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29 December 2006 Daily Comment

Thoughts

This is the last trading day of the year and it closed with a whimper in Asia with markets fractionally higher and European bourses are also mixed. Gold is up a few pennies as is oil and Treasuries are down a tick or two in price.

The NYSE and NAZZ and Federal Reserve are going to close on Tuesday January 2 as a Day of Mourning for Gerald Ford and to give everyone who works so hard a day off to shop and relax. Of course all the peons in this country will have to work a regular day. We are going to close also and take the dogs off perimeter patrol.

The next post will be Wednesday evening January 3.
*****

The NYT is reporting that Saddam may be executed on Saturday which is tonight. That may be one more reason for the Tuesday close to give more time in case there are any untoward incidents. But closing markets for four days is not a good idea and may induce some selling today from traders who donít want to be committed for that long a time period. Yes, four days is a long time for many traders.
*****

Oil closed the day early and at year end is was $61.05.

Gold closed at $638 in NYC.

Treasuries were a bit lower with the two-year at 4.82% and the ten-year at 4.71%. The close on the ten-year was 30 basis points higher than where it was when the year began.

The DJIA lost 41 points to finish the year at 12460. The S&P 500 closed down 7 points at 1417 and the NAZZ dropped 10 points to 2415.

Breadth was 2/1 negative on the day and volume was light.

There were 270 new highs and 50 new lows.

And thatís it folks. Our next post from the big casino will be Wednesday January 3.

We wish all a Happy New Year.
*****

 

28 December 2006 Daily Comment

Thoughts

Asia was mixed overnight with Hong Kong up another 1%. European bourses are slightly lower in quiet trading. Gold is up $7 at $636 in the early going and Oil is up 26 pennies at $60.60.

Jobless claims were up 1,000 to 317,000. There are some numbers coming at 9am that will determine the course of Treasury trading for the day. Stocks are going to open lower.
*****

Mexico is up 47% for the year while Brazil is up 33%.
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December Consumer Confidence was 109 which was better than expected and the December Chicago Purchasing Managers Index was still expansive at 52.4 which also was better than expected. November Existing Home Sales came at up 0.6% month to month or a 6.28 million annual rate which was better than expected. Treasuries are higher in yield on the data with the two-year at 4.80% and the ten-year at 4.68%. There is an auction of the five-year today.
*****

Royal Dutch Shell PLC said it hired former U.S. Interior Secretary Gale Norton (who regulated the oil industry) to serve as a counsel for the Anglo-Dutch oil company. The circle of back scratching and greed continues.
*****

Goldman Sachs has raised $6.5 billion in a fund to invest in infrastructure around the world. The fund will buy ports and airports and regulated utilities. The folks investing are pension funds and insurance companies and banks that are looking for stable income. They must never have heard of U.S. Treasuries.
*****

Oil ended higher by 19 pennies in NYC today at $60.53. Gold jumped $7 to $636 and Treasuries were higher in yield and lower in price with the two-year finishing at 4.80% and the ten-year at 4.69%.

European bourses were mostly small percentages lower.

The DJIA lost 10 points to end at 12500. The S&P 500 was down 2 points to 1425 and the NAZZ lost 5 points to 2427.

Breadth was 5/4 negative and volume was slow.

There were 360 new highs and 50 new lows.

And the fund games at the big casino end for the year tomorrow.
*****

 

27 December 2006 Daily Comment

Thoughts

The Prince and Princess arrived last night so the posts will be shorter than usual while they are here. Also there truly isnít a lot happening in the markets this week and trying to make hay when it is foggy is not a good idea. But if the rally continues for the next three days we will be tempted to take a chunk of change off the table.
*****

Overnight Asian markets were strong with Hong Kong up over 2% and Japan up fractionally and hitting a seven month high. European bourses are catching up to the U.S. markets after their holiday yesterday with France and Germany up over 1% at midday and the other markets also higher.

Gold is up $4 at $630 in NYC and Oil is down 20 pennies at $60.90 in the early going. Treasuries are a tad weaker.

News organizations are reporting that the CEOs of Ford and Toyota had talks in Tokyo. There is a difference of opinion about whether they just discussed sushi or something more substantive.
*****

Investors Intelligence had a drop in Bulls to 56% from 58% and a drop in Bears from 21% to 20%.
*****

Steve Jobs has hired a lawyer to represent him as the probe into option pricing practices at Apple continues and that has Apple stock down $3 per share this morning.
*****

The Commerce Department reports that inventories of new homes have dropped to their lowest level since last May. That news has weakened Treasuries in thin holiday trading. One guru suggested that when homes donít sell some become rentals and are removed from inventory.
*****

Oil ended lower by 76 pennies at $60.34. Gold gained $3 to $630. Treasuries were weak with the two-year at 4.78% and the ten-year at 4.65%.

European bourses closed higher across the board.

At the bell the DJIA was up 110 points at 12517. The S&P 500 gained 10 points to end at 1427. The NAZZ jumped 20 points to 2432.

Breadth was 3/1 positive on the NYSE and better than 2/1 positive on the NAZZ and volume remained holiday light.

There were 430 new highs and 50 new lows.

And there are two more days this year for mark ups and mark downs and the boys and girls to play their fund games at the casino.
*****

 

26 December 2006 Daily Comment

Thoughts

Asian markets were mostly higher overnight and European markets are closed for Boxing Day (http://en.wikipedia.org/wiki/Boxing_Day ). Oil is up at $62.80 and Gold is $5 higher at $627. Treasuries are a bit better with the two-year at 4.71% and the ten-year at 4.58%.

Not much occurred in the markets during the week we were absent and we would expect this week to be quiet also. Our plan of raising cash into the New Year hasnít worked since there has been a slight pullback and not the rally we thought might occur. We are going to hold for now and see how the week develops.
*****

Last week we bought Circuit City, the electronicsí retailer when its share price sold off 25% in one day to a yearly low after it announced margin pressure on its sales. Micron Technology announced better than earnings and the shares rallied back to where we initially purchased them and Ford stopped going down in price as several brokerages gave tepid support to the company shares at current price levels. Palm also announced better than expected results but Research in Motion which makes the Blackberry had super results which caused Palm to remain in the back seat for now.
*****

Saddam is to be hanged within thirty days. According to the court, from tomorrow any day could be the day of execution. That is a nice touch.

Joe Biden is going to run for President. He must be the only one who hears the sound of one hand clapping.
*****

Oil closed down $1.36 at $61.05 in NYC. Gold gained $5 to $627. Treasuries were better with the two-year at 4.71% and the ten-year at 4.60%

The DJIA gained 70 points to close at 12414. The S&P 500 rose 7 points to 1415 and the NAZZ was up 12 points to 2398.

Breadth was 2/1 positive and volume was holiday light.

There were 250 new highs and 60 new lows.

With three more trading days till year end the big boys and girls are mostly taking a pass on playing fund games at the casino.
*****

 

25 December 2006 Special Holiday Comment

Merry Christmas and Happy Holidays

From the Lemley / Bezold clan



Bud Lemley, Lisa Lemley Bezold, Katie Lemley, Christine Lemley, and Dave Bezold
(foreground) Tyler Bud Bezold and Abigail Bezold - 2006

 

21 December 2006 Daily Comment

Our mother, Odella Baum, died peacefully with her children around her on the evening of December 19, 2006. In keeping with her wishes there will be no wake or services. Her ashes will be scattered among her relativesí graves in St. Joseph, Kansas on her 94th birthday May 15, 2007.

Memorials in her name may be made to:

Marmion Academy
1000 Butterfield Road
Aurora, Illinois 60504

She is now at peace. Amen

 

18-22 December 2006 Daily Comment

Thoughts

We are in Chicago for the week comforting our mother as she passes to the other side. She is comfortable and in no pain and at home with all of us. This is as she wishes and for that we are thankful. There will be no wake and her ashes will be scattered in Kansas on her 94th birthday in May 2007.
*****

For the above reason there will probably no posts this week unless we make a trade. Our interest is to raise cash into the New Year as share prices allow. We will post trades and also update the Model Portfolio page as actions warrant.
*****

 

15 December 2006 Daily Comment

Thoughts

Happy Hanukkah.

Hanukkah, the festival of lights.

More than 2,000 years ago, the Jewish people led a revolt against oppressors who forbade them to pray, study the Torah, or observe their religious customs. Led by Judah Maccabee and fueled by their faith, their small army triumphed over tyranny. When they reclaimed the desecrated Temple and prepared it to be purified and re-dedicated, the holy oil that should have lasted only one day instead burned for eight days. During Hanukkah, Jews around the world honor this miracle by lighting the menorah, a symbol of hope shining through darkness.
*****

Asia was higher overnight as is Europe at midday following on the heels of yesterdayís big up day in the U.S. Oil is up another 32 pennies to $52.85 in early NYC trading and Gold is down $2 at $629. Treasuries are flat lining ahead of CPYI at 7:30am.
*****

CPI For November was unchanged as was the core rate. Year over year CPI was up 2.0% and the core year over year rate was 2.6%. Treasuries are rallying on the news as are stock futures. Goldilocks lives.
*****

Bank of America upped Intelís price target from $27 to $28. We wonder how much thought went into that change.
*****

November Industrial Production was up 0.2% and Capacity Utilization was 81% down from 82% in October.
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Apple delayed filing its quarterly report because of accounting issues with stock options and Dell has no quarterly report because of accounting issues on profits and sales in past years which also would have affected options. Same old same old with a yawn. And the bonuses for Wall Street are being announced. Where are the customersí yachts?
*****

We sold J Crew for a one day $2 gain.
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We are selling Fifth Third today for a $1 plus gain. We want to continue raising cash into year end and FITB can only be sold when others are buying. FITB is 40 pennies under its yearly high.
*****

Oil ended up 92 pennies at $63.43 in NYC. Gold dropped $12 to $619. Treasuries gave up most of their early gains that were the result of the tame CPI to end slightly better with the two-year at 4.72% and the ten-year at 4.59%.

European bourses closed to the good.
*****

The DJIA ended the day up 28points at 1244. The S&P 500 gained 2 points to 1427 and the NAZZ rose 4 points to 2457.

Breadth was 2/1 positive in the morning but was negative at the close as traders took profits. Volume was Quadruple Witching heavy.

There were 475 new highs and 50 new lows.

And tomorrow and the next day the casino is closed for the big boys and girls to rest.
*****

 

14 December 2006 Daily Comment

Thoughts

As the trading day begins we see that most Asian markets were big fractions higher overnight and that European bourses except for Stockholm are small fractions higher at midday.

Gold is flat in early trading in NYC at $632 while Oil is higher by 88 pennies at $62.25. Treasuries are firm to a few ticks better after yesterdays drubbing.
*****

Mother Merrill has decided to raise Ford to neutral from sell. Thank you Mother. Right now weíll take any kind of not negative comment as a positive.
*****

OPEC is going to cut production by 500,000 barrels a day beginning February 1. This cut suggests that they donít want oil below $60.
*****

We get mail:

Hi Bud

After looking at these positions, all I can say is that Mesirow must love you...this is the biggest position I have had in a long time...I am confused and nervous...
What makes Time Warner a sale at $20.86 and a buy at $21.25 only days later?
Now I have to go back to praying.

T

We respond:

If your praying is anything like ours -- stop immediatelyóthe ceiling may fall in.

We usually get this filled up at year end.

We sold TWX at resistance thinking it would come back off but then TWX broke out and you know how the momentum boys and girls like breakouts. We hopped back on in a smaller way for the ride.

We were this filled a few years ago and then got killed the first week in January but we had less quality stocks.

Our hope is for a move into yearend that gives us 4% and then we go back to cash. We know that is cute but then we are cute sometimes. We have the feel right now for what that is worth. We are also taking a lot of pills and cold medicine so that may be giving us the feel but then that is another story.

Life is a journey. You survived the car crash and you'll survive this. Keep the peace and let God rest. He doesn't care about our accounts--really. And we will be raising cash if the markets cooperate.
*****

B

Jobless claims for the latest week were down 20,000 claims to 304,000.
*****

We thought CPI came today but it comes tomorrow morning so it will make expiration even more interesting.

This morning import prices came in at up 0.2% and year over year import prices were up 1.2%. Treasuries flat lined on that news and stock futures improved on the less than expected inflation number and on the jobless claims number i.e. rosy scenario sweet spot the Fed got it right thinking...
*****

This morning as the trading day began for our larger/aggressive accounts we bought Tribune, Williams Sonoma, J Crew, Pier One and JDS Uniphase.
*****

An hour into the trading session Brazil is up 1% and making new highs for the year. Treasuries are lower in price/higher in yield and some gurus are positing that the big boys and girls are selling bonds and buying stocks. 1425 on the S&P is resistance and it is currently at 1422 up 9 points. The Treasury two-year is at 4.73% and the ten-year is at 4.59%.
*****

With a new record on the DJIA and the S&P 500 at 1426 it is time to raise a little cash.

We sold our Gap holdings at $20.07 for $1 to $1.50 per share two week gains. The shares are up on takeover speculation and they did this last week also before backing off. This stock is always an anchovy for us. We sold Sony for a nice $3 per share two week profits.
*****

Oil closed up 114 pennies at $62.51 in NYC. Gold was down $1 at $631.

Treasuries lost ground again today with the two-year at 4.73% and the ten-year at 4.59%.

European bourses closed higher big fractions to over 1% across the continent. Brazil also gained 1%.
*****

The DJIA gained 98 points to end at 12415. The S&P 500 rose 13 points to 1425 and the NAZZ jumped 22 points to 2453.

Breadth was better than 2/1 positive and volume was active.

There were 506 new highs and 56 new lows.

And tomorrow brings Quadruple Witching and also CPI which means a day of fund games for the big boys and girls.
*****

 

13 December 2006 Daily Comment

Thoughts

Asia was again mixed overnight and European bourses are mixed at midday. And oil and gold are flat in the early going in NYC.

Treasuries are lower on Preliminary November Retail Sales which were reported to be up 1.1% which was much greater than expected. The two-year is at 4.66% versus a 4.58% close and the ten-year is 4.55% versus a 4.48% close yesterday.
*****

Investors Intelligence has Bulls still at 59% but Bears have dropped to 21% from 23%. Those numbers remain worrisome but the reward at this time of year justifies the risk. Performance anxiety remains.
*****

AG Edwards downgraded Micron to sell. We are buying more today. MU is priced at $14 and has $4 per share in cash. The analysts are negative because MU has ramped up production to focus on NAND chips at the expense of DRAM chips. And DRAM chips are now in demand while NAND are in oversupply. Of course the analysts all said that MU should ramp up production of NAND chips but that was then. That is the way the chip business goes. The share price is under pressure as folks donít want to own it at year end in their portfolios because it has been such a poor performer.
*****

Global sales of microchips rose 11.3 percent to $261.4 billion in 2006, driven by demand for DRAM memory chips and devices used in mobile phones, researcher Gartner said on Wednesday. Intel kept its leading position in the market with sales of $31.29 Billion, equivalent to a 12 percent market share, but its revenue fell 9.5 percent year-on-year, the research firm said in a report. Samsung Electronics is the world's biggest maker of DRAM and NAND flash memory chips, expanded its market share to 7.9 percent this year, and its chip sales increased 12.4 percent to $20.6 billion.†† "Strong growth in DRAM picked up in 2006 where NAND flash left off the year before," said Jeremey Donovan, research director at Gartner. "Outside of DRAM, wireless semiconductor sales once again drove strong performance in the industry." Sales at No. 3 Texas Instruments jumped 17.4 percent to $11.88 billion or 4.5 percent market share, Gartner said. Infineon Technologies, which included gains from Qimonda, ranked fourth in 2006, a jump from its previous 7th place. Its chip sales gained 29 percent to $10.59 billion. Toshiba fell to fifth place in 2006, from the fourth slot a year earlier, with sales growth of 9.9 percent to $9.87 billion.
*****

GE raised their dividend yesterday and the shares now yield 3.1% and we are buying a position in our large/ aggressive accounts and also in some income accounts. GEís share price has gone nowhere for the last few years while earnings quality has improved and we think it may become a focus in the next few months.
*****

We added shares of Intel, Yahoo and Ford to accounts today. The short sellers are back pushing Ford lower today. We are using some caution with Ford purchases since, with the short sellers having the upper hand and more committed than any buyers including us, we have no idea where the bottom is. Fordís money needs have been satisfied for the next year. We donít want to get overly exposed but we want to own enough to make the round trip worth the angst when it hopefully rallies sometime in the future. That surely is Fear and Greed at play.
*****

According to the bond gurus the ten-year auction did not go well and oil has moved higher in the weekly report that there has been inventory drawdown.
*****

Gold finished up $1 at $633 in NYC. Oil was up 38 pennies at $61.40.

European bourses closed mostly better.

Treasuries were lower on the day with the two-year ending at 4.71% and the ten-year at 4.59%.
*****

we have to run out early and with five minute to go in the trading day the DJIA was up 10 points at 12325. The S&P 500 was up 2 at 1414 and the NAZZ had a 2 point gain to 2432.

Breadth was positive on the NYSE and negative on the NAZZ and volume was moderate.

There were 375 new highs and 60 new lows.

CPI is announced tomorrow morning and the big boys and girls will be ready to play their fund games at the big casino on any numbers that deviate from the expected.
*****

 

12 December 2006 Daily Comment

Thoughts

Asian markets were mixed overnight and so are European bourses at midday. Gold and Oil are flat as the trading day begins in the U.S. Treasuries are quiet as the Fed announcement at 1:15pm is awaited. No action by the Fed is expected and the only suspense is the wording of the statement.
*****

Texas Instruments lowered guidance for the quarter and the year but the stock is going to open a bit higher because JP Morgan raised it to overweight saying gross margins are bottoming in the first quarter of 2007. Several other brokerages cut their price targets on the shares.

JP Morgan went to neutral on Micron Tech saying it was concerned with the memory chip maker's growing inventory levels and prospects for a weaker-than-expected flash memory chips environment in the first half of 2007.

In the follow-up to Texas Instruments comments that low end cell phones are the ones that are selling several brokerages also lowered their views on Nokia and Motorola.
*****

The following is the text of the Federal Reserve's decision on interest rates released Tuesday, Dec. 12.

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market. Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace on balance over coming quarters.

Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

(Substantial is a new word added to this statement. Our emphasis.)
*****

Oil ended the day down 20 pennies at $62.04. Gold closed down $3 at $631 in NYC.

Treasuries gained on the Fed inaction with the two-year at 4.62% and the ten-year at 4.49%.

European markets closed mixed.
*****

The DJIA lost 15 points to 12313. The S&P 500 gave up 2 points to 1411 and the NAZZ dropped 12 points to 2430.

Breadth was 2/1 negative for most of the day and ended that way and volume was moderate.

There were 371 new highs and 70 new lows.

And there are three more hedge fund days at the big casino this week.
*****

 

11 December 2006 Daily Comment

Thoughts

Asia was higher overnight and Europe is also fractionally higher at midday. Oil is down a few pennies and Gold is up $1 in NYC in the early going.
*****

The Financial Times reports that Goldman Sachís $10 billion hedge fund Global Alpha (what a great name for a dog) is down 12% on the year after begin up 40% last year.
*****

Last week we sold Time Warner as it approached resistance. This morning on an upgrade from Prudential the shares have broke to a new high and in the momentum game played on the street that breakout is a buy signal. We are repurchasing shares on our large/aggressive accounts but forgoing repurchase for now in the other accounts where we sold. There may be a pullback in the markets this week and if there is we would expect TWX to test the resistance which has now become support.

This morning we also repurchased Micron Tech at $14.42. We have been trading the shares this year with our last sale occurring at $15.20 last month.
*****

Oil ended down 81 pennies at $61.22. Intimations of too much supply and thus a desire to cut by some OPEC members were offset by warm weather throughout the U.S. affecting the trading mentality of traders.

Gold gained $3.20 to $634.

Treasuries were firm to better at the long end and European bourses ended higher on the day.
*****

The DJIA gained 20 points to end at 13237. The S&P 500 rose 3 points to 1412 and the NAZZ jumped 6 points to 2443.

Breadth was positive and volume was moderate.

There were 420 new highs and 60 new lows.

And this week there is a Fed Meeting tomorrow Tuesday and Quadruple Witching at the big casino on Friday.
*****

 

8 December 2006 Daily Comment

There will be no one in the office on Monday. Kathy has a funeral to attend and we are having a routine colonoscopy. There will be a Monday post.

Thoughts

Asia was lower overnight and European bourses are mixed at midday. Oil is up 87 pennies to $63.36 in early NYC trading and Gold is down $1 at 635.

The November Employment report said 132,000 new jobs were created. Moreover October and September were revised to add a net of 42,000 jobs to those reports. The average monthly job creation for the last twelve months has been 149,000 jobs. Average hourly wages rose 0.2% in November and 4.5% on a year over year basis.

In the latest month 172,000 service jobs were created and there were a net loss of 29,000 construction jobs and 15,000 manufacturing jobs.

On that news Treasuries sold off with the two-year rising to a 4.63% yield and the ten-year moving up to 4.51%.
*****

Mother Merrill followed Goldman Sachs lead of yesterday and moved Hershey to neutral. Boo!!!
*****

The University of Michigan preliminary reading on consumer sentiment fell to 90.2 in December from 92.1 in November. It is pretty strange that this survey has preliminary and final readings just like GDP. Itís just another number for the big boys and girls to use to trade. Moreover since Michigan lost to Ohio State we would expect folks in Michigan to be a little down at the beginning of the month.
*****

We sold Time Warner for $1 per share profit. It took a while be we are out of the stock for now.
*****

Oil ended down 46 pennies at $62.03 in NYC. Gold lost $6 as Treasury Secretary Paulson said the U.S. supported a strong dollar causing the dollar to rally at the expense of gold which ended at $631.

And the strong employment report took its toll on Treasuries as they sold off with the two-year ending at 4.67% and the ten-year at 4.55%.

European markets closed slightly mixed.
*****

The DJIA gained 25 points to end at 12302. The S&P 500 rose 2 points to 1410 and the NAZZ gained 8 points to 2435.

Breadth was flat on the NYSE and 5/4 positive on the NAZZ and volume was moderate.

There were 335 new highs and 50 new lows.

And the casino is closed for the week-end.
*****

 

7 December 2006 Daily Comment

Thoughts

Today is Pearl Harbor Day. While we were born a few years after, we do remember and thank our uncles and aunts and all those who served and saved the world.
*****

Asia was mixed overnight and Europe is fractionally higher at midday. As U.S. trading begins Gold is flat and Oil is up a few pennies. Treasuries are firm. Jobless Claims were 328,000 which were down from last week.

The big number is tomorrowís November Employment report.

Ford sold $4.5 billion in convertible debentures with a 4.25% coupon and a conversion rate of $9.20 which equals a potential issuance of about 486 million shares. Too bad Ford didnít keep the 420 billion that was burning a hole in their pockets back in the 1990s.
*****

It must be December as our out of favor stock holdings receive their final downgrades of the year. TLAB was downgraded by JP Morgan today to underweight because the delay in the AT&T/ BellSouth merger will lessen orders fro TLAB equipment. And Hershey was downgraded by Goldman Sachs to neutral.
*****

Rite Aidís same store pharmacy sales were up 2.3%. We donít think that is any great shakes and we own enough low priced stocks so we are selling our final shares at $5.15.
*****

We added Symantec to more accounts this morning at $19.85. It is our guess that the shares will be marked up to $23 or more at year end. We know this type of activity never occurs but we think that there may be mysterious buying pressure on the shares at that time. If not SYMC still has value given the coming Vista induced computer buying spree that should occur next year.
*****

We are also adding shares of TLAB to accounts that sold Rite Aid yesterday and today. While the near term outlook may be muted for the shares we think that longer term either more business or a takeover is in its future. Moreover the stock is a candidate for a post year end bounce.
*****

The European Central bank raised its key interest rate 25 basis points today.
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The FDA panel was unanimous that the benefits of drug coated stents outweigh the risks when used as directed. Boston Scientific popped then plopped as buyers realized that traders expected that outcome.
*****

Normal trading volume in Ford is about 40 million shares a day. Yesterday over 170 million shares traded and today over 300 million shares have traded as the big boys and girls short Ford shares, buy puts, sell calls and do all manner of trading strategies in relation to the offering of $5 billion in debentures. The volume should return to normal with the selling pressure abating by the end of next week. With next week being Quadruple Witching Friday the share price should be pinned to $7.50.
*****

Oil closed up 30 pennies at $62.49. Gold ended up $1 at $637. Treasuries ended flat with the two-year at 4.57% and ten-year at 4.49%.

European bourses closed higher.

The DJIA dropped 35 points to end at 12275. The S&P 500 dropped 6 points to 1406 and the NAZZ lost 17 points to 2428.

Breadth was 3/2 negative and volume was moderate.

There were 450 new highs and 50 new lows.

And there is one more day for the girls and boys to play their fund games at the big casino.
*****

 

6 December 2006 Daily Comment

Thoughts

Asian exchanges were fractionally higher overnight and European bourses are mixed at midday. Gold is down $7 in the early going in NYC and Oil is softer at $62.22 down 22 pennies. Treasuries are weaker.

UBS raised Cott to a buy and since we have only owned it for 12 hours we are selling for a 7% gain.

Investors Intelligence has 59% Bulls up from 57% last week and 24% Bears. The correction camp is down to 16%. If it were any other time of year we would be raising cash with those numbers but we are comfortable though year end to hold and increase the stocks we own.
*****

Ford is offering $4.5 billion in convertible debentures tonight. That is the reason the common shares have been selling off. The big boys and girls who buy the convertible debentures have complicated formulas to limit their risk (and also their appreciation) that involves selling shares of Ford common stock short. The number of shares shorted is less than, equal to, or greater than the number of shares they would receive if they converted the debentures. That way if Ford goes broke they make money on the shorted shares as protection against any losses they would suffer owning the debentures.

Now one may ask why make an investment that you think may result in bankruptcy. But that is not the question. The correct question is, who thought of this strategy? And for that we have all our business school to thank. These schools have turned out thousands of bright young boys and girls who love computers and computer programs and who love to think up complicated strategies for speculating. That phenomenon creates thousands of big paying jobs that never existed and the bright boys and girls play zero sum games of financial poker (for every winner there is an equal loser) with each other to see who will wind up the richest when the casino closes.
*****

We sold our SGP holdings for a $1.25 gain. We added more Ford and Qwest to our larger accounts and VECO and SYMC to some accounts. We bought YHOO in our larger/aggressive accounts.
*****

Rite Aid is up 20 pennies and we are selling shares in our larger accounts for a scalping trade. We donít know why it is up and hope to repurchase lower. Our other accounts have a smaller number of shares and we are holding for more $$$.
*****

Treasuries lost ground today with the two-year ending at 4.57% and the ten-year at 4.48%.

Oil was down 24 pennies at $62.19 and Gold lost $12 to $635.

European bourses were mixed at their close.
*****

The DJIA dropped 20 points to close at 12311. The S&P 500 was off 2 points at 1413 and the NAZZ ended down 7 points at 2445.

Breadth was 5/4 negative and volume was moderate.

There were 490 new highs and 50 new lows.

And there are two more casino days left this week.
*****

 

5 December 2006 Daily Comment

Thoughts

Overseas markets were and are mixed as the day begins and Gold is down $1 to $649 with Oil at $63.08 up 64 pennies. Treasuries are firm.

Yesterdayís market action was pleasing to the Bulls and difficult for the Bears who late last week sensed they might have gained the upper hand. But one day does not a market make, and follow though today will give a better idea if the trend is again to the upside.

UBS raised Starbucks to a buy.

3rd Quarter Productivity was up 0.2% while Unit Labor Costs in the Quarter we up 2.3%.

Treasuries liked those numbers.
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It looks like the SEC is going to eliminate the shorting on downticks rule. From todayís WSJ:

The second proposal would scrap SEC and market rules in place since the 1930s that allow short sales only when a stock price is rising. An SEC experiment that temporarily lifted such restrictions for some stocks, begun in 2005, found the limits aren't needed to prevent market manipulation, SEC officials said.

The SEC will seek public comment on both proposals. Final adoption requires a second vote by the five-member commission, which would likely happen next year.

Other changes to crack down on short selling are in the works. Erik Sirri, the SEC's market-regulation-division director, said the SEC staff hopes to offer recommendations in January to amend a broad package of rules on short selling, specifically by eliminating exceptions for market makers and so-called grandfathered securities.

The exceptions have been controversial, and some critics say they undercut efforts to prevent abuses like "naked" short sales, where sellers don't borrow the shares they sell.

The reality is that there hasnít been a panic sells off since the change in the rule experiment was instituted last year. This rule has worked for 80 years and markets are less liquid now than ever because of the huge buying and selling power of the hedge funds. We will be saying we told you so sometime within the next few years.
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Some technicians are excluding bond funds and exchange traded funds from the new high list for the NYSE. We would rather use the raw numbers because in every market there are issues that maybe shouldnít be counted but have been. We are thinking of all the preferred stocks that used to trade on the NYSE as an example. We have always used the raw number and will continue to do so. Of course we are short term bullish so the raw numbers help our case. Some of the folks who want to winnow the number are short term bearish and that is why they want to use the numbers excluding certain items.
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The November ISM Services Index came in at 58.9 which remains expansionary and Treasuries are a bit weaker on the news.
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The drug-coated heart stents on the U.S. market are associated with a small but significant risk of blood clots months after they are implanted, U.S. Food and Drug Administration staff said in documents released on Tuesday. FDA reviewers said there was uncertainty about whether the devices, sold by Boston Scientific and Johnson & Johnson, were linked to a long-term increase in deaths or heart attacks. The analysis was released ahead of a two-day advisory panel meeting that starts Thursday on the safety of the devices.

The markets are taking that press release as good news not bad news as BSX is up 50 pennies per share this morning.
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Walgreen jumped $2 in the last day on the good same store sales numbers. We were betting those numbers would be good and so we are going to sell the news and take our $2.50 per share three day profit.
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Reuters reported that the richest 2% of folks in the world control 50% of the wealth. And the poorest 50% in the world control 1% of its wealth.
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We bought a beginning potion is Cott Beverages in our larger/aggressive accounts. We traded these shares a few years ago and subsequently they ran up to a ridiculous price but have come back down to trading range again. Cott engages in the production, packaging, and distribution of retailer branded bottled and canned soft drinks in North America, the United Kingdom, Europe, Mexico, and Asia. The companyís product line comprises flavored beverages, juice-based products, bottled water, energy drinks, ready-to-drink flavored teas, and iced teas. Its customers include national and regional grocery, mass-merchandise, drugstores, and wholesale and convenience store chains.

The share price is down from a high of $18 this year and $28 two years ago. We are buying for a year end trade.
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Oil closed down 1 penny at $62.44. Gold also was lower in NYC down $3 at $647. Treasuries were flat.

European bourses were mostly higher with Germany and France both up over 1%. Brazil is tacking on better than 1% again today.
*****

The DJIA ended up 45points at 12332. The S&P 500 gained 6 points to 1414 and the NAZZ rose 4 points to 2452.

Breadth was positive and volume was moderate.

There were 700 new highs and 50 new lows.

And with three more fund games days left at the casino this week the big boys and girls have their hands full trying to keep the rally going.
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4 December 2006 Daily Comment

Thoughts

Asia and European markets were slightly higher overnight and Oil is down 80 pennies to $62.81 as the day begins in NYC. Gold is unchanged at $651 and Treasuries are a tad weaker after Fridayís big run.
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Pfizer is calling off a drug test that was big time for it with the results that the share price is down 15% this morning. And Bank of New York is buying Mellon bank on the takeover front.
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One thought we had over the weekend is that merger activity is going to become feverish in the next three months as investment bankers raise the possibility of Dem takeover of the executive branch and thus the Justice Department which rules on mergers. Companies that want to merge are going to have an extra incentive to get it going so that the usual one year and more waiting periods occur during the present very friendly atmosphere.
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We are going to pick up some Pfizer while itis on sale today. PFE has a 4% yield and given the lowering of interest rates we are comfortable placing it in portfolios. What can go wrong has gone wrong at Pfizer and hopefully this may be the last bit of bad news for a while.
*****

The drop in Pfizer this morning is worth 30 points on the DJIA.
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Walgreen announced same store sales were up over 9% for November with Pharmacy sales up 11.4%. both numbers were better than expected. With the Medicare insurance plan it is logical that sales would be higher and it will take another year for the Wal-Mart $4 prescription plan to show up in WAGís numbers, if they will.
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Lehman and a bunch of other brokers downgraded Pfizer. BankAmerica maintained its buy rating.
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Stock markets that are storing and higher all day going into the final hour tend to close that way. The DJIA is up 100 points at 1:55pm.
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We have added GPS, BSX and ALU to accounts today.
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Oil ended at $62.44 down 99 pennies. Gold was unched at $651. Treasuries firmed late in the day. with the two-year ending at 4.52% and the ten-year at 4.43%.
*****

European bourses were higher at their close and Brazil was up 2.9% on the day into new high territory for 2006.
*****

On Friday the DJIA rallied in the last hour to cut a 125 points loss to a 30 points loss. Today the markets pulled back in the last hour to shave a 125 points gain to a 90 points gain.

The DJIA ended up 90 points at 12280. The S&P 500 was up 12 points at 1408. the NAZZ gained 35 points to 2447.

Breadth was better than 2/1 better and volume was active.

New highs expanded to 654 and there and 40 new lows.

And there are four more fund days for the big boys and girls to play in the casino.
*****

For a little fun we present the following:

In the beginning, God created the Heavens and the Earth and populated the Earth with broccoli, cauliflower and spinach, green and yellow and red vegetables of all kinds, so Man and Woman would live long and healthy lives. Then using God's great gifts, Satan created Ben and Jerry's Ice Cream and Krispy Creme Donuts. And Satan said, "You want chocolate with that?" And Man said, "Yes!" and Woman said, "and as long as you're at it, add some sprinkles." And they gained 10 pound s. And Satan smiled.

And God created the healthful yogurt that Woman might keep the figure that Man found so fair. And Satan brought forth white flour from the wheat, and sugar from the cane and combined them. And Woman went from size 6 to size 14. So God said, "Try my fresh green salad." And Satan presented Thousand-Island Dressing, buttery croutons and garlic toast on the side. And Man and Woman unfastened their belts following the repast.

God then said, "I have sent you heart healthy vegetables and olive oil in which to cook them." And Satan brought forth deep fried fish and chicken-fried steak so big it needed its own platter. And Man gained more weight and his cholesterol went through the roof. God then created a light, fluffy white cake, named it "Angel Food Cake," and said, "It is good." Satan then created chocolate cake and named it "Devil's Food."

God then brought forth running shoes so that His children might lose those extra pounds. And Satan gave cable TV with a remote control so Man would not have to toil changing the channels. And Man and Woman laughed and cried before the flickering blue light and gained pounds.

Then God brought forth the potato, naturally low in fat and brimming with nutrition. And Satan peeled off the healthful skin and sliced the starchy center into chips and deep-fried them. And Man gained 10 pounds.

God then gave lean beef so that Man might consume fewer calories and still satisfy his appetite. And Satan created McDonald's and its 99-cent double cheeseburger. Then said, "You want fries with that?" And Man replied, "Yes! And super size them!" And Satan said, "It is good." And Man went into cardiac arrest. God sighed and created quadruple bypass surgery.

Then Satan created HMOs.

*****

 

1 December 2006 Daily Comment

Thoughts

Kerkorian has sold his entire GM stake so it is back to abnormal for GM. And there are rumors that Texas Pacific and KKR are looking at Home Depot which would be a $100 billion leveraged buyout. Supposedly the buyout boys and girls are interested in retail. As the saying goes, make no mall plans. And as we have said before, leveraged buyouts of retailers with thin margins are risky because they are based on rosy assumptions. But with cheap money (low interest rates) supplied by the Fed and 20% performance fees to the deal makers the buyout binge will continue to its ultimate conclusion. See the late 1960s to early 1970s and late 1980s for the eventual results. Remember: Greed is good until it is foolish.
*****

Overnight Asia was mixed with Hong Kong down 1.4% and Japan up fractionally. Europe is higher across the continent at midday and US futures suggest a lower opening. Treasuries are slightly lower. Gold is down $2 to $650 and Oils is off 70 pennies to $62.40.
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National City said on Friday that it has completed its acquisition of Harbor Florida Bancshares Inc., the holding company for Harbor Federal Savings Bank.In March, Harbor Federal's 42-branch network will begin operating under the National City name.††† National City expects to complete its pending acquisition of West Palm Beach, Florida-based Fidelity Bankshares Inc., in January 2007.
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From www.minyanville.com we learn that this year the S&P 500 has finished higher in 10 out of the first 11 months. That has occurred only three times (1936, 1958, and 1996) before in the history of the S&P 500. And on two of the three times the S&P closed lower in December than it began the month. So only one time in its history has the S&P 500 registered a gain in December after being higher in 11 out of 12 months and that year was 1958. That year was our first year of high school.
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ISM Manufacturing Index was 49 which indicates a contracting economy. That has the Treasury two-year rallying to 4.55% and stocks selling off.
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The Alcatel/Lucent merger has been completed and we are buying shares in accounts that own Walgreen. With revenues approaching $25 billion from the combined company we think they can give Cisco a run. The new Alcatel- Lucent is priced at about one times sales or $26 billion. Cisco with $30 billion sales is priced at $150 billion net of cash. We bought shares of ALU in many accounts.

We also added shares of The Gap and Boston Scientific to these same accounts.
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Hershey is off $2.50 to $50.55 today on a Prudential downgrade and we are buying shares in accounts.
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We are gong to take our $2 profit in Williams Sonoma. It is up the $2 in the last two days on thin volume and if the correction in retail continues we are guessing we can get it back at $30. If not, it is an anchovy and weíll enjoy the gain.
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We are selling our Treasuries to profit from the move over the last two days.
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Gold ended down $2.30 at $650.60 in NYC.Oil was up 30 pennies at $63.43. Treasuries were on fire with the two-year closing at 4.52% and the ten-year at 4.43%.
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European markets were off close to 1% or more across the continent.
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After being down 125 points the DJIA rallied in the last hour and at the bell the DJIA was down 30 points at 12191. The S&P 500 lost 5 points to 1396 and the NAZZ dropped 19 points to 2430.

Breadth improved from over 3/1 negative to 2/1 negative at the close and volume was active.

There were 390 new highs and 60 new lows.

And the first day of December was a downer. If every trading day is this bad the DJIA will be at 10000 by year end. We donít think so. Short term to next month we think the risk is acceptable in stocks and beyond that we have no idea.
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