This is our last post until Thursday October 6. The Model Portfolio
will be updated if there are changes in the holdings
Durable goods orders were up 3.3%
and the ex-different things numbers were up 3.6% and up 4.2%. Stocks decided
they like that number while bonds are a little softer. Oil is up a few pennies
to begin the day.
Investors Intelligence has bulls 53/ bears 26.
Wednesdayís Markets September 28, 2005
and we sold our
trading position in CSCO and AMAT for a plus scratch on CSCO and 15 pennies on AMAT. The stocks
didnít act well after we purchased them yesterday and we are using the morning
rally to unload the trading positions.
Treasuries are lower with the two year at 4.12%. Last week at this
time it was at 3.90%.
Oil is higher and the major stocks measures are higher in
desultory trading. there is a bit of a kick in tech
stocks but we wonder whether that will last all day.
and the major measures are lower. Oil is up $1.58 at $66.65 and Treasuries have found a bit of a bid
and are better than this morning with the two-year at 4.08% and the ten-year at
Breadth is 5/4 negative on the NYSE and 2/1 negative o the NAZZ. Volume
We are buying New York Community Bancorp which yields
6% and we think the dividend is safe. The bank services the New
York metropolitan area with 143 offices. NYB ran into
mismatch problems several years ago and took a bi write-down and the share price
dropped from the mid $30s to the lower $20 range. We are buying shares at
$16.05 (book value is $12) as the quarter ends as we think there is mutual fund
selling pushing the shares down. The CEO has been buying shares on a monthly
basis and other directors have been buying. We view it as a recovery candidate
for next year.
and the DJIA closed up 19 points at 10475. The S&P 500 gained 1 point to 1217 and
the NAZZ lost 1 point to end at
2115. Breadth was positive on the
NYSE and negative on the NAZZ. New highs
exceeded new lows by 50. Oil closed
up $1.33 at $66.40 and Short Treasuries
were unchanged with the two-year at 4.08% while the ten-year ended at 4.26%.
And the games will continue while
we are not posting and we will be
watching and maybe playing if the price is right.
Weíll be back on October 6. *****
27 September 2005 Daily Comment
We are taking a week off from witting our comment beginning Thursday
September 29 when there will be no post. We will return on October 6. We
are heading to Chicago for meetings
with clients and will be watching the markets but our set up there is not favorable
for writing our comments. If we make any transactions we will post that news
and will update The Model Portfolio
Treasuries continue to weaken
with the two-year at 4.07% this morning. Fed folks keep talking about fighting
inflation and those words now have bond tradersí attention as the hurricane
scares recede to the old news category.
Bear Stearns had cautious comments on Cisco and that may account for some of the weakness in the shares yesterday
afternoon. We eliminated our trading position in the morning at a small profit
but remain interested.
AG Edwards said that AMD has
a good server product but reiterated its positive comments on Intel.
Morgan Stanley says the Bells may have trouble meeting revenue
projections in the year ahead and lowered its forecast for BellSouth and SBC. That
may present a buying opportunity since the dividends are so generous.
Heard on the Street in the WSJ has positive comments on TWX cash flow and also GE and KO and Yahoo.
Our tech guru is OK on the bull
case through the end of September because of mark-ups but he is gloom and doom
for October talking about eclipse similarities with 1987 and a whole lot of
other scary stuff. Weíll take it one day at a time but we like buying when it
is scary because prices are usually good.
Tuesdayís Markets September 27, 2005
Oil is lower after being higher earlier this morning. OPEC has basically said they are going
to pump all the oil they can and why not when the price is $60 plus per barrel.
Those guys arenít stupid.
The dollar is at a two month high
against the euro.
Mother Merrill cut Boston Scientific
to neutral from buy. Looks like BSX will be making another new low today. We
remain interested and are looking at an under $20 buy point.
President Bush wants folks to
stop driving and use public transportation. If he quit flying to the Gulf every
other day he would save a lot of fuel. We know he cares.
9:22am and the major measures have been up and down depending on
the programs that are being operated by the big boys and girls. Treasuries are
now up in price down in yield on the day and oil remains lower.
and JP Morgan cut its view on chip makers
and among others Applied Materials
sold off. We repurchased our trading position at $16.65 that we sold yesterday
at $17.06. We also bought back the CSCO
at $17.83 that we sold yesterday at $18.14. We are trading in our larger
accounts. In those same accounts we sold TLAB
at $10.10 for a 38 pennies profit. We added a few shares yesterday at this
level and the stock price proceeded to drop to $9.84. We are hoping for the
same action today.
We like trading these three
stocks in our larger accounts and $500 here and $1500 there eventually adds up.
It is our tried and true singles approach that has worked of us in the past versus
the home runs we went for at the beginning of 2005 that caused us to strike
The major measures a lower and
breadth is 2/1 negative. Fed governor Janet Yellen was talking inflation and
rate hikes about an hour ago and this caused Treasuries to give up their gains
and move lower with the two-year back to 4.09% and the ten-year at 4.31%.
We sold our OATS trade for a 50 pennies profit in smaller aggressive accounts
and a hard earned plus scratch in our larger accounts.
and oil is now down
over $1. Coincidentally the DJIA is rallying to the plus side on programs but
breadth remains negative by a 2/1 margin. Itís just the boys and girls paying
and the DJIA managed to close positively for the
day up 11 points at 10455. The S&P
500 was fractionally higher at 1216 and the NAZZ lost 5 points to end at 2116. Breadth was 5/4 negative and volume was moderate. New highs and new lows were about equal.Oil ended the day down 76 pennies at
$65.06 and Treasuries bounced positively
on Greenspanís late afternoon speech with the two-year ending at 4.07% and the
ten-year at 4.30%.
And tomorrow is Wednesday with only
three trading days in the month and quarter left. So join us for the fun and
26 September 2005 Daily Comment
Happily, for most the hurricane
was a minor inconvenience although some folks really got smacked. And with oil
down to $63 Treasuries are back in the proper alignment with the two year at 4.05%.
Barronís has an article that AMD has a chip that runs rings around INTC and so there will be the obvious switching
by the flighty folks today.
As we approach month and quarter
end we would expect some mark up games to occur although how much firepower and
will the big boys and girls possess to own stocks at this time is in question.
The sell off last week with most
major measures down 2% was in part engendered by the hurricane mania encouraged
by the media mania. But the timing of the sell off coincides with the time of year
when we have usually have strong corrections of 8% or more and so we donít
think the all clear has yet been sounded. Of course when it is it will be too late
to buy the way we do (on the way down). And so we plan on continuing to buy a
few more stocks if the weakness continues this week. If not there is always
next month when the bottom usually occurs.
Mondayís Markets September 26, 2005
9:04am and the major measures opened higher with breadth 2/1 positive.
That was the relief rally from the hurricane.
Now stocks are coming back in,
breadth is down to 3/2 positive and the real test of the power of the bulls
We sold our CSCO and AMAT trades for
better than and scratch profits. We think we can pick them up cheaper.
We added shares of TLAB to accounts that own it as the
stock received another upgrade this morning and traded over $10.
We also added Nokia at $16.40 to accounts that own EL and in the same amounts. MOT has been getting all the good vibes
but now there is a lot of positive news flow on NOK and with their strong financial position and our luck trading
it in the past we want to have a position in it now and will buy more if it
Greenspan made negative comments
about the budget deficit while in France
over the weekend and this morning Fed member Moskow made negative comments
about inflation and positive comments about the economy being sound.
Those comments and the drop in
the price of oil have short Treasuries selling off as it becomes clearer that the
Fed is going to raise rates again in November. We are going to hold off on
buying the two-year for a while. We want to get our portfolios set over the
next month and then place the rest of the funds in the two year and we w donít think
we have to rush to own the two-year over 4%. It would seem that the only rally
in t short Treasuries will now come from an intensified sell off and if that occurs
we will probably be using cash to pick up more stocks.
Existing home sales were up by
100,000. Since a bunch of homes were destroyed these numbers become pretty meaningless
for the next year.
11:10am and volume has slowed as the major measures hold their
gains and breadth moves back to 2/1 positive. Oil is on the plus side over $64.
and the bull test is
here as the major measures are back to even and the contra hour wanes. Oil is
now up $1.50 and Treasuries have disconnected from oil since the hurricane is
over and the Fed folks who are speaking remain inflation hawks.
We repurchased our JP Morgan position at $33.95. We have
had good luck trading the shares and at this price JPM yields 4% and will go x-dividend on October 4.
and the major
measures managed to finish on the plus side with last inning rally. The DJIA closed up 25 points at 10445. The S&P 500 gained 1 point to 1215 and
the NAZZ rose 5 to 2121. Breadth also finished positive. Volume was light. New highsexceedednew lows by 2/1. Treasuries finished lower with the two-year at 4.05% and the ten-year
at 4.29%. Oil went out on the plus
side up $1.63 at $65.82.
And tomorrow is Tuesday so join
us and weíll tell you how the games went.
23 September 2005 Daily Comment
Typhoons in Tokyo, hurricanes
and confusion in Washington
all converge on the markets this Friday.
Watching those folks trying to
get out of Houston is amazing and
confusing. Where do 6 million people go? We know Texas
is large but are they going to camp on the Ponderosa.
So much for American confidence
in evacuation plans.
Fridayís Markets September 23, 2005
and we donít think
today is going to be an up day in the markets or in Texas
and so we took our short profits and AEOS and SBUX. Hopefully weíll be able to
repurchase them next week.
We still would like to buy JP Morgan under $34 but we havenít had
any luck yet.
The major measures are lower and breadth
is 2/1 negative out of the gate.
This is the way yesterday began and then Rita was downgraded to a Category 4. If
they downgrade it to a Category 3 today weíll have another rally.
Treasuries are finally acting like the Fed is going to continue
raising rates as the two-year has moved back to 3.96% and the ten-year is 4.22%.
Oil is lower.
11:47am and we added Estee Lauder to accounts at $35.50 which is where it traded at the
beginning of the week on the disappointing earnings news.
The major measures have moved
higher but have now rolled over and breadth is flat. Treasuries are weak and
oil is down $1.65 under $65.† Breadth is
flat; volume is good; and new highs exceed new lows 2/1.
and Rita is now a
category 3 and the markets are rallying a bit. Itís known as the hurricane
effect in technical terms. As in baseball and as the White Sox are re-learning
it ainít over till its over. You could almost hear the sadness in the media mavensí
voices as they realized that most folks will be watching their favorite football
teams instead of the destruction of Houston.
And as stocks rally bonds
continue to retreat in price and rise in yields and your corner gas station is
lowering the price of gasoline.
and strange it the
only word we have for this weeks markets. The lunatics are running the asylum.
Yesterday we said that it was nuts that the Treasury two-year was trading under at 3.91% since the Fed has
indicated that it will raise the overnight rate to 4% in November. Well someone
must have read our post because in the last 24 hours the two-year has gone from a yield of 3.91% to a yield of 4.02%. The ten-year
moved from 4.11% to 4.25%.
With the hurricane now Category 3
oil ended at $64.19 down $2.31.
And stocks were all over the
place and the major measures ended mixed on the day. The DJIA gained 2 points to 10420. The S&P 500 rose 1 point to 1215 and the NAZZ gained 5 points to 2115. Breadth
was 5/4 positive and volume slowed. There were 212 new lows and 180 new
And tomorrow is the weekend and
play time for everyone except the folks in the southern red states.
On Monday the games continue.
22 September 2005 Daily Comment
We seem to be the only folks in a
buying mood. The hurricane looks like a bad one and the media mavens are
predicting the end of Texas which
we donít think would be so bad Ė except for Austin.
We never have understood that state. We are reading that 6 million folks are evacuating
Houston. The media rather than
serving as a calming influence is hyping the *&^%$#%^ out of this storm.
It is no wonder that some
individual investors are scared but one would think that the big boys and girls
have been around long enough to have some perspective. The markets are pricing
in the absolute worse with oil and natural gas at the top and all other stocks at
the bottom. Of course the hedge funds love the volatility and will short till
the markets turn higher and then reverse.
We are the only ones who think Treasuries
seem to be saying that there is going to be an inter-meeting announcement of no
more rate increases and a move towards loosening.
First time claims for
unemployment were 432,000 as the effect of the Katrina disaster begins to
ripple through the governmentís checkbook.
Rite Aid lost a penny a share for the quarter as expected. Not as
expected CFSB started Rite Aid as a
sell with a $3 price target. That wasnít nice of them.
We are hoping to buy JP Morgan back around $33.50 in todayís
Thursdayís Markets September 22, 2005
9:59am and stocks opened lower
and then a snap back rally moved the major measures to positive at which time
selling returned and the major measures are now lower and heading down.
We added TLAB at $9.50, International
Paper at $30.45 and SBC at
$23.90 to our large and/or aggressive accounts.
Fifth Third Bank now yields 4% and we are adding shares as the
share price drops. It is an OTC number and who knows where the bottom is but
you can only buy it well at times like this. It was overpriced at $60 but at $37.50
a lot of the steam is out of the stock.
10:58am and stocks are under pressure and out of the blue Rite Aid jumped 30 pennies to $4. We
sold our position thinking of sows ears and silk purses. As we said above CFSB came out this morning with a price
target of $3 and it is the confounding part of markets that the lowest quality stock
we own jumps 10% on such a dreary day. Luckily yesterday we reduced our cost
price by buying a big chunk of stock and so all but our largest accounts are escaping
with a small profit. Our largest accounts are taking a scratch loss versus a
10% loss where they were yesterday.
Our guess is that Carl Icahn has
reestablished or is reestablishing his 10 million share position that he sold
last month after the stock ran from $4 to $4.80 when he announced he owned it.
If he is, we wish him good luck. We have better stocks to own in this market
sell off and 10% one day gains in are not easy to come by.
and Hooray Hooray,
Rita is now a Category 4 hurricane and oil is lower, Treasuries are higher in
yield and stocks have stabilized.
and today was timid rallying
day after some early uncertainty. Treasuries
closed unchanged with the two-year at 3.92% when should be trading over 4%. Oil lost 30 pennies to end at $66.50.
The DJIA closed up 47 points at10425.
The S&P 500 gained 5 points to
1215 and the NAZZ rose 7 points to
2112. Breadth was negative at the
bell and volume was active on the
NYSE and moderate on the NAZZ. There were 240
new highs and 340 new lows.
And tomorrow is pre-hurricane
Rita Friday. It should be interesting. The games continue and we will be here
to play along.
21 September 2005 Daily Comment
We wish all a Happy Vernal Equinox and welcome autumn, our
Itís always something. Folks were wondering what calamity or event
would create the selling in September and October that the markets have come to
expect. There werenít many bets on a hurricane destroying New Orleans as the culprit. And for the same reason
that folks looked for another 9/11 for two years after it occurred, and another
1998 Long term Capital in 1999, and another 1990 lead up to the first Gulf War
in 1991, and another 1989 Untied Airlines buyout collapse in 1990, and another 1987Crashfor
the next ten years, the same is happening with the hurricanes. Maybe Hurricane
Rita will be another Katrina but the odds say it wonít be. The media needs a
story and as with 9/11 the hurricanes through the end of this year will be the
market moving and scaring stories. By the way, what is the color code for
terrorist attacks? Maybe it can be adopted for hurricanes *****
Take down the green clocks and
awnings on State Street and
say goodbye to the green Fieldís shopping bag for Marshall Fieldís is no more. Federated Department Stores has
decided that Chicago deserves Marcyís
and so that is what will become of the Fieldís name. Fieldís named for Macyís a
New York Store? That will be very strange. Chicago
is own town and it is a shame that our landmark department store is
disappearing. We are getting older.
Avon is the crash of the day with earnings for the
year forecast at $1.77 versus the $2.04 that analysts had been saying. We may
try to trade this blow up as we have McCormick
and Estee Lauder. Since Fidelity and Janus are major holders
of Avon to the tune of 45 million shares we may tiptoe
into this stock a bit more carefully.
Itís Hurricane Rita all day every day for the rest of the week. Now we
have the daily Hurricane reality show and the media networks are ecstatic
because there are no production costs, plenty of pathos and real sorrow, and
President Bush flies in afterwards in his big blue plane to see how the rescue
efforts are going and make nice photo pictures. Who needs phony reality shows
when we have 10 hurricanes a year?
And so why does the Treasury two-year trade at 3.97% the
morning when the Fed clearly indicated that short term rates are going to 4% in
Investorís Intelligence had Bulls
at 54 versus 53 last week and Bears
at 25 versus 26 last week. We think the bulls on stocks are bulls on oil stocks
and no others.
Tuesdayís Markets September 21, 2005
The oil and oil related stocks are the main reason the S&P 500 is
unchanged. Without their support the S&P 500 would be down over 10%. †(We saw this statement on www.minyanville.com but weíve been told
it was also in Barronís over the
That is one reason we are comfortable buying stocks now since the ones
we are looking at are already down 25% or more from their yearly highs.
Starbuckís is going to have a 2/1
split in October which will make it a $20 stock. We own a few shares in large accounts.
Today is the day the big boys and
girls are really killing the retailers. We forgot how relentless the selling
can be when they decide to get out. All of the retailers are in the sinker as
traders and institutional investors at higher prices decide that shopping is
dead, hurricanes and oil refineries are in. Also there is a lot of arbitrage
activity with Exchange Traded Funds (ETF) that owns retail stocks symbol RTH. The
big boys and girls develop intricate option and shorting strategies for stocks
that are active and volatile and that fit the retailers to a tee.
Gap is down 50 cents but we are going to take our time to add to
that position. We are buying a few shares of American Eagle Outfitters at $20.82 (the high this year was $34) and
looking at Talbotís but we are holding
our powder. Since all three are institutional stocks and the selling season for
institutions has another month to go with one first Thursday in October retail sales report to be announced
cautious buying is prudent.
Mother Merrill upgraded Intel to a buy. Thank you Mother, itís
the only stocks we own that is up today.
9:21am and the major measures are lower as Oil is up $1.65 and
Treasuries are better on the Hurricane Rita mania.
The book to bill ratio on
computer chips used to be a big trading number in the old days but it doesnít
arouse much interest among the big boys and girls anymore. Anyway it was 1.05
this month which means that for every chip sold 1.05 chips are being ordered.
With that in mind we have reestablished our Applied Materials at $16.97 holding in our aggressive trading
Gasoline inventories were up 1.7
million barrels. And heating oil was up.†
Those are the new weekly trading data for the big boys and girls. Of
course that means there is more gasoline and heating oil on hand than expected
but you wonít see that at the pump.
We are adding shares to our Rite Aid position at $3.68. It is down
almost 25% in the last month and is at a six month low. That doesnít mean it canít
go lower but our plan now is to hold our nose and buy as the sellers
1:35pm and in the contra hour the major measures are lower and we
would guess that the final hour is going to take stocks to their lows of the
day and month and bring the S&P 500 back close to its August low and not
far from the low of last June. The S&P 500 is now down again for the year.
Treasuries are up on the day and
oil is up $1.30 at $67.50.
and the disasters
continue as the DJIA closed on its
lows for the day down 104 points at 10379. The S&P 500 dropped 11 points to 1210 and the NAZZ lost 25 points to end at 2106. Breadth was almost 3/1
negative, down volume/ up volume was 8/1 and new lows exceeded new highs and reached 305. Volume was moderate and usually the selling climax has
over 600 new lows and much greater volume, so there must be more selling to
come. And that means even better buying
Treasuries in all maturities closed higher on the day and oil ended at $66.80 up 60 pennies.
And tomorrow is Thursday and the
first full day of Fall so why shouldnít stocks? the games begin bright and
20 September 2005 Daily Comment
These are a few of our comments from the September 20,2003 daily letter:
ÖÖ we just completed a sampling of the losses we would have incurred in
the last month had we not liquidated our stock holdings at the end of August in
the Model Portfolio. While we were only 45 % invested in the market on August
21 we would have lost $33,000 had we held those positions. Enough said.†
ÖÖ and the Model Portfolio ended the week up $378 for the year at a
value of $430,182. The DJIA is down 20%, the S&P 500 is off 26% and the
NASDAQ is down 37%. Happily we are 100% cash in most accounts.
We repeat these words to remind
that sitting on holdings often has been very painful in the month of September
and October especially the last few years. We donít think this year is different
from a risk standpoint. But we do think that gradual commitment to decent
quality stocks like Time Warner that
are coming into the focus of the momentum boys and girls; or buying good quality
temporarily of favor blue chippers like Estee
Lauder and McCormick for trades will
be rewarded this year as such purchases are most years.
We are trying our best to avoid
the down and out tech stocks we have traded at year end for the last five
years. But we remain interested in Tellabs
and Andrew Corp. Actually ANDW
and TLAB are cash rich well run companies that will eventually sell 50% higher
than present prices. The question is how long eventually is.
Heinz is joining the divesting game in which Sara Lee has been engaging. This too is about the fifth makeover
for Heinz in the last ten years. At least OíReilly is gone. The divesting game
with Heinz may affect HAIN because
of the 20% ownership. We donít know which way but we would think there is a
willing buyer of the block of stock.
UBS chain store sales fro the
week of September 17 we down 2% versus down 0.5% the previous week.
American Eagle Outfitters has been dropping like a rock down from a
high of $34 this year to $24. Itís still too rich for us but we are looking at
it and Talbotís which is at $29 probably
on its way to $25 again. We let a barn burner go earlier this year when we took
a small profit in Tiffany. We just
canít kick the retail habit.
Thursdayís Markets September 20, 2005
Today is all about the Fed
meeting and the release of the wording of the announcement. Then the markets will go back to focusing on the
new Hurricane Rita and conjuring the most horrid events imaginable to be
created by that storm. We are sure all the major network news anchors are already
positioning themselves to stand in the wind and rain and show their courage.
and Hong Kong were up overnight and Europe
Goldman Sachs announced big
number this morning.
Housing starts were down 1.2% in
We are buying Estee Lauder down
$5 per share at $35.50 in our larger and aggressive accounts. At the same time and
speaking of down and out Tech stocks, we sold JDSU for a scratch loss because we want the money for the EL purchase. This is a quality switch.
One low priced stock in Rite Aid is
enough for our portfolios right now.
9:18am and the major measures are higher with breadth 5/3 positive.
Treasuries are unchanged and oil is of a bit after the huge run up yesterday.
and the Hurricane
watch reminds us of the old days when it rained in Chicago
corn went down in price.
Oil is lower by $2 now and maybe
the hurricane isnít going to disrupt as much oil production as traders thought
(?) yesterday. Do traders think?
The major measures are higher and
breadth remains positive.
EL has jumped $1 from where we bought it and we will always take a
two hour 3% profit and so we sold part of our larger positions. We do think the
shares have at least $4 in them by year end which is why we didnít sell the
entire holding. In fact we hope the price comes back down so we can buy more
and The Fed raised the discount rate 25 bps and
kept the same language. The stocks markets didnít like that the language
wasnít changed and stocks are lower than before the announcement and the
two-year is at 4% while the longer notes and bonds are also lower. The Fed is
saying everything is OK and the markets donít want to believe.
Fifth Third raised its quarterly dividend to 38 pennies from 35
pennies. It didnít help the share price today.
In the after the Fed raise sell off we bought CSCO at $17.89 for a trade in our aggressive/larger accounts.
and at the bell the DJIA was down 72 points at 10485. The S&P 500 lost 7 points at 1222 and
broke support at 1225 and the NAZZ dropped
13 points to 2132. Breadth was 2/1
negative at the end and OIL lost $1.16
to $66.23. Treasuries gave ground
with the two-year going out at 3.99% and the ten-year at 4.26%. The thirty-year
actually closed higher at 4.53%.
And tomorrow is Wednesday so let
the games continue.
19 September 2005 Daily Comment
Reading articles in the NYT over
the week-end about the New Orleans and Mississippi and Alabama destruction and
the monies that are going to be needed to rebuild we wondered about all the
arguments about cutting and raising taxes and cutting spending. We know that
politicians arenít going to cut farm programs or road programs nor are they
going to raise taxes. We find it interesting that one unforeseen benefit of sun-setting
the tax change cuts in 2010 is the New Orleans
disasters. Some group of Americans is going to have to bite the bullet and why
shouldnít it be the folks who are deriving the benefit?
That argument of how to finance
the deficit and whether the deficit really matters and the effect of the deficit
on interest rates is of course a main bugaboo for present market conditions.
While the stock markets are on their recovery highs from the 2000 Ė 2003 sell
off; the DJIA and S&P 500 remain 15% below their highs. That is pretty amazing
when you think how low all those tech wonders that comprised the 2000 market measures
are now trading. Of course oil stocks and housing stocks have taken up the
slack but whereas tech booms are of benefit to the economy by creating new
means of productivity Ėthe IPOD excluded- oil booms only benefit the oil
companies especially since the booming earnings for those entities is coming from
rising prices and not an increase in exploration and discovery.
Where to for the markets? Even with
the cross currents we donít think the world is going to end. As we have said
before we are always cautious but the great World Wars and the great Depression
and the Cold War were all a lot more difficult to deal with than present problems.
The only difficulty now is for folks to get the wherewithal to deal with the
Hopefully the North Korean
situation has been settled.
Mondayís Markets September 19, 2005
9:15am and stocks are lower out of the gate with breadth 2/1
negative. Treasuries are a bit better ahead of tomorrowís Fed meeting and that
is the focus of todayís action. There is mindless media chatter about what the
Fed will do and of course waiting a day will resolve the whatever.
Gold is higher as is oil. Japan
and Hong Kong were closed overnight for holiday. The Washington
talk about the North Korean agreement seems positive and for that we are
grateful. Natural disasters can be dealt with, nuclear disasters canít be.
Rita the Hurricane is coming to
the Florida Keys and Gulf. Hopefully it will be an
With crude oil up $2.50 to $65.65
stocks are having a difficult time getting any traction. Interestingly
Treasuries are recovering all of Fridayís losses.
We are picking up a few shares of
Fifth Third and Starbucks for our larger/aggressive accounts and sold the Commerce Bancorp in those accounts for
a scratch gain. We are also adding more shares of GPS to larger/aggressive accounts.
and the major
measures continue at lower levels not wanting to fight the rise in oil and the
uncertainty of tomorrowís Fed meeting. Every 15 minutes mindless media plays
pictures of the Florida evacuation
from Hurricane Rita and while there are no levees to break the psychological
impact on an already skittish market is negative.
We are guessing that The Gap sales numbers for September
will be bad but we think the stock is cheap and want to own it. This may turn
into another Reebok or long ago ORYX or Nike situation where beginning in September through year end we bought
all the way down. We hope so anyway because our only mistakes with them was to
sell to soon for big profits. We love those kinds of mistakes.
and the big boys and girls are having fun today as crude oil is up $4 to $67.
If they can keep the levees
intact it would seem that a nice heavy rain would be the beginning of the
cleanup of New Orleans.
CNBC has a small picture of Hurricane Rita spinning on the TV screen
where it usually shows the DJIA. Since the hurricane is going to be around for
the next week that picture is going to get pretty boring. (It already is.) It
reminds us of our trip to the Philippines
to see our daughter Christine who was in the Peace Corps. We flew out of San
Francisco and on the TV monitor they showed the
progress of the plane towards Hong Kong which was
fourteen hours away. The TV screen was only about 6 inches wide so it took
about 6 hours for us to get out of San FranciscoBay. That was one long trip and we
have a feeling that this hurricane is going die of overkill by the media.
We are going back into Time Warner over the next month and we
are beginning today buying shares in our Aggressive accounts at $18.60. This is
higher than where we sold at the beginning of August but the rumors and
movement of the shares over the last few weeks suggest some positive
developments on the AOL front. Also MSFT
has been coming down in price and that is to be expected if they decide to take
a position in AOL.
and the DJIA closed down 86points at 10555. The
S&P 500 lost 7 points to 1230
and the NAZZ dropped 15 points to
2145. Treasuries closed higher and Oil jumped $4.39 to $67.39. Itís time
to raise prices at the pump again.
And tomorrow is Tuesday and the
games will continue on Schedule.
16 September 2005 Daily Comment
And we read in the WSJ that
Richard Parsons CEO of Time Warner has
placed a value on AOL of Ė yes you
guessed right- $20 billion. You of
course know that because that is the value that we have always placed on AOL
while Wall Street has been valuing it at zero.
From the WSJ: Öpeople close to the
discussions say that the size of Microsoft's possible stake in AOL hasn't been
determined and that investment bankers haven't been engaged. And the price of
the stake is likely to be a sticking point. In the past, Mr. Parsons has balked
at offers for AOL that fell below the price he has put at about $20 billion.
We of course
arrived at that value after serious and studied consideration of all aspects of
the business. Actually we just multiplied 10 times a $2 billion cash flow. But whatever,
great minds and all that, we would only be interested in Time Warner if they
kept a big chunk of AOL because that is the future while their magazines are
the past. *****
Our tech guru
is very short term bullish to 1250 on the S&P 500 if that index can move up
through the 1232 level in the next few days without settling below the 1225
level beforehand. Hope you understand that. It is called a down three down/up
one / twisted chicken breakout for you technicians out there. Just kidding, but
the guru does think those levels are important. He continues to look for an October
rollover. Nothing is simple. *****
curve is now 34bps between the two-year 3.89% and ten-year 4.23%. (4.23-3.89=34).
That is the steepest it has been since Katrina hit. The steepening of †the curve should help
banks like Commerce Bank , which
took a $3 hit to its share price this week, unless of course they reversed the positions
which is always a possibility. *****
being thrown at the economy will be stimulating to the economy. A trader on
CNBC says throwing the $200 billion at the economy will work since supply side
economics will provide the taxes to cut the deficit as long as Congress keeps
spending under control. Say What? That is what passes for analysis. We must
admit he was a trader and is probably long the markets so we know where his
sympathies lie. *****
CSFB upped Intel to neutral citing valuation.
Neutral is an upgrade? *****
Fridayís Markets September 16, 2005
8:50am and the University of Michigan
consumer Sentiment for September was 77.9 versus 88.7 in August. Since 85 was
expected that is a negative negative which in terms of stocks doesnít make a
positive although it should for Treasuries but isnít because Uncle Alan is an
economist and not a scientist.
higher on huge buying for witching day and the major measures remain higher but
are giving ground. *****
9:15am and stocks are holding onto
their gains with breadth 2/1 positive and volume active. Treasuries continue to
slip ahead of the Fed meeting and oil is lower by 65 pennies. *****
10:45am and breadth is moving back
towards even as the major measures do the same. The ten-year Treasury is up 5
bps and the two-year is up 3bps. Oil remains lower but above the $64 level.
The world is
not going to end and life has returned to normal for most of us. The folks in
the South will have to deal with their problems and those problems are many and
difficult. But a lot of Federal money is going to be thrown at the problems.
The rest of the country is fine and if oil can just come down a bit more so
will gas prices. *****
repurchased the GPS we sold two
weeks ago for less $18.27 that we sold it $18.35. It certainly wasnít a great
trade but at least we got back in for less. We want to own GPS into year end
since it is unloved by on Ďthe streetí with only 4 real buys and 16 holds which
mean there are low expectations of anything good happening. The flip of the
shares the week of Katrina was just that and was occasioned by our not wanting
to hold any stocks into the return from the Labor Day holiday. Since then the
pessimism has grown and as it grows we will slowly buy more stocks by continuing
to add beaten down big caps.
In the last
two years the Gap has paid down $2 billion
in debt and has cash on hand of over $2.5 billion with only $500 million in
debt. GPS has free cash flow of $2 billion per year and even with all their problems earnings are growing at 10% a year.
Shares outstanding will be reduced by over 10% this year which amounts to about
80 million shares. In its glory (goofy) days of 2000 the Gap sold at $50 and earnings
were 50% less and debt 4 times present levels. The stock is cheap. *****
bought JDSU at $1.85 in very
large/aggressive accounts for a trade. Citigroup
upgraded the shares today to buy and the company still has $1 per share in
cash so it will survive as long as we plan to hold it. JP Morgan upgraded (?) to neutral on August 8. There are currently
3 buys and 9 holds on the shares which is a slightly better percentage than
GPS. We are not going to buy it
around in any other accounts. *****
pre-closing imbalances look to mostly on the buy side. *****
and the DJIA closed
up 82 points at 10640. The S&P 500
gained 10 points to 1237 and the NAZZ rose
15 points to 2160. Breadth was positive
at the close. New highs exceeded 400
but new lows jumped to 200. †Treasuries
closed higher in yield and lower in price with the two-year at 3.96% and the
ten-year at 4.26%. Oil dropped $
1.85 to end at $62.90 and gold was
Friday and weíre out of here for the week-end.
begin bright and early Monday morning. *****
15 September 2005 Daily Comment
The secondary offering of Google stock was priced last night at
$295 versus a close of $302 and the shares were well received. Google gets $4
billion with which to play.
After buying Disney yesterday we were greeted with a speech by their CFO that said
the movie division was going to take a $350 million write down for Miramax
releases that arenít doing so well. Moreover Disney will write off $100 million
in Delta Airline leases that it owns since Delta filed bankruptcy yesterday.† And who was the genius that decided to own
airliners for the tax writoffs and long term gains? Now they get to write off
the whole amount with no gains or interest. We are sure the sales pitch was a
Our purchase timing could have
been better. But the new CEO assumes command in January and we would guess that
these and more write-offs are going to clear the decks. And we would expect
analysts at some point in time in the next few months to say the same thing.
Delta and Northwest bit
the dust on the same day by filing Chapter 11 bankruptcy yesterday. We and
others predicted the event several years ago when US AIR filed. It is impossible for many airlines to compete with
bankrupt airlines on a cost basis. Maybe all airlines should operate in Chapter
11 since many of them spend a lot of their lives their. UAL has been in bankruptcy for two years. We have tickets on Delta
to fly to Florida for a
basketball tournament in Christmas week so we hope they keep working on the planes.
Fifth Third Bank made a presentation yesterday at the Lehman
Banking Conference and today major brokers (6) are downgrading FTIB since they didnít like the forward
look the bank gave. The downgrades will hopefully provide a more profitable buying
experience for us than the last time we owned the shares.
Newell Rubbermaid is launching its umpteenth three year plan by
first laying off 5000 workers to attempt to get costs
under control. The Rubbermaid acquisition has taken a lot of years to integrate
and the growth of the super stores like Wal-Mart has placed great pricing
pressures on the company. Under $20 we will again be interested.
We are also looking at Sara Lee again since with the myriad
restructurings there seems to be value that will eventually rise to the
surface. The sale of the European apparel division has hit the rocks. With the
shares are under $19 and we would be interested at the $17.50 level.
Finally it is being reported that
Microsoft is going to buy AOL from Time Warner. There is no official confirmation or mention of price.
We presume it is neither the $20 billion number we suggested nor the plus $100
billion that Time Warner paid. And the investment bankers who did that deal
original deal and were paid big bucks still have their jobs. †Amazing.
Thursdayís Markets September 15, 2005
7:30am and CPI, the Consumer Price Index, was up 0.5% in August
while the core rate was also up 0.1%. Business Inventories were down 0.5%.
First time claims for unemployment were 398,000 and as the Katrina job losers
find unemployment offices that number will rise significantly. We guess we
wonít see the magic under 300,000 until next year at the earliest.
The talking heads on CNBC canít
figure out why the inflation numbers shown in full CPI donít pass thorough to
core CPI. The answer is simple, hedonics,
which is the art of making numbers say whatever you want them to say. And the
Fed and Administration want no inflation and so the core number shows no
There is a squeeze going on the
ten-year Treasuries. The Fed is interested. The big boys and girls must be
losing money and they need the Fed to rescue them.
Find a chart of the DJIA and if you draw a line from the
March high to the September high; and then draw a line from the April lows to
the August lows you will see a pennant formation that is narrowing. The DJIA is
going to break out one way or the other and whichever moves occurs should be
strong and quick.
This is the time of year when we
are not surprised that the stocks we buy continue to move lower after we
purchase them. That is why we are concentrating on quality names as we re-enter
the market. With hedge funds willing to short any name and spread any rumor to
help their short or long positions is important to believe in the stocks we are
buying. That is the expensive lesson we learned over the past year.
9:08am and the NAZZ is
lower as folks sell stocks to make room for the Google they purchased. We think that is one of the main causes of Intel dropping as many other lower quality
techs have risen. Or maybe that is our hope.
The major measures are mixed but
it looks like the DJIA and S&P 500 will test negative territory
before too long.
Breadth was positive out of the gate
and remains so on the NYSE but is 5/3 negative on the NAZZ.
11:24am and the Philly Fed manufacturing report was less than
expected and the markets turned lower. Oil
is also heading lower.
Treasuries are losing ground with the ten-year at 4.22% and the
two-year at 3.90%.
New highs are at 150 which is
half of where they were a week ago and new lows are at 80 which is twice where
they were a week ago.
Gold ended the day at $459 which is a 17 year high. We didnít know
it has been that long.
and we have to leave
early to get Luna, the dog, to the veterinarian for a check up.
The DJIA is currently down 10 points at 10535. The NAZZ is down 5 points at 2143 and the S&P 500 is down 2 points
at the very important 1225 number.
Breadth is almost 2/1 negative. Treasuries closed higher in yield lower in price with the ten-year
at 4.21% and the two-year at 3.89%. Oil
ended lower at $64.75.
This is a witching day and anything can happen into the close.
And tomorrow is tomorrow so let
the games continue.
14 September 2005 Daily Comment
The heat wave broke last night
with terrible storms last night north of us but not a drop of rain for us. We
had almost an inch in the morning though so we did Ok and missed most of the
wind. Every day as we water our plants we think of all those gardens in New
Orleans that will never be again and feel sad for the
owners who spent years creating their own private little paradises.
The S&P 500 punched through
1232 last week and was holding well above until the sell off in the last hour
yesterday. 1 point below does not break the break out but the next few days
will tell the story. One of the bearish gurus we like thinks that the S&P
500 will still make it back to 1250 which is a 2/3rds Fibonacci retracement of
the down from the March 200 high. Yes the S&P 500 remains 15% below its
high of March 2000.
We are maintaining a large cash position
awaiting the return of the two year to above 4% and also buying a few stocks we
want to own through year end and beyond.
We have abandoned the lower
priced tech area as it abandoned us this year and are concentrating on broken blue
chips and larger tech issues.
We bought Disney yesterday in small amounts in large/aggressive accounts
yesterday because Eisner is finally leaving at year end and we think that will give
the analysts a reason to begin recommending the stock in the next few months.
We are buying more in other accounts today at $24.65 and are willing to
increase the position lower.
We own Intel as a play on a move in the tech area into year end. Intel
powers Dell and others computers and will eventually be grabbed by the big boys
and girls if a tech rally commences.
Hain Celestial is a natural foods company that sells at one times sales
and is 20% owned by Heinz. HNZ owns the share around $30 and has said that by
year end they will either write down their investment or do something. We donít
know if that something is a takeover or a convincing of their investment
bankers to get the rice of HAIN higher. But we have had good luck trading the
stocks from this level to above $20 and we like their products and expect
something good to occur.
Rite Aid, the third largest drug chain, is turning the corner. In
our very large accounts we have been trading in big size for 5% moves and in
our smaller accounts we are just holding. RADís
debt load is substantial and acts as a hindrance but they are slowly whittling
it down. We have always had luck with drug store stocks and hope the luck
We own Verizon for the yield and the fact that it is down to $33 form $45
earlier this year. There is great competition in the DSL and cable field but the
melding of the whole area is a process in which Verizon will come out OK and
with the 4.5% dividend we will hold or trade as event unfold.
We are adding shares at $19.65 of
Cabelas (hunting/fishing/outdoor retailer)
to our large/aggressive accounts and to our son-in-lawís IRA account and our grandchildrensí
accounts since he is a great fan of the store. We traded last year in the middle
and high 20s and the shares have come down under the offering price of $20. We
think it is a good retail speculation. Insiders own 50% of the 66 million
shares outstanding and three of them bought 10,000 shares each a week ago. That
is chump change for them but more a sign to the market. Short sellers are all
over this stock and so we arenít going to make a federal case of it but we
think the shorts will eventually get caught by growing sales and earnings.
We are looking at other stocks of
this type and will be adding them over the next few months for our usual year
ends foray. Remember that that are two year ends now. Mutual fund year end is
October 31 and for that year end we concentrate on the McCormickís of the world that we bought in larger accounts for a
pop after October 31, or failing that after year end. We would like to buy more
of the spice provider but donít want to pay over $30.
Jack Welch is on CNBC giving his wisdom to a weary public. Some
folks donít know how to fold gracefully into the sunset.
Retail sales for August were down 2.1% but ex autos they were up
1%. Ex gasoline sales they were up 0.5%. We donít know what that all means but
that is what the talking heads are spending time on this morning.
Investors Intelligence has Bulls at 53% versus 52% last week and
Bears at 26% versus 28%.
Wednesdayís Markets September 14, 2005
9:45am and the major measures are mixed with flat breadth. Google is the item of the day since underwriters
are pricing 14 million shares tonight. GOOG is at 50 times earnings but it was
at that level when it went public 200 points ago. Some gurus swear it is the
new Microsoft only better. But 50 times earnings which is where it will always
sell until it doesnít isnít our cup of tea.
Oil is up $1.04 over $64 and
Treasuries are flat.
A fellow from Sanford Bernstein
was on CNBC suggesting that Ford be
taken private. That caused the stock to jump 20 pennies which it is now giving
back. Selling Hertz makes sense for Ford but breaking the rest of the company
up doesnít. The finance arm is an integral pat of selling cars. The ďold stock brokerĒ used to say that the
brokerage business was all about the interest earned on the money generated
by the brokering. And that is what the car business has become. Sell
the cars for cost and make money on the financing. Eventually analysts
are going to realize that. Breaking even on the car sales is the goal and every
few years make money on selling them. We are interested in Ford but our last
foray was too early in the autumn cycle and that is why we quickly exited. Hopefully
we will be able to get stock around the $8.50 level.
Courtesy of a friend who spotted
this in the NYT this is the perfect retort for folks who are upset when you
change your mind although we donít think it would work with grandchildren.
"The matter does not appear to me now as it
appears to have appeared to me then."
Supreme Court Justice in an
opinion repudiating as a Supreme Court justice a position he had advocated as
1:27pm and in the contra hour the major measures are now negative
with the DJIA down 32 points. Breadth is still positive on the NYSE but not on
the NAZZ. Treasuries are down a tick to one half points on the thirty-year. Oil
is up $1.19 to $64.30 on lower inventory numbers.
With BIDU (the Chinese Google) down $30 and the real Google down $10 the NAZZ is going nowhere
today but down.
3:02pm and the DJIA
closed down 53 points at 10543. The S&P
500 lost 4 points to 1227 and the NAZZ
dropped 22 points to 2150. Treasuries
closed lower with the two-year at 3.87 and the ten-year at 4.18%. Breadth was negative at the end and oil
closed up at $65.05. The Fed better hurry up and meet before oil is over $70
again or they will have to pass on raising rates.
And tomorrow is tomorrow so let
the games continue.
13 September 2005 Daily Comment
Last night we read a column in
the New York Observer that discussed the various types of mortgages that
are being used by folks to finance homes they are buying. More than 40% of
mortgagees currently outstanding required a 5% or less down
payment. Unlike the 1980s when banks and savings and loans went under because
they held the mortgages present day banks sell the mortgages in pools to
investors and other countries and such.
We found the article interesting
because yesterday we were listening to a banking analyst from Lehman talk about
Commerce Bank and why it was it had warned on earnings and dropped in
price. She said that CBH earnings were under pressure because the spread
between short and long rates had narrowed. Since CBH borrowed short and
invested long its profits were being hurt by the narrowness of the spread.
She made excellent sense and she
obviously knew what she was discussing. But then when discussing GNMA mortgage
pools that Commerce Bank might hold she made the comment that that they were
rated AAA so there was nothing to worry about. Obviously she was in grade
school or younger in the early 1980s and they neglected to discuss the pitfalls
of AAA securities in the early 1980s at the business school she attended.
Folks and traders are talking as
if 4.5% rates are going to be out of sight high. For any of us who lived
through the early 1980s and then the early 2000 we know that nothing is too
high or too low. Rates will go where the markets take them. And we would guess
that 6% will occur in the not too distant future.
Nokia announced that their
higher end phones are selling better and raised guidance. The shares are up 10%
this morning to $16.70. We have been hoping to re-purchase the shares at the
$15 level and the next sell off would have given us that price. Ah well
hopefully weíll have another chance.
In July Nokia lowered
guidance from 20 euro cents per share for the quarter to 14 to 17 euro cents
and the share price dropped $2. Now they have raisedto
under where they were in July but itís the action not the reality that
counts in the markets today.
PPI (Producer Price Index) for
August was up 0.6%, ex food and energy and other essentials it was unchanged.
Tuesdayís Markets September 13, 2005
Cendant and Best Buy
have lowered their numbers because of Katrina, of course. Oil is higher
and the major measures are going to open lower to begin the day.
A day late and several dollars
short JP Morgan cuts Delta Airlines from overweight to underweight.
We remember when JPM put the overweight rating on a couple of months ago and
the DAL shares rallied $1.50 to $4. JPM must have been helping a client get rid
of some stock or maybe getting out of their own position. We know we are
cynical but there is no other explanation for the rating action at that time
given subsequent events. Either that or the analyst should be looking for
and the major measures are lower as Treasuries are staging a bit of a rally.
Oil is up 36 pennies. Breadth is 2/1 negative and there are no real strong
We bought Disney at $24.92 in
some of our large accounts as a beginning position.
2:02pm and in the contra
hour the major measures rallied back to almost even before heading back down to
down 60 on the DJIA. The DJIA is now down 40 as programs rule the afternoon
trading. Since this is a witching week anything can happen over the next few
and for the day the DJIA closed down 85 points at 10597. The S&P
500 closed down 9 points at 1231 and the NAZZ lost 11 points to end
at 1276. Treasuries closed up on the day with the two-year at 3.87% and
the ten-year at 4.13%. Oil lost 23 pennies to $63.11. Breadth was
2/1 negative at the bell
The 1232 level on the S&P was
important support --but who knows.
Tomorrow is tomorrow so let the
Oracle is buying Seibel
for $10.66 which explains the 10% jump in SEBLís price last
Friday. Whoever bought August 10 options on Friday will probably get a
call from the SEC. We thought the bid would be less than $12 and after the CEO
said that SEBL wasnít for sale we moved on last spring. So much for listening
Mondayís Markets September 12, 2005
This Friday is quintuple witching
day as the Quarterly evening up comes early on the third Friday of the month.
For the first time ever, on
Friday Intel recorded a one month low at the same time that the Sox
Index recorded a one month high. Thatís never happened before and we
donít know what that means. We would guess that either the Sox is going to roll over or INTC is going to move
higher. We of course are hoping on the latter for now.
and the major measures are mixed in slow Monday morning trade. Breadth is
negative on the NYSE and flat on the NAZZ which is up a few points. Treasuries are
giving ground as the price of oil continues to drop and the indications of
another Fed rate increase on September 21 become more evident.
It was disturbing to read in the
Friday NYT that Yahoo cooperated with the Chinese Communist Government
in helping them trace a reporterís E-mails that were derogatory to that
government. That reporter has now received a 10 year jail sentence. There has
also been talk of Google cooperating with the Chinese government by
removing the ability of Chinese web surfers to reach sites that are inimical to
the Chinese government way of thinking.
This is scary action in the name
of profits. We guess the web isnít as altruistic and open as we would
like to think.
As oil drops so do Treasury
prices. The rally in Treasury prices and drop in yields in the few days after
Katrina hit and New Orleans flooded
has given way to profit taking and readjusting hedge fund holdings. The long
treasuries, long oil trade has been a disaster. Thatís trade thought $70 oil
would cause the Fed to pause in its rate increase pattern. With oil at $63
where it was the last time the Fed raised rates the thinking now is that Fed
raise on September 21.
Q: What is Bush's position on Roe vs. Wade?
A: He really doesn't care how people get out of New Orleans.
and the DJIA closed up 5 points at 10683. The S&P 500 lost a
point as oil stocks pulled back and closed at 1240. The NAZZ gained 7
points to 2182. Breadth was flat on the NYSE and positive on the NAZZ. Treasuries
gave ground with the two-year ending at 3.90% and the ten-year at 4.17%. Oil
closed at $63.69 down 48 pennies after trading below $63 during the day.
And tomorrow is tomorrow so let
the games continue.
9 September 2005 Daily Comment
Itís Friday. We are looking
forward to the weekend.
We are having a tough time wrapping
our arms around the tragedy that is New Orleans.
Thousands dead and recriminations fly. $2000 or $4000 to displaced folks who
have nothing and anger over the giveaway hits the airwaves. A whole city gone
and the uptown folks talk about keeping the riff raff out when rebuilding
starts with your and my money. This country isnít as kind as it would like to
think. It wasnít the poor folkís fault that the levees failed. Everyone is
suffering but the poor folks seem to be getting the short end. That higher place
and better life in the next life is a sop that isnít working as well as it did.
The tragedy gives a lot to think
about. But most folks donít have time because they have their own day to day
problems. Too bad.
Fridayís Markets September 9, 2005
9:08am and the major measures opened higher. Treasuries are
unchanged and oil is up 50 pennies to $65. Breadth is positive and volume has
begun on the light side.
Texas Instruments had a positive mid quarter report last night and
opened higher and is still up but off its highs. Intel had a good report but not enough and it is off 50 pennies. We
picked up INTC for accounts as a contrary
play in the tech area. INTC is near its 4 month low and while no stock is a
safe holding in a market collapse INTC is a good holding for a move up into the
September close if the big boys and girls want to keep the market higher till
then. And while every stock is an anchovy, INTC
is a premium anchovy from a quality
We also would like to buy back
some HAIN for accounts around the
$18.40 level. We sold over $20 in mid July. Earnings came last week and were OK
but the stock seems to have corrected enough before the earnings and not
realized that the slightly lower sales were for positive reasons. We are going
to leave enough room to buy more shares lower if the markets take a nose dive.
We have had good luck trading this stock and happily we also like their
Halliburton wins again. Do you think they know someone?
Bush suspends the prevailing wage which
just means more money for the contractors and less for the workers.
President Bush issued an executive order Thursday allowing federal
contractors rebuilding in the aftermath of Hurricane Katrina to pay below the
In a notice
to Congress, Bush said the hurricane had caused "a national
emergency" that permits him to take such action under the 1931 Davis-Bacon
Act in ravaged areas of Alabama, Florida, Louisiana and Mississippi.
and the DJIA closed up 82 points at
10679. The S&P 500 gained 10
points to 1241 and the NAZZ rose 10
points to 2175. Breadth was over 2/1
positive at the bell. Oil closed
lower down 40 pennies at $64.08 and longer dated Treasuries rallied while the two-year was unchanged. The market are
saying one more rate increase and then a pause.
And tomorrow is Saturday so enjoy the time off.
8 September 2005 Daily Comment
By moving all the black folk to Houston and other parts of Texas, Louisiana has just become a Red state that the
Republicans will carry in the future. New Orleans was the Democrat territory that delivered
the victory for Democrats. No more will that happen.
Thursdayís Markets September 8, 2005
and the major
measures are lower. There isnít much going on with oil unchanged and short
Treasuries off a bps while the ten-year is unchanged at 4.13%.
Breadth is negative and volume is
light. There is some strength in tech stocks while oil, drug and finance stocks
Itís quiet today and we are
having a nice rain which we are enjoying. Itís the first rain in two weeks and
we need it.
Searís Holdings which is K-Mart/Sears
is off $6 today as the synergies of two loser retail outfits combined to
deliver lower sales and earnings than expected. Eddie better get busy selling
all that valuable real estate in New Orleans
to puff up the balance sheet.
Searís Holdings named Aylwin Lewis to replace Alan Lacy as chief
executive on Thursday and announced that Chairman
Edward Lampert will take a more active role in the day-to-day management of
the company. ÖLampert, a renowned hedge-fund manager based in Greenwich, Conn.,
will direct the marketing, merchandising, design and online businesses of Sears
Holdings as well as its Lands' End casual-clothing unit ''to ensure that these
initiatives are clearly focused on responding to customer needs,'' the company
It sure makes sense for a hedge
fund manager to be making retailing decisions. Not. Supposedly the deal with the merger was to sell all the
valuable real estate.
400,000 jobs lost. A city and
surrounding area of 1 million souls in tatters; $200 billion and counting in
new Federal Debt; $20 billion plus in insurance payouts; and the Fed is still going
to raise rates. Wow!
and the major
measures closed lower with breadth
over 2/1 negative. At the bell the DJIA was
down 37 points at 1596. The S&P 500
lost 5 points to end at 1232 and the NAZZ
was down 6 points at 2166. Treasuries
closed unchanged and oil was up 38
pennies at $64.75.
And tomorrow is tomorrow so let
the games continue.
7 September 2005 Daily Comment
Last night when we were walking
the dogs we began thinking about our post of yesterday regarding holding the 4%
Treasury Notes. We argued then for holding them because the gain we would
realize would amount to one monthís interest. What our aging mind failed to take
into account is that the monies raised would
then be reinvested as 2.7% or higher until we repurchased the 4% which we
think will go back to the 4% level when the Fed raises the discount rate 25
basis points on September 24.
Moreover for taxpaying accounts the gain on the bond trade will be offset
by the current losses from our January fiasco so it will turn taxable
interest into a non taxable event.
And so this morning we sold the 4%
Treasuries for a $4 per bond gain. And we expect to repurchase them within the
month while earning interest on the funds realized in the mean time at 2.7%. Or
we may go back to one year or less paper yielding 3.6 %.
This morning preliminary 2nd
Quarter GDP productivity was announced as up 1.8% which is less than the 2.2%
number announced last month when the advanced 2nd Quarter Productivity number
was released. Remember there are multiple releases of GDP numbers before we get
the absolutely final GDP number for the 2nd Quarter.
2nd Quarter GDP labor costs were changed to up 2.5% from up 1.3%.
Both those numbers are negative
for Treasuries and would suggest that a 25 basis point increase is in the cards
for the September Fed meeting.
Moreover the employment and
jobless claims figures for the next few months are going to be all over the
board. The reality is that probably 300,000 plus folks are out of work for a
while. Nice companies like Wal-Mart cut their employees off salary after four
days for stores that arenít open. Starbucks and some other less enlightened
stores are keeping their employees on salary and with health benefits.
The German Dax is approaching
5000 for the first time in three years.
Over one million jobs existed in
the New Orleans area. The status of
170,000 homes is in doubt. With the toxic sludge there will at the least be no gardening
in New Orleans for many years if
ever. There is no estimate that we have seen of cars destroyed.
Major lending institutions are
going to forbear on mortgage payments and auto companies are going to do the
same and provide relaxed payment schedules. The whole lending mess is gong to
be a real Solomonís quandary. We
would guess there are going to be a record number of bankruptcies this year.
Tuesdayís Markets September 7, 2005
9:16am and stocks are flat out of the starting gate with the major
measures mixed. As of now there is no follow through to yesterdayís super
strong finish. Oil was lower early in the morning but is now a few pennies higher.
Investorís intelligence has bulls
at 52% versus 52% but Bears also higher at 28% versus 27%. For a sell off to
occur usually Bears are under 20%.
We sold our trading position in Rite Aid for a 10 penny profit but kept
the position in many accounts. The share price has jumped 15% in the last three
and Treasuries remain under pressure with
the two-year at 3.83% and the ten-year at 4.14%. The yield curve
on the two to ten year has steepened
from 5 bps last week to 31 bps. †Democrat Senators are urging Greenspan not to
raise rates at the September Meeting. They should be urging him to raise rates
if they want him not to raise rates.
Chicago Fed President Moskow is
talking today and says Katrina is extraordinary in its damage. Moskow says the
damage seems to be temporary and he remains more worried about inflation. That
means a rate increase or so the bonds are saying.
Breadth is 5/4 negative and new
highs are at 200. The major measures are mixed but the NAZZ is peaking into
The share price of McCormick & Co, the spice folks, is off $3.90
per share to $29.41 today on downgrades by Mother Merrill and others after MCK
announced that sales and earnings will be less than anticipated due to Katrina.
This may be the first of many but it is an interesting stock with a
stranglehold on its market and we are interested. Janus owns 3 million shares
and Janus used to abandon ship on these types of moves but we donít know if that
is still their style. On the other hand Ariel owns a chunk and would a buyer on
this kind of selling. We are buying a bit in our large/aggressive accounts with
room for more.
This is the kind of Reuterís
story that can get a real panic going:
As many as five people have died
from bacterial infections caused by the dirty water that
Hurricane Katrina drove ashore
last week, the U.S. Centers for Disease Control and Prevention said on
Wednesday. The patients appear to have been infected with Vibrio
bacteria, a water-borne pathogen that is related to the bacteria that cause
cholera and which is common in water off the Gulf of Mexico.† "There was one in Texas and I think
three or four in Mississippi that were confirmed by state and local health
officials and reported to CDC," CDC spokesman Tom Skinner said.
and oil is lower by $2 to $64. The major measures have turned positive and
breadth is also positive.
and oil closed down $1.59 at $64.37. At the
bell the DJIA was up 40 points at
10630. The S&P 500 gained 2 points
to finish at 1235 and the NAZZ rose 3
to 2170. Breadth was barely positive
at the close while up volume
exceeded down volume 6/4. New highs were over 300 again today. Treasuries gave ground with the two-year
going out at 3.84% and the ten-year finishing at 4.17%.
And tomorrow is tomorrow and all
the casinos except those on the GulfCoast
are open so let the games continue.
6 September 2005 Daily Comment
The governments finally have
plugged the levee leaks and now can begin pumping out New Orleans.
The ramifications of the New
Orleans disaster are being seen as positive and negative
for the economy. What we are certain of is that over 1 million lives have been permanently
disrupted, some for the good in the long run but all for the bad in the short
We went to cash last week when we
realized that we have no idea how the disaster will affect the markets. We can
guess like everyone else is doing but guessing is just that. And at this time
of year caution is our go byword.
Interest rates are backing up a
little as the September 20 Fed
meeting date approaches and the thinking since last week is that the Fed will
do one more quarter point raise and then stop. We didnít attempt to trade the
4% notes we bought early last week even though we had a 50 penny per bond
profit because that represents only 1.5 months interest and we want to keep a
4% yield locked in.
BellSouth says the cleanup is going to cost $500 million. And that
doesnít include the lost telephone connections which number over 750,000 that
will never be re-connected. We remain interested in the shares but only at
Last weekís trading was a wash
for most accounts. The bond purchase in the larger accounts ended the week with
a nice profit but we would expect the yield on the two year to move back to 4%
by mid-September as the meeting approaches.
We have lower buy levels on all
the stocks we sold last week and we are going to stick with them as the fall progresses.
Better to give up a gain than to take a loss. The risk/reward metric is on the
risk side this time of year and with the New Orleans
disaster in the mix we donít think a quick fix is going to arrive to change
Tuesdayís Markets September 6, 2005
8:54am and stocks gapped higher out of the gate with breadth 2.5/1 positive
and the DJIA up 90 points. Treasuries are giving back some of their gains of
last week and oil is lower at $66.90 range.
CNBC says there is a good start
to the markets this morning as the adults are back doing the investing. Well
that is good to know.
CNBC is reporting that gas prices
in Death ValleyCalifornia
are $5.03 a gallon. Maybe gasoline is finally more expensive than water there.
and stocks continue
higher as oil moves lower now down $1.72 at $65.85.
With the markets action today it
is apparent we should have waited for the adults to return so we could sell
them the stock we sold last week. For the last few months markets that have
been up/down all day have tended to stay that way into the close.
We think todayís reaction is the
one we had last Monday and Tuesday and that our negative reaction later last week
will also appear later this week in the markets. Time will tell.
43 out of 3150 Rite Aid stores are closed because of
We have sixty stocks on our main screen
and the only one in negative territory is Google.
and it was up, up an
away today. There is nothing like a good disaster with $200 billion in
rebuilding funds to get the markets going. We donít think it will be that easy.
At the bell the DJIA was up 141 points at 10590. The S&P 500 gained 16 points to end at
1233 and the NAZZ rose 26 points to
2166. Breadth was 2/1 positive and up volume/down volume was 3/1 on the
NYSE and 4/1 on the NAZZ. New highs
exceeded 300 and the only negative was that overall volume was still summer
light. Some of the adults must still be on vacation. Oil lost $1.75 to finish at $65.85 and Treasuries also gave ground as recovery boom talk held sway.
And tomorrow is tomorrow and all
the casinos except those on the Gulf coast will be open so let the games continue.
2 September 2005 Labor Day Week End Comment
We though the Federal government knew what it was doing. We thought
that the Disaster folks who have been studying these things for four years and since
New Orleans being hit by a hurricane was one of their three likely disaster
scenarios that they had a plan to deal with the event. Thatís why we bought on
Monday. We were wrong.
is gone and the Feds donít know what to do. Wal-Mart is giving $17 million to
someone for something. Big Deal. We have a Federal government that is responsible
for disasters. Federal Revenues should be going for this tragedy. Camps and
food distribution should already have been set up.
We are irate and disappointed in
the Government. They actions in this disaster are uncoordinated and amateurish.
They donít know what they are doing.
With that frame of mind our inclination
is to get rid of the stocks we were buying and go back to cash and the
Treasuries. Gas lines and not traveling arenít going to be good for the
economy. The bond markets are saying that.
Boeing machinists are on strike,
Northwest machinists are on strike. Two major airlines in bankruptcy, several
more nearly and gas lines begin.
Cash looks pretty good right now
Fridayís Markets September 2, 2005
Payroll jobs were up 169,000 jobs in August. The July report was revised
to up 242,000 from up 212,000. Manufacturing continues to lose jobs for a total
of 110,000 jobs in 2005. The unemployment rate is 4.9% as more folks quit
looking for jobs. Hourly earnings were lest than expected. That is good for the
markets i.e. no inflation and bad for workers.
None of these figures reflect the
job loss from the hurricane Katrina.
The dollar is back in a moving
The Treasury two-year is at
10:25am and the major measures have moved a bit lower although there
hasnít been much selling pressure. Breadth is negative and new highs are
contracting. Treasuries are firm and oil is lower.
We sold JPM and BLS for a slight gain, and Ford and Cisco and some GE and SBC for flat to a loss. We also sold the GPS we purchased yesterday for a 30 cents loss. Ouch. Most of these
were purchased in the last few days but we have always said that if the
situation changes as we perceive it we will step aside and reexamine our
theories. We have been discomforted by
the disorganized response to a major calamity and the gas lines and price
gouging are spreading the effects of the disaster nationwide. *****
A risk modeling firm has placed
the costs of Katrina at $100 billion.
We read today that the way CPI is
calculated the housing cost of CPI is from rental units and the rent cost not
from the cost of buying a home. And as a further distortion, when heating costs
rise because of the cost of fuel, the CPI is lowered because heating cost is
deducted from rent under the assumption that heating costs are part of rent.
Since housing costs are about 17% of CPI that is no small distortion.
and entering the
contra hour the major measures remain mildly lower while breadth is flat to
negative. Oil closed at $67.57 and Treasuries went out a bit weaker on the
day with the two-year at 3.74% and
thee ten-year at 4.03%. Volume is holiday light.
3:02pm and the DJIA
closed off 12 points at 10447. The S&P
500 dropped 3 points to 1218 and the NAZZ
lost 8 points to 2140. Breadth was negative at the bell.
And Monday is the Labor Day Holiday
observed and the markets are closed but all the other casinos are open. So let
the games continue. *****
1 September 2005 Daily Comment
Rabbit Rabbit! *****
The folks on the Gulf coast can surely
use some luck. The more pictures we see the more depressing for them the
situation seems. Their livelihoods are gone as well as their homes. The folly of
building in swamps below sea level and skimping on preserving the levees that
allow the whole town to exist is now apparent. The Federal folks saved on the
order of $100 million by not improving the levees over the last few years.
And no connection will be made to
the folly of building on earthquake faults or the Outer Banks and so these
catastrophes will continue to occur as man tries to prove more intelligence and
strength than nature. In the end nature always wins.
Mindless media is continues to explain
the reasons for immediate rise in the price of gasoline yesterday. Reasons
range from refinery shutdowns to pipeline cuts. Gouging is very seldom
mentioned. That word is not part of the party line for media outlets that earn
big bucks from oil company ads. And we are certain that oil company ads are in
the works that will tell just how wonderful and benevolent BP and Exxon are and how
they just hate; just absolutely hate to see these high prices.
It is pretty amazing that stocks
can rally in the face of all the devastation, but markets are anticipatory
mechanisms that are always looking six months down the road. And markets donít
Hain came in with punk numbers and so we are going to hope to pick
up a few shares this morning in a sell off.
Personal income was up 0.3% and
Personal spending was up 1% in July. Spending exceeded income in July. So what
else is new?
Thursdayís Markets September 1, 2005
Stock futures are indicating a
higher opening and overseas markets were overnight and are today higher.
Treasuries are firm. The TV pictures are showing only poor folks who donít much
vote and who were living in the areas that were devastated. It they were showing
a bunch of folks with Mercedes sitting waitng to be rescued we think the markets
reaction would be different.
Folks know where we stand
philosophically on this but from an economic standpoint and a political
standpoint the utilities are going to get industry going a lot faster than
domestic. The Entergy CEO on CNBC
said that most of the refineries on the Mississippi River
would have electricity today.
Remember the last President to
have gas lines was Jimmy Carter and that led to the Reagan revolution. Karl Rove
isnít stupid and gas lines and $5 gas arenít going to get Republicans elected
next year. And that is why we expect supply disruptions to be short lived if at
Colonial Pipelines, the nations
largest will be 60% operational by this week-end.
Oil is down a few pennies and Treasuries have begun to move lower in
price and higher in yield. No inversion yet today with the two-year at 3.81%. *****
9:24am and the major measures are lower after opening higher.
Treasuries are flying with rumors that Bush and Greenspan are meeting this afternoon.
That will be an interesting conversation.
We sold a few shares of BLS for a scratch profit in accounts
where we decided the position was too large and put some of that money into BMY
for the 4% dividend, we hope. We are buying GPS at $18.60 for many accounts. The Gap same store sales were down
9% but cash flow is large, cash on hand is huge and debt is miniscule. The
shares sell at less than one times sales. Maybe the Fishers will decide to cash
Pimco, the largest bond management firm in the business says the
Fed is finished tightening.
Itís just like the early 1980s
with talk of shale oil. There was a stock called Sullair that made the little
generators that are pulled behind trucks that you see hanging from cranes at construction
sites. That stock was like Sirius in
that all the traders were in and out of it all day long. We still see the
generators so we presume the company exists although it is probably part of Halliburton
Whatever, the talk is of nuclear
power to save the day. Never mind that it takes ten years to build the plants.
With the price of gasoline heading to $4, SUVs are going to be hard to sell and
that will do more to conserve than any other plan. For years folks have been
saying the government should put a tax on gas to make it $4 per gallon to force
conservation, now the markets are doing it. Hopefully the oil companies will
give some of their profits it back in taxes, but we arenít holding our breath.
Municipalities that charge a
sales tax on gasoline are getting a windfall also. As the price rise so does
their take since it is a fixed percentage of the selling price.
and the major
measures have been up and down all day. They currently are lower. Breadth is positive
and new highs are over 400. Volume is again brisk and again Treasuries are on
fire with the two-year at 3.73% and the ten-year at 4.02%.
3:02pm and the major measures closed mixed with the DJIA down 20 points at 10460 while the S&P 500 gained 2 points to 1221.
The NAZZ lost 5 points to end at
2146. Oil finished the day at $69.40.
Breadth was almost 2/1 positive on
the NYSE and flat on the NAZZ. Short Treasuries were strong with the two-year ending at 3.72% and
the ten-year went out at 4.02% which was unchanged from yesterday as the yield
And tomorrow is tomorrow and the
casinos are all open except those on the Gulf coast so let he games continue.
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