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Five Things You Need to Know: Mutually Assured Self-Destruction, Thus Spake Greenspanthustra, Human, All Too Human, 258,000 Square Feet of Luxury, Cisco


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. North Korea Mutually Assures Self of Pending Destruction

North Korea this morning says it has successfully conducted a nuclear weapons test.

  • Demonstrating that they have now developed the full capability of being bombed and invaded by a conquering multi-national peacekeeping force, North Korea announced this morning that they successfully conducted a nuclear weapons test.
  • The North's official Korean Central News Agency reported that the test was performed and that there had been no radioactive leakage from the site, according to the Financial Times.
  • "The nuclear test is a historic event that brought happiness to the our military and people," KCNA said... if by "happiness" they mean "the impending full might and force of a multi-national peacekeeping force determined to blow up our just-completed nuclear bomb-making capabilities."
  • North Korea's foreign ministry last week said that US pressure and threat of sanctions had put the state in danger, but, ironically, not nearly as much danger as the successful test of a nuclear weapon now has.
  • The UN Security Council last Friday agreed on a unanimous statement warning North Korea to refrain from testing a nuclear weapon, or else face unspecified consequences most likely to take the form of a multi-national peacekeeping force determined to "de-nuclearize" the Korean peninsula.

2. Thus Spake ZaraGreenspanthustra

Former Federal Reserve Chairman Alan Greenspan said the "worst may well be over'' for the U.S. housing industry that's suffering its worst downturn in more than a decade, according to Bloomberg.

  • In a speech in Calgary this past Friday, former Federal Reserve Chairman Alan Greenspan said the "worst may well be over" for the U.S. housing Industry, citing as evidence the October 4 report from the Mortgage Bankers Association which showed mortgage applications rose a seasonally-adjusted 11.9% for the last week of September.
  • Greenspan pointed to a "flattening out'' of weekly mortgage applications after they went down "very dramatically," according to Bloomberg.
  • Refinancing applications were up 17.5% from the week before and accounted for almost 47% of all U.S. mortgage applications, their highest share since February 2005.
  • Of course, Greenspan, though now retired from Fed decision-making still has a horse in the race, so to speak.
  • As the housing slump has deepened recently, he is more frequently remembered these days for his 2004 testimony before Congress that consumers would be better off with adjustable-rate mortgages instead of standard fixed-rate mortgages.
  • "Recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade," Greenspan said in 2004.

    "WHEN ZaraGreenspanthustra was 60 years old, he left his home and the lake
    of his home, and went into the mountains. There he enjoyed his
    spirit and his solitude, and for ten years did not weary of it. But at
    last his heart changed,- and rising one morning with the rosy dawn, he
    went before the sun, and spake thus unto it:
    Thou great star! What would be thy happiness if thou hadst not that ridiculous fixed-rate mortgage and had instead opted for a low introductory rate adjustable-rate mortgage for three years followed by a shining multi-decade period of falling interest rates?
    Lo! This cup of high rates is again going to empty itself, and ZaraGreenspanthustra is
    again going to be The Maestro!"

3. Hovnanian: Human, All Too Human

Last week as New Jersey upscale homebuilder Kara Homes sought Chapter 11 bankruptcy protection, another large New Jersey homebuilder, Hovnanian Enterprises, said slower sales will force an unspecified number of layoffs.

  • Hovnanian CEO Ara K. Hovnanian, in e-mail to employees last week that was obtained by the Asbury Park Press, said the company remains strong, but that market conditions will force an unspecified number of layoffs.
  • "Most of our markets have been affected, some severely," Hovnanian wrote. "At this point, we are preparing for a long period of slower sales, at least through 2007 and perhaps beyond," the newspaper reported.
  • After looking at its staffing levels, the company determined that at many of its locations, including corporate headquarters, there was not enough work for all of its employees the email said.
  • Still, the company has about 500 more employees now than it did a year ago, Chief Financial Officer J. Larry Sorsby said.
  • The company has about 6,600 employees nationwide.
  • In addition to the future layoffs, the company has taken other steps to deal with the challenging market, according to the article, including:
    - Making adjustments to pricing to make sales, including added features, free options, and base-price reductions.
    - Re-evaluating current land positions and canceling contracts for land purchases that can't be renegotiated on more favorable terms.

4. 258,000 Square Feet of Luxury

Standing on a corner in Tucson, Arizona, Shopping at Tiffany's
It's a girl, my lord, in a flatbed Ford, slowing down to look at Armani

  • Louis Vuitton and Tiffany & Co. will soon make their home at Tucson's La Encantada shopping center, according to th Arizona Daily Star.
  • But why Tucson of all places? Le Encantada has been developed and marketed as an upscale "lifestyle center" for shopping and dining.
  • And Tucson's median household income hovers at $41,500, below the national average of $46,200, according to U.S. census figures.
  • Luxury retailers are counting on three groups to sustain the 258,000 square feet of luxury retail space:
    1) Affluent Mexican nationals
    2) Affluent local residents
    3) Resort travelers
  • Still, as more high-end specialty stores have opened in the last couple of years, the customer base has been divided into smaller pieces, Sydney Duncan, owner of W Boutique, told the newspaper.
  • "The (new) boutiques are spreading the customer base thin," Duncan said, noting slower sales. "We're competing for the same customer base of high-end customers. Everyone is feeling the crunch."
  • Luxury retail motto: divide and conquer.

5. Cisco Ponies Up $100 Million to Shed Brown Paper Bag Image

Cisco (CSCO) kicked off a $100 million campaign last week in an effort to make its brand a household name, ZDNet News reported.

  • The $100 million campaign, which includes a revamped logo, will run in magazines and newspapers, and on television, Web sites and mobile phones.
  • The ad campaign is different from previous Cisco campaigns because it doesn't just target the corporate decision makers who actually buy the company's products, which struck me as a bit weird because I've never really thought of Cisco as a "corporate decision maker's" product.
  • "We're trying to increase general awareness in the company," Sue Bostrom, Cisco's chief marketing officer, told ZDNet News.
  • "When we tested audiences, we found that our familiarity is lower than our technology peers."
  • True enough, whenever someone mentions fortified wine technology to me a number of competing products come to mind before Cisco.
  • Product such as MD 20/20 for that perfect "Mad Dog" vision, or the back alley conductor's call for "all aboard, the Night Train," or the answer to that eternal question: "What's the word? Why, it's Thunderbird!", and even that infamous Hibernian brown paper bag flower, Wild Irish Rose.
  • Bostrom argues that more of Cisco's products are finding their way into the hands of consumers by way of their corporate IT departments, which may explain why our Internet connection seems a bit slower than usual this morning.

Cisco (CSCO) aims to move ahead of competitors in
the fortified wine technology sector.

No positions in stocks mentioned.

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