Bud's Poem Page

28 July 2006 Daily Comment

We are taking Monday and Tuesday off to spend time with the family. We’ll be back on Wednesday August 2, 2006.

Thoughts

Asia was higher overnight while Europe is lower at midday. Gold is $527 and Oil is $73.94 both of which are lower.

Advance GDP was less than expected at up 2.5% and the Core PCE Deflator (inflation) was as expected at 2.9%. With those numbers traders have decided that the Fed is not going to be raising rates in the near future. Treasuries are higher in price and lower in yield. The new Treasury Secretary is doing his job

JP Morgan and Mother Merrill have moved to neutral on Bristol Myers in the wake of the Justice Department investigation mentioned in yesterday’s post. Our guess is that drug companies have a special ear in Washington and unless BMY is guilty of giving great sums of money to Democrats that all the brouhaha will pass with a small fine. We do admit that CEO Dolan is a creep (he fudged earnings in the early years of this century and didn’t get canned) and shouldn’t be running the company but we are in the stock for a trade and not for life and so we will assume the risk for now.
*****

The major measures have closed lower the last seven Fridays.
*****

In the early going the major measures are higher and breadth is 4/1 positive on the NYSE and 2/1 to the good on the NAZZ.
*****

The University of Michigan Consumer Confidence number was 84 when 83 was expected.
*****

Three hours into the trading day the major stock measures are 1% and more better and breadth remains strong. Volume is good and Treasuries are continuing to rally with the two-year and the ten-year both at 5%.

With the S&P 500 at 1278 the next real resistance level is 1290. This rally may continue into the Fed meeting on August 8.
*****

In our largest accounts we have flattened our trading positions selling Ford, Intel and BMY. In our other accounts including The Model Portfolio we are maintaining our holdings in those stocks. We have been aggressively trading the very large accounts and want to continue that profile to remain consistent.
*****

We also sold the last of our Pharmaceutical ETF holdings (PJP) for a scratch loss. We were down over $1 per share on that holding a few weeks ago and are using the rally to flatten the position. The big boys and girls are fleeing to drug stocks and we think the BMY is a better trade at these levels than PJP.
*****

Oil ended at $73.24 and Gold was $630. Treasuries closed on their highs with the two-year at 4.98% and the ten-year at 4.99%.
*****

At the bell the DJIA was up 120 points at 11220. The S& P 500 gained 14 points to 1278 and the NAZZ rose 38 points to 2092.

Breadth was 4/1 positive on the NYSE and 2/1 to the good on the NAZZ. Volume was brisk.

New highs were 195 and new lows were 170.

The casino is closed for the week-end and we’ll be back on Wednesday August 2. Stay cool.
*****

 

27 July 2006 Daily Comment

Thoughts

Jobless claims were 298,000 and Durable Goods orders were up 3% and ex transportation up 1%. These numbers were more bullish on the economy than expected and so Treasuries are giving a bit of ground as the will they / won’t they crowd place their bets.

Overnight Japan was up 2%, Hong Kong 1.8% and the rest of Asia was also higher. European bourses are fractionally better and U. S. futures indicate a higher opening.

Gold is up to $632 which is up $10 from the NYC close and Oil is $74.43.
*****

The HCA buyout is an example of management choosing self over shareholders. What occurs in these buyouts is that the folks who do them immediately pay themselves a very large dividend or two or three and then wait two or three years until the company regenerates the capital to make going public again feasible. Then the companies are taken public with about 20% of the shares sold to the public at a very nice multiple of the going private value. Insiders also own the remaining 80% of the shares which over time they are happy to sell to the public.

Several weeks ago we mentioned that paying dividends to shareholders would be a much better way to reward them than buying back stock. But management ownership in the company is in the form of options which are not entitled to dividends. And so paying dividends, while it would be beneficial to shareholders, does nothing for management’s options.

In the old days, folks could mount proxy battles but now the companies are as large as countries and so the only way to vote is with one’s feet. The true genius of Buffet is that he has aligned his interest with shareholders interest over the years and has made his fortune by building his company not by using options to benefit himself at the expense of other shareholders.
*****

Exxon Mobil’s net income over the last four quarters is about $40 billion. Revenues were $388 billion. CNBC
*****

The Financial Times is reporting that General Electric will make the majority of its products outside the United States by 2010.
*****

Citigroup is maintaining a sell rating on GM.
*****

Aetna (cutting membership growth estimates) is being taken to the woodshed again this quarter with it expected to open down $9 at $31. We had our problems trying to trade the drop last quarter and so we will watch from the sidelines for a bit.
*****

New Home Sales were down 3% with the Northeast down 12% and the Midwest down 8%. The West was up.
*****

$400 billion of adjustable rate mortgages re-price this year and over $ 1 Trillion re-price next year.
*****

Two hours into the day the major measures are higher and breadth is 5/4.
*****

We are also buying BMY in our larger accounts at $24.20 down $1.80 from yesterday’s close.

BMY is down even though they announced better than sales and earnings. The company is the subject of a criminal probe. In March Bristol-Myers and Sanofi of France reached a settlement with Apotex, which had been sued by the two drug giants over its efforts to sell a cheaper, generic version of Plavix before its patent expires in 2011.

The proposed settlement of the patent-infringement litigation would allow Apotex to begin selling generic version of Plavix several months ahead of the patent expiration. In exchange, Bristol-Myers and Sanofi agreed to make certain payments to Apotex, some of which were covered by a $40 million reserve recorded by Bristol in the first quarter.

Bristol-Myers spokesman Jeff MacDonald said the company didn't have any more detailed information about the Justice Department's probe. He said the company's conduct in its settlement of the Plavix patent litigation has been "entirely appropriate," and the company intends to cooperate fully with the investigation.

We think the shares are worth a trade from this level.
*****

22 countries have raised interest rates more than 90 times over the past 12 months in an effort to control inflation.
*****

Entering the contra hour the major measures have turned negative in slow trading. The violent reactions in individual stock to their earnings reports may be taking a toll on traders and investors (if there are any). Breadth has also flipped and is now 5/4 negative.
*****

Oil closed at $74.64 and Gold was $634. Treasuries were unchanged on the short end to 3bps higher on the long end.
*****

The DJIA closed down 3 points at 11099. The S&P 500 was off 5 points at 1263 and the NAZZ ended down 16 points at 2054.

Breadth was 5/4 negative on the NYSE and 2/1 negative on the NAZZ.

Volume was moderate and new highs and new lows were about even at 185 each.

And there is one more day at the casino for he week. Tomorrow brings Advance 2nd Quarter GDP not to be confused with Preliminary GDP or Final GDP.
*****

 

26 July 2006 Daily Comment

Thoughts

Asia was mixed overnight and Europe is slightly higher. Oil and Gold are both unchanged and U.S. futures are flat.

Last night Amazon and Panera Bread disappointed and both are trading lower by over $5 this morning.

According to the street GM had great numbers reporting super earnings of $1.2 billion. That was after special charges of $7.6 billion but who is counting. The stock is looking to open two dollars higher.

Hewlett Packard is buying a software form for $4.2 billion in cash and the street likes the deal.

Mother Merrill raised The Gap to a buy.

Investors Intelligence numbers were basically unchanged with 42% bulls and 36% bears.

The tone of the talking heads is positive today and many of the web gurus are predicting further rallying.
*****

The major measures were lower in the early going but are now about even at noon. Breadth is flat after being negative. Now comes the hard part for the bulls as they try to make it three up days in a row.
*****

We bought Intel and Ford in accounts today. With the street deciding the GM is coming out of the woods and Mother Merrill’s comments yesterday about Ford having all the bad news in the current price we think a small position is warranted. We feel the same about Intel. We may be jumping the gun a bit but our exposure is small and if this rally continues the potential percentage gain in both stocks makes the risk assumable. The two stocks we are buying have been the subject of bad news for months. Since both have stopped going down on bad news it is the time to at least get our feet wet.
*****

The negative holding the major measures back today is the miss by Norfolk & Southern with the shares now down $5. All the other rails are lower in sympathy. Our take on the matter is that we didn’t understand the infatuation with these stocks to begin with.
*****

The Fed Beige Book released today suggests a slowing economy and Treasuries are rallying on the new. We placed a bit more money in the new two-year 5% Treasuries at a 5.03% yield.

We also sold our 3M trade from yesterday for a $1.20 per share gain.
*****

Today’s feeble rally is because the Fed may not raise rates at the August 8 meeting because the economy is slowing. But if the economy is slowing that means profits will be pressured. And if profits are pressured……
*****

Oil closed at $73.94 in NYC and Gold finished at $621.70. Treasuries were storing into the close with the new two-year at 5.02% and the ten-year at 5.03%. The dollar was weak.
*****

There are many cross currents in today’s markets with Boeing  off $4 and NSC and CSX down over $3 each, Amazon is down $7 bigger and Apple is up $2  and Amgen $1.50. The rally is failing and we are going to sell our GE and Cisco trades for a few pennies profit. We don’t want to own CSCO into earnings in early August and GE is an anchovy with us.
*****

The DJIA closed down 1 point at 11003. The S&P 500 dropped 1 point to 1268 and the NAZZ was down points to 2170.

Breadth was 5/4 positive on the NYSE and flat on the NAZZ. New lows at 180 bested new highs at 160. Volume was active.

And the casino will be open as usual tomorrow.
*****

 

25 July 2006 Daily Comment

Thoughts

Texas Instruments had good numbers last night and is trading a dollar higher this mooring. UPS announced lousy numbers and a less than happy outlook and that took the street by surprise and so the shares of UPS are trading $10 lower in the early going. That works out to a loss of $10 billion in Market capitalization.

Overnight Japan was up 1.5%, and the rest of Asia was also better. European bourses are green and U.S. futures are indicating a slightly higher opening. To complete the picture both gold at $622 and oil at $75.40 are higher.

The bulls would like a nice strong up move though the 1260 resistance on the S&P 500. Bears of course want the rally of yesterday to fail as the last two have. That failure would put in a higher low and continue the pattern of failed rallies.
*****

The four big up days in the last six weeks is not a normal occurrence. According to some technicians, in the past when this has happened the markets are always higher two months out. We certainly aren’t going to argue with history or say it is different this time but we do wonder if the up days occurred in July in the past.
*****

We have the urge to trade a few shares of stock in our very large accounts. There have been some substantial collapses in quality stocks that we think might offer a trading opportunity. We are buying 3M, DuPont, UPS, Wrigley, General Electric, Intel, Cisco, Netflix and Vicor in 1000 share amounts in our million dollar plus accounts.  All these stocks are down substantially from their recent highs and we think the trade profit potential warrants the risk. There is an old saying that one should not make a trade into an investment. We are buying these to trade but because of their quality we may give them for longer than our normal trading period if we don’t get the move we want.

MMM ($67.85) is down $4 today on its earnings announcement after being off $8 on July 7 on a warning of what was coming and UPS ($68.98) is down $11 today. We think those are overreactions which will be reversed in the next few weeks. Both are very high quality stocks.

DuPont ($39.95) earnings were better than expected but the company did not raise guidance. The shares are off 70 cents on the guidance issue and down 10% in the last month while being at a price ($40) from which they have bounced higher 6 times in the last three years.

Wrigley ($43.65) was downgraded on July 12th by Credit Suisse and has dropped 18% in price since March. The share priced reached a 12 month low of $43 last week.  WWY announced earnings today and they were lower on charges but revenue was better than.

General Electric announced excellent sales and earnings for all its division except NBC. The stock was over owned in the Welch Dynasty ears and has been under distribution for a few years. The price has been mired in the $32 to $35 range for the last year and we are buying ($32.55) at the low end of that range.

We are also buying Intel ($17.55) and Cisco ($17.86). Intel is at its yearly low and has already delivered the bad news for this quarter. INTC should participate – because of programs- in any move higher over by the major measures over the next week and the same goes for Cisco. CSCO announces earnings on August 8 and depending on market conditions we may be in or out of it by the date.

Obviously NFLX is not the quality of the other stocks we have purchased today. Netflix ($19.11) is the company that sends movie CDs by mail and announced good earnings today but gave tepid guidance going forward and the shares are off $4 and down $12 from their yearly high. Management has refused to raise guidance before and beat the estimates and we think the reaction in this stock is also overdone.

We bought Ford at $6.65, just because. Mother Merrill said all the bad news is in the stock.

Vicor is down $3.50 today to anew 24 month low of $11.35 and its high for the last 12 months is $23. Insiders own 50% of the stock and the company has no debt and $2.50 in cash per share. VICR owns the design for a chip that allows the miniaturization and easy to design-to-suit configuration of power converters. The chip allows a stable stream of direct current to electronic devices to allow them to work efficiently. Earnings were higher but book to bill was lower than expected. This is a small company with a unique product and we bought 500 shares per account as a speculation on a bounce.
*****

Existing home sales were a tad higher than expected and the Conference Board’s Consumer Confidence was 106 when 104 were expected. Treasuries are giving a little ground on the news.

The major measures are lower after an hour of trading but breadth is 2/1 positive and new highs are exceeding new lows.
*****

In the now you tell me department Mother Merrill upped Merck to a buy with the shares trading at $39 up from a twelve month low of $25.
*****

Oil ended down at $73.85 in NYC and Gold closed up at $618. Treasuries were a couple of ticks higher in yield across the board with the two-year at 5.12% and the ten-year at 5.06%.
*****

The major measures rallied and we sold the UPS for a $2 per share profit, the WWY for a $1.30 per share profit and the DD for a 45 penny per share profit. We sold one half our NFLX trade for a 40 penny per share loss. We are holding the rest of the NFLX and other stocks at least for the night. We think the markets are going to be up again tomorrow.
*****

The DJIA closed up 53 points at 11104. The S&P 500 closed up 8 points at 1268 which was comfortably above the 1260 support/resistance level. The NAZZ was up 12 points to 2074.

Breadth ended 2/1 positive and new highs exceeded new lows for the day. Volume was moderate.

The casino is open for business again tomorrow.
*****

 

24 July 2006 Daily Comment

Thoughts

The world did not disintegrate over the week-end (it never does and if it does stocks won’t matter anyway) and so the stock futures are indicating a higher opening. The action on Thursday and Friday was negative for the bulls but the major measures remain above collapse territory and the markets could still move higher this summer.

We can’t remember a time since we have been in the business (1965) when a significant rally of any duration began in July or August. We do remember more than a few that ended during those months.
*****

Asia was slightly mixed overnight and European bourses are slightly higher. Treasuries are giving a little ground and Gold is $615 with Oil at $73.65.
*****

Merger Monday brings the buyout of HCA by the founding family (Senate Majority Leader Bill Frist’s family) and some buyout firms. This will be the second time the company has been taken private. These are nice fees for the investment banks since it is a $31 billion deal including debt. After the deal is completed HCA will have $27 billion in debt up from $9 billion.
*****

Schering Plough had good numbers and the shares are trading over $20 this morning. The company may have turned the earnings corner and will get a bit more attention from us.
*****

Home Depot’s price target was lowered to $38 by Lehman. Dell warned late last week and fell out of bed on Friday to under $20.
*****

In a reprise of last Wednesday stocks are strong out of the gate with the DJIA up 100 points and the S&P 500 at 1251 up 11points after one hour of trading. Breadth is 4/1 positive. Friday was an options expiration day so this morning’s move may just be reversing the down of Friday. The bulls are breathing a bit easier and the bears are probably sweating, and not because of the temperatures.
*****

At noon stocks remain higher with strong internals and good volume. Europe ahs also moved up on the good action in U.S. stocks and most bourses are up 2% heading into their close.
*****

Crude oil is now higher ion the day in NYC with the price at $74.65. Oil issues are moving higher.
*****

Gold ended at $613 and Oil was up to $75.10 at the New York close. Treasuries were basically unchanged on the day with the two-year at 5.09% and the ten-year at 5.04%.
*****

We are heading out a bit early today and will be for the next few weeks as we enjoy our grandchildren’s visit. At 1:45pm the DJIA was up 140 points at 11105. The S&P 500 was flirting with 1260 resistance and the NAZZ was 32 points higher at 2052.

Volume was active for a summer Monday and Breadth was 3/1 positive. New lows at over 160 exceeded new highs at 135.

The bulls need follow through on the rally in tomorrow’s session. The casino will be open for business as usual.
*****

 

19 July 2006 Daily Comment

Dr Katie Lemley is helping Dr Christine Lemley move into her new home in Grinnell Iowa. We will be traveling there tomorrow after all the heavy lifting is completed to assist in sightseeing Grinnell College and the surrounding area. We’ll be home Friday evening in time for the Prince and Princess to arrive on Saturday so that we may attend the Crawford County Fair with them Saturday night. And so there will be no posts tomorrow or Friday. We will be at our desk on Monday morning July 23.

Thoughts

Overseas most Asian stock markets were fractionally higher overnight and the same trend is holding true in Europe. Traders have now placed the Lebanon conflict in the same old, same old file and have moved back to worrying about the Fed and the price of gasoline. Treasuries are flat ahead of the news today and Gold is down to $624 with Oil at $72.90.

The markets rallied late yesterday on a lower oil price and the fact that they had been going down long enough. This morning brings CPI in a few minutes and then Benanke at 9am. Those two events will set the tone.

There were 450 new lows yesterday which is the largest number of this current sell off. The last rally in June occurred with about 600 new lows the day of the rally. Further rallying from this level will depend on the testimony of the Fed Chairman and the price of oil.

The conundrum is that a higher stock market and lower oil price increase the odds that the Fed will continue to increase rates to fight inflation. If the stock markets are in a tailspin when the Fed meets in August or September we would posit that they would be less likely to add fuel to the fire.

Also the fact the Goldman’s Henry Paulson is now the Treasury Secretary and in a position to massage the data should not be ignored. Savvy fellows like Rubin and now Paulson who know how the street thinks obviously know what the street wants to hear.

On the earnings front Mother Merrill, JP Morgan, IBM, Coke, and United Health were all in line or a bit better.

Yahoo disappointed big time on its advertising revenue and is trading $7 lower (24%).
*****

June CPI was 0.2%, Core CPI was 0.3%. Year over year CPI was up 4.3%, Core was 2.6%. June Housing starts were down 5% but May starts were revised upwards. . Stock futures and Treasuries are lower.
*****

Stocks are higher out of the gate and Treasuries are lower in price higher in yield on the CPI number and before the Bernanke Show.
*****

Growth is moderating according the new Fed oracle and as a result stocks are moving higher wit the DJIA up 110 points and Treasuries now lower in yield higher in price on the day. Traders take Bernanke’s statement to possible mean a pause or one more increase at the most.
*****

A Reuters headline says that gold is rallying (up $14) because of Bernanke’s comments. The dollar is lower and short covering in gold as with stocks is moving both up.  Two hours into today’s session the major measures are all much higher in active trading. Breadth is 4/1 positive.
*****

As the Fed Chairman continues to testify the action of Treasuries seem to be saying that there will be no rate hike in August. The two-year is at 5.12% and the ten-year is at 5.07%.
*****

Short covering began today’s market move but we would guess that as the major measures hold their gains long buying is taking hold. We are observers.
*****

Oil closed at $72.90 in New York and Gold ended at $642.80.
*****

Treasuries closed higher in price lower in yield after a wild day in the bond pits in Chicago. The yield on the two-year ranged as high at 5.25% before ending the day at 5.11%. The ten-year finished at 5.06%.
*****

The DJIA jumped up 215 points to 11015 for its best up day in three years according to CNBC. The S&P 500 gained 23 points to close at 1260 and the NAZZ surged 38 points to 2080. Breadth was 4/1 positive most of the day long and volume was active.

New highs and new lows were about equal at 130.

The Casino will provide 2 more day of fun while we are away. We’ll be back on Monday.
*****

 

18 July 2006 Daily Comment

Thoughts

The Producer Price Index (PPI) which is the manufacturing cost side of the inflation picture was up 0.5% and Core PPI was up 1.9%. The Core PPI number strips out food and energy. The year over year numbers were 4.9% and 1.9%.

Supposedly the core number adjusts for the volatility in food and energy prices but since energy prices and now food prices are increasing at a consistent rate that reasoning leaves a bit to be desired.
*****

One big reason for having a core number with the Consumer Price Index (CPI) the consumer side of the inflation picture which will be announced tomorrow morning at 7:30am is that Social Security benefits and many other public and private plans adjust their payout for inflation (CPI) and so the smaller number mitigates the adjustment needed.
*****

Overnight Japan was down 3% and the rest of Asia was lower and Europe is mixed. Treasuries are weaker on the PPI number and Gold is up a tad to $654 and Oil is back above $76.
*****

Target lowered its July sales forecast.

Johnson& Johnson beat by a penny.

Redbook Retail Sales though mid month were down 2.2%.

Wells Fargo was a penny shy.

The New York Times met expectations but is firing another 350 folks. It is also reducing the size of the paper by 1 ½ inches which will save $42 million a year.

Schwab was 19 cents versus 20 cents expected but revenue was above expectations.
*****

This morning as bonds tailed off on the greater than expected PPI we repurchased a portion of the two year Treasuries we sold last week. We invested about one third of the cash in our larger accounts at a bit under par for a 5.15% yield.

We realized over the week-end that we had been buying the Treasuries for a trade instead of a two year investment and that is why we were uncomfortable holding them. We also realized that we did want to commit some funds in larger accounts for a two year period at over 5%. But in our last purchase we had invested much more money per account than we wanted to at that level. As with stocks sometimes we have to experience ownership and sale before we understand our purpose.

We don’t know whether the Fed will stop in August or September but we think they will stop for a while because the stocks markets are under pressure and we think stocks will remain so. And when the Fed stops the two-year will move lower in yield. Even if the Fed increases the rate to 5.50% in August and the two-year moves above 5.30% we will have funds available to commit more money if we so desire.

Currently we are reserving the balance of the funds in accounts for stock investment in September and October in the stocks we mentioned last week which we again list below. Yellowed are new additions We do have price levels in mind and if the stocks reach those levels before the October time period we will get our toes wet. The prices we have in mind are all about 10% or more below current levels. Truth be told we hope bonds move higher in yield from here because we may invest a good chunk of money left in the two-year or five-year Treasury.

General Electric (GE), St. Jude Medical (STJ), Boston Scientific (BSX), Schering Plough (SGP), DuPont (DD), Sprint/Nextel (S), Verizon (VZ), Pfizer (PFE), Cisco (CSCO), Intel (INTC), Texas Instruments (TXN), Kraft (KFT), Home Depot (HD), Tiffany (TIF), Time Warner (TWX), Wrigley (WWY), IBM, DreamWorks (DWA), Fifth Third Bank (FITB), New York Times (NYT), Alcatel (ALA) which is buying Lucent, Microsoft (MSFT), DELL, Williams Sonoma (WSM) which is Pottery Barn, Talbot’s (TLB), Ford (F), QUALCOM (QCOM), Symantec (SYMC), Starbucks (SBUX), and Whole Foods Market (WFMI).
*****

Stocks opened higher out of the gate and after an hour and one half of trading they have given up their gains and are in negative territory. Oil is up $1 as the big boys and girls have some fun. Breadth has turned negative.
*****

At noon gold is down $16 and oil is up 50 pennies and the major stock measures are lower with breadth slightly negative. Volume is moderate and traders seem to be waiting for tomorrow’s news on CPI and Bernanke’s testimony.
*****

We are heading out early today because we have guests coming. At 1pm the markets remain lower in tepid trading. Our guess is that not much happens until tomorrow when the data and talk will set the tone for the rest of the week.

And the Casino will be open for business as usual.
*****

 

17 July 2006 Daily Comment

Thoughts

Newt Gingrich called the Middle East crisis World War III over the week-end and Sally Krawchuck, the CFO of Citigroup, just repeated the phrase on CNBC. So that term is the new scare word for this election season if it flies. We don’t think it will but if it does and becomes part of the lexicon of the fall elections then the psychology of investors is going to be negatively affected.

Overnight Hong Kong was lower, Japan was closed and the rest of Asia was off over 1%. Europe is lower to begin the day.

There may be a WW III but the Lebanon crisis is not it. The markets sold off on Friday because traders didn’t want to be in stocks over the week-end. And stocks may rally today but the markets have been selling off because the economy is cooling and inflation is growing. Well actually inflation ahs been growing for many years but the CPI is now beginning to reflect that as rental prices rise with housing prices and sales stagnant. The earnings numbers being reported are history it’s what is coming that matters.

Citigroup had good numbers but not what the street wanted and is trading lower. Treasuries are a tad weaker as the end of the world trade is unwound.
*****

The big number of the week is the Consumer Price Index (CPI) which comes on Wednesday. The Producer Price Index (PPI) is announced on Tuesday.
*****

Capacity Utilization for June was 82.4% up form 81.2 % in May and a tad more than expected. Industrial Production was up 0.8% up from 0.5% and more than the 0.4% expected. These higher numbers were offset by the New York Empire State Index at 15 when 21 was expected.
*****

Out of the gate stocks are higher (except oil stocks) as traders and newbies get long. Citi is down 75 pennies and that is not a good sign for a bullish stance.
*****

Oil is $76.12 as the Lebanon stuff becomes old news to all but those who are in the midst of it including 25,000 American citizens. Gold is also lower at $660.
*****

GM merging with Renault, or even talking to Renault about combining is …..
*****

The Fed Chairman testifies before Congress on Wednesday. With IBM, Johnson& Johnson, Coke, Mother Merrill & Yahoo earnings tomorrow and BankAmerica, Motorola, Intel plus a slew of others on Wednesday and later in the week there will be enough data points for the traders that are around to have some fun.

Three hours into the trading day the major stock measures are slightly higher, the dollar is strong, Treasuries remain a tad weaker and breadth is 5/4 negative.
*****

McDonald’s is up $1.75 and Boeing is up over $2 and those two are helping the DJIA to be up 35 points. Breadth remains 5/4 negative as we enter the contra hour. Volume is summer moderate as traders await the earnings and data rush of Tuesday and Wednesday.
*****

Oil ended in New York down at $75.30 as the world didn’t implode over the week-end. Gold finished in New York at $651 which was down a chunk on the day.
*****

Treasuries were slightly lower in price with the two-year at 5.11% and the ten-year at 5.07%.
*****

Europe closed fractionally lower on most bourses. Mexico was up 1% near the close and Brazil was down 1%.
*****

At the bell the DJIA was up 8 points at 10748. The S&P 500 lost 2 points to close at 1233 and the NAZZ was unchanged at 2037.

New lows were over 350 and new highs were under 60.

Volume was moderate and breadth was 3/2 negative.

Tomorrow brings PPI. The casino will be open as usual for fun and games.
*****

 

Bastille Day 2006 Daily Comment

Thoughts

We wish all our French relatives and other fellow travelers a Happy Bastille Day.

Asia was 1% to 2% plus lower overnight playing catch up to the European and U.S. stock markets of yesterday. European markets are lower but only fractionally so.

Gold is $66.25 and oil is $77.31.

The Bank of Japan raised its discount rate to 0.25%. The Mid East is in turmoil. Retail sales were lower and that has pushed stock futures higher because in traders minds it means the Fed will pause.

Texas Pacific Group, which made a huge return by buying J Crew several years ago, is paying a 50% premium to buy PETCO, the animal supply stores for $1.9 billion which is a 50% premium over last nights close. They bought J Crew at the bottom of the market, they are paying top dollar this time. There is too much money sloshing around in the buyout funds.
*****

The S&P 500 hit 1237 which is a few points above the 1235 level support. After an hour of trading the S&P is above that level but breadth remains 2/1 negative and volume is moderate.
*****

GE reported increased earnings but the outlook was less than expected and the shares are down a bit but then so are most stocks. Borders Group, the office supply and book store, warned of a larger loss and is trading lower.
*****

The July University of Michigan preliminary Consumer Sentiment reading was 83 down from the final June reading of 84 and below the expected reading of 85.
*****

Two hours into the trading day the S&P 500 has broken support at 1235, next stop 1220 where the June rally started. The DJIA is down 135 points and traders are beginning to look for the rally. If it were any day but Friday we would say that the day is setting up for a last hour rally.
*****

European bourses closed more than 1% lower across the continent.
*****

In the contra hour the DJIA is down 125 points and the S&P 500 is down 10 points. Most trader types have a wait till Monday attitude.
*****

Oil closed at $77.03. Gold was $668. Treasuries closed better with the two-year at 5.10% and the ten-year at 5.07%.
*****

There was some short covering near the close and at the bell the DJIA was down 10 points at 10745. The S&P 500 lost 6 points to 1236 and the NAZZ was off 16 points to 2037.

Breadth was 2/1 negative at the bell and volume was moderate.

New lows expanded to 450 and new highs were under 60.

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

 

13 July 2006 Daily Comment

Thoughts

Israel has moved deeper into Lebanon gaining control of its international airport and as a result oil is at $75.77 which would be a new closing high.

The United Nations has given Iran a few weeks to give up uranium enrichment and that too is part of the rise in oil. China which buys Iranian oil is trying to soften the impact on Iran and our guess is that China won’t go along with the UN Security Council when and if push comes to shove. Iraq continues to suffer from random killings and that place is a mess but not on the traders radar screens.

The Israeli incursions in Gaza and Lebanon are worries both for the Israelis and the world. It is sort of you own it now what do you do with it situation similar to the U.S. position in Iraq.
*****

Overnight Asia picked followed the down U.S. markets of yesterday to lower levels and Europe is doing the same. Gold is up to $654 and Treasuries are 2 ticks better. U.S. futures are suggesting a lower opening.
*****

Pepsi had good numbers last night. It is trading higher re-opening.
*****

Federated is going to sell its bridal and formal wear stores for over $1 billion to some buyout firms. Again we say that the buyout of retailers is assuming risk for management fees. The reward may be there but only if the economy hums along for the next few years. The rush to retail flies in the face of any recessionary possibilities.
*****

Jobless claims for last week were 332,000 with 322,000 expected.
*****

SAP the large European software firm disappointed and so that won’t help the tech area at the start of trading.
*****

One hope of Bulls is that earnings season which begins in earnest next week will get the juices rolling. With summer vacation upon us all and a lot of institutional money going the way of the buyout funds that hope may be wishful.
*****

In our review of stocks we are watching we didn’t mention the ETFs we may be adding. Those are the Powershares Pharmaceutical ETF (PJP), the Tech ETF (XLK), the Russell 2000 ETF (IWM).
*****

We are reprinting the stock list from yesterday and will do so weekly adding or subtracting as the case may be:

GE, St. Jude Medical (STJ), Boston Scientific (BSX), Schering Plough (SGP), DuPont (DD), Sprint/Nextel (S), Verizon (VZ), Pfizer (PFE), Cisco (CSCO), Intel (INTC), Texas Instruments (TXN), Kraft (KFT), Home Depot (HD), Tiffany (TIF), Time Warner (TWX), Wrigley (WWY), IBM, DreamWorks (DWA), Fifth Third Bank (FITB), New York Times (NYT), Alcatel (ALA) which is buying Lucent, Microsoft (MSFT), DELL, Williams Sonoma (WSM) which is Pottery Barn, Talbot’s (TLB), Ford (F), QUALCOM (QCOM) and Symantec (SYMC).
*****

After on half hour of trading the DJIA is down 100 points and breadth is 4/1 negative and down volume exceeds up volume 9/1. This quick sell off may set up a rally situation. The S&P 500 is at 1250. The last good rally into quarter end on June 30 came from the 1235 level which will take another day to reach. A sell off all day into tomorrow would be a better set up.
*****

Wheat and Corn are at multi-year highs and so there is talk about inflation in the price of food which constitutes 23% of the CPI. Since the cost of most food products is mostly packaging and advertising and not the contents the flow through of these price increases will be negligible. Moreover the brand items are now competing with generic and so the price elasticity isn’t as elastic as it used to be.
*****

At noon the DJIA is down 70 points, breadth has improved to 2/1 negative and new lows are not expanding above yesterday’s number of around 220. The major stock measures attempted a rally about an hour ago that failed but we think another is in the cards for this afternoon. If that one fails and stocks drop in the morning we may try a few trades in some big cap names like DD, GE and VZ. All three are at their June lows and may be worth a point or two in a rally. But we want to buy off the 1235 level on the S&P 500 not the 1250 level where it is currently.
*****

This is an interesting part of an article from www.realmoney.com :

It's clear the markets are prepping for a U.S. consumer recession, which is expected to swamp tech companies across the board. The recession probably is coming next winter; the clock started ticking in September when the U.S. housing market peaked after one of the biggest property run-ups in history.

Consumer recessions following major property bubbles have often started roughly 12 months after the housing peak, so June's weakness in U.S. retail and car sales probably was a harbinger of the coming consumer crash. Not all housing peaks trigger recessions -- that's the element of uncertainty. But the blow off phase of this housing cycle was so incestuously linked to overall consumption growth that it's hard to believe retail won't get hit hard this winter.
*****

Crude oil is at a new high of $76.20. Maybe $80 will come before $40. We still think the markets need $40 (or at least under $50) for a real bull rally to come.
*****

How times change. Intel is involuntarily retiring 1000 managers. It’s time to hire folks in India.
*****

The question for the afternoon is do traders want to try and rally the markets with the unknowns in the Israeli situation and will they want to carry those longs over the week-end. We think the answer to that question is easy.

The more difficult question is whether the Israeli incursion and fighting means anything more to the markets. We know it is terrible for the folks involved but we think the market swill slough off the worries and treat it as the same old same old on Monday if it doesn’t get any worse. But we would guess that traders will wait until Monday to act.
*****

New York Gold closed at $654.40 which is a six week high. Oil ended at $76.68 which is a new closing high. Treasuries rallied on the bad news and down market with the two-year at 5.12% and the ten-year at 5.07%.
*****

Ford cut its dividend to 5 pennies a quarter from 10 pennies a quarter.
*****

All the European bourses closed over 1% lower and Mexico was down 3% while Brazil lost 2%.
*****

The DJIA closed down 165 points at 10845. The S&P 500 lost 16 points to end at 1242 and the NAZZ dropped 35 points to 2054.

Breadth was over 3/1 negative and volume was active for a summer day.

New lows exceeded 330 and new highs were about 50.

And there is one more day at the casino this week.
*****

 

12 July 2006 Daily Comment

Thoughts

Overnight Japan was down 1% while the rest of Asia was better with India up 3%. We don’t mean to be crass but in India the calamities both man made and natural seem to come all too often and so the Indian markets seemed to shrug off this latest disaster. Also U.S. traders who sold the news yesterday in the U.S. markets were probably scrambling to cover their sales by buying in the Indian market overnight once Indian stocks stabilized after an initial sell off.

Europe is higher as the U.S. trading day begins with France and Germany up over 1%. Treasuries are weaker as the dollar is stronger, oil is $74.24 and Gold is $647. We are going to cease giving the ups and down for gold and oil since they trade for 24 hours a day and close in different markets at different prices.

Investors Intelligence shows a gain in bulls to 42% from 39% and a drop in bears to 32% from 33%.
*****

Genentech’s disappointed last night and it is down $3 on an $80 price tag. Prudential and Deutsch Bank downgraded the stock to hold from buy. Supposedly the earnings and sales were OK but Avastin sales were suspect. That has given a soft tone to the opening.
*****

The weekly oil and gasoline inventory numbers were down more than expected. Oil is trading at $74.75.
*****

And hour into the trading day most major measures are lower. Breadth is 2/1 negative and Treasuries are also lower in price, higher in yield with the two-year at 5.19%.
*****

It’s easier to wait the markets out when stocks are going down and confirming our view. The days that they rise we always think that maybe we should be getting our toes wet. But then we remind ourselves that if we had stayed in cash the last two years after selling in January we would have had a much more positive return. Moreover cash now yields over 4% versus the 1% of the prior years and so it is a bit easier to sit on our hands.
*****

Talbot’s popped up $4 per share yesterday on news that their losses from the J Jill acquisition will be less than expected. The shares had dropped from $30 to $18 in the last six months after the acquisition was announced. We have owned TLB off and on over the years and have been watching for an entry point in the fall. Our number is $15 and yesterday’ bump higher put the cabash on that thought at least for the present. But TLB has to execute and we think yesterday’s move was short covering. There is not a large float in the shares and the stocks remains on our maybe watch list for September/October.
*****

Other stocks we are watching are: GE, St. Jude Medical (STJ), Boston Scientific (BSX), Schering Plough (SGP), DuPont (DD), Sprint/Nextel (S), Verizon (VZ), Pfizer (PFE), Cisco (CSCO), Intel (INTC), Texas Instruments (TXN), Kraft (KFT), Home Depot (HD), Tiffany (TIF), Time Warner (TWX), Wrigley (WWY), IBM, DreamWorks (DWA), Fifth Third Bank (FITB), New York Times (NYT), Alcatel (ALA) which is buying Lucent, Microsoft (MSFT), DELL, Williams Sonoma (WSM) which is Pottery Barn, Ford (F), QUALCOM (QCOM) and Symantec (SYMC).
*****

Treasuries closed about flat on the day with the two-year at 5.17% and the ten-year at 5.11% and Gold was $751 and Oil $74.95.
*****

Europe closed before the sell of in U.S. stocks and was higher across the board.
*****

At the close the DJIA was down 120 points at 11012. The S&P 500 was off 14 points to 1258 and the NAZZ lost 38 points to 2090. Breadth was over 2/1 negative and volume was moderate.

New lows stayed around the 210 mark and new highs actually expanded over yesterday to over 105.

The casino has two more days of fun in the cards for folks this week.
*****

 

11 July 2006 Daily Comment

Thoughts

Boring.

Alcoa had increased earnings last night but sales were less than expected and the shares are trading down $1.40 in the early going. AA is the first DJIA to report earnings although 3M warned last Friday and that warnings set a negative tone for the markets that day and helped with the sell off.

Overnight Asia was fractionally lower as is Europe. Gold is up $6 and oil is at $73.50. Treasuries are unchanged.

This week has few potential markets moving numbers and so today’s trading may be as boring as yesterday’s.
*****

In the early going oil and oil stocks are higher and most everything else is lower.
*****

The Treasury Department is projecting that the U.S. budget deficit for fiscal 2006 from $423 billion to $298 billion and in 2008 will drop to $181 billion. And Paulson has only been Treasury secretary for one day. The magic of numbers and growth projections have accomplished this projection. W won’t really know until after the elections of course.
*****

After four hours of trading the major measures are lower and breadth is 2/1 negative. Volume is light.
*****

Gold is up $16 to $642. Talking heads are ascribing the rise to the bombings in India. The reality is that folks are buying gold because it went up, in other words the momentum boys and girls are back in it because that is where the action is an a slow summer day.
*****

Europe closed lower with Germany and France both off over 1%. But that was before the U.S. markets rallied.
*****

Gold closed at $634.10 up $17. Oil was $74.16 up 55 pennies and Treasuries were better with the two-year at 5.16% and the ten-year at 5.11%.
*****

The DJIA was up 31 points at 11135. The S&P 500 gained 5 points to 1273 and the NAZZ was 10 points at 2127.

Volume was light and breadth was positive on the NYSE and 5/4 negative on the NAZZ at the close after being 2/1 negative both places for most of the day. There were 220 new lows and new highs were about 95.

And there are three more days left at the only internet gambling casino the House of Representatives wants to allow.
*****

 

10 July 2006 Daily Comment

Thoughts

Japan was up 1.6%, Hong Kong 0.8% and the Sensex, which is an index measure of Asian countries was up 1.65% overnight. European Bourses are mixed and U.S. futures are looking higher as the day begins. Gold is down $11 at $624 and oil is off 50 pennies to $73.50.

Earnings season is beginning and announcements like 3M (it dropped $7) on Friday will be movers of individual stocks and indexes if they are big stocks like 3M during the summer doldrums. 1254 is not to violate support on the S&P 500 and 1290 is get above and watch the markets run resistance.
*****

An hour into the trading day the major measures are all higher with the DJIA up 65 points and Breadths 2/1 positive.
*****

Three hours into the session the DJIA is holding its gains but the NAZZ is now in negative territory as several tech stocks have warned this morning. Breadth on the NAZZ is also 2/1 negative. UBS lowered their earnings estimates for IBM for 2006 and 2007 and set and $82 target down from $90.
*****

KKR and Apollo Management are in the running at above $30 per share to take Foot Locker private. The LBO mania in retail makes no sense to us. We know the buyout firms will only keep the companies private for a few years at most before trying to sell them back to the public. But retail is such a volatile area that the risk is only justified by the huge fees these buyout firms earn from the goofs who give them the money. In effect, the investors are paying the buyout firms to take as much risk as possible.
*****

Oil ended around $73.50 and Gold was $627. Treasuries were flat on the day.
*****

After being up 90 points early in the trading day, the DJIA dipped into negative territory early in the final hour but managed to close in positive territory although it gave up much of its early in the day gains.

The DJIA was up14 points at 11105. The NAZZ lost 13 points to close at 2117 and the S&P 500 was up 2 points at 1267.

Breadth was 5/4 positive on the NYSE and was 5/4 negative on the NAZZ. Volume was summer light.

New lows at 190 exceeded new highs at 110.

And there are four more boring days left for trading this week at the big casino.
*****

 

6 July 2006 Daily Comment

Tomorrow Friday July 7 we will be traveling to Chicago to see clients and celebrate our 40th wedding anniversary on Sunday. Our next post will be Monday afternoon July 10.

Thoughts

Weekly jobless claims were down 2000 to 313,000. Overseas Japan was lower by 1.3% and Hong Kong was up 1%. Europe is fractionally higher on most bourses and U.S. futures suggest a higher open. Oil is back under $75 and gold is down $4 to $524.

Treasuries are a tad better in price, lower in yield as traders await tomorrow’s employment report to see if the ADP report of yesterday was valid. Traders interviewed on CNBC say that the markets have priced in a plus 250,000 employment gain. Anything under 200,000 will engender a rally in Treasuries.
*****

The Bank of England kept its key interest rate unchanged at 4.5% and the European Central Bank was also unchanged at 2.5%. The Bank of Japan refused to say when it would raise interest rates above 0%. Yes 0% is correct.
*****

The ISM Non-manufacturing Index for June was 57 when 59 were expected. That is weaker than expected.
*****

In the early going all the major stock measures are higher. Breadth is 2/1 positive and volume is holiday light.
*****

Phillip Morris received a favorable ruling in Florida to the tune of $145 billion and the shares are up $5. That is about 25 points added to the DJIA.
*****

The conservative business candidate won the Mexican presidency by 200,000 votes and the Bovespa is up 3% with the peso also strong. The loser is making noises and may not go away quietly like Gore and Kerry did.
*****

Traders are hedging their bets in Treasuries which are better today. Oil finished at $75.14, gold at $629 and the Treasury two-year went out at 5.21% and the ten-year at 5.18%.
*****

Today’s meandering trading was an interlude before tomorrow’s Employment report after which there will be flurry of trading and then nothing as an early week-end begins for those who worked this week.

The DJIA was up 70 points (it was down 76 points yesterday) to 11225 with a big assist from a $4 gain in Phillip Morris. The S&P 500 gained 3 points to 1273 and the NAZZ also gained 2 points to end at 2155.

Breadth was slightly positive and the NYSE and slightly negative on the NAZZ.

Volume was snoozville and new highs at 155 beat out new lows at 125 for the first time in weeks.

The big Casino has one more day for the big boys and girls who are around to play and the Atlantic City Casinos re-open tonight.

We’ll be back on Monday.
*****

 

5 July 2006 Daily Comment

On Friday with the Fed statement in mind we decided to buy the two-year at 5.17% in our larger accounts. This morning the ADP June jobs report suggested over 300,000 jobs were added to the economy. This report which is new has been a good precursor the three previous months of the Labor Department Monthly Payroll Report which is coming on Friday. Rather than stick around and see what happens we decided to sell the bonds today that we bought on Friday for a 10 penny loss net of interest income. The loss amounts to an overall loss of six days interest.

We have been trying to catch the top in interest rates for the past five months and four times have quickly abandoned our position when data suggested that rates would move higher. We want to eventually place money to work in bonds but we don’t want to lose 1% or more of principal to do it. And that is the reason we have been quickly selling Treasuries when new data suggest higher rates.

Treasury Securities had their worst performance in seven years for the first half of 2006. The Lehman Composite Treasury Index is down 3% and the Long Term Index is down 6% for the year. In all our trading we have lost a total of about 20 days interest.

Once again we are on the sidelines.
*****

Thoughts

We first review what occurred on Friday and Monday and then present our take on today’s action.

Friday June 30, 2006:

Friday’s markets were anti-climax to the strong markets of Thursday. It seems the big boys and girls accomplished their goals on Thursday for the end of the quarter and were off to the Hamptons or wherever for the long Fourth of July Holiday week.

The DJIA closed down 40 points and the S&P 500 lost 2 points. Treasuries firmed with the two-year moving to 5.17% and the Ten-year to 5.17%.

Part of the reason for the weakness in the stock markets the last few weeks has been the rumors and reality of hedge funds selling to meet redemptions. There were rumors on Wednesday of a large hedge fund liquidating but those have become daily rumors in the markets. Some very large hedge funds are down 20% and that doesn’t make performance minded clients who are paying large fees happy.

Kirk Kerkorian’s Tracinda Corporation suggested that GM make an alliance with Nissan and/or Renault and that those two companies were interested in taking a $3 billion minority stake in GM. That caused GM stock to move higher on Friday. GM had no comment.

News was released on Friday that suggested that Apple I Pod sales had slowed and both Apple and Computer Associates were rumored to be under investigation for backdating options. Now we know how all those executives afford their yachts. It used to be the brokers yachts were purchased at the expense of clients, now it is the CEO’s yachts purchased by gullible shareholders.

Buyouts have become the new dot coms as buyout funds scramble to spend the money they raised before they have to return it and lose all the marvelous fees they will earn.

Lunch with Warren Buffet was auctioned for $620,000 on EBay. We are sure Buffet would never have paid more than $20 for the privilege.

Person Income was up 0.4% in May when 0.2% was expected. The PCE Deflator (inflation) was 3.3% on a year over year basis. The core deflator was 2.2% y/o/y.

Asia was up big-time on Friday with Hong Kong and Japan both up over 2%,,

The Final (remember there are three per month) University of Michigan Consumer sentiment reading for June was 84.9 versus 79.1 in May.

Sliver was up $2 on Friday and gold was up $16.

Model Portfolio As of 30 June 2006

 

 

 

 

 

Pct.

 

Quantity

Security

Value

Assets

 

 

 

 

 

 

550000

UST Note 5.125% due 06/30/08

$ 549,615

96.2%

 

 

Cash

$ 21,678

3.8%

 

 

TOTAL
PORTFOLIO

$ 571,293

100.0%

 

 

 

$20,743 Portfolio As of 30 June 2006

 

 

 

 

 

Pct.

 

 

Quantity

Security

Value

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$ 20,854

100.0%

 

 

 

TOTAL
PORTFOLIO

$ 20,854

100.0%

 

 

 

Model Portfolio Yearly Performance
Inception
12/31/1983 thru 6/30/2006

 

 

 

 

Date
Ending

Market
Value

Portfolio
%Return

S&P
500
%Return

12/31/1983

$49,934

Started

N/A

12/31/1984

$50,294

1%

6%

12/31/1985

$68,299

36%

32%

12/31/1986

$81,538

19%

18%

12/31/1987

$96,472

18%

6%

12/31/1988

$108,947

13%

17%

12/31/1989

$119,298

10%

32%

12/31/1990

$107,885

(10%)

(3%)

12/31/1991

$144,418

34%

30%

12/31/1992

$152,125

5%

8%

12/31/1993

$152,654

0%

10%

12/31/1994

$153,553

1%

1%

12/31/1995

$177,382

16%

38%

12/31/1996

$200,666

13%

23%

12/31/1997

$220,832

10%

33%

12/31/1998

$245,951

11%

29%

12/31/1999

$353,461

44%

21%

12/31/2000

$356,212

1%

(9%)

12/31/2001

$429,804

21%

(12%)

12/31/2002

$460,305

7%

(22%)

12/31/2003

$525,365

14%

29%

12/31/2004

$570,633

9%

11%

12/31/2005

$556,147

(3%)

5%

6/30/2006

$571,293

2.7%

1.8%

 

$20,743 Portfolio Yearly Performance
Inception
3/24/2006 thru 6/30/2006

 

 

 

 

3/24/2006

$20,743

Started

N/A

6/30/2006

$20,854

0.5%

(2.5%)


*****

Monday July 3, 2006

Stock markets closed at noon today. Some futures markets were not trading.

Asia was slightly higher on Monday and Europe was mostly higher. Gold traded up $26 at $616 and oil was close to $74. It looks like the commodity boys and girls are back in the Casino after bad run at the table in June.

Our guru says that the big move on Thursday besides being influenced by the Fed wording was also affected by the end of quarter shenanigans and the rebalancing of the Russell 2000.

Japan has a two day meeting regarding interest rates on July 13 and 14. The question is whether they should raise their borrowing rate above 0%. Far out.

The June employment report comes Friday at 7:30am. That will be the next important tell for the bond and stock markets.

CNBC reported that Bear Stearns was “disappointed” in the Fed statement in that the Fed seemed to be backing off its inflation fight. CNBC also reported that Bear Stearns said that last Thursday’s rally was a short covering rally and that Bear Stearns sees no sign of sustainable buying from institutional customers on its trading desks.

BankAmerica raised its rating on GM to neutral from sell with a price target of $30 raised from $15. GM is trading at $29.80 so that kind recommendation is a no brainer and worthless.

Wal-Mart Inc. estimated Saturday that it will post a 1.2% gain in same-store sales for June, hitting the low end of its earlier forecast.

The Institute of Supply management’s Index for June was 53.8 versus 54 last month. Any number above 50 implies expansion. The survey is based on responses from 400 companies in 20 industries. ISM Prices paid were 76.5, which mean that prices are running high and activity slowing. The ISM employment component was below 50 at 48.7. Stagflation?

Construction spending was down 0.4% in May versus and expected gain of 0.2%.

Oil ended at $73.93. Gold was $616. Treasuries were a tad weaker with the two-year at 5.17% and the ten-year at 5.17%.

The DJIA closed up 80 points, the S&P 500 was up 10 points to 1280 and the NAZZ gained 16 points.
*****

Wednesday July 5, 2006

North Korea decided to celebrate the Fourth of July with its own fireworks show and shot off seven missiles. The intercontinental missile was destroyed after 42 seconds of flight so it is back to the drawing boards on bombing the Aleutian Islands. Since the U. S. anti-ballistic missile defense has never shot down a missile in a true test the failure of the North Korean Missile is good news.

Nevertheless Japan and Hong Kong closed lower, the rest of Asia was mixed and European markets are lower on the news. Gold is up $14 at $630 and oil is at $73.90. U.S. futures are a bit lower in the early going.

Treasuries are slightly higher in yield on long end and flat on the short end.
*****

Mexico’s stock market rose 5% on Monday and 1% on Tuesday as it looked as if the conservative business backed candidate won the presidential election. Today the Mexican market is down 2.3%. 3 million votes are supposedly not yet counted. That sounds like the Chicago way of counting votes.
*****

The ADP employment report suggests 329,000 new jobs in June. The U.S. Govt. jobs created report for June is Friday and bond traders are following the ADP report as a precursor of the Friday report. Treasuries are lower in price higher in yield after the ADP report as the potential of strong job growth ahs traders again expecting a move to 5.25% in August. August is a long way off in today’s market terms.
*****

Ken Lay, the former Enron CEO and Chairman has died. He faced life in prison.
*****

After two hours of trading the major measures are lower in light trading. Breadth is 4/1 negative.
*****

The next Fed meeting on interest rates is August 8, and the one after that is September 20.
*****

Oil closed at $75.19. That is a new closing high. Gold ended up $13 at $629. Treasuries were lower with the two-year closing at 5.25% and the ten-year at 5.22%.
*****

The DJIA closed down 76 points at 11151. The S&P 500 was off 10 points at 1270 and the NAZZ lost 36 points to 2153.

Breadth improved during the day but still was more than 2/1 negative at the bell.

Volume was holiday light and there were 150 new lows and 1120 new highs.

There are two more days for the big Casino this week. The New Jersey Casinos are closed until further notice as the state shuts down for a budget crisis. A Democrat governor is fighting a Democrat assembly. That’s why Democrats can't regain power in Washington, they have no party discipline.
*****

 

 

 

 

 

 

 

 

 

 

 

 



FAIR USE NOTICE

This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.


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.