Market Review: Stocks Down, Investors Take Profits
Stocks headed south Friday as investors "took profits" on the heel’s of Thursday’s Greenspan-goosed rally. The Dow dropped 110.31 finishing the week at 10,733.56 – down 79.19 from Monday’s opening.
Analysts seemed altogether bored: "We have a typical summer Friday with profit-taking and low volume," said Arthur Hogan, chief market analyst at Jeffries & Co. by way of the money page in USAToday.
The Nasdaq also fell. Down 90.11 for the day to 4,094.45 – a 151.73 loss for the week. The S&P 500 slithered down 15.28 to 1,480.19. Decliners trounced advancers 11-to-7 on the NYSE.
Overall, not an impressive day, or week, on Wall Street. Business as usual for Mr. Bear? See "Mission of the Bear" below.
Prices this morning:
Russell 2000: 522.70 down 12.05
Gold: $280.60 up $.20
Crude Oil: $28.55, down $1.22
Natural Gas: $3.825, down $0.035
CRB Futures Index: 222.16, down 1.21 points
July 22, 2000
MARKET COMMENT: Brown Outs In Silicon Valley
The hot commodity in the news this week is electricity. USA Today ran a story about the dire situation in San Diego titled "Big Bills Give Shocking Lesson in Electric Deregulation." Our man on the scene there writes:
".simply put, California, like the rest of the United States, is running out of electricity. They haven’t built a new power plant in California in over ten years. And if prices aren’t allowed to go up, no one will have an incentive to build any new power plants. The shortage will grow worse, and we’ll be right back where we were in The Great Blackout of 1965, which put 30 million people in the dark for up to 13 hours."
"If we don’t work together and fix the problem," said Energy Secretary Bill Richardson in the International Herald Tribune "we’ll all end up sitting in the dark."
The full story – including a stock that is already earning record profits off the electricity shortage – Is in the August issue of Real Asset Investor. Due out next week.
MARKET COMMENT: Credit and the So-called "Soft Landing"
"…don’t believe it. Core prices are everything except food and energy. What manufacture is not using fuel? Who’s turned off the lights? Have you stopped eating?
It’s pure spin.
Two thirds of the GDP comes from consumer spending. And you can’t cool the economy when consumers are all heated up.
In May, the latest figures to come out, Americans rang up a record $11.8 billion in consumer credit. Not only was that a record, it amounts to an annual growth rate of 9.8%. Even worse, non-revolving credit (cars and other big items) hit $7.1 billion and a 10.1% annual growth rate.
Trouble is, American consumers are rambunctious. They always think there’s another deal – another raise – until its too late. They don’t buy gloom on a personal level."
Lynn also reports "the Contrarian Speculator made two "small" gains this week: 57% on EDS August calls in two weeks and 38% on Quintiles Transnational July calls in 7 weeks. a long time for us."
"By the way," says Lynn "our point and figure charts showed us just where to sell to make these gains work; the next day the calls were slipping in a soft market and we would have lost money on Quintiles and halved profits on EDS."
HEADLINES, INSIGHTS and NEWS:
I Know, That I Don’t Know… Socrates, 470-399 B.C
by Marc Faber
The more information investors have… thanks to Bloomberg, CNBC, CNN, and the cornucopia of Internet information providers and chat-rooms, the less they really know about stock values.
The Best Tech Stock in the World … Isn’t a Tech Stock
by Lynn Carpenter
Value. Let me say it again, value… it will simplify your life, help you earn solid profits, and let you start talking about something you really do understand again.
Mission of the Bear
by Raymond F. Devoe, Jr.
The bear will make himself obvious after he has lured the maximum amount of people in to lose the maximum amount of money. CNBC and other stock market cheerleaders are doing their part to aid in the bear’s mission.
by Lord William Rees-Mogg
For Britain, joining the euro would be a symbolic move towards joining this Europe of higher regulation. The basis of any future policy ought to be: "Europe for free trade, yes. Europe for higher regulation, no."
Whither the Price of Gold?
by Kevin Klombies
If central banks have created a veritable tidal wave of liquidity, why isn’t it finding its way into the precious metals markets?
Why Profits Drive the Economy
by Dr. Kurt Richebacher
The crucial role of profits in propelling economic growth was perfectly understood, even by a man like Keynes. To quote him: "Unemployment exists because employers have been deprived of profits." Which obviously applies to .coms, too.
And in case you missed it…
THIS WEEK in the THE DAILY RECKONING…
By Bill Bonner
07/21/00 DOT.COM DOLLAR
"… custodian of the dollar, and helmsman of the world’s largest floating economy, the Fed has reached a level of public confidence only surpassed, perhaps, by Biblical figures. In fact, I have it from one of my usually unreliable sources that they no longer serve fine wines at meetings of Fed officials. They serve water, and Alan Greenspan turns it into wine…"
07/20/00 DARNED CHEAP STOCKS
"…I could practically stand up under the hood of my ’54 Chevy. It was a relatively simple machine that invited tinkering. But I do not even open the hood on modern cars. Why bother? I have no idea what goes on in there. Young men seem to have lost interest. Instead, they spend their time connecting hard drives to CD burners. It’s cleaner work, and you don’t scrape your knuckles…"
07/19/00 UNDER THE BIG TOP, PART DEUX
"…goldbugs, people who harbor the quaint and romantic idea that there exist things in this world of real and lasting value, are mute. They have been silenced by 20-years of ridicule. Their only hope – one that I share – is that having indulged ourselves in the greatest investment error that the last two decades had to offer, and suffered accordingly, we might now have some measure of immunity from gross foolishness. We have been there. Done that…"
07/18/00 UNDER THE BIG TOP, PART I
"…the theory to which the author refers holds that, over time, all paper currencies will be rendered worthless by the people who produce them…but gold will retain its value. The theory turned out to be perhaps the most spectacularly imbecilic investment tool of all time. But that doesn’t mean it is wrong…"
07/17/00 THE INTERNET MANIA, R.I.P.
"…technology may be cumulative. But psychology is, alas, cyclical. Thus, when the party gets going, the rules that were learned at such cost – like the customs and traditions of the common law – are thrown over…"