from a free investor's e-mail newsletter which was just released ...
"1. Buffett’s Berkshire Picks New Investments
Warren Buffett’s Berkshire Hathaway bought shares of Johnson & Johnson and France’s Sanofi-Aventis, according to a filing with the Securities and Exchange Commission. It appears that the company also dumped its shares in Gap, Lexmark, and Outback Steakhouse.
Berkshire invested $116.7 million in Johnson & Johnson, buying a total of 1.97 million shares, says the Associated Press. Johnson & Johnson is one of the world’s leading manufacturers of health care products.
The Wall Street Journal reports that Berkshire also bought 488,500 American depositary receipts of France’s drug maker Sanofi Aventis, which it reported owning in its June 30 filing. The investment is in line with Buffett’s plan to purchase more international holdings.
Berkshire did not report owning any shares of Gap Inc. As of its March 31 filing, Berkshire owned 10 million shares in the troubled clothing company. Gap saw a 17 percent decline in earnings in the first quarter, says the AP.
Also absent from Berkshire’s filing was its 2.5 million shares of Lexmark International, a manufacturer of printers, and its 1.8 million shares of Outback Steakhouse, a restaurant chain.
Buffett continued to hang onto shares of Coca-Cola, Anheuser-Busch, and Wells Fargo & Co. Bershire Hathaway owns a variety of companies, including furniture, insurance, jewelry, candy, restaurants, natural gas, and corporate jet firms.
2. Leading Indicators Forecast Housing Crash
A key gauge of future economic activity fell unexpectedly for the fourth time this year amid signs of a slowing housing market, according to a report released by a private research group Thursday.
The so-called U.S. index of Leading Indicators declined 0.1 percent in July to 138.1 after inching up 0.1 percent a month earlier, according to the New York-based Conference Board. Wall Street economists in a Reuters survey were expecting the index to advance by a modest 0.1 percent.
"The economy is cooling but it isn't likely to stall out," said the firm's labor economist Ken Goldstein. "The cooling off in the housing market has been more pronounced, however, and is one factor in the softer domestic pace of economic activity."
Meanwhile, the coincident index - a measure of current economic activity -rose 0.2 percent last month, building on a 0.2 percent gain a month earlier. So far this year, this index has logged monthly gains.
The leading index measures a basket of economic indicators ranging from unemployment benefit claims to building permits and is intended to forecast economic trends up to six months ahead.
According to the Conference Board, half of the ten indicators that make up the leading index increased in July, but it was mainly a decline in building permits and a steady number of weekly claims for jobless benefits that drove down the index.
© 2006 Reuters.
3. Analysts: Crude Prices Ripe for a Fall
"Did you know there's a world surplus of crude oil?" asks Bloomberg columnist David Pauly. According to analysts, the production of low-sulfur crude exceeds global demand by about 1 million barrels a day, or 1.2 percent of consumption.
So why, posits Pauly, are oil prices so high? They reached a record high of $78.40 in July and have hovered in the $70s ever since.
Charles Maxwell, oil analyst at Weeden & Co. in Greenwich, Conn. says to count your blessings because without the excess surplus, oil prices would be in the $90s thanks to unrest in Nigeria, production cuts in Iran and Venezuela, and BP's pipeline shutdown.
Maxwell's two-year forecast for oil is that it will trade between $55 and $75, remaining mostly in the $60s. Maxwell says that oil prices "may actually decline into the $60s next spring, when supplies usually become more abundant, if U.S. economic growth continues to abate."
Maxwell cites energy conservation and the fact that "we're running out of bad things that can happen" for his forecast.
Ben Dell, analyst at Sanford C. Bernstein & Co. in New York tells Pauly that crude oil prices are "ripe to fall considerably." In addition to the crude surplus, Dell points to a drying up of buying by pension funds and hedge funds.
Dell says that the funds have been buying crude on the spot market and reselling for future delivery it at a higher price. But, explains Dell, the storage facilities the funds are using are beginning to reach capacity. Dell gives them about four to six months before they'll need to stop buying oil.
Dell says that, based simply on production costs, crude oil prices should be about $50 a barrel, but a premium is put on oil because of "increased investor interest and concerns about supply disruptions for political or military reasons."
Pauly also has an opinion on the future of oil prices. His hunch is that they "may soon drop even more than the experts think possible."
4. Gas Prices Reach Another Record High
The price of a gallon of gas rose to $3.03 over the past three weeks, according to the Lundberg Survey. That’s a new record high for the second consecutive time, and a full penny higher per gallon than it was post Katrina.
BP’s shut down of corroded oil pipelines at the Prudhoe Bay oil field in Alaska and continued tension in the Middle East kept prices at record highs over the last three weeks.
However, recent developments may help lower gas prices in the coming weeks. BP announced over the weekend that production levels will only be cut in half instead of completely wiped out.
In the Middle East, Hezbollah and Israel agreed to a UN-negotiated cease fire, reducing fears that oil supply in the Mideast would be jeopardized.
In addition, analysts believe that news of a terrorist plot to blow up airplanes, though foiled, will nevertheless result in less air travel and therefore less demand for jet fuel.
As a result, oil prices have fallen to $73 a barrel, well off its July 14 high of $78 a barrel following the onset of conflict in the Middle East. That should, in turn, bring gasoline prices down in the coming weeks.
The wild card for gas prices, however, is the development of a severe hurricane approaching the Gulf of Mexico. So far this season there haven’t been any strong hurricanes, and there is no hurricane activity at present.
Trilby Lundberg, publisher of the Lundberg Survey, points out that when prices are adjusted for inflation, the current average gas price is still well below the all-time high of March 1981. In March 1981, a gallon of self-serve regular gas cost $1.38, or $3.16 when adjusted for inflation.
The lowest average price for self-serve regular gas was found in Charleston, S.C. at a cost of $2.82 per gallon. Chicago’s gas prices were the highest, at $3.29 a gallon on average. "



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