Tuesday, July 25, 2006


WE ARE IN BOOM TIMES! It is difficult to fully describe a rotation. Yes, there are interest sensitive sectors such as housing that are getting pounded. The reason is that business demand is going out the roof. The world economy is growing at the fastest average rate in the history of the world. Do I need to say that again? The world economy is growing at the fastest average rate in the history of the world.

Companies are spending money because there are huge profits to be made by investing in productivity enhancers. Productivity is roaring ahead at 4% in the US, at 17% in China!

Do you remember Say's Law? "Supply creates its own demand." A good example is that the price of electricity has seen an incredible real decline for more than 100 years and the supply has been more and more abundant; the demand has risen to meet the supply. A reader wrote last week expressing concern about too many cheap goods coming from China. I should have mentioned Say's Law in my response. The more cheap goods we buy from China, the more demand China has for computer software, education, jet aircraft and other very high margin goods. The reason profit margins are at record highs in the US is because "huge supply is creating huge demand".

Yes, the public is pulling money out of stock funds ....(to receive complete stock opinion)

Friday, July 21, 2006


Continental Airlines reported second quarter earnings that doubled its quarterly profit from last year.
Revenues rose 22.8 % while profit increased for $1.84 per share

According to the CAL report, profit was improved by fare increases and strong demand and although the second quarter is traditionally strong for CAL, airlines have been fighting the rising fuel prices
As demand for travel continues to be robust into the 3rd quarter, CALwill continue to expand international flights .

All things considered, it’s past time to buy in for the next flight. CALopen today at $29.20 per share. I see dollar signs ahead.
Write me and let's get your investments producing


It is with great joy that we read about the doubling of second quarter profit for Google announced yesterday.
Google reported a net income of $721m, or $2.33 per diluted share, up from $343m a year earlier and .39 more than Wall Street predicted.
Google also exceeded revenue expectations with more than 99% of its profit coming from advertising and added more than 8000 employees during the second quarter growing 17% in staff .
Score networks comments that although Yahoo reports a 28.5 % of the US search market it has a way to go to catch up to the 44.7% share of the search market Google claims
Since its offering, Google has always been one of our favorite stocks. With market conditions prime we expect to see more wonderful profits from Google in the future.
Go Google Go!


Folks, commercial and industrial loans are up at the annual rate of 15.3%! Capital spending is taking off like it did in the 1990's. Lodging construction is up 51%! Airlines are flying with 85% of all seats full! Unemployment is below 5%! The US dollar is holding relatively firm. China is growing at better than 11% and the entire world economy is growing at the unprecedented rate of 4%. If you cannot make money in the stock market under these conditions, when will you ever make money? Sadly, I happen to know that one of the folks who has read my material for about three years, has lost money in the market during this time. This is sad for me because the accounts I manage have done extremely well during this time; volatile yes, but also profitable. My services are offered free of charge. I make a lot of mistakes, for example just this week, I did a tax swap on Apple just before it jumped $6 per share. The point is that I can help you and your friends and if there was ever a time to be in the market, now is the time....(WRITE, Let's talk about it)

Thursday, July 20, 2006


I like the mental picture painted by John Rutledge in regard to inflation. Rutledge says the commodity bulge is like the snake that swallows an egg; the egg is consumed and the snake enjoys the meal but, until the egg is assimilated, it makes for an ugly looking snake. Rutledge is a top economic advisor. He spends a fair amount of time as a paid consultant to the Chinese government. The growth in China is remarkable. China is making the change from an agrarian society to a service economy about as fast as possible. The huge move from agriculture to industrial production was the cause of the commodities "egg". However, this huge country is already spending heavily on IT which will lead the country out of the industrial age and into the service age. It is working. The productivity numbers are unprecedented; the country is growing at an 11% rate with little inflation and productivity has hit as high as 17%! The result will be a dramatic improvment in the use of resources, the "egg" will be assimilated! The buyers of goods made in China are enjoying the low prices that are only available because of the high productivity gains.

There are two major investment camps playing a game of tug of war right now. The one group believes inflation, as evidenced by the price of gold, oil and other raw materials, is making a major historic move to the upside. The other camp, believes that inflation is really not bad, as evidenced by the relatively tame wage market, the falling price of thousands of electronic goods and services and the total elimination of many costs as a result of new technologies. Being in this camp does not require one to believe that the price of gold, etc. are going to decline sharply. We have have high demand for commodities and low inflation because the cost of most any product is better than 70% labor costs. The proof is in the fact that many of the goods that require metals for production, such as computer chips, are falling in price.

It is clear to me that inflation is tame. Another strong indication is evidenced by corporate profits. Folks, companies are setting historic profit growth records. I don't believe there has ever been another time in history when so many companies have increased profits by such large percentages year after year for four years or more. The reason the Federal Budget Deficit improved by about 100 Billion last quarter was because corporations made lot of money and paid lot of tax. Nominal GNP is not all that much above average for this stage of the business cycle but real GNP roared along during the first quarter. The only way this is possible is for real profits to be high and for inflation to be a smaller portion of GNP.

Over the past couple of months, I have correctly suggested that the economy will slow. Housing in particular has been hit by higher interest rates. However, moderate inflation is the ideal investment climate and the slowdown in interest sensitive sectors of the economy will not kill the economy but it will pop the break this inflation egg. The bulk of the increase in the price of oil from $25 to $75 has already been squeezed through the economy, another "oil egg" will only pass through if oil goes up in price from here, yet, oil is in abundant supply and is priced extra high due to fear of a fight with Iran. The reality is that thousands of "Iranian Foot Soldiers" are under severe duress right now as a result of their fight with Israel. Israel dropped 23 tones of explosives on a bunker where Hezbollah leaders were known to hang out. Because life is precious, it is my hope that the 23 tones did the job intended and took the lives of those who are willing to kill the innocent.

It is easy to become paralyzed by the news of conflict in the Middle East and by the fear of inflation as expressed by those who do not appreciate that billions of decisions are made every day that substitute raw materials that are in abundant supply for goods that are currently scarce. My latest example is that 787 airplanes are being made with composite materials not aluminum.

Moderate inflation is good news for investments in stocks, bonds and real estate. Momentum is about to make a turn. Soon and very soon, those who are running from the market with fear in their heart will be chasing the market with greed in their heart.

Low inflation is ideal for real estate and stock investments. A slowing economy is good for bond investments. Of the three, stocks are poised to do the best. Real estate is likely to test some of the peaks made last spring but many a stock is going to set new all time highs and then some. BUY THE BULL!

Wednesday, July 19, 2006


The "War" is not about to end! Israel is using aircraft to "prepare the battlefield". Because the number of sophisticated weapons provided to Hezbollah by Syria and Iran is not known, Israel will pound Lebanon heavily before sending in the troops. Understandably, Israel wants to destroy the thousands of missiles that Hezbollah is willing to fire into civilian areas. The international community has grown tired of terrorist. While there is hope that the government of Lebanon will disarm the terrorist, the international community will stand aside to allow Israel to do the job.

As you know, I have suggested time and again that the time to buy is while there is "blood in the streets". Larry Kudlow likes to quote Rothschild who said to "buy on the sound of cannons and to sell on the sound of trumpets". Anyway you say it, the break out of war is an investment opportunity. NO--not to buy write me for more

Wednesday, July 12, 2006


One must go back more than 10 years to find better stock market valuations. Ten years ago, the projected earnings to price ratio for the S&P 500 Stock Index was below where it is now but US 10 year treasury bond yields were higher. You may recall that the following four years were wonderful years to be invested in these stocks. My belief is that treasury bond yields, which were down again today, are headed for the 4% range. Should the yields reach 4%, stocks could easily support P/E ratios of 25! Current earnings projections put the ratio at less than 14. Assuming no increase in earnings and one could still imagine stocks going up 78%! Wow! (25/14 = 1.78).

Now don't go running around telling folks that I said the market is ready to move up 78%, I can imagine it happening but I am not predicting it to happen. In the energy area, I believe earnings will go up this year but I believe PE ratios will decline. The net result will be that most energy stocks companies will enjoy good earnings but the price of the stocks will not go up.


Pirates of the Caribbean set box office records. Disney is on a roll.

Chip makers are ordering equipment; orders up 24.8% so far. MSFT will release Gargantua programs by January 2007 expect to buy new machines if you want to run the new stuff. Buy equipment and software companies if you want to make money.

MSFT and Google are in yet another race. MSFT will probably be first to market with a hand held combination device that will be kin to a game boy, kin to an I-Pod and kin to a portable computer. The Google product will be more of a GPS mapping, location service and communication device. The market for these products is going to be huge. Expect continued merger activity in the equipment makers, along the lines of the Nokia deal. Motorola, Texas Instruments, Nortel and others may need to get big in a hurry or they may need to partner with Google .

There's so much more to talk about, write me