Weekend Thoughts for February 2nd:

More Jobs
CNN Headline: Found! 1 million jobs – Government revisions to payrolls are likely to show job growth has been much stronger than first thought.

Question: If wages are not bad and jobs are doing great, with the lowest of unemployment levels in years, 4.5%, then why are we getting so excited about “job growth”?

Flashbacks?
Today’s Front page of CNN Money included the words: “Why Stocks will rock”, “Enron”, “Dow record”, “Fed holds rates steady”. Sound Y2K-ish?

Inflation?
Kevin Depew from Minyanville points out

The last time inflation readings were this low – referring to the 0.1% increase in the core CPI reported yesterday – this economy was fighting deflation, back in 2001. Makes you wonder is Inflation really the only thing that the Fed should be looking at right now?

Personal income rose by 0.5%, up from 0.3% in October and November, but the savings rate remains negative and for the 21st consecutive month now. Kevin points out that the last time we had such a reading, 1933 that is, we were amidst the best buying opportunity for stocks. People however didn’t have the money to buy due to the Great Depression.

My Thoughts: The reason that people aren’t saving is because they see no need to when their home equity value and stocks remain at all-time highs, paired with the strongest earnings seen in decades. But were the markets to decline substantially, let alone critically, it would seem to me that we would indeed have a phenomenal buying opportunity.

Scared yet?
The Times reported that many worry over a possible flue pandemic. If the Government was really interested in scaring us why don’t they just tell America the truth about the economy? Oh, no money to be made there? Then never mind.

Now that’s what I call speculation
Allen Wastler of CNN gives us three reasons why stocks will rock in 07

Number One … The January Barometer. That’s the one that says if the S&P 500 index goes forward for January, it will go forward for the whole year.

Number Two … The Presidential Cycle. The pre-election year … that’d be this one … usually logs the most gains for the market.

Number Three …
The Superbowl Indicator. If an old NFL team wins, then the market will gain.

My Thoughts:
#1. As everybody realizes this it will eventually be put to rest as all speculative signals eventually do. What if major players pumped up the “January Effect” just to create it in order to sell stocks at a higher price amidst even greater optimism?

#2. Follows with the same blind optimism as the first. What if this has already been processed into the cards the same way a “sell-off” worry always strikes Wall Street around October time.

As for #3. What are we now superstitious star gazers? The only thing football has to do with the money is with profit jumps from Beer, alcohol and T-shirt producers. We might as well just see if the Bears win.

On selling high, someone’s getting it right
Google speculators seemed to have been following the “Buy the Rumor, Sell the News” mantra of corporate bull runs in profits, after Google posted a $1B increase in returns after costs. We may soon see very similar action in other major companies that are expecting huge surges in profits such as Apple (iPhone), Microsoft (Vista) and maybe even a decline in stock prices if Michael Dell can pull his act together.

Speculative Trading
I decided to have fun over the past few weeks. I made some market calls. Heres how I did.

Call on Natural Gas at 6.28 as speculators seemed shut out after it hit its low after a 44% decline from mid-summer that wiped out large players such as Amaranth. +21%

Call on Oil at $52 after funds sold out after worry that the decline may extend to the possible 30s. A definite Buy signal. + 10%

Dow Put at 12,565 and a Nasdaq Put at 2,451 after stocks seemed to be losing their lacker after continued optimism for stocks, particularly Tech, over the coming year. Ultra Short adds leverage by 100%. Stocks remain bumpy with “Wet roads ahead”. Both -2%

Gold Call at 643.20 after metals seemed to have been left behind as major indexes and oil climbed higher. +2%

Silver Call on an even more bullish stance that Silver is moving closer to its eventual 1:16 Gold ratio. Closed 1.5% higher at +3.5%

Portfolio would have a current return of +5.7%

Prediction for the next 6 months – Stocks out and Metals and Energies in with both Gold and Oil breaking out of consolidation trends.

As for stocks, for the first time since 1996, the SP500 finished higher for the 8th consecutive month. And the DJIA daily chart has not seen a 2.5% correction since the fall of 2006 (longest streak since the 1950s).

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