Beyond the FOMC meeting, Durable Goods, New and Existing Home Sales, revised Q1 GDP and the rest of the economic schedule pale. In fact, the markets are more likely to be "moved" by the rebalancing of the Frank Russell Averages, that ought to see many tech companies move down a notch on the food chain.
In the same vein, earnings releases from Paychex, Walgreen, 3Com, Herman Miller, Kroger, Nike and FedEx will be a footnote. KB Home should have had a good quarter but its group rocked last week, on reports from Lennar and others.
So that quickly brings us to the conference schedule, which kicked off big time, on Sunday, with BIO 2001, in San Diego, with about 1000 protestors greetint attendees. And don't forget the Bush administration is still scheduled to weigh in on stem cell research. While I won't pretend the group can buck an FOMC disappointment, if you must play, stick to the biotech HOLDR's from Merrill, symbol BBH, rather than trying to select one or two companies from the dozens of companies represented. Also on the meeting schedule is a Schering-Plough Analyst Day. This company keeps screwing up its manufacturing so a pep rally won't help. The FDA will sit on approval for Clarinex, the successor to Claritin, until SGP gets its act together. Also starting this past weekend, the American Diabetes Association, where Johnson and Johnson has taken a bigger stand with recently announced acquisitions. With the quarter's end arriving at the end of the week, the stock near an all-time high reached last week and, therefore, with almost no overhead resistance, if fund managers reach for the drug stocks in the last couple of days of the quarter as they often do, JNJ could prove profitable.
TechX, formerly PC Expo, is supposed to better reflect the move to handheld devices. Yet, if you've paid attention to the outlooks from Palm and Handspring, you realize the handheld market has come and gone, for now. PC's mostly await release of Microsoft's WinXP, which isn't scheduled until October. For those who are confused about the XP launch, thinking it was done in May, Office XP was the May release; WinXP is the all new operating system due in October.
Oracle is holding an Analyst Day but its hopeful outlook didn't have staying power for tech when it accompanied its earnings release. Ignore the various Mobile, eBusiness, Home Networking Call Center, ASP Summit, and SAN Solutions (Storage) events in favor of Air & Waste Management. No JOKE! Waste Management is where your money should have been this quarter, this year, as Mark Leibovit, at vrsurvey.com, has repeatedly pointed out. Likewise, Billing World is notable mostly because the leader, Amdocs, showed up on the lists from two different members of Barron's Roundtable feature, this week.
In sum, the FOMC and the quarter's end are the stories of the week. And excuse me if I have NOT run on this week. It's not just the fact that the markets will hold it's breath awaiting the 2:15pm Wednesday announcement from the FED. It's also the fact that I'm rushing to get this out during an electrical storm that could shut me down at any minute.
© Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. Event-driven trading seeks to identify
near-term catalysts that will move individual stocks or sectors. The discipline involves
buying on a dip in advance of an event, and selling into the enthusiasm surrounding the
event. In a steeply falling market, targets identified might still rise, or at least, fall
far less than the averages, overall. Sandi remains long QQQ July calls in all accounts.
June 18-22, 2001
Et Tu Brutus? Some housekeeping before I launch into the week. For those of you who find your net surfing clogged by "pop-under" advertising from a certain PC videocam company, opt-out at www.x10.com/x10ads.htm. I've recently experienced yet another pop-under ad but closed it before noticing what company it was from. Next time I'll pay attention and try to pass on how to opt-out that one, too.Last week I started by saying I was short the NASDAQ 100 via QQQ puts, and kicking myself for not doing the same on the DIA's, representing the Dow. I talked about EU's trustbusters' opposition to the GE/HON merger acquisition being nationalism, so it should have come as no surprise that all the talk in the financial media, by the end of last week, concerned European "protectionism." Why do you think my column on Jagnotes.com was called Before the Upgrade? While I make no promises about predicting which stocks will go up or down, I promise to deliver what the media and analysts will talk about in the coming week.
So without further ado, the highlights of the coming week are likely to involve the Russell Averages rebalancing, where interested investors can check updated, official lists, at wwww.russell.com, which won't stop analysts from providing their own guesses. Needless to say, with the FOMC scheduled for another rate-setting meeting on June 26th and 27th, economists and the bond market will sound off on the Fed's next move, though some, like Lehman and Merrill already weighed in, last week, with predictions for a half point cut.
Needless to say, Oracle's post-close earnings report, on Monday, will be critical to the tech sector, especially software, while Solectron's earnings should be considered a window into the hardware sector, since its plants assemble components for PC, telecom and other tech subsets. Should either, or both of these companies disappoint, the urge to dump tech shares could continue. While analysts had long predicted a second half turn around, with the second half starting only two weeks from now, the fourth quarter of this year now wins half as many fans as the first quarter of 2002. Either way, the waning belief I forecast in the JUNE OUTLOOK has arrived on schedule. Despite that, even if the averages continue selling off on Monday and Tuesday morning, that might only constitute final options expiry gyrations that are likely to reverse late Tuesday or early Wednesday. Given how quickly and deeply the Nasdaq sold off last week--8.4%--I went long the QQQ on Friday, and posted a rare Premium Bulletin to that effect while waiting for my orders to get executed. Just bear in mind, unless the power of any rebound is enormous and appears sustainable, I'm not looking for more than $44.60--45.80.
Fed Chairman, Alan Greenspan will be speaking to the Senate Banking Committee but you can't really expect much illumination from him. He is cryptic, at best, in normal circumstances. This time, he is likely to be constrained by an unofficial FED policy quiet period in advance of the next meeting. Still, should the markets be in a free fall, it's quite possible he'll seek something reassuring to say. Given the industrial production and capacity utilization numbers released last week, only the most die-hard optimists see an imminent recovery. Since my September 15th, 2000 e-mail (contained in a piece dated December 7th, 2000) predicted realization of recession in March '01, and the trough in June '01, I'd say the economy, and the markets, are pretty much on schedule. Still, at this stage of the game, psychology holds more sway than reality, and it's psychology that swamped the markets last week, and could, still, this week. As proof I offer Nokia. It didn't say revenue and earnings would be down 10%. It said both would grow only 10%. Still the stock got crushed. Ten percent growth compared to it's peers and sector would, at other times, get cheered in this economy.
Other tradable events, this week, include the Paris Air Show, which will be accompanied by an S.G.Cowen investment conference, over there. While Airbus said, over the weekend, it doesn't object to the merger of HON/GE, many of the EU members own all or part of their national airlines, as well as a huge chunk of Airbus. However, the EU has until mid-July to change it's mind. In my fantasy, they do at the last minute, drawing credit for sparking the rally I expect about that time, anyway.
Biotechs, and to a lesser extent, Pharmaceuticals, will take the spotlight thanks to Beyond Genome (See Premium side for three tracks and presenters at each), BioMetrics, and Abbot Labs' analyst meeting. Last week I recommended preparing for this week by picking a spot for entry into BBH, the Merrill Biotech HOLDR's. Last week's pullback was it, though it doesn't mean investors won't get another chance into a down, Monday morning opening. Likewise, Abbot, at 42 times earnings may look expensive, but it's pipeline and newly accelerating earnings are a story that should win fans at Thursday's analyst meeting. Given the street's propensity to buy into pharmaceuticals on the last day or two of a quarter, and especially if tech continues to correct, ABT may offer a juicy trade for more than a day. Likewise, with meetings for Psoriasis, late in the week, and Neurology, starting late last week, Biogen might remain in the spotlight, even as its analyst meeting collided with Friday's sell-off. Then, to end the week, Diabetes convenes next Saturday, in Philadelphia, which puts Johnson & Johnson on my watch list. JNJ not only recently announce a diabetes acquisition but an eye treatment, used by diabetics and other sufferers seems to have the added effect of causing very significant weight loss.
And since we're already on the end of the week, San Diego will be the host of Alternative Energy Investor. F-CELLS, anyone? Not me, mind you but only because I believe this is a time to be cautious rather than take risks.
J.D. Powers Auto Roundtable doesn't do anything for me. Neither does Streaming Media West, VBITS, Digital Kids, CableSat & Networks, Asia, Data Warehousing NetSec, Israeli Tech, Broadband Year --evidently the year to forget--or Design Automation or Online Advertising. With Oracle and Solectron reporting, tech's near-term destiny is in their numbers.
While Bank of America's Energy Conference will be closely watched, the street is so sure energy prices will continue falling, the group may not catch the kinds of bids expected by consumers, as filling their tanks drains their wallets. While I wrote covered calls against my oft mentioned energy holdings, exactly because I promised prices were likely to fall after Memorial Day weekend, I expect the street to be proven as wrong as they've been for the past year about future energy prices--or at least the sector's profitability. OPEC is back in control. And the 7M barrel rise in reserves should be offset by recollection of big oil's 30M barrel IOU to the strategic reserves. With the heat of summer first kicking in big time, and hurricane season's potential to shut rigs drilling the Gulf Coast, and a couple new utility plants needing raw fuel to get online, Black Gold and Natural Gas still seem to have a profitable future.Granted, that future may not really arrive until fall but covered calls will keep it worth my waiting.
Last on the list of the week's notable events must include earnings releases from Lehman, Goldman Sachs and Bear Stearns. With new issues coming in a trickle, corporate bonds going into default at record rates, and trading volumes down, lower interest rates are not a panacea for the financials. Of the three, Lehman always is my favorite but that doesn't mean I'm tempted.
In sum, renewed volatility probably won't abate until mid- or late in the week. When it does, chalk if up to both summer escapes and the collective breath held before the FOMC's big meeting, next week. Whatever you do, don't mistake it for improved psychology. If you're a trader and have been on the sidelines, consider staying there until at least late Tuesday morning. Longer term investors can probably take off and return late in October--as long as they can bear missing the quick rally that should arrive in July and end between August 5th and 10th.
© Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event, and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified might still rise, or at least, fall far less than the averages, overall.
BULLETIN: FRIDAY, JUNE 15th. NOW LONG THE QQQ at 41.39, on the way up from day's
lows at 41.28. Risk averse traders might consider the QQQgQ (july 43 strike, or QQQGR,
July 44 strike on the call options. Also, keep your eye on Biogen and JNJ in advance of
Psoriasis meeting next week. Stay away from Xoma/DNA; their treatments cause worse rebound
when stopped.
June 11-15, 2001
Downside Offers Least Resistance Within the Recent Trading Range First off, be aware I own puts on the QQQ's, so all my comments should be framed within that context. Furthermore, be aware I'm sorry I didn't put my money on the downside, in the DIA's, also, because this GE/Honeywell merger is looking dicey, which could send not only HON but GE lower. Now I, for one, object to the EU standing in the way of this merger. Don't misunderstand: it's not my nationalistic self-righteousness but the suspicion that the EU anti-trust regulators are somehow protecting, from future problems merely perceived, Airbus, which was founded by a three-nation consortium of major European nations. So it's their "nationalistic" tendencies, not mine, that are driving my ire. Not only that but a collapse in the merger would dash, for now, my expectations for General Dynamics' admission to the Dow, replacing HON. And wouldn't it be nice to have 3 "generals," instead of two, as Dow components.And while I'm on my soapbox, can we please agree to ignore the weekend's comments about the NYSE trading halt, Friday, when new software failed. The astrologists and conspiracists were out in full force, this weekend, and would have you believe the halt stole the thunder engendered by Intel's "good" update. Oh, puhleeze! At best, Intel avoided delivering really bad news.
And while we're ignoring, let's all agree to ignore Bear Stearns' semiconductor conference, this week, even if it does overlap Frost securities semi conference. Bear is the firm that keeps giving us Wayne Angell, and his wrong headed Fed rate predictions; the very same Wayne Angell about whom, in a trial last fall, the head of Bear Stearns said economists predictions are only right 30% of the time and should be considered entertainment. Talk to me about Bear on transports or gaming stocks (they're also holding a Leisure Conference) but semiconductors? When it comes to chips, better for investors to pay attention to the Embedded Processor Forum, in San Jose, where news will come from chips used outside PC's, Servers, and other pure tech products. Or one could look to Hong Kong's CDMA World Congress, which may make, or break Qualcomm.
And while we're laughing about conferences, BofA holds a Growth Conference, in Paris, at which Intel will appear. Don't know about you but I wonder whether the definition of growth got bastardized in the trip across the Atlantic. Then, as long as we're talking tech, Satellite Internet, in Arlington, should rise above what it's been for many months: A question of who wins GM.H. Cable meets in Chicago, sponsored by the National Cable Television Association and, I must admit, it's a group that looks like almost a safe haven, since consumers don't quickly cancel their subscriptions and, in slowdowns, often stay home more and watch more. Last, before we exit tech, there's Win-Dev in Boston, concentrating on Windows development for 64-bit architecture, and Supply Chain Expo, in Chicago, about which Premium subscribers can learn more by using the URL provided.
Really in the spotlight this week, it turns out, should be biotechs and pharmaceuticals, with Managed Care/Health Plans, Infection Control, High-Throughput, Orthopaedics, and a Biogen Analysts' Meeting. Run, don't walk from Health Plans. They're overowned and overloved, yet lose subscribers as employment falls. Orthopaedics will touch on the bone preserving/building drugs, like Evista from Lilly, and Fosamax, from Merck, as well as scans, parts replacements and the like. High-Throughput, all known as HTT, really moved the chip and screening companies that seek to facilitate quick, targeted drug discovery. While Premium members have access to a complete list of presenters, I'll reiterate my preference for trading the PPH, or especially the BBH, (Merrill HOLDR's for pharmaceuticals and biotechs, respectively), as opposed for to limiting my picks to one or two individual company stocks. It may help stock pickers if they know Goldman Sachs' favorites, because they're holding a Healthcare Conference, in California, but with nearly 100 presenters, there still remains the problem of singling out a couple of companies.
For more unusual conferences, there's Chemicals Online, which just ain't what it used to be in the heyday of dot.com fever. However, Licensing, in New York, could yield next year's toys, linens, candy and costumes, even as Harry Potter Movie fever remains a few months away. After all, most of those licenses have already been awarded to the usual suspects. Rubber meets in the UK, but can hardly dwarf the ongoing snipes between Ford and Firestone.
Elsewhere, HBA Global, meets in NY. For those who don't know, it stands for Health and Beauty Aids, which means vitamins, cosmetics, fragrances and hair dyes, which will segue well into Proctor & Gamble's analyst meeting on Friday.
And speaking of Friday, it's a triple witch options expiration week, which probably means the real volatility arrives Wednesday and Thursday, as traders roll out to September and December. With May Retail Sales (as well as a CSFB Retail and Apparel Conference), April Business Inventories, May's Producer Price Index (wholesale) and Consumer Price Index (retail prices), as well as Industrial Production and Capacity Utilization, there'll be plenty of news offering a chance for added volatility, even without a triple witch. Throw in some more earnings warnings, and it's easy to understand why I'm kicking myself for not buying Dow Diamond puts when I bought 'em on the QQQ's. Of course I could be wrong--very wrong--if the market does what no one expects and powers yet higher in the face of bad news. And I could be wrong on the QQQ's if, as is possible, the courts rule on Microsoft's appeal and throws out Judge Penfield-Jackson's break-up order.
© Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event, and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified might still rise, or at least, fall far less than the averages, overall.
June 4-8. 2001
LEAKING AIR The sound you hear may be a little air leaking out of the rally but, as I wrote in JUNE SWOON, the slower trading and lack of investor enthusiasm is a seasonal issue that passes by mid-July.On the economic front, there are a few Fed Presidents and Governor's scheduled to speak, including head honcho, Alan Greenspan, via teleconference for to the IMF. While the Employment numbers released on Friday surprised in their strength, revisions are the norm. So not surprisingly, the Revised Q1 Productivity & Costs arriving Tuesday will lack punch. As I've long said, companies are reluctant to fire workers that cost much to attract and train. When production falls, while employee count remains high, productivity--the measure of output per worker--falls. Period. End of discussion. Not a new or old economy item.
So which is more important? The OPEC production setting meeting, in light of Iraq's decision to stop shipping oil? The Semiconductor Billings, due Wednesday, as well? Thursday's May Chain Store Sales (these exclude gas stations and restaurants, as opposed to the Retail sales)? Of Consumer Installment Debt, which others call "credit?" Well, if you own banks, especially those big credit card issuers, the latter counts the most, while tech investors can't possibly expect any good news out of the Billings during a seasonally slow month. And if you don't think negatives will hit the credit card industry, than you haven't checked the calendar and realized the group meets in Chicago, starting Wednesday.
SuperComm started Sunday, in Atlanta. The news, which isn't new, is a new router from Juniper. While this router was previously announced, traders rarely remember yesterday. How many of you remember that last week, at this time, we were facing another day off, for a holiday? I rest my case. Therefore, it wouldn't surprise me if Juniper made it back to $47, on the unveiling of this router at SuperComm. And at least, if you must be in tech, you'll be taking a fly on a company that in its short history has stolen 37%+ share in its routers from no less a colossus than Cisco. On the opposite end of the spectrum, traders with a penchant for momentum moves might keep Digital Lightwave on their screens.
In the tech hardware/software arena, Oracle, late Friday, announced their post-earnings conference call is scheduled for the 18th, this month. Because they didn't pre-announce, as they did last quarter on the day after their quarter ended, some are taking that as good news. Still, JavaOne won't help much, now that Sun Microsystems warned. And Hewlett-Packard's mid-week analyst meeting will only meet skepticism. The Fiorini luster has dulled. On the other hand, IBM's AS/400 Technical Conference, with partners EMC, CSC, CA, and Compuware could draw some buyers, though its Compuware I'm hearing the most buzz about.
London hosts a big TMT (Tech, Media & telecom) Conference, Internet World, which may get dwarfed by, not only SuperComm but the Gilder/Merrill Lynch Tech Conference, starting on the 8th. Ditto those negative feelings for Prudential's Semiconductor Conference, in London, Mobile Commerce and Digital Content, back home. Likewise, Bluetooth Congress, in Monaco is simply last century's technology.
While I'm negative on Managed Care and Health Plans which have outdistanced their fundamentals in the year long run they've enjoyed, a couple of Biotech events, and analyst meetings for Novartis and Human Genome Sciences (HGSI) shouldn't do anything to hurt the group--especially not when you consider BioLogic, in Geneva, and In Sito BioRemediation in San Diego. The BBH, Biotech Holdr's, which I've often mentioned when many biotechs are the focus, may just be a profitable vehicle this week. Just remember I'm on the side calling for a market pullback, here.
Pet Products, Pork Products, and Natural Foods meet this week, though you'd almost be better off playing the Russell Rebalance--the first prospects for which should be named this week. Other unusual events, this week, include Wood Products, EPRI: Electric Vehicles, and Joint Power Generation.. CSFB hosts a Power Generation investment conference, in NY, on the 11th, so you might want to take notes.
Robotics & Vision meet in Chicago. From the factory floor to semiconductors, inspection and automated manufacturing systems are replacing humans. However, my usual go to, Brooks Automation (BRKS) isn't cheap here and would need much help from NASDAQ to move higher.
Okay, so Gillette and Amazon also hold analysts meetings. I wouldn't touch either of them, but many feel differently. I'd rather buy Hershey for Chicago's Candy Expo, aware that analysts neurons will already be thinking about Halloween as they nibble on samples. Hershey's had a disastrous year, last year, when new supply chain software failed to keep the chocolate flowing. Those problems should be behind it.
Before I close, let me admit to an error in last week's column, wherein, in association with the Urologists conference, I mentioned an impotence drug to be marketed by Lilly. In the original post, I said the developer was Idec. Thank goodness the Gods of trading were smiling down on me. Idec, in fact, rose almost five points, last week, while the actual drug developer, Icos, did almost nothing. While I posted a correction as soon as I realized the error, I must point out the disclaimer, below, because it isn't just dribble posted to protect my A--. If you're relying on my comments, alone, and not doing your own due diligence, you're misusing this site which provides links to event sponsors which also provide news releases. The associated commentary serves only to highlight what analysts will talk about in the coming week. By now, all investors should have learned that skepticism is the best reaction to analysts. Nonetheless, I'm glad that the error worked out well for those who traded; glad that my subconscious plucked a winner rather than a loser.
In sum, traders have to dart in and out because the path of least resistance, for now, remains down. Investors should lighten up into rallies or write in the money calls. If you don't believe earnings warnings will weigh on the markets as the quarter draws to a close at the end of the month, then you've got to, at least, accept the prospect for the bond market to rule, as the FOMC meeting on the 26th & 27th blows every economic release out of proportion and whipsaws investors from hope to despair.
© Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event, and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified might still rise, or at least, fall far less than the averages, overall.
May 28-June 1, 2001 ALL DAYS LEAD TO FRIDAY Okay, so Friday isn't the only day of the week but the May Employment Report released at 8:30am on June 1st will certainly make it feel that way. That key data will most likely be preceded by lightened volume as traders choose to make up for a rainy Memorial Day weekend by staying at their summer homes. Oddly, the monthly employment report is rarely released until the following week when the first two days of a month falls on a Friday. This may be evidence of enhanced governmental technological productivity or may, as is often the case with bureaucratic releases, mean the numbers released Friday will be incomplete and subject to dramatic revision in the coming weeks. Too bad the tax cut was signed into law on a day the markets had no opportunity to react. Now, with a couple of days to digest the 11-year phase-in, and with time to contemplate the possibility that future administrations could easily alter or pare back the cuts, the Tax Cut will look more like what it is--lots of hype without much relief.
And about all that wet weather across the country this past holiday weekend, does anyone doubt that retail stores may have been unusually active? So while Consumer Confidence numbers are also due this week, don't be surprised if the recent trend continues: Consumers have been saying one thing while doing something else--namely spending. Evidence of the dichotomy could come on Tuesday when Consumer Confidence is released the same day Personal Income and Spending are released. Furthermore, we could talk about the Help Wanted Index and various Purchasing Managers' Reports and Indices, as well as Construction Spending but why bother? Friday's Employment Report is the key to future Fed moves. How so? Well, while the Fed can't force a recovery in the tech sector it is charged with keeping prices and employment stable. In the former the Fed has succeeded--ex-energy prices, of course. In the latter, the Fed has been watching the unemployment rate tick up. That's a trend the FOMC isn't willing to see accelerate.
As for sector concerns, Sun Microsystems issues it's mid-quarter update on Tuesday. (I'm long Sun and recommend that traders read the recent Fortune article on the company.) Since CEO Scott McNeally is widely quoted as saying the only "bottom he sees is his one-year old's, every time he changes a diaper," I'm not certain investors should hold up much hope for a catalyst for a tech rally from this conference call. STM Micro is also speaking to analysts, though you have to be delusional to expect really great news out of this communications chip supplier. Novellus (which I'm long--a long time, and short calls) offers it's mid-quarter update, Thursday. This chip equipment maker has been one of the strongest NASDAQ stocks, along with Applied Materials. With many companies mothballing new chip plants, investors in thiese the two equipment leaders seem to be taking their cue from Intel, which insists the tough times are when chipmakers have to gear up for nextgen technology. On that score, Intel and Hewlett-Packard are supposed to announce the official launch of iTanium, this week but the thunder was stolen by Dell, and others, which already announced machines run by iTanium.
FiServ, on the other hand, may just inspire the analysts, when it hosts them on Wednesday.. With a concentration in financial services customers, FiServ, like many software companies, has held up better than the broader NASDAQ. Should it surprise anyone that software companies have fared better than hardware companies? Once all that new equipment was deployed in '98-2000, commonsense demanded that money would next be spent on the software that makes hardware useful. LinuxWorld meets in Tokyo but none of the recent Linux announcements has seemed to do much for the pure play public companies ever since companies like IBM and Dell began to widely deploy the app on their machines.
The big tech events of the week are DBS (Direct Broadcast Satellite), in Denver, and both New York and San Francisco Broadband & Wireless, the west coast one concentrating on 3G. (IBWE in Orlando, sponsored by EMC Shows, is no longer listed on it's schedule, so it's either been cancelled or will be hosted by another producer.) The real focus at DBS will be the skirmish between Echostar (DISH) and NEWS Corp's for control of GM Hughes. The Wireless events are about the wireless internet access which includes DBS delivery--through PDA's and cellphones, as well as laptops and desktops. Either way, the desire for GMH is the news, unless Alcatel and Lucent decide to announce a deal to merge.(By mid-day Monday, on the East Coast, the Wall Street Journal was reporting that a deal would be announced on Tuesday, and that ALA was down, in Europe, while Lucent, traded overseas, was up to $11.20, with the deal peggeda at $32M.) I've long been a bear on LU, and have been widely quoted in the Newark Star-Ledger for that view. If ALA wins Lucent, I'll turn bear on ALA, too. (eMediatainment, in Los Angeles, was postponed. Next one is New York, in October. But the cancellation and postponement of trade shows says much about how worthless many became as events proliferated, as well as more about the tightening of business travel and marketing budget cuts. Those factors, combined with Reg FD requiring public announcement BEFORE event announcements, has done much to marginalize some shows.) Word to the wise: With Memorial Day Weekend often stretching into a full holiday week for traders, SuperCOMM, scheduled for next week, beginning Sunday, will be more market-moving than any of this week's wireless events--ex- deals, of course. Likewise, BookExpo America, in Chicago, will be dwarfed by Amazon's analyst meeting also scheduled for next week.
Goldman Sachs holds a Power Growth Conference, in Las Vegas, while Credit Lyonnaise hosts something similar in Paris. AES, Dynergy and Duke Power are scheduled at both events but the real "POWER" is OPEC, which is scheduled to meet next week, and hold production at current levels.
Healthwise, Jand J, which recently backed off levels above par, holds an analyst meeting. The change in Senate leadership sucked the uptrend out of the drug sector, a condition that may not reverse this week. In biotech, Recombinant Therapeutics meets in Baltimore, at the end of the week. Concerned with Antibody Therapeutics targeting cancer, HIV, autoimmune diseases (arthritis, lupus), neuromuscular disease (Parkinsons), vascular disease, organ rejection and allergies, speakers from familiar public companies include Alexion, Biosite Diagnostics, Zyomyx, Maxygen, and others, at the URL provided on the Premium side. Saturday, Urologists meet in Anaheim. Let's be honest: Nothing about this event has been much fun or profitable since Pfizer introduced Viagra, a few years ago. And lost in the Dole ads for the drug and late night jokes, the group doesn't only treat impotence. There's infertility, as well as bladder and prostrate cancer, even asICOS' competitor to Viagra, set to be marketed by Lilly, is likely to steal the headlines. 300 exhibitors are expected to which you can connect through this link: wwww.auanet.org/meetings/annual_meeting/exhibits/exhibitors.cfm )NOTE: ABbot also has a Viagra competitor in earlier stage trials. ALSO, An earlier post that had Idec 'stead ICOS was inadvertent error. Apologies for the error. However, as always recommended, independent verification and due diligence should always be conducted. We don't recommend stocks: only point out what we think analysts will talk about.)
Indexers meet in Albuquerque starting at the end of the week, so expect to hear much about the rebalancing that will take place at the end of June. With so many tech stocks way off their highs, the large cap indices are likely to lose many tech members while the small-cap ones will pick up a higher percentage than usual.
In sum, the week may drift aimlessly with a slight downside bias. When have you seen me highlight so many events NEXT week in a current posting? I still expect more downside than up for the bulk of June, as earnings warnings prey on the bulls. The full June Outlook posted HERE.
© Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event, and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified might still rise, or at least, fall far less than the averages, overall.
May 21-25, 2001 Multiple Choice
The Rise in Gold Signals:
A. Economic Recovery
B. Inflation on the horizon
C. Fear of explosive Middle East
D. All of the Above
The markets will, in the near-term:
A. Continue Rising
B. Pullback
C. Go Sideways
D. Do all of the Above, depending on which "Market" you're looking at
About this week: Monday will be hard to gauge as the usual post-options expiration activity obscures any hint of what's to come. While pre-holiday weeks tend to have an upside bias, all the markets have come a long way and, with the Middle East getting nastier by the minute, there could be some lightening up in advance of the long weekend.
Seasonally, the markets usually put in interim peaks around now. Add in the coming earnings warnings, a FOMC void, an earnings void from market leaders, and the likelihood that many traders have their fingers poised to sell at the first sign of a pullback, and it wouldn't take much for a decline to start. Having said that, I'm not expecting another pullback as severe as the one experienced earlier in the year. Call it more a lack of buyers than a flood of eager sellers--which could lead to marginally down, sideways action. With summer officially here for those escaping to beachside rentals, volume will wane. Last, with crude cresting $30 a barrel, OPEC meeting June 6th and, according to the Saudi Oil Minister, not even contemplating a boost in production, there ought to be some rude awakenings at the pump for traders who do most of their driving during the summer, crawling on the Long Island Expressway out to Fire Island and the Hamptons.
While the economic data due this week includes New Home Sales, Revised Q! GDP, April Durable Goods and Existing Homes Sales, as well as the Michigan Consumer Sentiment, there's another series due before the FOMC next meets June 26 & 27, for one of it's semi-annual Greenspan prep sessions in advance of the Federal Reserve Bank's Chairman's twice-yearly appearances before Congress, formerly called Humphrey-Hawkins testimony. So, while the data might cause some momentary reactions, only enormous surprises will have lasting meaning. Otherwise, the forecasters will wait for next month's series before getting serious about predicting the Fed's next move.
Toys 'R Us, Limited, Kohl's, Staples, Talbots, BJ's Wholesale, Target, Saks, Genesco, Neiman-Marcus, Ross Stores, Polo Ralph Lauren, Autozone, Barnes & Noble, Tommy Hilfiger, American Eagle Outfitters. Any doubt that it's retail's turn to report? Market leaders? Not now. And be aware, the group often peaks with this earnings period and often can't be considered again until August, when analysts' minds turn to Back-to-School. Don't really care that Jupiter MediaMetrix holds a retail conference this week. Scoot!!!
Okay, so software/tech/internet company Intuit (which I'm long) also reports but tax season is over, meaning the best quarter is too. Computer Associates also reports but short-sellers have always questioned their accounting and, recently got some ammunition for their target practice.
So what's interesting, this week? First the possibility that some version of Bush's tax package might see passage this week, allowing the upside bias to extend a bit longer than it would otherwise--especially for the retailers that I just recommended leaving. Then, Peabody Energy, a coal company (someone turn on my respirator), is coming public. Think back a year: Would this have been possible? Why now? Take a look at the chart for Arch Coal (ACI). I rest my case. Energy's hot, HOT HOT!!! And Bush's energy plan says much about the abundance of coal.
For the conference schedule, Lehman is making itself very busy. First, it's offering an Insurance Conference, with AXA, Aflac, UnnumProvident, Allstate, MetLife, Conseco, Jefferson Pilot, and HCC. Do you care? I don't. Then, Lehman, also offers, NextGen Wireless, in NY. While Lehman fave, Comverse Technology (CMVT), has held up better than others, Cisco finally closed above $20 for the first time since it reported the lack of earnings, which could mean there are a few more points to the upside. Qualcomm is nearing resistance at $70, though $80 is doable if it blasts through. Research in Motion got killed with Palm and Handspring. Motorola looks like death rolled over. Openwave seems pricey.. Verizon is on the schedule, too, but might get dwarfed by Deutsche Telekom's earnings report. So Nokia is my inclination--especially since it's guidance hasn't been as dismal as the rest. Then, again, Nokia will also appear at 3G Mobile Networks, in Barcelona. Just bear in mind, Ericsson meets with analysts, in NY. Bad news from them often pressures NOK, too, no matter what it says. Then, again, the Semiconductor industry releases its book-to-bill, on Tuesday, which could pressure tech across the board.
More interesting are the drug and biotech conferences, including In-Silico Technologies in Drug Discovery, Digestive Disease Week, UBS Warburg's Specialty Pharmaceuticals, and Cancer Vaccines. Warburg seems to consider EVERY pharma and biotech company "specialized," because there'll all be there. You can check the links on the Premium Calendar for lists of exhibitors, or you can buy something like the BBH, the Biotech Holdr's, or it's counterpart in the iShares issues. Just don't be surprised if tiny Entremed resurges. Not my kind of investment, so make sure it's yours before you step in. Likewise, the Pharmaceutical Holdr's, PPH, or the iShares counterparts may work well, too.
Automated Manufacturing meets in North Carolina, with 500 exhibitors displaying, motorized and automated equipment, vision and robotic systems, as well as Supply Chain Management Software. My favorite play was always Brooks Automation (BRKS) but, now, it seems it's not my secret investment anymore. That one's rocketed this year, even as other stocks cratered. While off it's high, it could move, again, but represents greater risk than it did 30 points ago.
Just be aware, the above mentioned conferences, as well as analyst meetings with Amazon and Ford Motor, could all get dwarfed by GIGA World's IT Forum, in Las Vegas, where the Keynote address is supposed to be delivered by none other than George Bush.
In sum, I'm sticking with my expectation for a pullback, and will celebrate if the worst we get is sideways action. As such, I've lightened up, written in the money covered calls, and will look to pick up some puts if the averages continue rising on a Bush tax deal.
May 14-18, 2001 What FOMC Meeting? Don't kid yourself: This week is all about Tuesday's FOMC meeting, and the rate decision to be announced at 2:15pm. While most economists have clung to their prediction of a half point cut, many have moved to a quarter, while Brian Finnerty, of C.E. Unterberg Tobin said, on a TV broadcast Friday night, that he thinks the Fed stands pat.
I'm sticking to my call for a quarter and will rejoice at a half. I think another cut is coming simply because it was all but promised in the statement that accompanied the last cut, which arrived intermeeting. But also, as far back as April 16th, in a piece called "Next Derailment Due in May," I said a fall in productivity was a natural outcome of lowered industrial capacity utilization at a time when lay-offs were happening with a lag. Certainly, the FOMC figured this out. Furthermore, the Retail Sales numbers for April don't seem like that big a deal to me: The three-month average blended to up 0.2%, hardly a big deal--certainly NOT a rate cut canceling deal. Last, with the FED desperately seeking to keep consumer spending up, and with energy prices at the pump hitting new highs just as summer driving season starts (see Friday's trading volume for proof that summer has begun), the Fed can't afford to destroy consumer sentiment or crush spending. Not when consumer spending represents 67% of GDP.
So Monday's Industrial Production and Capacity Utilization can be assumed to be something the FED will look to, with the Industrial sector stabilizing. Business Inventories and Sales. Inventories should be declining. Wednesday's CPI should reflect higher energy costs, as well as some higher food costs but otherwise say nothing. Housing Starts and Applications for Building Permits should remain strong with mortgage rates at multi-year lows but should, again, show a leveling after years of strength, even as spring is usually a ramp-up time. The Trade Deficit on Friday will be dwarfed by another Options Expiry, as well as a speech to State Bank Supervisors by Greenspan. Remember, Greenspan wants banks to lend to businesses, to ease the corporate credit crunch.
Before I attempt the list of the week's events, consider a couple that don't quite fit into the standard event calendar. Monday, Lou Dobbs returns to Moneyline, bringing a higher degree of professionalism back to financial news. Second, expect to hear more about growing protests against Microsoft's XP. While the official release date has been set for October 25th, competitors are grumbling about "bundling," and renewed pressure on justice to limit Microsoft's future hegonomy. My complaint is Microsoft's lousy timing, again. When Win95 was released in August, the timeing was just under the wire for Back-To-School, and perfect for the holiday season. Since then, it's like the Three Stooges head up their marketing department. Instead of introducing Win200 on New Year's Day, it was introduced in February. Now, the operating system that's supposed to drive consumers and businesses into the next upgrade is being released in October. Too late for Back-to-School and, if delayed, too late for holiday sales. And make no mistake: Delays are likely. Not just because anti-trust concerns are being raised but because developers are saying they don't have they final code they need to write new software to the app.
Last for the week, a trade you might consider: As the summer movie schedule officially opens on Memorial Day Weekend, the film garnering the most buzz is Pearl Harbor. Produced by the Touchstone division of Disney, word has it this movie could be the next "Titanic." A couple of weeks ago, Disney reported better than expected earnings. While a blockbuster of Titanic proportions wouldn't impact the bottom line to the same extent the "sinker" did for News Corp, it would certainly revive some of the Disney Entertainment Division's sorely absent recent luster. While hardcore, long-devoted event-traders frequently traded the movie houses like Regal, Carmike and Cineplex Odeon in advance of Memorial Day Weekends long past, the theater group is largely bankrupt. If you're looking for a pure play on the weekend's festivities, my pick would be Disney--or at least Pearl Harbor--which, unlike the Freddie Kreuger or Mummies films, will pull in hardcore movie goers, women and Veterans alike. (I'm long DIS via the '02 options for January.) Also note, Disney acted well while the markets were weak on Friday. In a perfect world, my target by August is $38.
Okay, so the world isn't perfect; that doesn't mean this trade might not be. However, if the analysts step in front of opening weekend and drive DIS shares up, (which is precisely what I anticipate), take the money and run. My expectations for a multi-week decline or stagnation hasn't changed. On the negative side, my friend Richard Lees of 21forward.com (a terrific site for monitoring FED moves, and more), tells me DIS offended the Hollywood elite by staging a $5M preview on an aircraft carrier during the writer's strike negotiations, and finds it offensive that the PM of Japan will be visiting during the release. I propose, the rest of the country hasn't heard much of these complaints, and couldn't care less. If anything, for much of the country, Hollywood's upset would be reason enough to go. Primadonna backlash.
Analysts Meetings for EDS, Aventis, Wellpoint, American Home Products, and Yahoo leave me underwhelmed. I already told you my best idea was Disney. On the profit-taking side, there's E3, where game developers don't have much more room on the upside and have often peaked concurrent with this event. Investment house conferences include CFSB hosts both Aerospace/Defense, and Communications Tech; Bear Stearns hosts Medical Information Management; Goldman Sachs hosts Financial Services, while Banc of America hosts Telecommunications, Media and Entertainment, where my pick of the week will appear. Finally, SSB hosts a Storage Conference. None of these excite me. While Industry Trade Shows remain the place where companies introduce and demo new products, as well as write orders, Reg FD has sucked the steam out of investment conferences, forcing companies to put out press releases in advance. In the absence of generally disseminated press releases, companies fear disclosing any material information at investment house conferences.
On the earnings front, Computer Science, Deer, Wal-Mart, Tiffany, Home Depot, Abercrombie & Fitch, Krispy Kreme, Federated Department Stores, Ann taylor and the Gap are some of the more high-profile reports expected. The Tech world, on the other hand, will be waiting to hear Applied Materials, Network Appliance, Hewlett-Packard, Dell and Ciena. Obviously, some of these will appear at related conferences mentioned above, while most have preannounced. Seasonally, this isn't a time when any of the techs make much headway. Conversely, the retailers, whose reporting season is just beginning, often peak with this quarter's report, before reviving, again, in August. Word to the wise.
Then again, the FOMC and Options Expiry will control the week's trading. Other than that, the coming long weekend and the onset of summer will so skew volume by the end of the week, I see no reason to deviate from my usual posture during this calendar period. I'm expecting a rally in advance, sell-off on the FOMC news, and lightening up into the rally so I'll have fire power to position for the next big rally I expect, the third week of July, more about which can be found here.
© Sandi Lynne, 2001 Nothing contained in this commentary is to be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified should still rise, or at least, fall far less than the averages, overall. As of this writing, Sandi and/or her affiliates were Disney, though accounts might, also, be short calls against the longs. Positions could change at any time, without notice.
May 7-11, 2001 Main Street's Loss Yields Big Street Gains Main Street, USA took a body blow in April but Wall Street celebrated, pegging another half point cut onto the FOMC's agenda when it next meets, on May 15th. That puts the Street back on FED watch, where bad news is good, while good news is bad, as traders count on a bigger cuts in response to weaker economic reports. Memo to Wayne Angell: No matter what you think, keep it to yourself. Ditto every other economist tempted to call for or predict a 3/4 point cut.
The Bush administration finally had some good news on a compromise tax cut, just a Tennesseen finally stole a title from Texas, when Lisa won on Survivor. Of course, as I said last week, the real Survivors proved to be NASDAQ's tech laden exchange but that's a condition that will correct soon enough. (But that's another story you can read here..)
Before I detail the week's events, I'll break form and first give you the events Wall Street will really be watching. First, Tuesday's earnings report from Cisco can only surprise if the company remains dour on the forward looking post-earnings conference call. Other than that, the street is prepared for a dumper. You might think Wednesday's Semiconductor Billings report would be something to watch but, again, you'd be wrong: Anyone not expecting another decline hasn't done his homework. More important might be Cadence Design's analyst meeting, on Thursday. The company makes software involved in chip design, which places CDN on the front lines of a chip recovery. Also, Thursday, IBM meets with analysts, an annual event that's served to send IBM to a near-term peak in years past. That Alan Greenspan is speaking to bankers, the same day, is immaterial. The Fed has a quasi-quiet period in advance of meetings so you can forget a preview, unless the FED is only going to move a quarter point, next week, and Greensapn wants that message disseminated. Last on the week's highlights is the lead-up to next weekend's meeting of Oncologists, where a stock I've spoken of positively in the past, Imclone, has snagged one of the premiere presentation slots. I'll be writing covered calls against my long if the stock crests $45. I expect it to pullback, again, before the FDA announces its decision on C225, the company's drug for colon cancer. For those you don't already own Imclone, it might gap at the open on Monday. Word has it "60 Minutes" included it in a piece, Sunday, about people seeking alternative and unapproved cancer treatments.
Elsewhere on the economic front, monetary policy meetings in the EuroZone and at the Bank of England might just dwarf the data reports due this week. Q1 Productivity and Costs, usually a headline number is so backward-looking, the market could burp and move on. Ditto April Chain Store and Retail Sales. Still, Friday's Producer Prices is a wholesale number that augurs ithe direction of inflationary pressures, while the University of Michigan's Consumer Sentiment report has the power to do damage if the consumer has gone into the crapper. Remember, 67% of GDP is comprised of consumer spending on products and servies.
Trade events cover a broad range of industries. Southern Gaming could mark a near-term top for the sector which has done tremendously, this year. Both US Food Exports and Supermarkets meet in Chicago, while Feed, does the same in Indianapolis. SInce it appears the market rally has legs for a few more days, at least, such defensive stocks make little sense short-term.
Tech events are dominated by networks/communications, with Networld+Interop having started, in Las Vegas, on Sunday. CLEO, the Optical Society of America's meeting, in Baltimore (not the ad awards), brings together Optical plays while Custom Integrated Circuits, in San Diego, gathers ASIC technology companies which ship most of their low-powered chips into the video, multimedia and communications OEMs (think LSI, Qualcomm, Intel, Philips, Cadence, and Synopsis. BICSCI weighs in in Las Vegas, too, which is a telecommunications association event--sort of the addendum for Networld+InterOp. Cable & Wire manaufacturers meet in Orlando, at CableTech, while TVision meets in Los Angeles, featuring broadband convergence with the likes of Disney, AT&T (@Home), AOL, TiVo, Geocast, CNET, Valuevision, etc. Then Seattle hosts Connections, for home networking. You'd think that would do, but ExpoComm Wireless (Korea) and Semicon (Singapore) are meeting in Asia, this week, which could yield news for the fabless chip designers back home. Then, again, SSB holds a Semiconductor Conference, right on the heels of last week's tech conferences from JPMorgan H&Q, and Merrill Lynch. Don't know about you but it makes me wonder how many new ways companies can come up with to say, "No Visibility."
Speaking of visibility, e-HR meets in Lake Buena Vista beginning Monday. While that wouldn't ordinarily be a big deal, the headline company is PeopleSoft, whose recent earnings so pleased the street. Then, add in keynotes from visionary Esther Dyson, and former Clinton cabinet member, Robert Reich, and you can be assured the meeting won't be ignored. Likewise, OSS (Open Source Code), in Arlington, might give a last boost to some of the Linux companies that benefited from last week's supportive comments from IBM.
For entertainment, unless you happen to live in California, there's West Coast Energy Management, in San Diego, featuring Enron, San DIego Gas & Electric, Baldor motores, Capstone, Chevron, H Power, FuelCell Energy and others. (Please check the URL on the Premium Area.)
Last of the events worth highlighting might just be American Business Press, in Greenbrier, WV. While ad pages have shrunk considerably, this year, and editorial sections highlighting the dot.coms have all but disappeared, I'm actually getting more interested in advertising companies, and the media companies that benefit from the ads placed by these agencies. I've received notice that Technology Investor and Online Investor have both, recently, ceased print publications. While advertising budgets won't grow, budgeted spending will get redistributed, perhaps saving survivors from additional cuts. While it may be too soon to act, it's certainly something to file in the back of your mind.
In sum, I expect the averages to claw their way to additional, though modest, gains this week, while remaining suspicious of next week, fairly certain that the intermediate top I've been expecting slinks closer with each passing day. Enjoy the bumpy ride up but take profits and buy protection because I've stated my case for another decline here.
© Sandi Lynne, 2001 Nothing contained in this commentary is to be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified should still rise, or at least, fall far less than the averages, overall. As of this writing, Sandi and/or her affiliates were long Cisco, IBM, AOL. Qualcomm, and Intel,, though accounts might, also, be short calls against the longs. Positions could change at any time, without notice.
April 30, 2001 Headed for an Intermediate Top Monday the month ends, which will bring some portfolio adjustments. A one-day event. However, if I'm right about the market averages topping sometime in the May 4-15th timeframe, then investors should be opportunistic about taking profits, writing deep in the money calls, or thinking about some puts. Furthermore, it wouldn't hurt to remember that retailers and their suppliers often perform well, in May, when they report earnings. Add in the likelihood of another cut in interest rates, come the May 15th FOMC meeting, and the Street's kneejerk reaction will be to grab financials and retailers. (I'm counting on only another quarter point cut and will be pleasantly surprised if we get more. If we don't, that virtually guarantees a sell-off on May 15th.) Just don't grab retail at spikes that may be caused by Lehman's Retail conference Monday & Tuesday.
First, the economic reports are numerous, with the capper coming Friday, when the April Unemployment Report is slated for delivery. While every economist with an opinion expects unemployment to rise to 4.4%, I'm not as certain and don't think it matters, unless, of course, the report is such a surprise it triggers the intermediate top I expect to arrive before May is through. (While private sector employment probably fell, government probably rose. Remember, there are new gunslingers in town, with many favors to repay.) Wednesday's Factory Orders could be more important if the level of orders has worsened.
With two-thirds of the S&P done reporting, and with Hewlett, Dell and Cisco not scheduled until closer to options expiration, investors are left with companies like repetitive warner, Proctor & Gamble, Nextel, Humana, CVS, CIGNA, and the one company sure not to disappoint--Royal Dutch.
In healthcare, events include Cataract & Refractive Surgery, which began Saturday and, perhaps, is less interesting than Carl Icahn's VISX takeover attempts. American Hospital Association started meeting the same day but I'm not buying the argument for more upside, here. Clinical Bio-Chemistry, in London, is a larger event, with 70 exhibitors ranging from Abbot to Thermo Labsystems. Advanced Cardiac Surgical Tehniquest starts Thursday but the event to watch is a toss between Genzyme's Analyst meeting, in NY, on Friday, and the American Psychiatric Meeting, in New Orleans, starting Saturday. GENZ has had an unbelievable run and still looks strong, though too rich for me. Psychiatrists, on the other hand, will hear more about Prozac generics, Zoloft, and Pfizer's Gedeon, about which will center all the buzz. Why? Unlike other anti-depressants and mood elevators, Gedeon is being touted as the first that doesn't cause weight gain. Now, if you don't think depressed people get more depressed when the medicine that's supposed to makes them feel better also makes them fat, then you either weigh 96 pounds, as I do, or you're a large sized model raking in millions from clothing endorsements.
I suppose there could be enthusiasm generated by Robertson Stephens' Genomics Tour, CART's Target Validation/Drug Discovery, or CIBC's Biotech Conference. However, keep in mind, earnings not promise are what investors are looking for. If you must, try BBH, the Biotech HOLDR's, or similar exchange-traded trusts. Express Scripts holds their analyst meeting, too. Closed Friday above $84, with resistance at 87, which, if broken, could propel it to 95 before it hits a wall. If a trade from 84.50-87 is your thing, you've got more time than I do. Fine company, expensive stock, with no guarantee it will surrmount 87, unless NASDIE extends it's rally.
Speaking of analysts meetings, BMC also chats up analysts, on Monday. Earnings were just out; chart's ugly. Adobe holds one in NY, on Tuesday. Still like the company and the businesses its in but I don't expect the huge run up it's often had in the past. With resistance at $50, and more at $58, there's room for profit only if it crests $50 with conviction--and perhaps, a lot of help from NASDAQ. Kodak meets analysts on Wednesday. Whatever you do, don't wake me! Qwest, on the same day, might be more interesting but, sitting just under resistance, you better know more than I do,.especially since resistance above $40 will hit ya at 42.5.
Elsewhere in tech, CWM Global, in London, gathers British Telecom, Cable&Wireless, Carrier1, Deutsche Tel, Global Crossing, MCIWorldcom, Ciena, Cisco, and 100 others. Wake me when it's over. Orlando will host AON: All-Optical Networks, a group as cash-starved as any on the planet. Other tech conferences include JP Morgan H&Q, which, according to a well-known street maxim, has traditionally been the one to sell, with AES, in November, the one to buy. Merrill Lynch hosts both Techtopia, and Hardware Heaven, promising appearances by lots of tech investors' favorite names, including Intel, which just held their analyst day, EMC, and a smattering of tinier mortals, like Inktomi and Akamai. Can you just give it up, yet? Semicon Europe? Ah, hah. You can't give it up: trade, don't marry--and consider the QQQ's, if you must. I mustn't but that might be because I was buying on April 2, the day after I said traders could nibble.
Two unrelated conferences strike me as very related: SG Cowen offers Broadband/Satellite Services, while CSFB promises Media & Broadband. For SGC, think GM Hughes and the ongoing debate: will Murdoch or won't he. For CSFB, Cable Networks, and radio broadcasters, advertising Agencies, newspapers, behemoth entertainment companies, like Disney, Viacom, AOL, and cable companies Comcast, Cox, Adelphia, etc. Bear in mind, BusinessWeek bulled VIA, this past weekend. Otherwise, I own AOL but don't believe it goes far anytime too soon.
JP Morgan also holds a Financial Services Conference. Let's just say I'm not as bullish on financials as older-timers are, based on historical outperformance when the Fed is cutting. Consumers went out on a limb with credit card and mortgage debt when their stock portfolios were in the stratosphere. Combine a market chill with rising unemployment and you get rising defaults. Period. Next!
In sum, I have a question: Did I mention NAPM, Factory Orders and Friday's Unemployment Report? Okay, two questions: Did I mention a near-term top creeping closer with each passing day?
© Sandi Lynne, 2001 Nothing contained in this commentary is to be construed as a
recommendation to buy or sell any security. Event-driven trading seeks to identify
near-term catalysts that will move individual stocks or sectors. The discipline involves
buying on a dip in advance of an event and selling into the enthusiasm surrounding the
event. In a steeply falling market, targets identified should still rise, or at least,
fall far less than the averages, overall. As of this writing, Sandi and/or her affiliates
were long AOL. Cisco, Intel, and Pfizer, though accounts might, also, be short calls
against the longs. Positions could change at any time, without notice.
April 22, 2001 Temptation Island Unveils the Real
Survivor and the Weakest Link As the gurus and pundits repeatedly, and
wrongly, called a bottom throughout the decline since January, the markets revealed
themselves to be the real "Temptation Island." When all was said and done, the
rally I'd long predicted for the third week in April arrived on schedule, boosted by my
new bestfriends, the Federal Reserve Board's Open Market Committee, which chose a surprise
1/2 point rate cut on the 18th, just when the signs of a multi-day rally were
already secure. By the end of the week, the tech-dominated NASDAQ proved the ultimate
Survivor, while the investment bank and brokerage firms proved, once again, they are the
"Weakest Link." After reiterating buys the whole way down, they finally fell all
over themselves to cut ratings and set the lowest targets on the street. While still in
the downgrading mode, the sight of elevating techs forced them to quickly reverse and,
with one incredible mad dash, they got onboard the rally with upgrades galore. So now, one
wonders when both investors and the very firms that employ these weakest links will turn
enmasse and say, "Good-bye."
Another busy week of earnings reports will feature Exxon Mobil, 3M, AT&T, Disney, and American Express, in the Dow. Well-known but not exactly market inspiring reporters will include PepsiCo, Black & Decker, Kellogg, Sara Lee, Bristol Myers Squibb, and WorldCom. My vote for most watched coming earnings goes to Compaq, which tech investors hope doesn't spoil the newfound optimisim; BMC Software, which, like Computer Associates, should have benefited from IBM's roll-out of new mainframe, Freeway; Checkpoint Software, which remains one of the ultimate momentum stocks; Qualcomm, which got good news on W/CDMA adoption from U.S. Cellular, last week; JDS Uniphase and Corning, both of which are so intrinsically tied to telecoms,the sector hit worst in the past year. Some better news from either of these two would lift a wide swatch of fallen angels. Finally, defensive investors will hear from many more energy related companies, a slug of which roll out their earnings this week.
On the economic front, Tuesday's Consumer Confidence might not quite jibe with Wednesday's New and Existing Homes Sales, since it has long appeared that consumers are walking and talking two different outlooks. Q1 advance GDP is widely expected to come in better than it would have since the Trade Deficit shrunk. The deficit is subtracted from GDP. With a smaller the number, less is subtracted. The Employment Cost Index, one of the best indicators of wage and benefits inflation, as well as a predictor of wage costs' effect on corporate profits. also is set for release, this week. Though this has always been one of Fed Chair Alan Greenspan's favorite indicators, you wouldn't know it from reading Barron's, this weekend, since the release didn't even make the "Preview" page. This number has been showing inflationary tendencies. Where beneift costs have risen, the HMO/Managed care Group has most benefited, as witness their charts. As for wages, with stock options no longer the tasty lucre they were in a raging bull market, salaries have, inevitably, risen, as well.
Which leads us to the trade show/conference schedule, which is heavy but, trust me, secondary to earnings news, and the push and pull of the markets, where bears will weigh in heavily for a sucker's rally, while bulls will tell you the Fed's on their side.
First, some groups that don't meet often: The National Association of Broadcasters (NAB) will meet in Las Vegas, where even declining advertising will take a back seat to the looming actors strike, setting the schedule up for a new round of "news format" and "reality" shows that are sure to send viewers to cable. In a related event, Web Advertising, hosted by Thunder Lizard, gets underway in New York. Who knows, if a Hollywood strike switches more people to the web during prime TV viewing hours, the strike could have a benefical effect on web advertising which AOL claims is okay, while Yahoo says it went into the tank. The Amercian Jail Association meets in Columbus, though I don't know many investors who remember when Corrections Corp was a hot IPO. There's a Meat Conference in Charlotte, that started Sunday, which wouldn't ordinarily make much news. However, with Mad Cow, Hoof & Mouth, the IBP takeover mess and friction over hormone enhanced cattle, this one could get interesting. Environmental Sciences (Estech) started the same day, and concerns waste disposal (a group that's risen from the compost this past year), clean running plants and water filtration, with a secondary concern for noise reduction, as well as chip fab clean rooms and supplies. Last in the unusual, American Truck Dealers also meet starting this past weekend, with truck sales very tied to the health of the economy. Mack, Daimler-CHrysler (Freightliner), Navistar, and Volvo are just some of the names involved.
Tech is represented, with telecom related events dominating. The list of events includes ePayments, Healthtec, Open Architecture, Networks and Digital Communications, Parallel Computing, Peer-to-Peer Computing, Mobile Communications (in Helsinki), GPRS Asia Pacific, Bluetooth Japan, VoDSL, in New York, Wireless Web, for satellite, fixed broadband and networking, in McClean, Virginia; BusinessWeek's Telecommunications; Smart Cards, Asia; Optical Summit, in Tuscon, Unified Communications, in New Orleans, Wireless Enterprise Summit, in Houston; and the real news, when JDSU and GLW report their earnings and provide outlooks for the coming quarters. Semicon, Europe and Hannover Fair, in Germany, won't change that. Then, again, Intel holds an analysts' meeting in New York, where it remains to be seen whether the post-earnings release bullish comments it made about a bottom in CPU's will remain convincing a week later, on Thursday.
Speaking of analysts' meetings, First Data, the huge credit card processor holds its own quasi-analyst meeting, this week, a road show sponsored by Merrill Lynch. This company benefits from consumer spending, no matter which card is used. It's recent earnings release (April 12) was one an investor could love. And they did, sending FDC to a new high. While a big seller crushed it at the end of the day, Friday, a pullback into the very low 60's in advance of the meeting on Wednesday could leave room for a profitable trade, even a move to new highs. It recently extended contracts with some major credit card issuers, including Citigroup.
Finally, as usual, the healthcare and drug development industry hosts a bunch of meetings, though not the National Institutes of Health's scheduled one on stem cell grants, which the dinosaur Bush administration nixed. The list? Fungal Metaolites, with presentations by GlaxoSmith Kline, Merck, Cibe, Bayer, and Lilly. Drug Discovery Technology, focused on chips and other technology that identifies potential targets, as do similar events, MicroArrays, and Genomic Sample Prep. (Oh puhleeze, don't make me hold your hand; check the Premium Postings for URL links and featured presenters. If I thought one company would stand above all others, I'd tell ya.) In Keystone, the pharma development complex contemplates Angiogenesis & Chronic Disease, as well as Atherosclerosis, while Tuscon's TIDES concerns PepTides.
Which leads me to next weekend, when investors sitting on piles of cash might think about the Berkshire Hathaway Annual Shareholders' Meeting, often called Woodstock for Capitalists. Believe it or not, BRK.A and .B have often gotten a boost after the annual meeting, as the devoted redouble their resolve and commitment. Yet, Warren Buffet's portfolio of American Express, Disney, Coke and Gillette are not doing all that well and, if you've been buying LEAPS, as I recommended beginning April 2, you shouldn't have THAT big a pile of cash sitting around burning a whole in your pocket.
In sum, last week's rally went farther and faster than I expected once the funds rate was cut, on Wednesday. With post-options expiration gyrations on tap for Monday, another ton of earnings releases, GDP and ECI released before Fed Chair Greenspan speaks, on Friday, a minor pullback before the next leg up won't come as a surprise. Some of those tech gaps should be filled before the next and, perhaps final leg of this spring rally. Set realistic targets and take some off the table before the expected late May/June/July decline begins. While the street is expecting another 1/2 point cut on May 15th, when the FOMC next meets, I wouldn't be at all surprised if a quarter is all that comes. While the FED may have raised too often and too much in its impatience to slow the economy, last year, I don't think it wants to risk going the opposite direction, before it sees whether the medicine already administered has has its desired effect. To do so would raise the specter of the FED's public enemy number one, next year: INFLATION. But to all the perma-bears claims of an economy and stock market that will follow Japan, please send a message: You are the Weakest Link, Good-bye.
(c) Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event, and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified might still rise, or at least, fall far less than the averages, overall. As of this writing, Sandi and/or her affiliates were long Intel, IBM, Sun, EMC, and Merck, though accounts might, also, be short calls against the longs. Positions could change at any time, without notice, and may have been initiated B.I. (Before the Internet), or earlier.LINK to EXCERPTS FROM PRIOR WEEKS HERE
April 16-20, 2001 NEXT DERAILMENT DUE IN MAY Since I weeks ago predicted the rally would come during the
"Earnings Sweeps" week now upon us, I don't suppose anyone's really eager to
hear when I think the party will end but I'ill tell you anyway. Since I expect a
"W" recovery, another leg down must, inevitably arrive, and I expect that
sometime between the 4th and 15th of May, with the greater
likelihood for the next top to arrive during the first five days of that window. I mention
my skeptical outlook so investors and traders, alike, can prepare their portfolios during
an earnings inspired relief rally in the coming days. Oh, and by the way, not to be a
complete downer on the fun but a little itty bitty economic indicator--the Employment Cost
Index (ECI)--is slated for next week, April 25th. With wage and benefit inflation evident
in recently released employment reports, you ought to at least be alert to what the Bond
traders are looking ahead to., especially with Options Expiration ending
the week.
With approximately 30% of the S&P expected to release earnings, this week, it should come as no surprise that many DOW stocks figure amongst the reporters. Citigroup, Caterpillar, General Motors, JP Morgan Chase, Gillette, Johnson & Johnson, Ford, McDonald's United Technology, Merck, and Boeing are included but investors will be watching most closely the reports from Intel, IBM, and Microsoft. If the list doesn't do enough to convince you this week is critical, throw in reports from AOL Time Warner, Global Marine, United Parcel Service, and Hershey Foods, and one can see the reports touch every industry. Granted, many of these companies have already warned but it's the "visibility" thing that's bothering investors and I'm fairly certain many companies have seen little in their crystal balls since the warnings were issued. Years ago, I got my start tracking earnings, looking for companies with vastly improved results that hadn't, yet, caught the eyes of analysts. After three consecutive quarters of improvement, I bought in, waiting for the analysts to notice and upgrade the stocks. With the advent of the internet, that kind of information became too widely available, and the method stopped working, so I switched to events. However, after severe economic decelerations, research into earnings improvements is exactly the kind of information that will lead to winning stocks. All of which leads me to Scientific Atlanta, the only company I'd own without fear as it reports earnings, this week--which isn't a recommendation to buy it. That's something you should have done before last week's action.
On the economic calendar, the heck with CPI and Housing starts or the Trade Deficit--phuleeze! That last is data for February, for heavens sake! Key will be Industrial Production. We already know Capacity Utilization has stabilized for the deep cyclicals, keeps falling in tech. But the Industrial Production number is worrisome because productivity divides Output by the number of workers, and as I've said before, companies that spent a fortune hiring and training employees are slow to let them go. If too many employees remain on payrolls as Output falls, as it must when capacity utilization falls, then Productivity falls dramatically. This would blow the "whole new paradigm" of efficiency that was supposed to accrue from technological investment.
Which brings us to the Trade Show/Conference schedule, which is far from inspiring. AeroSense, in Orlando, and Structural Dynamics & Materials, in Seattle, both involve aerospace/defense. While I recommended Boeing, last week, below $55, I'd be gone in the mid-sixties, unless the rally gathers more strength than I expect. The news is already out on Boeing; Anyone else doubt the National Security Agency will let fly Boeing's cooperation agreement with Russia, announced this weekend?
Also starting Monday, Food Safety. Hoof and Mouth? Mad Cow? Listeria? Salmonella? Hot topic with few tradable ideas, other than Smithfield Foods, one of the biggest pork producers, which has already benefited from the scares. However, if you know any of the companies involved in testing and/or irradication, than you know more than me and should certainly check the URL provided on the Premium Calendar to see if your company is one of the 150 exhibitors.
Other health-related events include Viral Immunity, one of the last Keystone Symposiums, which lacks any public company presenters. However, HIV and Hodgkins are on the agenda, so news could arrive. B-Cell Immunobiology meets in Snowbird, with ZymoGenetics the only non-research presenter. Again, No trades. Gastrointestinal Endoscopic Surgeons meet in Atlanta, with 80 exhibitors, many of the medical products/equipment variety, which lends itself to much overlap with the 750 exhibitors expected, Wednesday, too, in Atlanta, for Healthcare USA. Probably more tradable is American Burn Association, in Boston, starting the same day, with 75 exhibitors, all dwarfed by the presence of Baxter, BioTech General, and Genzyme Tissue Repair. Thursday brings the Arthroscopy Association, in Seattle, which, again, involves mainly medical products equipment vendors. )Are any of these guys working on salves for investors' NASDAQ burns?)
Last on the health-related topics is International Tobacco Expo, in Las Vegas, Tuesday. Okay, you didn't have the conscience to invest in MO (Phillip Morris) when the NASDAQ began it's death spiral. You heard news of a court victory against a flight attendant. There's the food spin-off and a juicy yield. Get OVER IT! If non-defensive issues are going to extend the rally, this week, you can revisit this one in May, when the decline in all else will return. Oh, yeah, there's also ITRA: Tire & Rubber, which didn't used to be a health-related event but Ford Explorers and Firestone Tires changed all that.
An Advertising Conference won't set the house on fire. The newspapers just warned of dismal results, making Omnicom and its brethren look a tad pricey, right here. Of course, a good report from AOL could relieve the pressure. So will a better 2002, when an interim election and Olympics arrive. But advertising is falling and the threatened Hollywood strike can only compound the issue.
You knew there wouldn't be a week without tech, so I'm gonna give it to you. Just be aware that earnings are the thing, this week. Nothing's gonna move the spotlight when IBM, Intel and Microsoft are reporting,. Not to mention Sun Microsystems, AOL, EMC and Nortel. So this week offers 3G Forum, in Washington, where my money would rather be on 2.5G, developing here as GPRS (General Packet Radio Switch), ever since AT&T Wireless (AWE) decided to go there. There's e-Sports, e-Security, DVD Summit (in London), NGN (Next Generation Networks), eLearning, Java Mobile Tech, M2001 Mobile, and the absolute BIGGEST of them all, Tokyo Big Sight, which includes every darn nook and cranny of technology. Last for technology is e-finance.com. If I had to look for any trades, it's here I'd prowl. While Checkpoint rallied to near resistance, last week, First Data reported great earnings and holds an analyst meeting on April 25th, making it a buy candidate on a pullback. Concord EFS is one of those stocks you wish you'd known about sooner. Fair Isaac, FiServe, Security Dynamics and Sungard Data have all pulled back but at least their customers are banks and brokerages, the kinds of businesses that can't skimp on security, no matter how bad the economy. Still, you've got to remember those earnings reports and believe that this rally has an expiration date.
In sum, don't let the rally cause you to lose your head. Trim your holdings in the rise and be prepared for May's decline. June will be notable for earnings warnings and could look a lot like March just did. No, I'm not expecting Jonestown-like depression, again, in June and early July. Remember, Jonestown didn't leave many survivors. Neither did March, 2001, in the markets. Then, again, that, in itself, limits the extent this rally can reach.
© Sandi Lynne, 2001 Nothing contained in this commentary is to be construed as a
recommendation to buy or sell any security. Event-driven trading seeks to identify
near-term catalysts that will move individual stocks or sectors. The discipline involves
buying on a dip in advance of an event and selling into the enthusiasm surrounding the
event. In a steeply falling market, targets identified should still rise, or at least,
fall far less than the averages, overall. As of this writing, Sandi and/or her affiliates
were long Corning, Compaq, AOL. Qualcomm, and Intel,, though accounts might, also, be
short calls against the longs. Positions could change at any time, without notice.
April 9-13,2001 Blue Light Not
so Special Good News! The markets are closed
Friday, which means it really will be a GOOD FRIDAY. Of course we've all seen how much
damage can be done even in four days, especially with so many Fed Presidents roaming the
country giving speeches. Up first, on Monday, the Kansas City Fed's President speaks on
Monetary Policy & Economic Outlook. Tuesday, the Atlanta Fed President ponders the
U.S. Economy. Thursday, comes Producer Prices, the so-called "wholesale" prices,
a forward looking indicator of inflation, or the lack thereof. Of course, the pundits
blanched at the "wages" component of last Friday's March Employment Report which
signalled inflation. But no one whose read this space before could have been surprised.
Nor will the Fed's voting members be: with stock options decidedly out of favor, wages
were bound to rise.
Perhaps the single most important economic releases--March Retail and Chain Sales--will be released on Thursday and reveal the trend in consumer spending, a component equal to about 67% of Gross Domestic Product (GDP). Should consumers stop spending, the economy will worsen by multiple degrees. However, it pays to remember that the vast majority of consumers earn their living as employees and ,according to the Employment Report just released, many of them are seeing higher wages. Furthermore, with oil and gas prices backing off, mortgage and credit card interest rates falling--not to mention spring in the air in many parts of the country--consumers could just decide to spread a little sunshine, even if they didn't during March.
Outside economic clues and the growing chorus of those predicting another intermeeting cut, the conference and trade show schedule is a mix of industries. Leading the way is Lipid Mediators, in Snowbird, part of the Keystone Symposiums. This small seminar includes Pharmacia as the only Corporate presenter. Research released will foreshadow next month's Oil Chemists' meeting, so take notes. Cambridge hosts Phage Display Technology, concerned with engineering proteins and antibodies for specific properties, especially against cancer, AIDs and autoimmune diseaes. Xencor, Millennium Pharmaceuticals, Selective Genetics, BioInvent Therapeutics and Cubist Pharmaceuticals are amongst the presenters. Millennium has the power to move but it will without me. However, with the genome mapped, proteins remain the last frontier, making this one to watch for potential future investments.
Monday should find IGEN and Roche before a judge, litigating the 15th, and last count of a lawsuit that's seen IGEN prevail previously. Should IGEN make it a clean sweep, it will win back all rights to the diagnostic tools for which it claims it's marketing partner, Roche, hasn't properly paid, paving the way for IGEN to recover back royalties at the October trial for monetary damages. I had recommended IGEN at $13, saw it move to just under $20 before it's recent pullback and still think another pullback is in the cards before the October trial. I'll revisit it then.
On Wednesday, Structure-Based Drug Design meets in Boston, with Anad, Vertex, Hoffman-LaRoche, Bristol-Myers, Structural genomX, Aventis, Lilly, 3-D Pharma, Tripos, Pfizer and Dupont Pharmaceuticals presenting, the latter also holding an analyst meeting the same day.
Battered techs, as usual, have their share of meetings. Software Development West meets in San Jose, while Microsoft Office meets in Orlando. The latter will be more about Microsoft's XP, while the former promises 100 exhibitors and keynotes from Microsoft, AT&T Labs, Sun Microsystems, and IBM. Also on the schedule are a number of events intrinsically tied to the ever poorer telecom and communications space. They include Tube, Pipe, Cable, Wire, in Dusseldorf, DSL.Con in Denver, Seybold's Printing/Publishing/Imaging & Graphics, in Boston, Carrier World Asia, in Hong Kong, DSP World (Digital Signal Processing), in San Jose, OPTO, in Rochester, Kagan's Interactive TV, in New York, and--deep breadth--Converged World Cable, in Dallas. With so many events surrounding communications, perhaps Embedded Systems, in San Francisco stands out from the crowd, despite recent earnings warnings from National Semiconductor, LSI Logic, Texas Instruments and Cyrus Semiconductor. At least these chip-makers sell product into multiple industries, from autos to appliances. Softworld's Supply Chain, in Boston, won't be the ticket when so many have warned and Ariba let it be known corporate America is on lock-down.
Away from digital and bio- tech, the National Space Symposium meets in Washington, where the usual suspect of defense and space contractors make a showing. While General Dynamics remains my favorite to replace Honeywell after the merger, and Boeing held support at $54 and might be attractive, the group probably gets dwarfed by General Electric, which is expected to report earnings on track, Thursday.
Despite these conferences and the economic news, the week may turn on earnings. Yahoo, Motorola, Harley Davidson, Roadway Express, Dow Jones, Boise Cascade, Genentech, Rowan Companies, First Data, VISX, Pier1 Imports, Commerce Bancshares, Juniper Networks, Safeway, and Marshall & Isley join GE in reporting, this week, representing a fairly diverse cross-section of many industries. For those looking for industries best weathering the slowdown, this week's reports should provide a launching pad for the diligent investor's research.
For awhile, now, I've proposed a lift for the averages when earnings releases replace warnings and investors find opportunity to celebrate any and all earnings, no matter how meager. I've also suggested that I wasn't expecting much of a lift before next week, the third week of the month, when tax season ends and earnings "season" ramps up. Since nothing has changed my opinion, I'm sticking to the plan, though granting the possibility that Thursday might see a lift, as traders jockey for position in advance of next week's possible rally. I also expect the House & Senate to quickly reconcile their separate tax cut bills, which would provide one more reason for investors to stop focusing on all the negatives and begin to discount the possibility of an economic recovery. For a longer-term perspective, don't forget to read my outlook for the coming quarters here. Just remember, the marked down prices of equities are no different than any "blue Light" specials--no matter the bargain, if you don't need it you shouldn't buy it.
© Sandi Lynne, 2001 Nothing contained in this commentary is to be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will move individual stocks or sectors. The discipline involves buying on a dip in advance of an event and selling into the enthusiasm surrounding the event. In a steeply falling market, targets identified should still rise, or at least, fall far less than the averages, overall. While positions can change at any time, without notice, as of this writing, Sandi and/or her affiliates were long General Electric and Juniper Networks, though accounts might, also, be short calls against the longs.
April 2-6, 2001 Once
Upon a Time, this week would have been all about
Comdex. Back when, Comdex really got the techs moving and investors could have made money
throwing a dart at a list of techs. Merrill Lynch would hold a dinner for Compaq, every
year, other investment banks would host Microsoft, Dell, HP, etc. Then, there were the
years when Zip drives were the rage, or hard drives added another couple of gigs of
storage and sent the group to the stratosphere. Rios, the original MP3 players and digital
cameras could once be counted on to send selected chip or flash memory makers to the
stratosphere. But that was then, and this is now, and concerns about the economy,
inventory, capacity, and second hand equipment will marginalize Comdex for all but
Chicago's cab drivers and brew halls. The presence of Linux and ASP's won't make a
difference.
The National Association of Purchasing Managers (NAPM) Index will get more attention than Fed Governor Gramlich's speech on Social Security, especially since falling markets make the whole concept of investing some of the trust funds in stocks seem so last century. Wednesday, the Semiconductor Billings will be released but no one expects an uptick there. Greenspan testifies before the Senate, the same day, so all of Wall St. will tune in, though he's not likely to be any clearer than he ever is, and won't thrill the Street with more allusions to an economy that's slowed but hasn't stopped growing.
One of last week's disappointments was the EU's failure to cut rates, Thursday offers the chance for Bank of England to join rate cutting fever. But by then, Wall Street will only be thinking about, and gaming, Friday's Employment Report for March, which most economists expect to show a small rise in unemployment.
The techs, while all but ignoring Comdex, will be pulled by a rush to buy stocks like Sun and Cisco, that look more like value stocks after the drubbing they took in the quarter just past, especially at the end of the quarter. However, enthusiasm will be greatly pressured by earnings warnings, more of which are sure to arrive, especially from software companies, since that's the group that often doesn't know where it stands until the quarter has ended. IPC, the Printed Circuit Board event in Anaheim will only be as good for the group as the post-quarter activity allows. Just don't expect to hear from the outsourcers, since they won't be there, though Jabil Circuit, which warned, does host an analyst meeting Thursday. Speaking of analysts, Dell holds it's analyst meeting on Wednesday. While I've been amazed at how well this one's acted this quarter, and how positive analysts seem to be on it's prospects, you might bear in mind Dell's quarter doesn't end until April does, so there's plenty of time for it to lose confidence. While I've been long Dell since '94, and regularly short calls against the long, a better price for new positions would be $20 or below. Nonetheless, don't be surprised it the stock lifts, though $30 doesn't seem surmountable.
AON (All Optical Networks) meets in Phoenix, but if you've followed GLW, JDSU and the rest of the group, a dead cat bounce may be due but it's too soon to expect a recovery. The telcos are still slashing Capex plans. Ditto those comments for the companies involved in i(interactive)Wireless, in Beverly Hills, where attendees include Qualcomm, InfoSpace, Omnisky, ArrayCom, Sun, Ericsson, Sonera, Disney, Vivendi, Intel, Handspring, Motorola, Inktomi and others. Then ditto for ISPCon, a meeting for the telco, CLEC and RBOC Internet Service Providers. If dead cats are your thing, be my guest.
Having expressed my reluctance to invest in tech, I must admit at least some interest in seeking upside in post-quarter bounces that could take some techs up quite a few profitable points. Just don't overstay the welcome. Greed will cost, especially if the drone of warnings picks up and investors sell to pay tax bills between now and the 16th.
Outside tech, WasteExpo meets in Chicago, too. Here's a group that's done quit well, thank you very much, which may mean a time to base and/or cool lies dead ahead. Lodging Expo, also meets in Chicago, but you have to believe a cut back in corporate travel hurts the group, as will consumer's vacation plans if the theory of a "wealth effect" bears any validity. Senior Housing meets in the senior capital, Miami Beach, and at least involves a group facing long term growth trends as boomers age. For tech with an old economy bent, the SAE World Congress brings together transportation and tech companies, so expect one last gasp for companies involved in satellite radio and GPS (Global Positioning).
As was the case last week, companies involved with drug research and development offer many meetings this week. Virginia will host Human Proteome Project, as well as Biological Safety and Protein Expression, while Beaver Run hosts Manipulating Plant Metabolism for Humans to Enhance Nutrition. If you play here, you must check the Premium listings for companies involved--like Amgen, which appears at both Signalling: Chemistry, Biology, Pathology, in Steamboat, as well as Hematopoiesis, in Whistler, Canada. The meeting of the week should be World Vaccine Congress, in Montreal, where Glaxo, AHP's Wyerth, BioChem Pharma, Aventis, Cytos Biotech, Aviron, Maxygen and Merck have speakers scheduled. The news, this weekend, was about vaccine shortages. Little noticed was February's announcement of Merck's AIDs vaccine that doesn't prevent infection but does stall replication. MRK had a pretty good lift at the end of the quarter and could make an assault on $80 before the week is out but don't expect more.
In sum, I expect neither a big decline nor a monstrous rally this week, as each day marches to Friday's employment report and cross-currents keep buyers matched with sellers, as the last of the warnings arrive. However, with the NASDAQ nearing an almost 6 year old trend line, and with expectations of a rally by the third week of the month, as earnings reports reassure investors that companies can still make money--albeit less than they were originally supposed to--if you feel a need to buy partials, be my guest. Just be sure and read my longer-term Outlook, posted here.
© Sandi Lynne 2001. Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading seeks to identify near-term catalysts that will boost stocks, and involves buying on dips in advance of an event, selling into the enthusiasm surrounding the event. As of this writing, Sandi and/or her affiliates were long Dell, Merck, Compaq, Intel, Corning, and Sun, though short calls might be in place, and positions can change anytime, without notice.
March 26-30, 2001 OBJECTS in your SIDE VIEW MIRROR MAY APPEAR SMALLER THAN THEY ARE Anyone who witnessed live market action, on Thursday (March 22)—especially in the DOW stocks--knows better what capitulation looks like, and why all prior declarations of a bottom were laughable, and woefully early. Yet, A bottom does not THE bottom make. Bear market rallies, such as the one seen both last Labor Day and this past January can be as giddy as the downturns are vicious. So I wouldn’t be surprised to see a giddy lift this week, even in the face of more earnings warnings as the quarter draws to a close. And I remain just as prepared to hear the gurus and pundits come out in force to encourage stock purchases, claiming the upturn is proof that the bottom has been seen.
Sorry. Not buying it. Yes, I’ll trade what may work into a very tradable rally. But the vast majority of INVESTORS can remain seated on their cash. I foresee stocks once, again, collapsing in the June-July warnings period, before an upturn during the third week of July, with another top arriving around August 10th. After that brief summer rally, I expect another decline in the month of October—the markets' most predictable reaction to the mutual funds closing their year and the acceleration of tax-loss selling. However, no matter whether the absolute lows of the bear are already in, or will first be put in place in the early summer, I expect that fall decline to remain well above the year’s low prior to October. That’s the action that will mark the true turn and signal the green light for investors and traders alike to accumulate longs for the recovery I expect in 2002. And make no mistake about it, for the reasons already stated in the first paragraphs of my last two weekly columns, I remain longer-term bullish while closeted in a bear cave, with full coverage of April now available here.
On the economic front this week, the media and pundits will make much of Tuesday's Consumer confidence numbers. On PAHLEEZE! I'm convinced consumers are telling pollsters one thing while doing another. So if you want the real skinny on Consumer actions, as opposed to their stated opinions, pay more attention to Monday's New and Existing Homes Sales, as well as Friday's Personal Income and Spending. The latter are the facts, all else the fiction.
Not much ado in the earnings reports camp, this week, though tech investors will certainly watch with interest as Palm reports, if for no other reason than alternatives to PC's are supposed to be where future tech growth will come from.
The trade show and conference schedule is so heavily weighted to biotech and pharmaceuticals, it would be easier to name only those companies not involved, rather than attempt to name those that are. (Premium members, please use the URL's provided with show listings to access speakers and exhibitors.) However, I will list the conferences for the non-med subscribers so they'll better understand why the media will find little else to talk about. Medtrade, in Las Vegas, Drug Discovery, in San Diego, AntiBacterial Drug Discovery (Princeton, NJ), Trends in Biotechnology (Australia), AIDS Vaccines & HIV Pathogenesis (Keystone), Anti-Fungal Drug Discovery (Princeton), Anti-Viral Drug Discovery (Princeton)--the Princeton Anti- trifecta, if you will. Atlanta hosts Internal Medicine, while Steamboat Springs offers Neurodegenerative Disease. Clinical Technologies: Accelerating Drug Discovery, Part II of Drug Discovery 2001, meets in San Diego, while both Physiological/Experimental Biology, and Human Genetics & Genomics get underway next Saturday. Now don't you wish you'd had the guts to buy the BBH (Biotech HOLDR's), last week, when it printed at $92.50? Just for the record, Merck (MRK) has a promising AIDS vaccine in clinical trials. This battered DOW stock got some press (2/22) about the vaccine, which doesn't prevent invasion of the virus but keeps it from replicating. Expect the market to get more enthusiastic as it receives more complete information, via Journal publications, concurrent with the AIDS Vaccines & HIV Pathogenesis in Keystone. (As of Monday, we can add JNJ's talks with Alza as another reason Pharma dominates the news this week.)
Tech Investors will focus on AFCOM, a Data Center event in Las Vegas, since storage is supposed to be the area least prey to the tech slowdown. Up north, Canada Call Center & CRM in Toronto will have trouble bucking the drag exerted by Nortel on the Toronto exchange and Canadian Index. A similar event in Boston, CRM Focus, is a Forbes sponsored event that won't make waves, unless NASDAQ swells.
I suppose those not paying attention to PALM will tell you that the OFFICIAL Nokia Update, on Monday, is the communications event to watch but I don't foresee Nokia having much to add to its numerous and oft-quoted comments in recent weeks. Speaking of communications, Satellite 2001 takes place in Washington, D.C., while IWCE, the International Wireless Communications Expo lands in Las Vegas. While I believe Satellite access will beat wired internet access in years to come, some of the best plays in satellite may be the defense area, where Boeing and Lockheed Martin dominate, while Panamsat's prospects certainly look more viable than Iridium's or Globalstar's were. Location software stands a good chance of shining as cellphone service providers march towards a federally mandated deadline for embedding locating ability into phones.
In so far as I already mentioned the defense group, AIAA sponsors Weapons System Effectiveness, on the 27th, at a time when the new administration is promising to beef up defense. I'll remind readers that General Dynamics is one of my favorites to be Honeywell's DOW replacement should GE succeed in acquiring HON--a merger with prospects far less certain than they were a few months ago.
The light tech schedule is probably a reflection of the upcoming COMDEX meeting, in Chicago next week, a fact that's sure to be in the back of analysts' minds as the week unfolds. Will analysts switch to bullish? Who cares? They didn't get bearish until stocks were near their worst. According to this week's BusinessWeek, if investors bought instead of sold the few "sell" recommended stocks, they would have outperformed the indices. Then J.P.Morgan, apparently, has told International Analysts they are NOT to downgrade stocks without first consulting with the firm's bankers and the effected companies. These are the jokers you want upgrades from?
Speaking of jokers, the quarter ends Friday, an event that's sure to cause some wild gyrations. Since energy companies (ex-California Utilities, especially), held up best this quarter, some may continue to catch rising bids, this week, which ought to suit Calpine investors just fine. The company holds an analyst meeting on the 29th, just in time for some bullish end-of-quarter comments.
Since investors who held some of the stocks that were winners this quarter know very well which they were, upside gaps should be used to raise cash or write in the money call options against those longs. When the end of quarter reverses, next week, you won't want to be holding stocks that decline into air pockets, especially in energy, where the group generally declines between now and Memorial Day Weekend, anyway. Likewise, while drug stocks have often been bid up during the last two days of the quarter, the charts there look deathly. Unless the week's abundance of biotech and pharmaceutical conferences provide sustainable news, it might not be a bad idea to do the same in this group. However, those comments must be taken within the context of my earlier comments about another decline in the June-July timeframe. If you think I'm wrong and believe THE BOTTOM has been chiselled, then be my guest and ignore these recommendations. However, as I said last week, if you're inclined to embrace large scale purchases now, consider LEAP's--long-term options that won't expire until 2003. They allow small investments to leverage big stakes with unlimited profit potential while downside risk is limited to the actual amount invested in the LEAP. More information is available free by calling 1-800-OPTIONS. And, perhaps, consider initiating only 1/2 positions, not just in case I'm right about the two buying opportunities still to come but because the last bull run lasted 18 years, which suggests that when the next one starts, there'll be plenty of time to board the train, even after it's left the station.
© Sandi Lynne 2001. Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. Event-driven trading involves buying stocks in advance of an identifiable catalyst, selling on the news and enthusiasm that surrounds the actual event. Sandi and/or her affiliates were long MRK & NOK at the time this was written but positions can change at any time without notice.
March 19-24, 2001 HOLDING
PATTERN Running
Out of Fuel I've been on a plane kept in a holding pattern
so long I worried about running out of fuel, which reminds me of an old joke: Shortly
after landing with only one of the original four engines still functioning, the
______(fill in your favorite group to knock), said to the passenger next to him, thank
goodness that last engine held up or we would have been stuck up there forever.
Well, this week, the last engine upon which investors are pinning a soft landing--interest
rates--takes center stage with the FOMC expected to announce the size of the rate cut at
about 2:15pm. Nevermind that rate cuts, alone, won't clear the tech inventory choking
suppliers and slashing new orders. Nevermind that the economy just isn't as bad as the
markets are, though I'll grant that the markets, according to conventional wisdom, may be
predicting far worse to come in the economy. And nevermind that most tech companies report
no visibility. Fact is, the mass fear and depression hitting the markets, for now, is a
psychological phenomenon on the far opposite end of the scale from last year's giddy
euphoria. (For every action there is an equal or greater reaction. Remember that from high
school?)
So every daily newspaper runs with a frontpage story about the markets and no one is talking about what might help. And soon. First, with tax season over on April 15th, and earnings reports replacing warnings soon afterwards, any earnings are likely to be greeted with cheers. Second, despite this weekend's reduction in oil production, OPEC will have a hard time keeping prices up. Energy prices tend to flag, every year, from now, until Memorial Weekend, when the summer travel and air conditioning season spurs a recovery. Speaking of summer, in June it will have been six months since the rate cuts were initiated, the interval after which the effects are usually most noticable. Also in June, Goodwill Accounting is scheduled to disappear, ratcheting up merger activity. The dearth of IPO's, combined with additional merger activity, will create the opposite of what happened in the past few years, as liquidity was spread thinner over a zillion new issues, many of which had no business being brought public. By summer, earnings comparisons will begin to get easier. Last, by the end of the summer, it will be nine months since M2 spiked to record levels, in February. This measure of liquidity has tended to spur economic activity nine months after a spike. Now add in the possibility of retroactive tax cuts, and the fact that many investors, who avoided committing new funds into these rocky markets, will have built enormous cash hordes by fall, and it's reasonable to assume that better times will arrive, even if no one knows exactly when. Nonetheless, in the midst of all the gloom and doom, it's important to keep an eye out for improvements, and prepare a watch list of companies you might want to own during a recovery. Furthermore, if you aren't familiar with long-term options, called LEAP's, now might be a good time to investigate (Call 1 800 OPTIONS for free educational material.). By June 18th, LEAP's that won't expire until January, 2004 open for trading. LEAP's are a low-cost way to participate in a market recovery, leveraging a very small investment into potentially very big--unlimited--profits, while limiting the downside to the amount invested.
Aside from the FOMC meeting, other economic data is noise, including the Trade Deficit and CPI (Consumer Price Index). The exception for tech, could come with the Semiconductor Book-to-Bill, set for release on Tuesday, where declines in bookings have been the norm. Nothing that comes out of Merrill Lynch's Asian Semiconductor Field Trip will help the semis, where Asian semis took their knocks in this weekend's Barron's, as well.
Needless to say, if investors are going to continue using DOW and S&P 500 stocks as sources of cash, to avoid selling their worst performing NASDAQ stocks, the cracks seen last week are just the tip of the iceberg the markets are on a course to hit directly. If, on the other hand, the conspiracists are correct in their claim that institutions have been sitting on growing mountains of cash in an effort to force the FED's hands into the largest in history single meeting cut, it's reasonable to assume that some of that cash will snatch up bargains as soon as the Fed's decision is announced. Either way, it makes little sense to expect any trade show or conference to trigger outperformance by a company or sector. Having said that, there are a number of events that will garner their share of press.
First up, AAAAI, for Allergy, Asthma & Immunology, which includes 165 exhibitors covering vaccines, allergies, Cox-2 Inhibitors, NSAID's, GERD, HIV and Silicone implant reactions. Cardiologists meet in Orlando, where lasers, imaging, stents, cholesterol and lipids are the concern, with right & left ventricle synchronization the leading technologies. While both meetings started this past weekend, Monday's NMHH (National Managed Healthcare) stars one of the best performing groups in the past year, whose light might begin to fade. With lay-off announcements in vogue, companies are cutting their enrollees everytime they cut staff.
While on the subject of healthcare, and still of the opinion that nothing will breakout until after the FOMC meeting, note Vision Expo, in New York beginning Thursday, gathers 650 exhibitors, making it too big to trade with precision. So skip it and look ahead to next weekend, when Leukemia & Lymphoma meet in Keystone, Viral Latency & Persistence meet in Breckenridge, Clinical Pathologists, meet in Chicago (hematology, microbiology and immunology), while AACR, the American Association for Cancer Research, meets in New Orleans. The latter makes almost weekly news as generic drugmakers fight for the right to release versions of Bristol-Myers end-patent Taxol, and Imclone awaits FDA approval for C-225, after it was accepted for accelerated review 6 weeks ago. I've said before that I like Imclone (IMCL), especially in the low-mid-20's, where it now sits. But again, there's nothing preventing it from going lower if the markets do, and that seems almost inescapable in the early part of the week, as post-options expiration machinations play out.
Away from healthcare, Salomon Smith Barney began it's R.E.I.T. conference on Sunday, which ought to mark the top for this group, which has outperformed the markets in February and March for, what is now, the fourth year. With mortgage statistics indicating that more borrowers are, now, paying later than in the recent past, and with corporations cutting back on travel, hurting the hotel REITs, and with lay-offs and dot.com closures weakening the office/commercial REIT markets, there's no reason to stick around in this group. Ditto Commercial Property Word, in NY, on Monday.
OPEC's production cut wasn't the only energy event for the week. Goldman Sachs hosts Natural Gas CEO's, while Electric Power meets in Baltimore, and FuelCell Investor, in Boston, held in conjunction with SSB. Need I restate my belief that nothing will rise above the markets, this week
Of course, no week is complete without the usual tech conferences. This week promises SSB's Israeli Tech, in New York, where even CHKP, one of Israel's top companies finally cracked, last week. Warburg hosts Financial Tech, a software group that, in the past, often held up but couldn't fight the decline, last week. CFSB hosts Global Services & Growth, in Phoenix, which offers a mishmash ranging from school operator, Edison, to payroll outsourcer, Paychex. Tuesday brings CTIA's Wireless, in Las Vegas, while Game Developers meet in San Jose. Wednesday's Printed Circuit Board, in Santa Clara--well, reread my comments on the semi book-to-bill and pass. Then, for the fun of it, imagine what a good idea a new show, in Scottsdale, sounded like when it was originally contemplated and scheduled: Telecom Supply Chain has to be the worst idea of all. Then forsheer numbers of exhibitors & attendees,, be aware CeBit meets in Hanover, Germany, with an expected 600,00 attendees examining all manner of computer and communication technologies. So far, it's reported, Europe is holding up better than the US, but you have to wonder how long that continues.
I'll mention, in passing, Gerard Klauer Madison's iTV, in New York, because Scientific Atlanta (SFA), manufacturer of set-top boxes, has proven able to buck downtrends for tech, in the past, though I wouldn't count on it this week.
I've go on at length because I wanted to make sure it was clear that I didn't see anything likely to ignite a rally or manage to buck the downtrend, at least until the FOMC meeting is over. However, if you put a gun to my head, I'd expect better from Boeing's analysts meeting than I would from Applied Materials., both on Thursday, at least after the FOMC decision is announced. While on the earnings front, I'd pass on Goldman Sachs, Nike, Jabil Circuits, Micron Tech, FedEx, Carnival and Morgan Stanley, while remaining interested in Lennar, ConAgra, and Lehman, where their strength in Bonds and lack of a retail brokerage presence works in their favor.
In sum, I'd recommend doing nothing until after the FOMC meeting ends, comfortable assuming that that's exactly what the institutions intend to do. As bank robber Willy Sutton said about banks being where the money is, it's always wise to follow the money flow. With institutions apparently parking their cash in mattresses, investors are best advised to do the same. On the other hand, the very brave can begin accumulating LEAP's out to '03, by buying half positions or less, in case the FOMC does cut 75 basis points, or in case the institutions get antsy, and start deploying their cash for a tradeable rally after Tuesday. I just don't believe the majority of employed America needs to play that game.
© Sandi Lynne, 2001 Nothing contained in this commentary should be
construed as a recommendation to buy or sell any security.
March12-16, 2001 STEPPING BACK Every once in a while, I step back into earlier thoughts by reading
some of the work I've posted in the past. Back on October 2, in a piece called "They
Shoot Tech Stocks, Don't They," I mentioned a number of high-profile tech stocks that
had retreated to 1998 and 1999 levels. Now, we can add many more companies to that ignoble
list and, hopefully, not suffer another CNBC NASDAQ 5000 flashback.
On October 30th, in a piece entitled "Treats Are Due After Weeks of Tricks." I stated the case that Y2K remediation converged with the rush to get onto the internet to create the greatest tech boom in history, from which the sector would decline until a new set of equipment and applications triggered a new upgrade cycle that would play out over years, not months. Now, it appears likely that the upgrade cycle will include more wireless communications applications and devices and, perhaps, fewer conventional desktop PC's. Unfortunately, communications needs telcos, and those are the companies in some of the worst straits, facing falling prices and expensive upgrades just as liquidity has dried up. (Both of these articles are archived at Jagfn.com, soon to be revised and returned to the prior name, Jagnotes.com. Navigate to the Commentators area, then hit up my name to reach the archives from the green bar under "Before the Upgrade.")
Because I'm a believer in history, I went back to my first tech purchase, IBM, in August 1993, to examine another tech trough, and highlight what went right. First, IBM traded in the low teens (split-adjusted) back then, so even just below Par at the close, Friday, the returns haven't been bad. Second, what attracted me to IBM, at the time, was the gurus' conviction that the company could file bankruptcy, which seemed to fly in the face of practicality. First, even at auction, IBM's assets seemed worth around twice what it was trading at--excluding it's brand name, which I couldn't begin to value. Second, with most government systems running on IBM mainframes, it didn't seem likely the government would have bailed out Chrysler and wouldn't IBM, if necessary. Then, new management had just been installed and was slashing costs and people--what I think of as bodies. Flash forward to today, when companies like Cisco and Dell are for the first time cutting headcount. When companies are growing at 70% or better, useless bodies are easily overlooked. Sure, technology kept these companies more efficient than most, elevating sales per employee but, surely, no one can doubt that a lot of fluff and superfluous expense flew below the radar during the heady growth.
While IBM has often been criticized for realizing earnings gains through cost-cutting, no one will deny that revenue grew, as well. Go back to other economic slowdowns, be they the late '80's or '73-'74, and the same thing happened. Companies cut costs and bodies to emerge leaner and meaner when business turned up. Earnings grew better even than revenues. So the current job cuts are the best thing that can happen to these tech companies now facing more normalized growth trajectories--though perhaps not for a few quarters. And that's why companies like Applied Materials will enjoy a premium multiple during an economic contraction: it's weathered storms before; management knows how to navigate good and bad times. The same can't, yet, be said for those tech companies that have known only the good times.
Now set aside, for a minute, how red and awful your quote screens looked on Friday. GE, the subject of a very critical Fortune article, closed down on the week all of 60 cents. Intel? up 13 cents. Applied Materials? up $1.50. Micron Technology? up $4.66. Which isn't to say some stocks, which had held up pretty well until last week, didn't get crushed. Many did. But this is all part of the shake out that's probably in the bottom of the eighth.
However, if you think of the recovery arriving at the top of a double header, understand there may be a rain delay between the two games. There'll come a time when orders stop getting cancelled or pushed back, though investors probably won't hear about it for awhile as CFO's shy from trusting a few good weeks as proof that the decline is over. Even as orders move from stable and begin to swing back up, there will be widespread distrust of the signs and reluctance by management to come forward with the information--especially with Reg. FD (Full Disclosure) limiting the ability of management to wink and signal to analysts at conferences and trade shows. While some companies that supply equipment early in the food chain may already have seen the bottoms for their business, others won't until the summer, the slowest time for tech companies-- every year. Therefore, if you're looking for signs of a BUSINESS recovery, you're both early and hoping for signals that aren't about to arrive in the next 30 days--even though I believe psychology could improve as earnings season unfolds in April. Haven't most companies already prepared the Street for the worst? Won't there come a time--perhaps as early as this week, for Oracle, when it reports--when any earnings are greeted as good news?
For the WEEK: On the economic front, Tuesday brings February Retail Sales. Consumption represents around 67% of GDP, which makes a still free spending consumer crucial to the economy. While the gurus and pundits will tell you that the reverse wealth effect is killing consumption, I think that's egocentric. Outside NY, Boston, LA, S.F. and other major cities, with major stock market players, the majority of the country spends what it earns in salary. With Unemployment at 4.2%, and salaries rising, the "average" consumer is in better shape than before, particularly with lower interest rates and a possible tax cut on the way. Therefore, I'd say Friday's Consumer Sentiment augurs nothing but rather will confirm the trailing sales from last month, even as I believe consumers are saying one thing and doing something else--namely spending more than he/she claims to be comfortable with. Also Friday, PPI (Producer Price Index), a wholesale number is released. Lowered energy costs and a snow day might skew the results. Then, again, OPEC is set to meet in Vienna, and threatening to cut production, again, while the day ends with another Options Expiration. Last year, the Pre-St. Patrick's Day expiration week saw the Dow recover from a long slide with a nearly 500 point gain. NASDAQ, which for almost a year had risen at the expense of the Dow, peaked the week before, yet nonetheless rose 98 points for expiration. Almost anything can happen, especially with the FOMC meeting set for early next week, and questions remaining about the size of the cut to come on the 20th.
Since I've already gabbed at length, and the only readers viewing this message are those with access to the event-by-event comments on the subscription side of this site, it seems silly to go on too much with the show schedule. Nonetheless, there are a few events worth highlighting:
Baxter International's analyst meeting, on Thursday, won't do anything to weaken this company's stock. Whether it can boost it is another story. If NASDAQ suddenly capitulates and rebounds, money will come out of stocks like Baxter. And I don't think NASDAQ capitulation can be far off. As I said, bottom of the eighth. Not only that but, if NASDAQ were to continue to decline at the current trajectory, it would stop at the point the NASDAQ 100 become so miniscule a complete rejiggering would remove every leading tech name from the index. (It does help to remember that ex-the 100, the rest of the NASDAQ isn't suffering and many stocks, in fact, are rising.)
For earnings, I'm ignoring all the food and retail companies, as well as ADOBE, which warned after many quarters of handily beating expectations. On a pullback to around $40, Scholastic (SCHL) is the only earnings story I'm interested in. If you know invoice dating in the publishing business, you know all those Harry Potter books from late fall were paid for in the quarter just ended. My own estimate is 3 cents above consensus. If I'm wrong, I'm still looking ahead to the fall, with Harry potter, the movie, and the many associated products to hit retailers' shelves, filling Scholastic with royalties. Then also entertain the possibility that Potter author, Rowlings, could walk away with the biggest prize in British book publishing, for the third time.
Should NASDAQ continue down, I'd get interested in Schering-Plough, which is making three presentations at the Keystone Seminar of the week, Dendritic Cells, in Taos. Then starting Friday, and through much of next week, Allergy Asthma & Immunology researchers meet in New Orleans, which should give more opportunity for SGP to clarify it's manufacturing shortfalls and the date on which nextgen Claritan can be expected.
Also, with OPEC meeting, it wouldn't hurt to note that eCommerce Oil & Gas meets in Houston, from Monday to Wednesday, while CIBC holds an Energy Conference in Boston, and Goldman holds Power Tech in Miami. I will be selling my Energy stocks into the pre-OPEC enthusiasm since these often decline into May, as the weather warms, then turn up again as summer driving season arrives with Memorial Day.
No fewer than four major telecom-related conferences probably won't help that group, or the chip and router suppliers to communications companies. (A NASDAQ short-term bottom would but it pays to remember I expect another decline in the June earnings warning season.)
LSI has an analyst meeting, but they just warned because of the meeting, as required by Reg FD. Intuit holds their analyst meeting, for which I hold out higher hopes. Don't forget, a tax revision could send more consumers to their sites or software. (EDITOR'S NOTE: Premium Subscribers benefited from comments that INTU was NOT the best $48 stock when could own, though it had been recommended some weeks ago in the low $30's.)
Outside Intuit, the software group remains under suspicion since Oracle warned, so I can't see where Lehman's Software Forum in Phoenix will change that--especially since their analyst initiated coverage on Gemstar, last week, and set a $175.00 price target on the stock, currently in the low $40's. Maybe it's just me but I don't want to hear another analyst set such a ridiculous target on any $40 stock unless the company has a cure for AID's or Cancer, or a proven vaccine to prevent the same. Analysts still making those kinds of calls have no credibility, so it won't matter if comments after the conference are wildly bullish.
In sum, I've long warned investors that I expected Jonestown-like depression in March. It arrived on schedule. I also said I didn't see a lift until the height of the earnings season, well into April--or a few days after the March 20th FOMC meeting, at the earliest. While others keep predicting a NASDAQ bottom, I prefer to stick to my own schedule, and at least wait until the market turns up. Anticipation has crushed investors and analysts who've been regularly declaring bottoms since last fall.
(c) Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. As of this writing, Sandi and/or her affiliates were long IBM (since 1993) and Intuit, though covered call positions may make for net neutral positions.
March 5-9, 2001 Moment of Truth And Blodget Gets
"Angelled"
Before I launch into the week, allow me to mention the lawsuit against Henry Blodget and
Merrill Lynch, because it relates so well to the one against Wayne Angell, mentioned last
week, and because it concerns accountability, which tech investors would, surely agree,
has been sorely lacking on Wall Street. (And thanks to Alan Abelson for not jumping all
over this and beating me to the coining of a phrase. ANGELLED: accusations or a lawsuit
brought by an investor when the advice of a Wall Street economist or analyst is so suspect
and wrong.)
Seems a female dentist alleges that she invested some half a million bucks in InfoSpace when it was priced around $120 a share, and lost most of her money because, she claims, Blodgett's positive recommendations of the shares the whole way down failed to warn her or suggest they may land somewhere around $4, about where they are now. Furthermore, her suit alleges, investment banking considerations determined Blodgett's views, benefiting the firm at the expense of retail investors. I'll freely grant, this is just one investor, who might have thought better about putting so much money into a single internet company. However, should this suit bear fruit for the plaintiff, the issue of accountability and the propensity of analysts to avoid sell recommendations could change, for good--and the good. The changes wrought by Reg. FD "Full Disclosure" will pale in comparison.
About this week: First, remember I've long called for Jonestown-like depression, in March (The full March Outlook is available here.). Second, though Thursday's late day turn around made for many hopeful bulls, Friday's reaction to Oracle's warnings sapped the strength and hope. I believe the markets, this week, could rally just as easily as they could experience an October, 1987, type capitulation crash. Though even former bears, like Doug Kass, have turned bullish, at best, I'm neutral, in the truest sense of the word. While I'd almost rather have the capitulation crash and slingshot rally arrive and be done, with guys like Brian Jones, an economist at SalomonSmithBarney, positing that a really weak Employment Report for February (to be announced this Friday) could "raise expectations of more than a 50 basis-point interest rate cut " at the March 20th FOMC meeting, the talking heads are setting the markets up for another rate hope rally which could be followed by rate cut disappointment.
On the tech and investment house side, Morgan Stnaley hosts a Semiconductor & Systems conference, in California, Name the chipmaker and they'll be there. But with estimates still coming down and zero visibility, the group will need the markets' help to lift, especially with Wednesday's Semiconductor Shipments report for January due out on Wednesday, likely to show another decline.
Merrill Lynch's fall Internet & eCommerce Conference, postponed last November, appears on this week's schedule, for Wednesday through Friday, with a focus on e- and m- Commerce. Ignore the commerce sites and focus on the facilitators, like Ariba (ARBA), Microsoft (MSFT), Comverse Tech (CMVT), and the aforementioned Openwave (OPWV). (I, for one, wonder how long CMVT's stock price can stay so high.) Or better yet, forget this group, altogether, and mine Lehman's Storage at the Edge, in San Francisco, where the storage biggies, like EMC (EMC) will be joined by the caching companies, like Akamai. (Veritas also holds a mid-quarter Update Conference Call, on Monday, but no one's prepared to believe good news, even if there is any.)
Don't think you have to own any tech, right now. Neither the i2Tech (ITWO) nor Scietific Atlanta (SFA) Analysts Meetings will help much, either, though i2 could undo some of the damage by association done by Oracle, even if it doesn't last long. Tech is under a cloud and will likely stay there for another couple of months--bear market rallies notwithstanding.
Outside tech and healthcare, GITA, in San Diego, starting Sunday, is about Geophysical Info Tech, which could boost Schlumberger (SLB) and Seitel (SEI), both leaders in mapping for the energy sector. The SAE World Congress involves 900 automotive and truck components and parts makers. Manufacturing Week, in Chicago, boasts 2100 exhibitors, where robotics and automated inspection is the advancing area. Update 2000, held concurrent with the Reggie Awards, is for advertising and marketing. Finally, Merrill Lynch holds a Retail Conference, in New York. With a winter storm of monstrous proportions on its way, and a very late Easter, this year, this group may not have much farther to go to the upside for the next month--or at least until the next rate cut. The February Chain Store Sales, out Thursday, should be considered a trailing indicator, not a predictor.
For the power starved West Coast, TechAdvantage, in St. Louis, features 400 exhibitors with products intended to boost Utilities' efficiency. Last, there's the show that features suppliers to my favorite holiday: National Halloween, Costume & Party Show, in Chicago. Of course, if you or your portfolio have been hanging out on Wall Street, you already know the ghouls of October haven't left. Hershey (HSY) could get interesting since Valentine's Day candy sales fell into the month just ended, and Halloween is quickly gaining on V-Day for candy sales.
For those who fear that trade shows and conferences ain't what they used to be, courtesy of Reg. FD and the pre-show pre-announcements of material news, the earnings calendar is weighted to retailers, like BJ's Wholesale, Kroger, Target, Michaels Stores, Toys 'R Us, Zale, Ann Taylor and Costco. Healthcare companies are represented by Henry Schein, HealthSouth, Sunrise Assisted Living, and Genzyme General. But for entertainment, there's Krispy Kreme, soon subject to lock-up expiration, and National Semiconductor, the system-on-a-chip maker that already warned.
In sum, with the market averages hanging on by a spider's web hair, the Middle East a cauldron, insurers faced with a Nor'easter following a major earthquake in the Northwest, and OPEC talking about cutting production at their next meeting, on March 16th, the place to be, other than cash, may just be the energy complex.
{c} Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. A full schedule of the week’s events is always available, free, at www.wallstreetinadvance.com.
February 26-March 2, 2001 Tradeable Rally Before Next Decline Triple More Likely than a Double Bottom Given the ground covered, and miraculously recovered, last
week's four days of trading condensed what once would have been weeks or months of
trading. Friday's turnaround was largely attributed to comments from Bear Stearns
Economist and former Fed Governor, Wayne Angell, who told his brokers he assigned a 60%
probability of a half point intermeeting cut as early this week.. I find the prediction
hysterical on two points: First, though I'm well aware Consumer Confidence will be
released on Tuesday, and consumer spending represents 69% of GDP, Alan Greenspan is
supposed to present, to the House of Representatives, part II of his semi-annual report on
the State of the Economy, on Wednesday (Formerly his Humphrey-Hawkins address.) Given the
power of Greenspan's words, he can rally the markets by talking the talk without actually
walking the walk.
The second reason I had to laugh has to do with the predictor, himself. As long time readers might remember from an earlier "That's Entertainment," Wayne Angell and Bear Stearns were sued by a Canadian investor who suffered steep losses in some $140M in bond positions initiated as a result of advice offered by Mr. Angell and Bear Stearns. In the course of last fall's trial, none other than Ace Greenberg, the top dog at Bear, testified on behalf of Mr. Angell and the firm by saying that "economists are right only 30% of the time." Further, in defense of the advise given and the decisions made by the Canadian, Mr. Greenberg said 'forecasts by economists should be taken as nothing more than "Entertainment.'" Da-dum!
Believe it or not, we're not, yet, done with the economic calendar. Monday brings Existing Homes Sales, Tuesday brings Durable Goods shipments and orders and New Homes Sales, in addition to Consumer Confidence, not to mention a milestone: the very last auction of One-Year Notes. Then add in Preliminary numbers of Q4 2000 GDP, the Chicago Purchasing Managers Report, as well as the National Association of Purchasing Manager's (NAPM) manufacturing and non-manufacturing Index, as well as Personal Income and Spending, Construction Spending, Vehicle Sales, and a European Central Bank announcement on Rates, and you'd hardly think there's room for investors to care about industry specific events.
Not True!!! First, Microsoft and the Department of Justice will argue their cases before the appellate division in the long-running anti-trust case that, so far, leaves pending Judge Penfield-Jackson's breakup decision. Since I really don't care for the company's tactics or the constant crashes and "illegal operation" messages," I'm surprised to find myself favorably disposed to initiating a LEAP's position in (MSFT). Not because of the trial or WIN or Office 2000, but because of early buzz on the long-awaited xBox. (Bear in mind, my stock in trade is event-driven trading--capitalizing on upside trading opportunities associated with a specific, identifiable catalyst.) Given the fall debut of xBox, I'm considering MSFT, just as I'm buying AOL TimeWarner (AOL) in advance of the Thanksgiving release of the Harry Potter movie, and Mattel (MAT) in advance of Barbie's cinematic (direct to home video) debut. Likewise, since I've mentioned Harry Potter, I can't help finding Scholastic (SCHL) tempting, again, at Friday's low of $41.75, in advance of, not just the coming Harry Potter movie, but the March earnings release, when the sales of Potter shipped for Christmas actually hit SCHL's bottom line. In the mid-to-high-30's, I'd like it even better.
As to the titles atop this page, rest assured I expect some continuation to Friday's late day rally. In fact, a NASDAQ run to 2600-2800 wouldn't surprise. But unlike other technicians claiming the NASDAQ has put in a double bottom, my months ahead outlook relies on a triple bottom. First, March and, especially, early April earnings warnings should crush investor confidence (Sandi's March Monthly Outlook is published here.). Secondly, even if the third leg of the decline doesn't arrive that soon, I'd expect it in June-July, or October. With companies still slashing expectations, comparisons still tough, and corporate spending not yet on an upturn, there's plenty of time for the averages to retest a third time--exactly what I expect them to do.
Congratulations to colleague, Mark Leibovit, of VRTrader.com, whose market timing, last year, beat most others'.
{C} Sandi Lynne, 2001 A full schedule of events is always available, free, at www.wallstreetinadvance.com. Nothing contained in this commentary should be construed as recommendation to buy or sell any security. Though positions can change at any time, as of this writing, Sandi and/or her affiliates were long Intel, Dell, Merck, Qualcomm and AOL, some for many years, against which she/they maybe short calls.
February 19-23, 2000 Remain
Skeptical of The Rebound Crowd Given my
expectation of Jonestown-like depression overtaking investors into April as earnings
warnings overwhelm all else--a comment repeated in the past two weekly articles--all I can
say is the forecast seems to be unfolding much sooner than I expected, thanks to Nortel's
announcement.
Many of those companies which have looked across the abyss, as well as almost all the analysts, would have you believe this "speed bump" will unwind in the second half of the year, suggesting that investors should be accumulating shares at least 6 months in advance of the turn. Fheggedaboudit! Whoever thought they'd see Corning (GLW) or JDSU back to the 30's? The analysts have been wrong all the way down and may very well be wrong now. Stop listening to the noise and listen to the markets instead. What they're telling me is that all rallies are bear market rallies--not the beginning of a new uptrend. Trends tend to exhibit continuation. Don't believe me? Then print out a chart of the NASDAQ composite and turn that sucker upside down. Upside down it looks like a real bull run, with much more room to move to the upside. Conversely, right side up it looks like the kind of severe downtrend that isn't about to reverse. Of course it will, someday. But that will only happen when companies say orders have picked up, that earnings estimates are too low, AND, perhaps as significantly, when comparisons get easier. None of that has happened yet. Then don't forget, the week will end with tech investors looking ahead, to the Microsoft appellate court arguments in the government's anti-trust case. Not exactly the future that leads to calming or optimism.
On the schedule, this week, is a holiday on Monday--thank heavens. Wednesday brings the CPI (Consumer Price Index) and the Trade Deficit. No expectation of a problem from these. Thursday's Semiconductor Book to Bill? No one's going to be surprised when that's down. We've heard nothing but that there's an inventory glut so don't expect the data to help.
One would have thought that a short week would have meant a lighter schedule but it isn't working out that way. See, those aforementioned analysts and investment banks just never expected the markets to look like they did last week. Historically, not only is February a decent (though not great) month, but it's usually stuffed with IPO's. With schedules set months and even more than a year ago, cancellations are occurring, but not in tremendous numbers, yet. Furthermore, January's rally didn't suggest there was reason to rethink the schedule. That's why analysts are still issuing buys. Listen to them, if you want. Just remember what I said back on January 21, in an article entitled
"Psst…Wanna Know When the Rally Will End?" (Archived, free at Jagfn.com, click my name on the Commentators Page, then access the Archives.){c} Sandi Lynne, 2001. Event driven trading is intended to profit from near-term catalysts that boost stocks. The concept involves looking ahead at the schedule of events, buying before Wall Street wakes up, selling when the street fans enthusiasm. By it's nature, event-driven trading is a quick response discipline designed for short-term traders. Nothing contained in this commentary is to be construed as recommendation to buy or sell any security. A full schedule of events is available, free, at WallStreetInAdvance.com. though positions can change at any time, as of this writing, Sandi, and/or her affiliates, were long PFE, MRK, QCOM, the latter long and covered with naked calls.
February 12-16, 2001 Earnings
End Game Whack! Whack! Whack! That's what investors
did to tech shares last week. Before they were done, the DOW and S&P were taking body
blows, too. I know it's easy to ignore the doomsayers, and listen to the optimists who'd
have you believe the averages are so oversold they're due for a bounce. So what if they
are? Take a look at your charts: no bounce has meant much since last March. Unless you're
a trader. Yeah trading in and out is okay, skimming a couple of points, then taking leave.
Funny thing is, the malls around here are jammed; my mailbox is stuffed with birthday cards and gifts; the florists are lining up the walkway awaiting their turn to ring the bell. Yet when I ask around, EVERYONE says the economy has slowed--not for them, but for lots of people they know. And EVERYONE agrees it's the new President, and his talk of a cracked economy, that caused it to happen--scaring shoppers, diners and investors.
So get a load of this week's tech conference schedule: Robertson Stephens, from the 12-15th, Goldman Sachs, from the 12-15th, both in California. Carrier IP forum in Miami, from the 12-15th; Wireless and Portable by Design, from the 12th-15th; 3G Wireless, starting the 12th, IT Outsouring; Data Warehousing, in Chicago; Variety's Interactive Summit, starting Valentine's Day, Commerce Chain, in Santa Clara, starting Thursday, and more, if you can believe it, over next weekend. Think all these conferences will help the NASDAQ? I don't.
Nor am I expecting miracles from Applied Materials, Dell or Hewlett-Packard, or Sycamore Networks, the highest profile earnings reports due this week, with the majority coming from retailers and healthcare companies.
Alan Greenspan will appear before Congress for his semi-annual testimony about the economy, formerly called Humphrey-Hawkins. But if cuts aren't yet helping, don't expect the wordsmith to have much more lasting impact. Readers might recall I termed the weeks to come a period of "Jonestown-like depression," with earnings warnings settling like a black cloud, and investment equivalent of SADD--Seasonal Affective Disorder. That's my story and I'm sticking to it. Consider every rally a bear market rally and lighten up.
Now, for the really big news of the week: The unveiling of the entire Human Genome in the journal, Science, to coincide with AAAS, the annual science meeting, a meeting that won't actually begin until Thursday. More genome-related news might come out of Pharmacogenomics and Genetic Patenting, as well as Gene Quantification and Molecular Diversity, not to mention HTS: High-Throughput Synthesis, and Chemo BioInformatics, all of which take place in California. {Just a reminder, (BBH) is the symbol for the Biotech Holders, while (HGSI) is Human Genome Sciences, and (CRA) is for Celera Genomics.}
Then, for ironies, consider the expected decision on Napster, widely rumored to arrive on Monday, while San Francisco (again) will host O'Reilly's Peer-to-Peer, which is what Napster invented and popularized.
Finally, bear in mind the CBOT and Treasury markets will close early on this Options Expiration Friday, in advance of the President's Day long weekend. See you on Jagfn.com on Tuesday, February 20th.
{c} Sandi Lynne, 2001. Event driven trading is intended to profit from near-term catalysts that boost stocks. The concept involves looking ahead at the schedule of events, buying before Wall Street wakes up, selling when the street fans enthusiasm. By it's nature, event-driven trading is a quick response discipline designed for short-term traders. Nothing contained in this commentary is to be construed as recommendation to buy or sell any security. A full schedule of events is available, free, at WallStreetInAdvance.com.
February 2-9, 2001 Last Big Earnings Reports Dead Ahead
The market had so well anticipated
another rate cut, the FOMC meeting on Wednesday all but put a hammer on the month's rally.
Yet, careful observers have detected a pattern. Mondays crummy; Tuesday "am"
follow-through to the downside, with a "pm" turnaround; Wednesday rally;
Thursday "am" rally follow-through followed by waning interest by the close;
Fridays down. Got that? Then you want to buy 'em Monday afternoon or Turesday morning,
sell 'em Wednesday afternoon, or Thursday morning at the latest. Certainly that would have
worked for last week's pick, AOL, which never managed to climb to my target. And just so
we clear the decks from the outset, OPEC is making noise about cutting production further.
With Saudi Arabia's oil minister attending a seminar in Oslo, those comments could be
further delineated. So I'm watching and playing energy for one last push to the upside,
sticking with favorites Enron (ENE), Apache (APA) and Tidewater (TDW) which reprovisions
all the rigs.
Understand, I'm saying psychology, not the economy, will rule trading, even as I believe the economy--ex-autos--might be in better shape than the earnings outlook suggests. After all, with the exception of niches that, last year, experienced reacted to component shortages by stockpiling more than necessary (drams, optical fiber and flat screen displays, come to mind) just-in-time-inventory controls should have limited the inventory glut before it got out of hand. All the technology deployed in the last few years should have provided managers with the kind of timely data that would have stalled orders before warehouses were filled to the roof. If that didn't happen, then all the backslapping about the "new" economy, productivity, and efficiency. will have been a lie, the kind of lie Wednesday's Productivity numbers can't hide.
Laugh now. I'm mentioning World of Asphalt, which started on Sunday, because one of the worst winters in years will cause road projects to boost this sector. Okay, you and I both know the press and talking heads will be talking, instead, about AON: All-Optical Networks, in Dallas, beginning Tuesday. But if you watched JDSU, GLW and AMCC, last week, you might just have gotten the impression that these stocks are correcting first, just as they corrected last in Fall 2000. And don't expect a better boost from World Optical Fair, in Tokyo. While broadband is being deployed by telcos at more rapid speeds, capacity currectly exceeds demand--even if that condition reverses sooner than the most negative commentators predict. Internet Telephony, Wednesday, is the app no one needs now that long-distance rates have cratered on their own.
In sum, I sticking with DOW-ish stocks, avoiding NASDAQ, expecting NASDAQ's correction to continue, sending money rotating into the places it's gone in the past. The only event that could change my mind is a great earnings report from Cisco, followed by really bullish comments from CEO John Chambers, as well as from Sun Micro, saying the slowdown in tech spending seems to have ended. I don't expect that to happen, even if the slowdown did end. Tempered expectations are the most prudent course, now. How else can companies manufacture upside surprises come April's next reporting season?
January 29-February 2, 2001 Forget Me Nots Like a kid pulling petals from a Forget-Me-Not, chanting "He Loves Me, He Loves Me Not," the bond market has bounced from expecting a quarter point cut, to a half point cut, to a quarter, a half, a quar…. Fed Chairman Greenspan's statement (before the Seante Budget Committee, last Thursday) that growth may have slowed to "zero," certainly seems to justify a half point cut.
Having said that, I expect a rally in advance, a sell-off next week. Because the markets--growth stocks, especially--have so often sold off in February. Because the din of earnings warnings will become depressive as February flows into March, March into April, investor psychology must be expected to turn increasingly negative. Negative psychology triggers outflows from mutual funds, sapping liquidity. While other analysts who I respect, especially Richard Lees, a colleague on Jagfn, feel the next downturn will be one to buy, I'm treating all rallies as bear market rallies until proven wrong. In other words, I'm trading, writing covered calls on long-term positions, and waiting for the market to deliver opportunities instead of chasing rallies. (For an overview of February 2001, see this link.)
I'll omit a list of economic data releases slated for this week, since those can be found many places, including here, and accept that the whole kitchen sink rests on 2:15pm Wednesday, when the FOMC decision on rates is released. Having said that, the talking heads will play up Friday's Unemployment Report for January, as if the Fed hadn't just met, and as if there could be an intermeeting cut before the March 20th meeting. Oh, pleeeeze!
Earnings, and the lack there of, will be just what they were last week, mostly background noise--except when the misses are huge, and the forward guidance comes from prominent, key companies. Think PMC Sierra, last week. For instance, though Amazon and AT&T report, this week, there isn't a person alive who expects great news.
AOL, on the other hand, is my favorite for the week--as it has been since mid-December. Management holds an analysts' meeting, Wednesday, in conjunction with the first merged earnings report. Point 1: Bob Pittman is a charismatic leader who knows how to cut the bloat from free-spending Time Warner. He also knows how to charm analysts. 2. Cable and Internet Access subscriptions set a floor for revenue, and aren't items cut from consumers' budget until many other expenditures have been. In fact, some consumers go out less and upgrade their cable service when the going gets tight. 3. While both companies are big advertisers, they can now keep all the money spent with each other--as well as leverage undersold advertising to cross-promote their considerable products. While AOL was long considered wasteful in member acquisition costs, 28 million subscribers and still growing proves that claim a lie. While $60 represents resistance, a move above and to $64 isn't unthinkable. AOL has survived attorney generals, free ISP's, and even member backlash, yet proved itself the Timex® of leisure--it just keeps ticking. (I am long AOL since the attorney generals sued, with a cost basis of a few bucks, and hold tens of calls purchased after I first started recommending AOL last year, so please weigh my comments and your upside against that backdrop.)
Finally, retailers have often come alive, this week, as their earnings releases dispelled fears of a disastrous Christmas. TJX (TJX) and Tommy Hilfiger (TOM) report at the end of the week, preceeded by Linens 'n Things (LIN). Since I think Limited (LTD) and Federated (FD) are better companies than stocks, I'll throw out Intimate Brands (IBI) as the speculative play, counting on Valentine's Day, the annual online Fashion Show (during the Cannes Festival) and Mother's Day--along with the whole spring bridal season, as reasons to play it if it pulls back to $16. Just bear in mind, you want to play retail the way you'd play tech--waiting to get aggressive until comps turn up or comparisons get really easy. With the Fed cutting rates, Financials and selective retail ought to do better.
Which leads me back to where I started: 2:15pm on Wednesday. May the FOMC do want the market wants, what business and the economy needs. Or Else!
{c} Sandi Lynne 2001 Nothing contained in this article should be construed as a recommendation to buy or sell any security. A full schedule of events is always available at WallStreetInAdvance.com. Event-driven trading seeks a near-term catalyst, and involves buying in anticipation of the event, selling into the enthusiasm surrounding the event.
January 22-26, 2001 Pssst.....Wanna Know When the Rally Will End??? Before I'm through, I'm going to specify when I think the rally will end. First,
I have to tell you about the coming week. The earnings equivalent of sweeps week might
suggest that earnings will be all the news. Fheggeddaboudit! Earnings will be the
ever-present elevator music, just as noise generated by the new administration will be the
commercial break as the elevator stops at each floor. The real stuff comes on Thursday,
when the quarterly ECI (Employment Cost Index) is released, which happens to be the same
day Fed. Chair Alan Greenspan is to appear before the Senate. His appearance before
the Senate Budget Committee can't help but touch on rates, tax cuts and the economic
outlook.
So, let the talking heads drone on about earnings set to report. Thursday's ECI and Greenspan's appearance are the whole Enchalada. With psychology improving, the last two hold the power to allow or accelerate a continuation, or to cause it to halt and reverse.
More than a few analysts' meetings are scheduled. However, I'm focusing on Enron's (ENE) earnings report and analyst meeting, but not just because the stock flew more than ten points after it's last meeting. See, California has this itty bitty power problem, and Enron (ENE) garners 69% of it's revenues from trading energy and power. If that doesn't happen to sound like a lucrative business at a time when the most populous state is experiencing brown-outs and not a new plant has been built in this country in ten years, then get thee a hearing aid or a shrink: Enron's business is rocking, and likely will continue do so for the foreseeable future.
In sheer numbers, no show compares to the SuperShow in Las Vegas. Then, again, it's merely a meeting of retailers and the Sporting Goods Manufacturers, who mount enormous exhibits featuring their new offerings. Go ahead and take a fly on Nike (NKE) making a last gasp back to $60; play with Callaway Golf (ELY), if you've got nothing better to do with your money. I want Enron.
NATPE (National Association of Television Programmers) meets in Las Vegas, including station groups, cable execs, producers, advertisers, etc. Name me the breakout new television show of the year, please. Exactly. Advertising is slowing, so maybe Viacom (VIA), Disney (DIS), and AOL Time Warner (AOL) jiggle. Just don't be surprised if all the talk is guessing about how Survivor does after next week's SuperBowl. Jury's still out and I'll tune out.
I didn't realize tech would stage such a strong comeback. Just remember that Monday and Tuesday morning offer suffer from post-expiration angst. That's why Tuesdays are so often turn around days. That means, sit back, watch the charts, and buy on pullbacks, sell on the rise. Date don't marry.
I say that because I expect the next market pullback, for NASDAQ, especially, to arrive the week of February 5th. This isn't a call I'm making specifically, this year. Nor is it a call related to an expected market spike immediately after the FOMC meeting ends on January 31st. Rather, I say it because it has too often been true. Given that the market has made all kinds of weird and unexpected moves in the last twelve months, I'm comfortable using history as my guide. Granted, I might miss the last 5-10% move up. On the other hand, I'd rather be early than caught like a deer in headlights when the payback for the recent rally starts.
{c} Sandi Lynne 2001 A full schedule of the week's events is available at WallStreetInAdvance.com. At the time of this writing, Sandi or her affilliates were long many of the companies mentioned positively and negatively. However, at the time of this writing, Sandi and her affiliates were not, yet, long, Enron, so obviously her best bet, and the one she's planning on buying on a Monday pullback..
January 15-19, 2001 Bear Market Rallies Can Be Traded not Trusted
Market Receives
Warnings Better than Upside Surprises Curious. Last
week's market action was some of the most curious seen in a long time. Ariba (ARBA)
handily beat earnings expectations, guided analysts higher for the next quarter, yet the
stock sold off big because growth next quarter will come in at about 6-8%. Hewlett-Packard
(HWP) proved itself a repeat offender, yet didn't get crushed as investors accepted the
slower economy as cause, rather than fingering a failure by the company or high-profile
leader Carly Fiorina to bring growth and costs into line. John Chambers, of Cicso (CSCO),
all but warned, yet the stock barely budged. Week's Tally? Cisco down a smidge over a
point; HWP down 1 5/8; ARBA down more than 8 points. Anyone else find this strange?
How about those retail sales which rose slightly, despite big drops in auto sales. Maybe all that awful weather had something to do with the drop in pre-Christmas sales? Maybe, as I wrote two weeks ago, and still maintain, slower growth is like decelerating from 75 miles an hour to a 25 miles per hour school zone. No matter how much it feels like you're standing still, the truth is you're still moving.
Admittedly, there's still time to get a flat, burst a water hose, or flood the engine, which would stop you in your trakcs. But with the FOMC on the economy's side, it's more than likely the US will experience a soft landing rather than a hard collapse--albeit one that may be softer than the Feds originally intended.
The other thing curious about last week was finding market psychology where I expected it to be in March. The recession word is being bandied about with unqualified unanimity, something I didn't think would arrive for two more months. Corporate revenues and earnings seem to have nearly collapsed late last year, something I thought would take until this quarter to happen. Selected tech, Micron Technology (MU), MSFT, and DELL, for example, are acting like they're on the road to recovery, again, something I thought would take until at least March, more solidly until June. The fact that sentiment moved on internet speed doesn't make me more bullish for the near-term. For that I'd need to see another 1/2 point cut, as well as simultaneous cuts in taxes, as well as overseas cuts in rates. So I'm operating under the assumption that all rallies are bear market rallies until proven otherwise, or until it's November because I'm convinced there'll be a big rally before the year is out. In fact, I've privately said I expect to NASDAQ close out the year in the mid-3000's, though I expect 90% of that gain to come in the last two months of the year. How and why? First, I'm a great fan of the data in the Stock Trader's Almanac, that provides substantial evidence of best gains coming between November and April, especially after down years. Second, the most recent cuts will be followed by another, at some point, and cuts take 6-9 months to have an effect. But last, and most important, I would expect the market to accept 2001 as the lost year for coporate earnings, while anticipating better times in '02. As a forward discounting mechanism, the market will price in the '02 upturn at the end of this year. Furthermore, with 1/3 of Congress facing re-election in '02, lawmakers will have tremendous incentive to force goood times to roll again. In particular, the Republican majority will not want to see it's advantage elected away in November '02.
In sum, as far as meetings go, the OPEC meeting has the second best potential to rule the market. While the US has been lobbying hard to deter cutbacks, Saudi Arabia is likely to give in to the OPEC members who liked Oil above $30 and who, probably rightfully, fear no cutbacks mean prices that will slide back towards $20 a barrel or below. However, I believe any announced cutback will only match the cutback in consumption caused by economies slowing all around the globe. While I've long pushed energy stocks, I recently said I liked the services better than the integrated oils. Use any enthusiasm to cut exposure to the group.
Earnings are the other centerpiece of the week. Here, I'm afraid, there's no place to hide. Reported numbers will come under suspicion, outlooks will be held under suspicion. However, that's all part of the process that creates the volatility that moves stock from weaks hands into the stronger hands of believers. Trust me when I say that, for the most part, prices seen this week will be seen again. If that makes every investment a short-term trade, then so be it. Use tight mental stops, and watch where bad news no longer causes bad action in stocks. With NASDAQ and tech so beaten down, that's where some of the best trades will be found. However, that's also where some of the most dangerous trades will be found. Just bear in mind, that niether the FED nor the new administration wants a weak economy. Both will work to prop it up.
{c}Sandi Lynne 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. As of this writing, affiliates were long EMC, DELL, PFE & CSCO, though those holdings may have been purchased years ago, at far lower prices, and/or may be owned against short calls.
January 8,-12, 2001 The Week 'Tween
The first full week of equity trading
between two holiday weeks, though the treasury market will close a 2pm on Friday in
advance of Monday's Martin Luther King Day. Those who watched football on
Saturday--particularly the Raiders/Dolphins game--instead of C-Span, missed the best
sports event of the weekend. As a joint session of Congress opened the Electroal votes
cast on December 18th, 2000, one after another Congressperson, members of the
Black Caucus, especially, rose to put Bush on notice that any hoped for Honeymoon
was out of the question.
Of course, as many pundits have said, Alan Greenspan has already shown he is more powerful than Bush by reducing rates intermeeting, last week, proving that the Fed Chairman can act immediately on his decisions while Bush has to submit his tax cuts to a Congress that's nearly evenly divided and punctuated by a cluster of elected officials who've already named him a marked man. As for the rate cuts, themselves, much has been speculated about the 'Fed knowing something markets don't know.' A couple of Fed Presidents speaking (Monday & Thursday) may put the lie to that scuttlebutt.
As is fitting for a week that falls between two bigger weeks--the week of the rate cut just past, and next week's big earnings and options expiration week--there'll be a little of everything: More earnings warnings, more earnings reports, more economic reports, more trade shows, and more investment conferences. What there won't be many of is IPO's, in what is a significant departure from this time frame in recent years.
Investment Conferences, like earnings, won't be what they used to be. In fact, just as the Merrill Lynch Internet conference was cancelled last November, the investment house schedules are still under review, while those finalized meetings scheduled for the next couple of months look to have been trimmed so severely one can almost say thay've been put on a starvation diet. I've already mentioned the Chase H&Q Healthcare Conference which starts Monday.
In sum, this week "between" is symbolic of the place in which investors find themselves. It's too late to sell and too early to get really bullish. Comparisons in tech will still be difficult, yet no one is certain that the worst is already priced in. NASDAQ is far from it's top yet may not have seen the bottom, or if it has, it may not have seen it for the last time. Nibble on longer term investments, trade some one-night stands, or buy some biotech leaders for a winter's nap by the fire: I assure you many of these will smoke. However, for the risk averse, it's not too late to warm your cash in two-year notes--especially if last week's rate cuts were the first of many. For a longer term view, feel free to read my Outlook for all of January here, or for the entire First Quarter here.. If I sound too dour, then you might not have been paying attention to the Mutual Fund Outflows reported last week. Inflows lift stocks, Outflows never do.
{c} Sandi Lynne, 2001 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. A full sechdule of events is always available at WallStreetInAdvance.com.
January 1-5, 2001 Twenty-Oh-One
Get ready to catch yourself every time
you write a check. Likewise, check yourself every time you're about to buy a stock. If
it's a tech stock under consideration, think twice. After years of 20, 30, 40 percent and
higher growth, single digits and worse are temporarily in the cards. And, while
prognasticating is a dangerous business--2000 proved that conclusively--here's what I
think:
Utilities, R.E.I.T's, healthchare providers, and drug companies will see early New Year moderation as scared investors lock-in gains as soon as they can do so without immediate threat of tax consequences. Ditto oil companies, though natural gas will ride the snow and cold a while longer. Energy services will fade lower but spike every time a major oil company announces its planned E&P budget increase. Make no mistake, the place to be for a couple of years will be companies tied to expanding production on both the refining and utility side. (Watch Thursday's meeting of California Utility Regulators
Though tradable rallies will arrive from very oversold levels, those expecting a quick and consistent uptrend in tech may be sorely disillusioned, at least until November, unless we're referring to biotech rather than digital tech. First, fully a third of biotechs are at, or very near, profitability. Second, swollen pipelines are moving more drugs toward final stage trials and larger infusions of milestone cash from old pharma. Third, still unprofitable companies hold vibrant promise freed of the handicap of potential missed earnings. Granted, some biotech trials will prove failures, others will have their NDA's rejected but many successful drugs have emerged from disaster--thalimode most notably.
Trade show activity picks up with a couple of major annual events that probably offer less upside than normal. Having said that, the year will offer far fewer dot.com conferences--be they B2C or B2B. The future will be more concentrated on the cost savings reaped by older economy companies that implement internet communications systems with customers and suppliers. When Merrill Lynch cancelled their annual fall Internet Conference in November, it was a sign of cancelled shows to come. In the future, internet companies will be amongst the exhibitors at the older, longer-standing expos held for every sector. The lapse in IPO's over the last couple of months also set off a trend which might see the slowest IPO pace in decades.
The end of the week brings Consumer Electronics in Las Vegas. Net appliances, DVD & HDTV are the focus, which may allow companies like Palm (PALM), Handsrping (HAND) and others a little lift, especially with tax-loss selling done. For my money, I'd rather bet on another lift for the Fuel Cell stocks which will benefit from the Los Angeles Auto Show, also starting next weekend. The group should be enhanced, more, by F-Cell on February 1st, as well as the Automobile Dealers Association meeting starting February 3rd. With snow and cold weather a feature across most of the country, California in a power crisis, and natural gas prices still climbing, fuel cell economics and improvements look more promising.
Expect more earnings warnings, this week, even as earnings reports warm-up. Just bear in mind, my month will revolve around biotechs, with fuel cells for a couple of two-night stands. Should I prove wrong, and the market lifts digital tech, now that tax-loss selling is over, I'll be writing covered calls and/or outright selling some longstanding positions. With at least two quarters of shaky earnings ahead, I suspect tech to be an avoid until late October, when comparisons and expectations going forward will be far easier to beat.
Happy New Year Everyone!
{c} Sandi Lynne, 2001. Use the link below to view the coming events. Nothing contained in this article should be construed as a recommendation to buy or sell any security. As of this writing, Sandi & her affiliates were long Imclone and Palm.
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