latest Bulls-Bears% Differentials for AAII and II surveys

[HenryTo]

Negative 10% for AAII and Positive 32% in the II survey.

The latter is still not confirming the former yet - it historically has lagged the AAII survey by about two weeks. We will see - but for now, I will definitely not be short here!

[HenryTo]

Just realized that I totally forgot to comment on the statements made by Dubious on Coca-Cola!

Re: Coca-Cola in Mandarin sounding like "crap water". Following is a quote from page 168 to 169 of the book "For God, Country & Coca-Cola" by Mark Pendergrast: "Different languages and cultures also caused problems. The Company developed one universal ad for distribution showing only the torso of a man in a tuxedo drinking from the trademark glass and featuring the hobbleskirt bottle. "Coca-Cola" was the only word in the ad. But even that wouldn't have worked in China. The Chinese characters which most closely reproduced the sound of "Coca-Cola" translated roughly to "bite the wax tadpole." Finally, an alternative that meant "can mouth, can happy" had to suffice."

The trend of the "globalization" of the Coca-Cola was accelerated by Robert Woodruff in the late 1920s, folks. Coca-Cola first coined this Chinese name for Coca-Cola and went to market in China in the late 1920s and still continues to use this name today. Coca-Cola had always spent a lot of resources on ad campaigns going back to the days of Asa Candler. The chances of Coca-Cola blundering by calling any of its products "crap water" is very small - probably a number that approximates zero.

As for how well Coke's products is doing in China, this is directly from the latest 10-K (filed on March 4, 2005): "In the Asia operating segment, unit case volume increased by 5 percent in 2004 versus 2003, primarily led by a 22 percent growth in China as a result of a new advertising campaign, innovative packaging and promotion in the cities, and affordable 200ml packaging in the towns. Japan growth of 4 percent was driven by Trademark Coca-Cola unit case volume growth of 3 percent and trademark Fanta growth of 17 percent. These increases were offset by an 8 percent decline in the Philippines due to affordability and availability issues. "

Coca-Cola may be having troubles in Europe (where case volume growth was zero in 2004), but definitely not in China.

[Dubious]

Gizmo,

The people starting social security has skyrocketed. This talk of decreased benefits have rushed a lot of people into "early retirement" (starting the benefits at the earliest possible age) instead of waiting for the full benefit at the later ages so they are on the clock and their checks are rolling in. Do not worry in a few weeks we will start to hear these M&A companies say "early retirement" is how we are going to deal with the job cuts (the 2005 catch phrase for the 2000 catch phrase redundancy retirement). Redundancy retirement is no longer PC...so they call it early retirement - they both mean "cut the fat" or get shoved out the door with nothing. Something is better then nothing. Take it or lose it.

My thesis (which is a King George Main Talking Point) - there will be more people retired then working starting 2008 still stands.

Good luck!

Dubious

[Gizmo]

Does anyone really think the Market is going to let all the Boomers out comfy and rich?

I'd bet my bottom dollar it ain't so.
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Gizmo

[Dubious]

Henry,

Oh yes it is!!!! With all the M&A you will start hearing the term "early retirement". It is going to play out just like I say with more people retired in 2008 then working. Gillette cut 12% of its work force, SBC cut 12% of its work force, Procter and Gamble cut 8% of its work force - and those are not small companies....I can continue the list.

The worst company for retirement benefits is Lucent and Ford - those pigs are going no where with that overhead.

A lot has happened since June 2004. Like over 3.5T in M&A....last time it was this high was DING DING - January 2000. Funny how that works, huh? Thank you for linking the story to me.

Have a great Easter. Be safe and God bless.

[HenryTo]

I really do not see how the core business of GM can keep the company afloat once we have a credit crunch scenario - even if a miracle occurs and GM comes out with superior products than Toyota or BMW over the next few years (which WILL BE a miracle).

GM's pension plan is also invested in stuff like hedge funds, real estate, and so forth - stuff that is intended to provide "superior returns" over the broad market. Hmmm...

As for aging demographics, please see our June 24 commentary which discusses the aging demographics report released by the Center for Strategic and International Studies and Watson Wyatt Worldwide:

http://www.marketthoughts.com/z20040624.html

It is getting bad here but it is not as bad as you think (see figure 2). Thank God!

Luckily, other countries like Spain or Japan have more of a problem than we do so we willl see how they fare for a good timeline of how we will be (or how we can alleviate the problem) ten years from now.

[Dubious]

The saying as go GM so goes the market still applies here. They have a HUGE problem. 16B market cap and 300B in outstanding bonds (debt). Interesting they are saying now - that does not apply (as go GM goes the U.S. economy). Remember in 1929 there were over 200 U.S. car companies that had stocks on the NYSE. Now there are 3. Just like the U.S. bike companies soon there will be ZERO. . You have to keep ahead of the trends.

Interesting on bubble vision (CNBC) they were saying the first week of January so goes the market - first week was bad then they switched to first month of the year so goes the market - first month was bad. Now you hear NOTA. Funny how that works. Nearly 90% of the time if the first month of the year is down the whole year is down. Interesting the last time this was broken was 2003 - with the dividend tax cuts - unless social security private accounts take place - no new drugs for the junkie. Remember in 2008 there are going to be more people RETIRED then working in the states. Which means they will shifting their money out of stocks and into short term bonds (if they are wise). I had another point but lost my train of thought...draughts!

Only stock I listed of any interested would be Coke. However the Euros basically have boycotted American products. Coke is pushing to get into the China market more. However, China all ready has a big soda brewery. So that is kind of banging your head against the wall. However Coke in Manadrain means something like crap water...or something like that. You would know better then I, Henry.

With the short term yields jumping and the long term yields staying flat...do not touch the financial stocks.

Actually everything is a powered keg at this point. Cash is King or Queen as the case may be.

I really enjoy your board. You are very knowledgeable. Keep up the good work.

Dubious

[HenryTo]

Dubious,

Well, the AIG news that came out on yesterday wasn't all that good either!

And there would be more bad news coming out of FNM or GM - just when you thought it was safe to go long in financial stocks (readers should keep in mind that I am now long-term bearish on financial stocks).

The disparity in the AAII surveys, the P/C ratio, and the ARMS Index, etc., all happened prior to the July 2002 decline - somewhere in the late May to early June period so I would not be surprised if we experience a significant decline in the next six to eight weeks.

MRK has had its shares of bad news and setback but IMHO, it is a better long-term hold then PFE. If any company can emerge from a turnaround successfully, it is MRK. Has anyone here read the book "Built to Last" that compares MRK to PFE? Any opinions out there?

Have a great weekend Dubious!

Henry

[Dubious]

Henry,

No worries. I believe the rallies will be sharp and quick - like a needle to the eye. Being in the market longer then a day on the long side will be painful and by all means do not go long on a Friday. All you need is for one foreign central bank to come out on Sunday and say "WE DO NOT LIKE YOUR WORTHLESS USDS ANYMORE". We are going to dump them.

I am actually looking for a September 1987 crash here any time.

Merck is a turd and a turd that is slowing sinking. IMHO .

Take care buddy.

Dubious

[HenryTo]

Dubious,

Thanks for your comments! My style truly works well for me in a bear market. i.e. I wait for a hugely oversold situation and then buy good-quality, near-blue chip stocks and then wait for the market to go back up again. And then I sell and repeat the process - it worked pretty good for me in the 2000 to 2002 period.

That being said, 2004 has been hell in the sense that there hasn't been any great volatility. I managed to call a couple of bottoms but those were very difficult to call and didn't really make huge buying opportunities - although the August bottom was decent.

Therefore, I will (and I advise our readers) to wait for a much more oversold situation (than August 2004) before dipping your toes or jumping back in the stock market on the long side.

As for going short, it is my experience that most people just cannot make money going short - even in a secular bear market. People are emotional beings and the greatest emotional roller coaster ride is to see the market have a huge bear market rally (rallies in bear markets tend to be ferocious but short) while one is short and while all his coworkers are making money once again. Dubious, what do you think?

Out of your list, I like MRK in the long run, although I think Coke will have a "Renaissance" of some kind in the future - but not before it goes down to $30 or below and a P/E of 15 or below.

Have a great weekend!

Henry

[Dubious]

Henry,

2003 was a false bull rally based on the injection of the dividend tax cut. Which really did not work out to well because the high dividend stocks have taken quite the beating (AIG, GM, Merck, Pfzier, Coke, etc etc).

Unless the private accounts happen...no more injection into the veins of this drug addict is going to take place. The addict is going to have to go cold turkey - and it is going to be ugly.

By the way: Bears make money too. It is actually easier to make money when the market is going down then up.

The market does not all ways go up. Those who can invest from the bull side and the bear side will do well. Just ride the coaster and do not get sick. You are ahead of the curve.

Right now - nothing is working. Cash is king. The shorts are going to get squeezed here. Just kick back and RELAX. Patient pays off.

You have a great board.


Take care! Dubious

[HenryTo]

Dubious,

Very much so.

The weird thing is that this time, a significant number of my other technical and sentiment indicators are not confirming. Sure, short interest is now at an all-time high but short interest also made all-time highs month after month during the 2000 to 2002 period and the market continued to go down anyway.

Oops, am I being a bear again?

I don't like being a bear - I just like to go against the crowd (sometimes) and think independently and now looks to be one of those times. The thing to do when the market is confusing me? Just sit it out and wait on the sidelines.

Henry

[Dubious]

[quote="HenryTo"]the lowest reading since late February of 2003 (over two years ago)!

Interesting a strong rally started March 2003. Isn't the market fun .

Dubious

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[Gizmo]

Agreed on the oversold bounce. Bradley turn on the 29th and again April 4. I think Tues. am low with bounce peak April 4 and then the real selling starts. BWDIK

Can charts be linked here for others to view?
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Gizmo

[HenryTo]

A huge negative 19% on the latest American Association of Individual Investors survey - the lowest reading since late February of 2003 (over two years ago)!

However, I am being very careful here since my other indicators such as the P/C ratio quickly went back to a more neutral level over the last couple of days - as the equity P/C ratio hit a low of 0.52 and 0.50 yesterday and today, respectively.

The ARMS Index is still also low - and I guess we will know more about the Market Vane's Bullish Consensus sometime this weekend. The market seems to be heading for a further fall in the intermediate term, although there *should* be somewhat of a bounce next week in order for the market to work off its currently oversold conditions.