The Taipan Group's 247profits e-Dispatch
Baltimore, New York, Chicago, Berlin, Bonn, London and Paris
January 29-30, 2004
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***Avoid the waiting room for the Next Collapse. More dynamic market opportunities...
***Gold appears after all to be subject to the same speculative pressures as the most ephemeral tech stocks: Could it be that it, too, fluctuates according to dynamic patterns? Let's see...
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Dear Friend,
e-Dispatch reader Mike P. today asked our customer service manager:
"Please tell your smug, self-absorbed, bragadoccio-prone, erudite editor, who's lightning-quick to point out others' mistakes, shortcomings and lack of education, made a very human mistake in today's editorial. The symbol for Amazon is AMZN, not AZN, and it trades on the NASDAQ, not the NYSE. (AZN stands for Astrazeneca, a biotech firm.) Curious
to see if he acknowledges his (gasp!) invulnerability in the next editorial."
Please, Mike, tell me how you REALLY feel about me! He has a point, of course. Amazon does trade under AMZN. My apologies. Which, I guess, makes me vulnerable... thus incapable of acknowledging my invulnerability. (And for the
record: "braggadocio" is spelled with two "g's" and only one "c"... just to stay in character.)
***Another reader, Henry G., commented on Tuesday's e-Dispatch, in which I smugly and self-absorbedly reflected
on "Financial Reckoning Day," the latest work of Agora founder and president Bill Bonner. He writes:
"I found Bill's book quite entertaining and informative, even if it did not change my philosophy. It seems little strange that he continually talks about Lumpen and lives off the proceeds of investing advice. I posed the question whether using Agora newsletters made me part of the Lumpengesindel. Perhaps you can answer because I have not heard from him."
I have bad news and good news for you: From what I've been able to make out, remaining invested in the equity markets makes us part of the Great Illiterate Unwashed that operates under the Marx-inspired soubriquet Lumpeninvestoriat which has become popular in certain circles.
Marx, as you will remember, used the term Lumpenproletariat
to describe the lowest layer of mid-19th-century capitalist
society - proletarians so destitute they were dressed in rags (German: Lumpen) or were considered vagabonds or scoundrels (also Lumpen).
The good news: You're in good company among the Lumpen readers and editors of the Taipan Group's newsletters and, of course, those of other Agora divisions. For the rest, even Roman emperors operated under the principle that Pecunia non olet: Money hath no odor.
And when in Rome, do as the Romans do.
***And speaking of Lumpen:
"The Dow dropped 141 points yesterday. Is it the beginning of something big? We don't know. But surely investors must wonder... " write our friendly competitors from the Daily Reckoning this morning:
"The lumpeninvestoriat may not quite figure it out this way. Still, they must have a little nervous residue from the first leg down of the bear market, March 2000 to October 2002. They must remember that while they still believe in 'buy and hold for the long run,' those 18 months
were a good time to neither buy nor hold. And if they were to sense a similar period coming up, they might well decide
to ride it out by being neither buyers nor holders, but sellers of equities. And whoa! Wouldn't that be exciting? We might even see a day or two of utter panic selling on the Wall Street. Sooner or later, they will come, dear reader."
We concur - even though we can't help observing that given current valuations, the past 24 months were great times to buy stocks... But sooner or later, every asset class goes down. Some go down slower. Others go down faster. It's the nature of markets.
But rather than joining Vladimir and Estragon in the waiting room for the Next Collapse, we prefer to turn the market's dynamic moves into equally dynamic opportunities:
***You see, we also couldn't help but notice that the euro,
too, isn't quite all it was cracked up to be just two weeks
ago: At US$1.24 per euro, it has lost six cents in just a few days. Gold, too, appears after all to be subject to the
same speculative pressures as the most ephemeral tech stocks:
All that was needed was a bit of speculation that the Federal Reserve was maybe, potentially, eventually inching toward raising US interest rates to shore up the dollar and
undermine the reason for gold's rise to 15-year highs this month... It's below US$400 again.
Could it be, that gold, too, fluctuates according to dynamic patterns? Let's see: Last Wednesday, Japan's Finance Minister said Tokyo was looking at the low weighting of gold in its foreign exchange reserves. Prospects of buying by a major central bank helped gold go up US$4.50. Meanwhile, the German Bundesbank stated again that it plans to join other central banks in selling gold (120 tonnes a year!) if the 1999 accord limiting government
sales is renewed.
I wonder what effect increased supply will have on the market...
***What's a Taipan-style Lumpeninvestor to do about this? I
remember the analysis published by WaveStrength team member
Ann Sosnowski on October 10, 2003. Then, she wrote:
"According to my calculations, gold's recent dip is in fact
only the very beginning of a sizable downturn. Investment in stocks and options, an increase in dollar valuation, and
an unhealthy interest in Iraq and oil commodities are persuading the overvaluing gold hoarders to open their panic rooms and spend their money and profit on a sure present (instead of an unsure, maybe apocalyptic, definitely apocryphal future).
"The mob mentality touting 'real' value in gold in a previously unresponsive economy has given way to the most recent interest in the American bull market: the Dow, S&P 500 and NASDAQ all hitting 52-week highs.
"The XAU chart shows the disinterest in gold investment repeatedly causing the index to predictably return to more modest levels, creating a slightly bullish bottom trendline. Currently perched near the middle of an event ellipse, the gold producers are now poised for a systematic
drop.
"A downside move is certain after the most recent value of four hundred dollars for one ounce of gold, a price unheard-of since the mid 1990's. This seven-year high, coupled with a bearish engulfing pattern, provides evidence
for a retracement to the bottom of the trendline at 65.
"The weekly XAU shows that the mountains of gold investment
have been fluctuating between the Fibonacci retracements and the up-trendline from October 2000. The next drop and hang should be around 84, followed by another drop and hang
at 77, and then the plummet to 65. This chart shows no possibility of a continued rally.
"More than a mere majority of my fellow analysts (including
our own Money-Flow Matrix guru, Brit Ryle) are anticipating
a 1,000-point gain on the indices by the end of 2003 as a very likely possibility. Should this probable scenario play
out, I would expect a correlating gold selloff around the beginning of January 2004, just as the bull rally is making
its next expected peak. I recommend that you short the XAU."
I hear the short-term plays made on the XAU in October and November didn't exactly pan out as planned for X-Wave readers. But it would appear that there's no arguing with the trend Ann identified.
According to Ann, her recommendation still stands.
Cordially yours,
J. Christoph Amberger Publisher, The Taipan Group
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Earnings Announcements for Friday, January 30, 2004:
AK Steel Holding Corp., Beckman Coulter Inc., ChevronTexaco
Company, Drexler Technology Corp., Kellogg Company, Manor Care Inc., Mesa Air Group Inc., Regeneron Pharmaceuticals, Royal Caribbean Cruises, SportsLine.com Inc., Tripatch Technology Inc., Vastera Inc., Walt Disney Company, Wendy's
International, and Zoran Corp. are some of the companies releasing earnings.
***Quote of the Day:
"ESTRAGON: Let's go. VLADIMIR: We can't.
ESTRAGON: Why not?
VLADIMIR: We're waiting for Godot.
ESTRAGON: (despairingly). Ah! (Pause.) You're sure it was here?
VLADIMIR: What?
ESTRAGON: That we were to wait."
--Samuel Beckett
***WORLD OF PROFITS***
***As of 11:15 A.M. EST on Thursday, January 29, the Red Zone Nanotech Index was up 6% for the year and down 2.01% for the day.
*** "While the bearish bias reflected in our indicators is not quite as pronounced as yesterday, we see tomorrow's bottom at or just below 13,300."
Our bearish call turned out to be a tad too conservative: the Hang Seng bottomed out at 13,168.43 before rallying back to close at 13,334.01, down 97.77 points or 0.73% for the day.
Our indicators now indicate a deep trough followed by a steep increase of about 200 points. How far toward the upward move we are we cannot say with certainty. There is a
33% chance, however, that we will see the Hang Seng close in positive territory tomorrow.
*** "More trouble is on the way: For tomorrow, expect another correction around minus 0.7%."
Did you hear that, too? The theme of "The Twilight Zone" underscoring yesterday's prediction? We said minus 7%, and that was pretty darn close to what the Nikkei 225 gave you today, as the index dipped to 10,666.55 before closing at 10,779.44, down 73.03 points or 0.67%.
For tomorrow, our indicators remain strangely without direction. We consider the low side of the Nikkei for tomorrow to be near 10,650... but believe the index will close near or even slightly above breakeven.
***DESK OF DENHOLM***
This just in from Taipan's resident Editor-at-Large, Martin
"Black Jack" Denholm:
***Japanese Service Sector Struggling: While the Japanese export markets might be flourishing, the same cannot be said for the country's service sector. The Ministry of Economy, Trade and Industry announced today that the services index sank 2.3% in November amid weak demand for telecommunications equipment and a slowdown in retail sales. After a 1.1% rise in October, the index wasn't expected to drop by that much in November, but consumers took another spending break towards the end of the year, sending services to their first decline in four months. Household spending dropped 0.2% during the month - the fourth fall in five months - and, according to Bloomberg, spending has now slumped to half the pace of the previous five years.
Indeed, things were little changed in December, as retail sales remained flat. That meant an overall sharp decline of
1.8% for 2003 - remarkably, the seventh straight year of sales losses - as lower wages and 5.2% unemployment took their toll.
Needless to say, it will be difficult for Japan to achieve a full recovery without consumer spending. As it is, falling services and retail sales are particularly bad for a Japanese economy that is currently relying on exports for
much of its growth.
Nevertheless, the government is sticking to its belief that
exports and corporate spending will continue to drive the economy forward and that growth during the 12 months from April this year will rumble in at 1.8%.
***China Forges Forward: That is no match for Japan's neighbor, China, which recently announced that economic growth hit 9.1% in 2003 - a six-year high. Retail sales galloped ahead by the same amount. And if you follow the World of Profits section in the e-Dispatch, you'll know that the Hang Seng stock market in Hong Kong gained a great
deal of momentum last week from news that fourth-quarter Chinese growth zoomed ahead by almost 10%... on top of third-quarter growth of 9.6%.
Remember, this growth was achieved against the backdrop of the SARS virus last spring. And it marks an impressive turnaround for China over the last quarter century - from a
poor, agriculture-based economy to a vibrant manufacturer and exporter of a vast range of goods. Indeed, Chinese industrial production jumped 17% last year, which helped create a notable 8.5 million new jobs.
For 2004, government officials are predicting growth of around 7%.
Such flourishing growth is naturally attracting greater inflows of investment into China. According to the Ministry
of Commerce, foreign direct investment (FDI) rose 1.4% last
year to US$53.5 billion.
***BBC Turmoil: The fallout over the publication of the Hutton Report in Britain continued today as the shockwaves bulldozed through BBC HQ.
After BBC chairman Gavyn Davies resigned late Wednesday night, the top dog at the Corporation followed suit today. Director-general Greg Dyke quit as boss after four years in
charge. I think he put it best, saying, "I don't want to go. But if you screw up, you have to go." And make no mistake... the BBC did screw up, badly. Dyke was a popular
and, by some accounts, an inspirational leader (staff at several BBC offices walked out in protest today). But with Lord Hutton criticizing management as "defective," the buck
stops at the top.
The BBC has apologized for its part in the affair, including an unreserved apology to Tony Blair, whom it basically accused of lying to make the case for war with Iraq.
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The Taipan Group's 247profits e-Dispatch Team
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Copyright © 2003 by Agora Taipan LLC. All rights reserved. The Taipan Group's 247profits e-Dispatch is sent daily to a
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