Monday, August 01, 2005

ISM Manufacturing Index Shows Growth

Today the market found out that the ISM manufacturing index topped estimates and it is above 50 so it indicates growth. The bond market didn't like this number and the fact that oil traded at a world record price (on the back of the announcement of the death of King Faud of Saudi Arabia). Bonds (US Treasury) fell through last week's lows and are now back in the down trend line we have seen for the last couple of months.

The bonds should attempt a rally to get them back toward that June high but it doesn't have to happen. We think that the rates need to drop one more time and housing not to follow for us to see a pretty good sized crack in the stock market. That could be happening now. As I drove through my old neighborhood this weekend, I noticed there were many open house signs along the road. I wonder if they aren't selling quite as fast as they once did.

Not much to report in the stock market today which is why all the talk about the bond market. As you know, we think the sudden contraction in credit is going to be very damaging to stocks so we are paying particular attention to the bond market and the real estate market. We are hoping to get a whiff of danger from them although if we do see some obvious break there, the stock market will not like it one bit.

I noticed today that Ford and GM are going to be cutting prices on their 2006 models to be more competitive and give us value for our purchases. Do you suppose they are having trouble selling cars? That would be my guess but the "employee" discount program seems to have gone a long ways to unload some of their inventory; but, will their strategy to lower sticker prices without rebates be successful?

Dow Industrials: 10,623.15 -17.76
BGEIX: 10.98

1 comment:

Anonymous said...

It sure has been hard to be bearish over the last few weeks. The emotional side suggests that there is a rally in place and people are spending and buying and spending and buying. Our new mantra should be “I spend therefore I am”. Nothing short of a market crash will shake our confidence. The spending mantra works well with the buy anything stock market mantra. When in doubt, buy more stocks. If stocks are not your thing, buy multi-million dollar mobile homes on the beach in Malibu CA. It is happening.

Here are some more of the things I think I thought….1) nobody talks about the stock market anymore. Not family or friends. Of course, this could be because I can get into raving lunatic mode when the topic is discussed but even then, it seems that all is quiet on the western front. Is this people being timid, or do they not care anymore or are they just unsure of where or how to invest their money? Or have they lost so much money that they are ashamed of themselves and are even more scared to say “I’m in cash and I’m not thinking about the stock market”. I think they can draw and quarter you if you say that in public. 2) If oil is at record highs, how do companies that are dependent on gasoline and other fuels to run their businesses make larger and Larger profits. Are oil company stocks driving this rally? 3) All-the-while the savings rate in the USA is the lowest it has been since the great depression. IS it possible that our great society is so great that it is impervious to market shocks? Do we not learn from history? Why was the depression so bad? Could it be because no one had any money in the bank for a rainy day. Or as it turned out a rainy decade? Think back about what your grandparent or even their parents were thinking about, worried about, or happy about 100 years ago. Is history repeating itself?

GM and Ford are stuck. I wouldn't buy a new GM or FORD unless money was not a limiting factor. Lower prices will not get me on to the lot but I believe it will sway many US consumers. Anyone see any similarities between this and the Japanese auto industry during the late 70's and early 80's?

BTW: Thanks for the word suggestions. I will have to start using them.

Erick