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September 19, 2005

Best Sell

Best Buy sunk to its lowest point since it gap up move in June, and now sits 21% off its high of Late July. It seems the notion that American consumers are tapped out is finally creeping into traders' collective minds. BBY's 4% sell-off today came in harmony with a drop in the shares of its benefactor, the housing industry. With the exception of Centex, the homeys were off between 2-3%. Centex bucked the trend by announcing the sale of its UK unit. CTX will put $290M in its pocket after taxes, but said the sale will not effect its 2006 results, which are still projected to be between $9.15 and $9.35 per share. I think those figures will be revised sharply downward in coming months.

Metals were shining bright today with gold and silver up about 2% and 3%, respectively early in the day before paring their losses. The recent moves appear to be more plausibly break-out than the fake-outs earlier in the summer. Why? Because gold has blown through its previous high, and the latest moves are coming on the heels of George Bush's declaration of spending excess in New Orleans. Like the awakening about consumer weakness, people are becoming more aware that the monetary printing presses are at full capacity in the United States, and the dollar will suffer. Today's metals rally came in spite of a rather positive day for the USD. It's hard to say why the dollar is still showing strength, but one postulation I've heard is that it is related to the repatriation of foreign profits. Companies have until October 22 to bring home foreign profits at a much-reduced 5% tax rate, and they've got to be buyers of dollars to do so.

In the scary news department, the Chicago Tribune reported that the Bush administration is seeking public donations, via a Web site, to help pay for the reconstruction of Iraq. It seems $200B of (future) taxpayer money isn't enough to finance this debacle, so now voluntary taxes are needed. Naturally, the government cannot share information about the use of funds with donors "for security reasons." It seems to me to be nothing but pandering. By utilizing donated (read: non-public) funds, the proprietors won't even have to report to Congress about the use of funds, making it all the more easy to divert the money to the pockets of their friends.

Disclosure: Short BBY, CTX


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