Wall Street Next Week October 6, 2003
WALL STREET, NEXT WEEK
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WALL STREET, NEXT
WEEK: OCTOBER 6, 2003
FOR THE SUCCESSFUL INVESTOR
1. OCTOBER MARKETS
2. UP STARS/DOWN STARS
5. ON THE WEB
7. AFUND LETTERS
1) OCTOBER IS MARKET LIFEBOAT DRILL MONTH
Will there be another October scare? Maybe, maybe not, but you should
have your market “go bag” prepared, just in case. I often claim that
financial astrology allows you to make more money with less risk. One of
the many reasons is that over the long run, the most successful investor
is the one who is surprised the least. Given October’s reputation, plus
Saturn’s (payback time) transit over the US horoscope as well as President
George Bush’s, it is prudent to be as cash rich and debt free as possible
October 8 is our next market marker day- when we get an important clue
as to what the Fall 2004 Zeitgeist will be. Will investors become realistic
and less speculative? Interestingly enough this cosmic marker follows
the mundane California recall election of October 7 and precedes the Treasury
Department introduction of a colorful redesigned $20 bill on Oct. 9. Then
it is punctuated by an important Full Moon the morning of the 10th. It seems
that politics will have an increasingly important economic role in markets
between now and November 2004: Duh!
EARNINGS SEASON: BEAT, HIT OR MISS FORECAST?
ONE DOWN, TWENTY-NINE TO GO?
Eastman Kodak is on it way out of the Dow.
ONE DOWN, NINTY NINE TO GO?
SUN (SUNW) now a billion dollars poorer with earnings and sales lower
than expected, will it hold or break $3?
Factoid: US consumer confidence is at its lowest level since the start
of the Iraq war.
Trading Note: October has several potential 150+ point UP/down days-
KEYDATES: October 6, 8, 10
Support S1 9250 S2 9000 S3 8800 Resistance R1 9331 R2
9400 R3 9550
NASDAQ: 1800 Pivot
S1 369 S2 374 S3 380 R1 385 R2 388 R3 395 R4 398 R5 400
DON’T BUY AND HOLD.THE STOCK MARKET IS LIVING ON BORROWED TIME: DJ FV
ELIMINATE ANY MARGIN DEBT, BE HIGHLY LIQUID AND BE SURE TO KEEP A BALANCED
AND DIVERSIFIED PORTFOLIO! Just 3 DJ Stocks offer 5%+ Dividends.
Q3 2003 Market TOP: SPX 1040 DJIA 9686 NASDAQ 1913
Q4 2003 targets: SPX 933 DJIA 8811 NASDAQ
12/31/2002 EOD: SPX 879 DJIA 8341 NASDAQ
2. IS ONLY GOLD IS AS GOOD AS GOLD?
As the business press has finally noticed, geopolitical uncertainty,
war, global economic sluggishness and a weak U.S. dollar are good for gold
companies. The major factor providing intermediate term support for gold
is that a further decline in the US dollar is practically inevitable. An
interesting historical note: Gold was a traditional safe haven until the
first Gulf War. Now, after the second Gulf War, it is again. One short term
positive is seasonal strength. Bearishly, current physical demand is not
that great, while happily looming in the not so distant future, will be soaring
Chinese demand (over taking India).
Just as IBM and GE are DOW bell weathers for DOW, so is Newmont (NEM)
for gold in BIG money portfolios. FYI: Last century, it was ABX, when hedging
wasn’t such a dirty word. My favorite major is Placer Dome (PDG). Still,
we sold PDG at last week’s highs, as I personally don’t like to chase hot
sectors, but wait for a correction to rebuy as we started to last Friday.
One aggressive alternative is Freeport McMoran Copper & Gold, perhaps
the most undervalued major. Buy FCX only if you are up-to-the minute in Indonesian
politics (I am not). Some analysts prefer buying bullion as a safer
way to go, as things can always go wrong with a gold company. No matter,
most investors should hold a core gold position as a portfolio hedge, especially
given low downside risk before November 2004.
We continue to underweight gold midcaps as investments given they already
have built in a gold price of $450. Alternately, astute traders can
periodically Sell HUI/Buy XAU. If you prefer the adventure of finding buried
treasure as I do, there are nearly 1000 mining exploration or development
stage companies on the TSX alone. I recommend putting from 10% to20% of
my gold allocation [not total portfolio, but of commodities allocation]
into a group of 5 microcaps, which, with obvious bias, include AFUND clients
Gallery and Osprey. Will gold end 2003 closer to $369, $380 or $450? If
gold drops, my loss will not be too great, but in the case gold does explode,
I am likely to partake in the gold rush up to 100% increase even without
one of these companies striking. In addition, to our two AFUND clients,
Gallery and Osprey, the three other gold microcaps we recommend investigating
WSNW subscribers should visit our S:MINING 2003
premium post for more.
3. Last month there was some concern that a Giant asteroid could hit
Earth in 2014. See Savings
plans and Armageddon. What would this mean for insurance companies?
Time to sell quickly before disaster strikes? Nah, don’t worry; Wall Street
would have waited until 2013 before reacting, if at all. I believe there
is more reason to should worry about the Solar Eclipse this November and
the Saturn/Neptune squares in 2005 and 2006.
These days I prefer insurance companies to banks and brokerages. Most
fund managers, for whom price is no object love AIG. [AIG, along with Cisco,
are the most likely replacements for EK in the next Dow Jones reshuffling.}
My current three favorites are: Aegon (AEG), AFLAC (AFL) and Canadian SunLife
(SLC) even though they are not likely to benefit from the current merger
mania such as John Hancock and Canadian Manulife combining into the No. 2
insurer in North America and No. 5 in the world. FYI: We rate MFC a
short term neutral, but a 2005 outperform
4. "There's a perception that stocks are overvalued, and that's holding
the market back."
Stephen Massocca, president, Pacific Growth Equities
HW: Given perception of reality partially creates a reality feedback
loop, I see markets as most toppy.
"America is not very attractive for European investors these days with
the risks of a weakening dollar spoiling returns."
Michael Fuchs, head of equities, AMB Generali
HW: Asian investors are hardly thrilled too. Given Saturn’s approach
to both the US Sun and President Bush’s, US investors are likely to join
the party and feel the same way.
"There's no compelling reason to hold U.S. equities. Until we see some
real growth in employment and income, which feeds into capital expenditure,
I don't see a recovery under way."
Lochiel Crafter, chief investment officer, State Street Global Advisors
HW: There was one, but as I have often repeated, it was nipped in the
bud with the misguided US Iraqi adventure. In the meantime, this fact has
yet to be built into the market. Once that happens, then perhaps, a more
lasting recovery may begin.
Reason for Nasdaq Exuberance
“Things are better in tech stocks--but not THAT much better.”
Best Winners Often
Show Higher P-Es Than The Market
HW: Especially true when the market is on drugs, which is most of the time.
Of course, one is also forced to sleep with one eye open, if you are not
likewise on drugs.
6. READER: Are trade deficits bad? Why? Show me ONE developed
country that doesn't have a huge trade deficit...The U.S. trade deficit
is 5.2% of GDP...similar to Australia...Remember also that China does not
float their currency, so the falling dollar doesn't ease the trade deficit
the way it Should...eventually China will have to float their currency, as
Treasury Secretary Snow has advocated, or China could end up like Argentina...in
HW: I just hope the US doesn’t end up like Argentina. Yes, trade deficits
are bad, especially when 5% or more of GDP. It will be interesting
to see how you feel about this issue same time, next year.
READER: Do you think we could be headed into a depression re: corporate
HW: Unfortunately, the intermediate term future for the US economy is
increasingly like political solutions for Iraq, there are ever decreasing
positions options. We are most wary of corporate junk, but hold some
READER: In your 9.12 broadcast you spoke about how investing in microcaps
benefits the market.
HW: I said in the frothy end part of a market cycle such as we have
now, or had in late 1999 and early 2000, investing in microcaps is highly
profitable using only a portion of profits earned earlier in the cycle,
assuming one is using prudent money management.
READER: You wrote in last week's WSNW that you were waiting for gold
to test $380. What do you think of the test so far?
HW: Not Complete, BUT sufficient enough to go long gold over the weekend
to 390-392, where we are likely to resell.
7. HERE WE TALK ABOUT AFUND CLIENTS:
READER: I remember you saying in your last radio show that OSGL may
go to $.90 and then drop back to $.50 and then within 2 years go to $5
- Most interesting prediction.
HW: Being a Leo, I find all my predictions interesting! ;)
READER: I have read the re done accounts re Canadian Exchange and think
it borders on pathetic the storm the Exchange have inflicted [on IHI].
Same results for the bottom line and the former way of accounts being done
would in my opinion be more exact re non refundable.
HW: Almost everyone I have spoken to agrees.
READER: I was JUST wondering how you marketed the company [IHI] to potential
investors, e.g. Amex Club.
One would think you would have to present information that would be
current and show IHI is actively producing, or had contracts, or something,
to convince people to invest now.
HW: I simply present the company fundamentals and then offer my assessment
of its potential. I point out the stock is basically dry and should have
good news come over the next month or two. It can easily double, triple or
READER: Where are the [IHI] orders?
HW: The Company has yet to announce this in a press release. There
are many potential orders that could be closed soon. I both hope and expect
some of these to be announced shortly.
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IHI has been an AFUND client since
1994 and is currently paying monthly $2,500 consulting fees and $500
for banner ads on our website. May 15, 2002, an affiliated company, Susan
Hahn & Associates became IHI’s media representative with a monthly
fee of $1500.
July 7, 2003 GYR-TSX became an AFUND client and is currently
paying $1000 monthly consulting fees plus we received a one time fee
of 100,000 free trading shares and will receive 200,000 options at C$.10
to be paid by a third party.
August 19, 2003 OSGL became an AFUND client and is currently
paying $1500 monthly consulting fees plus we will receive a one time
fee of 168,000 free trading shares and 200,000 options at $.25 to be
paid by a third party.
Please read our Disclaimer for more
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