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SOMBER SEPTEMBER OBSERVATIONS
9-10-2003 Lunar Alert
Full Moon
Full Moon, Wednesday 10 September.


Moon Phase Calendar
9-9-2003 Housing Bubble Alert
"...America is now in the midst of a property bubble. I havenít come to that conclusion lightly. Two piece of evidence have pushed me over the edge: First, the sleuths at The Economist report that inflation-adjusted US house prices have "risen more in real terms since 1997 than in any previous five year period since 1945." Second, thereís an excellent study by Dean Baker of the Center for Economic and Policy Research (CEPR) that comes up with a perfectly reasonable way of assessing whether this surge in house prices qualifies as a bubble, or not. The CEPR test hinges on the relationship between housing rents -- the intrinsic returns on the asset -- and market-clearing home prices. Baker finds that inflation-adjusted house prices have risen by about 30% since 1995 -- literally three times the cumulative 10% rise in the real rental index over that same period. In fact, this gap between house-price and rental inflation has never been wider in the post-1975 history of these data.

If thatís not a bubble, I donít know what is.

- Stephen Roach, Morgan Stanley
9-3-2003Peace

War is Over!

War is Over!
9-2-2003Life in Wartime
"Fascism should more appropriately be called corporatism because it is a merger of state and corporate power."
                     -- Benito Mussolini

"Think of the press as a great keyboard on which the government can play."
                     -- Joseph Goebbels,
                         Nazi Propaganda Minister.

More thoughts on this war.

* * *
9-1-2003Reflection                                                                                                                   
Channeling Orwell They say that patriotism is the last refuge
To which a scoundrel clings.
Steal a little and they throw you in jail,
Steal a lot and they make you king.

— Bob Dylan
9-1-2002Rule 1: Don't Panic.   Rule 2: Panic First!
"...We believe that as the next market downleg puts the average fund holder below the breakeven point, panic selling is a strong possibility. All past bear markets have ended only after investors disgorged stocks "en masse", and we see no reason why this time will be an exception. In the end fear overwhelms all other factors, and the need for a good night's sleep takes precedence over everything else."

- COMSTOCK PARTNERS: September, 2002
8-26-2002Revision In Progress


This book, first published in 1994, is great. It was ahead of its time, and is unfortunately now out of print. But it explains how the mutual fund industry actually CREATED the bubble. When large groups of people, many of whom had been individual investors, sent their money off to 'professionals,' they created a small group of people who were actually doing all the trading. Instead of having millions of individuals with different points of view trading stocks, what we ended up with was a few thousand acting in almost the same way. It's a joke, for example, to that the mainstream media is talking about how unwitting individual investors were bilked by Enron and WorldCom. What are they talking about? Only a few individual investors owned those stocks. Instead, they were held largely by mutual funds and other institutional investors who were 'professionals' and had promised to have the knowledge to PROTECT the small investor from such nonsense.

Tell it like it is, Don!
***
Email the author: Don Christensen
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