Wednesday, December 08, 2004


House prices were up an average 18.5% in the third quarter of 2004!

The year over year increase was 13%!


According to JP Morgan the 13% increase was the highest since 1979 and the 18.5% increase was the highest since the government started keeping records.

One reader who just received his county property tax appraisal asked, "Did yours go up as much as mine?" I checked last night and our tax appraisal climbed from $282,000 to $324,000. The good news is that the taxes will not go up much because the county will adjust the per 1000 rate.

Those of you who purchased a 10% share of a condo in Myrtle Beach might want to know that the Grand Palms, just next to Kingston sold all 251 condos pre-construction at reported prices of $480,000 to $850,000. Their new oceanfront swimming and entertainment complex will be located at the end of our boardwalk between us and the Hilton Hotel. For many years, I have enjoyed visiting the Hilton oceanfront deck to enjoy the entertainment and food services.


Satellite radio stocks are "hot". Yesterday, in a down market, SIRI traded above $9. Having purchased shares at $2.08, I was all set to celebrate another home run (four bagger--making 4 times the original investment) but this morning a news article knocked the stock down sharply. Because satellite radio stocks are speculative, I started with only a partial position in XMSR and latter added a partial position in SIRI. Clearly I should have bought more but I am comfortable riding these bucking broncs. The combined value is now equal to 5% of my portfolio but I am comfortable riding these bucking broncos given that most of the position is "found money".


It is incredible that in the face of a rapidly declining dollar import prices are declining. This is very good news for stock market investors. It is a major contributing factor to the "economic sweet spot" I have written about. There is a tendency for folks to look a cheap foreign goods as a negative (except when they buy goods). The efficient trading for low cost goods actually raises the standard of living for the buyer and seller. John D. Rockefeller was correct when he said, "The most charitable thing you can do for a man is to give him a job." The various heated arguments often given in regard to Chinese being willing to work for $1 per day are often totally absurd. To a Chinese man who has nothing, getting a job that pays enough to provide food and shelter for his family, is a blessing! The Chinese economy has grown at an extraordinary rate for about 10 years. Chinese who were not able to afford a bicycle ten years ago can now afford a motor scooter and some are buying cars. US consumers have benefited to the same degree during these years, saving thousands of dollars per family.


Gold, copper, other metals, oil and other commodities have turned sharply to the down-side. The dollar/yen has turned up sharply. Picking tops and bottoms is always impossible until after they occur. My previous warnings about buying Gold still hold; the metal pays no interest and will decline in value if US interest rates get ahead of the inflation rate. Gold has dropped $7 in the past few days. I have hoped to see Gold go to blow off levels from which I would sell Gold mining stocks short. Selling short is a speculative venture and a rare action for me. However, I believe, Gold shares will decline for two years or more when the increase US short rates actually begin to "bite".


In recent weeks, I have mentioned IBM and GE several times. These stocks fit the profile of big cap value companies that I believe will do well over the next five years. Today, it was announced that IBM has in fact made a deal to sell 80% of its personal computer business. IBM is gearing up to do more in their higher margin businesses. GE continues to make strategic acquisitions. IBM and GE should sell a lot of products overseas over the next few years. At the current level of the dollar, the profit margins should be fat indeed.


The very short-term outlook for semi-conductor stocks remains dicey. These shares are early cycle shares and BankAmerica down-graded seven stocks today on inventory concerns. I hope you can remember not to get overly concerned about the short-term news cycle and the penchant for analysts to make quick re-evaluations. The Soxx index is indeed off about 5% in a week but those who do not own TXN should use the pullback as a buying opportunity. The DLP technology is leading the pack in regard to High definition TV's and the cell phone replacement cycle will accelerate as new features are added. INTC will offer competitive TV technology soon but sales of High definition TV's is just getting started.


Two more readers are thinking seriously about allowing me to monitor their investment accounts. Marilyn and I are selling all but 10% of most of our real estate holdings. When I was a teenager, my Dad knew quite a number of men who died of heart attacts shortly before retirement or shortly thereafter. In retirement, Marilyn and I plan to visit the beach more often. However, while at home or at the beach, I need something to keep me busy and I very much enjoy studying the markets and helping others invest. I thank all of you for your comments and questions. I hope we can spend many a year watching our investments increase in value.


Gut instinct tells me that TIVO is headed for a buy out. Microsoft is making gains in the entertainment server market. The new souped up software in the next generation TIVO makes it an entertainment server. Many big companies would prefer for Microsoft not to "own" this market. It will likely take a bigger player than TIVO to fight the fight. TIVO is trading at $5.12. An attractive price for a speculator. Only the aggressive risk taker should invest more than 2 or 3%.


I closed the speculative option position today. These options were purchased on October the 18th and sold on December the 6th for a gain of 192%. After being fully invested for over three months; I took a little money off the table today. The sharp down-turn in commodities and the low long rates would lead one to believe the economy is slowing too much too fast. I don't believe it but will take a day or three to re-evaluate. Greenspans next report is of great interest.