Stock Market Overview. Guessing Doesn't Count

Cambridge Asset Management By Martin & Bart Siegel, CPA, CFP

Second-guessing doesn’t count especially when you have no responsibility for outcomes. This particularly includes retired generals appearing as pundits, offering conflicting views of the unfolding war scenario. Military success is a function of perception, as well as reality. When their actions erode confidence in leadership, they are in essence giving aid to the enemy. This phenomenon also takes place in our economy. When political leaders erode confidence in our economy by making unjustified statements, or thwarting positive action, they are in essence promoting recession, or at the very least delaying our potential recovery.

Again it is the media, stupid. The reporters that are imbedded in the military units have assumed the obligation to report honorably, as accepted members of their units. They aren’t supposed to practice punditry. We are encouraged to believe what they report. This holds true domestically. Their obligation is report the news, not slant it according to their philosophical, or political, desires. If they want to editorialize, it should be labeled as an opinion, not fact. As we approach the next election we will watch the polarization of the media, and politicians. It is difficult to find politicians that believe that there are things more important than their political self-interest. You are even witnessing news networks blatantly splitting along political lines.

A clear example of this is the confusion over drilling in ANWAR. The key to this problem is the 60 votes necessary to prevent a filibuster in the Senate. Isn’t it clear that this has become a national security issue? Without oil from ANWAR, our reliance on Middle Eastern crude according to an energy department agency is to grow from 24% in 2000, to 50% in 2020. Other examples of our oil interdependence is the recent labor strike in Venezuela, which exports 2.5 million barrels per day, as well as the political unrest in Nigeria, which is another major oil exporter. One would think that our Senators would realize that it is crucial that we reduce our dependence on foreign sources of oil. The anti-drilling coalition continues to pull out the same, worn out, protests to drilling. They describe the 2000 acres of permafrost muck on which total darkness descends for 58 days each year, where the temperature drops to 70 degrees below zero, as pristine wilderness. They claim they are worried about the caribou. The caribou actually thrive near the oil fields, where they find some warmth under the pipelines. Then they question the amount of oil that will be derived. They describe it as only a small fraction of US consumption. What they seem tend to leave out is the production of ANWAR could replace10 years of Iraqi production. They also seem to forget that the production of 10 billion barrels of oil will affect the supply/demand function, thus reducing oils overall price.

We at Cambridge have said many times that we recognize our responsibility to remain honest as we report to our readers. We offer opinions, as well as honest data. By providing data, which we used to form our opinions, it allows our readers to interpret the data, and form their own conclusions. The stock market, at any moment in time, is a closed system, with a limited supply of shares outstanding. This offers an opportunity to investors. Each investor synthesizes the information they deem relevant, and comes to their own conclusions. There are only three actions available, that is to buy, hold, or sell. These decisions are made by millions of investors, both large, and small. Those that own stock in an emerging market generally make money. It is that simple. When the tide rises, most boats rise. The number of investors that outsmart the market is extremely small.

It is our considered judgment that we are witnessing a broadening base that is now several months old. We believe that the stage is being set for the next market advance. There are those that do not wish the public to become optimistic about their future. They do not believe it is in their own political self-interest. There are also reporters willing to sacrifice your families well being in order for them to achieve their own career goals. First it was hiding the horrific treatment of the Iraqi people. Then it was the number of body bags that would be coming home. Now that that hasn’t occurred, it is the turmoil, and the cost of rebuilding Iraq. If you go back to World War II did you know that the French killed as many as 50,000 of their own countrymen, in revenge, after the war ended? Lets not even talk about the cost of the rebuilding Europe. Where is the objective journalism? Where are the congratulations for President Bush from the Democrat politicians for a successful mission? Where is the talk of cooperation in jumpstarting our economy? It is a sad situation.

We at Cambridge continue to believe in our leadership. We believe that our Harvard MBA President is up to the challenge presented him, even considering the poisonous political environment. We believe that order is going to be brought to Iraq. This example of potential consequence for rogue nations will hopefully promote peace in the Middle East. We also believe that a positive economic package will be passed, and will be coordinated with intelligent monetary. This should bode well for the economy. We are entering a presidential cycle. Historical trends are on our side. Stay strong, and remain confident.