ALL 2004 MONTHLY OUTLOOK ARE BELOW
HO, HO, HO!
DECEMBER 2004

One of the ironies of December is the skew to the most bullish days of the month. Aside from the run usually seen the first few days, every month, the next best days are often the last few, just like it is every month but, in December, it's when most of Wall Street is out of town. In between, the indices often do just about nothing. They may move a percentage or two up or down but rarely make big moves, unless the month prior was a bust.  Since November clearly wasn't a bust, except for the bears who stubbornly stayed short, consolidation for two weeks from the 6^th--17^th is the most likely outcome.

Often, energy stocks have outperformed from late November through March but, until the last days of November, the group had been filled with momentum. Though the energy names did start correcting around Thanksgiving, the group is still up big, this year, as is oil itself, even after the whacking in early December, coincident (but maybe not coincidental) to word that Chinese Aviation had taken a bath on a short position in the commodity.

Time was drug stocks were the best performers in December. Most of the big name pharma stocks are so beaten down, I'm sure some expect them to rebound. If it happens, at all, I wouldn't expect that until the last three days of the year, at the soonest. Meanwhile, biotech often tops early in December but is often a good buy for both the last 3 days of the year as well as for January, when a couple of big annual events make them the focus.

Media is another beaten down group which may be good for fresh pickings . However, not only were the newspaper names already lowering estimates as December opened but, with the election over, quarter over quarter comparisons can only get worse. Entertainment is another story. As the blockbuster movie season tallies start coming in, and royalties on toy, game, and clothing tie-ins start getting toted, analysts often tweak up their numbers. With DVD's a favorite gift, there's reason to expect that will happen again, ex- newspapers. This year could also be the biggest year, ever, for video games. While the games used to get developed after the movies, now they follow parallel development tracks, the game often creating demand for the movies and sound scores.

The big surprise in Tech was Intel raising its outlook during its December 2^nd mid-quarter update. The second week of December brings many more tech updates, so it may be too soon to get excited. Likewise, old tech has often tanked in early January, once the first few days are out of the way, since that's when warnings are most prevalent

Retailers are often amongst the worst performers in December. No matter how well they do, it's never quite good enough. This year the bar is even higher since chain store sales have been so very strong but, now, rates are rising. That, and chain stores that have been more promotional this year than ever before, and promoted earlier than ever before (despite what the OTHER analysts and companies themselves may have been telling you), the discounts should get shocking by the time Christmas arrives. Is it any wonder that consumers often hold out for as long as they possibly can hoping for even better discounts? Add in hurricanes that knocked a good part of the south out for half of August and most of September, then floods in Texas, and it's not surprising that retailers panicked. Of course, we could mention the high price of gasoline but that seems sure to come down in time for holiday now that oil has crashed from $56 to $43 a barrel. How much it comes down may depend on national weather patterns because, to date, unusually warm weather has prevailed.

One of the most dependable events in December has been GE raising its dividend at the board meeting that usually takes place right around expiry. Since GE upped the divvie even during the worst of the early century downturn, as well as when Jeff Immelt first took over, there's little reason to expect it to deviate from the pattern in '04.

There's often at least one run a year on orange juice futures in late December. Since a lot of Florida's crop was destroyed by the time the 4^th hurricane blew through, there's every expectation the first bad frost run up could send futures to records.  Of course, I'm watching gold, too, speaking of records but, ironically, while people tend to buy more gold for Christmas then at other times of the year, gold doesn't often see tremendous wholesale/commodity demand in December. In fact, there's usually selling until March, when gold and REITs are often the best plays.

Utilities have often outperformed in December, thanks to better demand (think cold weather) but the group often has a hard time competing with momentum. The markets entered December with tremendous momentum so utilities may not be the play--except for dividend capture, which tax protected retirement accounts can still play.

Earnings and conferences tend to dry up the third week of the month. That leaves only the economic data for guidance, which is why, big runs leading into early December often cause analysts to "downgrade on valuation." Since corporate America basically closes the books by the 20^th of the month, the last few days before Christmas are often fraught with warnings.  Of course, that only helps set up the so-called Santa Claus rally that arrives in the days after Christmas but that rarely stops the media from bemoaning the lack of a Santa Claus rally in the two weeks leading up to Christmas. Another phenomenom often seen in the markets is the January Effect--the tendency for the most destroyed stocks to rise the most the first few days in January. Of course, that tendency became so well advertised, as computers started slicing and dicing data in every way imaginable, we've often seen speculators jump the gun and start buying before expiry is finished.  In fact, the Hirsch Organization publishes, every year, a "free lunch" list of most beaten up stocks that are likely to rise the most by the second week of January. It's not a list to pick and choose but, rather, a list to buy in its entirety cause there will be losers that lose more but the winners will rise so much it rarely matters.  Since the markets have been rife with speculation in recent months, with a number of bulletin board stocks trading volume and gapping up every day like it's 1999. While that activity makes traders like me especially nervous, it almost assures the "January Effect" will be bigger than ever this year.

The third week of the month also brings a mini-earnings flourish, characterized by reports from some of the biggest brokers/investment banks. You'd think the recent flood of IPO's would make earnings strong, which should benefit the stocks but that hasn't happened in many quarters. Analysts always seem to criticize the earnings from the first group of brokers reporting no matter what, mainly because much of the earnngs performance comes from proprietary trading, which is seens as risky. Therefore, if you're thinking about brokers during the mini-earnings season, think again, then remember the FOMC is set to hike rates on the 14th, too.

We could talk about the prospects for 2005. The end of the year is a very good time to look ahead but it would only fall on deaf ears while the market is rallying. There are actually two schools of thought about next year. On one side, there's a group that will tell you years ending in five tend to be strong. On the other side, there are those who'll point out, rightly, that the first year of an administration (even if the President was the incumbent) is the worst, with the markets more likely to struggle that year than any of the other three. Though I love historical patterns and seasonality, they only augment fundamental analysis. The Current Account Deficit, the weak dollar, and a slowdown in Europe and China should not be ignored. I happen to think that at some time next year, analysts will be looking back at the end of 2004r rally and debating whether it was just a bear market rally in an ongoing mega downtrend. For the months before that happens, particularly for the next two months, I don't think that's the business of Wall Street. Therefore, I won't be the girl who cried wolf but, instead, will wish one and all a very Happy Holiday and terrific New Year.

© Sandi Lynne 2004 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 facet of due diligence.

It might pay to bear in mind that the year after an election year is often one of the worst for the markets, as the new administration sets its agenda. Given President Bush's promises to halve the budget deficit he wrought, his re-election could be as painful for the markets as Kerry's detractors claim he'll be. Either way, I'd keep track of the technicals which have confined trading for the year, and pay heed to all the companies expressing caution and disappointing margins because they've been squeezed by costs, and an inability to make price increases stick. I think the light is yellow, not green, and then only if there's a clear victor come Wednesday morning.

© Sandi Lynne 2004 Nothing contained n this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone.

STRAIGHT UP THROUGH THE ELECTION? NOT!
OCTOBER 2004

Let's put aside, for the moment, October's notorious potential for steep market declines and look at the evidence. First, the month started with a riproaring rally shortly after the FOMC raised rates and oil closed above $50 a barrel for the first time. The bond market has been pricing in stagflation or worse. Granted, the first signs of a rate reversal were seen last week but still, the bond market has been expressing a different outlook than the equity market--a far more negative one. Then, add in the current account deficit, made even worse by aid to hard hit Florida, and the possibility that Mt. St. Helens could spew ash across a large portion of the world, if she blows, disrupting transportation and communications with it. Speaking of blows, why don’t we mention the big earnings miss from Morgan Stanley, and warnings from Colgate and Intel, not to mention Merck imploding after pulling Vioxx off the market. Of course, the bulls will tell you that the fact that the markets could party so heartily despite all those worries, on October 1^st, is proof of the rally's veracity but I'm not buying it.

The first full week of the month brings Chain Store Sales, the Unemployment Situation, and earnnigs from GE. By the second week, earnings shift into higher gear, with Intel, JNJ, Merrill Lynch, General Dynamics, New York Times, Banc of America, Citigroup, Fannie Mae, General Motors, Wachovia, Yahoo, and, possibly, IBM, as yet unconfirmed. But it's the third week that usually brings the deluge, and doesn't let up until mid-November.

As the same time, as the month marches on, the markets will be moving closer to the November 2^nd election and the November 10^th FOMC meeting, at which another rate hike is impacted. Then, let's not forget one reason the markets often sell off in October: most mutual funds close their fiscal years, this month, which means selling losers for tax purposes, and raising cash to reserve against payments to investors who've told their fund managers they prefer to gains and dividends mailed to them. With all but the Russell small-cap index lower than they were in January, there could be much tax loss selling to come.

Then, because tax allocations are decided for fund investors in October, retail investors have been told to avoid investing n funds in October, at the risk of raising their tax bill without benefiting from the gains that lead to those taxes. That means the funds that surged into equities on the 1^st could dry up very quickly. Then, let's not kid ourselves, many people are first getting their credit card bills that reflect charges for summer vacations, back to school purchases, school tuition, and, down south, emergency repairs for hurricane damage or, even, just supermarket charges for replacing all the food lost when power outages hit a number of states, as first Charley, then Ivan, Frances, and Jean rushed up the east coast. We won't even discuss the shocker of rate and insurance hikes, because those are issues months out, yet. Meanwhile, up north, homeowners are preparing for winter, with heating oil and gas bills arriving for the first time in months, all reflecting the much higher prices seen at the NYMEX. In short, a month when bills often outstrip earnings gains often sees consumers take a step back, and sit on their cash. Because it's now 36 months since zero percent financing was first introduced, after 9/11, many consumers are seeing all their disposable income going to sales tax, title, and the like, for the new lease they're going to be driving home. Problem is, the automakers are offering even larger incentives than they did that year, while siting with higher inventories than they were in '01, which means margins are being squeezed at the end point even as they're being squeezed on the other end, with metals prices rarely higher, and consumers turning their backs on big purchases whenever the deals are pulled.

And suppose, for a moment, the bond market and equities get on the same page--the page the Feds are on, claiming the economy regained traction and is expanding strongly, again--something the equity markets must assume for stocks to run up any farther. Then, for the first time since June, consumers who opted for variable rate mortgages will face the potential for higher monthly payments, again decreasing the level of disposable income available to spend on other things. When consumers stop spending, the economy is back in trouble, because businesses still haven't evinced any inclination to ramp up spending.

As a rule, internet retailers and biotechs are the strongest in October, along with defensive plays, like metals and utilities. For internet retailers, the rise in broadband penetration should be a boon to online purchases. Biotechs often benefit from a slew of specialty meetings in October and November, then often sell off in December, when other sectors take over. Later this month retailers often prove smart buys,, after September comps are out and retailers have been punished for failing to meet Back to School high expectations. But not until they sell off and put in bottoms well below summer levels. With hurricanes contributing to retail weakness, this year, it's unclear when investors will look past the extraordinary pressure and recommend retailers or whether they'll ignore missed comps from the getgo. The hardiest of bears, of course, will dismiss hurricane-related weakness as "excuses," and try to convince investors that retail weakness in September is the beginning of a trend--proof that consumers are tapped out. Well, as someone who suffered through two of the hurricanes--who's owned retail stores--I can attest to the fact that the hurricanes did negatively impact sales--the malls were closed. When the weather cleared, many were still without power or, when power returned, phone service didn't for days. However, if I hear retailers without much of a southern presence warn, I'll see it for the excuse it is, while overlooking it as the reason, when retailers with a heavy presence in the south warn or merely report weak September comps. In other words, chain store comps won't provide proof of a trend, one way or another, which means a level of uncertainty, something the markets dread. It also means, however, it will take more work to pick and choose between beaten down retailers, this month. As retailers go, so too have package delivery companies, as a rule, in October but, of course, we've rarely seen oil as big a problem as it is right now, and the package delivery companies never favored the markets with their typical sell off in late summer. Tech has often struggled until very late in October, and usually represents a best buy for the end of the year. If business spending doesn't pick up, they may not be a by until next year.

While pharmaceutical companies have often been a safe haven in October, they haven't been for years, with Merck's recent travails just another reason to avoid the group, though generics might be an alternative, especially if Kerry's star keeps rising, since he seems determined to negotiate lower prices with pharmaceutical companies or, even, allow importation of prescription drugs, if elected.

Now, shortly after the first debate, Kerry's standings in the polls rose. With two more Presidential debates and a vice presidential debate to come before the election, a continued rise in the polls for Kerry and Edwards might spook Wall Street, which has come out strongly in favor of the incumbent. In fact, I can list any number of scenarios that could spook the market, including crude taking the break above $50 straight up to $60 before rationality returns. The fact is, every market rise this year has turned into a sell off that brought lower lows to accompany the lower highs. The trigger point for turns has, also, often been when VIX made a new low, as it did last week. In order for that pattern to be broken, the markets would have to challenge the January highs, and that's something I don't see happening this month.

Therefore, if you're long the rally that started the month, protect your gains, and prepare for a reversal. If October does nothing but follows the typical pattern in the average month, the first five days will be strong, the middles weeks will be weak, then the last 2--5 days will be strong. Look it up, it's true! That is the pattern of the indices, for years, in rallies and in sell offs. Then list the reasons for the market to gain much more from where it closed on October 1^s. My point exactly. Look for the rally to end, and a sell off to begin during the first week of the month, one that lasts until late into the month, until the 25^th, at least.

© Sandi Lynne 2004 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.

Last, mutual funds usually close their books in October. Rather than wait for the last minute, funds often start taking tax losses in August. Because of the rally the last two weeks of August, many Portfolio Managers will return after Labor Day to see some of the most attractive prices in month. Selling should beget selling, especially given the fall’s notorious propensity for declines. I’ll say it in no uncertain terms: Use the August and early September rally to prepare for September’s usual sell-off. Don’t be afraid to leave a percent or two on the table. By the time October arrives, it should be clear that a little early was much better than too late.

OLYMPIC YEAR
August 2004 

August is one of the three more neutral months. It doesn’t qualify for inclusion in either the best six months of the year or the worst three.  It generally starts strongly, carried by enthusiasm and relief fueled by earnings just released, in July, then ends poorly, as stocks sell off in some mutual fund squaring ahead of Labor Day weekend.  Time was, all tax loss selling took place in December but the proliferation of mutual funds caused a switch, resulting in funds ending their fiscal year in October, in order to facilitate providing investors with year-end tax statements in time to make their final estimated tax payment due January 15. Long story short, mutual funds switched to tax year ends 60 days before the calendar year ends, which pushed the worst of tax loss selling into October.  As October's reputation as the worst month grew, fund tax loss selling pushed back into September, which is tied with October for the worst performing month of the year. With the advent of cheap computers available to all, studies of seasonal patterns quickly made it apparent that it would be more profitable to sell in August, on the euphoria triggered by July earnings, to avoid the fall decline, and at the best price.  Hence, August became less neutral in recent years, transforming into the month most likely to tempt portfolio managers out of the markets before September arrives.

 August earnings come from energy companies, REIT's, retailers, and healthcare companies, including biotechs, while investment conferences trickle down to a few, most revolving around drug development and retail, the latter often outings to malls. In tech, the conference and trade shows in August involve engineers developing future technology, rather than meetings intended to lure corporate customers, many of whom are on vacation or getting their kids ready for school. Since scientific meetings often coincide with the release of investigational data in medical journals, biotechs often outperform.   

For tech, it's often a month of bad news, as Europe's almost continent-wide vacation period halts customer orders. If orders from other customers don't pick up the slack, warnings are heard. Making it worse, a strong Q3 in '03 makes comparisons tougher than they've been in almost a decade. The Federal government is rarely a help, since agency managers have often spent their budgets by this month, yet rarely know what their budgets for the coming year, which starts October 1^st, will look like. In recent years, interim spending bills have been the rule--it seems the actual US budget rarely passes Congress before November. In an election year, that could be just one more item that doesn't get completed, while more and more available funds find their way into defense. Speaking of defense, the group offers a number of meetings, many on bases around the country, but few of them are open to the public, as they used to be pre-9/11. Some aren't even open to analysts but provide the orders upon which analysts might get bullish on the group which sees far less seasonality than most, especially with the U.S. at war. 

Federal economists have gone out of their way to make a case that inflation is tame, ex-food and energy, while the rising prices of those are temporary. Unfortunately, you can't tell that to parents making tuition payments to colleges or private schools.  Working against a strong back to school shopping season, this year, could be Labor Day, which doesn't arrive until September 6^th. That may very well push back B2S shopping into September, hurting retailers used to seeing a strong end of the month make their months.  The group largely reports in August but seriously strong comps in the first months of the year will now meet tough comparisons from last year, when the wait for the Iraqi war tempered shopping until the major engagements of war were declared over in May. Add in thin clearance racks, in July, after a strong first half at retail, and retailers risk their fall merchandise looking stale, by the summer school actually starts, in most of the country, after Labor Day. That should make analysts worried about consumers, and cause the traditional decline in retail shares as the group reports in August.   

August 9^th will bring the first of the NFL season's events.  The kick-off of football season has often, also, kicked off renewed interest in media and broadcast names--in advance of the premiere of the new television season. The sector has been simply awful this year, which may require a more serious look--even for investors who rarely speculate there.  Nothing goes down forever. While analysts will be parsing upfront advertising sales for the new television season, politicos will be buying in the scatter market--the slots not pre-sold and available for more spontaneous purchase. Add in what should be aggressive retail advertising, since the group is likely to panic, as it traditionally does, when B2S shopping is postponed by the later Labor Day, and it might just be a recipe for some recovery, especially if some of the stations aggressively counter program the Olympics, which start on August 13^th, on NBC.  A combination of Football season, Olympics, and the Republican National Convention at the end of the month may be a boost to restaurants that offer home delivery--Domino's the most recently public of the group.

 Farm-related events are also more prevalent in August. Agriculture-related Philip Morris might be most interesting. Not only could it's dividend draw investors looking for yield in an uncertain market but it's board has a history of raising it's dividend at it's end of the month meeting--massive jury awards or government lawsuits notwithstanding. The board has upped the divvie annually, no matter what's gone on.  With a Federal Appellate court sitting on a decision about the profit disgorgement claims the tobacco companies are fighting--there's risk but also the potential for enormous rewards, if the decision goes in the tobacco companies' favor. 

LinuxWorld is a rare exception to the developers' conferences more suited to engineers.  Also scheduled, are Plug.In and eTail, two events that have an internet component.  Just as analysts begin examining Back to School, looking for clues to the holiday season at retail, internet analysts begin anticipating renewed hi internet usage from kids back from camp and returning to school. That's often made internet companies, particularly retailers, a group that outperforms the broad market in August. Bear in mind, the major shippers, like FDX and UPS, are often bid up with e-tailers, since someone has to ship the goods. Nonetheless, the shippers have often been spoken of more favorably than the stocks perform, finally seeing some profit taking this month, after a strong first half. Likewise, Bear Stearns may lead the mall outings, with 6 scheduled around the country, but it won't be alone. Lehman, Goldman, and every other major house will host their own mall outings--though they often fall on mostly deaf ears as back to school rarely turns at as well as analysts hope--this year, as stated, the late Labor Day, an added problem, since the rare analyst will see the later holiday as an added 3 or 5 days to the back to school selling season. 

Some of the bigger meeting for drug development bear names like Drug Discovery Technology World Congress, BioMEMS & Nanotech World, the Best of ASCO--a meeting of Clinical Oncologists, and the Am. Association of Diabetes Educators, as well as Disease Management but the real news could be made away from the meetings, as a number of drugs await FDA approvable letters, along with others due final approval after specialty meeting recommendations in the past 8 months.  

But it's retail that really takes center stage of all the industries, as earnings releases coincide with the New York International Gift Show, and a buying show for nearly every niche of retail provides analysts the opportunity to speak to retailers and gauge their optimism, in addition to previewing manufacturers' order books, even as Halloween goods start shipping to stores. 

This year, like last, economic concerns and the price of oil should hold inordinate power of stocks. Retailers report July comps on the 5^th, the July Unemployment Rate will be out the 6^th, the FOMC meets on the 10^th, while PPI and the preliminary University of Michigan August Consumer Sentiment survey will both be released on the 13^th. Since one of Fed Chairman Greenspan's favorite indicators, productivity, gets it's first estimate for Q2 on August 10^th, as well, the first half of the month will be chock full of the food of bond markets, no longer pricing in as aggressive a Fed as it did back in April and May.   

For nearly a decade, I've talked about the market highs on February 5^th and August 5^th which should send investors to more defensive positions. In July I foresaw a 5% correction which, at least, was right directionally, though way off the worst for NASDAQ, before the late July recovery.  Since the bear market started, we've seen many months end well, only to see the new month start with a sell off--July 2^nd's gap down sell off only the most recent and severe example.  As August opened, the markets were coming off a severe July sell off and late recovery, that looked likely to extend into the first week of the month, as it often does.  The charts suggested continuation into the first days of August, at least until Tom Ridge, of Homeland Security, held a 2pm press conference, on August 1^st, listing various offices in Washington, D.C. that are the targets of specific threats he was responding to, when raising the level of risk in D.C, and northern New Jersey to Orange, where New York has been since 9/11/2001. While my conclusions about the first few days of the month are available, only, to Premium Subscribers, it may not matter much. I don't think this will be another neutral August. Instead, I think the bias will be a continuation of the downturn, thwarting the bulls who will surely tell you many bear periods have ended in August. That doesn't mean NAZ will necessarily decline another 11% only that the recovery that started at the end of July was not the bottom. I don't think the real bottom has come or will in August. At best, August may end only a little lower than it started, or only a little lower than the July lows.I doubt that the bottom will come in September either, but that's a story for the Monthly Outlook I'll write in a month. 

© Sandi Lynne 2004 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. At the time this piece was written, Sandi and her affiliates had no positions in any companies mentioned, though that could change at any time, without notice.

OVERRATED
July 2004 

The July 4^th weekend held a bigger bang than expected, when it was learned Al-Jazeera, the Arab TV station of choice, and frequent mouthpiece for terrorists Osama Bin Laden and others, is mulling an IPO. Then, more locally, a former Cuban defector drove his Navigator through the double glass doors and into the Southwest Airlines ticket counter at Ft. Lauderdale airport, restoring debate about the security of sensitive properties at home. Luckily, Villa didn't take his unnatural route on a Saturday, when thousands of cruises line up to return home, which means he just missed fewer passengers, Sunday morning, than he stood a chance of missing on any given Saturday, at the airport that shadows the biggest cruise port in the world, Pt. Everglades.

Closer to Wall Street, let's start by acknowledging the markets have fallen in the first 30 days after the first rate hike, every single rate hike that represented a shift in prior policy.  Then, let's also concede the summer rally--usually arriving the end of July, a third of the way through earnings season--is the weakest of all rallies and often nothing more than a rebound off a decline sparked by earnings warning season, the immediate predecessor to earnings reports.  Throw in evidence of an economy now cooling off it's robust rebound from recession, and waning effects of massive stimuli, and the recipe for caution is irrefutable.

As is customary during earnings season, Investment Conference activity slows. It's not so much that analysts worry about light attendance during summer vacation but, rather, light attendance by analysts busy at the office tweaking their models in advance of earnings, or adjusting them after the required post-earnings conference calls. With mounting evidence of an economy settling back to touring speed from acceleration onto the growth highway, this earnings season may very well be less about the earnings and more about future earnings, with last year's Q3 one of the toughest in history to beat, when GDP printed above 8% higher.

CIBC, undetetred by earnings season, has nonetheless scheduled Consumer Growth,, from the 13^th--14^th.  Because retailers and restaurants largely report in August, CIBC seems to think it can draw analysts to Boston for the event. Go to URL www.cibcwm.com/conferences/schedule.html/ to see presenting companies. Along with the restaurant, apparel, sporting goods, and pet store names, note Planalytics on the list. This company projects weather patterns. It is a favorite of Merrill Lynch's retail and restaurant analysts, while weather is often cited by retailers for missed sales and earnings--even when weather hardly seems the cause. With Sears and Home Depot buying some K-Mart locations, and Office Depot buying some from Toys 'R Us, Target selling it's Marshall Field's, and the sporting goods sector currently rife with merger activity, CIBC should succeed where others dare to tread this month. Of course, consumption, which represents some 68% of GDP, has been the backbone of   the economy for 4 years but, now, faced with higher rates and higher costs to fill their SUV's, may finally slow discretionary spending. Oddly, I think many who had been contemplating buying a new home might get off the fence and complete their purchases before rates get any higher--good news for homebuilders and mortgage companies. But, clearly, the gig is up: with another FOMC meeting on August 10^th, and the odds of another rate hike at that meeting, retailers may have seen their best days for awhile, even if seniors, who can now get better rates for their conservative retirement, spend a little more freely. Luxury names should fair best but they're not the names the Street watches. Wal-Mart, Target, TJX and Ross Stores are seen as the heart of American spending, along with the "dollar" stores. Those names might find the sledding tougher ahead. (For those keeping score of retail events, Bear Stearns begins it's weekly, nearly nationwide mall tour on July 28^th, the same day the Federal Reserve's Beige Book is due).

Industry events are heavy with retail buyers' shows, even as fall goods are starting to arrive at the mall. Believe it or not, retailers attending shows are already looking to order Cruise and Spring, though some will surely finish filling in their holiday offerings. Down here, in Florida, the signs are already up for Back to School, since school starts August 8^th. College kids are already shopping for their dorms, many planning on arriving on campus soon after public school opens here. Clearance sales for summer abound, though after an incredibly strong first half of the year, the pickings are slim, which might make for lousy retail numbers in July, traditionally one of the weakest months of the year for retailers. June's Chain Store Comps will be out the 8^th, with tough May comps to top, month over month but, also, tough year ago numbers to beat, since June was strong after a winter of waiting for the Iraqi a year ago in the first quarter. One advantage this June can claim was a later Father's Day than '03, which lengthened the shopping season in the month. An adjunct to all the buyers' shows for consumer goods is a wealth of food and beverage events, in July, including Food technology, which should give rise to more articles about taking the carbs out, as well as more questions about the safety of the food chain, from Mad Cow to Avian Flu.

Some highlight events of the month will include the MacWorld (Boston, 12^th--15^th) and Cisco Networkers meetings, though Apple recently shot itself in the foot, when it announced a dearth of older iMacs and a delay in release of the updated ones which, now, will miss some of the crucial Back to School selling season. Later in the month, starting the 21^st, AdHoc-MacHack also meets, which should do nothing but reinforce what most already know: Microsoft's ubiquitous software is full of holes, while the Mac OS hardly attracts any virus writers.  Speaking of Microsoft, it holds it's Analyst Meeting on the 29^th. Should it fail to announce some grand gesture for it's cash horde, the disappointment will be palpable.

Dentists meet but Cardinal Health's recent blow-up has tainted the distribution chain stocks, so that meeting won't be any help.  AIAA holds it's two biggest events of the year, Joint Propulsion in Ft Lauderdale, starting the 11^th, then Internet, Media, Signal Processing, and a host of other comm/media subtopics in Hawaii, starting the 23^rd. With both of these engineering events more about future technology, unlikely to be commercialized for 3--5, it's hard to see a trade from either, though I'd go with the Joint Propulsion before I'd look for salvage from Comm & Media, since the defense group has seen four years of strong allocation--contracts with 5--10 year lifespans uneffected by a change in White House control.

SemiCon West, starting the 12^th, is often one comprehensive analyst meeting for the SemiEquip group. In fact, JPMorgan plans a one day mini-investment conference concurrent with the event but it won't have an exclusive. Almost evey member of the sector has scheduled an analyst  meeting concurrent with the assembly, which may not do anything to lift the group or disperse the clouds overhanging.  While the analysts seem divided over prospects, split between those who think the cycle has already peaked, and those who think the peak won't come until fall, investors have already voted with their feet--heading for the exits en masse.

One potential bright spot may be @d:tech, in Chicago, from the 12^th to the 13^th, one of the few surviving Internet events, one of the few actively attended and, often, source of news. With the Democratic National Convention scheduled at the end of the month, the Google IPO awaited, and Internets outperforming all other tech because their earnings are growing better than most, this event might be a diamond in an otherwise rough market.

 Maybe it's me, since I have so many friends dealing with parents demonstrating the first signs of Alzheimer's, but it seems like that disease has gotten inordinate attention, not just since Ronald Reagan's death but before, when Nancy Reagan made a public plea for more stem cell research. By the time the World Alzheimer's Congress meets in Philadelphia, on the 16^th--2^nd, there might be nothing more to say about the disease, robbing pharmaceutical and biotech companies of an opportunity to shine.

 A small event, TAWPI's Global Payments Forum, on the 18^th--20^th, may be cause for iPayments and Checkpoint Software, among others, to shine. Every month, when my bank sends my check statement, there's another check that's cleared electronically. The Federal Reserve has been closing branches regularly, as fewer check swaps require fewer processing centers. Clearly, this is one area of growth, even if consumers have been slow to move to online banking.

 Wrapping up the month, the 26^th will be the opening day for Open Source Software, in Portland, Plug-In, in New York, as well as the Dem's National Convention, in Boston.  I'll let you go to the Premium Area of the website for more on OSS and Plug-In because the Democratic National Convention is more important, and could be the single event that prevents the market from mounting it's usual late month rally--often an earnings relief rally, when earnings come in better than some hoped earlier in the month, when warnings are the rule.  Wall Street loves President Bush for many reasons, including the tax free dividends, lower estate taxes, and lower capital gains taxes, some of which John Kerry has already said should be tweaked or eliminated. The Street fears Kerry, who have been vocally targeting the rich--a group the Street can claim to be.  With Kerry and Bush so close in the polls, and the  candidate of the convention often rising in popularity during his convention, the last few days of the month could see Wall Street more worried about a Kerry Presidency, which would pressure stocks--especially stocks of companies which have benefited most under Bush. Then, suppose Kerry pulls out a vice presidential candidate that strengthens his candidacy-someone of the stature of Colin Powell, let's say (Powell used because he is one of the least likely, since he's a member of Bush's inner circle.) Should Kerry manage to put together a ticket that looks more formidable, at the same time his polls should rise, during the convention, the overrated summer rally that's supposed to arrive at the end of July could be a no-show.  Add to the ingredients, the fact that the markets don't rise for 30 days after the first hike, which would be July 30^th, and there's more reason to think July will be a tougher month than some talking heads would have had us believe, when they were predicting one big fat rally after June 30^th, when the Iraqi hand-over and FOMC meeting were to take place. (The hand over actually arrived 2 days early). (Ironically, if tradition holds, Bush’s ratings should rise during the Republican Convention. So, should the street get more hopeful about Bush’s chances during the Republican Cenvention and decide to go long, the markets would rise with Bush’s ratings, which would, further, solidify the preception of Bush’s benefits to the markets)

 In sum, there's already evidence of the economy cooling off it's torrid pace, just as the FOMC has started to drain the punch bowl. Earnings announcements, no matter how strong, won't do much to assuage the doubts some already have cast about the current and coming quarters. The Democratic Convention should boost Kerry's ratings in the polls, which will worry Wall Street, even as the markets have never managed to rise in the first 30 days after the first rate hike that reverses a period of cuts. If you're looking for a summer rally, you might do better to look somewhere than in US equities, might even do well to look at bonds--something Bill Gross of PIMCO, the guru du guru of bonds has already been doing--because Chicago may have priced in more hikes, more quickly, than the FOMC will execute..  

© Sandi Lynne 2004 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.

The pundits are split on the pattern that will rule June. On one side there's the "sell in May and go away" crowd. On the other, there's the Presidential cycle that says look to go long in June, for a rally that lasts into the election. Afraid I don't believe it'll be that easy this year: don't think either will play out so neatly.

Traditionally, stocks sell off in June, continuing a pullback that usually starts soon after the Employment Report is delivered in May. The next buying opportunity often doesn't arrive until the second week in July, when earnings start reversing the negative psychology built during warnings season. This year, after a year long rally and correction, stocks managed to bounce starting the last week in May, and look set to continue that rally the first few trading days of June. But the Employment Report on the 4^th, as well as the FOMC meeting on the 29 & 30^th are bookends, between which, the markets may bob and weave, ending the month near where they started. Many are saying it will be clear sailing once the U.S. hands over control to a local Iraqi government on the 30^th. Combined with the FOMC meeting passing, there could be a collective sigh of relief but I wouldn't count on clear sailing. For the first time, the companies are facing tougher comps, while corporations haven't quite picked up spending to replace consumers, who are now spending more to gas up their cars.

You may not think higher gas prices will have an immediate impact but I'm already seeing fewer teens in the malls--an observation I made in both Florida and New York. Many counting on Saudi Arabia, or even OPEC boosting production on June 3^rd may be frustrated when they realize prices charged at the pump won't fall quickly. Not only could it take as much as 112 weeks for the extra oil to hit our refineries but no one's convinced me there are sufficient tankers to transport more oil, or refining capacity to convert crude to gasoline--not with refineries working at mid-90's utilization rates already. Then, with the Saudi's seeing more unrest, including an attack on it's pipelines Memorial Day Weekend, intentions and execution may deviate. Need I mention Iraq may get worse, rather than better, after the June 30^th hand-off? That Iran could slow exports if it wants to keep crude at high prices, or otherwise punish the U.S.

In an election, when terrorists have proven, in Spain, that they can influence elections, I'm not willing to reduce my discipline to some pat cliché and don't think others should, either. With mid-quarter updates starting early in the month, I'd rather trade the fundamentals--fundamentals I'm convinced are a wee bit less robust than they were in recent quarters. First, there's the tougher comps and the consumer diverting more disposable income to filling the family car or oil tank in the yard but, also, there are the higher costs companies are absorbing, with energy as much a corporate expense as a consumer's. Recent announcements from a host of companies planning to raise prices after years of flat or falling prices suggests there's more pain to come--even as the bond market has already priced in a year's worth of rate hikes before the FOMC has even moved.

For now, I think a rally in the first week of the month will peter out. I don't think we revisit the January highs, though I think we make it up to 78% of the way back. After that, I expect more churning, dipping and technical rallies but nothing close to a trend. By the weeks, ASCO, starting the 5^th, suggests biotechs should be favored, and could be the best performing group into the second week of the month. June is a month of some infrequent trade shows, including Candy Expo, Pork Expo, Coffee Fest, National Lawn & Garden, AMSEED (think soy beans and the like), Institutional Gold, BookExpo, which includes Retail Music Expo, 2 Investment house Supply Chain events, 2 Homeland Security Events, Air & Waste Management, a number of property security and insurance events, the Rocky Mountain & New York Gaming Summits, a number of retail-related buying shows, as well as the usual tech onslaught, including Planet Internet and Planet Storage, not to mention the Bear Stearns annual tech event, and no fewer than 3 investment house healthcare events. My point is, there should be opportunity for rotating rallies and dips, just as we saw in March, April, and most of May.

In sum, I'm ditching the pat cliches and sticking to my discipline, looking ahead to events--be they economic, trade, or other, and planning on keeping an eye on the bond market--especially Friday, the 4^th, when the Employment Report comes out. Should it be another exceedingly strong headline event, I'll be preparing for the FOMC to move a half point, rather than a quarter, which is what most are talking about now. And I'll be tuning out the pundits and their certainty about everything market related. There are two political party conventions, an Olympics, and an election to get through this year. that's a lot of high profile events that could present surprises. The same political slanted gurus who claim you buy a Presidential election year in June, may feel differently after Kerry announces his running mate. When incumbents look likely to lose, the markets have rarely done well before the election. It's incredible to me that in such an uncertain world, the street is not just complacent but so cocksure. Since markets are known to frustrate the most people most of the time, I can't buy into either camp and plan for a flattish market, once the opening week of the month closes.

Do I think that could happen? ANYTHING can happen but it's not something I'd bet the farm on. Heck, I wouldn't even beta nickel on that because my thinking trusts the most typical seasonality, that makes May, June and July weak periods that are relieved by a post earnnigs rally in late July through early August, that's often the last good chance to exit longs before the fall decline that lasts into October. For those interested in what's often performed well in May, that would be retailers, biotechs, leisure (summer travel), media/broadcasting and advertising (upfront season and series finales--as in Friends & Frasier to name two), and, right before Memorial Day weekend, energy, as air conditioning season, and summer travel is expected to increase demand for oil.  Tangentially, there usually some optimism for tech as the quarter known for 5--10% declines is passed, and there's anticipation for better consumer sales for Graduation & Father's Day, along with some better enterprise demand as the winter doldrums are forgotten and companies assess their needs for the rest of the year, adjusted for Q1 earnings. With accelerated tax write-offs for capital equipment set to expire at the end of the year (if Congress doesn't seek to extend it), there's reason for visibility to expand, since U.S. Corporations have rarely seen a tax advantage they could pass up.

PLAY-OFFS
April 2004

In short, it's all about earnings and rates this month, with speculation sure to be wild on both. Traditionally, financials have lead but, given the recent Employment Report, the popular carry trade looks terminal. Never mind members of the group that have already reported made their money trading and advising on deals--if the bond market starts pricing in an imminent hike, the financials will struggle more than usual. Techs have often been middle to late month bloomers, with SOX related stocks often outperforming all others. Biotechs are often strong in April, though the bigger events are in May, including ASCO. Retail and energy usually back off while other groups take center stage and, if the Employment Report is for real--and the economy actually added that many jobs in March--if it isn't only a case of the Bureau of Labor Statistics finally counting jobs that were added all along, or a one-month seasonal anomaly lead by striking supermarket workers returning to work--then travel and leisure should do very well, while consumer non-durables should bring up the rear. Meanwhile, some of the top performers of recent months, including R.E.I.T's and utilities should lag, as well.

© Sandi Lynne 2004 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.

MARCH MADNESS
March 2004

A month ago, I posted the February Outlook late after learning that our servers were on lockdown after being hijacked by some virus. Here we are a month later, and it's the same thing all over again, to quote Yogi Berra. I knew I was in trouble Friday, when minutes after a client told me her e-mail has been hijacked I started getting messages from the mail server, returning a slug of mail to me as undeliverable--mail I never sent, supposedly sent by people I never heard of, @wallstreetinadvance.com. I'm told this is a newer extension of the MyDoom virus that circumvents earlier anti-virus software loaded to thwart the original. I was also told the problem necessitated installation of a new drive which should be completed by 4pm but that was off the mark, since by 7:30pm the server still wasn't back up. Luckily, I notified my webhost the minute the first bogus e-mail was bounced back to me, so the servers could be shut down as protection until the powers that be issue a new antidote to the new strain but I'm concerned about the problem. At least nothing posted in the lst few days was lost. As we saw last August, when the northeast was shut down by a black-out, one of these days, a virus will shut down the web, completely, which will have more far ranging consequences than anyone can imagine--even as the FDA and others want to start adding bar codes and supply chain software to medicines. In the next 50 years, the web will become so intrinsic to every piece of life, it may be impossible to allow private companies to maintain it--may have to become run by some world body or federal agency, protected by an intellectual military--just like our war-making infrastructure is. Now that's a scary thought!

I picked March Madness as the title for this month's Outlook because the college basketball playoffs are the BIG TV event this month, now that the Oscars were moved to February. Hard to believe but we're quickly approaching the one-year anniversary of the Iraqi war and the start of the big rally. That means that this is the last month of easier comps in nearly every industry--which makes the coming earnings deal breakers for continued market gains. Possible, but no cake walk.

Traditionally, March is the weakest of the so-called "best six months of the yea," said to run from November through April. Because this quarter is, also, one of the weaker quarters of the year for business, earnings warnings are usually more prevalent, this month. However, given the easy comparisons, that may not necessarily be true this year. Furthermore, despite the strong earnings rebound last year, analysts refrained from allowing their estimates to get out of hand--even though some have, recently fallen prey to giddy stock target prices.

Historically, gold, and defensive sectors, particularly hi-yield sectors do well in March, including utilities, R.E.I.T.'s and financials with high yields. This year, I'd expect investment banks to do well, also, thanks to hectic M&A activity and the recent spate of issuance--including debt, secondaries, and the return of IPO's. R.E.I.T's were supposed to suffer as a result of disqualification from the low 15% tax on dividends, since they're not tax paying entities but that hasn't happened, after all. Just for the record, as you're preparing your trading sheets and dividend statements for your tax returns, please bear in mind Congress did NOT make the tax changes retroactive but set  them as of May 7^th, 2003, so some of those long term capital gains will still qualify for taxation at higher rates than you might have been planning.

Now, because our servers are locked down and unavailable, I'm working from 100's of pages of notes, instead of from my database, so excuse me if I overlook something I should include in this Outlook. However, number one of the list has to be the March 16^th FOMC meeting, which one can only hope doesn't have more language to set off the firestorm the February one did--when "considerable period" was replaced by "afford to be patient." Clearly, the Unemployment Report out the 5^th will be key to persuading the Federal Reserve's opinion about how long rates can stay low. Ya think? Well, check out Challenger, Christmas, & Grey, which says January announced lay-offs were at the highest level in months. Some of those lay-offs won't translate into applications for unemployment insurance for at least 2 months, thanks to both union and federal notice rules, that require some businesses to keep laid off employees on the payroll until they've had 60 days notice but plenty of those January lay-offs will show up as unemployed in February. Of course, lay-offs don't necessarily translate into unemployed, if other businesses pick up the pace of hiring but it's clear from Alan Greenspan's latest comments that that is NOT happening--much to the puzzlement of the government, while some are blaming offshore outsourcing.

Either way, the first week of the month promises big catalysts. Aside from the February Unemployment report, Chain Stores will announce Comparable store sales, also known as "same store sales" on Thursday--officially, anyway, though some will surely release sooner. Additionally, the first day of the month promises the Chip Billings report, a three-month moving average, as well as Intel's mid-quarter update on Thursday, the 4th. Given the inflows typical of the first week of the month, and precarious technical position of the NASDAQ COMP, as February ended, the first week of March may provide what most of February did for digital tech--the last chance to sell or hedge before lower prices arrive.

Away from digital tech, biotechs ended February as strong as any group, thanks to Genentech's receipt of FDA approval for Avastin. There are actually more big pharma events in March, than biotech events, which might help big pharma at least hold. However, if history is any guide, biotechs will hold up better than the overall market, in March--which isn't to say they'll see more gains. Instead, they should merely decline far less, occasionally sparking to test the recent high's.

Retailers are another group that's often weathered March well--like biotechs, seeing some profit-taking while holding relatively better than the markets as a whole. I think retailers had a strong February--which easy comps with last year's SARS and Iraqi war depressed activity will make look even better, before we even discuss the extra day to the month this year--Leap Day--since some will book Leap Day sales in their March comps, because it falls on a Sunday. The Oscar shift to February should impact Cinema owners, as well as the VHS/DVD sales and rental chains--not to mention all the pizza delivery names., while putting a tiny dink in restaurants, which often see business decline on Oscar night. Of course, it's an EXTRA night this year, so shouldn't be that big a deal. As it is, restaurants were strong in February and could remain so in March, as better weather tempts some folks out of their fox hole. Besides, restaurants are often viewed as defensive, so March has often been kind.

Strong inflows early in the month, along with heightened M&A activity, and better overall market activity--be it in issuance or trading, should make the broker/dealers relatively strong, in March. Here's a group I think sees continuing upward estimate changes which, ironically, won't stop if digital tech accelerates to the downside after the first week of the month--after Intel's mid-quarter update. Furthermore, M&A announcements often spawn additionally M&A activity, as companies rush to stay competitive with suddenly bigger peers. The low cost of money should only enhance that rush to merge.

As for trade shows and investment conferences, it's all about retail, media, entertainment, and some rarely seen sectors, like Cement--despite Morgan Stanley's early March semiconductor fest. So, while we're on the major trade shows, VoiceCon, CRM, Instant Messaging, and the rest of the digital tech events rarely attract as much attention as EHX--Electronic House, which begins on the 10^th. Recent announcement of Sony's later than expected introduction of it's Portable PlayStation disappointed many who expected it to give gaming a big boost for Christmas. Meanwhile, Microsoft holds a devcon at which, many speculate, it will, again, lower the price of XBOX. Get over it! XBOX is only one piece of the puzzle MSFT is building--it wants to dominate the living room the way it does desks. Softee will continue to build "TV" like characteristics into it's PC's, and rely on networking technology continuing to saturate homes. P2 is too far ahead of XBOX for XBOX price cuts to make a real difference. What is helping to sneak PC-like qualities into the living room is Toy Makers' plans for Christmas top sellers, many of which are using VEIL technologies to create interactive toys meant to be used while watching TV shows or DVD's. In other words, it's NOT all about gamers but the goal to see PC-like technology permeate every room of the house--the failed interactive bathrooms, not withstanding. (You don't remember those? Bathroom doors that were supposed to allow "visitors" an opportunity  to read and respond to e-mail while…..?) Want another reason to pay attention to gamers? How's about the Game Developers Conference, in San Jose, starting the 22^nd? Speaking of the third week of the month, CTIA--the Cellular Telecommunications and Internet Association and the IWCE--the International Wireless Communications Expo both start on that date, in separate cities, just so you know how close to the end of the quarter some comm companies will have opportunity to give analysts a heads up and, perhaps, a chance to recover from selling between the 5^th and the 22^nd.

Mid-Month, Cambridge Healthtech Institute will hold it's annual Molecular Medicine Marketplace, while the International Pharmaceutical Industry Congress meets in New York, even as INTERPHEX meets in Vegas. The third week of the month promises two Cardiology events, while Consumer Directed Health Care meets at the end of the month. All the healthcare/biotech events should serve to keep a bid under the group--even if it sees some profit-taking.

The group with the most meetings remains retail. With the New York Fashion shows over, ready to wear takes over, with buyers flocking to New York, in March, to make their back to school decisions. But it isn't just apparel, cycles, fly fishing, snow boards, inline skating, surf--you name the niche and there's a retail meeting in March to satisfy--including the ICSC Specialty Retailing Conference--from the Council of Shopping Center owners, a group that derives a portion of it's revenue from a percentage of tenant sales.

Of course, March is the last month of the quarter, which makes it the month of earnings warnings. A lousy March, last year, should assure most companies can post year over year gains but it's the analyst estimates that companies must meet--and March is the month warnings often issue merely because it wraps up the quarter for the majority of companies. NOW, March warnings often cause sell-offs NOT because the warnings are so numerous--or the misses so large--but because it's so rare for companies to upside in March, offsetting the warnings. What happens is, a seeming cacaphony of warnings that aren't offset by upsides begins to make business activity sound awful, spurring a sell-off that often overdoes it to the downside, setting a crescendo in April, often by mid-month, when the real earnings start coming out.  In the past three quarters, or so, warnings have been few and far between so any pick up in warnings this month, could really do some psychological damage--especially with stocks at high multiples, and the NAZ Comp, as mentioned, sitting precariously above 2K. Meanwhile, the S&P and DOW entered March in much better shape but still poised above important trendlines. All the averages have been toying with their respective downtrend lines from the 2000 highs, with NASDAQ the only one to decisively break above before it's recent failure. Given the 7 year bull market that built to that 2000 high, and the devastating 3 years that followed--the 9/11 attacks, in particular--hesitation before conquering those downtrend line should not be cause for tremendous concern. I think all the major indices will take out their downtrend lines before the nearly year old rally will be declared over--so the questions become when, and whether a break out will sustain, and mark the next leg of an ongoing bull market or the final swan song for the year old bull--a blow off top. Luckily, I don't have to answer that right now, because neither will be March business. If you're not invested in the groups that tend to outperform in March, think about taking some off the table or hedging your positions, because defense should be the best offense, this month.

© Sandi Lynne 2004 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.

RETAIL and BIOTECHS USUALLY RALLY
February 2004

IF you back test the past  few decades you'll see how often Retail has outperformed, in February. Even when retail declined, it's managed to decline less than other sectors. Biotechs have been another group that's often shined in February--even in years when they were strong in January, as they are often are. However, biotechs usually surge early, than hit a lull after the first week, before resurging at the end of the month. With retail, the first signs of interest after December comps are reported early January usually hits between January 25th and the 5^th of February, with analysts first piling on the move around the 5^th. Why the 5^th, you ask? Cause that's the day retailers have often reported their January comps--give or take a day on each side. Remember, this is a site dedicated to event driven trading--events that serve as catalysts for stocks to move up or down. Whydidya think I annually said February 5^th and August 5^th are the dates by which you want to own retailers? And it's not only the quarterly comps but the earnings that follow, in February and August. Fashion Week, World Shoe, MAGIC, and other retail- related events happen to fall in February, which allows analysts to not only contemplate quarterly comps and earnings but project out to Back to School for winning names. Meanwhile, as if to emphasize the point, many investment houses hold Retail, Restaurant & Apparel conferences, in February, with Bear Stearns annual summit often credited for lifting those consumer stocks when it's earnings anticipation that does it. Heck, even Cosmetics, Toiletry's and Fragrances have a meeting in February, and ya know that doesn't happen every month.

Biotechs have often outperformed in both January and early February. They flag in the middle weeks of February, then usually make another push higher at the end of the month. The reason for the late month surge, you might rightly ask? The Genomic Tri-Conference, which is taking on a new name this year, without fully abandoning it's old name.

The Fed Chairman makes his semi-annual trek to Congress in February, this year on the 11^th and 12^th, while OPEC is meeting in Algeria, of all places. Wanna bet the dollar is as much a concern within OPEC as it will be for the G-7 meeting in Florida, the first full weekend of the month.

There's an extra day off for a holiday, this month, the consolidated President's Day, on the 16^th, but only the treasury markets close early the Friday before. If you think that'll make Friday, the 14^th, a Valentine for investors, fegheddaboudit! This is one holiday that hasn't seen a rise in advance in more than a decade. This year could make it an even dozen.

February is notable for many analyst meetings that don't favor any one group. Media companies mostly report this month but, unlike retailers and their monthly comps, the Nielsen ratings don't translate into near-term earnings intelligence--especially if a new hit show was sold out in the "upfront" market. A new hit show might help project out future earnings but it won't do a thing for the present.

Big, big meeting mid-month, starting the 11^th, is Advances in Cancer Research, which is why cancer concentrated biotechs hold their early month gains better than others but it's also worked to lift big cap pharma, a group that's lagged for years.

There are a number of Analyst meetings, including tech meetings of one sort of another hosted by nearly every investment bank large and small but those aren't the ones that get the most reaction. Conferences like Prudential's Planes, Trains, and Autos are concentrated and involve a manageable number of companies--unlike tech, which involves thousands--so plan on hearing about transports come mid-month, in advance of Pru's 2/18 kick-off.

Agriculture and metals meetings are less frequent, so the February concentration is notable--especially since supermarkets, restaurants, and mining shares largely report this month. Of course, gold often corrects., this month, but that's usually an opportunity to snap up some bargains before the metal soars in March, when India is usually a heavy buyer, stocking it's jewelry manufacturers with the raw materials that will show up in boxes under the Christmas tree.

Come the last week in February, the schedule promises GSM World Congress, Broadband Wireless World, Internet Telephony, a meeting of the Optical Society, and Goldman Sachs' Technology Investor Conference, so you know tech investors will be ferreting out clues to March's mid-quarter updates.

The biggest shows of the month, are MAGIC, for the apparel industry, in Las Vegas, as well as National Manufacturing Week, in Chicago, a catch-all for multiple concurrent trade shows that cover every facet of manufacturing--including collaboration and supply chain software.

This month is also big for broadcasts of entertainment events, from the SuperBowl on the 1^st, to the Grammy's on the 9^th, to the month-ending and very early Oscars, on the 29^th, this year. So happens, almost all the broadcast companies report earnings the second week of the month, to let's call that a sweeps week.

Both Intel and Texas Instruments hold devcons this month but any support those meetings provide are likely to be measured in nanoseconds. It's simply too early in the quarter for companies to have a good handle on how the quarter is going--especially with so many companies coming off their strongest quarter, while all quarters have been back loaded, lately. There's a World Outsourcing Summit the third week of the month that might help live the Contract Manufacturer's, also known as EMS stocks, like Jabil, Solectron, Sanmina, Flextronics, and the like, but I wouldn't lose my head over it, unless the group is very depressed by the 23^rd. Often, it's the companies doing the outsourcing, rather than the companies winning the business, which tend to lift on word they're trimming their operations. Again, there are better months to own tech.

Actually, there are better months to own stocks, in general, but if you must, I'd stick with retail and biotechs early, then return to biotechs for the end of the month and March, when it often outperforms, again. Personally, I'd bet on the reliability of retail, first and foremost because the group has done so much to deploy information technology to manage it's business so much better now, than in the old days, the best have often beaten estimates, even when their comparable store sales haven't met expectations.

In sum, February is short but often no less painful for it's brevity, unless you're looking for longs amongst retailers and biotechs. On the flip side, if you see R.E.I.T.s and mining stocks getting clocked this month, you might start looking ahead to March, when both have often outperformed, along with utilities.

© Sandi Lynne 2004 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.

WILL IT BE A HAPPY NEW YEAR?
JANUARY 2004 

It’s hard to believe another year has gone by, harder, still, to believe how absolutely CERTAIN every analyst seems to be about another year of gains in 2004. Well, excuse me if the deficit, dollar and crude concern me. Pardon me if I happen to think the equity markets won’t be able to ignore them much longer. Suppose OPEC decided to start trading crude in Euros instead of dollars? Whaddya think happens to equities then? And, while I’m no currency expert, I do know that currencies tend to move directionally with such persistence that support lines and trendlines don’t mean much once the directions is as clearly defined as the downtrend in the dollar is. Furthermore, should OPEC switch to Euros and the dollar trend continue, the real cost of crude in America will rise in line with the fall in the dollar, creating the same pressure on the US economy as it did back in the summer of 2000, when I was able to foresee the recession that was blooming long before the gurus became wise to it. 

On my list of concerns is how certain every analyst and talking head is that 2004 will be another year of gains. When did the market EVER do what everyone expected? And it’s not just the talking heads, it’s VIX that confirms every trader feels the same way. 

Now, that doesn’t mean January has to be the month when the market whacks everyone on the side of the head. BUT, if it isn’t January, January may just turn out the best month to plan for the market to do otherwise. 

The trade show calendar kicks off with a roaring start the first full week of the month, with investment conferences competing with big trade shows, CES—the Consumer Electronics Industry’s bi-annual meeting the biggest for sheer numbers. However, the Detroit Auto Show will be where 2005 models are introduced, while the SuperShow is the sporting goods industries second biggest show of the year, surpassed by only the summer show. Time was SuperShow met in March but in recent years it moved to February and, this year, it’s mid-January, the earliest ever and, for the first time, earlier than ISPO and the other European shows. Since 2004 will be another Olympic year, it’s importance for retail should not be understated. 

The FOMC has it’s pre-Greenspan Congressional testimony meeting the 27 and 28^th, while the coming Presidential elections will start occupying more and more newspaper space everyday. 

Rate talk will again resurface, as traders anticipate another strong earnings season, in full swing by the third week of the month. Trouble is, expectations have risen, reducing the likelihood of the kinds of surprises we’ve recently seen. Additionally, with many companies reporting earnings up 30, 40, and 50% in the 3^rd quarter, it’s hard to believe the quarter over quarter growth will prove as strong. 8.2% GDP is typical coming out of recession, and for developing nations—not huge countries like the U.S.  In other words, I’m suggesting that most of the BEST news is already out, with lower incremental gains ahead, a fact that should become abundantly clear when companies provide guidance with this month’s earnings reports. 

Add to these issues the fact that IPO’s will accelerate, while the government will become an even bigger borrower, and it’s hard to envision the kind of upside momentum the markets have recently seen. 

As I often do in January, I’m expecting strong action for the first day or two, followed by some serious profit-taking in advance of earnings, with another rally the last week of January into the first week in February, before a winter slump sets in. As always, I’ll be looking to position in retail the last few days of the month, and ride the group in February and March, when it reports earnings—earnings that are almost ALWAYS better than feared, as retailers have learned to cut costs and squeeze out better margins. 

I’d expect energy to pullback again, though it’s another group I’ll be interested in for February and March. Biotech exhibited leadership early in the rally but the January Show of Shows for the group—the Hambrecht & Quist conference in California—has rarely been the boost to the group it was before Chase bought H&Q. The difference became even more pronounced after Chase and JPM merged. In the most recent years, the JPM Conference has been as much big cap pharma as biotech, offering less of a boost to the biotechs than used to be seen. A couple of big conferences the last week of the month, including Rheumatology and Immunology should give the group another spotlight. 

The Detroit Auto Show, which used to fall over New Year’s now meets beginning the first weekend of the year. While it still promises automakers’ introduction of 2005 models, the J.D. Power Roundtable doesn’t even meet in the same city. Goldman Sachs plans a conference during the show but they won’t have it to themselves, since every analyst in the sector will be there. For the past few years, fuel cell stocks have had a tradable run during the show but I don’t expect one this year. It  feels like the flight of speculative issues has already run it’s course in the past few months.

 Maybe I’m wrong and everyone else is right: Maybe 2004 will be 2003 all over again. But you won’t convince me unless I see the dollar start gaining on foreign currencies and both gold and crude take a step back. 

Happy New Year to one and all 

© Sandi Lynne 2004 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.

2003 Monthly Outlooks HERE

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