For those folks who have accounts with us, you may now go to:
and fill out the account information and view your accounts online. If you
have trouble filling out the form, or in getting online, call and we will
help you with the process.
NASD regulations require the aacesonline site to be secure. Thus your
password must be changed every ninety days. You will be prompted to make this
change when needed. President Bush, Homeland Security Director Tom Ridge, and
the NASD thank you for your cooperation.
30 August 2002
6:34am and the last business day of real summer begins. Since CNBC is leading
with an anti union analysis of the baseball strike we presume that today is
going to be a non event. The move higher in the NASDAQ may continue as mutual
funds try to mark up their depressed holdings. We don't know why they bother.
And since Sun Micro and Novellus had more bad news yesterday evening no major
NASDAQ rally should be expected. Today, Goldman Sachs downgraded all the
RBOC. Glad we sold most of our holdings and we are looking for a new entry
point. Bristol Myers was weak yesterday afternoon because the SEC is
conducting a formal investigation of the channel stuffing that occurred last
year. We are waiting for the Imclone fiasco investigation to start before
repurchasing the shares, unless the share price drops to $15 in a major sell
VP Cheney's continuing verbal attacks on IRAQ and his desire to go to war
with IRAQ is a real downer. Never mind the effect it is having on the stocks
markets, the effect on the American psyche is profound. Whenever Bill Clinton
talked of military action in Bosnia or Serbia or Somalia, the fact that
Clinton avoided service in Viet Nam was always given as a reason for him to
back off and let those who know decide. Now we have the Chicken Hawks, those
who avoided service in Viet Nam because they were too busy or whatever among
whom are Bush, Cheney, Card, Perle, Wolfowitz, and Ashcroft plus Limbaugh,
Kristol and O'Reilly of the Republican Party and Right Wing Media, pushing us
into a war with no known outcome.
It is a given that Saddam Hussein is a bad guy who represses his people and
is not averse to using poison gas and chemical weapons. That same statement
can be made about twenty dictators around the world, nineteen of whom are
considered allies of the U.S. In his speech yesterday Cheney specifically
mentioned oil and the fact that Iraq controls ten percent of the world's
reserves. And that fact is what makes Saddam different from the other twenty
But in the 21st Century America cannot adopt a first strike philosophy. We
should use all the diplomacy and cajoling we can, we should be aware, we
should isolate, but we cannot attack. If we do, we will lose even as we win.
With the sophisticated listening and looking devices we have it is impossible
to believe that we can't isolate Iraq and watch the movements and be ready to
strike if any belligerency is detected. That's why we spend billions on black
hole defense every year. And if we don't have that capability then the folks
running those programs should be fired. The ridiculous fact that the FBI does
not have its computers connected so that they can communicate intra agency is
a travesty. And more of a travesty was the fact that no Senator at the
hearing where that fact was revealed seemed surprised or demanded immediate
action to remedy. The FBI director said it might take several years any no
one gagged. Forget about dropping smart bombs on piles of rocks in
Afghanistan, fix the computers.
Back to business and Merrill Lynch has downgraded Wild Oats. Guess they are
upset that JP Morgan was awarded the underwriting of the four million shares.
Glad we sold ours since it looks like we'll have a chance to buy it much
cheaper. Also, Hain Celestial earnings which were announced after the close
were in line but HAIN lowered expectations going forward and so that stock
isn't going higher anytime soon.
7:09am and the stock futures are indicating a slightly down opening. Looks
like it's going to be all baseball all day. Beats bombing Iraq.
7:36am and the big number of the day is July personal income was unchanged
and personal spending was up 1%. 1% increase in spending is the largest
increase this year, until it is revised next month. The Michigan Consumer
Confidence number will be announced at 9:20am and we'll be right on top of
7:41am and Nestlé's CEO is quoted as saying that he doesn't think U.S.
authorities would allow his company to acquire Hershey since together they
would control 60% of the chocolate market in the U.S.
9.28am and the Michigan number was down a point while the Chicago PMI was up
4 points. Chairman Greenspan of "spend the surplus before it gets too large"
fame said today that the FED couldn't do anything to prevent the stock market
bubble. Guess he never heard of raising initial margin requirements. The
market measures rallied on the Michigan and/or Chicago numbers we think.
Whatever, stocks are now a bit higher and breadth is positive.
10:44am and baseball is saved. The owners and union have reached a contract.
Hooray, hooray and the DJIA rallied 6 points in celebration. You read it here
first although you won't read this till tonight or tomorrow or Monday. So
rather we wrote it here first for you to read later. Oops, the rally is
fading. Time to get back to worrying about war.
12:26pm and the bond market is closed and the stock market should be. The
NASDAQ is negative but the DJIA and S&P are up a bit. We are trading a bit of
Biogen off the $33.55 level. Didn't get all we wanted even though we are
trading reduced size because of light volume and problems with size the other
day. We think Fidelity will mark it up at the close.
1:56pm and entering the last hour of trading the NYSE has advancing issues
ahead of declining issues by a 2/1 margin. Breadth on the NASDAQ is negative
as it looks to be giving back its gains of yesterday.
3:02pm and the DJIA, S%P 500 and NASDAQ all closed fractionally lower for the
day. For the year to date the Model Portfolio is all cash and unchanged,
while the DJIA is down 13%, the S&P 500 is down 19% and the NASDAQ is down
31%. We lost 10 cents a share on our Biogen trade. No mark ups today. Have a
good holiday weekend.
And tomorrow is another day.
29 August 2002
7:10am and as we begin the day the futures are slightly lower. Lehman reduced
earnings estimates for GE by 5 cents per share for 2003 from $1.81 to $1.76.
Retail stores continue to lower guidance on same store sales and that has the
markets worried because the consumer has been the driver of the economy the
last few years. We know that isn't new news but we would guess the slowdown
will continue. Going forward we think that September same store sales are
going to be punk because of all the memorials and the maudlin media coverage
of events surrounding the anniversary of 9/11. We doubt that the coverage
will place shoppers in a jubilant mood.
7:35am and jobless claims rose 8000 to over 400,000 in the week of 8/24. We
learned today that the U.S. is in a growth recession which is when an economy
is growing below its potential. That's a new term that satisfies both
recession fans and growth fans. The Commerce Department confirmed today that
GDP grew at 1.1% in the second quarter of 2002.
7:54am and our man on the trading floor just called to tell us that there is
a rumor sweeping the bond pits at this very moment that the US is going to
secretly attack Iraq on November 30 and that is the reason bonds are rallying
and stock futures are selling off.
8:45am and the DJIA is down 1.5% as if the NASDAQ and S&P 500. Much is being
made of the fact that bullish sentiment jumped to 47% in the latest
Investor's Intelligence survey. This week's market action has gone a long way
to curing that bullishness.
9:15am and the stock markets are rallying. We've been reading about the
closing of the spreads between corporate bonds and Treasuries. The spread is
the difference in the yield an investor receives from buying a corporate bond
of a certain maturity-say ten years-versus the yield the investor would
receive if he/she purchased a Treasury bond maturing in ten years. For
example the ten year Treasury is currently yielding 4.13%. So if an investor
bought a corporate bond due in ten years yielding 7.13% we would say the
spread was 300 basis points or 3% over Treasuries. Those spreads have been
narrowing recently, say from 300 basis points on single A rated bonds to 250
basis points. Some analysts are saying that the closing of the spread is the
result of investors having more confidence in an economic recovery. Our take
is that folks our panic buying higher yielding bond funds, since Treasuries
don't yield what they are accustomed to or what they need to live on.
Investors buy mutual funds that invest in lower quality bonds because those
funds have the higher yield and that inflow of investment money causes the
bond funds to buy in the open market and the demand lowers the yield and thus
shrinks the spread. We have repeatedly warned that individuals chasing yield
by buying lower quality funds is going to create the same gnashing of teeth
and bitter recriminations as the stock bubble bursting has, when interest
rates begin to move higher as economic recovery occurs.
9:29am and the NASDAQ is positive while the DJIA remains negative. Can the
Janus funds of the world be starting the month end markup period so soon?
9:35am and several folks have asked about a package of sold out telecom
stocks to buy. The idea is that an investor buys six or seven stocks with the
hope that over the next few years as the telecom fiasco works out only one or
two go bankrupt, one or two go up/down ten percent, and one or two rise five
to ten times in value. In a year like this such a package seems reasonable.
We just think it is too early to construct or buy one. We know that NT is
selling at $1 and LU at $1.73 but they both could go to fifty cents in the
next big down move. By the way, we are using NT an LU as examples, we would
probably not pick them. For now, we are waiting and watching and making a
list. We'll be checking our list twice to find out which stocks we think will
be nice to us.
10:25am and the NASDAQ remains higher while the DJIA is lower. We are
mystified by the TV folks that whenever they talk about the West Nile Virus
they always show a picture of a mosquito and then CNBC usually shows a
picture of an arm being bitten by hundreds of mosquitoes. What does that all
mean? There must be some subliminal message that we aren't receiving.
11:36am and the stock market measures have all turned slightly positive and
breadth is positive also. Softbank, the Japanese Internet investing company
sold 30 million shares of Yahoo yesterday at $9 per share to raise cash.
Yahoo bought back 11 million of those shares and the public the rest. Merrill
Lynch upgraded it opinion of Yahoo today from reduce to neutral. We would bet
that Merrill was part of the Yahoo/Softbank transaction and from recent
filings we would guess that Fidelity was a buyer of part of the block. That's
all the more reason for Merrill's analyst to raise his rating on the stock if
he can make a big trader like Fidelity happy. Raising a rating right after
the investment bank you work for has assisted in a transaction for the
company whose rating you raise is now called "doing a grubman".
1:12pm and the afternoon plus summer doldrums have begun. Now the only event
to keep us awake is to guess whether we close up or down for the day. We
DJIA down 65 points for the day and the NASDAQ up 5 points.
1:15pm and the Office of Homeland Security has announced that agents at
airports will no longer question passengers about their bags since terrorists
would probably not answer the questions honestly. Duh.
2:05pm and an analyst is on CNBC talking about Boeing. We have the sound off,
we usually do, but scrolling across the bottom of the screen reveals that the
analyst owns no Boeing stock although he is recommending the stock. We have
never understood why not owning a stock you are recommending that investors
own is seen as a sign of objectivity. We would like the folks telling us to
buy a stock to own a big chunk of it themselves. We never buy for clients
what we aren't buying for ourselves at the same price and at the same time.
We have the same practice when selling a stock.
3:02pm and the DJIA closed down 30 points while the NASDAQ was up 20 points
or 1.5%. So much for our guessing. The S&P 500 was slightly lower.
And tomorrow is another day.
28 August 2002
8:07am and we are running a little late this morning as holiday fever strikes
Soldiers Grove. The stock futures are indicating a lower opening and
Treasuries are a bit firmer.
One reason trading activity is light is that many investment folks are on
vacation. But a more serious reason is the War talk that is permeating the
airwaves. The stock market hates uncertainty. Not the uncertainty of whether
the US can succeed but the why and how and when and what of any war. Coupled
with lousy earnings, job layoffs and the summer doldrums there is not much
positive news to get stocks moving higher. Correspondingly, the bad news is
out and it doesn't seem to be getting any worse. The panic of July has
subsided and while there doesn't seem to be much incentive to buy there also
is no longer much incentive to sell. After Labor Day when folks return to
work and 9/11 and the coming November election and more War talk the markets
will be more likely to react. And so as with last year, enjoy these last few
days of August torpor, it's not likely to last.
The Model Portfolio is now 100% cash with a value of $429,650 which is $154
less than it was at year end. The DJIA is down 13%, the S&P 500 is off 20%
and the NASDAQ is down 31%. Most accounts are also all cash. Since we were
able to sell the HAIN and OATS today we have accomplished our goal of being
all cash and ready to start over after the Holiday. Larger accounts are
unchanged to up 2% and smaller and more aggressive accounts range from up 2%
to down 5%. Our recent flurry of trading added about 5% to account values and
for that we are grateful.
8:33am and Wild Oats priced a 4.45 million share offering at $11.50 so it
should sell well. We had been trying to sell to get ahead of that offering.
The offering put a good bid in the stock and so we sold at $12.26 for a
scratch profit. We had been hoping that a stronger market would have allowed
the company to price the shares to be sold higher. Since the company is happy
with $11.50 we'll gladly take $12.26 for our shares.
9:26am and speaking of nothing we read that US Airways which is in bankruptcy
is asking all its employees to take pay cuts, etc., to make the airline
solvent. Oh, and by the way, executives of the now bankrupt airline,
according to The Pittsburgh Post Gazette, are still seeking $6 million in
bonuses they say they earned before the airline filed bankruptcy. That
attitude certainly will inspire sacrifice.
9:33am and Pepsi is tanking on a downgrade. Several days ago PEP was trading
at $43 per share and it now is at $39.60. In an earlier post we bemoaned not
buying Pepsi at $36 in the July sell off. We wonder if we will buy it now or
wait for the $32 number we had picked?
11:13am and we were reading on a website this morning a short essay on
preserving capital. It reminded us of our response to an inquiry last week.
As we go to all cash in most accounts after a nice 5% gain we would like to
reiterate our philosophy for these volatile times.
You asked what percentage of liquid assets should be in stocks at our age?
First of all, we don't run money for folks based on age. We manage money for
our clients based on market risk. Our oldest client is 101 and he owns the
same stocks and has the same market exposure as our grandson who is 5. Since
we tend to error on the side of caution we have on average been less than 50%
invested in stocks for many years. But there are times of the year, usually
year end when we will raise exposure to 100% if we think the risk reward
ratio justifies that posture. Our philosophy presumes active management and
the willingness to take losses and realize short term gains. Most folks don't
like the activity involved in this approach but we find it works for us and
our record gives credence. We can't tell you how much you should invest on
your own because we don't know with whom you are investing and what their
philosophy and objectives are. We used to try and answer the question and
Now we have reached the point where we say,
give us all your liquid assets and let us do the worrying. We will
take the responsibility and we don't know anyone who will do better than we.
Nor do we wish to vouch for another's investment expertise. Finally your
question reminds us of two questions we asked early on in our former life
when we were actively engaged in farming. The first question was our asking a
farmer how often one should trim a horse's feet. The answer was obvious, "as
often as the horse needs it". Our second question was when we were digging a
foundation for a chimney for our wood stove and that question was how deep to
dig the foundation and the answer was, of course, "deep enough." Hope we have
been of some help.
11:25am and we sold our remaining HAIN at $14.50. HAIN earnings are being
announced tomorrow and whoever is buying thinks they will be good. We have no
opinion but since the market is so punk we can only sell when there is a
buyer. We lost about 50 cents per share on the trade.
11:55am and breadth is negative while volume remains light.
12:35pm and we bought BGEN at $34.32 in some of our larger trading accounts
for a one day trade since the DJIA is down over 150 points and we expect some
rally this afternoon. The $34.50 level has been a good trading buy level for
the past month in good and bad markets.
1:42pm and we are nearing the last hour of trading. The DJIA and S&P 500 and
NASDAQ have all been down over 2% today. Volume is very light. There is talk
that since Friday is the end of the month that it will be mark-up day for the
mutual funds. With the light volume anything is possible.
3:02pm and we sold our BGEN at $34.19 a half hour before the close for a loss
of 15 cents per share. Had we held a bit longer we would have made a few
dollars, but the size we were trading required us to move early. The moral is
don't day trade large size in thin markets even if the price is right. The
DJIA and S&P 500 closed down over 1.5%. The NASDAQ lost over 2%. Breadth was
two to one negative and the down/up volume was 8/1. The only saving grace was
that volume was very thin.
And tomorrow is another day.
27 August 2002
7:18am and as we enjoy another beautiful morning in God's country having
removed the sleeping bat from behind the picture on the screened porch we sit
down at our computer to find the stock futures suggesting a downward bias to
the opening. For those interested, there is a slight opening on our porch
through which a bat looking for a place to sleep after a long night of eating
mosquitoes slips once or twice a month. We have a picture frame that makes a
perfect bat motel and so every morning it has become our job to check the bat
motel for occupants. Today's occupant was removed to more appropriate
quarters in the barn. So much for our excitement for the day.
We really don't expect much from stocks the next few days although with the
low volume and few participants anything is possible.
7:31am and durable good orders came in up 8.7%, ex transportation up 3.9%.
Stocks are rallying and bonds are bombing. Last month orders were to down
4.5% from down 3.8%. The CNBC talking heads are talking to the other three or
four people besides us who are watching, and we are only here because Kathy
is on the Po. It now looks like an up opening in stocks and a down day for
8:24am and oil is trading over $29 a barrel in the near months. That's a heck
of a price for oil and if it continues will be a damper on an already
dampened economy. The DJIA looks to open about 75 points higher and then we
may all take a nap.
9:05am and we neglected to mention yesterday that we sold our Ford position
for a scratch profit. On our sell of HAIN yesterday we sold 500 shares from
the Model Portfolio. The Model Portfolio is now 95% cash Rich J so we hope
you are calmer.
The stock markets have turned negative and bonds continue under pressure.
Volume is light.
9:28am and consumer confidence came in at 93% down from 96%. Those numbers
mean nothing to us but we are sure some folks will use them as a reason to
get long or short.
11:23am and there isn't much happening. Breadth is negative, volume is light
and there is no one around to buy or sell large blocks. We presume the
markets will get even thinner as the week progresses. We are looking for an
opportunity to sell our GMH but the stock is just not doing enough volume to
move our small block. We may start piecing it out later today if a rally
11:30am and the Congressional Budget office today slashed its estimate of
budget surpluses over the next ten years from $1.7 trillion to $336 billion.
Last year at this time the same folks were estimating a budget surplus over
the next ten years of $5.6 trillion.
That's a revision!
12:20pm and Citigroup's Salomon Smith Barney unit admits it gave up to
200,000 share of hot IPOs to executives of WorldCom. The lawyer for Citigroup
says there was nothing illegal about this. We remember a discussion we had
years ago with a partner of a NYSE firm about legal and ethical and moral.
Some things never change.
1:45pm and the stock markets are lower. We are trying to sell the HAIN
position at $14.75. It looks like someone is buying ahead of earnings which
are coming on Thursday. We would just as soon sell and make up our minds
afterward. But the markets are so thin we can only show an offer and hope
someone is interested. We sold our remaining GMH at $10.70 for a $1 per share
profit. We are also offering our Wild Oats holdings at $12.25 because it
looks like there is a buyer. If there is a last hour rally we may luck out.
For now, the popular measures are down over 1%.
3:02pm and the DJIA closed down over 1%, the S&P 500 was down 1.4% and the
NASDAQ was off 3%. We sold a few shares of OATS at $12.18 including 500
shares in the Model Portfolio for a scratch profit. We sold part of the HAIN
at $14.75 including 500 shares in the Model Portfolio for a 50 cents per
And tomorrow is another day.
26 August 2002
7:37am and there is news that Nestlé is going to bid $85 per share for
Hershey. Nestlé is going to buy Dreyer's Ice Cream which is acquiring
Ben & Jerry's so two icons of the American way of life are off to Europe in one
year. Nestlé chocolate is sooo bad. Other than the Hershey news there is not
much of interest occurring. According to the gurus there are a lot of
economic indicators being reported this week so we will be here to report
them, mainly because our partner Kathy is floating down the Po River in Italy
on a fancy barge and so we have to man the battlements for the week.
8:11am and saving the best for first we are happy to report that the
is down one-eighth of 1% for the year but among friends (not the
SEC) we will round it to unchanged for the year. In dollars we are down $600
from year end 2001 including fees and commissions. The value of the Model
Portfolio on 8/23/200 was $429,265. On that same date the DJIA was down
11.5%, the S&P 500 was down 18.1%, and the NASDAQ was down 29.2%. We have
reduced significantly the number of stocks we own in the account and thus our
risk exposure and with a rally this week hope to be at down to Hain and Wild
9:05am and new housing starts were up smartly although last month's were
revised downward so that this month's numbers would look good. New home
starts were up 6.1% and existing home sales were up 4.1%. On the negative
news front Wal-Mart said same store sales growth for August would be at the
low end of expectations. The stock markets are meandering in desultory
trading and Treasuries are a tad weaker.
10:07am and a Fed governor is on the tape implying that the Fed doesn't need
to ease to save the economy. And so stocks have slipped lower. With the thin
markets this week any news will have a magnified effect. Now we'll go back to
11:51am and the stock markets continue to inch along down less than 1%.
Breadth is mixed and volume is very light. And there is no news.
2:06pm and we sold our 100,000 share Palm trade at 92 cents for a ten cents
profit. Since we were buying in 5000 to 10000 share amounts it was nice to
make a quick $500 to $1000. We sold our QQQ at $25.25 for a profit in many
accounts of $1.10 per share and a few others made a scratch profit. We are
determined to raise cash and we are now down to three stocks, GMH, Hain and
Wild Oats. We have the GMH in for sale at $11.
3:02pm and we sold some HAIN at $14.50 that we had purchased at $13 and
$12.80 a few weeks ago. The DJIA closed up 45 points, and the S&P 500 and
NASDAQ were up .75%. Volume was light.
And tomorrow is another day.
23 August 2002
6:46am and we noticed in last nights post that we were looking for 200 more
pints in the DJIA. Of course we meant points. We must have been in a hurry to
have our Kaliber after work. As we sit down to our computers the futures are
suggesting a lower opening. CNBC is discussing WAR with Iraq and its effect
on the economy. Even a Democrat Senator Corzine is afraid to say that
invading Iraq as a first strike to get rid of someone we think is a bad
person is morally wrong. And so as WAR talk permeates the air we wonder how
the markets will continue their advance.
Last night we reread our Winter 2002 Lemley Letter that is posted on the
website. We should first apologize for the lateness of the Summer 2002 Lemley
Letter and we fear it is becoming the Summer/Fall 2002 letter. Anyway, in
reading that letter we noticed that when we sent it to readers we were long
Ciena at $16 and some other stocks that were trading in the teens and are now
trading in low single digits. We had been trading Tellabs and Ciena for nice
gains and owned AT&T Wireless at a cheap $12 per share. It made us realize
how lucky we have been to sidestep the carnage of this year. And it also gave
us new resolve to eliminate our remaining stock positions now that we are
ahead for the year. A fresh start this autumn would be a good idea.
Saudi Arabia announced that it would make up for lost Iraq oil if there were
a war. They would encourage OPEC to increase production. How kind, and they
would also make extra bucks.
7:40am and we just finished reviewing year end values versus current values
of our accounts. Our larger accounts are ahead for the year as are some of
our mid size aggressive accounts. Many of our smaller accounts are down 2% to
5%. Those were the same accounts that were up 25% or more last year so there
is some regression to our mean performance occurring.
The WSJ reports that Sandy Weill, the CEO of Citigroup, is being investigated
by the NY State Attorney General. That is affecting the DJIA since C is down
a couple of points on that news. We do believe there is much more to come on
8.32am and as the stock markets open a sea of red covers the screen. We have
AT&T Wireless in to sell at $6, GMH at $11, the QQQ at $26.25, and Ford at
$12.25. We hope to catch the counter rally to this down opening in about an
9:27am and there has been no rally yet. The major stock measures are down
over 1% and volume is negligible. There may not be enough trading interest
for anything to happen today on our sales. We ourselves are leaving early to
go to Madison.
10:01am and the reason we are trying to sell the GMH and AWE and QQQ is that
on a technical basis they run into resistance right above our sale prices.
GMH currently trades on a discounted arbitrage basis with DISH, which is
offering .73 shares on the merger. The discount is over 25% annualized and
50% on a real time basis. This suggests that the street is not confident that
the merger will be approved. If the merger is not approved GMH stock will
sell off initially as arbitrageurs sell the GMH stock they have purchased
versus their short position in DISH. We only want to own GMH if the deal
doesn't go through since we don't like the debt load of the combined
11:49am and we decided to sell the AWE at $5.90. The stock may be down from
$30 several years ago but Palm is down from $95 and sells at less than a
dollar. Obviously we think AWE is a more viable company but it is also up 50%
in price in the last week on very low volume. We have seen AOL, Z and now EMC
drop by $1 per share in the last day after we sold them, and we are intent on
raising cash and locking in our 20% profit.
We sold a little of the GMH at $11 but since that is an arb situation we are
content to wait on that stock. The QQQ are off more than our profit so we'll
wait on that and the same goes for the Ford. We sold the balance of our
Fleming at $12.50 which was a $1.50 per share loss for most of the accounts.
We also have our HAIN position and a very small OATS position that we plan on
holding for now. We have the MODEL Portfolio down to only 10% invested from
45% in the last few days. And even with todays down market we are even for
12:41pm and we are taking the rest of the weekend off. As we leave the major
measures are down over 1.5%. It will be interesting to see whether the
hedgies can rally the markets in the last hour. We hope so because we are
leaving our sell orders in.
And tomorrow is another day.
22 August 2002
7:28am and as we wait with bated breath for the weekly jobless claim numbers
it look like the stock markets will open a bit higher. Treasuries continue
under pressure. There are a lot of corporate bond issues that require hedging
in the Treasury market coupled with a very complicated -- for our mind at least
-- mortgage versus mortgage backed security arbitrage that is affecting the
prices of Treasury issues. Flash! Jobless claims were down 2000 in the latest
week after adjusting the week before up 2000 so jobless claims weren't really
down. Anyway, in the last week of August only two people in the world care
about this number and they are the two people talking on CNBC where we have
the volume turned off.
We did some determined selling yesterday and will do so again today if the
opportunity presents itself. The rally has helped our accounts and with a
good today the Model Portfolio will push to the plus side for the first time
since year end. We think the low volume rally will disappear in September and
we are going to be back to cash is king by then. We are treating the current
10% to 25% rally in our stock selections as we would a year end rally and
moving to the sidelines. We know the market anticipates events six months
out. Unfortunately larger deficits, the threat of War, and lousy earnings and
sales are still a probability six months from now. And on that upbeat note
will go read the morning papers.
8:33am and the stocks are opening a bit softer as the futures sold off in the
last half hour before trading started. Footlocker came in with decent
earnings and we are hoping to sell the stock today. Right now we have it in
to sell at $11. If we get a decent rally today we will let SGP go and also
BMY. EMC popped over $8 at the close last night and we would like to sell
around $8.10. That's our wish list for today.
10:27am and we've been busy churning and earning for the last few hours so we
haven't had time to post. The markets had a nice move higher and so we sold
the BMY at $25 for a $2 per share profit, the SGP at $24.50 for $1.75 per
share, EMC at $8.10 for 70 cents per share and Z at $11 for a 50 cents per
share loss for most although a profit for a lucky few. We sold a big chunk of
our Fleming at $12 for a scratch profit to $1 per share gain. That's a good
morning's work raising cash. We are following our discipline of selling
stocks that haven't worked as well as those that haven't.
10:41am and the markets have stabilized at higher levels and Treasuries
remain under selling pressure. We are writing tickets and watching our few
remaining stocks move higher.
12:47pm and stocks have turned slightly lower. Oops, now they are higher. The
volatility in movement is caused by the thinness of the markets and it will
be this way till after Labor Day. We are feeling good with our trading
profits and higher cash reserves. As we always say we prefer bunt singles and
stolen bases to swinging for the fences.
2:03pm and the stock markets are moving higher. Breadth is positive and
volume is summer light. Looks like stocks will rally in the last hour. The
S&P 500 has broken through resistance at the 950 level and the DJIA is over
9000. We think the DJIA has another 200 pints of potential upside but we are
also glad to be moving to the sidelines. Almost all accounts are now up for
the year, and plus 40% to 80% for the last four years which is no mean feat,
if we do say so ourselves. We hope to move to an all cash position by Labor
3:02pm and the DJIA closed around 9055 up a bit over 1%. The S&P 500 was up
1.3% at 962 and the NASDAQ gained 1% to close at 1422.
And tomorrow is another day.
21 August 2002
7:10am and thunder storms are on their way while the stock futures are
suggesting a slightly higher opening. There isn't much morning news to move
any stocks and given the time of year, unless the hedgies are in a mood to
play we may have a dull day.
President Bush has called all his military advisors to The Waco Ranch to
discuss military matters. All the hoopla about Iraq is taking on the
character of the little boy who cried wolf. With 9/11 coming and the
potential for media created mania maybe war with Iraq will occur. And if it
does we will win it handily. We will also be violating a moral and ethical
principle of not striking first. But our take is that the Iraq war talk is on
a par with the "WAR" we are waging and the "wartime" footing the US is
supposedly on. The time span of the war talk verbiage has exceeded the
capacity of most Americans to stay interested. And since only Special Forces
troops and their families are sacrificing anything except some individual
freedom, which doesn't seem to bother most folks except a few at our end of
the political spectrum, we think the current effect on the markets is muted.
But come September, the media will begin filling the airwaves with pictures
and pundits and it will be impossible to avoid the maudlin coverage that is
sure to be presented. At that time, the markets may be much more affected and
that is one reason for our cautious attitude.
Another reason is that the Federal and many state budgets are in serious
deficit. Deficits are OK in tough times if they are the result of spending or
the providing of spendable money. One reason that consumer spending
continued to float the economy through the first quarter of this year was the
$100 billion tax rebate of last year. But all the tax cuts going forward that
are increasing the deficit exponentially are not of the spending variety. And
state governments are required to balance their budgets. The only way to do
that is to cut spending. It's obvious now that Governors Whitman from New
Jersey and Thompson from Wisconsin took cabinet positions to avoid the
revenue shortfalls that they knew were coming in the states where they were
Finally, the desire to recover lost profits has once again after a few short
months overtaken the fear of losing more. We are coming into that time of
year when volatility in the markets increases. So for all these reasons
caution is warranted.
7:38am and stock futures remain slightly higher while Treasury bonds are
8.25am and Verizon is going to sell $1 billion in 10 year bonds. They'll be
priced to yield about 7%. We remember when we started the bond desk at the
firm we worked for back in the 1960s that AT&T sold 6% debentures due in
1995. All the pundits waxed eloquent about the value of owning that
debenture. Unfortunately we were then on the cusp of the rise in Federal
deficits and the corresponding rise in interest rates that saw the 30-year
Treasury sell to yield 14% in the 1980s and short rates exceed 21%. That
can't miss AT&T 6% was priced at less than 50 cents per dollar of par value
in the 1980s. In other words, folks who bought that bond lost 50% of their
principal in 15 years. Of course if they held to maturity they got there
money back. But a lot didn't hold.
8:48am and stocks are higher but volume is light. We aren't expecting much.
It's nice to see green instead of red though.
8:51am and it's interesting that by mid-August the birds are no longer mating
so their songs of spring and early summer have ceased. Song is replaced by
the chirping of crickets that are seeking mates and will keep on chirping
till the autumn frost ends their season. Of course the crows can't keep quiet
and the barn swallow babies who are learning to catch bugs on the wing keep
flying into our windows in their determination to catch their flying food.
Happily the hayfields have had their second cutting and so the cows and
horses are happily munching on fresh grass shoots. With calm markets and cool
weather we are enjoying the last days before the fall.
9:56am and the popular measures have turned negative. Breadth remains
slightly positive and volume is non-existent.
11:22am and as the markets rally to positive we have decided that cash is the
better part of valor. The idea in this current bear market is to sell when
they are buying and buy when they are selling. We aren't sure who "they" are
but we are sure that we are in a selling mood. And so we sold our AMR trade
of yesterday at $10.18 for a $1 profit. We also sold Great A&P at $12.40 for
a $1.25 profit. And we sold AT&T Wireless that we bought at $4 per share two
weeks ago at $5.20 for a nice percentage gain. We still own a ton of AT&T
Wireless. We just want to have some room in larger accounts to buy on a
pullback without over sizing our position like we did earlier in the year. We
sold Cox at $24.80 for a $2.65 per share gain. We sold our trading position
in FBF at $24.80 for 75 cents per share gain. Beats losing money on a trade.
Remember in bear markets all stocks are anchovies.
12:04pm and we can't stand prosperity so we are selling our entire AOL
position for $14.15 for a nice 25% profit in a week. We bought it for a trade
and we sold for a nice profit. And all the financial shenanigans announced in
the paper today reminded us of what a house of cards AOL is. Finally, we
sold our small position in Goodyear at $14.60 for a scratch profit except for
RBs. We think we'll have a chance to buy all the stocks we sold today at
cheaper prices next month. If not, there are always other fish in the sea.
The fish in the sea comments reminds us that up here in God's country we have
wonderful trout steams. Our son-in-law Dave the basketball coach is an avid
trout fisherman as are most of his family. So the men in the family have
started coming up on bachelor weekends where they do chores like splitting
wood in return for room and board and the chance to do some trout fishing.
After the first day when they didn't come back with any fish we asked how the
fishing was going. They said great. It seems that many fly fishermen throw
the fish back rather than eating them. For all we know there may only be
three fish in the stream that keep getting caught over and over again.
12:46pm and the popular measures are slightly higher. Breadth remains
positive and volume remains light.
1:40pm and we are trying to sell our Footlocker position and $10.80. That
price would represent a small loss in most accounts but we make it a practice
to take losses when we are taking profits. It is a good discipline. Also Z
has had a 25% move off its lows. We just bought it too soon. And they have
been lowering same store sales projections with regularity so we stand a good
chance to get it cheaper in the fall.
1:59pm and selling came into the markets right on queue. We'll now see what
the last hour predicts for tomorrow. No luck selling the Z yet.
3:02pm and the DJIA closed up about 1%, the S&P 500 was up over 1%, and the
NASDAQ was up 2%. We didn't sell the Z.
And tomorrow is another day.
20 August 2002
7:57am and after urging the cows and horse into new pasture we sit down at
the computer for another day of fun and games. The stock futures are
indicating a softer opening. Treasury bonds are a bit firmer. The talking
heads are in a pullback is good mode.
Home Depot came in with better than expected earnings and Maria the Mouth is
talking the stock up. We think it will open higher and then sell off. HD is
off our radar screen for a while. We raised trading cash yesterday and we are
content to hold most of our purchases even if there is the pullback we
Cingular Wireless which is jointly owned by BellSouth and SBC is in
preliminary talks with VoiceStream Wireless concerning a merger. We don't
know where those talks will go. The effect of a merger might force AT&T
Wireless to join with someone, maybe Sprint PCS.
8:17am and all Martha, all the time, is back on CNBC. Time to turn off the
volume. Think we are going to have to go to Reuters or CNN financial for our
regular news. The only reason we have CNBC on is that we like their ticker
tape the best.
8:47am and the major measures are all down a bit over 1%. We are buying SGP
at $23.10 for accounts that don't have it and also QQQ at $25 for the same
accounts. We think this morning's pullback will be minor. We are also buying
AMR in our trading accounts at $9.08.
10:48pm and the stock markets remain off 1.5% in light trading. We sold our
trading position in Reuters for a $2 per share profit. AOL is buying all of
the Time Warner Entertainment that AT&T owns. Big price but what is another
$9 billion. According to the WSJ AOL would have to part with $2.5 billion in
cash and $1.5 billion in stock plus surrender 22% ownership in Time Warner
Cable to the new Comcast. AOL would get the right to offer its broadband
service on Comcast cable. AOL is up on the news and we are holding for now.
11:10am and Bristol Myers is rising on takeover rumors. We think the rise may
be related to the possibility that the Imclone fiasco is coming to a head.
Yesterday AstraZeneca's announced its EGF type cancer drug in stage III
trials failed to show any improved results over standard treatment. Imclone's
cancer drug Erbitux is the same EGF type of drug. The collapse of that drug
would save BMY from having to spend $1 billion and maybe allow them to get in
line to sue the Waksal brothers.
12:21pm and the markets measures are off 2%. So much for boring, although
with the low volume and the fact we have some greens showing, the activity
doesn't seem that gloomy. We'll see what the final hour brings. Hope we are
awake for it.
2:29pm and it looks like we are going to be wrong today about a higher close
and also that HD would sell off. The rally attempts in the last hour have
been met by selling. Breadth is negative and volume is anemic.
3:02pm and the DJIA, S&P 500 and the NASDAQ all lost about 1.5% today giving
back most of yesterday's gains.
And tomorrow is another day.
19 August 2002
7:38am and we begin the last two weeks of boring in the stock markets and
relaxation in real life before folks come back after Labor Day to begin the
Fall testing session. The weather up here has turned decidedly autumnal with
fifty degree lows at night destroying the flowers on the tomatoes and
cantaloupe. The rain is hastening weed growth but it is also keeping the
pastures green so that is a fair tradeoff.
The Model Portfolio as of Friday is posted.
We are 43% invested which is the
highest amount invested since early January. We are accepting a bit more risk
because the stocks we are buying are mainly on their lows for the year and
selling at reasonable price to earnings or price to sales ratios.
7:58am and stock futures are slightly higher. With probable low volume of the
next few weeks, anything is possible. Lowes just announced excellent sales
and earnings and we may sell HD on that news if it pops because we don't
think HD will have the same good numbers. We bought it for a pop last week
and we are leery of holding it thru its earnings announcement tomorrow
morning because the comparison with Lowes may not be favorable.
8:47am and the stock markets opened mixed. We tried to sell the HD at $29 and
of course the specialist opened it at $28.99. It's now trading at $28.50 and
our sell is in at $28.75. And so we will see. Since it is a DJIA and
large S&P 500 stock we are hoping for a program trade to lift it. We
also have Disney
in to sell at $16.20 after missing that price on the opening. The stock has
run $3 per share on news that CEO Eisner bought 875,000 shares between $13
and $15 dollars. That ensures his job for a cost of only $10 million. His pay
check most years is more. Finally we have an order in to buy Biogen at $34.50
for our trading accounts.
9:12am and short Treasuries are rallying a bit with the two-year at a 2.21%
yield down from 2.28% at Friday's close. Stocks are moving higher and we sold
the Disney at $16.06 for a nice percentage profit and the HD at $28.75 for a
scratch profit. We may look at the HD later this week, but probably only for
trading accounts. In these markets all stocks are anchovies for us. And we
still have to get through 9/11, a big September triple witch and year-end tax
selling by mutual funds through the end of October.
10:30am and we are buying 100,000 shares of Palm at 73 cents a share for a
few aggressive accounts. This stock sold at $165 per share. As we used to say
in the old days, "far out!" Palm has just been kicked out of the S&P 500 and
is going to do a reverse split. We normally don't buy stocks before they do
the reverse but Palm is priced at less than sales and has $50 million in
cash. Don't go out and bet the house money on this. It is a pure speculation.
We also sold our DIA trade at $89.41 for a $1.50 per unit profit. With the
DJIA up four weeks a pullback this week will give us a chance to reset this
trade. We are keeping the QQQ for now since they don't involve as much money
and they give us tech exposure.
AOL's September 14th filing was cleared by the SEC this morning.
12:07pm and the stock markets continue higher in light trading. All three of
the popular measures are up over 1.5%. Treasury bonds are a tad weaker. We
sold our JP Morgan trade for a $2 per share profit.
We are sorry but the folks for whom we purchased Home Depot are going to
receive a lot of tickets for one trade. Besides the original trade confirmed
at $22.55, the cancel of the $22.55 price, and new trade confirm at the
correct $28.55, and the sale confirm from today at $28.7546 are all going to
arrive at the same time. At least we didn't lose money on the trade. We
didn't make very much and we apologize for any confusion.
12:56pm and breadth is good but volume is very light. We are looking at
Campbell Soup and Ionics both of which are close to making new lows. Ionics
has $10 per share in cash on the books and is trading at $19.90. Because it
is heavily owned by institutions we are lowering our proposed entry point to
$17.50. We have always thought that at some time it would be acquired. ION
is in a highly specialized business building huge water treatment facilities
and also ultra pure water facilities. But since most of the mutual funds that
own it probably have losses ION may be under selling pressure through
The same selling pressure will probably apply to CPB. Another interesting
stock is Heinz, but as with the other two there doesn't seem to be a need to
rush. So we are watching for now.
2:07pm and we sold Southwest Airlines for a $1 per share trading profit. The
stock markets continue higher and all our stocks are green today for the
first time in a long time. We've sold most of our trading positions with only
Fleet Boston which we bought late Friday left. Stocks are getting ahead of
economic news but with the light trading volume it doesn't take much to move
stocks higher, and it probably won't take much to move them lower.
3:02pm and all our troubles will soon be over, or so the stock markets seemed
to say today. The DJIA closed on its high up 212 points, while the S&P 500
gained over 2% and the NASDAQ was up 2.5%.
And tomorrow is another day.
16 August 2002 Special Post
We would like to alert those folks who check their accounts online that we
did not purchase Home Depot at $22.55, we purchased the stock at $28.55. Home
Depot has sales but not even they have sales that are that good. The trade
will be canceled and rebilled at the correct price on Monday.
16 August 2002
5:53am and as we sit down at our desk the stocks futures are
suggesting a slightly lower opening. Morning news includes
info that Jack Grubman, the analyst who recommended WorldCom
till the bitter end has parted ways with Citigroup.
$32 million is his goodbye kiss so his lawyers can rest easy.
And now Citigroup can point the Feds towards Grubman and say
all the bad things are his fault. Ain’t capitalism great?
We are sorry that the website was down most of yesterday.
We use a service to provide the actual site and they experienced
server problems. Happily such interruptions are few and far
between, we hope.
As Franciscans say, "Lord; Thank you for the dark, for now we can appreciate the light."
6:46am and it looks like today is going to be all Jack
Grubman, all day, in every way. Off goes the volume and
we spent a few minutes answering an e-mail from a client
who asked how much of his liquid assets should be invested
in common stocks at our mutual age (59/61). Our answer follows:
You asked what percentage of liquid assets should be in
stocks at our age? First of all, we don't run money for
folks based on age. We manage money for our clients based
on market risk. Our oldest client is 101 and he owns the same
stocks and has the same market exposure as our grandson who is 5.
Since we tend to error on the side of caution we have on average
been less than 50% invested in stocks for many years. But there
are times of the year, usually year end when we will raise
exposure to 100% if we think the risk reward ratio justifies
that posture. Our philosophy presumes active management and
the willingness to take losses and realize short term gains.
Most folks don't like the activity involved in this approach
but we find it works for us and our record gives credence.
We can't tell you how much you should invest on your own
because we don't know with whom you are investing and what
their philosophy and objectives are. We used to try and
answer the question and suggest percentages.
Now we have reached the point where we say,
all your liquid assets and let us do the worrying. We will take
the responsibility and we don't know anyone who will do better
than we. Nor do we wish to vouch for another's investment
expertise. Finally your question reminds us of two questions
we asked early on in our former life when we were actively
engaged in farming. The first question was our asking a
farmer how often one should trim a horse's feet. The answer
was obvious, "as often as the horse needs it". Our second question
was when we were digging a foundation for a chimney for our
wood stove and that question was how deep to dig the
foundation and the answer was, of course, "deep enough."
Hope we have been of some help.
7:17am and we present below a more thorough explanation of our
analogy of Ebbers to Chance et al in Wednesday’s post.
Our brother Jody found the verse for us. Please note that
the verse refers to the pricking of a "bubble", in this case the "bubble"
of a pennant race, but the analogy turned out to be more germane than even we remembered.
"Tinker to Evers to Chance!"
Chicago Cubs infielders Joe Tinker, Johnny Evers, and Frank Chance formed the most memorable double-play combination in the history of baseball. Their consistently solid fielding and hitting led the Cubs to
four National League pennants (1906-8, 1910) and two World Series wins (1907-8). The Hall of Fame
inducted all three simultaneously in 1946. In 1910, New York newspaper columnist Franklin Pierce Adams
immortalized the three ballplayers in a short verse entitled
"Baseball's Sad Lexicon"
These are the saddest of possible words:
"Tinker to Evers to Chance."
Trio of bear cubs, and fleeter than birds,
Tinker and Evers and Chance.
Ruthlessly pricking our gonfalon bubble,*
Making a Giant hit into a double--
Words that are heavy with nothing but trouble:
"Tinker to Evers to Chance."
* The term "gonfalon" refers to a flag or pennant, and Adams uses the phrase "pricking our gonfalon bubble" to describe the repeated success of the Chicago Cubs and their celebrated infield against their National League rivals, his beloved New York Giants.
7:37am and the CPI was up .1% and the core (non food and energy) was up.2%, a non event. The talking heads are debating a further Fed rate cut. Boring and so we turn off the volume.
7:48am and we have to go off for an hour which will cause us to miss the opening.
8:45am and news arrives that Michael Eisner purchased 725,000 shares of Disney in the open market on Wednesday. We just purchased AOL at $11.75 in all accounts owning Footlocker. We are also buying some QQQ at $24.28 for our larger and more aggressive accounts. We bought 500 QQQ and 1200 AOL in the Model Portfolio. We are getting closer to 50% invested. Interestingly, we are buying stocks at prices significantly lower than they were when the DJIA made its low in July.
10:33am and the stocks are struggling to turn positive. The Treasury bond market has tanked. There is a rumor on the trading floor that Osama has been captured. More likely, some large institution has decided to cash in its chips after the fantastic rally that has occurred in Treasury bonds over the past month. Corporate and high yield bond prices are rising and the spread between Treasuries and other bonds is narrowing today as it seems folks are selling Treasuries to buy corporate bonds.
Housing starts fell 2.7% in July. From CNBC we learn that a new mutual fund is being formed called the Vice Fund which will invest in tobacco, gambling and alcohol stocks. Next to come will be the Bomb Saddam with Aplomb Fund.
Since the techs are starting to move we are buying EMC at $7.30 to place in our more aggressive accounts. And we have begun picking up Goodyear Tire around $14.10 which is at a 20 year low. Since it is a heavy cyclical we are going to buy in smaller quantities to leave room to add more at lower levels. We bought 1000 EMC and 500 Goodyear in the Model Portfolio.
12:10pm and President Bush says he is looking to lower capital gains rates and the rate of taxation on dividends. What capital gains?
2:01pm and the DJIA is trying to follow the NASDAQ and S&P 500 into positive territory. Breadth is positive but volume is very light as befits a Friday in August. We paid $23.90 to buy Fleet Boston for our aggressive trading accounts. The stock yields 6% and with the IMF loan to Brazil FBF’s Brazilian loan problems are at least under control. We have a bid in at $19.80 for Ionics, the water treatment folks that we have owned off and on for the past twenty years. We’ve never last money buying the stock under $20.
3:02pm and the DJIA and S&P 500 couldn’t hold the high ground and both closed slightly lower. The NASDAQ gained almost 1%.
For the year the Model Portfolio is down 3%, the DJIA is down 12%, the S&P 500 is down 19% and the NASDAQ is down 30%. The Model Portfolio is about 55% cash after today’s purchases. We will post the revised Model Portfolio by Monday Morning.
And tomorrow is another day.
15 August 2002
8:22am and the stock futures indicate a higher opening. Haven't had time to
read the morning news yet because we had to get the horses in the barn so the
grandchildren could say good-bye to them before they head back to Kentucky
The suggested bankruptcy of UAL is not a surprise although the maybe we will,
maybe we won't attitude is the one that got the last CEO fired. Many pundits
are blaming 9/11 for the demise of the airlines but few recall that The
Treasury already provided a pretty good piece of change and indemnification
to the majors. The airlines were headed for trouble before the tragedy, which
only speeded up the process. We are looking at Delta and Southwest and
Atlantic Coast, but we are only looking
The move higher yesterday by the markets seems to want to carry over into
today but we think that the 9200 level on the DJIA will be a sticking point.
Since that level is still 400 points higher we could see some good upward
action in the next few days. We will continue are hunt and peck acquisition
process although we will wait now for a correction or a move through
resistance on the upside.
8:43a and stocks are slightly higher as Treasury bonds are weak. The
hesitation moving higher is positive as selling is being met by buying at
slightly higher levels. We are no going to dismiss out of hand the
possibility that July may have been the low. We are inclined to watch a bit
this morning and then we may commit a bid more money for some
CNBC has Representative James Greenwood from Pennsylvania on as its guest
host this morning. We think he looks like Artie Johnson. He is reprising the
NYT, WSJ, CNBC garbage about Martha Stewart. She can afford to defend
herself, unlike the scientist Lee who was in the NYT crosshairs a few years
ago. But the print press's pillorying of her is a smokescreen for ignoring
the real, bad actors in the corporate world. Because she has been successful
is a lousy reason to after her in a case that cannot be made.
9:27am and this market is going higher. This move is going to be the bear
trap that destroys all the novice short sellers as they learn how painful
shorting can be. We have repurchased the BMY at $22.74 that we sold for a
profit at $22.53 a few weeks ago. We had been hoping it would back off but we
want to own it and so we are paying up. It is down $1 from yesterdays close
on old accounting news. We bought 500 shares of BMY for the Model Portfolio.
For trade/investment we also bought Cox Communications at $22 for accounts
that hold Disney and Home Depot at $28.55 and Ford at $11.65 for those same
accounts. Thus we bought 500 shares of each of the three stocks mentioned for
the Model Portfolio. In our large accounts we bought some DIA at $87.86 to
play the potential breakout today above 8850 on the DJIA.
We also bought LUV at $11.89 and JP Morgan at $24.50 and EMC at $7.20 in our
aggressive trading accounts.
1:13pm and the kids are off to Kentucky, the horses are in the fields, and
life returns to normal. Grandchildren are a true blessing.
With today's purchases we are betting that the DJIA will break out to the
upside for a pretty good bear trap run that will drag along the out of favor
stocks we own. If we are wrong, we are paying prices that may be 10% to high
over the next few months but they are prices that will provide good returns
after year-end. And we are still in possession of a great deal of cash.
3:02pm and at the close the DJIA was up 73 points, the NASDAQ gained 10
points and the S&P 500 also gained 10 points. Breadth was slightly positive
and volume was light.
And tomorrow is another day.
14 August 2002
7:26am and as we get a late start the stock futures are a bit lower. Treasury
bond yields continue to drop this morning. Theoretically the drop in yields
will force folks into the stock market, and not theoretically but in reality
the drop in yields is helping the banks recover from some sour loans. The WSJ
reported that IBM laid off 15000 folks in the second quarter, twice the
previous estimate. The WSJ also reported that Verizon is going to take $2
billion charge relating to the GTE merger of several years ago. It's a wonder
how special charges occur every quarter for these companies as they try to
manage reported operating earnings.
Oil prices are at two month highs as interest rates fall. Most of this
morning's news seems negative, so we'll see how the markets react.
7:47am and Nicor says that it won't be able to certify financial results for
2002. Share price of GAS is down $4. That's the fear we have with all the
utilities that were involved in the deregulated energy field and why we fled
to the sidelines when we belatedly recognized this fact. We haven't lost
interest; we just want the dust to settle and the markets to settle before we
decide to venture back in to this area.
Household International is reducing earnings by $386 million since 1994.
Ooops. We have never believed in HI and its' financials.
8:01am and the stock futures have turned positive. For the bull case we
think a smash down to DJIA 8250 this am would clear the air and set up a good
rally. A rise this morning will muddy that picture.
9:10am and the stock markets have turned lower as the ten-year Treasury
breaks 4%. We have placed a bid of $9.01 for GMH. Echostar is down on Reports
that Vivendi may sell its' ten per cent stake. In the merger proposal
Echostar is offering .73 shares DISH shares for each GMH share. With DISH at
$14.50 that works out to $10.58 for GMH. Our only worry is that if the merger
deal falls through, GMH will be under selling pressure from the arbs. We'll
have to add more if that happens so we only will only be establishing half a
position in larger accounts to be ready for the possibility.
10:02am and the markets are rallying back slightly. GAS opened at $24 and is
moving back to unchanged. So I guess no certification is a non-starter.
Nevertheless we are avoiding the utilities for now.
The NYT reported today that the Federal Energy Regulatory Commission (FERC)
has issued a report that says there is evidence that there was price
manipulation in the California energy crisis of several years ago. Maybe by
2010 they will have figured the whole mess out. No fines, indictments or
refunds are expected in our lifetime.
10:35am and the stock markets continue to meander at lower levels. Breadth is
negative and volume is light. Short term Treasuries have given back a little.
Once the yield dropped under 2% on the two year, some folks awakened to the
fact that with Fed Funds at 1.75% there isn't a whole lot of room let for
short Treasuries to rally without bumping up against the 1.75% ceiling.
Southwest Airlines, the most profitable airline and supposedly best run has
been dropping of late. Seems institutional investors have finally realized
that the faux socialist solution to the airline crisis being allowed by the
courts with the assistance of former free market
Congressional leaders and the White House are going to infringe on LUV's
profitability. We don't understand why the folks who want free markets and
open competition now feel the need to interfere and thwart the real effect of
deregulation in a capitalist system.
Cox Cable is down from $52 to $19 but still is priced at three times revenues
if debt is included. GMH including debt is selling for 1.2 times revenues.
11:17am and in our morning reading we see that News Corp is taking a $1.7
billion write-down to adjust the value of its Gemstar-TV Guide stake. NWS is
happy to report that operating income grew 25%. According to Value Line in
1997 News Corp took special charges of-in round numbers-$500 million; in 1998
only $90 million; in 1999 $300 million; in 2000 $400 million; in 2001 $500
million; and in fiscal 2002, including the above special charge, over $5
billion. But operating earnings grew 25% in the fourth quarter.
12:01pm and as we watch UAL cross the tape at $2.20 per share we can't help
but think of 1989 when the collapse of the proposed UAL buyout at over $180
per share caused the October mini-panic.
As the stock markets continue weak, we have lowered our GMH bid to $8.90.
Ford is weak today and we think that is one reason that Goodyear Tire is weak
off $1.60 at $13.21. We are interested in GT but are waiting for Ford to
bottom. Both the stocks may go below $10 in this crazy market. Jim Cramer on
www.thestreet.com reports that Ford bonds are off 4% today, a big drop.
Cramer has been negative on F for a while and has been right. Of course we
have been negative on the stock markets for three years and have been right,
but that hasn't saved us from losing money this year.
12:49pm and another of our daily predictions bites the dust as an S&P buy
program helps the stock markets turn positive. And back we go to snoozing.
1:44pm and the NASDAQ is now up 3% as the tech stocks regain the ground lost
yesterday. The DJIA is up 100 points but it could just as easily be down 100
points and may be before the end of the day. We don't have any inclination to
be buying. Our trading bug is hibernating and we really are looking for
values that we can hold into next year. We don't want to shoot all our
bullets now which is why we are pulling bids and treading softly.
2:40pm and today is the mirror of yesterday. Today's action may have
something to do with options expiration on Thursday and Friday. Breadth today
is not a good as it was bad yesterday. And volume is light. But this rally
seems to have a bit more oomph than the pfft (that's air escaping from a
tire) of the sell off yesterday. The S&P 500 has penetrated upside resistance
and that is a real positive.
3:02pm and the DJIA closed up 260 points. The NASDAQ gained 5% and the S&P
500 rose almost 4%. We decided to buy GMH at $9.19 for our larger accounts.
That was higher than our earlier in the day bid, but 50 cents less than our
Something about today's move was too pat, but the bulls carried the day. And
tomorrow is another day.
13 August 2002
7:02am and as we celebrate the 20th anniversary of the beginning of the late
great bull market we prepare for the results of the FOMC meeting at 1:15pm
and also the President's Economic Forum which is occurring in Waco Texas. At
the forum the economic problems of the US will be dissected and corrected.
Fear not help is on the way.
The stock futures are suggesting a down opening and from then on anyone's
guess will work. We presume trading will be as desultory as the weather. Our
big challenge today is to find our horses scattered by the one inch rain we
had last night so the farrier may give them a pedicure.
American Airlines is laying off 7000 workers, in addition to the 20000
announced earlier, and reducing flights and services to save cash. Surely
that will make flying even that more wonderful. This action is a continuation
of the fallout from the bankruptcy of US Air. Can UAL be far behind?
Wal-Mart is lowering same stores sales forecasts to 4% to 6% from 5% to 7%.
July retail sales were up 1.2%, without autos and their 0% financing retail
sales were up. 2%. those numbers were expected. The two-year Treasury is
7:47am and Merrill Lynch upgraded Neuberger Berman today. The shares are
selling at $30.50. Could that upgrade have anything to do with the fact that
last month Merrill was one of the underwriters of a sale of 3.8 million
shares to the public by insiders? Do insiders usually sell when then think
the price of their stock is going to rise?
8:19am and Ralph Bloch, a guru we like, still wants a retest before he will
call a bottom. He says September/October is the scary but profitable time. He
thinks the techs need to start moving higher for a reasonable rally to occur.
The semis are the key. We don't have any desire to play the techs and we will
stick with our old name stocks with assets and earnings,
10:35am and as the paint dries the stock markets have moved to the plus side
in light trading. Really isn't much occurring.
1:40pm and the Fed does nothing. We are back from the barn for the rest of
the day and not much has happened. Treasury bonds continue to rally and
stocks are meandering. We have no great insights at this time.
2:23pm and as we doze to the finish there isn't a catalyst to move stocks
either way. Just as we wrote the last line the markets began to head lower
with alacrity. Looks like the DJIA may have to head back to the 8400 area get
a bounce. We just canceled all our orders for today mainly because we don't
want a fill in a down last hour. We think the hedgies may carry the sell off
2:35pm and the CEO of US AIR is on CNBC talking about how great the new
airline is going to be after it emerges from bankruptcy. The US government is
going to guarantee $900 million in loans. Wipe out the common shareholders
and hooray for free enterprise.
3:02pm and the DJIA closed down 206 points. The NASDAQ lost 3% to close below
1300 and the S&P 500 was down 2.5%. There were twice as many down issues as
up on both the NYSE and NASDAQ and down versus up volume was 5/1 on the NYSE
and almost 7/1 on the NASDAQ. The only saving fact was that volume was light
and the DJIA closed above 8450.
And tomorrow is another day.
12 August 2002
6:45am and so the airline bankruptcies begin. Yesterday US Air filed. They
already have the financing to emerge from bankruptcy after wiping out the
equity holders and reducing the debt. So the company officers, who were
installed for the purpose of filing bankruptcy and the investment banks
putting up substantially less money than most shareholders lost, now have the
chance to wreak havoc in the rest of the industry. This is deregulation run
amok. By US Air choosing the bankruptcy route all the other teetering
airlines are going to have to file and wipe out their equity holders in order
to be able to compete. Sorry folks, this is not capitalism at work.
The stock futures are indicating a soft opening. While this week is an
expiration week and the FOMC meets tomorrow we have a feeling that the next
two weeks are going to be slow. We'll see.
Several clients have mentioned that they have tried to trade one or two of
the issues we mention on the website. We mention our actions to disclose what
and why we are doing things in customer accounts. We would suggest that it is
impossible to trade without being in constant contact with the markets. Thus
we do not encourage day trading of our trading stocks because the variables
involved are too numerous to explain. We don't day trade in our Model
Portfolio and so those stocks could be considered for investment. But even
then, we buy stocks as a package and as a complement, so we would discourage
buying just one or two of the stocks we own, unless that is all that is in
the portfolio. The one you buy may be the dog of the group. If you are going
to follow us buy the package.
By the by, on Friday we purchased 1000 Great A&P and 1000 GMH for the Model
Portfolio at the prices mentioned. That places the Model Portfolio at 23%
invested. Our focus is on depressed stocks that have reasonable long term
AT&T Wireless is selling for less than one times sales and the slowing in
subscriber growth has positive implications for cash flow. AWE is the third
largest wireless phone network and while debt approaches $10 billion, the
need for continued huge capital spending is diminishing.
Disney is on a multi year low and is totally discredited on Wall Street. CEO
Michael Eisner is supposedly washed up and needs replacement. At present
level the company's equity is priced at 1.3 times revenue. We will continue
to add DIS to accounts thru the fall.
Fleming Cos. is the largest wholesale food distributor in the nation. Owns
110 stores which it is considering selling. Stock earned $2 and sells at$12.
We've owned FLM many times over the years,
Footlocker is the old Venator which was the old Woolworth. New management has
reorganized and closed underperforming stores and transformed the company
into a seller of athletic shoes and equipment. Company is selling at less
that ten times projected earnings. These projections have been lowered in the
past few months which may be the reason the stock price has dropped from $18
to $10. That's a severe haircut for a few pennies of miss. We own as part of
a package of out of favor stocks.
Great A&P is a major grocery chain. Share price has dropped drastically. We
made good money buying Super Valu and Kroger in the same type of sell off
several years ago.
Hughes Electronics is Direct TV, the satellite TV provider that is in merger
negotiations with Echostar, Dish TV. Merger has been slowed but even if it
falls through GMH is in a good position. We have owned twice before and
realized a nice profit. Shares are at a multiyear low.
Hain Celestial is also at a multiyear low. Hain sells natural food products
and also Celestial Seasonings tea. Shares are priced at one times sales.
Heinz owns 18% of company and something may happen next year when Heinz
News Alert! Sam Waksal, former Imclone CEO has arrived at court. The way CNBC
and The WSJ and NYT are playing this and the Martha Stewart non story is
ridiculous. By overplaying this minor story the imminent bankruptcy of two or
three major airlines, the highway robbery of Enron and WorldCom and Global
Crossing investors by insiders and Wall Street investment banks are relegated
to page 10. The media is purposely missing the big story because Wall Street
banks and brokers pay the media's bills through advertising. Same goes for
Congress and the White House.
Schering Plough has been under selling pressure for a year. SGP's blockbuster
drug Claritin goes off patent at the end of the year. That will result in a
loss of $3 billion in sales and big profits. SGP still as a stable of
products and while they can't make as much selling Claritin over the counter,
smart marketing can recoup the brand and create a Tylenol type money maker.
We own a small amount of Wild Oats, the natural foods grocery chain that is
being eaten alive by Whole Foods. We will keep any investment small while the
share price is in the teens. They do seem to be getting their act together
under new management that came in a year and one half ago.
We are also following the three RBOC: Verizon, Bell South, and SBC and will
continue to trade them as conditions warrant. We are also following Tiffany,
Bristol Myers, Delta, EMC, Hewlett Packard, Goodyear, Estee Lauder, and
Burlington Resources. If there is another large drop in the markets, we will
trade the S&P 500 and DJIA Trusts listed on the ASE that mirror the movement
of those measures. We may even trade the QQQ.
8:03am and stock futures are looking more down with Treasuries a bit
8:35am and already the DJIA is down 145 points. Scratch our no action comment
at the top of the page.
8:57am and the CNBC guest expert this morning was Mark Cuban. He is a hero
because he sold his tech company at the top and made a gillion dollars. Since
he wasn't around to preside over the eventual dismantling of the company or
the firing of employees or the investor losses, he is considered a hero by
the money obsessed media. Can't figure out what makes him different from
Ebbers to Naccio to Chance. There really isn't a chance, but I wanted to make
the connection work.
9:01am and the market measures are all down over 1%. Maybe the week-end in
the Northeast was lousy. Probably the hedge boys and girls are playing today.
9:10am and we are off to move a couple of loads of hay today before our
son-in-law heads back to Kentucky. We have a bid in at $9.50 for more GMH and
$10.50 for more GAP. We also are bidding on Reuters in small amounts for
1:10 pm and taking a break from the heat of haying. Stock markets are where
we let them. We think the US Air bankruptcy may have reminded some folks of
the lousy business climate. Basically though we think we are in the August
doldrums and at a market level where no one has much conviction. We'll have a
final post after our next load of hay.
6:33 pm and it looks like we didn't miss much today. FOMC tomorrow as the
markets closed mixed in light trading.
And tomorrow is another day.
9 August 2002
6:23am and as we begin the day the stock futures are indicating a softer
opening. CNBC is wallowing in the Martha Stewart story. Their next story is
on Best Buy, which was clobbered yesterday by an 11-dollar decline. We used
to trade BBY but quit doing that when we decided we couldn't understand their
financials and how they were doing so well in a cutthroat business.
The last two days of rally have been because the IMF saved Brazil and in the
process saved the US from unwanted financial crisis. In effect the US
government has been bailing out the US banks for the past thirty years to
rescue them from defaults on South American debt. We think that's OK, since
we need growing economies south of the border and we are glad to see the
Bushies choose reality over orthodoxy.
But Citicorp and JP Morgan still have a lot of answering to do for their
participation and enabling of Enron and its financial scam. As more
information is exposed it is obvious that these two banks and Merrill Lynch
were integral parties in the criminal conspiracy. Yet these three entities
cannot be properly punished since to do so would endanger the financial
system. But the heads of these three outfits should be held responsible. And
horses will soon start whistling.
As we watch the Enron soap opera unfold we think often of Roger Lowenstein's
book When Genius Failed. When we reported on this book in our daily comments
last autumn, we mentioned that we were struck by the banality of the
characters that lead the major financial institutions on Wall Street. They
were risking billions of dollars of other folks' money so that they could
ride on a private airplane to a private golf course in Ireland. The
underlying tone of the book forecast the Enron scandal and the continuing
emergence of financial chicanery as long as there wasn't a sea change at the
top tier of Wall Street leadership. There wasn't, isn't and won't be and so
we expect these kinds of machinations to continue until change occurs.
7:34am and government numbers released this morning show that productivity
improvement slowed from 6%in the first quarter to 1% in the second quarter.
Unit labor costs rose from a negative number to up 4%. Productivity has been
revised downward for the late 1990s. Funny thing, by revising those 1990s
numbers downward we can expect current and future numbers to be better and
better for the bull case.
8:47am and the DJIA dropped 100 points on the opening but has stabilized at
that level. The sentiment is bullish and we along with many expect an assault
on 9000 by the DJIA. We are buying Schering Plough, which sold off several
dollars yesterday on an adverse court ruling on Claritin. The ruling was not
unexpected and if there is going to be a further run higher in the averages,
SGP should participate. Since it was on our list to buy we are only doing it
a bit early and 15 dollars below where we last sold the stock. We are also
trying to buy GMH at $9.60, which is 50% below our last sale. Finally we have
a bid in for AON at $13.60 and for BGEN at $34.50. Those two bids are away
and will only be filled if our rally thesis fails. We've been wrong all week
on the direction of the market so that's why we have the bids in.
9:17am and bought Home Depot for trading accounts at $27.20. That's up from
where we sold it yesterday but today HD is up in a down market. Yesterday t
was down in an up market.
10:34am and the DJIA and S&P are in positive territory. The NASDAQ is still
slightly negative. We are starting to buy Great Atlantic and Pacific Tea Co.,
GAP, at under $11 per share. They had some problems a few years ago but were
supposed to have cured them. The share price is down from a yearly high of
$27 and a high in July of $18. The stock dropped because when announcing
earnings they also announced they were going to have to restate some earlier
results. We think this a Kroger, Super Valu situation where we bought the
stocks in the low teens and sold a few months after year-end for a nice
profit. Also the current "street" wisdom is that Walmart is going to put all
the grocery chains out of business. We are also picking at HAIN under $13
ahead of earnings.
11:15am and breadth remains negative as the major market measures turn down
again. Fridays in August mean early to the beach and volume is slowing
accordingly. Will the hedgies come out to play this afternoon?
12:15pm and the NASDAQ is down 1% while the DJIA and S&P are off ½%. Volume
is light and breadth is bad. We were able to purchase some of the GMH at
$9.60 and some GAP, which is A&P grocery stores not Gap clothing stores at
$10.85. We placed these purchases in our smaller accounts and we plan to hold
them for recovery after year-end
1:09pm and the markets meander. Jim Cramer of www.thestreet.com has just
suggested that one event that might make the markets rise is for the US to
seize the Iraqi oil fields and start pumping oil to bring the oil price down.
We think Jim's mouth has outrun his brain on this one. America does not
invade foreign countries so our stock market can go up, at least not in the
2:03pm and the markets look like they are going to the beach too. Pepsi is
trading at $44 and we would like to say we really missed the ball on that
one. We bought and sold it at $42 before the July swoon, but we were too
smart to buy it back at $36 preferring to wait until it got to $32. Ah well,
maybe the September swoon will give us another chance.
2:20pm and a person from Schwab is on CNBC announcing a hedge fund for small
investors. OKEE-DOKEE. We sold Home Depot at $28.25 for a nice $1 trading
profit. We are buying small amounts of Reuters, the financial news folks in
some of our larger more aggressive accounts at $24. We haven't owned this
stock since 1987 when Don bought it at about the same price in August of that
year. It's priced at ten times earnings. Since RTRSY is down so much in
price, we wonder what Mayor Bloomberg's privately held business has lost in
3:02pm and the DJIA closed fractionally higher at 8745 above the recent July
high of 8736. The NASDAQ closed 1% lower at 1306 and the S&P 500 gained 3
For the year The Model Portfolio, which is currently 80% cash is down about
3.8%. The DJIA is down about 13%, the S&P 500 is off 21% and the NASDAQ is
down 33%. We will post the Model on Monday.
And tomorrow is another day.
8 August 2002
6:27am and the stock futures are fractionally higher as we sit down at our
desk for another day with the markets. The tone of the talking heads and
Internet gurus seems much less frantic in the last few days. This can be
ascribed to the fact that the markets have been rising rather than falling.
All hope that the down days are over and sunny skies are ahead. While we are
doubtful, we are open to whatever happens. We are willing to take positions
in stocks that over react to news and AON's fall from grace yesterday is a
AON is the second largest insurance broker in the country. The SEC is
investigating past revenue recognition and may require them to restate
earnings. The CEO of AON, Pat Ryan, has been around a long time and has a
sterling reputation. We are betting on that reputation. At current levels the
stocks has a 5% yield. In volatile markets opportunities arise and we think
AON may be one. For the present we have only purchased the shares for a
trade, but we may buy more in the next month if we become more comfortable
with the recent news. By the way, the stock symbol for AON is AOC.
7:04am and our, one day up next day down, theory will be tested today. We are
giving ourselves leeway on this theory. We have been positing that the stock
markets are not going significantly higher until after a wash out in the
September/October time period. Until then we believe that the myriad hedge
funds that have sprung up in the last few years will remain in control of the
vacation vacated stock markets. Since the DJIA is back above 8400, today
should be a down day for our up/down thesis to have validity.
7:10am and Talbot's same store sales were down 19%. This was better than
expected. Maria, the mouth, says these numbers are great because even worse
numbers were expected. This comment shows that bad news is now good news
7:21am and courtesy of Bill Fleckenstein at www.realmoney.com we learned
today that Fed Chairman Alan Greenspan has been knighted by Queen Elizabeth.
So now he is Sir Chairman. In early trading Treasury bonds seem to be under
some selling pressure. Three days up in a row would probably kibosh on any
Fed rate cut at next week's FOMC meeting. The IMF provided a $30 billion loan
guarantee for Brazil. So Chase and Citi are safe for another year.
7:31am and PPI fell .2% with core PPI down .3% and continuing unemployment
claims were down 15,000. S&P Futures are holding their gains. Talking heads
on CNBC are saying that the bottoming process is occurring as in 1973/74.
Goodbye easing. Lots of media, lots of young folks trading, lead to a lot of
volatility. The PPI number is the result of companies firing folks to bring
costs down. Hooray!
That tactic is the opposite of the great growth period after WWII and it's
the reason we never believed the boom of the latter 1990s, for the supposed
productivity increases were based on replacing workers with machines. Job
growth was in the service area and from folks taking their retirement pay and
buying McDonald's franchises. Fast food joints and other franchise
establishments allow folks to work twice as hard for half the money with no
hope of saving enough for retirement.
7:43am and we are reminded by technical analyst, Gary Smith, at
www.thestreet.com, that the Depression low price for the DJIA was made on
July 13, 1932. So have faith, the worst may be over. In our mind, the
imponderable for the markets is war with Iraq. We think the military is going
to try a limited Special Forces operation. We presume all the articles and
news leaks about a major action are for the benefit of obfuscating whatever
action is being planned. Even so, until the operation is completed, whatever
it is, there is a lid on how far up stocks can go
8.10m and the stock futures are giving ground. Maybe the no rate cut reality
if stocks rise is bumming the hedge fund jockeys. Short end of bonds are
8:46am and after initially opening a bit lower the DJIA is now higher by a
bit less that 1%. The NASDAQ is flat and the S&P500 is up 1%.
9:35am and the DJIA is flat while the NASDAQ is down 1%. The major banks are
strong with C up $2 and JPM up $1.50 on the Brazilian bailout. We'll be
looking at them in the next pullback. Don't know why the markets are
meandering except for the fact that the more the markets rise the less likely
the rate-cut, which is why the markets are rising.
We bought more AON at $14 to add to accounts for a trade. We are bidding on
some HAIN ahead of earnings and would like to add Disney to more accounts if
DIS comes in just a bit more.
10:09am and reports of mad cow disease in Canada have McDonalds and Wendy's
dipping a bit.
10:21am and the NASDAQ is lagging the DJIA. We think one reason for this
reversal of the recent trend is that most of the tech companies are refusing
to expense options, while more of the old line blue chip companies are going
to expense options. Obviously, expensing options would have a mush greater
effect on earnings of tech companies. But we think institutional investors
are guessing that at some point some pension fund and non-profit investors
are going to tell their money managers to avoid companies that don't expense
11:05 and we bought Home Depot at $26.80 for our trading accounts. We also
picked up a little HAIN at $13 including 500 shares for the Model Portfolio.
12:34pm and the stock markets are climbing steadily higher. The DJIA and S&P
are both up 2% and the NASDAQ is close behind. We've been adding a little
Wild Oats to larger accounts at$12.07 including 500 shares in the Model
Portfolio. OATS came in with decent earnings and modest same store sales
growth with their most recent earnings report. The company does not plan to
open any new stores this year and we think that is wise. We are not going to
make OATS a big item in accounts because the last time we did that we were
blindsided. We also are trying to buy Direct TV a k a Hughes Electronics at
1:54pm and we sold our trading position in AOC at $15.18 for a $1 per share
gain. Since the stock traded at $13.50 today, and we had a quick no sweat
profit we decided to take what the market gives. We weren't able to get the
GMH at our price so we have cancelled the order waiting for a better day with
a lower price. Entering the final hour the major measures are up 3%. We are
having yearly moves in stocks in the space of a few days. Most folks seem to
be joining the bull camp and the opinion that a bottom has been formed. We
haven't and we don't.
2:27pm and with the DJIA up 200 points Home Depot has not rallied and so we
are selling our trading position at $27 for a scratch. If HD won't rally more
than 20 cents on a 200-point move in the DJIA we'll sell now and look again
3:02pm and the stock markets are closing on their highs. The DJIA, S&P 500,
and NASDAQ were all up over 3% for the day. We have retired our up/down
theory and are now going bike riding to develop a new theory of market
behavior. Maybe the random walk theory is for real.
7 August 2002
7:23am and as we sit down to a new computer on another glorious day the stock
futures are again pointing to a strong opening. The futures are all up over
1%. We remain about 10% to 15% in stocks and we have no desire to invest more
at this time. We'll await the next sell off.
Cisco's earnings were better than expected but sales were a little less
according to a few of the analysts we read. NASDAQ stocks have been stronger
than the DJIA for the last few days and it looks like that will continue
8:43am and stocks are up 2% on good volume. All the talking head talk is of
Cisco. We have no interest at these levels. Market value is $90 billion less
$20 billion in cash equals $70 billion. That market cap is about 3.5 times
stagnant sales. With a share price of $13 and real earnings of about 40 cents
a share the company still sells at about 35 times no earnings growth. Sales
are shrinking and may do so until Lucent and Nortel go broke. If those two
companies don't go broke the stock is overvalued. That doesn't mean Cisco
isn't a good trading vehicle but we just don't have the inclination to trade
it at this time of year since we think the upside/downside is equal.
9:09am and profit taking is shrinking the market's gains.
10:17am and on cue the stock market measures have moved to the negative side.
Now we will see if the bulls or bears are stronger.
We read today in the NY Times of AON having trouble with their financials and
that they are being investigated by the SEC. AON is a Chicago institution and
it is really striking that Pat Ryan's company would do anything untoward. In
this kind of market we will avoid the stock, but the shares are intriguing
given Ryan's reputation.
10:56am and both President Bush and V.P. Cheney are talking at the same time
on CNBC. Talking Heads two. Bush wants to cap medical malpractice awards.
Cheney is saying that the vast majority of CEOs are honest. Also that with
the revisions that occurred last week it is obvious that the recession that
all the White House was denying last year actually began in the first quarter
of 2001. Thus the recession is Bill Clinton' fault. Cheney wants to make the
tax cuts permanent. Also give terrorism insurance to real estate so that
building can continue.
What about the folks losing their jobs? What about the poor? What about
rising medical/drug/insurance costs for ordinary folks? Our own medical
insurance just increased 20% and our daughters the same. While we can afford
it we are now paying $5500 a year for a policy with a $2500 per person
deductible and a 90/10 share of the next $5,000. The maximum lifetime
benefit is $2 million per person. We are happy to have the policies, but the
cost of our policy prices it out of the reach of most folks making thirty to
fifty thousand a year. End of our soapbox diatribe.
11:11am and the markets are in a meandering mood moving plus and minus in
12:35pm and the markets are negative again with breadth figures also
deteriorating. There doesn't seem to be a pattern to the weakness although
some stocks like the RBOCs have given up all their gains of the past week.
1:04pm and the Martha Stewart saga is back on CNBC. We saw an interesting TV
clip yesterday during a negative piece on Gary Winnick, the former CEO of
Global Crossing who walked a way with hundreds of millions of dollars from
share sales before the company filed bankruptcy. The clip showed Winnick
playing golf with Bill Clinton. Certainly a cheap shot, maybe even out of
bounds, but then typical of smear TV. Wonder if these same folks have a clip
of Martha bussing Clinton at some White House function. If they do we're sure
we'll be seeing it.
1:30pm and AON is off $7 per share. We couldn't resist a trading buy and just
bought shares for our trading accounts at $14.
2:08pm and entering the last hour the stock markets have rallied. Advancing
issues outnumber declining issues on the NYSE. And up volume is greater than
down volume on both the NYSE and the NASDAQ. These measures are the breadth
of the market that is often referred to in financial reports. When there is
more up volume than down volume - which means that there are more shares of
stock are trading at higher prices for the day than shares of stock that are
trading at lower prices for the day, we say that up volume exceeds down
volume. Since one company could trade a billion shares and be trading higher,
while 1000 companies could trade 900 million of their shares at lower prices
the up volume would exceed the down volume. The up/down volume measure would
thus be on the plus side even though 900 issues were trading lower and only 1
was trading higher. So the other measure that goes hand in glove with up/down
volume is that of how many companies are trading at higher prices versus the
number of companies trading at lower prices. This is called advancing issues
versus declining issues. This measure does not care how many shares of each
issue are traded, it only cares whether the stock's price is higher or lower
than yesterday's close. To say the stock markets had a bullish day one also
wants to see more advancing issues- those at higher prices - than declining
issues, coupled with more up volume than down volume.
2:24pm and the stock markets are now up over 1%. So much for our up day
followed by a down day theory. But today the DJIA is stronger than the
3:02pm and the DJIA closed up a very strong 2%. The NASDAQ was up a bit less
than 2%, while the S&P 500 gained 2%.
And tomorrow is another day.
6 August 2002
6:43am and as we settle in on a gorgeous August morning we find the stock
futures higher. European bourses with the exception of the UK were up
overnight and coupled with a little bargain hunting that has given a better
tone to the opening. Supposedly there is a German asset allocation program
occurring as reported on CNBC. But it also means that if the rally fails,
which we think it will, it is look out below day.
7:02am and CNBC is back on Martha Stewart's trail. Must be a slow news day.
We thought Barton Biggs, guru from Morgan Stanley, had give the all clear
signal to the markets. CNBC is reporting this morning that he is saying that
the markets have to retest the July lows.
7:50am and the stock futures are smoking higher with The DJIA and NASDAQ both
up almost 2%. Don't know why. If the rally holds all day then yesterday
morning's early comment that the markets were going to be subject to a series
of 200 point up and down days courtesy of the hedge fund folks not on
vacation again becomes operative.
9:04am and our brother Jody has arrived to install our new computer. So we
have been a little out of the loop for the last half-hour. The markets are up
2% as forecast by the futures. We have our Biogen trade in to sell at $36 if
we are luck enough to catch a two-point pop. Now we have to see what will
happen for the rest of the day.
9:29am and today the screen is money green as bulls are holding sway, but
fear not bears for we all know it is a long long day.
11:02am and we sold the BGEN for $35.53 or a $1 profit. BGEN is back to
$34.25 but we aren't going to press our luck. Tomorrow is another day. Also,
our Monday morning surmise of up 200, down 200, is holding so tomorrow should
be a down-200 day. In keeping with this thesis, we sold the BMY at $22.56 for
a $2 per share profit. Bristol Myers is cheap but so are the other mainstream
stocks we sold last week. We maintain our low in September/October belief and
so we think we'll have a chance to buy the BMY cheaper. The money raised pays
for the purchases of yesterday in most accounts.
11:58am and the stock markets continue to surge higher. Stocks are now up
more than they lost yesterday. Correspondingly, the imminent loosening of 75
basis points by the FED that was widely predicted yesterday has now been
placed on hold by the rise in stocks. Do folks really believe that the FED
makes decisions based on the daily movements of the market?
3:02pm and the stock markets closed up today as much as they closed down
yesterday. Tomorrow is the rubber day to tell if the hedge funds are in
5 August 2002
7:20am and the stock futures suggest a slightly down opening. On our way down
to the office this morning we were thinking that the markets might go into a
holding pattern for the next few weeks. That's because many of the major
players will be on vacation. We wouldn't be surprised by 200 point up and
down days because the hedge funds remain active, but while hedge funds seem
to be in control of the day to day action of the markets, the overall trend
is still determined by the outlook for the economy.
A client wrote and suggested that Footlocker and AT&T Wireless and Fleming
should not be considered investments. Fleming shouldn't be considered one
because it pays no dividend, AT&T Wireless because it has no earnings and
Footlocker because it sells at 18 times earnings.
To us an investment is what we own in the portfolio. It may not work out, but
as long as we own a stock, it is an investment. We make no claim that the
stocks we own are going to change the world. We own stocks for the purpose of
earning a return over the short or long term. In volatile times such as these
we sometimes wonder why we try. It would be easier to sit on cash and go to
the beach. But we are paid to use our judgment. And it's our belief as we try
to pick and chose in the next few months, that non nifty fifty issues will
offer the best reward since they are being kicked out of portfolios with
abandon. These issues are more volatile but we are sticking with stocks we
know and have traded over the years. Hopefully a year from now, with
hindsight, our purchases will make some sense.
7:37am and the economist for CNBC is discussing whether two recessions back
to back are double dip recessions or two recessions back to back. And can a
camel pass through the eye of a needle?
8:37am and the market have opened a little lower on light volume. There is
not much news to move the markets and the only remaining major earnings
announcement is Cisco on Tuesday evening. We are adding more Footlocker at
$9.50, and may try our Biogen trade at the $34.50 level in a while.
9:04am and we bought the Z. We have a bid in for AT&T Wireless at $4. We are
going to try the Biogen since the markets look like they are going to be plus
or minus 1% all day. At the present the measures are off 1%.
9:10am and the five-year Treasury is yielding 3.16%. Unless we are in
depression that yield entails a substantial risk to principal for those who
are buying to hold for a couple of years. The risk/reward ratio didn't seem
reasonable when the notes were yielding 4.5% so that risk is greater now. The
Treasury is going to sell $22 billion of the five-year tomorrow.
10:04am and bought the Biogen during a sell program. Also bought the AWE at
$4 to spread around in accounts, including 1000 shares for the Model
Portfolio. We purchased a bit more Footlocker at $9.50 including 300 shares
for the Model Portfolio. We believe that we need to invest as the markets
sell off if we are to have the ability to trade these rallies. Also some of
these stocks are going to make their lows early and while we aren't trying to
catch the absolute low, as investors we want to invest when we see stocks we
like at attractive valuations. We were doing that several weeks ago when the
abrupt 1200-point rally intervened and put us in a sell mode.
11:15am and the major stock measures are down about 1.5%. Breadth is bad and
volume is light. We are buying stocks at what we consider to be good value
whether the DJIA is at 8000 or 5000. We are buying slowly and with the
knowledge that it may be a while before we see any significant gain. Since
Fleming and Footlocker and Hain are out of the mainstream they will tend to
stabilize at investment value rather than program related value. That's OK.
Fleming is down because analysts are questioning the quality of its earnings.
Fair enough. We think the sell off is overdone. AWE is down because no one
wants to own any telecom stock. Fair enough, we think that at less than one
times revenues AWE is a good value. Hain is selling at one times sales. BMY
is a down and out drug company with a good dividend, lousy CEO and problems.
The definition of the kind of stock we have always bought.
11:56am and the markets continue their low volume drop. We are adding Disney
to accounts at $14.20 including 500 share for the Model Portfolio. We may be
early on some of this stock, but we are buying to own at these levels, not to
trade, unless we get a 1000 point run as we did last week. As we said two
weeks ago, we like buying the low volume sell off because we have time to bid
and make up our minds.
12:38pm and we just read that an analyst at Soundview has upped his rating on
three optical stocks from under perform to neutral. Now that is a ringing
endorsement. With most of these former high flyers priced at less than five
dollar stocks we think the analysts should just rate whether or not they are
1:02pm and the DJIA is approaching 200 points down. There are no rallies
today. The cable stocks are being decimated; in fact so many stocks are down
our screen looks like the Red Sea.
1:50pm and we are coming up to crunch time. If we don't rally this last hour,
tomorrow is going to be a real tester. A rally in the last hour will postpone
the inevitable, but our timetable calls for the inevitable to occur in
1:57pm and a young guy is on CNBC talking about his book about how to make
money flipping real estate properties. The author says there isn't much risk
because the "flipper" only holds the properties for a few weeks or months. HA!
3:02pm and no rally occurred. Don't know how those folks in the Hamptons and
the Capes are enjoying their vacations, but we would guess they have had
better. If we were down as much as some of the mutual funds are, we wouldn't
be on vacation. In fact we aren't on vacation but then we never are. The
DJIA, S&P and NASDAQ all closed over 3% lower. So much for our morning
prediction of plus or minus 1%
And tomorrow is another day. Should be an interesting one.
2 August 2002
6:36am and this is a bad way to start the day. Larry, "I am an economist",
Kudlow is on CNBC as the guest of the day pontificating about how the tax
rate on corporations is too high. Since he also thinks the tax rate on
individuals is too high we wonder whom he thinks should support the budget
needs of this country. We know, cut spending unless it is anybody's favorite
We raised a lot of cash the last two days and we are a bit ahead for our
trading; by no means back to even for the year but this is a stingy market
unlike the markets of a few years ago. Had we not had our brief unprofitable
foray into the electric utility stocks, we would have had a better trading
result. But hopefully we learn from our experiences. It's one thing to buy a
can of worms to go fishing, and it's another to buy a can of worms as an
investment. We know the difference, but sometimes we forget.
On this subject we were reading the New Yorker last night and came across an
article by James Surieowki in which he wrote about the confidence that
investors used to have in "white shoe" firms such as Goldman Sachs. He
mentioned that investors formerly believed that if Goldman or Salomon or
maybe even Merrill were placing their names on an IPO and vouching for the
value represented that an investor could be reasonably assured that the
company being offered was a real company. No longer is that the case. We
mention this article because we learned that lesson back in the IPO boom of
1983 when we bought a company whose name we have long forgotten. It proceeded
to head south with alacrity and we questioned our investment decision to buy,
We remember thinking that the company must have some value since Salomon
Bros., which was among the top firms back then, with Henry Kaufman as guru,
had underwritten the company. Sorry to say we were mistaken and we received
an expensive but long lasting lesson in the perfidy of the two sides of Wall
Street. Actually that's why we quit being stockbrokers and became money
managers. A stockbroker works for the firm that employs him/her. The
stockbroker sells the products the firm says to sell and the stockbroker uses
his/her clients acquired as a means of distribution of the firm's products. A
stockbroker's earnings depend on the firm and his/her clients belong to the
firm not the stockbroker.
A money manager works for his/her clients. The money manger's earnings come
from the clients. If the money manager does not perform for the clients, the
clients leave, and the money manager becomes a cab driver. This is Capitalism
at work in its best form.
7:10am and Disney is trading down $1.50 on lousy earnings. National
Semiconductor is warning. And the probe of AOL by the SEC has been expanded.
Rioting in Uruguay, Brazil is a basket case, Colombia is an armed camp,
Argentina is bankrupt and the US is trying to overthrow the government in
Venezuela. South of the border's economic problems are being ignored by the
US at our peril. What ever happened to the One Americas hoopla?
Even Kudlow sounds a little worried about the dreaded double dip recession
By the by, Cisco said it would sign the affirmations but not till September,
which dispels one of yesterday's rumors. If Cisco required the expensing of
options, reported earnings would be 40% less.
7:31am and the unemployment rate is unchanged at 5.9%. The average work week
shrank, and involuntary part time workers increased to 4.1 million from 3.9
million. Non farm payrolls up only 6000. And all these numbers will probably
revised downward next month. Can anyone say Japan circa 1990.
The Treasury bond futures are suggesting a Fed rate cut in one of the next
two meetings. The S&P futures are under 883.
The FED meets on August 13th, which marks the 20-year anniversary of the
start of the bull market that ended in March 2000.
8:11am and the futures are not as bad as would be expected given the lousy
economic numbers this morning. Don't know what that means for the day. Disney
is probably going to test the $15 low again made when the Bass brothers sold
We are off for a haircut and will be back at 9:15am.
9:16am and the markets are doing well considering the negative economic news
of the morning. Yesterday's sell off may have been the result of the
artificial push higher in the DJIA on the last day of July.
10:06am and we just finished talking with a valued client. He had asked our
opinion of Lucent's bonds earlier in the morning. We have an aversion to high
yield bonds to begin with. We learned that the Lucent 7.25% due 2006 are
trading in the low $60 range. We were surprised because we thought that with
Lucent's problems they would be trading in the $30 range. One reason they
aren't is that those bonds are owned by a lot of junk bond funds and if they
were valued in the $30 range the funds would be showing even greater losses
than they are. We assure you that if Lucent files bankruptcy those bonds will
lose half their current value over night.
At $62 the bonds yield 21% to maturity. If an investor really believes they
will mature, the investor would realize a much better return buying the
common stock at $1.50 per share. For if those bonds are paid at maturity the
common stock will be trading at least 200% higher. Ah, we hear the naysayers
saying not to buy the common because the company is going bankrupt. We don't
disagree that the company might go bankrupt. But if it does, the bonds will
lose half their value and the holder will face a one or two year ordeal of
waiting for Lucent to emerge from bankruptcy. And when it does emerge, the
current bondholder will probably receive a blend of bonds and equity not
worth much more than $30 to start.
The phony pricing of junk bonds is one of the great unspoken realities of
mutual bond fund investing. The controlling of the pricing and concentration
of the bond holding is similar to the concentration of stock buying by Janus
and Fidelity funds which causes huge run ups in stock prices when they are
buying, and startling collapses in stock prices when they are selling.
And when stock futures on individual stocks begin trading in September, the
volatility is going to be even greater.
10:31am and the markets are off across the board about 1.5%. Uh oh, President
Bush is on CNBC live. DJIA is down 120 points. Think he is off on vacation
for a month.
10:49am and all of a sudden bids are evaporating. Maybe it's beach time in
the Hamptons and on the Capes.
10:52am and they just had a story on the Hershey Foods imbroglio on the tube.
The Foundation wants to sell to diversify. The town, the governor, former
trustees and school students all want the company to stay in Hershey, Pa. We
are on the side of no sale. Wouldn't want to be buying our Hershey Bars from
Nestle. They already own Ben & Jerry's which we had to stop buying when
Nestle bought Dreyers Ice Cream which owns B&J.
12:02pm and we are back from chasing some cows out of a pasture in which they
didn't belong. We let the bull jump the fence to get back to the cows.
Markets are now down 3%. CNBC has some inane golf tournament on. Interviewing
golfers as the markets crash is a wonderful metaphor for the current budget
dilemma. Glad we did our selling before the rush. Can't see a big rally on a
Friday in August in a bear market. But who knows. We are back in Fleming for
a trade/hold depending on the afternoon. The AT&T Wireless and Fleming and
Footlocker or Woolworth (Z) as we still call it are suffering along with all
the other stocks. But we do like them as investments. Z is at 9 times
earnings, AWE is at less than one times sales and FLM is as 4 times earnings.
And in most accounts we are back to 15% or less in the market. We still own
BMY and Hain also in many accounts.
The interest rate gurus are now predicting 1% FED FUNDS by October. These are
the same gurus who last spring were predicting aggressive tightening as the
economy recovered. Can anyone say Japan circa 1990?
Interest rates are not the problem. All the goofiness of the late 1990s is
the problem. Out here in the Kickapoo Valley a lot of folks work
construction. And up until a few weeks ago many of the construction workers
were still laying fiber optic cable in various parts of the country.
Aggressive easing is in the cards. Two-year Treasuries are under 2%. The Fed
keeps rescuing banks and business from bad decisions by taking money out of
the pockets of savers. Low rates are forcing folks who live on interest
income and don't want stock risk to buy bond funds. That's bad news in the
long run for them. First folks lost money in stock funds and they are going
to lose in bond funds because they are buying the higher yielding funds,
which entail the most risk. The fleecing of Americans continues.
12:36pm and a story about disposable cell phones is on CNBC. Our disposable
society may cause our grandchildren to pay a high price for our own temporary
and ephemeral conveniences. Or maybe recreating diapers and real china and
glasses will become the new business mover of the 22nd century.
12:41pm and the stock markets need Listerine or Scope for their bad breadth.
Can't seem too rally much as volume dries up. The low volume is the only plus
today, but these 200 point a day DJIA drops are going to get us back to the
7500 test too fast for a successful test to succeed.
2:04pm and the markets are heading lower in the last hour. We are setting up
for the Monday Tuesday crash scenario again.
3:03pm and the markets closed lower but off the bottom. All three major
measures were down over 2% at the close.
In the last two days we gave up our gains for the week in the Model
Portfolio. The value of the Model Portfolio is approximately $409,800 and so
it is down $20,000 or 4.8% for the year. We are 88% cash and 12% in stocks.
For the year the DJIA is down 17.3%, the S&P 500 is down 25% and the NASDAQ
is off 36.7%.
We are taking the weekend off and will post the Model on Monday.
Tomorrow is another day.
1 August 2002
7:03am and as we stumble in from the birthday party chuckycheeseover we see
the stock futures fractionally lower. Maria, the mouth, is on CNBC talking
about Cisco and not saying much. Qualcomm is under pressure because CS First
Boston is negative and Adobe is trading off $5 because of bad news.
Yesterday the NASDAQ did not recover at the close and the action money seems
to be concentrated in the DJIA. We are hoping for another 500 points from the
DJIA before the rally rests.
7:31am and the number of the day -- jobless claims -- has just been released.
Claims were up 20,000 to 387000 which is about the four-week average. This
number causes no reaction in the markets.
8:15am and back from helping the birthday boy take his early morning ride on
Sylvia the horse. Nothing much has happened with the futures to give an
indication of the day. We guess that the NASDAQ will continue underperforming
and since we are in a new month it will be interesting to see if any of the
folks not at the beach are in a buying mood.
8:57am and the markets are off fractionally but looking to go higher. The
NASDAQ remains in a funk. The seller in Fleming is still around and so we are
placing a bid a $1.50 below the market. The seller is dumping stock into a
vacuum and when they are through there should be a nice pop. Earnings
estimates for the company are in the $2 range. It's a volatile stock. High
for the 12 months is $37 and low is here. The announcement of selling the
discount grocery stores seems to have disturbed the market for the stock. The
reality is that there are few buyers for this kind of stock in this kind of
9:03am and we are selling the ABS at $28 we bought a few days ago because we
are building a position in the Fleming and we don't want to over concentrate
in any area.
9:07am and the DJIA is down over 100 points. We are entering bids at $34.50
for Biogen and $16.50 for Disney for our trading accounts. Those bids are
below the market price but we are trying to trade the volatility in those two
9:47am and the DJIA is now down 168 points and the NASDAQ is off 2%. The 883
level on the S&P 500 remains important in that according to the technical
folks that level can't be breached without significant damage to the rally.
The S&P is currently at 891.
Several clients have called expressing concern that their realized losses are
quite large this year. Our response is that we never look at realized gains
and losses till year-end and then we hope we have losses rather than profits
to mitigate tax consequences. We are not being flip with this answer. The
most important number to be aware of is the total equity figure, which is the
overall value of the account. You'll notice that that is the only number we
refer to when mention the performance of the Model Portfolio.
Thus if at the end of last year an account was worth $429,800 and it is
currently worth $416,000 that account is down $13,800 or 3.2%. ($13.800
divide by $429.800). Another example is if an account was worth $1,400,000 at
year-end and has taken out $85,000 we adjust year-end value by subtracting
the $85,000 removed from the account from the value of $1,400.000. That would
give the account an adjusted year end value of $1,315,000. If the account is
now worth $1,275,000 it has lost $40,000 in value. $40,000 divided by
$1,315,000 shows the account is now down 3% for the year. The actual realized
losses for tax purposes may be greater than the $40000 drop because some of
the lost value may have occurred in prior years and thus the some of the loss
would be accounted for in the year end value.
We would note further that an account down 3% that was up 18% in 2001, and 1%
in 2000, and 42% in 1999 is performing better than 95% of all accounts being
managed in the world. So while we don't like being in a loss position
anytime, we are very proud of our long and short-term record.
10:10am and we learn that Morgan Stanley has cut its rating on Fleming and
changed its price target from $28 to $22. They did that yesterday. Morgan
Stanley estimates Fleming will earn $2.50 this year and $3.40 next year. UBS
Warburg cut its rating on Fleming today and cut its price target from $22 to
$12. UBS estimates Fleming will earn $2 in 2002. So Fleming is selling at
five times earnings or below. CNBC is saying the earnings revisions are
revolving around a discussion of the quality of earnings. Whatever, we are
10:25 and a rumor is floating that Cisco is not going to certify its
financials. Down goes the stock market with the DJIA off 212 points or 2.5%
and the NASDAQ down 3%.
10:40am and we bought the Disney at $16.95 (we raised our bid) and the Biogen
11:23am and CNBC has Jim Glassman the author of Dow "36000" on to tell us
that stocks are less risky than bonds. For long term investors stocks were
not and are not wildly over valued. Doesn't make any difference when the DJIA
hits 36000 to Glassman. Guess he is going to live forever. It will happen in
his lifetime. Japan anyone? Young folks shouldn't worry about the ups and
downs. He reminds us of the politicos who are saying now that yes they knew
we were in a recession last year. Even though last year they said we weren't.
11:38 and the markets continue lower because the ISM number was 50.1 which
means that manufacturing is slowing. This places the growth folks in a bind.
Also news reports have President Bush and Chairman Greenspan having lunch
today. For the last five days bad news has been ignored but today bad news
and good news are bad news again.
12:36pm and the stock markets remain lower but the selling pressure seems to
be abating. We've completed our purchase of Fleming and we own the stock at
$11.87. We think the selling is overdone in this issue. We are buying it for
a trade to reduce the higher priced stock we own. We sold all our SBC $27.30
for a nice profit and now our only remaining telecom stock is Verizon. We
sold Biogen at $35.40 for an 80 cents per share profit.
1:15pm and the rumor mill is rumbling about Citicorp and Jack Grubman the
analyst and Sandy Weil the CEO and what was said to whom about AT&T to get
Grubman to upgrade. Don't like the rumor mill so we are selling all our
Verizon for a profit or loss as the case may be. That raises a nice bit of
cash. The RBOCs have been active and playing catch up and we think they may
back off again.
2:06pm and a mini rally is underway. We are using it to reduce our Fleming
position by trading out of most of what we bought today for a 45 cents
profit. We would like to hold a large position in the stock but the market is
too dicey. We finished selling our Verizon and our average price was $32.21.
We sold the whole position in the stock. We also sold Disney trade for a
2:42pm and we bounced off 883 on the S&P 500. Not rallying off that number
but bouncing so the jury is still out.
3:02pm and the markets close on their lows. GM announced July sales up 24%
and the share price dropped 75 cents and the DJIA sold off another 100
points. At the close the DJIA was down 229 points or almost 3%, the NASDAQ
was down 4%, and the S&P 500 managed to close at 884, thus avoiding the
dreaded 883 technical breakdown number.
Easy come, easy go, and tomorrow is another day.
August 2002 Thoughts
July 2002 Thoughts
June 2002 Thoughts
May 2002 Thoughts
April 2002 Thoughts
March 2002 Thoughts
February 2002 Thoughts
January 2002 Thoughts
December 2001 Thoughts
November 2001 Thoughts
October 2001 Thoughts