International Sector Report

The market took quite a hit today with the poor domestic market reports combined with a terrible day in China. China's pullback was due basically to jittery investors pulling out after a big run-up, as well as the uncertainty of an upcoming government meeting that could take steps to slow down the booming economy.

As can be expected, global emerging markets followed China's suit, by pulling back. Our own positions took a dip today as well: EWS fell 8.5% as of 3pm, and VWO fell almost 8%.

For the week:

VWO

Monday Open: 80.20

Friday Close: 80.07

As of mid-day Tuesday: 73.55

EWS

Monday Open: 12.29

Friday Close: 12.49

As of mid-day Tuesday: 11.40

None of the ETF stocks I have looked at managed to eek out a gain today in spite of the volatile Asian markets. This includes index funds in Malaysia, China, Hong Kong, and Singapore, as well as another general emerging markets iShare (EEM) that I considered.

Consumer Goods Sector Report 2/27

Well, the market took a dive today...thank you Asia. But, we all knew a correction was coming, and it's probably not over yet. TIF lost about 5.6% today, but we're still up 2.7% since we bought it. CHKE lost 4.5% today, but we're still up about 13% since we bought it. TM lost almost 3% today, putting us down 1% since we bought it.
Toyota also announced today the location of its 8th North American plant, to begin producing Highlanders and other Toyota vehicles in 2010: Tupelo, Mississippi (birthplace of Elvis). The plant will cost $1.3 billion to build and will bring 2,000 new jobs to the town, that actively pursued Toyota (among locations in 24 other states) to get the plant.
TIF saw some gains this week (prior to today) as the Trian Fund Management, a hedge fund, took a 5.5% stake in the company stating that they believed TIF was undervalued. Tiran
is reportedly holding meetings with TIF management to discuss performance improvement. We may make some more money on this stock.
Today Standard & Poor's upgraded P&G from neg to Stable due to strong operating trends and improving debt leverage---P&G is going to issue $4billion in bonds denominated in dollars and euros. They too took a bit of a dip today, but are back up slightly in after hours trading. I still think they may be a good buy and hold, look for a proposal sometime after spring break when I have time....unless someone else wants to do a proposal?
Hansen Natural Corp. (like I talked about in the last post) released 4th quarter and 2006 year end results today, their sales were up 74% to $605.4million from $348.9million in 2005. According to the WSJ, Hansen Natural was the best 10-year performer according to the Shareholders Scorecard (see article below)...but will they rise much further? Goldman's analyst says maybe not and downgraded them to neutral from buy. But overall analysts are split between buy and hold. Lets still think about buying with an investment horizon of a few months to a year....anyone want to look into a proposal on this?.....maybe people will need energy drinks to stay up nights and figure out how to cope with this market correction?

Hansen Articles:
http://online.wsj.com/article/SB117225156965517431.html?mod=yahoo_hs&ru=yahoo

http://biz.yahoo.com/ap/070227/hansen_outlook.html?.v=1

REITS Report

Fresh economic news is out indicating that, as expecting, home prices have fallen. In January, the median price of homes sold fell 3.1%, although existing-home sales in the US rose 3% to 6.46 million-above economists expectations. Residential REITS fell slightly due to a broad sell off in the markets-D.R. Horton was down $1.07 or 4% to $25.76, Toll Brothers fell $1.15, or 3.6%, to 30.51, and KB Home fell $1.65, or 3.2%, to 50.37. As sub prime mortgages keep on defaulting, and banks like HSBC are losing millions, tightening debt markets pose a threat to the largest home builders-especially those not in the luxury sector. Prime mortgage defaults still are low although banks may over react to sub prime defaults and tighten up mortgages across the board.

In the commercial sector, investors are worried over Mortimer Zuckerman's recent exercise of $75 million of Boston Properties options. Many investors looked to Sam Zell's sale of EOP as a cue to begin selling as well. However, EOP was losing money and an executive's exercise of options could mean anything. Many in the commercial REIT industry still believe there is growth to be experienced. With relatively few new office buildings under construction there is a good chance rental rates in several markets will increase over the next two years. EOP's LBO is still sending ripples throughout the industry as Blackstone has already sold $21 billion of the EOP portfolio. Mackowe Properties recently snatched up 8 midtown Manhattan properties from the EOP portfolio for $7 billion in a record 10 business days. The REIT industry continues to be hot and there will most likely be more acquisitions while interest rates stay low.

Energy Report

Oil finally broke $60/barrel this week as we are currently trading at about $61.85. As a result, our USO fund which tracks oil futures is up more than 13% since our purchase of the fund. Our XLE fund which tracks the price of energy companies however is only up about 2.7%. This is to be expected though; when we bought the ETF I noted that it has a beta of .80, meaning it is 20% less volatile than the S&P 500.
In other news, Royal Dutch Shell PLC was given the OK to explore for oil off the coast of Alaska. Moreover, Russia and Qatar are continuing to discuss the possible creation of an OPEC like cartel for countries producing natural gas in order to influence the markets. The EU has formally announced their position against the creation of such a cartel, fearing that it would lead to higher natural gas prices amid the current crisis.
As for other sectors of energy, coal is starting to make a come back. TXU Corp. which is currently in play, increased its profit 33% due to the low cost of electricity from coal. I plan to start researching coal companies due to the fact that it is so cheap right now and provides a good alternative to oil.

Financials

The market is in correction, erasing some earlier gains. The US market is down amid the largest decline in Asian markets in a decade. The financials are being hit hard as Greenspan pointed out that our economy could be near a recession. Financials are also down due to traders focus on the defaults of subprime mortgages and where all of the exposure is (via borrowings, MBS, structures). Lets look at where our holdings are: Citi: Chuck Prince stepped up and brought in a new CFO. Poached from American Express, Gary Crittenden is on the hot seat from day one, as he needs to control cost and balance the firms massive product/services line with favorable return to shareholders. Coming from American Express, a used-to-be conglomerate that has shed itself of unwanted business units, some speculate the Crittenden hire as one that is supposed to unravel the empire Sandy Weil built. Nothing is set in stone yet, but investors will be paying extra attention to expenses in the coming quarters. Merrill: Merrill is down right now due to global market decline. There is nothing too new out about them right now. We have down extremely well with this position and for a portfolio of our size, I think MER is the most balanced firm out there with regard to diversified profitable businesses. I would say that aren't the best IB, not the best Private Bank, and not the best Capital Markets house - but together they perform in outstanding fashion. AIG: AIG recently acquired the assets of a middle-market PE house. Other than that, they still are well above our stop-loss point, and I kind of like the non-broker financial play. Until next week, Rich

Currency Report

Hello Everyone. Here is the new currency report for the week.

The Euro is expected to do well this week. Along with the "strong vigilance" rhetoric being played by the central bank, Malta is seeking to add itself to the growing Eurozone, making its currency more attractive. While this country's GDP is negligible to Germany's, it is a huge symbolic move. According to a Bloomberg survey, central banks are divesting their share of the US dollar, a move which will help to strengthen the Euro. Information from the Eurozone that is expected to be released are the PMI figures and money supply data.

The US dollar in contrast is expected to do a little worse as time passes and investors no longer feel that a rate hike is in the works. The economic releases are not expected to be positive to the dollar. The January durable goods report may not look so good as orders from Boeing have decreased and the demand for goods made to last more than 3 years has decreased. Higher oil prices may influence the consumer confidence report to the downside. The saving grace could be the housing market. A pickup in that sector would bring more positive news for the US Dollar. There is a change in the belief that unemployment lowers inflation in the ranks of the reserve. Should this hold true then the Federal Reserve will not raise rates preemptively.

The pound is expected to be flat this week. Housing prices grew by .7% however, some members believe that inflation will continue to fall and even dip below the 2% target rate over time. The lack of clarity in what is influencing the economy will keep the bank form taking action. The only pending release, which is expected to be alright is the mortgage approval data, to be released tomorrow.

The yen picked up some power from some hawkish comments on rising prices in Japan. There was also an increase in the output gap calculated at .6%. If the economy keeps strengthening then it will fuel more expectation that a rate hike is in the works. Repatriation this week would also bring strength. Be on the lookout for companies to begin doing so soon.

Australian and New Zealand Dollars have benefited due to rising prices in gold. Canada, however, did not benefit from the increase in oil, as the price action is a little exhaustive. Though its stock market hit a fresh new high, traders did not take that into account. New Zealand is reporting lower business confidence and export growth. Home sales from Australia and money supply data from New Zealand are the only data on deck for the commodity currency block.

In closing, happy trading to all of you out there and good luck.

Cordially,

Ian

Note on GYI: Acquisitions

KFG,

So far we are doing really well with Getty Images in the ultra-shortrun since we bought the shares. Earlier this week they announced 1 acquisition and are reported to be getting in on another. Below is the Morningstar analyst note on possible caveats (however the market really like the announcements so far, as the tape shows)
----

Amid speculation that it would acquire rival Jupiterimages from Jupitermedia JUPM, Getty Images GYI said Thursday that it was acquiring MediaVast, the parent of entertainment imagery distributor WireImage, for $200 million in cash. We have mixed feelings about this deal but are holding our fair value estimate steady for now.
While adding WireImage adds diversity to Getty's revenue stream, we worry that Getty may be paying too much for a business that may be near its peak. While early 2007 results show that celebrity magazines continue to grow in popularity, this trend is relatively mature, and MediaVast's sales growth--which was more than 1,400% between 2001 and 2005 according to Deloitte & Touche--is sure to slow in the coming years. MediaVast is a private company, so we have limited knowledge of its financial results and can't know for sure how fair a price Getty is paying; however, given Getty's expectation that the acquisition would dilute 2007 earnings per share (including amortization), the lingering concerns the market has about a slowdown in Getty's core business, and the recent hypergrowth in the entertainment imagery market, we'd wager that Getty is paying up to acquire MediaVast.
Getty is paying cash, which will put a big dent in the $339 million the firm had at the end of 2006. As we mentioned above, Getty is also thinking about buying Jupiterimages. This deal has a few moving parts--Getty doesn't want all of Jupitermedia, just Jupiterimages--which complicates things, but if it went through at the $9.60 per share price mentioned in Jupitermedia's press release, Getty would need to pony up another $400 million or so. To do so, the company would need to either issue new equity--which would be a poor choice, we think, given Getty's current valuation--or add debt. We suspect the firm would opt for the latter, as it has plenty of room for additional leverage on its balance sheet.
Getty is clearly making aggressive moves to remain the leader in the digital imagery business in the face of changing industry dynamics. While we appreciate Getty using its current market dominance to ensure the same in the future, we are mindful of the price it is paying to stay on top and are concerned that returns on invested capital could decline sharply in the next few years if the company makes too many acquisitions at too high a price

Economic Report

We had some important economic indicators come out last week. Core PPI which exlcudes food and energy was up .2% during January. However, if you include food and energy the PPI was -.6% indicating two things: first, the effect food and energy has on inflation and second, aside from energy prices the economy is growing at a moderate pace and .2% inflation is a comfortable number for investors.

As for housing starts, there were 1.408 million in January, down about 200,000 (-12%) from December's 1.642 million. This shows that although the housing market it starting to slow down, it is doing so at a not so drastically fast pace.

Lastly, consumer sentinement was down 4.7 points to 93.3 as surveyed by the Michigan's Consumer Survey Center. This indicator shows that consumers are not expecting economic growth and that consumer spending may start to slow down during February and March which would slow growth and inflation.

Also, at last meeting I was asked what the Fed said at the last FOMC meeting. To quote their minutes it says, "The Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information." Moreover, Fed Chairman Bernanke said in a recent speech that "If inflation becomes higher for some reason, then the Federal Reserve would have to respond to it" These two statements allude that we are currently seeing steady growth but should that growth pick up speed, the Fed will most likely raise interest rates.

Tomorrow we are expecting the CPI to come out at 8:30am ET.

Consumer Goods sector report 2/20

PG continues to look good, as it is trading near its 52 week high but still undervalued by Morningstar. Interestingly, while PG's Pampers (for babies) diaper brand is highly successful here in the US so is their Adult diaper brand, Attento (only sold in Japan), yet PG is seeking a buyer for that brand because it does not fit into their strategy of brands being able to expand on a global scale (hello, baby boomers?!?!). PG's Gillette is also in the midst of releasing their 'hottest' razor yet, the 'Fusion Power Phantom' for men. Consumer tests show that the Fusion Power Phantom is significantly preferred over their Gillette M3 Power and comes with a money-back satisfaction guarantee--so, gentlemen give it a try and help sales. Perhaps we should buy soon?

As PG would be a good steady growth company, it might be time to look into a high speculative growth consumer goods co: Hansen Natural (HANS). What do they make? Energy drinks, natural sodas, juices and smoothies. Their most successful product, bringing in 95% of their operating income in '50, is Monster Energy Drink. With Monster such a huge success, the company is focusing less on their natural soda products. Their growth has been near 40% per year for the past few years and is expected to be a modest 30% in 2007. They have recently entered into some more distribution agreements, such as with Anheuser-Busch, which should make their products more available and increase sales. The company is also in good financial health, but not leveraged, they have almost no debt and a big pile of cash--which will help with expansion or acquisition. The stock is risky, but it might be a good buy for half a year or so. Take a look at the Morningstar report, try a Monster drink, and consider it.

Toyota (TM) is also up about 2% from when we bought it.

Also, earlier this year we were asked to evaluate KFG's existing holdings in our sectors. Among the few consumer goods stocks is Cherokee, bought last year. This one, although we didn't quite understand what the company did at first, is a keeper (up almost 17% since we bought it). Cherokee(CHKE) basically markets and licenses the trademarks and brands the company owns for clothes, home furnishings, and other products. Cherokee was rated as one of the top 10 small cap stocks by TheStreet.com earlier this month

Tiffany's (TIF), whether considered consumer goods or services is also a keeper. Although we lost with it before we're back in the money (up almost 4% since we bought it) and it looks good for now. I'm not the only one who loves those little blue boxes, Tiffany's is a very valuable brand. Although they struggled recently by pricing too low their line of 'Return to Tiffany's' silver jewelry such that the stores were overrun with teenage girls almost to the point of alienating their older and richer clientele--they seem to have found the balance. They have raised prices on their silver jewelry, before the brand was cheapened and are consistently able to pass the higher prices of their inputs (commodities silver, gold, diamonds) on to the customer. Growth is also in the future, as Tiffany's plans to open 17 new stores in 2007, 10 of which are overseas, and same store sales have been increasing by 6%. TIF is a pick on TheStreet.com and is rated a solid 2.5 hold on Yahoo Finance.

That's all for now.

Techs

Below are today's closings. I have nothing important to add today really. I'm not feeling well, so if I think of some additional comments, I will bring them to tonight's meeting. Thanks. JB

Symbol	Time	Trade	Change	% Chg	Volume	Intraday	Related Info
MSFT	4:00PM ET	28.83	0.09	0.31%	53,221,034		Chart, Messages, Key Stats, More
INTC	4:00PM ET	21.18	0.05	0.24%	47,809,889		Chart, Messages, Key Stats, More
AMD	4:01PM ET	14.92	0.02	0.13%	21,951,000		Chart, Messages, Key Stats, More
NVDA	4:00PM ET	33.01	0.29	0.89%	10,392,630		Chart, Messages, Key Stats, More

Financials

Hey KFG,

MER: Up over 2% over the last week, nothing too special going on there. MER cut its subprime mortgage provider so they will save some money there. This is a hollistic issue across Wall St firms and subprime mortgage brokers are taking baths on unpaid mortgages that they gave to customers with shotty credit

C: Citigroup is a very newsworthy company right now, on the gossip track, however. Ever since the CFO shake-up, people cannot seem to get the story straight. Below is an excerpt from todays FierceFinance newsletter:

The wackiness at Citigroup is getting even more wacky. The latest is a round of rumors that some Citigroup insiders have been spreading gossip and half-truths to "get" an ousted and unpopular executive and to divert attention from the real problems at the bank. Business Week has looked into the issue and has raised the possibility of a smear campaign. Turns out that Todd Thomson, who has been maligned for his ties to CNBC journalist Maria Bartiromo, wasn't the only Citigroup executive with a fireplace--the hardware was in place when he took over the office. And heck, it was only a gas fireplace. Seems that some people are now coming to Thomson's defense. He has remained mum as he negotiates a severance deal. All this masks some serious operating issues--was this by design?

Otherwise, Citi needs to work on cutting its costs, for which CEO Chuck Prince met with Saudi officials on. I am still bullish on this company because I am behind Prince in bringing costs down.

Citi also is toying around with issuing its shares on Tokyo Stock Exchange. Citi is one of the major Wall Street banks playing Japan right now, and having its shares on the TSE would pave the way to make it easier to buy Japanese companies. Citi recently set up a holding company there to manage its acquisitions.

Look for reports at tonights meetings from KFG Analysts on Fortress on the Optionalble

Rich

Biotech Update

Biogen reported higher earnings for Q4 on sales of the drugs Avonex and Rituxan, but revenues still came in shy of analyst expectations. The company posted a more-than-doubling of net income to $108.6 million ($0.32/share) from $55.6 million ($0.16) a year earlier. Excluding items, EPS would have been $0.53 against $0.48 last year. Q4 revenue was up 12% to $708.3 million. Analysts were expecting EPS of $0.55 on $714.2 million in revenue. Sales of multiple sclerosis drug Avonex, the company's leading product, rose 6% to $439 million, while sales of oncology drug Rituxan were up 20% to $218 million. Biogen and Genentech co-market Rituxan, and a marketing dispute between the parties is threatening to escalate.

Elan Corp. PLC reported a smaller fourth-quarter loss and higher sales Tuesday, citing the expansion of its multiple sclerosis-fighting drug Tysabri. It partners with Biogen for the drug Tysabri which was pulled of the US market but has since been permitted to be put back on.

Britain's Shire Plc has agreed to buy U.S. partner New River Pharmaceuticals for $2.6 billion to gain full control of the two firms' new drug for attention deficit hyperactivity disorder (ADHD), Vyvanse.

REITS Update

News continues to support the belief that the housing "bust" is taking a soft landing. The "bust" the market has been worried about may actually be a correction to an overheated market. Fed Governor Susan Bies said today the country may be seeing a bottom in slumping demand for housing. Moody's has predicted improving home prices in 2/3's of the country's largest residential real estate markets due to the slow-down in construction which has yielding a more favorable market for existing homes. Residential REITS price to earnings multiples are at all time lows and may present an opportunity for a value investment. Toll Brothers (nyse: TOL), the largest luxury home builder, for instance, has a mere P/E of 7.93 versus D.R. Horton's 8.76 P/E, Pulte Homes' 12.25 P/E. At the same time, TOL has that largest operating margins of 18.74% and largest gross margin of 28.11%. Additionally, TOL is a luxury builder, operating in a sector which is not connected to the fast rate of sub-prime mortgage defaults. The downside is its -10.50% YOY revenue growth-although understandable due to the market correction. Looking to the future, with increased globalization, new foreign money will be seeking out a fashionable residence in the US by their new US branches. Asia especially loves the US and there are plenty of newly-made millionaires there ready to buy American property. Furthermore, debt is cheaper than ever. The spread between T-Bills and CCC bonds is only at 2.5%. PE funds and REITS are ready to expand and make acquisitions while the market has undervalued residential REITS. TOL and other residential REITS have the prospect of either external growth, or LBO's over the next year, while they prepare for the next residential bull-market.

Currency Report

Here is the news for the currency market for the upcoming week.

The US Dollar is slated to be weak this week for fundamental reasons. Globally, inflation is low, the producer price report that was released last week. This news has given rise to the expectation that the Consumer Price Index will also show weakness. The Federal Reserve has taken a wait and see attitude while the European Central Bank has clear plans to hike interest rates, including the other factors, it has no doubt spurred the Euro upwards.

As for the Euro, it has been and continues to be a great time for the currency. It had broken past its 1.3050 resistance from last week and has stayed around 1.31 versus the Dollar. The European economy is operating quite strongly and has more releases coming up than the US Dollar. French and German GDP is expected to show great results and will serve as impetus to raise interest rates within the Eurozone. The most important release to look out for this week is the German IFO report, which has been sustained by consumer consumption ahead of the new Value Added Tax. This may serve to slow down the business sector slightly. Overall, unless there is a severe drop in the consumer sentiment, the outlook looks positive for the Euro.

The Pound is seen as overvalued and expected to move lower to close the current account deficit. Inflationary pressures have become relatively stable and have been signified by a .8% drop in consumer prices in January. The question on traders' minds is whether the Bank of England will hike rates by 25 basis points to 5.50%. If at least 2 people vote in favor of the hike, then it is likely that it will happen. However if the sentiment to hold rates is unanimous then the probability of a rate increase is low.

In Japan, a rate increase may be in the works, as the odds were updated to 65%. While growth is improving in Japan and fourth quarter results show improvement, there is no significant change that will warrant a rate hike. However, it should be duly noted, that after the G7 meeting last week, rumors of an under the table deal between Japanese and European financial ministers may serve to bolster the rate hike to occur.

Commodity influenced currencies, mainly the Canadian Dollar, had noticed improvements in the Wholesale, Automotive, Housing and Manufacturing sectors. This means a rate hike may occur in the long term and making the currency bullish in the short term. The currency was weak however as the international securities transactions report came in lower than expected. The other currencies, such as the Australian dollar were flat while the New Zealand Dollar increased most likely due to yen selling in the NZD/JPY pair.

Energy Report

The energy industry was calm during the past week. Some news however is as follows. Russia has ruled that Exxon Mobil will not automatically receive additional reserves in the Sakhalin oil field despite its discovery by Exxon. The reserve which is currently next to an area already licensed by Exxon will be auctioned off instead. In addition, BP has begun restarting its Texas City refinery which will add about 300,000 barrels a day to supply. This action by BP will help mitigate the shutdown of one of Valero’s refineries.

As oil has become more expensive, the demand for biofuels and environmentally friendly fuels has increased. Thus, it is projected that in 2007 corn may outperform oil in the futures market due to increased demand from China. Corn is one of the key ingredients used in creating ethanol.

USO - $49.35
XLE - $58.00

Tech Report for the Week

Ok, here we go...

Stocks have seen a rise early today do to Alcoa being a takeover target...not that it matters that much right now.

First, let's tackle Microsoft (MSFT). The bears have sunk their teeth in them, and in my opinion for 2 very strong reasons. The rush to upgrade to Vista has been tardy and for good reason. Secondly, for all you techies out there, open source is the new wave of computing via the internet instead of the dependency on office suites to do documents and spreadsheets. You can now do all of these with the use of a simple Google account. Or you can download free software called OpenOffice and get a much more friendlier program, that will not eat up your system resources. Vista needs a new computer to run efficiently, so we will definitely not see the same increases in stock price do to its release. Besides no businesses will be upgrading to Vista, and college kids will either keep XP or do like the people at AU and get a Mac.

Intraday trading:

MSFT - Day's Range: 28.97 - 29.13

In terms of my interest in Sun Microsystems. I'm still interested. I think we should wait to the price drops closer to my $6 strike on the put option I have on them lol. That's the closest fair valuation, as of now I think the price is over exaggerated. But nonethless, it is a good buy as its deals with Intel, and Google can only continue to boost its balance sheet further over a beyond the black.

I don't know if we still have AMD but it sucks. That's just my bias showing its true colors again. I will save all other commentary on that stock.

But I will add that Nvidia Corp. (NVDA) which happens to be my stock pick for February, was up yesterday even when the market dropped, and it is up today. Fact of the matter is, Nvidia produces the gpu's that Vista customers and graphics enthusiast need to power Microsoft's new OS. So far, AMD doesn't have an ATI card that is truly made to power Vista with its Direct X10 interface. We need to BUY!

That concludes my feelings on the tech sector for right now. If anything else comes up, I will you keep all informed.

REIT Report

Blackstone wins!!!! After a very competitive bidding war for Equity Office Properties, Blackstone, the favored suiter, has finally won the deal. Vornado backed out of the deal after Blackstone offered $39 billion for EOP. Blackstone is now selling off 6.5 billion of its Seattle real estate to Beacon Capital Partners, a Boston real estate investment firm, to help finance the EOP acquisition.

It appears as though the "housing bust" was actually more like a market correction. Housing is taking a soft landing as existing homes are becoming more attractive due to a decrease in new construction. New housing starts increased in January and February, although this may be due to unseasonably low weather.

BXP: 123.50 down 3.54, 2.79%
TOL: 31.89 down .45, 1.39%
KBH: 51.94 down .03, .06%
VNO: 131.39 down 1.95 1.46%
Yahoo REIT Office index 1381.8 down 1.41%

Currency Report

Hello all. Here is the currency report for the upcoming week.

The minutes of the G7 meeting will be coming out soon, however, as of this writing, I have no knowlege of how it went.

However, here are the week's expectations. As of Saturday, it is expected for the currency pairs of EUR/USD, EUR/AUD and AUD/NZD to range trade (EUR=Euro, AUD=Australian Dollar and NZD=New Zealand Dollar). In the case of EUR/USD, it will fluctuate between the rate of 1.3050 and 1.2875. The EUR/AUD has a range from 1.6885 to 1.6555 and the AUD/NZD will trade between 1.146 and 1.1285. In this particular type of market, it is important to place a sell order once the pair has reached the top of the range and place a buy order once it has reached the lower end. The only risk you face is if the price breaks out of the range and begins to create a trend.

It is expected by the U.S. central bank that inflation will be within the 2% comfort zone, however, they are watching to make sure that should this become uncomfortably higher, that a rate hike would be in the works. This has helped the dollar some, however, since Susan Byes, one of the hawkish board members has left her position at the central bank, we may see a change in attitude.

If you have been keeping on track with the rates, you will also notice that the Euro dollar is quite high. This has led to some poor economic releases, namely that their trade balance has tipped towards favoring more imports. Imports have grown at 10% while exports from France have only increased 8.6%. Coupled with their banks decision to keep rates steady and the unsurprising results in industrial growth in France and Italy, this may cause a weakness in the Euro in the coming week. It is to be noted however, that a rate hike is in the works, which may prop the Euro some more.

Data coming from England, showing that there is little growth or sign of inflation has also led to some weakness in this currency. Their trade deficit came in a 7.1 billion pounds, which was higher than the expected 6.87 billion pounds. Though this is seen as slightly unreliable, the real direction of the pound, at least for the short term, will be provided by the retail sales report and consumer prices report later on during the week.

Lastly, the recent increase in oil should be watched carefully. Oil traded above $60 on the NYMEX and may be on the rise. Should this happen, it should be expected that currencies such as the US dollar and Japanese yen may weaken, due to their negative correlation with this commodity, while the Euro and Canadian dollars will strengthen due to their positive correllation.

All in all, I will be keeping watch and keeping you posted on what is available. In the meantime, always look at your charts and make sure you analyze properly before taking any positions.

Consumer Goods Report

General Mills, upon further investigation, won't do much for our portfolio. Although, they are one of the largest packaged foods companies in the US (Cheerios, Lucky Charms, Wheaties, Chex, Betty Crocker, Pillsbury, Gold Medal, Green Giant, Hamburger Helper, Old El Paso, Pop Secret, Colombo, and Yoplait), and some of their products are experiencing major growth, they are as a company only expecting 3% growth in 2007 and have aimed their strategy toward expanding their presence in the dry cereal market (where they already have 30% market share and competition is stiff). Also due to their commodity inputs (i.e. corn) margins are tight. So food conglomerates might not be the way to go, but.....

Seeing as our portfolio has a long-term focus, despite our want to see immediate leaps and bounds of return, I think it might be time to invest in everyone's favorite consumer goods conglomerate. That's right, Procter & Gamble. They make 22 product lines each with sales over $1 billion including Tide, Cover Girl, Crest, Charmin, Panteen Pro-V. Morningstar projects that they P&G will see consistant 6% growth over the next five years, their operating profit margins should grow, and thinks the stock is undervalued. It certainly won't bring large immediate gains, but it might be a good buy and hold.

I have also added a few stocks to watch in the consumer goods portfolio in our Yahoo account, take a look at them, Toyota's up today with more news that it is on track to overtake GM as the largest car manufacturer.

Tech Report

DELL - 23.618
MSFT - 29.41
AMD - 15.20

as of 2:09 pm sitting at work.

I plan on making a recommendation to purchase Sun Microsystems with some of our spare cash if possible. Not sure though, should we raise cash by liquidating one of our positions?

Also want to make a proposal to liquidate AMD for Nvidia or Intel but will get back to you all.

Tech stocks are sliding today due to profit warnings issued by the National Semiconductor Corp. That is all I have that seems important for now.

Biotech Report

Biogen (BIIB) was at 48.06 at midday today. Biotech stocks perked up considerably at the start of January, pointing to a long-overdue rotation into the speculative sector.
Biogen began a Phase III study of its investigational cancer drug in patients with non-Hodgkin’s lymphoma [NHL]. The compound, called galiximab, is an anti-CD80 monoclonal antibody. It will be given to 700 NHL patients who have failed an earlier therapy. Galiximab will be administered as an adjunct to Rituxan and compared to Rituxan by itself. The trial is governed by a special protocol assessment that Biogen Idec reached with the FDA in July 2006. Because the CE80 target is found in Hodgkin’s disease cells as well as NHL, Biogen Idec will test the drug in additional indications. Biogen Idec fell $1 to $47.79.
After the closing bell, Amgen (NasdaqGS: AMGN) reported Q4 revenues that were 17% higher at $3.8 billion and earnings per share of 90 cents (before special charges). The earnings number was about 5 cents below expectations, which sent the stock lower in after-hours trading. Amgen lost 29 cents in the regular session and then dropped another $1.60 after the announcement, ending at $73.34, a loss of 2.4%.
Monday, Kindler is expected to announce a drastic overhaul of Pfizer's budget during a conference call with analysts, though the company has been tight-lipped as to the form such cuts may take. After already cutting its U.S. sales team by 20% in November, it is felt Pfizer's European team can expect more of the same. "There will be facilities closures," according to someone with knowledge of the situation.
FDA announced plan to implement more security and regulation on biotechnology/healthcare drugs.

In other news for the healthcare sector, I am still following Abbot Laboratories as a potential proposal. They seem like they are declining a little since last week’s meeting but have just announced new studies and are working on more drugs. I will keep you all posted.

Economics Report

As of current there are many conflicting reports about the future of the economy. Some economists believe that we are due for a rate cut in order to help give the economy a boost. However, the majority of economists still feel that growth will continue well into 2007. Although, despite growth, interest rates may or may not be increased due to job growth. For the past year the pressure on the job market had been pushing up wages which as a result put upward pressure onto prices causing inflation. However, unemployment was at a fourth month high in January at 4.6%. The economy added only 111,000 jobs which is almost 39,000 below economist forecast. If the pressure on wages relents then our economy should grow at an acceptable rate while inflation stays within the 1 to 2% zone. This is of course unless we have a huge spike in oil prices which could cause more pressure on inflation and rates.

Financials Week of 2/5

Greetings all,

AIG: We placed the stop at 66.75 as the stock dipped below the 100 moving average and then is currently testing that very line. Recent bloggers and investing gurus have blessed AIG's fundamentals, which is why I did not opt for a all-out liquidation.

MER: Merrill had a quite week, adding about $1. They paid out a rather immaterial law suit to investors, which they shook off due to additional reports praising 2007 M&A activity.

C: Citigroup is currently getting slammed by the media for its mgmt problems, which eventually will blow over. Charles Prince is focusing on cutting expenses to be a more tight ship.

Rich

REITS Report

The Yahoo REIT Office Index closed at 1395 on Friday, up 1.01% or $23 from Monday's close of 1372. The sector continues to be hot, especially due to the Equity office Properties (EOP) deal. In the past week, Vornado countered Blackstone's $38.3 billion cash bid with a $41 billion cash and structure (debt, stock, dividends, with UBS, JPM, Lehmans, Barclays and RBS Greenwhich Capital) bid. Just yesterday, EOP rejected the Vornado bid, stating that the cash bid by Blackstone was less risky for shareholders. One set back to Blackstone's bid is that it comes out to $54 a share, which is lower than the closing price of EOP shares for the past 3 days. vornado's, however, comes out to $56 a share including dividends from December. Vornado's theory is that the acquisition would be a value investment since it would be more expensive to replace each property. One flaw to this argument is that older buidlings need more maintenance and renovations than newly built buildings. EOP is in the process of gaining approval from EOP investors to finally accept the Blackstone bid. I personally think EOP should accept the Vornado bid-it is more money, it is an investment that will return more than cash, and Vornado is an experienced manager of office real estate whose stock has steadily gone up since its IPO in 1988.

Boston Properties: 126.88 up .79, .63% P/E 15.68
Toll Brothers: 35.35 up 1.22, 3.57% P/E 8.48
Vornado: 125.35 down .39, .31% P/E 37.10
EOP: 55.38 up .23, .42% P/E 1,384.50

Currency Report

It appears that this week is going to be driven by fundamental factors. Economic releases from the developed countries and the upcoming G7 meeting will be affecting the currencies, specifically for Canada (CAD-Canadian Dollar) and Japan (JPY-Japanese Yen).

With oil rising in price, it is expected for the Canadian dollar to react to those prices. Being that Canada is an oil exporting country, it is beneficial for both the country's economy and the currency that oil continue to increase. Though it did not react to this increase last week, it is expected to do so this time and may range trade with the US dollar.

As for the Yen, its action will be decided by the G7 meeting. The financial minister of the Eurozone may pressure the Japanese to drive up the price of the Yen. Over the span of a few months, the Yen has traded over 119 compared to the US dollar. Being that one dollar can purchase so many Yen, it has no doubt driven up Japanese exports and has helped the Japanese economy flourish. However, China's subsidies and their subsequent effect on US trade in the country may put the US in a position to ask the the Eurozone minister to stabilize currencies in the entire region, Japan being one of these countries.

In the meantime, keep an eye on the economic releases and the minutes of the G7 meeting to stay ahead of the game.

Allow me to re-introduce myself

KFG 4 Life
A Rich/Rob/Jeff Collabo

Edited for content

Allow us to re-introduce ourselves, they call us k, k to the fg,
we analyze things like return on equity
fresh out of kogod and onto the street,
AU's soon to be JP's number 1 supplier
flier than my business card bearing my name
Got the hottest font in the game repping my fame
Not at YALE but similar to google noone can do it better
I write checks like an investment banker
My boy Gekko told me, "Lunch is for wimps"thats why i day trade all day to get me greenerwhen the bell rings im off to cop my beemer
lame folks snaggin' picks out of the trash bin,
I'll growl at you all with my ferrari engine
Ain't gotta try, pick stocks out da sky, let my darts fly, hit a bulls-eye
Cramer's Mad Money's my pocket change, get your dolla's together meet you at the exchange
the kfg make it rain, holla to john thainmy bankroll double then all 'dem strategy heads at Bain
you can't blame peeps for playin the game steady,
markets gettin' hot we'll take risks when we're ready
And my market cap is risin' cuz i flip bills faster than Gates
And you can't forecast my moves, I'm wild like interest rates
boot-strapping forwards with the new timb jawns
zero coupon bonds, my economics so gone
round the corner see Soros he is like boy you so wrong
i again peep the chart, book the gain, call him from my jet plane
he said snap KFG you must be on that in-sid-a trade

Allow me to introduce myself

Hey everyone, my name is Ian Bellamy and I am the minister of currency. Over the week, I will keep you updated on how the Forex markets are doing. I hope you find my information useful and profitable.