Good News And Bad News

11/27/05 Good News And Bad News

Wal-Mart expects to post a pleasing 4.3 percent gain in same-store sales for November. During Friday’s 6-hour special sales event, about 10 million shoppers jammed their stores. The way to play the holiday season has been through Wal-Mart. The way to play retail in 2006 and beyond is through Wal-Mart. Any company getting in the way, and that includes Target, will be a casualty.

Sol Palha: “For every dollar in actual currency there are over 10 dollars of electronic money; rather strange don't you think. Another strange factor is that most of the actual real (it's an oxymoron because the term should be dead) dollars were held in countries outside the US; in other words the US actually is loaded with nothing but electronic dollars.”

The NASDAQ composite, S&P 500, and Wilshire 5000 all closed at multi-year highs on Friday.

Mike Burk: “Next week includes the last 3 trading days of November and the first 2 trading days of December. The OTC(Nasdaq) during this period has been up 70% of the time since 1963, the SPX(S&P500) has been up about 60% of the time since 1928.”

Early yesterday morning I smiled when I read page 44 in Barron’s. There was a large article entitled “Palatin’s New Sexual Dysfunction Drug May Be Nothing To Sniff At.”
It was written by Jay Palmer and covered PT-141, an aerosol treatment for male and female sexual dysfunction; NeutroSpec; and potential treatments for weight control and congestive heart failure. Unlike other articles, it included earnings estimates for future years. It closed by stating “well before any money rolls in, publicity about PT-141 could pump up the stock price.” I will repeat. For me, this is a 3 to 5 year investment, and I believe it offers unusual risk/reward potential.

President Bush: “In the past year, these brave Americans have continued to fight terrorists abroad so we do not have to face them here at home.” You think our fighting in Iraq or Afghanistan will prevent al-Qaeda from hitting our shores? You think invading the country of Iraq had anything to do with fighting for our freedom or the freedom of the Iraqi people?

General Electric Co. said Friday it now expects to record a $3 billion fourth-quarter after-tax loss for the sale of most of its reinsurance business to Swiss Re.

Golda Meir: "Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!"

The future of oil hinges on access, according to independent energy consultant Dale Steffes.
"If we could drill the rest of the world like we've drilled the U.S., we'd have so much oil we wouldn't know what to do with it," he said. Good oil-reserve values still exist in Brazil and Kazakhstan, according to a recent study by energy consultancy Wood MacKenzie. Analyst Alan Murray said Nigeria and even Egypt have potential. According to the report, the very best oil-reserve value in the world remains the U.S. western Gulf of Mexico; however, there are very high costs surrounding drilling in deep water.

Ronald Reagan: "The taxpayer (is) someone who works for the government but doesn't have to take a civil service examination."

Newmont Mining stated it was thinking about making a bid for Placer Dome, the company that last week turned down a $9.2 billion cash and stock deal from Barrick Gold. They said the offer did not present a premium to the current market price. This deal will take some time to sort out, and I favor Barrick in the end. The fit is better.

Brian Riedl, the Heritage Foundation's chief budget analyst: "I'm not sure we'll ever pay it (the current $8+ trillion national debt) off...After 2017, we'll be looking at deficits of $2 trillion a year."

From 1776 to 2000, the nation's first 42 presidents borrowed a combined $1.01 trillion from foreign interests, official statistics show. In less than five years, Bush has borowed $1.05 trillion. That is not simply a red flag. It is a gigantic accident waiting to happen, and it will happen in the life of most Baby Boomers.

The existing debt limit is $8.2 trillion. "We think the first quarter next year is when we expect to hit the existing debt limit," Treasury Undersecretary Randal Quarles stated. If Bush and his Administration say one more time that they "are committed to cutting the deficit," I will puke. Staying the course with Bush is risking our financial independence.
Staying the course with Bush is risking the lives of our men and women stationed in Iraq, a country that wants us to leave.

Jeff Daiell: "When Barbary Pirates demand a fee for allowing you to do business, it's called "tribute money". When the Mafia demands a fee for allowing you to do business, it's call "the protection racket." When the state demands a fee for allowing you to do business, it's called "income tax."

There is one additional shopping day this year between Thanksgiving and Christmas.

According to China Daily, the number of unemployed Chinese in cities is about to hit 17 million next year. China has a population of 1.3 billion people.

Indian Petroleum Minister Mani Shankar Aiyar will visit Beijing in mid-January 2006. India will suggest to set up institutional mechanism to carry forward the cooperation in research and development of energy sector between the two countries, Aiyar said in New Delhi Saturday. "Around four to five MoUs (Memorandum of Understanding) are expected to be signed during my visit to China in January," he said.

Art Buchwald: " Tax reform is taking taxes off things that have been taxed in the past and putting taxes on things that haven't been taxed."

Consumers are projected to spend $19.6 billion on non-travel goods on U.S. Internet sites during November and December, up 24 percent from $15.8 billion during the same period last year, according to comScore Networks.

According to ShopperTrak RCT Corp., the overall sales on Friday were $8 billion, down 0.9 percent from a year ago, and this despite heavier discounting and expanded hours. Wal-Mart was the bright spot.

Will Rogers: "If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don't get wet you can keep."

Next Week

11/26/05 Next Week

As we turn the page of the calendar, December will appear, and so will reality. Right now Thanksgiving and Black Friday are on everyone’s minds. The holiday turkey dinner could not even keep the shoppers occupied. U.S. consumers using Visa credit cards spent $205 million shopping online on Thanksgiving Day — up 41% from the same day a year ago, stated the credit card company. They could not wait for Cyber Monday.
Next week it will not be all about bargains in the malls or online. Merck will announce a restructuring with layoffs. Then GM, Ford, and Chrysler will announce miserable North American vehicle sales for the month of November. Meanwhile, sales for Toyota will be just fine and dandy. You might consider the number of folks employed at the Big Three, the number employed in the auto parts business, the number employed at other companies serving the industry as well as the communities impacted by their slowdown in sales. This is not a laughing matter. GM CEO Wagoner said the company is selling more vehicles in other countries than in the US for the first time. No media outlet will spin these troubles into thin air. This is not Washington DC. This is the heartland, baby. This is not about winning re-election or gaining support for invading a foreign land. This is about putting food on the table and paying the mortgage, college, and medical bills. This may be the key shopping season, but for many there is real trouble.

For those of you who look for a further collapse in oil prices, you might consider that China may consume 331 million metric tons of crude oil next year, the State Council’s Development Research Center said… Oil consumption this year may gain 6.2 percent to 310 million tons, it said.

Bill Bonner asks “And what would our dead ancestors think of our mortgages? Most of them had small mortgages, if any at all, on their homes. And if they had them, they couldn’t wait to get rid of them. (Even our own parents held little parties to celebrate f inally paying off the mortgage on the family home.) What would our forebears think if they were to learn that the richest generation in American history has mortgaged a greater share of its homes than any in history? What would they think of no-money-down mortgages, minimum payment plans, and negative amortization schedules?
And what would the old-timers think of our government debt? The unpaid liabilities and obligations, expressed as though they had to be paid today, come to about $44 trillion, depending on the source you choose to believe.”

Wal-Mart Stores stated it had 2 million customers in the first two hours of shopping yesterday after opening its stores at 5 a.m., an hour earlier than last year.

Shopping on U.S. online sites will rise 24 percent this month and next to $19 billion, according to ComScore Networks Inc.

Bill Bonner: “The trouble with the news is that it is impossible to know what is important when you must rely solely on the judgment of people who happen to be breathing. The living can imagine no problems more urgent than the ones they confront right now, and no opportunities greater than the ones right in front of them. We prefer the obituaries.”

Turning to reality in Iraq, more than 100 U.S. troops were killed there this month, and since our March 2003 invasion, this raised the death toll to over 2,100. Meanwhile, meeting in Cairo, representatives of the three major Iraqi ethnic and religious groups called for a U.S. withdrawal and recognized Iraqis' "legitimate right of resistance" to foreign occupation. In other words, they want the occupiers (that means the USA) to leave. On Wednesday, Bush will speak to the nation and provide you with BS about the readiness of Iraqi troops to stand up so we can now stand down. It will be a pathetic and deplorable display similar to the reason given for our invasion of Iraq—the WMD. With over 2,100 dead and over 15,000 wounded, our troops deserve a lot better from a Commander-in-Chief. They deserve the truth that we never should have invaded and that the tragedy of dead soldiers, civilians, and wounded fighting men and women was for naught. Politicians can fill the media with gibberish prior to next year’s mid-term elections. If you re-elect most of these politicians, you are a fool. You re-elected Bush, and blood is on your vote. Next Thursday is December 1. It is time to take a good look at reality. It will be the start of a new moon. Let’s make it a new beginning and start the New Year early.

Louis Pasteur: “Chance favors only the prepared mind.”

Ecologists predicted that China’s benzene spill would enter Russian territory tomorrow or Monday and said it could pose a health danger for up to two weeks. Authorities in Khabarovsk ordered the immediate purchase and delivery of 20 tons of charcoal for use in the purification of drinking water and cleaning of water treatment facilities.

It’s strange to see gold trading at an 18-year high of $496 an ounce and the dollar trading at a multi-year high versus the yen and the euro. Certainly, the dollar is not rising due to its attractiveness as an inflation hedge and possibly gold is not being accumulated as a hedge against inflation or simply to make gold jewelry in India. It’s possible the dollars are being bought for wallpaper and gold as a paperweight. Imagination is required. Leave your rationality on the doorstep.

President Eisenhower: “Every gun that is made, every warship launched, every rocket fired, signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. The world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”

Happy Black Friday

11/25/05 Happy Black Friday

An increase of 7.2 percent in consumer spending in September and October, combined with falling prices at the pump, is providing "strong momentum" for the holidays, said Scott Krugman, spokesman for the National Retail Federation. "We're looking at a strong holiday season," Krugman said.

Cythina Helms: "If man liked shopping, they'd call it research."

Rep. Norm Dicks is a Democrat from Bremerton, WA. He is a member of the House Intelligence Committee and a known Hawk. Without the threat of weapons of mass destruction (WMDs), he said, he would "absolutely not" have voted for the war. Dicks says the intelligence was "doctored." "A lot of us relied on [former CIA director] George Tenet. We had many meetings with the White House and CIA, and they did not tell us there was a dispute between the CIA, Commerce or the Pentagon on the WMDs," he said.

China's central bank sold dollars to 10 domestic banks at the current exchange rate of 8.0810 yuan per dollar with an agreement to buy them back in a year's time at 7.85 yuan. The implied yuan rise of about 2.9 percent reflects nothing more than the difference between U.S. and Chinese interest rates.

Philip Stevens of the Financial Times: "The image that will forever haunt this president is of the mission accomplished banner that served as backdrop to his triumphal landing on the aircraft carrier USS Abraham Lincoln in those heady days of May 2003. Now, cynics will tell you the banner will soon be dusted down and unfurled again – only this time the purpose will be to give political cover to an American retreat from Baghdad."

According to Shop.org and BizRate Research, 79% of online retailers will offer free shippinh with conditions such as a minimum order this holiday season. Shipping and handling account for between 7.5 to 10 percent of overall sales.

Last year, the busiest shopping day was Saturday, December 18, according to the International Council of Shopping Centers. Black Friday was the second busiest day.

With the first in-depth analysis of the air bubbles trapped in the ice core of east Antarctica, scientists have discovered that today's atmospheric carbon dioxide levels are the highest in 650,000 years.
The analysis highlights the fact that today's rising atmospheric carbon dioxide concentration, at 380 parts per million by volume, is already 27 percent higher than its highest recorded level during the last 650,000 years, reported scientists in two papers in the Nov. 25 issue of the journal Science.

PJ O'Rourke: "At school we had a name for guys who were 'trying to get in touch with themselves.'"

Happy Thanksgiving

11/24/05 Happy Thanksgiving

Rebecca Harding Davis: "For, after all, put it as we may to ourselves, we are all of us from birth to death guests at a table which we did not spread. The sun, th earth, love, friends, our very breath are parts of the banquet...Shall we think of the day as a chance to come nearer to our Host, and to find out something of Him who has fed us so long?"

Ten days ago an exlosion at a PetroChina chemica plant released benzene into an 80 km stretch of the Songhua river. The plant is outside the city of Jilin but the polluted portion of the river is expected to reach Harbin, a city of 9 million people, this morning and it will take 40 hours to pass through. Thousands have jammed railroads and planes in an attempt to avoid the pollution. All water was turned off in Harbin, and there has been a run on bottled water.

Yesterday, there was heavy selling in shares of Saks. It was in reaction to the news that insiders at the company had sold 1,136,379 shares on Nov. 17 at $17.52+. Since just before mid-year, Saks has been in negotiation s to sell parts of the company. That has occurred. It also has meant that insiders could not trade in Saks shares during this period. It is believed that negotiations to sell its flagship Saks Fifth Avenue operation will not take place until after Christmas. As such, this was a limited window to exercise stock options and simultanelously sell shares in the open market. Many of the shares had an option price of $8.81 and the options were to expire shortly. Often it is wise to sell on the news, so to speak, but it is also wise to understand the news and not simply the headlines.
In my view, the market price is underestimating the enterprise value for Saks, its valuable real estate, its under-leveraged balance sheet, and the potential to improve the current margins at Saks Fifth Ave. On a risk/reward basis, one might seriously give consideration to the purchase of these shares. Many will buy cashmere at Saks this holiday season. I prefer to stock up on the stock at this level.

Unemployment claims resulting from Rita and Katrina now total 555,000 and for Wilma 27,400.

The Conference Board Help-Wanted Advertising Index -- a key measure of job offerings in major newspapers across
America -- was unchanged in October. The Index now stands at 38, the same as
in the previous month. It was 37 one year ago.
In the last three months, help-wanted advertising declined in eight of the
nine U.S. regions. Steepest declines occurred in the Mountain (-15.7%), West
North Central (-11.0%) and East North Central (-9.2%) regions. Help-wanted
advertising increased in the West South Central (2.4%) region.
Says Ken Goldstein, labor economist at The Conference Board: "The
post-holiday labor market will likely remain weak. This is consistent with the
slowing trend in The Conference Board Leading Economic Indicators. Hurricanes,
flooding and energy prices have all held back growth. But outweighing these
concerns is lingering consumer worries about prices starting to rise faster
than wages. With slower hiring, and indications that hiring might remain soft
in the months ahead, the economy could struggle, setting up a self fulfilling
prophecy."
The number of new online job ads fell to 2,002,600 in October, 36,000 less
jobs being offered than in September, according to The Conference Board
Help-Wanted OnLine Data Series(TM). In October there were 1.34 online job ads
per 100 persons in the U.S. labor force, compared with 1.36 in September and
1.43 per 100 persons in the labor force in August.

The holiday retail sales environment looks positive for 2005, although the conditions are less favorable than in
2004, according to Standard & Poor's in a report released this week, "Retail
Outlook:  Holiday 2005."
"Despite media reports about a potentially gloomy holiday season,
consumers have proven to be fairly resilient thus far and we have learned not
to underestimate their willingness and ability to spend," said Marie Driscoll,
an equity analyst for Standard & Poor's.  Overall, Standard & Poor's expects a
gain of about 3.5% to 4.0%, which is below the 6.7% increase reported for the
2004 holiday season by the National Retail Federation.
"The single biggest levers this holiday season, both positive and
negative, will be the robust employment picture and the projected increases in
heating costs, respectively," said Ms. Driscoll.  Some of the positive
influences include extra shopping days and an extra Saturday the day before
Christmas, declining retail gas prices, lower unemployment, and higher
incomes.  Conversely, some of the negative influences include the potential
for high home heating costs, negative savings rate, and declining consumer
confidence.
"We expect cost-conscious consumers to continue to seek the best
price/value offerings to maximize their gift giving and expect Wal-Mart and
Target to be lead destinations for more commodity-type gifts such as consumer
electronics, toys, and sporting goods," continued Ms. Driscoll.  "We also see
consumers shopping both discounters for quality, value-priced jewelry, fashion
apparel, accessories, and home furnishings.  In addition, we believe both
Wal-Mart and Target may benefit from some consumers 'trading down' this
holiday season.  That said, we see cross-shopping as a more enduring pattern
of behavior for most consumers," she concluded.

GfK NOP today announced results from its annual Roper Reports(R) Holiday Shopping Outlook, finding almost half (45%) of
Americans expecting to spend less this season compared to 2004, and only 8% of
consumers saying they will spend more. Fluctuating fuel prices are having a significant impact on consumers as
they enter the holiday season.  More than half (57%) of respondents state the
cost of fuel is hurting their household a lot, and a majority (56%) say they
will spend less money on gifts as a result.  Americans plan to spend an
average $780 on gifts for friends and family, down $78 from 2004.  While
spending is down, shopping lists remain steady with consumers on average
purchasing gifts for 11 people again this year.
"With all the recent noise around heating prices, Americans are feeling
the pressure, and it's showing in their spending plans," says Cary Silvers,
vice president of GfK NOP's Roper Reports division.  "There was a twenty
percentage point increase this year compared to last in the number of
consumers who say they plan to spend less.  As the holiday shopping season
kicks off, only 12% of Americans believe now is a good time to buy (October
2005 reading)-the lowest number we've seen in five years.  Faced with fading
consumer confidence, we may see the traditional battle-of-the-best-holiday-
deals reach new heights this year."
The Holiday Shopping Outlook found that a majority of consumers,
struggling with what to get Aunt Mae or Grandpa Joe, are turning to gift cards
as a way to please those hard-to-shop-for friends and family members.  Nearly
two thirds (62%) plan to give the gift of -- gift cards.  While gift cards
simplify shopping and ensure timely giving, they drag out the sales process
when it comes to redemption.  Only 11% of consumers use gift cards within one
week of receiving them, and half (52%) of Americans wait to redeem gift cards
thirty days or longer.

The University of Michigan Sentiment Index rose to 81.6 in November from 79.9.

W.T. Purkiser:"Not what we say about our blessings, but how we use them,
is the true measure of our thanksgiving." 

Travel Safely

11/23/05 Travel Safely

Optimism remains the watchword for this holiday season, with retail sales expected to increase by 4% to 4.5%over those recorded in 2004, according to Clear Thinking Group, LLC, a retailing/consumer products and industrial manufacturing consultancy.

New Survey from The Boston Consulting Group (BCG) Reveals Middle-Market
American Consumers(1) Looking To Reduce Overall Spending During The Holiday
Season, While Splurging On A Few Luxury Categories. 40% of consumers are planning to spend less over the next three months and only 23% are planning to spend more.(2) Nonetheless, they will treat themselves, family and friends to 'luxury' gifts while bargain hunting for items that don't mean as much to them.

U.S. holiday gift spending will likely fall slightly this year and stores will have to offer discounts to satisfy shoppers hunting for bargains, according to a survey released on Tuesday. U.S. households are expected to spend an average of $466 on gifts this holiday season, down from last year's estimate of $476, the survey by The Conference Board showed.

Consolidated Credit's 6th Annual Holiday Spending Survey finds sixty-two percent of people plan to spend less money during the 2005 holiday season. Last year, most respondents said they planned to spend more.
Over forty-three percent said they are paying off debt from last holiday
season, which is up from 30% last year. "The tough economic conditions in
2005 did not enable consumers to pay their debts in a timely manner," says
Howard Dvorkin, founder of the non-profit, Consolidated Credit Counseling
Services, Inc. and author of Credit Hell: How to Dig Out of Debt.

The National Retail Federation revised its holiday sales forecasts higher for the first time ever during a holiday season. It now expects November-December retail sales to rise 6% to $439.53 billion. The NRF saw 5% in September.

Marsoft: “For the third quarter as a whole, freight rates were down by an average of 40% relative to the second quarter, falling to their lowest level since mid-2003. Period charter rates also declined significantly, falling by about 25% over the past three months.
Cape rates on our benchmark Tubarao/Rotterdam iron ore route fell to a low of $22,000 per day by the start of August, before climbing back to $50,000 per day by the end of September. For the third quarter as a whole, rates averaged $39,000 per day, their lowest level in two years, and down from $61,000 per day in the second quarter. By mid-October, rates had strengthened further, topping $55,000 per day.”

Barry Ritholtz points out that, according to the BLS, “the average American spends more on entertainment than on gasoline, household furnishings and clothing and nearly the same amount as spent on dining out.”

The Mortgage Bankers Association said its index of mortgage application activity for the week ended November 18 declined to 635.4, 3.4 percent below the previous week's level.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.26 percent last week, down 0.07 percentage point from the previous week's 6.33 percent, a 17-month high.

Mexico’s Ortiz, Brazilian Finance Minister Antonio Palocci and Chile's Finance Minister Nicolas Eyzaguirre all commented on their exchange rates today, underscoring concern in the region that the currency rallies may drag on exports and hurt economic growth.
``The appreciation of the Mexican peso is not an isolated case,'' Ortiz said. Mexico's peso has gained 4.6 percent in 2005 and the Brazilian real has jumped 23%.

The House on Tuesday agreed to a $3,100 pay raise for Congress next year to $165,200. Officially, it is not a raise. It is a COLA. Interestingly, the same does not apply to the minimum wage.

Sen. George Voinovich (R., Ohio): "Contrary to what some of my colleagues believe, tax cuts do not pay for themselves." Ohio lost 6,500 jobs in October.

Today is the busiest travel day of the year. I hope everyone gets to their final destination safely.

Happenings

11/21/05 Happenings

Wal-Mart will match pricing in any local competitor's print ad; no rebates, no hassles, just low prices for customers; special items available at 5 a.m. on Black Friday; five days of special savings online at Walmart.com.

Saks Saks Fifth Avenue unveiled the new Holiday Snowflake Spectacular at the Fifth Avenue flagship yesterday during a special launch event. The company believes the Saks Snowflakes are destined to become a treasured New York Holiday tradition. To accomplish the Snowflakes in the windows required:
- 50 fully programmable, unique snowflakes reaching ten stories high
(36-8'-0"; 14-20'-0"), inspired by William "Snowflake" Bentley's
snowflake photos from the 1920s
- The project required 8,000 feet of steel, 5 miles of lighting, 72,000
LED modules, 15 multicolor changing uplights, 40 strobes, 13,000 feet
of cable and more than 5,000 hours of production.
This is a must-see for all residents and visitors to NYC during the holiday season.

Lobbyist Michael Scanlon, a former aide to Rep. Tom DeLay, pleaded guilty Monday to attempting to bribe a member of Congress and promised to help federal prosecutors in an investigation in which Washington officials are potential targets.
Scanlon agreed to serve between 51 and 63 months in prison and pay a $250,000 fine as part of his guilty plea to the charge of conspiring to commit fraud. He was also ordered to pay restitution of $19.7 million to the defrauded tribes.
The plea agreement filed by federal prosecutors listed 10 actions they said were taken by Rep. Bob Ney, R-Ohio, as part of a conspiracy with Scanlon and Abramoff aimed at passing legislation to help the lobbyists' Indian clients.
In exchange, Scanlon and Abramoff provided Ney and his staff with lavish trips, golf outings, tickets to sporting events and concerts, meals at expensive restaurants and campaign contributions, the plea agreement said. We will be reading more about Scanlon and certainly about Abramoff.

If sales in the final week of November meet the company's sales goals, Target said it expects to generate a modest gain of 2 percent to 3 percent in same-store sales growth for the month. Meanwhile, Wal-Mart Stores Inc. on Saturday said in a recorded call that it's still on track to generate same-store sales growth of 3 percent to 5 percent for November.

Washington Mutual is laying off 370 workers at its El Paso, Texas collections center. More customers are paying their bills online and that’s the reason for the cut in workers.

GM stated it would stop production at 12 plants, including four in Michigan, and cut 30,000 hourly jobs in North America by the end of 2008. An additional 2,500 salaried jobs at GM are in the crosshairs. The moves will lower GM's $41 billion annual operations expenses by $7 billion by the end of next year, GM’s CEO Wagoner stated.

2005 will be the sixth consecutive year of job losses in the state of Michigan.

GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group share of the United States' automotive market has fallen from about 81% of all vehicles sold in 1975 to about 60% today.

The Conference Board reported that the Composite Index of Leading Economic Indicators increased 0.9% in October, following a decline of 0.8% in September, and no change in August. Ken Goldstein, Labor Economist at The Conference Board stated "The Leading Economic Indicators began to slow in July. The latest readings, however, show
a snap back in October. That's an indication that the economy -- after losing
some steam this summer and then suffering a major shock -- bounced back a
little in October. But the big question mark is whether this will be enough to
save the holiday retail season. Latest readings from the Index could be a
signal that holiday sales won't be as bleak as earlier feared. But it doesn't
rule out a rough patch ahead for retailers or a relatively weak post-holiday
economic performance early in 2006."
The Conference Board also reported that the Coincident Index increased 0.1%
in October, following a 0.3% increase in September, and a 0.6% decline in
August. The Lagging Index increased 0.8% in October, following a 0.2% decline
in September, and a 0.2% increase in August.

The London-based Center for Global Energy Studies warned of low distillate stocks in the United States after production was battered from Hurricanes Katrina and Rita and stated "Distillate output has suffered most from the refinery shutdowns, falling by 600,000 barrels per day from peak summer levels. Imports have only made small inroads upon this supply gap...Stocks are now close to the bottom of the seasonal range."

Now I will turn my attention to Albertsons. Some analysts will emphasize that third quarter earnings were 3 cents below their estimates. Those folks will miss the story.
Reported net earnings year-to-date reached $284 million or $0.76 per diluted share versus $249 million or $0.67 per diluted share in the prior year. Net earnings from continuing operations for fiscal year 2005 year-to-date grew to $298 million or $0.80 per diluted share versus last year's results of $288 million or $0.77 per diluted share. Total sales year-to-date reached $30.1 billion versus $28.8 billion last year. Year-to-date comparable store sales were +0.6% and identical store sales were +0.4%. The Company has narrowed its previous guidance of $1.37 to $1.47 per diluted share for fiscal year 2005 earnings from continuing operations to between $1.37 to $1.40 per diluted share excluding any unplanned, extraordinary events (such as hurricanes and the Company's exploration of
strategic alternatives). First Call’s estimate is $1.32. The Company also reaffirmed its outlook for positive comparable and identical store sales for fiscal year 2005. Capital expenditures for fiscal year 2005 are expected to be between $1.0 and $1.1 billion, consistent with previous guidance. Gross margin in the quarter increased 19 basis points to 28.12% versus last year's third quarter at 27.93%. The Company stayed on track to meet its $1.25 billion cost reduction goal by the end of fiscal year 2006, recording $71 million in new cost reductions during the third quarter of 2005, bringing the total cost reduction achieved since mid-2001 to $1.156 billion. During the quarter, 7 new stores were opened, 18 were closed and 41 remodels were completed. A total of 2,476 stores were open at the end of the quarter in 37 states. I continue to believe that Albertsons will deliver value to its stakeholders and a sale of the company will produce results that exceed most expectations. A closer look at the sale of the San Leandro distribution center would confirm that statement. The Company consummated the sale of its San Leandro, California distribution center to Kaiser Hospital and entered into a leaseback arrangement to facilitate the transition to a streamlined distribution operation in Northern California. The net cash proceeds of $94 million were applied to reduce the Company's outstanding
commercial paper borrowings. Albertsons owns a great deal of valuable real estate, and, in my view, the stock price does not fully reflect those values. A sale of the company will unlock the differential.

Prepare

11/21/05 Prepare

The United States is unprepared for the next flu pandemic, lacking the manufacturing capacity to provide 300 million doses of a vaccine for three to five more years, Health and Human Services Secretary Mike Leavitt said Sunday.
"What we all learned from [Hurricane] Katrina is that sometimes we have to think very clearly about the unthinkable," Leavitt said. "We're not as prepared as we need to be. ... We will not have enough for everyone."

UAW officials from Chrysler Group plants across the country will meet in Dearborn today and Tuesday to discuss whether the union should give Chrysler the same health care concessions that it recently agreed to with General Motors Corp., according to a UAW delegate who will attend the meetings.

If Delphi Corp.'s 24,000 UAW workers were to go on strike, they would have nearly $1 billion at their disposal from existing strike funds.

A greater number of Web shoppers is expected to boost holiday spending online to $18 billion this year, a 25 percent increase from 2004, according to Forrester Research.
Today, online sales make up 7.7 percent of total retail sales, according to Forrester Research. One in five online retailers is expecting sales of 75 percent or higher this holiday than last year, according to the National Retail Federation.

We have Black Friday, the day after Thanksgiving. Now we have Cyber Monday, the Monday after Thanksgiving when Web sites carry ads about special discounts and promotions, according to a report to be released today by the National Retail Federation.

John Hussman: “Market action continues to display internal divergence that isn't characteristic of robust bull markets, and on a short-term basis, the market appears substantially overbought too…Last week, for example, despite the fresh high in the S&P 500, the number of stocks registering new 52-week lows expanded to 422, easily outpacing the 286 achieving new highs. Breadth was also unimpressive for a push to new highs, with the weekly advance/decline figures at 1893 versus 1609, respectively. Nasdaq, which was the strongest index, actually exhibited more decliners than advancers on a weekly basis…Despite the appearance that the major indices are making substantial progress, Friday's close for the S&P 500 was just 0.87% higher than its prior August 3rd high, while the Russell 2000 remains 1.27% below its level on that date on a total return basis.”

China confirms 21 bird flu outbreaks in 9 provinces.

The White House dispatched Defense Secretary Donald Rumsfeld to four networks Sunday to make the case for staying the course in Iraq. With Rumsfeld’s lack of credibility, that was one more dumb idea.

Light sweet crude prices turned higher on Monday, recently trading up 55 cents at $57.76 a barrel.

General Motors Corp Chief Executive Rick Wagoner will announce plans this week to close four US assembly plants, the Automotive News industry paper reported today.

One might consider the possibility that the recent rise in many equity indices could top out by the end of the November. Selling into strength appears to be a viable strategy. Being prepared with larger cash reserves is not the worst thing that can happen to you. It could also place you in a position to take advantage of an opportunity presenting itself during end-of-the-year tax-selling time.

On a pro forma basis, that is, as if the three newspapers acquired in
August had been with Knight Ridder in 2004 as well, total advertising revenue
for October was up 0.1%. Retail was down 2.3%; national was down 1.1% and
classified was up 3.5%. Help wanted was up 17.2%, real estate was up 13.3% and
auto was down 17.5%. I continue to believe better investing opportunities can be found elsewhere.

Microsoft’s Xbox 360 hits the stores at midnight. It launches on Dec. 2 in Europe and on Dec. 10 in Japan. The company expects to sell close to 3 million consoles over the next three months. With total company sales of $40 billion, how important can the Xbox 360 be? Will it transform Microsoft’s image to a “cool” company? I would doubt it.

Benjamin Franklin: "By failing to prepare, you are preparing to fail."

Developments

11/20/05 Developments

Emirates orderedr 24 Boeing 777-300ERs, 10 777-200LR Worldliners and 8 777 Freighters, with the first airplanes scheduled for delivery in 2007.

Saudi Arabia's King Abdullah: "Reduce the burden on citizens by reducing taxes on oil products when prices rise. Limit the speculation, refute rumors and misleading information that could distort the realities of the market."

The WSJ reported that Toyota may surpass GM to become the world's biggest car maker when it unveils its 2006 production targets next month.

On Friday, Michael Scanlon, 35, was charged with conspiracy, accused of plotting with Jack Abramoff to defraud the Indian tribes and bribe government officials, including a member of Congress. He is to appear in court Monday to enter a guilty plea worked out with prosecutors.
The matters surrounding Scanlon and Abramoff could have wide-spread political implications.

Pulte Homes recently advertised a free gas fireplace, free main-level hardwood floors, free upgraded cabinets and a free washer and dryer at one upscale development in Maryland. Also, it offered a choice of free heat for six months, a free 42-inch plasma television set or free window coverings worth $5,000. It sounds a little like the free gas offer for 2 years from Chrysler.

In 2004, the average disabled veteran nationwide received $8,378 annually from the Veterans Affairs Department for disabilities that ranged from war wounds to injuries suffered in car accidents while on duty. But disabled veterans in Illinois received the least in the nation at $6,961 -- which was more than $5,000 less than veterans in high paying states. For years, Illinois veterans and those in five other states -- Indiana, Michigan, Ohio, New Jersey and Connecticut -- have received well-below-average disability payments.

Greg Miller: "The Semiconductor relative strength gave us a short term pop on November 1, but has since given up its momentum. The Slow Stochastic on this ratio has turned DOWN! If you believe that the semi's must lead if we are to go higher, then I suggest that you must admit that their lack of out-performance at this juncture is becoming a bearish indication for the entire market."

Brad Setser: "As a result of the war on terrorism, the US now has bases all around China - something China no doubt has noticed."