Bud's Poem Page

31 August 2006 Daily Comment

Thoughts

Asia was higher overnight with Hong Kong and Japan both up strongly and Europe is also higher. Oil in NYC is up at $70.50 and Gold is also up at $634.

Jobless claims were up 2000 at 318,000 for the latest week and among economic numbers Personal Income for July was up 0.5% while Personal Spending was up 0.8%. The consumer lives. The PCE Deflator (inflation) was 0.3% for July and the core rate was 0.1%. The year over year rate was 2.4%. Treasuries are firm on the news.
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Crude oil has turned negative in the first hour of trading and is back below $70. Weak economic data overnight from Japan is also helping Treasuries which are strong with the two-year at 4.80%.
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Factory Orders were down 0.6% in July. The Chicago Purchasing Mangers Index was 57.1.
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We repurchased UPS and TLAB in our very large accounts.
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It is slow our there kids and trading will be even slower tomorrow.
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Oil ended in NYC at $70.26 and Gold was $632. Treasuries closed up in price with the two-year at 4.78% and the ten-year at 4.69%.
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The DJIA was unchanged at 11383 as was the S&P 500 at 1304 and the NAZZ was down 2 points to 2182.

Breadth was positive and volume was light.

There were 265 new highs and 50 new lows.

And tomorrow brings the Employment Report at 7:30am and then a slow day of trading.

The casino will be open but short staffed as folks head to the other casinos for the week-end.
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30 August 2006 Daily Comment

Thoughts

Preliminary GDP was announced at 2.9%. That has placed a bid in Treasuries as the markets open.

Overnight Hong Kong was up over 1% and the rest of Asian markets were mixed. European bourses are fractionally higher at midday. Gold is up a bit at $622 and Oil is also up at $69.96.
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The WSJ has an interesting article this morning on Dell Computer and its failure to capture a large share of the consumer market. Usually when the WSJ reports on a failure to execute at a large dynamic company, the company executives are hard at work on the problem. The story does make a good point and our guess is that Dell will address it. The story has a bit of the Oh Lord, what could they be thinking quality to it. We remember when the WSJ buried IBM back in the 1990s as incapable of competing. They did the same job on Apple. Kicking a stock when it is down is good fun and shareholders are already upset so it makes for good buying opportunities. In fact the WSJ did a good job kicking Hewlett Packard a few years ago and now they are using Hewlett Packard as the standard for Dell to match.

The interesting paragraphs that make the point of the article are:

For years, Dell -- famous for selling products directly over the phone and the Internet -- was a dynamo thanks to bulk sales to corporations, mostly of desktop computers. Its direct-sales business model made the Round Rock, Texas, company a widely admired paragon of efficiency as it underpriced rivals such as H-P and Gateway Inc.

But in the past few years, buying behavior in the PC world has changed. Much of the growth has come from consumer demand rather than the business market on which Dell focused. What's more, people looking for a new home computer are increasingly turning to laptops. There Dell is particularly weak: Its models lack the pizzazz and features of rivals. For laptops especially, consumers prefer to hold and test models in a store, but Dells aren't sold there. According to NPD Group, 56% of laptops sold to consumers in the first quarter of this year were bought in a store, up from 50% two years ago.

Dell has largely ignored the consumer boom although it says it still considers consumers an important market. For a while it had part-time workers with an annual turnover rate of 300% taking calls from customers who wanted to buy a PC. The company has poured money into corporate products such as printers, storage systems and computer servers. It nixed some overtures from retailers to sell its wares in stores. At a conference in 2004, Dell Chief Executive Kevin Rollins declared, "We have never focused on the consumer as a company."

At the same time, rivals such as H-P, Gateway and Apple Computer Inc., have charged ahead in the consumer PC market. In particular, H-P cut costs to become competitive with Dell, began working more closely with retailers and redoubled its marketing efforts. As Dell cut prices, H-P invested in consumer-friendly features in its notebooks. H-P computers, using a laser, can write a label on a specially coated music CD with artist and title so users don't have to use a marker. And people can watch movies on H-P laptops without booting up the computer, a feature that Dell now offers too.
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From Reuters: Costco warned of lower-than-expected quarterly profit because of disappointing gross margins and a tax reserve, sending its shares down nearly 5 percent.  The warning from the largest U.S. warehouse club operator took analysts by surprise because Costco's sales growth has been among the strongest in the retail sector. Costco also reported a stronger-than-expected 7 percent gain in its August sales at stores open at least a year on Wednesday. "This could be an early sign that the higher-income consumer is finally starting to feel a bit of a pinch," said Anthony Chukumba, an analyst with Morningstar.     Those higher-income shoppers have proved resilient in the face of steep energy prices over the past year, but as the housing market slows, Wall Street has been worried that upscale retailers would start to suffer. Chukumba noted that house wares retailer Williams-Sonoma Inc. WSM, which also caters to wealthier shoppers, cut its profit forecast last week.
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Among the 8,778 FDIC-insured institutions there are $859 billion in commercial real estate loans up 9.7% year over year at the end of Q2 2006. Another category is commercial and industrial loans, and they stand at $1.164 trillion, up 11.8%.
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Crude Oil inventories were up when down was expected and Oil is tanking on the news at $69.10.
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Fun if you have the time: http://usaattacked.com/100_years_of_pictures.htm
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$14 billion of new five-year Treasury notes were sold at a high yield of 4.738 percent, below the when-issued note's yield just before the sale. The bid-to-cover ratio, an indication of overall demand, was 3.11 times the amount offered, well above the average of 2.11 for these auctions this year to date.
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Gold in NYC ended unchanged at $626 and Oil rallied back to close at $70.03. Treasuries were firm with the two-year at 4.82% and the ten-year at 4.76%.
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The DJIA finished up 13 points at 11382. The S&P 500 was unchanged at 1304 and the NAZZ rose 14 points to 2185.

Breadth was 3/2 positive on the NYSE and 2/1 positive on the NAZZ and volume was end of summer light.

New highs expanded to 330and new lows contracted to 59.

And there are two more casino days of summer left.
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29 August 2006 Daily Comment

Thoughts

Asia was fractionally higher overnight as are European bourses at midday. Oil is under $70 and the hurricane is now a tropical storm and BP is producing 200,000 barrels a day at Prudhoe Bay. Gold is up a bit at $625. Treasuries are weaker ahead of the FOMC minutes to be released at 1pm.
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The median U.S. family has about $3,800.00 in the bank, does not have a retirement account, and has a home worth $160,000.00 with a mortgage of $95,000.00 (excluding MEW). No mutual funds or stocks/bonds. They jointly make $43,000.00 and have $2,200.00 in credit card debt.
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The Conference Board’s Consumer Confidence Index was 99.6 this month versus 107 last month.
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The major measures have pulled back this morning and with the pullback we are going to add or increase five stocks to our accounts. We are buying J Crew at $25.20, Schering Plough at $20.65, Home Depot at $33.85, Dell Computer at $22.08, National City at $34.80 and Time Warner at $16.61.

Time Warner has most of the bad news out (we’ve said that before) and is making a large push and receiving some nice reviews for expanding its cable/phone/computer hook-up triple play package. Eventually these folks are going to figure it out and we have been in and out of the shares for the past few years while we have waited the turn around. We are back in in a small way again with room to add.
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Dell is on its low and has stabilized around this level for the past few weeks. Again we have not taken a big position and as with all our stocks we have a lot of room to add.
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Schering Plough has been lagging the up move in most of the drug stocks and we are trying to catch a move higher with the idea that we can add some at lower prices. Today they settled litigation that had been overhanging the stock for some time and we think that is a big plus for price movement.

Schering-Plough said on Tuesday it will pay $435 million and plead guilty to one count of conspiracy to make false statements to the government to settle an investigation into its sales, marketing and clinical trial practices and programs. Under the agreement, the U.S. drug maker said it will pay a criminal fine of $180 million and an additional $255 million to resolve civil aspects of the probe, which was being conducted by the U.S. Department of Justice and the U.S. Attorney's Office for the District of Massachusetts. The company's previously disclosed litigation reserves will be sufficient to cover the settlement amount. The company said in a news release that the issues being resolved by the settlement predated the current management team.

With that issue settled now Merck can acquire them (Our guess only).
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Home Depot is within a dollar of its yearly low. Its last quarterly report had some good news in it and it is a big cap suffering because of the housing miasma and its own missteps. But recent analysts’ comments have been more positive and it’s a comfortable name to own and be able to add to.
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National City Corp, the Cleveland based bank holding company, has dropped several dollars in the last week on negative  industry mortgage reports but with its yield of 4.5% the stock is at a good level for a run to $37 into quarter or year end.
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In our very large accounts we initiated a small dollars position in Urban Outfitters, the non trendy/trendy woman’s clothing and accessories retailer. We have owned the stock over the years but missed the run up last year. The shares price has fallen over 50% in the last 6 months on a fashion miss and we think URBN is interesting at this level.

We are also beginning to acquire shares in J Crew (JCG) which is run by Mickey Drexel who made a ton of money for us in The Gap in the 1980s. With 55,000,000 shares outstanding but only 10 million in the float when the stock gets hot it is going to sail. JCG is selling at 1.3 times sales. On the initial offering several months ago the stock ran to $30 and now has settled back to the $25 level where it first traded after coming public at $20. JCG’s store base (200 stores), like URBN’s (175 stores), is relatively small and so offers the opportunity to expand and grow sales and earnings. That is exactly what Drexler did at The Gap. The shares are thinly traded and so we will be buying sporadically.
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Two year Treasury notes were auctioned at a 4.92% yield. Indirect bidding was small.
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Fed minutes said pause was temporary and not permanent. They were still worried about inflation but voted to pause for now. Members thought there was limited risk in deferring.
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Gold closed at $619 and Oil ended at $69.71 in NYC. Treasuries rallied to positive after the Fed minutes with the two-year at 4.87% and the ten-year at 4.78%.
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The DJIA closed up 20 points at 11372. The S&P 500 gained 3 points to 1304 and the NAZZ rose 12 points to 2172.

Breadth was positive and volume was last week of August light.

New highs were 225 and new lows are 90.

The next big economic number is Friday when the August Employment report is issued.

The casino will be open for the next three days although many of the payers are at the beach. Maybe the hurricane will force them inside.
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28 August 2006 Daily Comment

Thoughts

London is closed today. Japan, Shanghai and Taiwan were all down over 1% overnight and Hong Kong was fractionally lower. European bourses are fractionally mixed at midday and Gold is up pennies to $631 while Oil is lower at $71.10. The hurricane Ernesto has weakened to a tropical storm and its path is towards Florida and no production facilities in the Gulf.
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This week promises to be light on volume or at least on traders present, and we will be in and out as we try and catch a few moments of vacation in the last week of summer.
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On Friday we had a click through to a New Yorker article about Dependency ratios and their effect on pensions and health care costs for corporations. The following actions are the first step by a major corporation to address that problem since the new Pension bill was enacted. Others will follow suit. The actions will help corporate profit statements. What the loss of pensions will mean to future retirees and to the economy twenty years down the road is anyone’s guess.

            DuPont Co. on Monday said it will sharply cut its pension plan for U.S. employees, reducing the amount it will contribute to workers' pensions after 2007 by two-thirds. The company said it will enhance its savings and investment plan for employees, making a contribution of 3 percent of each employee's pay beginning in January 2008 and matching the first 6 percent of employees who contribute to the plan.

             DuPont is among the first major U.S. companies to cut pensions after President George W. Bush signed into law new rules meant to overhaul the country's pension system earlier this month. The move also follows an August ruling by a U.S.

court that found that IBM did not discriminate against older workers when it shifted to a new pension plan. DuPont said its defined benefit pension program for current

employees will continue, but after 2007 the pension calculation will be reduced to one-third of its current level. It said that beginning in 2007, new hires will not be eligible to

participate in the pension and retirement plan and will not receive a company subsidy for retiree health care or retiree life insurance. The changes do not affect DuPont's current U.S. retirees, former employees with vested benefits or current employees who retire before Jan. 1, 2008, the company said. (We would venture that the changes won’t hurt high echelon executives either who have their own baskets of goodies and options to tide them over their difficult retirement years).
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Oil in NYC is at $70.90 down over $2 on news that Ernesto is now a tropical storm. The price drop in oil an report that gasoline prices are down about 15 pennies a gallon around the country have give a bit of a bid to stocks. At 10am the major measures are up about one half percent but trading is thin.
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Freidman Billings upped Intel to outperform. Raymond James upped Williams Sonoma to strong buy.
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The 5.125% Treasuries that we hold in accounts now have $854 in accrued interest per $100,000 par value. The accrued interest is not included in the value of accounts on month end statements.

The 5% Treasuries have $416. That will not show on month end statements
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Commodities are lower at noon led down by natural gas (-10%) and Oil (-2%). The drop in commodities is helping stocks as the S&P 500 trades though 1300 on the upside and breadths is almost 2/1 positive. Volume is light.
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Wal-Mart is higher as the company reported that same store sales for August are going to be up 2.7% which is near the high end of the up 1% to up 3% range WMT had given at the beginning of the month. A year ago up 2.7% would have been a downer. It is called managing expectations.
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Home equity loans fell $700 million in the latest week to about $430 billion. That is the lowest level since May 2005 and $13 billion below the high mark of outstanding loans made one year ago.

And a year ago home equity loans were up $100 billion on a year over year basis versus August 2004.

The drop in home equity loans is important because is suggests that at least a good chunk of money that was being borrowed though this type of loan is no longer being borrowed and spent. The interest rates charged on home equity loans have jumped substantially and folks may be refinancing if they have large home equity loans. But most probably a good number of folks are just not borrowing to spend any more. And that news is bad news for the economy but good news for economic sanity.
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From Barron’s

     32.6% of new mortgages and home-equity loans in 2005 were interest only, up from 0.6% in 2000. 43% of first-time home buyers in 2005 put no money down. 15.2% of 2005 buyers owe at least 10% more than their home is worth. 10% of all home owners with mortgages have no equity in their homes.  $2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007.
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Minutes from the FOMC meeting when the Fed paused two weeks ago will be released at 1pm CST tomorrow.
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Oil closed $2 lower in NYC at $70.50.Gold was also lower at $624. Treasuries were lighter with the two-year at 4.88% and the ten-year at 4.80%.
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The DJIA closed up 70 points at 11353. The S&P 500 gained 7 points to close at 1302 and the NAZZ tacked on 20 points to 2160.

Breadth was positive all day and closed 2/1 to the good. Volume was light.

New highs were 200 and new lows were 85.

And there are four more casino days until the end of summer for the big boys and girls.
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25 August 2006 Daily Comment

Thoughts

Asia was mixed overnight and so is Europe. Oil is up to $73.50 on storms and the BP Prudhoe Bay new emergency cutoff of 90,000 barrels of oil. We guess the oil companies couldn’t stand the $3 drop in the price of oil.

Treasuries are flat ahead of Chairman Ben speaking at Jackson Hole Wyoming this morning at 9am.
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Former Treasury Secretary Rubin who is Vice-Chairman of Citigroup resigned as a Director of Ford because of a potential conflict of interest. Since there was no conflict until yesterday when rumors of a family buyout began circulating the resignation has added fuel to the rumor mill. Citigroup could also be advising on the buyout of the luxury car group which Ford want to unload.
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Prudential lowered hard goods retailers and so Williams Sonoma is under pressure again today. Our next buy point is around $26.
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The stocks we are now buying are stocks we pan on holding until next year and adding to if they go lower. Of course we may trade around a position in the mean time if the opportunity presents.
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We added DuPont, Dell (which has had time to settle after last weeks stuff), Lowes, Home Depot and Intel to our very large accounts in relatively small amounts to get our feet wet. We had traded out of the Intel in the largest accounts and want to own it as we do and have on our smaller accounts.
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The hurricane play is the only play today as natural gas and oil are jumping in price on hopes that Ernesto will disrupt production in the Gulf. What a great business. Buy tobacco stocks that kill folks, and hope for hurricanes to destroy rigs and cities.
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Uncle Ben didn’t say anything about interest rates. He is learning.
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We sold our TLAB trading position for a scalping profit. It has popped up the last two Fridays and then sold off early in the next week. We are playing that card since we haven’t heard dandy takeover rumors although a takeover wouldn’t surprise us. It would disappoint us if it occurred this week-end for obvious reasons.
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Citigroup cut its 2006 earnings estimates for Chico's to $1.12 a share from $1.21 and 2007 earnings estimates to $1.32 a share from $1.55 earlier.  The brokerage said it was maintaining its "buy" rating on the stock based on improving products at the women's apparel retailer. C also dropped its price target from $39 to $33. That is a fine price for us.
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We read this article http://www.newyorker.com/printables/fact/060828fa_fact from the current New Yorker issue after we had repurchased Ford. The article made sense to us and we decided we didn’t want to trade Ford anymore. F is higher today on all sorts of rumors which may be true or not but we are going to use the jump in the price to exit and not look back.
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Oil gave back some of its early gains but closed higher in NYC at $72.51. Gold was higher going out at $630. Treasuries closed better on the theory that no news from Uncle Ben is good news. The two-year closed at 4.86% and the ten-year at 4.78%.
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The DJIA closed down 20 points at 11285. The S&P 500 was unchanged at 1295 and the NAZZ was up 4 points at 2140.

Breadth was 5/4 to the good and volume was light.

New highs were 120 and new lows were 90.

The casino is closed for the week-end.
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The following is an interlude from market talk.

Beloit, Wis. - A rite of autumn is under way with the arrival of first-year students at thousands of colleges and universities for registration. Most 18-year-old students entering the class of 2010 this fall were born in 1988. They grew up with a mouse in one hand and a computer screen as part of their worldview. They learned to surf the internet as they learned to read. While they were still in their cribs, the 20th century started to close as the Berlin Wall came down, the Soviet bloc disintegrated, and frequent traditional wars in Latin America gave way to the uncontrolled terrors of the Middle East.

Each August since 1998, as faculty prepare for the academic year, Beloit College in Wisconsin has released the Beloit College Mindset List. A creation of Beloit’s Keefer Professor of the Humanities Tom McBride and Public Affairs Director Ron Nief, it looks at the cultural touchstones that have shaped the lives of today’s first-year students.

According to McBride, this year’s entering students form “a generation that has always been ‘connected’ and is used to things happening in ‘real time,’ like live satellite coverage of revolutions and wars, instant messaging and movies on demand. They expect solutions for every problem, from baldness to diseased organs. To the chagrin of teachers and parents, they’ve developed their own generational means of communication.”

The Beloit College Mindset List is used by educators and clergy and by the military and business in their efforts to connect with the new generation. Beloit creates the list to share with its faculty in anticipation of the first-year seminars and orientation. “It is an important reminder to faculty, some of whom are only a Ph.D. older than their students, that what we call ‘hardening of the references’ can set in quickly,” according to Nief. "It is meant to be thought-provoking and fun, yet accurate. It often provides the base for good opening seminar discussions as faculty and students address the challenges of examining important issues from differing perspectives."

BELOIT COLLEGE'S MINDSET LIST®
FOR THE CLASS OF 2010

Members of the class of 2010, entering college this fall, were mostly born in 1988. For them: Billy Carter, Lucille Ball, Gilda Radner, Billy Martin, Andy Gibb, and Secretariat have always been dead.

  1. The Soviet Union has never existed and therefore is about as scary as the student union.
  2. They have known only two presidents.
  3. For most of their lives, major U.S. airlines have been bankrupt.
  4. Manuel Noriega has always been in jail in the U.S.
  5. They have grown up getting lost in "big boxes."
  6. There has always been only one Germany.
  7. They have never heard anyone actually "ring it up" on a cash register.
  8. They are wireless, yet always connected.
  9. A stained blue dress is as famous to their generation as a third-rate burglary was to their parents'.
  10. Thanks to pervasive headphones in the back seat, parents have always been able to speak freely in the front.
  11. A coffee has always taken longer to make than a milkshake.
  12. Smoking has never been permitted on U.S. airlines.
  13. Faux fur has always been a necessary element of style.
  14. The Moral Majority has never needed an organization.
  15. They have never had to distinguish between the St. Louis Cardinals baseball and football teams.
  16. DNA fingerprinting has always been admissible evidence in court.
  17. They grew up pushing their own miniature shopping carts in the supermarket.
  18. They grew up with and have outgrown faxing as a means of communication.
  19. "Google" has always been a verb.
  20. Text messaging is their email.
  21. Milli Vanilli has never had anything to say.
  22. Mr. Rogers, not Walter Cronkite, has always been the most trusted man in America.
  23. Bar codes have always been on everything, from library cards and snail mail to retail items.
  24. Madden has always been a game, not a Superbowl-winning coach.
  25. Phantom of the Opera has always been on Broadway.
  26. Boogers candy has always been a favorite for grossing out parents.
  27. There has never been a "skyhook" in the NBA.
  28. Carbon copies are oddities found in their grandparents' attics.
  29. Computerized player pianos have always been tinkling in the lobby.
  30. Non-denominational mega-churches have always been the fastest growing religious organizations in the U.S.
  31. They grew up in mini-vans.
  32. Reality shows have always been on television.
  33. They have no idea why we needed to ask "...can we all get along?"
  34. They have always known that "In the criminal justice system the people have been represented by two separate yet equally important groups."
  35. Young women's fashions have never been concerned with where the waist is.
  36. They have rarely mailed anything using a stamp.
  37. Brides have always worn white for a first, second, or third wedding.
  38. Being techno-savvy has always been inversely proportional to age.
  39. "So" as in " Sooooo New York," has always been a drawn-out adjective modifying a proper noun, which in turn modifies something else
  40. Affluent troubled teens in Southern California have always been the subjects of television series.
  41. They have always been able to watch wars and revolutions live on television.
  42. Ken Burns has always been producing very long documentaries on PBS.
  43. They are not aware that "flock of seagulls hair" has nothing to do with birds flying into it.
  44. Retin-A has always made America look less wrinkled.
  45. Green tea has always been marketed for health purposes.
  46. Public school officials have always had the right to censor school newspapers.
  47. Small white holiday lights have always been in style.
  48. Most of them never had the chance to eat bad airline food.
  49. They have always been searching for "Waldo."
  50. The really rich have regularly expressed exuberance with outlandish birthday parties.
  51. Michael Moore has always been showing up uninvited.
  52. They never played the game of state license plates in the car.
  53. They have always preferred going out in groups as opposed to dating.
  54. There have always been live organ donors.
  55. They have always had access to their own credit cards.
  56. They have never put their money in a "Savings & Loan."
  57. Sara Lee has always made underwear.
  58. Bad behavior has always been getting captured on amateur videos.
  59. Disneyland has always been in Europe and Asia.
  60. They never saw Bernard Shaw on CNN.
  61. Beach volleyball has always been a recognized sport.
  62. Acura, Lexus, and Infiniti have always been luxury cars of choice.
  63. Television stations have never concluded the broadcast day with the national anthem.
  64. LoJack transmitters have always been finding lost cars.
  65. Diane Sawyer has always been live in Prime Time.
  66. Dolphin-free canned tuna has always been on sale.
  67. Disposable contact lenses have always been available.
  68. "Outing" has always been a threat.
  69. Oh, The Places You'll Go by Dr. Seuss has always been the perfect graduation gift.
  70. They have always " dissed " what they don't like.
  71. The U.S. has always been studying global warming to confirm its existence.
  72. Richard M. Daley has always been the Mayor of Chicago.
  73. They grew up with virtual pets to feed, water, and play games with, lest they die.
  74. Ringo Starr has always been clean and sober.
  75. Professional athletes have always competed in the Olympics.

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24 August 2006 Daily Comment

Thoughts

We need to correct an assertion we made a few days ago that Mohammed went to heaven on August 22. The actual facts are that:

Aug. 22, they calculated, was the anniversary of the date in the year 620 when, according to the Koran, the Prophet Mohammed made his famous night journey from the Kaaba in Mecca to the al-Aqsa Mosque in Jerusalem and back. In fact, on Islam's lunar calendar, the anniversary actually fell on Aug. 21 -- Monday -- but let's not split hairs. Either way Tuesday came and went without any apocalyptic incidents.
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Supposedly there are rumors floating around that Iran has the big bomb. I hope folks didn’t get that one from our website.
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Overnight Hong Kong and Japan both were down over 1% while European bourses are mixed in midday trading.

Oil is off pennies at $71.65 and Gold is unchanged at $634.

Treasuries are firm as the Durable Goods number for July was down 2.4% which was greater than expected from this volatile number. Initial claims for unemployment were 313,000 which were in line with expectations.
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From far out land USA Today has this: The Ford family that controls about 40% of the company is studying, among other options, whether to take it private.
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Rite Aid is buying Eckerd for $3.2 billion. The buy will give RAD 5,000 drug stores and also debt on the order of $6 billion.
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William Sonoma, the Pottery Barn Company, is off $2.50 this morning at $29.70 and down $16 from its high this year on warnings going forward. We are interested. This company said it now sees full-year revenue of $3.75 billion to $3.80 billion and earnings per share of $1.87 to $1.94. It had earlier forecast revenue of $3.83 billion to $3.90 billion and earnings per share of $1.97 to $2.01.

At $29 the shares are priced at 15 times earnings and the company is priced at one times sales.

We’ll see how it trades this morning and await new home sales at 9am.
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New home sales were down 4.3% in July and inventory rose to 6.5 months which is the highest inventory level since 1995. And the inventory of new homes for sale is up 54% form July 2005. Median house prices are now 10% below last April.
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Wal-Mart is expected to do over $100 billion in sales in the fourth quarter that ends in January 2007. In 1997 Wal-Mart’s total yearly sales exceeded $100 billion for the first time.
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We sold AMAT in our trading accounts for a scratch loss after JP Morgan went to neutral on the shares and because we had purchased TLAB at $9.82 in those same accounts. We are changing tech exposure from chip equipment to telecom equipment where we are more comfortable.

TLAB is down from a high of $17 and earnings were up 15% in the latest quarter. The share price is down because it warned going forward but we think the shares have value at this level and lower. TLAB has been rebuilding and refocusing for 6 years and finally may be turning the corner. Sales exceed $2 billion and the company is priced at $4 billion with about $1.4 billion in cash. And earnings are going to be about $0.50 this year and $.60 next year.
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We are taking a relatively small position in Williams Sonoma at $29.75.

Chico’s Fas is trading at $18.20 today. CHS is down $6 today and is down from $48 in March of this year and we are taking a position in it identical to our new position in WSM.

Chico’s Fas is a women’s clothing store that caters to the over 35 crowd. It has been a hot item for a number of years but this month its same store sales numbers are not going to be higher for the first time in 110 months. The company has no debt and is selling at 2 times sales. It is going to earn about $1.10 this year. This is a volatile stock but a lot of the excess has been wrung out of the price in the last few months and finally today. All the analysts are rushing to downgrade it today so it will be out of favor for a while but we would guess that when management turns it around all the lemmings will come back. It may go lower and that is why we are initiating holdings in a small way.

For the company press release go to http://biz.yahoo.com/prnews/060823
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In NYC Oil closed up at $72.36. Gold went out down at $628 and Treasuries were flat with the two-year at 4.88% and the ten-year at 4.80%.
*****

The DJIA closed up 5 points at 11303. The S&P 500 gained 3 points to 1296 and the NAZZ was up 2points to 1236.

Breadth was flat. Volume was summer light.

New highs were 110 and new lows were 110.

And there is one more quiet day at the casino this week.
*****

 

23 August 2006 Daily Comment

Thoughts

Asia closed fractionally lower overnight and European bourses are slightly red this morning. Gold is up to $638 and Oil is down at $72.50. There is some profit taking in Treasuries.

National Semiconductor warned as did Medtronic.
*****

Stocks opened higher but after an hour of trading the major measures are slightly red in slow trading.
*****

The passage below is from Reuters. We are again in that kind of market.

Shares in independent power producer Dynegy Inc. DYN rose more than 4% to $6.09 on the New York Stock Exchange on Wednesday. CNBC "Mad Money" Host Jim Cramer on Tuesday recommended the stocks saying it is worth buying because there's been "massive" insider buying, a sign of a possible future takeover.

Cramer reminds us of Dan Dorfman, the WSJ columnist and pioneer television financial news tout who thrived in the late 1980s and early 1990s.
*****

We moved back into Ford this morning at $7.71 on news from the WSJ that Bill Ford the CEO has contacted Renault and said Ford was interested in talking about a combination if GM wasn’t. We don’t know whether anything will come of it but it does suggest that Bill Ford is going to take any avenue to resurrect Ford.
*****

Existing home sales were lower by 4% in July to lowest level since January 2004 and inventories of houses unsold increased.
*****

Oil ended at $71.76 and Gold was $632.  Treasuries were weaker but closed above their lows with the two-year at 4.87% and the ten-year at 4.83%.
*****

The DJIA lost 43 points to 11296. The S&P 500 dropped 7 points to 1292 and the NAZZ was off 16 points to 2133.

Breadth ended 2/1 negative and volume was light.

New highs were 150 and new lows were 115.

And there are seven slow business days of summer left before the Labor Day week-end.
*****

 

22 August 2006 Daily Comment

Thoughts

There has been no end of the world yet, and no nuclear detonations by Iran so our day is beginning on a positive note.

Asia was higher overnight with Japan and Taiwan up over 1% and Hong Kong fractionally higher. Europe is mixed at midday and Gold is flat at $635 with Oil a few pennies higher at $72.63. Treasuries are firm.

Toll Brothers beat reduced estimates and is trading 1% higher.
*****

Since 2000 residential real estate values have risen $5.3 trillion while mortgage debt has risen $4.5 trillion.
*****

With the major stock measures moving higher stock traders seem to be implying that the Fed has done its job and that a soft and fuzzy and profitable landing is in store for stocks and corporate earnings.

On the other side the rally in the bond markets seems to be saying that recession is right around the corner and that the Fed is going to have to begin lowering rates soon.

Both can’t be right for long.
*****

Mother Merrill loved Sprint at $24 but now has had a change of heart at $16 and has changed from buy to neutral on the stock.

We read last night that each Sprint subscriber is valued in the marketplace at about $1500, while a Cingular subscriber is valued at $1900 and a Verizon subscriber at $2000.

We think the undervaluation is even greater. But trying times sometimes present good buying opportunities.

There is no rush to add to our position and we are going to let the downdraft the stock is suffering continue before we add. The selling pressure may continue until the end of October as institutional folks abandon the shares. The share price is too low to sell and try and get back in and so we will wait and see what occurs over the next two months.
*****

Stocks opened lower and now an hour and one half into the trading day the major measures have moved to the plus side without any conviction. Breadth is positive and trading is summer slow.
*****

In the contra hour stocks have now reversed and are lower. Trading is light.
*****

Gold closed at $634 down a tad and Oil ended slightly higher at $72.80. The two-year Treasury ended at 4.87% and the ten-year was 4.82%.

European bourses closed fractionally better and Brazil was off over 1% while Mexico was unchanged.
*****

The DJIA closed down 7 points at 11338. The S&P 500 gained 2 points to 1299 and the NAZZ rose 1 point to 2148.

It was a dull day. Volume was tepid and Breadth was 5/4 positive at the close.

New highs reached 160 while new lows were 85.

And the Casino is open for three more lackluster days this week.
*****

 

21 August 2006 Daily Comment

Thoughts

There are reports that major terrorist attacks are scheduled for tomorrow which is the day the Iranians are to give their answer to the world about whether they will stop enrichment of uranium. Our guess is that they will set off a nuclear device as their answer.

There is also talk that August 22 is the day Mohamed rose to the heavens from Jerusalem although we don’t think he used the Gregorian calendar.

Finally there are folks that think that tomorrow is the day of the Rapture when Christ returns to earth for the Second Coming.

It is going to be a busy day if these events occur.
*****

Asia was mixed but Hong Kong was off 1.8%, Japan down 0.8% and Taiwan was down over 3% overnight. Europe is fractionally mixed at midday. Stocks are going to pen lower and then we shall see.

Treasuries are firm, Gold is up to $631 and Oil is also higher at $71.49.

Lowe’s, the housing supply folks, disappointed and warned and is off 5% this morning. Williams Sonoma also warned that Pottery  sales are not going well and it is down $1.50. we are interested in WSM.
*****

We sold MSFT, HSY and WWY in our trading accounts for small profits.
*****

Words from Bernard Baruch in his autobiography:

. . . a remarkable documentation of the unbelievable crazes that have swept mankind down through the ages. No nation has been immune to these frenzies. The supposedly stolid Dutch were overcome by the Tulip Craze, the volatile French had their Mississippi Bubble, while the sturdy English had their South Sea Bubble.

As I read the accounts of these madnesses, I was tempted to shout, ‘This cannot have happened!’ Yet within my own lifetime I have seen similar deliriums in the
Florida land boom of the 1920’s and the stock market speculation that led to the 1929 crash. Something of this same crowd madness may have been at least partially responsible for Hitler’s rise to power in Germany.

These crowd madnesses recur so frequently in human history that they must reflect some deeply rooted trait of human nature. Perhaps it is the same kind of force that motivates the migrations of birds or the mass performance of a whole species of ocean eels. There seems to be a cyclical rhythm in these movements. A bull market, for example, will be sweeping along and then something will happen – trivial or important – and first one man will sell and then others will sell and the continuity of thought toward higher prices is broken.

‘Continuity of thought’ – what a wonderful expression that is. It did not originate with me. The first time I heard it was while I was operating in a steel stock which J.P. Morgan was trying to accumulate. The general market was on the rise. Then, while these operations were going on, the stock of
Rock Island broke. At the time I happened to be with Middleton Burrill, who remarked, ‘That collapse is going to break the continuity of bullish thought.’ I had never heard the expression before, but I saw at once that Burrill was right and even though Steel was being supported by the Morgans, I sold and took my profits.
*****

Raymond James real estate team is reporting that: …during the month of June, Florida existing home sales fell 29% year-over year. Notable declines included Naples (-48%), Sarasota-Bradenton (-40%), Daytona Beach (-39%), West Palm Beach-Boca Raton (-39%), and Tampa-St. Petersburg-Clearwater (-34%). Further demonstrating the market’s weakness, the single-family statewide median sales price of $257,800 exceeded the median price a year ago by only 3%, with markets such as Fort Myers-Cape Coral (-5%), Panama City (-10%), and Sarasota-Bradenton (-3%) showing year/year sales price declines. Additionally, Florida condominium sales declined 35% year/year to 5,241 units, with 12 of the 20 metro areas posting double-digit declines. The weakest markets were Punta Gorda (-97%), Fort Myers-Cape Coral (-66%), Naples (-48%), Sarasota- Bradenton (-48%), and Tampa-St. Petersburg-Clearwater (-47%). Moreover, the median condominium price during the month was $212,500, a 1% decline versus the period a year ago, although nine markets reported year/year declines in median prices. Notable weakness was cited in Fort Walton Beach (-42%), Daytona Beach (-14%), Panama City (-12%), Jacksonville (-9%), Fort Myers-Cape Coral (-7%), and Orlando (-4%).
*****

European bourses closed lower except for London which was a small fraction higher.
*****

We and the markets are trying to stay awake as the afternoon progresses. Breadth remains negative and trading is summer Monday slow. The major measures have been negative all day and show no signs of improving.
*****

Gold closed at $635 which was higher on the day and Oil was up over $1 at $72.45. Treasuries were firm with the two-year at 4.86% and the ten-year at 4.82%.
*****

The DJIA closed down 35 Points at 11345. The S&P 500 lost 4 points to 1298 and the NAZZ dropped 16 points to 2147.

Breadth was 2/1 negative all day and volume was light.

New highs were 155 and new lows were 100.

The casino should institute summer hours for the next two weeks.
*****

 

18 August 2006 Daily Comment

Thoughts

Asia was mixed overnight and so is Europe this morning. Both areas are showing fractional changes of no import in their major stock market measures. Treasuries are also flat and Gold is up to $629 while Oil is a few pennies higher at $70.89. This is the second last Friday in August so as soon as the big boys and girls place their bets for the day we would guess that trading will slow.

We are taking off at noon to drive around Iowa and Wisconsin with our daughter the PhD.
*****

Dell met expectations but announced a SEC inquiry into its accounting practices and is trading 8% lower. The Gap also disappointed and warned going forward and it is trading down 5%. Four brokers lowered ratings on the stock with Goldman putting a sell on it. The low for the past many years is $16 right after 9/11 and so under $20 with the bad news in the stock we think it is interesting. It is now selling at one times sales which it hasn’t done in a long time.
*****

China raised their lending rates by 25 basis points overnight to 6.12% from 5.85%. The rate paid on deposits was raised to 2.52% from 2.25%. That is a nice spread for the bank.
*****

The University of Michigan Consumer Confidence Index was 78 when 83 was expected. This is one of the dumb numbers traders use for their daily fix and bids evaporated with that news. The major measures are mixed an hour into the day and with the week-end a few hours away only folks squaring options positions are involved right now.
*****

Microsoft has increased its share buyback to $40 billion and the share price is higher because MSFT didn’t get all the shares it wanted in the tender offer at $24.75 that just expired.
*****

Ford is cutting 4th quarter production by 20% and is going to fire 35,000 more folks.
*****

As we head out the major measures are mixed and trading is muted. Breadth is 2/1 negative and hew highs are twice new lows.

The casino will be open for fun and games as usual on Monday.
*****

 

17 August 2006 Daily Comment

Thoughts

Asian markets were fractionally mixed overnight and so are European bourses at midday. Gold is at $639 and Oil is $70.70 as the Lebanon and BP crisis cooling cause traders to look elsewhere for action. Treasuries are holding yesterday’s strong gains.

The rally continued for a second day yesterday and with the S&P 500 at the 1290 level seems poised to break out above 1300.
*****

Jobless Claims for last week were 312,000 as was the four week average. Continuing Claims rose 24,000 and suggest that while firings are not increasing hiring is slowing.
*****

Leading Indicators for July were negative 0.1% when positive 0.1% was expected. On a year over year basis that 0.2% times 12 equals 2.4% which is often the difference between slow growth and recession, i.e. an economy growing at 1.4% or contracting by 1% (2.4% difference).
*****

In accounts that currently own Sprint we are taking a position in EMC which dropped from $14 in March to under $10 this month and is now trading at $10.92 on a BAC upgrade:

Banc of America Securities on Thursday said it replaced Apple Computer Inc. AAPL, the maker of Macintosh computers and iPod music players, with EMC Corp.

EMC, a data storage equipment maker, as one of its top two picks. In a research note, Banc of America said EMC's mid-range business has improved significantly from a weak June quarter, and the brokerage has modeled in a 15 percent year-on-year growth for September quarter.

We traded EMC a few years ago for a nice profit and then it moved up to the $14 range for several years and we ignored it. At the $11 level it is on support/breakout and if the markets go higher tech will go and with think EMC may develop some sponsorship as with the BAC upgrade this morning. Analysts have had time to lick their wounds after being blindsided last March.
*****

In our largest accounts we bought a few stocks to trade/own. The major stock measures are at inflection points where they could break out into new territory and make new highs by the end of August. Or they can do as they have done for the past few months and rollover.

We are not buying momentum stocks. Rather we are taking small positions in stocks we are comfortable owning through year end. If we get a good trade we will be happy to take the profit. If not we will hold them since most are near at least their six month lows and some are on multi-year lows. We are only buying them in our largest accounts because those accounts have oversized Treasury holdings that are working well for us now and we are comfortable taking the risk involved if the markets don’t make it through resistance this time. In our other accounts we are awaiting a rollover of the major measures and sell off in September/October.

To be clear, we are buying these stocks for a trade on a move to new highs by the major measures in the next few weeks but are willing to hold and add to them in the fall if we are wrong in our guess. The exposure in the largest accounts amounts to at most 20% balanced by a 60% two year Treasury position (invested at 5% plus) and a 20% cash position..

We continue to expect new lows in the fall on the major measures after a quick run-up into the end of August and that is why we are assuming a controlled risk in mostly quality stocks in only our largest accounts.

We bought: Wrigley, Hershey, Applied Materials, New York Times, DreamWorks, Microsoft, Estee Lauder, Schering Plough, NetFlix and Andrew Corp.
*****

Of the stocks we purchased today high Quality Wrigley, Hershey, and Estee Lauder are down on quarterly earnings or sales that disappointed analysts.

Applied Materials has been trading in a range between $15 and $20 for the past few years. We are buying at the low end of that range.

DreamWorks is on a multi-year low. We think it will be acquired in the next few years since Steven Spielberg et al sold their DreamWorks SKG movie making business earlier this year. They control DWA.

New York Times is out of favor as are all newspaper stocks. We owned last year around $38 and it is now $22. The bad news is in the share price but that doesn’t mean it can’t move lower. This price level seems a good place to begin purchase.

Andrew Corp just rejected a takeover bid and called off a takeover to which it had agreed. Arbitrage traders must be pained by this situation but that doesn’t mean another suitor won’t come along. We do think that arb selling to take losses may dog the stock into year end unless another suitor willing to pay a higher price surfaces.

Schering Plough is getting its hose in order after many years in disarray.

Microsoft share price has also gone nowhere for a few years and earnings and sales have caught up to valuation.

Netflix is a speculative trade.
*****

The Philadelphia Fed Index of Business Conditions was 18.5 (9 was expected) and versus a reading of 6.0 in July. The latest data was in contrast to other economic reports this week on industrial production and housing that were below analysts' expectations. The prices paid index fell to 45.3 in August from 50.3 in July. The Index number has taken some wind out the Treasury rally sails.
*****

Merck is dragging on the DJIA as it is off a few dollars on news that it lost a Vioxx case in New Orleans and that the verdict in another Vioxx case that it won last year had been overturned by the judge because of new evidence.
*****

Gold closed at $625 down $13 in NYC and Oil was down $1.83 at $70.06. Treasuries were a tick weaker with the two-year at 4.89% and the ten-year at 4.86%.
*****

Dell reports after the close. We took a position in it this morning but closed it out this afternoon for a few pennies loss because we didn’t want to hold the stock into earnings.
*****

The DJIA closed up 8 points at 11335. The S&P 500 traded above 1300 but finished the day up 2 points at 1297. The NAZZ gained 8 points to 2143.

Breadth was 5/4 positive and volume was active.

New highs were 225 and new lows were 110.

And tomorrow options expire.
*****

 

16 August 2006 Daily Comment

Thoughts

Asia closed 1% higher in most countries while Europe is fractionally lower on many bourses at midday. Gold is up to $636 and Oil is t $72.95 as we begin the day. Treasuries are unchanged awaiting the CPI data in a few minutes.
*****

The Consumer Price Index for July was up 0.4% month over month while the core CPI was up 0.2%. Year over year for the last 12 months CPI is up 4.1% while the core CPI is up 2.7%.
*****

Housing Starts came in at 1,795,000 (minus 2.5%) which were less than expected. Capacity Utilization was 82.4% also as expected and Industrial Production rose 0.4% when 0.6% was the guess.
*****

On the news stock futures have moved higher and Treasuries have a bid. The stock market needs to carry through on yesterday’s strong showing and move decisively above the 1291 area on the S&P 500 for the month end rally to continue.

Our tech guru thinks yesterday’s rally was related to options expiration on Friday and that today is the real test.
*****

Stocks opened higher out of the gate and the S&P 500 is fixed on 1290. Breadth is strong two hours into the day and Treasuries have rallied. Gold is lower as is oil at $72.40.
*****

Some of the sold out blue chips like UPS and MMM are catching a bid today while Hershey and Wrigley are two of only a few of the blue chips that are in the red today.
*****

Oil lost over $1 to close at $71.89 and Gold was up $6 in NYC to $639. Treasuries were strong into the close with the two-year at 4.88% and the ten-year at 4.87%.

Stocks and Treasuries made it two up days in row and the bulls are in control again.

At the bell the DJIA was up 96 points to 11327. The S&P 500 gained 10 points to 1295 and the NAZZ rose 35 points to 2150.

Breadth was 3/1 to the good on the NYSE and 2/1 positive on the NAZZ. Volume was active and new highs were 247 to 150 new lows.

And there are two more days left at the casino this week and we’ll see tomorrow is folks want to play catch up.
*****

 

15 August 2006 Daily Comment

Thoughts

July Producer Prices were up 0.1% and the core rates were down 0.3%. Year over year the PPI was up 4.2% for the last 12 months while the core year over year rate was up 1.3%. The stock and bond markets have taken this as a positive that inflation is not going to be a problem and both the major stock measures and Treasuries are rallying.
*****

The important number now becomes the Consumer Price Index for July which is reported tomorrow morning. CPI needs to confirm the PPI of today in order for bond bulls to rest easily.
*****

Overnight Asia was mixed and so is Europe at Midday. Gold is down a few dollars at $636 and Oil came out of overnight trading at $73.09 down a few pennies.
*****

Stocks are blazing higher out of the gate on the tame PPI and the hopes of the pause in rate increases by the Fed continuing and after 15 minutes of trading the major measures are over 0.75% higher with breadth running 4/1 positive. The last time the S&P 500 opened 0.75% higher was May 23 and the rally fizzled with the major measures lower on the day. The S&P 500 is right at 1280 resistance so time will tell.
*****

Eventually talking heads are going to move from no more rate increases to the economy tanking and then the markets will be tested again.
*****

Buffet’s Berkshire Hathaway unloaded its 10 million share position in The Gap between March 31 and June 30.
*****

Ford was upgraded by Bear Stearns yesterday and GM was downgraded. We remain interested in Ford although we sold it expecting a September downturn.
*****

The talking heads are saying that auto prices are only 5% of the CPI while auto prices are 10% of the PPI. The drop in auto prices was a large reason for the negative core PPI number. Rents are 40% of the core CPI and those numbers have been rising so the CPI tomorrow could reverse the bullishness of today. Add in the fact that the new Treasury Secretary is from Goldman Sachs and knows what markets want and the outlook for tomorrow’s CPI number is mixed.

Friday brings options expiration.
*****

According to the National Association of Homebuilders sentiment is deteriorating. The reading of 32 down from 39 was weaker than expected and the lowest since January 1991 when the reading was 20. A reading below 50 is a negative. The Midwest is the weakest area of the country by a significant amount with a reading of just 15. The so-called bubble areas, the south and west are at 41 and 42, down from 50 and 52 in July.

The index measures direction of change, not magnitude. The last time it was 32 was in 1991, when housing starts were less than half of today's levels. What is happening is that a large number of builders are saying that sales are down, hence driving the index lower. Nevertheless, the level of sales is substantially higher than in 1992 as is the stock market and most other assets.

Talking heads keep saying that housing prices won’t drop like the stock market. But a 5% or 10% drop (which is considered a normal correction in stocks) in housing prices will wipe out the equity of many recent home buyers.
*****

Exchange Traded Funds which supposedly mimic various market measures or industries like drug stocks, or tech stocks, or energy stocks have attracted over $335 billion in capital according to CNBC. That is a lot of money sloshing around and the buying and selling of ETFs creates myriad other market activities in options, futures and the underlying shares of common stock. We don’t know whether ETFs are good or bad but they sure do keep markets busy and create a lot of noise that must be filtered to understand if anything is really occurring.
*****

Gold closed in NYC at $632.60 and Oil finished there at $73.05. Both were down on the day. Treasuries rallied on the tame core PPI and the two-year closed at 4.94% as did the ten-year.
*****

The major measures all closed on their highs for the day. The DJIA ended up 125 points at 11225. The NAZZ jumped 45 points to 2115 and the S&P 500 closed well above 1280 resistance up 17 points at 1284.

Breadth was 4/1 positive on the NYSE and was 3/1 better on the NAZZ. Volume was good for a summer Tuesday.

New highs edged out new lows 185 to 165.

And tomorrow brings CPI to the Wheel of Fortune and the casino players will be ready for action on that news.
*****

 

14 August 2006 Daily Comment

Thoughts

Asian markets closed higher. European markets are higher at midday and gold is down to $636 and Oil is off more than a dollar at $73.04. Treasuries are weaker as the Fed must raise folks take center stage. It is summer and the big boys and girls need a reason to trade.

We would think that the markets will be range bound for the next few weeks as folks finish up their summer vacation and investors sit on their hands awaiting the next Fed meeting and a resolution of the Lebanon imbroglio.

The important level on the S&P 500 for today is 1275 (closed at 1268). And the tech guru we follow thinks that if the S&P 500 can move above 1284 this week that a two week rally into month end could occur.
*****

Crude oil fell and gasoline touched the lowest price in almost two months after BP said it will keep half of the production flowing at the biggest U.S. field. BP plans to pump 200,000 barrels a day from the Prudhoe Bay field while the company replaces corroded pipelines, rather than shut the Alaska site entirely as initially intended.
*****

Stocks opened higher and have held their gains through the first hour of the trading day. Breadth is 2/1 positive. The Two-year Treasury is at 5% as traders begin the countdown to this week’s inflation data and the next Fed meeting.
*****

We need to go to Madison to pick up Katie who helped drive the prince and princess back to Northern Kentucky. We’ll be back at our post tomorrow morning.
*****

 

11 August 2006 Daily Comment

Thoughts

Import prices were up 0.9% in July which was a bit more than expected. Retail sales in July were up 1.4%, and up 1% ex autos. Both those numbers were more than the bond boys and girls wanted and so Treasuries are lower in price as the day begins.

Asia was mixed overnight and so is Europe with no large moves in either area. Gold is lower at $641 and oil is higher at $74.64.
*****

After an hour and one half of tepid trading the major measures are lower with breadth negative. Gold has rebounded and is now up at $661. Treasuries are better but still lower on the day.
*****

We are sold our Ford today for a less than $1 but good percentage gain. That is the stock we sold not our trusty Ford 150 truck.
*****

Business Inventories increased 0.8% in June (consensus was for +0.5%) following a gain of 1.1% the previous month (upwardly revised from 0.8%), which matched the largest gain seen since May 1994.
*****

Seven years ago the S&P 500 closed at 1301. Today it is 1264.

The DJIA closed at 10787 seven years ago. Today it is 11068.

Seven year ago the Model Portfolio was $310,000. Today it is $572,000.
*****

Entering the final hour trading continues at a slow pace. The major measures are lower. Treasuries are also higher in yield lower in price because of the higher retail sales numbers this morning. Traders are looking for any piece of news on which to trade.

The terrorist plot is now old news to the markets. No harm no foul being the consensus view.
*****

Gold closed lower at $644 and oil was $74.20. The Treasury two-year ended at 4.97% and the ten-year was 4.97%.
*****

The DJIA closed down 40 points at 11085. The S&P 500 lost 5 points to 1267 and the NAZZ was down 15 points to 1257.

Breadth was 2/1 negative and volume was light.

New lows contracted to 225 and new highs were 85.

The Casino is closed for the week-end.
*****

 

10 August 2006 Daily Comment

Thoughts

Homeland Security Chief Chertoff was color coordinated as he announced code alert RED. He was wearing a bright red tie. That’s called reinforcing a point.
*****

CNBC has breaking news that oil is slumping on the foiling of the terror plot. The world is again safe for trading at the great casino. What a great market. By the by, just like George Bush, Tony Blair is on vacation

The plot had terrorists mixing liquids on board aircraft (as other passengers watched we presume) to blow the aircraft up. We envision an on board General Science Class like we had eons ago in high school.

As a result of the now foiled plot all liquids are banned from carried on luggage. No more shampoo, sun screen, and coke will be allowed to be carried on. (Travelers with infants are required to taste any baby milk in front of security officials.)

We wonder if the group is for real is like the Florida morons who were egged on by the FBI informant and accused of wanting the bomb the Sears tower in Chicago which none of them had ever seen.
*****

We wondered why the DJIA sold off yesterday in the last hour and why AMR was down over $1 and now those questions have been answered. Some traders may have know what was coming.

Ah well, Asia was fractionally lower overnight, while Europe is off over 1% but  well above worse levels as the terror news plot hit as those bourses opened. U.S. futures were down over night but are coming back and Gold and Oil which were both higher overnight are now are both lower with Treasuries unchanged.

The fact that gold and oil are lower and Treasuries are unchanged tells all about how seriously traders take the news. The cable networks are all over this and will be tonight as no one watches.
*****

Our thoughts are that, unfortunately, until an actual terrorist event occurs on U.S. soil that the market and traders are going to quickly ignore the ‘breaking news’ events like this morning. Even the London Subway bombings last year had little short and no long term effect. We think is the “cry wolf” syndrome at work.
*****

But the news should have the effect of slowing down investors. Why buy today when one can wait a few days to ascertain the severity of the threat and what the future holds.
*****

We aren’t going to buy or sell the news. In fact we are going for a bike ride later if it doesn’t rain. We had too much cake at Tyler Bud’s birthday party last night and we need to work it off.
*****

Two hours into the trading day we find the major measures higher but breadth slightly negative. Oil is down over $1.50 in NYC and gold is $13 lower. It’s a strange world.
*****

The DJIA closed up 49 points at 11125. The S&P 500 gained 6 points to 1271 and the NAZZ was up 12 points to 2072.

Breadth was 5/4 positive and volume was moderate.

Gold closed lower at $646 and Oil ended down at $74. Treasuries were weaker with the two-year at 4.92% and the ten-year at 4.92%.

There were 350 new lows and 100 new highs.

And the Casino will be open for Friday fun.
*****

 

9 August 2006 Daily Comment

Thoughts

Stocks are going to open higher today led by Cisco and Disney. Both had earnings and sales reports that wowed the street.

Overnight Asia was better by 1% across the board and in midday trading Europe is fractionally lower. Gold is unchanged and oil is a few pennies higher in NYC at $76.60. Production on the North Slope will be out until at least January.

Treasuries are flat.
*****

Toll Bros the high end home builder said that forward orders are down 45% from last year. The share price is at $25.20 down $1.50.
*****

Wal-Mart will allow and deal with unions in China but not the U.S.
*****

After and hour and one half of trading the major measures are fractionally higher in moderate trading. Breadth is 5/4 positive and the S&P 500 is back under 1280 after briefly trading above that number in the early going. The DJIA is up 25 points and Cisco is up $2.40 to $19.70.
*****

Gasoline inventories fell 3.2 million barrels when a drop of about 1 million was expected. Oil is now above $77.
*****

Stocks couldn’t hold their gains and surrendered to the bears in the last hour. Cyclicals were especially hard hit.

The DJIA closed down 97 points at 11076. The S&P 500 lost 5 points to end at 1265 and the NAZZ dropped 1 point to 1260 as Cisco held its gains and traders decided that tech stocks may be recession resistant.

Gold ended at $661 and oil closed at $76.35. Treasuries eased with the two-year at 4.92% and the ten-year at 4.95%.

Breadth ended 5/4 negative and new lows exceeded 330 while new highs were about 160. Volume was brisk.

There are two more days at the casino this week.
*****

 

8 August 2006 Daily Comment

Thoughts

Overseas markets were higher overnight with Japan gaining back the 2% it lost the day before. The rest of Asia was strong and European markets are fractionally higher.

Oil has backed down form its highs of yesterday to $76.50 and Gold is lower at $654. Treasuries are giving ground as the Fed announcement at 1:15 is just a few hours away.
*****

Bristol Myers is opening down $2 today as the company announced this morning that a generic version of Plavix will be shipped shortly. And so the old saw of not turning a trade into an investment when the trade shows a loss and pride suggests holding for a hoped recovery worked in this case.
*****

We sold our BSX trade because we don’t want to own it in front of the Fed announcement and it doesn’t look like it will pop before then. Our trades in our very large accounts over the last week were profitable overall on the order of lunch money. But any profit is better than a loss.

We also reduced but did not eliminate our Intel holdings in a few accounts for a scratch loss.
*****

The Labor Department reported that labor costs as measured by unit of output rose 4.2% when 3.7% was expected. That's up from a 2.5% rate in the first quarter and is the fastest gain for unit labor costs since a 5.1% rate of increase in the fourth quarter of 2004.  Productivity, the amount of output per hour of work, slowed to 1.1% in the second quarter, down from 4.3% in the first quarter.
*****

In June revolving debt (aka credit cards) was up $6.6 billion in June to $820 billion.
*****

Volume is light and the major measures are all higher as nothing of import is occurring. Traders await the Fed minutes which are to be released in an hour and then there will be a flurry up, down and all around. Then our guess is that folks will go on vacation since the Fed is going to mitigate any action or non action with the opposite reaction in the statement. At least that is what the talking heads are opining.

We think the rise in oil price is a real drag on the economy and is helping the Fed do its job too well. Higher oil prices are inflationary but they also sop up a lot of cash. That is the Fed’s conundrum.
*****

1:15pm and the Fed declined to raise rates and issued approximately the same policy statement as last time. A more hawkish statement was expected. The Fed statement mentioned our comments above about higher energy prices depressing the economy.

Treasuries are lower in yield and higher in price on the news with the two-year at 4.92% and the ten-year at 4.91%. The major stock measures are treading water at slightly higher levels.
*****

Gold ended up a bit in NYC at $658. Oil closed off a bit at $76.34. Treasuries finished better with the two-year at 4.90% and the ten-year at 4.92%.
*****

The DJIA closed down 45 points at 11173. The S&P 500 lost 4 points to end at 1271 and the NAZZ dropped 12 points to 2060.

Breadth turned negative after the Fed announcement and ended 5/4 to the minus side. Volume was summer light.

New lows were 225 and new highs were 140.

And the casino will be open for business as usual tomorrow.
*****

The following is a press release from Sprint about their new wireless technology.

Sprint Nextel Corp. (NYSE:S - News) today announced its plans to develop and deploy the first fourth generation (4G) nationwide broadband mobile network. The 4G wireless broadband network will use the mobile WiMAX (Worldwide Interoperability for Microwave Access) IEEE 802.16e-2005 technology standard.

Working together with Intel, Motorola and Samsung, Sprint Nextel will develop a nationwide network infrastructure as well as mobile WiMAX-enabled chipsets that will support advanced wireless broadband services for computing, portable multimedia, interactive and other consumer electronic devices. These efforts are intended to allow Sprint Nextel customers to experience a nationwide mobile data network that is designed to offer faster speeds, lower cost, and greater convenience and enhanced multimedia quality.

The Sprint Nextel 4G mobility network will use the company's extensive 2.5GHz spectrum holdings, which cover 85 percent of the households in the top 100 U.S. markets - the most of any wireless carrier in any single spectrum band. To access that network, Sprint Nextel will work with Intel, Motorola and Samsung to incorporate WiMAX technology for advanced wireless communications and help make chipsets widely available for new consumer electronics devices, connecting consumers to the Internet and to each other while providing them with the flexibility to do what they want or need to do regardless of time or place.

"None of us today can envision our lives without wireless connectivity or the Internet," explained Gary Forsee, president and chief executive officer of Sprint Nextel. "Sprint Nextel is taking a major step forward by linking the incredible potential of these two cornerstones of daily communications. We'll give customers the power to harness business information and personal entertainment easily and inexpensively -- and in ways that they will one day wonder how they lived without.

"This announcement is another step in Sprint Nextel's broadband mobility leadership, and we expect to establish a first-to-market next generation network advantage. We will have a unique broadband capability for meeting the growing access and mobile Internet needs of businesses, governments and consumers when and where they want."

In working together with Intel, Motorola, and Samsung, Sprint Nextel has the experience, network infrastructure, spectrum and distribution channels to make 4G mobility services pervasive and indispensable for customers. The company's deployment plans target a launch of the advanced wireless broadband services in trial markets by the end of 2007 with plans to deploy a network that reaches as many as 100 million people in 2008. Sprint Nextel plans to expand mobile WiMAX network coverage thereafter.

The company will continue to invest in and offer access to its current wireless and Sprint Power Vision(SM) mobile broadband networks to serve customer communications needs today and into the future. As evidenced by its strong data results and expanding 3G broadband network, Sprint Nextel continues its innovation and leadership in driving mobile data.

New Business Model

Sprint Nextel has created a unique business model designed to foster the rapid deployment and adoption of mobile WiMAX technology in the United States and abroad. Sprint Nextel is expecting to invest $1 billion in 2007 and between $1.5 billion and $2 billion in 2008 relating to the 4G mobile broadband network. The WiMAX technology to be deployed in the network is expected to offer a cost-per-megabit and performance advantage that reflects a substantial improvement in the comparable costs for the current 3G mobile broadband offerings.

Commitments from Intel, Motorola and Samsung in the areas of market development, mobile WiMAX devices and other contributions to Sprint Nextel's core business are expected to accelerate Sprint Nextel's goal of deploying services and market adoption. Motorola and Samsung will also support Sprint's current and CDMA/EV-DO network technologies by creating multimode devices that will support services on both the 4G network and the 3G network in areas outside the planned 4G coverage, and will provide voice service using the core 3G networks. The 4G broadband network will offer a complementary, high-bandwidth service driven by data centric devices.

Intel, one of the early members of the WiMAX Forum and one of the key contributors to the IEEE 802.16e-2005 standard, will deliver next generation WiMAX solutions for Centrino Mobile Technology and next generation computing devices. Intel will bring its extensive history in device-to-network verification as well as marketing expertise to expose customers to the breadth of new WiMAX capabilities and services.

Motorola has been a long-standing proponent of WiMAX and will offer Sprint Nextel both single- and multimode devices designed to enable seamless mobility for users, while playing a major role in its WiMAX infrastructure roll-out. Since Motorola is the exclusive supplier of iDEN technology as well as a major supplier of CDMA and EV-DO Revision A technology, it can offer a complete end-to-end solution (from radio access network equipment to both single- and multimode mobile devices) and is uniquely positioned to expand the seamless mobility experience into the wireless mobile broadband market.

Samsung Telecommunications America will be a primary Mobile WiMAX infrastructure supplier to Sprint Nextel and will also deliver dual-mode devices supporting Mobile WiMAX and CDMA2000 1xEV-DO, designed to enable Sprint's Mobile WiMAX users to utilize Sprint Nextel's existing 3G network resources. With its installation of networks in South Korea and other markets, Samsung Electronics is the first to commercially deploy Mobile WiMAX and with its alliance with Sprint Nextel will bring this global expertise to North America. Samsung is the global leader in delivering Mobile WiMAX technologies and offers Sprint a total solution including chipsets, infrastructure, mobile devices and consumer electronics focused on Mobile WiMAX and dual-mode WiMAX/CDMA services delivery.

Sprint Nextel's long-term goal is to have a broad range of mobile WiMAX-enabled chipsets and modules and an array of portable data and consumer electronics devices available from multiple vendors which work seamlessly among Sprint's network offerings. To that end, Sprint Nextel and other leading consumer electronic companies are planning to form a strategic marketing and product alliance for the purpose of introducing innovative consumer electronic devices and multimedia content solutions using Sprint's 4G mobile WiMAX network.

*****

 

7 August 2006 Daily Comment

Thoughts

Crude oil is trading $1.40 higher at over $76 on news that BP Amoco is in the process of closing down the Prudhoe Bay oilfield because of oil leaks.

Last week was a draw with the DJIA higher, the S&P 500 unchanged and the NAZZ lower. This week the focus is on the Fed Meeting tomorrow and also on the Lebanon imbroglio. Stocks are looking lower at the opening and Asian markets were mostly lower with Japan down over 2% but Hong Kong fractionally higher. European markets are lower and gold is higher Treasuries are a tad weaker as the day begins.
*****

Late last week we tried a few trades in our very large accounts with tepid results. The good employment news on Friday was the stimulus for a strong rally which reversed midday and caused us to sell our trading positions. We held on to Boston Scientific in the hopes of a rally to rescue us and Bristol Myers.  We now own BMY in most accounts. We purchased BMY for smaller and less aggressive accounts a few days ago when it broke under $23 on rumors that a generic form of Plavix will be available this year. Plavix is a very profitable heart drug for BMY. The yield on BMY is now 5% and we are hoping that the bad news is in the stock. We did not buy more BMY in accounts that already owned it. BMY is a trade with us. We are holding Intel in all accounts and Ford in our smaller accounts.
*****

Three hours into the trading day oil is at $76.40 and that is placing a damper on stocks. With the Prudhoe Bays oil shutdown talking heads are beginning to mention closing of the Straits of Hormuz and $100 oil.

The oil scare talk may cause the Fed to be cautious on raising rates again.
*****

Oil ended in NYC at $76.98. Gold was $659.50. Treasuries were lower in price with the two-year at 4.95% and the ten-year at 4.92%.
*****

Having purchased the BMY is our last few accounts this morning we decided this afternoon that we don’t want to rely on hope in a dicey market to rescue a trading position where there underlying premises for the trade have changed. Our initial purchase in the stock was before the Plavix news broke and the uncertainty of that patent has caused us to reevaluate our holding. We bought the shares for a trade which didn’t work. If the shares went back to $24.50 we would sell and we think there is a further downside risk of $4 in the stock from the current level if the Plavix patent is broken. That is not a good risk reward ratio. And so we sold all our shares.  We have a $1.40 plus loss on shares we bought early last week and a scratch loss on the shares we bought today and a few days ago in our smaller accounts. In this market we don’t want to go home with uncertainty.
*****

We traded Sprint Nextel in our large accounts last week for small profit when the shares tanked on what the street considered a bad earnings and revenue report.

Over the week-end we read S’s latest financial report and decide we wanted to own the stock at these levels. We have traded it over the years. The shares dropped $3 in price last week to $17.50 when their customer growth was less than expected and their quit rate of customers was over 2%.

Sprint has about 52 million subscribers. Verizon has 55 million and AT&T Cingular around 53 million. When the talking heads were theorizing about Verizon buying out Vodaphone’s interest in VZ Wireless they placed a value of $100 million on the total VZ Wireless business. SBC (now AT&T) paid over $30 billion for 15 million AT&T Wireless subscribers several years ago.

Sprint’s equity is valued at $50 billion is the marketplace after this latest price drop. Sprint has debt of about $20 billion while Verizon and AT&T both have about $40 billion in debt. With all three having roughly 50 million plus subscribers we think S is undervalued in relation to the other two wireless providers and that the next time S has a good quarter-or maybe before-the marketplace will take notice.

Today we bought a beginning position in the shares at $17.40 for accounts where we sold BMY.  We are buying to own for a while, not to trade.
*****

The DJIA closed down 20 points at 11220. The S&P 500 lost 4 points to 1275 and the NAZZ dropped 13 points to 2072.

Breadth was 2/1 negative all day and volume was light.

New lows at 210 outdistanced new highs at 110.

And tomorrow the casino will be awaiting Uncle Ben’s words at 1:15pm.
*****

 

2 August 2006 Daily Comment

We are back but our computer guru who is also our brother is taking the rest of the week off to journey to a wedding in Rochester New York. And so we are posting this comment early today and then there will be no comments until next Monday August 7 in time for the next Fed Meeting and the attendant activity.
*****

Thoughts

The markets survived our absence and continued to trade. Stocks were lower both days while Gold rose to $659 this morning and Oil is back over $75. Treasuries remain firm with the two-year at 4.95% and the ten-year at 4.98%. There are going to be some sad faces if the Fed goes against perceived wisdom and raises one more time for good luck next week.
*****

Toyota assumed second place in auto sales in the U.S. in July besting Ford for the honors by about 3,000 more vehicles sold.
*****

We are not going to trade the markets in our larger accounts until or unless the S&P 500 revisits 1240. We will maintain the few positions we have in our Model Portfolio and other accounts.
*****

After three hours of trading the major measures are strongly higher with the S&P 500 up 12 points at 1283. Breadth is 3/1 positive. Volume is moderate.
*****

The heat has tempered our enthusiasm and we don’t have many bright ideas about which to write. With the DJIA up 100 points we would guess that 1290 will be tested on the S&P 500 in the next two days. But after that we have no idea what will occur. We are happy with our cash/bond positions and will hold these until we have a better feel for the markets.
*****

And with that comment we wish you all a happy week. The casino is open tomorrow and Friday but we will be riding our bike and moving wood for the winter. We are lucky enough have two strong bodies in addition to our older one to do the work and so we are going to move wood while the sun shines.
*****

 

 

 

 

 

 

 

 

 

 

 

 

 



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