------------------------ Yahoo! Groups Sponsor ---------------------~-~> <FONT COLOR="#000099">Make good on the promise you made at graduation to keep in touch. Classmates.com has over 14 million registered high school alumni--chances are you'll find your friends! </FONT><A HREF="http://us.click.yahoo.com/03IJGA/DMUCAA/4ihDAA/xrOVlB/TM"><B>Click Here!</B></A> ---------------------------------------------------------------------_-> BREAKING NEWS POLITICS NATIONAL NEWS WORLD NEWS ECONEWS SERVICE CYBERSPACE ORBIT SURFING THE APOCALYPSE GET OUT OF STOCKS WARREN BUFFET COMPARES INVESTORS WITH CINDERELLA -- "They have stayed too long at the Ball! What actually occurs in these cases is wealth transfer, often on a massive scale. The fact is that a bubble market has allowed the creation of bubble companies...BUT A PIN LIES IN WAITING...And when the two eventually meet, a new wave of investors learns some very old lessons." Fed Rate Cut is Sold, with Authority Here are some Important words from Warren Buffett The "Sage Of Omaha" Is Right Again While economists have separated into two camps on the severity of the economic downturn, the market is starting to listen to the non-economists at Intel, Cisco, Sun and Oracle, who are telling you loudly and clearly that we are most likely in a recession that will extend into the second half of the year. We have been repeating for a long time that the continually deteriorating sales and earnings picture would overwhelm Fed easing, and this is apparently happening now. Meanwhile this weekend was the occasion of Berkshire Hathaway's release of its annual report containing the usual words of wisdom from Warren Buffet.(berkshirehathaway.com) We thought we'd quote a few of them here. "Another negative ? which has persisted for several years ? is that we see our equity portfolio as only mildly attractive. We own stocks of some excellent businesses, but most of our holdings are fully priced and are unlikely to deliver more than moderate returns in the future. We're not alone in facing this problem: The long-term prospect for equities in general is far from exciting. .Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities ? that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future ? will eventually bring on pumpkins and mice. But they hate to miss a single moment of what is one helluva a party. Therefore the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands. Last year we commented on the exuberance ? and, yes, it was irrational ? that prevailed, noting that investor expectations had grown to be several multiples of probable returns. One piece of evidence came from a . survey of investors conducted in December 1999, in which the participants were asked their opinion about the annual returns investors could expect to realize over the decade ahead. Their answers averaged 19%. That, for sure, was an irrational expectation: For American business as a whole, there couldn't possibly be enough birds in the bush to deliver such a return. Far more irrational still were the huge valuations that market participants were then putting on businesses almost certain to end being of modest or no value. Yet investors, mesmerized by soaring stock prices and ignoring all else, piled into these enterprises. It was as if some virus, racing wildly among investment professionals as well as amateurs, induced hallucinations in which the values of stocks in certain sectors became decoupled from the values of the businesses that underlay them. This surreal scene was accompanied by much loose talk about "value creation.".But value is destroyed, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get. What actually occurs in these cases is wealth transfer, often on a massive scale. The fact is that a bubble market has allowed the creation of bubble companies. At bottom, the 'business model' for these companies has been the old-fashioned chain letter. But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street.will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest". These comments from the "sage of Omaha" expound on many of the themes we have been mentioning in these comments (see Archives), and are particularly appropriate as we seem to nearing the capitulative market phase that we have been expecting. The chickens are now coming home to roost. Here's some helpful advice a new source . . . What Do You and I Do Now? Ever-expanding "credit" that is created out of thin air by the Fed to meet every financial crisis results in a never-ending stream of momentary monetary solutions - all measured in increasing trillions of dollars. "Easy-outs" for the world's greatest risk-takers encourages even greater risk taking and misallocation of money and credit in the search of instant riches. After all, everyone knows, the lender of last resort backs every play. There are several possibilities when the world's banking system breaks down for the last time: 1. Worldwide Depression - when "cash" and AAA muni bonds are king. 2. Ever-increasing Creation of Currency. Inflation in the price of financial assets like houses and stocks, which go up forever. (CNBC's dream.) 3. Hyperinflation - where a glut of currency, credit, and prices that are so high nobody can understand them, leads to a worldwide regurgitation of the dollar. At this point, nobody wants to "back" the over-expanded credit of America, and people worldwide revert to only believing in "something real." Hyperinflation (what California's energy and power industry is going through today), is the best bet for America's future if history, or human nature, are a reasonable guide to the future. Hyperinflation is an overnight explosion of prices created by prior year's misallocation of money, credit, and natural resources. As we can now see in California, huge imbalances of supply and demand that have been mismanaged by government rules, regulations, and whim, can wipe out the life savings (i.e., Southern Cal Ed. and PG&E) in a few months. Hyperinflation destroys savings and credit as a currency is rapidly devalued - and leads to speculation in financial markets and a huge reduction in real business activity. Hyperinflation is the worst of all worlds and is nearly impossible to stop. Hyperinflation devalues savings (and currency) so rapidly that money saved for a lifetime becomes worthless overnight, and people raise prices much higher as they doubt either your ability to pay, or tomorrow's value (buying power) of your money. (Does this sound like Southern Cal Edison and PG&E today - paying $19/mcf for natural gas?) Hyperinflation always relies on bigger and bigger bailouts - until government itself loses all credibility. Sound impossible? It's happened many, many times in the history of the world and the U.S. debt balloon today is the biggest ever created - it is gargantuan. So where might you try to protect the buying power (value) of the "money" you have saved? The choices of "real things" to replace "momentary currency" are basically simple. You want to invest in what people will need and use in the future. 1. SAVE SOME MONEY IN THE WORLD'S STRONGEST CURRENCY, if you can find it. This is difficult today, because all nations are continually devaluing their currencies in an ongoing effort to keep the people in their country employed. Lowering the value of a currency keeps your country's relative wages lower than your neighbor's as you compete to sell goods in shrinking world markets. 2. GOLD - Place a portion of your savings in gold coins - those that are easily recognizable. This has to be among the most attractive investments today, with gold trading near 20 year lows, and with the premiums in gold coins the lowest in decades. (Ed: DO THIS AS SOON AS POSSIBLE, March 20th) The only negative is that leading central banks are depressing gold prices and doing everything they can to talk down gold. This may not change until the banking structure collapses, but you won't find gold coins available in any form when people finally lose faith in a flawed financial structure. 3. BASKET OF COMMODITIES - Save your money now by converting it into your ownership of the raw materials that people will always need and use. As confidence in computerized currency and credit declines, as it is already doing, the physical real raw material that we need and use in our daily lives will go up in price in relation to devaluing currencies. This is already happening. Rogers Raw Material Fund is an index of 35 "paid for" (i.e., non-leveraged) raw materials that can easily serve as your "basket of commodities" to hedge against a faulty dollar. When the U.S. dollar sharply loses its value versus the Swiss Franc and the Euro, we can expect Rogers Raw Material Fund to do very well in protecting savings. Like physical gold coins, a 10-15% investment in Raw Materials, which cannot be regulated by central banks, is now warranted. 4. READY CASH - A 20 to 30% holding of momentary currency (dollar equivalents) is warranted now if you wish to be able to take advantage of air pockets (huge declines in price) in financial markets. The natural gas stock that declined to $3 a share two years ago when oil was at a depressed $10 a barrel has risen to $19 a share (Penneco on the ASE) as oil and gas prices have gone up. All viable natural gas stocks have shown significant gains from their lows - if you had the courage and the money to buy when no one else dared try. The investment, both shorter term and longer term, in stocks will continue to be exceptional if you have the courage to buy low and can accurately appraise future value and need. It takes liquid funds, it takes courage, it takes knowledge, and it takes some good fortune. Be sure to diversify your funds. 5. REMIND YOURSELF THAT "THEY" ARE WRITING NEW RULES TO THE GAME EVERY MINUTE OF EVERY DAY. Do not be complacent - no matter how sure you are in thinking you are right. If there is a primary rule for the future, as our current day value standards are turned upside down, it must be: Pick both a job and a diversified investment portfolio with one focus - what will people need and use in the future? Here's a comment by Martin Weiss Fed Decision: Does it Matter? A rate cut from the Fed will make about as much difference as the last one in January -- no difference at all! Here's why: The Fed can cut rates until the cows come home, but if consumers and companies continue to withdraw investments to pay down their debts, the markets will continue to fall. The savings rate turned negative last year and has continued on its downward path. Americans no longer have nest eggs or rainy day funds at their disposal. Instead, they relied on the winning ways of the stock market for the past decade. Well, now that the stock market has proven to be an unreliable savings vehicle -- losing $4.9 trillion in value since last March's peak -- consumers and companies have to unload equities in order to pay their bills. And it's only going to get worse. In 1990, all household debt (including mortgages) equaled 85% of personal disposable income. Last year, that figure hit 105% of disposable income. With the economy slowing drastically and every week bringing another raft of huge corporate layoffs, Americans are facing a cash crunch of historic proportions. That's why bankruptcy filings are on the rise, as are credit card, auto, and home loan delinquencies. The stock market slide over the past year is just making the cash crunch even worse! As investors remove funds from the stock market, prices will continue to fall, and as portfolios shrink, more investors will feel pressured to take money out of the stock market! It's a vicious cycle, and one that won't be helped by a mere rate cut in interest rates. Here's an important article The Ticking Derivatives Time Bomb "Derivatives have been the key to what has been basically unlimited credit availability that has financed the leverage behind the great bull markets, as well as the protracted economic boom. The proliferation of derivatives has created truly frightening risk, not reduced it." - Doug Noland, Prudent Bears Fund (1/5/2001 article) The most extreme manifestation of the greed which has helped to create the biggest speculative bubble in history is the $104 trillion derivatives pyramid - erected over the past decade or so by the largest banks, brokerage firms, and hedge funds in America and around the world. The bubble in derivatives is the biggest single threat to the entire global financial system. Derivatives are highly complex, sophisticated investment vehicles that are derived from more traditional investments - they are side bets on virtually anything such as interest rates, stocks, stock indexes, foreign currencies, energy prices, etc. Or they are the result of investments such as mortgages that have been broken into pieces. These derivative "side bets" (originally conceived of to "hedge" or "insure" against market risk) can carry incredible leverage of 100 to 1 or even 1,000 to 1. When Long Term Capital Management (a large hedge fund) hit the wall in September 1998, this fund with assets of $4 billion had leveraged securities positions of over $100 billion and exposure in the derivatives markets of over $1 trillion. Thirteen of New York's largest banks and brokerage firms (also huge derivatives players) had overlapping positions in LTCM's derivatives and ultimately had to have a Fed-engineered bailout costing several hundred billion. The whole U.S. financial system almost went in the tank over one defaulting hedge fund which was a large player in the derivatives markets. When LTCM went under creating chaos throughout world financial markets, U.S. banks were holding $26 trillion in derivatives positions. Today these banks hold $37 trillion in these highly leveraged financial bets. Doug Noland believes that the reason for the Fed's abrupt, precipitous drop in interest rates on January 3 was not just problems in the economy or stock market, but very possibly a major problem or series of problems involving derivatives and the highly leveraged speculating community. Rumors surfaced in early January and were quickly quashed of serious derivatives problems at Bank of America. Since the LTCM fiasco, there is no public discussion of derivatives problems. All such discussions are held "behind closed doors" between the "big players" and the Fed. It is important to remember that in recent weeks and months, we have seen extreme price movements in equities, interest rates, currencies and throughout the energy markets. Not all of these fluctuations are readily predictable, hence, with 100 to 1 or 1,000 to 1 leveraged positions, huge losses (in the billions, tens of billions, or more) can eventuate literally overnight or in hours or even minutes. It should be noted that Microsoft lost $350 million in derivatives in the second quarter of 2000 due to extreme market volatility. As Doug Noland wrote on January 5: "It sounds extreme, but we have always assumed that the massive U.S./global derivatives market would at some point collapse (perhaps Russian style with systemic counterparty defaults). This, in what we view as sound and rational analysis, is based on the fact that there are serious fundamental flaws in the entire process of relying on sophisticated derivative models, especially to the tune of $100 trillion... "Derivatives have been the key to what has been basically unlimited credit availability that has financed the leverage behind the great bull markets, as well as this protracted economic boom. As we have said before, the proliferation of derivatives has created truly frightening risk, not reduced it. There is no doubt that the California utility fiasco and an historic spike in energy prices (particularly natural gas) has wreaked havoc within the energy derivatives marketplace. To what extend, only time will tell. "The bottom line remains that derivatives and Wall Street 'structured finance' are deeply imbedded throughout the entire financial system and economy. The unfolding crisis is systemic and the problems structural. Throwing more credit and 'liquidity' at this extraordinary situation is a grave mistake with extreme risk. This is very much a U.S. financial system and economy 'balance sheet problem.' Not only has the financial sector become grossly overleveraged, the quality of financial sector assets is very poor and rapidly deteriorating. "The accumulation of unprecedented foreign liabilities continues by the day, only increasing dollar vulnerability. The 'off-balance sheet' derivative issue 'overhanging' the U.S. financial sector makes the situation only that much more precarious. The possibility of an inevitable collapse in confidence for the U.S. dollar and financial system can certainly not be ignored at this point." [ED. NOTE: Noland actually had a much longer, more detailed explanation of the huge derivatives problem. To read the balance of that excellent article, click here ] (THE CHARTS AND GRAPHS WILL BE REMOVED BY THE MAILING PROGRAM ON YAHOO -- THE URL IS AT THE BOTTOM IF YOU WISH TO SEE THE GRAPHS) Mkt Average Last High Date Highest Loss March 31 2003 Dow Jones 11,750.28 - Jan 14 9,652 -17.9% (Oct 18th) 5,940 1,713 S & P 500 1,552.87 - Mar 24 1,142 -26.4% (Mar 20th) 703 228 Nasdaq 5,132.52 - Mar 10 1,857 -63.8% (Mar 20th) 1,144 365 Tuesday, March 20th Here's the Prudent Bear Market Summary by Lance Lewis Fed Rate Cut Is Sold, With Authority Asia was lower last night as Hong Kong fell 2 percent. Japan was on holiday. Europe was up almost 2 percent as we whirled around to the US open where the futures were up slightly. We opened flat, traded up to a marginal new high above yesterday's romp, and then marked time till the FOMC announcement. As we approached the announcement, we traded up near the highs of the day. We got a 50 bp cut. That news was sold immediately as the market dropped sharply in response to the * point cut. Then, we whipped around and rallied back to a marginal new high for the day. That move quickly flamed out, and we collapsed back to the lows. From there it was a slow grind lower that accelerated into chain selling in the last hour where we ended right on the low. Funny enough, the action today was just about identical to the action we saw on the last cut at the Jan 31 meeting. I went back and checked the description of the day's action in my archives. Just as that rally was built on nothing but ! hope and then dashed on the rocks of reality, so this one was (complete with identical wild intraday swings too.) Volume was good (1.2 bil on the NYSE and 2 bil on the Naz.) Breadth was slightly negative on both exchanges after being strongly positive early on. Big winners were in the golds as the HUI rose a percent. Big losers were in the biotechs as the BTK lost 7 percent. Last night SLR, a contract manufacturer, warned and announced it was laying off about 10 percent of its workforce. People understandably didn't seem to like that and consequently spanked SLR for 12 percent. The rest of the contract manufacturers were hammered off that with FLEX and SANM being the standouts, both being down around 18 percent. We also had a warning out of semi equipment maker KLAC. KLAC said, ``Business fundamentals for the semiconductor industry have continued to deteriorate throughout the quarter. Excess semiconductor chip inventory caused by slowing end-market demand across the majority of semiconductor segments and slowing global economic growth have led our customers to defer equipment deliveries on pre-existing orders and delay order plans for additional capital equipment spending." Note that there is no sign of "this is just an inventory correction" nonsense there as many have been calling the current slowdown in demand in semi-land. KLAC was hit for 8 pe! rcent. The rest of the semi equips were busted as well with CMOS being the standout loser, falling 10 percent. The SOX was smoked for 6 percent as semi and semi equipment shares were whacked again, returning us to Monday's lows and the low for the move. The rest of tech was evenly hammered with just about everything moving back to levels just shy of a new low for the move as the market liquidation continues. Financials were also lower. The BKX banking index and the XBD brokerage index both fell 3 percent. GE fell 3 percent, and the credit cards were generally off by 4 percent. Retailers were mixed with the RLX ending down only a touch. . . . . <snip> . . . . The US dollar index fell a percent, taking a steep slide in the moments following the rate cut. I don't recall the dollar ever sliding like that in response to a rate cut during the bubble years. . . . <snip> . . . . Well, it appears the Fed got some religion today and only gave the kids 50 bps despite the demand by the Street for 75 bps. As expected, the news was sold and sold with authority after the initial wild gyrations. We ended the day on the lows with new lows for the move in all the major indexes (SPX, NDX, and the Dow), and the Dow has now closed below the previous year's low close for the first time since 1982 when the bull market began. They say nobody rings a bell when the bull ends, but that's about as close as it gets I think. The herd is clearly spooked now after the Fed's easing failed to bail them out. Now, we could see some real selling as the realization sets in that nobody is going to be there to bail them out this time. Or more to the point, maybe people will finally realize that lower interest rates are not going to make XYZ corp. rehire 10,000 workers that they just laid-off or build that new fab. It might make Joe Consumer reach into his wallet (and pull out a cred! it card probably) and buy more SUVs for a while, but even that won't last long once people begin to realize where things are headed. It also has consequences for the currency and thus long-term interest rates, and those consequences aren't good either. Stocks appear finally ready to leap into that abyss that we have so often warned of. Hang on tight, we could be about to go where no bull has gone before. -------------------------------------------------------------------------------- Market Links Here's web page of great market links: http://www.fallstreet.com/Links/links.html For a weekly Elliott Wave analysis visit Cycle-Pro (updated on Sunday) Visit the Fiend's Super Bear Page Bearmarketcentral.com Visit the Prudent Bear U.S. Financial News (Yahoo) For economic reports visit Usatoday BearFighter.com For interational news visit Yahoo Investech.com For information on Microsoft Financial Pyramid . . . For Martin Weiss' Safe Money Report Urban Survival Raging Gold Info-War Yahoo Finance: International Markets -------------------------------------------------------------------------------- Commentary Today started out like you would expect, trading sideways waiting on the Fed announcement. Right after the 1/2 percent rate cut was announced the markets dropped like a rock to the opening low, reversed back the upside, almost setting a new high for the day then fell almost straight down for the remainder of the day. I haven't seen this sharp a drop in a long time, but, I fear you will see more very soon. The 14th I made a forecast for the current decline based on the 1987 crash. Below is a chart that shows the forecast and our current Dow High, Low and Close figures. The oval is where the rate of decline begins to accelerate within the last 4 days before the low. The date for this oval is March 28th. Looking at the projection chart, the markets will drift lower until reaching a "give up" point on March 28th, then they will fall off the cliff. Long Term Dow Chart Long Term S&P Chart Long Term Nasdaq Chart This is a private, non-commercial, web page comparing our current market to previous market crashes. You will NOT find any click-ads here and you are welcome to visit as often as you like. It is my intention to update this page daily until our market crashes or returns to making new bullish highs. If our market enters a real crash, my commentary will switch from market comparisons to forecasting the bottom of the crash. I don't make specific stock recommendations and I am not connected with wallstreet in any way. I am solely responsible for the content of these pages and if I include any comments from others I will tell you who wrote it or include a link to the author's web page. This web page will be updated each evening until the crash low. FROM THE MCCLENDON FINANCIAL REPORT http://home.flash.net/~rhmjr/c0320.html RUMOR MILL NEWS AGENCY http://www.rumormillnews.com Rayelan Allan, Publisher Message From Rayelan: Many people have asked how I restored my health. Here is my secret: DEAD DOCTORS DON'T LIE. These are the products I used and continue to use. I am living proof they work! If you have questions, check out the chat room on Thursday nights, 7pm California time. Click the url for more information! http://www.deaddoctorsdontlie.com/agent/raye/ [Non-text portions of this message have been removed] RMNews, The Uncensored National Rumor http://www.rumormillnews.com THE ONLY RUMOR YOU CAN TRUST RUMOR MILL NEWS AGENCY P.O. BOX 1784 APTOS, CA 95001 TEL 831 462 3949 FAX 831 462 2545 WHY WAS PRINCESS DIANA MURDERED? http://www.dianaqueenofheaven.com Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
