Thursday, May 31, 2007

Recess or recession? Are we playing or being played by government numbers?

In April, the Commerce Dept. projected that first quarter GDP - the broadest measure of domestic economic activity - grew by 1.3%. As usual, the government number crunchers were wrong. Not only wrong, but wrong by more than 50% as the latest estimate was announced today at 0.6%. A couple more revisions and we'll officially be in recession. We may be already... probably are... but it doesn't really matter.

Leave it to the federal government to botch statistics in such a monumental manner, though it hardly manners to the average US citizen or investor. At the other end of the economic food chain, however, the big fish may not take the news so readily. Many investment decisions are based on economic data, and, at the very least, news of a recession looming is likely to send some of the weak-kneed types scrambling for the exits, and that's just fine. More profits for the brave.

Dow 13,627.64 -5.44; NASDAQ 2,604.47 +11.88; S&P 500 1,530.62 +0.39; NYSE Composite 9,978.63 +15.02

Based on today's trade, there was some effect from the figures, though it was muted. These macro-economic figures are tough to wrap one's mind around. First, nobody really has a handle on the real, raw data; second, there are rounding errors, adjustments for inflation, the foreign value of the dollar and other considerations in the nebulous world of economics to consider. The margin of error is probably around 1 1/2%, so when we get close to zero, it could be a positive or negative number.

Really, there's no good reason to get agitated over a decline in the GDP unless it's substantial, like 3 1/2% or more. Even then, recessions are natural and necessary cycles in robust Keynesian economies. Recessions are just the normal response to excesses - of which there have been plenty of late - as a way of balancing the books, so to speak.

Also, recessions are barely noticeable on the surface. Life goes on, some businesses do well while others have to tighten their belts a bit, but, unless the recession is long and deep, the economy in question usually emerges stronger for the experience.

We won't know for sure when we're in a recession for at least another 2-3 months, if at all. If the first quarter was actually contracting, so too would the second quarter have to be, as the most widely-accepted definition of a recession is two consecutive quarters of negative growth, or contraction. Fear not, even if we are already there, it's not going to hurt much.

Besides, annual GDP for the US is in the range of $13,000,000,000,000. That's 13 TRILLION Dollars. a 2% decline would be $26 billion. Believe me, nobody, especially you and I, is going to notice.

In any case, advancing issues were ahead of decliners by nearly a 3-2 margin. There were a preponderance of new highs: 568, to a mere 65 new lows.

The price of oil crept up another 52 cents to $64.01. Gold shot up $7.40 to $666.70. Silver was higher by 25 cents to $13.47, though both of the precious metals have been stuck in a narrow range for the past 14 months. That's why numismatists are called "collectors" and not "investors."

Wednesday, May 30, 2007

Stocks Soar; Dow, S&P Set New Records

It was business as usual for US equities, but today may prove to be especially important as the S&P 500 - regarded as the broadest measure of US corporate strength - made a new all-time high, eclipsing the previous record of 1,527.46, reached on March 24, 2000, just before the dotcom boom went bust.

Just in case anybody was still wondering about the effects of a China meltdown, a la Alan Greenspan's warning of last week, the AP reported earlier in the day:

The main Shanghai Composite Index tumbled 6.5 percent at 4,071.27 after hitting a record high on Tuesday. The Shenzhen Composite Index for China's smaller second market fell even more, closing down 7.2 percent at 1,199.45.

So, we can put that "all markets are related" canard to rest, along with the eminently detestable Mr. Greenspan and his worthless pronouncements.

Dow 13,633.08 +111.74; NASDAQ 2,592.59 +20.53; S&P 500 1,530.23 +12.12; NYSE Composite 9,863.61 +71.12

The Dow Industrials also set another closing high, though that's become old hat by now. With the S&P finally in record territory, the markets could actually break out from here, and that looks very likely in the near term.

The rationale continues to be healthy corporate profits, manageable macro-economics, low interest rates, an accommodative regulatory environment and lots of cash looking for places to invest. The beat goes on.

Not even the oil business could disrupt Wall Street's enthusiasm. As it was, oil was only 34 cents higher, closing at $63.49. Nobody noticed, especially on Wall St., where traders either take trains, limos or are making so much money they don't care.

Wall Street's gain was precious metals' loss. Gold sunk $4.10 to $659.30. Silver was unchanged at $13.22 the ounce.

Advancing issues were ahead of decliners by a 13-8 margin. There were 341 new highs, 95 new lows.

Tuesday, May 29, 2007

Another Nice NASDAQ Notion

Tech stocks are all the rage again, at least for today. The biggest gains were once again in the tech-heavy NASDAQ index, which was up better than a half percent on a day that the other indices barely budged.

Dow 13,521.34 +14.06; NASDAQ 2,572.06 +14.87; S&P 500 1,518.11 +2.38; NYSE Composite 9,892.49 +16.38

As mentioned here in previous posts, there are good reasons to like tech, especially internet or chip-related issues. Many businesses begun in the red-hot heyday of the 90's are now mature or maturing, solidifying their market positions and bringing down exceptional profits.

Tech fell somewhat out of favor after the dotcom bust of 2000 and it's yet to fully recover. The NASDAQ index is still only half way back from its all-time high, so there are undervalued companies with plenty of upside. Besides that, the blue chips are somewhat overbought and fund managers are looking to mid- and small-caps for more gains in the 2nd half of 2007.

The M&A hawks are also on the lookout for takeover or take private companies in tech. Many of the best have market caps of less than $30 billion. Tech takeovers could be de rigeur in the waning years of the 2000s decade.

Overall, advancing issues surpassed decliners by a nearly 2-1 margin on light volume. New highs checked in at 305, while there was nary a new low to be found - only 73 of them on the day.

The lack of volume was indicative of two matters: Summer and complacency. The nice weather is usually a harbinger of a prevailing slowdown in trading activity. There also was a paucity of economic and/or corporate news to digest, though the consumer confidence numbers released by the Conference Board were surprisingly upbeat and that set the tone for Tuesday.

And, shockingly, with the holiday driving done for now, the price of oil magically fell on the NY-MERC, as light, sweet crude dropped $1.90 to close at $63.30. Drivers should expect some - though not much - relief at the pump over the next three to four weeks. Of course, prices will go higher as the 4th of July holiday approaches due to (wink, wink) supply and demand, of course.

Gold and silver made modest gains but remain rangebound, depressed and somewhat overpriced.

It's a short work week, so expect the most volatility - if there is any at all - to occur on Wednesday and/or Thursday.

Friday, May 25, 2007

Stocks Rebound From Greenspan's China Gambit

Shares of US equities rebounded on Friday ahead of the Memorial Day weekend, apparently shrugging off suggestions from former Fed chairman Alan Greenspan, who opined that China stocks were overvalued and needed "correcting." Well, that's his opinion and China is China, not the USA. Stocks in the US are still the "gold" standard by which all other markets are measured, as the US is seen by most as having the most stable and mature markets. Risk is spread out among multiple millions and billions of shares on many stocks, adding to the appeal.

Adios, Mr. Greenspan. Have a nice retirement.

Dow 13,507.28 +66.15; NASDAQ 2,557.19 +19.27; S&P 500 1,515.73 +8.22; NYSE Composite 9,876.11 +63.60

All major indices were up smartly on the day, with the NASDAQ once again getting the best percentage gain (0.76%). Techs truly rule in this environment and many companies have been growing by leaps and bounds since the meltdown of 2000.

Stocks overall were led by a better than 2-1 margin of advancing issues over decliners.
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However, there were only 167 new highs and 98 new lows, the closest those two measures have been to each other in quite a while - well over a month. The lack of new highs - down significantly from the 400+ a week ago - may be due to profit-taking. There's no sin in taking profits on a stock that has made new highs and the end of May, in the midst of a long, long bull market is certainly not beyond reasonable trading etiquette.

While stock traders were having a solid day, so too the players on the oil bourses, who pumped the price of crude up another $1.02 to $65.20. Gas prices are at an all-time high in the US - that's not news to anybody - and after this holiday weekend, something has to be done to ameliorate the heavy price consumers are paying. The gluttony of the oil companies still threatens to derail the entire US economy, though, sadly, the Congress and the president have not shown leadership on the issue of protecting the public well-being.

Gold and silver gained marginally, but are still at multi-month lows.

For the week, the Dow fell by 49 points, the NASDAQ was down 1 point and change, the S&P 500 lost 7 points. Better days are just ahead as the S&P hints towards an all-time high.

Thursday, May 24, 2007

Thanks, Mr. Greenspan!

The markets responded both in China and the US today after former Fed Chairman Alan Greenspan issued a general warning about the overvaluation of stocks on China's exchanges on Wednesday. As expected, the fallout was felt on the Shanghai B-index of stocks demoninated in foreign currencies, which fell 8%, in Europe and on US exchanges.

Greenspan's comments coincided with a warning from Chinese government officials about the risks of investing in equities. As usual, investors were spooked by people who should have nothing to say and no influence over markets. Sadly, loudmouth outdated louts and know-nothing government squawkers are part and parcel of the risks of investing. They've been intruding and manipulating in open markets for centuries and their influence seems only to be growing.

Dow 13,441.13 -84.52; NASDAQ 2,537.92 -39.13; S&P 500 1,507.51 -14.77; NYSE Composite 9,812.51 -101.15

Other news included a 16% jump in new home sales for April along with an 11% drop in median prices from March to April. The year-over-year decline in median price of 10.9% was the biggest such decline in 37 years. The housing market is deflating - and quickly - while screaming "buyer's market" to potential home owners and speculators.

Sporadic reports also surfaced in newspapers and on the web pointing out what most Americans already know. Food prices are running very high, especially for quality meat, fruit and vegetables.

Besides food, high gas prices continue to eat away at Americans' wallets, though oil for July delivery fell $1.59 to $64.18. That price is still $4 to $5 higher than it can be before drivers can hope to see any noticeable impact at the gas pump.

Declining issues overwhelmed advancers by a 7-2 margin and the number of new highs was 222 - the lowest number in more than a month. 105 issues recorded new lows.

The metals took another dive on Thursday. Gold was down $9.30 to $653.30 while silver lost 19 cents to close at $12.92.

Stock prices are influenced by all kinds of data, noise, news and reportage. The mouthings of unofficial spokesmen, such as Alan Greenspan, should fall under the noise category. He has no more clue about the direction of markets, or, more pointedly, their valuation, than any b-grade stock broker. His irregular incantations and bemoanings ought to be ignored.

Wednesday, May 23, 2007

Greenspan Talks Off Rally With China Drop

Just when you thought everything was going swimmingly, somebody is sure to come along and throw salt into the pool. Today it was the old curmudgeon himself, former Fed Chairman Alan Greenspan, saying that there was trouble in China's stock markets, which have risen by as much as 90% in the past year.

The last time Mr. Mumbles muttered about China, it sparked a global selloff in stocks and a more than 400 point decline on the Dow. That was back on February 27. Today's mouthings sparked a spate of selling, wiping out gains made in the morning. The Dow had been up 70 points and the S&P was poised to set a record closing high, but after 1:30, the selling became vigorous and both indices ended in the red.

Dow 13,525.65 -14.30; NASDAQ 2,577.05 -10.97; S&P 500 1,522.28 -1.84; NYSE Composite 9,913.66 +12.70

What's troubling about Greenspan's comments are that they are coming from the mouth of a person with no official standing. Greenspan is retired and in his 80s, a time normally reserved for people to relax and enjoy what remains of their lives. Maybe he takes pleasure in moving markets - a likely explanation, since he did it so readily as Fed Chairman for so long.

The other problem is that China's markets have nothing to do with US markets. One can make a slew of arguments that they are somehow intertwined with the rest of the global economy, but they're not. Stock market exchanges are places where people are investing and betting on movements of individual issues.

The rise and fall of markets has something to do with the economic health of host nations, but barely. They have more to do with the perceived value of stocks and indices. Markets are moved by economic forces, not the other way around. Greenspan, and anyone who pays attention to his screed, make the mistake that stock markets are essential mechanisms of economies. They are not.
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China's stock markets are, by most measures, overvalued, much as ours were in 2000. The markets will make the corrections on their own. The economy of China - and certainly that of the US - will not collapse if the market drops 20%. Some rich people will lose money, likely to some other rich people who will take it.

Greenspan should just keep his comments to himself. Even better, people would be well advised to ignore what he says. In his lifetime, he's been dead wrong on issues often enough to make doubting his word a wise choice.

Whatever effect Greenspan had on the markets, they weren't widespread. Declining issues beat advancers by roughly a 3-2 margin. New highs numbered 483 to a mere 71 new lows. Obviously, not everyone was listening, though the after-effect, tomorrow and Friday, made be more severe.

What probably made traders shudder even more was the continued rise in the price of oil. The new July contracts came out today and even though US stockpiles continued to build steadily into the summer driving season. Despite rising stockpiles of gas and improved delivery from refineries, the price of crude still shook higher by 27 cents to $65.51 per barrel.

In other commodities, gold and silver both gained marginally, but remain stuck in a year-long rut.

Thursday's markets ought to be interesting, if only to see if Greenspan's mouth can move China's markets. If there's a selloff in China tomorrow or Friday, be prepared for a broad decline in European and US markets as well. It's uncalled for, but nobody ever made money by not paying attention, either.

Tuesday, May 22, 2007

Small Change, But a Big One

Please excuse the ambiguousness of the headline. Today's market movements were minimal, but the impact - for those paying attention - could be huge. Yesterday it was noted that while the Dow stumbled, the NASDAQ was having somewhat of a banner day, posting a gain of 20 points, which is close to 1% on that index.

Today was affirmation of our best hunch - that traders were moving away from Dow stocks and large caps to techs, mid-caps and small-caps. Contemplating the huge sums being paid by private equity to take certain companies private, it's obvious that there are a lot of undervalued companies out there. The private equity vultures are primarily interested in major names with established brands - a somewhat disturbing trend in itself - so the small and mid-caps are going to get the lion's share of attention during this summer's trading outside the M&A speculators.

Dow 13,539.95 -2.93; NASDAQ 2,588.02 +9.23; S&P 500 1,524.12 -0.98; NYSE Composite 9,900.96 +3.50

There's a caveat to the trade and it's called timing. Once the S&P tops its previous high, all bets are off. The markets could - and should - go on an unprecedented tear to the upside, similar to what the Dow has done over the past month and change. While the S&P will capture most of the headlines, the NASDAQ will be humming along with even more spectacular gains.

Remember, that since the downturn in 2000, the Dow has come all the way back and then some while the S&P is teasing us with a new all time high.
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Meanwhile, the NASDAQ has recovered only half its heft since the crash. Surely it was overbought back then, but by 2500 points? Doubtful. Figure that the top 20-25% of the Naz was real froth, so we're looking at an achievable number of 3,800 to 4,000 in relatively short order.

While that may sound like a stretch, take into consideration that the Naz crossed back over 2000 in January 2004 and has taken more than three years to gain just another 600 points. All the money that was being made on the Dow and S&P is going to get reinvested, and the most likely place for that to occur is on the NASDAQ and especially in computer and related devices, internet plays and generally anything that involves using a computer chip.

Computers and the internet don't use gas, and that's a major consideration. Media companies that are not newspapers should also do well, as will any disruptive technology company.

Advancing issues were better than decliners by a 4-3 margin. New highs outnumbered new lows, 433-68. The US dollar continued to show strength against most European currencies, though the weakness against the Yen (Japan) and Yuan (China) is still a concern. Oil dropped $1.30 to $64.97, gold and silver were down (again) and that's a wrap.

Monday, May 21, 2007

Shift From Blue Chips to Tech Starting?

Monday saw unusual movement in the various major indices. While the Dow was slightly lower, the S&P and NYSE up marginally, the NASDAQ powered ahead 20 points. As Friday was options expiration day for May, we can expect to see more of a realistic trading pattern for at least the next three weeks. Earnings for the first quarter are largely behind us, so the markets should move on M&A activity and economic reports.

Additionally, the price of oil and motor fuel should play significant roles in any movement over the next month. US motorists have just about had it with the managed price escalation by Big Oil. Unfortunately, there's little the US consumer can do about it. Nearly everybody in America owns a car out of necessity, except where public transportation is functional, like New York, Washington D.C. or Chicago.

Even in the grand metropolises, public transportation is either incomplete or only a portion of the total people-moving mechanism. Americans are overall tied to their cars and there's no easy solution. Therefore, gas prices are at a point right now that they are eating into disposable income in some classes. In the lower classes, high fuel costs are eating into necessities like food and health, and in some cases, savings.

Dow 13,542.88 -13.65; NASDAQ 2,578.79 +20.34; S&P 500 1,525.10 +2.35; NYSE Composite 9,897.46 +3.72

Keeping with the theme, light crude on the NYMERC shot up another $1.33 on Monday to settle at $66.27, the highest it's been in months. With summer driving season ahead and the American oil companies firmly in control of the pricing, the government, and soon, our wallets, don't expect any relief through the Memorial Day weekend at least. We're being gouged but good, and between our brain-dead (and oil rich) President and the supine Congress, the American public is on its own here. It's either fish or cut bait, or, more appropriately, drive or ride a bike.

Advancing issues held sway over decliners by a 5-3 margin (2-1 on the NASDAQ), and you wouldn't know it just from the headline numbers, but there were an impressive 540 new highs and just 71 new lows. For what looked on the surface like a dull day, there was plenty of movement out of the blue chips on the Dow and into mid-cap tech stocks. Whether this trend holds up over the short and long-term remains to be seen, though this kind of cyclical rotation is normal in bull markets. Sellers are taking profits and re-investing in what they may view as undervalued sectors. Tech is still rebounding from 2000, though it's been growing exceptionally, especially in the internet and computing space.

Gold was up $1.80 and silver gained 13 cents. Both of the precious metals have been depressed for over a year now - not so precious.

Update on Marvel Enterprises (MVL): Well, like I said in my original post on Marvel, the price decline after a stellar earnings report was more options-related and short term profit-taking than anything else. The stock dropped to a low of 25.50 on Friday, the options expiration date for May. Marvel finally closed at 26.25 as the week ended. On Monday, investors could not get enough of the Spidey-stock, boosting it 2.10 (8%) to a finish at 28.35. Volume was 4 times normal. The die has been cast. This one's a keeper in a big way. I re-reinterate my buy recommendation and price target of 38-42.

Friday, May 18, 2007

Another Day, Another Dow Record

The beat goes on and on and on...

Investors got back to their habitual buying on Friday - as the oil boom also continued apace - with little to hold them back. There was scant economic news and with the world awash with money, traders sent stocks soaring on all major indices.

Dow 13,556.53 +79.81; NASDAQ 2,558.45 +19.07; S&P 500 1,522.75 +10.00; NYSE Composite 9.893.74 +74.76

In addition to the Dow crashing through the 13,500 mark, the S&P closed to within 10 points of its all-time record closing high and the NASDAQ broke through a key support area at 2,553.00.

As has been repeated here ad nauseum the environment for corporations in the United States has never been easier and more conducive to high profitability. There is literally no government oversight and regulations are lax or outright disregarded.
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Empowered by a hands-off government, American corporations are able to bend rules and break laws at will and many of them are more than willing to take full advantage.

Investors sense this giddy atmosphere and are piling into US stocks like never before, the consequences be damned. America is at the height of its power and Wall Street is bent on cashing in.

The overall breadth of the market was not pronounced on Friday however, as advancing issues outpaced decliners by a modest 5-3 ratio, though new highs stepped up to 404, versus 126 new lows.

Oil was up only 8 cents, while the metals rebounded slightly after a recent spate of selling. Gold gained $4.80 to $662.00; silver was higher by 12 cents to close at an even $13.00. It wasn't but a week ago that silver was threatening to break above $14 and gold set to surpass $700, but the rally fizzled badly.

By any measure, this was one of the best weeks ever to be an investor, in one of the best years, so far.

Thursday, May 17, 2007

Stocks Take a Thursday Break

Stocks traded in very narrow ranges on Thursday as all major indices turned slightly negative. While volume was still on the high end, there was more than enough selling to offset any optimistic buying.

Dow 13,476.72 -10.81; NASDAQ 2,539.38 -8.04; S&P 500 1,512.75 -1.39; NYSE Composite 9,818.98 -6.45

Losers led the way over winners by a 5-3 margin, while new highs outpaced new lows, 312-151.

Oil was the enemy of all economies again, leaping $2.31 to $64.86, the highest price in weeks. The metals continued their declines, with gold down $4.30 to $657.20, while silver dropped 5 cents to $12.88.

Friday could turn either way, as profit-taking seems to be in vogue, though the lack of economic news may prove a catalyst in itself.

It was really one of the duller days of the past few months. Friday offers options expiration, but that all seems played out already.

Wednesday, May 16, 2007

The Hits Just Keep Coming... Another Record for the Dow

Just a day after a strong rally was derailed midday by discouraging housing news, investors shrugged off more bad news from the residential housing sector and galloped higher, with the Dow making another closing high, nearing 13,500.

Dow 13,487.53 +103.69; NASDAQ 2,547.42 +22.13; S&P 500 1,514.14 +12.95; NYSE Composite 9,825.43 +60.70

The S&P, meanwhile made up most of the losses from the previous four sessions' gyrations and closed at its highest level in more than 6 1/2 years, only 13 points away from an all time high of its own.

As has been noted here before, as long as the Fed remains even-keeled in its approach to interest rates and keeps creating new money out of thin air and debt, this bull run could continue longer than anyone suspects.
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Of course, the naysayers believe that the longer it runs, the worst the final fall will be. Most investors are willing to take that risk right now as corporate profits and merger activity continue unabated.

Adding to the glee chorus on Wednesday was a slight dip in oil prices and word from a possibly dubious source that gasoline prices may not rise much more. According to Guy Caruso of the government's Energy Information Administration: "We do anticipate some improvement in the coming months."

Whether Caruso was expressing improvement for the oil companies or motorists was not clear, though most assume he meant well for US gas consumers. Caruso appeared at a House Judiciary Committee antitrust panel on Capitol Hill that grilled oil execs over the recent and continued price hikes at the pump.

The price of crude oil fell 62 cents to close at $62.55, which seems to be the desired price level of the moment. At the $62-64 level almost everybody - oil companies, OPEC and consumers - is happy, though the argument is that OPEC and Big Oil are more happy than the average Janes and Joes filling their vehicles.

Gold and silver were off sharply. Gold lost $13.00 to $661.50, while silver fell 39 cents to $12.93.

Advancing stocks beat decliners by better than 3-2, and there were 286 new highs to 152 new lows.

Tuesday, May 15, 2007

Not As Good As It Could Have Been

A rather somber tone fell over Wall Street Tuesday afternoon as traders digested disheartening news from the housing sector. A report released by the National Association of Home Builders confirmed that home builders don't see a recovery in the housing market until 2008, plus, a confidence survey fell 3 points to 30 in May, equaling the low hit last September.

It was not the kind of news for which the markets were prepared. After the CPI report prior to the opening showed a rather tame increase of 0.4% for April - and 0.2 for core CPI (excluding food and energy) - traders responded with enthusiastic buying, though their buoyant mood was tempered later in the day.

The Dow, which had been up nearly 135 points early, slipped into the close with a marginal gain, though still closing at a new record high. The NASDAQ, S&P and NYSE Comp. all closed lower for the second straight day.

Dow 13,383.84 +37.06; NASDAQ 2,525.29 -21.15; S&P 500 1,501.19 -1.96; NYSE Composite 9,764.73 -0.65

Advancers were swamped by declining issues, especially on the NASDAQ, with the overall margin favoring losers by a 2-1 margin.
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New highs remained somewhat steadfast, with 347 issues making new tops, though new lows continued to mount, claiming 161 on the day, the highest total in weeks.

A pullback is more likely than ever, though chances are good that the persistent problems in the housing sector are likely to spill over enough into the equities economy to cause serious problems. Any downturn is likely to be short-lived without more evidence of failing corporate profits, which have remained solid.

Oil jumped 71 cents to $63.17, and the metals also caught some of the commodity updraft. Gold gained $4.40; silver was ahead by 8 cents.

With gas prices at all-time highs at US service stations, unemployment remains historically low and the American economy, from a comparative point of view, still seems as safe and stable as ever. The myriad of problems in the general economy continue to appear manageable and pose little threat to US stocks, especially, as it seems, those of the blue chip variety.

Monday, May 14, 2007

New Top for Dow, Other Indices Fall Late; Gas at Record $3.10 per Gallon

The markets were cruising along in positive territory Monday until mid-day when everything began to slide. By the close, only the Dow remained on the plus side, setting another record high finish.

Dow 13,346.78 +20.56; NASDAQ 2,546.44 -15.78; S&P 500 1,503.15 -2.70; NYSE Composite 9,765.38 -21.65

It was a split decision in more ways than one. Declining issues beat advancers by a better than 2-1 margin, though new highs upticked to 386 against 116 new lows. There's a bit of churning going on as investors take profits, reassess and reinvest.

According to general assumptions, much of today's action was attributable to apprehension regarding the monthly release of the government's Consumer Price Index figures, the April numbers due out tomorrow morning prior to the market's open.
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Conventional wisdom seems to be that if the numbers are bad (i.e., they show an inflationary trend), the Fed may be influenced to do nothing, or worse, raise rates, when the markets are hoping for some easing. If the headline number comes in at 0.5% or less, with the core at 0.2%, that should allay investor fears, but anything over those figures will be cause for concern, especially at the Fed, which has vowed for years to keep inflation under control while failing miserably in the process.

Regardless of Fed performance, Bernanke and company has made reference to an "inflation target" of between 1 and 2 % (using the core number, of course, which excluded food and energy) and they will use the tried and true interest rate hike to cool off the economy should they determine inflationary risk to be at an intolerable level.

Whatever the Fed does has little to do with the fundamentals of individual stocks, though an interest rate increase would cast a significant pall over Wall Street. Most days are precarious for investors and speculators, though being in record territory does impart some peculiar thought processes. On the one hand, stocks are robust and the economic picture is rosy. Meanwhile, the pessimist sees this high-flying behavior an open invitation for everything to come crashing down.

In the long run, it's probably going to take an event more significant than a 25 basis point hike in the federal funds rate to stop the party.

Side notes: Sure enough, the only time I make a prediction on an individual stock, it goes the other way. On Wednesday of last week, I noted that Marvel Enterprises (MVL) may be considered for a long term hold. As of today, it has slipped nearly 3 points from where I called it a buy to 26.81. I called the stock with an 18-month upside in the 38-42 range. I suppose all I can do now is reiterate my position. At it's current level Marvel sports a forward P/E ratio around 17. It is shouting, "buy" now; any lower, it will be screaming. This is not a falling knife situation. Once options expire on Friday, expect a congenial rebound.

Lest I forget, oil grabbed a bid on a Saudi pledge not to increase production. It closed modestly higher, up 9 cents to $62.46, and every American must be grateful to our Vice President, Mr. Cheney, for all he did while in the Middle East last week. The Lundberg Survey quoted the national average for unleaded regular gas at an all-time high of $3.10 per gallon on Monday.

Tomorrow, May 15, is the date certain for the "American gas boycott" whereby we're not supposed to buy any gas. Nobody seriously expects the effort to have any effect at all, though the sentiment of millions will be with anyone who refrains for a day. A better solution would be to have a national no-driving day. That could be effective.

I have two suggestions. One is to stay home and drink Canadian beer. In most northern states, it can be had for about the same price per gallon as gas, and it goes into you, not your car. Plus, the effects on one's mental well being are far superior.

My second suggestion is for Big Oil to just skip $4/gallon and go straight to $5. They have shown no propensity to stop increasing the price, so why not just goose it up good? They can always lower it later on and look good by comparison.

Gold and silver were both off marginally. Somehow, their fates are tied to oil's, though the relationship has become tenuous at best.

Friday, May 11, 2007

When Numbers Have Meaning

The Dow Jones Industrial Average set a new closing high on Friday, May 11.

The number of new highs was 268 while new lows totaled 113. Advancing issues overwhelmed decliners 23-8.

Dow 13,326.22 +111.09: Nasdaq 2,562.22 +28.48; S&P 500 1,505.85 +14.38; NYSE Composite 9707.03 +117.66

The markets are becoming more defined but not prohibitive.

Oil, gold and silver showed marginal gains for the day. US equities remain a solid, if not significant, investment. The rally continues.

Thursday, May 10, 2007

Broad Sell-off for US Stocks as Investors Take Profits

While some pundits may claim the sky was falling today and today's trade signals the end of the rally, others will point out that this kind of profit-taking pull-back is quite normal after such a long string of gains.

Just a day after the Fed decided to keep rates unchanged, the Census Bureau and the Bureau of Economic Analysis of the Department of Commerce announced that the US trade deficit increased to $63.9 billion in March, up from a revised $57.9 billion in February. The news was a little surprising though hardly exceptional.

What certainly worried Wall Street more were the string of dismal figures coming in from retailers, which showed April same-store sales falling sharply from the same period a year ago. Topping the list was the nation's largest retailer, Wal-Mart (WMT), which reported a decline of 3.5%. Other notables reporting sluggish sales below last year's levels included JC Penny (JCP), Federated (FD), the Gap (GPS), and Nordstrom (JWN).

Accordingly, investors headed for the exits in many of the retailers, though Wal-Mart escaped with merely an 0.18 loss. Analysts defended the numbers, citing an early Easter and an unusually cold April, especially in the population-dense Northeast.

Dow 13,215.13 -147.74; NASDAQ 2,533.74 -42.60; S&P 500 1,491.47 -21.11; NYSE Composite 9,669.37 -158.56

While the retail numbers and increased trade deficit are causes for concern, most believe the US economy to be in relatively sound shape, though overall growth is expected to stall out at around 1.5 - 2 percent for all of 2007. Such a projection is hardly surprising, considering the slowdown in housing and high fuel prices, both having negative effects on consumers and, ultimately, business.

The serious concern is that the US economy could fall into recession, actually contracting instead of expanding. Current wisdom sees that as a remote possibility. Former Fed Chairman Alan Greenspan gave it a 1 in 3 chance of occurring in 2007. Other economics experts are of similar mind, though calls for the Fed to reduce interest rates are growing louder.

A few more negative signals may induce Ben Bernanke and the FOMC to drop the federal funds rate a quarter point at their next meeting in late June, though most believe the Chairman will move slowly and cautiously, keeping one eye on inflation and the other on the overall health of the economy.

Putting today's action into perspective, it has to be respected that the markets have been on quite a roll, with the Dow rising over 1000 points in less than 2 months. Corporate profits are still strong and the business environment is probably the most lax and calm as it's ever been. Regulators and government interference has been cut to minimal under the pro-business Republican reign. That influence may be waning, though a dramatic shift under Democrats is unlikely as they too receive most of their campaign money from big business.

Declining issues far outpaced advancers, by a 7-2 ratio. New highs remained positive, though less than has been the norm. There were 263 issues making new highs with 121 reaching new lows - the first time in two weeks that the number of new lows have surpassed 100.

Oil edged higher, adding 26 cents to the cost of a barrel, ending the day at $61.81. Gold continued to slide, losing a substantial $15.50 on the day, ending at $667.00. Silver also sold off, though not in such a dramatic fashion, losing .33 to close at 13.14.

Both of the metals have flirted with breakouts recently and failed. Oil, on the other hand, may be headed into a stabilizing period. With high gas prices seen as a major threat to the economy, the US Congress has made noises about investigations and windfall profits taxes, so it may be about time for the Big Oil cartel to back down on its over-aggressive appetite for US greenbacks.

There has been good news from overseas, though few have noticed. After reaching lows against the Yen, Euro and British Pound, the US Dollar has recently shown some resolve and gained strength against most of our major trading partners. Apparently, the world's currency standard still has some muscle.

Wednesday, May 9, 2007

Fed Leaves Rates Unchanged; Dow Soars Again

As expected, the FOMC of the Federal Reserve decided to leave rates unchanged on Wednesday, marking the 7th consecutive meeting the Fed has issued no change in the federal funds rate.

Immediately following the announcement, stocks gyrated, with the Dow zig-zagging in a 50 point range before finally heading higher into the close, setting yet another record. The S&P moved to within 15 points of its all-time high. Despite the Fed offering no surprises, markets reacted positively, as has been the norm of late.

Dow 13,362.87 +53.80; NASDAQ 2,576.34 +4.59; S&P 500 1,512.58 +4.86; NYSE Composite 9,827.93 +39.90

With all eyes on the Fed, there was little else to move markets and volume was moderate.

Advancing issues held sway, beating decliners by an 8-5 margin. New highs outdid new lows 449-71, evidence that investor appetites have not yet been sated.

Possibly the best of the day's news came from the US Department of Energy, which said that stocks of gasoline rose by 400,000 barrels in the week ending May 4. Analysts had forecast a rise of 150,000. The inventory increase was the first in 13 weeks. Crude sold into the news, losing 79 cents to end the day at a moderate $61.47. With heightened demand of the summer driving season looming, this comes as welcome news and could spark a bit of easing of the price at the pump for US drivers.

Keeping with the theme, gold lost $4.90 to $682.50, while silver continued to slide, down another 13 cents to $13.47.

With earnings mostly out of the way and the next Fed meeting not for another 7 weeks, investors will focus on fundamentals and economic news. In the interim, the pace of gains should moderate, as the markets have been red hot of late.

A Little Savings for a Rainy Day

Since the advent of widespread use of the internet circa 1997, individual investors have all but abandoned traditional savings in favor of online trading, which is quick, easy and cheap.

The trouble with investing is that sometimes capital can be tied up for years, borrowed against or outright lost. Therein lies the American dilemma: the lowest savings rate in more than 70 years.

The previous generation of savers and investors - many of whom lived through the rigors of the Great Depression - was more inclined to save rather than invest, but Baby Boomers have lived a life of relative comfort, absent large scale economic catastrophe. Various recessions and the stagflation of the 70s accounted for about the worst of times for the current generation.

Lately, however, there's been a push to devote funds to actual savings - as in savings accounts - as a barrage of banks and other financial institutions have begun offering attractive interest rates on savings. affords consumers the opportunity to review the merits of some of the best savings account offers online. The recently launched site features short reviews with links to mostly online banks like FNBO Direct, Wells Fargo, HSBC, AmTrust, Emigrant Direct and others, offering interest rates ranging from 2.75 to as high as 6%.

It's a good place to start or expand your saving regimen as that rainy day seldom announces itself far in advance.

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Tuesday, May 8, 2007

Best Job In America: Do-Nothing Fed Governor

How would you like to have the entire financial community hanging on your every word, meet with your buddies 8 times a years and generally be rewarded handsomely for doing just about nothing?

If that sounds like a sweet gig to you, maybe it's time to look into becoming a member of the Board of Governors of the Federal Reserve. Naturally, some background (make that a lot of background) in economics is a necessary part of the resume, but once you're in, the perks are substantial and the hours are better than those of even the best-paid banker.

For 6 consecutive meetings the Federal Open Market Committee (FOMC) has met and done nothing. Sure, under the guidance of new chief Ben Bernanke, they were supposed to keep the economy cruising and hold the line on inflation, and they've achieved one of those objectives... well, maybe not, but they've managed to get through the last 10 months without changing the federal funds rate (the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight) and they aren't expected to do anything about it when they meet tomorrow, May 9, so make it a 7 in a row and a year of doing nothing. Not bad.

While some self-proclaimed experts are calling for a rate decrease, the nearly unanimous opinion is that the Fed will - and should - do nothing. America is pretty stable with a 5.25% fed funds rate, though the first quarter GDP (+1.3%) was the weakest in four years. While lowering the rate may prevent a hard landing later in the year or in 2008, is anybody really prepared to offer the oil companies any incentive to raise gas prices any further?

If anything, America needs to tighten the old economic belt a little. We're still wallowing in the aftermath of former Chairman Greenspan's unprecedented credit creation cycle, epitomized by the bust-up in the mortgage markets and a generally ailing real estate market.

And while loose money isn't exactly sound monetary policy, Wall Street isn't exactly complaining - today's modest decline was only the 4th down day for the Dow in the past 28 sessions.

So, after 2:15 pm tomorrow, expect the stock markets to get back to business and go on another in a long series of shopping sprees. Corporate profits have seldom been as good as the past couple of years and the 1st quarter of 2007 has turned out to be nearly exceptional across almost all industries.

Dow 13,309.07 -3.90; NASDAQ 2,571.75 +0.80; S&P 500 1,507.72 -1.76; NYSE Composite 9,788.03 -37.06

Market Internals: Declining issues held sway over advancers by nearly a 3-2 margin. New highs: 303, new lows: 88, in line, considering the A-D showing.

Oil kicked up a bit after 6 consecutive sessions of declines, gaining 79 cents to end up at $62.26, a manageable level which could actually auger - dare I speak - lower, or only moderately higher prices come summer. Consumers have had about enough pain, especially those driving trucks or SUVs which routinely take $80-100 or more to fill up.

Gold, again tantalizingly close to the $700 mark, backed off $3 to close at $687.40. Silver finished the day down 4 cents at $13.60.
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One to watch: Marvel Enterprises (MVL), the people behind Spider-Man, turned in blowout numbers Tuesday morning, though investors thought best to sell into the news. The stock was down as much as 0.84, but gained all day to close down just 0.20 at 29.40. There could have been some options and short shenanigans going on, but the future of the company is still somewhat cloudy as they continue to move parts around. Significant is that Marvel will be making most of their own movies in 2008, as opposed the current practice of licensing their character rights and receiving only a portion of box office receipts.

Analysts expected 35 cents per share, but Marvel shocked with 56. 2007 profits are expected to at least double last year's, so the good news is already partially baked in or the stock could continue to run. It's gone from below 20 to a peak just over 30 in the last 9 months and may be in a consolidation phase. Still, the stock looks like a keeper, a good bet to hit the 38-42 range by next summer.

Monday, May 7, 2007

No Stopping the Bull: Another New High for Dow

If you've missed the recent stock market explosion, take heart. The new highs will continue to come and stocks are poised to make impressive gains. The US economy - despite some persistent, nagging problems - continues to expand at a measured pace and corporations have never had it so good. This bull is getting a second wind. 15,000 on the Dow by the end of the year is looking more achievable every day.

Dow 13,312.97 +48.35; NASDAQ 2,570.95 -1.20; S&P 500 1,509.48 +3.86; NYSE Composite 9,825.09 +32.09

CNNMoney reports that today's Dow gain matches an 80-year-old record of 24 up sessions in the last 27. The previous run was in the summer of 1927.

While the Dow continues to awe and amaze, the NASDAQ dropped a little more than a point, though the S&P 500 moved to within 18 points of its all-time closing high. Once again, the if the S&P manages a new high, it could spark a significant break out, leading all indices higher.

The markets were buoyed by a confluence of forces today including Warren Buffet's suggestion that his Berkshire-Hathaway conglomerate would be pursuing an acquisition in the $40-60 billion range.
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Speculation on what Buffett will be buying ranges from the outrageous (think Yahoo or Adobe Systems) to the marginally feasible - like Dow components Caterpillar (CAT), DuPont (DD) or McDonald's (MCD) - each of which are within his market cap range.

Alcoa (AA) management announced that it would be pursuing rival Alcan (AL) via a hostile bid. Both stocks were sharply higher, with Alcan gaining more than 21 points at the close - a nearly 35% increase - to 82.11.

Oil fell for the 6th straight session, a run of losses which has drivers cheering. The price of crude on the NY Mercantile Exchange fell 46 cents to $61.47. The losing streak was the longest in more than 7 months.

Advancers and decliners were nearly equal, with about 100 more issues gaining ground than losing. New highs checked in at 468, versus only 66 new lows. Anybody shorting this market or individual issues, is likely to be taking it on the chin. Our new highs-new lows metric continues to suggest the bull will run strong for some time and that there is no top in sight.

Gold again moved closer to the magic $700 mark, closing at $690.30, up 60 cents per ounce. Silver experienced a similar gain of 11 cents to close at $13.64. The metals continue to confound investors who see inflation everywhere, but no corresponding gains in the time-worn precious metal hedge.

Stocks are where it's at, and with everybody - including the Oracle of Omaha - thinking big, this rally could run for months more.

Saturday, May 5, 2007

Dow Sets Another New High; S&P Inches Closer

Stocks continued their progression higher on Friday amid merger news and a somewhat mellowing jobs number for April. The Dow set another record high close and the S&P 500 got to within 20 points of its all-time high.

Microsoft (MSFT) is rumored to be interested in buying up Yahoo (YHOO), a marriage that would give both companies some heft in the ongoing ad and search war with Google (GOOG). Yahoo would likely benefit from the programming mindset at Microsoft, while Gates' company would get proven online business savvy and a healthy roster of advertising accounts. Neither company would confirm or deny rumors.

Dow 13,264.62 +23.24; Nasdaq 2,572.15 +6.69; S&P 500 1,505.62 +3.23; NYSE Composite 9,793.00 +39.06

The Labor Dept. announced the creation of 88,000 jobs in April, the smallest gain in more than two years, though the figure was in line with expert expectations.

Advancers led declining issues by a 7-5 margin; There were 495 new highs, 73 new lows. The internal numbers suggest that the bull is running along at an even pace.

Light crude for June delivery fell to $61.93, losing $1.26 on the day, the fifth straight day of decline for oil and welcome news for anyone with a gas tank to fill.

Gold: 689.70 +5.30
Silver: 13.53 +0.02

Thursday, May 3, 2007

More Gains as Rally Extends; S&P Tops 1,500

The run continued on Thursday, despite some very disappointing news from General Motors (GM), the markets were buoyed by a positive Labor Dept. productivity report which showed an uptick of 1.7%, nearly a full percentage point higher than the consensus estimate.

With the S&P 500 breaking an important psychological mark, that particular index is poised for a breakout. The all-time high is within hailing distance, a mere 25 points higher and when that is breached, the floodgates will be open. The S&P will join the Dow in uncharted territory and the gains should continue for a good period of time.

Dow 13,241.38 +29.50; NASDAQ 2,565.46 +7.62; S&P 500 1,502.39 +6.47; NYSE Composite 9,753.94 +35.94

It's important not to get married to stocks during this phase, as sectors and industry groups will rotate, though the overwhelming drivers continue to be tech, innovation and globalization. Companies that can leverage their advantage in these areas will emerge as winners and appreciate in spurts. This may become very much a traders' market, with quick turnaround trades the key to making money.

Buy and hold strategists need not be dissuaded by this, as the long-term viability of many leading companies should remain intact throughout.

Even though today's market action was somewhat muted, it was still in keeping with the overall positive tone which has prevailed of late. Advancing issues outdid decliners by 17-14 margin. New highs stood solidly at 419 versus just 62 new lows. That number continues to amaze and indicate that the rally will continue unabated.

A 4th straight day of slippage in the price of oil added to the upbeat mood. Light, sweet crude for June delivery dipped 49 cents to $63.19.

The precious metals played contrarians for a day. Gold closed at $684.40, up $9.30, while silver was less of a player, gaining 18 cents to $13.51. These commodities have been playing this game for over a year now and are nowhere near their 2006 highs. After sizable run-ups in the first part of the decade, the metals have been lackluster performers since early 2006.

Wednesday, May 2, 2007

US Stocks on Fire, Investors Face Buy-Sell-Hold Dilemma

In the face of a rapidly-rising market typified by another semi-spectacular day in which the Dow set another record close, investors are now faced with the time-worn predicament: Buy, Sell or Hold. Most, judging just by the indices, are holding and buying more, as first quarter corporate earnings reports continue to flow in with satisfying regularity.

One could hardly blame them. The run-ups from mid-March to today (just over 6 weeks): Dow, up 1136 points; NASDAQ, 207 points; S& P 500, 118 points; NYSE Composite, 790 points. These are all in the neighborhood of 8% gains, which normally (whatever normal is these days) would be good for 6 months or a year. Some individual stocks have fared even better.

Impressive, indeed, and still capable of going higher, much higher. Your investment outlook will certainly vary by the length and quality of your experience. Anyone who's been in stocks for the last 20 years can be colored by the deep declines of 1987 and the dot-com collapse of 2000, but also by the spectacular gains of the late nineties - especially 1999 - and this excellent early run since early 2003.

That's where the quality of your experience comes into play. If you were on the right sides of trades in the boom years, you took the declines in stride. Contrary to that perspective would be buying in close to peaks and then being blindsided. Most of us have experienced a share of both sides.

Dow 13,211.88 +75.74; NASDAQ 2,557.84 +26.31; S&P 500 1,495.92 +9.62; NYSE Composite 9,718.00 +78.21

To offer some perspective, while the Dow is at all-time highs, remember it took 6 1/2 years to get to them. The NASDAQ is still off 50% from its all-time high, so there's plenty of room there. And the S & P 500 closed at 1527.46 on March 24, 2000. It's just 30 points from there - an all-time high.

More and more money - much of it created by the Federal Reserve's loose credit policies of 2001-2004 - continues to flow into stocks and there's no indication that it's about to stop. I have to admit to being late to the party, thinking there was going to be a major correction, but that seems more and more a remote possibility.

If you're in this market now, hold and buy more. If you're not already in, it's not even close to being too late. In fact, the next 6-9 months may be exceptional.
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The US economy is still the most stable on the planet when investors look for gains without much risk, they look to the NYSE and the NASDAQ. Stocks are going to continue higher and there's no looking back.

Volume was strong again today, as has been the case of late, and the indices other than the Dow experienced stronger gains, indicating that the Dow's pleasure may be spreading.

The advance-decline line also gives this more credence, as advancing issues outpaced decliners by a 3-1 margin. As well, there were 406 new highs and a paltry 83 new lows, more evidence that this rally could actually be gaining momentum. That is not surprising, as these kinds of things run in cycles. The first phase was getting to the new records on the Dow, and now, phase two, will be longer and more sustained, though probably not as exciting. Nobody is going to forsake 12-15% gains over the next six months, however, which is exactly where this is heading.

Oil prices eased again on Wednesday - the third decline in a row - by 71 cents to close at $63.68. Gold and silver were also lower, though only marginally. Memo to gold bugs: It's time to sell some of your excess and try your hand at stocks.

Tuesday, May 1, 2007

Dow Rockets to Another New High; Other Indices Lag

The Dow made another in an ongoing string of records on Tuesday, gaining 73 points to surpass the previous record (set this past Friday) by 16 points. While the Dow has been enjoying a terrific ride, the other indices - especially the NASDAQ - have lagged, as they did today.

The Dow was at least twice as good on a percentage basis than any of the other indices, making the case that the 30 blue chips are still considered a safe bet in an otherwise turbulent marketplace. Only 7 Dow stocks closed on the downside, most notably Proctor & Gamble (PG), which was bid up yesterday, but dumped today upon the release of the company's 1st quarter report. P&G turned in profits of 74 cents per share, as opposed to 63 cents in the same period of 2006, though the number was short of analysts' expectations and the stock sold off 1.57 on Tuesday.

Dow 13,136.14 +73.23; NASDAQ 2,531.53 +6.44; S&P 500 1,486.30 +3.93; NYSE Composite 9,639.79 +12.06

Advancers led decliners by a slight margin, with just 150 more issues higher than lower. There were 213 new highs and 150 new lows, the closest those have been in more than three weeks.
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The trend is clearly in place for a broader pullback, as evidenced by the internals and yesterday's partial sell-off.

Perhaps the only reason the indices closed higher at all was the lower prices being bid for oil, which closed down for the second straight day. Light crude for June delivery fell 1.31 to $64.40, though the price would have to fall below $60/bbl. and settle there for any realistic relief for both consumers and businesses.

Following that lead, Gold was off 6.20 to $677.30, while Silver lost 21 cents to end the day at $13.37.

At this point, record high closes on the Dow are becoming so commonplace as to lose impact. The run of the blue chip companies has not nearly been matched by the NASDAQ or the S&P 500, reflecting a more challenging environment for mid and small-cap stocks.

The risk of a significant downturn grows with every uptick on the Dow. Buying high is not normally a good idea and it probably isn't at this juncture.