FUNDAMENTAL PICTURE: US Dollar, War economy, Housing Bubble and Inflation.

• Interest rates will continue to increase, “unless they can’t” because the US economy is too weak
• Real estate has peaked.
• The US Dollar, after the current rally cycle, will continue its secular decline unless things change.
• The real financial costs and consequences of the Iraq War and the War on Terror will be realized: It is like focusing on the more than 1500 dead and not counting the well over 15,000 seriously wounded. The future costs to the Veterans administration, military equipment replacement, and the higher cost of recruiting is NOT properly factored in.
• Corporate earnings will decline, especially as financial engineering and other such profits decline due to high interest rates.
• Increased inflation due to a declining US Dollar and the after effects of a vastly increased monetary supply.
• Budget deficits and trade deficits will continue at or near record levels.

Bottom line: 2006 will show sluggish growth under 2%, no growth or perhaps even an outright  recession!

TECHNICAL PICTURE

 A reasonable case can be made that the 2005 market top is in. If so, it is only a question of what to sell and when (ideally into the post tax season May rallies).

 
CYCLIC PICTURE

2006: In the 4 year presidential cycle, this is often a down year (witness 2002, 1998 etc.) 

 
ASTROLOGICAL PICTURE

• There are four possible high energy, i.e., potential crash dates, in 2006
• There will be three Jupiter/Saturn squares (which translates into a business cycle risk), beginning December 2005 and lasting until October 2006.
• On March 29, 2006, there is a Total Solar Eclipse, which increases the global terror risk in 2006.
• Jupiter squares Neptune in 2006, while Saturn opposes Neptune in 2006 and 2007. Both of these planetary pairings translate into future Oil and Inflation risks.

 
GOLD AND DISTRESSED INVESTING

• Looking ahead, Distressed Investing will replace M&A as the BIG money maker in 2006/2007. Watch for stocks near or breaking their 52 week lows.
• Gold is more than a currency, it is an INFLATION metal. Years ago, Weingarten was a rare voice saying that “Gold is more than an inflation metal, it is a currency.”  Gold has been above $400 for quite some time.  There is inflation, despite the fact that it is under-reported.
• Jupiter will enter Scorpio in late 2005, which will cosmically bestow favor on sectors such as Health Science, Mining and Nanotechnology, VOIP/Wireless, Business Intelligence (spying) and Environment Control. This will also increase bankruptcy, which is a challenge for the financial sector.

 

The following are a few potential courses of action investors are advised to consider by this Summer:

1.      Reduce margin in your securities account to 0.

2.      Consider selling what you personally would not dream of buying at current pricing or placing a close stop to protect profits.

3.      Explore whether writing covered calls or buying some put protection or a Bear Fund makes sense for your portfolio.

4.      Accumulate gold and/or gold stocks in May/June.

5.      Make a wish list of what you want to buy with the cash you have or will raise. However, don’t be in a rush to buy until there really are bargain basement price sales as CASH WILL BE KING in 2006.

6.      Take a vacation!

To be continued.