Comment 

General Electric’s CEO recently stated in Barron’s, ‘For the first time in maybe 20 years, our set of industrial businesses can grow to or faster than our financial businesses. . . . (more…)

A recent article on the US entitled ‘Signs of an empire in decline’ prompted these thoughts: 

‘Indeed Americans have collectively and wisely moved away from production of goods at wafer thin low returns. This is what happens when wealth has been accumulated. You outsource low margin activity, freeing up time and resources for higher margin activity.You ignore the position of the US in the new economy of the 21^st century. (more…)

Don Hays referred last week to the recent seminal bond market call from the guru du siecle (aka William Gross) last week, & how he had finally become, overnight, a bond bear.

He reminded us that if Bill Gross is as 1/10th as right as he was with his Dow 5000 forecast right at the 2002 low, then ‘we have it made‘…for the record, Hays’ view is that when the Fed gives up, this stock market is going to explode. Unfortunately, we are not at liberty to say in which direction! A clue lies in this: Hays is an equities man, Gross a bond man. Although this is the same Don Hays who called the equities big picture very much right, in 1999, and again in 2002/3. Crucially, he is not just writing about this stuff. His firm manages around $1bn in long term money, and his asset allocations are driven to a significant measure by these long term market calls.

You would expect the beginnings of some stabilisation in the FTSE 250 stocks sooner rather than later, unless sentiment has really turned. Notice in the chart the horizontal lines showing the move in the index from the March 5th low to the May 8th peak. A 50% pullback on this move takes it back to 1151, so at the current 1149 we are hovering just under this 50% line.

Markets often retrace to what are known as Fibonacci levels, typically drawn at 25%, 38%, 50%, 62% & 75%. A violation of these levels on strong volume can point to more serious things going on underneath the surface.

In this case, what we are seeing is a mini shift away from small & mid caps into the larger caps which has been much anticipated.

Using EWJ as a proxy for Japan, the chart shows little progress since the highs achieved in late 2005. From a trend analysis perspective, there are many weaker looking charts. (more…)

PIMCO on the global outlook for the next five years. Essential reading, which warrants careful analysis, and probably several readings, for anyone with a modicum of interest in investing and the global market. http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+May-June+2007.htm 

Jeff Saut notes that “the Dow Jones Wilshire 5000 Index broke out of a spread triple-top in the point and figure charts last week as can be seen by going to stockcharts.com and keying in $WLSH. Since the Wilshire 5000 ($WLSH/15304.99) is the broadest-based index we know this is not an unimportant event….while we don’t understand it, in this business what you see is what you get”…Also, the REIT Index (DJR/304.21) has broken below its rising trendline and accelerated on the downside.