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30 November 2004 Daily Comment

Yesterday’s Markets

7:21am and the Ukraine situation is heating up and Putin is not happy with the talk of the overthrow of the purported election victory by his man. We think Dubya’s friendship with Putin is going to be severely tested if Putin sends Russian troops into the Ukraine. The Ukraine sits between Russia and Western Europe and a pro western Ukrainian government is not something Putin, the former KGB head wants. The U.S. will bluster but do nothing nor will NATO if Putin supports the pro Russian folks with troops.

But such actions will rile the stock markets since they need something to be riled about.

7:41am and the S&P 500 needs to surpass the 1190 mark for the Christmas rally to continue. The S&P has yet to take out the 1184 closing high for the current up move that was reached on November 12 but it may rest a few days before it does so.

Smith Barney has reduced it rating on TLAB from buy to hold based on the merger with AFCI which should occur on December 1. They see integration problems. We are maintaining our buy rating.

8:30am and Treasuries are getting their lunch handed to them. The five-year is up almost 16 basis points in yield and the ten-year is up 10 basis points. At this rate all the gains in Treasuries will evaporate by year-end. But with the two-year Treasury yield 3.03% it seems to us that the longer maturities need to give up some of their recent gains.

Protecting number one is important and so Merck has adopted a severance package for top management on any change in control. 230 needy management folk are involved. Our reading doesn’t tell us whether bankruptcy would kick in the package but we assume it would.

10:07am and the rally has faded to negative on the DJIA and only up 4 points on the NAZZ. We didn’t understand the strong futures this morning and so are not surprised by the drop. The stock markets may do some floundering for a few days, although tomorrow is month end so there may be a flurry up towards tomorrow’s close.

Treasuries are under pressure with the ten-year now at 4.32%. That’s below its 200 day moving average and the next longer term support level is 4.70%. A move there would absorb all the principal gains for the ten-year for the year.

1:29pm and the DJIA was down almost 100 points a couple of hours ago. It now is down 50 points and the move has been tepid. The last hour will tell the tale today.

We sold KYO at $71 for a loss and repurchased TWX at $17.90 with part of the proceeds. KYO was in our larger more aggressive accounts and we wanted to redeploy the money. We added a few more shares of XEL to accounts and took a flier on Silicon Graphics at $1.61 for a few very large aggressive accounts. We owned that stock in the teens six years ago.

Maytag is acting well in this sell off and we may add more shares under $20 in the next day or two if the spirit moves us.

Wedbush raised Talbot’s to a buy from a hold. And Tiffany replaced the head of their Japanese division with the fellow who has been running the U.S. division.

3:02pm and breadth was 5/4 negative on the NYSE and the reverse on the NAZZ at the bell. Crude oil closed up 32cents at $49.76. The ten-year Treasury finished at 4.33% and the five-year went out at 3.71%. Stocks to rally back to even at 2pm but couldn’t hold the gain and at the close the DJIA was down 48 points at 10475. The S&P 500 dropped 4 points to 1178 and the NAZZ closed 5 points to the plus column at 2107.

And tomorrow is today

NKU Basketball Results:

We beat our nemesis Kentucky Wesleyan on their home court and then dropped a stinker of a game at Bellarmine on Sunday. The team is now 4-1 going into two tough road games on Thursday and Saturday. The KW game was a gem and in the Bellarmine game we had an intentional foul called on us with 8 seconds left after we missed the shot to take the lead. We were ahead or close the whole game and it was our lousy play not the other team’s prowess that was the difference. We will beat them by 20 points when we meet them again at home.

Nov. 26, 2004
Kelsey, Reinhardt combine for 46 points in the win
Box Score      

Mike Kelsey

OWENSBORO, Ky. - Mike Kelsey and Kevin Reinhardt combined for 46 points as Northern Kentucky University held off Kentucky Wesleyan, 79-67, Friday night at the Owensboro Sportscenter.

NKU built a 26-point lead in the second half and coasted past the 13th-ranked Panthers.

The Norse shot 53.8 percent from the field and limited Kentucky Wesleyan to 37.3 percent from the floor to improve to 4-0 overall, 1-0 in the Great Lakes Valley Conference.

Kelsey, who finished with a game-high 25 points, scored 13 in the first half as NKU built a 42-26 lead. Reinhardt collected 14 of his 21 points before halftime.

The Norse held a 54-28 lead after a layup by Sean Rowland at the 16:01 mark. Wesleyan, however, responded with a 14-2 run to cut the lead to 56-42 with 9:56 remaining.

Kelsey stopped the run with a layup to give NKU a 58-42 lead. But the Panthers responded with an 8-2 run and sliced the lead to 58-48 on a three-pointer by Matt Enos.

Steve Purdon, however, buried a pair of three-point shots to give NKU a 64-50 advantage and the Norse cruised to the road victory.

Frank Phifer scored 22 points for the Panthers in the loss. Franklyn Ferguson added 19 points and eight rebounds for Wesleyan (1-2, 0-1 GLVC).

Jordan Stowers had nine assists and seven rebounds for NKU. Rowland added seven assists for the Norse, who have won four straight under first-year head coach Dave Bezold.

The Norse have now defeated two nationally ranked opponents in their first four games. Besides Kentucky Wesleyan, the Norse also defeated sixth-ranked Michigan Tech in the season opener.

The Norse will finish up the GLVC road trip with a 3:15 p.m. contest at Bellarmine on Sunday.


Nov. 28, 2004
Knights defeat Norse for first time since 1994
Box Score      

Derek Smith

LOUISVILLE, Ky. - Bellarmine converted five free throws in the final 24 seconds of the game Sunday to rally for a 64-60 win over Northern Kentucky University in a battle of unbeaten teams.

In a game that featured 20 lead changes and 11 ties, Marcus Flynn made two free throws to give Bellarmine a 61-60 advantage with 24 seconds remaining. After an NKU timeout, Steve Purdon attempted a three-pointer that hit the back of the rim and was chased down by Matt Miller.

NKU’s Pat Cary was called for an intentional foul with 8.1 seconds remaining, and Miller made one of two free throws to extend Bellarmine’s lead to 62-60. Matt Pait then sealed the win for Bellarmine by converting two free throws, and the Knights defeated NKU for the first time since Feb. 3, 1994.

“We talked about playing winning basketball, and not turning the ball over, and I take a look at the stats and see we committed 20 turnovers,” NKU head coach Dave Bezold said. “We have to get much better offensively. (NKU leading scorer) Mike Kelsey only had five shots in this game, so we were not doing the things we need to do on offense.”

Going into Sunday, NKU had defeated Bellarmine 19 consecutive times. The Knights improved to 4-0 overall, 1-0 in the Great Lakes Valley Conference. NKU dropped to 4-1 overall, 1-1 in the GLVC.

NKU led by as many as six points in the first half, but Bellarmine pulled to within two points (31-29) at the break when Miller made a pair of free throws with one second remaining. The Norse still owned a 43-39 lead with 10:42 left, but Calvin Fowler scored five straight points to give Bellarmine a 44-43 advantage.

Pait scored a basket with 59 seconds left to give Bellarmine a 59-57 lead, but Derek Smith countered by following his own miss and converting the shot while being fouled. He finished off the conventional three-point play by making the free throw to give NKU a 60-59 lead with 34.5 seconds remaining.

On the ensuing Bellarmine possession, Harrison Morton was called for a hand-checking foul with 24 seconds left. Flynn hit two free throws to give the Knights a 61-60 lead, and Bellarmine added three more charity tosses in the closing seconds to wrap up the victory.

Smith scored a career-high 20 points and added five rebounds for NKU, which made just 38.9 percent of its shots from the field. In the second half, the Norse shot 9-for-30 from the field.

Morton and Cary each added 12 points for NKU, which managed just seven assists against 20 turnovers. Kelsey - who scored 25 points during a victory at Kentucky Wesleyan on Friday - was held to three points by the Bellarmine defense.

Pait led Bellarmine with 14 points, while Miller added 11 points. Fowler finished with 10 points, and Montonio Blake chipped in eight points.

NKU will visit Indianapolis at 7:30 p.m. Thursday, followed by a 4 p.m. Saturday game at Saint Joseph’s.



29 November 2004 Daily Comment

This Morning

6:08am and Asia was strong overnight with Japan and Hong Kong both up over 1%. The dollar seems to have stabilized and Europe is also strong. U.S. futures are higher an indicating an up opening.

Over the week-end Wal-Mart announced that November sales would be below forecast and would come in up about 0.7% when a rise of 2% to 4% had been the previous forecast. WMT also said that profits should be OK because part of the reason for the lower total sales was their holding the line and not offering as many sale items.

With that news it is strange to see stock futures higher but the strong overseas markets may be the reason. If that is the case, the strength will probably dissipate in the first hour.

We are fully invested in the Model Portfolio and expect to see further gains in stocks this month although a pullback in the next week or two would not surprise us.

So let the games begin.


27 November 2004 Week-End Comment

Friday’s Markets

6:51am and the big news today is that the 3-0 NKU Norse play their perennial nemesis Kentucky Wesleyan tonight at Kentucky Wesleyan. We need this game.

In the other big game we follow U.S. futures are indicating a mildly higher opening after a down day for Japan and Hong Kong while Australia and Indonesia hit record highs and there is mixed to down trading in Europe in part because of the disputed elections in the Ukraine and the continuing weakness in the dollar which dropped to 133 to the euro this morning.

Oil is up 50 cents at $49.50. The rise in oil is supposedly the result of the rise in the price of heating oil as winter weather heads to the eastern U.S. Our take is that the rise is the result of too many hedge fund dollars chasing too few willing hedge fund shorts.

Gold is up $1.50 over $450 per ounce.

9:40am and we are completing adding to accounts for year end today. The markets close at noon and volume is light. Breadth is 2/1 positive but the major measures are quiescent.

With the Bushies in power we are looking for more dividend and capital gains relief to the point where he Congress may eliminate the tax on dividends. We think the talk of such a possibility, even if it doesn’t occur, will move safe dividend paying stocks higher early next year and we are going to add more SBC and reestablish a position in Xcel Energy, the Midwestern utility that had some financial problems a few years ago and hasn’t yet completely recovered. It has a dividend yield of over 4% as does SBC.

Since 1/01/2002 the S&P 500 is up 2%. The Model Portfolio is up 30% in that same time period. Past performance is not an indication of future performance.

12:02pm and the DJIA closed up 5 points ate 10525. The S&P 500 rose 2 points to 1183 and the NAZZ gained 1 to 2103. Treasuries were weaker with the ten-year at a 4.24% and the five-year at 3.64%.

And tomorrow is today is the week-end.


25 November 2004 - Daily Comment

Yesterday’s Markets

7:17am and we get notes:


Bobble head day is December 22 not tomorrow night!!! L

We guess that all you folks who were planning on driving to Highland Heights for the bald Dave Bezold Bobble Head doll will have to wait till next month.

In other less important news, Goldman Sachs has placed a $225 price target on Google. That’s just like in the good old days of the 1990s when Henry Blodgett and friends would place a price on a stock and it would rise to that price in a week or less. No one has yet placed a $10 price target on Sirius Satellite but that will come. Asia was mixed overnight and Europe is higher as are U.S. futures. Today is a full day of slow trading and with oil down 25 cents maybe we’ll get an up day.

7:31am and Durable Goods orders were down 0.4%, ex transportation down 0.7%. Jobless claims dropped to 320,000 and last weeks claims were adjusted lower.

The dollar is a two edged sword. Its low cost makes U.S. stocks cheaper for Europeans as long as the dollar doesn’t keep falling. Thus, if there is some stabilization in the dollar/euro exchange rate, European money may begin to flow into U.S. stocks.

In regard to U.S. exports and imports the cheaper dollar supposedly helps. But the lower dollar makes foreign folks less anxious to buy debt that is denominated in dollars which may lead to a rise in interest rates.

That is the sum total of our knowledge of the dollar for folks not trading currencies.

We received a missive regarding our agricultural item yesterday that imports would exceed exports for the first time since the 1950s:

Bud: I have a satellite commodity news service called DTN.  The editor is Urban Lehner who worked for many years at the Wall ST. Journal.  He had some comments on the stories about the agriculture trade deficit.  For example, if you exclude coffee and cocoa which are not grown anywhere in the US the deficit disappears or at least gets much smaller.  According to him rubber is an agricultural import because it comes from trees.  A lot of it is due to more people wanting fancy varieties of olives etc.  Just FYI.

GE is buying Ionics which is one of the first stocks we traded back in 1966 when we came into the business. It is a logical takeover for GE which is building their control of water companies. We have profitably traded ION over the years.

Ionics earns at most a dollar a share and GE is paying $44 or 44 times earnings. GE’s multiple is 23 or 23 times earnings. ??

UBS has dropped its ratings on BellSouth and SBC. We may be able to repurchase lower.

Another missive:


            Jim Cramer is surmising that the weak dollar (even weaker next year) will make some domestic banks ripe for takeover early next year. He is suggesting maybe some buying in this area and holding till that time. I am reluctant to play the takeover game unless it is obvious. What about here?


You have to concentrate on the task at hand. Buy stocks to own them- not for takeovers. If they get taken over that is fine. If any of these stocks, all of which are on five year highs appeal to you then buy them. But buy to own or for a trade not for a takeover.

11:12am and breadth is 2/1 positive but the major measures are just slightly positive. According to the trading gurus we follow there are big boys and girls playing games with the SPX/SPY/SPOO because the markets are so thin.

We bought HPQ and SBC and SGP for accounts that had cash left and we will be adding more stocks on Monday and on to accounts that have a bit of buying power remaining. But we are pretty much completed in our buying program and now we will just have to wait and see if our predictions are correct. The Model is down to a 5% cash holding and is 95% invested in stocks and is up about 6.3% for the year heading into Thanksgiving.

The trading guru we have been following gives 1190 as next resistance (the S&P 500 is at 1183) and 1260 as the ultimate goal on this move. 1126 is a Fibonacci 66.667% retracement of the total high to low move in the S&P 500 from above 1500 in March, 2000 to below 800 in October, 2002.

We are for practical purposes fully invested now. We have not been this invested for a number of years and we may not stay for long. But we perceive a benign market through year end and we do also see an attempt at 1260 on the S&P which is another 8% up from here. The stocks we own should gives us a 10% move if the S&P moves 8% and we would be most happy with a 14% plus return for the year.

The end of the elections suggests a period of tranquility in politics, and since the U.S. is overextended in Iraq we don’t think there will be much more than posturing with regards to Iran and North Korea by the folks who do those things. If the quiet period continues though Christmas the markets will respond.

3:02pm and the DJIA closed up 27 points at 10520. The S&P 500 gained 5 points to 1182 and the NAZZ rose 17 points to 2102. Breadth was positive at the close, oil was higher and Treasuries weak with the two-year hitting a 3% yield for the first time in 24 months.

And tomorrow is today which is Thanksgiving. Happy Turkey Day.

Posted by hilatron at March 25, 2004 08:14 PM | TrackBack



24 November 2004 - Daily Comment

Yesterday’s Markets

6:23am and the three U.N. workers have been released in Iraq, the basketball brawl in Detroit has been shown for the one millionth time on TV and NKU plays Thomas Moore tomorrow night at home on Dave Bezold Bobble head Day. What more can one ask for.

Overseas Europe is higher and Hong Kong was also higher. Japan wasn’t anything since it was closed for a holiday. Existing home sales will be released this morning and they are expected to be lower than last month.

Yesterday’s markets acted well in the face of Friday’s sell off and we would expect a bit of follow through this morning and then another test of the bulls resolve. We bought some issues yesterday and will be adding to accounts on an individual basis for the rest of the week as we load up for year end.

The WSJ reports that farm imports will exceed farm exports next year for the first time in 50 years.

1:04pm and we have been busy completing our buying program today. We added TLB, COMS, and MU and a bit of Maytag to more accounts and initiated a position in Viacom. Supposedly satellite radio is going to put over the air radio out of business and VIAB has been under pressure lately. Sumner Redstone runs Viacom and he isn’t getting any younger.

Viacom Inc. is an entertainment company with operations in cable networks, television, radio, outdoor, entertainment and video. In the Cable Networks segment, the Company owns and operates advertiser-supported basic cable television program services through MTV Networks and Black Entertainment Television (BET) and premium subscription television program services through Showtime Networks Inc. The Television segment consists of the CBS and UPN television networks, the Company's broadcast television stations and its television production and syndication businesses. The Radio segment owns and operates 185 radio stations through Infinity Radio. The Outdoor segment, through Viacom Outdoor, displays advertising on various media. The Entertainment segment includes the operations of Paramount Pictures, Simon & Schuster and Paramount Parks, and the Company's movie theater and music publishing operations. The Video segment consists of the Company's equity interest in Blockbuster Inc.

2:18pm and we are selling Cabela’s for up to a $2 per share loss. The underwriters came out with a neutral rating on the stock after the quiet period when insiders sold 10 million shares of stocks at $22.50 and that is not a positive. After the sale we were hoping for a pop not a drop. We have traded profitably a few times but we don’t want to hold when we can redeploy the dollars elsewhere for better opportunity.

3:02pm and the DJIA closed up 3 points at 10491. The S&P 500 closed unched at 1176 and the NAZZ was off 2 points at 2083. Oil closed at $48.94 after topping $50 during the day. Breadth was positive on the NYSE and negative on the NAZZ.

And tomorrow is today. The stock markets are open all day today and a half day on Friday.


23 November 2004 - Daily Comment

Yesterday’s Markets

6:49am and we get letters. On Sunday:

       Tomorrow is a good test of how to react. I am somewhat bemused as to what to do if there is panic selling or something like that on Monday. Tokyo fell 2% or more on Mon. there due to higher oil and Yen. Is that a continuation of what happened in the US on Fri. or an indication of what will happen on Mon. here? Still if we get a very large drop; buy or sell? If you hold and the fall-off is severe and long, capital preservation is the norm. If you sell fast enough on Mon. one can preserve some gains but lose out on a big rebound to years end if it occurs. It is a tough call for me and maybe your experience can add some insight.

       It won't be long but it may be sharp and that would be good. You have to be in the market to make money and this is the most favorable time of the year to be in. But it is sometimes rocky and there have been years when the final rally didn't start until the New Year. If you are going to do stocks to make your retirement living then we think you should stay in. You told us you are only 50% in. If you are afraid, only commit 25% more on sell off that is occurring.

Last year the rally came in the last week of December.

We think it is worth the risk here but be in stocks in which you have confidence.


Trump Casinos filed for bankruptcy so now Trump can get more control and figure out a way to screw a new generation of stock and bondholders. Over the years only Trump and his bankers make money as they take investor lambs to slaughter on a regular basis.

Investing with Trump is like investing with Murdoch and a few other financiers who use the public as money chumps. And the major investment houses are happy to assist in the carnage, for a fee of course.

The pause on Friday was occasioned by Greenspan’s expressed concern about the dollar’s drop and the probability of the Fed raising interest rates to make holding the dollar more attractive. He said that in different words but that is the gist of the comments. Coupled with the rise in the price of oil, his comments created the atmosphere necessary for the first significant retreat from the straight up move since November 3.

The SEC is proposing a rule with the novel idea that investors are entitled to the “best” price on order execution by forcing electronic sweeps of all markets to find the best price offered. Where there is a will there is a way to avoid the rule and since less than best price is the bread and butter of many trading house earnings reports we are sure a way will be found to avoid the rule. The rule actually exists now but is not enforced because the ability to avoid detection of avoiding the rule is so easy.

Krispy Kreme moved to a third-quarter loss on a decline in same-store sales and the doughnut maker withdrew its guidance on sales growth. It was a short and not so sweet ride for investors who were not fast on their feet.

11:26am and stocks are meandering in holiday trading. We are buying more JPM and KO and MU and LU and TLB and RFMD for accounts. We are staying with our conviction of higher prices before substantially lower prices.

1:31pm and stocks have rallied in the contra hour so we have quit buying. We shall see if the bulls can keep the rally going in the last hour which is the most important. If they do…

2:02pm and entering the final hour breadth is positive 2/1 and oil is lower at $48.62. Treasuries are a bit firmer and all the major measures remain higher but are having a tough time holding their gains.

3:02pm and the DJIA closed up 32 points at 10490. The S&P 500 gained 7 points to finish at 1179 and the NAZZ rose 15 points to 2085.

And tomorrow is today.


22 November 2004 - Daily Comment

This morning

6:30am and as we begin Thanksgiving Week the futures are indicating a continuation of Friday’s sell off. It is always annoying to have a good run interrupted by a correction but that is the nature of markets. The testing of wills is a given and while we don’t like to give back even paper gains we think the reward potential of the next six weeks justifies the risk exposure we currently have. Only time will tell if we are correct.

The Model Portfolio is 83% equities and up 5.5% for the year and we hope to see our stocks resume their move higher over the next few weeks. Today and tomorrow will be important days and if the retrenchment can be contained then a Wednesday/Friday rally is a distinct possibility.

If not it will be time to go back to the drawing boards. Oil is now back over $49 and gold is a few pennies higher at $447. Hong Kong was a tad higher overnight while Japan and Europe this morning are continuing the pullback initiated in the U.S. on Friday. And the dollar is lower.

 Our trip to Kentucky was a success with the stories below for those interested.

So let the games begin for today is today.



Nov. 19, 2004
Morton hits winning shot with 1.5 seconds left to give Bezold first victory
Box Score Quotes    

Harrison Morton's winning drive

HIGHLAND HEIGHTS, Ky. - Can a debut get any better than this for either a collegiate head coach or a freshman basketball player?

Not if your name is Dave Bezold, who took the Regents Hall sideline Friday night for the first time as the head coach at Northern Kentucky University. And certainly not if your name is Harrison Morton, who put on a memorable performance in his first game with the Norse.

Morton, a 6-foot-4 freshman, scored the final five points of the game as NKU rallied for a 55-53 win over sixth-ranked Michigan Tech in the John L. Griffin/Lions Club Classic. He finished with a team-leading 12 points, including a driving, off-balance scoop shot with 1.5 seconds remaining to give NKU a 55-53 lead.

“I was supposed to go to get the ball, and I was supposed to take it to the hole and go off of Derek’s (Smith) pick. I was supposed to kick it out, but I thought I had a way to the basket, so I just took it,” said Morton of the winning shot.

Bezold, to say the least, was pleased with the freshman’s heroics.

“Harrison did great job there. We were really close to taking him out of the ball game just because we wanted a little more experience out on the floor, and then we felt like he would create a good opportunity to generate some offense because we weren’t generating with anything, and he made some great plays,” he said. “He’s won state championships and been in some big games, and when he’s got the ball in his hand, he can make it happen. He’s one of those kids who wants to win the game and will find a way to win it for you.”

Sean Rowland challenges Jason Marcotte

With 1:13 remaining in the game, however, it appeared as if there would be no chance for any late heroics by NKU. Josh Buettner’s basket gave Michigan Tech a 53-48 lead, and the Huskies were in control.

Sean Rowland countered with a layup while being fouled to bring NKU within 53-50 with 51 seconds left, but he missed the free throw and Michigan Tech rebounded. Jason Marcotte missed a three-pointer with 31 seconds left, and Morton grabbed the rebound for NKU.

NKU cleared out for Morton, who scored on a drive as a he was fouled by Tim Strom with 16 seconds remaining. Morton converted the free throw to tie the score at 53-53, setting up a key defensive stand by the Norse.

With 10 seconds left and the clock wining down, Marcotte drove to the basket while being guarded by Rowland. Marcotte lost the ball out of bounds with 8.1 seconds remaining to give NKU a chance to win in regulation.

The Norse called a timeout with 5.4 seconds left at midcourt and inbounded the ball to Morton. He drove the middle of the lane, powered his way to the basket and scooped up an off-balance shot that cradled into the net with 1.5 seconds left.

Michigan Tech had a final attempt, but a long inbound pass was knocked away at the buzzer and NKU opened the season - and Bezold’s coaching career - with a victory.

“We were just asking our guys to prove that we can play winning basketball. We’ve been getting accolades and pats on the back for competing against three great teams in Division I, and we weren’t interested in getting patted on the back. We wanted to win a basketball game against a great team and we did,” Bezold said.

Pat Cary defends Josh Buettner

Buettner - a 6-foot-9 senior and the Division II Bulletin’s preseason National Player of the Year - finished with 23 points and 13 rebounds for Michigan Tech, which shot just 36.8 percent from the field.

Smith said of Buettner: “He’s a great player. We knew he was going to come in and battle, and he did just that. He came in and gave everything he had, which he does every game. So, we’re glad to come out of here with a win. We know next time we play him we are going to have to do a much better job defensively on him and the rest of the guys.”

Marcotte added 10 points, but he shot just 4-for-17 from the field.

Pat Cary added 10 points for NKU, which made 41.7 percent of its shots from the field. Michigan Tech held Mike Kelsey - the Norse’s leading scorer last season - to five points on 2-for-8 shooting from the floor.

NKU will conclude the two-day event at 7:45 p.m. Saturday against Northern Michigan. The Wildcats dropped a 66-65 decision to Christian Brothers (Tenn.) in the other first-round game Friday.



Nov. 20, 2004
Cary finishes with 17 points, four blocked shots as NKU improves to 2-0
Box Score Quotes    

Pat Cary

HIGHLAND HEIGHTS, Ky. - From a shooter’s point of view, it was a perfect performance by Northern Kentucky University’s Pat Cary.

Cary scored 17 points Saturday night and did not miss a shot as NKU eased past Northern Michigan, 73-62, in the John L. Griffin/Lions Club Classic. Cary, a 6-foot-9 senior center, made all six of his attempts from the field and was 5-for-5 from the free throw line.

He also added four blocked shots and was named the Norse’s most outstanding player of the two-day event in Regents Hall. NKU defeated both Michigan Tech and Northern Michigan during the John L. Griffin/Lions Club Classic in Dave Bezold’s debut as Norse head coach.

Cary said the NKU players were determined to make their head coach’s first weekend of calling the shots on the sideline a winning experience.

“We came out last night real pumped up for Michigan Tech because we knew they were sixth in the nation, and we wanted to knock them off,” Cary said of NKU’s 55-53 win over the sixth-ranked Huskies.

“And, tonight we just wanted to get the win, and we knew we were the better team. We came out and knew we could win, and we just had to get it done.”

Kevin Reinhardt added 16 points - including 12 straight in the first half - as NKU improved to 2-0. The Norse shot 55.3 percent from the field for the game and held Northern Michigan to 41.8 percent from the floor to notch the victory.

Kevin Reinhardt

Reinhardt keyed a 15-0 run in the first half that turned a 22-19 Northern Michigan lead into a 34-22 NKU edge with 2:52 remaining. The 6-4 sophomore hit a three-pointer and a short jumper to give NKU a 24-22 lead with 7:25 left before halftime, and the Norse then scored the next 10 points for a 34-22 advantage.

Steve Purdon and Brian Lewin drained consecutive three-pointers during the first-half run for NKU. Lewin scored all seven of his points in the first half, while Purdon finished with nine points.

NKU led by as many as 18 points in the second half and was never threatened. Northern Michigan cut the deficit to eight points (64-56) with 4:15 remaining, but Cary responded with a tip-in to extend the Norse’s lead to 66-56.

“Our common theme this year, and I told them after the game in the locker room again, and they are probably going to get tired of me saying this, every night it is going to be something, somebody different as far as the way we are going to have to win basketball games,” Bezold said.

“And, tonight it was Pat Cary and Kevin Reinhardt, and the other night it happened to be Harrison Morton. It was very important to the ball club to have a cushion at the back end of the game because that’s a good basketball team we just played.”

Sean Rowland earned the John L. Griffin Hustle Award after dishing out five assists and grabbing a team-leading six rebounds. He also had two steals.

Mike Kelsey

Mike Kelsey added 14 points for NKU, which hit 76.5 percent of its free throws. Jordan Stowers added six assists for the Norse, who were 13-for-17 at the charity stripe.

Ricky Volcy led Northern Michigan (0-2) with 20 points. NKU is now 2-0 all-time against the Wildcats.

In the other game Saturday, Michigan Tech held off Christian Brothers, 55-52. The pairings for the John L. Griffin/Lions Club Classic were predetermined this season, switching from the traditional tournament format.

As a result, NKU was able to face two teams from the Great Lakes Intercollegiate Athletic Conference in the event. That could become a major factor in March because the GLIAC competes with the Great Lakes Valley Conference for NCAA Division II Tournament berths.

“They are GLIAC teams, so they are in our region. And, we know we have to go up to their places over Christmas break, so we needed to win both games,” Rowland said. “Plus, we expect to win every time we go out there, and anything less would be a disappointment.”

NKU will play host to Thomas More at 7:45 p.m. Wednesday night in Regents Hall in the Remke Market Campus Classic. The Norse begin GLVC play at 8:30 p.m. Friday with a road game at Kentucky Wesleyan.


20 November 2004 - Week End Comment

Yesterday’s Markets

12:13pm and so much for our comment of yesterday that the markets would rest until Monday. At the moment the DJIA is off 100 points, the S&P 500 is down 11 points and the NAZZ is down 26 points. The stock markets are suffering a bout of profit taking or maybe more although we are inclined to believe it is the former.

Chairman Greenspan kicked off the morning with a speech that said that folks should be hedging their interest rate risk. At the same time the dollar was dropping below 103 yen to the dollar and the ‘carry trade’ finally decide to sell bonds.

Greenspan’s comments are especially interesting since last spring he was telling folks to by adjustable rate mortgages. We know six months is a long time in market terms but we said at the time and reiterate now that Greenspan’s advice then was wrong and a disservice to the small mortgage buyer.

We have repurchased partial positions in JPM at $37.60, KO at $39.80 and added more Micron at $11.97on the sell off today. We remain of the opinion that the rally will continue through year end. The sell off today may continue on Monday but the latter part of next week is historically positive.

Interestingly, Applied Materials had a lousy forecast as and dropped on the news but it had run up in price after we sold it so the drop has not yet brought it back to our sale price. Concurrently Goldman Sachs lowered its outlook for chip equipment manufacturers. So this is another case of the right idea but the wrong timing.  And we continue to learn.


1:02pm and entering the contra hour Crude Oil is up $2. Supposedly tensions with Iran over its nuclear program are exacerbating the price rise. There is no way the U.S. is going to war with Iran and we think the rise in oil is a function of hedge funds liquidating losing dollar positions and trying to make up some of the losses.

Soros has been a bear on the dollar for a long time and the dollar has been going straight down for a number of weeks. Even dead cats bounce and we think the dollar will sooner than later.

The SEC is considering putting off its experiment with shorting stocks on down ticks for another six months. Maybe they have been watching how the momentum guys and gals have been shorting the dollar on downticks and pushing it lower and they and President Bush don’t want to see that happen with the stock markets. Can they be coming to their senses?

The major measures are on their lows for the day. Breadth is better than 2/1 negative and volume is moderately active. Today is an expiration day so anything can happen. We’ll see.


2:34pm and with the DJIA down 125 points and the NAZZ down 32 points its obvious there will be no positive close today. The market talk is of Greenspan and the economic meetings in Europe this week end. We’ll see what Monday brings. Today’s drop took away our gains for the week but one day does not a year make. And next week is Thanksgiving.

And tomorrow is today.


19 November 2004 - Daily Comment

Yesterday’s Markets

6:15pm and we have been traveling all day. We listened to the market reports and it seems that with us gone not much happened. Options and futures expire tomorrow (today) and that should be it for the week.

Our guess is that the markets may rest till Monday. We bought a bit more of Cabela’s at $22.65 for the May accounts but we are happy to await a correction if it comes.

And tomorrow is today.

18 November 2004 - Daily Comment

Yesterday’s Markets

6:26am and as we begin our working day we are greeted by the news that K-Mart is going to buy Sears for $11 billion. Sears shareholders will receive $50 per share in cash or shares in the new holding company to be formed. Crazy day sales are back. Can anyone say AOL/Time Warner? This may rank among the dumb acquisitions of the first half of the new century, or the most prescient. Only time will tell. And we missed it but we weren’t alone.


We didn’t have the imagination to see the Sears/K-Mart combo coming. We are getting old. In a similar vein last night both AMAT and HPQ announced ‘better than’ earnings (before dissection) and the stocks gained with HPQ rising 10%. We sold both to be out ahead of earnings because that strategy has worked for us recently with tech stocks and so missed the gain. But from this action we do learn that the current market is going to treat tech earnings well if the earnings treat the market.

In managing money we are not always right in our calls but we have been profitable on most of our recent trades. This year we had a dry spell in the summer when we misread the markets but before and since we have been able to tag along profitably.

We raised cash yesterday by selling a few large cap issues so we would have funds available to add to other positions if there is a pull back. If the markets move higher, the shares we own should outperform because they are more volatile (higher beta) issues and so we may match the markets with less cash invested. Our main goal as always is to earn a decent return with as little market exposure as possible.


The PPI number on Tuesday showed an outsized and inflationary increase and even though by itself it wasn’t enough to panic the markets it was enough to suggest to us that we take some money off the table. That’s because the CPI (Consume Price Index) comes today and if it doesn’t show a similar increase the market gurus are going to suggest that producer profit margins are going to be squeezed. There is a caveat to that theory in that a large part of the jump yesterday in Producer Prices was related to $55 oil. The PPI is a snapshot of prices on one day during the previous month and it is possible that the day in October used to figure the Index change happened to be the day that oil was at $55. Whatever, oil is 20% lower this month in price and so next months PPI will reflect that reality. And so the markets didn’t panic although they did take a much needed rest.

The above commentary may be rendered moot by CPI which comes at 7:30am this morning.


Anecdotally we were talking with a lawyer who handles real estate closings in Chicago and he told us that his business has slowed to a rate he hasn’t seen since the slow down in the late 1980s. He said the condo buying if not the building boom in near downtown Chicago and the rise in prices in the Lincoln Park area of Chicago has ended but no one wants to admit that fact.


7:32am and the Consumer Price index was up 0.6% (3.2% year over year) with th3 core number up 0.2% (2.1% year over year). Housing starts for October were up 5%. CPI real earnings were down 0.4%. On the news Treasuries were a bit stronger and stock futures remain higher. HPQ earnings are trumping the CPI in adding strength to stocks. The dollar is making new lows against the yen and euro.

Overseas Asia was mixed with Hong Kong higher and Japan lower. Europe is higher and U.S. futures are higher.


Talbot’s announced earnings of 50cents per share which were lower but had already been expected. They reaffirmed fourth quarter guidance.


Wall Street obviously doesn’t currently agree with our take on the Sears merger since both K-Mart and Sears are trading higher. Of course that may be folks who were short covering their sales.


8:43am and retailers opened higher on the Sears news and we sold our MAY at $30.50 for an almost $2 gain because it is only opening there because of the Sears/K-Mart news. That takeover is an anomaly. The fellow doing the deals is named Eddie Lampert and he has a great track record. Business Week (http://www.businessweek.com/magazine/content/04_47/b3909001_mz001.htm ) referred to him as the next Warren Buffet. He may be a billionaire but paying $50 a share for Sears is not a Buffet tactic.

Moreover Lampert owns a big chunk of Sears that he will be selling or exchanging for K-Mart so he is in effect using his board position on K-Mart to enhance his Sears holdings for his private investment company. That may be legal but we wouldn’t say it was ethical, or rather it is 1990s ethical.

Jim Cramer of www.realmaney.com and CNBC has a different take on this. But then he also thinks Merck officers are white knights trying to save humanity from wicked trial lawyers while we have a different take on VIOXX. We think that if the officers knew what is alleged they should go to jail and the company should pay through the nose.


Today is takeover day in the markets. Electrolux is a rumored takeover so Maytag is higher. Martha Stewart Omnimedia is up on the K-mart/Sears deal (only Martha could double her net worth while in jail). This type of action is a symptom of the speculative features that are taking hold of the markets as they move higher. They are a warning sign but probably not a sell signal. That’s because it has been a long time since the markets have had this kind of action and there are new faces and forces at work investing for the first time and in different ways. And there is a ton of hedge fund money, much more than in the late 1990s. And hedge funds are bulls in a china shop or bears in a honey factory when they decide to act.

By the way, we haven’t seen any mention that the weakness in the dollar might be George Soros on the sell side taking out his pique at Bush winning. So far if it is him he is ahead at the game and if it is him he has made back much more than the $30 million that he spent opposing Bush.


10:50am and the DJIA is up 100 points and the NAZZ is up 32points. The HPQ and S news gave a real jolt to stocks.

We are using our May proceeds to add additional shares of Agilent and Andrew to accounts that owned May. We are concentrating our positions down to those that we want to add to at higher and lower prices while not spending a great deal more cash.


12:08pm and crude oil is down 11 cents at $46. According to CNBC the big trade of the day is trading the German ‘bund’ against the ten-year Treasury. Also, the yen traded down though 105 to the dollar which means folks are losing money on the yen/dollar/ten-year Treasury trade.

We think we understand what all that means but since we don’t do anything in that area we are agnostic. Those relationship trades will eventually affect the stocks markets but not at this time. And as long as a big hedge fund doesn’t blow up over being the wrong way on those trades and short the stock markets we think any effect on stock prices will be muted over the next month.

The markets seem to be in a sweet spot and we may as well enjoy it while we can.

We get letters:


            The market seems to be doing things that the experts are mis-calling. A lot of them seem to be nervous about the “over-bought” state of the market now; although compared to the past 3 yrs it is not over-bought. I still feel that there is more in the year end to gain because the fund managers have been caught sitting on cash and need to perform better than the market. However, I am getting nervous and itchy to sell into any strength at this point. What do you think? Cramer is also getting edgy, but feels that we should hold (not buy) and watch out for any euphoria before selling up-legs. I see you are cutting back and rotating to higher beta stocks to squeeze out more gains year end. I have never gotten beyond 50% stocks. Probably will not. What do you see from here?

Our response:


            If you are 50% cash we would tough it out. We like the higher betas because we get more bangs for the buck. Cramer is sucking wind on CHTR and that is affecting his thinking a bit. He has a big gain in K-mart but he doesn't own that much.

The Sears/Kmart deal is dumb but it is the type of thing that hypes markets and coupled with HPQ's phony good earnings last night the boys and girls want to play.

Getting through this week gets to Thanksgiving week which is usually kind. Market setbacks usually occur in the middle of November.

Finally, there are a lot of new players over the last year and they know nothing of the catastrophe of 2000 to 2003. So they will keep buying on margin until the fat man sings. The markets are ignoring overseas event like the bank bombings in Argentina, and Iraq is totally off the markets radar screen.

So stay invested and rotate if you wish or hold em.


1:39pm and in the contra hour today’s pop higher is being tested. The DJIA is up 40 points after being 110 points higher earlier and the NAZZ has given up half its gains and is now 15 points higher. That sets the final hour up as the test for the bulls and bears.


2:27pm and we are going to take a flyer on 3Com at $4.86 for accounts where we sold JPM yesterday. This is in keeping with our desire to increase the volatility of the stocks we own while at the same time taking some money off the table.  COMS is an old flyer that has been grounded for the past four years. The company has $3 per share in cash although it is losing money at a pretty good clip it has no debt and revenues of $700 million and a market cap adjusted for cash of $400 million. Last year about this time COMS began a run from $4 to $9 by year-end at which time a slew of directors and insiders sold stock. Maybe they and we will be lucky again. If not, the $3 per share cash is a nice cushion. 3Com Corporation provides data and voice networking products and solutions, as well as support and maintenance services, for enterprises and public sector organizations of all sizes. The products and solutions are based on open-technology standards that are designed and engineered to reduce reliance on systems, complexity and total cost of ownership, and enable the customers to manage business-critical information efficiently, enhance the productivity of their employees and improve the effectiveness of their business relationships. The portfolio of enterprise networking products and solutions includes local area network (LAN) switches, Internet protocol (IP) telephony, network security, routers and gateways, wireless LAN network, Jack and IntelliJack switches, connectivity products, network management software and customer services.


3:02pm and at the close the DJIA finished 60 points higher for the day at 10548. The NAZZ gained 21 points to finish at 2100 and the S&P 500 gained 6 points to 1183. Breadth was 2/1 positive but the action was sloppy near the bell. Crude oil gained 73cents to end at $46.84. The ten-year Treasury rallied to end the day at 4.14% and the five-year was 3.47%. with inflation in the air the Treasury rally was counterintuitive.

And tomorrow is today.


17 November 2004 - Daily Comment

Yesterday’s Markets

7:24am and. We are traveling to Ohio and Kentucky to visit clients and take in the first two basketball games of our grandson’s father new career as head coach.

Our thoughts on the markets are that there may be a pull back sometime this week which will set up and after Thanksgiving rally. The world news continues muted since folks seem to have become inured to the death and carnage in Iraq and as long as it doesn’t threaten U.S. shores there is no reason to worry.

And with Bush in for four more years and Condi as Secretary of State and Rummy still on the ball at Defense what could there be to worry about. They have screwed things up so badly that it will take the next four years to straighten their screw-up out and they won’t have time for new adventures. Except that we do think the Bushies will invade Cuba sometime in the next four years to set up Jeb for the run in 2008.


7:37am and surprise! PPI (wholesale prices) was up a very large 1.7% in October as the hurricanes’ effect on food prices and the increase in the price of oil finally found its way into the government numbers. Strange that it didn’t happen until after the election.

Whatever, vegetables were up 32% in price, and the oil, heating oil, gasoline complex was up 6.8%. The inflation that some of us have been seeing finally has reared its ugly head. Ex food and energy and all other things folks need to live, the Core PPI was still up 0.3% which annualizes to 4%. The raw number annualizes to a figure no one wants to say.

Oil prices have begun to come down and vegetable prices should moderate as the growing season resumes so all is not lost. But the stock markets are going to open lower and we will discover how much cash is on the sidelines wanting to get in.

The Nikkei dropped 65 points overnight and Hong Kong was off over 1%. Europe is lower.

Wal-Mart had good earnings but sales were a tad lower than expected. Home Depot was strong and the shares are going higher.


8:01am and it is all too confusing to us especially since we don’t own the stock, Fannie Mae is going to have to report a $9 billion loss to adjust derivatives they won. That means that some entity or entities have a $9 billion profit. We hope that JP Morgan is one of them.

Bank of America upgraded RFMD to neutral saying strength at Nokia is good for RFMD. We hope so too on this one too.


10:04am and stocks are lower in moderate trading. This may be the pullback that gurus have been awaiting. Breadth is 2/1 negative and oil and gold are a bit higher on the day. Treasuries are a tad weaker. We are buying ANDW for accounts at $14.50.


11:19am and crude oil has turned lower trading at $46.65 down 22 cents. That has helped the markets a bit but selling continues or maybe it is more a lack of buying. Senate Dems have chosen dynamic Harry Reid as their minority leader. Ugh!


11:33am and we are going to sell our JPM, CSCO and TWX positions. By selling them we raise a lot of cash in accounts in case the markets head lower and if we are wrong and JPM and TWX head higher we own a ton of other issues that will do better on a per cent gain potential. We are making a scratch to small profit on the trades for almost all accounts which beats taking a loss.


1:56pm and entering the final hour stocks remains lower and breadth is still 2/1 negative. The last hour will be interesting to see how the bulls and the bears react. We raised cash as a function of the strong move and followed the old saw of selling our relative losers while keeping our relative winners. With crude oil closing down 76 cents to $46.11 we will be surprised if the sell off increases. Presently the DJIA is down 60 points and the NAZZ is off 15 points.


3:02pm and at the bell the DJIA was off 63 points at 10487. The S&P 500 dropped 8 points to 1175 and the NAZZ gave up 16 points to end at 2078. The Treasury ten-year ended at 4.21% and the five-year at 3.56%.

And tomorrow is today.



16 November 2004 - Daily Comment

Yesterday’s Markets

7:02am and this week will see a bunch of economic numbers into which the boys and girls can sink their trading teeth. Tuesday presents the Producer Price Index (PPI) for October and Wednesday is the grand day with CPI (Consumer Price Index) and Industrial Production and Capacity Utilization coupled with October Housing Starts. On Thursday weekly jobless claims are in the fore and Thursday and Friday are option and futures expiration days.


One technician we follow and appreciate commented this morning that gold is at a 16 year high and the dollar is at an eight year low. The implication is to suggest that stocks will have a tough row to hoe to keep rising. We have long felt that the dollar and commodities are the province of the hedge funds since commodities and Treasuries and hedging and cross hedging and triple hedging Treasuries and gold and corn and silver and wheat and dollars/yen/euro are the only places where hedge funds can find the liquidity they need for the large sums of money they trade on very little margin. So we aren’t’ surprised to see the dollar moving one way or the other. Gold is really a small market when you consider that hedge funds control about $800 billion which multiplied by 5 is $4 trillion. That is a lot of money chasing up or down too few goods and the classic laws of supply and demand are in control. But all these movements are occurring over relatively short terms and in the case of the dollar many companies affected are supposedly hedged. Anyway the stock markets are only one small part of the hedge fund world and we don’t think control there by hedge funds is all that great because of liquidity factors. Please read The Rise and Fall of Long Term Capital Management by Roger Lowenstein for a wonderful insight into the hedge fund world and the problems large hedge funds face in managing the huge amounts of money they control.


8:42am and Jim Cramer makes a good point in his column today that the weak dollar may lead to another round of acquisitions by European Cos as they use their more expensive currency to buy cheaper dollar assets.

Over the weekend we were thinking that with the Bushies in control for another four years we would expect some kind of rescue package to emerge for the drug companies facing lawsuits. The act could be called the Serving the Public Interest Drug Company Protection of Seniors Act. The new act would prevent folks from suing drug companies for untoward side effects of drugs – like death from heart attack – and instead appoint a commission to rule on the merits of the cases. This would save Merck from the eventual bankruptcy which it will have to file to gain protection from lawsuits for VIOXX.

Along these lines we make take a flyer on the drug stocks but it would be more toward the end of December if we do.


9:58am and stocks are meandering with no direction. We bought more RFMD for aggressive accounts and a few shares of Agilent for more of our larger accounts with cash available. We also added Rite Aid at $3.55 to larger/aggressive accounts.

Breadth is positive and Oil is off $1.52 at $45.80 and it is the reason stocks aren’t lower. Treasuries are a tad weaker.


10:58am and Time Warner is off because its $250 million Santa Claus train movie had a lousy opening week end with only $30 million in revenues. With world wide distribution and DVDs the movie will break even or make money but the bad opening is a disappointment.


1:11pm and breadth has turned negative but volume is muted and the major measures are also. We are slowly selling the KYO holding, not because we don’t like KYO but because we think the percentage gain potential is in the lower priced stocks.

European stocks closed lower. According the gurus we are reading the bulls want stocks to stop going up and the bears want them to continue their sharp but welcome rise.


3:02pm and stocks closed mixed on equal breadth. The DJIA gained 11 points to finish at 10550. The NAZZ rose 9 points to end at 2094 and the S&P 500 was unchanged at 1184. oil lost 53 cents to end at $46.87 and Treasuries were flat.

And tomorrow is today.


15 November 2004 - Daily Comment

This Morning

6:29am and Oil is down 72 cents at $46.60. European markets are slightly higher and overnight and Hong Kong and Japan were both up over 1% overnight. U.S. futures are a bit better.

Last week was a strong one and we would guess that this week might see a bit of a pull back to set up for further strength next week. That’s only a guess and given our strong stock position we would just as soon see the markets move higher all week.

The Model Portfolio which we run aggressively is up over 6.1% and most accounts are up 3% to 7%. The S&P 500 is up 6.3% for the year, while the NAZZ is up 4% and the DJIA is lagging at up 1%.

So let the games begin.


13 November 2004 - Weekend Comment

Friday’s Markets

7:15am and Dell delivered the goods last night and while the major measures are indicating a slightly down opening; Dell’s good numbers should help the tech area.

Also helping will be the good performance in Asia overnight and the positive markets in Europe this morning. Oil is up a few pennies.

The WSJ is reporting that the researcher who went to the NYT with concerns about one of Pfizer’s Cox II pain drugs has been taken off the review panel for the drug. The FDA says it doesn’t want anyone on the panel with bias. Okey Dokey.

The DJIA finally moved to the positive side for the year yesterday.

Retail sales were up 0.2% in October, ex autos up 0.9%. The up 0.9% includes the rise in gasoline prices. Treasuries are flat on the news with the ten-year at 4.24%. The dollar remains weak. Stock futures have turned positive.

1170 on the S&P 500 represents a 50% retracement of the whole collapse in 2000 to 2003. That makes 1170 an important support level for the bulls and stalking point for the bears to break to the downside.

The Charles Schwab Corporation released its Monthly Market Activity Report today. Company highlights for the month of October 2004 include:

  • Net new assets brought to the Company by new and current clients in October 2004 totaled $3.9 billion.
  • Total client assets were a record $1.015 trillion as of month-end October, up 11% from October 2003 and up 1% from September 2004.
  • Client daily average revenue trades were 153.7 thousand in October 2004, down 1% from October 2003 and up 16% from September 2004. Daily average trades through Schwab's Mutual Fund OneSource(R) service and other asset-based trades were 64.2 thousand in October 2004, up 8% from October 2003 and comparable to September 2004.

The Company also noted that client daily average revenue trades were 189,000 during the first 8 trading days of November.

We think that Schwab’s assets under control ($1 trillion) are an underappreciated gem in this company. Some large banking enterprise is going to buy Charlie out again.

10:27am and stocks opened higher and then moved back to even. Breadth is positive on the NYSE and negative on the NAZZ even thought the NAZZ is up 7 points on the strength of Dell and other high flying tech stocks. Oil is up 38cents at $47.78. Treasuries are firmer with the ten-year moving down to a 4.19% yield.

We added a good chunk of Schwab to accounts this morning at $10.30. We are paying up for the stock because averaged with our lower cost stock it gives us a fair cost price and a large position in many accounts. The upside from here is 40% and the downside is about 10% and that is a good risk/reward ratio.

11:42am and we are going to take a trading position in Agilent Technologies for a few aggressive accounts. Agilent announced good earnings last night but warned and the stocks is off $3.50 today at $22.20 which is near its yearly low at $19.50 which it made on last quarter’s earnings announcement in mid August. It made the low in August the day after it announced earnings and then didn’t trade lower. We think the same thing may happen this time. The shares are prices at 1.3 times sales and 20 times earnings. Agilent (A) is a spin off from Hewlett Packard. Agilent was downgrade by three brokerages today in the wake of the forward warning.

Agilent Technologies, Inc. is a global diversified technology company that provides enabling solutions to markets within the communications, electronics, life sciences and chemical analysis industries. The Company has four primary businesses. The test and measurement business provides standard and customized solutions that are used in the design, development, manufacture, installation, deployment and operation of electronic equipment and systems and communications networks and services. The automated test business provides test system solutions that are used in the manufacture of semiconductor devices and printed circuit assemblies. The semiconductor products business is a supplier of semiconductor components, modules and assemblies for high-performance communications systems. The life sciences and chemical analysis business provides application-focused solutions that enable customers to identify, quantify and analyze the physical and biological properties of substances and products.

12:26pm and we bought Agilent at $20.17 and also bought Cabellas the sporting goods outfitter that we’ve traded before at $23.22 in a few of our aggressive trading accounts. Cabellas had a 10 million share offering of stock at $22.50 yesterday and after the stock settled higher today we decided to buy for a trade. We are not going to make a big push on these two stocks unless they get cheaper in a market sell off. Our plan is to trade them.

Recently we have been buying AMAT at $16.30 to $16.50. We were hoping for a quick pop which hasn’t materialized. With the way tech stocks have been acting on earnings announcements lately we are leery of holding Applied Materials into Tuesday’s earning’s announcement. We did the same with HPQ earlier in the week happily at a profit. The pop we are looking for may turn into a drop. As a result we hope to exit the shares later today and take our small loss with the idea of revisiting it next week if the spirits move us. We bought AMAT as a package with Micron which has been acting OK and MU earnings don’t come until late December so we plan on holding it for now.

We are buying an equal amount of Lucent at $3.92 in accounts for the shares of AMAT that we sold at $16.

2:06pm and the major measures are on their highs for the day as the markets enter their final hour. Crude oil closed unchanged at $47.32.

We are letting our KYO go as we get back to even or a bit ahead on the stock. We can use the money elsewhere for better percentage gain potential.

3:02pm and The DJIA closed up 70 points at 10540. The S&P 500 gained 10 points to end at 1185 and the NAZZ rose 22 points to finish at 2084. Breadth was over 2/1 positive on the NYSE and 5/4 positive on the NYSE. The Treasury ten-year closed at 4.19% and the five-year at 3.53%.

And today is tomorrow. Enjoy the weekend and we will have a post on Monday morning.


12 November 2004 - Daily Comment

Yesterday’s Markets

7:02am and we want to remind readers that we are changing the thrust of our daily comment to cover the stocks that we own and our trading strategies rather than the rote commenting on daily hour by hour action in the markets. This change will allow us to create a better record of our trading decision and to also give readers a better understanding of the stocks we own and trade.

By now even for new readers it is obvious that we are traders and not long term investors. There are times like the present when we want a large equity exposure because we expect an up market. But even at these times we are quick to react to events and trends which suggest movement from one security or area of the market to another.

We sold a few large cap names yesterday because we wanted to have buying power to purchase more volatile issues over the next few weeks if the pullback from an overbought condition that we perceive occurs.

We bought the big caps a few weeks ago because we thought the markets were going to advance and we wanted some money on the table as the advance unfolded and buying opportunities arose. The big caps were the easy way to get big money on the table fast.

As the markets and our stocks moved higher other opportunities presented and the Model Portfolio rose to 90% equity exposure yesterday morning. It was time to take a few small profits and retrench and refresh our cash supply. Now we have money available this morning to take advantage of the temporary setback in TIF (see below) that is going to occur. We are going to present the individual stock news that is lengthy at the end of the Daily Comment each day so that those who don’t want to read it won’t have to. You ask and we comply.

10:40am and we bought some TIF for larger accounts on the sell off at $29.875. We also picked up a few shares of RF Micro which we have traded for flat results this year. We only bought in small amounts in larger accounts at $6.48. We also bought a few more shares of KYO a $69 and Schwab at $9.98.

Asia was mixed with Japan and Taiwan down over 1% and Hong Kong also lower. Europe is higher.

The DJIA is up 40 points and the NAZZ is up 10 points as oil has dropped $1.41 to $47.45. Breadth is positive and volume is moderate. Coke is off but not enough to peak our interest.

1:32pm and in the quiet trading of the Veteran’s Day holiday for the bond markets the stocks markets are moving higher/ Breadth is positive and the DJIA is currently up 90 points while the NAZZ is 20 points higher. We added shares of Rite Aid to accounts at $3.54.

3:02pm and the DJIA closed up 86 points at 11472. The NAZZ gained 26 points to end at 2060 and the S&P 500 was up 10 points ay 1074. Breadth was 2/1 positive at the close. Oil closed down $1.36 at $47.50.

Coke and Tiffany

Coca-Cola sharply lowered its long-term earnings and volume growth targets, as it boosted marketing spending to bolster its core brands. The beverage giant expects weakness in North America and other key markets to persist into 2005. We sold KO yesterday at $41 and if KO moves back under $39 we will consider repurchase.

Coke’s company press release contained the following points:

At a meeting with the financial community to be held later today, The Coca-Cola Company's chairman and chief executive officer Neville Isdell will comment, "When I returned to The Coca-Cola Company, I did so determined to help lead the greatest company I know to ever higher levels of profitable growth, and fully utilize all of our core assets -- including our world-leading brands, our unparalleled distribution system and our strong cash flow. At the outset, I recognized that meeting this objective would require a relentless focus on execution as well as the patience to get the basics right. Following our strategic and tactical review, we are now prepared to commit to key targets and launch our initial corrective steps to assure that we realize our potential."

Specifically, Mr. Isdell will outline in the meeting the Company's initial operational actions focused on: reestablishing marketing leadership; unleashing the potential of the Coca-Cola system; executing with excellence worldwide; and revitalizing the organization.

Beyond 2004, the Company's policy of not providing specific annual or quarterly earnings per share guidance will continue. However, the Company will still provide perspectives on key trends and business conditions that are important to understanding its business performance including perspectives for 2005.

In one we should have sold yesterday, Tiffany disappointed this morning with lower earnings from Japan and the shares which closed at $32 are going to open around $29. We would have liked to make that swap but to be honest we though Tiffany’s Japan troubles were already baked in the cake as we say. Whatever, we will add more shares to accounts as we receive an unexpectedly early Christmas gift and a temporary set back at the same time.

Tiffany & Co today reported its results for the third quarter ended October 31, 2004. Net earnings declined 26% in the quarter and were below management's expectations calling for earnings approximately equal to the prior year. Retail sales growth in the U.S. (including a 4% increase in comparable store sales) and in many international stores was partially offset by weaker-than-expected sales in Japan and the Company's Direct Marketing channel. In addition, higher precious metal and diamond costs were meaningful factors leading to a decline in consolidated gross margin.

In the three-month period (third quarter) ended October 31, 2004, net sales increased 7% to $461,152,000, versus $430,123,000 in the prior year, and comparable stores sales rose 3%. On a constant-exchange-rate basis (see attached "Non-GAAP Measures") that excludes the effect of translating local-currency-denominated sales into U.S. dollars, net sales and comparable store sales increased 5% and 1%. Net earnings of $20,809,000, or 14 cents per diluted share, were 26% lower than $28,031,000, or 19 cents per diluted share, a year ago.

In the nine-month period (year-to-date) ended October 31, 2004, net sales rose 10% to $1,394,709,000, compared with $1,268,457,000 in the prior year, and comparable store sales rose 8%. On a constant-exchange-rate basis, net sales and comparable store sales increased 7% and 5%. Net earnings were $97,733,000, or 66 cents per diluted share, compared with $105,041,000, or 71 cents per diluted share.

Sales results in the Company's four channels of distribution, and as compared to prior-year periods, were as follows:

  • U.S. Retail sales of $216,500,000 in the third quarter were 7% higher than a year ago and comparable store sales rose 4% (due to growth of 1% in New York flagship store sales and 5% in comparable branch store sales). In the year-to-date, U.S. Retail sales of $666,932,000 were 13% above the prior year and comparable store sales increased 11% (due to increases of 14% in New York flagship store sales and 10% in comparable branch store sales). In both periods, the comparable store sales increases were driven by higher average amounts spent per transaction, while the number of transactions declined. This year, the Company has opened four new TIFFANY & CO. stores: in Palm Beach Gardens, Florida, Edina, Minnesota, Kansas City, Missouri and, last week, in Westport, Connecticut. The Company now operates 55 TIFFANY & CO. stores in the U.S.
  • International Retail sales rose 10% to $190,851,000 in the third quarter and comparable stores sales increased 3% (an increase of 6% and a decline of 2% on a constant-exchange-rate basis). In the year-to-date, International Retail sales increased 10% to $556,530,000 and comparable store sales rose 4% (up 3% and down 2% on a constant-exchange-rate basis). Sales results by major region on a constant-exchange-rate basis were as follows: in Japan, third quarter retail sales declined 2% in total and 5% on a comparable store basis primarily due to continued declines, although at a lesser rate than earlier in the year, in silver jewelry, while year-to-date retail sales declined 7% in total and 9% on a comparable store basis; in other Asia-Pacific markets, comparable store sales increased 6% in the quarter and 15% in the year-to-date; and in Europe, comparable store sales increased 1% in the quarter and 3% in the year-to-date. This year, the Company has added six new international stores and boutiques, including three in Japan (in Tokyo, Takasaki and, last week, in Osaka), one store in Taipei, a store in Shanghai and a fourth store in London, and currently operates 96 TIFFANY & CO. stores and boutiques internationally.
  • Direct Marketing sales declined 6% to $36,861,000 in the third quarter and 5% to $114,034,000 in the year-to-date. Combined e-commerce and catalog sales declined 1% in the quarter and increased 5% in the year-to-date, due to an increase in the average order size but a decline in the number of orders for entry-level priced jewelry. Business sales declined 17% in the third quarter and 23% in the year-to-date, resulting from management's decision to discontinue service-award program sales at the end of 2003.
  • Specialty Retail sales rose 17% in the third quarter to $16,940,000 and rose 13% in the year-to-date to $57,213,000. As expected, the third quarter's sales increase in this channel was primarily due to the startup of sales of rough diamonds purchased as part of larger assortments from certain mines but determined, in the normal course of business, to be unsuitable for Tiffany's production. During the quarter, sales growth in LITTLE SWITZERLAND stores was affected by severely adverse weather in the Caribbean. In addition, in October the first IRIDESSE store opened in Tysons Galleria in McLean, Virginia, and a second store will open this month in The Mall at Short Hills in New Jersey. IRIDESSE focuses exclusively on the pearl jewelry category.
Other Financial Highlights
  • Gross margins (gross profit as a percentage of net sales) of 53.4% in the third quarter and 55.3% in the year-to-date were below prior-year levels of 55.3% and 56.9%. A significant portion of the declines (58% and 44%) was due to LIFO inventory charges of $8,682,000 in the quarter and $17,708,000 in the year-to-date (versus prior-year charges of $3,500,000 and $7,600,000) primarily resulting from increases in precious metal and diamond costs. To a lesser extent, gross margin was adversely affected by a confluence of factors including changes in sales mix and costs incurred to expand product distribution and sourcing/manufacturing capacity.
  • Selling, general and administrative ("SG&A") expenses increased 10% in both the third quarter and year-to-date, with a substantial portion of the increases tied to higher marketing, depreciation and amortization expenses. SG&A expenses as a percentage of net sales rose to 45.0% in the quarter and 43.0% in the year-to-date, compared with 43.8% and 43.0% in the prior year.
  • The American Jobs Creation Act of 2004 ("AJCA") was signed into law in October 2004. At this time, the Company is analyzing the AJCA to determine its impact on the Company's financial statements. The Company's third quarter results and 2004 outlook do not include any effects of the AJCA.
  • Net inventories at October 31, 2004 were 26% higher than a year ago. A 59% increase in raw material and work-in-process inventories was a direct result of expanded rough diamond sourcing and increased costs of raw materials. Finished goods inventories increased 17% to support new stores and new product offerings. In addition, inventories increased 2% due to the translation effect of a weaker U.S. dollar.
  • The Company was active in its share repurchase program during the third quarter, repurchasing and retiring 700,000 shares of its Common Stock at an average cost of $30.19 per share. In the year-to-date, the Company has repurchased and retired 1,435,000 shares of its Common Stock at an average cost of $32.46 per share. Approximately $70 million remains available for future repurchases under the currently authorized plan.
  • The Company's financial position at October 31, 2004 included cash and cash equivalents of $129,776,000 (versus $152,724,000 a year ago), short-term and long-term debt totaling $660,583,000 (versus $565,452,000 a year ago) and stockholders' equity of $1,509,895,000 (versus $1,346,648,000 a year ago).

Commenting on the results, Michael J. Kowalski, chairman and chief executive officer, said, "These disappointing results do not affect our long-term strategic direction. While the U.S. sales increase was geographically broad-based, we had to cope with softer demand in the early part of the quarter and faced a tough comparison with 2003's third quarter, when we achieved a 16% comparable store sales increase. In Japan, we are continuing to reposition our product assortment and support new product introductions with additional marketing and the opening of two freestanding stores. We are seeing some traction from these initiatives, but results were still below our expectations and it would be premature to draw conclusions."

2004 Outlook

Mr. Kowalski added, "We are excited about initial customer reactions to the entire range of new products we've introduced this year and are equally encouraged with successful early results from our new stores. Therefore, we continue to expect a healthy sales increase in the holiday season in the U.S. Nonetheless, we are slightly moderating our previous guidance to mid-single-digit comparable U.S. store sales growth to correspond with the pace of the third quarter. In Japan, we believe that our initiatives, combined with easier year-over-year comparisons, can enable us to improve to flat fourth quarter local-currency comparable store sales. We expect continued favorable results in other international markets and some improvement in direct marketing sales. In total, our target calls for high-single-digit worldwide sales growth in the fourth quarter. We now expect gross margin in the fourth quarter to be somewhat lower than the prior year due to a continuation of many of the third quarter factors, but expect only a mid-single-digit increase in SG&A expenses. As a result, we believe the Company can achieve 5%-10% net earnings growth in the fourth quarter, which would result in full year earnings in a range of $1.43 - $1.48, versus our previous expectation of $1.55 - $1.


11 November 2004 - Daily Comment

Yesterday’s Markets

7:32am and to get ahead Tuesday’s earnings from HPQ UBS has downgraded the stock to neutral saying organic growth will be hard to achieve in 2005. And we surmise they want to be ahead of the curve before tomorrow given that Cisco met expectations and was weak after the bell on Tuesday.


Writing of Cisco, Cisco revenues have grown from 1998 with share price high for year in ( ): 1998 $8.5 billion ($24); 1999 $12.1 billion ($53); 2000 $18.9 ($82); 2001 $22.3 billion ($44); 2002 $18.9billion ($21); 2003 $18.9 billion ($24); 2004 $22.3 billion ($29) with the shares currently priced at $19.50. Earnings have grown ever year from 29 cents per share in 1998 to an estimated 80 cents per share this year. Cisco has $12 billion in cash and has Depreciation of $1 billion per year.

While not cheap the shares are not overpriced on a relative basis and the company grew earnings at a 17% clip last quarter. BankAmerica cut CSCO 12 month price target from $26 to $24. That still would be a 20% plus return from present prices.


Raymond James cut Qwest to market under perform from market perform saying in so many words it is a mess. Raymond James doesn’t think Q is performing on a par with the other RBOC and mentions that it has no internal wireless operation. Good catch. It has been a market under performer for the past five years.


Asia was strong overnight with South Korea up 2% and the Chinese Exchanges up over 1% while Japan was a fractional gainer. Europe is higher and U.S. futures are indicating a mildly higher opening. The Treasury five-year is at a 3.55% yield and the ten-year is at 4.24% which are both up about 5 basis points. Gold is $438 up $1.38 and Oil is down 11 cents at $47.36.


Moody’s has dropped Merck’s debt ratings. Good call, wonder what they see?


Jobless claims were 333,000 (net employment gains for the month of October were 337,000 and the markets rallied) and the trade deficit was $51 billion versus $54 billion for September. The net new jobs are service and clean up in Florida and the jobs lost are manufacturing and white collar. We wonder if a person works two jobs is counted twice.


The dollar is trading at 1.30 to the euro. We remember the good old days when that ratio was reversed and trips to Europe by our children were affordable. We presume we will be having a bunch of foreign visitors this year. It’s a good thing John Ashcroft has eliminated the terror problem and moved on to saving the heathens of the United States.


8:53am and stocks have opened mixed with techs lower and retailers higher. We are initiating a position in May Department Stores. We have been watching it closely for about three months and with the upgrade this morning by Smith Barney after the company announced punk earnings we decided to buy a bit in aggressive accounts. MAY has a dividend yield of over 3% and is trading near where is sold in 1994 and at one half its five year high.

The May Department Stores Company operates six regional department store divisions in the United States. The department store divisions are Lord & Taylor; Filenes’s and Kaufmann's; Robinsons-May and Meier & Frank; Hecht's and Strawbridge's; Foley's, and Famous-Barr, L.S. Ayres and The Jones Store. As of January 31, 2004, May operated 444 department stores in 36 states and the District of Columbia. May National Bank of Ohio, an indirect subsidiary, extend credit to customers of May's six department store divisions. In July 2004, the Company acquired the Marshall Field's department store group from Target Corporation. In addition to its department stores, May's Bridal Group operates 210 David's Bridal stores, 460 After Hours Formalwear stores and 10 Priscilla of Boston stores.


9:23am and we plan on buying more CSCO when the volume reaches 100 million shares today if is it selling below $18.75. It is currently at that price but the volume is only 44 million shares. We added Lucent to many larger accounts at $3.75 after they announced a settlement of their pension and health care brouhaha with retired employees. This was the last remaining major overhang for them this year. LU also will get an $875 million tax rebate next year.

The NAZZ is down 7 points and the DJIA is up 15 points and the breath both places matches their loss or gain. Volume is moderate and the markets seem to be awaiting the FOMC meeting ¼ point raise.


11:23am and stocks have had a good run. We think there might be a pause after the FOMC announcement with a pullback into next week. With that in mind we sold our HPQ at $19.37 ahead of earnings next Tuesday. For those folks who owned HPQ but didn’t own CSCO we are going to switch the money to CSCO at $18.53 which is down $1.50 on earnings announced last night that seemed fine to us but which Wall Street didn’t like. In a cash raising mood we sold MYG for a $2 to $3 gain, and we sold Bellsouth for a $1.25 per share gain.

As we have over the last five years little steps that move the accounts higher seem to work better than holding on and hoping to hit the jackpot. We are not going to conduct a massive liquidation but we may sell Coke and Colgate and SBC into the FOMC announcement if the markets rally. This will raise cash but leave us in the more volatile stocks that can provide better than the market gains.


1:20pm and the Fed raised the discount rate to 2%. We were concentrating on how the markets would react and dozed off for a few minutes. And that about sums up the markets reaction. More interestingly, Intel doubled its dividend to 8 cents a quarter and is going to buy back 500 million shares. That placed a bid in that stock. other than that, the DJIA is up 23 points, the NAZZ is down 3 and Treasuries are a couple of basis points firmer. The fly in the rally ointment today is that oil has moved up $1.10 to $48.45. We shall see.


3:02pm and the DJIA closed up 4 points at 10390. The NAZZ was down 9 points at 2034 and the S&P 500 lost 1 point to end at 1162. Breadth was 5/4 positive and volume picked up in the last hour. Crude oil closed up $1.50 at $48.86. The Treasury ten-year finished at a 4.25% yield. We sold Coke and Colgate for $.90 to $1 per share profits as a cash raising exercise. We kept the SBC for now.

And tomorrow is today.


For those following NKU we have the story of the NKU vs. Ohio State contest. We are skipping the NKU vs. Cincinnati contest since we were thoroughly trounced by one very good basketball team.

In the Ohio State game NKU played them close till about 4 minutes to go in the half and then OSU pulled out to a ten point half time lead.

OSU was unable to pull away in the second half and with 1:40 remaining in the game OSU was only up 6 points. But NKU missed a 3 point try and that was the ball game as OSU won by 10 points. NKU played OSU even in the second half and had OSU sweating a bit at the end.


10 November 2004 - Daily Comment

Yesterday’s Markets

7:32am and Marsh and McLennan is laying off 3000 souls. That always seems to be the answer when a company gets in trouble. Spitzer’s investigation of their insurance commission practices will continue but the stock may get a pop on the layoff notices.

Boeing is under further investigation. Skilling is asking for a change of venue in his Enron trial. Why not?

UBS Chain Store sales index was 1.3% versus a prior 0.3%. As we said before the election, we think the air is now clear and that the scare tactics of both parties will recede at least for Christmas and provide a gentler kinder atmosphere for investment gains. Terror alerts may be a thing of the past. Bush held a press conference his second day after election and today he is visiting a military hospital. He obviously wants to portray the image of a kinder gentler presidency. And Cheney is out of sight.

The QQQ tracking Index of the top 100 stocks on the NASDAQ will move to trading on the NAZZ on December 1. The new symbol will be QQQQ not to be confused with Q or QQ. One can’t say quadruple Qs as fast as one can say triple Qs.

The WSJ reports that the Department of Energy is going to share the cost of utilities winning approval of new nuclear plants. GE will be happy. We thought capitalism was a ‘go it alone without government help/interference’ backbone principle of Republicans. We guess if a corporation accepts government help it is Ok, while individuals should fend for themselves since they have so many more resources than corporations.

Smith Barney Citigroup is making comments about a slowdown in PC sales growth in 2005 to single digits from the lower teens.

8:02am and economic data is absent today so the boys and girls will have to trade on tonight’s Cisco earnings and tomorrow’s Fed meeting.

Overnight Asia was mixed as is Europe and U.S. futures are suggesting a lower opening.

AOL is reorganizing again into four business units and laying off 700 souls while sending a few executives to upper echelon Time Warner heaven. The stock market assigns zero value to AOL and we think and also hope that eventually this value will be recognized.

Maytag this morning said that it sees profits for 2005 in the range of $1.50 to $1.60. Reuters estimate for 2005 is $1.57.

Merck remains interesting but we can’t get our arms around the litigation risks and costs, especially with the now surfacing e-mails that imply knowledge many years ago of the heart implications.

We failed to mention the pop in Sears on Friday after we traded it for a loss several weeks ago. It popped last Friday on news that Vornado, a real estate investment trust, had taken a 4% position in it. We mention that pop because the reason given was that folks were recognizing the hidden real estate value in the company. That was our original reason for purchasing S and so we get an A+ for intuition and an F for imagination. That’s because while we were first to recognize the real estate value compared to K Mart’s run up on real estate value, we didn’t have the imagination to believe that any big boys or girls would really act on trying to realize value from the real estate holdings.

That’s because K Mart is a dissipating business that will eventually disappear or retrench much smaller, while Sears is a permanent if staid business that needs most of its real estate holdings to continue operations. In fact Sears is buying some the K Mart properties that are being sold. Sale/leasebacks would increase Sears’s costs and Sears is so bad at investing surplus cash that there is no way any major real estate sales will occur, in our humble opinion a least. But we are sorry we missed the pop.

Redbook Chain store sales Index was announced as plus 0.2% versus an expected negative 0.6%.

8:32am and stocks are opening mixed. Oil is down $1 at $48.09 and that will be a push for the markets. Tech stocks are under pressure from some negative European tech stock reports overnight. There is more negative Merck Vioxx news and negative Pfizer news plus a $15 billion Treasury five-year auction at 1pm today.

12:10pm and the Treasury five-year came at a 3.51% yield. The ten-year is at a 4.20% yield. The major measures are meandering with no direction as tonight with CSCO and tomorrow with the Fed are center stage. The action in Falluja is a non event unless something untoward occurs and Arafat’s imminent demise is also not on the markets radar screen.

Maytag has had a nice pop today on their revised outlook. The techs are under pressure which actually is positive for tonight’s CSCO announcement. It’s better than having them move higher ahead of it.

3:02pm and oil finished below $48 at $47.37 down $1.72. At the bell the DJIA was down 5 points at 10386. The S&P 500 dropped 1 point to finish at 1164 and the NAZZ rose 4 points to 2043. Breadth was 5/4 positive and there were almost 400 new highs.

3:20pm and Cisco announced earnings of 21 cents for the quarter on sales of $6 billion which were up 17%. This was about as estimated but the shares are down 50 cents per share in early after hours trading.

And tomorrow is today.


9 November 2004 - Daily Comment

Rather than do posts on the hour about market internals which must bore everyone we are going to comment throughout the day on market action and then post at night with our guess for tomorrow’s action. If any unusual events elicit a morning post we will of course do one.

Yesterday’s Markets

7:32am and herecome the upgrades. MLFPS has upgraded a lot of the tech sectors this morning to market perform and outperform.


From the Financial Times: The dollar could slide still further, in spite of hitting an all-time low against the euro last week in the wake of George W. Bush's re-election, currency traders have said.

The dollar sell-off has resumed amid fears among traders that Mr. Bush's victory will bring four more years of widening US budget and current account deficits, heightened geopolitical risks and a policy of "benign neglect" of the dollar.

Many currency traders were taken aback on Friday when the greenback fell in spite of bullish data showing the US economy created 337,000 jobs in October.

"If this can't cause the dollar to strengthen you have to tell me what will. This is a big green light to sell the dollar," said David Bloom, currency analyst at HSBC, as the greenback fell to a nine-year low in trade-weighted terms……

India and Russia have reportedly been selling US assets, as well as petrodollar-rich Middle Eastern investors.

China, which has $515bn of reserves, was also said to be selling dollars and buying Asian currencies in readiness to switch the renminbi's dollar peg to a basket arrangement, something Chinese officials have increasingly hinted at. Any re-allocation could push the dollar sharply lower and Treasury yields markedly higher.


The WSJ reports that the U.S. imported more farm goods than it exported in June and August marking the first time this has occurred. The is not good for the trade deficit and represents more bricks in the Wall of Worry the stock markets need to climb.


BankAmerica is cautious on the semi-capital equipment market. AMAT is in that category.

Barron’s had a positive article on Nokia over the weekend. AMAT and HPQ earnings are due on November 16. If we get a further pop in HPQ we may chose to go to the sidelines on the HPQ . The shares have dropped 10% or more the last three quarterly earnings days. But that is a week off. Talbot’s earnings are November 17 but their November sales announcement implies no untoward surprises.

Cisco earnings come tomorrow and will give an indication how the big boys and girls will treat earnings from the rest of the big cap tech stocks in this new bullish phase.


10:18am and stocks are acting well given last weeks run up. The major measures have been flipping from slightly positive to slightly negative in the first two hours. JP Morgan upgraded EBAY and the trading gurus don’t like that since they think that upgrade marks the end of the momentum stocks run for now. We don’t know.

We completed our purchase of Univision at $28.90 and also bought the other stocks we mentioned this morning to round out our holdings. Our next area of interest is the low priced stocks but we plan on waiting for a pullback if it comes for them.

According to John Succo at www.minyanville.com the real trouble with the dollar begins when the yen breaks below 103 to the dollar. The yen is currently at 105 to the dollar. Under 103 the Japanese Central Banks and investors from Japan begin to lose on the interest rate/yen value arbitrage.

But if Uncle Allan raises rates on Wednesday that may stem the tide and force a readjustment of the above scenario, for the time being anyway.

Microsoft goes ex its $3 special dividend on November 15.


12:34pm and the three-year Treasury auction was priced at a 3.09% yield. The stocks markets continue their meandering way with neither bulls nor bears holding sway. The breadth is mixed with volume light as many traders wait for night when they can leave this ship of woes and leave for home on tippy toes.


1:04pm and we are going to take our loss in Cincinnati Bell and place the money in Lucent. For tax paying accounts the CBB represents a usable loss and the Lucent probably has as more upside and as much downside as CBB. Sell your losers and let your winners run.


2:01pm and entering the final hour the major measures are higher and the bulls are trying to make a run. Volume in the sell off today has been mild and that is a positive.


3:02pm and The DJIA rose 5 points to end at 10390. The S&P 500 rose was off 2 points at 1165 and the NAZZ lost 1 point to end at 2038. At the bell breadth was 2/1 negative on the NYSE and 5/4 negative on the NAZZ. Oil finished the day down 52cents at $49.09 and the ten-year Treasury had a yield of 4.22% a bit better than earlier in the day.

Cisco earnings are Tuesday night and Greenspan and his merry men meet on Wednesday.

And tomorrow is today.

The Coach at work NKU vs. Kentucky


8 November 2004 - Daily Comment

6:25am and stocks should rally sometime today as folks who missed last weeks rally have done their homework over the week end and are prepared to play. We then expect a one day retreat initiated by profit taking, the weakness of the dollar and the price of oil. After that we would guess that the rally will resume. We have a little bit of buying to do to round out accounts and we will complete that sometime early this week. Among the stocks we are adding to are Micron, Applied Materials, Chiron, Kyocera, and Talbot’s.

U.S. futures are lower this morning, Japan was lower but Hong Kong was higher and Europe is mixed. Oil is down at $49 the Treasury ten-year is at 4.18% and the five year is at 3.50%. We surmise that our no rate increase scenario is non-operative given Friday’s Employment report of 337,000 jobs added to the economy in October.

First on our radar screen as a new add for aggressive accounts is Univision, the Spanish language TV network that disappointed latte Friday and sold off $4 per share after the close. Univision Communications Inc. is a Spanish-language media company in the United States. The Company operates in four business segments: television, radio, music and Internet. The Company's principal business segment is television broadcasting, which consists primarily of the Univision, TeleFutura and Galavision television networks, the Univision Television Group owned-and-operated broadcast television stations and the TeleFutura Television Group owned-and-operated broadcast television stations. Univision Radio, Inc. operates Univision's radio business, which includes its radio network and owned and operated radio stations. The Company completed the acquisition of Univision Radio, then known as Hispanic Broadcasting Corporation, in September 2003. The Company's music operations include the Univision Records label, Fonovisa Records label and a 50%-interest in Disa Records, S.A. de C.V. Univision Online, Inc. operates Univision's Internet portal.

So let the games begin.

For those who are interested we present the story of the NKU vs. Kentucky game follow. Our son in law Dave Bezold is now the Head Basketball Coach of the NKU Men’s team. (NKU Link)

LEXINGTON, Ky. - To most of the 18,824 in attendance, it was just an exhibition game and a chance to see the heralded University of Kentucky recruiting class in action for the first time.

But for Northern Kentucky University’s Dave Bezold, it was a dream finally realized.

Bezold, entering his first season as NKU’s head coach, made his sideline debut Wednesday night against UK in an exhibition game and watched his Norse drop a 91-73 decision in Rupp Arena. The Wildcats used a 15-0 run in the first half to wipe out a 20-12 deficit and forced 26 NKU turnovers to win the first-ever meeting between the two schools in men’s basketball.

For Bezold, who spent the previous 14 years as an assistant coach at NKU, it was an experience he will never forget.

“Playing against Kentucky in Rupp Arena, now that’s a tough way to start off as a head coach,” Bezold said with a laugh. “Going up against the most storied college basketball program in history is something none of us will ever forget. I sure will have plenty to remember since it was my first game as head coach.

“My dream job was always to be the head coach at Northern Kentucky University, and I was able to do that tonight for the first time. The fact my first game was against Kentucky made it even more special, because UK is a class program with a tremendous head coach, and they are going to win a lot of games this season.”

For much of the first half, it looked as though NKU might be able to spring the huge upset. Mike Kelsey scored 11 points in the first seven minutes of the game as NKU bolted out to an 18-10 lead. After Harrison Morton hit a jumper to give the Norse a 20-12 advantage, Rajon Rondo made a pair of free throws to slice the deficit to 20-14, setting up the key play of the first half.

Harrison Morton

Morton drove the middle of the lane and appeared to have a layup. UK’s Randolph Morris, however, swatted the ball on its downward flight, but goaltending was not called and Bezold was hit with a technical foul for being out of the coaching box.

Rondo hit two more free throws, and UK was off and running. The Wildcats capped the 15-0 run with a three-pointer by Kelenna Azubuike for a 27-20 lead with 7:44 remaining before halftime. UK eventually led by eight points twice in the first half, but Brian Lewin nailed a pair of three-pointers in the final 3:40 to help NKU claw within 41-38 at the break.

NKU used 7-for-12 shooting (58.3 percent) from three-point range in the first half to stay in the game. Kelsey netted 18 of his game-high 27 points before halftime.

“We had a tough time defending their (NKU’s) perimeter game. I was really impressed with Mike Kelsey and the way he shot the ball,” UK head coach Tubby Smith said. “I thought we were doing some things well defensively until I saw the shooting percentages. Our press got going and gave us some momentum in the second half, so it was kind of two different halves.”

In the second half, UK forced 17 turnovers with its full-court pressure. Kelsey hit a three-pointer at the 12:44 mark to bring NKU within 51-49, but UK used a 14-2 run to build a 65-51 advantage with 8:56 left.

After a tip-in by Tory Reed cut UK’s lead to 69-57 with 7:22 remaining, NKU committed six turnovers against the Wildcat full-court press during the next three minutes. Several times, the Norse were unable to get the ball across midcourt.

Steve Purdon

“Their press was relentless, and it caused us a lot of problems,” Bezold said. “ It was like an ocean, with waves crashing down on us. We used a lot of timeouts and ran out (of timeouts) fast. Closer to the end, Tubby Smith called off the dogs, and that was a class act. He coaches a classy program.”

Azubuike scored 26 points to lead UK, which made 60.5 percent of its shots from the field in the second half. Rondo finished with 16 points for the Wildcats, and Chuck Hayes added 15 points.

Reed scored 12 points in his NKU debut, while Lewin added 11 points. The Norse finished 11-for-19 from three-point range, with Kelsey going 7-for-10 from downtown.

“It was a fun night and a great atmosphere,” Kelsey said. “I told the guys that there’s no better place in college basketball to play. Rupp Arena is the highest of highs in college basketball. It was a great experience and we’ll learn from this.

“It sure sounded like a whole lot more than 18,000 people. I’ve never played in front of this many people, not even half that. It was just a good experience.”

The crowd of 18,824 was the largest to ever watch an NKU sporting event in person. The previous NKU record was 10,836 on Dec. 2, 1993, when the Norse played at the University of Dayton and suffered a 99-82 setback against the Flyers.

NKU will conclude its exhibition schedule with games at Cincinnati (Nov. 8 at 7 p.m.) and Ohio State University (Nov. 9 at 7 p.m.). The Norse begin the regular season Nov. 19 in the John L. Griffin/Lions Club Classic with a 7:45 p.m. game against Michigan Tech University in Regents Hall.



5 November 2004 - Evening Comment

6:29pm and we are back in the land of milk and honey and will have a bunch to write on Monday. The rally of the last three days has exceeded our expectations and after a pop on Monday morning as the institutions that take days of meetings to make up their minds get in, we would expect a pullback.

We aren’t going to try and trade the pullback and in accounts that have dollars left we will continue to invest. We have prices in mind for the stocks we own and the stocks’ share prices aren’t anywhere near them now. So we are going to enjoy the week end and worry about next week next week.

And tomorrow is another day.



4 November 2004 - Evening Post

2:30pm and the stock markets are at their highs of the day with the DJIA up 150 points, the NAZZ up 14 points, and the S&P 500 well through 1150 at 1158 up 15 points. Oil is lower by $2 per barrel at $48.82 and Treasuries are basically unchanged.

We bought a small amount of Qwest at $3.50 in many accounts as the beginning of our low priced stock group purchase for year end. We may buy RiteAid tomorrow for this package.

We bought Motorola at $16.50 in a few samller accounts and also bought Micron Tech, the DRAM maker, at $11.75 in accounts that own Motorola.

The break through 1150 by the S&P 500 was bullish and while the stock marketks are extended they can stay that way for a while. In the 1990s they stayed extended for four years. We aren't looking for that now but we are in no hurry to take profits. This is the time of year to let things run.

And tomorrow is another day.



3 November 2004 - Daily Comment

3:02pm We are posting now because we have a basketball game to attend tonight.

The stock markets couldn't hold their Bush Wins rally although they did manage to close higher on the day. The NAZZ gave back two thirds of its gain. The retreat began when oil popped over $50 in the afternoon.

We bought a bit more Comcast and Motorola during the pullback but we are want to keep most of our buying power for any major pullback.

HAIN had a nice pop as they released lackluster earnings but promised better results.

We'll post again the evening of the 4th.

And tomorrow is another day.



3 November 2004 - Daily Comment

9:12am and the markets are higher in celebration of the Bush victory. We are as fully invested as we want to be and we have no intention of selling at this time.

We plan to maintain positions and when the euprhoria wears off in a couple of days, we may add other issues. For now we are going to stand pat.

Since we are travelling posts are a bit more difficult but we will have another short one tomorrow.

So let the games continue.



2 November 2004 - Daily Comment

This Morning

We are traveling to Kentucky to get there in time to watch the returns roll in.

Yesterday’s Markets

7:32am and Personal Income for September was up 0.2%, and Personal Spending was up 0.6%. Real Disposable Income was unchanged. The savings rate seems to be non existent.

9:55am and stock are floating along in moderate trading. The drug stocks are lower with Merck off over $2 as Prudential lowered earnings estimate. The DJIA is up 5 points and the NAZZ is up 3 points. Oil is down 21cents and breadth is negative on the NYSE and NAZZ.

10:34am and as oil slips under $50 stocks have started to rally we are going out for a couple of hours.

12:54pm and oil is down $2.25 at $49.60. The major measures are positive but just so and breadth is positive on the NYSE and stinky on the NAZZ. Merck is a drag on the DJIA with its shares down $2.25.

We added a few shares of Chiron, and Talbot’s and Comcast and SBC to accounts that were a bit underinvested in relation to our other accounts. The Model Portfolio is 68% invested in equities and that is where we want to be for now. Most of our accounts are over 50% in stocks now and we are going to hold off on purchases and let the election brouhaha and a little time pass before we add much more. Hain Celestial comes with earnings on November 3 and also Nokia and Talbot’s will have earnings and we will be ready to add stocks on any give back in those issues.

We are going to be traveling for the next week and so our daily posts will be brief until we return home. We are content with our holdings and look forward to the coming rally.

3:02pm and the DJIA closed up 27 points at 10054. The S&P 500 gained 1 point to end at 1131 and the NAZZ rose 5 points to 1980. Oil closed lower by $1.63 at $50.12. The ten-year Treasury had a yield of 4.09% and the five year closed at a yield of 3.34%. Breadth was even at the close.

And tomorrow is today which is Election Day.



1 November 2004 - Daily Comment

This Morning

6:45am and interestingly the S&P 500 closed Friday at 1130 only 1 point below where it began the month on October 1. The NAZZ and the DJIA moved above their 200 day moving averages last week. 1140 is resistance on the S&P 500 that must be broken to the upside on preferably high volume if there is to be a year end rally.

This week will be slow until the election outcome is obvious. We do think the markets will move down a bit if Kerry is the winner Wednesday morning and up a bit if Bush is the winner. If there is no winner folks are looking for a repeat of 2000 when the markets moved 3% lower while all the shenanigans were occurring. The same could occur this time. Our guess is that there will be a winner on Wednesday.

For today it should be slow and steady.

So let the games begin.

Friday’s Markets

7:32am and advance 3rd Quarter GDP was announced at plus 3.7% when 4.1% was expected. Personal consumption was 4.6% versus and expected 3.4%. Inflation was 1.3% versus 1.6% expected.

8:52am and the major measures are mildly higher with breadth running 2/1 positive. Crude oil is up 25 cents and Treasuries are a bit firmer on the less than expected GDP number.

We are picking at some ANDW since it looks like it won’t come back to us and we have also picked up shares of HAIN at $16.50.

9:07am and the Chicago PMI came in at 68.5 versus and expected 57 and a prior 61.3. Michigan Sentiment was 91.7 versus expected 88 and prior 87.5. Treasuries have slipped on the news.

11:22 and we bought more HAIN at $16.50 and are in the process of buying ANDW at $13.90 for accounts where we have purchased HAIN. With the way ANDW has performed in the last month we would rather be in at these prices and buy more if it moves lower. It won’t preannounce on earnings until January and by then we think the stock will be higher since the momentum folks seem to own this issue. We also completed buying more TLAB for accounts that already own it at $8.02.

The major measures are vacillating and breadth has turned negative. Traders seem to be waiting for the late day fiscal year end mark-up which may or may not come.

We have pretty much spent all our October money so it is a good thing that we are heading to Kentucky on Election Day to watch the beginning of basketball season for the next week and to meet with clients. NKU, our son in law the coach’s basketball team, opens its season with exhibition games against Kentucky, Ohio State and Cincinnati within a six day span. It will be interesting.

We like the stocks we own and we are comfortable with our exposure.

As we have said before, this market reminds us of the 1978 through 1983 period when it paid to own individual stocks and trade them individually. That time period was before indexing was popular and so folks had to concentrate on individual stocks. Now every hedge fund and large mutual fund is indexing. They add their own individual bells and whistles to their basic index package to try and beat their benchmark. The plethora of indexers pretty well negates any advantage that indexing provided when it first began in the mid 1980s.

Until speculative and investment money comes out of real estate where it has migrated to the last few years we would guess the markets will be range bound. But that doesn’t mean that individual stocks won’t perform.

After the election, which we believe will be decided by the opening Wednesday morning, whoever wins will emphasize the positive and that change in attitude will eventually affect the markets positively too before year end.

1:15pm and Arch Crawford is on CNBC. He is the fellow who makes market decisions partially based on astrology. The Mars-Uranus Crash Cycle is in effect and that makes the market vulnerable. Every crash in the last 100 years has occurred during that cycle, but not every cycle sees a crash. But the markets have till March 23 to crash during the cycle so hopefully we will be out by then.

Volume has slowed and the major measures are flat. We don’t know whether the last hour will have any fireworks but we would guess that the mutual fund boys and girls would like to see a higher close.

3:02pm and the DJIA closed up 20 points at 10025. The NAZZ was off 2 points at 1975 and the S&P 500 gained 2 points to finish at 1130. Breadth was positive on the NYSE and negative on the NAZZ at the close. Oil finished up 76 cents at $51.76.

And tomorrow is actually yesterday.




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