3 Peaks and a Dome House

TSPers,

We are headed to point 21. I believe point 22 will hit the day after the fed tightening and point 23 will hit after the IRA cash hits the market the first of the year.

After that the average loss is 30% from there.

But you can be like Spaf and wring your hands and ride it down with the other "this rally has to last" lemmings.

NOT BILL. He will follow the trend that happens at the end of January and take his profits.

When I first hit the board I told top every year I bail the end of the January. He said that was pretty smart. If you can read a chart it is pretty easy to see that is when the big boys bail.

Do not take losses.

Good day!

MT

http://chart.finance.yahoo.com/c/2y/_/_dji.gif

http://www.stocktradersalmanac.com/png.asp?urlkey=429592220546351035&page=5

[smedlap]

Last year's stats clearly support your advice and I myself planto rotateto G Friday 3rd week in Jan. Feb is a clear downer. But March and April should be good months and the market is forcasted to be a good play next year. I realize we are both talking too far out but I agree with you without question thru the end of February - both last year and historic trend analysis! Last year we had the influence of an election and a war. But we'll see as we get closer. As you say Forengi rule 1 - get the money when you can!

Actually if you go back 20-25 years (hey that was when hedge funds started - one and one make market monopolization). you will see the pattern over and over run up starting Nov - run down starting the end of Feb.

Spitz will not stick it to the hedge funds because he invests in them - funny how that works!

2003 was a little different (but it started off the same) with the retroactive tax cuts on March 2003.

Good luck. The trend is your friend. Good to bank your gains anyway...what goes up like this is sure to go down just as fast.

U.S. dollar weakness is good for U.S. companies? Hey Europe is boycotting U.S. products...look at Coke, Pepsi, McDonalds, Walmart, etc, etc. I was in the Walmart and England and had the place to myself. Pretty scary going to Subway (I was alone there also) and a foot long was $17U.S.

Good day!

smedlap wrote:
Last year's stats clearly support your advice and I myself planto rotateto G Friday 3rd week in Jan. Feb is a clear downer. But March and April should be good months and the market is forcasted to be a good play next year. I realize we are both talking too far out but I agree with you without question thru the end of February - both last year and historic trend analysis! Last year we had the influence of an election and a war. But we'll see as we get closer. As you say Forengi rule 1 - get the money when you can!By last year, do you mean earlier this year or 2003? I surely can't be talking about earlier this year.........

[tsptalk]

Ialso believe we will have reason totake cover sometime early next year but you have to be careful. If you notice my January 2004allocation, I was 100% G fund the entire month of January and also for much of the first 4 months of the year, as I (my indicators) anticipated the consolidation. The problem was the market didn't read my indicators and S&P 500 wouldn't relent. It didn't make it's final high until early March.

Again in July my indicators said good things were coming. But the consolidation wanted to continue. The market is like a freight train and sometimes you have to wait for the momentum to stop before you change teams. As some of you have said, the trend is your friend. You don't always have to wait for a trend change, but you should respect the momentum when it appears you are wrong.

I have my indicators to help me but I learned a lot in 2004 about repecting the market action first.

[smedlap]

Mlk Man - Thanks, my stats are for Jan 04 and I plan mytransfer out Jan 05. Tom has added some further information below which underscores the point that we play the market day to day with the best info!

MLK,

Around 14 March 2003 we had the tax cut on divs/cap gains. Coupled with the 1% emergency fed fund rate that caused the bull market rally in a bear market which normally last for nine to ten months. Dr Greenspan should of immediately went to 1.50% fund rate and start tightening back then. By the way tax cuts normally help the market for 18 months until the market starts to head down again. We are coming up to that period.

Europe is slowing to a 0% GDP and Japan is doing even worse on the brink of a recession again.

I am getting nervous now. The big rumour on the 8th was Germany and France were going to sell 220 tons of gold (which caused the dollar to raise). But if you notice a ton of foreign investors sold a ton of treasuries on that "rumour". Because that caused the dollar to go up strongly. By the end of the day the treasuries were sold and the dollar was about where it started for the day.

The trade report next week is really going to whack us I believe.

The thing that will continue the rally will be the reinvested div/cap gains come up on the end of the year and then the funding of IRAs the first week of January. After that I really do not what is going to be the ingredient to keep the market up at these levels. Inflation at the same time as slowing earnings is a very bad thing. If you have been watching the news Colgate, IBM etc etc are going to cut a lot of jobs.

If we go to flat tax like is being talked about that is very, veryy bad for the little guy like us...that means your TSPs will no longer lower your taxes and you will be unable to write of mortgage interest - good by housing bubble. This happened in if you remember in 1987. You were no longer able to write off credit card/loan interest and boom we had the largest two day downturn in the S&P 500 in its history. I highly recommend everyone max out their TSP just to get the tax cut now. Funding your ROTH should be if you can afford it. The reason you may have to pay tax on the ROTH that is now tax free because a flat tax means you pay tax on what you buy...not income tax. Think about that.

Good luck Milk. I am really trying to help on this board. I do not mean to come across as a know it all but I have been investing for over 24 years and have done fairly well.

Actually in January I am being interviewed as a co manager in a hedge fund in Florida.I very much I hope I get that job. I am pretty tired of my present job.

Good luck!



mlk_man wrote:

smedlap wrote:
Last year's stats clearly support your advice and I myself planto rotateto G Friday 3rd week in Jan. Feb is a clear downer. But March and April should be good months and the market is forcasted to be a good play next year. I realize we are both talking too far out but I agree with you without question thru the end of February - both last year and historic trend analysis! Last year we had the influence of an election and a war. But we'll see as we get closer. As you say Forengi rule 1 - get the money when you can!By last year, do you mean earlier this year or 2003? I surely can't be talking about earlier this year.........

Tom,

You appear to agreeing with my crystal ball.

Ialso believe we will have reason totake cover sometime early next year but you have to be careful.

Raising inflation and lower earnings is not helpful for stocks.

I am concerned right now about the credit rating of U.S. treasuries. This week the U.S. government sold 70B worth and we really have step up treasury sales since the U.S. dollar has fallen sharply since Sep 04. To make social security reform work the U.S. government will need to put another 1-3B of treasuries on auction. Foreign U.S. treasury holders will not continue to hold U.S. treasures at these yield rates while their currency is going up double digits every quarter.

Currently we are spending 20% more then we are taking in. In your personal life how long can you go on spending 20% more then your income?

I know the hedge fund guys are getting nervous and are thinking of selling off until the last week of December. I am thinking about doing that also. There is lots of bad news moving forward....trade deficient report and if Dr Greenspan puts some nasty comments on his fed report we could be in trouble. We have to keep in mind Dr Greenspan will have to step down Jan 06....he may use the fed reports to speak the truth and then after he retires he can say I told you so.

Some of my gurus are Jim Rogers/Bill Gross, etc, etc. They both have put out 2005 is going to be a bad year and 2006 is going to be horrible.

It may be a good plan to step aside until the end of December. I am thinking of going to G fund on the fed day (however that is the same day the trade report comes out)...if we get another record trade balance.

Sorry can not finish this...but do not want to lose the above.

Bill

P.S. I believe the hedge funds are getting out of the market and we will see a down day today.

[learning]

MarketTimer wrote:



Good luck Milk. I am really trying to help on this board. I do not mean to come across as a know it all but I have been investing for over 24 years and have done fairly well.

Actually in January I am being interviewed as a co manager in a hedge fund in Florida.I very much I hope I get that job. I am pretty tired of my present job.

Good luck!






Wish you the best of luck on the new job. We spend to much time at work not to be happy there. I believe that most if not all like to hear all ideas. Regardless if we agree with them or not. It gives us something to think and talk about. Speaking for me the more ideas on the board the better.

P.S. Where do you see the I fund going?

I fund,

The rumour of the 220 tons of gold being sold yesterday really helped the U.S. dollar and hurt the I Fund. A lot of countriesSURPRISE sold their U.S. treasury holdings yesterday(over 90B of 10 and 30 year) - funny how that works!!! Japan and Europe are in bad shape. Germany has an uemployment rate of 14% as an example. Japan is in a bad way:

Yen Weakens After Japan's Economy Expanded Less Than Expected (http://www.bloomberg.com/apps/news?pid=10000103&sid=aQvzfppECSQY&refer=us)
Bloomberg- Dec 7, 2004
Dec. 8 (Bloomberg) -- The yen fell against the dollar after a government report showed Japan's economy grew less than expected in the third quarter, raising ...
Yen Erases Gains After Japan's Economy Grows Less Than Expected (http://www.bloomberg.com/apps/news?pid=10000085&sid=aZySjPNT1Wyo&refer=europe) Bloomberg


World economies are slowing down. All stocks are not looking very good...because stocks do not do well in raising inflation and slowing earnings environment.

I have been saying since I have been on this board that 2005 is not going to be a good year for the market. The facts coming out week after week are starting to back up my view point.

Good luck!

Today I fund will be crushed :).

MarketTimer wrote:
Actually in January I am being interviewed as a co manager in a hedge fund in Florida.I very much I hope I get that job. I am pretty tired of my present job.

Good luck!



So that's why you hate the fact that I have a "system"............;)

Milk,

If it works for you...stay with it. I hope that we can share ideas here.

Nikkei just closed down 165. I fund is 25% Japan...I fund is going to have a big down day.

MT

[Lobo]

MarketTimer,

Way-to-go with the good attitude, good information and decision to not be "riled" into a word-fight again on this forum! I also appreciate ALL information the good folks here are constanly sharing. I don't understand a lot of it, but, slowly learning and grateful. I hope you get the job you want and things work out perfectly. That's all for now.

Lobo

Lobo,

Hey thank you very much. I appreciate that.

I let the market guide me based on historic facts and what is going on.

We are taught to be 100% bullish...buy buy buy and some people do not like it when I say "talk off the rose color glasses" and you are inside the matrix. And yes sometimes I agrue back but I am really seeing a lot of pain moving forward. I have been saying for some time 2005 is shaping up to be a bad year and the closer it gets the more it looks like we may be in for a hurting.

We are in bad bad shape. Story of interest:




Investment Outlook

Bill Gross | December 2004

http://www.pimco.com/PIMCO_US.Site/Images/spacer.gif


Too Much!

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2004/IO+December+2004.htm




http://www.pimco.com/PIMCO_US.Site/Images/spacer.gif





http://www.pimco.com/PIMCO_US.Site/Images/spacer.gif



(The weak dollar – causes and consequences)

John Snow and Alan Greenspan have finally bowed to the inevitable. Instead of blocking the lane in defense of a Shaq Attack slam dunk, they have politely if somewhat obfuscatingly stepped aside. “Put it down brother” they seem to be saying, but it’s the dollar and not a round ball that they’re referring to. The dollar has gone down. The dollar is going down. The dollar will continue to go down because it’s the easiest way out (for the U.S.) to begin to rectify its imbalanced finance-based economy. Balance the budget? Fugitaboutit. Raise interest rates to historic norms? Fugitaboutthattoo. “Let the market decide,” Snow says. “Likewise,” chimes Greenspan, warning that sooner or later foreign lenders will not be so exuberant in their purchase of U.S. Treasury bonds. Perhaps they’ll be a little less “irrational” with their money he might have thought, but that’s a word he doesn’t use anymore. And so the market’s most crowded trade – short the dollar – will inevitably become a little more crowded, perhaps “irrational” itself at some point. There is a whiff of crisis in the air.



How the world came to this point is well documented in some journals, including this one, but it bears repeating if only to reacquaint pre-Alzheimer candidates and those with “senior moments” such as myself with the facts. The U.S. spends too much; eats too much; drinks too much; TOO MUCH, (thank you Dave Matthews). And we pay for it with our debt and 80% of the world’s excess savings. In so doing our creepy crawly balance of payments deficit has inched its way up to 6% of GDP – a level never seen in the U.S. and reflective of third world nations in financial crisis. The imbalance has been tolerated by those nations on the surplus side of the ledger – read “Asia” – in a strange sort of mercantilistic Faustian bargain that promises China and Japan the benefits of a strengthening economy now for the perfidy of falling dollar denominated Treasuries bonds later, an arrangement that once again will prove that there is no free lunch, or that hell often follows heaven on Earth.



http://www.pimco.com/NR/rdonlyres/C27FC4BB-3A24-4356-9A58-39975DE0B95E/2351/CurrentAcct_chartI1.gif

Chart I

There are those that argue that this tidy little bargain between debtor and creditor nations can go on for a long, long time. Since each party gets what they want – the U.S. to consume, and Asia to produce – who’s to say when the first player will opt out? For now, China’s rather introverted geopolitik allows them the flexibility to revalue their Yuan whenever they damn well please as long as their inflation rate behaves. Japan is beholden to the U.S. militarily and continues to struggle with deflationary pressures. That argues for at least jawboning its Yen lower. “Dirty float” is and likely will remain synonymous with Japanese forex policy. So there seems no immediate incentive for either China or Japan to opt out of their Faustian bargain. On the debtor side, the U.S. will shop ‘til it drops – pure and simple but that phrase up until now has always accentuated the “shop” and conveniently forgotten about the “drop.” The drop comes when this comfy cozy current relationship between giver/taker, consumer/maker for some reason ends in divorce. The only question is one of timing. At some point, as Greenspan so astutely pointed out, “foreign lenders will eventually resist lending more money to the United States, causing the dollar to drop further.” What he didn’t say is that will be the point when the shopping stops and the fun goes out of a trip to the mall. That’s the point when U.S. inflation heads gradually but inevitably higher, and that’s the point, of course when interest rates move into harm’s way.



If it seems strange that Treasury Secretary Snow and Fed Chairman Greenspan are actually encouraging this weak dollar policy, one can rationalize that they’ve seen the end game and they want to ease their way around the pileup. Better to talk the dollar down now before the balance of payments gets so bad that a true crisis is inevitable. I cannot disagree. And as mentioned in my opening paragraph, alternative solutions to the problem are “pie in the sky” unimaginable. For Americans voluntarily to begin to get the old time religion of saving more money is beyond dreaming, especially with employment so weak and the source of historic capital gains – stocks and houses – still above cost. Likewise a Bush Administration seems unlikely to move towards a more balanced budget with its aggressive legislative agenda which includes social security reform. Optimists tout the escape route of faster foreign growth to suck up American exports but Europe has caught a congenital case of influenza, Japan is back to the zero growth line and China is maneuvering for a soft landing.



My point is this: dollar depreciation now, and Chinese Yuan revaluation as soon as possible is the easiest first step to rebalance an imbalanced U.S./global economy. This realization is and has been as close to a slam-dunk as we have seen in the world of finance; slam-dunkier than calling the stock market top at NASDAQ 5000 or Soros breaking the Pound Sterling. You can count on it (the Dollar going down against Asia)– not that there won’t be frantic short squeeze reverses even as this Outlook is being written, or that against some currencies (the Euro) the U.S. dollar actually may be cheap.



But how best to profit from it? Like I’m fond of telling my fellow PIMCO portfolio managers as they pontificate about the future of the economy, “You can’t invest in GDP futures, what are the investment implications?” Granted, some of you readers can or have already joined the trash party and are short the dollar. We can as well and have done so in minor amounts. But currencies are not the game for which we were hired. They go up and down quicker than 30-year 0’s and can ruin or make your day/year/career. And aside from the obvious benefits that a declining dollar imparts to gold and commodity prices, the focus of this Outlook[/i] should be on bonds. What bonds should be bought or sold? I have several specific thoughts:



1) As long as the Euro strengthens against the dollar, there is reason to favor German Bunds instead of U.S. Treasuries. We have recently reduced some of our positions but remain confident that the inflationary impact of a weaker dollar and the disinflationary benefit of a stronger Euro favor Bund/Euroland positions. A 10% decline in the trade weighted dollar according to our calculations increases U.S. inflation by approximately ½% over the ensuing 24 months. While a strengthening Euro/dollar relationship has a positive disinflationary impact in Euroland, it will unquestionably not be the inverse of the U.S. due to the smaller dollar impact on their trade weighted currency. But as Chart II shows, the inflation differential in the short run may be as high as ¾% in favor of Euroland with the Euro at its current 1.30 level. Because the Euro has appreciated inordinately as Asia has controlled their own currencies, I would be leery of Bunds when and if China revalues. That point, however, may be months ahead.



http://www.pimco.com/NR/rdonlyres/C27FC4BB-3A24-4356-9A58-39975DE0B95E/2352/USvsEurope_chartII1.gif

Chart II

2) Buy TIPS. I’ve said this before when discussing U.S. reflationary tendencies. Since a declining dollar is perhaps the most quantifiable of all reflationary weapons – ½% higher inflation per every 10% trade weighted dollar decline – the benefit should accrue to short maturity TIPS on an almost one for one basis and to 5-10 year intermediate TIPS in smaller proportions.

3) Be careful with U.S. Treasuries. I offer a word of caution here if only because of a strange rather unquantifiable twist in the balance of payments saga. While Greenspan has correctly suggested that foreign private institutions and central banks will not lend at the current pace forever because of a burdensome trade deficit, there is the probability that until the first sizeable creditor turns tail that an accelerating deficit actually lowers interest rates. Think about it: For every dollar we spend on imports, that buck comes straight back to us (for now) in the form of a Treasury buy ticket. So the more we spend on imports in the short run, the more we save. Sounds like my wife at a sale, but it makes sense as long as foreign creditors buy longer dated Treasuries. Purchases of intermediate and long maturity Treasuries reflect a confidence in the fiscal/monetary stability of the U.S. economy. When that confidence disappears, foreign purchases take the form of overnight deposits as the buck is tossed from one holder to another like a hot potato. That’s when the dollar tanks, the balance of payments deficit eases back towards 2 or 3% and perversely, intermediate and long-term interest rates are more susceptible to going up. To sum up this CATCH 22, a deteriorating balance of payments deficit may actually have a positive effect leading to lower interest rates until a large creditor turns tail. It’s another way of saying that U.S. yields depend upon the kindness of strangers and that the time to not own them is when the strangers become less kind. I suspect that is just around the corner but Beijing and Tokyo have the ball in their courts.



Wherever that should occur, there’s no doubt that the dollar is on the run and that higher U.S. interest rates are the inevitable consequence. Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries. Investors don’t need necessarily “TOO MUCH” intelligence to do this trade. Rather, they may need lots of patience in order to turn it into a profitable, near slam dunk opportunity.

Lobo wrote:
MarketTimer,

Way-to-go with the good attitude, good information and decision to not be "riled" into a word-fight again on this forum! I also appreciate ALL information the good folks here are constanly sharing. I don't understand a lot of it, but, slowly learning and grateful. I hope you get the job you want and things work out perfectly. That's all for now.

Lobo
See, now I'm the riler..............funny, funny, funny............Tom, I need those posts back!!!!!!!!!!!!!!! :P

MarketTimer wrote:
We are taught to be 100% bullish...buy buy buy and some people do not like it when I say "talk off the rose color glasses" and you are inside the matrix. And yes sometimes I agrue back but I am really seeing a lot of pain moving forward. I have been saying for some time 2005 is shaping up to be a bad year and the closer it gets the more it looks like we may be in for a hurting.

We are in bad bad shape. Story of interest:




So which is it, bad year or good year? You seem to be flip-flopping...............:*

EVERYONE SHOULD READ THE BELOW ARTICLE!!!!!!!!!!



We should expect a last big rally before the big drop. 3 Peaks and a Dome we are at point 22. This formation has happened around 22 times in the history of the stock market and each time after point 23 there has been on average a 27.7% drop in the DOW.

I have been saying all along that 2005 is looking to be a bad year and everyone wants to believe that every year is great.

The closer we get to 2005 the worse the econonic outlooks is. Gold is the story raising gold means inflation. Gold has gone from320 or so to 450 this year. Earnings are slowing and the pumkin heads are telling you that is ok.

Economic `Armageddon' Predicted
November 23, 2004
Boston Harold
By Brett Arends

Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bullish. But you should hear what he's saying in private.
Roach met select groups of fund managers downtown last week, including a group at Fidelity. His prediction: America has no better than a 10 percent chance of avoiding economic ``armageddon.''

Press were not allowed into the meetings. But the Herald has obtained a copy of Roach's presentation. A stunned source who was at one meeting said, ``it struck me how extreme he was - much more, it seemed to me, than in public.''
Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ``we'll muddle through for a while and delay the eventual armageddon.'' The chance we'll get through OK: one in 10. Maybe.

In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling.

To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded. Less a case of ``Armageddon,'' maybe, than of a ``Perfect Storm.'' Roach marshalled alarming facts to support his argument. To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day. That is an amazing 80 percent of the entire world's net savings. Sustainable? Hardly.

Meanwhile, he notes that household debt is at record levels. Twenty years ago the total debt of U.S. households was equal to half the size of the economy. Today the figure is 85 percent. Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes.
Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet. You don't have to ask a Wall Street economist to know this, of course. Watch people wielding their credit cards this Christmas.

Roach's analysis isn't entirely new. But recent events give it extra force. The dollar is hitting fresh lows against currencies from the yen to the euro. Its parachute failed to open over the weekend, when a meeting of the world's top finance ministers produced no promise of concerted intervention. It has farther to fall, especially against Asian currencies, analysts agree.

The Fed chairman was drawn to warn on the dollar, and interest rates, on Friday. Roach could not be reached for comment yesterday. A source who heard the presentation concluded that a ``spectacular wave of bankruptcies'' is possible. Smart people downtown agree with much of the analysis. It is undeniable that America is living in a ``debt bubble'' of record proportions. But they argue there may be an alternative scenario to Roach's. Greenspan might instead deliberately allow the dollar to slump and inflation to rise, whittling away at the value of today's consumer debts in real terms. Inflation of 7 percent a year halves ``real'' values in a decade. It may be the only way out of the trap. Higher interest rates, or higher inflation: Either way, the biggest losers will be long-term lenders at fixed interest rates. You wouldn't want to hold 30-year Treasuries, which today yield just 4.83 percent.

[Lobo]

mlk_man wrote:
Lobo wrote:
MarketTimer,

Way-to-go with the good attitude, good information and decision to not be "riled" into a word-fight again on this forum! I also appreciate ALL information the good folks here are constanly sharing. I don't understand a lot of it, but, slowly learning and grateful. I hope you get the job you want and things work out perfectly. That's all for now.

Lobo
See, now I'm the riler..............funny, funny, funny............Tom, I need those posts back!!!!!!!!!!!!!!! :P


mlk_man,

You are very sensitive person, and therefore, I surmise, a very good person. You contribute greatly to this forum. I read just about everything you write and am very grateful for your valued opinion. It's really not necessary to go beyond the good and useful opinions you bring to this forum. No one wants to be put down about there ideas/opinions....not market timer, not you, not me. Can't we just offer to share the knowledge we have in this forum with each other with gratitude, even when we disagree?...for the good all. Please stay here and continue to benefit us with your knowledge, and please don't take disagreement as personal.To do so ismore destructive than useful....for you, and others. Thanks :) Lobo

Wholesale inventories up 1.1% - this means recession. and is very bad for the stock funds. AGGGGHHHHHHHHHH.

Have a great day!

MT