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An old friend who is a CPA, portfolio manager and former broker sent the following email. Editors notes have been added.

Still two floundering airlines. I would think it would be determined how much stress is placed on the employees. I like NWAC. According to report they have somehow cut $5 billion from operating expenses in 2006. They could outperform CAL. (CAL has lowered costs by about $7 per share. A classical turn-around situation, where cost are down and revenues are soaring.)

The real loser in this looks to be DAL. I have a bunch of mileage with them and only wish I could cash them in. The airline analysts still believe there is overcapacity. Probably true. But the market forces(as well as bankruptcy judges) will force the marginal and inefficient players to reduce flights to profitable levels. (DAL has taken a sharp knife to its route structure; it has cut out numerous flights as have other carriers. DAL management stated this week that they expect to cut total costs by $5 Billion annually. Management is trying to make the cuts without using the bankruptcy court. UAL just turned its pension plan over to the PBGC--saving $3 Billion per year. DAL employees know that their pay must be rationalized with the other carriers or their jobs will be lost. The decision would be easy if unions were not involved; never-the-less, I believe a deal will be made.)

Oil prices are trending back to the CRB index. Its funny whenever I explain to people my belief the oil prices were manipulated to the earlier levels people think I'm crazy. Basically oil is a commodity used in industrial and commercial purposes. Over history it trends with the CRB but has a much higher std deviation. I think the current level is OK but is still high. Greenspan's comments are that oil inventories are at 3 year high. Wow!

As we know from standard deviations the swing could and should at some point in time reverse and actually become oversold. That may take some time. But I do believe it will happen. Double Wow! The price over-shot on the way up and may over-shoot on the way down?

I'm still keeping an eye out for the ET and AMTD's of the world. They could surprise many people in 2006 when more people are getting interested in the market. ET at double this price in a year sounds about right. In a bull market, trading volume will triple or quadruple at AMTD and ET. A double in stock price is certainly doable. My family owns more AMTD because we believe it has the higher take-over probability--ET has the most solid, diversified business model.

Cramer had a couple of good thoughts yesterday on St. Joe and Weyerhaeuser. Whatever there book values state, I would imagine they are probable understated by conservatively 50% due to historical acreage purchase prices. I have an uneasy feeling about this one. I bought Weyerhaeuser many years ago based on its land value and for years after-ward the land turned into a cash pig. The company spent money on taxes and maintenance during years when the property produced little income.

LJ

Hedge funds, hedge fund forum - Hedge Fund Lounge is a free hedge funds & hedge fund of funds forum. - Hennessee Hedge Fund Index Down -1.75% In April

Hedge funds moved into negative territory in April. The idea behind hedge funds is to eliminate down months. The negative performance happened before the GM blow up. Hedge funds are under pressure to perform.

The market is over-bought short-term. It may rest or retreat a little but it may keep the pressure on the funds until they capitulate. The resulting up-move could be dramatic.

BUY THE BULL!

Bill Cara: Capital Markets & Social Equity

Bill and Chairman Greenspan are correct to call for the elimination of the Freddie and Fannie subsidy. However, the 40 basis point subsidy is not the cause of soaring real estate prices. There is speculation in the real estate market but for the most part prices are being driven by an old reason called supply and demand.

Besides, long interest rates are in line with where they should be. The rates on TIPS, Ten Year bonds and inflation measures such as the PCED all forecast moderating inflation. Many big ticket items are offered at lower prices today than were available a short time ago; everything from computers to airline tickets.

Take a look at what IBM is doing with computer time. After paying a $5,000 retainer, companies of all sizes can now rent time on a super computer for a small fraction of the costs of last year. Consumers are dropping land based phone lines and newspaper subscriptions. They are substituting "free" services such as on-line instant messaging and on-line news.

Forty years ago, stock market newsletters of lower quality than Bills blog were available by subscription. They were typically delivered once each week, first thing Monday morning, and often cost more than $5 per letter. So far, Bill hasn't charged me a nickle to read his letter.

It is really hard to pump a tank of gas in today's market and believe inflation is tame. The rule that applies is "out of sight out of mind". Most of us do not buy an airplane ticket once a week or a computer once a week but the savings are large relative to the extra cost of the gas. Five hundred gallons of gas in a year cost maybe $350 more than last year. The savings on a lap-top computer might be $1,500. The interest savings on today's mortgages save the increase in price of a lot of hamburgers.

Greenspan is likely to continue to push congress to deal with Freddie and Fannie. I doubt that anything will happen as the congress is doing battle over judges. A republican win on this issue will save consumers and businesses billions if not trillions in the years ahead.

In the mean-time, investors have to deal with inconsistencies in the economic numbers. A case can certainly be made that economic growth is slowing and that oil prices will continue to fall. This argument would imply that the fed does not need to raise rates more. A case can also be made that the economy is stronger than perceived. The latest retail sales, unemployment claims, corporate earnings revisions, productivity growth and more suggest that GNP will grow at better than 4% this quarter! If this is true, the fed may need to snug a bit more.

History has shown that money is made by staying in the market much more than sitting it out on the sidelines. The conventional wisdom of three steps and a stumble is not born out by the data. Stocks tend to move up during periods of moderate rises in short interest rates.

BUY THE BIG BULL BOOM BUBBLE BEFORE THE FROGS JUMP OF OF THE HOT POT! SHORT SELLERS MAY JUMP OR THEY MAY GET BOILED!

BBC NEWS | Health | Stem cells tailored to patients

While avoiding the ethical questions in regard to stem cell research, I will address the age question. In recent discussions with a middle aged couple who have accumulated a decent retirement nest egg, questions about retirement ages came up.

A couple who has reached the age of 50, have about a 50/50 chance that at least one of them will live to be 90! This may not be surprising to you but are you prepared to live that long or longer. The 90 figure is thrown out just like historical figures are thrown out in regard to the stock market. It does not factor in health care advances.

Who knows what advances will be made in the next 40 years? I have often told my children that they should plan to live to be 150 years of age. This is not a prediction. It is the common sense idea that one should be prepared to live comfortably in the event that one does live a long time.

In the old days, it was common sense to buy lots of life insurance on the male bread winner as the risk was that he would die too soon. Now-a-days the bigger risk is that he will live too long.

In a recent speech, the head of a senior services organization said that of all the people who have ever lived to be 65 years of age, 90% of them are alive today! We need the government to reform social security but whether it does or doesn't do the job, Americans need to be prepared financially for longevity.

The break through in stem cell research offers promise of incredible health benefits. Diseases such as diabetes may be eliminated. Investors who have accumulated a million dollar retirement account might safely withdraw $40,000 in current dollars per year and know that he will always have another $40,000 to withdraw the next. Those who cannot live off $40,000 per year need to get busy making sure they have more than $1,000,000 saved. By the way, $40,000 per year may not cover your annual medical expenses in 40 years.

STOCKS HAVE A HIGHER LONG-TERM RETURN THAN OTHER INVESTMENTS--BUY THE BIG BULL WHILE YOU ARE YOUNG--YOU MAY NEED THE MONEY WHEN YOU ARE 120!

Peridot Capital Management LLC- Consistently Superior Investment Returns

Chad Brand post a good blog and a good web site. The web site includes a presentation that shows among other things the disadvantage of investing through mutual funds. I often mention to investors that 80% of mutual funds under-perform the market. Chad reports that the number is 84%!

He sites two reasons for the under-performance. First the funds over-diversify making their gross results consistent with index funds. Then they charge you a list of fees that often includes a big management fee. I did not see a mention of the distribution fee in Chad's work but this one takes the cake. Many funds charge customers a separate fee to cover the marketing costs to sell the fund to new customers.

Another well written missive is about sell side research. Instead of re-posting the info here, I will leave it to you to visit the site. Chad charges a significant fee for his services but in my opinion most investors would be better off using Chad's portfolio services rather than mutual funds or the typical "full service" brokerage account.

I have never met Chad and I have no financial interest in his company. Invest with him at your own risk. I am familiar with Chad only through what I have read on the internet. It is clear that he focuses his investment efforts on the important issues and avoids making the "game too complicated"; the KISS principle works!

BY THE WAY, NOW IS THE TIME TO INVEST IN STOCKS! LIKE CHAD SAYS IN HIS PRESENTATION, THERE HAS NEVER BEEN A 20 YEAR PERIOD OF UNDER-PERFORMANCE. IF YOU WANT TO MAKE SERIOUS MONEY, YOU NEED TO GET YOUR DOLLARS INVESTED IN THE MARKET AND HOLD ONTO THE BUCKING BRONCO (MANY THANKS TO KEN FISHER FOR HIS SAGE ADVICE OVER THESE MANY YEARS--I BELIEVE IT WAS AROUND 1992 WHEN HE FIRST WROTE TO HOLD ONTO THE BUCKING BRONCO).

Business of Senate Is Slowed as Battle on Judges Intensifies | theledger.com

Business of Senate Is Slowed as Battle on Judges Intensifies theledger.com

Many Americans know that the Senate Democrats and Republicans are behaving like school children. However, the battle is democracy at work. Solid arguments are being made on both sides of the issue and a small group of democrats and republicans are attacking from the middle.

The so called "moderate" group is trying to win by getting 6 Democrats and six Republicans to agree to a compromise. This would be enough votes to block the "nuclear" option and the filibuster.

The stock market likes the nuclear option. Businesses have long suffered higher over-head costs as a result of the actions of liberal judges. There has been a huge wealth transfer from the pocket of the American and international consumer to the pockets of extremely well paid lawyers. We are talking about Billions of dollars in legal fees. It is easy to understand why lawyers have contributed Billions of dollars to Democratic candidates and why business leaders have contributed Billions of dollars to Republican candidates.

It took a long-time but Republicans have finally gathered the votes to win. Congress was controlled by Democrats for more than 40 years until 1994. It was only two years ago when Republicans won a solid majority in the House and Senate. President Bush is determined to use the power won to make changes that have been needed for many years.

It is certainly possible that a compromise will be reached--but I hope not. The good news for the country and for the stock market will be that the "nuclear or constitutional" option will go forward. The Democrats will make a lot of noise but the Republicans probably have the 50 votes needed. Democrats are "bluffing at the pot" while showing their poor hand to the Republicans.

Democrats threaten to pull a union style "work slow-down" if the nuclear option is exercised. I hope so. The average American knows very few of the details but "citizen organizations" are prepared to spend millions to educate the public. Already, a multi-million dollar advertising campaign has been launched in favor of a vote up or down for Ms. Owens. This qualified Judge was nominated in 2001. It is a losing hand in the eyes of Americans to prevent her from receiving a vote.

BUY THE BIG BULL MARKET BEFORE THE FILIBUSTER BATTLE IS WON! ESTIMATES ARE THAT BUSINESSES WILL SAVE UP TO 2% OF REVENUES ANNUALLY!

WSJ.com - Wal-Mart to End Movie Rentals Via the Internet

When Icahn won seats on the Blockbuster Board, it was clear that the company would likely stop the price war with NFLX. That has happened. Blockbuster has raised its price. Now, in a deal reminiscent of the deal made between Yahoo and EBay in Europe, WalMart will close its on-line rental business in exchange for NFLX advertisements on its site.

The terms have not been stated, but, in the Yahoo-EBay deal, Yahoo received advertising revenues for 5 years while EBay paid to "own" this market. Chances are that Wal-Mart will make more money off the advertisements than they made in the rental business. The price of the advertisement may explain why NFLX down-played the benefit to NFLX. The company did not raise its guidance with this major competitor out of the way.

There are rumors and speculations that suggest another reason. For sometime, Blockbuster and NFLX have feared the possibility that Amazon would take the business. Blockbuster and NFLX feared they would be squeezed between WMT and AMZN. Now the rumor is that AMZN and Blockbuster are in talks to team-up. AMZN has the skill of operating on-line stores. They do it for a number of brick and mortar companies. These deals have been profitable for the stores and AMZN.

AMZN has traded sideways for a long time while its revenues have continued to climb. Blockbuster now has a cost cutter in charge. My earlier prediction that the company would play a better game of tit for tat is already inherent in the on-line price increase. It is almost always a mistake to try to buy a market with prices well below your major competitors. If a market is worth winning, it should be won with great service offered at competitive prices. There is almost always room for two or more players in any market if operating margins are maintained. NFLX deserves a lot of credit for refusing the meet the blockbuster price. The price spread may have slowed the recruitment of new subscribers but few subscribers are going to leave a good service to join an inferior service at a lower price.

Blockbuster is loaded down with short sellers. I believe a deal with AMZN would be good for both companies. The new Blockbuster management will squeeze cash out of the service to help pay down the large debts and give the real estate values of the company time to appreciate. The company does not need to grow but simply needs to increase earnings through lower costs. My family does not own Blockbuster. We own NFLX, YAHO, EBAY, AMZN and WMT. However, we believe Blockbuster is a much better buy than at any time in the recent past. If there is a deal in the works with AMZN the stock should see a significant bounce. If the company does not do a deal with AMZN but gradually grows on-line subscribers at a competitive price, NFLX and BBI will make money. My family added to our NFLX shares when the Icahn deal was announced, we have been well rewarded. From here we plan to hold long-term.

BUY THE BIG BULL BECAUSE THE SHORT SELLERS ARE GETTING STEAMED!