10/19/02 Consumers Are Spooked
Halloween sales of candy and costumes are forecast to be flat. WalMart says theirs "are not where we would like them."
Disney's debt rating is reduced for the 3rd time in 2 months. That is not easy to accomplish! No wonder Eisner has board backing.
The U.S. trade gap ballooned to a record $38.5 billion in August. The government takes 60 days to release these figures. I wasn't slow in noticing this news. Our account deficit with China continues to climb. If this trend were to be maintained, it's conceivable China could tender for the U.S. in 2050. Of course, they might not want to be burdened with our healthcare costs and social security concerns.
This should be an exciting world series. We have two former Dodger teammates going head to head as managers. That must be a first.
Friday, October 18, 2002
10/18/02 There's More Than The Headlines
As I often stated, over the past 25 years Microsoft is easily the biggest business success story. Yesterday the media butchered Microsoft's news release. Yes, their 1st quarter results were above expectations. New licensing programs were the major reason. I failed to read, however, that there was a positive swing in investment income to the tune of one billion dollars. Operating margins were lower, and the second quarter will be lower. The company raised their estimate for the entire year by 5 cents per share, and therefore, results should exceed the prior year by maybe 3-5 cents to about $1.90. At $53 the stock is not exactly a bargain.
Over the past week treasuries have been pounded and yields have risen by 55 basis points. This is a huge move in one week, and is another illustration of extreme market volatility. Some money managers have been shifting their asset allocation and purchasing more stocks- in hopes that last week saw the bottom in stock prices. Good luck to them.
Sears dropped another 30% yesterday, and is now down almost 50% in the past 2 weeks. They made additional provisions for uncollectable credit accounts. I hope you don't believe Sears is alone in this area. This is just the tip of the iceberg for financial institutions.
Delta Air is laying off another 8000 and Sun Microsystems 11% of its workforce. Ericsson's numbers were a nightmare. Eastman Kodak's results were a pleasant surprise. Colgate, one of the great ones, continues to deliver in tough times.
It's interesting that the unemployment claims rose sharply, that there was an unexpected decline in September industrial production, and yet housing permits were the highest in 16 years. Maybe record low mortage rates helped the latter. In the last week those rates have risen 15 basis points or more.
As I often stated, over the past 25 years Microsoft is easily the biggest business success story. Yesterday the media butchered Microsoft's news release. Yes, their 1st quarter results were above expectations. New licensing programs were the major reason. I failed to read, however, that there was a positive swing in investment income to the tune of one billion dollars. Operating margins were lower, and the second quarter will be lower. The company raised their estimate for the entire year by 5 cents per share, and therefore, results should exceed the prior year by maybe 3-5 cents to about $1.90. At $53 the stock is not exactly a bargain.
Over the past week treasuries have been pounded and yields have risen by 55 basis points. This is a huge move in one week, and is another illustration of extreme market volatility. Some money managers have been shifting their asset allocation and purchasing more stocks- in hopes that last week saw the bottom in stock prices. Good luck to them.
Sears dropped another 30% yesterday, and is now down almost 50% in the past 2 weeks. They made additional provisions for uncollectable credit accounts. I hope you don't believe Sears is alone in this area. This is just the tip of the iceberg for financial institutions.
Delta Air is laying off another 8000 and Sun Microsystems 11% of its workforce. Ericsson's numbers were a nightmare. Eastman Kodak's results were a pleasant surprise. Colgate, one of the great ones, continues to deliver in tough times.
It's interesting that the unemployment claims rose sharply, that there was an unexpected decline in September industrial production, and yet housing permits were the highest in 16 years. Maybe record low mortage rates helped the latter. In the last week those rates have risen 15 basis points or more.
Thursday, October 17, 2002
10/17/02 Corporate Disappointments
I mentioned yesterday that a 1000 point Dow rally would not prevent bad news from occurring. Yesterday disappointing results were announced by Coke, Boeing, Motorola, Novellus, Plantronics, Ultratech and others. Weyerhaeuser, Honeywell, and Retek all announced layoffs and additional layoffs are expected to be announced within the semiconductor industry.
After the close IBM had a 3rd quarter conference call, and the stock rallied sharply to 70. I listened to the call and read their release. Their income from continuing operations was flat, their revenue was down 2%, and gross margins declined. So why did the stock rally? Management projected a 4th quarter revenue level which excited the Street. I was in the minority. The projection was well within prior announced expectations, and frankly, that projection is nothing to write home about. The Street is grasping for straws, and that has proven to result in unfavorable investing returns.
I mentioned yesterday that a 1000 point Dow rally would not prevent bad news from occurring. Yesterday disappointing results were announced by Coke, Boeing, Motorola, Novellus, Plantronics, Ultratech and others. Weyerhaeuser, Honeywell, and Retek all announced layoffs and additional layoffs are expected to be announced within the semiconductor industry.
After the close IBM had a 3rd quarter conference call, and the stock rallied sharply to 70. I listened to the call and read their release. Their income from continuing operations was flat, their revenue was down 2%, and gross margins declined. So why did the stock rally? Management projected a 4th quarter revenue level which excited the Street. I was in the minority. The projection was well within prior announced expectations, and frankly, that projection is nothing to write home about. The Street is grasping for straws, and that has proven to result in unfavorable investing returns.
Wednesday, October 16, 2002
10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap. 10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, in my view, the stock market does not represent good value and is not cheap.
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap. 10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, in my view, the stock market does not represent good value and is not cheap.
10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap.
Good value is in the eye of the investor. For me the last two times the market was truly an excellent value was in 1982 and in 1974. Patient investors have a better chance to achieve above average results. Often that requires sitting on one's hands and doing nothing.
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap.
Good value is in the eye of the investor. For me the last two times the market was truly an excellent value was in 1982 and in 1974. Patient investors have a better chance to achieve above average results. Often that requires sitting on one's hands and doing nothing.
Tuesday, October 15, 2002
10/15/02 Polls Taken In 1998 And Now
In 1998 a Gallup Poll indicated that two-thirds of those surveyed found it a good time to invest. It was for the next two years. In a recent Associated Press poll 64% thought it a bad idea to invest now. Time will tell how smart those recently surveyed are.
Osama bin Laden: "We congratulate our Islamic world for the heroic operations of courageous jihad carried out by its pious fighter children in Yemen, against the tanker of the crusaders, and in Kuwait, against the American invasion and occupation forces." In my view the free nations of the world must come together to eliminate this on-going horror. Hittler was eliminated and so shall these evil doers.
In 1998 a Gallup Poll indicated that two-thirds of those surveyed found it a good time to invest. It was for the next two years. In a recent Associated Press poll 64% thought it a bad idea to invest now. Time will tell how smart those recently surveyed are.
Osama bin Laden: "We congratulate our Islamic world for the heroic operations of courageous jihad carried out by its pious fighter children in Yemen, against the tanker of the crusaders, and in Kuwait, against the American invasion and occupation forces." In my view the free nations of the world must come together to eliminate this on-going horror. Hittler was eliminated and so shall these evil doers.
Monday, October 14, 2002
10/14/02 Mitchell E. Daniels Jr.
This gentleman is the Director of the OMB(Office of Management and Budget). Last week he wrote a letter to Congress in which he stated "federal government's accounts would never be tolerated in the private sector...repair of the system so badly broken will not happen overnight." He was referring to the trillions of dollars in unsubstantiated balance adjustments occurring yearly in federal departments and related that 20 of the largest agencies had serious chronic problems.
This gentleman is the Director of the OMB(Office of Management and Budget). Last week he wrote a letter to Congress in which he stated "federal government's accounts would never be tolerated in the private sector...repair of the system so badly broken will not happen overnight." He was referring to the trillions of dollars in unsubstantiated balance adjustments occurring yearly in federal departments and related that 20 of the largest agencies had serious chronic problems.
Sunday, October 13, 2002
10/13/2002 The Unsuccessful Investor
A common cause for the lack of success is the frequency with which investors come to believe only what they wish to believe.
One case in point is GE. On friday the company announced that they had hit their targets for the third quarter. The CEO said they had encountered "a more difficult environment than the one we had expected in July... and was counting on extremely low economic growth for 2003." Mr. Immelt did not provide a forecast for their earnings in 2003. He is assuming a 2% growth in the GDP for 2003. It is most unfortunate for investors that they failed to read beyond the 3rd quarter numbers.
Back in 1957 Arthur Rock was one of the forefathers of the Silicon Valley. He stated that this is the worst slump he has seen in the Valley and "there are no jobs. None. Zero."
A recent NY Times/CBS poll indicated about half of Americans are worried that someone in their household will be laid off within a year's time. It's no wonder that consumer confidence is the pits.
A common cause for the lack of success is the frequency with which investors come to believe only what they wish to believe.
One case in point is GE. On friday the company announced that they had hit their targets for the third quarter. The CEO said they had encountered "a more difficult environment than the one we had expected in July... and was counting on extremely low economic growth for 2003." Mr. Immelt did not provide a forecast for their earnings in 2003. He is assuming a 2% growth in the GDP for 2003. It is most unfortunate for investors that they failed to read beyond the 3rd quarter numbers.
Back in 1957 Arthur Rock was one of the forefathers of the Silicon Valley. He stated that this is the worst slump he has seen in the Valley and "there are no jobs. None. Zero."
A recent NY Times/CBS poll indicated about half of Americans are worried that someone in their household will be laid off within a year's time. It's no wonder that consumer confidence is the pits.
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