Dear Bill or anybody else with more experience than me.
Thank you for your report on base metals.
I am a small investor, living in Italy.
Re: Xstrata, the current RSI (14) is over 50 for the monthly. Is it wise to wait to buy till it drops into the accumulation zone under 30?
Is this a general rule for buying shares?
Or do some shares never go down that low?
Sunshine from bella Italia and thankx.
Satyen

I was on vacation for some time and missed those discussions. Could anyone post a link please?

Thanks!

I am refering to Bill's
"Base metals mining 4Q06 Report, Mon., Oct. 9, 2006, 7:55 PM"
on this site yesterdays date
s.

Bill,

I wanted to comment on Leisa's post last night:

["The US consumer looks set to take a break after his long spending spree, to be replaced by European, Japanese and other Asian consumers. " Given the dependency of Asian markets on the US consumer, does such a strongly stated conviction hold water? Will the aphorism be "When the US consumer catches cold, the Asian markets will catch pneumonia?" I really struggle with this as I believe that the consumer is catching cold. With the strong dollar and the aforementioned dependency, it feels like if the Asian markets sputter, that will fell Asian consumer confidence. (little bit of a triangulation there!)]

I would tend to lean towards the aphorism as stated above for now, but it won't be long before the US consumer catches a cold because of a stronger yuan/rupee/dong (has the average American even heard of these currencies), with strength in the currencies of developing countries coming from a shift in manufacturing dominance.

I interact daily with highly-educated professionals for whom English is(/was?-sometimes you can't tell!) a second language. Maybe it's the mindset of those who arrive in the US from less-developed countries, but for those of us born here, we just can't imagine working that hard!

Is it that hard to imagine Toyota becoming the dominant automaker in the US? How about the Geely Group?

Developing countries have enormous ambitions. You could compare what Shanghai and Beijing have done in twenty years to the growth seen in the US from the 20s to the 60s. Now they're getting ready to really take off. Vietnam and India have barely begun.

If you believe these countries will succeed in becoming developed countries, then you have to begin investing outside the US. Or in hard assets that hold their value against a weakening dollar.

Leisa, I always enjoy reading your articulate posts, and hope to hear your thoughts on this.

While I find myself persuaded by the arguments from Bill and other commenters about our being in or near the beginning of a bear market, I've been trying to think about the assumptions involved in this thesis and how the thesis might break down. From my admittedly amateur point of view, it seems to me that the thesis depends upon inflation continuing to be a problem. The reason that people are cheering on a Goldilocks scenario is out of fear that strong economic news will prompt the Fed to raise interest rates. If inflation were to diminish, however, traders could go back to thinking, like normal people, that good news is good and bad news is bad.

In other words, what makes the bearish scenario persuasive to me is that the bulls right now need things to work out just perfectly, and things tend not to work out perfectly. If inflation stopped being such a problem, however, the bullish scenario would have a wider basis. (I don't think I'm using the term "basis" here in any technical sense.)

So, that leaves me with two questions:

1. Am I right in seeing inflation as the critical component of the thesis that we are heading into a bear market?

2. If I am right, how strong is the evidence that inflation will continue to be a problem? I don't have a well-informed opinion on the matter, but I know many of you do. Any help would be appreciated.

Thanks,
Eddie

Eddie -

Nobody knows, but I think if you pull back and think of Vietnam, where guns+butter=inflation, I can't see how we will escape inflation this time with guns-butter+massivetaxcuts+medicaredrugs+deficits+foreignoil.

Bill's not the only one feeling that stagflation (born of Vietnam+oilshocks) is returning!

2nd Ave: When you say the ambitions of developing countries, don't you need to differentiate? Asia, for sure - although some countries (korea) do better than others (indonesia).

Then there's Russia (?, except for Putin's energy take-back), Africa (largely stuck) and Latin America (strong in ag. commodities, but low growth economies).

2nd_ave--First, thank you for your kind words. Second, my opinions are held mostly in ignorance, so they hold no weight other than my venting them in hopes that someone (like you) smarter than I will add some much needed depth!

I absolutely believe that you are stating the prospects of these countries correctly, but I'm a handwringer at heart, so that is why I drag in the bloody carcass of market dependency into any jubilant discussion on the strength of those markets. I'm not smart enough to understand which has more tilt to the thesis of a strong market. I suppose the answer to the question is simply will home country consumption increase at a rate greater than or equal to that of the American consumer. There's a dearth of data on that, so if any have it, please share.

Hello Eddie...

Inflation is just one of the issues, the 6% FEd Discount rate, the growth prospects of the economy/consumer/housing, the divergences in the major indices, LIQUIDITY injection ( or lack of )Bond markets...are just some of the pieces that point to the near term direction of the market...

How much does inflation really matters in my experience to my investment results depends on whether the individual temperament and timeframe is more suited to be an investor or trader or economist?

This site and the contributors thought processes has been very useful in determining/examining my assumptions for asset allocation, weekly trading plan using the WIR for sector/country rotation and some effective entry/exit rules...combine that with relative strength of the international and sector indices, the intermarket WIR discussion that Bill does as it relates to FOREX and bonds has been more relevant/timely/actionable/profitable than CNBC/Bloomberg or Marketwatch/WSJ for me...

BTW...in my experience too much data hurts my results and my head,and pondering Why over What over When has not been profitable for me.

Borrowing from Bruce Lee..."better to be the water than the cup"...so not emotinally vested in either inflation or Bull/Bear market...going with the current trend and mindful of my stops/asset allocation, global market relative strength has kept me growing mentally and financially..and sane!

Leisa,

I would agree that we need data to validate or change our opinions. Bill and his readers do a good job responding to most requests, so we'll see what information arrives in response to yours. In the meantime, let me add that it's often people who freely admit to what they don't know who are able to see more clearly.

In response to Jock: I see the same geographical/cultural differences you noted. On the other hand, the advantage of living in the Bay Area is rubbing shoulders with people from all nationalities, and I have to say that regardless of national origin, first and second-generation children invariably do well in school. I think it's partly due to the desire to assimilate into a new culture, but hopefully it also reflects well on the values of the parent culture.