Saturday, September 27, 2003

9/27/03 Big Daddy

DeConna Ice Cream is the maker of the Big Daddy brand. In 2001 a class-action lawsuit was filed in Broward Circuit Court claiming that the company had understated the ice cream’s fat and calorie content. Big Daddy’s label claimed that a 12 ounce serving contained only 2 grams of fat and 100 calories. DeConna conceded the label was wrong. In truth, it contained 7 grams of fat and 300 calories. A settlement has been reached, and covers consumers who purchased the product from 5/195 through 6/17/2001, when the mislabeling became public. More than three million cups of Big Daddy ice cream were sold during this period. Consumers still holding receipts will receive a full refund or coupons for two free cups of ice cream for each cup purchased. About $25,000 of the $1.2 million settlement has been set aside for refunds. How many consumers saved their receipts from 2 to 8 years back? This type of settlement can leave a bad taste in your mouth. Vince DeConna is the owner of the company. He was not exactly apologetic when he remarked “people who purchased the product never said they disliked the product. They were unhappy it did not have the calories it said it had. It had more calories than they thought.” I think DeConna should have been ordered to eat a cup of the ice cream and then regurgitate it on the court house steps.

Yesterday 10,000 National Guard troops were activated for service in Iraq and another 5,000 were placed on alert for likely call-up. Bush has asked other countries to volunteer and form a third multinational division. No country has come forward. Marine Corps. Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff and the nation’s second-ranking officer, said “there are many countries out there talking about contributing troops, and we have every hope that will happen. But hope is not a plan.” On Feb. 27 Rumsfeld stated “it’s not logical to me to think it would take as many troops to keep the peace as it would to win the war.” Anthony Cordesman, a defense expert at the Center for Strategic and International Studies in Washington, stated “they planned to pull the troops out quickly.” He said there was an illogical assumption that U.S. troops would be greeted almost universally as liberators, that political control could be handed over to Iraqis quickly, and that there would be no insurgency. Cordesman said “we never really had a nation-building Plan.”

IBM laid off 1% or 380 employees in marketing in the company’s software divisions. First Virginia cut 940 jobs.

For the third consecutive month U.S. consumer sentiment fell, and the September reading was below the preliminary forecast. The loss of jobs and the on-going conflict in Iraq are weighing heavily on the American public. In addition, the folks on Main Street are not convinced the economic recovery is sustainable. Without hiring, it’s tough to get very optimistic.

A new Harris Poll shows a 46% to 27% plurality is not confident that U.S. policies in Iraq will be successful; 50% to 28% favors the U.S. handing over control of Iraq to the U.N.; 54% to 23% thinks that most people in Iraq see the U.S. troops there more as occupiers than as liberators; and 51% to 47% gives Bush a negative rating on his handling of Iraq over the last several months.

The Census Bureau reported that almost 35 million people lived in poverty in 2002. After accounting for inflation, they said the median household income declined 1.1% in 2002 from the prior year. At the same time, we should always remember that the government announced the recession officially ended in November 2001. These numbers will play a part in the 2004 presidential election. It’s Bush’s economy and its his Iraq war.

The state of Massachusetts is the only state still suing Microsoft for antitrust violations. On Thursday Massachusetts became the first state to move their computer systems from the windows operating system to Linux.

This week’s market decline was modest in relationship to the gains recorded since March 11. The Nasdaq lost 6%, and it was its worst weekly performance in almost a year and a half. The Dow lost 3.4%, and it was the worst weekly decline in six months. The S&P 500 dropped 3.8%, and it was the largest weekly decline in eight months. Historically, September has been the worst month on Wall Street. So far, the losses in this September have been modest. Possibly, the most significant change has been the withdrawal of funds from the equity market over the past two weeks.

Friday, September 26, 2003

9/26/03 Happy New Year

According to former U.S. Justice Department Nazi war crimes investigator and current president of the Florida Holocaust Museum, John Loftus, “the Bush family fortune that helped put two members of the family in the White House can be traced directly to the Third Reich.”

The Bureau of Labor Statistics reported yesterday that about 134,000 workers lost their jobs in August up from 128,103 employees who were laid off in August 2002. Yesterday the reading on job losses took a turn for the worse. Levi Strauss announced it would close its remaining North American manufacturing and finishing plants and leave approximately 2,000 employees out of work. Tyson Foods will close a plant in Arkansas and cut 600 workers. Federal Signal plans to aggressively cut costs, and will cut a number of jobs in various businesses. The number of layoffs was not announced. Lastly, as Kodak reinvents itself, the company will eliminate many manufacturing jobs. They will not be needed with the company’s move to digital imaging. Since Kodak sees industry film sales dropping 12% through 2006, I would imagine the job losses could number in the thousands.

Economists still write about a recovery. It’s tough to have a rebound in sustainable economic activity when U.S. durable goods orders drop. They did in August. Inventories of durable goods dropped last month too, and it was the 30th decline in the last 31 months. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University in Atlanta, stated “CEOs aren’t in a mood to keep investing. If you can’t raise your prices, then you are going to cut costs.” If CEOs don’t want to invest in their businesses, then why should investors invest in those businesses?

A new NBC News/WSJ poll released Wednesday night revealed Bush’s approval rating now stands at 49%. Interestingly, 56% of respondents said they’d opt for repealing the portion of the tax cuts that Congress passed last May that benefits upper-income taxpayers. In addition, 52% disapproved of Bush’s handling of the economy, a figure that surprised me as understated. A key state in the next election may be Pennsylvania, a state Bush lost to Gore by 4 percentage points. It has 21 electoral, the second highest percentage of people over age 65, and since getting elected, Bush has visited Pennsylvania 22 times.

An AARP survey reveals “in this latest study, nearly 70% of workers who have not yet retired report that they plan to work into retirement years or never retire, and almost half indicate that they envision working into their 70s and beyond.” Forty two per cent expect that during their retirement years they will have to “do some kind of work to help pay the bills.” This study is quite different from the findings out of the Conference Board report that states “the leading edge of boomers, now in their mid-50s, are beginning to retire, and not enough people are coming along in the much smaller Generation X, now 25 to 38 years old, to replace them. The unprecedented turnover rates in recent years among younger, mid-career employees will further shrink that pool of qualified replacements at many companies. There is a real question as to how many companies are prepared for the retirement tsunami already underway.”

Economist Henry Kaufman spoke before the Foreign Policy Association of the World Leadership Forum 2003 in New York. He stated that “U.S. economic growth will bump along at a more moderate and irregular pace of 2.5 to 3% growth over the next year. The dimensions of the current recovery are not robust enough to suggest a recovery of cyclical dimensions.”

The Conference Board’s Help-Wanted Advertising Index dipped one point to 37 in August. The Index was 41 a year ago. Their economist remarked “while total job advertising volume is stabilizing, it is at very low levels.”

Deputy Defense Secretary Paul Wolfowitz stated “certainly no one I know believes that we are not going to be in Iraq with significant forces through the end of next year.” Why would we have significant forces there through the end of next year if the primary fighting in Iraq ended on May 1, 2003? I have trouble reconciling those two statements.

Unnamed diplomats said new traces of enriched uranium were found in environmental samples taken during inspections at the Kalaye Electric Company on the southern outskirts of Tehran. A watch company serves as the front for Kalaye Electric. Their motto is ‘it just keeps ticking.’ Earlier this year, inspectors had found traces of uranium at a plant at Natanz. The diplomat stated “this finding may actually raise even more questions about the discovery of enriched uranium.” In an August 26 report, the IAEA said a team of U.N. centrifuge experts concluded Iran must have tested its centrifuges with uranium. Most likely, the testing was done at Kalaye.

A new study released by the Substance Abuse and Mental Health Services Administration (SAMHSA) revealed the following: 22 million Americans suffer from alcohol or drug abuse; 19.5 million used illegal drugs in 2002; 14.6 million use marijuana per month; 2 million are cocaine users; 1.2 million have used Ecstasy or other hallucinogens; 54 million are binge drinkers per month; and 16 million have 5 or more drinks per day.

Robert Higgs: “All sorts of economic, environmental, health and safety, and social regulations continue to spew out of Washington and Brussels, among other places. In addition, however, the U.S. government especially requires eve more uncompensated information collection and reporting by its subjects in order to slake the Surveillance State’s insatiable craving for the most minute details of everyone’s conduct…Simultaneously, the state and local governments, as well as various international bodies, continue to pour out endless streams of their own regulations, all of which entail resource costs and sacrifices of citizens’ liberties.”

Thursday, September 25, 2003

9/25/03 It’s A Kodak Moment

For those depending on the Kodak dividend it is a defining moment. It was only a matter of time. The company announced this morning that it will cut its semi-annual dividend by 65 cents or 72% to 25 cents per share. This was a necessary action. The company’s net cash flow was not supporting the higher dividend pay out. It is a good lesson to remember. Please do not focus on dividend yield alone. Please analyze whether the company paying the dividend can afford that dividend. In several cases the answer will be no. Eastman Kodak stock has been going down for years, and so has their business. A stockholder in this company should have cut his/her losses short by selling quite some time ago. Do not get emotional about a stock holding. It’s only a piece of paper. You’re not married to the stock.

Mirant is a company in bankruptcy. They continue to lose money, and had a layoff in 2002. In order to stem the red ink, they will shortly announce another cutback in employment. They have 6,700 workers worldwide.

Yesterday OPEC announced a cutback in their daily output by 3.5% or 900,000 barrels. It’s not a big deal because it returns their output target to what it was until April, when Iraq’s production was removed from the oil market due to the war. It’s another example of knowing the facts and not getting emotional. It’s business as usual, and also the cost of doing business at the pump.

Yesterday saw another example of negative pricing power. Nintendo cut the U.S. retail price of its GameCube system by 33% to $100 in order to increase holiday sales and to undercut Microsoft’s Xbox and Sony’s competing products. GameCube is now at least $50 cheaper than other gaming consoles.

The Pentagon announced they may need to call up thousands more Guard and Reserve troops over the next two months for duty in Iraq unless other nations send more soldiers to the region. It won’t make for a very happy holiday for our troops and their families.

San Ramon is a city located in Contra Costa County, California. The city will join more than 170 others around the country that have registered their opposition to provisions of the U.S. Patriot Act. Mentioned was a quote attributed to Hermann Goering, a commander in the Third Reich: “Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the pacifists for lack of patriotism, and exposing the country to greater danger.”

A widely watched survey was released yesterday by UCLA’s Anderson School which forecast growth at a modest 2.5% on average through the middle of 2004, and stated that consumers do not have much room left to spark stronger growth. They said tight budgets will keep a lid on spending at the state and local level and be a drag on the economy. They anticipate the unemployment rate rising to 6.4% and to remain above 6% through 2005. They peg inflation at 2.1% in this quarter and to drop to 1.5% at the end of the year.

Wednesday, September 24, 2003

9/24/03 Dark Matter Does Matter

Each day I receive emails with remarks about my on-going discussion of the job loss recovery. Yesterday, one said it was boring and another stated no one is entitled to a job. I will receive more email on this subject. Yesterday was a poor day for unemployment. On 8/28/03 Goodyear announced that it will eliminate 500 salaried and non-bargaining unit positions at its North American Tire manufacturing locations. Now Goodyear stated they are considering closing an Alabama tire plant and laying off as many as 2400 workers at other plants in 10 states. I’m not finished. TIAA-CREF has about 3 million customers and $286 billion in assets under management. They’ve been in business for 85 years, and never had a layoff-until yesterday when they announced laying off 8% of their workforce or about 500 people. I’m not finished. According to Gary Lapidus of Goldman Sachs, he calculates that the big three auto makers could eliminate 50,000 jobs over the next four years due to the closing or divestiture of 10-13 parts and assembly plants. I touched on this subject the other day, and would not be surprised to see these job losses occur by the end of 2005.

Avi Nachmany, director of research at Strategic Insight, said in the last 5 months $110 billion has poured into stock and hybrid (stock-and-bond mixture) funds. He said “for all of 2003, stock and balanced-fund inflows could eclipse $200 billion.” The peak of $279 billion was reached in 2000.

Tobias Levkovich, chief market strategist at Smith Barney, remarked “a word of caution. Part of this willingness to put money into stocks seems to be the result of return expectations that we consider excessive.” According to the UBS Index of Investor Optimism, investors polled this month expect an average 8.5% return on their personal portfolios in the next year. Interestingly, 73% of those surveyed expressed that their overall investment portfolio was medium to high risk.

If I hold a stock for 1 year, and make a profit of $100,000, I pay a maximum tax of $15,000. If I lose $100,000 during that time frame and have no gains, I can only take a loss of $3,000 in that year for tax purposes. In my view, this is ridiculously unfair and reduces the incentive for an investor to take losses unless that investor has gains as well. This is your government at work.

A total of 57,702 soldiers died in Vietnam. Our Iraq death toll is presently 304. When does it stop?

The annual meetings of the IMF and World Bank began yesterday. IMF chief Horst Koehler said the biggest risks to a recovery are the widening global trade imbalance and rising government debts. The Snowman acknowledged concerns about the U.S.’ ballooning budget and trade deficits. He emphasized that the “U.S. can’t be the real engine of growth for the world.” He must be in fantasy land. China’s economy has been growing at a 7% or greater rate for several consecutive years. They are the main growth engine. The proof is in the pudding. Our trade deficit with China exceeds $100 billion a year.

Yesterday the Snowman pledged to the IMF and the World Bank that the massive U.S. budget deficit would be halved by the end of 2008, and that it would be cut through “ample growth” and “disciplined spending.” He said that goal was “certainly very manageable.” Koehler politely informed the global bankers and economists that the U.S. now needed a “credible framework” to reduce its massive deficit as growth stabilizes. In other words, he doesn’t buy the Snowman’s pitch.

World Bank president Jim Wolfensohn criticized wealthy countries for providing just $56 billion a year in development assistance to poor nations as compared with more than $300 billion they spend on agricultural subsidies and $600 billion spent on defense. He said “it is inconsistent to preach the benefits of free trade and then maintain the highest subsidies and barriers for precisely those goods in which poor countries have a comparative advantage.”

Astronomers claim that Dark Matter (excess gravity) makes up more than 90% of our universe’s mass. Matter isn’t solid. At the same time it isn’t weak. This Dark Matter does matter as it interacts with time and space and possibly other dimensions.

Tuesday, September 23, 2003

9/23/03 It’s Not Business As Usual

According to the Bureau of Labor Statistics, the number of married-couple families in which both husband and wife were employed declined last year by 368,000. It was the first drop since the initial report on these employment characteristics were recorded in 1993. According to Challenger, Gray, and Christmas, the average number of households in which neither spouse was employed grew by 235,000 in 2002. John Challenger remarked that, “as job losses mount, more families are suddenly going from two-earner status to one-earner or no-earner status, which greatly reduces a family’s overall spending power. The protracted weakening of household income will continue to have an adverse effect on consumer confidence and spending.”

Gilroy, California is known for garlic and the Indian Motorcycle Corp. As I have noted previously, China’s exports of high quality and low-priced garlic have significantly reduced the demand for garlic grown in Gilroy. The Indian Motorcycle Corp. was founded in 1901. It specialized, until yesterday, in premium heavyweight motorcycles and had over 200 dealers. It ceased production effective immediately, and laid off its workforce of nearly 400.

A recent Fed study says 40 billion checks were written in the U.S. in 2002, down from 50 billion in 1995. In 1996, John H. Harland, a large check printer, cut its workforce by 10% and scaled back its 40 check-printing plants. Yesterday, the company said it would cut another 10% or 500 employees and close another 5 plants in its printing division.

According to a mid-September Atlanta-Journal Constitution/Zogby International poll, two out of every three Georgians say that, financially, they are either worse off or no better off than they were a year ago. Four in ten said they have less discretionary income than they had a year ago, and the same 40% noticed no change. Susan Raker of Alpharetta said “we have a neighbor who has been out of work for a while. A friend’s husband has been out of work for a year. It’s now affecting the people you know. We refinanced the mortgage. We are not doing any major improvements on the house. We pay more attention to where we put our retirement fund. You think a little bit more before you go out and spend money.”

According to a recent report by the Silicon Valley Manufacturing Group, whose member companies employ 1 in 5 valley workers, economic growth in the valley will lag the rest of the nation through 2005, and employment won’t return to its boom-era level until 2012. Carl Guardino, the group’s president and CEO, said “we’re still working through the excess of investments in telecommunications and Internet companies.” Roughly 200,000 Silicon Valley workers have lost their jobs in the past three years.

Thomas Tancredo, a Republican congressman from Colorado, is sponsoring a bill seeking to repeal the H-1B Visa program. Bush says “he and Tancredo are at opposite ends of the pole,” and H-1B workers “actually boost the U.S. economy.” About 35 to 45% of the estimated 900,000 H-1B Visa holders currently in the U.S. are from India. Beginning October 1, 2003, there is a stipulated reduction of H-1B quota from its current annual level of 195,000 to 65,000.

From January through July the Bank of Japan sold a record $80.5 billion yen. Since the G 7 countries agreed over the weekend that exchange rates should be more flexible, we have witnessed the dollar plunging against the yen. This morning the rate dropped below 111 yen. The Euro rose above $1.15. A sustained fall in the dollar would increase the risk for foreign invstors to incur currency losses on their U.S. assets.

In March 2000, Robert Shiller, a Yale economist, wrote a book entitled “Irrational Exuberance.” He warned of a stock market bubble. In a report written with Karl Case of Wellesley College, he surveyed homeowners through the third quarter of 2002 and compared results with a similar study they conducted in 1988. Schiller and Case found new evidence of a housing bubble by comparing home prices and income data over 71 quarters. Shiller says his data “doesn’t prove there is a bubble.” Yet, using the past as a reference, he states that “30% declines are not out of the question.”

One-in-nine low-income Americans rely on the Medicaid health insurance program, according to a Kaiser Family Foundation study. Because of gaping holes in state budgets, the number of states set to limit prescription drugs in the Medicaid program will likely more than double to 30 in 2004 from 14 this year, the study revealed. The states are trying to curtail double-digit prescription drug costs by adopting preferred drug lists. Additionally, more states are reducing or freezing payments to doctors, hospitals, and nursing homes.

Secretary-General Kofi Annan will deliver a speech today to the U.N. 191-member General Assembly, and will question whether nations have the “right and obligation to use force preemptively” against unconventional weapon systems even while they were still being developed. He will state that “my
concern is that, if it were to be adopted, it could set precedents that resulted in the proliferation of the unilateral and lawless use of force, with or without credible justification.”

Monday, September 22, 2003

9/22/03 The First Day Of Fall

This is the time of the year in the stock market that separates the winners from the losers. It separates the men from the boys and the women from the girls. It’s the first day of Fall. The fall in prices it shall be- just like the falling leaves off the trees; however, unlike the beautiful colors, the falling prices will produce much tears and some panic.

The G 7 meeting ended with the following statement: “We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.” Hello! You guys forgot to ask the market what it wanted. The adjustments promptly began, but certainly not smoothly. The market is bigger than any group. It’s just that arrogance replaces intelligence or possibly there wasn’t intelligence in the first place. The fireworks have begun. The yen surged to 111+. Just a couple of days ago it was at 116 to the U.S. dollar. The Nikkei plunged over 4% for fear the rising yen would reduce the export earnings for many companies, such as, Toyota, Honda, Canon, Sony and many others. Exports are critical to the revival of the Japanese economy. A strong yen places that recovery in some doubt. As such, Japanese government bonds rallied to a one- year high. The South Korean won jumped to its highest point in almost three years. Seoul shares fell, and particularly, Samsung that dropped over 6%. The Taiwan dollar, Singapore dollar, the Philippine peso, the Swiss franc, the British pound, and the Canadian dollar all advanced against the U.S. dollar. Many of these countries have export-driven economies. Exports account for at least 20% of Japan’s GDP. Taiwan’s and South Korea’s exports are critical to their economies as well.

Chinese yuan one-year non-deliverable forwards jumped to a record 2.250 points premium against the U.S. dollar. This increase prices the yuan at about 8.05 per dollar a year from now, and this would represent a gain of over 2.5%. I have been predicting an upward adjustment in the yuan’s value of 2-3% within a year’s time.

Spot gold rose almost $4 dollars to about $387 an ounce, and not far from the February high of $389 per ounce. There is continued speculation that European central banks will continue to limit their gold sales for several more years.

The European Commission earlier this month cut its 2003 growth forecast to 0.5%. With a falling U.S. dollar, it is doubtful that this lowered forecast will be reached. EU Monetary Affairs Commissioner Pedro Solbes said the EU countries will not meet his 2004 growth forecast of 2%. With reduced levels of exports, it is possible the results for 2004 will not be materially unchanged from this year. We must remember that the EU region’s $8 trillion economy fell in this year’s second quarter.

The overall message from the G 7 meeting was to lower the value of the U.S. dollar. The Snowman will pounce on the notion that a lower dollar will help our exports. If those economies importing our exports have some growth in 2004, then that might prove factual; however, that remains to be seen. In the meantime, the purchasing value of the dollar will be reduced; investments in our stocks and bonds will be less attractive to foreigners due to the dollar’s exchange risk; and funding our budget and trade deficits will prove more difficult.

GM will close a parts plant and an engine-parts plant. Delphi Corp. will close or consolidate six plants, and move to cut pay. GM wants to also sell its diesel automotive business. The GM parts plant employs 983 hourly and 128 salaried workers. The powertrain plant has 323 hourly and 55 salaried workers. Its railroad locomotive division employs 3,120 people in two locations.

On Friday afternoon Chris Galvin, Chairman and CEO of Motorola, resigned. The company was founded by his grandfather. The most likely candidate to replace Galvin is Mike Zafirovski, who is now president of the company. Some speculate that Motorola can be divided into six separate companies, and that the parts will be worth more than the whole. Time will tell whether a turnaround can be engineered at Motorola.

Bush’s approval rating dropped another notch to 51%. His handling of the Iraq war plunged 5 points in a week to 46%. Fifty-seven per cent of Americans disapprove of how Bush is handling the economy, and this is an increase of six points from the prior week.

Bush will tell the UN “the world is a better place without Saddam Hussein.” That was not the reason for the U.S. invading Iraq. After turning his back on the wishes of other countries-other than England- the U.S. elected to basically go it alone in Iraq. Now, Bush turns to the UN and says “Let’s work together on big issues.” It’s a big issue that over 300 of our soldiers have been killed in Iraq, and it’s a big issue that close to 1600 soldiers have been wounded and or injured. Bush may not like Ted Kennedy’s words, but the majority of the American people don’t approve Bush’s handling of the Iraq war. Until proven otherwise, Kennedy, in my view, is justified in describing our Iraq policy as “failed, flawed, and bankrupt.”




Sunday, September 21, 2003

9/21/03 Instability On Wall Street

Wall Street investors have a much larger problem than dealing with Dick Grasso’s pay package. Taking a page from FDR’s 1942 speech, after 9/11, all Americans were told to make whatever self-denial is necessary because the fight to combat terrorism would be a long one. This self-denial didn’t include being in denial. Wall Street is in the process of sacrificing the truth. That sacrifice will bring with it a price so dear that the clean up after Isabel will look like a dream come true.

One must be fair. Wall Street gets its clue on denial from Washington’s leaders. In an NBC interview, Dick Cheney called the military campaign in Iraq “a major success.” This morning two U.S. soldiers were killed and 13 were wounded in a mortar attack west of Baghdad. The deaths brought to 302 the number of soldiers who have died in Iraq and the number wounded are approaching 1600. Cheney is in denial. Bush is in denial. The major combat continues in Iraq. It did not end on May 1.

The Nasdaq has rebounded 70% from the lows reached in October 2002, and the Dow and the S&P 500 more than 30%. Many large tech names have jumped 100% or more but these same companies have experienced no rise in sales. Their earnings have improved due to cost cutting; however, reducing expenses cannot eliminate the need for top-line growth. Oracle knows that. Cisco knows that. There are some exceptions, such as, eBay experiencing superior revenue generation. Thomson First Call suggests operating earnings for the S&P 500 will increase about 15% for the third quarter. Despite the analysts’call for higher earnings, insiders continue to sell shares at a rapid rate. There is a growing disconnect between insiders and positive investor sentiment. Meanwhile, there is growing discontent on Main Street with continued job losses, the growing death toll in Iraq, bulging budget deficits, and some political leaders “misspeaking.”

The National Weather Service is unable to predict a storm forming on Wall Street. They can predict Isabel but not the in denial storm. As Pat Dorsey, director of stock analysis with Morningstar in Chicago remarked, “I’m skeptical. Our emotions often steer us horribly wrong. What makes us human isn’t changing. We have not all become rational, arithmetic calculators.” Margaret Jones, chief executive of Whittlinger Capital Management in Minneapolis, stated “it’s too soon to know. It’s going to be very interesting to see if the lessons stick. If history is any indicator, they won’t stick.” Whether the lessons stick or do not stick will be forthcoming. What will stick are losses. As Terrance Odean, an associate professor of investor behavior at UC Berkeley stated, “there is a difference between being told the market can go down and experiencing it. It’s a more expensive lesson to experience it, but it sticks.”

For the very first time electricity from a tidal current has been fed into a power grid. A sub sea power station on the Arctic tip of Norway began getting power from the moon yesterday. It will produce enough light and heat for about 30 homes. That’s what’s needed on Wall Street- an underwater windmill to generate enough energy to keep stock prices moving higher. Offsetting that dream is the knowledge that such energy costs three times that of typical hydro-generated electricity in Norway. Maybe Wall Street analysts can create some rosy cost projections. They’ve been successful in doing so in the past.

Li Ruogu, assistant governor of the People’s Bank of China, told the Institute of International Finance in Dubai that “I just don’t see the logic of scrapping the yuan’s peg. We’ve already promised that we will gradually liberalize, but I cannot give you a clear timetable. We want to do it as quickly as possible.”

Small businesses create 3 out of every 4 new jobs and make up 50% of our GDP. The House of Representatives’ Small Business Committee has created the Small Business Index, and this index reflects the current economic business conditions confronting small business. At the end of the second quarter the index reached a 5-year low, and is down more than 33% from the peak reached in 2000. With a job loss recovery and the economic conditions for small businesses so difficult, then what are the Wall Street indices doing at the present levels? I would describe the condition as being in denial.