Market Data 
Markets
Replies to post #13194 on Mostly: Classical
04/16/05 9:22 AM
04/16/05 5:34 PM
05/06/05 12:53 PM
H.S. Dent Forecast: The Second Buy Opportunity of a
Lifetime; Oil and Housing Bubbles Will Lead Stock Market Boom
DALLAS--(Business Wire)--May 6, 2005--
The surge in oil prices prevented a stock market rally
above 11,000 this year causing equity prices to plummet, states the
May issue of the H.S. Dent Forecast newsletter. "The mid-April market
panic accompanied with extreme bearishness among everyday investors
and the Dow's test of 10,000, gave the strongest stock market buy
signal in the newsletter's 16-year history," said Harry S. Dent, Jr.,
president and founder of the H. S. Dent Foundation.
"Investors need to understand that we are in a continuing bubble
boom that did not end with the 2000-2002 crash in stocks any more than
it did with the 1987 crash," said Dent. "The Dow appears to have
bottomed out at 10,000 in late April, but it is still possible we
could see one more brief sell off into early May. Stocks could go as
low as 9,700; should that happen, investors should view this as an
extreme buy opportunity."
Bubble After Bubble in an Ongoing Bubble Boom
Bubbles come when radical new economies, technologies and
infrastructures are first moving into the mainstream economy as
witnessed in 1914 to 1929 and again in 1942 to 1968. In this
generation, the first bubble was the huge inflation trend that ushered
the baby boomers and their new technologies and consumer trends into
the workforce and economy starting in the mid-1970s or early 1980s.
"For Boomers, it is critical to see this boom as a series of bubbles
in stocks, real estate, technology and other sectors like oil. It's
not that we have seen a bubble burst, but that we are in an ongoing
bubble boom," Dent believes.
Major Reversal in Many Trends Ahead
Many trends appear to be reversing this year, Dent contends. Oil
seems to have peaked, or it should sometime later this year. Bond
yields should continue to fall a bit with continued economic slowing.
Lower bond yields are likely to give housing prices a final burst of
strength into the summer or fall. According to Dent, over time, bonds
should start to edge up gradually for nearly 5 years as the economy,
stocks and the Dollar boom again.
As other sectors such as oil, commodities and housing start to
lag, "large and small cap growth stocks are going to take the stage
again and lead the next bubble. Stocks should now rally more strongly
from extreme oversold levels on April 20th," Dent said. "But there may
be some more bumps along the way as stocks will continue to see
slowing economic statistics and earnings on a lag into the fall,
before signs of a solid acceleration in economic growth and earnings
start to emerge around mid-summer to late 2005."
The Dow is poised to make a new high, Dent states. "The timing is
most likely to occur between January and March of 2006, or May 2006 at
the latest," said Dent. "Once the Dow hits this new peak, even bearish
investors will be convinced that we are in the next major bull market.
Surprisingly, most investors have failed to notice positive indicators
like the small and mid cap stock indices that have already made new
highs from the peaks in 2000. These are strong signs confirming the
next bull market."
The Oil Bubble: The Biggest Recent Market Mover
The March issue of the H. S. Dent Forecast predicted oil would
move up to around $60 per barrel. Oil made it up to $58.20 before
pulling back to $50 in mid-April. Since rising oil prices stimulate
new investment in supply over time and all of the major oil importing
countries have almost completed building strategic reserves, oil
prices should start dropping later this year, Dent suggests.
Lee Raymond, CEO of Exxon Mobil, recently stated strongly that oil
at current price levels are clearly due to speculation, not
fundamentals. "We agree," said Dent. "Oil prices look very likely to
fall substantially in the next year or two and a shake-out in oil and
energy stocks is imminent. We see the potential for as much as a 40 to
60 percent decline in oil stocks in the next year or so, and that is
like to affect stock indices like the Dow and S&P 500."
Bonds and Interest Rates
Economists have been surprised to see long bond yields decline
despite the Fed raising short-term rates in 2004 and early 2005. The
reason, Dent suggests, is due to modest inflation and a long and slow
economic recovery. Then, in early 2004, oil prices increased sharply
as did speculation in long bonds, rates recently jumped 0.65 percent
in the 10-year Treasury and near 0.5 percent in the 30-year bonds. "We
think the 30-year Treasury will fluctuate between 3.9 and 5.0 percent
in the next year. And that means mortgage rates will likely fall a bit
more, before rising modestly. No substantial increases are expected in
long-term rates for years to come -- unless we break above the 30-year
Treasury Channel," Dent said.
Home Prices: The Next Bubble to Burst -- but not as Dramatic at
First
House prices and demand continue to rise, but sales and prices
have been slowing since 2003, Dent warns. "Another bubble is about to
end in real estate, but only in the most overvalued areas," said Dent.
"Since economic trends and interest rates remain generally favorable
for housing, a broad crash is unlikely. Over time, slowing demographic
demand and strong stock appreciation will increasingly work against
strong price increases for homes.
"The real crash in housing -- and the final burst of the greatest
bubble in history -- will come in the downturn we project for 2010 to
2022 when we see a deflationary downturn."
Home prices could begin to fall more substantially over the next
year or so in the most overvalued areas like California, the Northeast
and South Florida. In addition, homeowners should be concerned for
investments in vacation/resort/retirement areas with high speculation
rates, Dent cautioned. These areas could see a substantial reaction
downward in prices as real estate trends start to slow. Ironically,
these same properties should also rebound into the later stages of
this boom with continued demographic trends behind them. "But when we
finally see an extended downturn and deflation in prices, housing
prices will finally crash across the board as it did into the 1930s,"
said Dent. "Homebuilding stocks which have been leaders will turn to
laggards once the real estate bubble starts to burst. These stocks
could suffer as much as a 40 percent correction in the next year or
two."
The Next Greater Bubble Emerging in Stocks
Since the bottom in October of 2002, the stock market has been
playing a "catch me if you can" game with investors as stocks move up
rapidly in short surges, then move sideways for months. Investors
become worn out by the market's lack of consistent performance. The
extreme bearishness by everyday investors is the greatest reason the
market is poised to begin the next bubble market in stocks, Dent
believes. "The April sell-off caused the Dow to bottom out at 10,000.
Now investors seem to have a higher level of confidence that the
market is moving forward more strongly and consistently," Dent said.
"We think the second great buy opportunity of a lifetime appears to
have occurred at the Dow 10,000 on April 21, 2005."
"Don't give up on the Next Great Bubble Boom with the second
investment opportunity of a lifetime that just occurred in late
April," said Dent. There appears to be very little downside risk going
forward. This bull market is likely to be even greater than 1995 to
early 2000. Technology, health care, financial services, Asia and
small cap stocks should provide better investment opportunities in
this continued bubble boom ahead. "Bottom line, don't wait for proof
that this is a bull market. By hesitating, you could miss a 40 to 50
percent rally -- and greater on the NASDAQ and small cap markets. The
time to buy is now."
About H.S. Dent Publishing:
H.S. Dent Publishing (www.hsdent.com) of Allen, Texas helps people
understand change and prepare for its arrival through a variety of
Dent publications, including the monthly H.S. Dent Forecast. The Dent
methodology, which is based on the study of demographics, or the study
of whole populations and their spending habits, takes financial
forecasting out of the world of theory and into the realm of
real-world consumer behavior allowing investors to make intelligent
and informed economic decisions about their future.
06May05 16:48 GMT
Source BW Business Wire
AI
