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The Stingy News Quarterly (Q3 2003)

Stingy Links

Stingy Links: Accounting

Issues with pensions
"The pension issue for defined benefit pension plans is a problem in only some industries (such as manufacturing) but generally is being overemphasized as an issue in credit ratings"

Stock options: the fuzzy new math
"It should come as no surprise that companies are aggressively managing option values as the prospect of expensing becomes real. But that's no reason to abandon expensing. Regulators need to devise a way to value options that doesn't give companies an opportunity to engage in self-serving guesswork. Without that, the calculation will distort the real cost of stock options -- exactly the problem expensing was meant to solve."

The patent shadow game
"If you're the type of person who has a lot of bad ideas, your ship may have come in. These days, even the "iffiest" innovations are fetching smart sums. Here's why: some of North America's largest corporations are donating intellectual property to nonprofit organizations in exchange for receipts worth enormous savings in taxes."

Stingy Links: Bonds

Why junk is bunk
"Like dot-com stocks in 1999, high-yield bonds are priced for perfection. There is no room for disappointment. But anyone who has looked at bankruptcy filings knows there is no such thing as perfection among heavily leveraged borrowers."

Today's high yield, tomorrow's headache
"Some investments with high yields promise current income but endanger your principal. It's best to watch total income instead. Here's how."

Stingy Links: Brokers

Why doesn't CIBC ban coffee too?
"CIBC World Markets is banning e-mail between its analysts and investment bankers, and other brokerage firms are said to be considering similar moves to shore up the "Chinese wall" between the two departments. But why stop there? Why not give analysts their own washrooms, so they don't run into bankers accidentally? Better yet, segregate the two in separate buildings, monitor their telephone calls, and comb the in-house baseball league for any illicit relationships."

3 insurers quietly end a brokerage policy
"So, for the insurance companies, it has been a long free ride. Yet suddenly they have concluded that the ride is too risky, in part because the worst-case outcome, though unlikely, would be catastrophic."

Stingy Links: Buffett

The world's greatest trader
"Berkshire Hathaway just released a bombshell. The company sold virtually its entire government bond portfolio -- $9 billion worth -- in the first half of 2003, just before the bond market crashed. This isn't the first time the poster child for buy-and-hold has scalped a billion or two from dumb old Mr. Market."

Finding winners Warren's way
"Using Buffett's proven growth-oriented strategy as the starting point, S&P turns up 30 promising names."

Buffett's trailer deal could get trashed
"But if jurors find fraud and attempt to award hefty damages to shareholders or force Clayton to renegotiate the deal, analysts warn that Buffett could walk. That may cause Clayton's stock to collapse. For shareholders, "this has become high-stakes poker," warns Michael A. Perino, a securities law professor at St. John's University."

Buffett tech holding revealed
"SEC filing shows Buffett's holdings of Level 3 Communications much larger than earlier disclosures."

Auditing an Oracle
"Shareholders nearly deify Warren Buffett for the way he manages his diverse holding company, Berkshire Hathaway of Omaha. There's little doubt that he's squeaky clean in how he operates. But that doesn't necessarily mean that other companies can or should follow the way the avuncular champion of business ethics conducts his own affairs. His approach: handshake deals on billion-dollar acquisitions and near-complete avoidance of technology in combating fraud."

High court hears from Buffett
"Billionaire investor Warren Buffett was among those whose opinions were being weighed by the nine U.S. Supreme Court justices as they heard arguments Monday regarding the McCain-Feingold campaign finance reform act."

Pious Buffett should heed own counsel
"Buffett, estimated to be the world's second-richest man, has gained prophet status in the world of business by calling on corporate America to become cleaner, better governed and more transparent. Because of this towering reputation, people sit up and listen when he preaches on things like financial disclosure and corporate governance. Problem is, his own actions at Berkshire Hathaway do not match his words."

Stingy Links: Crime

Gotcha!
"The Mounties say former Vancouver lawyer Martin Chambers is "a criminal genius" who eluded justice for years in the city's underworld. They've finally got their man."

Stingy Links: Dreman

Horror story
"Freddie Mac is not the villain that its enemies portray. Its accounting scandal is way overblown. Along with cousin Fannie Mae, it is a solid company with great prospects."

Hot stocks
"The economy is picking up, but investors' anticipation of a rapid improvement is a little too aggressive, said David Dreman, fund manager for Scutter Dreman High Return Equity Fund. Companies are boosting their earnings, but they aren't seeing fast enough improvement, Dreman said. He cited the strong rise in the Nasdaq, which he dubbed "bubble junior.""

Stingy Links: Economy

Are you worse off than Mom and Dad?
"If you feel like it's harder to provide the kind of middle class upbringing for your kids that your parents gave you, you may be right."

This job market would depress optimists
"Thousands of good-paying jobs are moving overseas. Nearly 5 million workers who are working part time need full-time hours to make ends meet. Another half-million have dropped out of the job market due to lack of prospects. Wages have fallen by 1 percent in the past year for both low- and high-wage earners. And despite a limited extension of federal benefits starting in May, more than two-thirds of the long-term unemployed have run out of unemployment insurance benefits."

Isabel blew fallacy ashore
"Hurricane Isabel roared onto eastern North Carolina shores in mid-day, September 18, 2003, continuing on into Virginia and north from there. While Isabel was no Hurricane Hugo, the monster storm that demolished Charleston, S.C. back in 1989, it washed up the usual economic fallacies."

Stingy Links: Fun

Ask not what telemarketers can do to you
"So what does the public care about right now? Telemarketers. The public hates them. It hates them even more than it hates France, low-flow toilets or ''customer service.''"

Living in a state of disrepair: California
"To make matters worse, Gray lost the state budget surplus. California had this gigantic surplus, billions and billions of dollars, and now it's gone. They've looked everywhere, but nobody can find it. It is the Weapon of Mass Destruction of budget surpluses. So now Gray is spectacularly unpopular. Everybody despises him. When he tries to get into the governor's house, his own dog attacks him. When he calls for his security personnel, they side with the dog."

More economic sophisms
"Special-interest-group pleading often tries to hide behind supposedly economic arguments. It is important to debunk such arguments as they arise, so that the interest-group politics can be seen for what it is."

Nothing like public humiliation
"This month's 8-K was a show stopper. Edward Wolfe, a Bear Stearns analyst who has a sell rating on Expeditors stock ("underperform," whatever), managed to get himself into a bit of a snit over Expeditors' failure to respond to his emails and requests for a visit. The entire response absolutely has to be read to believed. And keep in mind, this is in a federal filing, not some company press release."

Stingy Links: Government

Fed's truly scary idea: tax you into spending
"It's positively diabolical. Some Dallas Fed economists suggest perking up the economy by taking a piece of every dollar you have the gall to save."

A mortality warning for motorists
"The impact of mispricing risk in public insurance systems is to shift collision costs to other drivers.primarily female, safer and older drivers.and to encourage too many risky drivers to take to the road."

No golden days
"Most American states have now closed the books on fiscal 2003, after a year of slashing spending and raising taxes. But their financial woes will not go away in 2004, especially in budget-less California, which is $38 billion in the red."

Sumner's forgotten classic
"Many of these problems are foisted on the Forgotten Man. Look at the healthcare debate, where various proposals are put forth for the government to pay or subsidize medical costs. The politicians and policy wonks get all the attention, as do the alleged beneficiaries of their programs, but no attention is paid to the folks who have to pay for it all.Sumner's Forgotten Men. As Sumner writes, "In all the discussions attention is concentrated on A and B, the noble social reformers, and on D, the 'poor man'. I call C the Forgotten Man, because I have never seen that any notice was taken of him in any of these discussions.""

Your bank can blacklist you
"In the name of homeland security, financial institutions can close accounts and cancel credit cards with little explanation. Complaints are slowly mounting."

Denmark: A Case Study in Social Democracy
"In conclusion, we can say that neither on crime, education nor health do we see the favorable results we would have expected. Quite to the contrary. The prospects for being able to rely on government or family for social security are also rapidly diminishing. These are not very bright prospects indeed for a country where each working citizen are forced to sacrifice such a large share of his personal earnings to the common good."

The failure of the social market
"In a January, 2003 commentary appearing in the Financial Times of London, professor Norman Barry opined, "the social market advocates were too relaxed; they believed the new order would produce enlightened people who would not need market incentives to behave responsibly. How wrong they were. Germans are normal, rational people. They will not work unless they have to. Now it often pays not to get a job and it is rational to stay in education until you are 30." Unless chained to reality by the forces of the market, the people and politicians have been free to bloat and expand the welfare state of Germany."

Inflation and the American Revolution
"How odd that the tax bills of many American families would fall during a period of exorbitant increases in federal spending due mainly to war. But once we discover the record levels of government debt accumulation, perhaps it is not so odd. It's the shell game of government finance at work."

Government protects potential killers
"But anyone who looked at the law closely knew what was going on. The definition of disability was so vague that it clearly represented yet another massive encroachment of the government and its courts into the workplace. It made the disabled more expensive and more risky to hire. It made them more difficult to fire, and hence less likely to be hired. If anything, workplace discrimination against them has increased rather than decreased. Employers would rather find sneaky ways to keep them at bay than to risk unending lawsuits."

Faster is not always better
"This Concorde was not just the proud enterprise of government, but even the product of a consortium of governments! Accounting being the imponderable, not to say fraud-ridden, sort of activity it is, we will of course never know just how much this grand project took both from the taxpayers supporting it and from the private aircraft manufacturers and airlines competing against it."

Did price controls work?
"More than two decades ago, many of these same critics were claiming that oil was too important a commodity to be left to the market. The 1981 removal of price and allocation controls thoroughly discredited that belief. Likewise, given the awful government failures we have witnessed in creating energy policies, we can state unequivocally that electricity is so important that it must be left to the free market to produce and distribute it."

Will conservation save us?
"With the disappearance of the "energy crisis" in the early 1980s-an event that coincided with the ending of price and allocation controls on the oil industry-many of us had hoped that the voices of "conservation" and "alternative energy" would have been stilled. Unfortunately, we have had no such luck, and in the wake of yet more government-caused energy problems, the political classes and their media allies are once again beating the drums of government-enforced "conservation." Their words are as fraudulent today as they were two decades ago."

$10 trillion in deficits?
"Federal liabilities and accumulated deficits may actually soar by tens of trillions of dollars over the next few decades, leading to fiscal catastrophe, a Congressional expert warns."

Stingy Links: Graham

Margin of safety in the asset-class era
"No concept is more associated with Graham than the "margin of safety": that extra cushion of value which minimizes the probability of underperforming the default option of the prudent, risk-averse investor-the high-grade corporate bond."

Get rich slowly
"The Intelligent Investor (1949), by financial giant Benjamin Graham, is more relevant than ever, in a new edition updated with analysis by Jason Zweig"

Stingy Links: Gross

What, WE Worry?
"Well, maybe I.m just pessimistic because I.m a Californian and the not so Golden State currently resembles the pulp not the juice of its once famous oranges. But California is 15% of the nation and it is the trendsetter in more ways than fashion, Hollywood, and tongue rings. We have a huge deficit based on overspending which was in turn based on the anticipation that financial markets and their capital gains would continue indefinitely. Our schools are a mess. Businesses are departing daily to points unknown. But this Outlook will not be a California diatribe. I use it only to suggest that as California goes so goes the nation and at the moment its prospects are not good, Terminator or no Terminator."

Stingy Links: Law

Patent bending
"As Benjamin Day, Henry Ford, and Sam Walton might attest, American corporations have thrived on innovative ideas and new business methods, without owning them, for two centuries. In the past decade, the balance has been upset. The scope of patents has been expanded, copyrights have been extended, trademarks have been subjected to bizarre interpretations."

Enemy of the states
"Companies are increasingly worried by the growing power, and desire, of America's state attorneys-general to regulate and punish them"

Stingy Links: Management

Shareholder democracy is no demon
"Corporate America's objections to an SEC proposal to let investors more easily nominate board candidates are way overwrought."

The hidden costs of offshore outsourcing
"Moving jobs overseas can be a much more expensive proposition than you may think."

Pricing power ain't what it used to be
"As I talk with businesspeople in all kinds of industries, they keep making the same complaint. They can't raise prices, and it's killing them. Now that the economy is just maybe picking up some speed, they hope they'll finally get back some pricing power. But the hard truth is that the economy has changed, and pricing power isn't simply going to come back you've got to get it back. And the rules for getting it have changed."

The visionaries
"The country's greatest entrepreneurs, from Hugh Hefner to Charles Schwab, tell their stories in their own words--with lessons for anyone in business."

Scary truths about the graveyard shift
"Night workers make more mistakes and are more prone to accidents and illness than nine-to-fivers. Smart companies are waking up."

Be careful what you wish for
"There's no question that the publicity from option abuses, coupled with the market downturn, has tainted stock options. Many employees question the value of stock options in a down market, preferring now the "bird-in-the-hand" of a paycheck."

How deep is the ethics crisis?
"What if Tom Ridge issued alerts for corporate ethics lapses rather than terrorist threats? It'd probably be at the highest level--imminent danger of more Enrons, Tycos and Worldcoms to come."

Is your boss an idiot?
"You can't live with 'em. And you can't shoot 'em. This, of course, is the dilemma when you work for an idiotic boss."

Seven ways to solve the executive pay mess
"Suffice it to say excessive executive compensation has never been more of a hot button--and it's no wonder. According to Bruce Hutton, a professor at the University of Colorado who recently did a private research project on compensation, the ratio of chief executive pay to that of the average employee tops out at 500-to-1. That's not a typo."

Shareholder no. 1
"He's quiet and unassuming, and as head of the Ontario Teachers' mega-fund he's among the most powerful men in business today. But Claude Lamoureux is also at the centre of the brewing storm over corporate reform."

A CEO whose life is an open book
"One exception to adhering to the CEO code of omerta (the Sicilian "vow of silence") has been Bill George, former head of Medtronic, the pacemaker and medical-devices behemoth. George has now authored a book geared toward future corporate leaders, written with the hope of staving off future shame in publicly traded companies. I've found few books penned by former CEOs worth reading, at least cover-to-cover. But anyone interested in management and leadership will get a great deal from investing some time in Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value."

Lehman cash woes
"Lehman Brothers' carefree use of restricted stock has come back to haunt the Wall Street giant, costing the company virtually all of its 2002 cash flow, a shocking report by a leading Wall Street analyst claims."

Health costs skyrocket
"Faced with the largest price hike since 1990, firms pass more insurance costs on to their employees."

Chasing the dream
"A second and more important reason why more money does not automatically make everybody happier is that people tend to compare their lot with that of others. In one striking example, students at Harvard University were asked whether they would prefer (a) $50,000 a year while others got half that or (b) $100,000 a year while others got twice as much. A majority chose (a). They were happy with less, as long as they were better off than others."

Stingy Links: Markets

How actuaries missed stock risks
"Their models for long-run pension performance assume, wrongly, that over the long run investments in the stock market will rise fast enough to overcome essentially underfunded pension structures. For years, pension funds operated under the assumption that equities are on a long-term growth track that can be counted on to cover pension liabilities. The market meltdown of the last two years blew the model away, leaving pension plans and corporations facing massive losses that wiped out billions in pension assets across the world."

How to avoid another risk trap
"Over the long run, the risks in the stock market are not lower. The longer the time horizon, in fact, the higher the risk. This startling conclusion is not new. Some economists, including Nobelist Robert Merton and Paul A. Samuelson, raised the issue years ago. More recently, financial economist Zvi Bodie, of Boston University, among others, has written numerous papers warning long-term dependence on the stock market is a high-risk strategy that could go wrong."

How hidden risks fostered a crash
"As Bader-Gold put it: "Financial economics does not recognize equity risk premiums not yet earned for risk not yet weathered." But that is exactly what pension plans, both corporate and public sector operations such as the Ontario Teachers' Pension Plan, have been doing. The result has been a devastating crash in pension values, with fund after fund reporting losses and warning that either contributions will have to increase or benefits will have to be cut. They counted on long-run equity returns that are not guaranteed."

Should pensions invest in equities?
"The pension industry's fascination with the idea that the stock market is a sure thing over the long term remains intact, even as financial economics suggests the contrary. The stock market, say financial economists such as Nobelist Robert C. Merton, is not less risky over the long run. It is, in fact, riskier. However, backed by the belief that the markets will generate higher returns over the long-term, pension managers continue to pour billions into the markets every year."

Attack of the zombie stocks
"Some of the best performers in the recent bull market are stocks no one wanted just 3 months ago."

The swinging 60s
"Scandal. Hippies. Flower power. Strangely, it was all good for business."

The stagnant 70s
"Stagflation. Separation. Americanization. It was a tough time for Canada."

The excessive 80s
"Recession set in. Interest rates maxed out. Fortunes were made and lost"

The myth of a self-sustaining recovery
"When it dawns on people that demand isn't improving, the rebound has no legs and there's no rescue party on the way, the market is in for trouble."

Stocks are cheap!
"Professional investors think stocks are a great buy now. How worrisome."

Spitzer's mutual-fund fight deserves an A
"The New York attorney general's investigation of mutual funds is welcome news. Most investors had assumed this industry is squeaky-clean. It's about time the truth was exposed."

Will debt weigh down the recovery?
"Far from being models of health, most corporate balance sheets are groaning under debt loads. And that could crimp any rebound."

Like 1987, only worse
"As a crisis of confidence looms for bonds and the dollar and the markets play out their recovery fantasy, the chance of a crash grows every day -- as does the depth of its consequences."

Fame vs fortune: micropayments and free content
"The people pushing micropayments believe that the dollar cost of goods is the thing most responsible for deflecting readers from buying content, and that a reduction in price to micropayment levels will allow creators to begin charging for their work without deflecting readers. This strategy doesn't work, because the act of buying anything, even if the price is very small, creates what Nick Szabo calls mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price."

Pensions 'black hole' doubles
"Some of the companies are starting to look like giant investment trusts which just happens to make a few engines on the side - or own aircraft or whatever the business is."

A battle royal is brewing in Chicago
"Upstart electronic derivatives exchange Eurex is getting set to challenge the sacred turf of the Board of Trade and the Merc"

Of manias, panics and crashes
"Mr Kindleberger believed that "markets work well on the whole", but occasionally "will be overwhelmed and need help" from a lender of last resort. He understood both the danger of inaction by such a lender and the "moral hazard" that its mere existence can create, by encouraging investors to be reckless in the belief that they will be bailed out if all goes wrong. Thus, he argued, a "lender of last resort should exist, but its presence should be doubted." It should always come to the rescue, but "always leave it uncertain whether the rescue will arrive in time or at all, so as to instil caution." Pulling this off is, he noted, a "neat trick"."

The great stock market swindle
"History teaches that virtually every major multi-year advance during the last two centuries ended with a lengthy period of under-performance."

Wall Street plays dirty despite cleanup effort
"A review of recent takeovers shows price spikes and surging volume ahead of news that only an insider would know."

To have and to hold
"Some recent work should at least help. It explores the .endowment effect., one of the chief tenets of prospect theory. Put simply, this means that people place an extra value on things they already own. Think of a favourite sweater, or your house: would you swap either for something of equal market value? Over the past decade, prospect theorists have found support for the endowment effect in scores of experiments."

Stingy Links: Science

The new diamond age
"Starting in the 1950s, engineers managed to produce tiny crystals for industrial purposes - to coat saws, drill bits, and grinding wheels. But this summer, the first wave of gem-quality manufactured diamonds began to hit the market. They are grown in a warehouse in Florida by a roomful of Russian-designed machines spitting out 3-carat roughs 24 hours a day, seven days a week. A second company, in Boston, has perfected a completely different process for making near-flawless diamonds and plans to begin marketing them by year's end. This sudden arrival of mass-produced gems threatens to alter the public's perception of diamonds - and to transform the $7 billion industry. More intriguing, it opens the door to the development of diamond-based semiconductors."

Stingy Links: Stocks

Apple picking
"Wall Street analysts have missed the boat on Apple's big stock move. So why listen to them now?"

A showdown at the checkout for Costco
"It's under fresh assault from a revived Sam's Club, which is tapping parent Wal-Mart's buying power to slash prices. Can Costco stay ahead?"

Lifting the dark clouds over Sun?
"Scott McNealy and company are trying to change the business model for software and in the process revive Sun's prospects."

Brands in an age of anti-Americanism
"BusinessWeek/Interbrand's annual ranking of the world's most valuable brands shows that American labels are still potent."

That heartbeat you hear is Xerox
"The copier king seems firmly on the road to recovery. Now it needs to keep impressing investors with solid growth, and that's no small challenge."

Can Dunkin' KO Krispy?
"In the war of the doughnuts, the reigning champ has been getting bopped by the upstart. Now, Dunkin' Donuts is plotting a new offensive."

The $0.99 Empire
"Houseplants, hair gel, and the best deal on wine you'll ever find. How one entrepreneur is rewriting the rules of retail."

Five undiscovered picks from small-cap managers
"By and large, small-cap stocks aren't household names. There are exceptions, of course. Home decorators, party planners, and cooks (not to mention followers of the criminal justice system) are no doubt familiar with small-cap Martha Stewart Living Omnimedia. But few small caps get anywhere near as much analyst coverage or ink in The Wall Street Journal as giant companies like General Electric and Microsoft. With fewer analysts and investors closely following smaller companies, the odds are better that you'll find stocks whose virtues aren't appreciated by Wall Street in small-cap land than in large-cap territory."

Enron will be outed
"When Enron filed for bankruptcy in December 2001, it claimed assets worth $62 billion. That estimate in retrospect turns out to have been off by about $50 billion as the company will, in a filing expected today, say that it has something like $12 billion with which to pay creditors."

Gillette nicked by Schick
"Tensions escalate in the shaving wars as the world awaits the arrival of the four-blade razor."

Tough sell for Noranda
"Noranda's decision to slash its quarterly dividend rate to 12 cents a share from 20 cents was a surprise as most analysts were caught looking for a cyclical recovery."

Amazon's search for a river of growth
"Despite some standout quarters, the giant online retailer needs to keep expanding to justify its lofty p-e, and that won't be easy."

Is Blockbuster doomed?
"Video rental chains are cash cows today. But thanks to developments in technology and marketing, they could become dinosaurs more quickly than many investors believe."

Haggling
"During a three-year investigation by America's Department of Justice into Executive Life, a Californian insurer that collapsed in 1991 and was bought by Cr dit Lyonnais, a big French bank, it sometimes seemed that the affair was about little more than transatlantic regulatory nit-picking. This week proved how much bigger the scandal really is."

Stingy Links: Taxes

Soak the Rich. Which Ones?
"Some of those Forbes 400 characters are unusual--they pay lots of hard cash to the tax collector."

That Alabama tax vote
"Last Week, voters in Alabama resoundingly rejected Gov. Bob Riley's tax plan by a margin of more than 2 to 1. The plan would have resulted in the largest tax increase in state history."

Stingy Links: Value Investing

A dozen stocks for the next 5 years
"We don.t buy the post-bubble notion that long-term investing is dead. There's always a place for a good company riding a solid trend."

Wall Street great says the market is broken
"Investing pioneer John Templeton believes there is still huge downside risk to the stock market -- and he's almost as bearish on house prices."

Stingy Links: World

The poor are the solution, not the problem
"Take the case of Egypt. My research team and I were invited to Egypt by the government to make an inventory of the poor's assets versus all the other sectors of the economy. We found that since the end of the Second World War the poor accumulated some $245 billion worth of assets, including real estate and small enterprises. How big is $245 billion? Fifty-five times bigger than all foreign investment in Egypt over the last two hundred years, including the Suez Canal and the Aswan Dam. Fifty times greater than all foreign aid received by Egypt. Thirty times greater than the Cairo Stock Exchange. So the poor are the solution. The problem is that they do not have a legal system that allows them to bring together capital, create new enterprises, leverage their assets, and cooperate on a global scale. The poor certainly were the solution in the United States, which was built by poor, entrepreneurial pioneers. And the formula has not changed in the last two hundred years."

Voters can be such a nuisance
"Sweden's rejection of the euro will sustain anti-euro opinion in Denmark and Britain (the union's other non-euro members) and makes it unlikely that any of the three will soon fall into line: the EU will therefore remain a multi-currency area for the foreseeable future. That is significant, but far more important is the fact that forthcoming referendums on the constitution now seem increasingly unlikely to go as governments would wish. It will take only one Sweden to block plans for a new constitution, and two or three might kill them."

Different this time, maybe
"Japan's economy has had everything in the past 15 years except a sustainable boom. Now, at least, Japanese stocks are enjoying a rally. The Nikkei 225 closed the week just below 10,300. The last time it spent a week above 10,000 was July of 2002. Of course, "Nikkei 10,000" is not much of a rallying cry for a stockmarket that once topped 38,000, but the index is still up about a third since April."

Asia starts to gasp for energy
"Across all of Asia, from India to China and south to Australia, a severe energy crunch is developing as construction of energy plants and transmission facilities lags behind growing industrial capacity and burgeoning private consumption, according to energy and market analysts."

Tequila sunset in Cancun
"The world trade summit in Cancun, Mexico, has collapsed without agreement. Its fate may have been sealed seven years ago in Singapore"

Europe's population implosion
"Europe's population is shrinking and greying-with grim consequences."

Ratings agencies see danger in yuan float
"Credit-rating companies on Monday issued strong warnings that China should not let its currency appreciate or relax controls on the movement of large sums of money in and out of the country soon, as the United States has asked, saying that the Chinese banking system was not ready for the changes."

Fear of floating
"Indeed, from this point of view, the Asian economies are supporting America's profligate habits. By buying American government securities they help finance America's large external deficit, hold down interest rates, and so sustain the boom in consumer spending and mortgage borrowing. This may benefit America in the short term, but it allows even bigger imbalances, in the shape of consumer debt and foreign liabilities, to continue to build. The eventual consequences for America-and the world economy-could be more painful."

The promise of a blue revolution
"Fish farming has a bad reputation. Its supporters argue that it promises to meet the growing shortfall as the world's wild fisheries become more and more exhausted. But its critics have the louder voice. They argue that farmed fish is fatty, dyed, polluting and stuffed with antibiotics. Moreover, they say that it is unsustainable. When a carnivorous fish-such as the salmon-is reared on a farm, it too must be fed with fish. And these fish must be caught in the wild, thus putting even more pressure on marine life, not less."

Darkness falls on Tokyo
"The ministry, which oversees the electricity industry, is gearing up for a power shortage that could leave Tokyo facing unprecedented blackouts this summer, when demand for electricity reaches its peak. The reason: Tokyo Electric Power (Tepco), the world's largest private electricity company, had to close its 17 nuclear reactors after it was caught last September falsifying safety records to hide cracks at some of its power plants. Three have now restarted, but it is unclear when the local authorities will allow others to do so."

Lion cubs on a wire
"Economic growth in Africa was dismal last year. At 3.2%, down from 4.3% in 2001, it barely kept pace with a swelling population. The culprits, according to a new report* by the United Nations, were a weaker global economy, drought and AIDS in southern and eastern Africa, fresh armed conflicts in the Central African Republic, Ctte d'Ivoire and Madagascar, and yet more madness in Zimbabwe."

Bullishly Yours,
Norman Rothery
ISSN 1499-2787

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