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October 26, 2005

Shoe is about to drop, Wed., Oct. 26, 2005, 4:41 AM

It is 4:00am and I cannot sleep. The overnight trading in the USD and U.S. interest rates are crazy and driving me crazy.

Something big is about to happen. A shoe is about to drop.

In the last couple days, I have noted that the Gnomes in each country have been taking refuge in their fortresses. In Japan, there was a boost in the share prices of the auto manufacturers, like Toyota. In Australia, it was the big base metal miners, like BHP. Tonight it is the big banks in Switzerland, like CS Group. The move represents the economy-sensitive, the commodity-price sensitive, and the interest-rate sensitive.

This is no typical sector rotation; Consumer Discretionary (GICS 25), Basic Materials (GICS 15) and Financial (GICS 40) are all across the board.

Can this be a new bull market starting? No.

All you need to do is look at the U.S. Treasury market for the answer. Bonds are crashing, which means interest rates are rocketing. That is no partner for an equity bull to take to the dance.

Posted by Posted by Bill Cara on October 26, 2005 04:42:10 AM | Category: Cara Today in the Market

Discourse

Bill-
I do not know if you read Fortune magazine but you must look at the article on the real estate billionaire Barrack. He is exiting the US market. Reason? Too many amateurs with too much money chasing too few deals. He says it will all come crashing down, not for reasons of higher interest rates but the cascading effect of higher materials costs. All the speculative condos will be "upside down" once it comes time to deliver them to the buyers.This will force defaults, lower prices, withdrawn credit and this will reach into all the commercial markets.

Similarly, our company has been telling anyone who will listen that the margins on all these fancy lifestyle centers (retail) being built over the US are WAY too thin to survive any burps and that our next client profile will be the financial institutions, who will end up owning a bunch of them.

Posted by: MarkM [TypeKey Profile Page] at October 26, 2005 5:32 AM [link]