Construction And Housing

1/20/06 Construction And Housing

The American Institute of Architects (AIA) reported that billings at U.S. architecture firms were positive every month in 2005 for the first time since 2000, pointing towards 2006 being the best year for nonresidential construction in six years. With construction
accounting for nine percent of GDP, increased nonresidential activity will
ease the effects of a projected slowdown in the residential market. The
Architecture Billings Index (ABI), a leading economic indicator of nonresidential construction activity, had a rating of 50.4 in December 2005 (any score above 50 indicates a positive score), compared to 58.4 for November 2005 and 47.8 for December 2004. "Considering the sluggish consumer spending coupled with the softening residential sector, nonresidential construction should be viewed as a key driver for the overall economy in 2006," said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. "The nonresidential upturn should continue into 2007 and can be attributed to pent up demand for new projects that weren't able to be undertaken in recent years."

U.S. December housing starts fell 8.9% to a 9-month low. Meanwhile, building permits declined 4.4%.

The Philly Fed diffusion index fell to 3.3 in January from 10.9 in December. This is the lowest reading since last June.

For all of 2005, U.S. crude oil production fell 6.6%, while imports of refined products rose 13.9% to a record 3.48 million barrels a day.

Senator Patrick Leahy: "At a time when the president is seizing unprecedented power, the Supreme Court needs to act as a check and to provide balance. I have no confidence that Judge Alito would provide that check and balance. I cannot support this nomination."

Northwest University economists Robert Gordon and Ian Dew-Becker: “For the past 40 years, only the top 10% of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth.”

France will develop its nuclear forces to counter states that might resort to using weapons of mass destruction, President Jacques Chirac stated.

For all of 2005, Motorola had positive operating cash flow of $4.6 billion, an excellent performance. The company's outlook for the first quarter of 2006 is for sales of
between $9.3 billion and $9.5 billion. The outlook for earnings per share is
in the range of $.27 to $.29, excluding expected stock option expense of $.02
per share and excluding any potential additional recovery relating to Telsim.

By 2010, Home Depot expects that Home Depot Supply will generate 18-19 percent
of overall sales. By the end of the decade, Home Depot Supply expects to
operate more than 1,500 locations, covering all 50 states, and will be the
largest diversified wholesale distribution business in the United States. "We are poised for dramatic growth over the next five years across our business," said CEO Nardelli. "Our planned acquisition of Hughes Supply is a great example of how we are rapidly replicating in the professional market the same type of transformation that we brought to the home improvement retail market."

Bush: “And, actually, the non-discretionary -- non-security discretionary spending -- I'm from Texas -- (laughter) -- is lower in '06 than it was in '05. We've actually reduced non-security discretionary spending.” His definition of non-discretionary must be different from mine. He is from Texas and I’m from New York City.

Boeing Co. stated Thursday that 60-day layoff notices will be issued to 84 employees at its Wichita, Kansas site tomorrow as a result of Department of Defense program delays and budget issues.

The recent jump in oil prices is "unwelcome" and could create short-term troubles for the U.S. economy, Treasury Secretary John Snow stated Thursday.

Investors pulled an estimated $1 billion from U.S. stock exchange-traded funds in the week through Wednesday, compared to an inflow of $1.3 billion the prior week, TrimTabs Investment Research stated Thursday. In addition, investors channeled an estimated $3.8 billion to mutual funds in the week ending Wednesday, building on inflows of $2.4 billion in the prior week, TrimTabs reported yesterday.

Trade between China and the Association of Southeast Asian Nations (ASEAN) rose to 130.4 billion U.S. dollars last year, up 23.1 percent on a year-on-year basis.

The EU-3 on Thursday said that it isn’t looking at sanctions for Iran and sees an “important” role for India to help find a way to end the current impasse.

Novartis announced on Thursday that it will target Asia, especially China and India, as its expansion areas in future. China's pharmaceutical market expanded by 22 percent last year, while the proportion of people in India who can afford drugs is expected to rise from 35 percent to 80 percent in 2010, stated Daniel Vasella, chairman and CEO of the company.

Private equity and venture capital (VC) firms invested about $2.3 billion in Indian companies across 147 deals during 2005, the latest report by Venture Intelligence Media indicated yesterday. In 2004, VC firms invested $1.6 billion in 68 deals.

The pace of home sales in the nine-county Bay Area dropped year-over-year for the ninth month in a row in December, while prices fell 2.6 percent from November's record high of $625,000, a real estate information company reported today.
The 16% month-over-month decline in the number of sales is unusual as sales typically rise from November to December, DataQuick Information Systems said.

Median weekly earnings of the nation's 104.6 million full-time wage and salary workers were $659 in the fourth quarter of 2005, the Bureau of Labor Statistics of the U.S. Department of Labor reported Thursday. This was 1.9 percent higher than a year earlier,
compared with a gain of 3.8 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period.

Ford Motor Co. may cut 25,000 or more jobs over four years as part of a restructuring to stem North American losses, Bloomberg News reported Friday.

Albertson's Inc. announced today that it has received an offer for the purchase of
the entire Company. The offer was received from a consortium that had previously submitted an offer for the Company in December. After reviewing the new proposal the Albertsons Board of Directors authorized management and its representatives to enter into negotiations.

Apparel maker Russell Corp. said 1,200 jobs in the U.S. will eventually be replaced in Honduras and Mexico. In addition, Russell said it is freezing its defined benefit plan, effective April 1, and will improve its 401(k) employee savings plan.

Mexico and the United States have agreed to end to the dispute about U.S. imports of Mexican cement.

Hollinger, owner of the Chicago Sun Times, will cut about 300 jobs at the newspaper.

Japan is considering stopping all imports of U.S. beef -- just a month after lifting a ban on the meat -- after finding risk materials that could cause mad cow disease in a shipment from New York on Friday.

Crude is trading above $67 a barrel this morning, the highest point in four months.

Volatility Is Awakening

1/19/05 Volatility Is Awakening

eBay Inc. posted strong fourth quarter results after the market closed but disappointed Wall Street by failing to raise its 2006 outlook. The shares dropped 5 percent in after-hours trading.

Walt Disney: “People look at you and me to see what they are supposed to be. And, if we don't disappoint them, maybe, just maybe, they won't disappoint us.”

Apple Computer Inc. forecast current-quarter results below Wall Street expectations, and its shares fell about 3 percent in volatile after-hours trading.

Barry Ritholtz: “Since the bottom on March 5, 2003, the S&P has sustained only three corrections of more than 6% and none greater than 9%. There were five corrections that ranged in strength from 25% to 45% from 1966 to 1982. That averages out to one major correction every 38 months or so. The S&P's last major correction was a 33% drop from March to July 2002. That was 42 months ago -- implying we are overdue for another steep decline."

Within the next five years nearly 70 brand-name drugs, including 19
blockbusters such as Zocor(R), Zoloft(R), and Ambien(R), collectively
accounting for more than $45 billion in U.S. sales, are anticipated to become
available as generics.

Ford Motor Co. had the lowest capacity utilization in North America last year followed by larger rival General Motors Corp., Ron Harbour, president of Harbour Consulting, said on Wednesday.
Ford utilized only 79 percent of its total North American production capacity in 2005, while GM used 87 percent, Harbour told an automotive conference in Dearborn, Michigan.

Average weekly earnings rose by 3.1 percent, seasonally adjusted, from
December 2004 to December 2005. After deflation by the CPI-W, average weekly
earnings decreased by 0.4 percent.

Goldman Sachs cut Advanced Micro Devices to underperform from in line, citing likely cyclically peaking margins, rich valuation and excess supply concerns.

Homebuilder D.R. Horton now expects 2006 earnings between $5.25 and $5.35 a share on revenue of more than $15.5 billion. For the fiscal year, Beazer’s management anticipates that earnings will "meet or exceed" the company’s target of $10.50 a share. Both homebuilders appear to be doing just fine.

According to thedeal.com and the WSJ, a consortium of private-equity firms and Supervalu have submitted a new bid for grocery chain Albertson's. The new bid is priced "a few cents" above $26 a share and is structured differently to diminish antitrust worries, the report said.

Newmont Mining Corp. stated full-year 2005 gold sales totaled 8.6 million ounces, and costs applicable to sales were $238 per ounce. The company expects gold sales of 8 million ounces in 2006 at costs applicable to sales of $270 to $280 per ounce.

Walt Disney Co. is in serious talks about acquiring Pixar Animation Studios , the Wall Street Journal reported this morning.

According to Bloomberg, China National Petroleum Corp. and India's Oil & Natural Gas Corp., the biggest oil companies in each nation, may be among bidders for a $3 billion venture in Russia operated by BP Plc.

Talking about India, Wal-Mart may be close to finalizing plans for entering the market in that country.

For the first time since August, natural gas traded below $9. Crude closed at $65.73.

The Nikkei rebounded 2.3%.

El Paso Corp. expects oil and gas production to rise in 2006 between 8 and 11 percent and reserves to grow by 5 to 10 percent during what the company said will be "a breakout year."

Putting matters in perspective, the U.S. consumes 20 million barrels of oil per day but produces only 5 ½ million barrels per day. Nigeria, which produces 2.6 million barrels per day, is the fifth biggest oil supplier to the U.S.

For all of 2005, the CPI gained 3.5%, the most in 5 years.

Foreign official institutions’ purchases of U.S. treasury and government agency bonds dropped to $5.9 billion in November from $13 billion in October. What happens when their appetite ceases altogether? You think this cannot take place?

Yesterday, Washington Mutual told about 1,000 call-center workers in Chatsworth, Calif. that their jobs are headed to San Antonio and Costa Rica.

Moscow is experiencing its coldest temperatures in 50 years.

Ford Motor Credit Co. announced plans to periodically sell up to $18 billion in floating-rate demand notes, which are unsecured and non-subordinated obligations of Ford Credit. They will rank equally with all other unsecured senior indebtedness of Ford Credit.

Citigroup upgraded Saks, Inc. to hold from sell and raised its price target to $21 from $17. It believes there's a 50/50 probability that Saks will continue to run as an ongoing business or be taken out. I continue to hold all my shares and have stated previously that, in my opinion, $22 to $23 is a reasonable price for the company.

UnitedHealth Group reported an 18% rise in fourth-quarter net earnings to $870 million, or 65 cents a share, and raised earnings guidance for 2006. As I often stated, this is one of my favorite companies in the entire medical field.

Albert Camus: “Our civilization survives in the complacency of cowardly or malignant minds -- a sacrifice to the vanity of aging adolescents.”

Trading Halt

1/18/06 Trading Halt

U.S. industrial output increased 0.6% in December while capacity utilization soared to 80.7%, the highest since October 2000, the Federal Reserve said Tuesday. For all of 2005, industrial production increased 3.2%. These developments are especially surprising
given the recent decline in the average hourly workweek as well as the drop in the factory workweek.

The Nikkei plunged 2.9 percent Wednesday in a session that had to be shortened by 20 minutes because of a surge in transactions. In the last two trading days this index has declined 5.7%.

Google Inc. will acquire dMarc Broadcasting Inc., a privately held developer of digital advertising technology for the radio industry based in Newport Beach, Calif.

With the financial assistance of Abbott Labs, Boston Scientific Corp. raised its bid for cardiac device maker Guidant Corp. to $27 billion or roughly $80 a share in cash and stock.

The Supreme Court upheld Oregon's physician-assisted suicide law, rejecting a Bush administration attempt to punish doctors who help terminally ill patients die.

John Berry noted that, in the 2006 U.S. budget documents, the administration said the government's long-term fiscal situation is ``unsustainable.'' Last month the Congressional Budget Office reached the same conclusion in a new study, ``The Long-Term Budget Outlook.'' If these observations were just made by the administration and the CBO, how is it that nothing concrete is done to change the situation?

Since Jan. 1, it has been quite something to watch the administration make the handling of Medicare for recipients almost intolerable. Interestingly, it wasn’t until Jan. 15 that Bush stated that, the health insurance plans in existence prior to Jan1, were to be held responsible for the first month’s supply of medication. If this were so, how come no one knew that except Bush? How come the federal government will not reimburse states, such as, California for the money expended to provide medication in January to these recipients? Do you recall 9/11? Do you recall Bush speaking to a class of youngsters? Do you remember his being told about the terrorists flying into the twin towers? What did he do? He went back to sitting in the classroom with the children. Not much has changed – witness Katrina and now Medicare. The nation has elected an individual who is paralyzed in the time of crisis. Harry Truman he is not.

According to a report Monday in the Sacramento Bee, Ralph’s which is owned by Kroger, is putting its stores in northern California up for sale.

The times of extraordinarily high U.S. labor productivity growth rates are over, at least for now, according to a report released today by The Conference Board. Though still healthy compared with many other developed nations, the productivity growth rate slumped to 1.8% in 2005 in the United States, down from 3% in 2004.

Some 1,632,000 new online job ads were offered in December, a decline of 187,000 or 10.3 percent from November, according to The Conference Board Help-Wanted OnLine Data Series(TM). The December level was well below the August 2005 peak of 2,131,000 new online job ads.

Results of a recent analysis of 49 Lipitor clinical trials involving more than 14,000 patients showed that the overall rates of treatment-related adverse events reported by patients taking the highest dose of Lipitor were low and similar to those reported by
patients who received placebo or the lowest dose of Lipitor. The analysis is
published in the current edition of the American Journal of Cardiology.

Research conducted by economists at the University of California,
Santa Cruz found that bills that target large businesses fail to make a dent
in the number of uninsured because the vast majority of those who experience
loss of coverage over time are:

* Unemployed,
* Employed part-time,
* Employed at firms with fewer than 10 employees, or
* Newly employed and have yet to accrue the tenure required for
eligibility.

Yahoo’s net income rose more than 83 percent, but its results fell one penny per share short of some projections, and the stock got clipped for almost $5 per share in after hours trading. Revenue was $1.5 billion, up from $1.08 billion the year before.

Intel’s fourth quarter revenue rose 6 percent to $10.2 billion, but the company in December projected it would be between $10.4 billion and $10.6 billion. Analysts surveyed by Thompson First Call expected $10.56 billion. Intel said total chip sales were higher, but average selling prices were lower. In the coming quarter, Intel said revenue should be between $9.1 billion and $9.7 billion. That is also below the First Call survey's projected $10.05 billion. In after hours trading the stock had clipped for close to three points.

In the fourth quarter of 2005 the inventory of unsold homes in the SF Bay Area at the $1.5 million or higher level increased dramatically. Availability was up by 112 percent in Santa Cruz County, 80 percent in Alameda County, 74 percent in Santa Clara County, 50 percent in Monterey County, 44 percent in Contra Costa County, 30 percent in San Mateo County and 24 percent in Santa Clara County.

IBM’s fourth quarter revenue totaled $24.4 billion, well below analysts' estimates of $25.4 billion.

SEC Commissioner Roel Campos of Houston pointed to studies that suggest chief executive officers now make about 400 times the salary of the average worker, up from 40 times a few decades ago.

A high-level intelligence assessment by the Bush administration concluded in early 2002 that the sale of uranium from Niger to Iraq was "unlikely" because of a host of economic, diplomatic and logistical obstacles, according to a secret memo that was recently declassified by the State Department. Why am I not one bit surprised by this revelation?

Last year, 43% of first-time home buyers purchased their homes with no-money-down loans, according to a study released Tuesday by the National Association of Realtors.
If the margin rules on Wall Street were changed to no money down on purchases, then we could have a real casino.

After trading is over today, I wonder whether all the early January gains will have been erased for the Dow, S&P 500, and the Nasdaq? If that should occur, what spins will be provided by the folks at CNBC?

Crude is trading at $66.67 per barrel or about $10 higher than one month ago. Yesterday,
Heating oil jumped 4.5% to $1.79 a gallon and unleaded gas climbed 5.3% to $1.82 a gallon. Inflation is alive and well.

Yesterday, the yield curve inverted again.

Viewpoints

1/17/06 Viewpoints

"Help Wanted" may become a bigger part of window signs for retailers as 35 percent of retail workers say they plan to shop for a new job in 2006, according to a recent CareerBuilder.com survey. Workers cite pay, workload and career development as the leading factors for their decisions to look for new opportunities this year. The survey,
"Job Forecast 2006 - Retail," was conducted from November 15, 2005 to Dec.6, 2005.

Ron Ellison: “Too many people today, politicians and social do-gooders foremost, are too young to recall Blackout Wardens, officials who came around door-to-door during WWII and made folks turn off their lights.”

Ellen Johnson-Sirleaf was sworn in as president of war-torn Liberia. She became Africa's first elected female head of state.

Al Gore: the use of the National Security Agency to eavesdrop on Americans without a court order shows that President Bush "has been breaking the law repeatedly and persistently. A president who breaks the law is a threat to the very structure of our government," he said.

Next months, Mervyn’s will close 20 stores in Washington, Oregon, and Utah.

John Hussman: “On average, this set of overvalued, overbought and overbullish conditions has historically produced tepid results even when the broad quality of market action has been favorable on the measures we use, and has been downright mean when the internal quality of market action is unfavorable (such periods include February 1962, December 1972, and August 1987, all which shortly preceded violent declines). Given current conditions, the quality of market action is best described as either tenuously unfavorable or neutral, so in any event, market risk hardly appears worth taking at present.”

Over the years, I have frequently written about the inadequate medical care provided our
Veterans. Presently, we have a situation where members of our National Guard have been forced to sue the federal government for reimbursement of out-of-pocket expenses, such as, what took place when they were called to Louisiana to assist with the aftermath of Katrina. At some point, Americans need to hold the Commander-in-Chief accountable. Until they do, our Republic will be at increasing levels of risk.

E.B. White: “Prejudice is a great time saver. You can form opinions without having to get the facts.”

Airbus stated that orders in 2005 rose to 1,055, topping Boeing's 1,002 orders for the year. It also delivered more planes than Boeing, at 378 planes compared to Boeing's 290.

The International Energy Agency said that the global demand for world oil should rise 2.2% in 2006 after a 1.3% climb in 2005. It also sees OPEC capacity rising by one million barrels a day in 2006. Crude is approaching $65 a barrel this morning.

The Nikkei declined 2.8%, the worst drubbing in 9 months.

Warren Buffett agreed to purchase San Francisco’s Business Wire, with 500 employees and offices worldwide, and revenue of $127 million in 2005.

Steve Jobs: “Based on today's stock market close, Apple is worth more than Dell.”

Consumer debt has been climbing faster than personal incomes and wages have been trailing the rate of inflation. How long can this combination take place?

Russia and China made clear on Tuesday they did not favor UN sanctions to induce Iran to scale back its nuclear program.

Last year Korea emerged as the second largest exporter to China, overtaking Taiwan with exports rising 24 percent from 2004 to US$77 billion. Over the same period Korea's imports of Chinese goods rose 26 percent to $35 billion. Japan continues as the largest exporter to China.

The Chinese Ambassador to Tehran said that the trade between Iran and China exceeds $10 billion and that China is to become Iran's primary trade partner in the near future, IRNA reported. Speaking at an Iran and China economic gathering Lio G Tan said that Iran and China trade registered record high last year.
"China imported over $1 billion of non-oil goods from Iran in 2004 and the figure doubled in 2005." China's imports of non-oil goods from Iran are among the highest of non-oil exports from Iran, he said. Also, the two nations gained great achievement in signing agreement on new projects that totaled 38 last year, Tan said.

Harry S. Truman: “When even one American - who has done nothing wrong - is forced by fear to shut his mind and close his mouth - then all Americans are in peril.”

Interesting Tidbits

1/16/06 Interesting Tidbits

Nattokinase is an enzyme isolated from the vegetable cheese Natto; a typical and popular soybean food in the Japanese diet. Nattokinase has been found to have blood clot dissolving abilities. Studies have shown that men and women at high risk for strokes have a 70% reduction in risk by taking 100mg of nattokinase daily.
Nattokinase is an enzyme derived from a process of fermentation involving boiled soybeans and bacillus natto. Research has shown nattokinase to support the body in breaking up and dissolving the unhealthy coagulation of blood and to enhance fibrinolytic activity. For over 1000 years the Japanese have been consuming natto -- a fermented soy-based food that looks and tastes like soft cheese. Natto contains a unique enzyme called nattokinase, which was discovered by Dr. Hiroyuki Sumi in 1980, and has since been the subject of 17 studies, including two human studies, in Japan. Based on this research nattokinase has been shown to be a promising new nutrient that supports a healthy circulatory system. Nattokinase facilitates blood flow contributing to healthy circulation and supporting normal blood pressure.

Ford Motor Co. stated it had sold 82,225 of its own-brand vehicles in China in 2005, up 46 percent on the previous year.

Mike Shedlock: “If the FED is targeting asset prices, credit lending, and junk bonds, housing might be flattened by the time junk bonds capitulate. Then again there could be some sort of "credit event" as we saw with LTCM where overnight we went from complacency to near panic. The middle ground is to look for two more hikes, followed by a long pause. That is what happened in the UK and we seem to be following in their footsteps. A recession is coming but somehow the junk bond market and the equity markets have not gotten the message or worse yet just do not care (for now). The longer they continue not to care the more potential hikes the FED gets in.”

Rebels attacked a Royal Dutch Shell pumping station in Nigeria over the weekend. Since the beginning of the new year, crude oil futures have risen close to 5%. Gas at the pump is headed higher.

"With the housing market beginning to slow, consumers will be challenged to find new sources of spending power,”stated National Retail Federation Chief Economist Rosalind Wells in a statement. "The strong retail sales we saw in the second half of 2005 will be replaced by more conservative spending in the New Year."

On January 17, 2006, Benjamin Franklin will turn 300.

Mohamed ElBaradei, director-general of the U.N.'s International Atomic Energy Agency, told Newsweek "For the last three years we have been doing
intensive verification in Iran, and even after three years I am not yet in a
position to make a judgment on the peaceful nature of the [nuclear] program,"
We still need to assure ourselves through access to documents, individuals, [and] locations that wehave seen all that we ought to see and that there is nothing fishy, if you
like, about the program."

Michelle Bachelet, the candidate of Chile’s center-left government coalition, won the country’s runoff election to become South America’s first popularly-elected female president.

Cisco Systems plans to expand its share of the consumer-electronics market by selling phones, radios and home-theater equipment, the Financial Times reported today.

Terry Savage: “Maryland lawmakers probably figure that Wal-Mart will be forced by business considerations to accept its decision. But they should check recent history before pushing Wal-Mart too far. In Quebec, Canada, Wal-Mart employees in one store voted to unionize. After the vote, Wal-Mart pulled up its trucks to the store, loaded up all the merchandise, and closed the store overnight -- leaving hundreds of workers jobless.

The union leaders in that community were ostracized for denying bargain-seeking locals their favorite place to shop, and for denying jobs to the former store employees. The legislature of Maryland might find itself in the same position.”

Stephen Roach: “The US accounted for 28.4% of world GDP in 2005 -- more than six times the 4.4% share of China and more than 16 times the 1.7% share of India.”

The Banker magazine has named Indian Finance Minister P Chidambaram as the Finance Minister of the year 2005 for Asia for retaining and pushing reforms and controlling fiscal deficit.

TheDeal.com on Albertsons: “It might be too early to declare the deal dead. In fact, sources indicate efforts are continuing behind the scenes to resurrect an acquisition plan, composed of Supervalu, Cerberus Capital, Kimco Realty, and CVS, and to return to Albertson’s board with an offer to buy the entire company and split it up among themselves.”

Japan will dispatch its first public-private mission to Canada's Alberta to study the feasibility of exploiting oil sands, or deposits of bitumen trapped in a mixture of sand, water and clay, the Ministry of Economy, Trade and Industry stated Friday.

Steve Forbes: “Given his statements that gold is an obsolete, if not destructive, guide to monetary policy, Bernanke is not likely to recognize the inflation problem until it hits him--and the economy--square in the face. A year from now Greenspan's successor may, unfairly, resemble the ill-starred G. William Miller, whom Jimmy Carter appointed to head the Fed in December 1977 and who proceeded to stoke inflation to record highs.”

More vehicles were sold in China last year than in Japan, making China the world's second-largest auto market after the United States with almost 6 million units sold, the People's Daily said Friday. But if imports of 160,000 cars were excluded, China was still No. 3, the paper said. Domestic vehicle sales last year rose 14 percent from 2004 to 5.8 million units, the newspaper said, referring only to China-made products. Sales this year of vehicles are expected to grow 10 to 15 percent to 6.4 to 6.6 million units, the report said, citing figures from the China Association of Automobile Manufacturers.

Many textile producers in south China's Guangdong were forced to cut jobs by a large margin due to the lack of export orders in the year 2006.
From Jan. 1 this year, some categories of textile and garment products were placed with new export restrictions to the European Union (EU) countries and America, the markets of which accounted for 34 percent of all of China's textile exports in 2005.
The lack of export orders forced many textile producers, especially small and medium-sized companies to cut jobs or give leaves to workers ahead of China's important holiday of Spring Festival, which will fall on Jan. 29.

David Yu: “Currently, more than 70% of the NYSE stocks and more than 55% of the Nasdaq stocks are traded above their 200-day moving averages.”

Aesop: “Don't let your special character and values, the secret that you know and no one else does, the truth -- don't let that get swallowed up by the great chewing complacency.”

A Page From Saturday Night Live

1/14/06-1/15/06 A Page From Saturday Night Live

Watching the press conference with Bush and German Chancellor Merkel was like watching a scene from SNL. Here’s some of the dialogue from Bush: “what we’re doing here is diplomacy…We talked about a lot, and the reason we talked about a lot is because
we've got a lot in common…Guantanamo is a necessary part of protecting the American
people…Germany is a really important country. It's right in the heart of Europe …We've got something in common, we both didn't exactly landslide our way into office. …I'm looking forward to consultations, visits, contacts, phone calls, all the things you do. And now I'm going to take her to lunch.”
You don’t know whether to laugh or cry. You have just watched the President performing “hard work.”

Leo Tolstoy: “Everyone thinks of changing the world, but no one thinks of changing himself.”

Supervalu Chief Executive Jeffrey Noddle: "We viewed the sale of Albertsons and specifically the availability of certain of its premier properties as an extraordinary opportunity for us to consider," Analyst John Heinbockel of Goldman, Sachs & Co. said in a report to investors Friday that Supervalu and CVS "are almost certainly still willing to pursue a deal."

Under the new merger agreement, Johnson & Johnson will pay $40.52 in cash and
.493 shares of Johnson & Johnson common stock for each outstanding share of
Guidant common stock. Valued as of the market close on January 13, the
transaction has a per share value of $71.00 to Guidant shareholders.

The Economist magazine: “By borrowing against capital gains on their homes, households have been able to consume more than they earn. Robust consumer spending has boosted GDP growth, but at the cost of a negative personal saving rate, a growing burden of household debt and a huge current-account deficit.”

Mexican nationals crossing into the U.S. to shop are spurring retail growth and driving up sales, spending billions of dollars in American states bordering Mexico, according to a group of economists and retailers who convened Friday in San Antonio.
"Cross-border shopping accounts for a lot of jobs along the border, and it's significant even in places like San Antonio and Houston," said Keith Phillips, a senior economist with the Federal Reserve Bank of Dallas' San Antonio branch.
Shoppers are responsible for creating more than 63,000 jobs along the Texas-Mexico border, said Suad Ghaddar, a researcher with the Center for Border Economic Studies at the University of Texas Pan-American."Mexican shoppers are a major cornerstone in the economies of border communities," she said.

Robert McHugh: “There is a major Bearish Divergence occurring between the NASDAQ 100's price trend and the trend of its 10 day average Advance/Decline line, warning of a significant decline once this topping pattern completes.”

Congress appropriated $357 billion from 2002 through the end of 2005 for the wars in Afghanistan and Iraq and related security issues, according to the nonpartisan Congressional Research Service; however, two research papers — one authored by an Iraq war critic, the other by a scholar at a conservative research center — sparked controversy by suggesting that when economic factors not included in the budget are added, the true cost to the U.S. economy over the next decade could be anywhere from $657 billion to $2 trillion for the Iraq war alone.

Benjamin Franklin: “When you’re finished changing, you’re finished.”

The FDA warned consumers Friday not to use two unapproved Brazilian diet pills because testing has revealed they may contain tranquilizers, antidepressants and stimulants.The pills are sold over the Web as Emagrece Sim, or the Brazilian Diet Pill, and Herbathin, the Food and Drug Administration said.

Mike Burk: “Many of the major indices hit multiyear highs on Wednesday ending a run of 7 consecutive up days. Periods of 7 consecutive up days are relatively rare. Measured by the Wilshire 5000 (Wil-5) the market has had 3 periods of 7 consecutive up days in the past year. In May of 1996 the Wil-5 moved up for over 7 consecutive days and that blow-off marked the high for the next 5 months. Since then each period of 7 consecutive up days has been followed by a modest pull back lasting 1 day to 6 weeks followed by higher highs.”

You think inflation is under control? The metals give a different picture. Platinum closed at a 26-year high of $1,043.60 and gold jumped to $557 an ounce. Silver climbed to $9.165. Meanwhile, keep an eye on the dollar index. Since the beginning of 2006, it has resumed its downward path.

Recently, there have been a number of plant closings. Tyson will close two plants and cut 400 jobs. Dan River is closing a weaving mill and 490 employees will lose their jobs. Web Furniture is closing a Galax, Virginia factory and there will be over 300 lost jobs. Vaughn Furniture also closed a Galax factory. About 200 jobs will be lost.

For index investors it is wise to remember that, since 1926, the average p/e ratio for the S&P 500 index has been 15.9. Presently, it exceeds 19. With 2-year Treasury bonds yielding 4.35% and the p/e at 19, the risk/reward for the S&P is, on a historical basis, not promising. When you factor in the real inflation rate, it is even less promising. One does not have to live in fear of risk; however, it is prudent to respect risk. Keep it simple.

Among those who have caught H5H1 so far, the mortality rate has approached 50%. By comparison, 8,000 were infected with SARS and 774 perished.

In November, the median price for a home on Oahu was $418,000 -- well below a peak of $569,000 in August and 8 percent below the year-ago median -- according to DataQuick.

Over the past 52 weeks, M3 has expanded by 8.5%; however, in recent months, it has grown by 10.5%.

The year-end Wall Street bonus pool was a staggering $21.5 billion.

Options on the Vix begin trading Feb. 24. This may serve as an excellent hedging device.

How about those Seattle Seahawks!

Once again, it is business as usual at the federal government. We witnessed the ineptness after Katrina. Now we have a Medicare disaster for the 6 million elderly, low-income, and disabled people who were automatically switched into the new drug program on January 1. Previously, these people were covered by Medicaid. Not surprisingly, the federal government was not prepared to handle the influx of 6 million people.
Gov. Arnold Schwarzenegger on Thursday ordered state health officials to cover pharmacy costs for prescription drugs for five days, and the state Legislature plans to meet Jan. 17 to extend the emergency coverage for another 10 days, at a cost to the state of some $70 million. Further extensions are possible. California officials want assurances the federal government will reimburse California for the costs of the emergency care. More than a dozen other states are also providing emergency funding for drug coverage, among them Arkansas, Pennsylvania and Hawaii.

Warren Buffett: “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

Changes

1/13/06 Changes

Even though it is Friday the 13th, there is no need to be frightened. There will be some changes but most everything will appear the same tomorrow morning. I suspect the 14th will represent the 27th straight day of rain for Seattle and tomorrow Alito will not have to avoid providing a direct response to a question.

Charles R. Swindoll: “We cannot change our past. We can not change the fact that people act in a certain way. We can not change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude.”

As expected, Boston Scientific upped the ante for Guidant. Under the terms of the amended offer, Boston Scientific will provide Guidant shareholders with:

-- Improved Value: Acquire all of the outstanding shares of Guidant for
$73 per share, $36.50 in cash and $36.50 in Boston Scientific common
stock, subject to a collar. The amended offer is not subject to any
financing condition.

-- Certainty of Completion: Boston Scientific has now agreed that, if
required, it will divest all overlapping assets. This revision to its
offer addresses any perceived antitrust concerns articulated to Boston
Scientific by Guidant.

-- Certainty of Value: If the closing of the transaction does not occur by
March 31, 2006, the $73 per share price would be increased by $0.012
in cash for each day between April 1, 2006, and the date of closing
(representing an annual interest rate of 6 percent).

Let me just say that a higher offer does not guarantee a better offer. Would you prefer stock from Boston Scientific or J&J? Qwest found out that a higher offer did not guarantee success. I question the ability of Boston Scientific to swallow the debt required in this acquisition.

Denis Diderot: “There are things I can't force. I must adjust. There are times when the greatest change needed is a change of my viewpoint.”

As expected, Tyco announced its intention to split into three publicly traded companies. Such a split does not guarantee higher long-term value for shareowners.

The WSJ reported that China’s Cnooc is considering a bid of about $2 billion for Nations Energy, a Canada-based firm that has a large oil field in Kazakhstan.

Pfizer agreed to pay $1.3 billion to Sanofi-Aventis for the world-wide rights to Exubera, an inhaled form of insulin.

The California Public Utilities Commission approved investing $2.9 billion -- drawn from a new charge on utility bills -- into rebates for residents and businesses that install solar panels during the next 11 years.

Microsoft said Thursday that by the end of June it would begin selling advertising alongside its MSN Web search results. It previously relied on a partnership with rival Yahoo! for those ads, but has been testing its own system in the U.S. since October.

The Economist Magazine: "The accolades bestowed upon Alan Greenspan ahead of his retirement on January 31st have a strong whiff of irrational exuberance."

The Bush Administration now states the 2006 federal budget deficit will exceed $400 billion. In sum, the twin tower deficits for this year will approach $1.25 trillion!

NY Fed President Timothy Geithner: "The relatively low compensation for risk priced into asset markets today does not necessarily mean the future will justify that confidence." Complacency represents a great danger to your financial well-being. There is a significant difference between the “market climbing a wall of worry” and the “low compensation for risk priced into asset markers today.” It is essential for every investor to understand that difference.

A new Maryland law, which takes effect in 30 days, would require companies with more than 10,000 Maryland employees to spend at least 8 percent of their payroll on employee health care or pay the difference into the state's Medicaid fund. This law is directly aimed at Wal-Mart. If you were running this company, would you want to expand in Maryland?

Albertson's is planning to restart talks with potential buyers after a complex $15.7bn deal to take the struggling grocery chain private collapsed last month, The New York Post reported sources as saying in its Friday editions. The talks might have been rekindled at the urging of a group of Albertson's shareholders livid at the board for failing to seal the original deal, sources said.
The Post reported that the new discussions are aimed at inking a buyout over the next few weeks that mirrors the previous agreement to take the company private at $26 a share, sources said. That potential deal involved Supervalu acquiring 1,100 Albertson's stores, and drugstore chain CVS taking Albertson's pharmacy business. The rest of the stores would go to investment firms Cerberus Capital Management and Kimco Realty. The deal, which was for a combination of cash and Supervalu shares valued the company's equity at about $9.6bn.

Mexico's state-owned oil company Pemex's onshore and offshore proven, probable and possible hydrocarbons reserves were 46.6 billion barrels (Bb) at end-2005, 0.6% down compared to the previous year, newspaper El Universal reported.

Norway's 2006 oil output is expected to fall 5% this calendar year to 886 million barrels from 933 million bbl in 2005, the country's Petroleum Directorate said Thursday.

Marsoft: “With the exception of a brief rally in early November, the dry bulk market has generally been weakening since the middle of October. During the past month, the decline has been slow but steady, with the Baltic Dry Index tumbling from 3,000 in mid-November to less than 2,500 during the second half of December.”

Lucent lowered its revenue outlook for 2006 to flat to up in low single digits to roughly $2.05 billion, and this compares with the current First Call projection of $2.44 billion.
At $2.55 per share, the stock is selling at a market cap of 5 ½ times revenue. Barring an acquisition of the company, upside potential appears limited for 2006.

Robert C. Gallagher: “Change is inevitable - except from a vending machine.”

Concerns

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”

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.

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.

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.

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.

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.

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.

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 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.

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.

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.

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.”

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.

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.”

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."

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.

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.”

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."