Saturday, July 05, 2003

7/05/03 The New Order Is The Fireworks Display

Niccolo Machiavelli: "There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things."

Yesterday Americans watched their local fireworks display from their favorite vantage point. The President was weighing sending troops to Liberia. Unfortunately, our nation was focused in the wrong direction. The real pyrotechnics are taking place on the Indonesian island of Bali. You won't find shooting rockets and sparklers. It's the annual gathering of officials from the EU, China, Japan, and eight other Asian countries. The discussion centers on the macro-economic policy between these nations. The headlines will consist of the concerted fight against poverty and removing obstacles to trade. The real item is the yuan. That's the fireworks. That's the new order of things. Japanese Finance Minister Masajuro Shiokawa said "I have no plans to bring up the issue of revaluation directly." Naturally. It will be discussed indirectly over a ceremonial tea gathering. The fact is there are several Asian countries concerned with the impact of the falling dollar on their local currencies. If I were in their shoes, I'd be concerned as well. Kim Jin-Pyo, South Korea's minister of finance and economy, said "the European countries seem to be of the view that since the U.S. has a huge trade deficit and many countries in East Asia and in particular China has a large share of that, there should be or there could be a cautious correction of that imbalance." One European delegate mentioned the need for an appreciation of the yuan during the Bali meeting. Several economists have noted that a rise in currencies in Asia would cut the U.S. current account deficit, and that a stronger yuan would have a greater impact on the U.S. deficit than the euro's rise against the dollar. Since 1994, China's central bank has kept the yuan fixed at 8.28 to the U.S. dollar. The yuan is allowed to fluctuate only a fraction of 1%. China's state newspaper, the 21st Century Business Herald, reported on June 30 that China's central bank has had to buy huge amounts of dollars every day to stabilize the yuan. The chances of that continuing for much longer, in my view, are slim. It is more likely that the Chinese government will increase the trading range from 1% to at least 3%, and test the waters, so to speak.
The U.S. government believes the current yuan peg rate against the dollar provided China with an unfair export advantage. China has accumulated about $350 billion in foreign reserves. My belief is China's success has been built on low manufacturing costs thru low labor and material costs and not the yuan peg rate to the dollar. The fireworks from China are in the beginning stages. The display won't be pretty. It will be the real deal- the real shock and awe.

A big deal has been made of the recent change in the tax treatment of dividends. At the time of its announcement, I mentioned I thought the impact would be a minor plus. In June, 96 companies boosted their dividends up from 87 in June 2002. Approximately 95% of companies declaring dividends in June made no change in their payouts, and thus continued the same payout rate as in the prior quarter. The last time I looked dividends were paid out of earnings and not out of changes in tax policy.

WalMart now employs more than 300,000 people outside the United States, and that's more than any company in the private sector employs in the United States. The company plans to open about 130 new stores overseas this year. The U.S. economy accounts for 37% of the world's GDP. "That leaves 63% for our growth strategy," John Menzer, head of WalMart's international operations, said at the company's recent annual meeting.

Jerry Springer was, at one time, the mayor of Cincinnati. He is contemplating a run for the U.S. Senate in Ohio. He would be challenging Republican George Voinovich. Should he run, the unemployment rolls would increase. He currently employs 60 people on his show.

Friday, July 04, 2003

7/04/03 Polishing The Headstone At The Cemetery

There are many constants in my life. One is being asked why I care so deeply about others and the welfare of this nation. Most would state a single individual cannot have an impact, and believing otherwise is a futile effort. I don't share that view and never have and I never will. I feel the toll of those who have died to preserve my liberties. I don't watch fireworks. I look at the headstones in cemeteries and watch the loving and grieving faces of those left behind. They polish the headstone and hopefully there is some resulting comfort.

Today is Independence Day. I ask myself how can there be independence when there are at least 10 million Americans out of work and looking for work. That excludes the three million Americans who have given up trying to find a job. There are two million Americans who have been unemployed for 27 weeks or more. The average jobless duration is now 20 weeks. That is a 20 year high. The economy has lost almost one million jobs in the last 90 days. About 3.8 million Americans are collecting unemployment benefits, and that is a 20 year high. Those with jobs have an average work week of 33.7 hours and in the factory at 40.2 hours. It's tough to make ends meet with those limited hours. Overtime hours are down to 4 hours per week. An index of help-wanted advertising in major newspapers last month was at its lowest level in 41 years, and the most recent Manpower survey indicates hiring plans for the third quarter are at the lowest level in 12 years. It's tough to be independent under these conditions. How independent can one be when health insurance cannot be afforded? There are almost 45 million Americans who are in this situation. On this fourth of July I am reminded by the words of Teddy Roosevelt: "A man who is good enough to shed his blood for his country is good enough to be given a square deal afterward. More than that no man is entitled to, and less than that no man shall have." I know our veterans are not being provided a square deal when it comes to healthcare.

To achieve a competitive advantage in this information age it is necessary to have the skill in utilizing the information and then its application in sifting thru baloney to get to the prime cuts and the tidbits of knowledge capital found in the marrow bones. I am happy to report a success story in this endeavor. Adam Monk has achieved such success as head of the Chicago Sun-Times Monkey Business stock selection. Adam is a 31 year old cebus monkey from Brazil, and he recorded a gain of 19% in the five stocks he selected for the Chicago Sun Times early in 2003. The paper reports that Adam is working on a new line of monkey mutual funds. He made his stock picks by stabbing a pen at the Chicago Sun Times stock tables. Hopefully, this accomplishment will provide a meal for a lifetime for one of my email cohorts. There are many avenues available for the successful investor. Richard Chu, an SG Cown technology analyst states " tech investing is like jumping out of a window and hoping that someone will catch you." Hope springs eternal.

It is appropriate that I mention the new exhibit In Philadelphia. There is not a new replica of the Liberty Bell. It is a permanent exhibit on the money and banking system at the Philadelphia Federal Reserve and it is called "Money in Motion." What caught my eye was not Greenspan at the ribbon-cutting ceremony but rather the 25 foot tower of shredded money which depicts the $100 million destroyed in an average week at the Philadelphia Federal Reserve. I feel certain that the loss in the value of the dollar over the past year comfortably exceeds that weekly $100 million destruction. Maybe they should construct a waterfall depicting the demise in the value of the dollar. It's tough for a country to run massive budget and trade deficits and retain its independence. I think Thomas Jefferson would second that thought.

The other day I mentioned placing some money in China's yuan. Yesterday Goldman Sachs' Fred Hu said China's currency is undervalued by as much as 15% and thought the Chinese government might allow the yuan to appreciate before the end of the year. Whether it's in 2003 or 2004 this upward revaluation will take place. China is on its way to becoming the superpower of the 21st century. We had a big part in that. We run a $100 billion plus trade account deficit with China. We are handing them the reigns of power, and with that, our independence.

This week it was reported by Cushman & Wakefield that office vacancies in San Francisco's business distict climbed to 21% and that office rents dropped to an average of $27.72 per sq ft compared with $32.64 a year ago. That marked the 10th consecutive quarter that prices have fallen in San Francisco. Citywide there are 17 million sq ft of office space sitting empty. It reminds me of all the unused jets sitting in the Mojave.

There was an interesting study done by Runzheimer International and the Association of Corporate Travel Executives. It indicated that 40% of North American organizations have smaller travel budgets this year and that another 34% have travel budgets flat with a year ago. Importantly, 59% are making increased use of teleconferencing, Web conferencing, and video conferencing. The senior editor said she thought teleconferencing would come to be regarded as a permanent tool for doing business. I agree. The loss of business travel and its premium ticket prices could prove the long term demise of many airlines.

Siebel Sysyems cautioned that customers continue to delay making buying decisions. As a result, Siebel will have additional layoffs. Baxter International announced cutting 2500 jobs the other day. In addition to these cutbacks, I have noticed a slowdown in another area. There are less buyers to be found for 10 year U.S. treasuries, which slipped in price for the third consecutive week, the longest slide since November. Interestingly, Japan had a similar experience. The yield on 10 year Japanese treasuries have risen to their highest level since September 1999, and have more than doubled in yield since June 11.

Thursday, July 03, 2003

7/04/03 A Recap And A Peek Forward

To my original blog readers I apologize in advance, and appreciate your patience. Over the past three or four months there have been a great many new readers of this blog. Several times each day I have received requests to recap the suggestions provided over the past three years. So here goes. In May/June 2000 I turned completely negative and suggested that all securities be fully hedged or sold. I suggested the purchase of gold and Newmont Mining. About ten days after 9/11, I suggested going long to take advantage of what I believed would be a short-term rally. About one month later I recommended that those positions be sold or hedged. I did not return to a bullish stance until mid-October 2002 and recommended positions then taken to be sold or hedged prior to the new year. Other than the suggestion to buy McDonald's at 12 1/2, being negative on the takeover of Hershey's, being optimistic on the takeover of Dreyer's after a big drop from an FTC scare, and the recent selling of the J.D. Edwards $10 strike price puts, I have missed the big move in the upside since mid-March. Over the past two years I have also suggested taking positions in Pfizer, Merck, JP Morgan, Citigroup, Starbucks, Dell, Microsoft, Krispy Kreme, WalMart, Colgate, and Home Depot. All the suggestions were made at price levels significantly lower than the present. This year we eliminated our gold position at $370 per ounce and repurchased a few months later at $323 per ounce. Over the past 1 1/2 years I have been negative on the U.S. dollar and optimistic on the New Zealand ollar. That continues. About 7 weeks ago I turned highly negative on long term treasury bonds. That continues. Some weeks back I turned positive on the Nikkei about 20% below its current level. Yesterday the Nikkei had its highest volume since 1989. At one point the average almost touched 9900 before closing just above 9600. I think this is a good point to take some profits. I have been on the mark about the economy for the past 2 1/2 years and did predict the recession then and I believe we are still in a recession.

In 1998 and 1999 I turned very bullish on housing stocks and believed that the vast majority of one's portfolio should be weighted in this sector. Stocks were selling at 4 and 5 times forward looking earnings. I sold them for big gains. This year those stocks made new all time highs. The industry sold almost one million single family homes last year and a new record is expected for 2003. Mortgage rates went considerably lower than I had expected. Who would have thought there would be 1.7 million housing starts in 2002 and then again in 2003? The home improvement trend is alive and well, and that's why I had suggested adding to the Home Depot core position around $23. I am concerned for the housing sector though. Yesterday the president of the Mortgage Bankers Association said that mortgage rates had seen their lows. Troubling is the view expressed by Joe Carson, chief economist at Alliance Capita. He stated " the ratio of the market value of real estate to disposable income is at an all time high. Mortgage debt is now growing at two times the rate of growth in personal income and more than two times the rise in the value of real estate- faster than at any other period in U.S. history. This is the first cycle in history in which an increase in personal income is needed to pay for assets that have been purchased and not for assets to be purchased in the future."

Currently, I suggest hedging or selling all equity positions with the exception of the J.D. Edwards puts. I suggest continuing to hold New Zealand dollars and to nibble on China's yuan. Stay long gold. Avoid treasury bonds. Do not place your funds in U.S. money market funds where the average taxable yield has fallen to a record low 0.58 per cent. Any new thoughts will be provided, as always, in the next blog. Pundits say that we are at a turning point in the economy. The question is whether it's for the better.

John Graham, a professor at Duke's Fuqua School of Business, directs a quarterly nationwide survey of CFOs. The latest survey indicates that 20% of the CFOs say the depreciated U.S. dollar is increasing sales, but only 3 per cent say it will lead to increased capital spending or additional hiring. Among firms with foreign sales that make up at least one-fourth of their total sales, 51% say the depreciated dollar will lead to increased sales; however, even among these companies, only one in ten says the depreciated dollar wlll increase capital spending or hiring. In sum, if capital spending is on hold, if hiring is on hold, if higher mortgage rates are in the making, and if consumer cash flow fails to rise, then the current economic forecasts are mere folly and, with them, the current stock market upsurge built on a foundation of sawdust.

Wednesday, July 02, 2003

7/2/03 Scrounging For Scraps

Depending on your point of view. most pieces of information will provide some meat on the bone for a bull or a bear, as the case may be. Yesterday was no exception. The ISM June national factory gauge did rise to 49.8 from 49.4 in May; however, a number below 50 indicates a contraction in activity. The big three auto companies had an overall rise in June sales inentives. For GM the incentives were $4000 per vehicle, for Ford $3700, and for Chrysler $3500. U.S. auto sales did rise, however, 1 1/2% at GM, 6% at Chrysler, and Ford's were unchanged. However, the rise in sales were deemed disappointing given the level of incentives. By comparison, Nissan's June sales rose 22% and their incentives remained at $1500 per vehicle. It reminds me of a statement by Thomas Edison: "Results! Why, man, I have gotten a lot of results. I know several thousand things that won't work." U.S. construction spending fell an unexpected 1.7% in May. However, state and local governments cut spending by 1.5%. Therefore, the results weren't really too bad.

We should take a closer look at the ISM report. New orders were up slightly. The new backlog of orders picked up for exports. That's good. The new backlog of orders for supplier deliveries fell, and that's not a good sign. One real negative did stand out. There was a very steep decline in inventories. It might indicate a concern about the projected pick-up in the economy or it might indicate a concern about the possibility of falling prices. Either alternative doesn't bring a smile to my face. We can look at the aforementioned in a few ways. Jim Miller said "the road to success is always under construction." Maybe the pace of construction slowed in June. On the other hand, maybe Winnie had it right. Winston Churchill declared "most men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing happened yesterday." Maybe that's what happened with investors in yesterday's market. Alternatively, maybe we should shrug off the news. As Albert Einstein said, "we should take care not to make intellect our god; it has, of course, powerful muscles, but no personality." Actually, I think this market has plenty of personality. It's stubborn and often with muscles between the ears.

Personally, I wish I could stop thinking so much. It would make this market run much easier to grasp. I can't do that though. I appreciate the words of Confucius: "He who learns but does not think, is lost! He who thinks but does not learn is in great danger." I'm not looking for danger. I appreciated the limited danger in the Nikkei several weeks ago. The 20% rise has been a nice scrap.

Later this week the information on June payrolls will be released. The payrolls are expected to be flat and the unemployment rate to rise to 6.2%. In June I know U.S. employers cut 60,000 jobs. That was the fewest in 31 months, but the job cuts do continue. A year ago that number was 95,000. So there is some good news but not good enough. GNP growth is forecast to be 3.2% in the third quarter and 3.5% in the fourth quarter. From October 1, 2002 thru June 30, 2003 that growth number was about 1.4%. Going forward GNP is not going to miraculously increase by well over 100% in three months. It is not happening. You may take issue with that statement. That's ok. I walk the road Robert Frost described: "Two roads diverged in the woods, and I-- I took the one less traveled by. And that has made all the difference." You must take your own road. It's your money. Just remember the facts. Yesterday American Airlines furloughed 3100 flight attendants and Storage Networks cut 35% of its staff. That's the reality of the workplace.

The American Association of Individual Investors survey indicates 71% are bullish and 8% are bearish. 59% of investment advisors are bullish and 18% are bearish. The biggest bears of all are the insiders who continue with their selling at about four shares sold for each share purchased.

Investors might take note of Microsoft's decision to cut about 800 support staff workers in Texas and North Carolina and to add workers at the company's new campus in India. Many other tech companies have made similar moves. Microsoft employs 50,000 workers. They are looking to save money on services and having them fulfilled in India. Today Merrill Lynch raised their earnings estimate for Microsoft by five cents a share due to cost-cutting measures but not because of revenue growth.

General George Patton said " success is how high you bounce when you hit bottom." Looking in the rear view mirror, I know we hit a bottom in 1974, in 1982, and in 1987. Did we hit bottom in October 2002? Is the latest 15% S&P 500 Index run the final bounce for some time or the start of a bigger bounce? In the market success is limiting your risk and maximizing your reward. Success does not come to pigs- only to bulls or bears or sometimes both. Enjoy the scraps. Avoid getting stuffed. It's bad for the digestive system. That reminds me of something Elayne Boosler said: "When women are depressed they either eat or go shopping. Men invade another country." As Henny Youngman might say, then don't get depressed. It doesn't pay.

Before closing for the morning, I have a few final thoughts. The Maryland Pharmacy Discount Program for seniors just went into effect, and is for participants with annual incomes of up to $15,715 for an individual or $21,210 for a couple. Prescriptions are available at 65% of the state Medicaid program or a savings of about 50% off the retail price. The state is putting up $8 million which is matched by the federal government, and this will pay for the 35% of the cost that is not absorbed by the patient. We should monitor this program. It sounds promising.

Tobacco farmers are planting the smallest crop since 1874, the year Ulysses S. Grant was president. American manufacturers are buying less U.S. tobacco because, as an economist for the Agriculture Department says, they can get cheaper leaf from Zimbabwe, Brazil, and other countries. It's not just China that exports lower prices.

The U.S. has 361 ports with 5000 coastal facilities and some 10,000 ships. About 95% of international cargo to the U.S. arrives by ship. Many believe the maritime industry is our most vulnerable portion of homeland security.

California has the lowest credit rating among U.S. states. They did not pass a budget for the fiscal year which began yesterday. As such, the state was forced to freeze payments ranging from those to nursing homes to community colleges. More than $500 million in aid to schools was cut off. During Davis' first four years in office, state spending rose 33% while tax receipts rose 22%. The problem is pretty simple. The solution is not pleasant. What do you do with 37 million outstretched palms?

Tuesday, July 01, 2003

7/1/03 It Feels Great To Get On Base

Since Doubleday invented the game of baseball, there have been few great pure home run hitters: the Bambino, Hank Aaron, Jimmy Foxx, Barry Bonds, and some other select names. The point is the number is truly a dot on the list of names who have played this game over the past 100 years or so. For the rest, the object has been to get on base. The same is true in the field of investing. There have been very few consistent investors who keep hitting the ball out of the park, as it were. For the rest, it is accumulating nickles and dimes and on rare occasions quarters. The average annual gain for investors over the past 100 years has been about 9%. In the second quarter that just ended yesterday the S&P 500 Index had a gain of about 15%. It was the best showing in almost five years. The stock market's job is to anticipate the future and react accordingly. As such, the thought is by the end of 2003 business will be better, and stock prices thus moved higher. Now, maybe there will be a home run hitter out there. I'm not one of them. The historical percentages would suggest your taking some money off the table and save it for another day. We could have another barnburner in the second half. It would be smarter to be conservative. Wait for your pitch. Don't swing at a fork ball. The extent of the drop can really fool you.

The first of July generally brings stock market gains. It is a lot easier to sell into strength. Today the ISM will be forecast and many suspect it grew for the first time since February. That might touch everyone's fancy. Don't be fooled. Manufacturing and factory growth are going nowhere fast. As Ed Yardeni points out, "imports account for almost one quarter of goods transactions in the U.S. up from 14% in the late 1980s." Because of the growth in imports our trade account deficit for 2003 will be about $550 billion and China accounts for over $100 billion of that figure. China also helps to set the prices from goods manufactured in our factories, and this has resulted in little or no pricing power in the U.S. Fitch points out that over the 2000-2002 period exports from China to the U.S. grew at an average annual rate of 12%. When you combine the latter with an outsourced service industry to India and other countries, you have a recipe for increased unemployment with higher productivity from the remaining workforce. Companies, states, counties, and other municipalities will continue to cut the number of workers and will hire on a highly selective and infrequent basis. Yesterday Waste Management announced more job cuts and let 300 workers go in Houston.

There has been much good news in the housing industry. Mortgage rates have dropped to record lows, the pace of refinancing is at record highs, and prices are strong. There are pockets of weakness. The San Francisco data shows a price decline as of mid-May of 3.8%. In Santa Clara county the resale median price is down 2.2% for the first four months of 2003. The president of Foreclosures.com said "when price appreciation plateaus, people who have been using their homes as ATM machines can't do that any more. As job loss persists and markets flatten out, we'll see more defaults later this year. People will simply be unable to afford the homes they own."

No one knows when prices will plateau in the stock market. It's just a guess. I say why guess. It's much better to place historical data on your side. As Bernard Baruch said you can't get hurt taking a profit. Rather than watching for clues from the news, which really is old news, think for yourself. Be confident enough to pull the trigger. If you decide you've made a mistake in selling, there is always the opportunity to buy once again. This time, however, you would be playing with some of the house's money. That gives ou a leg up. It feels great to get on base.

Monday, June 30, 2003

6/30/03 It's A War Out There

Starting July 1 the EU will start to collect a VAT on various products or auctions run online by U.S. companies and other non-EU countries. Amazon will charge the VAT on sales of downloadable software and e-books as well as the commissions collected for online auctions. eBay plans to assume the VAT on behalf of consumers in France and Italy. In Germany and the U.S. the company will increase fees to reflect the tax. eBay expects the costs to be "substantial."

Jeremy Grantham points out that timber has provided a higher return than the S&P Index, including dividends, for nearly 100 years. That I did not know. It will be interesting to see how the relative returns might be between water and the S&P Index over the next 25 years or so.

I received an email from a few folks saying how happy they are with their larger paychecks as a result of the tax cuts but, at the same time, complained how other increased local and state taxes and fees are eating into their new-found wealth, as it were. New state budgets take effect tomorrow. Let's look at Georgia. They raised taxes on a pack of cigarettes by 25 cents. They cut hundreds of millions of dollars from state programs. Health insurance costs will increase for hundreds of thousands of state employees and retirees and teachers; hundreds of state jobs will be eliminated or left unfilled; some school programs like driver's ed will be eliminated; many areas of the state will have higher property tax bills being mailed out and the latter for services being cut by the state; doctors will get less from the state for treating poor people; and fees for corporate filings with the state are going up by two-thirds. In sum, state and local taxes are rising, fees are rising, services are being cut, and the quality of life is on the decline. That's a stiff price to pay for government waste, mismanagement, and poor planning. That goes for all levels of government. There have been other Bush tax cuts. The latest will not promote economic growth. Businesses will not increase spending. Consumers will have less to spend after they pay for the added expenses at the state and local levels. Companies will not be hiring more people. In fact. more state and municipal workers will be axed from the payrolls. Wall Street will get it. The Nasdaq won't be at 1600 and the Dow won't be at 9000. Short term rates won't be at 1%. Wall Street is mid-way into a 12 round fight. They lost the first two rounds and have won the last four. Lennox Lewis was behind on three score cards and won by a TKO on cuts. The next six months won't involve a TKO. The fight won't be stopped on cuts. When the selling begets selling, the buyers will wait for the sellers to be clamped into the corner of the ring. It won't be pretty. Fools have rushed in and invested more money in the Fed's reflation game. This isn't a game. It's the real deal. The Fed's motives are blatant and irresponsible. Unfortunately, greed often listens to losers and losses follow. Better to think for yourself.

Sunday, June 29, 2003

6/29/03 Jean Banchet

Thirty years ago Jean and Doris Banchet opened their restaurant, Le Francais, in Wheeling, Illinois. Some considered it the best restaurant in the country- not unlike today's praise for The French Laundry in Yountville, CA. Jean Banchet retired a couple of years ago, and the new owner just couldn't make it in today's economy. Whether it's over time or since yesterday, things evolve and change. To be a successful investor one must change with the times in order to effectively counter the risks. Make no mistake. Risk is in the balance.

Once again, central bankers from around the globe had another get together this weekend. The group is in agreement that there will be a slow and sluggish recovery in the world economy. I was particularly interested in a comment made by Bank of Canada Governor David Dodge. He said "the mood is guarded optimism but with guarded kind of underlined." What surprised me was his frankness. Can you see Greenspan walking out of a Fed meeting and avoiding non understandable gibberish? I didn't read where Greenspan disagreed with the group's economic assessment. Do you believe that the current levels in the Dow, S&P, and Nasdaq reflect a vision of a slow and sluggish recovery? I don't. The forecasts are for growth of 3.5% in this second half. That's hardly slow and sluggish. When the markets reflect the latter, the price levels will be much lower and not similar to the close on Friday.

I was reading an interview with Bill Miller of T. Rowe Price. He has outperformed the S&P for well over a decade. His portfolio is now down to 2% in technology stocks. For someone who once had 15 times that percentage this is quite a change. He believes technology is not the place to invest. I give him credit for changing with the times. I should mention he thinks we're in a bull market.

As I have said so often in the last six weeks or so, I believe the government bond market is a ponzi game with rates at these levels. There is no question in my mind that the best way to make money is to be negative on the bond market. I was quite pleased to see 10 year treasuries have their biggest two week decline since October. I'll even smile more when the long bond yields at least 7%. I'm patient. The market will get it right. The risks shall be balanced and produce yields quite different from today. When that happens, much will have taken place in this country. You don't have to purchase a ticket on the Cyclone to get a roller coaster ride. You might be able to watch crickets migrate to Wall Street. It won't be a Stephen King movie.

I have a plan. Rather than the Fed monetize more federal debt, I suggest we change the role of President Bush. He is a fantastic fund raiser. On Friday he had lunch and dinner in Burlingame and Los Angeles and raised $5 million. My idea is to for him to have fundraisers across the country- breakfast, lunch, and dinner- for 48 weeks of the year, and that accounts for a month's vacation. I feel certain he can raise at least $5 billion over that time, and that can go to reduce the national debt. It doesn't get better than that. It's a great return on his annualized salary. We can call it the ROI Tour.

Tomorrow the Justice Department will ask for a second request for more information from Oracle on its PeopleSoft bid. This hostile tender has been hurtful to PeopleSoft's potential business. LA County is putting on hold its talks with PeopleSoft for a $100 million software project. The County's CIO said "things were progressing nicely, then out of the blue Mr. Ellison decides to take a shot at PeopleSoft. We made a decision given the uncertainty to suspend negotiations." There are many other potential customers like LA County who have arrived at the same conclusion. Business is tough enough in the software industry. Privately, I have not heard from one top technology executive who is rooting for Ellison to succeed.

Fitch Ratings estimates the current global credit derivatives market at $2 trillion, and that market they predict, will rise to $4.8 trillion by next year. J.P Morgan, Citigroup, UBS Warburg, Bank of America, and Deutsche Bank are the major players. Greenspan says of credit default swaps "banks appear to have effectively used such instruments to shift a significant portion of the risk from their corporate loan portfolio to other organizations...concentration of market making has the potential to create concentration of credit risks." In my view, the derivatives market has been abused by greed. The banks seek out more and more fee-based income. Risks have not been spread. Risks have been concentrated. I have little faith in bankers to assess risk- much less concentrate it. Regulation is not the answer. Just some rational commonsense would be helpful. Unfortuately, I wouldn't hold my breath. The derivatives market will produce, in my view, a great many suicides. It's not too late to change with the times.