Replies to post #338200 on Zeev's Turnips Patch-No Politics (ZEEV)

[BobMcP]

Hello Zeev: Thank you for the detailed "road map" for 2005. I know your stance has been for some time that consumers are just about sated and that a consumer led recession may evolve next year.

A factor in the macro picture I have been pondering is capital spending. I'm not optimistic. We have the end of bonus depreciation in 2004 and a tightening of the expensing rules for heavy SUV's. And, given that our economy was never allowed to fully wring out the overcapacity and excesses of the 1990's, isn't it at least possible that at a time when the consumer gives up, business spending does as well? If so, we may be in for a fairly deep double-whammy recession.

Thanks again for your insight and the courage to go on record.

Bob McP

[Belgie24]

Zeev, thanks for the hard work you put in coming up with your forecasts. If you would, could you comment on the BTK vs the SOX during the down periods next year. I assume you think the SOX will get nailed, do you also think the BTK will be hit as hard? I am going to get either the SMH short or RYVNX, for 2X down the QQQQ. TIA.

Best 2005 wishes to you. Belgie

[TobagoJack]

Zeev, thanks for the heads-up look ahead.
Your script appear balanced, but still has enough drama to keep the more opportunistic of us enthusiastic.

Chugs, Jay

[choad]

Zeev, If that map is even close to right there are going to be lots of buy and sell oppurtunities.... should be good for the wallet if you get the turns right!

[porter]

So Z--

Is it Mauldin or Maudlin that we have to fear?<G>

The 2005 Legislative Stock Bill that you present is impressive but I'm just a wee bit concerned about all the "pork belly riders" that China and Company may decide to add on to it.

So far it's been a yuanderful ride but when you look at the charts you see a number of stocks trading between tight horizontal bands that are still considerably lower than many of their old-time highs. If we are still in the old Super Cycle Wave 3 Bull market (and I think we are!) then we are going to be drifting sideways in a Wave 4 plateau phase for a considerably longer time than anyone is projecting or willing to accept.

FWIW, your numbers support a MULTI-YEAR Wave 4 A-B-C formation, thus, confirming the above.

On my timeline the secular Bear will be visiting us near the end of this decade...Hopefully "the man from La Jolla" will hang on till then since his 73-74 calls were impeccable.

Regards
--P

[goodluck]

Just a couple of questions/comments.

1. A major question is if a Government owned oil industry can indeed be vibrant and raise current Russian production levels. I doubt it, one reason I don’t think that crude will get much under $40/barrel (increased Russian supply could put pressure on prices).

You used to talk about huge oil supply available (from shale?) if oil got above $40-45/barrel (not sure what that is equivalent to in current dollars, though it was only a couple of years ago, it seems to me, and inflation hasn't been a big factor since then). So is someone going after this supply, with oil prices in the 40s and no end in sight? Should this not pretty much cap oil here?

2. On SS. When Social Security was first enacted, life expectancy was around 61 or so (cf http://www.infoplease.com/ipa/A0005148.html for a life expectancy table). Wouldn't SS be made whole if we simply raised the age at which people begin to receive benefits to something closer to an equivalent age, relative to life expectancy (e.g., 75 or so--that wouldn't even really be quite equivalent, but would likely be enough given increased productivity)? Especially so if we either increased the caps on which people pay SS or eliminated them altogether, and made a maximum payout, combined these with a means test for payouts. I'd need an actuary to do the actual math, but it just seems like simple common sense to me. If so, this also would have the virtue of reassuring the markets, I think, in that it would show them that we can be serious about addressing the deficit and our future liabilities.

[langostino]

Annual roadmap question

Zeev, thank you for the time you put into your annual roadmap. One thing I didn't notice was any mention of China, where there is sure to be further rumblings about floating the currency, but also where there is still the spectre of the hangover from the mega-growth of recent years. Some believe that hangover will be mild or barely noticeable. But others think we are still on course for a much rougher "morning after".

Jim Rogers has made a "hard landing" call. In this week's Forbes magazine he says he expects the Chinese economy "is due for a hard landing within the next 12 months."

In warning of the hard landing he says:
"It will definitely happen, and when it does, I hope I'm brave enough, smart enough, and alert enough to pick up the phone and buy a lot more China."

I don't know what you think of Jim Rogers, but when he uses the words "It definitely will happen ..." I find it very hard to be betting the opposite. And if he is right, and China has a hard landing, then it seems impossible to believe there won't be shock waves reaching our shores (although that would probably result in falling commodities prices, particularly oil).

[stiv]

"As for the technical picture, we are getting very close to some major top like behavior in volatility indices. The EPC 21 days moving average has stayed under .58 for more than a month. Many of the BP are flattening out (BPTRAN at 100%, and for quite some time, it cannot go higher….). Advisors bullish are above 62%, an area from which a major bear could start. New highs on the NYSE have also reached levels approaching excesses, but not so, so far on the Naz. VIX and VXN keep hitting new lows."


Zeev, I would concur based on following the ISEE indicator which is a C/P ratio as measured by the non-institutional purchases made on the International Securities Exchange. See their site for further explanation http://www.iseoptions.com/marketplace/statistics/sentiment_index.asp

Two things of note with this indicator lately. First the readings are hitting heights not seen since this past January's peaks. Yesterday's 278 the highest since 304 on 1/20.

Second, a few months ago they started offering intraday readings. Unfortunately, intraday numbers were not available a year ago for comparison. However, in the last month the intradays have started to peg the meter. On 11/26 it hit 325, on 12/10 a whopping 447 (4.47 times as many calls as puts), and then yesterday it hit 334. In each case, the day's end reading was in the 200's.

"While these are all figures that are commensurate with a major peak, these can stay that way for quite some time, and the bears amongst us, should not, IMTO, anticipate a top and go short before a downtrend is actually established."

Good advice, but on the flip side, things could start sliding at any time, no? (Albeit not today by the looks of it)

The following is my Excel-o-vision of the ISEE.

Cheers!

[Softechie]

Zeev, You're looking my way in 2005! heheheh...welcome aboard!

[ogm]

I like this roadmap :) Beats this nasty low volume upward grind.

[newguy2005]

Zeev, thank you very much for the map. I asked you last time about suitable core holdings and followed your advice to have added TBL and TLM so far with a slight gain. In light of your 05 prediction, what will your advice be for people like me who are stilling in the process of building a core portfolio? Would you advice holding the positions tight or sell them out at some point?

PS, I read an article saying that since 1897, there has never been a down year in a year ending in "5", in fact, the average gain on those years is 38.5%, does your map take this into account?

PPS, do you have any opinion on KMRT?

Many thanks in advance and wish you another great year.

[lostalot]

Zeev: Donald Luskin has an opposite view to your Jan 05 map (see below). What do you think of his analysis?

Dec. 30, 04 http://moneycentral.msn.com/content/Stratlabs/Round11/P105013.asp
A pullback early in January
My overall market forecasting framework hasn't really changed. I'm still bullish on stocks and bearish on bonds for the coming year. But something's telling me that things have gotten a little too easy for the bulls, and that a decent little pullback may be in the offing for the first couple weeks of January.

My technical analyst friend Fred Goodman, who publishes a daily report on my Web site, feels the same way. Over the last couple weeks he's noted that this holiday season's market action has been eerily reminiscent of what happened in 1999. According to Fred, each day's changes in both price and volume have matched to a "T" the changes that occurred on the same calendar days five years ago.

So let's say the 1999 matching pattern continues? What's next? Remember that as the new year of 2000 dawned, stocks sold off hard. They recovered over the following weeks, and went on to make the bubblicious top of March 2000. Fred's not forecasting a March 2000 run for the roses -- but he is forecasting a near-term pullback, and I agree.