Happy Halloween and goodbye to October, that most difficult of
months in the markets. Up 150 points, down 150 points, and up 150 points in one
week is a little too much for our aging psyche. Happily Friday was an up and so
we were able to enjoy the weekend. Japan
began this week with a down 2% day.
The Fed meets tomorrow and if today were not the last day of the month
we would say that trading would be muted ahead of that meeting where the Fed
Funds rate is expected to go to 4%. With the two-year Treasury already at 4.4%
the immediate impact on short rates is going to be more affected by any policy
statement change announced with the increase.
Wal-Mart is reporting a 4.3% increase in sales for October and that
is better than. Oil is lower in the
early going and Treasuries are unchanged.
Monday’s Markets October 31, 2005
Personal Income was up 1.7% in September with the PCE Price deflator (inflation measure
Alan likes) was 3.8% y/y. Core Deflator
was 2.0% y/y. Personal Spending rose 0.5%.
The FCC meets on the VZ/MCI
and SBC/AT&T mergers today. They
were supposed to vote on Friday and didn’t.
9:14am and stocks are higher out of the gate with the DJIA up 66
points. Breadth is running 3/1 positive and volume is brisk. Treasuries are
flat and oil is down 50 pennies.
We are selling the CMCSA that we bought last week. Jim
Cramer the ubiquitous media market mouth had negative comments on CMCSA’s profit margins this morning. He
usually reflects the street’s thinking
and while the shares are near their lows we own them cheaper and so are getting
out with a plus scratch. Cramer had been a big fan of the stock and is why we
originally were interested in it and traded it and so we are going to follow
his lead and look for better opportunities for that cash.
With the money we are buying an
equal amount of shares of Micron Tech
at $12.90 and 4x the amount of shares in Lucent
11:02am and as Dick Cheney would say Europe
was up big time today with the DAX, CAC, and FTSE all rising
over 100 points on the backs of merger announcements.
Our stocks markets remain higher
with breadth a still comfortable 2.5/1 positive and new highs are leading new
lows by almost 2/1.
and the FCC cleared the Verizon purchase of MCI
and VZ said it hopes to close by year end.
and trading as
slowed but oil is back under $60, gold is down $8 and Treasuries are a little
better. Breadth remains 2/1 positive. We are going to purchase DuPont at $41.70 for accounts from
which, in the final hour today as the stock is marked up, we plan on selling
some higher priced EL that we
purchased before the stock tanked on earnings last week. It is too large a
position in some accounts in relation to other holdings.
Even with the sale in those accounts where we
purchased shares at above $32 we will be
ahead on the EL because we bought more shares under $31 and we will be back
in a cyclical that will benefit if oil continues to drop in price.
Magellan Fund has replaced its fund manager Stansky with a new
manager Harry Lange. Stansky was let go for lousy performance. Stansky was a
big cap buyer and Lange is a small and mid cap guy so there is going to be a
bunch of speculation on the big caps being sold and small and mid caps running
higher. The only problem is that doing that in a $50 billion fund isn’t easy.
But it does make for good performance when loading up.
The top ten holdings on 9/30/05 which comprised about 25% of
the fund were:
AMER INTL GROUP
JOHNSON & JOHNSON
Performance of Magellan fund:
For periods ended 09/30/2005
Fidelity Magellan® Fund*
S&P 500® Index1
Lipper Growth Funds Average
and with a sell
program on the close the DJIA closed
up 38 points at 10440. The S&P 500
gained 8 points to end at 1207 and the NAZZ
rose 28 points to 2118. Treasuries closed
a bit lower in yield with the two-year at 3.39% and the ten-year at 4.56%. Oil closed at $59,85 down 41.37.
Breadth was 2.5/1 positive and up
volume exceeded down volume 4/1. This
is the first back to back strong up market in a long while. Volume improved in the final hour but
was still only moderate. New highs
exceeded new lows.
The casino opens at the same time
tomorrow so join us for the fun.
28 October 2005 Daily Comment
Comparisons don’t salve losses
but they do offer perspective. As we begin the day the Model Portfolio is down
6% for the year, the DJIA is down 5.2%, the NAZZ is down 5.3% and the S&P
500 is off 2.6%. We know that slightly bettering the major measures to the
downside is neither our fort nor are we or our clients used to performing in
line with the measures when they are in a loss situation but sometimes we can’t
outperform the markets. So far this year we have been human. But there are two
months left in the year. And……
One final thought is that on October 28, 2004 which was one year ago the Model Portfolio had a value of $528,000.
The Model Portfolio ended the year with a value of $570,000. *****
Advance GDP was up 3.8% which was in line and shows the economy is
not tanking. Other figures released indicated that costs are in line but that
inflation is picking up. No big surprises there either. The headlines are that
White House indictments are going to affect the markets. Well they may because
the big boys and girls lead strange lives, but out here in the land of milk and
honey the fact that our local football team the North Crawford Trojans are in
the state football tournament is the only talk of the day.
Indictments of Libby or Rove or
both or none isn’t going to mean beans to the economy. And if the indictments
or non-indictments can slow the tax cutting mania in Congress all the better.
The best period in the markets in the last 20 years was when taxes were not
being cut but rather the budget was moving to balance. Guns and butter has not
been the best of strategies as the butter tastes like margarine produced in Argentina
and the guns aren’t working so well either.
The stocks markets are at the
inflection point of 1176 and while stocks look to open higher there will be a
test of 1176 before the day is over. Where that test leads in the short term is
anyone’s guess but ours is that most of the selling by mutual funds is finished
and the selling occurring now is a Pavlovian response to know facts. BMY is down this morning on lousy earnings
which all folks knew were coming. MSFT
is down because its earnings were fine but it warned going forward that it
didn’t have a clear picture.
The negativism in the market is a
bullish sign but the selling can go on well past the end of October. We are in
a hunkering in mode since we do think the stocks we own are fairly priced and
we don’t see much purpose in flipping out at this time. We will let our theory
of a rally into year end/ early next year play out and if we are wrong we will
circle the wagons next year and reconsider our strategy. Till then we plan to
enjoy the fall weather and let time run its course.
Friday’s Markets October 28, 2005
9:40am and the major measures all opened higher on good breadth.
Bulls were hoping for a 100 plus down opening to wash out the sellers but that hasn’t
happened and stocks are now beginning to roll over and give up their gains. There
is plenty of time in the day and the Washington
political brouhaha calls for a two part release of info at 11 am and press
conference at . So until then the
media is concentrating on the Pflame stuff and not the markets.
Treasuries are a few bps lower in
yield and oil is off pennies.
and the major
measures remain higher with breadth on the NYSE 3/1 positive. Volume is
moderate but it has been that way all week. This may just be month end mark up time.
We’ll know this afternoon and/or next week.
Treasuries are lower and oil is
up 10 pennies.
We repurchased in larger accounts at $16.30 the AMAT we sold on Monday at $17.20.
and the DJIA began the day higher and never
looked back. At the bell the DJIA was
up 170 points at 10400. The S&P 500
rose 19 points at 1198. The NAZZ was
up 24 points at 2087. Breadth was
better than 2/1 positive and volume improved. New lows contracted but still numbered 260. New highs were 100.
Treasuries finished lower with the two-year at 4.38% and the
ten-year at 4.47%. The thirty year is now at 4.78%. Oil ended up 11 pennies at $61.20. Gold lost 70 pennies to $474.90.
The casino is closed until Monday
so join us then.
27 October 2005 Daily Comment
White Sox Win! White Sox Win!
The prince was an honorary batboy for the
White Sox in May and Garcia pitched that day and lost. But since the SOX won
the whole enchilada we presume they will want him back next year for good luck.
Since the Red Sox took it all last year and the White Sox this year, we suggest
that the Cincinnati Reds go back to their original name for a
chance to win next year.
As they say in poker, we are now all in. With our
purchases yesterday we have constructed the portfolios we will live with
through year end and beyond.
We have concentrated on unloved
big cap stocks that are being abandoned by the big boys and girls as mutual
fund year end at the October 31 approaches. For example we thought Estee Lauder was cheap a week ago when
we bought some at $34 since we didn’t know how the street would treat earnings
announced yesterday. Well over 10% lower was the answer as we completed
establishing our position with a sizable purchase of shares at $30.82
yesterday. MKC went through the same
sell off/ rally/ and now sell off in the last month. Both are excellent
companies but are owned by insiders and institutions with little public
ownership. That makes them volatile at times like this but their overall price
pattern over the years has been a rising trend.
Verizon announced good earnings today and with a 5.3% dividend we are comfortable with
our large positions. The Baby Bells are never sold by individuals and so the float
on the shares is only the 50% that the institutions own. Once the merger with
MCI occurs the pressure will be relived.
We sold the SBC to switch to National City because we wanted a bank
stock. We were too quick on the trigger on JP
Morgan but we managed to pick up NCC
at a 10% discount from its level before recent earnings. With a 4.6% dividend yield and we think the
potential of a takeover we like the holding.
We have concentrated our tech
holdings in Intel and Cisco and our telecom equipment holding
in Nokia. We may trade TLAB again but our selling before earnings
on that stock helped us avoid a painful decision as it dropped $1 from its high
of a few weeks ago
We have added the Drug Holders Trust (PPH) to large accounts because the drug
companies are being thrown out with the bath water, but we don’t want to pick
just one or two stocks, (see our October 25 post for the companies held in the
trust) with the way the drug stocks are acting. Here again it is mutual fund
year end and that is the reason for the final blip down in these stocks.
We added DuPont and International Paper to large accounts as a play on the
drop in oil prices but we will be quick to take profits in those issues.
All the other stocks in the portfolios
have been there before. We may be early on the retailers but aside from the
large GPS position the smaller holdings
in AEOS and TLB leave room for adding. By the way a Japanese consortium owns
50% of TLB and it ahs since it went public many years ago.
We trade CMCSA a couple of times this year and we are now only in stocks
that were nice to us with the exception of TWX. That one has value and we are
going to ride with it for a while.
So settle in folks it is going to
be a rocky road to year end but we hope it will be a profitable ride.
Our guru man is long term bearish and we can’t tell whether he is short
term bearish. Anyway his S&P 500 markers are 1176 on the downside as the line
in the sand with 1200 as the moving day average and 1210 remains the breakout the champagne high point that
needs to be take out for any real rally to highs to
Initial jobless claims were down
to 328,000 versus and expected 350,000. Oil is up 50 pennies and Treasuries are
flat. And Harriet Miers is gone after her 15 minutes of blasting by the right.
Thursday’s Markets October 27, 2005
9:42am and the major measures are down this morning and breadth is
also 2/1 negative. Treasuries are better and oil remains higher.
We sold our DD trade for a $1.50 gain and also our Disney position for a plus scratch to have cash on hand in our aggressive
accounts to put into some more volatile issues like TLAB which we are buying under $9.50 (sold at $10.15 last week
ahead of earnings which came two days ago)and OATS at $11.05.
and the NAZZ is sting right above its 200 day moving average at
2075. The gurus say that if it breaks that level look out below. But it is the
end of October housecleaning and we are inclined to give the markets a little
Breadth is over 2/1 negative and
new lows are around 300. Volume is low though and that is a positive.
Treasuries are slightly better
and oil is up a bit.
and the markets are
always a great tester of resolve. We do believe in what we purchased and wish
that all of them had doubled overnight but that has never happened before and
certainly isn’t happening now.
A couple of takeovers (GDT & CD) have blown up in the last few days
and some of the selling may be related to folks raising cash to cover losses.
There is so much hedge fund static in the trading air that the day to day
movements especially at times like this create a lot of noise and dust and
hopefully not much more. *****
and the DJIA closed down 115 points at 10229.
The S&P 500 ended at 1179 and
will probably test the 1176 level tomorrow morning. The NAZZ dropped 36 points to end at 2063 which is below its 200 day moving average.
Breadth was 3/1 negative and down volume was 4 times up volume. Overall
volume was light.
Treasuries inched higher with the two-year at 4.35% and the ten-year
at 4.56%. Oil closed at $61.09 up 43 pennies and gold lost 50 pennies.
The casino is open again tomorrow
so join us for the games.
26 October 2005 Daily Comment
Investors’ Intelligence has bulls
at 44% and bears at 29%. Short interest is at a record 5.94 billion on the NAZZ.
Both of those are bullish numbers in a contrary way.
Wednesday’s Markets October 26, 2005
1:28pm and we have spent most of the day reviewing accounts and
investing in National City Bank, Estee
Lauder and McCormick spices. The
EL is down today on earnings and MKC is off as month end approaches but both
are great companies at attractive prices. The same goes for NCC.
We also added TLB, CMCSA, AEOS, CSCO, TWX NOK, and GPS to various accounts to bring them
up to a relatively fully invested level.
The markets have been see-sawing
back and forth and volume is active. Breadth
is negative and new lows are above new highs.
and the DJIA closed down 33 points at 10344.
The S&P 500 ended at 1192 down 5
points and the NAZZ was off 10
points at 2100.
Decliners outnumbered advancers 2/1 as did down volume over up
volume. New lows expanded to 250 versus
150 new highs.
Oil ended at $60.92 and Treasuries
were weak with the two year finishing at 4.37% and the ten-year at 4.59%.
We were limited in our posting
today because our computers were out for a while as the phone company installed
our Television setup so we could watch the White Sox for the rest of the
And tomorrow is another casino
day so join us.
25 October 2005 Daily Comment
We wish a very Happy Birthday to our sister Barbara on her 64th. (BETTER
LATE THAN NEVER). One more year to Medicare. Who would have thunk it back when
she was getting us to give her our quarter allowance for candy while she piggy
Stocks are going to open lower
this morning as profit takers take advantage of yesterday’s big move. Today
will be a good test of the bull’s strength because after the initial sell off
we would expect a move to the upside from the investment committee buy
decisions that took all yesterday to make. Then the perfect bullish scenario
would be another sell down into the
hour and a strong final hour that moves the S&P 500 up another 10 points
today and well above the 1200 marker which is the approximate 200 day moving
Tuesday’s Market’s October 25, 2005
10:23am and the major measures have been plus and minus a little so
far today. Breadth is negative and volume has picked up. New highs and new lows
are running even again today as the battle of 1200 on the S&P 500 is played
out. Treasuries are weaker ahead of the
Fed announcement and oil is higher this morning at $61 up 68 pennies.
We are buying more PPH, the Pharmaceutical Holders Trust at
$67.32 for larger accounts at 50 cents above its yearly low and down from $100
per share in 2000 and $85 per share in 2003. The drug stocks are being
abandoned by the mutual funds as tax selling season ends and the trust has a 3%
We also picked up a few more
shares of Comcast at $27.68 that we
are adding to accounts. In our larger/aggressive accounts we bought DuPont and
International Paper back this morning after they announced earnings. We paid
more than we sold them for a few weeks ago but still well below their yearly highs.
We want to keep buying good
quality stocks that are down significantly on the year. The big boys and girls
will eventually return to them.
and we switched our SBC to INTC this afternoon. We made a scratch profit on the SBC and we are placing a large bet on
the INTC to perform after
Because we are increasing the
INTC position we are going to sell our AMAT
holdings for a plus scratch again because we
don’t want to increase or overall tech exposure. Also the sale of the AMAT
will give us funds for the blow up of the next quality stock before quarter
Crude oil is up $2 because of the
Northeastern winter forecast. What? We think oil is up because the big boys and
girls want to speculate on a commodity that is down 10 points in month and a
Democrat Senator introduced an excess profits tax bill in Congress. Could
someone want the price of oil higher to show that there is a shortage of oil?
The last few months have shown that there is little connection between the
price of oil and supply and demand unless we are talking about supply and
demand on the New York Mercantile Exchange.
3:02pm and today the markets meandered finally closing lower after
a stab to the plus side by the DJIA with ten minutes to go. The DJIA closed down 7 points at 10377. The
S&P 500 lost 3 points to end at
1196 and the NAZZ dropped 7 points
Decliners outnumbered advancers by
2/1 as did down volume versus up volume.
New highs and new lows were about even and volume slowed after a good start.
Treasuries tanked with the two-year ending at 4.32% and the ten-year
breaking to 4.52%.
Oil finished up $2.12 at $62.44 as the big children had some fun.
And tomorrow is another casino
day so join us for the fun and games.
24 October 2005 Daily Comment
Jim Cramer comments today on his
website about the possibility that Refco was playing with the price of oil and
that its collapse marked the top of the cycle for oil futures prices. His
conjecture is that if Refco would lie about $500 million in capital why
wouldn’t it take a look at which way all the oil futures accounts that it was clearing
were leaning and go the other way and force covering that would lead prices
Stranger things have happened and
as we drove home last night in the rain from the land of the prince and princess
and listened to the White Sox capture another improbable win we were also
thinking about oil topping over $70 in the Katrina Hurricane crisis and the collapsing
of oil prices at the end of the hurricane alphabet with Wilma.
We have said all along there have
been no gasoline lines and that the weekly inventory figures showed enough
supply and yet the price of oil and derivatives kept on rising. The same thing happened
with electricity in the 2001 and it eventually was disclosed that a cabal led
by Enron was the culprit. If the story ever is written on this oil run it will
probably be the same type of cabal. There is no insider trading in the futures
market and traders can gang up with one another to run markets up and down as
long as the money lasts.
While we were away we sold TLAB and NVLS for scratch and BMY for a loss. With the BMY money we purchased CMCSA
and in various accounts we also bought TWX,
EL, RAD, ASD, NOK and OATS.
We sold the TLAB ahead of earnings due out tomorrow and because we have a good position
in larger cap tech stocks. Also our smaller accounts had a little profit so it
wasn’t’ a painful decision. We traded out of Bristol Myers on the news of
negative results from their new diabetes drug and the desire to switch the
funds to other stocks to take advantage of the drop in CMCSA, EL and NOK. We decided not to own individual
drug stocks and in our larger accounts we plan on buying PPH which is an exchange traded fund comprised of large ethical
drug company shares. 100 shares of PPH originally equaled 100 shares of the
following companies but splits and distributions have increased the number of
shares owned. The breakdown is now as follows:
Advanced Medical Optics
Bristol-Meyers Squibb Co.
Eli Lilly & Company
Forest Laboratories, Inc.
Johnson & Johnson
King Pharmaceuticals, Inc.
Medco Health Solutions, Inc.
Merck & Co., Inc.
Mylan Laboratories, Inc.
VRX Pharmaceuticals, Inc.
Watson Pharmaceuticals, Inc.
Zimmer Holdings Inc.
PPH gives exposure to the large
drug companies but also spreads the risk.
EL announces earnings on October 26 and we are going to await those
earnings to add more shares.
Monday’s Markets October 24, 2005
8:49ama and stocks opened higher
out of the gate with breadth better than 2/1. Oil is down $1.06 at $59.57 and
Treasuries are giving a little ground ahead of the Fed meeting tomorrow where
the Fed Funds rate will be moved to 4%.
Barron’s finally heard
our plaintiff plea about the value in Verizon
and had a nice article on it over the weekend. The stock is over $30 for the
first time in a few weeks.
Todd Harrison on www.minyanville.com is hearing rumors
that Greenspan’s replacement will be announced soon.
12:23pm and Harrison was correct
and stocks are higher on the news that Ben Bernanke the White House economic
guru is going to be the new Fed Chairman. Breadth is 3/1positive on the NYSE
and 2/1 on the NAZZ. And up volume over down volume is also impressive although
overall volume is relatively light. New lows are at 104 and there are more new highs today than new
lows which is the first time in a while.
Oil is off its lows but remains
under $60. Treasuries are weaker but steady with the two-year at 4.24% and the
ten-year at 4.43%
We are adding shares of American
Eagle Outfitters to more accounts at $22.75 and also we purchased some Drug
Holders exchange traded fund shares (PPH)
in our larger aggressive accounts and picked up a chunk of VECO which is Veeco Instruments.
We bought at $15.25 which is down $2 on the day. We have traded this stock
We also bought a few shares of McCormick, the spice people, and also
some more Intel and we are inching
into Kyocera in our larger accounts
at the $63 level.
and the DJIA closed up 170 points at 10385. The
S&P 500 gained 19 points to 1199
and the NAZZ rose 35 points to 2115.
The S&P 500 needs to crack through 1200 on the upside decisively in order
for the correction/collapse to be stymied.
New highs and new lows were about even and breadth was 3/1 to the good on the NYSE and 2/1 on the NAZZ.
Oil ended down 31 pennies at $60.32 and Treasuries were lower with the two-year at 4.25% and the ten-year
at 4.44%. Volume was the only
And the games begin again tomorrow
morning so join us for the fun?
19 October 2005 Daily Comment
This is our last
post until next Monday night October 24. We are heading to Chicago to see clients and then to Cincinnati
Ohio for the same purpose. We also plan to see the NKU men’s basketball
team practice, the princess play soccer, and the prince play football before our
return to the land of milk and honey. *****
In the early going stock futures
are lower, Treasuries are better and
Oil is up a few pennies.
Motorola delivered good news and rose after hours, Yahoo was a yawn and Intel was in line but traders were
disappointed by future revenue forecasts and the shares sold off.
We are pretty fully invested as
we take a few days off. We will be watching and acting if necessary but we like
what we own. Now it is a matter of waiting for quadruple witching to do its
thing in the next few days and the end of tax selling by mutual funds at the
end of the quarter.
Jamie Dimon is taking over at JP Morgan after year end and that is considered
a positive by those in the know. JPM reported
better than earnings as did Bank America.
American Standard took it on the chin yesterday. ASD went by the original name American
Radiator and Standard Sanitary for old-timers. It makes bathroom fixtures and its
Trane unit makes heating and air conditioning and air moving equipment. The
fixtures business was the back breaker yesterday since the air conditioning and
heating business was up 16%. We will be adding more shares as we raise money
from other sources and the share price moves lower.
Cingular Wireless (soon to be AT&T Wireless) is now making
money for SBC and BLS, its owners, earning $222 million
the quarter which was double last year’s comparable quarter. Those pesky
analysts don’t like the fact that it added only 900 thousand subscribers
instead of the million analysts were forecasting.
Housing starts were up 3.4% in
September and permits were up 2.4%.Treasuries remain up.
Wednesday’s markets October 19, 2005
To begin the day we sold Yahoo on the good earnings news at
$34.40 for a better than $1 plus gain. We can’t own the stock for long because it
has revenues of $4 billion and is priced at $44 billion.
We also took a short term gain on
Motorola on their earnings news. We
think Nokia is the better value
right now. We reinvested the MOT
money in Time Warner since it seems
something positive may occur with AOL and other portals before year end. We
have been trying to make money in TWX for two years maybe the 15th time will be
With both HD and ASD both being
considered as housing exposure by the big boys and girls we sold the Home Depot we purchased yesterday (in
the same accounts we bought ASD) for
a 50 cents loss to buy more ASD
which is down another $1 today and over $2 below our purchase of yesterday and $10 below Monday’s closing price. This
is too good a company to suffer such a fate and with earnings projected at
$2.65 (13 times our average cost) for the year and selling at one times sales
we want to own the stock on this break.
We are buying the ASD at $35.60 in accounts where we sold Yahoo today.
Crude oil inventories are higher
this week and oil begins to move lower.
10:03am and the major measures are mixed with the DJIA up 22 points and the NAZZ down. Breadth is 2/1 negative but stocks are trying to make a stand. New
lows are already over 270.
Treasuries remain firm and oil is
And we are off on our journey. Next post will be October 24.
The games will continue in our absence
as they always do.
18 October 2005 Daily Comment
Oops, guess the hurricane Wilma is
not going to make it to the northwestern Gulf of Mexico
and so oil futures are lower this morning.
Traders liked IBM’s numbers and we can only hope for
the same result tonight with Yahoo’s
and Motorola’s earnings releases.
Texas Instruments was lowered to under perform from in line by Goldman Sachs and Merrill Lynch call centers are being investigated by the NASD.
Mother Merrill reported above the street earnings this morning.
More than 52 million
recipients of Social Security and supplemental benefits will see a 4.1 percent
bump in their monthly payments come 2006, the Social Security Administration
The average retiree who
receives Social Security will see his payment increase from $963 a month to
$1,002. The maximum monthly benefit any retiree over 65 may receive will rise
from $1,939 to $2,053.
cost-of-living-adjustment (COLA), the largest since 1991, is based on the
change in the Consumer Price Index from the third quarter of the prior year to
the third quarter of the current year. The CPI for September was released on
The 4.1 percent COLA
will also raise the level of wages subject to the Social Security tax. The new
wage level next year will be $94,200, up from $90,000 this year. That means the
first $94,200 will be subject to the 12.4 percent Social Security tax, half of
which is paid by workers and half by their employers. The self-employed pay the
full 12.4 percent but may deduct half of that on their federal taxes.
As a result of the
wage-level increase, 11.3 million workers, or 7.1 percent of workers who pay
Social Security taxes, will be paying more next year as a result of the
Tuesday Markets October 18, 2005
7:50am and the Producer Price Index came at 1.9% and core at 0.3%
both a bit higher than expected. Year over year the PPI was 6.9% and core 5.5% respectively.
Treasuries are flat on the news and oil is down 60 pennies at $63.76.
Refco filed Chapter 11 and agreed to sell its futures trading
Fifth Third Bank reported in line earnings of 71 pennies. Those
earnings were lower than last year.
Intel, Motorola, and Yahoo
come after the close today.
In 12 Shiite and Kurdish
provinces, as many as 99 percent of the voters were reported to have cast
ballots in favor of Iraq's new constitution. Sounds like Chicago
And Sadaam goes on trial. There is just too much news. He never
received 99% of the vote as we remember.
9:12am and the major measures are
mixed. We must be in a bull phase though because Verizon is up 5 cents a share. Seriously, we view the continued
weakness in VZ as a buying
opportunity. We have been adding shares to accounts and will continue to do so
through year end. We expect it to be our largest position in all accounts at
Oil remains lower and Treasuries
have firmed. We are buying Home Depot for accounts in which we purchased
Comcast yesterday. Novellus which
makes chip equipment is off 10% today and on its 12 month and 36 month low and
we are buying shares in NVLS in those same accounts.
Fifth Third Bank’s share price spiked $1.60 higher during its
conference call on the morning’s earnings and we took the opportunity to unload
our shares for a scratch to $1 per share profit. Since we had an unrealized $3
per share loss in it last week we wanted out to rethink our ownership. There is
also a takeover rumor going around which has the October and November $40 calls
active. It won’t be the first or last takeover we miss. And it also won’t be
the first or last time we were able to get out of a stock with a profit when
takeover rumors that turned out to be untrue lifted the shares.
We are placing the proceeds in National
City Bank which is down $1.60 per share, also on lower earnings. NCC had warned
the street but the street doesn’t like lower earnings today. We have traded the shares
profitably earlier this year and we also bought shares in those accounts that
had profitable trades at higher prices this year.
American Standard, the toilet folks who also make air conditioners
and auto stuff missed their quarter although earnings were higher year over
year. ASD also warned going forward
and said the bathroom fixture market was tough. The share price is down $7
today and this is a good company. We are using the drop to initiate positions
in larger/ aggressive accounts that own CMCSA.
If the share price continues to fall we will buy more around.
October is sale month in the
stock market. We think the buys of Novellus
and ASD and NCC and Talbot’s will
turn profitable for us and we are buying all on their yearly lows as we did
with Comcast yesterday. All are good
and there are mixed
messages in the markets. A bunch of regional Fed presidents did not want to
raise the discount rate the last time around. Exxon just broke a triple bottom at $57 and technically the next
stop is $50. Oil is down $1.26 to $63.10 as the hurricane gambit of yesterday falls
into the Gulf. Home builders are getting crushed on the American Standard news
of no bathrooms equaling no homes.
Treasuries are flat and most
folks await the afternoon earnings releases.
Our thought is that the NCC we just bought is as likely a
takeover target as Fifth Third which we just sold. FITB traded at $62 and any
takeover at less than $50 ($26 billion) would probably upset folks. And if
someone is going to pay $50 ($26 billion) they may as well buy NCC at $38 ($23
billion) for the same earnings of better quality.
In the thanks a lot department the wire are reporting that Fed member
Janet Yellen is saying that a neutral Fed Funds rate is between 3.50% and
and the DJIA closed down 62 points at 10285. Altria
which was up $4 yesterday gave back $2.50 today an Exxon lost $2.59 today. The S&P 500 lost 12 points to end at 1178
and the NAZZ was down 14 points at
Treasuries closed a tad better with the two-year at 4.25% and the
ten-year at 4.48%. Oil lost $1.16 to
finish at $63.20.
Breadth was 2/1 negative at the bell and new lows were 247, about even with yesterday.
And the games continue tomorrow
at which time we’ll see how the markets react to the earnings reports of
17 October 2005 Daily Comment
We begin the week with a new storm/hurricane
in the Gulf and oil higher as a result as the worst scenario is always priced
into traders minds as they play their games. Gold is also higher.
On a positive front, GM has an
agreement with the unions to cut health care liabilities by 25% with the pretax
savings of $3 billion which converts to after tax of $1 billion.
It looks like a few hedge funds
are interested in owing Refco, the
harried futures broker.
Last weeks bugaboos are satisfied
and now it is time to look for new ones this week. That is the way it is in correcting markets when the next crash is only
a day away.
Newell Rubbermaid has fired its CEO (who was from GE by the by) so there will be more write
downs in the years to come as the new CEO takes over. NWL does have a nice dividend, for now at least.
Monday’s Markets October 17, 2005
9:23am and the DJIA is higher led by GM which is up on the healthcare news. The other major measures are
also higher and breadth is 5/4 positive. Oil is up $1.14 and Treasuries have
now moved back to flat on the day with the two-year at 4.25% and the ten-year
We are adding Comcast to our larger accounts at
$27.30. we have traded it profitably this year and it
is on its low for the year and is an institutional stock so we think the
selling pressure will abate after October 31. As with Verizon and SBC we don’t
expect them to move higher after that date but we do expect the down draft to
slow if not stop. If and when folks realize the economy is slowing then we
would expect these stocks to move higher.
Before that time comes we are
hoping our tech stocks pop as new institutional money flows in and we can take
a quick 20% profit and place the money in 2 year Treasuries. That is our December
We may be all wet but we would
bet that if and when folks look hard enough they are going to find bird flu in U.S.
chickens. It is sort of like the mad cow disease, we think the only reason the U.S.
doesn’t find mad cow disease is they don’t check as many animals. A pandemic
will occur as surely as New Orleans
flooded and a major earthquake will hit the west coast. But we think the
markets of folks spending their time worry about the avian flu pandemic is a
waste of time. We’ll let the experts handle it and hope the U.S.
government provides sufficient funding.
A company in India
is going to begin making generic tamiflu because Roche, which holds the patent won’t license
it and won’t drop its $60 per dose fee. Ain’t capitalism great?
If there really is going to be a
pandemic every drug company in the world should be making it and selling it at
cost to the governments of the world to give to all the folks.
1:49pm and in the contras hour the major measures are mixed with
the DJIA up on Altria and GM and the NAZZ lower as small cap
stocks continue to be sold.
Verizon continues its journey lower in very slow trading. The yield
is now 5.5%. we continue to add shares.
Breadth has slipped to the negative
side but new lows are down to 150 continuing the retreat from the high water
new low mark last week of over 600.
Bonds are lower now and oil
and the major
measures closed to the plus side. With Altria
up 4 points the DJIA closed up 60
points at 10347. The S&P 500 gained
4 points to 1190 and the NAZZ rose 5
points to end at 2070. Breadth was almost 2/1 positive at the close and new lows were a better 220.
Treasuries gave a little ground with the two-year at 4.27% and the
ten-year at 4.49%. Oil gained $1.73
on the topical storm to maybe hurricane news and volume was light.
And the games begin again
tomorrow, same time same place.
14 October 2005 Daily Comment
And so and era ends as effective October 24, 2005
All or None (AON) and Fill or Kill (FOK) order types will be
eliminated. All AON or FOK GTC orders will expire at the close of
business on October 17th, 2005.
We remember the ‘old stock broker’ running up to the order desk shouting “buy 5,000
Moog ‘A’ at $22 fill or kill”. Of course no one runs to order desks any more;
they type their orders on a computer and click a button. Some parts of the good
old days had much more flavor.
15% higher earnings while United Health
Care had better earnings on lower sales. Citigroup downgraded Ford to sell with a price target of $7.
We will be buyers at $7.50 since we do believe that Ford family ownership
precludes any bankruptcy as it has during tough times in the auto industry in
By the way the bankruptcy filings of Delphi were a way for Delphi
to get out of their union agreements the same as the bankruptcy filings in the
airline industry. The Congress just
changed the bankruptcy rules so that individuals can’t do the same thing. Welcome
back Robber Baron Capitalism.
Well it is ‘Buy
Yom Kippur Day’ and with all the government reports to be issued in a few
minutes we’ll see how the big boys and girls want to play the data.
and CPI for September was up 1.2%
with core CPI at 0.1% with the year
over year core up 2.0%. Retail sales
were up 0.2% and ex autos plus 1.1%.
Bonds were down and rallied a bit on the news as
did the stock futures so the data had something for everybody.
Friday’s Markets October 14, 2005
8:49am and stocks opened higher out of the gate with breadth 2/1 positive
but reality is setting in and stocks are coming back down. Michigan Sentiment
was 62 versus 63 but then their football team lost to Notre Dame so we don’t
know if that number means much.
We are adding a few shares AEOS to our large aggressive accounts and Yahoo to accounts that own BMY.
and stocks are
meandering at higher levels. Motorola
opened at $21 and backed off to $20 this afternoon and we bought a few more
The WSJ is reporting that Yahoo is considering a stake in AOL.
We are heading out early for a bike ride. As we
leave Treasuries are finishing lower on the day with the two-year at 4.27% and
the ten-year at 4.50%. Oil and gold remain under pressure as do oil stocks. We
continue to think that the Refco futures situation ahs something to do with
this weakness but for whatever reason we are glad to see oil moving down
instead of up.
is at $62 down $1.08 and gold is
down $2 at $471.80.
is now 2/1 positive and new lows are
at 380 down from yesterday’s 610 number.
is up 30 points 10246 and the S&P
500 is up 6 points at 1182 with the NAZZ
at 2056 up 10 points.
Enjoy the week-end. The games begin bright and
early Monday morning.
13 October 2005 Daily Comment
was mixed and Europe was lower. Treasuries have begun
the day higher in yield. The two year is at 4.25% and the ten-year is at 4.48%.
Jobless claims were 389,000 and the
trade deficit for September was $59 billion. The Import price Index was up 2.3%
(ex oil up 1%). Oil is25 pennies lower at $63.87.
Today is Yom Kippur and so
trading volume will be lighter than usual and the big boys and girls will have
a chance to play games.
We read the following in a WSJ
article on the Refco mess and thought the understatement was funny. Of course
folks will tell you we have an unusual sense of humor.
required to disclose such "related-party transactions" with their top
officers, directors and shareholders, to alert investors to a possible conflict
of interest. While Refco showed $74.3 billion of assets, the $430 million looks large compared with Refco's $185.4 million of
shareholder equity, as of May 31.
We get e-mails:
Sometimes I think the Market has a negative bias due to
short selling and the arcane situations that let people exploit it. XXXX
disagrees with me. Obviously the shorts are having a field day recently.
Shorting is an
integral part of the market. The more shorting there is the better that is for
the bullish case-- eventually. That’s because the shorts have to be covered (unless
the companies go broke) and that means future buying pressure at either a lower
or in many cases a higher price as the folks who are short lock in a profit or
can’t take the pain. In every bear market novice folks begin shorting who don't
understand that shorting stock is not the same as being long shares. A
different psychology is involved and it is very difficult to make the crossover
from being a long investor to being short. We have never been able to do it.
When we don’t like the markets we go to cash.
The old saying
is that “When you are short you can lose all the money in the world plus
commissions charged to cover the short. When you are long you can only lose the
money you invested.”
In the case of
the Verizon and SBC arbitrage takeover situations the shorting will end when the
mergers take place. And if VZ is around the $30 level there will be a few more
days of selling as arbs unload the extra shares they receive above the
announced terms set at a $34 price level on VZ. Of course as we commented
earlier as the merger date approaches there is a ‘strange’ tendency of the
acquiring company’s share price to migrate toward the more advantage price
level for the acquirer which would be $34.
Thursday’s Markets October 13, 2005
and the major
measures opened lower but are now slightly to the plus side. We bought Motorola at $19.70 and Disney at $23.22
which is a few pennies higher than where we sold it a few months ago before its
run to $23 for accounts that own BMY.
We also added a few shares of TLAB, CSCO, GPS, and NOK to smaller accounts and VZ and DIS which we sold last week at $1.50 higher in price than we are now
paying to some larger accounts.
This morning Bear Stearns issued
a bullish report on AMAT and set a $24
price target. They expect above consensus earnings and sales.
and trading in Refco shares is halted. Refco is one of
the largest derivatives brokers. Moreover we think it is interesting that the
oil complex and gold are both lower and that the Refco imbroglio has not roiled
the financial markets more. Refco has $70 billion in positions on its books
with $500 million of capital supporting them. Hopefully most of those positions
net out but there could be some panic created yet. As with Long Term Capital we would guess that
the Fed is involved. Goldman Sachs,
which is going to be sued because they were one of the underwriters of the
Refco deal, has been hired as an advisor.
We think the eventual result is going
to be someone like Goldman acquiring Refco to calm the markets. And then the
lawsuits will settle who pays how much to whom.
3:02pm and the big boys and girls had some fun this afternoon
rallying tech stocks in the contra hour and then selling in the final hour.
The DJIA closed down 1 point at 10216. The S&P 500 lost 1 point to end at 1176 and the NAZZ gained 10 points to 2047. Oilshares were under pressure all day.
Oil ended down $1.04 at $63.08 and Treasuries were unchanged on the short end to up a few bps on the
Breadth was 2/1 negative on the NYSE and 2/1 positive on the NAZZ.
New lows hit 610 so we are getting there. Volume
Tomorrow there are bunches of
numbers (CPI, Retail Sales, Capacity
Utilization, Industrial Production,
Business Inventories and Preliminary
Michigan Sentiment not to be confused with final Michigan Sentiment) for
the big boys and girls to ponder plus more news in the continuing Refco saga.
And the games end for the week tomorrow
so join us for the fun.
12 October 2005 Daily Comment
Apple’s earnings disappointed (they only quadrupled from last year)
and the shares are down $4 in the early going today. Harley Davidson did better than and its share price is up $1.50. Japan
and Hong Kong were down big and Europe
is lower so it is going to be a rough ride this morning.
Yesterday a friend and client wrote:
Happy birthday, you now have joined the social security gang. With the
long bike ride, hose ride and hot tub, you must have had time to reflect on
life and investments. As for the life, it seems it has been good to you which
is great. On the investment side, well you’re trying and it’s been tough. I
still think you didn’t like the market but got in anyway to please some of the
investors...as I said before there is nothing but bad news out there and it isn’t
getting any better esp. higher int. rates and natural disasters ...the hole is
just getting deeper and darker
Our response was:
Life is interesting but when my clients are not making money it is not
good. But it is better than a lot of folks have.
We don't get in or out any more to keep clients happy. We get in
and out to try and make a buck. Always in October we wonder why we get in but
then we have been getting in, in October, for 25 years and only missed in 1990.
That was the year we lost 50 pounds, a George Bush was President and Gulf War I
was around the corner. This year we lost 55 pounds, a George Bush is President
and we are in a Gulf something so we hope we are not down 12% at year end.
The next year in 1991 we were up 30% so
it all evened out.
I am staying with good stuff and some nice dividend payers and I do
think I understand what is occurring.
For sure these are tough times but there have been much worse. There
doesn't look like anything that can move stocks higher but it is October.
Wednesday’s Markets October 12, 2005 Columbus Day
Today is going to be a wild day with an early down opening in the
cards and then we would hope to see a rally. But with the old adage of buy Yom
Kippur we may not get the rally till Friday which would be a nice way to end
the week as long as we don’t go down another 4% before then.
Refco is the U.S.'s
ninth-largest futures brokerage firm, with more than $4.1 billion in customer
accounts as of March, according to the Futures Industry Association.
Refco’s CEO has been indicted and
the SEC is investigating to determine how he was able to hide $450 million in
bad debts from auditors and underwriters and the SEC. This is a story that usually
occurs in October. Refco just went public and was listed on the NYSE a few months
By the way the IPO was passed on
by the SEC, auditors and these other managers of the offering Credit Suisse
First Boston LLC, Goldman, Sachs & Co. and Banc of America Securities LLC were
the joint book-running managers for the IPO. Deutsche Bank Securities
Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Sandler O'Neill & Partners, L.P. and HSBC Securities (USA)
Inc. were the co-managers.
Here come the lawsuits.
Investors Intelligence finds bulls under 50% at 44.8% and bears up to 29.2%. We are getting there (a bottom).
9:02am and the major measures are higher and we used the pop up to
sell JPM for a net (including the
dividend) loss of 40 pennies. The Refco mess mentioned above has some
derivative and IPO risk for folks and we would guess that JPM is somehow
involved. That sale raises a good deal of cash for deployment in other areas.
We also sold our TWX holding when MSFT and YHOO announced this morning that they were combining their Instant
Messaging systems. MSFT and TWX had been in talks and the other deal would seem to close out any MSFT/TWX deal.
Finally we are taking some
serious lumps selling Cabellas. We
are going to stick that money in The Gap
which is down more than our losses in CAB
and which we plan on holding and adding to through the shake out. We are
holding off for now on the GPS.
Advanced Micro Devices has $4 billion in revenue and is priced at
$22 (30 times earnings) for a market
cap of $8 billion and may earn 70 pennies this year and has negative cash flow
and debt exceeds cash on hand. Intel
sells at $22 (15 times earnings)
with revenue of $38 billion and a market value net of cash of $128 billion and $14 billion in cash and free cash flow of $7 billion.
Which stocks do you want to own?
Wrong. Up until today the street wanted AMD and hated INTC.
Now it dislikes both.
We are buying INTC at $22.85 in accounts where we
sold MSFT last week.
and after breadth
hit a 5/1 negative reading around
the major measures began moving higher. New lows for the day are about 550 but
we would guess that an 800 or higher new low number will help mark the bottom.
The rally is now fading away. We still are going with the Friday rally theory.
Tomorrow will be a thin trading day because of Yom Kippur and there may be some
volatile movement in individual stocks and maybe even the major measures.
and the DJIA finished down 36 points at 10218. The S&P 500 ended off 8 points at
1177 and the NAZZ dropped another 24
points to 2037. Breadth was ugly at over 3.5/1 negative at the bell and down
volume bested up volume by a 4/1 margin.
Treasuries closed higher in yield
with the two-year at 4.24% and the ten-year 4.45%. The 4.40% level was
resistance on the ten-year. Oil was up 59 pennies to $64.12 and gold lost $3 to
Add the games continue tomorrow
so join us tomorrow night for the results.
11 October 2005 Daily Comment
The Delphi bankruptcy and GM’s
troubles continue to dominate the financial news while a potential Avian Flu
Pandemic dominates the world news. Coupled with the New Orleans and New England
floods, the mess in Iraq, the earthquakesin Pakistan, rising interest rates and the destruction of the United
Auto Workers labor union resulting in the loss of the last high paying blue
collar jobs and spending ability -- there doesn’t seem to be a whole lot of
reason to be in stocks. But it is October and a dismal market is par for the
course in October and normally a good time for buying stocks.
As a refresher from a past
From: 10 October 2002
6:52am and as we begin on a rainy day in Wisconsin the stock futures are suggesting a higher
opening. We think yesterday’s action was
a continuation of the October wash out. Why then did we buy some stocks
yesterday? We did that because those issues had reached what for us was
true investment value. That doesn’t mean they won’t go lower. But the stock
markets are in the process of establishing at least an intermediate if not
final low. Markets don’t go straight up and they don’t go straight down. We may
very well be in a three to ten year bear market but even bear markets have significant
rallies and we think that a tradable rally is in the cards.
We have learned over the years that when
rumors of bankruptcy fill the air, when major companies like Ford and JP Morgan
are rumored to face imminent bankruptcy that the markets are probably
approaching a tradable low. Ford and JP Morgan may very well go belly up but we
will be betting that not all the current bankruptcy candidates will. And when
panic is created by rumor, lows are usually made.
Of course if you turn off the
radio and TV and read a good book and visit with the neighbors in the back yard
the conversation might turn to the Yankees or the White Sox or the Bears or the
Packers. So as always it all depends.
We get paid to watch the mess in the markets and react accordingly, but
it isn’t getting any easier even though we have seen this scene many, many
Tuesday’s Markets October 11, 2005
and the major measures opened higher on the
backs of good markets in Europe and a better than 1%
rise in Hong Kong and Japan.
That lasted till about 15 minutes
ago when stocks turned mixed as the NAZZ is trading lower and the DJIA is higher. The DJIA is higher on
the backs of GM, Altria, and IBM.But breadth is almost 2/1 negative and
new lows are around the 240 mark of yesterday. Treasuries are lower in price and higher in yield and oil is up $1.45 at $63.25
Before the sell off in oil stocks
the other stocks in the S&P 500 were down about 10% for the year so as oil
comes down and the other issues continue to move lower there is a pretty good
correction occurring below the surface as is evidenced by our stocks.
There are times to assume risk
and ride out a downturn especially if you expected it and October usually is a
month where that strategy pays. Of course with the failed rally in January, October
may also turn into a real bummer also but we are aware of the risks and
adjusting and we hope improving our holdings as different stocks offer better opportunities.
We are also trying to keep our cash levels relatively high for an October time
We bought more Nokia at $16.85 in accounts in which we
soldNYB yesterday. Nokia has
been holding its own through the correction in the same manner as AMAT. *****
From today’s action it seems
apparent that the drop in Verizon is
related to the MCI arbitrage. That’s
because MCI is holding steady as a rock.
If the holders of MCI were afraid of Verizon they would be selling but because
of the unusual terms the lower Verizon goes the more valuable MCI becomes- if
the deal goes through. And so the arbs continue buying MCI and shorting VZ and
there are no investors left to buy VZ since they, like us, spent their limit at
the $32 to $33 range.
and the DJIA closed up 14 points at 10252. The S&P 500 lost 3 points to end at
1184 and the NAZZ dropped 18 points
to 2061.Breadth was 2/14 negative. New
lows hit 300 and oil gained $1.75 to $63.55. Treasuries firmed into the close but were still higher in yield on
the day with the two-year at 4.21% and the ten-year at 4.39%.
And the games continue tomorrow.
10 October 2005 Daily Comment
We celebrated our 62nd birthday
yesterday by riding 31 miles on our bike. Katie Also rode 31 miles to make a total
of 62. We then road our horse five miles, took a sauna and collapsed.
But this morning we are bright
eyed and bushy tailed and ready to celebrate Columbus Day.
With the bond markets closed today and the Yom Kippur observance on Thursday
this week in the markets may turn on who of the big boys and girls decides to
have the most fun.
The Delphi bankruptcy is
affecting the markets today in the absence of much other news. Delphi
was and is the supplier of auto parts to GM.
We read that the Delphibankruptcy had to occur before the 17th of October and
the filing is causing a bit of turmoil in the junk bond market.
The bankruptcy had to occur before
the 17th because after that date companies that enter bankruptcy have the
proscription that officers of the company can’t make more than 10 times the
average workers’ salary in stock options and other compensation when the
company emerges from bankruptcy. Under Delphi’s proposed
key employee compensation program as part of its bankruptcy filing:
486 U.S. executives would receive cash bonuses of 30 percent to 250 percent of
their salary, totaling $87.9 million, upon Delphi's exit
from bankruptcy or sale of the company.For example, President Rodney O'Neal would get a total cash bonus of
$2.75 million, based on a $1.15 million average salary. Some 464 executives
could earn bonuses ranging from $50,000 to $475,000, based on salaries of
$120,000 to $450,000.
Ain’t socialist capitalism great?
In Japan the
executives used to commit ritual suicide.
General Motors’ share price is suffering along with Delphi and we are
wondering if the media concentration on GM’s travails will turn out to be the
same as the IBM is dead and done for talk
of the early 1990s. Just asking.
We commented on the Verizon and SBC arb situation in Friday’s post. We realized over the week-end
that both stocks went ex-dividend on October 5th and so folks
shorting the stocks don’t have to worry about a dividend being owed until next
year by which time the deals may be completed. Relatively speaking the dividend
is a decent percentage of the arb’s potential profit and so that could account
for the more pronounced weakness late last week. Also it is October and both
stocks are on their lows so Mutual Funds may be taking losses. The tax loss
selling by mutual funds will end on Halloween. Finally the trading volume in
the shares has been low and mostly on the sell side as the folks who are buying
stocks at this time is not interested in dividend paying clunkers.
Monday’s Markets October 10, 2005
and stocks have
been higher and lower all day with the major measures mixed at the present
time. Breadth is 5/4 negative and oil is down 64 pennies at $61.20. Bonds are
closed today. Volume is holiday slow.
We are adding AMAT and CSCO and SBC and CAB to accounts. AMAT has been acting well throughout the correction.
CAB has been a one way stock (both ways) and so we are buying
gingerly. CAB is was a new issue at $22 last year and traded over $30 so everyone
who owns it since the public offering has a loss. And so the selling may
continue but we want to begin and increase positions at this level which is 13
times next year’s earnings.
We have had good luck with CSCO.
SBC yields 5.6% at this level. Once the arb situation disappears at
year end we would expect the more than
the market weakness in the share price to also.
To pay for tech buys and stay
relatively neutral on the day we sold MSFT
for a 60 pennies loss and NYB for a 25 pennies loss.
We think AMAT and CSCO have more zoom in them than MSFT
NYB sold off today on no news and that bothered us. In this kind of market that means sell.
We know NYB is trading on its yearly
low (but so are most of our other stocks) but we are more comfortable with JPM and FITB both of which are on their lows.
We continue to have a good cash
position in large accounts for future investment.
and the big boys and
girls did sell programs in the last few minutes to mark stocks down. The DJIA closed down 49 points at 10243.
The S&P 500 lost 9 points to end
at 1187 and the NAZZ dropped 12 points
to 2079. UGH!
Oil gained 44 pennies to finish
at $62.28. Breadth was 2/1 negative and down volume on the NYSE was 4 times up
volume. New lows expanded to 240 from 200 on Friday.
The correction is giving us the opportunity to continue to refine and
improve our portfolios. We get this chance every October.
And the games begin in earnest
7 October 2005 Daily Comment
We had been wondering what had happened
to all the terror alerts. No more do we wonder as a terror alert has been
issued for the New York subway
system this morning. During the election campaign there was an alert every
other day. After the elections, nada. Now when the administration is taking it
from both ends of the political spectrum a terror warning for New
York following a ‘terrorists
want to take over the world’ presidential speech. As the NYT put it: A senior White House official said Thursday
evening that the president's 40-minute speech arose from Mr. Bush's desire to
remind Americans, after "a lot of distractions" in recent months,
that the country was still under threat, and had no choice but to remain in Iraq so Al Qaeda did not use
it as a base to train for attacks on the United States and its allies. Coincidence
we are sure.
The big economic number today is
the employment report and the media talking heads on CNBC are speculating and
pontificating about the number. With the New Orleans
and Gulf situation the number is going to be meaningless because the Labor
Department will have adjusted it to account for the Hurricanes.
The stock markets are obviously
in a lot of pain and confusion. Why October happens to be the month when this
usually occurs is a mystery. It may have to do with the changing of the season,
the beginning of a new budget year for the U.S.,
the final month of campaign season every two years, the Baseball World Series
and the beginning of football and basketball and hockey, and finally it may
just be a continuation of the harvest festivals and early Halloween scariness.
Whatever it is it is doing a good
job again this year. From complacency last week the technical indicators have
moved to bearishness this week. The question of how long and how far down is
obvious but inscrutable. And so we are going along adjusting portfolios to
conditions and hoping to catch the magic carpet ride that will follow the
It seemed to us that the under loved
big cap tech stocks were seeing some rotational buying yesterday since the NAZZ
was down while they were up. The big cap techs may have become the stocks of
last resort for many big boys and girls when looking to stay in the markets
especially since these tech stocks haven’t done much for anyone lately.
Well that is our theme and we are
going to stick with it until we don’t. Today is Friday and so we only have one
more day of confusion. Let the games begin.
Friday’s Markets October 7, 2005
We aren’t sure you can handle
this but our tech guru says that the ‘get out of Dodge’sell
signal was issued on Thursday. Coupled with the seven Samurai sell signal
of Wednesday, events and the stocks markets are not looking good for the home
team over the short term. Our plan is to ride out the signal and add to positions
as the probable sell off continues. We will hope for the ‘hop on the freight train’ buy
signal soon after the end of Yom Kippur on October 13.
Asian markets were mixed
overnight with Hong Kong up fractionally and Japan
down another 1% after Thursday’s sell off. European markets are fractionally
lower. Oil is over $62 again and Treasuries are opening a bit weaker ahead of
the employment number.
and the envelope please:
the employment report says that non farm payrolls declined by 35,000 jobs. The
forecast was for a loss of 130,000 jobs. But the Labor Department counted jobs held
by folks not yet fired and also adjusted June and July numbers to add 70,000
jobs. Good for the Labor Department’s ability to adjust bad numbers into good
numbers. Treasuries are lower on the news but so are stocks futures.
4.25% yield on the Treasury
two-year as the potential of future Fed rate hikes becomes more certain.
A Prudential analyst is
suggesting that JP Morgan and Morgan Stanley might merge for cost
savings and synergies. At least the name would be synergistic. We don’t think
Mack and Dimon would be willing to share the top spot.
9:53am and the major stock measures have been higher all morning
but are beginning to give ground. Breadth is positive but new highs outnumber
new lows 2/1. Treasuries are back to flat for the day after a sell off on the
employment report a few hours ago and oil is now up a few pennies at $61.45.
and stocks are
meandering as are the markets. Yesterday’s big NYSE volume is not being
repeated and with the Monday bank and bond holiday for Columbus Day it seems as
if the market may close with a whimper.
Verizon is down again today and it is because we are in a lousy
market but also because there is a very complicated arbitrage situation. VZ has
agreed to pay $26 for MCI which is
currently priced at $25.50. Of that price $5.60 is to be paid in cash and the
rest in Verizon shares with a guaranteed value of $21.40. The original deal was
for .5743 shares of VZ to be issued. But as Verizon’s share price drops in value because the arbs are buying MCI and shorting VZ to lock in a profit as long as the deal goes through, the
arbitrage situation becomes more complicated because more VZ shares have to be issued to MCI
shareholders. And the more shares having to be issued causes the arbs to short
more VZ, we think. Our brain is too old and tired to figure it
out but it is now obvious that VZwill
be under pressure until the deal is closed and they ought to fire their
investment bankers for figuring out such a screwy deal. The FCC is going to
comment on the merger on Tuesday October 13 and that should go a long way toward
getting the deal done. Until the merger is completed or folds, VZ will remain under pressure. We own a
big chunk of VZ now so we won’t buy
much more unless the price drops to $29. We are not disturbed by the pressure
on the share price except for wishing we had waited a bit longer to buy. At our
cost price the yield is almost 5%. We aren’t buying MCI because the deal may fall through and the risk is not worth the
reward. Also stock prices have the unusual habit of moving up in price as a
merger closing dates approaches when shares of stocks are involved.
and the DJIA closed up
7 points at 10295. The S&P 500
gained 5 points to end at 1196 and the NAZZ
rose 6 points to 2090. Both the NAZZ
and DJIA are down 4% for the year
while the S&P 500 is down 1.3%.
At the bell breadth was 5/4 positive and volume
for the day was light. New lows
again exceedednew highs by a 2/1 margin but the absolute number of new lows was lower
than yesterday at 180.
Oil ended the day up 48 pennies at $61.84 and Treasuries closed early today and higher with the two-year at 4.17%
and the ten-year at 4.35%.
And tomorrow is Saturday so ride
a horse or bicycle or take a walk and enjoy the fall weather and forget about
the falling market. There is always next week when the games will begin again
6 October 2005 Daily Comment
Well all was fine until yesterday
when the confluence of several Fed folks speaking about inflation coupled with
folks returning from the holy day and general October malaise all combined to introduce
fear into the stock markets.
If we can’t have fear in the
markets in October when can we? Our take is that traders need some action and
since they can’t get it on the upside, and their oil trades have turned sour, with
the grain complexes boring which leaves stocks the only place to play.
The Fed speakers see inflation
and will raise rates yet Treasuries rallied yesterday. The high price of
gasoline is going to inhibit spending yet gasoline consumption is at a 17 year
low and refineries are cutting production of gasoline.
The economy is going to roll over
but the Fed sees strength. Obviously there is enough ammunition for both the
bull or bear case. And bird flu is going to kill us all so who cares anyway.
And on these happy notes we return
from 6 days of rest and relaxation and visiting with clients and friends. The
weather has turned autumnal which sure beats the 80 degree stuff we endured in Chicago.
We like this time of year because
of the weather change but also because it usually allows us a chance to find
decent stocks values at October sale prices. We know that everything is wrong
and will never be corrected. The deficit is too large, New
Orleans is a mess, there is too much government
spending and health care costs continue to rise. Every concern is new and old
at the same time.
Hopefully folks are taking the
time to watch the White Sox win a few games in between dealing with all the world’s
and markets’ problems.
While we were away we switched Disney to Applied Materials on the theory that if there is to be a rally in
the fourth quarter the tech stocks will lead it. And this year we plan on
staying with big cap tech stocks for our trading.
We own some out of favor big caps
(JPM, FITB, VZ, and GPS). There is going
to be more pain this month but we do think that our choices will reward us at
Thursday’s Markets October 6, 2005
The S&P is down 3% this week as the quarter end mark-ups have given
way to new quarter selling. Last week the S&P was at a three year high and
now it is at a six month low.
All the major markets around the
world are lower with Japan
and Hong Kong off 2% and Europe
down over 1%. The dollar is weak, Treasuries have a bid and oil is lower.
Federated Dept Stores who just bought May Dept Stores and has a ton
of debt is issuing warnings for the third and fourth quarter. The last time
Federated owned this may stores was back in the 1980s when the Belzbergs in Canada
created a leveraged monstrosity that eventually had to unwind all its
acquisitions in bankruptcy.
Jobless claim were up 16,000 to
As housing prices flatten and
weaken we think money will flow back into stocks.
The Gap’s same store sales were down 6% when the street was expecting
down 7%. That is small comfort. *****
The technical guru we like to
read says he received the seven Samurai sell signal yesterday. That means that
seven of his technical indicators went bearish. We are going to raise a bit of
We sold our IP, DD, AVP, EL and GE holdings. We lost on the first four
and scratched on the last. We want the cash since the rally failed again at
S&P 500 1250 and rolled over below 1200. The path to riches is never straight
and there are times and months when quick action and turns are called for.
October is always one of these times and months.
All of these stocks are source of cash stocks for mutual funds through October 31 and
probably have offsetting loss potential for funds hoping to mitigate any
capital gain sting. We are not abandoning them, we just don’t’ want to rent
them right now.
The rally this morning is very
thin and we expect a rollover to more downside this afternoon or tomorrow.
and the major
measures are mixed with breadth negative. Oil is at $61.55 down $1.24 and
Treasuries remain firm.
On days like today we watch which
stocks we own exhibit strength (are up) so that when the afternoon sell off commences
we can consider adding more. TLAB, CSCO,
MSFT, and AMAT are all up as the
major measures move lower. We expect them to give up the ghost today also but
we think up in a weak market is a positive sign for the eventual rebound. INTC isn’t on the list today. JPM has also been higher most of the
day and it went x-dividend yesterday.
The Verizon/MCI merger was approved by MCI shareholders today. This is
an arb situation and there are probably a lot of hedge players in the shares
right now which we think may be one of the reasons for the extraordinary
weakness in the share price. There had been opposition to the merger and maybe
the MCI holders opposed to VZ who have big profits are selling,
forcing the VZ down also.
and the big boys and
girls rallied the major measures into the close after the DJIA was down 90 points with 45 minutes to go. They didn’t have
enough power to get the measures to the positive side. They may do that
tomorrow. At the bell the DJIA was
down 30 points at 10287. The S&P 500
lost 5 points to finish at 1192 and the NAZZ
dropped 19 points to 2084.
Breadth was over 3/1 negative. Volume
was moderate. Oil ended down $1.11
at $61.68 and Treasuries closed
unchanged to down with the two year at 4.19% and the ten-year at 4.37%.
And tomorrow is Friday and the
casino closes for the week-end. We’ll be around all day watching the action for
you and reporting after the close. So let the games continue.
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