Wednesday, September 30, 2009

Nuclear Toys

EQUITY MARKETS TOOK a break this last week. By the numbers, for the week ended Friday, September 25, 2009, the Dow Jones Industrial Average closed at 9665, off 155 points, or 1.6%. The Standard & Poor’s 500 closed at 1044, off 24 points, or 2.2%, and the NASDAQ Composite closed at 2090, off 42 points, or 2%.

The Fed’s Open Market Committee held interest rates steady, and suggested that the economy is slowly improving. Sales of existing homes dropped 2.7% in August, while new home sales increased 0.7%. New home inventory stands at 7.3 months, down from a high of 12.4 months in January. Realtors continue to work for renewal of the home purchase credit, which applies to homes purchased by November 30, 2009.

Dell has announced plans to buy Perot Systems for $3.9 billion, in a move to compete with HP. A123 Systems, the government subsidized maker of lithium-ion batteries, went public last week, with its shares jumping 40% on its first trading day. This is good news for investment bankers and those with founders stock, a little less so for those who purchased at opening.

In other economic news, the index of leading indicators rose 0.6% in August, the fifth consecutive monthly gain. Durable goods orders fell 2.4% in August.

In 2010, the income limitations for Roth conversions go away. Many professionals will suggest converting your IRA balances to a Roth beginning in 2010, and paying income taxes. Our advice to clients will be to wait for a couple of years, to determine if Congress is going to do away with the tax deferral features of many types of plans, including IRAs. No reason to pay the tax now, if in fact Congress does away with the tax free benefits of Roth IRA distributions.

Kao-ling, or China Clay, known in the U.S. as kaolin, a clay mineral, is found in great quantities in four places around the world – China, Brazil, Australia, and Middle Georgia. It is found to a lesser degree in the UK, France, Germany, India, and several other places. It has many uses, and is one of the key components of porcelain.

Several counties in east central Georgia had a strong grip on kaolin mining and processing beginning in the first half of the 20th century, as kaolin’s industrial uses were developed. During the 80’s, commercially viable deposits were found in the mountains of Brazil, providing competition for the Georgians. While kaolin has long been used in China to make China and porcelain products, it has remained commercially unviable in China due to political considerations.

Mahmoud Ahmadinejad, president of Iran, is on a mission from Allah to destroy the infidels, starting with Israel and the U.S., expecting this to usher in the coming of the 12th Imam. Acquisition of nuclear capabilities will speed up this process, as far as he is concerned.

We expect Iran to announce viable nuclear toys by the end of 2010. It wouldn’t surprise us to see Israel attack Iran when this happens, as like all of us, they have a distinct interest in self-preservation. The price of oil, and most likely other natural resources, should jump when this happens, as large deposits of the world’s oil reserves become unavailable due to political turmoil.

The European Union, United Nations, and many in our own State Department dismiss these scenarios, confident that we can have conversation with Ahmadinejad that will cause him to stand down. Many thought the same thing of Hitler 70 years ago. Either there is a distinct lack of understanding of history, or those with decision making authority don’t understand that ultimately, the terrorist’s issues with Israel go back to Isaac and Ishmael. I suspect it’s the latter, as stories of Isaac and Ishmael don’t fit neatly with the worldview of many.

Quote of the week:

“If you want to feel rich, just count the things you have that money can’t buy.”
Anonymous

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