We are doing some tag end buying
in accounts to get them aligned. And then we are going to await the Fed
decision which supposed to be a raise of 25 basis points and no change in
language of gradual tightening.
This morning’s news had Jobless Claims at 310,000 which are
down 6,000 and the second best of the year. Personal Income was up 0.2% and the chain deflator (inflation) on a
year over year basis was 1.9%.
Thursday’s Markets June 30, 2005
There really isn’t much to do
until the Fed speaks. The markets are meandering and when oil was down earlier
this morning the major measures were positive. Now that oil has moved to the upside
the major measures are lower.
Treasuries are firm with the five
year at 3.72% and ten-year at 3.95%.
Federal Open Market Committee decided today to raise its target for the federal
funds rate by 25 basis points to 3-1/4 percent.
"The Committee believes that, even after
this action, the stance of monetary policy remains accommodative and, coupled
with robust underlying growth in productivity, is providing ongoing support to
economic activity. Although energy prices have risen further, the expansion
remains firm and labor market conditions continue to improve gradually. Pressures
on inflation have stayed elevated, but longer-term inflation expectations
remain well contained.
"The Committee perceives that, with
appropriate monetary policy action, the upside and downside risks to the
attainment of both sustainable growth and price stability should be kept
roughly equal. With underlying inflation expected to be contained, the
Committee believes that policy accommodation can be removed at a pace that is
likely to be measured. Nonetheless, the Committee will respond to changes in
economic prospects as needed to fulfill its obligation to maintain price
3:02pm and even with Boeing up over $4 per share which is worth 25
Dow points the DJIA closed 103
points lower at 10270. The S&P 500
lost 9 points to end at 1191 and the NAZZ
dropped 13 points to 2056. Breadth
was positive on the NYSE and negative on the NAZZ at the bell. Crude Oil ended down 72 pennies at
$56.50. Treasuries were better with
the five-year at 3.70% and the ten-year at 3.92%. Treasuries are suggesting a
slowdown which flies in the face of what the Fed is saying.
And tomorrow is tomorrow so let
the games begin.
29 June 2005 Daily Comment
It is wondrous how a good night’s sleep, a large cash position and
an up day in all our stocks can freshen the spirits and make the coming trading
day one of interesting anticipation.
The final number for first
quarter GDP was up 3.8%. More
importantly the Chain Deflator (Inflation Measure) was an annualized 2.8% which
was below the expected 3.2%. Personal consumption was up 3.6%.
Asia was lightly
lower overnight, Europe is higher and Oil is down below $48 in the early
This morning the gurus on CNBC
are saying the $60 spike was all speculation. Two days ago they were saying the
$60 spike was oil shortage, Nigerian war, and no refineries. Those who follow
CNBC are doomed to confusion.
Oracle had good numbers last night and that should help in the tech
Morgan Stanley raised Motorola to overweight from equal
Applied Materials was named one of Lehman Bros “uncommon values” for 2005-2006. We have never had a stock
we own on the list. We don’t know whether to worry or be happy.
BankAmerica lowered its price
target on Sara Lee to $20 (its now
at $19.61) with the comment that SLE has embarked
on a significant transformation plan that would cause near-term business trends
to suffer further. They see profits declining in every business segment for the
company, except in meats, in the first half of fiscal 2006. We agree, but
Duh! That’s why the stock is priced where it is. We think this restructuring
will be the last and the best. Meanwhile we hope to continue collecting the 4%
dividend which is supporting the stock and we think the company knows that.
Moreover, there are a lot of long term shareholders of SLE from the many
acquisitions made over the years who depend on the dividend for income.
A client questioned why we sold JP Morgan yesterday when it
goes x dividend on Friday. It is a good question. Our response was that we don’t want to own JPM on Thursday when
the Fed makes its announcement. If the Fed raises a quarter points and doesn’t
change the wording of its press release we think stocks will go lower.In all the recommendations we hear for JPM
the first thing mentioned is Jamie Dimon and the fact that he is going to make
the company’s stock a $100 per share stock. We don’t disagree but JPM doesn’t
exist in vacuum. Dimon isn’t even totally in charge of the company yet. Their second
quarter report is going to be a dog. That has already been announced so the bad
news should be in the price of the stock. But momentum players would rather buy
JPM at $42 on a technical breakout to new highs on good news than at $34 on bad
news. And momentum players currently rule the markets. We were going to hold
the stock for the dividend as support to wait for the eventual recovery in the
share price. That strategy was based on our belief in a summer rally and a strong
market. When the markets failed last week at resistance and quickly rolled over
on big volume we reconsidered and decided to raise cash. When we raise cash we
have to sell stocks, even ones we like.
Investor’s Intelligence has bulls at 55% and bears at 19%. That is
a contrary indicator and is a negative. The move of bulls above 53 last week
preceded the quick 2% to 4% drop in various measures over the next five days.
Wednesday’s Markets June 29, 2005
9:30am and CNBC has on
the screen the countdown to the announcement of the crude oil inventories for
the week. The Hunts could have had a lot more fun with gold and silver prices with
this type of coverage. Well folks, gasoline, distillates and crude oil
inventories were up. The oil traders were expecting a drop in crude oil inventories
and less of a build in distillates. Oil is now down $1 per barrel at $57.20.
Stocks have turned positive on the
news after trading in the negative column for the first hour.
9:56am and the major measures are higher in tepid trading. Oil is
now down only 59 pennies. Treasuries are firmer today with the ten-year at
3.95%. The S&P 500 is fixed on the 1202 resistance number and needs to
penetrate that today and move up through 1212 by week’s end to reverse the
negative downturn of last week. The only way that is going to happen in the
next few days given the upcoming holiday and the fact that traders seem averse
to getting long is for the Fed to take unexpected action tomorrow.
This morning we sold Bristol Myers at $25.25 for scratch
loss if the 29 cents dividend ($25.53 total) is included that we earned as the stock is today trading x dividend. Since
we read the proposed settlement of the phony numbers pumping of the early
2000-2002 period by BMY management and learned that neither the board nor
management were going to be punished we have wanted to get out of the stock.
The only reason to hold it is for a takeover and Pfizer and Merck have so
many problems of their own that we think any acquisition of BMY is a ways off. And
we just don’t like what management and the Board did to save their hides
through the pocketbooks of shareholders. This was an easy pick for raising
and breadth is flat
on the NAZZ and 5/4 positive on the NYSE. The major measures are slightly plus
or minus and oil is at $57.35. Volume is light and Treasuries are backing up
with the ten-year at 3.99%
We sold Dycom at $20 for a small gain and added a few shares of Schwab to accounts.
With the DY sale and SCH purchase
we have basically placed accounts in the position we want them for quarter end.
We have a good cash position and relatively large holdings in a few stocks like
Motorola and TLAB that have been bucking the downtrend of the last few days.
2:08pm and entering the final hour two large cap stocks, General Mills down $3.50 and Monsanto down $4 are acting as rally
extinguishers. Oracle remains up about 90 pennies or 7% and Google is doing a repeat
of yesterday when it dropped $7 in the last few minutes of trading. Today it is
down $7 after being up $2 in the early going. That drop is not a big one for a
$300 stock but it does show that the momentum guys and gals may have decided to
take their profits and head to the sidelines until Uncle Alan’s note to all tomorrow
at 1:15pm CST.
and the DJIA closed
down 31 points at 10375. The S&P 500 lost 2 points to 1199 and the NAZZ
gave up 1 point to end at 2070. Breadth was positive on the NYSE and 5/4
negative on the NAZZ. The ten-year treasury ended at 3.99%, the five-year at
3.76% and the two-year at 3.60%. Oil lost 94 pennies to $57.26.
And tomorrow is tomorrow so let
the games begin.
28 June 2005 Daily Comment
Google is above $300 and Oil is
above $60. One of them is overpriced. Which one?
Tuesday is beginning on a
slightly up note with the major measures looking to open slightly higher. After
selling SBC yesterday and raising a
bit of cash that we think we’ll sell another big cap income stock today if we
get a pop. We own these stocks for the dividends and if the markets are going
south holding a dividend paying stock is like writing a covered call. You receive
the 4% dividend and lose 10% on the share price. Folks who write covered calls
always say that they planned on holding the stock until it return to parity.
Our response is that we never buy a stock with the expectation that it is going
lower. They often do go lower and when they do we have to make decisions. But
when we buy stocks we are looking for 25% gains over a two year period. With
the markets playing chicken with us at this time our thought is to raise some
cash from stocks with the lowest upside return potential in any summer rally
We do not want to be long a lot
of stocks going into September and our fear is that the summer rally will go
the way of the January rally this year. By that we mean there won’t be one. And
so we are raising a bit of cash while there is some buying interest before
We are no longer measuring our
performance against our year end closing prices in making buy and sell
decisions. We are in a preserve the
capital we have left mood and will let the gains take care of themselves in
the future. This is our money too and the drop in value hurt us but it is spilled
milk and we find that concentrating on reaching a certain number rather than
concentrating on what the markets are willing to give is a no win game.
This an interesting article by Bill Gross, the man from Pimco, who
manages about $500 billion in bonds.
Tuesday’s Markets June 28, 2005
9:31am and after an hour of trading the major measures are higher
with the DJIA up 78 points and the S&P 500 at 1198. Guru Ville has 1202 as
resistance for the S&P 500. Treasuries
are a tad weaker with the ten-year at 3.95% and Oil is down $1.39 at $59.53. Breadth
is 2/1 positive. How long can it last?
The Conference Board reports that
June Consumer Confidence is a three year
and the major
measures remain higher with the DJIA up 95 points. Over the past few months
when the markets have opened higher and remained higher through the day to this
point they usually have closed on their highs. Today will be an interesting
We sold our JPM holdings for a profit and raised a good deal of cash in the
process. If the Fed doesn’t raise rates on Thursday or changes the wording of
its comments to suggest an end to raises then JPM will probably move higher. If
the expected rate increase and no change in wording occurs then JPM faces a lousy second quarter
earnings report and we don’t know how much the stock reflects that reality
especially if the markets are in a funk at that time. Moreover should the Fed
slow down or cease the interest rate increases our remaining holdings will
benefit from that action.
and as contra hour
draws to an end stocks have held their gains with Oil dropping $2.29 to $58.25. Traders love volatility but it can
hurt a lot kill if on the wrong side. Treasuries have backed up in yield as
stocks have rallied and oil prices have dropped with the five-year at 3.75% and
the ten-year at 3.96%. The S&P 500 is right at 1202 resistance and the NAZZ
has rallied 23 points to 2068.
In our cash raising mode into
quarter end we sold Verizon at $34.70
and Estee Lauder for scratch profits/losses.
To raise cash we have to sell when folks
and the DJIA closed up 100 points to 10390. The
S&P 500 gained 11 points to 1201
and the NAZZ rose 25 points to 2070.
Oil ended down $2.34 at $58.20 and Treasuries were weaker with the ten-year
at 3.97%, the five-year at 3.75% and the two-year at 3.65%. Breadth was better than 2/1 positive at
the bell and volume was the only negative since it was light on the rally and
has been much heavier on the sell off.
And tomorrow is tomorrow so let
the games begin.
27 June 2005 Daily Comment
In an effort to change our luck and make a bit more sense we are now posting
on the evening we write the comment so that we don’t get caught up in the wrong
tenses and days in our writings. Thus today’s June 27 post was written
during the day of June 27 and posted in the evening of June 27. It makes more
sense to our better half and we hope it does so for our readers.
$60 oil is the new cocktail
conversation. Markets crash, women shriek, grown men cry and pundits have hours
of fodder for talk. And we would hope that Uncle Alan will take the price of
oil into account when he and his band of merry men and one woman meet this week
to set Fed policy for the next two months. What do they talk about for two
Gloom pervades the street as all
the media and gurus have proclaimed that there is too much bullishness. How
quickly moods change. Last Tuesday at
we were getting richer and by Friday we and our accounts were heading to the
poor house. And if there is so much gloom how can folks be said to be so
bullish. Ah well consistency is not the hobgoblin of financial writers and commentators
Our favored tech guru has 1141 on
the S&P 500 as a line in the sand. The fact that 1141 is 4% lower than
Friday’s close gives us pause but doesn’t seem to bother him. But then he is
probably all in cash.
Often in the past when things
looked dicey we would move entirely to cash but this time we have been taking a
different approach. Different times suggest different methods and we want to
hold most of the stocks we own and make substitutions by selling weaker stocks
on news and go with our stronger holdings. We did this with Micron to Motorola last week and we
think it is a strategy that will work this time around. It is also the way we
managed our accounts in the 1980s and early 1990s.
One caveat to our steadfastness in maintaining our stock positions through
this correction is that we felt the same way at year end with disastrous
results. At year end we were looking for a rally as we are now. The difference
is that this time we own a different class of stocks of much better quality
than the stocks we owned at year end.
Anything is possible and to be cautious we are going to do some selling
into Quarter end. We are always
measuring risk versus reward. A 20% cash position is not going to save us from
a severe correction but since the markets failed at resistance and rolled over
last week we decided it is prudent to have some cash on hand for adding new or to
existing positions with better gain potential than those we are selling.
Now the second case of mad cow
disease has been reported. Our guess is that mad cow disease has been around
for a long time but since only one in 10,000 beef animals were semi-tested the
odds for discovery were minimal, especially since no one at the Ag Dept or in
the Cattle Industry wanted to find the disease. We don't each much beef but we
doubt that this discovery is going to affect beef consumption although it will
affect beef exports.
Short interest on the NAZZ rose 2.1% as of June 15. That is usually
considered a bullish statistic. NYSE
short interest declined 1.2% in the same period. The opposite is true and
so we have a wash sale.
Overnight Sunday Asia was lower with the Nikkei down 1%
and Europe is lower catching up with
Fridays’ downdraft in the U.S. markets U. S. futures are suggesting a lower opening
and with the OPEC ministers saying there isn’t much they can do (nor do they
want to) we would expect the malaise to take the markets lower in the early
The only potential save this week
is Greenspan not moving on rates and even that would be temporary since the
only reason to stop raising rates is because the economy is softening. And that
is why we have a good chunk of money in 4% plus dividend paying stocks.
The Fed will announce their decision on Thursday at . Thursday is also the last day of the 2nd
Quarter and the day before the long Fourth of July holiday weekend beings. It should
be an interesting and volatile day.
9:52am and the major
measures opened lower but now have moved to higher except the NAZZ which is off
1 point. Breadth is slightly better than at the opening but still remains
almost 2/1 negative. Oil is firmly over $60 and Treasuries are firm with the
ten-year at 3.91% and the five-year t 3.70%. The dollar is lower today against
the euro and the pound as rumors of an ECB bank rate cut fade.
12:16am and with no news the markets are meandering with the sell
off of the last few days casting a pall on any bullish action. Oil is trying to
get trough $61 on the upside while Treasuries are a bit better on the long end
as the yield curve flattens. Bu flattening we mean that Short maturities are
rising a bit in yield while long maturities are falling in yield and so the two
year yields 3.58% while the ten-year yields 3.90%. European stocks ended lower
with Italy and France down over 1%.
3:02pm and as a first step in rebuilding a bit of a cash position
we sold our SBC holdings at $23.58
for a scratch profit or loss as the case may be (including the dividends).
And Google made a new high today at $304 per share for a market
capitalization of $82 billion. Their search engine is not powered by oil.
For the day the DJIA gave up 4 points at 10295. The S&P 500 lost 1 point to 1191 and
the NAZZ lost 8 points to 2045. Oil ended at $60.54 up 70 pennies and
the ten-year Treasury closed at 3.91%.
There are some interesting bets being made this week. Breadth improved into the
close on the NYSE to about even while on the NAZZ it was still 5/3 negative.
And tomorrow is tomorrow so let the games begin.
25 to 27 June 2005 Weekend Comment
Yesterday was not a good day for
the bulls or our accounts. The S&P 500 broke support at 1208 and closed at
1200 with only 1198 out there as final support before correction city becomes
the word of the day. It seems like every time the Model Portfolio breaks through
the $540,000 level to the upside as it did yesterday morning gremlins arrive to
test our resolve. With oil at $60 and folks worried about China
buying up all American businesses, the rally has stalled and will provably turn
We do think the oil price level
is reminiscent of the energy crisis in California
that spread to the entire U.S.
in 2001. Back then it was energy traders creating the price rise and we believe
that now it is oil traders doing the same.
The talk is that the current rise
in the price of oil is demand driven, not supply driven. Back in the 1970s OPEC
cut the supply of oil and that caused prices to rise. This time around
and the U.S.
are increasing their consumption of oil so strongly that the demand will
eventually outstrip supply.
The potential for that to occur
in the future is the reason for the rise in oil’s price according to the gurus.
But economic theory would suggest that as the price of oil rises there is a
point where folks use less oil and so demand weakens. No thought of that phenomenon
is being accounted for in the current pricing.
The last $20 rise in oil is
trading and momentum driven and with record supplies on hand the current oil
crisis is as phony as the 2001 California Energy Crisis. And just as the
1970s-early 80s commodity shocks ended so to will this crisis and within a few
years the same experts will be wondering how low the price of oil will go. But the getting from here to there is the
By the by, Scott Reamer at www.miyanville.com has been asserting for
a while that there is not co-relationship between the price action in oil and
the action of the overall stock markets. He has presented back tested data to
support that thesis. Our only comment is that when that data was compiled CNBC
was not displaying the price of oil on a minute by minute basis and its
announcers were not ascribing stock market price changes to the changes in the
price of oil. Since investing over the short term is mainly psychological we
would guess that the continual harping on the price and the damage it may do
can’t be a positive for stocks.
Thursday night Micron disappointed big-time and the shares
are off 60 pennies at $10.30 this morning in early trading. We knew MU was a volatile issue when we bought
it since it depends on DRAM pricing for its profits and has for a number of
years. With last night’s report we were obviously early and must reevaluate. It
will probably be best to get out and reconsider.
J&J has a signed agreement to acquire GuidantTechnology at
$76 cash. Unfortunately one of GDT’s pacemakers doesn’t work and GDT knew that
when it sold them. Now it is trying to figure out what to do and we would
imagine that J&J is thinking about the merger. It is a good soap opera
except for the folks with the defective devices.
IBM is laying off 13,000 workers in the U.S.
and Europe this year. IBM will be hiring 14,000 workers
What’s good for IBM is good for India.
In 100 years the raising of living levels around the globe will have negated
the profitability of such actions. But from here to there involve pain for the
country that loses jobs and gain for the country that wins the jobs. It really
is no different than states competing to catch or keep Corporations by offering
tax incentives etc. that worked for the last 25 years. Now all the tax money is
down the drain as corporations such as Maytag abandon the U.S.
for overseas jobs.
Durable goods orders were up 5.5%
but ex transportation they were down 0.2%. No heated economy there and with the
price of oil placing the brakes on growth the bulls best hope is an end to Fed
tightening next week.
Friday’s Markets June 24, 2005
Asia and Europe
were both lower overnight Thursday into Friday after the drop in the U.S.
markets on Thursday. U.S futures are indicating a lower opening. Oil is back up
to $59.88 and Treasuries are lower in yield higher in price across the board by
a few bps in the early going. Remember the 1198 and then 50 day moving average
at 1181 on the S&P 500.
9:23am and stocks opened lower. Micron opened at $10.60 above its pre opening computer trading
level of $10.30. We decided to sell the shares and consider ourselves twice
burned with that stock.
10:25am and stocks remain lower but the major measures are above
their lowest levels of the day. We are investing the MU funds in Motorola at $18.75.
Yesterday it was one of the strongest tech stocks trading rising to $19.23
before succumbing to the DJIA drop by moving back to up six pennies on the day
at $18.86. We are concentrating our tech holdings in the strongest stocks. Motorola
has almost $5 per share in cash in the company and new management has turned it
around and caught the fancy of “the street”.
We are also picking up TLAB at $8.94 for the SGP sales of
and the bulls must
be leaving early because the major measures have moved much lower with the DJIA
down 100 points. The major measures are surely going down more easily than they
have been rising the last few weeks. We would guess that the bears will rule this afternoon.
and the DJIA closed down 120 points at 10300.
The S&P 500 dropped 9 points to
1191 and the NAZZ surrendered 17 points
to end at 2053. Breadth was 2/1
negative and volume was active. Treasuries
were firmer with the ten-year going out
at3.91% and the five-year at
3.69%. Oil closed at $59.84 up 42
pennies. The dollar improved against the euro. With the stock and Treasury
action it would seem that if the Fed tightens without some kind of ‘this is the last time’ comment that
they will be flouting what stocks and bonds are saying. But Uncle Alan is the
supreme and so he will make the decision.
All that is next week so for now
enjoy the week-end. We own what we like and like what we own.
And on Monday let the games begin
24 June 2005 Daily Comment
We hope our early departure
yesterday wasn’t the cause of the down close on the DJIA. Early indications
Thursday morning are of a lower opening. Overseas Asia
and Europe were fractionally higher. The dollar is
improving today against the euro. The Sage
of Omaha has been taking it on the chin this year with his short
dollar/long euro strategy.
Fed Ex announced‘less than’
earnings this morning and suggested that next year will be more difficult. The
company is still going to earn over $5 but the bears are wailing that the miss
by FDX is proof that the price of oil is having an effect on commerce and
earnings and so the markets have to tank. Our more bullish view is that FDX is
going to continue to earn a good deal of money and will have to adjust. By the way, Fed Ex’s profits were up 9%. *****
CNOOC which is 70% owned by the Chinese government made an offer
for Unocal. And now the talk of China
companies will begin.
Ford and GM are warning that SUV and truck sales are going to be
lower. Well, DUH! Those folks must not read the papers. Gasoline prices are
rising and SUVs get half the mileage of less guzzling vehicles. American car
buyers aren’t that stupid—we think.
And the auto companies want to
blame the losses they are suffering on worker health care costs which amount to
about 5% of sales. Funny thing is that the auto companies were flush with SUV
profits when they signed the last contract that included those worker benefits.
Now, suddenly when the companies can’t sell cars the benefits are the tproblem.
How about dumb decisions on which
cars to build. We know that SUVs are more profitable than cars; but when the writing
is on the wall that gasoline prices will be rising for the foreseeable future someone
in Detroit ought to be able to
figure out how to make more gas efficient vehicles or more attractive cars and
station wagon. Hey, there is an idea. Why doesn’t Detroit
sell a vehicle like a station wagon? Maybe the new engineers have never heard
First time claims for unemployment were 314,000 versus and expected
330,000 and continuing claims were 2.6 million which is down from the 2.9
million at the beginning of the year. They are going in the right direction
Thursday’s Markets June 23, 2005
9:01am and existing home
sales fell 0.7% in May to 7.13 million annual rate. That was a tad less
than expected. Uncle Alan and Mr. Snow make a nice couple and they are
testifying before Congress this morning about China-U.S. relations.
In the early going big cap tech stocks were higher and DJIA type
stocks weakly higher to lower. Breadth is now negative and the DJIA is down 40
points. The gurus are calling for a failure at this level where the markets
failed in March.
A drop in the price of oil or the
Fed not raising next week is the type of catalyst needed to allow the major measures
to push to substantially higher ground. Next week also coincides with quarter
end and we would guess that not a few big boys and girls are hoping that the
major measures can close near these levels. And they have a lot more money to
play with than we do.
11:11am and after visiting minus territory this morning the NAZZ is now trading above the 2100
level which is an important technical resistance area. A close above that level
on good volume 2/1 positive breadth would force the bears to endure a sleepless
night. Unfortunately breadth on the NAZZ
is negative at the moment and some gurus are ascribing the tech rally to window
dressing although it seems a bit early for that.
The DJIA has recovered from a down 50 points move but is still off 28
points. Volume is moderate and breadth on the NYSE is slightly positive while
it is slightly negative on the NAZZ. Oil
is up $1.26 at $59.40 on its way to $60 as the pushers keep pushing and the
momentum folks are enjoying the move.
and we are in one
screwy market. The divergence between the NAZZ
(up 5 points) and DJIA (down 50 points)
is disconcerting and may be suggesting that the run higher is coming to an end.
But the tech stocks are higher and everything else is lower. The NAZZ has not
been able to maintain the 2100 level and with oil doing its $60 number we would
guess that an afternoon rollover and down in all stocks is in store. The stock
markets have been ignoring the rise in oil for long enough and the markets may
be getting ready to acknowledge the negativity of the rise.
GE announced that it would meet estimates this morning and the
stock has sold off. Coupled with the FDX
$5 plus per share drop the big boys and girls may decide to sit on their hands
or take a few profits if they have any.
We sold shares of Cisco in larger trading accounts and we
bought TLAB with the proceeds only in the Model Portfolio in an
aggressive move. Since TLAB is up today against the markets trends we are going
to wait a day to see if TLAB backs off so we can invest the other CSCO money
below $9 per share.
1:36pm and immediately after our last post the DJIA dropped another
50 points to down 100 points and has stayed around the down 100 mark since. The
confluence of the failed push through resistance, the oil spike and the approaching
quarter end have made for interesting markets.
We sold our SGP holdings for a 50 cents gain more to raise cash than
to lock in the profit although this year any profit is appreciated. We would
like to have some cash in our aggressive accounts for any new bargains if the
sell off continues.
and the DJIA closed
down 170 points at 10420. The S&P
500 lost 13 points to 1200 and the NAZZ
dropped 20 points to 2071. Oil ended
the say at $59.42 up $1.33 and Treasuries
were up a few bps with the ten-year at 3.99% and the five-year at 3.74%. Breadth was 2/1 negative across the
board. Volume was active.
Some of our tech holdings fought the trend and closed higher and
even DreamWorks found support today
for the first time in two weeks. So there were some positives. We are not under
the illusion though that a general sell off won’t take our winners today lower.
It is just nice to have some on a day like today.
And today is tomorrow and it is
Friday so let the games begin and let’s get this week over.
23 June 2005 Daily Comment
The stock markets are setting up
for a strong opening on Wednesday the 22nd and that will provide an idea of the
bull strength versus the remaining bear power.
We readjusted a bit yesterday going
to a more conservative BLS from BSX and
with that switch we are in good shape for a rally or a continuation of the
meandering move higher that has been occurring over the last month.
We are sacrificing potential
quick gains by edging to more conservative stocks but we don’t have the stomach
to try and hit home runs to get all our drop of early January give-up back in
one swift up move. That’s because a down move would place us in a more
precarious position. And so we are going with stocks we know and looking for
bunt singles. Being down 6 runs is no fun but this game has no time limit on
innings played except the arbitrary ones of quarter and year end imposed by
folks who are running other folks money and not their own.
We too are running other folk’s
money but most of those folks are friends and our own family money is invested
right along and we want to recover and grow our own money as well as all the
other folks’ money in a prudent manner. Our approach now will do that.
Yesterday’s Markets June 22, 2005
9:16am and stocks opened higher out of the gate but the major
measures are stuck at fractionally higher. Breadth is strong and Treasuries are
also better with the ten-year at 4% down from 4.05% at yesterday’s close. Oil
is up 11 pennies at $59.20.
After doing a bit of reading this
morning we have come to the conclusion that the BSX/J&J fight is not over and that the jury verdict may be the
straw that leads to a takeover of BSX
by a cash rich drug company that wants some or more medical device exposure. Since
such an idea is speculative at best we are
repurchasing the shares of BSX only
in our more aggressive accounts and in much smaller amounts than we
The same holds true for Eyetech
which announced higher sales projections for Macugen for the year to $175
million from $150 million and in the past week has exhibited a desire to take
the fight to Genentech over the efficacy of the two company’s competing eye drugs.
Again, we are repurchasing stock in much smaller amounts only in aggressive accounts.
CNBC has announced that E-Trade
is going to bid about $7.5 billion for Ameritrade.
AMTD has revenues of $1 billion and holds total assets of less than $100
billion. It has not debt. Contrast that with the $1 trillion in assets that
Schwab holds, the $4 billion in revenues and a market cap of $16 billion
including $1 billion in debt. Schwab is
cheap on the price of the potential E-Trade/AMTD deal.
10:48am and crude oil inventories were down 1.6 million barrels
which was less than expected and that has caused oil to move down $1.04 to $58.
Stocks can’t get out of their own way and are plus or minus even on the day in
11:32am and it is too nice a day not to head out for a bike ride.
We own the stocks we want and there is not much to do but watch and wait. Being
absent prevents us from over thinking our strategy. How’s that for a rational
for taking the rest of the day off.
As we leave the major measures
are mixed and breadth is slightly negative.
And tomorrow is today so let the
22 June 2005 Daily Comment
June 22 is the day of the full
moon. Today June 21, the day we are writing this missive to be read on June 22
is the Summer Solstice which means its time to begin preparing for winter since
the days get shorter beginning tomorrow and winter is only 180 days off.
In our mindless discussions this
morning we were wondering when the last time the full moon and Summer Solstice
occurred on the same date and what the odds of such an occurrence were. Since there
are 28 days in the moon cycle and 30 days in June we think it must not be very
often. Leap year probably enters the calculations also. Anyone who knows will
be credited with the discovery.
We are happy that the Solstice
and full moon don’t coincide today because we are sure that the auguries would
predict doom and gloom for the markets and that the price of oil would zoom to
$100 per barrel.
But since the coincidence is not
going to occur we would guess that today is going to be more of the same summer
doldrums - which sure beats a market crash.
Yesterday we mentioned that we
didn’t think the price of oil was justified by current conditions. We neglected
to acknowledge that markets are anticipating mechanisms and while the present
may be rosy the markets are usually looking out any number of months and trying
to decide what conditions will be then. We understand that but we continue to
compare this period to the periods in the late 1970s/ early 1980s when
commodities including oil were on the rise, when real estate prices quadrupled
between 1970 and 1980 and when inflation was also the bugaboo.
Inflation is still the bugaboo
for the Fed and the way the government figures it now a 4% inflation rate is
supposedly as scary as the 12% inflation rates of the early 1980s.
The argument is being made that
oil is not overpriced because in constant dollars it is only a bit pricier than
it was in 1980. The only problem with that thought is that many of the folks
buying gasoline are making the same dollars working as they did in 1980. Not
adjusted dollars but the same dollars... folks living on Social security are
one example. Auto workers and other manufacturing workers who now have service
industry jobs would be another.
But when all is said and done the
markets will eventually recognize reality, and while OPEC members are wringing their hands on the way to the bank
about how terrible the high price of oil is for world economies, we are hoping
but not predicting that momentum might turn south for the oil trading complexes
in the not to distant future.
We are not shorting or going long
oil or oil stocks to affirm our hope, but our exposure to common stocks is a
chicken way to play the belief. Also, the rise in the price of oil will be a
drag on the economy and may be enough to get Alan and the gang to announce an
end to rate increases next week or at least slyly suggest the end by August.
On January 15, 2005
The Model Portfolio was down 6% at
$536,583. It is currently valued at
$537,212. That means that we have held our own for the past 4 ½ months and
that our losses occurred in the collapse
of the speculative stocks we were holding for the rally in early January that
never materialized. We offer that perspective to suggest that catching a rally
can have as salutary an effect on portfolio values as enduring the downdraft of
January was negative.
Tuesday’s Markets June 21, 2005
Foreign markets were higher overnight
markets look to open slightly lower. China’s
largest oil company is rumored to be bidding for Unocal. That will be an
interesting free trade issue. Is Bush going to let a Chinese company buy a U.S.
9:30am and stocks are lower. Gold is down a few pennies and
Treasuries are a smidge higher in price, lower in yield. Volume is muted.
10:40am and a Chinese firm is bidding $16 per share for Maytag and all the analysts who said it
was a sale at $14 are agreeing that the bid makes sense.
The Major measures are plus and
minus the close by small fractions, breadth is flat and volume remains summer
light. Treasuries have improved a bit more and oil is down 59 pennies.
11:44am and we sold our trading position in National City
for a $1 gain and we are placing the proceeds in SCH, MU, and TLAB. *****
and Boston Scientific lost its patent case
regarding stent infringement in a jury trial to Johnson & Johnson about an hour ago. While there will be
appeals (with up to $1 billion in the balance) and settlement discussions and BSX says it doesn’t use these stents
any more, we don’t like lawsuits and confusion and so we are going to sell the
stock for a loss and go on with our lives. BSX traded down $1.50 initially on the
news but has bounced back to down 35 pennies on the day and we are exiting. Our
other stocks are doing well except for Sara
Lee and DreamWorks. Both those
are ‘end of quarter get them out of
portfolio’ situations that we are comfortable (but not happy with the
12:35pm and we are placing the BSX
money in BellSouth which is also
down 35 pennies today and has a 4% dividend yield and will go x dividend the second
week in July. Every time we visit the city we are amazed at the number of folks
walking and driving while talking on their cell phones. And we would guess that
the cell phone business is only going to get greater. Prices will come in but
Cingular and Verizon are in the lead and with the capital costs involved should
maintain those leads. Moreover, BLS has been careful with its dollars and is in
an area where its combination business (DSL, cell, land lines and cable channels
on telephone lines) is doing well. In effect we are lowering our potential
reward by selling BSX but also our risk profile is lowered substantially. The
high for the year in BLS is $29 and with a 4% dividend that is a potential return
of over 14% if the shares move to new highs which would still be substantially
below the 8 year high. The three now adult Bells BLS, SBC and VZ are going to return to favor at some
point and we will own them (unless we trade out at a 10% plus profit) at that
time and collect the dividends until then. Also when the Fed quits raising in
the next few months yield stocks such as BLS
will engender interest from the income oriented.
and the DJIA closed down 10 points at 10600. The
S&P 500 lost 2 points to 1214 as
oil stocks closed lower and the NAZZ
rose 3 points to 2091. Breadth turned
slightly positive on the NAZZ and was negative on the NYSE at the close. Volume
was summer light. Crude oil closed
at $58.90 down 47 pennies and Treasuries
were lower in yield with the ten-year at 4.05% and the five-year at 3.83%. According to press reports, Bill Gross, a
bond guru, predicted that the Fed would be lowering interest rates by year end.
And today is tomorrow so let the
21 June 2005 Daily Comment
Thoughts on Monday afternoon June 20, 2005
We wish you a happy longest day
of the year and Summer Solstice. And we
also want to wish a belated Happy Birthday to our daughter Christine (Kelle) on
June 19. She is 36.
We have returned to the land of
milk and honey with our stocks in a holding pattern. We continue to lag the
major market measures but remain content that the stocks we own will move us to
the positive side before the summer or year is out.
But with oil toying with the $60
mark and light volume and the Fed meeting next week we would guess that not
much of interest to our accounts is going to happen over the short term.
Oil is being played by the
momentum boys and girls and it is the only game in town with good daily up nd down
action so we presume the volatility will continue. With record stores of
gasoline and oil we don’t think the price makes sense but as always the markets
are the final arbiter of price.
We have to water the garden and
walk the dogs so we will end for now.
And today is tomorrow so let the
15 June 2005 Daily Comment
Last Post till June 20, 2005 and Review of all our stocks.
We are heading off to Chicago
and Ohio for a client visit and
memorial service respectively. Because
we will be traveling the rest of the week today is the last post until next
Monday night for Tuesday June 20. In leaving we thought it would be a good
time to review our stocks.
We have now completed our
restructuring of the portfolios and now it is a matter of letting time and our
judgment play out. We like what we own and for the near future any buying will
be adding to existing holdings, and hopefully taking some profits. But we think
that for the most part we will be somnolent for the summer months and let our
summer rally theme play out.
Even if we are wrong in our
judgments we plan to hold since all our stocks are quality in good financial
shape. And in the future we plan on sticking with this type of issue since we
are getting to old to hit home runs and will have to rely on singles and
doubles for our scoring.
Applied Materials develops and sells fabrication equipment for the
semiconductor industry. The company manufactures systems that perform all the
primary steps in the chip fabrication process. AMAT also manufactures systems and testers for making flat panel
displays used in notebook computers and such. The company sells its equipment worldwide. AMAT has a market cap of $28 billion
with $6 billion of net cash on hand. Trailing twelve month revenues were over
$8 billion. Most analysts don’t see a pickup in the chip equipment market till
early 2006 and that is the reason the shares are at this level. In the 2000
mania AMAT shares sold over $55 per share and in the collapse of 2002 the share
price dropped to $12.50. Revenues topped out at $9.5 billion in 2000 and
dropped $4.5 billion in 2003 before beginning a rapid recovery.
BellSouth is one of the surviving Baby Bells. Interestingly, BLS has not done any large acquisitions
like the other Bells and yet has managed to grow its business. It owns a 44%
stake in Cingular Wireless (which also owns AT&T Wireless) with SBC
Communications which owns the rest of Cingular. With a yield of 4% at our cost
we are holding it for income and appreciation.
Boston Scientific manufactures and sells medical devices and is one
of the two companies (Johnson &
Johnson is the other through the purchase several years ago of Cordis) that makes drug coated stents
for cardiac usages. JNJ and BSX are suing each other over patent infringement.
J&J says BSX is using stents that are copies of its stents and BSX says
J&J is using its drug coating process. Our guess is that eventually if BSX
stays down or moves lower that another large drug company will buy them.
BSX has doubled revenues in the last three years to $6 billion and
has a market cap of $24 billion. Earnings will approach $2 this year.
Bristol Myers Squibb has been around forever and used to be well
run. Current management is terrible and has dons a terrible job running the
company and should be fired. They won’t be but hopefully they will decide to
sell out the company and take a nice large go away payoff. Until that happens
the dividend provides a 4.4% yield and we are guessing management won’t cut it
since they are sitting on a ton of cash and because they don’t want
shareholders madder at them since the dividend is one the main supports for the
price of the stock.
Cisco is run by John Chambers. He hasn’t done much better than
Carli Fiorina but he is a white male and so he has kept his job. CSCO was the darling of the tech mania
of the late 1990s. Back then the share price was over $50 versus the current
$19 and change. Revenues in 2000 were $22 billion and will be about $24 billion
this year. CSCO has no debt and $6 billion in cash on hand. The market cap is
over $116 billion and earnings per share will approach $1 this year versus 65
pennies in 2000. The share price has always been comprised of 60% reality and
the rest hope but CSCO is the leading equipment manufacturer of networking
computer systems and will continue to be and so you have to pay if you want to
play. At least now we are paying half for twice the earnings and growing
revenues versus the pricing in the year 2000.
DreamWorks Animation has been more of a nightmare for us since we
began purchasing it a month ago. But back in Pixar’s early years we saw the same type of price action. Ownership
of these shares is only in the animation part of DreamWorks and not the human
being movies. With earnings projected at $1 which is the same earnings per
share as for PIXR, DWA is priced at
half of PIXR. We like it as a speculation. No debt and bright folks run the
company. We think the reward potential outweighs the risk and we own it close
to the IPO price of $28 after which it ran to over $40. There has been some
quarter end ‘we want to look smart’
selling occurring the last few days but unless the markets tank we expect to
make good money in the shares.
Dycom Industries has the call letters DY which are the initials of out late partner Don Yarling and that
is what caught our attention when we say the symbol crossing the tape down $4
one day. DY builds facilities and
lays fiber optic cable for the telephone industry. The company has a backlog of
over $2 billion. The shares are priced at one times sales with no debt. This
year is a slow year and earnings will be flat at $1.10. The company has been
chosen by Verizon to lay fiber optics to the premises and the other Bell
subs are also signing on. We own for a trade.
Estee Lauder is run by two very rich sons of Estee who just passed
away. The product is excellent and we bought to own for a move back to the
upper $40s as we did successfully several years ago in a few accounts.
The Gap is an old friend that we have purchased sparingly in s few
accounts to be able to say we own a retailer. GPS is not cheap but it is out of favor. It is a huge company and
has a lot of cash and has paid down debt. Folks give credit to the Fisher
family for the success of GPS but the real mover was Mickey Drexler who left
the company several years ago to run J Crew. We own for a trade.
Hain Celestial manufactures yuppie teas and chips and other organic
products. Heinz owns 22% of he
shares at about $30 per share. HNZ said they will write down their ownership
cost at year end 2005 if the share price doesn’t move back to the cost price.
We think that magically the share price will move to the mid $20s at least
either through levitation or a buy out.
JP Morgan is our largest position. It is the combination of too
many banks to mention and is run now by Jamie Dimon who is out to prove that he
is a better manager than his mentor Sandy Weil who unceremoniously dumped him a
few years back when Jamie wasn’t business nice to Sandy’s
daughter. With a 3.9% yield on our cost and consistent underperformance over
the past few years in relation to Citicorp we think the tide is about to turn.
The dividend yield is our backstop and gives us the ability to wait out the
turn. Also our large holding in most accounts offers the opportunity to dump
half our holdings over $39 where the share price rise has run into trouble in
Micron Technology manufactures dynamic random access memory chips
a/k/a as DRAM. Earnings fluctuate wildly depending on need for this commodity
chip. MU was another darling of the
mid to late 1990s tech boom and is priced at 25% of its high in those
years. DRAM chips are currently in
oversupply. We own for a trade when conditions change and MU is in the chips
Motorola fired the founder’s grandson and brought in someone else
to run the company last year and that action is beginning to show results or
the company is just catching the sweet spot in its product cycle at an
opportune time for new management. Whatever, analysts are in love with the
company and so we own for hopefully a more profitable trade than the last time
we owned MOT.
is a Cleveland based bank that is
all over the Midwest through acquisitions. The shares
yield 4% and we have been profitably trading NCC for the past few years.
SBC is the Texas
based Bell Sub that bought Ameritech the Midwest
regional Bell sub and also owns a
majority stake in Cingular/ AT&T Wirelesses. SBC is in the process of buying AT&T the long distance company and
the arbitrage in that transaction plus the dislike of all the telecom industry
by analysts who were severely burned in the WorldCom debacle is the reason SBC is priced at $24 with a 5% plus
dividend yield. We own for the dividend and a move higher.
Sara Lee is the company nobody likes right now. SLE has been restructuring for the last five years or more but
new management says this time will be the last. Plans are to jettison the
European Apparel, European Meats, Direct Selling and U.S. Retail Coffee
businesses. SLE will also spin off its Branded Apparel businesses. This will
shrink revenues from $20 billion to $12 billion and raise cash to pay down debt
and form a more manageable company. Brand names remaining will be Hillshire
Farms, Jimmy Dean, BallPark,
Earthgrians, and Sara Lee. Among the spin off may be Hanes, L’eggs, Bali
and Playtex. We agree with the idea and like the 4% yield.
Schering Plough is the drug company that we think is being cleaned
up for sale. Deducting cash of $9 billion from market cap ahs the shares priced
at 3 times revenues which is 30% cheaper than larger drug companies. We have
traded - mostly profitably - over the past five years and currently own the
shares for a trade.
Schwab has over $1 trillion in assets on its books. SCH has lowered
commission rates to compete with the deep discounters and is an asset gatherer.
A bank or financial institution is going to purchase this company when Charlie
Schwab who is in his late 60s (which, by the way, is not as old as we used
think it was) decides to enjoy his billions.
Tellabs is in the telecom equipment manufacturing business. With
over $1 billion is cash and sales approaching the net of market value less cash
we think the stock price is cheap. It is the only low priced stock we have and
we expect to make some decent money this time around.
Time Warner is cable and AOL,
and magazines and other stuff. We own because we think the AOL portion is worth
$20 billion based on the market prices of Yahoo and EBAY and the stock market
thinks AOL is worthless based on a $17 price per share for TWX. One of us is
wrong but we have not much downside if we are wrong and lots of upside if we
Tribune owns a lousy Chicago paper, a decent paper in LA, the TV
stations including WGN, a goofy television network and of course the hapless
Cubbies who are probably worth $1 billion with Wrigley Field thrown in. down
form $45 this year and $65 when folks were nuts for TV companies we think it is
an interesting value at $36. At a lower price it will be more compelling and we
will buy more shares.
Verizon is our second largest holding. We own for the dividend and
recovery to the mid $40s where it sold in the last twelve months. It is the
largest Bell sub survivor and has
the best advertising campaign. But all three VZ, BLS and SBC are survivors and when we own them
we are reminded of owning the railroads in the game Monopoly. Instead of rent
we receive good dividends and we also have the potential for price
Wild Oats is a sorry imitation of Whole Foods in the organic grocery business. We have traded the
stock profitably over the years and plan to continuing to do so. It is a real
anchovy. We re-purchased this last time because a fellow from California
who has sold two grocery store chains had his charity buy a 10% stake in OATS.
We own in small amounts in smaller accounts but will be tempted to trade out at
some higher level.
And that’s it folks.
Tuesday’s markets June 14, 2005
PPI (Producer Price Index) was announced as down 0.6% with Core PPIup 0.1% these were weaker than
expected. At the time of the announcement the Treasury ten-year was at 4.09%.
Retail sales were down
0.5%, ex cars down 0.2%. These were
all May figures. Gasoline was down
1.7%. Gasoline sales are a large part of retail sales.
The ten-year is at 4.06%, and
stock futures are a bit higher on the news and the hope that the Fed may quit.
10:52am and The DJIA is
20 points higher while the NAZZ is
down a few dollars. Treasuries are weaker with the ten-year at 4.12% and crude
oil is off 34 pennies at $55.28. Breadth is positive and volume is light. We
bought shares of National
City in a few larger accounts since it is off $1
per share from where we sold and has good support in this area. We also added a
few more shares of GPS to select
and major measures
continue to float as slightly higher prices. ZZZZZ.
3:02pm and the DJIA
closed up 28 points at 10550. The S&P
500 gained 3 points to 1203 and the NAZZ
was unchanged at 2069. Breadth
was 2/1 positive on the NYSE and 5/4 positive on the NAZZ; Treasuries sank with the ten-year
ending at 4.12% and the five-year at 3.89%. Oil lost 62 pennies to close at $55.
And tomorrow is today so let the
games begin and continue in our absence. Happy
Quadruple Witching to all. *****
14 June 2005 Flag Day Daily Comment
Trading seems to have entered the
summer doldrums last week but the end of this week sees Quadruple Witching on Friday and the end of the month brings
another closely watched Fed Meeting.
Will they and if they do will they hint it is the last? These are the questions
that weigh on the minds of traders. Of course June 30 is month and quarter end and so the usual eliminations and
additions will have to be made for the big boys and girls to show they owned
the right stocks during the last quarter.
We are completing our re-working
of accounts today and tomorrow and then we plan to fade into the bright summer
haze as we let our selections work their magic over the next few months or
longer. We will of course trade a bit but in the main we are invested as we
wish to be.
Purcell is out as CEO at Morgan Stanley Dean Witter and he will
leave with a nice bundle of cash to salve his wounded ego. His imminent
departure, if one can call by February 2006 imminent, was breathlessly
announced by Maria the Mouth at on CNBC this morning. That means that
mindless financial media may now spend the time until the Scrushy and Jackson verdicts discussing the
intricacies of the Morgan Stanley Soap Opera for the one thousand or fewer
folks who care.
Babe Ruth’s baseball contract (the contract was 7 pages) which was the
instrument that transferred Ruth from the Boston Red Sox to the New York
Yankees back in the 1920s was sold at auction for $997,000 last week.
Fidelity now owns 10% of Google
in its various funds and managed accounts. That could be one reason for the run-up.
Tuesday the economic numbers for inquiring minds are PPI (Producer Prices for May) and
Retail Sales, also for May, and Business Inventories for April.
Wednesday has CPI
(Consumer Price Index), Capacity Utilization, Industrial Production all for May
and the Fed Beige Book at .
An exciting day for sure.
Thursday has Building Permits and Housing Starts.
Thursday and Friday are Quadruple Witching.
Monday’s Markets June 13, 2005
and after starting
the day lower the major measures are moving higher now with the DJIA up 65
points. Breadth is 2/1 positive on the NYSE and 5/4 to the good on the NAZZ.
Volume is summer Monday light. Short end Treasuries are unchanged while longer maturities
are few basis points higher in yield. Oil is up 36 pennies at $53.95.
We are adding JPM, DWA, VZ, TWX, BSX, DY, MU and SBC to some accounts to round up or
fill out. We have also added two new stocks, Cisco and The Gap to accounts.
and Oil is up #2.16
to $55.80 and the big boys and girls find a commodity to trade. The dollar is
at a nine month high versus the euro. And it is hot and humid here in the land
of milk and honey. The major measures are higher but floating lower.
and breadth was positive
at the bell. Treasuries surrendered
ground today as Oil closed up $2.08
The DJIA was up 12 points at 10525. The S&P 500 rose 3 points to 1201 and the NAZZ gained 6 points 2068.
And tomorrow is today so let the
11-13 June 2005 Week-End Comment
Intel offered its mid quarter report last night and raised revenue
guidance to over $9 billion for the quarter and had some other positive
statements and so in a good old fashioned sell the news reaction the shares
sold off in after hours trading and are down a few pennies this morning. We
don’t think that negative reaction will last since the report was very positive.
For the first time this week both
Asia and European markets are higher. Oil is off a few
pennies and media folks have a nice tropical storm in the Gulf of Mexico
to babble about 24/7 unless the Michael Jackson Jury comes up with a verdict.
Friday’s Markets June 10, 2005
10:49am and stocks have been meandering all morning with the major
averages as sleepy as our dogs are today with the temperature in the high 80s
and 100% humidity.
With news that the Chairman of
the Board resigned we sold our Eyetech
speculation for a slight to $1 per share loss and bought Micron Tech with the proceeds. Last night we were thinking about
which of our stocks we wouldn’t want to own in a lousy market and the answer
was obvious. Moreover, while we think that EYET’s
drug is probably better than Genentech’s
we are not willing to bet a million dollars on it. And so we will keep EYET
on our screens with Elan to see how events unfold into year
We also added some shares of Sara Lee which now has a 3.9% yield as
it dipped under $20 to a new low for the last 12 months and various small
amounts of stocks to round up or add to positions in various accounts.
and entering the
contra hour the major measures are lower. Oil is down 33 pennies at $53.95 and
Treasuries are also lower with the ten-year back at 4.03% and the five-year at
3.83%. Breadth is 5/4 negative and the NAZZ is taking most of the heat down 20 points
3:02pm and the DJIA, helped
by a $2.30 gain in GM on rumors of concessions by the UAW, rallied in the
last hour to close up 10 points at 10513. The S&P 500 lost 3 points to 1196 and the NAZZ lost 13 points to end at 2076.
Volume was summer Friday light. Oil ended down 74 pennies at $53.54. Breadth was 5/4 negative at the bell and
Treasuries closed lower with the ten-year at 4.04%, the five-year
at 3.83% and the two-year at 3.69%.
And tomorrow is Saturday and this
week-end we celebrate June Dairy Days
in the land of milk and honey. We are going to the Tractor Pull and horse show.
Our next post will be Monday
10 June 2005 Daily Comment
Eyetech has adopted a shareholders rights plan to protect
management from being fired in a takeover and to prevent shareholders from
seeing their share price rise unless management decides it’s OK. Ain’t Capitalism great?
Jobless claims were down 21,000 to 330,000. Remember the Fed Oracle
is speaking today at and his
talking as usual will affect the markets.
Thursday’s Markets June 9, 2005
10:13am and stock traders have greeted Greenspan’s testimony with a
yawn. Treasury traders have pushed yields higher and prices lower during the
testimony as Greenspan gives no indication of quitting the 25 basis point raise
at every meeting. The major measures are lower and breadth is 2/1 negative. Oil is up 86 pennies to $53.40 and with
the gyrations in that commodity so unpredictable we wonder if many oil traders
are making money. The volatility surely has been there but the movements up and
down seem too random to game.
GREENSPAN - IN RESPONSE TO QUESTION ON
"WELL, SENATOR, I'VE COMMENTED ON THE LAST
QUESTION, THAT IT'S VERY DIFFICULT TO KNOW WHEN THAT SO-CALLED NEUTRAL RATE IS,
BUT WE PROBABLY WILL KNOW IT WHEN WE ARE THERE BECAUSE WE WILL OBSERVE A
CERTAIN DEGREE OF BALANCE WHICH WE HAD NOT PERCEIVED BEFORE WHICH WILL SUGGEST
TO US THAT WE ARE SOMEWHERE VERY CLOSE TO WHERE THAT RATE IS."
We added shares of Motorola and Applied Materials to some accounts this morning with funds raised
from yesterday’s selling.
1:21pm and in the contra hour the major measures are slightly
higher but below their best levels of the day which were reached as folks
celebrated the end the Greenspan’s testimony. Breadth has climbed back to
5/4 positive and Treasuries have
firmed. Oil is now up $1.66 to $54.20 supposedly
because the first tropical storm of
the season is moving into the Gulf of Mexico. Traders
will trade on any news and the weather in Florida
is now the keystone of oil trading strategy.
We bought a few shares of BellSouth in larger accounts and added
to our Micron holdings in some accounts that already own the shares. We did not
add to many new accounts because we are paying up for this tranche of stock and
it makes more sense to add it to accounts that own shares at a lower price.
and the DJIA closed up 28 points at 10505. The S&P 500 gained 6 points to end at 1200
and the NAZZ jumped 16 points to 2076.
The NAZZ needs to get through 2100 and
the S&P 500 needs to close convincingly above 1200 for and rally higher to
occur.Treasuries closed lower
on the day with the ten-year at 3.96% and the five-year at 3.75%. Oil was higher up $1.74 at $54.28. Breadth was positive at the close but Volume was the lightest since Monday.
And tomorrow is today so let the
And we end the day with some
musings sent to us by a friend. We always wonder who has the time to sit around
and think up these things. Actually we should make the time to do so. It is
sort of like the old hippie advice for slowing down: lay on the ground and watching a carrot grow.
Can you cry under water?
How important does a person have to be before they are considered assassinated instead of just murdered?
If money doesn't grow on trees then why do banks have branches?
Why do you have to "put your two cents in " ...
But it's only a "penny for your thoughts"? Where's that
extra penny going to?
Once you're in heaven, do you get stuck wearing the clothes you were buried in for eternity?
Why does a round pizza come in a square box?
What disease did cured ham actually have?
How is it that we put man on the moon before we figured out it would be a good idea to put wheels on luggage?
Why is it that people say they "slept like a baby" when babies wake up like every two hours?
If a deaf person has to go to court, is it still called a hearing?
If you drink Pepsi at work in the Coke factory, will they fire you?
Why are you IN a movie, but you're ON TV?
Why do people pay to go up tall buildings and then
put money in binoculars to look at things on the ground?
How come we choose from just two people for President
and fifty for Miss America?
Why do doctors leave the room while you change?
They're going to see you naked anyway.
If a 911 operator has a heart attack, whom does
Why is "bra" singular and
Do illiterate people get the full effect of Alphabet
Who was the first person to look at a cow and say,
"I think I'll squeeze these dangly things here, and drink
whatever comes out!"
Why do toasters always have a setting that burns the
toast to a horrible crisp, which no decent human being would eat?
Why is there a light in the fridge and not in the
When your photo is taken for your driver's license,
why do they tell to smile? If you are stopped by
the police and asked for your license, are you going to be smiling?
If Jimmy cracks corn and no one cares, why is there a
stupid song about him?
Can a hearse carrying a corpse drive in the carpool
If the professor on Gilligan's Island can make a radio
out of a coconut, why can't he fix a hole in a boat?
Why does Goofy stand erect while Pluto remains on all
fours? They're both dogs!
If electricity comes from electrons, does morality
come from morons?
Is Disney World the only people trap operated by a
Do the Alphabet song and Twinkle, Twinkle Little Star
have the same tune?
Why did you just try singing the two songs above?
Did you ever notice that when you blow in a dog's
face, he gets mad at you, but when you take him for a car ride; he
sticks his head out the window?
9 June 2005 Daily Comment
With the S&P 500 having trouble at 1200 again we are more serious
about raising a bit of cash. *****
Wednesday’s Markets June 8, 2005
10:11am and the major measures are higher and Treasuries are
unchanged. Crude oil was off early this morning but is now higher up 79 pennies
at $54.65. Breadth is positive and volume is moderate.
We sold one half our EL holdings to reduce our exposure.
It’s a good company or we would have sold all because of our disgust at the price
the bought back a family member’s stock.
We also eliminated our holding of
Fifth Third in all but our largest accounts
and even in them we reduced the amount held. JPM has become our bank stock and we are hoping to deploy some of the
FITB money to BellSouth if it moves a bit lower.
Today we took our lumps on Brocade selling the rest of the position
for another loss when the company announced today that they are not going to be
filing their quarterly earnings report on time because of accounting issues and
the SEC investigation. We don’t own
companies that can’t file quarterly reports on time. And once again we
learn that buying speculative stocks involves risks. We didn’t think Brocade
was speculative even though it was a low priced stock when we purchased it. The
financial data seemed relatively conservative but we should have paid more
attention to the accounting issues. After
all, if the company and its auditors didn’t account for options correctly what
else is lurking in the books?
We once asked the “old
stockbroker” (when we were young and he was the age we are now) why he
didn’t buy speculative issues except for one exception at year-end 1974. He
said that for every winner in speculative stocks purchased there is usually a
loser and when you own a speculative issue that is not acting well you spend
all your mind time thinking about it rather than concentrating on the larger
Today we wholeheartedly agree,
although we wonder if we have finally learned our lesson. Often a seemingly financially
OK stock becomes speculative as
happened with Brocade today because of its
inability to file a quarterly report. Until the filing issue was made
public today we were on the fence and thought a relatively small position was
worth holding. With the filing issue
selling the shares is an easy, even if unprofitable, decision. *****
We also sold Siebel this morning when the company announced that they are going
to initiate 10 cents per share annual dividend, fire some folks, and may buy
back some stock in the future. Something good may happen with this stocks but a
dividend is not why we owned it. Maybe Icahn will force a takeover but again we
are not going to stay invested on hope and prayer.
We are taking our lumps in stocks that are not acting well because if
they aren’t acting well in an up market they probably will act worse in a correction? *****
11:56am and the major measures are inching higher in slow trading.
CNBC has a show on right now talking about the auctioning of baseball memorabilia. If folks are worried about the
real estate bubble they should take a gander at baseballs autographed by dead
players going for $10,000 and up at auction.
and it is disconcerting the way the major
measures have lost their gains in the contra hour the last few days. The
markets can’t hold their gains like they were able to a few weeks ago and that
is a symptom of a tired market. That is one reason we raised some cash. Breadth
is now 5/4 negative on the NYSE and NAZZ after being positive most of the
morning. Oil has turned lower and Treasuries are basically unchanged. Chairman
Greenspan testifies tomorrow and maybe he will hint at Fed policy.
and the DJIA closed down5 points at 10478. The S&P 500 lost 2 points to end at 1195
and the NAZZ dropped 7 points to 2060.
Oil ended down $1.22 at $52.54 and Treasuries eased a bit in price with
the ten-year at 3.94% and the five-year at 3.73%. Breadth ws 2/1 negative at the bell and volume was lower than yesterday.
And tomorrow is today so let the
8 June 2005 Daily Comment
Happy 38th birthday to our daughter Lisa. She has always made our life a joy as has her sister Kelle.
Greenspan’s talk on Monday night,
actually Tuesday morning in Europe, provided grist for
the talking mills for most of Tuesday morning. We didn’t read the speech since
we never understand what he is saying and we sometimes wonder...Anyway the bulls seem to think he was suggesting
that the fed policy of raising rates is near its end since he said that long
rates dropping suggested that the markets were predicting a slowdown. The bears
don’t think that is the case. So what else is new? The ten-year is up a few bps
in yield this Tuesday morning.
JP Morgan hired a 20 year veteran of Morgan Stanley Dean Witter to
run its proprietary equity division. That should be a positive for JPM.
We are going back into Applied Materials today as two more
brokerages recommended the stock. As with Motorola,
momentum is working, especially in tech and AMAT is one we have wanted in portfolios. We were waiting for a
pullback but it looks like we had better buy and add to if we get the pullback.
The wonder merger of Sears and K-Mart to create Sears
Holding reported first quarter results that were a disappointment. We think
there are more disappointments in store for Eddie Lampert who bought K-Mart
coming out of bankruptcy and has sold the Street on the value of the properties
versus the efficiency of the retail operations.
GM has its annual shareholders meeting today. We were remarking
over the week-end that in Japan
when CEO’s miss their numbers as badly as the folks at GM all responsible usually
resign in shame. In the U.S.,
company directors just grant new options at lower prices to the miscreants. Oh
and in the U.S.
they fire more folks as GM announced today that 25,000 unlucky souls will be
given their walking papers.
Back in 1988 before the collapse
combined stock market and real estate bubble the value of the real estate with
the city limits of Tokyo exceeded
the value of all the land in the entire United
While NYC real estate values don’t
approach that of the whole country we have read that NYC and WashingtonD.C. are among the two hottest areas. In
the Georgetown section of Washington
the average sales time is less than a month and higher close out bids than the
offering price are not unusual.
We continue to believe that a
slowdown in real estate price gains is needed to cause the 20% of buyers who
are speculators to bring that money back to the stock markets. That’s what
happened back in 1982, 1983.
Tuesday’s Markets June 7, 2005
and in the early
going the DJIA was up 100 points although it has pulled back. All the major
measures are higher and breadth is better than 2/1 positive. Oil is up about 50
pennies over $55 and the ten-year has rallied to a 3.93% yield.
We bought the AMAT at $16.90 for accounts that owned NCC and also we are both repurchasing Micron and Rite Aid and adding a few shares of Dycom Industries to aggressive accounts.
Dycom is going to have flat earnings this year of about $1.10. It has
an increasing $1.3 billion backlog of work and has a book of $11 per share. It
sells at one times revenues. It is currently a falling knife having dropped
from $26 to $19 since May 26. We are leaving room to buy more shares.
DY provides contracting services to telecommunications providers in
the United States.
Its contracting services include engineering, construction, installation, and
maintenance services. The company’s telecommunications infrastructure services
include engineering, placement, and maintenance of aerial, underground, and
buried fiber-optic, coaxial and copper cable systems owned by local and long
distance communications carriers and cable television multiple system
operators. The company also provides similar services related to the
installation of integrated voice, data, and video local and wide area networks
within buildings. In addition, the company offers underground locating services
to various utilities, and other construction and maintenance services to
electric utilities and others.
We sold some EL in accounts that needed money for the AMAT purchase. We thought
about the buyback of Lauder stock by the company (that we mentioned in
yesterday’s post) and decided we were not happy with the insider favoritism.
Lauder sold 1.9 million shares with no discount for the block movement and we
can’t sell 50 thousand shares without moving the share price down 50 cents. We
are going to use part of our EL holdings
as a source of cash when needed and will reduce the holding in most accounts.
We also sold a few shares of FITB for cash purposes. With our large JPM holdings we will reduce the FITB position to fund future purchases
in accounts that need to raise cash to do so.
1:20pm and while we weren’t looking a sell program or something hit
the big cap NAZZ stocks and knocked
the major measures down about 50% from their highs and placed the NAZZ in negative territory even though breadth
remains positive on both the NYSE
(2/1) and NAZZ (6/4). Stocks are off
their highs. Oil is down 75 pennies to $53.76.
and stocks weakened
in the last hour but the DJIA ended
in the plus column up 17 points at 10483. The S&P 500 was unchanged at 1197 and the NAZZ closed down 8 points at 2068. Treasuries closed on their highs with the ten-year at 3.92%. Breadth was positive at the bell. Volume was heavier than yesterday and
not bad for a summer day. That fact and the breakdown from the 100 point up
early move are negatives for the bull cause.
And tomorrow is today so let the
7 June 2005 Daily Comment
We have returned to the land of
milk and honey after spending time with good friends in a convivial setting. It
is too bad that we can’t say the same about the stock markets and their
relationship with the stocks we own. It may be a long long hot summer.
There was a decent up day and a
down down day while were celebrating and the down day did more damage that the
up day did good, but that is the nature of markets. Trader types have been
calling for down and ugly and Friday fit that bill.
Monday seems to be beginning as a
carry over of Friday’s negativity and that may finally lead to the nasty
correction that has been called for to clear the air for a further advance.
We remain content to hold our
good dividend paying stocks and other choices and have a few dollars left to
add to them as conditions warrant.
Before we begin the trading day we offer a few pictures of our trip to
Bud waving good-bye
Katie Lemley and Phil Vasta enjoying
10:32am and we repurchased Motorola
at $17.90. We traded it at lower levels earlier this year but now all the
brokerages are setting $24 price levels on the stock and raising earnings
estimates. JP Morgan raised yearly earnings estimates on MOT to over $1 this
year and $1.18 next year. We are buying in amounts equal to the National City
that we sold last week. We want a bit more exposure in the tech area and in
this purchase we are following the momentum traders which has been the way to
go in the current rally. At 17 times earnings we are not overpaying for the
stock. and since the NCC we sold was at almost twice the share price of the
price of MOT we have buying power left as the shares move lower in a continuation
of the correction.
The major measures are now lower
as selling has taken the upper hand. But volume is summer light. Breadth is 5/4
While we were away JPM lowered earnings
estimates for this quarter because of bad trading results.
A brokerage lowered its price
target on Fifth Third to $40 which
is less that the price at which it is trading. Obviously we think and hope they
EL bought back 1.9 million shares of EL from a Lauder family member who still has 16 million shares
left. EL paid $39.25 for the shares. We haven’t formed an opinion as to whether
that buyback is good or bad for the stock or just neutral. Our reason is that
we would presume there is no bad news coming because the company bought a
relative’s shares but we think they should have discounted the purchase price
since there is no way that block could have been sold by a Lauder in the open
market at the then current market price.
BMY is settling with the DOJ for $300 million for cooking the books
on sales a few years back. What were those folks thinking?
HAIN announced earnings while we were away and the results were up
but a penny below forecast. Revenues were up 16%. HAIN plans to raise prices
and cut out its Kosher and weight loss food lines.
DreamWorks announced that Madagascar
reached the $100 million mark one day sooner than Shrek 1 did but analysts yawned. The movie was also number 1 at the
Brocade ran up 20 pennies in price on last Thursday when Sun Micro announced the takeover of Storage Technology for $4 billion in
cash. Based on that buyout price Brocade is about 25% undervalued. We have
reduced the position to a level where we are going to hold for a while and hope
for $5 or more a share.
We are also adding more Eyetech to accounts today. EYET has traded
over 3 million shares this morning and there is a committed seller of the stock
with the shares down over $1 in price. We think that seller is Amerindo Investments
(the folks whose two founders were accused of converting customer money to heir
own use) which probably wasn’t able to act on its position until this week and
is selling because managed accounts and shareholders of its mutual fund are
asking for the money back. We warned when we began buying last week that the
shares would move lower as the momentum investors abandon ship.
Today Genentech announced that Lucentis
(Genentech’s drug for the treatment of macular degeneration which is still in
trials) in combination withVisudyne another already approved drug
prevented further macular degeneration and in some cases even led to vision
improvement when the drugs were used in combo. But there was a serious adverse
side effect. Traders are ignoring that news of a serious side effect.
It is our opinion that Genentech
is using its economic muscle and reputation to try and badmouth Macugen which is EYET’s new drug that works.
and oil traded over
$55 and the ten-year is at 3.98%. The NAZZ is back in positive territory but
breadth is now almost 2/1 negative.
and the DJIA rallied to positive at and traded above and below even for the
last hour before closing at 10470 which was up 8 points. The S&P 500 gained 2 points to 1199 and
the NAZZ was up 5 points at 2075.
Breadth was 5/4 positive and oil
closed lower on the day at $54.50. Volume
was summer light.
And tomorrow is today so let the
2 June 2005 the this will have to hold you till Tuesday
June 7 Comment
We are heading off to Washington,
DC to celebrate our 40th College Reunion for the week-end and so we will be reliving
the good old days with folks we haven’t talked within in a few days and others
we haven’t seen for 15 to 40 years. We are looking forward to the time away.
There will be no posts till Monday evening for Tuesday Morning June 6.
We were thinking last night that
with the portfolios well structured we should just stop trading and watching
for 6 months and give everything a chance to work out. But then that is not in our control freak nature and we only
know what has worked for us in the past and so we will go with that.
We own good stocks and with a
little tweaking today by eliminating an unnecessary LTD buy of last week and finishing up our NCC sale we will have
raised bit of cash for any sell off and yet still have a portfolio that will
participate in the rally higher that we see resuming after we and the markets
One stock that has us intrigued
is Eyetech. We traded it last week
without losing money and this week we bought a few shares in our own personal
accounts but not for clients. That was a positive since we already have a $2
per share loss on our purchase.
Eyetech was an IPO early in 2004 at $21 and quickly moved to $40
per share where it floated until just recently. About a month ago the share
price began dropping and last week it collapsed
Eyetech Pharmaceuticals, Inc., a biopharmaceutical company, engages
in the development and commercialization of therapeutics to treat eye diseases.
The company has collaboration with Pfizer, Inc. to develop the product
candidate Macugen, which is used for
the treatment of various types of neovascular age-related macular degeneration,
known as wet AMD or neovascular AMD. It also has licensing agreement with
Gilead Sciences, Inc. and Nektar Therapeutics to develop, manufacture, and
commercialize products containing Macugen.
Last week Genentech announced that its new drug for AMD called Lucentis had not only stopped the
progression of AMD in 92% of patients but had also improved vision in a number
of patients. Wall Street immediately reasoned that once Lucentis gets to market
after completing phase III trial in 2006 that Macugen will be an also ran drug.
But the trials that Genentech reported
on were not on the same subset of patients that Eyetech used in its studies.
Genentech presented impressive data on Lucentis.
95% of patients enrolled in the study showed improved or maintained vision
(which means their vision deteriorated by less than three lines on an eye
chart). In the control arm of the study, 62% of patients maintained or improved
their vision. That top line response rate is better than anything out of the
Macugen trials. But using two separate studies to compare two different
products is not scientific.
Using different groups of patients can lead to
false conclusions. For example Eyetech in its conference call suggested that
the patients in the Lucentis trial appeared to have less severe AMD. EYET said
that the Lucentis trial looked at a different population -- only those
with "minimally classic" or "occult" AMD, references to the
location and pattern of abnormal vascularization in the eye, while Eyetech’s Macugen
has been studied in, and is approved for, all subtypes of wet AMD, including
"predominantly classic," the most aggressive form of the disease.
In all studies there is a control group and in the
Lucentis study 62% of those not treated maintained their
Genentech made a big point in its press release
that Lucentis improved vision with the unsaid suggestion that Macugen didn’t. That
is not true. The real crux of the matter is that the Lucentis trial that was
reported and sent EYET stock price into a tailspin was conducted on a patient
group with a less severe presentation of AMD. Now, Lucentis may work as well on
the more severe presentation of the disease but the data to prove that has not
been presented although we read that such a study will be presented during the
Genentech still has to complete the trials for
Lucentis. If Lucentis is approved, Eyetech is going to have to conduct a
With the financial backing of Pfizer, Eyetech is going to be around
for a few years. It has $500 million in cash and is actually getting revenue
from Macugen sales. Moreover there are some support and performance payments
due from Pfizer over the next year.
One other point is that Macugen is much cheaper
to produce than Lucentis and if the eventual trials demonstrate that there
isn’t much difference between the drugs then Macugen will have the cost
With the above in mind we are going to buy some
shares in accounts because we think the risk/reward as a small part of many of
our portfolios is interesting. The risk is losing half our investment this year
versus at least a quadruple over the next few years if the drug actually works
better than Genentech’s drug. Macugen is currently being prescribed for patients.
Lucentis has at least another year before it can be marketed. And Pfizer and
Eyetech aren’t going to roll over and surrender without testing their drug
Finally, in relation to the sell off in the
shares of EYET we would expect that it might continue this month of June
through quarter end as a lot of go-go funds own the stock and won’t want to
have it in their portfolios at month end. One of the funds that owned over 2
million of the 37 million share float was Amerindo
Investment. That money management firm has been in the news in the last week because
two of its founders have been accused of taking money from client accounts that
was not authorized. Moreover the performance of the fund which has always been
a high tech chaser has been abysmal this year. EYET represented 14% of the Amerindo
Fund holdings on March 31, 2005.
We have a feeling that those shares are part of the sale waterfall that hit the
share price last week.
Wednesday June 1, 2005 Markets
8:57am and we sold our Limited
for a 25 cents per share loss if the 15 cent dividend we will receive is
included. We also finished selling our NCC
for a profit plus a dividend for many accounts. We have a large holding in JPM and FITB so we think we have enough bank exposure and with our SCH we have good exposure to the
Stocks have opened a bit higher. Google is the Apple of this month’s market and it is up another $7 today. We
tried to trade the stock a few months ago and lost $5 per share. A fellow asked
us if we were sorry we lost the money and we said no, we were sorry we traded
the stock. That’s because over the years we have learned that we are not
constitutionally suited to own and trade the high flyers of the market world.
Some folks are and some folks aren’t. Every once and a while we think we can
and learn an expensive lesson for our own accounts and a few select clients who
probably wish they hadn’t been selected. Moreover we told the fellow if we had
held the Google we would have sold with a $5 profit.
Actually GOOG is up today because
some firm raised its price target to $350 from $300. That is 1999 type analyst action
and suggests that the mo-mo folks are back. For how long they will be back is
the $1 trillion question.
9:21am and the ten-year is at a 3.91% yield which suggests that
some of the big boys and girls think the Fed is finished tightening. Stocks
have rallied with the DJIA up 85
points and it will be interesting to see whether the markets hold or add to this
gain through the day. The S&P 500 is
through 1200 to 1201.
11:10am the ISM number this morning was weak but above 50 which
says expansion. Also the prices paid portion of the number indicated more
benevolent inflation. And a Fed Governor Fischer said to Steve Leesman on CNBC
that the Fed may be in the eighth inning of its tightening regimen. Since there
have been eight tightenings so far the suggestion is that the Fed is nearly
finished increasing rates. That was the reason for the rally this morning.
and with interest
rates plummeting we are going to pick up a few more shares of SBC which down on the day and is
yielding 5.5%. The stock is being held down by the arbitrage with AT&T shares and also a general disinterest
in the Baby Bells. But with rates down eventually investment money will move
into the stock just for the dividend.
and we ended the day
by buying a few shares of EYET at
$12.90 for our larger and/or more aggressive accounts.
We are leaving early but
hopefully the rally will continue through day’s and week’s end. If there is a
major occurrence we will interrupt our revelry for a post but if not our next post
will be Monday night for the June 6 posting.
As we leave the DJIA is up 100 points and the S&P 500 is over 1200. The Treasury ten-year is at 3.92% and crude
oil is up $2 at $54. Strange.
So let the games continue in our absence.
1 June 2005 Daily Comment
The French in their inimical obstinate manner (we are one half
French) turned down the new constitution of the European Union of which they
are a part. We would guess that if the new Americans in 1789 had been given the
opportunity to vote on their new constitution in a plebiscite that it too would
have been turned down a few times. Democracy is a messy business. Heck if Americans
were given a chance now to vote on the Constitution, passage would probably be a nip and tuck
The French rejection has the euro
down with the dollar at 1.23 to 1 euro from a high of 1.34 to 1 euro a few
months ago when the talking was that the euro would never come down. Maybe the
French are long the dollar and short the euro on the other side of the Warren
Buffet, George Soros and every hedge fund in America
being short the dollar and long the euro sure thing trade.
On the euro news Treasuries are higher with the ten-year
at 4.04% and the five-year at 3.78%. Gold is down 44 to $434 and Europe
is fractionally lower while Japan
and Hong Kong were up fractions overnight. U.
S. futures are suggesting a down opening.
DreamWorks Animation new movie Madagascar did $61 over the four day weekend and that
is in the mid range of predictions.
Symantec was upgraded this morning to outperform by Piper Jaffray and if there is a good
pop in the stocks we might sell. Hugely valued tech stocks are uncomfortable
for us for some reason and we would rather be in other areas.
SBC and Verizon lost in
their attempt to buy the Texas
legislature to change the rules in Texas
so that SBC and VZ would only need state wide approval to offer cable over
telephone lines. Our guess is that the Texas Legislature would like this controversy
to go on for a few more years since the dollars flowing from the cable and telephone
companies to key legislators are quite nice. And SBC and VZ need another
year anyway to be able to roll out on a state wide basis. The Baby Bells are now
adults and are used to dealing with legislatures and the Congress and there is
a Congressional election next year. It is remarkable how cheaply folks sell
their votes at the state and even Federal level.
Wire Services are again reporting
that Ameritrade and T.D. Waterhouse are in merger talks. We
are agnostic as to the effect on Schwab.
A combination would make a stronger competitor but also might hasten the day
when Charles again decides to sell out to a major bank.
From our tech guru Jeff Cooper at www.realmomey.com our interpretation
of his gobblygook is that technically speaking 1198 on the S&P 500 has
become resistance since it matches the reaction low on March 11. And the NAZZ
weekly composite is either tracing a head and shoulders pattern with the right
shoulder ready to turn down or an inverse head and shoulders pattern with the right
shoulder (looked at upside down) ready to turn up. Cappiche!
Smith Barneyupped Intel and
UBS Warburg removed WMT from its Select
20 list. There is a lot of analyst talk on the wires about drug stocks today
and our sense is that much of the talk is cautiously optimistic although Mother Merrill is dumping on Imclone.
AIG has filed its quarterly
report and it is taking a $2 to $3 billion charge to clear up all its past
overstatements and promising to be good in the future. That should clear the way
for the share price to move back toward $60 and help the DJIA in the process.
We aren’t interested.
Tuesday May 31, 2005 Market’s Action
and today is the end
of the month so there may be a little marking occurring? It is not a quarter-end
so we think any mark ups will be
muted. But who knows.
9:02am and the Chicago
Purchasing Managers Index was 54.1 in May versus 64.5 in April. That
suggests economic expansion but a slowdown. On that news and the lower stocks
Treasuries are up a bit more with the ten-year at a 4.02%. The DJIA is down 40
points and volume is moderate.
9:26am and Arthur Andersen, the accounting firm, was convicted of
destroying documents several years ago. Now the Supreme Court has ruled
unanimously that the conviction should be overturned because the jury
instructions were incorrect. Oops. There is no Arthur Andersen left because the conviction put them out of
10:34am and Consumer
Confidence was 102.2 in May versus 96.1 in April. Lehman reduced DreamWorks
to equal weight from overweight.
and anticipating a
market pullback we sold all our AMAT,
NWL and SYMC andsomeNCC in our larger accounts. All were
sold for a profit. We also bought a small amount of DWA after it dropped over $2 on the Madagascar
movie receipt news. All traders are now movie critics and experts on running an
animation company. We think Spielberg and Katzenbach know what they are doing
and will take a ride for a while longer.
Breadth is flat with the major
measures lower and Treasuries moving higher in price and lower in yield. The
ten-year is about to break 4% which is a one half point move in that bond
today. The two-year is down 5 bps in yield to 3.59%.
and the DJIA gave up the ghost in the last hour
to close 74 points lower at 10470. The S&P
500 lost 7 points to 1191 and the NAZZ
dropped 7 points to 2068. Breadth
was positive on the NYSE and 5/4 negative on the NAZZ. A lot of lower priced
stocks were positive as traders rotated from the big cap names that have led
the rally. Volume was light even in
the last hour sell off. Oil closed
up 12 pennies at $51.97.
And tomorrow is today so let he
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