this is from another list..thought that some might find it interesting...as one has to be aware of all things in this market,,..note though he is a bear king, but has interesting points.... have a good day..
FROM THE DESK OF ... MARTIN D. WEISS, PH.D.
January 2, 2003
Dear Safe Money Subscriber,
Today's the first day of the new year, and I'm writing you from my home in Palm Beach Gardens, Florida.
Usually, my wife and I would spend the holidays in Brazil with her family, on their farm near Sao Paulo. But this year, her family decided to come to visit us in Florida for a change. So we have a full house, including our nephew's three young children, who are like grandchildren to us. (As to our own grandchildren, our only son, who is 21 years old now, says: "Don't hold your breath, Dad.")
Despite the holidays, my mind has continually drifted to the markets, to the economy, and to your investments. So early this morning, I decided to sneak away to my home office, sit quietly at my computer, and share my thoughts with you about where we are and where I think we're going.
Looking strictly at the events that have just transpired, I see:
THE WORST HOLIDAY SALES SINCE 1972! THE LONGEST BEAR MARKET SINCE THE 1940S! THE WORST DECEMBER DECLINE IN THE DOW SINCE 1931!
Retail stores are like a battlefield, the day after a major defeat. Retail executives went into the holiday season with hopes that were highly inflated by the early Thanksgiving crowds, but have come out with the worst sales growth in thirty years.
Investors around the world are equally shell-shocked. At the beginning of each and every trading day throughout December, they waited patiently for the faithful Christmas rally. But every one- or two-day triple-digit rebound was totally wiped out by a tortuous decline that immediately ensued. End result: The stock market had its worst December since 1931, which, itself, was the worst year of the 1929-32 debacle!
If this were just a one-month phenomenon, I'd seriously consider the suggestion that December could be a fluke. But the miserable December comes on the heels of the longest bear market since World War II.
Today, the first trading day in January is more of the same -- a triple-digit rebound, to be followed by new declines and new lows.
Meanwhile, I also see:
* The worst mortgage default rates in history, with more on the way
* The most personal bankruptcies in history, with more records to be shattered
* The largest corporate failures in history, with more to come
* The largest banks in the world (in Japan) in de facto bankruptcy, with no rescue possible
* The greatest corporate scandals, with no end in sight
* Another sharp decline in consumer confidence
Looking immediately ahead, I see an imminent war with Iraq, a new crisis on the Korean Peninsula, a worldwide spike in oil prices, and an acceleration in the worldwide economic decline.
And yet, despite all this, unbelievably, the talking heads on CNBC, Fox and CNN-fn are still spouting essentially the same material -- "how much the Dow will go up this year" (no matter how last year's Dow forecasts may have fared) ... "how soon the economic recovery will gain more steam" (regardless of the horrible data on consumer spending and confidence that's now pouring in) ... and "which hot stocks to buy for 2003" (despite the devastating losses in those stocks already incurred).
I will have my FULL response to these widely touted 2003 forecasts in the upcoming issue of the Safe Money Report which will be mailed to you January 8 and available at www.safemoneyreport.com on the same day, complete with instructions on what to do next.
For now, suffice it to sum up my reaction to the prevailing views in one word: Baloney!
Just ONE of the shocking facts I have cited for you -- such as the plunge in consumer confidence and spending -- blows a gaping hole in nearly every economic theory, forecast, or phrase coming out of Wall Street and Washington, raising serious doubts about any rally attempt, including today's.
They are sleepwalking right through the greatest economic landmines of several generations, and no one has bothered to wake them up.
I WISH I COULD BRING YOU MORE OPTIMISTIC NEWS, BUT I CAN'T
I sincerely wish I could tell you the worst is over, a recovery is finally underway, and it's time to buy up stock market bargains with both hands.
But I cannot. To do so would be a violation of my ethics and a betrayal of your trust. I must tell you what I truly believe, based on all the evidence I have before me, with no bias and no conflicts of interest. I must continue to warn you -- to urge you to get to safety and stay there.
Some people seem to think that pessimism is part of my nature, but they are wrong. I am a born optimist, a deep believer in my fellow man and in the future of our country. However, I also believe that government intervention to artificially and prematurely pump up the economy will only prolong the agony, and postpone the day when I can turn bullish on the market.
The more quickly it all washes out, the sooner we will be able to find a true bottom and go on to bigger and better days.
That's why, I think it is actually for the better that ...
MR. BUSH AND MR. GREENSPAN ARE POWERLESS TO FIGHT THE TIDE
Washington has thrown absolutely everything at this market to stop the bleeding.
The Fed crushed short-term interest rates down to nearly zero, and pumped big money into the banks.
Mr. Bush has promised a new round of tax cuts.
And over the holidays, regulators settled with Wall Street, letting the big investment banking firms off the hook with fines and penalties that amounted to a meager $14 for every $100,000 that investors lost in the market.
Yet, despite all the heaving and shoving, the bear market continues!
I repeat: This is the longest bear market our country has seen since the Great Depression. In this context, the latest rally is nothing more than just another blip. Nothing has changed since 2000 -- not on the charts, and not in the fundamentals.
(CHART NOT AVAILABLE IN TEXT FORMAT)
Look at this steady three-year downtrend! And look at all the failed rallies we've seen so far! No matter what Mr. Bush and Mr. Greenspan do, they cannot change this trend.
They cannot change the fact that Japan and Europe are sinking.
They cannot change the dire reality that deflation is beginning to turn the entire world economy inside out and upside down. Nor do they have the experience to deal with deflation.
They cannot make the ballooning federal deficit go away -- let alone change the fact that Uncle Sam is going to have to borrow hundreds of billions of dollars to finance it.
They cannot stop giant corporate dominos from falling. They didn't lift a finger to save Enron, WorldCom, United Airlines, and now, Conseco. And yet these were the biggest bankruptcies in the history of the world! They know that it would have been financial and political suicide for the government to throw good money after bad in bail- outs of that magnitude. The fact is, giant, sick companies are not too big to fail, as people used to think. THEY'RE TOO BIG TO SAVE.
What Mr. Bush and Mr. Greenspan do not seem to realize is that the giant, sick world economy is also too big to save. But they will soon find out.
Saving the Japanese economy would probably cost about $3 trillion -- one trillion for the banks to get rid of their bad debts, one trillion to bail out their sick economy, and another trillion to help get their stocks out of its 12-year bear market.
To save the sickest European economies would probably cost even more.
For Latin America, figure another trillion or so.
And in the US, just to get America's consumers, companies, cities, states, and federal agencies back to a livable level of indebtedness, I figure it would take another $5 trillion.
All told, it would probably cost close to $13 trillion to rescue the world economy from deflation and depression.
That kind of money simply doesn't exist -- ANYWHERE. The authorities couldn't scrape up one-tenth of it. And even if they could, any such massive rescue attempts would backfire because investors would dump their government bonds in any country that tried to spend its money so lavishly.
For decades, no one had to confront this day of reckoning because inflation and growth always helped paper over the debts and postpone the huge bankruptcies. People could always count on higher incomes and bigger profits -- plus cheaper money -- to make it easier to pay back their debts. No more!
Now, the circumstances have reversed. With deflation and falling incomes, paying off debts is more expensive and more painful for everyone across the board. That's why thousands of tech companies and nearly 200 telecommunications companies have gone bust. That's why Argentina went under and why we've had the worst bankruptcy crisis and the longest bear market since the 1930s.
The worldwide deflation is far too powerful to stop. The authorities in Japan tried to stop it, but they failed. They dropped interest rates down to zero. They spent trillions of dollars on massive public works programs over the years. They even bought common stocks with government money. But nothing worked. The deflation continued, and their bear market is now in its twelfth year, with still no bottom in sight.
The United States seems to be embarking on a similar path. Mr. Bush and Mr. Greenspan are trying to stop the deflation, hoping to nip it in the bud. But they don't have a chance against deflation. They don't control what happens outside of the United States, where tens of thousands of factories and billions of workers are ready to churn out boatloads of high-quality goods to dump into US markets at deep-discount prices. Nor do they control the new spending habits of millions of American consumers, most of whom now demand bargains, even giveaways. They certainly don't control the fire sales of assets by bankrupt companies.
DEFLATION IS HERE, WHETHER THEY LIKE IT OR NOT
Even a spike in oil prices cannot alter America's collision course with deflation. If anything, high oil prices pull spending power away from other purchases, depressing demand and spurring the deflation further.
This deflation -- plus the bankruptcies that knock gaping holes in the portfolios of investors and in the balance sheets of big banks -- is what's driving the stock market inexorably lower, year after year.
Yes, the newest and latest round of Wall Street hype is getting some individual investors to buy stocks, just like it has today, driving the Dow up by triple-digits in the first few trading hours of the new year. But all over the world, nearly everyone else is selling or getting ready to sell.
Big banks like J.P. Morgan Chase and Citigroup are using every rally to take some money out of the market to compensate for the huge losses they've taken in companies that have gone under.
German investors, who were a major support for the US market throughout the 1990s, are now unloading. This year, the German Dax Index has fallen more than any other major market in the world -- more than the Dow and more than the Nikkei. And Germany's Neuer Markt -- Europe's main rival to the Nasdaq -- has lost 96% of its value and is shutting its doors for good. So before year- end, German institutions must find something to sell to help offset their losses, and the only sector that's still got value is American blue chips. All over the world, deflation is forcing investors to sell their stocks.
That's another reason the rallies fail, why the rally since October is doomed to fail. It's also why I think the investments we have recommended in Safe Money will shine.
I leave you with just one more Big Picture thought ...
(CHART NOT AVAILABLE IN TEXT FORMAT)
This is the Dow since 1980. Look at how high it went by the end of the 1990s. Look also at how much room it still has to fall. Even a 50% decline in the Dow from its peak would be very modest in this context. And yet much smaller declines have generated incredibly good results for the bear market investments I have recommended in Safe Money.
Aside from the few precious moments with my family over the holiday weekends, I have been devoting nearly every moment of my waking hours to make sure we take full advantage of the next leg down. It could be a whopper.
Warm regards and a very Happy New Year!
Martin
P.S. Two more critical facts you must be aware of:
Fact #1. The positive number that drove the stock market higher today -- the ISM Manufacturing survey -- reflects factory activity back in November, when factory managers were apparently gearing up for big holiday sales. But the horrible sales and consumer confidence numbers that came out just a few days ago reflect what JUST happened now in December! As soon as the market wakes up to this ironic twist, it will come tumbling right back down again.
Fact #2. One year ago, in the first three days of January 2002, the Dow gained 410 points. By the end of January, however, the Dow was down 815 points for the month. This year, don't be surprised if January turns out to be even worse!