Table On-Topic Summary - 04-Oct-2002
A compilation of this board's financial/economic posts From 43156 to 43234

Post  43156  by  tinljhtkh       OT: pacemakernj!
Post  43157  by  oldCADuser       OT: The worlds funniest joke:

Post  43158  by  Decomposed       Reply

You bring up some good points.

Don't hold me to this since I didn't write the software and it has been a long time since I used VSE. But here's now I *think* that it *used to* work. (Vague enough for ya?)

Execution of an order is delayed 15 minutes -- to coincide with VSE's delayed stock quotes. (So, you can't get the current price of a soaring stock from Schwab, place a buy order on VSE, and reap the 15 minute difference in price.)

Market orders execute in 15 minutes, and are limited to the number of shares that traded during the time between when you placed the order and the time the order executed. That's 15 minutes, pmcw, not an entire day! On a light volume stock, acquiring a lot of shares quickly will be a challenge.

And, if I remember right, the execution price of that market order will be the WORST price it hit during that 15 minutes.

Yes, I know. Yuck! But at least it's fair. It'll do this to everyone.

If I remember right, a limit order behaves differently. It can take all day (or week) to execute since it is waiting for your specified price. When that price is hit, I think you will get ALL the shares you requested.

The bottom line is that two years have passed. You should experiment with the game for a little while, using a small number of shares, to gain a better understanding of its behavior. I *THINK* it behaves the way I described, but I wouldn't be at all surprised if I wind up being wrong. As long as it is consistent, I won't particularly care.

It may be a different story for you, of course. If you were planning to buy 10 million shares of some little 2 cent stock that only trades 200 shares a day (Yes, this happens. See one of my holdings, Millbrook Press - MILB.) then you could have a problem. But on the other hand, if you tried this stunt in reality, you'd find that your order actually moved the stock! And that, of course, is not something VSE could possibly simulate.

The game is NOT reality. But, aside from a bigger problem that I'll get to in a second, its idiosynchrasies have not altered the outcome of games in which I've participated. Knowing you, however, I suspect that this time it MIGHT!

There IS a bigger problem. VSE seems to go down. Briefly, but OFTEN. I would have thought they'd have fixed the problem by now, but I encountered it again this very evening, when I tried to return to VSE to change the contest's ending date and got no response. Long-suppressed, dark memories came flooding back... :) j/k! It's not usually that bad, but it can be really infuriating if you're trying to time a rapidly moving stock and the VSE website goes on the fritz at a critical point. (In fairness, the downage I observed today came after hours. For all I know, VSE might be rock-solid but go down after hours for maintenance. I hope.)

But I don't want to defend downages or other VSE misbehaviors. I don't know what they all are anymore, and don't want to speculate on things I know little about. They are, however, fair in that they affect everyone with an equal probability, and none of us really know what to expect. Downages will add risk to trading strategies, no question, but I don't know how much.

Downages, if they prove a problem, are a reason to invoke multiple LIMIT orders on VSE, when you can plan your moves that far ahead. Put a lot of them on the system at various prices, just in case the stock moves briefly into a desirable range and VSE picks that exact time to freeze up.

Enough of dispensing strategy. I fully expect you guys to whoop my sorry behind anyway!

Post  43159  by  jeffbas       Reply
"the dollar must drop 15-20% ..."

Against which currency? The Euro? I recall the recent article posted by someone predicting the Yen would go to 300-400 to the dollar. That is the wrong direction. By the way, I think a plummeting Yen would be good for gold as Japanese try to convert Yen to gold.

Post  43160  by  Decomposed       OT: Table ON TOPIC SUMMARY Oct 03, 2002

Post  43161  by  Warstud       Reply
Keep Buying...Keep Losing..

Keep Dollar Cost Averaging..Keep Dollar Lost Averaging. The Bull market is long gone people, wake the He11 Up.

EMC Corp cuts Q3 forecast, will buy back up to 250 mln shares (EMC) 5.01 halted : -- Update -- Company expects to report total revenue of approximately $1.25 billion, and a loss of $0.02 per share for the third quarter -- Multex consensus estimates are $ 1.4 billion and a net loss of $0.01 per share; says IT spending environment remains "brutal".

Post  43162  by  Warstud       Reply
New Short List..







Post  43163  by  pacemakernj       OT: Well said. Pace.
Post  43164  by  clo       OT: Shredding Firms, On a Tear

Post  43165  by  pmcw       Reply
jeff, The funny thing is there are credible people saying we will see strong deflation and credible people saying we'll see strong inflation. Interesting, huh?

I'm pretty confident the Fed (as long as Greenspan is there) will make it a priority to fight any hint of inflation. Yea, I know it would make it easier to pass the debt gas, but it would also kill the boomers that are nearing retirement and were just roughed up in the market. Think 70's.

Since deflation wouldn't hurt them quite as bad, I think that is more likely. However, it will hit many right in the housing pocket - particularly if they have been using home equity to finance other stuff.

Basically, when experts are this far apart it says to me that there is no clear direction. My solution is to keep the cash supply high and buy things that I think are selling for less than their value. Regards, pmcw

Post  43166  by  pacemakernj       Reply
Jeffbas, the Euro. Japan is a basket case. You are right that a plummeting Yen would be good for gold, which is another reason to own gold as well. The latest move by the BOJ is both reckless and dangerous. I continue to be bullish on gold being the best performing asset class over the next 3-6 months. If gold does not move appreciably higher in that time frame I will reevaluate what is going on. But until then it is one place to put some money to work on pullbacks in gold stocks. JMO. Pace.

Post  43167  by  clo       Reply
IAC; WM: if you are roaming around the Table, I wonder what you think of WM selling off to these levels?

They fell off a cliff yesterday.
I would appreciate your take.
Hope all is well for you & yours.
Thank you, clo

(Voluntary Disclosure: Position- Long)

Post  43168  by  sawblade88       Reply
The quote is from John Adams:

In a letter to Abigail (his wife) in May of 1780,

"I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain."

Post  43169  by  pacemakernj       OT: jbennett53, I'd rather have Bozo the clown, th
Post  43170  by  tinljhtkh       OT: Terrorism comes in many forms!

Post  43171  by  jeffbas       Reply
Warstud, as a general comment I would beware of trashing leadership companies, with reasonable Price/Sales, with very strong balance sheets, and that aren't losing any material amount of money (in fact cash flow positive). EMC is no LU, and a package of such companies, bought on a dollar average basis (over time not price) starting now will in 5 years, in my opinion, have materially outperformed broad indexes like the DJII or the S&P.

No one is going to ring a bell when the bottom has been reached. I believe that the 1929-32 Crash, the 1973-74 bear market, and the Japanese collapse a dozen years ago all show stocks hitting lows a LONG time before good economic times returned. (Despite the fact that Japan is still waiting, it took years for their market to move materially lower.) This market has already declined for longer than all of them.

Post  43172  by  jeffbas       Reply
pmcw, I disagree with the implication of part of what you said. Whenever we see a real economic recovery, I believe that the Fed will bend over backwards to be sure it is strong enough to tolerate their raising rates. In other words, I believe the Fed will allow the markets to lead their actions, as I think they are now (mistakenly) doing in the opposite direction now. (I think they should have cut rates more a while ago.)

Post  43173  by  jeffbas       Reply
pace, I would be careful about gold stocks versus bullion. The well-written Greed&Fear report (which I can't provide a link to) which is quite bearish, favoring government bonds, recently noted that "gold stocks fell with the rest of the market in the 1929 crash" (but still recommends holding some gold stocks and bullion).

Post  43174  by  jeffbas       OT: pace, in my opinion, pot-smoking, criminal par

Post  43175  by  jbennett53       Reply
pacemakernj, I have absolutely no liking for BC. Also I will admit that I get a little outrageous with some of my posts. Rather than a lengthy dissertation I will just say that I do not think this country is headed into the bright future that we could have created. Instead I am wondering if we are not falling into a very dark period of much suffering. The consequences of this administrations actions may be much, much worse than the economic disaster we may be watching unfold. We shall see. Good luck to you.

Post  43176  by  Decomposed       ot: jbennett53... "Consequences"
Post  43177  by  Decomposed       ot: Grrr. My last post
Post  43178  by  srudek       ot de vse - De said: Heck, we could even have some
Post  43179  by  danking_70       OT: From a Country that has a Peace Agreement with
Post  43180  by  tinljhtkh       OT: You've just
Post  43181  by  clo       OT: Decomposed, there are times the heart speaks f
Post  43182  by  maniati       OT: OT: OT: OT: Decomposed: I think your argument
Post  43183  by  Decomposed       ot: VSE, srudek,
Post  43184  by  Decomposed       ot: heart
Post  43185  by  VBRebel       OT: Want in on near the ground floor of a up and c
Post  43186  by  pmcw       OT: maniati

Post  43187  by  jbennett53       Reply
Decomposed, The "Western" world has meddled in the affairs of those in the Middle East for 800 years now. Much suffering was the consequence. Yes during that time they have attacked Europe. In the last 50 years the US and Britain have caused great turmoil for these people.
As regards Afghanistan, grudingly, I feel, that may have been warranted but it appears to be turning into a quagmire.
If we had left the Iranians alone there would now be no Saddam. We stopped them from killing him in the 1980's. Most of what George Bush blames Saddam with doing happened after we saved him. So actually we are to blame. Consequence! While we were at it we shot down an Iranian airliner with 300 aboard and said, "Sorry it was an accident". You can imagine an Iranian saying what the Hell were you doing there in the first place? Why did we overthrow the government of Iran in 1954? That ended up with the Ayatollah. Consequence!
If you lived right next door to Iran wouldn't it be nice to have nuclear weapons? Since the Soviets built over 40,000 nuclear weapons and over 4000 of these were of the 20MT variety and given the sorry state of their military organisation since the breakup I am convinced that many of those weapons have migrated to other locations. George tells me that Saddam spent 20 billion dollars developing nuclear weapons. I do not belive for a second that Saddam is that Stupid when for 10,20,30 million he could have easily bribed soldiers, truck drivers and border guards. A 20MT weapon detonated at ground level aboard a freighter in half dozen of our major ports would effectively destroy us. I feel that their IS NO current defense against such an attack. Saddam is a survivor as are most dictators and they realise the destruction that would befall them if they took such a course of action. Give them no choice but death and they might.
You may very well be right that taking out Saddam is the course now to be followed but I wonder what will be the consequences? Look at the unintended consequence of the Gulf War and the inciting of Iraqi's to rise up against Saddam afterwards. Saddam killed a million people and as they were begging for help George the Elder said "I was just making a suggestion, I didn't say I would help" That's a hell of a way to build trust!
By the way I mentioned that there is no current defense against a nuclear device being delivered by boat, etc. Do you wonder if one of these thousands of failing companies might have the solution? Or a cancer cure? Or a breakthrough tech for energy? How about a solution for any bio attack? Have you noticed Lucent? They're going bankrupt what chance given this environment does a bright little business have for financing?
We should be spending our wealth trying to make the world a better place not fueling another massive arms race.
Here's another one sinking away, down 99.8%

Good luck to you.

Post  43188  by  danking_70       Reply

Any comments on its steep decline.

I haven't noticed any major negative news from them.



Post  43189  by  jbennett53       Reply
decomposed, This could be the beginning of a very serious crisis?

Post  43190  by  srudek       Reply
jeffbas: Jesse Livermore, perhaps the most famous and successful "trader" of the approx 1905-1935 period, reportedly made at least a hundred million dollars shorting the 1929 market. This is remarkable but credible, especially if you read his EXCELLENT, thinly-veiled, autobiography "Reminisces of a Stock Operator" where you will see how he learned to ride the markets. Keep in mind that a million dollars back then was probably equivalent to a hundred million now (due to government sanctioned inflation of our currency) and his achievement is mind-blowingly amazing.

Well, that isn't the end of the mind-blowing. Jesse apparently thought he could call the bottom. He reputedly bought long, when he thought stocks had fallen far enough, and plunged all his winnings back in to the market, I guess a year or two after the initial huge drop. Well, if you look at a chart of the 1930's market you see what he faced: the market DID recover substantially from its initial fall and then dropped right back down again.

Jesse blew his brains out in a hotel bathroom.

This is a real sad story, especially if you read the autobiography (which only covers the period up to about 1921). Jesse was a remarkable and admirable man in many respects and the book is chock full of important lessons for every investor, not just "traders".

Unless you are a better market reader than Jesse -- not likely -- the smartest thing you can do is stay the hell out the markets (or, alternatively, only bet what you are fully willing to lose and smile when you lose it) until it is utterly clear how this market is going to turn out.

After you are sure the markets have bottomed, I'd suggest you wait 2-3 years before beginning to move substantially back into the market. Super bears, to my knowledge, ALWAYS last many years (think a decade or more, in this case) and they love to entice wise guys back in to the market, and build some momentum in that direction, so they can chomp off more limbs. A smart plan, for the typical investor, would be to let maybe the first 50% of the "recovery" take place before beginning to believe that the recovery isn't just a head fake. To repeat, to my knowledge it would be unprecedented -- on the order of getting a public visit from folks who come from Arcturus -- for a real, long-term bull market to resume in the U.S. within the next decade. Could it happen? Yeah. But alien visitation is much more likely.

Post  43191  by  Warstud       Reply

Bear markets generally last 18 months long, but the reason this is lasting longer is the fact that this market was in a BUBBLE. And it will take longer to unwind. If your just starting to buy EMC now after today's haircut, you'll probably do alright in a few years but the ones here that bought in the teens are screwd. This months price target for EMC will be between $2.25-$2.75.


Post  43192  by  maniati       OT: The Most Dangerous Kind of Derivative

Post  43193  by  jbennett53       Reply
maniati, You use a lots of words to rail about the right to vote. But actually what you want is the Republican to win. Are you trying to say that if one uses enough verbiage one can fool the Rubes?

Post  43194  by  srudek       Reply
Dow is below 7500! Yahoo reports Dow is 7495 (down 221+) and Nasdaq is 1139 (down 26+). Is this the first break below 7500 so far?

Obviously the close is going to be mighty important. From a technical standpoint, what is likely to follow from a below 7500 close? Anyone?

Post  43195  by  maniati       OT: jbennett: Don't ever presume to tell me what i
Post  43196  by  Decomposed       ot: maniati, past and present

Post  43197  by  jeffbas       Reply
sr, I will stick with the view in that post. I think the key is something you alluded to and something I mentioned specifically elsewhere. DON'T be dogmatic on the bottom price or date, and force yourself to buy no more often than once a month or once a quarter. Using SANM as an example, with my strategy, the guy who started buying at $10 thinking that was fantastic might have been prevented by the "time interval" rule from making a second buy until $2.

I also think my strategy works best with conservative, well managed mutual funds with a long track record of success, like DODGX.

As far as when the next bull market begins, I would have agreed with you 20 years ago, as that was the historical record then. However, I think that 401K money is more stable and that a market recovery is less dependent on (recovery of) direct investment by individuals. (I would love to see these reported money flows separated between retirement funding and other categories.)

By the way, I don't discount "alien visitation" at all. If you start with the theory that in the billions of galaxies there must be plenty that can evolve intelligent life, you are left with the conclusion that the odds are against us being the most advanced, or even very advanced.

Post  43198  by  pacemakernj       OT: jbennett, yes we are going through some rough

Post  43199  by  jeffbas       Reply
maniati, a wonderful post! Of course, don't forget the dead Democrats in Chicago that contributed to the election of Kennedy.

I almost wish the Republicans had stooped to their level and demanded an equal do-over with Christie Whitman instead of Forrester. I think that would have gotten some
attention and possibly a different court decision.

Post  43200  by  pacemakernj       Reply
Srudek, a close below 7500 will take the DJIA to 6500+/-. But I think we'll hold it today. Just a hunch. Meanwhile the underlying market is getting crushed. A Dow close below 7500 would take the Naz to 1000 as well. Maybe Gross is right for the Dow to hit 5000. We'll see. Pace.

Post  43201  by  Decomposed       Reply
re: KRY & KGC

*poof* It's magic.

For those of you who remember my post a few days ago, KRY and KGC are, again, the same price. I love it when a plan comes together.

This happened a bit faster than I dared hope, and was all KRY's doing (KGC contributed nothing to the convergence). KRY now has considerable momentum, all negative, so I'm going to hold off a bit longer before moving back, from KGC to KRY. After all, with downward momentum, there's a real good chance the pendulum will completely reverse itself in a few days, making KRY the "bargain" of the two, and creating a golden opportunity to snap it up prior to an upward surge.

Hmm. Any guesses as to what I'll be doing on VSE, come Monday or Tuesday?

Post  43202  by  Warstud       Reply
CSFB downgrades Celestica, Benchmark, Sanmina : CSFB believes that the broad end mkt landscape for EMS co's has not stabilized, as previously assumed, but instead is likely to further deteriorate well into 2003; hopes for a rebound in the communications infrastructure mkts have now been delayed into 2004-05, while the enterprise mkts are not expected to recover until late 2003 at the earliest. Downgrades CLS and BHE to NEUTRAL from Outperform and SANM to UNDERPERFORM from Neutral.

Post  43203  by  pacemakernj       Reply
Decomp, kudos to you. I saw that post and it was a great call. I never made the connection between the two. I am long KRY so any thoughts on it are appreciated. Pace.

Post  43204  by  tinljhtkh       OT: 43192 gets a 10 (tin)
Post  43205  by  pacemakernj       OT: Jeffbas, I thought I read somewhere about how

Post  43206  by  pmcw       Reply
Dan / CY:

I've known CY since the year they opened their doors. They went public within months of LLTC. I had an opportunity to buy both as a "friend of the company". I decided then to invest all I had available in LLTC rather than split it with CY. CY is currently selling for roughly the same price it sold for then and, even after being crushed this year, LLTC sells for roughly 20 times it's IPO price.

The vast majority of those LLTC shares have been sold (today each IPO share is 16 shares due to splits) at much higher prices than what we see today, but I still hang on to some for the very long term.

I started trading CY in the first half of the 1990's about when Dan McCranie came on board and they were trading at what was then, a record low P:S ratio of about 1.1:1. I did OK trading CY and felt there was a good chance that this year I would end up losing my shares to Sept20's that were sold in the money as CY surged in January of this year. Boy, I was wrong. I saw the summer swoon coming and even felt October would be ugly as we headed into the elections, but never imagined semis would be crushed to the levels we are seeing today.

Today, many tech companies are trading below the value they would bring at the curb - some for less than net cash. This means even those who remain with some equity exposure think the semi companies will eat cash for quite some time before the show a profit. In the cases of AMCC, VTSS and a few others, I feel they may be right. In other cases, some companies like ATML are so captive to commodity markets that the opinion is that they won't get enough pricing power in time to improve their balance sheet enough to keep up with the fab race. I think CY is caught in the middle of these two groups.

The last time CY set a record low P:S valuation in the first half of the 1990's they were pretty much captive to the commodity SRAM market and Asia was driving the ASP into the ground. This happened again in he mid-1990's. However, CY has long moved to a revenue model that protects them from the pains of a pure commodity house. This cure is a part of the second problem.

Much of CY's non-commodity business comes from PC, IT and wireline telecom. Couple this with some long term debt (all convertible with a very low interest rate) and you've got the perception of telecom, IT, PC and commodities mixed into a company that is running its own fab. However, I don't think the real CY picture is quite this ugly.

One of CY's strengths has always been their sales force. They've pulled CY out of many jams in the past. My bet is they will have "flattish" (around $200M) revenues and some pro forma loss (probably write off a bunch of non-cash stuff) this quarter. I think the book to bill will be roughly 1:1. I look for their guidance to be a slightly up Q4 - maybe a hint of pro forma profit, but hazy just like everyone else.

With CY's P:S ratio sitting just below 0.60:1 (my estimate of 2002 sales) they are easily trading at a record low P:S ratio. For companies that operate with high fixed (versus variable) costs, P:S is one of the quickest ways to measure "fair" value. Looking back at the past, the longest time to profit for a CY buyer who bought when the P:S ratio was below 1.3:1 was roughly 35 days. History may not repeat itself, but if your view is longer term, I feel scraping up a little at these levels is a pretty safe bet.

Regards, pmcw

Post  43207  by  jeffbas       Reply
Warstud, I hope that wasn't in reponse to my using SANM for an example in that post. As I said, my strategy is best suited to quality funds. Individual companies and whole industries can go bankrupt - telecom is and airlines and ECM are headed that way (and I haven't owned an ECM stock in years).

Post  43208  by  danking_70       OT: Maniati re: Derivatives

Post  43209  by  pmcw       Reply
VSH, Didn't get my price earlier in the week and I kept notching it down on the general weakness. Got a fill today at $7.90 I think I'll like. A bit more ISIL at $11.40 as well. Can't quite get to my XICO number today though. Regards, pmcw

Post  43210  by  danking_70       OT: Maniati re Derivative related satire
Post  43211  by  pacemakernj       OT: Maniati, right on! I cannot tell you how angry
Post  43212  by  pmcw       OT: Dan, On a different note: The Missouri Democr

Post  43213  by  pacemakernj       Reply
PMCW, thanks for the CY update. I wasn't sure whether to buy some today or not. Maybe I will. Pace.

Post  43214  by  jeffbas       OT: pace, I think I read in the paper that the Rep

Post  43215  by  IamCanadian       Reply
Clo, I'm not aware of anything specific on WM. In the absence of anything, my guess is a herd effect is underway. When people don't understand what's going on, the follow the crowd. Two examples are derivatives and now the re-fi effect. JPM continues to get clobbered into a buy area in my view, ditto for C if it drops down to around 25 again. WM could be sufferring in general (sympathy loss) with the banking shares as well as a feared mismatch in funding driven by Fannie's news this week. The FI's, like most times will lead the market out of here IMO, timing just the issue. WM's not going anywhere, nor is C, JPM (and let's not forget the C part), BAC etc. Regards eh, IAC

Post  43216  by  uponroof       Reply
JPM at 16.70 down 5.22%

Brazil going to the leftys. There is no election intervention team in place down in Rio. JPM and Citi are about to eat mucho billion dollars after Brazil tells the IMF to shove their bailout.....which is really a US bank bailout....tsk, tsk, tsk those third worlders are really getting annoying.

So let me get this straight...half of the capitalized world is underwritten by these two 'stalwarts'....who have, are, and will be losing billions more in market cap/balance sheet.

Keep an eye out for symptoms of systemic failure. Unexplained collapsing of shares in (thought to be) 'unrelated' companies. Not saying it's a sure thing, only very concerned that it might 'Enron like' very soon.


14:13 ET NEW YORK (CBS.MW) - Shares of U.S. banks and securities companies fell Friday, following similar declines of financial stocks in Europe and Asia on concern that Brazil might default on $360 billion in foreign debt after its presidential election Sunday.

Shares of J.P. Morgan fell to a new 52-week low while shares of Morgan Stanley, Merrill Lynch, Goldman Sachs, and Lehman Brothers all approached 52-week lows. The Philadelphia Bank Sector Index fell 3.4 percent, after tumbling 5.3 percent Thursday while the Amex Securities Broker/Dealer Index fell 3 percent.

Bankers and investors are also closely eying Sunday's Brazilian presidential election. The frontrunner, the leftist candidate Luiz Inacio Lula da Silva, has threatened to default on Brazil's massive $360 billion of foreign debt. Watch: Analyst outlines financial impact of Brazilian elections

Citigroup (C) shares fell 60 cents, or 2.1 percent to $27.91, and J.P. Morgan (JPM) fell 83 cents, or 4.8 percent to $16.79 almost a dollar below its previous 52-week closing low of $17.60. FleetBoston (FBF) shares fell 67 cents, or 3.5 percent to $18.27.

Merrill (MER) fell 82 cents, or 2.6 percent to $30.42, under its $30.95, 52-week low. Goldman (GS) surrendered $1.35, or 2.1 percent to $61.55, under its 52-week low of $62.75.

Lehman (LEH) fell $1.49 to $44.66, a 3.2 percent drop that took it below it's trailing 12 month closing nadir of $45.99. And Morgan Stanley (MWD) fared little better, falling 52 cents, or 1.7 percent to $31.15. Its previous 52-week low was $31.61.

European banks tumbled Friday after CS Group fell another 9.8 per cent after suffering a sharp slide on Thursday following a profit warning. The stock was also hit by news that a US congressional committee had said its CSFB investment banking arm had offered privileged access to IPOs to former executives of WorldCom.

"The worries about credit risk and bad debts continue. We've had a very negative move across the board," said Andrei Ilyin, industry analyst at Normura Securities in London.

In Asia, banks fell, pressured amid ongoing concerns over their business outlook. Japanese banks are laboring under an estimated $430 billion in problematic or non-performing loans. Analysts said investors are waiting to see how the government will handle the banks' bad loan issues without increasing deflation pressure.

Related Quotes

Symbol Last Chg
C 28.20 -0.31
JPM 16.70 -0.92
FBF 18.68 -0.28
MER 30.15 -1.09
GS 62.05 -0.85
LEH 45.02 -1.12
MWD 31.16 -0.52


At Fall Carlisle today and going back tommorrow. To he11 with this, I'm putting EVERYTHING in muscle cars!

Good Luck


Post  43217  by  jbennett53       Reply
pacemakernj, Thank you for you post, I certainly hope you are correct. I see many similarities to another place and time and am concerned about the possibilities. At times I wonder if a Krystallnacht could happen here. Serious economic problems coupled with problems dealing with the ME could lead to a rabble shouting down all voices of reason. When the mob mentality takes over from rational thought instances occur which can swiftly get out of hand. The recent news of the man on the porch attacked by 20 youngsters comes quickly to mind.

Post  43218  by  Nasdaq60       Reply
TRADING NOTES: A subscriber writes: "You've mentioned deflation a number of times in your newsletter, but at no point have you told us how the average investor should prepare for this period. For example, what asset classes one should concentrate on to prevent major damage to a portfolio. Gold? Sincerely, Nigel."

Nigel, I've written on this topic in the newsletter and in the column I once freelanced to the Sunday San Francisco Examiner column, but perhaps it's time to revisit it for those who have subscribed only recently. First, let me say there is no easy way to profit from a deflation; it will be challenging enough simply to preserve one's capital on the way down. I've often said that the geniuses will come through it with 50% of what they presently hold as assets. The biggest losers will be stocks and residential real estate, but making money on falling stocks is relatively risky, and making money on collapsing home prices next to impossible. I brainstormed the latter scenario with Howard Hill, an expert's expert on mortgage markets, but we failed to come up with a promising game plan. If Howard cannot think of a plausible way to "short" the housing market, there is probably no way to do so.

I expect a decade of deflation, and this one is likely to be far trickier for investors to navigate than deflations of the past, since it will be the first to run its course with the backdrop of a bogus global money system. The dollar and most European currencies were sound when the U.S. entered the 1930s deflation, and this helped to stabilize the economy, albeit it at a moribund pace. This time, however, with hollowed-out money all but universal, and a relative dearth of hard collateral to settle debts, there is no predicting how deflation will play out. But it is an unchallengeable fact that the dollar, the euro, the yen and pound sterling have been rendered intrinsically worthless by a vast infusion of credit money from the world's central banks. Which is to say, money is no longer "money," but rather a form of debt - an IOU from the respective governments that printed it.

$100 Equals $1

If the logic of this statement seems obscure, try pondering this: The $100 bill in your wallet is intrinsically worth no more than the $1 bill next to it. The conceptual basis for this assertion may be difficult to grasp right now, but you must trust that it is fundamentally true. The logic will be easier to understand, I am sure, when all forms of debt begin to implode. In such circumstances, it will become apparent that even the U.S. government is insolvent and unable to pay its debts. Facing default, there will be just two possible avenues of escape: hyperinflation, or deflation. Hyperinflation would have the effect of reducing the real burden of debt, but it would also destroy savers as a class. Imagine being able to pay off your mortgage with the $10,000 bills you'd be carrying in your wallet at that time to buy groceries. That might sound appealing, but consider the other side of the equation: Every mortgage lender in the country would be in bankruptcy, bond markets and all other forms of lending would have ceased to function, and the stock of Fannie Mae, whose bankruptcy would dwarf the total of all others up to that point, would be trading in reorganization at two cents per share.

The other escape route would be deflation -- essentially, allowing bankruptcies to take their course, with no help to debtors from cheapened dollars. This would crush debtors, lay waste to tens of thousands of businesses and wipe vast assets from the balance sheets of lenders. But it would have the virtue of leaving our financial institutions -- including the bond markets -- more or less intact.

In Gold We Trust

So how to secure one's nest egg against the gathering storm? A good rule of thumb is to make safety paramount, sticking with low-yielding but relatively safe Treasury paper that matures in 2-5 years. Some have suggested German bonds, in part to hedge the dollar's fall, but I believe euroland's statist, fiat economies will be in worse shape than ours once there is no U.S. consumer to lean on. As a corollary, I think that the dollar's impending collapse will be relative to gold rather than to other currencies. Because euros, yen and sterling are worthless, there will be no discriminating as to degrees of worthlessness. Real estate investments should not be ruled out, although the only winners will be companies with good tenants and rock-solid cash flow. Speaking of cash flow, the ideal investment in a deflation might be a casino. Not Bellagio, Mirage or some other bloated Shangri-La that needs to attract billionaire baccarat players to make money, but a grind joint with ten thousand slot machines and a huge parking lot for buses. In the end, though, there is just only one investment that qualifies as an absolute no-brainer. In a world whose currencies have been gutted and hollowed to the core, that investment is gold: coins, ingots, mining shares and all other forms of the asset that until recently had been shunned for more than two decades.

Rick Ackerman
October 4, 2002

CALVF Power Point Presentation Info at

Update: Gold Super Cycle to $1,257 Gold

Caledonia Risning from oversold conditions - Bullish*^*^*^*^*^

Current price of Gold

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

Post  43219  by  clo       Reply
IAC: WM, many thanks for your take on them. A friend was kind enough to email me the following. clo

14:18 ET ******

Washington Mutual (WM) 28.02 -1.28: Concern that bad loans are on the rise is hampering the entire banking group, and WM is no exception. However, there is little indication that loan problems are deep and/or widespread. As for WM, it has given investors no reason to question loan quality. Consequently, patient, long-term investors might want to take advantage of the recent retreat to (re)enter the long-side.

Washington Mutual is a regional financial services company committed to serving consumers and small to mid-sized businesses. Recent acquisitions have helped company expand its geographic reach (thereby diversifying risk) and build its mortgage business. In this low rate environment the latter has been a real boon, as company should enjoy a sizable jump in mortgage originations.

Of course, the low rate environment is a double-edged sword. While mortgage originations are likely to be up significantly, spreads/margins will be depressed by the recent refinancing wave. When customers refinance, banks replace higher interest loans with lower ones, thereby reducing their margins.

On balance, sees the low rate environment as a positive for the sector and for WM and, as such, is a bit mystified by the market's severe reaction to a couple of bank profit warnings. It's possible that the market is also concerned that low rates won't hang around forever and that difficult comparison periods will make it difficult for the stock/industry to exhibit similar growth going forward.

While there is some merit to these concerns, contends that the market is overreacting to the near-term threat. Regional banking sector remains one of the few areas in which investors can rely on respectable bottom-line growth in the quarters to come. Consequently, we expect money to rotate back into the group now that some of the refinancing related excess has been wrung out of the stocks. With WM trading at 7x estimated FY02 earnings; yielding 3.9% and sitting at major long-term support (see chart), it's a prime candidate for a turnaround. - Robert Walberg,

(Voluntary Disclosure: Position- Long)

Post  43220  by  ttalknet2       OT: maniati gets it right but the picture doesn't
Post  43221  by  tinljhtkh       OT: In Illinois,
Post  43222  by  jeffbas       OT: "Voting is the feedback loop."
Post  43223  by  jeffbas       OT: On MO, in a perverse way I am pleased with the
Post  43224  by  Tampathom       OT: War with Iraq: Making the world safe for Israe
Post  43225  by  pacemakernj       OT: Jeffbas, I don't know. I did not get a copy of
Post  43226  by  oldCADuser       OT: DUH!....
Post  43227  by  maniati       OT: ttalknet: I like the idea of equating voting t
Post  43228  by  clo       OT:Pace, do you really believe the very same Supre

Post  43229  by  jbennett53       Reply
maniati, hundreds of words with no meaning and you state "Equity and justice do not require that they also be their own legislature" I beg to disagree. Folks are being killed every day in this country by a Mad Dog named John Ashcroft and his Jack Booted Nazi Storm Trooper Police. Recently here in my county an old retired janitor was murdered by the local sheriff. His crime? A local junkie with a grudge against the janitors son told the Gestapo that marijuana was being sold from the residence. The jack boots invaded and murdered this poor old man. When the jury was presented with the facts they followed the law and called it a justified shooting. Under your theory November 9-10 1938 Germany was also justified. If Germans had stood up and denounced the horror of that night there was a plan by German military officers to take Hitler down and that plan would have been implemented. Nobody spoke out against the Evil and the rest is history. People need to speak against wrong no matter what the law is or the evil ones who wish to continue the killing of others. You and the Republicans and Liebermans wish to continue the killing that has caused the hate of the Muslim World. It's time that the good decent people stand up and tell your people to stop the GD madness.

Post  43230  by  andum       OT: Nixon, Illinois - Another Myth?
Post  43231  by  ttalknet2       OT: maniati, let me try again. Sorry if I heighten
Post  43232  by  pmcw       OT: andum, Don't forget TX. eom
Post  43233  by  maniati       OT: Hey, bennett, I have some neat questions for y

Post  43234  by  pmcw       Reply
Preservation and Private Property

by James E. McClure and T. Norman Van Cott

Haiti and the Dominican Republic share a Caribbean island. Haiti occupies the western portion, the Dominican Republic the eastern. An aerial photograph of the border between the two countries reveals a stark contrast (our favorite appeared in the November 1987 National Geographic). To wit, the Dominican Republic is heavily forested; Haiti, once heavily forested, is now virtually barren.

Does Haitian-like resource depletion await tomorrow's Americans? Yes, if you listen to many of our professional counterparts (and their students) at colleges and universities across the country. For these capped-and-gowned doomsters, the problem is that American capitalism's bottom-line focus shortchanges tomorrow's Americans. Capitalist decision-makers, say these critics, ride roughshod over natural resources in the same way that Buffalo Bill slaughtered buffalo and Paul Bunyan decimated forests.

"Sustainability" is the doomsters' rallying cry. The slogan is clever. It sparks apocalyptic urgency, since today's consumption of many natural resources (like petroleum) necessarily reduces future availability. The slogan also appropriates an aura of self-sacrificing piety for its proponents, while simultaneously hampering opponents by making it appear they favor "unsustainability."

Clever slogans and vivid imagery are no substitute for clear thinking. For example, the border between Haiti and the Dominican Republic convincingly demonstrates the essential role private property, which is the defining characteristic of capitalism, has in the preservation of natural resources. Haitian land ownership rights have always been tenuous, to say the least. Not so for the Dominican Republic. The stark contrast along the border of the two countries mirrors a stark contrast in land ownership rights. The pervasiveness of intergenerational myopia in Haiti traces to attenuated property rights.

The same applies to use of Buffalo Bill/Paul Bunyan-like examples to support an apocalyptic vision for natural resources under American capitalism. The fact is that Bill killed buffalo that were not owned by anyone. Ditto for the land where Paul Bunyan cut trees. Nobody owned the trees. Nobody owned the land. No wonder Paul didn't replant. A lack of private property biases attentions away from future generations. To blame capitalist institutions for something that happens when the defining characteristic of capitalism is lacking is disingenuous at best, ignorant at worst.

Our colleagues frequently respond with high-sounding nonsense to the effect that ". . . all humanity, by virtue of being inhabitants of spaceship earth, has an ownership stake in the earth's resources." Rhetoric aside, the fact is that no one effectively owns resources that "everyone owns." This explains why whales, for example, face extinction, while KFC serves up millions of chickens each week without people fretting over tomorrow's Americans facing life without fried chicken.

Private property in natural resources gives yet-to-be-born Americans a powerful voice in current resource use. These Americans "communicate" their resource desires via the prices that are expected to rule when the future arrives. The higher future prices are, the more profitable it will be for owners to delay current consumption of resources. Attempting to enhance the present value of long-lived resources in no way shortchanges tomorrow's Americans.

Of course, no one knows future prices with certainty (and that includes "sustainability" gurus). However, private owners of natural resources have an important reason to be among the most well-informed. Their personal wealth is at stake!

For hundreds of years, economists have shown that, despite the pervasiveness of self-interested behavior in the world, nations can achieve economic success as a by-product of their citizens' self-interested actions. The secret, they have said, is in getting incentives right. The evidence of world economic events over the years has demonstrated the veracity of this insight over and over again.

"Sustainability" gurus simply ignore this evidence. Instead, by attenuating private property rights, they muffle the voice that capitalism grants tomorrow's Americans. This distorts intergenerational economic incentives. That many of these gurus are well-intentioned is irrelevant. The road to hell is paved with good intentions. In economic affairs, it's important to get incentives right. If you still don't believe it, look again at a picture of Haiti's border with the Dominican Republic.