1/29/05 Making The Dream A Reality
I got a kick out of the presentation of the Gillette acquisition by P&G. They raised their annual sales growth target from 4 to 6% to 5 to 7% and stated that revenues and cost synergies would be $14 to $16 billion with 6,000 employees losing their jobs. Who are they kidding? The key to the merger is Wal-Mart. The new P&G will do close to 20% over their revenue with Wal-Mart and much of that 6-8% growth will come on the backs of Wal-Mart's double-digit growth internationally. If the deal works out financially, stockholders of P&G can thank Wal-Mart and the weak dollar.
According to the Fed, M2 money supply grew at an annual 5.3% rate over the past twelve months. Meanwhile, fourth quarter GDP growth increased by 3.1%. Printing dollars does not ensure commensurate economic growth.
Cao Yushu, deputy secretary general of China's National Development and Reform Commission:
"To balance the demand and supply of coal will be the major task for China's economic control in 2005."
Chinese economist Fan Gang: "So the real issue is how to change the regime from a U.S. dollar pegging to a more manageable reference, say euros, yen, dollars---those kind of more diversified systems." If and when that happens, what do you think the impact will be on 10-year U.S. Treasury rates?
According to the BLS, for state and local government workers, compensation costs rose 1% in December, a gain from the 0.5% advance in September. Benefit cost increases accelerated to 1.4% for civilian workers (nonfarm private industry and state and local government) in the December 2004 quarter, following a gain of 1.1% in the September quarter.
I would like to take a moment and acknowledge the work done by Castrese Tipaldi and Enrico M. Di Francia. They provided the charts of the DOW and the S&P 500 since 1959, adjusted for the increase in M2. As they point out, "we chose Fed data not seasonally adjusted, because we've never paid our bills in a seasonally adjusted way." The charts illustrate that, in actuality, the DOW and the S&P 500 today are worth less than in 1959. Such misfortune can occur in a fiat-money system.
The DOW is currently below the 2003 year-end level.
The number of people continuing on unemployment benefits rose 142,000 to 2.84 million for the week ended Jan. 15, the largest rise in six months. So much for this recovery's job creation.
Yu Yongding, Chinese central bank advisor: "The U.S. should take the lead in putting its own house in order. It's the root cause of global imbalances."
Trade Representative Robert Zoellick: "One has to get the budget deficit down, but the question is how to do it." He should speak with Cheney, who says deficits don't matter.
In the past week, M3 increased $26 billion to $9.460 trillion. For an $11 trillion economy, that's a lot of money supply flooding the system. Over the past 5 weeks, M3 has grown by $90.3 billion. No wonder Bill Gates stated "I'm short the dollar." The Fed's hyper printing press will ensure the continued decline of the dollar and this nation's declining purchasing power and standard of living.
China's oil-product imports rose 34% in 2004.
The Ministry of Finance stated "Japan's combined trade with China and Hong Kong exceeded that of the U.S. in 2004 for the first time." There is just so much foreign demand for Charmin.
Automotive supplier Johnson Controls will close its manufacturing plant in Glascow, Ky and put 297 workers on the unemployment rolls.
Friday, January 28, 2005
1/28/05 Dreams
Buffett calls P&G's proposed acquisition of Gillette a "dream deal." He's right. In one's wildest dreams what company would pay this price for razors and batteries? Sure, it will make P&G a larger consumer products company than Unilever. For the past five years under the present management, P&G has been buying companies---Wella, Clairol, Iams, and now Gillette. That's a lot of business to integrate. I'll stand on the sidelines for some time and watch the integration. Right now, in my opinion, the cost to buy Gillette is over the top.
When Microsoft announced paying a $32 billion special dividend, I suggested cutting back on holdings at $30 and above. Some analysts may get excited by Microsoft raising guidance for 2005. I am not interested in Microsoft as a hardware or an entertainment company. Microsoft's software attracted me close to 20 years ago. I know server sales are growing at 18% and that Halo 2 is a great success and that cash flow is running $1.2 billion per month. If the stock rallies to $27 and above, I'll cut back some more.
Some were surprised by the 3.1% GDP growth in the fourth quarter. It was the slowest growth in 7 quarters. The March quarter will be slower. I suggest expectations be lowered for growth and raised for inflation.
As anticipated a month ago, Boeing announced their 60-plane 7E7 deal with several China airlines. It's 3 years away and won't help the present growing trade deficit with China. That makes 116 firm orders for the 7E7.
Celestica will cut up to 5,000 jobs of its global workforce or 10 to 15%.
Buffett calls P&G's proposed acquisition of Gillette a "dream deal." He's right. In one's wildest dreams what company would pay this price for razors and batteries? Sure, it will make P&G a larger consumer products company than Unilever. For the past five years under the present management, P&G has been buying companies---Wella, Clairol, Iams, and now Gillette. That's a lot of business to integrate. I'll stand on the sidelines for some time and watch the integration. Right now, in my opinion, the cost to buy Gillette is over the top.
When Microsoft announced paying a $32 billion special dividend, I suggested cutting back on holdings at $30 and above. Some analysts may get excited by Microsoft raising guidance for 2005. I am not interested in Microsoft as a hardware or an entertainment company. Microsoft's software attracted me close to 20 years ago. I know server sales are growing at 18% and that Halo 2 is a great success and that cash flow is running $1.2 billion per month. If the stock rallies to $27 and above, I'll cut back some more.
Some were surprised by the 3.1% GDP growth in the fourth quarter. It was the slowest growth in 7 quarters. The March quarter will be slower. I suggest expectations be lowered for growth and raised for inflation.
As anticipated a month ago, Boeing announced their 60-plane 7E7 deal with several China airlines. It's 3 years away and won't help the present growing trade deficit with China. That makes 116 firm orders for the 7E7.
Celestica will cut up to 5,000 jobs of its global workforce or 10 to 15%.
Wednesday, January 26, 2005
1/27/05 Freedom
Unless freedom is accompanied by the truth, there can be no liberty. I find it disrespectful to discuss Iraq and freedom in the same breath. Invading Iraq was never about free elections and self-government. It was solely about WMD. At least 1,417 U.S. soldiers have been killed since we invaded. Depending on the source of information, upwards of 15,000 U.S. soldiers have been wounded and/or injured. That does not include the emotional damage borne by relatives on the home front nor does it include the emotional wear and tear absorbed while in hostile territory and away from home. The price of this war can never be measured because the lies erode the fabric of our nation. Our foreign policy is on an unsustainable path.
GE received $137 billion in tax breaks in 2004 due to the American Jobs Creation Act. The company also benefited from a growing percentage of its earnings generated from overseas locations, such as, India with low-tax jurisdictions.
Despite a decline in mortgage rates, last week applications for U.S. home mortgages decreased 3.6%.
Eight U.S. representatives and senators, including five Republicans, introduced a bill allowing Americans to import cheaper drugs from Canada and other countries.
The Michigan Retailers Association is the nation’s largest state trade association of general merchandise retailers. The December Michigan Retail Index found that 37% of retailers increased sales over the same month last year, while 15% reported as-good sales and 48% recorded declines. Thirty-seven percent of retailers believe their sales will increase for January-March over the same period last year, while 39% project as-good sales and 24% predict sales will decline. The results create a seasonally adjusted outlook index of 62.0, down substantially from 80.4 in November.
The CBO projects that, based on current law, mandatory-spending growth will average an annual 5.7% rate over the next decade.
The newly auctioned 10-year Treasury notes carried a yield of 3.245 percent. The notes attracted $2.01 in bids for every $1 in securities sold. That's below the recent average of $2.21. Indirect bidders, including closely followed demand from foreign central banks, fell to just under 30 percent, below the average of 50 percent. I continue to be amazed by the schmucks buying this paper. I guess they have a desire to lose capital. Possibly, they need a tax loss.
Readers remember our being short Lucent from early 2000 through the third quarter of 2002. Since then, I have been monitoring the operations of the company and, in particular, the leadership of their CEO, Pat Russo. She is turning this ship around. Expectations for 2005 are for mid-single digit revenue growth to $9.7 billion, up from $9.05 billion in 2004, with earnings of 18 cents per share. With a foothold in the 3-G network equipment, software, and services, and leadership in CDMA equipment and a growing UMTS business, gross margins are improving while expenses are being minimized. With the stock trading around $3.27, I believe it offers an opportunity for the long-term investor. The upside might surprise, and the downside risk appears modest.
In the journal “Health Affairs,” the Urban Institute’s Health Policy Center stated Medicaid costs rose from $205.7 billion in 2000 to $275.5 billion in 2003. Mike Leavitt, Health-Secretary designate, called the program “not efficient.” He might have used that description for 101% of government programs. As I have mentioned many times, Medicaid has placed heavy financial burdens on state budgets.
With respect to the ownership society, a nonpartisan public policy organization based in New York released a report and, “found that between 1973 and 2004, homeowner’s equity fell from 68.35 to 55% and that households cashed out $333 billion worth of equity from homes between 2001 and 2003. A majority of households that refinanced between 2001 and 2003 used cash equity from their homes to cover living expenses and pay down credit card debt. In 2002, the financial obligations ratio---the percentage of monthly income to the amount needed to manage monthly debt payments--- reached 18.56%, a single year record since the data started being collected in 1980. The rise of appraisal fraud fueled inflated home prices over the last several years. Appraisal fraud was the fastest type of mortgage fraud reported by lenders in 2000.”
Unless freedom is accompanied by the truth, there can be no liberty. I find it disrespectful to discuss Iraq and freedom in the same breath. Invading Iraq was never about free elections and self-government. It was solely about WMD. At least 1,417 U.S. soldiers have been killed since we invaded. Depending on the source of information, upwards of 15,000 U.S. soldiers have been wounded and/or injured. That does not include the emotional damage borne by relatives on the home front nor does it include the emotional wear and tear absorbed while in hostile territory and away from home. The price of this war can never be measured because the lies erode the fabric of our nation. Our foreign policy is on an unsustainable path.
GE received $137 billion in tax breaks in 2004 due to the American Jobs Creation Act. The company also benefited from a growing percentage of its earnings generated from overseas locations, such as, India with low-tax jurisdictions.
Despite a decline in mortgage rates, last week applications for U.S. home mortgages decreased 3.6%.
Eight U.S. representatives and senators, including five Republicans, introduced a bill allowing Americans to import cheaper drugs from Canada and other countries.
The Michigan Retailers Association is the nation’s largest state trade association of general merchandise retailers. The December Michigan Retail Index found that 37% of retailers increased sales over the same month last year, while 15% reported as-good sales and 48% recorded declines. Thirty-seven percent of retailers believe their sales will increase for January-March over the same period last year, while 39% project as-good sales and 24% predict sales will decline. The results create a seasonally adjusted outlook index of 62.0, down substantially from 80.4 in November.
The CBO projects that, based on current law, mandatory-spending growth will average an annual 5.7% rate over the next decade.
The newly auctioned 10-year Treasury notes carried a yield of 3.245 percent. The notes attracted $2.01 in bids for every $1 in securities sold. That's below the recent average of $2.21. Indirect bidders, including closely followed demand from foreign central banks, fell to just under 30 percent, below the average of 50 percent. I continue to be amazed by the schmucks buying this paper. I guess they have a desire to lose capital. Possibly, they need a tax loss.
Readers remember our being short Lucent from early 2000 through the third quarter of 2002. Since then, I have been monitoring the operations of the company and, in particular, the leadership of their CEO, Pat Russo. She is turning this ship around. Expectations for 2005 are for mid-single digit revenue growth to $9.7 billion, up from $9.05 billion in 2004, with earnings of 18 cents per share. With a foothold in the 3-G network equipment, software, and services, and leadership in CDMA equipment and a growing UMTS business, gross margins are improving while expenses are being minimized. With the stock trading around $3.27, I believe it offers an opportunity for the long-term investor. The upside might surprise, and the downside risk appears modest.
In the journal “Health Affairs,” the Urban Institute’s Health Policy Center stated Medicaid costs rose from $205.7 billion in 2000 to $275.5 billion in 2003. Mike Leavitt, Health-Secretary designate, called the program “not efficient.” He might have used that description for 101% of government programs. As I have mentioned many times, Medicaid has placed heavy financial burdens on state budgets.
With respect to the ownership society, a nonpartisan public policy organization based in New York released a report and, “found that between 1973 and 2004, homeowner’s equity fell from 68.35 to 55% and that households cashed out $333 billion worth of equity from homes between 2001 and 2003. A majority of households that refinanced between 2001 and 2003 used cash equity from their homes to cover living expenses and pay down credit card debt. In 2002, the financial obligations ratio---the percentage of monthly income to the amount needed to manage monthly debt payments--- reached 18.56%, a single year record since the data started being collected in 1980. The rise of appraisal fraud fueled inflated home prices over the last several years. Appraisal fraud was the fastest type of mortgage fraud reported by lenders in 2000.”
1/26/05 Taking The Cure
It was fantasy day on Capitol Hill. Yesterday, the CBO revised upwards their deficit projection for fiscal 2005, the one completed in September. The Congress munched on another silver spoon supplemental. Fiscal restraint pledges from this Administration mean nothing. Fiscal projections are but mindless numbers. For example, prior to the March 2003 invasion of Iraq, the cost of the war was projected at $50 billion.
With yesterday’s $80 billion supplemental request, the costs for military operations in Iraq and Afghanistan approach $300 billion. I feel confident that these numbers have little meaning to most Americans. Let’s approach numbers in this fashion. Sixty three billion seconds ago Jesus was alive. Does that put an $80 billion supplemental in another light? The CBO stated that, from October 1, 2004 through December 31, 2004, tax receipts were 11% higher than the corresponding period in 2003 and corporate tax receipts rose 50% from the like period. Knowing that, the CBO still predicted an increase in the 2005 deficit from 2004’s record $412 billion. Simply put, government spending is a cancer. It’s a growth that has no boundaries. Any individual, money manager, or non-U.S. central bank that continues to hold 10-year or 30-year U.S. Treasury bonds is a schmuck of the first order and should be committed. Our financial house is crumbling. I question Bush’s resolve in reducing government spending. I may not be from Missouri but I’m in the show me camp.
There will be other supplemental budget requests for Iraq. Army Lt. Gen. James J. Lovelace stated about 120,000 U.S. troops will stay in Iraq at least through 2006. We’re spending about $5 billion a month in Iraq.
Members of the Fed continue to be unconcerned with the rate of inflation. In Illinois, the state’s two largest utility companies stated the average home gas bill in December was almost 20% higher than the corresponding period one year ago and, for many, 88% higher than December 2000.
Firefox has been downloaded over 20 million times, and its share of the browser market is at least 5%. Look for it to rise further as Google considers incorporating Firefox into its offerings of web services.
According to a recent study by Gary Gorton and K. Geert Rouwenhorst, historical data reveals that, overall from the early part of a recession to late in a recession, the highest returns for all asset classes are sugar and soybean oil.
Some months back, in searching for opportunities in the technology sector, I suggested Veritas and Informatica (INFA). Yesterday, in its latest report, management stated that the fourth quarter set a record for Informatica. They had the highest revenues, the most number of transactions, and the largest number of million-dollar deals in a quarter. They signed repeat business with 226 customers. They signed 65 new customers. They expanded their relationship with Siebel, IBM, Sybase, and continued to expand internationally. Forrester Research named them the leading enterprise data integration vendor and DM Review named the company number-one in data integration. Since my original mention, the stock has moved from $5.50 to $7.50. However, with cash and equivalents and short term investments approaching $3 per share, and with a focused growth strategy, adding to our position could hold merit.
In addition to Informatica, I would suggest looking at Selestica (SLTC). The stock is selling just under $3.50 and a private company in Texas has offered to purchase them at $4 a share. I believe Selestica’s balance sheet and outlook offer more value than $4 a share. In my view, the risk/reward is a favorable one.
The Conference Board’s Consumer Confidence Index offered a mixed picture for January with the survey’s cutoff date one week ago. The short-term current outlook was favorable but looking further out expectations were not as rosy. The outlook for the labor market remained virtually unchanged.
Sales of existing homes in the U.S. fell by 3.3% in December from a record November high. David Lereah, chief economist for the National Association of Realtors, stated “our sense was that November sales were the peak for the current housing cycle, but activity remains strong. There is no sign of a downturn.” Lereah stated that 2005 home sales should be the second best on record. The supply of homes available for sale at the current sales pace was 3.9 months in December.
Provident Bank will eliminate 364 positions in Cincinnati by the end of March. Tellabs will cut another 300 to 320 jobs. Solutia Inc. will close the last acrylic fiber plant in North America by mid-April. The facility is in Decatur, and 500 workers will lose their jobs. Cargill is closing its Yuba County meat processing plant. It will leave 240 without a job. SBC will cut 7,000 jobs in 2005. This represents 4.4% of the 163,000 workforce.
Yesterday, traders went home with a sigh of relief. The DOW rose over 90 points. Unfortunately, the advances did not match declines and the relationship over on the NASDAQ was not much better. This morning traders are encouraged by the forecasting ability of Oracle’s top management. Their prediction for 2005 was unchanged at 62 cents per share but, behold, expectations for 2006 were raised to a minimum of 76 cents a share. Maybe we should take a poll. Whose long-range projections are more accurate--- those of the CBO or Oracle?
It was fantasy day on Capitol Hill. Yesterday, the CBO revised upwards their deficit projection for fiscal 2005, the one completed in September. The Congress munched on another silver spoon supplemental. Fiscal restraint pledges from this Administration mean nothing. Fiscal projections are but mindless numbers. For example, prior to the March 2003 invasion of Iraq, the cost of the war was projected at $50 billion.
With yesterday’s $80 billion supplemental request, the costs for military operations in Iraq and Afghanistan approach $300 billion. I feel confident that these numbers have little meaning to most Americans. Let’s approach numbers in this fashion. Sixty three billion seconds ago Jesus was alive. Does that put an $80 billion supplemental in another light? The CBO stated that, from October 1, 2004 through December 31, 2004, tax receipts were 11% higher than the corresponding period in 2003 and corporate tax receipts rose 50% from the like period. Knowing that, the CBO still predicted an increase in the 2005 deficit from 2004’s record $412 billion. Simply put, government spending is a cancer. It’s a growth that has no boundaries. Any individual, money manager, or non-U.S. central bank that continues to hold 10-year or 30-year U.S. Treasury bonds is a schmuck of the first order and should be committed. Our financial house is crumbling. I question Bush’s resolve in reducing government spending. I may not be from Missouri but I’m in the show me camp.
There will be other supplemental budget requests for Iraq. Army Lt. Gen. James J. Lovelace stated about 120,000 U.S. troops will stay in Iraq at least through 2006. We’re spending about $5 billion a month in Iraq.
Members of the Fed continue to be unconcerned with the rate of inflation. In Illinois, the state’s two largest utility companies stated the average home gas bill in December was almost 20% higher than the corresponding period one year ago and, for many, 88% higher than December 2000.
Firefox has been downloaded over 20 million times, and its share of the browser market is at least 5%. Look for it to rise further as Google considers incorporating Firefox into its offerings of web services.
According to a recent study by Gary Gorton and K. Geert Rouwenhorst, historical data reveals that, overall from the early part of a recession to late in a recession, the highest returns for all asset classes are sugar and soybean oil.
Some months back, in searching for opportunities in the technology sector, I suggested Veritas and Informatica (INFA). Yesterday, in its latest report, management stated that the fourth quarter set a record for Informatica. They had the highest revenues, the most number of transactions, and the largest number of million-dollar deals in a quarter. They signed repeat business with 226 customers. They signed 65 new customers. They expanded their relationship with Siebel, IBM, Sybase, and continued to expand internationally. Forrester Research named them the leading enterprise data integration vendor and DM Review named the company number-one in data integration. Since my original mention, the stock has moved from $5.50 to $7.50. However, with cash and equivalents and short term investments approaching $3 per share, and with a focused growth strategy, adding to our position could hold merit.
In addition to Informatica, I would suggest looking at Selestica (SLTC). The stock is selling just under $3.50 and a private company in Texas has offered to purchase them at $4 a share. I believe Selestica’s balance sheet and outlook offer more value than $4 a share. In my view, the risk/reward is a favorable one.
The Conference Board’s Consumer Confidence Index offered a mixed picture for January with the survey’s cutoff date one week ago. The short-term current outlook was favorable but looking further out expectations were not as rosy. The outlook for the labor market remained virtually unchanged.
Sales of existing homes in the U.S. fell by 3.3% in December from a record November high. David Lereah, chief economist for the National Association of Realtors, stated “our sense was that November sales were the peak for the current housing cycle, but activity remains strong. There is no sign of a downturn.” Lereah stated that 2005 home sales should be the second best on record. The supply of homes available for sale at the current sales pace was 3.9 months in December.
Provident Bank will eliminate 364 positions in Cincinnati by the end of March. Tellabs will cut another 300 to 320 jobs. Solutia Inc. will close the last acrylic fiber plant in North America by mid-April. The facility is in Decatur, and 500 workers will lose their jobs. Cargill is closing its Yuba County meat processing plant. It will leave 240 without a job. SBC will cut 7,000 jobs in 2005. This represents 4.4% of the 163,000 workforce.
Yesterday, traders went home with a sigh of relief. The DOW rose over 90 points. Unfortunately, the advances did not match declines and the relationship over on the NASDAQ was not much better. This morning traders are encouraged by the forecasting ability of Oracle’s top management. Their prediction for 2005 was unchanged at 62 cents per share but, behold, expectations for 2006 were raised to a minimum of 76 cents a share. Maybe we should take a poll. Whose long-range projections are more accurate--- those of the CBO or Oracle?
Tuesday, January 25, 2005
1/25/05 Searching For Value
Yesterday I was provided a reminder. Sometimes the best ideas are right under one’s nose. I was thrilled that Monsanto announced the purchase of Seminis. It meant we would receive a cash payment representing four times the cost of our investment. After a brief sigh of satisfaction, I began to wonder. How do we find another Seminis? I search every day. It’s not from lack of trying. For some reason, I looked over the portfolio for the 5000th time. The answer was right there all along. It was under my nose. I just had to look. We’ve owned The Andersons (ANDE) for 5 years. I know it’s not exciting. From 2003 to 2004, earnings will only be up 50%. The company is on its way to becoming a $2 billion concern. Our investment costs us $8 a share, and now it’s $25. Mike Anderson, the president and CEO, is a good man. I like the long-term outlook for the grain business, and in particular, the harvesting of soybeans. I believe in soybeans both for protein and health reasons. The plant nutrient business is, in my view, grossly under-appreciated. We can add to our holdings at 10 times 2004 earnings and be patient. Maybe we’ll be fortunate and the stock will triple again in another five years. Worse things could happen to us.
China cannot seem to slowdown its economy. It grew at a 9.5% rate in the fourth quarter. On the other hand, Germany is going in the opposite direction. Germany’s BDB Banking Federation predicted growth will slow to 1.4% in 2005. With unemployment at a 7-year high, that may prove optimistic.
Phoenix Color is closing a book text printing plant north of Hagerstown, MD that employs 180. Paxar will close a Virginia plant and cut 170 jobs. Hilfinger is cutting 200 jobs. I noticed that Sara Lee lowered its outlook for 2005.
We will be reading every day about the problems surrounding Social Security. Rather than private accounts, raising payroll taxes, and/or changing the retirement age, it is possible that the Congress could settle on value-added taxes on imports.
What’s the shelf life of the carry trade? How long will the federal government finance long-term commitments with short-term debt? Will corporate America issue another $1 + trillion in floating rate debt in 2005? How long will GMAC feed on variable rate debt and interest rate swaps? When does the exposure to $300 trillion in derivatives become a warning sign to money center banks? When does the individual consumer and household appetite for short-term variable rate debt, ARMs, hybrid adjustable mortgages, interest only mortgages, and negative amortization loans overwhelm the capacity of the sub-par lending industry? When does the ownership society realize that day-trading homes is strictly an avenue leading to a deflating asset market? Speculators do not truly appreciate the meaning and the impact of measured interest rate increases. Soon they will learn. Lessons can be painful.
Rep. Ron Paul: “Our relative wealth as a nation is measured in dollars, and the steady erosion of the value of those dollars means we will all be poorer in the future.”
According to Yale Hirsch’s Stock Trader’s Almanac, 19 of the 20 down Januarys since 1950 were followed by full-year declines of 13% on average.
Yesterday I was provided a reminder. Sometimes the best ideas are right under one’s nose. I was thrilled that Monsanto announced the purchase of Seminis. It meant we would receive a cash payment representing four times the cost of our investment. After a brief sigh of satisfaction, I began to wonder. How do we find another Seminis? I search every day. It’s not from lack of trying. For some reason, I looked over the portfolio for the 5000th time. The answer was right there all along. It was under my nose. I just had to look. We’ve owned The Andersons (ANDE) for 5 years. I know it’s not exciting. From 2003 to 2004, earnings will only be up 50%. The company is on its way to becoming a $2 billion concern. Our investment costs us $8 a share, and now it’s $25. Mike Anderson, the president and CEO, is a good man. I like the long-term outlook for the grain business, and in particular, the harvesting of soybeans. I believe in soybeans both for protein and health reasons. The plant nutrient business is, in my view, grossly under-appreciated. We can add to our holdings at 10 times 2004 earnings and be patient. Maybe we’ll be fortunate and the stock will triple again in another five years. Worse things could happen to us.
China cannot seem to slowdown its economy. It grew at a 9.5% rate in the fourth quarter. On the other hand, Germany is going in the opposite direction. Germany’s BDB Banking Federation predicted growth will slow to 1.4% in 2005. With unemployment at a 7-year high, that may prove optimistic.
Phoenix Color is closing a book text printing plant north of Hagerstown, MD that employs 180. Paxar will close a Virginia plant and cut 170 jobs. Hilfinger is cutting 200 jobs. I noticed that Sara Lee lowered its outlook for 2005.
We will be reading every day about the problems surrounding Social Security. Rather than private accounts, raising payroll taxes, and/or changing the retirement age, it is possible that the Congress could settle on value-added taxes on imports.
What’s the shelf life of the carry trade? How long will the federal government finance long-term commitments with short-term debt? Will corporate America issue another $1 + trillion in floating rate debt in 2005? How long will GMAC feed on variable rate debt and interest rate swaps? When does the exposure to $300 trillion in derivatives become a warning sign to money center banks? When does the individual consumer and household appetite for short-term variable rate debt, ARMs, hybrid adjustable mortgages, interest only mortgages, and negative amortization loans overwhelm the capacity of the sub-par lending industry? When does the ownership society realize that day-trading homes is strictly an avenue leading to a deflating asset market? Speculators do not truly appreciate the meaning and the impact of measured interest rate increases. Soon they will learn. Lessons can be painful.
Rep. Ron Paul: “Our relative wealth as a nation is measured in dollars, and the steady erosion of the value of those dollars means we will all be poorer in the future.”
According to Yale Hirsch’s Stock Trader’s Almanac, 19 of the 20 down Januarys since 1950 were followed by full-year declines of 13% on average.
Monday, January 24, 2005
1/24/05 Shifting Sands
In today’s Financial Times, there is article focusing on central banks shifting reserves away from the U.S. This is a subject I have frequently discussed. Basically, in 2001, the share of dollars in total reserve holdings was approximately 67%, and today they have declined about four percentage points. In the meantime, the euro’s share of total reserve holdings now exceeds 20% for the first time.
Oil futures have risen 20% in the past six weeks to over $49 a barrel. This sharp rise leads me to suggest the undoing of the previously recommended yen/euro hedge. The rise in oil will be a hindrance to the Japanese economy, and therefore, it’s best we husband the profits from this trade.
It should be noted that the recent storms have brought heating oil back to over $1.40 a gallon.
With a sales decline of 9%, Infeon is warning of a further slowdown. This is one more piece of bad news for the semiconductor industry.
Over the weekend I noticed that at least one bank was offering a 12-month CD for 3%. By historical standards, that’s a pretty scant rate; however, it may begin to attract the attention of more conservative investors, especially more seasoned citizens. With rising interest rates, Wall Street will come to realize that stocks are not the only game in town. Valuations and risk do count. As the economy slows, and additional Fed hikes put a brake on increased housing prices, it will become more fashionable to save, and it might even replace the borrow and spend mentality.
Cooper Companies acquisition of Ocular Sciences has resulted in the announcement of the Duke City, NM plant being closed with its more than 200 manufacturing jobs and the shutdown of their Huntington Beach, CA facility with 95 manufacturing workers.
The business of logistics and the management of supply chains are, in my view, one of the least appreciated sectors of our economy. Wal-Mart gets it though, and no company begins to approach them in the area of logistics. It is one reason why Wal-Mart can afford to have lower prices than their competitors. The management of logistic costs represents nearly 9% of our nation’s GDP.
Jas Jain: “9/11 was no economic blow. It was more like a feather flying in light wind hitting the paper tiger.”
Here is a little word of cheer. Frequently, successful investing requires patience. Monsanto has made a wise decision. They are purchasing Seminis Seed. It’s taken four years for us to make a ham sandwich, but the wait was surely worth it.
In today’s Financial Times, there is article focusing on central banks shifting reserves away from the U.S. This is a subject I have frequently discussed. Basically, in 2001, the share of dollars in total reserve holdings was approximately 67%, and today they have declined about four percentage points. In the meantime, the euro’s share of total reserve holdings now exceeds 20% for the first time.
Oil futures have risen 20% in the past six weeks to over $49 a barrel. This sharp rise leads me to suggest the undoing of the previously recommended yen/euro hedge. The rise in oil will be a hindrance to the Japanese economy, and therefore, it’s best we husband the profits from this trade.
It should be noted that the recent storms have brought heating oil back to over $1.40 a gallon.
With a sales decline of 9%, Infeon is warning of a further slowdown. This is one more piece of bad news for the semiconductor industry.
Over the weekend I noticed that at least one bank was offering a 12-month CD for 3%. By historical standards, that’s a pretty scant rate; however, it may begin to attract the attention of more conservative investors, especially more seasoned citizens. With rising interest rates, Wall Street will come to realize that stocks are not the only game in town. Valuations and risk do count. As the economy slows, and additional Fed hikes put a brake on increased housing prices, it will become more fashionable to save, and it might even replace the borrow and spend mentality.
Cooper Companies acquisition of Ocular Sciences has resulted in the announcement of the Duke City, NM plant being closed with its more than 200 manufacturing jobs and the shutdown of their Huntington Beach, CA facility with 95 manufacturing workers.
The business of logistics and the management of supply chains are, in my view, one of the least appreciated sectors of our economy. Wal-Mart gets it though, and no company begins to approach them in the area of logistics. It is one reason why Wal-Mart can afford to have lower prices than their competitors. The management of logistic costs represents nearly 9% of our nation’s GDP.
Jas Jain: “9/11 was no economic blow. It was more like a feather flying in light wind hitting the paper tiger.”
Here is a little word of cheer. Frequently, successful investing requires patience. Monsanto has made a wise decision. They are purchasing Seminis Seed. It’s taken four years for us to make a ham sandwich, but the wait was surely worth it.
Sunday, January 23, 2005
1/23/05 We Just Want To Do It
On attempts to develop the personal computer, Steve Jobs relates “so we went to Atari and said ‘Hey, we’ve got this amazing thing, even built it with some of your parts, and what do you think about funding us? Or we’ll give it to you. We just want to do it. Pay our salary, we’ll come work for you.’ And they said , ‘No.’ So then we went to Hewlett-Packard, and they said, ‘Hey, we don’t need you. You haven’t got through college yet.’” Obviously, The Apprentice had not come to HP’s attention.
Simon Pokagon, Potawatomie: “Often in the stillness of the night, when all nature seems asleep about me, there comes a gentle rapping at the door of my heart. I open it; and a voice inquires, "Pokagon, what of your people? What will their future be?" My answer is: "Mortal man has not the power to draw aside the veil of unborn time to tell the future of his race. That gift belongs of the Divine alone. But it is given to him to closely judge the future by the present, and the past."
The Business Research Division at the University of Colorado at Boulder predicted that, in 2003, a total of 22,300 new jobs would be created in Colorado. Instead, 32,300 were lost. That misjudgment did not cause them to miss a beat. For 2004, they projected 32,300 new jobs for the state. The final tally will show 9,300. I have a heart. I won’t provide their new 2005 forecast.
The comedy hour arrives on Tuesday. The CBO gives its updated budget and economic outlook. I wonder whether they will project the number of revisions they will provide in 2005. The CBO is pathetically amusing.
I’m certain that Bush will discuss Social Security in the State of the Union Address. As a primer, read the words of the Comptroller General David Walker on Social Security. He is quoted as stating “the left hand owes the right hand, and that has legal, political, and moral significance. But it doesn’t have any economic significance whatsoever. There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down…The trust fund gives a false sense of security about where we are and how much time we have.” He was trying to relate that the federal government has stolen $1.5 trillion from the trust fund and replaced it with IOUs that have no value. That’s committing a fraud. People go to jail for such acts. When society looks the other way, then the populace loses its self-respect and its right to freedom and liberty.
Today, the city of Philadelphia will be focused on the weather and the encounter with the Falcons. Tomorrow it will be time to consider One and Two Liberty Place, the Center Square building, and the Bell Atlantic Tower. It’s not a pretty sight. Philadelphia is still losing jobs. Grubb & Ellis concluded that there soon would be 4.4 million square feet of empty office space along West Market Street.
Wal-Mart reported that, during the past week, comparative sales for food were stronger than for general merchandise.
Many technicians believe the market is oversold. They get comfort in the thought that the end of January and the first few days in February are seasonally strong. If the next 7 to 10 trading days exhibit strength, then I would suggest utilizing those up days to weed out the weak sisters, so to speak, in your portfolio.
During some point in 2005, China’s GDP will be larger than the UK’s.
If China, over the next two decades, increases its number of nuclear plants by a factor of four, then what will happen to the price of uranium? With large deposits in Saskatchewan, Canada is the world’s largest uranium producer. Cameco Corp of Saskatoon ( stock symbol CCJ on the NYSE) is the world’s largest publicly traded uranium company. I apologize for arriving so late to the party. In 2004, the stock rose about 20 points to just under $35 and trades at a 40 p/e. Should bad news come out on the potential dangers of nuclear power plants, and should the stock have a big correction, let’s revisit the situation. This is a very long-term investment.
While we are on the subject of China, it is worth noting that their GDP is $1.5 trillion with about $400 million of bad bank loans on the books. Do you think that'’ a cause for worry?
Unless there is 100% trust, never turn your back on life, and that goes for your assets.
In a recent issue of Workforce Management: “Annual pay increase designed for optimal hiring and retention are no longer needed. If your salary-increase budget for 2005 is much higher than 3 percent, you’re probably overspending.” According to the BLS, average growth in wages and salaries fell below 3 percent for the 12 months through September for U.S. employees. Pay grew at 2.4 percent. Production and service workers represent four-fifths of the nation’s workforce, and their hourly wages declined or remained flat over the year, adjusting for inflation, every month since May.
From the 1927 Grand Council of American Indians: "The white people, who are trying to make us over into their image, they want us to be what they call "assimilated," bringing the Indians into the mainstream and destroying our own way of life and our own cultural patterns. They believe we should be contented like those whose concept of happiness is materialistic and greedy, which is very different from our way.
We want freedom from the white man rather than to be integrated. We don't want any part of the establishment, we want to be free to raise our children in our religion, in our ways, to be able to hunt and fish and live in peace. We don't want power, we don't want to be congressmen, or bankers....we want to be ourselves. We want to have our heritage, because we are the owners of this land and because we belong here.
The white man says, there is freedom and justice for all. We have had "freedom and justice," and that is why we have been almost exterminated. We shall not forget this."
On attempts to develop the personal computer, Steve Jobs relates “so we went to Atari and said ‘Hey, we’ve got this amazing thing, even built it with some of your parts, and what do you think about funding us? Or we’ll give it to you. We just want to do it. Pay our salary, we’ll come work for you.’ And they said , ‘No.’ So then we went to Hewlett-Packard, and they said, ‘Hey, we don’t need you. You haven’t got through college yet.’” Obviously, The Apprentice had not come to HP’s attention.
Simon Pokagon, Potawatomie: “Often in the stillness of the night, when all nature seems asleep about me, there comes a gentle rapping at the door of my heart. I open it; and a voice inquires, "Pokagon, what of your people? What will their future be?" My answer is: "Mortal man has not the power to draw aside the veil of unborn time to tell the future of his race. That gift belongs of the Divine alone. But it is given to him to closely judge the future by the present, and the past."
The Business Research Division at the University of Colorado at Boulder predicted that, in 2003, a total of 22,300 new jobs would be created in Colorado. Instead, 32,300 were lost. That misjudgment did not cause them to miss a beat. For 2004, they projected 32,300 new jobs for the state. The final tally will show 9,300. I have a heart. I won’t provide their new 2005 forecast.
The comedy hour arrives on Tuesday. The CBO gives its updated budget and economic outlook. I wonder whether they will project the number of revisions they will provide in 2005. The CBO is pathetically amusing.
I’m certain that Bush will discuss Social Security in the State of the Union Address. As a primer, read the words of the Comptroller General David Walker on Social Security. He is quoted as stating “the left hand owes the right hand, and that has legal, political, and moral significance. But it doesn’t have any economic significance whatsoever. There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down…The trust fund gives a false sense of security about where we are and how much time we have.” He was trying to relate that the federal government has stolen $1.5 trillion from the trust fund and replaced it with IOUs that have no value. That’s committing a fraud. People go to jail for such acts. When society looks the other way, then the populace loses its self-respect and its right to freedom and liberty.
Today, the city of Philadelphia will be focused on the weather and the encounter with the Falcons. Tomorrow it will be time to consider One and Two Liberty Place, the Center Square building, and the Bell Atlantic Tower. It’s not a pretty sight. Philadelphia is still losing jobs. Grubb & Ellis concluded that there soon would be 4.4 million square feet of empty office space along West Market Street.
Wal-Mart reported that, during the past week, comparative sales for food were stronger than for general merchandise.
Many technicians believe the market is oversold. They get comfort in the thought that the end of January and the first few days in February are seasonally strong. If the next 7 to 10 trading days exhibit strength, then I would suggest utilizing those up days to weed out the weak sisters, so to speak, in your portfolio.
During some point in 2005, China’s GDP will be larger than the UK’s.
If China, over the next two decades, increases its number of nuclear plants by a factor of four, then what will happen to the price of uranium? With large deposits in Saskatchewan, Canada is the world’s largest uranium producer. Cameco Corp of Saskatoon ( stock symbol CCJ on the NYSE) is the world’s largest publicly traded uranium company. I apologize for arriving so late to the party. In 2004, the stock rose about 20 points to just under $35 and trades at a 40 p/e. Should bad news come out on the potential dangers of nuclear power plants, and should the stock have a big correction, let’s revisit the situation. This is a very long-term investment.
While we are on the subject of China, it is worth noting that their GDP is $1.5 trillion with about $400 million of bad bank loans on the books. Do you think that'’ a cause for worry?
Unless there is 100% trust, never turn your back on life, and that goes for your assets.
In a recent issue of Workforce Management: “Annual pay increase designed for optimal hiring and retention are no longer needed. If your salary-increase budget for 2005 is much higher than 3 percent, you’re probably overspending.” According to the BLS, average growth in wages and salaries fell below 3 percent for the 12 months through September for U.S. employees. Pay grew at 2.4 percent. Production and service workers represent four-fifths of the nation’s workforce, and their hourly wages declined or remained flat over the year, adjusting for inflation, every month since May.
From the 1927 Grand Council of American Indians: "The white people, who are trying to make us over into their image, they want us to be what they call "assimilated," bringing the Indians into the mainstream and destroying our own way of life and our own cultural patterns. They believe we should be contented like those whose concept of happiness is materialistic and greedy, which is very different from our way.
We want freedom from the white man rather than to be integrated. We don't want any part of the establishment, we want to be free to raise our children in our religion, in our ways, to be able to hunt and fish and live in peace. We don't want power, we don't want to be congressmen, or bankers....we want to be ourselves. We want to have our heritage, because we are the owners of this land and because we belong here.
The white man says, there is freedom and justice for all. We have had "freedom and justice," and that is why we have been almost exterminated. We shall not forget this."
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