Goings On

12/9/05 Goings On

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

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

California housing affordability down 4% in October.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Something Has To Give

12/8/05 Something Has To Give

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wages, Productivity, And Inflation

12/7/05 Wages, Productivity, And Inflation

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

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

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

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

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

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

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

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

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

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

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

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

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

Dreamland

12/06/05 Dreamland

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Impeach!

12/5/05 Impeach!

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

Looking Beyond Your Nose

12/4/05 Looking Beyond Your Nose

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

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

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

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

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

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

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

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

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

Get Real

12/3/05 Get Real

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

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

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

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

Changing Landscape

12/2/05 Changing Landscape

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

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

Gold closed at $502.50 an ounce.

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

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

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

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

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

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

The Nikkei is trading at a 5-year high.

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

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

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

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

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

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

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

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

Make My Day

12/1/05 Make My Day

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Make My Day

12/1/05 Make My Day

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Let's Take A Close Look

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

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

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

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

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

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

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

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

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

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

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

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

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

Winter Has Arrived

11/29/05 Winter Has Arrived

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Holiday Specials

11/28/05 Holiday Specials

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

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

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

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

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

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

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

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

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

Good News And Bad News

11/27/05 Good News And Bad News

Wal-Mart expects to post a pleasing 4.3 percent gain in same-store sales for November. During Friday’s 6-hour special sales event, about 10 million shoppers jammed their stores. The way to play the holiday season has been through Wal-Mart. The way to play retail in 2006 and beyond is through Wal-Mart. Any company getting in the way, and that includes Target, will be a casualty.

Sol Palha: “For every dollar in actual currency there are over 10 dollars of electronic money; rather strange don't you think. Another strange factor is that most of the actual real (it's an oxymoron because the term should be dead) dollars were held in countries outside the US; in other words the US actually is loaded with nothing but electronic dollars.”

The NASDAQ composite, S&P 500, and Wilshire 5000 all closed at multi-year highs on Friday.

Mike Burk: “Next week includes the last 3 trading days of November and the first 2 trading days of December. The OTC(Nasdaq) during this period has been up 70% of the time since 1963, the SPX(S&P500) has been up about 60% of the time since 1928.”

Early yesterday morning I smiled when I read page 44 in Barron’s. There was a large article entitled “Palatin’s New Sexual Dysfunction Drug May Be Nothing To Sniff At.”
It was written by Jay Palmer and covered PT-141, an aerosol treatment for male and female sexual dysfunction; NeutroSpec; and potential treatments for weight control and congestive heart failure. Unlike other articles, it included earnings estimates for future years. It closed by stating “well before any money rolls in, publicity about PT-141 could pump up the stock price.” I will repeat. For me, this is a 3 to 5 year investment, and I believe it offers unusual risk/reward potential.

President Bush: “In the past year, these brave Americans have continued to fight terrorists abroad so we do not have to face them here at home.” You think our fighting in Iraq or Afghanistan will prevent al-Qaeda from hitting our shores? You think invading the country of Iraq had anything to do with fighting for our freedom or the freedom of the Iraqi people?

General Electric Co. said Friday it now expects to record a $3 billion fourth-quarter after-tax loss for the sale of most of its reinsurance business to Swiss Re.

Golda Meir: "Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!"

The future of oil hinges on access, according to independent energy consultant Dale Steffes.
"If we could drill the rest of the world like we've drilled the U.S., we'd have so much oil we wouldn't know what to do with it," he said. Good oil-reserve values still exist in Brazil and Kazakhstan, according to a recent study by energy consultancy Wood MacKenzie. Analyst Alan Murray said Nigeria and even Egypt have potential. According to the report, the very best oil-reserve value in the world remains the U.S. western Gulf of Mexico; however, there are very high costs surrounding drilling in deep water.

Ronald Reagan: "The taxpayer (is) someone who works for the government but doesn't have to take a civil service examination."

Newmont Mining stated it was thinking about making a bid for Placer Dome, the company that last week turned down a $9.2 billion cash and stock deal from Barrick Gold. They said the offer did not present a premium to the current market price. This deal will take some time to sort out, and I favor Barrick in the end. The fit is better.

Brian Riedl, the Heritage Foundation's chief budget analyst: "I'm not sure we'll ever pay it (the current $8+ trillion national debt) off...After 2017, we'll be looking at deficits of $2 trillion a year."

From 1776 to 2000, the nation's first 42 presidents borrowed a combined $1.01 trillion from foreign interests, official statistics show. In less than five years, Bush has borowed $1.05 trillion. That is not simply a red flag. It is a gigantic accident waiting to happen, and it will happen in the life of most Baby Boomers.

The existing debt limit is $8.2 trillion. "We think the first quarter next year is when we expect to hit the existing debt limit," Treasury Undersecretary Randal Quarles stated. If Bush and his Administration say one more time that they "are committed to cutting the deficit," I will puke. Staying the course with Bush is risking our financial independence.
Staying the course with Bush is risking the lives of our men and women stationed in Iraq, a country that wants us to leave.

Jeff Daiell: "When Barbary Pirates demand a fee for allowing you to do business, it's called "tribute money". When the Mafia demands a fee for allowing you to do business, it's call "the protection racket." When the state demands a fee for allowing you to do business, it's called "income tax."

There is one additional shopping day this year between Thanksgiving and Christmas.

According to China Daily, the number of unemployed Chinese in cities is about to hit 17 million next year. China has a population of 1.3 billion people.

Indian Petroleum Minister Mani Shankar Aiyar will visit Beijing in mid-January 2006. India will suggest to set up institutional mechanism to carry forward the cooperation in research and development of energy sector between the two countries, Aiyar said in New Delhi Saturday. "Around four to five MoUs (Memorandum of Understanding) are expected to be signed during my visit to China in January," he said.

Art Buchwald: " Tax reform is taking taxes off things that have been taxed in the past and putting taxes on things that haven't been taxed."

Consumers are projected to spend $19.6 billion on non-travel goods on U.S. Internet sites during November and December, up 24 percent from $15.8 billion during the same period last year, according to comScore Networks.

According to ShopperTrak RCT Corp., the overall sales on Friday were $8 billion, down 0.9 percent from a year ago, and this despite heavier discounting and expanded hours. Wal-Mart was the bright spot.

Will Rogers: "If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don't get wet you can keep."

Next Week

11/26/05 Next Week

As we turn the page of the calendar, December will appear, and so will reality. Right now Thanksgiving and Black Friday are on everyone’s minds. The holiday turkey dinner could not even keep the shoppers occupied. U.S. consumers using Visa credit cards spent $205 million shopping online on Thanksgiving Day — up 41% from the same day a year ago, stated the credit card company. They could not wait for Cyber Monday.
Next week it will not be all about bargains in the malls or online. Merck will announce a restructuring with layoffs. Then GM, Ford, and Chrysler will announce miserable North American vehicle sales for the month of November. Meanwhile, sales for Toyota will be just fine and dandy. You might consider the number of folks employed at the Big Three, the number employed in the auto parts business, the number employed at other companies serving the industry as well as the communities impacted by their slowdown in sales. This is not a laughing matter. GM CEO Wagoner said the company is selling more vehicles in other countries than in the US for the first time. No media outlet will spin these troubles into thin air. This is not Washington DC. This is the heartland, baby. This is not about winning re-election or gaining support for invading a foreign land. This is about putting food on the table and paying the mortgage, college, and medical bills. This may be the key shopping season, but for many there is real trouble.

For those of you who look for a further collapse in oil prices, you might consider that China may consume 331 million metric tons of crude oil next year, the State Council’s Development Research Center said… Oil consumption this year may gain 6.2 percent to 310 million tons, it said.

Bill Bonner asks “And what would our dead ancestors think of our mortgages? Most of them had small mortgages, if any at all, on their homes. And if they had them, they couldn’t wait to get rid of them. (Even our own parents held little parties to celebrate f inally paying off the mortgage on the family home.) What would our forebears think if they were to learn that the richest generation in American history has mortgaged a greater share of its homes than any in history? What would they think of no-money-down mortgages, minimum payment plans, and negative amortization schedules?
And what would the old-timers think of our government debt? The unpaid liabilities and obligations, expressed as though they had to be paid today, come to about $44 trillion, depending on the source you choose to believe.”

Wal-Mart Stores stated it had 2 million customers in the first two hours of shopping yesterday after opening its stores at 5 a.m., an hour earlier than last year.

Shopping on U.S. online sites will rise 24 percent this month and next to $19 billion, according to ComScore Networks Inc.

Bill Bonner: “The trouble with the news is that it is impossible to know what is important when you must rely solely on the judgment of people who happen to be breathing. The living can imagine no problems more urgent than the ones they confront right now, and no opportunities greater than the ones right in front of them. We prefer the obituaries.”

Turning to reality in Iraq, more than 100 U.S. troops were killed there this month, and since our March 2003 invasion, this raised the death toll to over 2,100. Meanwhile, meeting in Cairo, representatives of the three major Iraqi ethnic and religious groups called for a U.S. withdrawal and recognized Iraqis' "legitimate right of resistance" to foreign occupation. In other words, they want the occupiers (that means the USA) to leave. On Wednesday, Bush will speak to the nation and provide you with BS about the readiness of Iraqi troops to stand up so we can now stand down. It will be a pathetic and deplorable display similar to the reason given for our invasion of Iraq—the WMD. With over 2,100 dead and over 15,000 wounded, our troops deserve a lot better from a Commander-in-Chief. They deserve the truth that we never should have invaded and that the tragedy of dead soldiers, civilians, and wounded fighting men and women was for naught. Politicians can fill the media with gibberish prior to next year’s mid-term elections. If you re-elect most of these politicians, you are a fool. You re-elected Bush, and blood is on your vote. Next Thursday is December 1. It is time to take a good look at reality. It will be the start of a new moon. Let’s make it a new beginning and start the New Year early.

Louis Pasteur: “Chance favors only the prepared mind.”

Ecologists predicted that China’s benzene spill would enter Russian territory tomorrow or Monday and said it could pose a health danger for up to two weeks. Authorities in Khabarovsk ordered the immediate purchase and delivery of 20 tons of charcoal for use in the purification of drinking water and cleaning of water treatment facilities.

It’s strange to see gold trading at an 18-year high of $496 an ounce and the dollar trading at a multi-year high versus the yen and the euro. Certainly, the dollar is not rising due to its attractiveness as an inflation hedge and possibly gold is not being accumulated as a hedge against inflation or simply to make gold jewelry in India. It’s possible the dollars are being bought for wallpaper and gold as a paperweight. Imagination is required. Leave your rationality on the doorstep.

President Eisenhower: “Every gun that is made, every warship launched, every rocket fired, signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. The world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”

Happy Black Friday

11/25/05 Happy Black Friday

An increase of 7.2 percent in consumer spending in September and October, combined with falling prices at the pump, is providing "strong momentum" for the holidays, said Scott Krugman, spokesman for the National Retail Federation. "We're looking at a strong holiday season," Krugman said.

Cythina Helms: "If man liked shopping, they'd call it research."

Rep. Norm Dicks is a Democrat from Bremerton, WA. He is a member of the House Intelligence Committee and a known Hawk. Without the threat of weapons of mass destruction (WMDs), he said, he would "absolutely not" have voted for the war. Dicks says the intelligence was "doctored." "A lot of us relied on [former CIA director] George Tenet. We had many meetings with the White House and CIA, and they did not tell us there was a dispute between the CIA, Commerce or the Pentagon on the WMDs," he said.

China's central bank sold dollars to 10 domestic banks at the current exchange rate of 8.0810 yuan per dollar with an agreement to buy them back in a year's time at 7.85 yuan. The implied yuan rise of about 2.9 percent reflects nothing more than the difference between U.S. and Chinese interest rates.

Philip Stevens of the Financial Times: "The image that will forever haunt this president is of the mission accomplished banner that served as backdrop to his triumphal landing on the aircraft carrier USS Abraham Lincoln in those heady days of May 2003. Now, cynics will tell you the banner will soon be dusted down and unfurled again – only this time the purpose will be to give political cover to an American retreat from Baghdad."

According to Shop.org and BizRate Research, 79% of online retailers will offer free shippinh with conditions such as a minimum order this holiday season. Shipping and handling account for between 7.5 to 10 percent of overall sales.

Last year, the busiest shopping day was Saturday, December 18, according to the International Council of Shopping Centers. Black Friday was the second busiest day.

With the first in-depth analysis of the air bubbles trapped in the ice core of east Antarctica, scientists have discovered that today's atmospheric carbon dioxide levels are the highest in 650,000 years.
The analysis highlights the fact that today's rising atmospheric carbon dioxide concentration, at 380 parts per million by volume, is already 27 percent higher than its highest recorded level during the last 650,000 years, reported scientists in two papers in the Nov. 25 issue of the journal Science.

PJ O'Rourke: "At school we had a name for guys who were 'trying to get in touch with themselves.'"

Happy Thanksgiving

11/24/05 Happy Thanksgiving

Rebecca Harding Davis: "For, after all, put it as we may to ourselves, we are all of us from birth to death guests at a table which we did not spread. The sun, th earth, love, friends, our very breath are parts of the banquet...Shall we think of the day as a chance to come nearer to our Host, and to find out something of Him who has fed us so long?"

Ten days ago an exlosion at a PetroChina chemica plant released benzene into an 80 km stretch of the Songhua river. The plant is outside the city of Jilin but the polluted portion of the river is expected to reach Harbin, a city of 9 million people, this morning and it will take 40 hours to pass through. Thousands have jammed railroads and planes in an attempt to avoid the pollution. All water was turned off in Harbin, and there has been a run on bottled water.

Yesterday, there was heavy selling in shares of Saks. It was in reaction to the news that insiders at the company had sold 1,136,379 shares on Nov. 17 at $17.52+. Since just before mid-year, Saks has been in negotiation s to sell parts of the company. That has occurred. It also has meant that insiders could not trade in Saks shares during this period. It is believed that negotiations to sell its flagship Saks Fifth Avenue operation will not take place until after Christmas. As such, this was a limited window to exercise stock options and simultanelously sell shares in the open market. Many of the shares had an option price of $8.81 and the options were to expire shortly. Often it is wise to sell on the news, so to speak, but it is also wise to understand the news and not simply the headlines.
In my view, the market price is underestimating the enterprise value for Saks, its valuable real estate, its under-leveraged balance sheet, and the potential to improve the current margins at Saks Fifth Ave. On a risk/reward basis, one might seriously give consideration to the purchase of these shares. Many will buy cashmere at Saks this holiday season. I prefer to stock up on the stock at this level.

Unemployment claims resulting from Rita and Katrina now total 555,000 and for Wilma 27,400.

The Conference Board Help-Wanted Advertising Index -- a key measure of job offerings in major newspapers across
America -- was unchanged in October. The Index now stands at 38, the same as
in the previous month. It was 37 one year ago.
In the last three months, help-wanted advertising declined in eight of the
nine U.S. regions. Steepest declines occurred in the Mountain (-15.7%), West
North Central (-11.0%) and East North Central (-9.2%) regions. Help-wanted
advertising increased in the West South Central (2.4%) region.
Says Ken Goldstein, labor economist at The Conference Board: "The
post-holiday labor market will likely remain weak. This is consistent with the
slowing trend in The Conference Board Leading Economic Indicators. Hurricanes,
flooding and energy prices have all held back growth. But outweighing these
concerns is lingering consumer worries about prices starting to rise faster
than wages. With slower hiring, and indications that hiring might remain soft
in the months ahead, the economy could struggle, setting up a self fulfilling
prophecy."
The number of new online job ads fell to 2,002,600 in October, 36,000 less
jobs being offered than in September, according to The Conference Board
Help-Wanted OnLine Data Series(TM). In October there were 1.34 online job ads
per 100 persons in the U.S. labor force, compared with 1.36 in September and
1.43 per 100 persons in the labor force in August.

The holiday retail sales environment looks positive for 2005, although the conditions are less favorable than in
2004, according to Standard & Poor's in a report released this week, "Retail
Outlook:  Holiday 2005."
"Despite media reports about a potentially gloomy holiday season,
consumers have proven to be fairly resilient thus far and we have learned not
to underestimate their willingness and ability to spend," said Marie Driscoll,
an equity analyst for Standard & Poor's.  Overall, Standard & Poor's expects a
gain of about 3.5% to 4.0%, which is below the 6.7% increase reported for the
2004 holiday season by the National Retail Federation.
"The single biggest levers this holiday season, both positive and
negative, will be the robust employment picture and the projected increases in
heating costs, respectively," said Ms. Driscoll.  Some of the positive
influences include extra shopping days and an extra Saturday the day before
Christmas, declining retail gas prices, lower unemployment, and higher
incomes.  Conversely, some of the negative influences include the potential
for high home heating costs, negative savings rate, and declining consumer
confidence.
"We expect cost-conscious consumers to continue to seek the best
price/value offerings to maximize their gift giving and expect Wal-Mart and
Target to be lead destinations for more commodity-type gifts such as consumer
electronics, toys, and sporting goods," continued Ms. Driscoll.  "We also see
consumers shopping both discounters for quality, value-priced jewelry, fashion
apparel, accessories, and home furnishings.  In addition, we believe both
Wal-Mart and Target may benefit from some consumers 'trading down' this
holiday season.  That said, we see cross-shopping as a more enduring pattern
of behavior for most consumers," she concluded.

GfK NOP today announced results from its annual Roper Reports(R) Holiday Shopping Outlook, finding almost half (45%) of
Americans expecting to spend less this season compared to 2004, and only 8% of
consumers saying they will spend more. Fluctuating fuel prices are having a significant impact on consumers as
they enter the holiday season.  More than half (57%) of respondents state the
cost of fuel is hurting their household a lot, and a majority (56%) say they
will spend less money on gifts as a result.  Americans plan to spend an
average $780 on gifts for friends and family, down $78 from 2004.  While
spending is down, shopping lists remain steady with consumers on average
purchasing gifts for 11 people again this year.
"With all the recent noise around heating prices, Americans are feeling
the pressure, and it's showing in their spending plans," says Cary Silvers,
vice president of GfK NOP's Roper Reports division.  "There was a twenty
percentage point increase this year compared to last in the number of
consumers who say they plan to spend less.  As the holiday shopping season
kicks off, only 12% of Americans believe now is a good time to buy (October
2005 reading)-the lowest number we've seen in five years.  Faced with fading
consumer confidence, we may see the traditional battle-of-the-best-holiday-
deals reach new heights this year."
The Holiday Shopping Outlook found that a majority of consumers,
struggling with what to get Aunt Mae or Grandpa Joe, are turning to gift cards
as a way to please those hard-to-shop-for friends and family members.  Nearly
two thirds (62%) plan to give the gift of -- gift cards.  While gift cards
simplify shopping and ensure timely giving, they drag out the sales process
when it comes to redemption.  Only 11% of consumers use gift cards within one
week of receiving them, and half (52%) of Americans wait to redeem gift cards
thirty days or longer.

The University of Michigan Sentiment Index rose to 81.6 in November from 79.9.

W.T. Purkiser:"Not what we say about our blessings, but how we use them,
is the true measure of our thanksgiving." 

Travel Safely

11/23/05 Travel Safely

Optimism remains the watchword for this holiday season, with retail sales expected to increase by 4% to 4.5%over those recorded in 2004, according to Clear Thinking Group, LLC, a retailing/consumer products and industrial manufacturing consultancy.

New Survey from The Boston Consulting Group (BCG) Reveals Middle-Market
American Consumers(1) Looking To Reduce Overall Spending During The Holiday
Season, While Splurging On A Few Luxury Categories. 40% of consumers are planning to spend less over the next three months and only 23% are planning to spend more.(2) Nonetheless, they will treat themselves, family and friends to 'luxury' gifts while bargain hunting for items that don't mean as much to them.

U.S. holiday gift spending will likely fall slightly this year and stores will have to offer discounts to satisfy shoppers hunting for bargains, according to a survey released on Tuesday. U.S. households are expected to spend an average of $466 on gifts this holiday season, down from last year's estimate of $476, the survey by The Conference Board showed.

Consolidated Credit's 6th Annual Holiday Spending Survey finds sixty-two percent of people plan to spend less money during the 2005 holiday season. Last year, most respondents said they planned to spend more.
Over forty-three percent said they are paying off debt from last holiday
season, which is up from 30% last year. "The tough economic conditions in
2005 did not enable consumers to pay their debts in a timely manner," says
Howard Dvorkin, founder of the non-profit, Consolidated Credit Counseling
Services, Inc. and author of Credit Hell: How to Dig Out of Debt.

The National Retail Federation revised its holiday sales forecasts higher for the first time ever during a holiday season. It now expects November-December retail sales to rise 6% to $439.53 billion. The NRF saw 5% in September.

Marsoft: “For the third quarter as a whole, freight rates were down by an average of 40% relative to the second quarter, falling to their lowest level since mid-2003. Period charter rates also declined significantly, falling by about 25% over the past three months.
Cape rates on our benchmark Tubarao/Rotterdam iron ore route fell to a low of $22,000 per day by the start of August, before climbing back to $50,000 per day by the end of September. For the third quarter as a whole, rates averaged $39,000 per day, their lowest level in two years, and down from $61,000 per day in the second quarter. By mid-October, rates had strengthened further, topping $55,000 per day.”

Barry Ritholtz points out that, according to the BLS, “the average American spends more on entertainment than on gasoline, household furnishings and clothing and nearly the same amount as spent on dining out.”

The Mortgage Bankers Association said its index of mortgage application activity for the week ended November 18 declined to 635.4, 3.4 percent below the previous week's level.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.26 percent last week, down 0.07 percentage point from the previous week's 6.33 percent, a 17-month high.

Mexico’s Ortiz, Brazilian Finance Minister Antonio Palocci and Chile's Finance Minister Nicolas Eyzaguirre all commented on their exchange rates today, underscoring concern in the region that the currency rallies may drag on exports and hurt economic growth.
``The appreciation of the Mexican peso is not an isolated case,'' Ortiz said. Mexico's peso has gained 4.6 percent in 2005 and the Brazilian real has jumped 23%.

The House on Tuesday agreed to a $3,100 pay raise for Congress next year to $165,200. Officially, it is not a raise. It is a COLA. Interestingly, the same does not apply to the minimum wage.

Sen. George Voinovich (R., Ohio): "Contrary to what some of my colleagues believe, tax cuts do not pay for themselves." Ohio lost 6,500 jobs in October.

Today is the busiest travel day of the year. I hope everyone gets to their final destination safely.

Happenings

11/21/05 Happenings

Wal-Mart will match pricing in any local competitor's print ad; no rebates, no hassles, just low prices for customers; special items available at 5 a.m. on Black Friday; five days of special savings online at Walmart.com.

Saks Saks Fifth Avenue unveiled the new Holiday Snowflake Spectacular at the Fifth Avenue flagship yesterday during a special launch event. The company believes the Saks Snowflakes are destined to become a treasured New York Holiday tradition. To accomplish the Snowflakes in the windows required:
- 50 fully programmable, unique snowflakes reaching ten stories high
(36-8'-0"; 14-20'-0"), inspired by William "Snowflake" Bentley's
snowflake photos from the 1920s
- The project required 8,000 feet of steel, 5 miles of lighting, 72,000
LED modules, 15 multicolor changing uplights, 40 strobes, 13,000 feet
of cable and more than 5,000 hours of production.
This is a must-see for all residents and visitors to NYC during the holiday season.

Lobbyist Michael Scanlon, a former aide to Rep. Tom DeLay, pleaded guilty Monday to attempting to bribe a member of Congress and promised to help federal prosecutors in an investigation in which Washington officials are potential targets.
Scanlon agreed to serve between 51 and 63 months in prison and pay a $250,000 fine as part of his guilty plea to the charge of conspiring to commit fraud. He was also ordered to pay restitution of $19.7 million to the defrauded tribes.
The plea agreement filed by federal prosecutors listed 10 actions they said were taken by Rep. Bob Ney, R-Ohio, as part of a conspiracy with Scanlon and Abramoff aimed at passing legislation to help the lobbyists' Indian clients.
In exchange, Scanlon and Abramoff provided Ney and his staff with lavish trips, golf outings, tickets to sporting events and concerts, meals at expensive restaurants and campaign contributions, the plea agreement said. We will be reading more about Scanlon and certainly about Abramoff.

If sales in the final week of November meet the company's sales goals, Target said it expects to generate a modest gain of 2 percent to 3 percent in same-store sales growth for the month. Meanwhile, Wal-Mart Stores Inc. on Saturday said in a recorded call that it's still on track to generate same-store sales growth of 3 percent to 5 percent for November.

Washington Mutual is laying off 370 workers at its El Paso, Texas collections center. More customers are paying their bills online and that’s the reason for the cut in workers.

GM stated it would stop production at 12 plants, including four in Michigan, and cut 30,000 hourly jobs in North America by the end of 2008. An additional 2,500 salaried jobs at GM are in the crosshairs. The moves will lower GM's $41 billion annual operations expenses by $7 billion by the end of next year, GM’s CEO Wagoner stated.

2005 will be the sixth consecutive year of job losses in the state of Michigan.

GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group share of the United States' automotive market has fallen from about 81% of all vehicles sold in 1975 to about 60% today.

The Conference Board reported that the Composite Index of Leading Economic Indicators increased 0.9% in October, following a decline of 0.8% in September, and no change in August. Ken Goldstein, Labor Economist at The Conference Board stated "The Leading Economic Indicators began to slow in July. The latest readings, however, show
a snap back in October. That's an indication that the economy -- after losing
some steam this summer and then suffering a major shock -- bounced back a
little in October. But the big question mark is whether this will be enough to
save the holiday retail season. Latest readings from the Index could be a
signal that holiday sales won't be as bleak as earlier feared. But it doesn't
rule out a rough patch ahead for retailers or a relatively weak post-holiday
economic performance early in 2006."
The Conference Board also reported that the Coincident Index increased 0.1%
in October, following a 0.3% increase in September, and a 0.6% decline in
August. The Lagging Index increased 0.8% in October, following a 0.2% decline
in September, and a 0.2% increase in August.

The London-based Center for Global Energy Studies warned of low distillate stocks in the United States after production was battered from Hurricanes Katrina and Rita and stated "Distillate output has suffered most from the refinery shutdowns, falling by 600,000 barrels per day from peak summer levels. Imports have only made small inroads upon this supply gap...Stocks are now close to the bottom of the seasonal range."

Now I will turn my attention to Albertsons. Some analysts will emphasize that third quarter earnings were 3 cents below their estimates. Those folks will miss the story.
Reported net earnings year-to-date reached $284 million or $0.76 per diluted share versus $249 million or $0.67 per diluted share in the prior year. Net earnings from continuing operations for fiscal year 2005 year-to-date grew to $298 million or $0.80 per diluted share versus last year's results of $288 million or $0.77 per diluted share. Total sales year-to-date reached $30.1 billion versus $28.8 billion last year. Year-to-date comparable store sales were +0.6% and identical store sales were +0.4%. The Company has narrowed its previous guidance of $1.37 to $1.47 per diluted share for fiscal year 2005 earnings from continuing operations to between $1.37 to $1.40 per diluted share excluding any unplanned, extraordinary events (such as hurricanes and the Company's exploration of
strategic alternatives). First Call’s estimate is $1.32. The Company also reaffirmed its outlook for positive comparable and identical store sales for fiscal year 2005. Capital expenditures for fiscal year 2005 are expected to be between $1.0 and $1.1 billion, consistent with previous guidance. Gross margin in the quarter increased 19 basis points to 28.12% versus last year's third quarter at 27.93%. The Company stayed on track to meet its $1.25 billion cost reduction goal by the end of fiscal year 2006, recording $71 million in new cost reductions during the third quarter of 2005, bringing the total cost reduction achieved since mid-2001 to $1.156 billion. During the quarter, 7 new stores were opened, 18 were closed and 41 remodels were completed. A total of 2,476 stores were open at the end of the quarter in 37 states. I continue to believe that Albertsons will deliver value to its stakeholders and a sale of the company will produce results that exceed most expectations. A closer look at the sale of the San Leandro distribution center would confirm that statement. The Company consummated the sale of its San Leandro, California distribution center to Kaiser Hospital and entered into a leaseback arrangement to facilitate the transition to a streamlined distribution operation in Northern California. The net cash proceeds of $94 million were applied to reduce the Company's outstanding
commercial paper borrowings. Albertsons owns a great deal of valuable real estate, and, in my view, the stock price does not fully reflect those values. A sale of the company will unlock the differential.

Prepare

11/21/05 Prepare

The United States is unprepared for the next flu pandemic, lacking the manufacturing capacity to provide 300 million doses of a vaccine for three to five more years, Health and Human Services Secretary Mike Leavitt said Sunday.
"What we all learned from [Hurricane] Katrina is that sometimes we have to think very clearly about the unthinkable," Leavitt said. "We're not as prepared as we need to be. ... We will not have enough for everyone."

UAW officials from Chrysler Group plants across the country will meet in Dearborn today and Tuesday to discuss whether the union should give Chrysler the same health care concessions that it recently agreed to with General Motors Corp., according to a UAW delegate who will attend the meetings.

If Delphi Corp.'s 24,000 UAW workers were to go on strike, they would have nearly $1 billion at their disposal from existing strike funds.

A greater number of Web shoppers is expected to boost holiday spending online to $18 billion this year, a 25 percent increase from 2004, according to Forrester Research.
Today, online sales make up 7.7 percent of total retail sales, according to Forrester Research. One in five online retailers is expecting sales of 75 percent or higher this holiday than last year, according to the National Retail Federation.

We have Black Friday, the day after Thanksgiving. Now we have Cyber Monday, the Monday after Thanksgiving when Web sites carry ads about special discounts and promotions, according to a report to be released today by the National Retail Federation.

John Hussman: “Market action continues to display internal divergence that isn't characteristic of robust bull markets, and on a short-term basis, the market appears substantially overbought too…Last week, for example, despite the fresh high in the S&P 500, the number of stocks registering new 52-week lows expanded to 422, easily outpacing the 286 achieving new highs. Breadth was also unimpressive for a push to new highs, with the weekly advance/decline figures at 1893 versus 1609, respectively. Nasdaq, which was the strongest index, actually exhibited more decliners than advancers on a weekly basis…Despite the appearance that the major indices are making substantial progress, Friday's close for the S&P 500 was just 0.87% higher than its prior August 3rd high, while the Russell 2000 remains 1.27% below its level on that date on a total return basis.”

China confirms 21 bird flu outbreaks in 9 provinces.

The White House dispatched Defense Secretary Donald Rumsfeld to four networks Sunday to make the case for staying the course in Iraq. With Rumsfeld’s lack of credibility, that was one more dumb idea.

Light sweet crude prices turned higher on Monday, recently trading up 55 cents at $57.76 a barrel.

General Motors Corp Chief Executive Rick Wagoner will announce plans this week to close four US assembly plants, the Automotive News industry paper reported today.

One might consider the possibility that the recent rise in many equity indices could top out by the end of the November. Selling into strength appears to be a viable strategy. Being prepared with larger cash reserves is not the worst thing that can happen to you. It could also place you in a position to take advantage of an opportunity presenting itself during end-of-the-year tax-selling time.

On a pro forma basis, that is, as if the three newspapers acquired in
August had been with Knight Ridder in 2004 as well, total advertising revenue
for October was up 0.1%. Retail was down 2.3%; national was down 1.1% and
classified was up 3.5%. Help wanted was up 17.2%, real estate was up 13.3% and
auto was down 17.5%. I continue to believe better investing opportunities can be found elsewhere.

Microsoft’s Xbox 360 hits the stores at midnight. It launches on Dec. 2 in Europe and on Dec. 10 in Japan. The company expects to sell close to 3 million consoles over the next three months. With total company sales of $40 billion, how important can the Xbox 360 be? Will it transform Microsoft’s image to a “cool” company? I would doubt it.

Benjamin Franklin: "By failing to prepare, you are preparing to fail."