Monday, February 11, 2008

Vince Farrell of Scotsman Capital-Verbatim

From: vince farrell
Sent: Sunday, February 10, 2008 9:55 PM

On this day in history in 1752, the first hospital in the U.S was opened in Pennsylvania, and, in 1858, Bernadette of Lourdes claimed she saw the Blessed Virgin. It is also the day in 2006 that V.P. Cheney shot his "pal" Harry Wittington while hunting. Not good omens to start the week with. I know people are taking shots, and we all might need hospitalization soon, but I'm hoping we don't require heavenly visitations to get through the day.

We will for sure continue the debate as to we are/are not in a recession. I think recession is probable, which, I guess, is a touch more serious than possible. The four week moving average of unemployment claims being well below 400,000 tell us that moderate growth is likely. The recent data on revolving credit hints otherwise. Revolving debt grew 11% in October, 13.7% in November, but plunged to a rate of +2.7% in December. I want consumers to get real but movements like this in the past have indicated that the consumer will try and maintain a lifestyle into period of economic weakness, thus the growth in credit card debt, and then quickly retreat when the facts are clear. Banks are acting like stressed out teenagers in this environment by cutting credit limits and upping interest rates. The Wall Street Journal reported a woman in Arizona had her interest rate reset to 30%. Aren't there laws about things like this?

Toyota isn't helping the overleveraged consumer by offering 84 month car loans. 84 months !! Like a mortgage and we've created enough problems with those.

In the midst of this I think GE at $33.84 Friday close is attractive (I own it, so beware.) The stock trades at about a market multiple, is growing well above the average and yields 3.7%. The company also has a massive share repurchase plan underway. Another is Cisco, that was so volatile last week. $23.54 is close to the 52 week low at $21.77 and they disappointed the Street by predicting "only" 10% growth. They will probably recover in time to the targeted 12-17% growth CEO John Chambers thinks is the sustainable growth rate. At about 15x the consensus estimates of $1.55 for July 2008 with $22 billion in cash (a bit shy of $3 per share), I'm happy to be an owner.

Remember, we are hoping the intraday lows of around 11,600 on the Dow (12,182 close) and 1270 on the S&P (1331 close) are the levels I hope will prove to be the bottom.

Did he really say that ? Ari Feicher, then the White House spokesman, on the fact WMD weren't found, "I think the burden is on those people who think he didn't have weapons of mass destruction to tell the world where they are." Wha....?

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