BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Telecom longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. The Johnson Redbook same-store sales index rose 3.4% year-over-year this week vs. a 3.4% rise the prior week. The long-term average is a gain of about 2.9%. There is still no evidence, in my opinion, that a meaningful slowdown in consumer spending is underway, even as this remains a focal point for the many bears. Housing sales and net home equity extractions have been falling substantially for over a year. The Case-Shiller housing futures are still projecting about a 5% decline in the average home price over the next seven months. Considering that the median house has appreciated over 50% during the last few years, with record high U.S. home ownership, this would be considered a "soft landing." Home values are more important than stock prices to the average American. However, the median home has barely declined in value after a record run-up, as the S&P 500 has risen 15.4% over the last year. Americans' median net worth is still at or near all-time high levels. I continue to believe the overall negative effects of housing on the U.S. economy are currently being exaggerated by the bears. Recently, Alan Greenspan and several Fed members have made similar statements. I still expect holiday shopping sales to exceed estimates. I continue to believe a healthy labor market, falling energy prices, relatively low long-term interest rates, decelerating inflation, a rising stock market and less irrational pessimism will keep boosting consumer spending over the intermediate term as housing stabilizes at relatively high levels. The Morgan Stanley Retail Index (MVRX) has soared 20.2% in about 15 weeks vs. a 12.2% gain in the S&P 500 over the same timeframe. I still expect continued out-performance and another surge by retail stocks into year-end. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, performance anxiety, declining interest rates and lower energy prices.
Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets
Tuesday, November 07, 2006
Dow Jones Industrial Average Makes Another All-Time High as Energy Prices Fall, Election Uncertainty Winds Down and Long-term Rates Decline
Today's Headlines
Bloomberg:
- The Dow Jones Industrial Average is making another all-time high today as interest rates fall and election uncertainty winds down.
- YouTube Inc., the popular online video Web site that is being bought by Google(GOOG), was named best invention of the year by Time magazine.
- FedEx(FDX) scrapped its order for the troubled Airbus A380 jumbo jet and said it would purchase 15 Boeing(BA) 777 jets instead.
- US Treasuries are rising the most in a week on expectations international investors will add to their holdings at auctions this week.
- One of Britain’s top al-Qaeda terrorists will serve at least 40 years in prison for plotting to kill thousands of people through a series of attacks in the US and the UK.
- Baldor Electric, a maker of electric motors and drives, agreed to buy Rockwell Automation’s power systems business for $1.8 billion to expand into transmission products and larger motors.
- Energy consumers, including the US, European nations and China, must encourage alternative energy to avoid excessive costs, environmental damage and supply disruptions in coming decades, the International Energy Agency said.
- Oil prices at current levels are damaging world economic growth and a moderate price would be one that is “significantly” lower than $60 a barrel, the head of the IEA said.
- Crude oil is falling slightly on speculation that US inventories rose last week and doubts that OPEC will make promised output cuts.
- Saudi Aramco, the world’s largest state-owned oil company, plans to spend $80 billion over 5 years to increase crude production, company VP Al-Falih said.
- Corn and soybean prices in Chicago may fall on speculation farmers will increase sales as the US harvest nears completion and supplies in storage climb.
- Marathon Oil(MRO), the fourth largest US energy company, said it will go through with a $3.2 billion project that will expand its Garyville, Louisiana, refinery’s processing capacity by 73%.
Wall Street Journal:
- ABC, CBS, NBC, CNN, Fox News and the AP will tighten control over exit poll findings to prevent confusion that caused complaints about accuracy after the 2004 elections. Results were leaked two years ago from early polls that were posted by bloggers inaccurately called some states for Senator John Kerry, inaccurately suggesting that he would defeat President Bush.
- Verizon Communications(VZ) is negotiating with YouTube about bringing the Internet site’s videos to mobile phones and televisions.
- Expedia(EXPE) is offering customers loyalty points collected by Citigroup(C) credit-card holders to encourage people to make more bookings.
- The Humane Society, a group 10 million-strong in the US, is working to ensure candidates who support its animal-welfare agenda are elected to Congress this year. The group has spent $3.4 million on congressional elections and promoting initiatives that ban dove hunting in Michigan and determine the size of pigpens in Arizona.
NY Times:
- New York City is considering a plan that would allow people to change their genders on birth certificates even if they hadn’t had sex-change operations. Under the plan, which is likely to be passed by the city’s Board of Health, people born in New York will be able to make the change if they have affidavits from doctors and mental-health professionals that explain whey they should be considered members of the other sex.
- Comcast(CMCSA) has agreed to carry News Corp.’s(NWS) planned business channel, which would be spun off from the Fox News Channel. News Corp. Chairman Rupert Murdoch indicated the channel would “definitely” begin in 2007.
NY Post:
- Federated Department Stores(FD) plans to give division presidents more freedom over holiday promotions to help increase sales.
NY Daily News:
- Clorox’s(CL) Glad product line will post ads on 2,200 sanitation trucks to promote cleanliness in NYC and discourage littering.
AP:
- Syria is ready to resume peace talks with Israel, citing remarks by Syrian Foreign Minister Walid al-Moallem.
- Southeast Asian nations have reached a preliminary agreement to strengthen the fight against terrorism, citing diplomats.
Washington Post:
- Gannett Co.(GCI), the largest US newspaper chain, is increasingly trying to involve readers in news-gathering.
Xinhua News:
- China discovered a coal mine with estimated reserves of 6.4 billion tons in the northern Inner Mongolia Autonomous Region.
- The Dow Jones Industrial Average is making another all-time high today as interest rates fall and election uncertainty winds down.
- YouTube Inc., the popular online video Web site that is being bought by Google(GOOG), was named best invention of the year by Time magazine.
- FedEx(FDX) scrapped its order for the troubled Airbus A380 jumbo jet and said it would purchase 15 Boeing(BA) 777 jets instead.
- US Treasuries are rising the most in a week on expectations international investors will add to their holdings at auctions this week.
- One of Britain’s top al-Qaeda terrorists will serve at least 40 years in prison for plotting to kill thousands of people through a series of attacks in the US and the UK.
- Baldor Electric, a maker of electric motors and drives, agreed to buy Rockwell Automation’s power systems business for $1.8 billion to expand into transmission products and larger motors.
- Energy consumers, including the US, European nations and China, must encourage alternative energy to avoid excessive costs, environmental damage and supply disruptions in coming decades, the International Energy Agency said.
- Oil prices at current levels are damaging world economic growth and a moderate price would be one that is “significantly” lower than $60 a barrel, the head of the IEA said.
- Crude oil is falling slightly on speculation that US inventories rose last week and doubts that OPEC will make promised output cuts.
- Saudi Aramco, the world’s largest state-owned oil company, plans to spend $80 billion over 5 years to increase crude production, company VP Al-Falih said.
- Corn and soybean prices in Chicago may fall on speculation farmers will increase sales as the US harvest nears completion and supplies in storage climb.
- Marathon Oil(MRO), the fourth largest US energy company, said it will go through with a $3.2 billion project that will expand its Garyville, Louisiana, refinery’s processing capacity by 73%.
Wall Street Journal:
- ABC, CBS, NBC, CNN, Fox News and the AP will tighten control over exit poll findings to prevent confusion that caused complaints about accuracy after the 2004 elections. Results were leaked two years ago from early polls that were posted by bloggers inaccurately called some states for Senator John Kerry, inaccurately suggesting that he would defeat President Bush.
- Verizon Communications(VZ) is negotiating with YouTube about bringing the Internet site’s videos to mobile phones and televisions.
- Expedia(EXPE) is offering customers loyalty points collected by Citigroup(C) credit-card holders to encourage people to make more bookings.
- The Humane Society, a group 10 million-strong in the US, is working to ensure candidates who support its animal-welfare agenda are elected to Congress this year. The group has spent $3.4 million on congressional elections and promoting initiatives that ban dove hunting in Michigan and determine the size of pigpens in Arizona.
NY Times:
- New York City is considering a plan that would allow people to change their genders on birth certificates even if they hadn’t had sex-change operations. Under the plan, which is likely to be passed by the city’s Board of Health, people born in New York will be able to make the change if they have affidavits from doctors and mental-health professionals that explain whey they should be considered members of the other sex.
- Comcast(CMCSA) has agreed to carry News Corp.’s(NWS) planned business channel, which would be spun off from the Fox News Channel. News Corp. Chairman Rupert Murdoch indicated the channel would “definitely” begin in 2007.
NY Post:
- Federated Department Stores(FD) plans to give division presidents more freedom over holiday promotions to help increase sales.
NY Daily News:
- Clorox’s(CL) Glad product line will post ads on 2,200 sanitation trucks to promote cleanliness in NYC and discourage littering.
AP:
- Syria is ready to resume peace talks with Israel, citing remarks by Syrian Foreign Minister Walid al-Moallem.
- Southeast Asian nations have reached a preliminary agreement to strengthen the fight against terrorism, citing diplomats.
Washington Post:
- Gannett Co.(GCI), the largest US newspaper chain, is increasingly trying to involve readers in news-gathering.
Xinhua News:
- China discovered a coal mine with estimated reserves of 6.4 billion tons in the northern Inner Mongolia Autonomous Region.
Monday, November 06, 2006
Tuesday Watch
Late-Night Headlines
Bloomberg:
- The US housing slump won’t spill over into the broader economy, which will continue to grow at a “moderate” pace, Cleveland Feederal Reserve Bank President Pianalto said.
- Microsoft(MSFT), trying to wring a profit from its Xbox video-game console, will use the player to rent and sell high-definition movies and television shows from CBS, MTV Networks and Warner Bros.
- Global oil demand is “far from robust,” said OPEC’s president Edmund Daukoru.
- Asia’s oil imports from Russia, Africa and Latin America may increase 11% in four years as the region cuts its reliance on oil from the Middle East, said an official from Petroliam Nasional Bhd., or Petronas.
- The Saudi Tadawul All Share Index has plunged 57.3% since February 25.
AP:
- Starwood Hotels & Resorts(HOT) are among hotel companies offering vacation packages designed for couples attempting to get pregnant.
China Securities Journal:
- China should raise its benchmark interest rates further to curb bank lending and investment, citing Yi Xianrong, a researcher at the government-backed Chinese Academy of Social Science.
Yonhap News:
- The Iranian military commander acknowledged his country obtained missiles from North Korea during Iran’s war with Iran.
Late Buy/Sell Recommendations
CSFB:
- Reiterated Buy on (XMSR), target $17.
Night Trading
Asian Indices are +.75% to +1.0% on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.07%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (ADRX)/.16
- (BZH)/1.64
- (CECO)/.29
- (CHD)/.49
- (DF)/.56
- (DRC)/.27
- (DISH)/.38
- (EMR)/1.20
- (EXPD)/.29
- (FCL)/.24
- (FTO)/1.09
- (GBE)/-.05
- (IGT)/.34
- (NFI)/1.07
- (RRD)/.66
- (SLE)/.25
- (STE)/.21
- (SRZ)/.30
- (TRLG)/.44
- (OATS)/.06
- (WYNN)/.06
Upcoming Splits
- None of note
Economic Releases
3:00 pm EST
- Consumer Credit for September is estimated at $6.0 billion versus $5.0 billion in August.
Bloomberg:
- The US housing slump won’t spill over into the broader economy, which will continue to grow at a “moderate” pace, Cleveland Feederal Reserve Bank President Pianalto said.
- Microsoft(MSFT), trying to wring a profit from its Xbox video-game console, will use the player to rent and sell high-definition movies and television shows from CBS, MTV Networks and Warner Bros.
- Global oil demand is “far from robust,” said OPEC’s president Edmund Daukoru.
- Asia’s oil imports from Russia, Africa and Latin America may increase 11% in four years as the region cuts its reliance on oil from the Middle East, said an official from Petroliam Nasional Bhd., or Petronas.
- The Saudi Tadawul All Share Index has plunged 57.3% since February 25.
AP:
- Starwood Hotels & Resorts(HOT) are among hotel companies offering vacation packages designed for couples attempting to get pregnant.
China Securities Journal:
- China should raise its benchmark interest rates further to curb bank lending and investment, citing Yi Xianrong, a researcher at the government-backed Chinese Academy of Social Science.
Yonhap News:
- The Iranian military commander acknowledged his country obtained missiles from North Korea during Iran’s war with Iran.
Late Buy/Sell Recommendations
CSFB:
- Reiterated Buy on (XMSR), target $17.
Night Trading
Asian Indices are +.75% to +1.0% on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.07%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (ADRX)/.16
- (BZH)/1.64
- (CECO)/.29
- (CHD)/.49
- (DF)/.56
- (DRC)/.27
- (DISH)/.38
- (EMR)/1.20
- (EXPD)/.29
- (FCL)/.24
- (FTO)/1.09
- (GBE)/-.05
- (IGT)/.34
- (NFI)/1.07
- (RRD)/.66
- (SLE)/.25
- (STE)/.21
- (SRZ)/.30
- (TRLG)/.44
- (OATS)/.06
- (WYNN)/.06
Upcoming Splits
- None of note
Economic Releases
3:00 pm EST
- Consumer Credit for September is estimated at $6.0 billion versus $5.0 billion in August.
BOTTOM LINE: Asian indices are higher, boosted by technology, automaker and commodity shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
Stocks Finish Sharply Higher on Buyouts and Short-covering Ahead of Election
Indices
S&P 500 1,379.78 +1.13%
DJIA 12,105.55 +1.0%
NASDAQ 2,365.95 +1.51%
Russell 2000 763.08 +1.37%
Wilshire 5000 13,807.14 +1.16%
S&P Barra Growth 641.01 +1.16%
S&P Barra Value 736.55 +1.11%
Morgan Stanley Consumer 671.68 +.90%
Morgan Stanley Cyclical 855.07 +1.22%
Morgan Stanley Technology 554.91 +1.61%
Transports 4,694.96 +1.78%
Utilities 443.36 -.54%
Put/Call .75 -16.67%
NYSE Arms .63 -40.78%
Volatility(VIX) 11.16 unch.
ISE Sentiment 162.00 +38.46%
US Dollar 85.75 +.05%
CRB 311.72 +.58%
Futures Spot Prices
Crude Oil 60.07 +1.57%
Unleaded Gasoline 152.90 +1.47%
Natural Gas 7.44 -5.58%
Heating Oil 171.95 +2.50%
Gold 624.60 -.53%
Base Metals 244.73 -.29%
Copper 334.00 +.09%
10-year US Treasury Yield 4.69% -.47%
Leading Sectors
HMOs +2.86%
Airlines +2.77%
I-Banks +2.58%
Lagging Sectors
Utilities -.54%
Oil Tankers -.85%
Gold & Silver -1.23%
Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play
Afternoon Recommendations
Oppenheimer:
- Rated (ALO) Buy, target $30.
Afternoon/Evening Headlines
Bloomberg:
- US gasoline at the pump fell 1.8 cents to $2.20 a gallon, the lowest in 10-months.
- Natural gas fell 5% on forecasts for mild weather amid record inventories for the commodity.
- US Secretary of State Condoleezza Rice said the US role in Cuba must be to “insist” that Cubans “have a real opportunity for a true democracy.”
- NTP Inc., the patent-licensing firm that collected $612.5 million from Research In Motion in a patent dispute, said it’s turning its sights on Palm Inc.(PALM).
- The use of muscle-building anabolic steroids, often thought to cause impulsive and aggressive behavior, is also linked to more planned crimes involving fraud and weapons, a study has found.
Wall Street Journal:
- Nigeria is working toward boosting oil production, provided it can bring an end to attacks by militants on installations in the Niger Delta that are curbing output by about 500,000 barrels a day, citing Oil Minister Edmund Daukoru. Daily output would be 3 million barrels if not for the attacks, and may rise to 4 million in two years, Daukoru said.
S&P 500 1,379.78 +1.13%
DJIA 12,105.55 +1.0%
NASDAQ 2,365.95 +1.51%
Russell 2000 763.08 +1.37%
Wilshire 5000 13,807.14 +1.16%
S&P Barra Growth 641.01 +1.16%
S&P Barra Value 736.55 +1.11%
Morgan Stanley Consumer 671.68 +.90%
Morgan Stanley Cyclical 855.07 +1.22%
Morgan Stanley Technology 554.91 +1.61%
Transports 4,694.96 +1.78%
Utilities 443.36 -.54%
Put/Call .75 -16.67%
NYSE Arms .63 -40.78%
Volatility(VIX) 11.16 unch.
ISE Sentiment 162.00 +38.46%
US Dollar 85.75 +.05%
CRB 311.72 +.58%
Futures Spot Prices
Crude Oil 60.07 +1.57%
Unleaded Gasoline 152.90 +1.47%
Natural Gas 7.44 -5.58%
Heating Oil 171.95 +2.50%
Gold 624.60 -.53%
Base Metals 244.73 -.29%
Copper 334.00 +.09%
10-year US Treasury Yield 4.69% -.47%
Leading Sectors
HMOs +2.86%
Airlines +2.77%
I-Banks +2.58%
Lagging Sectors
Utilities -.54%
Oil Tankers -.85%
Gold & Silver -1.23%
Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play
Afternoon Recommendations
Oppenheimer:
- Rated (ALO) Buy, target $30.
Afternoon/Evening Headlines
Bloomberg:
- US gasoline at the pump fell 1.8 cents to $2.20 a gallon, the lowest in 10-months.
- Natural gas fell 5% on forecasts for mild weather amid record inventories for the commodity.
- US Secretary of State Condoleezza Rice said the US role in Cuba must be to “insist” that Cubans “have a real opportunity for a true democracy.”
- NTP Inc., the patent-licensing firm that collected $612.5 million from Research In Motion in a patent dispute, said it’s turning its sights on Palm Inc.(PALM).
- The use of muscle-building anabolic steroids, often thought to cause impulsive and aggressive behavior, is also linked to more planned crimes involving fraud and weapons, a study has found.
Wall Street Journal:
- Nigeria is working toward boosting oil production, provided it can bring an end to attacks by militants on installations in the Niger Delta that are curbing output by about 500,000 barrels a day, citing Oil Minister Edmund Daukoru. Daily output would be 3 million barrels if not for the attacks, and may rise to 4 million in two years, Daukoru said.
BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Semi longs, Medical longs, Computer longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was above average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was very bullish. Natural Gas fell 5% today, notwithstanding the bounce higher in crude. I still suspect natural gas made another meaningful top a couple of weeks ago. Natural gas speculative longs are back near record levels. The number of natural gas speculative long contracts on the Nymex has risen 272% since March. In my opinion, the current level of natural gas is mostly related to another bout of record speculation by investment funds, as inventories remain near record highs for this time of the year. Natural gas futures are now in their seasonally weak period.
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