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The Perspective Objective


The dollar tells the overnight tale!


Good morning and welcome back to the edge of your seat. Our daily movie continues today and the plot is thickening with each calculated step through Baghdad. The reviews, thus far, have been overwhelmingly optimistic and despite the noise from the cheap seats, the critics have overlooked the abysmal economic previews and closing first quarter credits. Will the Minx receive two thumbs up for her compelling performance or will the rally once action prove to be a painful science fiction? The curtain is about to lift so settle in and find your seats, Minyans -- it promises to be another nail-biter!

Perception is reality in the marketplace and that's never been more evident than at this juncture. Yes, the economy has seemingly stalled. Yes, business fundamentals are struggling at best. Yes, there is more risk to global stability than during any other time in recent history. While some view this as writing on an ominous wall, however, others see those very same concerns as a massively bullish wall of worry. Which picture makes dollars and cents? It all depends on your perspective.

Do you remember the Seinfeld episode when Mr. Pipp couldn't see the image in the 3-D picture? No matter how hard he stared, the lines blurred into a frustrating and unreadable mess. When he stepped back and changed his perspective, however, the image crystallized and he could clearly see what he had been missing all along. Fast forward to April 7, 2003. With the media blitz shaping the collective psychology and the green screens sweetly singing sexy sirens, investors are being similarly entranced by the latest promise of profitability.

As it stands, it (literally) paid to play the media musical chairs to the upside as each dip has been bought since the war began. Conventional wisdom dictates that this will continue until Baghdad is secured and war is "over." The wildcard, naturally, is investor perception and the ability of the market to follow through with the "best case." When will (the lack of) earnings matter? When will the economic malaise stop being given the benefit of the doubt? What happens if the transition to the new, democratic Iraq isn't as smooth as most predict? And what if Iraq proves to be more of a problem than a solution?

I've been consistent with my belief that the excess created by the stock market bubble is independent of geopolitical developments and will take time to deflate. By almost every historical measure, and despite the massive carnage we've witnessed in equities, valuations remain far from trough levels and overcapacity abounds. While that surely matters over the course of time, the daily nuances remain focused on one thing and one thing only: war. As such, it might be helpful if we take a step back and see if we can identify a disconnect between perception and reality.

The daily jiggles and wiggles are growing increasingly difficult to "see" but if you pull our charts out, the lines will smooth considerably. For instance, a one-year chart of the S&P illustrates the defined downtrend since last summer. Yes, there have been plenty of blips and dips but, when it's all said and done, the pattern of lower highs is firmly in tact. Pull that same chart out to a ten-year graph and you'll see what looks like a rather symmetrical mountain. If function holds to form, base camp will reside somewhere in the "four handle" when the fog eventually lifts and we find our way to the other side.

I'm not bringing these points up to scare you -- quite the contrary -- I simply want you to see the risks if you choose to hike the hill. It would be inconsistent for me to discuss the big picture and completely ignore the little pictures. However, many Minyans aren't active traders and a little perspective can go a long way. While the path of least resistance surely seems higher for the time being, it's precisely those times that often lead to the best opportunities to make sales. Ask yourself some tough questions and be honest in your response. After all, life isn't a dress rehearsal and you're the star in your own movie.

Good luck today -- and break a leg!

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