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31 January 2007 Daily Comment

Thoughts

The Fed is meeting only today-not having a two day meeting as we stated yesterday. But they will be issuing their statement at 1:15pm CST today and of course we await the statement with bated breath.

4th Quarter GDP was up 3.5% on annualized basis. That was a stronger number than expected but there are still revisions to be announced to the number so who knows. The inflation data connected with the number were less than expected so all in all everything in the economic sphere is nirvana.

On the GDP news Treasuries lost their bid and the two-year moved towards a 5% yield again.

Overnight Asian markets were lower with Hong Kong down 1.7% and Shanghai was down 4%. But fear not for those invested in the Shanghai market since it is up 100% over the last twelve months.

European bourses are mixed and Gold is up $1 in early NYC trading while oil is down 50 pennies after its large jump yesterday.

Investors Intelligence has 53% bulls and 21% bears.

Time Warner beat fourth quarter estimates but lowered guidance and the shares are off a few pennies in the early going.
*****

An hour and one half into the trading day Boeing is up $4 and 3M is down $1 as the DJIA is higher but most other major measures are lower with breadth negative.
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The Chicago Purchasing Mangers Index for January was 48 versus 52 in December. A number lower than the number 50 indicates a contraction and the markets were expecting a number greater than 50. This Index contrasts with the benevolent GDP number this morning. The boys and girls are delighted by the dueling indexes because they like to trade uncertainty.
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The Fed left rates unchanged at 5.25% and said some inflation risks remain. Stocks are higher immediately after the announcement. Treasuries are flat and the dollar is lower.
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Oil ended up $1.17 at $58.14 in NYC. Gold jumped $7 to 657. Treasuries joined the rally party with the two-year at 4.93% and the ten-year at 4.84%.

European bourse indexes finished lowered as they closed before the rally in the U.S. Mexico and Brazil are both up more than 1%.
*****

A rally after the Fed announcement cemented the day, week, month and maybe the year for the bulls. The as January goes so goes the year mantra in now in play. Next up is the super Bowl predictor where if Da Bears win the bears lose again.

At the bell the DJIA was up 103 points at 12626. The S&P 500 jumped to 1440 up 10 points and through resistance at 1433. The NAZZ gained 15 points to 2464.

Breadth was negative until the last hour and finished the day 2/1 positive on the NYSE and 3/2 to the good on the NAZZ. Volume was brisk.

There were 440 new highs and 60 new lows.

And now that month end mark-up is over the big boys and girls will have a harder time keeping the numbers up at the big casino.
*****

 

30 January 2007 Daily Comment

Thoughts

The Fed begins its two day meeting today.
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Consumer Confidence was 110.3 which is up a tad from a revised 110 in December. The Conference board, which compiles the Index, said an improving job market was responsible for the strength.
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Saudi Arabia is going to cut production by 138,000 barrels a day and that news has Oil higher at $54.67 up 66 pennies in the early going.
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Treasuries have a bid and are a few basis pints lower in yield. Gold is flat.
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3M missed and is down $4 a share in the first hour of trading. Motorola is higher by a dollar on news that Carl Icahn has a 2% holding and wants a position on the board in order to tell the company how to make better and more profitable cell phones. UPS also missed and is down $2.
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Asian markets were mixed overnight with Hong Kong up over 1% and European bourses are higher by fractions at midday.
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CNBC is showing pictures that show there were lines to buy Vista.
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The Washington Post reports that: Fannie Mae CEO Daniel H. Mudd received salary, stock and bonuses of more than $14.4 million in 2006, an increase of about 25 percent from the year before. His pay included a bonus of $3.5 million, restricted shares worth nearly $10 million and a salary of $950,000. Fannie Mae remains unable to file timely financial statements More than two years after its accounting problems came to light, and its shares continue trading on the New York Stock Exchange by special dispensation. What kind of bonus will he receive when they do catch up on their reports? And if Deloitte audits their books we are sure any delay is not Deloitteís fault.
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It has been 978 trading days since the Dow Jones Industrial Average has seen a 10% decline from a high, the second longest such run on record, says Ned Davis Research. The Dow has gone 135 trading days without a 2% decline, the longest stretch since 1958.
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Todayís WSJ has a story about the demise of Amaranth Hedge Fund last September which lost $6 billion in 15 days. It is an interesting story and one of the largest beneficiaries of the Fundís collapse was JP Morgan which was also the Fundís clearing broker. JPM refused to release money it was holding as collateral. That refusal quashed a rescue plan that had Goldman Sachs taking over the portfolio of the fund. Then JP Morgan, as the only game in town, stepped up and bought the portfolio on which it subsequently made a $725 million profit.

We have commented on how we are bemused that funds want to trade with the Goldmanísand Merrillís and JP Morganís of the world when those firms make their profits from taking opposite positions from their customers and being smarter or richer than they.

In this case JP Morgan was very pleased with their coup as the WSJ reports:

The Amaranth deal produced a "very nice increment to fixed-income trading," Mr. Dimon, J.P. Morgan's CEO, said in a speech in November. "But we did take a lot of risk."

Bill Winters, co-head of J.P. Morgan's investment bank, said at a November conference that through its hedge-fund relationships, such as trade clearing, "we have the insight into what's going on in these funds" and can "respond quickly to opportunities when they come up. Amaranth was one obvious example of that."

He added, "I imagine there will be others...where our ability to be both on the inside, but not compromised, is extremely powerful [as a way] to generate profits."

The huge, complex deal with Amaranth helped build J.P. Morgan's profile as a commodities player. This month, a magazine called Risk named the firm "Energy Derivatives House of the Year.Ē

$750 million of profit is a good chunk of the $ 4 billion JPM earned in the fourth quarter. Are they planning on a hedge fund blow up every year?

By the way the WSJ says that Brian Hunter, the trader at Amaranth who took the large positions that caused the losses, is thinking of beginning his own hedge fund. So is Nicholas Mouranis who is the founder and president of Amaranth Management.
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Too bad he didnít do this five years ago and of course how wonít be in office but:

President George W. Bush said on Tuesday he plans to submit a budget proposal for fiscal 2008 that would pave the way for the government to balance its budget in five years while still keeping taxes low. "I'm going to submit a budget for Congress to look at that shows how we can balance the budget in five years and keep your taxes low," he said in a speech to workers of heavy equipment maker Caterpillar.
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Oil surged to end up $2.96 at $56.97 in NYC. Gold was up $1 at $644 and Treasuries gained with the two-year at 4.96% and the ten-year at 4.87%.

European bourse indexes closed higher across the continent as did Mexico and Brazil.
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The DJIA closed up 35 points at 12525. The S&P 500 gained 8 points to 1428 and the NAZZ rose 8 points to 2448.

Breadth was 2/1 positive and volume was active.

There were 340 new highs and 55 new lows.

And the Fed speaks tomorrow and the boys and girls in the casino will be ready to play fund games with the news.
*****

 

29 January 2007 Daily Comment

Thoughts

Microsoftís new Vista operating system is available for sale to the public tonight. We havenít heard of any lines forming.
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Asian markets were mixed overnight and European markets are small fractions mixed at midday. Gold is lower by $2 in early NYC trading and Oil is down at $55. Treasuries are flat.
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The markets have been moving sideways with a downward bias for the last two weeks so this week may help define a trend. We continue to think that down is more likely than up.

On the other hand, and there always is one, Wednesday is month end and the bulls certainly want an up month. Thatís because according to the Stock Traderís Almanac and up month of January for the DJIA portends an up year 90% of the time.

Also on Wednesday the Fed is going to issue its policy statement for its January meeting.Friday brings the monthly employment report for January.
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A un-fact checked European newsís source is reporting that Sanofi-Aventis is going to acquire Bristol Myers. We think that nothing will occur until the Plavix patent trial is concluded. Schering Plough announced in line earnings to day and is a bit lower. It had been suggested as a BMY merger partner with CEO Fred Hassan taking the reins of the combined company.
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Symantec, maker of Norton antivirus software, said on Monday it will buy Altiris for about $830 million as it expands into the corporate software market from its previous consumer focus. Altiris makes software that helps companies manage and maintain information-technology assets, from laptop computers, desktops and mobile devices to servers and storage assets. SYMC is paying about 3.3 times revenues for the company.
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At noon Oil is down 80 pennies after being down over $1.25 an hour ago. The two-year Treasury is touching a 5% yield for the second day in a row.
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With respects to all the violent human death in the world that goes unnoticed and uncommented upon - this news is still sad. Horses are special animals. Kentucky Derby winning racehorse Barbaro was put to death on Monday after failing to recover from a shattered hind leg suffered in the Preakness Stakes last May.
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Oil ended down $1.43 at $53.99 in NYC. Gold lost $2 to 643. Treasuries ended weaker with the two-year at 4.98% and the ten-year at 4.89%.

European stocks were higher at their close and Mexico lost 1% and Brazil 1.8%.
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The DJIA closed up 6 points at 12492. The S&P 500 lost 2 point to 1420 and the NAZZ rose 6 points to 2441.

Breadth was barely positive and volume was moderate.

New highs expanded to 335 and new lows were 50.

And the week has just begun.
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26 January 2007 Daily Comment

Thoughts

Durable Goods orders were up 3.1% in December when up 3.5% was expected. But ex autos the number was up 2.3% when up 0.5% was expected. New U.S. homes rose 4.8 % in December and prices climbed 1.2 % as the number of homes on the market decreased, showing some firming in the weakened housing sector. On that news treasuries lost their bid. The two-year touched 5% in yield.

The canceling of new home building is probably firming the market but for how long is the question.
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Gold opened lower by $4 in NYC at $543 and Oil was higher by 51 pennies at $54.74. Asian indexes were lower overnight with Hong Kong losing 1.8% and European bourse indexes were also fractionally lower at midday.

Microsoft reported in line but lower earnings and in late trading yesterday the shares price rose fractionally. But the report was not enough to jump start the major measures this morning and after opening higher stocks turned lower in the first hour of trading.
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General Motors canít file its quarterly report because it canít yet compute how much money it lost.
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Slowly but surely we are eliminating our Wild Oats position. The difficulty of selling this stock without knocking the share price down $1 is why we are selling it. This holding is in the class of the companies where we took too much risk when we were Masters of the Universe last month. The shares can trade at $20 or $8 and neither price would surprise us. Ron Burkel has a 15% position in the shares and that is the reason they are selling at this price. If he didnít own the stock it would be at $8. It ran to $20 last year because he owned the shares. We bought it towards year end because we thought it would pop. Instead it fizzled.
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The S&P 500 trend line support is currently at 1418 which is where the S&P 500 is trading at 1pm.
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Oil ended at $55.35 up $1.12 in NYC today. Gold dropped $3 to $645.

European Indexes closed large fractions lower on Friday.

Treasuries rallied slightly to close flat on the day after touching five month highs in yields earlier in the trading session.
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The DJIA rallied in the last hour to try to save the day, the week and maybe the month for the bulls. At the close the DJIA slipped back into negative territory to close down 15 point at 12487. The S&P 500 lost 1 point at 1423 and the NAZZ gained 2points to 2435.

Breadth was slightly negative all day but turned positive near the close and volume was active.

New highs contracted to fewer than 210 and new lows expanded to 80.

And the casino is closed until Monday.
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25 January 2007 Daily Comment

Thoughts

EBay beat numbers and the shares are up 10% this morning so the traders who purchased yesterday are in hog heaven.

Asian market indexes were lower overnight and European indexes are small fractions higher. Oil is up a few pennies at $55.45 in the early going in NYC and Gold is $651. Treasuries are flat.
*****

Three weeks ago Symantec warned and the share price dropped from $21.50 to $17.50. Last night SYMC reported earnings that beat their lowered estimate of three weeks ago and the share price is up $1. Go figure.
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Jobless claims for the latest week rose 36,000 to 325,000.
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Ford lost $5 billion in the quarter and $12 billion for the year. That loss is a couple of billion dollars more than what Ford paid in a special dividend in the 2000. And it is a bit more than what they paid for Jaguar, land rover and Volvo to spend the cash they had on hand. Plan ahead?
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The two-year has moved to a 4.97% yield and the ten-year to a 4.86% at noon.
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With an hour and one half of trading left in the day the DJIA is down 120 points. The major measures have gone down today and Monday a lot easier than they went up on Tuesday and Wednesday. That is an observation, not a prediction.
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U.S. crude oil futures fell more than a dollar on Thursday amid profit-taking after two days of gains, oil product inventory builds last week and a drop in natural gas futures after storage data released by the government was near expectations.
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According to realmoney.com the S&P 500 is in danger of completely reversing the breakout move that occurred yesterday. It is called various names, such as a failed breakout, bearish engulfing pattern and a tweezers top. And that is supposed to be a negative.
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Microsoft announces earnings after the bell and its report is going to set the tone for tomorrow and the weekend.
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Gold closed at $645 and Oil lost $1.14 to $54.23 in NYC trading. Treasuries closed lower in price higher in yield with the two-year at 4.97% and the ten-year at 4.86%.

European market indexes also gave ground while Brazil was up 1% and Mexico was down almost 1%.
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Near the close the DJIA was off 115 points at 12510. The S&P 500 had lost 16 points to 1424 and the NAZZ had dropped 32 points to 2435.

Breadth was over 3/1 negative on the NYSE and close to 3/1 negative on the NAZZ on the day and volume was active.

There were 365 new highs and 70 new lows.

And there is one more hedge fund day at the big casino for this trading week.
*****

 

24 January 2007 Daily Comment

Thoughts

Our large cash position of over 90% is a reflection of our view that the markets are due for a correction.
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Asian market indexes were fractionally higher overnight and European bourse indexes are higher at midday. Oil is trading lower by 50 pennies after its big move of the last few trading days and Gold is also lower by $3 after its large move in the same time period.

Treasuries are flat as the trading day begins.

Yahoo had lousy numbers but said its new search marketing ads named Panama engine which is to compete with Google will be on line by the end of March and that is earlier than expected. The stock has popped over $1.50 higher on that last bit of news. Thus, our sale ahead of earnings was not prescient this time although based on the earnings numbers alone the stock would have been lower.

The main truth we take away from our failed foray in Whole Foods, Yahoo and EBay is to avoid high P/E stocks that we have no stomach to stay with as they plume and plummet on relatively insignificant news. It a lesson we unfortunately seem to have to relearn on a yearly basis after we have become Ďmasters of the universeí by making a few good trades.
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AMD disappointed and is off 5% in the early going.
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Itís interesting that among the stocks we have owned recently Hershey and Intel ran up $2 in the days ahead of their earningís report and then sold off $2 on the report. And Yahoo and Motorola were weak before their earningís report and then jumped on the report. And all the reports werenít much different than what had been forecast.
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Todayís stock markets are acting the same as yesterdayís markets. The bears donít seem to have any traction and the bulls are grinding away higher. The new highs and new lows are about the same as yesterday. The move higher in the DJIA is being led by a few issues and oil stocks are under pressure as the price of oil has retreated but is rallying now.

Investorsí Intelligence has Bulls at 52% up from 50% and Bears at 20% down from 22%.
*****

EBay is up $1.50 is seems to be running ahead of earnings tonight as traders attempt to front the news and catch a gain. This action seems to be initiated by the run up of Yahoo today after its earnings report last night. It will be interesting to see what happens tomorrow.
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Oil ended up 31 pennies in NYC at $55.35. Gold gained $2 to $648. Treasuries were slightly weaker with the two-year at 4.93% and the ten-year at 4.81%.

Most European country stock indexes ended 1% or higher.
*****

The DJIA gained 85 points to close at 12620. The S&P 500 rose 12 points to 1440 and the NAZZ jumped 33 points to 2465.

Breadth was 2/1 positive all day and volume was active.

There were 415 new highs and 50 new lows.

And there are two more fund game days this week at the casino.
*****

 

23 January 2007 Daily Comment

Thoughts

We sold stock yesterday and have been in a selling mood for the last few weeks. Unfortunately we didnít sell quickly enough to lock in this yearís gains but we are preserving last yearís gains. And with cash yielding 4.3% we will be happy to sit and watch for a while at least.

As we said last week after the large move up over the last six months and the substantial move over the last 40 months a correction would seem to be in the cards. The markets can move sideways to correct or they can move down. Our guess is that with all the hedge funds looking for action that any serious down move is going to be exacerbated by the funds piling in on the selling to the downside.
*****

Asian market indexes were fractionally higher overnight and European bourse indexes are mixed at midday. Oil is higher again toady at $53.21 and Gold is up $4 at $638 as the new trading day begins. Treasuries are flat.
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Gap and its CEO have agreed to part ways and one of the Fisher boys has taken over as interim CEO. They had better find a new CEO quickly.

Pfizer is going to fire 7500 plus folks and last week Motorola announced that it was going to fire 5000. Happy New Year.

Alcatel Lucent disappointed and the share price is down a quick 10%. Texas Instruments earnings were in line with expectations. National City had in line earnings.

With the expiration hangover of yesterday absorbed a rally may be in the cards for today.
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We sold National City at $36.19, we also have earned a $0.39 dividend and with that dividend the trade is a scratch in many accounts to a 1% profit or 1% loss in the others. The CEO said NCC was trying to figure out how to do their stock buybacks to raise the price of the stock. They should raise the dividend and make better loans so they donít have to write stuff off if they want the stock price to rise.
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We reduced our holding of Wild Oats in our larger accounts.
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Oil jumped over 4 percent to $55 a barrel on Tuesday as the United States announced plans to build up its emergency crude reserves and as colder weather pushed up demand in the world's top consumer. U.S. Energy Secretary Sam Bodman announced the government will buy 100,000 barrels per day (bpd) of oil over a few months starting in the spring to add 11 million barrels to the Strategic Petroleum Reserve. In addition, President George W. Bush plans to call for a doubling of the Strategic Petroleum Reserve's capacity in his State of the Union speech Tuesday, the White House said.

Oil ended up $2.25 at $54.83. Gold jumped $12 to $646. Treasuries were weaker with the two-year ending at 4.93% and the ten-year at 4.80%.

European market indexes closed mixed while Brazil and Mexico were both up over 1%.
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At the bell the DJIA was up 53 points at 12530. The S&P 500 gained 5 points to 1428 and the NAZZ was up 2 points at 2433.

Breadth was 2/1 positive and volume was active.

There were 340 new highs and 60 new lows.

And there are three more days of trading at the casino till the big boys and girls take a rest.
*****

 

22 January 2007 Daily Comment

Thoughts

We are again back in the land of milk and honey and more snow and ready for whatever the markets bring. The Bears are in the Super Bowl so all is well in Chicago.
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Asia was higher overnight with Hong Kong up 2% and Europe is higher at midday. Gold jumped last week but is off $1 in early trading at $635 and Oil is back over $62 so the sheiks are making plans to visit Monaco again. Treasuries have a bid.
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In the we are not surprised category the following story was in the British newspaper The Independent at http://news.independent.co.uk/business/news/article2171540.ece .

Wal-Mart, the controversial retailing giant, is under investigation in the US over allegations it is trying to pass off non-organic foods as organic.

It has been accused of using misleading labeling that is "tantamount to consumer fraud" by an organic farming watchdog, the Cornucopia Institute. The body has handed its complaints to the US Department of Agriculture (USDA).

The Wisconsin Department of Agriculture, Trade and Consumer Protection is also conducting an investigation into whether Wal-Mart is placing "natural" produce on shelf space labeled as containing organic items.

The Cornucopia Institute claimed to have found dozens of examples of Wal-Mart's mislabeling products - from "all- natural yogurt" to soya milk "made from organic soybeans".

USDA is examining the watchdog's claims, while the Wisconsin authorities are examining Wal-Mart's practices and those of other supermarkets within the state.

Wal-Mart said it had written to store managers to ask them to be careful, but added that consumers could tell whether a product was organic by looking for the USDA label.

The Cornucopia Institute first raised the issue with Wal-Mart last autumn, but found fresh examples of mislabeling on return visits to stores this month.

"The vast majority of organic farmers and food marketers operate with a high degree of organic integrity," said Tom Willey of T&D Willey Farms of California, an organic producer of fresh market vegetables. "These abuses endanger the credibility of the organic label for all of us."

Wal-Mart, which owns Asda in the UK, is trying to build a green reputation and attract more affluent consumers.

A year ago the retailer announced that it would stock new ranges of organic food.
*****

We are selling Palm for a 10% loss. It has been making a series of lower highs and lower lows. Palm has been the subject of takeover rumors but our guess is that the patent lawsuit which was filed after we purchased the shares will be s deterrent to any takeover until it is resolved.
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Yahoo announces earnings tomorrow night and we are selling ahead of that announcement. We have a 7% loss in the shares. We are also selling Intel for a scratch, J Crew for a 5% loss and WFMI for an 8% loss. We donít like taking losses but with the tentativeness of the markets we would rather have the cash than the risk. We can always repurchase these shares if the market climate improves.
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Gold ended at $633 in NYC down $3. Oil was down 86 pennies to $51.13 and Treasuries were firm with the two-year at 4.91% and the ten-year at 4.76%.

European bourse indexes closed lower.
*****

The DJIA lost 87 points to finish at 12478. The S&P 500 dropped 8 points to 1423 and the NAZZ was down 20 points to 2432.

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

There were 265 new highs and 65 new lows.

And there are four more trading days at the casino in what is a full week for the markets and for us.
*****

 

17 January 2007 Daily Comment

We are heading down to Chicago Thursday morning to see clients and to celebrate a Memorial Mass for our mother on Saturday so there will be no posts until Monday evening January 22. The Model Portfolio will be updated Friday night.
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Thoughts

Intel met earnings and revenue numbers but its gross profit margin slipped under 50% and the street was disappointed in that number. The shares are trading 75 pennies lower in the early going.
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The Producer Price index was up 0.9% with the core rate up 0.2%. Year over year through December the PPI was up 1.1% with the core rate up 2.0%. The monthly PPI number of up 0.9% induced some trader selling in short treasuries on the thinking that that number will be a deterrent for the fed in lowering interest rates.
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Overnight Asia was mixed and European bourse indexes are also mixed small fractions at midday. Oil is trading under $51 at a 20 month low.
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Investorís Intelligence reports 50% bulls down from 55% last week and 22% bears up from 21% with 27% in the correction camp up from 23%. Those numbers are short term bullish.
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At its present price, assuming the conversion of the $5 billion in convertible bonds recently issued, Fordís equity is valued at $18.5 billion while General Motorsís equity is valued at $17 billion in the marketplace.
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Industrial Production for December was up 0.4% when up 0.1% was expected. Capacity Utilization was 81% as expected.
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Motorolaís earnings come on the 19th and while they have already pre-announced lower results we are going to sell the stock for a positive scratch. We would like to continue raising cash and this is the only new name we have purchased this year. We have a position in Palm and upon further consideration one company in the cell phone area is enough at this time.
*****

Gold gained $7 to $633 in NYC by the close of trading. Oil also reversed its downtrend for a day to finish up $1.03 at $52.24.

The Fed Beige Book contained more gobbledygook and Treasuries remained lower on the day with the two-year at 4.91% and the ten-year at 4.78%.

European bourse indexes closed mostly lower.
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The DJIA closed off 2 points at 12580. The S&P 500 was down 1 point at 1430 and the NAZZ was down 18 points to 2480.

Breadth was 5/4 positive on the NYSE and 5/4 negative on the NAZZ and volume was active.

There were 385 new highs and 55 new lows.

And our next post will be Monday evening but the big boys and girls will be playing their fund games for the next two days and weíll be watching. Go Bears, the football Bears that is.
*****


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16 January 2007 Daily Comment

Thoughts

The land of milk and honey is now the land of snow and below zero temperature. But the sun is shining so all is well in our world as we hope it is in yours.

On Monday Hong Kong was up 2% and the rest of Asia and European bourses were also positive. Overnight into Tuesday though Asia was a tad weaker and Europe is mixed at midday. Gold is a few pennies higher and Oil is down 77 pennies to $52.20.

The Empire State Manufacturing Index is the only number of the day and is was 9 when last month it was 22 and so on the suggested slowing there is a bid in bonds and a tempering of higher stock futures prices before the full out trading day begins.
*****

Goldman Sachs initiated coverage of Motorola with a neutral this morning.
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Symantec is down $2.50 to under $18 today on third quarter revenue and earnings lowering.
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Here is another reason why we want to have cash on hand:

http://www.hussmanfunds.com/wmc/wmc070115.htm
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The euro has replaced the dollar:

http://www.ft.com/cms/s/572b41a6-a414-11db-bec4-0000779e2340.html
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Crude oil futures are trading under $51 for the first time since May 2005.
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Tomorrow brings December PPI and the Fedís Beige Book. On Friday CPI and Building Permits for December are announced.
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Oil closed down $1.78 at $51.21. Gold lost pennies to $626 and Treasuries were slightly higher in price with the two-year at 4.86% and the ten-year at 4.75%.

European bourse indexes closed lower across the continent.

At the bell the DJIA was up 25 points at 12581. The S&P 500 gained 1 point to 1431 and the NAZZ dropped 5 points to 2497.

Breadth was slightly negative and volume was active.

There were 480 new highs and 40 new lows.

And Merck and GE among others announce earnings this week.
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12 January 2007 Daily Comment

Thoughts

The markets are closed on Monday January 15 for the Martin Luther King Holiday. Our next post will be Tuesday evening January 16.
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J.P. Morgan Securities added Sprint to its U.S. analyst focus list, saying the company should be a turnaround story with the second-quarter of 2007 marking the turn to positive subscriber growth.
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AMD warned of lower revenues and earnings and its share price is lower as is Intelís share price. In the old days of ten years ago when AMD warned Intel usually went up in price. But this time the sages are suggesting that AMD is in a price war with INTC and that both will suffer. We wonder.
*****

Asia caught up with yesterdayís U.S. markets by rallying overnight except for Shanghai which was down 3.5%. European bourse indexes are mixed small fractions. Oil has bounced up 80 pennies but remains below $53 and gold is flat at $614.

Treasuries are higher in yield this morning with the two-year at 4.90% on bullish retail sales numbers reported at 7:30am.
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The S&P 500 has moved over 15% higher from its July low without even a 2% correction. From its 2003 low the S&P 500 is up over 50% without a 10% correction. There is excess liquidity in the markets and so the rally can continue for who knows how long but Ö..

And we always worry about the buts and when we worry we go to cash. For the past ten years the easy time to make some money in the markets has been the autumn churning and we were lucky enough to participate this year even though we didnít buy the July low. We are not young and greedy any more nor do we like assuming undue risk for any long period of time. Thus we continue our emphasis on moving to cash yielding over 4%.
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The U.S. budget surplus for December was $44.5 billion when $25.6 billion was expected. Fiscal year through December the deficit is $80 billion whereas last year it was $118 billion at the same time.
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Oil ended the week at $$52.99 up on the day and above its low for the day at $51.88. Gold popped higher by $13 to $627. Treasuries were higher in yield with the two-year at 4.90% and the ten-year at 4.78%.
*****

The DJIA closed up 41 points at 12556. The S&P 500 gained 7 points to 1430 and the NAZZ jumped 18 points to 2502.

Breadth was 3/2 positive and volume was active.

There were 390 new highs and 40 new lows.

And the casino is closed for the long weekend.
*****

 

11 January 2007 Daily Comment

Thoughts

Jobless claims were 299,000. That is the first time the number has been below 300,000 for a while. Coupled with the continued drop in the price of oil which is sporting a $53 handle (the July high was over $78) this morning, Treasuries are moving higher in yield and lower in price. That is because those two numbers suggest that the FED is not going to be lowering interest rates soon.
*****

Asian indexes were mostly 1% or lower overnight and European bourse indexes are mixed at midday. The Bank of England unexpectedly raised its benchmark interest rate by a quarter-point, the third increase since August, as policy makers said inflation may rise further and spur demands for higher wages. The nine-member Monetary Policy Committee lifted the repurchase rate to a five-year high of 5.25 percent today. The European Central Bank said it will maintain interest rates at 3.5%, after an increase last month.
*****

Cisco is suing Apple over the use of the term iPhone. It seems Cisco owns the trademark. And lawyers for both companies rejoice. We would bet there are also patent lawyers going over all the intricacies of Appleís new cell phone preparing to sue for patent infringement as they have sued Research in Motion (the Blackberry) and Palm (the Treo).
*****

We are taking a loss on EBAY and moving the money back into YAHOO where we have had more luck and which seems to have upside momentum. EBAY has popped this morning but earnings come on January 24 and we are afraid of the numbers.
*****

If Intel can get through $22 it may be off to the races.
*****

The air strikes in Somalia which the media and traders have ignored and the part of Bushís speech last night that suggested action in Iran and Syria are part of the reason we are raising cash. We think there is a good chance of air strikes in Syrian and Iranian territory which would be an escalation and maybe lead to increased terrorist activity.

The markets donít care about Iraq anymore but an escalation to other countries might catch the attention of market participants on the edge. By that we mean that markets are usually moved by 1% to 3% of the money involved. It is that 1% to 3% that moves stocks up and down. Look at the trading volume of any stock on the NYSE and you will see that on days when the shares move up/down substantially the volume involved are usually less than 5% of the outstanding shares. And on normal activity days the volume of trading in individual stocks is usually 1% or less of the outstanding shares.
*****

We sold our TLAB holdings for a scratch. We are working to reduce our holdings and with the lousy earnings to be announced in a few weeks we will watch this stock from the sidelines and hope for a buying opportunity at lower levels later in the year.
*****

In our large accounts we sold Starbucks for a scratch loss.
*****

The dollar is rallying big time today and oil is at $51.90 down over $2 as the close in NYC for commodities approaches. There have to be at least a few hedge funds feeling some pain and how that manifests itself in the other markets over the next few days should be interesting. The markets are closed on Monday so tomorrow may be more interesting than some folks can bear.

Stocks are higher today with the DJIA having approached up 100 points and currently up 80 points with an hour and one half to go in the trading day. But the rise today may also have a short covering component in it for the hedgies that were long oil and short the dollar and stocks. Only time will tell.
*****

Oil ended the day at $51.88 down $2.14. Gold lost pennies to close at $613. Treasuries were losers with the two-year going out at 4.86% and the ten-year at 4.75%.

European bourse indexes ended the day large 1% to 2% higher and Mexico and Brazil also gained over 1%.
*****

The DJIA closed up 75 points at 12515. The S&P 500 gained 9 points to 1424 and the NAZZ was up 25 points to 2485.

Breadth was 2/1 positive and volume was active.

New highs expanded to 395 and new lows contracted to 76.

The bulls won the day and hope to win the week in the last day of casino fund games tomorrow. The Bears hope to win on Sunday.
*****

 

10 January 2007 Daily Comment

Thoughts

We raised a good deal of cash yesterday and will continue to do so today. The meandering markets of the past few weeks seem to be suggesting some sort of top. We usually do well trading the fall rally and we did so last year. We donít want to give up those gains and with cash yielding 4% we are inclined to reduce our market risk to a few issues and assume our usual large cash position. The major measures have been rallying for over three years without a 10% correction and time is now on the correction side.

Apple is the apple of the markets eye and all by itself it is keeping the NAZZ afloat and slaying the other cell phone stocks. Google and a couple of other NAZZ names are along for the ride and our take is that the momentum hedge funds are longing for Apple and shorting all the other names like Motorola and Palm to name two of the current also rans that we own. We own them at decent prices but that doesnít mean they wonít go lower. They are part of a portfolio and as always we look at the bottom line of the portfolio rather than individual stocks when we are determining our performance and actions.
*****

Asian markets were mostly 1% or lower overnight except Shanghai which was higher. The Chinese and Indonesian market indexes were down 4%. The 4% moves are the result of international mutual funds and the big hedge funds moving too much money into and out of too small markets. European bourses are large fractions lower at midday and oil is down 45 pennies at 55.20 in early NYC trading with gold off $3 to $611. Treasuries are flat.
*****

Part of the reason for the up/down daily market action may be the fall in commodity prices like oil which would have affected some hedge funds and forced them to sell stocks to raise cash. The trillion dollar plus hedge fund juggernaut has an outsized effect on the day to day movement of stocks because of the amount of money the funds have to play their games. The hedge funds trade indexes like they trade oil or corn. By that we mean that the index is a commodity to the hedge fund trader and the underlying stocks are just different ears of corn. And individual stocks of any decent capitalization are usually part of some index. So as the hedge funds buy and sell indexes the underlying stocks are also bought and sold with no regard to the individual fundamentals of each company.
*****

Bear Stearns upped the technology sector to overweight from underweight citing a rebounding economic activity and the current negative attitude on the street towards the sector.
*****

This morning we sold Ford ending our misadventure in the stock for a while at least. We also sold Tribune for a loss and Micron tech for a scratch loss and Texas Instruments for a scratch gain. It is always easier to take gains than losses. We also sold ESLR in our larger accounts for a loss.
*****

At noon Treasuries are higher in yield and lower in price with the two-year back at a 4.82% yield. Oil has dropped $1.42 to $54.30 and we are guessing that Treasuries are lower in price on the thought that the oil price drop will be taken as stimulative to the economy by the FED. The reason given for the price drop is that the Govt. reported a very large increase in gasoline and heating oil inventories. Our take on the price drop is that the big boys and girls are just playing their games on the downside this month trying to Ďgetí a few hedge funds that were too long commodities.
*****

Sirius Satellite Radio paid Howard Stern $85 million in stock yesterday because he is responsible for adding 2 million subscribers. The total market cap of SIRI including debt is $6 billion. Is Howard Stern worth $6 billion? And what if something happens to Howard Stern?
*****

Oil ended down $1.62 at $54.02. Gold was off $1 to $613. Treasuries closed a tad lower in price with the two-year at 4.81% and the ten-year at 4.68%.

European bourses ended in the red with Spain down over 1%.

The DJIA gained 25 points to 12440. The S&P 500 was up 3 points to 1414 and the NAZZ which was helped by Apple jumped 15 points to 2460.

Breadth was slightly negative and volume was active.

There were 225 new highs and 90 new lows.

And there are two more trading days at the casino until the three day holiday weekend.
*****

 

9 January 2007 Daily Comment

Thoughts

In the we should have sold yesterday category Sprint is trading down $2 in the early going this morning as the company said this morning that revenue will be flat or slightly higher in 2007 and profit will remain under pressure due to lower margins. Sprint said it would cut 5,000 jobs, or nearly 8 percent of its work force, to reduce costs and further integrate Nextel, which it bought in August 2005. Sprint said it added 742,000 total net subscribers in the fourth quarter, ending 2006 with a customer base of 53.1 million. It lost 306,000 post-paid customers in the quarter, with its churn rate, or cancellation rate, at 2.3 percent.

We own enough shares for now. The company sells for about 60% of the price of Verizon or AT&T Wireless and we continue to believe it will provide a good return to us. We do wish we had been more adept at trading the shares.
*****

Asia was mixed overnight with Japan higher and Hong Kong lower. European bourses are mostly higher at midday and Gold is up $2 with Oil again lower by $1.63 at $54.46. Treasuries are flat.

The lower price of crude oil is the story of the day.
*****

Williams Sonoma affirmed its previous revenue and earnings comments. That is a non event since the previous guidance sent the share price down to low $30s. The share price popped $1.60 this morning on the news and we took the opportunity to sell our shares for a scratch.
*****

Boston Scientific and St. Jude Medical have both moved 10% in the last day and we are selling both. The BSX is a nice profit and the STJ is a scratch loss.
*****

Stocks were higher out of the gate but selling has come into the markets after two hours of trading. The selling seems to have a bit more urgency than the buying did.
*****

With the markets putzing for the last few weeks we have decided that cash is the better part of greed. And so we are making a concerted effort to raise cash in our medium to larger accounts. This afternoon we sold Symantec, Rite Aid, Yahoo, and Pfizer for small profits and Qwest for a small profit or loss depending on the account.
*****

We also sold Verizon, General Electric, Time Warner, Hershey, Veeco, and Circuit City. All were for profits some greater than others. We also will receive the Verizon dividend.
*****

Oil ended down 45 pennies in NYC at $55.64. Gold gained $6 to $615 and Treasuries were flat with the two-year at 4.79% and the ten-year at 4.66%.

The DJIA closed down 7 points at 12416. The S&P 500 lost 1 point to 1412 and the NAZZ rose 6 points to 2443.

Breadth was 5/4 positive on the NYSE and slightly negative on the NAZZ. Volume was active.

There were 250 new highs and 95 new lows.

And the casino will be open for fund games as usual for the rest of the week. Next Monday is the Martin Luther King Holiday and the markets will be closed.
*****

 

8 January 2007 Daily Comment

Thoughts

We are back in the land of milk and honey and a little, very little snow.
*****

Last week we sold Pier 1 and Sirius. We purchased them at year end for a quick bounce higher in the New Year. Unfortunately, PIR continued its errant ways and had lousy same store sales numbers for the December period. PIR is going to lose $100 million this year which is its cash position. It will probably survive or be acquired but for every Gymboree that we sold too soon as it came back from the dead there has been a Spiegel or Merry-Go-Round that we sold soon enough before they went broke. And so when PIR didnít bounce we bounced it for a scratch to 60 pennies loss. We sold Sirius for a scratch when it bounced back to our cost price last Friday.
*****

Overnight Asia was mostly lower and Europe is mostly fractionally higher. Gold is up to $610 after being pummeled last week with most of the commodities and oil is also 62 pennies higher at $56.96 after a bad week.

Treasuries are a few ticks lower as the day begins.
*****

Tellabs lowered sales and earnings forecast for the fourth quarter and said the shortfall should be temporary and the share price is down 10% this morning to under $10. We like the company and story but we own a large position now. Under $9 we would be interested in more.
*****

Motorola crashed last week when it announced great sales on phones but those sales were of the cheap not expensive variety. Earnings for the quarter are going to be half expected. With $7 per share in cash and trading within a dollar of its three year low we are buying shares in accounts that own EBAY. We are paying $18.55 when the shares were at $26 in October.
*****

Jim Cramer named Rite Aid as one of his three speculative picks for 2007. That comment has the stock up 20 pennies this morning and says something about the speculative juices of individual investors that are flowing in the present market environment.
*****

From this mornings WSJ: As tracked by the New York Stock Exchange, margin debt rose to $270.52 billion in November from $221.66 billion at the end of 2005, the first time in more than six years that margin debt has topped $270 billion. ...That 22% increase left margin debt not far from the record of $278.53 billion, reached in March 2000 as the NASDAQ Composite Index was setting a record high.
*****

The Gap has hired Goldman Sachs to explore strategic alternatives. The stock is up $1.50 on the news. That suggests that the Fishers have given up on turning the company around. Pier 1 hired JP Morgan last May to explore strategic alternatives when the share price was at $10. It is now trading at $6.
*****

Oil ended down 22 pennies at $56.09. Gold rose $3 to $609 and Treasuries were slightly lower.

European bourses closed mixed.

The major measures were lower most of the morning and then staged a tepid rally into the close.

At the bell the DJIA was up 24 points to 12420. The S&P 500 gained 3 points to 1412 and the NAZZ gained 4points to 2438.

Breadth was 5/4 negative most of the day but flipped to 5/4 positive by the close of trading. Volume was moderate.

There were 210 highs and 75 new lows.

And there are four more hedge fund days in the first five day trading week at the big casino in a while.
*****

 

4 January 2007 Daily Comment

Thoughts

We are heading off early for a basketball game tonight. And we have a dental appointment and a few client appointments tomorrow so there will be no posts until Monday January 8 when we have returned to the land of milk and honey. We are not taking any action on our portfolio this week as we want to give the markets a chance to adjust to the New Year. The portfolio will be updated on Friday night.
*****

Asian exchanges were mixed overnight with Japan up over 1% and Hong Kong fractionally lower and European bourses this morning. U.S. stock futures are a bit lower and Treasuries are up a bit. Oil continues to trend lower on top of yesterdayís big drop with is down 85 pennies at $57.65. Gold is down $1.
*****

BankAmerica has raised its earnings estimates on Intel.
*****

Most retailers were close to plan but Gap, Limited, Ann Taylor and Chicoís missed and are trading lower.
*****

Initial jobless claims were 320,000.
*****

As we leave for the day with a few hours of trading remaining the DJIA is off 20 points and the NAZZ and S&P 500 are higher. Breadth is slightly negative and gold and oil are lower while Treasuries are a few ticks higher.
*****

 

3 January 2007 Daily Comment

Thoughts

Asian markets were closed on Tuesday but made up for the closing by rising on Wednesday. European markets were higher on Tuesday and are mixed today. Oil is lower by $2.45 at $58.65 at midday and Gold is down $7 at $631.

Treasuries rallied early this morning on the ADP guestimate of down 40,000 jobs for the Employment report that is announced on Friday. But they have now given back most of those gains.

Stocks were higher out of the gate and remain up 100 points at 12 noon.

We are in the city this week for client meetings and so our posts are going to be short and sweet.
*****

Neutral news and good news all in one:

St. Jude Medical was cut to neutral from overweight, saying the stock price already reflects an expected rebound in the implanted defibrillator market. "Part of our concern is that we still see downside risk to estimates, owing to the challenges of the market and the level of share gains and margin expansion still embedded in Street models," J.P. Morgan said. "The challenge for St. Jude is sustaining share gains in the face of a likely rebound by Boston Scientific
*****

Gold closed down $8 at $629 and Oil dropped $2.73 to $58.32. Treasuries were better with the two-year at 4.76% and the ten-year at 4.66%.

Goldman Sachs downgraded most of the tech area today but remained positive on telecom equipment folks and oil stocks got hit with the drop in the price of oil and probably some New Year profit taking. That took the starch out of the rally.

As a result, after being 100 points higher at noon the DJIA dropped to down 40 points near 2 pm and then rallied to close up on the day. That is volatility.

The DJIA closed up 8 points at 12470. The S&P 500 made the same journey as the DJIA and the NAZZ did also.

The S&P 500 lost 2 points to 1415 and the NAZZ rose 5 points to 2421.

Breadth was 5/4 negative on the day and volume was active.

There were 190 new highs and 50 new lows.

And there are two more hedge fund days left in this holiday abbreviated trading week.
*****

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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