New Address:
Lemley Yarling Management Co
309 W Johnson Street Apt 544
Madison, WI 53703
Toll free phone numbers:
Bud: 312-925-5248
Kathy: 630-323-8422
|
31 December 2007 Model Portfolio
  |   | Model | S&P500 |
12/31/2007 | $582,294 | -3.7% | 3.5% |
12/31/07 | Purchase | 250 | National City Corp |
12/31/07 | Purchase | 500 | General Motors Corp |
12/31/07 | Purchase | 500 | SLM Corp |
12/31/07 | Sale | -100 | Walgreen Company |
12/31/07 | Sale | -500 | Dreamworks Animation SKG |
12/31/07 | Sale | -250 | Whole Foods Market Inc |
28 December 2007 Model Portfolio
  |   | Model | S&P500 |
12/28/2007 | $584,357 | -3.3% | 4.2% |
12/28/07 | Sale | -150 | Amgen Inc |
12/28/07 | Purchase | 500 | Alcatel Lucent |
12/28/07 | Sale | -250 | General Electric Company |
12/28/07 | Purchase | 500 | Micron Technology Inc |
12/28/07 | Purchase | 500 | Pier 1 Imports Inc |
12/28/07 | Purchase | 1000 | Rite Aid Corp |
12/28/07 | Purchase | 600 | Rite Aid Corp |
12/28/07 | Purchase | 500 | Advanced Micro Devices |
27 December 2007 Model Portfolio
  |   | Model | S&P500 |
12/27/2007 | $588,748 | -2.6% | 4.1% |
12/27/07 | Sale | -500 | Schering Plough Corp |
12/27/07 | Purchase | 500 | Circuit City Stores Group |
12/27/07 | Purchase | 500 | American Eagle Outfitters |
26 December 2007 Model Portfolio
  |   | Model | S&P500 |
12/26/2007 | $601,861 | -0.5% | 5.5% |
24 December 2007 Model Portfolio
  |   | Model | S&P500 |
12/24/2007 | $603,121 | -0.2% | 5.5% |
12/24/07 | Purchase | 250 | Chico's Fas Inc |
12/24/07 | Purchase | 250 | Alcatel Lucent |
12/24/07 | Purchase | 100 | Talbots Inc |
12/24/07 | Sale | -100 | Walgreen Company |
12/24/07 | Sale | -250 | Advanced Micro Devices Inc |
Season's Greetings
21 December 2007 Daily Comments
Thoughts
This will be our final post for the year. Our next post
will be on Wednesday January 2, 2008. We will continue to post the value of the Model Portfolio on a dally
basis in these comments plus any buys and sells but will not change the report on
the Model Portfolio page until January 1. We don’t expect to be making many changes
since we are fully invested and well satisfied with the composition of the
accounts.
*****
Asian markets were strong
overnight and European bourses are also higher at midday.
Treasuries are weaker; Stocks are stronger at the opening and Oil is flat with
Gold up $1.
*****
Mother Merrill is in the
confessional today with a $5 billion cash infusion and anther $8 billion in write-downs.
Ev Dirksen is smiling.
*****
The WSJ reports that Chrysler is in financial difficulty
just months after Cerberus Capital Management took the company private. Given
the other deals that Cerberus was making and attempting to make which made no
sense to us we are not surprised.
*****
Walgreen reported good numbers and was
positive going forward and the shares are up $2 in the early going. Micron numbers wee as expected and the
shares are off a few pennies. Circuit City’s report
was a disaster and the shares are off $1.25. We didn’t’ expect anything and our
positions in accounts are small. This is a going bust or four bagger stock. We
are adding shares at under $5 to accounts. We are also adding Coldwater and Micron.
*****
Gold gained $12 to close at $815.
Oil was up $2.28 at $93.34. Treasuries were weaker wit the two-year at 3.17%
and the ten-year at 4.16%.
European bourses closed 1% to 2% higher
as did Mexico
and Brazil.
*****
The DJIA and the major measures opened
up 1% and continued to climb throughout the day. At the bell the DJIA was up 210
points at 13450. The S&P 500 rose 25 points to close at 1485 a few points below
the important 1490 resistance /support level of the entire autumn period. The
NAZZ jumped 50 points to 2690.
Breadth was 3/1 positive on the
NYSE and 2/1 on the NAZZ and volume was moderate especially on the NAZZ for a Quadruple
Witching Day.
Three were 200 new lows and 100
new highs on the NYSE.
The bulls won the day and the week.
And as the Cubs always say, wait till next year.
Merry Christmas and Happy Holidays.
*****
20 December 2007 Daily Comments
Thoughts
Today Pier One
announced better than earnings and the stock is up $1.30 on the news. We sold
yesterday ahead of earnings because with current market conditions we thought
it better to be on the sidelines and then decide whether we want to own after earnings.
While some accounts had only 200 to 1000 shares there were more than a few that
had 10,000 plus so the ramifications of a $1 drop would have been felt.
Fortunately for the company but unfortunately for us PIR reported
a less than loss, better margins,
lower costs, and same store sales down only 1.6%. That is why we purchased PIR
and we should have had the courage of our convictions but recent market action
and the lack of any interim guidance has made us a tad gun-shy.
It is obvious that
the new CEO Alex Smith is on his way to turning PIR around. And with a short
interest of 25 million shares (shares sold but not owned) which is over 25% of
the shares available for trading the share price has popped this morning. Since
we want to own the shares for a substantial move we are repurchasing the shares
because the report signals a turnaround and this is a stock that is even now
selling at 30% of sales. When times were good the shares sold at two times sales
or $30.
But in the winsome
win some/lose some department, sometimes
selling stock ahead of earnings works. We sold Rite Aid
ahead of earnings at $4.14 a few days ago and we are repurchasing those shares
at $2.92 (they are down $1.20) this
morning since RAD reported a larger than
loss. We don’t have as lofty ambitions for RAD as we do Pier One but we think there
is at least a potential double in the share price of RAD from the current
level.
The action in RAD suggests what might have occurred had
Pier One not begun its turnaround until next quarter.
*****
Bear Stearns was the broker who went to confession this morning and
announced its first ever quarterly loss. The investment bank said it lost about
$854 million, or $6.90 a share, for the fourth quarter, compared to a profit of
$563 million, or $4 a share, for the same time last year. Bear Stearns also
said it had written down $1.9 billion of its holdings in mortgages and
mortgage-based securities, up from the $1.2 billion it had anticipated last
month. As a result of its disastrous results, Bear Stearns said its management
will not receive bonuses this year.
*****
Asian markets were mixed
overnight and European markets are mildly higher at midday. Gold is down $4 and Oil is up a few pennies at
$91.62. Treasuries are flat as the trading day begins.
*****
We added National City to accounts at $16.11. We also
bought more Fifth Third, more Home Depot at $26, and Cabelas in our
large/aggressive accounts. Cabelas is down from $30 to $14. Earnings this last quarter
disappointed but the shares are close to book value. Home Depot is at 15 times earnings
which is usually a good buy point.
Fifth Third raised its dividend
yesterday and said it had no sub prime exposure and the street has ignored the
news. With the shares at 6.7% yield and down from $44 this year and $60 three years
ago we think it is a good value.
We expect and it would be prudent
for National City to halve its
dividend when it announces the dividend on January 2.
*****
The prices of banks and brokers
and home builders are reflecting the current miasma in the housing markets. While
a few of the larger banks are only down 20% in value this year there are many
that are down 50%. Retailers are down 60% and more.
With this price action it doesn’t
make sense for taking heads to say that stock prices don’t reflect the problems
in the economy. They do.
There are some solar stocks and high
flying tech stocks that have maintained their momentum, the solar stocks
because they have no earnings and are trading on psychology, and the tech
stocks like Google and Apple because they do have earnings and
their prices while expensive can be justified by earnings growth. The markets
are doing a good job of pricing risk but in the case of the stocks we have been
buying the markets are too negative more from a lack of interest and short
sellers pushing their luck.
*****
European bourse indexes ended
mostly higher. Brazil
and Mexico were
also up. Treasuries were firm with the two-year at 3.08% and the ten-year at
4.04%. Gold lost $3 to $802 and Oil lost 16 pennies to $91.08.
*****
The DJIA gained 49 points to end
at 13245. The S&P 500 was up 7 points at 1460. The NAZZ jumped 40 points to
2640.
Breadth was flat and volume was
moderate.
There were 315 new lows and 40
new highs on the NYSE.
The bulls skimmed a win.
*****
19 December 2007 Daily Comments
Thoughts
Morgan Stanley was in the
confessional this morning with $9 billion in write-offs and John Mack the CEO is
forgoing his multimillion bonuses to make atonement for the loss. What brave
and humble men the titans of Wall Street have become. Of course, as with the
other penitent CEOs, Mack has $100 million of past bonuses and options to stem
the pain. Not so for the poor folks who bought the garbage Morgan, Mother
Merrill, Citi, JP Morgan, Goldman Sachs, Lehman, and Bear Stearns were selling.
*****
Stocks are mixed at the opening
as yesterday’s failure to fall has some traders rubbing their brows. Investors
Intelligence had 56% bulls and 22% bears last week and so from a contrarian’s
view there is more downside ahead because the bullish camp is too large.
*****
Asian markets were 1% to 2%
higher overnight with European bourse mixed small at midday. Oil ahs a $90 handle. Gold is up $3. Treasuries
have a bid.
*****
Palm announced disappointing sales and a loss last night. More
disappointing is that they are having trouble providing their new $100 Centro
phones to the marketplace because of production issues. The same goes for their
high end Treo. Of course that is the reason it is selling at $5. Hopefully PALM
will solve the problems.
*****
Fifth Third Bank is taking additional write-offs but it raised its dividend
10% and now is yielding 6.7%. The dividend raise is their way of saying that
events are not as bad as at their bank as at other banks. Truth or chutzpah is
the question?
Fitch rating services cut Fifth Third Bank to a B rating from an
A/B rating (a B rating denotes a strong bank and that there are no major
concerns regarding the firm). Aside from the charge in the fourth quarter,
Fitch noted that Fifth Third has remained relatively insulated from the recent
credit markets turmoil, as it reported just $3 million in mark-to-market losses
in the third quarter, and the bank
reports no wholesale sub prime loan exposure. The ratings agency also said
Fifth Third's planned purchases of North Carolina-based First Charter and First
Horizon's Atlanta branches provide
the bank with the opportunity to pursue higher growth opportunities in less
stressed geographies.
*****
We added National City to accounts at $16.40 which is
down form the $38 price at which they repurchased stock last spring. And we also bought some Fifth Third in
accounts on the strength that their dividend raise and announced write-offs
which should lead to some price stability after year end. And, we increased our Williams Sonoma holdings and in our large/aggressive
accounts added Schering Plough for a
trade. WSM is on a its 12 month low at 14 times forward earnings and SGP is
off because there is some question about the efficacy of their dual drug combo Vytorin which is SGP’s
Zetia with Merck’s Zocor. The shares are
at $26 down from $34 a month ago. We have been trading this soap opera stock
for the last five years. We also added
shares of BSX and Sprint to our large/aggressive accounts.
Finally with earnings tomorrow we sold
Pier One at $4 for a scratch but up
20% in the last two days. We can use the funds for other retail stocks if PIR
doesn’t sell off on the news. Circuit City announces this week and these funds
would be available to add there or to buy more Coldwater Creek.
*****
Late in the day we
sold Cott for a loss. We are going to use the funds in another issue that
is more liquid.
*****
European bourses closed lower
with Treasuries higher and the two-year at 3.10% and the ten-year at 4.02%.
Gold was down $6 at $800 and Oil jumped $1.410 to $91.49.97. Mexico
was lower while Brazil
was higher when trading ended for the day.
*****
The DJIA was down 30 points at
the close to 13202. The S&P lost 2 points to 1452 and the NAZZ rose 5
points to 2602.
Breadth was flat and volume was
light.
There were 275 new lows and 35
new highs on the NYSE.
The bears won the day at the bell.
*****
18 December 2007 Daily Comments
Thoughts
Several clients have questioned why
we have not remained in cash during this market turmoil. Our response is that
we were in cash for most of the year. Our overall purpose is to invest for
clients to earn a reasonable return for the risks assumed. We have always used
fall corrections as a time to invest in out of favor stocks and at this time we
think the bifurcated markets are providing an opportunity to buy select stocks –
not the markets-at good prices.
Our accounts have been volatile
recently. Since August accounts have been up 2% (AUG 31), up 8% (OCT 31), flat
(NOV 10), up 6% (Dec 10) and now down 2%. We think the stocks we own will all
provide a 50% or more return over the next three years. We won’t get that from
cash. The unknown is always the timing of the return. Usually year end is a
good time to establish positions. That is what we are doing. Yesterday’s
selling and buying was part of the process of setting the accounts up for the New
Year.
We view the Micron and AMD, Alcatel/Lucent and Tellabs as one industry
and are buying them as a package. The same goes for retailers Talbot’s and Circuit
City and Chico’s and Pier One and Coldwater
Creek. We want to own select depressed stocks in tech and retail. But the available
index products don't let you buy only the depressed ones. And we buy smaller
amounts of many because we don’t know which ones will work and which won’t over
any given period of time.
*****
Asian markets were quiet
overnight and mixed to slightly lower. Hong Kong is down
11% in the last seven trading sessions. Gold is up $3 and Oil is at $92 in the
early going. Treasuries are weaker and stocks are going to open mildly higher
in NYC.
*****
Sprint has chosen Dan Hesse to be its CEO. His entire experience is
in telephones with exposure to wireless at AT&T for many years.
*****
The Fed has promulgated new mortgage
lending rules to prevent future problems. Good for them and maybe now they can
address the present problems.
*****
We added various stocks to accounts today to round out
our positions.
*****
Housing starts were down 3.7% in
November which is the slowest pace in years.
*****
Click through to this important
story on Bloomberg that discusses how Florida was sold $800 million in debt by
Lehman Bros in July and August of 2007 that was worthless four months later.
Jeb Bush figures in the story.
http://www.bloomberg.com
*****
Goldman Sachs announced good earnings this morning and a large
buyback and initially the shares were up $5. But now they are down $5 and
leading the major measures back to even. If Goldman can’t get the bears off
their backs then there seems to be more downside in store.
Talking heads are on CNBC saying Goldman
has been losing big money in the last five weeks since tier year ended. Those
comments are pushing markets into negative territory.
*****
Oil ended down 14 pennies at
$90.47, Gold was up $7 to $806. Treasuries were flat with the two-year at 3.19%
and the ten-year at 4.14%. European stocks closed mixed and Brazil
was up over 2% while Mexico
gained a bit.
*****
The DJIA gained 65 points to end
at 13230. The S&P 500 was up 9 points at 1455 and the NAZZ jumped 20 points
to 2695.
Breadth was 3/2 positive on the
NYSE but volume was light.
There were 355 new lows and 25
new highs on the NYSE.
The bulls didn’t so much win as they didn’t lose today.
*****
17 December 2007 Daily Comments
Thoughts
While reviewing our accounts the weekend and bemoaning
that they are now under water for the year after being 7% and higher October 31
we shed a few tears and then remembered that this action is pretty much what
occurred to our accounts in 1990. And since we have been saying all year that
the market action and news cycle reminds us of that year we realized that we shouldn’t
be surprised. So we aren’t surprised but we are chagrinned.
We certainly don’t like begin down for the year and we
are going to take some action to mitigate some further erosion in the accounts
in case we are incorrect in our assessment of the present economic and market
situation. In reviewing accounts we realized that we were too heavy in some
issues because we bought more than we should have on the way down. We sometimes forget that Mr. Market is a lot
larger than we are and that our puny buying power is not going to stem the tide
of falling knives in a late year end sell off in individual stocks.
And so this morning we halved our holdings in Walgreen, AMD, Micron, Alcatel Lucent, and reduced positions in Dell, Ericsson, Starbucks, GM, and Yahoo. We also eliminated
our holdings in Marvel Technology, American Eagle, the two SPDR financials, and Intel. These actions have re-centered
the accounts so that they have relatively equal exposure in all issues held
which is more realistic diversification given the fact that the markets are
doing their darnedest to interrupt our sleep.
We would hope that these actions induce the Santa Claus
rally. At the least they have the accounts in good position to participate over
the longer term in the recovery of many of the issues that we hold.
Investing is more psychology than science and we firmly
believe that the stocks we own (and the portions we sold) will one day sell
substantially higher, but prudence and the nature of
this market with all its unknowns plus the volatility of hedge funds and
shorting on down ticks suggest that we have a bit more cash on hand than we did
at the end of last week.
*****
DreamWorks, the animation folks, stock is
down at $22.90. We are adding shares to accounts at that level. The
company has $4 per share in cash and a building library and good movies. The
high this year was $35. Eventually the trio of Spielberg, Geffen and Katzenberg
will sell out as they did with their moviemaking operation. Periodically they
or Allen want to sell shares as they did this year and magically a few brokers recommends
a buy on DWA and the stock rises to the low $30s where the sales take place.
*****
Asian markets were down 2% to 3% overnight
and European markets are down over 1%. These moves are a catch up to Friday’s U.S.
market action. Treasuries have a bid and Gold and Oil are both lower in the
early going.
*****
National City
released its mid-quarter update and reported it is reserving another $700
million for loan losses. This is a much more realistic posture than the $300
million they said in September and the market is rewarding their honesty with
the shares up 50 cents. That is the first rally in the shares in a week.
*****
Symantec was downgraded to neutral this morning.
*****
We do think the elimination of
the shorting on downtick rule has made the downs
more down this year. That increased downside pressure will of course work
the other way when the markets rally and we are seeing shorting in thin traders
which causes greater downside but then thin traders will also pop higher,
faster, and farther.
*****
Gold finished flat at $800 and
Oil lost 57 pennies to $90.70. Treasuries were up with the two-year at 3.22%
and the ten-year at 4.15%.
*****
European bourses closed 1% to over
2% lower and Mexico
and Brazil were
both down over 3%.
*****
Stocks again closed lower with no
bounce. For most of they day they looked like they wanted to rally but couldn’t
find any leadership. The momentum stocks finally broke today and that is a good
sign. A few more days of selling in them and there may be a set up for a
recovering final few days of 2007. New lows expanded
to 720 combined on the NYSE and NAZZ.
At some point we would guess that
the short sellers will step back but hedge funds do like to push their bets. If
you are in pain don’t look at the value of your account. Pretend it is 1990
when computers didn’t give daily values. We are holding on because what we own
will do well, eventually, if not sooner.
The DJIA lost 172 points to close
at 13167. The S&P 500 dropped 22 points to 1445 and the NAZZ dropped 61
points to 2575.
Breadth was 3/1 negative on the
NYSE and volume was moderate.
There were 375 new lows and 30
new highs on the NYSE.
The bears are in charge until further notice.
*****
14 December 2007 Daily Comments
Thoughts
Stocks opened down the 1% usual
number this morning and now are trying to fight their way back. Several brokerages
discovered that Citi is having problems and lowered their advice from buy to
neutral or sell. Given that the share price is down from $55 to $30 this year
we would suggest that these folks may be a little late to the bash Citi game.
Citi announced overnight that it
was taking $48 billion in assets from 7 SIVs onto its own books. This is either
good or bad depending on the talking head you wish to listen to. We have decided
to limit our exposure to talking heads and also blogging gurus and go with our
40 years of experience. There is too much noise and opinion floating around impairing
the ability to make reasoned judgments.
For several years we have been
saying the housing emperor has no clothes. During that time period we were leery
of markets and being too invested. Now that everyone recognizes that the emperor
has no clothes we are much more comfortable invested.
Back in the olden days twenty years ago when computers and dally market values
were not readily available it was easier to take positions in stocks and hold
them for eventual recovery.
Our advice to clients is that if
they are worried about the volatility in their accounts don’t look. Our surmise
is that in the longer run the risk we are assuming will be justified by the
reward.
*****
The Consumer Price Index was up 0.8% in November. Year over year the
CPI was up 4.3% and the Core CPI year over year was up 2.3%. Suddenly, traders
are looking at the CPI up 4.3% and getting worried. That is because this is a
market that needs to worry. We have been worried for years and are still
worried.
*****
Asian markets were lower
overnight except China
which was up over 1%. European markets are mixed at midday and Oil has a $92 handle while Gold is down $8 in
the early going. Treasuries are weaker as the dollar is showing strength for
the first time in a while because inflation in the November CPI and PPI suggest
that the Fed may not want to cut interest rates for a while.
*****
We did some switching in our large accounts. We sold Lowe’s, and Gap and bought Talbot’s,
National City, AMD, Micron, Alcatel Lucent, and Chico’s. The
percentage gain potential is greater in the purchased stocks.
We also re-established a position in the Financial SPDR.
*****
European bourse indexes closed
mildly higher on Friday. Gold was down $5 at $799 and Oil dropped $1 to $91.29.
Treasuries gave ground with the two-year at 3.30% and the ten-year at 4.24%.
*****
Chico’s CEO Scott Edmonds bought 100,000
shares of CHs last week. That was the largest insider purchase in five years,
according to Thomson Financial. Edmonds
bought 100,000 shares last Friday at an average per share price of $10.24. He
was joined by Chief Information Officer Gary King, who paid $103,398 for 10,000
shares, and director David Walker, who bought 1,000 shares. It’s nice to have
company.
*****
The DJIA tanked again on Friday closing
down 180 points at 13340 with no final hour rescue as occurred on Wednesday and
Thursday. The S&P 500 dropped 20 points to 1468 and the NAZZ lost 32 to 2636.
Breadth was 3/1 negative on the
NYSE but volume was light.
There were 230 new lows and 45
new highs on the NYSE.
The bears won the day and the week.
*****
13 December 2007 Daily Comments
Thoughts
For the two weeks preceding
Tuesday the glass was half full as the DJIA rallied 800 points. Then, on
Tuesday when Uncle Ben disappointed traders and self appointed economic talking
head experts, the DJIA gave back 400 points in 24 hours. A Wednesday morning
rally that attempted to reverse Tuesday’s quick carnage failed miserably and
this morning the DJIA is going to be down 100 points on the opening and back to
the 50% retrenchment level of the rally.
Markets anticipate events and so
while there is a slowdown and maybe a recession on the horizon the length and
severity of the economic turmoil is unknown. Stock markets usually price stocks
on the perception of revenues and sales six to nine months out. Current sales
and earnings are history as soon as they are reported. Our crystal ball doesn’t
tell us what will be in June of next year but we do know that the crisis in
housing that we and others have been- for the past few years- suggesting was
occurring in now recognized by those who chose to ignore it. That is the first
step in solving the problem. Financial stocks are suffering now for their sins
but there is no way the powers that be are going to
let any of the major players go broke. And so as all the banks and insurance
coma pines and brokers fess up to their mistakes and take their huge one time
charges the housing bubble becomes history and it is on to the next glory or
crisis in the ever-changing economic landscape.
*****
We have been buying stocks that are off 20% to 50% or
more from yearly highs and in most cases are selling at multi year lows. These
stocks represent value but will be under price pressure through year end. They
then should bounce a bit as the selling pressure dissipates but we don’t’ think
they will move substantially higher until they or the economy relieve the
problems that affected their earnings. We have often used year end tax and
disgust selling to establish holdings and we are doing that this year.
We are not buying these stocks for a 10% bounce. Many of
them bounce 5% to 10% on a daily/weekly basis. Many of these stocks have the
potential to move 50% after year end and 100% or more over the next few years.
And as we did in 1991 and in 2001 we are looking for significant gains and that
is why we are willing to endure our present pain.
The stocks we own
are not the mainstream momentum names and it may be that the momentum names
have to correct before the trading gods will be satiated. But we do think that
the stocks we own will provide an above average return over time. We hope to
reduce positions in the New Year on any rally but we will keep a core holding
of those stocks.
For the last seven years we have engaged in trading
accounts because we thought that strategy would help us attain above average
returns with less overall risk. For the first for years that strategy worked
like a charm and helped us well exceed S&P 500 returns.
But for the last three years we have had a more difficult
time obtaining satisfactory gains and while some of it is certainly the
uncertain markets we think that our difficulty stems from the fact that the
movements of stocks have become random over the short term because of index
trading and the plethora of day traders.
And so, because the present market reminds us of the
1990-91 market environments, we are buying stocks at year end as we did then to
hold for a longer period of time and/or a greater return than the 10% to 20%
trading return on an individual stocks that we have
been satisfied with recently.
As we state in our investment philosophy: Our portfolio
management follows an investment philosophy that buys good quality stocks when
they are out of favor. This investment philosophy infers that all companies, no
matter how smart the people in charge, eventually have problems with earnings
or sales - either because of incorrect internal business decisions or because
of external market forces. When this bad news hits the marketplace, selling
occurs and the price of the stock drops. After a period of time, those who run
the company usually solve the problem, earnings start to improve, institutions
become more aggressive buyers on the good news, and the price of the stock goes
up. Just because a stock is down is not a reason to buy. Rather, it is a reason
to begin looking at the company's fundamentals. We stress book value, cash
flow, low debt, insider ownership, previous market performance, and patience.
*****
Asian markets were down 2% and
more overnight as are European markets at midday.
Oil was higher but now is lower as the stock trading day begins. Treasuries are
on the downside in price and Gold is down $4.
*****
The Producer Price Index was up 3.2% versus 1.9% expected and 7.2% year over year. Year over year Core PPI without the necessities of
life was up 2.0%. The 7.2% year over year number may be the reason the Fed only
dropped the rates 25bps.
*****
These volatile markets are rife
with rumors that move stocks because the trading occurring is 99% psychology
right now. Yesterday there was a rumor of a Goldman write-down and many
websites are repeating the rumor today in case it turns out to be correct.
Today there is a rumor that Bear Stearns was on the wrong side of the Biogen Idec mess. Biogen is down $20
today because the hoped for takeover- BIIB had placed itself up for sale- ahs
become a take-under for those who hold the shares because no company was
interested at the price required.
Rumors moving markets and stocks
to the degree they currently are are signs of confusion and lack of conviction
and often occur near turning points.
*****
Ciena had great numbers today but warned that it may incur losses
from $43 million of short term SIV investments in fiscal 2008, as it did in the
fourth quarter. Ciena said that its fiscal fourth-quarter profit included a
$13.0 million loss related to the $43 million investment in commercial paper
issued by SIV Portfolio Plc and Rhinebridge LLC, two structured investment
vehicles that failed to make payment at maturity and recently entered
bankruptcy. CIEN said it may have to write down the remaining $30 million next
year.
These losses came from short term
cash investments. And there are many other companies that are going to be
writing down losses over the next six months.
For the life of us we will never
understand why folks bought that stuff for a few extra basis points of yield.
They ignored the basic investment rule of measuring reward/risk. Part of the
reason is that they didn’t buy it; they were sold it by Goldman and Citi and
Bear Stearns and Mother Merrill et al. who used their reputations to foist junk
on their clients while – at least in the case of Goldman shorting the same
stuff for its own account-and the sad fact is that the sheep will keep doing
business with those charlatans because they are invited to play golf a few
times a year.
Banks and brokers work for
themselves and their own profits- not for their clients. That is a truism that
investors seem to have to learn every ten years.
*****
We added Fifth
Third, New York Times and National
City Bank to some accounts that didn’t own it.
We sold St. Jude
at $41 for a $2.50 per share gain and placed the proceeds in the Regional Bank SPDR and shares of Pier One. We have had several
profitable trades in STJ between $38 and $41. And we also had a profitable
trade in the Regional Bank Index two weeks ago.
In an aggressive move we also sold CBS at a $2 loss and placed a portion of the proceeds in an equal
amount of shares of Time Warner which
is also down $2 from the time we bought CBS. We are investing the remaining
proceeds of the CBS sale in an equal amount of shares Alcatel Lucent. This move gives us a two for one opportunity. Both
stocks have the same dollar price range from high to low as does CBS.
*****
Gold ended down $16 at $801. Oil
lost $1.85 to $92.55. Treasuries were lower on worries that inflation (jump in
the PPI) will keep the Fed from lowering rates again for a while. The two-year
closed at 3.22% and the ten-year was 4.19%.
Most European bourse indexes
closed over 2% lower as did Mexico
down 1.5% and Brazil
down over 3%.
*****
Since we are fully invested we
are encouraged by the fact that the DJIA dropped about 100 points twice today
which is the approximate 50% correction point and then rallied back.
At the close the DJIA was up 55
at 13525. The S&P 500 rose 3 points to 1489 and the NAZZ was down 2 points
to 2668.
Breadth was 2/1 negative on the
NYSE and NAZZ and volume ws moderate.
There were 205 new lows and 30
new highs on the NYSE.
The bears won the day on the terrible breadth figures.
*****
12 December 2007 Daily Comments
Thoughts
No sooner did the Fed speak and
the markets crash yesterday than after the close the Fed spoke again and said
they were aware of the situation in the financial markets and that they were
working on solutions to the disintermediation.
With that blink by the Fed the stock
markets roared higher out of the gate erasing 70% of yesterday’s loss as shorts
scrambled to cover. The Fed seems to be speaking through Steve Liesman of CNBC
who broke last night’s news and is on the tube again this morning explaining
the various types of collateral the Fed will take to restore liquidity to the
system.
After the opening rally selling
ensued but the S&P 500 has regained the 1490 level and remains above that important
level. Since August the S&P 500 has made three lower highs on rally attempts
and it is important that the S&P hold the 1490 level and go on to make a new
high on the next rally attempt.
As we said yesterday we think the
markets will meander through year end. Moreover, the stocks we own are so
beaten down that we don’t think they will pop until after year end.
*****
Asian markets were lower overnight
and European markets are lower at midday.
*****
We miswrote yesterday about GE.
Actually earnings next year are forecast to be up 10% which is wonderful given
their potential sub prime exposure in GE Capital. And the shares at $37 are
price at 15 times next years earnings which certainly
isn’t expensive.
*****
The $60 deal for
Sallie Mae is off. The directors of
Sallie Mae wouldn’t consider a $50 bid a few months ago and with the stock now
at $28 there is a lot of money under the dam. The $50 bid would probably have been
withdrawn anyway. Easy come, easy go.
*****
Ratings on BankAmerica have been lowered and an analyst at Morgan Stanley placed
a sell on Citi. So much for timing.
Where was the sell the shares were at $55? They now are at $33.
*****
Investors’ Intelligence had 53% bulls and 27% bears last week. We
would guess that yesterday’s contremps may have lowered the bullish figures for
this week.
*****
Oil is back at $92 and gold is
down $3. Treasuries are lower in price this morning with the two-year back up
at 3.12% from 2.90% yesterday in the midst of the sell off and the ten-year at
4.12%.
*****
We are adding Sprint
to accounts at $14.85 and also we bought Williams
Sonoma and Hershey in some
accounts that didn’t own them.
We sold Qwest
and Rite Aid for 10% plus profit. We
want to winnow our low priced holdings. Qwest and Rite Aid have the most debt
in relation to market value of the low priced stock we own and that is why we
are eliminating them. We are holding the proceeds from these sales until Palm on the 18th, Circuit City on the 19th and
Pier One on the 20th announces
earnings.
*****
We are selling Cisco
for a $1 gain. We bought it for a trade and we would like to have the funds
available in case the retrenchment of the last day provides opportunities for a
longer term play.
We opened a new position in Liz Claiborne at $22.90. The shares are priced at book value and at
14 times 2007 earnings. LIZ sold over $40 this year. The company is attempting
to sell some of its brand lines to concentrate on its namesake. It’s cheap.
*****
European markets closed mostly
higher.
*****
Entering the final hour of
trading the DJIA was flat on the day having surrendered the 250 point morning
surge higher. With forty five minutes left to trade the DJIA is down 95 points.
The up/down/up/down/up moves over the last 24 hours exceed 1000 points on
the DJIA.
There is a rumor on the floor,
which is given as one of the reasons for the reversal, that Goldman is going to write off over $10
billion in SIV exposure and will announce that after the close.
*****
Gold closed unchanged at $817 and
Oil was up $3.66 and $93.48. Treasuries were lower but regained some of their
losses as stocks gave up their gains. The two-year at 3.07% and the ten-year
was 4.05%.
*****
The DJIA closed up 40 points at
13473. The S&P 500 was gained 9 points at 1486 and the NAZZ rose 19 points
to 2672.
Breadth was 5/4 negative on the NYSE
and NAZZ after being 8/1 positives in early morning trading and volume was active
on the NYSE but moderate on the NAZZ.
There were 135 new lows and 60 new
highs on the NYSE.
The bears squeezed out a win even though the major measures
closed higher because the S&P 500 wasn’t able to close above 1490. But the bulls can take heart from
the rebound from down 100 points in the last hour to close on the plus side. By
the by, that 100 point down move completed the 400 points correction from the
800 point up move of the alst two weeks that we wrote
about yesterday.
*****
11 December 2007 Daily Comments
Thoughts
Asian markets were higher
overnight with Hong Kong up over 2% and India
up 1.8%. European bourse indexes are lower at midday
and Gold is off $3 while Oil has an $88 handle and Treasuries have a bid ahead
of the Fed announcement at 1:15pm.
*****
Texas Instruments raised earnings guidance this morning and that
has given a bid to large tech stocks.
*****
Washington Mutual the large mortgage originator is taking a $2
billion write-down, cutting its dividend, and raising billions in a preferred
stock offering while firing a bunch a people. The share price is lower on the news
which is the opposite of yesterday’s market action in UBS and May portend a creeping
back of some caution on the part of traders.
*****
The Fed cut the discount rate (now 4.75%) and the Fed
funds rate ( now 4.25%) both by 25 bps. Since the
markets were expecting that they sold off on the news and the DJIA went from being
up 45 points to being down 200 points. Easy come easy go. The first move is
usually a fake out so we will have to see what the rest of the trading day
brings.
*****
We have been
adding to positions in various accounts most of the day. We bought no new
companies.
*****
European bourse indexes closed
lower before the Fed announcement. Oil ended dup $2.900 at $89.76. Gold lost $5
to $808. Treasuries rallied on the less
than Fed cut with the two-year at 2.97% and the ten-year at 4.05%.
*****
GE cut earnings guidance for 2008 by 7 pennies. Oops. That is going
to take the stock down to $35. There must be some sub prime stuff and SIV
lurking in the holding of GE Credit. That is doing more damage to the DJIA as
GE sells off. Why did they announce today?
Maybe tomorrow is an option pricing day.
*****
Well the stock markets reacted negatively to the Fed moves.
As we have been saying lowering interest rates isn’t going to solve the housing
imbroglio. The Congress has to set up a Government agency to buy sub prime mortgages.
But that isn’t going to occur soon.
And so the markets are now in the doldrums again and the 800
points up move in the DJIA over the last two weeks is now halted. If there is
any good from this move down today it is that it removes any need for us to take
some profits on the news since there are no profits to be taken. We didn’t buy
the stocks we own for the next week or two and better that the pullback comes
now. 400 points down to retrace the 800
points up and then muddling into year end is a likely scenario.
*****
The DJIA closed down 294 points
at 13432. The S&P 500 lost 40 points to end at 1478 and the 1490 support
level wasn’t, and now becomes resistance. The NAZZ dropped 66 points to 2652.
Breadth ended the day 4/1
negative and volume was light on the sell off as it ahs been on the rally.
There were 106 new highs and 110
new lows on the NYSE and the new lows exceeded new highs by 40 on the NAZZ.
The bears took control again today. No one said it would be
easy.
*****
10 December 2007 Daily Comments
Thoughts
Asian markets were mostly lower overnight
with Hong Kong down over 1% but of course Shanghai
was up over 1%. European bourse indexes re mixed small at midday. Oil ahs an $87 handle and Gold continues its
volatile trading up $15 at $815. Treasuries are better.
*****
UBS is going to write off $10 billion in mortgages and receive and
infusion of $11.5 billion. The markets yawned at the news which is an
indication of how the sub prime crisis is in the backseat--- for now.
*****
Barron’s was negative on Yahoo over the week-end.
*****
We are adding to positions in Yahoo, and Symantec and Talbot’s today and adding a new holding
in Amgen in many accounts. It sold
at $84 last year and is now at $50 selling at 19 times earnings.
*****
Bank America froze a $12 billion short term institutional fund and
is allowing only redemptions. The market hasn’t reacted negatively to the news.
This is another tell, a month ago the markets and BAC would have been lower
immediately. BAC is still up 2% on the day.
*****
European bourse indexes closed
mildly higher. Mexico
and Brazil were
lower.
Treasuries gave ground ahead of
the Fed meeting tomorrow. The two-year ended at 3.16% and the ten-year closed
at 4.14%. Gold finished up $15 at $815 and Oil was down 30 pennies at $87.99.
*****
The DJIA closed up 101 points at
13727. The S&P 500 gained 11 points to 1516 and the NAZZ was up 13 points
to 2718.
Breadth was 3/2 positive on the
NYSE and 5/4 on the NAZZ but volume was only moderate.
There were 120 new highs and 80
new lows on the NYSE and 100 new highs and 90 new lows on the NAZZ.
The bulls won the day but the Fed announcement tomorrow is
going to be the market mover of the week.
*****
7 December 2007 Daily Comments
Thoughts
The markets are overbought
according to the technicians and there is talk of a Christmas rally now but a
pullback (if the Fed only cuts 25bps) may come before a final push into the New
Year. At least that is our hope.
Asian markets were mostly higher
overnight except Hong Kong which was down over 2%.
European bourses are higher at midday
and Gold is unchanged while Oil is higher with a $90 handle. Treasuries are
flat.
The Employment report said that
94,000 jobs were created which was in line with expectations an 100,000 less
than the ADP report of Wednesday. Who is correct is anyone’s guess since
figuring out 100,000 plus or minus in an economy with over 100 million jobs is
a fool’s game.
October Employment was adjusted
to up 170,000 from up 166,000 and September was adjusted to up 44,000 from up
96,000. So much for certainty.
*****
Palm warned going forward and tanked 20% today. We own shares (just
added some yesterday in an example of year end risk in catching falling knives) in our large/aggressive accounts and feel
the pain but we don’t own any in our other accounts and so we may buy a few
shares today.
In October the investment group
Elevation Partners, who manage $2 billion, bought $350 million
of preferred stock convertible into about 28 million Palm shares at a
conversion price of $8.50. With the shares trading at $5.50 they are underwater
for now.
*****
We are adding more GM
and reinitiating National City Bank
in our large/aggressive accounts.
*****
The Model Portfolio is fully invested now or all in as they say in poker which is
pretty much what trading in the markets today has become.
*****
What the bears are not paying
attention to is who make the rules. When the Hunts cornered the gold and silver
markets in 1980 the folks on the other side of their trades who also ran the
CBOT just changed the trading rules and the Hunts were bankrupt in a year.
So too with the banks and
brokers. They are technically insolvent now. The Fed, Treasury Department and
SEC make the rules on capital needs and if they choose to look the other way on
valuing assets so be it. After all, the folks at the Fed and Treasury
Department and SEC play musical chairs with the folks who manage the large
banks and brokers. The folks who run the government agencies come from and
return to the bosom of the financial industry. The mess they have made is their
own creation and they certainly are not going to blame themselves. Oh sure,
they fire a few of their friends but they make sure those folks have wonderful
goodbye packages.
It has always been so. Capitalism
is only important as a motto not a reality.
*****
Why AMD is trading where it is:
AMD said the widespread release of its newest "Barcelona" computer chip would be delayed.
Barcelona is AMD's first chip that features four computing brains, or cores, on
one piece of silicon. It was originally scheduled for general availability in
mid-2007, but now won't be broadly available until early next year. AMD began
shipping the chip in small quantities in September, but it disclosed in an
October conference call with analysts that production was slower than it had
anticipated. The company said it was having problems translating Barcelona's design into production. A technical
glitch, or errata, in the chip has delayed its more general release.
Hopefully AMD will solve its
production problems.
The investment arm of the Abu
Dhabi government, Mubadala Development Co., invested
$622M for an 8.1 percent stake in AMD in November. The price per share works
out to $12.70. The deal, which just went through this morning, gives Mubadala
49 million shares of AMD, but doesn't come with a seat on the board or
represent a controlling interest in AMD. For its part, AMD didn't give any
specific plans for the cash, instead saying it'll be used for R&D,
manufacturing improvements, and unspecified "innovations."
*****
One
reason your health insurance premiums are so high:
Former United Health Group ( the health insurance company that is the
chief health insurance company for AARP) CEO William McGuire has agreed to
forfeit about $620 million in stock-option gains and retirement pay to settle
civil and federal-government claims related to stock-option backdating.
But weep not for Dr. McGuire for
he retains about 24 million stock options that currently could be cashed in for
a gain of roughly $800 million, on top of about $530 million in pay he pocketed
while running United Health from 1991 to 2006.
*****
We repurchased Coldwater Creek at $7.50 in our
large/aggressive accounts and bought
Palm at $5.85 in larger accounts that didn’t own it.
*****
European bourse indexes closed
higher except Norway
which was down 2%. Mexico
and Brazil also
closed higher.
Oil closed lower on the day down
$1.98 at $88.25. Gold lost $6 to $800. Treasuries were lower in price/higher in
yield with the two-year at 3.12% and the ten-year at 4.13%.
*****
The DJIA closed up 5 points at
13625. The S&P 500 dropped 3 points to 1504 and the NAZZ lost 3 points to
2706.
Breadth was flat on the NYSE and
slightly negative on the NAZZ and volume was moderate.
There were 120 new highs and 85 new lows on the NYSE.
The bulls are glad to see new highs assume leadership. New lows outdid new
highs on the NAZZ.
The Bulls won the day on the basis of new highs crossing
over and were ahead for the week.
*****
6 December 2007 Daily Comments
Thoughts
Markets in the U.S.
this morning are awaiting the Treasury Departments plan for the mortgage mess.
CNN's is
reporting:
People who qualify:
- have an income and live in their homes
- are currently making their payments on
time
- would default if their interest went up
Also:
- ARM mortgage has to have been taken
between 1/05 and 7/7
- Has a rate reset between 1/8-1/10
And you don't qualify if:
- have missed payment
- can afford mortgage rate increase
- don't have an income
- own homes which are worth less than their
mortgage.
*****
The Bush bailout plan is going to
work as well as the Bush plan for aiding New Orleans.
*****
Asian markets were mostly higher
overnight and European bourse indexes are also slightly higher at midday. Gold is down $12 and Oil is up to $88
after touching the $85 level in overnight trading. Treasuries are slightly
weaker.
The Bank of England cut its lending
rate by 0.5% but the European Central Bank left rates unchanged.
*****
Jobless claims were 338,000. One of
the reasons given for the market rally of yesterday was the ADP jobs report
which said that 190,000 jobs were created in November. That report has often
been at odds with the Labor Departments numbers which will be reported
tomorrow. We’ll see in the morning whether the numbers agree this time.
*****
Dell will begin selling notebook
and desktop computers through more than 900Best Buy locations in the U.S.
in the next few weeks. With this agreement, Dell products will be available in
nearly 10,000 stores worldwide. Dell announced a similar deal with the Wal-mart earlier this year. Among other stores Dells are
now available, or will be soon, include Staples, France's
Carrefour SA and Gome, China's
largest electronics retailer.
*****
We purchased Boston
Scientific in accounts from which we sold CMCSA yesterday. We also added
more TLAB to accounts as well as AMD. We initiated positions in Xlinx, American Eagle Outfitters
and The Gap in some of our large
accounts.
*****
Gold finished up $5 at $808 after
being $15 lower during the day. Oil gained $2.93 to close at $89.42. Oil traded
at $87 and $90.50 today. Treasuries were lower in price/ higher in yield with
the two-year at 3.04% and the ten-year back over 4% at 4.02%.
European bourse indexes close mixed
while Mexico
and Brazil were
higher.
*****
The DJIA gained 175 points to
13620. The S&P 500 rose 22 points to 1507 closing above 1490 resistance
which now becomes support. The NAZZ gained 42 points to 2709.
Breadth was 3/1 positive on the NYSE
and better than 2/1 on the NAZZ but volume was only moderate.
We would guess a lot of the gains
in the financial sector are short covering.
There were 101 new lows and 97
new highs.
The bulls won the day.
*****
5 December 2007 Daily Comments
Thoughts
Fannie Mae sold $7 billion in
preferred stock and cut its dividend by 30% to go along mirroring the actions
taken by Freddie Mac last week to shore up the finances of the two quasi
government mortgage bankers.
Asian markets were higher
overnight as are European bourses at midday.
U.S. markets
are going to open 1% higher. Gold is up $3 and Oil is up over $1 with an $89
handle. Treasuries are soft.
*****
Investors Intelligence had 49% bulls, up 2%, and 27% bears, down 2%,
in the latest reporting week.
*****
Chico’s earnings disappointed and warned
going forward and it is down $1 in early trading. And Comcast said that it will add only 6 million subscribers in the
next year down from a previous forecast of 6.5 million. CMCSA is also going to
increase capital spending. The street
doesn’t like that news and the shares of CMCSA are down $2.50.
Catching falling knives at year
end has become a way of life for us over the years. It takes a strong stomach
but the rewards are usually worth the risk. We are selling the Comcast
for a $1 per share loss because as it falls we are more inclined to buy
Time Warner as a cable play with other areas of interest than Comcast. This is
the second time we have lost money on CMCSA and so we are taking it off our
screens. The karma obviously is not right.
*****
Dell said it would resume its buyback
plans, and begin repurchasing $10 billion in common stock this week -- almost
20% of its outstanding shares at current prices. Dell had suspended its
repurchase program in August last year when it began restating four years of
earnings. The company did not announce any time frame for the buyback program. Dell
has sufficient liquidity to carry it through the announced share buyback
program. It has about $14 billion on its balance sheet and is likely to
generate strong free cash flows.
*****
3rd Quarter Productivity was up 6.3% while Labor Costs were down 2%. Those figures which have probably been
massaged and will certainly be revised do allow room for Uncle Ben to cut.
*****
European markets closed higher
with Germany up
1.8% and England
and France up
better than 2%. Mexico
and Brazil also
jumped 2%.
Gold ended down $8 at $799 and
Oil faded into the close to finish at $86.96 down $1.36. Treasuries were lower
with the two-year at 2.90% and the ten-year at 3.94%.
*****
The DJIA gained 196 points to
close at 13444. The S&P 500 rose 22 points to 1484 and the NAZZ jumped 46
points to 2666. With the positions we have on we sure like the up days better
than the down days.
Breadth was 2/1 positive on the
NAZZ and NYSE and volume was only moderate.
There were 135 new lows and 90
new highs on the NYSE.
The bulls won the day.
1490 on the S&P 500 is big-time resistance/support and if the bulls can
take it out to the upside December may wind up being in the 13% of the years in
the last 50 where the S&P closed higher after being down 1% the first two
days of the month. Time will tell.
*****
4 December 2007 Daily Comments
Thoughts
JP Morgan downgraded Goldman
Sachs and Morgan Stanley and Mother saying write offs and credit
market disintermediation are affecting earnings. Merck also said earnings will be less than by a few pennies and
Fannie Mae raised its loss estimate. This news has futures lower.
Overseas Asia
was mixed with Japan
and India lower
and the three Chinas higher. European bourse indexes are lower by 1% across the
continent and Treasuries are firm with Gold up $10 at $800 and Oil down a few
pennies with an $89 handle.
*****
A week ago oil was $99 and today
it is $87. But of course the gurus say that oil is trading on fundamentals and
not hedge fund manipulation. We guess that means the news that Iran
is not trying to create nuclear weapons ahs eliminated the imminent threat of
war. Of course Washington knew
this news last year. Too bad they couldn’t have shared it. But then there was
an election.
*****
We added shares of Walgreen
to accounts at $35.90 and also added SBUC to accounts that own Yahoo.
*****
According to Jason Roney, a
technician who writes on minyanville.com over the last 50 years if the S&P
500 was down more than 1% for the first two days of December the S&P 500
closed the month of December lower by an average 2.2% 87% of the time.
Conversely if the S&P 500 was higher by 1% over the first two days of
December the S&P 500 closed the month of December higher 85% of the time by
an average 3.3%.
To be 1% lower this year the
S&P 500 would have to close today lower than 1467. In between 1467 and 1494
and all bets are off.
*****
Walgreen same-store sales rose 4.4 percent in November. Pharmacy
same-store sales grew 5.5 percent, with the number of prescriptions filled
rising 3 percent.
*****
Gold was up $14 at $803 and Oil closed
down $1.10 at $88.20. Treasuries were a tad weaker with the two-year at 2.90%
and the ten-year at 3.89%.
European indexes closed about 1%
lower as did Mexico
while Brazil
was up slightly.
*****
The DJIA lost 70 points to finish
at 13245. The S&P 500 was down 10 points at 1463 and the NAZZ dropped 18
points to 2620.
Breadth was 2/1 negative on the
NYSE and MAZZ and volume was moderate.
There were 195 new lows and 45
new highs on the NYSE.
The bears won the day and according to Jason’s numbers stand
a good chance of winning the month since the S&P 500 were down over 1% in
the first two days of the month. We of course, hope not, but hope is not
tradable. But neither
is past performance an indication of future performance.
*****
3 December 2007 Daily Comments
Thoughts
December blew into the Land
of Milk and Honey on the winds of a
snow. And now we have a winter wonderland to get us in the holiday mood.
The market action last week
restored some of our holiday spirit also but we would guess that there is still
some coal to be removed from the stocking before Christmas arrives.
*****
Asian markets were mixed small
overnight and so are European bourses at midday.
Gold is down another $3 and Oil is off 80 pennies with an $87 handle on news
that the Chavez referendum was defeated and he accepted it without cutting off
oil to the U.S.
*****
In the spirit of holiday sales
Morgan Stanley purchased 1100 separate land plots from Lennar, the home builder
for $550 million. That land had been carried on Lennar’s books at September 30
at a value of $1.3 billion.
*****
The study behind these facts can
be obtained at: http://www.demos.org/pub1514.cfm
31 percent of middle-income families match our profile for being
securely middle class. That is, despite falling into the broad range that
defines middle-class "income," less than one in three families have
the necessary combination of other factors to ensure middle-class security.
Thirty-four percent of white middle-income families are securely in the
middle class, as compared to 26 percent of African-American middle-income
families and only 18 percent of Latino middle-income families.
One in four middle-class families matches our profile for being at high
risk of slipping out of the middle class altogether.
One in five (21 percent) white families is at high risk for slipping
out of the middle class, as compared to one in three (33 percent)
African-American headed households and an alarming two in five (41 percent)
Latino families.
More than half of middle-class families have no net financial assets
whatsoever-that is, no financial assets or debt levels that exceed their
assets.
13 percent of middle-class families have sufficient assets to meet
three-quarters of their essential living expenses for nine months, should their
source of income disappear.
About four out of five middle-class families do not have sufficient
assets to cover three quarters of essential living expenses for even three months
should their source of income disappear. Essential living expenses are defined
as food, housing, clothing, transportation, health care, personal care,
education, personal insurance and pensions.
Middle-class families have a median debt of $3,500 and median net
assets of $0.
Twenty-one percent of middle-class families have less than $100 per
week ($5,000 per year) remaining after meeting essential living expenses. These
families are living from paycheck to paycheck with very little margin of
security.
In nearly one out of four middle-class families (23 percent), at least
one family member lacks health insurance of any kind.
Twenty-eight percent of middle-class families spend 30 percent or more
of their income on housing expenses, putting them above federal guidelines for
housing affordability.
Twenty-seven percent of middle-class families do not have any education
beyond high school, placing them increasingly at risk in a rapidly developing
global economy where higher education skills have become fundamental to
achieving middle-class status.
*****
Any mortgage rescue plan that
doesn’t allow all mortgaged borrows to refinance at the same rate is a joke.
The rate should be 8% or 9%. Thus those with lower rates won’t be disadvantaged
and won’t refinance and those with higher rates who aren’t behind in their
payments won’t be punished for being current. The rescuers are spending too
much time worrying about the dopes who bought the junk. But that is the greed
of folks who only want to rescue if it is to their advantage.
We know we are blowing smoke with
our rant but it makes us feel better.
*****
We added AMD at
9.80, Dell at $24.50, Chico’s at $11.60, and Walgreen at $36.75 to various
accounts.
*****
Ford’s November sales were up
slightly while GM was down 7% and Toyota
was up 1%.
*****
European bourses indexes closed
down large fractions to over 1% lower. Mexico
and Brazil were
slightly higher. Treasuries were strong with the two-year at 2.88% and the
ten-year at 3.88%. Gold gained $5 to $794 and Oil was up $1 to $89.90.
*****
The DJIA lost 57 points to close
at 13314. The S&P 500 was down 9 points at 1472 and the NAZZ dropped 24
points to 2637.
Breadth was 3/2 negative on the
NYSE and NAZZ and volume was moderate.
There were 150 new lows and 60
new highs on the NYSE.
The bears carried the day.
*****
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Summary of Business Continuity Plan
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