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October 6, 2007

Saturday’s Commentary & Chat, 10/06/2007 7:25 AM ET

The start of Q4. The home stretch. Prelude to the Bear Market. Fasten your seat belts.

Yes, I think the evidence is mounting – probably overwhelming at this point – that the equity market is at the top of its long-term cycle. As I see it, half the world is in a Bull market and half has already started the Bear cycle. In the Week In Review (WIR) that I will publish Sunday morning, I’ll explain Why.

Although probably 99 pct of you disagree, in naming Bull or Bear, the Who comes easy. The equity markets of the US, Japan, UK and Germany have topped out, whereas another intermediate-term bull phase can be expected from India and China, Hong Kong and Singapore, Russia and Brazil, Canada and Australia.

What I am saying is that the super powers have spent their ammunition, and need time to re-load.

It won’t be a pretty sight watching. Something like 1973-74, or maybe 81-82, hopefully 87, and hopefully not like 2000-2002. Nobody knows at this point. All I know is that the cancer is terminal, and life in these markets continues hoping beyond hope, pumped up by the desperate Talking Heads of the corporate kowtowing financial media.

The second group doesn’t need hope at this stage. A developing middle class of consumers and savers in India and China -- well over a third of the world’s population -- is driving economic growth and corporate employment and profitability. The ammunition I spoke of came from you know Who.

The relatively small offshore centres of Hong Kong and Singapore serve as financial bridges to those huge emerging markets, while Russia, Brazil, Canada and Australia provides the natural resource commodities that rapidly growing Chindia requires.

But international trade and commerce does not operate in a vacuum. The fiscal, economic, financial and/or currency ills of the super-powers will at some point – likely not more than six to nine months later – spread to the rest of the world.

That’s not a scenario that is either popular or promoted in today’s media. Nonetheless, based on my observations and analysis of capital market prices, it’s how I size up what’s happening to the world today.

First there was the popping of the housing bubble, then the credit market bubble, and soon to come will be the presently developing commodity bubble.

Reversion to the mean. It’s how markets work. The market is us. In the long run, averages win.

This is not rocket science.


Table 1: Cara ETF List

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
XLF 35.77 0.37 1.05% 4.59% 3.38% 8.39% -3.11% -2.00% 0.03% 1.39%
XLY 37.97 0.61 1.63% 3.38% 2.35% 5.68% -1.43% -4.62% -2.27% 5.65%
XLU 40.90 0.32 0.79% 2.43% 1.44% 4.82% 11.08% 2.07% 0.49% 18.86%
IYH 72.38 0.62 0.86% 2.25% 2.33% 5.57% 8.91% 2.68% 5.46% 9.62%
XLB 42.91 0.67 1.59% 1.88% 3.22% 10.68% 23.98% 4.15% 11.57% 34.81%
XLI 41.58 0.45 1.09% 1.41% 2.34% 7.41% 18.02% 5.11% 16.05% 21.15%
IYZ 34.18 0.08 0.23% 0.97% 0.97% 5.07% 15.24% -0.78% 8.13% 22.91%
SMH 38.45 0.48 1.26% 0.39% -0.34% 1.69% 14.54% -1.13% 12.30% 12.46%
XLE 75.04 0.29 0.39% 0.13% -0.87% 6.80% 32.63% 6.36% 21.52% 42.55%
XLP 27.90 0.09 0.32% -0.14% 0.87% 4.34% 6.16% 2.42% 2.99% 9.80%

Table 2: Senior oil & gas equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
PBR 78.82 2.67 3.51% 4.40% 7.82% 22.89% 58.18% 21.17% 54.31% 93.99%
ECA 62.61 0.62 1.00% 1.23% 0.00% 6.10% 38.09% 0.81% 20.24% 36.23%
SU 95.56 1.46 1.55% 0.79% -0.38% 5.03% 29.29% 4.79% 23.30% 39.87%
XOM 91.36 0.44 0.48% -1.30% -1.03% 6.54% 23.28% 7.28% 18.31% 35.71%
CVX 92.32 0.48 0.52% -1.35% -2.66% 5.33% 30.08% 6.64% 22.10% 44.52%
CEO 164.04 9.88 6.41% -1.44% 5.96% 34.32% 74.01% 39.38% 85.99% 101.82%
IMO 48.55 1.14 2.40% -2.04% -3.17% 8.27% 36.15% 2.73% 28.64% 48.38%
TOT 77.89 -0.01 -0.01% -3.88% -4.36% 3.44% 9.75% -5.07% 10.08% 19.65%
STO 32.40 -0.04 -0.12% -4.48% -6.41% 7.11% 26.12% 0.40% 18.81% 40.38%


Table 3: Senior metals and steel equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
GGB 28.38 0.84 3.05% 8.24% 13.52% 20.56% 72.84% 6.73% 50.40% 104.61%
PKX 189.18 0.66 0.35% 5.82% 3.94% 25.40% 138.17% 49.16% 77.87% 187.95%
TCK 50.46 2.45 5.10% 5.76% 5.08% 24.13% -27.13% 14.11% -30.04% -20.35%
RTP 348.55 10.28 3.04% 1.50% 6.07% 18.25% 70.77% 7.36% 45.71% 86.17%
TS 53.36 0.24 0.45% 1.41% 2.91% 18.11% 9.98% 6.44% 15.65% 51.59%
BHP 79.52 1.26 1.61% 1.17% 9.64% 23.90% 104.58% 24.48% 60.71% 110.82%
MT 78.00 1.87 2.46% -0.46% 2.48% 21.91% 91.18% 20.52% 42.28% 119.47%
AA 38.79 1.13 3.00% -0.84% 3.72% 11.24% 32.25% -6.19% 12.14% 40.70%
RIO 33.56 1.51 4.71% -1.09% 10.21% -33.78% 16.45% -29.30% -15.57% 50.83%
NUE 58.04 1.05 1.84% -2.40% -2.45% 7.74% 6.50% -2.54% -12.73% 11.66%

Table 4: Senior capital goods makers and transportation

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
ERJ 47.93 1.67 3.61% 9.13% 8.81% 8.07% 17.53% -1.70% 1.63% 16.82%
ABB 26.97 0.08 0.30% 2.82% 5.43% 16.35% 51.35% 13.51% 50.67% 99.63%
MMM 95.85 1.60 1.70% 2.43% 4.55% 7.79% 22.48% 9.22% 24.89% 26.25%
CAT 80.33 1.69 2.15% 2.42% 2.78% 9.38% 31.34% 3.66% 18.78% 17.72%
FDX 106.06 1.31 1.25% 1.25% 1.88% -1.99% -3.38% -3.91% -2.54% -6.08%
GE 41.77 0.07 0.17% 0.89% 1.26% 7.79% 10.01% 8.38% 19.27% 15.10%
HON 59.82 0.23 0.39% 0.59% 1.93% 9.34% 32.64% 2.50% 26.58% 39.86%
UTX 80.84 0.75 0.94% 0.45% 1.78% 9.55% 28.71% 12.09% 24.50% 22.78%
BA 102.25 -2.25 -2.15% -2.61% -0.33% 7.81% 14.67% 3.95% 12.98% 22.28%

Table 5: Senior consumer discretionary equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
JCP 68.71 2.39 3.60% 8.43% 3.35% 5.59% -11.98% -3.73% -18.26% -2.43%
BC 24.21 0.67 2.85% 5.91% 8.23% 4.26% -24.15% -25.58% -24.60% -23.99%
WHR 94.29 2.36 2.57% 5.82% 2.26% 1.64% 11.37% -15.88% 9.30% 9.23%
CCL 50.80 0.80 1.60% 4.89% 3.23% 13.60% -0.29% 5.70% 8.66% 5.24%
DIS 35.47 0.57 1.63% 3.14% 2.51% 5.60% 3.71% 2.43% 1.60% 14.16%
NKE 60.35 0.99 1.67% 2.88% 5.40% 10.33% 23.59% 1.68% 12.85% 35.59%
SBUX 26.84 0.32 1.21% 2.44% -2.29% -1.18% -23.86% 1.90% -14.52% -30.63%
TM 117.67 1.38 1.19% 0.69% 2.27% 3.86% -13.03% -7.48% -6.97% 1.99%
EBAY 38.75 -0.41 -1.05% -0.69% -0.64% 9.93% 28.44% 20.08% 14.95% 27.22%

Table 6: Senior consumer staples equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
ABV 80.65 3.07 3.96% 10.28% 11.30% 22.68% 64.26% 11.83% 43.48% 74.04%
WFMI 53.20 2.12 4.15% 8.66% 18.14% 23.35% 16.97% 39.89% 17.23% -14.12%
WMT 45.37 0.37 0.82% 3.94% 2.58% 7.03% -4.58% -5.66% -6.01% -6.28%
BUD 51.60 0.68 1.34% 3.22% 2.04% 3.53% 4.84% -0.96% 0.98% 9.25%
DEO 90.44 -0.17 -0.19% 3.09% 4.28% 5.59% 13.72% 8.44% 10.36% 25.45%
KO 58.07 0.20 0.35% 1.04% 2.69% 6.37% 19.53% 10.25% 17.27% 29.53%
PG 70.83 0.00 0.00% 0.70% 2.08% 8.19% 9.75% 14.85% 12.43% 11.51%
PEP 73.74 -0.13 -0.18% 0.66% 3.22% 8.47% 17.57% 11.88% 15.80% 13.83%
MO 69.56 -0.13 -0.19% 0.04% 1.49% 3.22% 7.15% -2.25% -1.68% 18.22%
WAG 39.30 -0.47 -1.18% -16.81% -13.46% -10.99% -14.70% -10.50% -15.01% -9.43%

Table 7: Senior healthcare equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
PFE 25.58 0.28 1.11% 4.71% 4.03% 5.48% -2.70% -1.24% -1.01% -8.61%
BMY 30.09 0.35 1.18% 4.41% 3.76% 8.20% 14.06% -5.70% 8.16% 22.72%
GSK 54.07 -0.07 -0.13% 1.64% -0.30% 1.88% 0.48% 3.76% -3.86% 0.22%
JNJ 66.25 0.14 0.21% 0.84% 1.74% 7.41% -0.23% 6.37% 7.64% 1.75%
AMGN 56.84 1.45 2.62% 0.48% 2.56% 11.67% -16.90% 3.61% -2.55% -23.94%
DNA 78.28 0.28 0.36% 0.33% -1.39% -1.02% -4.30% 2.06% -6.14% -6.48%
BMET 45.99 0.06 0.13% 0.24% 0.31% 0.48% 10.90% 1.05% 8.47% 41.68%
AET 53.83 0.75 1.41% -0.81% 2.85% 7.15% 25.54% 6.70% 19.62% 30.78%
NVS 54.30 -0.17 -0.31% -1.20% -1.45% 1.69% -6.60% -2.07% -2.62% -6.86%
UNH 47.70 0.32 0.68% -1.51% -4.43% -3.03% -9.26% -9.06% -13.79% -5.86%

Table 8: Senior financial company equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
MS 68.90 1.79 2.67% 9.37% 6.92% 10.24% -15.58% -5.54% -14.20% -7.59%
UBS 57.75 0.32 0.56% 8.45% 6.85% 10.87% -5.93% -4.67% -4.88% -5.28%
MER 76.67 1.89 2.53% 7.56% 2.60% 4.77% -18.10% -8.62% -10.93% -6.25%
HBC 98.71 1.18 1.21% 6.60% 6.64% 10.89% 6.17% 7.21% 10.07% 4.81%
GS 228.50 2.55 1.13% 5.43% 8.82% 27.67% 13.84% 3.24% 9.89% 30.20%
DB 135.16 0.10 0.07% 5.27% 4.55% 9.01% -0.13% -7.44% -1.88% 9.02%
CS 69.61 0.18 0.26% 4.94% 4.85% 7.49% -0.71% -3.77% -3.72% 16.52%
JPM 47.58 0.33 0.70% 3.84% 0.95% 9.33% -1.02% -2.48% -2.44% 0.36%
LEH 63.98 0.76 1.20% 3.64% 2.04% 20.83% -18.63% -14.26% -10.44% -15.58%
C 48.30 0.67 1.41% 3.49% 1.66% 6.20% -12.58% -6.58% -6.34% -5.28%

Table 9: Senior technology equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
INFY 52.43 1.38 2.70% 8.35% 12.46% 9.87% -6.08% 4.46% 1.16% 9.16%
CTSH 85.79 2.45 2.94% 7.52% 13.07% 20.71% 10.33% 15.29% -1.12% 13.72%
QCOM 43.36 0.58 1.36% 2.60% 6.20% 14.44% 15.75% -0.41% 0.14% 19.58%
ORCL 22.18 0.42 1.92% 2.44% 0.90% 10.01% 26.66% 8.24% 18.79% 21.33%
ADBE 44.64 0.39 0.88% 2.24% 6.41% 3.91% 11.82% 9.06% 4.76% 16.92%
ADSK 50.56 0.59 1.18% 1.18% 3.78% 11.98% 24.65% 10.42% 27.84% 43.80%
SAP 59.23 1.34 2.31% 0.95% 1.01% 6.99% 11.33% 16.99% 26.78% 16.50%
INTC 25.54 -0.06 -0.23% -1.24% -1.28% 0.27% 25.50% 3.82% 30.44% 23.03%
CSCO 32.65 0.50 1.55% -1.45% 1.08% 3.58% 17.70% 15.08% 25.28% 36.44%
SNDK 52.10 -1.09 -2.05% -5.44% -2.73% -1.57% 24.88% 8.34% 17.08% -6.26%

Table 10: Yahoo Finance U.S. Treasury Debt, Municipal and Corporate Bond Yields

US Treasury Bonds
Maturity Yield Yesterday Last Week Last Month
3 Month 3.85 3.81 3.64 4.20
6 Month 4.02 3.97 3.91 4.22
2 Year 4.07 3.97 3.97 4.00
3 Year 4.11 4.00 4.01 4.01
5 Year 4.33 4.20 4.24 4.14
10 Year 4.64 4.52 4.58 4.46
30 Year 4.87 4.76 4.83 4.77
Municipal Bonds
Maturity Yield Yesterday Last Week Last Month
2yr AA 3.46 3.39 3.40 3.59
2yr AAA 3.39 3.45 3.49 3.62
2yr A 3.37 3.43 3.47 3.67
5yr AAA 3.50 3.48 3.48 3.60
5yr AA 3.45 3.47 3.49 3.62
5yr A 3.72 3.70 3.70 3.82
10yr AAA 3.76 3.78 3.77 3.99
10yr AA 3.74 3.76 3.78 3.97
10yr A 3.89 3.91 3.90 4.22
20yr AAA 4.29 4.44 4.33 4.59
20yr AA 4.48 4.64 4.73 4.62
20yr A 4.30 4.45 4.33 4.65
Corporate Bonds
Maturity Yield Yesterday Last Week Last Month
2yr AA 4.77 4.68 4.81 4.88
2yr A 4.88 4.84 4.89 4.98
5yr AAA 4.77 4.45 5.06 4.97
5yr AA 5.19 5.06 5.14 5.27
5yr A 5.24 5.13 5.21 5.21
10yr AAA 5.52 5.45 5.38 5.40
10yr AA 5.71 5.62 5.79 5.82
10yr A 5.80 5.68 5.78 5.83
20yr AAA 5.95 5.87 5.96 6.18
20yr AA 6.32 6.25 6.33 6.29
20yr A 6.28 6.21 6.29 6.32


Table 11: Interest-sensitive securities

Sorted by 1-Week Price Performance.
Symbol Close 1Day
Change
1Day
%Change
1W
%Change
2W
%Change
4W
%Change
YTD
%Change
3M
%Change
6M
%Change
12M
%Change
FNM 67.30 -0.09 -0.13% 10.67% 7.30% 7.65% 12.43% 0.64% 23.87% 17.21%
FRE 63.43 0.24 0.38% 7.49% 5.10% 6.95% -6.57% 4.15% 5.93% -5.31%
CFC 20.25 0.37 1.86% 6.52% 3.26% 11.20% -51.91% -44.75% -39.84% -44.60%
SHY