mixed overnight with Hong Kong lower and Japan ending
its fiscal year up a small fraction. Europe is also
lower in early trading and U.S.
futures are suggesting a lower opening.
Oil is off a few pennies in the early
going and gold is down 10 pennies. Silver is making 20 year highs as
speculators buy silver because a new Silver Exchange Traded Fund (ETF) similar
to the Gold ETF is in the works and will be offered shortly. The ETF will have
to buy a lot of silver and so speculators are front running. And a crude oil
ETF has also been proposed. When all three of these are trading the common
trader will be able to participate in the roulettes wheel in the Big Casino.
BP Amoco announced that it may delay
the restart of its Texas Refinery by one week into mid- April. That is a good
idea since it will allow BP to work off gasoline inventories at the current much
higher prices that are the result of BP and Exxon Mobil shutting down major
refineries for scheduled maintenance. The timing on the shutdowns is coincidentally
very profitable for the refiners. Funny how that works.
We were incorrect in our timing of
the military operation Divine Strake which will set off a 700 ton bomb in the Nevada
desert. That testosterone event wonít occur until June.
7:30am and Personal Income for
February was up 0.3%, Personal Spending was up 0.1%. Inflation y/o/y was 2.9%.
The Personal Savings rate was minus 0.5% for the second month in a tow and for
9 or the last twelve months. That means folks are dipping into their savings to
With the tame inflation news
Treasuries are flat and stock futures have turned higher.
Thomson financial reported that
insider selling reached $6.1 billion in February 2006 which amount is topped
only by the $9.1 billion in insider selling in February 2000.
Stock buybacks by Corporations
were a record $349 billion in 2005. A study by Mother Merrill found that over
60% of fourth quarter 2005 earnings per share
growth for S&P 500 corporations was the result of share buybacks.
of Michigan Confidence Index for
those who care was 88.9 in March versus 86.7 in February.
Factory Orders for February were
up 0.2% versus and expected 1.7%, and the Chicago Purchasing Mangers Index was
60.4 for March versus 57 expected. So factory orders were dovish for the Fed
and the PMI was hawkish. Todayís economic numbers have something for the Bulls,
Bears and Chickens Little.
The markets have been quiet for
most of the day. Volume is relatively light and the major measures are moving
plus and minus in desultory fashion.
At the close on the NYMX gold was down $4.90 at $581.80. Oil ended down 60 pennies at $66.55.
Treasuries were a tick better today with the two-year at 4.82% and
the ten-year at 4.85%.
At the bell the DJIA was down 40 points at 11110. The S&P 500 lost 5 points to 1295 and the NAZZ dropped 2 points to 2340.
Breadth was flat and new
highs contracted to a bit over 300.
And the Casino is closed for the
week-end, month, and first quarter.
30 March 2006 Daily Comment
Google is going to sell $2
billion in stock to help itself and provide stock to those index funds that
need to buy stock on Friday. The price of Google has jumped 20% in a week since
S&P announced that GOOG would be included in the S&P 500 as of March
31. It will be a nice payday for Google.
Japan at a five year high over
17000, and Hong Kong and Asia
were up strongly overnight and Europe is doing well
Gold is up another $5, silver
is at a twenty year high, and oil is moving up again today at $66.59. The rise in commodity prices isnít hurting
Treasuries though and they are a bit better in the early trading.
Nokia says it is going to sell 15% more units this year when 10% had
been the previous estimate and the share price is up a $1. Their news is
helping the others like Motorola and Ericsson.
Final Q4 GDP was up 1.7%. The Q4 Price Index (inflation) was 3.5%
versus and expected 3.3%. Jobless claims were down 10,000 in the latest week to
Morgan Stanley sees GE doubling in price in the next 3
years. That would give GE a market cap of $700 billion. GE did sell at $50 per
share in the salad days of the odt.com boom.
Iran, Iran, Iran and when the bombing raid will occur will soon to be the only topic of
conversation in the markets. After all, there is an election coming in six
Thankfully, kidnapped American
journalist Jill Carroll was released in Iraq
today. Sadly, few remember that her Iraqi interpreter was shot dead when she
Gold just moved to $582. The last
time Gold traded above $580 was in January 1980. It traded as high as $800 that month. So much
for the theory of buy and hold, at least with gold.
All the talking heads are mentioning
that the world is awash with extra dollars with no place to go but the U.S.
stock markets. We always worry when folks talk about money that needs to be
The WSJ Journal has a story about
splitting up the Tribune Co since
they canít seem to do anything right recently. They paid top dollar for Times
Mirror and just lost a $1 billion tax liability case related to that takeover.
They had to fund the taxes owed by borrowing money. The shares are at a multi
year low of $27.50 and will probably pop today because the liquidity in the
stock is very thin. TRB has $4 billion in debt. We trade it and NYT in the $30s
last year but are not moved to play the game again.
An hour into the trading day Treasuries are giving ground as the
data release this morning was not conducive to the one and done theory (one
more rate increase) that the bond gurus have been propounding. The two-year is
at 4.82% an the ten-year is at 4.85%.
As the S&P 500 neared 1309
resistance an hour and one half into the trading day selling entered the market
place and the major measures are now lower. Breadth flipped from 2/1 positive
to 5/4 negative in fifteen minutes of trading. It will be interesting to see if
the bulls and quarter end folks have ammo left to push higher this week.
Bird flu is coming says Chicken
Listed are some reasons why we are worried:
The creation of the Iran bogeyman
out of whole cloth (From the fabrication of garments out of newly
manufactured, full-sized pieces of cloth ) while Pakistan and China and
North Korea already have nuclear weapons, Iraq, bird flu, Bush 43, ballooning
deficit, a lot of dollars in the wrong hands, a lot of ten year Treasuries in
the wrong hands, elections coming, berating Venezuela while praising China and
lovey dovey with Putin, loose nukes in Russia, Putin, dictatorship returns to
Russia, Hamas , Palestine and Israel, three years up without 10% correction,
time of year, low priced stocks moving on hope not news, new money coming into
markets, gambling mentality, the run up and run down in the price of natural
gas with no oversight asking why, the same traders who screwed Californians and
the rest of the country in 2001 by manipulating the price of electricity doing
the same thing with oil and other commodities on 2005/06, commodities making
highs while bonds make lows in price, and of courses our basically cynical outlook.
We can always make such lists but
this time the list makes us more worried. It may be age catching up with us but
over the years when we have felt this way within six months and without giving
up many gains our caution has usually been rewarded. And in cash we are only
risking not making more money.
The combined assets of U.S.
Mutual funds are $9.2 trillion. Hedge funds at $1.2 trillion with their
leverage can easily control as many dollars.
From up 25 points in early
trading the DJIA moved to down 90 pints at
and now at it is staging a
bit of a rally with the average down 57 points. This is the contra hour and the
real test of course will be the last hour.
Gold ended up $13.60 at $586.70 and Oil rose 65 pennies to $67.10. Those pennies sure do add up.
is conducting a military† exercise this
weekend named Holy Prophet. Not to be
outdone the U.S.
is going to blow up a 700 ton bomb in the Nevada
desert. That military exercise is called Divine
Strake. Our comment is Holy Sxxxare these folks for real?
Treasuries ended lower with
rumors that the Japanese were selling the ten-year and thirty-year because
their fiscal year end is tomorrow. The two-year finished at 4.83% and the
ten-year at 4.86%.
At the bell the DJIA was down 61 points at 11153. The S&P 500 lost 3 points to 1300 and
the NAZZ was up 3 points at 2340.
The bulls couldnít break the pattern.
Breadth was 5/4 negative and
volume was active with 450 plus new highs.
And tomorrow is the last day of
the quarter and month with April Fools Day to follow.
29 March 2006 Daily Comment
was up 1.5% overnight while Hong Kong was lower. As we
year end for banks on their portfolios is March 31 so that may have something
to do with the up and down of the Nikkei 225 recently. Europe
is higher, gold is off $3 and oil is down 30 pennies as the trading day begins.
U.S. futures indicate
a higher opening.
Investors Intelligence has 46% bulls (same) and 28% Bears (down
The Carlyle Group, which is owned
and run by Washington power
brokers including Bush 41, is acquiring Chinaís
largest equipment manufacturer for $375 million. The deal has run into some
roadblocks. When the folks in power in Washington
have a† vested interest in companies in a
controlled society the political decisions made are sure to be affected by the
This poem seems appropriate as
March turns to spring, the frogs begin to croak, and the robins fill the fields
on their way north.
The Road not Taken
Two roads diverged in a yellow wood
and sorry I could not travel both
And be one traveller, long I stood
and looked down one as far as I could
to where it bent in the undergrowth;
Then took the other, as just as fair,
and having perhaps the better claim
because it was grassy and wanted wear;
though as for that, the passing there
had worn them really about the same,
And both that morning equally lay
in leaves no feet had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I--
I took the one less travelled by,
and that has made all the difference.
Crude oil inventories are up and
gasoline inventories are down. Oil has moved higher on the news.
Gold ended at $573.39 up $6.30 and oil was up 38 pennies at $66.30.
Treasuries were softer at the close with the two-year at 4.81% and
the ten-year at 4.80%.
At the bell the DJIA was up 55 points at 11220. The S&P 500 jumped up 10 points to 1303and the NAZZ was up 33 points to 2338.
Breadth was over 2/1 positive and volume was brisk. New highs
There are two more trading days
left and tomorrow the Bulls will try and break the up one day/down the next day
pattern of the last few weeks.
28 March 2006 Daily Comment
and Hong Kong were higher overnight and Europe
is lower in advance of the
Fed announcement on interest rates.
Andrew Card has resigned as White
House Chief of Staff and Josh Bolten (who?) is to take his place. Bush
announced the change at this morning.
Gold is down $2 after a big two
day run up and oil is up 50 pennies as the trading day begins in the U.S.
Treasuries are flat.
Consumer Confidence for March was
107 versus an expected 102 and an adjusted 102 in February. The March number is
a four year high according to CNBC.
Stocks opened mixed and are
meandering. There will probably be little action until the Fed announcement.
Oil is up $1.50 to $65.50 in
The Fed raised 25 basis points
and keeps almost the same language. At first blush the major stock measures are
selling off and Treasuries are about 5 basis points higher across the board.
The next meeting is in May.
In the Fed statement today there
was this sentence: The slowing of the
growth of real GDP in the fourth quarter of 2005 seems largely to have
reflected temporary or special factors. Economic growth has rebounded strongly
in the current quarter but appears likely to moderate to a more sustainable
pace. That seems to be giving some traders pause.
The DJIA was up 19 points when
the Fed released its statement at .
Entering the final hour of trading the DJIA is down 62 points and breadth has
gone from flat to 2/1 negative. But there is another hour of trading left and
the bulls have a chance to save the day and their money in the final hour.
At the bell the DJIA was down 95 points at 11154. The S&P 500 lost 8 points to finish at
1293 below the important 1295 support and the NAZZ dropped 11 to 2304.
Breadth was 2/1 negative and there were over 300 new highs made
before the Fed announcement. Volume was moderate.
And there are three more days of
trading at the Big Casino before April
27 March 2006 Daily Comment
We have been thinking that so
many folks are absolutely certain that 5% is going to be the top in Fed Funds
rate raising cycle that a contrarian should at least entertain the idea that
rates may move higher than that.
Our guru sees this as a mark up week
into quarter end but cautions that there will be some billions of dollars of
499 S&P stocks for sale in order to include Google in the S&P 500 on
begins taking payment for Oil in euros instead of dollars next week. Whether
this becomes a trend is something to watch. Dollar bears pooh-pooh that idea
since the mighty U.S.
and its dollar are the wonder of the world. Weíll see and maybe that is why
Buffet and other older sages remain bearish on the dollar.
At the end of this month, Iran is scheduled to implement
a new oil exchange based in euros as opposed to petrodollars. Interestingly,
many months ago, the Federal Reserve announced that it was going to suspend
publishing data on M3 (a measure of money supply that includes foreign holdings
of dollars), stating that the figure was no longer relevant. Is this just a
coincidence? Could it be that this Iranian oil exchange will require a massive
effort of Fed dollar purchases to support the dollar once this exchange is
implemented -- hence the game of "hide the M3"? Just askin'. *****
Short interest is at a new high on
both the NYSE and NAZZ. That is a bullish indicator since shares sold short must
eventually be repurchased, but with all the futures and options trading maybe hedging
those futures and options positions by shorting stock makes the short interest
number less meaningful.
Stock markets in Dubai
and Kuwait and Abu
Dhabi have tripled in value in the last three years.
The invasion of Iraq
was three years ago.
Gold is up $3 to $563 in the early going while Oil is 40 pennies lower at $63.80. Japan and Hong Kong were
fractionally higher overnight and Europe is mixed.
are forecasting a bland opening. Treasuries are trading slightly higher in yield.
The move in low priced telecom
equipment providers is fueling the speculative juices of traders and stock
market newbies and the new mouth of CNBC, Jim Cramer. Cramer has been touting these
issues for the past month and they have rising in price. He compares his
touting of these issues to his previous touting of Goldman Sachs and Lehman and
other financials. Well, there is a difference in quality.
But in a market where being right
if the stocks you† recommend go up is the
only measure then the touting of the telecom suppliers is proof of Cramerís
genius. And when the eventual collapse in the prices of the stocks that donít
get acquired occurs or because the overall markets turn lower Cramer will claim
that he told you to sell them yesterday.
Over the week end we realized
that the movement in these low priced issues coupled with the near certainty among
bond traders that Fed is close to stopping and will begin lowering rates are
two of the reasons why we are cautious. If the Fed is going to stop it must
mean that the think they have cooled the economy enough. If they are going to
begin lowering again in a few months which the bond boys and girls believe it
will be because the economy is souring. †
After a three year run, the stock
market are entitled to a rest or retrenchment and our
thought is to await that event and then decide.
Goldman Sachs is becoming more bullish on Intel and more bearish on Advanced
Micro Devices because they believe INTCís new advanced processing CPU that
is coming this fall will help stop AMDís gains of INTC processor business.
Intel is up 20 pennies on the news. In a strong bull market for tech it would
be up $1 or more on that kind of statement. Intel announces earnings on April
13 and we want to get through that event before considering the stock again.
The Bank of Japan is getting more
hawkish. They are going to raise the overnight funds rate for borrowing money
in Japan from
.001% to .01% according to Thompson Financial News.† Thatís hawkish?
It is a strange market today. The
techs are mostly green and the big cap stocks are lower. The DJIA and S&P 500 are both down a bit
and breadth is 5/4 negative after a
couple of hours of trading.
Every time the price of oil gets
to a large relative number the oil sands of Canada
become a front page story. The WSJ has a story on the potential for extracting
oil from the sands this morning. We doubt that the writer of the story was even
in grade school the last time the WSJ ran the same type of story.
We traded Google last week in a very
few aggressive accounts and after having a paper loss of $10 we managed to
sell it for a $2 per share loss (on 100 shares) the day before S&P announced
it was going into the S&P 500. †The
share price of Google jumped $30 on the news. Whatís the old saw about timing
Last week and above we mentioned
the dislocation Google may cause to index fund portfolios and today the Wall
Street Journal has a story apart of which is below.
The 18.8 million shares in play amount to about $6.9 billion of Google
stock, based on Friday's close. The departure from the index of Burlington Resources, which has been acquired by Conoco
Phillips will free up about $1.6 billion. That means funds will need to come up
with an additional $5.3 billion to buy Google shares. *****
The site minyanville.com reports that the
notional value of all derivatives is $236 Trillion. That is not the risk. No one knows the risk but the risk is less
than that figure but more than $1. How much more than $1 is the $236 trillion question?
At mid-day Gold is up another $7 today to $567. Europe
is closing lower across the board.
JP Morgan joined the list of
major money center banks spending billion to buy into banks in China.
And the Chinese are happy to give nothing for something since the Chinese
maintain control. It reminds us of the rush to lend money in South America
in the 1970s.† Taiwan
should be worried. So should the Fed.
Gold ended up $6.90 to $567.40.
Oil finished down 21 pennies at $64.05.
Treasuries ended the session
lower with the two-year at 4.74% and the ten-year at 4.70%.
Banks have become large lenders
to buyout funds. Leveraged loans which are used by buyout hedge funds to take
companies private are big profit centers for banks. Most of theses loans would
b considered junk on the old days of junk bond buyouts. †Leveraged loans (the term sounds much better
than junk loans) jumped to $500 billion in 2005 and major banks are the big
participants. When the party began a few years ago the loan risk was much less
because the companies were better and the prices paid were lower. Now the party
is in full swing. For the banks there is little worry because if the leveraged
bank loans blow up the Fed will just lower rates back to 1% so the banks can
make up their losses on the leveraged loans. Of course that means that true
savers who buy bank C/Ds and Treasuries will pay for the losses buy surrendering
interest earnings as they have twice before in the last 15 years.
At the bell the DJIA was down 29 points to 11251. The S&P 500 lost 1 point to 1302 and
the NAZZ gained 2 points to 2315.
Breadth was 5/4 negative. There were about 350 new highs in light
And Uncle Ben speaks to the Big Casino tomorrow at .
Weíll be here.
24 March 2006 Daily Comment
We get e-mails
I'm not a client, but have been
reading some of your poems and newsletter for about 8 months. A friend of
mine, Rxxx Wxxxxr, put me on to the website. I know you guys answer some
emails so I figure I'd take a stab at a question.
Every month that goes bye
seems more difficult for me to understand the pace of the markets. I just
graduated from law school and don't have too much debt in comparison to the
rest ($50,000). I have been able to turn a little over $9,000 into
$11,300 over two years. But, I'm kind of a pessimist and don't want to
end up like the people in 2000. Because I'm only 26, do I continue the
risk or turn it over to a professional?
You seem to be doing OK. In
1987 we had $10,000 in an IRA having added $2000 per year for five years.
The Congress then cut out the deduction of IRAs and so we didnít add any more. By
1998 that IRA had grown to $33,000 and this year when we combined it with
another account it was worth $150,000. We really don't know what the return
was but we were happy with it. We did take more risk because it was our
money and we had we did have some down years in the process
You have done the market in
performance over the past two years which is better than we have. But then
we were working with a large cushion from the 2000 to 2003 years and didn't
want to take the risk.
Everyone develops a
different investing style. Consistency is important and yet the ability to
change as market levels change is also important. The markets are not as
cheap as they were three years ago so we don't think it is untoward to be
risk averse right now. There is a bunch of information out there that can be
confusing and winnowing that info is the hardest part. It was much easier in
the old days when we didn't have computers or daily or even monthly pricing on
the value of our accounts. That lack of knowledge encouraged much longer
Now computers have turned
investing to trading in the big casino. But we all must adjust and we
would suggest that you just keep plugging along. At your age you can afford the
risk and learning curve.
We are going to begin posting a $20,000 portfolio this next week with
one of our daughterís Roth IRA accounts to measure whether we still have
the moxie to earn a decent return with a relatively small amount of money. We
know folks suggest turning small money over to mutual funds but we have never
followed the crowd. This will also give folks with smaller amounts an idea of
how they might act. We donít take small accounts unless they are related to
larger accounts and smaller accounts are the hardest to invest. That is because
they offer the best potential for gain or loss and also tend to be more
volatile because they can only hold four or five positions. What we try to do
is to trade them but take a long term attitude on results. †We have had success in the past and hope to in
the future, especially since we are spending our childrenís inheritance and
need to replenish it with the Roth money. Unlike some TV gurus who are loud and
wear shirts with rolled up sleeves for the effect of working hard and who tout
the portfolios they run, we donít add
money at market lows to improve performance since folks who give us money usually
give us all they have.
was higher as real estate stocks gained on news that property values are
improving in Japan
for the first time in fifteen years. Back
in 1988 the value of all the property in Tokyo was equal to the value of all the land in
the entire United States. Now that was a bubble. Hong
Kong was lower and Europe is higher in
early morning trading.
Standard & Poorís is adding Google to the S&P 500 on March 31
and so GOOG is up $30 this morning as shorts cover and traders move.
Alcatel is buying Lucent for $13 billion. That is an interesting way
to do a reverse split. And so the 1990s era loses one of its main go-go stocks.
Is Northern Telecom next?
Durable Goods orders were up 2.6%
in February versus and expected 1.3%. But the January numbers were adjusted so
that may account for the difference. Ex autos durable goods orders were down
1.5%. Why are autos considered durable goods?
New home sales come at and that is the number that traders and
Treasuries are awaiting.
New Home sales were down 10.6% in
February and Treasuries are breathing a sigh of relief by rallying a bit.
Existing home sales for February
were strong yesterday while today new home sales for February were weak. That
is not a dichotomy because existing home sales are counted
upon the closing of a home sale, which usually takes several months after folks
commit to buy an existing home. New home sales are counted at contract signing,
which means the day the commitment is made. And so the weak new home sales are
a more current indicator of the current trends in the housing market.
Gold is up $9 to $559 and Oil is also higher again today at $64.35
up 44 pennies. Treasuries are lower in
yield with the two-year at 4.72% down from 4.77% last night and the ten
year at 4.68% down from 4.73% yesterday. The major stock measures are all
higher with the DJIA at its high for the morning up 35 points. *****
The NYSE reported that Program Trading accounted for 35% of all trading
volume last week. Program trading is trading generated by computers based
on various parameters be they technical, fundamental, hedging, or wishful
guessing. Thatís why we call it the Big Casino.
The guess is that twenty million shares of Google ($ 7 billion) will
have to be purchased to fill the portfolios of various investment vehicles
that are constructed to mirror the S&P 500.
3/24/06 marks the 637th day since the FDIC last provided assistance
to a failed or failing bank--the longest such streak in the history of the
Gold ended at $559.80 up a bunch. Oil was $64.25 up 40 pennies.
Treasuries were lower in yield on the favorable lousy housing
numbers. The two-year finished at 4.71% and the ten-year at 4.67%.
The DJIA closed at 11275 up 5 points. The S&P 500 ended at 1303 up 2 points and the NAZZ gained 12 to 2312.
Breadth was 5/4 positive and volume
was moderate. There were 350 new
highs and 50 new lows.
And the Casino is now closed for
week-end cleaning. Next week brings the
Fed meeting and April Fools Day. Weíll be here for the first. *****
23 March 2006 Daily Comment
We get e-emails:
period 01/01/2006 to
portfolio had 29 trades of which 16 had gains and 13 resulted in losses.
However, in dollars terms the net result was a loss of over $1, 810. The trades include
stocks that were held for 3 days to approximately 45 days. The
numbers are not significant. The question is (at least as I see
it) why all this activity? The need to be in the market is one answer
but not the reason for such less than impressive results.
less than impressive results are why we moved accounts to cash yesterday. 3.6%
from the money fund is better than the trading results we have been obtaining this
year and we are obviously out of touch with the markets. When we are as out of
touch as we currently are it is best to clear the accounts and our head and get
liquid. This year marks twenty years in the management business and forty years
in the stock business. We have created sizable nest eggs for ourselves and our long
term clients. Our main goal is to maintain those nest eggs, grow them if we can
but make sure we keep them safe.
all our accounts as we do ours-with adjustments for size and risk taking
ability. We canít provide the retirement home in
Monte Carlo and 100 foot yacht that Morgan Stanley and Mother Merrill
promise clients in their ads. And they wonít either. (And in 2002 their managed accounts probably dropped
15% in value while ours rose 9%. That is when performance really mattered.)
in what we are doing and that presently stocks are overpriced, that the country
is going to hell in a handbag, and that in the current Casino atmosphere in
which stocks are traded that only short term trading at certain times of the
year makes sense. In the woulda, coulda, shoulda market we may have held a few
of our year end stocks longer than we did but all folks are much richer in the hindsight
world than in the real world. In and out
trading worked for us in the big downturn from 2000 to 2003 where we made up
for 6 years of underperformance in the 1990s and pulled ahead of the S&P
500 by a large margin just as Aesopís turtle did to the hare. We think the same
scenario is playing out now and so we are concentrating on preserving our
capital. We will continue to flip in and out of a few stocks when we think the
risk/reward warrants and hope for the best but take our losses if we must and
lick our little wounds awaiting the next good risk/reward trading opportunity.
than that everything is hunky dory.
Don Evans, the former Commerce Secretary
is on CNBC expounding on the wonders of Free Trade. Yesterday, Jim Cramer was
on CNBC expounding on the wonders of Free Trade with China.
Do we detect a theme here?
Jobless claims for the last week
dropped to 302,000 poor souls. We know most are happy to have the opportunity
to seek lower paying less rewarding employment with no benefits at Wal-Mart or
the local golf course.
was a tad lower overnight and Hong Kong recovered half
of the previous dayís loss in overnight trading. As our trading day beings Europe
is lower and U.S.
futures are higher.
Gold is off a few dollars.
Treasuries are lower in yield higher in price and oil is back to $62.01.
GM has begun selling parts of
GMAC to raise funds and get a better credit rating for the GMAC paper to reduce
borrowing costs. In our younger years we would have been all over this. Now we
would rather watch the soap opera than live it.
Existing home sales for February
were at a 6.9 million annual rate when a 6.5 million annual rate was expected.
Treasuries are trading higher in
yield at mid-day as the housing numbers have placed a scare in traders. The
two-year is at 4.76% and the ten-year at 4.74%.
The major stock measures are
lower at mid-day in light trading.
Itís time for refinery overhauls
at Exxon Mobil, with the company panning to close its largest refinery for a
month and maybe another also and that coupled with a loss of 200,000 barrels a
day exports form Nigeria because of the unrest there gave traders reasons to
push the price of oil up $2 per barrel near the close of NYMEX trading.
Oil ended at $63.80 up $2.03. Gold
finished the day at $550.80 down 90 pennies.
Treasuries were higher in yield at the close with the two-year at
4.77% and the ten-year at 4.74%.
At the bell the DJIA was down 48 points at 11270. The S&P 500 lost 4 points to 1301 and
the NAZZ dropped 4 points to 2300.
Breadth was 5/4 negative on the NYSE and flat on the NAZZ and volume was moderate. New highs exceeded 250 and new lows were
The games being again tonight and
the Big Casino has one more day for the big boys and girls to spin the wheel
before a week-end break.
22 March 2006 Daily Comment
At about yesterday
INTC was up 70 pennies with strong buying of about 80 million shares. Then
within fifteen minutes the buyers evaporated and the stock gave up most of its
gains to close up 15 pennies on the day. The same type of trading action
occurred in Symantec and Applied Materials and we presume it also occurred in
other tech stocks that we donít follow as closely.
After the close Microsoft announced that it was delaying the shipment
of its new Vista operating system until early 2007 instead
of for Christmas 2006. Could some big boys and girls have received the news
early? Certainly not in the Big Casino.
Today is oil inventory announcement
day for the last week and the boys and girls await that announcement with bated
breath and fingers on the buttons ready to buy or sell. As we have commented before
and will again, the whole up and down move in natural gas this past six months
was an event created by the hedge funds and oil companies. There never was a
shortage of gas; in fact there is a large surplus. But the big boys and girls need
their homes in the Hamptons,
vacations in the Caribbean and fancy cars and NYC condos
and so the rest of Americaís
working dolts have to pay to provide them with that luxury.
and Hong Kong were lower overnight and Europe
is also down. With MSFT bad news tech should take a hit this morning and then
weíll see how events unfold.
Oil is down near $62 and gold is
off over $3 and trading under $550 as the trading day begins.
According to our guru Tuesday was
a key reversal day which means that the S&P 500 which
is a reversal from a new swing high that takes out the prior day's low and
closes near the low of the day. That isnít good if one is a bull. He also makes
the point that March has seen significant turns every year since 2000. In 2000,
2001 and 2002 they were negative. Then 2003 the move was positive. Moreover
there is a solar eclipse occurring on March 29 which is one day after the Fed has
its first meeting under its new Chairman. The confluence of events is almost
too much to contemplate. 1295 is the line in the sand for today. With Mr.
Softeeís news last night it should be interesting. *****
With the Microsoft news we are selling Intel. With the delay of
the Vista system we think that over time the share price
will move lower. We bought it as a trade and our rule is never let a trade
become and investment.
For the same reason we are selling the AMAT for a scratch. Its
fortunes are also tied to Vista in tradersí minds.
Finally we are going to sell the Symantec to close out all our positions.
We have been wrong for a while and it is easier to eat humble crow in one
sitting than over a few days. Moreover all three stocks are higher than they
were last Friday even if they are losses for us. And now we retreat to lick our
Crude Oil and Distillate inventories dropped last week when they
were expected to be higher. Oil futures are a bit better on the news but still
in the minus column.
After an hour and one half of
trading the major measures are higher and tech is holding its own. That
explains how out of touch with the markets we are. When we are that off in our
views, cash is a nice place to hide.
A suspicious package was found on
the White House lawn and all the undocumented lawn workers have been evacuated
as a precaution.
A correction from the Washington
A headline in earlier editions of
this story incorrectly described the comments of Federal Reserve Chairman Ben
S. Bernanke in a speech. He did not say that further Fed interest rate hikes
are uncertain. He said it is unclear whether unusually low long-term interest
rates mean the Fed should raise short-term interest rates more than it would
During the hour the major measures are higher as traders shake
off the MSFT news and plough ahead.
In thinking about our first post
about the action in Intel yesterday the thought came to us that maybe the run
up in Intel in the morning was caused by the same MSFT news except that the
early morning buyers thought the announcement on Vista was going to be positive
as to time instead of the negative that eventually was announced.
In reviewing our accounts most
are about 2% to 2.5% for the first quarter. If we could do that every quarter we
would be up 10% for the year which would delight us. But we donít expect that
and would guess we are going to be cash for a while and so earn only about 1%
per quarter until we reach the fourth quarter and October decision time. But we
are way ahead of last year at this time (when we were down 6%) and even the
first quarter of 2004 so hope springs eternal in the spring.
Oil closed down 60 pennies at $61.77. Gold was off $1.50 at $551.70.
Treasuries ended the day unchanged on the short end to slightly
better on the long end with the two-year at 4.73% and the ten-year at 4.70%.
The DJIA is on track to close on
a five year high but it is still 10% below its closing high six years ago. That
means if you are a buy and hold investor
and you bought the DJIA five years ago you are finally getting back to even on
The bulls chased the shorts into
At the bell the DJIA was up 80 points at 11315. The S&P 500 gained 8 points to 1305 and
the NAZZ rose 10 points to 2303.
Breadth was 2/1 positive but volume
was lower today than yesterday. New
highs contracted to 210while new
lows expanded to 90.
And there are two more days left to
place bets at the Big Casino.
21 March 2006 Daily Comment
Fed Chairman Bernanke spoke last
night and from reports he was every bit as obfuscating as Greenspan at his
best. The take away from what we read is that he is hawkish on short rates and is
inclined to let long rates will do what they will do.
The Producer Price Index was down 1.4%. Ex all human essentials it was
up 0.3%. Treasuries didnít like Bernankeís speech or the PPI number and are now
a bit lower with the two-year back up to 4.69% and the ten-year inverted at
lower overnight and Asia closed lower. Gold is down 43
pennies and Oil is trading under $60.
Oracle came in with a penny better earnings and expected sales.
ORCL doesnít impress or move tech or the markets as it did seven years ago.
Bush is having a press conference
at and the markets usually sell off
during that event.
Our guru continues to point to
the 1309 level on the S&P 500 as resistance.
Three weeks ago SGP rallied from $18.50 to $19.30 before
backing off to $18.25. We almost pulled the trigger at that time even though it
would have involved a slight loss in many accounts. Today we are going to pull
the trigger at $19.25. The upgrades yesterday were not the bang the table type
and we want to raise some cash as the S&P stalls below 1309.
Moodyís says that four out of ten
jobs created in the last four years were housing related.
The Bush press conference is over
so now the markets can start to climb again.
Treasuries are lower at mid-day
as traders are now factoring in two more increases to at least 5%. That is the
result of Bernankeís speech to The Economic Club of New York last night. At
mid-morning the Treasury two-year is at 4.73% and the ten-year at 4.71%. A more
pronounced inversion will begin to affect the bank stocks which have been the
leaders and solid rocks of the recent markets move to new highs.
Intel is up 60 pennies this morning and we see no news. Part of the
gain may be the result of the work off of the expiration shenanigans. Also, Dell said this morning that they are going
to increase computer sales at better than expected rates and since Intel is the chipsupplier that may be helping.
Charles Prince was elected
Citigroup Chairman succeeding Sanford Weil. We wonder if there is room fro
Prince Charles on the board.
Oil ended at $60.35 down 7 pennies. Gold lost $2.90 to $553.20.
Treasuries finished lower with the two-year at 4.73% and the
ten-year at 4.72%. Inversion is back.
The S&P 500 moved up to 1309
again today but couldnít get above that number. It then reversed and moved down
to 1296 which is a point above 1295 support. The S&P 500 must close above
the 1295 number or...
The action today was not
encouraging for the bulls. The failure at the high and rollover into the last
hour means there is probably more work on the downside before the big boys and
girls attempt to run stocks up into quarter end. There is a Fed meeting next
Tuesday and Treasuries dropping today helped the negativism that has developed.
Also traders caught buying the high today just had their week ruined. Today is
the down day we should have had yesterday.
At the bell the DJIA was down 40 points at 11235. The S&P 500 lost 8 points to 1297 and the
NAZZ dropped 20 points to 2295.
Breadth was 2/1 negative and
volume was brisk. There were less than 300 new highs.
And there are three more days
left for traders to try their luck in the Big Casino this week.
20 March 2006 Daily Comment
Spring begins at today. Goodbye winter, hello
was up 1.7% and Hong Kong 0.8% overnight and Europe
is higher in early trading. There is not much happening early this morning on
the gold and oil front and Treasuries are weaker in early trading.
There were two analystsí upgrades
this morning on Schering Plough from
sell to hold. We would have liked a buy recommendation but weíll take what we
can get. Both upgrades were on valuation.
The Index of Leading Economic Indicators was down 0.2% for February.
The S&P 500 was up six days in a row as of Friday and so a pull
back is to be expected. 1295 on the S&P 500 is the line in the sand.
In our larger/aggressive accounts we are selling SGP for a small
profit. This is an aggressive sell because we may buy the shares back in the
next few days after the upgrade wears off and the share price pulls back. We
are holding the shares in our smaller and our larger less active accounts because
we think the shares will eventually move higher. Hopefully we arenít being too cute on this trade but we are flat
to profitable in the larger/aggressive accounts and may even sell in the other
accounts on a move higher tomorrow.
Crude oil ended down $2.47 to $60.30. Gold was up $1 to $556.10.
Treasuries ended flat on the short end to a bit better on the long
end with the two-year at 4.64% and the ten-year at 4.65%.
Luckily the DJIA and S&P 500 were
down slightly so the storing of up four days in a row and six days in a row respectively
were broken. At the bell the DJIA was
down 5 points at 11275. The S&P
500 lost 3 points to 1305 and the NAZZ
was up 9 points at 2315.
Breadth was negative and volume
was moderate. New highs exceeded 400.
And the casino is open for
business as usual tomorrow.
17 March 2006 Daily Comment
was up 1.5% overnight and Hong Kong was also higher. Europe
is trading higher as the trading day begins. Gold is up pennies and Oil down pennies
and Treasuries are a bit weaker this morning.
Tech stocks are underwater again
as the markets open. Our guru is negative on the markets.
We are going to sell our Ford position today for a 2% loss. With
the markets at all time highs we think that in any general market correction Ford
goes lower to the $5 range. This is a stock we should have waited for purchase
in the autumn.
Intel is down on a report from Taiwan
that major notebook buyers like DELL and HPQ are cutting their orders for INTC CPUs because of slow sales of
notebooks this quarter. Interestingly DELL
and HPQ are not lower.
We bought Applied Materials at $17.50 in many accounts. We sold the
stock two weeks ago at $18.80 and it is down like all the chip related issues.
But we also think it may be being pinned
to the $17.50 strike price today. If stocks are going higher the tech stocks
have to join the party. We have made money trading the shares from this level
Gold ended at $554.90 down 30 pennies and Oil closed at $62.80 down 78 pennies. Treasuries were a bit weaker all day with the two-year finishing at
4.64% and the ten-year at 4.67%.
At the bell the DJIA was up 25 points at 11280. The S&P 500 rose 2 points to 1307 and
the NAZZ closed 6 points higher at
Breadth was slightly positive and
new highs exceeded 440. Volume was active because of expirations.
The casino is closed for the
week-end so we all can enjoy the basketball tournaments.
16 March 2006 Daily Comment
Gold is at $555 and Oil is
down 6 pennies in the early morning going. Japan
was down 1%, Hong Kong up a bit and Europe is lower.
Housing starts in February were down 7% which was better than
expected after the rip roaring January. The Consumer Price Index for February was up 0.1%, ex all the important stuff it was still up only 0.1%. Jobless claims
for the prior week were 309,000 but the four week average remains under
JP Morgan downgraded Ford from overweight to underweight with the shares at $7.85.
This same analyst had upgraded Ford
to overweight in 2004 when the shares were at $14.50. Weíve had those kinds of
stock calls too. Sometimes the pain gets so bad that it is better to start with
a clean slate. Since we bought Ford at a different time with the troubles
already apparent we are going to hold for a while at least.
Hedge funds now control $1.5 trillion in assets and that number increasing
everyday. Multiply by ten (because of the leverage they employ) and you will
get an idea of the power now in the hands of the hedge funds. Total household wealth
in the U.S. is about
The government boosted the
testing for mad cow disease from 55 cows per day to 1000 cows per day. Now they
have found a third cow with the disease but are planning on reducing the daily
testing. That is because the purpose of the testing was not to find cows with
the disease but to placate the public.
We sold our Xcel holdings for a 60 pennies profit which is 3 quarters of
The games have begun, trading
Gold ended up $1.20 at $556.40. Oil closed $1.41 higher at $63.58.
Treasuries gained with the two-year finishing at 4.62% and the
ten-year at 4.64%.
Todayís markets were interesting.
Oil rallied in Iran
bombing rumors, Treasuries rallies on the end of tightening rumors and gold
rallied. Cyclical stocks rallied as tech stocks sold off.
At the bell the DJIA was up 550 points
at 1255. The S&P 500 gained 3 points
to 1305 and the NAZZ dropped 128 points
Breadth was over 2/1 positive on the NYSE and flat on the NAZZ. New highs exceeded 600 and volume was
Tomorrow is expiration day and
the Casino will be open on its last day of business for the week. And the games
continue tonight and tomorrow and seemingly forever.
15 March 2006 Daily Comment
After a 60 degree day on Saturday
we are expecting 6 inches of snow tonight. The land of milk and honey is an
interesting place to live.
Our guru liked yesterdayís action
and has now set targets of 1309 soon and 1330 by April 9 as targets. We are
This morning Oil and gold are off
pennies after their big moves yesterday and Treasuries are also a tad weaker.
was up 1% and Japan
half that, while Europe is fractionally higher across
the board as the trading day begins in America.
The WSJ reports that Fed Chairman
Bernanke wrote a letter to a Congressman saying he was quite concernedabout budget deficitsÖ because deficits hold
down the growth of national savings. We wonder what his position was when
he was serving as Head of the Presidentís Council of Economic Advisors in 2005
when tax cuts were proposed that have continued the deficits about which he is
The WSJ reports that Ultimate Fighting (thin glove boxing,
kicking, judo, rabbit punches and other such mayhem) is replacing boxing as the
ďsportĒ for the blood thirsty in Las Vegas
and on pay for cable. This month 10,000 folks paid between $50 and $450 to
watch a match at the Mandalay Casino in that fair city in the desert that
exists because of free government water supplied by U.S. taxpayers. Can anyone say
Intel announced a new server named Sossaman
which is a low voltage kin of its Xeon server and uses one third to one fifth
the power of most current servers.
Oil inventories were up again
while gasoline and distillate inventories were lower. At mid morning gold is up
European stocks closed mostly
With the North Fork Bank takeover and the rally in interest rates we are
going to begin to re-establish a position in New York CommunityBancorp
by buying shares in our large/aggressive accounts. NYB yields over 5% and we think there is a good risk/reward trade
possible in the shares.
Gold ended up $1.40 at $554.40 and Oil finished at $62.17 down 93 pennies.
Treasuries surrendered part of their gains of yesterday with the
two-year ending at 4.67% and the ten-year at 4.73%.
At the bell the DJIA was up 60 points at 11210. The S&P 500 gained 6 points to 1303 and
the NAZZ rose 15 points to 2310.
Breadth ended over 2/1 positive and new highs expanded to over 400 which is more like it. Volume was moderate.
There are two more days left for
the Big Casino players this week and only two more days until St. Patrickís
14 March 2006 Daily Comment
Gold is down $3.60 in early trading and Oil is over $62 as Iran
talks about cutting of companies that provide oil to countries that vote
against it in the U.N.
The Washington Times has a story
selling uranium to Iran.
Far Out. *****
Retail sales for February were lower but added to better retail
sales for January the numbers are a wash.
and Hong Kong were lower overnight and Europe
is mostly lower. U.S. futures indicate a down opening.
We get e-email:
Thanks for the news about the recommendations
from the HHS bureaucrat. I hadn't heard that. For some reason it reminds me of the
situation of friends of ours in San Francisco. They followed the advice and stored a lot of bottled
water etc. in case of an earthquake. In the big earthquake of - I think it was 1987- the only
damage they had was that all the bottles of water fell out of the cupboards and broke. *****
Our guru thinks that todayís
direction will govern Fridayís close, and that the direction after Fridayís
close into April 9 which is 6 months from the reaction low last year will tell
the tale. If stocks run up into April 9 then that will be a high and if stocks
move lower into April 9 that will be the bottom and stocks will move higher.
just announced a huge oil find. Can the U.S.
That would solve the illegal immigration problem since Mexicans would become U.S.
citizens and the U.S.
would pick up some large oil reserves without having to destroy the Alaskan
tundra. And it would be late payback for Mexico
invading Texas back in 1837, or
so the story goes.
In mid-morning Treasuries are rallying on positive
trader talk about the Fed stopping at 4.75%. Supposedly a NYC Consulting firm
in the know says that the Fed is going to stop there or at 5%. The two-year is at
4.69% and the ten-year is at 4.71%. The major
stock measures are mixed in light trading with no conviction.
An era passes as the NY Times says that it will stop printing daily
Oil ended up $1.48 at $63.25. Venezuela
is in the picture again and, unlike Iran,
Cheney and the boys in the Pentagon may think they can take them out or may be
fomenting a coup. If it doesnít work then Ö.. No oil. It seems strange to even
suggest something occurring but after the last five years and with a weak kneed
Congress anything is possible/
Gold was up $5.50 at $553.
Treasuries staged a nice rally with the two-year finishing at 4.65%
and the ten-year at 4.70%.
The DJIA closed at 11151 up 75 points, a new 4 year plus closing high. The S&P 500 gained 13 points to 1297, a
new 4 year plus closing high, and the NAZZ
rose 26 points to 2293. The S&P 500 outperformed the DJIA because of
GOOG, EBay and the oil stocks.
Breadth was 2/1 positive and new
highs were a bit over 300. Volume
Today was a win for the bulls but the new highs and volume were not super.
Tomorrow will be the test of whether the bulls can get two days in a row.
The casino will be open for
business at the usual time.
13 March 2006 Daily Comment
The bluebirds arrived on Thursday, the red-wing blackbirds on Friday and the robins on Saturday. Usually all three species arrive around the
Feast of St Joseph on the 19th or St Benedict which is the 21st. so they are
early this year. The geese are honking and the ducks are quacking and the herons
are yelping from the ponds in our neighborís valley. And the turkeys are gobbling
up a storm so hopes are bright that spring has sprung.
We purchased two horses over the winter
and rode one of them, Whitney, for the first time on the week-end. She has a
wonderful gait and except for a rein breaking and trouble getting her to take
the bit on the second day everything went well.
Stocks opened higher on Monday continuing
the trend from overseas where Japan
and Hong Kong closed higher and Europe
which is also trading higher. Treasuries
are a bit lower in early trading and gold
is up $4 while oil is back above
Over the weekend, Secretary of Health and Human Services Michael Leavitt
recommended that Americans start storing canned tuna and powdered milk under
their beds as the prospect of a deadly bird flu outbreak approaches the United
Why not the pantry?† Are folks going
to be to sick to get out of bed? And what about the masking tape? *****
According to Reuters, Oil is up
$1 because of worries by traders about supply disruptions caused by the Iranian
situation. And it is also Monday of expiration week and the big boys and girls
need volatility to make money.
Approaching the major measures are off their highs with the DJIA
down 10 points.
We bought more Intel for our large/aggressive accounts
at $19.76. If the share price moves lower we will add to more accounts.
We also purchased Symantec at $15.75 in accounts in which
we sold HSY last week. We have had decent luck trading SYMC in the past.
Oil ended at $61.85 up $1.89. Gold
was up $6.20 at $547.50.
Treasuries closed unchanged on the short tend to up down a tad on the
long end. The two-year finished at 5.73% and the ten-year at 4.77%.
At the bell the DJIA was unchanged at 11076. The S&P 500 gained 2 points to 1283 and
the NAZZ rose 6 to 2267.
Breadth was positive and new
highs exceeded 300 while new lows were less than 100. Volume was light.
And the casino has two more days
before attention turns to basketball
10 March 2006 Daily Comment
mixed overnight. Gold is down $4 to
$544 and Oil is 8 pennies lower at
$60.40. The Jobs report at is
the number of the day for the boys and girls to play with until the basketball
games begin again at .
Our guru from www.realmoney.com has the following to say about
the recent market action:
keep in mind that, bearishly, the S&P has carved out a bearish Minus-One,
Plus-Two daily sell pattern. In other words, the three-day chart turned down on
Tuesday for the Minus-One part of the equation, with three consecutive lower
lows. That was followed by two consecutive higher daily highs for the Plus-Two
part of the pattern. Additionally, a reversal of a reversal on trade below
Wednesday's low sets up the expectation for accelerated momentum lower.
So there you have the words of
wisdom. He is suggesting that a move to 1240 from the present 1275 may be in
Non Farm Payrolls for February increased by 243,000 souls. That was
30,000 more than expected but January was revised downward (the January report was
revised to 170,000 from 193,000) so the overage comes from the revision which
of course may be revised again next month. The Unemployment Rate was 4.8%. Average
Hourly Earnings were up 0.3%. Average hourly earnings year over year were up
U.S. Households total net worth increased to
$52.3 trillion in the Fourth Quarter of 2005. We wonder who adds up all the
numbers to come up with that figure.
The Dubai ports deal is dead but Dubai
is going to hire an American company to run the ports. Can anyone say Halliburton or Bechtel brokered by The Carlisle Group?
In fact the WSJ reported today that:
private-equity firm Carlyle Group is raising a $1 billion U.S.-focused
infrastructure fund, the first buyout house to create such a fund specifically
targeting infrastructure projects in the U.S.,
people familiar with the matter said.
The fund will be
co-headed by former Bechtel Group Inc. Senior Vice President Robert Dove, a
well-established figure in the industry, and will invest in projects such as
toll roads and other public-infrastructure developments through competitive
bidding, by means such as public-private partnerships.
After an hour and one half of trading
Treasuries are lower across the board and stocks are higher with the DJIA up 95
points.† We donít know the reason except
that maybe it was time for a rally since so many bulls were wearing sad faces.
trading higher into the close.
By selling shares at $7.82 we
reduced our Ford positions in larger
accounts where we realized we were a little too heavily invested for our tastes
after we had to ride the stock lower this week. We are taking a small loss on
the sales but we have a more comfortable position in our larger accounts now
and will be a more inclined to buy stock at a lower price- which we hope we
donít have the opportunity to do.
Google has been down all day even
with the DJIA up 100 points.
Oil ended at $59.95 and Goldlost $4 plus to finish at $543. Treasuries were marginally lower with
the two-year at 4.73% and the ten-year at 4.75%.
At the bell the DJIA closed up 102 points at 11075. The
S&P 500 bounced off support to
close up 10 points at 1282 and the NAZZ
gained 12 points to 2262.
Breadth was 2/1 positive and new
highs exceeded 200 but new lows once again approached 100 and volume was
light. That makes the rally suspect but a Friday rally is a plus and the fact
that the rally didnít fizzle in the last hour as it did last Friday is also a
plus.† Next week is Quintuple Witching so todayís action may be related to that. And
with the Witching, the Ides and the NCAA lotteries next week should be
The Casino opens bright and early
Monday and weíll be here.
9 March 2006 Daily Comment
After yesterdayís tepid rally the
major stock measures need a good day today to overcome the negative bias that
has been evident for the past week.
was up over 2% overnight and Europe is also higher. The
Japan bounce came when the Bank of Japan (BOJ) said that it is going to affect
the economy in the future by switching from its strategy of
using money supply ( by injecting vast amounts of money into the system)
to using its discount rate (which currently is 0%) to affect the economy. This policy change suggests that the BOJ has decide that
deflation is dead and that sustainable economic growth in Japan is possible and
that it will use interest rates to accomplish that goal.. In the U.S.
that overnight rate is called the Fed
Funds rate and is what the Fed moves up or down to affect other interest
rates and thus the economy. While the BOJ said it was going to switch to this
rate measure they did not raise it. Since it is at 0% the Japanese markets breathed
a sigh of relief that the rates would not be raised and all the talking heads
are saying that in effect the Bank of Japan tightened. Go figure, only in the
world of economics would move from 0% to 0% be a tightening.
Gold has bounced up $3 overnight
and oil is 20 pennies higher after the $1.80 sell off on Wednesday.
Our tech guru says that
yesterdayís action created a Lizard Buy Signal because the S&P 500 made a
ten day low and then tailed up to close near the high of the session and above
the 1275 mark. The guru has wonderful names for market movements but he has
been on and off the fence for the past month as have we. Anticipating a move is
a dangerous game in this market environment and the rotation among stock groups
makes stock picking especially difficult.
We are in the mood to preserve
our positive beginning to the year for this quarter by keeping large cash
holding and look to the autumn when more reliable patterns usually emerge
before we commit any major funds. We
will continue to try and scalp gains as with the XEL purchase in larger
accounts but only in solid companies.
By the by, Applied Materials dropped $1 yesterday on a downgrade so our
correction by selling at a scratch profit of our misdirected buy of last week
saved us from further consternation.
Initial claims for unemployment were 303,000 for the last week
which is the first time over 300,000 in four weeks. The January Trade Deficit was $68 billion.
Richard Bernstein, chief analyst
at Mother Merrill is on CNBC saying that consumer staples are where money is
flowing. That suggests a flat or down market because consumer staples are the
refuge of mutual funds that need to be fully invested while mitigating risk.
The Palm Casino is letting bettors place bets on individual plays or
events in a game, such as which team will score the first basket, opt the first
three pointer etc. Thatís almost as good as the daily trading in the big Casino
although the commission is greater because the odds on winning are only 50% on
most of the bets. Ancient Rome had
nothing on the current appetite in the U.S.
except the payers arenít killed at the end of the game.
Natural Gas inventories are 50%
above what is normal for this time of year. So the American consumer was again this
past heating season disadvantaged by speculators and the gas companies who knew
there was no shortage of gas. That was why utilities were regulated when they
were created. Deregulation has made investment banks and CEOs rich and
consumers the poorer.
closed higher with Germany
doing the best up over 1%.
Once the Big East tournament came
on ESPN there was a noticeable slowdown in trading. We would guess that the
gambling on the games is taking action away from the Big Casino.
After being 40 points higher in
the morning the DJIA dropped to down 40 points and at is now down 20 points.
In 1998 Intel earned 90 cents per a share. This year Intel will earn
$1.35. In 1998 shareholders equity was $23 billion and it is now $38 billion.† Working Capital was $8 billion and now it is
$16 billion. The net operating margin was 43% and now it is 46%. Sales were $26
billion and this year they will be $34 billion. In 1998 Intel closed the year at $30 per share. In the nutty years it
ran up to $60 per share in March of 2000. Today it traded at a twelve month low
of $19.75. *****
Gold closed up $2.70 at $547 and Oil was up 38 pennies at $60.40. Treasuries were unchanged with the two year at 4.72% and the ten-year
At the bell the major measures
were lower. The DJIA closed down 35
points at 10970. The S&P 500
lost 6 points to 1273 and the NAZZ
dropped 18 points to 2250.
Breadth was 5/4 negative but new
highs did outnumber new lows by 2/1 and volume was light.
The bulls lost their momentum today and the S&P 500 closed at
support. Traders probably wonít want to be long over the weekend so tomorrow at
the Casino may be ugly.
8 March 2006 Daily Comment
Overseas markets were lower again overnight with Japan and Hong Kong
both down almost 100 points and Europe is trading lower as are U.S. Futures.
The New York Stock Exchange is now a publicly traded entity under the symbol
Investorsí Intelligence had 42.7%
bulls and 31.3% bears.
Next Thursday and Friday are Quintuple Witching as well as being the
Ides of March.
Goldman Sachs lowered its price target on Google from $500 to $490. Say what? Google is lower this morning
after inadvertently posting internal financial comments that were negative on
The last rally came after down 7
days in a row. The markets are currently down five days in row going for 6. The
S&P 500 has held at the 1275 support level for the last few days.
Gold is down almost $4 and oil
is pennies lower while Treasuries
are firmer as we begin the trading day at the big casino.
The Bank of Japan is going to
make a decision on raising interest rates over night.
Crude Oil inventories rose again
for the umpteenth week and Oil is off $1 on the news.
Gold is down $12 at and other commodities
are being taken to the woodshed also.
We sold our Hershey position for a scratch loss to raise cash for deployment
into more volatile issues. When we bought HSY
we thought we would get a $3 pop as we did from ASD and EL. Instead we
got a $2 drop. We are now close to even and with the volatile market HSY ties
up too much cash. We want to maintain and maybe add to our INTC and SGP holdings
and this cash will give us the ability to do so without raising our overall
Intel may trade around $20 till options expiration next week and Schering Plough may very well go to
$17.50 which is the closest strike price. Finally we want to add some SYMC to accounts but we think that the
$15 strike price may act as a magnet if there is no rally and so we are holding
off for now.
As options expiration approach
stocks often are pinned to the
closest strike price because of all the hedge fund activity and institutional arbitraging
Oil ended at $60.05 down $1.53 and Gold finished down $10 at $544. Treasuries were firm on the short end as the curve is essentially
flat with the two-year at 4.72% and the ten-year at 4.73%.
With an hour and one half to go
the major measures moved to the plus side and held into the close. The bulls
saved the day but not by much. Internals were nothing to bray about with breadth slightly positive and new highs and new lows about equal at around
125. Volume was moderate.
At the bell the DJIA was up 25 points at 11005. The S&P 500 gained 3 points to 1278 and
the NAZZ was down 1 point to 2267.
The bulls need good follow through
tomorrow to make a case.
The casino will be open for trading
as usual with two days left in the week.
7 March 2006 Daily Comment
Dana Reeves, the widow of Christopher Reeves, Superman, died yesterday
of lung cancer at the age of 44.† Perspective is a word that comes to
overnight with Japan and Hong Kong down over 1%. Europe
is lower this morning as are gold and oil and many commodities. U.S.
futures suggest a lower opening and Treasuries are continuing to move lower in
price and higher in yield.
A few reasons for this action are
hedge funds unwinding positions that are going the wrong way for them. When one
position is unwound another needs adjustment and then another and these
adjustments affect other hedge funds creating the general malaise we see today.
The major measures have been in a
funk for a few days so maybe the down opening will wash out some of the gloom
and lead to higher prices later today or tomorrow.
We have reduced our exposure to
less than 15% in large accounts and may go all to cash and relax. Time will
We get e-mails:
all is well.
year in May I hit 62, which is my bogie for starting to think about edging
into retirement. (Where did all the years go?) I'm not exactly sure what
this means about my investments--I'm giving myself some time to figure this
out, but it may mean that by next year I'll want to draw down some of $ you are
managing. Just wanted to give you a heads up, so I wouldn't take you by
surprise, if I start asking for $ or start consolidating assets.
another track, I was just doing my taxes (which I hate) and trying to figure
out my basis for the hp that you sold last year. In the process I took a peek
at the accounts. I was glad to see we have a large cash position right now.
This made me think about where you saw the market going and what your
investment strategy was going to be this year.
"good old days" when you communicated with clients via the monthly
newsletter and the market had less volatility, I used to enjoy reading your
once-or-twice a year perspectives on the market and how your "buy and
hold" approach to investing was being applied. In our "e"
age when technology offers you the ability to communicate with us on a minute
by minute basis, we learn of your thinking throughout the day, but I
miss the periodic "big picture" view you offered us. You might want
to consider a special e-gram of your big picture "e-thoughts"
twice a year.
my readings, I seem to find these schools of thought to investing---not
counting those who are advocates for a bull or bear market:
Avoid the market by taking advantage of TIPS (no risk; inflation adjusted
Don't try to beat the market--just create a diversified
(passive) portfolio of low cost index funds or ETFs to ride with the
market (based on Modern Portfolio Theory)
to beat the market either by informed (or non-informed) stock picking or mutual
fund picking (i.e., so called "active approach")
something totally different (like buy real estate)
I'm a bit schizophrenic (inconsistent) in my approach, spanning 1, 2 and 3
but believing more and more in 1 and 2 as I get older. Someday maybe I'll
figure this out and get myself "aligned." As it is I'm a bit confused
and keep flopping around in my thinking. One day thinking I should be mainly in
TIPS, another day in index funds, and another wanting to beat the market.
Frankly, it is uncomfortable mentally to keep swinging around on this (my
problem, no?). I'd guess I'm searching for an investment philosophy that I'm
really comfortable with and that actually matches how I'm invested.
you've modified the "old stock broker's" approach to buy/hold value
over the last few years given today's market instability. Some years we've
"won." In some years we've "lost," as my interpretation of
"Modern Portfolio Theory" would suggest should happen. I'm
wondering how you see the "big picture" and if you are ever
tempted to move from a stock picking approach to a more index-oriented
We too are thinking about
reducing our commitments by continuing to manage only a small number of
accounts. Those thoughts are especially present when we are stuck in markets
like we have been for the last few years.
Our underperformance of the
S&P 500 was by a total of 5% in the last two years. And we have had only
one down year in the last 15 and that down was 3%.
As of year end 2005 over a
five year period the total return of The Lemley Model Portfolio was plus 56%,
for the ten year period the total return was plus 213%. For the S&P 500 the
five year total return was plus 1% and the ten year return was plus 135%.†Those numbers for the Lemley Portfolio include
an up 44% year and down 3% year. We try and take what the markets give us
always with a risk/reward mantra. We
donít think we will perform as well over the next five or ten years and of
course past performance is not an indication of future performance. There is
reversion to the mean in investing although we like to think that we do better
than the mean. Even our performance in the mid 1990s was on a par with the
S&P 500 for the dollars we had invested. We underperformed on an absolute
basis because we kept a large amount of cash or short term bonds in portfolios.
We think part of your
dissatisfaction has to do with when you gave us the bulk of your funds which
was late in the life of our five and ten year record. We would guest that some
of those funds came from other investments that had not performed as well in
the preceding five years. At the end of 2004 we said that there was no way we
were going to continue to outperform the markets. It may be called the
efficient market theory but our thought was that the risk reward matrix had
changed. We are in a cash preservation frame of mind right now and that has to
do with Fibonacci retracements, overbuilding of condos, Dubai and Las Vegas as
the two examples of the excesses of the Arab and Western worlds,† the world political situation, the Avian flu
threat, and the incompetence of our government. We donít think we are going to
get out of this funk for a while.
It is our belief that clients and
readers of our Daily Comments are much better served by daily communication
than by a monthly letter. Our thoughts as the markets are moving contain longer
term outlooks while at the same time we comment on immediate happenings and why
we have done what we have. Our guess is that folks donít have the time to read
on a daily basis and keep with the flow, but we would then suggest reading on a
weekly or monthly basis.
As to our investment philosophy
we would suggest that the world has changed since the days of the old stockbroker. It is our belief that
we now live in a casino society that has been conditioned through advertising
to believe that whatever financial return is needed to provide a wished for
life style upon retirement can be had by a certain type of investing and presto
the millions of dollars are there. Bunk, double bunk.
Rapid trading helped us survive
the year 2000 downturn/bear market. We have been considering a longer term
approach and will admit that had we stayed with some of the stocks we bought at
the bottom in 2002 we would be a lot wealthier. But at the time the trading
made sense and allowed us to survive a very difficult period. If you go back
and look at our record prior to 1998 you will see that we underperformed the
bull market that began in 1994. We have always underperformed bull markets
because we maintain large cash positions in bull markets. That is because since
the Crash of 1987 we have always been quick to raise cash when we smelled
danger. We wonít change in that regard.
We have had several long time
customers remove their accounts over the last year. They have said they want to
consolidate their assets or that they wanted to try a different style. We have
assisted them and thanked them for their confidence over the years. Clients
dying and moving on is part of the process of life in our business and our main
concern is that our clients are content in their investment programs. If they
believe they or others can better meet their needs we understand and encourage
In the process our work/worry
load is lightened and we all benefit.
mentioned that buying AMAT to recapture losses on VOD was not a good
reason for buying a stock. If so, why buy AMAT in the
first place since "hindsight" is not in play here? I notice
that VOD is now above the price we paid for the stock. I believe
we are holding on to SGP for a potential buyout. Nice if we had some Bell South
for the same reason. As for GE, I had assumed that the purchase of this stock
was a long term horizon purchase. If not, why buy it in the first place?
It is at least a dividend paying stock. Answers to these comments
and questions may help me to better understand the remarks made in
the 5th paragraph of your letter.
We are as confused as you are.
That is serious. The Vodaphone
purchase was the mistake. Sold the AMAT
because we didn't want to hold another chip related stock and because upon
reflection it is never a good idea to immediately buy a stock AMAT to recover a
loss in another stock VOD.
We did have Bell South, heck we have owned every stock on the Big Board over
the years. We just didnít own it when the takeover offer came. We may not
own SGP when the offer comes either.
We do our best.
GE is a down and out stock that is being sold. If the rally doesnít
occur GE isnít going to rally and if it does occur GE will rally less than Google if at all. That is what we
realized, that to participate in the March rally we need to own the Googles of
the world. We canít and so probably wonít participate.
The markets are not treating our
out of favor stocks kindly. Our premise was that a rally was in the cards for
March. Now we are not so sure. And so we are reducing holdings.
Wish we had done better but such
We added more SYMC at $15.90 to large/aggressive
accounts that already own it. We also bought Xcel Energy, the utility, at $18.07 for those accounts. XEL yields
4.8% and will go x-dividend at month end. We have traded this stock off this
level for the last year and it is down from $19.20 a month ago.
After two hours of trading breadth
is punk and the markets looks sad. Treasuries have stabilized but gold is down
another $3 and oil remains over $1 lower.
In the final hour of trading the breadth
remains very negative and the major measures are having a hard time.
Gold was down $2.30 to $553 and oil ended down 96 pennies at $61.45. Treasuries were firmer at the
close with the two-year at 4.76% and the ten-year at 4.73%.
At the bell the DJIA was up 18 points at 10976. The S&P 500 lost 3 points to 1275 and
the NAZZ dropped 18 points to 2266.
Breadth was over 2/1 negative and there were 120 new highs and almost 100 new
lows. That is the first time new lows have approached 100 for many weeks.
Volume was moderate.
And the casino is open for
business again tomorrow.
6 March 2006 Daily Comment
We had a beautiful snowstorm
yesterday and are now enjoying the calmness after the storm. March snows are
the best because we know they wonít last long. It is supposed to be fifty
degrees by Friday.
The NKU Norsemen
finished their season at 17-11. They missed the NCAA Division II tournament by
a hair but will make it next year. The Lady Norse are the number 2 seed in the
NCAA Division II Great Lakes region and have a great chance of going to the Elite Eight. Their record is 26-4. *****
The merger of AT&T and BellSouth has finally come to pass. All the other telecoms are up
on takeover speculation. The prices to be paid are not as nuts as back in the
1990s but we would much rather own the acquired than the acquirer. We donít own
any right now after our unprofitable fling with Vodaphone.
But we have suffered from bad
timing before and survived and we will survive this time too. Our scenario had
us repurchasing the shares at $15 this summer. We may still have the chance but
our only solace is that we would have been out at even. The reason VOD is
higher is that there is now speculation that Verizon will buy the rest of Verizon Wireless (48%) that VOD owns.
That is an especially good rumor because VOD is going to sell its Japanese
Wireless unit to Soft Bank. The difference is that the Japanese unit isnít as profitable
as the VZ unit. Verizon is going to have to pay a big price for it. That is why
VZ is selling off today. And then we would guess that VOD will make an offer for
Sprint after Sprint spins off its
land lines business. Rumors are the stuff of great profits and losses and even
better paper profit dreams.
Oil is down 60 pennies and gold
is down $2 in the early going.
We are selling our AMAT holdings for a scratch profit
because we bought the shares to try and make back the loss in VOD. That is not a good reason for
buying a stock and over the week-end we decided not to compound a mistake with
another. With the chip wars and supposed slowdown, our Intel holdings are enough exposure in the chip area. We are also
trading out of CSCO since we would
guess that at some point an analyst will posit that the telecom mergers are going
to increase the competition in the router area by lessening the demand. And we
also sold MSFT for a scratch profit.
The risk and reward on MSFT seems even to us and as the S&P 500 struggles just
above support we would rather raise more cash. In keeping with our cash raising
theme we eliminated GE for a scratch
loss. GE is buying www.iivllage.com† for $600 million which is peanuts for them
but reminds us of the NYT purchase of www.about.com
. We think both of those dot coms are a waste of money and wonder where GE is going.
On www.minyanville.com we read
sold $2 billion of 10 and 28 year debt with orders for $8 billion. The debt was
sold at around 7% which is a spread of 250 to 300 basis points over U.S. Treasuries.
That is too little reward for the risk involved. There is more risk than that
in Indonesian debt and suggests that risk/reward metrics are out of whack in
the bond markets too.
There is a bunch of speculation in
real-estate, stocks and bonds by the IPOD generation and †folks are reaching for yield and return
and ignoring risk.
Foreign markets closed higher on
the day with Japan up 1.6% and Europe up about 1/2% across the board.
This afternoon gold is down $15
at $555 and Oil is off 41.67 at $62. Guess no one is going to bomb Iran
With an hour to go the major measures
are on their lows for the day with the DJIA down 80 points.
Treasuries closed lower wit the
two-year at 4.75% and the ten-year at 4.74%. The inversion in the yield curve
is almost gone.
No rally today as the DJIA finished 63 points lower at 10959.
The S&P 500 lost 9 points to
1278 and the NAZZ dropped 17 points
Breadth was over 2/1 negative and new highs were under 200. Volume
And the casino will be open again
bright and early tomorrow.
2 March 2006 Daily Comment
We will be traveling tomorrow so there will be no post
until Monday March 6, 2006.
A very dear friend who is our age and whom we have known since
childhood died today. He was a good father and husband and friend.
We offer the following from Steven Dietz,
the author of the play Lonely Planet,
to express our feelings:
In the midst of a world that is too big and
too fast, a world where information rules like a dictator and news travels like
a virus, it is easy to be overcome by the hopelessness of the world and the
helplessness of we, its keepers. What impact can we hope to have? What traces
will we leave behind?
History is not the story of grand acts and
masterpieces. History, instead, is the inexorable accumulation of tiny events -
footsteps and glances, hands in soil, broken promises, bursts of laughter,
weapons and wounds, hands touching hair, the art of conversation, the rage of
loss. Historians may focus on the famous familiar names - but history itself is
made, day after day, by all those whose names are never known, all those who
never made a proclamation or held an office, all those who were a handed a
place on earth and quietly made a life out of it.
So what do we affect during our time on
earth? What ultimately is our legacy? Our legacy is our friends, we write our
history onto them, and they walk with us through our days like time capsules,
filled with our mutual past, the fragments of our hearts and minds. Our friends
get our uncensored questions and our yet to be reasoned opinions. Our friends
grant us the chance to make our grand, embarrassing, contradictory
pronouncements about the world. They get the best, and are stuck with the
absolute worst, we have to offer. Our friends get our rough drafts. Over time,
they both open our eyes and break our hearts.
Emerson wrote: ďMake yourself necessary to
someone.Ē In a chaotic world, friendship is the most elegant, the most lasting
way to be useful. We are, each of us, a testament to our friendsí compassion and
tolerance, humor and wisdom, patience and grit. Friendship, not technology, is
the only thing capable of showing us the breadth of the world we live in. *****
mixed overnight with Hong Kong up a bit and Japan
down a bit. Europe is also trading mixed this morning.
Oil is over $62 up 60 pennies and Gold is $565 down 60 pennies.
We are going to sell the Treasury bills today since we think that
with the presumed FED Funds target being raised at the end of March that their
yield will increase (value decrease) and we will be better selling now and
having cash available if we wish to extend maturities. We would guess that we
will see 5% on 18 month bonds within the next month and the time and yield
ramification of a discount rate move suggest it is better to get back into the
money fund than hold the Bills so we can move when we wish.
Jobless claims rose 15,000 to
There were a group of dead
flamingos found in the Bahamas
yesterday. It turns out they didnít have bird flu. But when the bird flu
arrives in the U.S.
what will be the ramifications to the markets.†
Shouldnít we be more worried about this than Al Qaeda? With spring
migrations about to begin the possibility of birds with the flu being found
dead in the U.S.
are a given.
Cisco broke out above the $20 resistance level that ahs been in
place for at least a year. We are buying shares for our aggressive accounts and
we are also purchasing at a bit more SGP
Tech is lower but has buyers around while retail is lower on lousy February sales and high P/E ratios.
lower on the day after the European Central Bank chief issued hawkish comments
on interest rates.
Google held an analysts meeting today and as the talking ceases the
stock has begun to move higher pulling along other tech stocks. The major measures
remain lower and volume is moderate. Breadth remains 2/1 negative.
Oil is up at $63.57 as Bush heads to Pakistan.
Gold was up $1.60 to $571.
Treasuries closed lower on the European Central Bank interest rate
increase. The two-year ended at 4.72% and the ten-year at 4.64%.
Ford is off today because Dana Corp. missed an interest payment
which means bankruptcy is the next step for Dana. Ford is not going
The bulls tried to rally them in
the last hour but werenít able to push the major measures to the plus side. The
DJIA closed down 23 points at 11032.
The S&P 500 lost 2 points to
1290 and eh NAZZ gave up 3 points to
Breadth was negative but improved
all day. Volume was moderate on the selling. New highs contracted to 300.
Weíll be traveling tomorrow but will be here
bright and early Monday morning when the casino reopens for the week.
1 March 2006 Daily Comment
Personal Income was up 0.7% in February and Personal Spending was up 0.9%. The year over year inflation indicator was 3.1%. *****
Investorsí Intelligence has 42% bulls down from 45% last week and 30% bears up from 29% last week. That
is a contrarian positive.
JP Morgan has negative comments
on Intel and doesnít think it will
make its quarterly $9.4 billion sales number. It says that AMD is taking share,
PC sales re slowing and Dell is not selling as much.
Since Dell is beginning to use
AMD chips that should also affect AMD. INTC
is cheap although it may get cheaper. *****
Oil is beginning the day up 47 pennies to $61.88 and Gold is also up at $566 which is $2
better than last night.
We bought Ford today for many
accounts at $7.98. With the Ford family owning stock and running the company we
are not worried about a bankruptcy filing. The equity in the company is priced
at $14 billion. We are buying to trade and/or own.
Oil and distillate supplies on hand in the U.S. rose for the umpteenth week in a row.
Ford beat estimates for domestic car sales at 84,000 (80,000
estimate) and truck sales at 145,000 (142,000 estimate) in February. Ford sales
world wide were down 4%.
The DJIA has been up 65 points
all day long and breadth ahs been 2/1 positive all day. Markets that are up all
day going into the final hour of trading tend to close on the plus side.
Oil ended at $61.90 and gold finished at $565. Treasuries slipped on
the short end and ewer down on the long end with the two-year at 4.70% and the ten-year
closing at 4.58%.
The DJIA closed up 62 points at 11054. The S&P 500 gained 10 points to finish at 1290 and the NAZZ rose 32 points to 2313. Breadth finished better than 2/1
positive, volume was active and new highs moved back above 300 on the
There was rotation to tech stocks
today. Whether that lasts for more than a day is the reason the casino opens
FAIR USE NOTICE
This site contains copyrighted material the use of which has not always been specifically
authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental,
political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any
such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107,
the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for
research and educational purposes. For more information go to:
http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use
copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.
For those folks who have accounts with us, you may now go to:
and fill out the account information and view your accounts online. If you
have trouble filling out the form, or in getting online, call and we will
help you with the process. NASD regulations require the eview
site to be secure. Thus your password must be changed every ninety days.
You will be prompted to make this change when needed.
Annual offer to present clients of Lemley Yarling Management Co. Under Rule 204-3 of the SEC Advisors Act, we are pleased to offer to send to you
our updated Form ADV, Part II for your perusal. If any present client would like a copy, please don't hesitate to write, e-mail, or call us.
The factual statements herein have been taken from sources we believe to be reliable but such statements
are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one
or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may
have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase
or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.