Pre The Next Storm

9/24/05 Pre The Next Storm

“Investing some of China’s massive foreign reserves into U.S. Treasurys is ‘not worthwhile,’ a senior party official said… ‘I think it’s better that China should invest its huge forex reserves in overseas energy resources stocks as reserves,’ said Zheng Xinli, deputy minister of China’s Central Policy Research Office.”

Doug Noland: “The confluence of booming mortgage Credit, ballooning Wall Street balance sheets, surging “repo” finance and unprecedented ABS issuance is seductively problematic. “Financial conditions” are patently and conspicuously much too easy. The “confluence” works magically in loose monetary conditions, creating only more liquidity and the loosest environment imaginable. This “confluence,” however, will function especially poorly when financial conditions eventually tighten, a development increasingly necessary to rein in heightened global inflationary pressures and precarious asset Bubbles.”

According to iSuppli, the 2GB iPod Nano retails in the US for $199. Of that, iSuppli states, less that half - $90.18 - goes on components. Add in $8 per unit labor costs, and Apple's base margin is a whopping $100.82. In addition, one can probably add a little more for software development.

Keith Olbermann: “No one is suggesting that mayors or governors in the afflicted areas, nor the federal government, should be able to stop hurricanes. Lord knows, no one is suggesting that we should ever prioritize levee improvement for a below-sea-level city, ahead of $454 million worth of trophy bridges for the politicians of Alaska.”

Palm Inc. is expected to end years of rivalry with Microsoft Corp. on Monday and announce that a version of its popular Treo handheld unit will run on Microsoft’s operating system.

Hurricane Rita has weakened to a Category 2 storm as it has moved farther inland, the National Hurricane Center said in its latest advisory. Maximum sustained winds have decreased to about 100 miles per hour and further weakening is expected during the day.

Wal-Mart: “In the Hurricane Rita location stores, we saw an increase in items such as canned foods, water, candles, batteries, and lighting (flashlights and lanterns). In Hurricane Katrina areas, we are seeing increased sales in items such as basic apparel, hardware, and cleaning supplies. Average ticket drove the comp sales and the strongest regions were the South and Southeast. We anticipate increased fuel supply issues with Hurricane Rita versus Hurricane Katrina due to the number refineries that could be impacted.”

Irish Blessings: "May God give you...For every storm a rainbow, for every tear a smile, for every care a promise and a blessing in each trial. For every problem life sends, a faithful friend to share, for every sigh a sweet song and an answer for each prayer."

A Changing World

9/23/05 A Changing World
The People's Bank of China said in a statement that it has widened the trading band against non-US dollar currencies to 3% on either side of a central parity rate from 1.5%, AFX reported. The changes are effective immediately.
It said the yuan-dollar trading band for retail transactions has been widened to 1%, around the central parity rate, also with immediate effect. The previous trading band was 0.2% on either side of parity.
The central bank said the retail yuan-dollar trading band for cash transactions has been widened to 4% from 1%, according to AFX.
Sears’ medical costs for retirees last year equated to 17% of the company’s operating income. Sears will stop subsidizing health care coverage for new employees and cut some retiree health benefits.
Ford will announce another round of cost cutting and reorganization on October 20.
Delta will cut up to 9,000 jobs by the end of 2007 and continue to reduce management’s salaries.
Analyst Charlie Di Bona of Sanford Bernstein stated that, if Oracle had included the corresponding year-ago applications sales of PeopleSoft and Retek, another Oracle acquisition, its application license sales would have actually fallen. To make matters worse, new sales of Oracle’s database software rose 1%. This information was announced after the close. However, during the day, Ellison gave a rosy long-tern outlook on Oracle doubling its business- - naturally it won’t happen organically. Just a piece of advice from the cheap seats. Before making more acquisitions, it might be wise to grow database and application revenues.
"The same things that harm the heart, such as smoking, high cholesterol,
obesity, high blood pressure, stress and genetic factors, harm the blood
vessels throughout your body," says Peter Henke, M.D., a vascular surgeon and
medical director of the Noninvasive Diagnostic Vascular Laboratory at the U-M
Cardiovascular Center. "Vice President Cheney is like millions of Americans who have lived with all of these risk factors for many years, and like many Americans, especially
men, his blood vessels are showing signs of wear and tear. Fortunately, he
was diagnosed and is being treated before something more serious happens,"
Henke adds.
Cheney's operation this weekend is for a condition called a popliteal aneurysm
(POP-li-teel ANN-yur-ism), which is a bulging, weakened spot in the main
artery that travels up the back of the leg. They're often diagnosed when a
physical exam reveals a bulge in the leg or a patient complains of leg pain
and tiredness. Cheney's spokespeople have said he has one of these aneurysms
behind each knee; the operation this weekend will fix one of them.
Popliteal aneurysms can encourage the formation of blood clots that can
block blood flow to the legs and can lead to amputation of a limb. Once a
person begins having symptoms from their popliteal aneurysm, they have a 1 in
5 chance of losing a leg, and a 1 in 20 chance of dying, unless the problem is
treated.
But even more seriously, the presence of popliteal aneurysms can mean that
a person has a high risk of having other aneurysms elsewhere in their body,
says Henke, an Associate Professor of Vascular Surgery who specializes in
diagnosing and repairing aneurysms and other blood vessel problems in the
legs, neck and trunk. And those kinds of aneurysms carry even higher risks of death and
disability. The biggest threat, Henke explains, are aneurysms in the aorta,
the giant artery that brings blood out of the heart and branches off to feed
the body. Like popliteal aneurysms, aortic aneurysms are much more common among
people who have smoked, and who have had high cholesterol and high blood
pressure for years. Men, and people with a family history of aneurysms, have
a much higher risk. Risk also rises with a person's age. With every beat of the heart, the high pressure of blood rushing through the aorta presses on the blood vessel's muscular walls. "Hardened" artery walls, made stiff by cholesterol deposits and the effects of smoking and high blood pressure, can become weak in spots. At any of those spots, the force of the blood can cause an aneurysm to bulge out, and to grow over time. Or, it
can cause the layers of the aorta wall to come apart, a condition called
aortic dissection that killed actor John Ritter.
President Bush: "To leave Iraq now would be to repeat the costly mistakes of
the past that led to the attacks of September the 11th, 2001. The terrorists
saw our response to the hostage crisis in Iran, the bombings in the Marine
barracks in Lebanon, the first World Trade Center attack, the killing of
American soldiers in Somalia, the destruction of two U.S. embassies in Africa,
and the attack on the USS Cole. The terrorists concluded that we lacked the
courage and character to defend ourselves, and so they attacked us." The fact that advanced warnings were provided- - that fact was not included in yesterday’s speech.
According to AFX News Limited, China National Petroleum Corp's board (CNPC) held an emergency meeting yesterday and has decided not to raise its original bid of 4.18 bln usd for PetroKazakhstan Inc, a CNPC official said.
'CNPC held an emergency meeting yesterday to discuss PetroKazakhstan,' the official said. He said CNPC's bid for the New York and Toronto-listed oil and gas company has been facing several difficulties including potential new bids and complications with joint-venture partners. He said an Abu Dhabi investment fund had expressed interest in acquiring PetroKazakhstan. He also said CNPC's bid was facing difficulties with PetroKazakhstan's joint venture with Russian oil company Lukoil. 'If CNPC wants to buy PetroKazakhstan, it must consider the joint venture which is very profitable,' he said.
ONGC has submitted a 1.2 bln usd bid for the A-1 21 block in Nigeria through ONGC-Mittal Energy, the joint venture with steel tycoon LN Mittal, the Economic Times reported citing oil industry sources. ONGC has bid for deepwater oil blocks along with Nigeria-based Equator Exploration, it said.
The report also said the company is seeking shareholder approval to raise its borrowing limit to about 620 bln rupees. Now compare this $1.2 billion bid with the current CNPC $4.1 billion accepted offer for PKZ and the latter’s stated reserves as well as the close proximity to pipeline transportation.
Peter Schiff: "Do not be fooled by the President's pledge not to raising taxes. Inflation acts like a hidden tax, allowing government to transfer purchasing power from the public to itself. The government finances spending though inflation by issuing bonds that are subsequently purchased by the Federal Reserve, thereby creating new dollars that reduce the purchasing power of existing dollars. The result is that consumer prices rise to reflect the dollar's diminished value. Therefore, if the public does not pay higher income taxes to pay to rebuild the Gulf, it will certainly pay higher inflation taxes instead, as the real values of their incomes and savings will be diminished."
At this point, I don’t believe anyone can predict the damage from Hurricane Rita. This storm is both powerful and large—stretching from Galveston to Cameron. However, the impact will be felt for up to 200 miles away. Communities will need to contend with wind gusts of up to 140 miles per hour, rainfall possibly exceeding 18 inches, and waves as high as 25 feet.
AccuWeather Meteorologist Gerald Mohler: "It is not often that we as meteorologists throw out terms like catastrophic or life-threatening. However, when dealing with a storm the magnitude of Rita, these terms are certainly appropriate. Rita will still be moving over warm water into Friday. This should allow it to still be a Category 4 storm when it makes landfall late Friday night or early Saturday. If you live within a few miles of the coast, this is NOT a storm that you want to stay and try to ride out."

Rita And Katrina

9/22/05 Rita And Katrina
Business Roundtable's new CEO Economic Outlook Survey, taken in the aftermath of Hurricane Katrina, suggests that CEOs expect their businesses and the U.S. economy to absorb a significant, but not overwhelming, hit in the aftermath of the epic August disaster. Business Roundtable is an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4 trillion in annual revenues.
Key indicators -- capital expenditures, sales and employment plans for the
next six months trended downward in the wake of Hurricane Katrina. The survey showed a 14 percentage-point decline in anticipated capital expenditure
increases from the third quarter Economic Outlook Survey, which was taken
prior to Hurricane Katrina and released September 7.
Sales expectations declined slightly from the pre-Katrina survey as well,
with those anticipating higher sales over the next six months dropping by 9
percentage points.
Employment expectations were impacted the least with only a 2 percentage-
point drop in the number of those planning on hiring. The responses reflected
50 percent maintaining current employment, with some increases in sectors that
will be increasing activity to help in recovery, such as energy, equipment
manufacturing and construction.
"While the economy, as reflected in our survey results, clearly took a
hit, it does not appear to be uniformly negative," said Hank McKinnell,
Chairman of Business Roundtable and Chairman and CEO of Pfizer Inc. "Decreased capital spending is a cause for concern because these investments have been a significant driver of long term economic growth. It is a number we will be watching in the next survey."

I would like to re-print and re-emphasize the importance of information from one week ago: ATYRAU. September 14. KAZINFORM /Andrey Sokolov/ - Kazakhstan Prime Minister Daniyal Akhmetov, visiting Atyrau oblast, answered a number of questions of journalists. Concerning the sale of PetroKazakhstan shares, he stated, we are the country with open market economy. Kazakhstan does not interfere into the process of selling. They are realized at Toronto stock market. One who pays more will own PetroKazakhstan company. We will demonstrate the economic world we hold to sound economy and have no political interests. We want the companies, functioning in Kazakhstan, to be comfortable, Daniyal Akhmetov pointed out.

Please do not get caught up in a lot of noise. It can only create unnecessary thought and increased stress.

According to today’s India Business, "NEW DELHI: Oil and Natural Gas Corporation is rebidding for acquiring Petro kazakhstan, a Canadian exploration and refining firm with business in Kazakhstan, even as the country's most valuable company on Wednesday promised to start pumping gas from deep sea field from April and ramp up oil output 13% by 2009-10. A committee of secretaries has cleared ONGC's plans to rebid for Petrokazakhstan, which was lost last month to China National Petroleum Corporation narrowly when it was denied a chance to clarify certain conditions for raising the offer."

According to the California Association of Realtors, the projected median price of $523,150 set this year will increase 10 percent to $575,500 in 2006. Sales for 2006 are projected to reach 630,610 units, falling 2 percent compared with 2005. Home sales for California in 2005 are expected to reach a record 643,480 units, surpassing the prior sales record of 624,740 set last year, according to economists for the association.

A late August survey by the International Council of Shopping Centers found 58% of consumers cut back on discretionary spending because of high gas prices. One out of five middle-income customers said they had reduced spending.

Mish stated that The Guardian is also reporting 34% of Britons are running out of money five days before payday.

What I am about to say may sound trite. If it does, then don’t bother reading any further. I write for me and not for you. Katrina and Rita should illustrate the importance of making the most of every day, and not taking anyone or any thing for granted. After Katrina, I wrote that the hurricane season is not over. After Rita, the hurricane season will not be over. Maybe 1.3 million or more people will flee and evacuate pre-Rita hitting the Louisiana-Texas coast. People can hide inland but the infrastructure and the services cannot. You can shut down refineries and rigs. You can shut off power. You can shut down 175 mile per hour winds. I cannot even imagine winds like that. Last year I experienced winds of 120 miles per hour in Florida. The power was unimaginable. The surf was something I had never witnessed up close. Maybe a miracle will spare this coastline and the cities from parts of Louisiana to Galveston. Don’t bet on miracles. Despite the words from Bush and Greenspan, the economic foundation of our country rests on debt. Hurricanes do not wipe out country and household debt. Hurricanes wipe out homes and businesses, the core of the equity in the U.S. I wish everyone well.

From The Economic Times (India): "The Committee of Secretaries has already given the nod to ONGC Videsh, to go ahead with a counter bid(PKZ). Industry sources said that OME has to also keep in mind that CNPC would get a chance to match the revised bid or better it. This development comes close on the heels of the recent controversy regarding the Nigerian blocks. OVL, which submitted the highest bid was denied operatorship or majority control of the blocks as Kogas was allowed to use its premption right. The preemption right over these blocks, which was given to Kogas just two days before the bids were submitted, was not known to the other players. Meanwhile, OVL is now getting ready for pumping out the first commercial gas from the Sakhalin fields in Russia from October."

"Ladies and gentlemen, the majority equity in your company(ONGC) is owned by the people of India, and the first citizen has articulated the desire of the people for sustained growth of your company into a global, integrated, multi-fuel energy business tasked to secure energy independence for India," Mr Raha said after quoting from President Abdul Kalam’s address to ONGC where he stressed on ONGC’s role in the "broader business of energy".

The IMF raised its forecast for Japan to 2 per cent from the 0.8 percent it expected in April. The lender increased its forecast for the rest of Asia to 7.3 per cent from 7, raising its projection for China to 9 per cent from 8.5 and for India to 7.1 per cent from 6.7. It cut its forecasts for economies such as South Korea, Taiwan, Malaysia and Thailand.

The IMF reported that "after averaging some 40 per cent of GDP during the 1990s, China's gross domestic savings rate has increased sharply to close to 50 per cent of GDP over the past five years."

Northwest Airlines to lay off 1,400 attendants. Sony plans 10,000 job cuts.

PKZ Bulletin

9/21/05 PKZ Bulletin

There is a Dow Jones release indicating the PetroKazakhstan gov't is trying to prevent the sale of PKZ. The key sentence is: "However, this amendment doesn't regulate deals involving listed companies, Nekhoroshev said. " Obviously, PKZ is a listed company.

Going Forward

9/21/05 Going Forward
The damage caused by Hurricane Katrina, coupled with higher gas prices, is expected to contribute to an increasingly difficult outlook for certain retailers as the holiday season approaches, according to Deloitte Research's Leading Index of Consumer Spending. Amidst weakening home prices, a rising tax burden and slow job growth, rising inflation and Katrina could trigger heightened challenges for consumer spending through the end of 2005.
"Retailers face hurdles in the coming months," says Carl Steidtmann, chief
economist of Deloitte Research and author of the monthly index. "A natural
disaster of this magnitude will almost certainly have a negative impact on
consumer spending in the short run, and will likely hurt some retail segments
during the upcoming holiday season."
"However, we can anticipate an upturn in consumer spending in communities
to which storm victims are migrating, such as Houston and Baton Rouge,"
continued Steidtmann. "As rebuilding efforts begin, we should see a boost in
sales of home-related goods and building materials, as well as basic clothing
and kitchen goods."
"With the current level of uncertainty surrounding the consumer's ability
to spend, retailers need to continue to be vigilant about their inventory
levels, costs, and effective promotional strategies," said Pat Conroy, vice
chairman and national managing principal of Deloitte's Consumer Business
practice. "They must also increase their focus on converting consumers they
have attracted into their stores into buyers. Finding better ways to
positively impact these conversion rates will be a critical element to
retailers' success this upcoming season."

Federated Department Stores may lay off up to 6,200 employees. The N.Y. Times will cut 500 jobs. Philly papers cut 100 jobs.

India imports 70% of its oil. As such, bidding for PetroKazakhstan should not come as a surprise.

With all the concerns about Rita and the Fed raising rates, it was easy for this news on Palatin to get lost. Stan Hull is joining their Board of Directors. He has 27 years of experience with Glaxo and their predecessor company, and is currently Senior Vice President for Glaxo’s U.S. Pharmaceuticals-RTP Business Division. His expertise is in sales and marketing and strategic planning. It is quite a feat to get someone of his caliber on the board of a $100 million market cap company. You might ask what potential Hull sees that the market is missing.

Lennar Corporation, one of the nation's largest homebuilders, announced
today that earnings per share for the quarter ended August 31, 2005 will
exceed $2.00 per diluted share when the Company announces earnings in its
regularly scheduled earnings release next week. Additionally, deliveries will
exceed 10,900 homes vs. the previously announced goal of 10,800 homes,
homebuilding gross margin will exceed 26.0% (more than 300 basis points higher than last year) and net new orders will grow more than 20% compared to the prior year. Greater detail will be provided in next week's regularly
scheduled earnings conference call.

It is good to remember that Texas accounts for 25% of our nation’s total oil output. Rita has been upgraded to a Category 3 hurricane, and crude has topped $67 a barrel once again.

Petroleum ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has acquired a 30 per cent stake in seven oil and gas blocks in Cuba, which hold more than 4 billion barrels of oil reserves.

Mittal Steel Co., the world's biggest steel maker, received final approval from the Commerce Ministry to buy 36.67 percent of China's Hunan Valin Steel Tube & Wire Co. for 2.56 billion yuan ($316 million).

According to the OECD, the most affluent one-fifth of China's population earn 50% of total income, with the bottom one-fifth taking home only 4.7%. Last year the average rural income was 2,936 yuan ($362), less than one-third of the urban income of 9,422 yuan.

The Mortgage Bankers Association said its index of total mortgage applications for home purchase and refinancing loans rose 1.5 percent to 772.2 in the week ended September 16. The index fell 1.4 percent in the previous week. The MBA's purchase index fell 2.6 percent to 500.3, reversing the previous week's 2.9 percent gain. The refinancing index rose 7.0 percent to 2,353.7, more than offsetting the previous week's 6.7 percent loss.

According to Businessweek.com, S&P sees the S&P Food Retail index outperforming the S&P 500; that margins will stabilize; that consolidation is likely; that Albertson's recent announcement on exploring alternatives focuses attention on underlying real estate values; and S&P's top picks are Albertson's, Kroger, and Safeway.

Rita is the 17th named hurricane of 2005. There has been only one year that the Atlantic had 21 hurricanes and that was seventy-two years ago in 1933. The National Hurricane Center emphasizes that the 2005 hurricane season is not expected to be over until November.

Qualcomm increased financial guidance for the 4th quarter and its fiscal year ending 9/30/05.

Mark Twain: "A thing long expected takes the form of the unexpected when at last it comes."

The Counterbid

9/20/05 The CounterbidIndia's ONGC Videsh Ltd (OVL) has decided to counter China National Petroleum Company's (CNPC's) 4.18 bln usd bid to acquire PetroKazakhstan, India's Financial Express newspaper reported in its online edition.The counter-offer will be made by ONGC Mittal Energy Ltd (OME), the joint venture floated by OVL and LN Mittal-promoted Mittal Investment Sarl, it said.ONGC Videsh has formally informed the Indian government of its decision, the paper said, adding that its proposal to make a 'superior counter offer' was discussed by senior Indian government officials earlier this month.'Consultations did take place on this issue and the committee had finally left it to the ONGC/OVL board to take a commercial call,' a senior government official was quoted as saying when asked to comment on the outcome of the meeting.OVL is the international arm of Oil and Natural Gas Corp (ONGC).Senior ONGC and OVL officials confirmed that a counter-offer is being prepared in consultation with their technical advisor GCA, legal advisor Ashurst and commercial advisor UBS, the paper said.It said OME will be required to pay a 'break fee' of 125 mln usd to PetroKazakhstan if its counterbid is accepted. PetroKazakhstan will in turn pay the money to CNPC.A bid price was not specified; however, it could be measurably better than $55. This sleeper could turn out to be the best risk arbitrage deal of 2005.Rita has certainly rattled the markets. Natural gas traded up to its highest level ever. Heating oil rallied back to over $2 a gallon, and unleaded gas knocked on the $2 a gallon area. Crude rallied over $4 to exceed $67 a barrel. All these escalating energy prices fueled inflation worries, and gold soared $7 an ounce to $470+, its highest price in 18 years.Peter DeLorenzo of Autoextremist.com: "SUV sales aren’t just slowing –they’re crashing to a halt."The NAHB-Wells Fargo housing index fell to 65 in September from 67 in August, the 3rd decline in a row and the lowest reading since July 2003.Delta stated "layoffs will not be small."Bombay’s Sensex crossed 8,400 on the upside.EnCana Corporation's wholly-owned partnership EnCana Midstream & Marketing hassigned an agreement with Methanex Corporation under which Methanexwill provide terminalling services to EnCana at Methanex's terminal facilitiesin Kitimat, British Columbia. EnCana plans to import up to 25,000 barrels perday of offshore diluent to help transport its growing oilsands production innortheast Alberta to markets in the U.S."Diluent is a necessary component for the pipeline transportation ofheavy oil, but Canadian supply is tight due to increased production fromAlberta's vast oilsands. However, cost-effective diluent is readily availableon the world market and this can help us manage transportation costs as weadvance our oilsands growth and integration strategy," said Bill Oliver,EnCana's President of Midstream & Marketing."With access to the ideally-located Kitimat terminal, we expect to beable to import diluent at a competitive cost and move it to where it's mostneeded - in northeast Alberta - then blend it with our growing oilsandsproduction for transport to key U.S. markets," Oliver said.In addition to the projected 25,000 barrels per day of additional supplyto be transported from Kitimat, EnCana is close to completing a newdebutanizer installation at its Empress, Alberta natural gas liquidsextraction plant. Planned to come on stream in October, the debutanizer isexpected to generate about 5,000 barrels per day of diluent. The combined30,000 barrels per day of added diluent expected from these two EnCanainitiatives represents an increase of more than 15 percent to the currentWestern Canadian diluent supply.The Kitimat terminal has an existing dock and tanks at an ice-free port,plus a railway car loading facility for ease of transport to an Albertapipeline connection that feeds EnCana's oilsands operations. EnCana expects tostart importing diluent through Kitimat early in 2006. Under the agreementwith Methanex, EnCana has an option to buy the Kitimat terminal within thefive-year term of the agreement.In conjunction with U.S. oil refiner Valero Energy Corporation, EnCana isconducting a feasibility study into the construction of heavy oil processingfacilities at Valero's existing refinery in Lima, Ohio. The study, which isexpected to be completed over the coming months, will examine the engineeringand economics of EnCana supplying an estimated 200,000 barrels of blendedheavy oil per day to the Lima refinery. The establishment of an offshoresupply of diluent is a key component in EnCana's market integration strategywhich is aimed at maintaining industry-leading low operating costs as thecompany expands in-situ oilsands production to an estimated 200,000 barrelsper day over the next several years.I continue to believe that EnCana offers excellent long-term potential. In my view, the stock should continue to be accumulated during periods of price weakness.John Menzer, President and Chief Executive Officer of Wal-Mart International announced today the purchase of a 33-1/3 percent interest in Central American RetailHolding Company (CARHCO). CARHCO is Central America's largest retailer, with 363 supermarkets and other stores in the following five countries: Guatemala (120), El Salvador(57), Honduras (32), Nicaragua (30) and Costa Rica (124). CARHCO hasapproximately 23,000 associates. Its sales during 2004 were approximately$2.0 billion.Wal-Mart acquired its interest in CARHCO from the Dutch retailer RoyalAhold NV. The purchase price was not disclosed. CARHCO was formed as a jointventure in 2001 with three equal partners: Ahold and two Central Americangroups: the Paiz family, the major shareholders of La Fragua, withheadquarters in Guatemala, and Corporacion de Supermercados Unidos (CSU), withheadquarters in Costa Rica."We are delighted to have this opportunity to invest in the future ofCentral America," said Menzer, adding that the alliance had been underdiscussion for several years. "We are joining a strong partnership that isdelivering outstanding service to customers throughout the region. We believeour investment will add strength to the partnership by helping to keep priceslow for consumers and will offer new opportunities to suppliers in the regionfor additional business development." As part of the agreement, Wal-Mart willacquire additional interests over time in CARHCO, including interests towardachieving majority ownership in the company.The new partnership demonstrates confidence in the region's economicpotential, Menzer said, adding that significant investments are planned in theyears ahead to open new stores and serve customers better with improvedservices, high quality and innovative products and lower prices.In addition, specialized training programs are planned for CARHCOassociates and for suppliers to assist in career and business development. Aconsolidated network of Central American supermarkets will have vast potentialfor product commercialization and regional economic development.The investment in CARHCO is Wal-Mart's first in Central America, althoughthe region is a major source of apparel for the company. Wal-Mart directlyimports more than $350 million in goods from Guatemala, Honduras, El Salvador,Nicaragua and Costa Rica. In addition, Wal-Mart purchases goods from manysuppliers with farms and factories in Central America.I have frequently stated that the major future potential for Wal-Mart is its international business. In my view, a long-term holder of WMT shares will be handsomely rewarded.The present price weakness offers an opportunity of uncommon value. That may be a minority view; however, I don’t see anyone creating terrific returns by swimming with the majority.Norsk Hydro’s purchase of Spinnaker works out to paying $41 per barrel for stated reserves. Now that’s putting your money where your mouth is. Compare that with the purchase price per barrel for PKZ’s reserves. I know Kazakhstan is not the Gulf, but maybe it’s underrated as a source of oil and gas reserves.As evening approaches, Rita is currently forecast to become a hurricane rather than a tropical storm. That brings me to a question. Is the panacea to sell protection against the risk of systemic crises and bad outcomes? I’ve been hedging for 40 years. Hedging exposure is a tall order, and especially for supposed sophisticated bankers and hedge funds—many of them just beginning to shave. It might be wise to watch your ass- - -especially during hurricane season.

The Counterbid

9/20/05 The Counterbid
India's ONGC Videsh Ltd (OVL) has decided to counter China National Petroleum Company's (CNPC's) 4.18 bln usd bid to acquire PetroKazakhstan, India's Financial Express newspaper reported in its online edition.
The counter-offer will be made by ONGC Mittal Energy Ltd (OME), the joint venture floated by OVL and LN Mittal-promoted Mittal Investment Sarl, it said.
ONGC Videsh has formally informed the Indian government of its decision, the paper said, adding that its proposal to make a 'superior counter offer' was discussed by senior Indian government officials earlier this month.
'Consultations did take place on this issue and the committee had finally left it to the ONGC/OVL board to take a commercial call,' a senior government official was quoted as saying when asked to comment on the outcome of the meeting.
OVL is the international arm of Oil and Natural Gas Corp (ONGC).
Senior ONGC and OVL officials confirmed that a counter-offer is being prepared in consultation with their technical advisor GCA, legal advisor Ashurst and commercial advisor UBS, the paper said.
It said OME will be required to pay a 'break fee' of 125 mln usd to PetroKazakhstan if its counterbid is accepted. PetroKazakhstan will in turn pay the money to CNPC.
A bid price was not specified; however, it could be measurably better than $55. This sleeper could turn out to be the best risk arbitrage deal of 2005.

Rita has certainly rattled the markets. Natural gas traded up to its highest level ever. Heating oil rallied back to over $2 a gallon, and unleaded gas knocked on the $2 a gallon area. Crude rallied over $4 to exceed $67 a barrel. All these escalating energy prices fueled inflation worries, and gold soared $7 an ounce to $470+, its highest price in 18 years.

Peter DeLorenzo of Autoextremist.com: "SUV sales aren’t just slowing –they’re crashing to a halt."

The NAHB-Wells Fargo housing index fell to 65 in September from 67 in August, the 3rd decline in a row and the lowest reading since July 2003.

Delta stated "layoffs will not be small."

Bombay’s Sensex crossed 8,400 on the upside.

EnCana Corporation's wholly-owned partnership EnCana Midstream & Marketing has
signed an agreement with Methanex Corporation under which Methanex
will provide terminalling services to EnCana at Methanex's terminal facilities
in Kitimat, British Columbia. EnCana plans to import up to 25,000 barrels per
day of offshore diluent to help transport its growing oilsands production in
northeast Alberta to markets in the U.S.
"Diluent is a necessary component for the pipeline transportation of
heavy oil, but Canadian supply is tight due to increased production from
Alberta's vast oilsands. However, cost-effective diluent is readily available
on the world market and this can help us manage transportation costs as we
advance our oilsands growth and integration strategy," said Bill Oliver,
EnCana's President of Midstream & Marketing.
"With access to the ideally-located Kitimat terminal, we expect to be
able to import diluent at a competitive cost and move it to where it's most
needed - in northeast Alberta - then blend it with our growing oilsands
production for transport to key U.S. markets," Oliver said.
In addition to the projected 25,000 barrels per day of additional supply
to be transported from Kitimat, EnCana is close to completing a new
debutanizer installation at its Empress, Alberta natural gas liquids
extraction plant. Planned to come on stream in October, the debutanizer is
expected to generate about 5,000 barrels per day of diluent. The combined
30,000 barrels per day of added diluent expected from these two EnCana
initiatives represents an increase of more than 15 percent to the current
Western Canadian diluent supply.
The Kitimat terminal has an existing dock and tanks at an ice-free port,
plus a railway car loading facility for ease of transport to an Alberta
pipeline connection that feeds EnCana's oilsands operations. EnCana expects to
start importing diluent through Kitimat early in 2006. Under the agreement
with Methanex, EnCana has an option to buy the Kitimat terminal within the
five-year term of the agreement.
In conjunction with U.S. oil refiner Valero Energy Corporation, EnCana is
conducting a feasibility study into the construction of heavy oil processing
facilities at Valero's existing refinery in Lima, Ohio. The study, which is
expected to be completed over the coming months, will examine the engineering
and economics of EnCana supplying an estimated 200,000 barrels of blended
heavy oil per day to the Lima refinery. The establishment of an offshore
supply of diluent is a key component in EnCana's market integration strategy
which is aimed at maintaining industry-leading low operating costs as the
company expands in-situ oilsands production to an estimated 200,000 barrels
per day over the next several years.
I continue to believe that EnCana offers excellent long-term potential. In my view, the stock should continue to be accumulated during periods of price weakness.

John Menzer, President and Chief Executive Officer of Wal-Mart International announced today the purchase of a 33-1/3 percent interest in Central American Retail
Holding Company (CARHCO). CARHCO is Central America's largest retailer, with 363 supermarkets and other stores in the following five countries: Guatemala (120), El Salvador(57), Honduras (32), Nicaragua (30) and Costa Rica (124). CARHCO has
approximately 23,000 associates. Its sales during 2004 were approximately
$2.0 billion.
Wal-Mart acquired its interest in CARHCO from the Dutch retailer Royal
Ahold NV. The purchase price was not disclosed. CARHCO was formed as a joint
venture in 2001 with three equal partners: Ahold and two Central American
groups: the Paiz family, the major shareholders of La Fragua, with
headquarters in Guatemala, and Corporacion de Supermercados Unidos (CSU), with
headquarters in Costa Rica.
"We are delighted to have this opportunity to invest in the future of
Central America," said Menzer, adding that the alliance had been under
discussion for several years. "We are joining a strong partnership that is
delivering outstanding service to customers throughout the region. We believe
our investment will add strength to the partnership by helping to keep prices
low for consumers and will offer new opportunities to suppliers in the region
for additional business development." As part of the agreement, Wal-Mart will
acquire additional interests over time in CARHCO, including interests toward
achieving majority ownership in the company.
The new partnership demonstrates confidence in the region's economic
potential, Menzer said, adding that significant investments are planned in the
years ahead to open new stores and serve customers better with improved
services, high quality and innovative products and lower prices.
In addition, specialized training programs are planned for CARHCO
associates and for suppliers to assist in career and business development. A
consolidated network of Central American supermarkets will have vast potential
for product commercialization and regional economic development.
The investment in CARHCO is Wal-Mart's first in Central America, although
the region is a major source of apparel for the company. Wal-Mart directly
imports more than $350 million in goods from Guatemala, Honduras, El Salvador,
Nicaragua and Costa Rica. In addition, Wal-Mart purchases goods from many
suppliers with farms and factories in Central America.
I have frequently stated that the major future potential for Wal-Mart is its international business. In my view, a long-term holder of WMT shares will be handsomely rewarded.
The present price weakness offers an opportunity of uncommon value. That may be a minority view; however, I don’t see anyone creating terrific returns by swimming with the majority.
Norsk Hydro’s purchase of Spinnaker works out to paying $41 per barrel for stated reserves. Now that’s putting your money where your mouth is. Compare that with the purchase price per barrel for PKZ’s reserves. I know Kazakhstan is not the Gulf, but maybe it’s underrated as a source of oil and gas reserves.
As evening approaches, Rita is currently forecast to become a hurricane rather than a tropical storm. That brings me to a question. Is the panacea to sell protection against the risk of systemic crises and bad outcomes? I’ve been hedging for 40 years. Hedging exposure is a tall order, and especially for supposed sophisticated bankers and hedge funds—many of them just beginning to shave. It might be wise to watch your ass- - -especially during hurricane season.

Questions

9/19/05 Questions
Will the Fed raise rates this week?
If the Fed does raise rates, what impact might there be on the slope of the yield curve?
Will Katrina help to move rates higher than originally forecast?
When will the U.S. and China finalize an agreement on textiles?
How do companies place orders for Chinese textiles when they don’t know whether the order can be filled?
Have you been following tropical storm Rita? Those living in the Florida Keys have been asked to evacuate.
Will Rita become a hurricane and damage the refineries in the Gulf along the southern Texas coastline?
Lloyd Alexander: "We learn more by looking for the answer to a question and not finding it than we do from learning the answer itself."
Have you ever heard of Google’s G drive? It’s not a drive honing in on the G spot. Rather, it is a drive that will facilitate the storage of information on Google servers.
Did you know that Google is looking at having its own WiFi service that would provide its own nationwide ISP?
Is Google TV in the works?
Isn’t it a long way for Norsk Hydro to be buying Spinnaker Exploration (with operations in the Gulf) and then pay $65.50 in cash per share? Does the purchase price provide any indication of future price spikes in natural gas?
How many more jobs will Siemens eliminate in Germany after the announcement to cut 2,400 positions at their computer services unit?
Who won the election in Germany?
With the current federal government spending spree, how long will it be before the Congress is asked to vote on authorizing the raising of the ceiling on the national debt level?
Have you considered going long gold and shorting crude oil as a hedge?
What percentage of the Gulf coast evacuees will move permanently to other areas?
Friedrich Nietzche: "What if a demon were to creep after you one night, in your loneliest loneliness, and say, 'This life which you live must be lived by you once again and innumerable times more; and every pain and joy and thought and sigh must come again to you, all in the same sequence. The eternal hourglass will again and again be turned and you with it, dust of the dust!' Would you throw yourself down and gnash your teeth and curse that demon? Or would you answer, 'Never have I heard anything more divine'?"
Why has the number of Category 4 and 5 hurricanes nearly doubled around the globe in the last 35 years?
Starbucks brought music to its 40 million weekly customers. Will books be the next offering on the list?
Rainer Maria Rilke: "Have patience with everything that remains unsolved in your heart. Try to love the questions themselves, like locked rooms and like books written in a foreign language. Do not now look for the answers. They cannot now be given to you because you could not live them. It is a question of experiencing everything. At present you need to live the question. Perhaps you will gradually, without even noticing it, find yourself experiencing the answer, some distant day."

Stark Comparison

9/18/05 Stark Comparison

According to Tang Xu, head of the central bank’s research bureau in China, the country’s foreign exchange reserves rose by at least $29 billion in July, and thus its end-July reserves exceeded $740 billion. He stated the change in August should be normal, and therefore, heading into September, China’s foreign exchange reserves in all likelihood exceeded $765 billion. By comparison, the U.S. current account deficit amounted to $394 billion in the first six months of 2005, and is expected to approach $820 billion for the entire year. There are those who state there is no reason to be concerned, and cite capital flows into the U.S. in the month of July amounting to $87.4 billion. The problem is the average monthly capital inflow for the past 12 months is less than $87.4 billion, and there is no cushion. It’s a bit like the present savings rate in the U.S. It too has dwindled to nothing.

Robert McHugh: "There is also a Fibonacci price relationship between the stock market crashes of 1929, 1987, and now September 2005."

As of September 16, a total of 1,898 U.S. soldiers had died in Iraq since our invasion of March 2003. With Katrina getting all the news, I wanted to make certain our memory was able to walk and chew gum at the same time.


"Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervor, for patriotism is indeed a double-edged sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry. Rather, the citizenry, infused with fear and blinded with patriotism, will offer up all of their rights unto the leader, and gladly so. How do I know? For this is what I have done! And I am Caesar."

There is increased speculation that Tesco might be interested in Albertson’s. Timing is everything. Reuter's in London just reported that Tesco has sent an in-house team to the U.S. to consider a bid for Albertson's.
As an aside, Albertson's operates 120 stand-alone supermarkets, 331 stand-alone drug stores and 320 combination supermarkets and drugstores throughout California. I would not be surprised if Raley’s of Northern California and/or Stater Bros. of Southern California would have an interest in these Albertson’s California operations.

Thomas Jefferson: "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

Siemen’s will cut 1,290 jobs.

There is a widening gap between rural inland China and the booming coastal cities in that country.

Kazakhstan Prime Minister Daniyal Akhmetov, visiting Atyrau oblast, answered a number of questions. Concerning the sale of PetroKazakhstan shares, he stated, we are the country with open market economy. Kazakhstan does not interfere into the process of selling. They are realized at Toronto stock market. One who pays more will own PetroKazakhstan company. We will demonstrate the economic world we hold to sound economy and have no political interests. We want the companies, functioning in Kazakhstan, to be comfortable, Daniyal Akhmetov pointed out.

Over the past year, the U.S. national debt has been increasing at an average of $1.66 billion per day, and now totals $7.966 trillion.

For those unfamiliar with Tesco, the company currently operates in the Czech Republic, Hungary, Japan, Malaysia, Poland, Republic of Ireland, Slovakia, South Korea, Taiwan, Thailand, Turkeyand the UK. At the end of their last financial year they had a total of 2,334 stores, with 49.1 million square feet of sales area. Tesco had 1,780 stores in the UK, with 24.2 million square feet of sales area and 554 stores in their international operations with 24.9 million square feet of sales area. In sum, the company has no operations in the U.S. and is large enough to acquire the whole of Albertson's. The Sunday Times reveals that Tesco has assembled a land bank of more than 185 development sites across the UK which could create 4.5m sq ft of new supermarket space. Tesco’s land bank is bigger than that of Asda, Sainsbury and Morrison combined.

Frank Zappa: "It would be easier to pay off the national debt overnight than to neutralize the long-range effects of our national stupidity." In both cases, it sounds like daunting heavy lifting.

Garrison Keillor: "One day Donald Trump will discover that he is owned by Lutheran Brotherhood and must re-negotiate his debt load with a committee of silent Norwegians who don't understand why anyone would pay more than $120.00 for a suit."

Surveys

9/17/05 Surveys
A new Wall Street Journal Online/Harris Interactive Personal Finance Poll finds that nearly one in five(19%) U.S. adults who purchased a home within the last three years for their primary residence say they spent above their suggested price range, while two-thirds (67%) stayed within their price range and 12% were below their price range. When obtaining a mortgage for their new home, recent homebuyers who used a mortgage broker, direct lender or another source were nearly three times more likely to obtain a fixed-rate mortgage (72%) than an adjustable-rate mortgage (26%), and fully a third (34%) opted for a creative or option mortgage.

The third quarter "CFO Outlook Survey" of 315 CFOs revealed that 46% stated their companies are absorbing most or all of the additional energy costs, while 7% are passing along most of the increased cost to their customers. Interestingly, the predominantly service companies that make up 29% of the survey stated they are not directly affected by the high oil prices. The survey indicated that hardest hit by the rising oil prices are the manufacturing companies where 60% stated they are absorbing the cost and another 28% are absorbing half and raising prices to cover the other half. Burton Rothberg, assistant professor of accounting at Baruch College, observed "as a result, we can expect corporate earnings or capital spending to be affected, at least until prices to customers are increased. Consumers, who are already bearing the brunt of high oil prices at the gas pump and bracing for higher home heating costs, will have more bad news down the road if and when companies decide to pass along more of the costs."

Google, the most-used Internet search engine, may consider making a bid for America Online to keep the company from switching to Microsoft Corp.'s search technology, a Merrill Lynch & Co. analyst said Friday. Google, which receives 12 percent of its sales from advertising and other fees generated by America Online, may make a bid to preserve that income, Merrill's Lauren Rich Fine wrote in a note to clients Friday. Losing AOL as a client would cut Google's earnings per share by 5 percent to 10 percent, she said.

Less than half of the Hurricane Katrina evacuees living in shelters in the Houston area want to go home again, according to a poll by the Washington Post and the Henry J. Kaiser Family Foundation. Forty-three percent said they want to move back home when they can. About the same number of evacuees -- 44 percent -- said they want to relocate, and most of them wanted to stay in Houston, said the poll published Friday.

The fifth round of tariff talks between the U.S. and China are scheduled in DC for 9/26 and 9/27. Meanwhile, Deputy Secretary of State Zoellick will give a major policy address on trade with China on Wednesday, Sept. 21.

Bill Bonner: "A more perfect 'nothing' is gold. It is a sort of anti-asset. It pays no interest. It issues no press releases. It offers no guidance on quarterly earnings; it has no earnings. It does no mergers, no acquisitions and it never restructures. It hires no celebrity CEOs. It offers no discounts. It makes no excuses. But it is the thing that goes up when other assets, including dollars, go down. Gold is as close to 'nothing' as you can get. Buy it."

I would like to come back to a discussion I initiated in 1998. Between then and 2001, you probably got tired of me writing about naked puts. Naturally, I couldn’t give a crap whether you got tired or not. Companies like Microsoft took billions into their income statement by selling naked puts. As the stock rose, the company booked the put premium as income. If the stock declined, then the company would be put those shares and use the shares for their stock option program. As long as the market didn’t get creamed, everything was just dandy. As we know, in 2000 the Nasdaq got decimated. This brings me to today. A very dangerous problem is developing. The markets have been range-bound for quite some time. This pancake-like look has been a picnic for those naked put sellers, and this time it is not being effectuated by the Microsofts of the world. It’s the hedge funds. Should an unforeseen jolt take place to the markets, the pancake would crumble. Who would stand ready to purchase what had been put? When it was Microsoft, there was no worry. They had over $20 billion in cash at all times. You had better hope that the "IHOP Market" continues. As an innocent bystander, you could get creamed.

Doug Noland: "Yet, fundamentally, it is the perception of relative safety and liquidity - with respect to the new financial instruments, financing arrangements and evolving markets - that is most culpable for the proclivity of securitization issuance to go to gross excess. This dynamic is, today, in extraordinary force throughout Wall Street "structured finance." As I have noted many times previously, The Moneyness of Credit – the capacity for creating Credit instruments with the perceived attributes of safety, stores of nominal value, and near-absolute liquidity – is an invaluable analytical tool, as we grasp for clearer understanding of the current peculiar inflationary boom. The "Moneyness" dynamic is especially precarious with regard to Wall Street finance. The greater the inflation of issuance, the seemingly more stable the underlying (inflated) collateral values, the more abundant general marketplace liquidity, and the more ingrained the market’s perception of the safety, soundness and liquidity of "structured finance." Yet, fundamentally, it is the perception of relative safety and liquidity - with respect to the new financial instruments, financing arrangements and evolving markets - that is most culpable for the proclivity of securitization issuance to go to gross excess. This dynamic is, today, in extraordinary force throughout Wall Street "structured finance."

Confucius: "The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved."
The University of Michigan September Consumer Sentiment Survey plunged 14% from August to a 13-year low, while consumers’ inflation expectations rose to a 4-year high. It was not surprising that, with those fears of rising inflation, that gold would rise to a 17-year high of $463.30 an ounce. As thoughts of inflation imbued the grey matter of the Fed members, the yield on the 10-year treasury bonds rose to 4.27% and the spread with the 2-year widened to 30 basis points.

On the week, crude declined a dollar a barrel to $63.

At $43.87, shares of Wal-Mart hit a 3-year low, and they are approaching a 5-year low. Between 1999 and the present, the stock has traded in a range of $40 to $70, while the sales and earnings have been rising. Of the stocks in the Dow, can you give me a better long-term risk/reward?

China already accounts for 6% of world exports and its potential to supply the globe with low-cost manufactured goods has caused tensions in the global trading system, exemplified by the recent "bra wars" row. The OECD said China's share was on course to rise to 10% by 2010, by which time it would overtake the US. Despite 25 years of gross domestic product (GDP) growth at an annual rate of more than 9%, China is not expected to slow in the near future. The thinktank predicted that the world's most populous nation would overtake Britain, France and Italy to become the fourth largest economy within five years.

Lenny Bruce: " Take away the right to say "f**k" and you take away the right to say "f**k the government!"

The Outlook

9/16/05 The Outlook

Federal Reserve Bank of Philadelphia yesterday issued the following:
"The pace of activity in the region's manufacturing sector slowed in
September, according to firms polled for this month's survey. Indicators for
general activity and new orders fell substantially from their readings in
August and suggest little to no growth this month. Shipments increased but at
a slower pace, manufacturing employment and work hours were virtually steady, and firms again reported an increase in industrial prices. The region's
manufacturing executives were significantly less optimistic about future
activity than in August."

George Carlin: "Fighting for peace is like screwing for virginity"

With home affordability historically high, an oversupply of housing units and lack of rental demand have combined to weaken the REITs market on a fundamental level, says Standard & Poor's in a special report to be published on Monday, September 19. However, rising interest rates and/or a decline in housing prices could dramatically improve the REIT outlook as new households and even some existing homeowners gravitate toward rental housing. The report is the cover story in CreditWeek, the
investment research leader's weekly magazine on credit risk.

Andrew Liveris, Chief Executive Officer of The Dow Chemical Company, warned today that the persistently high price of oil and natural gas, exacerbated in the wake of Hurricane Katrina, poses a severe threat to the long-term health of the chemical industry in the United States. "For two and a half years or more our industry has done all that it can to mitigate the impact of escalating feedstock and energy costs, which have been particularly severe in relation to US natural gas," said Liveris.
"We've been sharply focused on reducing operating expenses, improving
energy efficiency, increasing productivity and generally controlling those
things we are able to control in an effort to address this unprecedented
challenge."But right now, with oil and natural gas prices at astronomically high levels and showing no signs of receding, the US chemical industry faces the very real risk of being unable to invest in its own future in this country."

Rep. Ron Paul: "Many reasons have been given for why we fight and our youth must die in Iraq. The reasons now given for why we must continue this war bear no resemblance to the reasons given to gain the support of the American people and the United States Congress prior to our invasion in March of 2003. Before the war, we were told we faced an imminent threat to our national security from Saddam Hussein. This rationale, now proven grossly mistaken, has been changed. Now we’re told we must honor the fallen by "completing the mission."

9/16 BusinessWeek: "Microsoft has lost several key executives in recent months, many to upstart rivals. Google has picked off 100 former Microsofties alone. Why? Because employees say the software giant has slowed as it's moved into middle age. The challenges: morale, bureaucracy and impediments to innovation. If Microsoft can't fix the problem, it could find itself in the same situation as IBM did when Microsoft was the hot upstart on the scene two decades ago."

Ken Simonson, chief economist of the Associated General Contractors of America: "There are 700,000 construction businesses in the U.S., which employ 7.2 million. The value of construction, measuring payroll and materials, is $1.1 trillion, or 8.5% of annual gross domestic product."

The agency that insures pensions for millions of workers may have a shortfall of almost $87 billion during the next 10 years, the Congressional Budget Office (CBO) said. The deficit at the Pension Benefit Guaranty Corp. (PBGC) raises "the specter of a sharply reduced pension for some insured workers or the need to provide taxpayers' dollars to the PBGC," the budget office said in a report yesterday. When was the last time a government agency correctly forecast a deficit?

Wilbur L. Ross Jr. Ross has bought a majority of the $750 million in bank debt of Collins & Aikman, a bankrupt maker of carpets, consoles and other interior parts. That debt could be converted to stock and a significant ownership of the company when it emerges from bankruptcy protection.
Ross said Thursday that he is interested in buying Delphi Corp., the nation's largest auto supplier, if it were put up for sale or files for bankruptcy, which it has said repeatedly that it might do.

Real average weekly earnings fell by 0.5 percent from July to August after seasonal adjustment, according to preliminary data released today by the Bureau of Labor Statistics of the U.S. Department of Labor. A 0.1 percent increase in average hourly earnings was more than offset by a 0.6 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Average weekly hours were unchanged. If you believe the consumer will continue his/her spending ways way into the future, forget it. When the equity line of credit on the home runs out, the spending spiggot will be turned off.

Swiss scientists have developed a vaccine that blocks the pleasure factor in smoking leaving the smoker with no kick, reports news portal Annanova.The anti-nicotine injection, CYT002 - NicQb, patented by Swiss pharmaceutical firm Cytos, works by building antibodies in the blood that stop nicotine from getting to the brain, it said. The vaccine has so far proved to be successful as it has already passed one preliminary test. Forty percent of the participating smokers quit within nine months since being injected with the drug. University of Lausanne professor Jacques Cornuz, who helped develop the anti-nicotine injection, said: "The results have exceeded our expectations." Before the injection the participants had all smoked between 10 and 40 cigarettes a day. The vaccine is expected to be in the market by 2010. There are about 1.3 billion smokers worldwide.

The FTSEurofirst 300 index of leading European shares rose 0.6 percent to 1,214.35 points, its highest intra-day level since May 2002, and the DJ Stoxx basic resources index rose 1.9 percent to a new all-time high of 355.9. At $459 an ounce, gold closed at a 17-year high and Goldcorp at $20+ closed at a new all-time high.

Northwest Airlines will cut 400 pilots.

Jon Stewart: "This is inarguably a failure of leadership from the top of the federal government. Remember when Bill Clinton went out with Monica Lewinsky. That was inarguably a failure of judgment at the top. Democrats had to come out and risk losing credibility if they did not condemn Bill Clinton for his behavior. I believe Republicans are in the same position right now. And I will say this: Hurricane Katrina is George Bush's Monica Lewinsky. The only difference is that tens of thousands of people weren't stranded in Monica Lewinsky's vagina."

9/15/05 Uncommon Value
After four consecutive years of double-digit increases, Starbucks expects to spend about $200 million this year for health care for its 80,000 U.S. employees — more than the total amount it spends on green coffee from Africa, Indonesia and other countries. It’s no wonder theses costs are described by the company’s chairman as "unsustainable."
It’s not every day that two airlines (Delta and Northwest) file for bankruptcy on the same day. If that were not enough, Newell Rubbermaid stated it would close 1/3 of its factories and eliminate 5,000 jobs.
In 1966 Greenspan wrote: "The excess credit which the Fed pumped into the economy spilled over into the stock market - triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in breaking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed."
Crude is trading at $65+ a barrel. It’s still to early to say that the price of gasoline has peaked on a long-term basis. As for returning to $35 a barrel as predicted by Steve Forbes, anything is possible; however, he has a better chance of being elected president than his prediction coming true—in my view.
Sears Canada announced Wednesday that it intends to cut $100 million in costs by next year by eliminating jobs, closing merchandise-buying offices and making other "operating efficiency improvements."
On a year-over-year basis, producer prices have increased 5.1%, the fastest pace since December 1990.
China has edged out Canada for the first time, taking top spot in exports to the United States in July, according to international trade data released this week.
China will not adjust its currency's exchange rate through another revaluation, a senior central bank official said Thursday, responding to questions about speculation over such a move. Yi Gang, an assistant to the governor of the People's Bank of China, Zhou Xiaochuan, said Beijing was confident it can keep the yuan stable while allowing it to adjust gradually to market pressures under what it calls a "managed floating regime."
"The exchange rate would continue to be set by the managed floating regime rather than by official revaluation," Yi told Dow Jones News.
Gary Lammert, The Economic Fractalist, written on Sept. 13: "Tuesday September 13 was day 26 of a 28 day ideal second fractal decay pattern. Wednesday and Thursday, 14 and 15 September 2005 should ideally be down days for the Wilshire ending the second decay fractal of 28 days of a three sequence : 11/(28 of 28)/ 28 ideal daily decay fractal
pattern. An ideal next high for the third and final decay fractal would be on day 104 of a 52/130/96(day 96 =Tuesday13 September) of a 104 day sequence. The ideal final high of this nearly identical 1929 decay fractal pattern would be on day 7 of a 11/28/(7 of 28 )day sequence. If the fractal pattern identification is correct the last 28 days representing the third decay fractal will be the major primary crash sequence equivalent to the final third
fractal of 27 days seen in the fall and Fall of 1929."
Most people believe their government does not act according to their wishes, a worldwide opinion survey shows. Lack of confidence in governments is highest in the former Soviet bloc, where 75% say their country is not governed by the will of the people, but similar views are held by most Europeans (64%) and North Americans (60%).
The findings come from one of the largest international polls ever undertaken. Commissioned by the BBC World Service, Gallup interviewed more than 50,000 people in 68 countries, representative of the views of 1.3 billion people worldwide.
Google initiated its blogsearch service. In my view, it is far superior to that of Technorati.
China's fixed-asset investment grew 27.4 percent in the first eight months of 2005.
Yesterday’s Palatin conference call was quite illuminating. The company stated it would receive $20 million in milestone payments in their 2006 fiscal year, and the 40% fourth quarter growth rate for NeutroSpec indicates that $8 million from its share of the revenue for NeutroSpec in 2006 is a reasonable expectation. The company is placing increasing focus on the molecule-end of the business, the pipeline for obesity and congestive heart treatment products. In 2006, the annual loss should be reduced to approximately $6 million, and that is without a licensing deal with an international pharmaceutical company for these pipeline products. I believe by April-June 2006 such a deal is quite possible. Using a minimum of a 3-year holding period, I believe PTN is an uncommon value. At a market cap of $100 million, the stock does not, in my view, come close to approaching the current value for the company. In this case, patience is a virtue and the smart thing to have.

Increased Risk

9/14/05 Increased Risk
Mike Shedlock: "Rapidly decreasing margins on sub-prime loans in the face of rising delinquencies sure suggests evidence of increasing complacency and excessive risk taking in the mortgage loan industry."
U.S. employers are likely to increase hiring at a steady pace next quarter, but low optimism about hiring at retail and manufacturing companies could make for a bleak holiday season, according to the latest hiring outlook survey from Manpower Inc.
Two and one half years ago Fortune Magazine reported that Rumsfeld was instrumental in providing North Korea with "the design and key components of two light-weight nuclear reactors."
"Their(China's) prices are below our cost of production," said Octavio Pozo, spokesman for Mexico's National Council of Chili Producers. "We're worried." They should be worried. Look at what happened to the garlic industry in Gilroy, California. Chinese garlic was significantly cheaper and the quality did not suffer.
With nearly a billion dollars appropriated by Congress for the task last year, the United States still lacks uniform systems that can keep all emergency responders in touch.
"We're no better off than we were then," Louisiana State Sen. Robert Barham said last week.
George Bush: "We need an energy bill that encourages consumption."
China’s Hu Jintao: "What I would like to stress here is that China does not pursue a huge trade surplus with the United States and we’re willing to work with the United States to take effective measures to increase China’s imports from the United States."
As of yesterday’s close, 50% of the DJIA stocks were above their 30-dy moving average, 46+% above their 10-day moving average, and 33% above their 5-day moving average.
The IBD/TIPP Economic Optimism Index plummeted in September, dropping 9.7 points, or 19%, to reach 41.2, a new all-time low for the index. Over 50 means optimism; below 50 indicates pessimism. IBD/TIPP conducted the national poll of 909 adults from September 6 to September 11. The margin of error is +/-3.3 percentage points.
The Six-Month Economic Outlook, plunged 16.3 points, or 39%, to reach 29.0. This is 9.7 points below this component's previous all-time low reached in April of 2005.
The Personal Financial Outlook declined 12% from 57.7 to 50.8 – an all-time low for this component.
Confidence in Federal Economic Policies fell 5.6 points, or 11%, to 44.0 – another all-time low.
The nation's employers are anticipating close to a 10% increase in health-care costs in 2006, and consequently will be shifting more of that burden to their employees, according to a new Mercer Human Resource Consulting survey of more than 1,800 firms. That 10% increase would be if they leave benefits unchanged.
George Bush: "Katrina exposed serious problems in our response capability at all levels of government." With all due respect, 9/11 illustrated serious problems. During the past four years, billions have been expended on homeland security and several individual rights have perished. New Orleans proved that lack of leadership is at the forefront of our nation’s readiness problems.
Interior Secretary Gail Norton said 58 percent of Gulf oil production remains shut down, as does 38 percent of the region's natural gas production.
Peoples Energy told its customers to expect winter heating bills to be 39% higher than they were last year.
Approximately 350,000 gallons of oil spilled into the residential heart of Chalmette, La.
China's sales of luxurious products are expected to grow 20 pct annually till 2008, Xinhua news agency reported, citing a research report by Ernst & Young.
After 2008, the increase in luxurious products sales is expected to slow to about 10 pct until 2015. "By 2015, China will replace the US to become the world's second largest consumer of luxurious products," stated Kongwai Lee, a partner and industry leader of retail and consumer products of Ernst Young.
Latin America has become one of the top business partners of India in 2004-05 with the two-way trade growing by 77.66 percent to $3.5 billion, according the industry body Assocham.
Lenox Inc. plans to close 31 of its retail stores and end production of fine china at its Pomona, N.J., plant on Nov. 14, and stated the closings will result in the loss of 530 jobs, including 290 at the Pomona plant and 240 at the retail stores.
Ford President James Padilla: "We will align our capacity with demand and see how that falls.'' In other words, more plants may be on the chopping block.

The nationwide average price for self-serve regular gasoline has dropped 10.1 cents per gallon since reaching a new record high of $3.057 on Labor Day, September 5, 2005. Today's nationwide average price of $2.956 is 51.6 cents more expensive than it was one month ago and $1.115 higher than last year at this time.

Zhang Guobao, China's deputy director of the National Development and Reform Commission, stated China is expected to produce 180 million tons of crude in 2005, up from 175 million tons in 2004. In addition, last year China imported 117 million tons of crude. Zhang did not state how many tons would be imported in 2005.

Through July, the trade deficit is 18% larger than one year ago and 40% higher than 2 years ago.

What would the U.S. Federal deficit in 2005 be if the cost of the Iraq war and the cost for FEMA were included?

Palatin Technologies, Inc. announced today results for its fourth quarter and fiscal year ended June 30, 2005. Total revenues in the quarter ended June 30, 2005 were $5.8 million, compared to less than $0.1 million for the same period in 2004. Palatin reported a net loss of $5.1 million, or ($0.09) per basic and diluted share, for the quarter ended June 30, 2005, compared to a net loss of $7.0 million, or ($0.13) per basic and diluted share, for the same period in 2004. At June 30, 2005, the Company had cash, cash equivalents and investments totaling $18.1 million, compared with 20.4 million one year ago.
The decrease in the net loss for the quarter ended June 30, 2005 versus the quarter ended June 30, 2004 was primarily attributable to revenue recognized in the current period under the Company's collaboration agreement with King Pharmaceuticals, Inc. (King) related to PT-141, a drug under development to treat male and female sexual dysfunction, and product revenue from NeutroSpec(TM), approved by the FDA in July 2004 for the imaging of patients with equivocal signs and symptoms of appendicitis. These revenues offset higher development costs and other operating expenses.
For the years ended June 30, 2005 and 2004, total revenues were $18.0 million and $2.3 million, respectively. Palatin's net loss for the year ended June 30, 2005 was $14.4 million, or ($0.27) per basic and diluted share, compared to a net loss of $26.3 million, or ($0.55) per basic and diluted share, for the year ended June 30, 2004.
"We are pleased with the quarter and our progress to date," said Stephen T. Wills, chief financial officer of Palatin. "Commercial sales of NeutroSpec continue to gain momentum with the quarter ended June 30, 2005 showing a 40% increase over the preceding quarter. In addition, we recently commenced our definitive Phase 2B clinical trial to evaluate PT-141 in patients suffering from erectile dysfunction."
One should note that the company has spent $48 million on R&D over the last two years and the market cap for Palatin stock is only $100 million.

Stretched Thin

9/13/05 Stretched Thin

According to the AARP Bulletin, U.S. Census Bureau statistics for the year ending in 2004 show that property tax collections grew by 24 percent nationwide, while sales tax revenue grew by 12 percent—income tax collections actually shrank by a percentage point. Increased property taxes are taking a toll on the fixed income of seniors. More and more are being forced to sell the homes they have owned for decades. How would you like to have a home with no mortgage and still not be able t afford the escalating
property taxes?

Currently, four major refineries, owned by Chevron, Exxon Mobil, ConocoPhillips and Murphy Oil, are either flooded or without power, and are likely to be off line for several weeks, perhaps months. Together, these refine 880,000 barrels a day, or 5 percent of domestic capacity. "It's very significant," said Colm McDermott, an oil analyst at John S. Herold Inc. The loss is equal to 1 percent of the world's refining capacity. "It's a global market and that's certainly enough to have an impact on a global level."

The Big Picture: "I am starting to think that Economists are the new corrupt Analysts on Wall Street."

We must keep in mind that the market historically hits a significant low in the second year of a president’s second term. In other words, 2006 should not present rosy stock returns for investors. With 3 ½ months left until the start of 2006, how long do you want to wait to take some money off the table? Don’t stretch your luck too thin. A puerco does not live high on the hog forever.

Gary Lammert, The Economic Fractalist: "Just like in 1929 it will most likely be the third decay fractal of 27-28 days that will witness the profound drop that will be the equivalent of avery slow moving category 5 hurricane moving across the entire nationwithout benefit of a dissipating landfall. The civil and social chaos witnessed in New Orleans may well be a representative microcosm of thegeneral unrest that could follow."

India will receive crude oil from the Caspian Sea region in October, the first shipment from the region, as part of diversifying its sources of energy supplies. The 1,764-km Baku (Azerbaijan)-Tblisi (Georgia)-Ceyhan (turkey) pipeline would pour Caspian crude on the Mediterranean Sea port next month.
The first oil for the outside world from the Caspian region has been taken by Bharat Petroleum Corporation Ltd (BPCL), which would ship it from the Mediterranean Sea through Suez Canal to its Mumbai refinery.

Foreign companies in China are facing a future of slimmer profit margins as their number multiplies and competition gets fiercer, the American Chamber of Commerce president, Charles Martin, said "This place is getting more competitive," Martin told reporters "There's more foreign companies coming in, there's more Chinese companies getting stronger," he said A survey of member companies of the chamber suggested that about 30 pct were seeing better profits in China than in the world as a whole, down from 40 pct in previous years, he said "(China) is acting more like a normal competitive market and we would expect that to continue to happen over the coming years," he said. "You're going to get more competition, you're going to get pressure on the margins." The tougher competition is coming about not just as more foreign enterprises enter China but also as new local competitors emerge, typically in service industries such as media and law, according to Martin "They say -- we can't do the offshore investment but we can do everything else you need done here at one half the price or one third the price," he said.

EnCana Corp. said it's agreed to sell all of its Ecuador oil and pipeline interests for $1.42 billion. Andes Petroleum Co., a joint venture of Chinese oil companies, will pay Calgary-based EnCana cash under terms of the deal, which is expected to close before the end of 2005.

More than 25,000 Japanese will be aged over 100 by the end of the month, compared with just 153 four decades ago, the government said on Tuesday.
Of the 25,606 people aged over 100 -- about one in every 5,000 Japanese -- more than 80 percent of are women.

Mobile phone maker Nokia raised its third quarter sales and profit forecasts on Tuesday, saying demand was strong and average sale prices of its handsets were holding up better than expected. Nokia said it expected third quarter net sales to be in the range of 8.4-8.5 billion euros, compared to its previous guidance of 7.9-8.2 billion.

Between August 1, 2004 and September 1, 2005 our National Debt increased by $575 billion. The folks who have their head in an unpleasant place will tell you that it's of no concern because the increase is only about 5% of our GDP. Let's look at it another way. That same 5% is approximately 40+% higher than the growth rate of our GDP. Such a relationship can only lead to the breech of an economic levee.

Bernard Baruch: "Gold has worked down from Alexander's time... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Taking Precaution

9/12/05 Taking Precaution

Have you ever considered the possibility of an exit strategy for youur portfolio? Some folks will reply that selling during times of an emergency will be selling at the bottom. A good example would be selling after 9/11. I am not suggesting that the selling be done aftera horrible event occurs. My plan requires some thinking on the part of an investor. When a situation doesn't feel right or 2+2 doesn't equal 4, then begain by taking money off the table. It doesn't mean selling 100% of an individual holding at a single time. You might begin by selling 25%. If the stock continues to rise, and it makes no sense to you, sell some more. Do not listen to the media. It's your money. A good example is the 5000 level on the Nasdaq. It's five years later and that index is still down 60%. Don't wait for an investing disaster to strike. So many people have a stock portfolio and know nothing about their holdings and take no responsibility for knowing. However, their retirement often depends on that portfolio.
Would you rather begin thinking about selling when the S&P is at a 4-year high or a 4-year low?
Since 1946, the U.S. economy has experienced a recession every 57 months and the recession has had an average duration of 11 months. The current economic expansion has lasted 46 months. In other words, to be on the safe side and prepare for the future economic storm, one should begin to prepare the portfolio
today and take the necessary steps. In sum, initiate an action plan and cut back on your weak holdings.
There is one possible economic variable that needs to be taken seriously. This country has amassed unprecedented government and household debt levels. To keep the ballgame going, the Fed has been using its printing press. Just suppose that economic storm hits in a year and inflation turns into deflation.
The fail-safe levees could easily be breeched. What happens to the equity build up in the asset-class sector of the economy? It's hard to imagine but yoyr home might drop 20-25% in value- or worse. Are
you prepared for that? Bottled water and a flashlight won't be help.

September 11, 2001- September 11, 2005

Sept. 11, 2001- Sept. 11, 2005

Have you been to Ground Zero? What do you think has taken place over the last four years? Bill Doyle’s son Joseph died at the Trade Center. Bill stated “it’s astounding to me that the only thing they have up there after 4 years are a couple of posters.” To be precise, there are names of 2,749 victims on panels attached to a fence. That’s what the site has to show for itself after 4 years.

Bush remarked “and in the days and weeks that followed, America answered history’s call to bring justice to our enemies and to ensure the survival and success of liberty.” Maybe Bush needs a lesson in reality. Osama bin Laden and Abu Musab al-Zarqawi are still at large. Do you think that would be the case had Ross Perot been president?
As for ensuring the survival and success of liberty, no other president in the history of the United States has trampled on the individual constitutional rights and liberties of American citizens as has Bush. In 2001, I predicted that Bush would go down as the worst president we have ever had. The misery and blight he has brought on this nation far exceeds my worst fears.

Jon Stewart: "If the events of September 11th have proven anything, it's that the terrorists can attack us, but they can't take away what makes us American - our freedom, our liberty, our civil rights. No, only Attorney General John Ashcroft can do that.”

President George W. Bush's approval ratings have fallen across the board in the wake of Hurricane Katrina and a seemingly flawed government response to the disaster, according to the latest Newsweek Poll. Bush's job-approval rating dropped to 38 percent, the lowest
ever in the Newsweek Poll. Sixty-six percent of those polled say they are dissatisfied with the way things are going in the United States at this time; just 28 percent are satisfied, another record low in the poll.
A 52-percent majority of Americans say they do not trust President Bush to
make the right decisions during a domestic crisis, 45 percent do. The same
number-52 percent-do not trust him to make the right decisions during an
international crisis, again, 45 percent do. In addition, 57 percent of
Americans say the slow response in New Orleans has caused them to lose
confidence in the government to deal with another major natural disaster, 41
percent say it has not; 47 percent say it has made them lose confidence in
government to prevent another 9/11-type attack; half (50%) say it has not, the
poll shows.
The president's ratings on issues having little if anything to do with
domestic disasters also declined. Bush's approval on handling terrorism and
homeland security is 46 percent, a five-point drop from the August 2-4, 2005
Newsweek Poll. For the first time in the Newsweek Poll, more Americans
disapprove of Bush's handling of terrorism and homeland security (48%). And
almost half (49%) of all those polled say taking military action against Iraq
two years ago was not the right thing to do; 46 percent say it was. This is
the first time ever in the Newsweek Poll that more Americans have said going
to war was not the right thing to do than said it was.
A plurality of Americans also rates the federal government's response to
the problems caused by Hurricane Katrina as poor (40%). Thirty-two percent say
the Feds' response was "only fair;" and 21 percent believe the response has
been "good," the poll shows. State and local governments did not fare better.
35 percent say they did a poor job and 34 percent say they did a fair job.
However, views are starkly different when examined by political party.
Fifty-three percent of Democrats polled say the federal government did a poor
job vs. just 19 percent of Republicans. Thirty-seven percent of Republicans
believe the federal government did a good job and 11 percent believe it did an
excellent job. The Democrats are more forgiving of local and state
governments, though not as forgiving as the Republicans are of the Feds.
Twenty-four percent of Democrats believe the state and local governments did a
good job and four percent say an excellent job. Thirty percent of Democrats
believe the local and state governments did a poor job, vs. 43 percent of
Republicans; 35 percent of Dems and 29 percent of Republicans say they did a
fair job.
While 66 percent of all those polled say a "major reason" for the
government's slow response to the disaster was because of poor communication
between federal, state and local government officials, 57 percent say a major
reason was that the amount of destruction was unexpected and overwhelming.
Fifty-five percent believe that incompetence of federal officials whose job is
to prepare and deal with natural disasters is to blame and 57 percent believe
state and local officials incompetence is to blame.

Every day I am astounded by the level of ineptness in this administration. They might consider revamping their HR department. It is normal procedure to check on the resume of an applicant. Obviously, that did not take place with Brown of FEMA. In addition, evacuees were told they would be receiving a $2,000 debit card and then that promise is rescinded. Why? The administration maintains they don’t have sufficient staff to hand out the cards. If they were handing them out to Congress, state, local, and municipal government workers, would they have found the means to hand out the cards? So they will mail checks to people who don’t have a home, a permanent mailing address, and don’t have access to a checking account.

Ross Perot: "If someone is blessed as I am is not willing to clean out the barn, who will?"

September 11, 2001 was avoidable. The Iraq war was avoidable. The levees breaking in New Orleans – that too was avoidable. Electing George Bush twice was avoidable. I hope Reverend Parsley is pleased with himself.

Kurt Vonnegut, Jr.: "True terror is to wake up one morning and discover that your high school class is running the country."

Toxic Negates Toxic

9/10/05 Toxic Negates Toxic

Wayne Krautkramer: "Congressmen and regulators are just wannabe shamans by another name. Don't let their secular disguise deceive you! It wasn't long ago that your leaders were wearing loincloths, strange headdresses, had bones in their noses, and were dripping blood from their teeth! Today, we have better looking shamans, compliments of Max Factor, Vidal Sassoon, Clairol, and cosmetic surgery. For further proof, see Michael Jackson."
U.S. Commerce Secretary Carlos Gutierrez today announced a formal determination of a fishery failure in theGulf of Mexico due to the devastation following Hurricane Katrina. Theaffected area includes the Florida Keys and from Pensacola, Fla., to the Texas border. The determination came in response to a virtual fishery shutdown in the affected states due to major flooding, damage to fishing boats and fishing ports, waterways clogged with debris and closed processing facilities.

"We are taking action now because of the significant economic effects of
Hurricane Katrina on fishing communities in the Gulf of Mexico," Secretary
Gutierrez said. "Major commercial fisheries in the Gulf of Mexico include
finfish, shrimp and oysters, with an estimated value of almost $700 million
per year." Although the extent of the damage to Gulf fishing industries is not yet
known, fishing in the region has been essentially halted. NOAA will work with
the states to assess damage to the 15 major fishing ports and the 177 seafood
processing facilities in Alabama, Mississippi and Louisiana. Based on
preliminary estimates, there are 432 federally permitted fishing vessels in
Alabama; 3,738 in Florida; 1,033 in Louisiana, and 351 in Mississippi.
Additional fishermen hold state permits.
It is anticipated that the only sign of life in these toxic waters will be
government employees. Toxic negates toxic.

Mark Twain: "It could probably be shown by facts and figures that there is no
distinctly native American criminal class except Congress."

The RBC CASH Index, based on polling by Ipsos, showed that consumer
confidence sank to 61.5 in September, the lowest since early March
2003, when confidence dropped to 61.4 as a nervous country hunkered
down for the start of the Iraq war.
September's decline -- the third straight month that confidence fell --
followed a reading of 72.6 in August. The latest showing also
underscored just how much consumers' confidence has deteriorated
compared with a year ago. In September 2004, consumer confidence was a
robust 103.4.

Richard Benson: "China is printing money at an
annual rate of 16 percent; Denmark is 15+ percent; Australia, Britain, and
Canada are over 10 percent and broad money growth in Europe is 8%. While the
broad measure of money growth in the United States is only 5 percent, growth
of total credit is double digit!"

Import prices continued a steady upward trend in August, increasing 1.3
percent following advances of 1.2 percent and 0.8 percent in June and July,
respectively.  The August increase was the largest monthly gain since a 2.2
percent increase in March, and import prices rose 7.6 percent over the past
year.  Following the pattern of the prior two months, the August increase was
driven by higher petroleum prices, which rose 7.1 percent.  August marked the
third consecutive month that the price index for petroleum imports recorded
its highest level since the index was first published in 1982.  Petroleum
prices rose 42.5 percent over the past 12 months.  Nonpetroleum prices were
unchanged in August after decreasing 0.2 percent in each of the three
preceding months.  Despite those recent declines, nonpetroleum prices
increased 1.8 percent for the year ended in August.

It is 112 days until 2006 begins. In other words, the AMT is just around the corner
for 14 million Americans. What a cancer!

I am fully supportive of private philanthropy, and my annual giving reflects that
belief. At the same time, I am totally against the Federal government taking money
from the pockets of the citizens and giving that money as a chartitable gift, such as, the
the $2,000 debit card or the $1 million gift to the families impacted by 9/11.
The Constitution covered this matter quite adequately and James Madison stated
"I cannot undertake to lay my finger on that article of the Constitution which granted a right
to Congress of expending, on objects of benevolence, the money of their
constituents."

I strongly suggest Bush, his Administration, the Congress, State, City,
and Municipal workers take a refresher course on the meaning of liberty
and property rights. It would serve them all well to fully comprehend
and follow the words of John Stuart Mill: "The only purpose for which
power can be rightfully exercised over any member of a civilized community
against his will is to prevent harm to others. His own good, either physical
or moral, is not a sufficient warrant. He cannot rightfully be compelled
to do or to forebear because it will be better for him to do so, because it
will make him happier, because in the opinions of others to do would be wise
or even right. There are good reasons for remonstrating with him, or
reasoning with him, or pursuading him, or entreating him, buy not for compelling
him, or visiting him with any evil in case he do otherwise." In sum, the people in
New Orleans and the environs cannot be compelled to leave their homes. Understanding
and appreciating the rights of a citizen as delineated under our Constitution is
an absolute requisite for public office. The voters had better take their rights
more seriously. Otherwise, our democracy is doomed.

7-Eleven, Inc. announced on Friday that the special committee of its board of directors has
retained Greenhill & Co., LLC as its financial advisor and Weil, Gotshal &
Manges, LLP as its legal advisor to assist the special committee with its
evaluation of the unsolicited tender offer commenced by Seven-Eleven Japan
Co., Ltd.  As announced last week, the special committee comprised solely of
independent directors of 7-Eleven is analyzing the unsolicited tender offer by
Seven-Eleven Japan Co., Ltd. of $32.50 per share in cash for all of the
outstanding shares of 7-Eleven's common stock that it does not currently own.
7-Eleven, Inc., headquartered in Dallas, Texas, operates or franchises approximately 5,800 7-Eleven(R) stores in the United States and
Canada and licenses approximately 22,700 7-Eleven stores in 17 countries and
U.S. territories throughout the world.  During 2004, 7-Eleven stores worldwide
generated total sales of approximately $41 billion. SE is trading at an all-time high
of $35+.

Kazakhstan has the oil resources to
help stabilize world oil prices, but needs increased investment to bring
transport capacity up to production capacity, the nation's minister of energy
said today at U.S.-Kazakh business conference here.
"We have invested billions of dollars over the years to develop and
upgrade our pipeline and transport system," said Minister of Energy Vladimir
Shkolnik. "Still, we need to improve our ability to move more oil from the
Caspian Sea to world markets, and that requires greater investment in this
infrastructure."
Shkolnik then cited Kazakhstan's oil production outlook as follows:

-- In 2005, the country expects to produce 1.3 million barrels of oil a
day and 28.7 billion cubic meters of natural gas per year.

-- By 2010, those figures are expected to climb to 1.8 million barrels a
day and 52.5 billion cubic meters of natural gas per year.

-- By 2015, the Central Asian nation could produce 3 million barrels of
oil a day and 79.4 billion cubic meters of natural gas per year, which
could make Kazakhstan the world's fifth largest oil producer.
I trust ONGC/Mittal are familiar with these projections. I continue to believe
PKZ is undervalued at $54. It won't take long to see whether I am correct.

The Internal Revenue Service, citing rising gasoline prices, said Friday it would boost by nearly 20 percent the mileage reimbursement limit for taxpayers who use their cars for work IRS Commissioner Mark Everson said the agency would raise the limit to 48.5 cents a mile from the current 40.5 cents, the biggest increase ever and more than double last year's 3 cent rise. The adjustment was effective Sept. 1 and will expire Dec. 31.

Allen Wallenwein: "Either Greenspan or his successor have exactly two choices: Keep on hiking and drag the Dow back into the valley of death (with the dollar and the entire US economy soon to follow) - or stop hiking and make the dollar lose its footing completely."

Two days ago local police officers began confiscating weapons from civilians in New Orleans. Quite clearly,
this action is in violation of the 2nd Amendment of the Constitution. I have never owned a weapon and I have no plans to so. At the same time, Americans have the right to bear arms. As Thomas Jefferson stated, "no free man shall ever be debarred the use of arms." Speaking personally, I don't believe in impeachment. I think it's too much of a milk-toast punishment. Rather, for every government employee who blatantly violates the constitutional rights of Americans, I support life imprisonment. Throw away the key. There are others, such as, U.S. Rep. John
Conyers who favor impeachment.

The S&P had its highest weekly close in over 4 years.

HP is seeking to cut 6,000 jobs in Europe.

Gold closed nicely at $453 an ounce.

Speaking of Hewlett Packard, it's market cap is up to $80 billion and Dell's is slightly above at $83 billion. That's close enough to even for me. I believe this represents an uncommon value and an opportunity. I would suggest you consider going long Dell and shorting Hewlett Packard on a 1 for 1 basis.

What a difference a week can make. On September 2, Albertson's announced it was seeking alternatives, and that included a possible sale of the company. At the opening for trading, the stock rose about 6 points to $26.40 and then declined during the rest of the day and closed at $23.05. The volume was about 56.5 million shares or
almost 15% of the outstanding shares. Yesterday was a very different picture. On Thursday evening the stock had closed at $23.05. On Friday morning, the stock opened at $24, the low for the day, and traded up to $25.10 and closed at $25.01 in after market trading. The volume was 47 million shares. In other words, there was very little down volume. It's possible that Friday's trading was due to an article in The Deal.com that mentioned several large financial buyers were interested in Albertson's. In fact, every single suggested buyer was on a list of usual suspects. More importantly, the article simply confirmed the company is for sale to the highest bidder. Some folks need hand holding. That's typical of those who don't think for themselves--- like 95%+ of
investors. Understanding Albertson's is not too difficult. It has an important franchise, and there is significant
untapped value in this franchise. When money is lying on the floor, someone will pick it up. You can be sure of that.

Ralph W. Sockman: "The hope of free man in a frightened world is the values which man puts ahead of
inventions when his back is to the wall. These values are beauty, truth, goodness, and having a faith, all
of which are bombproof."