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Bush's War
In spite of Mr. Bush’s war, the economy seems to be making a
bottom. Does this mean that the market has turned and will go straight
up? No, war makes all the difference here. Where we would normally see
the market moving up in anticipation of better growth and higher
earning, the market dislikes uncertainty, and in war there is always an
uncertainty.
Where will our growth come from? First and foremost we will
let the market tell us where and when it wants to grow. But this is what
I can see now. The first half of 2003 looks dismal for the U.S. stock
market. The cycle peaks appear to be in and the tried and true 78.5-week
cycles and the 9-week lows are not due in until early-March, followed in
April, by the 9-month cycle low, and May bringing the 19-week and
55-week lows. These are big gun cycles and I expect the market to at
least decline to retest the October ’02 lows. But there is hope.
We will work the short side of the market to pick up some gain as the
market declines.
Additionally, in the last Special Report, I recommended
the European Government Bond portfolios. With European interest rates
much higher than ours, their economic slowdown of a larger magnitude
than ours, the UE's central banker must give up the inflation ghost and
lower interest rates. Furthermore, we have the U.S. Treasury’s
desire to let the dollar decline (like they have any choice with the
amount of money rolling off the printing press
each day) these funds
should do very well. I will go out on a limb and say I expect 20% to 30%
returns from this area. Like any other market it will not be straight
up, but it is one of the most conservative investment opportunities to
come along in years. If the trend stays in tact, we will concentrate a
large portion of our assets here over the year. Also, the confluence of
these cycles should also mark the 4-year cycle low. Too early to tell
for sure, but with the underline economy starting to grow, it looks like
we should have a profitable decline follow by some strong growth for the
second half of '03.
As predicted in our last special report the U.S.
Dollar had a precipitous decline. The daily chart of the dollar below
shows the next round of decline is about to begin. However, the weekly
chart now at extremely oversold levels, we should see some recovery or
consolidation at the least similar to the June to October of 2002. This
will put a hold on the growth of the international bond funds but it
should be temporary.
U.S. DOLLAR DAILY
U.S. DOLLAR WEEKLY
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