Folks always say bottoms are made
when unexpected news arises. The Gulf Coast Hurricane is certainly unexpected
news and $70 oil while not unexpected is not good news. The danger is to
quickly act on the news since it will take time for the full tragedy and losses
of this disaster to be recognized.
After the disaster is understood
the rebuilding will begin. And when it does the $30 billion in losses will
certainly be spent with insurance funds and government monies. That will be a
boon to the area. As crass as that sound that is the way most disasters in
developed countries are resolved.
Quarter GDP is now estimated at 3.3% versus the first look Advanced GDP number
of 3.4% last month. By having Advance, Preliminary, Actual, and Final GDP over
a four month period traders have a lot of numbers with which to play.
The White House says it will
release oil from the Special Petroleum reserve. That gave a boost to stocks and
a drop under $70 to the price of oil until folks released that unless the
refineries are working the oil won’t do much good.
Our thought is that the refinery
damage is going to be less than expected. That is only a guess and not from on
site information. But we presume that folks that make $50 million a year to run
oil companies and plan for emergencies will have taken more care planning than
the politicians in Washington who cut the funding for the New
Orleans levees by $1 billion to save money and will now
spend many billions repairing their shortsightedness.
It should be noted that this
calamity from a dollar and lives affected standpoints is worse than 9/11. But
the upside is that unlike 9/11 where most of the promised Federal moneys never
materialized there will be oodles of Federal moneys available. And the money
will be spent.
As we just told a client,
everyone is always looking for the event that changes the markets dynamics for
the next trend. We think the hurricane was such an event. The hurricane is bad
news but it is not an act of terrorism. While some of the talking heads are suggesting
that everyone throughout the country will be depressed we beg to differ.
Everyone throughout the country is glad it didn’t happen to them and will go on
about their lives.
Business activity in the Midwest
as measured by the Chicago Purchasing Mangers Index contracted for the first
time in more than two years. The National Association of Purchasing
Management-Chicago business barometer fell to 49.2 from 63.5 in July.Economists had forecast the index at 61.5. A
reading below 50 indicates contraction.The employment component of the index fell to 51.7 from 56.1 in July. Prices
paid rose to 62.9 from 61.3 and new orders slumped to 46.5 from 69.6. Above 50
indicates growth, less than 50 contraction. This is one index for one part of the country but its dour report is
probably the reason that all Treasuries are rallying.
For about ten minutes immediately
after the release of the Chicago PMI the thee-year Treasury dropped to 3.82%
while the two-year treasury dropped to 3.84%. That is called inversion as we
Wednesday’s Markets August 31, 2005
and the major
measures have been up and down and now up again. Treasuries remain strong although off their best levels and oil is back under $70. Breadth is positive and new highs are over 200 while new lows
are under 50.
We are buying BellSouth at $26.10 with a 4.4% yield in many accounts. We are
also buying Ford at $9.80 with a 4% yield which we think is secure since
the Ford family lives on the dividend. We also bought back JP Morgan at $33.74 with a 4%
dividend. If the Fed stops raising rates in December as the Treasury
futures markets are suggesting then the sell off in banks is overdone. And if
the Fed stops raising rates dividend stocks will remain attractive. Finally we
are buying a bit of Rite Aid at
$4.04 for accounts in a small percentage amount. RAD is doing a good job paying down debt and the consolidation in
the drug store industry may eventually make RAD attractive. We are buying. It
is down 20% in the last three weeks.
We are buying in reaction to the
move in Treasuries and stressing dividend yield as we said we would. We have
traded all these stocks this year and will do so again.
In our aggressive/large accounts
we bought Home Depot at $39.85. We
will add more at lower prices in other accounts. HD is selling at 14 times earnings
and that has been the place to buy in the past.
and stocks are
meandering in positive territory. Breadth is 2/1 positive and oil is down to
We sold the TLAB we bought yesterday for a 10 penny profit. We spent a few
dollars today and we wanted to get a little cash back in the aggressive
accounts. The range on TLAB was 25 pennies today and if it does that tomorrow
we will be back in it.
and oil closed at
$68.61. The DJIA gained 68 points to
104805. The S&P 500 rose 12
points to 1220 and the NAZZ jumped 22
points to 2152. Breadth was better
than 2/1 positive, new highs hit 300
and volume was brisk. Treasuries were the big gainers of the
day with the two-year going out at 3.83%,
the five-year at 3.87%, and the ten-year at 4.02%. The inversion in the yield
curve disappeared and the slope actually steepened.
And tomorrow is tomorrow and all
the casinos except those on the Gulf coast are open so let the games continue.
30 August 2005 Daily Comment
And what the computer gives it
can also take away. We are sorry to report that the price on the sale of the US
Treasury 3.125% notes was entered at $99.8007
when it should have been $98.8007. That
amounts to $1000 per bond less and turns what looked like a fantastic overnight
profit in to a slight loss. It was our error. We remain delighted with the switch.
The last time we were in New
Orleans we were 12 years old. So we don’t know what it
looks like today but the after the storm
pictures we have seen are not pretty. It is too bad, but when a city is built
below sea level in a hurricane prone area bad things are eventually bound to
occur. The same goes for California
and earthquakes and the outer banks on the Atlantic Ocean.
Funny thing is that after the calamity everyone wants the government to help-which
it does. That’s because the calamity strikes so many folks at once. Too bad
politicians and folks can’t figure out that health care is the same even though
it strikes individually in many communities every day? Add all the folks who
are diagnosed with the same disease every day and there is a hurricane or
earthquake every day in health care in the U.S.
The NYT and WSJ have been
running a story about a hedge fund named Bayou that seems to be worthless after
taking in over $400 million to manage. 20 years ago we had a hedge fund but we
closed it down because we realized there was no transparency for clients. By
that we mean that clients didn’t see the trades we made, or the stocks we owned,
or the mistakes we made, or the gains we produced. All they saw was value at
the end of the month.
We realized eventually that the
discipline of clients seeing our every good and bad trade would produce better results for them and us and so
we closed the hedge Fund. As currently structured our clients’ assets are held
by another NYSE firm under a strict clearing agreement and our only access and
control over those funds is to make trades in the accounts. The clients receive
confirmations on every trade so they see the good with the bad. Only the clients
control the assets in the accounts and monies or stocks from the accounts can
only be distributed on written client instructions or to the clients named on
the accounts. That is transparency.
Tuesday’s Markets August 30, 2005
Stocks are going to open lower
again this morning as the markets digest the hurricane’s damage and a rise to over
$69 in the price of oil. The rally yesterday endured some last minute selling
and that is carrying over into this morning’s trade. But the last week before
Labor Day often sees a rally and so we are not writing this week off for the bulls
1215 on the S&P is the
immediate number to be breeched for a continuation of the rally and then 1225 becomes the number that will turn
bears into bulls, al least for a short time.
rally has become today’s sell off as stocks return to their lows of Monday. Wal-Mart is making a new low today and
said 125 plus stores are out of commission because of the hurricane.
Breadth is over 2/1 negative, new
highs are well over 100 and new lows have receded so that is one positive. Oil
is approaching $70. All is lost. Just kidding.
It will be interesting to see whether
the bulls can stem the tide by interrupting their last vacation week.
The up one day, down the next
pattern seems to be reasserting itself and our rally is getting lost in the
shuffle. But the day is young and the sun is shining so there may yet be hope for
our trading positions.
We added Cisco at $17.58 and Verizon at $32.35 to some of our smaller
accounts this morning.
10:51am and $70 oil means
DJIA down 100 points at least for today. Breadth is back to only 2/1
negative and many stocks seem to be finding buying support at down 100 on the
DJIA. The S&P 500 is back to
1203 where it found support on Friday and that is an important level for it to
and the release of
the most recent Fed minutes has had no effect on the markets. The rally
attempts are failing and in the contra hour the major measures are moving
lower. Oil topped $70 then backed off and is now moving back toward that
number. Breadth remains 2/1 negative and volume is light.
We sold part of our oversized trading
position in CSCO in our aggressive/large
accounts for a 30 pennies loss and replaced it with an equal amount of TLAB which is off more than the CSCO in the same time period. We wanted
the CSCO position to be more in line
with the rest of our positions in those aggressive/large trading accounts. We
did nothing in the accounts that own only CSCO
3:02pm and Treasuries rallied
into the close with the two year ending
at 3.95%, the five-year at 3.97% and the ten-year at 4.10%. We don’t know
why treasuries rallied unless it was related to the stock sell off. Oil ended at $69.85. Volume was good for a summer Wednesday.
Breadth ended over 2/1 negative but new highs beat out new lows 2/1 and new
lows were under 100. The DJIA closed
down 50 points at 10414. The S&P 500
went out at 1208 down 4 points and the NAZZ
dropped 8 points to 2129.
And tomorrow is tomorrow and the
casinos are open except on the Gulf coast so let the games continue.
29 August 2005 Daily Comment
Hopefully the hurricane will not
be as bad as the forecasters predict. But it is going to do damage and as we
sit her in bright sunshine and cool temperatures having missed a tornado last
week by 15 miles we feel lucky and also hope for the best of a bad situation
for the folks in New Orleans and surrounding area.
This morning we sold our 3.125% Treasury notes due in 18 months that we
purchased week ago for a slight loss. With the proceeds we bought 4% Treasury
notes at a slightly better 4.02% yield than the 4% yield at which we sold the
18 month notes. Our purpose was to lock in the 4% coupon for two years. When we
bought the 3.125% notes the 4% coupon wasn’t available.
Our guess is that the 4% coupon on
the two year will attract buyers who don’t need the risk of the longer
maturities they have been buying to obtain a 4% yield. Over the weekend Greenspan
in his obtuse manner indicated that he thought longer dated notes should have
We think he would like to stop
raising rates before he leaves office in January and also that the rise in oil
prices which hit $70 this morning on the hurricane news will act to slow the housing
boom better than the persistent but relatively small discount rate increases.
The yield curve has flattened and
is about to invert. Inversion refers to the fact that in a normal yield curve
shorter maturity notes will have a lower yield than longer maturity notes. When
inversion occurs, notes at the shorter end have higher yields than longer dated
The inversions may occur in the shortest maturity
as occurred in the early 1980s when C/Ds yielded 20 % while 30 year Treasuries yielded
This time, perceived wisdom is that
the inversion will occur in the three to five year range. Inversion usually
suggests recession. It is different this time according to the bull gurus. Not
so say the bears.
We read this morning that years
ending in 5 have never been down in the modern market era with the average gain
being about 9%. And markets always rally in January.
Monday’s Markets August 29, 2005
Asia was lower
with Japan off
1% and Europe is mixed with France
on holiday just like President Bush.
Oil hit $70 over night and is
still at $69.25 up over $3. Futures are indicating a down opening.
With our 4% Note purchases we
have spent a good deal of cash so any buying is going to have to be selective.
In any kind of market collapse the Treasury notes will be a source of cash but
we will hold them for that occurrence which may come sooner than later. We will
be surprised if we hold the notes to maturity.
9:38am and stocks opened lower and then rallied after to move the major measures to the positive
side. But breadth is 2/1 negative and new highs are non existent. Oil remains
higher by $3 and Treasuries are firm but below their best levels of the day. We
are buying to trade some big caps (GE,
F, SBC, BLS, JPM, HAIN and SYMC and
all have good dividend yields except HAIN
and SYMC) in our large/aggressive
accounts including the Model Portfolio
but doing nothing in most accounts. SYMC
is Symantec which hasthe popular
Norton Internet Software Security system.
We still think there is a rally hiding
somewhere in this mire but we don’t want to bet the ranch or farm and are trading
in only a few large/aggressive accounts because the risk remains and the
trading is summer doldrums illiquid.
The media is having a field day
with the destruction in New Orleans.
The world is ending, the economy is tanking, oil will be $100 a barrel and how
will the world cope?
The reality is a little less
By the by, the hurricane is going
to do much more physical but not psychological damage than 9/11. That’s because
the politicians seeking re-election find the need with the media cooperating to
keep pushing 9/11.
The reality is a little less
In our memory, the nuclear standoff between Russia
and the U. S.
in the 1950s, and 60s, and 70s, and 80s, had the potential to destroy the world
as we know it.
The threats of rogue nuclear
devices don’t have the potential to destroy the world even though they could do
one heck of a lot of damage. So in the scheme of things, the hurricane in New
Orleans fills up the media quotient for the week for
engendering fear and calamity but on a larger scale means next to nothing.
And rebuilding homes and
infrastructure is an economic positive. Funding for rebuilding will come from the
insurance companies which have already reserved the money and the government which
will just print more money.
11:11am and the major measures remain slightly higher as breadth
moves towards neutral. New lows exceed new highs for the first time in a long
while and volume is light.
Heating oil and gasoline and
natural gas are rising in price today supposedly because of the hurricane. The
driving season and thus the need for increased gasoline supplies is over this
week-end and the refineries have already begun turning out heating oil.
Moreover natural gas for this year should already have been hedged by suppliers
and moved to underground storage facilities. And so the 15% jump in price today
is the result of speculators pulling the one armed bandit. The casino continues.
and breadth is now
positive as the major measures are at their best levels of the day with the DJIA up 47 points.
There is talk of tapping the
Strategic Petroleum Reserves although it is just rumor at this time. The spike
in crude to $70 overnight reminds of the spike in crude the night Gulf War I began.
That was the high for over 15 years.
In all the talk about Hurricane
Katrina costing insurers $25 billion and that is would be a record we hear no
qualifier like ‘inflation adjusted’.
If it is ‘inflation adjusted’ when it
comes to oil prices, why not with hurricane insurance payouts?
Treasuries are back to even as
From Reuters: It pays to be young at heart at Knott's Berry Farm! Grab the grandkids and come enjoy a
day of fun at Knott's Berry
Farm where seniors age 62 and over get in for the kid's price of only $14.95!
As we remember when we were kids
the admission price was $2. Maybe $14.95 is the ‘inflation adjusted’ price from 1956.
3:02pm and the major measures held their gains as the DJIA closed up 73 points at 10470. The S&P 500 rose 8 points to 1212 and
the NAZZ tacked on 18 points the end
at 2138. Breadth was 5/4 positive
and new highs bested new lows although new lows exceeded 100 for the first time in a long while. Treasuries closed flat and Oil ended at $67.38.
And tomorrow is tomorrow and the
casino will be open for business so let the games continue.
24 August 2005 Daily Comment
We need to make a trip
to Chicago on Thursday returning Friday and so
there will be no posts after today until Monday night August 29. We don’t think
much will happen and at least now we all have a few stocks to watch. *****
Asian markets, except for Japan,
were lower overnight and Europe is also lower. Oil is
higher by 50 pennies with a $66 handle because of storms in the Atlantic
and the release today of supply figures which are expected to be down. U.S.
futures are lower.
Verizon was upped by Wachovia to market perform saying the stock
seems cheap. We agree.
July durable goods orders were
down 4.9% and ex-transportation is down 3.4%.
Treasuries are unchanged on the
short end to firmer on the long end. We
are going to switch our 6 month Treasury 1.875% coupon notes to 18 month
maturity notes with a 3.125% coupon since we want to lock in more current
income. The price paid will be less than what we realize selling the
shorter maturity bonds and the yield to maturity will be about 20 bps greater
Lemley Yarling Management Co. takes the same approach to investing in bonds
that we use in the stock market, i.e., buying low and selling high. When
purchasing fixed income securities we usually buy U.S. Treasury securities.
That's because U.S. Treasuries are of the highest quality - with no credit
risk. The only two factors that affect the prices of U.S. Treasury bonds are
maturity and coupon rate. In the bond market, we "buy low" by
extending maturities (selling two year notes to buy five to ten year maturity
notes) when we believe interest rates are relatively high (bond prices are
low). When we perceive interest rates to be relatively low (bond prices are
high), we "sell high" the five to ten year notes have risen in price
and reinvest in shorter-term securities. This is because the longer the maturity
of any bond or bond fund, the greater the price volatility. Therefore, when
interest rates change, longer-term bonds are going to rise or fall in price to
a greater degree than short-term bonds.
And so, when we believe interest rates are low, we maintain a defensive
position by only owning short-term, less than five year average maturity, U.S.
Treasury securities. Unfortunately, most investors, when interest rates are
low, reach for a small degree of extra current income by buying long-term
bonds. Or worse, they buy high yield bonds, GNMA's, or high yield mutual funds.
These "high yield" funds not only purchase speculative bonds, but the
maturity on the bonds these funds own is usually fifteen years to thirty years.
When interest rates rise and we are buying seven year U.S. Treasuries, those
short-sighted, current yield-oriented investors, who purchased long maturity
corporate bonds or high yield mutual funds when interest rates were low, have
big losses in their bond portfolios and are locked into a low current yield
based on prices paid. Fixed income investors, like stock investors, must
consider both current yield and capital gains as part of a sound, prudent
Wednesday’s markets August 24, 2005
One market maven we follow and
whose work we like said that the contrarian
take on the high price of oil is that that high price is a function of strong
demand which means that the economy is humming. We take the opposite view
and believe that the high price of oil is a function of hedge fund trading
assisted by selective oil company refining and delivery disruption. Even if
today’s oil inventory report indicates a drop in oil reserves it is a fact that
for the past few months oil reserves have
been at a six year high. During that six years oil traded in the $30 and
We believe that the price rise is being artificially
created the same as the rise in electricity prices in the 2001 period and
that the FERC has no interest in regulating the best contributors to the party in
And we think the rise in the price of oil is going to force the Fed
to quit tightening earlier than the markets have forecast and that is the reason we made the Treasury
switch this morning. *****
9:39am and new home sales were ‘better than’ (why not with no money down and the builders paying
the closing costs) and oil inventories were up not down and that has given some
legs to stocks. The major measures are higher and breadth is positive.
We are bidding on Verizon as a dividend play to go with
our end of tightening theory VZ is down from a high of $45 in the last 12
months to $33.25.
By the way, the end of tightening
also fits in with our lousy economy theory.
11:47am and besides buying VZ
at $33.15 with a dividend yield of 4.8% we also repurchased our trading
position in Cisco at $17.72.
Treasuries are a few bps higher
in yield with the two-year back to 4% and the ten-year at 4.19%. Breadth is 3/2
positive and new highs are now over 150. Oil is up 49 pennies at $66.20.
1:27pm and the major measures are now lower as oil surges to up $1.64
to $67.35 on the lighter than expected gasoline inventories. Duh! It’s the end
of the summer driving season. Whatever hedge fund driven markets do what hedge
fund driven markets do and we are here to watch with you.
Breadth remains positive and
volume light and since it is the contra hour this sell down may be the pause
that refreshes the bulls.
and the DJIA closed down 80 points at 10440 as
oil jumped $1.75 to $67.45. The S&P 500
dropped through a couple of support levels and ended down 8 points at 1210 and
the NAZZ after being up over 15
points ended 6 points lower at 2130. Breadth
reversed and closed negative and volume was
light. Treasuries firmed as stocks
dropped with the two-year finishing at 3.99% and the ten-year at 4.18%.
The reason given for the sharp
sell off in the last hour is that the NY Fed has called a meeting for September
15 to discuss Derivative Trading with 15 of the largest trading firms. Talk of
another Long Term Capital blow-up sparks the sell off. That is stupid. If there
was a crisis we don’t think they would be waiting three weeks to have the
meeting but in a thin market any rumor will do.
And the games will continue as we
journey to Chicago.
Next post August 29, 2005.
23 August 2005 Daily Comment
Our vacation/business trip to Traverse
City, Michigan was very
Tuesday’s Markets August 23, 2005
9:36am and stocks opened lower and are off a bit in slow trading. It is going to be difficult to work up much
commentary for the next two weeks since until September it would seem that
any trend will be but a day or two long.
We remain in cash and looking but
and existing home
sales were down 2% and that helped push stocks lower. Currently the DJIA is
down 50 points in boring trading. Oil is up a few pennies and Treasury yields
are down a few bps.
and the major
measures tried but couldn’t make it to the plus side today. At the bell the DJIA was down 50 points at 10520. The S&P 500 was off 4 points at 1217
and the NAZZ was down 4 points at
2137. Breadth was 5/4 negative but new highs expanded to 135 after being in
the 50 range while we were on holiday. Treasuries
gained in price with the ten year ending at 4.18%, the five-year at 4.04%
and the two-year at 3.98%. Oil
finished up 6 pennies at $65.71.
And tomorrow is tomorrow so let
the games continue.
17 August 2005 Daily and Vacation Comment
This afternoon we are heading off for a short trip to Michigan to see some friends/clients and will back
on Tuesday August 23. Since we are mainly cash in accounts and want to be and
given the way the markets have been acting the last few days we can use the days
This morning the Producer Price Index (Wholesale Prices)
was reported as up 1%. We haven’t seen that type of number for a while. The
core ex food and energy was up 0.4%.
Year over year PPI was up 4.6% with core PPI up 2.8%.
Hewlett Packard announced good results last night and the stock
jumped 2 points. The results include all the usual suspect charges and
adjustments that will be part of the HPQ report for the next five quarters at
Applied Materials had a punk report but had good news going forward
and so the share price is up 50 pennies.
The market mavens are beginning
to concentrate on Tech stocks since retail has blown up on them with bad news
from Wal-Mart and Abercrombie and lowered guidance from Ann Taylor, Aeropostate and Federated.
And the mavens are tired and probably a little jittery about continuing to
recommend oil and housing stocks.
Wednesday’s Markets August 17, 2005
10:49am and the major measures are higher with breadth flat. Oil is
off $1.50 and Treasuries are a few bps higher in yield.
Even with the major measures
higher NYSE breadth is negative today. Techs are strong today and we used the
strength to sell the Cisco that we
bought the other day for a scratch 20 pennies profit. We sold because of the breakdown of the S&P 500through 1225 yesterday. Most
accounts are back to a cash position.
12:42pm and with oil down
$2.28 breadth is improving and the major measures are on their highs for
the day with the DJIA up 61 points and the S&P 500 flirting with 1225.
Treasuries continue to give ground.
and the major
measures held their gains with the DJIA
closing at 105550 up 38 points. The S&P
500 closed at 1221 up 2 points and the NAZZ
rose 10 points to 2146. Oil dropped
$2.83 to $63.25 and Treasuries rose
in yield with the ten-year ending at 4.28%, the five year at 4.14% and the
two-year at 4.05%. Volume was summer
light and Breadth was positive.
And tomorrow is our holiday so let
the games continue while we play.
Next post will be Tuesday August 23, 2005.
16 August 2005 Daily Comment
Fidelity owns 4.5 million shares of Google and picked up those shares over a four month period when the
share price ran from $186 to $286. We wonder which funds received the $186
stock and which the $286 share. Also, that spread in cost price puts the lie to
the SEC concentrating on cents per share on execution. Fidelity would have executed
the trades for 2 cents per share. The only problem is that it took a price rise
of 50% for them to fill their need and the needs of their mutual funds. The
same types of illiquidity will prevail when they go to sell.
The CPI for July was up 0.5%, ex Food and Energy which no one needs it
was up 0.1%. Year over year CPI was
up 3.2%, ex Food and Energy the y/o/y gain was 2.1%. So if you don’t eat or
drive a car or heat your home there is no inflation.
Industrial Production rose 0.1% in July and Capacity Utilization was 80%.
Tuesday’s Markets August 16, 2005
Stocks are going to open lower
this morning. Overseas markets were lower and the dollar is a bit stronger. Treasuries
are firmer on the economic data and oil is down 30 pennies to begin the trading
According to Rick the bond man on
CNBC the futures are pricing 4.25% Fed
Funds by year end. *****
10:36am and stocks lower with breadth 2/1 negative. Treasuries are
higher with the ten-year at 4.21% and the five-year at 4.08%. Oil is up 5
and in the contra
hour the major measures remain lower in light trading. Oil is also lower but
Treasuries have continued to rally. Bloomberg is reporting that Treasuries are
rallying on tame inflation news. That’s now how we read this morning’s report
but then we have been doubters for a while.
Since this is an expiration week
plus one of the last week’s of summer vacation the volatility is not
unexpected. But stocks seem to go down more easily than they go up.
and the S&P 500
has broken down through the 1225 mark quite substantially. This is a crucial
level for the bull case.
and the DJIA lost 12 points to close at 10512. The
S&P 500 dropped 15 points to
1219 and the NAZZ gave up 30 points
to end at 2137. Oil ended down 19
pennies at $66.08 and Treasuries
closed firm with the two-year at 4.01% the five-year at 4.09% and the ten-year
at 4.22%. Breadth was over 2/1
negative at the bell and volume was light.
And tomorrow is tomorrow so let
the games continue.
15 August 2005 Daily Comment
The media has been fully covering
the rise of buyout funds. Today the WSJ announced that Warburg Pincus had raised $8 billion. The Carlyle Group just completed a $10 billion fund and Goldman raised $8.5 billion with the Blackstone Group aiming for $11 billion.
These buyout funds take that money and borrow about 4 times the
underlying equity to buy companies. They hold the companies for a few years and
then try and sell them back to the public and a much higher price.
One element not commented on is
that these funds are buying companies with leverage and that the funds are taking playing money out of the
markets. The vast majority of money invested in many companies, especially
those being bought out, is stable long term investment money. When those holders are bought out they
don’t rush out and buy new stock. But the money being used to fund these buyout behemoths is fast money and
when it is employed to buy companies that money does come out of circulation.
We agree that there is an increase
in the amount of money seemingly available for investment because most of the
buyouts are done on a highly leveraged basis but long term investors with
profits in their pockets most times don’t’ feel the rush to place found money to work in a hurry.
One final though is that these
buyout funds have to spend the money they raise within a certain amount of time
in order to begin collecting their 2% plus yearly fees. If they don’t spend the
money they must return it to investors. With a $10 billion fund the fee amounts
to $200 million if the money is invested and $0 if it isn’t. Certainly that is
not a hard decision to make.
Carl Icahn and his group own 120 million shares of TWX and Icahn says he won’t sell his
shares in TWX until February 2007 or the next holders meeting although his
partners can sell their shares with his consent. As we have said in the past
Icahn is for Icahn and no one else. We do wish we had held for the Icahn pop
but we would be sellers on the pop because of Icahn’s track record.
Delta is exploring bankruptcy filing. Delphi is not.
This morning Treasuries
are giving back a portion of their Friday pop higher in price lower in
yield with the ten-year back to 4.25%
and the five-year at 4.15%. Overseas markets were mixed to yawningly higher
overnight. And U.S.
futures are indication a slightly higher opening.
Oil is off 50 pennies. Some traders are suggesting a spike to $70
on oil and then a rollover pull back. We don’t notice more media stories on
gasoline prices. The question then becomes what happens to stocks if oil pulls
back. We have seen several technicians note that they can find no day to day co-relation
between the action in oil and the action in the stock marts. But on a macro
basis the price of oil does have an effect and we also think the price affect
Months ago we suggested there
would be no sustained rally until oil dropped under $40 per barrel. We still
hold with that thesis.
Monday’s Markets August 15, 2005
9:26am and stocks have opened lower in moderate trading. Oil is off
21 pennies and Treasuries are moving higher in yield as Friday afternoon’s fun
and games in the bond pit are reversed.
Since last Wednesday Cisco is down 10% and we have had
decent luck with the stock this year. Their earnings were OK and traders were
expecting more. We are going to buy back at $17.70 the stock we sold at $19.90
on July 15.
With Friday being an options expiration
day, CSCO may be pinned to the
$17.50 number till next week. By that we mean that often as options expiration
approaches prices optionable stocks often trade around the nearest option
expiration price which in this case is $17.50.
and entering the
contra hour stocks are higher and breadth is positive. Oil is down $1.26 at
$65.60 and Treasuries are higher in yield with the ten-year at 4.27%. Volume is
Mother Merrill says the Housing Sector is accounting for 50% of the
growth in the U.S.
3:02pm and the DJIA closed
up 34 points at 10634. The S&P 500
gained 4 points to end at 1234 and the NAZZ
rose 10 points to 2167. Treasuries gave
ground with the ten-year ending at 4.28%. Breadth
was positive and volume was light. Oil
finished down 6 pennies at $66.61.
And tomorrow is tomorrow so let
the games begin.
12 August 2005 Daily Comment
Paul Krugman has an interesting column in the NYT this morning. The gist of his discussion is summed up in this
“In other words, a fuller answer to my former neighbor would be that
these days, Americans make a living selling each other houses, paid for with
money borrowed from the Chinese. Somehow, that doesn't seem like a sustainable
Dell disappointed on the revenue side last night and is trading 10%
lower this morning. Goldman Sachs
lowered its rating an others have lowered expectations. The shortfall by Dell which
is the darling can do no wrong computer company for Wall Street is affecting Intel and probably MSFT later since their components power the Dell machines.
A fellow on CNBC this morning
said that the price of oil today at $66 a barrel and rising versus three years
ago is taking and extra $700 million per
day out of consumers pockets.
Wal-Mart acquiring Target
is the rumor of the day.
Trade deficit for July was $58 billion which was greater than
expected. Import prices were up 1.1% in July and 7.7% on a year over year basis,
ex-oil import prices were only up 0.1%. Export Prices were up 0.1%
The ten-year is under 4.30% today versus 4.40% before the auction
Today looks to start as a down
day but that will give the bulls an opportunity to again show their strength. Japan was up over 1.5% last night and is up
10% since June as their GDP ahs finally begun to grow, up 1.1% in the latest
quarter. That is tepid but enough to stir interest. According to some websites
American (hedged funds) are playing the Japanese markets. Anything the hedge
fund boys and girls think they can move they will. It is all going to end
Friday’s Markets August 12, 2005
and 3/1 negative
breadth is leading the markets lower with the DJIA down 60 points. All is not
lost for the bulls although it is a Friday and with oil over $66 any late day
rally will be problematic. Treasuries are unched and the NAZZ is down 22 points
as the Dell news ripples through the large cap tech stocks.
11:02am and oil ticks at
$67 and the DJIA ticks at down 100
and breadth has gone from 3/1 positive
yesterday to 3/1 negative today. The DJIA
is off 105 points and the NAZZ is
down almost 30 points. The S&P 500
is hanging below 1230 and the next few hours should be interesting for the few
of us still watching the screens.
We offer our condolences to the 1000 Dean Witter brokers who were fired
yesterday because they didn’t get enough commission income out of their clients
to keep John Mack- who is making $25 million per year- happy.
As Dell swoons today Apple Computer
is making an all time high.
The rally in Treasuries continues with the ten-year moving to a 4.23% yield at
the close today. The five year went out at 4.11% down from 4.22% yesterday and
the two year was 4.03%. The boys and girls are having some fun on a summer
Friday. Also the folks who make the rules placed position limits on the
ten-year because there are fewer ten-years available for delivery than futures
contracts outstanding. As always when the folks who control the game feel pain
they change the rules. Just ask the Hunt brothers.
and crude oil closed up $1.36 at $66.86. The
DJIA came back a bit in the last
hour but still closed down 85 points
at 10600. The S&P 500 lost 8 points
to end at 1230 and the NAZZ dropped 17
points to 2156. Volume was light
and breadth improved to 2/1 negative at the bell. Happy
Wednesday, not so happy Thursday, happy Friday leaves us more happy than not
for the week.
And tomorrow is Saturday so the
games are suspended until Monday. Enjoy.
11 August 2005 Daily Comment
Retail Sales were up 1.8% in July when 2.4% was expected. Ex autos
retail sales were up 0.3% when 0.6% was expected.
The Nikkei was up 1% overnight to a new four year high at 12263. Before celebrating too much is should
be remembered that the Nikkei traded at 40,000 in 1989.
Jobless claims dropped to 308,000 for the latest week. They are going
in the right direction again
The S&P 500 failed at its 20 day moving average of 1232 yesterday.
The 50 day moving average is 1215.
Michael Powell, “son of”
and former FCC regulator, has found work with the folks he formerly regulated
at an LBO firm. Congratulations.
Goldman Sachs downgrade Intel
to in line from outperform.
Thursday’s Markets August 11, 2005
9:02am and stocks opened lower for a few minutes but the major
measures are now to the plus side even with Intel,Cisco and Microsoft and Applied Materials lower.
Breadth is flat and oil
is up 5 pennies to $64.95. Treasuries
are better today by a few bps.
11:20am and as crude moves towards $66 per barrel stocks are
heading the other way. Breadth is still positive but failing and Treasuries are
firm. The big cap banks and other blue chips have joined the big cap techs in
the red column as of this hour.
Sullivan gets five years while
Bernie got 25 years.
and in the contra
hour Treasuries have caught a bid and are higher on the back of a well received
auction of the ten-year.The major
measures are slightly positive and breadth remains flat. Oil keeps trying to
push through $66.
and the bulls
asserted themselves in the last hour of trading to power stocks higher. At the
bell the DJIA was up 90 points at
10685. The S&P 500 gained 8
points to end at 1237 and the NAZZ
rose 16 to 2175. Oil also gained
ending at $65.80 up 90 pennies and Treasuries
posted good gains with the ten-year going out at 4.34% and the five-year at
4.18%. Breadth was over 2/1 positive
on the NYSE and 3/2 on the NAZZ at the close and volume was moderate.
And tomorrow is tomorrow so let
the games continue.
10 August 2005 Daily Comment
It would have been nice of Carl Icahn to begin his pseudo-assault
on Time Warner a month ago so that
we could have received a better price for the shares we sold. Icahn is asking
for a breakup of the company but we assure you that if the shares reach over
$20 Icahn will be long gone Carl.
Cisco’s earnings last night were ‘better than’ but revenue forecasts
for the first quarter were a little lighter than expected and the shares sold
off in the late after hours. Disney had
better earnings on lighter revenues but its shares are a little lower. The judge
in Delaware also ruled that is
was OK for the Board of Directors to give Michael Ovitz almost $200 million of
the shareholders money to say goodbye to Mr. Ovitz.
Investor’s Intelligence has 59% bulls, 19% bears for its latest
weekly reporting period. In a contrarian way that makes us more secure in our
Wednesday’s Markets August 10, 2005
8:19am and with Asian markets strong overnight and Europe
higher the U.S.
stock markets look to open higher. Unlike yesterday, we think the higher opening
will be sold.
and on 3/1 sportive
breadth the major measures are higher as Cisco
is off almost $1. As John Chambers, the CEO of CSCO is taking on CNBC the
stock is moving lower. Oil is higher
and Treasuries are continuing their modest rally of yesterday afternoon. 1234
on the S&P 500 is a big number and it is trading above that number at 1238
currently. If it closes above the rally might continue.
and stocks remain
higher even in the face of the Cisco
$1 per share drop. Breadth is strong and the DJIA is up 85 points with the
S&P up 9 at 1242. Oil is up 33 pennies and Treasuries also are firm.
and entering the
contra hour tech stocks are in the red and the DJIA has surrendered 2/3 of its morning
gains. The ten-year is back to 4.40%, the NAZZ is negative, and oil is at a new
high at $64.20 up $1.13.
and my sister came
to visit and that is the reason for the late post. The DJIA reversed today and closed 21 points lower. The S&P 500 also closed several points
lower after being 9 points higher early on and the NAZZ dropped 16 points as big cap tech stocks did a swan dive led
The action of today will lead to
a down opening and then we’ll see if the bulls have any firepower left.
Breadth was 5/4 positive on the NYSE after being 3/1 positive in
the morning and was negative on the NAZZ reversing a 3/1 positive morning
Maybe $65 oil is the magic number
that affects stocks because that’s where oil traded today.
We must say that cash feels
pretty good right now.
And tomorrow is tomorrow so let
the games continue.
9 August 2005 Daily Comment
Ford is going to fire 25% of its sales and marketing
staff. They are doing that in order to cut costs, obviously not to sell more
cars which is the job of a sales an marketing staff.
Whirlpool wants until December 2006 to close its deal
to buy Maytag. That is how they sell their washing machines: buy now
with no payments or interest due till December 2006.
Baidu is trading at $110 after
trading at $170 yesterday. Now that is volatility like the old days of 1999.
We read an article that said that hedge and mutual funds are
now allowed to place all their assets in exchange traded funds know as ETFs. This removes stock picking from the mix and instead
allows funds to buy themes or industries without having to make a decision
about an individual stock. And so, folks are now placing their money in mutual
and hedge funds which in turn are placing the money in unmanaged or slightly
This phenomenon is the result of the markets becoming online
casinos. And it makes our job that much more difficult. It took us all year to
realize that this type of trading is now the norm for even Bank Trust
Departments. We may have to join them.
The median home price in the Unite States is now $225,000.
The median income is now $36,000. To buy a $225,000 home based on a 10% down
payment, an income of $75,000 is needed. Obviously the two medians are not
Unit labor costs rose 1.3% in the advance Q2 GDP report.
Hourly compensation and hours worked fell. Productivity was up 2.2%. Keep on
firing and outsourcing those folks.
Tuesday’s Markets August 9, 2005
8:35am and stocks are higher
out of the gate and crude oil trades above $64. Greenspan could use the rise in
the price of crude as an excuse to not tighten although all traders say that
won’t be the case. But Greenspan says the rise in oil is not inflationary and
the reality is the price rise will eventually low the economy so it would seem
to make sense. Also this morning’s productivity figures suggest that inflation
is under control. Of course Greenspan knows that the inflation numbers are
being cooked to make them more palatable and to keep down the built in cost of
living increases in Social Security and other inflation retirement programs and
contracts. That is why he is still on the inflation bandwagon.
Cisco earnings come tonight.
10:53am and stocks are
building on their gains with breadth expanding. The last few months, when the
markets have been strong or weak for most of the day, they have tended to close
that way. The only difference today is the Fed meeting. And since everyone
expects the same language and a raise, any variation may be a positive for
stocks. Oil is now lower on the day and Treasuries are unchanged.
Yesterday the rumor was that Delphiwas going to be filing bankruptcy. Today the stock is higher because Goldman
Sachs says any bankruptcy filing would harm GM and so it won’t
happen even thought the company said it might have to file bankruptcy.
1:05pm and pre-Fed announcement in twelve minutes the
DJIA is up 75 points, the NAZZ is up 11 points and the S&P 500 is 8 points
higher at 1230. Treasuries are 4.43% on the ten-year, 4.28% on the five year
and 4.15% on the two year. Oil is of 64 pennies at $63.30.
the Fed raised rates a quarter of a point and kept the measured language. So
far, the markets are yawning.
the DJIA closed up 80 points at 10616. The S&P 500 rose 8
points to 1231 and the NAZZ gained 10 points to end at 2175. Treasuries
gained a bit with the ten-year at 4.39% and crude oil lost 87
pennies to $63.07. Breadth flattened out into the close.
And tomorrow is tomorrow so let the games continue.
8 August 2005 Daily Comment
Whirlpool now wants to pay $20
per share for Maytag, a stock no one
wanted at $10 two months ago. And Addidas
is going to pay $59 for Reebok, a
stock no one wanted at $10 in 2000. As stocks rise in price interest grows whether
or not the underlying fundamentals justify.
Baidu, the Chinese Google, is up another $26 today.
Stocks look to open higher and
then we shall see how much strength the bulls have.
Uncle Allan and his band of merry
folks meet tomorrow and the markets expect another 1/4 points increase to 3.50%.
Monday’s Markets August 8, 2005
9:16am and share prices are higher out of the gate with the DJIA up
40 points. Breadth is positive but crude oil is up $1.19 to $63.40 and we doubt
that stocks are going to like that. Treasuries are giving more ground with the
ten-year at 4.40%.
Gap is up $1.15 per share on takeover talk? Saks
is up $2.25 on takeover talk? There is also Nokia/Cisco merger talk. Well it is August.
11:07am and trading has taken on the aura of a lazy summer day in
August. Breadth has reversed to 5/4 negative and oil is pushing higher.
and it’s a sleepy
Monday. With the Fed meeting tomorrow we don’t expect much for the rest of the
afternoon and so we are going out for a bike ride before it gets too hot. As we
leave Oil is up $1.43 at $63.65 and
breadth is negative. The major measures are mixed and the ten year is at 4.41%.
Tomorrow should be slow until when the Fed releases its decision and
So let the games continue.
5 August 2005 Daily Comment
The July Employment Number was plus 207,000. Average hourly earnings
rose 0.4% which was the largest gain in a year and both those numbers are bad
for bonds because the Fed will
continue to raise rates. Treasuries are lower in price, higher in yield on the news
and the stock measures also sold off on the rise in bond prices and higher oil prices
this morning. The dollar is stronger on the news since higher rates mean more
attractive yields for foreign Treasury bond buyers.
A down opening could set up a pretty
good rally or…
We get questions:
The call/put ratio yesterday was 2.72 to 100. That means 272 calls were
purchased for every 100 puts that were purchased. That is very high ratio and a
contrarian indicator if those types of numbers continue
What does this mean....in
When folks buy 2 times as many
calls as puts that is considered to be very bullish behavior in the markets.
Unfortunately when everyone is bullish that usually marks a top in the markets
because there is no one left to buy. So a high call to put ratio is a
contrary indicator-that is- because so many folks are bullish is considered bearish. *****
Friday’s Markets August 5, 2005
9:07am and stocks opened lower. The major measures rallied to almost
even but now the sell off has commenced again. Breadth is 3/1 negative and
Treasuries are a drag as yields head higher with the ten-year at 4.38% and the five-year
Hedge fund interrelationships
with stocks and bonds and currencies may be ruling the day again. On summer
days with light volume, hedge fund activity has been the major mover. And because
today was a ‘big number’ day with the Employment Report we would guess that
some lagging funds made bets that worked and some made bets that didn’t work. Those
that bet and were wrong are now scrambling to cover and reposition and that may
be a good chunk of this morning’s activity.
The afternoon hours will give a better
feel for how traders want to spend the weekend.
More investment firms have begun
to recommend Nokia after it sold off
the past few weeks on a bum sales/earnings report. With Motorola on its high we would guess that some aggressive types may
be taking profits in MOT and moving to NOK. After all, the analysts are saying
that Nokia is willing to cut prices to gain share and since MOT is part of that
share NOK wants to gain the price cutting action would logically seem to have
to affect MOT. That is just our observation, no a factual statement.
Harley Davidson (HDI) is one of the stocks in the SEC experiment that can be shorted on downticks. With some
folks suggesting that the backlog in bikes is not as large as HDI is implying
that stock might be interesting fro a trade if the shorts get interested. We
see a lot of bikes in yards with for sale signs on them.
Baidu.com was offered as an IPO last night at $27. It began trading
today symbol BIDU and has traded as
high at $150 per share. It is being called the Chinese Google.
Sears Holdings (Sears/Kmart) (SHLD) fired the CEO of Lands End yesterday. She had been with
the company since 1991. When Sears bought LE we said they were overpaying and
if Gary Comer were ten years younger he would be repurchasing the company at
one half the price he sold it. As it is Eddie Lampert the hedge fund genius who
put Sears and Kmart together will probably do an IPO of the stock to the
and the DJIA closed down 50 points at 10560. The
S&P 500 lost 9 points to close
at 1227 and the NAZZ ended down 12 points
at 2180. Breadth was almost 3/1 negative
all day and news highs were under
150 while new lows climbed to 70. Treasuries dropped in price as the two-year ended at 4.11%. The five-year finished at 4.23% and the ten-year at 4.39%. Crude oil gained 93 pennies to $62.31.
And tomorrow is Saturday and we
will rest easily over the weekend with our all cash position.
4 August 2005 Daily Comment
The Bank of Englandlowered its discount rate by 25 bps to 4.5%. That drop was the
first lowering in two years.
Jobless claims for the latest week were down 1000 to 312,000. That is heading in the right direction.
The July Employment report comes tomorrow morning and bulls are
pinning their hopes for the rally continuing on another Goldilocks number.
Proctor and Gamble borrowed $24 billion to buy back stock.
The call/put ratio yesterday was 2.72 to 100. That means 272 calls were
purchased for every 100 puts that were purchased. That is very high ratio and a
contrarian indicator if those types of numbers continue.
Thursday’s Markets August 4, 2005
9:28am and the major
measures are lower for no real reason except boredom.Retail sales numbers were not as good as
expected and oil is up about 50 pennies. Treasuries are firmer and breadth is
over 2/1 negative.
We sold our Eyetech holdings in aggressive accounts for a small loss. That was
the last stock we owned in most accounts and if the markets are going to do
what we think they will then we will be able to buy EYET, if we choose too, at
a lower price later this year.
Mother Merrill lowered Time Warner from buy to neutral.
Sara Lee announced a loss for the quarter due to restructuring and
lowered expectations going forward.
Wild Oats earned 3 cents a share for the quarter versus 2 cents
expectations. Same store sales were up 4%.
and we went for a
bike ride and when we return the only stock on our screen that is green (up) is
EYET. It’s been that kind of year
for us which is why we are in six month Treasuries. The ten-year and five-year Treasuries are higher in yield and lower
in price. The major measures are all lower with the DJIA down 80 points and the S&P
500 down 8 points. Breadth remains stinky and oil is up 80 pennies at $61.65.
Microsoft is the new darling of the bulls and it is helping all the
major measures because of the big capitalization.
and the bears win
one. At the close the DJIA was down
88 points at 10610. The S&P 500 lost
10 points to end at 1235 and the NAZZ
dropped 25 points to 2191. Breadth was over 2/1 negative all day. Treasuries closed higher in yield with
the ten-year at 4.31% and the five-year at 4.15%. Oil gained 52 pennies to $61.38. there were 300 new highs
And tomorrow is Friday and brings the Employment Report,
which is expected to say 180,000 new jobs were created in July, will rule the
trading for at least the morning hours.
So let the games begin.
3 August 2005 Daily Comment
It is Bulls 57% versus Bears 22%
in the weekly Investors Intelligence
New highs hit almost 700
yesterday. When they get to 1000 get ready for action.
The two-year maturity Treasury at 4.03% is at a four year high in yield.
That is pretty amazing. Not that it is at a four year high but that the yield
is only 4% that makes it a high. Alan Greenspan constantly harped on the lack
of saving in this country even as he forced interest rates lower to help the
banks recover from dumb loans. The low interest rates forced savers to do other
more risky things with their money and encouraged the real estate boom in
prices which will end badly for many.
Speaking of dumb, it is also
truly amazing that the banks and brokerages are paying billions to settle the Enron and WorldCom lawsuits while the CEOs of those financial institutions
have continued to collect their salaries and bonuses.
Challenger, Gray, and Christmas
announced 102,972 job cuts in July.
Addidas is paying big bucks to acquire Reebok so that it can better compete with Nike. Paul Fireman wins. Don was great with those stocks and when
we lost him in 1994 we lost our ability to play the retailers. We don’t have
the insight and imagination that he did. We miss him greatly and not because of
the lost gains.
Wednesday’s Markets August 3, 2005
9:32am and stocks opened a bit lower but are holding. Breadth is
2/1 negative and crude oil is up 42 pennies at $62.40. Volume is light.
Treasuries are firmer.
We were perusing the list of stocks
that the SEC has exempted from the short sale rule. Few
of them are in the DJIA and so our
scenario of selling this fall being exacerbated by the short sale rule
really doesn’t hold water. There is
an exemption for all stocks traded after hours so that might create an
interesting situation in an event driven sell off if the downturn occurred
during trading hours and the event continued to unfold after hours. But even if
this year is spared eventually the removal of that rule is going to undermine
Gasoline inventories dropped 4 million barrels while crude
inventories rose slightly. Distillate stocks also rose. Duh! No one is burning
heating oil this month. All in all oil inventories remains at multi year highs
as do oil prices. Ching, ching, ching go the cash registers of Big Oil.
For a couple of million dollars in political donations they have reaped multi
billions of dollars reward. That beats drilling for oil any day.
and the major measures
are inching slowly back to positive territory. Breadth ahs improved and is now
positive on the NYSE.
and the markets
closed with almost 500 new highs. Breadth was negative at the bell and
volume was light. The DJIA gained 11
points to 10695. The S&P 500
rose 1 point to 1245 and the NAZZ
was off 1 at 2217. Oil dropped $1.06
to $60.86 and Treasuries were firmer
with the ten-year at 4.30% and the five-year at 4.12%.
And tomorrow is tomorrow so let
the games begin.
2 August 2005 Daily Comment
Personal Income was up 0.5% in June while Consumer Spending was up 0.8%. The weakness in the dollar is said to be
due to the Russians adjusting their basket of currencies for exchange purposes by adding euros and subtracting dollars.
The Treasury is going to add 30 year bonds to it auction schedule. When rates were low the Treasury didn’t continue
selling the 30 year which it could have done at 2.5%. Now that it will have to pay 4.7% or twice as much interest over a thirty year period, the
Treasury has decided that 30 year bonds are OK to sell.
That reminds of all the takeovers in the oil patch when oil is at $62. There were takeovers when oil was $20 a barrel
but they were much fewer in number.
Being a hero or heroine doesn’t work in the corporate world if the takeover doesn’t immediately provide larger
corporate chieftain bonuses from meeting increased bonus targets. Of course takeovers very seldom lead to increased dividends for shareholders
because why would shareholders want dividends?
We decided to buy the six month Treasury notes yesterday at a 3.65% because they increase our yield by 50% for
the six months and give us the opportunity to roll into a longer maturity (16 to 24 month) at a higher coupon rate and same or lower dollar price
if rates continue to rise.
We slept well last night and that is our measure of our all cash position. We await an opportunity in the fall to put
some cash to work but we are in no hurry and are willing to let events play out. With earnings season having now devolved to the retailers that
are already selling at tech stock multiples, the big boys and girls are going to have to change their focus to find ideas on which to speculate. Time
is needed for market conditions to define the reality of where to from here.
Tuesday’s Markets August 2, 2005
9:06am and stocks are strong out of the gate. The major measures are higher and breadth is running 2/1 positive. Treasuries
have regained their early morning losses and are trading unchanged and crude oil is now down a few pennies.
11:38am and stocks have continued to rally on good breadth and volume. It is a few days late for us and is leaving us
a few dollars short but that is trader’s luck or unluck as in this instance.
1:37pm and with the NAZZ well above 2200 at 2211 and the S&P 500 at 1242 up 6 points it looks like the bulls
will win the day. We are off to our spring in the valley to do a little landscaping.
We’ll be back tomorrow with another post.
So let the games continue.
1 August 2005 Daily Comment
Oil is above $61 this morning as
King Fahd has died in Saudi Arabia.
Why that matters is beyond us since he hasn’t been in charge since a stroke in
1995. BP is also having troubles in Texas
with a refinery and a fire on a North Sea oil platform.
Wal-Mart announced that same store sales for July were up 4.4%
which was at the high end of there range.
The dollar is taking it on the
chin versus the yen and Treasuries are lower in price with the two year at 4.03%
and the ten-year at 4.29%.
AMD has lowered prices on some of its chip sets.
Friday brings employment hiring for the month of July.
And today we celebrate the prince’s eighth birthday and the princess’s
fifth birthday so posts will be short.
Monday’s Markets August 1, 2005
9:15am and stocks opened higher in the face of stronger oil, weaker
dollar and Treasuries and the Monday summer lightness they have moved back to
neutral. The ISM Mfg. Index was 56.6 in July versus 53.8 in June. The Employment
Index was up to 53 versus 49.
10:30am and over the week-end we kicked ourselves for taking the
trading potion in Yahoo. We were
expecting for a final one day rally that would lift all ships. That didn’t happen
and we are selling our trading position for a 35 pennies loss.
We are also liquidating the Time Warner
holding since it is our last position in most of our accents. We see no reason
to hold just one stock.
There is an auction of two-year Treasuries at the end of August that
would have a 4% coupon on it at current rates and we are going to monitoring
the bond markets more closely over the next few weeks with the intention of
investing about half the funds in larger accounts in two year or shorter
We think there is going to be a
significant downturn in the markets in the next few months. Folks have
forgotten about the ability of hedge funds to short on downturns when the
inevitable pullback occurs. If that pullback is accompanied by an unfortunate event
the correction could turn into a rout with the shorting on downtick rule no
longer in force.
and we are going to
buy Treasury 1.875% notes due January
31, 2006. That is a six months maturity and we are buying them on a
3.65% yield to maturity. That is about
1.25% better or 52 % better than the money fund yield. It also leaves us with
money for the two year at the end of the month if rates continue to rise. The
January maturity gives us the option of throwing the income into next year.
And with that purchase we are
going to take the rest of the day off. As we leave the DJIA is down 25 points,
the NAZZ is up 7 points, and the S&P 500 is unchanged. Oil is up $1.43 at
$62 and Treasuries are lower in price, higher in yield with the ten-year at
4.32% and the two-year at 4.04%.
And tomorrow is tomorrow and we
will be around in the morning with a post for the day.
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political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any
such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107,
the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for
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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 eview
site to be secure. Thus your password must be changed every ninety days.
You will be prompted to make this change when needed.
Annual offer to present clients of Lemley Yarling Management Co. Under Rule 204-3 of the SEC Advisors Act, we are pleased to offer to send to you
our updated Form ADV, Part II for your perusal. If any present client would like a copy, please don't hesitate to write, e-mail, or call us.
The factual statements herein have been taken from sources we believe to be reliable but such statements
are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one
or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may
have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase
or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.