New Address:
Lemley Yarling Management Co
309 W Johnson Street Apt 544
Madison, WI 53703
Toll free phone numbers:
Bud: 312-925-5248
Kathy: 630-323-8422
|
28 September 2007 Daily Comments
Hopefully our
phones are now working. Call Bud at the above number.
We will be
traveling until Wednesday so there will be no posts on Monday or Tuesday. The
Model Portfolio will be updated if there are any trades. If there are trades
the date of the portfolio will change to reflect the update.
Our next post will
be October 3.
*****
Thoughts
Asian markets were mixed overnight
but Shanghai recovered its losses
of the last two days closing up 2.4%. European bourses are mixed at midday. Gold is up another $4 in the early
going in NYC while Oil is a bit lower. Treasuries are flat.
Goldman and Greenspan made
negative comments about the U.S.
economy overnight and both suggested that the sub prime mess might be negative
for the world economy.
Traders are saying that their
comments are responsible for the negative opening that is coming this morning.
Inflation numbers released this morning
were benign.
*****
Alcatel-Lucent gained overnight on reports of pressure on CEO
Patricia Russo to present a restructuring plan quickly. The company said Friday
it was trying to speed up its efforts to combine French Alcatel with New
Jersey-based Lucent, which combined in November. A Financial Times report said
board members gave Russo one month deadline to present a restructuring plan
that spells out where to focus research and sales efforts.
We are going to
sell our ALU position in the hopes of buying back later at the lower level it
traded to last month. Restructuring news lasts a few days and then the bears
usually begin pressing their bets again. We may be too cute in this but
…
We do expect a lower market in
October and a chance to deploy more of our cash.
*****
We are redeploying
the ALU money into Palm. PALM announced a new $99 smart phone yesterday
called the Centro. An analyst we follow liked the phone and thinks that a $99
phone is a sweet spot for younger and overseas markets. We traded PALM over
year end last year and took a loss at lower levels. We bought it then for a year
end pop which was a sag instead. This time we are
buying to hold for a while to see how the Centro goes. With $5 per share in
cash and no debt and selling at one times revenues we are comfortable with the
risk/reward.
*****
The dollar is tanking again
today. It is the only commodity that the big boys and
girls can trade in size and with huge leverage and so they are playing their
games. The action in the dollar reminds of when the euro began trading and began
tanking ultimately reaching the level that the dollar currently holds versus
the euro. Back then, we can’t remember the year, the talk was that the euro
would never recover blah blah blah.
The pendulum swings, it always
has and it always will as the universe, world, economy, politics, and we as
individuals are always seeking equilibrium.
*****
Gold closed at a 27 year high up
$10 at $750. If the Hunt Bros could have held they would finally be even. The
pendulum swings.
Oil lost $1.26 to finish at
$81.64. Treasuries were a tad weaker with the two-year at 3.96% and the ten-year
at 4.58%.
European bourse indexes closed
mixed and Mexico
and Brazil were
fractionally lower.
*****
The DJIA closed 20 points lower
at 13895. The S&P 500 lost 5 points to 1526 and the NAZZ dropped 8 points
to 2701.
Breadth was 5/4 negative and
volume was light.
There were 170 new highs and 80
new lows.
The bears won the
day but the bulls won the week, the month and the quarter.
*****
27 September 2007 Daily Comments
Thoughts
Asian markets were all up1% or
more overnight and European bourse indexes are higher at midday. Treasuries are flat; gold is up the $3 it lost yesterday
and Oil has an $81 handle on it.
*****
U.S.
markets opened higher on a follow through from yesterday but after two hours of
light trading the major measures have pulled back to even. Jobless claims were
under 300,000 this morning and Final GDP for the Quarter Two was 3.8%.
*****
Investors Intelligence had bulls
at 55% in the latest week and that is an improvement of 10 per cent in the last
4 weeks. Rising markets make folks more bullish.
*****
According to reports the Fed
added $38 billion to the system today. That is the most since the crunch in
August. Suggestions are that there are quarter end needs and that this is not
to increase liquidity. Time will tell.
The ECB loaned $3.8 billion
overnight to borrowing banks at a penalty interest rate which is the most in
five years. That is unusual activity for each.
*****
Sales of new homes in August
dropped 8%.
*****
Rite Aid announced
sales and earnings today and the shares sold off. We bought RAD in our larger
accounts that already owned shares. We also added some Time Warner to accounts
that didn’t own it and purchased J Crew in our large accounts where we have
been trading it.
*****
Soybeans traded over $10 today
and wheat traded at $9. What a wonderful way to celebrate the harvest moon
unless you’re a beef finisher. And isn’t it great that with oil having an $82 handle
and beans and wheat at 28 year highs that the economic gurus tell us there
isn’t any inflation.
*****
Oil closed up $2.58 at $82.88.
Gold was up $4 to $739. Treasuries were better with the two-year at 3.94% and
the ten-year at 4.56%.
European bourse indexes closed mostly
high fractions higher as did Mexico
with Brazil
better by 1.7%.
*****
The DJIA gained 35 points to 13913.
The S&P 500 rose 7 points to 1532 and the NAZZ closed at 2710 up 10 points.
What worry?
Breadth was 3/2 positive on the
NYSE and volume was moderate.
There were 180 new highs and 80
new lows on the NYSE.
The bulls won the
day and on their way to win the week and the month and the quarter and the
first nine months of the year.
*****
26 September 2007 Daily Comments
Thoughts
Happy Harvest Moon.
*****
In the -we should
have left well enough alone department -we learned today that AT&T has
messed up our 1-800-BLEMLEY number. As of now if you call that number you may
or may not get Kathy. AT&T is once again The Telephone Company that doesn’t’ care about land lines and toll free
numbers. And so we will let you know when the problem is corrected. For now if you
need to reach Bud call 312-925-5248.
*****
Asian markets were mostly lower
overnight with Shanghai down 1.6%. European
bourses are higher at midday. Oil is
up $1 with an $80 handle in the early trade and Gold is flat.
Durable Goods orders were down
4.9% in August but that just reverses a large up in July. Ex Transportation
orders were down 1.8%. Treasuries are lower in price.
GM and the UAW came to terms overnight and that has given a boost
to stocks in the early going. The DJAI opened up 70 points and the major
measures are holding most of their early gains after and hour of trading.
*****
We sold CMCSA,
INTC, Whole Foods and J Crew for trading gains this morning in our
large/aggressive accounts.
*****
The major measures are on their
highs for the day at 10 am but many
of the go to momentum stocks like Crocs,
Amazon, Baidu, Under Armor and Apple are lower.
*****
We are buying
Fifth Third Bank in more accounts today. The shares are on a five
year low and yield 4.8%. The other income stocks that we own are the SPDR Large
Bank Trust with a 5.2% yield, National City
6.4%, Marsh McLennan 3%, Huntington Bank 6.1%, Bristol,
Myers 3.8%, Pfizer 4.8% and New York Times 4.7%. Even Talbot’s yields almost 3%.
Hopefully the banks will maintain their dividends as the dividends give support
to the share price. The unknown write-downs that will be announced next month
by most banks are a worry but to some extent the share prices reflect those unknowns.
The extents to which the share prices reflect the unknowns are unknown since
the unknowns are unknown.
*****
European bourses closed higher as
did Mexico and Brazil.
Gold lost $3 to $735 while Oil traded lower during the day but rallied into the
close to end at $80.30 up 77 pennies.
Treasuries were firm with the
two-year at 3.99% after a well bid two year auction that came at 4%. The
ten-year ended at 4.63%.
*****
The DJIA gained 100 points to end
at 13878. The S&P 500 rose 8 points to 1525 and the NAZZ jumped 16 points
to 2700.
Breadth was 2/1 positive on the
NYSE and volume was moderate.
There were 154 new highs and 91
new lows on the NYSE.
The bulls won the
day although many momentum stocks finished lower as Quarter end shenanigans
began.
*****
25 September 2007 Daily Comments
Thoughts
Target and Lowe’s
announced overnight that sales are going to be less than expected. Since those
two stocks have been the stalwarts and darlings of Wall Street analysts the
major market measures are lower.
And British Petroleum announced that third quarter revenues are going
to be dreadful. That news is probably company specific. But it still causes
wonderment as to how a huge oil company can be having problems with its
underlying commodity at all time highs.
Treasuries are higher in price,
lower in yield, on the Target and Lowe’s news. Gold is down $2 and Oil is down
$1.50 with a $79 handle in the early going.
Asian markets were lower with Shanghai
down 1% and European bourse are lower at midday.
*****
Consumer Confidence was announced at 99 for September which is
weaker than expected.
*****
Existing Home sales dropped in
August to a five year low. Home re-sales fell to a 5.5 million annual rate, a
4.3% decline from July. The S&P/Case-Shiller index showed the decline in U.S.
home prices accelerated nationwide in July, posting the steepest drop in 16
years.
*****
We’ve been doing a
bit of trading today in our large/aggressive accounts. We traded the SPDR
Financial (XLF) for a negative scratch and bought J Crew in accounts in which
we traded them last week for a nice gains. We also bought Comcast, which is trading on
its yearly low at $23.30 and sold NYX (except PV) for a nice gain, BSX for a $1
per share gain, and JDSU and IACI for a plus scratch in those same accounts.
*****
We sold S for a
small gain and YHOO and Dell for nice one week trading gains.
*****
The volume today is extremely
thin for a Tuesday in September during a quarter ending week. Maybe the big
boys and girls just want it to be over.
*****
European markets closed lower
across the continent with some down over 1%. Mexico
and Brazil were
also lower.
*****
Gold lost $1 to $738 and Oil
dropped $1.42 to $79.53 in NYC trading. Treasuries closed higher with the
two-year at 3.99% and the ten-year at 4.62% as by their actions bond traders
are predicting another Fed cut at the October meeting.
*****
The dollar closed
at a 40 year trading low versus foreign currencies.
*****
The DJIA gained 25 points to 13785.
The S&P 500 was unched at 1518 and the NAZZ rose 17 points to 2685.
Breadth was 3/2 negative and
volume was light.
There were 135 new lows and 72
new highs on the NYSE.
The reversal to
new lows exceeding new highs is a negative sign and coupled with negative
breadth gives the day to the bears.
*****
24 September 2007 Daily Comments
Thoughts
Last week while we were away Goldman
Sachs reported better than profits and Bear Stearns reported lousy results. Both
events were expected and the major measures took more positive vibes from the Goldman
Sachs earnings than negative vibes from Bear Stearns. That is because Bear Stearns
sub prime mortgage troubles were evident.
The markets seem to be in a sweet
spot and with this week marking the end of the third quarter there may be some
attempted mark ups toward week end. Stocks that have done well will continue to
be purchased and stocks that have done poorly will continue to be sold.
Since we usually buy the latter
we don’t expect portfolios to do much this week but we may find some more stocks
to add.
The DJIA has rallied 10% in the
last five weeks and so it is due for a rest and pull
back. But there is enough performance anxiety money on the sidelines to prevent
another major down draft unless circumstances extraneous to the stock markets
intervene.
Overnight Asian markets were mostly
higher and Hong Kong and India
and Shanghai traded at new record
highs. Japan
was lower. European bourses are mixed at midday
and Gold continues its climb up $4 at $743. Oil has an $81 handle and Treasuries
are weaker as the trading day begins.
*****
We added the SPDR
Major Bank Index to many accounts. The KRE has a 5% yield and its
top ten holdings are:
TOP
10 HOLDINGS ( 59.78% OF TOTAL ASSETS)
|
|
Company
|
Symbol
|
% Assets
|
BK OF AMERICA CP | BAC |   7.81 |
BANK OF NY MELLON CP | BK |   5.02 |
CITIGROUP INC | C |   7.48 |
JP MORGAN CHASE CO | JPM |   8.41 |
P N C FIN SVCS GR | PNC |   4.53 |
STATE STREET CP | STT |   5.32 |
SUNTRUST BANKS | STI |   4.42 |
US BANCORP | WFC |   7.80 |
WACHOVIA CP | WB |   4.68 |
WELLS FARGO & CO NEW | WFC |   7.80 |
|
*****
We are also buying Sears
Holdings at $131 in our large/aggressive accounts. The share price
is down from $180 at year end and a $196 high this year. Eddie Lampert is being
called the next Warren Buffet. We think there is only one Warren Buffet a
century and we aren’t sure Eddie is that person.
But we do know that Eddie’s year
end bonus is determined to a great degree by the price of Sears Holding and we
are guessing that Eddie will want it to be higher than $180 by then. He has
been buying back SHLD shares for the company for his hedge fund and currently
owns over 40% of SHLD. Some timely buying later in the year will get the share
price higher. Moreover the Sears/K Mart combine could probably do better if Lampert weren’t trying to run it himself. But his ego is
involved for now. When his pocketbook begins to suffer later this year his master of the universe syndrome may move
to the back seat.
*****
We added shares of
CC, MU, AMD, NCC, TLB, and COT to accounts.
*****
Oil closed down 67 pennies at
$80.95. Gold closed unched at $739. Treasuries were a bit weaker with the two-year
ending at 4.05% and the ten-year at 4.62%.
European bourses closed mixed and
Mexico was down
while Brazil
was higher.
*****
The DJIA lost 60 points to finish
at 13760. The S&P 500 closed down 8 points to 1518 and the NAZZ dropped 5
points to 2668.
Breadth was 2/1negative in the
NYSE and volume was light.
There were 135 new highs and 85
new lows on the NYSE.
The bears won the
day but are well behind for the month.
*****
18 September 2007 Daily Comments
We will be
traveling the next few days and so this is our last post until Monday September
24. We are off to Chicago to see a few clients and also to visit with a fine gentleman who was our
college roommate at Georgetown 42 years ago.
Thoughts
Lehman Brothers reported a 3.2% drop in fiscal third-quarter net
income, kicking off an intensely anticipated earnings season for brokerage
firms navigating turbulent mortgage and credit markets. The results topped Wall
Street forecasts, and Lehman shares rose before the opening bell. Those results
also gave a pump to the markets because the thinking is that since Lehman
didn’t pre-announce and had good results that Goldman and the other large
brokers haven’t pre-announced and so their results should be n line with
analyst forecasts. We would guess that the Fed and SEC have given the green
light for some lenient interpretations of valuations and marking to the market (setting a price) on quality mortgages that
don’t have good bids.
*****
The Fed announces its meeting
results in a statement at 1:15pm
today and all the trading for the past week has been pointed towards that
event. Producer Prices (PPI) for August released this morning was a negative
1.4% on lower energy prices and the year over year core rate was 2.2% which is
still mild enough to allow the Fed to cut. The guessing is that the cut will be
25 bps.
*****
Japan
was down 2% overnight and India
was up 1%. The rest of Asia was mixed small and European
bourses are also mixed. Gold is up $4 at $728 and Oil has an $80 handle. The
price on oil will affect PPI negatively (pushing it up) next month. To
paraphrase Uncle Alan in his new book, it’s
all about the oil.
*****
A total of 243,947 foreclosure
filings were reported in August, up 115 percent from 113,300 in the same month
a year ago, Irvine, Calif.-based RealtyTrac Inc. said Tuesday. There were
179,599 foreclosure filings reported in July.
*****
We have been
adding stocks to accounts today to bring invested levels in most accounts up to
40% to 40%. Some of our very small accounts are at 60% as are a few of our very
aggressive accounts. It’s that time of year when we think the risk/reward in the
broken down stocks we buy warrants taking positions with the idea of buying
more if there is more of a correction in the individual names into the end
of the year. Unlike past years we are
taking smaller positions in many stocks to mitigate the risk while hopefully
not hampering the reward.
*****
In our
larger/aggressive accounts we bought shares of Marsh & McLennan.
It is an insurance brokering and consulting/risk management enterprise that has
been around for 150 years. The share price is at a 9 year low on news that the
CEO of the March unit has been fired. It is a quality stock having troubles and
selling at 16 times earnings. Earnings have disappointed the last few quarters
which is probably why the CEO of the unit is gone.
*****
European markets closed higher
with France up
2% and London and Germany
up over 1.5%.
*****
The DJIA is up 75 points and the
NYSE is up 10 points two minutes before the Fed announcement. The two-year
treasury is at a 4.14 % and the ten-year is 4.50%.
*****
In somewhat of a
surprise the Fed lowered the Fed Funds rate 50 bps to 4.75% and the Discount
rate 50 bps to 5.25%% and said "Today's action is intended to
help forestall some of the adverse effects on the broader economy that might
otherwise arise from the disruptions in financial markets and to promote
moderate growth over time."
"Developments in financial
markets since the Committee's last regular meeting have increased the
uncertainty surrounding the economic outlook. The Committee will continue to
assess the effects of these and other developments on economic prospects and
will act as needed to foster price stability and sustainable economic
growth."
Fifteen minutes after the Fed announcement the DJIA was
up 175 points and the S&P 500 was up 25 points. The two-year was 4.03% and
the ten-year was 4.52%.
*****
Going into the final hour of
trading with the DJIA up 250 points it will be interesting to see if the bears
can make a stand. We remain cautious, as always, but we are obviously glad we
put a good chunk of money to work over the past few weeks in our kind of out of
favor stocks. Many of those stocks are rallying. We would rather be on the same
side of the trade as the central banks, at least for a while. They have a lot
more ammo than the bears. And we also think that underperforming hedge funds
that have lowered their leverage will migrate back to stocks –and increase their
leverage to do so-as the only game in town where they can create performance
over the short term. They don’t want to give up their 2% management and 20%
performance fees. After all they have high priced homes in the Hamptons
to support.
*****
Because we think
tech stocks will eventually get major attention-even the dogs we now own- we
are adding JDSU to our large/aggressive accounts. We also increased or Chico’s position in many of those accounts.
*****
T Bills rose a few bps today. Short
Treasuries closed lower in yield on the day with the two-year at 3.97%. That
price is too low a yield with a 4.75% Fed Funds rate. The ten-year ended at
4.50% which was lower in price and 7 bps higher in yield on the day.
*****
Oil hit $81.25 up 94 pennies and
Gold jumped $11.50 to close at $735. Brazil
was up 4% and Mexico
gained 3%.
*****
The DJIA rose 336 points to close
at 13740. The S&P 500 rose 43 points to 1520 and the NAZZ jumped 70 points
to 2651. All is well in la la land, at least for tonight.<
Breadth was 9/1 positive on the
NYSE and volume increased.
And new highs were
145 versus new lows at 95 on the NYSE. New highs also exceeded new lows on the
NAZZ.
The bulls won big
time.
*****
17 September 2007 Daily Comments
Thoughts
Asian markets were mixed
overnight with Shanghai of course
up 2% while Japan
was up almost 2% and Hong Kong was down 1%. European bourses
indexes are lower by 1% and more across the board at midday as there is more fall out in England
from the Northern Rock Bank special borrowing from the Bank of England. Oil is
lower with a $78 handle in the early going and Gold is up a bit at $720. Treasuries
are weaker.
*****
The talk of the morning is Uncle
Alan Greenspan’s 60 Minutes interview last night. We didn’t watch it since he
isn’t in power anymore and for the life of us we can’t figure why folks will
pay $100,000 to listen to his obfuscation.
*****
GM and the UAW are on serious talks and the press is saying the
confab is not going well. A strike is a day to day possibility but that is
always the case in these negotiations.
*****
We bought a small amount of NYSE
Euronext, Chico’s and Sears Holding in our very large accounts.
*****
Greenspan says he sees inflation ratcheting
up and the ten-year Treasury at 8%. He is giving these interviews before the
Fed meets tomorrow and is doing a disservice to the current Fed. But then ……
*****
We added Time
Warner, Rite Aid and Cincinnati Bell to some accounts.
*****
Mother Merrill cut
its rating on NYT from neutral to sell. With a 4.5% yield we think the stock is
attractive and we are buying some shares in accounts. We also added to positions
and added new positions in Alcatel Lucent, Huntington Bank, and Talbot’s.
*****
Newswires are reporting that U.K.
Chancellor of the Exchequer Alistair Darling said the U.K.
government will guarantee all deposits held with U.K.-based mortgage lender
Northern Rock if necessary. Separately, Northern Rock's board said it is
"actively considering all strategic options," but is not in
discussions with other parties.
*****
Gold was up $6 at $723 and Oil
was up $1.47 at $80.57. Treasuries were lower with the two-year at 4.06% and
the ten-year at 4.46%.
Most European indexes were over
1% lower as bank stocks were under pressure and Brazil
and Mexico also
closed lower.
*****
The DJIA lost 35 points to close
at 13405. The S&P 500 dropped 7 points to 1478 and the NAZZ dropped 20 points
to 2583.
Breadth was 2/1 negative and
volume was light.
There were 120 new lows and 60
new highs on the NYSE.
The Chicago Bears and the NYSE bears won the day and both were ugly doing it.
If Grossman were a stock we’d short him.
*****
Happy 30th wedding anniversary
to Bette from Jody.
14 September 2007 Daily Comments
Thoughts
Asian markets were higher overnight
but European bourses and U.S. stock futures are lower on news of a large
savings bank in England needing emergency help form the the
Bank of England.
*****
Northern Rock Plc got emergency funding from the Bank of England,
the biggest bailout of a British lender in 30 years, after rising credit costs
left the mortgage provider unable to make loans.
Northern Rock shares plunged as
much as 26 percent to a six- year low after the company said today the central
bank will provide an unspecified amount of credit. The Newcastle,
England- based
bank, whose roots date back to 1850, is the U.K.'s
third- biggest lender by gross mortgages with loans worth 17.4 billion pounds
($35 billion) as of June 30.
There were reports of lines of
depositors withdrawing their deposits after news of the Bank of England’s help.
*****
Gold is down $4 in the early
going, Oil has a $79 handle and Treasuries have a bid on the Northern Rock
troubles.
*****
Goldman Sachs Global Alpha hedge fund was down 22% in value in the month
of August. August was the worst month in the fund's 12-year history. So far
this year through the end of August, it was down 33.4% due to bad bets on
everything from the Australian dollar, the Norwegian stock market and Japanese
government bonds. Over the past 12 months, the fund has lost 37% of its value. Last
year, the fund did well for the first few months but was down 9% for the year.
Assets under management have slipped from a peak of $10 billion to about $6
billion.
*****
Discount borrowing under the
Fed's primary credit program for banks surged to more than $7.1 billion
outstanding as of Wednesday, up from about $1 billion a week earlier, the
central bank said yesterday. It was the highest level since the day after the Sept. 11, 2001, terrorist attacks.
*****
Mother Merrill lowered Intel from a buy to a hold saying the
shares were fairly valued even with the increased revenue guidance of earlier
this week. That announcement explains the weakness in INTC shares yesterday
when the markets were rallying. Obviously Merrill’s analyst was letting larger
clients know of his decision to lower guidance.
*****
GM and Ford rallied
yesterday on reports that the UAW will consider managing a trust fund for
workers benefits. That would free GM and F from future liabilities but still
would require a large chunk of money to fund the plan. And it was reported that
the UAW has also chosen GM to negotiate the first contract.
*****
The DJIA opened
down 80 points on negative retail sales for August and we did some buying ahead
of the Fed meeting on Tuesday. We know everyone is predicting a rally on the
interest rate cut and because everyone is predicting a rally the contrarians’
stance is that there will be no rally. But the contra contrarians’ stance would
be that there will be a rally because everyone expects there to be no rally because
everyone expects a rally. And of course we are contra contrarians. We purchased
Intel, Sprint, Pfizer, Bristol Myers, Time Warner, TLAB and Boston Scientific in our large/aggressive accounts. We bought shares of Dell, Huntington Bank,
Talbot’s, Yahoo and National City in accounts that didn’t own them. We also repurchased Micron Tech at
$10.96 in accounts that own AMD.
*****
We have owned all the stocks we bought
today before. A new stock we are adding is Circuit City
at $9.83. The shares sold at $30 this year and it will probably
remain under selling pressure through the end of October as institutional
investors continue to unload shares. Management stinks and sales are under
pressure but the company has no debt and in bygone days it was the premium electronics
retailer while Best Buy was in the dumps. That order has been reversed but we
have been waiting for the shares to trade under $10 and at this price we think
a few shares in our larger aggressive accounts is warranted for the
risk/reward.
*****
Europe
finished lower but above its lows for the day. Gold was unchanged to close the
week at $717 and Oil was down $.99 at $79.19. Treasuries backed up as talk of
only a 25 bps cut mellowed traders desire to own short maturities. The two-year
closed at 4.06% and the ten-year at a 4.47%.
*****
We are going back
into Whole Foods in a small way in a few aggressive accounts. we sold much
lower than we are repurchasing but the Wild Oats deal went through and we think
that gives WFMI the room to fudge earnings for a couple of quarters without
Wall Street complaining. If we are wrong and the shares trade lower we will
buy more. We are also adding a few beaten down stocks as initial positions.
These are Coldwater Creek at $12.25 New York Times at $18.75 and Netflix at
$17.25. All three stocks are down from highs this year above $26.
*****
The DJIA closed up 20 points at
13445. The S&P 500 gained 1 point to 1485 and the NAZZ rose 1 point to 2602.
Breadth was flat on the NYSE and the
NAZZ and volume remained light.
There were 115 new lows and 65
new highs on the NYSE.
The bulls won the
week. The Fed meets next Tuesday and it is also Quadruple Witching week so the
wheel of fortune should be spinning overtime.
*****
13 September 2007 Daily Comments
Thoughts
We haven’t been writing much and
it may be because there isn’t much occurring. The sub prime mess exists, financial
earnings will probably be hit, retailers seem to be suffering from slower sales
but Uncle Ben is expected to mitigate the bad news by cutting interest rates
50bps next week.
With the holiday yesterday and
the Fed meeting next week the markets seem to be in a holding pattern. News of
hedge fund blow ups is now greeted with a yawn and traders are looking for a
reason to move stocks higher. There doesn’t seem to be any great urge to sell
stocks.
And so we are just watching along
with everyone else.
*****
Asian markets were mostly higher
overnight except for Taiwan
which was down 1%. European bourse indexes are lower at midday. Gold is down $7 on profit taking and Oil is flat. Treasuries
have a weaker.
*****
Citicorp raised GM
to a buy. Alcatel Lucent forecast flat sales and break even earnings and the
shares ore off 10% and 20% from where we purchased them. We are buying a
few more shares in large/aggressive accounts. We like the company but this is a
longer term investment and with the markets in turmoil and ALU out of favor we
think there may be a chance to purchase at a more advantageous price in October.
We don’t want to be the farm on one stock this year.
*****
TLAB dropped under
$10 today when an analyst lowered his target price from $14.50 to $11.50 with
the comment that he no longer thought it was a takeover target. We bought a
small amount in our larger/aggressive accounts for a trade.
*****
European bourse indexes closed
higher with many up over 1%. Mexico
gained 1% and Brazil
2%.
*****
Gold lost $3 to $718. Oil gained 18
pennies to finish over $80 for the first time in history. Treasuries gave ground
with the two-year at 4.06% and the ten-year at 4.50%.
The talk now seems to be that
there will be a 25 bps cut in the Fed funds rate and a 25 bps cut in the
discount rate. If that is the case short term Treasuries are overpriced—there
yields should be higher.
*****
The DJIA gained 130 points to 13425.
The S&P 500 rose 12 points to 1483 and the NAZZ jumped 10 points to 2602.
Intel was lower on the day as were other tech leaders. And the
mantra has been sell financials buy tech.
Breadth was 2/1 positive on the
NYSE and 5/4 on the NAZZ. Volume was again light.
There were 158 new lows and 70
new highs.
The bulls won the
day.
*****
12 September 2007 Daily Comments
Thoughts
Asian markets were mixed
overnight with Shanghai recovering 1% and Hong Kong up 1.5%. Japan was
fractionally lower n news that Prime Minister Abe was resigning. European
bourses are off a bit after yesterday/s gains and U.S. stocks are opening
lower. Gold and oil are both flat and Treasuries have a bid in the early going.
*****
Barclay’s Bank is adding $1.5
billion to a third hedge fund of theirs. Citi’s hedge
fund lost 5% in value in August.
*****
Investors Intelligence reported
an increase in bulls to 48 from 42 and a decrease on bears to 31 from 37 in the
latest week.
*****
We were out most of the day but
the markets were quiet because of the holiday. Oil
jumped to a new all time high finishing at $79.80. Gold was
unchanged at $730. Treasuries were flat on the short end and weaker on the long
end.
European indexes closed
fractionally higher.
*****
The DJIA lost 17 points to 13291.
The S&P 500 rose 1 point to 1471 and the NAZZ was down 5 points at 2593.
Breadth was slightly negative on
the NYSE and volume was light.
There were 105 new lows and 70
new highs on the NYSE.
Today
was a draw for the bulls and bears.
*****
11 September 2007 Daily Comments
Thoughts
Asian markets were mixed
overnight with Japan
recovering from its Monday sell off and Shanghai
dropping 4% on news of a 6% inflation rate in August. European bourse indexes
are higher and the U.S.
markets are also up almost 1%. Treasuries are a bit weaker in the early going
and Gold is up $2 with Oil off a bit on news that some OPEC members including
the Saudis want to increase production.
*****
McDonald’s had good numbers and
the stock is higher and helping the market tone.
*****
London
closed 2% higher while Germany
and France were
both up 1%. Mexico
was up 1% and Brazil
over 2%.
*****
Countrywide is looking to raise
more capital since its borrowing sources have dried up or are all used up. Over
the weekend the company announced it was laying off 12,000 folks. This one is a
shoe.
*****
Gold jumped another $9 today to
close at $729. Oil was up to $78.23 even with an OPEC production increase.
Treasuries closed a bit lower in price with the two-year at 3.93% and the ten-year
at 4.36%.
*****
Wheat is at almost $9 a bushel.
Oil is at $78 a barrel. There is not inflation?
*****
The DJIA gained 190 points to
finish at 13310. The S&P 500 rose 20 points to 1472and the NAZZ gained 40
points to 2600.
Breadth was better than 2/1
positive but volume was light.
New lows bested new highs by 85
to 47 on the NYSE.
The bulls won the day.
*****
10 September 2007 Daily Comments
Thoughts
Intel raised its revenue estimate for the quarter and that gave the
stock markets a lift at the opening. The DJIA was up 76 points after 10 minutes
of trading but began a slow fade later in the first hour.
Overnight Asia
was mixed with Japan
down over 2% on news that its GDP was a negative 1.2% for the second quarter. Shanghai
was up 1.5%. European bourse indexes are mixed small at midday and Treasuries are firm. Gold is up $3 at $713 and Oil
is down 40 pennies but still has a $76 handle.
*****
At 10am
the major stock measures are all lower on comments by Fed member Janet Yellen
that the housing imbroglio may affect consumer spending. You think?
*****
We purchased National City at $25.75 and Yahoo at $23.30 in our larger/aggressive accounts. The
NCC is a play in the Fed rate cut and the Yahoo is a tech trade.
*****
Treasuries were strong all day
and closed at two year low yields. The two-year was 3.83% and the ten-year was
4.30%.
*****
European bourse indexes were large
fractions to over 1% lower across the continent.
*****
Oil gained 79 pennies to $77.49.
Gold increased $3 to $712.
*****
The DJIA gained 15 points to end
at 13125. The S&P 500 down 2 points to 1451 and the NAZZ dropped 7 points
to 2460.
Breadth was 5/4 negative and
volume was light.
There were 135 new lows and 40
new highs on the NYSE.
Today was a draw
between the bulls and bears.
*****
7 September 2007 Daily Comments
Thoughts
The Employment Report had a loss
of 4000 jobs in August when a gain of 100,000 was expected. The June and July
reports were also revised downward. Treasuries are rallying on the expectation
of a Fed rate cut but stocks are lower in the early going.
Gold is at $707 and oil has a $76
handle. Asia was lower with Shanghai
down 2% and European stocks are also in the tank.
*****
After an hour of trading the DJIA
is off 200 points. We added a few shares of Motorola
to some aggressive accounts. MOT is having an analyst meeting today and in a
sea of red it is one stock that is higher.
We also bought the
XLF which is the Financial SPDR that owns Citi, JP Morgan, Goldman
Sachs et al. we bought it in larger/aggressive accounts and it is our way of owning
financials without having to pick just one that may have bad news. We plan on
adding more on the downside and expanding ownership to other accounts. Of
course if XLF trades higher on the rate cut we may let it go.
We bought Fifth Third
Bank in these accounts at $34.75. FITB is on a multi year low with a
4.8% yield. We are sure they have as many problems as other banks but it is
getting to a value level. We own for a trade on the rate cut.
*****
Traders are hoping for a rate cut
and the saving of stocks that such a cut will supposedly bring.
*****
Alan Greenspan said last night
that current market conditions are like 1987-88. He must be short stocks. By
the way he also said the market is identical to the land bust of 1837 and the banks
panic of 1907. He wanted to get all the panics in the warning. He is working
for a very good living now and gets paid to say these things.
*****
The difference between today’s sell
off and the one a week ago Wednesday when we went to cash was that we didn’t
know of any reason for that Wednesday drop. Today’s downdraft is occasioned by
the lousy Employment Report and so it is understandable. That is why we are
reestablishing a few small positions. We think there will be a rally when the
Fed cuts. Everyone seems to be expecting a rally and that is a negative but
these markets have been so consternating that we do think the rally will occur.
For how long will be the question. Also it is September and time for the wash
out to begin and for us to commence placing some funds to work.
*****
We bought a few
shares of Ford and GM back at the prices at which we sold them on
the break on the 28th.
*****
We thought this post on realmoney.com by Robert Marcin was germane:
However, it just dawned on me that Cramer's case for so many existing
bull markets is the reason the Fed should not panic.
All of us in the real estate/finance industry see the problems from
excess leverage and lack of analytical rigor. But we don't see the world
through the eyes of the average American.
If you work for Microsoft, Apple, Caterpillar, Deere, Boeing, Goodrich,
Fluor, Halliburton, Alcoa, United Airlines, Merck, or Toyota, you don't see the financial stress. That
is if you didn't speculate in Florida condos. Ditto for most other big, profitable American companies.
Jim has astutely identified about 14 different bull markets. So much of
the real, ie non finance/real estate economy is thriving. Now maybe you work in
the health care system, or for the government, or an educational institution.
If you didn't do anything stupid with debt, things look pretty good as well.
Maybe you work in the accounting or legal profession; not so bad either. Maybe
you farm or mine or rough neck for a living. Things don't get much better
there.
So much of the recession in real estate and finance is in our face
daily, that we think the world is coming to an end. For the vast number of
normal, working Americans, it's not.
Now I don't intend to underplay the struggles working Americans face
with rising energy costs and stagnating wages. But those are cyclical/secular
factors that go well beyond the scope of the next Fed cut.
Again, the Fed will and should cut on September 18. However, it's more
insurance than in response to a collapse in the GDP or most of our
manufacturing/non- financial service base.
But, it's not a panacea for stock, housing, and structured debt prices.
And for most of America, that's just Wall Street's problem anyway.
*****
In the final hour
as the DJIA dropped lower we purchased Talbot’s and Huntington Bank in our
large/aggressive accounts and Advanced Micro Devices (AMD) in many accounts.
The sizes of the purchases today
are leaving plenty of room in accounts to add shares of the same stock.
Talbot’s is on a seven year low,
AMD on a five year low and in the rallies the last two weeks traders have
purchased tech stocks first, and we own the HBAN for the rate cut rally and it
too is on a four year low.
*****
Oil gained 40 pennies on Friday
to end at $76.70. Gold was up $5 to $710 in NYC trading. Treasuries were on
fire with the two-year at 3.89% and the ten-year at 4.37%. Treasuries are
pricing in a 1% rate cut.
European bourses closed sharply
lower with most off 2% or more. Mexico
was also lower but Brazil
gained a small fraction.
*****
The DJIA closed down 250 points
at 13110. The S&P 500 dropped 25 points to 1455 and the NAZZ lost 50 points
to end at 2565.
Breadth was 3/1 negative. Volume was again light.
There were 100 new lows and 20
new highs on the NYSE.
The bears won the day
and the week.
*****
6 September 2007 Daily Comments
Thoughts
Wal-Mart surprised to the upside with same store sales up 3% in
August and that gave a boost the major stock measures as the markets opened
this morning. But the pop didn’t last for long and after half an hour trading is
flat.
Gold is at $698 and Oil has a $76
handle in the early going. Europe is lower at midday and Asia was
mixed with only Shanghai and India
up over 1% overnight. Treasuries are a bit weaker and are reacting almost
instantly in a contra manor to the moves that stocks make.
*****
Michael Lewis is a great writer
and his tongue in cheek article is amusing:
http://www.bloomberg.com
*****
Bloomberg reports that overnight
rates for loans in Venezuela
were at 22% yesterday and as high as 90% today and the Central Bank has
suspended making any loans.
*****
Oil gained 55 pennies to end at
$76.32 in NYC. Gold jumped $14 to $704. Treasuries
were weaker with the two-year at 4.07% and the ten-year at 4.50%.European
bourse indexes closed mixed to slightly higher. Brazil
and Mexico were
up.
*****
The DJIA gained 60 points to
13365. The S&P 500 rose 6 points to 1478 and the NAZZ climbed 10 points to
2615.
Breadth was 3/2 positive on the
NYSE and volume remained muted.
There were 66 new lows and 45 new
highs on the NYSE.
The bulls won the
day. Traders are waiting on tomorrow morning’s Employment Report.
*****
5 September 2007 Daily Comments
Thoughts
The WSJ is reporting that Citicorp
has exposure to $100 billion of Structured Investment Products. We have no idea
what they are but we guess it is some kind of credit vehicle that some 25 year
old MBAs dreamed up and which could only provide oodles of profit and no risk
as long as every economic event went the way the computer models said they
would.
Whatever, the stock futures are
lower on this news. The fact that that the S&P 500 is up 4% in the last
four trading sessions might also suggest that the stock markets are in need of
a pause. The last four day up swing in the S&P 500 of 4% was in April 2003
when the bull market resumed.
*****
Asian markets were mixed
overnight as are European bourses at midday.
S&P futures are suggesting a lower opening and oil is pennies lower with a
$75 handle while gold is down $2 after yesterday’s $9 pop higher.
On the bad news for Citi, Treasuries
are higher in price as the markets try and decide whether bad news is good news
because bad news will force the Fed to cut. But then after the Fed cuts will
bad news again become bad news or will the Fed cut become bad news after it is
good news.
*****
ADP and Challenger & Grey are
suggesting weak jobs growth and that is affecting stocks. Also the Fed releases
its Beige Book this afternoon and that could rally the markets if they are
lower. Or maybe not.
*****
Pending home sales were down 12%
in July when the market were expecting an up 5% number. It is down 16% year
over year.
*****
An hour into the trading day the
DJIA is down 150 points and breadth is 5/1 negative. These huge mood swings are
disconcerting.
*****
We have not felt
positive about our sale of Motorola. We view it in the same class as Cisco,
Nokia and Hewlett Packard, all of which we traded out of way too early in their
recovery. And so we are repurchasing the Motorola in many accounts.
Our desire to be in cash does not
mean that we are going to ignore individual stocks that present themselves as
opportunities for the longer term. And as we often say we sometimes find we
want to own a stock after we sell it. MOT has been acting well. We shouldn’t
have sold it but in doing so we now know that we want to own it.
The same goes for Alcatel Lucent which has a 3% yield and which we are
repurchasing.
*****
The Beige Book report by the Fed
districts was released at 1pm and the
stock markets yawned and moved lower. The DJIA is now down 175 points. The
first move on news is sometimes the contra of the final direction for the day. But
then again….
*****
Apple was up all day in the down market in anticipation of an
announcement toady from Steve Jobs. When Jobs made the announcement of the new iPod
and iTunes the share price began to move lower in a sell the news reaction.
*****
Oil ended up 75 pennies at $75.79
in NYC. Gold lost $2 to $689. Treasuries were strong across all maturities with
the two-year at 4.02% and the ten-year at 4.47%.
European markets closed 1% to
over 2% lower as did Brazil
and Mexico.
*****
The DJIA closed down 150 points at
13300. The S&P 500 was down 18 points at 1472 and the NAZZ dropped 25 points
to 2605.
Breadth was almost 3/1 negative
on the NYSE and volume was light today on the downside as it was on the upside
yesterday.
There were 70 new lows and 40 new
highs on the NYSE.
As they did last
Wednesday the bears claimed the day.
*****
4 September 2007 Daily Comments
Thoughts
Asian markets were mixed in Monday
trading and were slightly lower overnight Tuesday. European bourse indexes are
also slightly mixed at midday. The U.S.
markets opened slightly lower but now have moved to the upside. Gold is up $8
and Oil has a $74 handle. Treasuries are a flat.
*****
The DJIA was at 13362 on August 1
and at 13358 on August 31. We guess not much occurred in August.
*****
New highs are ahead of new lows
on both the NAZZ and the NYSE. That is the first time we have seen that for a
month and is a positive for the bulls.
*****
Over the weekend we considered our move selling the final
15% of our holdings last Wednesday and the subsequent rally of the markets on
the Bernanke and Bush statements. Their statements affirmed that our caution
for the last few years has been justified by the sub prime meltdown and the corresponding
turmoil in the markets. The problem for us going forward is to balance our cautions
with the desire to earn a decent return on investment for our clients.
Preservation of capital is always our first
consideration. We now need to judge how much longer term effect the
intervention of the Fed in the markets is going to have on the economy. Lowering
interest rates will certainly help the banks on the funding end of the process
which is their cost of money. But unless the Fed or the Congress and Bush
create some kind of Resolution Trust Corp. to assume adjustable rate and sub prime
mortgages and lower the interest rates that those mortgage holders have to pay
we don’t see an end to the mortgage problems.
The mortgage problems have frozen and actually lowered property
values over the last three months. A problem that took 6 years to create will not
be solved in two months. But the thought of action by Bush and the Fed has
staunched the stock markets move lower. Perception and psychology are a huge component
of stock prices and since the overall trend over the years is to move stock
prices higher the natural flow is to higher prices.
But there are times when corrections are needed. And
sticking fingers in the dam doesn’t end the problem if the there is fundamental
flaw in the dam. Is there is systematic problem with the economy at this
juncture? Or is this just a correction in a bull market?
Last week we decided that trying to trade the markets
with a small ownership of stock was not what we wanted to do at this juncture.
In October we may decide- as we did last year- that the correction is just that
and nothing more. We think we are better off waiting till October to make that
decision.
*****
Gold ended $9 higher at $691 in
NYC trading. Oil also gained $1.04 to $75.06. Treasuries were flat with the
two-year at 4.13% and the ten-year at 4.55%. European bourses ended higher
across the continent as did Mexico
and Brazil.
*****
The DJIA gained 95 points to 13455.
The S&P 500 was up 15 points to 1489 and the NAZZ jumped 33 points to 2630.
What correction?
Breadth was better than 2/1
positive and volume was still on the post holiday light side.
There were 60 new highs and 50
new lows on the NYSE and 105 new highs and 45 new lows on the NAZZ.
The bulls won the
day.
*****
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Summary of Business Continuity Plan
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