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30 June 2008
Asian stocks were mostly lower
overnight with India down over 2% and most others fractionally lower. European
bourses are mixed with Sweden up 1% and Germany down over 1% etc. Gold is up $5
in the early going and Oil is touching $143. Treasurers are flat.
The question of the hour is
whether the Fed can raise interest rates to fight inflation while unemployment
grows and the economy falls into the tank. Stay tuned.
European country indexes closed
After trading above $143 Oil
closed abut unchanged at $140.25. Gold lost $5 to $925 and Treasuries were flat
with the two-year at 2.64% and the ten-year at 3.98%. The Yen closed at 106 to
the dollar and the euro equaled $1.57.
The DJIA closed down 5 points at
11346. The S&P 500 gained 1 point to 1280 and the NAZZ dropped 22 points to
Breadth was 5/4 negative and
volume was moderate.
There were a combined total of
850 new lows and a combined 130 new highs.
The bears won the month and the first half of the year.
27 June 2008
500 is now at 1283. The previous intraday low for the year was 1256, and
the low on a closing basis is 1273. So we'll see if we can break 1273 on a
closing basis or 1256 on an intraday basis and have fewer new lows than the
March low. If so that would be a positive divergence and set the stage for a
heads are calling for a bottom. Or rather they sound like they are hoping for a
bottom. One even gave the 1989 crash scenario as a positive since the markets
rallied that Tuesday in 1987. Unfortunately as we remember market measures were
35% off their highs when they did.
down 5% and India off 4% overnight and European bourse indexes are lower by 2%
and more. U.S. futures are indicating a slightly higher opening. We have no
idea what is going to happen and so we are just watching.
Personal income was up 1.9% and
personal spending was up 0.8 in May. The stimulus package, which mailed about
$50 billion worth of tax rebates in April and May, provided a lift to income
and savings of consumers last month, the government said on Friday. Thank you
Uncle Sam. And there was no inflation in case you were wondering. And how do
tax rebate checks count as income?
The up opening is not positive.
The wide jeans/narrow jeans
An Oppenheimer analyst downgraded
shares of American Eagle Outfitters
late Thursday, citing the departure of its president and merchandising chief, a
potential fashion misstep and overall economic weakness. Roxanne Meyer
downgraded the stock to "Perform" from "Outperform." Meyer
said she is less confident that the company's sales will pick up in the second
half of the year, and added that American Eagle's jeans may not be in fashion
for the back-to-school season. Late Thursday, Susan McGalla
said she will leave American Eagle effective Jan. 31,
2009. Meyer described the move as a surprise that raises doubts about a
recovery in sales, and in the success of new marketing concepts. Also, American
Eagle is offering wide-leg jeans during the back to
school season, while other teen retailers are selling skinny jeans, and if
American Eagle is out of step with jean fashion trends, it will hurt sales of a
key product, Meyer said. She also said heavy discounts could cut the company's
profits and margins, and economic conditions are still difficult.
Well, the rally lasted 10
There is a gap from $450 to $525
in Google’s chart that occurred when
Google reported better than earnings two months ago. Google is now pulling back
down into that gap. Gaps are usually filled.
(A gap occurs when a stock trades
at $450 and then the next trade is $525 with no intervening trades in the price
range from $450 to $525. Technical theory says that gaps are usually filled
although not always. To fill the gap Google would have to trade back down over
time to $450.)
Anheuser Busch is fighting a takeover bid and today announced it
will increase profits by- you guessed it- firing workers. That way Augie Busch the 14th or whatever number can keep his job
and perks and remain the big man about St Louis.
It’s high noon and the S&P
500 is right at closing support of 1275. The intraday low on the S&P 500 in
the sell off earlier this year was around 1255 so we have a ways to go to hit
European bourse indexes ended the
day and week mostly mildly lower. Mexico and Brazil were slightly higher.
Gold closed up $15 at $930 and
Oil to $143 before settling back to close above $140 at $140.55. No penny ante
moves for those two champs. And we were the folks who said the markets wouldn’t
rally till oil traded at $10. Oh well they didn’t rally but …….... The yen was 105 to the dollar and the euro
equaled $1.58. No help there either. Finally Treasuries rallied on a flight to
quality with the two-year at 2.62% and the ten-year at 3.96%.
The DJIA dropped 100 points to
end at 11355. The S&P 500 was down 5 points at 1279 and the NAZZ lost 6 to
Breadth was 2/1 negative and
volume was active. By the way a bunch of shares printed in the last few minutes
yesterday to place total volume over 5 billion shares. In our post yesterday we
said volume was light but missed the last few minutes and market on close
There were 820 new lows and 80
new highs combined.
The bears won the day and the week.
26 June 2008
European markets are lower by 1%
and more at midday as the very large Belgium bank Fortis said it will cancel its
dividend and raise $12.5 billion in capital to cover losses. The miasma has
spread to U.S. markets. Research in
Motion reported great earnings but not good enough for traders and the
shares are down $14 in the early going. Oracle
also had decent earnings but was not positive going forward and its shares also
sold off after hours yesterday.
Treasuries have a bid and Gold
after being lower is now up $28 while Oil has a $139 handle.
Goldman Sachs placed a sell on
the autos and bank stocks before the market opened.
Final first Quarter GDP was
announced as up 1%. And so, since a recession is defined as two consecutive
quarters of negative GDP, the recession the economy is supposed to be in has
been delayed by statistics. And since traders are suggesting a short ten month
recession, the statistics suggest that the recession now won’t end till next
year since it has not yet begun.
Final GDP is not really final
GDP. There is one more absolutely final
GDP number, we think. And the GDP price index was up 2.6% in the first quarter
which means that all those price increases are figments of our imagination and
not real to the numbers crunchers; which may be why the Fed says the economic
slowdown is slowing.
Ten minutes into the trading day
the DJIA is down 120 points and breadth is 10/1 negative. This may be the
washout that leads to the rally that many traders expect or…
capitalism great? BankAmerica sold
this guy auction rate securities that
he can’t sell back to them- or rather- they won’t repurchase from him and now
they want to lend him money until the markets improve to the point where there
will be bids for the securities. From Bloomberg:
``They were selling me their junk student-loan bonds, knowing the
market was going down,'' said Jimmy Walker, 53, who owns a doughnut business in
Dallas and who bought $1 million of auction-rate securities on Jan. 23 from
He says his banker brought in a broker who recommended the securities
and never mentioned anything about auctions. ``It took a lot of doughnuts to
get $1 million in the bank,'' Walker said. ``That's my life savings. I'll be
dead by the time I collect.''
Bank of America spokesman Matt Card said the bank doesn't discuss
individual cases. BankAmerica, like other firms, has offered loans to clients
stuck in the securities who need money immediately.
Comments by Robert Marcin at realmoney.com:
Still No Fear, Sell Small and Mid Caps
I believe that investors are still clinging to the hopes of the last
rally. I do so because of the outperformance, on both
up and down days of the small and mid cap stock sectors. If investors really
believed in another leg down in stocks and the economy, we would see
significant underperformance in these areas.
In light of the catch-downside of small and mid cap stocks I am adding
new shorts in this area, in individual stocks as well as the ETFs. When investors finally capitulate, these Indices will
make new lows like the S&P and Dow are already doing. At 18-20x's peak
trailing profits, the small and mid cap universe is expensive with big negative
estimate revisions coming shortly. The stocks have little liquidity and less
dividend yields. And they are very exposed to the receding US economy.
I think these stocks are being held up by the proliferation of hedge
fund long books, as hedgies tend to focus in this
area. But under the duress of a bear market, even hedgies
will bail on expensive, small and mid cap favorites.
At 11am The Dow Jones Industrial Average
tumbled through its 2008 low and the S&P 500 dropped below the 1300 mark
amid a broad market selloff. Financial stocks
declined sharply after Goldman Sachs downgraded Citigroup and the U.S. brokerage
sector. General Motors crumpled to multi-decade lows after it too was
downgraded by Goldman. Crude-oil prices surged nearly $4 a barrel, adding to
the pressure on stocks.
European bourse indexes closed
off 2% and lower across the continent. Oil ended at $139.94 up over $5 and Gold
gained $30 to $915 after being down $10 early in today’s trading. Treasuries
were firm on the back of a good auction with the two-year at 2.70% and the
ten-year at 4.05%. The euro was $1.57 and the yen rallied to 105 to the dollar.
Mexico and Brazil were both down over 2%.
Ouch! They threw out the
bathwater, tub, and baby. Stocks
ended on their lows of the day with the DJIA down 350 points at 11455. The
S&P 500 lost 36 to close at 1285 (1275 is must hold or else support) and the NAZZ surrendered 80 to 2320.
Breadth was 4/1 negative but
volume was moderate as down volume exceeded up volume 8/1 which only signifies
a lot of selling and not any kind of real panic.
There were 700 new lows and 70
The bears still have the reins.
We remain in cash with
no inclination to change.
25 June 2008
Investors Intelligence reports
33% bulls and 37% bears. That is the lowest bullish figure we have seen in
while and suggests that there is going to be a bounce higher. Doom and gloom,
which we and others feel, eventually leads to rallies, even in bear markets.
The Fed meets today and stocks
are going to open higher. Asian markets were up overnight with Shanghai gaining
3.6%. European bourse indexes are also on the plus side and Gold is up $4 with
Oil down $1 and carrying a $136 handle. Treasuries are flat.
Goldman Sachs took Boeing to a sell and dropped its price
target from $809 to $60. We guess they don’t do any underwriting for them.
Bernstein raised AT&T to a buy.
MasterCard agreed to pay American Express as much as $1.8
billion to settle an antitrust lawsuit claiming that MasterCard had blocked
American Express from the bank-issued card business in the U.S.
AmEx earlier reached an agreement with Visa to settle
similar claims for as much as $2.25 billion. Separately, AmEx
said that business conditions "continue to weaken in the U.S. and so far
this month we have seen credit indicators deteriorate beyond our
expectations." The CEO of AXP said that “while it is too early to
assess the impact of these indicators, the antitrust settlement we’ve reached
with MasterCard provides us with a multi-year source of funds that should,
among other things, help to lessen the impact of this weakening economic cycle
and, when conditions improve, give us the ability to step up investments in the
business.” In other words, AXP is going to be writing down bad credit and this
money will help fund and obfuscate are dumb loan decisions.
Several months ago the following
news would have had the markets down 1% or more. Barclays
said it will raise 4.5 billion
pounds ($8.86 billion) from investors including Qatar Investment Authority,
Challenger, Japan's Sumitomo Mitsui Financial Group, China Development Bank and
Singapore's Temasek Holdings. The U.K. lender, whose
shares are down more than 40% this year although it has taken few write-downs,
said the Qatar group would be the biggest investor with an injection of 1.8
In the same vein UBS has hired Lazard
Frères to explore strategic alternatives like sell
its securities division which has been a house of pain and huge write-down’s
($37 billion so far). And the shares are trading higher. The Swiss are supposed
to be financial genius when in fact they are just like all the rest of the
financial world, smart in bull markets and dumb when the markets go against
them. They made their reputation by not taking sides and storing wealth for war
participants at zero interest.
All these large financial
companies have an edge on folks like us because they see the other side of the
order flow. That order flow insight gives them an edge but greed destroyed that
Two hours into the trading
session stocks are higher led by financials and retailers. Who would have thunk? It looks like short covering ahead of the Fed
minutes at 1:15pm. Crude oil fell more than $4 a barrel after a U.S. government
report showed that inventories rose for the first time in six weeks.
Inventories gained 803,000 barrels to 301.8 million last week, the Energy
Department said. A 1.1 million-barrel drop was forecast by analysts in a
Bloomberg News survey. Demand averaged 20.2 million barrels a day in the past
four weeks, down 2.3 percent from a year earlier, the report showed.
Fed announcement was the same old
same old and stocks are immediately a bit higher and Treasury prices are about
the same as they were and lower on the day with the two-year at 2.96% and the
ten-year at 4.16%.
Gold finished down $8 and $883
and Oil dropped $2.50 to $134.50. European bourses closed plus 1% and higher
and the yen was 108 to the dollar with the euro at $1.55. Treasuries rallied
into the close with the two-year finishing at 2.83% and the ten-year at 4.11%.
The Fed met and all is well with
stocks as the major measures rallied big-time in the first half hour of the
last hour but then gave it all back in the last half hour of the last hour as
financials gave up most of their gains for the day and many moved into the red.
For example JP Morgan was up $2 in the early going and finished down 20 pennies
on the day.
The DJIA gained 8 points to close
at 11815. The S&P 500 tacked on 8 to 1323 and the NAZZ jumped 30 to 2400.
Breadth was positive all day
ending 2/1 to the good on light volume.
There were a combined 360 new
lows and 70 new highs.
The bears remain in control.
24 June 2008
Last night we were thinking about
our use of the term multiplier effect
in relation to GM, Chrysler and Ford’s lost sales that may amount to $100
billion plus this year. The term is usually applied to money introduced into
the banking system by the Fed.
The money generated by sales of
autos has always had a huge effect on the economy. Auto sales pay the salaries
of the workers, interest on company debt, and suppliers. The suppliers then pay
their employees. All companies and employees spend the money in their
communities and deposit their money in banks. The banks then use the deposits
to lend money. And the money keeps flowing through the economy as it passes
from buyer of goods and services to provider of goods and services and its
Moreover most of the goods in
involved in the production of autos comes from the U.S. and remains in the U.S.
The lost sales by the auto makers will in effect negate the stimulus effect of
the $300 checks recently sent to taxpayers because a large chunk of the
taxpayer rebate spent
at retail will wind up in foreign countries where the goods purchased were
End of lesson.
Asia was lower overnight except
Shanghai which was up 1.5%. European bourse indexes are lower at midday and Oil
has a $137 handle while Gold is a few dollars higher. U.S. stocks opened mildly
lower on the UPS warming but are rallying back to even. Treasuries are flat as
the trading day begins.
Ten minutes into the trading
session financials have a bid.
UPS said last night that a
sluggish U.S. economy and the raid rise in fuel costs, has cut its second-quarter
expectations. UPS said it expects to earn 83 cents to 88 cents for the quarter.
It originally anticipated earnings between 97 cents and $1.04. Slow U.S.
economic growth and skyrocketing fuel expenses have resulted in
lower-than-expected domestic package volume and reduced use of premium air
products, the company said. Additionally, it said "the anemic U.S.
economy" is affecting international results. However, revenues from the
supply chain and freight segment continue to exceed expectations.
Dow Chemical said on Tuesday that it would raise prices for its
products by 25 percent, institute freight surcharges and cut back on output of
some products because of higher energy prices. The increases are the second in
a month by the company, which is based in Midland, Mich., and makes thousands
of products ranging from plastic wraps to car parts and insecticides.
Home prices in 20 U.S.
metropolitan areas fell in April by the most on record, signaling the housing
recession is far from over, a private survey showed today. The S&P/Case-Shiller home price index dropped 15.3 percent from a year
Goldman Sachs Global Alpha hedge fund rebounded this year after a
40 percent plunge in 2007according to Bloomberg quoting unnamed sources. The
fund is up 19 percent through mid-June. That is nice for Goldman since the firm
put its own money into the fund at the bottom last year. But the original
investors have a way to go to get back to even. Goldman sees the other side and
knows how to play it well.
The world's biggest financial
firms may fire as many as 175,000 folks by this time next year as Citigroup
Inc. and other banks shed workers amid slowing revenue and billions in write
downs, executive recruiters say. Financial companies have announced plans to
trim more than 83,000 jobs since last July, according to figures compiled by
The Conference Board's confidence
index fell to 50.4, the lowest level since February 1992, from a
revised 58.1 in May. Consumers were the most pessimistic about the future in
the 41- year history of the index. A separate report today showed home prices
in April dropped the most since at least 2001.
Eastman Kodak shares are up 10%
today on news that the company will use a $500 million tax refund to buy back
$1 billion in shares. At least they are doing the buyback at a 25 year low. We
have commented before on banks raising capital by selling shares at their lows
after they bought back shares over the past five years at much higher prices.
Ford spent billions to buy Volvo and billions to buy back stock and
billions more for Jaguar and Range Rover which they are basically giving away
to rid themselves of losses.
And many of the CEOs who made
those decisions are still on the job or are receiving cushy pension golden
parachutes. The forward planning of the private sector of the U.S. economy has
been abysmal for the past decade. And yet Wall Street and its minions continue
to wail about government as these same folks urge the government to bail out
the banks and mortgage companies.
The share buybacks are nuts and
their purpose is to raise the price of the stock so that options granted to executives
and board members become profitable. A much better way would be to pay special
dividends if the money is burning a hole in the company’s pockets. But
executives wouldn’t benefit from that since their interest in the company is
usually in the form of options that would not participate in the dividend
payout. And on it goes.
European bourse indexes closed
Investors’ Intelligence reports more bears than bulls in the latest
period. That bearishness is bullish.
Treasuries gained ahead of
tomorrow’s Fed meeting with the two-year at 2.85% and the ten-year at 4.10%.
Gold gained $4 to $892 and oil was up pennies at $137.12. The yen finished at
108 to the dollar with the euro at $1.55.
After trading higher by one half
percent most of the day the major measures gave up the ghost in the final hour
of trading. At the bell the DJIA was down 30 points at 11810. The S&P 500
stumbled down to 1315 and the NAZZ dropped 17 to 2375.
Breadth was 2/1 negative at the
bell and volume was light.
There were 752 combined new lows
and less than 90 combined new highs.
The bears remain.
23 June 2008
Asian markets were lower
overnight with Shanghai down 2.5%. European bourse indexes are mixed and U.S.
stocks are going to open higher as a spate of stock for stocks takeovers are in
the News. Gold is $902 and Oil is $135 as the weekend OPEC meeting was a non
event. Treasuries are giving a bit of ground in front of the Fed Meeting on
Big Surprise: Speculative traders' interest in crude oil has grown to the
point that they now account for roughly 70% of all trading in West Texas
Intermediate crude on the New York Mercantile Exchange, compared with 37% in 2000,
according to an investigation by a congressional subcommittee that forms part
of an escalating political assault on Wall Street's role in the run-up in oil
Bunge is taking over Corn Products and Republic Services is buying Allied
Waste. Also the takeover of BCE
in Canada was approved by the
Canadian Supreme Court although
the banks who are loaning the money for the $50 plus billion buy may not be as
anxious to fund the deal as they were last year before the collapse of the
Thanks—Goldman Sachs added U.S.
Steel and Elan
to its Conviction Buy List. U.S. Steel is trading at $188 up from $14 several
years ago and Elan is $34 up from $6. Elan might work - but U.S. Steel?-we would posit the easy
money has already been made.
US Treasury securities held by
foreign entities: Japan $600 billion; China $500 billion; Britain $250 billion,
OPEC $150 billion; Caribbean Banks $115; Hong Kong $60 billion.
Financials are dragging stocks
And GM is making another new low at unlucky $13. GM has $200 billion in
sales. Last month the number of car/truck sales was off 20% and the higher
priced SUVs and pickup trucks even more. Assume dollar sales were down 25%. 25%
of $200 billion is $50 billion in lost sales and lost multiplier effect on the
economy. Multiply by two for Ford and Chrysler and the number is $100 billion
in lost sales and stimulus to the economy.
(Multiplier effect: An effect in
economics in which an increase in spending produces an increase in national
income and consumption greater than the initial amount spent. For example, if a
corporation builds a factory, it will employ construction workers and their
suppliers as well as those who work in the factory. Indirectly, the new factory
will stimulate employment in laundries, restaurants, and service industries in
the factory’s vicinity.)
Goldman Sachs reversed its May 5 recommendation for investors to
add to U.S. financial and consumer stocks, conceding it was ``clearly wrong''
about the prospects for both groups.
Goldman advised investors to
``underweight'' the categories by allocating less to them than their weightings
in the S&P 500 Index. In May, the world's biggest securities firm boosted
its rating on financial companies to ``neutral,'' or market-weight, and
assigned an ``overweight'' recommendation to consumer shares.
``We boosted our consumer
discretionary and financials weights in May on the belief the sectors would benefit
from bank recapitalization and fiscal stimulus,'' Goldman wrote to client
today. ``Our thesis was clearly wrong in hindsight.''
Here is an interesting Bloomberg
article on commercial real estate loans and large banks:
Gold dropped $17 to $884 on
Monday and Oil gained $1.67 to $136.55. Treasuries were slightly lower with the
two-year at 2.90% and the ten-year at 4.17%. European bourse indexes closed
mildly mixed and the euro was $1.55 while the yen was 108 to the dollar.
The major measures meandered plus
and minus small all day with the DJIA finally closing higher.
At the bell the DJIA was up 10
points at 11850. The S&P 500 gained 1 point to 1318 and the NAZZ dropped 20
Breadth was more than 2/1
negative and volume was active for a summer Monday on the NYSE.
There were over 610 combined new
lows and about 130 combined new highs.
Today was a workout day from Friday’s Witching and the bears
are in control.
20 June 2008
Happy summer (bulls); winter is on the way (bears)
Oil is up $2 in the early going
and Gold remains over $900. Treasuries have a bid and stocks are going to open
lower as rumors of more write downs at certain financials- you name the company
and there is a rumor- are casting a pall on the opening. Asian markets were
mixed overnight with Shanghai gaining 3% to end a tumultuous week of trading
and India dropping 3%. European bourse indexes are lower at midday.
Michael Gordon of the NYT, who is
a mouthpiece for the Pentagon, is reporting that Israel carried out a major
military exercise earlier this month that American officials say appeared to be
a rehearsal for a potential bombing attack on Iran’s nuclear facilities. Here
we go again.
Today is Quadruple Witching and so anything is possible. The NYT Iran/Israel story on top of the
financial rumors and S&P 500 expiration at the opening has the major
measures down over 1% after 30 minutes of trading. The sell off on the S&P
500 futures settlement this morning may be reversed this afternoon by the settlement
of the futures and options on individual stocks. Until them the S&P 500 is
10 points below 1335 support right now and needs to regain that level during
the day to assuage the bulls.
The Chinese plan for pollution and cutting gasoline consumption: With
less than 50 days to the Olympics, Chinese authorities on Friday announced
widely-expected plans to almost halve its car population in the capital for a
two month period. Starting July 20th, drivers of even and odd-numbers license
plates will only be able to drive on alternate days until September 20th,
almost a month after the close of the Olympics and three days after the closing
ceremony of the Paralympics.
The penalty for violating the
rules is death. Just kidding, we think.
Ford Motor lowered its hopes further, blaming $4-a-gallon
gasoline and consumers' worries about the economy. The auto maker said 2008
automotive results will be worse than 2007 and that it will difficult for
company to break even on an operating basis in 2009. The auto maker also
reduced its production outlook and said it will delay introduction of its new
Treasuries closed higher as
stocks were lower with the two-year at 2.85%. The ten-year was 4.14%. Oil
gained to $134.69 up $2 and change and Gold closed flat at $903. The yen was
107 to the dollar and the euro equaled $1.56. European bourse indexes ended the
week 1% and lower.
From The Guardian, a British
paper: Crude oil prices rose sharply on
the world's commodity markets tonight after the head of Opec
dismissed as "irrational and illogical" a call by Gordon Brown for
the cartel to pump more oil. Chakib Khelil said the near doubling of oil prices over the past
year was due to geopolitical tension, speculation and a shortage of refining
capacity rather than a failure by producers to supply enough crude. His
comments came as the prime minister flew to Saudi Arabia for a summit meeting
on Sunday of oil producers and consumers in Jeddah at which he will press for Opec to help contain rising inflation
in the West by pumping more oil.
Probable short covering into the
weekend moved stock measures off their lows of the day but the DJIA ended down
220 points to close at 11840. The S&P 500 was off 25 points to 1317 and the
NAZZ lost 55 points to 2405.
Breadth was 4/1 negative and
volume was witching active.
There was a combined total of 530
new lows on the NAZZ and NYSE and a combined total of 95 new highs.
The bears won the day and the week.
19 June 2008
Stocks opened higher out of the
box but the financials quickly turned negative with the rest of the markets
following. Overnight Asian markets were lower with most down over 2% while
Shanghai dropped 6% effectively eliminating yesterday’s 5% rally. European
bourse indexes are mildly lower at midday. Oil has a $136 handle and Gold is
unchanged. Treasuries again have a bid.
Crude-oil futures fell Thursday
after China said it would hike fuel prices, raising questions about the stamina
of oil's record-breaking rally. Traders are worried
that China's decision to increase the price of products such as gasoline and
diesel could crimp its demand growth, although many analysts say consumption
patterns in China aren't going to radically change overnight. In a surprise
announcement, China said it would raise gasoline and diesel prices by about
18%. Prices of other fuels as well as electricity were also increased. China
regulates retail and wholesale prices on oil products and has kept them artificially low as crude oil prices have skyrocketed. This
policy has squeezed the country's refiners, who are posting huge losses as a
result. This is the first time China has raised its oil product prices since
November, and it will be largest increase in more than four years.
One half hour into the trading
session oil is down $3 which is helping to arrest the stock swoon. There
doesn’t yet seem to be a theme in today’s trading. The S&P 500 is at 31350
which is the line in the snad on the downside for the
bulls this week. Today and tomorrow are Quadruple
Witching so the markets may be going many directions over the next days and the
real trend will emerge next Tuesday.
The Feds are indicting the two
Bear Stearns hedge fund managers for lying about what they said to investors in
their funds because one of them in an e-mail said that subprime
market was toast. The certainly weren’t the first nor the last to be scared
inside and putting on a brave face outside, we have done that in the past.
Luckily we were mostly right.
A big deal is being made about
one of them removing $2 million from the fund. But little mention is made about
the fact that he left $4 million in the fund and lost it all.
Whatever, one would guess that
the CEOs of all the banks and brokers that have sucked wind this year would be
prime targets for the Feds if they are really serious about getting folks who
misled shareholders. But of course they aren’t. Hedge funds are by their nature
speculative instruments. Banks aren’t.
For example, Citi raised capital by selling
shares and now it says: Citi’s Chief Financial Officer Gary Crittenden
told analysts on Thursday the New York bank will see a fresh round of
write-downs from failing mortgage investments in the bank's second-quarter
results, and said credit costs from souring consumer loans "may continue
to rise throughout the year." Mr.
Crittenden said Citigroup will set aside more money in the second quarter than
it did last quarter to offset failing consumer loans. He also said that when
investors demand higher yields for owning complex asset-backed securities like
collateralized debt obligations, each incremental rise in those yields means a
related decline in value in similar securities sitting on Citigroup's balance
sheet .He said Citigroup does not mark the value of those securities -- the
source of much of the bank's recent decline in performance -- directly to
market prices, but instead uses a proprietary model that accounts for market
values as one component in valuing the securities.
On the Citi
news most financials are lower with JPM the best of the lot down $1.50. The
major measures are higher at noon because Oil is $3 lower.
News from the land of milk and
honey: A Crawford County woman is in pain
and a little embarrassed after accidentally shooting herself in the foot
Tuesday afternoon while patrolling her garden for woodchucks. Late Tuesday
afternoon, the 45-year-old rural Ferryville,
Wisconsin woman called 911 to report she had shot herself, Crawford County
Sheriff Jerry Moran reported. The woman told authorities she was in her garden
with a loaded .22-caliber bolt-action rifle, waiting for woodchucks that have
been bothering her vegetable garden, Moran said. The gun, which had a problem
with its safety, accidentally discharged. The woman was taken to Vernon County
Memorial, where she was treated and released, Moran said.
Oil ended down almost $5 at
$131.80. Gold gained $10 to $904. Treasuries gave ground with the two-year at
2.95% and the ten-year at 4.23%. European bourse indexes closed lower. The yen
was 108 to the dollar and one euro equaled $1.55.
The major market measures staged
a rally in the last hour and one half of trading to close higher on the day.
The DJIA gained 35 points to end
at 12065. The S&P 500 rose 5 to 1343 and the NAZZ jumped 30 to 2460.
Breadth was flat at the bell and
volume on the NYSE was about yesterday’s 4 billion shares.
There were 205 new lows on the
NYSE and 90 new highs.
The bulls retrieved serve today.
18 June 2008
tonight see end of today’s post
Stocks are opening lower this
morning as lousy earnings from Federal
Express and Morgan Stanley plus
the announcement by Fifth Third that
it was cutting its dividend and raising $2 billion in capital by selling a
convertible preferred stocks and noncore but
profitable businesses put the cabash on any hopes for
Asian markets were mixed with
Shanghai finally moving higher gaining 5% and India down 1.7%. European bourses
are lower at midday. Gold is $3 higher as the trading day in NYC commences. Oil
has a $134 handle and Treasuries have a bid in the early going as stocks sell
Investors Intelligence number showed a large increase in bears in
the latest reporting week. Bulls were 35% versus 42% and bears were 37% versus
32%. A large bearish contingent is
considered bullish in the perverted thinking of Wall Street that the crowd is
always wrong, unless it isn’t.<
We think the markets are and will
act as they did in the first oil shock in the 1973. As we said yesterday we see
similarities in market action between then and now. And so we repeat our
we are in cash:
The DJIA had touched 1000 in 1968 and then entered a bear market that lasted
until May 1970 and saw the markets drop 44%. From May 1970 to January 1973
stocks gained 91%.
Between 1973 and 1974 oil prices tripled. And in that same time period the
stocks markets dropped 44%.
From January 2000 to October 2002 stocks dropped 38% and then rallied for the
next five years to top out in October 2007 up 91%. Since October 2007 stocks
are down 10%.
Oil prices have tripled over the past year. Coupled with the subprime mortgage crisis and rise
in other commodity prices it is our view that stocks have not adequately
reflected the dislocations that are going to occur. This morning’s CPI report
of 3.7% month over month rise and 7% year over year increase suggest that
Until we have a better handle we will stay as we are.
Here is a little new to brighten
the day for bears:
Royal Bank of Scotland Issues Crash Alert and BIS Warns of Great
Global stock markets are braced for one of the worst crashes in 100
years, according to the Royal Bank of Scotland (RBS) credit strategy
team. RBS credit strategy team, in a special report for
clients, said it expects inflation to paralyze economies and spark
the crash. The report advised investors to be prepared for a
severe downturn in global stock and credit markets, saying the S&P 500
index is likely to fall by more than 300 points to around 1,050 points by
September. Bob Janjuah, the report's author
is highly respected in the City after his foresighted warnings last
year about the credit crisis proved accurate.
from realmoney.com :It should be noted that the Royal Bank of Scotland statement was
originally released on June 11 and Janjuah has been
heralding Armageddon for over a year now. Markets usually don't crash when RBS
is yelling "fire.”
Gold closed up $10 at $897. Oil
gained $2 and change at $136.50. European bourse indexes closed lower while treasuries
gained as the markets lost.
With the markets entering the final hour of trading the
S&P 500 is again at the 1335 to 1340 area that held last week and must hold
again this week. With quarter end which is also
yearend for many no profit institutions our guru is guessing-but not
betting-that support holds this time around.
Stocks rallied in the final hour
to cut their daily loss in half but then ran out of steam and headed lower in
the last fifteen minutes of trading.
The DJIA closed down 130 points
at 12030. The S&P 500 lost 13 points to 1338 and the NAZZ dropped 28 points
Breadth was over 2/1 negative and
volume picked up with the NYSE reaching 4 billion shares.
There were 215 new lows and 70
new highs on the NYSE and 250 new lows and 60 new highs on the NAZZ.
The bears won the day.
moon will appear to be a giant pink sphere tonight, a sight that scientists
call the Moon Illusion, according to the NASA Web site.
sight occurs each year on June 18 and is called a solstice moon because
summer solstice occurs on June 21, according to this NASA site.
is significant because the sun and full moon are like kids on a seesaw; when
one is high, the other is low,” a description on the NASA Web site says. “This
week’s high solstice sun gives us a low, horizon-hugging moon and a strong Moon
solstice moon also is often called Strawberry Moon, according to NASA's Imagine
the Universe site. On the site, an astrophysicist explains it this way:
Full Moon of June generally goes by the epithet of the 'Rose Moon,' or the
'Flower Moon,' while people in certain areas blessed with berries, as ours is, prefer to call it the 'Strawberry Moon.'
NASA’s website: http://science.nasa.gov/headlines.
Wednesday night, June 18th, step outside at sunset and look around. You'll see
a giant form rising in the east. At first glance it looks like the full Moon.
It has craters and seas and the face of a man, but
this "moon" is strangely inflated. It's huge!
just experienced the Moon Illusion.
Above: The full Moon beams through trees in
Manchester, Maryland. Credit: Edmund E. Kasaitis.
Copyright 2008; all rights reserved.
no better time to see it. The full Moon of June 18th is a "solstice
moon", coming only two days before the beginning of northern summer. This
is significant because the sun and full Moon are like kids on a see-saw; when
one is high, the other is low. This week's high solstice sun gives us a low,
horizon-hugging Moon and a strong Moon Illusion.
watchers have known for thousands of years that low-hanging moons look
unnaturally big. At first, astronomers thought the atmosphere must be
magnifying the Moon near the horizon, but cameras showed that is not the case.
Moons on film are the same size regardless of elevation: example. Apparently,
only human beings see giant moons.
all these years, scientists still aren't sure. When you look at the Moon, rays
of moonlight converge and form an image about 0.15 mm wide on the retina in the
back of your eye. High moons and low moons make the same sized spot, yet the
brain insists one is bigger than the other. Go figure.
A similar illusion was discovered in 1913 by Mario Ponzo,
who drew two identical bars across a pair of converging lines, like the
railroad tracks pictured right. The upper yellow bar looks wider because it
spans a greater apparent distance between the rails. This is the "Ponzo Illusion."
Right: The Ponzo
Illusion. Image credit: Dr. Tony Phillips. [More]
researchers believe that the Moon Illusion is Ponzo's
Illusion, with trees and houses playing the role of Ponzo's
converging lines. Foreground objects trick your brain into thinking the Moon is
bigger than it really is.
there's a problem: Airline pilots flying at very high altitudes sometimes
experience the Moon Illusion without any objects in the foreground. What tricks
it's the shape of the sky. Humans perceive the sky as a flattened dome, with
the zenith nearby and the horizon far away. It makes sense; birds flying
overhead are closer than birds on the horizon. When the moon is near the
horizon, your brain, trained by watching birds (and clouds and airplanes),
miscalculates the Moon's true distance and size.
Below: The "flattened sky" model for the
Moon Illusion. Source: Explaining the Moon Illusion by Lloyd Kaufman and James H. Kaufman.
are other explanations too. It doesn't matter which is correct, though, if all
you want to do is see a big beautiful Moon. The best time to look is around
moonrise, when the Moon is peeking through trees and houses or over mountain
ridges. The table below (scroll down) lists rise times for selected US cities.
fun activity: Look at the Moon directly and then through a narrow opening of
some kind. For example, 'pinch' the moon between your thumb and forefinger or
view it through a cardboard tube, which hides the foreground terrain. Can you
make the optical illusion vanish?
that! You won't want to miss the Moon Illusion.
Selected US Cities
New York, NY
San Diego, CA
17 June 2008
Goldman Sachs beat estimates and all is right with the world as
Turn-up Tuesday begins. Adobe also
beat and those results coupled with Intel announcing that it will spin off a
division that makes solar chips has the bulls in a pre-market opening festive
mood. Oil is down a couple of dollars with a $132 handle and Gold is up $2.
Asian markets were mixed with
China down another 2.7% at 2700 which is 60% lower than the high last fall.
European bourses are higher by 1% and more at midday.
The Producer Price Index was up
1.4 % in May and up 7% year over year on the stuff that matters but stripping
out essentials like food and energy the core PPI year over year is up 3%.
Treasuries were better until the number came but they are now flat on the day.
The Producer Price Index measures prices of goods at the wholesale
level. There are three broad subcategories within PPI: crude, intermediate, and
finished. The market tracks the finished goods index most closely, as it
represents prices for goods that are ready for sale to the end user. Goods
prices at the crude and intermediate stages of production often provide an
indication of coming (dis)inflationary pressures, but
the closer you get to crude goods, the more that these prices track commodity
prices which are already available in traded indexes such as the CRB (Commodity
The market used to place more emphasis on the index excluding food and
energy, referred to as the core rate. Food and energy prices tend to be quite
volatile and obscure trends in the underlying inflation rate. Though the market
reaction is determined by the month/month changes, year/year changes are also
noted by analysts. The index is not revised on a monthly basis, but annual
revisions to seasonal adjustment factors can produce small adjustments to past
releases. Recently there has been talk among gurus that the actual number may
be more important than the core number
Why we are in cash:
The DJIA had touched 1000 in 1968 and then entered a bear
market that lasted until May 1970 and saw the markets drop 44%. From May 1970
to January 1973 stocks gained 91%.
Between 1973 and 1974 oil prices tripled. And in that
same time period the stocks markets dropped 44%.
From January 2000 to October 2002 stocks dropped 38% and
then rallied for the next five years to top out in October 2007 up 91%. Since
October 2007 stocks are down 10%.
Oil prices have tripled over the past year. Coupled with
the subprime mortgage crisis and rise in other
commodity prices it is our view that stocks have not adequately reflected the
dislocations that are going to occur. This morning’s CPI report of 3.7% month
over month rise and 7% year over year increase suggest that inflation is.
Until we have a better handle we will stay as we are.
Well that was one quick rally. We
guess some traders did pay attention to PPI. The major measures are back to
even and Lehman is lower after and
hour of trading. With bank stocks in the red today may be a glass half empty
day for them.
Gold closed $1 higher at $886.
Oil dropped $1 to $133.85. The yen was 108 to the dollar and the euro equaled
$1.55. Treasuries caught a bid with the two-year at 2.92% and the ten-year at
4.22% as the WSJ journal and other papers printed Fed inspired stories that an
interest increase in not in the cards in the near future.
European bourse indexes close
higher while Mexico was slower by over 1% and Brazil was 2% higher.
Goldman Sachs was $4 higher in
morning trading and is now $2 lower at the close of trading. The rest of the
markets have followed.
The DJIA lost 110 points to end
at 12160. The S&P 500 gave up 8 points to 1350 and the NAZZ dropped 15 to
Breadth as more than 3/2 negative
on the NYSE and volume was summer light.
There were 125 new lows and 80
new highs on the NYSE.
The bears awoke to a glass half full and turned turned-up
Tuesday around to turned-down Tuesday.
16 June 2008
Asian markets were higher
overnight and even China managed to gain a bit while Japan was up over 2% and
Hong Kong gained over 1%. European markets are mostly small higher at midday.
Gold is up $2 and Oil almost touched $140 in trading this early morning. Treasuries
Lehman announced losses about as
expected and the shares are $1 higher and leading financials to positive
readings and hour into the trading day. The DJIA opened down about 90 points
and then rallied to down about 50 and settled into a summer doldrums trade.
Financials are bouncing while other areas as telephone stocks and tech are
mixed. Volume is light.
AIG fired its CEO. That move is three years too
Verizon and AT&T
were downgraded and are trading lower.
Saudi Arabia said it is going to pump more oil and the rise in the
price of oil this morning is counterintuitive except to the big boys and girls
who have made commodity futures and stocks the tech mania of the current
The following is from a WSJ blog report from
the conference call by Lehman on their earnings:
This is my responsibility and I wanted you to hear a few things from me
directly,” he says. “We made
a decision to build out our best-in-class mortgage origination and distribution
platforms. We made active decisions to deploy our capital, some of which in
hindsight were poor choices because we really didn’t
react actively enough in the environment. We accumulated positions in
leveraged loans that we thought we could syndicate and clearly not all of those
could be sold.” He says the firm is in the process of delevering.
Unsaid in this blog report is that Lehman
is sorry it didn’t get rid of the leveraged loans on which it lost money. How
was Lehman to get rid of the loans? By selling them to customers, that way
customers would have taken the losses not Lehman. That is what the favorite
investment bank on Wall Street, Goldman
Sachs, was able to do.
Oil turned lower at midday and is now down $1.50 which is a $9 swing
for the day. The major stock measures
have rallied to the plus side on that swing. Financials remain today’s leaders
as bottom fishers are out. We are not among them. We are more interested in the
Open playoff on ESPN.
Bloomberg reported this afternoon: Richmond Federal Reserve Bank President Jeffrey Lacker
said downside risks to growth have ``diminished'' and reversing previous
interest rate cuts makes ``eminent sense'' as the economy recovers. While the
danger of a more rapid slowing in growth ``has not entirely disappeared, my
sense is that such downside risks have diminished appreciably,'' Lacker said today in a speech in Spartanburg, South
Carolina. ``And just as easing policy aggressively in response to emerging downside
risks made sense, withdrawing some of that stimulus as those risks diminish
makes eminent sense as well.''
Southern California's housing
market took another beating last month as median prices fell an average of 27%
from a year ago -- the sharpest drop in at least 20 years. The median home sale
price in six Southern California counties was $370,000, down from $505,000 a
year earlier, according to DataQuick Information
Systems. DataQuick said that was the biggest annual
decline it has recorded since it began tracking prices in 1988.
Oil closed lower by one dollar and change at $133.78. Gold gained $12
to $885. Treasuries were mildly better with the two-year at 3.01% and the
ten-year at 4.24%. European bourses were lower as was Mexico and Brazil closed
The DJIA stayed negative at the close after trading above and below
even all day. The DJIA lost 40 points to 12325. The S&P 500 was down 1
point to 1360 and the NAZZ gained 20 to 2475.
Breadth was 5/4 positive on the NYSE and volume was U.S. Open light.
There were 115 new lows and 80 new highs on the NYSE.
The bulls and bears tied today.
We want to share this article
from the June 5 NYT that we found amusing J
Peter Rabbit Must Die
THE homeowner, a city-boy artist and
illustrator who had moved to rural Pennsylvania, never wanted to kill the
woodchucks. Sure, they were ruining the garden and digging up the foundations
of outbuildings, but it was a moral issue: the artist, who is still so
uncomfortable about what transpired — and so concerned about how his New York
clients would feel about it that he is not willing to be identified — did not
want to take a life.
Given the size of the property — a 12-acre
former horse farm — fencing was out of the question. He bought a Havahart live animal trap but did not catch a thing. And he
worried that releasing woodchucks down the road would only be dumping the
problem on a neighbor. So he moved on to that tried-and-true landlord’s tactic:
harassment. He attached a hose to the exhaust pipe of his old pickup truck and
stuffed it into a burrow — not to kill the woodchucks, just to encourage them
to move on. That didn’t work, either.
Finally, the artist decided he would have to
shoot the animals. First, though, he went to each hole and made an
“I said: ‘I intend to kill you. You have 24
hours to get out,’ ” he recalls. “I wanted to give them fair warning. I
said, ‘If I were you, I would find another place to live.’ I also promised them
I would not take a shot unless I knew it would be fatal.”
He is making this into a funny story, he
says, but when he killed his first woodchuck he “literally felt sick.”
“I went outside and knelt down to it and said
a little prayer to whatever the powers that be that when my turn comes, I will
do it as gracefully and uncomplainingly.”
Eventually, though, he embraced his mission,
and grew so obsessed with it that an aunt began to call him Woodchuck Johnny.
How many did he kill that summer?
“I stopped at 19,” he says. “One was a
suicide. It realized its days were numbered and ran in front of a car.”
The artist’s story is not as unusual as some
would like to believe. As summer closes in, gardeners around the country are
starting to worry about the animals that may end up enjoying their roses and
cucumbers more than they do. Any day now, they know, they may come upon a
carrot patch ravaged by groundhogs, lettuce ransacked by rabbits and squirrels,
or a massacre in the koi pond.
But for many gardeners — the tenderhearted
ones, who pride themselves on their decency and compassion — killing pests,
particularly those with big eyes, fluffy tails and cousins who work for Disney,
could never be a solution of first resort.
“People who garden have an obvious love of
life, a reverence for life, and to kill something in order to garden is very
rough,” says Liz Krieg, who runs the Rising Sun
Greenhouses and Landscape Company in Bethel, Vt., and who dispatches only the
scarlet lily beetle.
City people tend to take up gardening in
their yards or at their summer houses with a generous attitude toward summer’s
bounty, ready to live and let live. The woodchucks want a few zucchini? No
problem, there are enough to go around. The rabbits are decimating the lettuce?
Get a humane trap and move them elsewhere.
Soon enough, though, they realize it’s not
that simple. The animals do not take one or two tomatoes as if they’re in a
greenmarket in the Hamptons; they go down the row
sampling, so that everything is ruined. Or they uproot and destroy a crop,
without eating a thing, in their search for insects and grubs. There is, in
fact, a sameness to the stories the gardeners tell:
“If they just had taken one head of lettuce, or a few strawberries — but they
decimated the whole thing!” After a season of grueling labor and multiple
attempts at benign deterrence, the sight of a trashed garden is often the last
straw: the moment when a gentle gardener will suddenly go Rambo.
Such was the case with Susanne Williams, a
retired supply officer for the Alaska Department of Transportation, who lives
with her husband in Douglas, near Juneau. Gardening is a struggle in southeast
Alaska, she says; there is not a lot of sun. But she and her husband have two
gardens, one at their home overlooking the Gastineau Channel, the other at the
local community garden near the Mendenhall Glacier. They give much of their
produce to charity and put up mesh at home in an unsuccessful attempt to keep
Five years ago there were serious animal
problems at the community garden — black bear, deer, beaver — but “the worst
pest of all was the porcupine,” Ms. Williams says. “The kindhearted would trap
them and drive them 10 or 15 miles away, until one of
the forest people said they just came back.”
It reached a point, Ms. Williams says, when
gardeners were so frustrated that at least 30 of the 150 plots were empty.
“So finally, four years ago, we put an
electric fence all around this big field, but the porcupines then decide to
burrow under the fence,” she says. “They’re ingenious. So we had to put rocks
down and pour cement.”
Even then, a porcupine managed to get in. And
when she saw it, “strolling along, munching away,” she could stand no more.
“He was after my carrot crop,” she explains.
“I said, I just cannot handle this anymore. He sees me
and tries to wander off, but they can’t run very fast. I got him with the
sledgehammer. He tried to dodge me, but I got him on the head.”
And no, she hasn’t lost any sleep over it.
“It was sad, but I am tired of being the
fancy kitchen for critters,” she says. She has a friend in the area who has
“just given up” on being kind to the animals: “He goes after them with a
pitchfork and puts them in his compost pile. I don’t think the PETA people would like him much.”
She adds: “Doesn’t the spinach scream when it
boils? I think probably all living things have some scream going on. We’re all
predators, no matter whether we’re animals, mineral, birds or fish, and that’s
part of it.”
Taking pest control into your own hands, of
course, is no simple matter. There are the ethical and emotional issues, and
while it is often legal to kill a pest, there are innumerable federal, state
and municipal laws and regulations that may make it illegal.
There would seem, at first, to be many
alternatives to killing. Besides mesh and electric fences, there are nets to
cast over trees and gardens; foul scents with names like Not Tonight, Deer; and
home remedies like sprinkling cayenne pepper around the tomatoes and dumping
used cat litter into woodchuck holes. There are scarecrows in the north and
fake alligators in the south, and household pets to scare predators away or to
do the gardeners’ dirty work. There are capture-and-release traps.
But none of these methods work all the time,
and some, depending on the species you are trying to catch and the area in
which you live, may not even be legal. The New York State Environmental
Protection Law, for example, forbids anyone but a state Nuisance Wildlife
Control Operator from transporting a wild animal, which puts the kibosh on the
use of capture-and-release traps.
Trapping and moving animals may not be in
their best interests, either: a backyard suburban squirrel, transported to a
forest, is easy prey for hawks and foxes, said John Hadidian,
the director of urban wildlife programs for the Humane Society of the United States and the primary author of “Wild Neighbors:
The Humane Approach to Living With Wildlife.” (The book suggests tolerance as
its first choice for everything from bats to rats.)
And releasing an animal in a more familiar
setting may not be in your neighbors’ best interests.
“We have yet to find anyone in outlying areas
who says, ‘We love raccoons, please bring your humanely trapped critters here
and let them go,’ ” says Wendell Martin, a retired engineer who has a
five-acre garden in Meridian, Idaho, near Boise. Raccoons have uprooted and
upended his water lilies to find snails. Mr. Martin finally borrowed a .22 and
shot them. It was not an ethical problem for him, he says — the animals are
overpopulated in his area — but it was not easy emotionally. (This year there
seem to be fewer of them, and he has been trying to protect his plants with
Then there are the difficulties that can
arise when transporting a wild animal.
Jessica DuLong, a
Brooklyn writer and marine engineer, managed to grow a fruit-bearing cherry
tree on her roof, but even in the wake of what she calls the Great Cherry Massacre
of 2007 she was not interested in punishing the squirrels who
preyed on it. She trapped one in a live animal trap and set out to Prospect
Park with good intentions.
Unfortunately, the squirrel had no way of
knowing this. It threw itself against the walls of the cage with such ferocity
it cut itself; it defecated; it ran back and forth inside the long cage in a frenzy so that the cage flipped up and down like a manic
miniature seesaw. New Yorkers, seeing a fluffy tail in distress, yelled at the
“This entire class of preschool kids was out
in one of their little preschool wagons, and the squirrel is looking rabid and
bleeding at the mouth,” she says. “It was not what I had in mind when I started
this humanitarian project.”
Not all city people, of course are so sweetly
disposed to cute rodents. Joanna Lennig is an
executive headhunter who lives in Brooklyn but grew up in Maine and New
Hampshire. As a 10-year-old she was stunned to see her mother, “an incredibly
polite, retiring, WASP lady,” attacking a woodchuck in the vegetable garden
with a shovel.
“You know that body posture someone has when
they’re using a pickax,” Ms. Lennig says. “She was
just enraged. We just talked about this recently — being WASPs, we’d never
talked about it. We were a family who canned the corn and canned the beans and
really put food aside for the winter, so having an animal go through the green
beans, she was furious. She said she’d had it.”
Ms. Lennig herself
has no sentimental attachment to squirrels. About three years ago she saw signs
of digging in the rooftop garden of her brownstone, which has pots of blueberry
bushes, grape vines, tomatoes and peppers, as well as flowering plants, and is
a regular stop on garden tours. She was unconcerned by this evidence of
squirrel interlopers until the day she went up to find the garden destroyed,
the blueberry bush razed, the tomato plants eaten through.
“There was a wow factor,” Ms. Lennig says. “Like when one looks out at the aftermath of a
really, really, really destructive thunderstorm and says, ‘Look at that tree
branch on the Volvo.’ ” Ms. Lennig went
“straight to rage.” She and her husband bought a Havahart
trap and captured a squirrel, then realized they did not have a plan.
Transporting it to a nearby park didn’t seem an effective solution. Squirrels,
they had heard, were territorial; it would only come back.
They did, however, as conscientious
environmentalists, have a large rain barrel on the roof, which they used to
water the garden. Who first came up with the idea of drowning, Ms. Lennig cannot recall, but it was her husband who handled
the first executions. The trap, which was long and narrow, fit perfectly in the
Ms. Lennig has yet
to be able to deal with the removal of the corpse, which is then thrown into
the garbage. But she and her husband are now so comfortable with this form of
pest control that when they visited Ms. Lennig’s
in-laws at their lakefront property last year, where squirrels were climbing on
the deck and ravaging the planters, they offered to drown them.
“My husband and I said, ‘We’ll take them to
the lake,’ ” she says, “but our in-laws were having none of that. We had
to get in the car and drive them five miles away. I spent the entire weekend
like a soccer mom, driving squirrels around.”
Isn’t drowning cruel?
No, Ms. Lennig
says. She recalls reading that you lose consciousness and then your heart
stops; it’s actually one of the nicer ways to go.
A reporter remembers reading just the
opposite (and the Humane Society agrees that drowning is inhumane).
“Listen,” Ms. Lennig
says. “I’m a former attorney. What do I know?”
Few who have made the leap from pacifism to
search-and-destroy missions are this open on the subject. Who, after all, wants
to risk being labeled a hardened animal killer? There are, however, those
willing to take the heat. Boldest are those who admit to killing garden pests
simply because they are annoying.
Dan Rattiner is the
founder of Dan’s Papers and the author of “In the Hamptons:
My Fifty Years With Farmers, Fishermen, Artists,
Billionaires and Celebrities.” He has a house in East Hampton, and for the last
three years he has hired exterminators to get rid of the carpenter bees, which,
he is well aware, do not sting.
So what do they do?
“They sort of follow you around,” Mr. Rattiner says. “They’re curious, like Curious George bees.”
That sounds sort of sweet.
No, Mr. Rattiner
“You can’t sit outside — the carpenter bees
come over to see what you’re eating,” he says. “They don’t land on you, it’s
not like menacing, it’s like having small children
that aren’t yours. You just want them gone. There’s no other way to do it, and
I feel very badly about it. I don’t know why they keep coming back. You’d think
they’d talk to each other about what happened last year.”
Many gardeners are able to kill only one
“If I see a spider, I would never kill it,”
says Jessica Melville, a nurse in Woodstock, Vt. “We have woodchucks in the
yard; they don’t bother me at all.”
But Ms. Melville, who lives with her husband,
Hunter, and two sons, is terrified of snakes. Unfortunately, her home, an 1850
farmhouse, is built into a stone wall that the local milk snakes and garter
snakes love. Ms. Melville’s husband, who co-founded cyberrentals.com,
explained to her that those snakes are harmful only to the insects they catch,
but no matter. Before kneeling down in the perennial bed, Ms. Melville
used to do what her family called her snake dance, jumping up and down, because
when those snakes heard the pounding, they slithered away. If she happened to
see a snake, she’d retreat into the house, and that would be it for that day’s
The Melvilles tried
a granulated repellent called Snake Away. It didn’t work, so Mr. Melville, who
occasionally hunts birds, bought his wife a 20-gauge shotgun. Although some
might think a snake would be a difficult target, it is not. Often, when a
predator is near, a snake will freeze.
“I just went up really close,” Ms. Melville
says. “I was probably five feet from it. The first shot I missed. The second
time I got it and then it was: ‘Oh, this is great! One less snake I have to
deal with.’ ”
Ms. Melville has been shooting snakes for the
last three years and estimates that she has killed about 15. But she’s killing
snakes that are eating bugs? Doesn’t that distress her?
“No,” Ms. Melville says. “I’m just a happier
Second thoughts? Regrets? Nightmares?
“Nope, never,” Ms. Melville says. “I’m just
glad they’re gone.”
Regrets are even rarer among those whose
livelihoods are threatened by pests.
Oskian Yaziciyan lives in Homestead, Fla., about a 20-minute drive
north of Key Largo, where he runs Goldfish & Koi
U.S.A., a two-and-a-half-acre ornamental fish and water lily farm. He has great
feelings of affection for some of the animals other people detest. He had a pet
squirrel as a boy and loves to watch squirrels. He finds them charming.
On the other hand, when he first began his
business 12 years ago, and an equally adorable raccoon figured out how to
depress a pipe to let the water out of a tank and ate about $6,000 worth of koi, it did not end well.
So what did Mr. Yaziciyan
“I’m not going to tell you,” Mr. Yaziciyan said. “I told my wife I took it to the
Mr. Yaziciyan has
since made a practice of covering the ponds with shade cloth, netting or wire.
It is not an aesthetic solution. And it doesn’t always get rid of his biggest
problem: birds. Herons, which are a protected species, are a problem, as are
crows, Mr. Yaziciyan wrote in an e-mail message,
because they eat the eyes out of fish and snatch surface swimmers. Heron, with
their rapierlike beaks, are adept killing machines.
“Koi are very
expensive fish — you have a 14- or 15-inch koi,
depending on the grade, it could be $50 or $2,000,”
says Mr. Yaziciyan, whose own stock ranges from a
more modest $5 to $500. “They go for the larger fish, your prize fish. They
even kill fish they are unable to swallow. They pull it out of the water, eat
its guts out.”
This eating-the-eyes-out part is casting a
new light on the bucolic animal kingdom, Mr. Yaziciyan
“I got a lot of blind fish,” Mr. Yaziciyan says.
Mr. Yaziciyan says
he does not touch the heron. But he has gone after ravens, blue birds and crows
with a net, banging their heads against a concrete or wood surface. It’s a
One visualizes a chirping cartoon bird,
advising Snow White on an available share in the woods. We’re talking the
bluebird of happiness, Mr. Yaziciyan. Isn’t it
difficult to slam it against the concrete?
“Not really,” Mr. Yaziciyan
says. “It’s a small bird. It may be a blue jay, maybe a blue bird with gray on
it. I’ve seen them poke the eyes out of the fish. You gotta
do what you gotta do. You got a $50 fish that is
totally useless. No one will buy a fish with one eye. I got dozens of fish with
The food chain is a brutal business. Or a natural one. Which brings us back to
the artist with the groundhog problem. He was finally able to make a
little bit of peace with shooting the woodchucks on his property by cooking and
eating them. “It was a way of taking full responsibility for taking a life,” he
says. “Almost like a spiritual journey.”
“Any number of local people offered up
recipes,” the artist adds. “The guy who was doing some roofing work was
Italian, and he described this wonderful recipe: essentially shallots, red
wine, cured green olives, black pepper and rosemary. My father-in-law had a big
helping. He declared it the best woodchuck he’d ever eaten.”
There Are Other Ways
JOHN HADIDIAN, the director of urban wildlife
programs for the Humane Society of the United States, is skeptical when he hears of gardeners who
claim they have tried everything to rid themselves of urban pests. He also
cautions that gardeners who kill animals and birds may be breaking the law,
noting that the Migratory Bird Treaty Act, for example, protects most species
Killing animals often does not solve the
problem. “Woodchucks are a classic case,” Mr. Hadidian
says. “If you do nothing to alter the burrow system or to protect against
reinvasion, it’s going to be back.”
Mr. Hadidian is the
primary author of “Wild Neighbors: The Humane Approach to Living With Wildlife,” which offers information about wild animals
as well as creative and humane methods of discouraging them from eating your
plants. To protect corn from raccoons, who tend to go
for it when it ripens, the book suggests leaving a radio “tuned to an all-night
talk show” out in the garden on the nights just before harvest. Or one might
try the more prosaic electrical fence.
For help, Mr. Hadidian
suggests calling the society’s wildlife hotline, (203) 389-4411, which is open
from 8 a.m. to 8 p.m., Eastern time. (It has a staff
There is also the approach offered by Catherine Wachs,
a gardener who runs the Right Brain Design advertising company and lives in
“I do what the Bible says: Leave the corners of your field unharvested for the poor and strangers among you.”
13 June 2008
Happy Friday the 13th.
KeyCorp is selling $1 billion in
common stock - 85.1 million shares at $11.75 each, a 1.9% discount to
Thursday's closing price - and $650 million in preferred stock that carries a
7.75% yield and $14.10 conversion price. We especially liked the comments of
the CEO: "By significantly
oversubscribing to the combined offerings, investors are showing great
confidence in our longer term business strategy. The strong investor response
restores our capital ratios and better positions the company for current
economic conditions and future growth opportunities." Hooray, Hooray,
KEY is selling stock to the public that it in its wisdom purchased at $20 per
share higher last year. That is the old buy/high sell low theory of losing
money that is so prevalent among banks and brokers this year. And these are the
folks managing the countries’ wealth.
JP Morgan’s head economist Bruce Kasman is
looking for a 25 basis point increase in the Funds rate in September’s meeting
and a gradual tightening thru 2009 with a yearend forecast of 3.75% for end of
Oil has a $134 handle in the
early going and gold is down $4. Treasuries are continuing to move lower
although at a slower pace than yesterday. The two-year is touching 3%.
Asian markets were mostly lower
with China down another 3% which makes almost 15% on the week. European bourse
indexes are again mildly lower at midday.
Stocks are rallying out of the
gate with yesterday’s bums showing
mixed results. Yahoo is down another
$2 while Lehman is up $2, for now.
Core CPI for May was up 0.25 and
year over year up 2.3%. Regular folks
CPI was up 0.5% in May and 4.2% year over year.
University of Michigan Consumer
Sentiment was 56 when 59 was expected. That number is
a 28 year low.
In the banking crisis in the
early 1990s all the Texas banks but one went broke or were acquired with
nothing for shareholders. We know because we were smart and bought a package of
them in case one or two went broke. Oops. And after our bad luck with them we
sold Citi on the low at $11 because we were shell shocked.
We thought of this when Key Bank raised money overnight. Maybe
all the Ohio banks have to go broke/be acquired for nothing before the current
Stocks are trying to bounce
higher from the 1340 level again today with the major measures up 1% in the
early going. Maybe today will be the charm that gets the rally going. The bulls
are sure trying.
We wonder when the media will
wake up and look at the Chinese stock market’s recent action. When it was
rising 2% a day last year the media couldn’t say enough about the action.
There are reports that the Saudis
are looking into increasing oil production. Oil is lower on the news.
Exxon Mobile said it now plans to
sell to distributors its remaining 820 company-owned stations and another 1,400
outlets operated by dealers. Exxon Mobil didn't disclose financial details but
said the sales will take place over a "multiyear period."
Our guess is that they are doing
it so that when gas reaches $10 a gallon and folks begin attacking gas stations
Exxon will only smile and keep collecting their money. Exxon says it is getting
out of the business because it isn’t making any money at retail. Of course
refiners aren’t making any money either and that is why refineries aren’t being
built. We guess Exxon is just doing business as a public service.
Oil closed the week at $134.87
down almost $2 on the day. Gold was up $2 at $873. Treasuries closed lower in
price on the short end with the two-year at 3.04% after treading down to 2.90%
during the day and the ten-year 4.26%. The yen was $108 to the dollar and the
euro equaled $1.53. European bourse indexes closed small fractions higher while
Mexico and Brazil were small fractions lower.
We sold our last stock, J Crew. Now we are all cash.
Buy programs in the last hour
helped the major measures close on their highs for the day and bulls can enjoy
their weekend while bears fret.
The DJIA closed up 166 points at
12307. The S&P 500 rose 20 to 1360 and the NAZZ jumped 50 to 2455.
Breadth was 2/1 positive and
volume was moderate.
There were 155 new lows and 40
new highs on the NYSE.
The bulls won the day and stemmed the tide for the weekend
12 June 2008
Lehman is in the news this again having fired its COO and CFO
overnight. The CFO Erin Callan had been the subject
of many complimentary stories in the financial press in the last few months.
Sic transit gloria.
Citigroup said on Thursday that it would close a hedge fund
co-founded by Citi’s now chief executive Vikram Pandit, just 11 months after the global bank acquired it for more
than $800 million. In April, Citigroup
Vice Chairman Lewis Kaden said in an interview with
Fortune magazine that the July 2007 Old Lane purchase was a way for the bank to
recruit Pandit…. ``This transaction is an investment
as much as it is an acquisition,'' ousted Citigroup CEO Charles Prince said of
the deal in April last year, citing the 20-year track records of Pandit and Havens. So Pandit made
a bundle of change (the WSJ reports $165 million) and got a new job in the
bargain and Citi is out $800 million. And now you
know why Citi is in the mess it is. And the board of
directors remains the same wise solons.
And a Belgian brewery wants to
buy Bud for $65 per share. – InBev, the world's
biggest brewer by sales, rose the most since February in Brussels trading after
saying it has ``strong support'' from banks to finance its $46.3 billion cash
offer to buy Budweiser. The Belgium-based brewer said late yesterday that it
intends to pay for the unsolicited bid with at least $40 billion of debt
arranged by lenders including Banco Santander SA, even as banks worldwide offer fewer loans,
and avoid a non- investment-grade credit rating. A loan that size implies InBev will have to sell less stock than some analysts had
Asian markets were lower
overnight by almost 2% across the board. Shanghai is now down 11% on the week
and priced at less than half of where it was last fall when the news media were
running all the stories of the new Chinese investors who were flocking to
stocks. There are no stories now.
European bourses are mildly
higher at midday and Gold is down $10. Oil is off $2 with a $134 handle.
Treasuries are lower in price, higher in yield.
15 minutes into the trading day
and the bounce off support is occurring with the S&P 500 up 1%. Now it has
to hold for the bulls to breathe a bit easier.
Old Lane's demise is the latest embarrassment for banks that operate
hedge funds or have bought stakes in them. Bear Stearns Cos., Goldman Sachs Group Inc. and UBS AG also have stumbled badly in hedge funds during the credit crunch,
piling up billions of dollars in losses for themselves or their clients. The
problems suggest that hedge funds, typically known for their independence and
entrepreneurial spirit, may have trouble thriving within huge financial
Or maybe it is because these
large trading outfits make their money by taking the other side of client
trades. They see the order flow (which the clients don’t) and trade and profit
accordingly. And the fewer large investment banks the more concentrated the
order flow and the greater the profit potential from trading with the knowledge
of client actions. For example Goldman made money this last year by shorting
sub prime while its customers were buying.
As investors on their own they
are no smarter or dumber than all the rest of us.
Retail sales rose 1% in May. As Tony Crescenzi
at realmoney.com points out with retail
sales running at a pace of $385 billion per month, it takes an increase of just
$3.85 billion to push retail sales up a percentage point. That's a small sum in
comparison to the $120 billion in tax-rebate checks that the government has
issued. There were also sharp revisions upward to previous months, totaling
nine-tenths of a percentage point both overall, and
excluding automobiles. These figures will force estimates upward for the
current quarter's gross domestic product. Most forecasters had been expecting a
flat-to-down reading for the quarter; expectations for growth in negative
territory are likely to shrink markedly following the release of these data.
Keep in mind that retail sales are not the end of the story in terms of the
income-tax rebates. Consumers spend about $800 billion per month, which
obviously means that retail sales do not fully capture all of the money
consumers spend, although the data certainly are an excellent guide. If you
think that gasoline sales are what drove retail sales, think again. Excluding sales
of automobiles and gasoline, retail sales increased 1% in May following gains
of 1.1% in April and 0.5% in March. The April and March figures were upwardly
revised by 1.3 percentage points compared to what was previously reported,
which means that the revisions to the headline figures were rooted in
categories unrelated to gasoline. An area of strength in recent months that
likely reflects the high price of gasoline has been the non-store category,
which reflects sales through catalogues and over the Internet. It saw an
increase of 1.6% in May, 3.2% in April and 1.7% in March.
Two hours into the trading day
the major measures remain 1% and higher. Volume is good and breadth is 2/1
positive on the NYSE and 3/1 to the good on the NAZZ. Short covering and
traders playing the 1340 support level to the upside are moving prices up.
Talbot’s is up $2 to $10.50 on news released yesterday that they
have obtained the last $50 million of financing that they were looking for to
replace interim financing that was cancelled by two banks. The financing came
from majority owner AEON which will loan them an unsecured $50 million. We
actually view that event as a negative because now AEON has a creditor’s
interest in the company and can take it over in any bankruptcy filing to the
detriment of only equity shareholders which it was until this loan.
The shares are up on short
covering. There were an astounding 12.5 million shares short with a float of
only 19 million shares. We don’t know what has possessed short sellers but they
are scrambling to cover since for some reason they must have thought TLB would
file bankruptcy imminently. We remain interested but at much lower levels and
will let the big boys and girls play their games for now.
At noon the DJIA remains up 100
points but today’s upside trading
doesn’t seem to have as much energy as yesterday’s downside trading.
According to technicians GE gave
a triple bottom sell signal today and with it trading at a new low of $29 the
number $25 is supposedly the next stop. Technical and ETF/Index trading are
controlling these markets and so the break in GE is a negative.
As the major measures approach
the final hour the DJIA remains up 50 after being 150 points higher early in
the session. It is imperative for the bulls that the major stock measure close
preferably strongly higher with a last hour rally.
European bourse indexes closed
higher on the day as did Mexico and Brazil. Gold lost $10 to $874 and Oil ended
up pennies at $136 and change. Treasuries were lower with the two year at 3.01%
and the ten-year at 4.20%. It takes 108 yen to buy a dollar and the euro is
worth only $1.54 today as the dollar rallied on rate hike talk.
The WSJ is reporting the Microsoft/Yahoo deal is caput and YHOO
is down $3 at $22.50.
The Yahoo blowup in the last two
hours of trading coupled with Lehman moving back to down over $2 in the final
hour drove a stake into the bulls rally. Sell programs moved the major measures
to negative at 2:20pm before buy programs in the final fifteen minutes created
positive outcome on the day.
The DJIA gained 75 points to
finish at 12150. The S&P 500 rose 5 points to 1340 and the NAZZ jumped 10
Breadth was flat and volume was
over 4 billion on the NYSE.
There were a total of 370 new
lows and a combined 75 new highs on the NYSE and NAZZ.
The bears won the day as we expect today’s failed rally to
lead to the sell off resuming tomorrow.
11 June 2008
Lehman is taking it on the chin again this morning as they may not survive stories make the
rounds. The shares are down $2 in early trading and we think we saw this
scenario two months ago. Next come the stories of Hedge funds and institutions
moving their accounts and then the final act will occur. The S&P 500 is now
below 1350 and on its way to test the line in the sand at 1335-1340.
Asian markets were mixed
overnight with China down another 1% but India and Japan both up 1%. European
bourses are mixed to higher at midday and Gold is $4 higher after yesterday’s
thrashing and Oil ahs a $133. Corn is at all time highs of $6.50 a bushel as
rains continue in the plains and speculation continues in Chicago. Treasuries
have a bid on financials down and bomb/bomb Iran fears.
There are rumors on the street
that Goldman Sachs may take a large write-down when it reports earnings next
week and that has weakened financials which rallied yesterday but are giving
back those gains plus today.
Oil inventories were down 4
million barrels and that of course has oil up $4. No liquidity and much
speculation make for fun for the big boys and girls.
European bourses closed over 1%
lower as they ended their trading day when the DJIA was down 150 points.
It may not be the top but some
folks know when to take money off the table. Oil and natural-gas producer XTO
said it will buy closely held Hunt Petroleum Corp. for $4.19 billion in cash
and stock, in a deal that highlights the changing of the guard in the U.S. oil
Hunt Petroleum, which traces its lineage to legendary wildcatter H.L.
Hunt, is the largest in a series of private companies, many of them
family-owned, that have sold to larger public companies in recent months. Large
players are rushing to snap up assets in emerging oil and natural-gas fields,
while small producers are seeking to cash in on holdings whose values have
soared along with commodities prices.
There’s a fellow on CNBC with a
red bowtie like who looks like an investment Tucker Carlson and the steam
message (since we don’t listen) says that he is counseling investors to be
broadly diversified right now. Given their druthers most folks probably wish
they went to cash last October and stayed that way.
As we sit her at 1:30pm watching
the tape we are wondering to ourselves whether there is any reason for the
markets to rally this afternoon. The only reason is technical and that reason
is that the S&P 500 is right at 1340. Even dropping markets dead cat bounce off major support. But
if the S&P 500 doesn’t rally then the close could be ugly.
Oil closed up $5+ at $136.70.
Gold gained $13 to $884. The yen ended at 107 to the dollar and the euro was
worth $1.55. Treasuries gained as stocks lost but closed off their best levels
with the two-year closed at 2.82% with the ten-year at 4.08%. Mexico and Brazil
were 1% lower.
The S&P 500 closed right on
major support. That should lead to a reflex rally in the morning followed by a
retest and then….
The DJIA closed down 210 points
at 12092. The S&P 500 dropped 22 points to 1337 and the NAZZ gave up 55
points to 2394.
Breadth was 3/1 negative and
volume reached 4 billion on the NYSE but was only half that number on the NAZZ.
There were 245 new lows and 40
new highs on the NYSE and 210 new lows and 35 new highs on the NAZZ.
The bears are smiling tonight.
10 June 2008
Fasten your seat belts kids
because today is going to be interesting. Will it be Turnaround Tuesday or
Terrible Tuesday? Only time and whether a trader is long or short will tell.
Markets in Asia fell sharply, with shares in China plunging
as investors got their first chance to react to Beijing's latest
credit-tightening moves after a holiday on Monday. Shanghai's benchmark index
plummeted 7.7% and the Shenzhen Composite dropped 8%. In Hong Kong, the Hang Seng index closed 4.2% lower.
European markets also fell in early trading, with the banking sector leading
declines. London, Paris and Frankfurt were all off about 1%.
European bourse indexes are
fractionally lower at midday and U.S. futures are suggesting a lower opening.
Gold is in the act down $8. Oil has a $134 handle as the trading day begins. According to the gurus we follow the line
in the sand is 1340. So 1350 is support and 1340 is the line not to cross.. Our guru
thinks the bounce off 1350 yesterday and higher close was positive but the
markets will have to do the same trick today.
And so we will either get a rally
from this level or not. But then that is always the case.
Texas Instruments narrowed guidance last night but didn’t warn but
that news is not doing much for its share price or techs in general.
According to Jim Cramer, JP Morgan is under pressure because
traders are betting the Bear Stearns deal will be bad. Traders base that bet on
the lousy news from Lehman. Our
guess is that JP Morgan had corrected less than most bank stocks and so the
short hedge funds decided to go after JPM. We are going to add at lower prices.
The wailers are getting all out
of joint about a windfall profits tax on oil companies in the U.S. the windfall
tax certainly won’t occur under Cheney/Bush since they are soon to move to
employment in the oil sector. But those wailing are certainly glad they are not
in Russia where Bush’s soul mate Putin runs things.
For their oil is taxed big time as Cheney likes to say:
The Russian government levies an
export duty of 65% at prices over $25 a barrel. Add to that
various corporate, payroll and production taxes, oilmen complain, and
the state creams off as much as 92% of profits. Executives at TNK-BP have argued that rising costs across the oil industry
will make many investments in Russia unprofitable unless the tax regime is
changed. As it is, TNK-BP accounts for a fifth of BP's production, but only a tenth of its profits. And that
is why British Petroleum (BP) is not happy with its deal. We wonder why they made
Thanks to those who are emailing and calling to see if we
are OK because of the flooding. We live on a ridge that never floods although
our basement does because of our lousy planning. But it is nothing a shop-vac can’t handle. Our nearby town of Gays Mills is under
water for the second time in ten months and folks there are in dire straits.
Soldiers Grove moved after the 1978 flood and so only a few houses are
involved. The Soldiers Grove story is here: http://www.soldiersgrove.com/ .
Why not $500?
OAO Gazprom, the world's biggest natural-gas
company, expects oil prices to reach $250 a barrel ``in the foreseeable
future'' as competition for energy resources increases, Chief Executive Officer
Alexei Miller said. ``We are witnesses
of a big jump in the price of hydrocarbons,'' Miller told reporters today in Deauville, France. State-run
Gazprom, Russia's biggest company by market value gets
most of its profit from gas sales to Europe, where it has a quarter of the
market and prices are pegged to oil. Miller said today that European customers
are now paying about $410 per 1,000 cubic meters of gas, more than double what they
paid two years ago.
We expected the markets to drop this morning and then
rally but we don’t think the drop was severe enough or this rally after one
half hour of trading is strong enough to hold. And so we are going to eliminate
our JPM holdings and reduce J Crew in our large accounts.
It is hot in NYC so naturally
CNBC has folks on to talk about which stocks to buy for the heat play. If it
rains tomorrow it will be the rain play. And that goes on top of their vacation
getaway prizes for folks who perform the best on a weekly basis in their
imaginary portfolios. We keep CNBC on without the sound for news items but
sometimes it is exasperating.
This is the blather that passes
as investment advice:
Let it ride. That's the judgment of the Apple
acolytes, and I am not going to disagree with them. The most important thing,
though, is that you have taken something
off the table. Especially
with the stock up huge today.
Say what? Apple is up $4 per
share. The share price is $186. That is like an $18.20 per share priced stock
going to $18.60.
Oil ended down $2 at $131.71.Gold
dropped $30 to $870. Treasuries were higher in yield with the two-year at 2.90%
and the ten-year at 4.10%. European bourse indexes closed lower as did Mexico
and Brazil. The euro is worth $154 today and it takes 107 yen to buy a dollar.
We just saw a CNBC promo for an
interview with Robert Nardelli. He’s the fellow who
suggested out of Home Depot with a nice $300 million golden parachute. He then
took the CEO job at Chrysler last year. Out of the frying pan into the fire. We don’t know whether
he put any of the $300 million into the Chrysler buyout.
The WSJ has a story today on our
favorite topic of outlandish CEO compensation. But at least with golden
coffins they have to die to win.
You still can't take it with you. But some executives have arranged for
the next best thing: huge corporate payouts to their heirs if they die in
Take Eugene Isenberg, the 78-year-old chief executive of Nabors Industries Ltd. If Mr. Isenberg died tomorrow, Nabors
would owe his estate a "severance" payment of at least $263.6
million, company filings show. That's more than the first-quarter earnings at
the Houston oil-service company.
Dozens of other companies offer lush death-benefit packages to their
top executives, according to a Wall Street Journal review of federal filings.
Many companies accelerate unvested stock awards after a death, which by itself can amount to tens of millions of dollars. Some
promise giant posthumous severance payouts, supercharged pensions or even a
continuation of executives' salaries or bonuses for years after they're dead.
The CEO of Shaw Group Inc. is in line to be paid $17 million for not competing with the
engineering and construction company after he dies.
Lockheed Martin Corp.'s top officer didn't even need to die to get a death benefit;
Lockheed paid out the sum, about $1 million, in March while he was still very
Death benefits, sometimes called golden
coffins, have been around for years, but until recently the amounts were
often impossible to determine or were shrouded in the fog of proxy-statement
language. A federal rule change 18 months ago required companies to be clearer
about what they're obliged to pay if top executives end their employment, under
It was announced this morning
that one billion shares -- half of Ford's
outstanding stock -- were offered to Kirk Kerkorian's Tracinda Corporation
offer to purchase 20 million shares at a price of $8.50. The shares are trading
at $6 so Kerkorian paid $50 million to get his name
in the paper.
Talk to Chuck
(Bloomberg) --Schwab, the largest U.S. online brokerage, may pay the equivalent
of half a quarter's profit, or about $260 million, to win public-relations
points by settling investors' claims over losses in a bond fund with subprime holdings. The San Francisco-based company is
accused in eight proposed class-action suits of misleading investors by
describing its Yield Plus Mutual fund in prospectuses as only ``marginally''
riskier than cash. From last July 1 through April 30, investors lost about $1.3
billion, said Boston-based Financial Research Corp., which tracks investment
flows for 35,000 funds.
``Schwab will have a particularly difficult time with this type of
adverse publicity because they project themselves as a wholesome
broker-dealer,'' said Robert Zito, a Carter Ledyard
& Milburn lawyer in New York who defends companies in securities suits and
isn't involved in Schwab cases. ``This will put a lot of pressure on them to
settle.'' The brokerage, which uses founder Charles Schwab in ads encouraging
clients to ``Talk to Chuck,'' has started offering some clients from 50 percent
to 90 percent of losses under $10,000. For losses of $50,000 or more, offers
have been 5 to 20 percent, he said. ``They seemed to be paying a higher
percentage to people who were retired or not sophisticated in the financial
The DJIA gained 5 points to end
at 12285. The S&P 500 was down 4 points at 1357 and the NAZZ dropped 10 to
Breadth was 2/1 negative and
volume was light.
There were 190 new lows and 35
new highs on the NYSE and one more new low and one less new high on the NAZZ.
We don’t see that very often.
The bears remain in control as Turnaround Tuesday melted in
the NYC heat.
9 June 2008
Lehman lost almost $3 billion in
the quarter and is going to raise $5 billion in capital toady. The street
didn’t like those numbers. But stocks rallied at the opening probably as a
bounce from Friday’s debacle and the fact the there was no war and that Oil is
off $3 in the early going. But financials are not participating and that is not
a good sign. Treasuries have a bid and Gold is over $900 up $9 in NYC trading.
Asian markets were mostly lower
overnight and European bourse indexes are mixed at midday. The S&P 500 is
remains above 1350 and needs to stay above that level. It broke the 1370
support level-which is now resistance-on Friday which suggests a test of 1350.
We are adding some J
Crew to accounts as it continues its sell off.
The Dallas Fed’s Richard Fisher
is on CNBC pushing an agenda on Social Security and Medicare. And they say the
Fed is not involved in politics. Where were these guys on derivatives and
subprime and Enron and budget deficits?
He says the U.S. taxpayer has to
face up to the liabilities of $100 trillion in future payments on these two
programs. Those are large numbers but the GDP (http://www.auburn.edu/~johnspm/gloss/GNP
) of the U.S. every year is $14 trillion. Multiply GDPP times 50 years with 3%
growth that is one heck of a lot of money to use to pay the cost of those
Moreover those opposing SS and
Medicare never remind us that if the government- which is really all the folks
living in the U.S.- doesn’t take care of the elderly then individual families
will be paying the health insurance and living expenses. With the programs in
place all the citizens share the responsibility. Eliminate the programs and we
all pay anyway.
We are going to take our loss on American Eagle and get down to just J Crew.
Now they answer our rhetorical
question above: From the online WSJ: The
nation's financial system needs tougher regulations and stronger supervision to
protect against future crises, Federal Reserve Bank of New York President
Timothy Geithner said Monday in a speech calling for
greater central bank authority over markets and financial institutions.
JP Morgan is down $2 per share today with
a $37 handle and we are going to buy shares in a few larger accounts.
Oil closed at $134.21 down $4.
Gold was up $4 to $895. Treasuries ended lower in price on tough Fed speak with
the two-year at 2.70% and the ten-year at 4.01%. European bourse indexes were
mostly lower by over 1% at their close and Mexico and Brazil were each down
Apple introduced its new 3G iphone today and it goes on sale July 11. Hurry and buy
before they drop the price.
The DJIA closed up 75 points at
12302 on the strength of the oil/agriculture/commodity plays in the average.
The S&P 500 failed at 1370 resistance and then later in the day bounced up
at 1350 support to gain 1 point on the day and close at 1362. The NAZZ dropped
15 pins to 2465.
Breadth was 2/1 negative and
volume was light.
There were 70 new highs and 165
new lows on the NYSE.
We give the day to the bears since the financials closed
down almost 3% on the day.
6 June 2008
Well the markets have taken back
yesterday all day gains plus in the first half hour of trading with the DJIA
down 225 points at 9am. The Employment Report said 45,000 jobs were lost in
May. The real kicker to the markets was a Morgan Stanley note that said oil
would hit $150 b the fourth of July.
In the old days folks used to
talk about how high corn would be on the 4th but this is the new age of markets
and gaming the system.
Oil is up $5 to $132 on the
prediction and Gold is also $20 higher this morning. At $5 an hour Oil will be
at $150 by 2pm.
Asian markets were lower
overnight and European bourse indexes are lower at midday following the U.S.
markets lower. Treasuries have a bid.
The European Central Bank is
preparing for a quarter point increase in its prime rate at its July meeting
according to the Financial Times. This would be the first increase in a year
and suggests that inflation is on the regulators minds. Coming at a time of
slowing economies the raise would be a further whammy.
We have owned a home over the
last 40 years and for the first time we awoke this morning wondering about how
much it is going to cost to heat our home this winter.
Three years ago we spent $2000. This year at present prices it is going cost
$7000. That is half the money we paid for our first farm in 1971. Our house is
2500 square feet so we hate to think what the Mc Mansions will cost. The rise
in heating costs isn’t on the radar yet will but it will be.
The rally in bonds and German
bunds may be related to a story in the British paper The Guardian that suggested that Israel may attack Iran. Prime
Minister Olmert of Israel is under investigation for
bribery and is being asked to step down. Portions of The Guardian story follow. The whole story may be found at: http://www.guardian.co.uk
'Unavoidable' attack on Iran looms, says Israeli minister
An Israeli minister
has said an attack on Iran's nuclear sites will be "unavoidable" if
Tehran refuses to halt its alleged weapons programme.
In the most explicit threat yet by a member of Ehud Olmert's government, Shaul Mofaz, a deputy prime minister, said the hard line Iranian
president, Mahmoud Ahmadinejad,
"would disappear before Israel does". "If Iran continues with
its programme for developing nuclear weapons, we will
attack it. The sanctions are ineffective," Mofaz,
who is also Israel's transport minister, said in comments published today by
the Yedioth Ahronoth
newspaper. "Attacking Iran in order to stop its nuclear plans will be
unavoidable." Iranian-born Mofaz is a former
army chief and defense minister. He is a member of Olmert's
security cabinet and leads regular strategic coordination talks with the US
state department. Iran denies trying to build nuclear weapons and has defied
western pressure to abandon uranium enrichment.
The leadership in Tehran has threatened that if attacked the country
will retaliate against Israel - believed to have the Middle East's only nuclear
arsenal - and American targets in the region. Ahmadinejad
has repeatedly called for Israel to be wiped off the map since becoming
president. On Monday, he said Israel was "about to die and will soon be
erased from the geographical scene". Olmert met
the US president, George Bush, on Wednesday to discuss concerns over Iran. The
Israeli prime minister, who is being pressured to resign over a corruption
scandal, has said that Iran's nuclear threat "must be stopped by all
possible means". Israeli planes bombed Syria in September, destroying what
the US administration said was a partly built nuclear reactor using North
Korean help. Syria denied having any such facility. UN inspectors announced
this week that they would be visiting Syria to investigate the American claim.
Another reason being given for the rise in the price of oil is that
traders and institutions are buying oil as a hedge against a continuing drop in
the dollar. And so it really isn’t about demand for oil it is about traders
trading. And the little folks are paying the price.
Wal-Mart buys stuff from China so the little people don’t have to pay so much. Unfortunately all the
dollars flowing to China from Wal-Mart et al cause the dollar to drop in value.
Then traders buy oil to hedge the drop in the dollar and the price of gas and
oil and food rise as a result. And the little
people pay for that increase so traders can have buy yachts. And Joe six-pack’s $15,000 retirement fund
rises to $15,200 as the folks running his fund buy oil and meanwhile his living
expenses rise $2000. Not a great deal any way you slice it.
Intel said that the Federal Trade
Commission has opened a formal antitrust investigation into the semiconductor
giant's business practices.
Intel's chief rival, Advanced Micro
Devices, has long been lobbying the FTC to investigate Intel, after
successfully convincing agencies in Europe, Japan and South Korea to open
investigations. AMD contends that Intel uses rebates and other tactics that
unfairly exclude it from the market for microprocessor chips, which Intel
dominates. Intel insists its practices are fair and lawful.
A friend just reminded us that we
go on Medicare in October just in time to use the $1000 per month we will save
in medical insurance premiums to pay our heating bills. How lucky can we be?
Bush says more teens in the job
market are responsible for the rise in the unemployment rate.
Oil is up $8 at 1pm. as the weekend approaches oil
bulls are singing the old John McCain refrain, “Iran, Iran, bomb, bomb, Iran.” Greed before worry.
At 1:30pm Crude is up $10 at $138.82 and the S&P 500
is down 35 points at very critical 1370 super support. With an hour and one
half or trading left the oil bulls want to go home long oil in the hopes of a
bombing of Iran over the week-end and that has the rest of the markets in
turmoil. Trading on such an occurrence sees obscene but then nobody ever said
Capitalism is bean ball. And if Bush and Olmert can
control themselves the oil bulls will give all the gains back on Monday. We are voting for sanity by sitting
happily in cash in our client accounts and the Model Portfolio with positions
only in two best of breed retailers.
Gold ended up $26 at $902 on the
war trade talk. Oil finished the day around $138.80 up $11 and pennies. Morgan
Stanley was wrong; it will only take two days to get to $150 at this rate.
Short end Treasuries rallied on the war talk with the two-year at 2.38% and the
ten-year at 3.93%. European bourse indexes closed 25 and more lower on Friday
and Mexico and Brazil were both down over1%.
The DJIA closed on its low for the day down 403 points at
12210. The S&P 500 closed down 2% at 1360, ten points below major
support at 1370. The NAZZ surrendered 75 points to 2475.
Breadth was 4/1 negative and down
volume swamped up volume 10/1. Total volume on the NYSE exceeded 4 billion
which is heavy for a summer Friday.
There were 115 new lows and 100
new highs on the NYSE. And it was worse on the NAZZ.
The bears regained the low ground.
5 June 2008
Asian markets were higher small
overnight and European bourse indexes are mixed at midday. Treasuries are flat
as the trading day begins and Gold is down $10 while Oil has a $122 handle.
The number of Americans in danger of losing their homes to
foreclosure rose to the highest in almost three decades during the first
quarter as borrowers who fell behind on payments were unable to sell their
homes. New foreclosures rose to a seasonally adjusted 0.99 percent of all U.S.
home loans, up from 0.83 percent in the fourth quarter, the Mortgage Bankers
Association said in a report today. The total inventory of homes in foreclosure
increased to 2.47
percent and the delinquency rate, loans with one or more payments overdue, grew
to 6.35 percent. All were the highest since 1979, the Washington-based trade
group said. Falling home prices have stalled U.S. real estate sales, making it
difficult for people who can't pay their mortgages to sell the properties. The
increase in foreclosures was led by states with the biggest price declines over
the past two years, said Jay Brinkmann, MBA's vice
president of research and economics. California, Florida, Nevada and Arizona
accounted for 89 percent of the gain in new foreclosures, he said. ``Price
drops mean that even the best borrowers who run into trouble can't get out of
their mortgage by selling, particularly in those states,'' Brinkmann
said in an interview. ``There's a bleed-over to the rest of the U.S. because
until those markets work through their problems, investors in mortgage-backed securities
are going to be nervous and credit is going to be tight for everyone.'' Prime
adjustable-rate mortgages in California, the largest U.S. state, accounted for
36 percent of all U.S. foreclosures started during the period. The state's subprime adjustable loans were 26 percent of the national
total. This week a spokesman for Ed McMahon, who appeared on television's ``The
Tonight Show'' for three decades, said the 85-year-old entertainer may lose his
Los Angeles estate to foreclosure after trying to sell it for two years for
enough to cover his $4.8 million mortgage. The Mortgage Bankers report is based on a
survey of 45.2 million loans by mortgage companies, commercial banks, thrifts, credit
unions and other financial institutions. The delinquency rate for subprime loans was 18.79 percent, up from 17.31 percent in
the fourth quarter, according to the report. The gain was led by loans 30 to 59
days late, at 8.83 percent. The delinquency rate for subprime
adjustable-rate mortgages was 22.07 percent and the so-called seriously
delinquent share, loans 90 days or more overdue, was 24.11 percent, the report
Verizon is going to acquire Alltel for $28 billion. VZ will acquire
13 million subscribers. Sprint
including debt is priced at $45 billion (1.9X) and has almost 4X the
subscribers. On the other hand France Telecom Thursday said it has
begun negotiations aimed at taking over Swedish peer TeliaSonera AB, planning a cash and share offer
worth $42 billion. TeliaSonera has 115 million
Federal Reserve policy maker Bank of Richmond President
Jeffrey Lacker's said lending programs the central
bank has created to combat the credit crisis distort private markets, encourage
risky behavior and could endanger the Fed's independence.
Rains in the plains make for beans in the teens.
Corn rose to within 1.5 percent of a record and soybeans
rose to a 12-week high as excessive rains in the Midwest flooded some fields,
slowing crop development and increasing the risk of production losses. Corn futures
for July delivery rose 12.5 cents, or 2 percent, to $6.27 a bushel at 10:18
a.m. on the Chicago Board of Trade, after touching $6.295, the highest since
May 12. Most-active futures are up 65 percent in the past year, reaching a record
$6.39 on May 9 as demand surged for feed and biofuels.
Soybean futures for July delivery rose 38.75 cents, or 2.8 percent, to $14.2775
a bushel in Chicago, after earlier gaining to $14.3175, the highest for a
most-active contract since March 11. The price has jumped 72 percent in the
past year, touching a record $15.865 on March 3 as demand surged for soy-based
feed and vegetable oil.
European shares ended marginally lower. Miners lost ground and
exporters were hit after European Central Bank President Jean-Claude Trichet hinted that euro-zone interest rates could
Gold lost $5 to $880. Oil ended
at $127.70 up $5.41. Treasuries gave ground with the two-year at 2.51% and the
ten-year at 4.02%. Mexico and Brazil were higher.
Part of the reason for the gain
in the major stock measures today is because the share price of Lehman has
recovered which means that the Fed machinations to prevent further runs on
brokerages by the shorts seems to be working. And that is a relief for the
bulls and sis encouraging them to buy which in turn forces the shorts to cover.
The DJIA gained 213 points to
erase three days of losses and close at 12605. The S&P 500 rose 27 points
to 1403 to close just below 1405 resistance and the NAZZ jumped 48 points to
Breadth was better than 3/1 both
on the NYSE and NAZZ and volume picked up but could have been better than the
3.9 billion traded.
New highs crossed on both the
NYSE and NAZZ with a total of 210 new highs and 160 new lows.
The bulls won the day big-time.
4 June 2008
Asian markets were lower
overnight and European bourses indexes are down 1% and more at midday.
Treasuries are firm, Gold is down $3 and Oil has a $123 handle as the trading
Lehman is still the focus of attention in the financials and it
opened lower this morning but now is trading $2 higher and is hauling the financials
higher with it. That has added a positive tone to the markets and negates a
Financial Times story that suggests that banks may have to take $5 trillion in
off balance sheet liabilities on to their books. Say what!
The markets have been trading as
a glass half empty for the last few days and we think they will move to a glass
half full today or tomorrow. The talk has been of financials but it may rotate
soon to the rebate checks and some kids spending them at trendy stores.
We are going back into American Eagle as another best of breed retailer. We are
buying for a trade the same as J Crew.
American Eagle had a punk earnings report after we sold them last week and yet
the shares jumped higher but now have returned to where they were selling. We
sold before earnings and fully expected the shares to drop and give us a chance
to reenter the stock when we read the earnings report. That shows what we know.
Whatever, AEO knows its stuff and so when the retail trade returns over the
next few weeks we think AEO will participate.
J Crew is bottoming on a trading
basis after the 25% drop of the last week in the share price. JCG’s earnings report disappointed the go-go folks but
still forecast 10% growth in earnings in a terrible retail market and so we think
a 20 multiple is justified and that when the retail trade returns we think JCG
will be one of the first to be grabbed.
The financials of both these
retailers are excellent. Moreover over 20% of JCG float (shares available for
public trading) is short right now so any move to the upside may be enhanced by
European stocks closed mostly 1% and more lower as falling
oil prices and a rising U.S. dollar weighed on commodity stocks, while
financials fell on fear that more capital raising
would be needed in the sector. Mexico was flat and Brazil lost another 1% on
top of yesterday’s 3% drop.
Oil ended at $121.95 down $2.34 and Gold dropped $1 to
$885. Treasuries closed weaker with the two-year at 2.44% and the ten-year at
CNBC is reporting that Verizon is going to buy the recently
taken private Alltel Communications.
Tech stocks held their own today
as traders moved in to them with the idea that there will be more mergers in
the next few months as companies try to take advantage of the favorable merger
environment of the Bush administration.
The DJIA closed down 12 points at
12390. The S&P 500 dropped 1 point to 1377 and the NAZZ rose 22 points to
Breadth was 5/4 negative on the
NYSE and 5/4 positive on the NAZZ and volume was light.
There were 40 new highs and 80
new lows on the NYSE and 70 new highs and 130 new lows on the NAZZ.
The bears remain in control.
3 June 2008
Asian markets were lower
overnight b 1% and more and European bourse indexes are mixed small at midday.
Gold is up $2 and Oil has a $125 handle. Treasuries are flat. U.S. futures
indicate a slightly higher opening.
GM has decided that it makes sense to build more hybrids and cut
back on production of Trucks and SUVs and close four factories and maybe close
down the Hummer division. You think? And we read last night that CEO Waggoner
made $16 million last year up 60% from the year before. Its scares us to think
how much he is going to make if GM ever earns money again.
Lehman is coming to market to raise $3 billion ahead of earnings
which were expected to be loss of $300 million but give the capital raising may
now be more.
Federal Chairman Bernanke said that interest rates are ``well
positioned'' to promote growth and stable prices, and that policy makers are ``attentive''
to the impact of the falling dollar. The Fed is working with the Treasury to
``carefully monitor developments in foreign exchange markets'' and is aware of
the effect of the dollar's decline on inflation and price expectations,
Bernanke said today in his first speech on the economic outlook in two months. Signs of accelerating inflation bolster
Bernanke's case for pausing after the Fed lowered its main
interest rate by 3.25 percentage points since September. The central bank is
trying to mitigate harm from the collapse of the subprime mortgage market without
endangering its credibility for keeping prices in check. “For now, policy seems
well positioned to promote moderate growth and price stability over time,''
Bernanke said in prepared remarks. ``We will, of course, be watching the
evolving situation closely and are prepared to act as needed to meet our dual mandate.''
We added shares of J
Crew to more accounts under $36.
About 12:45pm the DJIA dropped
100 points on a rumor that Lehman
had to go to the Fed window to borrow money to fund operations ala Bear
Stearns. LEH shares are off $4
today. And as with Bear Stearns rumor may become reality.
GM was trading higher this morning on the restructuring news but
upon further reflection the shares are now in the minus column.
Residential Capital, the mortgage lender, said Tuesday that its
parent company, GMAC, and the private
equity firm Cerberus Capital Management would inject more than $1.4 billion in
cash, a move that highlights the company’s struggle to stay solvent. The money
will come from asset sales and help ResCap plug a possible $2 billion cash
shortage, more than triple the amount it said it needed a month ago, according
to a Securities and Exchange Commission filing. ResCap had estimated May 5 that
it needed to raise $600 million by June 30 to pay its debts. It said it now
believed it might need the additional sum because “adverse” conditions left it
unable to sell about $1.3 billion of assets. Mirko Mikelic, a portfolio manager at Fifth Third Asset
Management in Grand Rapids, Mich., said that there was the potential for
bankruptcy at ResCap, “especially if G.M. and Cerberus get more hesitant about
providing capital.” Cerberus led a group in 2006 that paid the General
Motors Corporation $7.4 billion in cash for 51 percent of GMAC. GM
owns the other 49 percent.
the folks who bought Chrysler last year. We doubt their clients in these two
investments are singing today.
Too bad GM didn’t sell all of
GMAC. If they had Waggoner might have deserved the $16 million.
Oil ended down $3.40 at $124.37.
Gold dropped $12 to $885. European bourse indexes closed higher as their
markets closed before the U.S.swoon and Mexico was
fractionally lower while Brazil was down 3%. Treasuries were better on a flight
to quality on the Lehman rumor with the two-year at 2.42% and the ten-year at
Ford sales down 17%, Chrysler
sales down 28%, Toyota sales down 6%
and GM sales down 30%. Uuuggggllllllllyyyyyyy.
Around 2pm Lehman issued a statement that they did not access the Fed window
and that capital was in surplus at their firm and the DJIA stabilized and
rallied slightly. Lehman’s shares moved from down $4 to down $2 and now at
2:20pm are down $3.
The DJIA closed down 50 points at
12450. The S&P 500 dropped 6 points to 1380 and the NAZZ was off 6 points
Breadth was flat and volume was
There were 55 new highs and 80
new lows on the NYSE.
The bears remain in control.
2 June 2008
June arrived with 80 degree
weather in the land of milk and honey and for that we are grateful. The weather
has been uncertain and different in the last few months and so have the
markets. With all the turmoil in the financial industry which in many ways is
the backbone of the U.S. economy the stock markets are only down about 10% from
their highs of last autumn.
That fact suggests that there is
more downside to come as the dislocations caused by the collapse of the housing
industry and the mortgage markets and the subsequent losses by the major banks
continue to wend their way to the balance sheets of working folks. We were
bemused last night as we watched 60 Minutes and saw a story about a
fellow who spent $180 million to build the world’s largest sailboat. We don’t
begrudge the man his millions or even what he does with them, but it does seem
strange both on the part of CBS and this fellow to air such conspicuous
consumption during and economic malaise.
On this point we think that many
folks and companies haven’t yet come to grips with the reality of the slowdown
and probable fact that the downturn and recovery are going to be longer than
recent cycles. Barron’s published a bullish article on GM over the weekend reiterating our thoughts that the company
shares are trading at a 26 year low and that there is value at these levels.
Since we sold our shares last week we were interested in the story. But in
markets like these timing is the difference between large losses and excellent
buys. It is our belief that having moved our accounts back to close to even for the one and two year periods that remaining on
the sidelines (and sacrificing potential gain) is the prudent course of action.
The stock markets are
anticipatory and in the past have begun to recover six to nine months before
economic recovery is evident. And that timing is what the guessing game is all
about. We think there is little to lose not engaging in that guessing game at
the present time. For those clients who need to take monthly and yearly
distributions we are concerned about the drawdown without recovering the
drawdown with earnings from appreciation and dividends. But most of our clients
have the resources to withstand the drawdown and the reality of the markets at
the present time is that the dilution from drawdown is the price to be paid for
avoiding greater diminution of assets from stock market losses.
The billion dollar question is
when is when?
Asian markets were higher
overnight except India down 2%. European bourse indexes are lower at midday and
U.S. markets are also lower as trading begins.
Gold is up $1 and Oil has a $126
handle. Treasuries have a bid.
Wachovia asked its CEO to resign which he did and so now he
collects his excellent retirement package while the bank struggles under billions in losses that are the result of the CEO’s non excellent adventures in the
financial acquisition games of the past few years. As we say, “the rigors of
capitalism only apply to the peons.”
The ISM Manufacturing Index rose
in May to 49 from 48 in April. That was better than expected. And construction
spending was down 0.4% in April versus down 0.6 in March.
From WSJ: Lenders and investors
in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in
January and 231,000 in January 2007, according to First American CoreLogic, a
research firm based in Santa Ana, Calif., that collects data from lenders and
county clerks. The April total works out to about one in seven previously
occupied homes available for sale nationwide. A surge in defaults has increased
the inventory of bank-owned homes, known in the trade as REO, for "real
estate owned." By cutting prices, lenders have managed to increase sales
of such homes sharply in recent months in some cities hit hard by foreclosures,
including Las Vegas, Detroit and Sacramento, Calif., local real-estate brokers
say. With home prices falling, "holding the assets means further
losses," said Mark Fleming, chief economist for First American CoreLogic.
But lenders haven't yet managed to catch up with the inflow of foreclosed
homes. Mark Zandi, chief economist at Moody's
Economy.com, forecasts that the inventory of REO homes won't peak before the
end of 2009. In dollar terms, foreclosed one- to four-family homes owned by
lenders whose deposits are insured by the Federal Deposit Insurance Corp. more
than doubled to $8.56 billion at the end of the first quarter from $3.59
billion a year earlier.
S&P cut its ratings on Mother
Merrill, Lehman, BankAmerica and Morgan Stanley and the DJIA moved to down over 200 points at noon
on the news. Several market mavens are suggesting that the downgrades are the
bottom of the credit crisis because the rating services always are too late. We
agree that they are usually late but not that it is the bottom. The DJIA has
recovered slightly from those lows in afternoon trading. Volume is light and
breadth is over 2/1 negative.
Gold finished up $4 at $895 and
Oil was $127.41 up 6 pennies. Treasuries had a bid all day with the two-year at
2.50% and the ten-year at 3.90%. European bourse indexes closed 1% to over 2%
lower as did Mexico and Brazil and the dollar gave back some of last week’s
gains ending NYC trading at $1.56 to the euro and 105 yen to the dollar.
We bought shares of J
Crew in our large/aggressive accounts $36.15 this afternoon. We traded it
off the $37.15 level on Friday and it is again trade - which we plan on holding
at least overnight.
The DJIA lost 135 points to close
at 12505. The S&P 500 dropped 15 points to 1385 and the NAZZ was down 30
points to 2492.
Breadth was almost 3/1 negative
and volume was light.
There were 60 new highs and 85
new lows on the NYSE and 70 new highs and 135 new lows on the NAZZ.
The bears began the trading month with a win.
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Summary of Business Continuity Plan