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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: T L Comiskey who wrote (30439)	10/23/2003 6:04:08 PM
From: Jim Willie CB	Read Replies (3) \| Respond to of 89467

yes, I saw the Belkin piece yesterday (you are late!!) / jw

To: T L Comiskey who wrote (30439)	10/23/2003 6:04:57 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 89467

load up with Cardero (CDU.V=CUEAF), breaking upside soon put down your useless political cesspool discussions and lay down some hard money on this little dynamo it could gain 50% before January is passed she's gonna attack old highs and surpass them shortly this company is shaping up to be a 3-trick pony 1. silver in Argentina 2. gold in Baja Mexico 3. gold in Peru it is all coming together Steve Saville loves Cardero: Cardero Resource (TSXV: CDU). We suggested buying CDU at C$1.80, 1.35, 0.83, 1.20 and, most recently, on a pullback to 1.50 (a pullback that never occurred). CDU has treated its shareholders to a roller-coaster ride over the past few months, but with the stock now trading at 1.85 anyone who bought CDU as a result of our recommendations should have a profit. A few weeks ago we mentioned C$2.00 as a short-term upside target for CDU and this target is now within reach. We wouldn't, however, be enthusiastic sellers of the stock at that level. From a technical perspective C$2.50 looks achievable over the next few months, but longer-term this stock has much greater upside potential. CDU is not a typical TSI stock because the company has no defined resources. It is therefore not possible for us to crunch some numbers and come up with a valuation for the stock. It is a pure exploration play and is thus very risky, but its chances of success are a lot higher than is the case with most exploration plays. In particular, although its Argentine silver project was the main reason for our original recommendation of the stock and continues to be an interesting prospect, CDU's greatest opportunity now appears to lie with its joint venture with Anglo American in Mexico. As part of this joint venture Anglo are backing an exploration program with the goal of finding substantial IOCG (iron-oxide-copper-gold) deposits. Based on the large size of the geological team allocated by Anglo to this project it is clear that they see great potential. speculative-investor.com / jim

To: T L Comiskey who wrote (30439)	10/23/2003 7:31:56 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 89467

BELKIN REPORT: "The Point of a Bear Market Rally" [[Note: Here's the story from the horse's mouth, with some useful charts on the last couple of pages. This issue has been provided by the author as "Demo" of the newsletter.]] mondialepartners.com For Posterity: October 19, 2003 The Point of a Bear Market Rally The point of a bear market rally is to make everyone bullish again before the market does its next swan dive. That process has largely been accomplished. The fear and loathing of equities that the 2000-2002 bear market drilled into investors has been massaged into complacency by the subsequent 12 month rally. Individual investors are buying mutual funds again (even as the ‘market timing’ fund scandal unfolds). Hedge funds have been squeezed out of short positions. Option volatilities are near record lows (put protection is cheap but unwanted). Downside risk is far from most investor’s minds. Emerging market stocks are charging higher -- as capital flows into roach motel markets (you can check in but you can’t check out). Forecasts of continued economic expansion spring forth daily from the scribes of Wall Street and Silicon Valley. Analysts and strategists extrapolate current robust earnings into the 4th quarter and beyond. Tech stocks have climbed back out of the gutter into investor’s hearts again. Cyclical stocks are also highly esteemed by the rosy consensus crowd -- you’ve got to own them to participate in that economic recovery that always lies just around the corner. The 12-month rally has erased pessimism and enhanced the feel-good factor -- what, me worry? That psychology is the perfect starting point for the next bear market decline (it resembles the complacency in bond market psychology that preceded the July bond market rout). The good news is baked into the cake. Stocks are priced for perfection and vulnerable to disappointment. Although no one seems to care, risks abound. The timing of geo-political shocks is beyond our forecasting prowess, so we’ll stick to monetary and economic risks. Measures of credit hit a brick wall over the past several months. It’s not the Fed-controlled stuff that is ailing -- it is private sector credit growth that has plummeted (see October 12 Belkin Report). If the economy is doing so great -- why is bank lending growth plunging (commercial and consumer) and money supply growth negative (3 month annualized rate)? Probably because the post-July bond market rout sent a shock and margin call through the financial system, jolting cozy leveraged long Treasury and derivative positions established on the assumption that the Fed would keep shortterm interest rates low forever and therefore bond prices couldn’t decline. Bad assumption. The bond market sell-off started when bond market psychology was as rosy as equity market psychology is now. We expect a similar jolt out of the blue to strike equity markets, as struck bonds last July. An involuntary convulsion. The contrast between bullish equity market psychology and deteriorating private sector credit conditions is bizarre. The consensus has come around to believe that a liquidity bubble is pumping up world markets -- just as liquidity conditions deteriorate. Deleveraging in the credit markets should soon feed through to economic decay. Of course, bubble people would say ‘that will lead to lower interest rates so who cares? Lets keep partying.’ A more cynical observer might suggest that short-sighted monetary and fiscal policies have borrowed growth from the future -- and the cupboard is now bare with regard to auto sales, housing and consumption growth. With nothing left to borrow from the future -- and a single minded obsession with debasing the Dollar, policy makers better pull a rabbit out of their hat quickly, or the complacent equity market might have a rude shock. The bear market rally has done its job well. Almost everyone is back on board -- now that it is time to turn down again. Page 2: October 12, 2003 De-leveraging the System The Federal Reserve deliberately leverages the system -- every cycle seems to get more brazen and dangerous. Fed pump-and-dump operations resemble those of a boiler room penny stock operation -- cram a bunch of leverage (excess credit in the Fed’s case) into financial markets, entice investors into excessive long positions in the targeted market (penny stocks for boiler rooms, bonds and equities for those who follow the Fed), push the bubble as far as it can go -- then watch from a distance (and deny responsibility) when it all goes up in smoke. The Fed seems to do one of these pump-and-dump operations about every four years. The last was the 1999 Y2K credit expansion, which inflated the early 2000 Nasdaq bubble and led to the subsequent crash. The major one before that was the 1992-93 credit expansion, which culminated in the 1994 global bond market crash. The process of leveraging up the system sends out a signal -- go forth and speculate. Buy stocks, bonds and houses, build buildings, leverage up your holdings. Take no thought for tomorrow. Swing for the fences. At some point, the leveraged Ponzi scheme collapses -- either as a result of a Fed tightening -- or it simply topples from its own dead weight. Markets and the economy are approaching that point. Since Fed honchos are promising never to raise interest rates again -- it probably won’t be a Fed tightening that upsets the apple cart this time. But there is increasing evidence of an involuntary deleveraging (see charts). 1) Money supply growth has plummeted from 14% to just 1% since July (3 month annualized growth rate of M2). 2) Banks are liquidating Treasuries. Treasury holdings at commercial banks have dropped $100 billion since July. The Fed has pumped banks full of Treasuries with its low interest rate policy -- and now it is dump time. The model forecast sees an ongoing liquidation of Treasuries by banks. 3) Commercial lending has gone nowhere since July. The model sees no recovery in bank commercial lending. 4) A slowdown in real estate lending. So far it is just a slowdown in the growth rate, but the model sees a bigger real estate lending slowdown ahead. This involuntary deleveraging process should feed through into weaker corporate results and economic statistics. This is a seasonally weak period for unemployment. The average increase in Initial Unemployment Claims (IUCs) not seasonally adjusted over the past four years was 421,000 from late September to early January. The Labor Department tries to disguise this with seasonal adjustments. Just be aware that every commentator babbling on about stronger job statistics is ignorant of the most obvious seasonal trend in existence. They are not talking about real-world unemployment claims -- they are blabbering about how fudged Labor Department numbers differ from other Labor Department fudged numbers. Why financial markets take any notice of this nonsense is beyond us. In any event, many more people will be losing jobs over the next three months in the real world -- no matter what Labor Department or CNBC morons say. So the process of leveraging up the system has run its course and an involuntary deleveraging is underway. Deleveragings are not low-volatility events -- a financial market dislocation in the fourth quarter is likely. Earnings reporting season is keeping a bid under stocks for now, but the news should be mostly downhill from here. S&P500 earnings growth is at a 50 year high -- the profit cycle is probably topping. Overvaluation is still a huge issue -- the S&P500 P/E ratio is still 1.2 standard deviations above its long term average. That may seem cheap (down from 4 standard deviations), but the bubble era warped the concept of value. Templeton says to buy at a point of maximum pessimism and sell at a point of maximum optimism. For the current cycle -- this is a case of the latter.