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For those folks who have accounts with us, you may now go to: www.aacesonline.com and fill out the account information and view your accounts online. If you have trouble filling out the form, or in getting online, call and we will help you with the process. NASD regulations require the aacesonline site to be secure. Thus your password must be changed every ninety days. You will be prompted to make this change when needed.

For those clients of LY& Co and other interested persons the Quarterly Report on the routing of customer orders under SEC Rule11Ac1-6.
For Quarter Ending March 31, 2003 For Quarter Ending December 31, 2002 For Quarter Ending September 30, 2002
For Quarter Ending June 30, 2003 For Quarter Ending September 30, 2003 For Quarter Ending December 31, 2003

30 April 2004 - Evening Comment

11:56am and stocks are mixed with breadth on the NYSE positive and on the NAZZ negative. The NAZZ is off 1% and the DJIA is slightly positive.

Tech stocks continue to tank and the saving grace for us is that we have such a goodly amount of cash. We are surrendering all our gains for the year but our cash position gives us the buying power to take advantage of any continuing sell off.

There are rumors of mad cow disease in Texas , SARS in China , and with the week end at hand we don’t see a rally in the cards. Tech is now an area of avoidance for traders and the money that is flowing into the markets is going into the P&Gs and Avons of the investing world.

Since we were wrong on the recent direction of the market we are sitting on our hands until the NAZZ reaches 1900 and tests that level and the DJIA tests 10000. We don’t want to compound our error by trying to prove that we are smarter than the markets.

12:30pm and since January 2, 2002 or two and one half years the S&P 500 is down 3%. We like to remind ourselves of the longer term picture when our short tem crystal ball is cloudy. In that same time period the Model Portfolio is up 16%.

The 1935 area is the 200 day moving average support area for the NAZZ. Currently the NAZZ is at 1939 and if it breaks the 1935 area during the last hour of trading it may get ugly into the close.

3:13pm and the DJIA closed down 46 points at 10225. The S&P 500 lost 6 points to finish at 1106 and the NAZZ broke down through its 200 day moving average to 1920 down 38 points.

Next week should be interesting.

And tomorrow is another day.

30 April 2004 - Morning Comment

6:02am and yesterday’s stock action was a repeat of Wednesday although the closing numbers weren’t as bad.

In the morning the preliminary GDP number of 4.2% growth was less than stock traders were expecting. They had a 5% number in their sights and when the GDP number came in less with the price deflator at 2% the idea of rising interest rates to combat inflation coupled with not so hot economic growth threw the bulls for a loop.

The major measures opened higher but after an hour slipped into negative territory. In the afternoon Google filed its IPO papers but not even that event was enough to get things moving back to positive.

We added a few shares of AT&T to smaller accounts at $17.60 and sold our Time Warner position at $17.10 for a scratch profit when the share price jumped 65 cents on good earnings. TWX is going to be bidding on Adelphi Cable and we think the stock will trade lower on that news. Moreover with the markets not acting as we expected this week we are happy to raise a little cash without taking a loss.

For today we can’t see much of a rally before the weekend but we have been wrong all week and anything is possible.

So let the games begin.

29 April 2004 - Daily Comment

7:02am and we are off to Chicago this morning for business meetings and so this will be our only post today.

Japan was closed for holiday but Asia was and Europe is lower as we write. Early morning trading in U.S. stock futures is on the negative side. GDP is announced this morning and is expected to be up 5% or more. Such strong GDP numbers which we don’t believe but which will be the focus of today’s trading may have and either /or effect.

Either folks are going to take them as a sign of a rebounding robust economy and decide that stocks are worth owning and buying; or traders are going to decide that such robust numbers mean higher interest rates ahead and slowing growth.

Traders are marvelous at discounting in five seconds all bad that can happen from a given event over the next ten years.

Given that the markets are in a funk we would guess that stocks will open lower and move down. Another 100 points down on the NAZZ and it will be at the 1900 level where good buying has appeared before.

The news of ten soldiers dying in Iraq overnight and a pullback from Fallujah is devastating on the first item and not positive on the second. Stocks have chosen to ignore Iraq when moving higher but seem to regain focus as they are moving lower.

There was some panic in the marketplace yesterday and more panic will be a positive. This morning we are 25% invested and will adds stocks as they go lower.

All is not lost and all is not rosy and some reality is entering stock pricing and that is a long run positive.

So let the games begin.

28 April 2004 - Evening Comment

8:52am and stocks are lower with the NAZZ down 1%. Our issues are being hit harder than the market and we’ll have to ride this through and look to add if they get cheaper. We are comfortable with our exposure and the stocks we own and it is just a matter of patience.

Lucent is down because of the investigation of Nortel and we don’t think that investigation has anything to do with Lucent. Time Warner is down because traders think it is going to get in a biding war for Adelphia, the bankrupt cable operator. All the other stocks are going down because the market is going down and there are more committed sellers than buyers.

9:36am and breadth is negative 3/1 as is down volume over up volume. The DJIA is now down 72 points. We continue to believe there will be a reversal and a higher close today.

11:52am and we missed the news that is being reported on www.realmoney.com that Premier Wen Jiabo of China is on the wires saying that the Chinese economy is overheating and that the central banks have curtailed lending and are taking other steps to slow economic growth. That is one reason stocks are selling off today.

1:51pm and entering the final hour of trading the major measures are on their lows of the day with the NAZZ down 35 points and under 2000. We purchased RFMD at $7.77 which is off 10% today after announcing earnings.

The hedge funds and institutions are trading this market like there is no tomorrow. Every time we decide to become investors the big boys and girls make us rue the day. Today’s market action which is the opposite of what we expected reminds of the day when our partner Don walked in the office saying, “it’s too late to sell and probably too early to buy.”

3:02pm and Dick Hoey of Dreyfus made a good point on CNBC just now that some big players are caught on the wrong side of some inflation reflation deflation trades as commodity prices drop on the China slow down news. Some folks are losing big dollars today and part of the selling in the markets today is those folks raising cash.

For the day the DJIA dropped 135 points to end at 10342. The S&P 500 lost 16 points to end at 1122 and the NAZZ was off 43 points to 1990.

And tomorrow is another day.

28 April 2004 - Morning Comment

7:11am and the U.S. forces seem to be getting a handle on the immediate twin problems in Iraq . A slow down in daily hostilities over the next few days coupled with a good GDP number may instigate the resumption of the rally. Tech stocks have been the dogs of recent days and we think they need to assume leadership if a sustainable move higher is to occur.

Overnight the foreign markets in Asia and now Europe were negative and U.S. futures are also lower. If the pattern of the last few weeks holds we expect and up day today after initial weakness.

So let the games begin.

27 April 2004 - Evening Comment

8:06am and Iraq ’s current leaders have approved a new flag for the country. The road to peace is now secure.

8:32am and Bloomberg is reporting that OPEC is thinking of increasing its target range for oil prices by 30% from the $22 to $28 now in effect. According to Bloomberg OPEC feels the consuming countries are rich enough pay more. One other consideration may be that Saudis are paid in dollars but must gamble with euros when they go to Europe . And with the erosion of the dollar versus the euro over the past few years their gambling cost on the dollar/euro exchange are much more expensive.

8:40am and stocks are opening mixed.

9:14am and stocks are moving higher with the DJIA up 70 points. Breadth is 8/5 positive and volume is brisk. We are watching.

Existing home sales rose in March to 6.5 million from 6.1 million. Consumer Confidence rose to 92.8 from 88.6. Both those numbers were the reason for the markets recent pop.

12:28pm and we are not having good luck with the phone company this week. Our phones were out for a couple of hours this morning and that thru us off our work. Whatever. We repurchased HPQ in accounts at $21.50 and we bought Lucent in our larger and trading accounts at $3.72. If the markets are going to break out on the upside we expect techs to lead the way and so we are going with those techs we have traded before.

1:34pm and we saw some new numbers on Google suggesting revenues of about $500 million and earnings of about $125 million. Thus if the market cap works out to be $25 billion the company will be priced at 40 times revenues and 200 times earnings. We didn’t even know they had ads on the website and we use it all the time. By the way Microsoft word spell check doesn’t know Google.

The S&P 500 is at 1142 up 6 points today and technically if it can penetrate 1150 without a pullback in the next few days a bullish breakout may occur.

1:54pm and entering the final hour of trading the major measures have surrendered a good portion of their gains. Breadth is flat and volume is light. Our stocks are in a funk and about the only stocks showing strength across the board are the oil and oil related stocks. They are up on OPEC news of raising the price targets 30%.

European stocks closed basically unchanged for the day.

2:38pm and with Lucent off another 10 cents we bought more shares in most accounts at $3.60. Treasuries have rallied and the sell off in stocks is being attributed to explosions in the embassy section of Damascus Syria and heavy fighting reported in Iraq . The NAZZ is now negative and the DJIA is up 20 points. Trading remains light.

3:02pm and the DJIA closed up 34 points at 10478. The S&P 500 gained 3 points to end at 1138 and the NAZZ was off 4 points to 2032

And tomorrow is another day.

27 April 2004 - Morning Comment

Since we gave up walking in the morning we are returning to our morning comment in which our comments seem to make more current in a time frame

7:11am and yesterday was a non event as far as market trends go. Companies continue to report better that expected earnings but with the bar set low those earnings surprises seem to have been factored into market prices.

Overnight Japan dropped 1% while Hong Kong had a dead cat bounce. Europe is slightly lower and seem to be looking to the U.S. markets for guidance. The dollar is continuing its rally against the euro and the yen that began last week and oil is over $37 per barrel.

U.S. futures are also slightly lower.

Stocks seem to be caught in a trading range and the sideways movement is going to eventually result in a break out one way or the other. We are continuing our avoidance of any large commitment to stocks and see no reason to buy the QQQ or SPY here since we think the odds of going down are the same as the odds of going up.

There is no real catalyst in the market and with Bush/Kerry even in the polls and the Iraq fiasco showing no signs of improvement or ending there is no catalyst. We presume we may continue trendless until the May employment report on Friday May 7.

For today we expect down early and then boring.

So let the games begin.


And also a political joke for the cognoscenti:

Once upon a time, long, long ago there was a Presidential election that was too close to call. Neither the Republican presidential candidate nor the Democratic presidential candidate had enough votes to win the election. Therefore, it was decided that there should be an ice fishing contest between the two candidates to determine the final winner.

There was much talk about ballot recounting, court challenges, etc., but a week-long ice fishing competition seemed the (manly) way to settle things. They decided the candidate who catches the most fish at the end of the week wins. After a lot of back and forth discussion, it was decided that the contest would take place on a remote and cold lake in Maine . There were to be no observers present, and both men were to be sent out separately on this remote lake and return daily with their catch for counting and verification.

At the end of the first day, Kerry returns to the starting line and he has 10 fish. Soon, W. returns and has zero fish. Well, everyone assumes he is just having another bad day or something and hopefully, he will catch up the next day. At the end of the 2nd day Kerry comes in with 20 fish and G.W.comes in again with none.

That evening, Dick Cheney gets together secretly with G.W. and says, "I think Kerry is a lowlife cheatin' son-of-a-gun. I want you to go out tomorrow and don't even bother with fishing. Just spy on him and see if he is cheating in any way.

The next night (after Kerry comes back with 50 fish), Cheney says to Bush,"Well, what about it, is Kerry cheatin'?"

Bush replies. . . "He sure is, Dick, he's cutting holes in the ice."

26 April 2004 - Daily Comment

6:11am and Hong Kong was down over 200 points overnight as China ruled out direct elections. Japan was up slightly and Europe is also up across the board. U.S. futures are mixed

Goggle is filing to go public. Talk is that the company will have a market cap of over $25 billion, because it is profitable. We don’t know what profitable is but we would guess it is somewhere on the order of $25 million per year. That would be 1000 times earnings. if the earnings are $250 million it is a steal at only 100 times earnings.

9: 02am and new home sales were 1,228,000 versus and expected 1,620,000. Last month was adjusted downward.

Stocks are mixed and Treasuries are higher in price lower in yield. Breadth is slightly negative and the NAZZ is down while the DJIA is up. It is a lazy Monday morning.

Biotech are the stock group that is up on the day.

We are picking up more Cabot Micro for accounts.

11:57am and Breath is negative on the NYSE and positive on the NAZZ. New lows exceed new highs on the NYSE 122 to 110 while on the NAZZ new highs exceed new lows 112 to 10. Yet the DJIA is fractionally higher and the NAZZ is off 3 points. Oil and drillers are higher while chip stocks are lower. The market needs the NAZZ to lead it higher.

1:23pm and breadth is now negative on the NAZZ and remains negative on the NYSE. All the major measures are lower. There is little market moving news and the is little movement in the markets.

2:17pm and entering the final hour of trading the major measures are on their lows. There is not a lot of action in the markets. We have been having trouble with our computer hook-up and so we have been out of commission for much of the day. Hopefully it is now fixed.

We bought the CCMP in many accounts at $32.60.

3:02pm and the DJIA closed down 30 points at 10443. The S&P 500 lost 6 points to end at 1135 and the NAZZ gave up 15 points to finish at 2035.

And tomorrow is another day.

Political comment follows:


from www.patriotboy.blogspot.com we learned today the secret of President Bush’s successful policies:

The man behind the curtain

I've been absolutely amazed by Our Leader's long string of policy successes:

• His war on terror is going great--Our Leader has Osama just where he wants him.
• The situation in Iraq is a testament to the thoroughness of his post-war planning.
• He is on track to break an employment record previously set by another great conservative president, Herbert Hoover.
• His Secretary of State, Energy, and Reselection, Prince Bandar, promises lower gas prices this fall.
• His Clear Skies initiative allows us to see the air we breath and his Healthy forests Initiative will finally gives us a clear view of the forests once he removes all of the trees.
• His fiscal policy is bound to result in inflation--that means a boost in the dollar cost of American produced goods.
• His education policies are teaching schools important economic lessons and giving more children than ever the opportunity to pursue GEDs through independent study.

The secret to this success is revealed in the Japanese newspaper, The Asahi Shimbun, where Toru Takanarita writes, "... [Dan] Quayle is believed to wield influence over the current administration."

Of course that's it. Quayle is influencing Our Leader's policies. His fingerprints are all over them. I can't believe that I hadn't noticed how Quaylesque this Administration is until now.

23 April 2004 - Daily Comment

7:11am and Japan and Hong Kong were up strongly overnight. Europe is following course and U.S. stock futures are also higher. The major measures may make their assault on the resistance levels of 1160 on the S&P 500 and 2100 on the NAZZ in the next few days.

The bulls seem to have the bears on the run and today will be a “tell” for that thought. We are mainly and happily on the sidelines because it is our belief that the upside earnings surprises versus analysts estimates are more a function of analysts underestimating than the economy outperforming. A full two thirds of last month’s employment gain of 300,000 plus was part time workers. That figure may make traders feel good but we doubt that part time employment with lousy pay with no benefits is the long term solution to the lack of good paying jobs.

Of course if stocks continue higher we may have to join the crowd but for now we are content with our Missouri heritage and show us attitude.

7:15am and we are pleased to announce that our son-in-law who is also the father of the prince and princess of Shalom Farm has been appointed head men’s basketball coach of Northern Kentucky University. NKU is a NCAA Division II school in the process of moving up to Division I. You can read all about his new job at two sites: http://www.enquirer.com/editions/2004/04/23/spt_nkumetro23.html and http://www.enquirer.com/editions/2004/04/23/spt_nkubezold-0423.html

7:32am and durable goods rose 3.8% in February adjusted from the first reported up 2.8%. And durable goods for March were up 3.4%

7:35am and in answer to a clients question about using the word gambling rather than investing in relation to our purchases last week we wrote the following:

The whole market is a gamble and has been for the past eight years. 50% of the trading on the NYSE on a daily basis is by hedge funds and others doing program trading. Program trading is not investing; it is either outright gambling on the direction of stocks over a short period of time or an attempt at arbitrage. But the arbitrage is usually against a less than perfect alternative and so the degree of risk is commensurate with the risk profile of the hedge fund.

7:59am and Treasuries are lower in price higher in yield as stock futures move higher on the durable goods number.

8:35am and stocks are opening lower which is profit taking from yesterday. MSFT had positive numbers last night and is up over a $1 per share this morning. It is necessary for the bulls to put in a strong performance today if the rally is to continue. That’s because the bulk of the major earnings reports have been released. Working against a strong finish is the always present undercurrent of two days of not being able to trade in a world filled with terrorist acts.

Sprint PCS is now Sprint again and trading under the FON symbol.

9:39am and stocks are stable with Treasuries still lower. The markets have come off their pre opening highs and the battle is between traders who want to be flat for the weekend and some folks who think the earnings and tanking bonds signal good times ahead. Because of the weekend the traders may carry the day.

12:14pm and breadth is 2/1 negative on the NYSE and 3/2 negative on the NAZZ. Volume is light and the major measures are plus or minus small fractions. We are adding more CCMP to aggressive accounts today since volume has slowed and selling pressure seems to have lessened.

From the action so far today we don’t look for a big rally into the close because the weekend looms and traders are wary.

3:02pm and the major measures closed slightly higher but breadth remained 2/1 negative on the NYSE and slightly negative on the NAZZ. At the bell the DJIA was up 12 points at 1172, the S&P 500 was up 2 point at 1141 and the NAZZ gained 17 points to close at 2050.

And tomorrow is another day.

22 April 2004 - Daily Comment

7:11am and Asia was mixed overnight as is Europe this morning and U.S stock futures also. Earnings are being announced in a torrent and most seem better than last year.

One exception is AT&T which reported a 14% drop in revenues and lower earnings that were above consensus. We presume the stock will get hit today and if so we may add more. Our outlook is for consolidation to continue in the telephone industry and AT&T’s free cash flow of about $2 billion per year with a market cap of $8 billion makes it attractive. That doesn’t mean any company will buy it but on a value basis the stock is interesting. It has ranged between $17 and $22 several times over the past year and we own for that movement. There will come a point when the erosion of revenues will cease.

7:30am and PPI was up 0.5% , and 0.1% ex food and energies and all the other essentials necessary for living daily, and first time claims for unemployment insurance came in at 354,000 which was above estimates and down 6,000 from last week.

8:37am and Cabot Micro missed its number by 7 cents and the stock is down $4 per share. We are watching.

8:53am and stocks are higher by a bit after opening lower.

9:44pm and breadth is positive with stocks maintaining their small gains. We are bidding for small amounts of CCMP under $33 per share which is over $4 lower than yesterday’s close. New highs and new lows are equal on the NYSE and there is no catalyst to move stocks.

12:43pm and we had to visit the doctor for a check up and when we returned the DJIA was up 160 points and the NAZZ was up 40 points. We’ve been checking websites and can’t find any reason except the usual suspects, buy programs and a short squeeze. Breadth is strong and volume ahs increased but isn’t super.

2:09pm and entering the final hour the major measures remain substantially higher.

3:02pm and the bulls roared back today with the DJIA closing up 14 points at 10461. The S&P 500 gained 17 points to end at 1141 and the NAZZ rose 37 points to finish at 2032.

And tomorrow is another day

21 April 2004 - Daily Comment

7:11am and Motorola blew the numbers away last night as did Ford. As a result NAZZ futures are higher and even the DJIA an S&P are in positive territory. Europe is lower and Asia was also down overnight.

With the sharp sell off into the close there should be some carryover this morning even with the good MOT numbers. Motorola must have got the good performance by taking sales from Nokia. Cell phones are like the trend setters of retail fashion; they either hit it big or flop.

The bombing in Basra overnight, a city nobody knew a year ago or will know five years from now, coupled with a car bombing in Riyadh, Saudi Arabia is interjecting some reality into the marketplace.

Mother Merrill created a Nanotechnology Index Exchange Traded Fund (ETF) to begin trading a week ago last Friday and has already removed six of the twenty-five stocks that comprised it. Five were removed because they really weren’t nanotechnology plays among which was Three Five Systems which we owned shortly last week. Another was Cabot Microelectronics which we have been trading. It seems that the great minds at Merrill meant to include Cabot Corp but were so lackadaisical that they got the symbol wrong and included Cabot Micro. Can anyone say lawsuit soon to be filed?

Our guess is that is the reason for the sell off in CCMP is that folks were playing the loading up of the Index and now the disgorgement has created selling pressure. Given that CCMP announces earnings tomorrow and that the chip sector which they serve has been under pressure we now understand the drop. We may take a gamble on the stock today for more accounts in small amounts.

Greenspan hinted at higher interest rates and he testifies before Congress again today. With that in mind, Treasuries are weak.

9:06am and the major measures opened lower. Breadth is also negative but the strength in Ford and Motorola looks to be overcoming the selling in many stocks. Because both Ford and GM have had blow out numbers the auto sector is helping the cyclicals and the MOT news is good for areas of technology.

10:07am and with the markets negative action in the face of the Motorola blow out and Ford’s good numbers we decided to sell CCMP for a scratch profit rather than buying more. We will now wait for the markets and earnings news tomorrow night to decide on when to reestablish a position.

12:27pm and the markets sold of on Greeenspan’s testimony and then recovered to unchanged when he finished. The DJIA is now lower with the NAZZ about 9 points higher. The action today is like summer volume.

3:02pm and lots of stuff happened this afternoon not related to business. Not much happened in the stock markets with the DJIA closing up 3 points at 10317. The S&P 500 rose 6 points to 1124 and the NAZZ gained 17 points to finish at 1995.

And tomorrow is another day.

20 April 2004 - Daily Comment

7:11am and the markets marked time yesterday in light trading. Japan was higher overnight and Hong Kong lower while Europe is showing a bit of strength this morning.

Yesterday the NAZZ led the way rising over 1% and in early trading today stock futures are higher.

MCI, the former WorldCom, which was the former MCI, has emerged from bankruptcy. Shareholders lost everything and now the debt holders control the company along with the new company officers who did well financially during the reorganization. MCI has much less debt and now can start acquiring folks again.

Greenspan is testifying before the Senate Banking Committee today.

Pfizer reported a penny better per share earnings on slightly lower revenues.

CFSB has lowered the cable industry to underweight because of increased competition.

On that score, our local telephone coop is offering television over telephone lines and we’ll be getting it within the next year.

GM reported earnings of $2.25 for the quarter and a large jump in revenues.

8:06am and Treasuries are rising in yield moving slightly lower in price ahead of Greenspan’s testimony this morning.

9:12am and stocks have opened higher with tech stocks leading the way. If the NAZZ can get through 2080, it is now at 2030 therre could be a break out rally to the upside. That same number on the S&P 500 is 1163, with it at 1137.

9:55am and breadth is positive on both the NYSE and the NAZZ. But stocks are retreating from their highs of the day as supposedly good earnings news is being met by selling.

10:11am and banks have been announcing excellent earnings and selling off on the news. That is giving us some pause and so we are going to sell our RFMD and CCMP trades for scratch profits. Their earnings are coming within the next week and we have decided discretion is the better part of valor with these two both of which are on their lows for the last six months. The momentum players obviously aren’t interested in these stocks and the value or trouble buying traders seem to be on the sideline.

We are going to hold CBB and TWX and T through this week’s earnings because they are a different type of stock. While the share price of these three might drop on earnings news, traders are not expecting good news from them while they are expecting good news from RFMD and CCMP. Thus we think the take away will be less of a risk.

12:50pm and stocks have rallied a bit but trading is light and conviction is too.

Ciena announced some restructuring moves and a plant closing with the loss of 425 jobs and the stocks is rallying. We like the rally but don’t like the job loss.

Greenspan appears before the Senate Banking committee at 1:30pm and we may get some action then.

1:57pm and Greenspan thinks that the banks are ready for an interest rate rise. We wonder whether the folks who bought adjustable rate mortgages last month on Greenspan’s advice are ready for an interest rate rise.

Entering the final hour the DJIA and the other major measures are now down. Breadth is negative and down volume exceeds up volume by a 2/1 margin on the NQAZZ and 5/3 on the NYSE.

TASR which makes a stun gun and has been the spec traders delight for the last few moths is off $30 per share today to $80.

3:02pm and we got cute and bought the CCMP back $1 lower from where we sold it. Unfortunately the stock continued lower.

At the bell the DJIA was down 125 points at 10312. The S&P 500 least 118 points to end at 1118 and the NAZZ dropped 40 points to finish at 1980.

And tomorrow is another day.

19 April 2004 - Daily Comment

7:11am and not having been blown away by fifty mile an hour winds through the night we are at our desks and ready for the week. This is a big earnings announcement week and 3M started the day with better earnings and sales.

The CEO of McDonalds Jim Cantalupo died of a heart attack this morning at the age of 60. He had turned the company around. We will forgo the myriad fat content jokes that we are sure are making their way across the internet as we write.

Asia was lower overnight and so are Europe and U.S. futures. The news from Iraq over the weekend was dismal. We were thinking of the NRA after seeing a picture of them giving Cheney a long rifle after he spoke there and how happy the NRA must be that everyone in Iraq has an assault weapon and so are safe in their homes.

9:08am and stocks have opened lower following the lead of Asia and Europe . Good earnings don’t seem to be a catalyst that is working to stem the bearish tide. But it is early and it is Monday so there is along week ahead.

10:59am and the major measures remain lower except the NAZZ which is higher. Breadth is negative on both the NYSE and NAZZ. Volume is holiday light or normal for the last few months.

We bought AT&T at $18.60 for a trade in larger accounts.

12: 01pm and there is no movement. The DJIA is down 30 points and the NAZZ is also up 12 points. The NAZZ is taking the lead today and we think that is a good sign.

1:10pm and we have purchased a few stocks ahead of earnings. We have done that because they have reached good trading buy points. And we have the extra buying power to add to positions if there is a sell off on any untoward earnings news. With TWX, and T we are comfortable buying in many accounts and we only bought the CCMP and RFMD in more aggressive accounts. If there is a sell off in any of these issues we will add to our smaller and/or less aggressive accounts. We have a large holding in CIEN but their earnings don’t come until May 22 and we hope a tech rally before then will help us to reduce that position. CIEN is also only a few percentage points above its 12 month low.

2:02pm and we just saw that the military are asking the Fallujans to give up their weapons. We wonder what the NRA thinks of that.

3:02pm and the DJIA closed 14 points lower at 10437. The S&P 500 gained 2 points to end at 1135 and the NAZZ rose 25 points to 2020.

The purpose of the journey is the journey itself. (Todd Harrison)

And tomorrow is another day.

16 April 2004 - Daily Comment

7:11am and the DJIA and S&P futures are higher on the back of the mini rally into the close yesterday. NAZZ futures are lower. Today is expiration day and so there may be the ebb and flow of prices all day. Of course that has been happening for the past three months with little progress or retreat.

Economic data seems to support the theory that the economy is growing. Corporate profits are rising albeit from a lower base and as the result of layoffs, downsizing and outsourcing. One time tax cuts have stimulated demand for retail and household items as tax cuts should and low interest rates have convinced many that they can afford to own rather than rent.

The Fed Chairman has encouraged folks to pay for their buying by borrowing short to take advantage of interest rates. That is a sure recipe for disaster down the road.

Back in the early 1980s when short rates were 20% and long rates were 14%, very few –present company excluded- were willing to predict 6% short term rates. We now are at 1% short term rates. Rates can’t go lower and the only question is how far higher and how fast do rates go higher.

For the present the markets seem range bound and the day to day trend seems to want to take the markets back to 1900 on the NAZZ and 10000 on the DJIA. At least that is our view.

7:15am and Japan closed up a smidgen while Hong Kong was down the same. Europe is mildly higher.

Nokia is again down on reduced second quarter earnings forecast. It had already dropped because of a first quarter warning a month ago.

IBM earnings were in line last night but service revenues disappointed and the shares are trading down 2 points from the close in early morning action.

7:31am and March housing starts were up 6.4%. And February housing starts were revised from down 4% to down 2.6%. Building permits rose 1.9% in March.

8:50am and stocks opened mixed with all the major measures now in minus territory. The NAZZ is heading lower by 15 points and breadth is 3/2negative on the NAZZ and 3/2 positive on the NYSE.

10:39am and RFMD sold off on the Nokia news since they are a major supplier to NOK. We repurchased the shares we sold a week ago. The purchase price was $8.08. The CEO of RFMD said last week that the company would meet sales goals this quarter and that sales would rise next quarter. That was after Nokia’s first warning but not after the warning last night. RFMD reports on April 27. Hopefully we will be out by then.

We also initiated a very small position in CCMP at $37.55 in very large accounts. CCMP reports on April 22 and we don’t want to be too invested in the shares since they have been dropping all week but they are on a four year low with growing earings. We will trade out on a pop but are willing to add to the position if we don’t get out before earnings.

12:29pm and the DJIA is up 40 points while the NAZZ has improved but remains in negative territory. We purchased more Ciena at $4.85 in many accounts. We are looking for a rally in tech next week and we think CIEN will participate. They do not announce earnings until May 22 so there is some time for this trade to work and still be out of part of the holding by announcement day.

Today’s market sees traders rotating back into Finance and Retail which were down yesterday and out of Tech. We would rather trade Tech.

1:33pm and breadth has improved to positive on the NAZZ and the major measures are all positive with the DJIA on its high at up 56 points. Volume continues light for an expiration day. We’ll see what the next hour brings.

2:49pm and Europe closed on the plus side as did Treasuries.

3:02pm and the DJIA gained 50 points to finish at 10450. The S&P 500 was up 6 points at 1135 and the NAZZ lost 7 points to end at 1997.

The purpose of the journey is the journey itself. (Todd Harrison)

And tomorrow is another day.

15 April 2004 - Daily Comment

7:30am and jobless claims rose 30,000 to 360,000 which is the highest in a few weeks. Continuing claims dropped to under 3 million as folks ran out of benefits.

Overnight Japan dropped 297 points and Hong Kong lost 1.5%. Europe is slightly higher. Treasuries have rallied a bit on the jobless numbers. U.S. stock futures are ignoring the jobless rise as an aberration and remain in positive territory.

Consumer prices rising, more jobless claims are the makings of “stagflation.” From www.dictionary.com :
stag·fla·tion    Pronunciation Key  (stg-flshn)
Sluggish economic growth coupled with a high rate of inflation and unemployment.

9:12am and the DJIA is up 25 points and the NAZZ is off 2 points in light trading. As opposed to yesterday, breadth on the NYSE is 2/1 positive and is also positive on the NAZZ. New 12 month highs are about equal to the lows in early trading.

Earnings news today has been mostly positive and there is a $3 billion takeover deal in the oil patch.

10:42am and the markets continue to float along with no trend. Almost all bond indexes are up 1% to down 1% for the first four months of the year.

11:02am and the Philadelphia Fed Manufacturing Index was 32 versus and expected 26 and so the DJIA has rallied from down to up 25. We view this as a number to trade on rather than a number with meaning.

NAZZ breadth is 2/1 negative with the NYSE flat. The NAZZ is down 16 points and we still lean to the NAZZ as the market indicator of direction.

12:17pm and drug stocks are moving higher on an analyst upgrade and an article that suggests that imported stocks will improve drug company earnings because they will sell more at lower prices resulting in higher revenues. We are taking with a grain of salt.

1:31pm and the major measures are back to the downside with the NAZZ breaking below 2000 at 1995. The directional movement of stocks in the lead up hour to the final hour is often the opposite of the final hour. So we will have to see if the bulls can find the money for their convictions to reverse the current sell off.

2:04pm and entering the final hour stocks are trying to move higher. Just a few minutes ago Treasuries were higher in price lower in yield and now the reverse is true. At their close the ten-year was at a 4.40% yield and the thirty-year was at a 5.20% yield. Volume is light and there is no conviction. The big DJIA up stocks are Merck and J&J on the Boston University increased revenue study and analyst upgrade. We think those gains will be short lived.

Banks are weak while oils are strong.

3:02pm and the DJIA closed up 15 points at 10394. The S&P 500 rose 1 point to end at 1128 and the NAZZ dropped 22 points to end at 2002.

The purpose of the journey is the journey itself. (Todd Harrison)

And tomorrow is another day.

14 April 2004 - Daily Comment

7:11am and Europe is lower as was Asia . U.S. futures are a bit lower this morning but we think they markets may rally after an initial sell off at the opening.

Bush’s speech before the questions sounded good even if it was filled with misstatements. His answer to the puffball questions were in another world but his persona is so ingrained in the public psyche that even that part of the reality show probably was a positive for his poll numbers, to which he never pays attention.

“Have faith in your dreams and someday your rainbow will come smiling through. No matter how your heart is grieving if you keep on believing then the dream that you wish will come true.”


That quote was suggested by Kevin Tuttle on www.minyanville.com and it does capture the aura of last night’s press conference campaign speech.

7:12am and Intel had good sales and earnings last night but warned going forward and is trading slightly lower this morning.

7:30am and the Consumer Price Index (CPI) in March was up 0.5%, ex food and energy up 0.4%. Inflation is coming. The trade deficit narrowed to $40 billion. Treasuries are lower in price and higher in yield.

8:52am and stocks opened gap down on the NAZZ today. Coupled with Monday’s gap up opening there is bearish technical setup if NAZZ stocks don’t move to the plus side today. Breadth is decidedly negative.

Utility stocks are under pressure with the rise in interest rates. But the utilities do have the nice tax advantage so that eventually if they keep moving lower they will become attractive income vehicles. We think Kerry might want to cap the amount of dividend money that is taxed at 15%, but that cap will be high enough for most of our clients to benefit. And Kerry has to win and the Congress has to change and we think those odds are pretty long.

9:16am and stocks have moved to the upside so the technical doom has been avoided. Treasuries remain lower in price and higher in yield. Breadth remains 3/1 negative on the NYSE, 3/2 negative on the NAZZ.

12:03pm and the major measures are higher but breadth remains negative. Also since we have passed the March lows of last year, new 12 month lows are expanding and exceed new 12 month highs by a 200 lows versus 100 highs.

We reestablished our trading position in TWX at $17.76 this morning.

1:02pm and gold is close to breaking through $400 to the downside. It is off $8 per ounce today.

2:01pm and entering the final hour the major measures are lower and volume is light. Breadth has not improved and is now 4/1 negative on the NYSE and 2/1 negative n the NAZZ. If the bulls are going to make their play now is the time.

With oil prices lower and oil inventories higher than expected we decided to trade out of the remaining RDC holdings for a scratch profit. Rowan announced disappointing earnings this morning and we actually expected the stock to open a couple of points lower so we are glad to walk away from this trade for now. The sale also helps keep our cash position stable with last night’s close.

The dollar remains strong against the yen and the euro with the dollar up over 3% since March 31 against the yen. That helps the Bank of Japan with their losses in Treasury Notes over the past two weeks. The dollar is up 7% versus the euro since year-end. Someone is losing big euros.

3:02pm and the DJIA closed down 2 points at 10378. The S&P 500 lost 2 points to end at 1125 and the NAZZ dropped 7 points to finish at 2025. We may be headed back to the lower end of the range.

And tomorrow is another day.

13 April 2004 - Daily Comment

7:11am and with Novellus' good news last night chip stocks are stronger. Merrill and Johnson & Johnson also beat expectations this morning and that has given a lift to the stocks markets. Now traders await Intel news tonight and the reviews of the new reality TV show "Bush in Prime Time Answers All Questions". There is no word yet whether Cheney will be at his side or in the Bat Cave. Actually Cheney is as far away as he can be visiting the Chinese.

Overnight Asia was up fractionally while Europe is stronger today with the DAX up over 1%. Goldman Sachs raised Q to neutral from avoid.

7:31 and retail sales were up 1.8%, ex autos up 1.7%. The dollar is strong and Treasuries are weak. The stock futures are moving higher. The retail sales numbers were a full 1% higher than expected.

Tax refunds are helping no doubt. The S&P 500 is approaching 1160 which is the 50% retracement of the sell off and we have tested that 1160 number in January February and March, so why not April.

7:51 and Purdue Pharma, the makers of OxyContin is cutting 300 jobs. Now that Rush has cut down his purchases demand is lower.

8:56am and stocks opened strongly out of the gate but profit taking is now setting in. The DJIA is up 8 points and the NAZZ is down 3 points. We are keying on the NAZZ because it has been the leader to the upside and downside since the rally began one year ago.

We are discounting the strong retail sales numbers and we think the strength in stocks is negated by the weakness in Treasuries. Breadth is mixed and volume is light.

11:47am and we had to take a few hours off to help an undersized heifer deliver a humongous calf. It was a bully which makes three for three so far this year. Doing the midwife thing reminds us of our early years in Wisconsin in the 1970s when we had a cow and goat dairy farm. We aren't as strong as we were then but mother and calf are doing well.

Upon our return we find the major measures down 1% and negative breadth on both the NYSE and NAZZ. Is good new becoming bad or is it IRAQ? We think Intel's earnings tonight and Bush's speech may help in deciding which.

2:25pm and in the final hour of trading the major measures show no sign of rallying. With the rise in interest rates and the strength of the dollar today there may be some large hedge funds that bet the other way or were borrowing yen or employing other esoteric strategies that are being forced to raise cash by selling stocks. Then again, this may just be the pullback that refreshes. And this is an expiration week for options and futures and that may be having an effect.

We didn't expect this sell off till later in the week and so we are as befuddled as the markets by the weakness. A stronger economy means higher interest rates and we would expect that most folks understand that. We have read some gurus opining that rising stock prices don't necessarily mean higher interest rates but we are of the old school that suggests that increased industrial activity means greater demand for money which leads to higher rates. That's Money & Banking 101.

3:02 pm and the DJIA closed down 135 points at 10380. The S&P 500 lost 15 points to end at 1130 and the NAZZ dropped 35 points to 2030. Treasuries closed on their lows in price highs in yield with the five-year at 3.40%, the ten-year at 4.34% and the thirty-year at 5.15%

And tomorrow is another day.

12 April 2004 - Daily Comment

7:11am and DuPont is firing 3500 folks to become more profitable. Overnight Asia was mixed with Japan higher by 1% and Hong Kong lower. Europe is closed for the Easter holiday.

The prince and princess left for home today and so the cats and dogs and horses and we are sad, but happy for their visit.

8:45am and stocks have opened higher and Treasuries lower. The outlook for good earnings reports is trumping the lousy news from Iraq . That is a Monday phenomenon in our book and we would expect a pattern of up early in the week with moderation or a pull back towards the week end. The S&P 500 is most probably going to move up to the 1160 resistance area and then test of bull sentiment again.

12:44pm and we have been busy so haven’t had time to post. We blew out the rest of our RSTO at $6.59. The stock has been moving higher on the news that insiders bought stock at $4.90 and we just don’t think the earnings or sales justify the kind of move the stock has had in the last month. Of course it probably shouldn’t have dropped to the level it did at the beginning of the year either. But all that it is spilled milk and we are now out of the holding for a lessened loss.

We also repurchased Qwest at $4.24. We have had luck trading the stock.

The DJIA is up 65 points as it has been most of the day and the NAZZ is up 10 points. Breadth is 2/1 positive and volume light. Treasuries remain under pressure.

2:05pm and entering the final hour the major measures remain about 0.5% higher. President Bush will hold a press conference tomorrow night to answer questions about Iraq .

This week a bunch of S&P companies announce earnings including Intel on Tuesday night and IBM, and Apple on Wednesday night.

We have seen opinions that Iraq is acting as a lid on the markets and we posited that theory last week.

The final hour today will give an indication of how much the bulls are in control.

2:33pm and volume on the NYSE is not yet 1 billion shares. That is slow.

3:02pm and the DJIA closed up 75 points at 10516. The S&P 500 gained 6 points to finish at 1145 and the NAZZ was up 12 points at 2065.

And tomorrow is another day.

8 April 2004 - Daily Comment

7:11am and stocks are going to open higher as Yahoo beat by 2 cents and is up 6 points in early trading as the Yahoo-bears are routed. Dell reported better revenues and GE was in line. Asia was mixed overnight and Europe is also mixed. Our guess is that the stock markets open strong and then do a fade while Condi testifies and then wimp into the close.

Events in Iraq are coming to the fore for a while and that is going to affect stocks and trump earnings.

7:30am and first time claims for unemployment were expected to be 340,000 and came in at 328,000. Stocks are higher and bonds are lower.

Rite Aid reported 9 cents versus 8 cents and revenue was higher than expected. Unfortunately the shares are not up $6 as with Yahoo but they are 10 cents per share higher.

8:02am and Condi is on every news channel.

9:51am and we have been watching the Rice kebob. Stocks opened higher but are having a hard time holding their gains. Breadth is positive but trading is holiday light which means a few of the big boys or girls can have fun this afternoon if they wish.

11:18am and we were just reading a guru’s pronouncement that Yahoo deserves to be up $7 per share today. The company now is priced at $39 billion and expects revenues this year of $2 billion. Earnings per share may reach 50 cents for the year which would place the stock at 100 times earnings. We guess we are too old to understand the “steal” the stock is at its current price.

During Rice’s testimony the markets gave back most of their early morning gains but they are now moving higher again.

2:16pm and stocks are now lower on terror reports and our surmise that traders are more likely to want to be short stock than long stock over the four day weekend.

3:02pm and the DJIA closed down 40 points at 10440. The S&P 500 lost 2 points to end at 1140 and the NAZZ gained 3 points on Yahoo’s jump to close at 2053.

We are closed tomorrow; the next post will be Monday evening. We will update the Model Portfolio tomorrow.

And Sunday is Easter.

7 April 2004 - Daily Comment

7:11am and word that 12 Marines were killed yesterday in Iraq brought the predictable:

''Our resolve is firm, our resolve is unshakeable and we will prevail,''

White House spokesman Scott McClellan said. Too bad he isn’t old enough to know how much those words sound like the Johnson White House. We support our troops 1000% per cent. They should be brought home. Let the Iraqis sort it out themselves.

Overnight Asia was mixed and Europe is mildly higher on a rebound from yesterday’s Nokia sell off. U.S. futures are mixed. Alcoa disappointed last night with earnings.

Our guess is that the next two days will be slower and slowest.

7:20am and we have raised a good deal of cash. With the NAZZ turning lower ahead of the DJIA we see a repeat of last month’s downturn. We don’t have the feeling that good earnings are going to be rewarded while the past two day’s action has indicated that bad news is bad news.

Wal-Mart lost in its attempt to use the ballot box to steamroll its will by a 60% to 40% vote against.

7:30am and the March Import Price Index was up 0.9% and the Export price Index was also up 0.9%. We have never heard of those numbers but the traders need some number on which to focus every day.

9:39am and stocks are lower in lethargic trading. Breadth is negative on both the NYSE and NAZZ and the markets are descending into their holiday torpor as are we.

9:55am and the DJIA is down 100 points with the NAZZ losing 20 points. The S&P 500 is also down 9 points. Volume is light.

10:59am and with the fighting occurring in Iraq we have our doubts that traders will want to be long this week-end.

11:22am and in reading about Iraq and Afghanistan we are struck by the fact that Bin Ladin attacked NYC and killed 3000 people and destroyed billions of dollars in property. His attack probably cost the U.S. economy hundreds of billions of dollars in lost spending and consumption. And now the U.S. has spent over 700 lives and 10000 wounded plus $300 billion dollars and is no closer to ending the terrorist action than it was on 9/11.

Kerry is as mistaken as Bush in saying that the U.S. can’t withdraw. Russia did. Britain Did. France did. We did in Viet Nam and the country is stronger now in the world than it was then. What’s wrong with admitting a mistake? We tell our kids that we learn by our mistakes. Some truths are more important than being elected or re-elected President.

1:27pm and after being down over 100 points the DJIA has rallied to down 70 points. The NAZZ has also rallied a bit to down 14 points. Breadth remains negative. Most of the news today is about the fighting in Iraq and the testimony tomorrow of Condi Rice. We think her testimony and vacations will lead to a slow day tomorrow.

European shares closed lower on the day.

We are not doing anything. We did reduce our holdings in CBB in the Model portfolio and several other accounts but added in a few accounts and in our own personal trading accounts we are keeping it as an overweight. We reduced it in the Model because we wanted the CBB position more in line with most accounts and the other holdings in the Model.

3:02pm and the DJIA closed down 90 points at 10480. The S&P 500 dropped 8 points to 1140 and the NAZZ gave up 10 points to end at 2050.

And tomorrow is another day.

6 April 2004 - Daily Comment

7:11am and Asia was higher overnight with Japan and Hong Kong both up over 1%. Europe is lower today and U.S. futures are also mildly lower.

Nokia just announced that it sees first quarter sales below forecasts and so Europe is lower still and U.S. futures are giving ground.

8:55am and stocks opened lower on the Nokia news. The NAZZ is off about 1% while the DJIA is down 40 points. Breadth is 2/1 negative but volume is very light as it will be all week.

We are in a take some money off the table frame of mind and so we sold the TWX at 17.30 for a 30 cents gain and the SGP at $16.80 for a scratch loss.

We are piecing out larger amounts of RSTO at $6 plus per share, the stocks has moved up 50% in value in two weeks and wile we like the stock for the long term our discipline requires us to continue trying to sell while the buyers are around. Our only clue as to why the shares have risen is that the CEO bought 50,000 shares a week ago at $4.90. We do think the company is turning around. But we are traders and we want to take some off the table right now if possible. The market is so thin that we can’t sell 10,000 shares at 5 cents below the bid and that tells us that it is probably individual traders who are playing the game.

Spiegel is going to auction off its Eddie Bauer chain and so ends a company with a long history in Chicago . We almost went to work for them back in the 1960s.

9:19am and RFMD is off 7% today on the Nokia news which is why we sold the shares last Friday. RFMD is a supplier to NOK and so we didn’t want to own the stock ahead of NOK’s announcement.

12:17pm and the NAZZ remains 1% lower while the DJIA is off 30 points. This is sort of a paint drying week and so we don’t expect much unless there is another earnings disappointment like Nokia.

12:45pm and the NAZZ led the rally the last two weeks and the fact that the NAZZ has turned lower ahead of the DJIA is the same thing that happened one month ago.

1:28pm and Europe couldn’t overcome the Nokia news and most major stocks markets closed lower. Treasuries are a bit higher in price and lower in yield today although the thirty-year remains over 5%.

2:12pm and Reuters is reporting that four insiders bought 247,000 shares of RSTO. That obviously is why the stocks has moved up. We continue to view the move as an opportunity to lighten. In our large aggressive accounts we sold shares at $6. Now we own about as much as they do.

TASR is going to split 2/1 and this stock with little sales and no earnings is now up 15 points and valued at over $1 billion. The other hot trading stock MAMA is going to have its trading investigated by the SEC. There is a lot of speculative fervor in low priced issues. New investors and burned investors are discovering the wonders of one way markets. Oops, now TASR is only up 10 points.

3:02pm and the DJIA closed up 8 points at 10566. The S&P 500 lost 2 points to end at 1147 and the NAZZ was down 21 points at 2057.

And tomorrow is another day.

5 April 2004 - Daily Comment

7:11am and today is the first of a four day week with Passover underway and the stock markets closed on Friday. Japan was up over 1% overnight, oil is at $34 per barrel, and Europe is mixed with London lower and Germany gaining. American futures are slightly lower.

Friday’s action was good for the bulls and there have been very few pre announcements. Earning begin in earnest this week and we’ll have to wait and see how stocks react. Alcoa, General Electric and Yahoo all come this week with quarterly reports.

We don’t believe the employment numbers but the markets did and they are more powerful than we. We raised some cash on Friday and are not averse to trying other names if they strike our fancy.

The week end in Iraq was sad with fourteen Americans killed and a bunch of Iraqis also but traders don’t seem to be concentrating on that area of the world unless they have folks or friends there. That is too bad.

7:51am and the WSJ has a story about Wal-Mart trying to build a mega-store in Englewood California and the opposition to that store. We have never liked the Wal-Mart way but some things are inevitable. What peaked our interest was that the CBS National Evening News had a 3 minute story on the controversy last night. And the newscast was closed by a paid commercial by Wal-Mart which said that WMT sponsored that news show. There was no disclaimer during the story which was positive towards Wal-Mart.

10:11am and stocks are higher with breadth negative on the NYSE and positive on the NAZZ. Overall volume is moderated. We are buying Rite Aid at $5.58. RAD is the drug store company that we have owned off and on over the years. The Eckerd Drug Store sale by J C Penney suggests that RAD is undervalued in relation to other Drug store stocks. RAD has done a good job reducing its debt which is still too high. It is priced at 25% of sales.

12:06pm and breadth is negative with volume holiday light. We sold our BMY holdings for a 50cents per share profit. Basically we wanted to get back to just one drug stock exposure with SGP.

1:20pm and on the CBS news program last night they also mentioned that 800,000 credit card transactions had been double or triple billed on last Wednesday. Interestingly the report didn’t mention that Wal-Mart was the store that billed incorrectly.

1:34pm and the thirty-year bond is now over 5%. Europe closed higher with Germany and France both advancing over 1%.

3:02pm and the DJIA gained 88 points to end at 10558. The S&P 500 rose 9 points to finish at 1150 and the NAZZ gained 22 points ending at 2080.

And tomorrow is another day.

2 April 2004 - Special Post

7:11am and Asia was higher overnight as is Europe . All in the U.S. depends on the employment report at 7:30am .

Microsoft is paying Sun Micro $1.6 billion to settle all outstanding issues. SUNW is going to take a charge and fire some more folks. Walgreen same store sales were up 12%.

7:30am and employment reports was up 308,000 versus 120,000 expected. January and February were also revised upward. As we said yesterday any number is possible with the Bush folks. Bonds are down 2 points in the ten-year and four points in the thirty-year. Stocks are up strongly.

By the way from yesterday’s www.lemleyletter.com post in case you missed it:

11:27am and major measures are in positive territory but off their best levels of the day. With the employment number coming tomorrow it is going to be hard for the markets to rally significantly. If the BLS can mess around with the PPI we have no doubt that the Labor Dept can adjust the heck out of the employment number. And Bush needs a good employment number for his campaign tomorrow and we think he is going to get it. The current estimate is 125,000 and we suggest it will be over 200,000. That is the cynic in us but we do know that numbers are being massaged and who is to know.

Well we should have an interesting day. We seriously believe that the employment number is a figment of the imagination of someone in the Labor Department. If folks are told to lie about Medicare numbers how much of a stretch is it to figure this number is malleable also.

7:48am and gold is off $7, the dollar has risen 1%, Europe is 1% higher and U.S. futures are also 1% higher. Bonds have retraced a bit of their losses but yesterday may have been the low for interest rates for the foreseeable future.

www.minyanville.com is reporting that the NAZZ and S&P futures spiked higher 2 minutes before the official release.

By the way the unemployment rate rose 0.1% to 5.7% on this news.

All the talking heads are pontificating that there is no way loyal civil servants would adjust numbers for political purposes. Do the names Paul O’Neill and Richard Clarke ring a bell?

9:07am and stocks opened higher with the DJIA up over 100 points. Stocks are currently giving back some of the gain but the day is early. Bonds have also rallied off their lows.

We sold CCMP at $42.65 for a nice one day profit of about 90 cents per share. We are selling some RSTO into strength to reduce the position. As we said before, their first quarter is always a bummer and it will be announced about the time markets are turning south and so we think the prudent action is to reduce. This stock has not been a barn burner for us, in fact it burned us but we are trying to workout of the holding.

We also sold the TFS we bought yesterday for a scratch profit because we weren’t able to establish a tradable position before the move up today.

11:06am and volume is really not that great. The major measures are higher but contained. The ten-year Treasury is down 2 points and the thirty-year Treasury is down 3 points. We sold the TLAB at $9.11 for 50 cents per share gain.

12:03pm and the major measures are near their highs. On the NYSE breadth is 2/1 positive and up volume over down volume is 2/1. On the NAZZ the up volume over down volume is 11/1 and the breadth is 3/1 positive. That NAZZ up/down volume figure is interesting. Overall trading volume is not heavy. Bonds continue at lower levels.

12:28pm and as is our wont we are selling stocks on the unusual news. We don’t think the volume signifies much more than short covering. And there are interest rate sensitive stocks that are being pummeled today. It is going to take a few days to sort out the news and we are always comfortable raising cash. We sold Ford at $13.61 for a 70 cents per share profit.

The KOZ got his mistrial. And as his lawyers spoke they were smiling. And why were they smiling? They were smiling because they get to go through another trial with thousands of more billable hours.

With $500 billion in Treasury bonds each, China and Japan are having a bad day.

And the voice of reason in Israel , Ariel Sharon, soon to be indicted, is on the tape saying Israel should kill Arafat. At least Clinton only tried to kill Osama when things were going badly for him.

12:59am and we sold RFMD at $8.72 for a 30 cents per share profit. We purchased it with TLAB as a trading vehicle. We also sold one half the position in RSTO at $5.20 which we tried to do several weeks ago before it dropped to $4 when earnings were announced.

1:54pm and heading into the last hour of trading stocks are coming in. Breadth is flat on the NYSE and we imagine investment committees all over the land are feverishly meeting trying to decide what the employment number means and what adjustments need to be made. It is normal when stocks are up big for a pullback to occur at this time of the day. The action in the last hour will be the tell for early next week

3:02pm and the prince and princess arrive today for Easter vacation. Hooray, Hooray!

At the bell the DJIA was up 95 points at 10465. The S&P 500 gained 9 points to 1141 and the NAZZ rose 40 point to end at 2055.

And tomorrow is another day.

2 April 2004 - Special Post

7:11am and Asia was higher overnight as is Europe . All in the U.S. depends on the employment report at 7:30am .

Microsoft is paying Sun Micro $1.6 billion to settle all outstanding issues. SUNW is going to take a charge and fire some more folks. Walgreen same store sales were up 12%.

7:30am and employment report showed job growth of 308,000 versus 120,000 expected. January and February were also revised upward. As we said yesterday any number is possible with the Bush folks. Bonds are down 2 points in the ten year and four points in the thirty year. Stocks are up strongly.

April Fool's Day 2004 - Daily Comment

7:31am and today is the perfect day for the revamped and denuded February PPI to be released showing a gain of 0.1% and ex food and energy 0.1%. Remember four classes of commodities have been removed from the PPI because the BLS can’t figure them out.

Jobless claims were down 3,000 to 329,000 and the four week average is unchanged.

Asia closed mixed with Japan and Hong Kong down and Europe is also mixed. U.S. futures are indicating a slightly lower opening. It wouldn’t be surprising for stocks to sell off the first few days of this month as a fooler and then begin to move higher. We maintain our belief that the markets are going higher before they go much lower.

Merrill has downgraded some retail stocks saying that credit card debt and comparisons are going to start having an effect on the stock prices.

8:19am and in the same spirit as the BLS removing Commodity prices from the PPI, Eastman Kodak, International Paper and AT&T will be removed from the DJIA and American International Group, Pfizer and Verizon will be added. Actually these changes aren’t that bad and probably won’t affect the average that much in the future; in fact the ones being removed would have a greater impact.

It is interesting that Eastman Kodak’s removal is a final nail in the coffin of Rochester New York , which was a great and prosperous American city in the 1960s as the home of Xerox and Eastman Kodak and Chemical and also Rochester Telephone. The buy and hold folks and institutions that kept only those three stocks are now paupers.

9:55am and after a down open stocks have now moved into plus territory with the NAZZ up 1%. Breadth is positive but volume remains light.

11:27am and breadth is 2/1 positive with up volume exceeding down volume 3/1. The major measures are in positive territory but off their best levels of the day. With the employment number coming tomorrow it is going to be hard for the markets to rally significantly. If the BLS can mess around with the PPI we have no doubt that the Labor Dept can adjust the heck out of the employment number. And Bush needs a good employment number for his campaign tomorrow and we think he is going to get it. The current estimate is 125,000 and we suggest it will be over 200,000. That is the cynic in us but we do know that numbers are being massaged and who is to know.

1:17pm and the paint is drying again today. Tomorrow will be the test of whether the low volume is temporary or whether the markets have taken on the manner of “waiting for Godot”. We have a feeling it will be the latter. The major measures remain higher.

We bought another round of CCMP at $41.20 for our large trading accounts and also sold the CHTR at $4.60 that we bought last week at $4.10. CHTR is an anchovy to us and we have been buying in 2000 share or more amounts so we are happy to realize a $1000 plus profit for accounts.

2:18pm and we have joined the crazies. Merrill has created a nanotechnology index which will be traded on the ASE. One of the 25 stocks in the index is Three Five Systems which we have followed for a number of years. The stocks is up in the last few days as some folks obviously knew the index was coming. Anyway, we are taking a flyer on TFS at $7 for some of our aggressive trading accounts. TFS basic business are LCD modules for handsets with Motorola accounting for over 70% of business. We will only be buying in our aggressive accounts.

3:02pm and the DJIA closed up 15 points at 10375. The S&P 500 was up 6 points at 1132 and the NAZZ gained 18 points to end at 2012.

And tomorrow is another day.

Annual offer to present clients of Lemley Yarling Management Co. Under Rule 204-3 of the SEC Advisors Act, we are pleased to offer to send to you our updated Form ADV, Part II for your perusal. If any present client would like a copy, please don't hesitate to write, e-mail, or call us.

The factual statements herein have been taken from sources we believe to be reliable but such statements are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.