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27 November 2002
6:58am and on what is known as a slow news day the folks on CNBC are
interviewing folks at a turkey farm. And on the ticker we learn that a
Harvard study has found that eating a teaspoon of peanut butter every day
reduces the chances of getting type 2 Diabetes by 20%. The stock futures are
indicating a higher opening.
8:14am and after cooking pancakes for the kids we are back for the day. The
low priced tech stocks are running again this morning and we are going to let
JDSU go in keeping with our strategy of leaving the techs for now and moving
to the larger depressed stocks that we think will give a good year end
bounce. We bought AOL yesterday because we think the big boys and girls will
want to move the stock to $20 per share by year end. The 10% jump in Rite Aid
is a symptom of the speculation going on in low priced stocks right now. We
know we are selling to early but we have already had the moves in the stocks
we were looking for at year end.
8:35am and stocks have opened higher with bonds lower. Jobless claims were
down to 365,000 and the economic numbers this morning were good. Consumer
spending rose 0.4% while incomes rose 0.1%. Is that increased spending/income
coming from refinancing or savings?
10:30am and the DJIA is up 217 points. We sold JDSU at $3.25 for a 50% to
100% gain and also reduced some larger positions in GMH by selling shares at
$10.76 fro a $2 per share profit. We are happy to see the rally but we are
sticking with our plan of raising cash and taking profits since we still
expect a pullback before year end. We think the stocks we own will continue
to outperform the major measures and give us good performance with less money
11:04pm and we bought more CTS at $7.75 for accounts. We sold Masco at $19.60
for a scratch loss in our larger accounts. We may reenter lower or higher but
for now we just wanted to sell for cash. This will pay for our AOL purchase
yesterday in our larger accounts. And we added UAL at $3.65 to a few more
trading accounts. We think the Repubs will cave on the loan guarantee for UAL
because AMR wants a guarantee too and it is a Texas company. And we all know
who hails from Texas.
12:23pm and we sold the Brocade at $5.64 that we sold and bought back last
week. We want to get down to one tech stock and we are more comfortable with
Siebel. Again we make a scratch profit on the trade. Stocks are running
higher because the economic data released today suggests the economy is
recovering. We are selling the news to raise cash and we are also pleased to
see many of our remaining holdings rising at twice or more the rate of the
overall market. That rise will keep us even with the major measures with only
one third of our money at risk.
12:43pm and bonds are suffering as the stock markets rally. When will the Fed
tighten will be the question of the day next week. DJIA is up 240 points.
Breadth is 3/1 positive and up volume exceeds down volume 3/1 on the NYSE and
10/1 on the NASDAQ. The salad days are back again.
"my salad days, / when I was green in judgment, cold in blood" was a term
coined by William Shakespeare.
2:43pm and the grandchildren have been around this afternoon so our posts
have suffered. The DJIA has been up all day with no pull back at all. We'll
see what Friday brings. Even with our large cash position we had a good day
and The Model Portfolio is now up over 11% for the year.
3:02pm and the DJIA closed up 254 points for the day at 8930. The S&P 500
closed above the all important 937.50 mark at 938 up 27 points. And the
NASDAC jumped 44 points to finish at 1488.
And tomorrow is another day unless you are the Thanksgiving turkey.
THE NEXT POST WILL BE ON MONDAY.
27 November 2002 - Morning Post
6:33am and with the holiday trading there isn't much news today nor will
there be on Friday. The markets sold off yesterday but with the light volume
today and Friday we expect the upward bias of the markets over the last seven
weeks to resume. While 8400 is a downside possibility on the DJIA before the
year end rally we don't expect that kind of reaction till next week. The next
Morning Post will be on Monday.
26 November 2002
7:41am and McDonald's is going to allow folks to charge their purchases on
their credit cards. Soon folks will be filing bankruptcy for overeating at
McDonald's. Then they can sue McDonald's for their overweight condition and
with the settlement start all over again at Wendy's.
8:11am and we were just telling a friend that we are happy with our
performance this past year which is the result of our buying stocks some of
which we have no business owning. We are engaged in the greater fools' game
and so we are quick to take our profits in the tech stocks (the greater fools
stocks) we own. We know they may go higher when we sell them but the
valuations on all of them including Microsoft and Cisco are still ridiculous.
So we will be content to make a few dollars which in some cases is a 100%
return and retreat to more conventional year end recovery stocks like
Walgreen and BP Amoco and Masco. We also are pleased with our Goodyear, Wild
Oats GMH type holdings.
Our uncomfortable feelings with the tech stocks has caused us to sell to soon
and get scared out of issues that popped right after we sold them. But as we
tell clients, we want to avoid big mistakes and hit singles not home runs.
We may let JDS Uniphase, SUNW and EMC go today if they get a pop.
8:19am and the stock futures are indicating a softer opening.
8:46am and the stock markets are lower in moderate trading.
9:23am and Consumer confidence numbers are better this month with the
Expectations number 88 versus 81. New home sales were down 4.5%. Second
quarter GDP was revised from up 3.4% to up 4%. And folks say we are in a
recession. Numbers never lie? The DJIA is down over 100 points. Maybe this is
the beginning of the pause that refreshes?
10:14am and the price target was raised on Tyco from $24 to $28 by UBS
Warburg. For the life of us, we can't understand why anyone would want to own
a stock with the culture of deceit that Tyco exhibited over the past few
years. Moreover they are one of the patriotic companies that have
incorporated offshore to avoid US taxes. We would rather own a tobacco stock.
By the by, Tyco needs to sell convertible bonds next month and this upgrade
should help. UBS probably isn't part of the underwriting group but we are
sure the old "you scratch my back, I'll scratch yours" culture still prevails
in stockbroker land.
10:25am and we took a bit of money off the table by realizing profits in Sun
Micro and EMC. We sold the SUNW at $3.82 for a $1 to $1.50 per share profit
and the same for the EMC sold at $6.91. That leaves us with three dicey tech
stocks and if JDSU rallies back by the end of the day we will only have two,
Brocade and Siebel. We are selling the Sun Micro because they are having an
informational meeting tonight and we would rather be out looking on. It
worked for Brocade.
11:41am and stocks have stabilized at lower levels. The selling seems to be
profit taking right now but if we don't rally this afternoon the selling may
1:11pm and the markets are mired at lower levels. We are trying to decide
whether this is the beginning of the pullback. We have JDSU left to sell.
Hopefully we'll get a last hour rally.
2:08pm and we decided to take advantage of the sell off to buy AOL Time
Warner in many accounts that don't own it at $15.60. JDSU is down about 30
cents per share so we won't be selling it today. Looks like stocks want to
head lower. We sold our Fleming at $7.40 for a nice $2 per share profit.
3:02pm and the DJIA closed down 172 points at 8676. The S&P 500 lost 20
points to finish at 913 and the NASDAQ dropped 37 points to end at 1444.
And tomorrow is another day.
26 November 2002 - Morning Post
7:16am and the big news of the day is that the grandchildren are starting on
their way to the farm for Thanksgiving. Also, after months of travail, the
Model Portfolio is now up over 10% for the year. We don't know how long our
luck will last and so we wanted to get the news out in case we head back down
today. Several months ago we said we would sell everything when we reached
the 10% figure but since we are 60% cash and the stocks we own aren't
outrageously over priced we think we'll stay the course, for today at least.
Low priced stocks continued to gain yesterday as the general markets took a
rest. The big cap stocks like PG took a breather down from $95 to $85. Pepsi
had been over $45 and is now at $41. Walgreen is down from $33 to $28. The
pattern in these stocks has been one of lower highs and lower lows in the
rallies of the past few months and that is not a good sign for strength in
the markets next year. But since we are only interested in the next 60 days
we may place some money in Walgreen and Pepsi type stocks if the several day
sell off we envision occurs. We think the pullback may take the DJIA back to
the 8400 level before resuming the year end rally.
All these guesses have the caveat that the Iraq situation continues to only
simmer not boil over. Eventually the White House and Congress will have to
deal with the economy but for now they seem content to keep crying wolf and
playing at war. Too bad those guys making the decisions like De Lay, and Bush
and Cheney and Perle and Wolfowitz and the folks influencing decisions like
Limbaugh and Imus and Kristol and Tyrrell and Buchanan were too busy back in
the late 1960s and early 1970s to go to war in Viet Nam for their beliefs.
They might have a different approach now. But all that is spilt milk and by
the slimmest of margins and voter neglect the Chicken Hawks are leading us to
And that is the only event that can derail the year end rally.
25 November 2002
7:46am and the stock futures remain higher even with the Wal-Mart news. Cisco
was the feature in Barron's over the weekend with a bullish case. And so this
morning UBS Warburg downgrades Cisco. The WSJ is reporting that the Feds are
looking at the way Computer Associates recognized revenues in the past. Seems
the Feds think there might have been some shenanigans moving sales from one
quarter to another to smooth earnings. Now that's a novel idea and it's good
the Feds are right on top of that problem.
Tyco is going to sell $4 billion in converts in December. That's a nice round
number. Roadblocks by truckers in France have slowed commerce.
10:21am and the stock markets are meandering. If today is a harbinger of the
week we are going to have to find a good book to read. We added the BRCD to
accounts at $5.44. We are reviewing individual accounts and adding stocks as
we find warranted. GMH is up 7% on an Australian newspaper story that News
Corp is going to make a bid. Lucent is rising on speculative juices and we
may sell our spec position by the end of the day. A rising tide is raising
all stocks today, or at least many of them. We are content to watch.
Walgreen is making new lows for the year at $28.50. We are interested but the
shares are still a bit rich for our blood. Also with the way the stock is
acting we presume there is a sell recommendation on the street or that the
November same store sales number will be a disappointment. Around $25 per
share or after December 15 we are interested.
We are going to pick up a bit more UAL in trading accounts since the airline
stocks are running today.
12:10pm and we have been buying HAIN at $13.40, Carpenter Tech at $12.45, UAL
at $3.80, SEBL at $8.60 and Masco at $19.25 for accounts. We think Siebel
sold off today because of a reaction to their signing a consent degree with
the SEC and agreeing to a $250,000 fine for Regulation FD violations. That
amount of money says the violation wasn't material.
The volume today in the markets is pretty good, but it seems to be mostly
program related. The DJIA is currently down 19 points but there is no real
12:45pm and we are trying to buy more Masco under $19 per share. We sold the
Lucent at $1.80 per share for a 30% gain in two days.
2:06pm and the DJIA is up 23 points. Breadth is positive and up volume
exceeds down volume by 2/1 on NYSE and 3/1 on the NASDAQ. We were in error in
the morning post when we said the stock markets had been up eight weeks in a
row. They have been up seven weeks in a row. This week we are going for
eight. We sold the Sony we bought several days ago for a $2 per share gain.
We sold at $44.25. $45 has been a resistance level for the past six months.
3:02pm and the DJIA closed up 45 points at 8850. The S&P 500 gained 2 points
to close at 932 and the NASDAQ was higher by 13 points at 1481. We didn't buy
any Masco under $19.
And tomorrow is another day.
25 November 2002 - Morning Post
6:32am and cold weather has arrived in Wisconsin in time for deer hunting
season and Turkey Day. The stock markets finished up for the week on Friday
for the eighth week in a row since the October low. The rally has been
controlled and thus sustainable and even Friday's down close after three nice
up days was a good indicator that there is more on the upside.
In the very short range we would expect a one to three day pullback sometime
in the next two weeks as a mini-test of the strength of the rally off the
bottom. Then we believe that the stock markets will move higher through year
end. Everyone seems to want this scenario to occur and while the markets
don't always give what traders want, at year end the stars and psychology are
usually aligned in favor of the bulls.
Many stocks are moving up out of the trading ranges they have been on for
several months and this action is encouraging the bulls. We plan on staying
with our overpriced but beaten down tech stocks since we are only looking for
a move up into next year and these stocks have bounce written all over them.
On Friday even Brocade didn't make a new low for the year as it dropped $2
from Thursday's close. Today we are going to repurchase in smaller accounts
the shares we sold before Friday's drop. We have sold some stocks that have
risen after we sold but that is the way it is in a rally phase. This year has
been one of survival and we plan to continue our cautious approach until we
see signs that convince us that the economy is on the road to recovery.
Thanksgiving week will be interesting and we will be around to participate if
events warrant. Wal-Mart just announced that it sees November sales at the
low end of range. The stock futures have not had time to digest that news and
they are indicating a slightly higher opening. European bourses are mixed
this morning with London and Germany up and France lower.
22 November 2002
6:25am and European Bourses are mostly green and Japan closed higher
overnight. We learn from CNBC that Prudential Securities will not allow its
analysts to speak with the media unless they are paid. Now that decision is a
public relations nightmare. It must have seemed like a good idea to someone
as a way to show how valuable analysts are. The time for that move was 1999
not at the bottom of a three year bear market.
The WSJ reports that airlines are going to cut fares for business travelers
in an effort to win back their business. What a novel idea!
Defense spending in the next fiscal year will be $100 billion higher than it
was in the last year of the Clinton administration. Ah! Who says we can't
have guns and butter and a war with Saddam?
Doug Kass of
introduced some interesting statistics
yesterday in one of his posts. In the post he says that from 1990 to 1999 the
amount of money taken out of homes for other spending purposes when the homes
were refinanced amounted to about $25 billion to $50 billion a year. In the
year 2000, $100 billion was taken, in 2001 the cash out amounted to $150
billion and so far this year $250 billion has been removed. Now some of that
flowed into the stock markets where it evaporated but probably most of it was
spent. That spending has helped to keep the slowdown from turning into a deep
recession. Doug and we ask the question whether this type of money
availability is nearing its end. Moreover Doug points out that in every other
recession since 1970 the consumer has reduced debt not expanded it as the FED
has cut interest rates. In the 2001 to 200? recession consumer debt has
expanded. Where is this unprecedented debt bubble leading us? Coupled with
the expansion of the federal deficit what is the outlook?
All deficit spending is not equal. And the coming planned tax cuts do nothing
for the folks who would actually spend the money. Some Keynesian economic
theory is needed here to trump the trickle down Laffler theory. Reagan
raised taxes in 1984 and also was implicit in the deal cut by Repubs and Dems
to raise the social security tax by 400% over 15 years to keep Social
Security solvent. No politician wants to acknowledge that fact. And now the
public has adopted the borrow and spend philosophy of the Laffler Curve.
That's why we remain long term bearish.
7:29am and Brocade is trading at $5.80 down from the $7.20 price at which we
sold it yesterday. We'll decide later if we will revisit that stock. We
didn't want to hold ahead of earnings but the bad news is out for the next
three months and we are only looking ahead one month. Siebel is also down at
$8 from its close of $8.80. We didn't sell Siebel because it has no debt and
we are looking for a greater pop in the stock after year end.
A flock of geese just flew overhead. We always take that as a good sign. We
couldn't tell from their honking whether they were saying sell or buy but we
did catch a "keep on trading" honk. Coupled with the meteor shower of Tuesday
morning and the eclipse of the moon on Tuesday night there have been a lot of
natural signs signifying change. What kind of change is the million dollar
9:10am and we are back from the barbershop and the DJIA is now higher after
opening lower on profit taking. The NASDAQ is about to turn positive and the
S&P is a tad higher.
We just repurchased Brocade in larger accounts at $5.40 after selling it
yesterday at $7.20. A little brainpower and some luck were involved in this
trade. We said yesterday that we were selling because we didn't like their
debt load versus cash on hand. We are glad we were reading an incorrect
balance sheet. In last night's financial release we realized that BRCD has
$557 million in liquid assets versus a $550 million convertible bond issue
which pays 2% and is due in five years. The conversion price is $22. BRCD
actually earned money in the last quarter. The reason the stock is off is
that they said revenues will be down in the first quarter. With 235 million
shares outstanding, at its present price the company is selling for $1.3
billion. After subtracting net quick assets of $400 million BRCD is selling
for about 1.5 times depressed revenues. At that level and with enough cash to
see them through the next year, we think Brocade is a good year end
speculation for a move back to $8 or more in the next two months.
We are also buying more Wild Oats around $9.85, not to sow but to own.
Analysts are upgrading the grocery stores after booing for several weeks and
it is only a matter of time till they get around to Wild Oats. We get more
percentage bang for our buck from OATS than Albertsons.
And we are again trying UAL at $3.65 in smaller amounts in a few of our
speculative accounts since UAL settled with the machinists union. Now all
they have to do is get Uncle Sam to basically bet $2 billion of our tax
dollars on their recovery. Isn't crony capitalism grand?
Finally we initiated a position in Masco at $19.50 for a trade in our larger
or trading accounts. Masco makes Delta and Peerless faucets and Merillat and
Kraftmaid cabinets. The company is selling at one times its $10 billion in
yearly sales. MAS has too much debt to place in many accounts but it is on
its low at $19.35 and we only want a move to $24 or $25 after year end.
10:03am and stocks are again lower. Some money is flowing back in to the blue
chips as profit taking continues in the techs. Several brokerages lowered
their recommendation on Cisco and Applied Materials and coupled with the blow
up in Brocade, the tech buyers are pausing. Treasuries are higher in yield
and lower in price over the last two days. The speculators are back trying
for performance and we don't think they will go away. Also we think the bears
will cover their shorts later today.
12:39pm and folks seem to be leaving early for Thanksgiving week. The big
question is do traders want to go home long or short or flat tonight? We are
1:42am and we were just looking at cost prices for an account we manage that
over the years has purchased SPY, the S&P 500 Depository receipts, on a
regular basis. And lo and behold on November 13, 1997 this account began
buying SPY at $92.04. Five years later the SPY are selling at $94.04.
1:48pm and entering the final hour of trading the DJIA, S&P and NASDAQ are
all slightly higher. Breadth and up/down volume are both slightly positive.
3:02pm and it looks like the chickens won the day. The DJIA closed down 38
points to end at 8804. The S&P 500 was off 3 points at 930 and the NASDAQ
gained a fraction to close at 1468. By the way, Brocade traded 60% of its
shares outstanding today with volume of 110 million shares. Siebel acted well
today, after selling off below $8 per share it rallied to close higher.
For the year, the DJIA is down 12%, the S&P 500 is down 19% and the NASDAQ is
The Model Portfolio is up 9% and is 60% cash.
And tomorrow is another day.
22 November 2002 - Morning Post
5:48am and today is the anniversary of President Kennedy's assassination. How
different would the world be had he lived? We know that is a Frost's two
roads question but as with the death of Robert Kennedy and Martin Luther King
we can't help asking it.
The stock futures are a bit lower this morning which is to be expected given
yesterday's run up. We did a bit of selling yesterday to lock in gains. We
missed doing that several weeks ago and rued our buying instead of selling on
the Wednesday after the election. At this time of year everyone talks about
the year end rally and wants to jump the gun. With the rise in the trading
power of mutual funds in the stock market over the past ten years we think
two distinct end of year rally periods have emerged. The first is the period
in early November after the mutual fund year end of October 31, and the
second is the last two weeks of the year. In between those times in many
years we do have a lull.
Whether or not we have a lull in early December this year we are happy to
have taken some money off the table. We have been peripatetic in our trading
these last two months and that is because we remain short term bullish and
long term bearish. The tech stocks we have been trading are still overpriced
on a value basis. But since folks haven't been totally cured of the mania of
the late 1990s the tech stocks still bounce on any signs of life in the
marketplace. And that's why we trade them.
We think that stocks will sell of this morning but we think the bulls are in
charge today and we expect the markets to close strongly higher. Yesterday
we heard a talking head talking about inflation and the FED needing to raise
interest rates next year to contain it. What a difference a couple hundred
points up -or down- makes in the thinking of traders.
21 November 2002
7:38am and initial jobless claims fell 25,000 to 375,000. That's good news.
But last weeks numbers were revised upward from 388,000 to 401,000 so the
good news may be ephemeral.
7:48am and there is a rumor that Lucent and General Dynamics are in talks to
merge. It's a rumor but should give a good pop to the cheap techs at least
8:40am and the stock markets opened higher. No surprise there. Now we have to
see how it all plays out. We are trying to sell The Gap again today and we
are going to let our Hewlett Packard go. Anchovies all, you know. We bought
Lucent at $1.34 for our speculative accounts on the rumor, only for our
9:12am and the NASDAQ is through the magic 1425 number at 1442. Now it has to
hold for the day and the DJIA and S&P have to move strongly higher too. At
the moment the DJIA and S&P are stuck and there seems to be a battle between
the bulls and bears. We sold our HPQ for a $1.75 profit on the news at
$18.52. We were a little greedy with the GPS and missed selling it on the
opening push. We now have it in to sell at $14.20. It's funny but with the
new decimal system of pennies, five cents is a big number when in the old
days the spread was twelve and one half cents on every trade.
10:17am and we sold Brocade at $7.20 per share up 10% today and with a
scratch profit for most accounts although a few including my grandchildren's
are showing a 20 cents per share loss. BRCD announces earnings tonight and
they may be gangbusters. But when the stock sold off two days ago we had no
inclination to buy more which is our indication that we don't have the
confidence we need to own it. We also want to raise cash on this rally. We
were able to sell the Gap at $14.20.
We are kicking ourselves for missing buying the Sprint PCS Wireless when it
sold down to $4 per share Tuesday. We had a bid in at $3.80 and it never went
that low. We may have another chance to add to PCS to accounts that don't own
it in the next pullback.
10:27am and we have had luck trading TLAB so we are offering stock at $8.70
which is a 50 cents to $1 per share profit over a few days. As with several
weeks ago when we sold the TLAB shares at this level, TLAB is not
participating in today's big move and so we are taking that as a sell signal.
10:32am and "the old stockbroker" always told us that he thought there was a
group of 100 or so men who run the country. He always voted Republican but
his hunch was that these hundred families were like the old monarchies of
Europe and that while Republicans and Democrats came and went those 100 folks
maintained their power. This unusual thought, for him at least, that he
shared with us came to mind today with the appointment of Lou Gerstner to be
Chairman of The Carlyle Group. The Carlyle Group represents the normalization
of "the old stockbroker's" theory. The Carlyle Group was created in the late
1980s when some folks from the Reagan Administration created a fund for
investing. There are no public records of the size of the fund or who the
investors or principals are. Gerstner was CEO of RJR Nabisco, CEO of IBM and
now he joins the Great Pooh-Bahs. Among the folks associated or invested with
the Carlyle Group that are known are Frank Carlucci, Bush #41, John Majors,
and the Bin Ladin Clan from Saudi Arabia were and still may be investors.
Imagine if President Clinton's family had been associated with such a group.
Tom DeLay would have already impeached and shot him.
12:01pm and we just finished selling a bunch of stocks. We know we have been
active the last two months but the performance has justified the activity. We
don't believe this rally today is the end of the bear or even the beginning
of the year end rally. We think it is a rally in a bear market and we still
look for a December swoon. With that thought in mind we wanted to raise some
cash and book some profits. In addition to selling GPS, TLAB, and BRCD we
sold AMD which we just bought two days ago for a scratch profit or even. Our
theme in the selling we are doing today is to sell those tech stocks with
debt and keep the ones with no or little debt. After we bought AMD it swooned
on us and we didn't have the inclination to buy more so it became a sell for
cash candidate. We also sold the EMC we repurchased in larger accounts
several days ago at $6.70. We made about 20 cents on the trade which is
better than a loss and we are keeping the EMC we have in many smaller and non
trading accounts since EMC has negligible debt. We sold our entire position
in PCS for a nice profit. It may go higher as did AWE but we are happy for
the profit and we'll be interested if revisits under $4 per share. We sold
Kyocera at $61.12 for a $4 per share gain. Finally, we sold Veeco for a $2
plus per share gain at $12.50. And now we are going to get some brunch.
2:06pm and with less than an hour of trading left the DJIA is up over 200
points, the S&P is up 19 points and the NASDAQ is up 45 points. Breadth is
2/1 positive and up volume exceeds down volume by 4/1 on the NYSE and 8/1 on
the NASDAQ. The bears are about to make their sell/stand but the markets look
too strong for them.
GE is up $2 per share today after reserving billions and announcing a lower
earnings forecast for the next year. That's why we are doing some selling.
3:02pm and the DJIA closed up 225 points at 8847. The NADSAQ gained 48 points
to close at 1468 and the S&P 500 was up 19 points at 933.
And tomorrow is another day.
21 November 2002 - Morning Post
We are going to try to have a morning post most days by 7:45am and we are
starting today. We will add more thoughts after the close.
6:44am and GE is going to take a $1.2 billion after tax charge to increase
reserves at Employers Reinsurance. Oops, does that mean that CEO
Extraordinary Jack Welch under reserved to help make numbers. GE Industrial
is making billion dollar capital contributions to Employers RE and GE
Capital. In August of 2001 we predicted the need to clean up after Jack left.
We told you so as they say. The folks at CNBC should change the name to
GECNBC with all the talking and supporting they do of the stock. No matter it
still is half the price it was when Jack left.
Contrasted with that negative news we have Carli Fiorina, the Queen of
Techland and CEO of Hewlett Packard announcing last night that HWP exceeded
expectations. Can that be true? Can a woman really run a DJIA company? The
talking heads are now dissecting the numbers. Off with the volume.
Irony aside, the HWP news has given a pump to tech stocks this morning and we
will have to see how it all plays out. We think the news is a short term
positive but longer term we still await action on the economic front that
will turn us bullish. We have seen some suggestions that tax cuts like
raising the child credit from $600 to $1000 next year and elimination of
marriage penalty will be accelerated by slowing the drop in the top rate.
Those would be a start but we aren't holding our breathe. Another $1000 to
every American would be a real stimulus. The White House is continuing to keep
Bush in election gear since that is a safer place than trying to deal with
the economy. We don't think praying is going to solve the problems. But Carl
Rove is a smart guy and to get Bush reelected he knows he has to jump start
the economy. Maybe reality will trump payback?
European Bourses are higher on the HWP news and Asia including Japan also
closed higher. That's given a firmer tone to our markets. Today will be a
real test for the bulls. They have to get the NASDAQ above 1425 and keep it
there. We don't think they have the firepower to get the S&P 500 above 950
but if they do it is Katie bar the door.
20 November 2002
7:35am and we are in the office after getting the horses in the barn for the
farrier. Housing starts were down 11% versus a consensus guess of 7%. New
housing permits were up 2% versus a consensus guess of down 2%. The stock
futures are suggesting a day similar to yesterday with a weak opening.
There isn't a lot of market making news and it is probably going to take some
positive or negative Iraq news to move these markets up or down.
7:59am and Maria the Mouth is predicting a higher market. The futures don't
show that and so we'll stick with our prediction. She is saying negative
stuff about Hewlett. Funny how the talking heads can influence the short term
movements of stocks. We are waiting on the HPQ till after earnings unless HPQ
tanks during the day.
PCS sold off yesterday and so we are going to add Sprint Wireless to accounts
that don't own it today if it continues lower. News on Siebel Systems that
they are being sued for mispricing options is pressuring the stock so we are
going to buy the stock at $7.50 for folks who don't own it. SEBL has $2
billion in cash on hand which amounts to $4 per share.
9:21am and stocks are slightly higher after a down opening. Home Depot is off
on all the negative publicity of the last day. It is now a value stock so we
guess growth stock investors have to sell it.
One fact we find of interest is that one of the reasons given for the stock
market malaise is terrorism. Actually it is the talk of terrorism not the
actual occurrence of it that is the depressant. Terrorism is going to occur.
Hopefully the powers that be have a better grasp on the risks now than they
did before. But stocks will adjust as they have to war and pestilence and
even Democrat Presidents.
11:33am and the horses with feet trimmed are happily grazing the stubble in
the fields. Stocks are having their own celebration with the DJIA up over 100
points. We are trying to sell The Gap at $14.20. We decided we would rather
own Home Depot at 15 times earnings than GPS at 25 times. Also, we have a 50%
gain in most accounts. Pigs, etc., and even the Gapster is an anchovy for us
12:44pm and the DJIA is up 120 points. Maria was right. The NASDAQ is back
above 1400 and flirting with the 1425 break out to the upside number that all
the techies are watching. Hewlett is up in front of earnings which means it
will sell off when earnings arrive tonight. Breadth is 2/1 positive on the
NYSE and NASDAQ and up volume exceeds down volume by 2/1 on the NYSE and 4/1
on the NASDAQ.
1:02pm and the speculators are back with a vengeance. We saw Qwest up $1 in
early trading and were ruing our failure to wait a few days to sell. Then we
saw Broadwing up 50 cents per share. We sold yesterday from the few
aggressive accounts where we held it. We didn't mention owning BRW because we
didn't want any readers buying it. But the jump in these two stocks
demonstrates that the speculative juices are running. Hopefully they'll keep
running the cheapies through Friday so Brocade will get a pop after earnings
are reported tomorrow and we can sell with a bit of a profit.
1:19pm and we sold some WorldCom at 20 cents today for a client who needed a
loss. Jim Cramer of www.thestreet.com
made the point today that the 100
million shares of WCOM that trade each day are the best argument for not
privatizing Social Security. These WCOM shares are worthless. Yet there are
folks buying and selling these shares every day to the tune of $20 million.
Eventually the last musical chair folks will lose all the money they have in
this stock. Unfortunately there are many folks who don't realize that rule
number one of the stock markets is caveat emptor.
1:39pm and CNBC is comparing the wartime economy of WW II to the present
wartime economy. Hey guys and gals, the election is over and the Repubs won.
There is no reason to carry on the "we are at war" charade any more.
Terrorism is going to be with us forever as it always has been. The only
difference is that the recent terrorism was created by "foreigners" whereas
Oklahoma City and Shays Rebellion and Bloody Kansas and the Civil War and
Wounded Knee and on and on were the home grown variety. We know endless war
talk helps the ratings of talk radio and mindless TV and serves a useful
political purpose but...
2:59pm and the bears tried to sell stocks off in the final hour but failed.
We have to leave a bit early. At this time the DJIA is up 140 points at 8615.
The S&P 500 is up 16 points at 913 and the NASDAQ is up 44 points at 1418.
Breadth is positive 2/1 and up volume exceeds down volume 2/1 on the NYSE and
4/1 on the NASDAQ. We sold some but not all of The Gap at $14.20.
And tomorrow is another day.
19 November 2002
7:27am and we rose early today to watch the comets coruscate in the eastern
sky. The moon was so bright that we think we missed half the comets.
Nonetheless it was a beautiful night with an almost full moon and flashes
every few seconds all over the eastern sky.
Back in the world of commerce, this morning looks to have a lower opening in
store for stocks with the European Bourses all lower.
Several analysts are reporting that General Electric is going to take a $1 to
$2 billion charge for insurance reserves. GE also needs to have some money to
manage future earnings. What a joke.
Consumer Price Index up 0.3%, core rate up 0.2%. No news.
Home Depot reported in line earnings but same store sales were down 2%. Mr.
Market didn't like the sales number and so HD will open lower. We are
interested around the $25 level which is where we traded it from last month.
As with yesterday we are continuing to pick away at stocks for individual
accounts without making any big bets.
8:19am and AMD is going to sell convertible bonds today so the stock will
drop as the folks who buy the converts short common stock to hedge their loss
potential. At $6 a share the exercise seems ridiculous but old habits die
slowly on Wall Street. Two years ago, shorting a stock at $40 per share when
a company issued convertible bonds worked since most of the stocks dropped in
the subsequent bear market and the drop in the share price to say $10 hedged
the drop in the price of the convertible bond. But it is goofy to put that
same kind of hedge on with the share price at $6. If AMD bond buyers really
think the stock is going to $2 per share or bankrupt they should pass on the
bonds, not short the stock. Bur the price drop may provide a buying
9:29am and the DJIA sold off about 75 points at the opening. The NASDAQ was
off about 15 points. Home Depot dropped to $25 and we bought shares at $24.79
equal to the Sears shares we sold last week. At $25 HD sells at 15 times
earnings which is about as low as it gets historically. We think it is a good
trade from these levels. We also repurchased the EMC in trading accounts
where we sold it last week. We bought at $6.35 which is close to where we
sold it. We may be a bit anxious on this stock but we wanted to get back in.
We are also buying AMD under $6 per share and also odds and ends for various
11:55am and the stock markets are range bound in desultory trading.
2:01pm and the Homeland Security Bill has been passed and so we all will
sleep safely tonight. The stock markets continue to vacillate and Treasury
bonds are a bit stronger today. We completed buying the AMD at $5.85. There
isn't much happening today and the final hour may give an indication of
whether the bears or bulls have more ammo.
3:02pm and many of our tech stocks sold off in the last hour. Wild Oats
gained though. The DJIA lost 12 points to close at 8475. The S&P 500 was down
4 points and closed at 896. The NASDAQ gave up 20 points to close at 1374.
Breadth was negative and down volume exceeded up volume 2.5/1 on the NASDAQ
and 1.5/1 on the NYSE.
And tomorrow is another day.
18 November 2002
7:12am and after a weekend away from the office and walking in the woods for
two days, we are looking forward to an interesting week in the stock markets.
This morning the stock futures are higher following the lead of European
bourses. Japan was lower overnight but what else is new. Hopefully our
economy does not follow that track.
Wal-Mart reported this morning that November same store sales are going to be
at the low end of the 2% to 4% range. And Federated Department Stores has
said that same store sales will be down 2% to 4%. The Citigroup, Sandy Weil,
Jack Grubman, Nursery School scandal has taken on the proportions of the
Martha Stewart imbroglio. The press loves the story but the reality is that
Grubman is toast and Weil winds up with a tarnished reputation but with job
and billions intact.
We are going to be reviewing accounts this week and adding a few stocks. We
have our eye on HAIN, AOL, and HPQ. Earnings for HPQ are Wednesday so we will
wait for those earnings before buying.
8:44am and the markets are higher with techs leading the way. There has been
a lot of trading and up and down movement but over the last month the major
measures have risen very little. The only real gainers have been tech stocks
and that probably is because they have been so heavily shorted.
Several commentators have mentioned that Schering Plough might be a good buy
now that the CEO who loused things up is gone. We are looking but with the
Enron experience we wonder whether a CEO leaving is a buy signal or a sell
12:08pm and we have been slow to post today because not much is happening.
The DJIA has been up and down 50 points without much conviction. Almost seems
like the beginning of Thanksgiving week. We suppose it will become more
interesting as the week progresses. We are just adding stocks we already own
to accounts and don't want to do much here.
12:50pm and breadth is on the NYSE and NASDAQ with up volume exceeding down
volume 2/1 on the NYSE and 3/1 on the NASDAQ.
1:41pm and under the Homeland Security Act the White House is going about the
process of removing 850,000 folks from the US Government payroll and
replacing them with private contractor folks who presumably will make less
money. This may help the deficit situation although we are willing to bet it
won't. In times of recession the government usually seeks to help create high
paying jobs. The economic policy confusion of the current Congress and White
House is the reason we think the present rally is only an over year end
trading occurrence and is not signaling the beginning of a new era of
prosperity and job creation.
2:51pm and we bought AOL in a bunch of accounts at $15.25. That's higher than
where we last sold it but the markets are in different condition now and we
want to take advantage of year end. We also picked up Sony Group and Kyocera
in larger accounts at $42 and $57.25 respectively. We have made money in both
these stocks in the past and they are down significantly from their highs.
3:02pm and the markets turned mixed at the close. The DJIA lost 92 points to
close at 8486 and the S&P 500 was down 9 points at 900. Finally, the NASDAQ
closed at 1393 down 17 points.
And tomorrow is another day.
15 November 2002
7:10am and as we begin the day the stock futures indicate a slightly higher
opening. European bourses are positive and up about 1%. Where are the markets
going? For fun we though we would present a paragraph on this subject from
Jeff Cooper a technical analyst on the website
www.realmoney.com. Jeff is a
follower of a fellow named Gann who created a technical means of trading the
markets which has to do with something called the Gann Square of 90. We don't
profess to understand this theory but the terms used are colorful. By the way
Jeff has been right on for the past six months.
This morning Jeff wrote: "Thursday, I stated that the S&P was poised for a
Slingshot buy signal on any move above 893. Well, 893 was recaptured in the
opening minutes of trade on Thursday. In the process, the S&P catapulted back
above its 20-day moving average, also at 893, revalidating our Holy Grail Buy
Signal. Remember that the importance of S&P 894 is highlighted by the fact
that it is also 90 degrees down (in the Square of Nine Chart) from the
important 924 resistance". And there you have it. Jeff is bullish for now.
JP Morgan has downgraded General Electric to underweight. One would think
that the drop in the share price from $50 to $25 has gone a long way toward
doing that in most portfolios. How the mighty have fallen.
We learn this morning that the US Army has dismissed 6 interpreters fluent in
Arabic because they are gay. And no government agency will hire them. Guess
the Great War against evildoers who also hate gay folks has to take a back
seat to conservative and fundamentalist prejudice.
We would like to expand on our mention yesterday of companies filing Chapter
11 bankruptcy to solve their financial problems of too much debt and too
little income. As the WorldCom bankruptcy is demonstrating the courts and
financial types including the major investment houses that recommended WCOM
to investors until the bitter end have no interest in protecting the
shareholders who were theoretically the owners of the company. The common
shareholders are wiped out and the bondholders will, along with management
become the new shareholders of the reconstituted WCOM. Jim Cramer on his
has railed against the unfairness of allowing WCOM
to emerge from bankruptcy since that will give them a competitive advantage
over all the other telecoms that are struggling to pay their debt and
preserve their shareholders ownership. That's because WCOM debt will have
been significantly reduced nobody on Wall Street or in Washington want to
broach this topic since they were all part of the problem. And the WorldCom
and US AIR bankruptcies are placing pressure on all the other telecom and
airline stocks with large debt to think about screwing their shareholders and
seeking Chapter 11 protections. Then when the companies emerge from
bankruptcy the boards of directors will grant stock options in the new
companies to executives. So the only loser is the shareholder. That is the
reason for our quick exit from the UAL trade yesterday since UAL is using
bankruptcy as a bargaining chip with the machinists. We think the machinists
are going to stay tough on wage give backs that they just received after five
years of negotiating. And the bankruptcy option is what causes us sleepless
nights with Qwest and we are probably going to sell the position and let
others take the risk. We will be comfortable with a stock like Ford if we
ever decide to buy it because the whole Ford family fortune is tied up in
Ford common stock. Most of the tech stocks we own have little debt and large
cash positions and relatively high actual ownership of common stock by
7:30am and the Producer Price Index was up 1.1% in October with the core rate
up 0.5%. That number represents prices to producers. On the news Treasuries
are selling off and the stock futures have given up some gains.
Dell announced results last night that haven't wowed the street, and in
pre-opening trading DELL is lower. Merrill has cut recommendations on six
chip stocks of which one is Intel and so it is trading lower. We don't know
whether the cuts are justified or not, we jus wonder why anyone follow these
folks who have been so wrong for so long. That these folks still have the
power to move markets is a sad reminder of the lack of original thinking
among stock brokers, pension funds, mutual funds and bank trust departments.
9:08am and stocks are off slightly. We are going to sell our Qwest position
at a slight loss but an overall profit since September. After yesterday's
experience with UAL we are leery because the company still has not issued
clean financials and we have no idea what lurks underneath the surface. The
SEC continues to investigate and we would rather give up any future gain for
peace of mind. There isn't much difference for perfidy between Joe Nacchio
and the folks who collapsed WorldCom. We know we have been flipping this
stock around in accounts but these are changing markets and challenging times
and until we are proven wrong we would rather error on the side of caution
and quick decisions. It all reduced to the fact that with Qwest we started to
worry about what we could lose versus what kind of gain we wanted and we
decided the risk was not worth the reward.
As we completed selling the Qwest the following item appeared on the WSJ
website: "Qwest Communications said it won't file its third-quarter report on
time because it can't determine the impact that a current analysis of
operations and pending financial restatements will have on results".
10:02am and the DJIA is down 54 points. Michael Capellas the new CEO for
WorldCom in live on CNBC waxing eloquently about the opportunities in
WorldCom. Nice options for Mike and a great salary and no debt. Another
Michael, Michael Powell, the nepotic Chairman of the FCC on the strength of
his father's name, is allowing this travesty of WorldCom continuing to exist
in the name of Capitalism. In true capitalism companies that go broke, stay
broke and go away. What we are experiencing in this economic crisis is "Who
You Know" neo-capitalism that will eventually lead to the ruination of many
other companies that played by the rules.
11:09am and today is unexciting. Stocks remain lower in moderate trading. The
downgrade of GE is probably a bit of a drag coupled with the muted news from
Dell last night. Since today is an expiration day we may get some fireworks
in the last hour or two.
11:57am and several clients have called on their receipt of forms to complete
on the Bankers Trust litigation. We reviewed our records and we think that
all our customers made a profit on our trading in that stock in 1998. So we
have no beef with BT. But even if we lost money we wouldn't file. That's
because as a matter of policy don't file in these cases. We think 99% of the
law suits that arise from the drop in the price of a stock are without merit
and we wish the companies would not settle them. If we don't like what a
company has done we sell the company. We are waiting for new ground to be
broken when a lawyer files a lawsuit on behalf of short sellers who loose
money because a stock rises on better than expected news.
2:15pm and the markets are rallying. We bought Seibel at $7.83 in accounts
where we sold Sears two days ago. We also have been slowly adding Hain
Celestial under $13 per share and CTS Corp under $6.75 to accounts.
3:02pm and the DJIA closed up 36 points at 8579. The S&P 500 gained 5 points
to close at 909 and the NASDAQ lost a fraction to close at 1410.
For the year the Model Portfolio is up 6%. The DJIA is down 14%, the S&P 500
is off 21% and the NASDAQ remains off 27%. We will post the updated
over the weekend.
And tomorrow is another day.
14 November 2002
7:39am and this morning's news contains info that Sandy Weill, the CEO of
Citigroup, helped get analyst Jack Grubman's children get into a fancy
preschool in Manhattan. The talking heads on CNBC are appalled that anyone
would question the motives of Weill. What's most interesting is that the
allegation is that this help was part of the reason Grubman recommended AT&T.
We don't pooh pooh the info because we have been around long enough to know
that fortunes turn on such seemingly insignificant actions. To confirm this
just read the story of Long Term Capital Management where fortunes were lost
because lenders wanted to play a certain golf course in Ireland.
By the way, whatever happened to Enron and the California energy pricing
On an historical note we learn this morning that Household International
which was known as Household Finance in the good old days of the last century
is going to be acquire by HSBC Holdings in a $14 billion all stock deal at
$30.04 per share. HSBC used to be known as the Hong Kong and Shanghai Banking
Corp which back in the late 1970s acquired Marine Midland Banks. We are
reiterating this history because Marine Midland and Household Finance were
two stocks that were favorites of the "old stockbroker in the sky". We follow
and trade the same stocks over the years and in doing so they become like
family to us. Actually for the stocks that make us money we think we might
have a greater affinity with them than the CEOs who have come and gone over
Speaking of CEOs leaving we learn today of the departure of the CEO of
Schering Plough. We guess the subpoenas served yesterday were the final
Honeywell announced a $1.7 billion pension liability last night and the stock
is going to open $3 per share lower. This event reinforces our rule of
selling trades when they don't work out. A $2 loss could have been a $5 per
Speaking of losses, several clients have asked about our plans for Sears. We
are always amazed by how low stocks go when the street changes its opinion.
We don't like the loss we have in Sears but we do like the stock. We are
waiting to buy more if it goes into the teens. In taxable accounts we have
till the end of the month to double up to set up a short term tax loss by
year end. When we bought Sears we bought to own for a while and not day
trade. We were just too early but not as early as the folks who paid $50 per
share several months ago. (See below to see how we can change our minds
within a day. Don't know whether that's good or bad but over the last five
years it has worked for us.).
Japan went to new lows and Europe is up. Retail sales this morning were up
0.7%. Treasuries are dropping in light volume which may just be profit
8:17am and stocks will open a tad higher today. Applied Materials closed at
$14.70 last night. After the close it announced less that expected results
but said it would be profitable in the next quarter and this morning it is
opening higher. That's a good sign for the bulls and not good for the bears.
8:59am and the stock markets popped higher at the opening with the DJIA up
over 100 points. We are of the opinion that we won't have a sustained rally
till the War issue is resolved. With that said we decided to sell the Sears
position at a $5 per share loss when it popped up $1 per share this morning.
That price is $3 above yesterday's low and we think that Sears will become a
source of cash over the next month and that we will have a chance to
repurchase at lower prices before year end. The losses in the credit card
operations create an imbroglio for us and we can't get a handle on that part
of Sears. The losses on those operations are fertile ground for bears to
wander and feast on rumors. If Sears has lower same store sales in December
as it did in November the bears will continue to short the stock and it could
reach the teens. As a long term investment Sears is definitely attractive at
these prices but we have made all our money over the past four years as short
term investors and for now we should stick with that philosophy. This is a
tough loss to take but the fact that all our other stocks are working for us
today mitigates the pain.
11:41am and stocks remain higher with bonds lower. We sold our position in
SPDR Financials at $22.52 for a 30 cents per share profit or loss depending.
We also sold EMC in our large accounts a $6.36 for an average $1 per share
profit. We are maintaining the position in many accounts but the stocks has
had a $1 per share range every two days for the past week and so we are
trying to trade that range in our large accounts where the trades realize
$1000 plus gains per trade. We also are selling half our holdings in AMR in
our large accounts. We have a $2 to $3 per share gain that we have decided to
try and realize, again with the thought of buying back lower. We may be too
cute on this one but we are willing to take our chances. We are also going to
speculate on UAL in the accounts where we sold AMR by buying a like amount of
UAL at around $3.60 per share. It looks like they will stay solvent through
year end and we think the stock has 50% to 100% short term gain potential. We
are making this trade in our trading accounts only.
2:06pm and as we were enjoying lunch we saw a piece crossing the tape that
UAL was seeking debtor in possession financing in case they file bankruptcy.
Oops, our very smart switch mentioned above just took on very dumb
proportions. We immediately sold the UAL at $2.90 for a lousy two hour 70
cents per share loss, and we sold the rest of our AMR holdings because if UAL
files bankruptcy AMR may have to do the same thing to stay competitive. We
made a nice $2 plus profit on the sale of AMR at $6.91 so all was not lost or
a loss. And as our our late partner Don Yarling used to say, airline stocks
are the biggest anchovies of all.
We also picked up a few share of Veeco Instruments at $10 for a trade, and
added more Hain Celestial to accounts at $12.90. We bought more CTS at $6.55
and Fleming at $5.08 for a few trading accounts.
3:02pm and the DJIA closed on its high for the day at 8542 up 143 points. The
S&P 500 gained 21 points to finish at 904 and the NASDAQ jumped 50 points to
And tomorrow is another day.
13 November 2002
6:14am and the stock futures are down. In the last hour yesterday the tobacco
and spirits stocks all tanked. At first we thought it was because - oh well
we won't go there-but it turned out to be because MO said that revenue
forecasts were too rosy. Also folks are starting to talk about deflation and
no pricing power. Finally, these stocks were the last refuge and it is
logical that they should take a hit too. In after hours Nordstrom's dropped
$3 per share when they said sales were under plan. We are getting close to a
bottom or a war when they bomb stocks like they are doing these days at the
first hint of bad news.
We are happy with our cash position and our speculative stock holdings. Sears
is taking gas but it is now at a 4% yield and 6 times earnings. It shouldn't
go lower but...
The European bourses are all lower by over 2%. That isn't going to help our
markets. And Guru Greenspan appears before Congress today and will be
questioned about the economy and other matters. Eliminating the double
taxation of dividends is about to become the cornerstone of economic policy.
The Citigroup/AT&T soap opera continues. It isn't worth repeating except that
the CNBC talking heads choose to believe the CEO rather than the analyst. Big
7:07am and Merrill has raised ratings on Kraft which was down yesterday and
BUD has reaffirmed guidance.
7:53am and Goldman Sachs cuts Sears to under perform. Sears is now trading at
$22 down from $62 in three months and Goldman sees fit to change its rating
from in line to under perform.
10:31am and we are back from taking the dogs to the groomers. Saddam has
accepted UN inspectors for now and stocks have rallied. For how long we don't
know. Sears was off a couple of dollars in the early going but has bounced
back a bit. The speculative stocks are higher. We sold the rest of the
Alliant we own and now will concentrate on the XLU.
12:09pm and stocks are backing down. Sears remains $2 lower with a 4% yield
and selling at 6 times earnings. Analysts are again ga ga over Wal-Mart which
is priced at 33 times earnings with a 0.5% yield. Now we know WMT is going to
be the only store in the world soon but with $45 billion in sales we think
Sears will be around for a while. The Wall Street lemmings are going over the
cliff on Sears.
1:39pm and the stock markets are turning lower with only the NASDAQ in
positive territory. Breadth is slightly negative on the NYSE and slightly
positive on the NASDAQ. Same goes for the volume figures. We'll see what the
final hour brings
3:02pm and the DJIA managed to recover to gain 12 points for the day and
close at 8399. The S&P 500 lost a fraction to close at 882 and the NASDAQ was
up 11 points at 1361.
At the close we bought Wild Oats at $8.40 for accounts where we had sold
Alliant over the past two days.
And tomorrow is another day.
12 November 2002
6:50am and the Iraqi parliament just said No! Talking heads are telling us it
doesn't really mean no.
We are not war mongers as readers well know. But we are tired of both sides
yanking our chain. So let's let the warriors get it on and get it over so we
can deal with some real problems like starving children and lack of medicines
and over population and education. It's just too easy to let the war talk
monopolize our time. We want folks to see that after war talk there is no
agenda or ideas to deal with our economic or social problems except
eliminating the double taxation of dividends and making the estate tax repeal
The stock markets closed right on support last night and look to be opening a
bit higher this morning. Since the bankers are back to work today we'll find
out how the world looks with their particular genius mixed in.
The sales we made yesterday raised sufficient cash. We are sticking with the
volatile low priced speculative stocks because when the year end bang comes
we expect twice as much or more upside volatility as we experienced last
week. That up movement which rapidly evaporated gave an inkling of the
possibilities when the war issue is resolved and the first inkling economic
recovery surfaces. Till then we expect to back and fill.
Hain Celestial is making new lows under $13 and so we are going to be picking
Wild Oats has moved lower from our purchase price. It had the same kind of
price movement two years ago and eventually ended its fall at $5 per share.
New management has a much better handle on what is happening in the
marketplace this time around. Last time same store sales were falling month
after month on a failed expansion program. This time same store sales are
rising on a month over month basis even though we are in difficult economic
times. We think the selling is coming from the new institutional shareholders
who purchased stock on the public offering several months ago after the road
show and don't have familiarity with the stock and it's almost annual year
end swoon. And so we plan on continuing our accumulation.
7:42am and we read that snowmobiles will be allowed in Yellowstone and Grand
Teton National Parks. And so the change begins.
8:37am and our screen is a sea of green as stocks open higher on no news.
There is a theory that holiday moves are counter to the real markets
direction. We have always been of the opinion that holidays give the true
direction for the markets because only folks who really want to do something
do. Whatever, we like the higher today even with our selling of yesterday
because we want to make some dollars back from last week.
10:46am and the DJIA is up over 100 points. Breadth is 2/1 positive and up
volume exceeds down volume by 10/1 on the NASDAQ and 3/1 on the NYSE. The
up/down volume is indicative of the small speculative tech stocks moving
higher. We sold our Honeywell trading position for a $1.80 per share loss and
we are selling more of the Alliant at a $2 to $3 per share loss. We bought
Goodyear at $6.75 with part of the proceeds from the Honeywell.
1:18pm and the DJIA remains 100 points higher. Tech stocks are bouncing
again. We bought Siebel at $7.75 and Tellabs at $7.10 in accounts where we
are taking our loss on Alliant. We also are buying more Qwest at around $3.82
for many accounts. We are bidding on Wild Oats at under $9 per share to add
to accounts and we picked up some CTS at $6.25. We can't tell whether this
rally is real or not but we are enjoying it nonetheless.
3:02pm and stocks gave up a lot of their gains in the final hour. Guess the
rally was not real. In the final hour Phillip Morris lost $5 per share on
news that sales growth was under pressure. Other food stocks like Kraft and
Bud also dropped.
The DJIA did manage to close 27 points higher at 8386. The S&P 500 was up 7
points at 882 and the NASDAQ gained 30 points to close at 1349.
And tomorrow is another day.
11 November 2002
7:16am and on a cloudy moisty morning the temperature has turned lower by
about 20 degrees and so the wood fire in the stove in our office is welcome.
Stock futures are indicating a lower opening and with the Veterans Day
holiday bank closings we would expect low volume and high volatility.
War talk permeates the air and we may wind up being wrong on our no war
projection. Even so, we are on the tail end of a three year rather severe
market correction. The time of year and past three year downturn creates a
risk/reward ratio that is favorable in our view. That doesn't mean that our
holdings and the markets won't be volatile, but we plan on accepting the
volatility for the potential reward. Our assumption of risk only applies to
the next few months and can change at any time
We spent the weekend questioning our failure to sell the news on Wednesday
after the election. We sold a few issues but we continued to buy because we
were "hot". But Wednesday turned out not to be the day to buy and so we have
suffered a bit on a short term basis. The main reason we didn't sell was that
we think the speculative stocks we own will trade much higher over the next
few months. The big cap stocks are in the portfolio for 20% gains while the
speculative stocks are there for 100% gains.
We plan on continuing acquire utility stock exposure by buying the SPDR
Utility Trust (XLU). XLU owns a package of utility companies, some of which
are under pressure and we think that the XLU is a safer way to play the
utility stock sell off because of the diversification offered. With the DJIA
Utility average of 50% from a too high high, we feel there is a 20% gain
potential over the next year. And the XLU has a dividend yield of close to
The SPDR Financials Trust offers the same diversification in a package of
financial stocks and we are looking for the same potential gain. The yield is
9:19am and stocks are a bit weaker. We are selling our Albertsons for a $2
per share loss at $20. We are also taking a $2 per share trading loss on JP
Morgan. We are selling Schering Plough for 75 cents per share gain and we are
selling Corning Glass for a scratch profit. We are selling the Corning
because we want to repurchase a portion of the Qwest we sold last week. The
judge ruled in Qwest's favor. We think Qwest and Sprint PCS Wireless have
more bang for the buck than Corning. We hope to sell our trading position in
Honeywell by day's end. We are raising some cash which is what we should have
done last Wednesday. As we said earlier we are inclined to maintain our
speculative positions and raise cash from our big cap stocks. The losses on
the big caps we are selling today are in offset by the gains we made several
weeks ago in BP, G, COP and PNC. Had we followed our game plan last week we
would have sold these stocks even and looked smarter. But even though we
missed an opportunity we are following through today.
10:09am and we were able to repurchase a part of the Q we sold at $3.88. We
are also buying EMC at $5.40 for accounts where we sold Albertsons. We sold
the Albertsons with the idea of buying it or Safeway back in mid December, if
the spirit moves us. Every analyst has Wal-Mart putting these companies out
of business because Wal-Mart is in the grocery business. We don't think that
is the case but these stocks have become a source of funds for institutions
and will probably be under pressure through year-end.
We sold Baxter at $26.20 for 70 cents per share loss. We have no great love
for Baxter and we would just as soon deploy the cash in other issues over the
next month. We bought BAX as part of our big cap trading package last month.
12:03pm and the DJIA is down 1.5% as is the S&P 500. The NASDAQ is off 2%.
Volume is light
1:24pm and a fellow is on CNBC extolling the wonders of single stock futures.
Lower margin requirements, shorting on downticks and other terrible ideas are
all part of the package.
2:29pm and now deflation along with war is the worry on CNBC and we are
making new lows with the DJIA down 175 points.
2:45pm and we are going to sell the individual utility stocks we own. We
don't have the stomach for the up and down daily movements in these issues.
And so we sold TXU at $14.75 for a scratch profit. We sold Xcel Energy at
$10.10 for 75 cents per share loss. And we sold Duke Energy for a $1 per
share loss. We are going to concentrate on the SPDR Utility Trust which owns
a bunch of different utility stocks. We want to catch the overall move in
utility stocks and capture the dividend yield which we do with the XLU. After
owning the individual issues for a few weeks we realize we aren't comfortable
with the volatility. We are trying to work out of the Alliant Energy. We sold
some in taxable accounts for a $3 per share loss but we will probably hold
what we currently own for a while more and hope for a rally.
3:02pm and the DJIA closed down 178 points at 8358. The S&P 500 lost 18
points to close at 876 and the NASDAQ dropped 40 points to close at 1319.
Volume was holiday light. 8250 on the DJIA and 875 on the S&P are support,
and stocks closed just above those numbers.
We've raised cash today because the markets zigged when we thought they were
going to zag.
And tomorrow is another day.
10 November 2002
3:42pm and we are back in God's country after our sojourn in the "Windy
City". We have no great thoughts to pass on. Since tomorrow is Veteran's Day
we'll have time to share our thoughts of last week that we are still
processing. The Model Portfolio
is posted. The Model dropped about $2000 in
value but still remains 5% higher for the year and 54% cash.
7 November 2002
6:10am and as we turn on CNBC we see Jack Welch of GE fame which just by
chance owns CNBC defending the obscene benefits he received as CEO Emeritus
of GE. And of course all the other talking heads in a display of obdurate
obeisance agree with Jack. So much for hard news this morning.
The stock futures are indicating a softer opening. Last night Cisco announced
pro forma earnings of 14 cents versus and expected 13 cents. Revenues were a
bit higher than expected at $4.8 billion. The share price of Cisco rallied $1
on the news. Then the conference call began and executives of Cisco ventured
that next quarter's sales will be down 4% and the share price dropped back
$1. By the by, Cisco actually earned only 8 cents per share because it had to
write down some of its investment portfolio. But that's another story for
So that news leaves the stock futures down and the markets trying to discern
what will be the efficacy of the Fed's 50 basis point rate cut. Obviously the
Fed thinks the economy is in trouble but we don't think that should be
considered new news. That the Fed is worried enough to cut 50 basis points is
news but it also demonstrates a new willingness to get ahead of the markets
on the issue.
Our immediate concern is to decide whether the failure of stocks to react
positively to the news signals the end of the current rally. We don't know.
The rally does deserve a rest. But will the rest be interrupted by more
fevered preparations for an invasion of Iraq. Our take on the subject is that
the Iraq War talk was an election ploy and that while the Bushies will
continue to talk tough they will allow the inspection regime to do its thing
for at least a month or two. And if we do invade it will be an invasion to
secure the oil fields and to try and get SADDAM. But the US will let the
cities of Iraq pacify themselves and not engage in door to door fighting.
Without oil Iraq has nothing. And that's our arm chair quarterback view.
We saw talk of Qwest declaring bankruptcy if a ruling goes against it today
and so we are going to take our profit and move some of the money to Sprint
PCS. We may also take some AMR money off the table since the stock has almost
doubled in the last week.
7:30am and jobless claims dropped 20,000 in the 11/2 week to 390,000. The
stock futures remain about 1% lower but we still expect the rally to resume
later today in blow off fashion.
9:01am and the DJIA is down 100 points. We sold our position in Qwest at
$4.02 because there is a judge's ruling expected today. Q has threatened to
go into Chapter 11 if the judge rules adversely, although management says
they don't expect an adverse ruling. Since we have a 50% to 100% profit and
we abhor bankruptcy talk we are selling now. We know we said we could expect
more from Qwest but bankruptcy talk by management scares us. We are placing
some of the proceeds from larger accounts in Sprint PCS at $4 per share. We
are buying a few shares of Cisco at $12.45 for a trade in our trading
1:39pm and we are back after doing some clean up around the farm. #43 is on
TV and his talking hasn't been able to initiate a rally yet, but at least the
markets aren't tanking. We sold a little ION at $21 to raise cash but we are
keeping the balance of our position in many accounts. We and many others are
hoping for a last hour rally so we can lighten up on some trading positions.
2:14pm and the rally hasn't arrived. The DJIA is down 177 points.
3:02pm and the DJIA closed down 184 points at 8586. The S&P 500 lost 21
points to close at 902 and the NASDAQ gave up 42 points to close at 1376.
Nobody ever said it was going to be easy. AMR was down at the opening and so
we didn't sell, which is OK. We sold our trading position in Halliburton for
a 75 cents per share loss. Bad Karma. And we sold our Cisco trade of today
for a 30 cents per share loss. There were a few bright spots in that Gap was
up on an increase in same store sales. And Ionics also bounced back to close
We are heading off tomorrow morning for a wedding in Chicago so our next post
will be Sunday evening.
And tomorrow is another day.
6 November 2002
6:34am and as we walked to the office this morning we mused that being a
Democrat is rapidly becoming like being a Chicago Cubs fan. And so in the
spirit of all the pathetic Cub teams and the ever optimistic Ernie Banks we
say wait till 2004, or 2008 or hopefully once more in our lifetime.
We are finally back up on the website and we thank you for your patience.
The stock futures are indicating a higher opening although they are not as
rambunctiously higher as we thought they would be. We think that may be a
positive for sustaining the rally. Time will tell.
Harvey Pitt is gone and soon forgotten.
UAL is back up to $5 per share. UAL restructured some current debt and that
relieved pressure. Those folks at State Street Bank who are the Trustees and
sold 11 million shares at around $2.50 to diversify are starting to look like
8:39am and the stock markets are opening moderately higher. The bullish
reading from Investors Intelligence is 49 which say the current rally is
getting long in the tooth. We will hear from the FED this afternoon so the
rally may keep popping. Actually if it builds slowly it may start sucking the
bears in to cover.
The UAL news is good news for AMR Corp and AMR's share price is rising. We
are going to add more ION and a bit more OATS today if their prices continue
to fall. Ionics has $10 per share cash on its balance sheet and a $300
million backlog of business.
Brocade is down today on news that it is going to acquire Rhapsody for $175
million. BRCD is going to issue 23 million shares so it is a dilutive
transaction. The deal makes sense and the sell off will be temporary. We are
buying back at $6.40 the stock we sold at $7.50 several days ago.
10:50am and the markets are mixed with the S&P down a tad and the DJIA up a
tad. Or maybe we should say chad. We were able to purchase a little more ION
at $18.50 but others seem to have figured out that the company is selling for
$9 minus the cash. We bought OATS at $9.99. We are picking up Halliburton
around $17.10 (Paul Wellstone forgive us!) and Honeywell under $27 for large
and/or trading accounts as we bet with the markets that asbestos litigation
problems may be brought under control by the Republican majority.
12:35pm and the stock markets continue to drift. All the markets seem to be
waiting for the FED announcement. We are waiting for the furnace serviceman.
1:25pm and the Fed lowered the Fed funds rate to 1.25% a full ½% as predicted
here (see November 1 post paragraph 8) a few days ago and the stock markets
yawned. Since "the street" was expecting 25 basis points all the investment
committees now have to meet and decide what the 50 basis point cut means. Our
investment committee just met and decided the cuts give the rally new legs.
We bought some Goodyear at $7.50 that we had been waiting to buy but nothing
else. We own enough stocks to participate. The shorts will get nervous later
1:35pm and the big boys and girls can't decide what to make of a 50 basis
point cut. They are probably frantically calling their analysts to find out
if the FED is panicking and they should sell or if the FED is once again
smart and they should buy. It's tough when you have to rely on others for
decisions. The DJIA is now down 60 points. We continue to expect the rally to
2:20pm and the stock markets are higher in tentative trading. The short
covering whoosh higher will happen tonight or tomorrow morning. We bought JP
Morgan back in a few accounts at $22 for a trade on our hunch of a move
3:02pm and the DJIA closed up 92 points at 8771. The S%P 500 gained 8 points
to close at 923 and the NASDAQ closed up 17 points at 1418. Many of our
stocks made big percentage moves today. We may take some money off the table
tomorrow if we get the ramp we are expecting.
And tomorrow is another day.
Election Day 2002 - 5 November 2002
7:45am and we have a winter wonderland in the Kickapoo Valley this morning.
It's interesting how the first real snow of the year is a winter wonderland
and the next 40 snows eventually prepare us for wondrous spring.
Japan was strong over night while Europe is weak. The stock futures are
indicating a soft opening. Applied Materials had weak earnings last night.
Merrill cut its rating on American Express from buy to neutral which means
sell. And UBS Warburg lowered its rating on Goodyear to reduce from hold.
That should lead to weakness in GT and allow us to add more to accounts.
Most of our accounts are at their highs for the year. The gains range for
plus 12% for aggressive accounts to 0% to plus 5% for most conservative
accounts. We are pleased with our progress and with our cash position. We may
be entering correction time soon and so we plan on adding more stocks.
Hopefully the stock markets won't roll over to new lows till the middle of
next year, if at all. By then we hope to be long gone.
Paul Krugman in the New York Times this morning gives the best explanation of
the dilemma that today's election presents, "Of course, some pundits tell you
that not much is at stake in this particular election, that the parties
aren't really very different on the issues. I don't know what planet they are
living on: in reality, the parties are further apart than they have been
since the 1930s The fact that anyone imagines otherwise is a tribute to the
timidity of the Democrats, who are afraid to say what they really think, and
the subterfuge of the Republicans, who show a disciplined willingness to
pretend to hold positions they actually abhor."
8:07am and we see that Goldman Sachs is downgrading Tellabs from in line to
under perform. And so now we know why the stock was week all day yesterday.
9:24am and the DJIA is up 43 points in slow trading. We are buying some Wild
Oats for our trading accounts and also EMC at $5.70 and AMD at $6.70 for more
aggressive accounts. We are bidding again today on the SPDR Utility Trust for
larger accounts. Given the lousy action in the last hour yesterday today's
market action is a bit of a mystery. Since most traders watch CNBC and CNBC
is touting a Republican victory as we presume Fox is also we would guess that
the undercurrent of higher prices is coming from a presumed Republican
Ionics has dropped $4 per share on disappointing earnings and we are buying
shares under $21 per share. We sold JPM in our trading accounts for a $2 per
share. We also added Albertsons at $20 per share to accounts that didn't own
10:43am and we are buying Schering Plough at $21.60 for some larger accounts
and more aggressive accounts in anticipation of a Republican victory.
Moreover the bad news on the stock is now in the market and we are buying for
1:16PM and Wild Oats is down after the conference call and so the call must
not have gone well. We think the sellers may be institutions that bought the
stock on the offering several months ago. We are buying stock for many
accounts instead of just trading accounts on this sell off at $10.77. OATS
has moved lower but our experience with the stock tells us to give it room
and buy more in a few days if it is lower.
The DJIA is to the plus side while the NASDAQ is lower.
2:25pm and Ionics continues to drop as Merrill has placed a sell on it. We
are going to add it to a number of accounts at around $20.25 per share. ION
had to restate earnings of its French subsidiary and Reuters is reporting
that revenues dropped 30%. Revenues dropped because ION sold its water
subsidiary, so much for informed reporting. There is also talk that since GE
is acquiring Osmonics which is a competitor that ION may have a rough time.
Our guess is that ION will finally sell itself. We've traded this stock for
years and if it goes lower we will buy more.
Goodyear is unchanged today after trading lower earlier on a downgrade. Maybe
we are getting to the end of the downgrades and the stock will now start
trading on market conditions.
3:02pm and the DJIA closed up 107 points at 8679. The S&P 500 gained 7 points
to close at 915 and the NASDAQ was up 4 points at 1401.
And tomorrow is another day.
4 November 2002
6:48am and the stock futures are indicting a 1.5% higher opening in
celebration of Microsoft's ability to buy its way to a favorable settlement
of the anti trust charges against it. There seem to be a lot of earthquakes
and volcano eruptions occurring around the world. In the US the stock markets
are going to erupt to the upside for at least the first 15 minutes and then
what will happen is anyone's guess. We'll enjoy the show while it lasts.
Rather than predict election results we plan on reacting to them. The same
goes for Fed action and Cisco earnings.
We may regret selling Cisco last week but the stock is still overpriced and
we are just trading anchovies. And since we didn't lose money on the trade
we'll be content to look at it as an opportunity missed.
7:19am and all the stars are aligning to give the stock markets the final
push higher into the November post election correction before the final fling
higher in December. Auto sales were up against strong comparisons from the
introduction of 0% financing last October and so the drops reported on Friday
are being taken with some grains of salt. But 0% financing on fewer sales is
not the way to jump start the economy. Rather it seems a formula for further
But the stock markets are forward looking and with three years of significant
dollar losses for investors that we managed to avoid, we are going to error
on the side of aggressiveness over the next two months because we believe
there is the potential for our accounts to finish this year up 10% and to be
20% higher in the first month next year at which time we will go to cash and
Florida in that order. That scenario is our best case, but it seems doable
given the volatility of the markets. So we shall see.
7:28am and Treasury bonds are selling down with the stock markets higher.
9:02am and stocks opened 1.5% higher. Selling is now occurring and we'll see
how the battle goes. We sold some Brocade at $7.50 for a scratch in accounts
where we had too large a position in relation to the other low priced techs
we own. We are adding EMC at $5.60 and Sprint PCS at $4.40 to our larger
accounts and Qwest at $3.84 to many accounts. We also purchased a small
amount of AMR Corp at $5.54 for a few accounts. And we are trying to
repurchase the SPDR Utility Trust at $18.85 to regain exposure in that beaten
11:06am and the markets continue to hold their gains.
11:46am and we just received a call from George Bush asking us to vote. We
told him our views on the war but he was so on message that he didn't
respond. The same thing happened yesterday when Tom DeLay, Henry Hyde and
Laura Bush called.
The DJIA is up over 200 points and the NASDAQ is up 3%.
1:27pm and the DJIA is back to where it started the day at up 150 points.
We'll find out whether the four week rally is running out of steam by the
final hour. We are trying to sell Seibel at $9.35. We think we should sell
one of these stocks that has risen 30% in a week just so the others go
higher. And if the others go down at least we will have sold one.
2:38pm and the rally has failed. We sold the Seibel at $9.33 for a nice $2 to
$2.50 per share profit. We also sold TLAB at $8.50 for a $1.50 per share
profit. We sold TLAB because it was down most of the day when the DJIA was up
200 points. We placed the SPDR Utility Trust in a few large accounts. We will
look to buy more if the sell off continues this week.
By the way, the oil stocks are selling off so we may have a chance for
another trade in Conoco/Phillips and BP Amoco. Gillette is also creeping back
to $28 and Walgreen is dropping to a yearly low on analyst downgrades.
There's always something of interest at year end.
3:02pm and the DJIA closed up 52 points at 8570. The S&P 500 gained 7 points
to close at 908 and the NASDAQ was up 35 points at 1396.
And tomorrow is election day.
1 November 2002
7:24am and we are at the start of a perfect autumn day here in the Kickapoo
Valley. We are switching server hosts for our website today and if everything
goes as planned readers should suffer no interruption. If there is an
interruption and you are reading this post next week we apologize. We are
making the switch for better service.
The stock futures are suggesting a down opening but the employment report due
at 7:30am will have an effect. There has been no market shattering overnight
7:32am and non farm payrolls dropped by 5000. The unemployment rate rose
Dullsville. Service and government jobs were up, offsetting job loss in
manufacturing and construction. Everything is rosy according to the talking
head Larry Kudlow. Its fun to see Republicans happy to see increased
government employment save the day for the jobs report.
8:50am and the stock markets have opened lower. The DJIA was up 10.7% in the
month of October. Unfortunately it was down 27% for the year when October
Treasury bond prices are a bit lower with yields higher. Current yields
presume a 25 basis point cut next Wednesday.
10:45am and the stock market has turned higher and Treasuries are also
rallying. Treasuries are rallying on rate cut speculation and we think stocks
are just bouncing from late October selling. A lot of the beaten down techs
are up and we hope they don't move too fast since we want to take our gains
next year. We really shouldn't be so picky; any gains are welcome in a year
1:56pm and we've been busy buying Albertsons in all accounts at $21.25. ABS
ha a 3.7% yield and because it disappointed yesterday on earnings and
forecast lower earnings going forward the stock is down $7 from the close on
Wednesday. It's a good value at these levels and we traded it from these
levels for a nice profit on the same kind of news in 2000. Albertsons is
Jewel/Osco in the Midwest. We also repurchased at higher prices AMD, AOL, EMC
and JP Morgan in our trading accounts. Our low priced stocks are having a
The markets are pricing in a Republican victory and a 50 basis point drop in
interest rates by the FED. Our guess is that Bush wouldn't be traveling all
over the country unless White House polls show Repubs winning. They could
keep Bush home with war planning talk if they didn't see a win. And with the
lousy economic news the Fed may be panicked into cutting 50 basis points.
Neither event changes our longer term view that stocks are headed lower, but
in the short term we may bounce higher. And the stocks we own are benefiting.
2:41pm and GM reports sales down 32% and Ford announces down 34% and both
stocks are up as is the market. We are getting back to La La Land very
quickly. We know the stock market anticipates but what is it anticipating?
We will consider some selling next week. For the weekend we will enjoy our
good fortune and genius at buying a bunch of junky stocks that have risen 50%
and more in value in less than a month's time.
3:02pm and the DJIA closed up 120 points at 8517. The S&P 500 was up 15
points at 901 and the NASDAQ gained 30 points and close at 1360.
For the year the
is up 6% while the DJIA is down 15%, the S&P
500 is off 21% and the NASDAQ is down 28%. The Model Portfolio is still 56%
And tomorrow is another day.
November 2002 Thoughts
October 2002 Thoughts
September 2002 Thoughts
August 2002 Thoughts
July 2002 Thoughts
June 2002 Thoughts
May 2002 Thoughts
April 2002 Thoughts
March 2002 Thoughts
February 2002 Thoughts
January 2002 Thoughts
December 2001 Thoughts
November 2001 Thoughts
October 2001 Thoughts