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Their market has now settled down and seems to be recovering. But this incident stands out as a stark reminder that ANY market enjoying exuberant buying is vulnerable to panic selling. Thats true for investments that are rotten at the core … and it can also hold true, to a lesser degree, for investments that are fundamentally solid. For the former, the panic marks the end … and the time to run. For the latter, it opens up an opportunity for a new beginning a time to jump in. Your challenge: To clearly distinguish between the two.
This weeks news that Intel missed its profit targets by a mile hit the market like a ton of bricks, and the stock instantly plunged through its October low. Some people were shocked. Others are just confused. But if youve been paying attention to Tony Sagamis analysis, you should be neither. You should know that the company is up against stiffening competition from AMD and others. You should also know that Intels troubles didnt begin yesterday. Quite to the contrary, Intel is a classic example of a boom that was shot down years ago … and has been in the process of dying ever since.
This is not the picture of fundamental strength. Nor is it what you should look for in a bargain stock. Rather, its an outlook thats weak at the core and is likely to stay that way for some time to come. Yesterday, for example, even while the Nasdaq rose, Intel floundered. And while Intel floundered, its arch rival, AMD, surged.
Why Japan Is
Now, though, in the new millennium, while U.S. companies like Intel have continued to choke on the excesses of the past, Japan has finally emerged from its doldrums thanks in no small measure to the boom in China. Sure, the Japanese market was overdue for a correction. But the big picture trend and the fundamentals of their economy still point upward. And sure enough, yesterday, most Japanese stocks were already back on their feet. See the difference between a selling panic that ends a boom … and a selling panic that paves the way for a renewed rise?
Another Great Example of When the oil markets fell last September, we told you it was just a temporary correction. And when they fell some more, we said the same thing again.
Absolutely! Did it alter the surging worldwide demand for oil? Did it fix the dangerous threats to already-tight supplies? Not at all. Instead, the correction set the stage for a new oil-price surge that we believe is just now getting under way. Just yesterday, for example, the March crude oil contract rose again, challenging its recent highs. Even natural gas, which has been pounded recently, is picking up some new strength. Expect more of the same.
Wall Street Pundits Some Wall Street pundits are still trying to argue that the oil boom is ending. They say the conflict over Iran is transitory. They downplay the latest crisis in Nigeria. They don’t want anything to cloud their vision of the “Goldilocks economy.” Heres why we think theyre wrong: First, Iran and Nigeria are not one-time trouble spots. Theyre pressure-points that have been building up for years and will continue to escalate. Second, they are not the only threats to oil supplies. We see similarly simmering crises in Venezuela and Ecuador … Saudi Arabia, Iraq and other Persian Gulf nations. Why? Because accelerated economic growth everywhere has stretched the entire planet like a tight drum not just in terms of oil supplies … but also in terms of political tempers and the potential for social upheavals. Third, whether the balance of geo-political power in the world is stable or unstable … right side up or upside down … theres one thing that stays unchanged: For every ONE barrel of new oil reserves that are found … TWO barrels of oil are being consumed. Therein lies the fundamental reality of the oil market, driving its price inexorably higher.
Case in point: One week ago, I showed you how the shares of large energy producers had just broken to new, all-time highs. This week, they moved even higher. And after a minor correction on Wednesday, they were back up to brand new, all-time highs AGAIN yesterday. Metals Are Even Stronger Gold and silver also had minor corrections this week. But the declines didn’t last more than two short days! Yesterday, gold surged by a whopping $14.50. Silver jumped by over 23 cents.
Is a copper pullback overdue? Yes … But yesterday, copper was down by a meager penny. And looking at the past three years, all we can see is a metal that just keeps ramping up … and … up … and … up. Indeed, we believe copper is one of the best indicators of the broad, massive and sweeping natural resource boom now underway. It is telling you that, although the risk of sharp pullbacks is ever present, its far too soon to declare an end. Conclusion A panic in Tokyo is certainly a warning signal for those in the wrong investments. And it may even be a cautionary flag to other investors, for future reference. But its not your cue to change your strategies: Strategy One: Favor investments that are the leading beneficiaries of inflation. (See especially Seans latest special report: The Gold Rush of 2006.) Strategy Two: Stay away from investments that are the primary victims. That includes airlines, auto companies, banks and long-term bonds. Strategy Three: Always keep a substantial reservoir of cash in a safe place, such as a Treasury-only money fund. Good luck and God bless!
About MONEY AND MARKETS MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.
2006 by Weiss Research, Inc. All rights reserved. |
The Tokyo stock market suddenly cracked wide open this week the worst selling panic since the Crash of 87 … one of the greatest shocks to confidence since the Arab oil shokku of the early 1970s … and their first market shutdown in the postwar era.
Take Intel,
Intel’s bubble burst with the new millennium bringing wave after wave of selling that cut the stocks value in half … and then in half again.
Throughout the 1990s, while the U.S. markets were soaring in an ever-hotter speculative boom, Japan was undergoing a painful depression that helped clean out its excesses, especially bad debts.
Was the correction more severe than we initially expected?
Ditto for Oil Stocks
And copper never even had the 2-day correction to begin with!
