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Michael
----- Original Message -----
From: "JW" <JW@xxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Monday, March 27, 2000 20:26
Subject: [RT] FW: Watch closely to see what OPEC does next week
| FYI...
|
| JW
|
|
| -----Original Message-----
| From: James Smith [mailto:JSmith@xxxxxxxxxxxxxxxxx]
| Sent: Monday, March 27, 2000 5:38 PM
| Subject: Watch closely to see what OPEC does next week
|
|
| If OPEC decides in their meeting next week to
| supply sufficient amounts of oil to the markets
| oil could continue its plunge toward $20.10,
| which is first monthly support on Nymex
| Crude (basis the May contract)...setting
| in place a Higher Low off which the next leg
| of the longerterm bull market in oil will begin
| that will lead to $40/bbl or higher.
|
| But nobody will care about the longerterm
| view on oil next week if OIL is plunging to
| $20. A plunge in oil would certainly give yet
| another boost to stocks and could explain
| why the S&P will continue to a blowoff rally
| into late April.
|
| If the markets perceive that OPEC is not going
| to supply enough oil or that it is not going to
| arrive soon enough, you could see Crude
| move quickly above $30 again. This would
| put downard pressure on US bonds, which
| incidentally suffered a nice reversal on
| Friday. But I doubt that the Treasury is finished
| manipulating the yield curve. Obvious
| inflation just makes the manipulation more
| difficult, but not impossible...at least not
| on the short-term basis. It does underline
| how important this OPEC meeting is.
| I suspect the administration will put very
| heavy pressure on OPEC to supply adequate
| amounts of oil.
|
| Remeber it was the Clinton adminstration
| that coined the election phrase,
|
| "Its the Economy Stupid!"
|
| I have often wondered if this phrase
| would come back to haunt the administration.
| April may not be the cruelest month, but May
| certainly will be.
|
| Stocks are somewhat mixed. The DOW
| still needs to see closing New Highs before
| we can confirm a strong rally into April.
|
| The Nasdaq 100 (jun) closed today above
| 4800 which suggests a move higher, but
| I would still like to see the Composite close
| above 5200 to confirm a blowoff into April
| for the Nasdaq. The Nasdaq rallied
| strongly Friday morning but gave up a
| lot of its early gains. Again, its best to wait
| for a close above 5200 on the Composite
| to confirm a move higher into April.
|
| Can the S&P move higher into April while the
| Nasdaq moves lower? Sure why not?
| We've seen this just recently as investors
| re-discovered "value". I'm not saying
| this will happen, I'm saying it is possible
| (if the Composite fails to close above
| 5200 soon).
|
| The S&P (june) has given the
| strongest performance this week of the
| three stock markets, by closing above 1500
| and racing ahead. As worried as traders
| were on Friday of yet another rate hike,
| if OPEC comes thru with plenty of oil,
| rate hike fears will disapate quickly and
| the party will continue.
|
| With regard to BONDS, the month of
| APRIL is a "DIRECTIONAL CHANGE"
| month. A strong rally into this timeframe
| with bonds now yielding less than 6%
| leaves them vulnerable to a sudden
| correction which will lead to longterm
| rates over 7%
|
| Again, market manipulations are very
| very dangerous. They always end with
| someone getting hurt....usually the taxpayer,
| small investors, and people on a fixed income.
|
| It is important to see the Treasury's
| actions for what they are. This short-term
| political gambit guarantees higher inflation
| down the road. Helping Gore get elected
| in November may be the Adminstration's
| highest priority, but at what cost to the
| economy?
|
| It is also important to see the link between
| the Bureau of Labor's fiddling the numbers
| (PPI & CPI) and the administration's efforts
| to keep longterm rates lower.
|
| If they don't fiddle the numbers on CPI and
| PPI, investors will demand higher returns on
| longerterm notes and bonds. This would
| somewhat negate the Treasury's efforts
| to manipulate longterm rates lower. We
| certainly can't have that!
|
| Why should the adminstration want lower
| longterm rates? .....to keep mortgage rates
| lower. A lot of the off-the-run bonds that
| the Treasury is eagerly buying up are closer
| in maturity to the 10 year note. Mortgages
| are priced off the 10 year.
|
| If you can keep mortgage rates artificially
| lower it will help the housing market which
| is a key component to the economy.
|
| If 1% of the people own 40% of the stocks
| then a crash in the Nasdaq may not hurt
| the economy as much as you might expect.
|
| But given that over 60% of families own
| their own home and have the vast amount
| of their savings tied up in their house,
| what do you suppose would happen to
| consumption (which incidentally is 2/3rds
| of the economy), if the housing market
| suddenly peaked and began a wicked
| decline on the back of higher rates?---Oops!
|
| Sublimal message:
|
| "Its the Economy Stupid! And more
| specifically, its the Housing Market Stupid!"
|
| Can the adminstration keep this game going
| into November? -----No way!
|
| Some have argued that because Central Banks
| and govts can maniuplate the gold
| market and because they can manipulate the
| statistics off which all the financial markets trade,
| that there is no reason to believe in cycles.
|
| It is precisely this "arrogance of modern man"
| that guarantees greater volatility in the very
| cycles he wishes to deny.
|
| You are never going to get government to
| acknowledge the validity of cycles because
| doing so is tantamount to acknowledging
| the limitations of a government and its power.
|
| The prudent investor will not stand in the
| way of a market that is being actively
| manipulated, but it does present opportunities
| at the right moment.....to a student of cycles.
|
| It is my view that current manipulation of the
| yield curve will not last thru the month of April.
| Again the month of April is a "Directional Change"
| month for BONDS.
|
| For those of you on a fixed income or of limited
| means, I strongly advise you to get a car that
| is fuel efficient. Any further sell-off in oil is going
| to be temporary. Pay down your credit cards,
| pay down your debts.
|
| Do not buy a Suburban, Expedition or any of
| the other urban assault vehicles unless you
| can afford to pay $200 or more to fill it up.
|
| Also note that if you paid $40,000--$50,000
| for your tank you may not be able to sell it
| for $10,000 in just two year's time.
|
| That has to be one of the worst trades going.
|
| Just as the Japanese were ready in the 1970's
| with their economy cars, how ironic that they are
| just now coming out with hybrids that get 60-70mpg
| at precisely the right moment.
|
| Has Detroit learned nothing from their own history?
|
| Those who do not learn from history.....
|
| Economists may argue that oil represents less
| than 3% of GDP nowadays, whereas it represented
| over 10% of GDP in the 1970's.
|
|
| That's gotta be one of the dumbest arguments
| around. Again they are arguing against cycles
| without even realizing it.....because if you go back
| a bit further (before the 1950's, 1960's & 1970's) you would
| also find that oil was less than 3% of the economy.
|
| Just because oil is of less important to our economy
| now doesn't mean it will stay that way. When Oil prices
| move to $40/bbl and higher over the next few years, won't
| that percentage of GDP relationship also change?
|
| Until Fuel Cell vehicles become the primary means
| of transportation, their argument makes no sense whatsoever.
|
|
|
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