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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Secret_Agent_Man who wrote (88585)	6/30/2002 12:00:38 AM
From: Secret_Agent_Man	Read Replies (1) \| Respond to of 99280

In case you hadn’t noticed Merck and Co. and it’s pharmacy-benefits unit have been cooking the books by billions of dollars in 2001 alone. Report what you want, who cares whether the investors get screwed. As if it was a big secret, up until new dollar holders have begun bailing out enmass as the current-account deficit reached 4.3% of GDP in April with a deficit of $35.94 billion. The House has put off indefinitely a vote to start final talks with the Senate over granting George W. Bush fast-track status. We are happy to report Republican leaders put off the vote after they were unable to round up enough Republicans to support the bill. It should comfort you to know that Raytheon will sell Turkey 150 standard vehicle mounted launchers and more than 170 air-to-air Stinger launchers worth $34 million. The government has argued that a US citizen who is declared an enemy combatant has no right to an attorney and that federal courts have no right to interfere. The Justice Department is appealing a ruling by a federal judge, allowing Yaser Esam Hamdi, a US born Saudi suspected of being a Taliban member to meet with a public defender. Sooner or later we will all lose our rights to council if we are adjudged enemies of the state, but isn’t this what totalitarian government is all about. Don’t forget you could be next. When the DOW cracks 8200 the average investor will finally recognize that we have just had a bear market rally and that there is no recovery. We expect that break will mark the beginning of capitulation, which will last for some time. The prevailing wisdom has been wrong since April 2000, why should anyone listen to them? After raising over $100 million from its elite clients for a health-care private equity fund they have decided to abandon the effort. This was a painful and embarrassing move for Merrill Lynch. Corporate criminality again makes the news. Three former top executives of Rite-Aid were indicted on securities and accounting fraud that led to the largest restatement of earnings ever. We bet they don’t go to jail. Due to the dollar’s fast decline, whether they want to or not, foreign countries have been buying Treasury paper. Japan, Australia, South Korea and other nations are buying dollar denominated assets in an effort to staunch the dollar’s decline. This, in spite of a budget deficit of $80.63 billion in May. They have no choice and they are inflating their own economies hoping to keep the dollar from plunging lower and making their exports too expensive to compete with US produced goods. That would end free trade and drive industry back to the US. Foreign nations are desperate. Interest rates temporarily have fallen lower as a result. Treasuries are being bid higher by a flight to quality resulting from on-going terror concerns in the US, suicide bombings in the Middle East and more importantly, stock market weakness. This means there will be no interest rate increases by the FED in 2002. Unfortunately the longer rates stay at these unnatural levels, the more the economy becomes addicted to a funds rate that’s really at an emergency level. Investment-grade borrowers are increasingly likely to use interest-rate swaps to convert a fixed-rate obligation to cheaper variable-rate obligation. Last year companies issued a record $638.5 billion of investment-grade bonds. Thus far this year they have issued $343.6 billion of high-grade bonds. Short-term rates are even more critical to the profitability of Corporate America - to the level of the stock market, to the growth rate of the American economy – than ever before. The predilection of corporations for derivatives may serve to reduce interest rates in the short run, but increase exposure/risk in the long run. That means Alan Greenspan and Otmar Issing don’t dare raise interest rates too much or risk sinking the stock market and the economy once again. Fund management fees as a percentage of total returns should include the annual wrap account fee many investors are paying to the broker who recommended buying funds from poorly performing funds. It would give a complete and truer picture of investor operating costs and total return. Eleven insurance companies have accused JP Morgan Chase of conspiring to make Enron look healthier than it actually was. The insurance companies refuse to pay on $1 billion in surety bonds because they contend the arrangements were really loans disguised as trades and that Morgan and others actively helped Enron and others avoid taxes and otherwise burnish their financial disclosures. Regulators frown on such round-trip transactions, and Mahonia, the dummy offshore corporation used to hide the trades has gotten the attention of both Congressional investigators and the SEC. These round-trip transactions are simply fraud but thus far Congress and the Sec have chosen to ignore the lawbreaking. Morgan has repeatedly denied any wrongdoing, but few criminals ever confess voluntarily. In fact, where is the IRS? These were all sham transactions. Our IRS has plenty of time to coerce, intimidate and loot individual Americans, but little time to pursue America’s elite who steal billions. JP Morgan Chase is an institution devoted to fraud. We are finally hearing talk of corporate reform, but unfortunately legislation is not going to improve ethics. The absence of ethics is a question of morality. Unfortunately America is no longer a moral nation. Situation ethics prevail. Legislation won’t work. The answer has to come from each individual and his relationship with God and his fellow man. Industry, banking and government are plagued by conflict-of-interests, that come with excessive deregulation and the end of the Glass-Steagall Act. Unfortunately we predicted the unethical behavior you see today but no one wanted to listen. One of the functions of newsletters is to inform the public and expose wrongdoing whenever we find it. Rules in the final analysis are no substitute for ethics. Ethical behavior does not need to be rewarded. It should be normal. What we are failing to do is punish the unethical, such as the officers at Merrill Lynch responsible for the recent fraud, from which they emerged by paying off the government with $100 million. They should all have gone to jail, then most of what we see as unethical behavior would end. Fines only encourage criminality. It is thought of as a cost of doing business.