(c) Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. This opinions expressed are the author's alone and should be just one factor in more complete due diligence.

TOODLES TO "DON'T WORRY; BE HAPPY"
AUGUST 2005

An unusually light trade show schedule is probably just as well. Most of the action is likely to take place in the first 10 days. First, the FED plans to announce the size of its quarterly refunding--the first since China decided to switch to a more diversified basket of currencies. China had been cutting back on its treasury purchases all year but that didn't attract nearly the attention its purchases will get this time. Oddly, the FED is supposed to announce, almost simultaneously, whether it will re-issue 30-year bonds, which it had stopped issuing 3 years ago. As the quarterly funding announcement approached, it was clear the FED was more aggressively drawing down liquidity at its bi-monthly windows than it had done in 4 years. Was this in anticipation of the return of the 30 year? The first week of the month should answer the question.

The FOMC meets, again, 9^th, another quarter point hike in rates the very least that's expected. On the other hand, the FED could really shake things up by voting for a half point this month, though that seems most unlikely. There's been nothing in the data which is supposed to guide the FED, or anything in Chairman Greenspan's recent testimony to suggest an acceleration is coming. Not only has Greenspan been as transparent as he's capable of being, in his own elliptical way, but the last thing he would seem prone to doing, at this point, is rocking the bond market for a loop. With less than six months left in his tenure, he's running out of time to set the economy on a durable path for smooth sailing, the housing market down from its torrid pace, and somehow keep rates and inflation in check. That's a tall order--one that doesn't allow for many surprises that could take weeks or months to patch if he upsets the status quo.

While we're on the Fed, the Kansas City branch holds an Annual Economic Forum the last week in August, usually coincident with Labor Day weekend but probably the weekend before, this year, given the late Labor Day. Late Labor Days mean most of the country starts school a little later this year, which may impact August retail sales. Given the high cost of gas, and a heat wave that gripped the country, this might be one of those years that see consumers hold off buying fall clothing until closer to need. When the weather cools. That could make for a long August at the mall where consumers, to date, have enjoyed steep clearance sales and faced little of fall's revolutionary fashions promised at last Spring's Runway shows.

Food and agriculture are the subjects of a number of August trade shows, a group that meets far less frequently than most. Likewise, Atltria's board of directors meets mid-month, the meeting at which the board has raised the dividend year in and year out, even when massive jury awards and the worst of the Federal Government's venom was being felt. To see MO react to the divvie boost is a marvel every year, as predictable as any event on the annual calendar.

The Fashionistas from out of town converge on New York, Dallas, Atlanta, and Los Angeles for spring buying trips early in the month--tough when they don't even know how fall is going yet. Still, coming off months of strong sales, merchandisers, buyers, and managers should be as enthusiastic as analysts usually get as school draws closer and the taste of holiday sales arrives with the first cool breeze from the north. Every retail niche has a show of its own this month, including World Shoe, soon after Fashion Week ends in NY, and Outdoor Retailer, in Salt Lake City.

The first week of the month also promises Bear Stearns India Conference, Strategic Research Institute's Disease management Conference & Expo, and eTail, one of the last survivors of the dot.com bubble burst. VoIP Developer meets, too, while it's questionable which counts more: JP Morgan's Harbour Auto Conference, the Vehicle Sales numbers out from all the automakers, the first few days of the month, or the fact that the automakers have gotten consumers hooked on innovative discounts, discounts so successful GM, which was first with Employee Discounts, claims it has to stop due to a lack of inventory. Given up for dead just months ago, vehicle suppliers could be the stars of the first week of the month.

America's Growth capital hosts an Investor Conference heavily weighted to smaller cap tech, starting the 2^nd. LinuxWorld on the 8^th usually gets Redhat moving, despite the open source software getting more funding and sales at large behemoths IBM, Dell, Hewlett-Packard, and Computer Associates. RHAT's rally is almost as predictable as MO's this moth.

While a couple of small investment conferences early in the month, including Adams, Harkness' Hills get lost in the earnings crush, by the time CIBC hosts Enterprise Software, in New York, on the 10^th, analysts are ready to read the tea leaves again. It's too soon after Q2 earnings and too far from mid-quarter updates for anything but optimism to rein.Mid-Month, HP World meets in San Francisco, where the glow of a new CEO could still instill enthusiasm, assuming the Q2 earnings report hasn't been a total loss. Technically, Q2 is still Carly's fault, so HP World could attract some momentum.

If you want to hear the epitome of enthusiasm about retail, then the Council of Shopping Centers (ICSC) meeting in Kissimmee starting the 14^th is your ticket. Could the council have it any better? Chains are still growing, retail sales are strong, and the value of the property upon which their malls are sitting are rising in value just like the houses that surround those malls are doing. Sure hope their optimism isn't spoiled by Sear Holdings, the new owners of Toys 'R Us, and Fed's plans for excess May Department stores, once that merger closes--all of which have the potential to close or sell some locations, adding tot he ones Winn-Dixie is vacating.

There are lots of Defense department events, including Missile & Defense in Huntsville. Of course, with numerous bases set to close, and Congress trying to go on a budgetary diet, defense firms may find the last four years were better than the next four will be. That doesn't mean defense stocks will go into the tank immediately--contracts tend to look out 5 or 10 years, so decent business is assured even after George Bush leaves the White House.

While Take-Two Interactive has been having a host of problems with Grand Theft Auto, including pulling copies of US retail shelves and a complete ban in Australia, with XBOX 360 coming, the group is likely to heat up as August turns to September. GC Games + Entertainment, in Germany, starting the 16^th, is a meeting of developers that throws open its doors to gamers from the 18--21^st. The group should trade on anticipation by then, even if XBOX maker, Microsoft, doesn't, as has been its tendency for the last 4 years.

The Classic Gaming Expo (CGE) in Las Vegas, starting the 20^th, is not to be confused with video gaming 21^st century style. It's for classic games, the ones Jakks Pacific is turning into plug in TV games in huge numbers and at unprecedented speed. That IBM's UserBlue Tech Developers conference, in Boston, overlaps, says volumes about the extremes in technology now. Cone the last day of the month, ECTS: Interactive Entertainment Expo meets in London. Perhaps, by then, some will find a shred of enthusiasm for XBOX 360, despite the losses Microsoft will see subsidizing the box in the first year. Still, if analysts to get excited about gaming and the coming holiday season prior to ECTS, they certainly will by then.

The HDTV Forum, in Los Angeles, starting the 23^rd, looks ahead to the next huge upgrade in consumer electronics. HD and Digital TV are not the same thing, so don't confuse the Congressional deadline to convert to digital TV with HD TV. Digital broadcast uses less spectrum at a time, allowing spectrum in place to be split into multiple channels, instead of the single channel occupied now.

It will be a different story in the financial sector as the October 17^th change in bankruptcy law approaches. While filings had only minimally ticked up by August, the pace should pick up in August and September, as marginal borrowers seek to beat the new law, and have their debts discharged before the window closes. Most bankrupts will be required to work out their debt with pay outs, under the new law, not quite the clean slate available now--or the massive protections homestead exemptions offer in states like Florida, which will be lost under the new law. In fact, some of the heaviest filings may very well come in Florida, where homes of any value are exempt from all creditors but mortgage companies, under current law.

For years I said watch for a top to the summer rally around the 5^th of August. I see no reason to look for anything different this year, given the gains seen in July, the probability of another rate hike on the 9^th, and a post-meeting statement that's largely unchanged from prior ones, indicating more 'measured hikes' to come without cessation. The potential for the Quarterly funding to either go badly, or go so well bonds draw funds from equities is there even without the possibility of the 30-yr's return. Then, there's oil, which has not cooperated by taking its usual summer dip--the heat wave keeping utility demand at record levels, while BP's repeated fires at Texas refineries more than troublesome--even as refineries usually shut for maintenance to convert to heavier winter blends. The dip in crude may not come this month at all, unless the weather turns unseasonably cool, which doesn't seem in the cards.

There have been Augusts that didn't top until mid-month but with the FOMC meeting on the 9^th, and so many headwinds, even as programs and technicals dominate, that resistance line off the 2000 tops should stand well into October, if not later. We're in a range--the little spike above not yet confirmed, and unlikely to be. Last chance to protect and profit. Say toodles to the summer rally.

© Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and should be only one factor in more complete due diligence.

OF THEE I SING
July 2005

Excuse me for a minute while I blow off some steam. (oh say can I sing?) There was Barron's, touting Homeland Security stocks while at every gas station in Florida, as well as some football sized buildings of blend-in architecture at strip malls on major roads like Glades, Okeechobee Blvd and the ironically named Military Trail in West Palm Beach, anyone can walk in and buy, not just sparklers but major pyrotechnics of the kind that would make the Grucci's proud. Of course, you have to have seen a gas station blow up from a smoker's negligently dropped cigarette, as I have, to understand what a bad mix fireworks and gas are. You have to appreciate that this is a state that recently passed its first, ever, mandatory signal when changing lanes in the same session that passed a shoot first if you feel threatened law, for private citizens. (Can anyone disprove what you claim you "felt" when you shot a neighbor or stranger dead?) Homeland Security??????? Are ya kidding? They're more worried about drug stores putting psuedophedrine behind the pharmacy counter than they are about people being able to stock up on gun powder or pyrotechnic supplies. Homeland Security? I saw that at the airport when, a last minute flight to NY for a funeral saw me watch, for 40 minutes, as airport screeners swabbed everything in my tote bag, including all 10 $20's I carried. Homeland Security? Oh, yeah, they're the guys that took so long screening my sister and her 2 year old that they missed their flight to NY. But fireworks? Just get out your license and a credit card, claim you're a farmer or blasting a stump leftover from last year's hurricaness, and then load up that shopping cart with rockets or anything else ya want.

Now, this is no small matter to me. In 2002, as I was packing up the ex-'s dreck for shipment to his mother's I stumbled upon some packages marked "explosives, dangerous!." I called the local fire department. The responders took one look at my cache and called in the bomb squad and evacuated the neighborhood. Four hours to get the containment system down here from Palm Beach Airport. ONE hour while a robot was maneuvered by remote to pick up the ex-'s leftovers and load it on the containment vehicle. A return visit from the local Fed supervisor to explain how close I'd come to blowing a 60 foot crater in the neighborhood. Seems, some fireworks supplies cross the line but, worse, crystallize the longer they sit. They can spontaneously combust if water merely touches them.

Well, the Alcohol, Tobacco, Firearms, and Bomb Squad was aghast while the local police thought nothing of it--or the fact that my leaky gallon of water for hurricane season came thisclose to touching the contents of that crystallized package of "Exposives, Dangerous!" So imagine, for a minute, some lunatic stocking up at the local Lenny's Fireworks store (I kid you not--he's the biggest around here but most of the tented "Fireworks" outlets at the gas stations are run by the Patrolman's Benevelent Association or Kiwanis and Rotary Clubs), then devising a detonation system that could blow an Airbus or Boeing plane right out of the sky.  "…and the rockets red glare. The bombs bursting in air."

Discount stores? Wal-Mart says June comps topped 4.5%, above plan but, then, you can buy yourself a nice little package of fireworks at WMT for $14.99, $19.99 or $24.99. For that matter, you can pick up a pre-pack with your 6-pack at COST or any supermarketThe malls were quiet all weekend, though picked up a little as soon as Federer dispatched Roddick in the Wimbledon finals but it was basically deadsville everywhere, unless firewworks were involved. Are ya feeling Independent AND Safe yet? Welcome to the sunshine state, where it's rained every day since May 9^th which has done nothing to deter the local pyromaniacs who've been testing their horde for a week.

I sort of feel the same way about the markets, right now. Deficits and high priced oil, as well as a buying panic in housing seem destined to blow up sooner or later. Meantime, everyone is having a good time enjoying the holiday from reality. We'll get another rocky week or two but come the end of July, sure as shooting, there'll be a relief rally  Two and a half weeks of warnings, another weak Employment Report that everyone will criticize for the type of jobs created, no matter the number of additional jobs added, and a host of mixed data that will revive the argument about when rate hikes will stop--all the while, now, the Supreme Court a battleground even though it doesn't reconvene until October, and Sandra Day O'Connor has stated her intention to stay, until a successor is name.

The Trade Show and Conference calendar eases, as earnings and vacations take precedence but apparel stores will already be attending the many buying shows around the country to decide on Cruise and Spring, as well as fill in holiday. As soon as June Comp Store Sales are out on the 7^th, analysts will start talking about Back to School and Halloween. Meanwhile, retailers will be crossing their fingers, hoping the kids going to college will buy early and often, taking with their fall selections some of summer's leftover mark-downs. For the most part, retail inventories are fairly clean--something you'll hear analysts talk about, overlooking, for now, the discounts it took to get racks that way. Of course, retailers don't fully report earnings until August, so few will be paying attention but don't ignore the suppliers. Toy, candy, and apparel manufacturers have often seen summer rallies, even as retailers find themselves all but neglected one Comps are out.

Financials and tech dominate July earnings, which is a double edged sword. Far too many companies wiat to report until the week of the 18^th, or the week after, which leaves weeks of trading around warnings, and speculation. Unfortunately, some analysts feel a need to step in front and revise earnings estimates hours before a release. That ever optimistic crowd is cause for much of the disappointment seen related to earnings reported the week of the 18^th. Plus, with the dollar strengthening and diminishing the Forex benefits multi-nationals have enjoyed of late, and Options Expensing the rule for companies starting their quarter after the 15^th, the outlooks aren't going to match apples to apples. That oughtta make for two-tiered guidance, nearly a return to the old "pro-forma" earnings that were once so popular.

One thing Congress, the President, and even some economists are celebrating are higher Federal tax receipts than expected. Their astonishment is a laughable as the crowds waiting to pay for their firewords at Lenny's: did they all forget about the repatriation of billions of dollars of foreign earnings at 5%--that silly corporate gift granted under the guise of the Jobs Recovery Act? No conundrum here.

Perhaps one of the most eagerly awaited trade events of the month is Apple's Boston MacWorld Conference & Expo, starting the 11^th. Now that AAPL crossed to the dark side (will use Intel chips), will it also open its platform to other companies--perhaps a phone company willing to provide iTunes capability on a handset, as it's widely rumored has been done by Motorola, Cingular supposedly the first provider to sign on. Has Apple learned from its past MAC mistakes, and decided licensing helps penetration or will it insist on going it alone?

SemiCon West is a big Chip event, big enough for JPMorgan to mount a conference during the show. Meanwhile, Cisco hosts a Networking DevCon starting the same day. That's a lot of potential tech news starting the 11^th.

Healthcare is relatively quiet in summer but that won't stop scientific meetings for Prostarte Cancer, Lung Cancer, Anti-Cancer Drug Discovery & Development, Autism (watch the vaccine names while this approaches since some make a link), Optometry, Kidney & Bladder Cancer, the Veterinary Medical Association, Cardiac Safety (Calling Guidant?), Antibody World Congress, the International AIDS Society (in Rio the 24^th), even as FDA advisory committees plan a busy summer schedule reviewing new drug apps.

Herb Allen hosts his annual summer Media Conference in Sun Valley, so it was no surprise to read July 4^th speculation that Time Warner might buy Britain's ITV or Deutsche Mobile's supposed pondering of a sale of its US wireless service--something that couldn't happen too soon, for this T-Mobile user who has yet to be able to use her handset within a mile of her living room.

Live8 takes place on the 8^th, in Edinburgh, to make a point to the G8 meeting nearby though the multi-city international appetizer mounted the 2^nd pretty much stole that show.

CIBC goes where few investment houses go in July, and mounts Consumer Growth in Boston, concurrent with MacWorld, as coincident has it. Boston, what popular city this summer, will also be the cite of C.E. Unterberg, Towbin's Microcap conference, covering a mishmosh of industries that have nothing but their market values in common.

Alan Greenspan, working hard to quash a frothy housing market without spoiling the general economy, will trudge before Congress the 20^th for his semi-annual appearance that used to be called Humphrey-Hawkins. (Is there a year or decade limit after which correspondents to have to refer to the long expired Humphrey-Hawkins bill with respect the the Federal Reserve Chairman's sem-annual appearance before Congress?)

Digital Video Expo East, starting the 18^th may be more of an event this year than in years past, as both DreamWorks and Pixar try to figure out why DVD's aren't selling like they used to. If you ask me, the answer is $168 DVD recorders combined with Pay Per View and subscription movie channels but, then, no one asked me.

But, make no mistake, the month is all about earnings warnings, reports, and outlooks. Everything else is merely marking time--something the market often does the first week after the July 4^th break, as traders stretch the weekend into a week or two before they know it's early mornings and late nights listening to companies' post-earnings conference calls.

July is often cited as one of the best months of the year. That's often true for tech, not so for either the Dow or S&P that often see very strong rallies in early August--rallies that were lead by tech late in July. But make no mistake, most of July's gains are made late in the month, when warnings give way to not earnings but relief--the after glow of the top five tech earnings reports having past. Pay no mind to the pundits who'll complain about both low volume and that absence of a "summer rally" early in the month. That would be Standard Operating Procedure. That predictability is one of the reasons I tend to be own August puts in early July against which I can risk buying shares after they've fallen below my strike--assuring that I won't lose money as long as the markets act the way they usually do in late July and early August--often a week or two of some stunning comeback rallies. "O'er the land of the free, and the home of the brave.

© Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recoomendation to buy or sell any security. The opinions expressed are the author's alone and should be just one factor in more complete due diligence.

SPRING RALLY SHOULD PEAK EARLY IN THE MONTH
JUNE 2005 

June opened with a bang when both Novellus and Altera offered mid-quarter updates slightly ahead of expectations, Dallas Fed President Fisher appeared on CNBC and said the FOMC was in the 8^th inning of the tighetning cycle. But then, abruptly, the NYSE closed early when it experienced communications problems. That communication problem should be quickly followed by Fed Reserve member claims that Fisher's communication was incomplete because, indeed, even before the night of the 1^st was through Fisher was quoted as telling the Journal that he said the game may have to go into extra innings in the Fed's efforts to fight inflation. That's a pretty telling comment since the Chairman and post-meeting statements have insisted there is no inflation, no matter the pinch the average consumer has been feeling.

The first two weeks are filled with few earnings but many trade shows and conferences, before the schedule winds down in advance of the next earnings release cycle in July. In between, there'll be earnings warnings, no matter how distant and few it appeared as the month opened. In fact, JP Morgan reported some of the worst trading in many quarters, a comment largely overlooked in the heat of the rally on the 1^st, and Nortel, concurrent with its earnings release at the end of May said it expected lower capex as a result of all the telco mergers. Because May's rally wasn't damaged by bad news, that cluster of negative comment hasn't had an effect but, over time, it will build, especially as the indices reach higher, expanding multiples as they do.

Oil managed to end May with a rip-roaring recovery after a long decline that started in March but that, too, should reach a peak early in the month. Despite the extra drivers that hit the roads for Memorial Day, summer driving demand is more legacy myth than reality in an age of cut rate airline fares. There are far more drivers when school's in session than there are in the summer, when kids are at camp and no one has to be chauffeured to after school activities. In fact, with gas prices so high, still, air fare looks like a relative bargain. I could certainly fly to New York and back for less than it would cost me to drive, considering tolls, gas, and wear and tear on the car. If you ever looked at the IRS reimbursement rates for auto mileage, you know execs are better off flying than accepting the permitted mileage allowance.

Some of the bigger, more influential events early in the month include Smith Barney's 6^th Annual Semiconductor Conference and Goldman's 5^th Annual Power & utility Conference the first week of the month, when Friedman Billings Ramsey, the NY Society of Security Analysts, and the Wall Street Forum all host conferences that happen to fall at the same time as Computex in Taipei, and SuperComm in the U.S.  BookExpo has combined with Retail Music Expo to sponsor one big event in New York, though some of its thunder may be eclipsed by the disclosure of "Deep Throat" as a former #2 at the FBI, a scoop first revealed by Vanity Fair that should be followed by a book deal at the Expo. At the end of the first half week of June, Russell should be announcing the preliminary changes to its index, launching one of the best sports on the Street. Google's rocket shot to new highs was launched with some positioning in case it's added to the S&P but, should that happen--even if it doesn't--it appears all the gains will have been booked in advance. I'd be surprised if it wasn't sold on the news, no matter whether it is or isn't added. I don't think it will be so soon but wouldn't be surprised if it is. With an $83B market cap and serious profitability for a company so young, it can hardly be ignored.

Unfortunately, the Belmont Stakes the first Saturday in June won't be nearly as interesting as it was last year, when there was a chance for a Triple Crown winner. The Tony Awards, the first Sunday, has usually been one of the least watched big events of the awards schedule, so there's little reason to expect better this year, despite some unusual nominees based on prior movies, like Spamalot from Monty Python, and Dirty Rotten Scoundrels, a one-time hit movie, both of which should be familiar to the younger viewers who rarely tune into the Tony's and who can least afford tickets to Broadway or choose not, opting, instead, for MTV. Ironically, the MTV Movie Awards are on the 9^th, and might just garner more viewers than the Tony's. The site of the Summer Olympics 2012 are supposed to be announced the same day as the Tony's. New York is in contention but unlikely pick, I'd think.

The second week of the month brings an Apple DevCon, and conferences from Merrill Lynch, Piper Jaffray, and Bear Stearns, the latter the biggest in terms of presenting companies. Intel's mid-quarter update falls the same week, on the 9^th, though Wall Street is quickly running out of analysts who hadn't already previewed it and raised their numbers.

The week of the 13^th, the Paris Air Show should give Boeing bragging rights over Airbus for the first time in years, even as the US has filed a complaint with the World Trade Organization objecting to the support being provided to Airbus that seems to subsidize its business, just as the European partners in EADS have tossed back similar complaints about Boeing and the Federal government. OPEC also meets, though it may not coincide with a peak in crude since crude hasn't offered stayed aloft through the 15^th of June. CIBC plans an Investment Conference for Retail, Apparel & Restaurants that week, while Hewlett Packard, sporting new CEO Hurd, hosts an Analyst Meeting.  The American Diabetes Association also meets this week, so expect to hear more about the obesity epidemic.

The week of the 13^th also promises Goldman Sachs 26^th Annual Healthcare Conference, as well as Beyond Genomic in San Francisco. There's also a Global Interactive Gaming Summit in Montreal, NetSec in Scottsdale, with the Journal's Walt Mossberg a scheduled keynote and breaches at banks and data collectors a sore spot with Congress, regulators, and consumers. Planet Storage that week focuses on "recovery" rather than mere storage, a timely concern as the Northeast closes in on the anniversary of a big black-out while the southeast approaches the anniversary of 4 damaging hurricanes.  Singapore will host CASBAA, The marketplace for Electronic media in Asia, including satellites, cable, and communications technology,. Also notable, Internet World London, All Candy Expo (during which Hershey has almost always fluttered to upside and a few analysts have looked ahead to Halloween, believe it or not), Caribbean Gaming & Tourism, WiFi and VoWiFi Planet, a BPM Conference, Deutsche Bank's AsianGaming Expo, and the Best of ASCO, highlights from the May meeting of the American Society of Clinical Oncology, the meeting that spurred biotechs to the best performance of all sectors in May, thanks mostly to Genentech. The start of Best of on an options expiry--a quadruple expiry that results in index rebalancings, should make for more volatile trade.

Alzheimer's should be the highlight of the week of the 20^th, though quite a few analysts may be more interested in Cosmetic Enhancement Expo, in L.A. naturally. If there's any justice, the 52 International Advertising Festival in Cannes should serve up more interesting CNBC clips than what's usually offered. Somewhat newly public Freescale has scheduled its first independent DevCon that week, as well. The New York Gaming Summit takes a fly at the Turning Stone casino in upstate New York, while the top execs of the National Retail Federation plan to congregate in Washington for their annual summit. BuildingsNY meets the same week, so expect the debate about the replacement World Trade Center design to be renewed. The 21^st through 22^nd bring a Mid-Year Media Review, with the newspaper companies not only announcing first half lineage and ad pages but projecting ahead for the second half. Electronics Materials is a Geek event known for announcements of new conducting technologies that aren't usually available for years after the first debut at this event. With dual core now the rule, the need to boost individual processor speed per Moore's Law becomes less essential. Both the Dollar Expo and Career College Convention & Expo meet that week, too, both sectors often subject to volatility, the dollar stores, in particular, bearing the brunt of high crude prices.  The Consumer Electronics CEO's gather in Colorado for their annual Summit, while eBay welcomes its top sellers and Interep hosts a Radio Symposium.

The last week of the month brings the index rebalances--at least from Russell which has started pre-announcing final changes to allow a transition into the changes, instead of everyone moving on the first of July. The Sheriff's Association meets. A one-time bonanza for Taser, it isn't that simple anymore, with some alleging that Tasers are responsible for deaths. The exhibitors, though, include other companies as diverse as Motorola and Mine Safety Appliances, Aramark--the food service company--and NEC, as well as Miller Brewing. As scary as a sheriff drinking while on the job holding a Taser appears to me, I'll note that Dunkin Donuts and Krispy Kreme are NOT listed as exhibitors.

Analysts will beginning talking about Back to School and holiday, spurred by the end of June clearance sales and looking forward to July's first deliveries of transition and fall apparel, while the Int'l Watch & Jewelry Guild meets, too, in New York. Bear Stearns is one of three investment banks to host late June conferences, with a one-day Confab for Biotech, in Cambridge on the 28^th. Deutsche Bank offers Business Services Security in London, while SG Cowen will host Health Policy, though most will be watching for Index Rebalance activity even though  Entertainment Technology meets in New York, the same day, a sub show at C3Expo.

Of course, by the end of June, most will be thinking ahead to July 4^th, and a lengthened weekend--the first time in awhile July 4^th happens to afford a long weekend. I see the breakouts in the indices. I've heard the good news others have heard. But, unless more FED officials reiterate that the hike cycle is nearing a close, I'm inclined to believe they'll emphasize the exact opposite, in line with Greenspan's late May concerns about housing froth, and Vice Chair Fergusons May 27^th comments about policymakers {taking} "special interest in asset price movements because it has been alleged that badly designed or poorly implemented policy (even if well intended) sometimes has helped feed unsustainable movements in asset prices." Since it's nearly a given that brokerage and investment house earnings are likely to be way off the last two quarters' strength, and tech companies are still talking about modest demand in the US and outright weakness in Europe, there's a confluence of negativity that should come home to roost, negativity that extends, even, to a delayed reaction to Ford and GM bond downgrades to junk.

Enjoy the rally while you can and don't be afraid to take profits. All good things come to an end. While I think there's a strong likelihood that the rally could be interrupted as early as June 3^rd, I'll grant the possibility for an extension through Bear Stearns' tech confab ending the 8^th. Either way, I'd distrust anyone who claims it's a summer rally that could continue into August.

© Sandi Lynne Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and should be just one factor in more complete due diligence

SELL IN MAY and GO AWAY!
MAY 2005

Traditionally, the post-Q1 earnings rally has peaked between the 5^th and 11^th of May. Otherwise, May has often been the month when defensive names outperform. Given the dominant downtrend, that would seem to be the expectations this year, especially since pharmaceutical companies, left for dead for years, finally managed outperformance in April. Barrons pointed out that European pharmaceutical companies have outperformed their US counterparts and forgot to mention the part Forex played in that, while noting the large percentage of sales derived from the US. If you look back on weekly or monthly charts of European pharmaceutical companies, you'll actually find they've outperformed for quite awhile before Barron's noticed.

ASCO is often the main event in May, which has meant a flurry of buying activity in cancer-related pharmaceutical and biotech companies. The group had such a strong run in April, though, they might do nothing more than retest their recent highs and fail. The meeting this year is in the middle of the month. Other major healthcare meetings in May include the Kidney Foundation, Thoracic Society, Spinal Injury, Gastroenterology, Digestive Disease Week, BioMarker World Congress, Psychiatrists, Urology, and Anti-Aging. Of course, Stem Cell therapy is the holy grail of Spinal Injury but, surely, someone thinks it can retard aging, as well.

Also in the middle of the month is E3 (Electronic Entertainment Expo)--where game developers will try to renew the enthusiasm for a group that's never been as strong in summer as it is around holiday or when a new game box is released. At least, this year, the major players are splitting share, where once Electronic Arts so dominated it rarely paid to own anything else.

The month opens with NetWorld+InterOP, in Vegas, which will attract all the analysts, many with clients in tow. Electronic Distribution takes place in the same city, and overlaps.  Billing & OSS World meets in Philadelphia the first week, as well but it's analyst meetings and DevCons that will dominate week one, with Intel, SAP, Oracle, Qualcomm also hosting clients and analysts. Other tech events scheduled include PLM World, Call Center Demo, Connections (Consumer Electronics), Logistics & Supply Chain, On Demand Digital Printing & Publishing, Streaming Media, Mobile Enterprise World Congress, RFID Systems Conference, Retail Systems, ISPcon, and ISCe--the International Satellite & Communications.

FAME--the Fashion Avenue Manufacturers host Market Week, so analysts should have a lot to say  about coming fall fashions. From the looks of the Paris runways, lots of embellishments and velvet--including for men--should spark a new fashion cycle. For retailers, there's Kid Power, the second, ever, off-price show for Home Kids, and Specialty Toy Retailing. Of course, some of the best positioned retail analysts are the shopping center owners, who's retail projections are usually more modest and on target than analysts. The International Council of Shopping Centers-ICSC--meets starting May 22^nd.  If, as rumored, Neiman Marcus will be next to fall into the hands of a competitor, the group could start wondering where their anchor store growth will come from--especially if Win-Dixie isn't able to put its pieces back together again.

Coal, Iron & Steel, Nanotech, SeaCargo, American Jail Association, the National Stationery Show, a Small Arms Conference, the World Magazine Congress, and Reinsurance Agreements are just a few of the trade shows covering groups that hold them less frequently.

If oil doesn't continue its decline, and the Fed, which plans on raising rates on the 3^rd sticks to the path of steady hikes, there's little reason for the downtrend to reverse. This May, like many others, may very well prove a month to SELL, and GO AWAY.

©Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone, and should be just one factor in more complete due diligence.

COULD BE A DELUGE
APRIL 2005 

It’s been bedlam here because Jetblue canceled all flights today, and most yesterday, which means my arriving guests are on their way, while my department guests are extending their vacations 3 days, through Wednesday, because there are no seats available—through any city.    Therefore, I’m tempted to type DOWNand call it a night—seeing as those trying to rebook their flights have tied up all my computers for 5 hours and I’m already too worn out from the bedlam here. But that wouldn’t be me. So here goes, with highlights of the April, in which the markets should continue what they started in March and continued as April opened despite what would have been a favorable Employment Report under other circumstances. (I don’t know what’s going on at Jetblue but no only did it claim NO flights would leave Sunday, April 3^rd but the airline did NOTHING to book fliers with tickets on another airline and offered Wednesday as the earliest departure date. As I said years ago, when I was diverted, you don’t want to ever be on JetBlue when something goes wrong).

Let’s start with the fact that Taxes are due the day Options Expire Yeehaw! Of course, traders wait around all April anticipating tremendous inflows from last minute retirement funding as well as early filers’ tax refunds but that rarely proves a boon to stocks since earnings warnings often weigh on the indices.  The FOMC doesn’t meet again until May but the minutes of March’s meeting will be released on April 12^th.

A number of smaller retail trade shows, including Pet Industry & Fresh Produce & Floral won’t do much to reverse the building pessimism in retail though electronics stores should benefit not only from the recent release of PSP but, also, a new baseball season, as well as releases tied to summer movie blockbusters.

Cisco holds an Executive Summit at InfoSec, in Orlando, the first full week of the month though Dell, Pfizer and Wal-Mart analyst meetings that week should dominate the media. IWCE for Wireless Communications competes with NCTA, for cable companies, though it’s GameNet, at NCTA, that could garner all the print.

As if two major investment house Biotech and Pharma meetings weren’ enough,  the Acadmey of Neurology holds its Annual, in Miami Beach, which surely won’t here mention, this year, of the potential for Cox-2 inhibitors to clear the plaque that contributes to Alzheimers. Stem Cells, though, should be much talked about. Likewise, the FDA could be very busy since spring is one of two advisory committee review seasons.

The second week of the month, Intel holds a DevCon in Korea, and is widely expected to cut prices on some processors. The purpose of the Devcon s to drum up programmers for its dual processor core push, hence the name Route64 Training Tour, for ’05.  Of course, Hannover Fair, starting the 15^th, in Germany, puts all other electronics shows to shame. It’s timed perfectly for gathering channel partner comments for earnings previews—warnings often the norm, by then.

CIST, better known as CardTech/SecurTech, is also held with SIM American, so beyond transactions, handset makers could have some news, along with security systems from some of the same names expected to present at Janney Montgomery’s Biometric.

One highlight of the month, for lifestyle writers, anyway, will be Highpoint, the Int’l Home Furnishings Market in Highpoint N.C. Press releases from Ethan Allen, Legget, Basset, and others rarely involve earnings but, rather, stick to style.

AACR for Cancer Research, starting the 16^th should not be confused with ASCO, in May but often involves previews of the abstracts that will be presented next month

The 51^st Annual Advertising Research Foundation meeting and awards is dominate by online names, this, though it’s Prince Charles’ re-marriage that will provide the real gravy for ad firms and networks or cable companies.

AG Edwards plans on hosting Media and Entertainment in Las Vegas, starting the 18^th but you might bear in mind how little BAC’s recent conference meant, or even Bear Stearns’, which preceded it. It simply ain’t about the events or earnings, specifically, but, rather, about the economy, and what a growing deficit, weak dollar, and rising rates will wreak.

Starting the 19^th, JCP Penny will hold its Analyst meeting and already told analysts its long range plans will be laid out then. As March ended, JCP was trading on rumors that an LBO was in progress. Let’s just say maybe someday but not now.

CIBC holds Global Gaming & Gaming Tech in Toronto, which will follow up, actually, to NIGA, for National Indian Gaming.

By the end of the month, Microsoft will hosts WinHec—Windows Hardware, while Citrix will host a DevCon, as well. Not to be outdone, though it was, recently, by Oracle in the bid for Retek, SAP will hosts its annual SAPphire Devcon.

Batting clean up for the month are Wnn’s opening of the rebuilt Deert Inn Casino, starting the 28^th, and Warren Buffett’s Woodstock for Capitalists, more precisely the Annual Meeting of BRK.A’s shareholders but hardly only that, since Buffett not only spends hours fielding questions but also comments, lately quite negatively, on stocks. His competition will come from the Annual Chase H&Q Technology Conference, starting the 30^th.

The schedule this April doesn’t look identical to those past because of the Easter weekend falling in March this year but that’s not what ails the market. The peak and reversal that started in January, despite a spirited early March rally, is not complete by any means. Put on that flack jacket and don’t even think of going long for many weeks to come—intermittent rallies in between or not.

©Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s alone, and should be just one factor in more complete due diligence

 MARCH OFTEN CRUEL TO BULLS
March 2005

 Despite the big opening to the month, March more often than not is very cruel to the bulls. Consider the opening strength a suckers rally until proven otherwise. If you look back at chip stock charts for Nov, Dec, and Jan, you'll see a pattern of early month optimism too often followed by a decline that persists to the end of the month. I see no reason to expect things to be different in '05, especially with earnings expected to grow so much more slowly than they have the last few months.

For once, the Employment Report is supposed to show at least 200K jobs added and, for once, I'm actually aboard the more bullish train though not nearly as bullish as economists who are privately whispering of numbers as high as 275K or 300K. Still, March often surprises to the upside, capturing jobs that were missed in the two earlier months, and often less subject to anomalies like retail employment that seems to have laid off fewer people because fewer were hired for Christmas to begin with.

An early Easter, this year on the 27^th, versus 04's April 11 is bullish for retailers. While that may make April tougher, a little cooperation from Mother Nature, in the form of an early blast of spring weather would easily solve that problem, so April doesn't necessarily have to be the lost month. Of course, apparel retailers could suffer from a lack of exciting merchandise, which is what I see in stores. Recall, last year, more feminine, flippy styles debuted after a couple of years of oversized, slouchy looks. This spring doesn't have that going for it so there are refinements, with gauze and colors the sum total of what's different. Oh-hum, though I don't think you'll hear that from other analysts. Bear Stearns Retail, Restaurants & Apparel Conference (8^th) should provide an early look into March sales. New York's FAME--or Fashion Week is where most analysts will get a full look at Back to School fashions. The Halloween, Costume & Party show meets on the 4^th, so it's clearly not too early for Back to School thoughts. Likewise, the Int'l Housewares Show, starting the 20^th, is all about holiday introductions.

There's another FOMC meeting on March 22 and almost assuredly another rate hike but, with some committee members signaling displeasure with the Fed's new openness, because they feel it steals the element of surprise that keeps the bond market going in the direction intended, I think it's presumptious to count on only a quarter point rate hike.  Furthermore, expect real rates to rise anyway, since Japanese year end on March 31 has often triggered the kind of repatriation that could trigger some bond sales. Of course, once bond yields start rising, portfolio managers start seizing yield and abandoning the risk of equities, especially those custodians of retirement funds like pensions, something we've seen a couple of times each month this year, and at the end of February, in particular. That big down day on big volume at the end of February should be considered a precursor to what COULD come if yields start rising again.

Another March phenomenon is the strength in REIT's and gold. With REIT's it's a grab for yield while stocks are selling off. In gold, it's usually been Indian manufacturers stocking up on raw materials they need to manufacture the jewelry you'll start seeing for Mother's Day, Graduation, and next Christmas.

Speaking of Christmas, the snow falls in the northeast are just what the doctor ordered after a few unusually warm years for makers of heavy outerwear since retailers are already placing orders for back to school and next year's ski season. Additionally, sunbelt homes sell best the year after a wicked northern winter so, bubble or not, homebuilders who concentrate on southern states should escape rate pressure for many more months, even if there are some soft months in between.

Utilities, and energy companies usually start backing off in March, as the weather moderates and traders anticipate warmer spring weather that lowers heating demand. That situation generally does NOT reverse until close to Memorial Day weekend, when the summer driving and air conditioning season are at hand. Of course, with OPEC meeting in Iran, of all places, on March 16, there's potential for an oil ministers' surprise but I wouldn't invest on that. As long as prices stay above $40 a barrel, I think OPEC will be content to leave production where it is. At any rate, without any new tankers to transport the oil, there's only so much that can be brought to the US from OPEC member countries.

On March 5^th, Warren Buffett will publish his annual letter to shareholders on the Berkshire Hathaway website. can you guess what he thinks? Of course, he was actively buying utilities and energy companies when no one wanted them, so at least he can crow about those investments but don't be surprised if he adds more fuel to the March profit-taking in energy stocks. I'm sure he'll find the group at least fully valued now and will state that he wouldn't be adding to his holdings at current prices.

It's unfortunate for software companies that Easter falls at the end of the month since that will reduce the number of days available at the end of the month to close deals, software the one industry notorious for making the quarter at the end of the quarter. Of course, by Easter, earnings warnings will be the rule, but that's true at the end of every quarter. Webush Morgan's Software Confernce, starting the 10^th, should escape warnings, with more than two weeks remaining n the quarter. CTIA Wireless & Internet and VON are the major industry events this month, while Satellite brings up the rear, on the 22^nd. I don't expect much from Softee's Convergence, starting the 6^th, though word is there'll be a major messaging platform annoucned at the event around the 8^th.

Financials are another group that usually outperforms in March. A narrowing yield curve this year should be offset by strong M&A activity. Still loose money, recovering stocks, and foreign currencies so strong against the dollar should spur continued strong merger activity. Then, again, the mergers to date, alone, should have many CEO's thinking merger since some blockbusters, in telecom, retail, and pharmaceuticals (you forgot GDT and JNJ, already?) along with household products means more companies are under pressure to compete. Euro big wigs Nestle and Unilever won't sit idly buy as competitors get bigger or wait for a competitor to make the first and best move. Therefore, financials should weather any March decline better than most, despite rising rats. Merger rumors could even emerge by the time Merrill Lynch assembles its annual Retail Leaders, Household & Cosmetics Conference, on the 24^th.

The quadruple options epxiry on the 18^th comes with the S&P quarterly rebalancing but this year it will be massive as S&P moves in two stages to reweight the indices to account for free floating shares. Therefore, some big names like Wal-Mart and Microsoft, where founders still hold a large percentage of shares, will see their weighting decrease. Part two will come in September but, then, September is another month that's often cruel to bulls. March Madness is often a big distraction for the street, though beneficial to athletic wear makers and retailers, along with beer and pizza delivery but, with S&P reweighting for free floating shares, some of the top beneficiaries will be losers on the 18^th.

Tobacco should be a feature in March, not just because of the Int'l Tobacco Outlet Expo but because the government's case for $280B seems all but dead. Since the tobacco companies sport high yields, they, too, should benefit from any sell-off. Litigation risk hasn't been lower in years, with the pharmaceutical companies replacing tobacco as the riskier choice absent as strong a yield. The Inflammation & immune Diseases, starting the 14^th, should be notably less ebullient affair after VIOXX was withdrawn and Pfizer was told to put stronger warnings on Celebrex & Bextra, as well as to stop marketing directly to consumers. Funny, though, analysts are not as worried about the curbs on pharmaceutical advertising as they are about the fact that FD's acquisition of May will cost newspapers one advertiser. I'd think the pharmaceuticals have been bigger spenders, on TV, especially, so the fall upfront could be less bullish than anyone now expects. Maybe that's something someone will think about come Merrill Lynch's Advertising, Marketing Services, Education & Information Services starting the 8^th.

As for other major Pharma conferences, The American College of Cardiology meeting starts on the 6^th though it overlaps with Cardiovascular & Interventional Radiology meets in New Orleans starting the 31^st. Superdrugs & Superbugs starting the 7^th, in London, should be all about Chiron's flu vaccine problems and the growing threat of Avian Flu, which has been confirmed in two Thai people. The American College of Medial Genetics meets on the 17^th while the big one, AAAI--Alleergy, Asthma & Immunology meets starting the 18^th, in San Antonio, which could lead to the second consecutive volatile expiry for pharmacueticals. Both SG Cowen & SSB Citigroup will host the Healthcare group during the month, while Lehman will bat cleanup, hosting its Healthcare Conference overlapping with SSB's, starting the 30^th. Dentists meet mid-month, and, at this point, may represent a medical/pharmaceutical specialty safer than traditional drug companies.

Since earnings go into hiatus, except for retail, the conference schedule kicks into high gear. Of course, tech will star at the conferences but also lead for mid-quarter updates, as well, and this is a quarter that's usually down by 5--10%.

CIBC holds its Annual Gaming, Lodging & Leisure Conference the first week of the month, so the consolidation in the group could suddenly end. With Wynn's casino set to open in April, there should be more talk about the group anyway, especially with legislatures around the country and in the U.K. formulating gaming bills, while Florida votes on adding slots to Broward and Miami-Dade County pari-mutuel venues on the 8^th of the month, when it holds local elections. Las Vegas Sands is hosting analysts in Macau for three days starting the 16^th, so that should be another catalyst for the group, what with at least 3 other US companies planning on independently or with partners submitting bids for gambling venues in both Macau and Singapore.

I'll note Martha Stewart's exit from prison on the 6^th because it is sure to be a spectacle if not much of a market event. Don't get me started, please. Enuf Said.

Game Developers meet the 7^th, though the April 1^st opening of baseball season and Sony's debut of PSP in the US towards the end of March that should provide the catalyst for the game publishers. With Father's Day and Graduation ahead, the analysts are sure to be seeing sales through rose colored glasses sometime this month.

Defense will be a scattered focus throughout the month as one-day conferences are held on military bases around the country but, aside from Aerospace & Defense, starting the 7^th, it won't be until the end of the month, when Northrup Grumman hosts its analyst meeting (23td), Joint Undersea Warfare convenes (28--31), and Aerospace Global market Outlook brings analysts and defense companies together on the 30th that the group will really attract lots of media attention--baring an untoward event, which I'm certainly not counting on and the market and VIX certainly aren't pricing for.

In sum, while March opened with a bang, came roaring across Broad & Wall to melt the snow that fell the day before, it usually sends bulls out with wounds that don't heal until late April at the earliest. Aside from the groups mentioned positively above, I'd be using early strength for early exits. The odds seem stacked against the bulls even if I don't agree with the analysts will talk simply of a bull market now two  years old, the average age of any bull run. For me it's simply March, a month when economic activity slows, Japan is pulling more out, and the best performing groups, like energy companies, have seasonal reasons to see profit-taking.

© Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and should be only one factor in more complete due diligence.

WILL FEBRUARY SUFFER THE JANUARY JINX?
February 2005

In the January Outlook, I detailed some of the events coming at the end of the month and early February that could weigh on stocks. Included were the Iraqi Elections and the FOMC meeting, with a rate hike expected to be announced at 2:16pm on Wednesday, February 2. Since then, more events have appeared on the calendar, including a G-7 meeting February 4—5, that will, for the first time include China. Also added are the President’s State or the Union message on the 2^nd, submission of the President’s budget, on the 7^th,  as well as Alan Greenspan’s semi-annual testimony before Congress February 15 and 17^th, formerly called Humphrey-Hawkins. However, Greenspan’s Congressional appearance should not be an exceptional weight on the market. Since the FOMC will release a statement after it concludes its meeting on 2/02, and there’s been a move to more transparency, including earlier release of meeting minutes, after 3 instead of the former 6 weeks, the markets should know Greenspan’s position by Feb 2^nd—much as it EVER knows his position, given the convoluted Fedspeak employed in the FOMC communiqués. It is more likely that Greenspan’s testimony will center around eliciting his opinion on the deficit, weak dollar, and privatization of social security. As for the weak dollar, Congress should get nothing: time and again he has said he wished he could comment but it’s Treasury’s province. If he breaks from that standard, then we’ll know he’s really scolding the President and Treasury, which isn’t likely, even though he has little expectation of being re-appointed when his term expires in June ’06.

Since I’m dismissive of the testimony and, instead, concentrating on the first days of the month, know it’s because Chain Store Sales and the January Employment Report will also be revealed the first week, on Thursday and Friday respectively. Since Vehicle Sales data are coming in weakish, for January, once Chain Store Sales are released, the markets will pretty much presume overall Retail Sales, later in the month. Again, it seems to me the die will be cast by the time February 5^th rolls around.

We can debate whether the rally that ended January and continued today, February 1^st was a relief rally for an oversold market or a relief over the OPEC leaving production alone and the completion of Iraqi elections but we’d learn nothing significant from such an exercise. What we should discuss is the old Street adages, “As the first five days of January go, so goes the month,” and “As January goes, so goes the year,” which would seem to suggest that February is jinxed by January. Problem is, the market tends to be predictable only until everyone has the game plan. Then it reverses, or diverges, taking the path that would hurt most traders the most. In 2003, when the markets posted one of the best returns in history, January was extremely weak even as earnings had begun to rebound strongly. Of course, waiting for the Iraqi war to begin was the cause but, if January is a Jinx, then Jinx me a thousand times over, just like in 2003, because I’d much prefer to have confidence in the economy; much prefer that earnings and confidence were growing as strongly this year as they did then. But, alas, that isn’t happening. And the January Unemployment Report shouldn’t save the day. The month marked a multi-month record for lay-offs while retailers trimmed their part-time holiday staff, as well, though retail’s failure to hire as many workers as it usually does, under gov’t accounting, will lead to fewer lay-offs than normal. Likewise, Chain Store sales for January will reflect a weekend lost to a blizzard in some of the biggest markets though there will be a few stars, as Coach proved when it reported recently.

So which am I, a bull or bear on February? Neither. I believe the second week of the month will see a rally but I also believe it will be a rally to sell. European growth is tepid, while U.S. growth is moderate, at best. Meanwhile, equity flows have been terrible—the biggest surprise of all after last falls strong rally. Furthermore, while the President promises to halve the deficit in the rest of his term, I just don’t see how it’s possible, even using government equivalents of “Special Entities,” to keep another $80b in funding requests for the wars in Afghanistan and Iraq, especially considering the “S.E” he’ll have to set up to account for the trillions in losses Social Security would initially suffer if his plan for privatization gets through Congress and becomes law. I don’t see how to treat his special off-balance sheet spending any differently than I did the S.E.’s corporations used to protect their bottom line—a practice that was outlawed and fined and punished. Just as corporations were bankrupted by moving the S.E.’s back to their balance sheet, so will the U.S. Treasury be bankrupted technically, if not in actuality.

So, with accounting gimmicktry at the highest levels, mediocre data, and earnings largely over, that leaves trade shows and conferences to save the day. However, what gets the juices running at trade shows are new products, and there’s been little in any industry to match Cypher, Taxus, and iPod. Innovation is coming in increments, rather than broad strokes, which limits how much will be introduced to cause the kinds of revolutions that spur big earnings revisions across wide sectors. In fact, quite the opposite is happening: many an economist and trader is just waiting for the housing market to collapse, which would send serious ripples throughout the economy. Think of the people, products, and financial instruments that move when a house is built and sold. If housing slows at the same time Vehicle Sales slow, ……. It’s too big too think about.

There are some big (as in either important or large in numbers) and notable meetings planned for February, including the Am. Stroke Association, NEPA, for Newspapers, Graphics America, World Shoe & MAGIC, along with Fashion Week (for fall and back to school fashions), VoiceCon, investment conferences, including Gabelli Pump, Valve & Motor, CSFB Financial Services, Merrill Lynch Computer Services & Software, Merrill Lynch Global Pharmaceutical, Biotech & Medical Devices, Morgan Stanley “Under the Hood”  for Consumer Banking & Credit, Merrill Lynch Leisure, in London CSFB Energy CEO, SG Cowen’s 26^th Annual Aerospace Conference, CSFB’s Financial Services, Merrill’s Global Automotive, and the Grandaddy, perhaps, for them all, Goldman Sachs 19^th Annual Technology Conference. Are you psyched yet? Neither am I. Will Google’s Analyst meeting on the 9^th or eBay’s on the 10^th do it for you?

Be honest: none of the events above make you want to go out and buy stocks. The SuperBowl? Grammy Awards? How about LinuxWorld? I know, it’ll be the 3GSM World Congress of the Consumer Analysts’ Week, the latter, perhaps, the most intriguing, now that Proctor & Gamble is merging with Gillette, which should spur additional mergers, just as Cingular’s bid for AT&T Wireless begat Nextel/Sprint, and a deal from Alltel. How about the American Toy Fair, which could coincide with Toys ‘R Us as we know it disappearing, since the company isn’t likely to place orders if it’s going to either close or sell the stores. Is the North Nevada Gaming Summit gonna get your juices running? That group’s already in the throes of merger mania. Do you think all the foreign earnings companies will repatriate under the rock bottom, one-time 5.25% tax is going to spur the market? Deals, it might, but it isn’t likely to spur capital investment, since the tax deal on spending has largely done nothing for tech equipment so more deals may mean more job cuts and suppliers cut, a drag on other sectors and consumers.

So let’s look back on the last few paragraphs and see what we have? An unusually heavy week of economic influencing events and data, the potential for more M&A activity, and the most we can conclude is that investment houses are on track for lush profits from deals, which they’ll need to offset rising rates and flattening of the yield curve. Sure, Greenspan has warned against ignoring the rising rate environment, stating outright that some will get hurt by their own complacency yet, if he gets what he wants, Vehicle sales will slow more, and housing could collapse. That’s not something he wants. Definitely NOT.

So, the one group that may sit out the rally the second week is defense, as the President has already previewed some cuts in big iron. Ex- defense, the indices should rally once the opening week of February--perhaps even roar for some days--retesting the December highs or even setting new ones. But after that, I think there are major issues that will weigh on the markets, issues more durable than those that caused the January decline. It may very well be that the highs set the second week of this month stand at least until Q4 or even into next year. What would turn me more positive. A schedule for troop withdrawals from overseas, reversing the extensions troops have seen to date, and concrete evidence that the budget deficit has begun to decline, along with looser corporate purse strings

© Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s alone and should be only one consideration in more complete due diligence.

FRESH START, LINGERING ISSUES
January 2005

 The markets ended on a mediocre note after a rousing quarter that saw October, my annual "bottom" date serve as the actual bottom. Likewise, my first quarter "top" date has long been February 5^th, so it's quite telling that January is packed with so many unusual events that February 5^th may very well coincide with, or very near the top.

Of course, January will be the month of earnings, as usual, and a number of annual trade shows that rouse the troops. These include the Consumer Electronics Show, MacWorld, the JP Morgan Chase Healthcare Conference, successor to Hambrecht & Quist's former biotech showcase, more recently as much about med products and big cap pharma as biotech. The North American Auto Show continues, this year, starting the 9^th, unlike many years past when it fell on New Year's and includes lots of Automaker analyst meetings. For the 15^th year, Citigroup will host Entertainment, Media & telecom, while PepTalk, a 4- part Protein Information Week drug science/biotech Conference will meet as well. Hong Kong will, again, host Toys & Games Fair while Tokyo has 3G Mobile World Forum. Raymond James once, again, offers Government IT Summit while Needham offers Growth, SG Cowen Consumer. The International Builders Show takes over Las Vegas just as the ground is often too hard to allow building in most of the country. The National Retail Federation hosts its Big Show, more tech than retail event, while the National Candy, Gift & Gourmet Show arrives right in time for analysts to talk up Valentine's Day.

The Hong Kong Toy Fair is just one niche show out of dozens for retailers, the biggest of which is the Sporting Goods Manufacturers' Super Show but includes, as well, the Shot Show, Imprinted Sportwear, Crafts, Art & Frame, and every other category you can think of.

In healthcare, the FDA will resume an active schedule of advisory meetings to consider new drug apps while Immunologists and Rheumatologists meet, the latter in a quandary thanks to the withdrawal of Vioxx and questions about Celebrex, since they're the group who wrote more prescriptions for these drugs than anyone.

Towards the end of the month, Gold bugs will meet in Vancouver. Likewise, the fashinistas will descend on Paris at month's end for the Haute Couture runway shows at the same time the Online Betting and Gaming world will meet in London, and Television Programmers in Las Vegas. Meeting too, CAGNEY, the Consumer Products analysts, coincident with the Soup & Detergent Association's 79^th Annual Meeting. What makes January especially flush is not just the return of Investment Conferences, including Growth Airline, West Coast Energy, and too many more to name them all here but the rash of trade shows for industries that meet, at most, once a year. Concrete, Poultry, Credit Unions, and Convenience stores.

Beyond these annual events, though, lay the oddities. There's, of course, the President's State of the Union Address which won't air until after George Bush is re-inaugurated on the 20^th. Then, there are the elections in Iraq, on the 30^th. Add in a Beige Book in advance of the next FOMC meeting on February 1^st and 2^nd, and it's quite easy to see how some sort of frenzy could peak by the end of the first week in February.

There's a school of thought that says as the first 5 days of January go, so goes the year. Another school of thought claims as January goes, so goes the year. There's the unbroken year of gains for every year that has ended in "5," to date, contrasted with the relatively weak returns of the first two years of a new administration--even if the President is re-elected. Afraid I can't agree with either school because I think this year will look like a lot of years that peaked in February or March before selling off, then re-attempted the peak in May and late July or August before selling off again into October, when a year end rally fuels the bull beast, again. If I thought it was as easy as planning on 2005 being straight up, then I wouldn't write monthly and weekly. The market is never as pat as history suggests or the pundits predict. While I don't think the world will hold its breadth in advance of the Iraqi elections, I do think the news could get worse--insurgent activity could escalate in before the end of the month. That's a recipe for oil and gold to get bid up, which rarely is good for consumption or the markets.

Of course, much of what the market wants to hear most will arrive the first week, when Retailers report December sales, on January 6^th, and the Employment Situation is released on the 7^th.  I do think any rally that continues into the New Year will peak around those two announcements but, then, there'll be earnings and guidance to set the real tone for the first quarter, which should make early in the month euphoria fade to distant memory. One thing January does have is an extra day off, on the 17^th, for Martin Luther King Day. That mid-month break may, indeed, offer a dividing line for bulls & bears.

© Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and should not substitute for complete due diligence. Earlier Monthly Outlooks Here

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