M. Ramsey King Securities, Inc. Tuesday Jan. 18, 2005
– Issue 3078 "Independent View of the News"
..The FT: "There are two more telling gauges of how much of a turnround 2005 has been from 2004. First, the bottom 50 performers on the S&P 500 so far this year have shed 11.4 per cent since January 1. Last quarter, the 50 stocks returned 24.4 per cent, leading the robust year-end rally that put the benchmark index up 9 per cent for 2004…in the first eight days of trading in 2005, less than $2bn has flowed into equity funds, according to forecasts by TrimTabs. During the entire month of January last year, fund flows into equity funds reached an all-time high $44bn. The poor performance - and absence of cash flows - has caught many off guard and raises the ominous question: is this the prologue to a bad year?"
More and more it looks like the average American is tapped out. Our long-time friends at Van Hoisington Management delineate just how perilous the average American’s finances have become. "Household debt was a record 115.3% of disposable personal income in the third quarter, an all time high for the series. The financial condition is only slightly better when household debt is viewed in terms of assets or net worth. This is surprising since the value of homes has increased sharply in recent years, and stock values have somewhat recovered… In the first two months of the fourth quarter, total consumer fuel expenditures jumped to 8.3% of wage and salary income, the highest energy burden since 1990). Fuel expenditures now require an additional 2.1% of total wage and salary income from the lows in 2001. The current oil shock now stands as the third largest of the five events that have occurred since the early 1970s. Each of the preceding oil shocks were associated with recessions." www.HoisingtonMgt.com.
Though the fin media heralded the 0.8% gain in Industrial Production for December, they were remiss in mentioning that primary metals production increased 3%; energy production increased 2.84% and paper production increased 1.1% while the inventory building (up 10 of the last 11 months) continues. Several analysts commented that the report is an indication of increasing inflationary pressures…We have commented repeatedly during the past year, as has Dr. Marc Faber, that much of the increase in US industrial production is surging utility output, which is due in good measure to increasing inflation. All those monstrous homes built over the past boom require a lot more electricity and natural gas. Utility industrial production increased 2.7% in December.
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