Another feature of the mixed recovery is the dogged determination of failing companies to hang on despite every sign that the game has already ended. I was struck by the following news last week from one failing telecom company: "CoSine Communications, Inc.…announced that after an extensive evaluation of strategic alternatives, the Company has initiated actions to lay-off most of its employees in September 2004, retaining a limited team of employees to provide customer support and handle matters related to the ongoing exploration of strategic alternatives. Management and the Board of Directors concluded that maintaining the Company's existing employee headcount was not necessary for any of the strategic alternatives currently under consideration and the ongoing employee-related expenditures could potentially decrease total stockholder value." ("CoSine Communications Announces Headcount Reductions, " September 8, 2004). Of course, this is a thinly veiled warning that the company continues to generate little to no new business and is on the verge of bankruptcy. It seems over the last 6 months they generated $17 million, a drop of 15% from the previous period and net loss increased to a whopping $17.1 million. They are now down to $44.4M in cash and obviously are finally facing the grim reaper. But the only reason why they have managed to slug it out for roughly four years as a public company is that the technology bubble that first burst in 2000 is still slowly working its way through the tech jungle. So much cash was snatched from unsuspecting investors during the bubble that countless companies have been able to glide along on fumes for quite some time. You need look no further than CoSine's own stock chart. Adjusting for splits, this stock first dropped its wares into the market above $600/share! The high on that first auspicious day was $710. Where is the stock now? You guessed it…a mere $3.15. Essentially, a complete (albeit slow) destruction of the very shareholder value the board seems so desperately interested in preserving now off the backs of their hapless employees.

One mixed signal I find particularly vexing is that beer consumption now seems to have slowed! I can understand how small, niche beers like Boston Beer (maker of Samuel Adams) can run into troubles (they warned of a big shortfall on August 25, 2004). But Anheuser-Busch?!?! They had this to say last week: "'From mid-June through August, however, consumer demand for beer slowed, as it did for many other consumer product categories. Abnormally cool or wet weather in some key markets has played a part, and higher gas prices have also dampened sales.'" (Briefing.com). Supposedly, during recessions, beer consumption goes up or at least does not go down. But are we to believe that beer drinkers currently would rather let their cars guzzle gas than their bellies guzzle beer? Seems counter to the "drown your sorrows" theory! Nevertheless, if higher gas and other economic woes can make middle-America slow down beer-drinking, then we can only imagine what other "middle to low" market items can suffer. I would be very interested in understanding how luxury wining and dining is doing these days!

Now, for a grand finale of sorts for mixed signals…some political commentary (imagine that?!). I am not one to believe polls because I find it hard to imagine that there truly exists a reliable statistical method to take a sample of less than 1500 American voters and question them in such a way that they end up representing the entire United States voting population within a few percentage points. Yet, that is what these polls claim -- let's play along just for the sake of argument: From the Latest AP-Ipsos Poll: "Since the Democratic National Convention ended in late July, the president has erased any gains Kerry had achieved while reshaping the political landscape in his favor: Nearly two-thirds of voters think protecting the country is more important than creating jobs, and Bush is favored over Kerry by a whopping 23 percentage points on who would keep the United States safe. Voters were slightly more likely to say a candidate's positions on issues is more important than leadership and personal qualities. Of those who cited issues, Kerry was favored by 10 percentage points. People making a gut-level choice overwhelming favored Bush, 65-29 percent. The AP-Ipsos survey of 1,286 registered voters, conducted Sept. 7-9, had a margin of error of 2.5 percentage points. The sample of 899 likely voters had a margin of error of 3.5 percentage points. " (The article was unclear on what sample was being referenced when…"Poll: Kerry Lags Bush on National Security" - AP, September 11, 2004). There used to be a time when it was "the economy stupid." Now it is "your very life stupid." (My grandmother always tells me this related joke…When Rockefeller faced a mugger who asked "Your money or your life!" He responded "Can I think about it?")

Those of you who know me probably recognize that I am even more intrigued by the implication from this poll that Bush voters are going with instinct and gut-feel while Kerry voters are making an intellectual choice. Since I have often derided the President for being a mental lightweight, no one should be surprised that I am not surprised by this implication. But what does this say about where America is right now? Can we go so far as to say that those who are concerned about issues are less concerned with terrorism? Can we go so far as to say that those who are afraid of terrorism are scared "out of their minds" to the exclusion of many other important concerns? We need to get serious about asking these kinds of questions. Many regimes from history have done awful things when their subjects were governed by fear. Democracy and freedom cannot thrive in an atmosphere of fear. Have we truly gone from FDR's admonition that 'the only thing we have to fear is fear itself' to a terrorist-driven era where 'the only thing we have to fear is that we are not scared enough'? So far, the financial markets are still far from being controlled by the fear of terrorism. If they were, the market should be a lot lower and the "fear index" represented by the VIX should be a lot higher. Perhaps these characteristics represent a market confident that there will be no regime change in this country in November. Perhaps the market is actually behind the curve. Perhaps the general populace is no longer participating actively in moving the markets --- that is, the petrified amongst us have already removed our money and have withdrawn to higher ground (for example, increasing investments in real estate).

Ó DrDuru, 2004