Lemley Yarling Management Co
309 W Johnson Street Apt 544
Madison, WI 53703
Toll free phone numbers:
30 April 2008
GDP for the first quarter of 2008
was announced at up 0.6%. that number implies no
classic recession ( 2 quarters of negative GDP growth in a row). The anemic
growth doesn’t suggest economic nirvana. And there will be three more revisions
before the final number of the first quarter becomes history.
GDP px +2.6%, PCE core prices +2.2% (vs 2.5% in Q4); 0.3pt due to Fed pay raise
GM announced a $3.25 billion loss for the first quarter and the
shares are trading $1 higher as the markets open. The loss equaled $5.74 per
share, in the first quarter of 2008, as revenue was down slightly on business
in North America.
In the comparable quarter a year
ago, the Detroit automaker (NYSE: GM) posted net income of $62 billion, or 11
cents per share.
GM's total revenue for the first
quarter of 2008 was $42.7 billion, down slightly from $43.4 billion in the
year-ago quarter primarily due to lower North America automotive and financial
services and insurance revenues. Automotive revenues outside of North America
were up over 20 percent, with strong growth in China, Brazil, Russia and India.
Minus charges, GM
posted an adjusted net loss of $350 million, or 62 cents per share in
the period, compared to an adjusted net loss from continuing operations of $10
million, or 1 cent per share, in the first quarter of 2007. The net loss for
the quarter from operations was about half of what analysts were expecting.
Time Warner is going to spin off its cable division.
Asian markets were lower
overnight except China which gained another 4% and has now jumped 10% in the
last few days after being down 50% since last October.
Gold is down another $7 this
morning and Oil has a $116 handle. Treasuries are flat.
This plan seems to be a good start.
From the WSJ:
Federal Deposit Insurance Corp. Chairman Sheila Bair is finalizing a
legislative proposal that would allow the Treasury Department to make direct
loans for close to one million homeowners in the latest government initiative
to stabilize the slumping mortgage market.
The plan would authorize the new government loans so that borrowers
could pay down up to 20% of the principal they owed on their mortgage,
according to a confidential draft of the plan obtained by The Wall Street
Journal. That would mean that if a homeowner owed $100,000 on a mortgage, the
government could loan up to $20,000 to pay down the principal. "This
approach is scalable, administratively simple, and will avoid unnecessary
foreclosures to help stabilize mortgage and housing prices," the draft
Ms. Bair, a White House appointee, has raised concerns that existing
efforts to stem mortgage foreclosures are not effective enough. One difference
between her plan and another measure advancing through Congress is that the
FDIC proposal would not provide insurance for refinanced loans. Instead, it
would offer smaller loans to make existing loans more affordable. According to
the draft, borrowers would still be required to pay their mortgage and the new
government loan, but they would not have to make any payments on the Treasury
loan for the first five years. During that time, investors in the loans would
pay interest to Treasury, and after five years homeowners would begin repaying
the Treasury loan at fixed Treasury rates. For loans to qualify, mortgage
investors would "pay Treasury's financing costs and agree to concessions
on the underlying mortgage to achieve an affordable payment."
To modify one million loans, the FDIC estimated it would require a $50
billion public debt offering. Treasury would recoup the costs because it would
have the first priority to recover funds if homes are sold, refinanced, or if
the borrower goes into default. *****
Investors Intelligence had 40% bulls and 32% bears in the latest
at 30 pennies more than we sold it four weeks ago. Since then Icahn has been given two board seats and we think he will
stir things up now that he is on the board. We have room to add more at lower
prices. The improvement in the portfolios over the last month gives us more
comfort in owing a speculative value stock like MOT.
Stocks are running up (DJIA up
100 points at 10am) ahead of the interest rate decision of the Fed at 1:15pm.
That is worrisome.
European bourse indexes closed
mostly higher. Mexico was fractionally higher and Brazil gained over 1%.
We re-purchased Fifth
Third in measured amounts in accounts. We have been in and out of
the shares without making any money over the last few years but not losing much
either as the share price dropped from $50 to $20. FITB announced earnings last
week and also sold $750 million in ten-year notes with a 6.25% interest rate
and $350 million in preferred shares with an 8.875% dividend. The fact that
FITB raised its dividend recently suggests that the FDIC is complacent about
their balance sheet. We have room to buy more.
The Fed dropped the Fed Funds
rate to 2% and the Discount rate to 2.25%. The statement said:
Federal Open Market Committee decided today to lower its target for the federal
funds rate 25 basis points to 2 percent.
Recent information indicates that economic activity remains weak.
Household and business spending has been subdued and labor markets have
softened further. Financial markets remain under considerable stress, and tight
credit conditions and the deepening housing contraction are likely to weigh on
economic growth over the next few quarters.
Although readings on core inflation have improved somewhat, energy and
other commodity prices have increased and some indicators of inflation
expectations have risen in recent months. The Committee expects inflation to
moderate in coming quarters, reflecting a projected leveling-out of energy and
other commodity prices and an easing of pressures on resource utilization.
Still, uncertainty about the inflation outlook remains high. It will be necessary
to continue to monitor inflation developments carefully.
substantial easing of monetary policy to date, combined with ongoing measures
to foster market liquidity, should help to promote moderate growth over time
and to mitigate the risks to economic activity. The Committee will continue to
monitor economic and financial developments and will act as needed to promote
sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; Timothy F. Geithner, Vice Chairman; Donald
L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H.
Stern; and Kevin M. Warsh. Voting against were
Richard W. Fisher and Charles I. Plosser, who preferred no change in the target
for the federal funds rate at this meeting.
related action, the Board of Governors unanimously approved a 25-basis-point
decrease in the discount rate to 2-1/4 percent. In taking this action, the
Board approved the requests submitted by the Boards of Directors of the Federal
Reserve Banks of New York, Cleveland, Atlanta and San Francisco. *****
Gold finished at $865 and Oil was $114.85. Treasuries rallied with the
two-year at 2.29% and the ten-year at 3.78%.
The DJIA reversed its gain160 point gain in the last hour and closed
lower on the day. We liked it up 160 points better.
At the bell the DJIA was down 20 points at 12815. The S&P 500
topped 1400 in the contra hour but closed down 6 points at 1385. The NAZZ
dropped 12 points to 2412.
Breadth ended 5/4 positive on the NYSE and the reverse on the NAZZ and
volume was light.
There were 55 new highs and 65 new lows on the NYSE.
The bears won the daywhile the bulls won the month.
29 April 2008
While we were away Gold dropped
to $888, Treasuries backed up in yield with the two-year rising to 2.30% this
morning and the ten-year yield rising to 3.80%. Oil touched $120 last Friday
and is now at $118 as the day begins. The major stock market measures moved
slightly higher in our absence and futures are suggesting a flat opening for today.
Mars Candy is buying Wrigley
for $22 billion with Warren Buffet buying a minority position. Mars and Buffet
are paying 32 times earnings for WWY. What was that we heard about Buffet buying
is taking a 5% position in Ford. He owns 100 million shares now and is
tendering for 20 million at $8.50. He could have purchased the 20 million on
the open market and then declared his ownership. And he probably could have
purchased the shares cheaper than the $8.50 he is going to pay. Our guess is
that he wants the publicity but paying $5 million for the privilege seems a bit
steep. Kerkorian has owned Chrysler on which he made
good money, GM which he lost money and now Ford.
While we were away we
addedMicrosoft and Yahoo to our larger accounts. MSFT is
bidding for Yahoo and we think the takeover would be good for both. If MSFT
acquires YHOO we will make money on the YHOO and may suffer a short term
downdraft on MSFT. If MSFT abandons the bid YHOO will drop to the low $20s but
MSFT will rebound to the mid $30s. At least that is our scenario. Our hope is
that the folks at YHOO realize the deal is good for both companies.
We added shares of both stocks to more accounts
today and reduced the Yahoo position in a few accounts at a scratch to bring
the investments in line.
We also boughtStarbucks at $15.75 in small amounts in our larger accounts. The
shares dropped $3 in price when we were away on negative earnings and sales
news. The shares are currently at 17 times earnings and we view the present
price as an opportunity to being accumulating shares.
Since the markets are at trading highs for the range of
the last two months we are selling
our two speculative low-priced stocks Qwest
and RF Micro for small profits. *****
We added shares of Evergreen
Solar to accounts that own it and some other accounts. *****
Asian markets were mostly higher
in Tuesday trading and European bourse indexes closed fractionally lower on the
Gold ended the day at $877 down
$19 and Oil was down $3.11 at $115.65. The euro was worth $1.55 and it takes 103
yen to buy one dollar. Treasuries were flat with the two-year at 2.34% and the
ten-year at 2.82%.
We sold Schering
Plough for a nice one month profit. We bought the $4 sell off at the
end of February and the shares are now back to the
price at which the sell-off began.
CBS reported a 14 percent increase in first-quarter earnings
Tuesday as higher syndication sales from "CSI" made up for not having
the Super Bowl broadcast this year. CBS owns the network, 30 TV stations, the
Showtime cable channel, Simon & Schuster and a major radio business, earned
$244.3 million in the first three months of the year, up from $213.5 million a
year ago. Profits per share rose to 36 cents, beating the 33 cents predicted by
analysts polled by Thomson Financial, and also above the 28 cents a year ago.
The latest figures got a lift from a lower share count due to a stock
repurchase program. Revenue was essentially flat at $3.65 billion versus $3.66
billion a year ago, but still came in ahead of estimates of $3.55 billion. Separately,
the company also announced it was raising its dividend from 25 cents to 27
cents per share.
The action in MSFT and Yahoo today suggests traders believe a higher bid is coming.
The DJIA lost 40 points to close
at 12830. The S&P 500 was down 5 points to 1390 and the NAZZ gained 2
points to 2426.
Breadth was 3/2 negative and
volume was light.
There were 35 new highs and 70
new lows on the NYSE.
Today was a draw between the bulls and bears. The
Fed announces its interest rate news at 1:15pm tomorrow which is also the last
day of the month.
22 April 2008
We will be traveling for the next week. Our next post
will be Tuesday April 30.
Jim Cramer has an interesting
post on National City that expands
on what we said yesterday:
For pure laughs, go read the National City (NCC) conference call
yesterday, the one where they destroyed what was remaining of their common
shareholder base with the partial takeunder by
Corsair, an unknown private-equity fund that surfaced to inject $7 billion to
save the bank.
We have had some remarkably poorly run banks in this go-round of subprime, including Downey Savings (DSL) (takers
anyone?) Wachovia (WB) and Washington Mutual (WM) , as well as some nonbank
fiascos like E*Trade (ETFC) and CIT (CIT) .
But this Nat City takes the cake. They have to be the most stupid and
least rigorous lender since the S&L crisis. They have $10 billion in home
equity loans that have got to be among the worst ever issued. I swear, I bet that many of these are going to turn out to be
out-and-out fraud by the borrowers. Miraculously, Nat City found an even more
stupid soul, Merrill's (MER) Stan O'Neal, to sell its main originator of
this junk to, something that brought O'Neal down and almost brought Merrill
down. Some would say that the latter is still in question. I have no idea what
would have happened to NCC if they hadn't sold it before the height of the
fraud, the first quarter of 2007.
Nat City is not alone. The whole of Ohio seems consumed by crummy
lenders: Huntintgon Bancshares (HBAN)
and Fifth Third (FITB) being the most obvious. Both need infusions, I
believe; maybe Corsair's got enough juice to give them some life.
But Nat City is by far the worst, with loans to every imaginable sort
of bad borrower throughout Ohio and Florida. The sheer volume of specious
lending is remarkable, coupled with the moronically
aggressive buyback that the company did when the stock was much, much higher.
That's the subject of a lot of derision on the call, by the way. That and
repeatedly unanswered questions about all of the attempts to sell itself and
how they apparently broke down.
I don't know what Corsair saw in this darned thing. So far, those who
have tried to do these infusions don't have much to show for them. Maybe
Corsair says we are far enough along that it is time.
All I know is that everyone involved, not just the head of mortgages
and risk control, should be broomed here. That hasn't
happened at Washington Mutual, which is run by real knuckleheads, so I guess it
won't happen here either.
But you can't believe the breadth and depth of bad lending, including
condo construction loans in Florida that are just now going bad.
I think we are further along in losses than we were for these banks. My
target, established about a year ago, was $400 billion in losses -- a number
the Fed probably thought was ridiculous, but it was simply arrived at
from the number of exotic loans taken from 2005 to 2007 of the 14 million homes
that exchanged hands and then adjusting for the adjustable rates and geographic
dispersion. We hit $300 billion yesterday, but if you go read the NCC you will
know that the next $100 billion is already upon us.
This bank is a travesty. It reminds me of the worst of 1989, the Centrusts and the Columbias and
the Gunbelts, and the defrauding that took place here
must have been monumental.
At least, unlike CIT, they had the sense to find a sugar daddy. But,
unlike CIT, which just priced its crummy merchandise, the cost was an almost
total wipeout for the chumps who believed in these jokers. *****
Royal Bank of Scotland is seeking
$24 billion in capital to replace money lost on bad loans and to shore up
capital because of acquisitions. They are the folks who raised their bid twice
to buy ABN AMRO at top dollar just before the bottom fell out of banking
stocks. And the folks who run royal Bank and National City and Fifth Third et
al still have their jobs. As we have said capitalists apply the rigors of
capitalism to employees with abandon but the CEOs and other officers are
Asian markets were mixed small
overnight and European bourses are also mixed at midday. Gold is at $915 and
Oil has a $117 handle. Treasuries are higher in yield.
Texas Instruments beat last night but suggested weakness in the
high end chip for mobile phones and is trading lower this morning.
AT&T was in line and is higher. DuPont and McDonalds beat
and are lower.
Tellabs had an adjusted profit
of $32 million, or 8 cents a share, which excludes a pretax charge of $22.6
million. That compares with pro forma earnings of $34 million, or 8 cents a
share, a year ago and beat the 4-cents-a-share target analysts were looking
for, according to Thomson Financial. Total sales for the quarter were $464
million, 3% better than the year-ago level of $452 million and more than the
$453.7 million analysts expected. However, Tellabs
CEO Rob Pullen called the industry environment "challenging" in an
accompanying statement. "Going forward, our top priority is to free up
resources to innovate for customers," he said. Looking ahead, Tellabs says it expects sales in the second quarter to be
in a range of $425 million to $445 million, with gross margins shrinking to 31%
from the 39% level in the first quarter. Analysts had been looking for sales of
$474.9 million and a gross margin in the 36% to 37% range.
TLAB is off $1 today at $5. It is
priced at 65% of sales and has $3 per share in cash with no debt. The sell off
sales fell during March
after making a surprise climb in February. Home re-sales fell to a 4.93 million
annual rate, a 2.0% decrease from February's Un-revised 5.03 million annual
pace, the National Association of Realtors said. Sales were down 19% from the
year-earlier month. The median home price was $200,700 in March, up from
$195,600 in February but down from $217,400 in March 2007.
Gap moved back under $18 and we
rebuilt our holdings in the shares. As we have mentioned before we like their
clothes this year. Retailers are under pressure today as new short positions
are being initiated.
Oil ended at $119.48, a new
record high. Gold was $920. Treasuries were flat with the two-year at 2.20% and
the ten-year at 3.73%. The euro hit $1.60 and the yen was 103 to the dollar.
European bourse indexes closed large fractions lower.
The markets failed at resistance.
At the bell the DJIA was down 105 points at 12722. The S&P 500 lost 12
points to 1376 and the NAZZ dropped 31 points to 2376.
Breadth was 3/1 negative and
volume was light.
There were 90 new highs and 110
new lows on the NYSE and the ratio was 4/1 new lows to new highs on the NAZZ.
The bears are back. Hopefully the bulls will be in control by the time we
return next Tuesday.
21 April 2008
Spring has truly arrived in the
land of milk and honey and the full moon made its appearance especially
delightful. And the big up move on Friday also helped.
The markets are still range bound
and it will take a break above 1405 on the S&P 500 to suggest that the
current up move is more than positive action in a confused market.
Overnight Asian stocks were
higher but European bourses are lower at midday. Oil has a $117 number as the
trading day begins in NYC and Gold ahs tacked on $10.
has a column in the NYT today in which he gives three scenarios for the current
price of oil. http://www.nytimes.com
Last week, oil hit $117.
It’s not just oil that has defied
the complacency of a few years back. Food prices have also soared, as have the
prices of basic metals. And the global surge in commodity prices is reviving a
question we haven’t heard much since the 1970s: Will limited supplies of
natural resources pose an obstacle to future world economic growth?
How you answer this question
depends largely on what you believe is driving the rise in resource prices.
Broadly speaking, there are three competing views.
The first is that it’s mainly
speculation — that investors, looking for high returns at a time of low
interest rates, have piled into commodity futures, driving up prices. On this
view, someday soon the bubble will burst and high resource prices will go the
way of Pets.com.
The second view is that soaring
resource prices do, in fact, have a basis in fundamentals — especially rapidly
growing demand from newly meat-eating, car-driving Chinese — but that given
time we’ll drill more wells, plant more acres, and increased supply will push prices
right back down again.
The third view is that the era of
cheap resources is over for good — that we’re running out of oil, running out
of land to expand food production and generally running out of planet to
I find myself somewhere between
the second and third views.
We are more inclined to the first
view that speculation is the reason for the price rise. We think it is the same
as the electricity finagling that occurred in 2002 and eventually led to the
collapse of Enron. Krugman suggests that George Soros holds our view and we like that company. But Krugman says that Soros thinks
the speculation is in the early innings.
National City is not going to be
acquired. Instead it is expected to receive a $7 billion cash infusion and sell
10% of its shares to an investor group at $5 per share. Those are the same
shares that the company itself repurchased last year at $38 power share. And
management keeps its job with this arrangement. What a mess.
The WSJ reported on Saturday
The sharp decline in Chinese stocks is approaching a milestone: With a 4%
drop Friday, the market has fallen by nearly half since its peak last fall. The
decline has wiped out nearly $2.5 trillion of wealth and is testing the
government's apparent resolve to let the market find equilibrium on its own.
The plunge has slashed the
savings of millions of Chinese investors who jumped into the market as it rose
six-fold in two years. It is crimping expansion in the country's nascent
financial sector and may put a squeeze in corporate coffers. But so far, it has
not slowed the world's fastest-growing major economy.
The benchmark Shanghai Composite
Index has lost 49% since topping out, along with other global markets, last
October. The slide was triggered by the global economic slowdown combined with
the lofty valuations of Chinese stocks. It accelerated recently as investors
became convinced the government would not intervene to stop the fall. The index
finished Friday at 3094.67, down 4%.
While Chinese shares have been
among the hardest-hit anywhere, some other emerging markets have also had a
tough time, falling 6% so far this year after rising
an average of 32% a year over the past five years. The other big loser is
India, which was the other big winner over the past few years. The Mumbai Sensex
Index (India) is down 19% so far this year.
Arjun Divecha, an emerging-markets specialist who manages about
$20 billion for GMO LLC, says that until recently, investors bought pricey
stocks in both markets because these economies were seen as the
fastest-growing. "But with U.S. and global growth expectations slowing,
it's the markets that were bid up the most that are getting hurt the most
now," he said.
So much for the
wonder of the emerging markets being immune to happenings in the U.S.
Bank of America's net fell 77% to
$1.21 billion, or 23 cents a share, in the first quarter, compared with $5.26
billion or $1.16 a share, a year earlier amid higher provisions for credit
losses and at least $1.91 billion in write-downs. Net revenue fell 6.3% to $17 Billion.The Company had $1.31 billion in trading-related
losses, which includes write-downs of $1.47 billion on collateralized-debt
obligations and $439 million on leveraged loans, compared with year-earlier
trading income of $1.66 billion. It increased its provision for credit losses
to $6.01 billion from $1.24 billion amid rising credit costs in the home-equity,
small-business and homebuilder portfolios.
The Bank of England launched a
50-billion-pound ($100-million) plan to allow banks to swap temporarily their
mortgage-backed and other securities for U.K. Treasury bills, to ease the
current credit crunch. The central bank said that the swaps will last for one
year, but be renewable for up to three years and that the risk of losses on the
securities will remain with the banks. It said the swaps will be available only
for assets in existence at the end of 2007.
Stocks opened lower on Monday
morning and after an hour of trading the DJIA were down 90 points. The first
few hours of trading after option expiration often experience stocks moving in
the opposite direction of the previous close as positions are squared. The
afternoon trading will give an indication if the up move last week was a wonder
or the beginning of something more.
Oil ended at $117.47 up 78
pennies and Gold gained $5 to $922. Treasuries were flat and a euro would buy $1.59
while it takes 103 yen to buy a dollar. European bourse indexes were lower by
1% and more while Mexico and Brazil gained fractionally.
The DJIA lost 30 points to close
at 12820. The S&P 500 gave up 2 points to 1388 and the NAZZ gained 4 points
Breadth was 3/2 negative and
volume was light.
There were 120 new highs and 70
new lows on the NYSE and new highs were 60 and new lows 100 on the NAZZ.
The bulls won the day by holding most of Friday’s gains and
the last hour actually saw improvement in market measures.
18 April 2008
Citigroup reported its second straight quarterly loss on at least
$15 billion of write downs and increased loan losses as customers fell behind
on home, car and credit-card payments.
The first-quarter net loss of
$5.11 billion, or $1.02 a share, compared with earnings of $5.01 billion, or
$1.01, a year earlier, New York-based Citigroup said in a statement. While the
loss was worse than the $4.75 billion predicted by analysts in a Bloomberg
survey, revenue exceeded their estimates. The shares climbed 6 percent to $25.46
in early New York trading.
Google well exceeded expectations and traded $70 per share higher
overnight. The Google news coupled with good news from Honeywell and Caterpillar
plus the announcement that Citi would cut expenses by
10% (read 9000 layoffs) have the markets in a good mood this morning.
Today is a Triple Witch day as
options and futures expire. Asia was mostly lower overnight with China down
another 4%. That Shanghai market has been doing a real tank lately but the talking heads haven’t been mentioning
that fact. European bourse indexes are 1% and higher at midday and Gold is down $3 while Oil is off over $1 with a $113 handle.
Treasuries are giving more ground with the short end of the curve moving higher
in yield this morning. the reality of no imminent
interest rate cuts is in traders’ minds. Moreover the reversal of all the
buying that pushed short rates lower when extreme risk was perceived the
marketplace is now being reversed.
The NYT has a story on the high
price of Organic foods: http://www.nytimes.com
Folks will complain about the high price of organic milk at $7 a gallon but
think nothing of paying $3 for a gallon of Cherry
Coke which has absolutely no food value, or that the price of a loaf of
organic bread is $4 when they will buy a bag of Cheetos for $2. To each he/his
Wal-Mart is now the largest seller of
Organic foods. Wal-Mart selling organic foods. There
has been talk of Wal-Mart importing organic fresh produce from China. We have
found talk but no proof of that. But we do know we stopped eating canned
oysters because they are produced in China as is most of the frozen shrimp
available. Organic produce from China
isn't turning up at supermarkets stateside just yet. Organic Fresh vegetables
are not yet shipped to the U.S. because vegetables and fruits don't travel
well, so most of China's organic produce is shipped to closer markets such as
Japan, Hong Kong, and Taiwan. But organic soybeans, rice, and other grains,
along with frozen vegetables and fruit concentrate from China are all making
their way into processed organic foods that wind up on store shelves in the
U.S. food brokers say. U.S. government agencies don't collect data on the value
or country of origin of organic food imports.
Organic food from China is like workers rights at Wal-Mart. *****
The bank stocks are on fire this
morning as the future markups in the debt instruments that are currently being
marked down is the thought in traders’ minds. Don’t ask if that is reasonable-
it is the reality this morning. Of course next week the losses currently being
experienced could take over traders’ minds again.
We of course are ruing our inability
to hold bank stocks. But we comfort ourselves with the fact that our quick
exits at much higher prices in the last year have saved us a lot of moiety even
though our trades have not been profitable.
on CNBC observed that the elimination of the uptick
rule on short selling may be the reason for the massive up moves that the
markets have been seeing lately. That is because the shorts can cover and then
go short again without having to worry about getting their trades completed.
Since he is on the floor we assume he knows. And it makes sense to us.
That thought makes it important
that this move on top of Wednesday’s up move holds for the bulls to make their
At noon Google is up $95 per
share. Even on a $500 stock that is verrrrrrrrrrrrry
impressive. There are some shorts holding their shorts.
Evergreen Solar makes produces solar cells for
solar panels. We have been trading it in our own accounts and today ESLR
reported sales and earnings that were OK but was less than enthusiastic going
forward. ESLR is a true anchovy and when the shares dropped a dollar in early
trading we purchased a small amount in our large/aggressive accounts.
So far today the rally is great.
Good volume, good breadth, new highs stepping out. But the bulls are only half
way there and the bears may have a final hour trap set. With the major measures
all up 2% and the S&P 500 at 1393 it is possible that the S&P will
reach up and close at 1415 resistance. The question of the afternoon is do
traders want to b long over the weekend.
Gold ended at $921 down $21.Oil was up $1.89 at $116.75. Treasuries ended
flat on the short end with two-year at 2.17% and better on the long end with
the ten-year at 3.51%. It takes 102 yen to buy a dollar
and $1.55 to buy one euro.
European indexes closed higher
across the continent.
The DJIA gained 230 points to
12850. The S&P 500 was up 25 points to 1390 and the NAZZ jumped 60 points
Breadth was 3/1 positive and
volume was moderate.
There were 125 new highs and 65
new lows on the NYSE and 80 new highs and 75 new lows on the NAZZ. The NAZZ
crossed for the first time this month.
The bulls own the day and the
week and are winning the month. But the bears still have the year well in hand.
17 April 2008
a graphic on its screen this morning saying that the four week moving average
of jobless claims was down 750 jobs to 376,000 in the latest week. That graphic
demonstrated the ridiculousness of these statistics. 750 jobs in an economy of
135,000,000 jobs is not a measurable statistic.
lower overnight except China which was down 2%. European indexes are mixed at
midday and Gold is at $951 with Oil touching $115. Treasuries are under
pressure again today from the inflationary numbers of yesterday.
IBM beat, Nokia didn’t, Pfizer was
a few pennies short and Mother Merrill
announced less than expected holdings in subprime but
took another $8 billion write-off and said she will fire another 5000 folks. Ah
capitalism, the folks who followed orders pay for the mistaken instructions of
indexes closed lower across the continent.
We sold the balance of our SPDR Bank ETF this morning for $1 per
We also sold half our Talbot’s when it drooped down another $1.25
today. We think the credit line brouhaha is just that but… We are keeping the
other half because we are stubborn and think we will recover our loss on the
half sold when the story plays out in the next few weeks. Credit stories can
move stock prices down more than we have the courage to endure. The other three retailers we own have no
long term debt and good cash positions. *****
Ford has a current equity valuation of
$17 billion including dilution with $168 billion in debt. GM has an equity valuation of $12 billion with a net of $25 billion
closed at $114.78. Gold was $942 and Treasuries lost ground with the two-year
at 2.12% and the ten-year at 3.75%. It takes $1.58 to buy a euro and 102 yen
will purchase a dollar.
measures backed and filled most of the day and closed flat. The DJIA gained 1
point to end at 12620. The S&P 500 rose 1 point to 1366 and the NAZZ lost 9
was 5/4 negative and volume was light.
were 120 new highs and 80 new lows on the NYSE and 50 new highs and 105 new
lows on the NAZZ.
The bulls won the day.
16 April 2008
profit fell 50 percent in the first quarter after the bank took a provision of
$5.1 billion to strengthen its reserves by $2.5 billion and account for $2.6
billion in losses in its loan portfolio. And the markets are happy with the
results. How times have changed.
Intel's net profit for the three months ended March 29 was $1.44
billion, or 25 cents per share. That's 12 percent lower than a year earlier,
when Intel earned $1.64 billion, or 28 cents per share. But it was in line with
the average estimate of analysts polled by Thomson Financial.
Intel's sales of $9.67 billion --
a 9 percent improvement over last year -- came in slightly higher than Wall
Street's estimate of $9.63 billion. And the markets were happy with the results
and the guidance and the share price rallied in after hours trading. How times
Asian markets were mixed
overnight with Japan up over 1% and China down over 1%. European markets are
mostly higher at midday. Gold is up $6 at $930 and Oil is up another $1 with a
$114 handle. A dollar rise a day keeps the sheiks happy. Treasuries are flat.
CPI was up 0.3% and core 0.2%.
Year over year CPI was up 4% and core was up 2.4%.
Investors Intelligence has 37% bulls and 38% bears in its latest
week. That is the same as the week before.
The DJIA opened 100 points higher
on the JPM and INTC news. Specialists were delighted to short stocks to eager
buyers and now are covering their shorts as the markets come in a bit. The
bulls need to hold these gains to stem the selloff.
On this morning’s rally we are selling Fairpoint for a scratch and selling the
SPDR Bank ETF for a $1 loss in many
accounts. The accounts in which we are selling can use a bit more cash
and we wish to raise cash on this rally and selling the KBE accomplishes the
cash raising while not sacrificing a great percentage return potential.
I like to pay taxes. With them I buy civilization.
- Oliver Wendell Holmes, Jr.
We bought shares of Talbot’s
in our larger accounts at $9.25 down from the $12.40 where we sold two
weeks ago and the $12.85 close of last night.
Talbot’s is down 31%
after the retailer disclosed in a regulatory filing that two banks had
cancelled lines of credit. Lazard Capital
Markets says the cancellation of lines by Bank of America Inc. and HSBC is
more a “perception problem” than reality. They note that the firm had
$127 million in credit lines at the end of the third quarter (which probably
fell in the fourth quarter) but added that the company’s planned inventory
reduction makes it less dependent on these lines of credit. Bank of America
cancelled a $130 million line of credit, while HSBC dumped its $135 million
line of credit. (The latter line is being reduced, in excruciatingly slow
fashion, every month until it runs out in August.) Analysts at D.A.
Davidson & Co. downgraded shares today, estimating the company’s
remaining borrowing facilities at around $125 million. But it will
have to pay $35 million in yearly debt interest and $28 million for the
dividend. The retailer had $35.9 million in cash on hand at the end of
February. Oppenheimer & Co. analysts estimate available credit at about $78
million — $60 million of the dwindling HSBC line and Mizuho & Co.’s new $18
million line. They note that the retailer borrowed $143.2 million at the end of
1Q07 and $102.5 million in 1Q06. “Clearly, TLB will need to find a new form of
financing. But with two major banks walking away it won’t be easy and
financing will not be cheap,” they write. “In our view, TLB best case
scenario is that it will find other LOCs, but at a
much higher cost.”
European indexes closed higher by
over 1% as did Mexico and Brazil. Oil ended at$114.90 up $1.10 and Gold gained
$8 to $932. Treasuries lost ground on statements by Fed member Yellen and the inflationary CPI data. The two-year finished
at 1.98% and the ten-year at 3.69%. The euro was $1.59 and the yen 102 to the
Late in the day we sold VZ for a scratch (we were down $1.25 a share right after buying it
last week) as programs carried the DJIA to up 250 points. It’s an anchovy and
the markets are as ebullient today as they were morose yesterday. *****
The DJIA gained 254 points to
close on its high for the day at 12620. The S&P 500 gained 30 points to
1365 and the NAZZ jumped 65 points to 2350.
Breadth was 4/1 positive on the
NYSE and volume was better than on the selloff days but still only moderate.
There were 130 new highs and 80
new lows on eh NYSE and almost the reverse of those numbers on the NAZZ.
The bulls caught the bears short and napping.
15 April 2008
Tax Day 2008 Thoughts
State Street Bank beat estimates on its earnings as did Johnson & Johnson and those news events
have rescued stocks for the opening after futures traded lower in Europe
overnight. Northern Trust, US Bank and Commerce Bank also beat estimates.
Asian markets were up slightly
overnight and European bourse indexes are mixed at midday. Gold is up $7 to
$932 and Oil has a $112 tag as the trading day commences. Treasuries have a
The Producer Price Index was up
1.1% in March, ex food and energy PPI was up 0.2%. Treasuries have backed off
on that news. Core PPI was up 2.75 year over year which is much higher than the
Fed is comfortable.
The SPDR Bank ETFs that we purchased last week have not acted the way
we thought they would in this sell off in bank stocks. They have been more
volatile than we expected. In hindsight we ascribe the action to the fact that
hedge funds and other traders are using them as rapid trading vehicles. We are
going to lessen our exposure by selling the Regional Bank ETF for a $2.50 per
share loss. We don’t like taking this loss but since the ETFs
are not performing as we envisioned we are biting the bullet.
As we mentioned above State StreetBank reported better than earnings and the shares rose $4 to $79 in early trading. Then in the conference call
State Street said that it has
portfolio problems and that sent the share price down by $10 to $69 and
affected all the other banking stocks and in a spillover the markets in general
as the DJIA moved from up 70 points to flat after one hour of trading.
The State Street saga continues as the share price (and the DJIA) has
now recovered to $74. The volatility in this supposedly staid issue
demonstrates the impact of hedge fund trading to the day to day actions of the
markets. Some hedge funds obviously began shorting the shares during the
conference call and that set off a wave of me
too trading that culminated in the $10 drop. Then some other big boys and
girls joined the fray on the long side and the shares rebounded to unchanged on
the day on 4 times the normal daily volume in the first two hours of treading.
Crocs is down from $75 8 months
ago in September 2007 when most analysts had a buy on the shares to $10 today
on reduced earnings and sales guidance. Most analysts now have gone to sell.
Thanks a lot.
Since the S&P 500 can’t recapture the 1340 level
today and because the Markets are not behaving as we thought they would when we
made our final purchases last week we used the contra hour rally to raise a bit
more cash in our larger accounts by selling Deutsch Telekom and The Gap. We like both but we feel more cash in accounts is a good
European bourse indexes closed
higher across the continent on Tuesday. Oil ended at a new high of $113.75 and
Gold gained $2 to $930. Treasuries were lower on inflation news with the
two-year at 1.83% and the ten-year at 3.60%. The yen was 101 to the dollar and
one euro equaled $1.57.
Entering the final hour of
trading State Street is back under
$70 on much lower volume. The major measures are back to a bit above even on
The DJIA gained 60 points in the
last hour to end at 12365. The S&P 500 rose 7 points to 1335 and the NAZZ
recovered 10 pins to 2286.
Breadth was 5/4 positive and
volume was light.
There were 85 new lows and 60 new
highs on the NYSE.
Today no one won.
14 April 2008
Stocks are going to open lower
today as Wachovia announced a loss for the quarter on $3 billion in write-down
and loan loss reserving. WB also raised $7 billion in capital by selling $3.5
billion of common and $3.5 billion of 7.5% convertible preferred stock.
Asian markets were lower
overnight with Hong Kong and Japan both off 3% and Shanghai down 5%. For those
of us feeling bad about the give up of gains in our accounts it may be noted
that Shanghai is down 50% since last October. Of course it was up 300% in the
preceding two years. But in the what have
you done for us lately market the China markets have some real losers.
Gold is down $8 in the early
going. Oil has a $110 handle and Treasuries are flat.
Retail sales for March were up
0.2% and ex autos sales were up 0.1% which beats last month’s down number and
were better than expected. Unfortunately the gain was aided mightily by a rise
in the price of gasoline.
Blockbuster has bid $6 per share for Circuit City.
The drop in GE on Friday helped initiate the sell off that was probably ripe to
occur anyway. GE derives a good chunk of its earnings from its finance
arm.But the miss was only 7% and
earnings will be higher for the year.
We have been trading GE for the
past year and have traded versus holding it because we expected the street to eventually recognize that
earnings are finance related.. We were surprised that
the share price had not been slammed earlier and are still amazed that until
last Friday the analysts had not lowered their ratings or at least acknowledged
the potential for trouble. But Wall Street is populated by lemmings and the emperor’s subjects who are unable to
think for themselves.
And so GE met reality last
Friday. We took a position because finally the myth of ever-growing earnings
was broken and the drop in the share price created a trading opportunity. There
may be more on the downside but we do think that the earnings number was a kitchen sink number and that next
quarter the surprise will be to the upside.
European stock indexes closed
fractionally lower on Monday.
Oil settled at $111.76 up $1.65
and Gold was up $1 at $927. The yen was 100 to the dollar and the euro equaled
$1.56. Treasuries were flat on the day.
The DJIA closed down 13 points at
12313. The S&P 500 lost 4 points to end at 1329 and the NAZZ dropped 15 to
Breadth was 3/2 negative and
volume was light.
There were 90 new lows and 50 new
highs on the NYSE.
The bears won the day.
11 April 2008
GE missed this morning and turned Europe lower as well as futures
in the U.S. The shares are off $4 in pre-market trading. GE blamed its Finance
business. The good thing about the miss is that for the first time since the
Welch era began GE probably is releasing real numbers. The accountants finally
demanded the markdowns in the finance unit. And we would guess that as long as
they were going to take a hit in the marketplace that GE added a few items for
future positive earnings surprises. The folks on CNBC, which is owned by GE,
are falling all over themselves to ascribe the miss to the economy and not
their great CEO Immelt. The shortfall was only 8% and left earnings flat.In the Welch era businesses were sold to smooth
earnings and Immelt, the successor CEO, has continued to do that. In fact GE
tried to sell a business during the quarter which probably would have saved
earnings but the sale fell through.
It is not the end of the world.
The crisis the economy is not going to end overnight. The bottoming process in
stocks -which will precede the turn up in the economy by six to nine months- is
Asian markets closed before the
GE news and most were up 1% to 2%. European bourse indexes are lower at midday.
Gold is down $3 and Oil has a $110 handle. Treasuries are flat.
The University of Michigan
Confidence Reading was 63 which is the lowest reading since March of 1982.
Reality strikes. These measures are good for traders and talking heads and
We bought GE
in accounts at $32.75 which is a 3.8% yield. We also added Gap to accounts that were not part of yesterday’s purchase. *****
1340 on the S&P 500 is support and the also the
trend line on the 20 dma and 50 dma.
At noon stocks are currently bouncing off that level and have been touching it
for the last hour. Bulls want it to hold, bears want to break it.
European shares ended lower after earnings
from U.S. industrial bellwether General Electric raised concerns for the
health of Continental rivals like Siemens and Philips Electronics. Most indexes
were down over 1%.
Analysis of GE earnings from realmoney.com:
General Electric reported first-quarter 2008 EPS
of 44 cents on revenue of $42.2 billion. This is a dramatic miss on both the
top line and the bottom line. The miss was primarily driven from the financial
services business. According to management, a large asset sale fell through
when the purchaser could not obtain financing. The shortfall in the quarter
came toward the end of March. As GE is a conglomerate of many businesses,
however, we need to investigate the results for each part. Despite the problems
in financial services, GE did generate growth as orders rose 8%, revenue rose
8% and asset growth was 20%.
Infrastructure revenue rose 23%, and segment
profit rose 17%. Major equipment orders rose 11%, to $12.5 billion. Aviation
orders are lumpy, being up 66% in fourth quarter 2007 but declining 21% in
first quarter 2008, however, the backlog is building as orders were 1.3 times
shipments. Energy orders rose 59%, thermal orders rose 125%, and wind orders
rose 49%. Oil and gas orders up 7% and transportation orders up 25% are both
characterized as lumpy.
revenue was flat, and segment profit dropped 17%. Orders rose 2%, and service
backlog rose 7%. Comparisons reflect a change in the company's revenue
recognition method that was implemented last year.
and appliances revenue rose 1%, and segment profit declined 16%. Again, this
segment is facing a tough U.S. consumer market with growth around the globe.
The U.S. appliance industry was down 10% in units. U.S. orders declined 5%,
while Asia and Latin American orders rose 20%. Enterprise solutions were
strong, with revenue rising 8% and segment profit soaring 15%.
Universal revenue and segment profit each rose 3%. This marks the sixth
consecutive quarter of positive earnings growth. Prime time is expected to
finish No. 2 in the ratings. Also, there were strong DVD sales for NBC
Universal-produced titles such as "Heroes," "House" and
"30 Rock" (please note that "House" is broadcast on the Fox
network). Local markets were challenging as ad spending declined 11%.
Entertainment, information and cable were the bright spots with great results
from USA, Bravo and Sci-Fi networks. NBC Universal is
working hard on its cost structure.
financial services environment is weak as the global commercial real estate
market sales declined 60%, the leveraged loan market declined 41% and U.S. capex markets declined 7.2% in first quarter 2008. GE
funding was in good shape having closed on $35 billion of long-term debt
issuances in the quarter. Demand for GE commercial paper is strong, spreads
have come down, and credit default swap rates are more normal. Commercial
volumes were put on, with 40 basis points of higher spreads. Return on equity
for this segment was 20%.
financing saw 30-day delinquencies rise 10 basis
points, to 1.36%, still at historic lows. GE is on track to sell the U.S. PLCC
and the rest of the Japanese businesses. The big miss came from commercial
finance, where GE took $270 million of negative marks and impairments vs. plan.
In addition, $100 million of real estate gains were pushed out of the quarter,
and other asset sales in progress did not get completed. Some real estate sales
were completed in April. Asset quality is stable. Global originations were good
with assets up 27% and 19%, without forex changes.
Money had a tough quarter but was in line with expectations. Revenue rose 7%,
while segment profits declined 19%. Asset growth was up 21% and 8%, without forex
translations. Thirty-day delinquencies rose 42 basis points, to 5.64%, with North America rising
103 basis points, to 5.75%.
operating cash flow was $4.9 billion. General Electric paid $3 billion in
dividends and repurchased $1 billion of stock. The company started the quarter
with $6.7 billion of cash, ended the quarter with $5 billion in cash and
lowered debt levels during the quarter.
fiscal 2008 EPS guidance of $2.42 was lowered to a range of $2.20 to $2.30.
This equates to a flat to up 5% growth
in earnings for the year vs. a prior expectation of 10% year-over-year growth.
adjustments to the 2008 guidance were as follows:
infrastructure up 1
financial services down
8 cents to 17 cents; and
care/industrial/NBC Universal all down 5 cents to 6 cents.
second quarter, GE expects $45 billion in revenue and EPS of 53 cents to 55
Oil ended at $110.30 up 19
pennies. Gold lost $2 to $922. Treasuries were better with the two-year at
1.74% and the ten-year at 3.47%. The euro equaled
$1.58 and the yen was 101 to the dollar.
The DJIA closed down 250 points
at 12330. The S&P 500
broke the important support level of 1340 to end down 27 points at 1333.
The NAZZ dropped 60 points to 2290.
Breadth was 4/1 negative and volume
was about the same as yesterday.
There were a combined total of
200 new lows and 55 new highs.
The bears are back in
control for now.
10 April 2008
Asian markets were lower overnight except Shanghai’s
which rebounded 1% from the 5% sell off of Wednesday. European bourses are 1%
and more lower at midday. The Bank of England cut its
key lending rate to 5%. Gold is flat and Oil is trading at $111. Treasuries are
firmer as the trading day begins.
Yahoo is trying to hook up with AOL to thwart the
Microsoft bid. Company executives who have made mistakes often make more
mistakes to stay in power.
Retail sales for March were terrible. The
recession, cold weather and early Easter were the culprits. Our take is that
the share prices reflect the reality. American Eagle
same store also were down 12% and Chico’s were down 18%. Saks
were down 2%.
Schering Plough popped back to near our recent purchase price and we
sold the shares we bought on the Time Warner sale. After purchase of the last tranche we realized the SGP holding was greater than we
wanted. We invested the proceeds in Verizon
to own for a while. We are also adding more Saks today on the sell
off and we added additional shares of SPDR Regional Bank ETF which is 5%
lower than our purchase of a few days ago. *****
McCain is going to pick Condoleezza Rice as his
running mate. They will win the November election and McCain’s melanoma will
resurface and he will die during his first term. Rice will become the first
black and first woman president. Far out and you read it here first.
Cisco is higher today after Morgan Stanley
said it may beat analysts' revenue estimates in its fiscal third quarter.
``Mid-quarter checks with resellers, distributors, and component suppliers suggest
that end-demand held up through the end of March,'' analyst Scott Coleman wrote
in a note to investors.
The broad Lehman Brothers U.S. Aggregate bond index
-- which tracks taxable bonds, including Treasury notes, corporates
and some mortgage securities -- is up about 2.3% since the start of this year
through April 4. Yet a fifth of all investment-grade U.S. taxable bond funds
tracked by Morningstar Inc. are in the red for that same period. A few bond
funds that placed big bets on mortgage securities have posted shockingly big
drops. The Regions Morgan Keegan Select Intermediate Bond fund is down 44%
since the start of the year and 72% over the past year. State Street Global
Advisors Yield Plus and Schwab YieldPlus have fallen
18% and 23%, respectively, since the start of the year.
In February Americans had $951.7 billion in total
revolving debt, most of it on credit cards -- a seasonally adjusted annualized
increase of 5.9%. Although that increase has slowed from the 7.1% pace in January,
it is up 8.2% from year-ago levels.
European indexes closed fractionally lower. Today
it would take $1.57 to buy one euro and the dollar was worth 98 yen.
Mexico closed higher with Brazil lower. Gold lost
$6 to $931 and Oil gained $2 to end at $111.10. Treasuries were weaker with the
two-year at 1.80% and the ten-year at 3.53%.
We bought Liz
Claiborne and The Gap in our larger/trading accounts. We’ve
been trading LIZ profitably the last few times after an ignominious start and
we like the look that GPS has in its stores now. From their same store sales
numbers of down 18% we must be among the few who do.
The DJIA was up 100 points for most of the day but
surrendered a good chunk in the final hour to close up 52 points at 12580. The
S&P 500 rose 6 points to 1360 and the NAZZ jumped 30 points to 2350.
Breadth was 5/4 positive and volume was again
There were 45 new lows and 40 new highs on the NYSE
and 115 new lows and 35 new highs on the NAZZ.
The bulls took the
9 April 2008
Asian markets were mostly lower overnight with
Shanghai down 5%. Shanghai is now down 50% since last October.
European bourse indexes are lower at midday and
Gold is down $10 while Oil has a $108 handle in the early going. Treasuries are
The Wall Street Journal reports Citigroup (C) is
close to unloading about $12 billion of leveraged loans and bonds in a deal
with a group of private-equity firms, according to people familiar with the
matter. Citigroup originally issued the debt to help finance the
leveraged-buyout boom. It hoped at the time to pass much of it on to investors.
But when the credit crunch hit last summer, demand for the risky bonds and
loans dried up, leaving Wall Street firms such as Citigroup holding tens of
billions of dollars in unwanted debt. Under the planned deal, Citigroup will
sell the loans and bonds to buyout firms including Apollo Management, TPG and
Blackstone Group, people briefed on the deal said. The firms are expected to
pay 90 cents o the dollar.
In a speech on Tuesday, Paul A. Volcker
the former Fed chief of the 1980s, remarked that the current chairman,
Ben S. Bernanke reached “the very edge” of the bank’s legal authority in
orchestrating last month’s bailout of the beleaguered investment bank Bear Stearns.
“Out of perceived necessity,
sweeping powers have been exercised in a manner that is neither natural nor
comfortable for a central bank,” Mr. Volcker told members of the Economic Club
of New York. His remarks came on the same day that Alan Greenspan Mr. Bernanke’s immediate predecessor as chairman, deflected
criticism of his tenure in an interview with The Wall Street Journal,
dismissing as “unfair” claims that his policies stoked an untenable housing
But in defending his own stewardship
of the economy over 18 years, a period of generally healthy growth and low
inflation, Mr. Greenspan was forced to dredge up some painful memories that have
come back to haunt the Fed. “I don’t know of any time when previous chairmen
were so openly discursive about the current arrangements,” said Allan H.
Meltzer, an economist at Carnegie Mellon and the leading historian of Fed
policy. In the past, he said, “they just didn’t discuss.” Indeed, Mr. Volcker
also implicitly questioned Mr. Greenspan’s cheerleading of the “bright new
financial system” that “for all its talented participants, for all its rich
rewards, has failed the test of the marketplace.” In his time as chairman, Mr. Volcker insisted
that the Fed speak in a single, firm voice, and he sought to quell dissent in
its ranks. He faced only one open revolt on the board of governors, in 1986,
which nearly led to his resignation. But it was his challenger, Preston Martin,
who stepped down. Mr. Greenspan continued the autocratic tradition, gaining a
reputation for opaque policy pronouncements that, like Mr. Volcker’s, required
a carefully cultivated expertise to interpret. And he stood firm: in his
interview Mr. Greenspan said he did not regret a single decision he made during
his time as the Fed chairman. Mr. Bernanke, who took over the chairmanship in
2006 promising greater transparency for the central bank, has struggled to
maintain the same level of support.
Minutes released on Tuesday of the
Fed’s March 18 policy meeting revealed strenuous disagreements among top
central bankers, with 2 of the 10 officials present voting against the decision
to lower interest rates by three-quarters of a point. While not unprecedented,
it was the first dual dissent since September 2002. “It’s a club, and the
members of the club tend to be supportive of a club, and particularly of the
chairman,” Professor Meltzer said. “It’s not popular to dissent.” The
dissenters — Richard W. Fisher of the Dallas Fed and Charles I. Plosser of the
Philadelphia branch — said that a rate cut would further fuel inflation, which
has grown faster than anticipated on the back of high prices for gasoline and
food. Mr. Plosser argued that the Fed “could not afford to wait until there was
clear evidence that inflation expectations were no longer anchored, as by then
it would be too late to prevent a further increase in inflation pressures.” The
dissenters also argued that the Fed’s other efforts to restore confidence among
lenders — including its decision to provide cheap loans to investment banks in
exchange for relatively risky collateral — were a more effective and
time-sensitive approach to improving the economy. “Two voting members who
explicitly see the world differently is a notable development,” said Robert
Barbera, chief economist at ITG, an investment and research firm.
Ultimately, the minutes said, “most
members judged that a substantial easing in the stance of monetary policy was
warranted.” At the meeting, most of the members said they believed that the
economy would probably contract in the first half of the year, and they said a
“prolonged and severe economic downturn could not be ruled out.” The housing
slump has shown few signs of recovery, central bankers said in the minutes, and
they predicted home values would continue to drop. Fed officials also confirmed
that the central bank found itself in an extremely difficult situation.
“Members noted that appropriately calibrating the stance of policy was
difficult,” the minutes said, as officials weighed the benefits of lowering
interest rates against the possibility that inflation would get out of hand.
Professor Meltzer concurred. “Bernanke is under tremendous pressure from the
Congress, from the market, and from the president likely,” he said. “As Mr.
Greenspan has discovered, even after you leave, you run into people who
criticize what you did even though they may have applauded it when you did it.”
had bulls and bears both up 1% with bulls at 37% and bears at 38%.
From realmoney.com: If you invested $1000 in the
Russell 1000 Growth on January 1, 1999, your investment is now worth a whopping
$947. This is a return of -0.61% a year. Nearly a decade of ecstasy and
despair, and you've made zip in large cap growth stocks. AND... this analysis is favorable,
since the starting point is before the huge 1999-early 2000 run up!
Citing continued production delays, Boeing cut
the number of expected 787 deliveries in 2009 to about 25, down from its most
recent projection of 109. BA also said the first flight will take place in the
fourth quarter of 2008. At one time, the debut flight was scheduled for August
As we’ve said before, the new technology of
using plastic for the plane’s body is going to be more difficult. We don’t mind
riding in plastic cars but a plastic plane? We don’t ride in metal planes so…
keeping with our theme of improving the quality of the portfolios we sold Alcatel Lucent for a 10% profit and
bought the SPDR Money Center Bank ETF
Gold ended the day up $20 at $927 in NYC. Oil
was up $2.15 to $110.25. Treasuries were firmer with the two-year at 1.75% and
the ten-year at 3.47%. The yen finished at 102 to the
dollar and it takes $1.58 to buy a euro tonight.
European bourse indexes closed fractionally
lower across the continent and Mexico and Brazil were
The DJIA closed down 50 points at 12527. The
S&P 500 lost12 points to 1354 and the NAZZ dropped 28 points to 2321.
Breadth was more than 2/1 negative and volume
There were 55 new highs and 35 new lows on the
NYSE and there were 1000 new lows and 45 new highs on the NAZZ.
The bears are
8 April 2008
Alcoa missed last night with
earnings per share 3 cents light while revenues were greater than expected. And
stocks are in a funk this morning. Since it is Turnaround Tuesday the lower
markets are not unexpected. Asian stocks closed mixed to lower and European
bourses are off 15 and more at .
Gold is flat and Oil is $108.70. Treasuries are flat.
AMD missed and is going to fire 1800 workers.
We sold our Micron and AMD holdings
for a scratch loss. With the recovery in our accounts we wish to move to less
Washington Mutual raised $7 billion overnight and so they are out
of the woods, for now. They sold $1.3 billion in common shares at $8.75 with
the stock trading at $12 and the rest was in a preferred stocks issue with a
With this calamity out of the way
it seems that the markets army get back to just reacting to technical
indicators for a while. Most of the technical indicators suggest a buyable
pullback. How much of a pullback and when to buy are the uncertainties.
We have a new computer with a new
type of Word and so it is taking us a bit to get used to it. Thus our post is
shorter today as we transfer data and websites from our other computer.
Gold ended at $918 down $9 while
Oil was $108.64 down 45 pennies. Treasuries were a few ticks better with the
two-year at 1.87% and the ten-year at 3.57%.
European bourse indexes closed
fractionally lower across the continent as did Mexico and Brazil. The yen was
102 to the dollar and the dollar was $1.55 to the euro.
The DJIA closed down 35 points at
12575. The S&P 500 dropped 7 to 1365 and the NAZZ was off 15 points at
Breadth was 3/2 negative and
volume was light
There were 40 new highs and 25
new lows on the NYSE and 35 new highs and 85 new lows on the NAZZ.
The bears are back in
the game. *****
7 April 2008
The Employment Report on Friday
was negative with 60,000 jobs lost in March and a revision downward in the February
numbers also. Our thoughts on this subject are that unless the number is over
300,000 plus or minus the number is noise only since any lower number is within
a rounding error given that there are 150 million jobs in the U.S.
The markets were tentative at
first on Friday after the number but buying appeared as traders ignored the
This morning stocks are going to
open higher as Washington Mutual announced that it is receiving a cash infusion
of $5 billion. One by one the potential time bombs in the markets are being
neutralized. But neutralizing problems does not mean that recession or lower housing
prices are not a reality.
It is important to remember that pricing
in stock markets is anticipatory and usually looks out six to nine months and
prices accordingly. Our crystal ball is cloudy but the fact that the markets
have held 1260 support on the S&P 500 which level represents a 20% pullback
form the high suggests that maybe the worst of the decline is over.
Asian markets were higher
overnight as are European markets. Oil has a $107 handle and Gold is up at
$917. Treasuries are weaker.
Yahoo rejected the advances of Microsoft and MSFT has threatened a
We are adding SPDR
Regional Banks ITF to accounts. We have traded this ITF and we are now ready
to own it for a while as the turmoil in the banking sector is hopefully
We are also adding shares of SYMC and American Eagle
And we are instituting a position in Fairpoint Communications. FRP recently purchased the northern
New England assets of Verizon in a cash and stock transaction.
The stock portion was distributed to Verizon shareholders on a one share for 66
shares basis and those odd lots and small round lots are being sold
indiscriminately in the marketplace. The share price on FRP has dropped 50%
since the deal was announced.
FRP purchased over 1 million land
lines and 400,000 DSL lines in the Verizon transaction for a total cost of $2.3
billion of which $500 million was stocks and the rest debt assumption. We think
that the share price will migrate back to $12 after the unusable selling resulting
from the distribution of shares runs its course.
We are also selling Time
Warner for a scratch -we just bought- and placing the funds realized in Schering Plough which has bounced
nicely off its low of last week. we are getting pretty
fully invested and so we are consolidating positions as opportunities present.
The S&P 500 is at resistance
now at 1380 at and there is more substantial
resistance and trend line resistance at 1405. So the going will be tighter from
here on out for the bulls. Tomorrow is Turnaround Tuesday and the bears may
press their case by selling as folks who looked for stocks to buy over the
weekend fill their shopping baskets today and the big boys and girls look to play
their games tomorrow.
Oil gained $2.49 to $108.85 and
gold rose $14 to $927. Treasuries we lower with the two-year at 1.90% and the
ten-tear at 3.57%. The yen was 102 to the dollar and the dollar was $1.57 to
European bourse indexes closed
higher as did Mexico
GM is too large a holding in
relation to our other positions and so we are going to sell partials in our
larger accounts. Most of these sales involve a scratch loss on our average
price. We like the shares for the long term but discretion suggests trimming to
a manageable level after the market move that has occurred.
The major measures surrendered
their gains for the day in the final hour of trading.
The DJIA gained 3 points at 12612.The
S&P 500 was up 2 points at 1372 and the NAZZ lost 6 points to 2365.
Breadth was 5/4 positive on the
NYSE and flat on the NAZZ and volume was light.
There were 85 new highs and 15
new lows on the NYSE and 56 new highs and 75 new lows on the NAZZ.
Today was a tie between the bulls and bears. *****
2 April 2008
We will be traveling
the next two days and the next post will be Monday April 7, 2008.
The last three one day wonder
rallies have failed to follow through and so the question of the day is if it
is different this time.
Asian markets were higher
overnight with Japan
and Hong Kong both up over 3%. European bourse indexes
are slightly higher across the continent at .
Gold is up $8 but still under $900 and Oil has a $101 handle. Treasuries are
weaker as the trading day begins.
In the latest week Investors Intelligence had bulls remain
at 36% but bears declined for 41% to 36%. The low bullish number is still
bullish and the bearish number can go to 20% before we will become more
Uncle Ben is testifying before
Congress. As most folks know we don’t have a conservative bone in our body and
so we were happy to see Fed intervention to avert what would have been a
terrible crisis two Mondays ago. Funny thing is that now the liberals and
conservatives in Congress have joined forces for different reasons to questions
They should really be questioning
their own judgment for allow Uncle Alan to get away with the hogwash he fed
Congress and the press for the fourteen years of his disastrous term as Fed
Chairman. Greenspan and the Congress - by supporting the removal of the
separation between Banks and Brokers are the folks who are responsible for the
crisis. Of course Greenspan is now making millions telling corporate honchos
that the tax cuts he supported and the off balance sheet accounting he
encouraged are now the ruination of the economy and that the Dems had better do
something about it.. His remuneration through consulting and speaking fees is
on a par and as deserved as the obscene pay, golden parachutes and
non-accountability of the barons of Wall Street.
We are trading out of our Talbot’s position at $13.40 and placed half the funds in Chico’s at a
bit more than half the price ($7.26). There was a positive article in
the WSJ this morning and the shares are up $1.50 on that news. With TLB up $7
from its low a month ago we are going to the sidelines and will revisit the
shares if they move lower in the next general market sell off. We have had a
tough time wish the stock but at least this trade has been profitable.
We sold Motorola
(the potential spin off/sale of the handset business announcement created a
yawn) for a scratch and switched the money to RF Micro Devices. We traded RFMD at higher prices last year
and early this year.
We sold Sony
for a plus scratch. The percentage gain potential is greater in our
other stocks and we want to raise a bit of cash today.
We also increased holdings in Cisco, Intel and UnitedFoods in many accounts.
Oil jumped $3.86 to $104.84. Gold
was up $12 to $900. European bourse indexes closed 1% higher and Mexico
was mildly lower while Brazil
was mildly higher. The yen was 102 and the euro to the dollar $1.55. Treasuries
gave ground with the two-year at 1.88% and the ten-year at 3.57%.
The DJIA dropped 45 points to end
at 12610. The S&P 500 lost 3 to 1368 and the NAZZ was down 2 at 2362.
Breadth was flat and volume was
moderate on the NYSE and continues light on the NAZZ. The light NAZZ volume
suggests that much of the daily volume is Index/ETF related and created by the
hedge fund boys and girls playing their games.
There were 50 new highs and 25
new lows on the NYSE and 85 new lows and 50 new highs on the NAZZ.
The bulls won the day since a
modest pullback was healthy and positive after yesterday.
1 April 2008
April Fools Day Thoughts
began the new quarter by dropping 4%. Hong Kong and Japan
were up 1% and European bourse indexes are higher at . U.S.
futures indicate a higher opening and Oil has a $99 handle. Gold is under $900.
Treasuries are weaker as the trading day begins.
The S&P 500 is down 15.5%
from its high on October 9, 2007.
The NAZZ is down 14% this year, the S&P 500 is down 10% this year and the
DJIA is down 7.8%. The Model Portfolio is down 4.7%. Past performance is not an
indication of future performance.
UBS, the largest Swiss bank, said on Tuesday that it would write
down another $19 billion related to "U.S.
real estate and related structured credit positions" and said Marcel
Ospel, its chairman, would step down. UBS said the
write-down would result in a first-quarter loss of about 12 billion Swiss
francs, or $12 billion, and that it would seek new capital of about $15
billion, in the second time it has announced plans to raise new funds since the
credit crisis began. UBS has now written off a total of $37.1 billion,
including the $18.1 billion in American-housing-related losses that it wrote
off in the third and fourth quarters of 2007. UBS said it had remaining
exposure to the U.S.
sub-prime market of about $15 billion, down from $27.6 billion on Dec. 31,
while its exposure to so-called Alt-A positions declined to $16 billion from
$26.6 billion. But it said its exposure to auction-rate certificates (ARS that
we wrote about yesterday) had risen to $11 billion from $5.9 billion. That was
because the bank had participated in unsuccessful auctions for the securities
The UBS write-down was announced
this morning and the European markets are higher, UBS share prices is up a bit
this morning (it is down 50% in price over the last 52 weeks) and the U.S.
markets are higher. The action suggests that the markets are digesting the news
of losses better and expecting more write-downs. The action certainly doesn’t
suggest a strong move higher but at the same time is does suggest that the
digesting of bad news process is going better than might have been expected.
the DJIA is up 225 points and the S&P 500 is up 25 points. Is it an April
fool fake or real buying? Time will tell. In the past few months the bulls have
not been able to hold this kind of a move so early in the day through to the
The March Manufacturing Index
rose to 48 which is one reason for the strength today but any number under 50
indicates contraction so the cup is half full.
We initiated positions in Qwest at $4.70 and RFMD
at $2.83. We traded these stocks unsuccessfully last year but at level twice
the current prices.
and London closed 2% higher with France
up 3% and the rest of European bourses higher by 2% or more also. Brazil
was up 3% and Mexico
Toyotasaid it sold
217,730 vehicles in March, compared with 242,675 a year earlier. Toyota's
passenger-car sales fell 7.3% to 129,778, while light-truck sales fell 14% to
General Motors said Tuesday its U.S.
sales fell 19 percent. GM sold 282,732 vehicles in March, compared
with 349,866 in the same month a year ago. When adjusted for two fewer selling
days last month than a year earlier, sales fell a more modest 13 percent.
Heading into the final hour the DJIA is up over 350
points at its high for the day.
The euro ended at 1.55 and the
yen at 102 as the dollar rallied today. Gold lost $34 to $886 and OIL dropped
$1 to $100.50. Treasuries gave ground with the two-year 1.72% and the ten-year
The DJIA gained 390 points to
close at 12755. The S&P 500 rose 48 points to 1370. The NAZZ gained 85
points to 2365.
Breadth was 6/1 positive and
volume was active on the NYSE but should have been better to confirm a break
out and it was down right light on the NAZZ.
New highs exceed new lows on the
NYSE 30 to 20, not by much but we’ll take it. On the NAZZ new lows were 95 and
new highs were 45.
Today was another 90% up volume
day. That‘s four 90% up days in the last month which is very unusual.
The bulls are in the lead now, unless it was an April Fools
joke by the bears.
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