Saturday, November 02, 2002

11/2/02 Grip That Yellow Brick Road

The drive along the country road is beautiful. The colors are something to behold. Not a cloud on the horizon. I'm in hog heaven. I've just logged 4 straight weeks of stock market gains. November has just begun. How sweet it is! In the last dozen midterm election years there have been only two down Novembers- 1974 and 1994. We've just come off the low in early October and bounced a profitable 1200 Dow points. The consensus is that 4th quarter eanings will increase by 17% and in 2003 by 15%. We're off to the races. Look. I am driving with only one hand on the wheel and my head is outside the front window. The road is so magnificent. There isn't another car to be seen. I'll just drive with no hands and steer with my smile. Not to worry. My airbag has Alan Greenspan stenciled on the front. He's Superman's first cousin on his second wife's side. Alan looks out for all of us. He'll lower interest rates and I'll refinance my mortage for the 11th time in 2002. Capitalism works.

I hope you are one of the lucky ones with health insurance, workman's comp, and a 401K with some worth. I hope you have a job. May I suggest you get a holiday gift for Mr. Greenspan. How about a red, white, and blue parachute?

Friday, November 01, 2002

11/1/02 Hello November

We need some new cooks. The present economic recipe is for the pits. We have lower than anticipated 3rd quarter GDP; higher than expected jobless claims; the number of hours worked each week is down; business has cut investment spending for six straight quarters; there is overcapacity; we have a rising jobless rate; and over the next six months businesses expect to trim payrolls rather than hire. Maybe Wolfgang Puck should become the next Fed chairman.

It's not all bad though. The government continues to hire staff. They are attempting to keep people off the streets. They're reverting to the program initiated in the 1930's. It's not a concern. When the budget deficit gets larger, then more dollars can be printed. It's no wonder the dollar is at a two month low against the Euro.

Thursday, October 31, 2002

10/31/02 Goblins

The last three weeks should enable this October to be the best October on record. The market has climbed a wall of worry- disastrous consumer sentiment, lousy leading economic indicators, three straight weeks of declines for mortgage applications which provide the sign for slower housing activity, and 40% of consumers planning to spend less on gifts this holiday season. Operationally, the best results have been reported by consumer staple companies- Colgate, P&G, and Unilever.

Yesterday the CEO of IBM chimed in as a forecaster. The market took his word as the gospel. Of course, he missed the extent of the decline in the computing and IT industry as well as the second half economic weakness we are experiencing. What did he say? He stated that short term circumstances are difficult but that customers are ultimately optimistic about the long term. Additionally, he proclaimed the economy has hit bottom or is flattening out. He must have based that on being ultimately optimistic despite difficult short term circumstances. He could be the second coming of Yogi Berra. Come to think of it. There is only one Yogi Berra, and I think Yogi makes more sense.

I for one will not be eating a great deal of candy this Halloween. I am on a candy strike- at least candy made by Hershey's. The stockholders were disenfranchised and never had a chance to sell to Wrigley.

Wednesday, October 30, 2002

10/30/02 The Consumer Has It Right

The Conference Board proclaimed yesterday that "the outlook for the holiday retail season is now fairly bleak." That statement is perfectly understandable after the latest reading on consumer confidence plummeted to 79.4 from September's 93.7. The expectation was for a number around 90.

The consumer is on the right path to spending less and attempting to save more. The consumer is laden with 14% of disposable income going towards debt service. When you add the latter to paying taxes and accounting for normal living expenses, the monthly budget has difficulty in coming out on a positive note. In itself that is a downer. When you combine it with job layoffs and job instability, you have the foundation for unstable waters. This situation is not easily overcome, and it will take time to right itself.

I have often said over the past three months that the U.S. econnomy could no longer depend on the consumer to carry two-thirds of the load. Business investment is silent. Interest rates are already at a 40 year low. Don't look to the Fed to solve the problems. The landscape is definitely murky.

Tuesday, October 29, 2002

10/29/02 The U.S. Economy

A CNN/USA Today/Gallup poll indicated 60% of Americans rated the economy poor in October.

Richard Curtin, director of the University of Michigan's Consumer Research Center, said "consumer spending will depend on getting even larger discounts, and profits will depend on making even larger cost cuts." This sounds like growing deflation and more job cuts.

Curtin went on to say that "accumulated loss in consumer confidence could tip the economy back into recession."

The Conference Board will release its monthly index of consumer confidence this morning.

Talking about confidence or the lack of, IBM is reintroducing a 90 day deferral on financing payments and this includes initial down payments. Financing rates are as low as 3.1%.

Cisco's Catalyst 6500 LAN Switch accounts for about 25% of the company's total sales. Cisco lowered its price on this product by 15-35%.

Monday, October 28, 2002

10/28/02 When Is The Bear Market Over For You?

This question is asked time and time again each day. The answer is easy. The bear market has ended when the stocks you purchased at $50 no longer are selling for 5 cents. When they rally to $5, it's time to break open the Pellegrino. When they go back to $10, then mass hysteria has set in and you've hit irrational exuberance. In other words, for most of you the losses will be permanent.

No one likes to lose money; however, it's well to remember that the first loss is the best loss. Limit your losses and let your winners run- but only with the great ones. You never lose money by taking a profit. The stock market does not have a place for hopes and prayers or crystals or tarot cards. Hard work, long hours of study, and independent thought will bring better results.

All of the above may sound harsh and sarcastic. It's meant well, and maybe will provide an improved path to future stock market profits.

Sunday, October 27, 2002

10/27/02 World Series Time For The Consumer

Make the retailers pitch to you. There are only 26 shopping days between Thanksgiving and Xmas. DVD players are $59 or less vs $200 two years ago. PlayStation 2 and XBox are being discounted. Digital cameras are being reduced in price. 0 percent financing and free leather recliners are being offered on digital projection televisions. You are in the driver's seat. Drive a hard bargain and drive down the prces. Make deflation work for you. There are too many retailers out there with too much inventory and too few selling days.

We have seen patience on Wall Street pay off. Value will win out. It's only a matter of time. This week the numbers will indicate rising unemployment and lower consumer confidence. Wait for your pitch from the retailer. Don't swing at a ball out of the strike zone. The count is in your favor. Make them pay and not you.