Good afternoon to you all. As you all know, we take great pride in
reporting the news and how it affects you, as opposed to giving you a
re-cap you could find in any newspaper. Having said that, a quick review
of today's events will be helpful in determining our course of action for
Friday and the coming days.
THE BAD NEWS
The Dow was off 2.7% to 7632, the Nasdaq was off 4.8% to 1611 and the S&P
closed down 3% to well under 1,000 at 986. The Toronto stock exchange
was off 177 points.
It is very important to keep in mind this took place despite the
appearances of Alan Greenspan and Robert Rubin at separate hearings
today, in which each tried to be positive about the current
environment.
Of all these indicators, the most important one was not mentioned.
Specifically, the <underline>Dow Transports indicator</underline> closed
down 3.3% to 2560. This is extremely important because it is the first
indicator to break below it's August 31 low, which was at 2616. All the
other indicators mentioned above have yet to break through their recent
August 31 low.
More importantly, as we have stated in the past, the Dow usually follows
the Dow Transports in a down market. The rationale is simple, if the
transportation companies are not moving people and products, neither are
the industrials. The technical term here is a "divergence" between the
Dow Industrials and the Dow Transports. A divergence can not continue
for very long. Thus, either the Transports will have to turn up, or the
Industrials will have to turn down.
Given the fact tomorrow is a Friday, it is a generally accepted rule
during turbulent conditions, though not absolute, that investors tend to
decrease their exposure to any possible further news over the weekend.
You should all know this weekend has real meaning to large investors with
elections taking place in Australia and, more importantly, Brazil.
Given this set of circumstances, we will play the strong balance of
probabilities and anticipate watching the Industrials follow the
Transports further down. At best, we would expect sideways movement in
the markets. We rate the chances of a strong upward movement tomorrow at
10-15%.
THE GOOD NEWS
Gold rose above $300 on the New York close and ended the day at $299.95.
It would now appear to us that gold has broken it's recent habit of
floating up and down with the $US and is now being treated as a safe
haven for worried investors. We believe gold is now on the brink of
breaking out into the $320 range for the following reasons.
The US 30 Year Bond, the biggest safe haven investment in the world, is
now trading at it's highest level in history, thus driving the yield down
to as low as 4.87% today. There is a definite flight to quality here and
we do believe it will continue. However, the price of the long bond is
now extremely rich. As the price of the long bond gets higher, and the
yield lower, investors looking for a safe haven will begin to look to
gold. Remember, gold is just as safe of an investment but it is trading
near multi-year lows, while the long bond is trading at it's historical
highs. Thus, any safety advantages the bond may have over gold, are set
off by the upside price advantages of gold.
Secondly, the recent stock market sell-off can also be attributed to the
fact investors were looking for a bigger rate cut by the Federal Reserve
on Tuesday. Given the weak set of circumstances surrounding the world
economy, we expect further rate cuts will come before the end of 1998.
If those occur, the $US will continue to weaken, thus making gold (which
is priced in $US) more affordable to international investors. Higher
demand leads to higher prices.
In a worst case scenario, gold will no longer be the sacrificial lamb of
the equities market. To explain, we refer to comments we made on April
12, 1998
_________________________________________________________________
Having said that, though funds/brokerages are not abandoning this market,
they are beginning to hedge their bets and that hedge is gold.
<underline>The U.S. financial machine sacrificed gold late in '97 to
prevent an Asian sell-off of U.S. instruments but gold said "no more" at
$280.</underline> Today, we are not far above that level but the
fundamentals look much better than just 5 months ago. Why? Equity
participants are sneaking out of the dance just long enough to buy a
little gold and run back in. Also, those who might have been sellers of
gold only 5 months ago are now realizing the equity markets are far too
dangerous a place relative to gold. As such, they are starting to demand
a much higher price for their product.
Conclusion: Look for gold to continue it's slow and steady upward
movement
___________________________________________________________________
That is all for now.
Have a great day.
Regards,
Agora.
The Investor's Investor. Published by Agora International Enterprises Corp.
© COPYRIGHT 1997-1998 by Agora International Enterprises Corp. ALL RIGHTS RESERVED
Information provided by the Investor's Investor is intended to level the playing field between small and large investors by effectively and swiftly disseminating information to all those interested or in need of information pertaining to stock market event
s, global events and any other event which may effect their financial position. Information presented by The Investors Investor is not an offer to buy or sell securities referred to herein. It is strictly for information or entertainment purposes, highly o
pinionated and not in any way guaranteed as to accuracy or completeness. Readers are urged to obtain complete financial and other information directly from their investment advisor or the company. We are not liable for any investment decision. We are not a
n investment advisor, analyst, market maker, money manager, stockbroker, etc. The Investor's Investor maintains a model to demonstrate methods of portfolio management and to track our feelings with respect to the markets. However, because we buy a stock
for our portfolio, it does not mean you should go out and buy that stock for your portfolio. This is the same common sense you would apply when a complete stranger buys stock for their portfolio. Only you know your circumstances, your resources and your
needs. We do not. We are not investment advisors and do not purport to tell people, or suggest to people, what they should buy for themselves. We never issue "Buy" or "Sell" recommendations, and we don't give personal investment counseling. We hope our
information and immediate reporting of events supplies you with the complete knowledge of information necessary to help you make a fully informed decision as it pertains to your individual investment philosophy.
DISCLOSURE STATEMENT
AGORA INTERNET RELATIONS CORP. receives a monthly monetary fee from Mirandor Explorations Inc., Sideware Systems Inc., King Communications International and Valu-net Corporation for the purposes of communicating with Internet shareholders - both current and prospective - to increase awareness of and interest in these companies AGORA INTERNET RELATIONS CORP activities are aimed purely at keeping their clients' shareholders and prospective shareholders informed about their company. These activities consist of providing investors with previously disclosed factual information concerning the company, comments from company principals, copies of material that has been filed with regulatory authorities, comments prepared by registered brokers or investment dealers and material published in newspapers, magazines or journals.
AGORA INTERNET RELATIONS CORP does not participate in the maintenance of an orderly market in their client's securities, nor is required, or receives an incentive for, the maintenance or achievement of a price or trading volume for their client's securities
at a certain level, for a specified period of time or by a certain date. AGORA INTERNET RELATIONS CORP. may, at any time, own shares in these companies. |
