I am laughing about Bill Grosses comment this morning, Treasury please do not let the credit bubble burst! 

Between irresponsible lending, market to market accounting and uncontrolled leveraged investing assets prices are inflated.  The world has devalued our currency to more properly reflect the "value" of United States assets but that began to crush their economies so their central banks reversed some of the dollar decline. 

Asset prices are coming down, total earned income is going to come down, both corporate and individual; which means tax revenue (local, state and federal) is going to come down.  Many of those assets whose value Bill wants to keep inflated, exist because of loose credit and now or in the near future cannot service their debt for lack of demand or in governments cases ability to pay.

Here is the solution.  Any home destroyed in this hurricane season, the owner gets a foreclosed Fannie Mae or Freddie Mac home in Ohio, California or Nevada.  Lets use this time of natural disaster to shrink the housing base and relocate families to locations that are in less of harms way.

In one small way letting natural disasters wipe out assets, inflates the value of the remain assets achieving Bill Grosses goal of asset value stability.

I look at the chart and see $115 - $120 as strong support, I don't think it will be strong enough. 

I would argue that our economy is in far worse shape, from a structural perspective today than in 2002 - 2004.  I have mentioned that credit crunches, crunch economic activity and we are in for a pummeling.  That decreasing economic activity will lead to rising unemployment.  Given what I expect the level of excess leverage in the global financial system and just returning it to a normal level of leverage will contract the US economy by 15 to 20 percent from peak to trough and it will take five years.  I also have mentioned that mark to market accounting is going to wipe away many balance sheets unless something is done.

There is a price between $120 and $109 that if broken, we will see a decline as steep and long as third quarter 2003.  It is hard to argue that the market belongs here given the structural shape of our economy. 

I have mentioned these two stocks before and if you bought and sold them in the past, there is good chance you made some money.

NBR, Nabors industry a land based driller has taken a dramatic fall in the past few months.  I recommended it at $28 last October and it rallied all the way to $50.  It is my belief that the next administration whether it is Obama or McCain we are going to be drilling on land a lot more in the United States and Nabors Industry is the best positioned company to meet that growing demand.  I like NBR at $33, it might get cheaper, but not much.



Cree, Inc (CREE) is a Christmas play.  Yes, someone said that the retailers are going to be putting up the Christmas decorations to see if that will break the US consumer out of the consumption slump. 

I have the LED Christmas lights and just love them.  You cannot imagine how much cheaper and easier to use than conventional Christmas lights.  LED lights are the future and Cree, Inc. is the market leader.

I do not think you will be able to get below $20 again, but the price is attractive here $21.50

When a market as large as the currency market moves as much as it did last week, you would think there is a major economic event that occurred.  Well, there should have been, and it is my hypothesis that someone intervened in the dollar.  The nonsense coming from the talking heads just does not make sense or I am not stupid enough to buy the Euro recession argument. 

Just look at the fall off, way below the 200 day moving average.  Now how many dollars are there and what percent of them need to be bought and Euros sold in order to make a move like that.  Look out, it is a head fake or a FXE buying opportunity.

As we watch Freddie and Fannie slowly fade into non-existence I would like to take this opportunity to point the finger..... mark to market accounting.  The entire credit explosion and subsequent contraction we are experiencing now can be attributed, at least in part to mark to market accounting. 

As the values increased, earnings grew and borrowing occurred on those "paper gains".  As the values decrease, earnings plummet and lending is retracted and foreclosures ensue. 

Income statements and balance sheets were not subjected to the real-time valuations of economic activity and the business cycle.  Yes, the business cycle still exists and valuation of real assets change during the business cycle. 

AICPA you need solve this asset valuation problem before anyone believes the numbers. 

GM, Starbucks, and the financial services industries are announcing thousands of layoffs, is it really a surprise to anyone that at some point in time it would be reflected in initial claims?  With unemployment at only 5.5 percent, how many of you believe that the contraction in the home construction industry was fully reflected in the change?  Did all those mortgage brokers just change hats to become foreclosure specialist?

As the economy continues to contract unemployment will grow.  I am looking in Europe and seeing that those developed economies are experiencing unemployment in the 10-12 percent range and thinking why is ours only 5.5 percent. 

If our unemployment rate rose to even 8 percent, how big would our economy be?  What level would the SP 500 be?  As Mr. Greenspan once suggested in the middle 90's that the US economy was in a "Virtuous Cycle" well, this is the opposite. 

We can only hope that the US dollar remains cheap relative to other currencies in order to support our export industries.  While a dollar rally may bring commodity inflation down, unemployment would go up.  What a pickle the Federal Reserve is in.

There is much discussion on what will happen to the emerging markets as the US economy slows or as I have stated many times, contracts.  As aggregate demand in the United States falls the price of oil, concrete, timber, copper and engineering will also fall and the economies in the emerging markets will also contract at a greater pace.

Given, their equity markets have contracted significantly more than the SP 500, the question needs to be asked again.  How will the emerging market economies perform relative to US economy?  Will the emerging market economies contract or will their aggregate demand increase - from these levels? or will those economies take this opportunity to invest as the US recovers from its debt indulgence?  There is a price level that EEM is a buy and it will begin to exert is lack of correlation to the US economy and therefore market. 



It is time to get your feet wet with a quarter position, about 1.25 to 2.00 percent of your portfolio.

At some point in time it will be concluded that a landscape covered with windmills and solar panels is less attractive than one of trees, plants and critters.  That some agricultural land should be used to grow food not corn, flack and sugar beets.

The current energy debate is all about alternative means to generate electricity.  While I am a firm believer that many alternative energy solutions exists for local situations, there are regions of the country that the destruction to the environment by implementing these solutions far outweighs the benefit.  Nuclear energy and developing a national repository, not the Congressional boondoggle at Yucca Mountain must be included in the debate.

Our economy needs energy to operate, without it out we have no jobs, produce no food, manufacture no products.  We as a nation must move to an electrical future.  The more of our economy we convert to electrical energy produced locally, the less imported oil we require.  Let us set a National Goal say 80 percent of non-transportation energy is electrical and 50 percent of transportation is electrical by 2025.

I would like to see Senator Obama and Senator McCain discuss their visions of our energy future, not oil, gas or coal, but energy.  Electricity is our future!  If we Americans can accept that, then the private sector like T. Boone Pickens will take care of production.  There is room for government in Americas' energy future and that is distribution of electricity.  The current electrical grid mosaic is a National disaster and needs Presidential attention.  An efficient National distribution system where producers can supply users is as critical to America's future as a National highway system was when President Eisenhower created the Interstate system. 

Senator Obama, Senator McCain what is your position on electricity?  Energy?  A National distribution system?

It is becoming apparent to just about everyone on earth that the US economy is in shambles.  The currency is being debased, our housing market is shut down, unemployment is skyrocketing and inflation is out of control. 

President Bush, after eight years of your policy regime our economy is as bad as it was in the 1930's.  In a few short months the American public will elect a new policy maker and they will have their hands full fixing everything you and your administration broke, namely the housing market and the financial system. 

President Bush, take an early retirement and take the Treasury Secretary, SEC Chairman, and Federal Reserve Chairman with you.  You cannot fix what is broken, maybe the next guy can.  We need you to "Just say NO" to new economic, political, or military policies or actions. 

This weekend was filled with coverage of the passing of Tony Snow.  This morning I woke to news anchors discussing colonoscopies and how they are not so bad, people at 50 should get one, earlier if your family has a history. 

Now, apparently like most people the thought of a two day medical procedure that does not allow me to eat and violates my exit is not at the top of our "to do" lists.

There is a better way, Exact Sciences (EXAS) has a stool screen that is very effective in identifying colon cancer, it is non-invasive and you get to eat.  LabCorp (LH) is the distributer of this product.  Why is this product not being pushed as a low impact, attractive alternative to the medical procedure?  That is right, the FDA entered the picture decided this was not a procedure, but a device and therefore must complete more trials.  Exact Sciences already as developed the next generation of the stool screen and the FDA is obstructing its introduction.

This is how Exact Sciences product works.  You go to the doctor and they give you a little box and at your next bowel movement you collect a sample and ship it to the lab.  The lab finds a shed colon cell, (your colon like your skin sheds cells) and then they evaluate a particular chromosome that changes when cancerous.

Quick, easy, private and effective, what the hell is wrong with the FDA.  Exact Science (EXAS) is a small company with limited liquidity and the stock price moves dramatically with news releases.  I  own this stock and in fact bought some more this morning because of the price decline.  I do not know how many more people need to die from colon cancer before the FDA removes its head from its colon.