GROWTH STOCK OUTLOOK
P.O. Box 15381, Chevy Chase, MD 20825.
1 year, 24 issues, $235.
NYSE or Nasdaq will disappear
over the next 4-10 years
Charles Allmon: "If you are concerned that the U.S. has lost its 80-year edge in manufacturing, the situation might be worse than anyone would care to admit. Right now China is eating our lunch, while eyeing a big dinner feast, too. Here are two GSO forecasts which may jolt your thinking. Over the next 4-10 years:
- At least one major U.S. auto manufacturer will go bust, ending an era in our industrial history.
- Either the New York Stock Exchange or Nasdaq will also disappear.
Nasdaq and the NYSE are locked in a mighty struggle to offer virtually the same electronic trading services. Both soon may have ten times their current trading capacity. Scores of NYSE sacred cows (floor specialists) will be turned out to pasture to seek a living by competing in the real world. The gravy train is about to leave the station, hauling away remnants of a golden monopoly. And what might a Big Board seat be worth?
If the above has not made your day, consider this. Goldman Sachs reports that U.S. citizens yanked $640 billion in equity out of their homes in 2004 in various creative refinancing schemes. That's over 600% of U.S. personal savings in 2004. Alas, that gravy train, too, could disappear quickly."
The Elliott Wave FINANCIAL FORECAST
P.O. Box 1618, Gainesville, GA 30503.
Monthly, 1 year, $228. www.elliottwave.com.
The Dow and S&P assuredly receive
their final "kiss good-bye"
Steve Hochberg: "The Dow Industrials and S&P 500 have each completed a test of the underside of their respective weekly trendlines drawn off the March 2003 lows. The "goodbye kiss" of these lines marks the end of the rally from October 2002 and the start of the next major leg of the bear market. The spread between the performance of long-term U.S. Treasury debt and low-quality debt remains on track to widen to a record level. This remains one of the best opportunities in the debt market. Gold should have one more push toward $447.70 basis spot to complete an upward correction and set prices up for a significant decline. Silver is on the precipice of busting below a two year up-sloping trendline, which should result in a dive below $6.00. The U.S. Dollar Index has carried about half-way to our forecasted target, which surrounds the 100 level. While an extreme in bullish sentiment allows for a near-term setback, the rally started at the turn of the year is not over.
THE CONTRARIAN'S VIEW
132 Moreland St., Worcester, MA 01609.
1 year, 11 issues, $39.
Next major downleg of 10-year bear
market to pick up steam in the fall
Nick Chase: "The economy is clearly headed for at least a soft spot, if not something more serious... a recession or depression... as the housing bubble deflates. But you'd never know it from looking at the stock market or its technical indicators.
Stocks won't ignore economic reality forever... they'll catch up. So I expect the next major downleg of this decade-plus bear market to pick up steam in the fall and extend to about mid-2006 (maybe longer) when the Fed again loses control to a lesser or greater degree as the asset deflation sets in. Just don't expect stocks to give any advance warning. They're only along for the ride.
The risk of systemic failure is currently at about 20% as hedge funds unwind their "carry trades". In about two weeks it will revert to 15% until stocks go bananas in the fall, when I'll take another look at it."
THE MAJOR TRENDS
250 W Coventry Ct., Ste. 109, Milwaukee, WI 53217.
Published monthly for clients of Sadoff Investment Management LLC.
The economy is already slowing
Ron Sadoff: "The economy appears to be slowing down. That's what the declining and flattening trend of many commodity prices already portends - a softening economy ahead. Here are just a few examples of some sagging commodity prices.
Scrap steel prices have declined sharply, well below the lowest level in mid-2004.
The price of lumber has flattened over the last two years. The price of aluminum has recently slipped.
The CRB (Commodity Research Bureau) Raw Industrial Index has irregularly gone sideways over the last four months. The JOC (Journal of Commerce) Commodity Index has traded sideways over the last 1-1/2 years and is very close to slipping below its June 2004 level.
Meanwhile global growth prospects are eroding. Already Sweden has lowered interest rates because of a sluggish economy. It is expected other European countries will soon follow.
And very importantly, the Baltic Dry Goods Index, a vital measure of shipping rates, has fallen sharply and just slipped below its year ago lows. The slide has accelerated in recent weeks. The plunge from its December peak is down more than 50%. This sends a worrisome signal regarding the global economy.
The Baltic Dry Goods index is closely linked to commodities because it focuses on bulk cargo as opposed to container shipments, which often carry finished goods. If fewer loads of metals, cement, grains and other raw materials are in transit to industrial users, the production of finished goods will eventually turn down.
Surging demand and a shortage of ships pushed freight rates higher in 2003 and again in late 2004. These over-all forces may now be reversing. The latest sharp decline for the Baltic Dry Goods Index could be forecasting a softening for worldwide economic growth.
Industry officials point to a recent cutback in China's imports, particularly iron ore used in steel production as the primary force behind this precipitous decline. The slump in China's steel sector is accompanied by a downturn in the steel market in the U.S. and Europe. More than half of the dry bulk cargo - items shipped in bulk in huge ships - is steel related. But this decline may have broader footings. Simply put, prices are easing because world and U.S. growth is slowing.
At the peak of the market last year it cost more than $100,000 a day to charter a ship to carry material from Brazil to China. The same ship cost about $80,000 in mid-April. Now it can be had for $31,000 a day. An economic slowdown means less congestion in ports, fewer ships tied up in traffic and more ships available on any given day.
Container shipping is also hitting a soft patch mainly as a result of quieting consumer spending. For example, consumers in Europe are buying less household goods and clothing - cutting into the flow of containers.
In addition both the Dow Jones China Broad Stock Market and the Shanghai Composite have fallen off recently - down 40% and 15% respectively.
One Key Index is About to Turn Down
During the era of Fed Chairman Alan Greenspan, the Fed has never kept tightening once the ISM (Institute for Supply Management) Manufacturing Composite Index has dropped the key level of 50. When the Index is above 50 the economy is expanding. Conversely when this Index is below 50 the economy is contracting. In May this Index dropped to 51.4 from 53.3 in April. That marked the sixth straight decline and the lowest level since June 2003. Current levels suggest that manufacturing barely grew last month. This is just another indicator that reflects a weakening economy, particularly in manufacturing."
EQUITY FUND OUTLOOK
P.O. Box 76, Boston, MA 02117.
Monthly, 1 year, $149.
Thurman Smith: "All key trendlines are now up and the percentage of diversified EPO funds with buyable ratings is back to where it was before the correction began. The pattern of a down first four months followed by an up May-August is in accord with the presidential election cycle. Even more favorable is that this year ends in 5."
INVESTECH RESEARCH
2472 Birch Glen, Whitefish, MT 59937.
1 year, 17 issues, $295.
Ultra low long-term bond yields
key to further bull market gains
James Stack: "The Fed's tightening would normally start to take a toll on stocks at this point. We believe ultra low long-term bond yields have become a cornerstone of the current stock market stability and the key to further bull market gains. If long-term bond yields start to rise sharply, it will be time to batten down the hatches and step up our defensive strategy."
THE PERSONAL CAPITALIST
6911 South 66th E Ave., Ste. 301, Tulsa, OK 74133.
1 year, 24 issues, $195.
We believe the next
advance will start in August
Sean Christian: "We continue to target a move to DJIA 12,000 or higher with the expectation that the advance will begin as soon as August. This would complete the movement that began with Dow at 7,600 back in early 2003. The first move was from 7,600 to over 10,000 followed by a prolonged trading range that served as a "mid-point pause." We now believe that the pause has ended and the second half of the move will take the market up as much as 3,000 Dow points from the beginning of the pause at 9,500.
Overall, we continue to see renewed but manageable inflation combined with very strong economic and monetary growth. This combination should promote higher equity prices over the long term."
THE GRANVILLE MARKET LETTER
P.O. Drawer 413006, Kansas City, MO 64141.
1 year, 46 issues, $250.
Dow free fall to 7100-7500 area
Joseph Granville: "I think the Dow is rushing down toward its H & S neckline at 10,007. This time the powers that be will be unable to hold the Dow above that level. I base that belief on two things - where we are in the cycle, and the fact that the Dow has broken under its 200-day line. The Dow 200-line line stands at 10,444.53. My rule stands unchanged in this market, breaking the 200-day line puts the Dow in free fall to 10,007 and is especially bearish. Free fall under 9,700 is expected to take the Dow all the way back down to where the rise started in March 2003. This is why I believe we are still in the early stages of a decline in the Dow all the way down to the 7100 - 7500 area."
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