Saturday, January 28, 2006

False Prosperity = DEFAULT

1/28/06 False Prosperity = DEFAULT

Joey Adams: “Bankruptcy is a legal proceeding in which you put your money in your pants pocket and give your coat to your creditors.”

Growth in the U.S. economy slowed dramatically from 4.1% in the third quarter to a 1.1% annual rate in the fourth quarter, the weakest growth in three years, the Commerce Department estimated Friday. Inventory accumulation contributed 1.45% positive growth to fourth-quarter GDP. In sum, final sales declined 0.3%, the first drop since 2001. The personal savings rate was negative for the first year since 1933. Now compare these facts with what Bush will spin in his State of the Union message. A clue might be in a bumper sticker that reads—“What do diapers and politicians have in common?”

Sales of new single-family homes climbed to a 1.269 million unit annual pace in December after falling sharply the previous month. The Commerce department revised November's sales pace down to a 1.233 million pace from an originally reported 1.245 million unit rate. The number of new homes on the market at the end of December climbed 2.4 percent to 516,000, marking a new high. At the current sales pace, that represented 4.9 months' supply. The median home sales price continued to decline as well, down 2.2 percent to $221,800 in December, the Commerce Department stated. That marked the third month in a row of declining prices.

George Jones, who headed Saks Inc.'s department store group before retiring last year, is investigating a bid for the company's Parisian chain, Women's Wear Daily reports.
Jones would have to line up Wall Street backing to buy Parisian, which has $750 million in annual sales.

Chris Botti: “The trumpet is the ultimate temperamental mistress.” His new album, To Love Again: The Duets, shows his mastery of this instrument.

The Amex Gold Bugs Index (HUI) closed Friday's at 324.32, up 0.7% to mark a record close. It gained 6.8% for the week.

Pfizer’s inhalable drug to treat diabetes, Exubera, has been approved by the Food and Drug Administration, according to media reports. It will be the first inhaled diabetes treatment to be available in the United States.

March crude finished at $67.76 a barrel, up $1.50 or 2.3% Friday. It closed down 72 cents or 1.1% for the week.

Saudi Arabia, Russia, and Iran produce approximately 25% of the world’s oil.

Doug Noland: “The capacity for the unfettered global financial system to create unlimited finance is at the root of today's dangerous prevailing dynamic: a veritable breakdown in the market mechanism for creating and pricing global finance. No longer does the interaction of the supply and demand for finance determine market yields, while the surfeit of global liquidity has widely distorted asset prices, risk premiums and the allocation of Credit and finance. An unsound system has nurtured a precarious yet trumpeted backdrop, where surging demand for borrowings (by the U.S.) is easily accommodated ("relaxed constraints") at predictably low interest rates.”

BLOOMBERG NEWS yesterday reported the results of the first Bloomberg/Los Angeles Times national public opinion poll, which shows that President Bush wins the approval of only 43 percent of Americans, a seven-point drop from a year ago. The Bloomberg/Los Angeles Times poll reveals that three out of five say America is seriously off course, and by 62 to 31 percent those surveyed want to move in a different direction than the one Bush has set forth. According to the Bloomberg/Los Angeles Times poll, a slight majority (52percent) of Republicans say the country generally is moving in the right direction while Democrats, by a 75 percent to 18 percent margin, think America
is on the wrong track.

According to the WSJ, Citigroup is working with hedge fund Cerberus to put together a bid valued at some $11.5 billion for GM's GMAC finance arm.

Bush will send his 2007 budget to Congress on Feb. 6. His discretionary spending indicates that he has no comprehension of the word “budget.” That’s what happens when you are born into super wealth and never have to work for a living.

Adam Hamilton: “History will rightfully remember Alan Greenspan not as an inflation-fighting hawk, but as a socialist Keynesian advocate of endless inflation that betrayed his own principles that he expressed early in his life. In 1966 Alan Greenspan wrote “there is no way to protect savings from confiscation through inflation. ... Deficit spending is simply a scheme for the "hidden" confiscation of wealth." In light of his surprisingly poor monetary record Greenspan's legacy will be remembered as one of the confiscators of Americans' wealth that he so despised early in his life. His senseless inflation contributed to the moral decay of this nation, gutting the purchasing power of retirees' savings and ensuring that most American families would have to have two wage earners in order to keep a semblance of middle-class living.”

The Nikkei roared ahead by 3.6% to a 5-year closing high.

On several occasions I have written that the U.S. government would need to raise the current $8,184 billion debt ceiling by early February. I was wrong. On Tuesday, January 24th, the ceiling was exceeded. In sum, the Treasury Department is in technical default. Worse yet, they held an auction this past week while in default. How is it that no mention was made on CNBC or Bloomberg or the WSJ? How could Congress let this take place? You can bet Bush will not mention the default in his State of the Union Address.

Frank Borman: “Capitalism without bankruptcy is like Christianity without hell.”

During the market’s advance on Thursday and Friday, the big caps were the leaders—
P&G, Caterpillar, Microsoft, and Pfizer. History shows that big cap leadership soon brings forth weakness.

India has urged “that Iran’s right to develop peaceful uses of nuclear energy for its development consistent with its international obligations and commitments should be respected.”

Saudi Arabian King Abdullah bin Abdul Aziz al Saud stated on Friday that it was the first time he had actually "signed" an agreement with any country. "This is the first time that I am going to sign an agreement with any country," the king said just before signing the "Delhi Declaration" with Prime Minister Manmohan Singh at Hyderabad House.
According to the "Delhi Declaration," the king's visit heralded a new era in India-Saudi Arabia relations and a landmark in the development of increased understanding and cooperation between the two countries and creation of a mutually beneficial partnership.

Friday, January 27, 2006

Worse Off?

1/27/06 Worse Off?

GM expects to lower North American structural costs by $6 billion by the end of 2006. That is one big number! Should you wish to be an unsuccessful investor, just focus backwards on the loss reported for the fourth quarter. Then you can be in the same boat with the media.

In the latest week, the number of workers receiving unemployment benefits rose to 2.58 million, up by 53,000.

Orders for U.S.-made durable goods rose 1.3% in December despite a large decline in aircraft orders, the Commerce Department said Thursday. Excluding transportation equipment, orders rose 0.9 percent last month after a 0.6 percent increase. Orders for transportation equipment rose 1.9 percent after rising 16.5 percent in November. Bookings for motor vehicles increased 6.6 percent, while aircraft orders fell 8.1 percent after a 139 percent surge the previous month.

Bill Gross, managing director of bond giant Pimco, stated Thursday that the U.S. bond market's recent weakness is due in part to foreign central banks and institutions distancing themselves from a "fully priced" market for both Treasuries and the U.S. dollar, and they are "looking elsewhere" for investments. "That combination points them in other directions," Gross said in a MarketWatch interview. "It points them to gold, to assets that are oil-related, and perhaps to other foreign bond markets.” The yield on the 10-year Treasury bonds rose to 4.52% and the 2-year to 4.49%. That means higher mortgage rates are on the way.

Natural gas futures fell 7% to $7.88 -- the first time below $8 since July.

U.S. newspaper help-wanted advertising volumes were unchanged in December, the Conference Board stated Thursday. The help-wanted index remained at 39 in December; and it was 40 a year ago. "The economy is not going to build momentum any time soon," said Ken Goldstein, an economist for the Conference Board.

Christmas came early for those who were able to purchase Chipotle at the IPO price of $22. The stock opened for trading at $45.

Yesterday I wrote about Meritage Homes. In about four hours of trading the stock climbed $4.00 to $60.50 a share. Obviously, there are some serious doubters still remaining about the company’s rosy outlook for 2006. The February 2006 puts with a $55 strike price were trading at 60 cents. That gives an investor the right to sell the stock at $55 over the next 17 trading days. For that right the investor paid 60 cents a share. Therefore, the stock must sell below $54.40 (I have left out the commissions) before making money. The stock is already down from $90+ and is selling for about 5 times next year’s estimated earnings per share. Timing is everything. The stock already discounts potential disappointing news---should there be any! All homebuilders are not alike. It’s important to differentiate house price and location and, above all, management.


First Data to spin off Western Union.

Jacob Weisberg: “The president’s latest assertion that he alone can safeguard our civil liberties is not just disturbing and wrong. It is downright un-American.” It reflects a primal defense by a neo-fascist.

March silver rose 9.5 cents to close at $9.605 an ounce in New York, after trading as high as $9.67 -- levels not seen since 1987.

Privately held Atlanta –based Chick –fil-A’s sales rose 13% in 2005. It was the 38th consecutive year of sales increases. The chain opened 76 new restaurants last year, including 62 free- standing locations, two mall locations and 12 licensed operations. At the end of 2005, it had more than 1,240 restaurants in 38 states and Washington, DC.

Boston Scientific Corp. stated Thursday that the U.S. Food and Drug Administration has warned that its oversight practices for various operations within the company are "inadequate." The FDA warned of regulatory problems at three facilities and of concerns over quality control at six other operations. The letter does not prevent distribution of Boston Scientific products.

By a 59 percent to 37 percent margin, Americans disapprove of the way Bush is handling the economy, according to a Bloomberg/Los Angeles Times poll this week. About six out of 10 say the economy will stay the same in the next six months, while more say it will worsen than say it will improve. And by 47 percent to 22 percent, the public says the country is worse off economically since Bush became president.

Yesterday, the Dow Jones Transportation Index and the Russell 2000 both made new all-time highs. One might consider cutting back in the railroad sector as well as small cap shares. I continue to suggest some big cap companies as replacements, such as, Ford. Just a reminder- the Street has a short memory. They love McDonald’s at $35, but they despised the shares at $12+. How many liked Apple at $20? Only three years ago, few liked Schlumberger at $35. Today it’s a darling at $124. You get the picture.

Mittal Steel launched a $22.7 billion cash-and-stock offer for rival steelmaker Arcelor, and also agreed to sell to ThyssenKrupp the shares in Dofasco that Arcelor is buying in its pending tender offer for the Canadian steelmaker.

At $11.8 billion, the December quarter sales were less than the $11.9 billion Microsoft had forecast in October. Operating income fell 2 percent as the company spent heavily on several product launches. Microsoft now expects to ship 2.5 million video-game consoles in the product's first 90 days, down from its earlier goal of 2.75 million to 3 million units. This morning Microsoft shares are expected to trade higher. I would cut back on positions. There are better places for your money.

Ed Easterling: “We have explored two different methods using lessons of history. Both methods predict S&P 500 EPS near $64 in 2008. If overall stock market P/Es can be sustained in the low 20s—relatively high by historical standards—the stock market in 2008 will be near the same level that it is today. Flat, choppy markets are characteristic of secular bear markets. Of course, the bulls hope that maybe it’s different this time.”

The global threat that most preoccupies the world’s business leaders is the deadly H5N1 bird flu virus, according to a study released Thursday at the World Economic Forum.
Other global risks, such as terrorist attacks and the possibility of an even bigger oil price shock, were deemed just as dangerous, but less likely to happen in the coming year, said the “Global Risks 2006” report.

Karl Kraus: “How is the world ruled and how do wars start? Diplomats tell lies to journalists and then believe what they read.”

Thursday, January 26, 2006

Vigilance

1/26/06 Vigilance

In December 2005, employers took 1,308 mass layoff actions, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the Bureau of Labor Statistics of the U.S. Department of Labor reported yesterday. Each action involved at least 50 persons from a single establishment, and the number of workers involved totaled 149,565. The number of layoff events in December rose by 103 from November, and the number of associated initial claims increased by 28,782.
On a not seasonally adjusted basis, the number of layoff events in December2005, at 2,323, was up by 709 from a year earlier, and the number of associated initial claims rose by 92,987 to 254,258. These were the highest event and initial claim totals for December since 2002.

George Orwell: “I sometimes think that the price of liberty is not so much eternal vigilance as eternal dirt.”

March silver closed at $9.51 an ounce, up 28.2 cents at its highest level in 18 years. February gold added $4.40 to end at $562.50 an ounce. March copper finished at a record $2.2035 a pound, up 2.4%, April platinum ended at a 26-year high, up 0.6% at $1,064.80 an ounce. It's a good thing inflation is under control!

A Treasury Department auction of $22 billion in new 2-year notes Wednesday afternoon produced a weak bid-to-cover - or bids rendered to bids accepted - ratio of 2.11.

U.S. residential mortgage originations will likely drop to $1.46 trillion in 2006 from $1.49 trillion in 2005, the Mortgage Bankers Association estimated Wednesday. In its economic forecast, the group also stated existing home sales will probably fall by 4.7% in 2006 and 4.4% in 2007. New home sales will likely drop 4.3% in 2006 and 4.9% in 2007, the group added.

More money exited the hedge fund industry than flowed into it for the first time in more than a decade during the fourth quarter of 2005, Hedge Fund Research stated on Wednesday. There was a net outflow of $824 million during the final three months of the year, the research firm reported.

Richard Daughty, The Mogambo Guru: "Well, obviously, the swoons and zooms of markets around the world are only the beginning. Worse, these are the kinds of wild, worsening oscillations and turbulence that characterize systems just before they become unstable and blow up, sort of like how the idiocy of the modern incarnation of central banking makes me crazier and crazier, day by day, worse and worse, until one day I suddenly go berserk and wake up a few weeks later in a straightjacket being fed Jell-O through a straw."

The National Association of Realtors said existing-home sales declined 5.7% in December on a seasonally adjusted basis. Sales have fallen three months in a row. "Speculators are pulling out," said David Lereah, chief economist for the realtor group. Inventories of unsold homes fell 4.4% to 2.80 million in December, a 5.1-month supply.

Sprott Asset Management: "Before 1997 it took fourteen years for the money supply to double. Since then it has taken only nine; and if the rate of the past month is any indication, it will double again in four years."

Indiana Governor Mitch Daniels stated a Spanish-Australian consortium had bid $3.85 billion to run the Indiana Toll Road, a 157-mile highway across northern Indiana that runs from the Illinois to Ohio, for 75 years. Now, if only we could get the head of New Zealand to run our federal government. Maybe we should make him an offer he can't refuse. We can trade Bush for him and throw in some first round draft choices.

Housing appears alive and well in Arizona. Scottsdale-based Meritage Homes earned $3.53 per share in the fourth quarter versus $1.88 a year earlier. It was the company’s 18th consecutive year of record home closing revenue and net earnings. "We are maintaining our expectations to grow revenue to $3.8 to $3.9 billion in 2006, and to produce net earnings of $11.25 to $11.50 per diluted share," said John R. Landon, co-chairman and chief executive officer of Meritage. "We begin the year with a $2.2 billion backlog, which represents about 56% of expected 2006 revenue, up from 44% last year, providing good visibility to continued growth in home closings and revenue through the first half of 2006. We expect first quarter revenue of $825 to $850 million, and net earnings of $2.35 to $2.45 per diluted share, an increase of 52% to 58% over the first quarter 2005, excluding the one-time bond refinancing charge.” Meritage Homes was named to Forbes' annual listing of "America's Best Big Companies," its third consecutive appearance on this list, and was ranked 14th on the list of 400 companies for five-year annualized total return. Yesterday, the stock traded at a new 52-week low and closed at $56.63.

The other day the underwriters for Chipotle’s IPO raised the price range from $16-$18 to $18-$20. Morgan Stanley and S.G. Cowen, the lead underwriters, true to their word, priced the deal last evening at $22 per share. This spin-off from McDonald’s will trade under the symbol CMG on the NY Stock Exchange.

Nokia’s fourth quarter earnings report was disappointing and the company stated cell phone prices may decline. They should decline, and so should the price of GM and Ford autos.

Kerkorian raised his GM ownership back up to 9.9%, and the stock is closing in on $25. Recently, it has risen 6 points. Last Friday, Ford shares sold at $7.85. Last night, they closed at $8.62. These stocks are rising from the dead pile.

Hamas garnered a majority in the Palestinian legislative elections.

In his State of the Union message, I wonder whether Bush will discuss a bailout of the U.S. government. Our balance sheet reflects short-term, long-term, and contingent liabilities amounting to $49 trillion or about $165,000 for each American citizen. Maybe we should open our borders. That way the liability for every man, woman, and child would decline! Since our daily federal deficits (budget and trade) exceed $3 billion daily, we are receiving a bailout 365 days of the year. Saying it another way, our Treasury bonds are nothing but a Ponzi scheme.

24,500 Chicagoans applied for 325 jobs at a Wal-Mart opening Friday in south suburban Evergreen Park, one block outside the city limits.

Since consumer spending accounts for roughly 70% of our economy, it seems rational that any forecast for 2006 must be predicated on the health of the consumer. Saying it differently, any forecast must accurately predict the amount of equity that will be extracted from homes in 2006. Does anyone have data to backup a forecast? Guesses don’t count in my book.

Since our March 2003 invasion of Iraq, approximately 2250 of our fighting men and women have been killed.

Thomas Jefferson: “Eternal vigilance is the price of freedom.”

Robert W Baird raised the Lucent EPS estimate for FY06 from $0.14 to $0.19.

Pearl S. Buck: “When good people in any country cease their vigilance and struggle, then evil men prevail.”

Wednesday, January 25, 2006

Stress Testing

1/25/06 Stress Testing

Erectile dysfunction may be a warning sign of serious heart disease, researchers from the University of Chicago report. The latest study appears in the Jan. 23 issue of the Archives of Internal Medicine. "Among patients with symptoms that require stress testing, we found a very high prevalence of erectile dysfunction," said lead researcher Dr. R. Parker Ward, director of the university's cardiology clinic. "Over 50 percent had some degree of erectile dysfunction." In my view, the potential market for Palatin’s PT 141 is larger than most believe. As previously discussed. Palatin is the only company whose product addresses both male and female sexual dysfunction.

According to TMCnet, Madison Dearborn Partners and European produce company Fyffes PLC have emerged as the most interested bidders for Fresh Del Monte Produce Inc. J.P. Morgan is running the auction for a 52% stake, with an expected enterprise value of approximately $1.8 billion. One problem for the auction has been the disappointing near-term results for the company.

Centex reaffirmed its fiscal 2006 forecast for earnings from continuing operations of $9.65 to $9.85 a share, and its fiscal 2007 earnings forecast of $10.75 to $11.25 a share. The company expects to deliver 43,000 to 44,000 homes in fiscal 2007.

Walt Disney Co. it will buy Pixar in an all-stock deal worth $6.3 billion in stock and $1.1 billion of Pixar's cash.

According to the NY Times, Guidant is expected to announce this morning that it will accept Boston Scientific's $27 billion offer. J&J will not up its bid again; however, Johnson & Johnson said it will receive a $705 million merger termination fee from Guidant.

Ryland stated fourth-quarter home closings rose 11% to 5,165, while new orders fell 4.7% to 3,066 units from 3,217 units a year ago. Ryland said it was comfortable with analysts' current consensus 2006 earnings estimate of $10.09 a share.

China's economy grew 9.9 percent in 2005, overtaking the U.K. as the world's fourth largest.

The Richmond Fed's manufacturing index fell two points in January to -4, and now stands at its lowest level since November 2004.

Benjamin Franklin: “Do not anticipate trouble or worry about what may never happen. Keep in the sunlight.”

According to Jared Bernstein of the Economic Policy Institute, growth in the median U.S. wage dropped to 2.4 percent in 2004 and 2005, from about 3 percent, on average, in 2002 and 2003. In real terms, taking inflation into account, wages have declined in the last two years across all pay scales except for the very top earners, according to Bernstein's crunching of U.S. census data.

China’s Year of the Dog begins January 29.

Crude has eased this morning to just below the $67 a barrel level.

The volume of mortgage loan applications filed in the week ended Jan. 20 increased 7.7% from the prior week, Mortgage Bankers Association data indicated. Applications for mortgages to purchase homes rose 6.7% on a week-to-week basis, while refinancing applications increased by 7.8%.

De Clementia Seneca: "It is the nature of a great mind to be calm and undisturbed."

Tuesday, January 24, 2006

Changing World

1/24/06 Changing World

China and Saudi Arabia are expected to sign a broad energy cooperation pact. I would anticipate India would soon follow with their agreement with the Saudis. The world is definitely changing, and the growth in liquid assets can be found in the Asean countries as well as the Middle East. The U.S. is on a debt-laden path with leaders who fail to comprehend the meaning of pay as you go. Our grandchildren will be burdened with bond obligations many global investors will not want to touch with a ten-foot pole.

Ford’s revamping plan is a good first step. Consistency, cooperation, and dedication will need to be a mainstay of daily metrics if the company is to prosper once again. I believe support is warranted.

Time Magazine mentioned seeing six photos of Bush with Abramoff at White House functions. People should not be so shocked. Bush has been a close friend with “Kenny Boy” Lay, former CEO of Enron. You know the old saying—you can tell a person by the company he keeps. One might also observe—where there’s smoke, there’s fire.

February natural gas closed at $8.574 per million British thermal units, down 70.6 cents, or 7.6%, after touching $8.31 -- its lowest level since early June.

A new report by Kline & Company indicates that while
most of the world's leading drug makers are already including China in their
research plans to an extent, the Chinese are making systemic improvements that
will encourage future growth in the number and scope of clinical drug trials
and further enhance the nation's standing as a world hotbed of research activity.

Even wealthy Americans are concerned that rising heath care costs will eat up their financial assets, according to survey findings released by The PNC Financial Services
Group, Inc. (NYSE: PNC). One in three (36 percent) of respondents said,
"health care costs will ultimately consume a major portion of my financial
assets." Nearly four in 10 wealthy Americans, including one quarter of those
over age 65, said that affording health care for their families is a top financial concern.

The Conference Board reported that the Composite Index of Leading Economic Indicators increased 0.1% in December,following a 0.9% increase in November and a 1.0% increase in October. Says Ken Goldstein, Labor Economist at The Conference Board: "The indicators may be signaling a spurt of growth ahead (perhaps in the spring)
which could be followed by a slower pace of activity later in 2006.
Improvement in the leading series, steady modest gains in the coincident
series, a recent pick-up in the lagging series, and a flat to declining trend
in the ratio of coincident to lagging series is not the mix of indicators one
would expect if 2006 is to be a year of steadily building momentum. Rather, it
is suggestive of a quite choppy pattern of growth."
The Conference Board reported that the Coincident Index, a major barometer
of current economic activity, increased 0.2% in December, following a 0.4%
increase in November, and a 0.2% increase in October. The lagging index
increased 0.1% in December, after increasing 0.5% in November, and increasing
0.7% in October.

Engelhard's board unanimously rejected BASF's offer, calling it "inadequate" and "opportunistic." BASF launched its $4.9 billion hostile takeover bid earlier this month.
Engelhard is considering the sale of the company.

Target Corp. said Monday it expects January sales at stores open at least a year to rise 4.5% to 5%.

Texas Instrument Inc. late Monday issued a first-quarter profit forecast that fell short of Wall Street expectations.

Since 1997, the average price of a house in the US has risen by 79 per cent.
"Strong price growth momentum has resulted in very high prices relative to incomes across the country," says Ian Morris, chief US economist at HSBC.
Federal Reserve figures show that debt servicing costs for homeowners are now 16.61 per cent of disposable income, up from 15.76 per cent at the end of 2004, and the highest level since records began in the 1980s. Deutsche Bank stated a drop in house price inflation to zero "would subtract about a percentage point from real consumer spending growth.”

According to the WSJ and Reuters, Disney is considering making an all stock offer for Pixar.

According to the WSJ, DaimlerChrysler plans ABOUT 5,000 white-collar job cuts.

The Reserve Bank of India increased its overnight borrowing rate to a three-year high of 5.5 percent from 5.25 percent, and predicted growth in Asia's fourth-biggest economy will accelerate to 8 percent in the year ended March 31, from 6.9 percent the year earlier. Governor Yaga Venugopal Reddy stated he wants to stop stronger-than-expected demand causing ``inflation spirals.''

OPEC producer Kuwait's oil reserves are only half those officially stated, according to internal Kuwaiti records seen by industry newsletter Petroleum Intelligence Weekly (PIW)."PIW learns from sources that Kuwait's actual oil reserves, which are officially stated at around 99 billion barrels, or close to 10 percent of the global total, are a good deal lower, according to internal Kuwaiti records."

Saudi Arabia's King Abdullah bin Abdulaziz that his country would like to meet India's future energy needs.

Monday, January 23, 2006

Patience Can Be Rewarding

1/23/06 Patience Can Be Rewarding

The dollar fell to a four-month low against the euro after European Central Bank officials suggested higher interest rates are needed to prevent a surge in oil prices from spurring faster inflation. The dollar dropped the most in three weeks against the yen after William Poole, president of the Federal Reserve Bank of St. Louis, stated he's less concerned about inflation than six months ago and suggested the Fed may soon stop raising rates.

A group comprised of Supervalu, CVS, Cerberus, and Kimco Realty agreed to acquire
Albertsons for $17.4 billion. Shareholders of Albertsons will receive $20.35 in cash and 0.182 a share of Supervalu stock for a total consideration of $26.29 a share. The transaction is expected to close in mid-2006.

Lya Sorano: “When we talk about equal pay for equal work, women in the workplace are beginning to catch up. If we keep going at this current rate, we will achieve full equality in about 475 years. I don't know about you, but I can't wait that long.”

comScore Networks today released year-to-date consumer spending figures, which showed that online non-travel spending is up 33 percent for the first three weeks in January 2006 versus corresponding days in 2005. Total online spending for the full year 2005, including travel, reached $143.2 billion, up 22 percent over 2004. Online non-travel spending in 2005 accounted for $82.3 billion, an increase of 24 percent over 2004 levels.

John McCain: "We've got to get quickly on a track to energy independence from foreign oil, and that means, among other things, going back to nuclear power. We better understand the vulnerabilities that our economy, and our very lives, have when we're dependent on Iranian mullahs and wackos in Venezuela.”

"We exposed a base camp population [military and civilian] to a water source that was not treated," stated a July 15 memo written by William Granger, the official for Halliburton's KBR subsidiary who was in charge of water quality in Iraq and Kuwait.
"The level of contamination was roughly 2x the normal contamination of untreated water from the Euphrates River." What type of recrimination will Halliburton face? Ask Cheney. You’ll get your answer. Patience has its limitations.

Barry Ritholtz makes an important observation that, “when the Dow closes below its December closing low in the first quarter, it is an excellent technical warning sign. The lowest actual closing price for the Dow Jones industrials in December was made on the very last trading day of the year -- 12/30/2005 at 10,717.50. Closing price on Friday? 10,667.39. In the past, when the December low has been violated in the past, at some point, markets have been down later that year every single time but one. The average drop is about 10.7%, but its been as small as 0.3%, and as large as 25.1%.”

I found it interesting that, on Friday, 243 stocks registered new highs on the NY Stock Exchange versus only 33 new lows. Such a divergence gives the bulls reason for optimism. My suggestion remains the same—to lighten up into strength.

Saudi Arabia was China's top supplier of oil in the first 11 months of last year, providing 17 percent of its imports, nearly 440,000 barrels per day (bpd).

Timothy Geithner, President of the NY Fed: “We live with considerable uncertainty about the sustainability of the pattern of global capital flows and the relatively low risk premia that prevail today. That uncertainty necessarily adds to the normally substantial degree of uncertainty we face in making monetary policy judgments.”

Chipotle ups IPO price range to $18-$20 from $15.50-$17.50.

Barbara Johnson: “Patience is the ability to idle your motor when you feel like stripping your gears.”

Ford reported fourth-quarter earnings of $124 million, or 8 cents a share, up from a year-ago profit of $104 million, or 6 cents a share. Excluding a number of items, the company posted earnings from continuing operations of $511 million, or 26 cents a share, down from a year-ago equivalent profit of $554 million, or 28 cents a share. Total sales and revenue, which includes the contribution of the company's financial services business, rose in the latest three months to $47.6 billion from $44.9 billion in the same period a year earlier. While continuing to lose money on auto revenue, automotive sales totaled $41.82 billion in the December quarter, up from $38.87 billion a year earlier. For those with a greater appetite for risk, have you considered the purchase of Ford bonds?

Wal-Mart reaffirmed January same-store sales guidance of 3-5%.

Sunday, January 22, 2006

Questions

1/22/06 Questions

Ford has 18 assembly plants in North America. Tomorrow the company will most likely announce the closing of four or five of them. Many project that the following plants are in danger of closing:
Wixom, which employs 1,567 and makes the Ford GT, Lincoln LS and Lincoln Town Car.
St. Louis, which employs 1,445 and makes the Ford Explorer and Mercury Mountaineer SUVs.
St. Paul, Minn., which employs 1,965 and makes the Ford Ranger compact pickup.
Atlanta, which employs 2,028 and produces the Ford Taurus sedan.
Cuautitlan, Mexico, which employs 900, and makes the Ford superduty pickups and the Ikon car sold in South America.

Wall Street analysts and money managers are asking whether Friday’s pounding was a selling climax and many suggest the worst of the drubbing may be over. One of the reasons is that, on Friday, over 8 times as many stocks declined on the Nasdaq as rose and that this took place on extremely high volume. Before reaching a conclusion, please consider the advice from Dennis Gartman: “when the facts change, we must change.” In other words, did the facts change on Friday?

Let’s look at a scenario that has not been expressed. Let’s suppose the equity markets decline this week. Greenspan heads his last Fed meeting on the 31st. Do you think the Fed will not raise rates in order to give a lift to the equity markets and change psychology? Of course, that would not be the reason stated on an official basis. Rather, they would state core inflation is under control and that GDP growth in the fourth quarter slowed from the most recent periods and that the housing market is cooling. On the other hand, a Fed voting member, Richmond Federal Reserve President Jeffrey Lacker, told reporters
"I don't think that we're done yet."

Saudi Arabia’s King Abdullah is making his first-ever visit to China. During his three-day stay in China, Abdullah is scheduled to meet President Hu Jintao on Monday and on Tuesday with Wu Bangguo, the No 2 Communist Party leader and Prime Minister Wen Jiabao.

Barry Lopez: “How is one to live a moral and compassionate existence when one is fully aware of the blood, the horror inherent in life, when one finds darkness not only in one's culture but within oneself? If there is a stage at which an individual life becomes truly adult, it must be when one grasps the irony in its unfolding and accepts responsibility for a life lived in the midst of such paradox. One must live in the middle of contradiction, because if all contradiction were eliminated at once life would collapse. There are simply no answers to some of the great pressing questions. You continue to live them out, making your life a worthy expression of leaning into the light.”