Cash at 18-Year High Makes Stocks a Buy at Leuthold

By Eric Martin and Michael Tsang

Dec. 29 (Bloomberg) -- There’s more cash available to buy shares than at any time in almost two decades, a sign to some of the most successful investors that equities will rebound after the worst year for U.S. stocks since the Great Depression.

The $8.85 trillion held in cash, bank deposits and money- market funds is equal to 74 percent of the market value of U.S. companies, the highest ratio since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg.

Leuthold, Invesco Aim Advisors Inc., Hennessy Advisors Inc. and BlackRock Inc., which together oversee almost $1.7 trillion, say that’s a sign the Standard & Poor’s 500 Index will rise after $1 trillion in credit losses sent the benchmark index for American equities to the biggest annual drop since 1931. The eight previous times that cash peaked compared with the market’s capitalization the S&P 500 rose an average 24 percent in six months, data compiled by Bloomberg show.

“There is a store of cash out there that is able to take the market higher,” said Eric Bjorgen, who helps oversee $3.4 billion at Leuthold in Minneapolis. “The same dollar you had last year buys you twice as much S&P 500 as it did a year ago.”

Leuthold Group, whose Grizzly Short Fund returned 83 percent in 2008 thanks to bets against equities, said in its December bulletin to investors that stocks offer “one of the great buying opportunities of your lifetime.”

Obama, Fed

The S&P 500 rose 16 percent from an 11-year low on Nov. 20 as the government rescued New York-based Citigroup Inc., President-elect Barack Obama pledged to stimulate growth with the biggest infrastructure investment since the 1950s, and the Fed cut interest rates to as low as zero percent to combat the worst financial crisis in seven decades.

U.S. stocks fell today as Dow Chemical Co. and Rohm & Haas Co. plunged after financing for their merger fell through, raising concern companies may be unable to complete deals. The S&P 500 slipped 0.4 percent.

The ratio of cash on hand to U.S. market capitalization jumped 86 percent in the first 11 months of the year, the biggest increase since the Fed began keeping records in 1959, as the U.S., Europe and Japan fell into the first simultaneous recessions since World War II.

So-called money of zero maturity, the central bank’s measure of U.S. assets available for immediate spending, is mostly held by households, according to Richard G. Anderson, an economist at the Federal Reserve Bank of St. Louis.

‘Dry Powder’

“What the cash pile on the sidelines represents is dry powder,” said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim, which manages about $358 billion. The firm’s $1.17 billion Aim Diversified Dividend Fund beat 96 percent of its competitors this year, and the $3.95 billion Aim Charter Fund topped 93 percent of similar mutual funds.

“Recovery in the second half of the year will probably play out,” Meyer added.

Any recovery will depend on a rebound in corporate profits and the economy after $30 trillion was wiped out from world equities this year, according to Frederic Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.

Jobless claims reached a 26-year high this month, while economists surveyed by Bloomberg estimate household spending will fall 1 percent next year, the most since the aftermath of the attack on Pearl Harbor. A 13 percent slump in the median home resale price in November from a year earlier was likely the largest since the 1930s, the National Association of Realtors said last week, damping speculation the housing market is close to a bottom.

‘Biggest Cannon’

Analysts estimate profits at S&P 500 companies will shrink 10.3 percent in the first three months of 2009 and 5.8 percent in the second quarter, bringing the stretch of earnings declines to a record eight quarters, Bloomberg data show. Gross domestic product will contract in the first half of the year before growth resumes in the third quarter, according to a Bloomberg survey of economists.

“The fuel supply is there, but people have to have a reason to use it,” said Dickson, who helps oversee about $19 billion. “The Fed fired the shot out of the biggest cannon they know. Now the question is, will it hit the right mark?”

This year’s slump has left S&P 500 companies valued at an average of 12.6 times operating profit, the cheapest since at least 1998, monthly data compiled by Bloomberg show.

Cash in interest-bearing checking accounts at U.S. banks earns less than 0.1 percent annually, minus inflation, according to national data compiled by Bankrate.com. Ten-year Treasury notes yield 1.03 percent after adjusting for the cost of living, and yields fell to the lowest level on record this month.

Benjamin Graham

Seth Klarman’s Baupost Group LLC, which held 40 percent to 50 percent of the Boston-based hedge-fund firm’s more than $14 billion in cash, reduced its hoard by half to take advantage of falling asset prices, according to the December issue of Harvard Business School’s Alumni Bulletin.

The 51-year-old investor who seeks shares of companies trading at discounts to measures such as assets and cash flow was the lead editor for the sixth edition of Benjamin Graham and David L. Dodd’s “Security Analysis,” which laid out the principles of value investing followed by billionaire Warren Buffett.

Klarman has generated an annual compound return of 20 percent in the past 26 years, the Bulletin said. He declined to comment in an e-mailed response to Bloomberg News.

‘Same Scenario’

Cash holdings peaked one month before equities began to recover during the two longest recessions since World War II. In July 1982, money of zero maturity as a percentage of the U.S. stock market’s value rose to 95 percent before a 20-month bear market ended and the S&P 500 began a six-month, 36 percent advance, data compiled by Bloomberg show.

Cash on hand reached $604.5 billion in September 1974, representing a record 1.21 times U.S. stock capitalization. That preceded a 31 percent gain in equities between October 1974 and March 1975, Bloomberg data show.

“If history tends to repeat itself, we’re in the exact same scenario,” said Neil Hennessy, who oversees $650 million as president of Hennessy Advisors in Novato, California. “Once the money starts to come back into the market, buying is going to beget more buying. People don’t want to be left behind.”

Hennessy’s Focus 30 Fund beat 96 percent of its peers this year.

Lighting the Match

The last time cash accounted for a larger proportion of market value was 1990. The ratio peaked at 75 percent in October of that year, after the savings and loan industry collapsed, Drexel Burnham Lambert Inc. was forced into bankruptcy and the U.S. fell into a recession. The S&P 500 rallied 23 percent in six months and almost 30 percent in a year.

Robert Doll, the chief investment officer of global equities at BlackRock, has been buying stocks anticipating the S&P 500 may rise as much as 20 percent next year. The firm oversees $1.3 trillion.

“It’s a mountain of cash,” Doll, who is based in Plainsboro, New Jersey, said on Bloomberg Radio. “Somebody’s just got to find the match and light it.”

To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.

Last Updated: December 29, 2008 16:22 EST

Merry Christmas & Happy New Year!!!

market seems quiet as per ibd, so will analyze again on 9jan09

Stocks Drift Lower In Vanishing Volume As Housing Numbers Continue To Plunge

Stocks drifted lower in sleepy trade Tuesday, as the market digested a fresh round of mostly negative economic news.

The Nasdaq slid 0.7%. The NYSE composite and S&P 500 both shed 1%, the Dow industrials 1.2%. The small-cap S&P 600 gave up 1.4%.

Volume ebbed 19% on the Nasdaq and 12% on the NYSE compared with Monday's levels.

Wall Street clocked another whisper-quiet session, with most traders already on vacation.

As noted in Tuesday's edition of The Big Picture, precedents tell us that volume will likely stay low through New Year's.

With little market movement, this is a perfect time to reset your investing strategy for 2009. In the next few days, The Big Picture will review some New Year's resolutions that will help improve your future results.

Despite the lack of stock market action, economic news continued to flow. Most of the news was negative, continuing the trend for most of 2008.

Sales of new homes fell in November to the slowest pace in nearly 18 years. Also, new-home prices registered their biggest drop in eight months.

The National Association of Realtors said sales of existing homes fell to a seasonally adjusted annual rate of 8.6% in November, to 4.49 million units.

That was below estimates for 4.93 million homes, down from a revised total of 4.91 million homes in October, and 10% lower than the November 2007 total.

The median price of an existing home sold skidded to $181,300 in November, down 13.2% from a year ago.

Industry stocks tied to real estate struggled on the news.

In other economic news, the Commerce Department reported a revised third-quarter GDP reading of -0.5%. That was the third revision made to Q3 GDP, in line with economists' views.

Consumer confidence numbers did offer cause for optimism. The University of Michigan revised its consumer sentiment index up to a reading of 60.1 from the 59.1 it announced on Dec. 12. Economists had projected a downward revision to 58.6.

Elsewhere, automakers had another tough day.

Shares of General Motors (GM) and Ford Motor (F) both dived 15%. Those declines followed Monday's warning by Toyota Motor (TM) of an operating loss next year, as well as Credit Suisse's downgrade of GM.

Leading stocks kept their losing streak alive.

P.F. Chang's China Bistro (PFCB) erased early gains, falling 1.38 to 20.22 in volume 43% above average. Analysts see the restaurant operator's earnings tumbling 39% to 27 cents a share this quarter.

Fellow restaurant chain Panera Bread (PNRA) fell 1.96 to 50.21 in rapid trade, extending recent losses. The stock is working on a deep, cup-shaped base.

Chinese stocks fared poorly, a day after China slashed key interest rates by less than expected.

AsiaInfo Holdings (ASIA) tumbled 2.23, or 18%, to 10.25 in nearly twice its normal trade.

The Chinese maker of IT security products and software was one of the day's biggest losers among small-cap stocks.

Sina (SINA), China Petroleum & Chemical (SNP) and Huaneng Power International (HNP) also fell in brisk turnover.

On the upside, Fuel Systems Solutions (FSYS) climbed 2.09 to 35.08 in above-average trading. The maker of fuel-related engine components is entering a second week of tight trading just above its 50-day moving average.

But the stock still sits 42% off its 52-week high, after a four-month correction.

In the bond market, the yield on the benchmark 10-year note was unchanged from late Monday. Lending rates such as the Libor held mostly steady.

Commodities prices continued to dip, though.

February crude oil dropped 93 cents to settle at $38.98 a barrel. Slowing economic growth around the world has triggered a plunge in demand for energy, metals and other raw materials.

Gold prices slid about 1%.

19dec08

CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
22.50 AIWCX.X 5.70 0.00 3.70 8.00 10 10
25.00 AIWCE.X N/A 0.00 1.40 5.70 0 13
30.00 AIWCF.X N/A 0.00 N/A 3.40 0 134
35.00 AIWCG.X 4.50 0.00 N/A 3.40 32 152
40.00 AIWCH.X N/A 0.00 N/A 3.40 0 99


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 AIWOD.X N/A 0.00 N/A 3.40 0 52
22.50 AIWOX.X N/A 0.00 N/A 0.45 0 90
25.00 AIWOE.X N/A 0.00 N/A 3.40 0 59
30.00 AIWOF.X N/A 0.00 0.40 4.40 0 64
35.00 AIWOG.X N/A 0.00 4.60 8.90 0 28
























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
22.50 HQCCX.X 12.80 8.20 12.80 14.20 10 5
25.00 HQCCE.X 11.70 0.00 10.60 12.20 9 116
30.00 HQCCF.X 7.80 0.00 7.00 8.00 2 56
35.00 HQCCG.X 4.40 0.50 4.20 5.00 10 32
40.00 HQCCH.X 3.20 0.00 2.40 3.30 1 36


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 HQCOE.X 1.20 0.00 1.00 1.50 6 51
30.00 HQCOF.X 2.45 0.00 2.30 3.10 20 25
35.00 HQCOG.X 4.90 0.00 4.20 5.20 30 30























CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
10.00 ALKDB.X 13.00 0.00 17.60 18.70 0 10
12.50 ALKDV.X 12.78 0.00 15.30 16.40 5 5
15.00 ALKDC.X 10.50 0.00 13.20 14.20 10 36
17.50 ALKDW.X 7.90 0.00 11.40 12.00 10 103
20.00 ALKDD.X 7.80 0.00 9.60 10.10 10 81
22.50 ALKDX.X 8.90 0.00 7.90 8.40 10 56
25.00 ALKDE.X 6.70 0.70 6.40 6.90 39 371
30.00 ALKDF.X 4.80 0.00 4.00 4.40 1 225
35.00 ALKDG.X 3.00 1.00 2.40 2.75 30 171
40.00 ALKDH.X 1.90 0.20 1.40 1.65 30 20
45.00 ALKDI.X 1.10 0.05 0.70 1.00 40 10
50.00 ALKDJ.X 0.60 0.05 0.35 0.65 10 20


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
10.00 ALKPB.X 0.95 0.00 0.10 0.35 30 187
12.50 ALKPV.X 0.90 0.00 0.30 0.55 13 120
15.00 ALKPC.X 2.35 0.00 0.70 0.95 99 119
17.50 ALKPW.X 3.20 0.00 1.10 1.50 10 73
20.00 ALKPD.X 2.55 0.00 1.80 2.05 8 48
22.50 ALKPX.X 3.20 0.00 2.60 2.95 60 74
25.00 ALKPE.X 4.30 0.00 3.50 3.90 10 69
30.00 ALKPF.X 8.90 0.00 6.10 6.50 10 101
35.00 ALKPG.X 9.10 3.40 9.30 9.90 20 282
40.00 ALKPH.X 14.90 0.00 13.30 13.80 15 15






















CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
5.00 BIGDA.X 10.90 0.00 10.60 10.90 11 21
7.50 BIGDU.X 10.70 0.00 8.40 8.70 23 23
10.00 BIGDB.X 6.50 0.00 6.40 6.60 3 1
12.50 BIGDV.X 5.50 0.00 4.60 4.90 11 21
15.00 BIGDC.X 3.50 0.00 3.20 3.40 1 88
17.50 BIGDW.X 2.20 0.05 2.10 2.25 118 150
20.00 BIGDD.X 1.60 0.00 1.30 1.40 20 258
22.50 BIGDX.X 1.00 0.00 0.75 0.85 64 149
25.00 BIGDE.X 0.50 0.00 0.40 0.50 267 680
27.50 BIGDY.X 0.30 0.00 0.20 0.30 18 208
30.00 BIGDF.X 0.61 0.00 0.10 0.20 5 54
32.50 BIGDZ.X 0.10 0.00 0.05 0.10 43 130
35.00 BIGDG.X 0.20 0.00 N/A 0.10 120 314
37.50 BIGDT.X 0.20 0.00 N/A 0.10 1 122
40.00 BIGDH.X 0.10 0.00 N/A 0.10 9 137
45.00 BIGDI.X 0.70 0.00 N/A 0.10 0 62
50.00 BIGDJ.X 0.05 0.00 N/A 0.10 25 58


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
5.00 BIGPA.X 0.25 0.00 0.05 0.15 20 100
7.50 BIGPU.X 0.45 0.00 0.30 0.40 10 72
10.00 BIGPB.X 0.90 0.21 0.80 0.90 72 57
12.50 BIGPV.X 1.80 0.00 1.55 1.65 2 161
15.00 BIGPC.X 2.70 0.20 2.55 2.70 30 340
17.50 BIGPW.X 4.10 0.00 3.90 4.10 25 181
20.00 BIGPD.X 6.50 0.00 5.50 5.80 1 438
22.50 BIGPX.X 8.00 0.00 7.40 7.70 27 115
25.00 BIGPE.X 10.80 0.00 9.60 9.90 10 231
27.50 BIGPY.X 3.70 0.00 11.90 12.20 0 84
30.00 BIGPF.X 16.50 0.00 14.30 14.60 7 91
32.50 BIGPZ.X 17.30 0.00 16.70 17.00 20 67
35.00 BIGPG.X 11.60 0.00 19.20 19.50 0 15






















CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
12.50 VRXCV.X 6.00 0.00 9.30 10.30 0 10
15.00 VRXCC.X 5.80 0.00 7.00 8.10 2 147
17.50 VRXCW.X 4.50 0.00 4.90 6.00 10 224
20.00 VRXCD.X 3.50 0.00 3.40 4.20 30 1,068
22.50 VRXCX.X 2.45 0.10 2.15 2.65 23 673
25.00 VRXCE.X 1.70 0.60 1.20 1.70 20 230
30.00 VRXCF.X 0.35 0.00 0.25 0.75 20 189


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
12.50 VRXOV.X 0.50 0.00 0.10 0.40 10 84
15.00 VRXOC.X 0.90 0.00 0.35 0.75 10 200
17.50 VRXOW.X 1.05 1.30 0.80 1.35 10 268
20.00 VRXOD.X 3.80 0.00 1.60 2.30 10 136
22.50 VRXOX.X 3.40 0.00 2.70 3.30 34 211
25.00 VRXOE.X 4.90 0.00 4.20 5.10 15 249
30.00 VRXOF.X 10.10 0.00 8.20 9.20 11 78























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
17.50 NTTCW.X 4.50 0.00 9.10 9.40 0 9
20.00 NTTCD.X 6.30 0.00 6.90 7.20 8 388
22.50 NTTCX.X 5.10 0.00 5.00 5.30 2 33
25.00 NTTCE.X 3.60 0.40 3.40 3.70 3 114
30.00 NTTCF.X 1.30 0.05 1.35 1.55 8 228


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
17.50 NTTOW.X 1.20 0.00 0.10 0.20 30 59
20.00 NTTOD.X 0.50 0.20 0.35 0.50 10 363
22.50 NTTOX.X 3.10 0.00 0.90 1.10 60 100
























CALL OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 ORHEF.X 13.00 0.00 19.20 20.40 50 495
35.00 ORHEG.X 11.90 0.00 14.60 15.80 2 51
40.00 ORHEH.X 6.20 0.00 10.50 11.60 40 85
45.00 ORHEI.X 4.90 0.00 7.00 8.10 2 324
50.00 ORHEJ.X 3.10 0.00 4.30 5.20 90 293


PUT OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 ORHQF.X 1.80 0.00 0.15 0.75 7 42
35.00 ORHQG.X 0.70 0.00 0.55 1.15 10 20
40.00 ORHQH.X 1.45 0.00 1.30 1.95 10 10
45.00 ORHQI.X 3.70 0.50 2.70 3.40 60 22
50.00 ORHQJ.X 5.70 0.00 4.90 5.60 10 20























CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
12.50 DCMDV.X 1.70 0.00 6.20 6.90 0 20
15.00 DCMDC.X 4.80 0.60 4.20 4.90 2 10
17.50 DCMDW.X 3.50 0.00 2.65 3.20 1 26
20.00 DCMDD.X 2.05 0.20 1.50 2.05 10 132


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
12.50 DCMPV.X 0.35 0.00 0.05 0.40 10 115
15.00 DCMPC.X 1.35 0.00 0.55 0.90 10 10
17.50 DCMPW.X 1.80 0.00 1.40 1.90 1 127
20.00 DCMPD.X 2.70 0.90 2.80 3.30 3 6























CALL OPTIONS Expire at close Fri, Jan 16, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
10.00 MJQAB.X 29.10 0.00 34.50 34.90 1 1
15.00 MJQAC.X 24.10 0.00 29.20 29.90 0 49
17.50 MJQAW.X 23.10 0.00 27.00 27.40 5 58
20.00 MJQAD.X 21.21 0.00 24.50 24.90 20 345
22.50 MJQAX.X 10.60 0.00 21.90 22.40 10 10
25.00 MJQAE.X 20.00 0.00 19.50 20.00 10 352
30.00 MJQAF.X 13.20 0.27 14.60 15.00 1 2,373
35.00 MJQAG.X 8.82 0.62 9.90 10.30 35 4,604
40.00 MJQAH.X 5.70 1.50 5.80 6.20 34 3,767
45.00 MJQAI.X 3.00 1.00 2.85 3.10 789 2,043
50.00 MJQAJ.X 1.30 0.33 1.20 1.35 576 1,873
55.00 MJQAK.X 0.40 0.15 0.40 0.55 1 649
60.00 MJQAL.X 0.15 0.00 0.10 0.25 1 1,673


PUT OPTIONS Expire at close Fri, Jan 16, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
10.00 MJQMB.X 0.20 0.00 N/A 0.10 0 150
12.50 MJQMV.X 0.35 0.00 N/A 0.10 0 10
15.00 MJQMC.X 0.65 0.00 N/A 0.10 37 207
17.50 MJQMW.X 0.20 0.00 N/A 0.10 10 451
20.00 MJQMD.X 0.15 0.00 N/A 0.10 1 510
22.50 MJQMX.X 1.15 0.00 N/A 0.10 3 3
25.00 MJQME.X 0.10 0.00 0.05 0.15 192 2,293
30.00 MJQMF.X 0.20 0.10 0.15 0.25 34 2,536
35.00 MJQMG.X 0.55 0.45 0.45 0.60 86 1,576
40.00 MJQMH.X 1.40 1.25 1.40 1.55 79 1,131
45.00 MJQMI.X 3.50 1.46 3.50 3.60 167 204
50.00 MJQMJ.X 9.00 0.00 6.50 6.90 1 245























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 EBSCU.X 17.60 0.00 18.20 19.50 10 60
10.00 EBSCB.X 16.30 0.00 16.20 17.60 11 21
12.50 EBSCV.X 6.70 0.00 14.50 15.80 20 17
15.00 EBSCC.X 13.00 0.00 12.70 14.10 11 308
17.50 EBSCW.X 11.21 0.51 11.00 12.30 13 687
20.00 EBSCD.X 9.90 0.00 9.30 10.10 15 124
22.50 EBSCX.X 8.40 0.40 7.70 8.40 111 179
25.00 EBSCE.X 7.30 0.10 6.50 7.20 9 230
30.00 EBSCF.X 4.50 0.35 4.40 4.90 4 49


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 EBSOU.X 1.00 0.00 0.55 1.10 10 80
10.00 EBSOB.X 1.60 0.00 1.10 1.60 10 41
12.50 EBSOV.X 2.50 0.00 1.75 2.30 5 79
15.00 EBSOC.X 3.00 0.00 2.55 3.10 1 144
17.50 EBSOW.X 4.50 0.00 3.20 3.80 22 97
20.00 EBSOD.X 5.40 0.00 3.90 4.60 10 102
22.50 EBSOX.X 5.70 0.00 4.80 5.40 20 20
25.00 EBSOE.X 7.10 0.00 5.90 6.60 10 12
30.00 EBSOF.X 10.20 0.00 8.90 9.60 2 12

12dec08

CALL OPTIONS Expire at close Fri, Feb 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 CPABF.X 2.05 0.00 1.80 2.15 50 50


PUT OPTIONS Expire at close Fri, Feb 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 CPANE.X 3.90 0.00 3.20 3.60 40 40
35.00 CPANG.X 10.20 0.00 10.00 10.60 2 1






















CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
5.00 BIGDA.X 10.90 0.00 10.50 10.80 11 21
7.50 BIGDU.X 10.70 0.00 8.30 8.70 23 23
10.00 BIGDB.X 6.50 0.00 6.40 6.80 3 1
12.50 BIGDV.X 5.50 0.00 4.80 5.10 11 21
15.00 BIGDC.X 4.00 0.00 3.50 3.70 1 78
17.50 BIGDW.X 3.30 0.00 2.40 2.55 33 139
20.00 BIGDD.X 1.59 0.16 1.55 1.70 8 250
22.50 BIGDX.X 1.00 0.00 0.95 1.10 64 149
25.00 BIGDE.X 0.55 0.00 0.55 0.65 22 726
27.50 BIGDY.X 0.30 0.05 0.30 0.40 46 186
30.00 BIGDF.X 0.61 0.00 0.10 0.25 5 54
32.50 BIGDZ.X 0.16 0.00 0.05 0.15 5 107
35.00 BIGDG.X 0.20 0.00 N/A 0.10 120 314
37.50 BIGDT.X 0.20 0.00 N/A 0.10 1 122
40.00 BIGDH.X 0.10 0.00 N/A 0.10 9 137
45.00 BIGDI.X 0.70 0.00 N/A 0.10 0 62
50.00 BIGDJ.X 0.05 0.00 N/A 0.10 25 58


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
5.00 BIGPA.X 0.25 0.00 0.10 0.25 20 100
7.50 BIGPU.X 0.55 0.00 0.50 0.60 17 51
10.00 BIGPB.X 1.11 0.00 1.10 1.20 1 57
12.50 BIGPV.X 2.15 0.00 1.90 2.05 4 119
15.00 BIGPC.X 3.20 0.20 3.00 3.20 49 314
17.50 BIGPW.X 4.60 0.20 4.40 4.60 71 134
20.00 BIGPD.X 6.30 0.00 6.00 6.30 54 438
22.50 BIGPX.X 8.40 0.00 7.90 8.10 10 101
25.00 BIGPE.X 10.20 0.00 9.90 10.30 1 234
27.50 BIGPY.X 3.70 0.00 12.20 12.50 0 84
30.00 BIGPF.X 16.50 0.00 14.50 14.90 7 91
32.50 BIGPZ.X 17.30 0.00 16.90 17.30 20 67
35.00 BIGPG.X 11.60 0.00 19.40 19.80 0 15























CALL OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
27.50 DQOEY.X 14.30 0.00 15.40 16.20 1 74
30.00 DQOEF.X 11.20 0.00 13.40 14.20 3 38
32.50 DQOEZ.X 8.18 0.00 11.60 12.40 1 80
35.00 DQOEG.X 9.60 0.00 10.00 10.60 10 97
37.50 DQOEU.X 8.10 0.00 8.50 9.00 10 47
40.00 DQOEH.X 7.50 0.80 7.10 7.50 1 182
42.50 DQOEV.X 6.00 0.20 5.60 6.30 11 59
45.00 DQOEI.X 4.70 0.00 4.70 5.10 13 364
47.50 DQOEW.X 3.60 0.00 3.50 4.10 10 10
50.00 DQOEJ.X 3.60 0.00 2.90 3.20 7 38
55.00 DQOEK.X 1.65 0.00 1.50 1.90 10 207
60.00 DQOEL.X 0.90 0.00 0.80 1.10 10 82
65.00 DQOEM.X 0.55 0.00 0.35 0.65 204 228


PUT OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 DQOQD.X 0.55 0.00 0.55 0.80 20 69
22.50 DQOQX.X 1.10 0.00 0.80 1.05 4 84
25.00 DQOQE.X 1.50 0.10 1.15 1.40 10 54
27.50 DQOQY.X 1.95 0.10 1.55 1.85 10 174
30.00 DQOQF.X 2.60 0.10 2.05 2.35 10 60
32.50 DQOQZ.X 5.80 0.00 2.70 2.95 1 61
35.00 DQOQG.X 4.10 0.00 3.40 3.80 1 40
37.50 DQOQU.X 4.70 0.10 4.30 4.90 120 330
40.00 DQOQH.X 6.20 0.00 5.30 5.80 1 224
42.50 DQOQV.X 7.00 0.00 6.60 7.00 2 39
45.00 DQOQI.X 9.09 0.00 7.90 8.40 10 113
47.50 DQOQW.X 10.86 0.00 9.30 9.80 1 21
50.00 DQOQJ.X 11.50 1.10 11.00 11.40 11 51
55.00 DQOQK.X 18.60 0.00 14.70 15.20 12 12
60.00 DQOQL.X 21.70 0.00 18.90 19.40 0 10























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
45.00 CQXCI.X 10.10 0.00 12.50 14.30 20 36
50.00 CQXCJ.X 7.20 0.00 9.10 11.00 10 20
55.00 CQXCK.X 4.40 0.00 6.20 8.30 10 27
60.00 CQXCL.X 5.50 0.00 3.90 6.10 1 11
65.00 CQXCM.X 3.70 0.00 2.25 4.20 2 148


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 CQXOG.X 1.60 0.00 0.65 1.50 15 15
40.00 CQXOH.X 2.40 0.00 1.40 2.45 1 60
45.00 CQXOI.X 3.40 0.00 2.55 3.80 10 46
50.00 CQXOJ.X 6.00 0.00 4.00 5.60 4 55
55.00 CQXOK.X 10.00 0.00 6.20 7.90 1 12





















CALL OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
40.00 OAQEH.X 37.00 0.00 35.40 36.00 10 20
45.00 OAQEI.X 25.80 0.00 31.30 31.90 5 6
50.00 OAQEJ.X 28.70 0.00 27.30 27.80 20 49
55.00 OAQEK.X 20.50 0.00 23.70 24.10 30 109
60.00 OAQEL.X 18.00 0.00 20.30 20.70 20 236
65.00 OAQEM.X 17.50 0.00 17.20 17.60 1 201
70.00 OAQEN.X 16.60 0.00 14.40 14.80 4 239
75.00 OAQEO.X 12.50 0.40 12.00 12.30 242 1,041
80.00 OAQEP.X 10.10 0.30 9.80 10.10 48 794
85.00 OAQEQ.X 8.80 0.65 7.90 8.20 10 258
90.00 OAQER.X 7.00 0.00 6.30 6.60 3 328
95.00 OAQES.X 5.50 0.00 4.90 5.30 11 1,427
100.00 OAQET.X 4.50 0.00 3.80 4.10 2 230
105.00 OAQEA.X 3.20 0.20 2.95 3.20 10 109
110.00 OAQEB.X 2.50 0.15 2.15 2.40 32 712


PUT OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
40.00 OAQQH.X 1.70 0.00 1.35 1.55 2 103
45.00 OAQQI.X 2.55 0.05 2.15 2.35 20 544
50.00 OAQQJ.X 3.40 0.20 3.20 3.40 250 889
55.00 OAQQK.X 4.70 0.20 4.40 4.70 30 1,072
60.00 OAQQL.X 6.00 0.50 6.00 6.30 311 642
65.00 OAQQM.X 8.10 0.45 7.90 8.20 22 605
70.00 OAQQN.X 10.30 0.40 10.10 10.40 44 330
75.00 OAQQO.X 14.10 0.80 12.60 12.90 11 154
80.00 OAQQP.X 15.40 0.00 15.40 15.70 3 92
85.00 OAQQQ.X 20.10 0.00 18.40 18.80 100 100
90.00 OAQQR.X 24.20 0.00 21.80 22.20 1 27
95.00 OAQQS.X 30.80 0.00 25.40 25.80 0 20
100.00 OAQQT.X 36.50 0.00 29.20 29.70 11 23
110.00 OAQQB.X 39.90 0.00 37.60 38.00 10 21





















CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 AMQDE.X 32.85 0.00 32.95 33.30 4 51
30.00 AMQDF.X 24.75 0.00 28.20 28.50 10 12
35.00 AMQDG.X 23.15 2.65 23.55 23.90 11 40
40.00 AMQDH.X 17.73 0.00 19.20 19.55 1 44
42.50 AMQDV.X 16.65 0.00 17.10 17.45 24 60
45.00 AMQDI.X 14.05 0.00 15.15 15.45 1 101
47.50 AMQDW.X 13.90 0.00 13.25 13.55 4 295
50.00 AMQDJ.X 11.20 0.40 11.45 11.75 20 233
52.50 AMQDZ.X 9.45 0.55 9.80 10.05 10 889
55.00 YAADK.X 8.35 0.15 8.30 8.50 50 862
57.50 YAADY.X 6.97 0.13 6.85 7.10 1 865
60.00 YAADL.X 5.70 0.40 5.60 5.80 9 6,532
62.50 YAADZ.X 4.70 0.07 4.50 4.70 1 3,660
65.00 YAADM.X 3.50 0.10 3.55 3.70 40 2,595
67.50 YAADU.X 2.72 0.28 2.73 2.83 5 2,373
70.00 YAADN.X 2.06 0.06 2.04 2.14 14 7,799
72.50 YAADV.X 1.50 0.10 1.49 1.57 13 951
75.00 YAADO.X 1.06 0.10 1.05 1.12 100 923
80.00 YAADP.X 0.54 0.02 0.48 0.53 8 1,033


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 AMQPD.X 0.17 0.00 0.02 0.08 48 68
22.50 AMQPX.X 0.26 0.00 0.05 0.11 34 243
25.00 AMQPE.X 0.18 0.00 0.10 0.16 6 152
30.00 AMQPF.X 0.37 0.02 0.30 0.35 11 334
35.00 AMQPG.X 0.73 0.06 0.65 0.73 1 465
40.00 AMQPH.X 1.53 0.00 1.27 1.34 6 1,049
42.50 AMQPV.X 1.83 0.00 1.68 1.76 1 1,323
45.00 AMQPI.X 2.30 0.00 2.17 2.25 21 1,994
47.50 AMQPW.X 2.94 0.00 2.76 2.86 10 557
50.00 AMQPJ.X 3.55 0.25 3.45 3.60 1 1,231
52.50 AMQPZ.X 4.65 0.00 4.25 4.40 40 1,107
55.00 YAAPK.X 5.30 0.10 5.20 5.35 7 3,013
57.50 YAAPY.X 6.30 0.00 6.25 6.45 4 470
60.00 YAAPL.X 8.00 0.39 7.50 7.70 3 1,752
62.50 YAAPZ.X 9.20 0.40 8.80 9.05 1 1,003
65.00 YAAPM.X 11.25 0.00 10.35 10.60 30 1,280
67.50 YAAPU.X 15.30 0.00 11.95 12.25 1 802
70.00 YAAPN.X 16.84 0.00 13.75 14.05 11 266
72.50 YAAPV.X 19.07 0.00 15.70 16.00 2 216
75.00 YAAPO.X 20.90 0.00 17.75 18.05 20 195
80.00 YAAPP.X 22.50 0.00 22.20 22.50 7 28






















CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 EBSCU.X 16.30 1.30 16.70 17.90 10 40
10.00 EBSCB.X 16.30 0.00 14.80 15.90 11 21
12.50 EBSCV.X 6.70 0.00 13.00 14.30 20 17
15.00 EBSCC.X 11.60 0.40 12.10 12.60 16 257
17.50 EBSCW.X 10.50 0.50 10.10 11.00 32 687
20.00 EBSCD.X 8.20 0.20 8.80 9.60 71 55
22.50 EBSCX.X 7.70 0.30 7.40 8.00 28 134
25.00 EBSCE.X 5.70 0.30 6.00 6.80 71 184
30.00 EBSCF.X 4.00 0.80 4.10 4.80 4 19


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 EBSOU.X 1.20 0.25 0.90 1.30 10 40
10.00 EBSOB.X 0.80 0.00 1.45 1.90 19 31
12.50 EBSOV.X 2.50 0.25 2.15 2.60 5 74
15.00 EBSOC.X 3.70 0.30 3.10 3.90 1 135
17.50 EBSOW.X 3.80 0.00 4.00 4.70 52 77
20.00 EBSOD.X 5.40 1.00 5.00 5.80 10 103
22.50 EBSOX.X 6.30 0.70 6.00 6.60 5 2
25.00 EBSOE.X 6.60 0.00 7.20 7.80 1 20
30.00 EBSOF.X 8.20 0.00 10.20 11.00 10 10
























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
10.00 ISQCB.X 3.20 0.00 8.00 9.90 10 10
12.50 ISQCV.X 1.65 0.00 6.50 7.10 10 12
15.00 ISQCC.X 5.10 0.00 4.70 5.40 10 332
17.50 ISQCW.X 4.50 0.00 3.40 3.90 115 162
20.00 ISQCD.X 2.50 0.25 2.30 2.70 9 48


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 ISQOU.X 0.20 0.00 N/A 0.15 10 20
10.00 ISQOB.X 0.25 0.00 0.15 0.30 30 44
12.50 ISQOV.X 0.60 0.00 0.50 0.75 10 446
15.00 ISQOC.X 1.50 0.00 1.20 1.50 9 85
17.50 ISQOW.X 2.25 0.00 2.20 2.50 64 32























CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
37.50 UGHDE.X 7.60 0.00 8.00 8.50 40 40
40.00 UGHDH.X 5.50 0.00 6.50 6.90 65 325
42.50 UGHDA.X 5.50 0.00 5.20 5.60 5 75
45.00 UGHDI.X 3.70 0.00 4.10 4.40 150 263
47.50 UGHDW.X 2.70 0.00 3.20 3.40 25 37
50.00 UGHDJ.X 1.77 0.00 2.40 2.45 150 305
52.50 UGHDX.X 1.65 0.00 1.75 1.90 11 93
55.00 UGHDK.X 1.20 0.00 1.25 1.35 10 89
57.50 UGHDY.X 0.65 0.00 0.80 0.95 16 96
60.00 UGHDL.X 0.55 0.00 0.55 0.70 10 86
62.50 UGHDZ.X 0.55 0.00 0.35 0.50 10 46
65.00 UGHDM.X 0.60 0.00 0.20 0.35 0 55


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 UGHPU.X 1.00 0.00 0.40 0.55 40 68
30.00 UGHPF.X 1.40 0.00 1.05 1.20 10 40
35.00 UGHPG.X 2.65 0.00 2.20 2.45 10 60
37.50 UGHPE.X 3.40 0.00 3.00 3.30 10 165
40.00 UGHPH.X 4.40 0.00 4.00 4.30 10 145
42.50 UGHPA.X 5.91 0.00 5.10 5.50 15 107
45.00 UGHPI.X 8.60 0.00 6.40 6.80 6 120
47.50 UGHPW.X 10.30 0.00 8.00 8.40 6 26
50.00 UGHPJ.X 13.00 0.00 9.70 10.10 169 199
55.00 UGHPK.X 9.40 0.00 13.40 14.00 0 35
























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
12.50 VRXCV.X 6.00 0.00 7.60 8.80 0 10
15.00 VRXCC.X 5.80 1.00 5.50 6.90 2 145
17.50 VRXCW.X 3.50 0.00 3.60 4.60 10 218
20.00 VRXCD.X 2.75 0.00 2.35 3.00 477 1,077
22.50 VRXCX.X 1.55 0.00 1.20 1.90 21 693
25.00 VRXCE.X 0.85 0.10 0.55 1.05 40 188
30.00 VRXCF.X 0.35 0.05 0.05 0.40 9 166


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
12.50 VRXOV.X 0.70 0.00 0.30 0.70 10 79
15.00 VRXOC.X 1.05 0.00 0.75 1.25 10 197
17.50 VRXOW.X 2.35 0.00 1.35 2.30 40 268
20.00 VRXOD.X 3.80 0.00 2.55 3.30 10 136
22.50 VRXOX.X 5.30 0.00 3.90 4.90 2 245
25.00 VRXOE.X 6.00 0.00 5.50 6.50 47 250
30.00 VRXOF.X 10.80 0.00 9.50 11.10 10 78

Cheapest Stocks Since 1995 Show Cash Exceeds Market

By Michael Tsang and Alexis Xydias

Dec. 8 (Bloomberg) -- Stocks have fallen so far that 2,267 companies around the globe are offering profits to investors for free. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.

Bank of New York Mellon Corp. in New York, Danieli SpA in Buttrio, Italy and Seoul-based Namyang Dairy Products Co. hold more cash than the value of their stock and debt as the slowing world economy wiped out $32 trillion in capitalization this year. Companies in the MSCI World Index trade for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sell at a discount to shareholder equity, data compiled by Bloomberg show.

The cash-rich companies allow investors to pay nothing for future earnings streams, providing opportunities to buyers concerned about deflation, according to Jean-Marie Eveillard, whose $16 billion First Eagle Global Fund has beaten 98 percent of competitors this year. Microsoft Corp. and Novo Nordisk A/S, which generate the most money compared with debt, can expand even if lower consumer demand erodes profits.

“Cash is king, not necessarily for the investor but for corporations,” Eveillard said in an interview from New York last week. His fund holds both Microsoft and Namyang Dairy. “It’s useful to sit on a ton of cash, No. 1 to survive, as opposed to going bankrupt, and No. 2 to seize opportunities either to make acquisitions cheaply or to squeeze competitors.”

Wagging the Dog

BNY Mellon is among 50 companies with a market capitalization greater than $1 billion that hold more cash than the value of their stock and debt, out of 2,267 overall, data compiled by Bloomberg show.

“Everywhere I look, I see cash,” said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which manages $220 billion. “When greed overcomes fear again, value is going to wag the dog.”

Stocks plunged this year after almost $1 trillion in bank losses and writedowns froze credit markets and pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II. The 38 percent drop in the Standard & Poor’s 500 Index is the steepest since 1937, while the MSCI World’s 44 percent plummet is the biggest since the gauge started in 1970.

The slump left prices in the global measure at 1.17 times companies’ so-called book value, or assets minus liabilities, on Nov. 20, the lowest on record, data compiled by Bloomberg show.

‘Good Cash Flow’

The MSCI World climbed 5.5 percent at 4:32 p.m. in New York, while the S&P 500 rose 3.8 percent after U.S. President-elect Barack Obama pledged the biggest investment in the nation’s infrastructure since the 1950s to stimulate the economy. Today’s rally lifted the S&P 500 to 909.70, 21 percent above its 11-year low on Nov. 20.

Stagnating growth is heightening the risk of deflation. In the U.S., consumer prices plunged 1 percent in October, the biggest drop since records began in 1947. They may slow next year by the most since 1983, squeezing earnings, according to the International Monetary Fund in Washington.

Businesses with reserves will be cushioned from insolvency and may even benefit from deflation because buying power and the value of dividends increase as prices retreat, said Arlene Rockefeller, chief investment officer for global equities at State Street Global Advisors, which oversees $1.7 trillion.

“You want stocks with good cash flow and are self- funding,” Rockefeller said in an interview last week. “This is an opportunity for companies that are large and that do not have a lot of debt to go out and acquire other companies to gain market share.”

Last Bear Market

The firm’s SSgA Disciplined Equity Fund held shares of BNY Mellon, the world’s largest custodian of financial assets. The bank had $24 billion in so-called negative enterprise value, or the amount of cash that exceeds the value of its shares and debt. The stock climbed 26 percent since Nov. 20.

Danieli, Italy’s biggest maker of equipment for the steel industry, has $1.49 billion in cash, or almost 40 percent more than the combined value of its shares and debt after a 71 percent stock plunge this year, Bloomberg data show.

Just 276 companies had cash that exceeded the value of their stock and debt when the S&P 500 bottomed in 2002. Those shares posted a median total return of 115 percent over the next 12 months, according to data compiled by Bloomberg. That’s more than triple the return for the S&P 500 during the same span.

Of the 50 largest companies in the Dow Jones Stoxx 600 Index of European companies, Novo Nordisk, the world’s biggest insulin maker, is one of two whose cash exceeds debt by four times.

‘Going to Win’

Novo Nordisk Chief Financial Officer Jesper Brandgaard said on Oct. 30 that the Bagsvaerd, Denmark-based company is earmarking as much as $2 billion for takeovers in the next 12 months as the financial crisis forces biotechnology companies to seek buyers. The company has $1.35 billion and generated $1.83 billion in free cash flow in the first three quarters of 2008.

“The ones that are going to win are those that can generate cash,” Horacio Valeiras, who oversees $11.2 billion as chief investment officer at Nicholas Applegate Capital Management in San Diego, said in a telephone interview last week. His Nicholas Applegate International Growth Fund bought shares of Novo in the third quarter, data compiled by Bloomberg show. The stock has since gained 11 percent, while the Stoxx 600 slumped 21 percent.

Eveillard at First Eagle increased his fund’s position in Microsoft, the world’s biggest software maker, by 83 percent to 8.16 million shares last quarter.

Microsoft, Apple

The Redmond, Washington-based company is one of only two in the S&P 500 with cash and marketable securities worth more than $20 billion and less than $2 billion in debt, according to data excluding financial firms compiled by Bloomberg. Apple Inc., the Cupertino, California-based maker of iPhones and Macintosh computers, is the other.

Microsoft and Apple outperformed the MSCI World since its low on Nov. 20, posting advances of 20 percent and 24 percent, respectively.

Eveillard’s fund is also the biggest overseas shareholder of Namyang Dairy, which has no debt and $270 million in cash. The cash pile is 44 percent higher than the value of its shares. Reserves at the company, one of South Korea’s biggest dairies, account for 65 percent of its $418 million in so-called tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation.

“Cash provides a break against a potential catastrophe,” said Eveillard. “At the end of the day, cash is still worth 100 cents on the dollar.”

Private Equity

That helps explain why investors have rushed to Treasuries this year. Yields on three-month Treasury bills fell to 0.01 percent last week as investors paid a premium for the safest, most liquid assets. The level was the lowest since 1940, according to monthly figures compiled by the Federal Reserve.

One reason so many cash-rich companies are available now is because leveraged buyout firms such as Henry Kravis’s KKR & Co. and Blackstone Group LP have been hamstrung by the credit crunch, according to Tom Rozycki at Principal Global Investors, which held shares of Danieli.

Private-equity deals fell more than 70 percent from last year’s record $727 billion as banks stopped funding takeovers, Bloomberg data show. The $43 billion buyout of energy producer TXU Corp. by KKR and TPG Inc. in 2007 was the biggest ever.

“You don’t wish for this kind of environment, but it’s nice to have private equity out of the way so we can get some of these bargains too,” Rozycki, who helps oversee $2 billion from Des Moines, Iowa, said in an interview from New York last week.

‘Nothing Wrong’

The Principal MidCap Blend Fund, which he helps manage, has beaten 92 percent of competing funds this year. “For the longest time, a lot of these companies had premiums in them because people were pointing around at who’s going to be acquired next.”

Many stocks are cheap because investors doubt their reported asset values and ability to generate enough earnings to survive, said Sergi Martin, who oversees $9 billion as chief executive officer at Credit Andorra’s Credit Invest asset management unit in Andorra La Vella, Andorra.

“You have to screen very selectively for companies that will survive, and not for future corpses,” Martin said in a telephone interview last week. “There will be more bankruptcies, and where valuations are absurd and there is nothing wrong with the company, time will correct that.”

Grahame Exton, a money manager at Tilney Private Wealth Management in Liverpool, England, says clients want the margin of safety provided by reserves.

“We have always been paid to look for cash generators,” said Exton, whose firm had $9.9 billion under management at the end of September. “I just think that now people will put a greater emphasis on them.”



Companies with a market capitalization greater than $1 billion
that hold more cash than the value of their stock and debt,
according to data compiled by Bloomberg:

Banco do Estado do Rio Grande do Sul SA
Banco Popolare SC
Bank of East Asia Ltd.
Bank Leumi Le-Israel Ltd.
Bank of N.T Butterfield & Son Ltd.
Bank of New York Mellon Corp.
Bank of Beijing Co.
Bank of China Ltd.
Bank of Cyprus
Bank Sarasin
Banque Privee Edmond de Rothschild
Banque Centrale Populaire
BOC Hong Kong (Holdings) Ltd.
Canara Bank Ltd.
China Minsheng Banking Corp.
Chiyoda Corp.
Commercial International Bank
Comverse Technology Inc.
Discover Financial Services
Friends Provident Plc
Great Eastern Holdings Ltd.
Hachijuni Bank Ltd.
Health Net Inc.
Higo Bank Ltd.
Hong Leong Bank Bhd.
Hong Leong Financial Group Bhd.
HSBC Bank Malta Plc
Huaxia Bank Co.
Hutchison Telecommunications International Ltd.
Industrial and Commercial Bank of China (Asia) Ltd.
Intercontinental Bank Plc
Komercni Banka AS
Legal & General Group Plc
National Bank of Belgium
Northern Trust Corp.
OAO OGK-4
Oceanic Bank International Plc
Porto Seguro SA
Sapporo Hokuyo Holdings Inc.
Schroders Plc
Shanghai Pudong Development Bank Co.
Shenzhen Development Bank Co.
Swiss Life Holding
Union Bank of Nigeria
United Bank for Africa Plc
Wing Hang Bank Ltd.
Yamagata Bank Ltd.
Yamanashi Chuo Bank Ltd.
Zenith Bank
To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.

Last Updated: December 8, 2008 16:56 EST

5dec08

the above got no options, but worth taking a look at :

IBD SmartSelect® Corporate Ratings
Earnings Per Share (EPS) Rating Relative Price Strength (RS) Rating Industry Group Relative Strength (Grp RS) Rating Sales + Profit Margins + ROE (SMR) Rating Accumulation/ Distribution (Acc/Dis) Rating
46 99 A+ B A
Vital Statistics
Industry Group Rank (1-197) 1 % Off 52 Week Price High -8%
Daily Graphs Timeliness A 52 Week Price High $44.58
Alpha 0.36 52 Week Price Low $15.89
Beta 0.98 3 Year Earnings Per Share Rate 65%
Up/Down Volume 1.4 3 Year Sales Rate 60%






















CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 CUBDD.X 3.70 0.00 7.10 8.20 10 10
25.00 CUBDE.X 2.05 0.00 4.40 5.10 9 169
30.00 CUBDF.X 2.50 0.00 2.50 3.10 5 49
35.00 CUBDG.X 2.60 0.00 1.20 1.70 0 15
40.00 CUBDH.X 1.30 0.00 0.60 1.00 0 25


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
17.50 CUBPW.X 1.80 0.00 0.75 1.20 0 10
20.00 CUBPD.X 3.80 0.00 1.40 1.90 10 34
22.50 CUBPX.X 4.10 0.00 2.30 2.75 60 60
25.00 CUBPE.X 5.60 0.00 3.20 4.00 43 93
30.00 CUBPF.X 6.40 0.00 6.10 7.10 9 40
40.00 CUBPH.X 13.00 0.00 14.00 15.20 0 10






















CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 ECLDE.X 11.40 0.00 12.30 13.10 1 13
30.00 ECLDF.X 7.50 0.00 8.10 9.10 10 10
35.00 ECLDG.X 4.50 1.00 5.00 5.80 4 553
40.00 ECLDH.X 2.60 0.00 2.65 3.40 300 181
45.00 ECLDI.X 1.20 0.00 1.15 1.65 1 166
50.00 ECLDJ.X 0.66 0.06 0.35 0.80 40 182
55.00 ECLDK.X 0.25 0.00 0.10 0.30 1 166


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 ECLPE.X 1.05 0.00 0.95 1.25 10 10
30.00 ECLPF.X 1.65 0.00 2.05 2.35 1 14
35.00 ECLPG.X 4.50 0.10 3.70 4.30 5 280
40.00 ECLPH.X 7.50 0.00 6.20 6.60 16 91
45.00 ECLPI.X 10.69 0.00 9.50 10.10 20 56
50.00 ECLPJ.X 15.60 0.00 13.60 14.20 1 27
55.00 ECLPK.X 11.70 0.00 18.20 19.20 0 20























CALL OPTIONS Expire at close Fri, Feb 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 KQABF.X 11.50 0.00 15.30 16.80 12 3
35.00 KQABG.X 8.30 0.00 11.20 12.80 10 15
40.00 KQABH.X 8.00 0.80 8.10 9.00 2 24
45.00 KQABI.X 4.47 0.63 5.30 6.20 5 42
50.00 KQABJ.X 4.47 0.87 3.30 4.10 5 106
55.00 KQABK.X 1.90 0.00 1.85 2.65 5 68


PUT OPTIONS Expire at close Fri, Feb 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 KQANF.X 1.05 0.00 0.90 1.40 1 95
35.00 KQANG.X 3.00 0.00 1.70 2.45 5 31
40.00 KQANH.X 4.90 0.00 3.20 4.00 1 21
45.00 KQANI.X 9.40 0.00 5.30 6.30 30 39
























CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 KBUDF.X 32.30 0.00 42.20 45.10 10 10
35.00 KBUDG.X 26.70 0.00 38.10 40.00 1 1
40.00 KBUDH.X 22.00 0.00 33.40 35.30 3 25
45.00 KBUDI.X 16.70 0.00 28.90 30.70 0 9
50.00 KBUDJ.X 9.10 0.00 24.70 26.10 0 16
55.00 KBUDK.X 14.92 0.00 20.70 22.10 3 8
60.00 KBUDL.X 15.50 0.00 17.00 18.40 4 41
65.00 KBUDM.X 11.30 0.00 13.60 14.80 5 522
70.00 KBUDN.X 11.00 0.00 10.70 11.80 1 102
75.00 KBUDO.X 7.90 0.50 8.20 9.40 1 276
80.00 KBUDP.X 7.90 0.00 6.20 7.20 55 189
85.00 KBUDQ.X 4.40 0.00 4.40 5.30 1 59
90.00 KBUDR.X 3.00 0.00 3.00 3.80 15 88
95.00 KBUDS.X 2.10 0.25 2.30 2.90 25 63


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 KBUPG.X 1.05 0.00 0.25 0.75 10 10
40.00 KBUPH.X 1.30 0.00 0.60 1.10 10 30
45.00 KBUPI.X 1.80 0.00 1.10 1.65 20 83
50.00 KBUPJ.X 2.60 0.00 1.75 2.35 0 10
55.00 KBUPK.X 3.10 0.00 2.70 3.40 1 224
60.00 KBUPL.X 4.40 0.00 4.00 4.70 1 158
65.00 KBUPM.X 6.00 0.00 5.30 6.40 10 296
70.00 KBUPN.X 7.20 0.00 7.30 8.40 10 53
75.00 KBUPO.X 11.40 0.00 9.70 10.90 2 130
80.00 KBUPP.X 14.50 0.00 12.40 13.90 1 83
85.00 KBUPQ.X 19.90 0.00 15.60 17.20 10 20
90.00 KBUPR.X 30.00 0.00 19.10 20.80 10 10
























CALL OPTIONS Expire at close Fri, Feb 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 DQOBD.X 19.20 0.00 21.50 22.70 11 11
25.00 DQOBE.X 12.00 0.00 17.00 17.90 50 50
27.50 DQOBY.X 12.30 0.00 14.80 15.70 1 32
30.00 DQOBF.X 11.80 0.00 13.10 13.50 1 107
32.50 DQOBZ.X 11.00 0.00 11.00 11.50 1 30
35.00 DQOBG.X 7.10 1.90 9.10 9.50 2 210
37.50 DQOBU.X 7.20 2.00 7.40 7.80 10 797
40.00 DQOBH.X 5.80 1.00 5.80 6.20 4 731
42.50 DQOBV.X 3.70 0.30 4.50 4.80 53 1,382
45.00 DQOBI.X 3.00 0.58 3.30 3.60 5 302
47.50 DQOBW.X 2.40 0.50 2.35 2.65 1 365
50.00 DQOBJ.X 1.75 0.60 1.60 1.85 9 219
55.00 DQOBK.X 0.80 0.00 0.65 0.85 15 159
60.00 DQOBL.X 0.45 0.00 0.20 0.40 15 72


PUT OPTIONS Expire at close Fri, Feb 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 DQOND.X 0.45 0.00 0.20 0.35 20 49
22.50 DQONX.X 0.45 0.00 0.30 0.50 30 40
25.00 DQONE.X 0.60 0.00 0.50 0.70 22 284
27.50 DQONY.X 1.04 0.01 0.75 1.00 6 178
30.00 DQONF.X 1.49 0.31 1.10 1.35 6 188
32.50 DQONZ.X 2.20 0.25 1.55 1.80 2 354
35.00 DQONG.X 2.45 0.00 2.15 2.40 10 672
37.50 DQONU.X 3.80 0.60 2.85 3.10 4 596
40.00 DQONH.X 4.80 0.30 3.70 4.00 1 302
42.50 DQONV.X 5.00 1.20 4.80 5.10 43 329
45.00 DQONI.X 7.76 0.00 6.20 6.50 100 158
47.50 DQONW.X 9.20 0.00 7.70 8.10 10 54
50.00 DQONJ.X 12.50 0.00 9.40 9.90 12 32
55.00 DQONK.X 16.40 0.00 13.40 13.90 10 10
























CALL OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 ENJDF.X 46.00 0.00 58.60 60.60 10 31
35.00 ENJDG.X 41.40 0.00 55.10 56.00 10 21
40.00 ENJDH.X 40.00 0.00 50.40 51.30 0 11
50.00 ESIDZ.X 31.30 0.00 41.50 42.40 0 10
55.00 ESIDK.X 30.90 0.00 37.30 38.20 21 30
60.00 ESIDL.X 31.00 0.00 33.00 34.10 23 44
65.00 ESIDM.X 25.80 0.00 29.00 30.20 11 11
70.00 ESIDN.X 24.20 0.00 25.40 26.50 1 24
75.00 ESIDO.X 20.90 0.00 22.00 23.10 10 67
80.00 ESIDP.X 17.80 0.00 18.90 19.90 10 68
85.00 ESIDQ.X 7.30 0.00 16.00 16.90 6 129
90.00 ESIDR.X 15.10 0.00 13.40 14.30 11 549
95.00 ESIDS.X 5.30 0.00 11.20 12.00 10 403
100.00 ESIDT.X 9.80 0.60 9.10 9.70 31 294
105.00 ESIDA.X 8.20 0.10 7.40 8.00 20 120
110.00 ESIDB.X 6.18 0.32 5.80 6.40 40 240
115.00 ESIDC.X 5.30 0.10 4.60 5.10 10 140
120.00 ESIDD.X 4.30 0.10 3.50 4.00 20 210


PUT OPTIONS Expire at close Fri, Apr 17, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 ENJPF.X 0.35 0.40 0.10 0.45 1 100
35.00 ENJPG.X 0.40 0.00 0.45 0.75 10 20
40.00 ENJPH.X 0.85 0.00 0.70 1.15 11 21
45.00 ESIPV.X 1.55 0.00 1.20 1.55 10 20
50.00 ESIPZ.X 2.00 0.00 1.75 2.20 10 45
55.00 ESIPK.X 2.60 0.00 2.50 2.90 11 51
60.00 ESIPL.X 3.90 0.00 3.40 3.90 10 256
65.00 ESIPM.X 4.60 0.00 4.40 5.00 10 427
70.00 ESIPN.X 6.40 0.00 5.70 6.40 21 199
75.00 ESIPO.X 6.90 0.00 7.20 7.90 203 341
80.00 ESIPP.X 10.10 1.20 9.00 9.70 10 1,319
85.00 ESIPQ.X 12.53 0.00 11.20 11.80 4 253
90.00 ESIPR.X 14.71 0.00 13.40 14.20 4 364
95.00 ESIPS.X 18.00 0.60 16.10 16.90 50 771
100.00 ESIPT.X 18.90 0.00 18.90 19.80 8 236
105.00 ESIPA.X 22.50 0.00 22.10 23.10 62 63
110.00 ESIPB.X 26.20 1.71 25.60 26.50 11 50
115.00 ESIPC.X 29.00 0.00 29.20 30.30 0 10
120.00 ESIPD.X 35.27 0.00 33.10 34.20 2 24
























CALL OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
40.00 OAQEH.X 37.00 0.00 37.80 38.40 10 20
45.00 OAQEI.X 25.80 0.00 33.80 34.40 5 6
50.00 OAQEJ.X 28.70 0.00 30.00 30.50 20 49
55.00 OAQEK.X 20.50 0.00 26.30 26.90 30 109
60.00 OAQEL.X 18.00 0.00 23.00 23.50 20 236
65.00 OAQEM.X 19.60 0.40 20.00 20.50 2 199
70.00 OAQEN.X 16.99 0.49 17.20 17.70 4 241
75.00 OAQEO.X 14.00 0.20 14.70 15.10 12 1,040
80.00 OAQEP.X 11.40 1.20 12.40 12.80 23 764
85.00 OAQEQ.X 10.44 0.94 10.40 10.80 5 216
90.00 OAQER.X 8.30 0.10 8.60 9.00 10 321
95.00 OAQES.X 7.10 0.00 7.10 7.50 20 1,427
100.00 OAQET.X 5.70 0.00 5.70 6.20 14 230
105.00 OAQEA.X 4.90 0.00 4.70 5.00 32 119
110.00 OAQEB.X 3.50 0.00 3.70 4.00 57 712


PUT OPTIONS Expire at close Fri, May 15, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
40.00 OAQQH.X 2.10 0.00 1.85 2.10 1 103
45.00 OAQQI.X 3.13 0.00 2.80 3.00 15 516
50.00 OAQQJ.X 4.20 0.00 3.90 4.20 21 810
55.00 OAQQK.X 5.60 0.00 5.30 5.60 10 778
60.00 OAQQL.X 7.00 0.00 6.90 7.20 10 559
65.00 OAQQM.X 9.20 0.00 8.80 9.10 2 258
70.00 OAQQN.X 12.50 0.67 10.90 11.30 10 133
75.00 OAQQO.X 14.90 1.30 13.30 13.70 10 148
80.00 OAQQP.X 16.40 0.00 16.10 16.40 2 94
85.00 OAQQQ.X 20.10 0.00 19.00 19.30 100 100
90.00 OAQQR.X 24.20 0.00 22.20 22.60 1 27
95.00 OAQQS.X 30.80 0.00 25.60 26.00 20 20
100.00 OAQQT.X 36.50 0.00 29.30 29.70 11 23
110.00 OAQQB.X 39.90 0.00 37.10 37.70 10 21
























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 QHTCD.X 4.50 0.00 10.10 12.20 0 2
22.50 QHTCX.X 2.70 0.00 8.10 9.40 2 2
25.00 QHTCE.X 5.56 0.00 6.40 7.50 2 22
30.00 QHTCF.X 4.00 0.00 3.70 4.60 1 2


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
17.50 QHTOW.X 1.45 0.00 0.10 0.70 0 10
20.00 QHTOD.X 1.75 0.00 0.40 0.95 10 30
22.50 QHTOX.X 1.40 0.00 0.85 1.45 10 13
25.00 QHTOE.X 2.50 0.00 1.60 2.20 10 12
30.00 QHTOF.X 4.83 0.00 3.70 4.70 2 2























CALL OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 EBSCU.X 12.30 0.00 14.50 16.50 10 10
10.00 EBSCB.X 9.00 0.00 12.50 14.20 10 10
12.50 EBSCV.X 6.70 0.00 10.50 12.20 20 17
15.00 EBSCC.X 9.50 0.00 8.90 9.90 1 124
17.50 EBSCW.X 6.00 2.80 7.20 8.20 3 185
20.00 EBSCD.X 5.70 0.40 5.90 6.70 1 50
22.50 EBSCX.X 5.00 0.30 4.70 5.40 2 92


PUT OPTIONS Expire at close Fri, Mar 20, 2009

Strike Symbol Last Chg Bid Ask Vol Open Int
7.50 EBSOU.X 0.05 0.00 N/A 0.50 1 1
10.00 EBSOB.X 0.25 0.00 0.20 0.75 10 22
12.50 EBSOV.X 1.30 0.00 0.60 1.20 50 50
15.00 EBSOC.X 1.75 0.00 1.30 1.75 10 47
17.50 EBSOW.X 2.15 0.00 2.10 2.55 10 14
20.00 EBSOD.X 3.50 0.00 3.10 4.00 20 13
22.50 EBSOX.X 5.60 0.00 4.30 5.10 2 2






from ibd :
Stocks Reverse Higher In Higher Volume As Investors Look Past Ugly Jobs Report

The market bounced back from an early plunge Friday, as investors shook off an ugly jobs report and pushed stocks up in higher volume.

The Nasdaq slid 2.8% on the early bout of bad news. But the tech-rich index rallied, closing at the top of its intraday range with a 4.4% gain.

The NYSE indexes also rebounded. The S&P 500 jumped 3.6%, the NYSE composite 3.2% and the Dow industrials 3.1%. Small caps fared best, as the S&P 600 surged 4.3%.

Volume swelled 7% on the Nasdaq and 10% on the NYSE, compared with Thursday's totals.

Those gains pared weekly losses for the major indexes in what was an encouraging five-day stretch. For the week, the Nasdaq composite eased 1.7%, the Dow 2.2%, the S&P 500 2.3% and the NYSE composite 3.5%. The S&P 600 fell 2.5%.

This past week featured a raft of troubling economic news.

The U.S. auto industry, facing the prospect of collapse, begged the government for a $34 billion bailout. Retailers reported mostly weak same-store sales results for November. Factories continued to report widespread contraction.

But Friday's monthly jobs report was the most alarming headline of the week. Employers slashed 533,000 jobs in November. That was the biggest drop since 1974, and far above the 325,000 cuts predicted by economists.

Job losses also were revised higher for September and October. That raised the three-month decline to 1.3 million, the largest such loss total since World War II.

In the first 11 months of 2008, 1.9 million jobs have been lost. That tops the 1.6 million losses during the recession and 9/11 year of 2001.

Meanwhile, the unemployment rate climbed to 6.7% in November, up from 6.5% in the previous month. That was below the 6.8% figure projected by economists, but still the highest level in 15 years.

So here we have historically awful employment numbers, added to weak consumer spending, plunging consumer confidence, contracting manufacturing and a broader global recession. And yet, the stock market on Friday rallied sharply.

This brings up an important question: If news this bad doesn't derail stocks, what kind of news will it take to knock this market down?

Indeed, the past week marked a notable reversal for the market. For months, stocks had plunged at any sign of bad news, as a correction gained steam and whacked most industries.

But this past week brought impressive resilience from the broad indexes, coupled with big price gains after a Monday plunge.

Tuesday marked a follow-through day for the market. As noted in The Big Picture, a follow-through can signal a change in character and direction for the major indexes.

It's important, though, to see both those indexes and leading stocks build gains in healthy volume to confirm the market's strength.

That's just what we got. Wednesday and Friday delivered two more days of accumulation — buying by big-money institutional investors. Thursday was a down day for the market, but lighter volume softened that impact.

Growth investors should use this time to build a watch list of leading stocks. Monday's edition of IBD features The IBD 100, packed with charts and analyses of some of the market's top-performing stocks.

The IBD 100 index, which serves as a proxy for the action of those leaders, jumped 3.2% Friday. It slid 2.5% for the week.

Thoratec (THOR) gapped up 3.40 to 28.15 in more than triple its regular volume. Brokerage firm Lazard announced that Thoratec released positive interim trial data from its ventricular assist HeartMate II device. The report implied that a release earlier than the expected May 2009 timeline might be possible.

Shares of Thoratec are approaching a possible 29.60 buy point in a double-bottom base.

A handful of highly rated stocks had a tougher time.

Axsys Technologies (AXYS) sank 1.71 to 65.70 in nearly twice its normal trade. The maker of optical and motion control systems pared back earlier, deeper losses. Still, the stock's Wednesday breakout has failed.

Axsys trades about 240,000 shares a day. Stocks with such low liquidity are often ignored by fund managers, making them vulnerable to wider swings. Seek out stocks that trade at least 400,000 shares a day.

As America Goes . . .

Globalism: The experts said China and India were the
new economic “juggernauts”—strong, independent
and insulated even from America’s financial woes. The
experts were wrong.

The Chinese and Indian economies are in a free fall, proving
that when America booms, the world booms; and conversely,
when she sneezes, the world catches a cold. Stripped of
all the hype, the “China Miracle” now looks more mirage, and the
“Shining India” rather dull. Both countries, it turns out, have been
desperatelydependenton Americafor their growth.
Nearly 60% of China’s total exports are churned out by plants not
owned by the Chinese but by American and other Western companies.
And they’re now starting to close them. The resulting layoffs
havebeen so massive that dislocatedworkers are rioting.
At a factory in Dongguan that makes Nerf toys for U.S.-based Hasbro
Inc., some 500 workers battled security guards, turned over a
police car, smashed the headlights of police motorcycles and forced
theirwaythrough the factory’s front gate.
Some 3 million Chinese have already been fired in the industrial
province of Zhejiang alone. Millions more layoffs will follow by
Christmas, the World Bank predicts, as China grinds to its slowest
growth intwodecades.
It’s a far cry from 2005,whenthe media breathlessly predicted the
“communisteconomicjuggernaut”would“challenge the West.”
“It’s an article of faith in the West that democracy and free enterprise
must exist hand in hand,” said U.S. News&World Report in a
special cover report. “China is teaching theWestsomething new.”
Meanwhile in India, the economy is sliding into crisis mode, with
dislocated workers also turning violent. After Jet Airways, India’s
biggest private airline, laid off 1,900, a large crowd of workers
stormed the airline’s headquarters inMumbaito vent their anger.
Thoughlessexport-dependent thanChina, keysectors of the Indian
economy are exposed to the U.S. recession. The business outsourcing
industry is particularly vulnerable due to its dependence
onour crippled financial sector.
TheIndianemploymentbase relies heavilyonthe U.S. for call-center
jobs, as well as those involving technical support. India’s softwareindustry
is also taking a beating.
The U.S.-led global recession smashes the myth that Asian economieshavebecomeso
powerful their batteriesnolonger needchargingby
the American economy.
Neverbefore has a country risen as fast a China.Anditmayfall just
as fast. As foreign direct investment slows to a trickle, all the talk of
economic hegemony shifting to China and India won’t seem so authoritative.
Many best-selling books have been predicated on this
false assumption, however,andmoreare in the pipeline.
All this good press must be going to China’s head. In Beijing last
Thursday, U.S. Treasury Secretary Hank Paulson was lectured by
Chinese officials to get America’s economic house in order.Among
others, Zhou Xiaochuan, governor of the Chinese central bank,
called for a rebalancing of the American economy.
“Overconsumption and high reliance on credit is the cause of the
U.S. financial crisis,” he said. “As the largest and most important
economyin the world, the U.S.should take the initiative to adjust its
policies, raise its savings ratio appropriately and reduce its trade
andfiscal deficits.”
According to the Financial Times, the tone of the comments reflected
“an underlying shift in power”—a shift that’s also been detected
by a senior fellow at the Brookings Institution. “One result of
the crisis,” Eswar Prasad told the FT, “is that the U.S. no longer
holds the high ground to lecture China on financial or macroeconomicpolicies.”
What the financial crisis and U.S. recession have really exposed is
the Big Lie. Far from posing a threat to our economy, China and
IndiahaveprovedtobepapertigersdependentoncorporateAmerica.
AsAmerica goes, so still goes theworld—inbad times as in good.

WWW.IBDEDITORIALS.COM

What Would Warren Do?

Pat Dorsey
Wednesday, November 26, 2008

This article is part of a series related to Beginning Investing.

Or better yet - what is the Oracle up to in this market, and can you do the same?

Warren Buffett has already told the world what he's doing in this frightful market. The Oracle of Omaha proudly proclaimed that he's "been buying American stocks" with his personal funds.

But it should also be noted that Buffett has been putting his investors' money on the line as well. After sitting on piles of cash for several years and lamenting the lack of attractive opportunities, Buffett has made several key acquisitions through his investment conglomerate, Berkshire Hathaway, culminating in a flurry of late- September and early-October deals.

In just a two-week span, Buffett picked up Constellation Energy for the relative bargain price of $4.7 billion. He bought $5 billion in preferred stock from Goldman Sachs, receiving a fat 10% yield. And he purchased $3 billion in preferred shares of GE, also yielding 10%.

This doesn't mean Buffett is saying go out and buy Goldman or GE (GE) stock. In fact, there are plenty of reasons why you shouldn't try to follow his lead, not the least of which is the fact that Berkshire gets deals that individuals simply can't.

But that's not the point. The opportunity here is to pick up some valuable investing wisdom from the greatest practitioner alive. In this spirit, here's what I think you can learn from Buffett's moves:

Be Greedy When Others Are Fearful

It's the most famous of all Buffett-isms: "Be fearful when others are greedy and greedy when others are fearful." Today there's ample evidence that people are scared, as fund investors have been redeeming record amounts of money from their stock portfolios.

By contrast, Buffett is putting his money to work. Berkshire's cash balance, by my estimate, is at its lowest level in recent memory.

Now, this doesn't mean the market will turn around tomorrow. But Buffett's point is that this is not the time to flee U.S. stocks. In fact, now is a great time to be looking for shares of high-quality firms that have been beaten down to affordable levels.

For examples of attractively priced industry leaders, see the suggestions to the right.

Don't Be Hobbled by Past Mistakes

Buffett's investment in Goldman Sachs (GS) was surprising to many, given his frequent digs at Wall Street's casino culture and a problematic investment he made in Salomon Brothers.

In 1987, Buffett bought a stake in Salomon to ward off a hostile takeover, but the firm nearly collapsed amid a bond bid-rigging scandal a few years later, and Buffett had to step in as interim chairman.

Although the investment eventually worked out - Salomon was bought by Travelers, which merged with Citicorp to form Citigroup (C) - it's safe to say that it was a longer and harder road than he had anticipated.

Still, Buffett understood that investment banking, for all its recent woes, is an attractive business if managed properly. The group of top-tier firms is fairly small, and it would be hard for a new competitor to break into the business, which gives Goldman Sachs tremendous bargaining power over its customers.

There's an important lesson in this for individual investors. Just because many financial stocks in your portfolio have imploded recently, it doesn't mean you should sell out of this sector entirely - or turn your back on these stocks for good.

Don't Fall in Love With Your Stocks

Buffett is famous for having said that his favorite holding period is "forever." But he will sell a stock he loves if conditions warrant. For example, late last year, as crude-oil prices were approaching $100 a barrel, Buffett jettisoned his stake in PetroChina (PTR).

Why? After multiplying more than fivefold since he bought it a few years earlier, PetroChina shares had reached fair value, so he sold. Since he cashed out, PetroChina shares have been cut in half.

Chalk this up to a lesson the Oracle learned in the late '90s. As he admitted in 2003, "...I made a big mistake in not selling several of our larger holdings during the Great Bubble."

Buffett similarly made what may be one of his best decisions when he sold Berkshire Hathaway's long-held stake in Freddie Mac (FRE) in 2000. He's never written about exactly why, but he noted presciently at his 2001 annual shareholder meeting that Freddie Mac's "risk profile had changed."

Keep Your Powder Dry

While the rest of the world gorged on cheap credit, Buffett maintained Berkshire's conservative profile. This hindered his returns when times were good, but having lots of cash on hand enabled Buffett to snap up once-in-a-lifetime deals, like Constellation Energy (CEG).

Buffett, who owns several utilities, jumped on Constellation in September after its shares tumbled from around $60 to his purchase price of $26.50 in a mere matter of days. The result: He nabbed a company that produces nearly $1 billion in earnings a year for less than $5 billion.

Now, you may not be in a position to keep $40 billion in the bank. But as Buffett showed, it's smart to have some cash on hand for opportunistic purchases. What's more, there's nothing wrong with being disciplined enough to turn your back on stocks that you're not 100% confident in. That's sage advice.

Why He's Warren Buffett — and You're Not

If investing were as simple as mimicking Warren Buffett, then all you'd have to do to retire rich would be to download a free copy of the Berkshire Hathaway annual shareholder letter and shadow the Oracle's moves.

Given that you're reading this article instead of relaxing at your seaside villa, it's clear copying Buffett is no easy task. So as you marvel at the Sage, keep the following in mind:

Warren Can Strike Deals You Can't

Buffett's reputation and Berkshire's financial heft are enormous advantages that regular investors simply don't share. Take his recent investment in Goldman Sachs (GS). It was made in preferred stock that was offered only to Berkshire and pays a 10% fixed yield.

That's twice what Uncle Sam is initially earning on the preferred shares it got from Goldman in exchange for injecting capital into the bank. But chalk that up to the Buffett premium. Firms want the Oracle to invest in them for his seal of approval.

Berkshire's purchase of Constellation Energy offers a great example. Constellation's shares had fallen 75% from their highs because the market was worried about the financial health of the company's energy-trading operations.

If you or I bought the stock at that level, we would have been making a bet that Constellation would pull through. But we would not have been able to affect the odds. However, Berkshire's financial strength and Buffett's name assured Constellation's survival, making the investment more valuable as soon as Warren bought the company.

Warren Is Smarter Than You Are

Many casual observers assume that Buffett simply buys great companies and hangs on to them. Simple, right? But the real key to Buffett's success is far more complicated.

Buffett has created enormous value for Berkshire by buying all kinds of securities, from common stock and preferred shares to currencies, distressed debt and options.

He has also made money through merger arbitrage and fixed-income arbitrage. These are all areas that only the most sophisticated investor should dabble in.

Why Mimic Warren When You Can Hire Him?

Your best bet for benefiting from Buffett's wisdom is the most obvious: Buy Berkshire Hathaway (BRK.B) stock.

It's really an investment company. But unlike a fund, it doesn't charge annual management fees. Buffett has deployed a lot of cash into attractive deals lately, which should add value for years to come.

Why Government Spending Does Not Stimulate Economic Growth

Heritage Foundation ^ | November 12, 2008 | Brian M. Riedl

Posted on 25 November 2008 9:27:01 PM by Conservative Coulter Fan

In a throwback to the 1930s and 1970s, Demo­cratic lawmakers are betting that America's economic ills can be cured by an extraordinary expansion of government. This tired approach has already failed repeatedly in the past year, in which Congress and the President:

Increased total federal spending by 11 percent to nearly $3 trillion;


Enacted $333 billion in "emergency" spending;


Enacted $105 billion in tax rebates; and


Pushed the budget deficit to $455 billion in the name of "stimulus."
Every one of these policies failed to increase eco­nomic growth. Now, in addition to passing a $700 bil­lion financial sector rescue package, lawmakers have decided to double down on these failed spending pol­icies by proposing a $300 billion economic stimulus bill. Even though the last $455 billion in Keynesian deficit spending failed to help the economy, lawmak­ers seem to have convinced themselves that the next $300 billion will succeed.

This is not the first time government expansions have failed to produce economic growth. Massive spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates. Yet in the 1980s and 1990s—when the federal government shrank by one-fifth as a percentage of gross domestic product (GDP)—the U.S. economy enjoyed its great­est expansion to date.

Cross-national comparisons yield the same result. The U.S. government spends significantly less than the 15 pre-2004 European Union nations, and yet enjoys 40 percent larger per capita GDP, 50 percent faster economic growth rates, and a sub­stantially lower unemployment rate.[1]

When conventional economic wisdom repeat­edly fails, it becomes necessary to revisit that con­ventional wisdom. Government spending fails to stimulate economic growth because every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. Thus, gov­ernment spending "stimulus" merely redistributes existing income, doing nothing to increase produc­tivity or employment, and therefore nothing to cre­ate additional income. Even worse, many federal expenditures weaken the private sector by directing resources toward less productive uses and thus impede income growth.

The Myth of Spending as "Stimulus"

Spending-stimulus advocates claim that govern­ment can "inject" new money into the economy, increasing demand and therefore production. This raises the obvious question: Where does the gov­ernment acquire the money it pumps into the econ­omy? Congress does not have a vault of money waiting to be distributed: Therefore, every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistrib­uted from one group of people to another.[2]

Spending-stimulus advocates typically respond that redistributing money from "savers" to "spend­ers" will lead to additional spending. That assumes that savers store their savings in their mattresses or elsewhere outside the economy. In reality, nearly all Americans either invest their savings by purchasing financial assets such as stocks and bonds (which finances business investment), or by purchasing non-financial assets such as real estate and collecti­bles, or they deposit it in banks (which quickly lend it to others to spend). The money is used regardless of whether people spend or save.

Government cannot create new purchasing power out of thin air. If Congress funds new spend­ing with taxes, it is simply redistributing existing income. If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If Congress borrows the money from foreigners, the balance of payments will adjust by equally reducing net exports, leaving GDP unchanged. Every dollar Congress spends must first come from somewhere else.

This does not mean that government spending has no economic impact at all. Government spending often alters the composition of total demand, such as increasing consumption at the expense of investment.

More importantly, government spending can alter future economic growth. Economic growth results from producing more goods and services (not from redistributing existing income), and that requires productivity growth and growth in the labor supply. A government's impact on economic growth is, therefore, determined by its policies' effect on labor productivity and labor supply.

Productivity growth requires increasing the amount of capital, either material or human, relative to the amount of labor employed. Productivity growth is facilitated by smoothly functioning mar­kets indicating accurate price signals to which buy­ers and sellers, firms and workers can respond in flexible markets. Only in the rare instances where the private sector fails to provide these inputs in ade­quate amounts is government spending necessary. For instance, government spending on education, job training, physical infrastructure, and research and development can increase long-term productiv­ity rates—but only if government spending does not crowd out similar private spending, and only if gov­ernment spends the money more competently than businesses, nonprofit organizations, and private cit­izens. More specifically, government must secure a higher long-term return on its investment than tax­payers' (or investors lending the government) requirements with the same funds. Historically, gov­ernments have rarely outperformed the private sec­tor in generating productivity growth.

Even when government spending improves eco­nomic growth rates on balance, it is necessary to dif­ferentiate between immediate versus future effects. There is no immediate stimulus from government spending, since that money had to be removed from another part of the economy. However, a productiv­ity investment may aid future economic growth, once it has been fully completed and is being used by the American workforce. For example, spending on energy itself does not improve economic growth, yet the eventual existence of a completed, well-functioning energy system can. Those economic impacts can take years, or even decades, to occur.

Most government spending has historically reduced productivity and long-term economic growth due to: [3]

Taxes. Most government spending is financed by taxes, and high tax rates reduce incentives to work, save, and invest—resulting in a less motivated workforce as well as less business investment in new capital and technology. Few government expenditures raise productivity enough to offset the productivity lost due to taxes;
Incentives. Social spending often reduces in­centives for productivity by subsidizing leisure and unemployment. Combined with taxes, it is clear that taxing Peter to subsidize Paul reduces both of their incentives to be productive, since productivity no longer determines one's income;
Displacement. Every dollar spent by politicians means one dollar less to be allocated based on market forces within the more productive pri­vate sector. For example, rather than allowing the market to allocate investments, politicians seize that money and earmark it for favored organizations with little regard for improve­ments to economic efficiency; and
Inefficiencies. Government provision of housing, education, and postal operations are often much less efficient than the private sector. Government also distorts existing health care and education markets by promoting third-party payers, resulting in over-consumption and insensitivity to prices and outcomes. Another example of inefficiency is when politicians earmark highway money for wasteful pork projects rather than expanding highway capacity where it is most needed.
Mountains of academic studies show how gov­ernment expansions reduce economic growth:[4]

Public Finance Review reported that "higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product."[5]


The Quarterly Journal of Economics reported that "the ratio of real government consumption expenditure to real GDP had a negative associa­tion with growth and investment," and "growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment."[6]


A Journal of Macroeconomics study discovered that "the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%."[7]


Public Choice reported that "a one percent in­crease in government spending as a percent of GDP (from, say, 30 to 31%) would raise the un­employment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent)."[8]
Economic growth is driven by individuals and entrepreneurs operating in free markets, not by Washington spending and regulations. The out­dated idea that transferring spending power from the private sector to Washington will expand the economy has been thoroughly discredited, yet lawmakers continue to return to this strategy. The U.S. economy has soared highest when the federal government was shrinking, and it has stagnated at times of government expansion. This experience has been paralleled in Europe, where government expansions have been followed by economic decline. A strong private sector provides the nation with strong economic growth and benefits for all Americans.

Three Applications of the Spending Fallacy

The myth of government spending stimulus is often found in debates over tax rebates (which func­tion similar to government spending), highway spending, and federal bailouts of states.

1) Why Tax Rebates Do Not Stimulate

The debate on taxes and economic growth is also clouded with confusion. By asserting that tax cuts spur economic growth by "putting spending money in people's pockets," many tax cutters commit the same fallacy as do government spenders. Similar to government spending, the money for tax cuts does not fall from the sky. It comes out of investment and net exports if financed by budget deficits or govern­ment spending if offset by spending cuts.

However, the right tax cuts can add substantially to productivity. As stated above, economic growth requires that businesses produce increasing amounts of goods and services, and that requires consistent business investment and a growing, pro­ductive workforce. Yet high marginal tax rates— defined as the tax on the next dollar earned—create a disincentive to engage in those activities. Reduc­ing marginal tax rates on businesses and workers will increase incentives to work, save, and invest. These incentives encourage more business invest­ment, a more productive workforce by raising the after-tax returns to education, and more work effort, all of which add to the economy's long-term capac­ity for growth.

Thus, not all tax cuts are created equal. The economic impact of a tax cut is measured by the extent to which it alters behavior to encourage productivity.

Tax rebates fail to increase economic growth because they are not associated with productivity or work effort. No new income is created because no one is required work, save, or invest more to receive a rebate. In that sense, rebates are economically indistinguishable from government spending pro­grams that write each American a check. In fact, the federal government treats rebate checks as a "social benefit payment to persons."[9] They represent another feeble attempt to create new purchasing power out of thin air.

Consider the 2001 tax rebates. Washington bor­rowed billions from the capital markets, and then mailed it to Americans in the form of $600 checks. Rather than encourage income creation, Congress merely transferred existing income from investors to consumers. Predictably, the following quarter saw consumer spending growth surge from 1.4 percent to 7.0 percent, and gross private domestic investment spending drop correspondingly by 22.7 percent[10] The overall economy grew at a meager 1.6 percent that quarter, and remained stagnant through 2001 and much of 2002.

It was not until the 2003 tax cuts—which cut tax rates for workers and investors— that the econ­omy finally and immediately began a robust recov­ery. In the previous 18 months, business investment had plummeted, the stock market had dropped 18 percent, and the economy had lost 616,000 jobs. In the 18 months following the 2003 tax rate reductions, business investment surged, the stock market leaped 32 percent, and Americans created 307,000 new jobs (followed by 5 million jobs in the next seven quarters).[11] Overall eco­nomic growth rates doubled.[12]

Marginal tax rates were reduced throughout the 1920s, 1960s, and 1980s. In all three decades, investment increased, and higher economic growth followed. Real GDP increased by 59 percent from 1921 to 1929, by 42 percent from 1961 to 1968, and by 31 percent from 1982 to 1989.[13]

Yet in a triumph of hope over experience, law­makers embraced tax rebates over rate reductions again in early 2008. While the economic data are still coming in, it is clear that once again the rebates failed to support economic growth. There is no reason to expect another round of tax rebates to be any more effective.[14]

2) Highway Spending: The Myth of the 47,576 New Jobs

Nowhere is the government spending stimu­lus myth more widespread than in highway spending. Congress is already rumbling to push billions in highway spending in the next stimulus package. Over the years, lawmakers have repeat­edly supported their errant claim that highway spending is an immediate economic tonic by cit­ing a Department of Transportation (DOT) study. This study supposedly states that every $1 bil­lion spent on highways adds 47,576 new jobs to the economy.[15]

The problem: The DOT study made no such claim. It stated that spending $1 billion on high­ways would require 47,576 workers (or more pre­cisely, it would require 26,524 workers, who then spend their income elsewhere, supporting an addi­tional 21,052 workers). But before the government can spend $1 billion hiring road builders and pur­chasing asphalt, it must first tax or borrow $1 bil­lion from other sectors of the economy—which would then lose a similar number of jobs. In other words, highway spending merely transfers jobs and income from one part of the economy to another. As The Heritage Foundation's Ronald Utt has explained, "The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven."[16] The DOT report implicitly acknowledged this point by referring to the trans­portation jobs as "employment benefits" within the transportation sector, rather than as new jobs for the total economy.

An April 2008 DOT update to its previous study reduced the employment figure to 34,779 jobs supported by each $1 billion spent on highways, and explicitly stated that the figure "refers to jobs supported by highway investments, not jobs cre­ated."[17] Similarly, a Congressional Research Service study calculated similar numbers as the DOT study, but cautioned:

To the extent that financing new highways by reducing expenditures on other programs or by deficit finance and its impact on private consumption and investment, the net impact on the economy of highway construction in terms of both output and employment could be nullified or even negative.[18]

Not surprisingly, highway spending has a poor track record of stimulating the economy. The Emer­gency Jobs Appropriations Act of 1983 appropri­ated billions of dollars in highway spending (among other programs) in hopes of pushing the double-digit unemployment rate downward. Years later, an audit by the General Accounting Office (GAO, now the Government Accountability Office) found that highway spending generally failed to create a signif­icant number of new jobs.[19] The bottom line is that there is no reason to expect additional highway spending this year to boost short-term economic growth or create new jobs.

As stated above, resulting improvements in the nation's infrastructure may increase future produc­tivity and growth—once they are completed and in use. This is not the same as suggesting that the act of spending money on additional highway workers and asphalt is itself an immediate stimulant. Even the hope of future productivity increases rest on the assumptions that politicians will allocate money to necessary highway projects (rather then pork), and that those future productivity benefits will outweigh the lost productivity from raising future tax rates to finance the project.[20]

3) State Bailouts Merely Shift Money Around

Congress is reportedly considering using stimu­lus funding to bail out states dealing with their own budget shortfalls. This makes little sense as a matter of macroeconomic policy. State spending does not suddenly become stimulative because it is funded by Washington instead of state governments. Either way, any spending "injected" into the economy must first be taxed or borrowed from the economy. It does not matter which level of government is doing the taxing, borrowing, or spending.

Furthermore, sending federal aid to states would not save taxpayers a dime because state taxpayers are also federal taxpayers. Increasing federal bor­rowing to keep state taxes from rising is like run­ning up a Visa card balance to keep the Mastercard balance from rising. The overall costs do not change, only the address receiving the payment.

Governors typically respond that a federal bail­out is preferable because it could be funded with deficits rather than new taxes—currently not an option for the 49 states with balanced-budget requirements. But nobody forced these states to enact balanced-budget requirements, which they are free to repeal. It is disingenuous for a state to enact a balanced-budget amendment, and then demand that Washington bail it out of the conse­quences of its own policy.

Congress already sends $467 billion to state and local government every year—up 29 percent after inflation since 2000.[21] This is well beyond what is needed to reimburse states for federal man­dates. In fact, since 1996, Washington has imposed less than $25 million per state in new unfunded mandates. (No Child Left Behind is neither un­funded nor mandated.)[22] State health, education, and transportation programs remain heavily subsi­dized by Washington.

Because states are so dependent on income tax revenues—which are volatile—common sense says to build rainy-day funds during booms to cushion the inevitable recessions. Instead, states keep responding to temporary revenue surges with new permanent spending programs. Between 1994 and 2001, states flush with new revenues shunned rainy-day funds and instead expanded their general fund budgets by 6.2 percent annually.[23]

All booms eventually end, and these free-spend­ing states left themselves utterly unprepared for the 2002–2003 economic slowdown. Yet instead of suf­ficiently paring back their bloated budgets, the states demanded and received a $30 billion bailout from Washington in 2003. When government bails out irresponsible behavior, it only encourages more irresponsibility. And that is just what happened: After the 2003 bailout, states went right back to spending—with annual budget hikes averaging 7.2 percent over the next four years.[24] Rainy-day funds were expanded, although not nearly by enough. Thus, another recession has brought another round of state bailout calls.

How will states learn to budget responsibly if they know they can keep returning to the federal ATM?

The biggest losers from a federal bailout are the taxpayers who live in fiscally responsible states. They played by the rules and resisted extravagant new spending programs—and will be "rewarded" with higher taxes to bail out neighboring states that went on a spending spree they could not afford.That is simply unfair. And it encourages responsible states to be less responsible next time—better to be the bailout recipient than the bailout payer.

Congress should resist a bailout and instead instruct state governments to set priorities, make trade-offs, and reduce unnecessary spending. States that insist on deficit spending should reform their own balanced-budget laws rather than demand that Washington borrow for them. Finally, any fed­eral aid to state governments should come in the form of loans to be repaid in full, with interest, within three years.

A Better Way

Government spending has an abysmal track record of stimulating the economy. However, these repeated failures have not stopped lawmak­ers from proposing and enacting a seemingly end­less string of "stimulus" bills. Rather than redistributing money, lawmakers should focus on improving long-term productivity. This means reducing marginal tax rates to encourage working, saving, and investing. It also means promoting free trade, cutting unnecessary red tape, and streamlining wasteful spending that all weaken the private sector's ability to generate income and create wealth. Finally, it means strengthening edu­cation—not just throwing money at it. Addressing long-term growth and productivity is more chal­lenging than waving the magic wand of short-term "stimulus" spending—but a more productive economy will be better prepared to handle future economic downturns.