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Saturday, May 30, 2009

Ron Paul

This guy has balls.  My kind of politician.  Wish all politicians were more truthful like him.

Go Ron Paul!  Tell 'em like it is!!! 



Fwd: Barron's - 2009-06-01 ed.

The New Consumer


As the economy improves, consumers will pay a little more to get a little more, including some brands favored by Michelle Obama. Ten stocks that could benefit. (Video)

AMERICA'S FLING WITH BLING MAY BE OVER, but the shift to thrift -- brought on by a sagging economy and stock market, and heralded on the cover of Time -- also has gone too far. According to Gallup, the polling organization, Americans cut their daily expenditures by more than 40% in the past year. That's not just fewer lattes; it's muscle and bone.


Reuters/Jonathan Ernst

As savings rise and the market rallies, however, a new consumer is emerging, seeking a sensible middle ground between the gross excesses of the mid-2000s and the privations of the past year. He -- and more often, she -- is likely to find it in companies that offer great products, excellent service and outstanding value, which, by the way, doesn't always mean the lowest price.

Barron's has identified 10 companies that occupy this coveted territory and that stand to prosper as consumers trade up again after a protracted period of trading down: , Apple , Bed Bath & Beyond , Chipotle Mexican Grill , J. Crew Group , Nike , Safeway , Target , Toyota and Urban Outfitters . Not all boast cheap stocks at the moment, but each looks like a long-term winner.

We call this group of 10 the Michelle Index in a nod to America's First Lady, Michelle Obama, whose championing of brands that offer good value reflects a nationwide trend. The honor shouldn't be construed as an endorsement of her politics or her husband's, and we don't even know whether she favors all these concerns. But we do know she's famously fond of J. Crew separates, loads her iPod with Mariah Carey and Stevie Wonder, and has been photographed traipsing across the White House lawn in black-and-pink Nike sneakers.

MOST AMERICANS DON'T HAVE Michelle Obama's generous budget. Still, the evidence suggests that rich or poor, consumers are loosening their purse strings nationwide as they feel more hopeful about the future. According to the Commerce Department, personal consumption rebounded by 2.2% between January and March, after plummeting 3.8% in the third quarter of 2008 and 4.3% in the fourth -- the worst six-month spending squeeze since World War II. Separately, the Conference Board reported last week that its consumer-confidence index jumped to 54.9 in May from 40.8 in April, the biggest increase in six years.

Most economists don't yet see the change in attitudes or behavior: Collectively they expect spending to decline by 0.6% this year, a forecast that could prove too gloomy. McDonald's (ticker: MCD) gets it, however. Having ruled the recession with its dollar menu, the fast-food giant is adding a premium $4 Angus burger to its menu to satisfy those who crave meatier fare.

Surveys conducted by WSL Strategic Retail, a New York consulting firm, trace the arc of the nation's latest experience with thrift, which began long before Lehman Brothers' September collapse. The percentage of Americans who tried scrimping on prescription medications spiked to 25% in 2008 from 12% in 2007, before returning to 12% in WSL's latest "How America Shops" survey. The percentage cutting back on cereal purchases fell to 20% in April from 41% a year ago, while those stinting on frozen foods fell to 34% from 58% last year.

"Maybe we've cut back as much as we can and there isn't much more left, or it just isn't working out," says Candace Corlett, WSL's president.

Paradoxically, a sharp rise in savings is partially behind the nascent pick-up in spending, as those with more in the bank generally feel freer to part with their pennies. The nation's savings rate, negative three years ago, recently climbed to 4.2% of disposable personal income. James Paulsen, chief investment strategist at Wells Capital Management, expects it to stabilize near 5%. "The spike in savings has less to do with any 'new normal' in consumer spending than [with] the way we were panicked into buying Treasury bills at the height of the credit crisis," he says.

Paulsen sees consumer spending growing by 2% to 2.5% in the next few years. Here's a closer look at the companies likely to capture the extra dough.

Table: The Michelle Index

Do you like hefty discounts, comparison pricing and shopping in your pajamas? wins on all counts.

Launched in 1995 as Earth's biggest bookstore, amazin' Amazon has become the planet's best retailer. It combines unlimited shelf space with a personal shopping experience that includes gift registries, wish lists and product recommendations. The company sells a vast assortment of products, from books to refrigerators to dog shampoo. It also links to a burgeoning network of independent merchants.

So far, Amazon has defied the plunge in retail sales and blown away earnings expectations. It posted a 24% jump in first-quarter profits on an 18% rise in revenue.

The Web accounts for just 5% of U.S. retail sales, and Forrester Research reckons that can easily double in the next five years, leaving the company enormous room to grow. Alas, there's no discount on Amazon shares, which trade at 47 times expected earnings.


The press had a field day when the Obamas veered from protocol and gave the Queen of England an iPod. But just wait til Liz puts her Bing Crosby playlist on shuffle.

Innovation is hard-wired in Apple's genes, standing the company in good stead in all economies. The iPod didn't exist eight years ago, and today it's the most popular portable audio player in the world, with more than 173 million units sold. The two-year-old iPhone is available in 81 countries.

Apple's sales have grown at an average annual rate of 32% in the past five years, and its earnings at 61%. The company has $28 a share in cash and no debt, and is up more than 1,700% in the past six years. Shares now trade for 135.

Apple's personal-computer sales slipped 3% in the latest quarter. Still, Susquehanna analyst Jeffrey Fidacaro thinks Apple has "significant growth potential, including expanded market share in the smartphone market and above-market growth in its Mac PC business."

Bed Bath & Beyond

After Bed Bath & Beyond beat fourth-quarter forecasts, investors celebrated by sending its shares up 24% in a single session. If Wall Street is right about the recession ending in this year's third quarter, there will be more celebrations in store.

Bed Bath is a massive housewares bazaar. The breadth and depth of its assortment beats that of most department stores, and low prices combined with couponing keep the tab competitive. The company operates 930 stores in 49 states, and management's goal is to open about 400 more.

In the past three years, Bed Bath's margins contracted as then-rival Linens 'N Things promoted heavily to try to stay afloat. It didn't work, and Linens' liquidation last year should boost Bed Bath's profitability and market share. The company has no debt, generates lots of cash and trades at a discount to other home-furnishings outfits.

In bad times, people buy new towels. In better ones, they buy new bathrooms. Either way, Bed Bath benefits.

Chipotle Mexican Grill

Among restaurant chains, McDonald's has cheaper food, a more formidable platform for expansion and, at 15 times earnings, a more palatable stock. But we prefer the gentler ambience and healthier fare of its corporate offspring, Chipotle Mexican Grill, even if it costs a little more. Besides, a $7 burrito delivers $14 of flavor.

Barron's Kopin Tan talks about a group of brands, including some favored by Michelle Obama, that may prosper as America upgrades a bit due to the improving market.

Chipotle's "food with integrity" message is likely to resonate with more health-conscious Americans, maybe even the First Gardener, who recently planted a vegetable patch on the White House grounds.

There has been little increase in the number of Americans eating out of the house in the past six years. Yet fast-food and casual-dining chains have expanded aggressively, gorging on cheap credit to drive growth and placate investors. Denver-based Chipotle, spun out of McDonald's in 2006, chose a different path: It has no debt and about 860 units, half in just five states. A lone spicy outpost in Toronto feeds Canada, for now.

Chipotle's sales and earnings have sizzled since its initial public offering, and its growth rate will moderate as more units open. Indeed, shares that once fetched 80 times earnings now trade for 26. A rash of insider stock sales in April suggests investors would be better off nibbling, not gobbling, at today's 80. Easy on the hot sauce.

[follow]J. Crew Group

J. Crew imposes a modern sensibility on American classics -- like twin sets for women and plaid shorts for men. The result is designer-quality fashion at mid-range prices that has found fans far from preppie redoubts like Nantucket and New Canaan. Is it any wonder that Michelle Obama chose to wear J. Crew on the Jay Leno Show -- the better to press her point about affordable fashion -- after the hubbub over Sarah Palin's whirlwind shopping spree?

Rival Gap (GPS) is cheaper at 14 times this year's expected earnings, and its troubled child, Old Navy, finally looks to be on the mend. But New York-based J. Crew delivers a better retail experience, complete with well-lit stores and impeccable service. And its Website draws 80 million visitors a year.

J. Crew shares shot up 26% Friday, to 26, after the company beat fiscal first-quarter guidance and forecast operating earnings of eight to 12 cents a share, also better than expected. As CEO Millard "Mickey" Drexler said in the earnings release, "there is no choice in this environment than to continue to be creative and figure out where the customer is going, not to respond to where he or she has been."

We couldn't have said it better.


According to a recent Boston Consulting Group survey of global consumers, even as shoppers in the developed world have been trading down, those in China and India are trading up. For serious runners -- and weekend warriors -- the brand to own is Nike.

Nike controls roughly 50% of the highly fragmented $20 billion market for athletic footwear. More than 60% of its sales are overseas. Footwear sales suffer in recessions, but the prospect of double-digit growth in Asia provides a nice offset to setbacks in the U.S. Besides, Nike is gaining market share as its rivals struggle.

Nike has little debt and $2.6 billion of cash, and it pays an annual dividend of a dollar a share, for a yield of 1.8%. (Four Michelle Index components are dividend payers.) The company has maintained its foothold in recession. Come a recovery, it will be off to a running start.


Grocer Safeway spent the past four years renovating its stores, adding organic produce, fresh-made goods and mood lighting. It converted about 75% of its units to the snazzier format -- just in time for the worst recession in generations.

"It was the wrong strategy for the current market, but not necessarily the wrong strategy for the long term," says Credit Suisse analyst Edward Kelly, who recently upgraded the stock.

Safeway understands the new consumer's quest for healthier choices at prices between those of Wal-Mart Stores (WMT) and Whole Foods (WFMI). Improving the shopping experience will pay off, as well, when the economy improves. The company's West Coast stronghold is relatively untrammeled by Wal-Mart, and its store brands score well with cost-conscious shoppers. Winding down the remodeling project will free up cash flow and boost the company's thin margins. It also is likely to boost Safeway's shares, trading for 20, near their 52-week low.


Michelle Obama has declared herself more of a Target than Wal-Mart shopper. The Minneapolis-based chain offers a better mix of substance and style. It faces fierce competition from Wal-Mart and Costco (COST) on food and staples, but such commodities drive just 21% of gross profits even if they contribute 37% of sales.

Target has perfected the one-two retail punch, drawing shoppers in with low-priced household products and winning them over with tea kettles designed by Michael Graves, bedding by Isaac Mizrahi, and Liz Lange maternity dresses. Such "cheap chic" and discretionary goods account for 60% of profits and just a third of sales, earning it the Frenchified moniker "Tar-jay."

Wal-Mart wins hands down in the thick of a recession, but over the long haul Target will attract those willing to pay a bit more for greater value. The median age of its shoppers is 41, the lowest among big-box discounters. Based on the Lexus and Mercedes SUVs in its parking lots, the median income of its customers may well be the highest.

Target is expected to generate $2.5 billion in free cash flow this year. At 14 times expected earnings, its stock, too, is cheap -- and chic.


Michelle Obama gets driven everywhere these days. But if she manages to shake the Secret Service and sneak off for an afternoon, she might well drive an environmentally friendly Prius, or a sporty, fuel-efficient RAV4.

Car makers are risky bets; just look at Chrysler or General Motors (GM). But even as auto sales slump for an 18th straight month, losses have started to narrow and showroom traffic is picking up.

Toyota has long offered slick styling, affordable prices and a wide range of vehicles, now including hybrids. By entering new markets, localizing production and cutting costs, it has managed to increase net income every year of this century -- until 2009. Merrill Lynch, for one, expects global auto sales to bottom soon and the world's largest auto maker to snag even more market share.

Toyota would be a logical replacement for GM in the Dow Jones Industrial Average (see Up And Down Wall Street Daily, "What Now, Dow 30?" May 26, 2009), although that would require Barron's publisher Dow Jones to break with tradition and pick a company outside the U.S. The new consumer would get it -- and approve.

[way]Urban Outfitters

Compared with baby boomers with depreciating homes and decimated 401(k)s, teens and young adults are in pretty good shape. You can't lose your nest egg if you don't have one, and a 25-year-old with a job finds a whole world on sale today.

Lots of stores cater to the young and the feckless, but Urban Outfitters has carved out an especially well-defined niche. The company's namesake chain sells moderately priced apparel and home furnishings to the so-called new homeless, folks between 18 and 30 who are moving into college dorms or starter digs. Some will graduate in time to Urban's Anthropologie stores for affluent thirty something women.

Too many retailers expanded zealously during the credit boom. Not so Urban Outfitters, which has fewer than 300 stores and hasn't saturated the market.

ALTHOUGH WE'VE CHOSEN to emphasize what these 10 companies offer consumers, we wondered how they've treated shareholders, as well. To gauge that, we asked the analysts at Bespoke Investment Group to chart how an equal-weighted index of the 10 stocks might have performed over the past decade. (The weight was adjusted with each addition of a newly public stock, such as J. Crew and Chipotle, in 2006.) The result: $100 invested a decade ago would now be worth $504. That's a 404% gain -- compared with a 30% loss for the Standard & Poor's 500 over the same span.

Such outperformance reflects the rise of these strong brands. Their future looks promising, too.

A Pessimistic Assessment, Especially for Europe

Niall Ferguson, Transatlantic Author and Academic


AN INTERVIEW WITH NIALL FERGUSON: The Harvard professor and media star is cautious on the global economic outlook -- and bleak about Europe.

A PROLIFIC AUTHOR AND MEDIA STAR, NIALL FERGUSON has become one of the most prominent academics in the world. The Scottish-born Ferguson, 45, is a history and business-school professor at Harvard, and holds other high-profile posts at Stanford and at Oxford -- where he earned his doctorate.

Ferguson is a provocative writer. His most recent books are The Ascent of Money (2008) and The War of the World, a study of World War II, published in 2006. He has also done several TV projects, including a multipart series based on The Ascent of Money that will air in July on PBS, the Public Broadcasting System. He is working on a book on Siegmund Warburg, who was an influential British financier from the 1940s through the 1970s.


Gary Spector for Barron's

"Nobody has the faintest idea what next year is going to look like. It isn't clear yet that this is just a common recession. This is probably more like a slight depression." –Niall Ferguson

Barron's profiled Ferguson in a cover story more than two years ago ("Wake-Up Call," March 12, 2007), in which he astutely warned that the markets were too complacent about financial and geopolitical risk. Today, the rightward-leaning Ferguson is cautious on the global economic outlook, worries about Russian intentions in Eastern Europe -- and thinks Britain's Conservative Party may finally win an election in 2010. Ferguson also has a distinctive view on investments, inspired in part by the famed Rothschilds. Barron's caught up with him recently in New York.

Barron's: Is the worst over for the global stock markets and the economy?

Ferguson: It may look that way, but appearances can be deceptive. The stock market has actually tracked almost perfectly its downward movements between 1929 and 1931. Now that doesn't mean that we are going to repeat the Great Depression. I don't think we will, because the policy responses have been different. It would be excessively optimistic, however, to conclude from a relatively small set of green shoots in the economic data that we are all going to live happily ever after. It is certainly way too early to say the Obama administration is right that the economy is going to grow at 3% next year and 4% in 2011. I find that scenario as implausible as a rerun of the Great Depression.

What is the relative position of the U.S.?

It is in significantly better shape than the other major developed economies. The U.S. can run bigger deficits at lower cost, because of its reserve-currency status. The Japanese economy has fallen off a cliff. The German economy isn't a great deal better. These two economies are suffering their worst shock since the 1930s. The contraction in Germany and Japan probably will be roughly twice that of the U.S. Real gross-domestic-product growth in Japan is almost certainly going to be a negative 6% or 7% this year. In the U.S., it is going to be about minus 2.6% for this year.

It is ironic that the U.S. may hold up better.

We have a crisis that was clearly American in origin. It had a Made in America stamp on it, yet it ends up hurting other people more than it hurts Americans. That brings to mind [19th-century Prussian leader Otto von] Bismarck's great line: "God looks after drunks, fools and the United States of America."

When will the recovery come?

Nobody has the faintest idea what next year is going to look like. It isn't clear yet that this is just a common recession. This is probably more like a slight depression. We won't see a big V-shaped bounce. Much of the consumption growth in the decade up to 2007 was fueled by things like mortgage-equity withdrawal. That game is clearly over. Strip that out, and you are looking at an annual economic-growth rate in the U.S. closer to 1½% to 2% than 4%.

What is your disagreement with New York Times columnist and Princeton professor Paul Krugman about massive government borrowing?

This is one of the most interesting questions of the moment. The view of Keynesians, their Econ. 101 textbooks and the Nobel laureate at Princeton is that the world has an excess of savings over investments and therefore the deficit can be almost any size and it will be financed. My sense is that if the U.S. government tries to borrow $1.8 trillion in a year, that is an awful lot of bonds to sell at the same time [as] all the other major governments. It looks to me like a supply-and-demand story, and what tends to happen in those stories, regardless of the macro environment, is that the price of bonds tends to fall. The U.S. 10-year Treasury rate has moved up more than 100 basis points [one percentage point] since January. There is a problem in Britain, where the Bank of England had to protest about fiscal stimulus because it was causing a huge interest-rate problem. It is also happening here.

Are you concerned about the potential for overregulation as an outgrowth of the financial crisis?

My worry is that we end up with an overreaction. Now history is something that gets written in a hurry. The consensus is that this crisis came about because of deregulation in the U.S., and that what we need is more regulation. Whether it is bankers' compensation or derivative markets, there is going to be more regulation. My feeling is that all this zeal for regulation actually grows out of a very faulty analysis. Why do I think that? For one, if this crisis was all about regulation it took a hell of a long time to come about because deregulation began in 1980. And deregulation can't be all bad because lots of good things happened in the world economy after 1980. The second problem is if deregulation was the issue, why was it that the most regulated entities, banks, caused the biggest trouble, and that unregulated hedge funds didn't? Some hedge funds have failed, but there has been no systemic downside to it. And thirdly, the regulatory frameworks are not the same on both sides of the Atlantic, and yet European banks are in as big a mess as the American ones. German banks are the most leveraged on average in the world. Now the Germans have been wagging their fingers at the Anglo-Saxon model, but their model didn't prevent extra leverage in the balance sheets.

What about your native U.K.?

The economic outlook is pretty bleak. The size of these big too-big-to-fail banks like Royal Bank of Scotland is really huge, relative to the United Kingdom's GDP. It creates a fiscal nightmare. The U.K. is taking on an enormous pile of liabilities in relation to its GDP and the existing public debt. The U.K. isn't Iceland. It isn't Ireland. They were the extreme cases where finance was vastly greater than the economy. But the U.K. is closer to them than to the U.S. Americans worry a lot about bank leverage and the scale of the government's financial commitments. But the U.S. is a pretty large economy, and the financial sector never got as big in relative terms as it did in Britain.

Any hope for the U.K.?

I am, broadly speaking, bleak about the U.K. until it gets a new government, and that almost certainly will be within the next year. Then I think we will see some radical reform. The U.K. needs another dose of Thatcherism very urgently, and I'm hoping it gets that. [Conservative Margaret Thatcher was British prime minister from 1979 through 1990.]

Are you saying the British Conservatives may actually win an election?

They can and will. The Brown government is probably the most unpopular ever, and it is really quite spectacular. [Prime Minister Gordon Brown leads the British Labour Party.] The Conservatives would have to screw up on an absolutely epic scale to lose.

What about the rest of the world?

The emerging-market story is actually much more straightforward because there is a real stimulus package out there that is working much better than the U.S. stimulus package: It is the one in China. It is giving a shot in the arm to those economies that supply commodities to China, and they are the markets that have rallied the most since the year began. The Russian stock market essentially is a play on the price of oil. Brazil is partly a food story, and India has done pretty impressively, too. So, if you had to take a view on equities, it would be the BRICs [Brazil, Russia, India, China] over the U.S. There is also a big commodities opportunity there.

Where is the biggest potential source of political instability in the world?

Eastern Europe, for sure. Four governments -- in Latvia, Hungary, the Czech Republic and Estonia -- have already fallen since this crisis began.

Americans aren't focused on that.

It is funny, because the Eastern European crisis not only is economically interesting, but [also is] strategically important: It blows a hole in balance sheets of Western European banks. We have been beating ourselves up here for the way U.S. banks were managed. But Western European banks are in worse shape, and what really is going to hurt them is the mess that is Eastern Europe, from Ukraine to the Baltics, Romania, Hungary, and Slovakia. These economies are in a terrible mess.

Are there political implications?

These new democracies that came out of the collapse of Communism have been pretty solidly pro-American. They are Donald Rumsfeld's famous "New Europe." Well, now they are being hammered by this crisis, and that creates an opportunity -- all crises are opportunities -- for Vladimir Putin and his merry men in Russia to start reclaiming some leverage over what they call the "near abroad." The gas pipeline crisis in Ukraine last January, like the invasion of Georgia, could be a foretaste of an important trend over the coming year, where domestic instability starts to create opportunities for the Russians to regain at least some of their influence in that area.

In writing about the Rothschild family, you have discussed your admiration for their old-fashioned investment approach.

There is no doubt that orthodox notions of portfolio diversification didn't help much in this crisis. There was so much correlation among asset classes last year that it was hard to avoid a pasting. But that old Rothschild model, about a third securities, a third art, and a third in real estate has a certain appeal to it.

Or having some exposure to gold. That is the thing I most regret not having done. When the Bank of England sold a pile of gold in 1999 at an incredibly low price [around $300 an ounce], I remember thinking, "That is a stupid mistake," but I didn't buy any gold. That would have been a killer investment.

Stocks haven't done well since 1999.

You are back to square one if you had bought the "stocks for the long run" story then.

How were you positioned prior to the market meltdown last year?

I didn't have much equity exposure on the eve of the crisis. But I probably had rather more real estate than I wanted, though my strategy has been consistently to buy historic real estate on both sides of the Atlantic. Nothing I own was built after around 1800. There is a premium on things that can't be replicated.

You live now in Oxford.

I divide my time between Beacon Hill [in Boston] and Oxfordshire. And the Oxfordshire house is a 17th-century farm house. The Beacon Hill house is one of the oldest in the U.S. We also have an ancient pile in South Wales, which dates back to the Middle Ages. Most of its structure is 16th century. Now that's a kind of quirky investment, because most properties of this kind aren't very liquid. But I see them as investments for the long run -- I mean, they have already been around for the long run.

Thanks, Niall.

Where's the Smart Money Going?


A look at notable picks and pans discussed by Wall Street heavyweights at last week's Ira Sohn Investment Research Conference.

A GROUP OF WELL-REGARDED AND LOW-PROFILE Investment managers surfaced last week in New York and offered some notable picks and pans, including a bearish view on Moody's from David Einhorn, a bullish assessment of Strayer Education from Steve Mandel and a plug for embattled Bank of America from Mark Kingdon.

There also was a rare appearance at an investment gathering by the man who Barron's believes is the likely successor to Warren Buffett as CEO of Berkshire Hathaway (ticker: BRKB). David Sokol, chairman of Mid American Energy Holdings, a Berkshire-controlled utility, offered a cautious view of the housing and the electric-utility markets.


Clockwise from top left: Meigneux/Sipa; Reuters/Lucas Jackson; Najlah Feanny/Corbis; AP Photo/Nati Harnik

Clockwise from upper left: David Einhorn, Bill Ackman, Steve Mandel and David Sokol.

These heavyweights and seven top investors made presentations last Wednesday at the Ira Sohn Investment Research Conference, which drew over 1,200 people and raised $4 million for pediatric cancer centers.

Einhorn, head of Greenlight Capital, was the headliner, because he caused a big stir at last year's conference when he detailed his bearishness on Lehman Brothers based on the overvaluation of real-estate assets. That bearishness turned out to be right on the money. Einhorn said he's bearish now on Moody 's (MCO) because the credit-ratings agency has a "shattered brand," and because even the firm's largest holder, Warren Buffett, doesn't rely on credit ratings.

Mandel, who runs Lone Pine Capital, observed that great franchises are valued cheaply now relative to "struggling" economically sensitive stocks that are in vogue as recovery plays. Mandel said Strayer (STRA), a leading for-profit education company, has great management and enormous growth potential. He conceded that the stock, at 25 times estimated earnings, isn't cheap, but that it "will be a far larger business 10 years from now."

Kingdon of Kingdon Capital Management likes Bank of America (BAC) because the stock, now around 11, trades for just five times what he considers its "normalized" earnings power of $2.25 a share in a more benign economic and financial environment. He said the stock could double in a year.

Noting that Berkshire owns several housing-related companies, Sokol said he doesn't see a normalization of the housing market until mid-2011 because of a continued supply overhang. Speaking of the electric-utility sector, Sokol said: "The headwinds are the most significant in my 30 years in the business." Electric utilities are being squeezed by higher borrowing and building costs. Another potential problem: climate legislation.

Table: From Wall Street's Best and Brightest

William Ackman of Pershing Square Capital Management made a case for General Growth Properties (GGWPQ), a big shopping-mall operator that filed for bankruptcy in April because of problems refinancing maturing debt. "This isn't your typical bankruptcy," Ackman said, asserting that General Growth could be the rare bankruptcy in which equity holders do well. He said General Growth's assets are worth more than its $28 billion in debt. The stock could ultimately be worth $10 to $30. Investors liked what they heard as the stock rose 49 cents to $1.80 Thursday and traded Friday above $2.00.

Kynikos Associates' Jim Chanos, a short seller, said he is bearish on education stocks and a whole group of industries, including drugs and defense, that depend heavily on government payments. "The new sheriff in town," Barack Obama, isn't inclined to tolerate outsized profit margins for companies that get a lot of federal money, Chanos said. He is bearish on Lincare Holdings (LNCR), which provides home-oxygen services, saying the company, which depends on government reimbursements, could see "dramatic profit deterioration."

Joseph Healey, who runs HealthCor, a health-care hedge fund, recommended Valeant Pharmaceuticals International (VRX) and Hologic (HOLX), whose stocks could double, he asserted. Valeant has a promising epilepsy drug, and Hologic, a maker of mammography equipment, is "one of the only compelling new-product stories in medical technology." Hologic, he said, may become a takeover target for General Electric or Siemens.

Lee Hobson of Highside Capital Management recommended Millicom International (MICC), calling it a great play on the booming market for wireless phones in the developing world. He said the company is valued cheaply for less than four times projected 2010 pretax cash flow and is growing rapidly. Hobson is bearish on Ritchie Brothers Auctioneers (RBA) because the company, which specializes in used industrial equipment, trades for more than 25 times projected 2009 profit and is likely to get hurt by falling equipment prices.

Trimmer Sails, Dimmer Outlooks


More danger lurks in defense stocks as the military reels in spending. But two names -- Boeing and Rockwell-Collins -- have plenty of fight left.

BARGAIN HUNTERS CONSIDERING DIVING INTO defense stocks, beware. Despite drops of as much as 30% over the past year, these shares could fall further. The military will cut its spending during the next five years, especially on large-ticket items, predicts veteran industry analyst Rick Whittington.


Reuters/Jason Reed

The Pentagon is set to emphasize spending on personnel rather than on equipment. Likely to be hurt: Northrop Grumman and Lockheed Martin.

Whittington, of JSA Research, a Malta, N.Y., boutique covering the defense industry, is a credible prognosticator. Seven years ago, he correctly predicted in Barron's that military budgets and defense stocks would soar ("Military Power," Sept. 23, 2002). The shares initially tumbled, but then rallied for five years. Now he sees the reverse happening, and he has slapped Sell recommendations on L-3 Communications Holdings (ticker: LLL), Lockheed Martin (LMT), Northrop Grumman (NOC) and Raytheon (RTN). Company officials declined to comment on Whittington's views of their prospects.

Most defense contractors will see earnings climb next year, thanks to Bush-era spending increases. But Whittington warns there is roughly a two-year lag between passage of the Defense Department's budget and its impact on a vendor's bottom line. "We are still saying you want to sell. You don't want to be a buyer of these stocks," he says, arguing that 2010 may be the earnings peak for some of these companies for many years to come.

The analyst sees shares of the Sell-rated companies' revenues falling 5% to 7% annually through 2014. Earnings will drop even more during that period, by 8% to 19%. At the same time, earnings multiples will contract, creating a double whammy that could send the stocks 28% to 57% lower. (Whittington's earnings and price targets are laid out in the nearby table.)

The only large defense names to get a Buy rating are Boeing (BA) and Rockwell-Collins (COL), because of their exposure to the commercial-aerospace market. Both generate about half of their sales from commercial aerospace, which Whittington sees rebounding in the next year. If he is right about these two exceptions, Boeing could almost double to 84 and Rockwell-Collins could rise to 65. Both have been trading in the low 40s.

Table: Marching Orders

DEFENSE SPENDING TENDS TO BE cyclical, and since the start of this decade, it has gone straight up. The Defense Department has requested $664 billion for the 2010 federal fiscal year, which starts Oct. 1. That is more than double the $285 billion spent in fiscal 2000. The wars in Iraq and Afghanistan have pushed defense outlays to about 4.5% of gross domestic product, compared with 2.4% in fiscal 2000. Spending rose by 9% to 12% during a number of years earlier in this decade.

But the down cycle may have begun. There is broad support for an end to the wars in Afghanistan and Iraq. Defense Secretary Robert Gates has promised to remove all troops from Iraq by 2011. And in the face of an ever-growing U.S. deficit, Gates appears willing to slash military spending wherever he deems necessary.

"The U.S. military has prevailed in what it has set out to do. The troops overseas are coming home, and we don't have military competition with anyone in the world" as we did when the Soviet Union existed, Whittington says. Even the furor over North Korea's nuclear-bomb test doesn't change Whittington's forecast. President Obama will encourage China to control North Korea, he says.

China, India and Russia are solidly committed to the free-market, American-led economic system. With no reason to believe they are a threat, the U.S. could be in store for a long period of peace, Whittington contends.

The fiscal 2010 defense budget asks for a 0.3% increase in spending. But Whittington notes that, while current programs have been fully funded, some future ones have been cut. The outlook for specific programs -- and companies -- will become clearer this summer, when the Department of Defense publishes its Quadrennial Defense Review, which lays out the its strategy over the next 20 years.

Whittington believes Defense's base budget of $534 billion requested for fiscal 2010 could be cut to $420 billion by 2015, which would still leave it 41% larger than it was in 2001. In addition, the $130 billion requested for fiscal 2010 for war and nonwar supplements could fall to $20 billion, roughly where it stood eight years ago.

Some in the industry have acknowledged the sea change that may be upon us. Jim Albaugh, president of Boeing's Integrated Defense Systems, recently told Bloomberg: "It is possible that 2010 could be the high-water mark as far as defense spending" on new weapons.

[chart]In addition, Defense Secretary Robert Gates has indicated he plans to shift spending priorities. More will be spent on our troops in the Army and less will be spent on big-ticket items used by the Navy and Air Force, says Whittington. So companies producing fighter aircraft will get hurt (think Northrop Grumman), but those supplying the ground forces with equipment will benefit -- for example, General Dynamics (GD), on which Whittington has a Hold rating.

The war in Afghanistan has depended on ground troops climbing mountains and on unmanned drones, not on the tanks and manned aircraft of some wars past, notes Whittington. The Obama administration has increased its spending on people, increasing military headcount by 97,000, boosting pay and enhancing medical benefits. Spending on personnel could go to 30% of the budget, up from 20% to 25% in years past, estimates Whittington.

If he is on target, Lockheed Martin will feel the biggest impact. The defense contractor does about 84% of its civil and military business with the U.S. government. Defense has proposed ending the purchase of the F-22 Raptor, a fighter jet made by Lockheed and Boeing. Also under threat are the company's missile-defense products and the transitional satellite (TSAT) program for super-high-speed networks.

The company, in its first-quarter conference call, acknowledged that the proposed fiscal 2010 defense budget only increased slightly. But Chief Financial Officer Bruce Tanner said: "We continue to believe that our revenue growth will exceed the overall [defense spending] rate, driven by strong future sales expansion on the F-35 Joint Strike Fighter program and in our Information Systems & Global Services business area."

Tanner identified gainers under the proposed budget as the Aegis anti-ballistic missile system for ships; the THAAD land-based anti-ballistic missile system; the Littoral Combat Ship and 80 HF (high-frequency) satellites. He acknowledged that the VH-71 Presidential Helicopter program may be reduced and that the F-22 Raptor program could end.

Lockheed, at a recent 82.99, has fallen from the 120 it fetched last fall. And some bulls on the stock, including Oppenheimer's Myles Walton, believe it could rebound to 95 over the next 12 to 18 months. Whittington disagrees. As defense spending continues to decline, he asserts, the company's earnings per share will fall further each year from a 2010 peak of $7.59, to hit $4.20 in 2014. Its shares could fall to 35.

At Northrop Grumman, first-quarter earnings of $1.17 a share beat the consensus by nine cents, thanks to stronger-than- expected revenue growth and slightly less pension expense. The company subsequently increased its full-year outlook and boasted a $77 billion backlog.

In a quarterly conference call, Chief Executive Ron Sugar said Northrop is "very well aligned with the priorities that Secretary Gates outlined on April 6." The DOD is emphasizing areas of Northrop's strength including emerging initiatives in cybersecurity, intelligence, surveillance and recognizance; command, control and communications; and unmanned air vehicles.

But Whittington notes the fiscal 2010 budget would kill Northrop's Kinetic Energy Interceptor, once valued at $6 billion, and lower funding for the Northrop aircraft carrier programs to $484 million from $1.2 billion. In addition, the LPD-17 and Mobile Landing Platform transport ships are being delayed to save $3 billion.

The Bottom Line

Analyst Rick Whittington predicted the rise of defense stocks, and he now says that 2010 may be the high-water mark for contractors' earnings for years to come.

Whittington sees Northrop's net income falling from this year's peak of $5.14 to $4.60 by 2011, and to $2.90 by 2014. If he is right, its shares could fall to 24, from a recent 48. That is certainly different from David Strauss at UBS, who has a Buy on the stock and an earnings target of $4.90 this year, rising to $6.90 in 2011. His 12-month target: 61.

For those who want to look really far into the future, Whittington warns that if Obama is reelected in 2012, defense-industry revenue could slide another 10% to 15% in total. He adds that even if a Republican prevails in the election, the defense budget probably would stay flat, rather than grow.

Investors who agree with him certainly should be thinking defensively.

A Most Inefficient Theory


Not-so-efficient markets.

Reviewed by Glen C. Altschuler

AS THE ORIGINATOR OF "ALPHA," THE RISK-ADJUSTMENT tool that became a mantra for hedge-fund managers, Michael Jensen maintained that the prices of stocks and U.S. Treasury bills reflect virtually all available data. His studies revealed that between 85% and 90% of information in corporate earnings reports found its way into prices before the reports were released, and that even the most skilled mutual-fund managers could not outperform the "efficient market."

Formulated at the University of Chicago in the 1960s, the efficient-market hypothesis -- that stock prices provide accurate signals for production and investment decisions -- became a core tenet in business and finance in the United States at the end of the twentieth century. In this book, which is subtitled "A History of Risk, Reward, and Delusion on Wall Street," Justin Fox, the economics columnist for Time magazine, provides a lucid, lively and learned account of the rise and fall of the theory.

The Myth of the Rational Market
By Justin Fox
Collins Business,
400 pages, $27.99

A product of the search for a scientific model for financial markets, the hypothesis has for better and worse helped inspire index funds, modern portfolio theory, derivatives, and deregulation. Nonetheless, Fox demonstrates, it led policy makers and investors astray, most notably by undermining the notion that "the market is a devilish thing," rendered imperfect and at times irrational by "the noise introduced by uninformed traders."

Drawing on Thomas Kuhn's great book The Structure of Scientific Revolutions, Fox explains that, in a classic case of cognitive dissonance, the community of academic finance rallied around the theory of efficient markets once it became entrenched, even when "hard-to-explain anomalies started cropping up within the paradigm."

[book1]Studies showed that stocks with low P/E ratios did better than those with high ratios. And investors often behaved "like ocean-jumping sheep." Though earlier sophisticated pricing schemes based on Value at Risk (VaR) or the capital asset pricing model (CAPM) gave a false sense of security or failed to explain historical returns, true believers continued to insist that no other proposition in economics had more solid empirical evidence supporting it than the powerful new model of efficient markets.

Ultimately, the myth of rational markets was blown away by bubbles. The valuation of dot-com companies and subprime houses throughout the irrationally exuberant 1990s, it turned out, had not been based on "fundamentals," but, as they say in Las Vegas, "on the come." After "it all ended badly," Fox writes, even Chicago School "quants" admitted that financial markets don't just set the price of securities and get out of the way. The way investors interpret a market's behavior shapes that behavior -- and "in turn determines the economic reality that market prices are supposed to reflect."

And yet, Fox points out shrewdly, though they've poked some gaping holes in it, theorists and practitioners haven't quite abandoned the edifice of rational market finance. They're making do with a "muddle" of neoclassical and behavioral and experimental and asymmetric-information tools and techniques. More inclined now to study perturbations and biases, and to acknowledge that stability breeds instability, many of them still have faith that "pervasive forces are out there somewhere, pushing prices in the general direction of where they belong."

Their models assume "rational but half-informed actors who make flawed decisions, but who are capable of learning and adapting." And markets that are "the best aggregators of information known to man," but do not reach "a perfectly calm equilibrium," and occasionally go haywire.

Fox concludes with truisms that remain essential even if they are obvious. Although the market isn't exactly efficient, it's hard to beat or to find a professional who can consistently do so. Past performance may or may not be prologue. In short: It ain't easy to predict the future.

Read All About It


What's caused the big decline in the fortunes of the nation's newspapers. Figures don't lie but…

NEWSPAPERS THE NATION OVER, IT'S NO SECRET, have become the quintessentially endangered species. At the typical paper, the only thing falling faster than circulation is advertising lineage. Many a once proud leading daily has folded, while countless others are queuing up to effectively abandon print and take a desperate leap into the vast ethereal expanse of cyberspace.

To be sure, how well they'll fare, or even whether they'll survive, in their new incarnation as super blogs or 24/7 electronic news spewers knows no man (or woman). After pulling thoughtfully on their chins and squinting wisely, the venerable sages proclaim the source of the papers' travails is that the press moguls lack a good business plan (as makers of buggy whips early in the last century could have told them, sometimes the only truly good business plan for dying businesses is interment).

The accepted wisdom is that what brought newspapers to their current low estate was a deadly double whammy of deep recession and killer competition from the Internet. We have no quarrel with that, although we suspect that a creeping vogue for illiteracy is playing a role as well. But we also think the news is to blame: It's so darn repetitious that, it pains us to say, readers get awfully bored with it.

Just by way of example, how many times -- indeed, how many years, now -- have we picked up our favorite paper to be confronted by a boldface headline screaming at us that the incorrigible nukenik, North Korea, is getting ready to blow up the world? Frankly, we're tired of reading about it. OK, if they finally blow up the world, swell, then we'll be happy to read about it.

We're the first to admit we don't count foreign policy among our areas of expertise (which aren't exactly numerous in any case, once you get past martinis and pro football), but it mystifies us why, what with all those myriad pundits in the State Department, not one in over half a century has ever suggested sending Kim Jong Il, North Korea's diminutive supreme leader, a nice pair of elevator shoes. Then he wouldn't always be the shortest guy in the room and, we guarantee, his hostility toward the rest of the mankind would inexorably melt away.

And why -- while we're on the subject of no-news news -- does it warrant front-page coverage that one of our big auto makers is going bankrupt ? For gosh sakes, everyone knows that the car makers don't make their money selling cars anymore. They get their dough by filing for Chapter 11, confident that Uncle Sam feeds them a few billion here, a few billion there, to tide them over. Sure beats having to come out with a new model every year.

As an ink-stained wretch from way back, we'd hate to give the misimpression that we feel newspapers are dispensable. They're not. And we confess to a lifelong addiction to them. No other medium comes close to the exhaustive (even if sometimes exhausting) coverage they offer. A case very much in point is the nomination of Sonia Sotomayor for the Supreme Court.

Among the many details of Ms. Sotomayor's life that all those long columns devoted to her background, education and career revealed was this little-noted gem. She entered Princeton in 1972, a couple of months or so after Samuel A. Alito Jr., one of George W. Bush's appointments to the court, graduated from that ivy-clad institution. Women had been admitted to Princeton a scant few years earlier, and the surge in their presence at the university stirred protest by some of the grumpier male alumni, including, as it emerges, Mr. Alito.

We can hardly wait to see the interaction between the two as they take their respective places on the bench (let's hope they sit side by side). Enjoy the frozen smiles and kindred gestures of collegiality. Keep a careful eye on the body language and the darting glances at each other. It has the promise of a terrific hoot -- and whatever our age, circumstances and political persuasion, we'd all be the poorer for having missed a memorable spectacle, were it not for our ailing but gallant gazette.

NONE OF THE ABOVE, we're sorry to say, lets newspapers or their electronic kin off the hook for their contributions, however inadvertent, to the growing investor giddiness that has helped light a big fuse under this roaring stock market. In particular, a heck of a lot of the reporting has put a gloss on even the dreariest economic news.

Obviously, with an economy that has been flirting with catastrophe for going on six months, any semblance of good news is inarguably newsworthy. But, the job of a journalist is not to swallow whole what an interested party tells him, whether said party draws a paycheck from Washington or Wall Street. Rather, it's to act as a filter, separating out the facts from the flotsam. And that means taking a hard look for himself at the figures.

Thus, there were hosannas and chirping galore about the end of the slump in manufacturing when a 1.9% increase was reported for new durable-goods in April. What seemed to have escaped general recognition among the gushing reporters was that the March numbers were sharply reduced from a decline of 0.8% to a drop of 2.1% -- which might just have had something to do with April's unexpected jump.

And as Bill King of the always informative King Report, who has a thing about how much of the official data virtually across the board is quietly revised downward the next month, points out, in the latest tally of jobless claims, the previous week's data were also shaved from the original number. And that, too, got lost in the jubilation over what was hailed in many quarters as fresh evidence that the labor market was steadying.

While making a big deal over a modest dip in new claims -- the total remains dismayingly above the 600,000 mark -- both the Street and the media pretty much overlooked the new high in continuing claims, which, Bill notes, extended a parabolic rise. Somehow that doesn't quite square with an uptick in employment.

We still envisage unemployment hitting 10% early next year and the bum job market acting as a big drag on everything from housing (the bubble that ultimately broke the economy) to credit (whose 25-year spree came to an inglorious end) and to consumer spending (which is supposed to be the angel of recovery).

Yes, there are signs that the slump is slowing; but after two horrendously bad quarters back to back, the economy was either going to decline at a somewhat gentler pace or implode. We hope we're wrong, but we don't necessarily believe it's all uphill from here. That the consensus among the seers has swung to a second-half recovery only deepens our doubts

DAVID ROSENBERG, EX OF MERRILL LYNCH, is now chief economist and strategist (but a great guy nonetheless) of Gluskin Sheff, a money-management firm based in Toronto. (Dave, as we've mentioned before, hails from Canada.) Anyway, we're pleased to report, he's churning out what he calls his market musings and data deciphering (he's afflicted, poor chap, with a penchant for alliteration).

Crossing the border hasn't caused Dave to miss a beat. After perusing his latest batch of communiques, we can attest he's as sharp and incisive as ever, if anything maybe a touch more. He's that rare bird in the investment business who's skeptical without being invariably negative; who like Lord Keynes changes his mind when the facts change; who has firm convictions without being dogmatic and is able to convey his reasoning without resorting to gibberish. He also has a neat sense of humor.

We were particularly struck in his latest screed by his apostasy on government bonds. In true contrarian fashion, he takes issue with the increasingly popular notion that we've been witness to a bubble in Treasuries. "The Treasury market was never in a 'bubble,' Dave says. "Nothing that is fully guaranteed and pays a coupon semi-annually with no call or prepayment risk goes into a 'bubble' just because it was expensive at the yield's low."

He elaborates: "Sentiment never got wildly bullish; the public never became enamored of Treasuries; there were no widespread ownership or 'new paradigm' thoughts. At the lows in yield, there were legitimate concerns over a depression-like economic backdrop and deflation." But the Treasury market never met "the classic characteristics of a bubble," a la dot-com or housing.

Sounds reasonable to us.

Dave, we might add, in his most recent commentary points out that the delinquency data for the first quarter, courtesy of the Mortgage Bankers Association, were decidedly miserable. The overall mortgage-delinquency rate rose to a new high of 9.12%, from 7.88% the previous quarter and 6.35% in the corresponding three months last year. Subprime delinquencies shot up to 24.95%, from 21.88% in the final quarter of '08, while prime delinquencies rose to 6.06%, from 5.06% in last year's fourth quarter (and 3.71% in the like year-earlier stretch).

As Dave comments, "A year ago, the markets and the financials would have taken a big hit on data like this. But, heck, when the government steps in to guarantee the longevity of the large commercial banks," investors simply shrug off the bad news.

Still, he reflects, such dreary data are eloquent evidence of "the deteriorating level of credit quality, fully 18 months into this crisis." In short, don't do anything foolish.






Barack had best understand.

Did Bibi Box Obama in?

by Patrick J. Buchanan

On Sept. 20, 2002, as the War Party was beating the drum for preventive war on Iraq, lest we wake up to "a mushroom cloud over an American city," The Wall Street Journal introduced an eminent voice to confirm that, yes, Saddam was driving straight for an atomic bomb.

"This is a dictator who is ... feverishly trying to acquire nuclear weapons," wrote Bibi Netanyahu, former prime minister of Israel.

"Saddam's nuclear program has changed. He no longer needs one large reactor to produce the deadly material necessary for atomic bombs. He can produce it in centrifuges the size of washing machines that can be hidden throughout the country – and Iraq is a very big country. Even free and unfettered inspections will not uncover these portable manufacturing sites of mass death. ...

"(I)f action is not taken now, we will all be threatened by a much greater peril ... (for) no gas mask and no vaccine can protect against nuclear weapons."

This was horse manure of a high grade, as high as that which Richard Perle deposited on the podium of the Foreign Policy Research Institute a year earlier, when he informed a stunned audience that Saddam "is busily at work on a nuclear weapon."

Perle had it straight from Saddam's "Bomb Maker," "a man named Kadir Hamza." Hamza, said Perle, told him that after the Osirak reactor was destroyed by Israel in 1981, Saddam "began to build uranium enrichment facilities, many facilities, and we built 400 of them, and they're all over the country. Some of them look like farmhouses, some of them look like classrooms, some of them look like warehouses. You'll never find them. They don't turn out much, but every day they turn out a little bit of nuclear materials."

"So," Perle warned his riveted audience, "it's simply a matter of time before he acquires nuclear weapons."

Washing-machine centrifuges in uranium enrichment facilities disguised as barns and chicken coops! And Americans believed it. And so we were stampeded into war against a nation that did not threaten or attack us, to strip it of weapons it did not even have.

That war has cost 4,500 American dead and 35,000 wounded. It has brought death to perhaps a hundred thousand Iraqis. Four million people have been driven from their homes, 2 million, including half the Christians, into exile. Hundreds of thousands of fatherless Iraqi children are being raised by women widowed by that war.

Undaunted, the War Party has a new war planned for us.

Target: Tehran. And Obama may just have boxed himself in.

In return for Bibi's willingness to talk to the Palestinians, Obama agreed to a December deadline for progress in talks with Iran. If the talks are not fruitful by then, America will step on the escalator.

"I've been very clear that I don't take any options off the table with respect to Iran," said the president.

Bibi got what he came for.

By setting a six-month deadline, Obama has given an incentive to Israel, AIPAC, the neocons and even al-Qaida, which wants Shia Iran bombed back to the stone age, to provoke collisions with Iran, until December, then demand that Obama keep his word, suspend talks, impose severe sanctions and start us on the escalator to war.

And, already, the incidents are multiplying.

Iran's supreme leader, the Ayatollah Khamenei, has charged the United States with complicity in cross-border attacks from Kurdistan. Israel threatens Iran almost daily and practices bombing runs to Greece and Gibraltar. Iran says it can destroy Israel and tests a missile that can hit that nation.

Israel claims Iran is trucking weapons into Gaza via Sudan. But how the trucks get through Egypt, cross the Red Sea and Sinai, then pass through Israeli and Egyptian checkpoints is unexplained.

Hillary Clinton yesterday called an Iranian nuclear capability an "extraordinary threat" and said the U.S. goal is "to persuade the Iranian regime that they will actually be less secure if they proceed with their nuclear weapons program."

Query: What nuclear weapons program?

According to the National Intelligence Estimate of 2007, Iran halted its weapons program in 2003. Nor are there any reports of the diversion of Iran's industrial-grade uranium from Natanz or evidence of any secret centrifuge cascade to enrich it to weapons grade.

According to the Los Angeles Times, the EastWest Institute of Russian and U.S. scientists says Tehran is "at least six years away from building a deliverable nuclear weapon," and a Rand Corp. study says that Iran's "ability to wreak havoc in the Middle East through surrogates is exaggerated."

Iran represents no threat to the United States to justify a war.

And as Korea finished Harry Truman, Vietnam finished LBJ, and Iraq finished the Bush Republicans, war with Iran would make Barack – with the situations in Afghanistan, Pakistan and Iraq all deteriorating – a one-term president.

Barack had best understand. The crowd manipulating him into war with Iran has in mind, first, obliterating Iran; second, getting rid of him.

May 23, 2009

Patrick J. Buchanan [send him mail] is co-founder and editor of The American Conservative. He is also the author of seven books, including Where the Right Went Wrong, and A Republic Not An Empire. His latest book is Churchill, Hitler, and the Unnecessary War.

Copyright © 2009 Creators Syndicate





Just One State
This is only one State................If this doesn't open your eyes nothing will !

CaliforniaFrom the L.A. Times
1. 40% of all workers in L.A. County (L.A. County has 10.2 million people) are working for cash and not paying taxes.  This is because they are predominantly illegal immigrants working without a green card.
2. 95% of warrants for murder in Los Angeles are for illegal aliens.
3. 75% of people on the most wanted list in Los Angeles are illegal aliens.
4. Over 2/3 of all births in Los Angeles County are to illegal alien Mexicans on Medi-Cal, whose births were paid for by taxpayers.

5. Nearly 35% of all inmates in California detention centers are Mexican nationals here illegally.
6. Over 300,000 illegal aliens in Los Angeles County are living in garages.
7. The FBI reports half of all gang members in Los Angeles are most likely illegal aliens from south of the border.

8. Nearly 60% of all occupants of HUD properties are illegal..
9. 21 radio stations in L.A. are Spanish speaking.
10. In L.A. County 5.1 million people speak English, 3.9 million speak Spanish.
(There are 10.2 million people in L.A. County)

(All 10 of the above are from the Los Angeles Times)

Less than 2% of illegal aliens are picking our crops, but 29% are on welfare.  Over 70% of the United States' annual population growth (and over 90% of California,  Florida and New York ) results from immigration.  29% of inmates in federal prisons are illegal aliens.

We are a bunch of fools for letting this continue


Send copies of this letter to at least two other people. 100 would be even better.

This is only one State................

And you wonder why Nancy Pelosi wants them to become voters!


Tuesday, January 20, 2009

President Barack Obama takes the oath of office - inaugural address

President Barack Obama took the oath of office as the 44th president of the United States and delivered an inaugural address focusing on the themes of sacrifice and renewal on January 20, 2009.