For educational and research purposes only:

Interesting doings in the markets this week. Pay attention, the pros are in motion, stories are being told that don't fit and the sheeple are enraptured.

Buffet and Bonds Moreover, there is a precedent for a big investment in bonds by Berkshire. In August 1997, the company bought about $10 billion face amount of zero-coupon Treasury bonds that come due in 20 years for $2 billion, according to firms that were familiar with the purchases. Zero-coupon bonds do not pay interest; instead, they are sold at a significant discount to face value and return their full face value at maturity.

[Warren's buying debt, specifically commercial paper. He sunk 9.3 billion into bonds recently of which 2 billion were zero's. The rest was likely commercial paper which comes due in a year. This should be a clue for you. He feels there's not many stocks that meet his criteria for value at this time. And isn't Warren also holding some metals as well? Hmmm?] Story is here: http://www.iht.com/IHT/TODAY/THU/FIN/berk.2.html

Real Inflation

Higher commodity prices and a weaker dollar have removed an important source of imported disinflation for America, and firms input costs are now rising. The producer-price index for core intermediate goodsthose goods such as paperboard and plywood that firms use as part of the production processhas risen at a 4% annual rate over the past three months, the biggest rise in four years. Of course, there is no certainty that firms will pass on higher input prices as higher goods prices (if firms raise their productivity they can absorb the extra cost). But, as Bruce Kasman of J.P. Morgan points out, every stage of Federal Reserve tightening over the past two decades has been accompanied by an acceleration of core intermediate producer prices.

The replenishing of firms inventories could provide another short-term boost to growth. Currently, inventories are low. Between April and June firms added only $19.4 billion to their inventories compared with $38.7 billion in the first quarter. Most analysts expect a sharp rebound during the next few months, and as companies prepare for the uncertainties of the millennium bug they may well add to their stockpiles. Add to this a strengthened demand for exports as economies in Europe and Asia accelerate, and it is hard to see much chance of the economy slowing down.

[Higher commodity prices and the Pee Pee Eye. It's pretty simple really, you can't ignore rising raw materials costs in today's environment for long. They are rising and will continue to do so as everyone puckers up and increases physical inventories from consumers to corporations.]

Here's the above story:

http://www.economist.com/editorial/freeforall/current/index_us9460.html

Fantasy Baseball Leagues:

TV and technology... Justin Mamis, my favorite technician, in his Monday morning commentary had a great description of how the TV has changed things and America's love affair with technology. He segued from there into the narrowness of the present leadership. I'm going to share those thoughts with you today, because his piece was so extraordinarily well done.

Referring to tomorrow's CPI, he observed: "It is the media that has made routine, laggard, seasonally adjusted, and regularly revised statistics so `important.' We are the victims of `what else are they going to talk about?' The more they talk about `it,' the more important it seems to become, and thus the more attention they need to give `it.' The prolonged bull rise, and the enormous rise in various forms and shapes of couch potatoes watching, has, of course, given them an audience. So it is chicken-and-egg in its evolvement, but now the media is boss - CNBC and its spillover rivals and copycats have convinced this audience that the momentary `news' of a monthly statistic is of enormous importance. Investors can't go to the bathroom at 8:30 a.m. any more...but could go to the beach after they learn how the market has reacted.

"In a similar vein, via repetition and attention that thus requires more repetition, they have convinced the audience that technology stocks are the best, best, best, for ever and ever. If you are going to buy stocks for your retirement, you've got to have growth, and growth is technology. No fuddy-duddy foods for this audience; no bonds, so the money'll be there...it's got to be `more,' whatever that `more' will be used for. `How old are you?' went one question - `59? Well, sir, you're not just buying in preparation for retirement, but for the 40 years of your retirement.' (Apparently, by the time the boomers are ready to retire, the growth drug and bio stocks are going to help them live beyond 100 - a possibility we view with cheerful anticipation and our usual cynicism...if we can play in the 95 age group, we might win a tournament, although how we'd get to the courts would be interesting to find out.)

"A steady stream of interviewees talk about the growth virtues of technology, and the CNBC commentators, when not plying their sophomoric humor, report on technology stocks with added enthusiasm. And because technology is the best, by extension the Internets are still alive and well, although like adolescents they gave their investor-parents some scary moments. "Why can't you behave like JNPR and RHAT?'

"The result of this culture's conviction that technology is the end-all and be-all is that these stocks dominate the life of our charts. Technology stocks in general have not made serious tops yet in the manner in which such tops can be seen in the financials or consumers. It is technology that counts, and will ultimately be crowned when INTC or MSFT replaced UK in the Dow 30. This recent Nasdaq `correction' - a word we have permission to use because it exceeded 10 percent, a nice decimal system number which (those who validate such nonsense announce) `technicians' have established as the suitable measurement, and told us so over and over again, so much so that the town's handyman, barber and grocery store check-out clerk all can cite it.

Unrealistic expectations... I'd like to share a couple of news items I came across. The president of the Atlanta Federal Reserve Bank during a speech in Colorado had some interesting comments, which I think are along the lines of thoughts we've had and espoused.

"For bankers and central bankers alike, perhaps the most daunting legacy of the period is what I have called the institutionalization of unrealistic expectations." He went on to say, "For central bankers, it's the idea that three consecutive years of nearly 4 percent real GDP growth is no longer exceptional but merely average. For investors, it's the conceit anything less than 20 percent growth in the Dow Jones industrial average is unacceptable. And for bankers, it's the notion that there's no such thing as a bad loan."

Here's the above story: http://www.stocksite.com/features/contrarian/1999/08/rap0816.html

[Loose credit and a fixation on the "internet" as the new "paradigm" which will create unparalleled wealth has created some disturbing realities. The sheeple now watch the market like they watch Oprah and with about as much understanding of world events. Day trading has become a national sport. It's amazing really, people who normally wouldn't have known what "the Fed" is talk routinely about "the numbers". People actually root for their favorite stocks. Even some of my close friends whom I consider to be fairly astute are prone to this idiotic babble. When they talk, they sound like their talking about their favorite baseball team. The key difference being that in this league, Big Al's league, most teams win a LOT more than they lose. And as you know, in the real world, sports, like life, is a zero sum game. Winners must be balanced by losers. Now the boys down by the church and the graveyard are at this very moment wondering how they are going to tell their team that they're going to be losing quite a few games in the next season. In fact probably won't have a shot at the playoffs and in fact, the team may fold altogether.]

The Asian Recovery?

TOKYO (Reuters) - Three of Japan's biggest banks announced a broad alliance Friday, giving birth to the world's first trillion-dollar financial group and heralding Japan's long-awaited entry into the era of global mega-bank mergers.

``Even as dynamic realignments take place across the globe and across borders, Japanese banks had been left out in the cold while we tried to resolve our bad loan problems,'' Industrial Bank of Japan (IBJ) President Masao Nishimura told a news conference.

``The three of us agreed that we wanted to be the front-runner in revitalizing Japan's financial system,'' Nishimura said.

Yanagisawa said he hoped the tie-up would spark other such deals. The FRC has spearheaded efforts to raise the transparency of Japan's long-protected financial sector and has said unprofitable banks must merge or, in some cases, fail.

[Ah yes the age old story of "If ya can't run em profitably.....then merge em". The mathematical equivalent of which is 2 + 2 = 5 No one seems to be asking what happened to all the bad loans these days. Nope, the Nikkei is on the mend. The Asian tiger is back to health (If you exclude Hong Kong and China). Duh.]

Here's the above story:

http://www.stocksite.com/headlines/financial/19990820/japanbanks.html

[My point and I do have one, is that we are heading for a rather nasty fall. The smart money is already in motion. The "semi-professional market" which the stock market is now being called is still floating in some alternate universe where hard economics don't apply. The landing will NOT be a soft one. Yardeni was and is right. Party over Garth. Go back to watching Oprah.]

-- Gordon (g_gecko_69@hotmail.com), August 21, 1999

Answers

Gordon,

I agree. Thanks for the info. Made me glad I spent the morning dehydrating garden goodies!

-- Moore Dinty moore (not@thistime.com), August 21, 1999.

Gordon,

Thank you so much for the info and the commentary. Please do it again whenever you feel the urge.

-- R (riversoma@aol.com), August 21, 1999.

Are you listening Anita? :)

-- Andy (2000EOD@prodigy.net), August 21, 1999.

Andrew-

What happened friday? will you be putting your chart away now?

:)

-- David Butts (dciinc@aol.com), August 21, 1999.

Well there was that little incident in Turkey.

The Astorology thread I cut and pasted from www.kitco.com - an attempt at a little levity that has badly backfired it seems...

-- andy (2000EOD@prodigy.net), August 21, 1999.

Reuters Story - August 21, 1999 04:56

MUSCAT, Aug 21 (Reuters) - Oman's Oil Minister Mohammad bin Hamad Seif al-Ramhi was on Saturday quoted as saying he expected world crude prices to climb to a maximum of $21 a barrel. "We expect (the rise in oil prices) to continue until the end the year or the start of next year," Ramhi told the Arabic-language Oman newspaper.

http://www.marketwatch.newsalert.com/bin/story?StoryId=Cn74Kqb8ZtdiXnd a3mJqX&FQ

-- andy (2000EOD@prodigy.net), August 22, 1999.