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10-09-2004, 06:00 AM
Everyone is bullish (fundadvice, hirsch organization, CNBC, FOX, etc, etc). People on this board. That is not a good sign.

P/Es are over 23 and that is based on $32 oil that was just raised from $30 last month. PEs historically over 20 are considered nose bleed levels. Taken into account $53 plus oil PEs are much higher. Colgate still has a P/E of 24. I am not paying 24 PE for a freaking toothpaste company. When PEs get in to the high single digits then I will turn bullish.

Commodities prices can not be passed on to consumers. This will greatly hurt earnings moving forward

2005 stock options will be expensed on to balance sheets - which will crush earnings.

The "real" unemployment rate is 7.4 (economy.com). 400,000 people looking for a job this month dropped off the unemployment numbers last month due to they no longer are eligible for unemployment benefits. You can spin these job numbers anyway you want but 158,257 people are joining the labor force each month. The experts keep lowering the numbers month in and month out and sooner or later we will hit the numbers but if we are not creating at least 250,000 jobs each month this economy is in the crapper.

Personal earnings are not keeping up with inflation. It was up .02 this month but the average work week has done down .10. So they are basing personal earnings on a 33.6 hour work week. Work weeks of less then 40 hours at most companies mean you are not eligible for benefit plans. So that is fuzzy month increasing the earnings by .02 but lowering the work week.

The true inflation rate has passed GDP. GDP is 3.5 (based on 32 oil) and with energy and food inflation is 3.7% - NOT 1.9 the fed is telling you.

Oil at 53 plus has now passed over the the all time high in the 1970s.

Dollar is getting crushed which will hurt the import/export numbers.

Everytime oil has spiked we have had at least a 24 month recession. Just look at 73-74 and 90-91 the last two times we have spiked oil.

Bond market has it right. Yield curve is to steep. Which means inflation is high.

Next week is a goal line stance for Mr. Market...if the market continues to drop next week you will see a lot of people get out of the market.

The S&P 500 in the last 6 years has returned -21% and a lot of people are feed up with losing money.

If you want some good advice...buy REITs and Gold Funds NOW. 2005 is going to be a horrible year starting the end to late Jan 05. Dollar is going to get crushed and people will be pumping money into their houses and not the stock market.

Good luck!

Dr Bill

Paul
10-10-2004, 12:15 PM
Yea but our economy is not tied to oil as much as it used to be and with inflation oil would have to be over $100 a barrel to have the same effect as the 70's.

Paul

Mike
10-11-2004, 01:09 AM
First of all, oil prices have a long way to go in order to match the all-time high when you adjust for inflation.

Secondly, the fact our GDP continues to grow and the economy continues to add jobs in spite of this harsh climate prove that the current US economy is far more efficient and resilient than it was in 1991 or the early '80s (the last two times we had high oil price shocks).

We could certainly be doing a lot better, but we also could be doing a lot worse given what's happening in the world (widespread terrorist threat, continuing violence in Iraq, Iran close to having nukes, North Korea having nukes, hurricanes disrupting the Gulf of Mexico's oil production for months).

Lastly, I expect oil prices to gradually retreat. Every time in the past that oil has spiked, the bottom has fallen out at some point afterwards. The reason is that oil companies begin to invest massive amounts in exploration / drilling when prices climb up to this level which eventually leads to an oversupply which causes prices to drop back down. How long it will take this time around is anyone's guess - but it will happen.

As for investment strategy, it's possible to make money in any market environment. If we continue this irritating cycling trend, it'll just come down to timing the market. I think I feel dirty for saying that. :shock:

Spaf
10-11-2004, 10:33 AM
Mike In the last week or so the ups and downs have become excessive, like big waves. I can't do anything in this type of environment. If it would calm down, thats a better story. Right now, the risk is too high. I can play the market,not when things are this volatile!

Mike
10-12-2004, 12:39 AM
Any time you have a run-up in oil / stock prices and major economic news combined with a tight presidential race, there's bound to be volatility. The I-fund has been the most reliable climber this year, but I think it's due to drop back a bit (which is why I cut my shares roughly in half last week, and then put in a transfer to get rid of the rest today).

TheProphet
10-12-2004, 09:10 PM
Intersted analysis...
Would you please expand on your statement...
"Commodities prices can not be passed on to consumers" Do Do you think the market will have a short bullish before election ?
Do you think the US Dollar will continue collapse due to oil prices and terrible economy indicators ? If so, Perhaps the I Fund is our best solution...
Is the G Fund the best place to be during and after election?
Thank you again for your wisdom... I really appreciated...
What is your email ?
Sincerely,
Leon.Kattengell@us.army.mil

10-13-2004, 01:23 PM
Paul,

Like Austin Powers says, "Yea, right".

Do not listen to those people on TV!!!!

The lower income people are the ones that drive this market...if they can not buy stuff do to high gas prices then the we will have a recession.

Good luck!

MT

Got to go...will write more over the weekend.



Paul wrote:

Yea but our economy is not tied to oil as much as it used to be and with inflation oil would have to be over $100 a barrel to have the same effect as the 70's.

Paul

Mike
10-13-2004, 09:42 PM
... and the higher income people drive the economy because they are the ones hiring the lower income people. :P