interesting read

  1. 5,713 Posts.
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    this is from another list..thought that some might find it one has to be aware of all things in this market,,..note though he is a bear king, but has interesting points....
    have a good day..


    January 2, 2003

    Dear Safe Money Subscriber,

    Today's the first day of the new year, and I'm writing you
    from my home in Palm Beach Gardens, Florida.

    Usually, my wife and I would spend the holidays in Brazil
    with her family, on their farm near Sao Paulo. But this
    year, her family decided to come to visit us in Florida for a
    change. So we have a full house, including our nephew's
    three young children, who are like grandchildren to us. (As
    to our own grandchildren, our only son, who is 21 years
    old now, says: "Don't hold your breath, Dad.")

    Despite the holidays, my mind has continually drifted to the
    markets, to the economy, and to your investments. So
    early this morning, I decided to sneak away to my home
    office, sit quietly at my computer, and share my thoughts
    with you about where we are and where I think we're

    Looking strictly at the events that have just transpired,
    I see:


    Retail stores are like a battlefield, the day after a major
    defeat. Retail executives went into the holiday season with
    hopes that were highly inflated by the early Thanksgiving
    crowds, but have come out with the worst sales growth in
    thirty years.

    Investors around the world are equally shell-shocked. At
    the beginning of each and every trading day throughout
    December, they waited patiently for the faithful Christmas
    rally. But every one- or two-day triple-digit rebound was
    totally wiped out by a tortuous decline that immediately
    ensued. End result: The stock market had its worst
    December since 1931, which, itself, was the worst year of
    the 1929-32 debacle!

    If this were just a one-month phenomenon, I'd seriously
    consider the suggestion that December could be a fluke.
    But the miserable December comes on the heels of the
    longest bear market since World War II.

    Today, the first trading day in January is more of the same -- a triple-digit rebound, to be followed by new declines and
    new lows.

    Meanwhile, I also see:

    * The worst mortgage default rates in history, with more on
    the way

    * The most personal bankruptcies in history, with more
    records to be shattered

    * The largest corporate failures in history, with more to

    * The largest banks in the world (in Japan) in de facto
    bankruptcy, with no rescue possible

    * The greatest corporate scandals, with no end in sight

    * Another sharp decline in consumer confidence

    Looking immediately ahead, I see an imminent war with
    Iraq, a new crisis on the Korean Peninsula, a worldwide
    spike in oil prices, and an acceleration in the worldwide
    economic decline.

    And yet, despite all this, unbelievably, the talking heads on
    CNBC, Fox and CNN-fn are still spouting essentially the
    same material -- "how much the Dow will go up this year"
    (no matter how last year's Dow forecasts may have fared) ... "how soon the economic recovery will gain more steam"
    (regardless of the horrible data on consumer spending and
    confidence that's now pouring in) ... and "which hot stocks
    to buy for 2003" (despite the devastating losses in those
    stocks already incurred).

    I will have my FULL response to these widely touted 2003
    forecasts in the upcoming issue of the Safe Money Report
    which will be mailed to you January 8 and available at on the same day, complete
    with instructions on what to do next.

    For now, suffice it to sum up my reaction to the prevailing
    views in one word: Baloney!

    Just ONE of the shocking facts I have cited for you -- such
    as the plunge in consumer confidence and spending --
    blows a gaping hole in nearly every economic theory,
    forecast, or phrase coming out of Wall Street and
    Washington, raising serious doubts about any rally
    attempt, including today's.

    They are sleepwalking right through the greatest economic
    landmines of several generations, and no one has
    bothered to wake them up.


    I sincerely wish I could tell you the worst is over, a
    recovery is finally underway, and it's time to buy up stock
    market bargains with both hands.

    But I cannot. To do so would be a violation of my ethics
    and a betrayal of your trust. I must tell you what I truly
    believe, based on all the evidence I have before me, with
    no bias and no conflicts of interest. I must continue to
    warn you -- to urge you to get to safety and stay there.

    Some people seem to think that pessimism is part of my
    nature, but they are wrong. I am a born optimist, a deep
    believer in my fellow man and in the future of our country.
    However, I also believe that government intervention to
    artificially and prematurely pump up the economy will only
    prolong the agony, and postpone the day when I can turn
    bullish on the market.

    The more quickly it all washes out, the sooner we will be
    able to find a true bottom and go on to bigger and better

    That's why, I think it is actually for the better that ...


    Washington has thrown absolutely everything at this
    market to stop the bleeding.

    The Fed crushed short-term interest rates down to nearly
    zero, and pumped big money into the banks.

    Mr. Bush has promised a new round of tax cuts.

    And over the holidays, regulators settled with Wall Street,
    letting the big investment banking firms off the hook with
    fines and penalties that amounted to a meager $14 for
    every $100,000 that investors lost in the market.

    Yet, despite all the heaving and shoving, the bear market

    I repeat: This is the longest bear market our country has
    seen since the Great Depression. In this context, the
    latest rally is nothing more than just another blip. Nothing
    has changed since 2000 -- not on the charts, and not in
    the fundamentals.


    Look at this steady three-year downtrend! And look at
    all the failed rallies we've seen so far! No matter what
    Mr. Bush and Mr. Greenspan do, they cannot change
    this trend.

    They cannot change the fact that Japan and Europe are

    They cannot change the dire reality that deflation is
    beginning to turn the entire world economy inside out and
    upside down. Nor do they have the experience to deal with

    They cannot make the ballooning federal deficit go away --
    let alone change the fact that Uncle Sam is going to have
    to borrow hundreds of billions of dollars to finance it.

    They cannot stop giant corporate dominos from falling.
    They didn't lift a finger to save Enron, WorldCom, United
    Airlines, and now, Conseco. And yet these were the
    biggest bankruptcies in the history of the world! They
    know that it would have been financial and political suicide
    for the government to throw good money after bad in bail-
    outs of that magnitude. The fact is, giant, sick companies
    are not too big to fail, as people used to think. THEY'RE

    What Mr. Bush and Mr. Greenspan do not seem to realize
    is that the giant, sick world economy is also too big to
    save. But they will soon find out.

    Saving the Japanese economy would probably cost about
    $3 trillion -- one trillion for the banks to get rid of their bad
    debts, one trillion to bail out their sick economy, and
    another trillion to help get their stocks out of its 12-year
    bear market.

    To save the sickest European economies would probably
    cost even more.

    For Latin America, figure another trillion or so.

    And in the US, just to get America's consumers,
    companies, cities, states, and federal agencies back to a
    livable level of indebtedness, I figure it would take another
    $5 trillion.

    All told, it would probably cost close to $13 trillion to
    rescue the world economy from deflation and depression.

    That kind of money simply doesn't exist -- ANYWHERE.
    The authorities couldn't scrape up one-tenth of it. And
    even if they could, any such massive rescue attempts
    would backfire because investors would dump their
    government bonds in any country that tried to spend its
    money so lavishly.

    For decades, no one had to confront this day of reckoning
    because inflation and growth always helped paper over the
    debts and postpone the huge bankruptcies. People could
    always count on higher incomes and bigger profits -- plus
    cheaper money -- to make it easier to pay back their debts.
    No more!

    Now, the circumstances have reversed. With deflation
    and falling incomes, paying off debts is more expensive
    and more painful for everyone across the board. That's
    why thousands of tech companies and nearly
    200 telecommunications companies have gone bust.
    That's why Argentina went under and why we've had the
    worst bankruptcy crisis and the longest bear market since
    the 1930s.

    The worldwide deflation is far too powerful to stop. The
    authorities in Japan tried to stop it, but they failed. They
    dropped interest rates down to zero. They spent trillions of
    dollars on massive public works programs over the years.
    They even bought common stocks with government
    money. But nothing worked. The deflation continued, and
    their bear market is now in its twelfth year, with still no
    bottom in sight.

    The United States seems to be embarking on a similar
    path. Mr. Bush and Mr. Greenspan are trying to stop the
    deflation, hoping to nip it in the bud. But they don't have a
    chance against deflation. They don't control what happens
    outside of the United States, where tens of thousands of
    factories and billions of workers are ready to churn out
    boatloads of high-quality goods to dump into US markets
    at deep-discount prices. Nor do they control the new
    spending habits of millions of American consumers, most
    of whom now demand bargains, even giveaways. They
    certainly don't control the fire sales of assets by bankrupt


    Even a spike in oil prices cannot alter America's collision
    course with deflation. If anything, high oil prices pull
    spending power away from other purchases, depressing
    demand and spurring the deflation further.

    This deflation -- plus the bankruptcies that knock gaping
    holes in the portfolios of investors and in the balance
    sheets of big banks -- is what's driving the stock market
    inexorably lower, year after year.

    Yes, the newest and latest round of Wall Street hype is
    getting some individual investors to buy stocks, just like it
    has today, driving the Dow up by triple-digits in the first few
    trading hours of the new year. But all over the world,
    nearly everyone else is selling or getting ready to sell.

    Big banks like J.P. Morgan Chase and Citigroup are using
    every rally to take some money out of the market to
    compensate for the huge losses they've taken in
    companies that have gone under.

    German investors, who were a major support for the US
    market throughout the 1990s, are now unloading. This
    year, the German Dax Index has fallen more than any
    other major market in the world -- more than the Dow and
    more than the Nikkei. And Germany's Neuer Markt --
    Europe's main rival to the Nasdaq -- has lost 96% of its
    value and is shutting its doors for good. So before year-
    end, German institutions must find something to sell to
    help offset their losses, and the only sector that's still got
    value is American blue chips. All over the world, deflation
    is forcing investors to sell their stocks.

    That's another reason the rallies fail, why the rally since
    October is doomed to fail. It's also why I think the
    investments we have recommended in Safe Money will

    I leave you with just one more Big Picture thought ...


    This is the Dow since 1980. Look at how high it went by
    the end of the 1990s. Look also at how much room it still
    has to fall. Even a 50% decline in the Dow from its peak
    would be very modest in this context. And yet much
    smaller declines have generated incredibly good results for
    the bear market investments I have recommended in Safe

    Aside from the few precious moments with my family over
    the holiday weekends, I have been devoting nearly every
    moment of my waking hours to make sure we take full
    advantage of the next leg down. It could be a whopper.

    Warm regards and a very Happy New Year!


    P.S. Two more critical facts you must be aware of:

    Fact #1. The positive number that drove the stock market
    higher today -- the ISM Manufacturing survey -- reflects
    factory activity back in November, when factory managers
    were apparently gearing up for big holiday sales. But the
    horrible sales and consumer confidence numbers that
    came out just a few days ago reflect what JUST happened
    now in December! As soon as the market wakes up to this
    ironic twist, it will come tumbling right back down again.

    Fact #2. One year ago, in the first three days of January
    2002, the Dow gained 410 points. By the end of January,
    however, the Dow was down 815 points for the month.
    This year, don't be surprised if January turns out to be
    even worse!
