Sunday, February 28, 2010

BAGAKOAA February 28, 2010 The week ahead


February 28, 2010 The week ahead

Wow what a weekend. It was great. Hope yours was as well. Besides riding a bike on the wave ruined byways of Dana Point and San Clemente, swimming for the first time in our new swimming treadmill, enjoying breakfast with the guys, and visiting a new church, I got to do a lot of reading about the market, the current dismal real estate and employment figures, the political maneuvers regarding health care and the global debt crisis. It was a good weekend.

First off, and I am trying very hard not to be political here, the round table (Actually Square) for the health care bill was a charade. It allows the Democrats to say they made a valiant attempt at bipartisanship. The game plan as admitted by Harry Reid was not to take any of the new ideas (Dems and Rep ideas) and change to bill before them, but to take it back to the Senate and perform the ancient act of “reconciliation” (from the latin to RamRod). And get the bill though despite the fact that only 41% of Americans (USA Today Poll) are in support of the Senate’s healthcare proposal.

However there is a strong voice against the health care bill, well not really the health care bill, but the tremendous addition debt to the country programs like the health care bill would bring. This is a very strong voice and it is not a republican voice it is a Democratic Voice. Any guesses? Well here is a hint, this Democrat had their own health care bill get trounced about 16 years ago? Oh yeah they tried again with a health care plan in 2007? Another hint, this person has been traveling the globe over the last couple of weeks letting countries know that The US must shore up it financial affairs to make the US dollar a safe haven again. Figure it out yet? That is right; our Secretary of State is openly criticizing the size of some of our social programs, but especially a 1+ trillion dollar health care plan. Ironically her 2007 health care reform bill was only 110 Billion for more than 10 years. Put the calculators away it’s more than a trillion.

One must ask why? Could it be she is trying to buy some faith in the almighty dollar from the countries she is visiting? Perhaps. Do you think that maybe she has found some fiscal conservancy as she has traveled the world and seen the devastating effects of true socialism? Perhaps. Or do you think that if a major political image plays middle of the road and supports senators who don’t want to end up out of office next November and who can help a more moderately positioned Hilary Clinton gain traction again in the Democratic party to run against a standing president? Perhaps. The only real chance Hilary would ever have as a contender to Obama’s run for a second term would be yet another failure to get some pentultimately important piece of legislation passed. Say perhaps a health care bill. And do you think that Hilary wants anyone to pass a health care reform bill when it all she could talk about for the last 16 years of her life? Perhaps not. Food for thought, but remember you read it hear folks.

So now what does this week bring us? First some of the economic information coming out this week. Personal income and spending comes out tomorrow and the consensus says a .4% increase is in the making. (BTW, I had 3 people in the last week say I am getting too technical in the blog and I apologize. I just went back over my last 15 or so posts and some of them did have a ring of too many hours in the financial sections of the journal and baron’s. My Bad. I will tone it down.) I think the spending and income number will reflect the bad consumer sentiment report we say last week and come in at .1% or .2% That will way heavy on the market tomorrow, but I still believe we are at the beginning of a two to three month 10-12% rally.

The Institute of Supply Management report comes out tomorrow. (Definition=The Institute for Supply Management surveys more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where readings above (below) 50 percent indicate an expanding (contracting) factory sector. Export orders, import orders, backlog orders and prices paid for raw and unfinished materials are also measured, but these are not included in the overall index. Courtesy, I hope, of Baron’s) Why should you care? The ISM is a good gauge of economic activity and how HOT the economy is or isn’t.) January’s 58.4% was a nice improvement. The expectation is 57.5% for February which won’t impress anyone. Actually we will need to see 60+ to get this sluggish market of its cash and bond positions. I don/t think we will see it and actually think the 57.5% is a stretch.

Construction spending has been improving since September 09 and should continue to improve with January reporting numbers. They are still in negative territory, but heading toward 0 here in the next month or so.

Tuesday is quiet with vehicle sales reporting and the Bank of Canada announcing no changes in interest rates. Ford should report well GM will show a little improvement and look for both to take market share from Toyota.

As a precursor to Friday’s Job report, look at Wednesday’s ADP report. ADP, being the country’s largest payroll organization has a good but not perfect handle on the employment situation. I am expecting more bad news and more bad news on Friday. The ISM, sale group as above reports on the service sector. Look for positive growth above the 50% range. Again anything above 50% is growth anything below is retraction.

On Thursday look for the Bank of England and the European Central Bank to leave rates alone. There is no inflation concerns out there so there is no GOOD reason to change rates. England is even worried about a deflationary spiral, but I will spend more time on that when I can explain what that might mean to the average investor.

Friday as I mentioned is the jobs report, could make the market ugly. Also consumer credit reports on Friday. Look for further reductions in consumer credit which should be good but when people are paying down their Master Card balance, they are not buying the PADI Open Water Course On line and a bunch of other stuff that could kick this economy and the market in the bottom.

OK I’m tired and I have a few earning reports to tell you about that your might care about. Overseas Shipbuilding Group, OSG reports on Monday. This is a huge oil bulk type shipping company. It is expected to loose another 1.25 a share. I think it will do better than that because their commodity is down which means revenues are down but so are their costs. We have seen oil raise up to the near 80 market so I think OSG will only loose 1.20 a share. If this news comes in nice and you see a few days of upward movement, the 60 a share some people are talking about (Cantor Fitzgerald, Jeffries and Dahlman Rose), could make sense. Here is one to put on your watch list. SUG, Southern Union Company gathers transports and processes Natural Gas. It’s been cold and I like LNG as a Commodity. Estimates are at 51-52 cents a share. If there is a whisper number, I can’t find it. I am thinking 55 a share and look for the stock to go up a buck to about 25 a share. Do your homework. The do have some debt but it seems manageable.

Quick Silver reports tommorow and even though I can’t excited about the brand or the stock. I think it will beat 25 cents a share and the stock could look goog with a coupld more up days. Later in the week we have Staples and Autozone and Costco and others, but I am ready to call it a night.

Before I go, Friday I got in to a July Call 27 dollar for Juniper Networks. I’ll keep you informed.

Salve Lucrum

Thursday, February 25, 2010

BAGAKOAA February 25, 2010 A new economic indicator.


February 25, 2010 A new economic indicator.

Wow what a day to watch Bloomberg. You had the Survivor, Health Care Island in one corner and “try not smile” Benanke in another. There should be a study done to look for a new economic indicator called the ORP effect. I was watching the S & P and DOW the whole time the President, Harry Reid and Nancy Pelosi were on television. Now the market was off to a yucky start anyway because all of the European indices were down because “Το Χιονοδρομικό πέφτει”

That would be Greek for "the sky is falling".

Anyway the market was off about 125 points and then the President has his health care summit. Opening remarks put the market at 181 points down. They then went to Bernanke and the market came back to about 100 points down, which is when they cut back to some Senator from some place and he looked good in his Earnst Angely powder blue tie, but then Ms Pelosi had a few remarks and market was back down again to about 161 points, then back to Bernanke and the market came back a bit, then we had a screen full of the late Harry Reid (I say that because he has already lost his Senate Seat to Danny Tarkanian-if the name is familiar, Danny is the son of a famous or infamous basket ball coach of the Las Vegas Runnin Rebels via the Long Beach State 49r’s- remember the coach that used to chew on the towels- that was my good friend-Tark the Shark), and the market went down again. Of course we settled down about 60 points. Someone should check out the ORP effect, I might be on to something. (Obama, Reid, Pelosi, in case you were wondering.)

Ok did I get CRM right? They needed to beat 15 which they did but they did not hit the 19 I was looking for. 16 got them a couple of kudos but did not excite. The ORP effect knocked them down a buck and half. I have to hear or read the earnings report on Seeking alpha before I pass judgment on this stock. And when you get real lucky you can screw up and still get it right. Safeway, I said it should just beat the 53 cent a share estimate. Well it hit 53 spot on, BUT my bad 53 was a loss and they did loose 53 cents a share. FLR disappointed by missing the 87 cents a share estimate by a nickel. More importantly management had nothing nice to say about future prospects. Even with the gloomy statements, this 45 dollar stock has legs to 52. I would not be adding to the position but I’d hold if I had it which I don’t. As I had said, Kohl’s blew by the 1.37 estimate to 1.40 and was rewarding to the upside on a market challenged day. This stock is looking really nice. Do your homework but consider it a strong retail play. GAP’s also made me proud by beating the estimate and gained in the market today. 50 cents was the estimate and they hit 51. This is a good retailer as well but I’d look for a little cheaper entry point. Some value the stock at 28-30 which seems a little aggressive so look for an 18.50 entry point. Even with all of the creative accounting Siegfried and Roy could muster up, and at first glance there was a slew of fancy number work with Macau charges and interesting interest manipulation, their top line growth could not let them hit the estimate. Wynn didn’t win today. And there was no need for a Dr. in the house as DPS, Dr. Pepper beat the street by a penny. So I will proudly take 4 out of 5 and celebrate by taking my son swimming. Have a great weekend if I don’t talk to you tomorrow.

Salve Lucrum

Wednesday, February 24, 2010

BAGAKOAA Feb 24, 2010 CRM and SL Update


 Feb 24, 2010 CRM and SL Update

Well, Bernanke said nothing and that was good. It gave this rally a little more room to grow. Unfortunately it bumped the dollar so commodities got a bit cheaper and energy stocks went down. RIG was down about 4 bucks today. What does that mean? BUY BUY BUY!. I did.

What else did I do? Well I think we are out of our sideways stuck in the mud market that started on January 26th. I am thinking rally monkey (got better seats this year at the Angels Stadium-but I digress-oops wrong blog The rally started on the 19th of February so I have been buying. You will get a Salve Lucrum Update once all the chips settle, but here are some of the trades over the last several days.

The Feb 20 Call Options on RPM, parent company of the famous DAP caulking materials, was exercised at 17.50. I lost money on the calls but it is good to have this stock. There is some more COCO in the SL portfolio having been added on three occasions this week. Please take a look at this stock. This has made a nice run to 15 but I am thinking its 28-30 by summer. I added to my position on NEWN, but this is a very speculative play on lithium batteries, only the brave and stupid need apply. I got some more TELT, and if you think NEWN was speculative, TELT makes NEWN look like (I guess we don’t have any sound big name blue chips stocks to fill in the blank anymore?) Anyway its as close as I get to a penny stock. I added to my position on Intel and RIG. I got out of VZ. Verizon fell through an important barrier at 29.69 and I don’t see where the bottom is at this time. I took it out of all the portfolios. I also took my lumps on the VZ calls I had. If you heard a scream earlier this week it was when I took my hits on CHU, the stock and the calls. This hurt and if I look back in a year or so I hope I turn into a pillar of salt. Since I was into pain yesterday, I also took my medicine on a group of calls that were killing me, like a March call on MELI, Mexico’s answer to Amazon, NOT!.

I then regrouped and started a new position on CNXT. While this is another chip play I like it because of the international exposure. Look for this 4 buck chuck to get to 7 by years end.

Then you can call me Bond That’s Corporate Bond. I had to park some cash for a while, a long while I hope so I did some Bond hunting. Most of these are 6% callable bonds maturing in 5-15 years, junk rated. I got some Ford Motor Credit, Zion National Bank, and CitiGroup, all yielding between 7.2% and 8% to maturity.

Today I took a loss on a May call for United on Line UNTD? I don’t even remember why I bought it in the first place. To quote one of our seasoned sales people, “I may have been drinking at the time.” I am back into HAS. This has got legs to 40 easy and I am back in. I also added more COCO and BA today. Because I am convinced we are in a hopefully long rally (2-3 months maybe), I bought the burger, that’s right MCD. I think its channeling days might be over for a while and 78-80 looks doable in 12 months. And yet another chipper, TQNT. Very speculative, but into Bluetooth technology and wireless home network products. DO YOUR HOMEWORK. And a stock I did quite well on earlier in 2009, TEVA looks like a double to me. Ok maybe not a double, but 90-100 in a year. Generic drugs baby, that’s what they are all about.

So remember what I said in January, we needed consumer spending and housing improvements to get a year long rally going. That would be the 19% upside on the S & P I suggested in early January. We are not getting yet, YET, but we have some nice tells that as of the 19th of February kicked of what I think is a reasonable sustainable rally.

Salve Lucrum

Tuesday, February 23, 2010

BAGAKOAA Feb 23, 2010 Are we on the Target with Inflation


Feb 23, 2010 Are we on the Target with Inflation

Ok I am picking lotto numbers this week because I almost nailed TGT The whisper number was 1.18 a share I went out for a stretch and said 1.22 and they came in at 1.24 on better than expected Holiday sales. So why did they finish down. The management had some cautious statements about the balance of the year, the consumer confidence report came in negative, and TGT’s credit card program was reporting bigger than expected delinquencies. So what does that mean. Buy buy buy! At 50.00 a share, TGT is looking good. At a PE of about 15. I like it. I am buying some July calls at 50. Macy’s did come in short of the 1.32 hitting 1.10 but their CEO had some upbeat comments.

And I was correct with HD that reported 20 cents a share which did blow away estimates of 16 cents a share. The bad news was I did get priced out of the calls. I might just go long on the stock. I will let you know. Many of you have HD and it was a good bet for you. The stock was up a point and a half today. Medtronic’s did what it was supposed to do but benefited from 3 cents a share in accounting change rules. They reported 75 compared to 73, but the accounting changes helped them. The stock was down.

We’ll see if I got CRM right tomorrow. Thursday’s earnings just to keep you ahead of the game include, Safeway should just barely beat its 53 cents a share estimate, Fluor should beat by a long shot the 87 cents a share, (do some homework on this stock it is lookin good), look for Kohls and GAP to keep the retail rally alive by beating estimates-sorry I don’t have them at my finger tips, the big looser will be Wynn who will struggle and probably not make the 13 cents a share estimated, Heinz will probably meet the 75 cents a share they are looking for, and Dr Pepper should be right in line with the 43 cents a share they expect.

Someone asked me about inflation today and what a good strategy might be for inflation. My first reaction is don’t worry about it. I really don’t think there is an inflation issue till well into 2011. Core inflation reported down last week and the fed tightened a bit by raising the bank to bank discount rate a quarter point. It doesn’t mean much except the feds are willing and able to tap on the breaks when necessary. Even China with a robust 9+% GDP tightened credit by increasing bank reserve requirements. Let me explain what that means. You can restrict the flow of capital in two ways, charge more for the use of the money, like a spike in the prime interest rates, or the central banks of a government like our Fed or the People Bank of China can go to their member banks and say instead of lending 30% of your capital reserve you can now only lend 25%. That means they have to come up with 5% more capital. This slows lending and cools of a hot economy.

Last week for the first time since the 1980s the core inflation rate, (less food and energy) actually dropped .1%. (You can blame WMT for lowering their prices. Seriously, they had a sales drop for the first time in the company’s history. This is not a coincidence. Was it tonnage or was it pricing. My guess is pricing.)

So I can’t get all excited about inflation. The dollar’s increase since its bottom in November isn’t helping matters but I don’t think there is a problem. B.U.T., Behold the Underlying Truth, what should you do to protect against inflation if you think it is creeping up on us. First of have 10-20% of your portfolio in gold. Avoid the individual gold stocks unless you have the time to do a thorough study of the company, its management, its geopolitical issues it might be dealing with and all the fun stuff you need to know to make a nice profit. By GLD a great ETF that tracks the underlying commodity.

After gold just think about what inflation does. It makes everything more expensive. Look at other ETFs for other commodities as a possible hedge. Also get one or two great energy related stocks now while they are relative cheap. Look for a decent yield on dividends while you are at it. I own CVX and RIG. For a spec play in energy look at NEP and GST, (I do not own them but they are on a watch list), You can also look at real estate investments. It can be REITs or land or troubled assets, but if there is true inflation, real estate has always done well during inflationary times. You can try your hand at Forex. I DO NOT RECOMMEND IT BECAUSE OF THE INCREDIBLE RISKS. You can play some currency ETFs. For instance if you think the dollar will drop agains the Euro, there are a couple of contra dollar ETFs you can play. You can also by TIPS. I did some research on these a while back for my friend Butch and they did not excite me but I was also not worried about inflation. I believe I talked him out of it. Here is a link to give more about TIPS If you want to get tricky, you can short bonds, but it is just easier to buy a short bond fund.

As far as a good book, I have not read it, but just downloaded it to my Kindle: The Handbook of Inflation Hedging Investments by Robert J. Greer

In a nutshell I would suggest reading about inflation now and not actually investing for it till late this year. Unless if Benanke surprises us all.

Salve Lucrum

Monday, February 22, 2010

BAGAKOAA Feb 22, 2010 The week starts off soft


Feb 22, 2010 The week starts off soft

Lowe’s, hey did I call it. 14 cents a share got things rolling as reported here but then it cooled off by the end of the day to a slight drop. And CPB, Campbell’s Soup, reported today not Tuesday but I did call this one as well. They were expected to hit 74 cents a share profit. They did hit 74 cents a share profit and as I suggested it disappointed. The stock came down 1.2%. It is fun being right. Nordie’s reported after the market today and came in at 74 cents a share which was one little itty bitty penny of my guess of 75 cents. Same store sales were down 6.6 percent. A couple of the financial websites said it was too early for the luxury sector to show improvement. Hey they must be reading this blog. Despite the disappointing report, the stock was still up 43 cents to 36.13. I don’t get that as I really did want to get in at a 34.50 price. I am putting a limit in at 34.50 because I think JWN (Nordies) has managed inventory very well, they have invested heavily in a great IT backbone, they are well positioned for the return of the affluent client and this is easily a 40 dollar stock by end of the year. Even at 36 a share the forward looking multiple is about 15 and that ain’t too shabby for a household name like Nordstrom’s.

OK now tomorrow TGT, aka Target aka “the black hole” at my house, should have no problem beating the 1.16 a share estimate on earnings. The whisper number is 1.18. I am going out there and guessing 1.22 a share. Look for a nice pop on Target. As you remember I got stopped out in January when Walmart came out with predatory pricing and killed the whole retail sector. I think TGT can pull this off. People are shifting from Dollar Days and WalMart up the food chain again to TGT, then we will see the shift into Luxury again. This quarter is TGTs.

Macy’s is reporting but like JWN I think they will be shy of their 1.32 estimate.

Look for HD to blow way the 16 cents a share estimate but I told you that already. (August calls at the opening). MDT, Medtronic reports tomorrow and look for a miss. I am thinking 73 which would miss the mark by 3 cents.

And I’ll give you a heads up for Wednesday. Look for CRM, Sales Force to beat the estimate and whisper numbers. Those numbers are 14-15 a share. I am thinking 19 cents a share which would be huge. Everyone is jumping on the cloud computing band wagon and I think CRM is and will remain a big player. Cramer, the WSJ and Baron’s all are talkin sexy about this stock. This is an 85 dollar stock come years end. Let see what the report is on Wednesday. More for you later Skee Daddy.

Salve Lucrum.

Sunday, February 21, 2010

BAGAKOAA February 21, 2010 Last weeks scorecard


February 21, 2010 Last weeks scorecard and the week ahead.

I started to write this about three times and something always interrupted. Let’s go back to last Monday night and see what was prognosticated.

I had the Empire State mgf index coming in at 25. It actually came in at 24.91. That was a healthy jump and as indicated the news coming from the debt ladened EuroZone kept what could have been an exciting rally in check. Last Tuesday the S & P only went up about 1.8%. As I suggested the VXX got a little play, but by the end of the week I got out and got all other portfolios out of the VIX tied etf. This looks like some stable times and head so look for the VIX to head south of 30.

Now for the earning reports from last week and my grading my guesses. As suggested KFT was looking for a good report over 50 cents a share. They came in a very healthy 48 cents a share. As I indicated it needed something well over 50 cents to get the stock moving. It didn’t happen.

WM as suggested here did blow through the 48 cent whisper number and as it needed 50 or more to get some legs on the stock, hit 52 and the stock went from 31.70 to 33.40 over the week. A nice little trip if you had the stock.

I mentioned that housing starts needed to be above 590 thousand to keep the good time rolling and they came in at 591 thousand units. Good enough to keep the rally going. To keep it going further, as described here I thought the industrial production report would be positive and it was. All of this positive news knocked the VIX down and by Wednesday night I had all of the VXX ETFs pulled from all accounts.

NetApp got me so excited I took a new position when they reported 40 cents a share when everyone was looking for 28. I am taking a very short term position on this for about 15 days looking for about 7% gain. Then I will set in some stops and see what happens. This is a very healthy looking stock but I need to do more homework.

Well I didn’t get HPQ right. I figured with all the good banter about pc sales and chip market being strong the HP would fly though the 1.05 a share estimates, they came in at 1.04 which disappointed.

The producer price index did what was excepted and took more worry out of inflation.

I really missed the boat on Dell. Again, on all the good news about the pc sector and Dells great server business I was confident we would see 32-33 cents a share. They reported 17 cents a share which was pitiful and wet blanket for most of the tech sector.

Well on WalMart I was right and wrong. They blew away the estimates of 1.12 a share earning 1.22 a share for the fourth quarter. However they did so on cost cutting citing slow sales. Now sales can be down for tonnage or it can be down for pricing or it can be both. Other retail companies cited surprising strong, not robust, but strong sales. Traffic was strong at WMT according to the people who count bodies. Could it be WMT slashed to deep with the holiday pricing? That would be my guess. Still a nice 4th quarter. They had a couple of negative forward looking statement that put a damper on things.

The CPI or Consumer Price index did not bring any surprises and indicates that inflation is not a worry. Core inflation even went down a tenth of a point. So in a nutshell it was a calm week not a wild ride.

So what does next week look like.

Keep an eye on Bernanke as he speaks on Monday on the subject of employment and the need or lack of need for more stimulus. It should not be a market shaker but could be an interesting segment.

Consumer confidence reports on Tuesday and though we are coming off historic lows, I don’t think we will see much improvement. There is still a lot of mediocre news out there. The number will come in at 56 a point above consensus but still yucky.

Watch out Wednesday for new home sales. My guess is they will disappoint. Consensus is about 360 thousand units. My guess is 348 due mostly to bad weather and the government stimulus is confusing builders and buyers. Also On Wednesday Bernanke speaks again this time in his usual appearance before the parliament of whores, oops I mean congress. This should not be anything earth shattering and nothing to move the market.

OK I am going out on a limb here and I have a good feeling about the durable good orders on Thursday. The consensus number is a 1.5% increase over December. High end estimates are 3.6%. I am thinking 3.1% is where the number will come in.

Friday is a busy day with Consumer Sentiment, Existing Home Sales, GDP report, and the Chicago PMI report. Keep an eye on the GDP report for a nice surprise. Consumer sentiment should be positive as well.

What will be moving the market next week will be earnings and I have been doing some homework on the reporting that is coming this week. I will leave you with a couple that are reporting tomorrow and then get back to you on the balance.

Look for Lowes to beat the 12 cents a share estimate and come in at 14.cents a share. It has been trading sideways since November. Look for 14 cents to kick start this home improvement monster. HD will follow on Tuesday with good earnings. (hint, buy an August just in the money call option on Monday.) Campbell’s reports on Tuesday and will probably meet or exceed the 74 cents a share estimate, but it is one of those stocks that is expected to do well every quarter. Look for 74 to disappoint. 70 to make everyone dump the stock and it will need 80 plus to make it move. And on Tuesday we have Nordies reporting. The whisper number is 81 a huge jump from last year (36). I think we are a bit early for the high end luxury stores to do that well. I am thinking a slightly disappointing 75 cents a share. If that happens look for the stock to drop to 34.50 which is a nice entry point.

Ok that be enough tonight. If you’re not tiered of reading I am tired of writing. Buenos Noches and Salve Lucrum.

Monday, February 15, 2010

BAGAKOAAFeb 16 2010 The week ahead.


Feb 16 2010 The week ahead.

Ok this usually gets put up on Sunday night, but I was enjoying one of the best Valentines ever with my lovely wife Devin. It was a great day and I did not for one minute think about stocks, economics, or the Salve Lucrum Portfolio. But now it is back in the saddle.

The Empire State manufacturers index reports tomorrow and should follow the lead of the indicators and should be strong. January’s number jumped huge from 4 to almost 16 and the consensus figures are all over the place and some are saying look for 28. My guess will be a number closer to 25 still showing good growth. That should have little impact on the market tomorrow since eyes are still on The European drama playing out. The Greece issue may end up being greasier than thought and there is banter about some countries leaving the Euro. I don’t think that will happen but talk like that should get the VIX up a few more points.

The bigger play in the market should be some of the earnings report this week. Tuesday KFT reports. You know they just bought Cadbury but that should have no bearing on this earnings report. I looked for estimates and whisper numbers and they are scarce. The ranges are 42-55 cents a share. Since we are talking about staple brands like Oscar Mayer, Oreo, Maxwell House, and Nabisco and if you follow Kraft’s game plan to slowly leave the low margin area of sports drinks and juices, we could see a nice earning near the high end of the spectrum. Anything over the 50 cent range could get attention. There is no KFT in any of the portfolios.

Another one to watch will be WM. Waste Management might have problems with the lower level of revenue because of the drop in construction rubbish. Higher prices and the fact that they own a lot of their landfills give them a slight advantage. They have a lot of debt but it is manageable. Look for the estimates of 48 to get nailed and a possible 50 cents a share might give the stock some legs.

On Wednesday look for a couple of reports. Housing starts are coming out and NEED to be in the 580 thousand range or you can expect more of a drop in the market. That would cause a weakening in the dollar, more of a bump in the VIX, and an increase in Gold. If the number is north of 580, the market should continue sideways. A little later on Wednesday watch the industrial production report and the industrial capacity reports. All indications are they should go north, if not look for a drop in the market.

We have several tech stocks reporting Wednesday and all should be strong. We have NetApp, NVDIA, HP, and Analog Devices. Look for NetApp to blow by the estimate of 28 cents a share. HP should have no problem hitting the 1.05 a share expected. It would be bad news for the whole tech sector if they don’t come in strong.

Thursday we have the Producers Price index reporting and it should be relative flat taking more pressure off inflation. The jobless claims number should continue to be positive. Dell reports on Thursday and it should be strong and handle the estimate numbers with no problem. I’d be surprised if Dell did not come in above 30 cents a share. The down surprise will be Walmart. I am guessing the predatory pricing they engaged in over the holidays is going to bite their margin in the butt. They will blame any shortfall on weather and on line sales (Partially true), but they were giving away the farm over the holidays. Analysts are looking for 1.12 a share I am guessing 1.01.

Friday you have consumer price index reporting but again that should demonstrate little inflation threat. No one exciting is reporting on Friday so it should be quiet and my guess low volume.

In a nutshell, keep an eye on your stops. It could be a wild ride.

Salve Lucrum

Thursday, February 11, 2010

BAGAKOAA Feb 11, 2010 No News is Good News. . . .


Feb 11, 2010 No News is Good News. . . .

Well sometimes good news is good news. The AAII, American Association of Individual Investors, (great website, great educational stuff, interesting stock screens etc.), released it weekly sentiment indicator and after 5 weeks of a bearish trend, there was a significant reversal. The bears still have it with a 41.9% compared to 36.8% who thing the bulls are the way to got, but that 36% is a 7% jump from last week. Individual investors apparently thin the 9 point correction in the S & P was the adjustment we all have been waiting for.

Since we are all just a bunch of monkeys in a casino, I can’t necessarily agree with the shift in attititude. We’ll see.

Salve Lucrum

BAGAKOAA February 11, 2010 Greece is the word. . .

BAGAKOAA February 11, 2010 Greece is the word. . .

Way back on December 3rd 2009, this blog posted:

“So in 2010 the index to watch will be the S & P 500. Since my Feb 2009 prognostication the DOW went up 33% and the S & P 500 went up 26%. There are 500 stocks in the S & P 500 and many have revenue growth as well as cost cutting strategies. The S & P 500’s forward looking PE ratio is about 16. With the year end close of 1113, I am looking for a year end S & P 500 of 1335, almost a 20% increase. This will take two critical elements that must happen. Consumers need to start spending be it frivolous or value purchases. and we need to see a bottom in real estate. If both happen by mid year, the 19 % improvement in the S & P 500 is real. If not it will be difficult if not impossible. You could extrapolate a DOW around 12, 500 based upon that guess, but I wouldn’t bet me life on it.”

I only bring this to light as we have seen, over the last 4 weeks, a 9% correction in the S & P 500. This blog started talking about a correction since mid October but suggested it would happen by last year’s end. The increase in the dollar, anticipated but not stellar earnings improvements, US debt concerns, an intentional “tapping of the brakes” in China and the concern of a European domino failure collapse have all contributed to the long over due correction. I still think there is another 5% to go, then as mentioned in the Dec 3rd, if we see an improvement in consumer spending (Note XLY and XLP mentioned shortly) and a bottom in real estate, we could still hit the 1335 S & P and a 12,500 Dow.

There is a great book recently published by Bloomberg Press called Market Indicators by Richard Sipley. It is 220 pages of different market indicators, where to find them and how to use them. In it he explains how to use consumer discretionary ETFs and consumer staple ETFs to look for tells about the general market. If you look at a three month charts of the ETFs XLY and XLP you’ll see mostly sideways and maybe a slightly downward trend. Nothing as drastic as what the S & P 500 might be indicating with the 9 % drop. So that indicates to me that this is a correction and not a breakdown in fundamentals in the regional or global economy.

Today, we are seeing a move upward because leading countries in the EU have given assurances to help Greece through its debt default crisis. Some might ask why, and the prevailing wisdom is they would rather collectively help Greece than independently help the dozen or so banks left holding the bag at the end of the day.

The improvement today is causing a bit of a drop in the VIX index driving the holding of VXX down, but I am guessing more volatility ahead. Let’s see what tomorrow brings.

Nobody took a guess at the last trivia questions so it still stands.

Salve Lucrum

Sunday, February 07, 2010

BAGAKOAA; Feb 7, 2010 I leave the country one week and . . .

BAGAKOAA; Feb 7, 2010 I leave the country one week and . . .

Well. I went off to Germany to the Düsseldorf Boot Show. No, its not where they sell boots, they try and sell boats. “Try” being the key word here as much of the yacht and super yacht halls (there are 18+ halls each 100,000 square feet in size), were quite quiet. The busiest hall, number three, was the scuba hall. I kid you not. If the boating industry is any tell for the general economy, the Boot Show indicated we have a long ways to go. After Düsseldorf, I visited PADI’s office in Hetlingen Switzerland. The consumer confidence there was much more robust. There seems to be a general disillusionment with our “For Change” President, worries about Greece and other EU countries falling apart economically. They are talking a lot about the PIGS, Portugal, Ireland, Italy Greece and Spain or the STUPID countries which are Spain Turkey Ukraine (which makes no sense because they are quite stable and have some very interesting government bond issued) Portugal, Ireland and Denamrk, (Which again is strange because they are relatively healthy and have always had an export problem not abling them to build up their foreign reserves.) Or was it STUPID PIIGS, I don’t know. In a nutshell there was angst concerning some of these major countries defaulting on their debt and becoming the next Lehman Bros.

So in the week plus I was gone the market was down about 3.4%. The portfolio was down about 4.2% There was some stoppage and I have been in the process of rebuilding a bit.

Before I get into this, I hope you heeded the suggestion to look at AAPL after the iPad announcement. Cramer nailed this one and my recommended entry point of 192 worked. You should have picked it up at 192 Thursday night and it gained 3% on Friday. I know it’s hard to believe that 192 is cheap for a stock, but AAPL has got 275-300 written all over it. PLEASE Read the articles about the recent accounting changes for AAPL and how they account for revenues. Cramer (ooo twice in one blogg) brought this nugget of wisdom to light last October. It will and should create positive adjustments in some analyst’s reports, but this has already been factored in the current and forward looking PE.

The Salve Lucrum Portfolio took a sizeable position of ARMH off the table in a profitable trailing stop. Broadcom reported a nice quarter and Intel Corp, of course, reported well and nothing could help the sector so I was surprised to see ARM and its ADR in the US ARMH tale an 11 point hit last week. Besides a decent entry point of $9.30 on Friday, There is a possible limit entry at 9.50 Tomorrow.

The Portfolio got stopped out of most of its IBM at an 8% loss. I still like the stock and have a limit in at 118 for a round block. If I catch it I will be in the range of about a 9 PE and 2.5% yield.

The SL Portfolio got stopped out of 8% of its RIG Position, which I will re-establish after looking at what the dollar is going to do. Weaker demand for oil and a stronger dollar have played havoc with the energy sector. I do recommend looking at this 85 range a good buying point, but remember I am just a fluffy day trading casino monkey so do your homework.

I got stopped out of all three of my pharms. RHHBY, GSK and PFE with gains. I will look at the sector in the next week or so as there is some exciting new drugs hitting the market in 2010. IF the FDA cooperates and they do not have a reputation for cooperating. More to come on the drug trades.

Here is a teaser. TELT, do the homework.

I was really surprised to see American Tower take the hit this week but the market was a mess. I’ve been accumulating since September so my stop worked and I have some profit. I am looking to get back in at 40.00 first thing tomorrow. With the downward volume last week, you might wait to a 39.50, but I want back in. Actually if I had stayed home I would have moved my stop and stayed with this stock. What the world needs now is towers more towers. I will admit that the forward looking PE at 47 is rich, but still like it.

There was more INTC gathered on Friday at 19.00. Cheap.

Well, got to get ready for the big game. Here is my pick by quarter. Colts, NO, Colts and Colts to win. The final score is 30-27 Colts.

As you know I started a little trivia question, an idea stolen from Cashin Comments from UBS. The winner of the last question about giving the bird was Michael J. He got a copy of Cramer’s older book “REAL Money”.

Here is today’s trivia question: Where did the clothing style of buttons on the sleeve of a men’s suit originate. There are several variations of this answer so if you are in the ball park and the first to respond, I will announce you the winner.

Salve Lucrum