LiveRocket Week 22 Performance: Up 3.8%

How to tell if it’s a bubble: GDP goes from 5.6% to 0.6% within 1 year.
I was dead right in my prediction this week regarding the Fed. They don’t care about saving housing. They do care about inflation. They are secretly panicked about the dollar: Kuwait is another country leaving the dollar.

The implications of a weak dollar is inflation for the US on imports (oil especially).

There are several ways to spark interest in the dollar:
1. Scarcity – reduce the T-bill sales and/or buyback existing ones. This is not possible with a budget deficit AND an ongoing $100B annual Iraq war tab.
2. Boost value – The trade deficit, net oil, is a problem. The nature of global trade is that US companies are manufacturing outside of the US. So US control of the global economy is in fact strong, but the measurement of trade is limited to goods/services that cross borders. Ford is making cars outside the US and doing a decent business, but it is all offshore so it doesn’t get included. In other words, US global economic strength is bigger than ever, but the US based economy is much softer.
A cheaper dollar helps to boost exports, so that’s good. In essence, exchange rate fluctuations tend to work themselves out over time.
3. Raise interest rates – this has immediate impact. And higher rates stifle inflation. But they also tend to slow the economy.

The key issue here is that the US is no longer in charge of the global economy. China, India and the EU are players with impact. This was inevitable.
The result is that the US is in a big bind. It can no longer turn a dial or pull a lever and the US economy is managed. Global demand for oil, for example, is driving prices up and no monetary games will change that. The US is facing inflationary pressures while the economy is slowing down. Raising interest rates will stop inflation (drops import prices, throttles demand), but it will slow the economy at a time when the economy is already slowing.
It’s a trade off between growth and inflation. And there is really nothing the US can do to stop inflation. Unless the economy slows and demand slows.

This bind is called stagflation. We are going there but it will be a good 9 months before this materializes. Stagflation is the hangover to our 15 year party. What will make this version interesting will be the US ability to export to a hungry global economy.

I like wheat, btw. With all this ethanol stupidity, farmers are planting less wheat.
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We did ok for a short week.

HIGH TECH
AMX – Up 6% and hit a new high.
CTSH – Up 3.2%. An interesting reversal. CTSH has made to the latest US based Business Week magazine's list of the world's 100 hot growth companies with significant growth potential. That’s what I said, and now that it’s official – maybe we’ll be moving back up.
NUAN – Up 3.4%. the Wall Street Journal did a big article on voice recognition, mentioning Microsoft and Google. Both MS and Google rely on NUAN.
PWR – Up 5.8%. No news
TRID– Up 2.6%. Floating with the market.
UCTT – Up ~7%. No news. I hope that my prediction is correct and it is going to repeat last quarter: 50% growth in one quarter. It was actually up another 3% today before pulling back

OIL SERVICES/EQUIPMENT
Still incredibly undervalued
ATW – Up 3.5%. So much for missing earnings.
CLB – Up 3.6%. Coming back from that downgrade.
ESV – Up 3% hit a new high
MDR – Up 6.6%. Another new high. More contracts.

BIOTECH
DIGE – Up 2.6%.
HOLX – Up 3.7% on strong volume. I was going to leave but held back a bit. Glad I did
IMA – Up 10.4%. I’m really glad we waited out that Biosite bid. IMA hit a new 52 week high.

OTHER
KSU – Up 6% and a new 52 week high.
OCN – Up 1.6% a little bit each week.
PCP – Up 2.2%. Pulled back 2% after hitting a new high Friday. Lots of volume.
TIE – Flat. Ridiculous now. ATI & RTI both up 6%~10%.