I am looking at the monthly chart of the Relative Strength between
$SGX and $SVX using composites.

Growth and Value both do better when Growth does better.

I have previously developed the Growth-Value RS Oscillator (code not
included in this message) to reflect the Relative Strength of the
S&P Barra Growth ($SGX) and S&P Barra Value ($SVX) indices. It
certainly adds to my ability to track the stock market.

A buy signal occurs when the close price line penetrates zero to the
upside, as it did on October 2002. A sell occurs when the close
price line penetrates zero to the downside, as it did on March 2004.

A sell signal occurred on September 2000 following a market top of
972.11 which occurred on March 24 2000, precedent to the buy signal
which occurred on October 2002 following a market bottom of 400.96
which occurred on July 24, 2002.

Combining the indicators signals with a valid setup, I would be
still long on Value stocks from October 2002.

Right now, from a long-term (weekly) perspective, it seems like
Growth is just beginning to outperforming Value and from an ultra
long-term (monthly) perspective, Value is outperforming Growth. But
the weekly outlook is on hold right now. Have to go with the
monthly outlook.

The indicator is based on the observation that forms the basis of
this strategy that the markets are at their best when Growth stocks
outperform Value stocks. Of course when Value stocks outperform
there may still be gains to be made. However, when Growth
outperforms, the gains made by Value stocks are usually better than
they are when Value stocks lead the pack. To clarify, assume the
Value is leading and is generating 10% annually. When Growth starts
to lead, Growth stocks may generate a 20% annual return, but Value
stocks may actually produce as much as 15% -- more than they
generated when they were leading.

The more important point is that there is always "Value" to be found
in stocks regardless of whether the markets are at its best or not,
but can't say the same for the "Growth and Momentum" strategy, so a
caution is warranted.

From October 2002 to June 2003, Growth was outperforming Value.
From July 2003 onwards, Value is outperforming Growth.

This indicates that the markets are not at its best from July 2003
onwards. It is not a good idea to go for any more rate increases on
the US $. It may not be in the best intersts of the stock market.
That is the signal the stock market is giving the Fed.

Currently, it seems that a lot of small-cap companies are carrying
way too much long-term debt/Equity (most Recent Quarter).  Time for
some put options on the SPY (SPYRP).

The Fed Funds rate even though still bullish indicates a top. It
doesn't matter, if one is well diversified in Value Stocks, the
Canadian $, British Pound and the Swiss Franc. Flat on Euro,
US $ and the Aussie $.  The Japanese Yen has confirmed a long-term
reversal sell signal.

There's a very simple way of letting the free market decide how much
money there should be to perfectly match its supply with the demand
for it -- or to put it another way, how much liquidity should be
available to the economy without triggering either inflation or
deflation. That would be for the Fed to announce that it will forget
about CPI, unemployment, consumer confidence, productivity,
the "wealth effect," and all the other claptrap that seems to go in
and out of fashion in their decision-making process. Instead the Fed
would simply target price stability. And the simplest and most
effective way to do that would be to target a single price that
would stand as a proxy for all other prices: the price of gold.

Gold which surged from April 19, 2005 seems to have temporarily halted
its advance. It may be just a pause.

Alan Greenspan's Solution to Market Volatility: The Gold Standard 
by Don Luskin  (April 26, 2001)

Summary: There's only one surefire way for the Fed to match the supply of money with
the demand for it: target the price of gold.

Neither the size nor the rate of growth of the money supply are sufficient
to tell you whether there's enough liquidity in the economy. You have to consider
the demand for money, too -- not just the supply of money.

Think of it like trying to grow a vegetable garden. You may have what you consider
an awful lot of water. And it may be enough if you're trying to grow carrots. But
maybe it's not enough if you're trying to grow cantaloupes. It might be enough for
either of them in the spring, but neither of them in the summer. Or it may be too much.
It's all a matter of matching supply and demand at any given point in time -- and the
right match changes every day.

The fundamental challenge for Alan Greenspan or any central banker is to match the
supply of money with the demand for money. Too much supply in relation to demand, and
you get inflation. Too little supply in relation to demand, and you get deflation. It's
a dangerous challenge: if Greenspan makes a significant error in either direction, and
doesn't correct it quickly, he can create monetary havoc that reverberates through the
economy for years. Sadly, the Federal Reserve has a long and inglorious history of doing
just that, as the long-term record of violent inflationary and deflationary episodes all
too eloquently attests.

Free markets have an easy time matching supply and demand. They do it every day in
billions of transactions across millions of goods, services, and securities. But government
agencies aren't so good at it. The 20th century's dozens of failed experiments with
centralized economic planning prove that. Yet in America, the world's most productive
and most free economy, we let a committee of political appointees known as the Federal
Reserve decide unilaterally how much money there should be. There's no reason to think
they will be any better at it than the Soviet Union's farm bureau was at deciding how many
potatoes there should be.

For millennia, gold has been money. When the paper money issued by governments has been
tied to gold, that paper money has held its value. When gold was abandoned, that money
always lost its value. Just look what has happened to the US dollar since Richard Nixon
severed its last links to gold in 1971.

When the central bank prints too much paper money -- or provides too
much liquidity to the economy -- the price of gold denominated in
that paper money goes up. That's inflation. When the central bank
sees the price of gold rising, all it has to do is stop printing
money -- or withdraw liquidity -- until the price of gold goes back
down. It works just the same for deflation, but in reverse. If the
price of gold drops, the central bank prints more money -- or adds
liquidity.

All the Fed has to do is pick a gold price. $430 is a nice round number. And if the Fed
just followed this simple regimen, then it would be the free market that determined the
right amount of liquidity: by setting the price of gold.

And the Fed wouldn't have to hold a single ounce of gold in its vaults to use this system.
They'd simply use gold's price as a signal to add or withdraw liquidity through operations
in the bond markets, much the same as it employs today. It's that easy. The Fed could fire
all those economists and just get by with a single subscription to The Wall Street Journal
to see what the gold price is every day. They could probably even get the gold price free
from some website, and save the taxpayers the cost of that subscription.

Gold has been so thoroughly discredited over the last thirty years by the modern generation
of academic economists that I almost hesitate to write about it. But I've never been afraid
to go against the conventional wisdom, and I'm not about to start now.

"This is gold, Mr. Bond. All my life I have been in love with its color, its brilliance, its
divine heaviness." So said Auric Goldfinger to James Bond.

But gold has more credible advocates, as well -- even if the best of them have been driven
into deep cover. Consider this passionate pro-gold view:

"The abandonment of the gold standard made it possible for the welfare statists to use the
banking system as a means of unlimited expansion of credit... The law of supply and demand
is not to be conned. As the supply of money (of claims) increases relative to the supply of
tangible assets in the economy, prices must eventually rise... In the absence of the gold
standard, there is no way to protect savings from confiscation through inflation. There is
no safe store of value."

Who do you think wrote that? 

Some obscure 19th century Austrian economist? Or some crazy goldbug survivalist? Hardly.
Those words were written in 1966 by none other than Alan Greenspan. You can read Greenspan's
whole tribute to gold in Capitalism: The Unknown Ideal. 

Scary bonds are getting scarier.

Crude Oil, Unleaded gasoline, Heating Oil and the Natural Gas are
hot, right now. Anybody who were long just before it turned up would
have made a killing by now. When the public finally catches on, it
would be time to dump them.

Thwarting America's Energy Needs
by Alan Caruba (February 17, 2005)

Summary: The world has plenty of oil, enough says the US Geological
Survey to last for at least the next several hundred years or
longer.

http://www.capmag.com/article.asp?id=4140

The Real Threat to our Energy Supplies
by Eric Daniels (October 8, 2002)

Summary: Environmentalists, who cry that we can't produce enough
oil, actually regard less production as morally imperative.

http://www.capmag.com/article.asp?id=1956

Dispelling Some Crude Myths About Oil's Real Impact
by Richard Salsman, CFA (August 10, 2004)

Summary: Economists are beginning to panic about the recent run-up
in the oil price and its likely future impact on stock prices,
profits and output in the U.S. But there's no reason to panic. A
fast-rising oil price is no necessary impediment to forthcoming
growth.

http://www.capmag.com/article.asp?id=3851

A Free Market Will Solve America's Energy Problems
by Andrew Bernstein (March 23, 2003)

Summary: If the U.S. government establishes freedom in the energy
industry by removing environmental restrictions, we will witness a
significant increase in domestic production of oil, natural gas and
electricity.

http://www.capmag.com/article.asp?id=2561

rgds, Pal
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