Table On-Topic Summary - 29-Aug-2002
A compilation of this board's financial/economic posts From 41222 to 41282

Post  41222  by  Decomposed       OT: Table ON TOPIC SUMMARY Aug 28, 2002

Post  41223  by  lkorrow       Reply

The IRS has certified the first hybrid gas-electric automobile as being eligible for the clean-burning fuel deduction. Purchasers of a new Toyota Prius for model years 2001, 2002 and 2003 will be able to claim a deduction of $2,000 for the year that the vehicle was first put into use.

Post  41224  by  ljpit       Reply
briguy, do you live in a castle? With an output of over 250-500 W you must be. ;) In a normal sized room there's little chance you ever need 100 W, let alone 250 W. You'd have to sit at a considerable distance to enjoy that one. ;-)

More power in reserve does mean a more effortless performance and better handling of swings. In my house though I think the Krell wouldn't work, just like driving a formula-1 car through the streets of San Fransisco wouldn't work for me.

to improve sound quality I took a few easy measures, that improves more than power ever could: I biwired my speakers. another real difference I've noticed was the use of /short/ equal length interconnects between the amp and speakers (previously I had my speakers at the other end of the room, needing 2 times 8 metre cables). the decorations in a room can make or break the sound: if it is sterile and cool like most modern interior designs are, change that: put up fat drapes, put enough things in your room that make the sounds come alive. some say that sound gets improved by using gold-platted plugs, I could never hear the difference though.

From what I hear you saying, I would go for the Krell. Obviously it works for you, and for the money I don't think there's anything better. Though I would advise trying out the following: take 2 amps half the money of the Krell amp, and bi-amp your speakers (if they allow that).

Speaking of which, do you already have matching speakers for the Krells?

Myself, things I bought year after graduation are the more entry level stuff: an Arcam Alpha 8, Marantz 63 mk-II Technics SL-1210MK2 and a pair of Dali speakers. I never listen to the radio, so no receiver. Been dreaming for years of getting a Regal turntable, is definitely going to happen. First looking to upgrade the amp and speakers, but need a bigger house first (and one with no neighbours).


Post  41225  by  jcl22192       OT: lkorrow: Oh, we will listen but will it be in

Post  41226  by  maldinero       Reply
…Could use a few to go with this coffee about now.

Krispy Kreme tops Wall Street earns est. by a penny (6:17 AM ET) Krispy Kreme (KKD: news, chart, profile) reported fiscal second quarter earnings that topped the consensus analyst forecast and indicated that full-year results would also exceed expectations. Net income for the quarter ending July was $8.9 million, or 15 cents a share, up from $5.9 million, or 10 cents a share in the same period a year ago. Analysts polled by Thomson Financial/First Call were expecting earnings of 14 cents a share, on average. Systemwide sales for the period rose 29.5 percent over last year to $186.9 million, and comparable-store sales increased 12.8 percent. For the year, the doughnut retailer said it now expects earnings of 64 cents a share, a penny above analyst expectations, and same-store sales growth of 10 percent. The company also raised its forecast for store openings to 64 from 62. The stock closed Wednesday up 35 cents at $36.36.


Post  41227  by  clo       OT: Maniati: Maureen's reality check.
Post  41228  by  clo       OT: What the Saudis are missing is that their mone

Post  41229  by  abveldeh       Reply
The Fabulous Destiny of Alan Greenspan

The Daily Reckoning

Ouzilly, France

Wednesday, 28 August 2002

* * * * * * * * * * * * * * * * * * * * * * *

*** Dow down...led by disappointing tech stocks...

*** Poor Ted Turner...another rich guy less rich than he
used to be...

*** Gold moves up. Cheney gets hysterical. The world is
going to hell in a handcart...and more!...

* * * * * * * * * Advertisement * * * * * * * * * *

-- Been to the Daily Reckoning Marketplace Yet? --

If not, you ought to see what you've been missing.

Want to read more from our regular contributors? This
is the place to find it.

We've collected some of the best financial advice and
commentary available anywhere and presented it to you
all in one place. Take a look:

* * * * * * * * * * * * * * * * * * * * * * *

Poor Ted Turner. We noticed his face on the cover of the
International Herald Tribune yesterday as we rushed
through the train station. He looked sadly comic, like
Terry Thomas after a late night out. All we read was the
headline: He's not as rich as he used to be.

Not hard to figure out why. The poor man parlayed a few
billboards into Turner Broadcasting into Warner Bros.
into TIME Warner and Jane Fonda. Then Jane turned
religious on him and then he got parlayed into AOL...

The AOL/Time Warner merger was both one of the most
brilliant corporate moves of all time and one of the
stupidest. It was all very well for the rubes, patsies
and gilders to sacrifice themselves in the Great
Internet Illusion, but what did TIME Warner think it was
doing? The company had billions of dollars worth of real
assets, and expertise that it took nearly a century to
accumulate. What did it hope to gain by hitching itself
to an internet portal?

Who knows?

But one of the many charms of the market gods is that
they look for your weakness and provide a little moral

stupid...fearful...ignorant...arrogant, whatever your
problem, the market gods have a solution. Yes, it will
be costly and painful. But it almost always works; you
may want to repeat your mistakes, but you won't be able
to afford them.

Right now, for example, (and remember, we're just
guessing) we suspect the gods are baiting naive
investors. Stocks have gone up for the last few weeks.
The International Herald Tribune and other sources of
amusement have declared the bear market over. Grubman is
out of a job and MicroStrategy is on the rebound.

There was even a report in yesterday's news that durable
orders jumped much more than expected in the month of

And so, the lumpeninvestoriat is encouraged. Things are
looking up; buy the dips.

But what's this? Intel announced that the 3rd quarter
wouldn't be so good after all. Hewlett-Packard said its
sales were off. And Ciena, the Maryland fiber optics
company, reported sales off 89% from last year...and a
loss of $160 million in the last quarter.

So things are not exactly looking up in techland. What
had been moving the market forward these past few weeks
were the tech stocks - which rose twice as much as other
stocks. Investors didn't like hearing discouraging words
from the tech sector yesterday; disappointed, they took
the Dow down 94 points and knocked the Nasdaq down 43.

And what's this? The price of gold is finally moving
again, up $2.90 to $313. What's moving the price of

Big government deficits, for one thing. The
Congressional Budget Office forecast a $157 billion
deficit for the fiscal year ending Sept. 31.

And, of course, there was the Vice President of the U.S.
in the news yesterday saying that Iraq constituted
a "mortal threat" to America. In politics, as in
markets, people always have a good reason for doing the
wrong thing - whether it is launching an attack or
taking on AOL. The gods set them up...and then destroy

If that is not the way the world works, that it is the
way it ought to work.

*** Forget the market and the WAT (war against
terror)...the entire world may be in danger. A Daily
Reckoning reader tells me that the world may be getting
better, but not in his neck of the woods:

"Perhaps if Mr. Bonner lived in a country that was being
greatly affected by climate change TODAY, he'd recognize
Bjorn Lomborg as just another crackpot, like the
extremists on the other side of the debate (e.g. Brown
and Ehrlich).

In Canada our northern ice pack is thawing, adversely
affecting the wildlife and the natives that depend on

Our perma-frost is melting, causing multiple
infrastructure problems - things like buildings,
pipelines and roadways that normally depend on a solid
base underneath are sinking!

We're currently suffering through what is probably the
worst drought in our recorded history, and our cattle
and grain producers are asking that a 'national
disaster' be declared. A country-wide relief program has
had to be established to try and help the cattle

Our fresh water is evaporating and not being replenished
- yes, that very same fresh water that you Americans
want to buy.

The water levels in the Great Lakes are so low that
shipping channels are in danger - freighters commonly
report brushing the bottom of the lakes. And the
proposed solution of dredging deeper channels will
simply increase the flow of water out of the lakes.

I'm advised by the weather forecasters that I shouldn't
go outside today (or yesterday, or tomorrow) because the
heat and air pollution are too great for anybody's
health. When I do go outside, I must lather myself in
sun block so I don't get skin cancer because the ozone
layer has a huge hole in it.

Other examples of climatic change from around the world
are broadcast on television every day, most recently
images of great floods in Central and Eastern Europe.
Please recognize that these are not normal events - the
climate is changing, world wide.

Proposals for reductions in greenhouse gases (and other
environmental improvements) have been made, most
recently in Kyoto. But the biggest stumbling block to
implementing them is the refusal of the United States
to ratify the program and start working to solve the

may have been examples of environmental extremists
predicting doom & gloom, but ignoring the very real
problems that we see today is like cutting off your nose
to spite your face.

I do enjoy reading the Daily Reckoning, and I shall
continue to read it, but for Heavens sake, Mr. Bonner,
how about using some common sense when you write."

* * * * * * * * * * * * * * * * * * * * * * *

The Daily Reckoning PRESENTS: A DR Classique, first
published December 3, 2001, in which your editor returns
to one of his favorite topics...

By Bill Bonner

This week marks an important anniversary.

"How do we know when irrational exuberance has unduly
escalated asset values, which then become subject to
unexpected and prolonged contractions, as they have in
Japan over the past decade?" asked the Fed chairman,
when he was still mortal. The occasion was a black-tie
dinner at the American Enterprise Institute in December
- five years ago.

"We as central bankers," Greenspan continued, "need not
be concerned if a collapsing financial asset bubble does
not threaten to impair the real economy, its production,
jobs, and price stability. But we should not
underestimate or become complacent about the complexity
of the interactions of the asset markets and the
economy. Thus, evaluating shifts in balance sheets
generally, and in asset prices particularly, must be an
integral part of the development of monetary policy."

Mortals make mistakes. But Greenspan was right on target
in '96. It was later, after he became a demi-god, the
"Maestro," that the Fed chief erred.

In 1996, the bear market of '73-74 and the crash of '87
were still functioning as caution signs. Greenspan spoke
on the evening of the 5th. On the morning of the 6th,
markets reacted. Investors in Tokyo
the Nikkei Dow a 3% loss for the day, its biggest drop
of the year. Hong Kong fell almost 3%. Frankfurt 4%.
London 2%. But by the time the sun rose in New York,
where the Fed chairman was better known, investors had
decided not to care. After a steep drop in the first
half-hour, as overnight sell orders were executed, the
market began a rebound and never looked back. By the
spring of the year 2,000, the Dow had almost doubled
from the level that had so concerned the Fed chairman.

But while the maestro was alarmed at Dow 6,437 he was
serene at Dow 11,722. Fatal to Greenspan's judgment was
a combination of bad information, bad theory and a human
nature that - though unchanged for many millennia -
seems to have avoided the notice of central bankers.

Greenspan's theory was that by carefully controlling the
cost of credit and the money supply he could avoid
serious economic downturns. You have suffered enough
discussion of this issue here in the Daily Reckoning,
dear reader. For today's purpose, we will just point out
that Mr. Greenspan has everything he needs to get the
economy back on track, except the essentials. He cannot
make telecom debt worth what people paid for it. He
can't restock consumers' savings accounts. He can't make
Enron a good business. He can't erase excess capacity,
nor make investment losses disappear.

In addition to the bad theory, Mr. Greenspan had bad
information. The "information age" brought more
information to more people - including to central
bankers...but the more information people had, the more
opportunity they had to choose the misinformation that
suited their purposes.

Since the late '90s, however, many of the figures used
to justify the New Economy have been revised, downward.
"The government previously decided that neither
corporate profits nor productivity improvements were
nearly as good as they appeared to be in 1999 and 2000,"
reports Floyd Norris in the New York Times. "And now the
industrial production numbers have been sharply revised

"The new numbers show industrial production was
dramatically overestimated, particularly in the high-
technology area," Norris quotes John Vail, the chief
strategist of Fuji Futures, a financial futures firm in

What was true for the nation's financial performance was
also true for that of individual companies. Companies
engineered their financial reports to give investors the
information they wanted to hear - that they earned one
penny more per share than anticipated. But what they
were often doing was exactly what Alan Greenspan worried
about - impairing balance sheets in order to produce
growth and earnings numbers that delighted Wall Street.
Curiously, during what was supposed to be the greatest
economic boom in history, the financial condition of
many major companies - such as Enron and IBM - actually

But by 1998, Alan Greenspan no longer noticed; he had
become irrationally exuberant himself. Markets make
opinions, as they say on Wall Street. The Fed chairman's
opinion soon caught up with the bull market in equities.
As Benjamin Graham wrote of the '49-'66 bull market: "It
created a natural satisfaction on Wall Street with such
fine achievements and a quite illogical and dangerous
conviction that equally marvelous results could be
expected for common stocks in the future."

Stocks rise, as Buffett put it, first for the right
reasons and then for the wrong ones. Stocks were cheap
in '82...the Dow rose 550% over the next 14 years. Then,
by the time Greenspan warned of "irrational exuberance",
stocks were no longer cheap. But by then no one cared.
Benjamin Graham's giant "voting machine" of Wall Street
cast its ballots for slick stocks with go-go technology
and can-do management. Stocks rose further; and people
became more and more sure that they would continue to

"Greenspan will never allow the economy to fall into
recession," said analysts. "The Fed will always step in
to avoid a really bad bear market," said investors. Over
the long term, there was no longer any risk from owning
shares, they said. And even Alan Greenspan seemed to
believe it. If the Fed chairman believed it, who could
doubt it was true? And the more true it seemed, the more
exuberant people became.

"What happened in the 1990s," says Robert Shiller,
author of the book "Irrational Exuberance," is that
people really believed that we were going into a new era
and were willing to take risks rational people would not
take...people did not feel they had to save. They spent
heavily because they thought the future was riskless."

But risk - like value - has a way of mounting up, even
while it seems to disappear. The more infallible Alan
Greenspan appeared...the more "unduly escalated" asset
values became. Having warned of a modest "irrational
exuberance," the maestro created a greater one.

Your editor,

Bill Bonner

P.S. The most exuberant phase is passed. But neither
investors nor consumers could be said to be acting
"rationally". Consumers are still spending as if there
were no recession. And investors are still buying stocks
- as if they were bargains.

"People are habitually guided by the rear-view mirror,"
explains Warren Buffett, "and, for the most part, by the
vistas immediately behind them."

Post  41230  by  uponroof       Reply

Just thought I'd touch on the prognosticators I follow with you. Richard Russell (Dow Theory Letter) you saw the other night. He is long term bullish on tangibles and calls gold "the cheapest commodity around". Bill Murphy (Lemetropolecafe) is always offering bullish explanations which are based on the ramifications of misguided manipulation. Steven Saville (The Speculative Investor) is more of a short term trader/analyst.

in case you are not following Saville:

Saville's been around awhile. I have been reading him for 4 years now (at gold eagle previously). Recently he went deeper into stock market/gold inter relationships. His services are available for a very reasonable fee. I believe srudek also follows Mr Saville with much respect.

To the point.....

His latest thoughts on the stock market (8/28):

"...The bottom line is that we expect the stock market to drop below the July lows prior to the end of this year, but we are still unsure as to whether or not last week's highs will be exceeded prior to the start of a major decline..."

His latest thoughts on gold (8/28):

"...Further to the above we expect a rally in the gold price to 320-325 over the next week or so followed by a 4-6 week pullback..."

"...The upshot of the above is that a move in the gold price to above 320 or a move in the HUI to above 130 during the next week would, in our view, present traders of gold and silver stocks with a reasonable short-term selling opportunity. Investors should just continue to hold in anticipation of much higher prices over the coming 6-9 months, provided they are not currently over-committed to gold/silver stocks..."


*of course any invasion in the Middle East or some other sudden, major negative occurrance suggests an immediately higher POG.

Good Luck


Post  41231  by  Tampathom       OT: Situation Deteriorating Rapidly in Afghanistan

Post  41232  by  kduff       Reply
srudek, I'm far behind on reading table, but I wanted to say, and I know this goes against maniati, I think you may have a point. While I understand that expensing options does not make sense, you're idea of disclosing options on the financial statements seems appropriate. It will not have any affect on the bottom line. Shareholders have the right to see what options are costing them, front and center, and not hidden in the footnotes.

Post  41233  by  danking_70       OT: Jeffbas, other Arab League "intellectual&
Post  41234  by  lkorrow       OT: jcl, I grew up in Northport, LI, we used to al
Post  41235  by  lkorrow       OT: maldinero, boy does that sound good. :-)

Post  41236  by  pmcw       Reply

Let's see, yesterday it was news from SMTC that they expected soft sales in power control that hurt ISIL. Today we learn that their soft sales are probably attributable to quality issues that might cost them over $100M. Sound like an isolated SMTC problem to me and an opportunity for ISIL.

Today, the brain trust has released another hot bit of information:

"9:36AM WLAN chip makers to see pricing pressures - Digitimes : reports that Taiwan-based Gemtek Technology says the wireless LAN industry will start to see drastic price cutting in Q4 as Taiwanese IC designers compete head-on with co's such as ATML, BRCM, and AGR.A; by 2H03, Taiwanese suppliers will have a chance to capture some share in the price-oriented clone market. (Although not mentioned in the article, ISIL may see some pressure as well.)"

OK, how much crediblity would you assign to an article that doesn't even mention the company that owns 65% of the market?????? The truth of the matter is that, by design and strategy, ISIL has been leading the price war. Six quarters ago they clearly said they would reduce prices by 10% per quarter. Of course, simultaneous to this resale reduction, they will also reduce costs by 20% per quarter. Judging by the fact that their GP in this space has gone up each quarter, I think they are pretty close to staying on track. What, do you think ISIL entered the market thinking that the high volume wouldn't attract huge and serious competition??

Oh well, come the next conference call, ISIL will again surprise the analysts and reporters. Regards, pmcw

Post  41237  by  lkorrow       OT: Clo, Maureen's article has a more of an approv

Post  41238  by  maniati       Reply
Culmus: Ok, let's try this one last time. :-)

Relationship of Strike Price to Share Price

Stock options are almost always issued at strike prices that are out of the money.

(BTW, didn't I cover this in a post to jeffbas a few weeks ago? Interesting that no one responded to that.)

Anyway, for tax purposes, there are two types of options: ISO's and NQSO's. The ISO's are the ones that get the favorable tax treatment. They have to be at or out of the money when granted. Also, APB No. 25 allows the grant of options to be a non-event as regards the company's books, so long as they have no intrinsic value when they are granted (i.e., out of the money). So, there you have two independent reasons why companies have an incentive to issue options that are out of the money. As a result, virtually all options issued are ISO's, using APB No. 25, and they are out of the money on the day they are granted.

Yeah, for some reason there is this commonly-held belief that the strike price on incentive options is just pennies. Sure, that can happen - when the stock price is also in the pennies. So, you could have options issued either before the company goes public, or in its early days when the share price is still really low, and those options could be for a very low strike price. But, when granted, the strike price was greater than the share price. If the share price really takes off, those options could be worth a fortune. That, after all, is the whole idea. But, those options most likely had zero intrinsic value on the day they were granted.

The Shareholder vs. The Company

I know you said you agreed that the company is distinct from the shareholder, but I'm going to go over this again anyway, just in case anyone else missed it.

The shareholder owns a portion of the company. The shareholder is distinct from that which he owns. (I thought I covered this already, also.) Tax law draws this distinction. The law of corporations of all 50 states and the federal government all draw this distinction. The business is a distinct entity. In law, a "person" can include a corporation. That does not mean a shareholder; it means an entity that is created at law. Everyone draws this same distinction. GAAP does. Financial analysis does. There was some seminal work done by Coase on the theory of the firm, and by Markowitz on portfolio diversification, and they both carved out this important distinction between the firm itself and the shareholders. And both those guys won Nobel prizes.

Anyway, think of the firm as a box. The shareholder is someone who has a claim on the box; he owns the box (or a fraction of it). Money goes into and out of the box. Other things go in and out, as well. The balance sheet and income statement try to describe what's in the box, and what is going in and out of it. We would like the BS and IS to describe the value of the box as accurately as possible. And, while all of this is happening, the shareholder is in another room all together, holding his claim check on the box. The shareholder never even touches the box. One day, he'll sell his claim check to someone else. Then, the buyer of the claim check will be the new owner of the box.

The company, and ownership of the company, are two distinct things.

Issuing the Option vs. Exercising the Option

Let's start by distinguishing the issuing (granting) of the option from the exercise of the option. These are distinct events, with different economic effects.

You said, I am in disagreement with maniati on stock options having no wealth effect on the business. Once exercized the options lead to money coming into the company (the strike price) so there is an increase in the absolute wealth of the business....

But, that's no what I said. Here is exactly what I said: ...issuing a stock option does not result in a decrease in the wealth of the business. Issuing the option has no economic effect on the business at all. (Emphasis added.)

All along, I have carefully drawn the distinction between issuing (granting) an option and exercising it. In fact, in my original post, I said, when an employee exercises that option, the wealth of the company increases! That is because the employee pays the amount of the strike price to the company. (Emphasis in original.)

Issuing an option has no wealth effect on the business. It has a wealth effect on the employee to whom it is issued, and on the other shareholders, but no wealth effect on the business. That's why it should not be considered a business expense.

Exercising the option does have a wealth effect on the business, because the employee pays the exercise price to the company. This event is recognized in the financial statements - on the balance sheet - as an increase both in Cash and Paid-In Capital.

Expensing Options DOES Result in Double-Counting

You said you "strongly disagree" that expensing options results in double counting. But, then you later said, "So we agree that stock options are not an expense." Well, if they are not an expense, then they should not be treated like one. If you expense them anyway, then earnings take a hit from the amount of the expense, which, by your own admission, should not be happening. That's hit #1. Then, when EPS is reported on a fully-diluted basis, the shares represented by those options are taken into account, further reducing EPS. That's hit #2. You've counted the effect of issuing the options twice. That's double counting. One of those counts should not be there; the effect should only be counted once. And the effect that should not be there is the first one (expensing the options), which we both agree should not happen. I have to tell you, you sound confused about this, because if you agree that options are not an expense, then I don't understand how you cannot readily conclude that expensing them would result in double counting. If they should not be expensed, but you expense them anyway, that's a problem, no?

On a related note, you said, "The difference between the strike price and the market value is not being expensed by anyone, nonetheless it is a real value, just created out of air."

Well, first, let's remember that options are almost always out-of-the-money when issued, so there is no "real value" (measured intrinsically) when the options are granted. It is only when the stock price rises above the exercise price that there is intrinsic value. Therefore, that economic benefit that the employee gets (the difference between stock price and exercise price) comes when he exercises the options.

However, that benefit does not come "from thin air." It comes from the other shareholders. It is a wealth transfer from the shareholders to the employees. It does not come from the company. Therefore, it should not be treated as an expense by the company.

This seems to be difficult for much of the financial world to understand, but I'm not sure why. Just because there is a benefit to the employee, that does not mean it comes from the company. In this case, it comes from the shareholders. If I send you a check in the mail, you don't say that the money came from the mailman, just because he is the one who handed you the envelope, right? Same thing here. The company is the mailman, giving the employee something that came from the other shareholders. As a result, it is the other shareholders who are poorer, not the company. So, it makes no sense to think that the wealth of the company is affected by that transfer, any more than the wealth of the mailman is affected when he gives you my check.

* * * *

Now, I know the corporate world is going to start expensing options anyway, but they will be wrong in doing it, it's a bad idea, it distracts attention from more important issues, and we are going to pay down the road.

Post  41239  by  lkorrow       Reply
roof, I am surprised he sees a 4-6 week pullback in gold. Summer is almost over, India will start buying again, and the world situation may push more peope into gold. To the dismay of the analysts, the American people have moved gold up on their investment list. The exposure of late by the media may make it even more of a haven when the market takes its next leg down. Now I wouldn't mind taking some profits and buying back in low, but somehow I doubt that's where gold is going. jmho.

Post  41240  by  Warstud       Reply
Homebuilders selling stock at record pace - FT : The Financial Times reports that execs across the US home-building industry have been selling shares in their co's at a record pace this year, suggesting they believe the country's housing mkt has peaked; in addition, it is the largest net sale of stock in the industry in quarterly records going back to 1996, and in many cases officers have sold more than 50% of their holdings over the past year.

Post  41241  by  SkippyWalker       Reply
FT does some public service research

US housing executives offload stock
By Peronet Despeignes in Washington
Published: August 28 2002 22:59 | Last Updated: August 28 2002 22:59

Executives across the US home-building industry have been selling shares in their companies at a record pace this year, suggesting they believe the country's housing market has peaked.

Data compiled for the Financial Times show that corporate officers and board members in publicly traded US building companies sold a record $258m-worth of shares more than they bought in the second quarter.

It is the largest net sale of stock in the industry in quarterly records going back to 1996, and was done either by exercising options or directly cashing in stock grants. In many cases, corporate officers have sold more than 50 per cent of their holdings over the past year.

"This is an anomaly," said Lon Gerber, a research director at Thomson Financial, the information services group, adding that in many industries such selling had fallen.

The selling went on while home sales, home values and builders' stock prices were surging. In addition, most stock analysts were maintaining buy recommendations and economists were debating whether the industry was experiencing a bubble effect.

Thomson Financial and The Washington Service, a consulting firm prepared the figures from corporate filings to the Securities and Exchange Commission. The data show that of the 16 homebuilders with the largest market capitalisation, seven had reduced their executive shareholdings by the largest amount seen in individual records going back two decades.

Executives at another three companies engaged in share selling well above their average in the last 30 days, according to Bernard Fulk, a senior analyst with The Washington Service.

Debate has intensified in recent months about whether the housing market, a mainstay of growth for the US economy in the past year, is a bubble that will gradually deflate or abruptly pop.

Policymakers such as Alan Greenspan, Federal Reserve chairman, have dismissed the speculation, saying home values are supported by low mortgage rates and land shortages.

Some analysts, however, fear home values may be increasingly fuelled by excess credit, a subsequent deterioration in lending standards and unsustainable expectations among prospective home buyers for more double-digit percentage gains. In some metropolitan areas, home prices have risen by more than 20 per cent over the past year.

David Seiders, chief economist for the National Association of Home Builders, said the group expected housing numbers "to top out sort of right around now - housing isn't going to be the big engine of growth forever - but we don't expect them to recede much".

Rise in the value of the average home by metropolitan
area (per cent change from 2001-Q2 to 2002-Q2)
Source: National Association of Realtors

Nassau-Suffolk, NY 29.6
Bergen-Passaic, NJ
New York-North NJ-Long Island, NY 22.3
San Diego, CA 21.3
Monmouth-Ocean, NJ 21.0
Washington, DC/ MD / VA 20.8
Providence, RI 20.7
Los Angeles-Long Beach, CA 18.0
Miami-Hialeah, FL 17.0
Anaheim-Santa Ana, CA 16.6
Source: National Association of Realtors

There are various explanations for individual sales of stock, including routine profit-taking.

However, Mr Gerber called the industry-wide trend disconcerting, adding that "the insider signal is generally one to two quarters ahead of turns in the stock price". He speculated that executives may be worried about the risk of a slowdown, if not a reversal, and were not waiting.

Homebuilder share prices have surged over the past year, outperforming most of the stock market, as mortgage rates have slid towards 30-year lows. But they have been volatile over the past few weeks, declining sharply in June and July before recouping some of their losses in August.

The great majority of the homebuilder stock analysts monitored by First Call analyst Chuck Hill have maintained “strong buy”, “buy” or “hold” recommendations. Only one, Barbara Allen of Arnhold and S. Bleichroeder, has recommended “sell”.

She told the FT that the bubble speculation was “a little bit stretched, but it does seem to me there's a little too much optimism, and that Mr Greenspan is doing us a disservice with some of the statements he's been making about homebuying.”

Post  41242  by  SkippyWalker       Reply
Since I had the exact same reaction to this article when I read it, does that mean by association I bask in some of the warstudliness?

Post  41243  by  Arkural       Reply
Est. that, security, all types, will grow in interest in coming months/yr.

Post  41244  by  Briguy       Reply
ljpit, vinyl is where it is at baby!

CD's are convenient, but in my opinion they don't come close to the sound of vinyl. Put in an Emerson, Lake and Palmer record and then compare it to a CD- there is no comparison! Vinyl wins hands down every time. CD's are just to compressed to get the real deep frequencies out- 20Hz and below. Granted HDCD and PLII are steps in the right direction, but true audiophiles know that vinyl is king when it comes to sound reproduction.

I have an opportunity to buy a Audio Research turntable (forget the model) that originally listed at $5600, for only $2K. Problem is, my record collection is weak and so I can't justify that. Nevertheless, you obviously have a good collection to support that purchase. Rock on!

-No, I don't live in a castle. But I do have a 24' by 14' room I finished off for home theatre. Few audiophiles know this fact: More power does mean louder sound, but MORE POWER ALSO MEANS CLEANER SOUND. Efficiency is the key. Will I ever need 500W at 4 ohm? Of course not. But to reproduce lifelike sound and to run big mammoth speakers efficiently, the extra power makes all the difference in the world- just as you mentioned.

I also biwired my speakers. It does improve sound. I use JPS Labs- stuff is $2400 for 8'. Outrageous to some, but your components are only as good as your weakest link. I laugh because the big chains push Monster Cable which is an absolute joke. Monster Cable is a marketing company- like Bose- that does a good job of selling their product. But let me tell you, when you hear the difference, I would settle for nothing less. Why buy $10's of thousands of dollars worth of components and speakers and then settle for $100 speaker wire?

Anyhoo, your suggestion of bi-amping is something I am considering. Might monoblock the front amps and run the rest through the main amp. But right now, the Krell is kicking big time and the sound reproduction is very impressive. I have one month to demo the product. I always start by listening to two-channel music (the way it was meant to be heard). I do some pretty critical listening with rock, jazz, classical, country rock and some top 40/rap to test the real low frequencies. So far, I'm very impressed.

One thing I did notice yesterday watching Lord of the Rings is the relatively modest difference between 5.1 and 7.1. I don't know if I like have speakers in the back of me. Granted it did give a bit more realism to 360 degree sound, but I don't know if I'm sold on it. 5.1 sounds almost as nice and it costs less. Granted, after listening for years in Matrix 5.1, I could tell a difference between Matrix and Discreet.

Just one thought- don't upgrade just because you have the upgrade bug. That philosphy can cost you lots of money.

Finally, you are absolutely 100% correct. The room and what is in it makes all the difference in the world. Most people don't realize this, but clearly you do. It truly is amazing what a set of drapes can do to the sound. And it is alot cheaper than new equipment!

In closing, good luck in your hunt for a turntable.


Post  41245  by  Briguy       OT: Clo...

Post  41246  by  abveldeh       Reply
kduff if stockoptions were accounted for as expenses the 14 biggest Nasdaq companies would only be able to post a $350 million profit all together for last year. So where does that leave the real value of MSFT and INTC etc. INTC P/E would be around 350/1 says the Daily Reckoning if I remember rightly. Food for thoughts.

Post  41247  by  jeffbas       Reply
sr, some historical comments on Xicor first. They had 13 consecutive quarters of profitability in the mid-1990's and a few in the recovery from the industry recession that ended in 1999. They sold the fab at the peak of the cycle, and as sales declined due to planned exit from the serial memory business and the ensuing recession they have had what I would characterize as immaterial results since then. The company is burning cash at $1M per quarter (company statement) out of $45M on hand, which handily exceeds debt not due for a few years. Throughout this period gross margins have grown, to about 50% now, mostly because of the dropoff of the zilch margin commodity business. Expenses have been exceptionally well controlled.

They have publicly stated that breakeven is $13M sales. They are now at $9.5M, which is also the forecast for Q3. The Piper Jaffray presentation and the followup one at Soundview this week are must listening. They are similar, although the former has great slides available, while the latter has the latest update on the company's excellent momentum going forward. (See Yahoo XICO news for the links). One slide shows a forecast of $45M mixed signal sales for 2003, up from $25M for 2002. They also do about $12M of good margin Parallel memory sales per year, that is not being discontinued. Thus they did $9.5M sales last quarter and could be doing $15M at the end of 2003, with a bottom line of about a nickel at that time. (I believe the Street has them turning profitable in Q3 2003.)

More comments are in RB Table #40335, especially the reference to Yahoo XICO #31887.

The key thing (as well-covered in the presentations) is that the Served Available Market (with competitive products) by 2003 will be about $1B, up 4 times from what it was in 2001 - and with "differentiated" products with high gross margins, not "who cares" commodity products with commodity margins. At $100M mixed-signal sales in a few years (when SAM would have grown even further), the company would be making over a buck a share. Note that 3 leading competitors, LLTC, MXIM and ADI, have current Price/Sales ratios on annualized latest quarter sales of 15, 9 and 5, respectively.

One key to this story for me is the large number of senior people attracted to the company from leading M-S companies over the last 2 years. Each one of them left a solid company for Xicor, put more than money in a stock on the line, and did his own due diligence independently. Also the principals of the AIP company they bought in April took $5M cash and 1M shares then valued at $10 (most in stock, at more than double the current price - when Xicor could have paid more in cash).

Post  41248  by  Tampathom       OT: $2,400 for 8 feet of speaker wire?!
Post  41249  by  spirare       GOLD SPOT MARKET Change +$2.80 High $313.70/oz

Post  41250  by  motordavid       Reply
Pretty Good Lunch Read,
on the Dow, from a poster off the LU ancy board.

By: tradefast $$$$$
29 Aug 2002, 01:07 PM EDT Msg. 78285 of 78286

The Dow deserves to be toast
Bernie Schaeffer makes case against headline index
By Thom Calandra,
Last Update: 12:35 PM ET Aug. 29, 2002

SAN FRANCISCO (CBS.MW) - Years from now, when the carnage in stocks is over, a handful of U.S. researchers will get passing grades for sticking to their guns about the overpriced market.

Bernie Schaeffer belongs in that small group. Schaeffer's views at Schaeffer's Investment Research make him an easy target for the millions of Americans who are suffering deep portfolio losses in this, the third losing year for U.S. stocks.

"Pessimist, fear-monger, anti-American, I hear it all," Schaeffer told me over breakfast in San Francisco. "But in 1994 they were calling me Bernie the Bull on CNBC."

Back then, if Schaeffer had tried explaining the technical research that is his Cincinnati company's specialty, the general public's eyes would have glazed over. "Imagine my bringing up the VIX in 1995. No one knew about it or cared," Schaeffer said about the so-called fear indicator that measures stock market volatility (VIX: news, chart, profile) on the Chicago Board Options Exchange.

Schaeffer in person is just as direct as his regular written commentaries, which tell investors they are being way too forgiving of overvalued stock indexes. His main course these days is the Dow 30 stocks that likely will become chopped liver when the stock market falls off its perch.

"I call the Dow the headline index," he says about the Dow Jones Industrial Average that is destined for toast. "It's what we see every day in the newspaper, have seen for decades. There still is nothing tremendously scary about a Dow number that starts with 8."

That's 8 as in 8,580, which is where the index was Thursday morning. Schaeffer's case against the Dow is practically airtight. Stock market believers had best stop reading now.

Schaeffer sees the Dow as a "stupid" product of a long-gone age, when a small group of industrial companies could somehow represent the entire American stock market.

The Dow is a price-weighted index, unlike other major gauges, such as the Standard & Poor's 500 Index. Essentially, that means that stocks with high dollar prices wield enormous influence. Right now, there is one stock that is holding up the Dow: the only one with a price above $100.

"The single most important stock is a company in Minnesota," Schaeffer says about 3M Co. (MMM: news, chart, profile). "It's an industrial company with what, a 30 P/E? If 3M stops levitating, just maybe people start getting scared."

Schaeffer calculates that 3M stock, not far from an all-time high of $130 or so, could wreck the Dow if investors end their love affair with the company's shares. If 3M shares were to return to their 1997-'98 lows, roughly half their current level, the Dow would get a 425-point haircut.

hat's still not scary enough, says Schaeffer. He believes investors are still far too accepting of their portfolio losses since the Dow peak of January 2000. Schaeffer Investment Research relies heavily on "fear" indicators in options trading, such as the VIX and so-called put-call ratios.

"I get a chuckle about everyone getting so excited when the VIX made it to the 50s" in the July sell-off, he says. "They figured that was plenty scary, and a good sign that we had reached a bottom."

Nonsense. The VIX, a volatility index for the country's 100 hundred largest company stocks, was back-tested into the rough waters of 1987. In October of that year, during that horrible week of selling, the fear gauge hit 175. The indicator Thursday morning, as the Dow resumed its inevitable sell-off, was an easy-peasy, hakuna-mattata (no worries, mate) 38.

"October '87 gives you an idea of what true panic really is," says Schaeffer.

Toast and other stuff

The New York University mathematics major puts a lot of faith in the idea of a full-scale retreat from stocks. In that regard, his expectation of a market washout, complete with tears, jangled nerves and tremendous point declines, is similar to those of several other pure technicians, including Paul Desmond at Lowry's Reports and his own senior quantitative analyst, Christopher Johnson in Cincinnati.

"I want to see three to six months of heavy mutual fund outflows, not this business of one month of sharp outflows," Schaeffer says, between bites of scrambled eggs and toast. "Look at it like this: The S&P 500 in this sell-off got cut in half. Nasdaq got cut in half twice. For that to happen to the Dow, it has to be at 5,875. It happened in 1973 to '76, so why not now?"

Schaeffer says the Dow's superior performance to the rest of the stock market - since the January 2000 Dow peak, the Dow is beating the S&P 500 by more than 15 percentage points - is "curious."

Does Schaeffer believe in market manipulation? "I'm not going to go as far as Bill Murphy and the gold folks about that subject," Schaeffer says, referring to the chairman of the Gold Anti-Trust Action Committee and a growing belief that commercial banks and governments work behind the scenes to inflate paper values and deflate hard assets, like gold. "But if you are going to manipulate an index, it would be the headline index."

Schaeffer sees gold - and gold mining stocks -- as investments that will fare well in what inevitably will be turmoil in coming months or years for the stock market. "Whether it's a panic or a grind-'em-down bear market, it's going lower," he says.

He recommends buying put options on the Diamonds (DIA: news, chart, profile), a trust security that trades like a stock and represents the Dow index. Put options increase in value as the underlying security, in this case the bloated Dow, declines.

Schaeffer's business in Cincinnati employs 60 people, thanks to a growing awareness of equity options among Main Street investors. The former insurance executive is quick to admit he makes mistakes.

"My biggest goof of late was being caught flat-footed by counter-trend rallies, in the 1994 and 1998 sell-offs, when I was a bull, and the September 2001 rally," he says. "Oh, and before I got it right, I got clobbered by airline puts."

In February and March, airline stocks soared, leading Wall Street to believe the worst was over for the battered industry. Schaeffer was amazed at the rally, but stuck to his guns. "I travel, and I know the airlines are in pain," he says.

Today, the airline stocks are, collectively, at half their highs from February. "What was with that rally? I want to know. Leave it to Wall Street to parse the travel figures and say, 'Oh, capacity was worse last month than it is now.'"

No wonder no one listens to Wall Street these days, Schaeffer says.

The veteran stock market researcher's views can be found online at

Thom Calandra's StockWatch by e-mail

Post  41251  by  jeffbas       Reply
sr, on XICO, I should also note that institutions have built a position of 54% of the stock:`&selected=xico&FormType=Institutional

Note that in this latest quarter, when the stock dropped a good deal, Wellington, Franklin Resources and Fidelity (FMR) added a lot of shares.

Post  41252  by  oldCADuser       OT: Ever looked at Crown International amplifiers?

Post  41253  by  ttalknet2       Reply
maniati, expensing options could lead companies to take up a new reporting trick that I'll call GAAP BEO: Before Expensing Options. Reminds me of EBITDA, and we know investors are spitting at that gimmick, eh?

It never ends.


Now, I know the corporate world is going to start expensing options anyway, but they will be wrong in doing it, it's a bad idea, it distracts attention from more important issues, and we are going to pay down the road.

Post  41254  by  pmcw       Reply

Interesting buy/write opportunity. I just sold DEC7.5's for $1.10 as the stock traded up. I think IDNX might continue to trade up as we approach 9/11. It is currently trading at $6.70. Therefore even a straight buy/write will knock you down to $5.65 (after commissions) and a subsequent call will yield 33% in about 3.7 months. If it doesn't get called, you can always push it again by selling another call. IDNX ain't a bad stock to hold at $5.65. Regards, pmcw

Post  41255  by  jeffbas       Reply
Anyone (Schaeffer) who recommends buying puts to the public is a gambler, which in my opinion destroys his credibility. Playing options with the time value against you is like betting against the house in Las Vegas.

(Shorting DIA on margin is a far better leveraged strategy, which has a trivial time value risk, since interest rates are so low.)

Post  41256  by  kduff       Reply
ab, I'm not sure if you have been around for the list of post on expensing options. If not, take a look at pmcw, maniati, and culmus's, those will give you plenty of food for thought.

Post  41257  by  pacemakernj       Reply
Roof, thanks for those updates. As I've stated before we are on the razor's edge. IMO, there seems to be an upward bias to stocks. We are holding 8700 on the Dow which I thought we would. I cannot yet answer where we are headed until I get a sense of cap ex spending for '03. I think things will have to get a lot worse for us to break 7500 on the Dow. From what I've read the earnings for the Dow next year will be about $500. The DJIA @ 8700 today gives us a forward p/e of 17.5. Not cheap but not expensive. I could see a big trading range for the next 12 months of 7500-10,000. The dow could drop to 5000 but I think the sky would have to fall. The Dow has done nothing for 4 years and I do not think it will do much in the future. I do believe this bodes well for gold. If Peter Palmedo of Sun Valley Gold is correct gold should do well in this environment. As he said gold performs best when all other investment returns are subpar. We, imo, are in for years of sub-par returns on equities. I don't know if I mentioned this to you earlier but he had a chart which showed the Dow and gold charts together. For the first time in years the two lines are crossing with gold on the upside and the Dow on the downside. This means that gold is beginning to outperform the Dow. I do not see gold rising dramatically unless of course there is a major catastrophe. I see gold rising slowly and steadily rewarding the patient investor. I like you continue to favor the non-hedgers like DROOY, KGC, GFI. I can see a scenario where gold can break 300/oz. But I would really back up the truck if that were the case. The only thing that would throw a shoe in the ointment is for stocks to take off. That would mean the economy is far stronger than originally thought. This is possible given the massive fiscal stimulus coming on line with the government starting to spend big time on defense. That $380 defense budget for '03 will have a major effect on the economy. BTW, that starts in October. But this story is so fluid that one really is sitting on edge as to which way we could go. I also think that a lot of money came out of the market and people will be VERY reluctant to put money back in. Also a lot of that money has gone into housing which as we all know is not the most liquid of investments. I cannot recall in my 20+ business years where I have felt this uncertain about everything. I simply am hoping for the best and expecting the worst. Not fun times to say the least.


Post  41258  by  pmcw       OT: clo,

Post  41259  by  pmcw       Reply
jeff, He does have a point about how the DJIA is calculated and that, due to this, 3M has extra weight. However, if he believes what he says, the play is to short 3M. Pretty simple and probably even a better play than shorting the DOW since some of the other components are pretty bloody. Regards, pmcw

Post  41260  by  clo       OT: pmcw:"Bush blocking access to Clinton's p

Post  41261  by  motordavid       Reply
jeffbas:re Schaeffer's art,;
I wasn't promoting him or his angles. I jes'thought it interesting,his take on the Dow/Headline index,etc. As for gambling, well, there isn't much I can think of,in life,that is not, to some degree.

This august board is probably beyond that catch, but Mr&MrsAmerica hear the "Dow did this or that" every day. I thought he had a few good points. As for Xperts like he, I always liked Dylan's line: "don't follow leaders,watch the parking meters..."BR,md

Post  41262  by  pmcw       OT: Too funny to copy, you'll have to open the lin
Post  41263  by  oldCADuser       OT: I think that GWB is looking ahead to the day w
Post  41264  by  oldCADuser       OT: That item is making the rounds on several Yaho

Post  41265  by  Warstud       Reply

Very much so, and if you short the housing industry you'll be even more of a stud in the next six months or so. In fact I just shorted a company that manufactures and markets lumber named Deltic Timber Corp, (DEL).


Post  41266  by  lkorrow       Reply
Briguy, you must be a great dj! :-)

Post  41267  by  kmdream       Reply
agte bb powerhouse studios

Post  41268  by  kduff       Reply
ab, My previous response was done in haste as my basement was flooded and I had to go get that darn wet vac again.
I get the impression that you feel I am in favor of expensing options. I do not feel options should be expensed. As stated here on numerous posts, the expense is not to the business, it the shareholders that bear that price. The idea that tickled my funny bone was, using options as an extraordinary income from theft. I would expect when shareholders opened up that annual report and staring at them from the income statement was "theft from shareholders", we would see some changes on how company's pay their officers.

Post  41269  by  Arkural       Reply
Est. 2yr SP tgt via fib source, 500-560. Churn and burn syndrome.

Post  41270  by  maniati       OT: kduff: Who needs a wet vac? Just let the basem
Post  41271  by  maniati       OT: OCU: Maybe, but, then again, maybe you're just
Post  41272  by  oldCADuser       OT: This day in history: 10 years ago today the C

Post  41273  by  abveldeh       Reply
kduff agree as long as it is put to paper for anyone to see. that was also the meaning of my post

Post  41274  by  pmcw       Reply
maniati, Ironic, don't ya think? I wouldn't be cynical even if the tables were reversed (Clinton followed GW). Of course, he (Clinton) would have later proved me naive. ;o) Personally, I think the stance is consistent with his apparent respect for the office, probably chapped some of his own party, but was the appropriate thing to do. I would like to think that all who take the Presidential Oath desire to put their country first and honor their post. Regards, pmcw

Post  41275  by  srudek       Reply
jeffbas, thx for the xicor rundown. Much appreciated. I have bought and sold xicor stock at a profit a number of times since 2000 , based mainly on the observation that the stock kept swinging between 5ish and 10+ over and over. I thought it was interesting -- and doubtless was a bullish sign -- that the stock kept recovering every time it fell. However, in this new era, I've been trying to only put cash where I feel the long term risk is near zero and the payoff could be substantial.

Post  41276  by  danking_70       OT: PMCW re: blocked access to Clinton's pardon f

Post  41277  by  uponroof       Reply
MIDAS letter 8/29/02

August 29 - Gold $312.70 up $3.20 - Silver $4.52 unchanged

Superb Gold Action, Gold Shares Soaring!

It has been a dog’s age since we have seen such relatively positive gold action. Early in the New York trading session gold took off, the dollar tanked and the DOW swooned along with NASDOG. The economic/financial news is just terrible everywhere and that early action in those three markets was quite appropriate. However, as always, when the U.S. financial markets are on the precipice, The Working Group on Financial Markets swings into action, with a little help from their friends.

A fellow Café member:

PPT at it BIG time...

The Federal Reserve just pumped $11.75 billion into the hands of the banks under THREE repurchase agreements before 11 AM this morning. (See

Best Regards,
Geoff S

Quickly, the dollar began to rise and the NASDOG turned around at 1300, despite negative high tech news. The DOW began its comeback after being down 125 points on the day. Gold started to dip, but only briefly. In most unusual action, gold bucked the cabal selling and held its own. It would sell-off as the dollar and Dow gained, but then would rally right back up again when that selling subsided.

At the end of the day, gold worked its way back close to its highs. Had gold made new highs it would have been a great gold day. Regardless, it still was superb gold trading action and a rare one. The Gold Cartel has clearly been put on notice. The Hung Fat’s and Dr. No’s of the world are taking them on again.

The bells and whistles go off if gold closes above $315. The gold derivative neutron bomb goes off with a close above $330.

The Dec gold chart:

The spot CRB closed in new high ground at 217.45, up another 1.25. Crude oil led the way closing at $28.92, up .66. The Nov futures CRB chart follows, disregard the previous high spike. It is a misprint:

The dollar closed well off its lows at 106.73, but still finished .49 on the day. Technically, it is breaking down from a slanted head and shoulders formation. It is most bearish:

The fundamentals for explosive gold price action are all in place. Volatility remains gold’s friend. Only The Gold Cartel stands in the way of gold rising hundreds of dollars per ounce.

The John Brimelow Report

Indian ex duty premiums: AM $2.00, PM $2.64, with world gold at $310.90 and $ 310.70. Ample for legal imports.

Tocom continued deeply bored by gold, with volume low, equal to 15,581 Comex lots, dampened down by NY’s late sell- off and a robust yen, which actually passed 118 at one time. Open interest fell the equivalent of 1,089 Comex contracts. (NY yesterday traded 19,101 contracts: open interest fell 2,727 lots.). Nihon Unicom observes:

“Gold turned down following the COMEX gold breaking $310 again. Although commercial demand has been growing, fund purchase is needed for additional climb.”

Perhaps today’s +$2 rise will stimulate more attention.

The Washington Post provides the most interesting gold story today, with an account of a mysteriously leaked draft UN report bewailing Al Qaeda’s success in evading American efforts to interdict its’ resources by because of

“…the group's decision to shift its assets into precious metals and gems, and to transfer its money through an informal money exchange network, known as hawalas, that is virtually impossible to trace.”

It appears that the hawala business is not as obsolete as the FT report yesterday suggested! However the important aspect of this report is the disapproving remark that further success is impeded in Europe by the tiresome habit of Governments there of requiring

“"stringent evidentiary standards" …before they will seize an individual's assets.”

The all- too- true implication that this has ceased to be the case in America ( see )

will eventually effect the asset preferences of parties closer to home than Muslims living in their own countries.

Lest friends in Europe feel to smug, they should note according to the Post:

“Washington has continued to press its European allies to fully comply with the U.N. sanctions. "We are concerned about it, and we have raised this issue bilaterally with the Europeans," a U.S. official said.



The DOG put in a 20 plus point rally that will not hold, while the DOW could not maintain any of its rallies, regardless of PPT efforts. If the Dow (8670) closes below 8736 tomorrow, it will have closed down 5 months in a row. That has not happened in 21 years.

Keep in mind the input sent your way in the last Midas regarding the President’s people knowing the real economic/stock market situation is BEARISH! Some reasons WHY:

Growing employment is the key to the U.S. recovery. The numbers are not good:

Washington, Aug. 29 (Bloomberg) -- The number of U.S. workers filing new claims for jobless benefits rose last week to the highest in almost two months, indicating companies are still firing workers and the economy's recovery may be faltering.


The balance sheets of many firms are rapidly deteriorating:

Munich, Aug. 29 (Bloomberg) -- Munich Re and Swiss Reinsurance Co. said earnings were wiped out by plunging stock markets. The world's biggest reinsurers, along with Germany's Allianz AG, also said they may face more than $1.1 billion of claims from floods in Central Europe.
Munich Re posted a second-quarter loss of $378 million after writing down the value of its equity holdings by $1.5 billion. Swiss Re's first-half profit plunged 91 percent to $79 million following $613 million of investment writedowns.
``These are very disappointing results,'' said Sandro Monti, a fund manager at BSI SA in Lugano, Switzerland, which manages $29 billion and holds Swiss Re shares. ``The writedowns were bigger than we were expecting. What worries me about Swiss Re is the company hasn't given us any new business targets.''


Real estate has been a refuge for many escaping the financial ravages of various stock investing debacles. That sort of thinking has probably set up the next bubble to break. This news is not good for those who think otherwise:

FT: US housing executives offload stock By Peronet Despeignes in Washington Published: August 28 2002 22:59 | Last Updated: August 28 2002 22:59
Executives across the US home-building industry have been selling shares in their companies at a record pace this year, suggesting they believe the country's housing market has peaked.
Data compiled for the Financial Times show that corporate officers and board members in publicly traded US building companies sold a record $258m-worth of shares more than they bought in the second quarter. -END-

The bailout of the bullion banks heavily invested in Brazil may have been little better than a Band Aid effort by the U.S.:


Business Week


Brazil: When an IMF Bailout Is Not Enough
The loan guarantees help, but they won't rescue its economy

The news brought a surge of euphoria. On Aug. 7, the

International Monetary Fund announced it was prepared to lend Brazil $30 billion--a record sum that was expected to calm the country's roiled markets. But the IMF package wasn't enough. After an initial boost, Brazil's stocks, bonds, and currency went right on falling. The real has lost a third of its value this year. The country's benchmark sovereign bond is trading at a 40% discount.
Analysts say that there are two main explanations for Brazil's continuing malaise: debt and politics. Following are some questions and answers for investors wondering whether Brazil, post- IMF agreement, is a buy or a sell.


Word to me from another good source is that most of the Brazilian bailout money actually went to the bullion banks, whose Brazilian loans were underwater.

The car selling boom may soon be history too:

BBC News, August 28:

The production halt means 2,000 less cars a day

Daewoo's car production has ground to a halt at three plants after running out of parts.
The South Korean firm, which has now been bought by the world's biggest car firm General Motors, is up to its ears in debt.
Its biggest supplier, Delphi Automotive Systems stopped delivering parts on Tuesday due to payment delays.
Rival suppliers have also threatened to halt supply later this week.
"We have a limited inventory of components," said a spokesman for Daewoo. "Our chairman is continuing talks with our biggest suppliers to seek their cooperation."


Another scandale du jour:

New York, Aug. 29 (Bloomberg) -- Bristol-Myers Squibb Co., the world's fifth-largest drugmaker, said it faces a formal investigation by the U.S. Securities and Exchange Commission into wholesalers' overstocking of its products. -END-

But, there is no inflation:

Baraboo, Wisconsin, Aug. 29 (Bloomberg) -- Cocoa's rise above $2,000 a metric ton today may signal a profit squeeze for Hershey Foods Corp., Mars Inc. and other chocolate makers as they gear up for Halloween, their busiest sales season.
``If cocoa prices stay at this level, everybody will have to charge more for their products,'' said Dennis Roney, president of Baraboo Candy Co., maker of Moo Chews, Udderfingers and other candies. ``You don't like to raise prices during a bad economy, but we'll have to if prices stay this high.''

On the big picture From The King Report:

The WSJ notes the Nikkei is still 74% below its bubble peak of 12 years ago. Sentiment in Japan is overwhelmingly negative with 83% of Japanese people saying they have no interest in investing in stocks. Contrast that to the US where sentiment is still overwhelmingly bullish, whether measured by institutional cash of 4.4%, high bullishness of both retail and institutional investors in surveys, and the ridiculous PEs that US stocks still sport. Guess what market will bottom first? -END-

President Bush had best not count too much on his buddy, Premier Putin of Russia.

Gold related news from Moscow:

Mark H. Rodeffer's Daily Report, Wednesday 28th August, 2002

Ruble Will Be Steadier
Moscow News

Within the next few months, the Central Bank will be ready to offer banks new instruments for purposes of refinancing and maintaining liquidity. This involves forming a flexible system that would even out sharp fluctuations on financial markets. The initial results of the systems implementation may be evident as early as December, and they are expected to benefit all Russians. The Central Bank's ultimate aim is to stave off sharp falls in the rubles buying power that have hitherto preceded every New Year Day. And it means to do it without massive sales of its gold and foreign-exchange reserves.

Dangerous news also reported by Rodeffer:

Russia flirts with U.S.'s axis of evil
Ehsan Ahrari - Asia Times

As the United States becomes increasingly assertive about the use of its military muscles in different parts of the world, Russia is also determining its own zones of cooperation and competition with that lone superpower. Russia will cooperate on issues that it regards as part of its zone of comfort. On issues that fall in the zone of competition, it will almost invariably choose its own courses of action regardless of whether this will put it at odds with Washington.


A follow up on a budding silver scandal mentioned in the Tuesday Midas, as reported by a fellow Café member:

Went on a field trip today. Went to a good jewelry store showed him a magnetic Wal-Mart chain . He was surprised. He then went to his case and pulled out one of his. It was NOT magnetic. He then pulled out another and surprise, surprise it was magnetic. It was from Singapore. Went to BELLS department store (they had a magnet mounted to the counter to check jewelry.

She checked out the Wal-Mart chain and said it was not magnetic. (She was holding it in her hand and dipping it onto the magnet.) She could not feel the pull. My friend then held it up and let it hang and put his magnet next to the chain and it pulled it right over against the magnet. She started pulling out other silver stuff and it was all magnetic. She was shocked!

Went to pawn shop and checked some of their new silver chains and they were
also magnetic.

I'm anxious to hear what the deal is with all this magnetic silver.

Brian / $hifty

Me too!

Midas and in-the-know Café contributors have alerted you to coming financial nightmares for the overly hedged Aussie gold producers. Some of the latest news on that subject from the Sydney Morning Herald this morning:

Two gold companies, but two vastly different results.

That was the story of Newcrest Mining and Sons of Gwalia yesterday, when the two companies revealed their results for the year to June 30.

While Sons of Gwalia's net profit before significant items of $69 million came in right on target, Newcrest surprised the market with a worse than expected net loss of $53 million.

Newcrest's result compared with a profit of $38.2 million in the previous year.

The bottom-line number was affected by a surprise $25 million provision for the restructure of currency hedging positions.

Analysts had been forecasting a net loss of $25 million to $30 million after Newcrest warned in early June that it would make a provision for surplus currency hedging positions.

However, Newcrest defended the surprise $25 million provision, arguing that it was simply a reflection of a change in accounting rules which forced companies to recognise all hedging contracts marked to the spot exchange rate at the balance date for their financial accounts.

Analysts expected the loss to have a negative short-term impact on Newcrest shares but said the market would soon start to focus on the upcoming financing of the company's $1 billion Telfer goldmine development.

Paterson Ord Minnett associate director Paul Carter said he was more concerned about Sons of Gwalia - its net profit fell 10 per cent on 2000-01 to $57 million after significant items.

A $25 million writedown of the value of the company's Gwalia mine in Western Australia had an impact on the final number.

Mr Carter said Sons of Gwalia's rising costs and declining profit margins were cause for concern.

"Margins have been significantly eroded," he said.

In light of that, analysts widely applauded Sons of Gwalia's decision to reduce its final dividend by 5c to 7.5c a share unfranked, to preserve cash for exploration and expansion opportunities….


My guess is that Newcrest and Sons of Gwalia will blow up when the price of gold soars just like Ashanti did 3 years ago.

Shareholders beware! Speaking of shareholders bewaring:

Placer Dome reducing gold hedge position by 20%

Placer Dome Inc. announced today that it is reducing the level of its committed ounces by 20% from the 8.5 million ounces of gold reported as at June 30, 2002.
The recent volatility in the gold price has afforded Placer Dome the opportunity to reduce its call option commitments for the years 2003 and 2004 at an anticipated net cost of about $2/oz, or approximately $2 million. By December 31, 2002 Placer Dome expects its committed ounces to total 6.8 million at an expected realized gold price in excess of $400/oz. This level of committed ounces would represent less than 40% of Placer Dome's average expected production over the next five years, or 15% of currently published reserves. For 2003, Placer Dome expects to have in excess of 90% of its production uncommitted. -END-

Placer Doom is finally waking up, but not nearly enough. Meanwhile, Newmont and Barrick are awfully quiet on their hedging numbers.

The Bush/Cheney war talk continues to confuse many around the world. What is the real story behind the scenes? The following article by Tom Flocco may shed some light on this curious posit by the Bush Administration:

Scoop - Bin Laden's Brother-in-law Had Close Ties To Bush
[ ]

Mahendra Mania

(Sent to me last night)

Dear Bill,
For Gold and Silver I see a great month of September coming, during this period my prophecy says that the month of September 2002 will remove all the negativity as well as weaknesses from gold and silver and they will move upward without any major downtrend which gold and silver investors experienced in the last two months. Once again I want everybody to know that still I hold my predictions on Gold to reach $360 to $380 and for silver $6.80 an ounce by the year end. Looking at the planetary positions I see this prices being on the very conservative side. They should go far above my predictions.

Key predictions for 2002 which I predicted in September 2001 are as follows:
Dollar will go down and Euro will rise.
Australian Dollar will also rise.
After July 2002 world stock market will stabilize.
Middle East crisis, India-Pakistan and USA - Iraq war.
Weather and nature will play negative role for Asia and Europe.
I think the overall with little bit of time difference they are coming true. So nothing to worry about gold and silver current trend. Gold and silver will create a history for highest return on investment before end of 2003.
Expect flash news as well as great news from me on 2nd September 2002.

Thanks and God bless.
Mahendra Sharma

Little by little the world is beginning to understand the fraud, corruption and market rigging that has been running rampant on Wall Street for years. The latest flap involves the IOP shares allocated to executives who awarded huge business deals to the investment banks (in many cases bullion banks). The issue is that the analysts at the investment banks were giving buy recommendations to the investing public, while these executives were flipping the trades and netting millions. Congress is up in arms because the public is up in arms, as many of these Nasdaq investors have lost 75% of their money, SO FAR!

Alan Murray of the WSJ on CNBC today: The impression with these IPO revelations is that the “the system here is rigged.”

The issue is that many on Wall Street cleaned up, while the average investor has been slaughtered. These investors are venting to their members of Congress.

Wait until the U.S. investing public realizes how much money The Gold Cartel made over the last half decade by rigging the system, which led to the stock market bubble, which led to their loss of hard-earned money. That is exactly what the Gold Anti-Trust Action Committee and its ARMY have been trying to alert the public to for over 3 ½ years now. While it has been a long, tough road, we are making significant progress. Word is spreading all over about the gold fraud. Some recent feedback:

*"If GATA and its associates are indeed correct, and I haven't ruled this out, Bill Murphy and the gang are making so much noise about this now that it can't be that long before the accused, that is to say, Goldman, JP Morgan and the others are dragged before the regulators and the matter is addressed."

Well done, Bill, well done!
Kind regards,

*Thom Calandra's StockWatch's+StockWatch&dist=nwtwatch&siteid=mktw

Does Schaeffer believe in market manipulation? "I'm not going to go as far as Bill Murphy and the gold folks about that subject," Schaeffer says, referring to the chairman of the Gold Anti-Trust Action Committee and a growing belief that commercial banks and governments work behind the scenes to inflate paper values and deflate hard assets, like gold. "But if you are going to manipulate an index, it would be the headline index." (Referring to the Dow)

*Dear Bill:

I am 110% behind you and the GATA cause. I have dedicated over 10 hours a day since Nov 01 to monitoring the gold market. I watch every tick, every day. My insight on the current gold-price action is as follows....

The plunge team is running out of ammo, that's obvious. The current manipulation method is now reduced to buying and selling the inside action. I believe they are buying higher, then using this ammo to sell it lower, before markets open, during illiquid times, and throughout the day. Hey if you control the printing press, what's the difference if you take a paper loss on the differential?

Today I saw just before 10am massive volumes in sales at or below the ask, noticeably in GFI & BGO. Sure enough it was the sign ,as gold has tanked on a steady downstream since.

In the past the Bullion desk tick chart showed more violent spikes during the hammering process. The past 7 trading days or so, these volatility spikes have failed to have to desired effect. Now it appears they have been reduced to "slow upstream" buying, then "trickle down" selling.

We all need to realize the ONLY way to victory are natures laws of supply and demand through TRUE physical accumulation. Please remind the growing army that massive returns on investment through gold stock leverage is the prize, but not to let the human nature of Bull Market greed overlook the underlying fundamentals. We must work as a team. How many patrons have jumped on the bull 100% in stock and zero physical? I personally am 60%-40% Stock to physical. Besides in these uncertain times Paper stocks could end up as worthless as paper currency.

Bill, from the bottom of my heart, I thank you for your tremendous efforts. I have championed the gold cause as my life's work. I am a very small time newbie in the financial sector, but thanks to you and the many other honest souls in the gold market, I am learning and spreading the word!

Personally, I have tremendous computer skills with 20 years of database/internet development. Please accept my offer to VOLUNTEER my talents to the army. If interested please contact me for more specifics on what I have to offer and how it could benefit your organization.

Very truly,
John M. Colwell

Thanks John, they are running out of ammo. I am sure you will here from some of the GATA ARMY.

Laurie McGuirk from Sydney, Australia:
Huge nite last night with Gold stock up massive. Oops sorry, all except the hedged ones. Barrick up 2.75% and Newmont up 3.6%..not bad for a nights work where gold moved up $2 or $3.... Gold 314 now.... tick,tick,tick.

Compare them to..... GG +6.5%, Harmony + 9.4%, Durbies +7.5%, IAG +12%, AEM +8.4% ...

The goldies are back at levels before the crash in July, but gold was 325 then... someone prepositioning maybe, or are we ahead of ourselves??? If Gold trades through $330, don't wait......

The Dow surprised was actually up after 2 hrs after initially being off 150pts,... go figure, after Europe was smashed early shoulda been down 300!...Don't doubt that its coming, no matter what TPTB (the powers that be) try and do.

Good day and speak later... LM

Chuck checks in:

The action this week, I believe, brings us closer and closer to the moment of truth. What is "barbarous" gold or paper? The persistent upward move in the gold shares, particularly in the quality producers, and the unreal negative action in the stock market is signaling something historic and, perhaps, catastrophic. Today, for instance, the plus TICKS flirted with 1000 on numerous occasions and yet the market was flat or slightly down. Keep a close eye on the real estate related stocks, for once they turn down again, we will be in panic mode. It could begin next week. Goldcorp, probably the most pure of the large producers appears to blowing out on a new leg. It should be the technical leader, although the best performers will be the smaller ones and the exploration companies which are sitting on large deposits and have not participated to any extent. A historic occasion and one to be feared. Our world is about to be changed-forever. Sound the alarm in Zion. Best, Chuck

If you are in it, you are winning it as far as the gold shares go. They are soaring. The XAU finished at 69.87, up 3.07. The HUI zoomed to 128.64, up 3.07.

BOMBSHELL, JUST IN, from a friend of mine of 21 years:
There is a Saloman Smith Barney internal report floating around that says if gold goes above $340, they believe J.P. Morgan is toast (in so many words) because of their massive gold short position. My friend also said that Saloman believes gold WILL go above $340. My friend said a Saloman man told him something about the price of gold being capped. My friend said he just chuckled and walked away from his meeting with a big smile on his face.

Happy Days are here again!


Good Luck


Post  41278  by  jeffbas       Reply
pmcw, I just hope that when Xicor carries a forward earnings estimate of $.52 like NEM does now

as it might at the end of 2003, that XICO is also $28 and "soaring" :-)

Post  41279  by  uponroof       Reply
might we be starting that run to 320-5...
as per Saville's thoughts?

Resistance at 313.10 just removed. 315.40 is next level then 318 before walking through 320. Is the rally cycle here? Easy money in gold shares over the next few weeks if so.

Good Luck


Post  41280  by  ferociousD       OT: Global Eye -- Sucker Punch
Post  41281  by  ferociousD       OT: Test your CEO knowledge
Post  41282  by  kduff       OT: Maniati, You are too funny. ;o) I must go wr