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

Market Mover

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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