What's in Your Wallet?

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From the Nightly Business Report of 4 Nov 2005:

PAUL KANGAS: My guest market monitor this week is Douglas Jimerson, president of National Investment Advisors. And Doug, welcome back to NIGHTLY BUSINESS REPORT.

DOUGLAS JIMERSON, PRESIDENT, NATIONAL INVESTMENT ADVISORS: Thank you, Paul, great to be back.

KANGAS: For some time now you have been very cautious about owning stocks saying that they have been showing characteristics of a classic bear market. Have you changed your opinion or have you become even more bearish?

JIMERSON: I haven`t changed my opinion. I am still of the same opinion.

KANGAS: Still bearish. But why?

JIMERSON: This market is trendless. Its been flat for, gee, how long, we cant even remember.

KANGAS: That`s not good for the bears or the bulls.

JIMERSON: No, its not. But the -- the real concern I have is interest rates. Because we continue to have a ratcheting higher of the short-term rates and the long-term rates are going up. The Treasury bonds and notes are now below their long-term moving averages.

KANGAS: So that is your main concern is higher interest rates. How much higher do you think they can go?

JIMERSON: You know, I don`t have that crystal ball. But it does seem that the Fed is intent on making certain that they flush out any hint of inflation in spite of possible deflationary hints from overseas and in spite of, you know, what we are seeing in the economy employment reports don`t seem too bullish.

KANGAS: So you believe in the old axiom don`t fight the Fed when they are boosting.

JIMERSON: Absolutely.

KANGAS: OK. Now one group that you have been bullish on and very correctly so has been in the oil sector. But you did recommend taking some profits there on your last visit with us in early May of this year. What is your stance on the oils now?

JIMERSON: Well, by and large were flat the oils. You know, as you look at ExxonMobil which I have been talking about for years, this is basically unchanged, but it`s had a wild ride since last May. And so I really think that that long-term bull phase for the oil stocks is passed.

KANGAS: OK. Now on that last visit in May, you said that the NASDAQ market was due for a fall and you even recommended purchasing a bearish mutual fund. Lets see how its done since May. I think it was the 5th of May you were with us.

JIMERSON: Right.

KANGAS: There we see it, down 9.3 percent. Now you did have a profit briefly in it when the market went down. But now its moving against you. Are you still with it?

JIMERSON: Absolutely. I was calling that a long-term investment. And the NASDAQ is down for the year still. That fund is up for the year still. I think that we are going to see a more important or more significant leg down in the market in the next month or so.

KANGAS: And it will be lead by the NASDAQ market?

JIMERSON: I think so. Although, an important element of this is going to be a correction in the oil stocks which corrected during the summer and I expect --

KANGAS: They corrected today pretty well also.

JIMERSON: I believe its the beginning of a next leg down in the oil stocks.

KANGAS: So no year-end rally for the oils, in other words.

JIMERSON: No. And I think that they there are better opportunities overseas. I`m suggesting that --

KANGAS: You have some new recommendations on the buy side.

JIMERSON: Yes. I think its good to look at markets that are in a very different phase from ours. The bubble burst here in 2000. The bubble in Japan burst in 1990. And their recovery has been under way for a long time. And their interest rates are very low, practically nil.

KANGAS: Can we get specific as to recommendations?

JIMERSON: A couple of very nice opportunities with no-load funds would be the Rydex Japan fund.

KANGAS: It has had quite a rise.

JIMERSON: It`s begun a very nice advance.

KANGAS: So you think that this chart just is typical of the beginning of a trend.

JIMERSON: Oh, I think so. Now obviously its going to correct if our market corrects. But I think this is a long-term opportunity.

KANGAS: Do you have another choice in that area?

JIMERSON: And Fidelity Japan fund also, another no-load fund. So its diversified within the Japanese market which is very much out of phase with the American markets.

KANGAS: OK, so you are going overseas, do you own any of these two securities personally?

JIMERSON: At this point, no.

BTW, many of those Market Monitor guests on NBR make for some of the best investment information sources. A tribute to interviews by Paul Kangas.

Many MBA type brokers will simply hype stocks. But even many of them are changing their tune. Too many are now recommending investments outside of America. How can this be if George Jr has created five years of growth? The growth has not existed thanks to a former alcoholic now addicted to Treasury credit cards and a destructive tax cut. As posted by this author so many years ago, that tax cut will result in a few good years followed by economic forces that punish the economy. There is no reason for history to change this time. We are now entering the punishment phase as demonstrated by so many stock brokers who also note that the stock market has been completely flat during the entire George Jr administration. How can this be if there has been growth?

Where is all this growth? Its clearly well invested - in bullets and broken Humvees in Iraq - in SUVs - in all those more efficient factory and power plant equipment not invented in America because George Jr only advocated more oil consumption and denials about global warming. The classic 'guns or butter' concept from economics. Any stock brokers here want to recommend a domestic investment? Good ones are scarce as the Fed must drastically increase interest rates to correct for George Jr's tax cut and for what any alcoholic would call a balanced budget.

Remember all those Capital One, et al credit cards with near zero interest rates? Where were they making money? They have invested in US. They need you to maintain high balances. Then when you default on a single payment - even to the gas company - then they apply massive interest rates to that large balance. Maybe 20%. Credit card companies are getting ready to reap huge profits because so many Americans do not and cannot pay off their credit cards. Part of those upcoming profits includes the 'reform' of bankruptcy laws. Don't think for one minute that those credit card companies have not been thinking long term. They needed and will now get even the Fed to increase interest rates. And unlike house mortgage companies, then credit card companies can immediately apply those higher rates to your debts. Worse still, you may not be able to declare bankruptcy; must keep making payments for what - a decade? Long term and profitable planning.

If you have any such debts, better be paying them off ASAP. The legacy of George Jr economics is fast approaching.

Ahhh... but nobody expected the levees to be breached. What's in your wallet?