1/12/06 Concerns
NY Fed President Timothy Geithner: “ People must be concerned about what the current account deficit means for the future.” With the trade deficit amounting to $700 billion in 2005 and $800 billion in 2006, one might be concerned about the present. It’s unfortunate that the Fat Flush diet cannot be used on our twin tower deficits. We need a Congress and an Administration to take hefty doses of daily probiotics.
Shelley Berman: “If you've never met a student from the University of Chicago, I'll describe him to you. If you give him a glass of water, he says, "This is a glass of water. But is it a glass of water? And if it is a glass of water, why is it a glass of water?" And eventually he dies of thirst.”
There was below average demand for the 5-year Treasury auction. As such, yields rose. The dollar is at a 3-month low versus the yen. Since the beginning of January, the dollar has declined 2.7% versus the euro.
Crude is trading at $64 a barrel. Gas at the pump will jump another 10+ cents in the next two weeks.
The UK may be a net crude oil importer in 2006. The last time that occurred was 14 years ago. India continues to import 70% of its crude requirements.
Bush opened hundreds of thousands of acres around Teshepuk Lake, on Alaska’s North Slope, to oil drilling. I thought Congress had voted down expanded oil drilling in Alaska.
I read where Alito’s wife left yesterday’s confirmation hearing crying. The questioning seemed to have upset her. I feel badly for her. I would feel much worse for our nation if Roe v. Wade were overturned due to Alito replacing Sandra Day O’Connor.
Plutarch: “I don't need a friend who changes when I change and who nods when I nod; my shadow does that much better.”
In the roller coaster deal for Guidant, Johnson & Johnson stated late Wednesday they reached a new agreement to acquire Guidant in a deal worth $23.2 billion. Under the new agreement, Johnson & Johnson will pay $37.25 in cash and 0.493 shares of Johnson & Johnson common stock for each outstanding share of Guidant common stock. As of the market close on Jan. 11, the transaction has a per-share value of $68.06 to Guidant shareholders. Guidant shareholders will vote on the revised merger agreement on Jan. 31.
Boston Scientific will, in all probability, improve its bid. I have never seen such a fight over a company where the quality of its product line has come into question. To me, it is
irrational exuberance.
Christopher Thornberg, senior economist with the UCLA Anderson Forecast: “You are starting to see a slowdown in housing market activity, and that says loud and clear that things are starting to break. The feeling is that we have peaked. And beyond that is a downhill run.” He stated California home prices are about 30% to 40% overvalued, but that such a decline, if it occurs, would do so over the better part of a decade. He went on to state that “if you have a big decline in unit sales, you’ll have mortgage brokers and real estate agents and construction workers all losing jobs. And what’s driving the California job market now? Construction, finance, and real estate jobs. Those will go away.”
Lenny Bruce: A lot of people say to me, "Why did you kill Christ?" "I dunno... it was one of those parties, got out of hand, you know." "We killed him because he didn't want to become a doctor, that's why we killed him."
For the first nine months of 2005, homeowners felt pretty darn wealthy. All of sudden, it became apparent that selling a home was not so easy. The inventory of unsold homes began to approach 5 months. Flipping homes was no longer the center of conversation at parties. Five years earlier, it was the Nasdaq. In the last quarter of 2005, talk focused on Google and Apple. Now, after the first seven trading days of 2006, investors are beginning to feel their oats. There is talk of the Dow making a new all-time high in 2006. The Nasdaq is holding its recent gains. The train is leaving the station. All aboard!!!!
Standard and Poor's said after Wednesday's closing bell that its investment policy committee has reaffirmed its positive outlook on the U.S. equity market for 2006, and said it expects a 9% rise in the S&P 500 Index to 1360 by year-end. It should be noted that this index closed at 1290 last night. The difference between 1290 and 1360 is 5.5%.
Do you want to remain invested at present levels to make 5.5% for the next 11 2/3 months? Are you totally nuts? And that is assuming the S&P investment policy committee is correct.
Friedrich Nietzsche: “Insanity in individuals is something rare, but in groups, parties, nations and epochs it is the rule”
Thursday, January 12, 2006
Wednesday, January 11, 2006
Facts And Opinions
1/11/06 Facts And Opinions
Murray Rothbard: “Inflation tends at once to repress saving-investment and to cause consumption of capital.”
In the latest Commerce Department report, U.S. wholesale sales fell 0.7%, the biggest decline since April 2003.
Wal-Mart created over 125,000 new jobs in 2005. Wages for average hourly full-time store workers rose from $9.68 in 2004 to $10.11 in 2005.
OfficeMax will close 110 stores. They did not provide the number of jobs that will be cut.
Marc Faber: “I would argue the CRB index will outperform the Dow over the next 10 years.
The International Council of Shopping Centers stated about 40% of gift cards are redeemed in January. As the number of gift cards sold each holiday season increases, the month of January will become a more important month for retailers.
Boeing delivered 285 commercial airplanes in 2004, 290 in 2005, and expects to deliver 385 planes this year.
For the months of November and December, China’s imports rose faster than their exports. As such, their trade surplus in the fourth quarter of 2005 dwindled to only $5 billion, a sharp decline from the $25 billion in the Jan-March 2005 quarter. I would not be surprised to see China start to run monthly trade deficits some time in 2006. If the U.S. is depending on China to purchase Treasury bonds, Agencies, and corporate offerings, I think there will be disappointment. If there is a surplus, it will go into commodities, and that includes gold.
Italy’s Lottomatica will buy Gtech for $35 per share in a cash merger.
Home Depot announced the largest acquisition in their company history. They will purchase Hughes Supply for $46.50 per share in cash. That’s a nice beginning to 2006. I very much appreciate the $9 per share ham sandwich. Home Depot is buying a first-class
Company.
John Hussman: “If we restrict valuations to a price/peak earnings multiple of 16 or higher (the current multiple is 19), we find that on average, S&P 500 earnings declined by -8.6% over the 18 months after the final rate-hike. Yet despite this decline in earnings (which would normally raise the raw P/E ratio if prices were to remain constant), the raw P/E ratio actually declined as well, by an average of -1.3%. The result was an average loss, including dividends, of -6.5% over the 18 month period (an annualized loss of -4.4%).
Suffice it to say that the bullish argument – based on the “common knowledge” that P/Es expand once the Fed is done tightening – really has no data to support it. Nor is there data to support the notion that corporate earnings have grown at all in the period after a tightening cycle, particularly when those earnings began at fresh records at the top of their long-term historical 6% growth channel (as they currently reside).”
The U.N.'s food agency warned Wednesday that avian influenza could become endemic in Turkey, and said the virus poses a serious risk to neighboring countries.
DuPont, a component in the Dow, warned that fourth-quarter earnings would fall short of expectations due to operation disruptions from hurricane's Katrina and Rita, as well as weaker-than-anticipated performances in its crop protection chemical, performance coatings and surfaces businesses.
On a seasonally adjusted basis, applications for mortgages to purchase homes rose 9.3%, while refinancing applications increased 9.9%. Refinancings accounted for 42.2% of total applications and adjustable-rate mortgages amounted to 28.1%.
Viktor Frankl: “We who lived in concentration camps can remember the men who walked through the huts comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken from a man but one thing: the last of the human freedoms -- to choose one's attitude in any given set of circumstances, to choose one's own way.”
Whole Foods Market Inc. stated Tuesday it will rely on wind energy for all of its electricity needs. It is purchasing 458,000 megawatt-hours of wind energy credits a year -- enough to power 44,000 homes annually -- from Renewable Choice Energy of Boulder, Colo.
The volume of China's trade with the European Union and the United States topped 200 billion U.S. dollars in 2005, according to statistics with the General Administration of Customs of China released here Wednesday.
EU remained as China's largest trade partner, with bilateral trade volume reaching 217.31 billion dollars, up 22.6 percent year-on-year.
Bilateral trade volume between China and the United States amounted to 211.63 billion dollars, up 24.8 percent.
Japan registered as China's third largest trade partner with their trade volume up 9.9 percent to 184.45 billion dollars.
In 2005, the volume of trade between China and the Republic of Korea (ROK) topped 100 billion dollars for the first time.
Murray Rothbard: “Inflation tends at once to repress saving-investment and to cause consumption of capital.”
In the latest Commerce Department report, U.S. wholesale sales fell 0.7%, the biggest decline since April 2003.
Wal-Mart created over 125,000 new jobs in 2005. Wages for average hourly full-time store workers rose from $9.68 in 2004 to $10.11 in 2005.
OfficeMax will close 110 stores. They did not provide the number of jobs that will be cut.
Marc Faber: “I would argue the CRB index will outperform the Dow over the next 10 years.
The International Council of Shopping Centers stated about 40% of gift cards are redeemed in January. As the number of gift cards sold each holiday season increases, the month of January will become a more important month for retailers.
Boeing delivered 285 commercial airplanes in 2004, 290 in 2005, and expects to deliver 385 planes this year.
For the months of November and December, China’s imports rose faster than their exports. As such, their trade surplus in the fourth quarter of 2005 dwindled to only $5 billion, a sharp decline from the $25 billion in the Jan-March 2005 quarter. I would not be surprised to see China start to run monthly trade deficits some time in 2006. If the U.S. is depending on China to purchase Treasury bonds, Agencies, and corporate offerings, I think there will be disappointment. If there is a surplus, it will go into commodities, and that includes gold.
Italy’s Lottomatica will buy Gtech for $35 per share in a cash merger.
Home Depot announced the largest acquisition in their company history. They will purchase Hughes Supply for $46.50 per share in cash. That’s a nice beginning to 2006. I very much appreciate the $9 per share ham sandwich. Home Depot is buying a first-class
Company.
John Hussman: “If we restrict valuations to a price/peak earnings multiple of 16 or higher (the current multiple is 19), we find that on average, S&P 500 earnings declined by -8.6% over the 18 months after the final rate-hike. Yet despite this decline in earnings (which would normally raise the raw P/E ratio if prices were to remain constant), the raw P/E ratio actually declined as well, by an average of -1.3%. The result was an average loss, including dividends, of -6.5% over the 18 month period (an annualized loss of -4.4%).
Suffice it to say that the bullish argument – based on the “common knowledge” that P/Es expand once the Fed is done tightening – really has no data to support it. Nor is there data to support the notion that corporate earnings have grown at all in the period after a tightening cycle, particularly when those earnings began at fresh records at the top of their long-term historical 6% growth channel (as they currently reside).”
The U.N.'s food agency warned Wednesday that avian influenza could become endemic in Turkey, and said the virus poses a serious risk to neighboring countries.
DuPont, a component in the Dow, warned that fourth-quarter earnings would fall short of expectations due to operation disruptions from hurricane's Katrina and Rita, as well as weaker-than-anticipated performances in its crop protection chemical, performance coatings and surfaces businesses.
On a seasonally adjusted basis, applications for mortgages to purchase homes rose 9.3%, while refinancing applications increased 9.9%. Refinancings accounted for 42.2% of total applications and adjustable-rate mortgages amounted to 28.1%.
Viktor Frankl: “We who lived in concentration camps can remember the men who walked through the huts comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken from a man but one thing: the last of the human freedoms -- to choose one's attitude in any given set of circumstances, to choose one's own way.”
Whole Foods Market Inc. stated Tuesday it will rely on wind energy for all of its electricity needs. It is purchasing 458,000 megawatt-hours of wind energy credits a year -- enough to power 44,000 homes annually -- from Renewable Choice Energy of Boulder, Colo.
The volume of China's trade with the European Union and the United States topped 200 billion U.S. dollars in 2005, according to statistics with the General Administration of Customs of China released here Wednesday.
EU remained as China's largest trade partner, with bilateral trade volume reaching 217.31 billion dollars, up 22.6 percent year-on-year.
Bilateral trade volume between China and the United States amounted to 211.63 billion dollars, up 24.8 percent.
Japan registered as China's third largest trade partner with their trade volume up 9.9 percent to 184.45 billion dollars.
In 2005, the volume of trade between China and the Republic of Korea (ROK) topped 100 billion dollars for the first time.
Tuesday, January 10, 2006
Developments
1/10/06 Developments
A couple of weeks ago I stated my preference for owning GM and Pfizer in 2006 rather than Google and Apple. Most of my friends thought I had gone off the deep end. They may still be right. In the meantime, Kerkorian has urged GM to cut the company’s $1.1 billion annual dividend in half and to hasten plans to cut losses. Wagoner, GM’s CEO, stated today he expects a ``significant'' reduction in losses this year with added revenue from new models and savings from plant closings and the elimination of 30,000 jobs. GM’s stock traded at $18.33 on December 29, and last night closed at $22.41. For the past week, it has been the hottest stock in the Dow. Not bad for a company everyone predicted was on the way to a bankruptcy filing.
Another stock that was given up for dead was Saks. Yesterday, the company stated it might sell its Parisian boutiques, the chain that contributed $700 million in annual sales. In addition, the company announced some very positive management changes. Over the last four trading sessions, the stock has risen from $16.45 to $18.71. Not bad for a company almost every analyst had counted out.
Yesterday had some interesting developments. The Dow closed above 11,000 for the first time since June 7, 2001. Gold closed at $550.50 an ounce, its highest close since January 1981. What are the odds of this happening on the same day?
Coming right on the heels of reports of lackluster 2005 holiday retail sales, a new report shows that investors in retail real estate are more bullish than ever, with 75% of
investors confirming that they plan to increase their 2006 holdings by at
least 25%. This, and more information on investor sentiment, is confirmed in
a 130-page report, a portion of which is being published this week by REZA
Investment Group in collaboration with National Real Estate Investor and
Retail Traffic. The research is based on 2005 year-end surveys to 10,000
owners and developers.
HSBC, the world’s third largest bank, operates in 77 countries. Bob Piggott, the company’s head of group crisis management, is estimating that up to half of its staff could fall ill or be absent from work at the peak of the next flu pandemic.
Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, stated “in the 20th century, there were three pandemics, which means an average of one every 30 years. The last one was in 1968, so its 37 years. Just on the basis of evolution…we’re overdue.”
On a seasonal basis, the demand for gold starts to wane in February. The holiday season has ended as has the peak wedding festival period in India. One might consider cutting back on positions as the month of January comes to a close.
Medical costs now consume 16 percent of nation's economic output -- the highest proportion ever.
Robert V. Green: “The most important thing in investing is to match an investment methodology with the investor’s personality.”
The U.S. Treasury on Monday announced a $13 billion sale of five-year notes and $9 billion in 10-year inflation-protected securities (Tips) this week - the first tranches of approximately $100 billion in coupon-bearing notes due to be issued in the next month. It will be the biggest single month of supply since a similar period in 1996, according to Bank of America figures.
Jack Welch: “If you don’t have candor, you don’t have much of anything.”
If the Dow were to rally to approximately 11,300, I would suggest you consider fully hedging your portfolio. Protecting your capital should be an on-going focus for all investors.
Toys “R” Us will close 75 stores and cut 3,000 jobs.
Alcoa’s quarterly profits were a disappointment. They declined to 26 cents from 30 cents.
Iran removed seals on its nuclear research sites on Tuesday, despite international calls to refrain from resuming sensitive nuclear work, officials said. Mohammad Saeedi, deputy chief of the Atomic Energy Organization of Iran, told reporters that the research work would be resumed later Tuesday under the supervision of the International Atomic Energy Agency (IAEA), the UN nuclear watchdog.
Federal-Mogul Corp., a 106-year-old auto-parts supplier, stated Friday it will cut 10% of its workforce or 4,500 workers and could close 25 plants as part of a new 3-year restructuring plan.
Collins & Aikman has 17,000 employees in North America. They will soon file a reorganization plan. A number of plants could be closed and a significant number of workers cut from the payroll.
In my view, 2006 will be an important year. It will mark the end of the “goldilocks” economy. Volatility and risk will become every day words. Fireworks will not be reserved for only July 4th. The yellow light is flashing.
A couple of weeks ago I stated my preference for owning GM and Pfizer in 2006 rather than Google and Apple. Most of my friends thought I had gone off the deep end. They may still be right. In the meantime, Kerkorian has urged GM to cut the company’s $1.1 billion annual dividend in half and to hasten plans to cut losses. Wagoner, GM’s CEO, stated today he expects a ``significant'' reduction in losses this year with added revenue from new models and savings from plant closings and the elimination of 30,000 jobs. GM’s stock traded at $18.33 on December 29, and last night closed at $22.41. For the past week, it has been the hottest stock in the Dow. Not bad for a company everyone predicted was on the way to a bankruptcy filing.
Another stock that was given up for dead was Saks. Yesterday, the company stated it might sell its Parisian boutiques, the chain that contributed $700 million in annual sales. In addition, the company announced some very positive management changes. Over the last four trading sessions, the stock has risen from $16.45 to $18.71. Not bad for a company almost every analyst had counted out.
Yesterday had some interesting developments. The Dow closed above 11,000 for the first time since June 7, 2001. Gold closed at $550.50 an ounce, its highest close since January 1981. What are the odds of this happening on the same day?
Coming right on the heels of reports of lackluster 2005 holiday retail sales, a new report shows that investors in retail real estate are more bullish than ever, with 75% of
investors confirming that they plan to increase their 2006 holdings by at
least 25%. This, and more information on investor sentiment, is confirmed in
a 130-page report, a portion of which is being published this week by REZA
Investment Group in collaboration with National Real Estate Investor and
Retail Traffic. The research is based on 2005 year-end surveys to 10,000
owners and developers.
HSBC, the world’s third largest bank, operates in 77 countries. Bob Piggott, the company’s head of group crisis management, is estimating that up to half of its staff could fall ill or be absent from work at the peak of the next flu pandemic.
Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, stated “in the 20th century, there were three pandemics, which means an average of one every 30 years. The last one was in 1968, so its 37 years. Just on the basis of evolution…we’re overdue.”
On a seasonal basis, the demand for gold starts to wane in February. The holiday season has ended as has the peak wedding festival period in India. One might consider cutting back on positions as the month of January comes to a close.
Medical costs now consume 16 percent of nation's economic output -- the highest proportion ever.
Robert V. Green: “The most important thing in investing is to match an investment methodology with the investor’s personality.”
The U.S. Treasury on Monday announced a $13 billion sale of five-year notes and $9 billion in 10-year inflation-protected securities (Tips) this week - the first tranches of approximately $100 billion in coupon-bearing notes due to be issued in the next month. It will be the biggest single month of supply since a similar period in 1996, according to Bank of America figures.
Jack Welch: “If you don’t have candor, you don’t have much of anything.”
If the Dow were to rally to approximately 11,300, I would suggest you consider fully hedging your portfolio. Protecting your capital should be an on-going focus for all investors.
Toys “R” Us will close 75 stores and cut 3,000 jobs.
Alcoa’s quarterly profits were a disappointment. They declined to 26 cents from 30 cents.
Iran removed seals on its nuclear research sites on Tuesday, despite international calls to refrain from resuming sensitive nuclear work, officials said. Mohammad Saeedi, deputy chief of the Atomic Energy Organization of Iran, told reporters that the research work would be resumed later Tuesday under the supervision of the International Atomic Energy Agency (IAEA), the UN nuclear watchdog.
Federal-Mogul Corp., a 106-year-old auto-parts supplier, stated Friday it will cut 10% of its workforce or 4,500 workers and could close 25 plants as part of a new 3-year restructuring plan.
Collins & Aikman has 17,000 employees in North America. They will soon file a reorganization plan. A number of plants could be closed and a significant number of workers cut from the payroll.
In my view, 2006 will be an important year. It will mark the end of the “goldilocks” economy. Volatility and risk will become every day words. Fireworks will not be reserved for only July 4th. The yellow light is flashing.
Monday, January 09, 2006
The Real Deal
1/9/06 The Real Deal
Richard Nixon's defense secretary, Melvin Laird: ''Both the Vietnam War and the Iraq war were launched based on intelligence failures and possibly outright deception."
A secret government report stated that 80% of the Marine Corps deaths in the Iraq war could have been avoided with the proper body armor, and the body armor was available as far back as 2003. Whose decision was it not to supply the needed body armor? You get one guess.
Since we invaded Iraq, the number of our Armed Forces that have been killed is almost at 2200.
If you were a foreign nation, would you purchase our dollar or our bonds? What makes you believe they are safe havens? GM and Ford were once safe havens. So was AT&T and Eastman
Kodak and plenty of other former blue chips. Times change and so do risks. This is no time for complacency.
There is a growing danger in the increasing level of Executive Power at 1600 Pennsylvania Ave.-- as well as the increasing concentration of power. It's time for the voters to wake up to this danger.
Richard Nixon's defense secretary, Melvin Laird: ''Both the Vietnam War and the Iraq war were launched based on intelligence failures and possibly outright deception."
A secret government report stated that 80% of the Marine Corps deaths in the Iraq war could have been avoided with the proper body armor, and the body armor was available as far back as 2003. Whose decision was it not to supply the needed body armor? You get one guess.
Since we invaded Iraq, the number of our Armed Forces that have been killed is almost at 2200.
If you were a foreign nation, would you purchase our dollar or our bonds? What makes you believe they are safe havens? GM and Ford were once safe havens. So was AT&T and Eastman
Kodak and plenty of other former blue chips. Times change and so do risks. This is no time for complacency.
There is a growing danger in the increasing level of Executive Power at 1600 Pennsylvania Ave.-- as well as the increasing concentration of power. It's time for the voters to wake up to this danger.
Sunday, January 08, 2006
It Does Matter
1/8/06 It Does Matter
There is a debate over whether a negative savings rate matters. You see, 2005 will be the first year since the Depression that the U.S. has experienced a negative savings rate, one where spending exceeds income. Many Fed officials have expressed the view that the primary focus should be on household wealth, and in the last few years, home prices have risen sharply and the net worth of most American families has gone up despite the spending spree. They point out that cash taken from equity of homes approximated $200 billion in 2005 and may amount to about $100 billion this year. They make a valid point. However, the same could be said for the stock market bubble in 1999-2000. Most households could cash out many stocks selling at unrealistic and unsustainable prices. Then the Nasdaq collapsed 80% and suddenly those households didn't feel so rich. Home prices will not decline that same 80%, but they have the potential to drop 30% or more. Will they? I think so.
We have a situation where wages do not exceed the rate of inflation, and probably won't again in 2006. As the economy slows, companies will continue on the path of cutting costs. That does not lead to healthy wage gains. It leads to cutting high-paying jobs and replacing them with employees who will accept lower wages. Maybe they will be in the U.S. or possibly outside our borders. The result is the same. If households are to meet the rising cost of healthcare, education, energy, and other expenses, the choice narrows to increasing debt or cutting spending. Up to now, the choice has been to increase debt. We are approaching a crossroads. Soon there will be no choice. Why? The debt load will topple families as well as this nation. There will be a cry to save. We will go back to basics, a good thing. Saving does matter. There is no free lunch. Stock prices do not live permanently in the stratosphere nor do home prices. It's not different this time. Listen to the Fed and the Administration and you and your family will be wiped out.
For the January reporting period, Wal-Mart's comparative sales for the U.S. are estimated to be within their guidance of 3 to 5 percent. Despite what some analysts have stated, I believe the improvement over December can be attributed to gift cards being spent on merchandise. It does not indicate new accelerating spending levels on the part of the consumer.
There is a debate over whether a negative savings rate matters. You see, 2005 will be the first year since the Depression that the U.S. has experienced a negative savings rate, one where spending exceeds income. Many Fed officials have expressed the view that the primary focus should be on household wealth, and in the last few years, home prices have risen sharply and the net worth of most American families has gone up despite the spending spree. They point out that cash taken from equity of homes approximated $200 billion in 2005 and may amount to about $100 billion this year. They make a valid point. However, the same could be said for the stock market bubble in 1999-2000. Most households could cash out many stocks selling at unrealistic and unsustainable prices. Then the Nasdaq collapsed 80% and suddenly those households didn't feel so rich. Home prices will not decline that same 80%, but they have the potential to drop 30% or more. Will they? I think so.
We have a situation where wages do not exceed the rate of inflation, and probably won't again in 2006. As the economy slows, companies will continue on the path of cutting costs. That does not lead to healthy wage gains. It leads to cutting high-paying jobs and replacing them with employees who will accept lower wages. Maybe they will be in the U.S. or possibly outside our borders. The result is the same. If households are to meet the rising cost of healthcare, education, energy, and other expenses, the choice narrows to increasing debt or cutting spending. Up to now, the choice has been to increase debt. We are approaching a crossroads. Soon there will be no choice. Why? The debt load will topple families as well as this nation. There will be a cry to save. We will go back to basics, a good thing. Saving does matter. There is no free lunch. Stock prices do not live permanently in the stratosphere nor do home prices. It's not different this time. Listen to the Fed and the Administration and you and your family will be wiped out.
For the January reporting period, Wal-Mart's comparative sales for the U.S. are estimated to be within their guidance of 3 to 5 percent. Despite what some analysts have stated, I believe the improvement over December can be attributed to gift cards being spent on merchandise. It does not indicate new accelerating spending levels on the part of the consumer.
Saturday, January 07, 2006
Euphoria + Dysfunction= Rising Risk of Instability
1/7/06 Euphoria + Dysfunction = Rising Risk Of Instablity
The first week's equity trading of 2006 equated to a good 2005. The Dow rose 2.2%, the
S&P 500 2.9%, and the Nasdaq 5.2%. That euphoria was balanced in part by the dollar index slumping 2.6% and the CRB Index climbing 2.3% to a new all-time high. All the talk about Fed rate hikes coming to a close took a back seat to the Fed's increasing accomodation.
Put simply, since mid-November, the Fed has pumped $177.8 billion into the M3 money supply.
The Administration focused on the unemployment rate declining to 4.9% due to a strengthening economy. Meanwhile, over the past year, the labor participation rate has actually declined to 66%. Discouraged workers are alive but not well. Look at the pay situation for the individual on Main Street. The BLS stated hourly pay rose by 5 cents an hour in December, but that is after revising downward pay by 3 cents an hour in November
and one cent in October. Much is made of 108,000 jobs being created in December. Let's take a closer look. The factory workweek declined by 0.1 an hour to 40.7 hours per week and the non-factory workweek also declined to 33.7 hours from 33.8 hours in November. If you multiply the number of workers by that 0.1 hourly decline, you will come out to a loss
of jobs approaching 140,000. Any way you cut it, the middle class is working less, their wages are trailing the rate of inflation, and with the labor participation rate at 66%, there is no reason to believe wages in 2006 will jump significantly. I have been making this same statement for three years running.
Much is made of 4% gains in GDP on the back of increased productivity. When does the average worker get compensated for this increased productivity? Is the goal to make the individual worker more dependent on government handouts? And by the way, the government doesn't generate cash flow. The government just collects taxes and spends the money and accumulates increased debt. Is the goal to have an increasing economic divide between the rich and the middle class? How long can the Fed print money at a minimum of twice the rate of inflation?
EMC Corp. has 25,200 workers. They will be eliminating 1,000 jobs in 2006.
For the last three years, analysts have predicted a capital spending boom by corporations.
This year the same prediction was made. I will disagree for the fourth year. Companies are
expanding in low-paying countries, and not here. In the U.S., capital is used for stock buybacks. Do you see many new plants being built in the U.S.?
It's the beginning of the new year. If you want to jump on the euphoria band wagon, be my guest. You'll be taken for a ride-- for sure. Don't complain to me if you are thrown off the horse. Trotting is one thing. Stay out of the fast lane. It's not stable.
The first week's equity trading of 2006 equated to a good 2005. The Dow rose 2.2%, the
S&P 500 2.9%, and the Nasdaq 5.2%. That euphoria was balanced in part by the dollar index slumping 2.6% and the CRB Index climbing 2.3% to a new all-time high. All the talk about Fed rate hikes coming to a close took a back seat to the Fed's increasing accomodation.
Put simply, since mid-November, the Fed has pumped $177.8 billion into the M3 money supply.
The Administration focused on the unemployment rate declining to 4.9% due to a strengthening economy. Meanwhile, over the past year, the labor participation rate has actually declined to 66%. Discouraged workers are alive but not well. Look at the pay situation for the individual on Main Street. The BLS stated hourly pay rose by 5 cents an hour in December, but that is after revising downward pay by 3 cents an hour in November
and one cent in October. Much is made of 108,000 jobs being created in December. Let's take a closer look. The factory workweek declined by 0.1 an hour to 40.7 hours per week and the non-factory workweek also declined to 33.7 hours from 33.8 hours in November. If you multiply the number of workers by that 0.1 hourly decline, you will come out to a loss
of jobs approaching 140,000. Any way you cut it, the middle class is working less, their wages are trailing the rate of inflation, and with the labor participation rate at 66%, there is no reason to believe wages in 2006 will jump significantly. I have been making this same statement for three years running.
Much is made of 4% gains in GDP on the back of increased productivity. When does the average worker get compensated for this increased productivity? Is the goal to make the individual worker more dependent on government handouts? And by the way, the government doesn't generate cash flow. The government just collects taxes and spends the money and accumulates increased debt. Is the goal to have an increasing economic divide between the rich and the middle class? How long can the Fed print money at a minimum of twice the rate of inflation?
EMC Corp. has 25,200 workers. They will be eliminating 1,000 jobs in 2006.
For the last three years, analysts have predicted a capital spending boom by corporations.
This year the same prediction was made. I will disagree for the fourth year. Companies are
expanding in low-paying countries, and not here. In the U.S., capital is used for stock buybacks. Do you see many new plants being built in the U.S.?
It's the beginning of the new year. If you want to jump on the euphoria band wagon, be my guest. You'll be taken for a ride-- for sure. Don't complain to me if you are thrown off the horse. Trotting is one thing. Stay out of the fast lane. It's not stable.
Thursday, January 05, 2006
Recent Trends
1/6/06 Recent Trends
February natural gas fell 55.7 cents, or 5.5%, to $9.64 per million British thermal units in afternoon dealings on the New York Mercantile Exchange. The Energy Department reported an unexpected 1 billion-cubic-foot increase in supplies of the heating fuel for the week ended Dec. 30.
Matthew Slaughter, member of the Council of Economic Advisors, in an interview on Bloomberg Television on Thursday, reiterated earlier estimates by the administration and said the White House expects job growth to average 176,000 per month and the unemployment rate at 5% in 2006.
The index of signed purchase agreements, or pending home resales, fell 2.5 percent to 120.6, the National Association of Realtors stated. That follows a reading of 123.7 in October and a record 129.2 in August.
Announcements of job reductions by U.S. corporations increased 3.1% in 2005 to 1.07 million, the first annual increase since 2001, outplacement firm Challenger Gray & Christmas said Thursday.
It was the fifth year in a row that announced job cuts exceeded 1 million.
Planned layoffs increased 8.6% to 107,822 in December from 99,279 in November, the most since June. Layoffs rose 17.5% in the fourth quarter to 288,402, the most in a year, Challenger Gray & Christmas stated.
The holiday season is over and so is the holiday for cheap gas. Have you filled up this week? In my neck of the woods, stations raised prices between 10 cents and 20 cents a gallon. With crude circling the $63 a barrel mark, it appears likely that gas at the pump will shortly be back to $2.50 a gallon, and we are in the winter driving season. You still believe inflation is under control? Look at your home heating and electricity bills.
Action Economics expects China's currency to gradually appreciate by approximately 5% vs. the U.S. dollar over the course of 2006.
February natural gas fell 55.7 cents, or 5.5%, to $9.64 per million British thermal units in afternoon dealings on the New York Mercantile Exchange. The Energy Department reported an unexpected 1 billion-cubic-foot increase in supplies of the heating fuel for the week ended Dec. 30.
Matthew Slaughter, member of the Council of Economic Advisors, in an interview on Bloomberg Television on Thursday, reiterated earlier estimates by the administration and said the White House expects job growth to average 176,000 per month and the unemployment rate at 5% in 2006.
The index of signed purchase agreements, or pending home resales, fell 2.5 percent to 120.6, the National Association of Realtors stated. That follows a reading of 123.7 in October and a record 129.2 in August.
Announcements of job reductions by U.S. corporations increased 3.1% in 2005 to 1.07 million, the first annual increase since 2001, outplacement firm Challenger Gray & Christmas said Thursday.
It was the fifth year in a row that announced job cuts exceeded 1 million.
Planned layoffs increased 8.6% to 107,822 in December from 99,279 in November, the most since June. Layoffs rose 17.5% in the fourth quarter to 288,402, the most in a year, Challenger Gray & Christmas stated.
The holiday season is over and so is the holiday for cheap gas. Have you filled up this week? In my neck of the woods, stations raised prices between 10 cents and 20 cents a gallon. With crude circling the $63 a barrel mark, it appears likely that gas at the pump will shortly be back to $2.50 a gallon, and we are in the winter driving season. You still believe inflation is under control? Look at your home heating and electricity bills.
Action Economics expects China's currency to gradually appreciate by approximately 5% vs. the U.S. dollar over the course of 2006.
Purchasing Power
1/5/06 Purchasing Power
The purchasing power for Californians earning the state's minimum wage is one-third less than it was in 1968 and is not enough to support a single adult, according to a report by the California Budget Project. The report by the nonprofit, nonpartisan organization comes as Gov. Arnold Schwarzenegger is expected to propose in his state of the state address this week a $1 an hour increase in the state's minimum wage, to $7.75 an hour. The report also concludes that moderate increases in the minimum wage do not trigger job losses in the state's low-wage industries, such as food service and retail.
The Reuters Jefferies CRB Index of 19 commodities rose 2.12, or 0.6 percent, to 338.49, after earlier reaching a record 338.78. The index has jumped 21 percent in the past year as demand for raw materials such as fuels and metals climbed.
The Administration and the Fed may tell you that inflation is under control, but commodity gains of 21% certainly tell another story. Whether the Fed raises interest rates another one or two or three times is not the story. Demand from China and India and other Asean countries will continue to fuel demand for commodities- not just in 2005 or 2006- but for years to come. The purchasing power of the dollar will dwindle and dwindle. Those hoping for a long-term bull ride on the dollar index shall be disappointed. They are on a one-way trip to palookaville.
The purchasing power for Californians earning the state's minimum wage is one-third less than it was in 1968 and is not enough to support a single adult, according to a report by the California Budget Project. The report by the nonprofit, nonpartisan organization comes as Gov. Arnold Schwarzenegger is expected to propose in his state of the state address this week a $1 an hour increase in the state's minimum wage, to $7.75 an hour. The report also concludes that moderate increases in the minimum wage do not trigger job losses in the state's low-wage industries, such as food service and retail.
The Reuters Jefferies CRB Index of 19 commodities rose 2.12, or 0.6 percent, to 338.49, after earlier reaching a record 338.78. The index has jumped 21 percent in the past year as demand for raw materials such as fuels and metals climbed.
The Administration and the Fed may tell you that inflation is under control, but commodity gains of 21% certainly tell another story. Whether the Fed raises interest rates another one or two or three times is not the story. Demand from China and India and other Asean countries will continue to fuel demand for commodities- not just in 2005 or 2006- but for years to come. The purchasing power of the dollar will dwindle and dwindle. Those hoping for a long-term bull ride on the dollar index shall be disappointed. They are on a one-way trip to palookaville.
Wednesday, January 04, 2006
The Fed
1/4/06 The Fed
It's nice to see the first two trading days start off with good gains, and this
despite a rally in crude to over $63 a barrel, a pop in gold, and a drop in the dollar. The impetus appears to be the statement by the Fed that "additional firming
steps would not be large." This was not new news so maybe the New Year just started with a smile rather than a frown.
It was not a concern that the Dec. ISM Mfg Index declined to 54.2 from November's 58.1 and that multi-month lows were recorded for prices paid, employment, and new orders. Bad news was greeted as good news for the bond market and rationalized that
it would build a further foundation for the Fed to stop raising rates. No mention has bee made of when the Fed will stop printing money at a rate that equals at least the real inflation rate--not the core rate that is meaningless.
No mention was made of the $2.5 trillion in household debt that will be re-figured
at higher interest rates and this will further cramp the average family's finances.
My suggestion is to continue reducing positions in equities with unfavorable outlooks. It would be wise to build a cash cushion for a rainy day, and this is the rainy season in much of the country.
It's nice to see the first two trading days start off with good gains, and this
despite a rally in crude to over $63 a barrel, a pop in gold, and a drop in the dollar. The impetus appears to be the statement by the Fed that "additional firming
steps would not be large." This was not new news so maybe the New Year just started with a smile rather than a frown.
It was not a concern that the Dec. ISM Mfg Index declined to 54.2 from November's 58.1 and that multi-month lows were recorded for prices paid, employment, and new orders. Bad news was greeted as good news for the bond market and rationalized that
it would build a further foundation for the Fed to stop raising rates. No mention has bee made of when the Fed will stop printing money at a rate that equals at least the real inflation rate--not the core rate that is meaningless.
No mention was made of the $2.5 trillion in household debt that will be re-figured
at higher interest rates and this will further cramp the average family's finances.
My suggestion is to continue reducing positions in equities with unfavorable outlooks. It would be wise to build a cash cushion for a rainy day, and this is the rainy season in much of the country.
Tuesday, January 03, 2006
New Year's Resolutions
1/3/06 New Year's Resolutions
Focus on what is.
Keep it simple.
Be more forgiving.
Take more time off from work.
Eat smarter.
Exercise more regularly.
Cut my losses short.
Filter out the noise from the media.
Give encouragement to others.
Make every day count.
Focus on what is.
Keep it simple.
Be more forgiving.
Take more time off from work.
Eat smarter.
Exercise more regularly.
Cut my losses short.
Filter out the noise from the media.
Give encouragement to others.
Make every day count.
Monday, January 02, 2006
Predictions For 2006
1/2/06 Predictions For 2006
In 2006, the world economy will begin to lose its appetite for the dollar.
For three years there has been a suggestion here to go long gold and short the dollar.
In 2006, I would also add going long silver against the dollar.
In 2006, there will be a greater appreciation for volatility and risk. In particular, the danger lurking in derivatives will be borne out.
With the window of cheap money closing, our citizens will begin to sour on consumption.
Even though a recession will come to pass in the fourth quarter of 2006, interest rates will continue to rise. Why? Not because of the Fed but because the world economy will have lost its appetite for our debt-laden Treasury bonds.
As the Baby Boomers turn 60, there will be a greater focus on the entire pharmaceutical spectrum. We can also expect more foreign takeovers of our domestic drug companies.
Overall construction, and that includes home building, will lessen. This will generate a greater level of layoffs than previously anticipated.
Wages will continue to trail the rate of inflation. At some point in 2006, rebellion of some citizen groups will come to the forefront.
Google and Apple will continue to prosper but the rise in their stock prices will stall. GM’s fortunes will not turn upward but its stock price will. The parts are worth more than the whole.
Citizens will ponder an alternative for Bush and Cheney—should they simply be removed from office or be imprisoned.
Roe v. Wade will not be overturned.
Natural disasters will become more prevalent in 2006.
Energy prices will continue to move higher. There will be a growing appreciation for alternative energy sources.
There will be a greater acceptance for carbs. Bread lines will begin to appear and the lines will get longer throughout the year.
The trend towards assembling parts rather than manufacturing the whole will hasten. Boeing’s 787 is a prime example.
Since we invaded Iraq in March 2003, 2,179 of our fighting men and women have died. The bloodshed will continue and the death toll will exceed those that perished in 9/11 (2,819).
Lao Tzu: "Those who have knowledge, don't predict. Those who predict, don't have knowledge.” So much for my predictions. My predictions and a buck and a half will get you on the bus.
In 2006, the world economy will begin to lose its appetite for the dollar.
For three years there has been a suggestion here to go long gold and short the dollar.
In 2006, I would also add going long silver against the dollar.
In 2006, there will be a greater appreciation for volatility and risk. In particular, the danger lurking in derivatives will be borne out.
With the window of cheap money closing, our citizens will begin to sour on consumption.
Even though a recession will come to pass in the fourth quarter of 2006, interest rates will continue to rise. Why? Not because of the Fed but because the world economy will have lost its appetite for our debt-laden Treasury bonds.
As the Baby Boomers turn 60, there will be a greater focus on the entire pharmaceutical spectrum. We can also expect more foreign takeovers of our domestic drug companies.
Overall construction, and that includes home building, will lessen. This will generate a greater level of layoffs than previously anticipated.
Wages will continue to trail the rate of inflation. At some point in 2006, rebellion of some citizen groups will come to the forefront.
Google and Apple will continue to prosper but the rise in their stock prices will stall. GM’s fortunes will not turn upward but its stock price will. The parts are worth more than the whole.
Citizens will ponder an alternative for Bush and Cheney—should they simply be removed from office or be imprisoned.
Roe v. Wade will not be overturned.
Natural disasters will become more prevalent in 2006.
Energy prices will continue to move higher. There will be a growing appreciation for alternative energy sources.
There will be a greater acceptance for carbs. Bread lines will begin to appear and the lines will get longer throughout the year.
The trend towards assembling parts rather than manufacturing the whole will hasten. Boeing’s 787 is a prime example.
Since we invaded Iraq in March 2003, 2,179 of our fighting men and women have died. The bloodshed will continue and the death toll will exceed those that perished in 9/11 (2,819).
Lao Tzu: "Those who have knowledge, don't predict. Those who predict, don't have knowledge.” So much for my predictions. My predictions and a buck and a half will get you on the bus.
Sunday, January 01, 2006
Happy New Year
1/1/06 Happy New Year
Wal-Mart said December U.S. same-store sales rose about 2.2 percent, the smallest December gain in five years. However, this gain may prove to be understated. The company did a big business in gift cards. A percentage will be redeemed in 2006, and not counted, therefore, in December.
The new Medicare Part D prescription drug plan goes into effect today.
Mike Burk: “Since 1965, during the 1st year of the Presidential Cycle, the market as measured by the NASDAQ composite (OTC) has been down 3 times during the last 4 trading days of the year. Following those 3 occurrences the 1st 4 trading days of January have always been up. The month of January has been down 2 out of 3 times and the following year has always been down.”
Bush’s latest radio address: “During 2005, thanks to our tax relief, spending restraint, and the hard work of the American people, our economy remained the envy of the world. Our
economy has been growing strongly for more than two years, and has added
nearly 4.5 million jobs since May of 2003. More Americans own their homes than
at any time in our nation's history. Inflation is low, productivity is high,
and small businesses are flourishing. Real disposable income is up, consumers
are confident, and early reports suggest good retail sales this holiday
season.” Have you learned anything over the last 5 years? From your experience, is inflation low? Is your disposable income up? Were Wal-Mart’s December sales good?
If the government restrained spending, how come the deficit is rising and the Treasury has asked for another increase in the debt limit? In other words, Bush has begun 2006 spouting the same lies over again.
Average annual temperatures in the Arctic have risen as much as 7 degrees Fahrenheit in 50 years — even more in Alaska — according to the Arctic Climate Impact Assessment, a report by the eight nations with land inside the Arctic Circle.
The amount of ice covering the ocean in late summer has shrunk 15 to 20 percent in three decades, and 2005 was the worst year ever. That shrinking contributed to a rise of about 8 inches in sea level, an extraordinary amount.
Mike Shedlock: “The bottom line is real wages are declining, bankruptcies are skyrocketing, consumer debt is soaring, and equity extraction from homes is used for routine consumption. This is happening in a "recovery". Something does not add up. In fact many things do not add up. Topping off the list is the idea that housing is now affordable…40-50% of the jobs in this recovery were directly related to real estate. Many of those jobs will vanish in the upcoming consumer led recession and many people will lose their homes over it as well. Just as the downward spiral begins we see silly articles telling us how affordable thing are. I find it all rather amazing.”
In making a forecast for 2006, please make a particular note of March 20, 2006. To reiterate, that day Iran begins trading Petroeuros on the Iranian Oil Bourse. This is a
highly significant event. Oil will be traded and priced solely in euros for the first time. In my view, this will have a major impact on the value pf the dollar and the demand for the dollar. Several decades ago our nation went off the gold standard. Several decades from now the world will note that the global economy went off the dollar standard, so to speak.
Have you ever heard of Big Cola? It started in Peru and moved into Mexico. It is quickly taking market share from Coke and Pepsi. Why? A 3.3-liter container of Big Cola brand sells for about $1.12 and sometimes as little as 86 cents on special. Toyota started small too.
Northern California residents braced for a second storm to hit the region Sunday, a day after the first one sent rivers spilling into cities and mud sliding into homes and highways. Saturday's storm dumped an average of 4 to 5 inches in Northern California, with parts of Marin County recording more than 7 inches, according to the National Weather Service. Yountville in the Napa Valley had 8 inches of rain.
Twelve car bombs exploded around Iraq on Sunday, including eight in Baghdad that detonated within a three-hour window.
Elaine Maxwell: “My will shall shape the future. Whether I fail or succeed shall be no man's doing but my own. I am the force; I can clear any obstacle before me or I can be lost in the maze. My choice; my responsibility; win or lose, only I hold the key to my destiny.”
Wal-Mart said December U.S. same-store sales rose about 2.2 percent, the smallest December gain in five years. However, this gain may prove to be understated. The company did a big business in gift cards. A percentage will be redeemed in 2006, and not counted, therefore, in December.
The new Medicare Part D prescription drug plan goes into effect today.
Mike Burk: “Since 1965, during the 1st year of the Presidential Cycle, the market as measured by the NASDAQ composite (OTC) has been down 3 times during the last 4 trading days of the year. Following those 3 occurrences the 1st 4 trading days of January have always been up. The month of January has been down 2 out of 3 times and the following year has always been down.”
Bush’s latest radio address: “During 2005, thanks to our tax relief, spending restraint, and the hard work of the American people, our economy remained the envy of the world. Our
economy has been growing strongly for more than two years, and has added
nearly 4.5 million jobs since May of 2003. More Americans own their homes than
at any time in our nation's history. Inflation is low, productivity is high,
and small businesses are flourishing. Real disposable income is up, consumers
are confident, and early reports suggest good retail sales this holiday
season.” Have you learned anything over the last 5 years? From your experience, is inflation low? Is your disposable income up? Were Wal-Mart’s December sales good?
If the government restrained spending, how come the deficit is rising and the Treasury has asked for another increase in the debt limit? In other words, Bush has begun 2006 spouting the same lies over again.
Average annual temperatures in the Arctic have risen as much as 7 degrees Fahrenheit in 50 years — even more in Alaska — according to the Arctic Climate Impact Assessment, a report by the eight nations with land inside the Arctic Circle.
The amount of ice covering the ocean in late summer has shrunk 15 to 20 percent in three decades, and 2005 was the worst year ever. That shrinking contributed to a rise of about 8 inches in sea level, an extraordinary amount.
Mike Shedlock: “The bottom line is real wages are declining, bankruptcies are skyrocketing, consumer debt is soaring, and equity extraction from homes is used for routine consumption. This is happening in a "recovery". Something does not add up. In fact many things do not add up. Topping off the list is the idea that housing is now affordable…40-50% of the jobs in this recovery were directly related to real estate. Many of those jobs will vanish in the upcoming consumer led recession and many people will lose their homes over it as well. Just as the downward spiral begins we see silly articles telling us how affordable thing are. I find it all rather amazing.”
In making a forecast for 2006, please make a particular note of March 20, 2006. To reiterate, that day Iran begins trading Petroeuros on the Iranian Oil Bourse. This is a
highly significant event. Oil will be traded and priced solely in euros for the first time. In my view, this will have a major impact on the value pf the dollar and the demand for the dollar. Several decades ago our nation went off the gold standard. Several decades from now the world will note that the global economy went off the dollar standard, so to speak.
Have you ever heard of Big Cola? It started in Peru and moved into Mexico. It is quickly taking market share from Coke and Pepsi. Why? A 3.3-liter container of Big Cola brand sells for about $1.12 and sometimes as little as 86 cents on special. Toyota started small too.
Northern California residents braced for a second storm to hit the region Sunday, a day after the first one sent rivers spilling into cities and mud sliding into homes and highways. Saturday's storm dumped an average of 4 to 5 inches in Northern California, with parts of Marin County recording more than 7 inches, according to the National Weather Service. Yountville in the Napa Valley had 8 inches of rain.
Twelve car bombs exploded around Iraq on Sunday, including eight in Baghdad that detonated within a three-hour window.
Elaine Maxwell: “My will shall shape the future. Whether I fail or succeed shall be no man's doing but my own. I am the force; I can clear any obstacle before me or I can be lost in the maze. My choice; my responsibility; win or lose, only I hold the key to my destiny.”
Saturday, December 31, 2005
2005
12/31/05 2005
I will provide a short recap of some highlights in 2005. Even though history can repeat, I try not to spend too much writing time on the past but rather focus on the present and what is most likely to occur around the corner.
The trend in Iraq remains ominous. Despite the elections and the Constitution, 841 of our fighting men and women were killed and that is only 5 less than in 2004 and represents an increase of 73% over the level in 2003. The tragedy resulting from this year’s historic hurricane season was quite overwhelming. FEMA’s ineptness was brought starkly to light. Our government continues to spend at record levels, our twin tower deficits climb higher and higher to the sky, and our nation’s complacency level makes me puke. It almost makes me as sick as listening to the lies coming out of Washington, DC.
From a financial standpoint, the dollar trade-weighted index rose 10%; however, between 2002 and 2004 this index had declined by 27%. The M3 money supply reached about $10.2 trillion and expanded at a rate of approximately 7.5% over the year. Bank credit expanded by 11% and real estate loans over 14%. Total mortgage debt rose by $200 billion to approximately $1.4 trillion. It is no wonder that we saw record new and existing home sales.
The stars for the year were the Goldman Sachs Commodity Index, which rose 39% (crude was up 41%, natural gas + 58%, gasoline rose by 41 cents a gallon on average, gold up 18% and silver +30%, and copper up 45%); global M&A activity increased by 38%; there were record-breaking stock buybacks of $456 billion—thanks to the one-time repatriation of foreign earnings; Google; and Apple.
A big surprise was the flat performance of the Dow, Nasdaq, and the S&P 500. The Dow lost 65 points or 0.6%; the Nasdaq rose 30 points or 1.4%; and the S&P 500 rose 36 points or 3%.
Wages on Main Street continued to trail inflation. That was a big disappointment. It has been a yearly occurrence of late.
I made some lousy predictions. I underestimated the global demand for the Boeing 787, the Dreamliner. After a sharp drop, the yen barely recovered against the dollar. After Hewlett’s rise of 35%, I thought it was a good idea to short it and go long Dell. Hewlett continued to rise another 3% and Dell continued to decline another 4%. The acquisition of Albertsons has not taken place and the stock has declined by approximately 2+ points.
As for my good calls, I never feel a need to recount them.
Tonight we turn the page on 2005. One can always look at the past year’s disappointments as well as the joyous moments and tally up the score. For me, each year begins and ends with family and friends. Each year the toll of losing a family member and/or a friend gets heavier on my soul. I am thankful for the love and devotion I receive each day from those who remain in my heart. I feel deeply for the families who have lost love ones in Iraq and from the devastating hurricanes. I feel for thousands who have been wounded and injured-both physically and emotionally- from the war in Iraq.
I pray for less complacency and more outrage. I pray that 2006 will bring less lies, more global rational thought, and more kindness.
I will provide a short recap of some highlights in 2005. Even though history can repeat, I try not to spend too much writing time on the past but rather focus on the present and what is most likely to occur around the corner.
The trend in Iraq remains ominous. Despite the elections and the Constitution, 841 of our fighting men and women were killed and that is only 5 less than in 2004 and represents an increase of 73% over the level in 2003. The tragedy resulting from this year’s historic hurricane season was quite overwhelming. FEMA’s ineptness was brought starkly to light. Our government continues to spend at record levels, our twin tower deficits climb higher and higher to the sky, and our nation’s complacency level makes me puke. It almost makes me as sick as listening to the lies coming out of Washington, DC.
From a financial standpoint, the dollar trade-weighted index rose 10%; however, between 2002 and 2004 this index had declined by 27%. The M3 money supply reached about $10.2 trillion and expanded at a rate of approximately 7.5% over the year. Bank credit expanded by 11% and real estate loans over 14%. Total mortgage debt rose by $200 billion to approximately $1.4 trillion. It is no wonder that we saw record new and existing home sales.
The stars for the year were the Goldman Sachs Commodity Index, which rose 39% (crude was up 41%, natural gas + 58%, gasoline rose by 41 cents a gallon on average, gold up 18% and silver +30%, and copper up 45%); global M&A activity increased by 38%; there were record-breaking stock buybacks of $456 billion—thanks to the one-time repatriation of foreign earnings; Google; and Apple.
A big surprise was the flat performance of the Dow, Nasdaq, and the S&P 500. The Dow lost 65 points or 0.6%; the Nasdaq rose 30 points or 1.4%; and the S&P 500 rose 36 points or 3%.
Wages on Main Street continued to trail inflation. That was a big disappointment. It has been a yearly occurrence of late.
I made some lousy predictions. I underestimated the global demand for the Boeing 787, the Dreamliner. After a sharp drop, the yen barely recovered against the dollar. After Hewlett’s rise of 35%, I thought it was a good idea to short it and go long Dell. Hewlett continued to rise another 3% and Dell continued to decline another 4%. The acquisition of Albertsons has not taken place and the stock has declined by approximately 2+ points.
As for my good calls, I never feel a need to recount them.
Tonight we turn the page on 2005. One can always look at the past year’s disappointments as well as the joyous moments and tally up the score. For me, each year begins and ends with family and friends. Each year the toll of losing a family member and/or a friend gets heavier on my soul. I am thankful for the love and devotion I receive each day from those who remain in my heart. I feel deeply for the families who have lost love ones in Iraq and from the devastating hurricanes. I feel for thousands who have been wounded and injured-both physically and emotionally- from the war in Iraq.
I pray for less complacency and more outrage. I pray that 2006 will bring less lies, more global rational thought, and more kindness.
Friday, December 30, 2005
Numbers
12/30/05 Numbers
Housing starts fell significantly in November throughout California, but the overall starts for 2005 are the same as 2004's "robust numbers," according to the California Building Industry Association. The building association attributed the 18 percent drop in November to 9,400 starts to the fact that builders needed to sell the homes they had already built or were under construction.
On a year-to-date basis, Alan Nevin, the association' chief economist, noted in the press release that total permits were almost exactly even with the first 11 months of 2004 - 193,562 this year compared to 193,652 last year. "The slowdown in November will give builders an opportunity to clear out their standing inventory," Nevin said. "We anticipate that 2005 will conclude with figures matching 2004, which was a very good year for the industry."
November U.S. existing home sales fell 1.7% to a seasonally adjusted rate of 6.97 million, the lowest since March, while inventories of homes on the market rose 1.2% to 2.9 million, the most in nearly 20 years.
WPP Group Chief Executive Sir Martin Sorrell told the Times of London in an interview that the outlook for the advertising market in the U.S. in 2006 could be at risk of a shower. He did note, however, that at present there “there were no signs of a bath or a shower.”
Yesterday, the yield curve inverted in the final hour of trading, with the yield on the 10-year Treasury note down to 4.368% vs. a 2-year yield of 4.381%. If the curve inversion grows, banks and lenders will have to charge home buyers higher rates on ARMs than on fixed loans. Total household mortgage debt is approaching $8.4 trillion dollars, and over 40% is floating-rate. Does that raise any concerns?
The Shanghai Composite Index fell 0.8 percent to 1161.06, its lowest year-end level since 1998, when it closed at 1146.70. The index was down 8.3 percent from its closing level in the last session of 2004. The Shenzhen Composite Index fell 1.0 percent to 278.75 Friday. It was down 11.7 percent from last year's final session.
The Goldman, Sachs & Co., Nielsen//NetRatings and Harris Interactive(R) fifth annual Holiday eSpending Report revealed that online holiday shopping totaled $30.1
billion, excluding travel, during the 2005 holiday season (October 29 -December 23). This season's online spending in the United States resulted in a
30 percent increase (+/- 3.1 percent margin of error) from the 2004 holiday
season.
According to a study of more than 1,300 hiring managers nationwide by CareerBuilder.com and America Online, the survey, titled "Key Hiring Trends to Watch in 2006," indicated the following:
Bigger Paychecks
-- 51 percent of hiring managers plan to increase salaries on initial
offers for new employees; 32 percent will raise offers by 3 percent
or more and 16 percent will increase them by 5 percent or more.
-- 78 percent of hiring managers plan to increase paychecks for existing
employees; 57 percent will raise compensation levels by 3 percent or
more and 22 percent will raise levels by 5 percent or more.
-- 31 percent of hiring managers expressed concern over a shortage of
skilled workers and intellectual capital lost due to the large segment
of Baby Boomers approaching retirement.
-- An even greater number -- 45 percent -- expect to recruit retirees
from other companies or offer incentives for workers at or approaching
retirement age to extend their employment at their organizations.
Ron Ellison: “By our calculations if you figured the inflation rate the old fashion way, before they began fiddling with the figures and the indicators, inflation is now running about 6.5 or 7 percent. That's nearly three to three and a half times what most money market funds yield. It also reflects a similar ratio to what officials say is the current inflation rate. And if you believe that the government doesn't have good reason to keep inflation fears under wraps, you probably believe that Mata Hari was a nun.”
"The administration now projects that the statutory debt limit, currently $8.184 trillion, will be reached in mid-February 2006," Snow said in a letter to 21 members of the U.S. House of Representatives and Senate released by Treasury after financial markets had closed. Snow said that the Treasury, if the debt limit was not raised by then, would have to take "extraordinary actions" to keep paying its bills for everything from Social Security to national defense spending. Even if Treasury took "all available prudent and legal actions to avoid breaching the statutory debt limit, we anticipate that we can finance government operations no longer than mid-March." Congress has increased the limit by $2.4 trillion since Bush took office, voting to raise the ceiling in June 2002, May 2003 and November 2004. In sum, since taking office in Jan. 2001, the debt limit has been raised by over 40%! Where is the outrage? My recommendation continues to be the same it has been for the last 4 years—do not raise the debt limit. Either authorize a pay-as-you-go system or close the Treasury down. There is too much spending, too much debt, and too much pork. Take a stand. The Congress is gutless. They will do absolutely nothing and the voters will do absolutely nothing. It is no wonder the voters accept lies from this administration. The majority does not have the word “outrage” in their vocabulary.
Marc Gerstein, Director of investment research at Reuters.com, wrote an interesting article on Albertsons, and provided an approach towards establishing the worth in a buyout of the company. Gerstein stated the possibility of another deal or future shareholder activism and the good dividend yield could keep things interesting.
Henri Frederic Amiel: “Truth is not only violated by falsehood; it may be equally outraged by silence.”
Housing starts fell significantly in November throughout California, but the overall starts for 2005 are the same as 2004's "robust numbers," according to the California Building Industry Association. The building association attributed the 18 percent drop in November to 9,400 starts to the fact that builders needed to sell the homes they had already built or were under construction.
On a year-to-date basis, Alan Nevin, the association' chief economist, noted in the press release that total permits were almost exactly even with the first 11 months of 2004 - 193,562 this year compared to 193,652 last year. "The slowdown in November will give builders an opportunity to clear out their standing inventory," Nevin said. "We anticipate that 2005 will conclude with figures matching 2004, which was a very good year for the industry."
November U.S. existing home sales fell 1.7% to a seasonally adjusted rate of 6.97 million, the lowest since March, while inventories of homes on the market rose 1.2% to 2.9 million, the most in nearly 20 years.
WPP Group Chief Executive Sir Martin Sorrell told the Times of London in an interview that the outlook for the advertising market in the U.S. in 2006 could be at risk of a shower. He did note, however, that at present there “there were no signs of a bath or a shower.”
Yesterday, the yield curve inverted in the final hour of trading, with the yield on the 10-year Treasury note down to 4.368% vs. a 2-year yield of 4.381%. If the curve inversion grows, banks and lenders will have to charge home buyers higher rates on ARMs than on fixed loans. Total household mortgage debt is approaching $8.4 trillion dollars, and over 40% is floating-rate. Does that raise any concerns?
The Shanghai Composite Index fell 0.8 percent to 1161.06, its lowest year-end level since 1998, when it closed at 1146.70. The index was down 8.3 percent from its closing level in the last session of 2004. The Shenzhen Composite Index fell 1.0 percent to 278.75 Friday. It was down 11.7 percent from last year's final session.
The Goldman, Sachs & Co., Nielsen//NetRatings and Harris Interactive(R) fifth annual Holiday eSpending Report revealed that online holiday shopping totaled $30.1
billion, excluding travel, during the 2005 holiday season (October 29 -December 23). This season's online spending in the United States resulted in a
30 percent increase (+/- 3.1 percent margin of error) from the 2004 holiday
season.
According to a study of more than 1,300 hiring managers nationwide by CareerBuilder.com and America Online, the survey, titled "Key Hiring Trends to Watch in 2006," indicated the following:
Bigger Paychecks
-- 51 percent of hiring managers plan to increase salaries on initial
offers for new employees; 32 percent will raise offers by 3 percent
or more and 16 percent will increase them by 5 percent or more.
-- 78 percent of hiring managers plan to increase paychecks for existing
employees; 57 percent will raise compensation levels by 3 percent or
more and 22 percent will raise levels by 5 percent or more.
-- 31 percent of hiring managers expressed concern over a shortage of
skilled workers and intellectual capital lost due to the large segment
of Baby Boomers approaching retirement.
-- An even greater number -- 45 percent -- expect to recruit retirees
from other companies or offer incentives for workers at or approaching
retirement age to extend their employment at their organizations.
Ron Ellison: “By our calculations if you figured the inflation rate the old fashion way, before they began fiddling with the figures and the indicators, inflation is now running about 6.5 or 7 percent. That's nearly three to three and a half times what most money market funds yield. It also reflects a similar ratio to what officials say is the current inflation rate. And if you believe that the government doesn't have good reason to keep inflation fears under wraps, you probably believe that Mata Hari was a nun.”
"The administration now projects that the statutory debt limit, currently $8.184 trillion, will be reached in mid-February 2006," Snow said in a letter to 21 members of the U.S. House of Representatives and Senate released by Treasury after financial markets had closed. Snow said that the Treasury, if the debt limit was not raised by then, would have to take "extraordinary actions" to keep paying its bills for everything from Social Security to national defense spending. Even if Treasury took "all available prudent and legal actions to avoid breaching the statutory debt limit, we anticipate that we can finance government operations no longer than mid-March." Congress has increased the limit by $2.4 trillion since Bush took office, voting to raise the ceiling in June 2002, May 2003 and November 2004. In sum, since taking office in Jan. 2001, the debt limit has been raised by over 40%! Where is the outrage? My recommendation continues to be the same it has been for the last 4 years—do not raise the debt limit. Either authorize a pay-as-you-go system or close the Treasury down. There is too much spending, too much debt, and too much pork. Take a stand. The Congress is gutless. They will do absolutely nothing and the voters will do absolutely nothing. It is no wonder the voters accept lies from this administration. The majority does not have the word “outrage” in their vocabulary.
Marc Gerstein, Director of investment research at Reuters.com, wrote an interesting article on Albertsons, and provided an approach towards establishing the worth in a buyout of the company. Gerstein stated the possibility of another deal or future shareholder activism and the good dividend yield could keep things interesting.
Henri Frederic Amiel: “Truth is not only violated by falsehood; it may be equally outraged by silence.”
Wednesday, December 28, 2005
Consumers
12/29/05 Consumers
The Conference Board Consumer Confidence Index increased to 103.6 in December
up from 98.3 in November. The Present Situation Index surged to 121.5 from 113.2.
The Expectations Index increased to 91.6 from 88.4 last month.
"Consumer confidence continues to bounce back and is now at its highest
level since Hurricane Katrina struck the Gulf Coast," says Lynn Franco,
Director of The Conference Board Consumer Research Center. "The resiliency of
the economy, recent declines in prices at the pump, and job growth have
consumers feeling more confident at year-end than they felt at the start of
2005. Even though all of the improvement over the past twelve months has been
in consumers' assessment of current conditions, and expectations remain below
earlier levels, consumers are confident that the economy will continue to
expand in 2006."
The outlook for the labor market did not change. Those expecting more jobs
to become available in the next six months was virtually unchanged at 14.3
percent versus 14.1 percent a month ago. Those expecting fewer jobs was also
virtually unchanged at 18.0 percent versus 18.1 percent in November. The
proportion of consumers anticipating their incomes to increase in the months
ahead declined to 20.6 percent from 21.3 percent last month. I find the latter
expectation quite interesting. How does one's confidence rise if the expectation
is low for for one's income to rise? A disconnect appears to be at work.
Front-month crude futures shot up $1.66, or 2.9%, to close at $59.82 on the New York Mercantile Exchange,
and had reached a two-week high of $60.45.
Blogger is having some software difficulties. I will try to
add more thoughts tomorrow.
Historical Predictions
12/28/05 Historical Predictions
The vast majority of pundits have predicted a rally between Xmas and the first two days of 2006. After all, the past has provided substance to that prediction. Who would have thought the Dow would decline 100+ points on the first trading day after Xmas? Has that taken place before? Who would have thought that inverting of the yield curve would send buyers fleeing? After all, the Fed says it's different this time. Brief inversions don't count, such as, in 1998. Twice in the past 40 years an inversion of the yield curve has not been followed by a recession. Will this inversion be brief and not count or will it be protracted and still not count? Will the Fed continue to print money at an unsustainable rate in an effort to stimulate economic activity? Will the Fed buy long-term bonds in order to reduce already low mortgage rates and help boost house buying?
It's winter. It is suppose to get cold. Unfortunately, for those speculating on heating oil and natural gas prices, the last week has been a most unprofitable downdraft. Yesterday, January natural gas futures fell $1.261 to settle at $11.022 per million British thermal units on the New York Mercantile Exchange. It was the lowest closing price since the Sept. 13 settlement of $10.763, which was slightly above the level on the day Hurricane Katrina struck and took out significant Gulf of Mexico output.
Front-month natural gas futures reached an all-time intraday high of $15.78 in mid-December as cold weather and predictions of snowstorms raised fears about supplies.
The equity market is nearing an oversold condition and fright is building in the natural gas trading pits. The likelihood is for both markets to have a bounce-back rally.
During WWI the stock market closed for 4 1/2 months. In 1933 banks were closed. After 9/11, the equity market was closed for several days. Are there
cracks in our economic infrastructure that could cause closure again?
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended December 23 decreased 6.8 percent to 554.1 from the previous week's 594.6. Volume was at its lowest level since the week ended May 24, 2002, when the index hit 516.9. Maybe consumers were just too busy buying gift cards.
The Talmud: "Never expose yourself unnecessarily to danger; a miracle may not save you...and if it does, it will be deducted from your share of luck or merit."
The vast majority of pundits have predicted a rally between Xmas and the first two days of 2006. After all, the past has provided substance to that prediction. Who would have thought the Dow would decline 100+ points on the first trading day after Xmas? Has that taken place before? Who would have thought that inverting of the yield curve would send buyers fleeing? After all, the Fed says it's different this time. Brief inversions don't count, such as, in 1998. Twice in the past 40 years an inversion of the yield curve has not been followed by a recession. Will this inversion be brief and not count or will it be protracted and still not count? Will the Fed continue to print money at an unsustainable rate in an effort to stimulate economic activity? Will the Fed buy long-term bonds in order to reduce already low mortgage rates and help boost house buying?
It's winter. It is suppose to get cold. Unfortunately, for those speculating on heating oil and natural gas prices, the last week has been a most unprofitable downdraft. Yesterday, January natural gas futures fell $1.261 to settle at $11.022 per million British thermal units on the New York Mercantile Exchange. It was the lowest closing price since the Sept. 13 settlement of $10.763, which was slightly above the level on the day Hurricane Katrina struck and took out significant Gulf of Mexico output.
Front-month natural gas futures reached an all-time intraday high of $15.78 in mid-December as cold weather and predictions of snowstorms raised fears about supplies.
The equity market is nearing an oversold condition and fright is building in the natural gas trading pits. The likelihood is for both markets to have a bounce-back rally.
During WWI the stock market closed for 4 1/2 months. In 1933 banks were closed. After 9/11, the equity market was closed for several days. Are there
cracks in our economic infrastructure that could cause closure again?
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended December 23 decreased 6.8 percent to 554.1 from the previous week's 594.6. Volume was at its lowest level since the week ended May 24, 2002, when the index hit 516.9. Maybe consumers were just too busy buying gift cards.
The Talmud: "Never expose yourself unnecessarily to danger; a miracle may not save you...and if it does, it will be deducted from your share of luck or merit."
Tuesday, December 27, 2005
Choices
12/27/05 Choices
Life is all about making choices, and hopefully, the right choices; however, as human beings
we do make mistakes. It's important not to just learn from the mistakes and correct them.
It's more than that. Don't let the wrong choices eat up precious time. Correct the mistakes in a
timely manner. All of the aformentioned can be said of investing.
Since it's your life, make your own choices. Don't let the choices be made for you. The same can be said for investing. It's your money and it's your responsibility to be a protector of your capital. Don't play follow the leader. The leader will not call or email you to mention when he or she is leaving the game, so to speak.
There is no law that says you need to know all the answers. However, there are places to find many of the answers. You can start by being honest with yourself. Know your limitations. Don't be a fool and grandstand. No one will buy tickets for that performance.
There will be times that you need a breather. At times, everyone needs to rekindle energies and focus. That is also true of investing. Don't press. Don't keep your foot pressed down on the peddle 100% of the time. Even cars need recharging or refueling.
Life and investing can be really complicated-- if you make it that way. Simple doesn't mean dumb.
Life is all about making choices, and hopefully, the right choices; however, as human beings
we do make mistakes. It's important not to just learn from the mistakes and correct them.
It's more than that. Don't let the wrong choices eat up precious time. Correct the mistakes in a
timely manner. All of the aformentioned can be said of investing.
Since it's your life, make your own choices. Don't let the choices be made for you. The same can be said for investing. It's your money and it's your responsibility to be a protector of your capital. Don't play follow the leader. The leader will not call or email you to mention when he or she is leaving the game, so to speak.
There is no law that says you need to know all the answers. However, there are places to find many of the answers. You can start by being honest with yourself. Know your limitations. Don't be a fool and grandstand. No one will buy tickets for that performance.
There will be times that you need a breather. At times, everyone needs to rekindle energies and focus. That is also true of investing. Don't press. Don't keep your foot pressed down on the peddle 100% of the time. Even cars need recharging or refueling.
Life and investing can be really complicated-- if you make it that way. Simple doesn't mean dumb.
Monday, December 26, 2005
Quotations
12/26/05 Quotations
Plato: “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.”
Paramhansa Yogananda: “Divisions are imaginary lines drawn by small minds.”
Aristotle: “Friendship is a single soul living in two bodies.”
Carl Jung: “Your vision will become clear only when you look into your heart... Who looks outside, dreams. Who looks inside, awakens.”
Ayn Rand: “The smallest minority on earth is the individual. Those who deny individual rights, cannot claim to be defenders of minorities.”
Booker T. Washington: “Few things help an individual more than to place responsibility upon him, and to let him know that you trust him.”
Anais Nin: “From the backstabbing co-worker to the meddling sister-in-law,
you are in charge of how you react to the people and events in your life.
You can either give negativity power over your life or you can choose happiness instead.
Take control and choose to focus on what is important in your life.
Those who cannot live fully often become destroyers of life.”
Erma Bombeck: “If a man watches three football games in a row, he should be declared legally dead.”
P.J. O’Rourke: “One of the annoying things about believing in free will and individual responsibility is the difficulty of finding somebody to blame your problems on. And when you do find somebody, it's remarkable how often his picture turns up on your driver's license.”
Mark Victor Hansen: “Now is the only time there is. Make your now wow, your minutes miracles, and your days pay. Your life will have been magnificently lived and invested, and when you die you will have made a difference.”
Napoleon Bonaparte: “Courage is like love, it must have hope for nourishment.”
Mary Manin Morrissey: “Even though you may want to move forward in your life, you may have one foot on the brakes. In order to be free, we must learn how to let go. Release the hurt. Release the fear. Refuse to entertain your old pain. The energy it takes to hang onto the past is holding you back from a new life. What is it you would let go of today?”
Albert Einstein: “The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing.”
Ronald Reagan: “Freedom is a fragile thing and is never more than one generation away from extinction. It is not ours by inheritance; it must be fought for and defended constantly by each generation, for it comes only once to a people. Those who have known freedom, and then lost it, have never known it again.”
Thomas Jefferson: “Banking establishments are more dangerous than standing armies.”
James Madison: “I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.”
Jack Paar: “Poor people have more fun than rich people, they say; and I notice it's the rich people who keep saying it.”
John Wayne: “If you've got them by the balls their hearts and minds will follow.”
Jack Benny: “I went to a meeting for premature ejaculators. I left early.”
Mike Burk: “Since 1886 (118 years) the Dow Jones Industrial Average (DJIA) has been up 73% of the time with an average gain of 1.07% during the last 4 trading days of the year.”
Groucho Marx: “Alimony is like buying hay for a dead horse.”
Bill Frist: “Sugar growers will not face any cuts in this important budget agreement, and
Sen. Coleman will support the package.”
James Pfaus, Concordia University psychology professor: “Getting an erection is one thing. Feeling horny is another.”
George Orwell: “During times of universal deceit, telling the truth becomes a revolutionary act.”
Hitler: “Who says I am not under the special protection of God?”
Robin Lovin, a United Methodist ethicist and professor of religion and political thought at Southern Methodist University: “All sorts of warning signals ought to go off when a sense of personal chosenness and calling gets translated into a sense of calling and mission for a nation.” (Lovin was not referring to Hitler)
Ann Landers: “Resentment is letting someone you despise live rent-free in your head.”
Daniel Patrick Moynihan: “We are each entitled to our own opinion, but no one is entitled to his own facts.”
Plato: “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.”
Paramhansa Yogananda: “Divisions are imaginary lines drawn by small minds.”
Aristotle: “Friendship is a single soul living in two bodies.”
Carl Jung: “Your vision will become clear only when you look into your heart... Who looks outside, dreams. Who looks inside, awakens.”
Ayn Rand: “The smallest minority on earth is the individual. Those who deny individual rights, cannot claim to be defenders of minorities.”
Booker T. Washington: “Few things help an individual more than to place responsibility upon him, and to let him know that you trust him.”
Anais Nin: “From the backstabbing co-worker to the meddling sister-in-law,
you are in charge of how you react to the people and events in your life.
You can either give negativity power over your life or you can choose happiness instead.
Take control and choose to focus on what is important in your life.
Those who cannot live fully often become destroyers of life.”
Erma Bombeck: “If a man watches three football games in a row, he should be declared legally dead.”
P.J. O’Rourke: “One of the annoying things about believing in free will and individual responsibility is the difficulty of finding somebody to blame your problems on. And when you do find somebody, it's remarkable how often his picture turns up on your driver's license.”
Mark Victor Hansen: “Now is the only time there is. Make your now wow, your minutes miracles, and your days pay. Your life will have been magnificently lived and invested, and when you die you will have made a difference.”
Napoleon Bonaparte: “Courage is like love, it must have hope for nourishment.”
Mary Manin Morrissey: “Even though you may want to move forward in your life, you may have one foot on the brakes. In order to be free, we must learn how to let go. Release the hurt. Release the fear. Refuse to entertain your old pain. The energy it takes to hang onto the past is holding you back from a new life. What is it you would let go of today?”
Albert Einstein: “The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing.”
Ronald Reagan: “Freedom is a fragile thing and is never more than one generation away from extinction. It is not ours by inheritance; it must be fought for and defended constantly by each generation, for it comes only once to a people. Those who have known freedom, and then lost it, have never known it again.”
Thomas Jefferson: “Banking establishments are more dangerous than standing armies.”
James Madison: “I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.”
Jack Paar: “Poor people have more fun than rich people, they say; and I notice it's the rich people who keep saying it.”
John Wayne: “If you've got them by the balls their hearts and minds will follow.”
Jack Benny: “I went to a meeting for premature ejaculators. I left early.”
Mike Burk: “Since 1886 (118 years) the Dow Jones Industrial Average (DJIA) has been up 73% of the time with an average gain of 1.07% during the last 4 trading days of the year.”
Groucho Marx: “Alimony is like buying hay for a dead horse.”
Bill Frist: “Sugar growers will not face any cuts in this important budget agreement, and
Sen. Coleman will support the package.”
James Pfaus, Concordia University psychology professor: “Getting an erection is one thing. Feeling horny is another.”
George Orwell: “During times of universal deceit, telling the truth becomes a revolutionary act.”
Hitler: “Who says I am not under the special protection of God?”
Robin Lovin, a United Methodist ethicist and professor of religion and political thought at Southern Methodist University: “All sorts of warning signals ought to go off when a sense of personal chosenness and calling gets translated into a sense of calling and mission for a nation.” (Lovin was not referring to Hitler)
Ann Landers: “Resentment is letting someone you despise live rent-free in your head.”
Daniel Patrick Moynihan: “We are each entitled to our own opinion, but no one is entitled to his own facts.”
Sunday, December 25, 2005
Happy Holidays
12/25/05 Happy Holidays
As many as 55 percent of shoppers have bought gift cards, said Britt Beemer, chairman of Charleston, South Carolina-based America's Research Group. "Gift cards may be the big winner of this Christmas," he said. "I was in three stores last night where the line for gift cards was twice as long as the line to check out to buy something."
Hanukkah starts at sundown today. A Hanukkah that runs into January is rare. In 1967 and 1986, the eight-day festival of lights began at sundown on Dec. 26, and in 1978 it started on Christmas Eve.
Mohandes Gandhi: “Be the change you want to see in the world.”
According to comScore.com, the three-day transit strike in New York City may have forced residents there to purchase gifts over the Internet. The New York area generated 4.4 percent of all U.S. online spending in the first two days of the strike, up from 3.4 percent previously.
Aristotle: "The beauty of the soul shines out when a man bears with composure one heavy mischance after another, not because he does not feel them, but because he is a man of high and heroic temper."
Retailers may have lost as much as $230 million in the first two days of the strike, stated Kurt Salmon Associates Inc. retail strategist Michelle Bogan. Particularly hard hit would be Tiffany’s, Bloomingdale’s, and Saks.
Yesterday, Wal-Mart stated demand for groceries outpaced sales of general merchandise last week.
"I don't think the day is the kind of day that retailers thought it would be," said Britt Beemer, head of America's Research Group, which surveys consumer spending habits. "Christmas Eve is seldom the big day because of the fact that so many consumers ... want to be home." When the results for the holidays are tallied, I think we’ll find that Friday, December 23, was a gigantic shopping day and possibly the largest of the season.
Yesterday President Bush gave his Saturday radio address. He wished the nation a happy Christmas. He forgot that Hanukkah begins at sundown on Christmas and that Kwanzaa, a seven-day African-American holiday created in 1966, begins Monday.
According to BigResearch, which conducted a poll for the National Retail Federation, consumers are expected to spend a total of $18.48 billion on gift cards this holiday season, up 6.6% from a year ago. I believe that figure will prove conservative.
According to the San Francisco Chronicle, the 11-judge court that authorizes FISA wiretaps has approved at least 18,740 applications for electronic surveillance or physical searches from five presidential administrations since 1979.
The judges modified only two search warrant orders out of the 13,102 applications that were approved over the first 22 years of the court's operation. In 20 of the first 21 annual reports on the court's activities up to 1999, the Justice Department told Congress that "no orders were entered (by the FISA court) which modified or denied the requested authority" submitted by the government.
But since 2001, the judges have modified 179 of the 5,645 requests for court-ordered surveillance by the Bush administration. A total of 173 of those court-ordered "substantive modifications" took place in 2003 and 2004, the most recent years for which public records are available. The judges also rejected or deferred at least six requests for warrants during those two years -- the first outright rejection of a wiretap request in the court's history.
Starbucks opened 354 drive-throughs in the U.S. during its latest fiscal year, increasing its nationwide total to 1,065 -- nearly 15 percent of its roughly 7,300 domestic stores. During the first year of operations, a typical company drive-through will generate sales of $1 million versus only $715,000 for a regular store. That comparison was a surprise to me.
Plato: "Be kind, for everyone you meet is fighting a harder battle."
As many as 55 percent of shoppers have bought gift cards, said Britt Beemer, chairman of Charleston, South Carolina-based America's Research Group. "Gift cards may be the big winner of this Christmas," he said. "I was in three stores last night where the line for gift cards was twice as long as the line to check out to buy something."
Hanukkah starts at sundown today. A Hanukkah that runs into January is rare. In 1967 and 1986, the eight-day festival of lights began at sundown on Dec. 26, and in 1978 it started on Christmas Eve.
Mohandes Gandhi: “Be the change you want to see in the world.”
According to comScore.com, the three-day transit strike in New York City may have forced residents there to purchase gifts over the Internet. The New York area generated 4.4 percent of all U.S. online spending in the first two days of the strike, up from 3.4 percent previously.
Aristotle: "The beauty of the soul shines out when a man bears with composure one heavy mischance after another, not because he does not feel them, but because he is a man of high and heroic temper."
Retailers may have lost as much as $230 million in the first two days of the strike, stated Kurt Salmon Associates Inc. retail strategist Michelle Bogan. Particularly hard hit would be Tiffany’s, Bloomingdale’s, and Saks.
Yesterday, Wal-Mart stated demand for groceries outpaced sales of general merchandise last week.
"I don't think the day is the kind of day that retailers thought it would be," said Britt Beemer, head of America's Research Group, which surveys consumer spending habits. "Christmas Eve is seldom the big day because of the fact that so many consumers ... want to be home." When the results for the holidays are tallied, I think we’ll find that Friday, December 23, was a gigantic shopping day and possibly the largest of the season.
Yesterday President Bush gave his Saturday radio address. He wished the nation a happy Christmas. He forgot that Hanukkah begins at sundown on Christmas and that Kwanzaa, a seven-day African-American holiday created in 1966, begins Monday.
According to BigResearch, which conducted a poll for the National Retail Federation, consumers are expected to spend a total of $18.48 billion on gift cards this holiday season, up 6.6% from a year ago. I believe that figure will prove conservative.
According to the San Francisco Chronicle, the 11-judge court that authorizes FISA wiretaps has approved at least 18,740 applications for electronic surveillance or physical searches from five presidential administrations since 1979.
The judges modified only two search warrant orders out of the 13,102 applications that were approved over the first 22 years of the court's operation. In 20 of the first 21 annual reports on the court's activities up to 1999, the Justice Department told Congress that "no orders were entered (by the FISA court) which modified or denied the requested authority" submitted by the government.
But since 2001, the judges have modified 179 of the 5,645 requests for court-ordered surveillance by the Bush administration. A total of 173 of those court-ordered "substantive modifications" took place in 2003 and 2004, the most recent years for which public records are available. The judges also rejected or deferred at least six requests for warrants during those two years -- the first outright rejection of a wiretap request in the court's history.
Starbucks opened 354 drive-throughs in the U.S. during its latest fiscal year, increasing its nationwide total to 1,065 -- nearly 15 percent of its roughly 7,300 domestic stores. During the first year of operations, a typical company drive-through will generate sales of $1 million versus only $715,000 for a regular store. That comparison was a surprise to me.
Plato: "Be kind, for everyone you meet is fighting a harder battle."
Saturday, December 24, 2005
Negative Signals
12/24/05 Negative Signals
Sales of new homes in the United States fell 11.3% in November, the biggest decline since January 1994, to a seasonally adjusted 1.245 million units from October's 1.404 million pace, originally reported as 1.42 million. Sales jumped 11.4% in October. Sales in November were up 6% from a year earlier.. Inventories of homes on the market rose 3.3% to a record 503,000, representing a 4.9-month supply at the November sales pace. This is the largest monthly supply since December 1996.The median price of a new home fell for a third straight month to $225,200. The price is still up from $224,500 a year earlier.
Led by demand for transportation equipment, orders for new U.S.-made durable goods jumped 4.4% in November. However, excluding transportation orders, durable good orders fell 0.6% in November, the third straight monthly drop. Orders for core capital goods equipment fell 2.0% in November. Shipments of durable goods fell 0.2% in November after a 1.2% gain in October.
Robert McHugh: “For the past two weeks, the Fed added $93.5 billion to the money supply, a 24% annual clip. Over the past 6 weeks it is up $192.9 billion, a 16.7% Banana
Republic hyperinflationary pace.”
In some areas, including New York City, Los Angeles, San Diego, San Francisco and Miami, housing affordability has dropped to levels not seen since the early to mid-1980s, according to mortgage giant Fannie Mae. In addition, Fannie Mae predicted Tuesday that U.S. home sales are set to decline by as much as 10% in 2006 as higher interest
rates and housing market jitters reverse a five-year run that helped fuel consumer spending and economic growth.
According to a recent survey from Deloitte & Touche, U.S. consumers plan to spend an average of $628 on improving their house this holiday season, up 84% from the $341 they said they'd spend in 2003 at this time.
For the holidays, I have given myself a dunce cap. It is a reminder of my ineptness when analyzing my thinking on Albertsons. Maybe I should say lack of thinking.
Japan's Cabinet approved plans to cut spending to the lowest in eight years to stop the expansion of their public debt.
U.S. consumers spent a record $17.48 billion buying products online from Nov. 1 through Dec. 21, according to comScore Networks. That's up 24% from the year-ago period.
As a Reagan administration lawyer, Supreme Court nominee Samuel Alito argued that federal officials can't be sued for damages for wiretapping Americans without warrants in national security cases, a document released Friday showed.
According to the NY Times, the volume of information harvested, without court warrants, is much larger than the White House has acknowledged. I hope that does not come as a surprise.
Thomas G. Donlan, Editorial Editor of Barrons: “Willful disregard of a law is potentially an impeachable offense. It is at least as impeachable as having a sexual escapade under the Oval Office desk and lying about it later. The members of the House Judiciary Committee who staged the impeachment of President Clinton ought to be as outraged at this situation. They ought to investigate it, consider it carefully and report either a bill that would change the wiretap laws to suit the president or a bill of impeachment.”
The NY Times reported that Guidant officials projected that some patients might die as a result of short circuits in a company heart device, but it did not publicize the flaw, records show.
Gary Lammert: “What is clear at this point is that America cannot produce and manufacture itself out of the debt hole and entitlement money obligation system that it now finds itself in. The Comptroller for the United States knows this. The only option is to lower interest rates and loan terms to an extent that the consumer, now unable to use bankruptcy protection, can both gradually pay off his substantial debt relative to earnings and perhaps borrow more based on asset inflation. The Japanese banking system used this ploy in 1990 and and experienced 13 years of equity deflation temporarily ending in 2003.
Like any pyramid scheme, the scam fails when there are not sufficient bottom feeders supporting the base. If the remaining entry level American service sector workers cannot support the pyramid base, or if there is a contraction in consumer spending secondary to the disconnect between ongoing wages and the cost of living including inflated real estate taxes and fuel costs, the pyramid scheme will falter and implode just as occurred many times before every 60-80 years over the last 450 years for every leading hegemony.”
The biggest U.S. companies have underfunded their health-care benefits and other obligations to retirees by about $292 billion, according to Standard & Poor’s.
It is important to remember that a busted clock is right twice a day. In other words, even schmucks are capable of having a minute or two on the right side of the ledger. It is not enough to follow the trend. Nor is it wise enough to state going against the trend will generate disappointing results. In the end, decisions need to be grounded in rationality. There are no short cuts to 2+2= 4. If it doesn’t add up correctly, don’t follow that path. What is right for you might not be right for me, and vice versa. I am not here to convince you my thinking is correct. I simply offer it for your consideration. Should you dismiss it out-of-hand, I could care less. Next week we are entering days that seasonally favor a rally in equities. If that does occur, I suggest you take advantage of this strength to cut back positions in your weak sisters, as they say. Times are tough, and will get tougher. If you are uncomfortable with a holding, then do something about it. Don’t think the market will make up for your errors. They don’t for me. When it comes to equities, some believe time is on your side. At this stage of credit expansion and the velocity of Fed money printing, I do not believe time is on your side or mine. When government officials authorize exploding debt that cannot be repaid and when the value of the dollar’s purchasing power is, over time, eradicated by inflation, then you know it is not business as usual. It’s not just the clock that is busted. The economic system has been compromised.
I wish all my good friends a happy and healthy holiday season.
Sales of new homes in the United States fell 11.3% in November, the biggest decline since January 1994, to a seasonally adjusted 1.245 million units from October's 1.404 million pace, originally reported as 1.42 million. Sales jumped 11.4% in October. Sales in November were up 6% from a year earlier.. Inventories of homes on the market rose 3.3% to a record 503,000, representing a 4.9-month supply at the November sales pace. This is the largest monthly supply since December 1996.The median price of a new home fell for a third straight month to $225,200. The price is still up from $224,500 a year earlier.
Led by demand for transportation equipment, orders for new U.S.-made durable goods jumped 4.4% in November. However, excluding transportation orders, durable good orders fell 0.6% in November, the third straight monthly drop. Orders for core capital goods equipment fell 2.0% in November. Shipments of durable goods fell 0.2% in November after a 1.2% gain in October.
Robert McHugh: “For the past two weeks, the Fed added $93.5 billion to the money supply, a 24% annual clip. Over the past 6 weeks it is up $192.9 billion, a 16.7% Banana
Republic hyperinflationary pace.”
In some areas, including New York City, Los Angeles, San Diego, San Francisco and Miami, housing affordability has dropped to levels not seen since the early to mid-1980s, according to mortgage giant Fannie Mae. In addition, Fannie Mae predicted Tuesday that U.S. home sales are set to decline by as much as 10% in 2006 as higher interest
rates and housing market jitters reverse a five-year run that helped fuel consumer spending and economic growth.
According to a recent survey from Deloitte & Touche, U.S. consumers plan to spend an average of $628 on improving their house this holiday season, up 84% from the $341 they said they'd spend in 2003 at this time.
For the holidays, I have given myself a dunce cap. It is a reminder of my ineptness when analyzing my thinking on Albertsons. Maybe I should say lack of thinking.
Japan's Cabinet approved plans to cut spending to the lowest in eight years to stop the expansion of their public debt.
U.S. consumers spent a record $17.48 billion buying products online from Nov. 1 through Dec. 21, according to comScore Networks. That's up 24% from the year-ago period.
As a Reagan administration lawyer, Supreme Court nominee Samuel Alito argued that federal officials can't be sued for damages for wiretapping Americans without warrants in national security cases, a document released Friday showed.
According to the NY Times, the volume of information harvested, without court warrants, is much larger than the White House has acknowledged. I hope that does not come as a surprise.
Thomas G. Donlan, Editorial Editor of Barrons: “Willful disregard of a law is potentially an impeachable offense. It is at least as impeachable as having a sexual escapade under the Oval Office desk and lying about it later. The members of the House Judiciary Committee who staged the impeachment of President Clinton ought to be as outraged at this situation. They ought to investigate it, consider it carefully and report either a bill that would change the wiretap laws to suit the president or a bill of impeachment.”
The NY Times reported that Guidant officials projected that some patients might die as a result of short circuits in a company heart device, but it did not publicize the flaw, records show.
Gary Lammert: “What is clear at this point is that America cannot produce and manufacture itself out of the debt hole and entitlement money obligation system that it now finds itself in. The Comptroller for the United States knows this. The only option is to lower interest rates and loan terms to an extent that the consumer, now unable to use bankruptcy protection, can both gradually pay off his substantial debt relative to earnings and perhaps borrow more based on asset inflation. The Japanese banking system used this ploy in 1990 and and experienced 13 years of equity deflation temporarily ending in 2003.
Like any pyramid scheme, the scam fails when there are not sufficient bottom feeders supporting the base. If the remaining entry level American service sector workers cannot support the pyramid base, or if there is a contraction in consumer spending secondary to the disconnect between ongoing wages and the cost of living including inflated real estate taxes and fuel costs, the pyramid scheme will falter and implode just as occurred many times before every 60-80 years over the last 450 years for every leading hegemony.”
The biggest U.S. companies have underfunded their health-care benefits and other obligations to retirees by about $292 billion, according to Standard & Poor’s.
It is important to remember that a busted clock is right twice a day. In other words, even schmucks are capable of having a minute or two on the right side of the ledger. It is not enough to follow the trend. Nor is it wise enough to state going against the trend will generate disappointing results. In the end, decisions need to be grounded in rationality. There are no short cuts to 2+2= 4. If it doesn’t add up correctly, don’t follow that path. What is right for you might not be right for me, and vice versa. I am not here to convince you my thinking is correct. I simply offer it for your consideration. Should you dismiss it out-of-hand, I could care less. Next week we are entering days that seasonally favor a rally in equities. If that does occur, I suggest you take advantage of this strength to cut back positions in your weak sisters, as they say. Times are tough, and will get tougher. If you are uncomfortable with a holding, then do something about it. Don’t think the market will make up for your errors. They don’t for me. When it comes to equities, some believe time is on your side. At this stage of credit expansion and the velocity of Fed money printing, I do not believe time is on your side or mine. When government officials authorize exploding debt that cannot be repaid and when the value of the dollar’s purchasing power is, over time, eradicated by inflation, then you know it is not business as usual. It’s not just the clock that is busted. The economic system has been compromised.
I wish all my good friends a happy and healthy holiday season.
Thursday, December 22, 2005
SOP Time
12/23/05 SOP Time
For the month of November consumer spending and personal incomes both rose by 0.3% and the savings rate remained at a minus 0.2%.
Brad Setser: "If US households don't save, the US government cannot run a fiscal deficit without adding to the overall national savings shortage, and a worrying large current account deficit."
Last week, sales at U.S. retailers rose at the fastest pace since Thanksgiving as shoppers stepped up purchases in the second-to-last full week of the holiday season, according to the International Council of Shopping Centers and UBS Securities LLC. Part of the reason may be attributed to price cutting and added extra incentives, such as, gift wrapping.
The Conference Board reports today that the Composite Index of Leading Economic Indicators increased 0.5% in November, following a 1.0% increase in October, and a 0.7% decline in September.
Ken Goldstein, Labor Economist at the Conference Board: "The Leading
Economic Indicators have been anything but consistent -- flat to declining
from July through September, and recovering in October and November. The
recent two-month snap back in the leading indicators raises the probability of
the coincident economic index remaining on a moderate rising trend through
early spring. High and potentially rising energy prices are one consideration
in this outlook. A second consideration is the effect of spillover -- that is,
prices for derivative materials (rubber, paint, plastic and chemicals) are
starting to increase faster now. Rising costs and questions about whether they
will be matched by price hikes are also a factor in how fast the economy grows
this spring."
The Dannon Company, the U.S.fresh dairy unit of Groupe Danone, announced today plans for the U.S. introduction of Activia(R). Activia is the first and only probiotic yogurt
that is clinically proven to help naturally regulate your digestive system in
two weeks, when eaten daily as part of a healthy and balanced diet. Activia
will be available nationwide beginning in January 2006.
Placer Dome Inc. has agreed to a sweetened buyout offer by Barrick Gold Corp. for $10.4 billion. Under the deal, Placer Dome shareholders can choose to receive either $22.50 in cash or 0.8269 of one Barrick share plus 5 cents a share in cash. The revised offer includes a $259.7 million breakup fee, but Placer Dome has the right to consider other proposals until Jan. 19.
Natural gas in storage declined by 162 billion cubic feet in the week ended Dec. 16, but remained 2.3% above its five-year average, the Department of Energy said Thursday.
The difference between the 2-year and 10-year Treasury bond yields is just 0.04 percentage points. This portion of the yield curve hasn't inverted since 2000.
On September 2 Albertsons announced the exploration of strategic alternatives. The news was greeted enthusiastically. The stock rose over 2 points, traded 56.5 million shares, and ended the day at $23.05. Over the past 3 ¾ months the average daily volume has approximated 5 million shares. On Wednesday, December 21, the stock closed at $24.10. Shareholders as well as CVS expected a deal to be announced by yesterday morning. When the WSJ, the NYT, and the FT suggested a deal could be in question, nervous stockholders dumped the shares. The stock closed at $23.28 on 29.9 million shares. In sum, between 9/2 and 12/22, hundreds of millions of shares have changed hands while lots of buying groups kicking the tires. It’s time to move on from the foreplay to the real deal. It's SOP time. Towards 8PM, that time arrived. Albertsons CEO Johnson stated the board of directors decided to halt efforts to sell because "put simply, we did not receive a bid that we could accept." He said the company will continue to discuss selling off its "underperforming assets" with several parties. Despite what Johnson stated, it will not be "business as usual." The status of the company will remain uncertain, and that is not a positive for shareholders, employees, and/or the communities served by the company. Albertsons needs to compete on all cylinders in the supermarket arena. Uncertainty will make that more than a daunting task. I appreciate walking away when the bids are inadequate. However, when walking away, there needs to be an alternative safety net in place. Unless I am missing something, that is not in place. There is one final point. During the deliberations on the $26 deal, I would like to know whether the Board of Directors had been supplied with a fairness opinion relating to that $26 value. There could be many lawsuits resulting from this bidding process. Hopefully, from a financial point of view, the Board had their decision to walk away firmly backed up.
Bayle Roche: "Disappointment is the nurse of wisdom."
Senator Russ Feingold: "We could have avoided these last-minute negotiations if the House had just adopted the Senate version of the Patriot Act that passed unanimously earlier this year. As we move forward, I hope that the Republican leadership in the Senate and the administration will continue down the path they started on tonight so that we don't find ourselves in this same situation six months from now. One thing is clear - what happened in the Senate over the past few weeks shows that (long-term reauthorization of the Patriot Act in the version favored by Bush) is dead."
Adnan Shihab-Eldin, the acting secretary general of OPEC, and Sheik Ahmad Fahad al-Ahmad al-Sabah, the Kuwaiti oil minister and president of OPEC, met yesterday with Chinese officials in Beijing. Industry analysts expected the discussions to concentrate on increasing Chinese imports from OPEC countries, which supplies about 40 percent of the world's oil. China now gets more than 60 percent of its oil imports from the Middle East and North Africa, mostly from OPEC producers, and has become increasingly anxious to diversify its supplies. It is anticipated that China will import about 4.5 million barrels of oil daily. The U.S. imports over 10 million barrels per day. There is speculation that China is willing to pay a premium to OPEC for a guaranteed daily supply of oil over a period of time.
Home sales in the San Jose region slowed in November, while prices continued to rise, according to the California Association of Realtors Thursday.
Year-to-year sales drops ranged from 15.1 percent in the Santa Clara region and 23.2 percent in the Monterey region to 31.4 percent in Santa Cruz County. The October-to-November declines were 8.4 percent for Santa Clara, 9 percent in Monterey and 9.8 percent in Santa Cruz. That compares to an 11.2 percent drop in single family home sales statewide compared to last year, and a 6.8 percent drop from October.
Statewide, the median price of an existing home in November increased 16.2 percent over last year to $548,400, but sales decreased 11.2 percent compared with the same period a year ago. November's median price was 1.8 percent higher than October's.
"While year-to-date sales in November were 1.7 percent above last year's pace, we are starting to see the 'soft landing' we have been expecting," said CAR vice president and chief economist Leslie Appleton-Young.
The association also reported that its index for unsold inventory of existing, single-family detached homes in November 2005 was 3.9 months, compared with 2.8 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
In November 2005, employers took 1,183 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from
a single establishment, and the number of workers involved totaled 118,098,
on a seasonally adjusted basis. The number of layoff events in November rose by 95 from October and the number of associated initial claims increased by 11,860.
From January through November 2005, the total number of events (seasonally
adjusted), at 14,306, was lower than in January-November 2004 (14,689), while
the number of initial claims (seasonally adjusted), at 1,563,837, was higher
(1,468,844).
For those owning shares of Guidant, it might serve you well to read today's NY Times article on Medicare and how its plan could impact the growth trajectory for electronic defibrillators.
Benjamin Disraeli: "What we anticipate seldom occurs; what we least expect generally happens."
For the month of November consumer spending and personal incomes both rose by 0.3% and the savings rate remained at a minus 0.2%.
Brad Setser: "If US households don't save, the US government cannot run a fiscal deficit without adding to the overall national savings shortage, and a worrying large current account deficit."
Last week, sales at U.S. retailers rose at the fastest pace since Thanksgiving as shoppers stepped up purchases in the second-to-last full week of the holiday season, according to the International Council of Shopping Centers and UBS Securities LLC. Part of the reason may be attributed to price cutting and added extra incentives, such as, gift wrapping.
The Conference Board reports today that the Composite Index of Leading Economic Indicators increased 0.5% in November, following a 1.0% increase in October, and a 0.7% decline in September.
Ken Goldstein, Labor Economist at the Conference Board: "The Leading
Economic Indicators have been anything but consistent -- flat to declining
from July through September, and recovering in October and November. The
recent two-month snap back in the leading indicators raises the probability of
the coincident economic index remaining on a moderate rising trend through
early spring. High and potentially rising energy prices are one consideration
in this outlook. A second consideration is the effect of spillover -- that is,
prices for derivative materials (rubber, paint, plastic and chemicals) are
starting to increase faster now. Rising costs and questions about whether they
will be matched by price hikes are also a factor in how fast the economy grows
this spring."
The Dannon Company, the U.S.fresh dairy unit of Groupe Danone, announced today plans for the U.S. introduction of Activia(R). Activia is the first and only probiotic yogurt
that is clinically proven to help naturally regulate your digestive system in
two weeks, when eaten daily as part of a healthy and balanced diet. Activia
will be available nationwide beginning in January 2006.
Placer Dome Inc. has agreed to a sweetened buyout offer by Barrick Gold Corp. for $10.4 billion. Under the deal, Placer Dome shareholders can choose to receive either $22.50 in cash or 0.8269 of one Barrick share plus 5 cents a share in cash. The revised offer includes a $259.7 million breakup fee, but Placer Dome has the right to consider other proposals until Jan. 19.
Natural gas in storage declined by 162 billion cubic feet in the week ended Dec. 16, but remained 2.3% above its five-year average, the Department of Energy said Thursday.
The difference between the 2-year and 10-year Treasury bond yields is just 0.04 percentage points. This portion of the yield curve hasn't inverted since 2000.
On September 2 Albertsons announced the exploration of strategic alternatives. The news was greeted enthusiastically. The stock rose over 2 points, traded 56.5 million shares, and ended the day at $23.05. Over the past 3 ¾ months the average daily volume has approximated 5 million shares. On Wednesday, December 21, the stock closed at $24.10. Shareholders as well as CVS expected a deal to be announced by yesterday morning. When the WSJ, the NYT, and the FT suggested a deal could be in question, nervous stockholders dumped the shares. The stock closed at $23.28 on 29.9 million shares. In sum, between 9/2 and 12/22, hundreds of millions of shares have changed hands while lots of buying groups kicking the tires. It’s time to move on from the foreplay to the real deal. It's SOP time. Towards 8PM, that time arrived. Albertsons CEO Johnson stated the board of directors decided to halt efforts to sell because "put simply, we did not receive a bid that we could accept." He said the company will continue to discuss selling off its "underperforming assets" with several parties. Despite what Johnson stated, it will not be "business as usual." The status of the company will remain uncertain, and that is not a positive for shareholders, employees, and/or the communities served by the company. Albertsons needs to compete on all cylinders in the supermarket arena. Uncertainty will make that more than a daunting task. I appreciate walking away when the bids are inadequate. However, when walking away, there needs to be an alternative safety net in place. Unless I am missing something, that is not in place. There is one final point. During the deliberations on the $26 deal, I would like to know whether the Board of Directors had been supplied with a fairness opinion relating to that $26 value. There could be many lawsuits resulting from this bidding process. Hopefully, from a financial point of view, the Board had their decision to walk away firmly backed up.
Bayle Roche: "Disappointment is the nurse of wisdom."
Senator Russ Feingold: "We could have avoided these last-minute negotiations if the House had just adopted the Senate version of the Patriot Act that passed unanimously earlier this year. As we move forward, I hope that the Republican leadership in the Senate and the administration will continue down the path they started on tonight so that we don't find ourselves in this same situation six months from now. One thing is clear - what happened in the Senate over the past few weeks shows that (long-term reauthorization of the Patriot Act in the version favored by Bush) is dead."
Adnan Shihab-Eldin, the acting secretary general of OPEC, and Sheik Ahmad Fahad al-Ahmad al-Sabah, the Kuwaiti oil minister and president of OPEC, met yesterday with Chinese officials in Beijing. Industry analysts expected the discussions to concentrate on increasing Chinese imports from OPEC countries, which supplies about 40 percent of the world's oil. China now gets more than 60 percent of its oil imports from the Middle East and North Africa, mostly from OPEC producers, and has become increasingly anxious to diversify its supplies. It is anticipated that China will import about 4.5 million barrels of oil daily. The U.S. imports over 10 million barrels per day. There is speculation that China is willing to pay a premium to OPEC for a guaranteed daily supply of oil over a period of time.
Home sales in the San Jose region slowed in November, while prices continued to rise, according to the California Association of Realtors Thursday.
Year-to-year sales drops ranged from 15.1 percent in the Santa Clara region and 23.2 percent in the Monterey region to 31.4 percent in Santa Cruz County. The October-to-November declines were 8.4 percent for Santa Clara, 9 percent in Monterey and 9.8 percent in Santa Cruz. That compares to an 11.2 percent drop in single family home sales statewide compared to last year, and a 6.8 percent drop from October.
Statewide, the median price of an existing home in November increased 16.2 percent over last year to $548,400, but sales decreased 11.2 percent compared with the same period a year ago. November's median price was 1.8 percent higher than October's.
"While year-to-date sales in November were 1.7 percent above last year's pace, we are starting to see the 'soft landing' we have been expecting," said CAR vice president and chief economist Leslie Appleton-Young.
The association also reported that its index for unsold inventory of existing, single-family detached homes in November 2005 was 3.9 months, compared with 2.8 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
In November 2005, employers took 1,183 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from
a single establishment, and the number of workers involved totaled 118,098,
on a seasonally adjusted basis. The number of layoff events in November rose by 95 from October and the number of associated initial claims increased by 11,860.
From January through November 2005, the total number of events (seasonally
adjusted), at 14,306, was lower than in January-November 2004 (14,689), while
the number of initial claims (seasonally adjusted), at 1,563,837, was higher
(1,468,844).
For those owning shares of Guidant, it might serve you well to read today's NY Times article on Medicare and how its plan could impact the growth trajectory for electronic defibrillators.
Benjamin Disraeli: "What we anticipate seldom occurs; what we least expect generally happens."
Consider The Possibilities
12/22/05 Consider The Possibilities
The International Energy Agency has stated that current oil production exceeds worldwide oil demand by a mere
1%. In 2006, the IEA predicts world wide oil consumption will increase by 2.1%. Do you think production will match or exceed that 2.1% rise? Inventories of distillates, including heating oil and diesel, plunged 2.8 million barrels last week, the U.S. Department of Energy reported yesterday. That decrease exceeded analyst estimates by a wide margin. In addition, Royal Dutch Shell Plc said today it will miss some oil deliveries after an explosion and fire at a Nigerian pipeline cut output by 180,000 barrels a day.
Housing affordability sank in October to its lowest level since 1991.
I have been attempting to piece together various reports on the acquisition talks for Albertsons and what took place at yesterday's board meeting. It appears that the Cerberus group, which includes SuperValu and CVS, had planned to split the company into three parts-- the supermarket business in two and then merging the drugstore business with CVS. Their proposal was to buy Albertsons for slightly more than $26 per share, with $6 a share in SuperValu stock and the remainder in cash. For some reason, at a late stage in the negotiations, the Albertsons board of directions decided not to accept this offer. Talks will contiue but not on the offer that was not accepted. I do not believe Albertsons will simply sell the drugstore business to CVS and proceed to close
unprofitable stores. Over the past three months, the board has had the time to consider many alternatives. Discussions will continue, and, in my view, a deal will be struck--- just like it was with the Saks division and Bon Ton Stores.I believe the investment bankers for Albertsons will generate a positive outcome for the shareholders. However, any deal will not come at the value of $31 a share that I had expected. It is obvious that my analysis stunk the house out.
Interestingly, CVS must have thought the acquistion of Albertsons was a done deal. .CVS today announced that it is confirming that it has been in discussions with Albertson's, Inc. regarding a purchase of Albertsons' standalone Sav-on and Osco drugstores. CVS also announced that, on Wednesday evening, it inadvertently issued an invitation by email to investment analysts and other interested parties inviting them to participate in an analyst call on Thursday morning, December 22, regarding this transaction. CVS subsequently recalled the email and advised the recipients that the email was sent in error because no agreement on any transaction between CVS and Albertsons has been reached. When was the last time you saw this happen on a multi-billion dollar
transaction? One last point is that Albertsons has not issued any press release concerning the acquisition talks since they stated back in September that the board was seeking alternatives to maximize value for shareholders. All the reports in the media are unconfirmed other than CVS's release last night.
Madison Marquette, a Washington, D.C.-based retail developer, confirmed Wednesday it had acquired the former KMart 40-acre headquarters site at Big Beaver Road and Coolidge Highway from Sears Holdings Corp.
The Senate on Wednesday passed a six-month extension of the terror-fighting USA Patriot Act as a last resort after Democrats and a small group of GOP senators blocked President Bush and Republican congressional leaders' attempt to make most of the anti-terrorism law permanent. In addition, Sen. Ted Stevens' drive to open the Arctic National Wildlife Refuge to oil drilling failed in the Senate on Wednesday when he fell several votes short of the 60 votes he needed to avoid a filibuster. The vote was 56-44. One might consider polling all members of Congress and inquire whether Bush's all-mighty power is waning.
As Doug Kass points out, according to Ned Davis Research, there have been 16 separate tightenings over the last 100 years (defined as at least two consecutive rate increases). The Dow, on average, has declined by 4.90% in the four-month period following the last tightening date and by 3.90% in the eight-month period following the last tightening date.
The International Energy Agency has stated that current oil production exceeds worldwide oil demand by a mere
1%. In 2006, the IEA predicts world wide oil consumption will increase by 2.1%. Do you think production will match or exceed that 2.1% rise? Inventories of distillates, including heating oil and diesel, plunged 2.8 million barrels last week, the U.S. Department of Energy reported yesterday. That decrease exceeded analyst estimates by a wide margin. In addition, Royal Dutch Shell Plc said today it will miss some oil deliveries after an explosion and fire at a Nigerian pipeline cut output by 180,000 barrels a day.
Housing affordability sank in October to its lowest level since 1991.
I have been attempting to piece together various reports on the acquisition talks for Albertsons and what took place at yesterday's board meeting. It appears that the Cerberus group, which includes SuperValu and CVS, had planned to split the company into three parts-- the supermarket business in two and then merging the drugstore business with CVS. Their proposal was to buy Albertsons for slightly more than $26 per share, with $6 a share in SuperValu stock and the remainder in cash. For some reason, at a late stage in the negotiations, the Albertsons board of directions decided not to accept this offer. Talks will contiue but not on the offer that was not accepted. I do not believe Albertsons will simply sell the drugstore business to CVS and proceed to close
unprofitable stores. Over the past three months, the board has had the time to consider many alternatives. Discussions will continue, and, in my view, a deal will be struck--- just like it was with the Saks division and Bon Ton Stores.I believe the investment bankers for Albertsons will generate a positive outcome for the shareholders. However, any deal will not come at the value of $31 a share that I had expected. It is obvious that my analysis stunk the house out.
Interestingly, CVS must have thought the acquistion of Albertsons was a done deal. .CVS today announced that it is confirming that it has been in discussions with Albertson's, Inc. regarding a purchase of Albertsons' standalone Sav-on and Osco drugstores. CVS also announced that, on Wednesday evening, it inadvertently issued an invitation by email to investment analysts and other interested parties inviting them to participate in an analyst call on Thursday morning, December 22, regarding this transaction. CVS subsequently recalled the email and advised the recipients that the email was sent in error because no agreement on any transaction between CVS and Albertsons has been reached. When was the last time you saw this happen on a multi-billion dollar
transaction? One last point is that Albertsons has not issued any press release concerning the acquisition talks since they stated back in September that the board was seeking alternatives to maximize value for shareholders. All the reports in the media are unconfirmed other than CVS's release last night.
Madison Marquette, a Washington, D.C.-based retail developer, confirmed Wednesday it had acquired the former KMart 40-acre headquarters site at Big Beaver Road and Coolidge Highway from Sears Holdings Corp.
The Senate on Wednesday passed a six-month extension of the terror-fighting USA Patriot Act as a last resort after Democrats and a small group of GOP senators blocked President Bush and Republican congressional leaders' attempt to make most of the anti-terrorism law permanent. In addition, Sen. Ted Stevens' drive to open the Arctic National Wildlife Refuge to oil drilling failed in the Senate on Wednesday when he fell several votes short of the 60 votes he needed to avoid a filibuster. The vote was 56-44. One might consider polling all members of Congress and inquire whether Bush's all-mighty power is waning.
As Doug Kass points out, according to Ned Davis Research, there have been 16 separate tightenings over the last 100 years (defined as at least two consecutive rate increases). The Dow, on average, has declined by 4.90% in the four-month period following the last tightening date and by 3.90% in the eight-month period following the last tightening date.
"We will nationalize (Bolivia's) natural resources," Morales said at a news conference Tuesday in La Paz.
"Many of these contracts signed by various governments are illegal and unconstitutional. It is not possible that our natural resources continue to be looted, exploited illegally, and as the lawyers say, these contracts are legally void and must be adjusted," Morales said. Bolivia's proven and potential reserves total 48.7 trillion cubic feet of natural gas, second only to Venezuela in South America, according to the U.S. Department of Energy's Energy Information Administration.
Rob Peebles reminds us that, according to the Investor's Business Daily, the alternative minimum tax (AMT)
will generate more revenue than the real income tax by 2008, and that, according to CNN/Money and BEA, property tax revenues have risen 34% in five years. It is well to remember the words of Chief Justice Marshall --
"the power to tax is the power to destroy." The words were spoken in 1819 and they are alive and well today.
I would like to say a few more words about Albertsons. I know what it takes to run a board meeting of a public company. I did it for many years. Albertsons has 12 members on its board. The insiders are the current CEO and the retired president of American Stores, a company now owned by Albertsons. In sum, there are 10 outside board members. These individuals are sophisticated and have been around the block. I believe they will negotiate the best possible deal for the shareholders and not be influenced by the day-to-day movements of the stock price. This morning the stock will be down, and most shareholders will have losses. I too will have a loss marked to the market. As always, I remain calm and rational and consider the various alternatives available to the company and the most likely scenario. That scenario remains to sell the whole company. If SuperValu believes a purchase will be accretive to their company, then maybe they can pay a touch more and still make it a good deal for their shareholders. I think they can. It's well to remember that equity holdings are not the same as holding your loved ones. There is no room for no emotions when deciding on whether to buy, sell, or hold.
Tuesday, December 20, 2005
Beyond The Headlines
12/21/05 Beyond The Headlines
From November 2004 to November 2005, prices for finished goods increased 4.4 percent.Over the same period, the finished energy goods index jumped 17.8 percent,prices for finished goods other than foods and energy advanced 1.7 percent,and the finished consumer foods index inched up 0.8 percent. For the 12months ended November 2005, prices received by manufacturers ofintermediate goods rose 8.4 percent, and the index for crude goods went up 21.0 percent.
Mike Burk: "Many of the momentum type indicators are at or near their lows for the year suggesting there is little downside potential remaining and a snap upward could occur any time soon. Seasonally the week following options and futures expiration turns positive on Wednesday."
Paul Kasriel: "Each of the past six recessions was preceded by an inversion in the spread between the Treasury 10-year yield and the fed funds rate. But there were two other instances of inversion - 1966:Q2 through 1967:1 and 1998:Q3 through 1998:Q4 - immediately after which no recession occurred. It would appear, then, that an inverted yield curve is more of a necessary condition for a recession to occur, but not a sufficient condition. That is, if the spread goes from +25 basis points and to -25 basis points, a recession is not automatically triggered. Rather, whether an inversion results in a recession would seem to depend on the magnitude of the inversion and, to a lesser extent, the duration of it."
Builders broke ground on 2.123 million homes at an annual pace, up 5.3 percent from a revised 2.017 million in October, the Commerce Department said today in Washington. Building permits, a sign of future construction, rose to 2.155 million from 2.103 million. Part of this strength may have been due to the rebuilding efforts after the hurricanes.
Kirk Kerkorian's Tracinda Corp. disclosed in an SEC filing that it sold 12 million GM shares over the past few sessions, bringing its stake in the Detroit giant down to 7.8% from 9.9%.
"Any time you hear the United States government talking about wiretap, it requires - a wiretap requires a court order," Bush said during an April 2004 town hall meeting on the Patriot Act in Buffalo, N.Y. "Nothing has changed, by the way. When we're talking about chasing down terrorists, we're talking about getting a court order before we do so." Does that sound like the same President during this week's press conference?
Calpine Corp. said Tuesday evening it has filed to restructure under Chapter 11 of the U.S. Bankruptcy Code.
From November 2004 to November 2005, prices for finished goods increased 4.4 percent.Over the same period, the finished energy goods index jumped 17.8 percent,prices for finished goods other than foods and energy advanced 1.7 percent,and the finished consumer foods index inched up 0.8 percent. For the 12months ended November 2005, prices received by manufacturers ofintermediate goods rose 8.4 percent, and the index for crude goods went up 21.0 percent.
Mike Burk: "Many of the momentum type indicators are at or near their lows for the year suggesting there is little downside potential remaining and a snap upward could occur any time soon. Seasonally the week following options and futures expiration turns positive on Wednesday."
Paul Kasriel: "Each of the past six recessions was preceded by an inversion in the spread between the Treasury 10-year yield and the fed funds rate. But there were two other instances of inversion - 1966:Q2 through 1967:1 and 1998:Q3 through 1998:Q4 - immediately after which no recession occurred. It would appear, then, that an inverted yield curve is more of a necessary condition for a recession to occur, but not a sufficient condition. That is, if the spread goes from +25 basis points and to -25 basis points, a recession is not automatically triggered. Rather, whether an inversion results in a recession would seem to depend on the magnitude of the inversion and, to a lesser extent, the duration of it."
Builders broke ground on 2.123 million homes at an annual pace, up 5.3 percent from a revised 2.017 million in October, the Commerce Department said today in Washington. Building permits, a sign of future construction, rose to 2.155 million from 2.103 million. Part of this strength may have been due to the rebuilding efforts after the hurricanes.
Kirk Kerkorian's Tracinda Corp. disclosed in an SEC filing that it sold 12 million GM shares over the past few sessions, bringing its stake in the Detroit giant down to 7.8% from 9.9%.
"Any time you hear the United States government talking about wiretap, it requires - a wiretap requires a court order," Bush said during an April 2004 town hall meeting on the Patriot Act in Buffalo, N.Y. "Nothing has changed, by the way. When we're talking about chasing down terrorists, we're talking about getting a court order before we do so." Does that sound like the same President during this week's press conference?
Calpine Corp. said Tuesday evening it has filed to restructure under Chapter 11 of the U.S. Bankruptcy Code.
Seagate and Maxtor today jointly announced they
have entered into a definitive agreement under which Seagate will acquire
Maxtor in an all stock transaction. Under the terms of the agreement, which
has been unanimously approved by the boards of directors of both companies,
Maxtor shareholders will receive .37 shares of Seagate common stock for each
Maxtor share they own. When the transaction is completed Seagate shareholders
will own approximately 84% and Maxtor shareholders will own approximately 16%
of the combined company. The value of the transaction is approximately
$1.9 billion.
Chevron Corp. said hurricanes in the Gulf of Mexico that shut oil wells
and the company's biggest refinery probably cut fourth-quarter profit
by more than $600 million.
I have a thing about government numbers. Here is an example of why I do.
Yesterday, China discovered a small statistical oversight. It appears that
China's economy is $285 billion larger than first thought. The statistical
difference is a mere 17%.
With only 8 trading days remaining in 2005, the S&P 500 is up about 4%.
It is the third consecutive year for gains in this index. According to
Barry Ritholtz "there were only two out of eleven occasions when the span of winning
or losing years exceeded three consecutive winners over the past five
decades. One of those two periods were during the late-1990s bubble
years (1995-1999 ); the other was from the beginning of the secular
bull market that began in 1982 (1982-1989); Even 1987, the year of the
crash was up 2.03%. Under the circumstances, that implies pretty good odds that 2006 is
less than likely to be an up year, just based uon historical averages.
Furthermore, on the seven (out of nine) occasions when the market has
had a 2 or 3-year winning streak, the median return in the following
year has been -11.36%."
In considering the recent sale of GM shares by Kerkorian, is it possible
he is simply taking a tax loss for 2005 rather than on his way to
eliminating a position? Since purchasing the shares, what new information
has surfaced to make him a seller? If selling begets selling over the next 31 days,
he could be in a position to tender for more shares at a much lower price
than $31. In fact, $25 might look appealing to many holders.
In the recent Iraqi election, Ayad Allawi, the former prime minister and
Bush's choice, received much fewer votes than even the most pessimistic
forecasts. If he were a horse, he'd still be running to the finish line.
Bush's stamp of approval is the kiss of death.
According to Forbes.com, the top investors at Marketocracy decided to invest
in Saks. With the stock continuing to languish in the $16-$17 range, all
savvy support is appreciated.
The Mortgage Bankers Association said its seasonally
adjusted index of mortgage application activity for the week
ended December 16 decreased 4.0 percent to 594.6 from the
previous week's 619.3. Volume was at its lowest since the week
ended January 7, when the index reached 587.8.
The Talmud: “Fish die when they are out of water, and people die without law and order.”
Monday, December 19, 2005
Under Funded
12/20/05 Under Funded
Standard & Poor's reported Monday that the under funded OPEB liability of the S&P
500 companies is significantly higher than that of under funded pensions.
According to Standard & Poor's data, at $292 billion, the S&P 500 under funded
OPEB balance is 95% higher than the under funding of pensions at $150 billion.
OPEB consists mostly of medical costs paid for the benefit of retired
workers. These benefits may be contractual or implied, and usually require
retiree contributions in the form of monthly premiums and direct co-payments
for services and products rendered. Unlike pensions, which are regulated,
OPEB has no legal requirement to create a trust entity to fund the current or
future costs. Additionally, specific tax treatments and credits, set up to
encourage pension funding, do not exist for OPEB funds. Standard & Poor's
data shows that pensions, while under funded, have 88% of the their
obligations set aside in pension trusts, compared to only 22% for OPEB
obligations.
"The state of OPEB is extremely unsettling, as many companies have not
created trust accounts to fund their OPEB obligation," says Howard
Silverblatt, Equity Market Analyst at Standard & Poor's. "Those that have
created trust accounts fund them to significantly lower levels than are
required under current pension funding rules."
It should be noted that Ford and General Motors account for 32% of the unfunded OPEB amount in the
S&P 500 compared to 13% of the pension under funding. Together, the two auto
giants are a combined $20 billion under funded in pensions, and $94 billion
under funded for OPEB.
RealtyTrac(TM)yesterday released its November 2005 Monthly U.S. Foreclosure Market
Report, which showed 71,606 properties nationwide entered some stage of
foreclosure in November, a 12 percent decrease from the previous month. The
report shows a November national foreclosure rate of one foreclosure for every
1,615 U.S. households.
The Goldman Sachs & Co., Nielsen//NetRatings and Harris Interactive's Holiday eSpending Report
reveals today that online shoppers spent $18.6 billion, excluding travel,
during the first six weeks (October 29 -- December 9) of the 2005 holiday
season. This year's U.S. online spending resulted in a 16 percent increase
(+/- 3.1 percent margin of error) from the same time period in 2004, with 19
percent of consumers having indicated that they have yet to start their
holiday shopping. The eSpending Report is based on a weekly national survey of
approximately 1,000 online adult consumers, capturing consumer spending,
attitudes and motivations of more than 6,500 shoppers during the first six
weeks of the 2005 holiday season.
Attorney General Alberto Gonzales said Congress had essentially given
President Bush the authority for domestic surveillance after the Sept.
11 attacks."Our position is that the authorization to use military force which was
passed by the Congress shortly after Sept. 11 constitutes that
authority,'' Gonzales said.
Despite rising healthcare costs and
repeated calls for universal healthcare, nine in 10 healthcare leaders in the
United States say that a primarily taxpayer-funded healthcare system, as in
Canada and Britain, is not the best way to solve the nation's healthcare
problems, according to new survey findings released Monday by
PricewaterhouseCoopers. Nonetheless, nearly all leaders surveyed (95 percent)
expect healthcare spending to rise, with more than half (51 percent) expecting
accelerated spending at much higher rates than in the past.
"Consumers are stepping aside and manufacturing and other business sectors
are stepping in," said Dr. Jim Paulsen, chief investment strategist of Wells
Capital Management during Wells Fargo's first-annual economic forecast
teleconference. "The U.S. business sector is looking very healthy, and this
will help alleviate the slight slowdown in consumer spending and housing. I
believe we're in the early stages of what will be considered a 'manufacturing
renaissance period' in the next several years that's tied to steady trade
improvements. We're also seeing renewed strength in the stock market, and
foreign economic growth is accelerating, which further positions the U.S.
economy for a more sustainable recovery."
According to Wells Fargo senior economist Dr. Scott Anderson, "a housing
price slowdown, in part triggered by the Federal Reserve's policy actions,
will become more pronounced as the year 2006 progresses, placing consumer
spending, credit-quality, and job creation at some risk. The challenges are
mounting for U.S. consumers, restricting their ability to spend." Anderson
also said that, "real earnings are being squeezed by the spike in inflation,
job growth will remain subdued and energy prices elevated, home equity
borrowing and wealth creation from the housing market will dry up."
Sentiment among U.S. homebuilders continued to deteriorate in December,
according to the monthly survey by the National Association of Home Builders.
The index fell to 57 in December from 61 in the previous month, the NAHB said
Monday. It's the lowest level since April 2003.
The 3 and 5-year U.S. Treasury bonds yield less than the 2-year and
the 10-year only yields 7 basis points more than the 2-year. Maybe some
believe the world is different now, but inverted yield curves are
meaningful to me.
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.
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.
Sunday, December 18, 2005
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?
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?
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