December 30, 2005

The power of Blogs

Every business must use this tool! Period!

"Living with genital herpes can be a nightmare"

You think!!!!!!!!

I am putting together a video blog that runs 10 of these in a row. If you loop them and listen, you can't help but throw up.

Listen, I can cure General Herpes better than the medicine they are pitching on TV. You probably wont even spend the next 24 hours on the toilet with cramps, blurry vision, your toenails falling off and your teeth turning a light shade of green. These commercials are a comic's dream.

They are so insulting. Maybe its not the legislation holding back drug companies, its these nasty commercials with a one second description of the product and a 10 minute listing of how your butt will feel.

I heard a comedian ponder the commercials that Budweiser would have to air if held to the same legislation.

Budweiser side effects include: vomiting, a year in prison with your new bride Vic, you may sleep with your best friend's wife........

So many putzes, so little time to hassle them.

December 29, 2005

January means one thing - MacWorld

Was chatting over some sushi with my good buddy Ian (Spiritual Gangster) about our second annual trek to hear our boy Jobs spread the gospel of Apple. With Steve Case funding a $500 million fund aimed at spiritual industries, and the convergence of tech, fashion and media, I am looking for big, bold deals in 2006.


We both think that the show will revolve around the Mini Mac. It will be cheaper,sleeker and more functional as an information and entertainment hub for American Living rooms. Can't wait to be a part of it. Sonny S. will be showing us the local spots and we are counting down the days.


Bring it on....

Internet - Long Tail economies - not just a buzzword anymore?

Having almost started a music business focused on the longtail economy and the Ipod craze, I have spent a whole year talking about the term. It is now more mainstream and could be here to stay. More insight below from www.ventureblog.com:

Where's The Money In The Long Tail?
By David Hornik on December 13, 2005 11:56 PM | Permalink | Links In | Print | Comments (10) | TrackBack (0) | Categories: Consumer Internet & Media and Internet Infrastructure and The Economy & Finance
Six months ago there was barely a pitch I heard that didn't include a slide entitled "Long Tail" or "The Long Tail of [fill in the vertical]," with the obligatory long tail curve. Impressively, it has taken less than a year of entrepreneurs explicitly referencing and explaining the Long Tail before it has become so well recognized and understood that it need only be implicated in passing without the same sort of fanfare as it used to receive. This is by no means an indication of the diminishing relevance of the Long Tail. Quite to the contrary. It is a recognition that the Long Tail is so obviously relevant and important as to no longer require explanation. Saying "Long Tail" is like saying "viral" or "search engine optimization" -- the concept is part of the standard parlance for VCs and entrepreneurs alike.

Yet despite the fact that "Long Tail" has become short hand, the economics of the Long Tail are, to my mind, still often misunderstood. I continue to hear funding pitches that talk about the Long Tail as a powerful enabler for content creators. Companies are presented to me premised upon the increased value of Long Tail content for musicians and artists and film makers. The fact that increasingly the likes of Amazon and iTunes make it possible for Long Tail authors or bands to sell a few books or records through legitimate, recognized channels is touted as the revolution of the artist. Far from it.

It is certainly the case that in the aggregate, Long Tail content is extraordinarily valuable. The question for VCs and entrepreneurs is "for whom?" I've had the good fortune over the last year or so to engage in a number of conversations about the economics of the Long Tail with Chris Anderson and to see those economics illustrated by innumerable Long Tail investment pitches. And, from those conversations and pitches, I have come to the conclusion that there are essentially two general classes of technology the will benefit economically from the Long Tail -- aggregators and filterers. And while both aggregators and filterers rely upon the increasing volume and diversity of content to assure their value in the ecosystem, that growth of content will not have a material impact upon the value of any one piece of content floating somewhere in the Tail. The value will all inure to the benefit of the aggregators and filterers. So who are the aggregators and filterers?

The aggregators are those web businesses that seek to collect up as much of the Long Tail content as is possible, so as to make their "stores" a one stop shop for content no matter how popular or obscure. That aggregation may be on a horizontal basis, as is the case with Amazon or Netflix, or it may be on a vertical basis, as is the case with WantedList or GameFly (the Netflix of porn and video games respectively). The value to consumers from these content aggregators is that they need not shop in dozens of places on the web in order to acquire a diverse set of content. As a result, aggregators are able to extract a disproportionate amount of value for the sale of each individual piece of content. And while creators are likely to sell slightly more content as a result of the increased ease of salability, they will not likely emerge from the obscurity of the Tail merely because they are made available for sale on Amazon or iTunes.

The filterers are those businesses that make it easier to find the content in which we are interested, despite the increasing proliferation of content creators, hosts, aggregators, etc. The purest form of filterer is the search engine. But the more obscure the content, the less effective the generalized search engine will be. Thus, I have been pitched on an increasingly large number of vertical search engines that use their thematic focus (shopping, real estate, employment, etc.) as a proxy to increase search effectiveness. And I have also seen an increasing variety of clever technical solutions to help filter the myriad of available content (for example, Pandora uses professional musicians analyzing songs based upon a standard set of characteristics and Delicious and Flickr use forms of end user tagging to characterize a disparate set of content). Again, while these different filtering technologies may make it slightly more likely that an end user finds his or her way to a piece of obscure content, it will not likely be sufficient to catapult an artist into the mainstream. The beneficiary of the filtering is the end user and the filterer, not the content owner per se.

(As an aside, I believe that it is difficult to be an aggregator without also being a filterer. It will be hard to sustain the scale necessary for an aggregation business if you don't initially also provide some of your own filtering tools. For example, Amazon has long been a leader in collaborative filtering, as has Netflix for that matter (interestingly, iTunes has been the laggard in this respect and I anticipate that we will see innovation on the filtering side from Apple soon enough). Once a business has reach scale as an aggregator, it can then rely upon mechanisms like affiliate programs and content syndication to empower others to be the filterers for their content (this has happened with Amazon in spades). But until that time, it will be necessary for aggregators like iFilm or Rhapsody to come up with their own clever filtering mechanisms to help consumers fully appreciate and navigate the breadth of the content they have to offer.)

None of this is intended to express any skepticism about the power of the Long Tail or the importance of the phenomenon. Long Tail economics are implicit in virtually every new media company I spend time with. But I think it is helpful for venture capitalists and entrepreneurs alike to focus on where the money is in the Tail. The real money is in aggregation and filtering and those will continue to be interesting businesses for the foreseeable future.

Internet - RSS - sweet spot!

Another big trend in information will be the continued emergence and improvement in RSS technology

Special thanks to www.ventureblog.com for sharing your knowledge:

RSS - Really Something Special?
By Kevin Laws on February 8, 2005 08:03 AM | Permalink | Links In | Print | Comments (5) | TrackBack (15) | Categories: Internet Infrastructure
Is RSS for real, or is it today's Social Networking?

It is hard to travel Silicon Valley these days without hearing the term RSS. People who don't even know what the term means want to invest in it, create companies around it, or add it to their products. (VentureBlog's David Hornik correctly predicted the rise of RSS over a year ago). AskJeeves just purchased Bloglines this week, spurring more interest in the space.

The core concept isn't new. Push technology was the hot trend of the mid 90's, spawning PointCast, Marimba and a host of others. What's changed is the wide adoption of RSS as a standard, enabling an explosion of new products and services.

Really Short History

At its core, RSS is just Really Simple Syndication - literally. That's what those three letters stand for. It is a way of organizing content so that it can be understood by a machine; kind of HTML for computers (in fact, RSS is a form of XML).

It was used long ago to serve up changing content to the portal at Netscape (for example, new AP news stories). Bloggers have since adapted it to serve up articles they write so they can reach their audience more easily. If I make this article machine readable, then you don't need to check VentureBlog every day to see if we've written anything new. Since we use RSS (via FeedBurner), your computer will do that for you. It can distinguish one article from another even if they're on the same page, and tell if a new one appears. Your computer can deliver it as a message to your email inbox, or create a page of all the interesting articles on the web that day. This has since extended to news sites (like MSNBC and CNN). Now other creative services on the web like Netflix are creatively using RSS to deliver new release information and recommendations.

Those are simple examples. Making the content machine-readable allows a host of new services and tools to aid you in navigating changing content on the web. Many are already in development.

RSS Landscape Today

RSS is developing in the same order as the World Wide Web: content, browsers, plumbing, media, and finally business.

On the web, a few scientific and academic sites had web pages, which led enterprising coders created browsers. The most popular of these, Mosaic, was eventually duplicated by the same team to form the basis of Netscape. Ultimately, Microsoft built it in to their products as Internet Explorer. Next, tools addressed the plumbing needed to manage all of the content: search, creation, management, security, personalization, serving, etc. Altavista, Excite, Yahoo, and a host of others were born. The media sites came along shortly thereafter (portals, mostly), and finally business came to the web.

While the evolution of the web was not as neatly organized as I've implied, that was the general development track of web businesses. RSS is going through the same phases, though much more quickly since people have the web model as a reference. The space is breaking down into similar stages:

Browsers (readers): As RSS spread widely, thoughtful engineers designed a series of useful readers. These allow you to specify the content you want, and the reader will find and deliver it to you. There are now many readers, including You Subscribe, NewsGator, and IntraVNews (for Outlook), SharpReader (Windows client), NetNewsWire (Mac), Bloglines and My Yahoo (Web), as well as many others.
Plumbing: We are just starting to get tools to deal with the profusion of RSS content. These include?
RSS Search engines: Technorati, Feedster, and others.
Portals for RSS content: Technorati, FeedDemon, Bloglines, Syndic8, Del.icio.us, Blogdex, etc.
Content Managers & Servers: Six Apart, Blogger, Feedburner, others.
There are still interesting services to create in this area, including personalization, security, and other tools surrounding RSS. Plumbing is the area getting the most VC attention these days. When a VC says they're looking into RSS, they generally mean infrastructure.
Media: This has grown up with the readers. Some of the existing players are now supporting RSS feeds, and the blogging phenomena has thrown up some new stars (Boing Boing, Instapundit, Endgadget, etc.).
Business: RSS is still in the plumbing phase, so business and commerce concepts, such as advertising inserted in RSS feeds or charging for subscriptions are just now starting to appear. Some companies are also starting to poke around consumer commerce - Dulance, for example, is providing RSS feeds of price search results, so you know when prices change on items you've been eyeing. Others are exploring syndication of business data, or using RSS as a business communications standard.
The Future Of RSS?
Unlike the original push towards push technology, the open RSS standard is already widely adopted. As with the web, this may allow a variety of interesting capabilities which extend RSS capabilities in different directions.

One direction relates to automating tasks for you. This is basically the return of agent technology. Now that a wider variety of web sites are available in machine readable format, it should be possible to tell your computer things like "tell me when an article about gnosticism appears". While this is similar to the stored searches on Google, the fact that RSS aggregators are closer to real-time makes this more valuable. The best analogy is "Tivo for the Web" - specify web sites to definitely "record" and the agent can also record a selection of potentially interesting web posts.

Another direction is enterprise use for RSS. Imagine replacing Microsoft Exchange with an interlocking array of RSS feeds. Each user with Outlook receives their shared calendar, contacts, and other information from subscriptions to RSS feeds. Or they become contributors, sharing one of their calendars with others. I'm sure reading that sentence inspires a host of potential objections for why RSS can not do that. Yet.

Overcoming those objections with new solutions will inspire a new wave of RSS companies, along with some of the current players. Existing enterprise solutions will then be able to adopt RSS as a communications mechanism that isn't limited by sharing a Microsoft Exchange server, allowing standardized information sharing. This direction more or less completes the promise of interoperability that began with XML.

As both examples imply, however, RSS is more evolution than revolution. It is not a brand new Internet; rather, it is an improvement on the existing one that has finally pushed machine-to-machine content communication over the tipping point. That certainly allows some interesting and very large opportunities, particularly in search and collaborative filtering (see the Attention.XML project). However, after several companies become successful laying down the plumbing and infrastructure to support it, for the most part it will become a tool integrated into existing platforms (much like XML).

Most of the future winners already exist, with only a few more to come in the infrastructure and business areas. While the space is evolving rapidly, I will be shocked if more than a handful of companies become large enough to be standalone ventures. More likely, current players will be acquired very soon if RSS does become mainstream for other applications.

In the meantime, we're finally getting a set of new content and services on the Internet. Enjoy.

Internet - Social Networking

I am talking my position here, but this will be big in 2006 and beyond. Old models have been revamped and the opportunity cost to new and established brands is too large to ignore.


Social Networks 3.0
By David Hornik on December 4, 2005 07:16 AM | Permalink | Links In | Print | Comments (12) | TrackBack (0) | Categories: Consumer Internet & Media and Internet Infrastructure and Podcast
I have received a lot of calls recently from reporters interested in discussing social networks. It reminds me of the set of calls I got way way back in 2004. The reporters today want to know what I think of social networking companies and if the venture capital community remains excited about social networks. I certainly don’t claim to speak for the venture capital community. But I am happy to share with them my thinking about social network. And, while a well tread topic here at VentureBlog, it may be worth revisiting social networks given the ongoing activity in the space.

For those of you who have long commutes, or are joggers, or simply prefer the sonorous tones of my voice, you can check out my podcast on the topic at VentureCast. For the rest of you (and those of you who have complained that you think I'm being lazy by recording my thoughts rather than writing them) let me take a second to share my thinking on the evolution of social networks.

Let me simply start with this. I am a huge fan of the fabric of social networking. I believe that it makes up a crucial piece of the online communication that is driving the consumer web experience. But I do think that social networks have undergone an significant and important evolution, even since 2004, which will continue to pay dividends for end users.

For what it is worth, to my mind we are now experiencing Social Networks 3.0.

Social Networks 1.0 were built during the late 1990s to enable the initial set of consumer services that created such excitement about the promise of the web. Services like eGroups/OneList, ICQ, Evite and many many more relied upon groups of users organizing and communicating on the web through coordinated networks. Those networks were not explicitly described as such but they were the underpinnings of these communications platforms.

Social Networks 2.0 began in the early 2000s when entrepreneurs got to thinking about the nature of their online networks and the power that could come of making those networks explicit. Services like Friendster, Tribe, Orkut, LinkedIn, Spoke emerged to allow users to organize their recreational and business networks. The focus of those services as they were first built was to enable the creation, growth and management of an explicit social network. In other words, the consumer experience of Social Networks 2.0 was around the creation and discovery of the network itself, rather than a particular use of that network.

I believe that we are now in Social Networks 3.0. After a fair bit of excitement and energy around pure play social networks, it became clear that the building and management of a social network was not, in and of itself, a compelling consumer experience. In a nod back to the earliest instantiations of social networking, entrepreneurs have come to realize that social networks are enablers of other compelling consumer experiences. Thus, social networks are becoming an important ingredient of all sorts of consumer experiences. Social networks inform the conversations that take place among friends on LiveJournal. Social networks enable the discovery of new music on MySpace. Social networks enhance the multi-player gaming experience at Xfire. Social networks now empower recruiting on LinkedIn. And dozens of new social networks are emerging to enable specific, valuable consumer experiences that are enhanced by the underpinnings of the network.

I am more than a little excited about Social Networks 3.0 because I believe that social networking will be a crucial element of virtually all online consumer experiences going forward. And truly compelling online consumer experiences will always make successful companies. Thus, I look forward to seeing how social networking continues to evolve. I see great things in the future for Social Networking 4.0, whatever that ends up being.

More 2006 Predictions

'twas the Thursday before New Year's and not a piankiller was working. Let me say that Percocet is way way better than Vicodin.

I left off after prediction number 6.


7-10 - More, better, INTERNET.


There is just so much going on and in such innovative, cost sensitive ways that there is no reason to look further than this. I already talked about information and it's continued importance as my number 2 prediction.


www.youtube.com, tagclods, tagging, RSS feeds, Newgator, Blogging, Social Communities, longtail economies (Ipod/Itunes as an example).


Early innings of the revolution, so stay tuned and focus on exploiting the negative. Great brands will go on sale. Notice Ebay down from 60 plus to 30 this year (what an opportunity). yahoo in the 20's. apple in the 30's, google quadruples. They were there for the picking and others will be this year.

Some Good Business Insight from Seth's Blog

Clean firetrucks

We live in a neighborhood where all the firehouses are run by volunteers. I don’t know how we’d get by without them... they do brave work, with little credit.

One thing you’ll notice is how clean the trucks are. “Why are the trucks so clean,” a friend asked? After all, a clean firetruck isn’t a lot better at putting out fires than a smudged one.

The answer: Because when there isn’t a fire, the firemen wait for the siren to ring. And while they’re waiting, they clean the truck.

Sounds a lot like where you work. Most organizations are staffed with people waiting for the alarm to ring. Instead of going out to the community and working to prevent new fires, the mindset is that firemen are working to put out the fires that have started. Hotel desk clerks don’t write letters or make calls to generate new business—they stand at the desk waiting for business to arrive. Software engineers are often overwhelmed with an endless list of programming fires—and rarely get a chance to think about what they ought to build next.

The structure of most organizations (and every single school I've ever encountered!) supports this. It’s about cleaning your plate, finishing your assignments and following instructions. Initiative is hard to measure and direct and reward. Task completion, on the hand, is a factory orientation that is predictable and feels safe.

In fast-changing markets, clean firetrucks show attention to detail but rarely lead to growth and success.

What a great way to describe a stuck but busy organization. "They sure have clean firetrucks."

Posted by Seth Godin on December 29, 2005

Apple and Google sitting in a tree - See previous Post

Another reason why the title stocks go up and Microsoft does not is posts like my last one where Jeff Matthews describes the event of the year.

www.youtube.com - Very cool site

I watched a Thomas Friedman - Discovery Channel - video on India and Outsourcing the other day and now this from Jeff Matthews. I love the way some people can look at the year and the events and give you some different angle and perspective

Thursday, December 29, 2005

The Business Story of the Year.


Parnell: Yo where’s the movie playin’?
Samberg: Upper West Side, dude.
Parnell: Well let’s hit up Yahoo Maps to find the dopest route.
Samberg: I prefer Mapquest—
Parnell: That’s a good one too.
Samberg: Google Maps is the best!
Parnell: True dat!
Both: Double true!
Samberg: 68th and Broadway—
Parnell: Step on it, sucka…
—“Lazy Sunday” video from Saturday Night Live


The business story of 2005—if I may be so presumptuous as to declare it myself (and, since this is my blog, I will)—can, I think, be summed up quite neatly in the following URL:

http://www.youtube.com/watch.php?v=oZOsgQC8qqM&search=SNL%20

That URL takes you to a web site called YouTube (“Broadcast yourself. Watch and share your videos worldwide!”).

YouTube contains almost any kind of video you want to see—from Ashlee Simpson’s lip synch unmasking on Saturday Night Live to OJ Simpson’s car chase and the Beatles’ final gig on a rooftop in London—and many you don't, particularly the bizarre and highly personal videos posted by individuals you’d rather not have your daughter bring home for dinner, if you catch my drift.

The video you will see at the above URL is a Saturday Night Live-sponsored “digital short,” called “Lazy Sunday,” and it shows two earnest young white Manhattan-ites rapping earnestly about going to see “The Chronicles of Narnia.”

And for those of us who have failed to find anything funny coming out of Saturday Night Live since, oh, Eddie Murphy or Martin Short left, the video is hilarious.

What does a YouBet video have to do with the Business Story of the Year?

Well, it was created, produced, filmed, edited and uploaded digitally, very likely without the use of a single product from Microsoft. Furthermore, it was searched for and downloaded by hundreds of thousands of individuals likewise without the expenditure of a single dollar going to Microsoft.

Finally, and not surprisingly, not one of the products shown or rapped-about in "Lazy Sunday" mentions a Microsoft product.

Which is why, in the category of “Most significant business story of the year 2005,” I nominate the undermining of Microsoft’s monopoly by a band of mostly anonymous individuals who did it with nothing much more than ideas in their head and lines of code in their computers.

Which is, I think, pretty cool.


Jeff Matthews
I Am Not Making This Up

New Blogging Software

Great Tech Site - www.techcrunch.com

Any other comments on this software?

Wordpress 2.0 - The Good and the Bad
Posted by Michael Arrington | Discussion: 14 comments
We’ve switched TechCrunch over to Wordpress 2.0. Not everyone is interested in the feature set of the Wordpress blogging platform, so I’ll keep this brief.

To see a good overview of the new features, see Asymptomatic.

A big change is the ability to create categories on the fly, from the post page, with Ajax. This was previously a multi step process. Since Technorati and other blog search engines view categories as synonyms to tags, this is a quick way for most users to quickly and easily tag their posts without adding additional code.

Another big improvement is the enhanced “view post preview” function. This shows the post exactly as it will look on the blog, with all formatting and CSS that will be applied. This is a welcome feature.

They’ve also added a wysiwyg rich text editor. I disabled this immediately, although many users will like it.

Now for the bad. The new image uploader is a train wreck. Yes, they’ve moved it to the post page which removes a click. However, what took a couple of steps before now takes five or six because I format images in a very particular way which the uploader doesn’t support. It also has default settings, like thumbnails, that require extra clicks to get This needs to be fixed or I will literally go crazy. At the very least, just showing me the URL string for the uploaded image will get me back some of the functionality lost.

The image URL folder is now reset every month as well, and so I can’t easily find old images, either. They didn’t think through this very well, or at all.

Transition took a few days (yes, days) before comments and images were showing properly (thank you, Bryan, for doing this) The support site provides some help, but the depth of questions and obvious user frustration shows that many, including me, should have tested it out before transitioning our entire blog there.

Yes to the Phoenix SUN

Loving this news. I hate sunscreen. 80 degrees and golfing today. Enough said!



Revealed: The Simple Pill That Prevents Cancer
A daily dose of vitamin D could cut the risk of cancers of the breast, colon and ovary by up to a half, a 40-year review of research has found. The evidence for the protective effect of the 'sunshine vitamin' is so overwhelming that urgent action must be taken by public health authorities to boost blood levels, say cancer specialists.

A growing body of evidence in recent years has shown that lack of vitamin D may have lethal effects. Heart disease, lung disease, cancer, diabetes, high blood pressure, schizophrenia and multiple sclerosis are among the conditions in which it is believed to play a vital role. The vitamin is also essential for bone health and protects against rickets in children and osteoporosis in the elderly.

Vitamin D is made by the action of sunlight on the skin, which accounts for 90 percent of the body's supply. But the increasing use of sunscreens and the reduced time spent outdoors, especially by children, has contributed to what many scientists believe is an increasing problem of vitamin D deficiency.

After assessing almost every scientific paper published on the link between vitamin D and cancer since the 1960s, US scientists say that a daily dose of 1,000 international units (25 micrograms) is needed to maintain health.

'The high prevalence of vitamin D deficiency combined with the discovery of increased risks of certain types of cancer in those who are deficient, suggest that vitamin D deficiency may account for several thousand premature deaths from colon, breast, ovarian and other cancers annually,' they say in the online version of the American Journal of Public Health.

The dose they propose of 1,000IU a day is two-and-a-half times the current recommended level in the US. In the UK, there is no official recommended dose, but grey skies and short days from October to March mean 60 percent of the population has inadequate blood levels by the end of winter.

The UK Food Standards Agency maintains that most people should be able to get all the vitamin D they need from their diet and 'by getting a little sun'. But the vitamin can only be stored in the body for 60 days.

High rates of heart disease in Scotland have been blamed on the weak sunlight and short summers in the north, leading to low levels of vitamin D. Differences in sunlight may also explain the higher rates of heart disease in England compared with southern Europe. Some experts believe the health benefits of the Mediterranean diet may have as much to do with the sun there as with the regional food.

Countries around the world have begun to modify their warnings about the dangers of sunbathing, as a result of the growing research on vitamin D. The Association of Cancer Councils of Australia acknowledged this year for the first time that some exposure to the sun was healthy.

Australia is one of the world's sunniest countries and has among the highest rates of skin cancer. For three decades it has preached sun avoidance with its 'slip, slap slop' campaign to cover up and use sunscreen. But in a statement in March, the association said: 'A balance is required between avoiding an increase in the risk of skin cancer and achieving enough ultraviolet radiation exposure to achieve adequate vitamin D levels.' Bruce Armstrong, the professor of public health at Sydney University, said: 'It is a revolution.'

In the latest study, cancer specialists from the University of San Diego, California, led by Professor Cedric Garland, reviewed 63 scientific papers on the link between vitamin D and cancer published between 1966 and 2004. People living in the north-eastern US, where it is less sunny, and African Americans with darker skins were more likely to be deficient, researchers found. They also had higher cancer rates.

The researchers say their finding could explain why black Americans die sooner from cancer than whites, even after allowing for differences in income and access to care.

Professor Garland said: 'A preponderance of evidence from the best observational studies ... has led to the conclusion that public health action is needed. Primary prevention of these cancers has been largely neglected, but we now have proof that the incidence of colon, breast and ovarian cancer can be reduced dramatically by increasing the public's intake of vitamin D.' Obtaining the necessary level of vitamin D from diet alone would be difficult and sun exposure carries a risk of triggering skin cancer. 'The easiest and most reliable way of getting the appropriate amount is from food and a daily supplement,' they say.

The cost of a vitamin D supplement is about 6 cents per day. The UK Food Standards Agency said that taking Vitamin D supplements of up to 1,000IU was 'unlikely to cause harm'.

What it can do:

-- Heart disease

Vitamin D works by lowering insulin resistance, which is one of the major factors leading to heart disease.

-- Lung disease

Lung tissue undergoes repair and 'remodelling' in life and, since vitamin D influences the growth of a variety of cell types, it may play a role in this lung repair process.

-- Cancers

Vitamin D is believed to play an important role in regulating the production of cells, a control that is missing in cancer. It has a protective effect against certain cancers by preventing overproduction of cells.

-- Diabetes

In type 1 diabetes the immune system destroys its own cells. Vitamin D is believed to act as an immunosuppressant. Researchers believe it may prevent an overly aggressive response from the immune system.

-- High blood pressure

Vitamin D is used by the parathyroid glands that sit on the thyroid gland in the neck. These secrete a hormone that regulates the body's calcium levels. Calcium, in turn, helps to regulate blood pressure.

-- Schizophrenia

The chance of developing schizophrenia could be linked to how sunny it was in the months before birth. A lack of sunlight can lead to vitamin D deficiency, which scientists believe could alter the growth of a child's brain in the womb.

-- Multiple sclerosis

Lack of vitamin D leads to limited production of 1.25- dihydroxyvitamin D3 which regulates the immune system, creating a risk for MS.

-- Rickets and osteoporosis

The vitamin strengthens bones, protecting against childhood rickets and osteoporosis in the elderly.

December 28, 2005

40 Year-Old Virgin

Run, don't walk to your local videostore and watch the chest wax scene and drunk girl pick-up scene,

Better deal than the $34 inflated Pizzas.

Forget Oil prices - Check out Pizza

NYPD makes a pretty good pizza. Let me start by saying that. But $34 freaking dollars for two large pizzas. TO GO!

I am not a penny pincher or one to look at my food bills, but this is inflation and this is not talked about.

In oil talk, it is the equivalent to talking seriously about invading the cheeseheads of Wisconsin. How about bombing a Ragu plant in Italy. These are our tactics to bring down the price of oil, which has not shown price increases like those in a slice of pizza - an American food staple.

I gladly will pay $34 to fill up my Element, but for a couple of take out pizzas?

Pricing is set as if someone has cornered the cheese and sauce market.

I will enforce a household rule that we will not pay more than $9.99 for a takeout pizza.

Things are getting a little out of hand down here in sunny Phoenix. I smell the inflation and today it came in a pizza box. Tomorrow, maybe a milkshake or Grilled Cheese.

Nice Gold Trade

I am selling half my trade into the Consumer number this morning with golf now touching 520 an ounce. My cost basis is getting lower and lower and the fundmantals of gold look better and better. Good bull market bounce of $490. Was a little early at an average of $505, but could see 530 tomorrow.


My post on December 14th was as follows


Gold Dips briefly below 500

Sometimes, the markets can hand you money. I think this is one of those moments. A $40 sharp pullback in Gold, entrenched in a bull market is a time to buy.

Let's see where Gold settles in the next few days

The Story of Wheat

Great article from the Economist

The story of wheat

Ears of plenty
Dec 20th 2005
From The Economist print edition


The story of man's staple food


IN 10,000 years, the earth's population has doubled ten times, from less than 10m to more than six billion now and ten billion soon. Most of the calories that made that increase possible have come from three plants: maize, rice and wheat. The oldest, most widespread and until recently biggest of the three crops is wheat (see chart). To a first approximation wheat is the staple food of mankind, and its history is that of humanity.

Yet today, wheat is losing its crown. The tonnage (though not the acreage) of maize harvested in the world began consistently to exceed that of wheat for the first time in 1998; rice followed suit in 1999. Genetic modification, which has transformed maize, rice and soyabeans, has largely passed wheat by—to such an extent that it is in danger of becoming an “orphan crop”. The Atkins diet and a fashion for gluten allergies have made wheat seem less wholesome. And with population growth rates falling sharply while yields continue to rise, even the acreage devoted to wheat may now begin to decline for the first time since the stone age.

It is time to pay tribute to this strange little grass that has done so much for the human race. Strange is the word, for wheat is a genetic monster. A typical wheat variety is hexaploid—it has six copies of each gene, where most creatures have two. Its 21 chromosomes contain a massive 16 billion base pairs of DNA, 40 times as much as rice, six times as much as maize and five times as much as people. It is derived from three wild ancestral species in two separate mergers. The first took place in the Levant 10,000 years ago, the second near the Caspian Sea 2,000 years later. The result was a plant with extra-large seeds incapable of dispersal in the wild, dependent entirely on people to sow them.

The story actually starts much earlier, around 12,000 years ago. At the time, after several warm millennia, a melting ice sheet in North America collapsed and a gigantic lake drained into the North Atlantic through the St Lawrence seaway. The torrent of cool, fresh water altered the climate so drastically that the ice age, which had been in full retreat, resumed for a further 11 centuries. The Scandinavian ice sheet surged south. Western Asia became not only cooler, but much drier. The Black Sea all but dried out.

People in what is now Syria had been subsisting happily on a diet of acorns, gazelles and grass seeds. The centuries of drought drove them to depend increasingly on wild grass seeds. Abruptly, soon after 11,000 years ago, they began to cultivate rye and chickpeas, then einkorn and emmer, two ancestors of wheat, and later barley. Soon cultivated grain was their staple food. It happened first in the Karacadag Mountains in south-eastern Turkey—it is only here that wild einkorn grass contains the identical genetic fingerprint of modern domesticated wheat.

Who first replanted the seeds and why? For a start, he was probably a she: women have primary responsibilities for plant gathering in hunter-gatherer societies. The time was certainly ripe for agriculture: the ability to make tools and control fire (cooking makes many plants more digestible) was already well established. But was it an act of inspiration or desperation? Did it perhaps happen by accident, as discarded grains germinated around human settlements?



The wheat plant evolved three new traits to suit its new servants: the seeds grew larger; the “rachis” which binds the seeds together became less brittle so whole ears of grass, rather than individual seeds, could be gathered; and the leaf-like glumes that covered each seed loosened, thus making the grains “free-threshing”. In the past two years, the very mutations that allowed these changes have been located within the wheat plant's genome.

Wheat's servants now became its slaves. Agriculture brought drudgery, subjugation and malnutrition, because unlike hunter-gatherers, farmers could eke out a living when times were bad. But at least that meant that they could survive. Population growth was now inevitable. Within a few generations, wheat farmers were on the march, displacing and overwhelming hunter-gatherers as they went, and bringing with them their distinct Indo-European language, of which Sanskrit and Irish are both descendants. By 5,000 years ago wheat had reached Ireland, Spain, Ethiopia and India. A millennium later it reached China: paddy rice was still thousands of years in the future.

Wherever they went, the farmers brought their habits: not just sowing, reaping and threshing, but baking, fermenting, owning, hoarding. By 9,000 years ago they had domesticated cattle, to which they could feed wheat to get meat and milk. They could also get precious manure to fertilise the fields. Not until 6,000 years ago did somebody invent the first plough to turn the earth, burying weeds and breaking up the seedbed.




Innovations came slowly in wheat farming. The horse collar arrived in the third century BC, in China. By not pressing on the animal's windpipe, it enabled the animal to drag greater weight—and faster than an ox. In 1701 AD the Berkshire farmer Jethro Tull devised a simple seed drill based on organ pipes, which resulted in eight times as many grains harvested for every grain sown. Like most agricultural innovators since, he was vilified. A century later the threshing machine was greeted by riots.

In 1815 a gigantic volcanic eruption at Tambora in Indonesia led to the famous “year without a summer”. New England had frosts in July. France had bitter cold in August. Wheat prices reached a level that would never be seen again in real terms, nearly $3 a bushel. Thomas Robert Malthus was then at the height of his fame and the harvest failure seemed to bear out his pessimism. In 1798 he had forecast a population crash, based on the calculation that it was impossible to improve wheat yields as fast as people made babies (each new baby can make more babies; each new field of grain leaves less new land to cultivate).

The Malthusian crash was staved off in the 19th century by bringing more land under the plough—in North America, Argentina and Australia especially. But wheat yields per acre grew worse if anything as soil nutrients were depleted. So in 1898, in a speech to the British Association, a chemist, Sir William Crookes, argued again that worldwide starvation was inevitable within a generation. Population was rising fast. There was little new land to plough. Famines became worse each season, especially in Asia.

This time it was the tractor that averted Malthusian disaster. The first tractors had few advantages over the best horses, but they did not eat hay or oats. The replacement of draft animals by machines released about 25% more land for growing food for human consumption.

The Malthusian limit would surely be reached one day, though. The only way to increase yield was to find a way of supplying extra nitrogen, phosphorus and potassium to the soil. Neither a break crop of legumes, nor manure was the answer, since both demanded precious acres to produce. The search for fertiliser took unexpected turns. British entrepreneurs scoured the old battlefields of Europe searching for phosphorus-rich bones. In about 1830 a magic ingredient was found: guano. On the dry seabird islands off the South American and South African coasts, immense deposits of bird droppings, rich in nitrogen and phosphorus, had accumulated over centuries. Guano mining became a profitable business, and a grim one. Off South-West Africa, the discovery in 1843 of the tiny island of Ichaboe, covered in 25 feet of penguin and gannet excrement, led to a guano rush followed by a mutiny and battles. By 1850, Ichaboe, minus 800,000 tonnes of guano, was deserted again.

Between 1840 and 1880, guano nitrogen made a vast difference to European agriculture. But soon the best deposits were exhausted. In the dry uplands of Chile, rich mineral nitrate deposits were then found, and gradually took the place of guano in the late 19th century. The nitrate mines fuelled Chile's economy and fertilised Europe's farms.

On July 2nd 1909, with the help of an engineer named Carl Bosch from the BASF company, Fritz Haber succeeded in combining nitrogen (from the air) with hydrogen (from coal) to make ammonia. In a few short years, BASF had scaled up the process to factory size and the sky could be mined for nitrogen. Today nearly half the nitrogen atoms in the proteins of an average human being's body came at some time or another through an ammonia factory. In the short term, though, Haber merely saved the German war effort as it was on the brink of running out of nitrogen explosives in 1914, cut off from Chilean nitrates. He went on to make lethal gas for chemical warfare and genocide.

On farms, Haber nitrogen ran into much the same revulsion as had greeted the seed drill. For many farmers, the goodness of manure could not be reduced to a white powder. Fertiliser must in some sense be alive. Haber nitrogen was not used as fertiliser in large quantities until the middle of the 20th century, and for a good reason. If you put extra nitrogen on wheat, the crop grew taller and thicker than usual, fell over in the wind and rotted. On General Douglas MacArthur's team in Japan at the end of the second world war a wheat expert named Cecil Salmon collected 16 varieties of wheat including one called “Norin 10”, which grew just two feet tall, instead of the usual four. Salmon sent it back to a scientist named Orville Vogel in Oregon in 1949. Vogel began crossing Norin 10 with other wheats to make new short-strawed varieties.

In 1952 news of Vogel's wheat filtered down to a remote research station in Mexico, where a man named Norman Borlaug was breeding fungus-resistant wheat for a project funded by the Rockefeller Foundation. Borlaug took some Norin, and Norin-Brevor hybrid, seeds to Mexico and began to grow new crosses. Within a few short years he had produced wheat that yielded three times as much as before. By 1963 95% of Mexico's wheat was Borlaug's variety, and the country's wheat harvest was six times what it had been when Borlaug set foot in the country.

In 1961 Borlaug was invited to visit India by M. S. Swaminathan, adviser to the Indian minister of agriculture. India was on the brink of mass famine. Huge shipments of food aid from America were all that stood between its swelling population and a terrible fate. One or two people were starting to say the unsayable. After an epiphany in a taxi in a crowded Delhi street, the environmentalist Paul Ehrlich wrote a best-seller arguing that the world had “too many people”. Not only could America not save India; it should not save India. Mass starvation was inevitable, and not just for India, but for the world.


No need to starve


Borlaug refused to be so pessimistic. He arrived in India in March 1963 and began testing three new varieties of Mexican wheat. The yields were four or five times better than Indian varieties. In 1965, after overcoming much bureaucratic opposition, Swaminathan persuaded his government to order 18,000 tonnes of Borlaug's seed. Borlaug loaded 35 trucks in Mexico and sent them north to Los Angeles. The convoy was held up by the Mexican police, stopped at the border by United States officials and then held up by the National Guard when the Watts riots prevented them reaching the port. Then, as the shipment eventually sailed, war broke out between India and Pakistan.


Natural-born mutants
As it happened, the war proved a godsend, because the state grain monopolies lost their power to block the spread of Borlaug's wheat. Eager farmers took it up with astonishing results. By 1974, India wheat production had tripled and India was self-sufficient in food; it has never faced a famine since. In 1970 Norman Borlaug was awarded the Nobel Peace Prize for firing the first shot in what came to be called the “green revolution”.

Borlaug had used natural mutants; soon his successors were bringing on mutations artificially. In 1956, a sample of a barley variety called Maythorpe was irradiated at Britain's Atomic Energy Research Establishment . The result was a strain with stiffer, shorter straw but the same early harvest and malting qualities, which would eventually reach the market as “Golden Promise”.

Still Pictures


Today scientists use thermal neutrons, X-rays, or ethyl methane sulphonate, a harsh carcinogenic chemical—anything that will damage DNA—to generate mutant cereals. Virtually every variety of wheat and barley you see growing in the field was produced by this kind of “mutation breeding”. No safety tests are done; nobody protests. The irony is that genetic modification (GM) was invented in 1983 as a gentler, safer, more rational and more predictable alternative to mutation breeding—an organic technology, in fact. Instead of random mutations, scientists could now add the traits they wanted.

In 2004 200m acres of GM crops were grown worldwide with good effects on yield (up), pesticide use (down), biodiversity (up) and cost (down). There has not been a single human health problem. Yet, far from being welcomed as a greener green revolution, genetic modification soon ran into fierce opposition from the environmental movement. Around 1998, a century after Crookes and two centuries after Malthus, green pressure groups began picking up public disquiet about GM and rushed the issue to the top of their agendas, where it quickly brought them the attention and funds they crave.

Wheat, because of its unwieldy hexaploid genome, has largely missed out on the GM revolution, as maize and rice accelerate into world leadership. The first GM wheats have only recently been approved for use, their principal advantage to the farmer being so-called “no till” cultivation—the planting of seed directly into untilled soil saves fuel and topsoil.

Soon after Norman Borlaug went to India in 1963, a remarkable thing began to happen. The world population growth rate, in percentage terms, had been climbing steadily since the second world war (bar a two-year drop in 1959-60 caused by Mao Xedong). But in the mid 1960s it stopped rising. And by 1974 it was falling significantly. The number of people added each year kept on rising for a while, but even that peaked in 1989, and then began falling steadily. Population was still growing, but it was adding a smaller and smaller number each year.

Demographers, who had been watching the exponential rise with alarm, now forecast that the population will peak below ten billion—ten gigapeople—not long after 2050. Such a low forecast would have been unthinkable just two decades ago. Already, in developing countries, the number of children born per woman has fallen from six to three in 50 years. It will have reached replacement-level fertility (where deaths equal births) by 2035.

This is an extraordinary development, unexpected, undeserved—and apparently unnatural. Human beings may be the only creatures that have fewer babies when they are better fed. The fastest-growing populations in the world over the next 50 years will be those of Burkina Faso, Mali, Niger, Somalia, Uganda and Yemen. All except in Yemen are in Africa. All are hungry. All remain untouched by Borlaug's green Revolution: all depend on primarily organic agriculture.

In 10,000 years the population has doubled at least ten times. Yet suddenly the doubling has ceased. It will never double again. The end of humanity's population boom will happen in the lifetimes of people alive today. It is the moment when Malthus was wrong for the last time.

Of course feeding ten billion will not be trivial. It will require at least 35% more calories than the world's farmers grow today, probably much more if a growing proportion of those ten billion are to have meat more than once a month. (It takes ten calories of wheat to produce one calorie of meat.) That will mean either better yields or less rainforest—which is why fertilisers, pesticides and transgenes are the best possible protectors of the planet. The story of wheat is not finished yet.

More on the Yield Curve - It's Implications

Bill Cara does a great job below, discussing the yield curve and implications. A must read and something you can refer back to on many occassions. Thanks Bill.

December 28, 2005
Yield curve focus, Wed., Dec. 28, 2005, 8:35 AM
There are two aspects of bond yields that traders must keep in mind. One is the level of yields, which I see as a reflection of how much capital there is in the world seeking a reasonable risk-adjusted return, and the other is the slope of the yield curve, which I see as being an indicator of economic health. These are separate but not mutually exclusive concepts.

A country’s central bank and Treasury administration works together to (i) maintain stable financial and capital markets, (ii) act as key money facilitator of government operations, and (iii) be an important instrument of the Administration’s political policies.

For many years in the U.S., until George Bush became President in 2000, the Federal Reserve Bank was able to keep a fair distance from the White House. But, whether by design or by events related to international terrorism and natural disasters, it is clear today that politics and central banking are fused.

Some argue that this mixture is like oil and water (no pun intended), and should be kept apart like Church and State (again no pun intended). As I see it, there is no longer a benefit to maintaining separation between the Fed and the Treasury because the Fed now operates mostly in the short-term.

I wonder if anybody has ever seriously considered having Congress elect a Fed head for six-year terms that would offset the four-year Presidential cycle (and the appointment of the Treasury head).

In any event, due to the size of the bond market, neither the Treasury nor the Fed can manage the long-term bond yield as well as they can and do the short-term rates. In fact, in just five years, the bond market has grown so huge, and the percentage of U.S. Treasury debt in the control of foreign traders (now over 50 pct versus one-third in 2000) that I believe U.S. monetary policy is out of control, i.e., it can no longer be used as an effective control mechanism.

So, with respect to the yield curve, I now believe that international financial and capital markets are in control.

What does that imply? For one, the occupant of the White House is no longer the master of his domain. From this point forward, whenever financial and capital market risks, and opportunities for creating wealth, warrant the re-investment of foreign capital into their own domestic economies, foreigners will sell their holdings of U.S. debt. And the moment that begins to happen, the U.S. bond market will fall, and rates will rise.

And if the U.S. economy happens to fall into recession, where turnover of the money supply falls, and money becomes scarce, the short rates will rise faster than long rates.

I suspect that 2006 will see the first recession in the U.S. since foreigners have gained control of the U.S. bond market. Should the economies of Asia/Pacific and Latin America regions continue to grow strongly, I believe that the USD will come under extreme pressure, and the Treasury and Fed will have no option but to reflate. In fact I think they started this process in September.

Such a move makes U.S. bonds relatively more attractive than equities, and gold more attractive than USD.

As I say, I think the process has started, and the scorecard will be the Living Yield Curve.

To reiterate, the flatter the curve, the more attractive bonds will be relative to equities. The higher the level of rates, the less attractive bonds become, but the more risky equities become (average PE multiples will fall). In both cases, gold will out-perform.

As traders come to realize what I am saying has currency, the price of gold has been rising. In fact, gold today is up a further $5.50 to this point. It is now at $515.50 on the Feb-06 contracts.

Where gold will under-perform is when the living yield curve begins to slope back to normal, where long rates are significantly higher than short rates, because that will imply that real wealth is being created, and that assets should be allocated to those processes rather than let sit unallocated in cash or gold.

One other point, which you have seen me making for some time in going short U.S. financial stocks versus long the gold sector. a U.S. recession -- regardless of reflation -- will hurt the profitability of commercial bank and mortgage lenders. Make no mistake about that.

How could it end?

In simple terms, the bond market dwarfs the size of all other markets in the United States. It makes senses than that financial decisions at the government level, take on more importance when they are dealing with bond market issues.

As a middle class American, one which has capitalized on the 15 year housing boom to buy three homes, than sell at higher prices, the bond market has been very important. it has been - "vedy vedy gooood to me"

I have simply assumed that demand for our bonds and mortgages has remained strong, so rates have remained low. Last year, when our Paradise Valley Home sold for double it's value, I knew it was time to downsize. We were extremely stretched to take on the home in the year 2000. We made money for all the wrong reasons. We thought we were paying top dollar at the time. We almost walked away from the house when the square footage appraisal came in 100 feet lower that the number we made a decison on. Our agent, a most successful one still today, said that tyou can't measure a home like this by square footage, you need to consider the lot size and location.

We wanted the house and we paid. Bad decision, unbelievavble gain. Best we will ever make. Now that we have moved that gain into other investments by downsizing, I feel like the luckiest person alive. We thought we were buying the home of our dreams so we stretched. That's what "they" (haven't tracked "they" down) say. By the middle of last year, I couldn't believe how much my dream house and monthly income become so entwined, hence the main reason to sell.

I feel lucky, because the house sold the first day and although prices continue to rise, we profited from an out of character investment that was supposed to be our dream house even though it never would have been a dream house.

I don't feel the country or all the new home buyers and speculators can possibly remain so lucky. Part of Mark Cuban's legend is that he sold to Yahoo for an ungodly amount. The genius is that he took control of the situation and created immediate liquidity for himself. There is no one dream house, or one perfect business, the key is to capitalize on that one dream business that comes along, because you only need one in your lifetime.

All these perfect dream house buyers and sellers and STRETCHERS (like me) will be caught. They always are. I firmly believe the reason is unknown, It is never one textbook reason. If it was, I would be practicing economics, because I was good at understatnding the textbooks.

The facts are - we have inflation, people are stretched, the dollar is manipulated (big time) in the short-term, political and economic decisions have never been so closely tied, Asian and Indian economies (not just Japan) offer exciting growth opportunities for Americans, Asians and Europeans to move their capital, and the good times have really been going on a long-time in this housing cycle. To me, with our stock markets still well off their 1999 highs, we have had two phenomenon working in our favor - the US Dollar and our Culture.

In the beginning of the US dollar decline the last 4 years (not including 2005 as it was a strong one for the US dollar), the combination of cool culture, weak dollar has proven to be a big boom, sort of a phenomenon. For Europeans and Asians, it was like - "Cool. Look how cheap it has become to see the monkeys in their own environment" Than, - "Cool Hans, you mean with the Euro so strong, I get get a condo, on a golf course on the beach, near a PF Changs and a Domino's and play with the monkeys whenever I want. That would cost me one bazillion euros and 2 bazillion yen and three bazillion fleegn floggns. Who cares about the sqaure footage, this is cheap in US Dollars! I willl take three. Next christmas, Mama and Papa and yound ismael can come."

I think 2006 is when we see the risk of losing our dollar. I think only the sense of risk would be all that matters, but that we could really lose control of the value. I am a little lazy to write about all the scenarios, so I will search for them and refer them here . Stay Tuned

Simply, I would conclude that with places like Macau, and the Mediterranean and all the other resort opportunities for newly Global rich, a sense of boredom will settle in for having four homes in the US for the Europeans and Asians. The Global airlines are in an upgrade cycle as well that won't be so kind just to America.

Culture will be neatly packaged and exported to these great new places. We are good at that. Once the combination of our culture packaging (Apple - taking the first big step), and weak dollar take firm hold, look out below. Interesting times ahead indeed!

December 27, 2005

Overstock

The first few days of Channukah have not been kind to Patrick Byrne of Overstock.com. He's lucky Chanukah is only 8 days and not Ramadan's 30 days or he would wake up at the end of January with the stock at zero.

Patrick - only 5 more days left - hang in there.

As Al Pacino says - hoohah!

Inverted Yield Curve - NEVER a healthy sign for ECONOMY

Looking for more signs of an economy that looks good on the surface - mall parking lots's, restaurants, home prices, but troubled underneath, check out today's yield curve.


I was reading about it this morning and was looking for a simple explanation. Sure enough, trust the blog world. Here is Bill Cara's interpretation:


December 27, 2005
Inverted yield curve, Tues., Dec. 27, 2005, 7:37 AM
Traders who want to see the "living yield curve" can go to this link, and slide the diamond symbol at the bottom of the chart along the date line. At different points over many years where the yields invert, you might wish to look at the broad market indexes at that same time.

Early this morning, the yield on the 2-year U.S. Treasury Note was higher than the 10-year. A pure definition of an inverted curve says that the 10-year yield is less than the T-Bill yield, but today where the 2-year is higher than the longer-term yield, that is a serious problem for bank and mortgage lenders.

Moreover, an inverted yield curve condition in financial markets has a perfect record in indicating an unhealthy economy.

Rather than get caught up in discussion of recession vs no recession, equity traders need only concern themselves with what I refer to as an “unhealthy economy”.

Gains that are being made in the economy today are largely resulting from (i) increased use of debt, and (ii) the wealth effect from equity and house prices, which, due to the speculative premium that exists at times, is not sustainable.

A healthy economy needs investment that produces real wealth in the form of new goods and services, priced in constant money value i.e., inflation-adjusted.

The inverting yield curve is telling us that too much capital today is being directed to trading for financial gain as opposed to investment to build real wealth. These situations never end well for traders who chase prices higher who are unskilled at the game of musical chairs.

Going back to the Living Yield Curve, you can see that in 1979-82, at the last peak of the gold cycle, and going into recession, there was an inverted yield curve. You will also see one in 1989-90, going into recession, and one in 1Q2000, at the peak of the last equity speculative peak. The only time that I can see in recent years where the yield curve was normal during a stock market crash was October 1987, and that had a lot to do with the rapid run-up in debt and the increased margin rates at the time.

Taking some profits in Japan

Hard for me to argue with the record of Bill Cara, so his call today for a top in Japan is worth heeding. I have sold some Japanese and Korean Holders and am a net seller of US stocks this week.


Thanks Bill -

December 27, 2005
Cycle peak in Japanese equities, Tues., Dec. 27, 2005, 6:50 AM
Japan’s main stock market index has been rising at an unsustainable pace. The Nikkei 225 now stands at 15,969, which is a +48.3 pct move since mid-May-05 when it reached a cycle bottom of 10,770. What is striking about this bull phase is that it comes not off a major over-sold spike bottom, but one that had been flat for 18 months.

But today the Nikkei suffered a loss of –0.86 pct (-138.27 points) as traders learned the Tokyo Stock Exchange (TSE) may soon raise the margin rates, according to the financial newspaper Nihon Keizai. Traders everywhere need to take heed.

Internet stock trading in Japan, which is based on loose margin rules, has been exploding in volume, and the Nikkei has just reached a five-year high. Speculation abounds.

According to the Japan Securities Dealers Association, about 30 percent of all trading is now done via the Internet (versus ~20 pct two years ago) and individual traders who use margin extensively are doing about 60 pct of that.

According to Nihon Keizai, the TSE may soon increase the minimum margin deposit from 30 pct of the purchase price to 40 or 50 pct. In addition, the upper limit on the value of stock that can be counted as collateral for margin trading will drop from the current 80 pct to 70 pct.

Such a move would be like shouting “Fire!” in a crowded theater.

Shares that have been bought on margin on Japanese exchanges now exceeds 5 trillion yen, which is an increase of +1 trillion yen in just one month. Not since the Aug. 1991 has total margin debt been so high.

In fact, the all-time margin debt record (10 trillion yen) was set in 1Q90, as the Japanese reached a massive speculative all-time peak in equity prices. After new margin rules had been installed at that point, the Nikkei dropped from ~40,000 to ~20,000 in one year.

Today’s warning to individual traders of equities is clear: a +48.3 pct gain in seven months is not sustainable. Moreover, such a price move in Japan cannot be justified by economic or corporate fundamental reasons either.

And the almost +5 pct move last week in four days, was speculation, pure and simple.

Such enthusiasm – speculation really -- will now likely come to an end with the increase in margin requirements. Moreover, the Bank of Japan is set to raise its bank rate for the first time in many years. So a cycle peak in Japanese equities is at hand.

The timing of the pull-back in the broad market indexes in the world’s second largest economy, which I am suggesting could be next week, is likely to coincide with the same cycle peak on the NYSE and Nasdaq.

As I see it anyway.

December 25, 2005

Oncology

I mentioned in an earlier post that oncology was a faster growing industry than Sleep.


One stock that would benefit directly from this is RTSX, which was created to buy oncology centers. They recently purchased the clinic of a good friend of mine in Phoenix. As smart a doctor as you will find so I will give them the initial heads up. The stock has had one hell of a run in it's early public life, but there would seem to be plenty of room for growth in the next 3-5 years. It is on my buy list to add during 15-20 percent drops - last week was the most recent one.

While you are printing money....

I think it would be cool to make every American a Millionaire. In Yen, I would be there already.

I can see the headline now....



NY TIMES

January 1, 2006

In a move that began with pressure from Uber Blogger Howard Lindzon, Greenspan created another currency called the Sitheroo that when converted from American Dollars and redeemed at WalMart, made each American a Millionaire.


According to Greenspan:"We are all millionaires so I can now retire in peace. My work is done. The shame of it all is I could have done this so much earlier and saved all the printing costs!" Patrick Byrne of Overstock.com will be replacing Greenspan as Fed Chairman. Byrne immediately granted every American (meeting certain criteria) 5 million Sitheroos to spend at Overstock.com which should "put an end once and for all to all the Jewish shortsellers in my stock."

Speaking Of Mergers

Here is a doozy already and it is in Japanese retail, a category I did not mention in my 2006 predictions. From Bloomberg News:

Seven & I Offers 238 Bln Yen for Millennium Retailing (Update5)
Dec. 26 (Bloomberg) -- Seven & I Holdings Co., the world's largest convenience store operator, offered to buy Millennium Retailing Inc. for as much as 238 billion yen ($2 billion) to add Japan's Seibu and Sogo department stores to its retail network.

Nomura Holdings Inc.'s private equity unit agreed to sell its 65 percent stake in Millennium for 131.1 billion yen in cash, Tokyo-based Seven & I said in a statement today. The company will offer cash or stock for the remaining shares.

Seven years of deflation in Japan have left supermarkets unable to match sales growth at department stores, which renovated outlets to attract shoppers. The acquisition will strengthen Seven & I's position as the nation's biggest retailer, helping it fend off Wal-Mart Stores Inc., which in September took control of Seiyu Ltd., an unprofitable supermarket chain.


My comment - Yen is a cool name for currency.

2006 Predictions

1. So much Capital, so few opportunities equals many more mega mergers. Combined with the mergers, will be many corporate unwindings (maybe Time Warner leads the way). Mergers will help keep a lid on any 20 plus percent selloffs in the US markets in 2006. Energy, Internet, Biotech and Financials will show the most activity.

2. Information is still king and those companies that deliver it in unique ways will provide great growth opportunities again, as they have since the beginning of the printing press. Apple, Yahoo, Ebay, Google will remain the buzz media companies (not much of a stretch, but they continue to execute!)

3. Videos prove to be more popular than music as a download. Apple keeps on trucking but there will be a hiccup at some point during 2006 - a buying opportunity.

4. Inflation becomes a hot topic, likely in the first quarter of 2006. Gold passes $600 per share in 2006.

5. The convergence of fashion and technology continues - Apple gets a hostile takeover bid.

6. Blackberry, Palm and the Motorola Q - no prediction, just excited to see how this play's out. I am tempted to try a TREO 700 and Motorola Q as soon as they are released. As a devoted Blackberry fan, that means anything could happen in this space.


More to come..

Sleep Industry

SNY - If you like Ambien, this is your stock.

RESP - make the personal breathing (sleep) machines) for home use. I have tried and tried, but just can't get used to them. The masks will get better and thise that commit to the process, swear by their machines.

RMD - more home sleep apnea producrs

SEPR - New approved drug - Lunesta - to compete with Ambien.


The returns in this industry have been phenomenal. The lesson is that a trend does not have to be flashy, fashionable and exciting - like Apple's Ipod or Blackberry's Rimm - to create outsized gains.


The aging of America and the growing middle class in China and India will provide countless opportunities in the capital markets.

On-Line Gambling

New York Times did a piece about how Goldman, Fidelity and Morgan have taken investments in offshore gaming businesses, deemed illegal in the United States.

They have gone so far to hire an expert to calculate their risks of being prosecuted.

As usual, class acts amongst the three institutions. Shameless, putze's, every single one of them.

Munich or Schindler's List

Is making out with a girl in Munich as bad as Schindler's list?

December 23, 2005

Cramer and Kudlow

They sucked together and they suck more apart. I mean they really suck. Can anyone be more annoying than Cramer. Yes, Kudlow.

My wife screeches if I happen to watch it (Cramer) for the laughs.

CNBC may be the worst channel and least value added of all-time. They have sunk to new lows with these shameless shows.

The US market can only hope to churn as long as Cramer is the top rated show of CNBC.


GE - you should be ashamed

Gold - a different opinion

The continued rise in Asian markets is yet another reason to expect continued inflation around the world. Commodities will continue to boom and should be bought on dips. The most talked about commodity is always gold. It has had a good year, but pales in comparison to other base metals like Copper. I like Gold because it is more liquid and has many stocks to trade.

I came across this cool article by about Gold by Mark Cuban:

All the gold in Ft. Knox…Sell It
I’m going to stray from the topics I normally cover to talk about gold.
The NY Times Magazine had some great articles on Hedge Funds and investing. One article in particular caught my attention.
The article was about gold and the people who follow it as an investment and those who believe it is the foundation of our world’s economy. As the article states, “To a small but extremely avid subculture in the American financial community, gold doesn’t mean bling, or King Midas, or them thar hills. Gold is money; and not just money, but the one true money.”
Which got me thinking and made me ask the question… Why do people still think that gold has any more significance than any other precious metal or commodity?
I understand that gold was a common denominator as currency between countries starting more than a thousands years ago. I understand that until it was delinked from our currency that it was possible to exchange currency for gold and that created a “world currency.”
But the world has changed since then. Where gold acted as the ultimate hedge against the devaluation of currency in the past, that is no longer the case. Gold is priced in dollars. Not services or other commodities. If the markets and economies were to crash, a basement full of gold bullion would just take space. I couldn’t imagine farmers trading chickens and milk cows or fresh vegetables for gold bullion. For guns , ammunition, gas and oil, yes. For gold no.
Nor could I imagine a scenario where our currency was completely devalued and a gold standard was reinstituted. The reality is that our population , and the world population has gotten too big. There isnt enough gold in the world, let alone in the US to reconstitute a new currency based on gold.
So to get to the point. Its easy to understand why the US needs to maintain oil reserves. Without, the country could grind to a halt. Government oil reserves would at least allow us to fight over who got to keep their lights on and their cars running.
What I don’t understand is why we still keep $10 billion dollars worth of gold stashed in depositories around the country.
My suggestion, let’s sell it.
Let’s sell it a little bit at a time so that we don’t freak out the markets and decimate the price.
Let’s sell it and pay down some of this country’s debt. I know its just a dent. But in order to pay off a debt, you have to make the first payment.
Let’s sell it before some other country beats us to it.
Let’s sell it while the price is over $42 per troy ounce.
Just storing and protecting all of that gold has got to cost a fortune. Let’s jump into the 21st century and sell it all.
And for the record, I’m not part of any organizations discussing this. I have not had any contact with the government regarding this idea. I am not part of any conspiracy although I fully expect to be entertained by such suggestions and by all the educational comments Im sure to receive on this post.

Asia - just the beginning

Asian Stocks Advance for Ninth Week in Longest Rally in More Than 12 Years.



This is the headline tonight on Bloomberg News. This can't be ignored. It is not just China. Japan, Korea, Malaysia. Combined with the power of ETF's. there is a long list of ways to profit from this trend. DO NOT IGNORE.


There will be plenty of bumps along the way to dollar cost average so it is never too early to get involved.

Overstock - More must read

I was in the hospital today andf randomly watching Bloomberg TV. Patrick Byrne was being interviewed and he was making no sense. Than agaiin, I was on a lot of Percoded. I have read some goofy stuff on him at Jeff Matthews blog so when I checked, sure enough he posted about it and I posted it for you. Now this from Mark Cuban:


This will make a good movie someday… overstock.com
You never think this stuff really happens, but it does. There are crazies out there, and in a population of thousands of public companies, at least one is going to be run by someone who is a little bit “off”.
I dont know Patrick Byrne personally. I have followed his comments as CEO of Overstock.com because I am short 20k shares of the stock (Which i shorted because Patrick Byrne is CEO), and because he is extremely entertaining. Humor, even if unintentional is hard to find in the business world, so from that perspective, his efforts are much appreciated.
I have written in the past about his amazing conference call that will go down in business history as the most bizarre ever. When Broadcast.com first broadcast live an Insight Enterprises quarterly earnings call, and then archived it for future listening back in 1996, I never could have imagined that any call would reach such entertainment heights.
I have written in the past about one of Mr Byrnes pet topics, Naked Shorting and how its become its own little XFiles conspiracy community with people matching Byrne with their paranoia. The only question about those guys is which will come first, a Law & Order episode mocking them or one of them actually stabbing themself in the foot to try to prove that someone is truly after them.
In any event, I guess it should come as no suprise when Mr Byrne made some comments about me in an interview this morning on Bloomberg Television . This in turn led to a request for comment from Bloomberg.
It was all humorous to me, so i thought i would share. Hope you get a chuckle out of it.
On Fri, 23 Dec 2005 1:07 pm, JEANNINE DEFOE, BLOOMBERG/ NEWSROOM:
wrote:
>
> Mark,
> Hello, my name is Jeannine DeFoe and I am a reporter with
> Bloomberg News.
> Patrick Byrne of Overstock.com was on Bloomberg television earlier
> today and made some critical comments about you and short-sellers in general.
> Here is a quote:
> ``I can tell you that Cuban’s friends, what they’re going to do is
> come after me in January, they’re trying to get the SEC to launch an
> investigation, I think they’re going to try to get the DOJ to investigate me. Some of
> the people I’m up against are mobsters. I fully expect you’re going to hear
> about the police stopping me with a pound of heroin, or a dead body, or
> something in my trunk.’’
> We want to give you a chance to respond
my response
Patrick byrne is a paranoid fool. I am short 20k shares. I would love to
short many many more shares because a rule of thumb I have is that
companies run by people I feel are paranoid fools, tend to go out of
business. That makes them a good short

Unfortunately, I can’t borrow any more shares to short. I do business
through UBS. Nobody in their organization has a way to short more
shares. (Puts are too expensive. Even shorting the stock has a huge
rebate expense attached)

I have no idea who he is referring to as my friends, but I am happy to
swear to the fact , and you can take this as a sworn statement that I
have never discussed ‘going after’ him. Nor do I have any sense of what
he is talking about.

in a perfect world, if I want a company to fail, I wouldn’t go to the
SEC, or to the DOJ. (Neither of which I have ever done, nor do I plan
to) I would just try to get them to hire Patrick Byrne.



PATRICK IS A WORLD CLASS PUTZ AND YUTZ

Overstock -Must Read

If any of the stuff that Jeff Matthews writes about Patrick Byrne - CEO of Overstock - is true, all I can say is wow!

Check this piece out below.


Friday, December 23, 2005

Conspiracy of the Jews?—Part II


When I published “Conspiracy of the Jews?” two weeks ago, I was roundly criticized by many readers for going over the line.

In that piece I questioned why Overstock.com CEO Patrick Byrne had thought to slam the respected New York Times columnist Thomas Friedman, for having a pro-Israel bias in his editorials, in a Motley Fool rant about ace financial reporter Herb Greenberg and star "Mad Money" host Jim Cramer.

It was hard to imagine any CEO bringing up an issue in a manner smacking of anti-Semitism, and I was skeptical even Patrick Byrne would have written the following about Greenberg and Cramer:

"They resemble Thomas Friedman's write-ups on the Arab-Israeli conflict: "Let's see, Arabs, Israel, Arabs... Israel, Arabs........ Israel...... okay, I gotta call this one for the Israeli's." In op-ed after op-ed."

What on earth, I asked, did Tom Friedman’s supposed pro-Israel bias have to do with the subject of Byrne’s rant, other than that all Byrne’s target in the piece were Jewish?

Yet, while Byrne really did write that stuff, readers used the space below to call “Conspiracy of the Jews?” “hysterical” and “claptrap” and worse.

So in case you're one of the hundreds of millions of Americans who do not listen to something called the Christian Financial Radio Network, let me “drill down,” as the analysts like to say, into the religious issue, by reporting here on an interview CFRN did with Overstock.com CEO Patrick Byrne, including a segment about who or what appears to be behind the naked shorting financial scandal he believes to be hurting his company.

The interview took place on Friday December 16th, and it lasted for an hour and a half. (You can listen to it at a speeded-up rate in far less time on the CFRN web site).

In the midst of the usual paranoid-sounding diatribe against the so-called naked short-selling scandal, Byrne is encouraged to get specific about the root causes of the problem. The host asks:

“Are we dealing with the traditional old-boy network or has organized crime gotten involved?”

To this, Patrick Byrne says the following, and I quote him:

“Every rabbit hole you go down leads to either [sic] the Italian mob, the Russian mob or the Israeli mob, and nobody's ever asked about that, and I haven't pressed the issue…but every rabbit hole you go down you end up in one of those three places….

“The Israeli mob and the Russian mob are the two ones [sic] who scare me.”

Those are the words of Patrick M. Byrne, CEO of Overstock.com. I am not making them up.

Byrne goes on to discuss, briefly, the “Russian mob” as a kind of band of marauders who perpetrate scams and then retreat to their “dachas” on the Caspian Sea for a break before the next scam.

He elaborates in far greater detail on the nefariousness of the so-called “Israeli mob”:

“If you Google 'ecstasy Israeli mafia' you'll find articles that basically the Israeli mob…is thought to control 75% of the ecstasy trade in the United States.”

Now, as with Byrne’s bringing up Thomas Friedman’s supposed pro-Israel tendencies in a Motley Fool rant, I find it hard to understand how Israel’s supposed domination of the ecstasy trade in the United States relates to naked short-selling on the U.S. stock exchanges.

But let’s assume, for a minute, that it does.

And let’s do exactly what Patrick Byrne says: let’s Google 'ecstasy Israeli mafia' and see what we come up with.

Okay, I Googled the phrase and I got 30,600 results in 0.16 seconds.

Hmmm. Patrick Byrne appears to be right: when you type in those three words, you get articles that—this is incredible—accuse Israel of controlling the U.S. ecstasy trade!

The first two links are to the web site of an author touting a book he wrote about the rise and fall of an Israeli kingpin in the ecstasy trade, but he doesn’t particularly focus on the Israelis-as-uber-mobsters angles that Patrick says “scare me.”

The third listed link resulting from this Google search recommended by Patrick Byrne—and I am not making this up—is to the web site of Al Jazeera.

Yes, you have it right: that Al Jazeera.

For a moment, let’s skip the fourth and fifth links and go to the sixth link of the Google search results: it is a Lyndon LaRouche web site, and it contains what it calls “a contender for the story of the new century: the investigation of the connections between detained Israeli spies and the events of Sept. 11.”

The article explains that the 9/11 attacks were “a coup d’etat” attempt against George Bush involving—you guessed it—Israelis. I am not making that up.

The seventh link on the Google search is to the web site of "Radio Islam," and the web page is headed: Jews and Crime.

The sub-headings read as follows:

—Jewish Gangsters
—Jewish Money Laundering and Counterfeiting
— Jews and Drugs
—Jews and Arms Sales
—Israel a Haven for Jewish Criminals
—Jews and Scandals
—Jews and Slave Trade
—Jews and the Sex Industry

There are more, but you get the picture.

Sick as this these are, it is the fourth and fifth links that are the most disturbing to me, for they lead to a web site for something called “The International Campaign for Real History.”

Recall that Patrick Byrne said, and I quote:

“If you Google 'ecstasy Israeli mafia' you'll find articles that basically the Israeli mob…is thought to control 75% of the ecstasy trade in the United States.”

Well, the article that comes up on “Real History” is called “The agony of the Ecstasy” by one Nathan Guttman, and it starts out as follows:

The most commonly heard estimate is that Israeli criminals control no less than 75 percent of the Ecstasy market in the U.S.

I don't know if this particular web site is the one where Patrick Byrne got his alleged facts about the so-called Israeli mafia. I certainly hope not. Because if the phrase “The International Campaign for Real History” makes your throat tighten a little and your mind start to hope it’s not about what you think it’s about—well, I’m sorry.

That’s exactly what it’s about.

The site is historian David Irving’s, and if you have never heard of David Irving, then the following quote from him, which you can find on the links to this site, explains what he means by 'Real History':

“Until the end of this tragic century there will always be incorrigible historians, statesmen, and publicists who are content to believe, or have no economically viable alternative but to believe, that the Nazis used 'gas chambers' at Auschwitz to kill human beings. But it is now up to them to explain to me as an intelligent and critical student of modern history why there is no significant trace of any cyanide compound in the building which they have always identified as the former gas chambers.”

I am truly sorry to have published this two days before both Christmas Day and the start of Hanukkah, but until yesterday I had not bothered to listen to yet another seemingly trivial rant by the CEO of Overstock.com.

Patrick Byrne is scheduled to be on Bloomberg TV this morning to talk about holiday sales results.

I hope they ask him tougher questions than that.


Jeff Matthews
I Am Not Making This Up

Sleep Industry

I am late to this party but with the aging of America and the continued trend towards an overweight country, the sleep industry should see some continued growth. I will post some leaders a little later.


I have had sleep problems for the last 5 years and have battled the use of Ambien, which has been a wonderdrug.


Yesterday, I went in for nasal and tonsil surgery and I hope that it improves my condition. My wife is taking excellent care of me as usual.


The only guys busier than Sleep doctors are, unfortunately, oncologists.


Sorry, one busier company, Apple. Two hour line-ups at the Biltmore store in Phoenix today. Unrelated, but just can't help it. Ipod came in handy at the hospital, where I was watching tv on a 1950 Zenith I think.

Two great blogs if you want to grow your business

www.micropersuasion.com

Steve Rubel is just a must read for marketing in today's internet world



www.genuinevc.com

A referral site from Steve Rubel and a good one.

Pop pop pop

The housing boom may be slowing. Lot's of homes on the market even in the always booming Phoenix, Scottsdale, Paradise Valley neighborhoods.


From Bill Cara today....


Clearly, the tipping point was reached as mortgage rates rose in the 3Q05. Should rates increase further in 1Q06, buyers will disappear.

Today’s data shows that the inventory of new homes on the market has gone from a supply of 4.3 months a year ago to 4.9 months today. Further increases in mortgage costs will remove demand and increase supply.

There are experts today who believe that the market will take as much as five years to stabilize, during which time we should expect generally flat to falling prices, particularly in the over-priced California coastal market, and in NYC-New England, the mid-Atlantic states, and South Florida.

This is a good sign, I think, for bonds, but you know that it was the wealth effect of the housing market that has supported the growth in the U.S. economy and stock market in the past year. At the end of Jan-06, should there be further weakness in the reported December U.S. housing data, that would be a major negative for the U.S. economy and the coup de gras in terminating the 2002-2006 bull market.

Of course, with the amount of research done being today, this trend reversal would already be known, and starting to be priced into the stock market early in January. The first losers would be the California regional banks, the mortgage lenders, and the consumer sector, which needs a healthy economy to support the earnings growth priced into stocks at these levels.

Traders will be watching the flatness and possible inversion of the U.S. Treasury yield curve as an indicator of economic weakness and possibly recession. They will also be watching the level of real estate foreclosures as well.

December 21, 2005

Gas is Cheap - it can't last?

I was just filling up my Honda Element. I paid about $28 bucks. It was seriuosly empty. I drive for 6-7 days on that. I live in a city where I am driving all the time.

Price per gallon - $2.11


That is cheap. How do we do this? There is no better deal on the planet for anything than filling up your car - next to sending an e-mail message on a blackberry or blogging and surfing on Cable interenet?


It is magic, yet we complain. How, at $58/barrel do we get $2.11 gas is mind boggling. There is a disconnect. Either we are on the verge of a major oil find in a friendly country (is there one left?) or gasoline is way underpriced. I imagine, gas prices are going way way way, did I mention way higher!

The media and movie moguls make you think the Middle East is partying with their 1 cent per gallon oil for their countrymen. Newsflash - they have no where to drive too on a full tank of gas so who cares!

Nike

Maybe I am a sucker for brands as an addicted shopper or maybe Nike is just as good as it gets when it comes to branding.

Either way, I feel that any dips in the stock are buying opportunities until they lose that edge. I am not so eager to say it has tremendous upside, but was surprised to read Bill Cara talk about it losing it's luster and talk about the technical condition of the stock as weak. I love reading Bill's opinion and rarely disagree.

Yes it did hit an all-time high of 91 and change a few days ago only to touch 83 this morning after the news of, well, who cares really. They are selling a lot of shit. What is really going on:


Best commercials - always----check

Best logo - checkomundo

Best athletes - checkerooo

Best distribution - feelin' good Billy Ray

Golf - Just getting started


Tiger Woods is maybe the best deal of all time. I remember the way Knight was filmed following Tiger around at his last amateur win, what now seems like decades ago. Turned out to be a bargain. What a wily guy he was.


Until Tiger does something stupid, you are OK with Nike.


The whole country is white and over 80 and ther are enough courses built and being built to have one for every person in the United States. Do the math. Stay out of Jail Tiger, please.

More on GM

Yesterday I poked fun at Kerkorian. Today I searched for key articles that best summarize the debacle of GM.

Jeff Matthews, long time hedge fund operater had this to say on his blog- nuf said - thanks Jeff

Fixing a Hole at GM

Pressure grew on General Motors Corp., with its shares falling to a 23-year low yesterday as rival Toyota Motor Corp. said it would boost production, potentially surpassing GM as the world’s biggest auto maker.—Wall Street Journal.


In the wake of GM CEO Rick Waggoner’s Wall Street Journal op-ed self-defense a few weeks back (described in “General McClellan Awaits Battle…In Detroit”), we now find financier and GM shareholder activist Kirk Kerkorian selling GM stock—12 million shares worth—for tax purposes.

Kerkorian simultaneously annoyed the Feds and spooked investors betting on a Kerkorian-led turnaround of what has been “the world’s biggest auto maker” that perhaps Kerkorian's knees are buckling. Most likely, they are not.

But this fascination with being the “world’s biggest auto maker”—what’s the point? Frequently in today’s Journal article the wordsmiths revert to that sort of language to describe the beleaguered company:

GM, still the world’s largest manufacturer, remains a colossus, with more than $190 billion in annual revenue and 325,000 employees worldwide…

If being “a colossus” matters, however, why is General Motor’s market capitalization less than the $19 billion of cash the company’s automotive business had on hand at the end of last quarter?

In fact, it does not matter.

Perhaps it mattered in the 1960s—the glory years of American manufacturing and the apotheosis of “Man in the Grey Flannel Suit,” when “Made in Japan” held the same derogatory connotation that some now associate with cars made in Detroit.

But it does not matter today, when GM is fighting for its life on many fronts—trying, simultaneously, to lower its cost structure, raise quality, reduce its dependence on trucks and SUVS by introducing fuel-efficient models—and all the while avoiding bankruptcy.

When the Beatles’ uninterrupted string of Number One hits (starting with “She Loves You”) was bizarrely interrupted by the failure of the "Penny Lane"/"Strawberry Fields" single to outsell the reigning Number One, Ringo said it was the best thing that could have happened: it took all the pressure off.

The band went on to do their best work—the White Album—and take their place in history.

("Penny Lane"/"Strawberry Fields" was held to Number Two by an entirely forgettable Number One song. Whoever identifies that song honestly, no Googling allowed, will be rewarded with nothing but their name on this blog.)

Far be it for me to prescribe a solution to the list of GM’s woes. But I suggest they stop worrying about staying “Number One.”

Get over it, already, and move on. The risk to GM, in my opinion, is not losing a few points of unprofitable market share to Toyota: the risk is becoming the Number One Chapter 11 filing in history.


Jeff Matthews
I Am Not Making This Up

If The World is Flat

If you believe the world is Flat or as Billy Crystal says in The Princess Bride "..only partly....", you should check in on the following site occassionally


http://english.peopledaily.com.cn/


Cool stuff

December 20, 2005

Blackberry

Has there ever been such a great product.

I love to spot trends and I sure missed that one. My best buddy Rob was all over this and XMSR in single digits.

Find a friend or someone smart in marketing that has an eye for products and use Yahoo finance to do a little research and you don't need any other help.

Shut out the noise and wait. I think you need 6-10 great ideas because 3-4 will go bust to nowhere if you are good.

KKK

Kirk Kerkorian has rung up a 200 million plus loss on a GM investment in less than a year. Nice! Let's face it, what was he thinking.

Putz.

Did you see GM at $20 bucks

Pathetic. Blair walks into my office and we chat for a second and than laugh. It is not news anymore. This is old news.

72 month financing, free gas, lower prices - the list goes on and is ridiculous.

Pricing power is gone, and the product sucks. Nobody is to blame except management. Of course, there are lots of issues that I have cut and pasted below from a Bill Cara blog, but so many bad decisions that seem to follow the heard that have led to the demise.

Unless something drastic happens in the economy and or with management, $20 is a pit stop on the way to zero. Good riddance.

FROM BILL CARA:


The problem with North American auto makers, Tues., Dec. 20, 2005, 12:12 PM
GM is trading at exactly $20.00. It traded as low as $19.63 a few minutes ago. The last time GM stock traded in the teens was in the market crash of October 1987. The time before that was the bear market of 1982. I suspect I have readers who were born since then. It might seem like a new world, but it’s not.

For GM, is the problem caused by a labor union? No.

Is the problem caused by bad workers? No.

Is the problem caused by an under-funded pension plan (as big as it is)? No.

Is the problem healthcare? No.

Is the problem gasoline costs? No.

Is the problem a lack of pricing power? No.

Is the problem one of high auto finance costs? No.

So what is the problem that is pulling down both GM and F?

I say it is management.

To coin a word, “Detroit” created the production line, but the Japanese learned how to produce cars more efficiently using robotic technology.

Detroit created the concept of auto fashion, but the Japanese learned how to produce cars with more aesthetically pleasing skins.

Detroit created the concept of the “muscle car” with the high-powered racing engines, but the Japanese learned how to build better engines.

Detroit created the auto tire industry, and the Japanese learned how to dominate that too.

And now within 250 miles of Detroit, across the border in Southern Ontario, where GM, Ford and Chrysler plants are shutting down, the Canadian auto industry is thriving, and that’s because the Japanese arrived to take control.

Today the major top-of-page headline in the Toronto Star business section reads: “Honda Canada lines up new headquarters.” The story starts: “Honda Canada Inc., which is bursting at the seams....”

Are you starting to get the message?

Foreigners can come to North America and dominate. That’s the message.

They are not stopped by the same labor unions, workers, pension plans, healthcare costs, gasoline costs, lack of pricing power, or auto financing costs.

They are in the same competition, but the news they bring is not one of bitching and moaning. They hire the same workers, they build good cars, and they pay their bills and collect their receivables. They show a good profit, and bankers scurry for their business.

Nobody talks bankruptcy.

The clarion call does not go out to the Harvard Business School and the Wharton School of Finance to show them the way to manage successfully.

They can’t afford to make that call.

Are you getting the message? Traders cannot give in to bad management. Avoid it at all costs.