The Bear Hibernates

Fellow bears,

I wouldn't blame you if you think this market commentary series have ceased.

Having said numerous times about how the market might behave through the

end of the decade, there really isn't a whole lot left to say regarding the market.

Plus, all of my market commentary websites are offline now. This series seems

to come out only once or twice a year now.

I could say what I think the market might behave in an even longer timespan,

but what use would that have? What I like to reiterate is that I think market

bubbles will reappear, time and again, because of human greed and intrinsic

market dynamics. I have speculated where the next bubbles might be:

China, gold, biotech, etc. I have also discussed the tendency of such bubbles

to start forming in the ashes of a previous bubble, typically during the 3rd year of

a decade, and gradually mature over the rest of the decade and finally burst.

First China. We already witnessed the mini-bubble in Chinese internet stocks

during the last year, which is now quickly bursting. Didn't we all wish we had

bought NTES when it was 50 cents. Don't blame yourself if you didn't. I didn't

either. Because it was risky.

The rest of the China bubble, however, is likely to continue to develop over the

rest of the decade, and the bubble will be located within China per se. The gold

rush to China has already begun. I can't say for sure whether the China bubble

will burst at 2010 or 2015. Afterward China will enter an era of negative growth

as a demographic consequence of its one-child policy decades ago.

Now Gold. I think gold still has potential to compete with China to be the next

bubble, as a continuing reaction to the worsening US economy. The decline of

the US economy, by the way, hasn't even started. The real test will be when the

baby boomers starts to drop out of the work force and have to rely on the next

generation to feed them.

Whether both bubbles (gold and China) will materialize is hard to say, but at

least one of them is likely. Supposed Gold is in the formative years of a decade

long bubble, now look back to 1993 to see where Nasdaq was in its comparative

stage. Nasdaq went on to increase 400+% from its 1993 levels. A similar bubble

developing on gold could put it north of $2000/ounce. Whether or not gold will

reach such bubbly levels, it's for sure that it still has upside potential.

Nonetheless, Gold has spent many many years in the $400 neighborhood during

the last two decades, and it's likely to meet resistance at these levels on its way

up. At this point, it would be healthy for gold to consolidate the gains from its recent

run-up from $260 to $400, perhaps sending it back to the $340 neighborhood, but

not to go below $300-310.

Nasdaq. Our old friend Nasdaq is back, testing the 2000 point resistance level.

Bouncing back down from this level, a preliminary support should be found at 1700,

with secondary support around 1500. Bouncing up from either support, our hope of it

going back to 2600 is still intact. If 1500 doesn't hold, then its 1200 or lower.

Babyboomer Retirement. Make no mistake, all life-sustaining materials are

perishable, and you can't store any of them to be used later in retirement. Ok, you

could save some money, and you can use that money to buy what you need during

retirement from the next generation. But if there are fewer bodies in the next generation

to sell those services to you, and more people in your generation in need of those

services, you can see how the supply-and-demand situation is going to be. As

they say in China, "have children, in case of old age". That will still be true even

after retirement has been socialized.

The market is a scam and a fraud, perpetrated by the financial elites on the masses,

who will buy at the top and sell at the bottom, and they knew it. (Well, if you are part of the

elite, congratulations. It's brilliant.)

Ya-Gui Wei
11/8/2003.