Bud's Poem Page

28 February 2006 Daily Comment

Thoughts

Today is Fat Tuesday and the last day of both Mardi Gras, and also the last day of meteorological winter.
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Preliminary 4th Quarter GDP grew at a 1.6% which was better than the 1.1% rate that Advance 4th Quarter GDP was seen at last month. Since there are two more GDP number revisions due before final 4th Quarter GDP is announced we presume the elves at the Treasury Department will get the number up over 2%. Inflation is seen at 3.3% at the end of the Fourth Quarter on a year over year basis.
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Heinz missed its numbers and is going to be down a point or more on the opening. There is a hedge fund that has been making break-up or takeover noises about HNZ and that noise has pushed the share price up $3 in the last week.
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We arenít happy with the performance of Vodaphone over the last few days. We bought VOD because T and BLS were moving higher and we thought there would be a natural migration to VOD. But then there was a downgrade and then another and we should have exited rather than buy more. Since we bought it for a trade and it is down 10% from our initial purchase we are taking our lumps and moving on. On a value basis it is cheaper than all the other wireless companies, but when a knife begins falling in this market on a multi day basis it is best to avoid it or sell it. We shouldnít have added the shares yesterday but we were in a master of the universe frame of mind. Given present market conditions, when two major brokerages downgrade a stock unless one is resolute and wants really wants to own a stock it is best to avoid it. That is a lesson we continue to relearn.

The same thing happened (three downgrades after we purchased) with Intel but we want to own the stock, for a while at least.
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We are switching the Vodaphone we own in most accounts to Applied Materials which is down the same amount in the same percent in a little longer time frame and we are also buying SYMC in aggressive/large accounts. Symantec is back at $17 after running to $19.70 on news that Fidelity Magellan was buying. Also Fidelity Magellan buying may have been the reason it ran to $19 plus.
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By the by, we bought Hershey with a longer term horizon. The difference between our view of HSY and VOD is that when we made the initial purchase of HSY we were ready to buy the HSY at lower prices and to hold for a longer period of time. With VOD we bought as a trade and didnít plan on buying more at lower prices and shouldnít have.
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Existing home sales in January were down 2.8%.
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Google is tanking as the CFO of GOOG says growth is slowing it will have to find other ways for external growth. The shares are down $40 and have taken the rest of the market with them.
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Breadth is now 3/1 negative and the DJIA is down 100 points at 10:16am. This news from Google is supposedly old news since it was in the 10K but neophyte day traders donít read 10Ks.
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Natural Gas is now at $6.72 after trading at $16 early in the fall of 2005. So much for futures markets setting reasonable prices. The gouging that occurred should spur an investigation but wonít.
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In our aggressive/large accounts we sold the DD we bought yesterday for a scratch plus profit to get a bit more cash in the accounts. We donít know what the fallout from the Google news is going to be overnight but with Bush going to India and Pakistan there are bound to be riots.

The markets canít seem to break the up one day and down the next pattern that they have established and that has been symptomatic of an intermediate top over the past year. As always time will tell but we want to be in comfortable stocks and a lot of cash if our idea of a rally into the end of March is wrong.
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European Bourses were off sharply today with most down over 1% to 2%.
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Markets that are down all day tend to close down.
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Ford has come down to $8 where we have bought it before and so we are buying a bit for our large/aggressive accounts.
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Gold closed up $7 at $563 and Oil ended at $61.69 up 28 pennies.
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Treasuries closed better with the two-year at 4.68% and the ten-year at 4.55%.
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At the bell the DJIA was down 104 points at 10992 The S&P 500 lost 14 points to 1280 and the NAZZ was down 27 points at 2280.

Breadth was better than 2/1 negative, volume was brisk and new highs contracted sharply to fewer than 250 from more than 500 yesterday.

And tomorrow is midweek and the first day of March. The Ides are just around the corner. The casino will be open for business as usual.
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27 February 2006 Daily Comment

Thoughts

We are back in the land of milk and honey after a week-end of basketball enjoyment. The Norse won both their exciting games and are now preparing for the conference tournament. They need one win for an NCAA berth in Division II. We arenít counting our chickens but we have hope.
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Overseas markets were to the plus side with Asia closing higher and Europe trading higher at mid day. Early on, gold was up $2 to $558 oil was higher by 84 pennies to $62.07. But as the stock markets opened oil has traded lower and slipped to the negative side.

U.S. stocks opened higher. Apple is supposed to be introducing new commuters with Intel chips for immediate sale tomorrow and there are also rumors that Apple is going to buy Disney. As a result Disney is higher. JMP Securities also raised its opinion on INTC and the stock is up a few pennies on either that or the Apple news.

Vodaphone is lower on news that they are going to write down goodwill by $40 billion. Since VOD has $82 billion in goodwill on the books they have some more writing down in their future. But the write-offs are non cash and free cash flow exceeds $22 billion on a yearly basis and will not be affected.
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We are buying DuPont in accounts under $40 per share. We were day trading DD a few weeks ago and lost our focus as the stock got away from us. Now it has come back in and we are adding in small amounts in our large/aggressive accounts. We also picked up more shares of VOD under $20 for those accounts.
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New home sales were down 5% in January and the inventory of new homes for sale is now at a ten year high and represents 5 Ĺ months supply.
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At midday Oil is now down $1.76 at $61.16 as Russia and Iran seem to have some deal to do the enriching of uranium in Russia. Gold is down to $555. The DJIA and other major measures are all up.
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Oil ended at $61 and Gold at $556.30. Treasuries were unchanged with the two-year at 4.72% and the ten-year at 4.54%.
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At the close the DJIA was up 36 points at 11098. The S&P 500 gained 5 points to 1294 and the NAZZ rose 20 points to 2291.

Breadth was almost 2/1 positive but volume was light. New highs exceeded 500.

And tomorrow is another day and the casino will be open as usual.
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22 February 2006 Daily Comment

Thoughts

We are going to be traveling tomorrow and Friday since the basketball season is winding down and we have to catch a few NKU games. We also have to visit our favorite accountant and a few clients. So today will be the last post until Monday February 27.
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The Consumer Price Index for January was up 0.7%. The Core CPI which excludes everything folks need to live and get to work it was up 0.2%. Year over year the CPI was up 4.4% and the core rate was up 2.1%.
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Asia closed mixed with Japan down 0.7% down 113 points and Europe is higher.
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In early morning trading Oil was down 72 pennies at $62.02 and Gold was down $3.40 at $553.
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Stocks opened higher and after an hour of trading the DJIA was up 40 points.

Intel was downgraded again and it looks like it is going to break $20 on the downside. We are committed to our holding since we think the upgrade cycle will begin later this year when MSFT releases its new operating system and that INTC and MSFT will benefit. Till then we will batten down the hatches and keep a lot of cash on hand. Of course if the big boys and girls take a liking to either we arenít averse to a short term gain.
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We added shares of Vodaphone to more accounts and picked up a few more shares of Smuckers for our larger/aggressive accounts that didnít own it.
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Banks borrow short and lend long. That means banks borrow money at short term rates and lend out money at long term rates. With the current inversions where short rates are 15 basis points higher (4.68% on T Bills) than long rates (4.53% on the ten-year) one (including us) would think that banks would not be making new highs in the current interest rate environment. Wrong. We guess we are missing something.
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Investors Intelligence has 45.3% bulls last week and 29.5% Bears. On a contrarian basis those numbers suggest a rally.
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In our aggressive accounts we traded (bought and sold) Smucker today for an 80 penny profit and we are adding Hershey to more accounts.
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Crude oil closed down $1.72 to $60.95 as traders await the release of inventory reports on Thursday.Or maybe the boys and girls just felt like selling today. Gold ended at $557.
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At the bell the DJIA was up 70 points at 11138. The S&P 500 gained 10 points on the day to end at 1292 just below 1295 resistance. The NAZZ ended at 2283 up 20 points.

Breadth was 2/1 positive all day and volume was moderate. New highs popped over 400.

Treasuries finished better with the two-year at 4.67% and the ten-year at 4.54%.

The casino will be open for the next two days and we hope all of our readers can survive two days without our words of wisdom.

We are back on Monday February 27.
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21 February 2006 Daily Comment

Thoughts

This is from a NYT article on Saturday: Having overcome the country's sluggishness in embracing cyberspace and deregulating discount brokerage firms, day-trading has taken off in Japan, the world's second-largest financial market, after the United States. The number of accounts at Japan's electronic brokerage firms reached 7.9 million last September, up from 296,941 in 1999, when the first such firm opened, according to the Japan Security Dealers Association. That is an impressive gain, even after considering that some traders hold more than one account.
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In the Monday NYT there was an article that mentioned that China owns $829 billion of U.S. assets most of that in Treasuries. Only Japan holds more at about $850 billion in Treasuries.
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Overnight Japan was up 2.9% (see first thought), Hong Kong was up slightly and Europe is higher as are U.S. futures. Oil is back above $61 and Gold is up $1.
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Retailers are announcing better than expected earnings this morning with Wal-Mart, Federated and Home Depot all beating estimates on earnings and revenues.
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The FOMC (last Fed) meeting minutes will be released at 1pm today. Tomorrow the Consumer Price Index will be released.
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We sold the INTC shares we bought on Friday for a 15 pennies loss. We have a good position in the stock and we were too aggressive in adding the shares on Friday, after the RBC downgrade.

We are adding shares of VOD to accounts after JPM downgraded it. We are not doing this for a day trade. VOD is completely wireless and owns a chunk of Verizon Wireless plus wireless around the world with 135 million subscribers. It has less debt than most of the large Bells and some kind of buyout is going to occur with its Verizon holdings. We also like that it is world wide company.
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The Index of Leading Economic Indicators was up 1% in January versus and expected 0.3%.
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We sold the SJM we purchased on the sell off Friday for a small profit. We also sold Hershey except for some of our larger accounts for a $1 profit.
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The FOMC minutes see inflation a little bit higher than desirable but rates may be near where they need to be and inflation seems to be contained. Hopefully these are the last Greenspanís nebulous something for everyone parsing.
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And so we are reading Jin Cramerís latest missive to subscribers to his portfolio action and he says that he is selling one half of his 5000 share Intel position because he doesnít want to hit the market with his whole potion at the same time. The implication is that 5000 shares of Intel is too large a position for the markets to handle well. Right now INTC is quoted $20.54 to $20.55 with 60,000 shares on each side. That means Cramer could sell 60,000 shares of Intel on the bid. Cramer has been around a long time, too long we are beginning to think.
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By the way, he is selling Intel because he says AMD is eating INTCís lunch. Maybe they are but we have heard that story for years and AMD always manages to screw things up.
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This afternoon Oil and Gold have both pulled back form their early morning highs as stocks have sold off. That seems counterintuitive but is the way the markets have been acting for a while. Treasuries are unchanged on the short end and better on the long end.
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Oil finished up $1.22 at $61.10. Gold ended at $556 up $2 and the two-year Treasury went out at 4.70% while the ten-year was 4.56%.
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At the end of the day in many accounts we bought back Ėat lower prices- the SJM and HSY that we sold Friday and today.
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At the bell the DJIA was down 47 points at 11068. The S&P 500 closed down 4 points at 1283 and the NAZZ lost 20 points to close at 2262.

Breadth was 5/4 negative on the NYSE and 2/1 down on the NAZZ. Volume was moderate and new highs were over 300.

The casino is open tomorrow with only three more days to play this week.
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17 February 2006 Daily Comment

Thoughts

Japan was down 300 points overnight as the rest of Asia was mixed. Japan seems especially volatile this year. Europe is higher and Gold is up $2 and Oil $1.50.

Today is an options expiration day but also it is also the beginning of a three day week-end so the trading volume may be lower.
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Paint drying would be more interesting than todayís markets. Trading in Treasuries is closing early and traders are squaring positions for the holiday. Gold is up $4 and Treasuries are firmer o the short end. Oil is up but below the dayís highs.
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RBC lowered their price target on Intel from $29 to $21. They are worried about inroads being made by AMD. To our way of thinking, INTC is on a low, it remains a tremendously profitable company with a 75% market share and now Apple is using INTC chips for the first time ever. If it were on its high or midrange we would be worried. But we are not at these levels.
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Year over year the Producer Price Index was 1.5% ex food and energy. With food and energy it was 5.5% but no one pays attention to that number. We wonder whether Bernanke believes that food and energy donít matter.
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Treasuries closed higher with the two-year at 4.67% and the ten-year at 4.54%.
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Oil closed up $1.42 at $59.88 and Gold ended at $554.80.
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We bought more INTC in our large/aggressive accounts down 60 pennies on the day and we also picked up some Smuckers at $37.80. The shares are down $4.75 on the day on an earnings disappointment. Donít cry for the two Smuckersí boys who run the company since they each sold about 400,000 shares last June at what looks like about $50 per share. If itís Smuckers it has to do good for us, we hope.
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Carl Icahn called of his takeover attempt of Time Warner and the shares are headed back down. We would guess that TWX will buy him out at a price that pays him for his effort.
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At the bell the DJIA was down 10 points at 11111. The S&P 500 lost 3 points to 1286 and the NAZZ dropped 12 to 2283.

Breadth was 5/4 positive on the NYSE and the reverse on the NAZZ. New highs exceeded 400 and volume was moderate.

The Casino is closed until Tuesday.
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16 February 2006 Daily Comment

Thoughts

Hewlett Packard had very good numbers and that has added a positive tone to the stock markets pre-opening. Asia was higher overnight and so is Europe. And gold is down $2.40 and oil is up 65 pennies this morning.
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1280 is strong resistance on the S&P 500 and was tested twice yesterday as the Index closed just below that number. With 1275 close as first resistance the trading range band is narrowing. The S&P 500 needs to break out convincingly above 1280 for the rally to gain steam. With HPQís numbers this morning and better talk about Dellís numbers tonight it has a good chance to do that. But there is a three day week-end upcoming and so how traders feel about being long or short over the holiday is going to control in the very short term of two days.
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Jobless claims rose 19,000 to 297,000. January Housing Starts and Building Permits were greater than expected. And both were revised upward for December also. Import prices rose 1.3% which was greater than the 1.2% expected.
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We bought more GE for accounts that didnít own it. If stocks are going we believe GE has a few points in it and if this rally is going to fail GE is near its 15 month low.
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Tomorrow is an options expiration day and that may be having some effect on stocks although we donít know what the effect is since there are so many different strategies. In fact there may be so many that they cancel each other out.
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For our large/aggressive trading accounts we repurchased Vodaphone which owns slightly less than half of Verizonís wireless operation. All the Telephone stocks are moving and this one is lagging the group.
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Google gained $21 today.

Gold closed at $548, Oil at $58.80 and Treasuries were basically unchanged.
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At the bell the DJIA was up 60 points at 11120. The S&P 500 gained 9 points to 1288 and the NAZZ rose 18 to 2294.

Breadth was 2/1 positive and volume was moderate. New highs were 370.

And tomorrow is the last casino day before traders board the charters for Las Vegas.
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15 February 2006 Daily Comment

Thoughts

Chairman Ben says a few more rate hikes may be necessary and that housing prices are not going to collapse. He sees steady economic growth and maybe some pricing pressures.
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Overnight Japan was down 200 points and Europe is weak. U.S. stocks opened lower. Gold is down another $3.50 and oil is a bit higher at the opening and Treasuries are firm.
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With the S&P 500 above the 1275 level and the markets looking for a Bernanke rally we are going to place Intel and Microsoft in accounts. MSFT shares are down $2 in the last month and we think there is a trade in them. INTC is down $5 in the last two months.

We had a client who is in the software business call and suggest MSFT for the longer term because he feels that companies that use computer equipment are entering an upgrade cycle. He also likes Cisco but we are inclined to wait a little on it since it is up $2 in the last month.

Finally we are adding Hershey to larger/aggressive accounts. The share price is down from $68 to $52 in the last year on higher sugar prices. Sugar is one of the traded commodities like natural gas that are being maneuvered by the big boys and girls. At this price we think HSY is worth the risk for a trade.

And we bought GE for more than a day trade in the large/aggressive accounts with enough room to buy shares at a lower price.

We arenít committed to the longer term on any stock.
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Investors Intelligence has 48% bulls and 27% bears in its latest survey. The drop in bulls under 50% suggests to us that and into March rally is possible.
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In a wonder of wonders oil inventories were up in the latest weekly report and oil has dropped under $58 down $1.62. Gold is off $7 to $542.
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At the end of the contra hour the S&P 500 is pushing through resistance at 1280.
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Treasuries closed slightly weaker on the short end with the two-year at 4.70% and the ten-year unchanged at 4.60%.
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At the close the DJIA was up 30 points at 11060. The S&P 500 gained 4 points to close at 1280 and the NAZZ was up 12 points at 2275.

Breadth was 3/2 positive on the NYSE and over 2/1 on the NAZZ and volume was moderate. News highs expanded to over 300.

There are only two more casino days until the three day Presidents Day week-end.
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14 February 2006 Daily Comment

Thoughts

We wish a Happy Valentineís day to all our Valentines.
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The new Fed Chairman Bernanke speaks before Congress on Wednesday and traders are positing that knowing the fellow will help the markets. That is plausible because there is a lot of negativity towards stocks right now and a new catalyst is needed to get them moving higher into March when the real test will come after Quarter end.
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Early morning market data show that Japan closed up 1.5% overnight, Hong Kong was up .50%. Europe is mixed and U.S. futures indicate a higher opening. Gold is up a couple of dollars and oil is down under $61.
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Retail sales were up 2.3%, ex autos 2.2%.
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Brian Belski of Mother Merrill said this morning in CNBC that there could be a 10% correction but that such a correction shouldnít be of concern to long term investors. We wonder if that is a throw away line because we donít know anyone with a $500,000 portfolio who wouldnít be bothered by s drop of $50,000 in value over the period of a few months. We know from our experience last year that such an occurrence is quite painful -and we on dropped 6%- and worth avoiding at all costs, especially if the upside is less than or only equal to the downside.
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It looks like stocks arenít going to wait for Bernankeís testimony as the major measures are moving higher this morning with only oil stocks and homebuilders as groups which are lower.
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Natural Gas is down 54% in price in 63 days in the middle of winter. www.minyanville.com says it best when it say that this price drop proves that it is not supply and demand for the product that is determining the price of this and other commodities, but rather liquidity and speculation (by hedge funds and institutions). And we would add that oil and gas companies and OPEC are enjoying the ride.
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Today it looks as if the bullish retail sales numbers have encouraged the hedgies and hot money to abandon the oil patch and head for the big caps. Folks have been waiting for this rotation and it has come today. Volume is good as is breadth and when the hot money moves it moves without regard to price since momentum is the catalyst.

Movement is the name of the game in the big casino.
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Home builders are lower as Treasuries are a bit weaker on the bullish retail sales. The rise in the yield on the ten-year is seen affecting mortgage rates which in turn affects the ability to pay mortgage interest.
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In early afternoon trading as the DJIA topped 11000 up 120 points oil fell to $59.95.
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January trading at Schwab rose 62% from last yearís levels. The little guy and gal are back in the casino. We wish them well.
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The NYT is reporting that the oil industry is going to get royalty relief to the tune of $9 billion over the next few years.
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The inversion in the yield curve flattened today as the ten-year lost ground on the retail sales number. The Treasury two-year ended at 4.69% and the ten-year at 4.61%.
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Oil closed at $59.57 down over $1. Gold finished at $550.
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At 3:02pm the DJIA closed up 140 points at 11030. The S&P 500 jumped 13 points to 1275 and the NAZZ gained 22 points to 2262.

Breadth was 2/1 positive and new highs expanded 200. Volume was moderate.

The casino gave a nice Valentineís gift to the bulls.
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13 February 2006 Daily Comment

Thoughts

After being down large early on Friday the markets reversed in the last two hours to close up slightly on the day.

The Commodity Research Bureau Index fell 4% last week as Copper and Sugar were hammered. Many commodities are up so much this year that the drop for long time holders isnít disastrous. But for the Ďnewbiesí we presume they are learn gin their lesson about being late to a momentum market. The same goes for some of the mo-mo stocks like Google and Whole foods where a penny per share earnings miss, even on much higher earnings can lead to a 10% to 20% drop in the share price.

This market volatility in the former leaders is one reason we are on the sidelines right now. Some traders are anticipating a switch to laggard big caps with the hope that GE and Citigroup become market leaders again. We see those stocks as trades but not leaders.

The markets are looking for new leadership. Even the oil stocks took it on the chin as oil dropped to $61.65 Friday afternoon after trading over $69 just a week ago.
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This new gambling vehicle is especially prescient while late given the week-end snowstorm up the east coast. A lot of trading money wasnít made or lost. Remember futuresí trading is a zero sum gain. No wealth is created; it only changes hands with a small portion of each trade going to the house. Thatís why we say these markets are not one larger casino.

The Chicago Mercantile Exchange said Thursday it will begin trading snowfall futures and options contracts later this month.

The world's largest derivatives exchange said the new product, which will trade electronically starting Feb. 26, should help cities manage risk associated with snow accumulation. Insurance companies, retailers and other businesses with a lot riding on the weather also can use the futures to hedge their risk.

"The impact of weather can influence regional and local markets, playing a critical role in the overall economy," said Rick Redding, the exchange's managing director of products and services. "CME weather futures provide the safety and soundness investors are seeking to manage their weather-related risk."

Snowfall futures and options are geared to a snowfall index focusing initially on Boston and New York. The index will change based on official daily snowfall totals.

Investors can buy and sell contracts trading on a monthly basis from October through April. A trader makes money on a contract when the index rises after it is purchased and loses money when it falls.

It all may make little financial sense to a small retail investor, but the Merc is counting on it succeeding with large companies just as temperature-index or weather futures have since they were introduced in 1999. More than 889,000 weather contracts were traded last year and the pace is picking up in 2006, with 108,000 traded last month, the exchange said.

Last fall, it began trading futures contracts based on the number of frost days in Amsterdam after a major construction project in the Dutch capital was delayed several times due to a persistent frost, resulting in heavy financial losses.

"We're seeing more and more hedge funds and banks trading the weather contracts," said Brian O'Hearne, managing director of the environment and commodities markets for Swiss Reinsurance Co. and president of the Weather Risk Management Association.

"From the standpoint of municipalities or companies that are concerned with excessive snowfall and whether they will have shipment of goods, there's now the opportunity to hedge your removal costs or transportation delays or other weather-related exposure," he said.Ē
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Spot Gold was down $15 on Friday after being up $15 on Thursday after being down $13 on Wednesday. With a price of $560 those are only 1% moves but in dollar terms they are large and demonstrate the volatility in the markets.
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The U.S. Trade Deficit was $726 billion in 2005.
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Some things just arenít right.

The military's health care program, TRICARE, supports some 9.2 million beneficiaries. Veterans from wars too soon forgotten depend on the program.  From military families who have buried their husbands or wives, to those who dread a call in the middle of the night about those who currently serve, the program is designed to take care of those families--our families.  First, Bush's plan would eventually cause some 600,000 retirees to be dropped from the military's healthcare program. Bush's budget also makes across-the-board premium increases to TRICARE retirees under the age of 65. Veterans will see an increase of 41% for single or family coverage within two years; senior enlisted and officer retirees will see increases of up to 204%. By 2009, healthcare premiums for our veterans will TRIPLE.  (See PDF of TRICARE fee increases here)
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The Nikkei dropped 2.8% on Monday and is now below where it began the year.
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There was a negative story in Barronís on Google and the shares are trading down another $14 this morning. At some point the bulls are going to make a stand with this stock and that may be when the rally resumes.
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According to an article in Barronís by the always perspicacious Jonathan Laing, the trade publications Inside B&C Lending states that sub-prime loans amount to about 10% of the 8.4 trillion mortgage market or $840 billion. The teaser rates on these loans were 7% but as they come off the teaser rates the interest rate may move closer to 10% which is 50% higher than the original rate. In the last two years over 1.2 trillion in sub-prime loans were originated.

Several interesting quotes in the article are: "I just don't see any coming collapse in the sub-prime market as long as the U.S. economy and job growth stays strong and interest-rate increases remain subdued," insists Doug Duncan, chief economist of the Mortgage Bankers Association in Washington. Echoes Guy Cecala, publisher of Inside B&C Lending: "People have been crying wolf about the looming sub-prime reset crisis for two years and nothing has happened. Lending standards are now being tightened up, so I expect we'll muddle through."

We seem to remember the same kind of quote about the stock market and tech stocks back in 1999.
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Reuters reports: The U.S. labor market may be facing supply constraints that could make efforts to boost job growth with easy monetary policy backfire, Cleveland Federal Reserve Bank President Sandra Pianalto said on Monday.Pianalto, who is among the Fed officials who vote on interest rates this year, told the Cleveland Association for Business Economists that a decline in the percentage of workingage Americans participating in the labor force could reflect a decision by younger workers to seek more education.

"In that case, attempting to spur more rapid job growth with an accommodative monetary policy is exactly the wrong thing to do," she said. "It will not accomplish the goal of maximum sustainable growth in the long run, and it may threaten our goal of price stability," she said.
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At 12:25pm Google has not bounced and is on its low for the day. the last hour will be the tell but we would guess there are a lot of day traders and margin traders in the stock and that doesnít bode well for the last hour for GOOG or the NAZZ. The DJIA keep trying to move to the plus side but breadth has been 2/1 negative for the day and is not improving.
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Europe closed higher across the board today.
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The CRB (Commodity)Index is approaching a multi year uptrend line at 320. Gold is off $11 at $543 and Oil is down 80 pennies at just above $61.
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This is an interesting comment piece by Stephen Roach of Morgan Stanley. His conclusion that the Trade Deficit is only going to be solved by higher real interest rates.

http://www.morganstanley.com/GEFdata/digests/20060213-mon.html#anchor0
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Measuring from the beginning of 2002 the S&P 500 is up 10.4%, the DJIA up 8.9% and the NAZZ up 15.9%

Measuring from the beginning of 2000 the S&P 500 is down 13%, the DJIA is down 5% and the NAZZ is off 44%.
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We found the following interesting. Of course we are willing to bet that 75% of the folks opposed to Naked Shorting think it means folks who sell stocks they donít own while wearing no clothes. The item is from Reuters:

Three out of four U.S. investors(1) (76%) say someone who naked shorts a stock should face civil (8%) or criminal penalties (9%) or both (59%).By the same margin (76%), investors believe such penalties should be about as (65%) or more (11%) severe than those for fraud and counterfeiting, according to a recent survey commissioned by Working Americans for an Open Economy, conducted online by Harris Interactive(R) among 1,243 investors nationwide.
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3:02pm and the DJIA closed down 30 points at10890. The S&P 500 lost 5 points to 1262 and the NAZZ dropped 22 points to 2240. Google finished near its low at $346 down over $16.

Breadth was over 2/1 negative at the close and new highs contracted to 140.

Treasuries closed firmer with the two-year at 4.67% and the ten-year at 4.58%.

And tomorrow is another day at the casino. Maybe the bulls will have recovered from the snow storm by then.
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We werenít very busy today and so we had fun surfing for comments on Cheneyís hunting mishap. By the by, in hunting when a hunter shoots a person and not the prey it is always the hunters fault. Period. As always ignore the following if you think Cheney is the next George Washington.
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Cheney steps up war on lawyers

U.S. Vice-President accidentally shoots hunting buddy

The above headline from: http://www.canada.com/national/nationalpost/news/cnspolitics/story.html


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Cheney shoots pal; bird's fine

http://www.nydailynews.com/

http://www.talkleft.com/


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Dick Cheney's top 10 excuses for shooting fellow hunter Harry Whittington

Author unknown ... emailed to me without attribution:

10. Sick and tired of Whittington's "Hey, I'm having a heart attack" jokes
9. Pushed over edge by
Dixie Chicks and Streisand blasting on pick-up truck stereo
8. Ongoing dispute over whether it's acceptable to torture quail before shooting them
7. Thought he saw Scooter Libby on other side of tree line
6. Bombed out of his gourd on Wild Turkey and Lone Star Beer
5. Companion's ill-advised decision to wear Moveon.org sweatshirt
4. Was trying to impress Jodie Foster
3. Whittington's repeated ribbing that Bush is actually the "real president"
2. Targeting scope on rifle made by Halliburton

And the number one excuse given by Dick Cheney for almost blowing away hunting companion Harry Whittington...

1. Because he's a wartime vice president, damn it

http://smirkingchimp.com/

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Prominent Civil Servant seeks new hunting buddies

http://washingtondc.craigslist.org/act/133438837.html

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For the Record

CORRECTION

Due to an editing error, a February 13 item on how Dick Cheney totally shot a guy in the face mistakenly referred to Mr. Cheney as ďBest Vice President Ever.Ē In fact, Aaron Burr was way cooler, due to his actually killing a cabinet member. Then he attempted to take over the country with the head of the Army, who was a Spanish agent. Thatís awesome. We regret the error.

http://www.wonkette.com/

*****

An endorsement he regrets  

http://patriotboy.blogspot.com/

*****

 

9 February 2006 Daily Comment

Thoughts

There will be no post tomorrow Friday February 10 since our computer manager brother is taking the week-end off. Next post will be Monday night February 13. We wonít be doing any trading tomorrow or soon so you wonít miss anything.
*****

Asia was higher overnight with Japan up 1% and Europe is higher with France and England both up 1% following on yesterdayís strong U.S. close. Oil is back up to $63 and gold is up $6 to $559.
*****

The first thirtyĖyear Treasury auction for years will occur today.
*****

Jobless claims remain firmly under 300,000 at 277,000 up 4.000 since last week.
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The 200 day moving average on the S&P 500 is 1225. With\t the S&P 500 over 1260 next resistance is the 20 day moving average at 1269 and then it is one to 1275.
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According to Tony Crezenzi at www.realmoney.com the bond markets are trading on the assumption- with the odds at 92% -that the Fed Funds rate will be raised to 4.75% at the March FOMC meeting. The odds were 90% yesterday. There are instruments that can be traded that bet on a change in the odds. As we have said, the casino has every type of action for the risk taker. The Treasury Market is priced for 100% odds that the funds rate will be 4.75% by the May 10 meeting, and 56% odds that it will be raised to 5% at that meeting. and if the rate doesnít go to 5% at that meeting then the odds rise to 82% that a 5% rate will occur at the June 29 FOMC meeting. About a week ago the odds were at 24%. Lord Greenspan and the inflation hawks are working their magic.
*****

For Greenspan to give a paid for talk during a Treasury refunding right after leaving the Fed is in keeping with the letís get ours philosophy.
*****

The new Treasury 30 year came at 4.53% while the old Treasury 30 year is trading at 4.65%. The explanation of the 12 basis point difference is too complicated for us.
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We would bet that 95% of the fund and institutional managers making the decision to rush into 30 year securities at 4.50% werenít around in the late 1960s or early 1980s. In the late 1960s everyone had to own the AT&T 6% bonds due in 1998. Those bonds traded at less than $500 per $1000 bond in 1982. We are also sure that 95% of the talking heads were not around for either of those occurrences.
*****

Gold closed up $15 at $569. Oil ended at $62.46 down 9 pennies.
*****

Treasuries ended unchanged on the short end with the two-year at 4.65% and the ten-year at 4.54%.
*****

In the last hour the momentum stocks had no oomph. Apple closed down $3.50 per share and Google was down almost $10. And Whole Foods which is a market darling lost $7 per share on a penny per share miss in their earnings.
*****

3:02pm and the DJIA gained 25 points to finish at 10884. The S&P 500 was down 2 points to 1263 and the NAZZ lost 11 points to 2255.

Breadth deteriorated in the last hour but was still 5/4 positive on the NAZZ but the reverse o the NYSE and new highs expanded to over 300 all before 2pm.

The last hour saw the rally of yesterday and this morning collapse and sets up an interesting Friday.

One more day at the casino and then the Winter Olympics begin. We are going to have a little snow tonight to celebrate.
*****

 

8 February 2006 Daily Comment

Thoughts

Gold is down $4 this morning at $549 and oil is up 16 pennies. Japan was down over 2% with Hong Kong losing almost 1% and Europe is trading lower. U.S. futures suggest an up opening. One reason is that traders like the Cisco earnings number and forecast going forward to the tune of pushing the share price up 10%. Most of the gurus were suggesting that old tech is no growth tech and so some folks must have been caught with their shorts unattended.
*****

Investors Intelligence had 51% bulls and 25% bears with both number down about 1% for last week.
*****

The number of houses and condominiums up for sale is about 2.8 million nationwide which represents a 26% jump from last year.
*****

Bob Marcin at www.realmoney.com points out today that if a commodity has an active futures market that commodity has been making new highs. And if the commodity does not have an active market it is not. Examples are the spot price of aluminum spiking higher/ the price of steel is not. The spot price of Oil is spiking higher/ the price of coal is not. Marcin suggests with we would guess tongue in cheek that maybe the hedge funds are responsible. To this we say ďOh really?Ē
*****

We used the morning rally to sell our PPH and NCC positions. That leaves us with Schering Plough at a loss. With the announcement today that Pfizer is thinking of selling their consumer business we presume that analysts will be talking of the spin off values of other drug companiesí consumer operations and that we think that has given a slight lift to SGP shares. We are taking the opportunity to reduce the size of our holdings in our larger accounts.
*****

Our trading spurs are hanging in the barn and we are just watching the actions.
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The weekly Oil inventory numbers were just releases at 10am and crude supplies were down a tad more than expected while gasoline inventories were up 2.3 million barrels more that expected and heating oil was a few hundred thousand barrels less than expected.
*****

Darling Google is down $12 today and Intel has just turned negative at 10:30am.
*****

Gasoline is $2.50 per gallon, so is water.
*****

www.realmoney.com is reporting that there is talk in the markets that Greenspan gave a speech to select group sponsored by a US securities house. Greenspan reportedly was upbeat on the economy, negative on housing and seemed to warn of the risk of more Fed tightening than the market expects.

We wonder how much he was paid. The Greenspan green making machine begins to spin.
*****

In the final hour of trading stocks are moving higher. This is the move we expected yesterday but as traders say, ďtiming is everything.Ē We are happily in cash and we do know that anecdotal phone call and stock action suggests that at some point this year we will be very happy with our cash/T Bill position.
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3:02pm and as the Ďold stockbrokerí used to say ďbuyíem now boys fore they go lowerĒ.

The DJIA closed up 108 points at 10858. The S&P 500 regained the ground above 1260 closing at 1265 up 10 points. And the NAZZ rose 22 points to 2066. Were the hedgies selling Google to buy Cisco? We doubt it. Rather we think the CSCO move was short covering and there is the suggestion that the Google selling was insider unloading. Google managed to close higher on the day on the last hour rally.

Breadth was 5/4 positive on the day which is not nor exciting on a 1% up day; and new highs contracted to 185 which is also not a good sign.

Treasuries closed weaker after a so-so Treasury ten-year auction and gold was off pennies as was oil at $62.50.

We received a call from a fellow who thought we were buying gold and wanted our opinion. We realize that our daily mention of the price of gold is placing us at the top of some website search lists. Live and learn.

And there are two more casino days left this week and with no Super Bowl left we suggest that Mrs. Gretzky look at stocks.
*****

 

7 February 2006 Daily Comment

Thoughts

GM halved its dividend and is also cutting executive compensation and health benefits for salaried workers as a prelude to asking union workers to join the cause. The CEOís salary is going to be cut in half and the next two fellows will be down 30%. But we are sure there are plenty of bonus sweeteners in the deal for them. And 30% and 50% down are still 20 times what any union member makes.
*****

John Snow, the Treasury Secretary, says that President Bush will do the hard thing and not raise taxes. Yes. In the new speak raising taxes is the easy thing to do and cutting taxes is the hard political choice. We all now how higher taxes make constituents happy and lower taxes make them angry and inclined to vote for opponents.
*****

American countries are pushing the Bush folks hard to allow the building of nuclear generators in India by American countries. The problem is that there is this little law that says that countries that develop nuclear weapons on the sly like India has done are not entitled to U.S. assistance in building nuclear reactors. The law makes sense to us but makes no cents for American companies so the Bushies are going to ignore the law.
*****

Disneyís earnings beat estimates and the share price is $25.75. We do think the company is going to turn the corner this year and are hoping for a sell off into the low $20s at some point this year to establish a longer term position.
*****

Sock it toíem, Gold is down $12 today.
*****

Toll Brothers, the large home builders said first quarter signed contracts were down 21%.
*****

Itís 9:51am and the 1260 support level for the S&P 500 was pierced on the downside a few minutes ago. The close is more important than the intra-day but traders are taking note. New support which must hold or it is the end of the world -at least for a while- is 1240-1245.
*****

We have been intra-day trading GE for a few very large/aggressive accounts. We close our position at the end of the day and have lost a few pennies trading. GE is now right above support at $32.50 and we think it will hold. We expect a rally in the next few days since the markets have been negative for the past week.
*****

We are adding PPH, which is the Drug Holders Trust that owns PFE, ABT, MRK and many other drug stocks, to a few larger/aggressive accounts. We are using this as a proxy for drug stocks. The high for the last twelve months is $ 76 and the low is $66 and we are buying under $70. We own some shares over $71 that we bought in aggressive accounts. Those shares are entitled to a 55 penny dividend.
*****

We are also trading GLD which is the Gold Holders Trust in these same very aggressive accounts.
*****

Capital Research sold its Time Warner stake. Time Warner said it will be buying back $1.5 billion in stock for each of the next three months. Our guess is that if TWX can get the share price above $19 Icahn sells his stake.
*****

At 11:40am Oil is off $1.46 at $63.50. With oil and gold (now down $15) both lower and the S&P 500 teasing around support /resistance 1260 we continue to believe in a rally today or tomorrow.
*****

Morgan Stanley has upped its forecast for 1st Quarter GDP to plus 5.5%. If that is the case then why are stocks meandering?
*****

Spot gold is down $19 which is the largest one day fall in dollar terms since 1993. Of course the price is 60% higher.
*****

The auction of Treasury three-year notes was weak and has helped the sell off in all maturities of Treasuries.
*****

Energy shares are down today in sympathy with Oil.
*****

We closed out our gold trade with a 60 pennies loss and also sold the GE for a loss.
*****

Cisco is the important earnings report of the evening.
*****

3:02pm and the DJIA closed down 50 points at 10750. The S&P 500 lost 10 points to 1254 and ending below support at 1260 and the NAZZ dropped 15 points to finish at 2245. Breadth was 2/1 negative and new highs were under 200 while new lows were 75.

It isnít the end of the world but we were trading around support levels and when they didnít hold we had to close the positions.

Treasuries finished unchanged on the short end to up a bit in yield on the long end.

And tomorrow is another day at the great internet casino.
*****

 

6 February 2006 Daily Comment

Thoughts

In the Say What department:

The DJ news wires reported today that President Bush proposed Monday cutting federal health spending, including Medicare, youth programs, and the Centers for Disease Control and Prevention, by $4 billion for fiscal 2007.

In budget documents submitted Monday morning to Congress, the White House estimated that about $2.3 billion of those savings would be needed to fund future emergency preparations for a possible pandemic flu.
*****

The end-zone call that took the touchdown away from Seattle and the holding call that took the pass to the one yard line away were bummers and changed the game. Finally the tackle by Quarterback Hasselbeck that was called a block below the waist was ridiculous although by then the gameís outcome had already been determined. Obviously we were for the Bengals who the Steelers beat by injuring their quarterback.
*****

We get e-emails:

Hi Bud
††††††††††††† I was being kind with the maturity date. What I donít understand is what is the big difference if you are getting 3.4% or 4.6%... no risk at 3.4%, able to use funds when something arises... now youíre back into a fox hole trying to climb outÖ
anyway the weather is sunny and 75 in Arizona. Just got back from watching a calf roping event... Have a good weekend

We reply:

††††††††††† Hi Ö

††††††††††† The difference between what cash and T Bills earn in larger accounts is the fee you pay us and we were trying to earn it for you. We didnít plan on using that money till next fall anyway. But I do agree it is a lot of work for very little-or so it seems.

But the 1% plus additional yield on $32 million is $208,000 for clients for six months. Our only mistake was doing the Treasury two-year instead of the T Bills to start because when rates rise and you lengthen then you can buy more yield for the same price.

But we thought the language of the January Fed Meeting would suggest they were finished. It was a contrarian play. We were wrong. Now weíll hold the T Bills until August unless rates move significantly higher. Owning the T Bills makes it acts as a check on us trading those funds before August. That is a positive.
*****

Asia finished higher overnight and Europe is also higher. Gold is up $2 to $574 and oil is up 60 pennies to $66.03. Today should be an up day according the three day after the Fed rule and the year should be an up year because an old NFL team won the Super Bowl. We havenít heard anyone talk about that theory so maybe it is now inoperative.
*****

Talbotís is buying J Jill for $517 million. We have owned both but have no immediate interest in TLB at the present $28.
*****

Minyanville.com reports that Prudential strategist Ed Keown cut his Model equity exposure to 55% from 100% and raised bond exposure to 35%. He must be reading our stuff.
*****

Bloomberg reports that GM may cut its dividend by $1.2 billion per year to give it more leverage with the unions. That makes sense to us although we donít own GM.
*****

Toshiba is going to buy Westinghouse Electric so that it can build nuclear reactors in China. Now that is a real Ďmy how times have changedí event. It also says much about the long term meaningless of war.
*****

CNBC is reporting that Cat Doctor Frist, the Senate Majority Leader, is saying the U.S. must be ready for action against Iran. It must be an election year.
*****

With the Senate Leader suggesting the U.S. might invade Iran we are now getting as nervous as other traders.

Ciscoís earnings come tomorrow night and our guess is that with the markets reaction to other tech earnings that Cisco is going to be a bummer. With that in mind we are going to take a small 30 pennies loss in out tech holding Symantec at $16.64 to clear the air.

All the major tech stocks have been acting poorly and we thing discretion suggests the sidelines for now.

Motorola has been giving ground for the past few weeks and so we are going to sell Nokia at $17.98 for a small 20 pennies loss with the hopes of getting back in under $15.

We sold our remaining ASD at $38.29 for a $1.15 gain. We hope to trade out of the NCC this week.

We will hold the Schering Plough since that is more a takeover/value play.
*****

There is a three-year maturity Treasury auction on Wednesday, a ten-year auction on Thursday and a new thirty-year auction on Friday. The when issued thirty-year which is trading on guesses as to what the new thirty-year auction will bring on Friday is trading at 4.45% which is 16 basis points below the two-year which is at 4.61%. that is not as great as inversions can get but is still a large inversion.
*****

Treasuries closed higher in yield on the short end with the two-year at 4.61% and the ten-year at 4.54%. Gold was higher and oil was lower.
*****

At the bell the DJIA closed up 5 points at 10798. The S&P 500 gained 1 point to end at 1265 and the NAZZ was down 4 points at 2263.

Energy and metals stocks were higher while drug, retail and home building stocks were lower.

Today was dull for both bulls and bears. Maybe there was a Super Bowl hangover.

The casino is open for business as usual tomorrow.
*****

 

3 February 2006 Daily Comment

Thoughts

Asia was lower overnight with Hong Kong down over 1%. Europe is higher as are U.S. futures.

The employment report released at 7:30am showed an increase of 193,000 jobs in January and average hourly earnings increased 0.4% employment gains were revised up 80,000 for last two months of 2005.
*****

Stock futures seem to like the news while bonds donít.
*****

With the benign employment numbers plus the newness of the new Fed Chief we have rejoined the ďthere will be more rate increasesĒ camps. We thought there might be a chance that Greenspan would go out saying his job was finished on raising interest rates. We were wrong and we were too early buying the two year Treasury.

For our larger accounts that have large amounts of money in cash we wanted to obtain a better rate than the money market rate. But we are not yet ready to assume much risk to principal. We should have followed our own advice in the About Lemley section of our website where we discuss bond trading http://www.lemleyletter.com/lemley_about.html . In a rising interest rate environment we should buy the shortest maturity first and then roll out to longer maturities as interest rate rise. We didnít do that. But it isnít too late to correct the problem.

To correct our misadventure we sold the two-year Treasuries we bought on Monday for a $2 per bond loss and bought 6 month Treasury bills with the money. We sold the bonds at a 4.61% yield and bought the Treasury Bills on a bond equivalent 4.61% yield. The net yield (factoring in the $2 per bond loss that will be regained) for the six months is going to be 4.20% which is well above the present 3.40% money market rate cash is earning in our accounts and will be above that rate through August even if Fed Funds go to 5%. This action is making lemonade from our lemon trade.

We will take a look at our options to extend maturities when rates move higher. Our thinking on Monday was contra the perceived wisdom in that we wanted to be in two-year treasuries in case the Fed decided to stop tightening but with the consensus suggesting further tightening we think the switch is prudent.
*****

University of Michigan Confidence Index was 91.2 for January versus a final 91.5 for December and an expected by the guessers 93.5. This is one of the strangest data points off which the big boys and girls trade.
*****

Both the stock and bond markets decided they didnít like the jobs report and sold off in early trading. The DJIA has dropped 70 points and the bears seem to be in control.
*****

Tiger Woods was paid $5 million to play in a golf tournament in Dubai in the United Arab Emirates. The total purse for the golf tournament for all players is $2.5 million. It is nice to know that at least one American is getting back some of the oil profits.
*****

We have tried to buy relatively small amounts of 40,000 shares of DuPont and National City and Schering Plough at 5 pennies over the last sale. We havenít bought more than 10,000 shares of each. We tried to sell 5000 shares of ASD down 5 cents from the last sale and didnít get any sold. Those attempted trades show the thinness of the markets both ways.
*****

Technically IBM has broken a triple bottom on a short term trading basis as it trades down through $80.
*****

We added some SGP and NCC to our large/aggressive trading accounts.
*****

After stabilizing yesterday afternoon at $400 Google is now down $14 per share on a as analysts suggest that only half of GOOGís earnings miss was due to a higher tax rate. Amazon is also down 15% or over $4 per share on disappointing to traders earnings.
*****

Oil ended at $65.35 up 65 pennies. Gold was $565. Treasuries closed unchanged on the short end with the two-year at 4.59% and the ten-year up in price at 4.54%.
*****

The major measures were up and down today, but mostly down although the DJIA rallied to positive territory for a few minutes about an hour and one half before the close. But in the last hour stocks sold off.

The DJIA closed down 60 points at 10793. The S&P 500 lost 7 points to 1263 and the NAZZ dropped 20 points to 2262. Breadth for the day was 5/4 negative and new highs contracted to 200 while new lows were 70.

And the casino is closed till Monday but they are still taking bets on the Super Bowl for those who need the action.
*****

 

2 February 2006 Daily Comment

Thoughts

Security analysts are warning computer users about a new and potentially destructive Internet worm that can obliterate important documents. The worm, called Kama Sutra, is making the rounds now, but is scheduled to execute its first massive attack on February 3.
*****

Japan was up another 1% overnight but the rest of Asia and Europe are mixed to negative. U.S. stock futures are negative. Jobless claims dropped another 11,000 to 273,000.
*****

Fourth Quarter Productivity was down 0.6%. We really donít know what the number means, or rather where they get it. It is one of those throw away numbers.
*****

Stocks look to open lower this morning which should be a positive for the close.
*****

Same store sales for retailers were better than expected. But the question always is whether were sales gained at the expense of profit margins.
*****

This stuff about Iran and nuclear weapons is election year garbage. We really donít care about the politics but is annoying to listen and read market pundits speculate about the rise in oil and gold and all that stuff related to Iran. One Iraq is enough. By the way did the Terror Alerts go the way of the Manned Mission to Mars?
*****

Our down early thesis is playing out as the DJIA is off 80 points at 10:10am and breadth is 2/1 negative. There are profits to be taken and folks seem to be doing that.

We are buying American Standard back under $37 in large/aggressive accounts. We traded it in the last quarter on and earnings miss between $35 and $37 and then the stock ran to $42. Two days ago it disappointed again and went to $35 but we missed it. We think it is a good play on eventually lower interest rates and its Trane subsidiary should be doing big business in Mississippi and Alabama and Texas. Itís an anchovy.
*****

The S&P 500 is now down though the important 1275 support level. We have seen a 1260 support level mentioned but our trading guru is sticking with the 1275 number as the Holy Grail above which the S&P 500 must close.
*****

We just read on the www.realmoney.ocm website that one of the reasons for the drop this morning is that there are rumors that the Government may raise the dreaded Terror Alert level. And what were we just saying? It surely is an early election season. We think the folks in Washington are the only ones paying attention.
*****

Homeland Security at 11:07am denied that it was going to raise the Terror Alert. We have recalled the dogs from preliminary perimeter patrol.
*****

The DJIA has been down 200, up 100, and down 100 on a daily basis all in the last two weeks. And that doesnít include the intraday swings. Japan has also been extremely volatile since the beginning of the year. Volatility and churning usually increase at turning points. The only problem is in knowing which way the turn is going to go.
*****

The Terror Alert rumor did stabilize Treasuries which may have been the whole purpose of the rumor.
*****

In the contra hour oil is down $2 to $64.90 and gold is up $2 to 576. Why oil is going up and down like a yo-yo is a question for the hedge funds to answer.
*****

Markets that are down all day without a bounce tend to close lower. Also this market is acting a lot like the one of a few weeks ago which closed down 212 points on Friday January 20. Weíll know more in half an hour when we reach the final hour of trading. Two weeks ago we expected a bounce and didnít get it. Now we donít expect a bounce soÖ
*****

The Fed theory we talked of yesterday said the markets should be higher than the close on the day of the Fed meeting if the market close lower that day. With todayís down day the action between now and Monday will be interesting.

Moreover, with the Super Bowl on Sunday the Super Bowl Theory will be in play. That theory says that if and old NFL team (the Steelers) wins the market goes higher for the year and the converse if an AFL team wins.

Finally today is Groundhog Day and the groundhog would have seen his shadow if we hadnít shot him last fall. But since we havenít had any winter since December six more weeks of winter will be welcome.
*****

Well, the stock market didnít bounce but it didnít sell off in the final hour either. It just sort of slithered into the close. At the bell the DJIA was down 103 points at 10853. The S&P 500 lost 12 points to end at 1270 which is below our magic number but above the 1260 support level that most technicians are watching. The NAZZ dropped 30 points to 2306.

Breadth was 2.5/1 negative and new highs contracted to a bit over 300 while new lows expanded to 80.

Treasuries closed unchanged with the two-year at 4.58% and the ten-year at 4.57%. Gold was $575 and oil $64.68.

The big item tomorrow is the monthly employment report at 7:30am.

There is one more trading day before the casino closes for Super Bowl Blowout Sunday where more money will be made or lost than we care to think about.
*****

 

1 February 2006 Daily Comment

Thoughts

Beginning January 31, 2006 we decided to skip the play by play (the market is up the market is down stuff) during the day since it is dated information by the time it is read and just provide our observations on occurrences during the trading day. Many readers have said they skip that part and since we have had many pearls of wisdom interspersed in those comments we are making the change so all readers can garner the pearls.

If the statistics we quoted yesterday about market action after Fed meetings hold true the stock markets should be higher at Fridayís close. As always time will tell.
*****

Google disappointed the Googlites and other traders last night when their earnings were less than expected and the shares are trading $50 per share lower this morning. OOPS!
*****

Time Warner earnings rose but the shares are trading lower in price by 20 pennies in pre opening trading because better earnings means less of a case of lousy management for Carl Icahn in his glorious quest of Time Warner. And if Icahn doesnítí get control nobody else seems to care about the stock.
*****

Asia was lower fractionally over night while Europe is on the plus side. Investors Intelligence had bulls at 52.6% versus last week 53.7% and bears at 25.8% ursus 25.3% last week.
*****

The trading number for today is the oil inventory report this morning. Inventories should be higher because of the warm weather. The question is how high the inventories will be. Oil is off pennies ahead of the report.
*****

Symantecís profits were down and the shares are trading at $17.50. As with Google and American Standard yesterday and DuPont two weeks ago it ahs paid to be out of individual stocks before earnings are reported this month.
*****

Crude inventories rise was greater than expected and the gasoline inventory rise was three times greater than expected but oil hasnít budged.
*****

Now Time Warner is trading higher so we guess there are some folks who care about earnings.
*****

We bought Symantec at $16.82 down $1.60 from yesterdayís close. Mother Merrill dropped its price target to $25 and Piper Jaffrey cut theirs to $27 either of which would be a nice pop from the price we are paying.
*****

$10 billion worth of Google shares have changed hands today.
*****

Fordís U.S. sales were up 2% and GMís were up 6% in January. Forecasts had been for lower sales for both. Fordís Truck (SUV) sales were down 6% and GMís were down less than 1%.
*****

Oil is up $1 initially after the inventory numbers. Now it is lower which makes more sense. Maybe it is the hot money in Google both short and long that is fueling the volatility in oil and the drop is the price of gold. Losses in Google have to be covered or mitigated in other areas.
*****

Breadth was positive until 1pm and then began turning negative.
*****

Boeing is up $3.40 and that is 23 points of the so far 30 point increase in the DJIA. There were folks who have been pushing to have Google included in the S&P 500 and the DJIA. Todayís $50 drop in the share price of Google would have caused the DJIA to be down over 350 points.
*****

All day yesterday CNBC had an artist on its television set who paints only pictures of Alan Greenspanís head. During the day she was putting the finishing touches on a painting. In the afternoon we mused with a friend about who would be inclined to buy a painting like that, what they would pay, and where they would hang it.Today CNBC showed that there is a bidder on EBay willing to pay $40,000 for that Greenspan painting. We are happy for the artist but wonder greatly about the sanity of the bidder, unless it is Andrea Mitchell and even then...
*****

Treasuries closed lower in price higher in yield with the two-year at 4.58% and the ten-year at 4.56%. Inversion (the shorter maturity bond has a higher yield than the longer maturity bond) suggests recession but with higher auto sales and Wal-Mart sales at the high end of expectations in January recession seems a way off.
*****

And the DJIA closed up 90 points at 10952. The S&P 500 gained 3 points to 1282, and the NAZZ was up 2 points to 2308. Breadth was positive at the close and volume was moderate. New highs climbed back above 500.

Gold and oil both finished lower on the day.

There are only two more trading days for the casino this week.
*****

 

 

 

 

 

 

 

 

 

 

 


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Website Information

For those folks who have accounts with us, you may now go to: https://eview.mesirowfinancial.com and fill out the account information and view your accounts online. If you have trouble filling out the form, or in getting online, call and we will help you with the process. NASD regulations require the eview site to be secure. Thus your password must be changed every ninety days. You will be prompted to make this change when needed.

For information on Mesirow SIPC and Excess SIPC protection SIPCmesirow.pdf.

For those clients of LY& Co and other interested persons the Quarterly Report on the routing of customer orders under SEC Rule11Ac1-6.
For Quarter Ending 09/30/2002 For Quarter Ending 12/31/2002 For Quarter Ending 03/31/2003
For Quarter Ending 06/30/2003 For Quarter Ending 09/30/2003 For Quarter Ending 12/31/2003
For Quarter Ending 03/31/2004
All future SEC Rule11Ac1-6 Quarterly reports may be found by visiting the diclosures at LY& Co Clearing Broker Mesirow Financial at: http://www.marketsystems.com/reports/1-6/msro/.


Annual offer to present clients of Lemley Yarling Management Co. Under Rule 204-3 of the SEC Advisors Act, we are pleased to offer to send to you our updated Form ADV, Part II for your perusal. If any present client would like a copy, please don't hesitate to write, e-mail, or call us.


Summary of Business Continuity Plan


The factual statements herein have been taken from sources we believe to be reliable but such statements are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.