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27 November 2002

6:58am and on what is known as a slow news day the folks on CNBC are interviewing folks at a turkey farm. And on the ticker we learn that a Harvard study has found that eating a teaspoon of peanut butter every day reduces the chances of getting type 2 Diabetes by 20%. The stock futures are indicating a higher opening.

8:14am and after cooking pancakes for the kids we are back for the day. The low priced tech stocks are running again this morning and we are going to let JDSU go in keeping with our strategy of leaving the techs for now and moving to the larger depressed stocks that we think will give a good year end bounce. We bought AOL yesterday because we think the big boys and girls will want to move the stock to $20 per share by year end. The 10% jump in Rite Aid is a symptom of the speculation going on in low priced stocks right now. We know we are selling to early but we have already had the moves in the stocks we were looking for at year end.

8:35am and stocks have opened higher with bonds lower. Jobless claims were down to 365,000 and the economic numbers this morning were good. Consumer spending rose 0.4% while incomes rose 0.1%. Is that increased spending/income coming from refinancing or savings?

10:30am and the DJIA is up 217 points. We sold JDSU at $3.25 for a 50% to 100% gain and also reduced some larger positions in GMH by selling shares at $10.76 fro a $2 per share profit. We are happy to see the rally but we are sticking with our plan of raising cash and taking profits since we still expect a pullback before year end. We think the stocks we own will continue to outperform the major measures and give us good performance with less money at risk.

11:04pm and we bought more CTS at $7.75 for accounts. We sold Masco at $19.60 for a scratch loss in our larger accounts. We may reenter lower or higher but for now we just wanted to sell for cash. This will pay for our AOL purchase yesterday in our larger accounts. And we added UAL at $3.65 to a few more trading accounts. We think the Repubs will cave on the loan guarantee for UAL because AMR wants a guarantee too and it is a Texas company. And we all know who hails from Texas.

12:23pm and we sold the Brocade at $5.64 that we sold and bought back last week. We want to get down to one tech stock and we are more comfortable with Siebel. Again we make a scratch profit on the trade. Stocks are running higher because the economic data released today suggests the economy is recovering. We are selling the news to raise cash and we are also pleased to see many of our remaining holdings rising at twice or more the rate of the overall market. That rise will keep us even with the major measures with only one third of our money at risk.

12:43pm and bonds are suffering as the stock markets rally. When will the Fed tighten will be the question of the day next week. DJIA is up 240 points. Breadth is 3/1 positive and up volume exceeds down volume 3/1 on the NYSE and 10/1 on the NASDAQ. The salad days are back again.

"my salad days, / when I was green in judgment, cold in blood" was a term coined by William Shakespeare.

2:43pm and the grandchildren have been around this afternoon so our posts have suffered. The DJIA has been up all day with no pull back at all. We'll see what Friday brings. Even with our large cash position we had a good day and The Model Portfolio is now up over 11% for the year.

3:02pm and the DJIA closed up 254 points for the day at 8930. The S&P 500 closed above the all important 937.50 mark at 938 up 27 points. And the NASDAC jumped 44 points to finish at 1488.

And tomorrow is another day unless you are the Thanksgiving turkey.


27 November 2002 - Morning Post

6:33am and with the holiday trading there isn't much news today nor will there be on Friday. The markets sold off yesterday but with the light volume today and Friday we expect the upward bias of the markets over the last seven weeks to resume. While 8400 is a downside possibility on the DJIA before the year end rally we don't expect that kind of reaction till next week. The next Morning Post will be on Monday.

26 November 2002

7:41am and McDonald's is going to allow folks to charge their purchases on their credit cards. Soon folks will be filing bankruptcy for overeating at McDonald's. Then they can sue McDonald's for their overweight condition and with the settlement start all over again at Wendy's.

8:11am and we were just telling a friend that we are happy with our performance this past year which is the result of our buying stocks some of which we have no business owning. We are engaged in the greater fools' game and so we are quick to take our profits in the tech stocks (the greater fools stocks) we own. We know they may go higher when we sell them but the valuations on all of them including Microsoft and Cisco are still ridiculous. So we will be content to make a few dollars which in some cases is a 100% return and retreat to more conventional year end recovery stocks like Walgreen and BP Amoco and Masco. We also are pleased with our Goodyear, Wild Oats GMH type holdings.

Our uncomfortable feelings with the tech stocks has caused us to sell to soon and get scared out of issues that popped right after we sold them. But as we tell clients, we want to avoid big mistakes and hit singles not home runs.

We may let JDS Uniphase, SUNW and EMC go today if they get a pop.

8:19am and the stock futures are indicating a softer opening.

8:46am and the stock markets are lower in moderate trading.

9:23am and Consumer confidence numbers are better this month with the Expectations number 88 versus 81. New home sales were down 4.5%. Second quarter GDP was revised from up 3.4% to up 4%. And folks say we are in a recession. Numbers never lie? The DJIA is down over 100 points. Maybe this is the beginning of the pause that refreshes?

10:14am and the price target was raised on Tyco from $24 to $28 by UBS Warburg. For the life of us, we can't understand why anyone would want to own a stock with the culture of deceit that Tyco exhibited over the past few years. Moreover they are one of the patriotic companies that have incorporated offshore to avoid US taxes. We would rather own a tobacco stock. By the by, Tyco needs to sell convertible bonds next month and this upgrade should help. UBS probably isn't part of the underwriting group but we are sure the old "you scratch my back, I'll scratch yours" culture still prevails in stockbroker land.

10:25am and we took a bit of money off the table by realizing profits in Sun Micro and EMC. We sold the SUNW at $3.82 for a $1 to $1.50 per share profit and the same for the EMC sold at $6.91. That leaves us with three dicey tech stocks and if JDSU rallies back by the end of the day we will only have two, Brocade and Siebel. We are selling the Sun Micro because they are having an informational meeting tonight and we would rather be out looking on. It worked for Brocade.

11:41am and stocks have stabilized at lower levels. The selling seems to be profit taking right now but if we don't rally this afternoon the selling may intensify.

1:11pm and the markets are mired at lower levels. We are trying to decide whether this is the beginning of the pullback. We have JDSU left to sell. Hopefully we'll get a last hour rally.

2:08pm and we decided to take advantage of the sell off to buy AOL Time Warner in many accounts that don't own it at $15.60. JDSU is down about 30 cents per share so we won't be selling it today. Looks like stocks want to head lower. We sold our Fleming at $7.40 for a nice $2 per share profit.

3:02pm and the DJIA closed down 172 points at 8676. The S&P 500 lost 20 points to finish at 913 and the NASDAQ dropped 37 points to end at 1444.

And tomorrow is another day.

26 November 2002 - Morning Post

7:16am and the big news of the day is that the grandchildren are starting on their way to the farm for Thanksgiving. Also, after months of travail, the Model Portfolio is now up over 10% for the year. We don't know how long our luck will last and so we wanted to get the news out in case we head back down today. Several months ago we said we would sell everything when we reached the 10% figure but since we are 60% cash and the stocks we own aren't outrageously over priced we think we'll stay the course, for today at least.

Low priced stocks continued to gain yesterday as the general markets took a rest. The big cap stocks like PG took a breather down from $95 to $85. Pepsi had been over $45 and is now at $41. Walgreen is down from $33 to $28. The pattern in these stocks has been one of lower highs and lower lows in the rallies of the past few months and that is not a good sign for strength in the markets next year. But since we are only interested in the next 60 days we may place some money in Walgreen and Pepsi type stocks if the several day sell off we envision occurs. We think the pullback may take the DJIA back to the 8400 level before resuming the year end rally.

All these guesses have the caveat that the Iraq situation continues to only simmer not boil over. Eventually the White House and Congress will have to deal with the economy but for now they seem content to keep crying wolf and playing at war. Too bad those guys making the decisions like De Lay, and Bush and Cheney and Perle and Wolfowitz and the folks influencing decisions like Limbaugh and Imus and Kristol and Tyrrell and Buchanan were too busy back in the late 1960s and early 1970s to go to war in Viet Nam for their beliefs. They might have a different approach now. But all that is spilt milk and by the slimmest of margins and voter neglect the Chicken Hawks are leading us to war.

And that is the only event that can derail the year end rally.

25 November 2002

7:46am and the stock futures remain higher even with the Wal-Mart news. Cisco was the feature in Barron's over the weekend with a bullish case. And so this morning UBS Warburg downgrades Cisco. The WSJ is reporting that the Feds are looking at the way Computer Associates recognized revenues in the past. Seems the Feds think there might have been some shenanigans moving sales from one quarter to another to smooth earnings. Now that's a novel idea and it's good the Feds are right on top of that problem.

Tyco is going to sell $4 billion in converts in December. That's a nice round number. Roadblocks by truckers in France have slowed commerce.

10:21am and the stock markets are meandering. If today is a harbinger of the week we are going to have to find a good book to read. We added the BRCD to accounts at $5.44. We are reviewing individual accounts and adding stocks as we find warranted. GMH is up 7% on an Australian newspaper story that News Corp is going to make a bid. Lucent is rising on speculative juices and we may sell our spec position by the end of the day. A rising tide is raising all stocks today, or at least many of them. We are content to watch.

Walgreen is making new lows for the year at $28.50. We are interested but the shares are still a bit rich for our blood. Also with the way the stock is acting we presume there is a sell recommendation on the street or that the November same store sales number will be a disappointment. Around $25 per share or after December 15 we are interested.

We are going to pick up a bit more UAL in trading accounts since the airline stocks are running today.

12:10pm and we have been buying HAIN at $13.40, Carpenter Tech at $12.45, UAL at $3.80, SEBL at $8.60 and Masco at $19.25 for accounts. We think Siebel sold off today because of a reaction to their signing a consent degree with the SEC and agreeing to a $250,000 fine for Regulation FD violations. That amount of money says the violation wasn't material.

The volume today in the markets is pretty good, but it seems to be mostly program related. The DJIA is currently down 19 points but there is no real trend.

12:45pm and we are trying to buy more Masco under $19 per share. We sold the Lucent at $1.80 per share for a 30% gain in two days.

2:06pm and the DJIA is up 23 points. Breadth is positive and up volume exceeds down volume by 2/1 on NYSE and 3/1 on the NASDAQ. We were in error in the morning post when we said the stock markets had been up eight weeks in a row. They have been up seven weeks in a row. This week we are going for eight. We sold the Sony we bought several days ago for a $2 per share gain. We sold at $44.25. $45 has been a resistance level for the past six months.

3:02pm and the DJIA closed up 45 points at 8850. The S&P 500 gained 2 points to close at 932 and the NASDAQ was higher by 13 points at 1481. We didn't buy any Masco under $19.

And tomorrow is another day.

25 November 2002 - Morning Post

6:32am and cold weather has arrived in Wisconsin in time for deer hunting season and Turkey Day. The stock markets finished up for the week on Friday for the eighth week in a row since the October low. The rally has been controlled and thus sustainable and even Friday's down close after three nice up days was a good indicator that there is more on the upside.

In the very short range we would expect a one to three day pullback sometime in the next two weeks as a mini-test of the strength of the rally off the bottom. Then we believe that the stock markets will move higher through year end. Everyone seems to want this scenario to occur and while the markets don't always give what traders want, at year end the stars and psychology are usually aligned in favor of the bulls.

Many stocks are moving up out of the trading ranges they have been on for several months and this action is encouraging the bulls. We plan on staying with our overpriced but beaten down tech stocks since we are only looking for a move up into next year and these stocks have bounce written all over them. On Friday even Brocade didn't make a new low for the year as it dropped $2 from Thursday's close. Today we are going to repurchase in smaller accounts the shares we sold before Friday's drop. We have sold some stocks that have risen after we sold but that is the way it is in a rally phase. This year has been one of survival and we plan to continue our cautious approach until we see signs that convince us that the economy is on the road to recovery.

Thanksgiving week will be interesting and we will be around to participate if events warrant. Wal-Mart just announced that it sees November sales at the low end of range. The stock futures have not had time to digest that news and they are indicating a slightly higher opening. European bourses are mixed this morning with London and Germany up and France lower.

22 November 2002

6:25am and European Bourses are mostly green and Japan closed higher overnight. We learn from CNBC that Prudential Securities will not allow its analysts to speak with the media unless they are paid. Now that decision is a public relations nightmare. It must have seemed like a good idea to someone as a way to show how valuable analysts are. The time for that move was 1999 not at the bottom of a three year bear market.

The WSJ reports that airlines are going to cut fares for business travelers in an effort to win back their business. What a novel idea!

Defense spending in the next fiscal year will be $100 billion higher than it was in the last year of the Clinton administration. Ah! Who says we can't have guns and butter and a war with Saddam?

Doug Kass of www.realmoney.com introduced some interesting statistics yesterday in one of his posts. In the post he says that from 1990 to 1999 the amount of money taken out of homes for other spending purposes when the homes were refinanced amounted to about $25 billion to $50 billion a year. In the year 2000, $100 billion was taken, in 2001 the cash out amounted to $150 billion and so far this year $250 billion has been removed. Now some of that flowed into the stock markets where it evaporated but probably most of it was spent. That spending has helped to keep the slowdown from turning into a deep recession. Doug and we ask the question whether this type of money availability is nearing its end. Moreover Doug points out that in every other recession since 1970 the consumer has reduced debt not expanded it as the FED has cut interest rates. In the 2001 to 200? recession consumer debt has expanded. Where is this unprecedented debt bubble leading us? Coupled with the expansion of the federal deficit what is the outlook?

All deficit spending is not equal. And the coming planned tax cuts do nothing for the folks who would actually spend the money. Some Keynesian economic theory is needed here to trump the trickle down Laffler theory. Reagan raised taxes in 1984 and also was implicit in the deal cut by Repubs and Dems to raise the social security tax by 400% over 15 years to keep Social Security solvent. No politician wants to acknowledge that fact. And now the public has adopted the borrow and spend philosophy of the Laffler Curve. That's why we remain long term bearish.

7:29am and Brocade is trading at $5.80 down from the $7.20 price at which we sold it yesterday. We'll decide later if we will revisit that stock. We didn't want to hold ahead of earnings but the bad news is out for the next three months and we are only looking ahead one month. Siebel is also down at $8 from its close of $8.80. We didn't sell Siebel because it has no debt and we are looking for a greater pop in the stock after year end.

A flock of geese just flew overhead. We always take that as a good sign. We couldn't tell from their honking whether they were saying sell or buy but we did catch a "keep on trading" honk. Coupled with the meteor shower of Tuesday morning and the eclipse of the moon on Tuesday night there have been a lot of natural signs signifying change. What kind of change is the million dollar question?

9:10am and we are back from the barbershop and the DJIA is now higher after opening lower on profit taking. The NASDAQ is about to turn positive and the S&P is a tad higher.

We just repurchased Brocade in larger accounts at $5.40 after selling it yesterday at $7.20. A little brainpower and some luck were involved in this trade. We said yesterday that we were selling because we didn't like their debt load versus cash on hand. We are glad we were reading an incorrect balance sheet. In last night's financial release we realized that BRCD has $557 million in liquid assets versus a $550 million convertible bond issue which pays 2% and is due in five years. The conversion price is $22. BRCD actually earned money in the last quarter. The reason the stock is off is that they said revenues will be down in the first quarter. With 235 million shares outstanding, at its present price the company is selling for $1.3 billion. After subtracting net quick assets of $400 million BRCD is selling for about 1.5 times depressed revenues. At that level and with enough cash to see them through the next year, we think Brocade is a good year end speculation for a move back to $8 or more in the next two months.

We are also buying more Wild Oats around $9.85, not to sow but to own. Analysts are upgrading the grocery stores after booing for several weeks and it is only a matter of time till they get around to Wild Oats. We get more percentage bang for our buck from OATS than Albertsons.

And we are again trying UAL at $3.65 in smaller amounts in a few of our speculative accounts since UAL settled with the machinists union. Now all they have to do is get Uncle Sam to basically bet $2 billion of our tax dollars on their recovery. Isn't crony capitalism grand?

Finally we initiated a position in Masco at $19.50 for a trade in our larger or trading accounts. Masco makes Delta and Peerless faucets and Merillat and Kraftmaid cabinets. The company is selling at one times its $10 billion in yearly sales. MAS has too much debt to place in many accounts but it is on its low at $19.35 and we only want a move to $24 or $25 after year end.

10:03am and stocks are again lower. Some money is flowing back in to the blue chips as profit taking continues in the techs. Several brokerages lowered their recommendation on Cisco and Applied Materials and coupled with the blow up in Brocade, the tech buyers are pausing. Treasuries are higher in yield and lower in price over the last two days. The speculators are back trying for performance and we don't think they will go away. Also we think the bears will cover their shorts later today.

12:39pm and folks seem to be leaving early for Thanksgiving week. The big question is do traders want to go home long or short or flat tonight? We are guessing long.

1:42am and we were just looking at cost prices for an account we manage that over the years has purchased SPY, the S&P 500 Depository receipts, on a regular basis. And lo and behold on November 13, 1997 this account began buying SPY at $92.04. Five years later the SPY are selling at $94.04.

1:48pm and entering the final hour of trading the DJIA, S&P and NASDAQ are all slightly higher. Breadth and up/down volume are both slightly positive.

3:02pm and it looks like the chickens won the day. The DJIA closed down 38 points to end at 8804. The S&P 500 was off 3 points at 930 and the NASDAQ gained a fraction to close at 1468. By the way, Brocade traded 60% of its shares outstanding today with volume of 110 million shares. Siebel acted well today, after selling off below $8 per share it rallied to close higher.

For the year, the DJIA is down 12%, the S&P 500 is down 19% and the NASDAQ is down 25%.

The Model Portfolio is up 9% and is 60% cash.

And tomorrow is another day.

22 November 2002 - Morning Post

5:48am and today is the anniversary of President Kennedy's assassination. How different would the world be had he lived? We know that is a Frost's two roads question but as with the death of Robert Kennedy and Martin Luther King we can't help asking it.

The stock futures are a bit lower this morning which is to be expected given yesterday's run up. We did a bit of selling yesterday to lock in gains. We missed doing that several weeks ago and rued our buying instead of selling on the Wednesday after the election. At this time of year everyone talks about the year end rally and wants to jump the gun. With the rise in the trading power of mutual funds in the stock market over the past ten years we think two distinct end of year rally periods have emerged. The first is the period in early November after the mutual fund year end of October 31, and the second is the last two weeks of the year. In between those times in many years we do have a lull.

Whether or not we have a lull in early December this year we are happy to have taken some money off the table. We have been peripatetic in our trading these last two months and that is because we remain short term bullish and long term bearish. The tech stocks we have been trading are still overpriced on a value basis. But since folks haven't been totally cured of the mania of the late 1990s the tech stocks still bounce on any signs of life in the marketplace. And that's why we trade them.

We think that stocks will sell of this morning but we think the bulls are in charge today and we expect the markets to close strongly higher. Yesterday we heard a talking head talking about inflation and the FED needing to raise interest rates next year to contain it. What a difference a couple hundred points up -or down- makes in the thinking of traders.

21 November 2002

7:38am and initial jobless claims fell 25,000 to 375,000. That's good news. But last weeks numbers were revised upward from 388,000 to 401,000 so the good news may be ephemeral.

7:48am and there is a rumor that Lucent and General Dynamics are in talks to merge. It's a rumor but should give a good pop to the cheap techs at least early on.

8:40am and the stock markets opened higher. No surprise there. Now we have to see how it all plays out. We are trying to sell The Gap again today and we are going to let our Hewlett Packard go. Anchovies all, you know. We bought Lucent at $1.34 for our speculative accounts on the rumor, only for our speculative accounts.

9:12am and the NASDAQ is through the magic 1425 number at 1442. Now it has to hold for the day and the DJIA and S&P have to move strongly higher too. At the moment the DJIA and S&P are stuck and there seems to be a battle between the bulls and bears. We sold our HPQ for a $1.75 profit on the news at $18.52. We were a little greedy with the GPS and missed selling it on the opening push. We now have it in to sell at $14.20. It's funny but with the new decimal system of pennies, five cents is a big number when in the old days the spread was twelve and one half cents on every trade.

10:17am and we sold Brocade at $7.20 per share up 10% today and with a scratch profit for most accounts although a few including my grandchildren's are showing a 20 cents per share loss. BRCD announces earnings tonight and they may be gangbusters. But when the stock sold off two days ago we had no inclination to buy more which is our indication that we don't have the confidence we need to own it. We also want to raise cash on this rally. We were able to sell the Gap at $14.20.

We are kicking ourselves for missing buying the Sprint PCS Wireless when it sold down to $4 per share Tuesday. We had a bid in at $3.80 and it never went that low. We may have another chance to add to PCS to accounts that don't own it in the next pullback.

10:27am and we have had luck trading TLAB so we are offering stock at $8.70 which is a 50 cents to $1 per share profit over a few days. As with several weeks ago when we sold the TLAB shares at this level, TLAB is not participating in today's big move and so we are taking that as a sell signal.

10:32am and "the old stockbroker" always told us that he thought there was a group of 100 or so men who run the country. He always voted Republican but his hunch was that these hundred families were like the old monarchies of Europe and that while Republicans and Democrats came and went those 100 folks maintained their power. This unusual thought, for him at least, that he shared with us came to mind today with the appointment of Lou Gerstner to be Chairman of The Carlyle Group. The Carlyle Group represents the normalization of "the old stockbroker's" theory. The Carlyle Group was created in the late 1980s when some folks from the Reagan Administration created a fund for investing. There are no public records of the size of the fund or who the investors or principals are. Gerstner was CEO of RJR Nabisco, CEO of IBM and now he joins the Great Pooh-Bahs. Among the folks associated or invested with the Carlyle Group that are known are Frank Carlucci, Bush #41, John Majors, and the Bin Ladin Clan from Saudi Arabia were and still may be investors. Imagine if President Clinton's family had been associated with such a group. Tom DeLay would have already impeached and shot him.

12:01pm and we just finished selling a bunch of stocks. We know we have been active the last two months but the performance has justified the activity. We don't believe this rally today is the end of the bear or even the beginning of the year end rally. We think it is a rally in a bear market and we still look for a December swoon. With that thought in mind we wanted to raise some cash and book some profits. In addition to selling GPS, TLAB, and BRCD we sold AMD which we just bought two days ago for a scratch profit or even. Our theme in the selling we are doing today is to sell those tech stocks with debt and keep the ones with no or little debt. After we bought AMD it swooned on us and we didn't have the inclination to buy more so it became a sell for cash candidate. We also sold the EMC we repurchased in larger accounts several days ago at $6.70. We made about 20 cents on the trade which is better than a loss and we are keeping the EMC we have in many smaller and non trading accounts since EMC has negligible debt. We sold our entire position in PCS for a nice profit. It may go higher as did AWE but we are happy for the profit and we'll be interested if revisits under $4 per share. We sold Kyocera at $61.12 for a $4 per share gain. Finally, we sold Veeco for a $2 plus per share gain at $12.50. And now we are going to get some brunch.

2:06pm and with less than an hour of trading left the DJIA is up over 200 points, the S&P is up 19 points and the NASDAQ is up 45 points. Breadth is 2/1 positive and up volume exceeds down volume by 4/1 on the NYSE and 8/1 on the NASDAQ. The bears are about to make their sell/stand but the markets look too strong for them.

GE is up $2 per share today after reserving billions and announcing a lower earnings forecast for the next year. That's why we are doing some selling.

3:02pm and the DJIA closed up 225 points at 8847. The NADSAQ gained 48 points to close at 1468 and the S&P 500 was up 19 points at 933.

And tomorrow is another day.

21 November 2002 - Morning Post

We are going to try to have a morning post most days by 7:45am and we are starting today. We will add more thoughts after the close.

6:44am and GE is going to take a $1.2 billion after tax charge to increase reserves at Employers Reinsurance. Oops, does that mean that CEO Extraordinary Jack Welch under reserved to help make numbers. GE Industrial is making billion dollar capital contributions to Employers RE and GE Capital. In August of 2001 we predicted the need to clean up after Jack left. We told you so as they say. The folks at CNBC should change the name to GECNBC with all the talking and supporting they do of the stock. No matter it still is half the price it was when Jack left.

Contrasted with that negative news we have Carli Fiorina, the Queen of Techland and CEO of Hewlett Packard announcing last night that HWP exceeded expectations. Can that be true? Can a woman really run a DJIA company? The talking heads are now dissecting the numbers. Off with the volume.

Irony aside, the HWP news has given a pump to tech stocks this morning and we will have to see how it all plays out. We think the news is a short term positive but longer term we still await action on the economic front that will turn us bullish. We have seen some suggestions that tax cuts like raising the child credit from $600 to $1000 next year and elimination of marriage penalty will be accelerated by slowing the drop in the top rate. Those would be a start but we aren't holding our breathe. Another $1000 to every American would be a real stimulus. The White House is continuing to keep Bush in election gear since that is a safer place than trying to deal with the economy. We don't think praying is going to solve the problems. But Carl Rove is a smart guy and to get Bush reelected he knows he has to jump start the economy. Maybe reality will trump payback?

European Bourses are higher on the HWP news and Asia including Japan also closed higher. That's given a firmer tone to our markets. Today will be a real test for the bulls. They have to get the NASDAQ above 1425 and keep it there. We don't think they have the firepower to get the S&P 500 above 950 but if they do it is Katie bar the door.

20 November 2002

7:35am and we are in the office after getting the horses in the barn for the farrier. Housing starts were down 11% versus a consensus guess of 7%. New housing permits were up 2% versus a consensus guess of down 2%. The stock futures are suggesting a day similar to yesterday with a weak opening.

There isn't a lot of market making news and it is probably going to take some positive or negative Iraq news to move these markets up or down.

7:59am and Maria the Mouth is predicting a higher market. The futures don't show that and so we'll stick with our prediction. She is saying negative stuff about Hewlett. Funny how the talking heads can influence the short term movements of stocks. We are waiting on the HPQ till after earnings unless HPQ tanks during the day.

PCS sold off yesterday and so we are going to add Sprint Wireless to accounts that don't own it today if it continues lower. News on Siebel Systems that they are being sued for mispricing options is pressuring the stock so we are going to buy the stock at $7.50 for folks who don't own it. SEBL has $2 billion in cash on hand which amounts to $4 per share.

9:21am and stocks are slightly higher after a down opening. Home Depot is off on all the negative publicity of the last day. It is now a value stock so we guess growth stock investors have to sell it.

One fact we find of interest is that one of the reasons given for the stock market malaise is terrorism. Actually it is the talk of terrorism not the actual occurrence of it that is the depressant. Terrorism is going to occur. Hopefully the powers that be have a better grasp on the risks now than they did before. But stocks will adjust as they have to war and pestilence and even Democrat Presidents.

11:33am and the horses with feet trimmed are happily grazing the stubble in the fields. Stocks are having their own celebration with the DJIA up over 100 points. We are trying to sell The Gap at $14.20. We decided we would rather own Home Depot at 15 times earnings than GPS at 25 times. Also, we have a 50% gain in most accounts. Pigs, etc., and even the Gapster is an anchovy for us these days.

12:44pm and the DJIA is up 120 points. Maria was right. The NASDAQ is back above 1400 and flirting with the 1425 break out to the upside number that all the techies are watching. Hewlett is up in front of earnings which means it will sell off when earnings arrive tonight. Breadth is 2/1 positive on the NYSE and NASDAQ and up volume exceeds down volume by 2/1 on the NYSE and 4/1 on the NASDAQ.

1:02pm and the speculators are back with a vengeance. We saw Qwest up $1 in early trading and were ruing our failure to wait a few days to sell. Then we saw Broadwing up 50 cents per share. We sold yesterday from the few aggressive accounts where we held it. We didn't mention owning BRW because we didn't want any readers buying it. But the jump in these two stocks demonstrates that the speculative juices are running. Hopefully they'll keep running the cheapies through Friday so Brocade will get a pop after earnings are reported tomorrow and we can sell with a bit of a profit.

1:19pm and we sold some WorldCom at 20 cents today for a client who needed a loss. Jim Cramer of www.thestreet.com made the point today that the 100 million shares of WCOM that trade each day are the best argument for not privatizing Social Security. These WCOM shares are worthless. Yet there are folks buying and selling these shares every day to the tune of $20 million. Eventually the last musical chair folks will lose all the money they have in this stock. Unfortunately there are many folks who don't realize that rule number one of the stock markets is caveat emptor.

1:39pm and CNBC is comparing the wartime economy of WW II to the present wartime economy. Hey guys and gals, the election is over and the Repubs won. There is no reason to carry on the "we are at war" charade any more. Terrorism is going to be with us forever as it always has been. The only difference is that the recent terrorism was created by "foreigners" whereas Oklahoma City and Shays Rebellion and Bloody Kansas and the Civil War and Wounded Knee and on and on were the home grown variety. We know endless war talk helps the ratings of talk radio and mindless TV and serves a useful political purpose but...

2:59pm and the bears tried to sell stocks off in the final hour but failed. We have to leave a bit early. At this time the DJIA is up 140 points at 8615. The S&P 500 is up 16 points at 913 and the NASDAQ is up 44 points at 1418. Breadth is positive 2/1 and up volume exceeds down volume 2/1 on the NYSE and 4/1 on the NASDAQ. We sold some but not all of The Gap at $14.20.

And tomorrow is another day.

19 November 2002

7:27am and we rose early today to watch the comets coruscate in the eastern sky. The moon was so bright that we think we missed half the comets. Nonetheless it was a beautiful night with an almost full moon and flashes every few seconds all over the eastern sky.

Back in the world of commerce, this morning looks to have a lower opening in store for stocks with the European Bourses all lower.

Several analysts are reporting that General Electric is going to take a $1 to $2 billion charge for insurance reserves. GE also needs to have some money to manage future earnings. What a joke.

Consumer Price Index up 0.3%, core rate up 0.2%. No news.

Home Depot reported in line earnings but same store sales were down 2%. Mr. Market didn't like the sales number and so HD will open lower. We are interested around the $25 level which is where we traded it from last month.

As with yesterday we are continuing to pick away at stocks for individual accounts without making any big bets.

8:19am and AMD is going to sell convertible bonds today so the stock will drop as the folks who buy the converts short common stock to hedge their loss potential. At $6 a share the exercise seems ridiculous but old habits die slowly on Wall Street. Two years ago, shorting a stock at $40 per share when a company issued convertible bonds worked since most of the stocks dropped in the subsequent bear market and the drop in the share price to say $10 hedged the drop in the price of the convertible bond. But it is goofy to put that same kind of hedge on with the share price at $6. If AMD bond buyers really think the stock is going to $2 per share or bankrupt they should pass on the bonds, not short the stock. Bur the price drop may provide a buying opportunity.

9:29am and the DJIA sold off about 75 points at the opening. The NASDAQ was off about 15 points. Home Depot dropped to $25 and we bought shares at $24.79 equal to the Sears shares we sold last week. At $25 HD sells at 15 times earnings which is about as low as it gets historically. We think it is a good trade from these levels. We also repurchased the EMC in trading accounts where we sold it last week. We bought at $6.35 which is close to where we sold it. We may be a bit anxious on this stock but we wanted to get back in. We are also buying AMD under $6 per share and also odds and ends for various accounts.

11:55am and the stock markets are range bound in desultory trading.

2:01pm and the Homeland Security Bill has been passed and so we all will sleep safely tonight. The stock markets continue to vacillate and Treasury bonds are a bit stronger today. We completed buying the AMD at $5.85. There isn't much happening today and the final hour may give an indication of whether the bears or bulls have more ammo.

3:02pm and many of our tech stocks sold off in the last hour. Wild Oats gained though. The DJIA lost 12 points to close at 8475. The S&P 500 was down 4 points and closed at 896. The NASDAQ gave up 20 points to close at 1374. Breadth was negative and down volume exceeded up volume 2.5/1 on the NASDAQ and 1.5/1 on the NYSE.

And tomorrow is another day.

18 November 2002

7:12am and after a weekend away from the office and walking in the woods for two days, we are looking forward to an interesting week in the stock markets. This morning the stock futures are higher following the lead of European bourses. Japan was lower overnight but what else is new. Hopefully our economy does not follow that track.

Wal-Mart reported this morning that November same store sales are going to be at the low end of the 2% to 4% range. And Federated Department Stores has said that same store sales will be down 2% to 4%. The Citigroup, Sandy Weil, Jack Grubman, Nursery School scandal has taken on the proportions of the Martha Stewart imbroglio. The press loves the story but the reality is that Grubman is toast and Weil winds up with a tarnished reputation but with job and billions intact.

We are going to be reviewing accounts this week and adding a few stocks. We have our eye on HAIN, AOL, and HPQ. Earnings for HPQ are Wednesday so we will wait for those earnings before buying.

8:44am and the markets are higher with techs leading the way. There has been a lot of trading and up and down movement but over the last month the major measures have risen very little. The only real gainers have been tech stocks and that probably is because they have been so heavily shorted.

Several commentators have mentioned that Schering Plough might be a good buy now that the CEO who loused things up is gone. We are looking but with the Enron experience we wonder whether a CEO leaving is a buy signal or a sell signal.

12:08pm and we have been slow to post today because not much is happening. The DJIA has been up and down 50 points without much conviction. Almost seems like the beginning of Thanksgiving week. We suppose it will become more interesting as the week progresses. We are just adding stocks we already own to accounts and don't want to do much here.

12:50pm and breadth is on the NYSE and NASDAQ with up volume exceeding down volume 2/1 on the NYSE and 3/1 on the NASDAQ.

1:41pm and under the Homeland Security Act the White House is going about the process of removing 850,000 folks from the US Government payroll and replacing them with private contractor folks who presumably will make less money. This may help the deficit situation although we are willing to bet it won't. In times of recession the government usually seeks to help create high paying jobs. The economic policy confusion of the current Congress and White House is the reason we think the present rally is only an over year end trading occurrence and is not signaling the beginning of a new era of prosperity and job creation.

2:51pm and we bought AOL in a bunch of accounts at $15.25. That's higher than where we last sold it but the markets are in different condition now and we want to take advantage of year end. We also picked up Sony Group and Kyocera in larger accounts at $42 and $57.25 respectively. We have made money in both these stocks in the past and they are down significantly from their highs.

3:02pm and the markets turned mixed at the close. The DJIA lost 92 points to close at 8486 and the S&P 500 was down 9 points at 900. Finally, the NASDAQ closed at 1393 down 17 points.

And tomorrow is another day.

15 November 2002

7:10am and as we begin the day the stock futures indicate a slightly higher opening. European bourses are positive and up about 1%. Where are the markets going? For fun we though we would present a paragraph on this subject from Jeff Cooper a technical analyst on the website www.realmoney.com. Jeff is a follower of a fellow named Gann who created a technical means of trading the markets which has to do with something called the Gann Square of 90. We don't profess to understand this theory but the terms used are colorful. By the way Jeff has been right on for the past six months.

This morning Jeff wrote: "Thursday, I stated that the S&P was poised for a Slingshot buy signal on any move above 893. Well, 893 was recaptured in the opening minutes of trade on Thursday. In the process, the S&P catapulted back above its 20-day moving average, also at 893, revalidating our Holy Grail Buy Signal. Remember that the importance of S&P 894 is highlighted by the fact that it is also 90 degrees down (in the Square of Nine Chart) from the important 924 resistance". And there you have it. Jeff is bullish for now.

JP Morgan has downgraded General Electric to underweight. One would think that the drop in the share price from $50 to $25 has gone a long way toward doing that in most portfolios. How the mighty have fallen.

We learn this morning that the US Army has dismissed 6 interpreters fluent in Arabic because they are gay. And no government agency will hire them. Guess the Great War against evildoers who also hate gay folks has to take a back seat to conservative and fundamentalist prejudice.

We would like to expand on our mention yesterday of companies filing Chapter 11 bankruptcy to solve their financial problems of too much debt and too little income. As the WorldCom bankruptcy is demonstrating the courts and financial types including the major investment houses that recommended WCOM to investors until the bitter end have no interest in protecting the shareholders who were theoretically the owners of the company. The common shareholders are wiped out and the bondholders will, along with management become the new shareholders of the reconstituted WCOM. Jim Cramer on his website www.thestreet.com has railed against the unfairness of allowing WCOM to emerge from bankruptcy since that will give them a competitive advantage over all the other telecoms that are struggling to pay their debt and preserve their shareholders ownership. That's because WCOM debt will have been significantly reduced nobody on Wall Street or in Washington want to broach this topic since they were all part of the problem. And the WorldCom and US AIR bankruptcies are placing pressure on all the other telecom and airline stocks with large debt to think about screwing their shareholders and seeking Chapter 11 protections. Then when the companies emerge from bankruptcy the boards of directors will grant stock options in the new companies to executives. So the only loser is the shareholder. That is the reason for our quick exit from the UAL trade yesterday since UAL is using bankruptcy as a bargaining chip with the machinists. We think the machinists are going to stay tough on wage give backs that they just received after five years of negotiating. And the bankruptcy option is what causes us sleepless nights with Qwest and we are probably going to sell the position and let others take the risk. We will be comfortable with a stock like Ford if we ever decide to buy it because the whole Ford family fortune is tied up in Ford common stock. Most of the tech stocks we own have little debt and large cash positions and relatively high actual ownership of common stock by company officers.

7:30am and the Producer Price Index was up 1.1% in October with the core rate up 0.5%. That number represents prices to producers. On the news Treasuries are selling off and the stock futures have given up some gains. Dell announced results last night that haven't wowed the street, and in pre-opening trading DELL is lower. Merrill has cut recommendations on six chip stocks of which one is Intel and so it is trading lower. We don't know whether the cuts are justified or not, we jus wonder why anyone follow these folks who have been so wrong for so long. That these folks still have the power to move markets is a sad reminder of the lack of original thinking among stock brokers, pension funds, mutual funds and bank trust departments.

9:08am and stocks are off slightly. We are going to sell our Qwest position at a slight loss but an overall profit since September. After yesterday's experience with UAL we are leery because the company still has not issued clean financials and we have no idea what lurks underneath the surface. The SEC continues to investigate and we would rather give up any future gain for peace of mind. There isn't much difference for perfidy between Joe Nacchio and the folks who collapsed WorldCom. We know we have been flipping this stock around in accounts but these are changing markets and challenging times and until we are proven wrong we would rather error on the side of caution and quick decisions. It all reduced to the fact that with Qwest we started to worry about what we could lose versus what kind of gain we wanted and we decided the risk was not worth the reward.

As we completed selling the Qwest the following item appeared on the WSJ website: "Qwest Communications said it won't file its third-quarter report on time because it can't determine the impact that a current analysis of operations and pending financial restatements will have on results".

10:02am and the DJIA is down 54 points. Michael Capellas the new CEO for WorldCom in live on CNBC waxing eloquently about the opportunities in WorldCom. Nice options for Mike and a great salary and no debt. Another Michael, Michael Powell, the nepotic Chairman of the FCC on the strength of his father's name, is allowing this travesty of WorldCom continuing to exist in the name of Capitalism. In true capitalism companies that go broke, stay broke and go away. What we are experiencing in this economic crisis is "Who You Know" neo-capitalism that will eventually lead to the ruination of many other companies that played by the rules.

11:09am and today is unexciting. Stocks remain lower in moderate trading. The downgrade of GE is probably a bit of a drag coupled with the muted news from Dell last night. Since today is an expiration day we may get some fireworks in the last hour or two.

11:57am and several clients have called on their receipt of forms to complete on the Bankers Trust litigation. We reviewed our records and we think that all our customers made a profit on our trading in that stock in 1998. So we have no beef with BT. But even if we lost money we wouldn't file. That's because as a matter of policy don't file in these cases. We think 99% of the law suits that arise from the drop in the price of a stock are without merit and we wish the companies would not settle them. If we don't like what a company has done we sell the company. We are waiting for new ground to be broken when a lawyer files a lawsuit on behalf of short sellers who loose money because a stock rises on better than expected news.

2:15pm and the markets are rallying. We bought Seibel at $7.83 in accounts where we sold Sears two days ago. We also have been slowly adding Hain Celestial under $13 per share and CTS Corp under $6.75 to accounts.

3:02pm and the DJIA closed up 36 points at 8579. The S&P 500 gained 5 points to close at 909 and the NASDAQ lost a fraction to close at 1410.

For the year the Model Portfolio is up 6%. The DJIA is down 14%, the S&P 500 is off 21% and the NASDAQ remains off 27%. We will post the updated Model Portfolio over the weekend.

And tomorrow is another day.

14 November 2002

7:39am and this morning's news contains info that Sandy Weill, the CEO of Citigroup, helped get analyst Jack Grubman's children get into a fancy preschool in Manhattan. The talking heads on CNBC are appalled that anyone would question the motives of Weill. What's most interesting is that the allegation is that this help was part of the reason Grubman recommended AT&T. We don't pooh pooh the info because we have been around long enough to know that fortunes turn on such seemingly insignificant actions. To confirm this just read the story of Long Term Capital Management where fortunes were lost because lenders wanted to play a certain golf course in Ireland.

By the way, whatever happened to Enron and the California energy pricing investigation?

On an historical note we learn this morning that Household International which was known as Household Finance in the good old days of the last century is going to be acquire by HSBC Holdings in a $14 billion all stock deal at $30.04 per share. HSBC used to be known as the Hong Kong and Shanghai Banking Corp which back in the late 1970s acquired Marine Midland Banks. We are reiterating this history because Marine Midland and Household Finance were two stocks that were favorites of the "old stockbroker in the sky". We follow and trade the same stocks over the years and in doing so they become like family to us. Actually for the stocks that make us money we think we might have a greater affinity with them than the CEOs who have come and gone over the years.

Speaking of CEOs leaving we learn today of the departure of the CEO of Schering Plough. We guess the subpoenas served yesterday were the final straw.

Honeywell announced a $1.7 billion pension liability last night and the stock is going to open $3 per share lower. This event reinforces our rule of selling trades when they don't work out. A $2 loss could have been a $5 per share loss.

Speaking of losses, several clients have asked about our plans for Sears. We are always amazed by how low stocks go when the street changes its opinion. We don't like the loss we have in Sears but we do like the stock. We are waiting to buy more if it goes into the teens. In taxable accounts we have till the end of the month to double up to set up a short term tax loss by year end. When we bought Sears we bought to own for a while and not day trade. We were just too early but not as early as the folks who paid $50 per share several months ago. (See below to see how we can change our minds within a day. Don't know whether that's good or bad but over the last five years it has worked for us.).

Japan went to new lows and Europe is up. Retail sales this morning were up 0.7%. Treasuries are dropping in light volume which may just be profit taking.

8:17am and stocks will open a tad higher today. Applied Materials closed at $14.70 last night. After the close it announced less that expected results but said it would be profitable in the next quarter and this morning it is opening higher. That's a good sign for the bulls and not good for the bears.

8:59am and the stock markets popped higher at the opening with the DJIA up over 100 points. We are of the opinion that we won't have a sustained rally till the War issue is resolved. With that said we decided to sell the Sears position at a $5 per share loss when it popped up $1 per share this morning. That price is $3 above yesterday's low and we think that Sears will become a source of cash over the next month and that we will have a chance to repurchase at lower prices before year end. The losses in the credit card operations create an imbroglio for us and we can't get a handle on that part of Sears. The losses on those operations are fertile ground for bears to wander and feast on rumors. If Sears has lower same store sales in December as it did in November the bears will continue to short the stock and it could reach the teens. As a long term investment Sears is definitely attractive at these prices but we have made all our money over the past four years as short term investors and for now we should stick with that philosophy. This is a tough loss to take but the fact that all our other stocks are working for us today mitigates the pain.

11:41am and stocks remain higher with bonds lower. We sold our position in SPDR Financials at $22.52 for a 30 cents per share profit or loss depending. We also sold EMC in our large accounts a $6.36 for an average $1 per share profit. We are maintaining the position in many accounts but the stocks has had a $1 per share range every two days for the past week and so we are trying to trade that range in our large accounts where the trades realize $1000 plus gains per trade. We also are selling half our holdings in AMR in our large accounts. We have a $2 to $3 per share gain that we have decided to try and realize, again with the thought of buying back lower. We may be too cute on this one but we are willing to take our chances. We are also going to speculate on UAL in the accounts where we sold AMR by buying a like amount of UAL at around $3.60 per share. It looks like they will stay solvent through year end and we think the stock has 50% to 100% short term gain potential. We are making this trade in our trading accounts only.

2:06pm and as we were enjoying lunch we saw a piece crossing the tape that UAL was seeking debtor in possession financing in case they file bankruptcy. Oops, our very smart switch mentioned above just took on very dumb proportions. We immediately sold the UAL at $2.90 for a lousy two hour 70 cents per share loss, and we sold the rest of our AMR holdings because if UAL files bankruptcy AMR may have to do the same thing to stay competitive. We made a nice $2 plus profit on the sale of AMR at $6.91 so all was not lost or a loss. And as our our late partner Don Yarling used to say, airline stocks are the biggest anchovies of all.

We also picked up a few share of Veeco Instruments at $10 for a trade, and added more Hain Celestial to accounts at $12.90. We bought more CTS at $6.55 and Fleming at $5.08 for a few trading accounts.

3:02pm and the DJIA closed on its high for the day at 8542 up 143 points. The S&P 500 gained 21 points to finish at 904 and the NASDAQ jumped 50 points to 1411.

And tomorrow is another day.

13 November 2002

6:14am and the stock futures are down. In the last hour yesterday the tobacco and spirits stocks all tanked. At first we thought it was because - oh well we won't go there-but it turned out to be because MO said that revenue forecasts were too rosy. Also folks are starting to talk about deflation and no pricing power. Finally, these stocks were the last refuge and it is logical that they should take a hit too. In after hours Nordstrom's dropped $3 per share when they said sales were under plan. We are getting close to a bottom or a war when they bomb stocks like they are doing these days at the first hint of bad news.

We are happy with our cash position and our speculative stock holdings. Sears is taking gas but it is now at a 4% yield and 6 times earnings. It shouldn't go lower but...

The European bourses are all lower by over 2%. That isn't going to help our markets. And Guru Greenspan appears before Congress today and will be questioned about the economy and other matters. Eliminating the double taxation of dividends is about to become the cornerstone of economic policy.

The Citigroup/AT&T soap opera continues. It isn't worth repeating except that the CNBC talking heads choose to believe the CEO rather than the analyst. Big Surprise.

7:07am and Merrill has raised ratings on Kraft which was down yesterday and BUD has reaffirmed guidance.

7:53am and Goldman Sachs cuts Sears to under perform. Sears is now trading at $22 down from $62 in three months and Goldman sees fit to change its rating from in line to under perform.

10:31am and we are back from taking the dogs to the groomers. Saddam has accepted UN inspectors for now and stocks have rallied. For how long we don't know. Sears was off a couple of dollars in the early going but has bounced back a bit. The speculative stocks are higher. We sold the rest of the Alliant we own and now will concentrate on the XLU.

12:09pm and stocks are backing down. Sears remains $2 lower with a 4% yield and selling at 6 times earnings. Analysts are again ga ga over Wal-Mart which is priced at 33 times earnings with a 0.5% yield. Now we know WMT is going to be the only store in the world soon but with $45 billion in sales we think Sears will be around for a while. The Wall Street lemmings are going over the cliff on Sears.

1:39pm and the stock markets are turning lower with only the NASDAQ in positive territory. Breadth is slightly negative on the NYSE and slightly positive on the NASDAQ. Same goes for the volume figures. We'll see what the final hour brings

3:02pm and the DJIA managed to recover to gain 12 points for the day and close at 8399. The S&P 500 lost a fraction to close at 882 and the NASDAQ was up 11 points at 1361. At the close we bought Wild Oats at $8.40 for accounts where we had sold Alliant over the past two days.

And tomorrow is another day.

12 November 2002

6:50am and the Iraqi parliament just said No! Talking heads are telling us it doesn't really mean no.

We are not war mongers as readers well know. But we are tired of both sides yanking our chain. So let's let the warriors get it on and get it over so we can deal with some real problems like starving children and lack of medicines and over population and education. It's just too easy to let the war talk monopolize our time. We want folks to see that after war talk there is no agenda or ideas to deal with our economic or social problems except eliminating the double taxation of dividends and making the estate tax repeal permanent...

The stock markets closed right on support last night and look to be opening a bit higher this morning. Since the bankers are back to work today we'll find out how the world looks with their particular genius mixed in.

The sales we made yesterday raised sufficient cash. We are sticking with the volatile low priced speculative stocks because when the year end bang comes we expect twice as much or more upside volatility as we experienced last week. That up movement which rapidly evaporated gave an inkling of the possibilities when the war issue is resolved and the first inkling economic recovery surfaces. Till then we expect to back and fill.

Hain Celestial is making new lows under $13 and so we are going to be picking at it.

Wild Oats has moved lower from our purchase price. It had the same kind of price movement two years ago and eventually ended its fall at $5 per share. New management has a much better handle on what is happening in the marketplace this time around. Last time same store sales were falling month after month on a failed expansion program. This time same store sales are rising on a month over month basis even though we are in difficult economic times. We think the selling is coming from the new institutional shareholders who purchased stock on the public offering several months ago after the road show and don't have familiarity with the stock and it's almost annual year end swoon. And so we plan on continuing our accumulation.

7:42am and we read that snowmobiles will be allowed in Yellowstone and Grand Teton National Parks. And so the change begins.

8:37am and our screen is a sea of green as stocks open higher on no news. There is a theory that holiday moves are counter to the real markets direction. We have always been of the opinion that holidays give the true direction for the markets because only folks who really want to do something do. Whatever, we like the higher today even with our selling of yesterday because we want to make some dollars back from last week.

10:46am and the DJIA is up over 100 points. Breadth is 2/1 positive and up volume exceeds down volume by 10/1 on the NASDAQ and 3/1 on the NYSE. The NASDAQ up/down volume is indicative of the small speculative tech stocks moving higher. We sold our Honeywell trading position for a $1.80 per share loss and we are selling more of the Alliant at a $2 to $3 per share loss. We bought Goodyear at $6.75 with part of the proceeds from the Honeywell.

1:18pm and the DJIA remains 100 points higher. Tech stocks are bouncing again. We bought Siebel at $7.75 and Tellabs at $7.10 in accounts where we are taking our loss on Alliant. We also are buying more Qwest at around $3.82 for many accounts. We are bidding on Wild Oats at under $9 per share to add to accounts and we picked up some CTS at $6.25. We can't tell whether this rally is real or not but we are enjoying it nonetheless.

3:02pm and stocks gave up a lot of their gains in the final hour. Guess the rally was not real. In the final hour Phillip Morris lost $5 per share on news that sales growth was under pressure. Other food stocks like Kraft and Bud also dropped.

The DJIA did manage to close 27 points higher at 8386. The S&P 500 was up 7 points at 882 and the NASDAQ gained 30 points to close at 1349.

And tomorrow is another day.

11 November 2002

7:16am and on a cloudy moisty morning the temperature has turned lower by about 20 degrees and so the wood fire in the stove in our office is welcome. Stock futures are indicating a lower opening and with the Veterans Day holiday bank closings we would expect low volume and high volatility.

War talk permeates the air and we may wind up being wrong on our no war projection. Even so, we are on the tail end of a three year rather severe market correction. The time of year and past three year downturn creates a risk/reward ratio that is favorable in our view. That doesn't mean that our holdings and the markets won't be volatile, but we plan on accepting the volatility for the potential reward. Our assumption of risk only applies to the next few months and can change at any time

We spent the weekend questioning our failure to sell the news on Wednesday after the election. We sold a few issues but we continued to buy because we were "hot". But Wednesday turned out not to be the day to buy and so we have suffered a bit on a short term basis. The main reason we didn't sell was that we think the speculative stocks we own will trade much higher over the next few months. The big cap stocks are in the portfolio for 20% gains while the speculative stocks are there for 100% gains. We plan on continuing acquire utility stock exposure by buying the SPDR Utility Trust (XLU). XLU owns a package of utility companies, some of which are under pressure and we think that the XLU is a safer way to play the utility stock sell off because of the diversification offered. With the DJIA Utility average of 50% from a too high high, we feel there is a 20% gain potential over the next year. And the XLU has a dividend yield of close to 5%.

The SPDR Financials Trust offers the same diversification in a package of financial stocks and we are looking for the same potential gain. The yield is minimal.

9:19am and stocks are a bit weaker. We are selling our Albertsons for a $2 per share loss at $20. We are also taking a $2 per share trading loss on JP Morgan. We are selling Schering Plough for 75 cents per share gain and we are selling Corning Glass for a scratch profit. We are selling the Corning because we want to repurchase a portion of the Qwest we sold last week. The judge ruled in Qwest's favor. We think Qwest and Sprint PCS Wireless have more bang for the buck than Corning. We hope to sell our trading position in Honeywell by day's end. We are raising some cash which is what we should have done last Wednesday. As we said earlier we are inclined to maintain our speculative positions and raise cash from our big cap stocks. The losses on the big caps we are selling today are in offset by the gains we made several weeks ago in BP, G, COP and PNC. Had we followed our game plan last week we would have sold these stocks even and looked smarter. But even though we missed an opportunity we are following through today.

10:09am and we were able to repurchase a part of the Q we sold at $3.88. We are also buying EMC at $5.40 for accounts where we sold Albertsons. We sold the Albertsons with the idea of buying it or Safeway back in mid December, if the spirit moves us. Every analyst has Wal-Mart putting these companies out of business because Wal-Mart is in the grocery business. We don't think that is the case but these stocks have become a source of funds for institutions and will probably be under pressure through year-end.

We sold Baxter at $26.20 for 70 cents per share loss. We have no great love for Baxter and we would just as soon deploy the cash in other issues over the next month. We bought BAX as part of our big cap trading package last month.

12:03pm and the DJIA is down 1.5% as is the S&P 500. The NASDAQ is off 2%. Volume is light

1:24pm and a fellow is on CNBC extolling the wonders of single stock futures. Lower margin requirements, shorting on downticks and other terrible ideas are all part of the package.

2:29pm and now deflation along with war is the worry on CNBC and we are making new lows with the DJIA down 175 points.

2:45pm and we are going to sell the individual utility stocks we own. We don't have the stomach for the up and down daily movements in these issues. And so we sold TXU at $14.75 for a scratch profit. We sold Xcel Energy at $10.10 for 75 cents per share loss. And we sold Duke Energy for a $1 per share loss. We are going to concentrate on the SPDR Utility Trust which owns a bunch of different utility stocks. We want to catch the overall move in utility stocks and capture the dividend yield which we do with the XLU. After owning the individual issues for a few weeks we realize we aren't comfortable with the volatility. We are trying to work out of the Alliant Energy. We sold some in taxable accounts for a $3 per share loss but we will probably hold what we currently own for a while more and hope for a rally.

3:02pm and the DJIA closed down 178 points at 8358. The S&P 500 lost 18 points to close at 876 and the NASDAQ dropped 40 points to close at 1319. Volume was holiday light. 8250 on the DJIA and 875 on the S&P are support, and stocks closed just above those numbers.

We've raised cash today because the markets zigged when we thought they were going to zag.

And tomorrow is another day.

10 November 2002

3:42pm and we are back in God's country after our sojourn in the "Windy City". We have no great thoughts to pass on. Since tomorrow is Veteran's Day we'll have time to share our thoughts of last week that we are still processing. The Model Portfolio is posted. The Model dropped about $2000 in value but still remains 5% higher for the year and 54% cash.

7 November 2002

6:10am and as we turn on CNBC we see Jack Welch of GE fame which just by chance owns CNBC defending the obscene benefits he received as CEO Emeritus of GE. And of course all the other talking heads in a display of obdurate obeisance agree with Jack. So much for hard news this morning.

The stock futures are indicating a softer opening. Last night Cisco announced pro forma earnings of 14 cents versus and expected 13 cents. Revenues were a bit higher than expected at $4.8 billion. The share price of Cisco rallied $1 on the news. Then the conference call began and executives of Cisco ventured that next quarter's sales will be down 4% and the share price dropped back $1. By the by, Cisco actually earned only 8 cents per share because it had to write down some of its investment portfolio. But that's another story for another day.

So that news leaves the stock futures down and the markets trying to discern what will be the efficacy of the Fed's 50 basis point rate cut. Obviously the Fed thinks the economy is in trouble but we don't think that should be considered new news. That the Fed is worried enough to cut 50 basis points is news but it also demonstrates a new willingness to get ahead of the markets on the issue.

Our immediate concern is to decide whether the failure of stocks to react positively to the news signals the end of the current rally. We don't know. The rally does deserve a rest. But will the rest be interrupted by more fevered preparations for an invasion of Iraq. Our take on the subject is that the Iraq War talk was an election ploy and that while the Bushies will continue to talk tough they will allow the inspection regime to do its thing for at least a month or two. And if we do invade it will be an invasion to secure the oil fields and to try and get SADDAM. But the US will let the cities of Iraq pacify themselves and not engage in door to door fighting. Without oil Iraq has nothing. And that's our arm chair quarterback view.

We saw talk of Qwest declaring bankruptcy if a ruling goes against it today and so we are going to take our profit and move some of the money to Sprint PCS. We may also take some AMR money off the table since the stock has almost doubled in the last week.

7:30am and jobless claims dropped 20,000 in the 11/2 week to 390,000. The stock futures remain about 1% lower but we still expect the rally to resume later today in blow off fashion.

9:01am and the DJIA is down 100 points. We sold our position in Qwest at $4.02 because there is a judge's ruling expected today. Q has threatened to go into Chapter 11 if the judge rules adversely, although management says they don't expect an adverse ruling. Since we have a 50% to 100% profit and we abhor bankruptcy talk we are selling now. We know we said we could expect more from Qwest but bankruptcy talk by management scares us. We are placing some of the proceeds from larger accounts in Sprint PCS at $4 per share. We are buying a few shares of Cisco at $12.45 for a trade in our trading accounts.

1:39pm and we are back after doing some clean up around the farm. #43 is on TV and his talking hasn't been able to initiate a rally yet, but at least the markets aren't tanking. We sold a little ION at $21 to raise cash but we are keeping the balance of our position in many accounts. We and many others are hoping for a last hour rally so we can lighten up on some trading positions.

2:14pm and the rally hasn't arrived. The DJIA is down 177 points.

3:02pm and the DJIA closed down 184 points at 8586. The S&P 500 lost 21 points to close at 902 and the NASDAQ gave up 42 points to close at 1376. Nobody ever said it was going to be easy. AMR was down at the opening and so we didn't sell, which is OK. We sold our trading position in Halliburton for a 75 cents per share loss. Bad Karma. And we sold our Cisco trade of today for a 30 cents per share loss. There were a few bright spots in that Gap was up on an increase in same store sales. And Ionics also bounced back to close at $21.

We are heading off tomorrow morning for a wedding in Chicago so our next post will be Sunday evening.

And tomorrow is another day.

6 November 2002

6:34am and as we walked to the office this morning we mused that being a Democrat is rapidly becoming like being a Chicago Cubs fan. And so in the spirit of all the pathetic Cub teams and the ever optimistic Ernie Banks we say wait till 2004, or 2008 or hopefully once more in our lifetime.

We are finally back up on the website and we thank you for your patience.

The stock futures are indicating a higher opening although they are not as rambunctiously higher as we thought they would be. We think that may be a positive for sustaining the rally. Time will tell.

Harvey Pitt is gone and soon forgotten.

UAL is back up to $5 per share. UAL restructured some current debt and that relieved pressure. Those folks at State Street Bank who are the Trustees and sold 11 million shares at around $2.50 to diversify are starting to look like bankers.

8:39am and the stock markets are opening moderately higher. The bullish reading from Investors Intelligence is 49 which say the current rally is getting long in the tooth. We will hear from the FED this afternoon so the rally may keep popping. Actually if it builds slowly it may start sucking the bears in to cover.

The UAL news is good news for AMR Corp and AMR's share price is rising. We are going to add more ION and a bit more OATS today if their prices continue to fall. Ionics has $10 per share cash on its balance sheet and a $300 million backlog of business.

Brocade is down today on news that it is going to acquire Rhapsody for $175 million. BRCD is going to issue 23 million shares so it is a dilutive transaction. The deal makes sense and the sell off will be temporary. We are buying back at $6.40 the stock we sold at $7.50 several days ago.

10:50am and the markets are mixed with the S&P down a tad and the DJIA up a tad. Or maybe we should say chad. We were able to purchase a little more ION at $18.50 but others seem to have figured out that the company is selling for $9 minus the cash. We bought OATS at $9.99. We are picking up Halliburton around $17.10 (Paul Wellstone forgive us!) and Honeywell under $27 for large and/or trading accounts as we bet with the markets that asbestos litigation problems may be brought under control by the Republican majority.

12:35pm and the stock markets continue to drift. All the markets seem to be waiting for the FED announcement. We are waiting for the furnace serviceman.

1:25pm and the Fed lowered the Fed funds rate to 1.25% a full % as predicted here (see November 1 post paragraph 8) a few days ago and the stock markets yawned. Since "the street" was expecting 25 basis points all the investment committees now have to meet and decide what the 50 basis point cut means. Our investment committee just met and decided the cuts give the rally new legs. We bought some Goodyear at $7.50 that we had been waiting to buy but nothing else. We own enough stocks to participate. The shorts will get nervous later this afternoon.

1:35pm and the big boys and girls can't decide what to make of a 50 basis point cut. They are probably frantically calling their analysts to find out if the FED is panicking and they should sell or if the FED is once again smart and they should buy. It's tough when you have to rely on others for decisions. The DJIA is now down 60 points. We continue to expect the rally to resume.

2:20pm and the stock markets are higher in tentative trading. The short covering whoosh higher will happen tonight or tomorrow morning. We bought JP Morgan back in a few accounts at $22 for a trade on our hunch of a move higher.

3:02pm and the DJIA closed up 92 points at 8771. The S%P 500 gained 8 points to close at 923 and the NASDAQ closed up 17 points at 1418. Many of our stocks made big percentage moves today. We may take some money off the table tomorrow if we get the ramp we are expecting.

And tomorrow is another day.

Election Day 2002 - 5 November 2002

7:45am and we have a winter wonderland in the Kickapoo Valley this morning. It's interesting how the first real snow of the year is a winter wonderland and the next 40 snows eventually prepare us for wondrous spring.

Japan was strong over night while Europe is weak. The stock futures are indicating a soft opening. Applied Materials had weak earnings last night. Merrill cut its rating on American Express from buy to neutral which means sell. And UBS Warburg lowered its rating on Goodyear to reduce from hold. That should lead to weakness in GT and allow us to add more to accounts.

Most of our accounts are at their highs for the year. The gains range for plus 12% for aggressive accounts to 0% to plus 5% for most conservative accounts. We are pleased with our progress and with our cash position. We may be entering correction time soon and so we plan on adding more stocks. Hopefully the stock markets won't roll over to new lows till the middle of next year, if at all. By then we hope to be long gone. Paul Krugman in the New York Times this morning gives the best explanation of the dilemma that today's election presents, "Of course, some pundits tell you that not much is at stake in this particular election, that the parties aren't really very different on the issues. I don't know what planet they are living on: in reality, the parties are further apart than they have been since the 1930s The fact that anyone imagines otherwise is a tribute to the timidity of the Democrats, who are afraid to say what they really think, and the subterfuge of the Republicans, who show a disciplined willingness to pretend to hold positions they actually abhor."

8:07am and we see that Goldman Sachs is downgrading Tellabs from in line to under perform. And so now we know why the stock was week all day yesterday.

9:24am and the DJIA is up 43 points in slow trading. We are buying some Wild Oats for our trading accounts and also EMC at $5.70 and AMD at $6.70 for more aggressive accounts. We are bidding again today on the SPDR Utility Trust for larger accounts. Given the lousy action in the last hour yesterday today's market action is a bit of a mystery. Since most traders watch CNBC and CNBC is touting a Republican victory as we presume Fox is also we would guess that the undercurrent of higher prices is coming from a presumed Republican victory.

Ionics has dropped $4 per share on disappointing earnings and we are buying shares under $21 per share. We sold JPM in our trading accounts for a $2 per share. We also added Albertsons at $20 per share to accounts that didn't own it.

10:43am and we are buying Schering Plough at $21.60 for some larger accounts and more aggressive accounts in anticipation of a Republican victory. Moreover the bad news on the stock is now in the market and we are buying for a trade.

1:16PM and Wild Oats is down after the conference call and so the call must not have gone well. We think the sellers may be institutions that bought the stock on the offering several months ago. We are buying stock for many accounts instead of just trading accounts on this sell off at $10.77. OATS has moved lower but our experience with the stock tells us to give it room and buy more in a few days if it is lower.

The DJIA is to the plus side while the NASDAQ is lower.

2:25pm and Ionics continues to drop as Merrill has placed a sell on it. We are going to add it to a number of accounts at around $20.25 per share. ION had to restate earnings of its French subsidiary and Reuters is reporting that revenues dropped 30%. Revenues dropped because ION sold its water subsidiary, so much for informed reporting. There is also talk that since GE is acquiring Osmonics which is a competitor that ION may have a rough time. Our guess is that ION will finally sell itself. We've traded this stock for years and if it goes lower we will buy more.

Goodyear is unchanged today after trading lower earlier on a downgrade. Maybe we are getting to the end of the downgrades and the stock will now start trading on market conditions.

3:02pm and the DJIA closed up 107 points at 8679. The S&P 500 gained 7 points to close at 915 and the NASDAQ was up 4 points at 1401.

And tomorrow is another day.

4 November 2002

6:48am and the stock futures are indicting a 1.5% higher opening in celebration of Microsoft's ability to buy its way to a favorable settlement of the anti trust charges against it. There seem to be a lot of earthquakes and volcano eruptions occurring around the world. In the US the stock markets are going to erupt to the upside for at least the first 15 minutes and then what will happen is anyone's guess. We'll enjoy the show while it lasts. Rather than predict election results we plan on reacting to them. The same goes for Fed action and Cisco earnings.

We may regret selling Cisco last week but the stock is still overpriced and we are just trading anchovies. And since we didn't lose money on the trade we'll be content to look at it as an opportunity missed.

7:19am and all the stars are aligning to give the stock markets the final push higher into the November post election correction before the final fling higher in December. Auto sales were up against strong comparisons from the introduction of 0% financing last October and so the drops reported on Friday are being taken with some grains of salt. But 0% financing on fewer sales is not the way to jump start the economy. Rather it seems a formula for further lackluster earnings.

But the stock markets are forward looking and with three years of significant dollar losses for investors that we managed to avoid, we are going to error on the side of aggressiveness over the next two months because we believe there is the potential for our accounts to finish this year up 10% and to be 20% higher in the first month next year at which time we will go to cash and Florida in that order. That scenario is our best case, but it seems doable given the volatility of the markets. So we shall see.

7:28am and Treasury bonds are selling down with the stock markets higher.

9:02am and stocks opened 1.5% higher. Selling is now occurring and we'll see how the battle goes. We sold some Brocade at $7.50 for a scratch in accounts where we had too large a position in relation to the other low priced techs we own. We are adding EMC at $5.60 and Sprint PCS at $4.40 to our larger accounts and Qwest at $3.84 to many accounts. We also purchased a small amount of AMR Corp at $5.54 for a few accounts. And we are trying to repurchase the SPDR Utility Trust at $18.85 to regain exposure in that beaten down sector.

11:06am and the markets continue to hold their gains.

11:46am and we just received a call from George Bush asking us to vote. We told him our views on the war but he was so on message that he didn't respond. The same thing happened yesterday when Tom DeLay, Henry Hyde and Laura Bush called.

The DJIA is up over 200 points and the NASDAQ is up 3%.

1:27pm and the DJIA is back to where it started the day at up 150 points. We'll find out whether the four week rally is running out of steam by the final hour. We are trying to sell Seibel at $9.35. We think we should sell one of these stocks that has risen 30% in a week just so the others go higher. And if the others go down at least we will have sold one.

2:38pm and the rally has failed. We sold the Seibel at $9.33 for a nice $2 to $2.50 per share profit. We also sold TLAB at $8.50 for a $1.50 per share profit. We sold TLAB because it was down most of the day when the DJIA was up 200 points. We placed the SPDR Utility Trust in a few large accounts. We will look to buy more if the sell off continues this week.

By the way, the oil stocks are selling off so we may have a chance for another trade in Conoco/Phillips and BP Amoco. Gillette is also creeping back to $28 and Walgreen is dropping to a yearly low on analyst downgrades. There's always something of interest at year end.

3:02pm and the DJIA closed up 52 points at 8570. The S&P 500 gained 7 points to close at 908 and the NASDAQ was up 35 points at 1396.

And tomorrow is election day.

1 November 2002

7:24am and we are at the start of a perfect autumn day here in the Kickapoo Valley. We are switching server hosts for our website today and if everything goes as planned readers should suffer no interruption. If there is an interruption and you are reading this post next week we apologize. We are making the switch for better service.

The stock futures are suggesting a down opening but the employment report due at 7:30am will have an effect. There has been no market shattering overnight news.

7:32am and non farm payrolls dropped by 5000. The unemployment rate rose 0.1%. Dullsville. Service and government jobs were up, offsetting job loss in manufacturing and construction. Everything is rosy according to the talking head Larry Kudlow. Its fun to see Republicans happy to see increased government employment save the day for the jobs report.

8:50am and the stock markets have opened lower. The DJIA was up 10.7% in the month of October. Unfortunately it was down 27% for the year when October began.

Treasury bond prices are a bit lower with yields higher. Current yields presume a 25 basis point cut next Wednesday.

10:45am and the stock market has turned higher and Treasuries are also rallying. Treasuries are rallying on rate cut speculation and we think stocks are just bouncing from late October selling. A lot of the beaten down techs are up and we hope they don't move too fast since we want to take our gains next year. We really shouldn't be so picky; any gains are welcome in a year like this.

1:56pm and we've been busy buying Albertsons in all accounts at $21.25. ABS ha a 3.7% yield and because it disappointed yesterday on earnings and forecast lower earnings going forward the stock is down $7 from the close on Wednesday. It's a good value at these levels and we traded it from these levels for a nice profit on the same kind of news in 2000. Albertsons is Jewel/Osco in the Midwest. We also repurchased at higher prices AMD, AOL, EMC and JP Morgan in our trading accounts. Our low priced stocks are having a good day.

The markets are pricing in a Republican victory and a 50 basis point drop in interest rates by the FED. Our guess is that Bush wouldn't be traveling all over the country unless White House polls show Repubs winning. They could keep Bush home with war planning talk if they didn't see a win. And with the lousy economic news the Fed may be panicked into cutting 50 basis points. Neither event changes our longer term view that stocks are headed lower, but in the short term we may bounce higher. And the stocks we own are benefiting.

2:41pm and GM reports sales down 32% and Ford announces down 34% and both stocks are up as is the market. We are getting back to La La Land very quickly. We know the stock market anticipates but what is it anticipating? We will consider some selling next week. For the weekend we will enjoy our good fortune and genius at buying a bunch of junky stocks that have risen 50% and more in value in less than a month's time.

3:02pm and the DJIA closed up 120 points at 8517. The S&P 500 was up 15 points at 901 and the NASDAQ gained 30 points and close at 1360.

For the year the Model Portfolio is up 6% while the DJIA is down 15%, the S&P 500 is off 21% and the NASDAQ is down 28%. The Model Portfolio is still 56% in cash.

And tomorrow is another day.

November 2002 Thoughts

October 2002 Thoughts

September 2002 Thoughts

August 2002 Thoughts

July 2002 Thoughts

June 2002 Thoughts

May 2002 Thoughts

April 2002 Thoughts

March 2002 Thoughts

February 2002 Thoughts

January 2002 Thoughts

December 2001 Thoughts

November 2001 Thoughts

October 2001 Thoughts
The factual statements herein have been taken from sources we believe to be reliable but such statements are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.