John Mugarian's Dynamic Growth

The Council on Foreign Relations said on October 12, 2006, that “The lack of sustained attention to energy issues is undercutting U.S. foreign policy and U.S. national security.”

In its report, "U.S. Energy Dependence Undercutting U.S. National Security", former CIA director John Deutch said;

"Higher energy prices are unleashing remarkable forces for innovation in this country. Entrepreneurs are seeking new ideas for products and services such as batteries, advanced oil and gas exploration and production techniques, and biofuels. However, “no strategy will be effective without higher prices for transportation fuels, or regulatory incentives for more efficient vehicles, to stimulate new technologies that ultimately are vital to reducing the dependence on oil and gas, and to making a transition away from petroleum fuels.”

Federal Reserve Chairman Ben Bernanke piggybacked on the comments by John Kerry by saying;

"Some evidence, including recent Federal Reserve research on consumers holding adjustable-rate mortgages, suggests that awareness could be improved, particularly among borrowers with lower incomes and education levels,"

In turn, the market for "sub-prime" borrowers -- people with weaker credit records who are considered higher risks -- has grown considerably over the years.

Facts are facts. It痴 not always the case, but people who have an education normally do better economically than those who do not.

Bernanke's remarks came after John Kerry told students yesterday;

"That if they studied hard they could do well, but if they didn't "you get stuck in Iraq".

After getting a decent bounce from its October 11th low's ($21.08), I want to sell GG from the IA portfolio and wait for another opportunity elsewhere. The stock is currently trading at $26.29. I really am not concerned if the stock goes higher from here, there are a lot of good companies that can go higher without the hassles (I.E. - MasterCard).

There are too many corporate governance and shareholder rights issues surrounding this company that frankly makes me a little nervous. The issues surrounding Goldcorp amount to shareholder rights which are being afforded to Glamis stockholders, but not Goldcorp's.

With earnings season just about over, the numbers for the S&P should average about 12%. With consumers on the hook with their heavy debt loads, expect earnings estimates to be revised downward in the months ahead.

After President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, more than 600,000 cases were filed in the bankruptcy courts 16 days before the act became law.

As my friend Louis Navellier recently said, "if a consumer has a dollar in their pocket, they will spend it.' I can't necessarily disagree with him.

Today, as I was taking my son to school, I saw a guy who is a physician's assistant, driving a large Mercedes. His wife, who is a school teacher, drives a large Lexus. These people either hit the lottery, inherited a fortune, or are living way above their means. I must add that the husband is a little more uptight than he used to be. My mentor used to call this "form over substance".

Consumers who are now experiencing financial difficulties because of overspending, job loss, divorce, etc... are now facing two choices;

With the mid-term elections only a few days away, crude oil futures continue to hug the $58.00/bbl mark. Yesterday, crude oil futures traded down after the EIA inventory report revealed a build in crude inventories.

Kuwait's oil minister said OPEC should wait before making another supply cut. Oh is that so? Wait until when? After the election?

Now that additions to the Strategic Petroleum Reserves have been temporarily suspended (another pre-election move), its only natural to assume that the reserves will resume their supply build after the elections.

Whole Foods Market (WFMI) is the world's leader of natural and organic foods. The company has embraced a growing trend among consumers for healthy food choices. Unlike those (Wal-Mart) who are attempting to capture a piece of the growing trend toward healthier food products, Whole Foods selects many of their products from local producers of fruits and vegetables.

Companies like Wal-Mart are looking for ways to cut into the organic food business, but they have one major problem. Wal-Mart has a reputation of driving down the prices on its suppliers where it becomes unprofitable for farmers to do business with them.

With farmers refusing to give in to Wal-Mart's pricing pressures, the company simply turns to the overseas markets like it does with the rest of their products. Given the high food standards set by Whole Foods, industry experts believe that companies like Wal-Mart will lower those standards by importing cheap organic products from places like China and South America.

Oh, but Wal-Mart has forgot one important issue. People looking for organic alternatives are not stupid. One reason consumers have turned to stores like WFMI, is because of foreign grown food products sold by Wal-Mart. Now the corporate beast is trying to convince consumers that they are an organic supplier too. Oh, really?

As voters prepare to go to the polls tomorrow, politicians are running around giving speeches in hopes to convince the electorate that they are fighting for them. As for the economic landscape and psyche, things could not be better. The stock market is soaring, interest rates are still relatively low, oil prices are manageable, and geopolitical problems have disappeared. What a perfect environment in which to be an American.

Once voters get past tomorrow, what will the next two years bring. If the republicans prevail, we will continue to have fun with oil stocks. If the democrats win, oil, telecom, defense and healthcare will come under scrutiny, while technology will begin to show some signs of life.

Company insiders continue to clean up.

Its become clear that the Google boys hate their stock. Hank Greenberg at AIG continues to liquidate through his holdings company Starr International. If technology is on the rebound, you wouldn't know it as insiders at Oracle and Microsoft continue to cash in their chips.

Insider Sales- Top total sale in dollar amount

SFSH- SINOFRESH HEALTHCARE INC- $1,470,675,000
NHWK-NightHawk Radiology Holdings Inc- $252,997,120
LYO-LYONDELL CHEMICAL CO- $251,402,336
GOOG-Google Inc.-$193,343,349
FRX-FOREST LABORATORIES INC- $140,618,000
AIG-AMERICAN INTERNATIONAL GROUP INC- $130,040,580
ORCL-ORACLE CORP -$101,614,682
TZOOTRAVELZOO INC-$91,057,921
MSFT-MICROSOFT CORP-$63,298,380
BEN-FRANKLIN RESOURCES INC-$45,835,766

While the major media networks focused on Iraq being the major issue for the power shift in congress, they all but ignored what may have been an issue just as important.

In 1992, Democratic strategist James Carville coined the phrase "it痴 the economy stupid", and believe it or not, that same phrase came home to roost yesterday. I believe one of the main issues on voter痴 minds was the high cost of energy.

High energy prices go to the root of the economy for consumers. Yesterday, the BigPicture.com listed some findings by California-Berkeley economist Emmanuel Saez. Saez said, "The median value of stock holdings for the wealthiest 10 percent of Americans was $110,000 per household in 2004, according to Morgan Stanley, the banking giant. The value of stocks held by the other 90 percent of Americans averaged $8,350."

So, despite the recent rise in the stock market, the 90 percent of Americans who have an average $8,350 in stocks are more concerned with their incomes going into their gas tanks than they are a rise in the market.

Now that the democrats have won, let’s try and project what the investment landscape will look like in the future. Of course there is no way of knowing how these events will unfold, but thinking” outside of the box” has a way of paying big dividends.

1) Immigration of Latino’s will skyrocket: Since President Bush was not concerned with the number of illegal immigrants entering the country, with the democrats in power, the floodgates will open allowing in 10 million more immigrants.

By 2008, the Latino vote may be the deciding force that allows the democrats to re-take the White House.

So, what will be the investments of choice for 2008 and beyond?

Here are some comments from Don Harrold at StockPickGurus.com. I think you enjoy his "in your face" approach as he talks about Wall Street "spin machine".

Wall Street wants you to open up and swallow a string of "coincidences" about the recent "rally". The charlatans on CNBC want you to stay glued to the hype-machine to have your brain blasted with more "non news" so they can sell more ad space. The "system" wants you to remain in debt, in fear, and chained to bad investing decisions.

Don Harrold

I wrote several articles in 2005 on how the US has old their economic souls to China- Click Here.

I said;

What most Americans don't know is our long term interest rates are currently controlled by China and Japan. China has bought a massive amount of US debt, and now holds the pulse of the US economy in the palm of its hand. If the Chinese should begin dumping their holdings of US government bonds onto the open market, our long term interest rates would spike. The spike up in interest rates would send our real estate market into a tailspin, and real estate speculators would experience the equivalence of a NASDAQ 2 crash. The facts you need to face is at one time the US was a creditor nation. Now we are a debtor nation. Someone else owns us, we (they) have sold our souls.

The issue I warned about in 2005 is beginning to happen. Today we received news that China is looking to diversify some of its foreign exchange reserves out of US dollars, and into European and Asian bonds.- Read Article

Now, the question that everyone is asking is how much will the Chinese diversify? The Dollar is down against most major currencies on the news, and the once shunned Euro continues to appreciate.

Russ Winter at the wallstreetexaminer.com did a good job of explaining what is going on behind the scene's with China's announcement to diversify their exchange reserves out of US dollars.

I warned investors last year about the possibility of this happening. Actually, it was my warning shot across the bow. Since nothing happened right away, many have ignored the warning.

As Russ Winter points out in his article, the initial Chinese response of backing sanctions against China is a threat to sell US Treasuries and inflict damage on the US economy. Winter said that the initial Chinese response is a classic form of Sun Tzu, “Art of War”.

I spent most of the night Sunday, and all of Monday in a dreary haze after attracting an intestinal virus. The cause has me a little puzzled. I don’t know if it was due to something I ate, natural, or all of the viral misinformation we keep receiving on the economy. From time to time, all of these things can make us sick.

When I returned back to my office bleary eyed, I was cleaning up some papers and old magazines, and ran across several past issues of Barron’s. As I began to throw some away, I ran into the October 23rd issue which read “Survivor! GOP Will Hang On.” Needless to say, I don’t think that many in the financial media have their fingers as close to the pulse of the average American like you and I.

The cover of November 6th issue of Barron’s proudly proclaims, “Next Stop 13,000?” The hedge in this headline is the question mark.

If I sound like I’m a little frustrated you’re right. No, I am not frustrated with the stock market; we have actually made some good money this year. Like many professional investors, I keep long and short positions at all times.

I have heard more BS about the soft landing, Goldilocks, and the end of the Real Estate recession than I can take. Not to anyone’s surprise, I don’t believe a word of it.

The old saying for years has been “don’t fight the fed”. Will the new mantra now be “Don’t fight the Plunge Protection Team?”

If you closely follow this blog, you know that we, as well as others, have expressed the possibility of the PPT being involved in this market-See Articles Below.

Is the "Plunge Protection Team" at work ?

More on the Plunge Protection Team

Here is a Reuters article quoting J.P. Morgan.

"Thanksgiving peak seen for US specialty retailers"

To keep some perspective, here are John Hussman's November 13th Market Comments.

I want to give you some news items that may be of interest to you;

ENERGY

Venezuela-Owned Citgo Sued by Companies

CFTC Future-and-Options Report- Large speculators increased their net length in crude oil, and decreased their net length in RBOB.

Crude Oil: Long 48,705 contracts
Heating Oil: Short 7,343 contracts
Unleaded Gasoline: Short 290 contracts
RBOB: Long 2,474 contracts

"Crude oil futures continue trading higher this morning after the EIA reported yesterday a draw in gasoline and heating oil stocks amid expectations of increasing demand. The December contract is trading at $59.28/bbl, 52 cents above Wednesday's close".

I don't bet on Football games, but someone who does told me that you can bet over or under on the final score. It was explained to me but I still didn't get it.

A few minutes ago, I was watching CNBC during lunch and I noticed an "over the closing high" window above the TV screen. To what depths have we sunken to in order to appeal to the greed of the masses?

The greedy and selfish will do anything they can to gain an advantage. I learned that from coaching youth league sports and watching how parents jockey for position in order to gain an advantage for their child. By the way, they still try and do it to high school coaches as well. Fortunately, many high school coaches ignore these types of people. It’s often been said that if you want to be constantly second guessed and hated, all you have to do is coach.

Let's get back to this "over the closing high" stuff again.

Casino operator Wynn Resorts (WYNN), Hit a 52 week high recently, and the shares have been climbing prior to the company’s announcement that it was going to pay a "special" cash dividend to shareholders of record on November 23rd.

I want you to take a look at the insider activity of one of the company’s insiders in the weeks leading into Wynn’s announcement.

In the month of August, long time Las Vegas casino operator, and Chairman of Wynn International, Jack B. Binion, purchased 911,956 shares at prices ranging from $68.90-$74.00. After the announcement of the “special” dividend, yesterday (11-16-06) the stock traded as high as $96.50.

Now you know why they called this dividend "special".

The news is out. Housing starts for October fell 14.6%, to 1.486 million units. This is the lowest level in six years. Nationally, new home prices have fallen 9.7%. Existing home prices have yet to fall, but will soon.

The next shoe to drop will be retail sales, and when it does, the stock market will follow. I don't even think the mighty Altria’s (Phillip Morris) stock performance can help the Dow. Slowing or falling retail sales will be the catalyst that will make the markets fall. When this happens, investors will wake up to the realization that the stock markets recent advance was one of the biggest sucker rallies known to man.

I don’t know if you have been watching, but the Discovery Channel has been featuring a six-week documentary entitled “Everest: Beyond the Limit.” The program chronicles the journey of eight men who are attempting to scale Mt. Everest.

Many climbers suffered from oxygen deprivation which caused brain swelling, insomnia, digestion problems, and even death. The extreme cold has caused frostbite, and one man attempting to scale the mountain lost both legs below the knee to frostbite 24 years ago. He is attempting to climb Mt. Everest on two false carbon legs with spiked feet.

Are all of these risks are worth losing your life? Stupider things have been done. For example; Listening to the Wall Street spin machine has got to top the list. Don’t you find it odd that since the July lows that the market has gained over 1500-points, and about 1300 points have come during only 12 sessions? Keep in mind our story about the Plunge Protection Team- October 26th.

Last night, I really enjoyed watching the CNBC interview with Warren Buffett. The real beauty of the interview is how the world’s second richest man revealed his key ingredients to investment success, and I'll bet you only a handful of investors understood what he said. Why do I say this?

Buffett laid out his investment strategy, and this strategy does not jive with the investment psyche of today's investor. Simply put, investors who have a mindset of instant gratification cannot, and will not, achieve Buffett like returns because they are not patient enough to wait for "the perfect pitch."

In my 35 years as an investor, and 18 years as an investment advisor, I have seen it over and over again. People will not change, and as long as financial publications and TV programs constantly appeal to investor’s greed, they will continue doing what they're doing. The recent real esate debachle is a prime example of what greed and following the crowd can do to your pocketbook.

Here is a great article written by Bill Bonner the founder and president of Agora Publishing. The article appeared in the American Free Press (645 Pennsylvania Avenue SE, Suite 100 Washington, D.C. 20003)

CHINESE HAVE MOST MONEY ON PLANET

AMERICA NOW BIGGEST DEBTOR IN THE WORLD

On the Money with Bill Bonner

And another point of comparison: the third quarter in 2006 showed China’s gross domestic product still going up at more than 10% per year. The same quarter in the United States revealed a slowing economy—growing at only 1.6% per year.

My wife and I took a trip to three different Mall's in our area (On the Saturday after Black Friday), and this is what we saw;

1) Considering it was a holiday weekend, the largest Mall in our area had very few shoppers. The shoppers we did see were not loaded down with purchases, they were basically walking around.

2) The second Mall was more upscale, in an upscale area. The parking lot was full, and people were buying. Women and young adults were the buyers while the men were eating, drinking, and sitting in the massage chairs at Sharper Image (me included).

3) The third Mall was pretty nice. American Eagle was busy (selling their Salvation Army look-a-like clothing), Abercrombie & Fitch (more expensive Salvation Army look-a-likes) had browsers but not a lot of buyers. Panera Bread was jammed.

Is it just me, or are all of the clothes that you and I threw away (holes in pants, severely worn) as kids now being sold at places like American Eagle, Abercrombie & Fitch, and Gap?

I quickly concluded that our economy (gas prices and inflation) has taken a toll on people with lower-lower middle class incomes. Arm chair economists know that consumption accounts for about 70% of GDP growth. So, if 70% of GDP is the consumer, I would like to know what percentage of the 70% the various income classes represent.

Weaker sales at Wal-Mart this weekend was one of the catalysts for today's sell-off in the market. Given the reaction, I would guess that the lower-lower middle class income group carries a pretty big stick. I've been telling you for quite some time that the CPI numbers do not reflect what is happening in the real world. The average consumer is seeing their incomes evaporate because of a higher cost of living and massive inflation. Many of a consumer’s daily expense are not properly accounted for in the CPI data.

Today, we are finally seeing a small dose of reality.

Once again the fine people at the Big Picture (http://bigpicture.typepad.com/) have done a great job searching for the truth in today's retail sales figures. See- "Don’t Believe the Hype, Redux: NRF Bad Data"

According to the Big Picture, the 19% rise in retail sales this weekend were not the actual results, but numbers taken from a survey done by the National Retail Federation.

Here is a quote from the Big Picture;

"No, spending was not up 19%. A survey of shoppers DONE 11/23-11/25 found that people said they expected to spend 19% more. These were not actual spent dollars, but rather, were expctations of spending. There's an enormous difference, especailly when we consider that people tend to be very poor judges of their own behavior."

A viewer asked;

Looked all over the Big Picture web site but could not find the story. Did they pull it?

I don't know if they pulled it or not, but when I went back and looked, it was gone. I did find the original article by doing a Google bolg search, and here it is;

"Don’t Believe the Hype, Redux: NRF Bad Data"

In case this doesn't work, I copied the article below;

Jeff Saut at Raymond James said;

Verily, we think the nation’s embedded inflation rate is likely closer to the dollar’s decline over the past five years (some 30%), implying a 6% inflation rate per year, rather than the re-jiggered CPI figure comprised by the government’s gear-heads. Plainly, anyone living in the real world knows the current inflation rate is higher than the laughable 1.9% (estimated) core rate to which the government keeps referring.

I'm glad we are not the only one who believe the CPI data is seriously flawed. Inlfation is clearly out of control. If you don't believe it, look at the impact it is having on average American's who shop at Wal-Mart.

The market has more work to do on the downside, but I do have some reservations. I have reservations because I don't know what former Goldman Sachs boss, and current Treasury Secretary Hank Paulsen has up his sleeve. All things being equal, and with no more funny business from the Plunge Protection Team, the market should continue to head lower.

When you look at all the evidence, I don't see how the market can hold up;

1) Fed Chairman Ben Bernanke said today that;

a) "Economic growth will be modestly below trend in the near term." (Earnings are coming down)

b) "A failure of inflation to moderate as expected would be especially troublesome."(Inflation is still a problem)

c)" In the case of inflation, the risks to the forecast seem primarily to the upside."(Dido)

d) "Whether further policy action against inflation will be required depends on the incoming data and in particular how these data affect the FOMC’s medium-term forecasts."(No, we are not going to lower rates anytime soon)

e) The housing market "is likely to be a drag on economic growth into next year.'' ``The correction to the housing market could turn out to be more severe and widespread than seems most likely at present,'' ``to date there is little evidence that the weakness in housing markets is spilling over more broadly to consumer spending or aggregate employment.'' If these trends continue, growth ``might return to a pace that could intensify upward pressures on resource utilization.'' (We have not scene the bottom in housing, and consumers are crazy)

f) '' Still, wage and salary growth has supported consumer spending." (Inflation is all around us and consumers are still crazy)

g) Food and Energy prices are still above our ``comfort'' range. (More inflation)

Need I say more? I think I will.

CNBC reported this morning that former AIG boss, Maurice "Hanky Panky" Greenberg was buying large blocks of shares in the NY Times (NYT) company. Greenberg has been unloading shares of American International Group (AIG) in mass quantities through his holdings company Starr International, and C V Starr & company.

Greenberg is a man in the know, and is very well connected with Wall Street and other higher ups. Believe me; he does not invest unless he knows for sure he will make money.

Since October 25th, 2006, Starr International, Maurice R & Corinne P Greenberg Family Foundation and C V Starr have sold have sold 7,099,232 shares of AIG. You can look at the sales of AIG by Starr (Greenberg) dating back to 2004 on Yahoo. In November 2005, C V Starr reportedly sold a massive 47,337,246 shares of AIG.

If energy was a horse race, this is how the announcer would call the race;

"Well, their off and running. Crude Oil is coming around the track at $62.47, up $1.48 for the January contract, while RBOB Gasoline is holding a close second at $1.705 up another .0679. Unleaded Gasoline is coming in third at $1.67, up .0504. If you tack on another 15% for store profits along with a .50 cent tax, average price of unleaded should come in around $2.46/ gallon."

So much for the stealth tax cut for consumers.

Here's the last lap of the race;

"Consumers are coming around the bend at Best Buy; they are running neck and neck. Oh, my god! We have had a terrible pile up just as we were rounding the home stretch! It looked as if consumers were going to win in a surprise victory, but energy prices that were predicted to stay down or go lower cut the legs right out from under them. Oh, this is awful! Energy prices have raced ahead of the consumer once again to win the race. Oh, the poor consumer. I really thought they were going to win this one."

I really don’t know if the average American cares anymore. I know for sure that they have no idea that the “New World Order” gang is responsible for the widening of the gap between the haves and have-nots. What better way to get the masses to agree to the “New World Order” agenda than to inflict as much economic pain as possible on the middle class.

Last night, on Lou Dobbs Tonight, Lou, Casey Wian, and Christine Romans, reported on one of the big agenda’s of the “New World Order” movement; a North American Union.

A North American Union calls for, as Casey Wian reports, “open borders, commerce of all costs, and, by the way, without the approval of either American voters or the U.S. Congress.” In addition, to all of the above, another agenda of the North American Union is to have a single currency shared by all three countries in North America known as the “Amero.”

The architects of the North American Union are denying the formation of single currency, but they also denied that NAFTA would result in the loss of American jobs.

Here are a few of the transcripts from yesterdays show (Lou Dobbs Tonight);

Here is a question from a reader;

What are your projections on Ford stock now?

There is no doubt about it, Ford will continue to have another rough year or two.

The key point however is Ford must begin making products that consumers want to buy. Right now, their product line is very slim, and the only real marketable products they have are trucks and SUV's. If gas prices continue to remain high, these products will not sell.

Buying Ford at these levels (or lower) is a leap of faith. That faith being that they will transform the company into a Toyota or Honda. Frankly, I don't think they have a choice. If they don't, they will go bankrupt.

Yesterday, I heard that GM & F were allocating $720 million toward the development of front wheel drive vehicles.

This is a big step toward transforming the companies into true competitors of Toyota and Honda. If they don't cut corners, or lets their arrogance get in the way of what they must do, they will regain much of what has been lost. Arrogance has gotten both companies in the shape they are now. Maybe now they have been humbled enough to make some real progress.

If they truly do what they need to do to become real competitors to Toyota and Honda, owners the stock will make a lot of money. Personally, I don't think they will back peddle like they have done in the past.

Here is a quote from Jim Rogers on Saturday, November 18, 2006; Cavuto on Business

Jim Rogers: The housing sector is already in worse than a recession. We know that automobiles are in worse than recession. Those are two of the largest sectors in the American economy. We’re talking about how people are cutting prices. That’s because something is wrong. We have an inverted yield curve in the bond market. That almost always means a recession is coming. The thing that makes me wonder is the stock market. It is at all-time highs, the Dow anyway. But as Dr. Samuelson pointed out, the stock market and economy don’t always get it right. And you referred to the government’s numbers. We just had an election. The government numbers have to look good. Don’t rely on that information if you’re going to be an investor.