Saturday, May 27, 2006

Not Surprising

5/28/06 Not Surprising

Wal-Mart estimated that May sales rose 2.3 percent at its U.S. stores open at least a year, the low end of its forecast, held back by steep gasoline and utility prices. This should not come as a surprise.

U.S. adults remain very pessimistic about the situation in Iraq, and are not confident that U.S. policies there will be successful. As a result, President Bush's job approval rating in handling the situation in Iraq hasn't changed in two months -- two-thirds (68%) give the president negative marks -- tying an all-time low. This should not come as a surprise.

The Bush Administration late Friday asked federal judges in New York and Michigan late Friday to dismiss a pair of lawsuits filed over the National Security Agency's domestic eavesdropping program, saying litigating them would jeopardize state secrets. This should not come as a surprise.

Mike Burk: "The OTC has been up 100% of the time on the 2nd trading day of June during the 2nd year of the Presidential Cycle." I found this quite surprising.

As I have stated previously, from May 11, in just a few days, the VIX skyrocketed
from 13 to just about 20. In 8 trading days the VIX has declined to 14.26. That is an unprecedented round trip in such a short time frame. It is not business as usual. To think so would ignore the risk of the recent extreme volatility. Let me repeat. Just because the market may be oversold does not mean you need to be a buyer. Do not ignore the potential danger associated with variance swaps. You can be swept away with them.

Behind The 8 Ball

5/27/06 Behind The 8 Ball

When you cut through all the government numbers for April, the disposable income for Americans declined 0.1% after taking inflation into account. That's the bottom line. Our economy is based primarily on the consumer. With growing inflation pressures, the consumer is still behind the 8 ball. Is the Fed a real inflation fighter?

Peter Schiff: "Higher inflation is actually the government's best friend and is the most politically expedient way to resolve America's economic imbalances and reduce the real burden of repaying its own debts."

The University of Michigan's index of consumer confidence fell to 79.1 this month from 87.4 in April, the biggest drop since hurricanes slammed into the Gulf Coast last year. The final May reading compares with an initial estimate of 79.0. The university's measure of current economic conditions fell by the most since record-keeping began in 1978.

Barron's: "After a long string of double-digit annual price increases, many second-home meccas across the country are witnessing plunging sales and burgeoning inventories of unsold homes."

The U.S. Food and Drug Administration gave its approval late Thursday to Merck's new shingles vaccine, which is intended only for adults 60 years of age and older who
previously have had chickenpox.

Air fares over Memorial Day weekend were expected to average 10% more than they did last year, AAA said. Hotel rates have climbed 5%. And rental car rates have shot up 19% from a year ago to $36 a day, the highest Memorial Day rate in the past six years.

A panel of three judges said in a 69-page decision that a group of bloggers did not have to divulge their sources to Cupertino's Apple Computer Inc., contending that the same laws that protect traditional journalists, the First Amendment and California's Shield Law, also apply to bloggers.

Analysts expect May sales for General Motors Corp. to lead the decline, with a drop of between 10 and 14 percent compared to the same period in 2005. Sales at Ford Motor Co. are expected to fall between 6 and 8 percent for the month, while DaimlerChrysler AG's Chrysler Group sales are expected to be down about 5 percent.

Because of $3 gas at the pump, the media focuses on the price of crude, which has risen 17% this year, By comparison,
wheat futures traded at a 9-year high this week and have gained almost 50% over the past year. Very often the best place to mine for profits is where the media coverage is minimal at best.

On friday, the VIX traded between 15.04 and 14.26, and closed on the low of the day. Volatility continues to diminish while equities have taken a turn for the better. It would be a mistake to dismiss this recent run up in the VIX to the 19+ area and it would be a mistake to return to complacency. You should consider this recent strength an opportunity to lighten positions.

It was one thing to buy GM at $20 and quite another to jump on the Merrill/Prudential bandwagon at $27-29. Believe it or not, the same reasons to buy GM at $20 are no different than at $28. It just required a bit of foresight. GM may return to $29 in a period of time, but for now, there are too many hurdles to warrant this price. Being complacent about GM is a mistake.
On the other hand, everyone has written Ford off. That would be a mistake. Why? Check the cash flow.

Nouriel Roubini: "Q2 growth may already be in the 2-2.5% range that I predicted in January and is likely to further decelerate in H2."

Let's return again to a discussion of volatilty and particularly variance swaps.
Todd Steinberg opines "variance swaps isolate volatility and take away all of the other attributes that you would ordinarily have to factor in, such as interest rates, dividends and movements in the price of the underlying asset." That is a start. Let's turn to the Minyanville staff for some additional thought: "A variance swap is a contract between two parties agreeing to swap cash flows on the measured variance of an underlying asset during a set time frame. Variance is the square of standard deviation. The payout on the variance swap is linear to variance rather than volatility. This means the payout will rise at higher rate than volatility. In a period of rising volatility, this can be problematic if someone is over-leveraged based on a model that is predicting a continuation of muted volatility. The variance swap provides a trader with a "constant" exposure to volatility with a fixed gamma and time decay that is not dependent on stock prices, therefore providing a "pure" play on future volatility.Minyanville Professor John Succo noted a similar situation last October. Describing some of the selling taking place at that time, he wrote: "There is a rather large position in the Street composed of what are called "variance swaps." "Essentially, volatility funds and credit funds have bought variance swaps (long volatility) from several large brokers," Succo wrote. "The volatility funds buy them to make bets on volatility. Credit funds buy them as a correlation hedge against credit risk (as credit spreads widen, volatility tends to pick up)."

This is obviously complicated stuff. However, there is a problem with all of this. What happens when during the trading day, due to the tremendous volatility, trading is halted, and halted for the remainder of the day? Then you are left behind the 8 ball. Not only are these traders hurt, but the every day vanilla investor is impacted as well. Could this have taken place after May 10th? In sum, investing can be simple or complicated. Those that think they are so clever and endowed with self-proclaimed genius may be the first to be carried out.

Thursday, May 25, 2006

Interesting Finding

5/26/06 Interesting Finding

Almost 70,000 women took part in the research, part of a major health investigation in the US called the Nurses Health Study.
Scientists monitored the women for 16 years, keeping records of their weight and sleep patterns.
Compared with the sound sleepers, women who slept no more than five hours a night were 32 per cent more likely to experience major weight gain - defined as an increase of 33 pounds or more - during the course of the study.
They were also 15 per cent more likely to become obese compared with women who slept seven hours.

Gary Lammert: "A dysequilibrium
tipping point of negative equity is now found in a good percentage of 2005 acquired US homes. And the negative equity grows every day with
the growing backlog of oversupply. One of the last major American
manufacturing holdouts, the housing industry, with better blue collar
salaries, mitigated by a proportion of labor provided by the south of the
border non Ellis Island immigrants, is in steep decline. Coupled to its
decline is the US lending industry and the over populated and bloated
real estate industry."

The volume of help-wanted advertising in major U.S. newspapers declined in April, the Conference Board said Thursday. The help wanted index fell to 35 from 37 in March. In the last three months, help-wanted advertising declined in all nine U.S. regions.

I would be surprised if 2nd quarter GDP were not at least a positive 4% grower.

For the past eight years, ethanol has cost an average of 49 cents a gallon more than gasoline, according to data compiled by Bloomberg. Last year, even with oil reaching a then record $70.85 a barrel, it cost refiners $1.61 to make a gallon of gasoline -- less than the $1.80 it cost to buy a gallon of ethanol. Today, the U.S. consumes 4.4 billion gallons of ethanol, or the equivalent of 3 percent of all the gasoline used, according to the Energy Department. The federal mandate will boost that figure to almost 5 percent by 2012. It should be noted that the cost to produce ethanol in Brazil is 50% less than it is in the U.S.

Yesterday, equities had their best day in awhile. It was no coincidence that volatility declined sharply with the VIX closing at 15.50 and having a range of only 1.15 points. The rise in equities was led by GM, Wal-Mart, the energy sector, and the Mastercard IPO. However, all was not rosy. Crude rallied back to 71.40 a barrel, gold had a strong performance, and interest rates were on the rise again with the 10-year at 5.07% and the 30-year at 5.17%. Although interest rates rose, the dollar index declined. The question one should ask is what was the real inflation rate in April and has there been a change in the first three weeks of May. I believe the numbers are not benign and that is a big reason to be cautious.

The National Association of Realtors said Thursday that sales of previously owned single-family homes and condominiums dropped by 2 percent last month to a seasonally adjusted sales pace of 6.76 million units.
The median price of homes sold in April rose to $223,000, an increase of 4.2 percent from April 2005. That represented the smallest year-over-year price gain since September 2001.

Mason Cooley: "Great men wait for the right moment to abandon caution. The rest of us abandon it when impatience becomes too much for us."

The cost of insuring against a default on Italian government bonds – through credit default swaps – rose sharply.

Now that the results of the Lay and Skilling trials are in the books, so to speak, let me remind you of some background facts. You do recall the political contributions Enron/Lay made to Bush and Cheney. You do remember the close friendship between Bush and "Kenny Boy" Lay. You do remember back to the spring of 2001. Vice President Dick Cheney cleared his calendar for an April 17 private meeting with Lay regarding what aides described as "energy policy matters" and "the energy crisis in California." At the meeting Lay handed Cheney a memo that read in part: "The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps...." The administration rejected any attempt to adopt energy price caps. I wonder why Bush and Cheney were not character witnesses at the trial. That's what friends are for ---- in time of need. Have you heard the media bring up any of these points?

Natural gas utility Northwest Natural Gas Co. backed its previous earnings guidance of 2006 earnings between $2.12 and $2.27 per share. Chief Financial Officer David Anderson backed the outlook at the company's annual shareholder meeting. The estimate assumes normal weather.

Arcelor SA agreed to buy most of Russia's OAO Severstal in a 13 billion-euro ($16.6 billion) deal to create the world's biggest steelmaker and repel a hostile bid by Mittal Steel Co.

Brad Setser: "
If the global economy goes south because of an oil supply shock, I would run into the Canadian dollar and the Norwegian krone. I would even rather hold the Russian ruble than the US dollar. Putin isn’t the nicest guy, but Russia is now a substantial net creditor – and with oil at $70 Russia is adding about $150b to its reserves a year. I kid not -- Russia's reserves have been rising by $5b a week recently. Its external fundamentals are solid. And I doubt the central bank will be able to resist nominal ruble appreciation forever. I would also prefer the euro and even the yen to the dollar."

Wednesday, May 24, 2006

Housing

5/25/06 Housing

When the consensus is that there is a bubble, it is wise to consider alternative scenarios. Over
the past two months, I have attempted to provide some of those thoughts. All housing markets are not the same --- just as all stocks are not the same. There is value somewhere and overvalue somewhere else. Both will be discovered, but not necessarily at the same moment in time.
Sales of new homes in the U.S. unexpectedly rose in April to the highest this year, even as inventories of unsold dwellings climbed to a record. Sales increased 4.9 percent to an annual rate of 1.198 million from a revised 1.142 million in March that was lower than previously reported, the Commerce Department said Wednesday in Washington. There were 565,000 homes for sale at the end of April, the most ever.

Shortly after the durable goods number was released interest rates declined sharply, but the full extent of the rally could not hold as the yield on the 10-year went down to 5% and then rose to 5.04%. Again, the Fed does not control long term interest rates.

Washington Mutual notified 850 call-center workers in Bothell, Washington that their jobs would be gone by fall. The company also gave layoff notices to 550 call-center workers in Jacksonville, Fla. WaMu is moving those functions to less-expensive locations — in Milwaukee, upstate New York and Manila, Philippines.

In April 2006, employers took 1,148 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from a
single establishment, and the number of workers involved totaled 118,504,
on a seasonally adjusted basis. The number of layoff events rose by 66, and the
number of associated initial claims decreased
by 51 from March 2006. In the manufacturing sector, 358 mass layoff events
were reported during April 2006, seasonally adjusted, resulting in 48,086
initial claims. The number of events in manufacturing was higher than a
month earlier, while the number of initial claims decreased.

Dave Kimble:“Russia's oil exports represent 15.2% of the
world's export trade in oil, making it a much more significant player
than Iran, with 5.8% of export volumes. Russia also produces 25.8% of
the world's gas exports, while Iran is still only entering this market
as an exporter…. Venezuela has 5.4% of the export market.” Russia is planning
on selling oil for rubles (not dollars) in about 2 weeks.

XM Satellite reaffirmed that it remains on track to have positive cash flow
from operations for the fourth quarter of 2006 and on an annual basis for 2007.
"Subscriber growth for the first quarter of 2006 was consistent with
our initial guidance of nine million subscribers by the end of 2006," said
Hugh Panero, President and CEO of XM Satellite Radio. "Although XM has
regained retail market share since the first of the year, the satellite
radio category has seen an overall softness at retail during the second
quarter to date, and we have been later than anticipated with broad
availability of our new products."
The revised guidance of 8.5 million subscribers represents growth of
more than 40 percent over the course of the year. The revised subscriber
guidance leads to a reduction in subscriber revenues and a narrower EBITDA
loss for the year. XM expects to add a total of more than 2.5 million net
new subscribers this year. XM ended 2005 with 5,932,957 subscribers, and
the company added more than 568,000 net new subscribers during the first
quarter of 2006 for a total of more than 6.5 million subscribers.

Yesterday's trading saw another large swing in the VIX, between 17.13 and 19.87.
Therefore, it was not surprising to see equity indices go from positive to
negative to positive etc etc etc. and end with a tiny gain thanks to GM,
Microsoft, and Wal-Mart. Meanwhile, gold lost $36+ an ounce and silver and the other
metals had a rough time. Crude closed just below $70 a barrel. THis recent sharp
decline in the energy sector gives me a reason to revisit Diamond Ofshore and
Chevron.

Many investors are asking whether this is just a normal correction or whether
we have hit a patch of quicksand. I guess it depends on your portfolio and your
objectives. Unlike 1974, I haven't seen anyone jump out of a 24 story window.

The LA Times reports home builder Ryland Group Inc. on Wednesday slashed its 2006 earnings
forecast for a second time this year, citing a 35% decline in sales in
April and May.
The Calabasas-based company said it expected full-year earnings of
$8.50 to $9 a share, based on the sale of 16,500 to 17,000 homes at a
gross profit margin of 23.2%. Before you slit your throat, the stock has already
declined from $83 to $52. Of course it can go lower, but, in my view, most of the
damage has been done.






Tuesday, May 23, 2006

Patience

5/24/06 Patience

Investing requires patience. With some investments you might have been
fortunate enough to have had some terrific returns over a period of years.
Then the stock moves sideways. For example, Microsoft and Home Depot are
selling for the price where the shares traded in 1998. In the case of Medtronic,
the shares are trading today where they were in early 2000. That's a long
dry period but over a period of 20 or more years the returns have been
terrific. You must consistently analyze your holdings and assess your risk/reward
going forward.

Packaged Facts projects sales of natural/organic food and beverages
will soar past $46 billion by 2010, increasing by nearly 63%, as the
popularity and availability of natural/organic products continues to gain
momentum. The addition of Wal-Mart as a major purveyor of organics, rapid
growth in all major supermarkets' private label organic offerings, and
highly anticipated expansion of the widely successful supermarket
"lifestyle" stores assures the forthcoming exponential market growth.

The first rally often is disappointing. Yesterday was no exception. With the Dow, Nasdaq, and S&P 500 up for most of the day, participation was lacking. Yes, the metals and crude
were up but the transports and the utilities were in the red, interest rates were rising, the dollar index was weak, and then some major company shares were on the downside ----
GE, Home Depot, Intel, Advanced Micro, Best Buy, Kellogg, Wrigley, Amgen, IBM, Aetna, Dell,
Applied Materials, Texas Instruments,and Citigroup,just to mention a few. Not
surprisingly, the rally did not hold and the Dow, Nasdaq, and S&P closed on the downside.
In sum, the action lacked conviction. The buyers were holding their breath. The complacency
was gone, and it took less than two weeks for that to occur.

If you listened to Helicopter Ben before the Senate Finance Committee, you could hear a
tremor in his voice. He did not have a frog in his throat. He was nervous and unsure of how to react to the questions. He appeared out of place and clearly did not provide
confidence to the financial markets. That's what happens when you depend on a government
official. More often than not, you will be disappointed.

In after market hours trading, the weakness persisted --- especially in the big tech sector. For example, Microsoft had been up nicely for almost the entire day, but in late trading hours the stock fell to $22.70. In other words, it couldn't even hold the $23.25 level. Apple also weakened to the $62.70 area, and Broadcom dipped under $34. Medtronic's quarterly report was on the money, but the stock was not able to get above $49. St. Jude Medical and Boston Scientific had made new 52-week lows on Tuesday.

I would like to revisit the VIX, the volatility index. On May 12, the index traded below
12 and on May 16 it was only 13. For months the VIX had shown almost no life. Yesterday it had a range of about 3 points between 15.36 and 18.26 and closed at 18.26, the high for the day. As the VIX dropped in the morning, the market rallied and then vice versa in the afternoon. In the last week of trading a higher VIX has been a negative for equities.

Henry To: "

Let's now review the implications of a Lowry's 90% downside day on the NYSE (which took place last Wednesday). As I have mentioned before, a 90% downside day occurs when both the declining volume and the number of downside points equal or exceed 90% of the total volume and the total number of points, respectively. A 90% downside day sometimes signals the beginning of a panic decline, or if the market is already oversold, further evidence of a very oversold market. Generally, a significant market bottom is preceded by two or more number of 90% downside days. A single 90% downside day like today may create an oversold situation in the short-term - one which would signal a temporary bottom - but with a number of intermediate term indicators (see below charts) still in a semi-oversold or neutral condition, the chances of a bottom here is very low. In fact - as Lowry's points out - in four of the last six bull markets since 1980 - a Lowry's 90% downside day has occurred anywhere from 5 to 15 days subsequent to a bull market top. The occurrence of a 90% downside day on the NYSE has significantly increased the odds that the cyclical bull market which began in October 2002 has now topped out."

This morning the April durable goods ex transportationdeclined by 1.1%. In response, the interest rates declined and the 10-year Treasury yield dropped to 5%. This will lead to more talk that the Fed will not raise rates at the June meeting. Whether or not that takes place, it is important to focus on taking a defensive posture. The utility sector would be a prime area to mine for value.


Monday, May 22, 2006

Buying Time Has A Price Tag

5/23/06 Buying Time Has A Price Tag

It was only a short time ago I discussed the point that the Fed wanted to buy time and look at the data prior to its next meeting, and then decide what to do about rates. That was a novice attitude towards the real world. Time is expensive. The world is beggining to see how expensive. The VIX has rallied from 12+ to 19 and is now trading above its 200 day moving average. Volatility is alive and well. The Nasdaq is at a 6-month low and the Dow at a 1-month low. The dollar index still has trouble holding a rally. Hong Kong, Russia, India's Sensex have been hit hard and so have other emerging markets like those in Latin America. Meanwhile, oil has rallied back to $70 and gasoline and natural gas are holding too. Froth has been taken from the metals but they are still up nicely for the year. Money has been moving into the utilities and other defensive groups.

Over the past several years the globe has been awash in liquidity. Now you must ask is there a dark side to liquidity? Do people really know what they have purchased? Are margin calls around the corner? Is it possible that the excess liquidity has been leveraged to such an extent that there is soon to be a tipping point? Would you bet your portfolio against that notion? How about the ATM on your home?

Over time, one of the best places for to mine for potential profits has been in the spinoff arena, and recently Embarq Corp was spun off from Sprint. Yesterday their CEO spoke at a Lehman conference. At $40 per share the market cap is $6 billion and their revenues are $6.3 billion.
CEO Dan Hesse said Monday that the new local phone company's threat from cable competitors is "greatly exaggerated," despite its anticipated market-share loss. The company is projecting that it will lose 5.5 percent to 7.5 percent of its access lines this year as the availability of phone service from cable companies expands from 40 percent to 90 percent in Embarq's markets. He stated "It is our hope and intention that this year will be the highest level of line losses that we will ever see." Hesse said that less than 10 percent of Embarq's roughly $6 billion in revenue is at risk from cable competition, based on his analysis of cable availability and what services consumers choose in the company's markets. "The size of the cable threat to our business, while sizable, we believe is greatly exaggerated," Hesse said. Hesse also said Monday that the company plans to launch Embarq-branded wireless phones and services next month in a bid to expand providing bundled services to consumers. Embarq will rent Sprint Nextel's infrastructure to provide the service. Regarding mergers and acquisitions, Hesse said that Embarq plans to sit on the sidelines for now but that it could be active in the future. "When we do, we believe a strong balance sheet makes us a more attractive suitor and a more attractive target, either way," he said.
In my view, it pays to monitor Embarq. The risk, in my opinion, far outweighed by the upside
potential. It may be rewarding for those with patience.

Another word about risk. Increased volatility leads to greater risk but also to the possibility of greater reward. You must decide whether large market swings are healthy for your personality.
Remember -- it has been several years without a 10% market correction in the U.S. Volatility has been low. For many, that low volatility has been an impetus to greater conviction on the part of investors. The mentality grew to believing volatility was a thing of the past.

Microsoft Corp. told more than 1,000 contract workers doing software development and testing to take seven business days off without pay to lower costs during this quarter, the company said on Monday.

Toll Brothers said that increased material and labor costs and higher write-downs - mainly from continuing weakness in the metro Detroit market - means that it now expects to report earnings per share for 2006 in a range of $4.69 and $5.16 a share. Previously, earnings were expected in a range of $4.77 and $5.26 a share.

The OECD called on Tuesday for the Federal Reserve to tighten interest rates a bit more as it projected U.S. economic expansion was set to stay solid this year before easing slightly in 2007. "A light 'tap on the brakes' seems necessary to keep the economy in balance," the Paris-based Organization for Economic Cooperation and Development said in its half-yearly Economic Outlook report. It raised its projection for U.S. GDP growth to 3.6 percent in 2006 from the 3.5 percent it forecast in November. Core inflation was seen at 3.0 percent for the year.

Ford is doing a debt exchange. The fixed-rate debt will yield 5.7 percentage points over Treasuries, or about 10.64 percent. The floating-rate securities will pay investors 5.25 percentage points above the London interbank offered rate, or about 10.46 percent. If you believe Ford's cost cutting and new models will turn the company aound, then these bonds present an opportunity.

Common painkillers such as ibuprofen increase the risk of heart problems in older people , say researchers. They found that 14 per cent of patients admitted to hospital for heart failure for the first time were taking painkillers, compared with 10 per cent of healthy people.

The Waiting Game

5/22/06 The Waiting Game

I frequently provide timely quotes from John Hussman. He's a bright guy and puts his money where his mouth is. Here is what he had to say today. "Our fully hedged investment position in stocks doesn't require any forecasts here – the prevailing combination of valuations and market action has historically produced unsatisfactory returns on average – and this is sufficient reason to be defensive. That said, I strongly encourage investors to evaluate their exposure to market risk here. The Strategic Growth Fund is fully hedged, so I don't have concerns about general market direction on the Fund, but for other investments that are more linked to general market movements, if you could not accept or financially tolerate a market decline of 20-30% in the value of those holdings, you're probably not being realistic in terms of the risks you're taking."

Yields on 10-year U.S. notes, German bunds and Japanese government securities with the same maturity dropped at least 4 basis points in early morning trading. Prices of gold, copper, oil and zinc all fell, driving stocks of mining companies down worldwide.

Microsoft Corp. today announced the industry's first pay-as-you-go personal
computing offerings powered by Microsoft(R) FlexGo(TM) technology, enablingmore-flexible Microsoft Windows(R)-based PC purchasing options forcustomers in emerging markets. Customers can get a full featured Windows-enabled PC with low entry costs that they can access using prepaid cards or through a monthly subscription.

The Financial Times reported the US Chamber of Commerce has warned that the US could lose its leading position in global capital markets if it does not reform its regulatory environment. The call reflects mounting concerns that tough Sarbanes-Oxley rules and the increasing competitiveness of stock and derivatives exchanges in Europe and Asia, could permanently divert capital flows away from the US.

Dean Richardson, chief of surgery at the University of Pennsylvania's school of veterinary medicine at the New Bolton Center, performed the 5-hour, 10-minute surgery on Barbaro's right-hind leg. "No one's going to want to hear this," Richardson said. "He's still a coin toss, even after everything went well." Barbaro's fractures were above and below the ankle. He also dislocated the ankle joint, doctors said. The pastern bone was in "probably 20-plus pieces," Richardson said afterward. A metal plate was put in, 23 screws were inserted and the ankle joint was fused, meaning it will not be a joint anymore if the fusion is successful.
When he came out of surgery, Barbaro was lifted by sling and placed on a raft in a pool so he could calmly awake from the anesthetic.
Richardson said the horse "practically jogged back to his stall" and was wearing a cast from just below the hock to the hoof.
"Right now he's very happy," Richardson said. "He's eating, he's doing very good. But I've been doing this too long to know that day one is not the end of things."
Barbaro, who will be at the center for at least several weeks and possibly much longer, did pass another hurdle: Richardson found that the blood supply in the colt's injured leg was adequate.

UK Prime Minister Tony Blair said he expects Iraq's security forces to reach full strength by the end of the year, paving the way for Western troops to withdraw from the country.



Sunday, May 21, 2006

The Unexpected

5/21/06 The Unexpected

When money managers went home on Friday night, the vast majority stated the market was oversold and positioned for a bounce. That statement has little meaning. First, a market can remain oversold for some time. There is no magic formula that states the market must return to the green. Second, a bounce could be for one hour or one day and not have legs. Third, when the vast majority say something, watch out. The market consistently accomodates the fewest number of participants at any one time. Epect the unexpected.

I have felt for months that Barbaro had the potential to be the greatest racehorse in the last 25 years. The horse trains brilliantly and races with ease. The unexpected happened yesterday. Instead of winning the Preakness in possible record time, the horse was pulled up by his jockey after a 100 yards or so. The ankle was broken in two places. Would this be an injury that ended in tragedy like Ruffian's? Hopefully, the vets at the Univ. of Pennsylvania will be able to save this horse. It's wise to appreciate what we have when we have it. Don't save the appreciation for a later time. There may not be a later time. Expect the unexpected.