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The moderate 14.75-point Nasdaq gain on Tuesday was mostly due to short-covering, probably on the back of a modest amount of dip buying or possible even a little real buying. The shorts had hung out hoping to see another leg down after Friday's decline, but they can only wait so long and tolerate only so much buying pressure before they cave and have to cover their short positions. That said, I wouldn't get too optimistic until we see Nasdaq tack on at least another measly 75 points and close solidly above the 2,000 level.
[10/25/04] People will continue to position in advance of the advance Q3 GDP report due out on Friday. Unfortunately, it is is now ancient history and people are much more interested in what's happening since Q3 ended in September.
The Conference Board Consumer Confidence posted a moderate decline in October, it's third consecutive monthly decline, and is now roughly at the same level as in April and May. The report noted that "Subdued expectations, as opposed to eroding present-day conditions, were the major cause behind October’s decline in consumer confidence. And, while consumers’ assessment of the labor market this month showed a moderate improvement, the gain was not sufficient to ease concerns about job growth in the months ahead."
The ICSC-UBS Weekly Chain Store Sales Snapshot registered a moderate decline (-0.6% vs. -0.2% last week) for the week ended October 23 compared to the prior week, and sales were up moderately (+3.7% vs. +3.4% last week) compared to a year ago for “comparable-store sales”. This was a mixed report, but there is a lot of volatility. The group is forecasting 3.0-4.0% growth for the month of September on a year-over-year basis.
The weekly Redbook Research Sales Average report registered a moderately sharp decline in chain store sales (-0.7%) for sales so far in October (October 23) compared to the same period in September and registered a moderate gain (+3.1% vs. +2.9% last week) for the week compared to a year ago. This was a mixed report. The report notes that "Some department store retailers said sales growth was being driven by clearance, rather than by full-price merchandise as fall apparel had been delayed by prolonged summer like weather."
The AAA Daily Fuel Gauge Report showed a modest rise since Sunday (from 2.017 to 2.019), erasing the declines of the previous two days. Regular unleaded gasoline is now 13.3 cents above the level of a month ago, but still 3.5 cents below its May peak.
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ATA Holdings (ATAH), parent of ATA Airlines filed for Chapter 11 bankruptcy protection. We can only hope that the remains will be bought up at fire-sale prices or that the firm is outright liquidated. It will be very unfortunate if they get an infusion of cash and then continue to limp along. The airline industry desperately needs more restructuring. The silver lining in the dark cloud of high fuel prices is the incentive for the airlines to consolidate.
KB Toys, already in bankruptcy, says that it will close 141 to 238 "underperforming" stores by the end of January as part of its reorganization plan and that this will be the final round of store closings.
Electronic Data Systems (EDS) announced that it will be offering a voluntary early retirement package to 9,200 employees and expects about half of them to accept the offer.
[10/21/04] I attended the VentureOne Exchange venture capital conference up in Boston on Tuesday, October 19 and Wednesday, October 20. Click here for my write-up of last year's conference.
[10/21/04] I'll have a write-up on the conference soon, but the simple summary is that venture investment is making a painfully slow comeback. It is coming back, but at a very slow pace. Even worse, companies are raising less money and hence hiring less (or hiring offshore) and spending less. The net effect is that current venture investment is only a very modest boost for the economy, and a much smaller boost than it could be.
[10/11/04] For some background information on venture capital, click here.
[10/12/04] Since my consulting income has picked up a bit recently, I'm going to up my monthly investment, by at least a factor of three, as of my November investment.
[6/29/04] As an experiment, I have set up a new account with ShareBuilder and will be making a modest dollar-cost averaging investment each month. At a cost of $4 per month I will be buying a fixed dollar amount of the S&P 500 Tech Sector ‘Spider’ (XLK). The money for the investment will be automatically taken from my bank checking account. My purchases will be made on the first Tuesday of each month, beginning on July 6, 2004.
[10/23/04] Short-term (10-day): Very volatile, and modestly bearish.
[10/26/04] Short-term (1-month): Very volatile, but modestly bullish.
[10/15/04] Short-term (2-months): Moderately bullish.
[10/22/04] Medium-term (3-months): Very volatile, but modestly bullish.
[10/26/04] Medium-term (6-months): Moderately bearish.
[10/15/04] Medium-term (9-months): Moderately bearish.
[10/15/04] Longer-term (1-year): Flat, volatile trading range.
[10/15/04] Longer-term (2-years): Moderately strong bullish.
[10/15/04] Longer-term (3-years): Modestly bullish.
[10/15/04] Longer-term (4-years): Strongly bearish.
[10/15/04] Longer-term (5-year): Moderately bearish.
[10/15/04] Longer-term (6-year): Modestly bullish.
[10/15/04] Longer-term (7-year): Slightly bullish.
[10/15/04] Longer-term (8-year, 9-year, 10-year): Modestly bullish.
[10/15/04] Overall outlook: confused and volatile, but with a modest upwards trend. The economy is neither "booming" nor "busting", but making modestly positive progress at restructuring problematic industries.
[8/23/04] Clearly the elevated price of crude oil has to have some negative impact on the economy, but the big question is how much impact. Overall, the economy is less sensitive to the price of oil and “oil shocks” than in past decades, but some sectors (such as airlines and chemical companies) are significantly more sensitive, whereas most sectors are only modestly sensitive. The current price escalation in fact has not been caused by any supply shortage or any excess demand by end users, but is merely due to a dramatic level of speculation in crude futures. The bad news is that we don’t know how much longer that speculative ‘bubble’ will continue to grow. The good news is that oil at these prices is not as attractive an ‘investment’, so the speculation will be increasingly susceptible to profit-taking and renewed interest in short-selling. Besides, if oil really were expected to rise dramatically from here, we’d see it in the price of futures in coming years, and we don’t. In fact, futures ‘predict’ that the price of crude will decline in coming years. In any case, elevated oil prices will be a moderate drag on the economy, but not so much as to spur accelerating inflation or to trigger a recession. Maybe it will trim a quarter to half-point off GDP, but that’s about it. Besides, people and businesses will adjust their lives and operations to further reduce their dependence on expensive oil. And finally, high-efficiency hybrid-electric vehicles are beginning to debut and anxiety over the price of gasoline will simply accelerate the development and introduction of such innovative products, which will dramatically moderate the demand for oil a few years from now.
[8/7/04] The latest economic data continues to support the thesis that the U.S. economy is solidly into a gradual, zigzag, underappreciated, stealth recovery. It will be another two years before the economy is fully back on track. Unemployment will decline only gradually. The bankruptcy rate will decline off recent highs, but remain at a fairly high level for another two years. There are still quite a number of businesses (and entire sectors) that will need to be restructured over the next two years as well.
[7/3/04] A major uncertainty is the state of the economy in Q4 and the first half of 2005. We currently have enough momentum to do well in the current quarter (Q3), but nobody really has even a halfway decent handle on how that momentum will play out towards the end of the year and into next year. We have the looming specter of rising interest rates, but the Fed would certainly back off if the economy started to sputter. The bottom line is that the economy is likely to be doing “okay”, but probably not a lot better than “okay”, in Q4 and early 2005.
[7/6/04] Some people are protesting that company profits could suffer as companies run out of costs that they can cut. That’s complete nonsense. First, companies will never run out of costs to cut. But more importantly, one of the factors that has been holding back growth of business revenues (and profits) over the past three years is the fact that companies have been dramatically cutting costs and the cutting of a cost for one company is the cutting of the revenue of one or more other companies. That cost-cutting binge was exerting a distinct headwind on businesses, but that headwind will in fact fall off as the cost-cutting moderates. And as revenues begin to grow more strongly, companies will begin to reverse the process and both spend more and hire more workers. Continued technological advances will spur further cost-cutting, but on a more moderate basis.
[3/13/04] A major uncertainty that will begin to loom over the economy and the financial markets is the impact of the outcome of the Presidential election. Although the political rhetoric can get very intense, the fairly even split in Congress makes it very unlikely that either party in the White House will be able to dramatically change federal economic policy significantly over the next four years. Besides, both parties are interested in reducing the federal budget deficit. The proposals from both parties will be hotly debated, but I can’t see that either side is either a clear winner or a clear loser for the economy and the markets.
[12/29/03] The two key factors driving the pace of the recovery will continue to be the ongoing process of shutting down or restructuring ‘problem’ businesses and the pace of the formation of new businesses which will create new jobs.
[12/29/03] A big wildcard in 2004 will be the possibility of a new wave of corporate cost-cutting as companies burn through the easy part of revenue growth and are forced to revert to cost-cutting to keep up earnings growth. The problem is that one company’s cost is another company’s revenue or an employee’s income, so more cost-cutting can boost earnings in the near-term but risk putting intense downwards pressure on business spending and employment. This cost-cutting process will moderate once companies begin to build up a deep enough backlog of unfilled orders so that they can keep revenue growth at a consistently strong pace to keep earnings growth up. The economy will survive this process, but the zigging and zagging of the pace of the recovery will continue.
[9/1/03] Our Tech Stock ‘Safe’ Signal is still stuck at 0.00 (no safety) since none of the big tech companies are even hinting that they are seeing any significant improvement in demand. There does seem to be some sense of stabilization and a modest hint of improvement, but no clear and decisive indication of a dependable ramp up in revenues and earnings.
[5/25/02] DISCLAIMER: I cannot and do not offer any recommendations of stocks to buy or sell. I may on occasion discuss companies that I am considering or myself have bought or sold, but the reader must do their own research before making their own purchase or sale decision. It is never a good idea to buy a stock just because someone else tells you to or even merely mentions a company in a favorable light.
Jack Krupansky -- The Unrepentant Optimist (Click here for Jack's Bio)
Updated: October 26, 2004 10:01:15 PM -0400
Copyright © 2004 John W. Krupansky d/b/a Base Technology