Here’s How I See The Scenario Playing Out

• March 17, 2003
• Peter Navarro

Market
Trend: Down

Market
Outlook: Highly volatile

Sector Watch:
Long cash, short housing

Macroplay of the Week:
House of Cards
(
CTX |
Quote |
Chart |
News |
PowerRating)

The Broad Market Outlook:

The moment of truth arrives on
Monday with a thud and a scud for the markets. All but the bravest, smartest,
and most foolish will be in cash. Fortunes will be made and lost in a few days
or weeks.
If you have any margin exposure
whatsoever, you are an idiot. If you don’t and you are long, there is no way
out of the market now, without pain.

We see a bearish sharp contraction
as the war begins, a bullish burst if it goes well, and at some point the fading
of the rally as the economic realities of flagging consumer confidence, stagnant
business investment, a time delay drag from the oil price shock, deficit
spending, and soft exports to Europe overtake any real hope for a real bull to
surface before 2004. So sell any explosive rally, and think about hugging the
short side thereafter and until further notice.  We certainly are.

The Week’s Macro Data Market Movers:

The Macro Economic Calendar

 

 

 

 

 

 

 

War news dominates all that is economic. But watch
for the housing starts data to signal the beginning of the end for the housing
sector.The Fed will keep its mouth shut in a week of war worries but also watch
for a hot CPI to signal possible stagflationary pressures. (Only the core
matters here, not the non-core which includes energy.)

Macroplay of the Week: House of Cards (courtesy, David Aloyan)

Building a SHORT position in Centex
(
CTX |
Quote |
Chart |
News |
PowerRating) 

This stock took a hit about a week ago on news of a slowdown in mortgage
applications. It has exposure to the housing and mortgage markets (both which
will slow on a rise in interest rates) which is a two-edged sword. The media
touts the low P/E s of these type stocks, but a look at the cash flow statements
tell a not-so-cheery story—