Workers of the World Unite!

By on August 2, 2006

Originally published in May 1997:

The market is relentless in its advance, leaving all the bears (the few left) behind in its wake. What we are alive to witness is a huge wave of money; money generated from a booming worldwide economy; money being stashed for future retirements; money making its way to the only logical place to put money…in equities…or in other words, ownership in vibrant, wealth creating companies. We are alive to witness an era of overperformance of equities that could last another 10 years, possibly a couple more years, but not many more. No one will ring the bell and pronounce the end of the bull market, but based on an analysis of the facts, the era of overperformance appears to be far from reaching its conclusion. This is the bull market of our generation…once it’s finished, the likes of it will probably not be repeated in our lifetimes. Sadly, many will miss out on this opportunity to make money hand over fist, or worse, jump in near the end and lose a large chunk of their capital. There is no getting around this. However, a prudent, lifelong, unwavering strategy can lessen the chance of the end of the bull market destroying investor’s dreams.

Workers of the World Unite!

In the past (mainly prior to 1800), many have viewed the working class of people as powerless to alter their destiny. They were considered the poor, huddling masses the property owners exploited. The owners and bosses lived in comfort due to the labors of the working peasants. When you look at CEO salaries today you may think that things really haven’t changed that much. However, workers today can take advantage of a tremendous opportunity. Workers can now slowly transfer themselves into the class of the owners. It has been possible in the last 200 years for workers to control their own destiny by purchasing shares in companies.

Technological innovations are occurring at a rapid pace. As manual labor is supplanted by robots and machines at an ever increasing rate, it is important that working people save and invest their money. Cheap foreign labor is competing with our own, causing blue collar wages to wither. The only way workers (both blue collar and white collar) can protect themselves against the risk of job loss and wage stagnation is to become an owner and reap the rewards of innovations and improving efficiencies. Those persons who hold non-intellectual jobs without investing anything in equities are basically standing still. They are susceptible to the following risks; 1) wages don’t keep up with inflation, or 2) the loss of their jobs.

Much of the population has been brainwashed into believing the key to happiness is spending their entire paycheck as soon as they get it. This behavior limits options. Those who follow this line of thinking have much less choice in what they do with their work and play time. Workers without self discipline become, in essence, slaves to the system. Human frailties and susceptibility to peer pressure contribute to the stratification of society not being that much different than it was 200 years ago. However, people do have the ability to break this cycle of dependency. Unfortunately, few take advantage of the opportunity since it takes a little sacrifice like foregoing the new car or the Nike shoes.

Sell Signal

The Tactical Timing System issued a sell signal on 6/13/97. To comply with the system, the lowest relative strength stocks over the past year were sold to approach the following allocations:

Aggressive Portfolio:

75% Equities

25% Cash

Coachmen Industries (COA) and Templeton Dragon Fund (TDF) were sold which brought the Aggressive Portfolio within a couple of percentage points of the above allocation.

Conservative Portfolio:

55% Equities

45% Cash

Mylan Labs (MYL), Fleetwood Enterprises (FLE), and Clayton Homes (CMH) were sold to reach the recommended allocation.

As a new feature of this site, the latest signal will be published on the home page at http://members.aol.com/stocksystm as soon as it occurs.

Portfolio Updates

Royal Caribbean Cruises Ltd. (NYSE: RCL; 34 15/16), held in the aggressive portfolio, recently offered to purchase privately held Celebrity Cruise Lines for $500 million. Initially, this gave RCL a boost as the stock price vaulted over 10% after the announcement. However, bad news hit when Carnival Corp. (NYSE: CCL; 41 1/2), held in the conservative portfolio, started a bidding war by offering slightly more than RCL for Celebrity. This caused both stocks to weaken. All I can hope for is that the managements of both companies do not get carried away and let egos cause them to pay too high of a price for Celebrity. The cruise line industry is dominated by CCL, RCL and Princess Cruises. These three companies are the only profitable players in this industry so some consolidation is to be expected.

On June 23, Novellus Systems, Inc. (NASDAQ/NMS: NVLS; 86 3/8), held in the aggressive portfolio, announced that it has filed suit against much larger Applied Materials, Inc. (AMAT), for infringement of several patents owned by NVLS. This is apparently a retaliatory move against AMAT for a suit they filed and recently won against NVLS.

Keane, Inc. (AMEX: KEA; 52), held in the aggressive portfolio, is a leading software services firm and provider of year 2000 compliance solutions. Recently management announced KEA won a $14.4 million year 2000 compliance contract with the state of Indiana to prepare the systems of 44 of its agencies to operate in the new century. KEA also announced recently that it has signed a definitive agreement with Microsoft under which Microsoft will contract its Tucson support facility to KEA. KEA will provide help desk technical support by phone to several corporate customers, including Microsoft. “The new Tucson facility further enhances Keane’s strategic commitment to its rapidly growing help desk technical support business,” said Tom Rossman, vice president of KEA. “The center is designed to meet this growth and will benefit existing customers by providing a full backup capability with our Seattle facility.” KEA is a $550 million application development, outsourcing and integration services firm headquartered in Boston, Massachusetts. More information is available at http://www.keane.com.

Recommended Allocations

Aggressive portfolios: 75% equities, 25% cash.

Conservative portfolios: 55% equities, 45% cash.

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