Nov

20

Sorry I missed last week folks, was traveling quite a bit:

Abelson: The USDA has gotten rid of all the hungry people in the US by defining them away. Now they have “very low food security”. “Speculative sap” is rising, as indicated in increases in bullish sentiment. Exiting early could be costly, but exiting late could be disastrous. Housing is collapsing, and is going to get worse. Alan Newman suggests that the market is up because of the $34 billion that has gone into ETF’s this year, which must purchase their underlying stocks. He also says that insiders are selling financial stocks on a major scale. The sky is falling.

Page 18: Barron’s was bullish on airline stocks last month, and we were right. Barron’s has been generally upbeat on Sony, but the stock keeps languishing, will continue to do so until Sony proves that a broad turnaround is underway.

Page 21: The interests of CCE and KO have diverged, so KO ought to buy CCE back, should be willing to pay $21 per share.

Page 22: The street thinks that MGIC is great, but the housing bubble collapse is going to hurt them worse than everyone thinks. The troubles facing them are the same things everyone has been talking about for a year, but somehow two pages were written about it.

Page 24: Dupont has been saying for years that they are going to have to be a science company again, but nothing has really happened. Now, they really, really mean it. They are getting into the kinds of GM seeds that Monsanto does, and they have a new fiber coming out.

M2: For those of you in Saamiland, stocks were up last week. They might keep going up because even those who are skeptical have to chase the market in order to not lag behind the indices. There could be more mergers happening before the end of the year. Despite a lack of buzz, Verizon’s yellow pages spin-off looks interesting. Consumer stocks have been doing well since oil has been down.

M4: The Nymex IPO did well, it went up. (”Doing well” obviously refers to those who bought stock, and the bankers who will get paid a good sum despite having totally mispriced the IPO., costing the sellers of stock massive amounts of money. - This is one of the last great Wall Street scams. Such a poor job performance would, in any other industry, be a matter of disgrace and shame. Instead the I-bankers will get nice bonuses this year).

M5: The socialist candidate from France may be good for investors because she may wipe away the last vestiges of Mitterrand era socialism. On the downside, she is still a socialist. The film Blood Diamond looks to be a winner for TWX. The diamond industry, not surprisingly, isn’t too happy about it since it is about how the diamond trade results in all sorts of misery and death in Africa. On the other hand, its not as simple as that, so don’t get all worked up after seeing the movie.

Also on M5: Lot’s of stuff happened last week in the credit markets. What is all suggests is a general lack of worries. Volatility is low. It’s time to count our blessings.

M6: Singaporean stocks are finally doing alright. Ng Guan Mean thinks that this is going to continue. Long term, however, if the US economy goes south it will hurt Singapore. He likes property stocks, and the marine, oil, and gas sectors.

M7: High wholesale prices mean that supermarkets won’t be offering good deals on Turkeys this year (For what it’s worth, I recommend brining your Turkey as taught by Alton Brown). Turkey production is down. Chicken prices are down, however. Crude-oil and copper were down last week.

M12: Options on retail stocks are inexpensive, which is surprising because Black Friday is just a few days away. (Another possibility is that the markets are somewhat efficient and there is no reason to assume that known events recurring events should impact the markets a few days out). Retail investors should sell their high priced retail stocks and buy low-priced calls. If they are concerned about taxes, they should buy contracts that expire in January ‘08.

Page 27: Cover Story, the Death of the Floor: You need a cover story to tell you that technology is destroying the trading floor as more and more trades are being done electronically.

Page 31: Cardiac device makers, who have been pummeled in the past, may start doing better thanks to some reassuring safety studies. Investors will be watching Medtronic’s earnings report. A new wireless protocol is out.

Page 32: Gates, Nealy, Doerr, et all are spending a lot of money and knowledge on green technology to try to save the world.

Page 33: Free trades aren’t free. Not all of the costs of investing are commissions. Execution quality plays an important role, and you should consider the interest paid on your cash balances as well. Some brokers might route your orders to market makers that pay them for the order flow, even if that market maker is not offering the best prices.

Page 34: Picking the right bonds requires care, but don’t worry, you subscribe to Barron’s. We like Harvard College 6.3% 2037. Dallas, Texas, 4.75 2026. Freddie Mac 4.75 2009, Wal-Mart 6.875 2009, Kraft(Nabisco) 7.55 2015, K. Hovnanian 7.75 2013, GMAC 8.00 2031. Two good places to look for bonds are www.bonds4sale.com and www.shop4bonds.com. Tax free munis can be good.

Page 35: UAS is a great separate account manager.

Page 37: After the Blackrock-Merrill deal, everyone thought that there would be a bunch of other huge M&A deals in the mutual fund industry, but that hasn’t happened, although it still might. Basically, the Mutual Fund companies are over-priced.

Page 38: Everyone keeps saying that the dollar is going to go down, but there is a huge demand for the dollar since it is the main currency used for trade, and global trade keeps increasing. Plus, other countries all have an interest in keeping the dollar strong so that we can buy their stuff. Now is the time to be long the dollar.

Page 39: Wynn resorts is going to pay a fat dividend. JCI and ADP are boosting their dividends.

Page 40: The KBR spinout will help Halliburton. HAL is a complicated company, so its energy services business doesn’t trade at the same multiples as SLB and BHI. Without KBR, Halliburton will be “cleaner” and should close the multiples gap with its competitors.

Page 40: Farewell, Milton Friedman, for all of the reasons that ever other right of center pundit has made clear.

Page 41: The money fund/Wilshire gauge indicates how much cash is sitting around, waiting to fuel a stock rally. It currently suggests that the rally could continue. (However, looking at the graphs they supplied, there appears to be zero predictable relationship.)

Page 42: Interview with David and Lyric Hale of Hale Advisors and China Online. This couple gives advice to hedge funds and has an internet site. Their stunning insight is that the election creates risks to trade and tax policy. That the coming report from the bipartisan commission on Iraq will be important, that the US economy is in a slowdown, and that inflation is creeping up. Asked what asset classes are most attractive, they offer that that equities are more attractive than bonds because interest rates are low, but, at the same time, the slowing economy should help bonds. Also, the private equity boom is spinning out of control.

Page 44: Chinese manufactures are able to undercut their competitors. How come? Is it because of mercantilist policies, or something else? The U of Cal/Irvine China price project is trying to figure that out. They say 39% of the Chinese price advantage. 11% of the advantage is an undervalued currency. Export subsidies count for another 17%. Piracy and counterfeiting are 9%. 5% due to lax environmental and worker safety regulations. Network clustering i.e. supply chain members in close proximity accounts for 16%, and foreign direct investment 3%. What does all this mean? For one thing, US corporations should be careful transmitting technology there. They should also consider the ethics of relocating to where there is slave labor.

Page 46: The good news: There will be more nuclear power plants built. The Bad News: There is no place to store the spent fuel. The source of the Problem: Jimmie Carter made it illegal to reprocess spent fuel rods. The solution: Recycling.


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