Little is reported now about the 1998 tobacco agreement in the US. This agreement, (settled upon by tobacco companies after most of the States in the US sued them for the extra costs tobacco was putting on their health budgets), called for tobacco companies to make payments to 46 of the US States in perpetuity; $206 billion for the first 25 years, adjusted for inflation and cigarette sales. (Anyone see a conflict of interest there? Our states addicted to gambling revenue, the US to smoking revenue ?)

Okay so what has this to do with the business cycle? The settlement recommended that the proceeds of the payout be used to fund anti-smoking campaigns. In practice, the pollies are using the money to plug unfunded spending holes (makes them popular), not have to lift taxes (keeps them popular) and in one state already, Illinois, used the funds to allow rebates on the property tax (ensures they are re-elected). Expect much more of that to come.

Do note, and this is not something you are likely to read in any economics textbook, though you might find it in a property valuers handbook, reductions in property taxes inflate land value. And if you care to read a bit of Fred Harrison, (The power in the Land), rising land value further prices labour out of its own ability to purchase what it produces within the economy; when land value goes too high, recession must follow. Watch that 18-year cycle.

2. You may have seen this month; the US was officially dated by the relevant authorities as having entered recession in March 2001. The market had already assessed that likelihood you should have noticed, and lowed March 22. Since the 2nd World War, recessions have averaged 11 months in length. So March (incl) plus 11 months takes us to January 2002. The US market lowed again 21/9 (date); I would watch for a medium term top in the market around Jan 5 or 16th. In Feb, the gurus might announce the recession over. (A good book to read about how markets recover quickly after recessions is "It was a very good year", by Martin Fridson. And for those who know a bit of Gann, the dates will jump out at you.) Further, The Economist Nov 24th page 72 recorded: "Since 1932, Bianco Research has found seven similar sized rallies of the S&P 500 index during a recession. And on each occasion, the rally preceded the end of the recession by an average of three and a half months. Moreover, such stock market rallies have usually continued into the following quarter, with share prices gaining on average a further 22%." And with interest rates being lowered so aggressively, one should always remember the old adage on Wall street, 'don't fight the Fed'; meaning by the time the Bankers are lowering interest rates it is usually time to buy.

3. The Dutch Telecom KPN this week also issued 5 billion Euros worth of shares at half its current share price to reduce the debts from accumulating several years ago, its 3G spectrum. There is your recovery taking place, and the turning of the cycle is occurring right before your eyes. That share issue is a recapitalisation of privilege (of course that's not what conventional economists call it) foisted onto taxpayers via the savings of you and me through all the fund managers who subscribe to the issue. And the cycle continues. (Happens every recession at the bottom; the detail is different, but the method's the same) At the end of the 18 year property cycle it will be the turn of the banks to have to recapitalise once again.

4. The market (consensus of opinion) is usually right I have found. Why? Because there is very little the big US fund managers do not know about in advance, way before the public ever does. They deal in tons of those greenbacks, and there is a lot at stake with their performance. Charts will tell you pretty much the direction of their thinking as their actions of buying and selling are recorded 'on the tape'.

5. And this, again from The Economist, Dec 1 st, page 23; Start quote; "One night at the end of October, Osama bin Laden and 120 bodyguards came to spend the night at the camp of Beni Hassar, near Kabul. He told the camp boss that he would leave at eight in the morning. But he got up at five, prayed and then left. After that, everyone else was ordered out on the news that a missile strike was imminent. The rockets struck at eight. Since missile strikes happen with little or no warning, Mr bin Laden evidently has some very reliable sources of information. The best of these, operated by his legion of foreign supporters, is linked by a sophisticated Codan radio network, of the type used by the United Nations and aid workers in places such as Afghanistan. Despite the destruction early in the war of the Taliban's air defences, Arab and Afghan residents of Beni Hassar were given frequent warnings, via this network, of possible strikes by aircraft." Endquote.

Now I find that intriguing. If Osama knows of such things in advance(and I do remain wary of what I read) you can bet the big fund mangers do too. Note the recent peak of the Dow, 27th, with the news that 1000 marines were already in Afghanistan.

6. October 26th was 45 days from the start of the war. Given all the events of November 27th:

- 300 representatives of UN agencies meet in Islamabad to discuss Afghanistan's future
- arrival of marines coinciding I might add with the all but final
victory of anti-Taliban forces in the north - start of Bonn conference,

I would mark Oct 26 as a zero date in this war, and count forward.