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26-28 February 2005 Week-end Comment It certainly has been interesting
week and it looks like the Cramer rule that a 1% drop the day after expiration
means nothing will again be true since the entire 150 point DJIA collapse on
Tuesday will have been recovered in the ensuing three days this week if Friday
is any kind of up day. It used to be that traders were no likely to go home
long over the weekend because of fear of what might happen in Overnight Thursday Japan was up
1% and Preliminary as opposed to Advance
4th Quarter GDP was revised to up 3.8% from the less appealing up 3.1% that was
reported last month. It seems some trading between And so there is nothing to worry about. Our trading this year has been less than stellar and our adventure with SBUX and EBAY over the past few weeks is just the latest example. We turned a trade for large/aggressive accounts into more and as a result we and our clients have less. We have never been able to own momentum stocks trading at 40 times earnings and every time we try it costs us all money. As with Ann Taylor we will avoid such situations in the future and ask our clients indulgence for our straying from the straight and narrow. We are in a “staid is good” and “let’s trade old favorites” mood even if those stocks may not provide the action of the mo-mo stocks. It is a truism that in bull markets we tend to under perform because of our caution and it is important that we remember that fact. The market will be opening soon and we need to do some reading before the fray. So let the games begin.
9:51am and crude oil is down a few pennies but remains above $51 per barrel. The DJIA and S&P 500 are slightly higher while the NAZZ is off a bit. Breadth is positive on the NYSE and the reverse on the NAZZ. Treasuries are flat and maybe after all the downs and up this week folks just want to stay home. There was a snowstorm overnight in the east and that has probably encouraged some folks to take a long weekend To complete our move to staid stocks we have added JPM, General Electric and Coke to accounts. All three are much closer to their 8 year lows and significantly (40% to 100%) below their highs. we are not buying these for trades. we don’t expect 50% moves but they will move with the markets and are sold out and have been basing for a year. These purchases pretty much complete our buy list of stocks. From now on out we are going to add to the issues we own if they move lower. We continue picking up Veeco because it could be a big winner
but its volatility has us treading softly and buying gingerly. The same goes for
Wild Oats.
11:49am and the major measures are higher though most of the strength is in the NYSE not the NAZZ. Oil is higher bond yields are lower and all is right with the world, for the next ten minutes. www.minyanville.com pointed us to this article by Michael Lewis that is interesting. He discusses Howard Hughes and the movie The Aviator. http://quote.bloomberg.com. By the by, Qwest is at $3.95 today. We are not biting.
1:23pm and in the contra hour the major measures are making new highs for the week with the DJIA up 80 points and the S&P 500 and NAZZ both up 1%. The S&P 500 is now positive for the year at 1212. Breadth is 2.5/1 positive on the NYSE and 5/4 positive on the NAZZ. Treasuries are unchanged and volume is light. That is the fly in the ointment but it may be because of the snow. Also most folks have computers and stuff and can trade form home if they wish so it may just be that the buying today is short covering and month end mark ups. Next week will tell the tale. We added some SEBL, TLAB, SCH, OATS, and BRCD to some our very small accounts to go with the MOT that they already own. In the good old days of the last century the oil stocks always topped out in March. Oil stocks are moving like tech stocks these days and it is a marvel to behold. Don’t be the last one off the train before it jumps the tracks. We sold the XEL we bought yesterday. We paid $17.52 and sold for $17.92. That 40
pennies profit is one half year’s dividend in one day and one of the nice
things about having short term losses, in fact the only nice thing, is that we happily
can take short term profits till we use them up.
And tomorrow is today and it is
Saturday so enjoy.
25 February 2005 Daily Comment We used to have fun writing about the coming Ides of March and warning folks to beware. This year that may be good advice. This morning RBC Markets downgraded Google and Yahoo and both are trading down with Google off $10 per share and Yahoo down $1.50 per share. Yahoo was off yesterday more than seemed normal and now we know the reason why. The market action in YHOO yesterday is a good example of price action telling you the news before the news is announced. Viacom announced earnings per share of 42 pennies versus 38 pennies a year ago. Revenues were off a bit. Not included in the per share earnings is a minor $18 billion with a B write down of assets in radio and outdoor advertising. Oil is trading at $51.63 up 46
pennies in the early going. Our gurus say the line in the sand for the S&P 500 for today is 1184 (closed last night at 1191) and 2008 for the NAZZ. Qwest is going to raise its bid to $8 billion for MCI. The dollar is once again weaker
against the euro at 1.327 and against the yen at 104.80. We’ve put off our
world tour for another year.
7:32am and Jobless claims were 312,000 and continuing claims were
2.6 million. Durable goods orders were down 0.9% which was due to a large
decline in auto production. November and December Durable Goods orders were
very strong. There is no reaction in Treasuries or stocks for now.
9:57am and stocks opened lower but have finally moved to the upside. Google is the fly in the ointment today down 10 points but $4 above its low. The S&P 500 and NAZZ are still negative and the DJIA is now up 10 points. Oops, it is now down 10 points as we write. It’s that kind of day. We bought some shares of Xcel Energy at $17.50 for larger accounts for the dividend yield and for trading purposes. XEL has established a range of $17.50 to $18.25 and we are will to trade that range or collect the dividends. We have set our sights on less volatile and thus less risk/reward trades. We bought VECO, a chip equipment maker, at $15 yesterday in some larger accounts. We have traded the stock several times in the $25 range and it is currently selling at one times revenues. They fired their comptroller and are going to have to restate earnings in one division that they acquired several years ago. There is now uncertainty over how much they will have to pay of a $20 million performance payment that may or may not be owed to the company whose subsidiary they acquired. Since the messed up books were in that subsidiary there might be a legal battle. Veeco is a real company and there is value at these levels but we are approaching gingerly since lawsuits have a way of knocking share prices down well below value. We are also looking at OATS. We bought some at $6.90 in larger/aggressive accounts after earnings but the share price action suggests that OATS will visit the under $6 level before it moves higher. We will be buyers as we were last quarter in similar circumstances. TLAB said at a conference yesterday that it was willing to be acquired or to acquire as consolidation in the Telecom Equipment Industry continues. The share price is lower today. There is a two-year Treasury auction
today.
Qwest has run up on news that it is going to make a new offer for MCI. There is speculation that Q is trying to get Verizon to buy it as well as MCI.
We think Q will merge but a merger
with the spun off operations of Sprint
combined with Century Telephone
would seem to make more sense to us. Anyway we decided to sell our holdings at
$4.18 in which we have a scratch/profit for the first time since we repurchased
the stock and wait and see what develops. If Q doesn’t get MCI -and
we don’t think they will- the shares will probably visit the $3.50 area again.
And tomorrow is today so let the
games begin.
24 February 2005 Daily Comment In like a lamb out like a lion refers to the weather in March, but it could just as well refer to the markets’ action this February. January was a downer of unusual proportions and February was setting up to recover the losses and move higher to the Ides of March. Now the Ides of March may be a positive turning point rather than the negative one we expected. That’s because Tuesday’s turndown was very ugly if you were at all bullish and rally chances have vanished from the landscape. Now the stock markets are back to the holding support or look out below mind frame. Don’s old saw, “Too late to sell to early to buy” keeps going through our head. Actually most of the losses in accounts come from our ill timed waiting till this year to take the profits of December that turned to losses in January. We console ourselves with the thought that if we had done nothing (stayed in cash) from October 2004 to today we would be in basically the same position we are now. Nevertheless we are paid to know when to hop on and off the train and we are not happy we overstayed our welcome. Our thought is that the stocks we
own will participate in the eventual rally after the sell off and that most of
them are of the less than volatile kind. And so we will be adding to positions
as the markets move lower. We did not buy most of these stocks for short term
trades and so by holding we are we are not turning trades into investments
which of course is a no no. And we have a goodly
chunk of cash to invest if the downturn turns uglier.
7:31am and the core CPI for January was up 0.2% which will add no end of confusion to the investment picture since after the initial elation that the number was not higher trader types will begin hand wringing and wondering how companies will profit if raw goods prices (PPI) are rising while finished goods prices (CPI) are not. Well, finished goods prices are rising so don’t worry about company profits. There was news this morning that 9:03am and stocks opened higher out of the gate with all the major measures up and breadth over 2/1 positive. That is not the way stocks should act after a day like yesterday if any kind of a bottom is going to occur. After less than an hour of trading the selling is coming into the markets and w expect them to be lower within the hour. Treasuries have held on to their minor gains and when stocks head lower later today it will be interesting to see if the Treasuries add to their present gains. Our great friends the Saudis said
overnight that OPEC may increase production now that the price of oil is over
$50. The talking heads have been making the point that since OPEC is paid in
dollars the weakness in the dollar has lowered OPEC earnings by 30% versus
other world currencies. That is the move down in the dollar versus the euro
over the past few years. We all know the
sheiks have to use euros when they gamble at 9:32am and rather than rolling over the major measures are resuming
their upward move. One guru who we respect thinks the major measures may move
higher. With bonds holding their gains
that may give heart to stock traders.
Jim Cramer at www.realmoney.com had an interesting statistic
that 8 of the past 25 monthly expirations of futures and options have seen a
decline of more that 1% in the DJIA the first trading day following. And in all
eight of those one day declines there was no follow through. In other words the
major measures were flat or higher the rest of the week.
And tomorrow is today so let the
games begin.
23 February 2005 Daily Comment We spent the holiday week-end considering what to do with the Treasuries we purchased late last month. In fact last night we dreamed about Alan Greenspan and when that happens we know its time to take action. This morning we sold the Treasuries with the idea of buying them or similar bonds later this year. We sold the Treasuries at $99.23 which is down about $3 per $1000 bond from our highest buy price. In effect we surrendered one month’s interest to take a look. That interest will be recovered if Treasuries continue to move lower in price and higher in yield. If the Fed raises two more times by June 2005 the Fed Funds rate will be at 3% and Treasury notes due in 1.5 years (the ones we are selling) will be selling to yield about 4.25% or at dollar price of $98.50. While the bonds will eventually go back to $1000 we will be getting an almost 3% money fund yield while awaiting an opportune time to repurchase. It is always difficult to
determine the optimum time to begin purchasing Treasuries in a rising interest
rate environment and we were a bit early and will try again later in the year
with a shorter maturity note. The interest we will earn in the money market
will absorb the small loss incurred for taking a look.
The dollar is down again this
morning as 9:49am and stocks are rallying after opening lower. Crude oil is at
$49.90 and bonds remain weak. We are buying TLAB, SEBL, and BRCD in
taxable accounts. We are also buying more Fifth
Third Bank under $45 per share.
10:19am and with crude oil at $50.45 up $2.10 the markets are not tanking. There seems to be a divorce between oil and stocks this morning. The big guess for the markets today is whether the PPI number of last Thursday will affect the CPI number tomorrow which is expected to be up 0.3%. a 0.3% rise would allow the Fed to continue its measured approach. A tame CPI number would suggest profit pinching on companies that can’t raise prices. But part of the PPI large gain was a jump in tobacco taxes and other such stuff. The rise in the price of oil won’t show up till next month. We believe there is inflation and that it is underreported and so any numbers that don’t reflect it are suspect. We were surprised by the PPI number because till now the inflation although occurring throughout the economy has been absent from the reported numbers. Can anyone say election is over and a lame duck is sitting? The dollar continues lower after
the rally in January. It is all a conundrum.
11:39am and the divorce between oil and stocks has ended. In a few
moments the DJIA sold off 100 points and the S&P 500 is down 10 points.
Higher Treasury prices and oil through the roof have taken their toll.
We are adding OATS at $6.72 to aggressive and larger accounts. OATS announced earnings today and surprised with a loss. Well that didn’t surprise us and is the reason we didn’t want to hold through the earnings announcement. We will be adding more shares as the markets sell off. Wild oats did a not announce final earnings since they still have to refigure earnings for the new rules on lease obligations. They really are going to have to be acquired to prosper. If not they have enough cash to give us one more rally profit if we are lucky. With crude oil up 6% and the
dollar down 1% stocks are going to have a hard time surviving today. But there
is always tomorrow.
2:15pm and with the sell off today we decided that a bit more cash would be good and so we sold our QQQQ holdings at $37.05. It was an easy way to raise cash and it was a trading position so it was easy to eliminate. We lost about 30 pennies per share on the trade. In the final hour stocks are
heading south with a vengeance and the DJIA is down 150 points with the S&P
500 is off 15 points. The market gods are not happy.
At the bell the DJIA was off 175 points at 10610. The NAZZ lost 26 points to 2032 and the S&P 500 broke support to finish down 17 points at 1184. Looks like the markets want to test the downside waters for a while. Breadth was 3/1 negative and Treasuries also closed slightly lower. We like the stocks we own. And tomorrow is today so let the
games begin.
21 February 2005 Daily Comment Treasuries were hit hard at the end of last week as the PPI was much higher than expected with the core PPI being up 0.8%. CPI is announced this Wednesday and it will be interesting to see what that number is. We probably won’t hang around in our short term Treasuries for the CPI number. We have already surrendered about ¼ of a point in holding them and our inclination is to sell and wait a while before returning to the markets. We were obviously too early in the two year. Even if CPI is benign we would guess that the Fed will raise rates a few more times. We would be more comfortable if the rate curve were not flattening. With a flattening rate curve (yields on the short end are rising faster than yields on the long end) we don’t have the opportunity to extend a year and pick up 1% in yield to pay for the risk of holding for the next two years. We didn’t think the curve would flatten so quickly and it may even invert. If that is the case merely staying in Money Market funds will pay. Stocks were lethargic at weeks end and only the pop in Merck and Pfizer on news that the FDA is going to allow them to market their pain/life killing drugs allowed the DJIA to register a gain on Friday. For this week we would guess that the markets will wait for CPI before making any big bet one way or the other. Enjoy the holiday if you have one. The games begin tomorrow. The
next post will be tomorrow evening for Wednesday morning.
18 February 2005 Daily Comment Monday February 21 is the Presidents’ Day First time claims for unemployment were 302,000 and with a little luck maybe next week the claims number will drop under 300,000. Import prices rose 0.9%. HPQ came with in line numbers Wednesday night and is trading a bit higher on the news. We are going to be traveling today and tomorrow but we will have a post on Monday morning. The updated Model Portfolio will post on Saturday. The markets are lower as Greenspan is testifying. With expiration tomorrow the action of stocks is being distorted and so Tuesday and more likely Wednesday of next week will give a better indication of the trend. It is obvious that the major measures are having trouble piercing overhead resistance and more than a few folks don’t think stocks can continue moving higher from this point. As supply comes in though, it is being absorbed and so we think the markets are looking for a reason to go up or down. They don’t have any clear cut information to push them one way or the other. We bought some Brocade Thursday morning at $6.50 on the back of a good earnings report last night and we also bought EBAY at $43 for a trade in accounts that also own SBUX. Both these stocks are volatile but EBAY just split today and after options expiration we think they both will move higher with the markets. We own both of these for a trade and not for posterity. We are now off to watch the Norsemen play two games and visit some clients and our accountant. Have a good week-end and enjoy
the market games.
17 February 2005 Daily Comment Coke announced above expectation earnings and revenues and increased their stock buy back by $2 billion. The action of that stock this morning which is within 10% of its 12 month lows should give a good indication of the thirst for big cap blue chips that are turning the corner. Actually lower taxes and currency gains led to the better earnings but the traders had been expecting lower earnings so flat earnings were better earnings. The WSJ has a story on the big big drug companies buying the medium big drug companies with the repatriated billions of dollars from overseas. BMY and SGP are mentioned as acquisition targets, maybe. First Pfizer and Merck have to get through three days of Congressional hearings on Cox inhibitors. The Chairman speaks today delivering his semi annual Humphrey Hawkins gobbling to Congress. Bond traders will be trying to decipher any change in policy. Housing starts hit a 21 year high in January with starts up 4.7%. There have been reports of a bomb
blast in Although Greenspan and most seers
see the economy recovering and clear sailing ahead we are not of that school.
That is one reason in our larger accounts we have purchased the short term
Treasuries. We think there may come a point this summer when the Fed puts on
the brakes on raising interest rates and reverses course.
9:16am and the bomb in Greenspan did not use the word
measured in his testimony and so longer Treasuries are lower in price as folks
presume the Fed may raise rates with a bit more speed.
10:41am and the horses just had their feet trimmed and so all is well with the world. We are buying more Motorola for accounts at $15.75. Oil inventories were up so oil is
off a bit. Recent statistics on GDP show that both One analyst suggests that because
countries are connected globally that recession in two of the world’s largest
economies will eventually affect the Stocks are trading at slightly
lower levels on moderate volume. Breadth is 5/4 negative and oil is up $1.14 at
$48.40 which flies in the face of reported higher inventory levels. The EIA,
which is the Energy Information Administration, reported that an early cut in
OPEC oil production could affect summer supplies of gasoline. Now that is a
real shock. That wire service story may be the reason for the rise or maybe the
boys and girls weren’t having any luck pushing other trading vehicles today.
And tomorrow is today so let the
games begin.
16 February 2005 Daily Comment Retail sales ex autos were up 0.6% last month. Overall retail sales were down 0.3% because of a drop in auto sales. Autos had a good last quarter of 2004 from sales if not profit standpoint and so the number this morning is being viewed as good by traders. The major measures are higher this morning on good volume as Google leads the way. Oil is up 23 pennies at $47.67 and Treasuries are a bit weaker. The S&P 500 is up at 1211 and looks like it will make it to the 1226 number we had in mind in December. Then what happens is anyone’s guess. We have been picking at some TLAB and SEBL and Q for larger accounts but have not made the commitment to smaller accounts. We are more inclined to stay with the large caps in the smaller accounts even if it involves buying 25 or 50 shares. We just like the security of the larger cap names and are committed to our singles only philosophy. Holders of 11% of MCI shares are in favor of Qwest’s higher offer but we don’t know
if they have enough persuasion power to negate the deal with Verizon.
10:05am and the DJIA is up 50 points with the NAZZ up 20 points. we like to see the NAZZ leading as it did on Friday and yesterday’s go nowhere day was also positive as long as today end on the upside. The real test will be the final hour. There are rumors that there was a sizable QQQQ buy error on the Pacific Coast Exchange this morning. That could have been the reason for the run up in the underlying stocks and the QQQQ itself. If so the unwinding is going to cause the markets to head down. It surely will cause disarray in the technicians’ books as well as a job loss for whoever made the error and a monetary loss for the folks who employed the unfortunate soul. 12:46pm and www.minyanville.com is reporting that it is hearing that Knight Trading’s auto execution was ‘off their markets’ and hit the system up for up to 900,000 QQQQ put/call trades. This is only rumor but there is talking of busting trades so who knows what it all means except fun and games and many headaches. And tomorrow is today so let the
games begin.
15 February 2005 Daily Comment The explosion and death of the former
PM in Hopefully the election results in
Cramer over at www.realmoney.com laments the fact that Verizon and SBC have purchased more land lines by buying MCI and AT&T respectively. He does hedge his bets by saying Wall Street, rightly or wrongly, thinks that the acquisitions are a bad bet. We don’t. We know the demographics for kids having only cell phones and not getting land lines. But when the kids join the married folks or start their own businesses they are going to need land lines and will be buyers. And at the rate the telecoms are combining there are only going to be three left in a few years with decent pricing power. We know that cable is supposed to steal all the local folks but having two carriers to a residence is prudent in these days of storms and outages. Business as a whole is on its way
back to the era of the Robber Barons when a few oligopolies controlled commerce.
Oil and Telecom are just the beginning.
9:10am and the major measures are lower in light trading. Qwest is off 10% on the VZ/MCI news and
we are repurchasing shares under $3.88 that we sold in the $4.40 range last
month. We are also buying shares of Seibel
at $8.80 and TLAB at $7.25 in
tax free accounts where we sold last month at higher levels. Both stocks have
settled and if the NAZZ is going to lead to higher territory we think these two
will participate.
9:56am and Schwab is having almost the same per day run rate on customer trades in February as in January. This contrasts with the drop in customer trading that Ameritrade reported in February and is suggesting to the marketplace that SCH is going to be able to maintain and/or increase customer accounts. SCH is up 30 pennies on the news. And tomorrow is today so let the
games begin.
14 February 2005 Daily Comment Happy Valentine's Day Friday’s market action was positive with good breadth and the DJIA moving to the plus side for the year. The NAZZ was a leader on Friday and more action like that is needed. The NAZZ needs to break through 2105 on the upside to keep traders happy. This week is an expiration week with all that entails. Verizon is buying MCI and so Qwest is being left at the altar. That means that Capellas is available for HPQ. We continue to believe there is a marriage in Qwest’s future but our bet in occurring in only large and aggressive accounts. We think the markets have clear sailing until April Fool’s Day, but that is only a guess and our guesses have been suspect lately. We had been thinking of buying some Pfizer but there is a Congressional hearing on Thursday at which a study may or may not be presented by Dr. Graham, the fellow who blew the whistle on VIOXX. So we are holding our fire for now. It’s that time so let the games begin.
12 February 2005 Daily Comment Overseas markets were higher on Friday and oil and gold were up pennies. It is interesting that nuclear weapons in North Korea and Iran are yawners to the markets for now. The markets seem much more worried about whether Dell’s revenue shortfall of $100 million is going to mean the ultimate demise of the growth story for this stock. Growth stocks live in a world of their own at the mercy of the hedge fund gunslingers who move them around like kites in a March wind. By that we mean that one slight gust can cause a stock to swoon and then miraculously rise a few days later when another growth fund decides that the pull back represents buying opportunity. For folks like us who are used to seeing stocks move in 25 cent increments in markets such as these, the $3 up and down moves take some getting used to. We are of course referring to SBUX which we have never owned before because it has always traded at 50 times earnings. but we spend so much money at Starbucks when we are in Chicago and they do such a good job taking our money we decide to take a fling for at least a trade. But when stocks trade at 50 times earnings volatility goes with the territory and we knew that going in. We are going to tweak our portfolio today but will probably ride with most of the stocks for a while even though the technical picture is not as rosy as we would like. Is the wall of worry just that or a warning sing of bad times ahead? Only time will tell but our mix of companies and the fact that most are on their lows gives us hope that over the next year or less we will see some good moves. Most of the gurus are now recommending oil stocks as the place to be. February/March has always been the time for oil stocks to rise followed by the inevitable down move in the spring. It’s nice to see a pattern we have noticed over the years asserting itself. Sometimes in the brave new world of stock gambling old patterns don’t appear and that causes us to worry. As we said in December a trip
below $40 for oil is needed to really get stocks and the economy moving. That
type of move will be a surprise to all but we think it is needed. Whether it will
occur is not for us to say. Till then we remain traders with our finger on the
trigger.
9:25am and stocks have opened lower which actually may be a positive. Most times this year that they opened higher they have closed lower so maybe the reverse will prove the charm. We decide to sell Amazon for a positive scratch since SBUX is enough in the volatile stock area for us to handle right now. 10:31am and Citigroup announced it was going to lay off 3000 folks and the major measures rallied to the plus side. We don’t think the two were connected. The up move looked more like a series of buy programs got things moving and pulled in some sideline money. We are beginning to repurchase the Hain Celestial that we sold over $20 a few ago before earnings. We bought shares today at $18.93 in accounts that own SBUX. HAIN announced earnings last week that were punk but our main aim was to be out of the stock when earnings were announced. 11:21am and with the following news we are selling our JPM position. We don’t know why the fellow is leaving and it maybe is for greener pastures (more money) but we will get out for a scratch gain and see what develops. Andrew Palmer, former global head of credit derivatives marketing at JP Morgan JPM, has left the bank, a source with close knowledge of the situation confirmed on Friday. Palmer had not departed to join another bank, the source said. Palmer was at JP Morgan for nine years and was involved in the merger of the IBoxx and Trac-X indices which formed the Itraxx credit derivatives indices last year. 1:13pm and the NAZZ is up 20 points. It is important for the NAZZ to rally if the markets are to move higher since it has been a laggard the last week. 3:02pm and stocks ended the week on an up note with the DJIA up 48 points to 10798. The S&P 500 gained 9 points to end at 1206 and the NAZZ rose 24 points to 2077. Oil was up 6 pennies at the bell at $47.16. Treasuries finished a couple of basis points lower with the ten-year at 4.10%. Breadth was 2/1 positive at the close. And tomorrow is today so enjoy
the week-end. We will have a short post on Monday morning to begin the week.
11 February 2005 Daily Comment
Jobless claims were 303,000 last week which is the lowest in four years. Traders are concentrating on other issues. The 4 week moving average is now 316,000. The trade deficit was down to $56.4 billion. The flattening of the yield curve
has moved short rates within 1% of long rates. The two-year rallied yesterday
and is giving less back today than the ten-year.
In some catch up info on stocks we own or are interested in: TLAB is going to buy back 9.5% of its outstanding shares. We are agnostic on this action. Carli is out at HPQ and Capellas, the guy who is going to sell MCI and make millions in performance fees for doing so, is the front runner for the job since he ran Compaq which Carli bought for HPQ which is the reason she is going to lose her job. So HPQ is going to hire the guy that ran the company that the current CEO has been fired for buying. But the new guy is a guy and that counts in a board room full of guys. HPQ earnings come February JP Morgan recommended OATS raising the rating from avoid to neutral because things have been going bad for so long that something will have to happen. That’s as good a reason as any and the only one that makes sense. We want to wait for earnings to decide whether to re-purchase. Earnings should be bad. The only reason to own the stock is that some other grocer might buy it to get a foothold in the ‘foo foo’ food marketing areas. Three large (30%) shareholders of Univision are arguing over the newly appointed COO. Two shareholders say they weren’t consulted and their noses are out of joint. Sara Lee is restructuring for the sixth time in ten years. BLS, Q, SBC and VZ are all tied up concerning who will take over MCI. The MCI deal would be good for Q but supposedly MCI wants to go with Verizon. We still think that Q trade at these levels will be profitable but we are being greedy. Same goes for CBB. Both are going to be acquired eventually. SBUX won’t raise prices this year. They are doing well expanding their offerings in the stores. There have been rumors that MOT and Lucent were going to combine. That would be interesting. Maytag declared its regular quarterly dividend. Talbot’s same store sales were up 13% in January. TLB earnings come March 9, and Tiffany’s are on February 28. Ann Taylor announces this morning
February 11 at Bloomberg reports that one of the
pressing issues for SEC Chairman Bill Donaldson is which SEC commissioner will
get which room in the new office building into which the SEC is moving. Seems there
are only two with a view of the Capitol. The other three identically sized
rooms have views of the railroad tracks. According to Bloomberg the SEC commissioners
only make $140,000 per year plus benefits and health care and free trips and so
the size and view from their room is of paramount importance. Ah power.
8:44am and stocks are higher and so is crude oil up 77 pennies at
$46.23. Most bullish gurus would like a sell off with a test back to the S&P
1193 level this morning and then a strong rally this afternoon to confirm a
bull case. Folks don’t often get what they wish for.
9:18am and SEC mistakenly issued a press release saying that Google was being investigated for talking during the quiet period. Within an hour the SEC said ‘oops’ that matter has already been settled. We are going to be buying GOOG in small amounts in large
accounts. We know the shares have doubled since the public offering but the
sales and earnings have risen at four times that rate. We would like to own
some for the long term since we use the site about ten times a day as does everyone
else on the web. It is not the hits that interest us but the revenues and most
importantly the earnings which are estimated to be $5 next year up from $1 this
year. We are buying small amounts as GOOG
has come back down to support/resistance.
Breadth remains positive on the NYSE and negative on the NAZZ. The DJIA is up 60 points but the NAZZ has just managed to push into positive territory. The major measures are rallying even though crude is up $1.29 at $46.75. The Treasury thirty-year is down 10 basis points which equals
$17.50 per $1000 bond. The ten-year is off 7 basis points which equals $7 per
bond, while the two-year is off 2 basis points which equals 40 cents per $1000
bond. Those numbers well demonstrate the danger of long term bond holdings and
also the potential reward in seemingly small basis points moves.
And tomorrow is today so let the
games begin.
10 February 2005 Daily Comment It never fails that when we say the coast is all clear that the markets decide to head south. Carli is out at CEO of HPQ while John Chambers remains at Cisco. Maybe a little chauvinism is involved. Maybe not. Anyway, stocks closed lower today, bonds gained in price and dropped in yield with the ten-year ending at 3.98%. Oil rose 6 pennies to $45.46. We are back home in the land of milk and honey and so we will have a full post beginning on Friday. Till then we remain satisfied with our holdings even though they all dropped in price today with the overall market. And let the games continue.
9 February 2005 Daily Comment Stocks continued to snooze as we traveled the Midwestern country side. The major measures closed slightly higher but after the bell Cisco was a little light on its earnings number although the revenue number was in line. Our stocks were slightly higher and our short terms bonds lost a couple of ticks as the yield increased a few basis points. We remain convinced that the one week rally isn’t over and that this phase is just that. We will be home tomorrow and will have a post on Thursday morning. Till then let the games continue.
8 February 2005 Daily Comment The markets closed lower by a tad yesterday with volume on the light side. Treasuries with maturities of longer than five years rallied to higher prices and lower yields while shorter maturities were weaker by a couple of basis points. Monday’s action was constructive given recent market action. We remain content with our holdings and think the markets are going to attempt a move higher from here. We will again be traveling on Tuesday and Wednesday but will continue the short posts so you know we are making progress back to the farm. These last few days have reminded us that family and friends are the most important asset we have. So let the games begin.
7 February 2005 Daily Comment The Nikkei and the Hang Sang Indexes both played catch-up with the U.S. markets’ Friday rise as both gained over 1% in Monday trading. Europe is higher and oil is a bit lower. The major measures are back to the point where they have failed in the past and so the question becomes whether the bulls have the strength to push stocks higher. The markets seem to be yawning at all the number s being bandied about concerning the Bush Social Security overhaul. This may be because the markets don’t think it is going to happen or are ignoring the issue until crunch time in the fall. Our take is that stocks will move higher. We are 50% invested in the Model Portfolio and as we mentioned last week we are singles hitters from now on and don’t plan to buy more stocks without selling issues. We will be happy to get back to even in this rally and worry about making our money for the year in the autumn miasma. We will be out most of the day but will have a post late tonight or early tomorrow morning. Our trip ends on Wednesday night. So let the games begin.
5 February 2005 Daily Comment The markets on rose on Friday even though the employment report showed an increase of 130,000 jobs which were less than expected. Bonds rallied on the news and that eventually led stocks to their best gains of the tepid rally of this week. We added more Schwab to accounts at a price of $10.50. We have posted and updated Model Portfolio and will have a post Monday Morning. Enjoy the game. 4 February 2005 Daily Comment Yesterday the NAZZ headed south as the DJIA and S&P 500 held their ground. The culprits for the NAZZ were Amazon and Starbucks. We bought more Starbucks and also added Amazon to accounts. Our thought is that these high flyers will recover in any rally. SBUX dropped on good but less than expected same store sales and has now pulled back 25% since year end. After the low volume advance of the last few days the pull back is not unexpected. We must say that the rally lacks pizzazz and will need to get some life if the bulls are to prevail in the short run. Friday sees the jobs report and that will set the tone for the day. Another slow day would set up next week for a rally else. Time will tell. We are traveling and will be home
next week end. Until then we will be keeping the posts short.
3 February 2005 Second Comment The good news is that JP Morgan raised its ratings on SBC saying the AT&T deal was the right deal at the right price. We said that last week. Now the bad news. SBUX sales were up but same store sales increased 7% in January when the street was looking for 10%. Oops the coffee was spilled and Smith Barney decided to downgrade the shares to neutral from buy. Smith Barney said they wished they had done that at year end 2004 when the share price was 30% higher. That’s the coulda, woulda, shoulda markets talking. We were a day early and are learning the lesson of volatile stocks. We may add a few shares today. Also Qwest is thinking of making a bid of $17 billion for MCI. So Notebart at Qwest remembers when he could play with the big boys. According to the talking heads MCI is going to be purchased by Verizon and they can pay whatever while Q is limited by its already large debt burden. We think the Q bid is a signal that they want to be bought and if the shares sell off this morning we are going to reestablish our holdings. Amazon disappointed and is down $6 per share this morning. That is affecting the NAZZ. Overnight both Asia and Europe were lower and U.S. futures are indicating a lower opening. That is not bad and a pullback this morning would be welcome. First time claims for unemployment were down to 316,000 and the continuing number dropped by 500,000. Oil is lower. We are going to be traveling today and without computers tomorrow afternoon so we will post again in the morning with our take on today’s action and any moves we may have made. The games have begun.
3 February 2005 Daily Comment The action of the last few days has renewed hope among the bulls that a rally may ensue after the markets clear the hurdle of today’s Fed Meeting. The technical folks have all sorts of numbers for support and resistance but it seems that if the S&P 500 can clear 1190 and the DJIA 10575 in the next few days that there should be at least a continuation of the rally. The rally fun begins if the S&P 500 clears 1196 because then a lot of technical bears will have to cover and go long for a move to the old 1260 number we were talking about in December. It’s good to wait until the chicken hatches though and technicians do. We are going to jump the gun a bit and add two more issues today. We are buying a Starbucks in aggressive accounts since it has backed down 10 points from its high at the end of December. It is trading at a ridiculous P/E multiple but it has its entire public existence. We want to participate in the rally of the next few months that we continue to foresee in big cap stocks and if we are correct in our prognostications SBUX will go along for the ride. We are also repurchasing shares of Schwab because we don’t want to be out of that issue for too long and miss the run up to the higher teens that we have suggested may occur. We are also going to buy back some Univision in larger and aggressive accounts under $27. The shares are on the 12 month lows and they are the largest Spanish language entertainment provider. The equity is priced at 4 times revenues so it is not for the faint hearted but we want to have a few volatile big caps in our larger and aggressive portfolios. We are going to be traveling for
the next few days and so the during the day posts are
not going to be. We will be commenting on the Fed announcement and the daily
market action in a final afternoon post.
3:02 pm and the Fed raised the discount rate to 2.50%. They didn’t change the wording of their “measured pace” rate increases in the announcement and so traders will have to wait for the release of the minutes of the meeting to discern any subtle changes in policy. On the Fed rate news and after an initial upside flurry both stocks and bonds returned to their yawning mood and finished the day on the upside for the third positive close in a row. But the close was feebler than the last two and no serious upside markers were breeched. At the bell the DJIA was up 45 points at 10597. The S&P 500 gained 4 points to end at 1193 and the NAZZ rose 6 points to 2075. Breadth was positive at the end and oil closed 43 pennies lower at $46.69 on mixed inventory data. Surprisingly, that is the first close under $47 in three weeks. Treasuries were a tad weaker. BellSouth was lower today and trading near a six month low and with a 4% yield we decided to buy the shares for the accounts in which we have been purchasing the other stocks. BLS has been careful in their acquisition strategy and we don’t think they will do anything foolish. January retail same store sales are on tap for Thursday morning as well as the weekly first time claims for unemployment which are guessed to be 325,000. And tomorrow is today so let the games begin.
2 February 2005 Daily Comment Overnight Monday’s action was a tepid rally at best but the fact the S&P didn’t tank in the last hour and closed on its high was a small victory for the bulls. The volume was suspect and the stocks markets seem to be in trouble in part from a lack of interest. There have not been the usual inflows into mutual funds that occur at the beginning of a year and the gurus ascribe the failure of the January rally in part to that fact. We have opined that money is continuing to flow into real estate on a leveraged basis and that until interest rates are significantly higher the stocks markets are second sister to the outsized leveraged paper gains that folks are seeing on their real estate, including homes, investments. The only problem with looking at the home as an investment is that few folks are ready to sell and move into cheaper housing to realize the profit. And whatever folks buy is going to be as overpriced as what they sell. But not to worry. Real estate investors don’t have computers generating the second by second increases and decreases in the values of their real estate holdings as they do with their equity and debt holdings. And there in lies the rub. For folks expect their stocks to always rise, since in their minds but not on their computers they know that their real estate holdings never falter, always increase in value and that value increase is limited only by the imagination of the imaginer. We said yesterday that Time Warner bid $17 billion for Adelphi. Actually it was a joint cash
and stock bid by Time Warner and Comcast.
7:10am and hopefully stocks will open lower and consolidate a bit this morning before moving higher and taking out the 1185 area on the S&P 500 to the upside. Technically that is the type of action required in the next few days to get the show on the road. But with the Fed announcement not
scheduled until tomorrow at Presently stock futures are non committal and Treasuries are a bit firmer. We’ll no be posting again till
after the close and we will be able to review the day’s action then.
Google had good numbers after the close and that should set the tone for early morning trading. Our stocks were higher today and that is a good feeling. And two up days in a row is a new experience for this year. And today is tomorrow so let the
games begin and let’s hear what Alan has to say at 1:15pm.
1 February 2005 Daily Comment We misstated the price on the
AT&T/SBC deal. It is $16 billion not $19 billion. The deal is at the
market. CNBC is reporting the AT&T name will survive which of course to us
is a no brainer. The regulatory approval process will take a year.
We must admit we were amazed to
learn that we are spending over $1 billion for a fleet of helicopters to fly
the President around the country. He needs the helicopters; it is just the
price tag that is a bit staggering.
Oil is down $1.66 to $45.18 and
the dollar is higher. The trifecta of the Fed meeting will end the news of the
week that we think will lead to higher stock prices.
There is a reason. On Dec. 31, the S&P 500 closed at 1211.90. The index was down almost 4% as of Friday. The NASDAQ is down nearly 7% for the month. Otherwise, barring a spectacular rally on in January31, this January will show the worst performance since January 1990. In that January, the S&P slid 6.88%. In January 2000, the S&P declined 5.09%. And so, this January 2005 will be the worst January in 15 years. And if you look at the performance page of the Model Portfolio you
will see that our only down year since we began the Portfolio was 1990. We made
up for that down in 1991. But, in 1990 we remained fully invested after a rally
that lasted from February through March and our accounts will not remain fully
invested this year unless and until after there is a severe market correction.
Core PCE Inflator for the year was 1.5%. That’s the Fed’s
inflation measure. The yearly PCE Deflator was 2.4%. Personal Income was up
3.7% of which 3% was the Microsoft dividend payment. Personal Income was up
0.8%.
The SBC/AT&T deal is .78 shares of SBC for each share of AT&T. After the merger is approved AT&T shareholders will receive a special $1.30 dividend. That works out to $19.70 based on closing prices last night. The deal is expected to take a year to close. 8:47am and stocks opened higher with the DJIA up 70 points in the early going. The major measures are giving some ground as time passes. Breadth is 2/1 positive. Oil is off its lows but still down over $1 per barrel at $46.10. Treasuries are weaker with the ten-year at 4.15% and the two-year at 3.28%. 10:57am and in some of our larger accounts we bought Treasury 3% due 12/31/06 at 99.53125 to yield a touch under 3.25% to maturity. We think the Fed will raise the discount rate to 2.50% on Wednesday and 2.75% later and then may stop for a bit. At year end the now 20 months to maturity notes we bought will be 12 months to maturity notes. If Fed funds are 3%, one year paper will be yielding 3.5%. The notes that we are buying at 99.53 will be at the same price as now to yield 3.5% (because they will have to pay more since cash rates will be 3%) but we will have earned 3% for the entire year instead of an average of 2.50% in the money fund. If the economy shows signs of weakness these Treasury Notes will
rally back to par and we will have the option of selling for a gain or holding
to maturity. Should rates move higher and prices lower more quickly than we
foresee we will be able to lengthen maturity and increase current yield using
the same amount of principal that we are presently investing.
Crude is only down 50 pennies now and the NAZZ is up 22 points with the S&P up 8 points and the DJIA up 60 points. Breadth is 3/1 positive. SBC has moved
to the plus side and Verizon and BellSouth are lower as analysts realize
that the remaining Baby Bells have to do something to negate SBC’s move which we
like.
2:23pm and we have been out of order for the past three hours. It seems someone decided to dig up a fiber optic cable in the neighborhood in honor of the SBC/AT&T merger. Now that we are back on line we see that the DJIA has given back half its gains as has been the pattern of the last month; not so with the S&P 500 and the NAZZ. CNBC is reporting that Time
Warner bid $17 billion for Adelphi
Cable assets. We can’t find the reference on Reuters but we think that buy
would be good for TWX.
3:02 pm and at the close the DJIA was up 63 points at 10489. The S&P 500 gained 10 points to end at 1181 and the NAZZ rose 27 points finishing at 2062. Treasuries closed lower but firmed a bit into the close. Oil closed up 102 pennies at $48.20. Breadth at the bell was 2/1 positive. And tomorrow
is today so let the games begin.
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