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The North Korean Conflict Will Have Dire Effects on Your Portfolio
*** North Korea Fires Second Nuclear Test
*** Inside Today’s Boiler Room…
Dear American Capitalist Reader,
As I was watching FOX News last night, a “breaking news” bulletin flashed on the screen to announce that North Korea had fired a second nuclear test; just one day following comments from President Bush and other world leaders denouncing the communist country’s nuclear ambitions.
My first reaction was that this news would lead to all-out war. How brazen can this regime actually be by testing another nuclear warhead hours after the world said there would be serious repercussions if North Korea continues down this path?
Well, as it turned out, what was considered a nuclear test was actually an earthquake in northern Japan. What a relief. But then this morning, headlines around the world reported that North Korea’s No. 2 threatens further nuclear tests if the United States continues its “hostile attitude.”
Diplomacy Is Not the Answer
Kim Jong-il is out of control and his regime needs to be eliminated. That’s the bottom line and there really is no other solution. Sure, to speak like former Secretary of State James Baker, diplomacy would be a solution. However, you need two people to tango and the outrageous North Korean leader is someone nobody wants to dance with.
Here’s another problem that hasn’t been getting a lot of news yet: The North Korean population is insanely poor. Some citizens literally have to eat bark off of trees just to survive. Yet, the goofy squad known as the U.N. Security Council feels economic sanctions are in order to send a message to Kim Jong-il that it’s unhappy with his new toy and wishes him to stop.
Please! This is not the answer. Strangling the North Korean population will make the regime even more desperate to look for other ways to make money. And, considering it now owns the secret sauce to the nuclear recipe that countries like Iran and Venezuela want, the concern will be that Jong-il may have to cut a couple of business deals just to improve the country’s cash flow.
Hit on the S&P 500
The North Korean conflict will lead to something monumental, and will have an immediate impact on the world economy and trickle down to personal finances. All escalating geopolitical conflicts always do. Simply look at history.
In the days following Iraq’s invasion of Kuwait and leading up to the Gulf War in 1991, the S&P 500 dropped 7.5%, and the time period consisted of only four months.
The 2003 Iraqi invasion had the same result. Between the time President Bush received permission to invade Iraq to the war’s commencement on March 20, 2003, the S&P 500 lost 8.2%.
This time will be no different if tensions continue to rise and the North Korean conflict expands into other non-American interests. Let’s hope for the world and our wallets that this conflict ends soon and peacefully.
Until tomorrow,
Todd M. Schoenberger,
Senior Equities Analyst, Diligent Investor
Over to Ian Cooper with more…
Inside the Boiler Room…
Eddie Lampert rumors are a dime a dozen.
By mid-September, option traders were scooping up Home Depot calls hoping to profit from speculation that Eddie Lampert would soon invest in the company.
We weren’t buying it. It was highly doubtful given Lampert’s hefty multibillion-dollar position in Sears. We bought Home Depot puts on our doubts, which we cashed out three days later with 38% gains. The rumor died, by the way.
Nowadays, there’s a rumor that Lampert could offer $56 a share for Anheuser-Busch, a rumor that we’re also quick to qualify as bogus, and worthy of a short position. The rumor, according to Bloomberg.com, was courtesy of the London-based Times’ “Rumour of the Day” section.
The problem with BUD -- a takeover would involve the assumption of $7.8 billion in debt, which makes any transaction rumor even more difficult to fathom. We actually don’t think he’ll buy given a lack of a profitable return on investment.
EVS bought BUD puts shortly after taking five-hour gains on Cummins Inc. (CMI) puts.
1. First Fed Southwest
(30.30%)
2. Consulier Engr Inc.
(22.72%)
3. ECC Cap Corp.
(26.92%)
4. Vocaltec Communicati
(18.00%)
5. Jacuzzi Brands Inc.
(16.23%)
1. Australia/All Ordinaries
(0.64%)
2. Turkey/100
(0.56%)
3. New Zealand/NZSE Gross
(0.33%)
4. Hong Kong/Hang Seng
(0.26%)
5. Poland/Warsaw
(0.23%)
Earnings Announcements
Gannett Company Inc, Lam Research, Media General, Monsanto Company, Ruby Tuesday, Sealy Corporation, and Yum! Brands are releasing earnings.
Brought to you by www.americancapitalist.com
Unlock Dates for October 2006
10/3/06 – Visicu Inc is unlocking 6 million shares.
10/3/06 – Castle Brands Inc is unlocking 3.5 million shares.
10/4/06 – Sealy Corporation is unlocking 28 million shares.
10/23/06 – Corel Corporation is unlocking 6.5 million shares.
10/31/06 – Delek US Holdings is unlocking 10 million shares.
Brought to you by www.vixtrader.com
Upgrades and Downgrades
Express Scripts upgraded by Matrix Research from Hold to Buy.
Washington Mutual upgraded by Morgan Stanley from Underweight to Equal Weight.
Shire Pharmaceutical downgraded by Goldman Sachs from Buy to Neutral.
Resources Connection downgraded by Matrix Research from Buy to Hold.
Vail Resorts downgraded by Matrix Research from Hold to Sell.
Legg Mason downgraded by Friedman Billings from Outperform to Market Perform.
Cummins Inc. downgraded by Credit Suisse
Brought to you by www.gressor.com
