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The higher cost of labor should push technology as we become more capital intensive. Fewer workers creating a larger economy should mean higher wages if the system is not dragged down by benefits. Private saving increase investment and growth - government benefits decrease saving, work, and investment and therefore drag the economy down. Retirement could be shifted to private savings and investment by subsidies of 401 ( k ) and IRA for more and more people. For the poor 100 % support, declining twice as fast for each higher decile of median income - .i.e.. if you are at the 20 % level of all incomes you get a 60 % subsidy , 30% from the bottom gives is 40 % support level - of $100 in retirement ( or health benefits ) and the government gives you $ 40 toward your retirement.
The support ends at 50 % or the median income, half higher, half lower.
Then additional public benefits could be means tested and budgeted rather than an open check book system.
The Social Security and Medicare Trust fund could be transferred to the Federal Reserve - who would appoint trustees who would invest the funds like any other retirement fund such as the California States Employees fund. Current beneficiaries would be held harmless ( grandfather clause ) - and health benefits would be a fixed amount with choices such as the Federal Employees Health Plan with again a more support for the poor. Pay more get more is not a new idea, competition and benefit / cost analysis as in every other aspect of life. No free lunch. If health care is not paid for by the client ( but a third party ) and the doctor benefits from services - it will be too expensive.
The trade imbalance is related to investment in that we are importing foreign cash to balance our export of US dollars to buy foreign goods. Increased local savings will lower interest rates - by increasing the supply of money - and reduce the attraction of foreign investment. This will force an orderly decline in the overpriced dollar - make imports more expensive and exports cheaper. I think Ross Parot could explain it with charts but Protection is not the answer.
The gender gap is because unmarried women ( I will fight for you ) need more outside support including government help and feel ( without fathers or husbands ) more insecure than married women and many men.
They have to feel that paying down the debt, setting social security on a really sound footing, providing medical care, education and other critical public services is safe for them. ( No risky schemes ) and have less concern with tax cuts and ideological motivations.
They have to take care of children, often the elderly or are elderly themselves - they know where the tire hits the road and don't want any fancy machine going too fast on unsafe tires. After the Democratic convention, Al Gore reasserted his lead over Republican George W. Bush among women, with a margin of 15 points or more in some polls, while making the race close among men. In the latest poll from the Pew Research Center, Gore leads among women on all of the issues that they consider the most important: keeping Social Security and Medicare financially sound (Gore is up 52-33); health care (Gore is up 50-30) and education (Gore, 44-38). Gore also has an advantage on protecting and strengthening American families, 44-37 among women. Appealing to women voters is important because they turn out on Election Day. Since 1980, women have been exceeding men in their rate of voting by up to 3 percentage points, and they also make up a bigger share of the electorate, said Curtis Gans, director of the Committee for the Study of the American Electorate. In 1996, he said, women made up 52 percent of the voting population. http://www.washingtonpost.com/wp-srv/aponline/20000918/aponline162845_000.htmCan Bush win? That question, which had been the subtext to the last couple of weeks of presidential campaign coverage, is increasingly becoming the main text — no longer "subliminable," as one candidate might say.
http://www.washingtonpost.com/wp-dyn/articles/A28193-2000Sep18.html"Most countries continue to face heavy tax burdens and high debt stocks and are ill-prepared to deal with the coming demographic shock from aging populations," the report said.
There are a couple of big issues that could be debated and move the country forward in preparation for the coming crisis . The overhang of benefits for the aged - In 1935 less 2.3 million were born and have reached 65 in 2000- in 1950 over four million were born and will reach 65 in 2015 - the current benefit is over $10,000 for Medicare and more for Social Security and going up with inflation and with more medical services the total will climb from the current about $ 400 billion ( $ 215 Medicare) to $ 1.2 trillion - 4.2 % of GNP up from 2 % for Medicare. ( Health care is 14 % of GNP ) http://www.lib.umich.edu/libhome/Documents.center/stats.html The numbers go from 33 million beneficiaries to 60 million or 13 % to 27 %, ( children are 25 % of the population or 75 million ) , workers paying in decline from 130 million ( 45 % ) 5 workers to 1 retired to 120 or 2 to 1 worker to retired. The cost will be 85 % of the current taxes / budget base and 20 % to 40 % of all earned income at 1.2 Trillion ( $ 1,200,000,000.00 ) or 10 % of the projected 12 trillion GDP rather quickly. http://concordcoalition.org/THE MISSING ISSUE IN THE CAMPAIGN"Last month, the CBO released a study that tallies up federal spending on the elderly and children. It shows that, per capita, spending on the elderly towers seven-to-one over spending on kids, and that, overall, it consumes 35 percent of the budget. This is before the age wave even begins to roll in. By 2050, according to the White House, the major senior benefit programs will consume an incredible 84 percent of budget outlays.
CONTINUED from Money page
The private sector is ill-suited to allocate international credit. It provides
either too little or too much. It does not have the information with which
to form a balanced judgment. Moreover, it is not concerned with maintaining
macroeconomics balance in the borrowing countries. Its goals are to maximize
profit and minimize risk. This makes it move in a herd-like fashion
in both directions.
The excess always begins with over expansion, and the correction is
always associated with pain. But with the intervention of the IMF and other
official lenders, the pain is felt more by the borrowers than by the creditors.
That is why over expansion has recurred so soon after each crisis. Successive
crises have, however, become more difficult to handle.
The Korean crisis, as distinct from that in other south-east Asian
countries, bears some similarities to Brazil in 1982 - with one major difference:
the loans are not to Korea as a sovereign country but to individual companies.
This has made it more difficult to get the banks to act collectively....
There are other shoes that may yet drop, notably China. On the other hand,
Japan, which looks so bad at present, has the wherewithal to solve its
problems.
TO CONTINUE from
WHAT TO WATCH FOR: Greenspan shocked markets over the weekend
with his
focus on deflation. Markets will be looking for a ratification of his
views
from the 2 governors speaking Tuesday. And while people are still
interested in how the Fed views the ongoing Asia crisis, if the Fed
officials simply stick to that spiel about growth being cut about half
a
percentage point or so, there won't be much reaction. Also, there's
a lot
going on with South Korea, so any news on how that country is making
its
way through its short-term funding crisis has implications for all
3 major
financial markets here. On the forex front, Japanese vice-minister
for
Finance Sakakibara is coming to DC and New York later this week. Forex
traders, ever the conspiracy theorists, will be spinning all sorts
of views
as to what Mr. Yen will cook up when he meets with US Treasury officials.
FOREX:
The markets will continue to bid up the dollar/yen if central
banks do
not intervene. Dollar/yen should trade in 131.75+135.00, while dollar/DM
range
is expected to be 1.8000+1.8350. Even if the BOJ does not intervene,
Sakakibara's trip to the US Wednesday through Friday will likely keep
traders on edge.
BONDS:
The market will be waiting to see if any remarks from Fed governors
Meyer or Phillips support its upwardly mobile interpretation of Chairman
Greenspan's comments about deflation. If these officials choose to
focus
once again on deflation, look for more price gains. But if they caution
the
market for reading too much into the Chairman's comments, prices are
likely
to give back some of the gains posted Monday. Also today, players will
be
watching the weekly retail sales data.
US STOCKS: Volatility is expected to continue as market jitters persist
ahead of the release of fourth-quarter earnings. All eyes will be focused
on the overnight performances of key Asian markets as the calendar
remains
light on economic news.
BOJ SEEN GENEROUS:
The Bank of Japan is widely expected to continue to take a generous stance in the money market in January in order to curb any rise in the unsecured overnight call loan rate, money traders said.
The traders said private banks will continue to find it difficult to raise funds through term-instruments, such as 3-month certificates of deposit, in the money market. (Story .108) What to watch: Japan 15258.74 Japan and other troubled economies sell a billion dollars or so of US bonds to recapitalize banks and brokers that have trillions in Yen bad debt.
The stock market
fall
The Nikkei collapse is also forcing banks to tighten lending, which in turn is leading to a big increase in corporate bankruptcies. That creates further selling pressure on the stock market - so undermining the value of the banks' equities holdings.
"We've got into a dangerous negative spiral; it's difficult to know what the authorities can do," says Ryoji Musha of Deutsche Morgan Grenfell in Tokyo.
At yesterday's closing Nikkei level, more than half of Japan's top 19 banks have sustained losses on their equity portfolios, according to brokers Jardine Fleming. Bank shares have fallen 32 per cent since September.
This is alarming because banks count 45 per cent of "unrealised gains" - the difference between the "market" value of the shares and the "book value" of the shares in the banks accounts - on their holdings as capital. If the market does not rebound before the financial year-end in March, many banks will have to book big losses. This will weaken their capital to assets ratio - the conventional measure of financial strength set by the Bank for International Settlements.
They sell $ bonds and buy yen - drives dollar down and yen up - interest rates up - decline in foreign sales slows US economy; growth drops to under 2.5 % in 4 Q 1997 and 2.25 % in 1 Q 1998, under 2 % in 2 Q 1998 ( down from 3 to 4 % forecasts ) Profits up 6 % rather than 12 to 14 % as forecast - FED lowers rates - 30 Y to 5.5 % by April and 5 % by June, notes just under 4 % by April. S&P 500 range at 860 at P/E of 17, to 930 at P/E of 20 with 5 % long term rates is
The
money page will be done at 8 and 10 PM the day before and updated with action in Europe at 6 AM and 9 AM just before the market opens with news and bond prices. Sometimes we are down so it's important to bookmark the
http://www.wiredbrain.com/money.htm a backup server -
http://www.geocities.com/~wiredbrain/flash.htm another backup server
Send Letter to Dr. Peter Pflaum
the
market for:
US market could decline while Europe and Asia rally ( the reverse of flight to quality) ( future DOWN )
Technologies
2X market FLAT
Asia's Rally and Europe's off record high ( US Germany France London )
Markets Asia down ( mixed) Europe UP mixed: bonds [ atbonds down, interest UP well off lows of 5.65 high of 6.2 ] and currencies (dollar) UP , in a tight range in a
positive FX market - Indonesia Rupiah down 15 % to 11,500 from low
of 5,000 high of 15,000
Confidence levels: (+ or - numbers -)
0 = 50 % ( 50/50 ) 3.5 = 55 % 5.5 = 65 %
6.5 = 70 % 7.5 = 75 % 10 = 80 % 15 = 90 % 15 + = 95 %
Reports of weaker dollar and bonds, due to trade imbalances
beginning to show up a little - causing higher interest because of further
unwinding of the flight to quality sales of US bonds, lowers exports,
lower growth and profits because of higher costs of skilled labor in domestic
production vs. lower cost imports.
Asia ex Japan - will have the best net return over
the next 3 months as China does now, Taiwan stocks as the key index approached
the 9,300-point level.:
GOING
DOWN GOING UP look at this....
Support
Level key 200 day low now near old average of 955.
UP + [ TRADE ** INDEX ]***
- DOWN
After-noon top
of wave look to go short IF and only if and when Technology
SAFE TRADE UP
or hold long on three or more * and + 6.5 index enter on UP target S&P500
1050
SAFE TRADE DOWN down or hold on
three or more *: enter on three or more - 6.5 WI ( index) down target S&P500
955
Follow the $SOX often up or down twice as much as market
MORGAN
STANLEY HI TECH 35 ($MSH) and the
NDX
goes down ( it's going DOWN with the If the
$SOX INDEX
PAGE made by AltaVista, enter "wiredbrain" to update
):
TRADE at
10:30 AM - SELL
The money page will be done at 6, 8 and 10 PM the day before and updated with action in Europe at 6 AM and 9 AM just before the market opens with news and bond prices.
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SEE ANALYSIS on how the
US market could drop 10 % and
why ?
Cognitive dissonance:
A psychological state that occurs when an individual
questions an action s/he has taken and seeks reassurance that s/he has
indeed made the right decision and/or when the message and the source are
in conflict, you believe the message but don't trust the source, or trust
the source but don't believe the message.
and common misconceptions: the division between conventional
wisdom and reality.
There is a strong epistemological argument, elaborated by Karl
Popper, in favor of the open society ( and mind ): Our understanding
is
inherently imperfect; the ultimate truth, the perfect design
for
society, ( or business, or school, or political system )
is beyond our reach.
We must therefore content ourselves with the next best thing -- a form
of social
organization that falls short of perfection but holds itself
open to
improvement. That is the concept of the open society: a society
open to improvement.
The more conditions are changing --
and
a global economy fosters change -- the more important the
concept becomes.
A global economy is characterized not only by the free
movement of goods and services but, more important, by the
free movement of ideas and of capital. This applies to direct
investments and to financial transactions. Though both have
been gaining in importance since the end of the Second World
War, the globalization of financial markets in particular has
accelerated in recent years to the point where movements
in
exchange rates, interest rates, and stock prices in various
countries are intimately interconnected. In this respect
the
character of the financial markets has changed out of all
recognition during the forty years that I have been involved
in
them. So the global economy should really be thought of as
the
global capitalist system.
Financial markets are inherently unstable,
and international
financial markets are especially so. International capital
movements are notorious for their boom-bust pattern. During
a
boom capital flows from the center to the periphery, but when
confidence is shaken it has a tendency to return to its source.
I
have seen many ebbs and flows and booms and busts, and
though I fully recognize that international capital markets
have
become much more institutional in character and demonstrate
much greater resilience, I cannot believe that the present
boom
will not be followed by a bust until history proves me wrong.
The risk of a breakdown is greatly increased by the fact
that
our theoretical understanding of how financial
markets operate
is fundamentally flawed. Economic theory
has been built on the
misleading concept of equilibrium. In my view, equilibrium
is
elusive because market participants are trying to discount
a
future that is itself shaped by market expectations.
For
instance, a company whose stock is overvalued can use that to
justify the inflated expectations of its shareholders, but only
up
to a point. This renders the outcome indeterminate, and it
is
only by accident that the actual course of events corresponds
to prevailing expectations. Market participants, if they
are
rational, will recognize that they are shooting at a moving
target
rather than discounting a future equilibrium.
The theory
of
rational expectations makes the heroic assumption that market
participants as a group are in a position to discount the
future
accurately. That assumption may yield a hypothetical
equilibrium, but it has little relevance to actual market behavior
-- and neither market operators nor regulators have ever fully
accepted the theory, exactly because they are rational people.
I
am told that economic theory has gone a long way toward
recognizing and studying disequilibrium situations.
This brings me to the most nebulous problem area, the
question of values and social cohesion. Every society needs
some shared values to hold it together. Market values
on their
own cannot serve that purpose, because they reflect only what
one market participant is willing to pay another in a free
exchange. Markets reduce everything, including human beings
(labor) and nature (land), to commodities. We can have a
market economy but we cannot have a market society. In
addition to markets, society needs institutions to serve such
social goals as political freedom and social justice.
There
are
such institutions in individual countries, but not in the global
society.
The development of a global society has lagged behind
the growth of a global economy. Unless the gap is closed,
the
global capitalist system will not survive.
Federal Reserve Chairman Alan Greenspan:
"We cannot rule out two worrisome possibilities. On the one hand, should the momentum to domestic spending not be offset significantly by Asian or other developments, the U.S. economy would be on a track along which spending could press too strongly against available resources to be consistent with contained inflation.
"( and), we also need to be alert to the possibility that the forces from Asia might damp activity and prices by more than is desirable by exerting a particularly forceful drag on the volume of net exports and the prices of imports," he said.
With the current situation reflecting a balance of strong countervailing forces, events in the months ahead are not likely to unfold smoothly, he said.
LONDON, Feb 18 (Reuters) -
The U.S. and European equity markets have benefited from recent reductions in cash holdings but are vulnerable to further shocks, fund mangers told Reuters Television on Wednesday.
A number of unpleasant surprises could still be lurking including next month's U.S. corporate earnings and a possible escalation of the stand-off in the Middle East, they said.
Stock Market Divorcing Itself from Real Story?
By Pierre Belec
NEW YORK (Reuters) - The economy is slowing, corporate
earnings are slipping and Asia is still a time bomb just waiting to explode
again but the stock market keeps making new highs. Has Wall Street gone
nuts?
The rally is being fueled by mutual fund managers, whose trading activity has added tremendously to the market's upward momentum.
"
The fund traders have got to put their money in stocks every day and they don't get paid to build up a lot of cash," said Alfred Kugel, senior investment strategist for Stein Roe & Farnham, which manages $5 billion in mutual fund assets.
"During the events of Asia at the end of October, the fund managers might have raised their cash holdings from three to five percent, but with all the money that keeps coming into 401K and Keogh retirement plans, they had to stay invested," he said.
There's concern that the mutual funds' spectacular gains over the last few years might be creating a false sense of confidence that the market can only go higher.
DAVOS, Switzerland, Jan 29 (Reuters) - Former U.S. presidential economic advisor Fred Bergsten said a sharp plunge of the dollar was the next crisis likely to hit world markets after Southeast
Asia's financial turmoil is over.
In a statement released at the annual meeting of the World Economic Forum here, Bergsten said short-term fundamental factors continued to favour the dollar but long-term fundamentals were increasingly negative.
``
The next major disturbance to the world economy, once the world has safely surmounted the current Asian crisis, is likely to be another sharp plunge in the exchange rate of the dollar,'' he said.
``As always, it is impossible to predict the turning point at which the long-term fundamentals will again dominate the short-term fundamentals,'' said Bergsten, who is director of Washington's Institute for International Economics.
In a global economic forecast for the years 1998-2000, Bergsten said the long-term fundamentals included U.S. trade and current account deficits, which he said were likely to reach $250 billion to $300 billion in 1998-99.
``
The net debtor position of the United States, which has already passed $1 trillion, will shortly exceed $1.5 trillion.''
``
There is no apparent sign of a turnaround in these trends,'' he added.
Bergsten said there were several possible scenarios for what could trigger
a dollar plunge, including a sharp slowdown of the U.S. economy or
a significant pickup in Europe.
The Wiredbrain Theory of market
motion :
There are external and internal factors. The external
factors are based on the existence of one global market, working 24 hours
a day - going from New York to Asia to Europe and back. This market then
influences the open because of actions already taken elsewhere. The third and fourth factors are The American and global economy is driven by new technologies in communications
and computers. The model companies are Intel and Microsoft, rather than
G.M. and Dupont on the older DJIA which as been below market as measured
by the SP 500. Therefore the NDX is more representative of future growth
than the Dow Industrial.Factor
one includes foreign markets.
Factor
two is made up of currencies flow into and out of
the dollar. A higher dollar means more people are buying than selling which
implies movement into U.S. markets.
INTERNAL.
Since Oct. Intel and the semi-conductors have been relatively
weaker than the market as a whole. This has held down the NDX as a whole.
Microsoft has charged ahead of the market pulling technologies up. You
can notice that Intel ( SOX index ) drops first, then the NDX then the
market. As the auto's drove the market in the 1950's and 1960's, and IBM
was the bell weather in the 70's and early 80's, these new technologies
now forecast the market as a whole. Now what do you see ? A decline in
Intel and loss of relative strenght of Technologies, A high flying MicroSoft
( ready for a fall ) ?
The final factor is built around Interest rates which
effect the markets when they move out of range or quickly. The market does
not have very good peripheral vision and only takes account of rapid motions
on the edge of its focus. The futures CME flash reports, reflects all these
factors and confirm Wiredbrain analysis.
When there is agreement - everything moving in the
same direction the Instant Index goes up or down - gets bigger or smaller.
The market is a human activity and as all human activities is a mixture
of objective reason and magic. The world as we know is a perception, objective
reality is only a special case observed by special methods. Events maybe
perceived as important or not depending on the message and the media and
preset patterns of expectations and prejudices. These all too human factors,
reflective factors, add temporary uncertainty and volatility.
The S&P 500 Wiredbrain's Index
as a SHORT TERM TIMER:
NOTE A grain of salt:
The higher the score the higher the probability of
being right. The wiredbrain index score is close to points on the S&P500
but are not points but the summation vector on the strength of different
market forces.
+- 15 on the Wiredbrain Index = 90 % right or better, ++10 = 75 % or better, +-6.5 is over 65 %, under 4 is just a little more than 55/45
When the Wiredbrain's Index is greater than +- 6.5,
The predicted Open ( at 9 AM) is about 90 % correct on direction, 85 %
correct on scale -
If the index is above 6.5 the predicted close is about 75 % correct in direction so positions maybe left open, above 10 the prediction is better but not as good as at the open.
Longer term direction depends on very strong trends: when Wiredbrain's Index is over +- 10 the move lasts for several days and real profits can be earned. Doesn't happen often that all the forces are lined up in the same dirrection.
If you get all the way to the end of the page - you
will be up to date on what's going on in the market. It is cut and paste
so is current but a little messy. The system is geological, the newer stuff
is on top, older down a couple of layers.
UP + [ TRADE *** INDEX ]**
- DOWN
After-noon top
of wave look to go short IF and only if and when Technology
SAFE TRADE UP
or hold long on three or more * and + 6.5 index enter on UP target SP500
1000
SAFE TRADE DOWN down or hold on
three or more *: enter on three or more - 6.5 WI ( index) down target SP500
955
Follow the $SOX often up or down twice as much as market
MORGAN
STANLEY HI TECH 35 ($MSH) and the
NDX
goes down ( it's going UP with the If the
$SOX
):
TRADE at
10:30 AM - SELL
WAKEUP
CALL NASDAQ+100 INDEX (NDX )
1138.81
Sell June ( covered ) Call around the strike price Selling calls gives
you the advantage to earning premium earning beyond the
gain from lower NDX prices - once the position is taken but on a stop
loss and a limit to buy back at some target price from 1138 the low target
is about 990 and should be a nice gain on selling at 100 and buy back at
30 or so ..
NCZFT
at a offer price that would have to be figured - as some of the prices
are odd - odd high is OK but odd low is not.
Bonds UP, rates down a little, currencies stable, foreign markets DOWN
The market is too high on individual ( small ) investors and mutual
funds cash flow - has to go down sometime - but maybe not today
- in a no news market the balance could be pushed this way or that by minor
events. Here we go again Jakarta Composite ^JKSE
3:16AM 445.524 -42.086 -8.63% back up to 495
DJX
Index
Or
Intel at 88 1/2 down from 94 high,
Microsoft
84 down at 82 -2.5 [split = 170 high]
Bloomberg
backup International markets:
Yahoo International not working
this moring go to my.yahoo.com sign
in as "wiredbrain" password "synergy" and open major markets - see the
individual stock picks for the next century.
Backup at http://www.wiredbrain.com/money.htm for what we thought a few minutes ago:
COMM RES BUR NDX
(NYSE:^CRB) - Jan 30 · 234.39 Change -0.59 (-0.25%)
SOX flat to 309
SOX Semiconductor Index 1071
MORGAN STANLEY HI TECH 35 ($MSH)
DJ COMMODITY NDX
131.38 UP to 144 from 167.2 high Commodity prices
going up in the last month from long term down - at 3 months high -
^DJC `
Updates
on Dealers UP + [ TRADE
**** INDEX ]*- DOWN
Noon
top of wave look to go short IF and only if and when Technology
SAFE TRADE UP
or hold long on three or more * and + 6.5 index enter on ***UP target SP500
1000
Safe Trade down
or hold on two or more *: enter on three or more - 6.5 WI ( index) down
target SP500 955
Follow
the $SOX and the
The
Tailgate thing ``It does make you kind of nervous, and when people are nervous, they sell stocks,''- the index means direction -+ if to buy, sell, close or hold, time to hold them, fold them or bet them? Hold down - maybe close them ? -
Mail in your results before 9:30 Am and win free options profits from $ 1,000 trade :
( SELF.HTM
free standing form )
Mail in your results before 9:30 Am and win free options profits on $ 1000.00 trades:
__ Points for foreign markets (
bookmark ) assign from - 9 to + 9
__ Points for foreign exchange ( bookmark
) assign from -3 to + 3
________ sub-total for Markets and FX - 11 to + 11
__ Points for Technology as leading indicators (
bookmark
) assign - 3 to + 3
__ Points for market momentum (
bookmark ) and news ( bookmark
) look for FOCUS - 3 to + 3
________ sub-total for Market direction and technology as leading indicator - 6 to + 6
SUB-Total for above _________ ( Markets and FX ) + ( Direction ) - 5 to + 5
______ Interest rates (
bookmark ) - 3 to + 3
TOTAL _______
Future market S&P500 _________ ( bookmark
) less premium - 6.5 = _______ from cash price (
bookmark ) = ______ from cash
Grand total ________ Index of today's market
Then cut and paste to
Send Letter to Dr. Peter Pflaum
What I think ( at the moment) - Go short at Dj 8900 or SP500 1100
Wait until market hits 1100 and look to go short -
the rally was somewhat unexpected by the futures market and didn't turn
quickly enough because of tailgate - bonds weak and dollar flat - Rally
was built first on good earning reports that are difficult to take into
account then rally in Asia and Europe. The technical aspects ( breath,
leadership and futures ) are still weak. Too late and too risky to go long
even with WI ( wiredbrain index at + 11.5 ) The trouble with all index
and measures is that they are about what happened - The market went up
so a lot of measures when up - BUT that doesn't say what will happen for
more than a few hours.
TRADE at 10:30 AM
Resistance: At about 1100 on the S&P500 9000 on the Dow people hit target prices on individual stocks and index futures and begin to close positions. This may trigger sell programs as people sell stocks and futures, going short and buying puts.
The drop in the futures price sets off more sell programs etc.
There is just a few minutes when the
Tail wags the dog
:
The futures price is enough below the cash price to sell the market and buy the future - the future then goes back to near the cash price where it is sold again. If the DJIA only a few stocks are involved but with the S&P500 more. If the market keeps falling we can get into a free fall until there is a market halt. If people keep selling the futures it will keep dropping which triggers sell programs - which drives the market and the futures down et al - this is what happened in the Oct crash.
The FTSE 100 index sprinted into record territory and over the 5,500 level for the first time.
The index was up 121 points or 2.2 percent at
5,579.9 by 0901 GMT.
Germany's Xetra DAX index set a fresh record high, jumping 1.3 percent
in early trade to 4,567.13 points. Its previous record high was
4,555.05 points set on Wednesday.
``People don't know quite what to do,'' said the head of trading
at one large brokerage, stunned at the size of the rise. ``It's
a very brave person who chases the market at this level.'''
30 Y TSY YLD NDX (
-
DJ COMMODITY NDX 131.38 UP to 144 from 167.2 high Commodity prices going up in the last three weeks from long term down - at 3 months high -
TRADE at 10:30 AM
-
Tech's
down and market will follow - good reason not to do anything until
10:30 - Strange things happen in the first 1/2 hour as we adjust to trades
done in other places and other time zone markets.
Until this week's breakout - the market has been hanging around these numbers for more than six months: 955 on the S&P as been a working average with 1000 as a high and 930 as a low but the market has to adjust to the loss of buying power because several trillion dollars has vanished from global wealth and people cant buy what they had planned to purchase. 950 is a better number with 1000 now being the high and the low about 910 - 955 S&P500 = DJIA @ 7500.
The semiconductor industry is the leading edge as the Auto industry was in the 1950’s and 60 ‘s.
The
business cycle depends on high technology.
It’s not their fault, our founding fathers, just got carried away with the application to theory to complex social systems.
The separation of powers, balance of powers theory expressed in the constitution and the federalist papers suggest that the people will be protected from tyrannical government by control of ambition with ambition, power with power.
There was little or no concern with governmental efficiency or effectiveness but almost completely concerned with the protection of property ( Liberty ) because of their fears that popular government would be socially radical. Complex social theory has to be based on experience and tradition, not theory, because of the universal law of unexpected and unpleasant consequences of social engineering.
The
founding fathers assumed the Constitution was a temporary document
to be fixed up by the next generation.
The complex federal and divided government has not protected liberty better than simpler and more functional parliamentary systems in most modern democracies.
The U.S. is not freer or more democratic than Canada, New Zealand, Australia, Great Britain, Holland, Sweden, et al. It is simply less effective in handling domestic problems, the others have national health systems, rational transport policy, schools that work, modern industrial economies, less social tension, class inequality, mess and ugliness.
The U.S. Constitutional system failed to solve the crisis that led to a great civil war, for a century it failed to protect the freed slaves, it failed to reform local tyrants and police and judicial corruption and brutality.
Now the U.S. is at an international disadvantage because they are better organized than we are. Campaign reform, and other tinkering will only made a bad system worse. We need united government, responsible political parties, platforms that have some connection to action, and the other normal functions of democratic governments in the rest of the industrial world. Since the U.S. is too big to manage from a central office, regional organizations are critical.
The ten federal regions are a model of how domestic policies could be created by regions and administrated from regional capitals, Atlanta, Dallas, Chicago, Denver, San Francisco, Boston, Kansas City, New York, etc.
The regionalization of federal administration can be done by executive order. Education, health care and other issues that can not be handled by our fractured government with powerful the iron triangle of committees, their captive agencies, veto groups, lobbyist, campaign money, would be better done at the regional level.
The market is first of all Global but effected by local as well as international forces. We are in the early stages of
THE THIRD WAVE, the global markets for information, design and production of goods and service. In the first wave the ownership of land was center of economic and political power in traditional societies.
The second wave replaced feudal aristocracies with capitalist nation states.
The model industries were railroads, steel, autos then in this century petroleum, electric and chemical.
The next century’s third wave industries have to do with symbols, speed and information transfer.
The ability to "catch-on" quickly to new technologies in a global context has never been more important.
The model industries are software, the domination of this new world is by communication networks, satellites, bandwidth, and
Moore’s Law, twice as fast at half the price, every 18 months, quite different from the industrial model. We are still controlled by industrial age thinking, schools, politics, and economic thinking.
We need to begin to think of world markets and quick response to fast moving global forces.
The currencies, bond and futures markets have been fast and global for a decade.
The stock markets are just catching up. Since futures have a broader overview they become the tail that wages the dog. When values get out of line global futures will jerk them back into a more reasonable place. If Asian currencies were out of line, hedge funds start the process of a correction. If American shares are over valued, futures will pull them down. If now markets have over reacted as they are prone to do and there are real values in depressed markets, fast moving international forces will correct that situation as well.
Think of the price in any particular market as being on the end of rubber bands with different forces and different levels of elasticity. Currencies rates and interest rates are very elastic within their range -
The rates for money and exchange rates can change within a limited range and have little or no effect BUT if they move quickly and out of range can be very important.
Economic forecasts and statistics have short term impacts. Often the propensity exists to move one way or the other and small events set off an avalanche. World economics are very large and can not shift quickly.
The trends are clear and do not change quickly. People’s attention span’s are much shorter and they will suddenly notice some trend that has been around for awhile and react quickly. Last year the importance of
Global telecommunication was very clear but more attention is now being paid to ASDL, DSL, satellite phones, etc.
The network computer ( called by many names ) will be the event of this year but people have yet to notice. Next year the broadband low orbit satellites will be in place and the combination of network utility devices and broadband digital telecommunications will begin to revolutionize the world, and then people will notice the reality of the third wave.
Fundamentals:
Prices are over time effected by ROI, the return on investment, a
income stream from interest and earning. Net earning are effected by tax
law, and other extraneous factors but mostly by the quality of management,
intelligence and foresight of specific companies in a specific industry
and the health of the general economy. Microsoft can command a high
price because it is in the cutting edge industry and has shown an ability
to invest as well as develop products in the technology of tomorrow.
IBM, DEC and other computer companies lacked foresight, quickness and imagination
in the rapidly changing world economy.
In Italy, only 50 percent of the working-age population has a job,
while in France and Germany the ratio rises to 60-65
percent, the paper said. This compares with around 70 percent in Britain
and Canada and 75 percent in the United States and Japan.
. ^SOX Individual Tech stocks see,
SOX SOX Semiconductor Index
Moving the market:
Late week : New highs in Europe
& US, recovery in
What I think ( at the moment) - Go short at Dj 7800 or SP500 975
Wait until market hits 1050 and look to go short -
the rally was somewhat unexpected by the futures market and didn't turn
quickly enough because of tailgate - bonds weak and dollar down - Rally
was built on good earning reports that are difficult to take into account.
The technical aspects ( breath, leadership and futures ) are still weak.
Too late and too risky to go long even with WI ( wiredbrain index at +
11.5 ) The trouble with all index and measures is that they are about what
happened - The market went up so a lot of measures when up - BUT that doesn't
say what will happen for more than a few hours.
DJXNZ 79 FEB PUT at 1 5/8 or DJXNZ 78 Feb Put at 1 1/8 Resistance: At about 1005 on the S&P500 7800 on the Dow people hit target prices on individual stocks and index futures and begin to close positions. This may trigger sell programs as people sell stocks and futures, going short and buying puts.
The drop in the futures price sets off more sell programs etc.
There is just a few minutes when the Tail wags
the dog
:
The futures price is enough below the cash price to sell the market and buy the future - the future then goes back to near the cash price where it is sold again. If the DJIA only a few stocks are involved but with the S&P500 more. If the market keeps falling we can get into a free fall until there is a market halt. If people keep selling the futures it will keep dropping which triggers sell programs - which drives the market and the futures down et al - this is what happened in the Oct crash.
In currencies, the dollar remained under pressure, due to concern about the sex allegations against President Bill Clinton and fears that the Asian crisis will take a bigger toll on growth in the United States than in Europe.
Davos-Bergsten sees dollar plunge as next crisis
DAVOS, Switzerland, Jan 29 (Reuters) - Former U.S. presidential economic advisor Fred Bergsten said a sharp plunge of the dollar was the next crisis likely to hit world markets after Southeast
Asia's financial turmoil is over.
In a statement released at the annual meeting of the World Economic Forum here, Bergsten said short-term fundamental factors continued to favour the dollar but long-term fundamentals were increasingly negative.
``
The next major disturbance to the world economy, once the world has safely surmounted the current Asian crisis, is likely to be another sharp plunge in the exchange rate of the dollar,'' he said.
``As always, it is impossible to predict the turning point at which the long-term fundamentals will again dominate the short-term fundamentals,'' said Bergsten, who is director of Washington's Institute for International Economics.
In a global economic forecast for the years 1998-2000, Bergsten said the long-term fundamentals included U.S. trade and current account deficits, which he said were likely to reach $250 billion to $300 billion in 1998-99.
``
The net debtor position of the United States, which has already passed $1 trillion, will shortly exceed $1.5 trillion.''
``
There is no apparent sign of a turnaround in these trends,'' he added.
Bergsten said there were several possible scenarios for what could trigger a dollar plunge, including a sharp slowdown of the U.S. economy or a significant pickup in Europe.
``
The other likely trigger for a reversal of the dollar's rise is the creation of the euro,'' he said about the planned European single currency.
The euro would almost certainly become a major international currency attracting substantial portfolio diversification, even in its early years and even if it takes several years to rival the dollar.
``
The dollar correction could of course be orderly rather than disruptive,'' Bergsten said.
But he said history showed that every major postwar dollar correction had been highly destabalising, because the preceding overvaluations had been allowed to go too far and last too long.
``
The lesson is of course that the world needs new arrangements to stabilise exchange rates within broad target zones among the major currencies,'' he said.
How the whole house of cards falls:
"
The IMF became the bill collector of the foreign commercial banks,"
The performance of markets often has little to do with economics or logic. Hunch and inspiration:
These are the sentiments that usually rule, often with the additional influence of herd instinct.
WHAT TO WATCH FOR: All eyes on trade, but the story everybody is looking to materialize, the Asia effect, still won't be felt for some months now.
The US trade deficit will widen, but not by that much in November.
The real impact probably won't be seen until March, when January data seeps out. Jeffrey Sachs, the Harvard economics professor who served as adviser on economic restructuring to the Russian government, is among the IMF's fiercest critics. He argues that the Fund "turned a dangerous situation into a calamitous situation" by imposing austerity measures, thereby "signaling to anyone who didn't see it before that these economies would go into free fall."
As sky-high rates throttled businesses, the rupiah, won and baht continued to slide, pulling down the Malaysian ringgit, the Philippine peso and the Singapore dollar. Even Hong Kong, Taiwan and China felt the heat. Why? "IMF remedies are deflationary and not appropriate for a private-sector debt crisis," argues Manu Bhaskaran of SocGen-Crosby Securities in Singapore. "
The standard IMF methodology was better suited to Latin America, with its high public-sector debt, overvalued exchange rates and inward-looking trade regimes." He raises the specter of capital controls and
Nothing (short of outright default) quite worries financial markets
as much as a debt-repayment moratorium. For one thing, the lenders who
would be most immediately impacted are often located in other parts of
Asia. For instance, some of the biggest commercial creditors
to Indonesia are South Korean banks. In turn, those banks owe large sums
to Japanese banks, which are already saddled with trillions of dollars
in non-performing loans (not to mention their own heavy exposure to Indonesia).
In cases where the lenders are from North America
and Europe,
debt moratoriums discourage future lending.
Second, the IMF prescriptions have, at least for the time being, restricted credit available to enterprises, worsening the problems of financial institutions and threatening to plunge the region into recession.
Last week: Index instant
RALLY
IN ASIA spreads to Europe Dollar down
in Europe and vs. Yen,
Market short term: for the new - NEWS I don't trade unless there are more than three all on one side - see flash for actual trades
short side: ... about 1000
to 1030 on the S&P500 down Target at 930 -close out LONG UP positions on
the rally take
When at top ( or bottom ) and Wiredbrain
Index instant
Index Call ( close at 1050 on S&P)
start
@ 920 target 955 or close enough -
Index PUT ( close at 930 on S&P)
start
@ 965 target at 930 then 900 or close enough - actual trades on
Wait until total Wiredbrain index turns down - 5.5 or more.
The major problem is minor variations being taken as a move and being cut out too soon - you have to take a position and hold it long enough to really get something out of the move but not too long.. Let tech stocks be your guide - a lamp unto your feet.
$IXCO
NASDAQ High Technology Index UP 1.5 % Will most likely
turn and the market will follow ?
Individual Tech stocks
see,
(PSE)
We miss the tops and bottoms but catch the safe middle of waves.
System is only in process - I don't have all the parts together but it's
coming along - with more resources we could do a lot better - maybe one
of your tech connections would be interested in making the model better
and commercial -
Free is what free does - with money you can do a lot more than
you can without - Each international market needs
to be figured for the % of capital worth - balanced with currencies
so NET loss or return on investments -
The
links between interest rates and stock prices is better understood
than I can use with current technology but
could be linked real time...
The tech index is linked better
to SP500 than the DOW but clearly the tail that wags
the dog.
Objective data is better than subjective analysis BUT the factors
keep changing so the model need to change all
the time. This is double level models = a model that models
itself to see how it's doing and corrects the weights as
it goes along. Sometimes currencies matter ( within a range
) sometimes interest rates ( within a range )
sometimes earning, sometimes news, most of the time foreign
markets because we are really global - one
interconnected world market.
"Things are a bit unsettled
Money online
SHORT TERM ( a few days)
= TOP of
Last Week: GLOBAL January RALLY
is started
under
Asia's Markets are UP 6 % to 9 %, Interest rates up a little ( bond prices down ), Dollar a little weaker, no leadership from tech stocks, technical weakness in market - depends on earning reports Monday and Tuesday - as the MOB is running looking backwards - It's next years earning stupid not last quarters. Global shifts in currencies and market buying power take up to two years to show up.
Now is the time to start to shift back to under priced markets from over priced US assets and dollars . (MAP)
SEE ANALYSIS on how the
US market will drop 10 % and
WHAT TO WATCH FOR: All eyes on trade, but the story everybody is looking to materialize, the Asia effect, still won't be felt for some months now.
The US trade deficit will widen, but not by that much in November.
The real impact probably won't be seen until March, when January data seeps out.
The homebuilders' survey should be of interest. With long-term interest rates hovering just above 30-year lows, builders should be salivating at the thought of breaking new ground. By Geoff Spencer
The Federal Reserve released a survey that showed
Asian fallout spreading to most parts of the United States and pinching a broad range of manufacturing and agricultural industries. ``Districts reported weaker export demand for industrial equipment, building materials, aircraft parts, semiconductors, processed food and some metals,'' the central bank said in its ``beige book'' survey of economic conditions by its 12 regional banks. Asia also cast its shadow over Wall Street on Wednesday.
The Dow Jones average of industrial stocks closed down 79 points at 7,794 after International Business Machines Corp. warned its sales were being hurt by slack consumer demand in Asia. Rubin, speaking at Georgetown University, said the administration planned to convene an international meeting of finance ministers in the spring to search for permanent reforms in the global financial system.
and
the 
The long term US 30 Y bond is from 56.95 to · U.S. Treasuries stumbled under the weight of profit taking in London on Wednesday, thanks to another upmove in Asian equities overnight.
http://www.wiredbrain.com/ is back on line ( 12/20 ) but if you are there I suggest you go to
WIREDBRAIN.COM for new updates as there is a bandwidth limit on that site ( I hate it ) so I can't up date all the time. see
http://www.wiredbrain.com/money.htm for 9 AM report unchanged or updated. Wiredbrain is a private forecaster has been amazingly accurate in foretelling how the market will perform before it opens. Dr. Peter Pflaum ( Ph.D.) uses a simple mixture of bond prices, FX, action on foreign markets, and leading technologies to come up with a number in line with the CME flash reports but somewhat more accurate. I am looking for the fair market value of S&P futures ???? --
The page will not be free for much longer but will require a fee for access.
The big MO
IN THE REAR VIEW MIRROR:
Charts tell you where you have been BUT notice the waves. Technology did not drop much and recovery maybe quick. About 930 is the low end of the trading bands. We are close to the TOP of the wave. SP500 green HLC at TOP of trading rage, black technology nice turn down, blue line turns up or down before the red line at the bottom
There was a clear sign of UP turns and end of the DOWN cycle. In the relationship between science and magic, when forces are not understood, people tend to use magic.
The information is not in the system and much does not yet exist. Markets do NOT discount the future very well or quickly and live on hype and hope or fear and panic. Conventional wisdom is half right and half wrong. Information transfer is not smooth or quick.
There is no way charts can "foretell" the future.
The idea that the market "contain" the information is more than half wrong.
Charts are only useful is there are small changes over time - people adjust to interest rates, earning reports as the information moves slowly in the market. Real change ( such as the problems in Asia ) take six months to be absorbed - by then the situation has changed on the ground.
The quality of analysis is VERY poor and reporting even worse. Zack reports are only useful as a measure of MOB thinking and too little too late - IMF and credit reports are even much worse.
There is a wave action - that makes trading possible, as information and beliefs change - belief is slower to change than information - it's in the nature of people then hold to their beliefs in the face of facts - For example the market is OVER valued by any measure - current or future - it will adjust but in waves - the SMART money is one step ahead of the wave.
$xci
technology stays above the market ( wiredbrain ) Charts long term - 2.5 now are now
- 1.5 over the TOP of wave
on
the Big
We have been down since Thursday because PC's are too complex as a utility device. I added a Cannon C3000 printer/fax/scanner/copier all for $300 and created a conflict ( IO port address) between the mouse and the modem ( or digital connection to replace the analog ) when I added a new printer port to support this printer.
The network computer -
Personal Communications Device PCD connected by cable, DSL, wireless broad band, or direct satellite will appear this year with over 10 Mb per seconds with the hard stuff done by the network -and the box under $300 providing fax, digital TV, video telephones, cable, and other utility networks.
The PCD will be the "
convergence"
of communications into a universal system that provides computer programs
and the internet as one of many services.
The market data is in constant motion. I try to update but miss some numbers. When I say UP or Down it is relative to some beanchmark not just the last tick.
The 30 Year bond at 5.8 %,
The ECU at .92, YEN 129 markets are guide posts. It is important to know where you are, the S&P is used for the main market index - with 955 marker - +- 25 ( 930 to 980 ) that has been the range for seven months. This range is based on a P/e ratio of 22 to 25 or 4 % and earning growth of over 10 % - the P/E will return to 17 = 5.8 % the bond rate with earning about half of the projected in most sectors. This is 30 % off the high of 685 but given a lot of 20 P/e's and tax advantages - and hype and hope - and foreign interests (flight to quality ) we expect a decline to 840 as a bottom 15 % off the top and about 10 % from here - in three to six months. For short term traders all this means is the short side has more potential above 955 -
The market could go to 1000 + but just makes more room for short positions. Long positions are more difficult - like today at 961 the market could well go up 15 pts or even to new highs - but the bull is very sick and the bear is asleep - If we stay with these numbers for another seven months - inflation and earning will catch up. We could close the year right where we are and it would be just about right. UNLESS some banks in Europe, China and South America start to fall - insurance companies and brokers who are out on limbs could break - anytime ! ________________________________________________________________________
Wiredbrain will trade your account for 50 % of net
return. You set up an options account ( any on line discount broker, we
use Quickway but E-trade, Datex or Suretrade is OK ) and for at least $2500.00,
we will trade it for you ( after we have done our own ) with the expectation
of 100 % return a week of funds at risk. ( some weeks there are no good
trades) You send us 50 % of the profit and we will continue to do trades
for you at the moments it right to do so, since you don't have time to
watch the market the way we do.
http://www.cboe.com/intro/whatis.html is a good place to start.
The CBOE booklet is very useful and free.
There is TOO much to learn all at one time - so you need a step by step method - Etrade has some educational materials - You will have to request the options trading form and you could enter my name as a authorized trader. All we are doing is index trades - if the market is going down we buy puts ( OEX has the volume and P/e ratio that works best at the moment ) look at
http://cboe.pcquote.com/cgi-bin/cboeopt.exe?TICKER=ndx&ALL=1 NDX JAN 980 PUT at 10 1/2 is $1050.00 for one -up $300.00 from 7 in the last few minutes, each point is $100.
http://cboe.pcquote.com/cgi-bin/cboeopt.exe?ticker=OEX the OEX is at 454 the PUT just under the cash price is the Jan 450 .OEXMJ at 6 3/8 ( $637.50 ) up $112.5 NOW 19 1/ 8 + 11 1/ 8 $1912.50 300 % gain in two good days Actual trades on
The January effect could help us out temporarily -- it
looks like a lot of people sold for tax reasons and are hoping to pick
up those stocks again in the next year,"
OPTIONS Positions: -
Today's
OEX Options Trades ( Technology
SOX turns down ) Actual trades on
WORLD Markets Reuters
bond rates Watch it as the Market OPENS
!
bonds are the place to be.
OPEN Positions: -
S&P500
and the
NASDAQ YESTERDAY: technologies are UP MORE than the dow.
The January effect could help us out temporarily -- it
looks like a lot of people sold for tax reasons and are hoping to pick
up those stocks again in the next year,"
A business
sector ( wiredbrain password synergy ) that is built in good measure
on the stock market is bound to look good after one of the longest bull
runs in history.
Now it turns out that Asian banks are - at best - much less efficient at allocating capital than American shareholders. At worst, they are incompetent, venal, and corrupt.
( 12 step method to safe trading):
STEP ONE: check CME - 6.75 to 7.75 over market Fair value for March S&Ps was about 9.15 points over cash. Arbitrage buy programs needed a premium of about 9.00 points, and sell programs wanted about 7.30 points over cash.
STEP TWO: check international markets
$SOX semiconductors most and other tech index
STEP FIVE and SIX:
The Dow was seen starting FIVE:
"
The big concern now is not interest rates, it is corporate earnings," said one dealer. Economists expected S&P 500 profits growth to be anywhere between four and eight percent this year, according to Barron's.
ALL indications are in line, foreign markets
Foreign Markets OK = Most markets up in Europe and recovery in Asia - but problems in JAPAN "
There's a great deal of trouble to come," says Neil Saker of SocGen-Crosby in Singapore. "I'm expecting some kind of cataclysm in the first quarter, possibly a debt default in Indonesia that would trigger a more general collapse and concerted intervention by the industrial world."
Market Indications Europe posts early gains European markets opened higher on Monday after a mixed performance in Asia, but scarcely anyone noticed.
(full story) Separately on Wednesday, the Bureau of National Affairs, a private news and information group, released a survey of economists that forecast U.S. economic growth of 2.3 percent in 1998, down 1.4 percentage points from the expected pace of 3.7 percent for 1997.
The News CBS MarketwatchSTEP
SEVEN
:
07:26 NIKKEI DOWN 21% IN 1997.
WIREDBRAIN HAS
The best
record in short term market forecasts ( short term means about 2 hr on open at 85 % or better ) bounce at 75 % and close at 65 % +- 2 % .i.e. 2 pts on the SP500 - 80 % 8 days out of 10, in market direction - for the day. Keep track and see - check in at 10 PM EST and at 6 AM Markets in Europe, - as we get closer new information is used to up date - 8 AM, 9 AM ( bond markets report ) We were Right On Thursday Dec 18th said 955 was 955 ( luck ) again on Friday 19 Th.
WORLD
Markets ReutersSTEP 9:
The morning direction DOWN 60 %
-flat 10 % -
chance of UP 30 %
BIG CHART Wiredbrain charts
( 75 % confidence level )
Technologies NEWS & INDEX or · or
$IXCO NASDAQ High Technology Index NEW YORK (CBS.MW) -- Money
flowed into bellwether technology issues Monday even as Merrill Lynch released
another bearish outlook for semiconductor equipment makers.
METHODS:
BIG CHART Wiredbrain charts
The US market is projected for tomorrow ( or later this morning) to open up/down
based on foreign markets,
CME flash futures,
currencies long
bond interest and
international bond rates. Leading indicators include
high tech and currencies in Asia.
ASIA CURRENCIES set the tone "Wiredbrain" is 80 % correct on the open, 70 % on the second bounce ( at 10:50 AM to noon ) and 60 % on the close of the days trading. Our forecasts are like weather reports - they are more accurate when BIG fronts and systems are clearly seen on the international radar.
They are based on probabilities not solid physical models because markets are
living systems, therefore, ordered biological and organic systems feedback models work better. As in medicine there is ART and skill and experience that goes into diagnoses and prognosis of complex interactions. Markets are NOT a random walk but follow patterns as Autopoiesis are self organizing, reproducing, evolving patterns of interactions of Dissipative feedback loops within and among living things such as the stock market, families and states. "Humberto Maturana"
bust may rise the most in a boom.
( excellent article from Washington Post )
$IXCO
NASDAQ High Technology Index UP 1.5 % Will most likely
turn and the market will follow ?
Tech stocks,
LONG TERM: Three weeks to a few months:
WALL ST. WEEK AHEAD Investors await Super Tuesday s
By Huw Jones
NEW YORK, Jan 18 (Reuters) - Wall Street investors face a shortened trading week that will be heavy on earnings and light on economic data, with
Asia's financial woes still the market's wild card.
The earnings reporting season will move into top gear.
`But longer term worries lingered. John Noonan, head of Proprietary Trading at National Australia Bank Singapore summed it up: ``You have the classic market risk of buy the rumor, sell the fact.''
Investors Beware: Asia's Ills Not Over
By Pierre Belec
NEW YORK (Reuters) - Bargain hungry investors are looking at Asian stocks with lust in their eyes after months of deep declines that have been fueled by the Asian economic meltdown.
But the experts say there is still danger in ailing Asia and warn investors that they are not dealing with just a 24-hour flu.
Stocks in Japan, Hong Kong, Indonesia, Thailand, Singapore and South Korea have had near death experiences as investor hysteria has walloped their markets, sending them to levels that priced their companies for outright bankruptcies.
The myth that the Asian economy was invincible came crashing to the ground in October, and the fallout is still being seen globally.
The
Asian turmoil was critical because the region has been a key pillar in the global economy.
Asia was the victim of its own success as investors convinced themselves that trees grow forever to the sky and rising real estate prices beget ever higher returns. When the speculative bubble burst, the region's economies and stock markets fell like a house of cards.
Now it seems that all the bad news about Asia has been reflected in the stock markets, and the crisis may be easing.
Although some optimistic investors say they don't see anything that can still upset the markets, the experts warn that Asia's problems have not been solved and the healing will take time.
"
There's still danger out there even though it's tempting for investors after stocks have fallen so much," said Anthony Cragg, head portfolio manager for Strong Capital Management's Strong Funds, an internationally invested fund with assets of $250 million.
He said people are making a big mistake when they try to draw a parallel between the mid-'90s economic crisis in Mexico, -- a relatively brief economic disruption -- and the current Asian mess.
"I don't think we are going to get a rapid overnight recovery in
Asia because, for one thing, several countries are involved and we are dealing with a different set of problems that will take longer to work out."
The hope that Asia was turning the corner this week helped spark a recovery in the Dow Jones industrial average.
By Friday, the index of 30 blue-chip stocks was up 173 points for the week, nearly halving the trading period's loss of 385 points, which was the biggest weekly fall in history. ( in points not % )
Cragg believes that Asian markets will eventually offer opportunities to investors but not before the second half of this year.
"Sure, there will be rallies in the markets -- dead cat's bounces or suckers' rallies -- but serious investors will need to be wary and very, very selective about getting back into Asia," he said.
Analysts feel it is still too early to talk about a bad situation where the worst is over.
01/19 05:32 FOCUS-Asia currencies firm but lag stocks rally
And analysts saw little scope for a sustained rebound.
"
The deteriorating balance sheets of corporates, coming debt payments, higher inflationary pressures and high interest rates will make it difficult for Asian economies to show much growth this year," Banque Paribas said in a daily commentary.
"Pre-emptive buying on the discounting of these negative factors could see a period of strong gains in Asian currencies (based primarily on the stock market rallies), but sustained gains beyond last year's closes are unlikely," it added.
The Indonesian rupiah was flirting with the 10,000 per dollar level again in late trade, hit by rumours that Jakarta banks were unable to meet their maturing dollar obligations and were offering to make payments in rupiah.
It was at 9,550/750 to the dollar at 1010 GMT after hitting a low of 9,900 against an opening 8,600/800.
Growing signs of social unrest due to rising food prices and uncertainty over who would succeed President Suharto also weighed against the rupiah.
ECONOMIC HEADLINES
(Updates with morning's trade)
http://www.webtv.net/ns/corporate/media/mci.html)
From this weeks issue of "Rapidly Changing Face of Computing" Technology Journal
h
Bonds short term low 56.74 now at 5.89 % ( short
term - 1.5 )
FLIGHT TO QUALITY
:
There are two reason for higher bond prices and low interest: flight to quality because of problems elsewhere or expectations of low inflation and steady economy, this is a flight to quality - while this supports short term stock prices it is a sign of trouble to come.
BONDS: Treasury 30-year yields hit their lowest level in more than 4 years on Friday as both Asian and US stocks took another beating. Bond traders will continue to watch US stocks and events in Asia.
The fall in Asian stock markets today could see a rise in US Treasury prices.
US CREDIT:
____________________________________________________________
The Spiritual Quality of Money:
The first law of science is that energy and matter is not created nor destroyed, and the second is like unto it; to every action there is a equal and opposite reaction. In the normal course of transactions there is a buyer and seller, money is transferred from one to the other, the debit is balanced by a credit and the world is no richer. Both sides benefit from trading so there is synergy - not a zero sum games but mutual gains.
But Governments and central banks can create money from nothing. With the authority of the state the central bank can add funds to treasury accounts that are not debits to anyone's account but additions to the issuance of notes, bonds and certificates of public debt. When the debt is raised it is done by creation of instruments of obligation to pay.
The US Federal reserve can create treasury accounts based on deposit of bonds which it has issued. Since the government has with the central bank hundreds of billions of treasury notes and bonds on account, it owes itself money and pays itself interest. In this way governments can make something of nothing but rests only on the faith that it will pay.
Value is like the holy ghost of money. When the value of US bonds increases the numbers in the treasury accounts go up. When the stock market goes up the value of stock accounts rises but no debits are made to any other account.
There has been and increase without decrease. It defies the laws of physics. BUT… it goes both ways - what spirit has created, the spirit can take away.
The whole financial system depends on the mystery of faith. If the belief that paper is money holds then the value of the money stocks and bonds is solid. When there is a massive failure of faith the system fails.
The global system is having a crisis of faith.. . Mistakes: When we hit tops or bottoms of life events including market moves it's easy to make mistakes.
The point is to recover quickly and keep both directions open -don't get tied up or down. In sailing, mountain climbing, or options trading - skill, planning, knowledge can be tested by sudden and unexpected forces of nature.
The survivors don't make many fatal mistakes
by being prepared and careful .
12/31 05:24 Soros says global finance system
breaking down- FT
"We are on the verge of worldwide
deflation." What started out as a minor imbalance has become a much bigger one that threatens to engulf not only international credit but also international trade. We are on the verge of worldwide deflation.
( Note: deflation is when the money supply decreases, there is less activity, less demand and therefore cuts in supply, prices drop and so on in a downward cycle. Inflation is where the money supply increases, more activity and more demand in an upward cycle. Asia has gone from a up cycle, up to 10 % a year to a down cycle. To stop a down cycle the banking system needs more money ( not less by IMF tight money policy ), easy credit ( not a credit crunch ).
The deflation policy should happen before not after the fall.
They let things ( credit, construction, loans on loans, etc. ) get out of hand.
The answer is not to do the wrong thing too late but the right thing on time.
The problem is politics - ( surprise ) people are elected and popular during inflation and "taking away the punch bowl" during the party is never popular or from questionable actors.
Therefore, the need for independent central banks that are not popular or elected. That's what George is talking about, an international bar tender who will say when you have had enough and the bar is closed. But if you are already in the tank, feed you, give you coffee as a stimulant, and get you straight again. )
The IMF has been criticized for applying the wrong remedy.
The FT's columnist Martin Wolf has pointed out that the deflationary effect of the debt burden is reinforced by the deflationary effect of the IMF programs.
Jeffrey Sachs, director of the Harvard Institute for International Development, has carried the criticism further by blaming the IMF for insisting on punitively high interest rates. But high interest rates are essential to prevent the currency from going into a free fall....
The problems run much deeper. But we are unwilling to face them.
The prevailing system of international
lending is fundamentally flawed yet the IMF regards it as its mission to
preserve the system.
We
are such stuff -
As dreams are made on, and our little life - Is rounded with a sleep.
ECONOMIC HEADLINES
(Updates with morning's trade)
http://www.webtv.net/ns/corporate/media/mci.html)
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February 1, 12:44 am Eastern Time
Chronology of the Asian financial crisis SINGAPORE, Feb 1 (Reuters) -
The following is a
chronology of the financial crisis that has rocked Asia. 1997 Jan 23 - Leading South Korean steel maker Hanbo Steel Corp defaults on loans, the first of a string of major corporate failures in 1997. May 14+15 - Thailand's baht currency comes under attack by speculators who decided Thailand's slowing economy and political instability meant it was time to sell. Thailand and Singapore jointly intervene to defend the baht.
The Philippines is affected.
The central bank raises the overnight rate 1-3/4 percentage points to 13 percent and dumps dollars. June 19 - Amnuay Viravan, staunchly against devaluing the baht, resigns as Thai finance minister. Resignation has immediate impact in the Philippines, where the overnight deposit rate rises to 15 percent. June 27 - Thai central bank suspends operations of 16 cash-strapped finance companies and orders them to submit merger or consolidation plans. June 30 - Thai Prime Minister Chavalit Yongchaiyudh assures the nation in a televised address there will be no devaluation of the baht. July 2 -
The Bank of Thailand announces a managed float of the baht and calls on the International Monetary Fund for ``technical assistance.''
The announcement effectively devalues the baht by about 15-20 percent. It ends at a record low of 28.80 to the dollar. In Manila, the central bank is forced to intervene heavily to defend the peso. July 8 - Malaysia's central Bank Negara has to intervene aggressively to defend the ringgit. In Indonesia, the rupiah starts to crumble. Jakarta widens its rupiah trading band to 12 from eight percent. July 14 -
The IMF offers the Philippines almost $1.1 billion in financial support under fast-track regulations drawn up after the 1995 Mexican crisis. July 24 - Asian currency meltdown.
The rupiah, baht, ringgit and peso all slump, as confidence in the region rapidly deteriorates. Around this time the Singapore dollar starts a gradual decline. August 11 - In Tokyo the IMF unveils a rescue package for Thailand including loans of $16 billion from the IMF and Asian nations. August 14 - Indonesia abolishes its system of a managed exchange rate.
The rupiah plunges. August 20 - IMF approves a $3.9 billion credit for Thailand. Brunei later adds $500 million to the bailout package, bringing it to total of $17.2 billion. Sept 20 - Malaysian Prime Minister Mahathir Mohamad tells delegates to IMF/World Bank annual conference in Hong Kong that currency trading is immoral and should be stopped. Oct 6 - Rupiah hits a low of 3,845. Oct 6 - Russia and London Club sign agreement rescheduling roughly $33 billion of debts over 25 years with seven years grace, dated from December 1995. Oct 8 - Indonesia says it will ask the IMF for financial assistance. Oct 20-23 -
The Hong Kong stock market suffers its heaviest drubbing ever, shedding nearly a quarter of its value in four days on uncertainty over the Hong Kong dollar.
The Hang Seng index plunges 23.34 percent to 10,426.30 by Thursday's close, after 13,601.01 the previous Friday. Around this time the South Korean won also begins to slump rapidly in value. Oct 27 - Asian jitters spill over onto world stock markets.
The Dow plunges 554 points, its largest single-day point loss ever, in a session halted twice after the drops tripped circuit breakers on the New York Stock Exchange. Oct 31 - Indonesia's IMF package is unveiled. It provides for as much as $40 billion in aid, although the front-line defence is $23 billion. Nov 5 - IMF approves a $10 billion loan for Indonesia as part of the massive international package. Dec 4 - IMF approves a $21 billion loan for South Korea, part of a bail-out package that will total nearly $60 billion. Two days later the Central Bank of Korea announces that it received $5.22 billion. 1998 Jan 6 - Indonesia unveils its 1998/99 budget projecting an increase of 32.1 percent growth in revenue and expenditure over the current budget and a four percent economic growth rate.
The rupiah loses half its value against the dollar over five-day period, breaking through the 10,000 to the dollar level, before a slight recovery. Freefall is triggered by perceptions that budget not tough enough to meet IMF-mandated austerity measures and by market talk that Jakarta might declare debt moratorium. Jan 8 - Representatives of the IMF and South Korea agree to a 90-day rollover of short-term debt. Jan 10 - Indonesia's President Suharto comes under increasing international pressure to adhere to IMF conditions. He announces the delay or review of 15 big infrastructure projects. Jan 11 -
The IMF's first Deputy Managing Director Stanley Fischer arrives in Jakarta for talks about the IMF's programme and how to move ahead with it. Jan 14 - IMF Managing Director Camdessus heads for Jakarta. Stopping off in Singapore he says the IMF is asking Indonesia to sign a new letter of intent committing itself to implementing further IMF reforms. Jan 15 - Camdessus and President Suharto sign an agreement strengthening economic reforms. Jan 16 - Camdessus says he expects the Indonesian and Thai economies to recover within two years. Jan 21 -
The rupiah falls to a record low of 12,000 to the dollar as reports surface that beleaguered corporates are now paying their dollar debts off in rupiah.
The rupiah is then being dumped by the creditors. In New York, international bankers and Korean government officials meet to thrash out a solution to Korea's short-term debt problem.
The talks are expected to continue for some days. Jan 22 -
The rupiah collapses. It is dealt at 17,000 to the dollar at one stage, but traders say volume is tiny. This enables Bank Indonesia to intervene and drive the currency back to end at 11,800. Jan 23 - Indonesia presents a revised budget sticking to figures agreed with the IMF.
The budget expects zero growth in fiscal 1998 and inflation of 20 percent. But it also assumes the rupiah will be at level of 5,000 to the dollar. It ends the day at 12,000. Jan 27 - Indonesia announces a temporary freeze on debt servicing but says this is not a moratorium as companies with the dollars can pay their creditors. It also announces banking reforms in which the government will guarantee the security of both depositors and creditors. Jan 28 - International creditor banks and the South Korean government said they had agreed on a plan to exchange $24 billion of short-term debt for new loans maturing in one, two and three years. Jan 28 - An alliance of U.S. lawmakers from the right and left launch a legislative assault on the International Monetary Fund, proposing measures that could limit Washington's role in bailouts and cut off funding for the IMF. Jan 30 - Korean markets re-open after a three day holiday and surge on the news of the short-term debt deal. Stocks rise more than seven percent, and the won surges to close at 1525 to the dollar against its previous close of 1,688. U.S. Federal Reserve Chairman Alan Greenspan warns Asia's financial crisis could spread to other regions of the world and said large investments were needed to quell the turmoil which bordered on ``panic.''
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MARKET CONDITIONS:
DJIA should go down 5 % to 8 % 625 points to be in
sink with ROI @ SP500 at 860 UNLESS interest rates drop, current forecasts
of higher interest are all wrong and out of date:
The market does not forecast six months ahead but looks back six months behind.
The Asia problem is more than six months old.
The earning forecasts have been out of date for more than three months.
LIBOR JAN98 94.31 this is = to a cost of money on the world market of 5.69 % ( 1 - .9431 ) IF this changed to 4.69 % down one percent in interest rates = bond prices up 10 % the "paper" value of global assets ( stocks and bonds, mortages ) go up 5.000 billion $ from 50 trillion to 55 trillion. ( 12 % growth in the value of US Gov. debt, 12 % higher stock values US stocks, go up in "paper" value a trillion $ ) This is possible to support recovery in Asia, prevention of bank defaults, growth in Europe and the re-election of current office holders, who always want cheap money and rapid growth vs. central banks that want to be party poopers and worry about inflation, speculation and general moral character.
The world has lost more that two trillion in assets in the last 3 months, could go down at that rate for sometime unless interest rates drop, as they will.
Each .1 % change in LIBOR can add or subtract 500 billion in global assets. IF we face global deflation this is a correct policy and the cost of money is over valued. Clearly it's easier to repay debts with "cheaper" money. Tight money can cause a global crash.
The danger of inflation is far less than the threat of defaults. An injection of 4.5 trillion into global markets would be quite healthy.
The G-7 (11) should get together on such an injection 10 % at a time. 5.7 to 5.6 etc. so that different rates in different countries at different times don't upset FX rates. We need a global viewpoint and cooperation. Not as complex as global warming !
When good News in Bad News - is no News at all.
Why, I ask, is the reporting of the stock market and
economics so poor. Of course, it's difficult to know why the market
does what it does and opinions are not based on scientific observation
but superstition, magic and witchcraft.
There is a craft of economics and a logic that is generally accepted in the profession. It is said that you can stretch economist from here to the moon and not reach a conclusion but they agree on the variables and the language of discourse.
The
idea that good news
The theory is that all investments are controlled by ROI ( return on investments ) or the expected current value of an income stream or annuity. If you expect to get $ 1000 in a year, you will pay $ 960 dollars if there is no risk ( the discount rate ) and less depending on the risk - a junk bond may go for $850 because of some uncertainly that you will get paid on time. Under conditions of "full employment " the discount rate goes up - expected returns go up because a lot of people are making a lot of money in a good market.
There is a greater supply of credit but more demand as people expand - more of everything, called inflation.
People still do not believe there is only one world. There
is now only one large market with business and capital moving freely. Global
markets means the different exchanges are part of one system moving with
the time zones but linked together. The idea that you gain protection by
spreading investments around in "foreign" markets doesn't work. Major shares
are traded 24 hours and are reflected on the open of the US markets from
actions taken elsewhere.
(NDX )
Last Sale Net Bid Ask Vol Open Int
JAN 990 (.NDXAR ) 30 0 29 3/ 4 31 3/ 4 0 686 JAN 990 (.NDXMR ) 19 1/ 2 0 18 5/ 8 19 5/ 8 0 754
FEB 990 (.NDXBR ) 53 5/ 8 0 52 1/ 2 55 1/ 2 0 10 FEB 990 (.NDXNR ) 0 36 1/ 8 39 1/ 8 0 0
S& P 100 INDEX (OEX ) 461.33 0
S & P 100 460 JAN PUT INDEX 7 3/ 4 0
Closed: S & P 100 INDEX 453.02 + 7.89 (OEX) to S & P 100 INDEX (OEX ) 457.62 +4.60
455 Call (.OEXAK ) S & P 100 INDEX 10 + 3 3/ 8 to 455 (.OEXAK ) 13 3/ 8 + 3 3/ 8 13 + 33.8 %
ORACLE SYSTEMS ORACLE SYSTEMS CORP. (ORCL ) 21 3/ 4 +5/16
OWQAD 20 CALL JAN 2 3/ 8 + 3/ 8 + 15 %
Closed: DJXAX Jan 76 CALL DOW JONES INDUSTRIAL AVG CALL 2 9/16 to (.DJXAX ) to 4 1/8 + 62%
NYA NYSE COMPOSITE INDEX (NYA ) 505.87 +4.3 Jan 500 NYOAZ 9 7/8
MZT
The MORGAN STANLEY HIGH-TECH (.MZTAJ )
DJXMX Jan 76 put AT 1 5/8 76.60
ORACLE CORP 1:01PM 21 7/16 +3/8 +1.78% 21 1/16 - 21 7/16 20 15/16 - 42 1/8 ORCL 21 1/16
109 DPMI SS 500.000 MKT 34.500 DAY O
108 ASYT SS 500.000 MKT 20.125 DAY O
107 MTSN SS 1000.000 MKT 7.875 DAY O
106 TRKN SS 1000.000 MKT 1.094 DAY O
105 TGAL SS 1000.000 MKT 4.562 DAY O
104 WFR SS 750.000 MKT 15.125 DAY O
103 MICN SS 750.000 MKT 14.500 DAY O
102 EGLS SS 750.000 MKT 15.250 DAY O
101 NVLS SS 500.000 MKT 30.375 DAY O
100 GGNS SS 1000.000 MKT 3.188 DAY O
99 CMOS SS 500.000 MKT 25.250 DAY O
98 NANO SS 1000.000 MKT 8.812 DAY O
LONG:
97 TER SS 500.000 MKT 31.750 DAY
O 96 SFAM SS 500.000 MKT 24.375 DAY
O 95 REAL SS 1000.000 MKT 13.000 DAY O
Past Trades:
buy OEXMJ at 10 1/2 ( PUT on OEX at 452.66 ) SXB JAN8 940.0
P
SXBMH Chicago Board Options Exchange Price: 26 +7 1/4
+38.67% Volume: 515 Previous Close: 18 3/4 Contract High: 60
Contract Low: 11 1/2 Open Interest: 11525
PSE @ 278 PSEMP JAN 280 PUT 14 1/2
M STAN HI TECH
@ 427
MZT JAN8 420.0 P
MZTMD Price: 14 7/8 +2 5/8 +21.43% Volume: 35
Daily High: 14 7/8 Daily Low: 12 Daily Open: 12
MZT JAN8 425.0 P 425 26 +6 3/4 25 445
26 26 12/19
MZT JAN8 430.0 P MZTMF 430 16 +1/8 2 2506 16 1612/23
NYA Jan8 495.0 P NYAMS Price: 11 1/8
SXBMH SBX Jan 940 PUT buy 10:30 at 17 1/2 sell at 26 on close up 7 1/4
OEX 453.81 OEXMJ at 10 1/2 ( PUT on OEX at 452.66 ) at 11:30 Tuesday Call JAN 450 (.OEXAJ ) 15 1/ 4 + 1 1/ 4 14 3/ 4 15 1/ 4 PUT JAN 450 (.OEXMJ ) 10 1/ 4 - 1 3/ 4 10 10 1/ 2
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