Friday, June 16, 2006


Some of the best intermediate term stock market signals are screaming BUY! I made aggressive buys the past few days. I added to the aggressive buys this morning. While I must warn and warn again that I do not know anyone who has a great track record of predicting what the market will do in a few months, I must also say that it is rare to get such strong signals.

I will never never never recommend to you to buy options. However, my feeling about the market is strong enough that I can report that I bought options in family accounts over the past few days. Making money in options requires being right in a relatively short period of time. A person can be right about the direction of the market in the right amount of time and still pay such a high premium that he still loses money on options. On the other hand, if you buy a basket of stocks and hold for several years, the odds are strongly in your favor to make a better than average rate of return.

My seemingly constant barrage of positive comments to you may lead you to believe that the majority of investors are "bullish". This is not the case. One consumer confidence ratio for stocks just hit 21%. The AAII survey just hit levels not usually seen except near market bottoms.

The Presidents popularity has just jumped into the range where stocks normally do very well. The majority of the people of the world now believe interest rates will go higher over the next year. This is in the face of an incredible surge in low cost production of products. The cost to manufacture most products is going down not up. At the same time, service businesses are using technology to lower costs.

One definition of inflation is too much money chasing too few goods. Today's economy is almost the reverse. Today, there are more than enough goods being produced to satisfy all needs. Many a store has opened to recycle "slightly used goods". There is no limit to the number of times an aluminum can can be recycled.

Those who are speculating in commodities should look back in time to see how we use less and less raw materials to produce more and more goods. Yes, the tremendous growth in Asian economies means the world needs to mine more copper but there is plenty of it in the ground. Fibre optic cable that is replacing copper cable is made from sand. I don't think we are going to run out of sand any time soon.

How many shares of CAL do you want to own when the price of oil drops from $70 per barrel to $50 per barrel? How many shares of GLW do you want to own when video's become the most common form of communication?