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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: sixty2nds who wrote (29359)	3/15/2006 4:41:55 PM
From: Return to Sender	Respond to of 95640

Toe in the water? More like I'm blowing on soup too hot to eat. It's been really a tough market to make any money in on the short side so I'm just trying to do like everyone else. Make a few bucks on the long side. But I don't have much at risk. I'm 90% in cash. Lots of economic numbers for the market to react to tomorrow: Economic: CPI & Core (.1%, .2%), Housing Starts & Bldg Permits (2030K, 2128K), Weekly Claims, Philly Fed (12.6) I'm hoping we get some more upside. So look out for the sharks for sure! A quick check on where we are now in the business cycle? The Four Phases of the Business Cycle By Jeff Neal, Optionetics.com 3/14/2006 9:15 AM EST optionetics.com Even though there is no particular investment for all seasons, there is certainly a season for all investments. This is why, as an investor, it is very important to have a good understanding of the business cycle; it is crucial to being able to consistently time your investments. The economy ebbs and flows as economic boom gives way to bust and bust to boom. The business cycle moves through four distinct phases. The first phase involves strong to moderate economic growth with low inflation. The cycle actually commences at the bottom of a recession, when the government believes it must do something to get the economy moving again. Typically, the Federal Reserve will lower interest rates by aggressively purchasing Treasury securities from commercial banks. Essentially when the Federal Reserve buys securities, it credits the banks reserve accounts at the Fed, creating money out of thin air. Rather than leaving this new money on deposit with the Fed at zero interest, the commercial banks lend out as much as they prudently can. The money supply expands and the economy gains steam as bank customers spend their loan money and the prices of raw materials stop falling. The second phase is approaching unsustainable growth. Eventually, the economy speeds up to a point where businesses begin to make unwise investments. Interest rates still seem low enough, so business people decide to build factories and buy equipment to keep up with the demand. Capital spending by business bids up loan demand and interest rates. Prices also start to rise more rapidly. The price increases spread down the production chain, from machinery to packaging until they impact the consumer. Phase three involves rising inflation. The government moves to fight higher consumer prices by raising interest rates. The Federal Reserve gets tighter and tighter about supplying funds to the banking system. Consumers reach their personal buying limits and slow their spending. An economic slowdown or recession begins, exposing all the mistaken investments by business people who thought the boom would go farther than it did. Finally, phase four is slow or negative economic growth and perhaps falling prices. As the slowdown or recession progresses, credit demand surges as businesses run low on cash. Consumers pay down their debts and businesses get rid of workers and reduce inventories to bring production into line with demand. Raw material prices fall sharply and after a lag, consumer prices slow their ascent. Finally, when the pain of recession grows too severe for the government to tolerate, the Fed eases credit and of course the cycle begins all over again. Some business cycles are more severe and therefore more distinct than others. But regardless, there are certain types of investments that are best in each stage of the business cycle. For instance, in phase one, at the bottom of a recession, common stocks are the best place to be while bonds, real estate and commodities are okay but gold and collectibles should be avoided. In phase two when the economy accelerates and prices begin to climb, all commodities, including gold, are the best investments; stocks are good and bonds are fair. During phase three of the cycle with rising interest rates and a coming recession, equities start to weaken and bonds begin to move up. Finally, in phase four the slowdown or recession is progressing full steam ahead. This is when fixed income instruments, like bonds provide great returns. Late in this phase, stocks start looking good again. Commodities and real estate should be avoided during this phase. Happy Trading. Jeff Neal Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent Next note that before a recession the yield curve moves from flat/inverted back to normal. stockcharts.com