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EQUITY FUND OUTLOOK
P.O. Box 76, Boston, MA 02117.
Monthly, 1 year, $139.
Approaching favorable Nov-April period
Thurman Smith: "Since the low in March the market has headed almost straight up, except for a modest retreat to the 13-week trendline last month. The bounce since August 6th has again put conditions back to an area where another correction is a possibility. Intermediate-term, the favorable November-to-April period and fourth-year-of-presidential-election cycle pattern are positive. Longer-term, valuation levels still argue for the current rise being a rally in long-term secular bear market. That means that it will be a good while before widely followed large-cap stocks are a good buy.
Don't assume that the recent stories about improper practices at some fund families mean that all fund groups are up to no good! You might well want to avoid new purchases at Janus and Strong, the only two no-load groups implicated, until it becomes clear that there was deliberate malfeasance. The earlier situation at Baron Asset Management was less serious and did not impact shareholder worth. Baron has hired a full-time compliance officer."
THE WALL STREET DIGEST
8830 S. Tamiami Trail, Ste. 110, Sarasota, FL 34238.
Monthly, 1 year, $150.
How to capture low-risk profits
from the new bull market
Donald Rowe expects stock prices to rise dramatically between now and year-end. "Investors have better investment choices for this new bull market than ever before. The 1995 2000 bull market was more than half over before most investors realized they should have owned the small-cap stocks and technology shares. Investors should not make the mistake of listening to stock analysts this time around.
The conventional wisdom on Wall Street tells investors that since the technology and small-cap stocks led the last bull market, you had better look elsewhere this time.
This is very simply not true! Nor do you need a stock analyst earning $20 million annually to tell you where to invest or, most likely, lead you down a dark alley for a haircut. Many investors are still on the sidelines because the gloom and doomers are warning investors that this new bull market is nothing more than a bear market rally. Let's examine the easiest test for a bull market:
The time-tested Dow Theory says a bull market is underway if the Dow Transportation Average is also rising in support of a rising Dow Industrial Average.
The Dow Industrial Average is up 25 percent since the 3/12/03 market bottom. More importantly, the transportation sector is soaring! The Dow Transportation Index is up 40 percent since the 3/12/03 market bottom. The rising prices of the transportation stocks is welcome proof that economic activity is accelerating. FedEx, UPS and the freight companies are reporting rising sales and earnings.
The Wall Street pros know that a booming transportation/freight industry is a reliable early warning indicator of an economic recovery.
With this knowledge, the Smart Money has been pushing stock prices higher on heavy volume during the final hour of trading. Another quick way to confirm or deny a bull market is to use Cabot's Two Second Indicator: the daily new highs and new lows.
As long as daily new-lows stay below 40, stock prices will be rising and you should be fully invested. But where can you achieve the most reliable, low-risk profits form this new bull market?
This powerful new bull market is being led by the small-cap technology stocks. Technology is the future of this country, as it will be difficult to stop the flow of manufacturing jobs to China and Asia. Therefore, owning mutual funds that duplicate and leverage the performance of these soaring small-cap technology stocks is a very profitable investment strategy.
The profitable performance of these indices since the 3/12/03 market bottom is far better than the volatile performance of the technology sector during the 1995 2000 bull market.
I see two advantages, and both will help you make far more money during this new bull market:
1) Stock analysts and brokerage companies cannot manipulate an entire stock index. Do you remember the famous stock analyst who was told to recommend a stock so his company could capture billions in investment banking fees? After doing so, he sent an e-mail to a friend and told him. "This company is a piece of garbage!"
2) You can leverage your profits (150 percent to 200 percent) from these investments as the bull market gains momentum.
The bull market just began. The biggest profits are still ahead. The rapidly growing small and mid-cap stocks are still undervalued with earnings about to explode in the second-half.
I have summarized Ten Index Mutual Funds, along with their investment objective and the year-to-date performance since 3/12/03.
Ten Index Mutual Funds
Profunds Ultra Internet (INPIX) Investment Objective: 150% of Dow Jones Internet Index, Gain: 114%; Profunds Ultra Japan (UJPIX) 200% of Nikkei 225 Index, 90%; Rydex Velocity 100 (RYVYX) 200% of Nasdaq 100, 87%; Profunds Ultra OTC (UOPIX) 200% of Nasdaq 100, 87%; Profunds Ultra Wireless (WCPIX) 150% of Dow Jones Wireless Index, 76%; Profunds Ultra Small-Cap (UAPIX) 200% of Russell 2000 Index, 108%; Rydex Titan 500 (RYTNX) 200% of S&P 500 Index, 58%; Profunds Ultra Bull (ULPIX) 200% of S&P 500 Index, 58%; Rydex Internet (RYIIX) 100% of Rydex Internet Index, 52%; and Profunds Ultra Dow 30 (UDPIX) 200% of Dow Jones Average, 55%."
Libera's CLOSED-END COUNTRY FUND REPORT
725 15th St., Suite 501, Washington, DC 20005.
Monthly, 1 year, $225.
Global bull in equities to continue
James Libera: "The global economy appears to be on the mend, although the evidence is not yet conclusive. The U.S. economy, as usual is key. According to the Fed, economic activity rose during the summer in 11 out of 12 Fed districts. Capital outlays, manufacturing activity and consumer spending are all on the rise, although employment has not increased. Many economists are waiting for a jobs turnaround to validate the recovery. Improvement in the U.S. outlook has been mirrored by trends elsewhere. Japanese growth has been slightly higher than expected, and other Asian economies are booming. Europe is lagging, although we expect it to begin recovery over the next six months. Global equity markets are already reflecting the rising confidence about economic prospects. Developed markets are up an average 15% so far this year, while emerging markets are up 30%. We expect the global bull market in equities to continue, although valuations are not as compelling as several months ago.
Europe will follow the U.S. in recovery, although we expect only about half the U.S. growth. European economies continue to be constrained by rigidities in labor and capital markets. Limited structural reforms by Germany and France will help somewhat, but more radical changes are needed. We expect the euro to hold at about its present level. Equities are reasonably priced at about 14x earnings and we recommend moderate exposure here.
Central European equity markets have been strong this year despite economic problems. Structural budget deficits are high in most of the countries and need to be sharply reduced. Regional growth, about 3% this year, is limited by reduced exports to Western Europe. However, we expect 4% growth in 2004. After the equity market rallies, valuations are not quite so compelling, but we nevertheless expect further gains in the run-up to European Union membership in May 2004.
The Japanese economy finally appears to be recovering, although the magnitude of growth will be modest. Authorities are attempting to prevent the yen from rising, since a higher yen could push the economy back into deflation. Foreign investors have been increasing their Japanese equity holdings although domestic investors are mainly on the sidelines. We have recently increased our exposure here to around capitalization weighting and intend to remain at these levels for the near future.
Asia-Pacific economies, led by a booming China, continue to represent the world's fastest growth area. We project regional GDP growth of 5% in 2003 and 6% in 2004. China will probably allow only a modest rise in the yuan, since it relies on an undervalued currency to support its export-led growth. Equity market returns in the region have picked up and we expect further gains over the next twelve months. We are buying Korea Equity Fund.
Latin American markets have made sharp gains this year. Political/economic developments have been better than expected in Argentina and Brazil. Markets are also discounting economic recovery after the upturn in the U.S. Equities are still selling at moderate valuations and we recommend overweight exposure here."
THE FINANCIAL REPORT CARD
P.O. Box 7173, Kensington, CT 06037.
Monthly 1 year, $129.95.
Possible 10-12% drop in this market
Dr. Robert Valuk: "Let us address the bond funds first by saying that while bond funds may incur some losses over the next year, we are still in our holding pattern on our recommended bond funds. Unless this economy and inflation surges, the rates should remain low until after the Presidential election in November 2004. Long bond rates will continue to slowly rise over the next year. We have already seen the lows in mortgage rates, which will continue to slowly rise.
With the Dow at 9500, we have real concerns that this mini bubble is feeding on greed. We strongly suggest that you compact or sell all high PE/high Beta funds, and we are now extending that compacting recommendation to Fidelity and Vanguard for balanced funds, growth & income funds, equity income funds, asset allocation funds, and all funds in general that are not strict income funds. We are recommending you compact 50% of your holdings to lock in large gains and continue to purchase these funds using dollar cost averaging (DCA). We see a possible 10 12% drop in this market, and value investors like to have cash when fire sales occur."
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