Thursday, April 21, 2005

this week's headlines

On April 19 2001, Augusto Giangrandi, a Chilean arms dealer currently the subject of half a dozen US and international investigations, ordered a discreet payment to an Iraqi company in Jordan. The transaction would ensure his supply of millions of barrels of Iraqi oil. "We need to send an additional US 30,000," he wrote to his Italian partner. "For your info, il magro is sending an additional 520 K in euros equivalent in order to cover shortages." (FT)

"We are here to see Mr Giangrandi," they barked to a secretary. The men wanted to discuss the latest foray by Augusto Giangrandi, a Chilean-Italian former arms dealer, into the murky world of Iraqi oil sales. (FT)

Dramatically broadening the scandal surrounding the United Nations Oil-for-Food program, federal authorities in New York today charged David B. Chalmers, a Houston oil trader, and his company, Bayoil, with making millions of dollars in illegal kickback payments to Iraq while trading oil under the program. (NYT)

The complaint says two Turtle Bay officials, identified only as "U.N. Official #1" and "U.N. Official #2," were targeted for bribery by Mr. Park, a Korean businessman who was the main figure in a 1970s-era Washington influence-peddling scandal known as "Korea-gate." Mr. Park is now accused of acting illegally as an unregistered agent for Saddam. (NY SUN)

UNITED NATIONS - A Canadian tycoon who is a special adviser to Secretary-General Annan yesterday acknowledged that since at least 1997 he has had business and other dealings with Tongsun Park, the Korean influence-peddler who was identified in a federal criminal complaint last week as an unregistered Iraqi agent targeting U.N. officials for bribery. (BENNY AVNI NY SUN)

WASHINGTON (AP) - People scurrying to meet tonight's tax deadline might consider this: It's taking you and your fellow Americans 6.6 billion hours to do all that paperwork. The basic tax return - the Form 1040 filed by most people every year - accounts for 1.6 billion hours.
initial excavations have substantiated the accounts of witnesses to a number of massacres. If the estimated body counts prove correct, the new graves would be among the largest in the grim tally of mass killings that have gradually come to light since the fall of Mr. Hussein's government two years ago. At least 290 grave sites containing the remains of some 300,000 people have been found since the American invasion two years ago, Iraqi officials say. (NYT)

BEIJING (AP) - China on Sunday rebuffed Tokyo's demands for an apology after sometimes violent anti-Japanese demonstrations, while new protests took place in several cities over perceived efforts by Japan to gloss over its wartime history and to gain a permanent U.N. Security Council seat.

The Department of Homeland Security (DHS) may use remotely piloted airborne vehicles to patrol the country's southern border later this year, according to an online announcement  the second such notice in less than a month. The department's Bureau of Customs and Border Protection (CBP) on Wednesday issued a request for information (RFI) on unmanned aerial vehicles (UAVs) and support systems. The latest RFI seeks information on a system with a medium-altitude long-endurance vehicle and technology to control it from the ground. Initially, the system is intended to be used on "the southern border" of the United States, it says. (Zack Phillips from The Congressional Quarterly)

Terrorism is like cancer, if not encountered it will grow and destroy everything on its path. It is generally defined as the unlawful use or threatened use of force or violence by a person or an organized group against people or property with the intention of intimidating or coercing societies or governments, often for ideological or political reasons. By this or any other accepted definition of terrorism, the inception, growth and survival of the Islamic Republic of Iran, as a system, is based on terrorism. (Iran va Jahan, Shaheen Fatemi)

Yemen's military said the have routed Iranian-backed insurgents in an offensive near the Saudi border. For the fifth straight day, Yemeni main battle tanks and artillery pounded strongholds of the Believing Youth movement in the Saada province. Yemeni government sources said Special Forces units raided several hideouts of the Shi'ite insurgency group in the area of Razamat about 240 kilometers north of Sanaa as dozens of fighters surrendered. Many of the insurgents were said to have fled north toward the border with Saudi Arabia as fighting was reported to have died down over the last day. Yemeni sources said more than 200 people have been killed in the fighting, including the No. 2 member of insurgency movement, Middle East Newsline reported. (World

Something astounding occurred last week at France, is the way it was put in a wire to us by one of our correspondents in Gaul, Michel Gurfinkiel. It seems that President Chirac went on television to defend the European Constitution. He was on for two hours and discussed the matter with what Mr. Gurfinkiel characterizes as all kinds of young people. Yet a day later, opposition to the constitution in France soared to 56% from 53%. This has sent the various elites into a continental lather in advance of France's referendum on the constitution, which is set for May 29. It seems the European Constitution won't go into effect unless all 25 nations of the European Union approve the document. (NY SUN)

waiting for the smoke to clear...................

April 17 2005


The markets certainly hate uncertainty. The recent sell off has given way to sector rotation with drugs and healthcare stocks taking the lead .Energy still looks to be the place to be . The pricing in of terrorism in the market has been getting a very hard hitting revision. Given the latest moves the fighting season may coincide with the summer driving season. The problem with pondering the imponderable is that it usually comes in a form and from and place you would least suspect. The market senses mid east tensions are again beginning to mount. Egypt has been added to the list of political hot spots along with Syria, Lebanon and Iran. These events have currently upped the ante in the global risk paradigm.

Another recent addition is the increased tension in Asia. The US is rearming and pushing to place Japan on the Security Council at the UN. Recently Japan signed on to the US policy to defend Taiwan against aggression. A rearmed Japan is a terrifying prospect for most of Asia. China which suffered terrible hardship under the Japanese occupation during World War Two is feeling acutely threatened. Friction between Japan and China is the worst it has been in 30 years or more. Add the already unstable North Korea and strong terror movements in Indonesia and the Philippians and you have brewing a recipe for trouble.

Meanwhile it is becoming reasonably clear to everyone that because of the UN oil for fraud program, the UN was in the pocket of Saddam Hussein. It now looks as if the war and the bloodshed could have been avoided if the UN had not taken the payoffs and done it’s job and enforced it’s own sanctions. The oil for fraud programs looks to have not only bought the favor of many of the Security Council members such as France and Germany but also global power brokers deep in the halls of many governments. So deep and so vast that the oil for fraud could be considered part of the social welfare fabric for many countries. Saddam used the program to buy favors and insulate himself from criticism or removal. Many on the 38th floor of the UN are now facing questions as to what did they know and when did they know it. The scandal seems to encompass everyone except one notable exception; Halliburton.

On the domestic side this week is dominated by first the tax day hangover and then Corporate Earnings. The bad earning usually hit the tape early; with better earnings filtering in as the week goes on. The pundits have gotten even more negative and the fund managers have followed suite. The market looks very over sold to me yet recent economic data is showing a slowing of the industrial and real-estate sectors. Again the jury is out weather these data releases indicate a trend. I remain primarily bullish and look at the short term volatility in the market as buying opportunities. The bearishness of the pundits and press compels me to remain bullish .The consistency of the press being always wrong when it comes to investing is mind boggling at times. This week the New York Times was touting a hot real-estate market, wow run for your life that’s one party that may be near the end.


Friday, April 15, 2005

"there is a palpable sense of frustration"

April 11, 2005


One of the trends (increasing oil prices, low inflation, low interest rates and a declining dollar) I spoke several weeks ago has made what seems to be a fundamental shift in the direction of its movement. Ever since the Condi and then the Presidential visit to Europe and many of the Europeans squawked about how the declining dollar had impinged on their ability to do trade with the rest of the world. The dollar has miraculously switched direction and slowly trended up ward. But what about the trade deficit, the budget deficit and the Iraq war you say. The truth is and always was that the decline in the dollar had nothing to do with the rest of the world passing judgment on the fate of America and the American economy. The declining dollar was a function of the liquidity the Federal Reserve (the FED) had flooded the US economy to deter deflationary pressures put on by the bursting technology bubble market meltdown and the shock of 9/11. What does this mean for investors, well at first we may see some declines in oil prices .Some exporters like steel or autos may be negatively impacted because their products may be more expensive on world markets. Agricultural products and Consumer brands may also be also be negatively affected. Many of the gains made in the last couple of years by investing in overseas markets came because the dollar declined therefore increasing the earning in dollar terms. These gains may now be few and far between .Traditionally small caps stocks have out preformed their bigger brothers during periods of a strengthening dollar. My guess is also the domestic energy companies (coal) may do well because their product becomes more valuable yet the stronger dollar gives them more purchasing power for plant and equipment. Some financials may do better also, as long as the interest rate trend doses not accelerate .As with every trend there are short term and long term effects. Lower oil prices in my view are a very short term effect and in my view a buying opportunity. The fighting season seems to be upon us. So oil looks to move higher shortly. Some exporters may have temporary windfall profits until the higher dollar takes it effect. However in the long run exports may be hurt by the higher cost of US goods to their end consumer.


Don’t forget IRA contributions for 2004 are due when you submit your taxes.

Note: for some reason on Tuesday April 12, any message left on my cell was not received by me till 6:00 at night, lost in cyberspace I guess? Don’t feel ignored as a well trained Financial Professional I will return your calls shortly.


Head Lines

In real terms, today’s gold is 70% down from its $1314 peak in January 1980. The inflation peak in those days was 10-15%, depending on the price index.So the real value of gold today seems consistent with less than 2% inflation. Gold stock indexes are about 20% below last autumn’s high, and about 40% under their mid-90’s high. (Larry Kudlow ,Kudlow and Company CNBC)
"You have to have a belief that prices are going to stay high for a long, long period of time," Raymond said in a MarketWatch interview in New York, joined by Exxon Mobil (XOM) President Rex Tillerson. "One has to be very careful of this," Raymond added. "Oil is a commodity, and it's hard to find any commodity that doesn't have a lot of cyclicality." (Exxon Mobil Chairman and Chief Executive Lee Raymond)

The world faces “a permanent oil shock” and will have to adjust to sustained high prices in the next two decades, the International Monetary Fund said on Thursday in the starkest official warning yet about the long-term outlook for energy supplies. (FT)

WASHINGTON - There's pump shock at every corner gas station, with prices well over $2 a gallon and still rising. And the government says you better get used to it. (AP)

Governors from 33 states are pushing to expand a proposed federal mandate for use of ethanol as a vehicle-fuel additive, raising hopes that growing political support for the provision will revive stalled energy legislation. (WSJ)

Russian authorities slapped BP PLC's Russian joint venture with new back-tax claims totaling 22 billion rubles, or about $790 million, undercutting the Kremlin's efforts to win back the confidence of nervous investors. (WSJ)

TYRE, Lebanon (Reuters) - Lebanon's Hizbollah guerrillas flew an unmanned surveillance drone over northern Israel on Monday, the group and the Israeli army said. "In response to repeated and continuous enemy violations of Lebanese airspace, the surveillance plane Mersad 1 carried out a reconnaissance mission in the skies of occupied northern Palestine, flying over several Zionist colonies," a Hizbollah statement said.

JERUSALEM - Ariel Sharon’s military attache presented aerial photos of Iranian nuclear installations during the Israeli prime minister’s summit with US President George W. Bush, Israeli public radio reported on Tuesday. (AFP)

Pacific Rim Bureau ( - In a major breakthrough for Chinese diplomacy, Beijing has launched a "strategic partnership" with India, laying the groundwork for deepening cooperation between longstanding rivals, which together account for one-third of the world's population.

ASHINGTON, April 8 - After two senior-level meetings between North Korean and Chinese leaders over the last two weeks to discuss the North's nuclear-weapons program, the Chinese have failed so far to persuade North Korea to rejoin nuclear disarmament talks, senior administration officials and diplomats said Friday. (NYT)

"Leaflets are handed out saying Democrats vote on Wednesday, Republicans vote on Tuesday. People are told in telephone calls that if you've ever had a parking ticket, you're not allowed to vote," he said. (John Kerry on CNN)

( - A neurologist hired by Michael Schiavo to confirm that his wife Terri was in a persistent vegetative state said he was "105 percent sure" of that diagnosis, but Dr. Ronald Cranford expressed similar certainty about a patient he examined in 1980 who later regained both consciousness and the ability to communicate.

Saturday, April 09, 2005

a 'super spike' .....2005 Opening Day Edition

April 3, 2005


Well it is that time again, a time for new beginning. All is forgiven why even Bill Clinton is going to the Popes funeral, wow now that’s forgiveness. Spring is here and with spring it is opening day of baseball season. The season has started off right back where it ended last year with the Yankees playing the Red sox. The Days are longer, the birds are singing and harmony has returned. Well not quite, oil is signaling a move higher and geopolitical storm clouds are brewing. My experience on “Wall Street” has lead me to believe that the “street” often very significantly underestimates the geopolitical and home political risks in the markets. My point here is that “Wall Street” never takes politics seriously. I have said it often my self, “if politicians were so smart they would have a real job.” But we live in a time were politics have become very serious as witnessed by 9/11, very serious indeed. So what currently lies over the horizon is affecting us today. Will the seeds of freedom and democracy take root in the Middle East or will tyrannical revolutions over whelm more reasoned people’s quest for self determination? The rumor mill is ripe with tales of a coming invasion of Syria, or a naval blockade or Iran. Perhaps the social unrest in Egypt will spill over on the streets and turn to violence creating a global caliphate or cooler heads will prevail and Egypt like Iraq will one day raise the “lone finger of defiance” and vote them selves free from the yoke of tyranny. The same scenario holds true for most of the Middle East and much of the “greater stans” ie Afghanistan, Pakistan, Uzbekistan and so on and to a lesser extent Africa. Many would say where there is oil there is revolution, I would say however where there are tyrants there is revolution and where there are tyrants with oil there is potential for global conflict, which brings us back to you the investor and why energy stocks have out performed this year and will continue to do so.

Thank you again for all the referrals this last month


Saturday, April 02, 2005

energy,inflation,interest rates and the dollar

March 28th 2005


The trend is your friend, but what is the trend? That at the moment that is the million dollar question. Will the dollar continue to decline? Will inflation flare up? Will interest rates continue to creep higher or sky rocket? And will oil continue it’s up word spiral driven by demand and fear? It is the trend that counts, not just the single events or the daily volatility. It is often very difficult for investors to discern the forest from the trees as they say. Recent events both with economy and the geopolitical suggest that the trends that have driven the market the last few years are still intact. Interest rates for moment will continue their slow steady upward climb. The FED has strongly telegraphed its intentions to the markets. The question has become how high and how long? The effect on the bond market has so far been contrary to what logic and history would suggest. While short rates have continued to rise steadily. The long bond as witnessed by consumers thru mortgage rates has risen very slowly. We may however be near the end for rate increases and this may be the inflection point in the housing markets that so many including yours truly have been warning about. Long rates may begin to jump up .I am not looking for a melt down just a stagnant environment. Real estate is very much a regional issue so some areas may be more impacted than others often depending on the local economy, property and other tax rates. The one area that we may be seeing a significant change in trend is the movement of the dollar. The change in direction may have a very negative impact on some of the major export industries. Remember the value of the dollar is dependent on the currency liquidity level another words the level of short and long term interest rates and the amount and ease of credit availability . The main stream media continues to present a falling dollar as a negative judgment being passed on the US economy, even though the US economy continues to out perform all other major industrial economies by a wide margin in virtually every economic category. The dollars recent rise is being characterized by “US economic growth outpaces Europe and Japan” gee wiz no “Shot” Sherlock. Who would have thunk it, it only took 5 years for the mainstream media to notice. I just want to say thanks guys for doing such a “professional” service to the great unwashed. On the inflation front I am still very skeptical. Even with the huge increases in fuel prices pricing power has remained marginal at best. I think the jury is still out as to weather a long term inflationary spiral is bubbling up or pricing is just performing an equalizing adjustment in a post deflationary time period.

I have noticed many of you are asking me a lot of general questions on getting your finances organized. Here are some basic steps:
1) Consolidate your accounts; most investors have disparate IRA’s, Mutual funds, old 401k’s and brokerage accounts. If the account serves no specific purpose it is time to move it. Start with old 401k’s from past employers they can be easily rolled over tax free into a single IRA. Scattered Mutual funds can be consolidated at no cost into one account. And perhaps some old brokerage accounts that no longer serve their function can be consolidated.
2) Work on a plan to pay off credit cards. Figure out the real balance and what it would take to pay them off. Remember it is not how much you make, but how much you keep that counts in the long run. Start with the smallest balance and pay extra to get rid of the balance ,once it is payed off take the money used to pay down the smallest and apply it to the payments of the next smallest ,there by snow balling your debt reduction . If you pay off a bill with a 10% interest rate you can guarantee your self a 10% return to pay off the bill.
3) Don’t be fooled by the “discount”, just like shopping it is important to know what you’re really paying. Discount brokerages often have lower commissions but have much higher fees. Many discounters charge for stock certificates, money wires, extra for limit orders, $25 fund switch charges and so on. It is often the fees you don’t see that are the largest. Full service brokers like my self don’t charge for any of that and fees are generally negotiable. Remember no matter what you invest in or advice you take someone is making money off that information, it is foolish to think otherwise. If you what help with your investments you have to pay for it and if you pay for help you should expect to get it. If you don’t pay for it don’t expect it.

James Foytlin