Vol. 12, No. 3,009 - The American Reporter - October 19, 2006



Market Mover
THE JUDO OF MASSACRE AND ECONOMY

by Mark Scheinbaum
American Reporter Correspondent
Boca Raton, Fla.

Printable version of this story

BOCA RATON, FLA. (Oct. 10, 2001) -- The bizarre, overly simplistic stra= tegy of the martial-wrestling art of judo sticks in my mind over the Sept. = 11th massacre and the road to global economic recovery. My concerns have = been compounded by the possibility this week that agronomists in Iowa, work= ing to share global anti-anthrax knowledge, could have had their bacteria t= urned against their own country. But, the jury is still out on that one. = Rabbi Arthur Schneier of New York was on my television from Yankee Stadium = a few weeks ago. His prayers were for national unity. It seems as if it wer= e centuries ago, not decades, when he tutored me for my bar mitzvah lessons=

in a Brooklyn synagogue. Mental judo where the weight of reality and life = experience is twisted off balance by sorrow and rage.

Murderers took Amer= ica's weak airport security, laissez-fare airline security, full fuel tanks= , the elementary but lethal use of an airborne fuel bomb, and took the weig= ht of the moment into a judo toss of historic infamy.

David Malpass, international economist for Bear, Stearns & Co, spoke on= a closed-circuit conference call recently and painted a dismal picture of = global recession and deflation. Parallels to 1929 and the start of the Gre= at Depression. He calmly and precisely documented the "crunch points" which= could kill any Wall Street rally. The crunch involves Turkey, Brazil, Arge= ntina, and Japan.

Japan, sliding deeper into bankruptcy could be the key. Industrial Japa= n's banking system is at the fulcrum of crisis. The judo of economics can f= lip it to the side of recovery or oblivion.

The modern world runs to the grocery store and the theaters of war on pe= troleum. Middle Eastern crises mean disruption of oil flow. Higher oil pric= es lead to massive inflation.

Malpass, however, points out that lower airline and consumer oil utiliz= ation means OPEC turmoil. Oil prices have gone down, not up. Factories whic= h won't expand and consumers who won't by new cars have twisted textbook ec= onomics into market judo. It is the judo of what Malpass calls "simultaneou= s global worries of inflation in commodities and deflation of national prod= uct."

Lower interest rates should mean historic lows in mortgage rates. Yet yo= ur neighborhood bank branch or savings and loan is getting money from the = Federal Reserve at 3 percent, or even less. When you add in application fee= s, documentary costs, "point" and miscellaneous charges, most 30-year fixed= conventional mortgages last week actually drifted back up to 7.75%.

Tha= t's a gargantuan 475-basis-point (4 3/4 percent) spread for the banks. Whil= e you were worrying about windfall profits for BP Amoco and Royal Dutch She= ll, you were being gouged by Washington Federal and Wachovia in their own f= orm of financial judo.

The call came from the Dow Jones News Service. "Mark, how did you come = up with a possible support level of 5,400 on the Dow Jones Industrial Avera= ge?" I explained that recent Forbes research places the S&P 500 Index's 60-= year historical Price-earnings ratio at 15 to 1. When the Dow was at Dow 8= ,200 and dropped 1,400 points in one week, the ratio was 26 to 1. Applying= this artificially high level to the Dow, the "theoretical fair value" shou= ld be 5,400.

Yet my monthly charts show a clear support level set back in 1996 at 7= ,100 which seems manageable. All of my professional training tells me this = is a huge buying opportunity. Yet my own detached research shows new lows.

Well, let's write it off to stock market judo where numbers turn them= selves inside out.

Perhaps the world's best-managed company, General Elec= tric, confirms double-digit growth for next year, and determination to keep= on track in supporting and expanding its diverse world from annuities and = insurance to locomotives and medical diagnostic machines. Wall Street respo= nds positively. The negatives are flailing at us. The market steps quickly = to one side and uses all the negative weight to find a pressure point of po= sitive thinking. Call it psychological judo.

My old rabbi has finished with his homily. Killers who used a perversion= of the Koran to practice kamikaze hate, are pushed out of my mind by a hol= y man who has taught three generations of kids about love and charity.

Who knows? Maybe it's religious judo.

Mark Scheinbaum, is a veteran UPI Newsman who serves as chief investment= strategist for Kaplan & Co., members Boston Stock Exchange, Boca Raton, Fl= a.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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