GOOD NEWS FOR INVESTORS!

The news is bad all over! Much of it is good news for investors.

Preliminary government numbers show a small slow-down in personal consumption expenditures from 3.3% to 3% growth and the Chicago Purchasing Index dropped all the way from 63.5% to below 50%! The economy is slowing down.

HAVE YOU SEEN THE BOND MARKET!

The ten year bond is pushing against 4% again! Expectations of future inflation are extremely low. The stock market does extremely well when inflation expectations are low, except when the Y-Curve goes into high gear. If you are not familiar with the Y-Curve you should check the work by Shiller or read Bulls Eye Investing by John Mauldin.

By the rule of 20, twenty minus 4% bonds leaves 16 times S&P forward earnings. Forward earnings for the S&P are under 15. Stocks keep getting cheaper every day as "bad news" has the shy heading for cover. If you don't believe me take a look at Put Call ratios, new high-lows, or other gauges of market sentiment. Some of these can be found at MarketGage

Warren Buffet said to fear greed but to be greedy when others are fearful. He may be amongst the majority who are fearful but his advice still holds. There have only been a few times in the past 20 years when the rule of 20 has been so positive. In each of those times the market did well.

THE BRAKES ARE OFF!

The evidence mounts that Greenspan is letting up on the brakes! I am not talking about his verbage, but about market indications. The futures markets have lower expectations for fed funds rate increases and more importantly, broad measures of money supply are finally on the upswing. A significant bottom may be in the works.

THE OIL CRISIS IS OVER!

Once everyone in the world is aware of a supply shortage in any commodity the crisis is over. The evidence is everywhere. A good example is Indonesia. The government just lowered its oil price subsidy for 250 million people. While it is true that this relatively poor country does not consume nearly as much oil as the United States, the price just went up sharply for a population almost equal to the US. On the supply side, companies have paid big bucks for Canadian Tar sands and even OPEC is looking for ways to increase production. The pressure is on the Iraqi Sunnis to make a deal. The whole country would love to export more oil while the prices are high. With new supplies coming on line and consumption cutbacks underway, it is only a matter of time before crude prices fall. Resources are plentiful. Everything from the Baltic dry goods shipping rates to the price of lumber shows the pressure is coming off prices. Labor is plentiful. Industrial capacity is available. Yes, the developing countries are consuming much more oil and gas. Yes, the developing countries are preparing to substitute nuclear power and coal power. Twenty-three nuclear power plants are currently under construction.

TRADING VOLUME HAS DIED!

Last year, trading volume declined all year until August. The market made a big move from September through December. This year the volume has declined all year. The next few months could be a repeat of last year.

Worldwide productivity growth is remarkably strong. While the US has enjoyed 10 very strong years, our productivity has paled in comparison to several developing countries. This trend will continue because the internet infrastructure has been built. The process is now the simple matter of learning how to use the internet to save time and effort. The ways are countless.

KATRINA IS NO LAUGHING MATTER!

Katrina was a very bad storm and my heart goes out to all of those who have suffered losses. My family will make donations to the Red Cross, the United Methodist Relief Fund (UMCOR) and other charitable organizations. Please consider making donations to assist.

While it is difficult to appreciate the magnitude of the suffering, it is true that the news and the market over react to tragedy. There has been talk of recession. A recession is certainly possible but the reality is that the rebuilding efforts serve as a stimulus to the economy. As my friend Lamar Jones points out, the talking heads like to tell how much business Wal-Mart will lose because 123 stores are closed. They don't like to discuss the fact that many folks will use insurance proceeds to repurchase items that were lost or destroyed.

The GOOD NEWS FOR INVESTORS IS THAT THE BAD NEWS IS OFFERING A BUYING OPPORTUNITY. BUY THE BULL!