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HOUDINI OR WAR?

The way I look at it currently (and things can change rapidly), the only way Bush can stave off massive losses for Republicans this fall is to pull off some incredible magical act(s) that would even impress Houdini, or go to war with Iraq. Which do you think has the best possibility?

His two worst enemies now are H&H! You know, those two boulders around his and Dick’s neck. Bush and his Harken Corporation loans-dealings (even if legit back then) and Dick Cheney and his Halliburton years as their CEO. The Democrats have some real black powder here to make some big explosions.

There’s the imploding stock market that got manipulated by the “Plunge Team” Monday bringing it back from the brink of disaster (down 436 points at one point) to close down only 45. As I’ve said, we’re going to have a 500+ down day- at the close one day soon. The market can be manipulated for a day or so but not for the long-term, or trend.

Then there’s those “scandals de jour” that I’ve been mentioning. Seems as though the one to pop up any day this week is a “family affair”. Word has it, and USA Today carried the story, that Adelphia Communications founder, John Rigas and his three sons, are about the get nailed by the Justice Department and the SEC.

Then there’s Richard Russell using my word- ominous in his Monday letter saying that the 45% drop in the Dow Utility Index is a precursor to bad things down the road.

And finally (please), you’ve heard about the S&P500 but what about the S&P3? Coke has decided to join Boeing and Winn-Dixie as being the only three in the S&P500 who expense stock options. Talk about pressure!

Seems to me that war with Iraq is Bush and the Republicans only option. I don’t see any rabbits on the horizon!

CHILLY & DRY

I am writing this at 1:46 my biological clock time here in Napa. Temperature outside is 50 something.

After spending a couple of hours reading a few dozen news sources it seems that not much has happened recently. Here’s a couple of stories though.

The Pearl kidnappers have been given a guilty verdict, things are heating up in the Mideast again and rumors have it that Arafat is shipping millions out of the his homeland as he prepares for eventual defeat by his own party.

This is the last hurrah for the Dow- maybe. Fully 50% of the 30 stocks that make up the index report this week. And, they have to report realistically, so who knows?

It appears that little happens or that little gets written at 3 am EST so I’m going to chuck it in and get some sleep-time. Maybe the world will look different in a few hours- it usually does.

From the West Coast where everything looks optimistic!

PARTING THOUGHTS-

Today I head out for seven days and nights in northern California (I stress northern)
visiting one of my favorite “get-aways” of all time- Mendecino. Whether hiking into the redwoods of Russian Gulch, tasting wine at nearby vineyards, exchanging stories with old men and women of the area, or listening to the waves crash against the cliffs of the coastline at night, it’s totally refreshing. Did I mention the temperature range of 75 at day and 55 at night?

I will have my computer at night and 9290 Nokia Communicator during the day so I’ll be “in touch” with the world. I’ll do most posting at night since “sleeping-in” is a must! Did I mention SEVEN mornings to sleep in?
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Before I go though let me briefly mention a couple of things. The Dow crashed big time last week being down every day and four of those were triple digits to give the Dow it’s worse one week loss since 9-11.

People have just recently gotten their quarterly 401(k) statements and the losses are horrendous. They could have been prevented, Oh well. In spite of the blood on the floor many are being hyped into staying in. CNBC has been talking about the BOTTOM for two years. And of course they are telling you that this is IT. I don’t think they could find their own!

By the way, have you noticed that Bush hasn’t said a word in months about allowing people to use some of their social security funds to invest in the stock market. Does anyone remember that idea?

Fox News introduced a new program this past week entitled PULSE. One of their lead stories was the “discovery” that many al Qaeda terrorists have been coming into America via the Mexican order. Duh! Most terrorists don’t fly in any more any way- unless you’re Saddam’s step-son. The talked about sleep-cells have mostly been fueled by illegal crossings from Mexico or Canada.

Anyway, few Americans have time for such conspiracy theories or evil-doer activities. Most Americans are too busy and concerned with their dwindling wealth and stock investments. Soon this cycle will be over and we’ll get back to the fundamentals of life. In the meantime nothing seems fun.

Hasta luego-

SCANDAL de JOUR!

It’s Thursday evening and I am listening to Bill and the “Factor” as I write this for Friday’s commentary. I want to comment on the lastest fraud on Wall Street and in the halls or corporate sham-accounting or what we might as well call the “scandal de jour”.

The latest Wall Street confession involves Bristol-Myers. Not wanting Merck to have to go it alone with their $14B non-collected revenue scandal of earlier this week, Bristol-Myers announced that it was being investigated by the SEC for alleged improper accounting. I wonder who it will be Friday the 12th (feels like the 13th).

This I know for sure, there are many more out there. I have been warning for three years now that some corporate executives would trade thier pin-stiped suits for orange jump-suits; and we’re about to see the first batch go to court- then jail sometime in the near future. The whole 1995-2000 sham of parading out IPO’s by corporations that had never made a sale and did not have a sound business plan, so that the Wall Street boys (not just corporate CEO’s) could make a fast buck, was blatant fraud. We now know that.

Between now and August 14th we’re going to see a continued deterioration of the markets as truth comes to the surface. You see, August 14th is what’s now being called CEO Certification Day wherein the head-man has to sign off and certify that the numbers you, I, and the press get, he saw and approves. How novel! And, what was the CEO doing before this no-brainer concept was drawn up? Oh well! And you wonder why the Nasdog is OFF 77% from it’s 2000 high?

PS. This morning Duke Energy announced that it was responding to a U.S. Attorney subpoena out of Houston. Is this our next scandal de jour?

YA-Hoooooooooo?

Wall Street is still playing the same old game even though the “game” has been ruled officially over! Yesterday, Yahoo reported that (hold your breath now) they “beat the street” by a PENNY! Yahoooooo!

It appears that some analysts are beginning to take “cover” and instead of telling everyone to “buy-n-hold”, Merrill Lynch actually DOWNGRADED Yahoo. Say what? They actually dropped the stock’s rating from neutral to “reduce-sell”. Amazing. In the last three years, there were fewer than 1 in a hundred such calls. Things must be changing after all- maybe.

Richard Russell of Dow Theory Letters feels that we’re on the verge of a DEBT MELT DOWN and that there’s nothing that can stop it. Worse yet, one of the other few “veterans” who know what they are talking about because they have “been there”, is saying that you’ve not seen anything yet.

I’ve been predicting a 5,000 Dow and a 1,000 Nasdaq for 2+ years now but Robert Prechter (www.ElliottWave.com) is projecting a Dow UNDER 1,000. I really cannot imagine what that would be like but if you’re not afraid to listen to a bit of logic, I’d recommend you immediately go out and buy his latest book that was written THIS YEAR entitled- Conquer The CRASH! So, there will be a crash but you can live through it and even prosper. If you want to know how, buy the book! Or, one could continue to believe all that BULL from CNBC and lose more money.

VENEZUELA & WALL STREET

Following up on my commentary of yesterday, unfortunately, Carter made nothing more than a token appearance in Venezuela. He refused to extend his visit by a day to monitor the massives marches that are to occur tomorrow.

So, what kind of peace can one earn in a four days? None! And what kind of achievement did he bring to the peace process? None!

He wasn’t able to add one new idea. He could not get the parties to meet face to face. His comment at his departure was that he “thought Chavez was eager for reconciliation”. What else could a guy say about the man who invited him to the party? What else could be said when he really doesn’t know anything about the nation other than what a few people have whispered in his ear over the last few weeks. And, where did he have to go that could not be postponed for twenty-four hours.

So, Carter came, Carter went, and tomorrow the nation faces a major crises. May the tens of thousands who are expected to turn out do so in peace.
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Back here at home the euphoria of last Friday didn’t last long. As I said after the 324 point Dow run-up last Friday: it would be short-lived! I mean REAL SHORT! The last three days has seen the Dow drop a whopping 566 points (283 today alone).

The Dow is now in the 8,800 range, the Nasdog continues to head towards triple digits (now at 1,346) and the newly revamped S&P500 is close to dropping into the 800 level. Did anyone get the names of those analysts who coaxed you into buying stocks because it was going to be a great year? Maybe a license plate number? Hey, maybe some of them will even be “making” license plates soon.

TIME FOR FAIRNESS!

It seems paradoxal to be in Vegas writing this article. A place where the “house” has the odds stacked in their favor, where normal societal laws are forgotten, and where it seems little is based around the concept of “fair”. But, my 48 hour stay here is about over. It’s being here and on the run nearly 24 hours a day that caused me to miss Monday’s commentary. I trust no one suffered any major trauma as a result.

It seems a bit odd to me though that Jimmy Carter went to Venezuela this past weekend to try and bring objectivity and truth to the political and social unrest. He was brought there at the request of Chavez. Who knows if Chavez’s interest are honest or not. I can’t judge his heart or motives.

There is to be a major demonstration of the opposition this Thursday though. Tens, if not hundreds of thousands of people will demonstrate and it could be a repeat of the earlier coup attempt.

The opposition has made a simple request of Carter. Stay one day beyond your scheduled departure and observe the demonstration. If he wanted to be FAIR why didn’t he say sure? What’s one day in his schedule? What’s one more day for an observance of fairness? If his answer is no, how can anyone deem his travel there one of fairness?

BILLIONS & TRILLIONS!

After awhile value and worth just seem to lose their perspective. So, let me give you perspective that might help before I throw out some meaningless numbers.

If you were to stack $1,000 bills one on top of the other and press them firmly down, a million dollars would be four inches high. To get a billion dollars, you’ve have to have a stack 333 ft. high or the equivalent of a 30 story building. Then we come to a TRILLION: that figure that we throw around like it’s nothing. To get a trillion dollars, you’d have to have a stack of $1,000 bills that would extend 63 miles into the air! Got the picture?

Okay, now the facts. Reliant Energy just wrote off $8 billion in revenue that it really did not make in the last three years. No big deal, it’s just a billion! Worldcon has more than $30 billion in debts after getting a $450 million dollar contract from the government.

The stock market has lost $1.4 trillion in value so far this year and $5.1 trillion since March of 2000. I mean, we’re talking real money now. But fear not. Alan Greenspan is PRINTING money as fast as the machines will work. Currently, he’s on course for adding $2 trillion to the nation’s money supply this year. What’s that mean?

It means he’s scared to death of a major recession-depression. It means our credit markets are in deep yogurt. It means INFLATION will be a major problem come 2003. And Barron’s CI (Confidence Index) just took a major tumble which says to me that there’s going to be some serious and major financial-market dislocations over the next 3-4 months.

Most insiders and rumors say we’ll probably see a derivatives meltdown. We shall see. But what I do know for certain is that we’re talking big money (trillions) and no one can fathom the enormity of the problems yet to come.

But tune in to CNBC Monday and they will be parading expert after expert before the cameras proclaiming that the new bull market is now running, stocks are cheap, and you need to get on board now. By the way, most of those people have lost their clients 25-75% of the money that they invested with them over the last two years. And, they want to lose more for you- and get a commission for doing so!

LET’S ROLL….?

July 4th is past. UBL didn’t attack. Only three were killed at LAX. So, with nothing but clear blue skies ahead, it’s time to BUY STOCKS. Analyst after commentator hailed the GOOD NEWS of a bright future and the Dow took off like a rocket, ending up 324!

Ahhh, has anyone heard of “bear market rallies”? Has anyone heard of short-covering? Has anyone thought how easy it is to move the Dow on just 710 million shares traded (about half normal). Has anyone thought?

Well, as I THINK about it I see that nothing has changed. People are still in debt as much (if not more) than they ever were. The consumer is tapped out and going bankrupt at a record pace: al-Qaeda is still alive, and the war on terrorism is still in play.

And then if you really THINK about it, the markets have been oversold, down 11 of 13 weeks and way over due for a brief rally. The upward momentum might last 2-3 days more or maybe not at all but the bottom line is if you think this is one of those “Let’s Roll” rallies- THINK AGAIN, or at least don’t think with your check book.

HAPPY 4th- Independence Day!

If you are a history buff, then it’s not so much July 4, 1776 that matters as it is November 11, 1620. Let me remind you of this important event on board a ship called the Mayflower, with some 102 passengers. They were fleeing religious persecution in Europe. Before they put down anchor at what is now called Cape Cod, Massachusetts, they entered into a covenant.

On that cold November in 1620, forty-one men signed their name to a statement that said in part…”In the name of God….by the grace of God…defender of the faith….having undertaken for the glory of…solemnly and in the presence of God…”. There seems to be a common thread here- GOD!

Fewer than 50% survived that first winter. And, the hardships that they endured over the next 156 years that led up to the American Revolution were years of toil that few know. The eleven years from the Declaration of Independence and the signing of the Constitution of these United States (Sept. 17, 1787) were a test of faith indeed.

We who live today ride on the shoulders of millions of men and women who have given their lives for the concepts of freedom, democracy, and the right to worship God. It is my faith that though greatly watered-down, our collective faiths in these concepts will survive, thrive, and overcome all attempts to take God out of the Pledge Of Allegiance and take God out of our social fabric.

Yes, we are a multicultural nation, but one whose core looks to God realizing that “every good gift and every perfect gift” comes from the one true God (James 1:17).

May you and yours stop for a few moments to remember not just the day, but the men and women who fought and died for it; and the concepts that they held most high! May we not betray them, or God!

BACKING IN?

You’ve probably heard the phrase thousands of times over the last several years. So-n-so “beat the street” by how much? You got it! A PENNY! I’ve commented on this stupid ploy for years but now it’s coming to light- right on the heads of the investors and CEO’s as well.

Back before the hyper-stock days (1994), the generally accepted accounting principle was that you added up and substracted all of your quarterly expenses and income and then you found out what you made or lost! That was in the old days before CNBC came up with their cheering squad. The new hype was to see WHO could “beat the street”, even though they were not making money.

Recently, accounting practices that have brought down Enron, Dynergy, Worldcon, Tyco, and others has been to find out what “First Call” thought your income would be. You start with that “street figure” and go “backwards” to come up with a numebr that is a PENNY better. If you had to book income that was not yet realized, (Xerox) no big deal. Just make the numbers beat the street by a penny.

CEO’s got massive raises and the “working-Joe” got stock options (not expensed of course) and everyone was happy. Well, everyone was happy until corporations came to the end of the string and had to admit the truth. Everyone was in on it. The SEC promulgated favorable rules, auditing firms just accepted the CFO’s numbers as though they were written on two stones. And, everyone else just looked the other way. And, as a result we had days like Monday wherein a massive. 2.1 million shares were traded on the NYSE- 1.5 million in one bankrupt stock (Worldcon)! Well it’s not official yet but the stock has lost 98% of it’s value and it is being “de-listed” from Nasdaq Friday.

That was THEN, this is NOW, and “backing IN” is now taking on a whole new concept!

NOT ANOTHER “D”!

Many peopel feel that there is too much waste in our Department Of Defense. We pay ten times what the private sectors pays in some instances. So, if you really want to freak out, what would you think if we had TWO Departments Of Defense?

Philosophically it seems to be the case. Of course I am talking about Rumsfeld who has some definite ideas. He is the positional head of the DOD. But then there’s that other general who though his title is Secretary of State, he has much to say about war issues. And, the two do not appear to be on the same page.

But, let’s go one question further. What’s the job of our military? What’s the PRIMARY job of the central government as it relates to the constitution? Wasn’t the federal government set up to DEFEND America- to do that which we individuals, local governments, and states could not do? If your answer is YES, and I’d sure be interested if it was something other than yes, then what’s this Mainland Defense stuff?

Are we now creating two DOD’s? Are we now adding a DDOD (Domestic Department Of Defense) to the already existing DOD (that we really must now call the FDOD as in “foreign”).

Ahh, government. Be it Republican or Democrat, the sole purpose of government is CONTROL- of you, me, and everyone. And, to do that, they have to give us more and more programs and tax us more and more. I guess I could wrap this commentary up by grading what our government’s performance. How about a “D’?

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