Table On-Topic Summary - 24-Sep-2002
A compilation of this board's financial/economic posts From 42525 to 42608

Post  42525  by  lkorrow       Reply

You had expressed an interest in Rydex awhile back. There's a heat map (called carpets) of their fund results and others on Stockcharts -- market summary, major averages, fidelity, rydex, and toronto exchange.

LQMT +20% Friday, +5% today. No news that I've seen. . . .

Post  42526  by  lkorrow       OT: Tin, there should be a special high award rese
Post  42527  by  Decomposed       OT: Table ON TOPIC SUMMARY Sep 23, 2002

Post  42528  by  lkorrow       Reply
Can't wait to hear the industry response!


Good news for the wayward wireless carriers

A surprise FCC move frees up $16 billion for the industry — and could spur much-needed consolidation.

by John Filar Atwood, equity research columnist

In January 2001—when investors were still using the word "slump" to describe the unfolding telecomm collapse—the major U.S. wireless carriers promised to pay a total of $16 billion at an auction for the spectrum licenses owned by a bankrupt company called NextWave.

As conditions steadily deteriorated since, that collective IOU has hung like a sword over the flailing industry. The companies—including Verizon Wireless (VZ), AT&T Wireless (AWE), Voicestream Wireless, and Cingular Wireless (BLS)—tried to back out of the obligations. The Federal Communications Commission's response: Pay up.

But in a stunning reversal that is further evidence of how bad things have gotten in the wireless industry, the FCC last week proposed to release bidders in the NextWave spectrum auction from their NextWave obligations. The move will give cash-strapped firms some breathing room and, more importantly, may push the industry toward desperately needed consolidation.

Until recently, the Commission had refused to budge from its view that releasing companies from their bids would damage the integrity of the auction process.

Paul Glenchur of Schwab Capital Markets tells Multex Investor that the FCC did not want to dilute the guiding principle in spectrum auctions that you pay what you bid.

"You can't have people coming in and bidding up prices and then walking away," he says. "The FCC wanted companies to know that when they bid in the future, the government will hold them to it."

Glenchur said the Commission softened its stance in recent weeks because of the declining condition of the capital markets, and its recognition that the opt-out proposal would give carriers more strategic and financial flexibility.

As weak retail pricing and the high cost of network upgrades drive the wireless industry toward consolidation, he noted, the removal of carriers' NextWave contingent liability will make it easier to get deals done.

Eli Lapp of BNP Paribas tells Multex Investor that that's a huge benefit to the wireless industry, because consolidation is critical to the long-term health of the group.

"There are very few markets with six national operators such as in the U.S.," he says. "Germany is an example of a country with six wireless operators and it has proven disastrous."

He believes the industry needs to contract because the existence of too many suppliers has led to a debilitating price war.

"Companies like T-Mobile (DT) and AT&T Wireless are battling the larger players for subscribers through pricing," he says. "Large companies battle back to maintain and/or grow subscribers, but there is no price rationality."

With the release of the NextWave obligations, large companies now may be able to fight back through acquisitions.

Friedman Billings Ramsey's Alex Rygiel believes the FCC's decision may hasten a Verizon Wireless/Nextel (NXTL) combination, especially given the NXTL spectrum-swap proposal currently being reviewed by the FCC. He also thinks the rumored acquisition of T-Mobile by AWE and/or Cingular may now be resolved more quickly.

Spectrum-rich carriers like Sprint PCS (PCS) and T-Mobile are likely targets in the coming consolidation, according to William Benton of William Blair, who views the FCC's recent move as a huge positive for the wireless industry.

While the FCC's decision will help the entire group, the clear winner is Verizon, which had nearly $9 billion tied up in the NextWave auction. AWE will also benefit through the elimination of its $2.9 billion liability.

The release of those obligations will have an enormous impact on their near-term capital needs, and will help the carriers de-leverage their balance sheets. That, and not the push toward consolidation, is the most important result of the FCC's proposal, says Frank Governali of Goldman Sachs.

He adds that the fear of its spectrum obligation has weighed down VZ shares, and increased the risk of a two-notch ratings downgrade.

"We have favored VZ over the other two Bells for a variety of reasons, including our belief that a one-notch cut was more likely

Post  42529  by  Decomposed       ot: ljpit

Post  42530  by  spirare       Reply
Funds round-up: Gold to hit $1,000 as stocks fall for 20 years

By Justine Trueman

LONDON (Reuters) - The gold price could more than treble to $1,000 per ounce if western stockmarkets suffer from a 20 year bear market, says Hugh Hendry, the manager of the top-performing Odey Continental European fund.

"I think there are some circumstances where the gold price could go to $1,000. Logically you could construct an argument where the gold price goes up by several times its current value," Hendry said.

Hendry, who has invested in several gold mining companies through his hedge funds and the Odey Continental European fund (See Fund Fact Sheet), says a 20 year stock slump is not as strange as it sounds.

"I think the equities market will fall for 20 years. From 1929 it was 25 years before the market recovered and some stocks didn't come back for 40 years. When will we see 40,000 in Japan again?"

Hendry, a partner at Odey Asset Management, said it was 'ridiculous' that some market commentators think shares will bounce back in the next year or so.

"We've seen the biggest bull market in history and history demonstrates that the intensity of any bull market is more than matched by the intensity of a bear market. The S&P is on 37 times earnings. Bear markets end when stocks are on six to seven times."

Hendry is also investing in government bonds and says there is a bull market in risk-averse instruments with US and European bonds regularly making new highs.

However, despite recent share price rises, he is still very bullish on gold mining stocks.

He said South African mining stocks like Harmony Gold Mining HARJ.J and Durban Deep DBNOo.J , that suffered falls over the summer have now recovered and many stocks are still trading at reasonable prices.

He has been buying shares in Ashanti Goldfields AGC.GH at one times revenue and expects further stock price rises if the gold price keeps going up.


His bullish outlook on gold is partly due to the fact that many gold mining companies have stopped hedging against a fall in gold prices and are taking a positive view on prices for the first time in many years.

Even Barrick Gold ABX.TO , a Canadian blue chip famous for hedging the gold price, has been closing down some of its hedges as has AngloGold ANGJ.J .

"You want to own the unhedged gold producers because if the gold price rises their profits will rise dramatically," said Hendry.

However, he is less keen on holding gold bullion as he said gold bars have been confiscated by governments in the past and this could happen again if a government felt its currency was under threat.

The United States banned private ownership of gold bars from the early thirties to 1971 when the US got rid of the gold standard so that dollars were no longer backed by gold. France took a similar policy in the early 18th century.

A spokesperson for the World Gold Council said such a move would be unlikely these days with the move towards further de-regulation of markets.

"You can never anticipate what any government is going to do but I would think it would be extremely unlikely," she said.

The Odey Continental European Accumulation fund has returned 14.56 percent in the last year compared to a 21.51 percent fall in the AUTIF Europe (ex UK) index over that period. Over three years the fund has returned 29.80 percent according to data provided by Lipper, compared with the index's 19.87 percent fall.

Hendry's fund is also ranked first in the Europe excluding UK category on the Citywire Funds Insider database even beating star manager Anthony Bolton's Fidelity European Fund (See Fund Fact Sheet).




TA LT higher highs and higher lows
4 Strong Bull waves to go*^*^*^*^

Bull Wave Breakout soon to follow*^*^*^*^*^

Dollar Index Cash (NYBOT:DXY0)
TA LT lower highs and lower lows...
3 bear waves left...

TA ST small 5th bull wave correction
soon complete, followed by
continuation of the LT bear waves...

CALVF Risning from oversold conditions - bullish

Current Price of Gold

(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)

Post  42531  by  ribit       Reply
...first of all, buy a vowel!

Dennis Miller: on the MiddleEast:

"A brief overview of the situation is always valuable, so as a service to
all Americans who still don't get it, I now offer you the story of the
Middle East in just a few paragraphs, which is all you really need. Don't
thank me. I'm a giver. Here we go:

The Palestinians want their own country. There's just one thing about
that: There are no Palestinians. It's a made up word. Israel was called
Palestine for two thousand years. Like "Wiccan," "Palestinian" sounds
ancient but is really a modern invention. Before the Israelis won the
land in war, Gaza was owned by Egypt, and there were no "Palestinians"
then, and the West Bank was owned by Jordan, and there were no
"Palestinians" then. As soon as the Jews took over and started growing
oranges as big as basketballs, what do you know, say hello to the
"Palestinians," weeping for their deep bond with their lost "land" and

So for the sake of honesty, let's not use the word "Palestinian" any more
to describe these delightful folks, who dance for joy at our deaths until
someone points out they're being taped. Instead, let's call them what
they are: "Other Arabs Accomplish Anything In Life And Would Rather Wrap
Themselves In The Seductive Melodrama Of Eternal Struggle And Death." I
know that's a bit unwieldy to expect to see on CNN. How about this, then:
"Adjacent Jew-Haters."

Okay, so the Adjacent Jew-Haters want their own country. Oops, just one
more thing. No, they don't. They could've had their own country any time
in the last thirty years, especially two years ago at Camp David. But if
you have your own country, you have to have traffic lights and garbage
trucks and Chambers of Commerce, and, worse, you actually have to figure
out some
way to make a living. That's no fun. No, they want what all the other
in the region want: Israel.

They also want a big pile of dead Jews, of course-that's where the real
fun is-but mostly they want Israel. Why?

For one thing, trying to destroy Israel-or "The Zionist Entity" as their
textbooks call it-for the last fifty years has allowed the rulers of Arab
countries to divert the attention of their own people away from the fact
that they're the blue-ribbon most illiterate, poorest, and tribally
backward on G-d's Earth, and if you've ever been around G-d's Earth, you
that's really saying something. It makes me roll my eyes every time one
of our pundits waxes poetic about the great history and culture of the
Muslim Mideast.

Unless I'm missing something, the Arabs haven't given anything to the
world since Algebra, and, by the way, thanks a #### of a lot for that

Chew this around and spit it out: Five hundred million Arabs; five
million Jews. Think of all the Arab countries as a football field, and
Israel as a pack of matches sitting in the middle of it. And now these
same folks swear that if Israel gives them half of that pack of matches,
everyone will be pals. Really? Wow, what neat news. Hey, but what about
the string of wars
to obliterate the tiny country and the constant din of rabid blood oaths
to drive every Jew into the sea? Oh, that? We were just kidding.

My friend Kevin Rooney made a gorgeous point the other day: Just reverse
the numbers. Imagine five hundred million Jews and five million Arabs. I
was stunned at the simple brilliance of it.

Can anyone picture the Jews strapping belts of razor blades and dynamite
to themselves? Of course not. Or marshalling every fiber and force at
their disposal for generations to drive a tiny Arab state into the sea?

Or dancing for joy at the murder of innocents? Impossible.

Or spreading and believing horrible lies about the Arabs baking their
bread with the blood of children? Disgusting.

No, as you know, left to themselves in a world of peace, the worst Jews
would ever do to people is debate them to death.

Mr. Bush, G-d bless him, is walking a tightrope. I understand that with
vital operations coming up against Iraq and others, it's in our interest,
as Americans, to try to stabilize our Arab allies as much as possible,
and, after all, that can't be much harder than stabilizing a roomful of
supermodels who've just had their drugs taken away. However, in any
big-picture strategy, there's always a danger of losing moral weight.
We've already lost some. After September 11 our president told us and
the world he was going to root out all terrorists and the countries that
supported them. Beautiful.

Then the Israelis, after months and months of having the equivalent of an
Oklahoma City every week start to do the same thing we did, and we tell
them to show restraint.

If America were being attacked with an Oklahoma City every day, we would
all very shortly be screaming for the administration to just be done with
it and kill everything south of the Mediterranean and east of the Jordan.
(Hey, wait a minute, that's actually not such a bad id . . . uh, that is,
what a horrible thought, yeah, horrible.)"

Post  42532  by  ribit       Reply
...another village book. How quaint.

Post  42533  by  ribit       Reply
...the assumption that since we cannot catch everybody, we ought not to pursue anybody is "fuzzy" thinking at best.

Post  42534  by  ribit       Reply
...most folks could buy one of the 14,000 cars but they would wind up filling the tank with a bicycle pump cause hardly nobody could afford the 100k filling station. When the demand is there, the product will come into being. Right now there is no demand for rubber band cars or balloon cars outside the toy section at walmart.

Post  42535  by  clo       OT: Blair says Iraq must disarm or face action

Post  42536  by  clo       Reply
LEH comes in with .70 Vs. .85... clo

Post  42537  by  uponroof       Reply
POG breaks through 326...

at the NY open.

Post  42538  by  lkorrow       Reply
ribit, No demand, I guess you haven't been to LA recently. Or Great Smokey Mountain Park, which according to the news is the most polluted place in the country. I guess everything is a tradeoff, the website doesn't mention the cost of electricity to recharge the car vs. the cost of gas. I guess they know the cost of gas in LA in terms of human health . . .

Post  42539  by  tinljhtkh       Reply
In re Market phenomenon!

When I did my daily market analysis last night, my stock screeners indicated that we are close to a watershed of some type! I do these regularly and this indication is a very rare phenomenon! We are, imvho, very close to a major market event of some kind, although I would not want to predict what that it might be!

I do want to emphasize that this is a very rare event, although I'm not going to say just how rare it is. Looking at other indicators that I follow does not indicate any real back-up for this type of indication but I have found that these screeners are very reliable as an early warning of "something" about to happen!

Just thought that I would pass on the information! In this very uncertain environment I would advise erring on the side of caution!

The bond market is now moving back into the 1950's as its yields continue to break historic barriers! Although there may be a bubble there, I am not sure that the equities marketplace will be the beneficiary of its bursting simply because bonds have risen in part because of discomfort with equities and the moral climate existing there!

We are in a very uncertain time right now. Market heroics are for heroes, and we know what happens to so many of them!




Post  42540  by  Decomposed       ot: Politicization of Iraq
Post  42541  by  lkorrow       OT: roof, 326! that will make the big screen at th

Post  42542  by  uponroof       Reply
JPM on the hook again in the UK...

The potential collapse of British Energy is also providing a headache for banks exposed to the UK power sector – notably JP Morgan Chase and Barclays.

Morgan, which last week issued a profits warning and had its debt rating lowered by Standard & Poor's, was one of the lead lenders to US groups that bought into the UK energy sector. Its exposure is said to run into hundreds of millions of pounds.

Post  42543  by  clo       Reply
Good morning roof! word from CNBC is Japan's consumers are tightening, and TIF gets 25% of their business from them...

So folks, think of the rest of the companies depending on Japan, and so it goes... lower! clo

Post  42544  by  uponroof       Reply
Linda...that's a nice pop at the open.
Lets see if we can close above 325 today.

But let's not forget we're talking about a measley 326 POG. Half of the 90's we were between 350 and 410. Today equilibrium is closer to 450 given the state of world politics and economies. One of these days the run will be on as market forces retake control of the precious metals. Be sure you have a few tickets as they will pay off nicely.'s coming.

Post  42545  by  jeffbas       Reply
I wish I could understand the logic here - a 20 year bear market in stocks and $1000 on gold.

The former I can certainly see, as I have commented for years on how we have had for 100 years a generation of good stock performance followed by a generation of under-performance. However, in the kind of economy that is associated with that, demand for gold by people that actually use it (e.g., jewelry) would suffer more than almost any other commodity. It would fall off a cliff. Thus, it seems to me that any rise in the price of gold would have nothing to due with its utility, but be totally speculative, and likely temporary.

Can anyone of our gold folks please BRIEFLY explain what I am missing?

Post  42546  by  uponroof       Reply
thanks clo! Going to check on Japan now.
So many fires to put out!

Here's another smoldering problem. We read every day about the American consumer being the last stronghold of the failing economy....How will these consumer's optimism fare if their pensions come into question?

Pension funds: the next crisis?

By SCOTT BURNS / The Dallas Morning News

Pension plans are the next big shoe to drop in corporate accounting.

That's the new buzz. With stock prices way down, pensions that were overfunded two years ago are now underfunded. When the annual reports for 2002 come out next spring, many companies may report lower earnings because they'll have to feed new cash into their pension funds.

But that's only half the story.

David Hershey, a senior portfolio manager at Lotsoff Capital Management in Chicago, wants to change how pension funds are managed.

Not stocks, bonds

He makes the case that pensions are heading for another crisis (the first big one since the 1973-74 market crash) because they're focused on the wrong goal. That focus leads them to invest in volatile stocks. He believes pensions can achieve their financial goals by investing in bonds.
"There's a widespread belief that stocks outperform bonds over the long term," he said in a recent telephone interview.

"I differ. The real reason equities outperform over time is that equities have more risk. If you elevate your risk in bonds, you can achieve the same return. For instance, if you leverage up the bond portfolio, you'll get the same risk."

Corporate bonds and mortgage-backed securities, for instance, could be leveraged with short-term debt to provide 12 percent net yields.

"Stocks are fine for most investors," Mr. Hershey said. "But they aren't good for pension plans because pension plans have real liabilities."

Assets and liabilities

Mr. Hershey, whose early background was as a federal bank examiner during the Texas savings-and-loan crisis, pointed out that management, investor and public attention were all focused on the performance of pension plan assets.
But that was only half the problem, he said.

The other half was pension plan liabilities – the lifetime pensions that were promised to millions of employees.

When interest rates went down, the cost of funding those lifetime pensions went up. When interest rates went up, the cost of funding those lifetime pensions went down. As a result, a pension fund portfolio dominated by bonds would move in the same direction as its liabilities, not the opposite.

I asked for an example.

"Look at 1989 and 1995. Those were two big years for stocks. They were up more than 30 percent. In spite of that, pension liabilities rose faster than pension assets."

I asked how that could happen.

"Interest rates went down, so the cost of funding a pension went up," he said.

"Now look at 1994. That was the year the Fed raised rates from 3 percent to 6 percent. They had left rates low for a long time [due to the banking crisis] and then had to go from a low rate to a market neutral rate in a short time. Pension liabilities went down."

Up is down

An examination of the figures shows just that. In 1994, stocks provided a puny return of 1.54 percent. Bonds had their worst year in history. But rising interest rates meant that it cost less to fund pensions. As a result, pensions zoomed from being underfunded to nearly fully funded.
In 1995, everything reversed. Stocks returned a stunning 37.57 percent as interest rates fell. But lower interest rates also raised the cost of funding pensions. Pensions went back to being underfunded. The accompanying table shows how assets and liabilities of pension funds changed in 1994 and 1995.

In measuring pension fund strength,
liabilities can do as much as assets
Rising interest rates in 1994 caused pension fund portfolios to have a tiny return. But the same rising interest rates also reduced the cost of funding pensions, so pension funds were stronger. In 1995 the reverse happened. Stocks soared as interest rates fell. But the cost of funding pensions rose 41 percent, so pension funds were weaker. All figures in percent.

Index.................% Weight.......1994.........1995
Cash ........................5%..........3.94........7.11
Lehman Bros.
Aggregate (bonds)..........30%........(2.92)......18.47
S&P 500......................60%.........1.29.......37.57
MS EAFE.....................5%.........8.06.......11.56
Pension Assets.............100%........0.55.......28.67
Ryan Labs Liability Index..100%.......(12.60).....41.16
Pension Assets
minus Liabilities...................13.15.....(12.49)

Source: Lotsoff Capital Management, Chicago

"What I'd like people to do is look at pensions as an asset/liability matching problem," Mr. Hershey said.

He pointed out that stocks had positive, bull market returns for 10 of the last 13 years. In spite of that, pensions had lost ground against their liabilities over the period. From 1989 through the end of 2001, the change in pension assets trailed the growth of pension liabilities by 7 percent.

Questions of general interest will be answered in future columns. Write Scott Burns, The Dallas Morning News, P.O. Box 655237, Dallas, Texas 75265 or send an e-mail.

Post  42547  by  lkorrow       Reply
Roof, maybe there will be a point where shifting from gold stocks to gold will be prudent, I wonder. Up around 25% on NEM and AU, KRY close to even. I guess as long as the stocks are outpacing gold, it pays to stick.

p. s. Quite a post on British energy and JPM. Not another one. . . .

Post  42548  by  uponroof       Reply
Linda... close above old cieling 325
will be very good for shares.

This might be the start of the second leg up for gold shares. Keep in mind the war with Iraq has been discounted by now. We might get a 5 buck pop on an invasion but not anything substantial long term IMHO. Strength is coming from market supply demand and long term financial concerns. Very bullish.

BTW can't access KITCO gold chart which means it's being overwhelmed by traffic. Last time I checked 328 was hit and 327.30 current. Good Luck!

Post  42549  by  lkorrow       Reply
Roof, Everyone wants to see Kitco!

That pension story was something. Old news, but rearing its ugly head. The story might provide a lead on why AG is not lowering rates saying when interest rates go down, the cost of funding pensions goes up. Shows the complex factors influencing an interest rate decision.

CNBC poll - 39% favor lowering rates; 53%, no action; 9% raise rates. 1145 votes cast.

Iraq, wish we didn't have to go in there. The little people always get hurt and our guys will be at risk. GWB hasn't made a decision yet. I wonder if he hopes they will clean out their own house. . . .

Post  42550  by  uponroof       Reply
EDS derivatives now found out...
down another 20%

The thing about derivatives is there's always someone else down the line sweating out the news.

8:51AM EDS cut to Sell at Merrill Lynch
(EDS) 16.52:

Merrill Lynch downgrades to SELL from Neutral and withdraws EPS ests based on the belief that the co is facing a loss from settling derivative instrument exposure that could result in a charge of up to $0.21; also, reduced financial flexibility may impact the co's ability to effectively compete for contracts, and co still faces the potential for additional charges if troubled contracts are restructured or reduced.

gotta run

Post  42551  by  pmcw       Reply
EDS is a sad situation. OCU, who is on the road this week, holds what I suspect is a fairly major position in that they bought his company a couple years or so ago. I certainly feel bad for him, but know he's diversified enough to recover.

The news, as it is presented and when combined with EU allowing IBM to move forward with the PW acquisition, appears to position IBM in a very strong position.

Regards, pmcw

Post  42552  by  lkorrow       Reply
Food for thought on rates and pensions, assuming raising rates lowers corporate pension expense.

Perhaps AG's waiting for long rates to decline so companies can refinance long term debt (having already shifted into cheaper short term debt where possible), then he'll rise rates to ease the Pension fund burden (and give us a break on our beleagured savings & MM accounts in the process). Just a thought!

Post  42553  by  lkorrow       Reply
I wonder if OCU has heard all the EDS news. Hopefully not and he's having a good vacation. I'm surprised, I thought companies would tend to outsource more in difficult times to reduce costs over the short term.

Post  42554  by  lkorrow       Reply
pmcw, had a similar thought on OCU/EDS. After reading yours, I hope OCU did see the news so he could take action if he wanted to. . . .

Post  42555  by  lkorrow       Reply
Ark, an afterthought on cellular phone emissions. I would think the wire length issue has been resolved by now and hopefully newer model phones are better shielded. Guess it's a good idea to check the handset specs on emissions when buying. If one is using a properly engineered earpiece, RFI should be a non issue. It drops off very rapidly with distance from the antenna and from what I have read it's only an issue at orafices like the ear, which is why the ear phone extension's recommended.

Post  42556  by  Briguy       Reply
My apologies to all...

In response to alot of emails...

For three years we have managed to keep the TABLE a place where differences of opinion are most welcome and encouraged while maintaining a civil balance. As you all know, the TABLE has become very popular because of that. I don't mind heated debates. I don't mind differences of opinion. I don't mind if your a Jew, Christian or Muslim or anything else. I don't care if you live in America or abroad. But I do mind when someone starts calling Americans murderers and I especially mind when someone suggests they would love to murder my fellow brothers and sisters in the Armed Forces. If you have a problem with that, then I don't really care! Go somewhere else!

With that being said, a particular poster at the TABLE got my blood boiling. Some of you already know this, but I am an E-6 reservist in the United States Marine Core. When someone comes here and expresses that if they see a Marine on their soil and that they would love to slit our f-----g throats, I couldn't help but respond angrily. My apologies if some of you were bothered by the language I used, but know this, I feel no remorse for the way I feel!

Article VI in the US Marine Corps Code of Conduct says this:

"I will never forget that I am an American, fighting for freedom, responsible for my actions, and dedicated to the principles which made my country free. I will trust in my God and in the United States of America."

America always has and always will stand for FREEDOM! And I am proud to be a Devil Dog, Leatherneck, Jarhead or whatever else you want to call us. And when someone pisses on us with comments like what was made, then I am sorry, but I'm not going to just let it slide! But again, I do apologize if I bothered some of you with my ripe language- even if it was only directed towards the UN.

Post  42557  by  jeffbas       Reply
lkorrow, seeing your remarks on pensions, I have to chime in on that article.

The conclusion of that article is partly sound. The commentary is moronic and misleading.

As to the conclusion. Companies that still have defined benefit pension plans (which notably excludes most tech companies) that also had a substantial portion of assets in stocks will be having to increase pension contributions, at the expense of earnings, for two reasons. For companies with plans managed by insurance companies with minor stock exposure, the situation is unclear.

In conjunction with plan actuaries, a valuation interest rate is chosen at which liabilities for future payments are discounted. This is designed to be a reasonable/conservative estimate of LONG TERM investment returns on plan assets. IT IS NOT CHANGED FREQUENTLY. (Thus, short term changes in returns do absolutely nothing to plan valuations as that article repeated stated.)

A high valuation rate reduces the present value of future obligations and reduces required contributions (and the reverse). For many years after the bull market started in 1982, valuation interest rates were not changed. However, in the 1990's they were raised for some companies that had substantial exposure to stocks in their pension plan assets to reflect the belief that it was appropriate to assume higher returns (reflecting outsized returns on stocks).

Note that throughout much of this period, bond rates were dropping and since much of pension plan assets are administered by insurance companies which invest little in stocks an increase in the valuation rate made no sense for them. However, with interest rates and stocks both now dropping, companies will have to reduce their long term return assumptions. Whether this increases contributions AT ALL will depend on the proportion of stocks held and the matching of assets and liabilities by duration. You could, in fact, have a situation where bonds was the primary investment and if their duration was longer than the liabilities, required pension contributions could drop.

The second issue is the effect of fluctuations in asset values because of changes in interest rates and stock prices. Bonds, unless they are in default, are normally carried at amortized cost (the purchase price adjusted over time for any difference between that and face amount at maturity), with changes in market rates in any given year having no impact. Thus, you can see that a change in interest rates in a given year has no immediate impact on the valuation rate OR on the valuation of bond assets, making most of that article irrelevant.

With respect to realized capital gains and losses on all assets, and with respect to unrealized capital gains and losses on assets like stocks (which are carried on the books at market), my recollection is more fuzzy. I recall that they are typically recognized on a "spread basis". Thus, if you have a loss in a current year it might be combined with the results from the 4 preceding years to give a 5-year levelling of the impact on the required pension contribution for the current year. However, with stock prices in the toilet for years now and defaults on the debt of major companies, I would expect this particular element to lead to contribution increases for most plans for many companies.

Hope this is of some help.

Post  42558  by  ribit       Reply
...the article said that the car was 10-14k and the pump ya refill it with was a 100k. Yer gonna have to buy yer own or find someone who has one. Nobody is going to put the pump in til "after" there is a demand for there will be no demand for the balloon cars until pumps are plentiful. Then how do ya suppose people are gonna feel about paying five or six bucks a gallon for air. BTW the pumps run on electricity which is created by burning fossil fuel and there is always a loss when transforming one form of energy to another. Ooooops, back to square 1.

Post  42559  by  ribit       Reply
Parris Island Platoon 334 (disneyland)
1963-1967 Vietnam 64-65. Know how ya feel.

Post  42560  by  Briguy       Reply
Predictions on what the Fed will do...

and how the market might react? Anyone?

It's a tough call, but I believe the Fed leaves rates unchanged, which will certainly dissapoint alot of investors today. However, I wouldn't be suprised to see the market react positively tomorrow if rates are left unchanged today.

On the flip side, if they do lower rates today, I expect alot of short covering and some buy interest.

Anyone care to speculate how the market will react one way or the other?

Post  42561  by  clo       Reply
Briguy, FED predictions, I'll take a shot.

I think they will stay unchanged, might change the bias to more cautious?
The street won't be happy, they didn't get a cut, but were warned the future is NOT bright.

However, if they lowered rates I think the market would get really ugly tomorrow. I think Europe would really sell off thinking a double dip is a sure thing..

By the way your post appoligizing was a class act!
Being human is a good thing, you are both human & classy!clo

Post  42562  by  jbennett53       Reply
I can almost smell the diesel fumes from all that mining machinery firing up.

Post  42563  by  wilful10       OT: Ribit - Thought I noticed a certain discipline

Post  42564  by  pmcw       Reply
Bri, It appears that AG finally has himself back into a position where he can keep the market guessing. It's been quite some time since he's had that ability and I think he likes it.

We bantered a bit last time AG didn't drop rates. I was one of the few in favor of holding at that time. I felt that the growing cash supply, particularly in M2, coupled with decreasing corporate debt would force rates down simply based on the supply and demand of money. I think that's pretty much what happened.

Beyond lowering the cost for capital investment and helping the consumer keep the economy running, the lower rates have helped lending institutions absorb the bad debt gas bubble and maintain liquidity. This is been a huge and somewhat transparent benefit we've derived from lower rates.

Right now I feel the only thing that is certain is that rates won't go up. If they drop rates I don't see where they can present a credible spin for the move that doesn't lead us to believe what they are really saying is the economy has taken a turn for the worse. Whether it has or has not it would probably be just as well if headlines weren't created over what in reality is simply a unstable situation. To do so would be like pushing a man standing on one foot. He may not fall, but it won't be pretty to watch him catch his balance.

When the reports finally come in, I don't think the today's market will like anything they say today unless they improve their bias and I don't see how they could do that with a straight face. However, I think that so long as they don't move the bias in a negative direction or move more than a quarter of a point down, the market will be happier tomorrow.

Bottom Line: Between zero change and a 0.25% drop is a 50/50 shot. If bias stays the same we will move to positive ground tomorrow. If bias improves, positive ground today. If bias declines, look out below cause here we come. Personally, I would like to see rates held steady and bias modestly improved with enough caution to where they can do so with a straight face.

Regards, pmcw

Post  42565  by  pmcw       Reply
Bri, Are you still holding your ORCL short? I think they have more problems that what most think and it will be interesting to see how they adjust to a market that is eroding their pricing power. However, I think they have certain underlying strengths that should prevail in the longer term. As I posted here, I sold Dec10's when the stock was trading strongly before the anticipation grew of a negative conference call. I've not driven my ORCL cost below zero yet as I have with BELM, but it ain't far. Time will tell if hedged caution was the right move. Regards, pmcw

Post  42566  by  beusa_1       Reply
>Gold Spot Last Trade $326.5/oz Change +$2.5/oz

>The Iraqi Ambassador to the UN has just finished giving a speech, and

> >walks out into the lobby where he meets President Bush.

> >

> >They shake hands and as they walk the Iraqi says, "You know, I have just

> >one question about what I have seen in America."

> >

> >

> >President Bush says "Well your Excellency, anything I can do to help

> >you, I will do."

> >

> >

> >The Iraqi whispers "My son watches this show 'StarTrek' and in it there

> >are Russians, and Blacks, and Asians, but never any Arabs. He is very

> >upset. He doesn't understand why there are never any Arabs in Star

> >Trek."

> >

> >

> >President Bush laughs and leans toward the Iraqi, and whispers back,

> >"It's because it takes place in the future...."

+ + +

CALVF Risning from oversold conditions - bullish

Current Price of Gold

(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)

Post  42567  by  pmcw       Reply
For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate unchanged at 1 3/4 percent.

The information that has become available since the last meeting of the Committee suggests that aggregate demand is growing at a moderate pace.

Over time, the current accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, should be sufficient to foster an improving business climate. However, considerable uncertainty persists about the extent and timing of the expected pickup in production and employment owing in part to the emergence of heightened geopolitical risks.

Consequently, the Committee believes that, for the foreseeable future, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; William J. McDonough, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Jerry L. Jordan; Donald L. Kohn; Mark W. Olson; Anthony M. Santomero, and Gary H. Stern.

Voting against the action were: Edward M. Gramlich and Robert D. McTeer, Jr.

Governor Gramlich and President McTeer preferred a reduction in the target for the federal funds rate.

Post  42568  by  Decomposed       Reply
re: Predictions

The Fed will leave interest rates unchanged, with a bias toward lowered rates later this year. (Which I *do* think they'll do, but later.)

I don't think the markets will react much at all -- since everything is tanking now and the Fed's inaction is already being factored in. In the next day or so, things will go down as people come to grips with an increased likelihood of Dippy Doo (Dip numbre deux).

Read this, by CBS Marketwatch's chief economist:

Code orange
Commentary: Higher double-dip odds with latest LEI drop

By Dr. Irwin Kellner, CBS
Last Update: 10:17 AM ET Sept. 24, 2002

NEW YORK (CBS.MW) -- By falling for three months in a row, the index of leading economic indicators has just flashed a warning that a U.S. recession is probable -- although not inevitable.

In some respects this index has a great track record, while in others it does not. See full story:

For example, every one of the seven recessions that the United States has experienced over the past four decades has either been preceded or accompanied by such a three-month decline -- including last year's downturn.

On the other hand, not every three-month decline in this index has led to the onset of a recession within a reasonable period of time -- say, nine months.

Since 1959, this index, originally assembled by the Commerce Department but now put together by the Conference Board, has fallen at least three months in a row 13 times while the economy was still growing.

The most recent skein makes it 14.

On three of these prior occasions, there were two three-month declines in the index separated by a month or two of increases before a recession struck. You have to count both sets of declines as one accurate signal.

But there were four occasions when this index fell for at least three straight months and no recession developed -- although the economy did slow down after one of these events.

The first and most notorious of these four was in the period April through December 1966, when this index fell for nine straight months. There was no recession in 1967, although preliminary estimates did show a drop in first-quarter 1967's real gross domestic product until it was ultimately revised out of existence.

The next time this index gave off a false signal was toward the end of 1987, in the wake of the October stock market crash. It fell four months in a row, but no recession appeared.

In 1993 this index fell three straight months, while in 1995 it declined five months in a row. Neither occasion led to a recession, much less a noticeable slowing in economic growth.

The here and now

That leaves us with the current decline.

There's no question that the economy is expanding at a checkered pace. After jumping in the first quarter, it slowed in the second but has picked up speed in the third.

The consumer powered the economy over the summer, boosting spending on cars, homes and most other items. However, business got cold feet and stepped up the pace of layoffs, affecting personal income growth not to say consumer confidence.

Business has also slashed outlays on structures and equipment, as well as orders for future purchases.

Now there's a risk the consumer will pull back, and without help from business, the economy will slip into another recession.

Is such a development inevitable? No, but if history is any guide, it is more likely than not.

Dr. Irwin Kellner, chief economist for, is the Weller professor of economics at Hofstra University.

Post  42569  by  Warstud       Reply
Re: Rates..

I believe that rates remain unchanged as is the bias. I think as low as rates are now, that if the consumer doesn't take the bait they most likely never will. As insane as this may sound I wish they would raise rates, which would indicate that the economy is improving. Look at Japan, there low to almost nil rates have done nothing.


Post  42570  by  Decomposed       Reply
Thanks, pmcw. Of course, your announcement takes some of wind out of my prediction's sails... but I'll let you slide, this time. 8-)

Hey, AFTER-THE-FACT predictions may not take as much courage or be quite as useful as the other kind, but they have their place! Those of us who prize accuracy above all else couldn't get along without 'em.

Post  42571  by  ribit       Reply
wilful10 of soap wrapped in a towel and I could change scotties attitude. Ya know he got $400,000 from one of Hussein's pals to make a movie?

Post  42572  by  wilful10       OT: Decomp - Just as I was gearing up for a

Post  42573  by  tinljhtkh       Reply
Releasing the vote (10-2) on the decision to leave rates alone may be an interesting and intriguing move! AG and company can watch the markets reaction over the next few hours and days and try to judge what the actual effect of a rate reduction might have on the markets at large!

One commentator on CNBC this morning has determined that his market, bond and Fed rate charting patterns can only be interpreted as fitting into a deflationary situation! The most the Fed can hope to do at this point is no further harm! Announcing the vote may just be an attempt to determine just how much harm a rate decrease stampede might really cause!

Imvho, perception here is everything! I also believe that we are in a pricing power poor environment where the only increases in most sectors are going to come at the expense of those who do not survive! Roadway trucking announced today that they had seen increases only because of the bankruptcy of one of their main competitors earlier this month! The CEO said that what started as 50 companies around 1980 is now down to 4! Same with the airlines and the telecoms, except in 1980, AT-T was most all of telecom!
It looks to me like the wheels are coming off of some parts of the great Reagan revolution just 20 years after it really got under way! Did we really, in the final analysis, simply teach people that paying less taxes meant continually paying less for everything else too?

And when this cycle completes itself and the competition finally matches the willingness to pay, just how many will have any money left to spend? And when does this productivity boom, fueled by all of this efficiency, do anything more than make up for this continual pricing power erosion? Those, imvho, are the multi-trillion dollar questions!




PS--Now, let's create a miracle and have a very civil debate about this! I'll be out for the rest of the day so this is as good as its going to get from my end of the Table!

Post  42574  by  wilful10       Reply
ribit - The movie is not doing well...

His value as a spokesman is rapidly receding as the evidence of his perfidy becomes more widely known.


Post  42575  by  Briguy       Reply
pmcw, re: ORCL...

I am still short with a very tight stop loss. I only shorted 500 shares, which helped me balance some margin money, but I have a feeling I could have shorted more. Oracle, while appearing cheap, is not in my opinion. Cash flow analysis, and the overall financial picture of the company and visibility going forward suggest to me that this stock just may visit the $5's before the end of next month- when institutional selling kicks in HIGH GEAR due to the fiscal year ending for mutual funds.

I don't know if you caught it, but ORCL was downgraded today...

Oracle (ORCL: $7.64, Cap $42b, Attractive) - Downgrading from Buy to Attractive; Waiting for signs of improvement.
• We are downgrading our rating on ORCL from Buy to Attractive. Our ERP channel checks in September lead us to
believe that the selling environment for software continues to worsen. Our conversations were peppered with the usual
litany of sales woes: lengthening sales cycles, complex approval processes, delayed budgets, downsizing, and ferocious
pricing pressure. Oracle management alluded to signs of improvements in its pipeline beyond F2Q03 (Feb Q), but we
don't find much to corroborate the assertion in the marketplace. Furthermore, we are concerned that budgets for C2003
will be set with the state of the economy unsettled and the possibility of war looming.
• We are comfortable with our reduced estimates for F2Q03 and F2004. Our F2Q03 license revenue, total revenue and
EPS estimates of $710mn (-13% year over year), $2,225mn (-7% year over year) and EPS of $0.08, respectively, are at
the low end of guidance. Our F2004 revenue estimate of $10bn assumes 6% year over year growth.
• While we see short-term price risk for ORCL, we believe it represents a solid play of the recovery. With the specter of
preannouncements and lowered estimates coming soon for competitors reporting Sept Q, we see downward risk to ORCL in the short run. Our estimates for stocks in our universe tend to be lower than consensus and we fear downward
revisions for Oracle's competitors will weaken confidence in ORCL, too. At 3.9x EV/ CY2003 the stock appears rich
versus its competitors, though at a forward P/E of 19x, it trades in range with the competition. Until we see signs of a
market recovery, we believe Oracle deserves an Attractive rating. At this time we cover no stock with a higher rating.
Estimates: May '03 $9.4bn, $0.39; May '04 $10.0bn, $0.42
Analyst: Robert Schwartz 617-488-4625

Post  42576  by  Briguy       Reply

Well, I feel I don't deserve your compliment, but thank you very much. I know you and I have big time differences politically, but I have thoroughly enjoyed them so coming from you, I appreciate it.

No question I was out of character, and I knew I would risk angering some people, but after all, this is just a message board. The way I see it, if people don't like what we talk about or what we say, they can tune in somewhere else.

All I ask is that we keep it civil- which I clearly was not in the post referenced by so many in my emails. My apologies again.



Post  42577  by  Briguy       Reply
Warstud, Home Depot...

Short term, I must admit you were right. Seems like just a moment ago, HD was in the $34's. Now we sit in the $28's. I don't know how long you have been playing the stock market game, but the fear driving this market is absolutely amazing.

Sure is a GREAT time to be short and a terrible time to be a long!

Good call my friend!

Post  42578  by  pmcw       Reply
Bri, As I said right after their conference call, ORCL has troubles, but they are mostly with pricing power - a pretty common challenge today. I've been hesitant about ORCL since Lane left Ellison without adult supervision, but never totally dismissive of their potential to leverage their natural assets. The core of these is their data base engine. As MC Hammer says, "can't touch this".

Ellison is far from stupid and his ego can cut both ways. However, when he is down he is usually at his best.

I'm not sure where you are getting your data on cash flow being weak. It's not IMO. However, some might forget that they've bought roughly a quarter billion of their shares back on the open market with cash. This comes off the bottom line of cash flow and can make it look weak if one doesn't look at the details. In reality, operational cash flow is great. Their balance sheet is also strong with over $5.3B in net tangible assets.

Personally, I think Weisel was a little late to the party with a downgrade today. For the most part, I've seen the market move away from Weisel's short term changes in bias. However, that's not to say that ORCL will not face more troubles before they see brighter days.

One of the many lessons I've learned this year is that when I place relatively small bets (the 500 short for you is of that nature) the movement required to earn a return that is worth a "click" is pretty large. Due to this, I've found that the small position encourages greed for enough of a move to make the trade worth my time and not enough "healthy" respect for the downside risk. Kind of an "Oh well" attitude. Bad mojo.

As you would say - "anyhoo" I wish you luck with your trade - I intend to keep clipping call coupons on ORCL until I finally lose the shares. Hopefully, I'll be able to start writing them at increasing prices rather than the other way around.

Regards, pmcw

Post  42579  by  wilful10       Reply
Really good questions in your last paragraph,,

especially the second one.

The first one: [And when this cycle completes itself and the competition finally matches the willingness to pay, just how many will have any money left to spend? ]

Maybe only a few, but quickly enough - others will spring up - even as the new shoots pop up thru the ashes after a forest fire. More similes exist between nature and economics than one generally would consider. In one sense -nothing could be healthier! Sooo - despair not - my friend.

The second one, [And when does this productivity boom, fueled by all of this efficiency, do anything more than make up for this continual pricing power erosion?] to which I have devoted some thought over the past several years - is not so easy.

I say: At such point as sustainable equilibrium is achieved.

Again, my compliments Tin - for a couple of great dinner table questions.


P.S. I'll let slide the "great Reagan revolution" digs,, as I'm sure others will handle that. :-)

P.S.S. Should this be OT?

Post  42580  by  ljpit       ot: decomposed, no offence taken.
Post  42581  by  ljpit       ot: ribit

Post  42582  by  Briguy       Reply
Predictions for the market near term...

I believe the market tanks in the next 30 days or so...

I have no crystal ball. I have no facts to back this up. I have no inside information.

Why do I believe this? Many reasons! For starters, the bad news just keeps flooding the markets. Earnings warnings, coorporate corruption, reduced capital spending, threats of war, threats of recession, threats of deflation, consumer debt levels that are at all time highs, etc etc.

But one thing that leads me to believe we head lower is tax loss selling. Hard to believe we are at this point again, but tax loss selling is going to put serious pressure on the broader markets until the end of October and will probably kick in again big time in December. Remember, mutual funds fiscal year ends on October 31. The rule is, in order to write off a loss, you cannot buy or sell a stock within 30 days of the loss. So, I can only imagine the selling is going to start kicking in now from mutual funds for two reasons- they can get out at higher prices now then 30 days from now and they can buy back when the stock is possibly much cheaper.

In sum, look for lot's of volatility and look for an outside chance the DOW drops into the 6K-7K range in the weeks ahead. I could be wrong. I hope I'm wrong. But I would not be suprised to see the markets be significantly lower by Oct 31 vs. where they are today.

And lest we forget, individuals will be selling heavily in December for tax loss purposes. I think it is safe to say, we can forget about any recovery this year. 3 years in a row of disastrous losses. Who knew!?

Post  42583  by  Briguy       Reply
IBM, EDS and SANM...

Agreed! Even though IBM was down in sympathy with EDS today, I believe long term IBM stands to benefit very handsomely from EDS' problems, which are very troubling at the moment. Hard to believe this was a $60 stock several months ago...$11 bucks today. I do believe the market is way overreacting to the bad news.

I find it interesting that Moody's, Standard & Poors, and Fitch all sat on their butts during the excess days of the late '90's and said nothing, but now are out to hammer any company that has a hint of problems. Anyone else find this strange? It sure is doing alot of excessive damage to the markets!

Back to IBM and EDS, I believe one company that stands to benefit handsomely from the EDS debacle is SANM, which is now trading at an unbelievable market cap of around $1.3 billion, yet the company will do $10 billion in revenues this year. A rising tide raises all ships and if IBM gets some business from EDS (which they surely will), then relationships like this one...

stand to benefit both parties.

Frankly, I cannot believe that SANM is trading at just pennies above the $2.06/share cash it has on hand. The meltdown value of this company, exluding the worthless goodwill of $4.5 billion, is well in excess of $8/share.

I don't get it. I really don't. Companies are being punished mercilessly and it is starting to get old. Nevertheless, I bought another lot of shares of SANM at $2.51 today and will be happy to buy another lot if it goes lower.

Post  42584  by  spirare       Reply
Spot GOLD in New York settled higher at $326.10 an ounce, Sept. 24, 2002, up $3.40 an ounce from
yesterday?s close.

The price of gold gained on geopolitical fears as
British Prime Minister Tony Blair said that Iraq could launch weapons of mass
destruction on short notice during a meeting with Parliament today.
Britain, seeking to show why it backs U.S. plans for military action to oust Saddam
Hussein, released a dossier Tuesday saying Iraq could launch a chemical or
bio-weapon at 45-minutes notice.
The price of oil gained as well adding
pressure to the overall health of the global economy.
The U.S. stock markets
tumbled prior to the end of trading in the gold pits and in anticipation that the
Federal Reserve would not cut short-term interest rates.
"Wealth destruction
in the U.S. is about to reach new heights, in terms of the equity market
bonfire," Gregory Weldon, publisher of Weldon's Metal Monitor, wrote
"This should be gold bullish during any confidence and store-of-value
Investors were selling dollars and moving into safe havens like gold,
U.S. Treasuries and the Swiss franc.
"It's strong fund buying off technicals
and buying off the fact the dollar is weaker, the stock market is weaker, crude
oil is stronger and off Tony Blair's comments about Iraq," said a floor broker.
"The tensions around Iraq are increasing day after day and combined with
poorly performing stock markets, the coming FOMC meeting, the gunman
action in the Gujarat Temple and the blockade on Arafat's headquarters are
reasons enough to keep market worried about these events," said Frederic
Panizzutti of gold online trading company GoldAvenue.

London gold was fixed this afternoon at $326.30 an ounce, up from $323.30
an ounce at the morning fixing.
Gold is seen as supported by weak dollar,
financial market jitters about possible war tensions between the United States
and Iraq and Wall Street worries about growth.
"Gold continues to receive
support from concerns about a US attack on Iraq, the resultant high oil price
and safe-haven buying from the stock market," Lawrence Eagles at GNI
Touch Research, said. The continued slump in the Brazilian real is also
providing some additional support for gold.
"There is also some concern about
the destabilizing effect the Brazilian currency collapse could have on the
region," Eagles said.

World gold mine production is set to drop by three
percent in 2002, the first fall since 1995, while depleting reserves and falling
production could lead to a longer-term decline in output, a leading commodities
consultancy said on Tuesday.
Precious metals research firm Gold Fields
Mineral Services predicted Tuesday in an update to its Gold Survey 2002 that
gold prices would stay above $300 in the second half of the year, averaging
$316, as investors look to preserve capital in uncertain times.
commodity consultant Gold Fields Mineral Services expects worldwide gold
mine production for the year to be down by 3 percent at 2,514 metric tons -
the first fall in output since 1995.

GFMS managing director Philip Klapwijk
said: "Depleting reserves, in particular, at the mature operations in North
America, and a marked decline in new production timetabled to come on
stream, should lead to a longer term fall in global mine production beginning in

Earlier gold closed at US$323.25 an ounce in Hong Kong, unchanged from
Monday's close.
Spot gold was higher Tuesday in Asia, with Japanese buying
lifting it to test resistance at US$324 a troy ounce, but dishoarding by
Southeast Asian players erased most of its gains, said traders.
Gold was also
supported by reports that the Israeli army launched what was described as its
largest incursion in two years in Gaza, killing nine Palestinians, said a
Singapore-based trader.

Rising crude oil prices, with the November futures on
the New York Mercantile Exchange past the key resistance of US$31 a
barrel on possible storm-related disruptions, also helped buoy gold, he said.

"These are indications about people's fears of what's going to develop" in the
Middle East, he said.

However, for gold to rise past the next resistance of
US$325 an ounce, there needs to be a serious geopolitical event or incident, he said.
Traders in the yellow metal are keeping their eye on tensions in the
Middle East, which they believe will boost the cash prices to US$331 in the medium term.
"I am more and more pessimistic about the Iraqi situation...and
Bush may have reached the point of no return," said David Thurtell, metals
analyst at Commonwealth Bank of Australia in Sydney.
"Some are saying that
February is a good month to attack," Thurtell said.
But financial markets were
shaken by the various war scenarios, he said, adding "You can't let this go on for another four
"There was reasonable buying from Tokyo and
funds were buying on the TOCOM which has given our market a firmer
tone," said another trader in Sydney.
But the very heavy interest shown in
TOCOM's August gold contract, did not spill over into the spot market.
"There is not a lot going through the spot market which is a bit disappointing," the
Sydney trader said.

According to Reuters, a state newspaper said on Monday that China?s
long-awaited gold exchange, a key step in the liberalization of the domestic
precious metals market, should begin trading next month after nearly a year?s delay.
The launch of China?s first gold exchange has been shelved repeatedly
as authorities debated whether to waive a controversial 17% value-added tax
(VAT) which the industry fears it might hamper trading interest.
But most of
the details had been finalized and formal trade should begin in October, the
Guangzhou Daily quoted an unnamed senior exchange official as saying.
Gold exchange General Manager Wang Zhe declined to comment, saying that
authorities would announce details soon.

There are more interesting comments coming out of the New York
Institutional Gold Conference on Tuesday. John C. Doody, editor of Gold
Stock Analyst, said he expects gold, which has benefited from the relentless
decline of equities, and war fears, to reach $450 an ounce in the next two
years, in part because of investment demand for the metal.
Miners' output of
the metal is seen falling about 3 percent this year, the largest drop since 1976
and a bullish sign for gold.
"At the end of the day, investors will find they need
to own physical gold, which is extraordinarily difficult to do," said Eric Sprott
of $1.2 billion (Canadian) Sprott Asset Management in Toronto.
Sprott said his
clients have a strong desire to own gold.
"The world's faith in managed
currencies is a source of amazement," said James Grant, editor of Grant's
Interest Rate Observer. "Gold will have its day as people confront the
immense over-investment of faith they have in dollars, yen and so on."
James Turk, chief executive of Turk and others in the gold industry
say they expect gold prices to rise sharply as investors begin to consider the
metal as a substitute for currencies.


The price of gold has held firm, as global equity markets remain
weak and as geopolitical tensions heat up.

These events are expected to
attract buyers that may erode overhead resistance and set the stage for
another attempt at the $330 an ounce level.

However, as with every attempt
at a breakout, bank profit taking and short selling caps the price rally.

Nevertheless as the global economy suffers under the weight of deteriorating
fundamentals and the stage is set for the invasion of Iraq or with an increase
in violence in the Middle East we are sure to see the price of gold breakout
above $330 an ounce resistance.

War appears to be on the horizon as British
Prime Minister Tony Blair addresses Parliament to make his case for a
preemptive strike against Iraq.

He presented a ?dossier of evidence? detailing
how Saddam Hussein has acquired uranium and continues to develop ballistic

President George W. Bush has presented evidence to Congress and
Congressional approval is expected for a U.S. led strike against Iraq.

Blue chip stocks fell with a triple-digit loss Tuesday afternoon in reaction to
the Federal Reserve's decision to keep short-term rates at a 40-year low.

This just added worries to a market already burdened with profit warnings,
accounting scandals, corporate malfeasance, and rising debt.

As has been widely expected, the overnight federal funds target was left unchanged at 1.75
percent, and also maintained its so-called "ease bias," indicating that risks
were weighted mainly toward conditions that may generate economic
weakness in the near future. In its statement, the Fed acknowledged that
"considerable uncertainty" persisted over the timing of a pickup in production
and employment, in part because of the "emergence of heightened geopolitical

That last statement was enough to send the U.S. equities into a tailspin
in the last couple of hours of trade.

Meanwhile nervous investors continue to
seek out safe haven investments such as gold even as other traditional ?safe?
stocks like utilities and some energy company shares continue to come under
pressure amid debt rating downgrades as U.S. regulators probe into
questionable accounting and trading practices.

However, precious metals have
held firm and even gained as talk of war and global geopolitical tensions heat
up and global equities markets crash.

***The price of gold is still considered undervalued in the current economic environment and the
outlook suggests
higher gold prices going forward.***



TA LT higher highs and higher lows
4 Strong Bull waves to go*^*^*^*^

Bull Wave Breakout soon to follow*^*^*^*^*^

Dollar Index Cash (NYBOT:DXY0)
TA LT lower highs and lower lows...
3 bear waves left...

TA ST small 5th bull wave correction
soon complete, followed by
continuation of the LT bear waves...

CALVF Risning from oversold conditions - bullish

Current Price of Gold

(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)

Post  42585  by  pmcw       Reply
Bri, I like SANM on cash flow and positioning, but I don't know if we're looking at the same balance sheet. I show their net tangible assets at around $2.50 per share and much of this is in AR + inventory - both of which I think one needs to discount to calculate a "in a box at the curb" value.

What leaves me really confused, however, is how SANM fits into a EDS / IBM dialog. Can you help me see the same picture?

Regards, pmcw

Post  42586  by  Briguy       Reply

A couple other thoughts...

SANM generates POSITIVE CASH FLOW- generated $365 million this quarter.

SANM has $1.13 billion in cash

SANM has $370 million available on it's credit line

SANM also has about $2 billion available from a shelf registration.

The company's interest rate on it's debt is only 3.7%

The only thing really negative that I can see is the $2.6Billion in debt from the merger and the $4.5 billion in goodwill that will most likely have to be written off. But c'mon, is this stock not cheap? Am I missing something here?

Your comments are most welcome!

Post  42587  by  Briguy       Reply

Many studies show that U.S. electronics companies are expected to outsource a growing portion of their manufacturing over the next decade. That means that even if demand remains flat for PCs, routers and switches, revenue for the outsourcers could grow strongly.

A recent survey of 150 electronics companies conducted by Bear Stearns showed that brand-name companies intend to sharply increase the percentage of their products outsourced to companies such as Sanmina and Flextronics. The average PC-maker plans to outsource around 73 percent of its total manufacturing in the next few years – more than five times the industry average today. Fully 40 percent of those companies plan to off-load virtually all of their manufacturing, becoming essentially R&D, design and marketing companies. Such a move to "virtual manufacturing" would mark a huge shift in the electronics industry and would translate into renewed rapid growth for the contract manufacturers.

The way I see it, if airlines, auto manufacturers, telecom companies and the like lose faith in EDS, many will turn to Big Blue for their needs, which in turn should help SANM gain even more business since IBM is cost cutting and looking to outsource more and more. EDS isn't in the EMS business, but it does provide consulting and technology expertise to thousands of businesses and government clients worldwide- just as IBM does- of which many of them need the products SANM provides. If IBM takes some of these big clients away- assuming existing customers of EDS lose confidence- in an indirect way this will help outsourcing contractors like Sanmina.

GM alone provided for 15% of EDS' revenues in '01. Imagine for a moment (it won't happen, but for sake of arguement) if GM gave EDS the Hiesmann and went to IBM for their electronic business solutions and electronic manufacturing solutions. This would be a big boost for SANM as I would speculate IBM would look to outsource much of this business to save money.

Maybe I am way off base here. Frankly, I sometimes wonder if I even know what the hell I'm talking about. OCU would be the guy to talk too. But when I look at the client base of EDS and their current problems, I'm left to wonder about the possibility of many of these clients moving to IBM, which should help SANM.

FWIW, that article I linked really doesn't have anything to do with what we are talking about. I simply linked that to show that SANM/IBM are buddies. Does that make sense?

Post  42588  by  jeffbas       Reply
Individuals MAY be selling for tax loss purposes. I assure you that individual tax loss selling to offset gains or create a net $3,000 loss will be trivial compared with recent years. There are few gains to offset/reduce for most people. That said, there MAY still be a lot because some folks may wish to "just get rid of that damn dog" even if it creates a $100,000 loss. I strongly advise from a tax-planning point of view to be aware how your state treats capital losses before ending up with more than $3,000 of net realized losses. (Of course, if a stock should be sold for fundamental reasons, it should be sold, regardless of tax issues.)

By the way, I expect institutions MAY be in the same boat. I suspect that their prior interest in taking tax losses was to reduce net realized gains otherwise paid out to fundholders and thereby make the fund more tax efficient.

None of this means that the stock market won't drop a lot before yearend. I also think if it happens it may publicly be blamed on tax loss selling. However, I think the facts poorly support that explanation.

Post  42589  by  lkorrow       OT: ribit, when put in the perspective of having a

Post  42590  by  lkorrow       Reply
Briguy, Apologies, shoot don't do that. Talk about speaking from the heart. . . .

Retreat, Hell! We Just Got Here! :-)

Had to look up devil dog, I hadn't heard that one.

Devil Dogs. In the Belleau Wood fighting in 1918, the Germans received a thorough indoctrination into the fighting ability of Marines. Fighting through supposedly impenetrable woods and capturing supposedly untakeable terrain, the men of the 4th Marine Brigade struck terror in the hearts of the Germans, who referred to Marines as the "Teufelhunden", meaning "fierce fighting dogs of legendary origin" or as popularly translated, "Devil Dogs."

Post  42591  by  Briguy       Reply
Jeff, re: tax loss selling...

Fair enough. But you do acknowledge that the possibility exists that mutual funds may dump their dogs before their fiscal year ends, yes? Remember, they won't be dumping for tax reasons alone. They will also be dumping to get the LOSERS out of their portfolio so as to not look bad when the next perspectus is printed.

You do make a good point about individual tax loss selling. But mutual fund selling is a whole different ball game. Individuals are why mutual funds exist. And individuals are pulling out of mutual funds by the tens of BILLIONS per month, which will only force fund managers to liquidate. Case in point, according to one of my banks, US Bank, over $6 BILLION, I say again, $6 BILLION DOLLARS, was pulled out of equity mutual funds LAST WEEK! Other sources say $5 BILLION. Regardless, that is a ton of money in just one week.

Seasonally, the best time to own stocks is between November and April, as the old adage goes, "Sell in May and then go away (until October)". Since 1950, the S&P 500 has increased +8.2% per year in this favorable period, versus only +0.4% during the rest of the year. Also, on a very consistent basis, the first year after a mid-term election (or the third year of a presidential term) has been a good time to own stocks. Even after the Crash of 1929 the pattern held, the degree of gain was just less. Of course, next year could be an "exception", but after three down years, I am somewhat inclined to doubt it will be proven wrong this time.

Nevertheless, I politely disagree with you! When anywhere from $4-$6 BILLION DOLLARS are flowing OUT of equity mutual funds EVERY WEEK, and with ALL of the major indices down by more than 20% (Dow, -20.3%; S&P 500, -26.4% and NASDAQ, -37.4%) so far this year, and considering equity mutual fund cash reserves remain under 5% and represent precious little buying power without some of the $2.17 trillion of fund money that fund managers have lost in the last several months, sadly I'm banking that there will be a BUNCH of tax loss selling in the next 30 days!

In fairness, I'm hoping you could explain your comment (I think the facts poorly support that explanation.) in a bit more detail to help me understand why you feel or are implying tax loss selling won't be significant this year.



Post  42592  by  lkorrow       Reply
Thanks, Jeff, this fills in a lot of gaps, especially the aspects on bonds. I can see how stock-based pension funds are running out of time on the 4-5 year rule with three bad market years. What's disturbing is most companies have factored in returns higher than Buffet's moving forward and I thought his might be high. It's nice to see the Tech companies will be spared something!

Something that irks me about pension funds in general is that companies can raid them in good times. It also frustrated a friend of mine who used to be a pension attorney working for the IRS years ago. Little could be accomplished in closing loopholes. Pensions are peanuts unless you're a police officer or similar (and I don't how adequate Federal pensions are) so my feeling is if the fund prospers, payments should be increased as long as the fund can remain solvent. It's annoying that pension funds and social security can be manipulated. In the latter, Congress should go to jail!

Thanks again, hopefully the press will clarify this issue for the public when it comes up again. It doesn't seem quite as bad as it did prior, although some companies will have a time of it.

Post  42593  by  Arkural       Reply
OT-lk-Yes, if you have to, esp, for extended time intervals, the ear piece would be better, Imo. in NYC (you mentioned this along the way if I recall accurately) it matters little because that environment is completely polluted, so, life there is being bombarded with stuff constantly............I just travelled up thru your neck of the woods recently and looked at it once again.

Post  42594  by  lkorrow       OT: wilful I was glad tampa stepped up to the plat

Post  42595  by  jeffbas       Reply
You made my point for me. Withdrawals from mutual funds forces selling by them, which has nothing to do with tax loss selling, which by definition is selling motivated solely by reasons of tax reduction. This is plain and simple - panic (prudent?) selling which is unrelated to taxes. If you reread my previous post you will see that there is little reason to expect more than a trivial amount of "selling motivated solely by reasons of tax reduction" by either institutions or individuals.

By the way, I have always thought that, "They will also be dumping to get the LOSERS out of their portfolio so as to not look bad when the next perspectus [sic] is printed" (which is not original with you) is a load of crap (aside from the special situation of possibly recognizing losses to offset gains, reduce distributions and be more tax efficient).

Warren Buffett has said many times he would love it if a stock he just started buying were to be cut in half. I would hope that institutions are half as smart. In addition, I can tell you for sure that Franklin Resources, which has accumulated 17% of XICO, is not selling because they have a large unrealized loss. They have been buying hand over fist at reduced prices. Finally, the last common stock prospectus I looked at (DODGX, my long time favorite) did not show cost but just market values, so there would be no way for an average investor to know whether they had losses or not (on a specific stock), or whether they bought after a major decline or not (since the average person would not track many sequential quarterly reports).

Post  42596  by  Arkural       Reply
Briguy-Mkt-Yep, per comments previously posted, no recovery in 02. I had moved it out to early 03-I think it was last Oct, but canceled that call here a while ago. May have told you directly if I was to get an update. Way too busy right now.

Looking for an end of the mess (low?) mid-Oct perhaps out to Jan 03. However I do have some odd (positive??) indications that would telegraph to early to mid Dec, 02.

Btw, Ibm-

Post  42597  by  jeffbas       Reply
Lkorrow, let me clarify something on "pension fund raids" which might help you.

The typical "raid" works as follows (stated simply). A company has accumulated plan assets that are in excess of those needed to fund pensions for retirees. It goes to a quality insurance company and buys annuities whose payments to retirees are guaranteed by the insurance company, and recaptures for the benefit of shareholders what was really excess contributions to the plan in earlier years. (There are even insurance industry guarantee funds that would stand behind a troubled insurance company's liabilities if one or more got into trouble, by virtue of assessments on healthy ones - as happened in the major failure of Mutual Benefit Life of Newark, NJ due to excessive real estate speculation in the late 1980's.)

This doesn't bother me at all. In fact, I suspect a lot of employees would have had more secure retirements now had this been done on a wide scale 2 years ago.

Post  42598  by  lkorrow       OT: Ark, You're right, NYC is so bombarded from mi

Post  42599  by  Arkural       Reply
See-Quick trade?, News.

Post  42600  by  lkorrow       Reply
jeffbas, I was unaware of annuities until my company sent me a letter recently saying I would be given a pension annuity. Hadn't thought much about what the mechanics were behind pension plans until then. Should be aware of such things! Thanks. In your example, I would rather have seen them increase the sizes of the annuities. Not that I'm against shareholder value, but regardless of the so called low inflation over the past several years, the price of gas, shoes, lunch, healthcare, drugs, everything, has gone up considerably and it's difficult for many people to make ends meet (seeing some deflation now). COLA hasn't kept pace, imho. Yes, I guess the point is expenses go down in retirement, but everyone can't fit in FL! :-) Some fixed costs don't decline with fuel oil hwere it's at. More and more people had been planning to stay put in retirement, but with their retirement funds way down, that's more difficult. We may see some more demographic changes before this is over . . . Thanks! Linda

Post  42601  by  Briguy       Reply

I hear what you are saying, in part. The CURRENT and PAST selling we have seen this year is NOT because or for tax reasons. I'm simply suggesting that it is going to start in a few short days and will get worse as the month of October rolls on. Whether it is alot of selling, or a "trivial" amount remains to be seen.

Certainly, with all the broader markets being down big this year, the talk of tax loss selling does seem a bit strange. Tax loss selling is mostly employed to OFFSET profits, right? I believe so. Well, if the markets are down big and mutual funds down also, the arguement could be made that tax loss selling will be trivial due to the fact that most funds haven't turned any sort of profit this year, so there is really no profits to offset. In that respect, I would agree with your quantitative analysis. Nevertheless, there are lots of funds who have outperformed the broader markets (value funds-all of them- are up 9.3% since 2000 while the average growth fund is down almost 70%), and it is these value funds that will liquidate and cash out on their winners and sell the LOSERS to offset capital gains.

Speaking of losers, I don't think it's a bunch of crap. Investors- at least those who do their research- care less about the price a stock was bought- but care far more about WHAT the fund manager is buying. Imagine if I managed a fund with WorldCom, Global Crossing, Enron, Adelphia, Lucent, Qwest, Haliburton, Tyco, EDS, Riverstone, Redback, Williams, and a host of other absolute dogs that showed up in a prospectus. How many financial planners do you think would be pushing my fund? I imagine not very many at all! Sorry, but I disagree my friend. Fund managers won't hesitate to sell any dogs that dissappoint or affect perception.

Something to consider: In the spring of 2000, 500 new mutual fund offerings came out with 116 of them being tecnology focused and around 378 of them being aggressive growth funds. Through the end of August of 2002, 414 of these stock funds have been liquidated. Furthermore, 566 mutual funds have been merged into other choices this year alone. That is an amazing statistic considering there are about 4000 funds available.

I guess the point is, whether the selling is related to taxes or not remains to be seen. I personally believe value funds will be selling for tax reasons much more than growth funds. Regardless, I'm simply suggesting the markets will be lower for MANY reasons, of which ONE reason includes what we have been discussing.

Post  42602  by  maniati       Reply
I guess I missed today's Fed predictions on Table. Well, I would have simply reiterated what I said in August, when I predicted no rate cuts then. Actually, in August, I predicted no rate cuts through November. We'll see. There's no Fed meeting in October. And I'm not expecting any emergency meetings. I still say we would have to hear some unexpected bad news in order to get a cut. I can't say that anything we have heard lately has been unexpected, and nothing too out of the ordinary.

This is an odd thing, for me to be predicting no rate cuts, because it's not as though I'm also predicting some kind of robust economic recovery. If one were predicting a recovery, then one might also predict no further rate cuts.

But, I'm not predicting that there will be no further cuts. There well could be. I just don't think the Fed sees the evidence it needs to make any further cuts now.

As I see it, the Fed has been, and continues to be, willing to wait a while for things to turn around. In the meantime, the Fed isn't anxious to drop rates any further, for the reasons that I mentioned back in August. ( )

AG is watching and waiting to see if demand is going to pick up, and if demand is going to spur a growth in production. The idea is that demand leads to improved corporate profits, and that, in turn, leads to increased investment spending and more hiring. This has been his recovery scenario for a number of months now.

But AG has never actually said that this is what he expects to happen. It's more of a hope than an expectation. And the lynchpin to the whole thing is final demand.

AG says he sees some improvement, however modest, in final demand, so he has not given up hope that demand finally gets production going again. In the meantime, scandals and earnings warnings aren't necessarily going to convince him to give up hope. It's going to take a little more than what we've seen so far.

Now, if we do get that extra bad news, then we'll see another cut. I would repeat what I said in August, that, in addition to final demand, the employment numbers are important to watch. If the employment picture deteriorates, that would be evidence to the Fed that the recovery scenario is not panning out, and they would cut again.

November 6 will be interesting. If they don't cut, then the vote to leave rates unchanged should be a lot closer than it was today - IMO. There won't be much in the way of holiday season retailing data at that point, though. So, barring any unexpected bad news between now and then, it's not so hard to imagine the Fed doing nothing in November, then holiday retail sales turning out to be poor, then the Fed cutting rates either in December or January after it looks like retailing is taking a hit, and then the Fed being roundly criticized for, once again, being behind the curve. Can you picture that?

Personally, I'm not as convinced as the Fed is that demand is doing all that well. We'll see about that, too, I guess.

Another possibility is that the stock market tanks so bad in October that the Fed cuts rates in November. I can't rule that one out, but it sure would disappoint me if that happened. That would serve to convince everyone that the purpose of interest rate policy is to prop up the equities markets. It's not. I see that a lot of people still like to believe that, and you still get that impression from watching too much CNBC, but the Fed's main focus is the economy, not propping up the equities markets as an end unto itself.

Post  42603  by  jeffbas       Reply
lkorrow, I share your view, but that is what "defined benefit" means :-) I am not so sure today that those of us who have them would really prefer to have gotten the cash equivalent over the years in 401-K money - which is the way employers have shifted in general. "Defined contribution" programs are much better for employers, but give the employees much more risk, as is now being found out.

Post  42604  by  tinljhtkh       OT: Briguy!

Post  42605  by  jeffbas       Reply
I must have been unclear on one point. You said that fund managers will be selling their losers so their new prospectuses look good. I interpreted you to mean stocks with losses, as I think is commonly meant. That is what I think is "crap". Fund managers should be driven by fundamentals and value, and not the price they paid. Bad companies/values should be sold regardless of the cost basis, and similarly good companies/values retained. The price paid should be irrelevant to this decision, except for that special situation I noted. That is why I gave the example of Franklin funds and XICO - which sure is a "loser" for them but they have continued to buy heavily. Another example is SANM, where I could certainly see some funds might think would be the dumbest sale imaginable at $2, despite being down 80% in the last year.

By the way, my experience is that you rarely get two catastrophic years in a row with large, reasonably sound companies, that are not going under - which helps account for the performance of the "Dogs of the Dow" strategy.

Post  42606  by  Arkural       Reply
OT-Preparing for War

(excerpts from a source, take it as you wish)

"....lxii September 22. The Washington Post.

(A) “What is already clear, however, according to senior officers and others familiar with emerging ‘concept of operations’; is that unlike the 1991 war, neither Iraq's infrastructure nor its military rank-and-file would be targeted. Instead, the U.S. military is thinking about how to execute a sharply focused attack on Hussein and the people and institutions that keep him in power. And rather than a five-week-long air campaign followed by a ground attack, as happened in 1991, the two could occur nearly simultaneously. . . . The bull's-eye is Hussein's hometown of Tikrit, where about 50,000 people live on the Tigris River about 100 miles north of Baghdad. ‘Tikrit is the political center of gravity,’ said Rick Raftery, a retired Marine intelligence officer who served in northern Iraq in 1991. ‘It must be immediately eliminated.’ Air Force officials say an attack on Iraq likely would begin with hundreds of bombers, cruise missiles and fighter aircraft executing a series of airstrikes with a barrage of firepower only hinted at in other recent U.S. air campaigns. Their warheads would rain down on antiaircraft systems and missiles and aircraft that could deliver chemical or biological weapons. Then the campaign would concentrate on ‘regime targets’ -- presidential palaces, Hussein's bodyguards, military communications systems, secret police facilities, and the bases of the elite Republican Guard and other diehard supporters. . . . All told, the U.S. invasion force would likely amount to more than 100,000 troops, planners and others say. That's a fraction of the nine divisions -- seven Army and two Marine -- and 500,000 troops the United States deployed for the Gulf War.” (Ricks 9-22-2002)

c Observations.

i UPI correspondent, Martin Sieff (7-18-2002), wrote: “These reports may be accurate, or they may be the American version of masrilovka -- the old Soviet term for strategic disinformation to misdirect an enemy. Undersecretary of Defense for Policy Douglas Feith, who championed the actual creation of an explicit information unit in the Pentagon that would spread misleading stories as well as accurate ones, is known to have a passion for such things.”

d Conclusions.

i So far three general plans have come to surface.

(A) Use proxies.

(1) Summary.

(a) This plan involves using existing Iraqi opposition groups directed under U.S. command to remove Saddam Hussein from power. U.S. and British planes would clear the way and U.S. troops would follow behind as ‘reinforcements.’ According to the plan’s backers, such an assault would stimulate mass defections in Saddam’s military.

(2) Supporters of this plan.

(a) Paul Wolfowitz, deputy secretary of defence. (Smyth 3-14-2002; Scarborough 3-18-2002; Marquis 6-19-2002)

(b) William Lutti, deputy assistant secretary of defence for Near East and South Asian affairs. (Smyth 3-14-2002)

(c) Richard Perle. (Dawn 2-4-2002; Smyth 3-14-2002)

(d) Wayne Downing, retired army general. (Smyth 3-14-2002; Scarborough 3-18-2002; Marquis 6-19-2002)

(3) Detractors from this plan.

(a) Director of Central Intelligence George Tenet. (Barry and Dickey 1-7-2002; Marquis 6-19-2002)

(b) Colin Powell (Barry and Dickey 1-7-2002)

(c) Richard Armitage. (Barry and Dickey 1-7-2002)

(4) Criticisms of this plan.

(a) Many of the Iraqi opposition groups do not trust U.S. intentions. They understand that their interest would be subservient to those of the U.S. and that they would lack significant autonomy.

(b) Many of the Iraqi opposition groups do not get along.

(c) Saddam Hussein’s military may not defect. This would pose a tremendous problem because his army is more than 400,000 strong and would likely repel any attack from U.S. proxies. (Smyth 3-14-2002; Norton-Taylor et al. 3-15-2002)

(d) It could provoke a Kurdish uprising in Turkey. (Jones 2-1-2002; Dougherty 12-11-2001; AFP 2-12-2002)

(B) Use massive U.S. ground forces.

(1) Summary.

(a) This proposal advocates the use of some 200,000-300,000 U.S. troops along with massive support from perhaps as many as 1,000 U.S. and British warplanes.

(2) Supporters of this plan.

(a) Kenneth Pollack, former Clinton National Security Advisor. (Pollack 3-2002; Smyth 3-14-2002)

(b) General Tommy Franks, Commander-in-Chief of the U.S. Central Command. (Evans 4-27-2002; Marquis 6-19-2002)

(c) Air Force leadership. (Smyth 3-14-2002)

(d) Navy leadership. (Smyth 3-14-2002)

(3) Criticisms.

(a) It would result in a large number of casualties.

(C) Mount a covert operation to remove or assassinate Saddam Hussein.

(1) Summary.

(a) This plan obviously has not been presented to the public in detail.

(2) Criticism.

(a) It is not clear how a covert operation could effectively deal with a huge national army after Iraqi’s top leadership is removed from power.

(D) Bomb Iraqi sites where it is suspected that weapons of mass destruction are being developed. (Smyth 3-14-2002)

(1) Summary.

(a) This plan advocates a more narrow objective than those outlined above. It would not intend to remove Saddam Hussein, but would rather aim only to bomb specific targets suspected of being involved in the development of weapons of mass destruction

(2) Supporters.

(a) Some State department officials.

(3) Criticisms.

(a) Such a dependence on air power would likely result in significant civilian casualties.

(E) Mount and aggressive attack that would focus on the Iraqi military leadership.

(1) Summary.

(a) This plan calls for a “sharply focused attack on Hussein and the people and institutions that keep him in power” instead of attacking Iraq’s infrastructure and military rank-and-file as the U.S. did in the Gulf War.

(2) Supporters.

(a) The Defense Department’s civilian leadership.

(3) Criticisms.

(a) It assumes that Iraq’s rank and file military units will not resist the U.S. invasion.

ii The most likely scenario.

(A) Available evidence appears to indicate that in the late summer or fall of 2002, or the very beginning of 2003, the U.S. and Britain will launch a major air attack on Iraq followed by a massive ground assault of about 250,000 American troops supported by another 20-30,000 British troops. Additional efforts will be made, probably both prior to and during the invasion, to foment a coup d’etat in Baghdad. U.S. troops will likely approach from the north, east and south from bases in Qatar, Jordon, Turkey, Kuwait. The U.S. will also supplement U.S. ground forces with any ‘indigenous’ forces that are available and willing to cooperate, including the INC, INA, INL, SCIRI, KDP, and PUK (see appropriate outline for more info on the Iraqi dissident groups). These proxy forces will likely be used to participate in the riskier campaigns in order to minimize casualties to American forces so that support at home is not undermined. Another likely scenario would be a more targeted attack “on Hussein and the people and institutions that keep him in power,” as was described in the Sept. 22 edition of The Washington Post.

6 U.S. has put safeguards in place in preparation for war.
a U.S. has taken steps to guard against spikes in the price of oil

i Putin agreed to increase Russian production of oil in the event of an Arab oil embargo.

(A) Summary.

(1) In an essay on the coming oil crisis, James Puplava (3-16-2002), a conservative financial advisor, wrote, “President Bush has . . . secured an agreement with Vladimir Putin to access oil from Russia as a countermeasure against any possible threat from OPEC. The new agreement with Russia will act as a checkmate against threats of another oil embargo. This puts the U.S. in a better position to pursue its military objectives without the threat of an interruption in oil supply. Russian oil executives have been crisscrossing the ocean to Washington in an effort to cement and secure agreements to supply the U.S. with oil in case of war or higher prices caused by OPEC cutbacks.” (He did not cite his source in the essay; see also Hughes 8-14-2002.) On July 4 2002, the first shipment of oil, containing 200,000 metric tons, arrived in Houston. (Hays 7-5-2002)

(B) Additional information.

(1) As an additional buffer to any possible disruptions to the world oil supply, the U.S. and Western nations can tap into the International Energy Agency’s strategic reserves. It presently has some 4 billion barrels, which by itself could satisfy world oil demand for about fifty days. (Yacoub 4-8-2002)

ii The U.S. is building up its supply of strategic oil reserves.

(A) Summary.

(1) By the end of 2002, the administration intends to have filled its 700 million-barrel strategic oil reserves in giant caverns in Texas and Louisiana. (McGeough 8-5-2002)

b The U.N. and Iran are preparing for an influx of refugees into Iran.

i Summary.

(A) The Guardian reported, “The United Nations has started moving tens of thousands of tents and blankets to western Iran in readiness for a huge wave of Iraqi refugees who are expected to escape across the border if the US and Britain launch military action to topple the Iraqi leader, Saddam Hussein.” (Steele 3-16-2002)

c Kuwait is planning for emergency conditions.

i Summary.

(A) The World Tribune (7-25-2002) reported, “On Wednesday [July 24], the Kuwaiti Cabinet formally began discussions to prepare for any U.S.-led attack on Iraq. The Kuwait Al Rai Al Aam daily reported on Thursday that the discussions focused on emergency regulations that would be imposed.”

d Israel is preparing its defenses.

i Israel deployed anti-missile batteries.

(A) The Israeli daily Yediot Aharonot reported that the Israeli military had deployed an anti-air missile battery north of Tel Aviv. (AFP 8-9-2002)

e Kurds preparing for a fight against Iraqi army.

i Summary.

(A) The Observer reported that the Kurds are expecting to be on the frontline of the Bush administration’s war against Iraq. In order to avoid having to fight on two fronts – Saddam’s troops on the one side and Ansar al-Islam on the other – the Kurds intend to neutralize Ansar al-Islam prior to the U.S.-led invasion. The newspaper reported, “Guerrillas, known as peshmergas, are working day and night hauling sandbags, digging trenches and bulldozing mountain roads to their front lines. Iraqi Kurdish sources say they need to move quickly to crush the Taliban-inspired Islamists known as Ansar al-Islam because, if a US-led attack on Saddam begins, all peshmerga forces will be needed to surge southwards into government-controlled Iraq. They do not want to face a war on two fronts.” (Judah 8-11-2002)

7 Logistical preparation

a ???- Present. U.S. officials have been meeting with Iraqi opposition groups. (Go to outline)

i Summary

(A) Various government officials have been meeting with the leaders of Iraqi opposition groups in order to plan the removal of Saddam Hussein and the installation of a new puppet regime. Official accounts of these efforts suggest that there is much division among the various groups and the U.S. with regards to interests and objectives. Read More . . .

b September – present. U.S. military commanders are being relocated to the Persian Gulf.

i According to “highly placed U.S. military sources” interviewed by Fox News, U.S. Central Command headquarters began moving from its headquarters in Tampa, Fla., to al Udeid Air base in Qatar mid September 2002. CENTCOM “controls America's military in 25 countries in Central and Southwest Asia, the Middle East and Northeast Africa.” (Baier 9-11-2002)

ii The operational headquarters of the U.S. 3rd Army apparently set up camp at the U.S. base in Kuwait in mid-December in anticipation of an operation against Iraq. (Bruce 1-31-2002)

iii Lt. Gen. Earl B. Hailston, a Marine commander, and nearly half of his staff of 500 marines were relocated to Bahrain, a tiny country that shares the Arabian Peninsula with Saudi Arabia and a slew of other small nations. (Dao and Schmitt 2-3-2002; AP 2-5-2002; WSWS 2-16-2002)

iv Lt. Gen. Charles F. Wald relocated his headquarters from Shaw Air Force Base, S.C., to Saudi Arabia in mid-September. (Dao and Schmitt 2-3-2002)

v Admiral Calland relocated his special operations headquarters from MacDill to some undisclosed location. (Dao and Schmitt 2-3-2002)

vi General Mikolashek relocated from Fort McPherson, Georgia to Kuwait on November 11 with most of his staff of 700. (Dao and Schmitt 2-3-2002)

c February 22. The U.S. military strengthened its ties with the Caucasus states of Georgia and Azerbaijan. (For more details read appropriate outline)

i Summary.

(A) According to the Russian newspaper, Nezavisimoe Voennoye Obozrenie, U.S. military planes carrying some 40 members of the U.S. Special Forces and Air Force logistical personnel landed in Tbilisi, Georgia. The U.S. has also increased its ties to Azerbaijan. (cited in Stratfor Global Intelligence 2-22-2002; Traynor 2-22-2002; see also DeYoung and Pincus 2-24-2002) Some observers speculated that the Caucasus region could provide the needed bases to launch an operation against Iraq and therefore resolve the Pentagon’s current dilemma of having an insufficient number of bases in the region.
Read more . . .

d The Bush administration is working to undermine efforts at diplomacy with Iraq.

i Summary.

(A) Not only has the administration failed to make any serious attempt to solve the conflict peacefully, but it has also actively gone to considerable lengths to undermine the diplomatic efforts of the UN.

ii Talking down diplomacy.

(A) Summary.

(1) The administration has repeatedly talked down efforts to use diplomacy in resolving the current conflict. Samples of statements representative of this can be founded in several different locations at 'Reasons' for attacking Iraq

(B) Some recent examples.

(1) In apparent frustration that Saddam might admit weapons inspectors, Rumsfeld argued that any inspection would, “have to be far more intrusive, [involving] the Iraqis not controlling when they come in, where they could go, what they could do. . . . . The Iraqis aren’t going to agree to something like that.” [emphasis added] (cited in Isaacs 3-9-2002)

(2) In response to a late August attempt by British Foreign Secretary Jack Straw, to set a deadline for Saddam Hussein to admit UN weapons inspectors, the noncompliance of which would result in military action, White House spokesperson Scott McClellan said, “United States position is that the Iraqi regime needs to abide by its obligations. There is no room for negotiation or discussion. They need to do so, and do so now.” (cited in Brown et al 9-1-2002)

(3) On September 2, White House press secretary Ari Fleischer stated, “Iraq changes positions on whether it will let the inspectors in more often than (Iraqi President) Saddam Hussein changes bunkers. (cited in Reuters 9-2-2002)

(4) On September 3, Donald Rumsfeld referred to Iraq’s offers to admit weapons inspectors as “a dance they engage in. And then you'll find at the last moment, they'll withdraw that carrot or that opportunity and go back into their other mode of thumbing their nose at the international community.” (cited in Jelinek 9-3-2002)

(5) Cheney argued that the readmission of weapons inspectors would “provide false confidence that Saddam was somehow back in his box.” (cited in Harnden 9-4-2002)

k The type and number of U.S. reserves that are currently being called upon suggest the possibility of an attack on Iraq within 5-6 months.

i Summary.

(A) Stratfor (8-2-2002) summarized a DoD press release that had provided information regarding the mobilization of reserves during the summer of 2002 through July. Stratfor noted that the “mobilization appears to be shifting to include more infantry, armor, artillery, engineer and combat medical units. Moreover, the Army is mobilizing full companies, battalions, and brigades, rather than just individual augmentees or skeleton crews.”

ii Data.

As Of 2002 Army Air Force Navy Marines Coast Guard Total
01/02 17,952 30,628 9,193 1,492 2,108 61,373
01/30 23,606 33,550 10,008 3,135 1,904 72,203
02/27 25,731 36,723 10,597 4,387 1,831 79,269
04/03 28,615 37,813 10,597 4,398 1,836 83,259
05/01 28,013 37,451 9,629 4,380 1,762 81,235
05/29 31,431 37,404 9,011 4,265 1,635 83,746
06/26 34,478 36,773 8,760 4,096 1,485 85,592
07/31 30,923 36,914 6,882 3,846 1,215 79,780
Source: US Department of Defense cited in Stratfor 8-2-2002

iii Observations.

(A) Stratfor (8-2-2002) noted that the pattern and timing of the reserve mobilizations were consistent with what might occur in preparation for a large-scale military operation in the Persian Gulf.

l U.S. military conducted a massive training exercise in California under conditions similar to what would be expected in Iraq.

i Ground units participating in the Millenium 2002 training exercise. (Research by From the Wilderness)

(A) 82nd Airborne Division. (Ruppert 8-21-2002)

(B) 101st Air Mobile Division. (Ruppert 8-21-2002)

(C) Special Operations Command, JFK Special Warfare Center. (Ruppert 8-21-2002)

(D) 160th Special Operations Aviation Regiment - U.S. Army Special Forces - 75th Ranger. Regiment - U.S. Army Civil Affairs and Psychological Operations Command. (Ruppert 8-21-2002)

(E) U.S. Army III Corps (Armor, Ft. Hood). (Ruppert 8-21-2002)

(F) 1st Air Cavalry, Heavy Armored. (Ruppert 8-21-2002)

(G) 21st Cavalry Brigade. (Ruppert 8-21-2002)

(H) 31st Air Defense Artillery Brigade. (Ruppert 8-21-2002)

(I) 13th COSCOM Logistics and Support . (Ruppert 8-21-2002)

(J) 3rd Armored Cavalry Regiment. (Ruppert 8-21-2002)

(K) 4th Infantry Division. (Ruppert 8-21-2002)

(L) 3rd Signal Bde. (Ruppert 8-21-2002)

(M) III Armor Corps Artillery. (Ruppert 8-21-2002)

(N) 3rd Brigade/ 2nd Infantry Division (Stryker Assault Teams, Ft. Lewis). (Ruppert 8-21-2002)

ii Troops that would likely be deployed in the event of an Invasion of Iraq.

(A) Summary.

(1) Michael Ruppert of FTW, citing unspecified “open source material posted on various Defense Department websites, from major media sources,” compiled a list of Reserve and National Guard combat and support units “likely to be used in an Iraqi invasion that have been mobilized since 9-11.” He said, “These mobilized personnel are for the most part experienced veterans. Various numbers of personnel have been activated from each of these units and they likely represent a core cadre, which in the event of a full mobilization could have the complete units ready for combat in a short period of time. All data is current as of Aug. 7.” (Ruppert 8-21-2002)

(B) Air Force

(1) 37 Airlift Wings (7,493 personnel)

(2) 41 Fighter Wings (9,439 personnel)

(3) 23 Refueling Wings (4,318)

(4) 3 Rescue Group Wings (401 personnel)

(5) 2 Bomb Wings (B1B) (218 personnel)

(C) Navy.

(1) SEAL Teams 1, 2, 3, 4, 5, 8 (52 personnel)

(2) Special Boat Squadron -- Team 1 (18 personnel)

(3) Naval Support Activity, Bahrain (53 personnel)

(4) Inshore Boat Units (89 personnel)

(a) Inshore Undersea Warfare Units (113 personnel)

(b) Assault Craft Units (74 personnel)

(c) 4th Marine Division Support (105 personnel)

(D) Marine Corps

(1) 23rd Regiment/4th Marine Division (976 personnel) - 25th Regiment/4th Marine Division (1,003 personnel) - 4th Marine Division (49 personnel, most likely headquarters staff)

(E) Army.

(1) 20th Special Forces Group (941 personnel)

(2) 19th Special Forces Group (711 personnel, plus an undetermined additional number announced in a call-up on Aug. 20)

(3) 131st Armored Regiment -- Alabama (209 personnel)

(4) 180th Field Artillery

(5) Arizona (125 personnel) - OpFor (Opposing Force)

(6) 11th Armored Cavalry -- California (125 personnel)

(7) 123rd Armor -- Kentucky (159 personnel)

(8) 110th Field Artillery/29th Division -- Maryland (331 personnel)

(9) 104th Armored Regiment -- Pennsylvania (304 personnel)

(10) 103rd Armored Regiment -- Pennsylvania (541 personnel)

(11) 769th Engineer Battalion -- Louisiana (515 personnel)

(12) 201st Engineer Battalion -- Kentucky (300 personnel) - 876th Engineer Battalion -- Pennsylvania (223 personnel)

(13) 246th Field Artillery -- Virginia (165 personnel)

(14) 112th Armor -- Texas (629 personnel)

(15) 145th Field Artillery -- Vermont (206 personnel)

(16) 1st Battalion/213th Air Defense Artillery -- Pennsylvania (201 personnel)

(17) Total for these call-ups: 29,571 personnel.

m DoD civilian leadership created an ‘Iraq planning unit.’

i Summary.

(A) Knight Ridder Newspapers reported, “Aides to Defense Secretary Donald H. Rumsfeld have created a special Iraq planning unit, composed largely of civilians, to oversee a military campaign against Saddam Hussein. The existence of the planning operation in the defense secretary's office [was] confirmed by two individuals. . . . The new planning unit would coordinate the non-military and political aspects of any campaign, as opposed to drawing up actual invasion plans.” (Strobel 8-16-2002)

n Department of State is making plans for a postwar Iraq.

i The Boston Globe reported, “The State Department has undertaken its own effort in planning for what would follow the fall of Hussein. The topics addressed so far include questions of justice, amnesty, and war crimes with members of Hussein's government, as well as postwar economic and budget planning. By next month, groups of five to 15 people will begin looking at issues of public health, humanitarian work, agriculture, water, the environment, and democratic principles. The initial project, at a cost of $1.5 million, will wrap up work by late October or early November, officials say.” (Schlesinger and Shadid 8-18-2002)

8 Action
a ??? – Present. U.S. and British troops regularly infiltrate Iraq.

i U.S. troops.

(A) Summary.

(1) During the early months of 2002, perhaps even before, U.S. Special Forces infiltrated Northern Iraq to survey potential airfields to be used by the U.S. and to train Kurdish opposition groups. Current reports suggest that the U.S. intends to use Jordan as a major base from which to direct operations in Northern Iraq.

(B) Reports.

(1) Early 2002.

(a) The Japanese daily Sankei Shimbun, reported that U.S. military forces had infiltrated Iraq. (Worldnetdaily 2-21-2002) The report failed to provide its sources. U.S. Navy Commander Frank Merriman denied the reports, saying, “There are no U.S. troops in Iraq. . . . Are we invading Iraq? No.” (cited in Reuters 2-22-2002; Rose 2-25-2002)

(b) The Israeli intelligence firm, DEBKA, suggested in late-February that U.S. attacks on Iraq are imminent, saying, “a major U.S. ground assault on Iraq is only three or four weeks away.” DEBKA reported that the U.S. was transporting large numbers of troops and Matziel to air bases in Turkey. It also reported that Patriot anti-aircraft missile batteries were being set up in various locations in the Middle East. (Rose 2-25-2002)

(c) The AP reported, “–– Small groups of American diplomats, intelligence analysts and officials periodically infiltrate northern Iraq to confer with Kurds and other opponents of the Baghdad government. They apparently operate freely. The area is protected by U.S. and British military overflights and is beyond the reach of Iraqi President Saddam Hussein's air force.” (Schweid 2-27-2002)

(d) The AP reported that in December, U.S. diplomat Ryan Crocker visited opposition groups in northern Iraq in an attempt to form some form of coalition. (Schweid 2-27-2002)

(e) The Observer reported, “America has already begun a discreet military build-up in preparation for a ground war in Iraq. US special forces are training Iraqi militia to be ready for a strike against Saddam in the coming months. Teams of instructors drawn from American elite regiments have been arriving in Kurdish-held areas in the north of Iraq in recent weeks, targeting the semi-autonomous areas run by the Kurdish Democratic Party. The instructors are improving local fighters' tactical and weapons skills and teaching them how to exploit chaos caused by American air strikes. They are also drawing up lists of potential targets, a vital prerequisite to any ground offensive.” (Ahmed, Burke, and Beaumont 3-10-2002)

(f) The Independent reported, “CIA officers have surveyed three key airfields in northern Iraq. The airfields, situated in northern Iraq near the cities of Arbil, Dohuk and Sulaimaniyah in Kurdistan – the only part of Iraq not held by Saddam Hussein – could be used to receive arms and troops in the event of a conflict between the US and Iraq, an Iraqi source has told The Independent.” (Cockburn 3-18-2002)

(2) Mid 2002.

(a) The Lebanese daily, as-Safir, reported that according to “well informed diplomatic sources,” the U.S. “has launched a security and military operation in Iraq” and that “Dozens of those US soldiers, along with CIA agents, have been sent into Iraqi territory.” The report stated that Jordon had allowed Washington to set up forward operating bases in their territory. “Jordanian King Abdullah has given orders to clear two military airports in Jordan for the US forces. About 2,000 US troops have been deployed in Jordan so far.” (as-Safir 6-29-2002; AFP 6-29-2002b; 6-29-2002c; Stratfor 7-3-2002; Arbuthnot 7-8-2002) According to Stratfor (7-3-2002) Russian military intelligence, as well as Syrian sources, believes that U.S. troops are already in Iraq. This report was refuted by Jordan. The as-Safir article also stated that George Tenet had “personally visited northern Iraq during his last tour of the region and had given orders to start the security plan after US President George W. Bush (recently) approved a decision to ask the CIA to overthrow ... Saddam.” (as-Safir 6-29-2002; AFP 6-29-2002b)

(b) On July 12, The Times of London reported, “British and American agents are on the ground in Iraq fomenting revolt among opposition groups and potential traitors in Saddam Hussein's inner circle as part of a covert campaign to topple him, senior officials disclosed last night.” (Harnden 7-12-2002)

(c) The Guardian reported, “US officials have reported that SAS troops and MI6 agents

Post  42607  by  pmcw       Reply

The point to my original response was to first discover why you felt that SANM might benefit from problems at EDS. SANM is in the contract assembly business and EDS is in the services business. They are very different companies. If, as I suggested, IBM does in fact benefit from EDS problems, I don't see it as an avenue for SANM to gain business.

The other point I wanted to make was that I don't see SANM as inherently worth $8 per share based on their balance sheet. This seemed to be one of the primary points of your post and I can't understand how you are arriving at this conclusion. Even without discounting their net tangible assets, they are worth "only" about the trading price of their outstanding shares (not diluted).

There is no doubt that the world has transitioned from vertical integration to what I like to call horizontal integration. This was the primary pitch of my business as well as yours in your former business. By this I mean we both pointed out the fact that it is key for any company to figure out their strength in the value chain and then lever and concentrate on that strength.

In my business I sold everything from subsystems, power supplies (PWER) to semiconductors and you sold "marketing services". Power supplies take a special design expertise and very few businesses had either the staffing to "waste" on this design or the unique needs to justify efforts towards the design of something they could easily buy from those who designed them as their core competency. Similarly, many companies would be wasting their valued time if they used part of it to do what you could do better and more efficiently.

This trend towards horizontal integration set the stage for fabless semi houses and contract manufacturers such as SANM (originally known as SCI). Without a doubt, they are in a sweet spot, but with equal certainty, they are in what one might call the "P" trap of JIT (Just In Time Inventory).

In this weak market they are caught between the jaws of the manufacturers who don't want to reschedule orders or take parts back and their customers who need to slow shipments. This is why their inventory ratio to sales stands at roughly 50 days and their accounts receivable are roughly 65 days of sales. Both of these are carried as fully valued assets and I feel should be discounted if one is to use a balance sheet valuation as a strong argument.

Even with all assets counted as full value, their net tangible asset value stands at $1.3B. Since they showed a loss on their income statement last quarter they didn't show fully diluted shares, but I would guess them to be roughly 560M. This is why I say they are currently trading at net tangible book value, but with the warning that I would discount inventory, receivables and property before I would get too carried away in proclaiming any buy based on book.

As I mentioned earlier, I do like their cash flow. However, without closer scrutiny, I feel it is suspect. I always look closely at a company that pumps their cash flow early in a financial release. This is what got me to look at TYC in January and state they were a train wreck looking for a curve. This was back when everyone seemed to like Koz and I was pretty unpopular for having an alternate opinion.

I don't see SANM as anywhere near a TYC problem. ON the contrary, I see SANM as a very well managed company. They floated a convertible issue at a good time which is why they have ultra low interest on their debt and a conversion price well north of their current trading price. They saw the bad news coming and packed a war chest to get themselves through. SANM has always been smart and this is further evidence nothing has changed.

The cash you spoke of includes short term investments so it isn't pure cash. Short term investments are supposed to be very liquid, but I've seen too many companies fudge in this area to take them as equal to cash. Their improvement in cash plus short term can basically be seen through a decrease in receivables, an increase in payables and a decrease in inventory. Therefore, I don't see it as a huge plus unless one can provide some solid details.

The reason I started looking at these factors closely is because they do show good cash flow, but yet show a decrease in net tangible asset value. To me this is a red light. Maybe you can explain why they have a $150M drop in tangible asset value and show a $320M positive cash flow.

I think it is a lead pipe cinch that the better contract manufacturers will do well in the long term. I also feel SANM is a very well run CM. However, I certainly can't say that SANM won't see some harder times before they see good times. A very significant portion of their business is building stuff that is purchased as capital equipment rather than durable consumer goods. I certainly see a trend to outsource manufacturing, but I don't see one to build more capital goods. Due to this, I would be very hesitant to make a big play in SANM unless my horizon was very long.

Regards, pmcw

Post  42608  by  lkorrow       Reply
jeff, yes, true, "defined benefit." :-) Business Week said months back that some very large companies, like GE, are exposed to the pension issue. I assume they've been busily repositioning their portfolios in the time that's transpired.

Yes, those cash plans are nice for the young people, it would have been nice to have been in such a plan and a partially privatized social security plan too, assuming a MM option. Perhaps that would help strengthen financial services companies and get them through this slump.