"the daily reckoning" excellent journalism

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    Below is a copy from The Daily Reckoning. It is an excellent site with exceptional journalists portraying the contrarion view. Hope you enjoy.
    Depending on the reception I may paginate this on a daily basis for you all.

    *** The winter of investors' discontent is upon us...or the late autumn, anyway...
    *** Gold and oil fill the news...who cares about coffee
    and propane?
    *** While commodity bulls cheer, consumers
    lament...investor portfolios remain under Wall Street
    misguidance...and more!


    It's a gloomy winter day here in the Daily Reckoning Paris HQ, not least of all as your editors are elsewhere.

    Bill is on a plane bound for Nicaragua...and Addison is
    snow-bound in New Hampshire. But our faithful man-on-the-scene in Manhattan, Eric Fry, is here with the latest news from Wall Street for you...



    Eric Fry, reporting from New York:

    - The "sandpaper" bear market keeps grinding away. 189 Dow points turned to sawdust last week, as the blue chips dropped to 7,864 - the index's lowest level since early October. The Nasdaq fell 3% to 1,282.

    - "The poor start to the year might be a harbinger," USA Today points out. "Of the 19 times since 1950 when the market fell in January, stocks finished up for the year only seven times, the Stock Trader's Almanac says."

    - We shudder to think what a losing January AND a losing February might portend...A fourth straight losing year perhaps? Of course, Mr. Market does not observe the Gregorian calendar...or any other calendar, for that
    matter. He observes only the seasons of investor emotions, and now is the winter of their discontent...or at least the late autumn.

    - "Wall Street today is in one of its recurrent sinking
    spells," writes James Grant, editor of Grant's Interest
    Rate Observer. "Many call it a crisis of confidence, by
    which they mean under-confidence. Less attention is given to the preceding crisis of verconfidence...Markets are cyclical. First, investors trust too much. They believe that no price is too high to pay for a stock or a bond, then they doubt that any price is too low. So credulity is followed by cynicism, unreasonably high prices by ridiculously low ones."

    - To be sure, stock prices are no longer "unreasonably
    high," but neither have they become "ridiculously low". At least, not as most might define "ridiculous" - the sort of valuations that typified the stock market in 1982, when stocks sold for eight times earnings and yielded 6%...Now, THAT was ridiculous!

    - The seasonality of investor sentiment manifests itself in all financial markets, commodities as well as stocks. Prior to 2001, two decades of falling commodity values had driven the price of most commodities to ridiculously low levels, in many cases below the cost of production. Even today, after a two-year rally, commodity prices are still low.
    - Curiously, despite the rallying commodity markets, long-term bond yields remain below 4%. Normally, bond yields rise when commodities are rallying. One of these two markets would appear to have it wrong.

    - "The deflationists own Treasurys," Jim Grant observed
    recently, "while the inflationists own oil, gold, nickel,
    natural gas, soybeans etc. For now, everybody - temporarily - is happy. The question before the house is which constituency is more likely to become unhappy?"

    - Bridgewater Associates - like the New York-based editor of the Daily Reckoning - unapologetically, albeit humbly, predicts that bonds will become less happy as time goes on. "Arguably, we are in the midst of the most powerful commodity move in the last 22 years, and this will now start hitting the CPI," Bridgewater Associates asserts. "One of the major global themes in 2002 was the powerful surge in commodity prices. So far, 2003 has seen the move continue...[Therefore], our estimates suggest overall inflation will jump well above 3% in the coming months...Given the commodity move, this is pretty much baked in the cake.

    - "Prices are rising across all major commodities,"
    Bridgewater continues. "96% of all major commodities are up since January 2002 [lean hogs being the one exception...But who would want a 'lean' hog anyway?]."

    - Standout performers since January 2002 include coffee, which is up 130%, and propane and natural gas, which have more than doubled. But who cares about coffee or propane when gold and oil are capturing all the headlines? Gold and oil are the Taylor and Burton of the commodity markets - glamorous, volatile and prone to making front-page news.

    - Last week, gold soared to nearly $390 an ounce before retreating to finish the week at $370. The energy complex put on an even more dramatic performance, as crude oil, heating oil and natural gas all soared to multi-year highs.

    - Crude for March delivery rallied nearly $2.00 to $35.12 a barrel, its highest level since November 2000. Next up, natural gas jumped 8% to $6.043 per million BTUs. Not to be outdone, heating oil gushed an incredible 17% last week, from 93.2 cents a gallon to $1.10...Time to shut off the furnace and start foraging for firewood.

    - Commodity bulls may be enjoying the rallying energy
    markets, but the rising cost of driving a car and heating a home will bring no smiles to the faces of consumers.

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