Vince Farrell of Scotsman Capital-Verbatim

From: vince farrell
Sent: Sunday, March 02, 2008 8:37 PM

There will be a lot of economic news this week. There is every week but we seem so much more fixated on the announcements now. The most important comes this Friday with the monthly jobs report. Consensus calls for a small gain of 30,000, but there was a very good article in Sunday's NY Times regarding an indicator that Charles Biderman has developed that shows consumers to be much worse off than the Government statistics would lead us to believe. Biderman is the founder of Trim Tabs Investment research and his proprietary index measures the here and now of consumers in totaling what they have to spend. He may well be right in his assesment that we are in recession now, but maybe not. He states that since October of 2007 the economy has lost 175,000 jobs. The Bureau of Labor Statistics would disagree and while I don't put a lot of faith in govenment numbers, I put less into a proprietary index that unveils the secrets of the universe. Biderman is a smart guy and, like I said, he could be right. But even if he is, the loss of 175,000 jobs over 5 months is a slowdown, not a recession (unless you were one of those that lost their jobs.) The last recession saw job losses of well over 200,000 per month for each month of the recession.

While I'm on the newspapers, there was another article in Barrons by a more optimistic Craig Johnson that noted the nations personal income is $12 trillion and grew 2% in the fourth quarter, and that income growth will help stabilize the ship. While we are in an energy shock, energy accounts for 7% of consumer expenditures. That's the highest its been since the 1980's but it's still well below prior levels and, hurtful though the price of gas and fuel oil is, it's still a single digit expenditure for the average household.

Buried in an article about energy was a very important nugget. Friday's WSJ talked about gasoline inventories building in the US and that oil inventories have risen for several weeks in a row, implying that the price of crude should come down. Barely mentioned in passing was my nugget, that is the worldwide inventory of crude oil is down to 51 "days of usage".That is very low and typically inventories in the low 50 days of usage means higher prices.

I need to touch on AIG for a moment. I own the stock and would be a buyer anew. The news Friday that their mark to market loss on exotic financial instruments was greater than expected shook the stock and the market. Many doubt (myself included) that AIG will actually realize the full force of the losses they are booking. The WSJ quotes Charles Thayer of Chartwell Capital who wonders why they have to apply liquidation accounting to a going concern. The intention is to hold this stuff to maturity and the actual loss will be manageable and much smaller than the quoted loss which reflects a chaotic market where there are no bids.But like all market crisis's, "This too shall pass." (Lincoln during the Civil War.)

George Soros says this is the worst market crisis in 60 years. With respect, I think that's more a political statement than not. I remember 1973-74 as being a touch worse. He may be proven right, but Time Magazine disagrees in an article in the March 10th issue. If the crisis is so intractable, how can the largest IPO in US history be set for flotation ? VISA will raise between $15-19 billion. It may or may not be a good investment, but you have to be impressed with the ability of the turbulent financial market to get this done.

A German tourist company, OssiUrlaub, will launch the first nudist airline this coming July. Passengers will be able to shed their clothes and fly in the nude, reports "The Week" magazine. Hot drinks will not be served. Thank God for small favors

He didn't really say that ! French politician Alexandre Ledru-Rollin quoted in ESPN- " There go the people. I must follow them. I am their leader."