Tuesday, May 17, 2005

Bill Cara: Capital Markets & Social Equity

Bill has said he will take the other side of the energy trade with Jim Cramer. Bill expects a rally in gold and oil.

Jim can change directions so fast that Bill and Jim will likely be on the same side of this trade within a couple of days. A case in point is Dell. On the first news of the good Dell quarter, Jim was "ringing the bell" when the stock was up $1. Last night, Jim listed Dell as his "power forward" along with a few other tech stocks. I enjoy Jim's show and I have learned a few things from him, however, if you pay attention you will see that he reverses directions on the slightest news. Jim clearly does not trade his trust account as quickly as he flips back and forth on his views. I have never met anyone who has a long-term great record of short-term trading.

In regard to the energy "contest" between Bill and Jim, I am largely ignoring the sector. It is in the "news too much" stage. When everyone is talking about a certain sector it is usually the wrong place to buy.

There are those who make a good case for rolling over to consumer staples and heath care and there are those who say that tech will benefit from the decline in oil. The recent action has been in tech. Of the eight S&P Spyders, tech is the recent top performer.

The story that fits the current situation the best is that the commodity inflation "minnie bubble" has popped; inflation fears are subsiding; the 10 year bond, the tech sector and the commodities sectors are forecasting low future inflation. The PPI report--a backward looking measure--showed high but the increases in short rates will take their toll.

The futures market is forecasting a fed funds of 3.5 or so 6 months from now! The market believes the fed will not need to raise rates short rates much more.

Now is the time to buy solid good value stocks. Buy stocks off our Stock of the Week list if you want some solid holdings.

This market is pushing through resistance this afternoon. The gains of the past few weeks are being consolidated. Some of the money that was pushing South Beach Properties out the roof may be looking for a better home (pardon the pun, the one bedroom second homes at South Beach are mostly over $1 million now). Americans have hoards of cash. The supply demand for stocks looks really good; stocks are cheap relative to bonds and real estate--what else are you going to do?