Microsoft’s net income was up 16% but it missed consensus estimates
by a penny last night and gave a glum forecast and the share price is down 10%
in early morning trading. Whether that miss will affect the other techs or
remain company specific is the question for today.
UBS cut Aetna’s price target from $61 to $51 and maintained their buy rating. With a
purchase price for us of $37 we will happily take $51 in the next year.
There is now $9.4 trillion in
mutual funds. Measured against the $1.3 trillion in hedge funds, the amount of
buying power are about equal given the hedge funds ability to lever their
assets which they do all the time.
Remember the when a hedge fund
earns a 40% return and has been leveraged 10 to 1 that is like ordinary folks earning
a 4% return with no leverage and much less risk. The difference is that hedge
fund investors for some strange reason pay the folks who run hedge funds 20% of
the profits to take such risks. And the hedge funds only risk is that it won’t
earn its fee while the hedge fund investors’ risk is that if the hedge fund
guesses incorrectly the investor will lose a large chunk of change.
Overseas markets were lower
overnight and MSFT ahs cast a pall on the early morning trading. Oil is down more
pennies and gold is up a few dollars.
Advance GDP was 4.8% which was
expected. Stocks are higher. Treasuries are coming in on the long end.
After reading and listening to Bernanke’s testimony last night we decided
to invest cash we have been holding for bonds. We bought the two-year 4.875% Treasury note due 4/30/08
at a teeny weenie under par. This yield is 1% more than we are earning on cash
and a pick up of 30 bps from our February foray.
Our thinking is that if the Fed
stops after the May meeting we will have locked in a good two year return. If
at some point the Fed begins again to raise interest rates we have the option
of extending maturities to pick up the extra yield. And if there is an untoward
event these Treasuries will rally and we will be able to raise cash at a profit
to move into stocks.
We know we are taking a
conservative approach but we think such an approach is warranted.
Upon further review we would rather own MSFT at $24.25 down $3 than AET
at $38 and so we are switching our AET to MSFT and adding MSFT to other accounts
as well. AET has more bangs on the upside than MSFT over the short term but
also more risk on the downside. MSFT is having an earnings visibility problem
right now coupled with ‘going nowhere’ holder fatigue. We think now is a good
time to buy a bit. MSFT is back to where it sold in 1998. Since that time earnings
per share and sales per share have doubled, working capital and equity per
share has tripled. It is currently priced at the lowest P/E ratio (16X) since 1988
Based on yesterday’s action and
the close on the S&P 500 our guru sees a rally into the end of May. We are
not following his advice because we are chicken.
Chicago PMI for April was 57 versus 60.
Since the Fed began tightening in
June 2003 the thirty-year Treasury has lost 17% of its value and ten year has
lost 16% of its value. Since interest rates were only 3% at the time those
losses are over five year’s worth of interest payments. And holders still own a
The U.S. dollar is at an eight
Microsoft will trade over 500 million shares today. When we began
working in the business back in 1965 that was a good two months worth of
trading for the entire NYSE.
Gold ended $18 at $654 which is a 25 year high and Oil closed at $71.75 up 70 pennies as
the Friday close approaches.
Treasuries are closing lower in yield with the two-year at 4.86%
and the ten-year at 5.06%. The yield inversion of a month ago has now reverted
to a 20 basis point spread between the two and ten year.
Bank stocks are moving up today
as the yield curve steepens and rescues their loan portfolios. We think
investors are ignoring credit quality but that is what makes a market.
The DJIA closed down 15 points at 11368. The S&P 500 gained 1 point to 1310 and the NAZZ lost 23 points to
Breadth was positive all day.
Volume was brisk and new highs exceeded 525 while new lows are 150.
And the Casino is closed for week-end
cleaning. The Wheel of Fortune will be ready for spinning again on Monday.
27 April 2006 Daily Comment
How strange it is that many oil
companies are missing their consensus numbers and reporting earnings that are
better but less than expected. A refinery here, a tanker there, and all sorts
of nagging problems are preventing them from reporting record profits. Could
some mysterious malady be affecting the oil companies at a time record high
raised a key interest rate to dampen speculative lending and while Japan
and Hong Kong finished slightly higher ahead of the
Chinese move European bourses are trading lower by 1% or more. Gold is down $10
and oil is off 70 pennies. Treasuries are unchanged to a bit higher in yield.
The two-year traded at 5% in the early going. We are a bit greedier for yield
right now and so are maintaining our wait and hear Bernanke
today and see Advance GDP tomorrow mode.
Jobless claims were 315,000
versus and expected 305,000.
In Bernanke’s statement released
before as he begins testimony he mentions the word pause and on that news the
Treasury and stock market have rallied a bit. The boys and girls are antsy.
Here is a link to the full text of Bernanke’s testimony before the joint
session of The Congress:
After an hour of trading stocks
the major measures had moved higher on the Bernanke testimony rally but the
move fizzled and now at the DJIA
is again down. Breadth never did turn positive. Treasuries are maintaining
about half of their gains with the two-year at 4.93% after trading in a range
of 5% early this morning to 4.90% right after the testimony commenced.
The CEO of Intel, Paul Otellini, says he is going to resize and restructure
the company and forecasts high single digit growth in personal computer sales
for this year.
NASDAQ short interest is at a record high which is usually a
bullish sign. The theory is that trades who are short stock eventually have to
buy it back and that it is a source of future buying. With all the different
hedges and computer games that now exist we don’t know whether that theory
still is a reliable as in the good old
We decided to try and catch a falling
knife and bought Aetna with room to buy
more in our large/aggressive accounts. We bought the shares when the stock was down
$9 at $37.70 and it promptly fell another $2 before bouncing. We are buying to own
for a while and not trade quickly unless….. The shares are down because AET
said they have to wait till fall to raise premiums on their smaller customers because
that is when the policy anniversary dates mature. It seems a little crass to
hope AET raises already high premium rates to make a higher profit and have the
share price rise but until folks vote in Congress people who will get the
medical insurance catastrophe under control we may as well try and make a few
bucks trading the stocks.
Our revised thought process on
buying a stock like AET which is
under pressure or VZ or T for the 5% dividend yield and maybe a 10% gain
besides, is not to look for day trades but to look for month or longer
situations where we are not at the whims of the big boys and girls. Actually it
is the big boys and girls abandoning AET today that is presenting the opportunity.
But there may be more large actors exiting the stock over the next days or weeks
and that is why we left room to buy more once the share price reaches some sort
of equilibrium. AET is down from $52 to $37 which is a good correction in price.
AET earnings were actually higher for the quarter.
The S&P 500 is back above
1309 at 1314 so today’s market action may mirror the Fed minutes rally of
Tuesday a week ago. Remember what occurred the rest of the week-nothing.
The reason we haven’t purchased T and VZ in all our sizable accounts is
that with VZ we are not sure how the markets will greet a Vodaphone buyout. We think it will be a positive but we don’t know
if analysts will like the price VZ has to pay. We are guessing VZ wants a
cash/stock deal and that VOD wants all cash and that that is the hang-up. We
thought the MCI takeover was good last year but the arbitrage and price war
with Q pushed VZ shares lower until the deal closed.
With T we are waiting till the
fall since the momentum folks are controlling the buying and selling right now
and T is not on their radar screen. It looks to us like the big boys and girls
are using T and VZ as sources of cash when they want to take dicier positions.
We have to head off for the afternoon
but we will be her tomorrow for the last day of the week at the Grand Casino.
As we leave the major measures
are up but off their highs and Treasuries are strong on the short end with
thetwo-year at 4.90% and better on the long
end with the ten-year at
Oil is down 70 pennies and Gold
26 April 2006 Daily Comment
Durable Goods orders for March were up 6.2% versus 1.6% expected
and the prior month was also revised higher. The Durable Goods numbers are
volatile because they represent such big ticket items. Treasuries are moving
lower in price higher in yield on the news.
Overnight Japan was up over 1% and Asia
was higher as is Europe in the early going.
are flat. Oil is off a few pennies and Gold is up $1.
Citigroup placed a sell
Our guru says that 1280 is the new downside line in the sand
for the S&P 500. He wouldn’t be surprised by a rally higher that fails. It’s
called covering your bets.
Investors Intelligence for the latest week has 45% Bulls versus 48% the prior report but Bears dropped also to 22% from 24%. The rest were for a correction?
The markets opened higher with the
DJIA up 40 points after 15 minutes. Breadth is 2/1 positive. Treasures remain
weaker and oil is $72.40 down 48 pennies while Gold is down $1.40.
Mother Merrill went to neutral from underweight on GM overnight and that has placed a bid
in the stock. Ford is higher in sympathy. And old dumb Kirk Kerkorian is
New home sales were up 13% in March 2006 which was better than expected.
But that number is 7% below last March and the median sales price of houses was
$224,000 and the average sales prices was $279,000. The median sales price is
2% lower than last year and the first year over year decline since December 2003.
Crude oil and gasoline inventories for the latest week were down
50% less than expected.
There is a time to buy and a time
to sell and the New York Stock Exchange has decided that it is
time to sell 15 million more shares of itself to the public.
The Fed Beige Book was released and there is a hint of inflation.
We spent $60 filling up our pickup truck yesterday. But that doesn’t count in
the inflation picture.
Bernanke testifies at
tomorrow. Advance 1st QuarterGDP is Friday.
Oil closed at $71.90 and Gold
finished at $642.
Treasuries gave ground with the two-year at 4.99% and the ten-year
The DJIA closed up 70 points at 11350. The S&P 500 gained 3 points to 1303 and the NAZZ closed up 3 at 2333. Breadth
was positive on the NYSE and Negative o the NAZZ and there were 380 new highs and 190 new lows. Volume was
And there are two more fun days
left this week for the boys and girls to spin the Wheel of Fortune.
25 April 2006 Daily Comment
Scott Mc Nealy is out as CEO at Sun Micro and the share price is up 10% which is good for him since he owns a ton of stock
in the company he founded.
was off overnight but most of the rest of Asia was
higher. Europe is higher in the morning session. Gold is
at $629 and Oil is $73.70. Treasuries are easier with the two year at 3.89%,
the five-year at 4.91% and the Ten-year at 5%.
We are itching to buy some Treasuries
but continue to look for a 5% handle on the two-year before we commence. We
feel that if the Fed does stop at 5% on the Fed funds rate that there will be
enough doubt after the initial rally to buy bonds near these current levels and
that conditions suggest that the Fed may go higher.
The NAZZ is below its 50 day moving average as the trading day
begins. Both Bulls and Bears are pointing to positives for their positions. We
chickens just don’t see a compelling reason to risk our necks at these levels.
Many stocks are triple where they were three years ago and the daily crashes in
stocks as the momentum folks abandon them for one reason or another is unsettling
and mind focusing at the same time.
We are as greedy as the next
person and since we are now living on our earnings from our portfolio we would
like to make as much money as we can but we don’t wish to lose principal to do
Index buying is the name of the
game and the obvious oil and precious metals plays have become yo-yos in their
And so we remain on the sidelines
biding our time.
Bush has halted deposits to the Strategic Petroleum Reserves (SPR).
It is interesting that the Repubs do things for which they chastised the Dems
when Clinton was in office. There is
not shortage of oil; there is a shortage of refining capacity because Mobil and
Amoco have echoes to close refineries for maintenance right at the beginning of
the summer driving season. And if the Busies are intent on keeping pressure on Iran
to the point of suggesting military action, continuing to build up the
Strategic Petroleum Reserve would make more sense.
Oil is down $1 on the closing the SPR closing news. But Exxon Mobil
is countering that action by closing its Nigerian terminal because of terrorist
Big Surprise, Bush opposes windfall profits tax on oil companies. He
wants to encourage conservation and the use of ethanol. We’ve heard both those
canards for thirty years. If that is the case why is there a
almost total tax write-off when buying SUV behemoths and why does Bush drive
one all over his ranch to cut wood?
Existing Home Sales in March were at a 6.92 annual rate versus 6.6
million expected and up from 6.6 million in February. Consumer Confidence in April was 109 versus 106 expected and up
form 107 in March. Both those numbers were stronger than expected.
On that news Treasuries have weakened
as a move to 5.25% becomes a possibility.
Fed Chairman Bernanke gives a speech on Thursday and Treasuries are
now going to focus on that speech. There are Treasury auctions today, tomorrow,
Portfolio Yearly Performance
Entering the contra hour the DJIA
is down 60 points and NYSE breadth is 2/1 negative. The NAZZ is lower by 7 and
breadth on the NAZZ is 5/4 negative. The big boys and girls may be setting up
to try and pop the markets higher in the last hour.
Treasuries are lower in price
higher in yield today with the two-year back up to 4.95% and the ten-year at 5.07%.
The Treasury TIPS auction did not go well. There is an auction of the two-year
tomorrow and the five-year on Thursday.
The new chatter is that if the Treasury pauses in raising the Fed Funds
rate then the dollar will continue its decline. That is because foreign interests
who hold $4.3 trillion in Treasury debt will look for other places to find
yield since the decline in the value of the dollar will not be offset by an
increase in yield income. That in turn will cause bond prices to fall as that
debt is sold. And so longer term Treasury issues will rise in yield.
This chatter explains why our initial
investment in Treasuries will be the two-year as we think the Fed pause is
coming. If rates continue to rise we will have the option of selling the two-year
and buying a longer maturity Treasury at a higher yield and lower dollar price.
Also two-year Treasuries are readily
marketable at a small spread should events warrant moving the invested funds
back to stocks.
Gold ended the day session at $634.20 up $10.30. Oil finished the day session at $72.88
down 44 pennies.
Treasuries closed on their low prices for the day with the two-year
at 4.95% and the ten-year at 5.08%.
The DJIA was down 60 points at 11275. The S&P 500 lost 7 points to 1302 and the NAZZ dropped 5 points to 2328. Volume was brisk.
Breadth was 2/1 negative and new
lows expanded to 150 while new highs contracted to 310.
And tomorrow is mid-week in the
Casino society and there is a two-wear note auction and other fun events and announcements
scheduled. We’ll be around.
24 April 2006 Daily Comment
was down 2.8% and Hong Kong was off 1.2% in overnight
trading. Europe is also lower and the metals and oil are
Stocks have opened weaker while
Treasuries have a bid.
Earnings continue to beat the
estimates but this morning’s down action is probably related to Friday’s
expiration and the pop up in the major stock measures in the last half hour. This
early reversal of that move may mean waiting until tomorrow to see the
direction for the week.
The major measures are at their
high marks for five and six years and the question is:
“Are they going higher, sideways or lower?” But then that is always the
With gold and oil and stocks all
at highs in price and Treasuries at their highs in yields something has to give
eventually. The normal course of activity would not see all four major groups
moving in the same direction.
Friday’s close on the DJIA was
the highest since January of 2000. That means that the DJIA is back to where it
was in January 2000. That means that if you owned the DJIA in January 2000 and
held you are even, after a lot of heartburn, with about 10% total gain from
The Lemley Model Portfolio is up
56% since then. That is why we are taking it easy right now.
stocks remain lower with breadth 2/1 negative and volume light. Oil is down
over $1 and gold is down $5. Treasuries are firmer.
We have to take off for the
afternoon so we’ll bid adieu.
The Casino will be open for
business as usual tomorrow and we’ll be here.
21 April 2006 Daily Comment
Asia was mixed
overnight with Japan
up one half percent and Hong Kong down a bit. Europe is mostly higher and Oil is down 60 cents to $73.10 while Gold is
at $660 down another $2.80. We had a $71 dollar NY close on oil yesterday so
there must have been some interesting action overnight.
Google had great numbers and the share price is up 10% this morning
setting a positive tone for the opening.
JP Morgan & Co. agreed to pay $425 million to settle civil charges
of improperly awarding hot new stock issues during the market bubble,
indicating Wall Street's tab for the class-action case could hit $4 billion.
Ford lost $1.2 billion in the quarter on write downs. Earnings from
continuing operations were 24 cents per share.
EBay and Microsoft and Yahoo are in talks to try and figure out how
to stop the Google train. *****
Capitol One, the largest credit card issuer, announced bang up quarterly
earnings and said the credit quality of its portfolio had increased. As a
result they reduced loan loss provisions by $600 million which is why earnings
were better. That action flies in the face of the deterioration of credit
quality in credit card issuance.
Citigroup upped Hershey
to a buy, citing valuation. Even with the upgrade HSY is priced below where we
sold a few months ago. And the big boys and girls are buying momentum stocks
not value stocks. Values stocks are October’s buys.
In that same vein, there was an
article in the WSJ today extolling the value in Bausch & Lomb, the contact lens folks. The stock has dropped about
40% in value in the last month because of the botched recall of the ReNu
solution that was contaminated. The article called BOL as value play. The shares
opened $1 higher but are now below last night’s close.
And the same happened to Intel yesterday after earnings. It opened
higher and closed lower and is lower still today. Folks are now calling it a
value play, which it is.
All three stocks are on our radar
screen. But momentum is the name of the
game in April and May and that is a game we don’t play well. *****
Wintrust Financial is down 12% today after announcing earnings.
This morning three brokerages lowered their ratings on the stock.
The only negative we could see in
the report was an adjustment on some swaps where income was overstated last
year and moved to this year.
We are commenting because City National Corp dropped 10%
yesterday on their earnings report. It too is a $3 billion bank. We don’t’
follow the area closely but 10% drops in an instant are an indication of a lack
of liquidity or willing buyers.
Anecdotally a local bank which is
part of a larger bank holding company in Wisconsin,
not the one we use, was scammed by its lending officer to the tune of a $2
million loss. And the accountant of one of our clients committed suicide after
he was discovered to have pilfered a million dollars from two trusts for which
he was trustee.
We haven’t seen these kinds of
stories for a while but we think they are representative of the Wild West
atmosphere and greed that is back in the Casino.
Silver (up 7%), gold (up $16) and
copper (up 6%) are rebounding today after markets digested the raising of
margin requirements on these commodities as of the close of business today.
Crude Oil ended trading in NY at $75.21 up $1.51. Gold is trading at $637. Most of Europe closed higher on the day.
With an hour and one half to go in
Casino’s wheel spinning the DJIA has moved to the negative side for the first time
after being up over 40 points early in today’s session. The NAZZ has been lower
all day on the heels of yesterday’s lower close and is now down 1%. Breadth is
till positive on the NYSE but negative on the NAZZ.
www.minyanville.com is suggesting that there is “trouble” with a large hedge fund
or funds or institution or institutions in copper. Whether it is actually
occurring and/or is isolated or systematic will be interesting.
The DJIA finished up 5 points at 11348. The S&P 500 closed down 1 point at 1311. The NAZZ ended at 2343 down 20 points.
Breadth was negative at the close and volume was active. There were 500
new highs and 125 new lows.
The Casino is closed for the week-end.
20 April 2006 Daily Comment
Earnings are burning up the wires
and except for Intel, EBay and a few others most are above estimates and
setting a very positive tone for today’s opening.
was off a bit but most of Asia was higher as is Europe
Treasuries are higher in yield
with the two-year at 4.89% and the ten-year at 5.04%. Initial jobless claims
for last week were 303,000.
Oil is at a record $72.49 after a
car bomb exploded in Nigeria’s
oil producing region and gold is up again. Today is pivotal for the bulls. They
need a good up into Friday’s expiration. The S&P 500 stopped at 1309
yesterday and needs to get through that level convincingly for another leg up.
We are now hearing the talking heads speak of Gold as a
storehouse of value. That reference brings back memories of our Money and
Banking economics class with Lev Dobrianski back at GeorgetownUniversity in 1964. Janet Yellen, the
President of the San Francisco Fed, said yesterday that the rise in the price
of Gold was related to ‘strong economic global growth’. The
story line goes that folks in developing countries want to place their gains in
hard assets since the currencies are not stable in times of crisis.
We don’t know that paying twice
the price of two years ago for gold makes sense but that is the story. It isn’t
that same story for Oil since oil can’t be worn as an ornament but there again folks in the know are dismissing the
record price as something we all can live with. We’ll we can live with it but
to say that oil and gold and copper and steel at record price levels is not
inflationary is hogwash. The BLS is massaging the numbers and in a bull market
all favorable numbers are believed and all non favorable are dismissed.
Golden West Financial in announcing earnings that were a penny shy
of estimates also revealed increased its
loan loss reserves from $850 million to$4 billion. They are one of the largest issuers of adjustable rate
mortgages. Do they know something?
The DJIA is up 80 points in the
early going with GM up $1.80 and Merck
up 90 pennies leading the way. That is not the leadership needed to
continue the rally. Breadth is negative.
Apple is up $4 and EBay is down $3 after both announced first
quarter results last night.
The WSJ reports today that
folks are using margin loans i.e. loans on stocks in portfolios not to buy
stocks but to fund other purchases like
airplanes an artwork and second homes. Say What? Talk about risk. And the
brokerage houses are encouraging this behavior.
AG's wealth-management division says about 75% of its more than $10 billion in
securities-based loans are used for purposes other than buying additional
securities, including for purchasing real estate and cars or for paying tax bills
and a child's tuition. UBS says one client borrowed money against his
investment portfolio this month to buy a jet, because the rate was lower than
he could have obtained on a loan elsewhere. E*Trade
Financial Corp., a major discount-brokerage firm, is offering a low rate of
3.99% to certain customers and is suggesting that they use such loans to pay
down higher-interest debt.
Inc.'s Smith Barney unit says some of its high-net-worth clients are using
securities-based loans to buy artwork and boats. There is a "dramatic and
marked increase" in these kinds of loans, says Bob Matthews, director of
wealth management at Smith Barney. Both UBS and Smith Barney say they reward
their financial advisers for selling securities-based loans whose proceeds are
used for purposes other than to help an investor buy additional securities.
It is a new day or so some folks say.
This is more from the WSJ article:
firms play down the risks of margin lending, saying it is unlikely investors
will be hit with margin calls if they hold a diversified portfolio of stocks
and bonds, domestic and international securities, and other assets.
"People generally think of margin as being scary and speculative, but really margin is another collateralized
loan that's no more scary than a home-equity line," says R. Jarrett
Lilien, president of E*Trade.
That is our underline. What Lilien
say is wrong, very wrong but brokerage commission rates have fallen so low that
the only way the E-Trades and Schwabs can make money is on margin loans. And of
course the name of the game is to make money not worry about risk until….
The difference between a home equity
loan and a margin loan is that with a home equity loan the value of the home
can go down 50% and the bank won’t sell you out as long as you make your
interest payments. With a 50% margin account loan if the value of your account
goes down 25% and you don’t put up more money you are sold out.
Silver is down 13%, copper is
down 10% and gold is off 3% ($20) two hours into the trading day; maybe ‘strong
global economic growth’ just became weaker.
There are rumors going around
that the NYMEX is going to raise margin requirements on certain commodities.
That may be one reason for the large drop in the metals complex today. The
locals probably got short yesterday.
breadth is now almost 2/1 negative as oil and mineral related stocks drop in
sympathy with their underlying commodities.
Google reports tonight and that will set the tone for Friday’s
trading. The ‘whisper’ number is $2.
In March nearly 144 billion shares of penny stocks were
traded. The last time anywhere near that number of shares traded was the salad
days of the dot.com era. In the spring of 2000,
traders put on trades of around 5,000 shares at a time for stocks that averaged
about $1 per share. Last month, they were averaging 82,500 shares per
trade at an average price of $0.05 per share. These statistics were
presented by Jason Goepfert on www.minyanville.com.
It is our favorite financial website. It is a pay for but well worth
the dollars. *****
Hedge funds gathered new dollars
in the amount of $24 billion in the first quarter of 2006 reversing an outflow
of $800 million in the last quarter of 2005 according to Thomson Financial Services.
Hedge funds now manage $1.1 trillion and growing at ten to one leverage that is
a lot of fire power to move markets--- both ways as is evidenced today by GM up
10% and silver down 20% today.
The average pay of a worker in China
is $100 per month. The average pay of a U.S.
worker is $100 per day. (CNBC)
With two hours of trading to go
the NAZZ is down 7 points while the DJIA is up 80. And Apple is only up $1.50
after being up $4.20 in early trading while EBay is on its low for the day down
Jim Cramer sent an e-email to subscribers saying he was buying 500 shares of
Newell. The share price jumped $1 in about ten minutes. This is the good
anecdotal evidence that the small speculator is back big time ….. and the
specialist says thank you Mr. Cramer as the share price moves back down to
where it ws trading before the e-mail. By the by, we didn’t receive the e-email
until . The internet age is
The Feds rounded up 1000 illegal
immigrants today. Could somebody be trying to place a damper on the street marches
scheduled for May 1?
Rambus, which is a computer chip licensor and was a hot stock back
1999 going from $10 to $80 to $4 in 2002, is doing a mini version of that round
trip today. It closed at $45 last night, traded
as low at $30 today and is now at $38. There are rumors about a patent
dispute. The company has a market cap of $4 billion and revenues (not earnings)
of $180 million so nervousness among holders is understandable. By the by,
former Senator John Danforth is General Counsel, and also insiders sold 2
million shares last month. Danforth sold
about $3 million worth of stock. What a stroke of luck.
Gold finished at $622 and Oil was off 22 pennies to $71.95. *****
Treasuries were a bit higher in yield with the two-year at 4.88%
and the ten-year at 5.04% as the yield curve steepened.
At the bell the DJIA was up 65 points to 11345. The S&P 500 gained 2 points to 1311 and
the NAZZ lost 9 points to 2362.
Breadth was negative. Volume
was brisk and new highs exceeded 500 while there were over 130 new lows. The new low figure is unusually high in
relation to the number of new highs.
And tomorrow is the last Casino
day of the week.
19 April 2006 Daily Comment
The Fed minutes are being read as
and done (one more raise to 5% and then an announcement that they are
going to watch and react) and that is the reason for the bullish move in stocks
and the firming in Treasuries.
Earnings are coming fast and
furious. Most of them are meeting or above expectations and that should give
stocks a good beginning this morning. Then the bulls will need to carry through
and get the major measures through resistance and onto new high ground for a
Motorola margins were constrained and so the stock traded lower
last night although we would bet it will trade higher this morning. IBM beat but revenues were lower, Yahoo net was down but advertising revenue
was higher and so the share price popped $2 in after hours trading. Amgen had good numbers but the stock
traded off a bit. Coke was in line
and not exciting. And that is the way the announcements have been going. No big
blowups and movement higher on the news for most companies.
Yesterday’s action was the
largest gain for the DJIA since April of last year. Does that say something?
We are basically cash and missing the fun but we are going to stick
with our cautious approach. As we mentioned yesterday, history shows that 6 months
to 18 month after the Fed stops tightening markets are usually 10% or more
lower than they were on the day the tightening stopped. Of course the markets
may run another 10% before the may Meeting and then the normal correction would
only bring them back to today’s level. Even so, we want a decent correction
before committing much cash and if we have to wait until October or longer then
so be it.
With our 5% hope on the two-year we would expect a move back towards 5%
as the May Fed Meeting approaches.
higher overnight on the heels of the U.S Market great day and Europe is following suit into the .
Gold is another $5.70 higher at $629
and Oil is down 35pennies at $70.90.
Treasuries are firm to better on the long end.
As the guru we respect says the markets
are what they are. Yesterday may be a one day wonder but our and his guess is
that today is an up day. Then Thursday becomes a pivotal day if the markets
open lower and buyers show up. Their purchases may exhaust the buying power
leading to a reversal. The other scenario is that stocks move higher into the
end of the week and we wonder how we missed the show.Time will tell as the big wheel begins to
spin at the Casino.
This is an options expiration
week and so that is affecting action as is the fact that there are a large
number of indexers out there. And the e hedgies are always around to work their
Investors Intelligence for the latest
week had Bulls receding to 48% from
52% while Bears jumped from 24% to 26%.And then the market rallied.
The Consumer Price Index for March was up 0.4%, ex the important stuff
it was up 0.3%. Year/year the CPI was 3.4% and core was 2.1%. Stock futures are
Crude oil inventories come later this morning and traders will key
off those numbers.
Yesterday we wrote that 10/1 up
over down volume was bullish but we misspoke, we should have said 10/1 down
over up volume is bullish because it marks the bottom. www.minyanville.com commented on the
10/1 up over down volume yesterday:
to my quote vendor, there is just over 10 times as much volume flowing into
advancing issues than declining issues as of now. The old saying is that the
most vicious rallies occur in bear markets, and perhaps that's true...one month
after the six other occurrences since 1997, the S&P 500 showed an average
return of -3.6% with four of the six being negative. Be careful of buying into
the hype that is sure to follow such a day." Jason Goepfert *****
Oil and gasoline inventories were
lower but Oil is not rallying. At
Gold remains higher and Treasuries are giving back some of yesterday’s gains.
The major stock measures opened higher but have been mixed to lower since the
first hour of trading. Given yesterday’s large jump some digestion is in order.
The last hour will as always be the tell.
Janet Yellen in on CNBC right now
and her comments suggest that the assumptions of the overnight crowd of 5% and
that’s it may not be the whole story. It
sounds to us like some hedging is going on.
Tim Adams the Treasury
Department’s top official on foreign affair is saying that Global Growth is at
risk if the budget gap closing is too aggressive. Are the Republicans in power?
The fawning by the business
community over the dictator from China
is stomach turning. So is Henry Kissinger’s big hug although we would guess
that the Chinese paid big bucks for that hug.
with a billion plus citizens has a military budget of $35 billion.
Gold ended the day session at $636 up $12.70. near
the close of NYSE the metal is trading
at $644. Oil ended at $72.17 up 82
pennies. And there is no inflation.
Treasuries closed a bit weaker with the curve steepening and the
two-year at 4.86% and the ten-year at 5.03%. The three-year at 4.87% and
five-year at 4.90% are now yielding more than the two-year for the first time
in a while.
The Bulls won today again. At the
bell the DJIA was up 15 points at
11285. The NAZZ gained 15 points to
2370 and the S&P 500 finished at
1310 up 3 points.
Breadth was positive and volume
was brisk. There were over 700 new highs
and 150 new lows.
And there are two more days left
at the Casino for the big boys and girls to spin the wheel of fortune before
18 April 2006 Daily Comment
Today is a big numbers day with UBS chain store sales, the Producer Price Index and all its permutations,
Building permits before the opening and
the FOMC meeting minutes at .
The Hang Seng and Nikkeiboth gained over 1% overnight while Europe is mixed early on. Oil is up
about 30 pennies at $70.70 in overnight trading and Gold is another $1 plus higher at $620. Treasuries are a bit firmer ahead of the PPI and Fed minutes.
DH Horton reported a record backlog of 24,000 homes up 155 from
last year and blow out earnings. Clearly the housing boom is continuing at this
and PPI was up 0.5%, ex food and energy
was up 0.1%.PPI y/y was up 3.5%, ex
Food and energy up 1.7%. Housing starts were 1.96 million which was less
than expected (down 7.8%).
Symantec received a $1 billion bill from the IRS for taxes related
to its Veritas purchase.
After the first half hour trading
breadth is 3/1 positive on the NYSE and 2/1 positive on the NAZZ. It looks like
the Bulls are going to try and take the markets higher on the backs of the good
earnings reports and neutral PPI numbers.
Fifth Third and National City banks both had lower
earnings as interest income dropped and loan right offs rose. The money center
banks are beating their numbers but the large regional banks that don’t have the
investment banking and trading businesses are under-performing.
Mother Merrill reported record revenues for the quarter. Profits were
also a record if a $1.2 billion charge for stock based compensation is backed
out. Why should it be backed out? Isn’t compensation an expense? And the
interesting fact about brokerages is that the bonuses and stock awards continue
even in bad times because these awards are needed to keep the traders and
brokers from jumping ship.
Fed Member Janet Yellen said today that the Fed funds rate is near
neutral and that the Fed is worried about policy lag affect and going to
far. With that news stocks more than Treasuries have rallied with the DJIA up
132 points three hours into the trading day. And the S&P 500 has pushed through the old 1295
resistance/support/resistance and now again support level to trade at 1298.
The Fed minutes released say that
they are close to quitting on the raises. Stocks are rallying further on that
On this point the following from
Comstock Partners (who are usually bearish) from the pay for www.minyanville.com site is interesting:
Partners took this intuition one step further. To wit:
conventional wisdom that the end of Fed tightening is immediately bullish for
stocks is simply not supported by history. In looking at the last rate hikes in
all 16 instances going back to 1920, we found that the Dow Jones Industrial Average
declined by an average of 19.1% from the date of the last rise in rates to the
eventual market bottom. In fact the Dow dropped by at least 10% in 12 of the 16
instances and by more than 20% half of the time. In only four cases did the Dow
actually rise after little or no decline, and one of those times was in early
1995. That is why Wall Street likes to bring up that one case while ignoring
the bulk of the evidence.”
Gold ended at $623.30 up $4 and Oil jumped another $1 to $71.45. *****
Treasuries also finished on the plus side with the two-year at
4.84% and the ten-year at 4.97%.
The Bulls won the day and the
month today and forced the Bears to do a lot of covering. At the bell the DJIA was up 180 points at 11260. The S&P 500 gained 22 points to 1307
after trading at that same old 1309 resistance number and the NAZZ jumped 45 points to 2356.
Breadth was strongly positive, volume
was brisk and new highs jumped to 450
but new lows still exceeded 175.
The NYSE had 10/1 up volume versus down volume at the close (the NAZZ
almost made it) and we haven’t seen that kind of a number for a long long time.
It is a very bullish reading.
Friday is a Triple Witching day
and some of the action today may have been related to that but we won’t know
till then. Tomorrow the bulls have to carry through and Motorola, Yahoo, IBM, and Amgen
and other earnings announcements tonight should set the tone for early morning
With Gold, Oil and many other
commodities at multi year highs and stocks at multi year highs also there is
something that is going to have to give unless it is different this time. It
may well be that the markets are different but we don’t think so. Greed and Fear still rule.
The Casino is humming and will be
open again tomorrow and we’ll be here watching.
17 April 2006 Daily Comment
was lower by 1.4% overnight while Hong Kong was
closed.Most of Europe
was also closed for Easter Monday. Oil
touched $70 overnight and is trading a few pennies under that level in the early
going. Gold is up $8 at $608.
Citigroup exceeded consensus expectations with their quarterly earnings
Lee Raymond the retiring CEO of
Exxon Mobil received $51 million in pay for 2005. He is also receiving a
retirement package worth $400 million. Nice work if you can get it.
Moody’s lowered the rating on Jet
Blue’s debt to speculative... Just a few years ago the gurus were suggesting
that Jet Blue was the model for airlines of the future. And then reality set in
and now Jet Blue is representative of airlines past.
the Treasury ten-year is now at 5.03% having closed at 5.05% last week.
Intel announces earnings on Wednesday after the close. This morning
Needham cut its earnings guess for
the year on INTC to $1.04 from $1.10. That’s called fine tuning ahead of the
PPI and CPI data are released on Thursday.
prices likely jumped in March, reflecting resurgent energy costs and the surge
in commodity prices, but excluding volatile food and energy costs, prices
probably rose modestly, a Reuters poll showed.
The median estimate from 40
economists polled by Reuters put the producer
price index -- a gauge of prices received by farms, factories and
refineries -- up 0.4 percent in March after a drop of 1.4 percent in February. The
median forecast from 39 economists projects core PPI, which strips out food and energy costs, to rise 0.2
percent after an increase of 0.3 percent in February.
This week about 120 S&P companies
report earnings. The Fed minutes from the last meeting will be released
The dollar is under selling pressure today.
The U.S. currency has declined about 3.4 percent
this year versus the euro (now at 1.23 dollars to the euro) and it is basically
unchanged in 2006 against the yen.
Moines on Monday Chicago Federal Reserve President
Michael Moskow said that the Federal Reserve policy-makers must remain
"vigilant" because of the risk of higher U.S.
Oil closed at a record high $70.40 today. Gold ended at $618.80 up $18.70.
Treasuries rallied on a low
Homebuilders sentiment reading and the two-year closed at 4.90% and the
ten-year at 5.01%.
After opening higher the major
stock measured turned negative around
and moved lower into the close as Oil made a new high and Gold jumped. At the
bell the DJIA was down 65 points at
11075. The S&P 500 lost 4 points
to 1285 and the NAZZ dropped 16points to
Breadth turned from 2/1 positive early on to 2/1 negative at the
close. There were about 230 new lows and
230 new highs. The new highs were made early in the day and the new lows
And tomorrow is another day and
it should be interesting.
13 April 2006 Daily Comment
This is the last comment until
Monday April 17. The markets are closed tomorrow and the Treasury market is
closing early today.
AMD and GE both met
expectations. GE expects to sell
some more properties which are how it continues to meet expectations.
AMD is trading lower in the early session because they gave soft
guidance for the coming quarter. GE is also trading lower.
Retail sales were up 0.6% in
March, ex autos up 0.4%. The ten-year
Treasury at is now at
is tightening and that is also a negative for Treasuries.
We are off to ride horses with
the prince. As we leave at the
major measures are mixed in very light holiday trading. The NAZZ is showing the
best strength on the backs of CSCO, INTC and AMD and other techs that have been
down and out bouncing on low volume. We would guess that INTC is up because AMD
is down $3 per share on their earnings report. CSCO was mentioned positively by
The Casino is closed for the
12 April 2006 Daily Comment
and Japan were
down over 1% overnight and Europe is trading lower. U.S.
futures are indicating a higher opening. Yesterdays trading action breached
support levels and so the ball is in the Bulls court to show that they have the
stuff to get back on the upside.
Vodaphone popped on another selling its wireless stake toVZ rumor this morning and so we decided
to get out of our shares for a scratch. This stock is a soap opera and we have
to get over trying to recover our loss in it last month. Something good may
happen to VOD but we are concentrating on T and VZ.
And we would like to add some St
Jude Medical, the heart device maker to accounts in the next month. The share
price is down over 40% from its 12 month high and STJ announces earnings on
April 19th.STJ pre-announced that earnings would be less
than forecast and it if the markets are in a funk next week there may be an
opportunity to acquire a beginning position in the company. At current levels
it is attractive and our caution now is market related not stock specific.
Gold is back over $601 and Oil is pennies lower as traders await
the inventory numbers. The Iran
situation has faded from view this morning in traders’ eyes but remains on the
back burner. We continue to believe the Busies are going to bomb them and…
Today is weekly oil inventory day
and traders are awaiting those numbers.
The suspense is over and Oil
inventories were up 2 million barrels more than expected and gasoline inventories
were down 1.5 million barrels more that expected. That is what happens when
companies shut down refineries for upkeep right at the beginning of the driving
season. And low and behold gasoline prices are rising although there are no
shortages. God bless capitalism and oligopolies.
Goldman Sachs upped Hershey to outperform from in line. We
have been watching the stock since we sold earlier this year (it is trading
lower than our sale price even with the upgrade) but are holding off for now.
Investors Intelligence has Bulls jumping to 54% from 49% and Bears
dropping to 23% from 27% in the latest week.
Greenspan gave a talk in Korea
by video conferencing and what he said bollixed the Treasury market. He did it
by TV conferencing. The thirty-year is back over 5%.
GM says that bankruptcy is not an
Gold ended at $601.60 and Oil
Treasuries closed lower with the two-year at 4.91% and the ten-year
At the bell the DJIA was up 40 points at 11130. The S&P 500 rose 2 points to 1287 and
the NAZZ was up 3 points at 2314.
Breadth was slightly positive at the close..There were 162 new lows and about
100 new highs.
There is one more trading day
before the long holiday week-end. We’ll be in and out.
11 April 2006 Daily Comment
Alcoa announced better than
expected earnings last night and is trading up about 6% in early morning
D. R. Horton, the homebuilder, said orders rose over 10% to a
record for the second quarter and that business was strong in every area of the
country except the Midwest where they only have two
M/I Homes also announced record backlog this morning. Bulls will
take this as an indication that the housing boom may be getting a third wind.
Unfortunately for Bond Bulls the Fed may get the same impression.
The WSJ reports that gold demand
by investors and institutions as a commodity holding in a diversified portfolio
is a major reason for the increase in the price of gold. The story reinforces
the trading phenomenon that folks only like to buy stuff that is going up and
only when it is going up. That is known as momentum investing although the
folks doing it don’t know that is what they are doing.
In the same vein, we don’t think
it is happenstance that Oil is approaching the $70 level this morning on the
heels of the introduction of the OIL ETF yesterday. Interestingly we would bet
that half the folks buying the Oil Exchange Traded Fund don’t know that they
are buying a piece of paper that gives them a future interest in oil and not
the actual commodity itself. Heck, it says oil in the title so it must be oil.
Asia was lower
overnight and Europe is lower but U.S. stocks are going to open higher on the
Alcoa news and some good news from Nokia that the average
selling price of its phones for the quarter was 5% higher than previously
Bausch & Lomb is not going to participate as BOL is going to
have to pull all its contact lens solutions ReNu from stores because of an unsanitary
production facility. The solution has caused eye infections and so the tort
lawyers are circling.
Today is a key day for traders because
of the shortened trading week. Yesterday’s action held support at 1295 and the
Bulls would like to see the major measures move higher today to preserve the
hope for a continuation of the rally after this two week period of
consolidation. We are open to a rally into the end of May but don’t think the
types of stocks we buy would participate anyway which is why we are hugging the
The jury in the Merck Vioxx case awarded $9 million in punitive
damages to go with the $4.5 million in compensatory damages. MRK is trading
higher on the news but we would think the news is not positive.
The low priced telecom stocks are
all going the wrong way today with CIEN
down 8% and JDSU down 6%. The
speculative run may have been short lived.
the major market indexes have turned south after a less than enthusiastic up
opening and the S&P 500 is well
below 1295 support and is
approaching the line in the sand 1287 support (50 day moving average) we
mentioned on Monday. Breadth is 2/1 negative on the NYSE and 3/1 negative on
Alcoa is up smartly today on the good earnings. AA’s contract with
its 9000 unionized workers is up in May and with the good earnings we would
presume that the union is taking notice. A strike is expected.
Entering the contra hour new lows
exceed new highs for the first time in weeks and breadth is over 2.5/1
negative. The Bulls are going to have to gather it all up to rally today.
Gold ended down $2.40 at $599.40. Oil gained 26 pennies to $69.
Treasuries were a bit better at the finish today with the two-year
at 4.87% and the ten-year at 4.93%.
The DJIA lost 55 points to close at 11087. The S&P 500 dropped 11 points to 1286 and the NAZZ lost 23 points to 2310.
Breadth was almost 3/1 negative and volume was moderate. New
lows at 190 bested new highs at 150 for the first time in many weeks.
And there are two more casino
days left in this shortened gambling week. The prince and princess arrive
tomorrow afternoon so our writings will be abbreviated the next two days.
10 April 2006 Daily Comment
We were traveling on Friday and
the stocks markets decided that the employment news was bad news and sent stock
lower as treasuries moved higher in yield. The S&P 500 closed right at 1295
support on Friday with the next support at 1287 so anything is possible today.
mixed overnight with Japan
lower and Hong Kong higher. Europe
is mixed. Gold is back near $600 and oil is up a bit.
The New Yorker magazine is
reporting that the Bushies are thinking seriously of dropping a tactical
nuclear bomb on Iran. That is good stuff for the oil markets.
Total consumer debt is now $2.2 trillion.
Reports say the Fed is beginning
to worry about bank leaning standards as delinquency rates rise. Also St. Louis
Fed President Poole is reported by Bloomberg to have said that 5.25% on Fed
funds is “reasonable given what we know.”
This morning the exchanges began
trading an Oil Exchange Traded Fund
that will buy and own oil futures. That ETF which goes under the symbol USO will trade alongside the Gold ETF (GLD) and the soon to be listed
Silver ETF. And the casino grows.
We are repurchasing Vodaphone at $22.06 in some
large/aggressive accounts because we think that the Verizon acquisition of
VOD’s wireless interest in Verizon is nearer rather than farther. We were whip
lashed by the stock and took a loss a month ago and that is why we are only initiating
in our more aggressive accounts. Should it go lower we will buy more because
with VOD selling its Japanese business and the retirement of a top officer we
think that the wheels are turning. There was a rumor going around over the
week-end about a $26 buyout price but today’s market action would seem to demonstrate
a non belief in the validity of the rumor.
We will be relatively comfortable
adding to our VZ and T holdings in more accounts if the share
prices come down a bit more because the 5% dividends are support. We like T’s proposed acquisition of Bell South
and while that may be a cap on the stock until completed the 5% dividend offers
a yield and the random price movements also offer trading opportunitieswithout the risks associated with momentum stocks.
We were early on VZ last year but now more analysts seem to be coming around on
the stock and we are hoping to reacquire it in more accounts if it comes back in a bit more.
These purchases don’t reflect a
change in our overall bearishness. We are willing to add reasonably priced stocks
and also to reinvest in value high yield stocks in which ‘the street’ has begun
to take notice.
Oil ended up $1.36 at $68.75. Gold
gained 9.10 to $601.80.
Treasuries closed a little better with the two-year at 4.8% and the
ten-year at 4.96%.
Second quarter earnings season begins tonight with Alcoa reporting
after the close.
At the bell the DJIA was up 22 points at 11141. The S&P 500 gained 1 point to 1296 ad
the NAZZ was down 6 points at 2333.
Breadth was negative, volume
was light and new highs were a bit over 200 while new lows expanded to almost 150.
And tomorrow is another day. The stock markets are closed Friday.
6 April 2006 Daily Comment
We will be traveling to Chicago tomorrow on business and so the
next post will be on Monday April 10.
3M raised guidance and its $3
rise will help the DJIA at this mornings opening. Boeing is also poised to make
new highs and Google is back to its highs. The questions of course is how long
does the rally continue. The bulls comment is that this rally has been climbing
a wall of worry which good rallies have to do.
Since we own no stocks at this point in time we are not in the game and
that may be disconcerting for some clients who have only been with us through
the last three years of the bull run. Our response is that we told folks who
have joined us in the last three years before we ceased accepting new clients
that we didn’t and never have outperformed in bull phases of the markets. Our
aim is to outperform in bear phases by not surrendering gains and to
participate and earn a decent return in the bull phases.
We have done that over the years and plan on continuing to do so.
Wednesday’s markets which we
missed were not strong but did finish higher and above the 1309 breakout number
that we had been using. Today’s markets will have to continue the move to
create new trading territory where 1309 will become support instead of
resistance. Our guru sees 1380 as an upside target by the end of May.
That represents a 6% move from
this level and if it occurs we will be discomfited that we missed it. But we
think the risk is great and the stocks we need to own to participate are all
selling on their highs and at the mercy of momentum boys and girls and we aren’t’
ready to accept the risk.
The shares that we recently sold
remain on their lows and weak and most are below the price at which we sold.
Our reason for not owning stocks now is that the kind of value out of favor
stocks we are most comfortable buying are at their lowest in the September
October institutional./mutual fund year end house cleaning time.
Jobless claims dropped under 300,000 for the prior week to 299,000.
Tomorrow is the employment report for March which is the focus of today’s market.
That is the way it is with markets, tomorrow’s news is much more important than
Retail sales reports from specialty stores were disappointing this
morning but the late Easter is the reason being proffered by the stores and
accepted by traders. Wal-Mart same store sales were up 1.2%.
Gold moved over $600 in early morning
trading and oil is approaching $68. Treasuries are weaker.
Treasury Secretary Snow offered on Wednesday that the Friday
Employment Report would be very good. Since he is not supposed to know those
numbers we don’t know whether he was blowing smoke, smoking blow, or illegally
in possession of confidential material.
Sears Holdings is buying back another $500 million in stock having
just completed a $1 billion share buyback. Buybacks increase the share price
over the short run in many cases especially in the case of tiny traded $100
stocks. Eddie Lambert, the fellow now running Sears/Kmart, also is general
partner of a hedge fund that owns a huge chunk of SHLD. That is how he got
control of SHLD. And he is paid 20% of yearly gains in the fund. B buying back
SHLD stock the increases demand for the share which raises the price. And as
the price rises he earns 20% of the rise in the value of the SHLD shares in his
fund. There would seem to be a conflict of interest since in the long run the
money being spent buying shares might better be used in expanding the business
or improving the stores.
Wednesday into Thursday in Japan
the Nikkei 225 was up 1.4% and in Hong
Kong the Hang Seng Index
was up 1.9% and Europe is mixed in the early going.
Overnight the European Central Bank left rates unchanged
at 2.5% although the President of the bank may have implied that future rate
increases are coming; and the Bank of England left their rates unchanged at 4.5%.
Ford said bankruptcy is not an option.
The rise in the price of gold and silver is the talk of the markets.
We think it is a supply/ demand shortage created by hedge funds with a lot of
money. Gold as a store of value in uncertain times is only a truism for Gold
Breadth is 5/4 negative after a few hours of trading and the major
measures are underwater. But the employment report is the focus and that
doesn’t come till tomorrow so we don’t expect any great sell off.
The Drug stock Index has broken trend line support as it breaks
down on Merck moving lower because
of the Vioxx verdict. Merck lost one and won one in a jury trial about Vioxx
causing heart attacks in New Jersey,
the home state of Merck. Multiply 25,000
times $5 million and you will get an idea why. Though not lawyers we would
think that the jury verdict yesterday will stand on appeal because the jury in
effect ruled against one plaintiff while ruling for the other and thus showed
that their judgment was rational. This verdict would seem to say that if a
person took VIOXX for 24 months before the recall and then had a heart attack
that Merck is going to have a problem with juries.
The President of the Chicago Fed Harry Moskow (he’s a non voting member this year) gave a
speech today in Europe in which he said:
"The most recent monthly indicators of activity have been quite
favorable, and we think that growth in output is rebounding smartly from the
low fourth-quarter number. The bulk of our productive resources that were
underutilized following the 2001 recession are now back at work. At the same time,
core inflation remains contained. The housing sector poses both upside and downside
risks. The probable slowdown in housing should be an important factor in
bringing growth back to potential. If housing growth remained solid this would
then heighten the risk of above-trend GDP (gross domestic product) growth and
the further development of pressures on resources." *****
The Bureau of Labor Statistics adjusts the Monthly Employment Report
to account for new jobs or lost jobs that in any given month may not yet be reported.
And because historically many new companies start up in the spring, the BLS
will adjust tomorrow’s number by adding 200,000 jobs that may or may not have been
created to the actual number which is
a guess number too. Any number over 250,000 gains will not be well received by
the bond market. And perversely we would think that the stock market will also
not like a large number because that would mean the Fed will keep tightening.
But a good jobs number would mean the economy is continuing to expand which
should be good for stocks except when it is not.
When the Fed stops raising rates
some traders expect the markets to continue rising because the Fed is done. But
if the Fed then begins to lower rates which would be good for business because folks
and companies could borrow at cheaper rates, the stock markets may sell off. And
that is because lowering rates by the Fed would mean they think that the
economy is in danger of contracting.
The low priced tech stocks remain
hot as newbie money is going into these stocks. And the tech stocks that have
made it to the teens are now probably getting hedge fund and other interest.
Those stocks are one way streets- at least they have been for the last few
years. We don’t think the second coming of tech utopia is in the cards so we
would guess the runs in these issues will end badly.
In our large/aggressive accounts
we bought shares of VZ and T for a trade. Both are in the DJIA and are
x-dividend today and are off twice as much as the dividend they paid. Yesterday
both were more than a point higher than our purchase price.
The Treasury ten-year is at
4.90%. 4.94% will trigger some sell orders in the bonds. There is a rumor
floating that the consulting folks, who a couple of weeks ago caused a rally in
the bond by issuing a bullish report, are no longer so bullish.
Nigerian nationalists who have
been attacking foreign owned pipe lines have said that attacks on those
pipelines will commence again shortly. Oil is approaching $68 on that news. Do
you think those folks are trading the oil markets? They could be making some
Gold closed the day session at a bit under $600 but is now trading
over that figure. Oil ended the day
Treasuries were lower on the session as the two-year finished at
4.83% and the ten-year at 4.90%.
The DJIA closed down 25 points at 11215. the S&P 500 lost 2 pits to end at 1309 and the NAZZ was up 2 points at 2362.
Breadth was almost 2/1 negative on the NYSE and volume was moderate. New highs were over 400 and new lows exceeded 100 for the first time in
The Casino will be opening bright
and early for the employment news and the accompanying frantic trading. We’ll
be traveling to clients so we will bring you news of the action next Monday
4 April 2006 Daily Comment
We’ll be traveling tomorrow so the next post will be on Thursday April 6. *****
Retail stocks were on the sale
counter yesterday; and one reason is that the weekly chain store sales numbers
were unchanged on a week to week basis. Since Easter is two weeks later this
year there is some guessing that the late date is the reason fro the sales
slowdown. If not, the markets will begin to worry since the consumer economy is
the backbone of GDP growth.
funds are creating a fund to invest in BRIC which is the acronym for Brazil,
and China. Those
four countries are the darlings of the momentum investing and hedge fund
communities. One reason is that the stock exchanges in those countries are extremely
volatile and the big boys and girls love to play ‘chicken’ trading the shares
of companies in those countries.
There was an article last week in
the NYT about a hedge fund that invests in Russia
whose general partner could not get a visa to enter Russia.
Not to worry, he was trading from London.
As in the past our guess is that
these “new” growth stories will cost a lot of folks a lot of money.
mixed overnight and Europe is lower in early trading. Gold
is down $1 and oil is up a few pennies. Treasuries are firmer.
After an hour and one half of
trading the major measures are higher without conviction.
Wal-Mart going organic is like
Limbaugh endorsing the ACLU.
CNBC keeps running alerts like
NASDAQ trading at five year high, S&P 500 at four year high. We offer
congratulations to the buy and hold
folks they may be back to even for the last five years but still 10% below
where the S&P 500 was six years ago and 50% below the NAZZ high.
The low priced tech stocks like BRCD,
CIEN and JDSU are down today about 5%. This is the second down day for many.
They will go down faster than they went up because they are not in strong
hands. Many made their 12 month highs on March 31.
the DJIA is up 80 points and the S&P 500 is approaching 1308. Breadth is
3/2 positive on the NYSE and flat on the NAZZ. New highs are 300 after ending
over 500 yesterday. Volume is light.
down $1.60 at $590.60. Oil was down 50 pennies at $66.25.
sold 5.1 million acres of its forest lands to
two investor groups for $6.1 billion. That works out to $1200 per acre. IP has
now sold 85% of its forests. Weyerhaeuser
and Louisiana Land have also sold forest lands to institutional
investors like the Harvard and Yale Endowments. These institutional investors
are diversifying their holdings and also buying assets that don’t get priced on
a daily basis. In fact the value is in the eye of the buyer as is the yearly
appreciation. And if remuneration is based on appreciation……
Treasuries were up a tick on the short end and down a few ticks on
the long end. The two-year went out at 4.83% and the ten-year at 4.87%.
The DJIA finished up 60 points at 11205. The S&P 500 was helped by a $12 point spurt higher by Google and closed up 8 points at 1306. The NAZZ gained 8 points to 2344 even
though CSCO, AAPL and INTC closed lower.
Breadth was 5/4 positive on the NYSE and negative on the NAZZ. Volume was light and new highs contracted to 335.
And the Big Casino will have to
survive without us tomorrow as we visit the Casino at the Menomonee Nation in Wisconsin.
3 April 2006 Daily Comment
The coyote caught in Central Park
Died today when the folks
In a place he did not choose
Folks took to long to let him loose
To Africa some hunters go
To shoot old lions in the brush
And bring their carcasses back home
To mount on their walls just for show
In Texas and other states
Hunters quail and pheasant hunt
Birds raised in pens and held on ground
Till old men can gun them down
Often when on the road
You’ll see pheasant cock display
To cars their plumage before they’re crushed
Because they were not wild raised
Man controls and man destroys
The habitat that was not his
And will not be in many years
When nature collapses our many fears
A few hundred years are nothing long
Yet in that time such wrongs been done
There may be only a few hundred more
Before were back to before.
GM is selling the majority stake
in GMAC for $10 billion with a $4 billion kicker over the next few years if
certain goals are met. Selling off its only moneymaking arm is an indication of
how bad things are at GM. We remember in the mid 1990s both GM and Ford and so
many billions in Treasuries that analysts were worried that they weren’t
getting any bang for their bucks. That is like Greenspan and Congress worried
about the budget surpluses in 2001.
The Hang Seng was up 1.7% and the Nikkei
up 1.6% overnight in Asia. Europe
is also higher as U.S.
stocks through the first hour of trading are also doing well.
Basically stocks are recovering
from the Friday at the close markdown of the other 499 stocks in the S&P
500 that were sold to make way for Google’s inclusion.
Gold is back up $4 and oil
is over $57 as Treasuries are weaker
this morning. The two-year is at 4.85% and the ten-year at 4.88%.
Lucent and Alcatel have formalized their merger agreement.
is offering to lock in long term contracts for its heavy crude oil at $50 per
barrel. The heavy crude is only economical if light sweet crude is trading over
$40 per barrel because it must be reduced to light crude.
At two minutes and three seconds after 1am on April 5th the
time will be 01:02:03 04/05/06.
Gold is up $7.70 at $595, Oil is higher at $67.50, Treasuries are lower and the
major stock measures are all up with the S&P 500 holding just below the
1309 level which it
touched about an hour ago.
With the major measures strongly
higher breadth is not reflecting the gain. Breadth on the NYSE is 5/4 positive
and it is 5/4 negative on the NAZZ.
GM and Ford reported sales down
more than expected for March.
Retail stocks are getting hit
with most down today.
For the First quarter of 2006 the
DJIA and S&P 500 were both up3.7%. The Lehman Intermediate Treasury Index
was minus1.4% and the Treasury Long Term Index was minus 4.8%. The Lemley Model Portfolio was up 2.4%. *****
Gold ended the day session at
$594 and Oil was up 11 pennies at $66.74.
Treasuries closed lower with the
two-year at 4.86% and the ten-year at 4.88%.
By the bell the DJIA gave up most of its gains but was still up 35 points at
11145. The S&P 500 gained 3 points
to 1298 and the NAZZ lost 3 points to
Breadth was flat on the NYSE and 2/1 negative on the NAZZ and volume was moderate. New highs exceeded 500 on the first trading
day of the new quarter.
And the Casino will be open again
for the big boys and girls tomorrow.
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