Lemley Yarling Management Co
309 W Johnson Street Apt 544
Madison, WI 53703
Toll free phone numbers:
31 July 2008
More than a few hedge funds are
wishing the end of the month came a few days sooner since the rally in
financials has taken a bit of luster off returns for those short the industry.
Exxon Mobil reported lower
than expected earnings (although a record) citing hindered refining margins
(and maybe political considerations in that in times of high oil prices etc.). Exxon
Mobil once again reported the largest quarterly profit in U.S. history
Thursday, posting net income of $11.68 billion on revenue of $138 billion in
the second quarter. That profit works out to $1,485.55 a second. That barely
beat the previous corporate record of $11.66 billion, also set by Exxon in the
fourth quarter of 2007.
Motorola beat estimates on earnings and revenues and is up a bit in
early trading. CBS was in line but
dour with forward expectations.
Asian markets were mixed small
overnight except China which was down another 2.5%. European bourse indexes are
higher at midday and Gold is up a few dollars while Oil has a $125 handle.
Treasuries are flat ahead of Jobless claims.
Advance GDP was up 1.9%. Where is
the recession? Certainly the government
doesn’t see one.
Unfortunately for those who lost
them and for the markets Jobless claims
were up to 448,000 and continuing claims were 3.3 million.
Bristol Myers is going to buy the rest of Imclone, overpaying again because they don’t know what else to do.
BMY is paying $5 billion for $200 million EBTIDA and hope. The hope part is the
Starbucks lost money this quarter for the
first time taking write downs to close stores. We are going to buy the news. From news wires: Analysts offered mixed opinions on Starbucks Corp. after the coffee
chain reported a third-quarter loss due to slow U.S. sales and restructuring
costs. JPMorgan analyst John Ivankoe wrote in a note to investors that although
the business could get worse in the near term, "we agree with current
existing store focus (including many new products/initiatives), low risk new
development, and major organizational restructuring initiatives." But
other analysts were less optimistic. RBC Capital Markets analyst Larry Miller
said the chain faces more competition and needs to reverse a trend in brewing
coffee at home. "We think it's too early in the turnaround to get involved
with Starbucks shares," he said in an analyst note. After the market
closed Wednesday, Starbucks reported a quarterly loss of a penny per share.
Excluding costs for closing 600 underperforming stores and other restructuring
costs, the company earned 16 cents per share. Adjusted profit missed analyst
estimates by 2 cents per share, according to a Thomson Financial poll.
Starbucks also lowered its 2008 guidance and cut its plans for growth both in
the U.S. and internationally. For 2009, however, Starbucks said it still
expects profit between 90 cents per share and $1 per share. Analysts expect
profit of 92 cents per share. Starbucks has been attempting to transform its
U.S. business -- which has suffered from declining traffic and sales -- by
closing the stores, cutting 1,000 office positions and introducing new products
like Vivanno smoothie drinks. The company said in a conference call Wednesday
night that the initiatives will produce substantial cost savings in fiscal 2009.
GMAC, the auto and mortgage finance company majority owned
by Cerberus Capital Management and GM, reported a $2.5
billion loss as vehicle sales plummeted and the housing slump boosted
foreclosures. Residential Capital’s, the mortgage subsidiary of GMAC, loss jumped to $1.86 billion from $254
million a year earlier as the decline in home prices accelerated.
We are using today’s drop to add
some stocks to accounts. We bought Starbucks
and more CBS and SPDR Financial in many accounts. We
also repurchased part of the Whole Foods
we sold two days ago at the price we sold. The street seems to think that the court remand is a non issue. We added Yahoo to accounts as it dropped under $20.
Oil ended down $2.57 at $124.20.
Gold was up $10 to $922. Treasuries gained on the Jobless claims number with
the tow-year at 2.51% and the ten-year at 3.95%. European bourse indexes were
There was just another 200 points
mover on the DJIA today and today it was to the downside. The bears raided
financials in the last hour and recouped a bit of their lost gains of the last
few days. And commodity stocks were also under selling pressure all day. Other
stocks we ignored.
The DJIA closed down 205 at
11378. The S&P 500 dropped 17 points to 1268 and the NAZZ was down 5 at
Breadth was 5/4 negative and
volume was moderate.
There were about 220 new lows and
105 new highs. (Combined NYSE and NAZZ)
The bears won the day and with it the month and remain well
ahead of the year.
30 July 2008
Federal regulators on Tuesday extended through mid-August a temporary
order banning a certain kind of short-selling of the stocks of mortgage finance
companies Fannie Mae, Freddie Mac and 17 large investment banks. The Securities and Exchange Commission said
the ban on so-called "naked" short selling will be in effect until
11:59 p.m. EDT on Aug. 12 and will not
be extended. Short sellers make a bet that a stock's price will fall so
that they can profit from it. They borrow shares of the stock and sell them. If
the price drops, they buy cheaper actual shares to cover the borrowed ones,
pocketing the difference. "Naked" short selling occurs when sellers
don't even borrow the shares before selling them, and then look to cover
positions immediately after the sale. The SEC order requires short sellers to
actually borrow shares before selling them. SEC Chairman Christopher Cox said
the order was also helping prevent potential "distort and short"
manipulation of stocks, which occurs when rumors and misinformation are used to
drive down the price of a stock that has been sold short. "In addition to
continuing the existing order against naked short selling, the commission will
continue exploring other remedies for the broader marketplace to further
protect investors from 'distort and short' artists," Cox said in a
According to the WSJ: Mr. Cox has indicated that the SEC may
propose rules "very soon" to extend the restrictions to all stocks
that trade in the U.S. In its announcement of the extension, which came shortly
after 9 p.m., the SEC said that following the Aug. 12 expiration, the agency
"will proceed immediately to consideration of rulemaking which would
become effective after public notice and comment" and would focus on the
Asian markets were higher
overnight with India up 3%. China did not participate in the fun closing
fractionally lower. European bourse indexes are higher at midday and U.S. futures
are flat. So are Treasuries while Gold is down $9 in the early going and Oil
has a $121 handle.
Bulls are 30% and Bears are 50%
in the latest Investors Intelligence reading.
With the markets up big time in the early going and all
the financials that we sold yesterday morning on fire we were thinking how humbling this business is. And then a
trading friend called and asked if we were having fun. After a few expletives
we said we are flummoxed and consternated and ready to hang it up. The markets
have a way of humbling that is unmatched. Ah well, there is always tomorrow and
tomorrow and we have our health and our family and friends and we live in the
land of milk and honey and even with today’s rally we are still outperforming
the S&P 500 by 13% this year and are even with it over the last three years
so we must be doing something right. But it is frustrating...
At 11am financials are well of
their highs of the day and the markets have a roll over look to us. The DJIA
remains up 100 points. What happened to the somnolent trading?
Mother Merrill is on the hook for
$3.9 billion on the $30 billion of CDOs it sold. It cannot participate in any
gain. And these are the folks who want to manage your money?
From the Chicago Sun Times: Friendly bantering between three Cubs fans
and a White Sox fan at a child's birthday party turned nasty, then allegedly
erupted into a brutal beating that cost a 32-year-old Gurnee man his right eye.
Sox fan Robert Steele's eye was damaged beyond repair when an attacker wearing
steel-toed boots kicked him in the face during the 2-year-old's birthday party,
authorities said Tuesday.
Sony is down 30% in the last month
and 10% in the last day on disappointing earnings and we bought shares this
morning at $37.50 in accounts that own Verizon. We also added GE with a 4.5%
yield to accounts. All these adds are to own, not trade.
Gold closed down $7 at $909. Oil gained $5 to $127. Treasuries were
flat. The oil gain placed pressure on stocks and the financials were all over
the place today but managed to close on their highs. European bourse indexes
closed 1% higher.
We added shares of J
Crew to accounts as the share price dropped $1.50 on twice the normal trading
volume. We noticed weakness in the shares price for the last two days. Our
guess is that the drop is occasioned but a neutral rating form Goldman Sachs.
The Goldman Sachs analyst sees a balanced risk/reward. The analysis sees
attractive growth profile, controlled store growth, strong direct business, and
solid management. Note risk stemming from continued macroeconomic
pressures. At the beginning of the month
a Citi analyst upped the shares from sell to neutral saying the
apparel retailer has likely issued overly cautious second-quarter guidance.
Since its first-quarter earnings report on May 29, shares have fallen 32
percent, partly due to a disappointing second-quarter outlook. However, Citi
Investment Research analyst Kimberly Greenberger said there is upside potential
to the guidance.
"We believe management's
guidance is overly cautious and the second quarter is likely running inline to
slightly better than expected," Greenberger wrote in a note to investors.
June sales likely improved from April and May, she added. “If improving June
sales continues into July, we believe there could be upside to management's
cautious second-quarter earnings per share guidance," she wrote.
Robert Marcin at realmoney.com
writes: This is one of the most complicated
markets I can remember in my career. Many stocks are down and cheap with solid
fundamentals. These usually represent attractive longs. Also, sentiment is a
bad as it gets. That also usually means a bottom.
Yet fundamentally, things are deteriorating with the potential to get
much worse. The uber bear case has a spreading global recession and still
expensive stocks in the case of a global economic meltdown. Therefore investors
are shooting economically sensitive shares first and asking questions later.
Bullet proof stories or defensive plays, i.e. expensive stocks are gaining at
the expense of cheap ones. That makes life tricky for a deep value guy like myself.
I am limiting my bets in this type of market. I believe that the big
bottom will come this fall on a deteriorating economy (no more rebate checks)
and negative political sentiment from a democratic administration. In this
environment, small/mid caps drop more than large caps, the VIX hits 35, and you
hear "it's not too late to sell" from the talking heads on CNBC. At
that point, I hold my nose and buy like crazy and pray I am not too early. Til
then I stay more defensive than not.
The DJIA gained 190 points to end at 11585. The S&P 500 rose 21
to 1384 and the NAZZ was only up 10
points to 2330. The financials rallied and tech didn’t.
Breadth was 2/1 positive on the
NYSE and 5/4 positive on the NAZZ and volume was active at over 5 billion
shares on the NYSE.
There were about 225 new lows and
120 new highs. (Combined)
The financial bulls are breathing a bit easier and the
financial shorts are sweating.
29 July 2008
Our prediction of a dull week was
obviously wrong. Last night we reconsidered our purchase of the Pro Shares Ultra Financials while
taking our evening walk and this morning we sold UYG at a scratch loss. Too
Mother Merrill surprised us and the
street last night-although not some folks who sold the shares down $4 the
previous two trading sessions-by announcing another $6 billion write-down and
the sales of $8 billion in new shares which will dilute existing shareholders
by 25%. We were surprised since John Thain, the CEO, had said just recently
that no more equity sales were anticipated. Or at least that is what we heard
although we are sure the language was couched for any eventuality.
In effect Mother wrote down $30
billion in CDOs to a value of $6 billion and then loaned a hedge fund 75% of
the $6 billion to buy the CDOs. And the loan is non recourse to an entity that
will have no other assets but the CDO and so Merrill remains on the hook for
the amount of the loan if the hedge fund is not able to repay the loan from
earnings on trading the CDOs. Merrill raised $8 billion by selling shares of
which $3 billion were purchased by the Singapore government. But since Merrill
had sold Singapore shares at $48 last December and guaranteed that buyer
against loss, $2.5 billion of the proceeds of the stock sale went to reimburse
Singapore for its losses. So much for high finance. By the way the CDOS that
Mother Merrill sold are part of the CDOS that Merrill bought from Fifth Third
in early 2005. Since Fifth Third still has CDOs that were
returned to it by Merrill we decided to sell FITB again since we presume FITB
will eventually have to mark the billion dollars plus in even sketchier CDOs
that they hold down to zero also.
Oil is down $4 at $120 and so the
sellers are back. The major measures are 1% higher but Mother Merrill can’t
turn green. AIG and Citi are also in the red column as other financials rally.
We are using the rally to eliminate financials. We didn’t
sleep last night and that tells us that we are too heavily invested. We are
trying to get out of all our financials except the
SPDR financial Index. With that in mind we sold the UYG, FITB, Marshall & Isley for losses
and Old Second for a scratch. Our
aggressiveness the last week turned a nice bounce in our accounts into a not nice
give back plus. But that is what trading in a bear market will do and we want
to take our medicine and have funds and chutzpah to fight another day. We are
keeping our techs-except ADCT which
we sold today since we have enough of a speculative position in Micron- and retailers and the income
yielding telecoms plus CBS and will hunker for a while.
The FTC won its appeal of the
trial court’s ruling not granting a preliminary injunction to the FTC to
prevent the merger of Whole Foods/Wild Oats. The appeals court remanded the
case the trial court to reconsider granting a preliminary injunction against
the merger. Since Whole Foods has sold 30 Wild Oats stores and closed 16 more
as well as changing a number to Whole Foods stores we presume the lower court
will say that Humpty Dumpty is already and pieces and can’t be put back
together. But anything is possible. We sold Whole Foods for a
scratch since another trial in this case will be disconcerting for
management. It is strange that the FTC is not interested in opposing the merger
of Budweiser and InBev the two largest brewers in the world but is intent on
preventing WFMI/OATS. But such are the ways of the current administration.
BKX at $60 and 1235 on the
S&P 500 became support with today’s move. If the move holds this will be a
higher low for bull traders than the low on July 15.
At 1:42 pm there was an
earthquake in Los Angeles. Why not?
Oil ended down $3.06 at $121.60.
Gold lost $9 to $918 and Treasuries lost ground as stocks strengthened with the
two-year at 2.65% and the ten-year at 4.06%. The dollar was better at 108 yen
and a euro was worth $1.55.
Up big today regains all of
yesterday’s losses plus. Who would of thunk it last night? Do some shorts know
that the SEC is going to extend the no naked rule to all financials? Or are
they just too cautious to take the chance knowing they can sell in the morning
The DJIA gained 250 points to
close at 11385. The S&P 500 jumped 25 points to 1262 above 1260
resistance/now support and the NAZZ rose 52 to 2316.
Breadth was 3/1 to the good and
volume was summer active and better than on the sell off yesterday.
There were 225 new lows and 75
new highs (combined NYSE/NAZZ).
The bulls fooled us and recaptured the gold baton for today.
28 July 2008
Over the weekend we were at a
wedding anniversary party. And the talk was not of Obama’s
foreign tour or the woes of Wall Street. Rather the main topic of conversations
was the picture of the 12 pound trout that was caught in an unnamed stream in
our county that was on the front page of the local weekly newspaper.
We don’t know whether this anecdotal
incident is specific to the land of milk and honey but we do think is adds a bit
of perspective to both the present political and economic turmoil.
Verizon announced earnings and
revenues that were good but the stock is going to open a bit lower this
morning. Overseas Asian markets were higher and European bourse indexes are
lower at midday. Oil is $1 and change higher and gold is at $930 up $4 in early
trade. Treasuries are flat.
Our thought is that the markets
may calm and assume summer doldrums inactivity for the next month or so with
the Conventions and Olympics and non directional trading replacing the
hyperactivity of the last month. Or maybe that is our wish.
Except for diehard conservatives Krugman’s column is an interesting read today. If you are
conservative save yourself the heartburn. http://www.nytimes.com/
and look for Krugman’s column under Opinion at the
far upper right.
European bourse indexes closed
lower on the day by over 1%.
We added Verizon with a 5% yield to accounts.
At noon the DJIA is down 190
points. The selling has been consistent but the drop has been more erosion than
a punch down. We don’t know what to make of it. We have done some
small buying adding to financial positions in our very large accounts at 10%
down levels from previous purchases. Volume is summer Monday light.
We have confidence in the issues we hold but we find that
we don’t in AIG or American Express because when they moved
lower today we realized we are uncertain of them. And so we are selling and
placing part of the proceeds in Ultra
Financials ProShares (UYG) which is an ETF that
invests in the DJ Financials and provides twice the upside and downside of the
moves in that index. Its top ten holdings mirror the XLF but have different
percentages. It is a volatile issue having traded at $75 and $14 in the last
twelve months but no more volatile than AIG has been and we have more certainly
in what we own. We also switched Wachovia
holdings at a loss to the UYG. (UYG is down a similar amount as Wachovia in
the same time period.) We want exposure to the volatile financials without
concentrating specifically on one troubled money center bank like Wachovia or
insurance company like AIG.
Oil closed up $1.36 at $124.61.
Gold was up $3 at $928. Treasuries were better with the two-year at 2.59% and
the ten-year at 4.01%.
The DJAI closed down 240 at
11130. The S&P 500 was off 24 to 1234 and the NAZZ dropped 46 to 2264.
Breadth was 2.5/1 negative and
volume was light.
There were about 235 combined new
lows and 70 combined new highs.
The bears control.
25 July 2008
The stocks markets are in a
quandary this morning. Durable goods orders were up 0.8% and ex transportation
up 2%. That has bulls happy. But the action yesterday was scary and the markets
still seem to go down easier than they go up with the movement down twice the
movement up on volatile days. Given that today is a Friday the markets may just
fade away into a summer weekend. That would make neither the bulls nor bears
happy but it is summer.
We were waiting to buy stocks for
a summer rally and we have done that. Now we just have to have the patience to
let the rally come to us. Many of the
shares we own have 4% plus yields. We didn’t buy for a one or two day trade
although we did make a few.
Asian markets were down 1% and
more overnight as are European markets at midday. Gold is up $10 and Oil has a
$126 handle. Treasuries are weaker on the durable goods number and U.S. stocks
are going to open flat on that number after being lower in pre market trading.
We just noticed on our screen
that Yahoo has real time quotes on their regular financial website. They are
New home sales were better than
and the DJIA is now up 100 at 9 am after being lower on the opening. This is
one screwy market.
We bought Marshall&
Ilsley at $14.45 in accounts that own Old Second
Bancorp and also in those accounts we bought Wachovia at $14.60. We are adding some issues to our very large
accounts today also.
The oil seller showed up this
afternoon and Oil finished of $2.21 at $123.28. Gold was up $7 at $929.
Treasuries were weaker with the two-year at 2.70% and the ten-year at 4.11%.
European bourse indexes were fractionally lower.
The DJIA closed up 25 at
11375.The S&P 500 gained 6 to 1258 and the NAZZ rose 30 to 2310.
Breadth was 5/4 positive and
trading was summer Friday light.
There were about 225 new lows and
95 new highs. (Combined)
Today was a tie but yesterday’s drop gave the week to the bears.
24 July 2008
Today looks to be a glass half
empty day after the rally of the last week. Some reality about the continuing
crisis in banks is evident. Asian markets were mixed overnight but China did
manage a 2% plus gain. European bourse indexes are lower by over 1% at midday
and U.S. futures are indicating a mixed to lower opening. Gold is up $5 after
dropping $25 yesterday and Oil has a $125 handle. Treasuries are flat in the
Jobless claims were 406,000 in
the latest week which is not good.
Ford reported an $8 billion loss for the quarter and National City a $2 billion loss. So
what else is new?
This excerpt is from this
morning’s LA Times:
Customers of failed IndyMac Bank faced shorter waits and less confusion at branch locations Wednesday, but some depositors who closed their accounts encountered new hurdles when they tried to deposit cashier's checks at other banks. Sheryl MacPhee, 46, said she liquidated a certificate of deposit at IndyMac's San Marino branch Tuesday morning after a two-hour wait. She then took the check to a Washington Mutual
branch in South Pasadena to deposit. MacPhee said a WaMu manager told her that under a new corporate policy, the bank was not accepting IndyMac checks. If a customer insisted on depositing the check, it could be eight weeks or more before the full amount would be accessible, she said she was told. "It seems to me that other financial institutions not accepting these checks are only furthering the panic," said MacPhee, a freelance writer from South Pasadena who deposited her check elsewhere. "Sure, IndyMac will give you a check, but what good is it if no other institution will accept it?" Officials at the Office of Thrift Supervision, WaMu's chief regulator, are investigating the complaints about the checks, agency spokesman William Ruberry said.
Lucky for Ms MacPhee that WaMu
wouldn’t take the check since WaMu is probably the
next domino for the FDIC to close down.
Yesterday at this time (noon) we
were smart. Today, not so much. The major measures are
1% lower with 4/1 negative breadth on the NYSE. Everything is lower including
the commodity stocks that have been moving counter to the financials which are
We switched Marshall
& Ilsley with a $1.50 profit to a double
position in Wachovia. The sell was
great timing the buy was not. We reduced the buy position in our large accounts
at days end. We also sold some Merck
to reduce the percent holding to more in line with our other large cap stock
holding. We bought International Game,
Fannie May and Financial Ultra ETF in our very large accounts.
Oil closed at $125.49 up $1.05.
Gold gained $10 to $925. Treasuries caught a bid as stocks sank with the
two-year t 2.62% and the ten-year at 4.01%. European bourse closed on their
lows of the day down over 1% across the continent.
40% up moves are usually followed
by 15% down moves and that is what occurred today in the financials. Tomorrow
needs to be flat/up or...
The DJIA was down 283 points to
11350. The S&P 500 lost 30 points to 1252 below the 1260
support/resistance/support and now resistance level. The NAZZ lost 45 to 2280.
Breadth was 4/1 negative and
volume was moderate which was the only good sign for bulls today.
There were 215 new lows and 85
new highs. (Combined NAZZ + NYSE)
The bears are naked shorting the financial indexes
and they are back in the game on the winning side.
23 July 2008
Back in 1980 famed oil man Bunker
Hunt thought he had cornered the Gold and Silver markets. Gold was at $800 and
silver was $50. Folks we selling the family silver for $20,000 an 8 piece place
setting. Hunt was the richest man in the world. Then the powers at the futures
trading exchanges changed the rules that forbid the opening of positions and
placed limits on the size of positions. That these same officials’ were
traders some of whom were on the other side of Hunt’s trades didn’t seem to
bother any officials. Within months
Silver was back to $10, Gold $300 and Hunt was broke. And so it goes in the
world of Finance where no matter how big a hitter you think you are the hidden
forces of government and industry can change the rules at any time.
Last week the SEC at the
suggestion of hidden voices said that it would begin enforcing rules on the
books to compel delivery of shares sold short in fourteen stocks. In the last
week those fourteen stocks are up an average of 40% in price and there is blood
in the streets of Shortsville.
And now Congress according to
Bloomberg is debating the following:
Congress may outlaw elements of oil futures trading that lawmakers
found distorted demand and contributed to the 69 percent surge in prices in the
past year. U.S. legislators are considering limits on the number of oil
contracts an investor can hold and may increase disclosure requirements.
Speculators such as Goldman Sachsuse the practices to bet on price swings, which may drive up prices,
though they have no intention of taking delivery of underlying goods, lawmakers
say. Proposals being debated this week in the Senate would bring prices more in
line with demand, proponents say. Excluding the effect of speculation, oil
would be around $80 a barrel, 38 percent lower than yesterday's price,
according to Jesus Reyes Heroles, the
chief executive officer of Petroleos Mexicanos. Critics
say restrictions may interfere with the functioning of a $4 trillion annual
market for crude oil. ``Americans are being taken advantage of not only by OPEC
but by speculators right here in our own country,'' says Senator Ted Stevens,
an Alaska Republican, referring to the Organization of Petroleum Exporting
Countries. ``Historically, this has not been a bad problem. Only recently has speculation reached these unsustainable levels.''
Asian markets were higher by 2%
plus except China which can’t buy a rally this year. European bourse indexes
are higher at midday by over 1%. Gold is down $5 and Oil has a $127 handle.
Treasuries are weaker on the strong stock markets.
Yahoo was OK with earnings. Costco missed and is down 10%. COST is
the darling of the street and so this miss has the big boys and girls worried
about other retailers. The big boys and girls are still playing their shorting
games in the retailers since the powers in Washington don’t care.
AT&T reported good number and the share price is up 5%.
We added shares of
American Express, AIG and Whole Foods to smaller accounts that didn’t own the shares. We also
doubled our holding of Whole Foods in accounts that own it. We sold our Wachovia for a one day $3 gain.
We bought more SPDR Financial and
new positions in Old Second Bank, Fifth Third in accounts in which we
sold Wachovia. Fifth Third and Old Second are to own, Wachovia was an anchovy.
ADC Telecom is at a new five year low this morning down
30% in price on lower than news and poor forward guidance. We bought shares at
$10.15 in accounts that own Motorola.
In our largest accounts we bought a small amount of Vimware which is
a technology high flyer. Well it was a technology high flyer having traded at
$125 in the last year. We ought shares at $33 down $5 on the day. We also
bought shares of EMC in those
We are buying Chico’s
and Coldwater in accounts that own J Crew and Williams Sonoma in those that own American Eagle.
Coldwater provided positive guidance a
few weeks ago and we are buying the Chico’s betting that shorts in the stock
will get nervous and cover.
European bourse indexes close
higher by 1% to 2% on Wednesday. Gold dropped $30 to $918 and Oil was down
another $4 at $124.20. The magic sellers are still around even with the Gulf
The DJIA gained 30 to 11632. The
S&P 500 was up 5 to 1282 and the NAZZ gained 22 to 2325.
Breadth was 3/2 positive and
volume was moderate.
There were about a combined 170
new lows and 135 new highs.
The bulls were weaker today but still won it.
22 July 2008
Texas Instruments, Apple, Merck and American Express all missed last night and
this morning Wachovia announced an
$8.8 billion loss for the quarter. That has the major measures lower in
pre-market trading although not off even 1% on the DJIA. If the bulls can hold
today then the summer rally may ensue. If not, more testing of lows is in
Asian markets were mildly lower
overnight and European bourse indexes are 1% and more lower
at midday. Treasuries have a small bid, Gold is up $10
and Oil down $1 with a $130 handle.
Today should be interesting. Oil
is dropping in early trading as the mystery sellers push oil down to help
Stocks opened lower but are
climbing back after one half hour of trading. The $4 drop oil seems to be
helping. We wonder who is selling?
We are buying today. Why today and not last week? What is
different this time? What is different is that is that Goldman Sachs
is now in charge of
the U.S. economy. The Treasury secretary is from Goldman Sachs. The number two
man at Treasury just left Goldman Sachs to go to the Treasury to deal with the crisis.
Rubin at Citi is from Goldman. The fellow who took
over at Wachovia last week is from Goldman. John Thain
who is managing the crisis at Mother Merrill is from Goldman. These guys all
made their fortunes together while they were at Goldman.
Goldman weathered the financial crisis and knows where
all the bodies are. Oil is dropping for no reason other than there is a
dedicated seller who wants to get the price down. Events don’t occur in a
vacuum. The enforcement of the delivery rule on short sales is the result of
thoughts from traders who know how the system works. There is an implied
warning in that rule’s enforcement that the game is changing. If the rule enforcement for the fourteen
stocks doesn’t calm the shorting then the SEC may chose to make it a blanket
enforcement on all stocks. After all, the rule is on the books. And if that
doesn’t work we would guess that the uptick rule will be back. Shorting will
still occur and stocks may drop but short attacks on stocks will be stopped.
Our buying doesn’t mean that we think that the economy is
cured. If we did we would go all in. but we do think a decent rally is possible
and the lows of last week may hold for a while unless some unforeseen event
occurs. And $8 billion write-down at Wachovia this morning occasioned a 10%
drop in the share price but the shares are now trading 10% higher than
yesterday’s close. With a Goldman person at the helm at WB traders are betting
that his friends in high places are at his back.
We bought Wachovia,
Texas Instruments, Fifth Third Banks, Merck and repurchased American Eagle in many accounts plus
more Financial SPDR and.
In our very largest accounts we bought the Regional Bank ETF, AIG, American Express,
Sprint and Old Second Bank Corp.
We bought AXP, Wachovia, Merck, and Texas Instruments 10%
or more below yesterday’s close. We don’t expect immediate gratification from
these purchases and still have room to buy much more. We also purchased Marshal & Isley
Banks, and added to our AT&T,
Cisco and CBS in various accounts.
After the buys large accounts are 30% invested and medium
sized accounts may be up to 25% invested. Smaller accounts by their nature
1260 on the S&P 500 is an
important number and the markets have been trading slightly above and below it
all day. With an hour left the major measures are even on the dye. The final
hour awaits. Oil has bounced back and is now down only $2.50 on the day after
being $5 lower earlier. That has given stocks a reason to pause and ponder.
Oil ended the day down $3.63 at
$128.20. The world didn’t end and so Gold reversed its early morning gain to
close down $15 at $948. Treasuries were weaker with the two-year at 2.70% and
the ten-year at 4.10%. European bourse indexes mixed.
The big boys and girls decided to
pop the markets in the final hour.
The DJIA closed up 135 at 11605.
The S&P 500 gained 17 to 1277 and the NAZZ was up 25 to 2305.
Breadth was 2/1 to the good and
volume was summer light.
There were a combined 200 new
lows and 100 new highs.
The Bulls won.
21 July 2008
Bank America reported better
than and that has stocks looking to open higher. BAC’s
financial report is a work of art. BAC says Countrywide will contribute to
earnings this year although for the latest quarter Countrywide lost a net $2.5
billion which was not included in BAC’s quarterly
report since they didn’t own it in the last quarter.
Asian markets were higher last
night with China up 2% and others up 3% and more. European bourse indexes are
also higher by 1% at midday and U.S. stocks will open higher. Gold is up $7 and
Oil has a $130 handle.
Roche is purchasing the remainder of Genentech for $44 billion. It
had the right to purchase these shares in 1995 for $4 billion but passed. It
then bought shares in 2000 but has offered shares to the public over the past
decade at much less than it is now paying. And so goes the world of high
finance investment banking.
Oil ended up $2.62 and $131.60.
Gold gained $6 to $962. European bourse indexes closed mildly higher and
Treasuries were flat with the two-year at 2.64% and the ten-year at 4.07%.
The DJIA closed down 30 points at
11470. The S&P 500 was down 1 at 1259 and the NAZZ lost 4 to 2280.
Breadth was 2/1 (NYSE) and 5/4
(NAZZ) positive and volume was summer Monday light.
There were a combined 175 new
lows and 75 new highs.
The bulls won the day by not losing it.
18 July 2008
Google and Microsoft
disappointed last night and are trading lower but above their initial reaction
sell off of last night. IBM was down
overnight but is now trading higher. Same with Mother Merrill in that it traded lower overnight but now is
basically unchanged. Citi announced a loss of $2.5
billion and the street is happy with
that number and the shares are up $2 at $19.
Asian markets were mixed
overnight with India and China up over 3% and Japan lower with Taiwan down 2%.
European bourse indexes are plus small and Gold is
down another $7 in the early going. Oil is up at $131 and Treasuries are
continuing to give ground.
The mess that is out there in
bank portfolios is now known- or maybe known. From this morning’s WSJ:
An amended complaint filed Thursday by the California attorney general
related to a suit against Countrywide Financial Corp. sheds new light on the
poor quality of loans the company was planning to sell to investors.
The new data provide a close look at 158,000 mortgages that had been
slated for sale by Countrywide Homes Loans before last summer's credit crunch
-- which was triggered by rising mortgage defaults -- turned investors away
from mortgage-backed securities. Nearly 48% of nonprime loans and 21% of
pay-option adjustable-rate mortgage in that portfolio were in some stage of
delinquency or foreclosure as of April 30, according to the amended complaint,
filed by California Attorney General Jerry Brown in state court in Los Angeles.
Overall, more than 21% of all loans in that portfolio were in some stage of
delinquency or foreclosure, it says.
These loans account for roughly 17% of mortgages held by Countrywide,
says Dan Frahm, a spokesman for Bank of
America Corp., which completed
its acquisition of Countrywide earlier this month. Mr. Frahm
added that 9.53% of all loans owned by Countrywide were 30 days or more past
due as of the end of April.
From the Financial Times of London:
Furious investors trash Karachi stock exchange
By Farhan Bokhari in Islamabad
>Published: July 18 2008 03:00
Investors upset over falling
Pakistani share prices yesterday smashed the Karachi Stock Exchange's windows
during protests that led to scuffles between market traders and share owners
demanding the temporary closure of the stock market.
The KSE-100 index dropped by 2.7 per cent to close at 10,212.92. The
index has plunged 35 per cent from a record high on April 21.
"I am upset because I am constantly losing money and there is no
one ready to help me," said Naeem Jehandad, an equity investor in Islamabad, who said the
value of his shares had halved in the past four months.
"For me, this is just a murder for my economic future," added
Usman Khan, a lift operator who returned from the
Middle East last year and invested his savings of Rs350,000 ($5,000, £2,500, €3,150)
in the KSE.
"There is so much uncertainty all around that it has crept in to
the stock market," said Shuja Rizvi, head of brokerage services at Karachi's Capital One
securities brokerage house.
Last night a group of large investors and brokers set up an emergency
fund to buy shares from small investors, many of whom were at the centre of
yesterday's violence. The Rs3bn fund was mainly aimed at preventing a
recurrence of the unrest, analysts said.
Razi-ur-Rehman, who chairs the securities and exchange
commission, Pakistan's stock market regulator, said: "If we can get rid of
distressed investors, that would help to stabilise the situation. The intention is to have an
orderly fall rather than an abrupt fall."
The slump in investor confidence was accelerated by the weakening
rupee, which dropped by 1.3 per cent yesterday on political uncertainty and an
economic meltdown during Pakistan's transition to civilian-led democracy.
Pakistan's current account and fiscal deficits are unsustainable,
inflation is at a three-decade high of more than 21 per cent, and foreign
currency reserves have fallen below $11bn, more than $5.5bn under last
October's record high.
Analysts said worries were mounting among Pakistanis about the
government's campaign to get rid of President Pervez Musharraf. He has been credited with overseeing a five-year
economic recovery that made the KSE one of the fastest growing emerging
"The danger is that we could see our economic -success unravelling," said Salman
Shah, former de facto finance minister. He said the government should act to
tackle growing discontent over the worsening economy and internal security
conditions and to stem further slide in investor -confidence.
The KSE's decline has also been fuelled by
reports in the past week that the US, along with its Nato
allies in Afghanistan, was considering putting more troops along Afghanistan's
border with Pakistan to combat Taliban fighters crossing from the Pakistani
European bourse indexes closed
higher with Germany, England and France all up 1.5%.
We are repurchasing the Financial Index (XLF) in accounts that own CBS. We realized this
week that we shouldn’t own all three indexes because then we are multiplying
our exposure with no diversification. The three we owned tend to move together.
We want to acquire a position in financials over time but the exposure when we
bought the three together last Friday was more than we realized and was a
distraction, especially with the violent moves of last week. We now have a more
realistic plan. We learned from our four
day ownership the risk involved. Luckily we survived the ride with no losses.
No harm no foul.
We are going to sacrifice the potential home run gained
by correctly picking a beaten down bank like National City or Huntington Bank.
We tried that in 1990 with the Texas banks and they all went bankrupt. And that
bad experience led us to miss the move in Citi. This
time we would rather buy the Index and take a larger position over time
deriving the same profit from greater exposure in a diversified index. For
example a 2% position in a depressed bank stock that quadruples over the next
five years can be equaled by a 4% holding in an index that doubles over that
same time period. Even if the index underperforms the individual stock the
risk/reward favors the index at our age and risk level.
Crude Oil settled at $128.88 down
41 pennies on the day. There is a tropical depression heading for the Gulf of
Mexico but not even that was enough to rally oil into the close. There were
probably some hedge funds that got caught in the short slaughter this week that
needed to sell some oil to raise cash. Plus our darker side sees the hand of
Central banks on the sell lever.
Gold was down $14 at $956.
Treasuries closed flat on the day.
At the bell the DJIA was up 45 at
11490. The S&P 500 was flat at 1260 and the NAZZ dropped 30 to 2280 as Google and Microsoft swooned.
Breadth was 5/4 negative and
volume was light.
There were about 225 new lows and
75 new highs.
The bulls won the day and week.
17 July 2008
JP Morgan’s earnings dropped 53%
but that was ahead of expectations and the shares are up $2 in early trading.
By the by, JPM beat the earnings consensus by taking lower loan loss reserves
this quarter than last. Does that make sense? Short covering from yesterday is
continuing this morning as shorts realize the SEC is going to enforce rules
that have been on the books for 80 years. That short covering has markets
looking higher again today and the rally is now in full bloom.
Asian markets were higher overnight
with India up 4% but China was fractionally lower. European bourse indexes are
2% to 3% higher at midday. Gold is down another $5 and Oil has a $133 handle.
Treasuries are a tad weaker.
Housing starts for June were
higher and Jobless claims at 366,000 lower than expected.
Xcel Energy said Wednesday it is shutting off power and
heat to an average 1,000 residential customers every week in Colorado for
nonpayment of bills and expects to disconnect 72,000 customers in 2008 — a 33
percent increase over 2007. Xcel is based in
Minneapolis. It’s Colorado’s largest utility, serving about 1.3 million
customers — roughly 70 percent of the state’s population. The number of
customers disconnected for nonpayment of bills is an indication of how they’re
coping with higher energy bills and a rocky economy. Uncollected bills
eventually are rolled into the rates paid by all customers.
1.26 million natural gas customers are paying $13,034,237 every year to cover
write-offs. Xcel’s 1.3 million electricity customers
in Colorado pay $13,457,057 every year for unpaid bills, according to state
regulators. During the first six months of 2008, Xcel
said it shut off service to 36,000 customers, up 33 percent from the 27,000
customers shut off during the first half of 2007. Yet 85 percent of the 36,000 Xcel customers disconnected during the first half of 2008
had service restored by paying all or a portion of the total amount they owed
the utility. About 80 percent of those who were reconnected paid the full
amount they owed, said Xcel spokesman Tom Henley.
Today and tomorrow are options
and futures expiration days and that is also affecting the pricing of bank
stocks as well out of the money options of two day ago are now in the money.
Option call writers are being forced to cover their bad bets.
We are repurchasing AT&T
with a 5% yield and adding to Micron
and Motorola. We are also buying CBS with a 6% yield. Our thought is
that AT&T has a 5% yield which pays us for owning it and the dividend offers
downside protection. The Motorola and Micron holdings were not large enough to
make it worthwhile and even with the add it is only 1.5% in large accounts. We
also bought Cisco $1 higher than
where we sold it last week to have one quality tech stock in case this rally
Oil was down $5 at $129.75. Gold
closed off $2 at $958. Treasuries collapsed with the two-year at 2.52% and the
ten-year at 4.03%. European bourse indexes closed 1% to 2% higher.
The DJIA gained 207 points to end
at 11445. The S&P 500 was up 15 to 1260 and the NAZZ gained 28 to 2312.
Breadth was 2/1 to the good and
volume was active at 5 billion on the NYSE.
There were about a combined 265
new lows and 75 new highs.
The bulls won again.
After the bell Google
disappointed and the shares are off $60 but IBM’s earnings were better
than although half of IBM‘s better than gain is from foreign exchange
trading. Mother Merrill exceeded
loss expectations and is trading $1 lower.
Microsoft was a penny light on earnings with better revenues and the
shares are $1 lower. Citi
announces in the morning and it should be an interesting day as options and
16 July 2008
The weight of this sad time we must obey,
Speak what we feel, not what we ought to say.
The oldest have borne most; we that are young
Shall never see so much, nor live so long.
The Duke of Albany, King Lear, Act V, Scene III
Wells Fargo announced 22% lower earnings and a $3 billion reserve
for loan losses and then raised its dividend. That last action has the shorts
flummoxed and the share price of WFC up 15% in early trading. And the rise in
WFC shares was enough to place in bid in stocks futures. Unfortunately June CPI was up 5% year over year and 1.1%
in June. Futures didn’t like that number and so the markets are now flat
Fifth Third announced a drop in earnings and raised its dividend in
Quarter 1 when the shares were at $22. The shares of Fifth Third are now at $11
as on June 8 FITB cut by 2/3rds the dividend they had just raised. Now Fifth
Third is much smaller than WFC and Warren Buffet is neither on its board nor
does he won 8% of the FITB shares as he does at WFC. We presume Buffet was privy to the dividend
raising action. We don’t think it was prudent. But it makes a statement and
that is obviously what WFC and Buffet (?) wanted to do.
Net charge-offs at WFC increased
to 1.55% from 0.87% but dipped from the first quarter's 1.6%. The San Francisco bank changed its policy on
writing off defaulting loans in April. Instead
of writing off a defaulting loan after 120 days, the bank now waits 180 days,
potentially postponing a major hit to earnings. That doesn’t sound very Buffet like to us.
Wells Fargo is diversifying by
bolstering its insurance and credit cards units. In May, Wells Fargo bought
Flatiron Credit Co., which finances insurance premiums, and the bank has been
building its credit-card business. Insurance revenue climbed 27 percent in the
quarter to $550 million and credit card
fees rose 14 percent to $588 million, the company said. How Wells Fargo is
going to avoid the credit card write-offs that other banks are experiencing is
a work in progress.
Intel announced inline number last night and in line forward
guidance and the shares are up 50 pennies. Cleveland Cliffs Iron with a market
value of $10 billion is going to pay $10 billion for Alpha resources. Both
companies were worth $2 billion each two years ago. The proposed merger is a paper for paper
exchange and is an indication of the huge gains in the commodity era.
Investors’ Intelligence has 27% bulls and 48% bears in the latest
week which is similar to the previous week.
Asian markets were mixed to lower
overnight with China down 2.7%. Where are all the China bulls now? European
bourse indexes are lower at midday. Gold is down $7 and oil is off $1.50 at
$137 and change.
The CEOs of Lehman and Bear
Stearns are accusing Goldman Sachs of spreading nasty rumors about their firms
and shorting stock in the process. The CEO of Goldman Sachs is shocked, just
shocked by the accusations and promises to act swiftly and firmly if the
dastardly accusations are true. And so goes the soap opera on Wall Street.
The Wall Street Journal has a
front page story about the emergency actions of the SEC to limit short selling.
It is not until paragraph twelve that the article mentions the emergency action
applies only to naked short selling
and the article never mentions that naked short selling has been illegal since
1934. So goes news paper reporting in the era of the newspaper barons.
Another point that hasn’t been
mentioned is that intuitional accounts like mutual funds and charities that own
the shares in companies that are being shorted loan those shares to the short
sellers because the institutions are paid a fee for letting short sellers use
the shares for delivery. If those institutions refused to loan their shares the
shorts would not be able to short stock. But the institutions are so myopic and
unimaginative that they and the trustees who are supposedly making fiduciary decisions
don’t’ realize that a concerted effort to refuse to lend to shorts would eliminate
great deal of short selling. Where are CALPERS, and FIDELTY and FEDERATED?
In reading the blogs and listening to CNBC we seem to be the only folks
who think it is strange that Wells Fargo raised its dividend after it reported
la 22% drop in earnings and a $3 billion increase in loan reserves with
earnings helped by an extension of 2 months on recognizing defaults on
We sold JP Morgan
at $33.20 today. It is up $2 on the Wells Fargo dividend raise news and the no
naked short selling SEC dictum. Earnings come tomorrow and given that WFC is up
$4 we are guessing that part of JPM’s earnings news
is in this move. Moreover the shares traded under $29 yesterday and the markets
still have not had the washout that is usually necessary for a trading bottom
to be in place.
Oil is down another $4 this
morning as the Central Banks continue to work their magic. An hour and one half
into the trading session the DJIA is up 140 points and the banks stocks are up
10% with Wells Fargo up 25%. That just shows what we know. But since there wasn’t
a swoosh lower before the rally it is our guess that this is more short
covering from folks fearful of what the SEC than real investment buying.
For the bulls it is important for
this morning’s rally to carry though and end the day up 250 points or more.
Some Federal Reserve policy makers in June said an increase
in the benchmark U.S. lending rate ``would be appropriate very soon,'' minutes
Washington today showed. The economic outlook made the ``timing and magnitude
of future policy actions'' unclear to the full committee, the minutes said.
Still, ``with increased upside risks to inflation and inflation expectations,
members believed that the next change in the stance of policy could well be an
increase in the funds rate,'' minutes of the June 24-25 Federal Open Market Committee
meeting said without specifying when. The June inflation alarm came before
renewed bouts of financial turbulence in July shaped Federal Reserve Chairman
Ben S. Bernanke's views about growth risks. The
chairman abandoned the FOMC's June assessment that
the threat of an economic downturn had diminished in his testimony this week.
There are ``significant downside risks to the outlook for growth,''
and ``upside risks to the inflation outlook have intensified,'' Bernanke said
in semiannual testimony before the
House Financial Services Committee today. The FOMC on June
25 left the benchmark interest rate unchanged at 2 percent, pausing after seven
cuts that totaled 3.25 percentage points since September. Futures traders have priced
in a 93 percent probability of no change in policy at the Aug. 5 meeting.
SEC Chairman Cox is on CNBC saying naked short selling is not illegal.
Say what? Maybe he should listen to his testimony from May 25, 2008 when he
called naked short selling illegal: http://www.deepcapture.com/
European bourse indexes rallied
as U.S. stocks moved higher and oil dropped. Oil ended at $134.41 down $4 plus
and Gold was down $18 at $962. Treasuries gave ground as stocks rallied with
the two-year at 2.42% and the ten-year at 3.93%.
The rally has arrived. Will it be
a one day short covering wonder? Stay tuned.
We are non believers. Cisco, AT&T and Intel went
nowhere today and Oil stocks tanked. We sold the Bank Indexes and Financial
Index for a scratch gain that offsets the scratch losses of yesterday. We broke
even-which is not as good as a profit but much better than the 20% loss in the
financials that we had yesterday morning.
The DJIA gained 280 points to end
at11245. The S&P 500 was up 30 points at 1245. The NAZZ jumped 70 points to
Breadth was 3/1 positive and
volume was active a 6 billion plus on the NYSE.
There were a combined 580 new
lows and 75 new highs.
The bulls are back.
15 July 2008
I believe that banking institutions
are more dangerous to our liberties than standing armies. If the American
people ever allow private banks to control the issue of their currency, first
by inflation, then by deflation, the banks and corporations that will grow up
around [the banks] will deprive the people of all property until their children
wake-up homeless on the continent their fathers conquered. The issuing power
should be taken from the banks and restored to the people, to whom it properly
Jefferson, Letter to the Secretary of the Treasury Albert
Stocks are going to open 1% lower
this morning but we have a feeling that Turnaround Tuesday may be at hand. The
mood on Wall Street and CNBC has turned remarkable dour and even bear markets
have good rallies. Of course yesterday morning’s 150 point gain in the DJIA may
have been the rally for this week.
Asian markets were off with China
down over 3% and India down almost 5%. European bourse indexes are 2% and more lower at midday. Gold is up $12 and Oil has a $146 handle.
Treasuries are better.
We love the former government
officials- on whose watch all the problems occurred- coming on CNBC and giving
their critiques of the current crisis. Where were they when?
World markets are now down $13
trillion from their highs.
We want to keep
buying the Bank indexes on a scale down without increasing our overall market
exposure. We are concentrating in financial issues as our thoughts are that
until these stocks stabilize no other areas are going to markedly improve. And
so we are selling AT&T, Cisco and Intel for multiple penny losses and
bidding on another tranche of the Financial Indexes
10% lower than yesterday’s close.
PPI was reported up 9.9% year over year June to June. Core PPI was
up 3% year over year. Retail sales were up 0.1% and ex autos up 0.9%.
Bush is now talking on the tube.
The DJIA is down 160 points as he begins speaking. Don’t raise taxes and
everything will be OK.
With over 1700 new lows in early
trading we are getting close to a temporary bottom.
Crude Oil is down $8 a barrel as
the Central Banks work their magic and stocks are rallying back and the DJIA is
now down 50 points two hours into the trading day.
The rally seems
strained to us and we are going to sell the KBE, KRE, and XLF we purchased
yesterday. All three were 8% lower this morning and are now at scratch losses
from our purchase price yesterday afternoon. We know we are flipping but it’s
that kind of market. The kitchen heat is intense.
relies heavily on the fiduciary duty concept to protect those who
entrust their money to large and often distant corporations.
-- Senator Susan Collins, Congressional Record, July 11, 2002
Does she know something we don’t?
From Bloomberg: Fannie Mae and Freddie Mac drooped in price again today as Moody's
Investors Service cut the financial strength ratings of the biggest U.S.
mortgage-finance companies and said credit losses jeopardize dividend payments.
In cutting the ratings today Moody's cited the companies' limited ability to
raise capital and the likelihood of rising credit losses. Washington-based Fannie
Mae has slid 79 percent
this year, and Freddie Mac, based in McLean, Virginia, has lost 84 percent in 2008. Hedge fund
manager William Ackman said today he is betting against the stocks
of both companies and said it would be a ``grave error'' for the government to
buy Fannie Mae and Freddie Mac equity.
It would be especially bad for Ackman since he is short the shares.
At noon the major measures are
positive after being 1% lower in the early going. Breadth has improved from 8/1
negative to 2/1
negative. Volume is active and on track to exceed 6 billion on
SEC Chairman Cox says that the
SEC is going to issue an emergency order to enforce a law still on the books to
enforce the rule on naked shorting of
shares (selling shares not owned and which have not been borrowed for delivery)
of Fannie and Freddie and primary dealers like Lehman. This rule has been on
the books for years and says that if a person or entity has not arranged to
borrow stock they can’t short it. The SEC has just never made and effort to
enforce it. Duh. Now Cox says the SEC is issuing an
emergency order to prevent naked shorting of those specific stocks. How about
enforcing the rule for all stocks since it is on the books. Maybe Cox meant to say any shorting of
Fannie and Freddie and primary dealers. We’ll have to wait until the emergency
order is issued to see if he understood what he was saying. Yes, Cox is that
dense. His previous experience was as a Congressman for 17 years.
Cox, in his testimony, also said
that the SEC is revisiting the whole short selling area. They must be reading
our stuff. We don’t think shorting should be banned. We just think the old rule
should be re-imposed. To remove any short selling would be a benefit in the
short run but a detriment in the long run. But that is what the Exchanges did
back during the Bunker Hunt gold and silver panic of 1980. The one who runs the
game can always change the rules.
The watch that Paulson is wearing
at the Senate Finance Committee hearing looks like it could set off missiles to
The Head of the Federal Home Loan
bank of New York is on CNBC saying that the Feds are going to lock up rumor
mongering short sellers and throw away the keys.
Stocks are trading above and
below breakeven and it looks like the final hour will call the trend for the
day and probably tomorrow. Intel
reports earnings after the bell today and may affect the market’s mood for good
or ill. So far there has been a bunch of trading with no resolution although
the selling this morning and the 1700 plus new lows suggest at least a
temporary bottom may be in.
Oil finished down $6.50 at
$138.80. Gold finished down $2 at $972 after being $12 higher during the
morning’s selling spree. Treasuries reversed as stocks gained with the two-year
at 2.39% and the ten-year at 3.85%. The euro was worth $1.58 at the close,
after making a new low of $1.60 versus the euro, which was double the value
eight year ago when the euro was worth 80 pennies. The pendulum swings and it
will eventually swing back. Most of Europe closed over 2% lower.
There were 10% and more down/up
share price moves in many stocks today. We were going to buy the financial
indexes on 10% lower moves and that is what we did yesterday. And then today
when the indexes moved down another 8% we realized that we had to expand our
parameters to 15% to 20% down. That is why we lightened our positions when the
indexes moved back to scratch losses from yesterday’s purchase prices. These
markets are dynamic and it doesn’t pay to have fast rules. The more folks keep
trying to call the end to the sell off or the end to the commodities bubble the
less likely they are to occur. We still perceive folks wanting to make money or
make it back rather than worrying about preserving the capital they have left.
the banks into the close as BankAmerica looked punk all day.
lost 100 to end at 10960. The S&P 500 dropped 14 to 1215 and the NAZZ
gained 3 to 2215.
was 2/1 negative and volume was very active at over 7 billion on the NYSE.
over 1750 new lows and about 66 new highs.
The bears held serve.
14 July 2008 Bastille Day
We celebrate today because we would guess that our French ancestors were not part of nobility.
Go to http://www.youtube.com if you haven’t yet heard Le Marseillais today.
Doubt is not a pleasant condition, but certainty is absurd.
The rabble short sellers mounted
the ramparts but unlike in France in 1789 Uncle Sam repelled those with an
announcement on Sunday evening by Monsieur Paulson of the Treasury that Freddie and Fannie will be saved by hook or crook. With that news the shares of
both stocks are up 25% this morning as short sellers scramble to limit losses
or lock in still sizable profits.
Stocks are going to open higher
in celebration of the rescue. We would remind a similar rescue and rally rescue
occurred in March during the Bear Stearns fiasco. A rally has been in the cards
but $4 gasoline and layoffs galore still are extant in the economy.
Budweiser is returning to its European roots as InBev and BUD agreed that $70
per share was a proper price for the King of Beers.
Yahoo said no thanks to a new offer by Icahn
and Microsoft and Boeing was given a second chance for the Ai Force Tanker contract.
Asian markets were lower except
China which gained fractionally. European bourse indexes are higher at midday
and Oil has a $144 handle with Gold unchanged as the trading day begins.
Freddie offers $3 billion in three and six month notes this morning
and the need for this offering to be successful was the reason for the scramble
to affirm the implied government guarantee.
Late Friday the Office of Thrift Supervision announced
the seizure of Indy Mac Bancorp
because it was insolvent. We were amused by the story on the wires because of
an attributed quote that we have highlighted:
Bancorp a prolific mortgage specialist that helped fuel the
housing boom, was seized Friday by federal regulators in one of the
largest bank failures in U.S. history. The Pasadena, Calif. thrift was one of
the largest savings and loans in the country with about $32 billion in assets.
It now joins an infamous list of collapsed banks, topped by Continental
Illinois National Bank and Trust Co., which failed in 1984 with $40 billion of
assets. IndyMac specialized in Alt-A loans, a type of
mortgage that can often be offered to borrowers who don't fully document their
incomes or assets. The company sold most of the loans it originated but
continued to hold some on its books. As defaults piled up, IndyMac's
finances deteriorated. The bank will be run by the Federal Deposit Insurance
Corp., a federal regulator, and will reopen Monday. In a written statement, the
Office of Thrift Supervision, which regulated IndyMac,
said "the immediate cause" of the failure was statements made by New
York Democratic Senator Charles Schumer. Mr. Schumer in late
June publicly raised concerns about the bank's solvency."Although this institution was already in distress, I am troubled by any
interference in the regulatory process," said OTS Director John Reich.
Mr. Reich had the responsibility to oversee IndyMac
during all its mortgage lending of the last few years and wasn’t perceptive
enough to know that the stuff they were issuing was toxic. To blame someone
else for the failure of IndyMac when OTS was the
regulator is ridiculous. By the way, IndyMac is spinoff from Countrywide
Financial which remains one of the main culprits of the mortgage crisis.
Countrywide was acquired by BankAmerica in one of the more perverse mergers of
Word of the Day for Monday, July 14, 2008
cupidity \kyoo-PID-uh-tee\, noun:
Eager or excessive desire, especially for wealth; greed; avarice.
Freddie traded at $11 up from $7
in pre market trading this morning but now the markets have opened and FRE
shares are at $8.50. The same trading action is occurring in Fannie. We don’t
know what it means but there must be some doubt on the street as to the commitment of the Treasury to the common
Fifteen minutes into the trading
day financials are giving back most of their opening gains and Morgan Stanley and Wachovia are both negative. Wachovia is the next shoe that traders
are watching. On Friday WB announced the hiring of Treasury Secretary’s right
hand man at the Treasury Department as CEO. We would guess that Wachovia’s
Board wasn’t friends in high places to help them get through the mess they
The Glass/Steagall Act (no bank
underwriting) and the Securities Act of 1934 (no shorting on downticks) were
passed to cure the ills of the 1920s. One major action was to take away the
underwriting functions of banks to remove the risks that underwriting and
selling securities entails. Another important consequence was to prevent short
selling on downticks.
The SEC said on Friday it is going to look into rumor
mongering causing stocks to go down. The horse is out of the barn. The fault
lies with the SEC and Treasury for negating the value of the 1933 and 1934 Acts
(that worked well for 80 years) by allowing banks to underwrite securities. The
ability to underwrite securities allowed the banks to make huge profits by
underwriting mortgages and now is forcing them to realize bankrupting losses
from those same mortgages. The repealing of the 1933/34 Acts is the reason the
banks have all those bad mortgages on their books and off their books in SIVs for which they are liable. And shorting on downticks
allows hedge funds to raid financial stocks and force their prices lower. The
problem is in the rules changes not the rumors. Duh!
Legislation passed by Congress
authorizing deposit insurance and prohibiting commercial banks from owning
full-service brokerage firms. Under Glass-Steagall
passed in 1933, these banks were prohibited from investment banking activities,
such as underwriting corporate securities or municipal revenue bonds. The law
was designed to insulate bank depositors from the risk involved when a bank
deals in securities and to prevent a bank collapse like the one that occurred
during the Great Depression. The original separation of commercial and
investment banking had already significantly eroded when, on November 12, 1999
the Financial Services Modernization Act of 1999 was signed into law,
repealing parts of the 1933 Glass-Steagall Act and the
1956 Bank Holding Company Act and effectively allowing banks, brokers, and
insurers into each other's businesses. Basically, the 1999 Act allows banks to
affiliate with securities firms and insurers through a holding company
structure and permits nationally chartered banks to engage in most financial
activities through direct subsidiaries. While provisions of Glass-Steagall continue to restrict banks from most underwriting
activities and securities firms from taking deposits, these restrictions apply
only to the banks and securities firms, not to their Financial Holding Company
affiliates and are, therefore, technical.
Note that the uptick rule on short selling
was eliminated in July of last year. The markets topped in October of last
SEC Eliminates Short Sale Price
As discussed in the July 3, 2007
Alert, effective on June 28, 2007, the SEC eliminated the short sale price
restrictions ("tick tests") of Rule 10a-1 under the Securities
Exchange Act of 1934, as amended. The SEC also amended related rules to
prohibit self-regulatory organizations ("SROs")
from maintaining price tests and eliminate order marking requirements that
applied to transactions relying on exceptions from the tick tests. The SEC
release formally implementing these changes indicates that they do not affect
other amendments to Regulation SHO also approved by the SEC in June 2007, but
not yet the subject of a formal release, that tighten close-out requirements
for failures to deliver on short sales by eliminating certain grandfathering
provisions with respect to securities that become threshold securities (i.e.,
are put on a list of those hard-to-buy securities that occasion a high number
of failures to deliver) and make other related rule changes.
History of the Tick Tests.
The tick tests were implemented by the SEC nearly 70 years ago to restrict
short selling in a declining market. Although the core provisions of Rule 10a-1
have remained virtually unchanged, in response to changes in the securities
markets, the SEC has over the years created exceptions to, and granted numerous
instances of exemptive relief from, its restrictions.
Requests for exemptive relief from the tick tests
have increased dramatically in recent years in connection with increased
automation in the securities markets. Under Regulation SHO as in effect prior
to the tick tests' elimination, price restrictions applied to different
securities trading in different markets and generally only to large or more
actively traded securities. In some cases, price tests would apply (or not) to
the short sale of a given security based on where a trade was executed.
Program Suspending Price Tests for Certain Securities. In
2004, the SEC enacted Regulation SHO, which established procedures for an SEC
program to suspend price tests temporarily in order to assess whether changes
to short sale regulation were necessary "in light of current market
practices and the purposes underlying short sale regulation". The SEC
conducted a pilot program during which price tests were suspended with respect
to certain securities selected by the SEC from the Russell 3000 index (and,
with respect to after-hours trading, the Russell 1000 index) because they were
deemed relatively less susceptible to other sources of manipulation based on
their capitalization and liquidity. The pilot program was undertaken to obtain
data on the impact of short selling on market volatility, price efficiency and
liquidity and to decide whether to remove price tests or to impose them with
respect to additional securities. The
SEC received four completed academic studies on the effects of the pilot
program and held a public roundtable discussion in September 2006. All of the
studies generally supported the removal of price tests. (See the June 29,
2004 Alert for a discussion of the adoption of Regulation SHO and the
pilot program and the September 26, 2006 Alert for a discussion of the
SEC roundtable on the pilot program.)
The academic studies are no
substitute for the real world.
This article at Bloomberg is
worth reading: http://www.bloomberg.com/
We sold Sprint
since it is too far above its low to hold as the markets are trying to decide
whether to hold the rally.
The DJIA was up 150 points in the
first 10 minutes of trading and is now up 40 points after 90 minutes of
Two hours into the trading day
stocks are now negative. Hold on.
Three notes from Diane Swonk Chief Economist
at Mesirow Financial:
- Fed acts:
Early reports that the Federal
Reserve was in talks with Fannie and Freddie in order to open the discount
window to government-sponsored enterprises remain unconfirmed. A Fed
spokeswoman (I think Greenspan's old sidekick, Michele) has denied the talks with
Freddie and Fannie, and Treasury Secretary Paulson is not giving much to go on.
Clearly, the Fed and the Treasury
are trying to figure out some sort of a plan to stabilize market concerns on
Fannie and Freddie. Whatever that plan is, it clearly
is not yet ready for primetime. Unfortunately, this has been the hallmark of
communications between the Fed, Treasury and financial markets for some time.
The Fed is clearly under pressure
to stretch its authority as lender of last resort. Also, this move likely requires
four additional votes by the Board of Governors. Ben Bernanke will not have the
required Board votes for emergency actions such as the one rumored this
afternoon, when Mishkin vacates his seat on the Board
on August 31.
The Fed seems to be learning
faster than its cohorts at the Treasury, but a shortage of staff at the
Treasury is clearly showing. This administration has never treated economists
very well, and we are all now paying the price.
All I can say for sure is that
the collateral damage of a Fannie and Freddie collapse is much greater than the
risks implicit in the Bear Stearns meltdown. Something will be done to minimize
risk to bond holders. Not too many people in DC care much for the outcome for
shareholders, though. Remember, bond holders include a wide array of private
and public institutions, including foreign central banks, who view agency debt
to be as safe as Treasury debt.
Fed tries again:
The Board has granted Federal
Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac,
should such lending prove necessary. This is in addition to the swapping of
securities for treasuries offered by the Fed to Fannie and Freddie earlier in
the spring. Once again, they made the announcement before Asian markets opened.
This move really looks more like
a band-aid than a fix. I don't think we are done with dealing with Fannie and
Freddie yet. I've just returned from the National Governors Association
Centennial meeting in Philadelphia, where I spoke for the Economic Commerce
committee. The consensus of the multitude of DC liaisons there is that Congress
needs to guarantee existing Fannie and Freddie debt, not future debt, and cut
NOTE: This move was approved by
the five-member Fed Board in DC, which drops to four members in August when Mishkin vacates his seat. The Fed will have to change its
charter to take emergency actions such as this (if they really work), or not
get them done when membership on the board dips to four!
Bank Failure in California
represents the second largest bank failure in history. Chicago's own
Continental Bank, which failed in 1984, was the largest.
suffered a run on reserves after Senator Chuck Schumer called the bank's
solvency into question a month ago. (We can thank Congress for adding to the
panic many already feel about our financial system, which has now created a
self-fulfilling prophecy in the case of IndyMac.)
The bank will reopen on Monday
with FDIC insurance funds under the new name IndyMac
Federal Bank. Regulators plan to have the bank privatized again within 90 days.
This is not the only bank failure
this year, just the largest (and the one with the most press). Bernanke warned
that more were to come. I fully expect the FDIC to make all investors whole,
even though FDIC insurance is technically designed to cover only up to $100K
per account. The reason is simple, the Fed can't risk the collateral damage
associated with spooking the nations most conservative of investors - those who
make deposits into the banking system.
A couple of observations:
- If you have more than $100K in
any one account, it does make sense to split those holdings into separate
accounts at different banks. Banks need to be prepared for this. We don't
need a run on banks to withdraw funds!
- Consolidation in the banking
industry will accelerate sharply as the Fed moves to encourage consolidation of
weaker institutions into stronger ones.
- The most solvent of banks should
make moves NOW to reassure their clients of their solvency to preempt
With regard to Fannie and
- The treasury and Fed are clearly
in talks with Fannie and Freddie.
- The ideal solution would be for
Congress to limit its guarantees to existing debt, squeeze shareholders out of
these institutions, and force them to move forward in a more sensible way. We
would all be better off if Fannie and Freddie weren't as large as they are
today, and if the market functioned more on its own. Indeed, at least a portion
of the subprime debacle can be attributed to the
excesses that the existence of these agencies encouraged in the financial
- Investors in debt in these
agencies need to be made whole, as the collateral damage of not doing so would
be too great and devastating to endure. Going forward, however, it would be
much better if investors stopped thinking of the debt these agencies issue as
comparable to treasuries, because it is NOT!
It's always darkest before the
dawn and a new day is coming...but not tomorrow.
FNM, FRE, and Lehman are now negative on the day after being up 30%,
28% and 20% respectively in the first ten minutes of trading today. That is
volatility. We are going
to sell a few retailers, CHS and AEO. We are adding another tranche
to our Bank/Financial Indexes (XLF, KBE, KRE which are
down 8% on the day after being up 8% on the opening.
Just like 1990/91:
11:54AM National City halted, news pending $3.20 -1.21:
11:59AM National City issues statement in response to market rumors; NCC is
experiencing no unusual depositor or creditor activity. NCC issues the statement in response to
market rumors. "National City is experiencing no unusual depositor or
creditor activity. As of the close of Friday's business, the bank maintained
more than $12 bln of excess short-term liquidity.
Further, as a result of our recent $7 bln capital
raise, National City maintains one of the highest Tier I regulatory capital
ratios among large banks." (Stock is currently halted)
Banks are going broke and Bush is
going to lift the drilling ban on the outer continental shelf to solve the
crisis. Are these guys in touch with the problems in the economy or what?
90% of the folks trading this
market and probably 90% of hedge fund jockeys were not trading the markets at
the time of the 1987 Crash.
European shares advanced Monday on a flurry of deals and
rumored deals, overshadowing U.S. government support for mortgage lenders
Fannie Mae and Freddie Mac. Gold gained $12 to $972 and Oil was up 10 pennies
to $145.30. Treasuries were flat. The dollar fell with one dollar buying 106
yen and a euro will cost $1.59.
Stocks rallied in the last hour
but couldn’t hold and the major measures closed lower on the day. Financials
closed near their lows.
At the bell the DJIA was down 45
at 11055. The S&P 500 lost 11 to 1228 and the NAZZ was down 26 at 2212.
Breadth was 2/1 negative and
volume was active for a summer Monday at 4 billion shares on the NYSE.
There were about 1000 combined
new lows and a combined 75 new highs.
The bears won the day.
11 July 2008
Open your ears; for which of you will stop
The vent of hearing when loud Rumour speaks?
I, from the orient to the drooping west,
Making the wind my post-horse, still unfold
The acts commenced on this ball of earth:
Upon my tongues continual slanders ride,
The which in every language I pronounce,
Stuffing the ears of men with false reports.
I speak of peace, while covert enmity
Under the smile of safety wounds the world:
And who but Rumour, who but only I,
Make fearful musters and prepared defence,
Whiles the big year, swoln with some other grief,
Is thought with child by the stern tyrant war,
And no such matter? Rumour is a pipe
Blown by surmises, jealousies, conjectures
And of so easy and so plain a stop
That the blunt monster with uncounted heads,
The still-discordant wavering multitude,
Can play upon it. But what need I thus
My well-known body to anatomize
Among my household? Why is Rumour here?
Rumour, Henry IV, Act 1 Scene1
Hank Paulson may get his wish
over the weekend that one or two brokerages go belly up. It was nuts for the
Treasury Secretary (Paulson) and former Fed member Poole to pour gasoline on
the smoldering fire that is our financial system.
Be that as it may today will be
interesting. Yesterday we had written a few lines about the Crash of 1987 that
we eliminated at the end of the day. These are the lines:
As Don always said, markets never
crash off the top. Back in 1987 the markets dropped about 10% from a new high
made in the spring of 1987 and then climbed back up to make another higher high
in August of 1987. The markets then dropped 20% from that high into October
1987. The week before the crash there was a strong up day with no follow
through. Then there was a collapse on Friday.
Folks are always calling for a
Crash. It has been 21 years since the last one. But in a way 1974 was more
insidious because the down markets never seemed to end. At least with a crash
you get to a point where you can recognize value and that if the economy is
going to eventually recover there are stocks worth buying. When there is a slow
evaporating of prices with no real climax the investment decisions become much
Well enough doom and gloom talk. The Cubs are in first
place, the prince and princess are
coming today for a four month stay and the land of milk and honey received
a much needed rain yesterday. Oh, and we are all in cash.
On the other hand a large washout
this morning may lead to a rally that salves the wounds. Fannie and Freddie are
going to open at a price that has been cut in half from yesterday’s close as
the NYT followed up with a dour story that builds on the dour story in
yesterday’s WSJ. When the
media discovers a problem it is always too late to matter but
they sure do enjoy turning the knife day after day. By the by, FNM and FRE have
lost $100 billion of market value this year.
Asian markets were lower
overnight and European bourse indexes are lower at midday. There was and is not
panic selling in either of those markets, just the slow dribbling lower of the
past few months. Oil has a $147
handle and Gold is up $10. Treasuries have a bid.
raised its bid to $70 for Budweiser.
And GE reported in line earnings – excluding special items, of course.
Goldman dropped Cisco from it is special buy list.
Citigroup sold its German business for $7 billion.
It’s nice how a scary market can
quickly change the thoughts of laissez faire officials:
U.S. Treasury Secretary Henry Paulson
said federal regulators are backing Fannie Mae and Freddie Mac, the biggest
providers of financing for U.S. home
loans, in ``their current form.'' ``Today our primary focus is supporting
Fannie Mae and Freddie Mac in their current form as they carry out their
important mission,'' Paulson said in a statement today. ``We are maintaining a
dialogue with regulators and with the companies.''
The markets are down 15% this year and 25% from their
highs. Fannie and Freddie are blowing up today and the DJIA is down 250 points.
We are going to do a little buying. We are buying to hold for the long term
which we said is a week to a bit less than our lifetime. Since we are 65 we
think we have a least a few years left in our lifetime. If we don’t we won’t
care what happens with stocks anyway.
We are taking relatively small positions - with room to
add - if today is the beginning of the cataclysm instead of the end of the sell
off and the beginning of a bear market rally.
We bought the KBE
(major bank index), ( regional bank index), XLF (financial
index), American Eagle Outfitters, J Crew, Whole Foods, AT&T, JP Morgan,
Intel, Cisco, CBS, Motorola, Micron, and Chico’s.
We bought about one third of our normal purchase amount
of each stock in accounts so we have plenty of room for more downside. But all
these stocks are least 20% below the prices at which we wished to be able to
purchase them six months ago. (AS in, if they go to such and such a price we
are going to buy.) We know the financial world is different than it was six
months ago but these are not fly by night companies and all will be here on the
other side of the tunnel.
JP Morgan is back
to the price it was when Jamie Dimon took over. J
Crew is back to the price it sold after its initial offering two years ago. The
bank and financial indexes are down over 50% from their highs. Whole Foods is
on third of the price folks paid for it a year and one half ago. When they
finish integrating Wild Oats they will be in great shape. Intel and Cisco are
down 40% and 50% respectively from 12 month highs. Motorola has $3 per share in
cash. And Chico’s and Micron are the only speculative stocks in the bag.
At day’s end the most any account (except the smallest)
will be invested will be about 20%.
Jim Cramer is on TV saying that he knows the President has changed his position and now
believes that Freddie and Fannie should survive. He says Freddie turned and
recovered most of the day’s losses when the President changed his mind. Far Out. If Cramer knew a lot of other folks knew too. The
stock was trading at $4 and it is now at $8. This is called rescuing the
market. Someone in the administration told Cramer. If the president changed his
mind an announcement should have been made. We guess the republican laissez faire doctrine only counts when
markets are rising.
Oil closed up about $3 at
$144.78. Gold gained $23 to $965. Treasuries were flat when the markets rallied
in the last hour and one half. The two-year ended at 2.43% and the ten-year at
After the shorts covered for the
weekend into the final hour and their buying pulled the average averages up to
down 75 points, bull traders who didn’t want to be long into the weekend did
their selling but the DJIA held to close better by one half than the days lows.
Today’s trading was positive for the near term.
At the bell the DJIA was down 128
points at 11000. (And today was 7/11 so it may bring luck.) The S&P 500
lost 14 points to 1240 and the NAZZ lost 20 to 2240.
Breadth was 2/1 negative and
volume was active at over 5 billion shares.
There were over 1200 combined new
lows and 75 new highs.
The bears won the day the week the month and so far the year.
10 July 2008
Jobless claims for the week last
were 358,000 down 58,000 but way too many. U.S. foreclosure filings rose 53
percent in June from a year earlier and bank repossessions increased the most
since RealtyTrac began collecting data in January
2005 as deteriorating property values forced more people to give up their
homes. One in every 501 U.S. households lost the home to foreclosure, received
a default notice or was warned of a pending auction, RealtyTrac,
an Irvine, California-based seller of default data, said today in a statement.
Bank seizures rose 171 percent.
Nay, take my life and all; pardon not that:
You take my house when you do take the prop
That doth sustain my house; you take my life
When you do take the means whereby I live.
Shylock-- The Merchant of Venice
And a busy morning it is friends.
Dow Chemical is paying $18 billion,
an 80% premium over last night’s closing price, for Rohm & Haas. Dow must be calling the top in the energy markets
since petroleum is the feedstuff of many chemical processes and the rise in the
price of oil has been impinging earnings big-time. Warren Buffet is investing
$3 billion in the deal by purchasing DOW shares.
General Electric is considering spinning off its entire consumer
operation not just its appliance division. That means they can’t get a bid
but need to get the division off the books before their earnings report so they
can treat the lousy results as a special item.
The WSJ has a front page item on
the demise of Fannie and Freddie with a comment from Treasury
Secretary Paulson that the Government should guarantee the two against failure.
And last night former Fed Member Poole said that both companies are insolvent.
Now he tells us. Why didn’t he say something when he was a fed member? Oh, he
was part of the club then.
Asian markets were mildly lower
overnight and European bourse indexes are lower by over 1% at midday. Oil is
unchanged at $136 and Gold is up a few dollars.
U.S. stocks are opening higher on
the Dow Chemical/Rohm & Haas takeover news. Stocks opening higher are not
positive for the bullish case.
We have been saying that the
markets remind up of 19734-1974 and the first Oil shock. Folks have been saying
that the markets need to rally here because bearish sentiment is so high. Those
two disparate thoughts meld together in the following observation by Helen Meisler of realmoney.com confirming.
In the 1973-74 bear market, the Dow Jones
Industrial Average was in a trading range until the summer of '74. Sure, it
was down 20% when it was around 800, but it really hadn't broken badly from
that level. Sound familiar? 've
boxed off the early summer on the chart. We currently have 47% bears,
an extreme for the past few decades, but in the summer of '74 when we broke
down from that 800 level on the DJIA, the percentage of bears soared. By
mid-August, they were at 69.6%. Now that's
extreme! But forgetting that number, note that for nearly two or three months
the bears stayed high and the market went down, relentlessly, another 25%. The
bears were actually right for that final leg down.Of course, we didn't have a VIX back then. Heck, we didn't even
have options back then! But you can see why an orderly march down is simply a
trend, not a bottom, despite how stretched my indicators are. No panic, no
bottom. The Chinese have an expression that is centuries old (I ask my Chinese
readers to forgive me if I don't get this exactly correct!) that translates to
something like this: "Chaos creates opportunity." Note I said centuries old. They didn't have a VIX
when they came up with that expression, but they knew that in severe
dislocations there is opportunity, but without dislocations there is not a
U.S. Treasury Secretary Henry
Paulson said he's been assured by the regulator for Fannie Mae and Freddie
Mac that the two government-chartered mortgage companies have enough capital.
The Office of Federal Housing Enterprise Oversight ``has made clear that they
are adequately capitalized,'' Paulson said in prepared testimony for the House
Financial Services Committee. Paulson said he is counting on Fannie Mae and Freddie Mac,
which own or guarantee about half of the $12 trillion in home loans, to help
revive the U.S. housing market. Fannie Mae shares tumbled 13 percent yesterday
in New York to the lowest level in almost 14 years, and Freddie Mac has fallen
70 percent this year in New York Stock Exchange composite trading. ``Fannie Mae
and Freddie Mac are also working through this challenging period,'' Paulson
said. ``They play an important role in housing markets today and need to
continue to play an important role in the future.''
We were watching a documentary
about Dennis Koslowski of Tyco infamy who is in now
in jail. His infractions were penny ante when related to the decisions made by
the CEOs of most major banks in the last ten years. In China the CEOs would
have been executed by now. In the U.S. they have retired with $50 million cash
(not their company’s stock) and a watch.
Zion’s Bancshares tried to sell
$200 million of preferred shares yielding 9.5% to raise capital that they said
they didn’t need. Who pays 9.5% to borrow money that they plan to loan at
6%? Only in America. Anyway, Zion was
only able to sell $47 million to retail customers. No institution wanted to by
the stocks at that yield. We were interested to find out who the charlatan
underwriters of the preferred sold to retail investors were. To our surprise Zion
sold it to customers of their own retail brokerage firm. Now the buy may turn
out to be wonderful; but no institutional investors wanted it. If that isn’t
self dealing we don’t know what is.
Approaching noon retailers are on
sale today while financials are finding a bid and Freddie and Fannies are, as
they say in the business, stabilizing at lower levels.
European bourse indexes closed 1%
to over 2% lower on the day.
Oil popped at the end of the
trading day to gain $5 to $141. Gold was up $16 on the day at $945. Treasuries
were flat with the two-year at 2.42% and the ten-year at 3.83%.
And the bulls now say, “Whew! Maybe that uptick
rule for short selling was a good thing. Maybe the SEC was nuts to get rid of
it. The downturn began at the same time the rule was repealed. Do you think
those folks back in 1933 knew something?”
The ones who had any money left did.
Who cares about Sumner Redstone? Or Barry Diller? David Faber is
paid a million dollars a year by CNBC to interview these guys? Who cares?
J Crew and Whole Foods are at beginning investable prices and we purchased
less than 1% positions in each for a few of our large accounts and the Model with the idea that these
two companies could eventually become 5% long term holdings, long term being
longer than a week and less than a lifetime.
The mo-mo commodity stocks
rallied a bit today and were the only play that worked for traders and even
there folks had to risk a lot of bucks to make a little. Financials couldn’t
hold their gains as Lehman was under
pressure all day and Fannie and Freddie slipped lower late in the
session. GM made a new low for the
last 50 years. GE announces in the
morning and should be the focus for at least a minute or two.
The DJIA closed up 80 points at
11230. The S&P 500 gained 9 to 1254 and the NAZZ was up 23 to 2258.
Breadth was flat and volume was
active at 4.5 billion on the NYSE. NAZZ volume remains light at around 2
There were about 775 combined new
lows and 60 combined new highs.
Bulls win! Sort of.
9 July 2008
Happy 42nd anniversary to our better half.
“What shall Cordelia speak? Love, and be silent”.
Today is important for stocks in
that they need to close with a flourish in order to suggest a sustainable
rally. The jury is out as the trading day begins. Asian and European markets
were up overnight following the rally in U.S. stocks yesterday.
We didn’t think the rally was all
that strong but many gurus disagree with our take. In early trading today
stocks opened higher but are now trading mildly lower. This type of action is
positive for the bulls as long as the close is positive.
Gold is flat and Oil is up $2
with a $137 handle. Iran announced it had fired some long and short range
missiles. The announcement was a shot across the bow.
Alcoa which is always the first
DJIA stock to report each quarter said that revenues were down 7% and earnings
down 24% versus last year’s quarter. But that was better than and gave a
positive tone the early futures trading. Perception is not reality.
From CM: Bernanke and Paulson speak before House tomorrow at 10:00 EST. After
Bernanke said yesterday he will extend lending facilities to dealers after year
end, market took that as a sign that as long as the FED is being so
accommodative, chances of any sort of tightening before year end was greatly
diminished. I believe that the last thing the FED wants to do is paint
themselves into a corner, so I would expect tomorrow’s testimony to be on the
hawkish side. The FED can still raise rates to bolster the dollar and help
diminish inflation expectations, as well as be accommodative to the banks and dealers
who need ST financing. Market still pricing in a 25 bp tightening by end of year.
Crude oil inventories in the
latest week were down 5 billion while gasoline inventories were higher than
expected. Oil remains up $1.50.
UBS and RBC raised questions
about capital spending and its effect on Cisco
and analysts from both companies lowered their price targets but not their
ratings and the shares are off over $1. And that is a real drag on the DJIA as Intel joins the down. Financials tried
to rally and haven’t been able to hold but the commodity complex is higher.
That may be good news for the mo-mo boys and girls but it is not for the value
bulls who have been calling for a bottom. There are three hours left in the
trading day and that is lifetime.
With an hour left in the trading
day the DJIA is down 150 points. The bulls have an hour to rescue themselves
from this mess.
Oil finished at $135.60 down a
few pennies on the day. Gold was up $5 at $928. Treasuries rallied with the
two-year at 2.39% and the ten-year at 3.83%. European stocks closed their day
before U.S. markets tanked and were 1% and higher on the day.
There was no rally in the last
hour and stocks closed on their lows for the day.
At the bell the DJIA was down 240
points at 11146. The S&P 500 lost 30 to 1245 and the NAZZ dropped 60 to
Breadth was 2/1 negative and
volume was brisk at 4 billion shares.
There were about 400 combined new
lows and about 60 combined new highs.
The bears are back after a one day hiatus.
8 July 2008
No, no, no, no! Come, let’s away to prison.
We two alone will sing like birds i th’ cage.
When thou dost ask me blessing, I’ll kneel down
And ask of thee forgiveness. So we’ll live,
And pray, and sing, and tell old tales, and laugh
At gilded butterflies, and hear poor rogues
Talk of court news; and we’ll talk with them too-
Who loses and who wins; who’s in, who’s out-
And take upon ’s the mystery of things,
As if we were God’s spies; and we’ll wear out,
In a wall’d prison, packs and sects of great ones
That ebb and flow by th’ moon.
King Lear, Act 5, Scene 1
Attention Fed Shoppers—the discount window will remain open until
further notice for sub prime owners who need to lay off risk on the Fed.
The Federal Reserve may extend securities dealers' access
to direct loans from the central bank into 2009 as long as emergency conditions
``continue to prevail,'' Chairman Ben S. Bernanke said.
``The Federal Reserve is strongly committed'' to financial stability and is
``considering several options, including extending the duration of our
facilities for primary dealers beyond year-end,'' Bernanke said in a speech to
a conference in Arlington, Virginia. Bernanke also endorsed proposals to set up a federal liquidation process
for a failing investment bank. The Treasury should ``take a leading role in any
such process, in consultation with the firm's regulator and other
authorities,'' he said. The comments reflect the Fed's
assessment last month that financial markets ``remain under considerable
after the Fed started the unprecedented lending programs in March. Bernanke at
the same time is aiming to address criticism that the Fed's loans to Wall
Street may encourage more reckless lending, sowing the seeds of future crises.
And with those comments this
morning Bernanke again doused the fires in the markets as Asian and European
stocks fell overnight on worries about the financial system. U.S. futures will
open flat. 200 points down in the early going would clear the air for a rally.
Oil has a $138 handle and the interesting drop in the price of oil the
last two days as stocks have fallen suggests that there are forces at work to
dampen speculation. The reality will prove the point if oil drops to the $100
level over the next month.
A Lehman analyst placed fear in
the wallets of Fannie and Freddie shareholders yesterday when he
said that they would have to raise $75 billion in capital to meets accounting
requirements. Coming from someone at Lehman which has its own capital problems
the markets ignored the irony and pounded the shares lower. We wound guess that
he selloff was engendered by the short sale on
downticks but then that is an old battle that has been lost.
Fannie and Freddie’s debt have
always traded with the implicit backing of the Federal Government but the
common equity has never had the backing. So the question becomes whether the
Fed and Treasury would let Fannie and Freddie file bankruptcy and wipe out the
common shareholders. Since none of the Bush crowd own shares or have an
affinity to either entity we know they wouldn’t but the Fed and Treasury and
Congress would have to measure the too big to fail against the disruption in
the marketplace that would occur from such a filing. There are $4 trillion in
Fannie and Freddie debt in money funds and that debt is
in almost every money fund in the country. While there is little question the
eventually the debt would be honored the market pricing mechanism would
probably lead to many funds breaking the dollar in the short run unless the SEC
granted an exemption.
And so it just gets more
interesting and the reality dawns that in today’ financial system there is
really no safe place to hide.
The S&P 500 is trading at the
same level it was in 1998.
At 10am Oil is now down $5 and
$10 form last Thursday’s high. Gold is down $12 and the mo-mo stocks are taking
it on the chin. But since the opening the major stock market measures have been
levitating slightly above and below unchanged on the day.
European bourses reversed
slightly into their close but still lost over 1% across the continent.
Piper Jaffray recently surveyed over 5,000 teenagers and their
spending habits. The results suggest teen spending is expected to drop nearly
20% year over year. Surveyed parents signaled that they would reduce spending
on their teens by average of 28% year over year.
Gold lost $7 to $922. Oil ended
down $5 and change at $136.22. Treasuries were better with the two-year at
2.44% and the ten-year at 3.88%. The yen was 107 to the dollar and one euro was
Treasury Secretary Paulson in a
speech today promotes covered bonds as
a way to help homebuilders. Definition: Covered bonds are debt
securities backed by cash flows from mortgages or public sector loans. They are
similar in many ways to asset backed securities but covered bond assets remain on
the issuer’s consolidated balance sheet. Essentially, a Covered Bond is a
corporate bond with one important enhancement: recourse to a pool of assets
that secures or "covers" the bond if the originator (usually a
financial institution) becomes insolvent. This enhancement typically (although
not always) results in the bonds being assigned AAA ratings. Sort of like the
old first mortgage bonds of railroads secured by specific assets.
With an hour to go in the trading
day the DJIA is up 125 points. If this rally fails the markets are in super big
The rally held and all is well in
La La Land for the night at least. We would guess
that the bulls will be able to build on this day since so many were calling for
it. We remain in cash.
The DJIA closed up 150 points at
11382. The S&P 500 gained 21 to 1273 and the NAZZ jumped 50 tp 2295.
Breadth was 2/1 positive and
volume was brisk at almost 5 billion shares.
There were about a combined 800
new lows and 50 new highs.
The bulls turned the tide for today at least.
7 July 2008
Stocks are due for a rally and it may begin this week. Last
Friday Asian markets were mixed with Shanghai up 2% and Hong Kong down 2%.
European bourse indexes were 1% lower. Oil traded at $145 and Gold lost $13.
This morning European bourse indexes are mildly higher and Asian markets
rallied strongly overnight with Shanghai up 4.5% and Hong Kong recovering its
Friday losses. Gold is down and Oil is lower with a $142 handle as the treading
GM is going to
fire a bunch more people and try to figure out how to raise money. UBS reported better than expected
results due to a $3 billion tax credit.
On Thursday the European Central Bank raised its lending
rate to 4.25%.
The monthly Employment Report said that 60,000 jobs were
lost in June and Initial Jobless Claims exceeded 400,000 for the first time in
a long time. The DJIA gained on Thursday while the NAZZ and S&P 500 were
From the British newspaper The Independent: With
Americans cutting back on luxuries, and the price of transport rocketing, the
so-called “Vegas vacation” is facing the axe. This week, as the nation
celebrated Independence Day, major hotels were taking stock of a fall in
all-important room occupancy rates from their usually impressive 95 per cent
levels to nearer 80 per cent. ... More worryingly, new figures showed gambling
revenue has also dropped – a further 3 per cent this month – starting a price
war between worried firms anxious to lure punters back. Hotel rooms, which last
year averaged $130 each, now go for less than $100
It is a wonder to us that 80% of the rooms are being used.
The DJIA is up 100 points in thee first half hour of
trading. For a sustained rally a large drop in the morning with a reversal
higher at midday would be better.
The Case for
by Helene Meisler
7/7/2008 9:09 AM EDT
For those of you who keep asking me why we need capitulation
before we can have any sort of decent rally, I ask you to take a look at
Thursday's action. In the past when we have been this oversold, any little
piece of good news -- or even news that's not as bad as expected -- such as the
employment number or the ECB's commentary we had on
Thursday, would have rallied the market and rallied it hard, even if it appeared
to be a one-day wonder.
that was not the case. Instead, we got a rally attempt that failed to hold on.
I don't need the VIX and I don't need options ratios to tell me that means there
are still plenty of folks sitting out there waiting to sell stocks on any
rally. Or worse, buy 'em on any dip.
When you get real capitulation, it's because everyone
who wants to sell has sold. Once they have sold, it's easy to rally because
there are no sellers above. It's as simple as that. But when there are sellers
above, we get action like we had on Thursday.
What was most disconcerting about Thursday's action to me
was the ISE call/put ratio was quite high at 150%. In a down market, readings
that high should be unusual. But that has not been the case in this decline.
For example, June 25 saw a reading of 161%. Notice on the chart of the S&P
below what the action on June 25 was -- it's the red arrow. You can clearly see
there is no wall of worry, but rather a slope of hope still out there.
I know the Investors Intelligence readings and the American
Association of Individual Investors readings show the same bearishness as we
had at the March lows. And gosh, now CNBC has declared this an official
bear market, as has Barron's. Yet the folks who are actually putting
money to work might be talking bearishly, but they are acting like
It is true that almost every one of the indicators I follow
is stretched to excess. If that is the case for my indicators, then you
have to figure it's the case for everyone else's as well, and that's the reason
everyone is waiting on that elusive rally.
So I will remind you that we are oversold enough to rally
and we even had fewer stocks making new lows on Thursday vs. the March lows (a
very positive divergence), but I think I'd rather wait for some capitulation,
or at least an oversold rally that relieves some of the downside pressure and
then comes down again.
We read that over $11 trillion in market values around the
world has evaporated since October 2007.
Two hours into the trading day the major measures remain
higher but can’t put on a push because financials are in the red.
At three hours into the day the major measures are now all
lower with the DJIA off 50 points.
European markets closed before the nose dive in the U.S.
markets. The European bourses were all up 1% and more at day’s end.
Fannie Mae and Freddie Mac both are dawn 20% today and
Goldman Sachs is 6% lower. Fannie
and Freddie plunged in New York trading and their credit-default swaps rose as
concerns grew the two largest U.S. mortgage-finance companies may need to raise
more capital to overcome write downs and satisfy new accounting rules. The new
FAS 140 rule that seeks to stop companies keeping assets in off-balance sheet
entities may force Fannie Mae and Freddie Mac to bring mortgages back onto
their books, requiring them to put up capital, Lehman analysts wrote in a note
to clients today. Fannie Mae would need to add $46 billion of capital and
Freddie Mac would need about $29 billion, the Lehman analysts wrote. The companies
will probably get an exemption from the rule because it would be ``very
difficult'' for them to raise that amount of capital, the analysts said.
The failure of the financials to join the rally this morning
has disappointed the bull traders. The major stock measures are now down 1% and
more and oil is coming off its $4 drop to be down only $2.
Market mavens continue to call for a capitulation bottom. If
the sell off today continues to the close and stocks open a couple of hundred
points lower in the morning then there could be a trading rally. But it will
only be a trading rally that recovers the losses of the last week. We see
nothing on the horizon to prevent lower prices ahead. Most everyone is still
looking for profits and while they may be worried visions of gains and
motivation of greed prevail.
Oil finished down $4 at $141.28. Gold dropped $7 to $926.
Treasuries were better with the two-year at 2.41% and the ten-year at 3.91%.
The yen was 107 to the dollar and the euro equaled $1.57.
The DJIA was up 100 points out of the gate this morning and
then dropped to down 150 points at 1pm before rallying to up 20 points ten
minutes before the close.
At the bell the DJIA was down 65 points at 11223. The
S&P 500 lost 12 to 1250 and the NAZZ dropped 2 points to 2245.
Breadth was 3/2 negative at the bell and volume was active.
There were over 1100 combined new lows and less than 50
combined new highs.
no idea who won the day. Last hour rallies in this kind of market are
not a positive.
2 July 2008
The markets close at noon tomorrow and we are taking the
morning to go sign up for Medicare – Hooray! And so we are taking the rest of
the week off to enjoy the holiday. The next post will be Monday July 7.
Asian markets were lower
overnight but European bourses have reversed the down trend and are higher at
midday. Gold is down $10 and Oil has an unchanged $141 handle. Treasuries are
lower in price higher in yield.
U.S. stocks opened higher as
financials are trying to rally. After an hour of treading though the major
measures are flat. Today is an important trading day from a trend standpoint
since tomorrow will be light and the big boys and girls can have their fun with
the limited liquidity.
Investors’ Intelligence reported 31% bulls and 44% bears which from
contrarian bent suggests that some type of rally is in
The Yahoo/Microsoft soap opera is on again as the WSJ suggests that
MSFT is trying to enlist Time Warner
and News Corp. to join in breaking
up Yahoo. Large egos are involved.
Starbucks is going close 600 stores and let up to 12,000 folks go.
It is time for them to retrench.
Mother Merrill placed a sell on GM and mentioned the nasty bankruptcy
According to the Federal Deposit Insurance Corp., $45.4 billion of the
$631.8 billion in construction loans outstanding at the end of the first
quarter were delinquent. When banks announce second-quarter results in coming
weeks, they are expected to report sharp increases in loans that builders can't
repay. Banks are also facing intensifying pressure from federal and state
regulators to deal with the problem loans on their books. WSJ
Treasury Secretary Paulson - of Goldman Sachs is
shorting subprime to its customers fame- is
saying that financial institutions must be allowed to fail. He says we (whoever
we are) must reduce the perception that a bank is too big or too connected to
fail. He may want to reduce the perception but the reality is that some banks
and brokers are too big to fail. Paulson wants to have orderly failures. Say
what? Do these guys really know what they are reading and saying?
At 11 am it looks like the shorts
who were leaving early for the weekend covered their
financials and now the markets are meandering in negative territory as the
short covering buying in the financials has faded.
European markets closed lower.
We posted a new Prairie
Full speed backwards: Faced with a surge in the number of proposed
solar power plants, the federal government has placed a moratorium on new solar
projects on public land until it studies their environmental impact, which is
expected to take about two years. The Bureau of Land Management says an
extensive environmental study is needed to determine how large solar plants
might affect millions of acres it oversees in six Western states — Arizona,
California, Colorado, Nevada, New Mexico and Utah.
The Employment Report for June is
announced in the morning and there will be some trading around that number
which is expected to be grim. Same store retail sales will also be announced.
Oil ended up $2.85 at $143.80.
Gold was up $2 at $946. Treasuries ended with the two-year at 2.58% and the
ten-year at 3.96%. The yen was 105 to the dollar and one euro was worth $1.58.
U.S. Steel dropped 10% today and
Potash was down 5% as the momentum names were sold with a vengeance. RIMM down
6%, First Solar down9%, Mittel down 10% and Apple
down 4% are a few more.
There was no rally today as the
DJIA dropped 166 points to close at 11215. The S&P 500 lost 24 points to
1266 and the NAZZ dropped 54 points to 2250.
Breadth was 2/1 negative and
volume was active.
There were about 730 combined new
lows and 105 combined new highs.
The bears are in control again.
1 July 2008
Once believed to be recession-proof, casinos are proving to be highly
vulnerable to the economic downturn, which is striking the industry at a bad
time. Las Vegas is entering its lethargic summer season and a boom-time frenzy
of grand expansion plans and private-equity buyouts has left casinos laden with
And so goes the story in the WSJ
this morning about the slowdown in gambling in Las Vegas. As with ever rising
home prices, the myths of eager lenders and builders are meeting reality.
Asian markets were lower
overnight with India and Shanghai both down over 3%. European bourse indexes
are 2% and lower across the continent and that has U.S. futures down almost 1%
pre-opening. Gold is up $11 and Oil is again touching $143. Treasuries have a
The WSJ also has a story today
about folks in Abu Dhabi paying millions of dollars to buy vanity license
"Everyone has a nice watch, a nice car," says Abdullah Al-Mannaei, organizer of the city government's monthly auction
of desirable numbers. "It's not enough to just have a Ferrari anymore."Hundreds of men in starched robes descend on
an opulent hotel here to vie for the most distinguished digits. Earlier this
year, Abu Dhabi businessman Saeed Khouri
made headlines and the Guinness Book of World Records when he paid $14 million
for the tag simply sporting a "1." His cousin, stockbroker Talal Khouri, paid $9 million for
"5" -- the second-largest sum ever paid for a license plate. Abu
Dhabi is hardly the first boomtown to be swept up in luxury license plates.
Hong Kong has had a thriving auction for years, while high-rolling Russian
executives have gone to great lengths to secure custom tags.
The media suggests that Iran will
retaliate against the U.S. if Israel bombs. It would be much easier for Iran
and militants to retaliate against the Arab Emirates and especially Abu Dhabi.
With the billions being thrown away in that country building gambling casinos
and million dollar vacation homes it seems to have missed that attention of the
media that Abu Dhabi is a short missile trip across the Persian Gulf for
The DJIA and S&P 500 are both
down about 15% since 6/30/07.
Stocks opened lower with the DJIA
down 100 points in the first five minutes. The measures then rallied back to
even but are floating along in negative territory after the first hour of
One of the large secrets that the media and regulators
don’t want to talk about is the fact that many money funds -not the one we own-
are actually worth less than a dollar. That is because some of the investments
that these funds own are in illiquid securities related to the subprime debt fiasco. This news is the tip of the iceberg
and management companies are either going to have to step up and rescue the
funds or mark them to market at some point. The reality is that folks buying
these funds now are paying too much and folks selling them a receiving more
than they should. And this has been going on since January.
Money manager Legg
Mason said late Monday that it expects to take $155 million in charges against
earnings as it moves to shore up its money-market funds. Legg said it has
reached a deal to pay up to $240 million into three money-market funds managed
by a subsidiary if they lose money on the sale of asset-backed commercial paper
securities. That deal will cost Legg $90 million after taxes, or 64 cents per
share, in the quarter that ends June 30. Legg (NYSE: LM) also expects another
$65 million in after-tax charges related to previous support of money-market
funds, including the cost of buying securities from those funds, the company
said. It's the most recent hit Baltimore-based Legg has taken to the bottom
line to keep its money-market funds from losing money on securities affected by
the mortgage market upheaval. The company said the agreements deal with the
same securities Legg has already agreed to support in other funds.
The ISM Manufacturing index rose
to 50.2 last month after a 49.6 reading in May, on a scale where readings over
50 represent growth. This is the first time in five months the index has been
GM sales were down 8% in June while Toyota sales were down 11%. Ford
sales were down 28%. The street had
been expecting GM sales to be down over 20% and the GM news is actually
allowing stocks to rally a bit from DJIA down 150 points at 12.30pm.
Oil ended up $1.30 at $141.30.
Gold gained $14 to $942. Treasuries were weak with the two-year at 2.63% and
the ten-year at 3.99%. European bourse indexes closed down 1.5% and more as did
Mexico and Brazil.
With over 1100 combined new lows
this morning as the DJAI was down 150 but the markets struggled to positive
territory at the end of the day in active trading.
The DJIA gained 33 points to
11385. The S&P 500 was up 6 points to 1287 and the NAZZ turned positive to
gain 12 points to 2270.
Breadth was 3/2 negative and
volume was active.
The bulls regained serve late in the day. They need to follow
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Summary of Business Continuity Plan