Friday, February 01, 2008


I have little time to write but I feel that I must take the time to tell you that the valley we are in is over flowing.

Our train has sped down the mountain with stocks leading the way. The second section of the train holds the economy and the third section holds interest rates. The mountain was steep enough and the valley floor long enough such that when the first section hit the valley, the economy and the interest rate sections were still coming down. Suddenly the middle of this train is in the valley and the stock market end is already climbing the next mountain. It is being pushed up by the momentum of the interest rate car.

Once again, I must remind you that interest rates and commodities trade together. Thus, it stands to reason that oil prices are falling almost as hard as interest rates. The economy is the here and now except that the data we get is always old. The economy has slowed but that is old news. Stocks lead the the economy and interest rates. By the time the data show that lower interest rates have boosted the economy, the stock market will be over the top of the first row of mountains that we are climbing.

The past two days have started with terrible economic data only to see stocks shrug the bad news off. This is the nature of Bull Markets. Some will tell you that this is only a Bear Market Rally. This folks do not appreciate the power of lower interest rates. The decline from 4.25% to 3% in a few days represents a "reflation" for 75 Trillion Dollars worth of assets. 1.25% is 30% of 4.25%. The economic stimulus of 30% applied to 75 Trillion Dollars is almost like an economic gain of 22 Trillion Dollars.

If you are not adding money to your accounts as rapidly as you can, you are missing out on the kind of market strength that is normally seen about every 8 or 9 years.