Gut feeling

[Wildbill]

I sense the market right now is sitting in undecided territory, but not for long. A lot of the post-war rally was done before the troops took over Baghdad and so now we have a real battle between buyers and sellers. I see this clearing up soon and a pretty strong rally setting up within a month. Consumer confidence was supposedly the reason why the economy was at risk, but that issue is going positive right now. The cutting of jobs and production has to end soon, the economy continues to grow and you can only squeeze so much out of your factors of production. If the jobs machine even gets moving up a little bit this could be a blowout economy by year-end. The dollar is getting repriced slowly, the best of all worlds. Interest rates are still lower here than anywhere but Japan so I think business' outlook has to be very positive unless geo-political events come up. Fact is quite simply the economy survived this current run of under capacity GDP quite well, with the GDP running only about 1-2% under capacity. That isn't exactly a disaster. The biggest shot has really been confined to the market, but the indications are that the market will lead the economy this time. I am seeing a very strong and sustained rally very soon. Even energy costs are lining up to be on the favorable side. In sum almost every implication going forward is higher reward, less risk. Valuations aren't cheap, but in my view the low interest rate environment makes them pretty much in the fair range. To my thinking every 1% of downside possible is offset by 2-3% upside potential. Good odds and I have gone 100% back into the market.

[adios]

Good post. A lot of sectors are working right now. One thing to take note of is that in general corporations have deleveraged their balance sheets a lot. I think that's one of the main reasons for the rally in junk bonds. Bottom fishing has been the most profitable approach for me along with several mortgage REITs. Check out GTW, Gateway, it's up quite a bet percentage since I posted about it. Tech is working too and I believe the Nasdaq is beating all the other major averages this year.

On a related note the scuttlebut on the net is that Congress will pass some sort of tax relief for divis AND retained earnings. Bush won't get what he wants totally. I'm hearing speculation that half of divis and retained earnings will be tax free and the rest will be phased in. Here's what I find interesting and again it's something I've brought up many times. All these tech companies that have no debt and hoardes of cash parked in marketable debt securities i.e. high grade bonds might be induced to sell at least some of their bonds. The coupon payments from the bonds are taxed at the corporate rate I believe and now if half the divis are tax free, it would be more tax efficient for corps to pay out the divis. Microsoft has around $50 billion in cash and marketable debt securities. AAPL, CSCO, SUNW, EMC, GTW, CMVT to name a few all have a lot of excess cash. Might be a good place to invest some money seeing that businesses may invest more and there is an outside chance that divis will be paid.

[Wildbill]

My best guess is that this will go nowhere, not this year. The dividend tax is an all or nothing thing I believe. They will have a hard time getting a lot of support and excitement for this if they start horse trading. Further people are going to make the claims that this will just muck up the tax code really badly. Its all non-sense if you ask me, the problem isn't the double taxation, its corporate tax in the first place. Taxing companies is terribly inefficient, but of course popular. To go out and say that dividend taxation is the problem is patently ridiculous to anyone with economic sense. The problem is the mess that taxing corporations and then making a complex tax system with weird credits. After all why do the auditors make so much money off corporate tax guidance and why must corporate tax departments be loaded down with some of the highest-paid people in a firm? THAT is ridiculous!

If you really wanted to clean up the mess stop taxing corporations and force them to pay out a required level of dividends. Much of the world already requires through law or custom that they must pay out dividends. And it would unleash a lot of talented people into more worthwhile pursuits instead of scheming to save the company money.

Ok, enough about that. Part of the problem with your concept Tom is that even if the dividends are tax-free or reduced, these companies would have to pay tax on the income they produced. Best thing for these companies to do is to stop being ridiculously tight and give the money back to the investors. They act like the money will be needed when things get going again, but who are they fooling? Prices for capacity and acquistions will never be cheaper, they should be pulling the trigger now or forget it. Their business models are supposed to be strong in better times, what are they worried they won't generate cash then? Come on, they are just being greedy. Simple as that. Ignore their other claims.

I would personally avoid REITs or narrowly focused tech right now. As things get going major techs will benefit from extra spending by business and I think brokers are an especially timely call at the moment. Volumes in both businesses should pick up nicely and lead the market.

[scalf]

/forums/images/icons/tongue.gif i've felt there has not been a true bottom...but it has been a long bear market...there is a lotta cash sitting on sidelines....interest rates are low...there is a feeling that business is picking up...maybe with good seech recognition software there will be a new killer app...real reason to upgrade,,,,

still what happens when fed has to raise rates???lol

overall , i still think there has to be another crash...but if we can get from here to there...bullish..gl /forums/images/icons/blush.gif /forums/images/icons/diamond.gif

[adios]

"i've felt there has not been a true bottom...but it has been a long bear market...there is a lotta cash sitting on sidelines....interest rates are low...there is a feeling that business is picking up...maybe with good seech recognition software there will be a new killer app...real reason to upgrade,,,,"

Good points. IMO a lot of tech is an deflationary spiral. What I'm looking for is innovation brought about by technology. One thing that is getting big in tech is stuff like FPGA's where they are very configurable and much design is akin to designing software algorythms. In other words the lines between software and hardware design are getting blurry.

"still what happens when fed has to raise rates???lol"

Dollar goes up in value against the Euro, British Pound, and the Yen?


"overall , i still think there has to be another crash...but if we can get from here to there...bullish..gl "

Why another crash? Haven't we had enough /forums/images/icons/grin.gif

[scalf]

/forums/images/icons/blush.gif may 6...around this date...bears should growl....

5 bar rsi have daily failures both vix and vixn..

5 bar rsi failures on russell, 2000, sp500, nas 500..

still waiting for macd histogram to turn ...

then short the piss outta spx...

may 6 is historical extrapolation...lol...

breadth and volume should increase at this juncture...lol

this advice is worth whatch paid: nothing...

invest in what ya see, not what ya believe...gl /forums/images/icons/diamond.gif

/forums/images/icons/smile.gif /forums/images/icons/smile.gif /forums/images/icons/club.gif