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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (40117)	5/20/1999 9:57:00 PM
From: Les H	Respond to of 94695

interesting note re: dow theory transports 'confirmations' By the time Wed. was said & done; the Dow Industrials recovered to plus 50; Dow Transports were off 70, and the Dow Jones Utilities were breaking out to new highs for the move, amidst numerous recommendations (likely months after they bought) from various funds to buy the Ut's. Again; the Transports were confirming not a strong stock market recently, but a strong economy, as was originally intended when Charles Dow commissioned the gentleman to work out a study to determine just that. That is why Dow "Theory" confirmations typically come near a market top, because in the modern era that is normally accompanied by higher Oil prices (transport fuel cost of course), as well as the first inklings of wage and price pressures thought by most impossible. I suggest that although the API data we commented on last night showed an inventory surge, this is a transitory factor, and that demand will increase later in the year. If it does not, then the stock market's problems are infinitely more immense, as troubles won't be competitive debt yields of a traditional nature (in late-stage business cycle growth), but unsupportable multiples & ROE. We, to no great surprise, see the potential of a confluence of both difficulties, as profit margins in fact likely are peaking, while at the same time a slowing forward economy runs into real pent-up pricing pressures, that for a time will not be able to co-exist rather easily. That is what we meant when we spoke of Asia and Europe eventually catching up with the forecast market & currency stabilization's we accurately forecast last year (and which Secretary of the Treasury Rubin today in fact basically affirmed, almost precisely in the same words), while consumption or demand for U.S. produced goods would lag that development significantly enough to foster a non-linear year. Rest of the story in the Inger Letter at decisionpoint.com