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Your world with Neil Cavuto: (11/30/04)

Tuesday, November 30, 2004 | 03:07 PM
in Media


A heads up: I'll be appearing on Fox today: Cavuto on Business @ 4:15pm EST.

The topics will be the market's performance for November, as well as the usual (Iraq, Oil, GDP, Jobs). Also on will be ENTrust Capital's Greg Hymowitz, and Reagan afficianado Tom Atkins.

Tuesday, November 30, 2004 | 03:07 PM | Permalink | Comments (0) | TrackBack (0)
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What If . . . ?

Tuesday, November 30, 2004 | 12:07 PM

Over the weekend, I penned a corny piece “Giving Thanks” for the technical improvements we have been blessed with (broken downtrend, above 50 & 200 day MAs, etc.) But a chance encounter yesterday with a peer from a competitor led to a rather intriguing economic discussion. That chat thankfully spared you of my holiday hokum, sending me back to my keyboard instead, to ask:

“What If . . .?”

Third quarter GDP came in at a robust 3.9%; What if Oil was at $30 instead of $50 per barrel? Let’s acknowledge that related factors impact both energy and growth, so as avoid a disingenuous query. Oil is higher because of the weak U.S. dollar, as well as due to increased global demand, both of which get reflected in improving GDP numbers. The War in Iraq has also contributed to rising Oil prices, while increased military spending and government hiring has been a significant part of that GDP growth. That said, what might the world look like if Oil were at $30/brl?

From a macro perspective, back out higher energy prices’ drag on GDP (estimated at 1.2%), and growth is a robust 5.1%. Other commodities priced in Dollars (Gold, etc.) would be significantly below their recent highs. Consumer sentiment would improve, sending discretionary spending higher. Manufacturing activity would also expand, with some positive impact on employment numbers. Perhaps corporate margins might progress to the point where some Hiring and Capex spending became all but inevitable. Unfortunately, Oil prices have no impact on Productivity or Outsourcing, so the hiring gains would be rather muted.

Drilling down to specifics, many sectors would see relief. Retail numbers, especially at the big discounters, would be significantly better. Dining, travel and entertainment would also perk up. Airlines would see reduced margin pressure; Domestic automakers – long overly dependent on gas-guzzling SUVs for the bulk of their profits – would find immediate sales and margin improvements.

But let’s not paint this scenario too rosy. The economy’s heartiest sector – refinance/refurbish/new homes – are also the most rate sensitive. $30 oil would have long ago forced Fed Chair Greenspan to raise rates considerably. The fallout of a less accommodative Fed: Homebuilders top lines would drop, as would those of real estate agents, mortgage and home equity loan originators. Big box retailers and durable goods manufacturers would suffer also.

Policymakers may lament high-energy prices, but should also consider the ramifications of the alternative in our complex economy. $50 oil may make investing challenging, but we should bear in mind that there are no silver fiscal bullets. Investors must play the hand they have been dealt.

Tuesday, November 30, 2004 | 12:07 PM | Permalink | Comments (0) | TrackBack (2)
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Universal Dominance (so much for Piracy)

Tuesday, November 30, 2004 | 10:26 AM


Vivendi-owned music giant Universal Music Group "shattered a music industry record, scoring a whopping 43% share of albums sold last week."

Massive sales of the heavily downloaded Eminem CD, "Encore," has Universal capturing the top three slots on the pop charts, along with six out of top ten. Toby Keith, Shania Twain, and Ja Rule were amongst the Universal best sellers -- all heavily traded artists on the P2P networks.

Sayeth Universal Music Group chairman Doug Morris: "We're winding up a very nice year. We sold 43 out of every 100 records in the country. That's amazing."

Earlier in the month, Vivendi reported that music profits surged sevenfold to $38 million, thanks to lower costs and rising sales. When Vivendi decided against selling its music business, it was a bet on a recovery in the macro-economy, as well as the industry, despite the continued increase in file swapping.

So much for Piracy . . .

Universal dominance
Phyllis Furman
Daily News, November 17, 2004

Tuesday, November 30, 2004 | 10:26 AM | Permalink | Comments (0) | TrackBack (0)
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Chart of the Week: Chinese and World Exports

Monday, November 29, 2004 | 03:55 PM

Chinese exports, which were growing 10% faster than world trade in 2002, are now growing nearly 20% faster, according to Charles Dumas of Lombard Street Research. Asian surpluses contribute to the US deficit “problem.” The dollar-yuan currency contains the undervalued yuan as well as the overvalued greenback.

Chinese and World Exports (12 month MA, Y/Y)


Source: Lombard Street Research

Dumas believes China is slowing, and will likely to suffer a hard landing. Rapid export growth - even unfairly rapid export growth - will be welcome in 2005.

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Quote of the Day: 

“To me, the ‘Tape’ is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!”     - Martin Zweig

Monday, November 29, 2004 | 03:55 PM | Permalink | Comments (0) | TrackBack (0)
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Wal-Mart / U2

Monday, November 29, 2004 | 11:28 AM

Wal-Mart throws the gauntlet down on CD sales for the holiday: The retailing giant is discounting U2's new CD by 37%, to $8.84 (shipping is $1.97).


The rest of their CDs are priced between $9.94 and $13.94.

As mentioned previously, I expect to see Wal-Mart continue to apply additional pressure on the labels to drive the price of CDs to under $10.

I disagree with several commentators who believe Wal-Mart "needs" CDs to drive foot traffic; In the entertainment space, its DVDs -- not CDs -- that are the growth product. CDs growth chart is sloping down the other side of the mountain.

Wal-Mart focuses on revenues and profits per square foot. Their real estate is the most valuable in the retail landscape. If CDs fail to generate significant sales because they are priced too high, or significant profits because the margins are not advantageous, they will simply be dropped as a product line.

And noted before, DVDs are priced far more competitively than CDs are. Indeed, the DVD/CD combo is the only interesting audio product outside of the iPod to generate any sort of buzz . . .

Monday, November 29, 2004 | 11:28 AM | Permalink | Comments (2) | TrackBack (0)
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An Energy Illusion of the Highest Order

Sunday, November 28, 2004 | 10:15 AM


"We are living with an energy illusion of the highest order,"

So warns oil banker Matt Simmons, 61, whose "bold and often prescient pronouncements have won him followers -- and detractors -- in the course of his 30-year career."

According to Simmons, whether the Saudis have overestimated their crude reserves or not is the key question for energy prices the next decade or so.

In an interview with Barron's, Simmons lays out the Bull case for Oil:

"With global demand for oil on the rise, and prices hovering near $50 a barrel, the Saudis' production profile is more than academic. The No. 1 oil producer, Saudi Arabia pumps 13% of the world's oil and boasts 23% of its oil reserves. Moreover, the Saudis alone claim to have excess production capacity and the ability to increase output if demand continues to rise.

Barrons_oil_11262004_1 Simmons' conclusions are based largely on his analysis of the high water content and other signs of aging of Saudi oil fields. Not surprisingly, they have caught the attention of Saudi Aramco, the kingdom's national oil company, which has dismissed his views and remains committed to previously published numbers of the size of Saudi reserves.

Because the Saudi oil industry is state-run, and there is no independent auditor of national reserves, it is impossible to determine just how large -- or small -- the Saudis' are.

If the Saudis' numbers are correct, the kingdom could continue to produce at current levels of about 10 billion barrels a day for the next 50 years, or more. That would give the industrial world time to develop alternative energy sources and prepare for a graceful transition.
If Simmons is right, however, the world could face a dangerous imbalance between rising oil demand and diminishing supply, perhaps within the next 10 years. Oil prices could soar, economies could suffer, and oil-dependent nations, such as the U.S., China and Japan, would be forced to scramble for additional energy sources."

Consistent with my long term view on this sector, Simmons may not be that far off.

Field Theories
Barron's, NOVEMBER 29, 2004

Continue reading "An Energy Illusion of the Highest Order"

Sunday, November 28, 2004 | 10:15 AM | Permalink | Comments (1) | TrackBack (0)
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Guess who's blogging?

Saturday, November 27, 2004 | 08:54 AM

Guess who's blogging? 

Larry Kudlow!

Whether you agree or disagree with his politics (and I'm more moderate / progressive than LK), he has long since proven his economic chops. I always find him intelligent, eloquent, and thought provoking.

Since he has been so kind to me personally, my objectivity stands about zero. But if you disagree with him, its all the more reason to understand the thought process from his school of economics.

Flame away . . .

Kudlow's Money Politic$
Pro-growth, strong defense, virtuous values, business, and stocks

Saturday, November 27, 2004 | 08:54 AM | Permalink | Comments (3) | TrackBack (0)
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Media Appearance: Forbes on Fox (11/27/04)

Friday, November 26, 2004 | 11:06 AM
in Media


Quick media appearence note: I will be on Forbes on Fox, Saturday (11/27/04) at 11am on FoxNews. Look for the "Makers and Breakers" segment towards the end of the half hour.

Friday, November 26, 2004 | 11:06 AM | Permalink | Comments (1) | TrackBack (0)
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Economic Metablog Roundtable

Friday, November 26, 2004 | 05:47 AM

Several readers had asked for a list of economic blogs (which I discussed back on October 8)

Since that post, I've discovered a new resource: The Economics Roundtable. Its a metablog of economic and market related publications, hosted by economics professor William R. Parke of the University of North Carolina, Chapel Hill.

Warning: Highly addictive (Some posts may cause drowsiness).

Friday, November 26, 2004 | 05:47 AM | Permalink | Comments (2) | TrackBack (0)
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Live at St. Ann's Warehouse: DVD + CD

Wednesday, November 24, 2004 | 12:05 AM

This past June, I saw Aimee Mann Live at St. Ann's Warehouse in Brooklyn, an intimate little venue just under the Brooklyn Bridge. It was a special evening, with Mann's performance perfectly in sync with the capacity audience's expectations. All told, a great concert was enjoyed by the 1200 people in attendance.

By coincidence, the show I saw was video recorded, and just came out on DVD .

Here's what I cannot understand: The DVD is $15 -- but it also comes with a CD of the concert. Will someone explain to me why major labels release 45 minutes of music on disc for the same price as a small label's DVD and CD ?

Perhaps its Mann's notorious dislike of her past labels. The New York Times' Jonathan Van Meter wrote:  "Mann is known for writing clever, disappointed love songs that can also be read as damnations of the music industry."  Her Album "I'm with Stupid" was a thinly veiled reference to Geffen (What label are you with?) as were numerous songs on that disc (Choice In The Matter, Par For The Course, You're With Stupid Now); The song "Nothing Is Good Enough" off the CD Bachelor No. 2 was reputedly based on a conversation with a music exec.

Mann subsequently dumped her label  (Geffen's Interscope, mentioned previously), negotiated the purchase of her masters, and set out for own label: Superego Records, part of United Musicians, a cooperative, artist owned label. In a further break with the big labels, her most recent albums can be streamed -- for free -- at her site (click "listen").

I doubt that releasing a DVD/CD -- for the same price as a major label CD -- is a money losing idea. Even a 9 camera shoot will be profitible, if it sells modestly. It just goes to show ya how corrupt the major label $15 CD business model is.

Maybe someone with basic math skills can explain to the major labels what they are doing wrong.

UPDATE:  November 28, 2004 12:29pm
A quick trip this morn to Best Buy reminded me that "Coldplay - Live 2003" was a similar DVD + CD; There was also a Sarah McLachlan DVD + CD combo (Mirrorball?)

UPDATE 2:  November 28, 2004 1:32pm
On a hunch, I went ot Amazon's DVD section, searched fro DVD+CD, and came up with 152 results. These combo DVD+CDs are apparently an ongoing trend, and gaining in popularity . . .

Makes sense -- if a CD at $15 is a lousy deal, than a DVD+CD at $15-20 is a pretty good one

UPDATE 3:  November 29, 2004 3:33pm
More DVD+CD: R.E.M. will reissue their entire Warner Bros. catalog on February 15th, with each two disc set including the original album and a bonus DVD featuring the record remixed in 5.1 surround sound, as well as unreleased documentary and video footage.

Wednesday, November 24, 2004 | 12:05 AM | Permalink | Comments (7) | TrackBack (0)
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