2005-04-09 Report

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Bill's Portfolio:

This is just something to ponder for those American's who are screaming that high gasoline prices are killing the economy, killing the stock market, and so forth:- People in most other countries have it a lot worse.

In an article by the excellent financial writer David Olive in today's Toronto Star, "Pumped Up: Living with high oil and gasoline prices; We're caught over a barrel," there are a few good points being made, such as: (1) theft at the gas pumps is on the increase, in the U.S. and Canada (2) fewer Hummers are being sold on the car lots, presumably everywhere, and (most importantly) (3) gas prices haven't risen enough to cause widespread alarm among consumers.

The third point is really important to Americans because they ought to realize that, while high gasolene prices have slowed economic growth in Europe and Canada, there still is growth. As gasoline is priced in Canada and Europe by liter, let's have a look at how much more Canadians are paying at the filling station.

The Toronto Star graphic compares prices at five Canadian cities (Vancouver, Calgary, Winnipeg, Toronto and Halifax) and seven U.S. cities (Los Angeles, Seattle, Chicago, Miami, Buffalo, New York and Boston). On a comparative Cdn $ per liter, the average price paid in Canada this week is C$0.94 and in the U.S. it is $0.749, which is a 25 pct difference. That's a lot.

Seattle to nearby Vancouver is C$0.77 to C$1.00; and Buffalo to nearby Toronto is C$0.73 to C$0.91.

A family member last week drove from Toronto to South Carolina for a golfing week, taking a friend's oversized SUV. His comment on returning home was, "I wish we had taken my VW diesel". That reminded me of the time I criss-crossed Canada twice in 90 days, almost 20,000 miles to give talks to doctors in 90 towns and cities. My Winnebago got just under 8 mpg; I couldn't pass a gasoline station " especially in the far north -- without having to pull in. Ouch!

But I did it, and so too will Americans.

The result of this crude oil price spike will be that more investment capital will seek alternative energy sources (biomass, wind, nuclear), new technologies related to energy, increased production in Canada's oil sands, smaller automobiles, and so forth. But, there will also be changes in life style, such as the development of more elaborate home entertainment systems, the convergence of computing and television, etc.

These will be the best areas for equity investors to catch the next wave of growth.

Meanwhile, I am preaching the benefits of being defensive because I can see that all the hustlers are trying to strike while the iron is still hot.

Imprudent speculation is starting to show signs of weakening, but it still goes on. In spite of the fact prices are softening, oilmen (and women) are still warning of $100 crude oil as they seek money for wildcat programs. And, realtors in select markets are trying to wring every last dollar out of speculators in hopes the laws of economics will somehow change.

So, my portfolio is on the defensive. Even speculations I normally like, such as Taser and Lexar, are getting whacked.

Yes, this is a time to be defensive.

Even as Mad Money Cramer says he likes AIG, whack. Carnival Cruiselines CCL, whack. ChevronTexaco CVX, whack (-4.4 pct this week). Oracle ORCL, whack. American Express AXP, whack. Citigroup C, whack. And even Yellow Roadway YELL, which was one of JJC's real favorites on the CNBC Kudlow & Cramer program, has been whacked 7.0 pct since he started his own show less than a month ago.

This is no reflection on Cramer; these are all great companies. It's just tough to make a buck on the upside in a down-sloping market. Unless you're short, that is.

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ETF:

The ETF sector funds started to recover this week in what I feel was a ‘dead cat' bounce. I suspect there is more downside to come.

But, except for the Energy (XLE) and Basic Material (XLB) sector funds this week, all the rest recovered some ground. Biggest winner was Healthcare (IYH), which was up 2.70 pct, followed by Telecom Services (IYZ), up 1.49 pct, Tech (Semiconductors), up 1.28 pct and Consumer Staples (XLP), up 1.27 pct.

Only the Energy (XLE), down 2.75 pct, and Basic Materials (XLB), almost flat at "0.27 pct, did not hold tight.

So why does this equity market seem so weak then?

Well, for starters, the big up day was Thursday, but that was the day bond yields roared higher. And we all know that at some point in a rising bond yield scenario, there ain't going to be many " if any " rallying days for equities " unless they are of the proverbial ‘dead cat' variety.

Next, we all know that it's easier to talk a good game than to ‘walk the talk'. That's the reason you want to see the period of a day or of a week in which stock prices are rising or falling.

If they rise in the morning, that's the result of the sell-side yapping. But when prices fall in the afternoon and particularly on Friday afternoons, it's a case of walking. Simply put, actions speak louder than words, and investors these days are not confident enough to hold positions overnight or over weekends.

That's the sign of a bear phase.

In a bull market, you can most often see a spurt of early morning selling from the overnight worrywarts, then a full day of buying as confidence spreads.

I don't see that happening yet.

The following ETF charts are for sectors 10 (energy: IYE), 15 (basic materials: IYM), 20 (industrial: IYJ), 25 (consumer discretionary: XLY), 30 (consumer staples: XLP), 35 (healthcare: IYH), 40 (financial: IYG), 45 (technology: IGM, IGV and IGW), 50 (telecom: IYZ) and 55 (utilities: IDU).

The hourly data ETF charts in the following interactive links are for the 10 industry sectors. I have taken a screen shot of some of them.

10 (energy: XLE, IYE, VDE, and IXC)

For several weeks, I have been saying: "Don't chase the oils. The risk is clearly to the downside; After a loss of 4.00 pct on the prior week, this (a week ago) was the one with April Fuel's Day, when a Goldman Sachs analysis opined that sometime in or before 2007, crude oil would experience a "super spike" to $105. ; So, why the talk now about $105 oil except to excite the speculative traders amongst us? I'm not buying it. Nor, for the record, are the senior officers of the largest oil companies in the world;So, with respect to the energy ETF (the XLE HOLDRS), I think the next one to two percent on the upside is an opportunity to sell into strength. At 43.93, XLE carries too much risk, and cash is the better alternative."

XLE closed this week at 42.72, down 2.75 pct. For Petrolio Greggio, I already told you, "Con Te Partiro!"

15 (basic materials: IYM, XLB, and VAW)

Last week I wrote, "The XLB at 30.07 could be taken higher with AA."

After a tough month for the Basic Materials sector, I said I thought there might be an opportunity for a three to four percent move to the upside. Well, Alcoa (NYSE: AA) was the Dow leader on the week, up 4.43 pct, just like the doctor ordered, but the XLB didn't do much at all. It was down "0.27 pct to 29.99.

20 (industrial: IYJ, XLI, VIS, and IYT)

The XLI was up 0.23 pct on the week, but did have a bad Friday, especially at the close.

25 (consumer discretionary: XLY and VCR)

XLY was up 0.12 pct this week, which is hardly showing evidence of a vital sign. And, if crude oil prices were not falling quickly on the week, what, prey tell, would investors be thinking about Consumer Cyclicals?

I guess ‘no tickee, no laundry'. Wal-Mart shoppers are still missing, and I guess they'll return to the stores when they got tickee.

The world's biggest retailer (NYSE: WMT) was down a further 0.9 pct on the week, including a real bad Friday afternoon. I guess investors were thinking they weren't going to Wal-Marts on the weekend.

30 (consumer staples: XLP and VDC)

XLP was up 1.27 pct to 23.09, but once again had a bad Friday afternoon. Did I not write a week ago about the Consumer Staples, "Oh boy, they got hammered on Friday as well. I'd have to say this bear is just starting to sink in its claws."?

Yes, I did. Maybe high PE multiples and slow growth has something to do with it. Do you think?

I do know that for companies in this sector like PG and STZ, if management is going to try to use their stock as currency to buy up other companies, they had better plainly be accretive deals or the house will fall in.

35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)

A week ago I wrote: "The IYH weakened again going into the close of the week, which is not a good sign. I suspect it will be a down week next week again. Partly my reasoning is that these regulators, once started, have a difficult time letting up in their relentless pursuit of the industry players that don't please them."

So this week, Healthcare (IYH) was the market star, up 2.70 pct. Well, let's just agree that it was up Tuesday and Thursday, and leave my other comments to sit on the back burner for a couple months.

40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)

Financials (XLF) had a good week, up 1.14 pct. Actually Financials (XLF) had a huge week last Monday " but who's watching anyway. The rest of the week was like fighting for air in bad LA smog.

Last week I wrote, "AIG looks like it could disappear, going down a further 8.4 pct on the week. This week, yes."

Isn't it nice to see what an expensive Manhattan lunch, a couple cognacs and a nice cigar can do for an ailing stock? Well on Monday some of that smog I mentioned was actually permeating the lunch rooms in NYC as Wall Streeters were hatching a plan (rumor? "but does it matter?) to have Hank Greenberg return from his Spitzer-enforced retirement.

AIG stock immediately spiked from just under $51 to almost $55. That $9 billion pop in AIG market value, you might say, paid for lunch. I would say, but I don't know how many of Hank's friends, other than Larry Kudlow, were there.

No problem, everybody got back to reality. AIG closed the week at $51.91.

I happen to like AIG's track record, but I guess I am a little like Spitzer; I'd like to know more about their offshore operations and their offshore financial engineering deals regarding compensation for management.

Last week I wrote, "I have to think AIG is getting into an accumulation zone. If you actually believe that the entire corporate culture at AIG was poisoned, taking down one of the leading insurance companies in the world, then throw away your stock. But, if you believe as I do that AIG represents good value at $50.95, then you will start to look for a place to accumulate." I'm starting to think that zone might be in the low 40's.

45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, and MTK)

The SMH HLDRS had a great day Thursday and also a good one on Monday, being up 1.28 pct on the week. But, U.S. semiconductor stocks still have a longer-term chart that reflects a slow growing global economy.

50 (telecom: IYZ, VOX and IXP)

It was a huge day Monday for telecommunication services, with the IYZ up 1.49 pct on the week. This is not the ‘same old; same old', but on the other hand I'm still not impressed.

55 (utilities: IDU, XLU, and VPU)

The Utility sector, which had been tracking the Energy stocks, had a good week even with the Energy sector down sharply. The Utilities (XLU) were actually up 0.72 pct on the week, which goes to show that investors don't mind over-paying for expensive stocks.

The Utility sector is interest-rate sensitive and is hanging on to its high equity prices because of abnormally low bond yields. Now this week the bond market had a bit of a speed wobble as yields started to back up, so next week it would not be surprising to see the prices of Utility stocks fall along with bonds.

But, I've been wrong here, too. In fact I now am starting to think ‘conspiracy'. More on that later. See the section on bonds.

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Bonds:

There was a weakening this week in the bond market " if you happen to read the data published by some vendors.

According to the data at Yahoo Finance, the 30-day to 30-year yield spread on the U.S. Treasuries moved down from 216 basis points two weeks ago to 208 bp last week, but up to 213 bp this week, signalling economic expansion.

Now, it seems, commodity prices (see $CRB) are falling " down 2.42 pct on the week " so the data is suggesting that STAGFLATION is not such a big deal to worry about.

But I don't believe that and neither, apparently, did the bond market " although it's hard to tell depending on where you go to find the data.

Yahoo Finance gives numbers that show a rising bond market for the 10-year and 30-year bonds this week. The charts at Investertech show the 10-year bonds were down 0.9 pct as yields moved up to 4.491, and the 30-year bonds were down 1.0 pct as yields moved higher to 4.775.

I suppose (being an amateur) all one can do is stick to one set of data and hope for the best. I know that the data between Reuters and Bloomberg, for example, is off by a country mile, and I have often wondered why.

From the U.S. Fixed Income (Bonds) Yield Table at Yahoo Finance, the 30-year T-Bond is now yielding 4.75 percent, down from 4.84 pct two weeks ago.

The one series I have my eye on is the 2-year U.S. Treasuries. The yield is up this week to 3.72 pct. I have to think that as the short-term money gets progressively more expensive that there will be cracks in the real estate financing market, and ultimately in real-estate prices.

I wrote a piece this week on the power of low rate ARM financing, which so far powered huge demand in certain markets, and driven construction building to new heights. Two things are happening: (1) as ARM financing is getting more expensive, more new buyers are affected, and (2) as ARMs are rolled into new financing that requires the inclusion of principal repayment, many buyers are going to be forced out of their homes.

This is a part of the market everybody should be watching closely. Some people call it a bubble ready to burst. Others " mostly mortgage brokers, real estate agents and construction builders " are confident that any landing will be a soft one. Still other " mostly doomsday sceptics " are calling for a hard landing, the collapse of the credit derivatives market and the eventual bailout by the Fed.

I don't know enough about credit derivatives yet, but I'm learning enough to get concerned.

We'll see.

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Commodities:

Commodity prices rallied last week 1.63 pct after falling the prior week by 3.86 pct. This week they were down sharply again, 2.42 pct. The bloom may be off the rose.

With a Goldman Sachs report two weeks ago, suggesting $105 oil, maybe the word ‘tulip' would be a better choice than ‘rose'.

You all, of course, know about the Tulip Mania of 17th century Holland?

Well, at the height of the craze in 1635, a single tulip bulb was sold for the following items:
• four tons of wheat
• eight tons of rye
• one bed
• four oxen
• eight pigs
• 12 sheep
• one suit of clothes
• two casks of wine
• four tons of beer
• two tons of butter
• 1,000 pounds of cheese
• one silver drinking cup.

The present day value of these items is about $35,000. People would sell everything they owned for the opportunity of owning tulips, on the expectation that the bulbs would continue to escalate in price. There has never been a commodity price speculation like it since.

Not even house prices in parts of the U.S. or China (Shanghai) can compare.

A week ago, crude oil hit a new record high of just over $58 per barrel. Wasn't the list of affected Wall Streeters and Texas oilmen lining up at CNBC to spout $100 oil something to behold?

Well, Light Sweet Crude closed the week at $53.32, down a gushing 6.90 pct. If it keeps going south, the term ‘dry hole' will have to apply to the orifice used by these sell-siders to con you out of your (possibly hard-earned) capital.

Last week I wrote, "Crude oil inventory is at the highest level in the U.S. since July 2002, so the current price spike is all about speculation; As long as I see massive selling of stock options by oil company insiders, I will not believe the current rise in crude oil contracts has a long life."

That fact was known BEFORE the futures contracts for $WTIC hit a record high. You see; it pays to follow the money flow. That's why even the most died-in-the-wool fundamentalist has to use some technical tools for investment analysis.

For a month now, I have written, "In my database of the energy sector (GICS 10), I have 59 oil & gas stocks broken into six sub-industry groups. As the oil market is shifting gears, I will continue to post these charts in the Week In Review until oil becomes less of a market driver:"

10101010 Oil & Gas Drilling Drilling contractors or owners of drilling rigs that contract their services for drilling wells.

10101020 Oil & Gas Equipment & Services Equipment manufacturers, including drilling rigs and equipment, and providers of supplies and services to companies that drill, evaluate and complete oil & gas wells.

10102010 Integrated Oil & Gas Integrated oil companies engaged in the exploration & production of oil and gas, as well as at least one other significant activity in either refining, marketing and transportation, or chemicals.

10102010 additional list.

10102020 Oil & Gas Exploration & Production Companies engaged in the exploration and production of oil and gas not classified elsewhere.

10102020 additional list.

10102030 Oil & Gas Refining & Marketing Companies engaged in the refining and marketing of oil, gas and/or refined products not classified in the Integrated Oil & Gas or Independent Power Producers & Energy Traders Sub-Industries.

10102040 Oil & Gas Storage & Transport Companies in storage and/or transportation of oil, gas and/or refined products. Includes diversified midstream natural gas companies facing competitive markets, oil and refined product pipelines, coal slurry pipelines and oil & gas shipping companies.

It pays to be observant. Last week, I wrote: "As you can see, the stock prices had been in a free fall on Wednesday morning, continuing down from the prior weeks, but the Goldman Sachs report caused a complete turnabout. Now that the easy money has been made by squeezing the shorts on a reflex rally, I have one more word to say: . Forgettaboutit.

Now you can see why I urged you to forgettaboutit.

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Gold:

Gold closed the week at $427.18, up slightly from $426.12, and just under the 50-day Moving Average resistance level, which was then $428.87. A week ago, the strong support of the 40-week MA ($422.43) was tested and held in. It's now $423.14.

This interactive chart shows the better week for the Gold Bullion index closing at $427.18.

The Philly Gold & Silver stock index fell again, 1.19 pct, to 92.89. There is sill resistance at just under 96, and breaking through it will depend on the action of the USD.

The Toronto Exchange-listed goldminer ETF had started to look attractive. This is the iUnits S&P/TSX Capped Gold Index Fund, which trades under the ticker symbol TSE:XGD. But this week was flat.

The XGD closed at 48.44, down a touch from 48.53. I continue to opine that XGD is headed to re-test the 58 - 62 level. But, it's like watching a cobra snake before the attack; nothing much happening, and then BAM.

So far, no BAM! On the other hand, the gold stocks are not moving like the Wall Street favored oil stocks. Thank goodness.

Here are the interactive charts of the leading goldminers. As I said three weeks ago now, immediately preceding a period of weakness: "The fundamentals are lagging the prices at this point, so there are risks. If you see a distinct change in the USD forex market you may wish to step aside, which you can do by writing calls on the gold stocks you want to continue to hold for the long-term, and to sell the rest. Active traders enjoy these markets, but I can certainly appreciate the nervousness of the average investor. In any event, you do have to watch the USD closely and try not to get faked out.

I still think I got it right. Again, time will tell. You shouldn't expect all markets to skyrocket or collapse overnight.

List #1

List #2

List #3

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Forex:

The U.S. Dollar was almost comatose this week, up 0.04 pct. But, now the upper resistance (40-week MA) has fallen from 85.19 to 85.10, so with the USD index at 84.45, can there be much strength left.

I still don't believe the March 7-11 low of 81.28 represents a cycle low (sending the USD into a new bull phase), and I feel strongly that slowing U.S. economic data, and worsening trade and current account data, will cause the USD to have at least one more serious fall in this cycle. I still believe that December's low for the USD of 80.39 is going to be tested before mid-summer, and surpassed by September.

Although I have learned to be flexible in all aspects of trading, I definitely do not expect the 85.44 cycle high to be exceeded for the USD.

Two weeks into September all bets are off because Beijing is going to be calling the shots regarding the USD after that, and Greenspan will be preparing for retirement.

The $XEU was up 0.14 pct to 129.19. The $XEU now sits at 129.01. The USD bulls are staring at a 127.96 resistance, while the bears are hoping for a test of the 134.73 cycle bottom.

As you know, I anticipate a move to 135-140 by the summer. If Harry's dreams were liners, mine are glitter.

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International Equities:

This was a good week for the international equity market ETF's except for EWC (Canada) which had an appalling jobs report, and really fell out of bed on Friday.

Japanese equity market ETF: EWJ

The Japanese market tanked on the prior week, because of a weak Tankan business confidence reading, but the EWJ was up 1.15 pct this week to 10.58.

Last week I wrote, "I think (EWJ) is over-sold. Still, I don't think I'd care to test my nerves there, or in any of these equity markets." So, there was a bounce, but it might have topped out on Thursday. I am not bullish going into next week.

U.K. equity market ETF: EWU

A week ago I suspected downside for the EWU, but it was quite strong this week, up 1.94 pct to 18.40. Can it do the same the next week?

Canadian equity market ETF: EWC

Last week I wrote, "I am moderately bearish for next week for the EWC." and it did go down 0.90 pct to 17.61. The story is jobs " or lack thereof.

Being Canadian, I get a lot of mail asking me to write more about Canada eh. I would, but I figure 70 pct of my readers are Yanks, which is the reason I try to use American English " and not English-Canadian English.

Why the world needs to have all these versions of English is beyond me anyway. Why don't bloggers the world over start to redefine the language we want?

I'm sure it will be an improvement.

I mean, what's wrong with the spelling liter, as in a liter of gasoline? Why do Canadians have to spell the word ‘litre'?

You know why? Because somebody in Ottawa deemed it only proper to satisfy half the country with the ‘lit' part, and the other half with the ‘tre' part. How ridiculous it is to try to satisfy people who in their own province won't even permit road signs to be in English as well as French. So, now we have a third of the country's population dealing in French and two-thirds dealing in English-French.

Is it any wonder why the rest of the world is calling us a bunch of loonies?

I tell this story often because it demonstrates just how stupid politicians can really be. The federal government based in Ottawa, which happens to be in Ontario but which also is responsible for the post office, calls my former town of residence Frazerville, and being a two-store town dominated by the post office, the big sign says Frazerville. But not to be outdone, the province of Ontario, and master of our roads and highways, with its headquarters in Toronto, calls the place Fraserville. So of course, the big Ontario sign, right in front of the big federal sign, says Fraserville.

Actually, now you can see why even Canadians refer to our money as the Loonie. But, last time I checked, a Loonie in Toronto is worth the same as a Loonie in Montreal " even if you have to refer to it officially in a different language.

And, it's only when times get desperate are there signs on Ottawa buildings and billboards offering to sell visas to cross into Quebec.

But, still, I don't think Canadians have near the problem that American's have. We even have some luxuries in that we did not give away our fiscal surplus to try to kickstart the economy, and we also have a trade surplus. Moreover, we don't have the Iraq/Afghanistan albatross either. So, our Loonie ought to be strong.

But we have to admit that the Dividend and dividend tax credit in the U.S. and the GOOG, and the share buybacks, etc, put a lot of money into the U.S. economy. The falling USD then helped with export jobs and with tourism -- and that hurt ours -- for a while.

But, I feel, the relative positives have been seen for the U.S. and now Canada is going to pull ahead. $50+ crude oil is such a boon for Alberta, it's incredible, and that money gets spread across Canada.

I have to say I think Canada is in good shape -- the jobs will come back as soon as the USD starts to sink again -- and it will. And our banks and mortgage lenders will be in much better shape -- and our real estate market will be in much better shape -- than in the USA.

And as soon as the auto industry sales start to pick up in the U.S., sometime in 6 to 12 months, the Cdn jobs there -- plus steel, auto parts, etc, will also pick up again.

So, all in all, I think Canada is a great place to invest for many years forward. I'd write about it more except that, as I say, most of my readers want to write to their interests, which rightly so, are American, and about putting U.S. capital into foreign investments.

And, not even Niagara Falls, or Lake "Ontario" for that matter, knows which country it belongs to. So, except for some arcane rationale behind the need to have a passport to spend a day watching the Bills, Sabres, Tigers, Red Wings, Canada is hardly foreign territory.

Did I say "Sabres"?

Must have been that French connection " Perrault, Martaine and Roberhr.

Funny, but back when those Canadians dominated the "National" Hockey League for the Buffalo Sabers, it is a fact that the Canadian dollar was more valuable than the USD. But, then people started calling it Loonie!

Let's have a look at the hourly data charts of the various international equity markets, including Canada, as represented by the U.S.-listed and dollar-denominated ETF's:

(Japan, Taiwan, Hong Kong, Singapore)
(U.K., Germany, France, Italy)
(Canada, Mexico, Brazil, Australia).

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U.S. Equities:

After a month of declining prices, the Dow 30 dropped 5 percent to close a week ago at 10,404. This week, in spite of an 85-point loss on Friday, the Dow gained 57 points to close at 10,461.

Somehow, though, I don't hear that clarion call for a bull market.

Last week, I wrote, "I don't see enough technical strength " or much at all " to stem the bearish ebb tide to equity prices in the Dow. " And, nothing happened this week to change my mind.

Nothing.

Here is the 60-minute data chart of the Dow, S&P 500, Nasdaq Composite, and Russell 2000 (small cap) indexes.

As you know, I look at the weekly performance for the individual Dow 30 stocks and try to see where the big money is moving. This week, which was a modestly positive one for most stocks, there were nineteen Dow 30 components that gained. Of the losers, only IBM " down 3.14 pct on the week " was down more than 1.0 pct.

So, this past week was not such a bad one for the large caps.

For those that rallied, PG, MSFT and MRK were up more than 3 pct and AA was up 4.43 pct. That's quite the eclectic mix, which illustrates a confused marketplace.

Ask yourself if a month or two ago you would have been happy sitting with a portfolio of these ten Dow stalwarts: C, MSFT, SBC, AXP, WMT, IBM, JPM, HD, VZ, AND AIG?

Well, just for those who are counting (and who recall that a month ago I recommended you sell all stocks and go to cash), these ten Dow leaders are off between 6.0 pct for C and 21.4 pct for AIG. Roughly, that's an average of ten percent capital loss in 4 weeks in these ten stocks.

In fact when I looked at just four of them in the past month: WMT, INTC, C and IBM " none of which has been down more than 6.86 pct (WMT) " I can see that the equity market has removed $47 billion in valuation. That's almost $12 billion per stock in 4 weeks.

I point that out because these four companies " Wal-Mart, Intel, Citigroup and IBM " have not changed much in terms of management performance, financial structure, solvency, and so forth, during that time. What has changed is attitude.

Investor attitude is fickle. Think about that when you think about the U.S. real estate market. If Wal-Mart, Intel, Citigroup and IBM can lose an average of more than 6.0 pct in four weeks, why can't house prices, let's say, go soft?

But, you say, houses are residences, and we are building equity in our homes, so that will not happen. And I respond with the argument that in a normal market, that's true. The record speaks for itself. But what percentage of houses were built for, and purchased by, investors " yes, for investment only (not to live in) in the past year? Pretty high, right.

In those housing markets where prices rose quickest, it is a fact that the majority of new houses were purchased for investment, with no money down and a short-term Adjustable Rate Mortgage. The fuse has been lit.

I'll ask again, if Wal-Mart, Intel, Citigroup and IBM stock (i.e, a paper investment) can lose an average of more than 6.0 pct in four weeks, why can't house prices in select markets do the same? I say they can.

No, I say they will. Caveat emptor.

Time is of the essence.

The following table shows the price performance of the Dow 30 stocks, which I sorted by 1-week price change.

You can do this table yourself by copying the following list of the Dow 30 stocks and entering them in the window for "Summaries" at Investertech.com.

AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG SBC UTX VZ WMT XOM

After you bring up the list, click on the Performance tab. To sort for the relative price performance for any recent period, you just need to click on the column header of the period that interests you.

Here are the Dow charts from Investertech.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)

For each of the individual Dow 30 component issues, using Investertech.com, you can look at the different time frames from intra-day to monthly data charts, and see the technical indicators at the points where trends and cycles reverse.

In a bearish equity market like the one that exists today, it's important to focus on weekly and monthly data trends and cycles. That's because as the wave is rolling over, you can ignore the ripples.

Sure there will be the odd good day in the interim, but it is more important to take in the whole picture during a rainy season. When markets return to normal, you can go back to looking at daily and hourly technical data indicators.

And when do I think that will likely happen?

Well attitude is a funny concept to grasp. Stock prices are like people " following the leader, moving to and fro in cycles. Right now, they are taking a vacation, heading south, waiting for central banks to let up in their credit tightening process.

How long that process lasts is, I think, up to you and I and not the FED or any other central bank. The monetary authorities in any country have a single task, which is to stabilize currency. They are like police officers (or referees) in a free society and they don't blow their whistle unless you and I and the people around us are showing signs of lack of self-control.

So FED tightening is going to last as long as it takes to stop money being invested in speculative vehicles like real estate in select markets or certain (zero sum) commodity price contracts " and start investing that money in sustainable wealth creating opportunities that will, for example, enhance productivity.

You'll note that in the past 20 years, whenever Greenspan spoke glowingly he was speaking about productivity or long-term capital projects and the like. And when he was most negative it was in matters of the people's "irrational exuberance" or government's proclivity to write checks they left him to cash.

Our favorite Financial Entertainment TV personality James Cramer seems to think the only thing wrong with today's equity market is Greenspan. He blames Greenspan for the 2000-2003 bear market as well.

Well, I think those of us who are serious people understand the concepts of accountability and responsibility. This (so far) minor bear phase in the equity market is going to end when commodity price and real estate price speculation subsides. And that is up to us.

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I suppose I could keep writing all day about the capital markets, but my wife is telling me to get a life. After all it is Saturday.

And thinking of the home front, no matter how difficult life can be " in the market or elsewhere " there is always room for humor. So yesterday my Dad said to me that the staff had taken him and my Mom to a concert at the Lodge, and that his nurse was singing Country & Western: "Just like Dolly Parton, but without the boobs".

Have a good weekend.

BCara@BillCara.com