The Way It Is

10/18/05 The Way It Is

Soaring energy prices and the enormity of Hurricanes Katrina and Rita will have a significant impact on the U.S. economy, putting upcoming holiday retail sales at risk. But the economic havoc generated by the two deadly hurricanes in and of itself is unlikely to trigger a recession, The Conference Board reported yesterday..
"While the economic damage assessment is still underway, it is already
clear that the impact from Hurricanes Katrina and Rita will be the biggest
among natural disasters in recent U.S. history," says Ken Goldstein, Senior
Economist of the Conference Board. "But economic growth could slow down enough
to make it feel like a recession, even if one does not occur technically."
The fallout from the hurricanes will have a major impact on the
economy and the business cycle:
It has already produced energy-price shocks that will cut into consumer
spending.
The magnitude of damage to lives and property is still being measured.
Consumer confidence has fallen, a further danger sign for consumer
spending.
The labor market continues to cool off.

The October U.S. Empire State Index declined to 12.1 from 15.6 in September.

Henry To: “Real estate as a percentage of household assets made another record high
At 30.23% - - - surpassing the 30% level for the first time in history.”

Silver closed at $7.87 an ounce, a one-year high, while gold closed at $477.

Wil Rogers: “Ancient Rome declined because it had a Senate; now what's going to happen to us with both a Senate and a House?”

Gartner Inc.stated that, for U.S. PC shipments in the third quarter, Dell had a 30.7% market share and H-P had a 19.1% market share.

Refco filed for bankruptcy.

Rising fuel costs have drained consumers' purchasing power and ``will undoubtedly be a drag'' on global economic expansion, Alan Greenspan stated.

Nearly 70 percent of African Americans say they would have less than three months of available cash to pay for living expenses if faced with a life crisis today, according to a new survey by financial services company HSBC - North America. Additionally, nearly half of African Americans surveyed reported having no savings at all. The survey found that most consumers, regardless of race, are also worried about their level of savings.

Hedge funds were up an average of 1.73% in September, according to the HedgeFund.net-PerTrac Universes. The top 25% of hedge funds gained an average of 2.62%, while the bottom 25% of hedge funds was up an average of 0.34% for the month. Emerging Markets sector funds, the month's top performing strategy, were up an average of 3.71% in September. By comparison, the S&P 500 was up 0.70% during the month. Through September, the year-to-date average gain for hedge funds was 6.32%. The top 25% of hedge funds gained 9.73% for the year-to-date, while the bottom 25% was up 1.31% over the same period. The S&P 500 is up 1.39% since the beginning of 2005. Hedge funds included in these calculations were up 0.86% on average in August. The top 25% of hedge funds gained an average of 1.45% in August, while the bottom 25% was up an average of 0.05% during the same period.

Marc Faber: “Once the housing inflation comes to an end, and households can no longer refinance their homes at lower interest rates, consumer confidence will tumble and lead to a rising savings rate, and along with it, to a recession. This could happen sooner than expected, given the fact that the shares of the largest lender to the housing industry, Fannie Mae, just hit an eight years' low and that the shares of homebuilders now appear to have topped out! However, not to worry too much! The Fed, once it notices that the asset inflation, which supported consumption, has come to an end will once again turn on the money printing press. But will it help? I doubt since further money printing is likely to result in consumer price inflation exceeding personal income gains…Under this scenario long term bonds would be about the worst possible
Investment.”

GM’s annual expense for providing medical care for 750,000 employees, retirees and their family members will decrease by $3 billion before taxes. To partially offset those reductions in health care, GM said it would deposit $3 billion into a voluntary employee health benefit fund in 2006, 2007 and 2011. If GM meets certain financial goals, the company may put more money into the fund. I would not hold my breath though.

Provid Pharmaceuticals of North Brunswick, NJ is a world leader in peptide mimetics technology, In addition, the company offers capabilities in structure-based drug design, lead optimization, protein biochemistry and assay development. Provid and Palatin Technologies entered into a research services agreement for the optimization of leads emerging from PTN’s Proprietary MIDAS novel drug discovery technology. Dr. Trevor Hallam, EVP of R&D at Palatin, stated “Provid’s experience in all aspects of medicinal chemistry is going to be a key factor in the acceleration of our internal drug pipeline.”
It should be noted that yesterday afternoon MDB Capital Group initiated coverage on PTN with a buy rating. It’s a little like chicken soup. It can’t hurt.

In the say it isn’t so department, is it possible there was fraud at the voting polls in Iraq over the weekend? Could Cheney be part of the probe conducted by Fitzgerald? This is all too much for me to absorb on an early Tuesday morning.

In the BS department, India’s oil minister stated ''after PetroKazakhstan gets restructured and a legal framework worked out, perhaps we can start talking about how to acquire an Indian participation in assets run by PetroKazakhstan.”

Tom Clancy: “The difference between fiction and reality? Fiction has to make sense.”

Regarding Novartis's offer to acquire the remaining 57.5 pct stake it does not already own in Chiron Corp, the company stated that there “can be no assurance that an agreement will be reached”after Chiron's directors said the offer was inadequate. In effect, that’s nothing new and a smart negotiating ploy.

According to the NHC, tropical Storm Wilma gained strength in the Caribbean Sea but shifted its expected path to the east toward Florida. With that forecast, crude has dipped to the $63 level.

Barry Ritholtz: “Before 1983, CPI measured housing inflation by looking at what it cost to own a home (house prices, mortgage, property taxes). After 83, BLS changed the housing component, using the concept of Owner’s Equivalent Rent. Revert back to the true cost of housing, and Core CPI spikes to a more realistic 5.3%.”

You still do not believe in global warming? According to earthfiles.com, the average global temperature anomaly for combined land and ocean surfaces for September (based on preliminary data) was 1.13 degrees F (0.63 degrees C) above the 1880-2004 long-term mean. This was the warmest September since 1880. The second warmest September was in 2003.

You still do not believe in UFOs? You might want to see the pictures taken at various times over the last few months. They can be seen at ufosnw.com.

We are in the midst of earnings season. It might be wise to focus on the guidance for future quarters as well as noting comparative tax rates, the number of shares repurchased (IBM and Citigroup, for example), the topline growth, and the trend in gross profit margins. The headlines frequently do not reflect the nitty gritty.

China imported 19.53 million tons of soya in the first nine months of 2005, up 39.9 percent year-on-year, China Securities Journal reported, citing the most recent data from the General Administration of Customs. In September alone, the country imported 1.87 million tons of soya, up 29.3 percent over the same month of last year, the report said.
In the 2004-2005 fiscal year, China imported a total of 25.8 million tons of soya, more than last year's import and higher than the figure estimated by the US Agricultural Department. For years I have written about soy as an excellent source of protein as well as the growing consumption of soy. In my view, that trend will continue well into the future.

Economic news for today: Sept. PPI, August net foreign securities purchases, and the Oct. NAHB Housing Market Index. In addition, Janet Yellen gives a talk on the economy.

Robin Williams: “When the media ask George W. Bush a question, he answers, ‘can I
use a lifeline.’”

Business As Usual

10/17/05 Business As Usual

There are times when news outside of the financial world takes center stage over earnings season or mergers. This is one of those times. I am not a political analyst; however, I can think for myself. In my view, prior to October 28, Karl Rove and, possibly, Scooter Libby will be indicted for, at least, obstruction of justice and lying to a Grand Jury. Problems for the Administration do not end there. We still have the situation with Jack Abramoff and Michael Scanlon. The name of Susan Ralston may also be raised. She was the personal assistant to Rove, and before that, Abramoff’s secretary. How far did these tenacles reach? Do not be surprised if they went very very deep. Politics can be a nasty and unsavory profession. Richard Nixon is one example. He does not have a monopoly in this regard. It is going to be a very long winter going into springtime with respect to damaging political news.

Margaret Thatcher:“You don't tell deliberate lies, but sometimes you have to be evasive.”

As I frequently mentioned, there will be other hurricanes this season after Katrina and Rita. Wilma is looming in the Caribbean. The storm has spooked the oil market with the price jumping this morning to $64 a barrel. One should not forget that two-thirds of U.S. oil production in the Gulf of Mexico region is shut in, and 10% of U.S. refining capacity remains idle.

Which is more important to you—the weekend vote on the Iraq constitution or the fact that at least 1,976 members of our fighting forces have been killed in Iraq since we invaded this country in March 2003?

On Saturday, CNPC made peace with the Kazakh government over their planned purchase of PKZ. The purchase should be finalized on Oct. 19. China National Petroleum Corp. signed an agreement to sell a 33% stake in PetroKazakhstan Inc. to KazMunaiGaz. for $1.4 billion, and refine a determined amount of crude oil through the Shymkent oil refinery which it will jointly own with the Kazakh state-owned company, according to the Asian WSJ and Bloomberg.

China is expected to meet the 15 pct growth target of M2 money supply set earlier this year by the country's central bank, the Securities Times reported, citing a government official.
Li Yang, director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said he expects M2, which rose 17.9 pct year-on-year to 28.7 trln yuan at the end of September, to continue to meet government expectations.

The OPEC oil cartel revised lower its 2005 and 2006 forecasts for the crude oil its members produce, by 200,000 barrels a day in 2005 and by 400,000 barrels a day in 2006.

Ayn Rand: “Thinking men cannot be ruled.”

Barriers

10/16/05 Barriers

On Jan. 1, 2006, a new law goes into effect. The current law allows those owing monies on credit cards
to pay a minimum of 2% monthly on the outstanding balance. This will be increased. The average household credit-card balance is $9,205, according to credit research firm Cardweb.com, up from $8,940 in 2002. Nationally, outstanding credit-card debt has ballooned from $443.49 billion in 1995 to $797.97 billion currently. "In principal, raising minimum payments makes sense because it allows consumers to pay off their debts faster and save thousands of dollars in interest," said Joseph Ridout, who manages the consumer hot line at Consumer Action in San Francisco. With sharply higher home-heating bills, inflation continuing to outpace wage gains, and higher interest rates diminishing refinancing opportunities, the higher minimum credit card payments will further strangle the individual and/or families on Main Street.

According to the Detroit Free Press, as of Sept. 1, there were 40,110 Michigan families seriously delinquent on their mortgages or in foreclosure. In metro Detroit alone, nearly 26,000 homes were in foreclosure. The state's 2005 mortgage delinquency and foreclosure rates are 50% higher than the national average, a startling statistic that reveals a large number of metro Detroiters are being forced out of their homes and into financial ruin.

Over the years, I have often written that government economic figures are a barrier to reality. The unemployment rate is closer to 10% than it is to 5%. The CPI is closer to 5% than it is to 2%. The 2005 budget deficit is closer to $500 billion than it is to $300 billion. As the city of New Orleans discovered, you cannot ignore the ineffective levees forever.
In Washington, you cannot spin the country's way out of looming financial ruin. Turning blind eyes to reality is an act of desperation and ignorance, a combination that can leave you homeless and on a bread line. Don't turn to Washington for help. Mostly bankrupt souls reside along Pennsylvania Avenue and on Capitol Hill. You can blame yourself for that fact.You voted them into office. I know the alternatives weren't great, but maybe if you didn't demand the media to look up a candidate's rear end for every personal detail of one's life, more qualified candidates would run for public office. No one is perfect and no one gives you the right to practice as a proctologist without a medical degree.

The government of Kazakhstan has done its best to legislate aginst free enterprise. Yesterday "President Nazarbayev signed the law amending legislation on the subsoil and on conducting oil operations. The document aims to perfect
state regulation in this sphere." According to a letter seen by Reuters on Friday, CNPC stated that PKZ's Shymkent
refinery could be run on a parity basis with the Kaz government as long as CNPC purchased PKZ. It should be noted that CNPC signed the agreement to purchase PKZ back in August or two months prior to Nazarbayev signed the new law. As the Kaz energy minister stated in writing on Friday, "so we might be facing a legal collison, but I think it won't happen." If the Kazakhstan government wants to attract future investment, I strongly suggest barriers not be erected to free enterprise. Don't bite the hand that feeds you. The world can be a lonely place.

Ronald Reagan: "There are no constraints on the human mind, no walls around the human spirit, no barriers to our progress except those we ourselves erect."

The Status

10/15/05 The Status

President Bush's overall job approval ratings continue to sag in Illinois -- down to 33 percent from 45 percent in October 2004, according to the latest Chicago Tribune/WGN-TV poll. Recent national polls show the presidents' approval rating among voters nationwide at 38 percent. Factors driving this pervasive decline in Illinois are even higher disapproval levels for how Bush is handling the economy (63 percent), how he is handling Iraq (64 percent) and a similar rebuke for his handling of Katrina (60 percent). Notably, Bush is losing support even among the most reliable segments of Illinois Republicans. The president now has a 77 percent approval rating among Republican voters versus 85 percent in May. For the first time in his presidency, half of the voters in Chicago's collar counties disapprove of Bush, and among voters Downstate, 54 percent say they disapprove of Bush's performance. Party officials fear this could complicate their efforts in next year's Congressional and gubernatorial races.

Social Security beneficiaries in 2006 will see a relatively large increase in their monthly checks, according to CCH INCORPORATED (CCH), a leading provider of tax and payroll law information and software. As a result of inflation, an increase of 4.1 percent will be applied to this coming year's benefits, starting with December 2005 benefits, which are paid in January 2006. This is the largest annual increase since 1991. The 4.1-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $1,002 for all retired workers in 2006, $47 a month more than in 2005. However, $10.30, or 22 percent, of that increase will be eaten up by a rise in the premium paid by beneficiaries enrolled in Medicare Part B in 2006. With a total monthly Medicare Part B premium of $88.50 in 2006, Social Security beneficiaries enrolled in Medicare Part B will see that average $47 benefit increase reduced to $36 after rounding required by law.

Albert Einstein: "Not everything that can be counted counts, and not everything that counts can be counted."

President George W. Bush, in October 2005, received his lowest positive job performance rating recorded by the Sacred Heart University Polling Institute. According to the national poll, the President's favorable job performance rating is 42.0%. This is down from 52.3% in April 2005, 57.7% in April 2004, 53.2% in February 2004, 58.4% in October 2003, 77.9% in April 2003 and 65.1% in March 2003. "Although public approval ratings normally decline throughout a President's term of office, the severe decline in President Bush's ratings suggest an unusual degree of dissatisfaction among the American people with the President's policies as well as a loss of confidence in his leadership ability," said Dr. Gary Rose, professor and chair of the Department of Government and Politics at Sacred Heart University. Among Republican leaning voters, the President's rating was 78.6% positive while those who vote mostly Democrat provided a 14.8% positive rating. Among unaffiliated voters, the positive rating was 42.7%. Among Hispanics, President Bush received a 20.7% favorable rating while whites provided 46.7% and African-Americans provided a positive rating of 19.8%.

Seneca: "While we are postponing, life speeds by."

Wal-Mart customers found items they wanted in stock more often due to the retailer's use of electronic product codes (EPCs) powered by radio frequency identification (RFID) technology when compared to control stores. This is according to an independent University of Arkansas study's initial findings. Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks. Additionally, the study also showed that out-of-stock items with EPCs were replenished three times faster than comparable items using standard bar code technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory. "This is no longer a take-it-on-faith initiative," said Linda Dillman, executive vice president and CIO for Wal-Mart. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."

 Real average weekly earnings fell by 1.2 percent from August to September
after seasonal adjustment, according to preliminary data released today by the
Bureau of Labor Statistics of the U.S. Department of Labor.  This decline
stemmed from a 1.4 percent increase in the Consumer Price Index for Urban Wage
Earners and Clerical Workers (CPI-W), which was partially offset by a 0.2
percent increase in average hourly earnings.  Average weekly hours were
unchanged. Average weekly earnings rose by 2.3 percent, seasonally adjusted, from
September 2004 to September 2005.  After deflation by the CPI-W, average weekly
earnings decreased by 2.7 percent.  Before adjustment for seasonal change and
inflation, average weekly earnings were $548.24 in September 2005, compared with
$530.54 a year earlier.

Barry Riholtz: "The only real bright
spot in the inflation data is worker earnings relative to inflation.
They fell, as the the Labor Department reported 'real average weekly
earnings of U.S. workers, adjusted for inflation, fell 1.2% in
September.' That marks the third consecutive monthly  decline of real
wages (average hourly earnings rose 0.2%). So the only place where there is no
inflation is in the pocketbooks of the consumer, whom I must remind you accounts
for 70% of the economy."

According to J.D. Power, in the first nine days of October, new-vehicle sales
plunged 57% at GM and 45% at Ford compared with the first nine days of September.
"The aftermath of the employee pricing programs is having a dramatic impact," stated
Jeff Schuster, executive director of global forecasting at J.D. Power. He remarked
that "at this pont, we're on track for an October like we haven't seen since the
early 1990s." Toyota overtook GM and Ford in U.S. retail market share in
in early October and gained 4 percentage points to 18.2 percent.

Comair to cut up to 1,000 jobs.

Socrates: "My advice to you is to get married. If you find a good wife you'll
be happy; if not, you'll become a philosopher."

September industrial production declined 1.3%, the largest monthly drop in 23
years. Capacity utilization slumped to 78.6 from 79.8 in August. The drop in
capacity utilization and industrial production pushed the BullandBearWise Index
to match the lowest level of the year.

In case anyone cares other than the Fed, core inflation is up 2% in the past year.

In the first part of October, the Univ. of Michigan Consumer Sentiment Index
dropped to 75.4 and the expectations index declined to 62.4, a 13-year low.

John Murphy: “The most dangerous time for the market is the autumn of 2005 to
the autumn of 2006."

According to GM, UAW workers pay 7% of their health care costs, while white-collar
workers pay 27% of these costs. The differential is about to narrow. There is no
alternative available at the bargaining table.

"All countries, major economies in particular, should keep
major currencies reasonably stable and prevent trade
protectionism," Hu said today in Beijing, in an opening speech
for the Group of 20 nations gathering of finance ministers and
central bankers being held near the Chinese capital.

In the first nine months of this year, actual foreign direct investment
in China dropped 2.11 percent from a year ago to US$43.25 billion, the
country's Ministry of Commerce stated.

Kierkegaard:"People demand freedom of speech to make up
for the freedom of thought which they avoid."

According to Marsoft, from mid-August to mid-September, the Baltic Dry Index
registered its largest monthly increase since the end of 2004. During this
period, the index gained 700 points or roughly 30%, as it climbed above 3000
for the first time since early June.

Techenguiz and 2 partners agreed to buy Sommerfield plc,U.K.'s 5th largest grocer,
for $1.9 billion.
The Tchenguiz group is paying 8.6 times cash flow from
operations for Somerfield, according to data compiled by Bloomberg.
William Morrison Supermarkets Plc paid 20.7 times cash flow for
Safeway Ltd. in 2004. When viewing the deal for Sommerfield and its
less than appealing operating history, one can see that Albertson's
is significantly undervalued at present price levels.

Store-bought swordfish contained mercury
levels above the legal limit in a study released Thursday by
environmental groups.

The printing presses are alive and well at the Fed. In the week of October 3,
M3 topped $10 trllion for the first time. Recently, M3 has been surging at
a double-digit annualized rate. Do you think that has contributed to the
spike in inflation?

Bayou Group, Wood River, and now Refco. How many more black holes will
soon rise to the surface? There are a million stories in the naked city.
But only the Shadow knows....

Kazakhstan's Energy Minister Vladimir Shkolnik claims that CNPC did not
consult with the Kazakh government prior to reaching an agreement to buy
PKZ. From my perspective, he has two choices-- to grow up and get over it
or learn to swim with sharks. Is there any doubt that Shkolnick would have told
his cronies and they would have rushed out to buy PKZ prior to the public
annuncement of the deal?

Gary Lammert: "The cash reserves in US equity mutual funds are at a historically low
level, lower than immediately before the peak of the Wilshire in March
2000, and equalling the low in 1972 before the 50 percent steady
decline in equity valuations into 1974. The difference between 1974
and now is the additional massive siphoning effect that a declining
housing market will soon have on the monies available to the equity
market and the impetus to liquidate equities in order to futilely
continue mortgage payments on houses with growing negative worth
during a rapidly developing economic and money contraction."

Rising spending by Chinese consumers will make China the second-largest
market in terms of household consumption in the world by 2014, next
only to the United States, said a study by Credit Suisse First Boston.
China's consumption is likely to grow 18 percent annually by 2014, against an
average growth of 11 percent globally and 2.1 percent in the United
States, CSFB estimates. The estimate is based on its
assumption that the Chinese economy will expand 7 percent annually and
the proportion of consumption in the gross domestic product will rise
5.5 percentage points a year in the runup to 2014.

Prime Minister Paul Martin told some New York executives last week that
Washington's refusal to adhere to NAFTA rulings on lumber tariffs was
threatening North American trade relations, and he reminded them that
China was thirsty for the Canadian oil and natural gas that pours into
the United States each year. You can thank Bush for reneging on lumber
agreements with Canada. You cannot spin reneging.

Gardenburger filed for bankruptcy in California. Having tasted one in
a weak moment, I am not surprised.

For those who eat salmon two or three times a week, you might consider
spicing up the fish by making a rub of the following:
1 tablespoon garlic powder and black pepper.
1 teaspoon ground cumin and sugar.
1/2 teaspoon paprika, cayenne pepper, dried oregano and dried thyme.
1/4 teaspoon salt.

Don't look now, but there have been increased sightings of UFOs. Please visit
earthfiles.com and ufosnw.com.

The Missouri Department of Transportation is finalizing a contract to
monitor thousands of cell phones, using their movements to map
real-time traffic conditions statewide on all 5,500 miles of major
roads. Of course, the information will be kept confidential and anonymous!

Mary Manin Morrissey: "Even though you may want to move forward in 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?"

















        


   

        


   

Thinking For Yourself

10/14/05 Thinking For Yourself

The August trade deficit rose 1.8% to $59 billion, the third highest monthly ever.

Import prices rose 2.3% in September, the biggest one month rise in 15 years. The Treasury market reacted negatively and the the yield on 10-year government bonds rose during the day to 4.50%. This yield is still ridicously low, in my view, given our twin tower deficits and the direction of spending in the Congress and by the nation as a whole. Thirty-year mortgages rates topped 6%, and it is only a matter of time until the home owners with ARMs are feeling the pinch of higher interest rates. What goes down can also go up.

U.S. consumer inflation surged at the fastest pace in more than 25 years in September, rising a bigger-than-expected 1.2%, the Labor Department said Friday.

The number of lost jobs resulting from Katrina jumped to 438,000 last week. The amount of flooding in the Northeast is rising to devastating proportions, ad has impacted many families in several states.

According to briefing.com, Bear Stearns downgraded Albertsons from Peer Perform to Underperform. The downgrade is based on Bear's increasing skepticism that a single strategic buyer or private equity participant acquires the co, and the risk that the current deal premium embedded in the stock evaporates accordingly. They continue to assign a low probability that a buyer (or group of buyers) emerges to purchase the entire co. Removing the deal halo, firm believes that the stock would trade down to roughly $18. This is a more negative view than Lehman took a week or so ago, but the basis premise is the same. At 23, the stock already reflects a low probability of one buyer or group of buyers. Before the news that they were seeking alternatives, ABS shares were selling at about $20.50. In my view, the risk at this level is minimal compared to the upside worth imbedded in the company. This situation is very different from that of Saks.

An international team led by a dermatologist at The University of Manchester has found that the treatment with
the emerging drug infliximab, marketed as Remicade, can quickly and
significantly improve psoriasis symptoms.
The European Infliximab for Psoriasis Efficacy and Safety Study (EXPRESS)
was a placebo-controlled trial on 378 patients with moderate to severe
psoriasis, to test the efficacy and safety of the drug.  The findings,
published in the 15 October issue of The Lancet, show that 80% of patients
achieved at least a 75% improvement in symptoms after ten weeks treatment with
the drug, as opposed to just 3% of those receiving a placebo.

Palatin Technologies today announced that it will present at the 2005 BIO
Investor Forum in San Francisco at 10:40 a.m. local time (1:40 p.m. eastern) on
Wednesday, October 19, 2005.  This conference is being organized by the
Biotechnology Industry Organization.
 Carl Spana, Ph.D., President and Chief Executive Officer of Palatin
Technologies, will provide an update on the Company's commercial and
development programs.  To access the live audio broadcast or the subsequent
archived recording, log onto http://www.palatin.com.

Frequently, I write that, as an investor, one must think for oneself and know
what you own. You don't listen to rumor or garner information from message
boards. Investors in PetroKazakhstan entered the world of risk arbitrage
after the deal to sell to CNPC was struck. This is a very different environment
and PKZ already operates in a hostile part of the world. There were some basic
backgroud facts that needed to be at the forefront. China looked like an
amateur with the botched deal between CNOOC and Unocal. They did not want to
lose face twice in a matter of months. Losing face is a no no. Then there
is the new 1,000-km pipeline pumping crude from the Caspian region to China.
In a matter of months it goes on stream. In addition, CNPC is building a
refinery in NW China to process the Kazakh crude and then transport it thru the
pipeline. This means CNPC could afford to sell PKZ's refinery to the Kazakh
government and make peace with the acquisition. Another important piece to
the analysis is one of the advisors to PKZ. He is former Prime Minister
Jean Chretian. He will help guide the company through the rough and tumble world
of Kazakh and Rusian politics. I expected a bumpy ride until deal completion on Oct.
18 but yesterday was out of the ordinary. For the everyday investor it must
have been quite unnerving for the stock dropped from 50 to 46.50 in a matter of
minutes. This is not watching paint dry. If you were prepared with the facts,
the sharp intraday decline was an unexpected opportunity. It requires self-
confidence built on experience and quick thinking of the facts. It is but for
a handful of investors. After the close, the Asian WSJ stated China's CNPC
is poised to sell a 33 percent stake in PKZ to Kazakh state oil firm KazMunaiGaz
for $1.4 billion. "China National Petroleum Corp. (CNPC) is close to agreeing to a side deal that is likely to help it seal the controversial acquisition," it said, citing people familiar with the situation. One should have remembered that
well over a month ago there was discussion between CNPC and the Kazakh government
to sell a piece of the company. One should always keep in mind that, when various
parties sit down at the table, each one needs to get a piece of the pie,
so to speak. CNPC knew that in the beginning before they sealed the deal with
PKZ. (It is a point that Bush has not learned and has no interest in learning.
It is his way or no way. That's not the way the world works. That's why the
U.S. has few if any friends left.) In sum, don't invest scared. Invest smart. Know
your stuff. Knowledge really can be power. It can make you money while others
are running for the hills.

Consequences And Circumstances

10/13/05 Consequences And Circumstances

According to the Hindu news, Kazakhstan is believed to have discouraged India from making a rebid for acquiring PetroKazakhstan.
Kazakhstan's Minister for Energy and Mineral Resources V Shkolnik had last week told Petroleum Minister Mani Shankar Aiyar in no uncertain terms that Kazakhstan was looking at nationalising oil properties being sold by foreign companies and would not want ownership to pass on to another foreigner, sources stated.

Kazakhstan's upper house of parliament, the Senate, passed a bill on Wednesday to allow the state to intervene in the sale of foreign-held stakes in oil firms, a move that may hinder CNPC's bid for PetroKazakhstan. The bill, which also seeks to limit property rights for "strategic resources" like oil and gas assets, was passed unanimously by the lower house last week. It now needs President Nursultan Nazarbayev's signature to become law.

China National Petroleum Corp, which has made an agreed takeover offer for Canada-based PetroKazakhstan, is confident it will see the deal through despite the move by Kazakhstan's upper house of parliament, said Tong Xiaoguang, an advisor to CNPC International -- the wholly owned unit of CNPC which is conducting the deal. "Several of our company's main leaders are gone to Kazakhstan for the PetroKazakhstan takeover deal," said Tong, who is also a former vice president of CNPC International.
Tong reaffirmed to Reuters by telephone that CNPC had reached an understanding with the Kazakh government on the transaction. "Before deciding to acquire the company, CNPC communicated with the Kazakh government, and they allowed us to go ahead. As for what is on the mind of the (Kazakh) parliament, I'm not sure," said Tong. "If the Kazakh government had not given the OK for us to bid for the company, why we would bother to do it to begin with?," he asked.

I know it is sundown and the start of Yom Kippur, and this may be the wrong time to discuss consequences; however, when governments or any other entity attempt to reneg on an agreement, it is not enough to be civil and put on a face that does not reflect reality. As such, in my opinion, CNPC needs to dole out consequences to those attempting to create harm. This is not a game. Thugs need to be taught a lesson they will never ever forget.

Joseph Addison: "When a man is made up wholly of the dove, without the least grain of the serpent in his composition, he becomes ridiculous in many circumstances of life, and very often discredits his best actions."

According to an NBC/WSJ poll, for the first time in the poll, Bush’s approval rating has sunk below 40 percent, while the percentage believing the country is heading in the right direction has dipped below 30 percent. In addition, a sizable plurality prefers a Democratic-controlled Congress, and just 29 percent think Supreme Court nominee Harriet Miers is qualified to serve on the nation’s highest court.

Golda Meier: "There will be no peace in the Middle East until the Arabs love their children more than they hate the Jews."

Google Inc. and Comcast Corp are in serious discussions with Time Warner Inc. about buying a minority stake in America Online, the Wall Street Journal reported on its Web site Wednesday, citing people familiar with the situation. The negotiations focus on AOL's Web portal, rather than its dial-up Internet access business, the paper reported.

The Energy Dept stated that heating bills would be 48% higher this winter.

10-year Treasury bonds closed at a six-month high yield of 4.45%. The higher the yield the more mortgage rates will rise. Those with adjustable rate mortgages may begin to feel a pinch.

Research shows that credit card debt in America has almost tripled since1989 and increased 31 percent since 2000. Americans now owe some $800 billion in credit card debt. In addition, owing largely to job instability and medical costs, bankruptcies rose from 616,000 in 1989 to over 1.8 million in 2004. However, too little is known about the causes of America's household debt crisis. Existing data sources tracking debt, such as the Federal ReserveBoard's triennial Survey of Consumer Finances, provide limited information and do not answer basic questions about how long households have been in debt and about the type of charges that lead to outstanding balances. Prior to the survey findings presented in The Plastic Safety Net, there have been few studies that analyze how households are using credit cards and how they are managing their debt. "American families are facing financial hardship not experienced for generations, and we commissioned this survey to tell us precisely why they are turning to credit cards so often," says Tamara Draut, Director of the Economic Opportunity Program at Demos and co-author of the report. "The results are clear: wages have stagnated while medical and housing costs have skyrocketed, and if confronted with a layoff or health emergency there are few, if any, personal or public safety nets adequate enough to help in a crisis. Households are turning to high-cost credit cards to keep afloat." Key survey findings from The Plastic Safety Net: - $8,650 is the average credit card debt of a low- and middle-income indebted household in America. - 59 percent of respondents were in credit debt for longer than one year, with an average length of just over three and a half years. - Seven out of 10 low- and middle-income households reported using their credit cards as a safety net -- relying on credit to pay for car repairs, basic living expenses, medical expenses or house repairs. - One out of three households reported using credit cards to cover basic living expenses on average four out of the last 12 months; households that reported a recent job loss or unemployment, and those without health insurance in the last three years, were almost twice as likely to use credit cards for basic living expenses. - 20 percent of survey homeowners had paid off some credit card debt with a mortgage refinance in the last three years, reducing their home equity $12,000 on average. Further, these households still had average credit card debt over $14,000. As a result, they were carrying 18% more debt than homeowners who had refinanced a mortgage but not paid down credit card debt -- even though their incomes were almost identical. In other words, they were trading unsecured credit card debt for higher mortgage debt secured by their home. The Plastic Safety Net also reports that, as Americans are increasingly relying on credit cards to pay for essentials that wages no longer cover, reliance on credit cards is having a multiplying effect that is creating millions of "debt-stressed" families: - 47 percent of households had been called by a bill collector. - Almost half missed or were late with a payment in the last year, with nearly a quarter of households reporting paying a late fee at least one or two times in the past year. - In addition to charging late fees ranging from $30 and $39, most issuers also penalize cardholders for late payments by increasing the interest rate on the account two- or three-fold, often after only one late payment. A household with the average amount of credit card debt in the survey ($8,650) would pay an additional $1,100 in costs each year if their card's interest rate were increased from the typical 12 percent to the average 25 percent "default rate" for one late payment. "American families are losing the fight against an economy and lending practices that are working against them," said Mark Pearce, President of the Center for Responsible Lending. "It's time for Washington to address this crisis head-on and create policy that protects, and promotes economic vitalityfor all American households."

U.S. 5-year Treasury notes hit a yield of 4.27%, the highest in 3 years.

Countrywide Financial closed at a new 52-week low.

Plato: "Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws."

Updating

10/12/05 Updating

Investor's Business Daily and TechnoMetrica Market Intelligence stated their economic optimism index rose to 42.0 from a record low of 41.2 in September in the aftermath of Hurricane Katrina. Even a baby step is better than the alternative. Unfortunately, anything below 50 still reflects a lack of optimism.

Michael Asbaugh: "Yet with last week's losses, both the S&P and the Dow are positioned under their major moving averages, and the Nasdaq is getting a good solid test of its 200-day moving average. As suggested repeatedly last week, a more cautious approach to the U.S. markets is probably well advised until better signs of a bottom are in place."

When it comes to Habitat for Humanity, Jimmy Carter builds houses. Bush creates photo-ops.

With tens of millions of people affected by natural disasters over the past 10 months, the American public "may be
reaching an unprecedented level of 'compassion fatigue,'" according to the
president of World Vision.
"These last few months may be unprecedented in regard to human suffering
from earthquakes, hurricanes, droughts and other emergencies," says Richard
Stearns, president and CEO of the U.S. offices of the international
Christian humanitarian organization. "Some people probably are becoming
numb to these tragedies. What we call 'compassion fatigue' may be setting
in."

According to Supermarket News, at least three investor consortiums interested in acquiring Albertsons are scheduled to make presentations this week to corporate management, industry observers said last week. The three consortiums, which trade sources said have completed due diligence and are likely to present offers this week, are: 1) Thomas H. Lee Partners, Boston; Bain Capital, Boston; and Warburg Pincus, New York, which are said to be receiving financial input from Morgan Stanley, Banc of America Securities and J.P. Morgan; 2) Kohlberg Kravis Roberts & Co., New York; Apollo Management, New York; and Texas Pacific Group, San Antonio, which are reportedly working with Deutsche Bank, Citigroup and Credit Suisse First Boston; and 3) Cerberus Group, New York, and Kimco Realty Corp., New Hyde Park, N.Y., which sources said are receiving financial advice from UBS and Wachovia Corp. Sources told SN that Yucaipa Cos., Los Angeles, may be involved with one of the groups, but would like to have operational control in any buyout and may prefer to make its own bid to avoid potential conflicts with partners in the future.

Microsoft Corp. and RealNetworks Inc. stated yesterday they have reached three agreements valued at $761 million in favor of RealNetworks to settle an antitrust lawsuit and create a new partnership to develop and promote digital music and games. It seems that every quarter Microsoft is settling lawsuits out of court for hundreds of millions of dollars, and, in the case, of Sun Microsystems, for a few billion dollars. There is something wrong with this picture.

The Federal Trade Commission has cleared Kirk Kerkorian to increase his stake in GM from the present 9.53% to more than 9.9% and to seek a seat on the company's board of directors.

Ten-year treasury bonds traded up to a 4.40% yield on Tuesday, and gold traded at the $480 an ounce level. Crude rallied back to the $63 a barrel mark.

According to the notes released yesterday of last month's FOMC meeting, the majority of Fed officials said they did not believe the longer-term growth path of the economy was affected by the hurricane, but did think upside risks to inflation had increased. It's taken two years for the Fed members to seriously worry about the risk of inflation. In my view, they have come very late to the party. As such, since I have little faith in the ability of government employees, I will turn my vigil to deflation rather than inflation.

In New Delhi, Mittal stated they are awaiting clarity in Kazakhstan law before deciding on making a revised bid for PetroKazakhstan."Kazakhstan has amended its oil policy and has preemption rights in any deal where foreign companies acquire Kazakh firms. We will wait for clarity before deciding on the rebid," Mittal Group Chairman and CEO Lakshmi N Mittal told reporters here.

Tolstoi: "The more is given the less the people will work for themselves, and the less they work the more their poverty will increase."

As anticipated, China's planning agency reported Tuesday that the country's gross domestic product grew by 9.4 percent in the first nine months of the year, and is forecast to grow by 9.2 percent for the full year.

Bertrand Russell: "It is preoccupation with possession, more than anything else, that prevents men from living freely and nobly."

The damaging effects of HurricaneKatrina and Hurricane Rita, rising heating oil prices, and escalating housingcosts present challenges for the 2005 holiday retail season, according toDeloitte Research's Leading Index of Consumer Spending and "Outlook for theHolidays" report. High inventories and moderated consumer demand will driveretailers to pursue more substantial promotional strategies. "Consumers have done a heroic job in holding up their end of the economy over the past eight months, with real consumer spending rising by four percent, despite real wages declines, falling savings rates, slow employment growth, and a rising tax burden," says Carl Steidtmann, chief economist of Deloitte Research and author of the monthly index. "Continued weakness in the index poses a challenging sales environment for retailers as they move intothe all important holiday season."

Third Wave Technologies Inc. announced that it has filed two patent suits in federal court in Madison, Wis. The company last Friday filed suit against Digene Corp., seeking a court ruling supporting Third Wave's right to sell its human papilloma virus (HPV) products. Third Wave also filed suit against Chiron Corp., Bayer Corp., and Bayer HealthCare LLC asking for a similar ruling about its right to sell its hepatitis C virus products. Chiron is the owner of several patents relating to HCV; Bayer is its licensee for clinical diagnostics.

Donald Kohn: "The need to compete for business in a globalized economy has quite likely raised the efficiency and flexibility of economic systems as well as reinforcing the requirement for noninflationary monetary policies... the extent and duration of (globalization's) damping influence on inflation are open questions... Inflation will still rise if central banks allow economies to run 'too hot' -- beyond sustainable potential -- and such a pickup could become self-perpetuating if it became embedded in inflation expectations."

Natural gas prices are expected to rise at least $59 a month to an average of nearly $200 starting in November, according to the Michigan Public Service Commission’s latest Winter Energy Appraisal report released in Lansing today.

Norman Cousins: "People are never more insecure than when they become obsessed with their fears at the expense of their dreams."

A Closer Look

10/11/05 A Closer Look

I find that a good way to get a closer look at the housing market is to peek at the results for Countrywide Financial. The company provided this information for the month of September as well as forthe entire third quarter:
Operational highlights for the month of September and the third quarter of 2005 included the following: * Mortgage loan fundings for the month of September reached $49 billion, a 58 percent increase from September 2004. For the third quarter, mortgage loan fundings were a record $146 billion, rising 59 percent over last year's third quarter. Year-to-date mortgage loan fundings were $358 billion. Monthly purchase volume was $23 billion, 35 percent greater than September 2004. For the third quarter, purchase volume was a record $69 billion, up 32 percent over the same period a year ago. Year-to-date purchase activity totaled $171 billion. Adjustable-rate loan fundings for the month were $24 billion, up 14 percent from September 2004. For the quarter, adjustable-rate loan fundings were $75 billion, an increase of 32 percent over last year. Year-to-date adjustable-rate fundings totaled $190 billion. Home equity loan fundings for September advanced 21 percent over last year to $3.8 billion, bringing home equity production for the quarter to $12 billion which was up 28 percent over last year's third quarter. Year-to-date home equity loan fundings reached $31 billion. Nonprime loan fundings totaled $4.0 billion in September, which compares to $3.9 billion for the same period last year. For the third quarter, nonprime fundings reached $12 billion, a gain of 2 percent over last year's third quarter. Year-to-date nonprime fundings totaled $32 billion. On a consolidated basis, Countrywide funded $9.9 billion in pay-option ARM loans and $8.8 billion in interest-only loans for the month of September 2005. This compares to $2.8 billion and $6.3 billion, respectively, for the same periods a year ago. Average daily mortgage loan application activity in September was $3.0 billion, 45 percent higher than the September 2004 level. The mortgage loan pipeline advanced by 51 percent from September 30, 2004 to $77 billion at September 30, 2005. The mortgage loan servicing portfolio continued its uninterrupted growth, reaching a new high of $1.05 trillion at September 30, 2005. This is an increase of $262 billion, or 33 percent, from September 2004. Delinquencies in the servicing portfolio rose 35 basis points from August 2005 to 4.03 percent at the end of September. This increase is primarily attributed to the forbearance granted to customers in the areas affected by Hurricane Katrina and normal seasonal fluctuations.

Further confirming the robust housing market, D.R. Horton stated that 4th quarter comp net sales orders rose 33%. The housing market will not rollover without a fight. Low interest rates are still spurring demand in many sections of the country.

The IEA estimates that global oil demand should approximate 1.75 million barrels a day in 2006. That should keep oil prices at historically high levels.

The Nikkei rose 2.5%, the biggest one day percentage increase in a year.

Inco offered to buy Falconbridge in a cash and stock deal representing a 9% premium over yesterday's closing price. Boards of both companies approved the deal.

Natural gas closed at a 2-week low of $12.975 per million BTU. Crude ended at $61.80 per barrel.

Xilinx and International Rectifier issued warnings for the quarter.

Sugar prices have recently hit 7-year highs. More and more suger is being blended into the manufacture of gasoline. Flexible fuel cars are the rage in Brazil. The cars offer fuel savings as well as appealing to those who wish to drive a vehicle on cleaner fuel. According to the National Ethanol Vehicle Association, there are about 4 million flex cars in the U.S. but there are 14 states without even one ethanol pump.

Due to inflation, next year's Social Security benefits will rise about 3.8% or approximately an additional $36 per month.

Douglas Malloch: "The river belongs to the Nation,
the Levee they say, to the State;
the Government runs navigation,
the Commonwealth, though, pays the freight.
Now, here is the problem that's heavy--
Please, which is the right or the wrong--
When the water runs over the Levee,
To whom does the river belong?"

Nature As A Risk

10/10/05 Nature As A Risk

If Columbus were sailing the seas today, he would need to be careful where he put into port. Nature and its impact on the planet is quite different today. In my view, there is a lack of appreciation of this specific risk in the management of equity and debt portfolios. Unless you had a real reason to own property and casualty insurance stocks and/or reinsurance companies, I would steer clear of them. If you were looking at a chart of the number of natural disasters over the last three years, the trend would be clearly visible. It's not the recent days of the horrible earthquake in Pakistan/India, the mudslides in Guatemala, or the floods from North Carolina to New Hampshire. The world's growing population is altering nature's landscape, and that change is decidedly negative. I don't know where the next natural disaster will occur, but I would not dismiss this risk as I would not dismiss the growing risk created by derivatives.

It is not unsual for me to disagree with analysts, and today's take by Lehman on Albertson's is no exception. According to marketwatch.com, Lehman Brothers cut supermarket chain Albertson's, Inc. to underweight from neutral weight, saying it believes the company will break up as no buyer will want to purchase and operate all of its assets in the long term. The broker told clients it values most of the stores as ongoing businesses rather than as pure real estate since its analysis shows the ongoing business value as higher. In my view, the parts are clearly worth more than the whole and that's what would be enticing to a financial buyer. The 750 free-standing drug stores alone have significant worth. Just look at the purchase price realized by JC Penney in its sale of Eckerd's, and the latter was not operating smoothly. In the end, the parts will drive the price and not the operating company by itself.

Lincoln Financial will purchase Jefferson Pilot for $7.5 billion in cash and stock.

U.S. trade rep Portman offered to end farm export subsidies in 5 years and substantially reduce U.S. domestic subsidies. I'm sure Portman is sincere. In my view, most of these reductions will not to come to pass. I've had significant experience with farm politics and I would not underestimate the power of the farm bloc, and particularly, the sugar growers.

According to the Detroit Free Press, GM could be forced to pay the Delphi pensions and that would cost $12 billion. In addition, it is likely that at least 11 plants will be closed, creating large layoffs.

There are 16,000 homes listed for sale in Las Vegas, and that is up from 10,000 last year.

It was over a year ago that I suggested going long the Nikkei and shorting the Dow as a hedge. In answer to some emails, I would not alter that position. I consider it a core part of a portfolio.

John Hussman: "Wednesday was particularly decisive – to an extent that I closed the bulk of our remaining exposure to market fluctuations in the Strategic Growth Fund about mid-afternoon. There has to be a lot wrong with market action to provoke me to increase hedges when the market is down rather than up. There was a lot wrong on Wednesday – it was singularly the worst technical showing I can recall in years...We don't have sufficient reason to accept broad market risk. Both valuations and market action are unfavorable here."

This morning gold hit a new 18-year high of $480 an ounce.

Today, crude has stabilized aroud $62 a barrel.

Joann Wolfgang von Goethe: "Nature knows no pause in progress and development, and attaches her curse on all inaction."

Round Numbers

10/9/05 Round Numbers

The M3 money supply is about to reach the $10 trillion mark. When you have year-to-date M3 expanding at a 7% rate, how can you expect inflation to subside and the dollar to retain value in the long-term? The U.S. federal debt will soon touch the $8 trillion level, and that excludes liabilities for Medicare and Medicaid in the coming years. It is a matter of pure math that the interest on the growing debt will prevent deficits from decreasing. Should there be a recession over the horizon, then the tax receipts will plunge. Will the Congress pass legislation to cut spending to offset the decline in tax receipts? I'd prefer the odds on winning the lottery.

The Economic Cycle Research Institute said its Future Inflation Gauge rose to 122.7 last month, its highest since June 2000, the tail end of the late 1990s economic boom. August's reading was revised down to 120.7. However, all that was last month. In the just-in-time market world, last week crude dropped $4.40 a barrel, unleaded gas declined 13%, and natural gas had a downdraft of 5%. These are not insignificant drops. Will they be a mere blip in the long-term rise of energy products? Part of the answer depends on the winter weather for natural gas and heating oil usage. As for gasoline and crude, the peak driving period is behind us. However, Spring is only six months from now.

Inflation in the 12 eurozone nations rose to 2.5% in September. As such, the ECB may have a need to raise its 2% benchmark rate in the coming months. This possibility might provide a further lift to the euro.

Delphi, the largest U.S. auto parts manufacturer, filed for bankruptcy protection. This action was anticipated; however, it will have an impact on employee wages and benefits as well as layoffs.

On this Sunday morning, I would like to re-visit a statement that Freddie Mac recently made. The company mentioned that 74% of Freddie Mac-owned loans that were refinanced in the second quarter resulted in new mortgages with loan amounts that were at least 5% higher than the original mortgage balances, the highest such share since early 2000. This statement reflects significantly on the rise of real estate prices as well as the increasing spending appetite on the part of consumers. The last chapter has not been written.

Thomas Jefferson: "I sincerely believe that banking establishments are more dangerous than standing armies, and that the principles of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

If Only

10/8/05 If Only

If it is possible that Bush truly gets his directions from God, I wish he'd request having earnings from jobs exceed inflation. Do you really care whether there are more or less leisure and hspitality workers, food employees, or amusement and gambling jobs? If the factory workweek and overtime remains unchanged and wages can't even rise a plug nickel, isn't that more vital. Year over year average hourly earnings rose 2.6%. This compares with a Consumer Price Index that rose 3.6% for the 12 months ended August. How come that doesn't bother Bush?
During the 12 months ended August, the year-over-year gain in the CPI exceeded the year-over-year growth in average hourly earnings in all but one of those months. The average worker, the man or woman on Main Street, busts their ass at work and gets little reward and certainly little appreciation. An increasing number cannot afford health care. Every day the media focuses on the price of gas, heating oil, and the housing bubble. I too am guilty of this. More attention needs to paid to take-home pay versus the inflation rate.

Do you think those shopping at Tiffany's also shop at Big Lots or even have heard of Big Lots? The latter is closing 126 underperforming stores and all 41 of its freestanding furniture outlets.

In the most recent AP-Ipsos poll, the number of people who strongly approve of Bush's job performance has eroded over the last year, most notably among key groups like evangelical voters, down from 49 percent who strongly approved in January to 33 percent now; Republican men, down from 57 percent to 42 percent; Protestants, down from 36 percent to 25 percent; and Southerners, down from 32 percent to 22 percent.
While four of five Republicans say they approve of Bush's job performance, enthusiasm in that support has dipped over the last year.
In December 2004, soon after his re-election, nearly two-thirds of Republicans strongly approved of his job performance. The AP-Ipsos survey found that just half in his own party feel that way now. Where is Pastor Parsley now?

"I think we've hit the tipping point, and think that in many areas you're seeing a leveling off of prices," Countrywide CEO Angelo Mozilo told Reuters at this week's meeting of the Business Council, which includes chief executives of various companies.
Mozilo said he thinks housing prices will especially moderate in areas where there has been speculative buying in condominiums such as South Florida.
"Wherever you see speculators, no matter where it is in the country, that's trouble, because as soon as there's a little blip, they're gone," Mozilo said.

Media reports from India maintain that, after a failed attempt at buying PetroKazakhstan, theLN Mittal group and Oil and Natural Gas Corporation(ONGC) are now exploring investment opportunities inNigeria. Nigerian President Olusegun Obasabjo has written to the Mittals seeking investments in export-oriented refineries, liquefied natural gas projects and railways. The Indian government is using the opportunity to seek exploration and production (E&P)contracts in the African nation. The Mittal group is now facilitating meetings in Indiafor a ministerial delegation from Nigeria, which is expected to arrive on Monday. The delegation will hold discussions with ONGC regarding E&P projects on Tuesday. Only recently, ONGC was outbid for some oil exploration sites in Nigeria.

Adelaide's housing market has recorded its first fall in house prices in five years. A 1.09 per cent fall in the September quarter ends the run of 19 consecutive quarters in Adelaide in which prices had grown or remained constant. The last time house prices fell was in the September 2000 quarter.
State Government figures released to The Advertiser show the Adelaide median house price fell from $275,000 to $272,000 in the September quarter. For the year, prices grew 3.82 per cent. The Real Estate Institute of SA said the latest figures were "nothing to be alarmed about". "I am not distressed by this at all," president Robin Turner said. "The market is getting some normality back and there is more buyers' resistance. "We don't want to drive homeowners out of the market with never-ending increases in prices. "We are coming off an incredible high which has been sustained for five years and this is a very small change in value and a very soft landing." Robin Turner sounds like he could sell manure in farming country.

At $477.70 per ounce, gold had the highest close since late 1987, and silver at $7.77 had its highest close since March 2005.

When the BLS reported the latest nonfarm payrolls, for some reason the headlines did not mention that the number of unemployed rose by 270,000 in September. It must have been an oversight.

Last year, the British-based Hong Kong and Shanghai Banking Corporation (HSBC) bought 19.9 percent of the Bank of Communications for $2.25 billion. In June, the Bank of America invested $3 billion for a 10 percent stake in the Bank of China (BOC). In July, the Royal Bank of Scotland bought another 10 percent of the BOC for $3.1 billion, while Singapore’s Temasek committed $2.5 billion to the China Construction Bank. In August, Goldman Sachs paid out $3 billion for a 10 percent stake in the Industrial & Commercial Bank of China.
By 2007, it is estimated that foreign financial groups will control one sixth of China’s banking system.

The evolving reason for war in Iraq has gone through stages. First, Bush stated there were WMD. Then there were no WMD so the reason became getting rid of the tyrant Saddam Hussein. Now Hussein is in jail and the new reasoning, states Bush, is "would the United States and other free nations be more safe, or less safe, with Zarqawi and bin Laden in control of Iraq, its people, and its resources?" Maybe we should just get bin Laden and Zarqawi and dispense with the war in Iraq where 1,950 U.S. service personnel have died. We've had over 4 years to get bin Laden. How many more do we need? If only Ross Perot had been president. The results would have been quite different.

Affordability

10/7/05 Affordability

In the Bay Area, the CAR estimates only 12 percent could afford a median priced home, which it pegs at $730,360. That's down from 14 percent last August when the median home there went for $644,920.
Of course, you can always take a trip to Las Vegas and try your luck. Maybe you can win the home of your dreams like the lady with $4 in quarters. In the meantime, the lack of affordability will be the downfall to the housing market in California.

A tax benefit added 4 cents to Costco's per-share earnings in the last quarter, while lower state taxes contributed 3 cents. That helped lower the company's tax rate to 28.9 percent from 37 percent a year ago. In reading the third quarter earnings reports coming out, it would be wise to check the comparative tax rates for 2005 and 2004.

According to the Detroit Free Press, Delphi Corp. has demanded such drastic cuts in wages and benefits for workers that, according to one UAW local, its members would no longer be able to afford the cars they help build. According to a flyer sent to at least two UAW locals Thursday, the company is asking for wage cuts of as much as 63%, to $10 an hour, and for workers to pay 27% of their health care costs versus 7% currently. Rather than generate more animosity, maybe Delphi would be better advised and just shut up and file for bankruptcy.

Federated CEO Terry Lundgren blamed weaker-than-expected sales in September on Hurricanes Katrina and Rita, high gasoline prices, dampened consumer confidence and poor sales of Bloomingdale's and Macy's furniture and home furnishings. Other than that, everything was coming up roses. One more thing, the CFO stated they had challenges in turning around May. No one forced them to buy May.

Strong Sino-Kazakh ties are likely to ensure that China's state oil company CNPC wins its $4.2 billion Kazakh oil prize, even as signs emerge that the Kazakhstan government wants a piece of the action. Tong Xiaoguang, a senior adviser to CNPC's overseas operations, said the company had an understanding with the Kazakh government ahead of the deal.
"Before we decided to acquire it, we had notified the Kazakh government and they agreed to the plan," he said I have never doubted that. It's unfortunate though that ONGC/Mittal did not walk the talk. In the future, I will remember that. Fool me once....According to the India Times, it is understood that the Indian Government has failed to make a “substantive” bid approach for PetroKazakhstan, despite its many declarations that it may scupper Chinese plans to buy the oil company.

U.S. nonfarm payrolls fell by an estimated 35,000 in September, the first decline in more than two years, the Labor Department said Friday. The drop was much less than the 150,000 expected. Payrolls in July and August were revised higher by a total of 77,000 jobs. The unemployment rate rose as expected to 5.1% from 4.9%. The government would not precisely quantify the impact of Hurricane Katrina, but gave a rough estimate of 230,000 lost jobs based on the assumption hiring was normal elsewhere. Job losses were concentrated in manufacturing, retail and leisure. Don't look now but the 10-year Treasury yield has jumped to 4.42%. Are you starting to feel the interest rate pinch on your ARM? You can always file for bankruptcy. That's the American way.

China's trade surplus from January to August reached $60 billion, already far exceeding the $32 billion recorded for all of 2004. By year's end, the surplus is expected to balloon to $90 billion to $100 billion, the Commerce Ministry said, according to a report in the official China Daily newspaper.

Rodman & Renshaw, LLC initiated research coverage of Palatin Technologies PTN with a Market Outperform Rating and a 12-month price target $5. Ilya Kravets, Senior Specialty Pharmaceuticals Analyst, issued the report. It's a little like chicken soup. It can't hurt.

Almost one third (31%) of Americans say they are using more credit to pay the higher prices for energy and other consumer goods resulting from Hurricane Katrina, according to the Cambridge Consumer Credit Index. 19% say they are using less credit, while 50% say they are using the same amount of credit as they did a year ago. "The results of the Cambridge Consumer Credit Index wildcard question show that higher prices for energy and other consumer items brought on by the aftermath of Hurricane Katrina are causing a large amount of Americans to use more credit than they did a year ago because they just don't have enough income to pay these higher costs. Lower income Americans are feeling the pinch most, since they have little discretionary income to start with," says Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index.

Never A Dull Moment

10/6/05 Never A Dull Moment

The American Petroleum Institute said crude inventories fell by 4.2 million barrels for the week ended Sept. 30. The government data showed a 300,000-barrel decline. Motor gasoline inventories dropped 4.8 million barrels. Distillate stocks were down 4.9 million barrels, the API said.

Planned job reductions by major U.S. corporations rose 1.8% in September to 71,836, according to Challenger, Gray & Christmas. Layoffs were down 33% from September 2004. Layoffs in the third quarter were down 2.5% from the third quarter of 2004. It was the smallest number of layoffs in five quarters. However, layoffs are up 8.2% year-to-date

The U.S. ISM Services Index for September tumbled to 53.3% from 65% in August, the lowest level in 2 ½ years.

Kazakh lawmakers voted in the lower house to allow the state to intervene in sales of oil firms, adding uncertainty to PetroKazkahstan's takeover by China's CNPC.
The bill becomes law only after it wins approval by Kazakhstan's upper house and President Nursultan Nazarbayev -- and that is not assured. There is never a dull moment in risk arbitrage.

The Energy Information Administration (EIA) reported that the average price truckers paid for diesel fuel had soared 34.6 cents over the last week to a record $3.14 a gallon.

Motorola is cutting 1,900 jobs.

The Dow, S&P 500, and the Nasdaq had one of their worst days in quite a while. My portfolio didn't
ring the register either.

India's ONGC Videsh Ltd and Kazakhstan's KazMunaiGaz will jointly develop oil and gas properties in the Caspian sea region, Kazakhstan's Energy Minister V Shkolnik said on Tuesday.
"We have agreed to have strategic energy cooperation. KazMunaiGaz and OVL will work together in the Caspian Sea." The arrangement concerns two medium sized blocks. Importantly, it indicates to me that this strategic cooperation is no different than the long-standing relationship between PKZ, the Kazakh government, and LUKOIL. It is one more indication that the deal with CNPC will go forward on October 18.

What A Bad Joke

10/5/05 What A Bad Joke

Dallas Fed President Fisher: "If the Federal Reserve were to resist the upward pressure on interest rates, it would in effect monetize the burgeoning fiscal deficits. The Federal Reserve has staunchly resisted monetizing deficits for more than a quarter century, and I feel strongly that it can ill afford to monetize them today." With twin tower deficits looming larger by the day, who is printing the money to cover the bills? Just remember that, over the last 92 years, the dollar has lost 95% of its purchasing power. There is a reason investors are purchasing gold and Goldcorp common stock.


90% of daily Gulf oil output offline vs 93% Monday and 72% of daily natural gas output offline vs 75% on Monday, according to the MMS.

Hugo Chavez: "We've had to move the international reserves from U.S. banks because of the threats from the U.S."

Sun will include the Google Toolbar as an option in its consumer downloads of the Java Runtime Environment. In addition, the companies have agreed to explore opportunities to promote and enhance Sun technologies, like the Java Runtime Environment and theOpenOffice.org productivity suite.

PetroKazakhstan said Tuesday that its planned sale of the company for $4.2 billion US to China's largest state-owned energy firm will continue regardless of Kazakh intentions to gain control of parts of the company. PetroKazakhstan officials said it will go ahead with a special shareholders meeting in Calgary on Oct. 18 to vote on the takeover deal by China National Petroleum Corp. And the company said that because it is Canadian-based and the deal is a corporate transaction rather than an asset sale, Kazakh approvals are not required. The takeover will be finalized with two-thirds of shareholder support and approval by an Alberta court, said spokesman Ihor Wasylkiw. "Comments coming out of Kazakhstan don't have any impact in terms of us holding that meeting," Wasylkiw said from Calgary Tuesday. "All we need to do is follow the laws of the land and the laws of Kazakhstan do not come into play here," he said. "Once we have the transaction done, the government of Kazakhstan has every right to review its asset base and do what it feels is right." Energy analyst Wilf Gobert of Calgary-based Peters & Co. said he expected the takeover to proceed. "It kind of looks like that the sale of the company is going ahead and subsequently the Chinese will be negotiating with Kazakhstan over portions of the company," he said Tuesday. It should be noted that Peters & Co. have had an investment banking relationship with PKZ and Gobert probably knows the management of PKZ better than any one else in the investment community.

La-Z-Boy Incorporated announced that one of its key suppliers of polyurethane
foam has put its customers, including La-Z-Boy, on notice of allocation, due
to the lack of availability of TDI (toluene diisocyanate), a key chemical
component of polyurethane foam which is used throughout the upholstery and
bedding industry.  The company also said that this situation, coupled with the
continued soft retail environment and damage to one of its plants by a tornado
spawned from Hurricane Rita, will have a significant adverse impact on its
results for the fiscal 2006 second quarter and potentially beyond.
Kurt Darrow, President and CEO of La-Z-Boy said, "Several TDI suppliers
have communicated that because of the effects of Hurricanes Katrina and Rita
they have had to declare Force Majeure, a condition which allows companies to
depart from the strict terms of a contract because of an event that cannot be
reasonably controlled.  As a result they will be limiting the amount of TDI
they will be supplying which will limit the amount of polyurethane that can be
produced.  We have been advised by one of our significant polyurethane
suppliers to the La-Z-Boy(R) branded product of their industry-wide notice of
an allocation of 50% of normal polyurethane supply.  This situation will have
a greater impact on us relative to the rest of the furniture industry given
the higher percentage of upholstery in our overall product mix."
Darrow noted, "Polyurethane foam, because of the volume of storage space
it requires, is shipped on a just in time inventory basis and therefore our
inventories of this raw material are very minimal.  Each of our divisions has
a different mix of polyurethane suppliers and finished goods inventories and
thus will be individually impacted.  We anticipate that the price of
polyurethane will increase and that our production schedules at various plants
will also be modified according to availability of supply.  We will therefore
work judiciously to minimize the potential interruption to our customers in
all effected divisions by closely communicating with them to assess and
balance their product needs to the degree possible."

Lexmark and Clorox issued profit warnings.

Although crude dipped to $63.90 a barrel, natural gas closed at a record high
of $14.224.

Georgia Pacific will cut 1,100 jobs.

At least 1,941 U.S. service personnel have died in Iraq.
On Iraq, Bush said that "more and more Iraqis are able to take the fight to the
enemy." Maybe they didn't teach math in Texas.

Mayor Ray Nagin said Tuesday that New Orleans has to lay off as many as 3,000 workers, about 40% of its total
payroll, because of the damage done to the city's finances by Hurricane Katrina.

The FDIC stated only seven California markets (Bakersfield, Merced, Stockton, Visalia,
Modesto, Yuba City, and Fresno) ranked among the nation's top 20 for home price appreciation during the second quarter,
down from 14 in the first quarter.

Weyerhaeuser will close its Prince Albert pulp and paper mill in Saskatchewan as a result of poor market
conditions, eliminating the jobs of 690 employees.

"Although royalty revenues were better than expected, it was not enough
to offset a disappointing contract revenue shortfall," said John
Bourgoin, MIPS president and CEO, in a prepared release. "A number of
our customers delayed their investment decisions, especially for deal
values in excess of $1 million. This slowdown has reduced the number
and the corresponding dollar value of agreements completed in the
quarter."

Futures-market predictions that the Federal Reserve will raise its target interest rate by a half- percentage point over two remaining meetings this year are ``reasonable,'' St. Louis Fed Bank President William Poole said.
``I think that the market's expectation is reasonable. That is not the same thing as saying we have a commitment to produce exactly that outcome.''

Two hurricanes, one of them particularly intense, are expected to develop this month in the Atlantic, says William Gray, a leading hurricane forecaster.

Uzakbai Karabalin, head of Kazakh state oil and gas firm KazMunaiGas, said fast-growing output would make it possible to export natural gas for a trans-China pipeline. "The Chinese side has been offered several routes of Kazakh natural gas shipments for the East-West pipeline (within China)," Karabalin said.
Chinese President Hu Jintao and his Kazakh counterpart Nursultan Nazarbayev signed a feasibility study project in July after reaching understanding on future investment in a gas pipeline that would run from Kazakhstan to energy-hungry China. Do you really think the Kazakh government is going to disrupt a long-term relationship over PKZ? What country wants to puke on its future bread and butter? In the end, money talks and so does graft.

For the second consecutive month, U.S. worker confidence fell to an historic low, as the Hudson
Employment Index(SM) declined 1.4 points to 96.8. The aftermath of Hurricanes
Katrina and Rita contributed to a steep decline in workers' optimism about
their personal finances, which were previously impacted by high energy prices.
Additionally, hiring plans stalled slightly. This month's Index is ten points
lower than one year ago as well as the start of 2005.
While there was virtually no change in how workers rated their finances
this month, 47 percent indicated their financial situation is getting worse.
This is the highest figure on record and seven points higher than the 2005
yearly average of 40 percent. Just 36 percent of the workforce claimed that
their finances were improving in September, compared to this year's average of
41 percent.
Hiring expectations also suffered another slight setback as only 29
percent of employees reported their firms expected to hire in the coming
months. After holding steady at about 31 percent for nine successive months,
this was the second month in a row where hiring outlook dropped by one point.
The percent of workers anticipating layoffs remained at 17 percent.

McNeil Nutritionals, LLC, the maker of SPLENDA(R) Brand retail products,
announced the all-new SPLENDA(R) Brown Sugar Blend, just in time for
the popular fall baking season. A first-of-its-kind reduced calorie brown
sugar product, SPLENDA(R) Brown Sugar Blend is a proprietary blend of brown
sugar and SPLENDA(R) Brand Sweetener, or sucralose.

The volume of mortgage applications slipped 1.1% in the week ended Sept. 30 compared to the prior week,
data compiled by the Mortgage Bankers Association show. Also on a seasonally adjusted basis, applications for mortgages to
purchase homes dropped 1.9%, while refinancing applications nosed 0.1% higher on a week-to-week basis.

According to the Detroit News, the UAW and GM are near a deal on healthcare that would save GM $1 billion
annually, while impacting active UAW members as well as the hundreds
of thousands of retirees nationwide by increasing co-pays for
prescription drugs and perhaps instituting cost-sharing of monthly premiums.

Will Rogers: "The trouble with practical jokes is that very often they get elected."

Based On The Past

10/4/05 Based On The Past

John Challenger: “According to the our analysis, employers cut 10,149,381 jobs from 1993 through 2004. Of those, 38 percent occurred between September 1 and December 31. In 2004, 41 percent of the year’s job cuts were announced in the last four months. This year, the jump may not be as large, simply due to the fact that layoff announcements were heavier than normal during the summer months, but we are still likely to see an increase. The last part of the year is crunch time for many organizations in terms of meeting earnings goals, as well as establishing budget levels for the coming year.”

Small business statistics highlighted in the 2005 Small Business FAQ
include:

* Small businesses represent 99.7 percent of all employer firms.
* Over the past decade, small business net job creation fluctuated between
60 and 80 percent.
* Small businesses generate more than 50 percent of the nonfarm private
gross domestic product (GDP).
* Two-thirds of new employer establishments survive at least two years
after start-up, and 44 percent survive at least four years.
* Small businesses employ half of all private sector employees.
* Very small firms with fewer than 20 employees spend 45 percent more per
employee than the largest firms to comply with federal regulations.
* Minorities own 4.1 million firms that generate $694.1 billion in
revenues and employ 4.8 million workers.
* Women own 6.5 million businesses that generate $950.6 billion in
revenues, and employ 7.2 million workers.
* In 2004, an estimated 580,900 employer firms opened while an estimated
576,200 closed.

The Institute for Supply Management's national factory index rose to 59.4% in September from 53.6% in August. The 5.8-point increase was the biggest monthly gain since March 1991 and a big surprise. How much of this gain can be attributed to rebuilding in the Gulf? The prices paid index surged to 78 from August’s 56.4, the biggest jump in 15 years. This jump spooked the bond market and the yield on the 10-year Treasury increased to 4.39%.

The NY Times reported that more sellers are putting their homes on the market, houses are selling less quickly and prices are increasing less rapidly.

In September, truck and SUV sales plunged at Ford and GM. Overall vehicle sales for Ford declined 19% and for GM 24%; however, Toyota’s sales increased 10.3%.

A 30-year study finds that most adults -- nine out of 10 men, seven out of 10 women -- are likely to be or become overweight as they grow older. The report, published today in the Annals of Internal Medicine, was based on the experience of more than 4,000 white adults who were the second generation of a long-term study of heart disease sponsored by the National Heart, Lung and Blood Institute. Participants were the offspring of the original Framingham Heart Study subjects, and were 30 to 59 years old when the next-generation study began. They were followed from 1971 to 2001.

Kazakh Oil Minister Vladimir Shkolnik said Tuesday that Kazakhstan would seek to acquire a portion of Canadian-based oil producer PetroKazakhstan Inc., which had reached a takeover deal in August with China's largest state oil company. China National Petroleum Corp. agreed to pay $4.2 billion US for Calgary-based PetroKazakhstan (TSX:PKZ). An agreement by CNPC to sell part of PetroKazakhstan to a Kazakh state company could help to smooth approval of its agreement to buy the Canadian firm. It might be wise to remember that Kazakhstan has only 3 oil refineries, and PKZ’s is by far the best of the 3. In addition, the new pipeline carrying oil from Kazakhstan to China, and paid for by China, will begin flowing on Jan1, 2006. PKZ will transport its oil to China through this pipeline and transportation costs will be reduced by $7 a barrel. This fact has not been lost on the Kazakh government, China, or ONGC/Mittal.

Royal Ahold NV, the owner of Stop & Shop and Giant stores, might be interested in buying parts of Albertson's Inc., Chief Executive Anders Moberg said. He ruled out buying all of Albertson's, the second-largest U.S. supermarket company.

The latest world investment report by UNCTAD has rated India as an attractive destination for pharma and clinical research for companies looking at faster and efficient ways to test drugs. The report said that drug firms could reduce costs 20-30 percent by moving R&D activities to India while they save from hiring clinical researchers, nurses and IT staff at less than a third of the wages in the West. The findings also said India has really skilled R&D personnel.

Kazakhstan’s President said oil production from Kazakhstan's share of the Caspian Sea could reach "oil production levels of 100-150 million tons (per year) by 2015. When completed, this National Program will allow us to export 2 million barrels (of oil) a day in 2010 and 3 million barrels (a day) in 2015. The natural gas output will reach 100 billion cubic meters a year.”
According to the Energy Information Administration of the U.S. government, in 2004 Kuwait and Nigeria both produced 2.51 million barrels per day and Iraq produced 2.03 million bpd. Only two nations in the world, Saudi Arabia and Russia, exported more than 3 million bpd each in 2004: Saudi Arabia exported 8.73 million bpd and Russia exported 6.67 million bpd.

A new study in the New England Journal of Medicine says China's health-care problems "make those of the United States seem almost trivial by comparison and ... constitute a major potential threat to China's domestic tranquility."

Gary Lammert, The Economic Fractalist: “By using day 288 as the ideal third fractal top, using 72 days (fromSeptember 30) to an expected low and 72 days as an expected low with the 52/130/104/day 5 of 78 to an expected low, the first decay base most likely started 31 August 2005. The initial decay fractal base
was 16 days. This ideally would be followed by second and third decay fractals of 40 days for a total of 79 trading days from 22 September 2005. This is in exact agreement to a day of the major 144/360/288/72
daily fractal sequence and the final third fractal 52/130/104/78 day sequence both which end within one day of each other.”

The West Amazon rain forest is in severe drought with rainfall down 70% from 2004.

Sears Canada is cutting 1,200 jobs across Canada.

Should We Worry?

10/3/05 Should We Worry?

Up to 150 million people could die in a global avian flu pandemic if action is not taken to prevent it being transferred from human to human, the United Nations has warned.
Dr David Nabarro of the Geneva-based World Health Organisation said preparations for an expected mutation of the virus enabling it to spread from human to human must be carried out. "I am almost certain there will be another pandemic soon," Mr Nabarro added.

The U.S. government reported that GM’s pension deficit is $31 billion. That’s the bad news. The good news is that government figures are rarely correct.

The PBGC had a $23 billion deficit prior to bankruptcy filings by Delta and Northwest, and both have requested up to 25 years to make up their pension shortfalls. The PBGC stated that corporate defined benefit pension plans were underfunded by $450 billion one year ago. The good news is that these defined benefit pension plans are voluntary. That’s also the bad news.

Napoleon Bonaparte: “The torment of precautions often exceeds the dangers to be avoided.”

How important have company stock buy backs been to the resiliency of the equity markets? Companies in the S&P 500 repurchased $82 billion of their shares in the second quarter. When the third quarter numbers are released, I would expect a continuance of this activity.

Jay Leno: “They had to let Judith Miller out of jail. They had to make room for DeLay.”

Wal-Mart’s September same-store sales rose about 3.8%.

With 3-month Treasury bills yielding about 3.5%, is it prudent to buy a 10-year Ttreasury bond yielding only 4.32%? For such a small pick up in yield, why take the risk. You are not getting paid to take that risk.

Bush, according to a media report, will nominate Harriet Miers, currently counsel to the president, to succeed Sandra Day O'Connor as an associate justice of the Supreme Court. Miers, 60, was the first woman president of the Texas state bar. Bush named her White House counsel in November 2004. This may be Bush's idea for diversity on the court. Miers has had no prior experience as a judge.

Three days ago, we unleashed “Iron Fist” in Iraq. Two and one half years ago we unleashed “Shock and Awe.” We have yet to announce the capture of Osama bin Laden or Zarqawi. However, since we invaded Iraq in March 2003, at least 1,920 U.S. military personnel have been killed in that country.

David Letterman: “Al Gore has gained a lot of weight lately. Of course, unlike his former boss he only has to worry about getting into his own pants.”

Coming Up Roses In Fall Weather

10/2/05 Coming Up Roses In Fall Weather

San Francisco has more than 20,000 one million dollar homes and another 46,000 or so are in Orange County, Calif. The average price for an apartment in all but Harlem and the borough's northern tip climbed above $1.2 million in the second quarter of 2005, said Gregory Heym, chief economist for Terra Holdings, an owner of real estate brokerages in the city. "For a million dollars, you couldn't get a two-bedroom on the East Side," Heym said. The Census Bureau's 2004 American Community Survey found 1,034,386 homes worth at least $1 million in 2004, compared with 595,441 in 2002 and only 394,878 in 2000.

"When you're living in a place with home values up 50 percent, you have what Alan Greenspan calls a piggy bank," said Elizabeth Warren, a Harvard law professor and an author of "The Fragile Middle Class" (Yale University Press, 2000), a study of bankruptcy. "The bubble has operated like wreckage from the Titanic - you could climb on and float along for a while. The question is for how long."

According to the Houston Chronicle, in the wake of Katrina and Rita, Houston's apartment market has made one of the quickest turnarounds in history. More than 17,600 apartments have been absorbed since Labor Day, according to preliminary estimates from O'Connor & Associates, a real estate research firm. They also show that Houston landlords will absorb more than 10 times the normal level of apartments in September.

U.S. bankruptcy courts, like the one for Northern California, in San Francisco, have been inundated with cases. In San Francisco, Chapter 7 filings increased 32 percent in August and 125 percent in September from the same months last year. Chapter 13 filings dipped a bit in August but rose 24 percent in September compared with the same months last year. The new bankruptcy law takes effect at 12:01 a.m. on Monday, Oct. 17.

Seneca: "The greatest loss of time is delay and expectation, which depend upon the future. We let go the present, which we have in our power, and look forward to that which depends upon chance, and so relinquish a certainty for an uncertainty."

According to a separate study released last month by Boston-based Ceres, a coalition of institutional investors and environmental groups, insured and total property losses are already rising more quickly than premiums, population and economic growth.
"It's unclear how the insurance industry is going to survive in the sort of world that we're expecting," said Andrew Logan, an insurance analyst with Ceres.
"For obvious reasons, people really focus on the huge catastrophic events like hurricanes and earthquakes," he said. "But the damage from smaller events is also expected to rise, from hailstorms to forest fires to lightning strikes to floods to heat waves to droughts."

Ford Motor Co. took over 23 plants and facilities from auto supplier Visteon Corp. on Saturday in a deal designed to make Visteon profitable while assuring a supply of parts to Ford.

The consensus forecast for third-quarter profit growth now stands at 17.8 percent, up from 15.1 percent at the start of the quarter, according to Thomson Financial. Fourth-quarter estimates have also risen - to 16.5 percent from 12.2 percent in July. Now let’s take out earnings from the energy sector. That’s only fair since the government looks at inflation ex- food and energy. If you eliminate the earnings of energy companies, earnings growth would not be much higher than the inflation rate. Maybe everything is not coming up roses in the Fall weather.

Stephen Roach: “According to the Greenspan-Kennedy framework, US homeowners tapped the ever-expanding home equity till to the tune of about $600 billion in 2004 -- equivalent to about 7% of disposable personal income, or more than double the 3% share recorded in 2000. In a companion speech, Greenspan goes on to concede that this equity extraction from ever rising property values was large enough to have accounted for all of the decline in the personal saving rate since 1995 (see his 26 September speech, “Mortgage Banking”).”

In a major endorsement of India’s IT capability, a survey by the Santa Clara University revealed on Friday that 53% of the jobs being outsourced by Silicon Valley companies are going to India.

Foreigners control 52% of our U.S. debt. Those who control the debt ultimately control the equity.

Housing prices in San Francisco are in need of a good dose of reality. Approximately, only one in ten people living in that city can afford to buy a home. Equally important, the population in San Francisco is declining. According to the Census Bureau, between 2000 and 2004, the population declined from 776,733 to 744,230. I feel comfortable in stating the population will be even lower on December 31, 2005. The picture is not a pretty one for those trying to cash in on million dollar homes in 2006.

Confucius: “Life is really simple, but we insist on making it more complicated.”