Market Review: Lazy Tepid Days...Mr. Market and the Fed on Vacation

The earnings season is over… the Fed has done the market’s bidding… and all is well as the markets continue their late summer doldrums.

Consequently, stocks changed little Friday. The Dow closed up a measly 9 and finished the week at 11,192. That’s a gain of 146 for the week. Over the last two weeks the Dow has gained over 650 points. It’s currently at its highest point since April 11 when it closed at 11,287.

Broader indexes were lower… but not by much. The Nasdaq was down just over 10 on Friday… but was up 112 for the week closing at 4042. The S&P 500 was so lazy, it barely moved. It’s currently enjoying the slow summer vacation, gin and tonic in hand, at 1506.

The only memorable event on Friday? Internet giant Yahoo! got beaten down five and a half… but it’s still trading at 134 and a quarter… and at 403 times earnings it could use a few more beatings like that one.

The Russell 2000 was up just under 2 at 525.

Mr. Market, no longer preoccupied with interest rates or earnings, is "searching in vain for guidance." (Reuter’s) But there are big numbers to look forward to this week so maybe he’ll get a clue: personal income and spending on Monday; new home sales and consumer confidence on Tuesday; the index of leading economic indicators on Wednesday… we expect them to all be positive. After all, in the summer of love all news is good news for stocks. We’ll see…

PRICES:

Gold: $278.60, down $1.10 "Gold is looking a lot like it did before it took off from $252 to $324 last September." (Dan Ferris)

Silver: $4.90, down $.35

Platinum: $580.50, up $6.80

Palladium: $724.00, up $3.45

Crude Oil: $32.05, up $.40

Natural Gas: $4.63, up $.088

CRB Index: 221.9, up .70

Dollar Index: 111.14, down .19

Yen: $.0093, up a miniscule amount

Euro: $.90, same here

British Pound: $1.48, down even less

Addison Wiggin
August 26, 2000

MARKET COMMENT: Is the rise and fall of pure hypr and geek know-how off limits to us analog types?

"I have a clue how the tech mania ends. I’ve been looking at the winners and losers of this latest mania to see if there was any way for a value investor to tell them apart. P/E’s don’t offer a clue; book values don’t mean a thing; even sales don’t count for much in mania stocks. They have different rules … but they still can’t escape value.

It turns out there’s a simple one-two punch that reveals which high-flyers are about to get knocked down. It’s all about value…but a different value than most amateur investors look at.

So, I took the leap and came up with my three best short calls from the world of tech mania stocks. How’s it working? … Errr… maybe a little too well for the analog world. Since Tuesday, two of my short picks have given me returns of 11.2% and 25.9% in three days. And that’s with no help from the market – the Nasdaq rose 100 points!"

Lynn Carpenter,
The Contrarian Speculator

THE DAILY RECKONING INVESTOR’S LIBRARY:
The Profit Cycle is Headed Your Way!

Commodities are booming…while stocks languish. Oil is at a decade high. Water recently set a record high. What’s next? You can make a fortune in Mining Stocks… if you understand the industry and the money flow. We recommended a mining stock last week. It’s up 6% already. Don’t miss out.

FLOTSAM AND JETSAM: Telltale Signs of Stagflation?

From John Myers

Outstanding Investments in the Natural Resource Sector

"Durables, those things that last for years and which people buy when they feel particularly flush with cash fell at a record rate in July, dropping 12.4 percent. That was the largest monthly decline since 1958.

In terms of raw numbers July orders decreased $30 billion to $212.4 billion. The consensus amongst economists was that orders for durable goods would decline 6.7 percent. In what other work can you miss your mark by more than $5 billion and still keep your job?

Other evidence that the economy may be weakening comes from the Internet of all places. According to Challenger, Gray & Christmas Inc., an out-placement firm, the number of job cuts at dot-com companies has jumped 55% since the firm’s report a month ago. That brings the total job cuts at Internet companies to 11,785 since December.

Meanwhile President Clinton is pressing OPEC to increase production and provide some price relief for consumers and the transport sector. Clinton’s real aim of course is to calm the bond markets that have been acting nervously at the hint of rising prices and falling growth.

According to Clinton, oil prices must fall by about $5 a barrel to ensure the United States and other consuming countries don’t slip into recession. Clinton has gone directly to Saudi Arabian leader Crown Prince Abdullah bin Abdul Aziz, urging him to open the country’s spigots. The Saudi’s and other producers must wonder where Clinton was when the price of crude went beneath $12 a barrel in ’99.

Of course OPEC sees retaining current prices as essential to backstopping their cash starved treasuries. What most do not realize is that at current levels petroleum is relatively cheap. In fact if you account for inflation, oil would have to sell for $70 a barrel to equal its highs of the early 1980s.

The silver lining in this cloud can be found on the Oil and Gas Index of the Toronto Stock Exchange. The Index is testing its highs for the year, and currently stands 7753; up from 5500 last March.

The expectation in the oil and gas sector is for rising stock prices. Given the weakness in the mainstream economy and a potentially troubled bond market suggests that now is an excellent time for investors to move some money into natural resources."

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"I think and think for months and years. Ninety-nine times, the conclusion is false. The hundredth time I am right."

– Albert Einstein