4/12/03 Read The Fine Print Not Just The Headlines

It was reported that GE's first quarter earnings per share were down 9% on a 1% revenue decline. However, provision for taxes dropped 30% and made the already dismal results look better than they actually were. The television and newspaper reporters failed to provide this little tidbit of information. As investors, it's your job to read the fine print.

Cemex SA, the world's third-largest cement maker, said first quarter profits dropped 71%. I thought construction was so booming.

In 2002 only 3.5% of U.S. equity funds produced positive results. Do you still want to invest in a mutual fund?

In Texas wholesale gasoline prices have been trending downward for over a month. The average price for regular unleaded is $1.52 per gallon in Texas. California officials said everything is on the up and up in their state's gasoline pricing. Maybe they should get their heads out of the tank. Gasoline still goes for $2 per gallon or so in the San Francisco area where they have some major refineries.

The U.S. Commerce Department said retail sales rose 2.1% in March. I have serious reservations about that figure. Would you prefer to believe WalMart, Target, Federated, Kohl's, Sears, JC Penney or the government? The latter are not required to attest to their numbers. The government said the sales were supposedly up due to strong auto sales; however, GM, Ford, and Chrysler said their sales were down. Retailers complained about lousy weather in March, and yet the government said sales were strong in garden shops. People must be planting in the snow and rain.

Lee Ah-Miu, age 73, lives in Hong Kong. In discussing SARS she said "I have never seen anything so bad in all my life and I am very old. I don't know if I can live to see the day when I walk around without a mask."

The commander of the 37,000 U.S. troops based in South Korea barred military and associated civilian staff from traveling to China and Hong Kong because of SARS.

The good news is that Chinese doctors recommend a potion containing dead silkworms and cicada skin as a protection against SARS. Now we have nothing to fear.

What will it take for traders and investors to comprehend that we are in a bear market? Yesterday the Dow rose 105 points in the first half hour of trading and the Nasdaq about 20 points. By the end of the first hour the gains were lost, and results would remain negative for the remainder of the day. It would be wise to stop throwing good money after bad. On the other hand, the bears are coining it.

RF Micro Devices announced a bigger than expected loss for the quarter and traded down to the $5 level. A few years ago the stock sold over $90.

Consumer sentiment in April rose to 83.2 from 77.6. This was better than economists had predicted, and was welcome news. At the same time declining stock prices and continuing job layoffs won't do much for the nation's on-going confidence.

Santa Clara-based wireless network equipment maker Netgear filed for an IPO. They had filed for an IPO in September 2000, but pulled the offering several months later due to market conditions. In the prospectus, the company cites SARS as a risk factor for potential investors.

Walt Disney, in a debt filing made Thursday, said SARS could potentially worsen their theme park business and "may also contribute to a reluctance to travel."

While looting continues in Iraq, the war toll is 107 killed, 399 wounded, and 10 missing in action.

Hong Kong's Cathay Pacific Airways is considering stopping all passenger flights in May due to a 70% decline in passenger traffic.

The WHO says SARS could spread worldwide by air travel.

Another 10,000 pink slips may be going to N.Y.C. workers.

4/11/03 Tommy Thompson: "Probably It Will Be A Year Before We Come Up With A Vaccine For SARS"

State Street to lay off 1800 workers. Proctor & Gamble to cut 275 jobs. Brocade Communications to let 115 go.

Crude oil at a three week low.

The Nikkei declined 2% to its lowest level since January 1983. Toyota, Sony, and Ito-Yokado, market leaders, were hit hard. Trading volume was especially heavy on the downside.

The Concorde is no more. Likewise Cypress Gardens.

The eurozone economy could very well have contracted in the first quarter.

As of April 9, 1290 cases of SARS had been identified in China. There is little question that China's outbreak of SARS is bigger than what their government has reported. Hospital statistics reveal a much larger problem.

Four percent of the identified cases of SARS have died. From a medical standpoint, that is a high percentage.

Three times as many companies are giving negative profit warnings as firms providing pleasant earning surprises.

In February the U.S. trade deficit amounted to $40.3 billion. No matter how you spin the number it was the third highest monthly deficit on record.

Microsoft has slashed Xbox prices by 20% in Europe.

SARS is impacting hotels, airlines,restaurants, and other services across Asia. Nine people in Singapore have died from SARS and 126 more have been infected. Singapore's Minister of Manpower, Lee Boon Yang, said on Thursday "we are facing an unprecedented situation. We are dealing with a serious, unseen threat." The country slapped a quarantine on arriving workers from China, Hong Kong, Canada and others for 10 days. In the last three weeks hotel occupancy in Singapore is down more than 50%.

In Kowloon there are over 50,000 people for every square kilometer. That excludes the untold number of cockroaches and rats.

Last Fall I warned of the slowing sales at WalMart. I specifically stated, if the best company in the industry and possibly the country was having difficulty, then watch out for the others in the industry. Yesterday WalMart reported March same-store sales up only 0.7%. The last time their same-store sales rose less than 2% was in December 2000. Therefore, it was not surprising that Target, Federated, Dillard's, JC Penney, and Sears all had declining same-store sales. Only Costco showed good results. By the way, for the thirteen straight month McDonald's had lower same-store sales. Bank of Tokyo-Mitsubishi Ltd economist Michael Niemira said "the consumer isn't just shifting towards discounters. It may be the consumer is holding off spending regardless of the venue." That has been my contention.

Hong Kong-based Political and Economic Risk Consulting ranked China's health care system next to last in the region, ahead of only Indonesia.

Motorola is one of the largest investors in China. The company has restricted travel to SARS-impacted areas and is permitting workers to leave Guangdong and Hong Kong.

India-based IT consulting services firm, Infosys, is cautious for the quarter and for the whole year. The stock dropped 30% yesterday.

A survey of the Business Roundtable indicated that only 9% of U.S. executives expect to hire new workers while 45% expect to have worker layoffs. Twenty seven percent expected to reduce their capital spending. Forty four percent of the companies said rising health care costs were the greatest cost pressure they are facing.

Twenty five percent of Hong Kong's 1000+ SARS cases are health workers. Reportedly, 30 people have died from SARS in Hong Kong. I believe that figure is understated.

The CDC said that SARS does not look like anything they have seen before in animals or in people in the U.S. It's possible, they said, the damage is caused by the body's immune response killing the healthy cells plus the microbes.

2002 was the first negative return year for hedge funds since 1987. Supposedly, there are more than 6000 hedge funds. In my view, there are too many mutual funds, too many hedge funds, and too many VC funds.

Some analysts have said that Yahoo is trading at a discount to both eBay and Amazon.com. That is true; however, that statement fails to suggest that eBay and Amazon.com lack good value at current trading levels. I believe this is the case. No one has proven to me you need to overpay for 20 to 30% annual growth. To illustrate my point, take First Data Corp. They will earn $1.90 per share, the stock trades at 35, and they are the leading processor of credit cards purchases in the U.S.

I have received some emails asking why I am making such a big deal about SARS. It is a big deal, and globally is getting to be a bigger deal every day. It will be in the headlines long after many of our troops have left Iraq.

4/10/03 Headlines Provide An Incomplete Story

Yesterday the world watched a 20 foot statue of Hussein come down in Baghdad. 100 soldiers died, about 180 have been injured, and eight are still missing in action. Hussein ruled for 24 years, and because of our military skills and the determination of our troops, he was overthrown in three weeks. It says a lot about our fighting men and women. As the statue came down, the Dow rose 75 points. It looked like a wonderful day in the neighborhood. The other half of the day emerged. Another U.S. soldier was killed and another 20 were injured in fighting in Iraq. Then we learned that a friendly-fire incident killed 11 civilians in Afghanistan. War is devastating. The toll mounts long after the shooting stops. The market knows from reality. By the end of the trading day the Dow lost 100 points and the Nasdaq declined 26 points.

WalMart is in my view our country's finest public company. They set the standard in many areas. The company consistently is ahead of the pack. Yesterday they limited employee travel because of SARS.

Gold closed up three dollars at $326 per ounce.

AT&T closed at its lowest price $14.67, in almost 20 years. The company expects to report a loss and more job cuts.

Dun and Bradstreet expects earnings to miss expectations. The stock dropped almost 5 points yesterday.

Stanley Works cuts 1000 jobs, Nokia 1800, and Applied Micro Circuits 275.

The director of the CBO said that medicare beneficiaries will spend $1.8 trillion on prescription drugs over the next 10 years. I think that number is low.

Dr. Jim Hughes, head of infectious diseases at the CDC, said "I think we have to assume that the SARS virus is in Asia to stay." He said it may well remain in the U.S. too.

Mexico's inflation rate accelerated in March to a yearly rate of 5.64%.

With Yahoo selling at 60 times estimated earnings, where's the value?

Spirit Airlines, the largest U.S. privately held airline and a leading low-fare carrier, reported a 9% rise in March in their load factor and a 19% increase in revenue pasenger miles. These results are due to good management, fair pricing, and strict attention to the needs of the customer.

Nordstrom as well as American Eagle announced declines in March same store sales.

The Nikkei dropped below 8000 and Sony hit a 4 year low.

The IMF chief economist, Kenneth Rogoff, said he believes the Bush propoed tax cuts were "awkwardly timed" because they would add to a budget deficit already rising sharply. He criticized Alan Greenspan and other central bank officials for failing to combat falling prices which have impacted Japan and which threaten weak growth in the U.S. and Europe.

Microsoft has about $45 billion in cash. About one quarter of its 2002 income came from its investments. Unfortunately, its equity investments have not been nearly as successful as the returns from its software business. For the first time Microsoft is allowing hardware makers to modify the CE code and sell devices based on that code. This will enable "derivative works" to be produced by others.

Currently, Philip Morris has until April 21 to pay the full $12 billion bond. Madison County Judge Nicholas Byron doesn't want to bakrupt the company. The lead plaintiff lawyer believes the company has the funds to pay the $12 billion without bankrupting them. I think they can come up with the money but believe each side will give somewhat.

The Congress won't vote on the proposed Bush tax cut proposal for another thirty days. It must not be such a pressing matter.

Doctors and nurses in Hong Kong are contracting SARS at an astonishing rate. This illness will kill a great many people.

I read every day where long-time bears are throwing in the towel on this bear market. Each person has a perfect right to change an opinion. I give them credit for believing in their own convictions. At the same time I question their analytical processes. I am ecstatic about the three week accomplishments of our troops in Iraq. At the same time my pessimism about the global economy has increased during that period of time. SARS is a growing problem, and second half optimists will be immensely disappointed.

4/9/03 Your Neighborhood Cockroach May Cause SARS

N.Y.C. to lay off 2000 education workers. Qantas Airways to let 1000 go. Tecumseh Products gives pink slip notices to 550. Barra to cut 9% of their workforce.

The war on Iraq has produced 95 dead, 155 wounded, and 8 MIAs.

The Philip Morris judge says the company may not have to post a $12 billion bond to appeal a $10 billion damage suit. They may have to post the damaged lungs of the company's top brass. Just a joke.

Japanese companies plan to cut back on capital spending in 2003 by 2.2% for the third straight year.

Global airlines body IATA warned that SARS could hurt the industry more than the Iraq war. For example, Cathay says SARS has "annihilated" passenger bookings.

Due to SARS, Malaysia bars visitors from China and Hong Kong.

In Chinatowns around the U.S. people are scared. For many, business is down 50% in the last two weeks. People are afraid of SARS, and aren't coming to Chinatown. On the other hand, family medical practices are seeing more patients as they arrive with cold symptoms and want to be checked for SARS.

The dollar is already about two cents weaker vs the euro from its strongest level since the war started. This is a good clue that the war rally on Wall St. has come to a close.

The Federal government gave San Francisco $10 million for the fight on terrorism. I guess the fight is expected to go only a few rounds.

Gartner, Inc. said for the second consecutive year worldwide semionductor manufacturing sales declined by more than 30%.

Sales at major U.S. chain stores fell 2.5% in the week ended April 5 compared with the same week a year ago.

Disney's stock is selling at about 30 times estimated 2003 earnings. Where's the value?

Between 1995 and 2010 the 45+ age bracket will grow 3 times as quickly as the rest of the population. Baby boomers now control 43% of the nation's disposable income.

Joseph DeRisi is a researcher at UCSF and he created a computer "virus chip" which identified SARS as a type of coronavirus which, he said, "is not a simple mutation of a human virus." Despite anything you might read or hear about SARS, DeRisi's statement indicates trouble ahead.

Cockroaches may carry the SARS virus. Everyone needs to be extra careful about the people with whom they associate.

Here's a no brainer. Which economy is more important to you- that of the U.S. or post-war Iraq?

4/8/03 Selling On The News

The weekend war news was so encouraging that the amateurs pounced on the markets in the early going yesterday, and then they got pounded. Before the day was over a significant reversal had taken place. After being up 242 points, The Dow staggered to a meager 21 point gain. The Nasdaq had gained over 3% and barely could hold a plus side of 7 points. The S&P 500 had been at 904 and ended almost unchanged at 880. When your entry point is poor, lessons from Wall Street can be expensive. Follow the leader doesn't hack it on the corner of Broad and Wall streets. In Iraq they take prisoners of war. The stock market doesn't take prisoners.

Another potentially lethal venue is SARS. We know over 100 people have now been killed, 2700 have been infected, and it has found its way into 16 countries. SARS targets the world.Yesterday India reported its first SARS case. We are aware that the disease is spread easily from person to person. It may have multiple ways to spread. It also originated in a part of the world that sees a great many travelers. There is no cure for SARS nor a vaccine. Fast recognition appears the only possible solution. The director of the CDC said yesterday "we may see further spread of the disease in this country...we don't know where this is going to go." It was suggested to avoid travel to Hong Kong, Hanoi, Singapore, and China. Hopefully, SARS will not be like the 1918 flu when more than 20 million people died.

Recently, retail sales have dropped 50% in Hong Kong.

Consumer credit for February increased $1.5 billion vs consensus of $3 billion. Total consumer debt is $1.74 trillion.

N.Y.C. will lay off 3400 workers in the next 30 days.

Citigroup will lay off additional traders and salesmen in its global equities business.

March consumer confidence in Tokyo worsened, and fell 1.5 points to 38.8. This reveals a serious level of pessimism.

U.K. retail sales last month fell the most in 11 years.

Our states are suffering their worst budget crises since WW II.

U.S. movie ticket sales have dropped 8% from last year.

When the Iraqi war started, consumer confidence picked up. More job cuts, disappointing earnings, and growing deaths from SARS will take consumer confidence down again, and to new lows.

The Fed's top monetary policy staffer said "the best policy for dealing with deflation is to avoid it strenuously by acting preemptively." Does preemptively mean waiting from 2001 to do something about deflation?

4/7/03 The Labor "Underutilization" Rate

There are about 5 million workers who have taken part-time jobs because they couldn't get full-time work. If you add them to the country's 8.5 million unemployed, plus discouraged job-seekers who have stopped looking for work, you have just under a 11% labor "underutilization" rate in February.

The labor pool is growing in substitute teaching. In the Chicago public schools the number of substitutes has about doubled in the past year to over 8000.

New York City has lost 223,000 jobs in the past two years. Local unemployment stands at a five year high of 8.6%. Last year applications for food stamps rose 20%. However, business is booming at pawnshops. People want cash rather than Rolex watches.

In 1997 William Strauss and Neil Howe wrote "The Fourth Turning:An American Prophecy". They predicted "a global terrorist group blows up an aircraft and announces it possesses portable nuclear weapons. The United States and its allies launch a preemptive strike. The terrorists threaten to retaliate against an American city. Congress declares war and authorizes unlimited house-to-house searches. Opponents charge the president concocted the emergency for political purposes." The authors predicted an era with 20 years of global crisis.

The Washington Times reports that 14 al Qaeda members are in Mexico working with Mexican crime organizations in an attempt to enter the U.S. covertly and conduct a terrorist attack.

Chemical Ali is dead.

Gordon Brown will deliver the UK's annual budget. The country's growth prospects will be cut.

The Pentagon says the U.S. military will govern Iraq for at least six months. Will that be a situation that pleases Tony Blair? He is our best friend on the global landscape.

Roger Clemens is five wins from the 300 club.

North Sea Brent crude oil declined to $23.50 per barrel. Gas at the pump is not coming down fast enough. It is way too high given current crude pricing.

For the first time the number of people in U.S. prisons and jails exceeds 2 million. That excludes juvenile offenders. This means that one in every 142 U.S. residents is imprisoned or in jail.

The Illinois legislative pension plan provides those with 20 years of government service to collect a pension based on 85% of the salary of their choosing, and they receive a 3% increase in their pensions after that. Pensions grow by 3% annually once an individual turns 60. Still this is not enough of a reward, in my view, for working a government job for 20 years. At the end of each day your soul pays too stiff a price.

Alan Greenspan: "Ownership of physical property is capable of being defended by police, the militia, or private mercenaries. Ownership of ideas is far less easily protected."

Some experts have linked SARS to a new form of coronavirus, other types are usually found in animals. Chinese specialists, however, link many SARS deaths to a rare form of the virus chlamydia, usually transmitted thru sexual contact.

In Texas Cash Today as well as Harrigans have filed for chapter 11.

This morning witnessed stocks soaring on the international markets; government bonds plunged in price and yields increased; the dollar rose to a 2-week high against the euro, yen, and Swiss franc; the Nikkei was up over 2%; and gold hit a 4-month low around $320.50 per ounce in Asia.

When the shelling in Baghdad ceases, stocks will plunge with fervor. Peace will not produce prosperity. Only jobs ring cash registers. The "underutilized" can tell you all about that.

4/6/03 AdJusted For Inflation The GDP Has Declined For The Past Six Months

The average per capita GDP in the whole of China is $900, but it's $5000 in Shanghai.

The latest survey by Investors Intelligence reveals that 47% of investment-newsletter writers are bullish on U.S. stocks and 35% are bearish.

China is Washington state's third-largest trading partner.

Paul Wolfowitz, the U.S. deputy defense secretary, said today that it would take more than six months to create a new Iraqi government after the Hussein regime is defeated. More than six months may mean years. It should also be noted that we still have soldiers in Germany after almost six decades.

With our consumers retrenching, imports are beginning to decline.

The end of the war will not unleash corporate spending. Businesses require confidence in the future, and that is lacking due to contaction in many sectors.

Fed officials continue with heightened surveillance about the economy's "soft patch." Their time might be better spent considering their lack of performance.

Our Treasury secretary does not think a recession is likely. He would were he out of a job, couldn't find a new one for 19 months, and had his unemployment benefits run out. Snow's abilities might make him a good candidate for serving double-dip cones at the local Baskins and Robbins.

Syracuse freshman Carmelo Anthony is something special.

Sumitomo Mitsui warns of a big loss.

The death toll in Iraq keeps rising and the SARS disease continues to topple more as well.

In a few years California's population will amount to 20% of the people in the U.S. The state's budget deficit has a firm strangle hold, and will not let go. California, in my view, has seen its best days. If N.Y.C. can declare bankruptcy in the mid-1970s, so California can do so in the early 21st century.

Our armed forces came home from WW II with what scientists called GWVI. In the Gulf War soldiers returned home with "Gulf War Syndrome," and between 15,000 and 20,000 veterans reported a variety of illnesses when they returned. Maybe it was the smoke from burning oil wells, desert parasites, or other causes which have created on-going health problems these past dozen years. What will our troops bring home from Iraq? It won't be limited to liberating Iraq.