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31 December 2004 Daily Comment 7:32am and the last last jobless claims of the year were 326,000 down from an adjusted 331,000 last week. The four week moving average is off 6,000 at 333,000. That is the main trading number for the day for the boys and girls who are still around and not in the Caribbean or Mexico enjoying their year end bonuses. The Nikkei was up 100 points
overnight and At some
point today we expect the selling pressure to abate and the natural float
upwards to begin.
10:57am and we are adding more shares of Ciena to some aggressive accounts at $3.32. This is for a short term trade and not to own for any amount of time. The stocks has recently jumped $1 off its lows and we think there is another quick dollar in the stock after year end. But we aren’t going to stay around and pray to be right. We also bought shares of Pfizer for a year end trade at $26.87 when it traded down this morning on news that Celebrex scripts writing have dropped 50% in the last month. We don’t know why folks are surprised; we were surprised that 50% of the business still existed. By the time of the next announcement we hope have traded out for a profit. Tellabs has purchased a privately owned high tech outfit for a consideration of $53 million in cash and restricted stock. Treasuries
are a bit firmer; oil is down 53 pennies but above $43 per barrel and the major
measures are slightly positive. Breath is 5/4 positive on both the NYSE and
NAZZ.
And tomorrow is today and is the last day of the year. Hooray!
30 December 2004 Daily Comment 8:09am and the only number for the boys and girls to trade with is
Existing Home Sales which comes at Treasuries are 2 basis points better this morning with the ten—year at 4.28% and the five-year at 3.56%. The Treasury two-year is at 3.07% and it is getting interesting to us. Oil is at $42.20 up 42 pennies
and gold is down $5 at $440.
9:45am and the DJIA is lower while the NAZZ is a bit higher. Crude oil inventories were down instead of the expected up and so crude is holding up 43 pennies. Volume is light and breadth is slightly positive on the NYSE and the reverse on the NAZZ. Existing Home sales were up 2.7%. We are selling more TLB today at $27.47 and are placing some of that money in an equal share amount of Seibel at $9.91. We are also buying SBC and Fifth Third Bank for some of our larger accounts.
12:36pm and crude oil surged higher as two bomb blasts in Saudi
Arabia gave the boys and girls a trading opportunity. Oil is up 133 pennies at
$43.10 and stocks are lower in the bargain. The ten-year Treasury is at 4.31%.
The two-year auction came at 3.12% with a bid to cover ratio of 2.
And tomorrow is today and the day
before the last day of the year. So let the games begin.
And here is the bad news from the Norse game on December 28. Better luck tonight December 30 we hope.
29 December 2004 Daily Comment 6:53am and the only news for the boys and girls to trade on today is the Consumer Confidence number at 9am. We presume it will be another slow day. The NYT has a story that mentions slow sales at Tiffany. We have the two retailers (TLB, TIF) and we want to trade out of them since many of our other stocks are doing well and we want to stay with the strongest. At year end retailers are subject to tax loss selling and ‘get me out’ selling but they are also dependent on holiday sales numbers that are announced the first week in January. A bad number can blow up a stock and we don’t want to be there when that occurs.
9:02am and Consumer Confidence came at 102 for December versus an
expected 95 and a revised November number of 92. The boys and girls like that number
and have taken the major measures to their highs for the day. We sold our TIF holdings at $31 on the news and
would like to get out of TLB but it
needs to rise a bit before we sell. Retailers have always been anchovies to us
and they aren’t acting well so the discipline is to sell. Actually, we made a
couple of dollars per share on the TIF so we are happy with the trade. We are
putting the TIF money in Schwab at
$12.01. As most of our clients know we like the stock and it has done well for
us. We are also going to buy more SEBL
with the funds.
11:02am and we are selling a small amount of HAIN every day as it moves higher. It is a thin trader and we don’t know how high it is going before year end. We have a nice trading profit and we are selling it in the tax-free accounts first. We also are trying to unload some Talbot’s at $27.40 which is a $1.50 per share loss to reduce the size of that holding in some accounts. We had a nice profit in TLB and didn’t take it in late November
and we are kicking ourselves now. But that is spilled milk and useless kicking
and since accounts are at their yearly highs we are mainly interested in
positioning them for the New Year. We think TLB is cheap but if their numbers
are bad in January the shares will get cheaper and if the numbers are good the
stock we own will go up in price.
11:33am and as the news continues to surface from
And tomorrow is today so let the
games begin.
28 December 2004 Daily Comment 8:52am and we have just returned from taking the prince for a ride in the new pony cart. It was a bit chilly but fun.
The major measures are higher but volume is slow as it will be all week. And our posting will also be slow because it is not interesting to write
about paint drying. Crude oil is down $1.75 at $42.45. That is a positive for as long as that lasts. There is supposed to be a warm up this week
at least where we are.
1:06pm and crude oil is now down $2.63 at $41.55. $40 will set off a rally. The paint is drying and the major measures are up and down on
very little volume. We are napping in between to catch up on our sleep so we can keep up with the grand children. Breadth is negative but the
final hour may bring a higher close if oil remains down. Treasuries are weaker with the ten-year at 4.28% up 10 basis points and the five-year is at 3.64%.
3:02pm and crude oil ended at $41.26 down $2.92. Treasuries closed a tad above their lows for the day and the DJIA finished down 40 points at 10785. The S&P 500 dropped 4 points to end at 1206 and the NAZZ lost 6 points to close at 2155.
And tomorrow is today so let the games begin.
27 December 2004 Daily Comment 6:09am and Southeast Asia seems to get the brunt of the bad news. The earthquake and tsunami killed thousands of folks over the week-end. Shopping news seems to be good for retailers while the weather results were terrible for the airlines and the weather this morning in the northeast is going to make a slow day even lower. Oil is down $1.43 with a $43 handle and Asia was lower and Europe slow with London closed for Boxing Day which is England’s gift giving day. This week the markets will be open all week for last minute selling and buying. We’ll be around, in and out, and doing more watching than trading. So let the games begin. Merry Christmas 24 December 2004 Daily Comment 6:44am and this is going to be a slow day as folks have many other events on their minds. The markets are closed on the 24th and will reopen on Monday the 27th. We continue to wait for our stocks to do their thing as year end approaches. Until then we would like to present our Christmas thoughts. Thoughts at Christmas
To be happy is to love and be loved.
Love is both a quantity and a quality.
The more people you love and are
loved by, the happier you are.
The concept of love is personal.
It is difficult to conceptualize love,
to talk about love and to relate to love
since love is always limited
by custom and time and strength.
When love becomes personal
in its intensity for the giver
and impersonal in its direction,
love is complete.
In a place where all try to love,
love will be. For with love
as with no other emotion,
to make the effort is to succeed.
Personal love cannot be talked about
in public, in politics, or even in church.
In these places love is a concept and a hope.
The reality and humanity of Christ and Ghandi
was their personal involvement and risk taking,
their personal love given freely and unconditionally.
Change occurs with love, not dialogue.
To do, to help, to love is not for government
or organizations but for people.
To wrestle with who we are and what we are doing
is to begin to love.
To constantly question one's own risk level,
To take small steps instead of rejecting the large,
and to love,
are the requirements of being human.
To be human is the first and only concern.
To be human is to love,
and to love is to be concerned.
To limit love is to destroy love.
To direct love is to weaken love.
To love and beloved is the ultimate end
of freely giving and yet
time and our human relationships usually
prevent this reality.
BL, Christmas 2001/2004
23 December 2004 Daily Comment 6:48am and there has been a shakeup at Fannie Mae with Franklin Raines out as CEO and KPMG out as accountants. This should be a positive for the stock and the markets. Also, QualCom had better than numbers and we think Research in Motion’s numbers and forecasts were better than but we aren’t sure. Since these last two are momentum favorites, the good reports should add a positive tone to an already positively toned market. Overseas BankAmerica has lowered its
outlook for fourth quarter earnings on eight retailers including Ann Taylor and
The Gap and Limited. That should lead to a little selling in those stocks early
today. Only 9 days left to eliminate your losers although The Limited has been
a good stock this year.
7:32am and the trading number for
today has been released. 3rd Quarter GDP was announced as a final up
4% versus 2nd Quarter GDP of 3.3%. The Deflator (inflation) was
1.4%. Business and software spending was strong.
9:26am and the DJIA is up 10
points while the NAZZ is off 1 point. Fannie Mae has opened higher and since it
is a stock with a lot of shorts the contest over what the resignations means is
being fought in the dollar price of the stock. So far the bulls are winning. We
are picking up a few shares of Fifth Third Bank at the $47.50 level for
aggressive accounts and also buying more RFMD at $6.85 for aggressive accounts.
9:48am and stocks are rallying as
crude oil is off 196 pennies at $43.80 on news that crude oil inventories are
up 2 million barrels and gasoline 1.8 million in the latest period.
1:08pm and entering the contra hour the major measures remain higher as trading slows significantly. Trading in various stocks is thinning and with the lack of volume enterprising boys and girls can have some fun if they wish. Oil remains down 150 pennies at
$44.30. The S&P broke above the 1208 number this morning but has pulled
back below. Drugs are seeing a bit of buying and we are watching the birds eat
at the feeder in the far field that on the Solstice yesterday we filled with
seed for the winter season.
Happy Birthday Puccini!
Bobblehead Night and the Norse basketball game were cancelled due to the snow that grandpa ordered for the prince and
princess of Taylor Mill for Christmas. 3:02pm and the DJIA closed up 60 points at 10820. The S&P 500 gained 5 points to end at 1210 and the NAZZ tacked on 8 points to 2158. Breadth was 6/4 positive at the close. Oil lost 152 pennies to end at $44.24 and failed this morning right at its down trend line. Treasuries were a bit weaker with the ten-year at 4.20% and the five-year at 3.57%. And tomorrow is today so let the
games begin. It will be a slow one.
22 December 2004 Daily Comment
7:32am and now Naproxen
known better under the trade name Aleve
has been found to increase the risk of heart attacks by 50% in folks who take
it regularly according to one study by NIH. That’s one way to permanently cure
pain. Bayer, BAY, makes Aleve which
is the old Syntex drug. Syntex was a
particular thorn in our side the last time drug stocks were under attack in the
early 1990s and we were trying to make a buck buying down and out drug stocks. The
problem was they kept getting more down and out, especially Syntex which
eventually went to drug stock heaven or drug investor hell. Roche eventually bought Syntex in
December 1994.
Happy Winter Solstice. Tomorrow
(today) there will be more daylight again as we begin the six month frolic to
the Summer solstice.
There is no economic data to be released
today so the boys and girls are going to have to trade on their own whims. Smith Barney on Tuesday initiated coverage of Qwest Communications with a "sell" rating and a price target of $3.50. Shares of Q rose 2.6 percent to $4.34 in morning trade on the New York Stock Exchange. Maybe folks read the recommendation incorrectly. Anyway, we are holding. Morgan Stanley cut Time Warner’s rating on a valuation
basis and the shares are off a few pennies this morning.
11:01am and the DJIA is 40 points higher with the NAZZ up 12 points. We are selling SGP and BMY since we have a profit in both and we are never comfortable owning drug stocks. SGP is on its high for last sixteen months and Bristol Myers is at a 6 month high. We are in our ‘time to put some cash back in the accounts’
mood and these are our first sales. We are not looking to buy any more stocks.
1:02pm and trading is
slowing as the holiday week-end approaches. The tragedy in Iraq
today hasn’t affected the markets and we would guess that most trading is going
to be on cruise control through year end. We think there may be a pop in HAIN towards year end and if there is
we will take profits since that stock must be sold when there are buyers or
folks tying to mark the share price higher. Andrew is another issue that may climb higher into year end. But in
the main we don’t expect many of our stocks to move till after the New Year
rings in.
3:02pm and the DJIA closed up 98 points at 10760. The S&P 500 rose 10 points to 1204 and the NAZZ was up 22 points to 2150. Breadth was 2/1postive and oil closed up 2 pennies at $45.75. Treasuries were a bit better with the ten-year at 4.17% and the five-year at 3.57%. And tomorrow is today so let the games begin. By the by the Norsemen play tonight so we will have the results tomorrow. 21 December 2004 Daily Comment
7:06am and The Financial Times is saying that
Nokia has reaffirmed its forecast of
10% cell phone sales growth for its fiscal year. Some analysts had been
questioning that figure and Nokia also says that sales could be better than
that with a good third quarter selling season. Bear Stearns has added Nokia to its focus list. Thank you Bear
Stearns.
There is not a lot of economic data for traders this week. The markets are closed on Friday and so the big boys and girls will have to cram all their trading into four days. This morning we get Leading Indicators
at Wednesday has final 3rd Quarter GDP and the final inflation figure for Quarter 3. Thursday brings: Durable Goods
Orders, New Home Sales, Jobless Claims, and Personal Income and Personal
Spending. All the numbers will be for November except jobless claims which are
for the prior week.
10:28am and Leading Indicators for November were up 0.2% when 0.1% was expected. Stocks opened higher with good breadth. They are pulling back a bit and breadth has turned negative on the NAZZ. Friday’s expiration is being unwound and after a somnolent hour or two the trend of up for the next week or two may hopefully emerge. We are buying a chunk of Seibel for accounts at $9.90 and that should wrap up our year end buying. Seibel has $2 billion in cash and no debt. Revenues are $1.3 billion and market cap less the cash is $3 billion. Siebel Systems, Inc. is principally engaged in the design,
development, marketing and support of Siebel eBusiness Applications, a family
of enterprise applications that help organizations manage their relationships,
including their interactions with customers, partners and employees. A
substantial portion of its business applications is focused on the Customer
Relationship Management market. The Company also provides professional services
and technical support organizations, through its Global Services Organization.
Services include a range of implementation services, training and technical
support to its customers and implementation partners.
11:33am and crude oil is down $1.10 at $45.10.
3:02pm and we didn’t have much to say today. Since we are fully invested we now await year end and beyond to see if our crystal ball is working correctly. At the bell the DJIA was up 12 points at 10662. The S&P 500 was up 1 point at 1195. The NAZZ was down 7 points at 2128. Oil closed down 64 cents at $45.64. The ten-year Treasury ended at 4.19% and the five-year at 3.58%. Breadth was 2/1 negative on the NAZZ and flat on the NYSE. Santa Claus and his rally delayed their arrival. And tomorrow is today so let the
games begin.
20 December 2004 Daily Comment 6:45am and the winds are howling but we have no snow as we begin the day. There is a toasty fire in the wood stove so all is warm here in the land of milk and homey. We would think that today may see a reversal of the negativity of Friday. The Pfizer news is old hat by now and the talking heads are arguing about whether or not Celebrex should be pulled from the market. Folks who own or work for Pfizer say no: folks who are short Pfizer or dislike the drug companies say yes. We don’t care because we have no dogs in that hunt. Oil is lower in the early going. U.S. futures are higher as is Europe. Hong Kong was up big-time and Japan was a bit higher. Treasuries are a little weaker with the ten-year at a 4.20% versus 4.19% on Friday. The dollar is better against the yen and the euro. So let the games begin 18 December 2004 Daily Comment 7:32am and CPI (the Consumer Price Index) for November was up 0.2%. Core CPI was also up 0.2%. Today is the final Quadruple Witching of the year and there also is rebalancing in many of the major indexes at the close today so it may be a wild ride for some individual stocks. Overnight Gold is up $2 at 440 and Oil is up 22 cents at $44.40. Treasuries are flat with the ten-year at 4.18% and the five-year at 3.57%. Alan Questrom, the former CEO of JC Penney is on CNBC and his quote of the day is that “The mall is not dead; it will continue to be important in the future.” Wow!!! And the talking heads at CNBC
managed to spend five minutes discussing that topic.
3Com announced earnings last night and depending on the news service the report was: 3Com Posts Wider-Than-Expected Loss Reuters [$$] 3Com Loss Narrows to $48.8 Million Wall Street Journal Online 3Com Narrows 2Q Loss by 65 Percent Associate Press [external] 3Com sales fall 17 percent, though loss is narrower CBS MarketWatch Whatever, the share price is
lower in early trading. We will buy more if it continues to sell off. The news
they announced was expected and we think the fall is much more related to the
large price they are paying for a relatively unknown company. They are betting
a large chunk of money on a process that they hope will get theme some respect
in the router area. The stock is an anchovy with us and we are still interested
in the year end bounce.
Stock futures expire on the open.
The options expire on the close. Year over year the CPI was up 3.5%. year over year Core CPI (inflation) was up 2.2%
8:38am and Pfizer has opened yet
but they are out with a press release saying one new study shows an increased
risk of heart problems with Celebrex while another one doesn’t. The shares are
going to open down about 4 points and that will place the DJIA firmly in
negative territory. Not to worry though, tort reform is on the way just in time
to rescue Merck and Pfizer from the clutches of the awful plaintiffs bar and
those money grubbing folks who suffered heart attacks from taking these drugs.
Haven’t folks heard of Caveat Emptor?
11:30am and stocks are absorbing the Pfizer news. Crude oil is up $1.37 at $45.65 and that isn’t helping matters. Treasuries are weaker with the ten-year at 4.22% up from 4.17%. The DJIA is down 45 points which is mainly Pfizer (30points of the 45)off over $4 and the NAZZ is down 5 points. Breadth is 2/1 negative. We have read that there is a sell bias on the close today but we don’t know whether it is being absorbed during the day. We added Hewlett Packard to accounts at $21.05 and we’ve decided to also buy Seibel at $10.08 in some larger and aggressive accounts. We have owned SEBL off and on over the years and with $4 per share in cash and no debt we are attracted to this software company. There have been some acquisitions in the software area recently and while we don’t think SEBL is a takeover target the acquisitions emphasize what other companies see as value in this area. We also added a few shares of Newell Rubbermaid to a few accounts and
we are adding 3Com at the $3.80
level to accounts in which we sold Micron
the other day.
Lucent named Andrew Corp
their Supplier of the Year. Way to go ANDW.
Pfizer traded 280,000,000 shares today. That single day volume in one stock PFE is greater than the total share volume for all stocks listed on the NYSE for any year before 1946. Martha sold $8 million worth of stock in her company this week. She probably had to pay her legal bills. She got her money’s worth. And tomorrow is today which is
Saturday. Enjoy. We will have a new post Monday AM.
17 December 2004 Daily Comment
6:42am and the month of
takeovers continues. Johnson & Johnson
is going to buy Guidant Technology
which will consolidate the makers of heart stents to two. And United Technologies is going to buy Kidde. Finally Symantec will buy Veritas
Software. And those are only today’s announcements. Visions of big fat
sugar plum bonuses must certainly being in the dreams of investment bankers
this holiday season.
In somewhat good news for Qwest and SBC and BellSouth: In a 3-2 vote along party lines, the Federal Communications
But under new rules for the residential market, the Bells
The FCC has been trying for eight years to set local
Democrats on the commission argued that the latest rules
Competitors will have a year to move their existing
We’ll see how the markets react.
The RBOCs were lower yesterday after this news came out.
Today is the beginning of Quadruple Witch and so anything or nothing may happen. Bulls have been carrying the day for the last six weeks and we presume that trend will continue. Over the next six weeks Republicans are going to change the perception if not the reality of the economic outlook in the U.S. Since only words and promises will be forthcoming for a while and because the psychology of the markets is predisposed to like what it hears and act accordingly we think the up trend will continue at least though the January Inauguration. We were thinking this morning of a top in March to go with the 2000 top but that might be too cute. We will ride the rise for a while
more but at some point we are going to start throwing bags of stocks off the
train as it gathers steam.
7:32am and Jobless claims dropped 41,000 to 317,000. Housing starts
were down 13% in November while Housing Permits rose 4.2%. The Current Account
Deficit was a record 165 billion in November. We don’t think any of this means
anything to today’s market action.
9:37am and Treasuries are lower with the ten-year at 4.18% and the five-year at 3.64%. Crude oil is down 29 cents. The dollar has rallied against the euro and yen. Stocks are mixed. Martha Stewart may decide to stay in jail as her stock is up another $2 today at $32 and near its all time high. She is now once again a very rich lady. Good for her. All the talk media morons who attacked and vilified her are stewing in her luck. We bought a few shares of Nokia at $15.39 and HPQ at $20.85 and Schwab at $11.98 but in the main we are watching and want to get through witching today and tomorrow. Rite Aid announced lousy earnings, in fact a loss and warned on
next year. The share price is down 10 cents. Now that earnings have been
announced and that number is out of the way for three months the stock will be
able to move higher after year end.
11:28am and breadth is 5/4 negative. Oil is down 1% and the major
measures are mixed with the DJIA up 27 points and the NAZZ down 4 points. We
are adding Ciena at $2.90 and JDS Uniphase at $3.12 to accounts in
equal amounts to the Micron Tech
that we sold yesterday. Ciena surprised with better sales and less loss last
week and JDSU continues to plod along with $1.2 billion in the bank. We are
buying the two stocks as part of our
Speculative package which now totals
six stocks in most accounts.
Supposedly there is a shortage of
Apple iPod for the HPQ has been waiting patiently to be able to
offer its iPod. The company had originally planned to offer a model this summer
based on Apple's third-generation design. However, the company decided to wait
until September to ship the iPod to use the new "click-wheel" design.
HPQ's version is expected to be similar in price to the Apple models; the 20GB iPod
sells for $299, while the 40GB model sells for $399.
3:02pm and the DJIA closed up 15 points at 10705. The S&P 500 lost 3 points to end at 1203 and the NAZZ dropped 15 points to end at 2145. Breadth was 2/1 negative at the bell. Treasuries gave ground today with the ten-year ending at 4.18% and the five-year finishing at 3.67%. Oil closed off 1 cent at $44.18. And tomorrow is today, so let the games begin. ***** 16 December 2004 Daily Comment 6:48am and with yesterday’s close
above 1200 on the S&P 500 our guru is saying the markets are a bit
extended. They can get more extended but if they do, the pullback will be that
much sharper. If we were trading indexes we would take some money off the table
today but since we are trading individual stocks we are going with the flow and
our year end strategy. It’s 10% up or bust with us for the Model Portfolio and
almost that much or much better for individual accounts depending on the risk
profile of the account.
Speaking of sharp, our farrier
John Sharp will be here this morning to prepare the horse and ponies’ hooves
for their annual holiday visit from the prince and princess of Taylor Mill. As
a result we will be in and out this morning.
Most of our Christmas shopping is finished except for dealing with our one problem stock this year which is 3Com. COMS is either presenting us with the greatest buying opportunity since ORYX a few years ago, or a great disappointment. We bethink the strong sell off to a new ten year low on the announced purchase of TippingPoint is the result of several large mutual fund holders and institutional investors saying by by to the shares and not caring for what price they received since they are taking a loss anyway. These sell offs at the end of the years in low priced speculative stocks, if painful, are not all that unusual, in fact AT& T Wireless and Sprint PCS did the same last year. We are going to stay with our present position but if the stock moves below $3.50 we will be buying another tranche. Timing is somewhat important since the share price will probably be under pressure through year end and we don’t want to spend the rest of the money we will commit until we see the lows. And so we will be watching and waiting for opportunity. 3Com earnings will be announced tomorrow and they already predicted disappointment so we hope that is in the price of the stock. 3Com has no debt and will be left
with $800 million cash after the TPT purchase. Even though COMS is losing money
we think the risk/reward justifies playing the odds with the share price at
year end.
11:50am and stocks are lower in moderate trading. Oil is $1.80 per barrel higher in part because of the bankruptcy of Yukos and in part because the hedge funds are trying to make a buck. All the gurus are suggesting stocks are extended and need a rest and we are agnostic. Breadth is positive and the S&P 500 is holding above 1200 so we will see what the rest of the day brings. Andrew Corp is off again and we bought a few more shares at $13. We also are adding Newell Rubbermaid to a few of our larger accounts. NWL has been having problems making money since the Rubbermaid acquisition more than a few years ago and we are betting that the payoff is near. The rising price of plastics and oil are not a help and are squeezing margins but the stock is near its low and if stocks take off next year it is an economy type stock that should participate. Also just yearend arriving should remove selling pressure. Morgan Stanley was nice enough to
lower its rating on Rite Aid to
under perform from market perform because the last six months of same store
sales comparisons have not been good. The stock is off 13 cents per share on
the downgrade. We own enough but the downgrade and resultant selling should
clear the way for a nice bounce after year end. That news is not news.
2:06pm and entering the final
hour stocks are trying to move higher but the $2 plus rise in he price of oil
is a large detriment. We decided to eliminate our holdings in Micron Technology for a scratch at
$11.84. We own a bit too much in tech and while the stock is cheap we would
rather have the cash available than own it and we are more comfortable with our
other tech and telecom names.
3:02pm and the DJIA closed up 17 points at 10693. The S&P 500 gained 3 points to end at 1205 and the NAZZ gained 3 points to 2163. Breadth was 2/1 positive at the bell on the NYSE and 5/4 positive on the NAZZ. Oil finished at $44.19 up $2.38. Treasuries were firm as the ten-year went out at 4.08% and the five-year at 3.47%. And tomorrow is today so let the games begin.
Special Post 15 December 2004 The commissions on the purchase of QWEST yesterday were billed at 25 cents per share when they should have been billed at 2.5 cents per share. They are being corrected today. 15 December 2004 Daily Comment From our website counter of daily readers we know that for some reason Monday was a slow day on the website and so many regular readers of the website missed our Monday comments on the stocks we currently own. We spent most of Sunday afternoon composing that missive and so we are re-running that post at the end of this post. Yesterday’s Markets 5:53am and here we are. We are in an early to bed, early to rise mode and so all the night clubs in Soldiers Grove are suffering. Overnight Asia
was higher with Hong Kong and Japan
strongly higher. Europe is to the plus side and U.S.
futures are below fair value and at the present indicating a lower opening. The
NYT is suggesting a Symantec acquisition of Veritas so it looks like the investment
bankers are going to be having a good year as companies take advantage of the
laizzez faire attitude of the Republicans to grow though combination.
This morning’s NYT also has a
story about how Motorola is going to
lose all its Nextel iDEN business with the merger. That
should pressure the share price again today. If it doesn’t we would guess that
the storm has passed for now at least.
We are considering adding more 3Com to accounts on the share price drop yesterday that was occasioned by the announcement that COMS was buying TippingPoint Technologies for $430 million. The net cost will be about $400 million since TPTI has $30 million in cash on the books. 3Com obviously believes that the technology
it is buying will be beneficial to sale of its products and the addition of
front end intrusion prevention systems to its internet connection products does
make sense. At 6% the $400 million would produce $24 million although the risk
free Treasury return would be closer to $15 million. Unfortunately, TPTI is
losing money and so the synergies have to be excellent to justify the merger.
But life is about risk and these guys have been flailing since their hot streak
in the early and mid 1990s so they may as well use the cash to build a new
product that has potential than sit around and watch the cash go down the
drain.
Nextel/Motorola just issued a news release that suggests that the weeping and gnashing over the NXTL/FON merger hurting the MOT/NXTL relationship is a bit overblown. We don’t think this new release is an accident of timing. Nextel and Motorola Announce Innovation of Direct Talk, the First Off-Network Walkie-Talkie Feature Integrated with a Mobile PhoneRESTON, Va. & PLANTATION, Fla. --(Business Wire)-- Dec. 14, 2004 -- The Rugged Motorola i315 and i325 Provide a Reliable Back-up Communication System for Public Service WorkersNextel Communications Inc. (NASDAQ:NXTL) and Motorola Inc. (NYSE:MOT) announced the availability of Direct Talk(SM), a unique service that provides a back-up off-network walkie-talkie service for use when customers are outside Nextel network coverage areas. This service, available only on the Motorola i315 and i325 from Nextel, provides a range of up to six miles(1). Nextel is the first national carrier to offer this type of off-network service integrated directly into a cellular handset. Direct Talk is the first service of its kind to allow digital group and private walkie-talkie calls through 10 channels and 15 privacy codes, allowing for higher voice quality than traditional analog radio communications. The user can easily activate Direct Talk by entering "off-network mode" through the phone's keypad. Direct Talk is also the only service that provides users with an acknowledgement tone, letting them know instantly whether or not someone is available on their channel. The Motorola i315 and i325 rugged handsets are the first handsets equipped with the off-network walkie-talkie feature. The handsets are designed for use by public sector and field-based workers, as well as people who enjoy rugged outdoor activities, who may require a durable handset with a back-up communications system. Key features of the Motorola i315 and the i325 include: -- Nextel Direct Connect(TM) instant walkie-talkie service - Nextel's coast-to-coast and country-to-country digital walkie-talkie service -- Rain-Resistant - Certified to Military Standard 810 F for blowing rain, humidity, and salt fog -- Rugged Design - Performs in extreme outdoor conditions and stands up to dusty environments, drops, and exposure to vibration from heavy machinery use and hot/cold climates -- GPS-Enabled Additionally, the Motorola i325 includes these unique features: -- Emergency Call Button (for Public Sector use only) - Provides priority, preemptive access to network resources during times of heavy congestion -- Priority Connect (for Public Sector use only) - this feature intelligently applies five levels of priority service to place a Direct Connect(R) call ahead of others in time of network congestion -- Talkgroup Scan Service Support - Monitor communications on up to four talkgroups simultaneously -- Fixed antenna for durable and enhanced performance in fringe areas -- Java(TM) technology-enabled Pricing for the Motorola i315 is $174.99 with a 2-year contract. The Motorola i325 is available for $399.99 with a 2-year contract. (1)Direct Talk is an all-digital off-network walkie-talkie service that works between compatible phones in up to a six-mile range under optimal conditions. Terrain, weather, foliage, and usage in or near vehicles and structures (such as buildings), among other things, may decrease performance and result in a significantly shorter range. About Nextel Communications Nextel Communications, a FORTUNE 200 company based in Reston, Va., is a leading provider of fully integrated wireless communications services and has built the largest guaranteed all-digital wireless network in the country covering thousands of communities across the United States. Today 95 percent of FORTUNE 500(R) companies are Nextel customers. Nextel and Nextel Partners, Inc. currently serve 297 of the top 300 U.S. markets where approximately 259 million people live or work. About Motorola's iDEN Subscriber Group Motorola's iDEN handsets combine the capabilities of a digital wireless phone with "always on" Internet access, text pager, and two-way radio to enable users to instantly communicate with one or many individuals at the push of a button. For further information on iDEN handsets, visit www.motorola.com/iden. About Motorola Motorola, Inc. (NYSE:MOT) is a global leader in wireless, broadband and automotive communications technologies that help make life smarter, safer, simpler, synchronized and fun. Sales in 2003 were U.S. $27.1 billion. Motorola creates innovative technological solutions that benefit people at home, at work and on the move. The company also is a progressive corporate citizen dedicated to operating ethically, protecting the environment and supporting the communities in which it does business. For more information: www.motorola.com. MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. (C) Motorola, Inc. 2004. ***** The FOMC (Federal Reserve Open Market Committee aka Alan Greenspan and
friends) will make their interest rate announcement today at 7:32am and the Trade Deficit was
$55 billion in October. Treasuries are a bit weaker on the news. Oil is up
29cents at $41.29.
From a Business Wire Press
Release: Charles Schwab Corp. the
biggest U.S. discount brokerage, on Tuesday said customer stock trading rose 25
percent during November, reflecting enthusiasm by individual investors and
recent price reductions by the company. Schwab, based in San
Francisco, reported 192,100 daily average revenue
trades for November. The company said it brought in $4.6 billion in new
customer cash in November, bringing its total assets to $1.05 trillion.
For all of you who are going to miss Dave Bezold BOBLEHEAD NIGHT we present a view of what you are missing. (Dave is our son-in-law)
***** The attorney for Gary Winnick, the founder and former chairman of Global Crossing Ltd., said Monday he has been told that his client will not be charged or fined by the Securities and Exchange Commission after a lengthy investigation of the fiber-optic company's finances. The SEC's two-year probe of Global Crossing has focused particularly on its swaps of fiber-optic network capacity with other telecom companies. Enforcement attorneys at the agency recently recommended a fine against Winnick as part of a settlement with the SEC. But the SEC commissioners voted 3-2, on party lines, on Thursday to reject the staff attorneys' recommendation, a person familiar with the matter said Monday. The person, who spoke on condition of anonymity, confirmed a report in Monday's editions of The Wall Street Journal. SEC Chairman William Donaldson is said to have sided with his fellow Republican commissioners Paul Atkins and Cynthia Glassman in opposing the sanction at a closed-door meeting. "We are gratified that after a thorough and complete investigation with which we fully cooperated, the SEC has determined that no charges should be brought against Gary Winnick," his attorney, Gary Naftalis, said in a statement. "We always believed that the evidence demonstrated that Gary Winnick acted lawfully and properly in connection with Global Crossing." George Bush # 41 made millions of dollars on
Global Crossing options given to him for a speech he made. Terry McAuliffe the
former DNC chairperson also made a fortune on the stock. Gary Winnick by some strange
happenstance realized over $150 million in proceeds of sales of his shares
before the company collapsed.
10:09am and stocks are mixed with crude oil up
39cents at $41.40 and Treasuries a bit weaker. The ten-year is 4.17% and the
five-year is 3.56%. volume is moderate and breadth is flat on the NYSE and 5/4
positive on the NAZZ.
We have decided to add more Qwest at $4.17 to many accounts rather than significantly increase
our COMS holding in smaller accounts. We are going to buy more COMS at $3.93
but only in larger accounts. The drop in the equity value of COMS in the last two days about equals
the $400 million they are going to pay for TPTI. We bought COMS as part of a
package and we are trying to keep the share holdings of each stock relatively
even. That seems to work best with the package approach. COMS will bounce back
and may turn out to be a wash for us but that goes with the territory.
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 2-1/4 percent. The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output appears to be growing at a moderate pace despite the earlier rise in energy prices, and labor market conditions continue to improve gradually. Inflation and longer-term inflation expectations remain well contained. The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. In a
related action, the Board of Governors unanimously approved a 25 basis point Stocks are mildly higher and Treasuries are firm.
Oil is at $41.75. The S&P 500 has crossed the 1200 mark for the first time
since it was there on the way down three years ago. we have added a few shares of Andrew to accounts at $13.85.
And tomorrow is today so let the games begin.
Our accounts and the Model Portfolio are invested for Year End and
beyond we thought it would be a good time to review our holdings and the
reasons why we own each. Speculative Package (12%) 3Com is a low priced speculative stock that is part of our five stock year end package. We have been buying out of favor stocks at year end since we began in the business back in 1966. The package approach allows one or two stocks not to move while the hope is that one or two will make 50% or better moves as the tax and position selling abates. 3Com should not be confused with 3M. COMS is the old U.S. Robotics/Palm combination that sold at ridiculous levels in the late 1990s. COMS has no debt and cash per share of $2.50. It still makes stuff for computer connecting and such. Sales have been falling and competition is great but net of cash the company is priced at $500 million with sales of $700 million. 3Com is losing money. This stock is part of a package of five low priced stocks we own which add up to about 11% of assets. Lucent is our second low priced speculative stock. They make everything for the telecom industry. LU is actually going to earn money this year. Cash on hand is $2 billion with debt of $5 billion. Sales are a bit under $9 billion and the company has a market cap of $15 billion. We are looking for a 20% move after year-end. Qwest is the forgotten RBOC. Phillip Anschultz, a very rich man, owns 17% of the common and he is the reason we keep coming back to the stock. With the new Sprint/Nextel combination and the spin off of Sprint’s land line business there will be consolidation in the land line business. Someone is going to buy Qwest once it gets its legal problems settled. It has a ton of debt but the equity is priced at $5 billion which coupled with the debt of $15 billion still only values the $15 billion revenue company at $20. A $25 billion take out price would equal $10 a share. By the by, Sprint stole Sprint PCS when it repurchased the shares last year and now it is going to spin off the land lines which is the reverse of what it did five six years ago. Investment bankers win again. Rite Aid is speculation # 4. The share price reached $6 last year and in any bull run it could again next year. We would be out of it by then. RAD has sales of $17 billion and new management has reduced debt by $2 billion over the last three years. RAD has 3300 drug stores in 29 states. The equity in the company is priced at $2 billion at present prices. RAD earns money. Silicon Graphics is our final speculation. We owned the stock in the teens years back and we are taking another flyer this year under $2 per share. At this level the company is priced at less than one times sales and has enough cash to survive for as long as we plan to own it. SGI makes computer stuff also and we own it because of its price. It is a real anchovy. We also own Cincinnati Bell in some large accounts on our consolidation in the telecom industry thesis. If it gets a bit cheaper we may make it the sixth low priced speculation in many accounts. Wireless Telecom Suppliers (18%) The new watchword has moved from the 1960’s “Plastics my boy, Plastics” to “Wireless my boy, Wireless.” Andrew Corp was in our portfolio last year and we were scared out before we made any money in the stock. In fact in many accounts we realized a loss. It is a player in the wireless telecom supplier area. We also own Motorola and Nokia and RF Micro all of whom are involved in wireless telecom infrastructure stuff. Motorola sold off on Friday because Nextel uses their products and its system is different from Sprints. The guessing is that eventually NXTL will convert to Sprint CDMA but we think that the walkie-talkie feature that NXTL has and which NXTL has used to sell their service is the kind of ‘add on’ that many folks won’t gladly surrender. In any case, Motorola has been getting its house in order and just recently spun off its commodity chip making arm to concentrate on the higher tech proprietary stuff. Over the years MOT has shown the ability to reinvent itself as tech fashions changed and advanced from the time of radio and television, to color television, to satellites, and now on to wireless phones and infrastructure. With $10 billion in cash we think it is good tech rebound candidate. Nokia made
wireless available to RF Micro makes
chipsets for both MOT and NOK cell phones. Cash equals debt and market cap is
about 1.5 times sales. This former high flyer has been grounded by the
alternate boom and bust cycles in cell phone suppliers. We have owned RFMD
twice in the past and not made any money. This time we own it mainly in larger
accounts and are hoping the third time will be the charm. RBOCS (5%) We own BellSouth
and SBC for their dividends, their
control of Cingular Wireless and their positions in the telecom industry. Both
of these stocks are fairly priced and will participate in any general market
move higher. Their dividends, even in a rising interest rate environment, are
attractive because of the 15% tax rate and the share prices also offer
appreciation potential. And we think the Republs are going to eliminate
entirely the tax on dividends. Drug Stocks (10%) Bristol Myers and Schering Plough are old line drug companies with patent and new drug problems that have been working on resolving those issues for the better part of four years. Again we think the Republican Congress is going to be helpful to drug companies exempting them from catastrophic lawsuits over FDA approved drugs and also the strong euro suggests that companies like SGP and BMY would be candidates for acquisition by European companies. Chiron is in a
world of its own in that it is lower because its flu vaccine operation was shut
down this year. It will be up and running next year and Wall Street and Hippie Stocks (6%) Wild Oats Markets has been in and out of our portfolios for years. It is the only major natural foods grocery chain outside of the major player in the arena, Whole Foods. At one time years ago we owned both and made money trading both. Ten year ago Whole Foods was valued at twice Wild Oats. Now Whole Foods is valued at 30 times Wild Oats even though WFMI sales are only 4 times OATS sales. OATS has never been able to get its act together and periodically blows up. We bought it on its autumn blow down to under $6 per share and hope for a double. We also think there is the potential for a major grocery chain like Safeway or Kroger to buy it. Hain Celestial
markets natural and organic foods. Heinz owns 22% of the shares. HAIN tends to
run between $16 where we own it this time and $25 where we won’t own it if it
makes it close to that price. HNZ is planning on writing down its ownership in
the company if the share price doesn’t rise in the next year. Their cost is a
round the $30 per share level. Computers (8%) Hewlett Packard is also an in and out of portfolio stock for us. We like what Carli is doing with the company and if she weren’t a Republican we would love what she is doing. HPQ comprises every computer company we have ever owned including Digital Equipment, Tandem Computer, Compaq and probably a few others we can’t remember. It sells at 1.5 times sales, has a ton of cash and has shown a remarkable ability to survive. We have never before owned Micron Technology which makes DRAM chips. Its business is a
commodity business and when it is hot it makes $2 per share and when it is not,
like now, it loses money. Household Goods (4%) We have purchased Maytag
almost every time it has tanked over the last twenty years on a bad sales
or earnings announcement. We have made money each time and each time we have
sold too soon. We hope to sell too soon again for a nice profit. We don’t like
holding it for long because it has an onerous debt level. Financial (6%) Schwab clients
have $1 trillion in deposits of cash and securities at the firm. Charlie Schwab
isn’t getting any younger and the guy he had running the company quit last
spring. We think that suggests Schwab selling out to a major bank like JP
Morgan that has a CEO who is trying to one up Sandy Weill and Citigroup. We may
not be in the stock when that happens because at $14 we have a 50% gain. Specialty Retailers (11%) Talbot’s has run
into sales problems that started with the Entertainment (2%) We have a love hate relationship with Time Warner and we
currently own in larger accounts. For how long we don’t know. Special (6%) Tellabs makes and market voice and data equipment for the telecom markets. It was a high flyer in the 1990s and has crashed to earth. At its present price net of cash it sells at a bit over 1.5 times sales. TLAB has no debt and $1.5 billion in cash. We hope it makes big buck for us. And that’s it on our portfolio review. 14 December 2004 Daily Comment 7:01am and Asia closed lower overnight while Europe
is higher as is the U.S. Our Saudis friends have told Japan
that they will cut exports to that country by 8% in January. Gold is up $3 at
$348 and oil is off pennies at $40.69.Treasuries are a tad firmer with the ten-year
at 4.13% and the five-year at 5.53%.
The FED meets on Tuesday (today)
and another rate hike is expected. Friday brings CPI and Quadruple/Quintuple
expiration.
7:32am and Retail Sales were up
0.1%, ex auto up 0.5% for November.
More analyst folks are going to
neutral today on Motorola in the
wake of the NXTL/FON deal because of the supposed switch by Nextel from iDEN
(which provides the walkie-talkie feature) to Sprint’s CDMA. Motorola is the
exclusive iDEN supplier to NXTL. But many are saying that it will be several
years before the changeover will occur. We continue to believe that the
changeover will not happen and that MOT will keep the walkie-talkie feature.
One analyst is suggesting a dual CDMA/iDEN phone. Nextel has used the walkie-talkie
feature in all its advertising and it is a feature folks like. Only dopes would
take it away.
Lucky us. 3Com is going to pay $430 million of its $1.2 billion in cash for Tipping Point Technologies, a company with $28 million in revenues. Well we really should say lucky Topping Point technology shareholders. On the news COMS is down 35 cents a share. At least there is no dilution. TippingPoint Technologies, Inc. is a provider of network-based intrusion prevention systems that deliver in-depth Application Protection, Infrastructure Protection, and Performance Protection for corporate enterprises, government agencies, service providers and academic institutions. Analysts, who have been critical of 3Com's product portfolio, applauded the TippingPoint deal as a way for the company to enter the fast-growing market for so-called intrusion prevention products. They detect problematic network traffic such as viruses and worms. To remind, 3Com which makes routers, switches and other networking gear, has
been battling stiff competition from Cisco Systems Inc. CSCO on the high end
and cheaper competitors such as Dell Inc. DELL on the low end.
11:39am and stocks are higher in moderate trading. Oil was higher early but is now down 16 cents at $40.55. When it breaks $40 the markets will break out to the upside and the shorts will scream. Breadth is positive and the DJIA is up 30 points, the S&P 500 is up 5 points at 1192 and hopefully will break out to the upside today. The NAZZ is better by 6 points. We are somnolent although we did
add Time Warner to accounts that own it and we added 500 shares of Nokia to the
Model Portfolio. We are saving our cash for a blow up like what happened in
Motorola last Thursday and Friday.
And tomorrow is today so let the games begin. The Sad news from Norse land:
13 December 2004 Daily Comment
With our accounts and the Model
Portfolio invested for Year End and beyond we thought it would be a good time
to review our holdings and the reasons why we own each.
3Com is a low priced speculative stock that is part of our five stock year end package. We have been buying out of favor stocks at year end since we began in the business back in 1966. The package approach allows one or two stocks not to move while the hope is that one or two will make 50% or better moves as the tax and position selling abates. 3Com should not be confused with 3M. COMS is the old U.S. Robotics/Palm combination that sold at ridiculous levels in the late 1990s. COMS has no debt and cash per share of $2.50. It still makes stuff for computer connecting and such. Sales have been falling and competition is great but net of cash the company is priced at $500 million with sales of $700 million. 3Com is losing money. This stock is part of a package of five low priced stocks we own which add up to about 11% of assets. Lucent is our second low priced speculative stock. They make everything for the telecom industry. LU is actually going to earn money this year. Cash on hand is $2 billion with debt of $5 billion. Sales are a bit under $9 billion and the company has a market cap of $15 billion. We are looking for a 20% move after year-end. Qwest is the forgotten RBOC. Phillip Anschultz, a very rich man, owns 17% of the common and he is the reason we keep coming back to the stock. With the new Sprint/Nextel combination and the spin off of Sprint’s land line business there will be consolidation in the land line business. Someone is going to buy Qwest once it gets its legal problems settled. It has a ton of debt but the equity is priced at $5 billion which coupled with the debt of $15 billion still only values the $15 billion revenue company at $20. A $25 billion take out price would equal $10 a share. By the by, Sprint stole Sprint PCS when it repurchased the shares last year and now it is going to spin off the land lines which is the reverse of what it did five six years ago. Investment bankers win again. Rite Aid is speculation # 4. The share price reached $6 last year and in any bull run it could again next year. We would be out of it by then. RAD has sales of $17 billion and new management has reduced debt by $2 billion over the last three years. RAD has 3300 drug stores in 29 states. The equity in the company is priced at $2 billion at present prices. RAD earns money. Silicon Graphics is our final speculation. We owned the stock in the teens years back and we are taking another flyer this year under $2 per share. At this level the company is priced at less than one times sales and has enough cash to survive for as long as we plan to own it. SGI makes computer stuff also and we own it because of its price. It is a real anchovy. We also own Cincinnati Bell in some large accounts on our consolidation in the
telecom industry thesis. If it gets a bit cheaper we may make it the sixth low
priced speculation in many accounts.
The new watchword has moved from the 1960’s “Plastics my boy, Plastics” to “Wireless my boy, Wireless.” Andrew Corp was in our portfolio last year and we were scared out before we made any money in the stock. In fact in many accounts we realized a loss. It is a player in the wireless telecom supplier area. We also own Motorola and Nokia and RF Micro all of whom are involved in wireless telecom infrastructure stuff. Motorola sold off on Friday because Nextel uses their products and its system is different from Sprints. The guessing is that eventually NXTL will convert to Sprint CDMA but we think that the walkie-talkie feature that NXTL has and which NXTL has used to sell their service is the kind of ‘add on’ that many folks won’t gladly surrender. In any case, Motorola has been getting its house in order and just recently spun off its commodity chip making arm to concentrate on the higher tech proprietary stuff. Over the years MOT has shown the ability to reinvent itself as tech fashions changed and advanced from the time of radio and television, to color television, to satellites, and now on to wireless phones and infrastructure. With $10 billion in cash we think it is good tech rebound candidate. Nokia made wireless available to RF Micro makes chipsets for both MOT and NOK cell phones. Cash
equals debt and market cap is about 1.5 times sales. This former high flyer has
been grounded by the alternate boom and bust cycles in cell phone suppliers. We
have owned RFMD twice in the past and not made any money. This time we own it
mainly in larger accounts and are hoping the third time will be the charm.
We own BellSouth and SBC for
their dividends, their control of Cingular Wireless and their positions in the
telecom industry. Both of these stocks are fairly priced and will participate
in any general market move higher. Their dividends, even in a rising interest
rate environment, are attractive because of the 15% tax rate and the share
prices also offer appreciation potential. And we think the Republs are going to
eliminate entirely the tax on dividends.
Bristol Myers and Schering Plough are old line drug companies with patent and new drug problems that have been working on resolving those issues for the better part of four years. Again we think the Republican Congress is going to be helpful to drug companies exempting them from catastrophic lawsuits over FDA approved drugs and also the strong euro suggests that companies like SGP and BMY would be candidates for acquisition by European companies. Chiron is in a world of its own in that it is lower because its flu
vaccine operation was shut down this year. It will be up and running next year
and Wall Street and Wild Oats Markets has been in and out of our portfolios for years. It is the only major natural foods grocery chain outside of the major player in the arena, Whole Foods. At one time years ago we owned both and made money trading both. Ten year ago Whole Foods was valued at twice Wild Oats. Now Whole Foods is valued at 30 times Wild Oats even though WFMI sales are only 4 times OATS sales. OATS has never been able to get its act together and periodically blows up. We bought it on its autumn blow down to under $6 per share and hope for a double. We also think there is the potential for a major grocery chain like Safeway or Kroger to buy it. Hain Celestial markets natural and organic foods. Heinz owns 22% of
the shares. HAIN tends to run between $16 where we own it this time and $25
where we won’t own it if it makes it close to that price. HNZ is planning on writing
down its ownership in the company if the share price doesn’t rise in the next
year. Their cost is a round the $30 per share level.
Hewlett Packard is also an in and out of portfolio stock for us. We like what Carli is doing with the company and if she weren’t a Republican we would love what she is doing. HPQ comprises every computer company we have ever owned including Digital Equipment, Tandem Computer, Compaq and probably a few others we can’t remember. It sells at 1.5 times sales, has a ton of cash and has shown a remarkable ability to survive. We have never before owned Micron Technology which makes DRAM
chips. Its business is a commodity business and when it is hot it makes $2 per share
and when it is not, like now, it loses money.
We have purchased Maytag almost every time it has tanked
over the last twenty years on a bad sales or earnings announcement. We have
made money each time and each time we have sold too soon. We hope to sell too
soon again for a nice profit. We don’t like holding it for long because it has
an onerous debt level.
Schwab clients have $1 trillion in deposits of cash and securities
at the firm. Charlie Schwab isn’t getting any younger and the guy he had
running the company quit last spring. We think that suggests Schwab selling out
to a major bank like JP Morgan that has a CEO who is trying to one up Sandy
Weill and Citigroup. We may not be in the stock when that happens because at
$14 we have a 50% gain.
Talbot’s has run into sales problems that started with the We have a love hate relationship
with Time Warner and we currently own in larger accounts. For how long we don’t
know.
Tellabs makes and market voice and data equipment for the telecom markets. It was a high flyer in the 1990s and has crashed to earth. At its present price net of cash it sells at a bit over 1.5 times sales. TLAB has no debt and $1.5 billion in cash. We hope it makes big buck for us. And that’s it on our portfolio review. This week should be interesting with witching on Thursday and Friday. So let the games begin. 11 December 2004 Weekend Comments 7:19am and first the bad news, the NKU Norsemen lost to Lewis University of Chicago in a desultory game last night. The Norse Ladies won their game. The sordid details are available at the end of this daily post. Japan and Hong Kong headed south overnight while Europe is a bit higher. All our wonderful OPEC friends led by our best friends the Saudis are getting together to try and cut production by one million barrels a day in order to raise oil prices. Thank you very much. The U.S. election is over and so the Saudis can go back to their old ways. Crude Oil is up 75 cents at $43.68. Treasury bonds are better with the ten-year at a 4.13% down from 4.17% last night. The dollar is doing better against the yen and the euro this morning. In a few minutes we’ll have PPI and then at Our technical guru feels that the S&P 500 need to close
above 1191 today or Monday in order for the rally to resume without a pullback
and so we are on pins and needles and pine cones waiting for the results.
7:32am and PPI, the Producer Price Index, was up 0.5% which was hugely more than the expected 0.1%. Core PPI was up 0.2% as expected. Year over year the numbers were 5% and 1.9% respectively. These last numbers represent the rise in inflation over the last year. Thank the gods for hedonics which are the adjustments to the base PPI number that reduce the rate of increase in the core number which is the one the FED considers. The real PPI number suggests inflation and higher interest rates. Bonds are flat on the news and stocks futures remain lower at this time. There is inflation and it is getting worse and eventually the boys and girls in Washington or at least on Wall Street will get religion and interest rates will head much higher. Moreover talk of the two trillion dollars that need to be
borrowed for revamped Social Security Accounts which will be called Retirement Insecurity
Accounts that the Bushies plan to borrow off book- so that the borrowing
doesn’t exist- is going to break the interest rate ceiling that has existed for
the past few years.
8:51am and the Michigan
folks are 95% confident this month which is better than expected. They sure are
great folks to help the markets along today and may they shop till they drop
and borrow till it hurts so that our great economy can grow and grow and grow
and so stocks can resume their rally and we can sell in January with profits
for all.
Bloomberg is reporting that as the dollar is rising today
the markets are looking at the biggest weekly gain on the dollar versus the yen
in six years. Don’t cancel the trip to Tokyo
just yet. We presume Soros has made his money and has locked up some gains for
the year.
11:43am and we added more Motorola to accounts at $16.98. We also repurchased Qwest at $4.24 in larger accounts which is the price at which we sold it earlier in the week to buy Rite Aid 20 cents lower than its current price. We have repurchased the Q and also CBB at $3.75 in only a few large accounts because we think the Nextel/Sprint merger suggests the emergence of four survivors in the telecom area with the other smaller telecom companies having to merge or die. Since merging is preferable to dying we presume that Qwest and CBB are doing a mating dance or if not them then some enterprising investment banks are. Stocks are floating along and the last hour today is going
to tell the tale of the week.
Reuters is reporting that analysts are saying Motorola is off today because it might lose its exclusive supply contract with Nextel if the Nextel/Sprint deal goes though. Motorola owns 80 million shares of Nextel. MOT will figure it out and we are using the sell off to buy stock. It is interesting that recently Prudential said the
following: “Earlier this week, Motorola announced that
it had been awarded a $450 million contract from Sprint. This represents
the first major EV-DO [evolution data optimized] business from Sprint and could
potentially lead to business with other carriers as well. With the contract
valued at roughly 15% of Sprint's announced spending plan, we believe Motorola
held its market share steady with this customer." Prudential has a $21
price target for Motorola.
Goldman Sachs is suggesting 75% equity exposure for 2005 and no bond exposure. Goldman says that European companies may use their dollar advantage to go on a buying spree. Oil is down $1.43 at $41.15 and gold is off 80 cents.
GE raised its dividend and announced a $15 billion buyback. With
oil down $1.60 stocks should be doing better.
2:38pm and the big boys and
girls keep selling Motorola. We
can’t buy all their stock but we have purchased another chunk at $16.25 for
accounts. There is an all out panic in the selling of the shares today and it
may continue on Monday but this is the type of buying opportunity for which we
raised cash. Motorola has been trying to get its house in order for a number of
years and has finally streamlined operations and we think they will be able to
well handle any merger between Sprint and Nextel. We will buy more at lower
prices.
3:02pm and after a boring day of volume action the DJIA closed off 10 points at 10542. The S&P 500 dropped 2 points to end at 1187 and the NAZZ lost 1 point to end at 2128. Breadth was positive at the close, oil made four month low closing down $1.82 at $40.71 and the ten-year finished at 4.15% with the five-year at 3.53%. And tomorrow is today and it’s
the week-end so relax, recharge and enjoy. There will be a post Monday morning.
The sad news on the Norse:
NKU vs. Lewis (Dec. 9, 2004) Head Coach Dave Bezold On the outcome of the game… Mike Kelsey
10 December 2004 Daily Comment 7:32am and jobless claims were 357,000 were higher and the week before were revised higher. Import prices were up 0.2% in November and 9% year over year, export prices up 0.3%. The jobless claims continue to rise and are 25,000 per week higher than two months ago. Asia was lower, Europe is lower and the U.S. is lower. Japan lost over 1% and Hong Kong just a bit. Oil is up 52 cents at $42.48. Looks like more pain before any gain.
10:03am and the NAZZ is down 26 points with the DJIA down 65 points. Volume is moderate and while there is no imminent rally, stocks seem to be getting a little buying at this level. There is probably more downside but many of the folks who were bullish last week have changed their horns for claws and are now shorting rather than longing for stocks. We are adding more Motorola at $17.15 to accounts owning Univision which we plan to sell on any
pop higher. We jumped the gun on MOT earlier this week but we remain convinced
that after year end it will move higher. We are also adding a bit of Nokia at $15.60. NOK never made its
$17.50 resistance sell point for us so now we are holders and buyers into the New
Year.
12:27pm an the ten-year Treasury auction resulted in a 4.15% yield with a 2.68 bid to cover ratio. National Semiconductor announced better than results and didn’t warn and that news set off a short covering rally that has the major measures positive or almost positive. The WSJ and CNBC are also
suggesting the possibility of a Sprint/Nextel
merger which makes sense to us and would be beneficial to the tele-suppliers
that we own. Sprint has excess borrowing power and needs wireless and the
converse is true for NXTL.
1:22pm and we are selling Univision
at $28 which is up 30 cents per share in this short covering rally for a $1
to $2 per share loss to use those funds to buy BellSouth which is off 40 cents per share this afternoon on the
projected Nextel/Sprint deal. We’ve wanted to buy BellSouth for a week and are
using this pullback of $1 per share over the past 24 hours to switch. The BLS
is less volatile than the UVN which is contrary to most of our switches but as
we mentioned above we also bought the Motorola this morning in the UVN
accounts. MOT will give us enough jazz.
3:02pm and the DJIA rallied in the final hour to close up 55 points at 10550. The S&P 500 rose 6 points to end at 1188 and the NAZZ jumped 4 points to 2130. Breadth moved to the positive side on the NYSE but was 5/4 negative on the NAZZ at the close. Oil closed up 59cents at $42.53 and the ten-year ended at 4.16% with the five-year finishing at 3.55%. The Producer Price Index comes on Friday and with the touchiness of the markets may have an influence. And tomorrow is today so let the games begin. 9 December 2004 Daily Comment
6:29am and the grey and cloudy
morning fits our spirits as we review the Model Portfolio and see than we have
given back 2% in two days. We dislike giving back gains but that goes with the
territory at year end as we construct our accounts for the rally into the New
Year. Yes, we may have already seen the rally but our historical perspective of
thirty-five plus years watching these year end events tells us there is more
upside to come after a shakeout this month. And so we will wait and watch and
adjust and do a little hoping and praying. That’s all part of a days work.
Overnight markets were mixed in Oil prices are in the hands of
the speculators right now and as the boys and girls trade among each other and
make and loose fortunes the rest of the country pays the price. We haven’t yet
seen a 30% drop in the price of gasoline, heck we haven’t seen a ten percent drop
even though oil is down from $55 to $41. As with all prices, they seem to rise
faster than they come down.
Bear Stearns downgrades Sirius Satellite on a valuation basis. The
company is valued at $12 billion and has revenues of $100 million. Over valued
is not too tough a call although we would bet the stock resumes its speculative
rise after a slight pull back.
Gold is down $6.40 at $447. As soon as the Gold ECN (GLD) began trading Gold the metal has been selling off. That is often the case that when Wall Street makes a trading vehicle available for the little guy and gal and intermediate trading top is made. “GLD” is streetTRACKS Gold Trust is an investment trust whose shares
strive to reflect the performance of the price of gold bullion, less the Trust’s
expenses. The Trust holds gold, and is expected to issue baskets in exchange
for deposits of gold, and to distribute gold in connection with redemptions of
baskets. The gold held by the trust will only be sold on an as-needed basis to
pay trust expenses, in the event the Trust terminates and liquidates its
assets, or as otherwise required by law or regulation. The Trust is not managed
like an active investment vehicle, and it's not registered as an investment
company under the Investment Company Act of 1940.
Investors Intelligence has 60% bulls and 21% bears. That’s bearish, hopefully not for a while. (Speaking of intelligence, the Intelligence Bill passed by the Republican Congress is a real gem and reflects the intelligence of the parties involved in writing the bill. That is probably why no one reports to anyone and no one is responsible. But the name sounds good.) To continue the bearish theme
from bullish data www.minyanville.com
reports that the Weekly Traders Commitment Report from the CFTC says that there
are currently held 113,000 long S&P 500 contracts representing $33 billion.
The last time that number was this high except last week was back on We present the bearish case not
to scare but to point out the conflicting voices out there in trader land that
we must decipher and cogitate and lose sleep over.
Lehman upgraded GE to overweight and Goldman cut Wal-Mart to neutral. Merck is having a conference call this morning
and has appointed a special committee to deal with the VIOXX lawsuits. MRK is
guiding lower for next year by a few pennies excluding any lawsuit stuff.
Upcoming Economic Reports for the rest of the week: Dec 9 8:30AM Export Prices ex ag Dec Dec Dec Dec Dec Dec 10:02am and discretion being the better part of valor when the Markets rallied this morning on a further drop in oil we decided to raise a bit of cash by selling some of the mundane stocks we own to have funds available to reinvest in any further sell off. We sold JPM, A, VIAB, ANN, CMCSA, KO, and a bit of SBC in larger accounts. All were scratch sales or slightly profitable and this is not a rally ending call, rather we sold the less volatile issues to raise cash to place in more volatile issues later this month. If we are wrong and the markets rally from here we won’t be disappointed. These sales get the Model Portfolio and many accounts back
to a 20% cash position.
The major measures are higher but
our stocks continue in the red as today’s up move seems mainly program related.
Breadth is 5/4 positive and volume is brisk.
The five-year Treasury auctioned today came at a 3.55% yield with a bid to cover ratio of 2.55. That means that there were bids for 2.55 times the bonds that were sold. Gold is down $16 and ounce and silver is off 10%.
European stocks closed lower. The advance/decline line has been positive all day and remains 5/4 winners over losers. Crude oil is back to the upside but remains under $42 while Gold is now off over $12 per ounce. Bush has asked Snow to stay on as
Treasury secretary and stocks are selling off. We don’t think there is a
connection.
The DJIA closed up 53 points at 10475. The S&P 500 rose 6 points to 1183 and the NAZZ gained 12 to end at 2126. Treasuries rallied strongly after the five-year auction with the ten-year going out at 4.13% and the five-year at 3.50%. Gold finished $11 lower and oil closed at $41.94 up 48cents. And tomorrow is today so let the games begin.
8 December 2004 Daily Comment 6:02am and the fire in Chicago was in the LaSalle Bank Building which was called the Field Building in our youth and is located catty corner across the street from our offices. Happily it seems that no folks were killed. In order to avoid the turmoil of the area and to test our systems we are conducting all our business today from our Disaster Recovery Offices in the Kickapoo Valley and Oak Brook, Illinois. We apologize that the URL to Steven Roach yesterday sent you to a website about the Ohio elections. Some liberal virus must be running rampant on this website. The URL address is http://www.morganstanley.com/GEFdata/digests/20020913-fri.html#anchor0 . The NYT is reporting that Johnson & Johnson is going to purchase Guidant the stent and heart device maker. Current value of Guidant is about $25 billion and it has revenues of $4 billion and earnings of $600 million. The dollar is at almost 1.35 to
the euro and the yen is approaching 102 to the dollar. No trips to France
or Japan are in store.
IBM and a Chinese Company plan to create a personal computer
company to make and sell IBM computers. Also, Dell is going to cut prices on corporate computers and servers by
up to 20% in a throwing down of the glove against IBM and HPQ.
Colgate is going to fire 12% of its work force which is 4400 souls. Happy Holidays. Asia was lower overnight but Europe is higher and U.S. futures indicate a higher opening as Oil is off about 40 cents. The terror attacks on the U.S. Consulates
in Saudi Arabia had no effect on the markets yesterday which fits our theory
that as long as whatever death is occurring is far away the markets and most Americans
plan to have a merry holiday season, except the Colgate workers. Out of sight,
out of mind, which is also the reason the U.S.
health care system is in such bad shape.
Deutsch Bank lowered its rating
on Andrew Corp due to valuation and Bank America
reduced earnings projections for Micron for the quarter and for all of next
year by a few pennies in each case.
12:02pm and after trading lower the major measures rallied for about an hour but now have turned lower again. Breadth is 5/4 negative and volume is moderate. We sold Qwest at $4.27 for a nice percentage profit and are placing the funds in Rite Aid at $3.33 which is down 30 cents (10%) per share from yesterday’s close on lower same store sales and a reduction in sales and earnings outlook. But the stock is already a $3 number and we think it is worth the speculation. We added a bunch of Motorola to
accounts at $18.50. We would have liked to purchase a bit lower but we missed
the opportunity by horsing around with limit orders yesterday.
12:54pm and with oil down $1.23 at $41.75 stocks are also lower. This is a disconnect from the usual action of the last few months. Treasuries are a bit firmer with the ten-year at 4.23%. Breadth remains negative. We have no reason for the sell
off except that maybe it is time for some profit taking. We are going to remain
‘all in’ as we await year end.
We should have known. Colgate is going
to fire 4400 folks and take $650 million in write offs over the next few years
and that is just what Wall Street wanted as the share price is up $3 today. What
a warped economic system we have.
3:02pm and the markets zagged today even as oil moved to a new recent low down $1.52 at $41.46. The DJIA closed off 107 points at 10440. The S&P 500 lost 13 points to finish at 1177 and the NAZZ dropped 36 points to end at 2115. Breadth was 3/1 negative and volume was brisk although Sirius did about 400 million shares by itself. The trading in that stock shows that speculation is alive and well on Wall Street. the volume and strong negative breadth is and indication that the profit taking may continue for a few days. And tomorrow is today so let the games begin.
7 December 2004 Daily Comment
6:20am and we had our first snow
of the season last night and the fields and trees are coated with the thick
white crystals. Since temperatures are above freezing the white mantle will not
be here for long but it is calming while it lasts.
Overseas markets are lower and U.S. futures are also muted with oil up 40 cents at $42.85. With most earnings reports out of the way warning season will soon be upon us. Traders require a never ending stream of information on which to trade and the media and brokerages do their best to try and provide. Treasuries are at better levels
than they were when we left last week with the ten-year at a 4.25% and the
five-year at 3.60%. The two-year has moved a bit below 3%.
Merrill has downgraded Pfizer and Wyeth just in time to create further year end tax loss selling in the two. We may buy some Pfizer before year-end. With the Bushies in power there is no chance of negative legislation and we expect the new Congress to pass legislation to protect drug companies from lawsuits if the FDA has approved the drug in question. You get what you pay for and the drug companies have paid a lot for protection. Piper Jaffrey has nice things to say about RF Micro Devices in that they supply the chips for Motorola as well as Nokia handsets. Motorola spun off its chip making operation last week as Freescale Semiconductor (FSL) and the
price of MOT was correspondingly adjusted downward. One advantage of our sale
last month is that we avoided the spin-off. That’s because the spin-off usually
trades lower as folks sell odd lots and the big boys and girls eliminate a
holding they didn’t buy. We may pick up a little Motorola today.
Last week’s late drop in crude oil caused it to touch its 200 day moving average. The usual response to such a move is for crude oil to bounce higher. Citigroup is raising its S&P
500 target for 2005 to 1300 from 1250.
3Com is out with an update on the second quarter which isn’t
pretty. As a result the shares will be heading lower today.
Liberty Media is repurchasing 3 million of its shares from
Comcast for $150 million. By the by,
since we are subscribers we now know that CMCSA is raising cable rates 7% in
January. Onward and upward is the cable companies’ motto when it comes to
rates.
This is an interesting report on housing prices by a very bearish Steven Roach. http://www.morganstanley.com
9:13am and everything we own is a sea of red this morning as the DJIA is off 56 points. That’s the daily give and take of market action. We are not trying to catch $1 moves and so we must take the bad days with the good. We bought a few shares of
Motorola but it has run away to the upside so we will bide our time. COMS has been trading around $4.20 which is 40 cents lower than the
close (10%) but is still better than we expected. They really didn’t have to
pre-announce. We would have been happily out of the stock in January before earnings
came. But we think the stock will trade higher that our cost in the next month
and we are adding to aggressive accounts today. We also added a few shares of
NY Times to accounts under $40 per share.
Fifth Third Bank fessed up to wrong
way bet on interest rates on Friday to the tune of over $1 billion and the
stock has dropped 10% to $46. We are again interested but unfortunately or
fortunately we have little cash left and no stocks we want to sell at his time.
We presume there are other banks and hedge funds out there with the same
problem. Luckily we sold the stock last month to place in other securities. We
are going to buy a few shares back at the $47 level.
12:32pm
and it’s a blah day in the stock markets with the trend trending down. Breadth
is stinky and the only positive is that volume is light. The NAZZ poked its
head to the positive side about and hour ago.
3:02pm and the DJIA closed down 45 points at 10547. The S&P 500 was up 1 point at 1192 and the NAZZ gained 3 points to finish at 2150. Breadth was 5/4 negative. The Treasury ten-year closed at 4.23% and the five-year ended at 3.58%. Crude oil was up 44 cents at $42.98. And tomorrow is today so let the
games begin.
6 December 2004 Daily Comment
The stock market was kind to our accounts last week and we closed out Friday with a 7.3% gain for the year in the Model Portfolio versus a 1.6 % gain in the DJIA and a 7.1% gain in the S&P 500 and 7.2% rise NASDAQ composite. Past performance is not an indication of future performance. Late in the week we added Ann Taylor to some of our aggressive accounts and added Maytag to many larger and aggressive accounts to replace the Kroger and Safeway that we sold. The next three weeks promise to be interesting as the bulls and bears tug and push. The press and many gurus are making too much of a fuss over the lousy retail sales numbers for November. They seem to have forgotten that the first week of the month included a pretty volatile election process that left half of the population satisfied and half of the population disappointed. We are not surprised that folks didn’t run out and shop their heads off. We think that now that the political situation has had time to mellow that the psychology of the populace has also. Whatever, this time of year is usually a sweet spot for being long stock and we continue to look for opportunities for year end trades. And yesterday is today, so let the games begin. For those folks interested in the basketball wars we present the
story of Saturday’s win below. After two unhappy losses NKU got its act together.
It may have been because we were in attendance and making sure the timekeeper
did his job; but the men and women’s teams both won and so enjoyed a happy ride
back to the
3 December 2004 Daily Comment 7:40am and we are heading to Chicago today for a client’s 90th birthday party tomorrow. With that in mind this post will be shorter than usual but as heartfelt as the all are. We had a great day yesterday in all client accounts. We fear today’s will not be as gangbusters since Talbot’s came in with dreary same store sales numbers that were down a fraction for the month of November although TLB reaffirmed fourth quarter guidance. We will stay the course since we continue to believe that the effects of the Florida hurricanes may have affected them more than many of the specialty retailers. Last night we were thinking about Wal-Mart’s punk sales numbers for November and we had the idea that it may be that more than a few of the folks who have been shopping there may have moved up a notch in their shopping habits as the economy and their personal situations have improved. We don’t know how to take the over 10% sales drops at Ford and GM although it is interesting that the announcement of the drops had no impact on the overall markets. The old saying “As GM goes so goes the Nation” seems to have dropped by the wayside. Now the big boys and girls are more interested in how DELL and EBAY perform when making their Macro market decisions. Overnight Oil is under $45 and gold is
lower. Unemployment in Tomorrow (today) brings the employment report for November and the guru thought is that a number of at least 200,000 jobs added are needed to close the week out with an up day. We will not be trading the number since we’ll be running around – unless something extreme occurs. We would expect some consolidation today and then an attempt to get through the 1190 S&P number with more conviction. If that fails a retreat to 1174 could be in the cards. And today is tomorrow. Our next post will be Monday morning.
2 December 2004 Daily Comment 6:30am and we get letters:
Hi bud And we respond: We are happy to know that reaffirming your belief in the Almighty is a positive side effect of our management of your funds. We bought TLB and TIF for 10 point moves. We may change our mind but for now that is our plan. The 32 stocks we own are stocks that we have owned off and on over the years. Nokia is new as is Chiron but the others have been part of portfolios at some time in the past. And we have followed both NOK and CHIR for years. Moreover there are only nine themes involved in the stocks we own. Safeway & Kroger & Wild Oats as grocery stores go together and Hain Celestial as an organic food supplier 20% owned by Heinz should be lumped in with them. Talbot's is a better quality women’s and kids retailer and fits nicely with high end Tiffany. Tellab and Andrew manufacture optical switching equipment, Nokia& Motorola do cell phones and RF Micro makes the chips for those phones. Chiron, Bristol Myers and Schering Plough are drug companies on their lows that should have nothing to fear from a Bush administration and now need only to get their houses in order to figure out how to continue ripping off the elderly consumer. Hewlett Packard, Micron and Agilent are computer related with Micron a chip maker that has boom or bust cycles and is currently in between. Viacom, Comcast, Univision and Time Warner are entertainment and cable. Lucent, 3Com, Right Aid, Qwest and Silicon Graphics are our low priced package for year end and beyond. Excel and SBC and JP Morgan are- at the least- dividend plays. Coke is a cheap blue chip and Scwab is our play on assets under management and fits with JP Morgan. And so that is our portfolio. We plan on holding and readjusting though year end and then we will see what Santa brings to us. As you know all our own money is invested in the same stocks that you own and we look at all accounts as we do our own and our families’ accounts. In many like yours we take less risk but in those that have expressed a desire to ride along aggressively we welcome the company. Past performance is no indication of future performance but believe me when we tell you that with the Bushies intent on destroying Social Security and all the social safety nets created in the last 80 years we are intent on ensuring a secure future for our children and grandchildren and the only way we can do that is to grow the assets we will leave them when we pass to the other side of the river. Our desire to preserve capital is always foremost but our need to grow capital is a close second.
There are times when we must assume risk to grow principal and also create income for client that take part of their capital each year so that they
are not invading their asset base and this time of year after a settling election seems a good time to take that risk.
7:32am and October personal income was up 0.6% and spending was up 0.7%. The core PCE Deflator (inflation) index was up 1.5%. Overnight
Hong Kong was higher but Japan was down 1% as was most of the rest of Asia. Europe is higher. U.S. futures are suggesting a higher opening. The
dollar has stabilized against the euro and the yen.
8:32am and in the early going the DJIA is higher as oil slips below $49. Treasuries are a bit firmer with the ten-year at 4.33%.
Tellabs today closed its $1.5 billion merger with AFCI, creating a leading global supplier of access, transport and data solutions for telecom service providers worldwide. "The new Tellabs is a strategic telecom equipment supplier that will lead the industry's shift to reliable broadband services around the world," said Krish Prabhu, president and chief executive officer of Tellabs. "Together, Tellabs and AFC can help carriers even more as they seek easier ways to provision new voice, data and video services, to simplify their networks and to sharpen their competitive edge."
In honor of the merger another brokerage lowered its rating on TLAB from buy to neutral. We of course maintain our buy rating on the shares.
This morning we sold Motorola, Safeway and Kroger for scratch to $2 per share gains. We sold the Safeway and the Kroger because there are rumblings of more trouble with California workers who are unhappy about the cuts in their health insurance and increase in their health insurance costs. The companies are using the ‘Wal-Mart doesn’t so we can’t’ bugaboo to explain their actions. The last time this occurred Wild Oats benefited from the disruption and so we are going to invest the number of Kroger shares we sold in OATS and raise a chunk of cash in the process.
We sold Motorola because it has reached the apex of its trading range for the last 12 months and is either going to break out or pull back. Our
inclination is to take the trade since we have never been enamored of Motorola’s management and bought it for a trade when its share price broke
down in October. We own enough Nokia et al to participate in the cell phone industry and would rather redeploy the money to one of our other
stocks, specifically Time Warner and or Maytag.
Even though we don’t own the stock and probably never will we are delighted by the rise in the price of Martha Stewart’s stock MSO. Martha has tripled her net worth since she went to jail for five months and it couldn’t happen to a more deserving person. We do think the share buyers are overestimating the potential gains in sales etc. from the Sears K-mart hook up since that deal is real estate not retail sales driven. Martha will have served time for something she didn’t do, made her faithful shareholders more than whole and still Ken Lay is walking around free as a bird, but a lot poorer and despised except by the Bushies who are afraid of what he knows which is why he is still free.
Martha is admired by a third to one half the population which does translate into a lot of magazine subscriptions.
9:47am and there is a good rally underway which has brought the S&P 500 back to 1187 and within spitting distance of 1190. Crude oil being
down 4% helps.
12:48pm and Crude Oil is down $3 per barrel as inventories on hand were greater than expected. We added TLAB to some accounts and also
bought Duke Power in our large accounts for the 4% dividend. That may seem counterintuitive to our belief that interest rates are going to rise
but we continue to believe that the Bushies are going to push for and get the elimination of taxes on dividends. There is some justification for that
position since dividends are supposedly taxed at the corporate level. The only problem with the theory is that many of the dividends paying
corporations don’t pay taxes. But consistency is the hobgoblin of Democrats not Republicans and we currently live in Republican Nirvana in the
land of the Brobdingnagian Yahoos.
We are having trouble acquiring the OATS at our price and so we are going to put some of the money we raised this morning to work by purchasing an amount of Lucent equal to the Kroger shares sold in accounts. That still leaves enough money for the Wild Oats if we can purchase at our price.
Lucent received a nice contract from Cingular Wireless and at the same time Baird cut LU to neutral from outperform on a valuation basis. For that
reason the stock is unchanged on the day.
The Fed’s beige book coupled with the $3 drop in the price of oil has overcome afternoon weakness in the dollar and led to a continuation of the rally on very good volume. Treasuries have weakened a bit and breadth is 2/1 positive. The Summary of the Beige Book stated: Reports from the twelve Federal Reserve Districts generally paint a picture of continued economic growth from mid-October to mid-November, with a number of areas improving. Eleven Districts reported expanding economic activity, with New York, Philadelphia, Atlanta, and Dallas noting a pickup in the pace of expansion since their last reports. Minneapolis indicated that the expansion in that District was broad-based, and San Francisco described the region's activity as solid. The Richmond, Chicago, and Kansas City Districts saw moderate gains in economic activity while St. Louis viewed the gains there as modest. Only the Cleveland District reported little change in economic activity.
Overall consumer spending was uneven since the last Beige Book, with only a few Districts reporting stronger retail sales and many noting mixed, flat
or slower sales. Automobile sales were flat to down across most Districts, and several Districts reported higher dealer inventories than
desired. In contrast, manufacturing and service sector activity increased across the country. Residential real estate activity generally
remained at high levels, but continued to show signs of cooling in a number of Districts. Nonresidential activity, while still sluggish in many
areas, appeared to be turning the corner in several Districts. In credit markets, business lending was strengthening, but the pace of consumer
and mortgage lending was mixed across the country. Contacts in the securities industry reported increased inflows into stock mutual funds and
noted a pickup of stock issuance and merger-related activity. Many agricultural producers across the country said they were looking forward to
large or record crop production. Energy-related activities remained strong.
3:02pm and Zowie, Wowie, the DJIA closed up 158 points at 10585. The S&P 500 closed above the important 1190 mark up 17 points at 1191 and the NAZZ rose 40 points to 2036.
And tomorrow is today.
1 December 2004 Daily Comment
6:05am and the dog awoke us early to the wonders of a beautiful moonlit frost shimmering all around and the reflecting soft glowing light was
perfect for finding our way to the barn for chores and our office for work. The stars and planets were bright and the chill just right for
encouraging the fire that now glows in our old cook stove.
And we get notes:
Hi Bud And we respond: The Repubs won and control ever thing. The ‘era of good feeling’ has returned to the financial markets at least. The Model Portfolio (our money) is ‘all in’ as they say in poker which is now so popular. There is a new day dawning. Really though, we think December will be OK and January also. We think there is a good chance to make this year and next years’ 10% returns in the next few months. Funny how all the terror scares have disappeared. They were the events worrying the markets. You are correct in saying we haven't been this long since the last century. Hope we are right. The talk of a falling dollar and rising gold prices are only distractions from the real problems of rising deficits as far as the eye can see and the intractable price of oil. We do fear the deficit and we also think the price of oil is going to eventually doom whatever recovery is occurring. But markets are 90% psychological and we are guessing that folks are glad the elections are through. Bush is a known commodity who is going to change Social Security and run up the deficit or move a lot of spending ‘off budget.’ We think he will propose eliminating any taxes on dividends and capital gains and we wouldn’t mind if he lowered the tax rate on short term gains while he is giving money away. Because we say Bush is going to try to do these things does not mean we agree with his choices. But the realities are that Repubs control and are going to have their way and so we have to adjust our thinking accordingly. Economies as large as ours do not become Banana Republics over night. It takes time and many years of deficits to reach that status. The dollar has been rising and falling for years and it is true that the markets crashed in 1987 when the dollar was under pressure. But more importantly, the 1987 markets had been in a speculative period for years and had just moved 40% higher on the year (and up 170% over the previous four years) to an all time highs which they made in April 1987. The major measures then came off those highs and dropped 10% before resuming their 20% climb to new highs in August,1987 before beginning a 20% decline over 2 months that ended in a further 40% lower three day Crash. We just don’t have that scenario now. It is important to remember that portfolio insurance was a new idea back then and the selling of stock futures by a few goliaths set off the collapse. There are always new ideas and new strategies to prevent loss being created and sold by the big boys and girls. And that is true of the present with all the hedges and various instruments that folks can trade. But we don’t think the time is ripe for a panic unless of course some currently unknown billion dollar hedge fund has been leaning too heavily the wrong way. The day to day movements in the dollar and gold and bonds and even oil are the hedgies playing zero sum games with each other. It is just a big poker game with about as much financial acumen involved. Over the short run – which is all that interests us from an trading standpoint – these gyrations may affect the day to day movement of the overall markets but we think that individual stocks are in their own worlds right now and that there is a fair chance that we will gain 10% or more from this level..
Enough said.
The guru who has been right on the markets for the past few months suggests a move above 1187 on the S&P 500 today will set up a further move to 1200.
Asia was lower overnight as is Europe. Treasuries continue to exhibit weakness although this morning it is only a couple of basis points. Oil is 12
cents higher to $49.88 and gold is also up a bit. The dollar is continuing its stabilization against the euro although it is off a tad against the yen and U.S.
futures are suggesting a slightly lower opening.
7:32am and 3rd Quarter GDP was revised from a first look up 3.7% to a preliminary up 3.9%. The deflator (inflation) remained at 1.3%, and with that
look in the rear view mirror the futures have turned a bit better.
9:02am and Consumer Confidence was reported at 90 versus an expected 95. And so stocks are a bit weaker. It is amazing that folks would
buy or sell stocks based on a number that is as reliable as the exit polls of the last two elections. The exit polls were actually more reliable. The
computers just decided to count the votes differently.
11:20am and the major measures have been rambling below positive for most of the morning. Most have now turned up for the day but there
doesn’t seem to be a lot of conviction in the move. We are buying Bristol Myers for accounts as another down and out drug stock. The dividend
yield is 5% which means the dividend is in jeopardy but if BMY did cut the dividend the share price would probably rise since that uncertainty
would be out of the way. While we don’t expect any move up before year end we do think the large drug stocks will have a pop in the New Year.
12:01pm and crude oil is now 61 cents lower at $49.15. The ten-year Treasury is up in yield down in price at 4.36% and the five-year is at
3.70%. The major measures are again heading lower. The big boys and girls may want to move stocks higher later this afternoon since it is the
last day of the month but they had better wait until 2:30pm to try it. They started too early yesterday and weren’t able to hold the momentum into the close.
We will be able to wait till May and go to cash and go away since the U.S. Securities and Exchange Commission has postponed the planned
Jan. 3 start of a one-year test of relaxed limits on short-selling of some large stocks. Under the delay, the test will begin on May 2, 2005 and
end on April 28, 2006, the SEC said in an order.
3:02pma nd the DJIA closed down 48 points at 10428. The S&P 500 dropped 5 points to 1174 and the NAZZ lost 10 points to end at 2097. The ten-year closed at 4.36%, the five-year at 3.70%, oil was lower and breadth was negative at the bell.
And tomorrow is today.
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