Saturday, September 23, 2006

It's Time To Buckle Down

9/24/06 It's Time To Buckle Down

On page 52 of Barron's there is an article entitled "Value re-emerges in oil services." The author recommends Weatherford Int'l, a fine company, but not in the class of BJ Services from a management standpoint and its p/e is much higher on 2007 earnings. In addition, they recommend a drilling company, Transocean, another fine company but again not nearly in the same value camp as Diamond Offshore or Helmerich and Payne (where you also get 22% ownership in Atwood Oceanics).

It's time to put up with the quarterly window dressing next week. That's where all the subpar money managers attempt to get rid of all the positions that did poorly this quarter. Better the fund managersshould fire themselves.

Talk about stupidity. The 3-month treasury bills yield more than 30-year treasury bonds. I'll gladly take on this trade.

Doug Noland: "Inevitably, however, there will come a point when The Unrelenting Inflation in the Quantity of Late-Cycle U.S. Debt Instruments Collides with the Grossly Inflated Market Price of Total Dollar Financial Claims. And, sure, U.S. financial sector and bond market dynamics certainly increase the likelihood that this collision manifests in the currency markets. Even assuming that dollar confidence holds in the near-term, there remains the more nebulous issue of a bloated and foolhardy leveraged speculating community faced with the Upshot of Heightened Monetary Disorder, including wild volatility across the spectrum of global financial markets, widening spreads, wildly vacillating marketplace liquidity dynamics, and acute general financial and economic uncertainty. The bond market rally has become destabilizing."

Last week the advance/decline ratio was not very promising and the ARMS index was bearish three out of the five trading days. Yet, on block trades of 10,000 shares or more, a good deal more traded on upticks rather than downticks. It is also well to remember that program trading is comprising greater amounts of the daily volume. At times it can run up to 50%.

Volkmar Hable: "What is risk management? It is the ability to think in losses rather than in profits. Before doing any investment, always determine "How much loss am I willing to take? How much loss can I stand at all?", if the trade / investment should go against you. Determine your maximum loss in absolute hard money, like for example: "I cannot take more than 10000 USD in losses on stock xyz". Most of the money managers that I know have some technical indicator or some piece of fundamental information as exit trigger. However, this does not cut it, and most certainly will not save the day. Experience shows that the markets can go much higher than most people would believe and they can fall much harder than most people would dare to consider. Safeguarding your own performance against these events can be done only by strict risk management in absolute terms of hard money. Respect risk. Trial and error is an integral part of the daily games in the financial markets. How errors are handled separates the losers from the winners."

Addressing the offshore market, Lee Ahlstrom, director of investor relations at Noble Corp., pointed out that most deepwater drilling projects remain profitable even when oil hits $30 or $40 a barrel, let alone Friday's midday price of $60.48 in NYMEX futures.

George Ure: "The whole War on Terror has appeared in the nick of time to give government the set of economic controls necessary to jiggle the economy as desired and keep the public from seeing things. I think of the War on Terror as the modern analogy to the Works Progress Administration and the Civilian Conservation Corp of the last Depression. Thanks to the (almost too convenient) timing of 9/11, however, the positive economic impacts of the War on Terror are infrequently discussed. Without it, the country would have sunk much further into economic malaise before taking definitive action, and only then after much public rancor."

The last time I looked NYC was basically nect door to Philly. The Empire State index was clearly on the upswing while the Philly stunk. The markets only focused on the Philly. Smart investing takes in the whole landscape- not selctive tidbits.

On Friday, most companies in the energy sector took it on the chin. Interestingly,
ExxonMobil was up 13 cents. Chevron was only down 11 cents. ConocoPhillips only declined 17 cents.

Gold had a good day on Friday. Yet, Newmont was down 5 cents and Freeport McMoran was down 82 cents. American Barrick rose 22 cents and Goldcorp only 1 cent. Copper had a decent day but Phelps Dodge declined $1.09. Silver did ok too but Silver Wheaton only managed a gain of 8 cents. The market can certainly be puzzling.

From earthfiles.com: September 19, 2006 - Lowest Arctic Ice Concentration On Record.
"This situation is unlike anything observed in previous record low ice seasons.
If this anomaly trend continues, ‘Northern Sea Route’ between Europe and Asia will be open over longer intervals of time, and it is conceivable we might see attempts at sailing around the world directly across the summer Arctic Ocean within the next 10-20 years." Mark Drinkwater, ESA Oceans/Ice Unit

Friday, September 22, 2006

Going Against The Grain

9/23/06 Going Against The Grain

December gold climbed $7.10 to close at a more than one-week high of $595.40 an ounce, up 2.1% for the week. December silver added 6.5 cents to close at $11.31 an ounce, up 4% from the week-ago closing level. And December copper finished Friday at $3.4435 a pound, up 1.2 cents for the session and up 3.8% for the week. In the meantime, yields on treasury bonds plunged once again and that meant the dollar index moved back closer to the 84 level.

The number of rigs drilling for oil and natural gas in North America fell by 105 to 2,134, according to a weekly update by Baker Hughes Inc.

Two months of talks between General Motors Corp., Renault SA and Nissan Motor Co. have resulted in little progress toward a possible alliance, according to the Wall Street Journal and Detroit News.

Peter Schiff: "There are two primary reasons that I still believe oil prices will continue their long-term ascent. First, years of cheap oil, and the false perception that prices would stay low indefinitely, lead producers to under-invest in exploration and development, and consumers to over-utilize energy resources. As a result, it will take a long time for supply and demand to readjust to the new reality, ensuring high prices for years to come.
Second, once Asian central banks finally allow the U.S. dollar to collapse, Asian demand for oil will surge. That is because appreciated local currencies will not only make oil cheaper for Asian consumers to buy, but result in risings living standards throughout the region. As the values of their savings and incomes rise, more affluent Asian consumers will then be able to afford more energy utilizing products. Currently the purchasing power of Asian consumers is being suppressed by their governments' foolish policies of propping up the purchasing power of American consumers."

It is not unusual for me to go against the grain. I've been doing it selectively for about 40 years. When you entertain such a thought, you should know that the stock will go down after you buy it. Only luck makes you buy a stock at the year low, as was the case this week with Foundation Coal at $29.02. That happens rarely. Every now and then, you are able to buy shares in a wonderfully run company with exceptional growth, exceptional long range potential, and results that should produce a conservative p/e ratio of at least 15. BJ Services is such a company. Their fiscal year ends on Sept. 30. They are constantly on the lookout for more engineers and more capital equipment to be used in their field of oil services. There is a 3 month backlog to use their services. They are terrific at what they do and their customers provide repeat business. This has been their experience over the last 130 years or so. If we took a 15 multiple of earnings for the year that begins Oct.1, we'd arrive at a price of $47 or about $19 higher than the current price. Their growth, cash flow, and P/E make high growth Nasdaq stocks look expensive by comparison, and that includes Google. I think all investors should consider BJS for their portfolio. One more thought. BJ Services is a key oil service player in India and Qatar,and has a growing presence in Kazakhstan. In sum, the company has a good nose for international growth markets.

Jim Jubak: "In the long term, the huge U.S. trade deficit, the huge U.S. budget deficit and the finite appetite of foreign investors for U.S. dollars will produce a weaker U.S. dollar and higher U.S. inflation. Gold, the hedge against a falling currency and rising inflation, will earn a place in more and more portfolios. With gold supply expanding only very slowly, gold prices will rise steadily. The great bull market rally in gold will resume after the recent correction."

Thanks to rigzone.com for the following: "Oil and gas drillers, gathered here for the annual meeting of the International Association of Drilling Contractors, continue to revise projected rig activity upward, even in the United States, where gas storage sits at near-record levels, said IADC Chairman Claus Chur.
That optimism has bled into projections for 2007, with rig operators brushing aside worries that energy companies will cut back on drilling should crude or gas prices retreat further. Near-record storage levels in the U.S. have raised concerns that a mild winter or slowing economy could max out storage capacity, causing prices to crash. The oil companies "are not so much focused on the month-to-month gas price," John Lindsay, executive vice president for Helmerich & Payne Inc. (HP), a leading land driller, said on the sidelines of the conference. Helmerich & Payne has seen no tapering off of activity due to recent commodity price declines, he said.
Helmerich and Payne was one of the five companies I mentioned this week reflecting unusual value. I believe Helmerich and Payne should be considered for all portfolios.

November crude closed at a 10-month contract low of $60.55 a barrel Friday, down $1.04 for the session and down 5.4% for the week. October natural gas closed at $4.627 per million British thermal units, down 15.4 cents, or 3.2%, for the day. The contract lost 7.1% for the week.

The benchmark 10-year note closed up 11/32 at 102 06/32 with a yield of 4.598%, its weakest level since March 1 and down from 4.648% late Thursday.

Thursday, September 21, 2006

A Turning Point?

9/22/06 A Turning Point?

Just a reminder. A few days ago I wrote that 9/22 is a reversal day for W.D. Gann. It is also interesting to note that Gary Lammert and his fractal analysis point to 9/22 as a turning point.

Henry To: "The historical correlation between the Canadian dollar and the CRB and the CRB Energy Index has been quite significant (correlation of over 50%) over the last 16 years or so. Consequently, any breakdown of the major commodity indices without the confirmation of the Canadian dollar on the downside should be viewed as suspicious. At the very least, a non-confirmation on the part of the Canadian dollar should at least lead to some kind of bounce in commodities in general. Are we about to see such a bounce - given that the Canadian dollar is still holding on? Particularly in gold or crude oil? This author would not be surprised if either gold or crude oil bounce over the next week or so - but any buying in either gold or silver should be short-term only in nature and should only be bought if sentiment and technical indicators confirm, such as extreme bearish sentiment in the Hulbert Gold Newsletter Sentiment Index (HGNSI), declining assets in the Rydex Precious Metals fund, etc." As I mentioned yesterday, several companies in the energy sector made new 52-week lows on Wednesday.

The dollar weakened to $1.2787 per euro at 3 p.m. in New York from $1.2686 late Wednesday, for its biggest loss since July 26. The U.S. currency fell to 116.35 yen from 117.46 yesterday, the largest decline since July 28.
The Fed Bank of Philadelphia said its index for September fell to -0.4 from 18.5 in August. The median forecast in a Bloomberg survey was for a drop to 14.

Alameda County, California reported a 28.2 percent drop in year-over-year sales and a 1.5 percent drop in home prices -- the first annual price decline since March 2002, DataQuick Information Systems reported Wednesday. In Contra Costa County,California where sales toppled 23.5 percent, the median price was unchanged from last year, the worst performance since November 1999, said DataQuick spokesman Andrew LePage. Solano County, California sales also dropped 34.3 percent, and sales appreciated 1.9 percent, the lowest rate since August 1999. The median price in the Bay Area rose a scant 0.2 percent.

Japan's trade surplus surged in August as automobile shipments to the U.S. rose at the fastest pace in almost a decade, spurring export growth.
The trade surplus widened 96 percent to 200.5 billion yen ($1.7 billion) from a year earlier, the Ministry of Finance said today in Tokyo. Exports rose 17.7 percent, faster than the 16.3 percent median forecast of 13 economists surveyed by Bloomberg.

October natural gas fell 15 cents to close at $4.781 per million British thermal units after a low of $4.60. An Energy Department report Thursday showed more-than-ample supplies of the commodity. The October contract hasn't traded or closed at prices this low since Feb. 2004. Meanwhile, November crude rose 85 cents to close at $61.59 a barrel.

The benchmark 10-year note ended up 22/32 at 101 25/32 with a yield of 4.648%, the highest close since Mar. 16 and down from 4.728% late Wednesday. The 2-year note ended up 6/32 at 100 09/32, yielding 4.716%, keeping the yield curve inverted. Robert Parry, the past president of the SF Fed, said Wednesday he "was surprised by the 10-year rate" and how low it is. I am certainly in that camp.

KB Home said quarterly revenue reached $2.67 billion, compared with $2.53 billion during the same period in the prior year. The company said the revenue growth was driven by a 10% increase in the average selling price, and partly offset by a 3% decrease in unit deliveries. The company's backlog at Aug. 31 totaled 23,878 units, down from 27,744 units at the same time last year. The company expects market conditions for the rest of 2006 and into next year to have an unfavorable impact on year-over-year net income comparisons.

Kurt Richebacher: "In 2005, real disposable incomes of private households in the United States increased $93.8 billion, or 1.2%, while their debts grew $1,208.6 billion, or 11.7%. Total consumer spending on goods, services and new housing accounted for 92% of real GDP growth.
The U.S. economy's recovery from the recession in 2001 has been its slowest in the whole postwar period, and in addition, it has been of a most unusual pattern. Real GDP rose by 11.7% over the four years to 2005. Within this aggregate, residential building soared by 35.6%. Consumption gained 13.4% and government spending 10%. The big laggard in domestic spending was business nonresidential investment, up only 3.6%. Net exports year for year were increasingly negative."

Wal-Mart announced that it will make nearly 300 generic drugs available for only $4 per prescription for up to a 30-day supply at commonly prescribed dosages. The program, to be launched on Friday, will be available to customers and associates of the 65 Wal-Mart, Neighborhood Market and Sam's Club pharmacies in Tampa Bay, Fla. area, and will be expanded to the entire state in January 2007.

Wonders never cease. The VIX rallied .86 and closed at 12.25.

Tuesday, September 19, 2006

More Surprises

9/20/06 More Surprises

I am not sure what surprises me more- the 44% approval rating for Bush or the 30-year treasuries yielding only 4.85%.

Were you surprised by the coup in Thailand where that country's military overthrew Prime Minister Thaksin Shinawatra on Tuesday and declared a provisional authority loyal to King Bhumibol Adulyadej? Army Commander Gen. Sondhi Boonyaratkalin surrounded Thaksin's offices with tanks and troops and seized control of television stations, the Associated Press reported. Sondhi will serve as acting prime minister, Army spokesman Col. Akarat Chitroj said, according to the AP. Martial law was declared, the constitution revoked, and all troops were ordered not to leave duty stations without permission. Thailand's stock exchange will be closed, as well as banks, schools and government offices on Wednesday, the AP reported.

This should not come as a surprise. A group of Iranian reporters and photographers who were to travel with President Mahmoud Ahmadinejad to New York were refused visas by US State Department officials although they had officially applied for such visas one week earlier, it was reported here Tuesday.

Iran and Venezuela here Sunday signed 29 memoranda of understanding for expansion of bilateral cooperation in various fields on the first day of an official visit by Iranian President Mahmoud Ahmadinejad to this Latin American state. Cooperation in various activities in the field of oil and gas, including exploration and construction of oil rigs and tankers, construction of ships and airplanes, expansion of their aviation industries, establishment of an engineering company for downstream industries, cooperation in maritime trade and setting up of a joint oil trading company were the subjects covered by documents signed by the two countries' officials.

Over the last 46 trading days the VIX has ranged from 19.58 to 10.99. It now sits around 11.50. I would be very surprised if in the next 46 trading days the VIX did not trade at least as high as 17. Thus, going long the 10 call and selling the 15 call makes some sense to me- especially with a time horizon going out to May 2007.

Foundation Coal made a new 52-week low at $29.49. It's down from the high of $57+.

J.P. Morgan Chase CFO Mike Cavanagh said Wednesday that the firm thinks volatility in the trading business at its investment bank is too high, and it wants to lessen it. Judging from the VIX, you wouldn't think there is much volatility coming around the bend.

This year the purchasing power of the dollar has declined by more than 7% on an annualized basis. Now compare that with the rise in the S&P 500. The pundits will tell you that the Dow is only about 500 points from an all-time high reached in 2000.
How much has the dollar fallen since 2000? How much has gold risen? How much has gas at the pump risen? You still feel all giddy? Take a cold shower and look reality in the face. This Administration has plundered the economy with its spending and raising the debt limit four times. There is no free lunch for stupidity.

At Wednesday's close I was able to find 5 uncommon values. Each company's shares made a new 52-week low today and each is down significantly from its 52-week high. In addition, each sells at a big discount to its on-going enterprise value as well as its historical relationship to its cash flow generated per share. The five companies are: ConocoPhillips, BJ Services, Helmerich and Payne (which owns 22% of Atwood Oceanics), Peabody Coal, and Foundation Coal. Not only are they uncommon values, but each has potential as a takeover target. I only consider companies uncommon values when I believe strongly that they will generate 30%+ returns over the next 12 months with limited downside risk. Those selling these stocks will look back at this period and realize the herd mentality did them in-- as it always does.

Please Take Note

9/20/06 Please Take Note

I want to thank George Ure for providing this information:
"18 September 2006: In an article provided exclusively
to the Northeast Intelligence Network and Canada Free
Press by Dr. Paul Williams and Mr. David Dastych on
Saturday, “final preparations have been made for the
next major attack on the US” identified as “American
Hiroshima,” suggesting the attack will be nuclear in
nature. Since we published that report, confidential
sources in law enforcement positions have privately
confirmed to the Northeast Intelligence Network that a
"disturbing trend" is being reported on both of our
borders – a pattern that is consistent with a
potential nuclear attack scenario against the US.
According to these sources, a "significant and
alarming number" of illegal aliens attempting entry
into the US, caught by border patrol agents, have been
found to be carrying Potassium Iodide tablets, which
are used to protect against exposure to radiation in
emergency situations.*
According to our sources, the illegal aliens who have
been caught have been described as OTMs (other-than
Mexicans), and consist primarily of Chinese and
Iranian nationals on our southern border, and Asians
and others from a variety of Middle Eastern countries
at the US-Canadian border. Law enforcement sources
providing this information to the Northeast
Intelligence Network agreed that this is “a very
recent phenomena,” but one that has increased to
“alarming levels” and is of particular concern to
government officials.
Additional and more specific information will be
contained in the upcoming issue of the HQ INTEL-ALERT
Private Intelligence Report.
*NOTE: An astute and well-educated reader accurately
points out that Potassium Iodate, also referred to as
KI, protects only one organ in the body (the thyroid)
from ONE form of radiation (I-131). And it does so
only if a person takes the tablet BEFORE (or just
after) being exposed to I-131, as the KI fills up the
thyroid gland with "good" salt instead of the
radioactive version."

Tuesday morning there was a reported coup in Thailand with the military taking control of the government.

Stephen Roach: "After three years of extraordinary outperformance, denial over the possibility of a sustained downside adjustment in commodity prices is very much in evidence -- underscoring the time-honored sociology of an asset class that has gone to excess. Meanwhile, China and US-housing-related fundamentals are going the other way -- setting up increasingly tender commodity markets for unpleasant downside surprises on the demand side of the global economy. The herding instincts of institutional investors could well magnify the price declines -- when, and if, they emerge. All this suggests there is still plenty of life left in the time-honored commodity cycle."

The Chrysler group will cut its production by around 90,000 units in the third quarter and around 135,000 in the second half of this year to try to reduce a glut of inventory, the company said today.
In a presentation made available before a conference call, the Chrysler group said deliveries to dealers would fall to around 380,000 units in the third quarter and to 705,000 in the second half. The Chrysler group expected deliveries to rise again in 2007 and subsequent years.

Housing starts plunged 6 percent last month to an annual rate of 1.665 million, the Commerce Department said today in Washington, a steeper slide than economists forecasts. Building permits dropped to an annual rate of 1.722 million from 1.763 million the prior month. Not since May to November 1986 have permits declined seven straight months.

Yahoo! Inc., the most-visited U.S. Web site, said profit and sales this quarter will be at the low end of its forecast on slower advertising demand from automakers and financial services providers. The shares slumped as much as 13 percent.
"We have seen a little bit of weakness in the last three or four weeks,'' Chief Financial Officer Susan Decker said today at a Goldman, Sachs & Co. conference in New York. ``It is having an impact on our quarter." With incentives provided by the GM, Ford, and Chrysler, the prices of autos dropped and so did the profit margins. It should not come as a surprise that advertising would be reduced. The bottomline for my money is that at $25+ the market cap still is close to 20 times the cash from operations. We can do better than that.

Chuck Butler: “The Net Foreign Security Purchases (NFSP) which need to be around $70-75 billion each month to finance the deficit, only amounted to $32.9 billion in July. That's right less than half the amount needed!”

Prices of raw materials and other producers' inputs rose a slim 0.1% in August, the Labor Department said. Excluding food and energy costs, the core PPI fell 0.4%. This is the biggest drop in core PPI since April 2003 and the first two-month decline since late 2002. If you consider the drop in auto prices, the PPI takes on a different view. Of course, the treasury market rallied strongly and the yield on the 30-year declined to 4.86%. It's hard to believe but true. The dollar took a dip but remained well above the most recent lows.

"To slow growth in exports, a better way would be to allow the yuan to gain faster, specifically around 5 percent cumulatively, annually," Zhu Baoliang, deputy director of economic forecasting at the State Information Center, said in an interview. The Center is an affiliate of the National Development and Reform Commission, China's top planning body.

Richard Daughty: "How ridiculous is the fractional-reserve ratio?" I laugh derisively and say "It can only be crudely estimated by the difference between a paltry $798 billion in cash, and the sum total of everything else! Zillions of dollars in assets, created by an equivalent debt! Hahaha! We're freaking doomed! Doomed! Hahaha! Welcome to the insane hell of fractional-reserve banking!"

Crude took a big hit to $61.70 a barrel and gold backtracked $9.60 an ounce. Meanwhile unleaded gas plummeted to $1.49 a gallon. You can expect further drops at the pump.

Cramer makes the point that the market is shifting from oil to tech and says buy Cisco. I did recommend Cisco at $16.50. I don't believe it represents value at $22.50. For my money I can think of a lot more values in the energy patch, and that's for all types of investors. Just because a stock is down from $80 or so, doesn't make Cisco a value at $22.50. That's just my view from the cheap seats.

BJ Services traded at a new 52-week low at $29.86.

Medtronic Inc. said the Food and Drug Administration's orthopedic and rehabilitation devices advisory panel has unanimously recommended approval of its Prestige cervical disc system. The panel's recommendation will be considered by the FDA in its review of the pre-market approval application for the device, Medtronic said.

Monday, September 18, 2006

Trouble Brewing?

9/18/06 Trouble Brewing?

David Bloom, global head of currency strategy at HSBC,
said: "It is the US that we are worried about as the
housing market turns down. The US needs nearly one
trillion dollars of foreign money each year just to
stand still. If people around the rest of the world
start keeping their money at home for any reason, the
dollar will face a serious decline and we think it
will kick in later this year.
"The risk has moved from the outskirts to the heart of
the system, and it's now pressing on the very aorta of
capitalism."

The 12-billion-dollar Indian realty sector is growing at the rate of 30 per cent annually, with the information technology (IT) and business process-outsourcing sectors powering the growth, the joint study by the Federation of Indian Chambers of Commerce and Industry (FICI) and global consultancy firm Ernst and Young said.
IT and business processing outsourcing industries alone will need 367 million square feet of space by 2012-2013, a statement by FICCI quoting the study said.
The study, however, cautioned that this demand was dependent on the growth of the IT sector which faced stiff competition from countries such as Poland and China.

The direction of reform is clear and our determination is firm. We will not backtrack,’ Zhou, governor of the People’s Bank of China, told reporters.
But he said currency reforms would be gradual. Policy makers would take account of China’s ability to adapt to changes in the exchange rate as well as the country’s international responsibilities.
‘We will keep the renminbi’s exchange rate relatively stable at a rational and balanced level,’ said Zhou, speaking during the annual meeting of the International Monetary Fund and World Bank.
China revalued the yuan CNYCFXS, or renminbi, by 2.1 percent against the dollar in July 2005 and scrapped a decade-old dollar peg in favour of a managed float.
Since then, to the frustration of critics who say the currency remains grossly undervalued, the yuan has gained only a further 2 percent.
Under the floating regime, the yuan may rise or fall by 0.3 percent a day from a midpoint rate set every morning by the People’s Bank. The daily band against other major currencies is plus or minus 3.0 percent.

John Hussman: "There's presently no evidence in the quality of market action that investors have adopted a robust speculative mood. Good investments are those based not on hope, but on some foundation of evidence – either of reliable “investment merit” (based on properly normalized valuations), or of measurable “speculative merit” (based on the quality of market action). Taking a significant exposure to market risk without such foundations is like moving into a house built on sand.
The NYSE registered 193 new highs on Friday. This was fewer daily new highs than we observed two weeks ago, and less than half the number registered in early May. Weekly new highs also fell far short of the April-May period. Despite the recent advance in the major indices, the Dow, S&P 500, Nasdaq and Russell 2000 all remain below their April-May highs. Since early April, when our measures of market action shifted from neutral to unfavorable, the S&P 500 has delivered a total return about equal to the return on risk-free Treasury bills (within a fraction of 1%). This simply is not a market that is “running away,” but rather one that is range-bound and now strenuously overbought."

The Administration points to Medicare and Social Security as the main ills for the growing deficit. Our U.S. total public debt is close to $8.5 trillion. Interest on this debt will approach $420 billion in the year ended Sept 30, 2006 and this will be $50+ billion more than in the prior year. Next year it will easily exceed $450 billion. You probably didn't know this. How much gold does the government own? A puny $11 billion worth. You can be fool and think our deficits will decline. What will decline will be the worth of the dollar. In time, you can use it for wallpaper.
I would think twice before you sell or short gold. And that goes for silver too.

The current account shortfall totaled $218.4 billion in the second quarter, larger than Wall Street forecasts of $214 billion, a Commerce Department report showed.
The government also raised its estimate of the first-quarter current account deficit to $213.2 billion from a previously reported $208.7 billion.
The current account is the broadest measure of U.S. trade with the rest of the world, including both trade in goods and investment flows.
Is there trouble brewing?

Keeping It Real

9/17/06 Keeping It Real

Target Corp.late Monday said it now expects sales at stores open at least a year to rise around 5% in September vs. a previous forecast for a 3% to 5% rise. Same-store sales at the discount retailer rose 5.6% in September of 2005.

Retail gasoline prices plunged 12 cents a gallon last week to average $2.55, the lowest average price since March, the Energy Department said Monday. The 12-cent drop was the biggest decline since last October. Pump prices have fallen by 53 cents, or 17%, in the past six weeks. Even in Marin County, Ca unleaded gas at an Arco station was $2.51.

Meritage Homes Corp. after Monday's closing bell said it sees third-quarter results near or slightly below the lower end of the company's prior view due to "further deterioration in market conditions," and that it will be "difficult to achieve" its outlook for the rest of the year. The Scottsdale, Ariz.-based homebuilder added that July and August preliminary net new orders were 38% lower than during the same period in the prior year, while home closings rose 17%.

Con-way Inc after Monday's closing bell lowered its view for third-quarter earnings per share from continuing operations to a range of $1.10 to $1.15 from its prior outlook of $1.21 to $1.29. The San Mateo, Calif.-based freight transportation company cited issues such as business volumes that are lower than expectation at the company's less-than-truckload operating unit.

The Treasury Department said capital flows skidded to $32.9 billion in July, the smallest inflow since May 2005. Michael Wallace, a strategist at research firm Action Economics stated "The capital inflows were not even really half of the (trade) deficit." Does this concern you?

BP announced Monday afternoon that repair of sub-sea production equipment will delay the start up of production from its Thunder Horse platform in the Gulf of Mexico until at least the middle of 2008. October crude climbed 47 cents to close at $63.80.

December gold climbed $9.80, or 1.7%, to close Monday at a three-session high of $592.80 an ounce.

The confidence of U.S. home builders fell for the eighth straight month in September, dropping to the lowest level since February 1991, the National Association of Home Builders said Monday. The NAHB/Wells Fargo housing market index dropped by three points in September to 30 from a revised 33 in August, indicating that most builders think the housing market is poor. Economists expected the index to fall to 31. A year ago, the index was at 65.

Chief executives at major U.S. corporations were more pessimistic about the economy than anytime since the third quarter of 2003. The Business Roundtable CEO economic outlook index fell to 82.4 in the third quarter from 98.6 in the second quarter. "We believe that we are beginning to see the effects of energy and interest rate pricing pressures reflected in the business outlook," said Harold McGraw, Business Roundtable chairman and the chairman and CEO of The McGraw-Hill Companies. Chief executives "see things slowing down."