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CORNERSTONE INVESTORS NETWORK, June 2006
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Below is a complete copy of the presentation by Stewart Bishop at the Cornerstone Investors Network Conference at Schaumburg, Illinois. |
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| PDF LINK | TOPICS |
| Part One | Market turmoil overview; Baby-Boom retirement challenges |
| Part Two | Baby-Boom retirement challenges & the impact on treasury bonds; Foreign financing of the U.S. "twin deficits"; Artificially low U.S. interest rates [which have in part fueled the U.S. Housing Bubble, see below]; IMF governance of the U.S. economy; Gold breakout in 2005 was at least partially linked to deficits & the risk of currency debasement. |
| Part Three | Housing Bubble, in part fueled by low interest rates; Low levels of U.S. consumer savings; Housing glut (inventories at levels as high as the 1989-93 real estate debacle); Proliferation of risky mortgage financing; U.S. economy highly exposed to housing (32% of jobs created since 2001 are linked to housing, 4X normal); Reasons for possible optimism longer-term: the long-term drivers of housing. |
| Part Four | U.S. consumer can no longer stimulate the economy (deep in debt, low savings, etc.); Inflation is likely to remain tame; Major question: will business spending pick up the slack from the consumer and keep the economy running strong? |
| Part Five | Global economy remains strong with upward estimate revisions; IMF looks for weaker U.S. dollar to correct deficit imbalances; Japan recovers but faces grim longer-term challenge of retiring their Baby-Boom generation; Central banks tightening worldwide sparks market worries but commercial banks still lending (monetary policy at this point is not recessionary) |
| Part Six | Bishop's historical bond market calls; The bond top in June 2003; Bonds are now nearing a very important technical bottom in June 2006; Yield curve inversions & their implications for lower rates; Federal & Local revenue collections (taxes) are up - this should lead to lower deficits and take short-term pressure off interest rates; Bonds benefit from a flight to safety from turbulence in stocks, commodities, and other markets. |
| Part Seven | Corporate bonds were attractive in 2002 with wide yield spreads over Treasuries; Corporate spreads are now pricing perfection & vulnerable to an increase in stock volatility |
| Part Eight | Bishop's historical stock market calls; The 2002 stock slide; The October 2002 market bottom; Analysts slash earnings estimates at the 2002 bottom, thereby increasing the probability of "positive surprises" and an eventual rally; Just the opposite is happening today - analysts raising estimates & increasing the risk of "negative surprises"; Calling the 2004 correction as a mere pullback in on-going rally; Calling energy the #1 play during the 2004 correction; Calling the May 2006 stock market selloff; Price patterns, technical indicators & confirmation signals; Is this selloff a correction or a major top? Both scenarios explored. Short-term stock market selloff targets; Global stock picture. |
| Part Nine | Near-term primary risk to stocks is a downward earnings revision vortex sparked by a greater than expected housing collapse effect and a weaker than expected business investment cycle; Otherwise the global economy is still strong and economically this selloff is probably just a correction; The hopeful case for stock correction and recovery; Market breadth has probably peaked either way. |
| Part Ten | Calling the U.S. dollar rally in Oct. 2004 and Jan. 2005; Dollar technical signals through 2005; the Nov. 2005 dollar top; the dollar selloff in late April 2006; Dollar benefits short-term from safety flight in current market turmoil; Will that be enough to stop the dollar sliding to new lows?; Unclear currency charts as of 6-17-2006; We prefer the sidelines to let clearer patterns emerge in the weeks ahead; Key currency support & resistance levels; the dollar relationship to U.S. corporate earnings. |
| Part Eleven | Gold bull market calls; Gold vs. mining stocks as an indicator of trend; Gold breaks out against all major forex in Sep/Oct 2005; implications for long-term currency debasement to finance the baby boom retirement; Calling the May 2006 gold top and selloff; Commodities bubble pops; Will take pressure off inflation and interest rates; Crude oil, gasoline, heating oil: softness in current rallies may portend the most significant pause in the energy rally in the past 5 years. |
