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We are going to go into a few stocks here, but we thought we'd share withyou some of our thoughts that come up at our morning sit downs. They affect the markets, so they are pertinent to our business. What's with Mutual Funds? You are aware that there are some major illegal activities taking place in the mutual fund world. We find this very disturbing but not at all surprising. This $6 to $7 billion industry did whatever it wanted to do while the regulators stayed asleep at the switch for years. Now we are seeing segments of the industry being accused of making patently illegal profits. They did this and continue to do it today by "market timing" and "late trading" We would lock these guys up for 20 years. There is nothing like a long, sleepy jail sentence to make everybody else get in line. In the end, you have to have as many people as possible adopt an ethical structure, or else the system begins to fail. We are at that point where these practices can seriously erode confidence in the business itself. Mutual funds have been fooling people for years through their deceptive advertising and reporting practices. They always advertise their compounded rates of return, but never mention tax implications. Since many of these funds change their portfolios two times or more per year, you have no shot at a long term capital gain taxed at let's say 15%. This is in comparison to short-term gains, taxed at your maximum individual tax bracket, which is several times the capital gain rate. The real deal is this, and you will never read it in newspapers. Elliot Spitzer, the New York State Attorney General who is going after these mutual funds is once again scoring points against the Federal Government, namely the SEC. Elliot Spitzer has a staff of 22 people (yes, we know these things). He has already gotten over a billion dollars worth of fines from Wall Street for the shenanigans Wall Street perpetuates on the American investor. Spitzer is prominent; as a result he gets tips from tipsters. The SEC chooses to ignore these tips. Spitzer chooses to follow up. The SEC has thousands of employees, Spitzer has 22. We guess it's a question of priorities. An example of priorities is the mutual fund fiasco that Spitzer has unveiled. The tipster gave the same information to the SEC in Boston. They ignored it. Now the main office of the SEC in Washington is investigating why the SEC in Boston ignored it. Soon, the Congressional committee overseeing the SEC in Washington will investigate why SEC has not implemented procedures to deal with these matters. In fact, the Congress is looking at this issue today. Meanwhile, the American investor continues to get SERVICED by Wall Street. We will discuss servicing later. To top it all off, the Governor of New York, Mr. Pataki, is trying to figure out ways to cut Mr. Spitzer's staff. This would be most helpful to the Republicans in Washington who not looking too good these days, with regard to protecting the American investor. There will more on this topic in the future. IPO allocations Do you remember the stink about two years ago when it was disclosed that Goldman Sach's gave the Chairman of the Ford Motor Company a $14 million gift by allocating Goldman stock to the Chairman's private equity account. Quietly, the Ford Chairman was giving Goldman some of Ford Motor's investment banking business. Well guess what? They never outlawed the practice. This is a practice that has been going on in Wall Street for decades. It is legalized stealing. The regulators close their eyes to it. What this means is that Wall Street will continue to reward Chairmen of companies who give them investment banking business by flooding them with IPO stock allocations. What we are concerned about is the brokerage firms who will continue to give "outperform" ratings on research reports in exchange for investment banking business of the company that is the subject of the research report. This is especially important when the stock is rightfully a "sell", not a "buy". What's the expression, "caveat emptor"? Let the buyer beware. Folks, if you are not aware of these practices, you are subject to getting your clock cleaned by Wall Street. Halliburton There was an article reported in yesterday's newspapers where a Congressman is accusing Halliburton of defrauding the American government as a result of its Iraqi oil service contracts. You might remember that the Bush Administration gave Halliburton a "No Bid Contract" for a couple of billion dollars to do work on the oil fields in that country. The problem was two fold. The first problem is that the contract in question was not put out for competitive bidding. It was literally given to Halliburton. The second problem was that Vice President Cheney was Chairman of Halliburton immediately before becoming Vice President of the United States. It kind of smells, doesn't it? Let us tell you how badly it smells. There was a time fellow citizens when Presidents were Presidents. During that time the mere appearance of impropriety was sufficient to drive someone from office. My, how times have changed. Now the politician's attitude is, "I ain't leaving". Here's the best part of the whole deal. The Chairman of Halliburton stated in reply to what's been leveled against him that "We have been "servicing" the American military for 50 years, and we are not going to back down now." We loved it, we completely loved it. Years ago, Will Rogers, the famous American satirist talked about how the American Electric Company advertised how they were servicing the American public. Rogers said his father who owned a farm at the time took him out to watch two horses in the field go through the reproductive ritual. The father looked to the son, and said son, "That's what we call servicing". Did Halliburton's Chairman have the same concept in mind? We think so. Our purpose in going through these topics is to expose you to the real deal. We want you to look behind the news, or through the news at what's really going on. Successful investors do not filter their opinions through political biases. They just want to make money, and that's what we want for you. If you think we are just poking fun at Republicans here, we can assure you we are just as hard on the Democrats. Deal with reality and get a better result. Abrams Tank During the Iraqi invasion, the manufacturers of the Abrams Tank made public statements that no American soldier had ever been killed in an Abrams Tank. Last week, that statement got cancelled when two American soldiers died in an Abrams tank in Iraq when an explosion went off under it. We can't imagine what the power must have been like? The tank is so well made that an RPG rocket hitting it broadside, barely scratches the surface. At the same time, Under Secretary of Defense Paul Wolfowitz, who was an early architect and proponent of the Iraqi invasion almost got himself killed in Baghdad. Saddam loyalists attempted to assassinate him while he was visiting Iraq on a fact-finding mission. The interesting point is how did the bad guys know he was there? They even knew the room he was in. You and I didn't know, but they knew. Nobody talks about these things. An Iraqi withdrawal plan option Tom Friedman (NY Times foreign affairs columnist) who is very smart even when we disagree with him came up with a great idea for withdrawing from Iraq. First of all, he feels that disbanding the Iraqi army was a terrible mistake. Remember these guys never put up a fight. Everybody knows which generals loved Saddam and which generals were just loyal Iraqis. The army should never have been disbanded. What Friedman thinks we should do is publicly state we are reconstituting the Iraqi army. Every time the Iraqis put together two working divisions, we should withdraw one American division. It sounds good to us. Helicopter explosion in Iraq In Sunday's news, word reached the American public that an American Chinook helicopter was shot down by a shoulder held missile in Iraq killing at least 16 American soldiers. It looks like the stakes are being raised in Iraq and the Administration will have to bear responsibility for it. The American people will have to pay the consequences. The situation in Iraq with shoulder held missiles is going to get worse and not get better. These missiles are everywhere. They've been around for decades, not years. If you go back and look at the history of the Viet Nam war, you will remember that we dominated the air campaign, most of the time with helicopters. There came a time when the Soviet Union flooded Viet Nam with tens of thousands of shoulder held missiles. Our air dominance started to wane with dire consequences. We don't know if the lesson was ever learned by the military. Now for some stocks Honeywell HON $30.76 This one continues to have momentum, big momentum. Clearly the announcement of a GDP increase of 7 plus percent in the overall economy helped to spur Honeywell on. We've made clear that Honeywell is a substitute for the overall economy. With $20 plus billion in sales as the industrial sectors of the economy goes, so goes Honeywell. The stock was also mentioned Friday night on Louis Rukeyser's Wall Street Reports by one of the guests. This also created buying this morning. The stock is probably a $50 stock in two years, with a nice dividend while you wait. Landry's LNY $25.80 This restaurant chain had a truly blowout quarter with record setting revenues. The stock is very much undervalued and really should be in the $30 to $35 ranges right here, right now. Until it gets above $30, it wouldn't be anywhere near the value we have in mind for it. The economy is doing better and people are eating out. Landry's is going to be a prime beneficiary of the additional spending headed in this direction. IBM $89.68 We think the stock has $110 written all over it, so don't be surprised when it happens. IBM is going to be the bell weather of this stock market. We are in a Presidential election cycle and this economy is not going to stand still. IBM can only benefit. It makes sense to get on board the train as it leaves the station. Microsoft MSFT $26.24 Nobody dominates software like Microsoft. This company's monopoly on its end of the market is so strong that they are able to charge monopolistic pricing on their products. We don't see an end to it for years to come. Did you know that Apple's computers have zero virus issues? Microsoft is devoting the rest of the year and into next year with virus issues. They are bringing out a new Window's XP version just because they have to deal with virus related problems. Nevertheless, we see the stock trading into the $30's soon. Kohl's KSS $54.50 You are not going to beat this top retailer. The numbers speak for themselves. We continue to see $70 as our price target for this stock. Since the stock is getting stronger, it is telling us that October is shaping up to be an excellent month for the sales side of the company. Don't be afraid of Kohl's. Embrace the future. Your Friends At StocksAtBottom.com JOIN NOW |
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