We are proud to announce the unveiling of VectorVest U.K. at the Money Show in London, England today. The product was warmly received by the several thousand investors in attendance. VectorVest U.K. will be available to you starting Sunday, October 1, 2006 for thirty days at no charge. This product will join our other international products, VectorVest Canada and VectorVest Europe and will be priced accordingly at $49.00 USD per month or $545.00 USD per year. For those of you who are current subscribers to VectorVest OnLine, once the trial period has ended on October 31, 2006, you may receive this outstanding product at the low rate of $20.00 USD per month or $199.00 USD per year. Simply log on to www.vectorvest.com, click on the members button, enter your user name and password and select VectorVest U.K. Try it, you'll like it! VectorVest U.K.!
THE GOLDILOCKS SCENARIO.
Last week, we were pleased to learn that the Investment Climate had attained the exalted status of a Case 2 Bull Market Scenario. This scenario is also called the "Goldilocks" scenario because the economy is growing just fast enough to permit robust earnings growth, but not so fast as to cause inflation and interest rates to increase. In this scenario, stock prices are expected to soar.
The current situation also is likened to a "Soft Landing" because the economy is slowing down due to a series of seventeen consecutive interest rate increases by the Federal Reserve Board. All is not peaches and cream, however. The concern being that the economy may decelerate to negative growth and a "Hard Landing" instead of gliding gracefully to a lower rate of steady growth. Most investors will, of course, be anxiously watching and analyzing the daily flow of events and economic reports to see how this plays out. VectorVest, however, does not get caught up in this game. We believe that the consequences of all events are manifested in economic terms by changes in earnings, inflation and interest rates. So that's what we track.
Given the paradigm that stock values rise and fall in accordance with the direction of earnings, inflation and interest rates, we constructed a matrix of stock market scenarios which we call the "Truth Chart." This chart was first presented on March 21, 2003 and is reproduced here for your convenience.
|
| 1. | Up | Up | Down | Up | Bull Market Begins |
| 2. | Up | Down | Down | Up | Bull Market Thrives |
| 3. | Up | Down | Up | Up | Rarely Happens |
| 4. | Up | Up | Up | Up | Bull Market Ends |
| 5. | Down | Up | Up | Down | Bear Market Begins |
| 6. | Down | Down | Up | Down | Rarely Happens |
| 7. | Down | Down | Down | Down | Bear Market Prevails |
| 8. | Down | Up | Down | Down | Bear Market Ends |
There is a story to be told with each scenario and we tend to tell them as they occur. As noted in my essay of 03/21/03, "the Case (2) scenario reflects the best of all worlds, a rare combination of a strong economy with rising earnings and falling inflation and interest rates. This is the so called "Goldilocks" scenario. It prevailed from January 1995 to October 1997." 1995 was a great year for the stock market, 1996 was only so, so, and 1997 was another great year until October came along. In any event, 21 months is a long time for this scenario to exist. Can it happen again?
There's really no reason why it can't. The housing and automotive slow-downs pose the largest threats to the economy and Dr. Bernanke knows it. He doesn't want to see those markets or the economy go down the tube, so he'll be lowering interest rates soon. In fact, he has already begun to emulate Dr. Greenspan's actions of late 1994, early 1995.
After brutalizing the market with a series of interest rate increases in 1994, Dr. Greenspan paused for several months beginning in December. Throughout this period, long-term interest rates were headed down lower, there was talk of a "Soft Landing" and stock prices began to soar. On June 2, 1995, stocks were so undervalued I wrote an essay called "The VectorVest Rocket." Finally, in July, Dr. Greenspan moved to lower interest rates by a "modest," as he termed it, quarter point. Indeed, The Fed had begun to stimulate the economy before it crashed and the impossible dream of a "Soft Landing" was due to come true. Inflation was no problem, and interest rates and earnings were working together to push stock values higher. The Case 2 scenario was in overdrive and investors were enjoying the fruits of The Goldilocks Scenario.
