Eye-catching

12/19/05 Eye-catching

Honda Motor Co. stated on Monday it plans to start mass-producing solar cells in 2007, eyeing growing demand for environmentally friendly energy sources.

Energy companies FPL Group Inc. and Constellation Energy confirmed Monday they have agreed to merge in an $11 billion deal that will create the nation's largest energy supplier. Under the terms of the transaction, each share of Constellation Energy held will be converted into 1.444 shares at the time of the merger, while each FPL Group share will be converted into one share of Constellation Energy at the time of the merger.

''This was a healthy weekend, but it wasn't something to knock your socks off,'' said Marshal Cohen, chief analyst at NPD Group Inc., a market research company based in Port Washington, N.Y. ''But stores aren't panicking because the season has more time to go. The trickiness of the season is that consumers are calling the shots on where they were going shopping.''

Light, sweet crude for January delivery rose 42 cents to $58.48 a barrel on the New York Mercantile Exchange by midday in Europe. The contract had fallen $1.93 to settle at $58.06 Friday, its lowest close since Nov. 30. It will expire Tuesday.

At 11.5 percent, German unemployment is still close to a post-World War II record of 12 percent reached in March. Meanwhile, Germany's PPI rose 5% in November due to higher energy prices.

The pump price of gasoline rose 8 cents in the past two weeks to a national average of $2.21 a gallon, analyst Trilby Lundberg said Sunday, citing her company's biweekly survey of about 7,000 filling stations nationwide.

John Hussman: "There have been 13 tightening cycles since 1950 where the Fed has raised rates at least twice. In the six month period following the last hike of the cycle, the S&P 500 has delivered annualized total returns averaging 2.47% over the following 6 months, 5.06% over the following year, and 8.55% over the following 18 months. All figures are on a monthly closing basis...If you look at periods where the price/peak earnings multiple was 16 or higher on the S&P 500, the final rate hike of a tightening cycle was actually associated with losses on an annualized total return basis, averaging -7.18% over the following 6 months, -9.94% over the following 12 months, and -5.87% over the following 18 months. Given the current multiple of 19 times peak earnings on the S&P 500, this would be the relevant set of comparisons even if the latest rate hike was the final one."

Microsoft Corporation has announced that it will stop supporting the Mac OS X version of its Internet Explorer (IE) Web browser from December 31.

Bolivia elected a new president-- Evo Morales, the Socialist candidate and a coca farmer.

Google has introduced a "mobile version" of its Gmail service, which allows mobile phone subscribers quick access to their e-mail.

I'm a slow learner. I could never figure why Wall Street paid such big year-end bonuses. Now I know. An analyst at Lehman Bros. originally figured that Albertsons would fetch $20 a share in an auction. Now, after a zillion of articles on the subject, this same analyst projects a more accurate evaluation is $26 a share. We have yet to hear from Albertsons.

Palatin Technologies,Inc. announced today that, as a result of safety concerns recently
raised in connection with the use of NeutroSpec(R) diagnostic imaging agent
kits for the preparation of Technetium (99m Tc) fanolesomab, identified during
routine pharmacovigilance, Palatin and Tyco Healthcare Mallinckrodt have
decided to voluntarily suspend the sales, marketing and distribution of
NeutroSpec and recall all existing customer inventories of this product.
Palatin and Mallinckrodt acted at the request of the U.S. Food and Drug
Administration (FDA).  NeutroSpec, the only diagnostic agent approved for
imaging equivocal appendicitis, was approved for marketing by the FDA on July
6, 2004. Since it was introduced to the marketplace in September 2004, NeutroSpec
net sales to customers, through September 30, 2005, totaled $9.8 million, of
which Palatin received royalty payments of $2.5 million and product transfer
sales of $2.5 million from its marketing partner, Tyco Healthcare
Mallinckrodt.  For the quarter ended September 30, 2005, NeutroSpec net sales
to customers totaled $3.7 million, of which Palatin received royalty payments
of $0.9 million and no product transfer sales.
The FDA also stated that they would convene an Advisory Panel early next
year to discuss the use of NeutroSpec with additional safeguards, and evidence
needed to continue use of the product for equivocal appendicitis, as well as
plans for other indications, most notably being osteomyelitis.
Palatin and Mallinckrodt are reviewing data and assessing approaches for
understanding the relationship between NeutroSpec use and the observed serious
adverse events. No final decisions concerning future activities involving
NeutroSpec have been made by Palatin or Mallinckrodt.

Just a reminder-- as a result of the judge's decision upholding Pfizer's
two Lipitor patents, the shares are up close to 3 points in early trading.
The stock is in the Dow.

The Seal Of Approval

12/18/05 The Seal Of Approval

The approximately $9 billion kosher market is growing at a rate of 15 percent a year. Meanwhile, total grocery store sales grew 4.4 percent during the first 11 months of the year over the same time last year, to $424.8 billion, according to the Food Marketing Institute. Marcia Mogelonsky, a senior research analyst with Mintel International Group, a Chicago-based consulting firm, recently completed a nationwide study in April. She found 55 percent of the people who buy kosher products believed the food was better for them — almost double the number in a similar study Mogelonsky conducted in 2003. "They trust the kosher symbol like they'd trust the Good Housekeeping seal," she said. Part of the trust, Mogelonsky said, is derived from how the animals are raised. According to Jewish law, they cannot be pumped with antibiotics, additives, hormones or fed animal byproducts. As such, vegetarians and younger customers looking for healthier food — the same demographic that has helped the organic market take off- are helping to fuel the demand for kosher products. Interestingly, Albertsons, has, over the last few years, dramatically expanded kosher aisles at hundreds of its supermarkets across the country. The company has also launched more than two dozen kosher destination stores that include everything from bakeries to delis.

John Adams: "The happiness of society is the end of government."

Over the past several months, Weyerhaeuser has announced closing the Dryden Pulp and Paper mill in Ontario, Canada; the Prince Albert Pulp and Paper mill in Saskatchewan, Canada; 3 corrugated sheet plants in Little Rock, Memphis, and Shreveport; a specialty packaging plant in Valley View, Ohio; corrugated packaging plants in Bedford Heights, Ohio, Elmira Heights, NY, Little Rock, Ark, and Matthews, NC; and other facilities in Tenn, TX, CA, OKLA, and WA. "As a result of our ongoing strategic review, we anticipate future changes," according to the company's statement Friday. That's a busy company. Why all the hectic activity?

James Madison: "I believe there are more instances of the abridgement of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations." President Bush, are you listening?

Do you think the Federal Reserve would agree with this statement by James Garfield that
"Whoever controls the volume of money in any country is absolute master of all industry and commerce."

Last year at this time almost every financial wizard thought the dollar was dead and buried for good. As January came into view, some of the skeptics, like me, had second thoughts. We had had a very nice ride for the past 18 months. It was time for a reality check. Markets don't go up or down in a straight line. Long-term, the dynamics don't favor the dollar. The same can be said for manufacturing in our country; however, could manufacturing be the dollar in 2006? All the financial wizards think manufacturing is dead and buried for good. Hundreds of plants have been closed. When everyone says black, the answer frequently is white. We saw that this week in Pfizer. Could 2006 be a better year for GM and its bonds?

Crucial Developments

12/17/05 Crucial Developments

Pfizer's Lipitor is the largest selling drug in the U.S. Last year sales amounted to an amazing $10.9 billion in the U.S. and in more than 70 countries. Pfizer's two patents on Lipitor expire in 2010 and 2011. India's Ranbaxy sued to make its own version of Lipitor, and claimed Pfizer's patents did not cover the generic version Ranbaxy wanted to make and market. Delaware District Judge Joseph J. Farnan Jr. upheld Pfizer's patents. The ruling came out after the close of trading on the NYSE yesterday. This ruling should not have come as a surprise. Ranbaxy will appeal; however, I believe the appeal will be unsuccessful. In late trading, Pfizer rallied to $25+ or almost $5 higher than the low reached only a few days ago. The investors who have written off Pfizer must feel like real schmucks, and they should.

President Bush has personally authorized a secretive eavesdropping program in the United States more than three dozen times since October 2001, a senior intelligence official said Friday night. Maybe Bush believes the U.S. Constitution is meaningless. Meanwhile, our fighting men and women should fight for the Iraqi Constitution and lose their lives as well as get wounded and maimed. It's never to late to make a change.

Time Warner will sell a 5% stake in AOL to Google.

Doug Noland: "The third quarter's 9.1% rate of non-financial debt growth and the 14% pace of household mortgage Credit expansion garner virtually no attention from the economic or analytical community. And $200 billion quarterly Current Account Deficits are now promulgated as proof of our robust economy outpacing our feeble trading partners. The well-oiled and inspirited propaganda machine functions superbly from Wall Street to Washington D.C...It is becoming increasingly incontrovertible that the Greenspan/Bernanke "post-Bubble" view and policy prescriptions have been disastrously misguided. They have instead been actively reinforcing ongoing Credit Bubble inflationary forces. And the sad irony is that they have assured just the type of major monetary system breakdown Professor Bernanke has spent his career convincing himself and others that an aggressive Fed could avoid."

Employees at Supervalu's Cub Foods and at Albertson's Jewel supermarkets in the Chicago region are represented by the same two locals of the United Food and Commercial Workers International Union.

Yu Yongding: "We're still facing the possibility of a big devaluation of the US dollar, so the capital losses will be huge. If that happens, it will be a tremendous hit to the Chinese economy."
China will reduce their holdings in U.S. Treasury bonds and other dollar-denominated assets. October's reduction was not an isolated incident.

January crude oil fell $1.33 to $58.06. January Unleaded Gasoline declined 3.2%, and January Natural Gas ended the week down 4.6%.

Wal-Mart's growth will continue in 2006 with plans to open as many as 600 new stores and clubs, including up to 230 new international stores and 370 U.S. units.

The Disappointing And The Good

12/16/05 The Disappointing And The Good

According to the WSJ, an investment group consisting of Cerberus Gruop, Kimco Realty Corp. and Supervalu Inc. are set to win the auction of Albertson's Inc. for about $9.6 billion, or $26 a share, citing anonymous sources. An announcement could come sometime after the board meets this week, the newspaper added. The company is still working out details with CVS Corp., which is in the lead to purchase the company's drug chain for up to $4 billion of the overall purchase price, the report added. If this is the final deal, it is a far cry from the $31 I had figured shareholders would receive. I know that would work out to an annualized return of 35% counting the dividend received, and for that I am thankful, but it would still be disappointing.

GMAC, with assets of about $310 billion, has earned more than GM's auto unit since 2002 and forecasts profit of more than $2.5 billion this year. GM's CEO stated there is ample interest in the purchase of 51% of GMAC. As such, one might consider making a speculative buy of the GMAC bonds. They have recently been downgraded by various credit agencies.

The Philly Fed Index in December rose to 12.6 from 11.5 in November, and that was disappointing. New orders and shipments were lower in December than the prior month. However, prices paid dropped to 49.0 from 56.8; however, prices received also declined to 30.5 from 32.5.

On the other hand, the December Empire State Index rose nicely to 28.7 from 22.8 in November. However, shipments and unfilled orders and employment were lower than in November.

The CPI in November dropped 0.6%, the biggest decline since 1949, due to energy prices plunging 8% (they recovered in December). Excluding food and energy, the CPI rose 0.2% in November. Over this year, the CPI has risen 3.5%. At the same time, production has gained 2.8%.

Importantly, capital flows into the U.S. in October amounted to $106.8 billion. However, we had better look under the hood, so to speak. Chinese holdings of U.S. Treasury bonds declined in October by $4.4 billion and foreign central banks only purchased $13 billion in U.S. Treasury bonds. In other words, private investors were responsible for $97.3 billion in capital inflows. It would be interesting to know the identity of these investors.

For the very first time, Toyota is making the Prius outside Japan. It's not in the U.S., but rather in Jilin Province in China through a joint venture with that country's number one automaker.

Adobe will cut 650 to 700 jobs that were overlapping after their rcent acquisition of Macromedia.

My thanks to Rob Kirby for making the following observation. He pointed out that the Fed will discontinue the publication of M3 monetary aggregate on March 23, 2006, and that coincidentally, on March 20, 2006, Iran is scheduled to begin trading oil for Petroeuros on the Iranian Oil Bourse. Ron asks what happens if Asian countries, such as, Japan and China, no longer require U.S. dollars to purchase oil. Might hey begin to liquidate their U.S. Treausry bond holdings? China liquidated $4.4 billion in October.

Paul L. Kasriel: " When economic growth downshifts in 2006 and so does corporate profit growth, corporate bondholders may start to feel a little exposed. With less cash being generated by corporations with which to buy back shares, even stockholders may begin to feel a bit exposed."

Abu Musab al-Zarqawi, America's most wanted man in Iraq, was arrested last year but released because his captors did not know who he was, an Iraqi government minister has claimed. Are we to believe this? Zarqawi must have had a get-out-of-jail Monopoly card.

Wal-Mart is purchasing Sonae's 140 Brazilian "hypermarkets" for $764 million. This means Wal-Mart willoperate more than 250 stores in 17 of Brazil's 26 states.

Developments

12/15/05 Developments

Amgen signed a definitive agreement to buy Abgenix for $2.2 billion or $22.50 a share. The deal gives Amgen full ownership of panitumumab, which the companies have co-developed. Panitumumab is a new class of drugs that is being developed for metastatic colorectal and other cancers and is seen as having blockbuster potential.

Pier I expects negative mid-single digit comp sales for December and won't provide guidance for the quarter.

Lennar, the homebuilder, expects to meet its 2006 goal of $9.25 per share due to a record $6.9 billion backlog.

Kazakhstan opened the pipeline to China. The 625-mile pipeline is designed to carry 140 million barrels of oil a year and opens a huge market for the Central Asian nation. Kazakhstan is aiming to more than double its production from 1.3 million barrels to 3 million barrels a day by 2015, the Oil Ministry says.

The yen staged its biggest two-day rally since March 2002.

Bush: "We are in Iraq today because our goal has always been more than the removal of a brutal dictator; it is to leave a free and democratic Iraq in its place...We need to remember that these elections are also a vital part of a broader strategy for protecting the American people against the threat of terrorism." Do you think this is why we invaded Iraq in March 2003? Bush maintains he did the right thing and would repeat his decision. Tell that to our 2,150 fighting men and women who have perished and the 20,000+ who have been wounded and injured. Tell that to their families and loved ones. How do you feel about voting for Bush's re-election?

NPD Group Inc., reported that game sales at U.S. retailers declined 18% to about $700 million in November from approximately $850 million during November of the prior year.

Merrill Lynch analysts see room for margin expansion at Saks and the catalysts to make it happen, and noted that improved merchandising and marketing initiatives combined with new planning systems "could act as a catalyst over the next few years."

Robert Toll, CEO of Toll Brothers: "We're nowhere near the sales that we did in '04-'05 on a same-store, per-community basis." The company already has cut its sales projection for next year. Its average home sells for $680,000, he said.

The U.S. trade deficit soared to a record $68.9 billion in October and could reach $800 billion this fiscal year. The October trade deficit with China was
a record $20.5 billion.

Dianne Swonk, Mesirow Financial's chief economist, stated she believes the nation's economic expansion, which started in late 2001, has at least four more years ahead of it. She said that while consumer spending will grow at slower rates, business spending will pick up to replenish tight inventories.

Marsoft: "After rising sharply during the first half of October, the dry bulk rally has sputtered over the past month or so. The Baltic Dry Index, having increased from a low of 1750 in August to a mid-October peak of 3370, fell back below 2800 during the latter half of November. This left the BDI down by more than 50% compared to its level of a year ago.
Much of the weakness seen during the past month has been centered on the Panamax and Cape sectors, where rates fell by an average of 20%. On our benchmark USG/Japan grain route, rates fell from $47 per tonne, or $26,000 per day, to $43 per tonne, or $22,000 per day. Other routes saw similar declines, with earnings for most Panamaxes falling from about $20,000 per day in mid-October to about $16,000 per day by mid-November."

The Bank Credit Analyst sees zero growth for the S&P 500 operating earnings in 2006. By comparison, the overall analyst consensus is for roughly 12% growth.

UnitedHealth Group Inc. , the largest U.S. health insurer by market capitalization, reported today that more than 2 million Medicare beneficiaries have enrolled in new programs offering prescription drug coverage.

Economists are predicting a drop in the Consumer Price Index for November, which is being released this morning by the Labor Department.

Mortgage rates retreated on hopes that consistent interest rate increases are winding down. The average 30-year fixed rate mortgage dropped from 6.39 percent to 6.34 percent, according to Bankrate.com's weekly national survey of large lenders.

Patterns

12/14/05 Patterns

A recent Maritz(R) Poll showed that the
vast majority of those traveling over the winter holidays will choose to
drive, rather than fly. While nearly one in five Americans (19 percent) plan
to travel sometime in December or early January, six out of 10 (58 percent) of
these holiday travelers will drive and one-third (35 percent) will choose to
fly the friendly skies. The remainder will travel by train, bus or some other
means.
When considered against the total number of poll respondents, the numbers
traveling by car versus plane are consistent with similar Maritz Polls taken
over the past two years:

2005 2004 2003
Your own car 11 percent 9 percent 10 percent
Airplane 7 percent 8 percent 6 percent

According to a recent Maritz(R) Poll found that almost nine in 10 (88 percent) holiday shoppers describe themselves as "generous" gift givers. The telephone survey of more than 2,000 adults also revealed that the respondents were honest in their assessment of their generosity levels. The data prove that generous gift givers will spend an average of
$367 more on gifts this holiday season than non-generous gift givers. Those
who described themselves as "somewhat" or "extremely" generous gift givers
plan to spend an average of $843 on holiday gifts this year, which is significantly higher than the $476 that those who consider themselves to be "not particularly generous" plan to spend. Generous gift givers are significantly more likely to take two months or
more to pay off their holiday debts (25 percent) than those who consider
themselves to be not particularly generous (15 percent).

Lehman Brothers investment banking revenues were a record for the quarter, increasing 34% to $817 million from $608 million in the fourth quarter of fiscal 2004. These
results were driven by record merger and acquisition advisory revenue, which
increased 54% from the prior year's period, and solid performances in equity and debt origination, which increased 48% and 15%, respectively, from the prior year's period.

Stephen Roach: “Barring the development of a new technology or the emergence of a new industry, capex (capital expenditure) cycles in high-cost developed economies will be increasingly dominated by the replacement of old capacity than by the expansion of new capacity.”

At least 2,149 of U.S. service members have died since we invaded Iraq in March 2003, according to an Associated Press count.

Factory and service sector supply managers are optimistic about the economy in 2006, according to a semiannual forecast released Tuesday by the Institute for Supply Management. Growth is expected to be strong in the first half of the year, before slowing in the second half. Major economic concerns are inflation-related.

Rather than focus on the Fed dropping the word "accomodation" from their press release, let's
keep a watchful eye on the amount of money they print and how quickly it is printed. That way you
will get a feel as to how fast the value of your dollars is being depreciated.

January natural gas climbed to a high of $15.78 per million British thermal units Tuesday to mark the highest price ever recorded on the New York Mercantile Exchange.

Founded in 1860, Shaw's Supermarkets operates 206 stores in New England (Maine, Massachusetts, New Hampshire, Vermont, Rhode Island and Connecticut) and employs over 30,000 associates. Albertsons purchased Shaw's in 2004. This operation is hardly ever mentioned in an analysis of Albertsons and rarely included in print in the potential value shareholders may receive in a takeover. This is a mistake. Shaw's was a good acquisition and that will be reflected in a final deal for Albertsons.

Oil powerhouse Saudi Arabia said it will post a record budget surplus of 57 billion dollars in 2005 on the back of surging crude prices, and forecast its biggest-ever spending plans for next year.

Meanwhile, some Arco stations are selling unleaded gas in Oregon and Washington for
$1.99 a gallon.

The Season

12/13/05 The Season

About three of every eight adult Americans (37 percent) are concerned about their ability to pay for heating their homes this winter, according to a nationwide survey released yesterday by the National Oilheat Research Alliance (NORA). And about half of Americans(51 percent) say they are concerned that higher energy costs will impact their
budget for holiday shopping this year.

More than two-thirds of U.S. shoppers are expected to buy nearly five cards(gift) on average this year, according to a survey of about 17,500 consumers by accounting firm Deloitte & Touche. In the Deloitte study, just 48 percent of respondents had redeemed all of the cards they received last year.

Paul Kasriel: “Here's the good news. In the third quarter, the market value of households' assets increased by 2.7%. Here's the bad news, the value of households' liabilities increased by 3.0%. So, the leverage of households moved up to 18.24% in the third quarter from 18.19% in the second quarter. The third quarter household leverage ratio is the highest since the record high of 18.32% set in the first quarter of 2003.”

Pfizer repatriated approximately $37 billion in foreign earnings this year(the current market cap is down to $150 billion), which it will use to reduce debt, enhance its balance sheet and invest in business opportunities. In addition, the company has purchased nearly $4 billion in common stock in 2005, and it will continue to buy back its stock in 2006. As Pfizer previously announced, it will provide a comprehensive review of its strategy, operating performance, new product pipeline and financial outlook at its analyst meeting on February 10, 2006. With the increase in the quarterly dividend to 26.3 cents, the stock now yields 5%. If I were running the company, I would repurchase at least $25 billion of the shares at the $20+ level. If this is not an uncommon value, then the world is upside down. Jeff Immelt of GE ran the latter’s medical division before becoming CEO. Pfizer would make a great acquisition for GE.

Whirlpool Corp. stated Monday that once its new refrigerator plant in Ramos Arizpe, Mexico, is operational, 730 employees at its Fort Smith, Ark., plant will be laid off. The layoffs are currently planned for October of 2006.

Yesterday, crude closed at $61.30 per barrel, natural gas rose to $14.84 per million BTUs, and heating oil jumped to $1.77 a gallon.

The November federal deficit surged to $83.1 billion from $57.9 billion a year earlier. The deficit for October and November rose to $130.2 billion versus $115.2 in the like months in 2004. Naturally, Bush continues to maintain the deficit will be cut dramatically in future years. And the Iraq war is also going well. And there is a tie between Iraq and 9/11. Have you had enough of the BS? Here’s yesterday’s sample from Bush: “We're taking the fight to those who attacked us and to those who share their murderous vision
for future attacks.”

Yu Yongding, a Chinese government economist and chief consultant to the central bank, told Market News International that China must reduce accumulating dollar-based assets, and also cut its existing holdings. I strongly suggest bulls on the dollar as well as bulls on our nation’s ability to fund growing twin tower deficits chew carefully on Yongding’s words.

ConocoPhillips will acquire Burlington in a $35.6 billion deal. Under the transaction, subject to approval by Burlington Resources shareholders, Burlington shareholders will receive $46.50 in cash and 0.7214 shares of ConocoPhillips common stock for each Burlington Resources share. This deal represents a transaction value of $92 a share, based on the Dec. 9 closing price of ConocoPhillips stock.

For those who pay very tiny commissions, a little-appreciated route to making money with tiny risk is the following example. Yesterday, one could sell a January(2006) 70 Burlington Resources put for 35 cents. That may seem unexciting to most, but not to me. With the stock at $82+, it gave the buyer of the put the right to sell the stock to me at $70 less the 35 cents in 5 weeks. If the takeover goes forward, the put should expire worthless. That places about 35 cents per share in my pocket or a little ham sandwich. You might be surprised to discover other such examples during 2006. Making money with little risk is exciting. Making money with high risk is for schmucks.

New research on pricing practices of over 4,200 hospitals across the U.S. documents that huge markups in charges to patients are continuing, even after federal changes in Medicare reimbursement policies that were supposed to help contain skyrocketing costs.
The research is contained in the third annual report on charges by the
Institute for Health and Socio-Economic Policy (IHSP), the research arm of the
California Nurses Association. For the third consecutive year, the report
documents a strong correlation between huge hospital markups on their sticker
prices over their costs, high profits and the growth of large corporate
hospital chains.
The new report shows that the nation's 100 most expensive hospitals set
their gross charges at an average of 680% (up from 673% in 2002-2003) of their
costs -- meaning the average top 100 hospitals would bill $680 for a patient's
case where the actual costs were $100, or a 680% charge to cost ratio. The
national average for all 4,184 hospitals surveyed was 244% of costs, an
increase from 232% the prior year.

According to the seasonally adjusted results of the latest Manpower Employment Outlook Survey, conducted quarterly by Manpower Inc,"U.S. businesses are not aggressively seeking to increase staff levels as they enter the new year. Instead, they are looking back over the past several quarters and are concluding that hiring is still on target with their operational needs," said Jeffrey A. Joerres, Chairman & CEO of Manpower Inc. Of the 16,000 U.S. employers surveyed, 23% anticipate an increase in
hiring activity for the first quarter of 2006, while 10 percent expect to
decrease staff levels. Sixty-one percent of employers surveyed foresee no
change in hiring plans, while 6% are unsure of their staffing needs. The
seasonally adjusted Net Employment Outlook for the first three months of the
year is 20%, identical to the fourth quarter of 2005 and nearly the same as a
year ago. Employers in six out of 10 industry sectors surveyed foresee minimal
changes in hiring activity as they move from the fourth quarter into the new
year, including Durable and Non-Durable Goods Manufacturing, Wholesale/Retail
Trade, Finance/Insurance/Real Estate, Education and Public Administration.

Shoppers plan to spend $339 on gift cards, or 33% of their total holiday budget this year, according to American Express.

Thomas H. Lee Partners, the Carlyle Group and Bain Capital announced they had agreed to buy Dunkin' Donuts, Baskin-Robbins, and Togo’s for $2.43 billion.

Marc Faber: “I feel that asset prices will tend to depreciate against the only currencies for which the supply is limited - gold, silver, and platinum…Simply put, since 2000, gold has risen at a much faster clip than the Dow Jones and I would expect this out-performance to continue for the next few years until "gold currency" holders will be able to buy one Dow Jones with just one ounce of gold.”

Headlines

12/12/05 Headlines

General Glut: “With a savings rate of 0% in 2005:III, real GDP for the third quarter would have been $11,087.2bn. It doesn't take a math genius to see that real GDP for 2005:III with a 0% savings rate would have been lower than in 2005:II -- and have generated a 0.0% real growth rate.
In short, without negative savings and all other things being equal, the US economy would be at a standstill. Now that would have been one hell of a headline.”

Just a reminder--- with the workweek holding less hours for the folks on Main Street, that would have equated to a loss of more than 300,000 jobs in November. In other words, there was a net loss of jobs in November and not a gain of 200,000+. That would have been one hell of a headline.

Winston Churchill: "Men stumble over the truth from time to time, but most pick themselves up and hurry off as if nothing happened."

As we turn the calendar into 2006, the Congress will be asked to raise the U.S. debt ceiling. As I have stated on previous occasions, I am firmly against such approval. I prefer to shut down the government until mandatory spending cuts become a fixture in the budget process. In other words, it’s either pay as we go or it doesn’t get spent. Why should those on Main Street work their butts off so the Administration and the Congress can make a mockery of all the hard work? Congressional staffs are too large, government is too large, and they are cancerous growths impacting the financial well-being of this nation. Until rational spending comes into being, close Washington down. That would be one hell of a headline. The hand-outs are bad for our nation’s heart and soul.

Maxwell Anderson: “"When a government takes over a people's economic life it becomes absolute, and when it has become absolute, it destroys the arts, the minds, the liberties and the meaning of the people it governs."

The WSJ reported that ConocoPhillips may buy Burlington Resources for $30 billion.
At $30 billion, Burlington's 2.16 billion barrels of oil and gas reserves would cost $13.88 each. That compares with $10.15 a barrel that Chevron Corp. paid for Unocal Corp. and $10.66 that China National Petroleum Corp. spent for PetroKazakhstan Inc. Norsk Hydro ASA of Norway agreed to pay $18.99 for each barrel of Spinnaker Exploration Co.'s reserves. A big attraction in Burlington is its natural gas reserves are essentially onshore.

Husky Energy Inc. advised today that the Alberta Energy & Utilities Board (EUB) has approved the commercial application for its Sunrise Oil Sands Project, located approximately 60 kilometers northeast of Fort McMurray, Alberta. It is estimated that the
Sunrise lease contains original bitumen in place of 10.6 billion barrels, and
that approximately 3.2 billion barrels of oil resources will be recoverable over the project life of approximately 40 years. Husky, which holds a 100 percent interest in the Sunrise lease, intends to develop the 200,000 barrel per day project in phases. The EUB approval
relates to Husky's bitumen extraction plans, and Husky is completing its alternatives for upstream development, upgrading, transportation and marketing of the produced bitumen.

John Hussman: “If we split year two of the Presidential Cycle into two periods – the first nine months of the year compared with the final quarter - the patterns become apparent. The average market performance during the period from January through September of each second year of the Presidential Cycle has been roughly flat since 1933. The market has been down during these periods nearly as much as it's been up.
Things have usually been more interesting in the fourth quarter, where the average gain has been 8.7 percent. This is the highest average fourth-quarter return of any of the four years of the cycle, including the last quarter of year three and year four. The fourth quarter of the second year is actually where many third-year rallies are born…The 12-month period beginning in October of the second year of the presidential term has enjoyed average total returns of more than 28 percent, on average. And since 1933, not a single third year 12-month period beginning in October has registered a loss (the worst return was a gain of 6.6 percent).”

As we move into the New Year, there are 15 trading days remaining in December. We will encounter option expiration, tax selling, a Fed rate increase, and seasonal joy that frequently breeds a holiday rally. It’s never too late to position your portfolio for the coming year. Often this year’s dogs turn into next year’s bright spots. Will Pfizer be such an example? Do not make portfolio decisions based solely on tax considerations. That you will regret. One thing is for certain. Tomorrow’s headlines will include some large acquisitions. Most often, it is cheaper to buy than to build from scratch. Yet, the majority of acquisitions are not successful. Maybe that reflects management’s ineptness. Bigger does not mean better. Most managers can’t manage small --- much less large.

This morning, gold is surging again. February futures topped $544 an ounce. For traders, it might be an opportune time to reduce positions. However, the long-term outlook remains quite positive, in my opinion. The same can be said for many commodities.

Aristotle: "A democracy is a government in the hands of men of low birth, no property, and vulgar employments."

You Can Smell The Stench

12/11/05 You Can Smell The Stench

Bush: “The valuable protections of the Patriot Act will expire at the end of this
month if Congress fails to act, but the terrorist threats will not expire on
that schedule. In the war on terror, we cannot afford to be without this
vital law for a single moment.” Has the Patriot Act helped to capture Osama
bin Laden? Our country spends billions each year on defense. With those billions
how is it that bin Laden has not been caught? You can smell the stench. It emanates from 1600 Pennsylvania Avenue.

Yesterday, U.S. casualties came in three separate attacks across Baghdad, the military announced. Two soldiers were killed by small-arms fire in the southern district of Yusufiyah. A third soldier was shot dead in Baghdad and the other died in the northern district of Adhamiya when his patrol was hit by a roadside bomb.
In addition, on Saturday, officials announced that one American soldier had been killed and 11 wounded on Friday when they were attacked by a suicide car bomber near the town of Abu Ghraib just west of Baghdad. That brought to at least 2,140 the number of U.S. military personnel who have died since we invaded Iraq in March 2003, according to an Associated Press count. And for what?

Howard Gruenspecht, the deputy administration of the Energy Information Administration, stated that, eliminating the use of additive MTBE in 2006, may require some refiners to produce more gasoline, putting added pressure on refiners and thereby creating upward pressure on prices at the pump.

I have been asked several times how I arrived at my takeover value for Albertsons.
Rather than provide my entire analysis, I outlined two points: the pharmacy operations of Savon and Osco should approach about $4 billion in value. Secondly, looking over the locations of the 2500 Albertsons stores and the 2500 Kroger stores, there is minimal overlap.

If I am not for myself,
who will be for me?
If I am not for others,
what am I?
And if not now, when?

Rabbi Hillel

Employer Costs For Employee Compensation

12/10/05 Employer Costs For Employee Compensation

Employer costs for employee compensation averaged $26.05 per hour worked in
September 2005,the U.S. Department of Labor’s Bureau of Labor Statistics
reported. Wages and salaries averaged $18.28 and accounted for 70.2 percent,
while benefits averaged $7.77 and accounted for the remaining 29.8 percent.
In September 2005, private industry employer compensation costs averaged
$24.34 per hour worked.
In September 2005, employer costs in State and local governments averaged
$36.16 per hour worked.
Among State and local government employees, average hourly compensation
costs were
higher for management, professional, and related occupations ($44.11) than for
service occupations ($28.07) and sales and office occupations ($24.74).  Wages and
salaries averaged $31.37 per hour worked for management, professional,
and related occupations and $17.25 for service occupations, and $15.49 for sales and
office workers.

Henry Giles: "If the poor man cannot always get meat, the rich man cannot
always digest it."

Before you join the bash Wal-Mart crowd, consider these facts: the company added
100,000 jobs this year, provided almost $200 million to various charitable causes,
and will save the average American family $2,300 per household. This overshadows
any good you believe you receive from your vote at your local polling place.

The Talmud: "The burden is equal to the horse's strength."

Former President Clinton told a global audience of diplomats,
environmentalists and others Friday that the Bush administration is
''flat wrong'' in claiming that reducing greenhouse-gas emissions to
fight global warming would damage the U.S. economy.

Doug Noland: "I believe a strong case can be made that we are in the midst of a
marketplace liquidity dislocation.  Perhaps market yields are today no more
discounting prospective fundamentals than technology stocks and telecom bonds were
back in 1999/early 2000.  While unsustainable, these types of liquidity dislocations
are nonetheless powerfully self-reinforcing – and just what we would expect from
history’s greatest Credit Bubble."

Canola seeds seem to be the best source of oil for biodiesel. The problem is twofold.
Currently, it sells for only 8 cents a pound with breakeven 33% higher. Secondly,
after the oil is squeezed out, 40% of the remaining canola seed is in mash, which is
frequently fed to livestock as a source of protein. This is similar to the leftover
sugar beet pulp(mixed with molasses) after processing the sugar beets to make sugar.
Canola growers maintain it will be necessary to find new and higher-value uses for
the mash. They might begin by sun-drying the mash as I did with the sugarbeet pulp.

William Barclay: "We will often find compensation if we think more of what life has
given us and less about what life has taken away."

Goings On

12/9/05 Goings On

Two-thirds of the companies participating in the fourth quarter "CFO Outlook" survey plan to increase capital spending over the next twelve months,and the average change is expected to be up 9%. Technology spending isexpected to rise at three-quarters of the surveyed companies, and almost half(48%) will increase research & development spending, while 47% expect nochange. Technology spending will rise an average 8%, and research &development, 5%.The CFO economic optimism index, which had been dropping since June 2004, jumped 4.34 points to 69.69. CFO optimism about their own company reached 77.37, the highest it's been since June 2004. The survey is conducted quarterly.

Douglas Gillespie: "As of the end of the third quarter, the United States owed the rest of the world almost $5.5 trillion more than the rest of the world owed it. This represented an increase of $1.25 trillion from a year earlier -- remarkable when you consider that as recently as the mid-1980s, the United States was a net creditor nation. This and other sobering facts are contained in the latest flow-of-funds data, released yesterday by the Federal Reserve."

California housing affordability down 4% in October.

In its 28th annual economic
forecast for 2006 presented by Comerica Bank, the Gary Anderson Center for
Economic Research (ACER) today forecast an overall economic slowdown in Orange
County. In Orange County, homeowners have to use 50 percent of their income
for housing costs, compared to 20 percent on the national average.

According to Reuters, Kroger has approached buyout firms Bain Capital, Thomas H. Lee Partners and Warburg Pincus about a joint offer for Albertsons. Another consortium consisting of Kohlberg Kravis Roberts & Co., Texas Pacific Group and Apollo Management, are also bidding, according to several sources close to the deal. The drug store units have nabbed bids from CVS Corp. and Walgreens, sources said on Thursday. A third group made up of Cerberus Capital and Kimco Realty are also bidding, and have been joined by grocer SuperValu Inc., sources said.

Responding to thegrowing demand for foods without trans fatty acids, Kellogg Company
today announced a major investment in new technologies that will make it
possible to reduce or eliminate trans fatty acids while also minimizing the
saturated fat content of its products.
As a major part of this investment, Kellogg will become one of the first
food manufacturers to use low linolenic soybean oil through an agreement with
Monsanto. Kellogg will use Monsanto's Vistive(R) low-lin soybean oil to
reduce or eliminate trans fatty acids in a number of its products.

Consumer confidence is up for the third
consecutive month, according to the December results of the RBC CASH (Consumer
Attitudes and Spending by Household) Index. Retailers are likely to react
favorably to this upward trend as more optimistic shoppers should equate to
strong sales over the holiday season.
The RBC CASH Index, which is derived from telephone interviews held with
1,000 individuals across the U.S. this week, stands at 85.5 for December. This
is compared to 66.8 for October - and substantially above the yearly average
of 78.7. Buoyed by continuing optimism in future economic conditions, the RBC
Expectations Index for December now stands at 53.9, continuing a positive
trend after expectations hit rock bottom in September, (when the RBC
Expectations Index stood at -13.5). It is also above the yearly average of
40.0.

Constellation Brands,Inc. today announced that its offer to purchase all of
the common shares of Vincor International Inc. expired at midnight
(Toronto time), on Dec. 8, 2005, consistent with the terms of the offer.

Nanotechnology, using particles as
small as 100 nanometers in size, is offering exciting new possibilities for
finding and treating breast tumors, according to speakers at the 28th Annual
San Antonio Breast Cancer Symposium being held this week. Two researchers from
Rice University in Houston, Texas, offered enticing insights into how these
minute particles can be manipulated to have different properties, and tagged
with antibodies to target them specifically at cancer cells.

According to the WSJ, Viacom's Paramout may make an offer for Dreamworks SKG.
NBC Universal has been in talks to purchase that company as well. I have sat this one
out, and until more information is forthcoming, I will continue to watch from the
sidelines. Dreamworks has not impressed me. It's been a single hit compnay.

Natural gas prices jumped 9 percent to a new high Thursday, and oil
prices also climbed above $61 a barrel as cold weather across the U.S. raised jitters
about increased demand for home-heating fuels. Oil and natural gas production in the
Gulf Coast area probably won't recover from this year's hurricanes until next summer,
Energy Secretary Sam Bodman stated today.

Americans increased their household debt at an annual rate of 11.6% in
the third quarter, the fastest growth in 18 years, the Federal Reserve
said Thursday in its quarterly flow of funds report
Total outstanding debt in the household sector rose to $11 trillion.
Total debt in the economy increased at a 9.1% annual rate, one
percentage point faster than in the second quarter, to $25.72 trillion
Non-federal borrowing grew at a 10% pace, the fastest in six years.
Total nonfederal debt outstanding grew to $21.13 trillion. Net national
savings fell by $120.5 billion at an annual rate. It was the first
quarter that net savings had been negative since the Fed began tracking
the data in 1952.
In the household sector, borrowing was paced by real estate loans.
Mortgage debt grew at a 14% pace, while credit card debt increased 5.4%
Meanwhile, household net worth increased at 10.6% annual rate to a
record $51.09 trillion on increases in the value of assets already
held. Real estate assets grew by $546 billion.
The federal government's debt increased at a 5.1% rate, up from 0.1%.
State and local government debt grew at a 12.6% rate, up from 6% in the
second quarter. Disposable personal income increased at a 2.8% annual
rate to $9.04 trillion. Household net worth was 5.65 times disposable
income, up from 5.54 times in the second quarter.

The Saks board of directors approved a 35 million share increase in its repurchase
plan. To date, during the fourth fiscal quarter, the company has repurchased 8 million shares
at an average cost approximating $17.60 oer share. The company anticipates
distributing a substantial portion of the net proceeds of its NDSG sale to Bon Ton
Stores to shareholders. The sale price is $1.185 billion and distribution could
include share repurchases, a special cash dividend, or a combination of both.
Given the company's management performance over the last several years, it would
be wise for the board to distribute the vast majority of the proceeds in the form
of a special dividend. I continue to believe that, after the start of the new year,
an offer will be forthcoming for Saks Fifth Avenue, the flagship operation. Under
the right management, this division could be a big winner. I strongly suggest the
present Saks board and management expend its finest energies to maximize the
return to the shareowners of the business in the coming year.

Today, gold reached a 25-year high of $527.60 an ounce and silver is a sliver
away from $9 an ounce.

Palatin Technologies,Inc. today announced that it will present at the JP Morgan 24th
Annual Healthcare Conference at 2:30 p.m. Pacific Time (5:30 p.m. EST) on
Thursday, January 12, 2006 at the Westin St. Francis Hotel in San Francisco,
California.

The Hennessee Hedge Fund Index is up 6% through the first 11 months of 2005.

In addition to the possibility of Home Depot, I wonder whether Wolseley or Rexel
are in the running to purchase Hughes Supply.

The Oil Service Index closed at a record high of $190.22.

A storm that wreaked havoc as it dumped as much as 10 inches of snow from Texas to Indiana barreled eastward on Friday, promising to bring more of the same. 

Something Has To Give

12/8/05 Something Has To Give

From Bush's speech on 12/7/05 : "This generation of Americans in uniform is every bit as brave and determined as the generation that went to war after the attack on our nation 64 years ago today. Like those who came before, they are defeating a dangerous enemy, bringing freedom to millions, and transforming a troubled part of the world. And like those who came before, they will always have the gratitude of the American people." My patience has had it. Enough of this BS. Iraq did not attack us. We attacked Iraq. There is absolutely no connection to a war 64 years ago. There is a big difference between freedom of speech and manipulating facts to suit one's purposes. In fact, all of our fighting men and women have not placed themselves in harm's way since the founding of our nation so that Bush could make a mockery of the "freedom".

John Williams: "Risks of the current circumstance evolving eventually into a hyperinflationary depression remain extraordinarily high."

Rob Kirby: "Natural Gas is perhaps the only strategic commodity that is truly "above being rigged" - only because no one has enough of it to do so."

The Federal Reserve reported Wednesday that Americans' borrowing fell by $7.2 billion at an annual rate in October, the biggest amount on record, with much of that decline reflecting a record drop of $5.6 billion, at an annual rate, in the category that includes auto loans. The declines were a drop of 4 percent in overall borrowing, the biggest setback in nearly 15 years, and a decline of 4.9 percent in the category that includes auto loans, the biggest drop in 13 years.

Toll Brothers provided a range of fiscal 2006 earnings a share that was weighted below consensus forecasts, and said fiscal 2007 earnings may beat or miss a previous estimate of 20% growth. "Our sales results indicate that housing demand is returning to the more normalized levels of the decade from 1994 to mid-2003, before home prices really took off in quite a few markets," said Chairman and CEO Robert I. Toll.

GM is holding talks with Kerkorian's Tracinda investment firm regarding possible board representation.

From today's Financial Times: "In 2005 the US current account deficit is expected to top $700bn. It comes after 27 years of unbroken deficits that have totalled more than $5,000bn, leading to concerns of an impending global crisis. Once the massive financing required to keep on paying for such a widening gap dries up, there will be an ugly adjustment in the world economy. The dollar will collapse, triggering a stampede away from US debt, interest rates will shoot up and a sharp global recession will ensue."

Chad Hudson: "Every time it appears that consumers will start to retrench, some form of stimulus has been injected to spur consumer spending. With the housing boom starting to get long in the tooth, the last boost to consumer spending will diminish. While it is likely consumers will come through for the holiday season, it might prove to be the last hurrah. For retailers, the expansion of retail space over the past several years will exacerbate any slowdown in spending."

In its weekly petroleum supply report, the U.S. Energy Department said American inventories of crude oil grew last week by 2.7 million barrels to 320.3 million barrels, or 11 percent above last year.
Inventories of distillate fuel, such as heating oil and diesel, rose by 2.7 million barrels to 130.6 million barrels, or about 6 percent higher than last year.
Gasoline inventories rose by 2.7 million barrels to 202.6 million barrels, or 4 percent below last year.
With oil imports at 10.6 million barrels per day and U.S. refiners running their plants last week at almost 91 percent of capacity, up more than 1 percent from the prior week, it is not surprising that the price for crude does not collapse. It is currently trading between $59 and $60 a barrel. This is December 8. Wait until Spring arrives and Americans go out for a weekend drive in the country. Those predicting a sharp drop in gasoline prices have their heads screwed on backwards.

Nobel literature laureate Harold Pinter slammed President Bush and British Prime Minister Tony Blair in his prize acceptance speech, saying the two leaders should be prosecuted for the invasion of Iraq.

Ford will eliminate up to 30,000 jobs and close at least 10 assembly plants.

The Dow Jones Industrial Average is now down for the year. The S&P 500 and the Nasdaq continue to show
small gains.

According to Challenger, Gray & Christmas, U.S. corporation job layoffs rose 22% in November to 99,279 and layoffs have increased for three months in a row. So far in 2005, there haebeen 964,232 job cuts, and that is 3.6% higher than one year ago.

According to the quarterly UCLA Anderson Forecast, a slowdown in the U.S. housing market could claim 800,000 jobs in 2006. The study also predicts a slowdown in construction activity through 2007 and moderate
job construction losses.

Barges are fuel-efficient and labor-cost efficient and thus there is a growing demand to move heavy grades of oil by barge. Kirby Corp. claims the no. 1 spot in hauling petroleum products and chemicals along inland waterways on barges with tanks.

Wages, Productivity, And Inflation

12/7/05 Wages, Productivity, And Inflation

In the past year unit labor costs have increased 1.8%, and, at the same time, productivity has increased 3.1%.

The seasonally adjusted annual rates
of productivity growth in the third quarter were:

          5.4 percent in the business sector and
          4.7 percent in the nonfarm business sector.

In manufacturing, revised productivity increases in the third quarter
were:

          3.4 percent in manufacturing,
          6.5 percent in durable goods manufacturing, and
          0.2 percent in nondurable goods manufacturing.
Unit labor costs fell 1.1 percent in the third quarter of 2005 following
a decline of 0.9 percent one quarter earlier.  The implicit price deflator
for the business sector, which reflects changes both in unit labor costs and
in unit nonlabor payments, rose 2.8 percent in the third quarter of 2005.
In the nonfarm sector, when the rise in consumer prices is taken into account,
real hourly compensation declined 1.4 percent in the third quarter of 2005 and
3.1 percent one quarter earlier. The economists at the Fed cheer news like this,
but how can one be happy when the average worker's wages trail the rate of inflation?

Paul Kasriel: "Fed Chairman Greenspan
disparages the usefulness of the yield spread as a leading indicator. I have
found Greenspan to be a pretty reliable contra-indicator throughout
his professional career." The yield spread continues to flatten. Next week the Fed
raise interest rates again. This should make for an interesting picture. Rates are
poised to invert. Should this take place, will investors want to pour more money
into equities? I prefer to stay on the sidelines and watch the show.

"The best forecast of future real activity is provided by
the level of the term spread, not the change in the spread, nor
even the source of the change in the spread," states Arturo
Estrella, economist at the Federal Reserve Bank of New York.

Home sales in San Diego are 12.7 percent lower
than last year, the sharpest drop of any major urban county in the
state. The SF Bay Area is down an average of 7.2 percent, and home sales
in some rural counties around Sacramento, such as El Dorado and Placer,
have dropped more than 20 percent. Throughout the U.S., October pending
home sales declined 3.2% to a level 3.3% lower than one year ago.

The U.S. Postal Service reported today
it concluded fiscal 2005 with a net income of $1.4 billion on record revenues
of $70 billion and record volume of 212 billion pieces of mail.

Almost Four in 10 Consumers Plan to Pay Off Their Debt, and 30 Percent of
Workers Anticipate Getting a Promotion in the Coming Year,according to the latest
Experian-Gallup Personal Credit Index(SM) survey,and 68 percent of consumers say
they are optimistic about their financial situation in the coming year,
including 30 percent who are "very" optimistic.

Applications for mortgages at major U.S. banks rebounded by a seasonally adjusted 5.2% last week
after a slump during the Thanksgiving week, the Mortgage Bankers
Association reported Wednesday. Applications are down 6.1% from the same week a year ago.

Homeowners on average will see a 25.7% increase in their heating costs
from a year ago, the Energy Department stated Tuesday. That's down a bit from a
28.1% increase forecast last month, but if realized, the gain would be
the biggest since the 2000-01 season. Average heating bills rose 12%
last season. Meanwhile, in the latest BLS report, weekly wages rose 3 cents.
There is something wrong with this picture. Worker productivity continues to
outpace wage gains and the latter trail the rate of inflation. Bend over and
touch your toes. That's the position of the average worker.

Gold hits new 22-year high at $517.60 an ounce.

Dreamland

12/06/05 Dreamland

Bush: "We've been wise with your money, as well. Each year I've been in office,we've cut the rate of growth in non-security discretionary spending. We're ontrack to reach our goal of cutting the budget deficit in half by 2009." He must be in dreamland!

"The avian flu bears the potential for societal disruption ofunprecedented proportion," said Homeland Security Secretary Michael Chertoff. "Strong partnerships and smart planning will be our best protection against this threat. At the President's direction, we are tapping every capability and expertise within the federal government and among first responders and public health officials to maximize our nation's preparedness." I hope our preparedness is a step up from our lack of expertise after Katrina. Given the report from the 9/11 Commission, I have little faith in the President's direction and/or leadership. Maybe it would better be described as lack of direction and leadership.

Henry K. To: "This author would not be surprised if we see some kind of "financial accident" in either an emerging market country or in one of the companies of the S&P 500 - such as the bankruptcy of GM or Ford, for example."

John Hussman: " Despite seasonal hopes and economic optimism, the overall constellation of market conditions currently provides no support for accepting a material exposure to market fluctuations here. That may change if, for example, internals improve enough to signal a robust preference of investors to take risk, but here and now, risk-taking seems confined to speculative sectors of the market. "

Yesterday the 10-year Treasury yield jumped to 4.57% while gold continued its climb to $508.90 an ounce. Crude reached the $60 a barrel level and that indicates to me that gas at the pump is too cheap at roughly $2.13 a gallon. The ISM Services Index for November dipped to 58.5% from 60%. This flies in the face of the large addition of service jobs for November. On the other hand, the quality of many of those additions is suspect, such as, 60,000 seasonals for UPS.

I was surprised by Boston Scientific's $36 cash and $36 stock bid for Guidant. On the surface, that looks overly aggressive to me. I thought the reduced bid by J&J was rich. Then again, what do I know about medical hardware?

Visa USA said its e-commerce credit-card sales peaked on Thursday. All sales during the week of Nov. 28 to Dec. 4 reached $25.1 billion, a 13.9% increase over year-ago spending.

Janet Yellen, Pres. SF Fed: "The federal budget deficit is not sustainable. I'm concerned that the people take it as a given they have Social Security, Medicare and support from Medicaid to pay for nursing home care.A lot of people are not well prepared for retirement. Social Security, Medicare and Medicaid now equal 8 percent of gross domestic product and will rise to 16 percent of GDP in 2030. But tax revenues as a percent of GDP don't show a similar rise to pay for those benefits. Some think the federal government is in a similar position (to that of corporate America) in that it has unfunded liabilities."

Gary Lammert, The Economic Fractalist: "Will the debt laden credit cards of the American consumer be able to once again do what American manufacturing through reasonably paid blue
collar jobs cannot, provide buying power to sustain retailer viability
and economic growth? Has the Christmas rally completed its maximal
growth sequence a few weeks early? Time will tell."

Verizon stated Monday evening management employees hired after Jan. 1, 2006, will not earn pension benefits. Under the restructured benefit plans, after June 30, 2006, Verizon management employees will no longer earn pension benefits or receive any additional service credits toward the company's subsidy of retiree medical benefits. Management employees without 15 years of service will not be eligible for a company subsidy for retiree medical benefits. Do you think this policy will enable Verizon to attract top management candidates? Would you want to work for this company?

Rumsfeld: “To be responsible.....one needs to stop defining success in Iraq as the absence of terrorist attacks.” That's another way of saying that bodybags don't count. He is a spinmeister residing in Dreamland.

Texas is the only state in the nation that reduced education spending during the 2004-05 school year, according to a report released Monday by the National Education Association. This may help to explain the lack of intelligence for some with an extended stay on Pennsylvania Avenue.

Airbus received an enormous order for 150 single-aisle jets from China on Monday. Airbus stated it has offered China a 5 percent share of work on the airframe of the A350 and is considering building an assembly line for single-aisle planes in China.

The average yield on bonds rated BBB-, the lowest investment-grade ranking, and backed by payments on adjustable rate mortgages made to the riskiest borrowers is 7.23 percent, the highest since December 2003, according to JPMorgan. The yield was 5.7 percent in October. Do you think the bond market smells trouble
coming down the road?

Before you stand up and clap for GDP and employment numbers, it might be worth pondering what impact the real estate industry and government spending (municipal, state, and federal) have had on the last 4+ years of growth. Then adjust the growth for household and government debt levels as well as non-core inflation.

Last Friday I noted that the latest BLS numbers revealed that the workweek for nonsupervisory workers fell from 33.8 to 33.7 hours. Professor Andrew Samwick points out that this reduction equates to 10.56 million hours or about 312,000 workers.

Kmart comparable sales declined 2.8% in the quarter and Sears domestic sales plunged 10.8% in the quarter. At this rate, soon their sales performance will look those from Ford and GM.

Tom Naylor: "The bigger the real-life problems, the greater the tendency for the discipline to retreat into a reassuring fantasy-land of abstract theory and technical manipulation."

Impeach!

12/5/05 Impeach!

Next week will mark the 1,000 day of the Iraq war. Ninety-four percent of the 2,121 fighting men and women who have been killed in the Iraq war perished after Bush proclaimed "mission accomplished" on the aircraft carrier. In a recent poll 80% of the Iraqi people were in favor of us leaving their country and 45% stated they would support harm coming to our troops. In the meantime, the VP of Iraq stated that training of the Iraqi army had taken a setback over the past six months. When our citizens can no longer verify the trust in its leader, it is time for the leader to go.

Looking Beyond Your Nose

12/4/05 Looking Beyond Your Nose

John Dugan, Controller of the Currency: "Many payment-option-ARM borrowers calculate that they will be able to sell their property or refinance the mortgage by year six. But if real estate prices decline – and there already is evidence of softening in some markets – these borrowers could face the bleak prospect of loan balances that exceed the value of the underlying properties. In that case, selling the property or refinancing the loan would not be a viable escape valve for avoiding huge payment shocks.
In these circumstances, do consumers really understand the potential consequences of the neg am feature inherent in a payment-option ARM? Is this an appropriate product to mass market to customers who may be looking at the less than fully amortizing minimum payment as the only way to afford a larger mortgage – at least for the five years before the onset of payment shock?"

Robert Frost: " He burned his house down for the fire insurance and spent the proceeds on a telescope. "

Is Bush aware that, since his taking office in Jan. 2001, total government purchases (Federal, state, and local) have risen by 16.15%, while Federal government purchases have increased by 29.68%? Bush has not vetoed one spending bill.

Henry David Thoreau: "The question is not what you look at, but what you see."

Since we invaded Iraq in March 2003, at least 2,120 of our fighting men and women have been killed.

The aging of our population is one of the most important trends in today's U.S. society. According to a new report from the Congressional Research Service, "Income and Poverty Among Older Americans in 2004," one senior in 10 lives in poverty. The bad news is that the poverty threshold for a single person 65 or older is $9,060 a year. For a couple, the figure is $11,418.
The Current Population Survey done by the Census Bureau reports income of individuals, not households. It states a person 65 or older is in the top 25 percent of all seniors with an income of only $26,777. They're in the top 50 percent with an income of only $15,199. That news should make everyone sit up and take notice.

Japan's NEC Electronics Corp. has developed a technology to make advanced microchips with circuitry width of 55-nanometres, or billionths of a meter, the Nihon Keizai Shimbun business daily said on Sunday.
Intel stated on Thursday it would build a 45-nanometre chip factory, which would cost more than $3.5 billion, in Israel -- its second such plant after one being built in Arizona.

How do we know that the recent large purchases of U.S. treasury bonds by the UK and the Caribbean do not mask, at least in part, the Federal Reserve making a portion of these buys?

Aristotle: "The soul never thinks without a mental picture."

Get Real

12/3/05 Get Real

On November 8, Palatin released its sales and earnings for the quarter ended 9/30. Due to less than anticipated revenue generation from NeutraSpec, some analysts and shareholders were disappointed and the shares fell back towards the $2 level where my purchase of stock occurred nine months prior. (The market cap was $100 million.) I mentioned that I never invested in Palatin because of NeutraSpec. I invested for the company's potential in male and female sexual dysfunction with PT-141 and in the field of weight control. In theNov. 8 release, Palatin stated "For the quarter ended September 30, 2005, royalty revenue on Mallinckrodt's commercial sales of NeutroSpec amounted to $916,000, compared to $578,000 in the quarter ended June 30, 2005 and $327,000 in the quarter ended September 30, 2004. In the current period, the Company recorded no product sales revenue from shipments of NeutroSpec to Mallinckrodt, compared to $416,000 for the quarter ended September 30, 2004."
In the prior quarter that ended June 30, Palatin reported 0.8 million in product sales and 0.6 million of royalty revenues related to NeutraSpec, a proprietary radiolabeled monoclonal antibody approved by the FDA for imaging and diagnosing equivocal appendicitis in patients five years and older. "A NeutroSpec® image allows a physician to more rapidly obtain diagnostic information that supports patient management decisions. In Phase 3 clinical trials, 90% of positive appendicitis cases were diagnosed within just one hour. The preparation is simple to produce and can be done by any qualified radiopharmacy." The product is distributed by TycoHealthcareMallincrodt. Yesterday afternoon at 3:28 EST the two companies released the following information:
"The companies have received reports of several patients with severe underlying cardiopulmonary co-morbidities who experienced life-threatening or fatal reactions soon after NeutroSpec was administered. No causal relationship has been established. The occurrence of these reactions is rare and has only been observed in patients receiving NeutroSpec for off-label indications."(Off-label uses are uses not approved by the Food and Drug Administration.) Within the next half-hour of trading the stock declined about 20% or almost $40 million in market value. Let's get real. For the last two quarters, product and royalty income of NeutraSpec only amounted to $2.3 million. I can't make it any clearer.

Year-to-date, M3 has expanded at a 7.4% rate and now exceeds a record $10.1 trillion. Meanwhile, real estate loans have surged to almost $2.9 trillion, or close to twice the Fed foreign holdings of Treasury, Agency debt.

You think inflation is under control? Copper is at a record high. Gold is at a 22-year high, silver at an 18-year high, aluminum at a 16-year high, zinc is at a 15-year high, and my old favorite sugar is at a 10-year high. These highs have helped the Goldman Sachs Commodities Index to rise 40% in 2005. Get real. Inflation is alive and well. The core inflation rate is for economists only. They don't pay the bills. They are too busy making speeches. Their wives pay the bills.

Barry Ritholtz: "The structural problems are quite real. Whether its Gold at $505, or the incredible minus 1.5% savings rate for Q3, or any one of a dozen other problems out there, we have a developing situation. Understanding it, preparing for what will eventually come, looking for signs that the cracks in the foundation are getting worse is the only prudent thing to do."

Changing Landscape

12/2/05 Changing Landscape

Toyota's November sales rose 5.6% to 169,665, its best-ever for the month of November.
Year-to-date comp sales are up 10.3%. Meanwhile, for the month of November, Ford's U.S.
sales declined 15%, GM's 11%, and Daimler Chrysler's 3%.

Equity options volume for November reached 136,197,319 contracts, 29.18% higher than November last year and also the second highest month on record for equity options following October. Year-to-date equity options trading volume is up 25.9% over the same period a year ago.

Gold closed at $502.50 an ounce.

In viewing the employment numbers this morning, it is a good idea to compare apples with apples. In other words, comp hiring gives a better look at the trend. For example, Coach opened about 25 new stores in 2005. Last year the company hired 3,000 holiday seasonal workers. This year Coach added 3,500 seasonal workers. We can visit the numbers at Wal-Mart, Target, Best Buy, etc. and it would provide a similar comparison. Therefore, it's important to look beyond the headline number. In addition, attention should be addressed towards the average hourly earnings, hours worked, and overtime hours, and compare those results with the current inflation rate, and not just the core rate.

People wonder where the money is coming to spur holiday spending. It results from refinancing cash-outs, home equity lines of credit, and credit card debt. The money is not coming from current savings, which is running in negative numbers.

Eric Hoffer: "The hardest arithmetic to master is that which enables us to count our blessings."

Home Depot announced the purchase of Petaluma, California's Yardbirds Home Center and its 10 Bay Area stores, ending 30 years of independent ownership for the local chain.

In November, nonfarm payrolls rose by 215,000, of which 165,000 were service jobs. Before you get too excited, total hours worked fell 0.1%, the average workweek fell by 0.1% of an hour to 33.7 hours, and average hourly earnings rose by 3 cents or 0.2% to $16.32. That means earnings continue to trail inflation. In addition, the average workweek in manufacturing declined
to 40.8 hours from 41 hours.

The Financial Times reports that three groups of bidders are this weekend expected to put the final touches on offers to take over Albertson’s. The paper stated the consortia, which mostly include private equity firms, are facing a deadline of Tuesday to enter bids for the entire company. At yesterday's closing price of $23.71, the risk/reward looks like an excellent one to me.

The Nikkei is trading at a 5-year high.

The WSJ reported that Ford Motor Co. is likely to close five plants that employ about 7,500 workers, or about 6 percent of the company's North American workforce.

Calpine Corp. stated yesterday it might consider filing for bankruptcy and there was a "substantial risk" it might not have enough money to pay its debts or keep operating.

This morning light, sweet crude for January delivery gained 35 cents to $58.82 a barrel in electronic trading. This level remains 17% below th high reached in late August.

Yesterday was the first time that shares of Hughes Supply ever closed at $39 or above.

Christine Khemis, a nationally ranked long-term care specialist and Partner
of LTC Financial Partners LLC, the nation's leading long-term care insurance
brokerage, observed as the population ages, homeowners
and real estate professionals face a challenge: meeting the special needs of
people who can't take care of themselves--things like making bathrooms
wheelchair-accessible, or creating space for hired care workers.

Walgreen's November same-store sales rose 7.8%. This company just keeps churning out
numbers-- month after month,year after year,and decade after decade.

GM estimated that it would build 1.25 million vehicles in North
America during the first quarter of 2006,up 6% from the same period
this year.

Robert Louis Stevenson: "To know what you prefer instead of humbly saying Amen to what the world tells you ought to prefer, is to have kept your soul alive."

Make My Day

12/1/05 Make My Day

Scott Krugman, a spokesman for the National Federation of Retailers, said, "it wouldn't be terribly surprising, given the deep discounts that retailers are running this year," if the amount spent on self-giving were to "go up a little bit" this year. A new trend may be developing where consumers are buying more for themselves during the holiday season.

Joel Kier, interim CEO at Fortunoff, a NYC jewelry and home furnishings chain, stated "a lot of people are saying, 'I earned it, baby,' " Mr. Kier said. "Women are better shoppers at this time of year. They're more skilled at identifying value. So they're saving money and spending it on themselves."

According to the WSJ, three private equity firms have formed an alliance to consider buying newspaper publisher Knight Ridder Inc. I'll sit by the sidelines.

"The weather that's coming at us now is earlier than we'd anticipated," said Ed Silliere, vice president of risk management at Energy Merchant.

Yesterday, the build in distillate inventories — which include heating oil and diesel — was greater than traders had anticipated, but the decreases in crude and gasoline inventories were unexpected.

Even though the Dow got clipped yesterday, the Russell 2000 Small Cap Index rose 3 1/2%
on heavy volume.

The Commerce Department stated the GDP rose at a 4.3 percent annual rate in the July-September quarter. Unfortunately, the folks on Main Street continued to see their wages trail the inflation rate. Something is wrong with this picture. The personal savings rate in October was a negative 0.7%. In September it was a negative 0.8%.

Fannie Mae and Freddie Mac have raised the size of single-family home loans they will buy next year by $57,350, or 16 percent, to $417,000. That's not chicken feed. China may place an order for Airbus A320 planes during Wen's visit to France.
Airbus has recorded orders for 66 planes this year in China valued at $8.3 billion, compared with 122 aircraft valued at $11.7 billion by Boeing.

Alan Greenspan: "History has not dealt kindly with the aftermath of protracted periods of low risk premiums."

The U.S. dollar is above 120 yen for first time since August 2003. That sure makes me look stupid and poorer. That places it in the same league as my Dell/HP hedge.

European interest rates rose by 1/4% to 2.25%, the first hike in 5 years.

Yesterday morning Albertsons was trading firmly at $24+ and then an article was released by Reuters written by Michael Flaherty. He wrote that "private equity firms Bain Capital, Thomas H. Lee Partners and Warburg Pincus are losing interest in their joint bid for grocer Albertsons Inc. with the deal's price tag among their worries, according to three people ivolved in the auction... As for Albertsons, CIBC analyst Perry Caicco estimates the struggling chain, which is under serious pressure from discounters, could sell at 7.15 times EBITDA, assuming a $30-per-share price tag. The stock was trading at $23.84 at midday on Wednesday.
Other analysts say the overall price for Albertsons could be around $16.5 billion, including $6.5 billion in debt, which would make it the second-largest leveraged buyout ever."
It has been pointed out in many articles that there are many potential interested parties for Albertsons. From the beginning, I felt a fair price for the buyers and sellers was at least $31. If that level or another level scares off a buyer or two, so be it. After the article came out, Albertsons declinedto $23.50. In my opinion, it offers an outstanding risk/reward value. If others disagree, they should cut and run. I believe Albertsons will accomplish its mission to deliver optimum returns to its shareholders. Their exit plan, handled by Goldman Sachs and the Blackstone Group, should have a pleasing outcome.

Abercrombie & Fitch Co. today reported net sales of $251.2 million for the four-week period ended November 26, 2005, a 34% increase over last year's November sales of $188.0 million. November comparable store sales increased 23% compared with the four-week period ended November 27, 2004. Year-to-date, the Company reported a net sales increase of 36% to $2.075 billion from $1.522 billion last year. Comparable store sales increased 24% for the year-to-date period. WOW!!!!

On a year-to-date basis, for the ten months ended November 26, 2005 compared to the ten months ended November 27, 2004, company-owned comp sales for the Saks Fifth Avenue division of Saks rose 4.2%. For the four weeks ended November 26, 2005 compared to the four weeks ended November 27, 2004 they declined 2.3%. Categories with the best sales performances for SFAE in November were women's and men's contemporary sportswear, women's "gold range" apparel, and men's shoes. Categories with the softest performances for SFAE in November were private brand, women's bridge apparel, evening dresses, and Salon Z (women's large sizes).

Make My Day

12/1/05 Make My Day

Scott Krugman, a spokesman for the National Federation of Retailers, said, "it wouldn't be terribly surprising, given the deep discounts that retailers are running this year," if the amount spent on self-giving were to "go up a little bit" this year. A new trend may be developing where consumers are buying more for themselves during the holiday season.

Joel Kier, interim CEO at Fortunoff, a NYC jewelry and home furnishings chain, stated "a lot of people are saying, 'I earned it, baby,' " Mr. Kier said. "Women are better shoppers at this time of year. They're more skilled at identifying value. So they're saving money and spending it on themselves."

According to the WSJ, three private equity firms have formed an alliance to consider buying newspaper publisher Knight Ridder Inc. I'll sit by the sidelines.

"The weather that's coming at us now is earlier than we'd anticipated," said Ed Silliere, vice president of risk management at Energy Merchant.

Yesterday, the build in distillate inventories — which include heating oil and diesel — was greater than traders had anticipated, but the decreases in crude and gasoline inventories were unexpected.

Even though the Dow got clipped yesterday, the Russell 2000 Small Cap Index rose 3 1/2%
on heavy volume.

The Commerce Department stated the GDP rose at a 4.3 percent annual rate in the July-September quarter. Unfortunately, the folks on Main Street continued to see their wages
trail the inflation rate. Something is wrong with this picture. The personal savings rate in October was a negative 0.7%. In September it was a negative 0.8%.

Fannie Mae and Freddie Mac have raised the size of single-family home loans they will buy next year by $57,350, or 16 percent, to $417,000. That's not chicken feed.

China may place an order for Airbus A320 planes during Wen's visit to France.
Airbus has recorded orders for 66 planes this year in China valued at $8.3 billion, compared with 122 aircraft valued at $11.7 billion by Boeing.

Alan Greenspan: "History has not dealt kindly with the aftermath of protracted periods of low risk premiums."

The U.S. dollar is above 120 yen for first time since August 2003. That sure makes me look stupid and poorer. That places it in the same league as my Dell/HP hedge.

European interest rates rose by 1/4% to 2.25%, the first hike in 5 years.

Yesterday morning Albertsons was trading firmly at $24+ and then an article was released by Reuters written by Michael Flaherty. He wrote that "private equity firms Bain Capital, Thomas H. Lee Partners and Warburg Pincus are losing interest in their joint bid for grocer Albertsons Inc. with the deal's price tag among their worries, according to three people involved in the auction... As for Albertsons, CIBC analyst Perry Caicco estimates the struggling chain, which is under serious pressure from discounters, could sell at 7.15 times EBITDA, assuming a $30-per-share price tag. The stock was trading at $23.84 at midday on Wednesday.
Other analysts say the overall price for Albertsons could be around $16.5 billion, including $6.5 billion in debt, which would make it the second-largest leveraged buyout ever."
It has been pointed out in many articles that there are many potential interested parties for Albertsons. From the beginning, I felt a fair price for the buyers and sellers was at least $31. If that level or another level scares off a buyer or two, so be it. After the article came out, Albertsons declinedto $23.50. In my opinion, it offers an outstanding risk/reward value. If others disagree, they should cut and run. I believe Albertsons will accomplish its mission to deliver optimum returns to its shareholders. Their exit plan, handled by Goldman Sachs and the Blackstone Group, should have a pleasing outcome.

Abercrombie & Fitch Co. today reported net sales of $251.2 million for the four-week period ended November 26, 2005, a 34% increase over last year's November sales of $188.0 million. November comparable store sales increased 23% compared with the four-week period ended November 27, 2004. Year-to-date, the Company reported a net sales increase of 36% to $2.075 billion from $1.522 billion last year. Comparable store sales increased 24% for the year-to-date period. WOW!!!!

On a year-to-date basis, for the ten months ended November 26, 2005 compared to the ten months ended November 27, 2004, company-owned comp sales for the Saks Fifth Avenue division of Saks rose 4.2%. For the four weeks ended November 26, 2005 compared to the four weeks ended November 27, 2004 they declined 2.3%. Categories with the best sales performances for SFAE in November were women's and men's contemporary sportswear, women's "gold range" apparel, and men's shoes. Categories with the softest performances for SFAE in November were private brand, women's bridge apparel, evening dresses, and Salon Z (women's large sizes).

Let's Take A Close Look

11/30/05 Let's Take A Close Look

The Commerce Department reported that new home sales rose by 13 percent in October to a record 1.424 million annual rate, but the report also showed that home prices were not rising at quite the same pace -- up 1.6 percent -- and the number of homes still on the market reached a record 496,000.

New orders for durable goods in October rose by 3.4 percent. The main reasons for the upswing were transportation orders, including a 140.4-percent increase in defense aircraft orders, and a 50.4-percent rise in nondefense aircraft orders, although orders for motor vehicles fell by 2.2 percent. October orders outside the transportation sector rose by just 0.3 percent, falling short of forecasts for 1.0 percent increase.

Palatin Technologies, Inc. announced that it will present at the Lazard Capital Annual Life Sciences Conference at 1:00 p.m. Eastern Time on Wednesday, November 30, 2005 at The New York Palace Hotel in New York City. Carl Spana, Ph.D., President and Chief Executive Officer of Palatin Technologies, will provide an update on the Company's commercial and development programs.

Lao Tzu: "Be gentle and you can be bold. Be frugal and you can be liberal. Avoid putting yourself before others and you can become leader among men."

U.S. consumer confidence rebounded strongly in November as gasoline prices retreated, the Conference Board said Tuesday. The consumer confidence index jumped 13.7 points to 98.9 in November from 85.2 in October. It was the largest jump since just after the invasion of Iraq in 2003. "The shock of the hurricanes and subsequent leap in gas prices has begun wearing off just in time for the holiday season," said Lynn Franco, director of consumer research at the private research organization. The present situation index rose to 114.0 in November from 107.8 in October. The expectations index surged to 88.8 in November from 70.1 in October.

Frontier Airlines stated it may not be able to secure financing for new aircraft, meet debt payments or follow through with expansion plans.

January crude settled down 86 cents at $56.60, the lowest close for that contract since June 8. The price has lost 6.3% since the end of October and 19% since the end of September.

The Postal Service will deliver 20 billion letters, packages and cards
between Thanksgiving and Christmas, with the busiest mailing day expected to
be Monday, Dec. 19, with more than 280 million cards and letters being
cancelled -- more than twice that of an average day. Total mail volume on Dec.
19 is expected to rise to 900 million pieces of mail, up from 670 million
pieces on an average day.

Joseph Phelps Vineyards' 2002 Insignia has been ranked the #1 Wine of the Year in the Wine Spectator's year-
end review of the top 100 wines tasted in 2005. Marvin R. Shanken, Wine
Spectator's editor and publisher, explains that 12,400 wines from around the
world are blind tasted and narrowed down to a thousand, then a hundred, then
the top 10. The honor is well deserved. If you are in the Napa Valley, I strongly
suggest you visit this winery. The setting is truly beautiful and incredibly
peaceful. Even though I do not drink, I appreciate the quality of the
staff and their talents.

Temple-Inland Inc. said late Tuesday it plans to further reposition the mortgage origination activities 
within its Guaranty Bank subsidiary, cutting 250 jobs.

President Bush: "This country must never forget the
lessons of September the 11th, 2001. And a victory in Iraq will deny the
terrorists their stated goal." I never thought there was a direct connection between
9/11 and Iraq. Did terrorists from Iraq fly into the Twin Towers?

Benjamin Disraeli: "Never apologize for showing feeling. When you do so, you
apologize for the truth."

Winter Has Arrived

11/29/05 Winter Has Arrived

Temperatures are dropping, and the housing market is cooling. October’s existing-home sales fell 2.7% to an annual rate of 7.09 million from Sept.'s revised 7.29 million, despite heavy selling in areas hit by Hurricane Katrina, the National Association of Realtors said. Without storm-related sales, the drop would have been 3.2%. The inventory of unsold homes rose 3.5% to 2.87 million, the most in 19 years. It amounted to a supply of 4.9 months and 16.3% higher than a year ago.

Ameriquest Mortgage is cutting 1,500 employees from its payroll or about 10% of its workforce.

Gold topped $500 an ounce and platinum traded over $1,000.

As of Monday, at least 2,107 members of the U.S. military had died since the beginning of the Iraq war in March 2003, according to an Associated Press count.

Delphi postponed a plan to petition bankruptcy court to void labor contracts.

Ford is cutting the workforce at Volvo Cars by 5.3%.

One of the top-selling items this holiday season is cashmere. That spells good news for walmart.com (the company sells its cashmere sweaters etc. online only) and for Saks Fifth Avenue. The latter has featured cashmere for the holidays. Comp sales at
Saks Fifth Avenue could comfortably exceed analyst expectations. For anyone in NYC over this Thanksgiving weekend, you would have seen incredible crowds jamming into the company’s flagship store on Fifth Avenue.

After the weekend article in Barron’s, Palatin rose to $4.03 on record daily trading volume exceeding 6 million shares. A short mention was made of the company’s efforts
in the management of weight control. It might have been helpful to note the findings in the Nov. 4, 2005 issue of the journal Cell. The findings demonstrate for the first time that the neuronal pathways that help to keep body weight stable diverge at the melanocortin-4 receptor (MC4R) to regulate either food intake or energy expenditure. The link is
http://www.researchmatters.harvard.edu/story.php?article_id=968.

A big beneficiary of the post-hurricane rebuilding effort will be Hughes Supply. Their recent 8-K filing reflects benefits for 18 top officers in the case there is a change of control. I believe the company’s shares offer an unusual value for holiday shoppers. There is no question in my mind that the recently-formed Special Committee of the Board will use its efforts to maximize value for the shareholders.

Inc. Magazine has chosen Ms. Ping Fu as the entrepreneur of the year. Ms. Fu is the President and CEO of Raindrop Geomagic.

Stephen Roach: “The capitalization of the Dubai and Abu Dhabi equity markets, combined, is now around US$200 billion -- up dramatically from less than $15 billion in 2000.”

Nouriel Roubini: “In 2006 the structural medium term factor that will tend to weaken the dollar - the large and growing US current account deficit - will reassert its role while the short term cyclical factors that have lifted the dollar this year will tend to weaken their effect. So, at the end you cannot fight the laws of gravity as the cyclical forces that have defied such gravity are temporary while the forces that will cause a gravitational fall of the US dollar are as strong as ever.”

More than 330-miles of Interstate 70 was closed Monday because of poor visibility due to blowing snow from the Denver area east to Russell, Kansas. The South Dakota Highway Patrol shut down a 175-mile stretch of I-90 on Monday from Kadoka to Mitchell. In central Nebraska, a 60-mile stretch of I-80 was closed Monday from North Platte east to Lexington. Numerous other highways were closed across the Plains.
The National Weather Service posted blizzard warnings for parts of Colorado, Kansas, Nebraska and South Dakota. A winter storm warning was issued for parts of North Dakota and Minnesota. One can expect many future winter storms for a good portion of the United States. We will have to wait and see what impact those storms will have on energy supplies and heating bills. Prudence dictates that this will be a highly variable winter capable of some major storms from time to time.

Chain store sales fell 0.7 percent in the week ended November 26, compared with 1.0 percent rise the previous week, the International Council of Shopping Centers and UBS said in a joint report. But compared with the same week a year ago, sales grew to 5.1 percent.

Victor Hugo: “Laughter is the sun that drives winter from the human face.”

Holiday Specials

11/28/05 Holiday Specials

With 145 million shoppers hitting the stores over the Thanksgiving holiday weekend, and with heavy promotions offered by many stores, weekend sales rose 22% to $27.8 billion, up from $22.8 billion spent in 2004, according to a National Retail Federation survey released Sunday. The group had projected that 130 million consumers would be out shopping. The average shopper spent $302.81 last weekend, according to a telephone survey done for the NRF by BIGresearch. The federation has projected average total spending for the holidays at $738.11, or a total of $439.5 billion.

John Hussman: “The current market condition is extremely overbought, and the constellation of internal divergences and interest-rate action has “whipsaw” written all over it.”

Today is the 60th trading day since Albertsons announced seeking strategic alternatives. Basically, the stock has traded between $23 and $26 a share. About 40% of the time, the stock traded between $25 and $26 and almost 40% of the time between $24 and $25. On Friday the stock closed at $23.99. In sum, the stock has been marking time. We are approaching the cut-off date for bids from interested parties. At current levels, I believe the shares offer an unusual holiday value. I’d rather do my shopping here than in the malls.

Gold last traded above $500 an ounce on Dec. 11, 1987. Newmont’s CEO predicted that gold may rise to more than $1,000 an ounce in the next five to seven years.

Monetary and credit growth continue to exceed GDP growth. That powerful one-two punch has done wonders for asset prices—in particular, housing and equities. It is rather interesting that the monetary presses remain revved while no attempt is made at repair and maintenance. That operating policy can only lead to the machinery breaking down. The longer it goes the greater the feeling that the machinery is indestructible. The last time I checked the machinery did not carry a warranty.

After hurricanes Katrina and Rita, some PVC production plants in the Gulf Coast area remained off-line, which sent prices skyrocketing, construction industry officials stated. In the last two months, contractors have reported that prices for PVC have jumped between 20 percent and 100 percent higher than pre-hurricane levels.

From today’s Newsday on Palatin: “PT-141 will not just fix the plumbing as vascular drugs do, it promises to renovate the entire kitchen. Based on the compound Melanotan II, PT-141 has the ability to light up the nervous system like a Christmas tree in December, and it may be available as soon as 2007…PT-141 conjures up an image of a grinning, love-stunned population wandering around in a haze of desire. The hundreds of rats and the 300 men who have already participated in the clinical trials are reportedly over the moon. They say it makes them hum. It's a 21st century Love Potion No. 9.” You gotta love this!

Merck announced the elimination of 7,000 jobs by the end of 2008 and the close or sale of 5 of its 31 manufacturing plants.

The dollar hit a 27-month high against the yen and two-year high versus sterling today.