9/10/02 Quotes For Tuesday
Bank for International Settlements: "The recent decline in share values might forshadow some downward pressure on house prices...that to a greater extent than before, share prices indicated a loss of confidence in the financial sector... every previous recession has been accompanied by at least a slowdown in housing price increases."
Tim Loughran and Jay Ritter, Why Has IPO Underpricing Changed Over Time? : "Average first day gain in IPOs was 7% during the 1980s, 15% during 1990-98, but 65% during 1999-2000."
Sir Edward George, chairman of G10 central bankers: "It is not a strongly negative situation. I do not think there was anybody talking in terms of double dip...the wages developments in the eurozone plus very slow productivity growth in this more modest growth environment could have an upward effect, not a huge upward effect, on inflation."
Rand Institute: "Asbestos lawsuits affect 85% of the US economy... the longest-runing mass tort litigation in US history."
Monday, September 09, 2002
9/9/02 The Colors On Our Flag Do Not Run. They Fly.
As we begin the week of September 11, I give thanks for living in this great country of ours. On September 11 thousands of innocent Americans died along side hundreds and hundreds of freedom fighters, our every day heroes. Wars have been fought for centuries in this country. We will win this war just as we have defeated Hittler and other demons before him. As Americans stand together, we get stronger and our collected will rings with increasing resolve. Our flag flies with honor, grace, and strength.
As we begin the week of September 11, I give thanks for living in this great country of ours. On September 11 thousands of innocent Americans died along side hundreds and hundreds of freedom fighters, our every day heroes. Wars have been fought for centuries in this country. We will win this war just as we have defeated Hittler and other demons before him. As Americans stand together, we get stronger and our collected will rings with increasing resolve. Our flag flies with honor, grace, and strength.
Sunday, September 08, 2002
9/8/02 Sunday's Thoughts
Stock brokerage firms employ roughly the same number of people as live in San Francisco- 727,000. The comparison ends there.
"Nothing has come to anybody's attention that we have done anything wrong," proclaimed Citigroup's Sandy Weill. Just to be charitable Citigroup is paying a $200 million fine to settle alleged FTC charges of predatory lending practices. Imagine the fine were it an accounting scandal. Someone could have been indicted.
Crude oil is back to a one year high of $30 a barrel.
We have a $10 trillion U.S. economy. The 2 year bear market has wiped out $7 trillion in wealth. This might be an indication of how inflated the values really were. Ben Graham would argue they still are overvalued.
When Williams Companies took down a one year loan from Buffett's Berkshire Hathaway, the interest rate was set at 19.8%. Williams must have put the loan on its Visa or Mastercard.
Stock brokerage firms employ roughly the same number of people as live in San Francisco- 727,000. The comparison ends there.
"Nothing has come to anybody's attention that we have done anything wrong," proclaimed Citigroup's Sandy Weill. Just to be charitable Citigroup is paying a $200 million fine to settle alleged FTC charges of predatory lending practices. Imagine the fine were it an accounting scandal. Someone could have been indicted.
Crude oil is back to a one year high of $30 a barrel.
We have a $10 trillion U.S. economy. The 2 year bear market has wiped out $7 trillion in wealth. This might be an indication of how inflated the values really were. Ben Graham would argue they still are overvalued.
When Williams Companies took down a one year loan from Buffett's Berkshire Hathaway, the interest rate was set at 19.8%. Williams must have put the loan on its Visa or Mastercard.
Friday, September 06, 2002
9/6/02 Posting #3 Voodoo Unemployment Rate
There is no way the unemployment rate dropped. A survey of 60,000 households was taken. How about looking at the overall available data. There are still 1.5 million people out of work for 27 weeks; the 4 week moving average for first time unemployment claims is the highest in about 3 months; only 162,000 non-farm payroll jobs have been added in the past 4 months and that includes 39,000 in the latest period, or 2000 below the 4 month average. The private sector lost jobs in the latest period. Do the math.
There is no way the unemployment rate dropped. A survey of 60,000 households was taken. How about looking at the overall available data. There are still 1.5 million people out of work for 27 weeks; the 4 week moving average for first time unemployment claims is the highest in about 3 months; only 162,000 non-farm payroll jobs have been added in the past 4 months and that includes 39,000 in the latest period, or 2000 below the 4 month average. The private sector lost jobs in the latest period. Do the math.
9/6/02 Posting #2 Spur Consumer Spending
Here's my plan. The goverment should issue credit cards to all consumers. They would come with 0% interest and no monthly payments until 2005. Let the consumer spend our way out of the present economic malaise instead of the Congress running up the budget deficits on favorite pork programs and overstaffing.
Right now 40% of credit cards are held by sub-par borrowers. Extending credit cards to everyone wouldn't be such a leap of faith. Maybe the government could carry the debt as an off balance sheet item. They can hire some folks from Enron to show them the way.
Here's my plan. The goverment should issue credit cards to all consumers. They would come with 0% interest and no monthly payments until 2005. Let the consumer spend our way out of the present economic malaise instead of the Congress running up the budget deficits on favorite pork programs and overstaffing.
Right now 40% of credit cards are held by sub-par borrowers. Extending credit cards to everyone wouldn't be such a leap of faith. Maybe the government could carry the debt as an off balance sheet item. They can hire some folks from Enron to show them the way.
9/6/06 The Employer Of Last Resort
Great news!!!! Payrolls increased 39,000 for August. Now the bad news. The entire increase was new hiring by the government. Nothing has changed. With enormous deficits the government just spends and spends with money they don't have. If this were a business, the doors would have been closed a long time ago.
Great news!!!! Payrolls increased 39,000 for August. Now the bad news. The entire increase was new hiring by the government. Nothing has changed. With enormous deficits the government just spends and spends with money they don't have. If this were a business, the doors would have been closed a long time ago.
Thursday, September 05, 2002
9/5/02 Posting #2 The United States
The latest ISM employment index fell to 47.3, and this reflects the 18th consecutive month of job losses. The four week moving average of first time unemployment claims rose to its highest level since June 8. For anyone dismissing these facts, WalMart certainly is paying attention as their latest sales numbers rose only 3.8%
The latest ISM employment index fell to 47.3, and this reflects the 18th consecutive month of job losses. The four week moving average of first time unemployment claims rose to its highest level since June 8. For anyone dismissing these facts, WalMart certainly is paying attention as their latest sales numbers rose only 3.8%
9/5/02 Germany
Their unemployment rate rose to 9.9% and manufacturing orders dipped. If large developed economies are weak, who is going to purchase our exports? It's pretty predictable our unemployment rate will rise in the near future. When it does, consumer confidence will weaken some more. You can bet earnings estimates will continue to drop. Winter will soon be upon us. One might consider investment hibernation.
Their unemployment rate rose to 9.9% and manufacturing orders dipped. If large developed economies are weak, who is going to purchase our exports? It's pretty predictable our unemployment rate will rise in the near future. When it does, consumer confidence will weaken some more. You can bet earnings estimates will continue to drop. Winter will soon be upon us. One might consider investment hibernation.
Wednesday, September 04, 2002
9/4/02 Posting #2 Thoughts For The Afternoon
I love all the talk from pundits who say stocks are cheap. What's cheap is their talk. Wake me up when one pundit says he or she is purchasing stocks for his/her own account and is unhedged.
In a prior blog I gave my thoughts on Hershey as a risk arbitrage investment. Now to add some spice a judge issued a TRO against a possible sale. Going into court should be avoided at all costs. As I said, buying some Reese's in a store is the best idea.
A German newspaper reports that UBS has thoughts of making an offer for Merrill Lynch. UBS denied the story. At some time I believe Merrill Lynch will be acquired.
I love all the talk from pundits who say stocks are cheap. What's cheap is their talk. Wake me up when one pundit says he or she is purchasing stocks for his/her own account and is unhedged.
In a prior blog I gave my thoughts on Hershey as a risk arbitrage investment. Now to add some spice a judge issued a TRO against a possible sale. Going into court should be avoided at all costs. As I said, buying some Reese's in a store is the best idea.
A German newspaper reports that UBS has thoughts of making an offer for Merrill Lynch. UBS denied the story. At some time I believe Merrill Lynch will be acquired.
9/4/02 The Nikkei 225
With a closing low just above 9000 the Nikkei made a 19 year low. You're possibly thinking 9000 isn't so bad because the Dow is at 8300. The difference is a drop of 30,000 points rather than 4000. What's a few points between friends.
You might be thinking Japan is Japan and we're the U.S. As long as men put their pants on one leg at a time and women need to snap their bras closed, there are similarities to cultures. Countries are not run by robots. When the good times roll, most everyone believes they'll roll on for ever. It gets infectious and then the next thing you know there is an infection caused by overindulgence and it is necessary for the patient to rest and get stronger. Japan has been in that state for 19 years. The U.S. has just begun the process. If you rush out too soon, you'll just have a worse relapse.
With a closing low just above 9000 the Nikkei made a 19 year low. You're possibly thinking 9000 isn't so bad because the Dow is at 8300. The difference is a drop of 30,000 points rather than 4000. What's a few points between friends.
You might be thinking Japan is Japan and we're the U.S. As long as men put their pants on one leg at a time and women need to snap their bras closed, there are similarities to cultures. Countries are not run by robots. When the good times roll, most everyone believes they'll roll on for ever. It gets infectious and then the next thing you know there is an infection caused by overindulgence and it is necessary for the patient to rest and get stronger. Japan has been in that state for 19 years. The U.S. has just begun the process. If you rush out too soon, you'll just have a worse relapse.
Tuesday, September 03, 2002
9/3/02 Posting #3 It's Just Business
As I mentioned at the beginning of my Aug. 19 blog, 9000 on the Dow and 1400 on the Nasdaq were good spots to sell into the then rally in this 28 month bear market. No one enjoys losing money. The idea is to preserve capital by limiting losses and letting the gains in great companies run. That's the way to come out a winner. We cannot be right on all of our investments. When wrong, swallow the red ink and don't take it personally. The market doesn't know your name or recognize your face. Learn from the loss and don't repeat the same mistake. Don't make excuses. It's your money and it's your decision to buy or sell a stock. If you've given power of attorney to someone else, that too is your decision. Do not lose more than you can afford- under any circumstances. Use stop losses when necessary. Bear markets can be ugly. They don't take any prisoners.
As I mentioned at the beginning of my Aug. 19 blog, 9000 on the Dow and 1400 on the Nasdaq were good spots to sell into the then rally in this 28 month bear market. No one enjoys losing money. The idea is to preserve capital by limiting losses and letting the gains in great companies run. That's the way to come out a winner. We cannot be right on all of our investments. When wrong, swallow the red ink and don't take it personally. The market doesn't know your name or recognize your face. Learn from the loss and don't repeat the same mistake. Don't make excuses. It's your money and it's your decision to buy or sell a stock. If you've given power of attorney to someone else, that too is your decision. Do not lose more than you can afford- under any circumstances. Use stop losses when necessary. Bear markets can be ugly. They don't take any prisoners.
9/3/02 Winning Creates Believers
The current bear market has lasted 28 months, extinguished $7 trillion in value, and is the longest bear market since the 1930's. Along the way it has created more and more non-believers in the stock market and corporate America.
Yesterday the A's won their 19th straight thereby tying an American League record with the 1906 Chicago White Sox and the 1947 New York Yankees, the latter possibly the greatest team ever. When Jason Giambi was signed by the Yankees, no one gave Oakland much of a chance to succeed. As their first baseman says, "we've come so far and it's going to end sometime, but we have so much confidence." They believe in themselves and their growing fans believe in them. It's fun to watch a winner.
As we can see, every once in a while a streak will start and build on itself. Confidence and believing are often the keys to keeping it alive. In the case of the stock market it's the exact opposite- lack of confidence and non-believing- that keep the bear market streak alive.
The current bear market has lasted 28 months, extinguished $7 trillion in value, and is the longest bear market since the 1930's. Along the way it has created more and more non-believers in the stock market and corporate America.
Yesterday the A's won their 19th straight thereby tying an American League record with the 1906 Chicago White Sox and the 1947 New York Yankees, the latter possibly the greatest team ever. When Jason Giambi was signed by the Yankees, no one gave Oakland much of a chance to succeed. As their first baseman says, "we've come so far and it's going to end sometime, but we have so much confidence." They believe in themselves and their growing fans believe in them. It's fun to watch a winner.
As we can see, every once in a while a streak will start and build on itself. Confidence and believing are often the keys to keeping it alive. In the case of the stock market it's the exact opposite- lack of confidence and non-believing- that keep the bear market streak alive.
Monday, September 02, 2002
9/2/02 Labor Day
I am wondering. Do the unemployed celebrate labor day? When your employer goes out of business, and then the only job you can get is behind the counter at Starbucks, do you feel joyous about celebrating labor day? If you are unemployed, do you want to march in the labor day parade?
The Economy Policy Institute recently issued a report on the job situation and stated "with the boom gone bust, American workers are headed back to an economy marred by slow wage growth and no job growth, with wage and income disparities widening again."
Over the past two years unemployment has risen by almost 3 million. Of course, that doesn't include millions of service workers receiving $7 per hour and making ends meet.
Then the Institute described hidden unemployment of another 1 million with "a weak labor market in which potential job seekers avoid even attempting to enter the workforce because they are pessimistic about their employment prospects."
Then I turned to all the upbeat comments on productivity. With higher job uncertainty and greater income inequality it's no wonder there is greater productivity. So many jobs are tenuous the worker is afraid to say "take this job and shove it."
I am wondering. Do the unemployed celebrate labor day? When your employer goes out of business, and then the only job you can get is behind the counter at Starbucks, do you feel joyous about celebrating labor day? If you are unemployed, do you want to march in the labor day parade?
The Economy Policy Institute recently issued a report on the job situation and stated "with the boom gone bust, American workers are headed back to an economy marred by slow wage growth and no job growth, with wage and income disparities widening again."
Over the past two years unemployment has risen by almost 3 million. Of course, that doesn't include millions of service workers receiving $7 per hour and making ends meet.
Then the Institute described hidden unemployment of another 1 million with "a weak labor market in which potential job seekers avoid even attempting to enter the workforce because they are pessimistic about their employment prospects."
Then I turned to all the upbeat comments on productivity. With higher job uncertainty and greater income inequality it's no wonder there is greater productivity. So many jobs are tenuous the worker is afraid to say "take this job and shove it."
Sunday, September 01, 2002
Facts For A Sunday
Statistics show that less than 29% of women have orgasms during intercourse.
Statistics show that less than 29% of mutual fund money managers beat the averages year in and year out.
In 2000 AOL settled a prior SEC inquiry by paying a fine and promising not to break securities laws again.
InDuring the first 6 months of 2002 the number of millionaire households dropped by 17%.
The A's win their 17th straight, the major's longest winning streak in 49 years.
Although interest rates have dropped in 2002, most corporate bond fund returns have declined this year.
Cocoa hit a 15 year high in N.Y. and London trading.
Opec meets Sept. 19 in Osaka.
Citigroup sold their 399 Park Ave. Manhattan headquarters building with 1.68m sq ft for $1.06 billion.
Arthur Andersen had 2500 public companies for clients.
Siebel to buy up to $32 million of worthless share options(exercise prices at $40 & up) from its employees.
Statistics show that less than 29% of women have orgasms during intercourse.
Statistics show that less than 29% of mutual fund money managers beat the averages year in and year out.
In 2000 AOL settled a prior SEC inquiry by paying a fine and promising not to break securities laws again.
InDuring the first 6 months of 2002 the number of millionaire households dropped by 17%.
The A's win their 17th straight, the major's longest winning streak in 49 years.
Although interest rates have dropped in 2002, most corporate bond fund returns have declined this year.
Cocoa hit a 15 year high in N.Y. and London trading.
Opec meets Sept. 19 in Osaka.
Citigroup sold their 399 Park Ave. Manhattan headquarters building with 1.68m sq ft for $1.06 billion.
Arthur Andersen had 2500 public companies for clients.
Siebel to buy up to $32 million of worthless share options(exercise prices at $40 & up) from its employees.
Saturday, August 31, 2002
8/31/02 "It Was Very Difficult To Definitely Identify A Bubble Until After The Fact"
That's what Alan Greenspan said yesterday to a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. Maybe Greenspan might have inquired of the elk, moose, and buffalo wandering in Yellowstone. They might have had experience with bubbles in the many streams and rivers. In the end, markets characterized by supply and demand correct bubbles as well as recessions. The Fed reads the market's tea leaves. They make policy after the facts. The only certainty is the marketplace itself. The on-going bubble is the imagined halo formed around the Fed. I cannot say with certainty when that bubble will burst.
That's what Alan Greenspan said yesterday to a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. Maybe Greenspan might have inquired of the elk, moose, and buffalo wandering in Yellowstone. They might have had experience with bubbles in the many streams and rivers. In the end, markets characterized by supply and demand correct bubbles as well as recessions. The Fed reads the market's tea leaves. They make policy after the facts. The only certainty is the marketplace itself. The on-going bubble is the imagined halo formed around the Fed. I cannot say with certainty when that bubble will burst.
Friday, August 30, 2002
8/30/02 Housing
In prior blogs I have opined that the housing market has peaked at the bubble stage. There are many who disagree with me including the Fed's Greenspan. Clearly, corporate officials and board members of housing companies agree with me. In the latest quarter they were net sellers of about $260 million worth of stock in their own companies. It is the largest insider selling in housing stocks in 6 years. I consider the selling significant. These individuals should understand their business better than anyone. I wouldn't want to buck their selling. It reminds me of all the selling by insiders in the dotcom stocks at the height of that bubble. We must remember that policymakers like Greenspan aren't in the trenches.
In prior blogs I have opined that the housing market has peaked at the bubble stage. There are many who disagree with me including the Fed's Greenspan. Clearly, corporate officials and board members of housing companies agree with me. In the latest quarter they were net sellers of about $260 million worth of stock in their own companies. It is the largest insider selling in housing stocks in 6 years. I consider the selling significant. These individuals should understand their business better than anyone. I wouldn't want to buck their selling. It reminds me of all the selling by insiders in the dotcom stocks at the height of that bubble. We must remember that policymakers like Greenspan aren't in the trenches.
Thursday, August 29, 2002
8/29/02 The GDP Report
Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1.0 billion pace and contributing strongly to the quarter's overall growth rate. That growth rate of just over 1% should indicate how weak the economy really is. An inventory build up will only mean markdowns in the coming months and lower corporate margins.
It's most unfortunate that politicians and the media feel a need to talk up the economy in the hopes of improving confidence. The stock market has been declining for over 2 years and the economy has been following in the same direction for months and months. There isn't a double dip- just one extended dip. Rallies in bear markets are still part of a bear market. The same is true with the economy. Rallies take place at lower levels for both.
Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1.0 billion pace and contributing strongly to the quarter's overall growth rate. That growth rate of just over 1% should indicate how weak the economy really is. An inventory build up will only mean markdowns in the coming months and lower corporate margins.
It's most unfortunate that politicians and the media feel a need to talk up the economy in the hopes of improving confidence. The stock market has been declining for over 2 years and the economy has been following in the same direction for months and months. There isn't a double dip- just one extended dip. Rallies in bear markets are still part of a bear market. The same is true with the economy. Rallies take place at lower levels for both.
Wednesday, August 28, 2002
8/28/02 September
First I want to apologize for some postings which are duplicate and triplicate in nature. I stink at technology!
Now for the real stuff. SEPTEMBER IS THE WORST MONTH FOR THE STOCK MARKET. In the last 50 years or so the market has been down 80% of the time in September. My suggestion- do nuthing. If you think you're smarter than the percentages, I can find a nice plot for you at Forest Lawn.
First I want to apologize for some postings which are duplicate and triplicate in nature. I stink at technology!
Now for the real stuff. SEPTEMBER IS THE WORST MONTH FOR THE STOCK MARKET. In the last 50 years or so the market has been down 80% of the time in September. My suggestion- do nuthing. If you think you're smarter than the percentages, I can find a nice plot for you at Forest Lawn.
Tuesday, August 27, 2002
8/27/02 Posting #2 Congressional Budget Office
Today the CBO forecast cumulative surpluses of $336 billion from 2002 thru 2011, down from $1.7 trillion only 5 months ago and $5.6 trillion last year. This is rather incredible for an economy supposedly ramping up. They also projected a deficit of $145 billion for 2003, and that the budget would not be balanced until 2006. At election time I am certain you will be hearing these forecasts over and over again. One should remember the CBO is non-partisan.
Today the CBO forecast cumulative surpluses of $336 billion from 2002 thru 2011, down from $1.7 trillion only 5 months ago and $5.6 trillion last year. This is rather incredible for an economy supposedly ramping up. They also projected a deficit of $145 billion for 2003, and that the budget would not be balanced until 2006. At election time I am certain you will be hearing these forecasts over and over again. One should remember the CBO is non-partisan.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. Additionally, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. Additionally, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
Monday, August 26, 2002
8/26/02 A Pimple On An Elephant's Ass
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
8/26/02 A Pimple On An Elephant's Ass
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
Sunday, August 25, 2002
Saturday, August 24, 2002
8/24/02 Quotes For Saturday
In memory of Peter Martin, Senior Business Editor Financial Times: Lessons from the dotcom bubble-
"much internet technology does not work...most new business models do not work...nothing destroys
value like underpriced capital...financing start-ups in the public markets is a terrible idea...the web era has just begun...
there is at least as much interesting innovation ahead as that which lies behind."
Winston Churchill: "You may take the most gallant sailor, the most intrepid airman, or the most audacious
soldier, put them at a table together- what do you get? The sum total of their fears."
Kofi Annan, secretary-general of the United Nations: "Attempts to promote human development and reverse
environmental degradation have not, in general, been effective over the last decade."
Bob Semple, Deutsche Bank, "we have to concede that recent economic and corporate developments have been more
disappointing than we anticipated, with little prospect for improvement over the next month...at best, we believe
equities are likely to consolidate rather than make further progress in the short term."
In memory of Peter Martin, Senior Business Editor Financial Times: Lessons from the dotcom bubble-
"much internet technology does not work...most new business models do not work...nothing destroys
value like underpriced capital...financing start-ups in the public markets is a terrible idea...the web era has just begun...
there is at least as much interesting innovation ahead as that which lies behind."
Winston Churchill: "You may take the most gallant sailor, the most intrepid airman, or the most audacious
soldier, put them at a table together- what do you get? The sum total of their fears."
Kofi Annan, secretary-general of the United Nations: "Attempts to promote human development and reverse
environmental degradation have not, in general, been effective over the last decade."
Bob Semple, Deutsche Bank, "we have to concede that recent economic and corporate developments have been more
disappointing than we anticipated, with little prospect for improvement over the next month...at best, we believe
equities are likely to consolidate rather than make further progress in the short term."
Friday, August 23, 2002
8/23/02 Posting #2 Republicans and Democrats
In one of my blogs last month I mentioned that the White House budget office predicted a $444 billion budget surplus between 2002 and 2011. I provided commentary on this estimate. Now we have another voice from the peanut gallery, the Senate Budget Committee, who yesterday predicted a $475 billion budget deficit for the same period. They predicted deficits would continue thru 2008. They must believe George W. will be elected for a second term! The White House predicts a surplus in 2005. They must believe George W. will get elected for a second term!
For my money I want to see the revised numbers. Don't cheat me. I want revised monthly budget deficit numbers. The government revises most numbers. Let's set up a new committee just for revising government numbers. That would help the employment numbers.
In one of my blogs last month I mentioned that the White House budget office predicted a $444 billion budget surplus between 2002 and 2011. I provided commentary on this estimate. Now we have another voice from the peanut gallery, the Senate Budget Committee, who yesterday predicted a $475 billion budget deficit for the same period. They predicted deficits would continue thru 2008. They must believe George W. will be elected for a second term! The White House predicts a surplus in 2005. They must believe George W. will get elected for a second term!
For my money I want to see the revised numbers. Don't cheat me. I want revised monthly budget deficit numbers. The government revises most numbers. Let's set up a new committee just for revising government numbers. That would help the employment numbers.
8/23/02 The Nation's Secret Intelligence Court
The court said the F.B.I. and the Justice Department had made "erroneous statements" in eavesdropping applications about "the separation of the overlapping intelligence and criminal investigators and the unauthorized sharing of FISA information with F.B.I. criminal investigators and assistant U.S. attorneys."
It was also mentioned that an "alarming number of instances" of misleading justifications for electronic surveillance and wiretaps occurred during the Clinton administration. As citizens we each "own" a piece of the federal debt and we are each asked to work 4 1/2 months each year for free so that the monies earned during that time can go to pay taxes. It's fair to say the citizens own this country and not the federal beaurocracies. Isn't it time federal employees recognize who pays their salaries and that they should be held to a high standard of ethics- just like at Enron, Global Crossing, WorldCom and the like?
The people responsible for "erroneous statements" in these 75 cases cited by the Secret Intelligence Court should be prosecuted to the fullest extent.
The court said the F.B.I. and the Justice Department had made "erroneous statements" in eavesdropping applications about "the separation of the overlapping intelligence and criminal investigators and the unauthorized sharing of FISA information with F.B.I. criminal investigators and assistant U.S. attorneys."
It was also mentioned that an "alarming number of instances" of misleading justifications for electronic surveillance and wiretaps occurred during the Clinton administration. As citizens we each "own" a piece of the federal debt and we are each asked to work 4 1/2 months each year for free so that the monies earned during that time can go to pay taxes. It's fair to say the citizens own this country and not the federal beaurocracies. Isn't it time federal employees recognize who pays their salaries and that they should be held to a high standard of ethics- just like at Enron, Global Crossing, WorldCom and the like?
The people responsible for "erroneous statements" in these 75 cases cited by the Secret Intelligence Court should be prosecuted to the fullest extent.
Thursday, August 22, 2002
8/22/02 Government Statistics
Once again the government has provided "moving target" numbers. This time it was the labor department, and they have just revised preliminary estimates for the latest weekly jobless claims and raised the number to 391,000. These are weekly not quarterly numbers. How difficult can it be to get a weekly number correct? GE is a massive company and gets daily numbers. I ran a company with a 1000 employees, not massive, and got daily numbers.
Unemployment statistics are vital numbers. They have a bearing on many aspects of our way of life. The U.S. citizens are up in arms about Enron and Global Crossing and Worldcom and rightly so. Providing accurate and timely government statistics should be treated with at least the same seriousness. Should it come out that the statistics are being "manipulated", then proper actions should be taken and that too should be front page news.
Revising weekly numbers is akin to 3 card monte.
Once again the government has provided "moving target" numbers. This time it was the labor department, and they have just revised preliminary estimates for the latest weekly jobless claims and raised the number to 391,000. These are weekly not quarterly numbers. How difficult can it be to get a weekly number correct? GE is a massive company and gets daily numbers. I ran a company with a 1000 employees, not massive, and got daily numbers.
Unemployment statistics are vital numbers. They have a bearing on many aspects of our way of life. The U.S. citizens are up in arms about Enron and Global Crossing and Worldcom and rightly so. Providing accurate and timely government statistics should be treated with at least the same seriousness. Should it come out that the statistics are being "manipulated", then proper actions should be taken and that too should be front page news.
Revising weekly numbers is akin to 3 card monte.
Wednesday, August 21, 2002
8/21/02 Management Lessons
Lesson Number One
>
> A crow was sitting in a tree, doing nothing all day. A small
rabbit saw
the > crow, and asked him, "Can I also sit like you and do nothing all
day
long?"
> The crow answered: "Sure, why not." So, the rabbit sat on the
ground
below
> the crow, and rested. All of a sudden, a fox appeared, jumped on
the
rabbit > and ate it.
>
> Management Lesson? To be sitting and doing nothing, you must be
sitting
> very, very high up.
>
> Lesson Number Two
>
> A turkey was chatting with a bull. "I would love to be able to get
to
the
> top of that tree," sighed the turkey, "but I haven't got the
energy."
"Well, > why don't you nibble on some of my droppings?" replied the
bull.
"They're > packed with nutrients." The turkey pecked at a lump of dung
and
found that > it actually gave him enough strength to reach the lowest
branch
of the tree.
> The next day, after eating some more dung, he reached the second
branch.
> Finally after a fourth night, there he was proudly
> perched at the top of the tree. Soon he was spotted by a farmer,
who
shot > the turkey out of the tree.
>
> Management Lesson? BullShit might get you to the top, but it won't
keep
you > there.
>
> Lesson Number Three
>
> A little bird was flying south for the winter. It was so cold the
bird
froze > and fell to the ground in a large field. While it was lying
there, a
cow > came by and dropped some dung on it. As the frozen bird lay there
in
the > pile of cow dung, it began to realize how warm it was. The dung
was
actually > thawing him out! He lay there all warm and happy, and soon
began
to sing for > joy. A passing cat heard the bird singing and came to
investigate.
Following > the sound, the cat discovered the bird under the pile of
cow
dung, promptly > dug him out and ate him.
>
> Management Lesson?
>
> 1) Not everyone who shits on you is your enemy.
> 2) Not everyone who gets you out of shit is your friend.
> 3) And when you're in deep shit, it's best to keep your mouth
shut!
Lesson Number One
>
> A crow was sitting in a tree, doing nothing all day. A small
rabbit saw
the > crow, and asked him, "Can I also sit like you and do nothing all
day
long?"
> The crow answered: "Sure, why not." So, the rabbit sat on the
ground
below
> the crow, and rested. All of a sudden, a fox appeared, jumped on
the
rabbit > and ate it.
>
> Management Lesson? To be sitting and doing nothing, you must be
sitting
> very, very high up.
>
> Lesson Number Two
>
> A turkey was chatting with a bull. "I would love to be able to get
to
the
> top of that tree," sighed the turkey, "but I haven't got the
energy."
"Well, > why don't you nibble on some of my droppings?" replied the
bull.
"They're > packed with nutrients." The turkey pecked at a lump of dung
and
found that > it actually gave him enough strength to reach the lowest
branch
of the tree.
> The next day, after eating some more dung, he reached the second
branch.
> Finally after a fourth night, there he was proudly
> perched at the top of the tree. Soon he was spotted by a farmer,
who
shot > the turkey out of the tree.
>
> Management Lesson? BullShit might get you to the top, but it won't
keep
you > there.
>
> Lesson Number Three
>
> A little bird was flying south for the winter. It was so cold the
bird
froze > and fell to the ground in a large field. While it was lying
there, a
cow > came by and dropped some dung on it. As the frozen bird lay there
in
the > pile of cow dung, it began to realize how warm it was. The dung
was
actually > thawing him out! He lay there all warm and happy, and soon
began
to sing for > joy. A passing cat heard the bird singing and came to
investigate.
Following > the sound, the cat discovered the bird under the pile of
cow
dung, promptly > dug him out and ate him.
>
> Management Lesson?
>
> 1) Not everyone who shits on you is your enemy.
> 2) Not everyone who gets you out of shit is your friend.
> 3) And when you're in deep shit, it's best to keep your mouth
shut!
Tuesday, August 20, 2002
8/20/02 The Trade Deficit
For the second month in a row our monthly trade deficit exceeded 37 billion dollars. On an annualized basis this approaches 450 billion dollars. With the budget deficit projected at 165 billion dollars this makes a total budget deficit exceeding 600 billion dollars. Such large deficits undermine the stability of the economy, the stability of the dollar and our independence. This course must be reversed before we hit a stonewall and crash out of control.
For the second month in a row our monthly trade deficit exceeded 37 billion dollars. On an annualized basis this approaches 450 billion dollars. With the budget deficit projected at 165 billion dollars this makes a total budget deficit exceeding 600 billion dollars. Such large deficits undermine the stability of the economy, the stability of the dollar and our independence. This course must be reversed before we hit a stonewall and crash out of control.
Monday, August 19, 2002
8/19/02 Posting #2 V Shaped
The Dow is now approaching 9000 and the Nasdaq 1400. At the same time the Index of Leading Economic Indicators came in at the lowest point since last September. The stock market reflects future profits and, in my view, the economic environment does not appear
poised to get rosy. Those buying on dips will regret their purchases. The recent bounce will not be V shaped as it was in December 1974. Even then, there was another significant buying opportunity in 1982.
In the past two years we have witnessed several dead cat bounces, and from declining price levels. Look at the charts. They tell me to body surf on a warm beach. I won't forget my sunscreen. For buyers of stocks maybe you can find some "price screen".
The Dow is now approaching 9000 and the Nasdaq 1400. At the same time the Index of Leading Economic Indicators came in at the lowest point since last September. The stock market reflects future profits and, in my view, the economic environment does not appear
poised to get rosy. Those buying on dips will regret their purchases. The recent bounce will not be V shaped as it was in December 1974. Even then, there was another significant buying opportunity in 1982.
In the past two years we have witnessed several dead cat bounces, and from declining price levels. Look at the charts. They tell me to body surf on a warm beach. I won't forget my sunscreen. For buyers of stocks maybe you can find some "price screen".
8/19/02 Continuous Replenishment
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
8/19/02 Continuous Replenishment
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
Sunday, August 18, 2002
8/18/02 Certain Givens
Our population is aging, and along with that trend, healthcare will continue to become a larger portion of our GDP.
Too many people are out of work. There aren't enough good jobs for educated Americans.
Too many Americans work in low-paying service jobs.
Taxes are too high at all levels of gov't.
Congress spends too much money. For Congress economic stimulus means overspending. We have a coin operated gov't.
Tough decisions require a willingness to be vilified.
There is too much inner turmoil in families.
The U.S. consumer has good reasons not to be confident at this time.
Our forefathers never envisioned regulations strangling every day life.
Too many cooks spoil the broth, and gov't bloat is akin to botulism.
Random acts of kindness make the world a better place.
Our population is aging, and along with that trend, healthcare will continue to become a larger portion of our GDP.
Too many people are out of work. There aren't enough good jobs for educated Americans.
Too many Americans work in low-paying service jobs.
Taxes are too high at all levels of gov't.
Congress spends too much money. For Congress economic stimulus means overspending. We have a coin operated gov't.
Tough decisions require a willingness to be vilified.
There is too much inner turmoil in families.
The U.S. consumer has good reasons not to be confident at this time.
Our forefathers never envisioned regulations strangling every day life.
Too many cooks spoil the broth, and gov't bloat is akin to botulism.
Random acts of kindness make the world a better place.
Saturday, August 17, 2002
8/17/02 Posting #3 Unsustainable
From mid-1999 to mid-2000 stock price gains were frequently outpacing household incomes for the 50% of the population owning stocks. It reached a point where stocks became unaffordable, as it were. The value wasn't there and the prices unsustainable.
From mid-2001 to mid-2002 house price gains were, for many of the 75% of the population owning homes, outpacing their household
incomes. Clearly the home prices are unsustainable. To accomplish ownership the Mortgage Bankers Association anticipates about $1 trillion in mortages will be placed this year. That is on top of the $873 billion in mortages taken down in 2001.
A significant worry is the mortage debt level relative to the disposable income of the homeowner. In my view, this is an accident waiting to happen. The debris will have far-flung ramifications.
From mid-1999 to mid-2000 stock price gains were frequently outpacing household incomes for the 50% of the population owning stocks. It reached a point where stocks became unaffordable, as it were. The value wasn't there and the prices unsustainable.
From mid-2001 to mid-2002 house price gains were, for many of the 75% of the population owning homes, outpacing their household
incomes. Clearly the home prices are unsustainable. To accomplish ownership the Mortgage Bankers Association anticipates about $1 trillion in mortages will be placed this year. That is on top of the $873 billion in mortages taken down in 2001.
A significant worry is the mortage debt level relative to the disposable income of the homeowner. In my view, this is an accident waiting to happen. The debris will have far-flung ramifications.
8/17/02 Posting #2 A Proxy Fight
Lawrence Lindsey: ``We need tax simplification and we need lower taxation of capital on all fronts.'' If the gov't wants to encourage investing and promote savings, incentives would clearly be helpful. For the most part, our federal, state, and local governments have clogged our citizenry's cash flow pipeline thru a myriad of taxation roadblocks, and the culprits should be ousted by each eligible American's proxy- VOTING.
Lawrence Lindsey: ``We need tax simplification and we need lower taxation of capital on all fronts.'' If the gov't wants to encourage investing and promote savings, incentives would clearly be helpful. For the most part, our federal, state, and local governments have clogged our citizenry's cash flow pipeline thru a myriad of taxation roadblocks, and the culprits should be ousted by each eligible American's proxy- VOTING.
8/17/02 What Comes Around Goes Around
One day a poor boy who was selling goods from door to door to pay his way through school found he had only one thin dime left, and he was hungry. He decided he would ask for a meal at the next house. However, he lost his nerve when a lovely young woman opened the door. Instead of a meal he asked for a drink of water.
She thought he looked hungry so brought him a large glass of milk. He drank it slowly, and then asked, "How much do I owe you?"
"You don't owe me anything," she replied. "Mother has taught us never to accept pay for a kindness."
He replied, "Then I thank you from my heart." As Howard Kelly left that house, he not only felt stronger physically, but his faith in God and man was strong also. He had been ready to give up and quit.
Years later that young woman became critically ill. The local doctors were baffled. They finally sent her to the big city, where they called in specialists to study her rare disease. Dr. Howard Kelly was called in for the consultation. When he heard the name of the town she came from, a strange light filled his eyes. Immediately he rose and went down the hall of the hospital to her room.
Dressed in his doctor's gown he went in to see her. He recognized her at once. He went back to the consultation room determined to do his best to save her life. From that day he gave special attention to the case.
After a long struggle, the battle was won. Dr. Kelly requested the business office to pass the final bill to him for approval.
He looked at it, then wrote something on the edge and the bill was sent to her room. She feared to open it, for she was sure it would take the rest of her life to pay for it all. Finally she looked, and something caught her attention on the side of the bill.
She read these words...
"Paid in full with one glass of milk"
(Signed) Dr. Howard Kelly.
Tears of joy flooded her eyes as her happy heart prayed: "Thank You, God, that Your love has spread abroad through human hearts and hands."
Life is as simple or as difficult as we make it. Investing is no different. How one manages every day life or how a CEO manages a company will go a long way towards determining the end results.
One day a poor boy who was selling goods from door to door to pay his way through school found he had only one thin dime left, and he was hungry. He decided he would ask for a meal at the next house. However, he lost his nerve when a lovely young woman opened the door. Instead of a meal he asked for a drink of water.
She thought he looked hungry so brought him a large glass of milk. He drank it slowly, and then asked, "How much do I owe you?"
"You don't owe me anything," she replied. "Mother has taught us never to accept pay for a kindness."
He replied, "Then I thank you from my heart." As Howard Kelly left that house, he not only felt stronger physically, but his faith in God and man was strong also. He had been ready to give up and quit.
Years later that young woman became critically ill. The local doctors were baffled. They finally sent her to the big city, where they called in specialists to study her rare disease. Dr. Howard Kelly was called in for the consultation. When he heard the name of the town she came from, a strange light filled his eyes. Immediately he rose and went down the hall of the hospital to her room.
Dressed in his doctor's gown he went in to see her. He recognized her at once. He went back to the consultation room determined to do his best to save her life. From that day he gave special attention to the case.
After a long struggle, the battle was won. Dr. Kelly requested the business office to pass the final bill to him for approval.
He looked at it, then wrote something on the edge and the bill was sent to her room. She feared to open it, for she was sure it would take the rest of her life to pay for it all. Finally she looked, and something caught her attention on the side of the bill.
She read these words...
"Paid in full with one glass of milk"
(Signed) Dr. Howard Kelly.
Tears of joy flooded her eyes as her happy heart prayed: "Thank You, God, that Your love has spread abroad through human hearts and hands."
Life is as simple or as difficult as we make it. Investing is no different. How one manages every day life or how a CEO manages a company will go a long way towards determining the end results.
Friday, August 16, 2002
8/16/02 The King And The Market
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
8/16/02 The King And The Market
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
Thursday, August 15, 2002
8/15/02 Restoring Confidence
You thought I might be writing about the CEOs signing off on their financial statements. What restored my confidence was Kmart. They requested to have their loan covenants changed and that change would provide for Kmart to report a larger than anticipated loss- $400 million instead of $100 million. The reason given said their CFO:
"I don't need people to worry. I need their confidence." The larger loss sure made me feel better.
You thought I might be writing about the CEOs signing off on their financial statements. What restored my confidence was Kmart. They requested to have their loan covenants changed and that change would provide for Kmart to report a larger than anticipated loss- $400 million instead of $100 million. The reason given said their CFO:
"I don't need people to worry. I need their confidence." The larger loss sure made me feel better.
Wednesday, August 14, 2002
Tuesday, August 13, 2002
8/13/02 The Parking Lot
We might have a money maker. With all of the planes being mothballed the idea is to open a very large parking lot for the planes. We might need a bit of security but other than that this should be a cash machine. We need to lease some space in the Mojave desert and then place ads. We should get a great deal of repeat business and I feel the business has excellent growth potential. There are too many airlines and too many planes. I will look for additional space in other locations. I shall keep you posted on developments.
We might have a money maker. With all of the planes being mothballed the idea is to open a very large parking lot for the planes. We might need a bit of security but other than that this should be a cash machine. We need to lease some space in the Mojave desert and then place ads. We should get a great deal of repeat business and I feel the business has excellent growth potential. There are too many airlines and too many planes. I will look for additional space in other locations. I shall keep you posted on developments.
Monday, August 12, 2002
8/12/02 Posting #2
Morgan Stanley lowered its 2002 real gross domestic product forecast for the U.S. to 2.3 percent from 2.9 percent, and its 2003 forecast to 3.1 percent from 3.8 percent, with further risks to the downside. Maybe they'll be proven correct; however, their reading of the tea leaves looks rosy to me. I wonder whether Morgan Stanley would put their money where their mouth is.
Morgan Stanley lowered its 2002 real gross domestic product forecast for the U.S. to 2.3 percent from 2.9 percent, and its 2003 forecast to 3.1 percent from 3.8 percent, with further risks to the downside. Maybe they'll be proven correct; however, their reading of the tea leaves looks rosy to me. I wonder whether Morgan Stanley would put their money where their mouth is.
8/12/02 US Airways
Yesterday they filed for Chapter 11, and at the same time, their pilots voted to accept a proposal that will reduce their wages and benefits by an average of 26 percent through 2008, helping the financially strapped airline dramatically reduce its costs. In exchange the pilots will receive a 19.3 percent stake in the company. Another 38% ownership stake will go to Texas Pacific, a group that will buy $200 million worth of stock when the airline emerges from bankruptcy.
Texas Pacific invested in two other airlines which had filed for bankruptcy- Continental and American West. Hopefully, for all concerned, US Airways will be another successful rescue effort.
Yesterday they filed for Chapter 11, and at the same time, their pilots voted to accept a proposal that will reduce their wages and benefits by an average of 26 percent through 2008, helping the financially strapped airline dramatically reduce its costs. In exchange the pilots will receive a 19.3 percent stake in the company. Another 38% ownership stake will go to Texas Pacific, a group that will buy $200 million worth of stock when the airline emerges from bankruptcy.
Texas Pacific invested in two other airlines which had filed for bankruptcy- Continental and American West. Hopefully, for all concerned, US Airways will be another successful rescue effort.
Sunday, August 11, 2002
8/11/01 Next Week's Non-Event Fed Meeting
Out of 21 dealers recently polled by Reuters, 17 expect no change in rates for the rest of the year. The chances of an Aug. 13 easing are less than one in five, according to federal funds futures.
As for me, I have often said I don't spend time listening to economists; however, I have pointed out the importance of tracking fed funds futures. Based on the latter, the Fed meeting will be a non-event. Let's continue to monitor the fed funds futures after the meeting has been completed. It will provide an indication of future interest rate direction.
Out of 21 dealers recently polled by Reuters, 17 expect no change in rates for the rest of the year. The chances of an Aug. 13 easing are less than one in five, according to federal funds futures.
As for me, I have often said I don't spend time listening to economists; however, I have pointed out the importance of tracking fed funds futures. Based on the latter, the Fed meeting will be a non-event. Let's continue to monitor the fed funds futures after the meeting has been completed. It will provide an indication of future interest rate direction.
Saturday, August 10, 2002
8/10/02 A Chuckle For Saturday
WHY WE LOVE CHILDREN
A kindergarten pupil told his teacher he'd found a cat. She asked him
if it
was dead or alive. "Dead." She was informed. "How do you know?" she
asked
her pupil. "Because I pissed in its ear and it didn't move," answered
the
child innocently. "You did WHAT?!?" The teacher exclaimed in
surprise.
"You know," explained the boy, "I leaned over and went 'Psssst!' and it
didn't move."
_________________________________________________
A small boy is sent to bed by his father. Five minutes later.
"Daaa-ad...." "What? "I'm thirsty. Can you bring drink of water?"
"No.
You had your chance. Lights out." Five minutes later: "Da-aaaad....."
"WHAT?" "I'm THIRSTY. Can I have a drink of water??" "I told you NO!"
If
you ask again, I'll have to spank you!!" Five minutes later......
"Daaaa-aaaad....." "WHAT!" "When you come in to spank me, can you
bring a
drink of water?"
________________________________________________
An exasperated mother, whose son was always getting into mischief,
finally
asked him, "How do you expect to get into Heaven?" The boy thought it
over
and said, "Well, I'll run in and out and in and out and keep slamming
the
door until St. Peter says, 'For Heaven's sake, Dylan, come in or stay
out!"
_________________________________________________
One summer evening during a violent thunderstorm a mother was tucking
her
son into bed. She was about to turn off the light when he asked with a
tremor in his voice, "Mommy, will you sleep with me tonight?" The
mother
smiled and gave him a reassuring hug. "I can't dear," she said. "I
have to
sleep in Daddy's room." A long silence was broken at last by his shaky
little voice: "The big sissy."
_________________________________________________
It was that time, during the Sunday morning service, for the children's
sermon. All the children were invited to come forward. One little
girl was
wearing a particularly pretty dress and, as she sat down, the pastor
leaned
over and said, "That is a very pretty dress. Is it your Easter Dress?"
The
little girl replied, directly into the pastor's clip-on microphone,
"Yes and
my Mom say it's a bitch to iron."
_________________________________________________
When I was six months pregnant with my third child, my three year old
came
into the room when I was just getting ready to get into the shower.
She
said," Mommy, you are getting fat!" I replied, "Yes, honey, remember
Mommy
has a baby growing in her tummy" "I know," she replied, but what's
growing
in your butt?"
_________________________________________________
A little boy was doing his math homework. He said to himself, "Two
plus
five, that son of a bitch is seven. Three plus six, that son of a
bitch is
nine...." His mother heard what he was saying and gasped, "What are
you
doing?" The little boy answered, "I'm doing my math homework, Mom."
"And
this is how your teacher taught you to do it?" the mother asked.
"Yes," he
answered. Infuriated, the mother asked the teacher the next day, "What
are
you teaching my son in math?" The teacher replied, "Right now, we are
learning addition." The mother asked, "And are you teaching them to
say two
plus two, that son of a bitch is four?" After the teacher stopped
laughing,
she answered, "What I taught them was, two plus two, THE SUM OF WHICH,
is
four."
_________________________________________________
One day the first grade teacher was reading the story of Chicken Little
to
her class. She came to the part of the story where Chicken Little
tried to
warn the farmer. She read, ".... and so Chicken Little went up to the
farmer and said, "The sky is falling, the sky is falling!" The teacher
paused then asked the class, "And what do you think that farmer said?"
One
little girl raised her hand and said, "I think he said: 'Holy Shit! A
talking chicken!'" The teacher was unable to teach for the next 10
minutes.
WHY WE LOVE CHILDREN
A kindergarten pupil told his teacher he'd found a cat. She asked him
if it
was dead or alive. "Dead." She was informed. "How do you know?" she
asked
her pupil. "Because I pissed in its ear and it didn't move," answered
the
child innocently. "You did WHAT?!?" The teacher exclaimed in
surprise.
"You know," explained the boy, "I leaned over and went 'Psssst!' and it
didn't move."
_________________________________________________
A small boy is sent to bed by his father. Five minutes later.
"Daaa-ad...." "What? "I'm thirsty. Can you bring drink of water?"
"No.
You had your chance. Lights out." Five minutes later: "Da-aaaad....."
"WHAT?" "I'm THIRSTY. Can I have a drink of water??" "I told you NO!"
If
you ask again, I'll have to spank you!!" Five minutes later......
"Daaaa-aaaad....." "WHAT!" "When you come in to spank me, can you
bring a
drink of water?"
________________________________________________
An exasperated mother, whose son was always getting into mischief,
finally
asked him, "How do you expect to get into Heaven?" The boy thought it
over
and said, "Well, I'll run in and out and in and out and keep slamming
the
door until St. Peter says, 'For Heaven's sake, Dylan, come in or stay
out!"
_________________________________________________
One summer evening during a violent thunderstorm a mother was tucking
her
son into bed. She was about to turn off the light when he asked with a
tremor in his voice, "Mommy, will you sleep with me tonight?" The
mother
smiled and gave him a reassuring hug. "I can't dear," she said. "I
have to
sleep in Daddy's room." A long silence was broken at last by his shaky
little voice: "The big sissy."
_________________________________________________
It was that time, during the Sunday morning service, for the children's
sermon. All the children were invited to come forward. One little
girl was
wearing a particularly pretty dress and, as she sat down, the pastor
leaned
over and said, "That is a very pretty dress. Is it your Easter Dress?"
The
little girl replied, directly into the pastor's clip-on microphone,
"Yes and
my Mom say it's a bitch to iron."
_________________________________________________
When I was six months pregnant with my third child, my three year old
came
into the room when I was just getting ready to get into the shower.
She
said," Mommy, you are getting fat!" I replied, "Yes, honey, remember
Mommy
has a baby growing in her tummy" "I know," she replied, but what's
growing
in your butt?"
_________________________________________________
A little boy was doing his math homework. He said to himself, "Two
plus
five, that son of a bitch is seven. Three plus six, that son of a
bitch is
nine...." His mother heard what he was saying and gasped, "What are
you
doing?" The little boy answered, "I'm doing my math homework, Mom."
"And
this is how your teacher taught you to do it?" the mother asked.
"Yes," he
answered. Infuriated, the mother asked the teacher the next day, "What
are
you teaching my son in math?" The teacher replied, "Right now, we are
learning addition." The mother asked, "And are you teaching them to
say two
plus two, that son of a bitch is four?" After the teacher stopped
laughing,
she answered, "What I taught them was, two plus two, THE SUM OF WHICH,
is
four."
_________________________________________________
One day the first grade teacher was reading the story of Chicken Little
to
her class. She came to the part of the story where Chicken Little
tried to
warn the farmer. She read, ".... and so Chicken Little went up to the
farmer and said, "The sky is falling, the sky is falling!" The teacher
paused then asked the class, "And what do you think that farmer said?"
One
little girl raised her hand and said, "I think he said: 'Holy Shit! A
talking chicken!'" The teacher was unable to teach for the next 10
minutes.
Friday, August 09, 2002
8/9/02 Gov't Revised Numbers
On Aug.14 company officials will need to validate their reported numbers. That's a wonderful idea. If Paul O'Neil were still running Alcoa, he'd be doing just that; however, he is ONLY Sec. of the Treasury, and therefore, GDP numbers can continue to be revised. When initially released, the press makes a big deal about the GDP number. Then a month later a revised GDP number is provided. This is absolute crap. What's good for the goose is good for the gander. Find someone who can provide the real number in a timely manner, and clear the deck with the others. It's time the public demanded the best from gov't officials. It's a privilege to vote and a privilege to be an American citizen. Many have died so we can have these privileges.
On Aug.14 company officials will need to validate their reported numbers. That's a wonderful idea. If Paul O'Neil were still running Alcoa, he'd be doing just that; however, he is ONLY Sec. of the Treasury, and therefore, GDP numbers can continue to be revised. When initially released, the press makes a big deal about the GDP number. Then a month later a revised GDP number is provided. This is absolute crap. What's good for the goose is good for the gander. Find someone who can provide the real number in a timely manner, and clear the deck with the others. It's time the public demanded the best from gov't officials. It's a privilege to vote and a privilege to be an American citizen. Many have died so we can have these privileges.
Thursday, August 08, 2002
8/8/02 Posting #3
The Scoreboard
Since starting this blog, some have commented that I appear overly negative. Everyone is entitled to their opinion and that includes me. Often I have stated that I do not make recommendations on individual stocks. Rather I try to mention potential opportunities which each person might investigate.
Over the past few weeks I have mentioned the following stocks: Pfizer, Merck, Microsoft, GE, JP Morgan, and Citigroup. In order of mention they have risen from 26 to 33; from 39 1/2 to 50 1/2; 42 to 49; 26 to 32; 20 to 26; and 25 1/2 to 33 1/2. There have been opportunities in this market as there are in every market. Searching them out requires a good deal of work and study.
The market makes us humble and I shall look stupid and out of synch many times in the future. The idea, however, is not to be too proud, and therefore, admit mistakes and cut one's losses. Let the winners ride until proven otherwise. Give yourself a chance to hit a tape measure homerun. Maybe you won't hit 600 out of the park but you'll hit a few- that's more than most can probably say.
The Scoreboard
Since starting this blog, some have commented that I appear overly negative. Everyone is entitled to their opinion and that includes me. Often I have stated that I do not make recommendations on individual stocks. Rather I try to mention potential opportunities which each person might investigate.
Over the past few weeks I have mentioned the following stocks: Pfizer, Merck, Microsoft, GE, JP Morgan, and Citigroup. In order of mention they have risen from 26 to 33; from 39 1/2 to 50 1/2; 42 to 49; 26 to 32; 20 to 26; and 25 1/2 to 33 1/2. There have been opportunities in this market as there are in every market. Searching them out requires a good deal of work and study.
The market makes us humble and I shall look stupid and out of synch many times in the future. The idea, however, is not to be too proud, and therefore, admit mistakes and cut one's losses. Let the winners ride until proven otherwise. Give yourself a chance to hit a tape measure homerun. Maybe you won't hit 600 out of the park but you'll hit a few- that's more than most can probably say.
8/8/02 Posting #2
Deflation Is Not Tame Inflation
In July the PPI fell 0.2% and over the past 12 months 1.1%. This is the first year over year decline in the PPI since 1998.
One can expect profit margins to be continually squeezed at the producer level, and one result will be increased layoffs.
Someone reading this will state that the jobless numbers released today were quite positive. My answer is relative to what. The number of people out of work remains high, and in my view, will increase in the future.
The second result of the PPI falling will be the lowering of inventories being carried on the books. You are starting to see this at the retail level. If inventories are kept exceptionally lean, then economic activity will be reduced- especially at the manufacturing level. Retail same store sales were lower than expected for July and that was true even for WalMart and Target. I feel this weakness will carry forth into the near future. As I have pointed out previously, the common stocks for both companies topped out several months ago. In other words, the market was able to once again forecast accurately.
Deflation Is Not Tame Inflation
In July the PPI fell 0.2% and over the past 12 months 1.1%. This is the first year over year decline in the PPI since 1998.
One can expect profit margins to be continually squeezed at the producer level, and one result will be increased layoffs.
Someone reading this will state that the jobless numbers released today were quite positive. My answer is relative to what. The number of people out of work remains high, and in my view, will increase in the future.
The second result of the PPI falling will be the lowering of inventories being carried on the books. You are starting to see this at the retail level. If inventories are kept exceptionally lean, then economic activity will be reduced- especially at the manufacturing level. Retail same store sales were lower than expected for July and that was true even for WalMart and Target. I feel this weakness will carry forth into the near future. As I have pointed out previously, the common stocks for both companies topped out several months ago. In other words, the market was able to once again forecast accurately.
8/8/02 Gold
From 1981 gold was in a 20 year bear market, and then it reached $250 per ounce and just stopped going down in price. There wasn't any big news, and slowly it has risen to well over $300 an ounce. Given the size of the decline over the 20 years this rise is minimal at best. Recently, gold hit a 5 month low at $300 per ounce and bounced up from that level.
There are some good reasons for the rise in gold. Production of gold will be declining for the next several years. Secondly, some of the big producers, such as, Barrick have been hedging their production year in and year out and have now decided to go into the market and buy back some of those hedges. That appears to be a smart policy with gold in the early stages of a bull market.
In the end, supply and demand as well as psychology will determine the future price for gold. India is the largest purchaser of gold, and India's economy is very strong at the moment. That should provide a floor under the demand for gold.
From 1981 gold was in a 20 year bear market, and then it reached $250 per ounce and just stopped going down in price. There wasn't any big news, and slowly it has risen to well over $300 an ounce. Given the size of the decline over the 20 years this rise is minimal at best. Recently, gold hit a 5 month low at $300 per ounce and bounced up from that level.
There are some good reasons for the rise in gold. Production of gold will be declining for the next several years. Secondly, some of the big producers, such as, Barrick have been hedging their production year in and year out and have now decided to go into the market and buy back some of those hedges. That appears to be a smart policy with gold in the early stages of a bull market.
In the end, supply and demand as well as psychology will determine the future price for gold. India is the largest purchaser of gold, and India's economy is very strong at the moment. That should provide a floor under the demand for gold.
Wednesday, August 07, 2002
8/7/02 Posting #3
Nat'l Bureau of Economic Research
Reuter's reports The National Bureau of Economic Research said on Wednesday it was not yet ready to make a formal call that the U.S. recession has ended, saying it will first need to rule out the possibility of a ``hypothetical'' second leg to the economic downturn.
Nat'l Bureau of Economic Research
Reuter's reports The National Bureau of Economic Research said on Wednesday it was not yet ready to make a formal call that the U.S. recession has ended, saying it will first need to rule out the possibility of a ``hypothetical'' second leg to the economic downturn.
8/7/02 Posting #2
The West Nile Virus and Containing "The Enron"
The West Nile was first detected in the U.S. in 1999. No one knows for certain when Enron's wrongdoings were first uncovered. The West Nile has spread to 34 states, and hundreds have been impacted and close to two dozen have died. Many more have been touched by Enron; however, it is diffficult to attach a specific death to Enron. Heartache and financial ruin are much easier to delineate.
There is a vaccine for the West Nile but immunization to this point is only for horses and not for humans. Humans cannot contract the West Nile from horses. My suggestion is that we stay in close proximity to horse's asses, and that should alleviate some of our concerns. As for Enron, the jury is still out. It is doubtful that an inoculation program can assist those already "infected". The good news is there is an abundance of horses asses. Just stay upwind and away from the hot air.
The West Nile Virus and Containing "The Enron"
The West Nile was first detected in the U.S. in 1999. No one knows for certain when Enron's wrongdoings were first uncovered. The West Nile has spread to 34 states, and hundreds have been impacted and close to two dozen have died. Many more have been touched by Enron; however, it is diffficult to attach a specific death to Enron. Heartache and financial ruin are much easier to delineate.
There is a vaccine for the West Nile but immunization to this point is only for horses and not for humans. Humans cannot contract the West Nile from horses. My suggestion is that we stay in close proximity to horse's asses, and that should alleviate some of our concerns. As for Enron, the jury is still out. It is doubtful that an inoculation program can assist those already "infected". The good news is there is an abundance of horses asses. Just stay upwind and away from the hot air.
8/7/02 Cisco's Quarterly Reporting
Cisco went public in 1990, and the company and the stock for many years produced a tape measure home run- we're talking out of the park and into the next county. The last few years have proven to be difficult for Cisco, and another side is peeking through the infrastructure carnage.
Each quarter Cisco steers the analysts to earnings estimates which the company is able to beat. Last evening the stock rallied a point after the release. They beat expectations thru cost cutting. Nothing wrong with that except the revenue figures did not meet expectations. Management discussed extending the stock repurchase program. The stock has dropped over 85% from its highs. How about management buying stock for their own account, and not using the $21 billion in cash in the corporate till for the repurchase.
Management discussed making acquisitions when the economy turns around. Warren Buffett buys companies in bad times, and in reality, bad economies should bring bargains to the fore.
What's really hurting the bottomline at Cisco? The bear market is the culprit. The company can no longer sell naked puts on Cisco stock, have the puts go unexercised, and take the premium money on the puts into income. The heavy cream has disappeared. How many hundreds and hundreds of millions went into net income over the decade of the 90s? It's not just Cisco but also the majority of the large tech so-called growth companies. It sure beat new product introductions. Just pocket the premium money and go to the bank. It's 100% legal from an operating standpoint. From a disclosure point of view did the stockholders get an accurate reading? So now Cisco must resort to cost cutting instead of naked put selling. While it lasted, the latter was a joy ride.
Cisco went public in 1990, and the company and the stock for many years produced a tape measure home run- we're talking out of the park and into the next county. The last few years have proven to be difficult for Cisco, and another side is peeking through the infrastructure carnage.
Each quarter Cisco steers the analysts to earnings estimates which the company is able to beat. Last evening the stock rallied a point after the release. They beat expectations thru cost cutting. Nothing wrong with that except the revenue figures did not meet expectations. Management discussed extending the stock repurchase program. The stock has dropped over 85% from its highs. How about management buying stock for their own account, and not using the $21 billion in cash in the corporate till for the repurchase.
Management discussed making acquisitions when the economy turns around. Warren Buffett buys companies in bad times, and in reality, bad economies should bring bargains to the fore.
What's really hurting the bottomline at Cisco? The bear market is the culprit. The company can no longer sell naked puts on Cisco stock, have the puts go unexercised, and take the premium money on the puts into income. The heavy cream has disappeared. How many hundreds and hundreds of millions went into net income over the decade of the 90s? It's not just Cisco but also the majority of the large tech so-called growth companies. It sure beat new product introductions. Just pocket the premium money and go to the bank. It's 100% legal from an operating standpoint. From a disclosure point of view did the stockholders get an accurate reading? So now Cisco must resort to cost cutting instead of naked put selling. While it lasted, the latter was a joy ride.
Tuesday, August 06, 2002
8/6/02 Posting #2
The Fed Revisited
We have touched on this subject in prior postings; however, given today's rally, let's discuss it again. The reason given for the rally is the opinion that the Fed will lower interest rates. The market has already lowered interest rates. Short term treasury bills yield less than Fed Funds. The Fed may discuss policy and provide liquidity in the marketplace but the latter sets the yields in real time. Economists at Lehman, Deutsche Bank, and Dresdner Bank today predicted the Fed would lower rates between now and the end of the year. It's a little late for this prediction. Rates have been coming down sharply- especially recently - as stocks have declined to new lows.
I have previously indicated the need to watch the Fed Funds futures and the directions of their sentiment. This is a very good indicator. The sentiment has been strongly leaning towards lower interest rates.
The question one might pose is why the lowering of rates. The answer lies in the weak economy and the lack of demand, and it should provide a clue as to the direction of corporate profits. If profits continue to be weak, then stocks should mirror profits. Low interest rates do not ensure higher stock prices. Look at Japan for the past dozen years or so. In addition, low interest rates do not ensure higher corporate profits. Demand must improve before cash flow starts to perk up. At this point demand looks flat at best.
We don't get paid to be investing superpeople. Rationality will provide a better foundation for your portfolio to grow.
The Fed Revisited
We have touched on this subject in prior postings; however, given today's rally, let's discuss it again. The reason given for the rally is the opinion that the Fed will lower interest rates. The market has already lowered interest rates. Short term treasury bills yield less than Fed Funds. The Fed may discuss policy and provide liquidity in the marketplace but the latter sets the yields in real time. Economists at Lehman, Deutsche Bank, and Dresdner Bank today predicted the Fed would lower rates between now and the end of the year. It's a little late for this prediction. Rates have been coming down sharply- especially recently - as stocks have declined to new lows.
I have previously indicated the need to watch the Fed Funds futures and the directions of their sentiment. This is a very good indicator. The sentiment has been strongly leaning towards lower interest rates.
The question one might pose is why the lowering of rates. The answer lies in the weak economy and the lack of demand, and it should provide a clue as to the direction of corporate profits. If profits continue to be weak, then stocks should mirror profits. Low interest rates do not ensure higher stock prices. Look at Japan for the past dozen years or so. In addition, low interest rates do not ensure higher corporate profits. Demand must improve before cash flow starts to perk up. At this point demand looks flat at best.
We don't get paid to be investing superpeople. Rationality will provide a better foundation for your portfolio to grow.
8/6/02 The Prices For A Safe Haven
With the backdrop of the Fed Funds rate at 1.75% the Treasury's auction began yesterday when $16 billion in three month treasury bills sold at a discount rate of 1.6% and a similar amount of six month treasury bills sold at roughly the same yield. Today $22 billion in four week bills will be sold as well as $22 billion in 5 year notes at an approximate yield of 3.1%.
It is significant to mention that 2 year treasuries now yield 1.9%, and this is a clear indication that bond investors believe the Fed may lower interest rates in the near future.
On Wednesday the Treasury will sell $18 billion in 10 year notes at an approximate yield of 4.2%.
Poor economic data may undermine the stock market but it sure provides a bull market for treasuries. The two year notes were first issued in 1972, and this is their lowest yield in 40 years. Considering the size of the U.S. deficit, one could argue the yields represent irrational exuberance for a safe haven.
With the backdrop of the Fed Funds rate at 1.75% the Treasury's auction began yesterday when $16 billion in three month treasury bills sold at a discount rate of 1.6% and a similar amount of six month treasury bills sold at roughly the same yield. Today $22 billion in four week bills will be sold as well as $22 billion in 5 year notes at an approximate yield of 3.1%.
It is significant to mention that 2 year treasuries now yield 1.9%, and this is a clear indication that bond investors believe the Fed may lower interest rates in the near future.
On Wednesday the Treasury will sell $18 billion in 10 year notes at an approximate yield of 4.2%.
Poor economic data may undermine the stock market but it sure provides a bull market for treasuries. The two year notes were first issued in 1972, and this is their lowest yield in 40 years. Considering the size of the U.S. deficit, one could argue the yields represent irrational exuberance for a safe haven.
Monday, August 05, 2002
8/5/02 Posting #3
Down Volume
With about 30 minutes left in the trading day it is clear that at least 1 billion shares will trade on both the New York Stock Exchange and the Nasdaq on down volume. The down/up volume ratio has expanded to between 6 and 7 to one on the downside.
We are seeing more comments about a double dip in profits and a double dip economy. Had you blinked it's possible you might have missed the upticks in profits and/or the economy.
Down Volume
With about 30 minutes left in the trading day it is clear that at least 1 billion shares will trade on both the New York Stock Exchange and the Nasdaq on down volume. The down/up volume ratio has expanded to between 6 and 7 to one on the downside.
We are seeing more comments about a double dip in profits and a double dip economy. Had you blinked it's possible you might have missed the upticks in profits and/or the economy.
8/5/02 Posting #2
Advance/Decline Volume
With 3 1/2 hours left in today's trading session there are twice as many stocks moving down as up; however, a closer look reveals that 5 times as much down volume has taken place as up volume. That ratio is obviously negative, and once again indicates the lack of buyers.
There are many pundits who continue to state that it is too late to sell. Clearly many investors don't agree.
Advance/Decline Volume
With 3 1/2 hours left in today's trading session there are twice as many stocks moving down as up; however, a closer look reveals that 5 times as much down volume has taken place as up volume. That ratio is obviously negative, and once again indicates the lack of buyers.
There are many pundits who continue to state that it is too late to sell. Clearly many investors don't agree.
8/05/02 The Fed
As always, the following represents my view, and in this case, many may disagree. Next Tuesday the Fed has their meeting relating to the economy and interest rates. Most believe that the Fed moves the markets. Rather, I feel the markets anticipate events and the Fed therefore is a follower. As such, I prefer to watch fed funds contracts and see what thew market in real time is telling us. I believe you have an advantage in doing so and I urge everyone to become familiar with these contracts.
As always, the following represents my view, and in this case, many may disagree. Next Tuesday the Fed has their meeting relating to the economy and interest rates. Most believe that the Fed moves the markets. Rather, I feel the markets anticipate events and the Fed therefore is a follower. As such, I prefer to watch fed funds contracts and see what thew market in real time is telling us. I believe you have an advantage in doing so and I urge everyone to become familiar with these contracts.
Sunday, August 04, 2002
8/04/02 The Market Decline
CNN recently took a poll concerning the 2 year market decline, and 46% responding said that this bear market would impact their ability to retire and the same 46% stated they would need to stay longer in their jobs prior to retiring. The poll did not inquire as to whether the 2 year decline had impacted their views on investing.
I would hope that this decline has made a change in people's investing behavior. Many Americans had never been thru a bear market. They hadn't invested in 1974 or 1981-82. I think this period has taught the vast majority of the investing public that they really didn't know the companies in which they had invested. A successful approach is to study a company prior to investing with the same view as if you were purchasing the whole company. This exercise will sharply reduce your errors in investing judgment and provide for more successful results.
Few people have the ability to look out 10 years and forecast cash flow over that period of time; however, it is wise to try to look down the "field" with a 2 to 3 year time horizon. That is doable with hard analysis, and to make money consistently in the stock market requires that discipline.
CNN recently took a poll concerning the 2 year market decline, and 46% responding said that this bear market would impact their ability to retire and the same 46% stated they would need to stay longer in their jobs prior to retiring. The poll did not inquire as to whether the 2 year decline had impacted their views on investing.
I would hope that this decline has made a change in people's investing behavior. Many Americans had never been thru a bear market. They hadn't invested in 1974 or 1981-82. I think this period has taught the vast majority of the investing public that they really didn't know the companies in which they had invested. A successful approach is to study a company prior to investing with the same view as if you were purchasing the whole company. This exercise will sharply reduce your errors in investing judgment and provide for more successful results.
Few people have the ability to look out 10 years and forecast cash flow over that period of time; however, it is wise to try to look down the "field" with a 2 to 3 year time horizon. That is doable with hard analysis, and to make money consistently in the stock market requires that discipline.
Saturday, August 03, 2002
8/3/02 Looking Down The Field
It's worthwhile to keep a journal which describes your reasons for buying, holding, and selling a stock. These notes can be revisited and will, hopefully, reduce the chance for future misjudgments.
While assessing the present, it's important to look down the "field" and to be on guard for pitfalls coming your way. You are the quarterback. You're in charge of calling the plays, as it were. If something appears ominous, audible and change your plan immediately. Listen to your instincts and do not second guess. In the journal write down the reasons for your decisions.
It's helpful to keep an eye on the Wilshire Associates Equity Index because it represents the combined market value of all N.Y. Stock Exchange, American Stock Exchange, and Nasdaq stocks. A year ago at this time the index value was $11 1/4 trillion and now it's $8.2 trillion, a drop of 27%. By comparison, the assets in money market funds amount to $2.2 trillion. Given the latest GDP numbers as well as the current jobless rate, it is certainly possible for more assets to be transferred from the Wilshire Index into money market accounts. When looking down the "field", that's one alternative scenario.
It's worthwhile to keep a journal which describes your reasons for buying, holding, and selling a stock. These notes can be revisited and will, hopefully, reduce the chance for future misjudgments.
While assessing the present, it's important to look down the "field" and to be on guard for pitfalls coming your way. You are the quarterback. You're in charge of calling the plays, as it were. If something appears ominous, audible and change your plan immediately. Listen to your instincts and do not second guess. In the journal write down the reasons for your decisions.
It's helpful to keep an eye on the Wilshire Associates Equity Index because it represents the combined market value of all N.Y. Stock Exchange, American Stock Exchange, and Nasdaq stocks. A year ago at this time the index value was $11 1/4 trillion and now it's $8.2 trillion, a drop of 27%. By comparison, the assets in money market funds amount to $2.2 trillion. Given the latest GDP numbers as well as the current jobless rate, it is certainly possible for more assets to be transferred from the Wilshire Index into money market accounts. When looking down the "field", that's one alternative scenario.
Friday, August 02, 2002
8/2/02 The Sun Is Rising Today But There Are Few Bright Spots
The headlines state that the economic recovery is sluggish and losing steam. Possibly the "recovery" was illusory. There was a rebuilding of inventories. Did that rebuilding translate into positive cash flow? We can examine the zero percent financing for the auto companies. With their latest labor contract the industry can no longer save money by closing factories. Why? If a factory is closed, the workers receive 90% of their wages and benefits.
After 9/11 billions were spent towards the war on terrorism. Hopefully this is a one time event. As I have stated previously, the gov't cannot spend us out of a recession. We need industry and small businesses to add workers, and an improving confidence level is required to accomplish this feat. In the latest July job numbers there was essentially no job creation, and, in fact, the number of hours worked in each week for each individual went down.
I am not an economist, and maybe that gives me an advantage in assessing the landscape. I want the country's economic picture to improve; however, the downward trend in confidence creates a growing skepticism on my part. Interest rates are at extremely low levels but Japan has discovered that 0 interest rates do not ensure economic recovery.
Lastly, corporate numbers will continue to be viewed with question marks. Yesterday's CFO Magazine reported that about one in six CFOs were pressured to misrepresent financial results. That doesn't leave the investing public with warm and fuzzy feelings.
The headlines state that the economic recovery is sluggish and losing steam. Possibly the "recovery" was illusory. There was a rebuilding of inventories. Did that rebuilding translate into positive cash flow? We can examine the zero percent financing for the auto companies. With their latest labor contract the industry can no longer save money by closing factories. Why? If a factory is closed, the workers receive 90% of their wages and benefits.
After 9/11 billions were spent towards the war on terrorism. Hopefully this is a one time event. As I have stated previously, the gov't cannot spend us out of a recession. We need industry and small businesses to add workers, and an improving confidence level is required to accomplish this feat. In the latest July job numbers there was essentially no job creation, and, in fact, the number of hours worked in each week for each individual went down.
I am not an economist, and maybe that gives me an advantage in assessing the landscape. I want the country's economic picture to improve; however, the downward trend in confidence creates a growing skepticism on my part. Interest rates are at extremely low levels but Japan has discovered that 0 interest rates do not ensure economic recovery.
Lastly, corporate numbers will continue to be viewed with question marks. Yesterday's CFO Magazine reported that about one in six CFOs were pressured to misrepresent financial results. That doesn't leave the investing public with warm and fuzzy feelings.
Thursday, August 01, 2002
8/1/02
The Senate August Recess
This recess begins tomorrow- none too soon in my view. Yesterday by a vote of 49 to 50 the Senate failed to pass Medicare coverage and benefits for drugs taken to combat heart disease, strokes, arthritis, and other illnesses.
The House had previously passed a plan to provide Medicare drug benefits via private insurance companies.
I feel comfortable in stating that each political party will blame the other for failure to pass this bill. That is besides the point. Both parties had promised to provide seasoned citizens with prescription drug benefits. At some point I hope the American public will hold their elected officials accountable just as CEOs are being asked on August 14 to be accountable for the financial and income statements reported for their respective companies. Maybe I am mixing apples and oranges; however, the spirit of accountability holds the same- what's good for the goose is good for the gander.
The Senate August Recess
This recess begins tomorrow- none too soon in my view. Yesterday by a vote of 49 to 50 the Senate failed to pass Medicare coverage and benefits for drugs taken to combat heart disease, strokes, arthritis, and other illnesses.
The House had previously passed a plan to provide Medicare drug benefits via private insurance companies.
I feel comfortable in stating that each political party will blame the other for failure to pass this bill. That is besides the point. Both parties had promised to provide seasoned citizens with prescription drug benefits. At some point I hope the American public will hold their elected officials accountable just as CEOs are being asked on August 14 to be accountable for the financial and income statements reported for their respective companies. Maybe I am mixing apples and oranges; however, the spirit of accountability holds the same- what's good for the goose is good for the gander.
Wednesday, July 31, 2002
7/31/02 Posting #3
Money Market Assets
These assets, despite yielding only about 1%, now total in excess of $2.2 trillion. That is trillion and not billion. This huge number indicates the disenchantment of investors with the stock market and its current uncertain climate. Washington can give all its pep talks, but obviously the vast majority isn't buying it. With this kind of money on the sidelines a sustained rally becomes even more suspect.
Money Market Assets
These assets, despite yielding only about 1%, now total in excess of $2.2 trillion. That is trillion and not billion. This huge number indicates the disenchantment of investors with the stock market and its current uncertain climate. Washington can give all its pep talks, but obviously the vast majority isn't buying it. With this kind of money on the sidelines a sustained rally becomes even more suspect.
7/31/02 Posting #2
GDP
The first quarter results were revised downwards from 6.1% to 5%. More importantly, the second quarter came in at only plus 1.1% down from estimates of 2.1% or about 50% less than expected. With consumer confidence dropping I believe that the second half GDP numbers will be much less than others expect. In fact, I wouldn't be surprised to see no growth in the third quarter. Unless the "rules" should change, stock prices still follow corporate profits, and I don't hear the cash register making too much noise.
GDP
The first quarter results were revised downwards from 6.1% to 5%. More importantly, the second quarter came in at only plus 1.1% down from estimates of 2.1% or about 50% less than expected. With consumer confidence dropping I believe that the second half GDP numbers will be much less than others expect. In fact, I wouldn't be surprised to see no growth in the third quarter. Unless the "rules" should change, stock prices still follow corporate profits, and I don't hear the cash register making too much noise.
7/31/02 Our Counterproductive Taxation Policy
Chief Justice Marshall said it best: "The power to tax is the power to destroy." Our present income tax policy creates discord as well as inequities for the vast majority of our 130 million taxpayers.
Political pundits lay blame on the stock market 2 year decline for the looming budget deficit. How about creating a level playing field for our millions of stockholders. Why should the taxpayers not have the same "privileges" as corporate America who, when receiving, for example, dividends on preferred stock, are only taxed on 15% of the dividends. Possibly they end up paying 5% on each dividend dollar received. Additionally, why should dividends be taxed twice? Congress and the Administration complain about corporate wrongdoing; however, how about helping the taxpayer and change the laws on dividends.
To add insult to injury the Administration has suggested "individual personal accounts" under social security. We can double our "fun"- pay taxes on dividends at inequitable rates and then pay money management fees while we depend on the vagaries of the stock market for our retirement money.
Where is Chief Justice Marshall when the American people need him?
Chief Justice Marshall said it best: "The power to tax is the power to destroy." Our present income tax policy creates discord as well as inequities for the vast majority of our 130 million taxpayers.
Political pundits lay blame on the stock market 2 year decline for the looming budget deficit. How about creating a level playing field for our millions of stockholders. Why should the taxpayers not have the same "privileges" as corporate America who, when receiving, for example, dividends on preferred stock, are only taxed on 15% of the dividends. Possibly they end up paying 5% on each dividend dollar received. Additionally, why should dividends be taxed twice? Congress and the Administration complain about corporate wrongdoing; however, how about helping the taxpayer and change the laws on dividends.
To add insult to injury the Administration has suggested "individual personal accounts" under social security. We can double our "fun"- pay taxes on dividends at inequitable rates and then pay money management fees while we depend on the vagaries of the stock market for our retirement money.
Where is Chief Justice Marshall when the American people need him?
Tuesday, July 30, 2002
[7/30/2002 9:26:45 AM | michael buchsbaum]
7/30/02 Posting #3
Consumer Confidence
Consumer confidence plunged in July to a five-month low, the Conference Board said Tuesday. Its monthly index of confidence dropped to 97.1 in July from 106.3 in June. The present situation index fell to 99.2 from 104.9 while the expectations index sank to 95.7 from 107.2 in June. "The continued declines in the value of stock market portfolios, coupled with ongoing reports of corporate scandals, have taken a toll on consumer confidence," said Lynn Franco, head of the board's consumer research. "A continued slide could very well jeopardize the economic recovery."
7/30/02 Posting #3
Consumer Confidence
Consumer confidence plunged in July to a five-month low, the Conference Board said Tuesday. Its monthly index of confidence dropped to 97.1 in July from 106.3 in June. The present situation index fell to 99.2 from 104.9 while the expectations index sank to 95.7 from 107.2 in June. "The continued declines in the value of stock market portfolios, coupled with ongoing reports of corporate scandals, have taken a toll on consumer confidence," said Lynn Franco, head of the board's consumer research. "A continued slide could very well jeopardize the economic recovery."
7/30/02 Posting #3
Consumer Confidence
Consumer confidence plunged in July to a five-month low, the Conference Board said Tuesday. Its monthly index of confidence dropped to 97.1 in July from 106.3 in June. The present situation index fell to 99.2 from 104.9 while the expectations index sank to 95.7 from 107.2 in June. "The continued declines in the value of stock market portfolios, coupled with ongoing reports of corporate scandals, have taken a toll on consumer confidence," said Lynn Franco, head of the board's consumer research. "A continued slide could very well jeopardize the economic recovery."
Consumer Confidence
Consumer confidence plunged in July to a five-month low, the Conference Board said Tuesday. Its monthly index of confidence dropped to 97.1 in July from 106.3 in June. The present situation index fell to 99.2 from 104.9 while the expectations index sank to 95.7 from 107.2 in June. "The continued declines in the value of stock market portfolios, coupled with ongoing reports of corporate scandals, have taken a toll on consumer confidence," said Lynn Franco, head of the board's consumer research. "A continued slide could very well jeopardize the economic recovery."
7/30/02 Posting #2
"Infectious fraud not infectious greed"
Those are the words of Ernest Hollings, Democratic Senator from South Carolina and most senior member of the Senate budget committee. He is describing the fraud of the Bush Administration in not properly describing the true deficit this country is running. He cites the gov't budget deficit estimate of $165 billion when he says the true estimate is $412 billion. Actually, in a posting from several days ago, I discussed this issue and estimated the deficit at about $450 billion. I never suggested fraud, and never for a second believe it is. This is commonplace Washington disclosure.
What's needed is not the opinion of Senator Hollings nor my opinion. The facts are simple. The gov't is spending much more than it receives in tax revenues. The gov't estimates that this deficit will go on for several more years. It's been proven you cannot spend your way out of hard times. We can all do the math. Can your elected officials do the math? More importantly- do they want to do the math? In November you can answer this question for them.
"Infectious fraud not infectious greed"
Those are the words of Ernest Hollings, Democratic Senator from South Carolina and most senior member of the Senate budget committee. He is describing the fraud of the Bush Administration in not properly describing the true deficit this country is running. He cites the gov't budget deficit estimate of $165 billion when he says the true estimate is $412 billion. Actually, in a posting from several days ago, I discussed this issue and estimated the deficit at about $450 billion. I never suggested fraud, and never for a second believe it is. This is commonplace Washington disclosure.
What's needed is not the opinion of Senator Hollings nor my opinion. The facts are simple. The gov't is spending much more than it receives in tax revenues. The gov't estimates that this deficit will go on for several more years. It's been proven you cannot spend your way out of hard times. We can all do the math. Can your elected officials do the math? More importantly- do they want to do the math? In November you can answer this question for them.
7/30/02
Yesterday's Rally and the Yield Curve
The rally was the first one this year I found impressive. First, 90% of the trading volume was up volume. People were buying in earnest. Second, the breath had 5 stocks up for every one down. Now we'll wait to see whether the market can repeat that performance. Once is not enough to make an enduring difference.
Yesterday the yield curve in the gov't bond market was the steepest in 10 years. There was over a 300 basis point difference between the yield on 2 year and 30 year bonds- 2.23% vs 5.38%. This spread is meaningful and raises some issues. It may mean the Fed is not going to raise rates or it might indicate they are going to lower rates. It can tell us there are better economic times ahead and it can mean a flight to quality. Historically, it has indicated that the economy will be improving. That seems to be the general consensus.
There have been times when the spread has gone to 400 basis points and once to 500 basis points; however, that differential proved to be unsustainable.
I believe the wide difference in the gov't bond spread is one reason the market rallied yesterday. People believe better times are around the corner. Maybe they're correct. I hope so. I don't invest via hope. I don't believe the current yield difference between the 2 and 30 year is sustainable. Why? I believe the consumer will save more and spend less- a new trend to begin this century. Less consumer spending will place a heavy drag on the economy and countries exporting into the U.S. will see less demand and the cash flow for those countries will lessen and therefore their appetite to purchase our gov't bonds will not be so great, and thus yields will increase. These factors will weigh on the stock market and corporate profits-maybe not in that order.
Yesterday's Rally and the Yield Curve
The rally was the first one this year I found impressive. First, 90% of the trading volume was up volume. People were buying in earnest. Second, the breath had 5 stocks up for every one down. Now we'll wait to see whether the market can repeat that performance. Once is not enough to make an enduring difference.
Yesterday the yield curve in the gov't bond market was the steepest in 10 years. There was over a 300 basis point difference between the yield on 2 year and 30 year bonds- 2.23% vs 5.38%. This spread is meaningful and raises some issues. It may mean the Fed is not going to raise rates or it might indicate they are going to lower rates. It can tell us there are better economic times ahead and it can mean a flight to quality. Historically, it has indicated that the economy will be improving. That seems to be the general consensus.
There have been times when the spread has gone to 400 basis points and once to 500 basis points; however, that differential proved to be unsustainable.
I believe the wide difference in the gov't bond spread is one reason the market rallied yesterday. People believe better times are around the corner. Maybe they're correct. I hope so. I don't invest via hope. I don't believe the current yield difference between the 2 and 30 year is sustainable. Why? I believe the consumer will save more and spend less- a new trend to begin this century. Less consumer spending will place a heavy drag on the economy and countries exporting into the U.S. will see less demand and the cash flow for those countries will lessen and therefore their appetite to purchase our gov't bonds will not be so great, and thus yields will increase. These factors will weigh on the stock market and corporate profits-maybe not in that order.
Monday, July 29, 2002
7/29/02
Professor Sharpe
In today's Financial Times there is an interview with Bill Sharpe, a Nobel laurete. I would like to provide one of his quotes:
"The interesting thing is to find out what kinds of decisions people make under conditions of uncertainty if they know what they are doing." That is a $64,000 question, and maybe even a billion dollar question.
Professor Sharpe
In today's Financial Times there is an interview with Bill Sharpe, a Nobel laurete. I would like to provide one of his quotes:
"The interesting thing is to find out what kinds of decisions people make under conditions of uncertainty if they know what they are doing." That is a $64,000 question, and maybe even a billion dollar question.
7/29/02 Posting#2
Social Security and Pension Funds
We need to root harder for the stock market to go up. President Bush's Commission on Social Security reform assumes a long term 6 1/2% return on an annual basis for stocks. Maybe that will prove correct; however, at this point in the world economic cycle, it might be wise to re-think that number and adjust it downward somewhat. Isn't that what corporate America has been doing on their quarterly earnings projections? They lower the guidance and then come in with numbers at or slightly above the guidance.
It would be wise to also address the unfunded pension liabilities. Clearly the corporate pensions are underwater by at least $130 billion. If 45 million Americans are covered under the pension plans, we can do the math for each individual.
With the population aging we don't need additional problems in social security and pension funds. The stock market cannot be viewed as the ultimate bailout savior.
Social Security and Pension Funds
We need to root harder for the stock market to go up. President Bush's Commission on Social Security reform assumes a long term 6 1/2% return on an annual basis for stocks. Maybe that will prove correct; however, at this point in the world economic cycle, it might be wise to re-think that number and adjust it downward somewhat. Isn't that what corporate America has been doing on their quarterly earnings projections? They lower the guidance and then come in with numbers at or slightly above the guidance.
It would be wise to also address the unfunded pension liabilities. Clearly the corporate pensions are underwater by at least $130 billion. If 45 million Americans are covered under the pension plans, we can do the math for each individual.
With the population aging we don't need additional problems in social security and pension funds. The stock market cannot be viewed as the ultimate bailout savior.
7/29/02
Strictly Business
Investing is a business. Making money is fun; however, the market does not accomodate winners on a daily basis or even a monthly basis or sometimes on a yearly basis. Japan has been in a bear market for 13 years. Not much fun there. You have a choice- to make the trend your friend or the media but not both.
The media would have you believe the latest Michigan consumer confidence numbers weren't that bad. The trend shows a decline for that index of 4 1/2% both in June and July. The news could always be worse. More people could have been killed in the 9/11 tragedy. Tell that to the families of the victims. You too can be victim. Ignore the trend and make the media your friend. The two year bear market trend doesn't know from voters or race or religion. If, however, you buck the trend, there will be a stretcher and an ambulance waiting for you.
Our accounting scandals continue. On Sunday Qwest Communications admitted that they had incorrectly accounted for over $1 billion in revenue over the past 3 years. When they say incorrectly, does that mean the second cash register didn't correspond with the first or were both registers a figment of their imagination? I need clarification here. But the news is better, Ttheir $1 billion error is less than Worldcom's $3.8 billion. See how easy it is to make the world seem a better place for you and for me.
Now I'm waiting for the news out of Europe. Bertelsmann abruptly kicked out its CEO. That followed Messier leaving Vivendi. The latter and Bertelsmann are both in the media business. Maybe the industry is starting a new trend. Let's make the trend our friend.
Strictly Business
Investing is a business. Making money is fun; however, the market does not accomodate winners on a daily basis or even a monthly basis or sometimes on a yearly basis. Japan has been in a bear market for 13 years. Not much fun there. You have a choice- to make the trend your friend or the media but not both.
The media would have you believe the latest Michigan consumer confidence numbers weren't that bad. The trend shows a decline for that index of 4 1/2% both in June and July. The news could always be worse. More people could have been killed in the 9/11 tragedy. Tell that to the families of the victims. You too can be victim. Ignore the trend and make the media your friend. The two year bear market trend doesn't know from voters or race or religion. If, however, you buck the trend, there will be a stretcher and an ambulance waiting for you.
Our accounting scandals continue. On Sunday Qwest Communications admitted that they had incorrectly accounted for over $1 billion in revenue over the past 3 years. When they say incorrectly, does that mean the second cash register didn't correspond with the first or were both registers a figment of their imagination? I need clarification here. But the news is better, Ttheir $1 billion error is less than Worldcom's $3.8 billion. See how easy it is to make the world seem a better place for you and for me.
Now I'm waiting for the news out of Europe. Bertelsmann abruptly kicked out its CEO. That followed Messier leaving Vivendi. The latter and Bertelsmann are both in the media business. Maybe the industry is starting a new trend. Let's make the trend our friend.
Sunday, July 28, 2002
7/28/02
Controlling Expectations
In every market there are opportunities to make money; however, those opportunities maybe less rewarding than at other times and in different markets. At this time we have historically low mortgage rates. That enables families to breathe a bit easier and cope with unemployment problems, low-paying service jobs, and rising healthcare costs(it certainly doesn't pay to get sick). While many are fortunate to refinance their mortgages and receive lower monthly interest payments, many struggle with high interest credit card debt.
It is unrealistic to expect the stock market to solve our problems. We got very lucky for a period of time. With the stock market experiences over the past two years, yearly returns of 5% would look good. Historically, the returns have been closer to 9%. However, with companies finding it difficult to raise prices, and with that increase their cash flow, it might be wise to control our present and future expectations about stock market returns and live accordingly. Saving more and spending less maybe right for these times, and hopefully lessening pressures will make it easier to sleep better at night. If our savings rate improves, the Japanese might want to adopt the United States as their sister country. Maybe then we could merge the yen and the dollar and make it one currency. Even Austin Powers would think that cool. Yeah baby!
Controlling Expectations
In every market there are opportunities to make money; however, those opportunities maybe less rewarding than at other times and in different markets. At this time we have historically low mortgage rates. That enables families to breathe a bit easier and cope with unemployment problems, low-paying service jobs, and rising healthcare costs(it certainly doesn't pay to get sick). While many are fortunate to refinance their mortgages and receive lower monthly interest payments, many struggle with high interest credit card debt.
It is unrealistic to expect the stock market to solve our problems. We got very lucky for a period of time. With the stock market experiences over the past two years, yearly returns of 5% would look good. Historically, the returns have been closer to 9%. However, with companies finding it difficult to raise prices, and with that increase their cash flow, it might be wise to control our present and future expectations about stock market returns and live accordingly. Saving more and spending less maybe right for these times, and hopefully lessening pressures will make it easier to sleep better at night. If our savings rate improves, the Japanese might want to adopt the United States as their sister country. Maybe then we could merge the yen and the dollar and make it one currency. Even Austin Powers would think that cool. Yeah baby!
Saturday, July 27, 2002
7/27/02 Posting #2
Margin Calls
This is a very short note. Unless you are extremely comfortable owning stocks on margin, please think twice about it. As stocks drop, others on margin are forced to put up more equity to meet their calls. As such, the stock you own on margin maybe at the mercy of another holder who does not have more equity to put up, and that individual's stock will be sold to meet the call. That's one way stocks can gap down- due to margin selling and liquidation.
Margin Calls
This is a very short note. Unless you are extremely comfortable owning stocks on margin, please think twice about it. As stocks drop, others on margin are forced to put up more equity to meet their calls. As such, the stock you own on margin maybe at the mercy of another holder who does not have more equity to put up, and that individual's stock will be sold to meet the call. That's one way stocks can gap down- due to margin selling and liquidation.
7/27/02
Reese's Peanut Butter Cups
On Thursday the lead article in the WSJ concerned the possible sale of Hershey Foods. That got my attention in a quick hurry. I specialize in risk arbitrage. My mind though focused on Reese's and not on what Kraft, Nestle, Wrigley, Mars, or Cadbury Schweppes might pay for the business. In trading that day Hershey stock rose 14 points, and it was obvious to me the market thought Hershey could be sold for as much as $11 billion. I don't care about Hershey chocolate bars or the kisses or the cocoa or the syrup or the Almond Joy. York's peppermint patties or Twizzler's don't send me. But the Reese's that's another story. Then I thought why would I spend $11 billion on this company(that's presuming my piggy bank had the jack). Hershey's, at that price, would be valued at over 2 times annual sales and over 50 times earnings. That's a lot of Reese's. Milton Hershey would be laughing all the way to the bank- if he could. He died a very long time ago. Then I got to thinking. Milton and I have two things in common. We both love chocolate and we both come from a German immigrant heritage. Maybe I should try to keep the company in the family, so to speak. Then I thought. Am I for real? This is not a value. So I went to the Grocery Outlet and bought 4 Reese's Peanut Butter Cups for a $1. I savored every bite and realized this was the way to go. Putting $11 billion on my American Express Card makes absolutely no sense. I had come to my senses! My Mother would be proud of me.
Reese's Peanut Butter Cups
On Thursday the lead article in the WSJ concerned the possible sale of Hershey Foods. That got my attention in a quick hurry. I specialize in risk arbitrage. My mind though focused on Reese's and not on what Kraft, Nestle, Wrigley, Mars, or Cadbury Schweppes might pay for the business. In trading that day Hershey stock rose 14 points, and it was obvious to me the market thought Hershey could be sold for as much as $11 billion. I don't care about Hershey chocolate bars or the kisses or the cocoa or the syrup or the Almond Joy. York's peppermint patties or Twizzler's don't send me. But the Reese's that's another story. Then I thought why would I spend $11 billion on this company(that's presuming my piggy bank had the jack). Hershey's, at that price, would be valued at over 2 times annual sales and over 50 times earnings. That's a lot of Reese's. Milton Hershey would be laughing all the way to the bank- if he could. He died a very long time ago. Then I got to thinking. Milton and I have two things in common. We both love chocolate and we both come from a German immigrant heritage. Maybe I should try to keep the company in the family, so to speak. Then I thought. Am I for real? This is not a value. So I went to the Grocery Outlet and bought 4 Reese's Peanut Butter Cups for a $1. I savored every bite and realized this was the way to go. Putting $11 billion on my American Express Card makes absolutely no sense. I had come to my senses! My Mother would be proud of me.
Friday, July 26, 2002
7/26/02 Posting #2
Mutual Fund Outflow
For the most recent weekly July reporting period investors pulled out over $30 billion from mutual funds. That amount exceeds the outflow figure just after 9/11. Contrarians would consider this event significant in that it shows overwhelming bearish sentiment. That is an accurate appraisal of the sentiment. On the other hand, the individual investor, believe it or not, has quite frequently outperformed mutual fund money managers over the past several years. I don't believe one should shortchange the individual investor. The so-called experts clearly have been underperforming the S&P for many reporting periods.
Mutual Fund Outflow
For the most recent weekly July reporting period investors pulled out over $30 billion from mutual funds. That amount exceeds the outflow figure just after 9/11. Contrarians would consider this event significant in that it shows overwhelming bearish sentiment. That is an accurate appraisal of the sentiment. On the other hand, the individual investor, believe it or not, has quite frequently outperformed mutual fund money managers over the past several years. I don't believe one should shortchange the individual investor. The so-called experts clearly have been underperforming the S&P for many reporting periods.
7/26/02
"Confidence Comes Not From The Talking Heads On TV But From The Fundamentals"
This was a statement made yesterday by Treasury secretary Paul O'Neill before the National Association of Manufacturers in Washington. Yesterday the Commerce Department released information that factory orders dropped for the first time since March and was the sharpest drop since December.
Mr. O'Neil opined that he was optimistic about the rebound in investment. I suggest he look at the fundamentals rather than be a "talking head". The fact is business investment fell at the sharpest pace since 9/11. That comprises all non-military investment. If business is shying away from investing in business, then what does that tell you about the confidence going forward? Based on this lack of confidence, why should someone invest in business? This is telling, and will have an impact on future stock prices. Decreasing investment will directly impact the profits of corporations. Just look at IT spending and the telecom industry or what's left of it. Additionally, this lack of confidence will continue to weigh on the dollar.
"Confidence Comes Not From The Talking Heads On TV But From The Fundamentals"
This was a statement made yesterday by Treasury secretary Paul O'Neill before the National Association of Manufacturers in Washington. Yesterday the Commerce Department released information that factory orders dropped for the first time since March and was the sharpest drop since December.
Mr. O'Neil opined that he was optimistic about the rebound in investment. I suggest he look at the fundamentals rather than be a "talking head". The fact is business investment fell at the sharpest pace since 9/11. That comprises all non-military investment. If business is shying away from investing in business, then what does that tell you about the confidence going forward? Based on this lack of confidence, why should someone invest in business? This is telling, and will have an impact on future stock prices. Decreasing investment will directly impact the profits of corporations. Just look at IT spending and the telecom industry or what's left of it. Additionally, this lack of confidence will continue to weigh on the dollar.
Thursday, July 25, 2002
7/25/2002 Posting#2
Advance/Decline
As we move into the last 40 minutes of trading today, the Dow is off about 100 points and the Nasdaq is off about 50 points. Irrespective of the final numbers the last couple of days should have illustrated a point. A market's direction is ultimately determined by its internal strength and or weaknesses, and one of those internals is the advance/decline line. This line has been negative for some time, and even a large Dow upsurge yesterday was not confirmed by a change in the advance/decline strengthening very much. That's why the rally was suspect. Additionally, the new low list has kept expanding and expanding while the new high list was reduced to single digits.
The one bright spot is Hershey Foods as it skyrockets in price. The company is putting itself up for sale.
Advance/Decline
As we move into the last 40 minutes of trading today, the Dow is off about 100 points and the Nasdaq is off about 50 points. Irrespective of the final numbers the last couple of days should have illustrated a point. A market's direction is ultimately determined by its internal strength and or weaknesses, and one of those internals is the advance/decline line. This line has been negative for some time, and even a large Dow upsurge yesterday was not confirmed by a change in the advance/decline strengthening very much. That's why the rally was suspect. Additionally, the new low list has kept expanding and expanding while the new high list was reduced to single digits.
The one bright spot is Hershey Foods as it skyrockets in price. The company is putting itself up for sale.
[7/25/2002 7:14:45 AM | michael buchsbaum]
7/25/02
Arresting Reporting
God help us all. Yesterday many in the media suggested, while the markets were rallying, that the strength could be the result of the arrests made at Adelphia Communications. When handcuffs and not profits make stocks move, then we are in deep deep trouble. I for one would like to see some real growth in homeland free cash flow. I am an optimist. I see something really positive coming out of Adelphia Communications. It's possible that handcuffs might become the restraining unit of choice and replace handguns. If that did occur, we might research the number one manufacturer of handcuffs, and possibly buy their stock at value levels. Until that happens, show me the real net income per share. Green is my color of choice, and I hope yours as well.
Yesterday my early morning blog did not get posted for over 8 hours. I am at a loss of words to explain this happening. Someone suggested that a great many people in Northern California were fixed to their tv screens watching the Adelphia execs being carted off. I believe it was just a technology glitch but not the same one that has hit the Nasdaq for the past two years.
7/25/02
Arresting Reporting
God help us all. Yesterday many in the media suggested, while the markets were rallying, that the strength could be the result of the arrests made at Adelphia Communications. When handcuffs and not profits make stocks move, then we are in deep deep trouble. I for one would like to see some real growth in homeland free cash flow. I am an optimist. I see something really positive coming out of Adelphia Communications. It's possible that handcuffs might become the restraining unit of choice and replace handguns. If that did occur, we might research the number one manufacturer of handcuffs, and possibly buy their stock at value levels. Until that happens, show me the real net income per share. Green is my color of choice, and I hope yours as well.
Yesterday my early morning blog did not get posted for over 8 hours. I am at a loss of words to explain this happening. Someone suggested that a great many people in Northern California were fixed to their tv screens watching the Adelphia execs being carted off. I believe it was just a technology glitch but not the same one that has hit the Nasdaq for the past two years.
7/25/02
Arresting Reporting
God help us all. Yesterday many in the media suggested, while the markets were rallying, that the strength could be the result of the arrests made at Adelphia Communications. When handcuffs and not profits make stocks move, then we are in deep deep trouble. I for one would like to see some real growth in homeland free cash flow. I am an optimist. I see something really positive coming out of Adelphia Communications. It's possible that handcuffs might become the restraining unit of choice and replace handguns. If that did occur, we might research the number one manufacturer of handcuffs, and possibly buy their stock at value levels. Until that happens, show me the real net income per share. Green is my color of choice, and I hope yours as well.
Yesterday my early morning blog did not get posted for over 8 hours. I am at a loss of words to explain this happening. Someone suggested that a great many people in Northern California were fixed to their tv screens watching the Adelphia execs being carted off. I believe it was just a technology glitch but not the same one that has hit the Nasdaq for the past two years.
Arresting Reporting
God help us all. Yesterday many in the media suggested, while the markets were rallying, that the strength could be the result of the arrests made at Adelphia Communications. When handcuffs and not profits make stocks move, then we are in deep deep trouble. I for one would like to see some real growth in homeland free cash flow. I am an optimist. I see something really positive coming out of Adelphia Communications. It's possible that handcuffs might become the restraining unit of choice and replace handguns. If that did occur, we might research the number one manufacturer of handcuffs, and possibly buy their stock at value levels. Until that happens, show me the real net income per share. Green is my color of choice, and I hope yours as well.
Yesterday my early morning blog did not get posted for over 8 hours. I am at a loss of words to explain this happening. Someone suggested that a great many people in Northern California were fixed to their tv screens watching the Adelphia execs being carted off. I believe it was just a technology glitch but not the same one that has hit the Nasdaq for the past two years.
Wednesday, July 24, 2002
7/24/02 Posting #2
Fools Rush in Where Others Fear to Tread!
The Dow up 488. The Nasdaq up 61. Merck, JP Morgan Chase, Citicorp, Microsoft, and GE lead the way. They look similar to the stocks mentioned in my pre-opening blog of today. The rally has bad breath! On the New York Stock Exchange the advance/decline was 20 stocks up for every 13 down and on the Nasdaq 20 up for every 15 down. Those ratios don't make for lasting reversals.
Fools Rush in Where Others Fear to Tread!
The Dow up 488. The Nasdaq up 61. Merck, JP Morgan Chase, Citicorp, Microsoft, and GE lead the way. They look similar to the stocks mentioned in my pre-opening blog of today. The rally has bad breath! On the New York Stock Exchange the advance/decline was 20 stocks up for every 13 down and on the Nasdaq 20 up for every 15 down. Those ratios don't make for lasting reversals.
7/24/02
Bad Breath and New Lows
You probably think I am referring to this weekend's Gilroy garlic festival. Actually, I am talking about yesterday's trading when, on the New York Stock Exchange, there were 28 stocks down for every 5 that were up. Certainly that would indicate a market much worse than the Dow 30 stocks.
Yesterday the two companies with the highest market caps, GE and Microsoft, made new lows. Both market caps approximate $280 billion. At one time both had market caps of well over $500 billion or much larger than the GDP for most countries!
In the financial sector Citicorp and JP Morgan Chase traded down to levels not seen in some time. Their charts look like both stocks dropped off a cliff.
Talking about drops, Merck fell to a new low of 39 1/2. The board of directors announced a $10 billion buyback of shares. Since 2000, under a previously announced buyback, Merck had already spent $7.7 billion on buying their own shares. Maybe they should have increased the R&D budget for discovering new drugs. I would prefer to see corporate officers and directors reach into their own pockets and purchase shares- not by exercising options- but by making market purchases. That would be more meaningful, and something that you don't see too frequently these days. Maybe insiders are nervous about the market. If they aren't buying, why should the investing public buy? They should know more about their own company.
Bad Breath and New Lows
You probably think I am referring to this weekend's Gilroy garlic festival. Actually, I am talking about yesterday's trading when, on the New York Stock Exchange, there were 28 stocks down for every 5 that were up. Certainly that would indicate a market much worse than the Dow 30 stocks.
Yesterday the two companies with the highest market caps, GE and Microsoft, made new lows. Both market caps approximate $280 billion. At one time both had market caps of well over $500 billion or much larger than the GDP for most countries!
In the financial sector Citicorp and JP Morgan Chase traded down to levels not seen in some time. Their charts look like both stocks dropped off a cliff.
Talking about drops, Merck fell to a new low of 39 1/2. The board of directors announced a $10 billion buyback of shares. Since 2000, under a previously announced buyback, Merck had already spent $7.7 billion on buying their own shares. Maybe they should have increased the R&D budget for discovering new drugs. I would prefer to see corporate officers and directors reach into their own pockets and purchase shares- not by exercising options- but by making market purchases. That would be more meaningful, and something that you don't see too frequently these days. Maybe insiders are nervous about the market. If they aren't buying, why should the investing public buy? They should know more about their own company.
Tuesday, July 23, 2002
7/23/2002
Bear Market Rallies
Overnight the dollar staged its largest rally against the euro since last September. With the dollar strength U.S. stocks in foreign markets rallied sharply as well. That's the natural course of events. Stocks don't go up or down in a straight line. Just look at historical charts and that will be plain to see.
Focus on the current trends and don't be misled by day to day fluctuations. Again, looking at a chart will give you a picture of the trend. There should not be any doubt that the stock markets and the dollar are in bear markets and that the bond market has been in a bull market. Trends can last a very long time. When a long trend is broken, it stays broken for some period. That period can last 10-20 years and not 10-20 days. Rallies in bear markets give a respite to those investors needing to calm their nerves, and to raise the question as to whether a bottom has been reached. No one rings a bell at market bottoms. Only in hindsight do we know a market has reversed itself.
Yesterday I asked what is the rush. Today I am suggesting to keep your eye on the ball, and particularly the trend provided in charts. As the old saying goes, make the trend your friend. Daily fluctuations are the norm. That's what makes markets.
Bear Market Rallies
Overnight the dollar staged its largest rally against the euro since last September. With the dollar strength U.S. stocks in foreign markets rallied sharply as well. That's the natural course of events. Stocks don't go up or down in a straight line. Just look at historical charts and that will be plain to see.
Focus on the current trends and don't be misled by day to day fluctuations. Again, looking at a chart will give you a picture of the trend. There should not be any doubt that the stock markets and the dollar are in bear markets and that the bond market has been in a bull market. Trends can last a very long time. When a long trend is broken, it stays broken for some period. That period can last 10-20 years and not 10-20 days. Rallies in bear markets give a respite to those investors needing to calm their nerves, and to raise the question as to whether a bottom has been reached. No one rings a bell at market bottoms. Only in hindsight do we know a market has reversed itself.
Yesterday I asked what is the rush. Today I am suggesting to keep your eye on the ball, and particularly the trend provided in charts. As the old saying goes, make the trend your friend. Daily fluctuations are the norm. That's what makes markets.
Monday, July 22, 2002
7/22/2002
What's the Rush?
The media spends too much time talking and writing about searching for a market bottom. It makes for bad press and fruitless airtime.
Let's be productive and rational. Most bottoms are comprised of consolidation after consolidation. True bottoms can take place over long periods. On rare occasions there will be a V bottom marked by a long downturn and a sharp reversal. This happened in December 1974. Values were so extraordinary at that time. That is not true today.
I dislike shopping. I look at a sale and see an item marked 50% off. I'm rarely impressed by the markdown. Even going out of business sales aren't great as far as I'm concerned. So many company stocks were marked up to ridiculous prices that 50-60% price reductions aren't that exciting. I can do without almost all of the items on sale. But that's just me.
Please don't think you are going to outsmart a treacherous bear market. It's not going to happen. As they say, when they raid the whorehouse they take all the girls. (That is not meant as a male chauvenist remark. It's an old saying on Wall St.) Your "sister" or "cousin" maybe the prettiest of the bunch, but she's going too. That's the reality of bear markets.
Please take your time prior to investing more money. Do your homework. Invest a little at a time. Do not commit all the funds at one time. You are not about to pick the bottom. Hope may spring eternal but we're not in the hope business. What's the rush?
What's the Rush?
The media spends too much time talking and writing about searching for a market bottom. It makes for bad press and fruitless airtime.
Let's be productive and rational. Most bottoms are comprised of consolidation after consolidation. True bottoms can take place over long periods. On rare occasions there will be a V bottom marked by a long downturn and a sharp reversal. This happened in December 1974. Values were so extraordinary at that time. That is not true today.
I dislike shopping. I look at a sale and see an item marked 50% off. I'm rarely impressed by the markdown. Even going out of business sales aren't great as far as I'm concerned. So many company stocks were marked up to ridiculous prices that 50-60% price reductions aren't that exciting. I can do without almost all of the items on sale. But that's just me.
Please don't think you are going to outsmart a treacherous bear market. It's not going to happen. As they say, when they raid the whorehouse they take all the girls. (That is not meant as a male chauvenist remark. It's an old saying on Wall St.) Your "sister" or "cousin" maybe the prettiest of the bunch, but she's going too. That's the reality of bear markets.
Please take your time prior to investing more money. Do your homework. Invest a little at a time. Do not commit all the funds at one time. You are not about to pick the bottom. Hope may spring eternal but we're not in the hope business. What's the rush?
Sunday, July 21, 2002
7/21/2002
Worth Remembering
The stock market is not like baking a cake from a mix. The ingredients are never the same. It is wise to remember that the market accomodates the fewest number of investors at any one time. As such, there will be times when the risks overwhelm any chance for rewards. Pundits put too much stock in assigning the "proper" P/E for the S&P and the Nasdaq. Obviously, the lower the P/E the lower the risk factor.
When do you commit funds? When it feels right for you; when values jump out at you like in 1974 when I could buy really good companies at a 5 P/E and yielding 10%. We are a long way from that now; however, those times may not return. Microsoft was not in existence in 1974. Very few people had heard of the internet. I hadn't. Times in 1974 were different from today. To be a successful investor you need to remember the past but truly concentrate on the present and anticipate the future. Suppose in 1974 you weighed 160 pounds and 38 years later you tipped the scales at 210. You are the same individual getting on the scale but your well-being is different.
Today the country's balance sheet is laden with debt and that is true of most households. That makes us different from 20-30 years ago. We are not as agile financially. That alone limits our abilities. We can become a two job family but we still work 4 1/2 months for the IRS and the second job pays for credit card and mortgage debt. The gov't can only tax you so much. Their revenue capabilities are limited, and tax receipts from stock market bubbles may only occur once in 50-70 years. The debts keep piling up for the gov't and more bonds need to be issued- almost like a ponzi scheme. Conditions today are different and therefore reading the stock market becomes more challenging. Don't rush your learning curve. Invest at your pace and acknowldege the risks before looking for rewards.
Worth Remembering
The stock market is not like baking a cake from a mix. The ingredients are never the same. It is wise to remember that the market accomodates the fewest number of investors at any one time. As such, there will be times when the risks overwhelm any chance for rewards. Pundits put too much stock in assigning the "proper" P/E for the S&P and the Nasdaq. Obviously, the lower the P/E the lower the risk factor.
When do you commit funds? When it feels right for you; when values jump out at you like in 1974 when I could buy really good companies at a 5 P/E and yielding 10%. We are a long way from that now; however, those times may not return. Microsoft was not in existence in 1974. Very few people had heard of the internet. I hadn't. Times in 1974 were different from today. To be a successful investor you need to remember the past but truly concentrate on the present and anticipate the future. Suppose in 1974 you weighed 160 pounds and 38 years later you tipped the scales at 210. You are the same individual getting on the scale but your well-being is different.
Today the country's balance sheet is laden with debt and that is true of most households. That makes us different from 20-30 years ago. We are not as agile financially. That alone limits our abilities. We can become a two job family but we still work 4 1/2 months for the IRS and the second job pays for credit card and mortgage debt. The gov't can only tax you so much. Their revenue capabilities are limited, and tax receipts from stock market bubbles may only occur once in 50-70 years. The debts keep piling up for the gov't and more bonds need to be issued- almost like a ponzi scheme. Conditions today are different and therefore reading the stock market becomes more challenging. Don't rush your learning curve. Invest at your pace and acknowldege the risks before looking for rewards.
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