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Wed morning we learned that KMRT is selling some more of their stores
and it seems like Sears is buying a lot of those locations. We think
that's pretty interesting because a lot of the older KMart stores
were in rather poor locations to start with. On top of that, Sears
said the purchase would be slightly dilutive in 05.
We put a "long/short" on JCP, and it triggered a buy at 38.10. Well
it ran for 30 cents, and fell apart. We held it past our entry, but
weren't willing to hold it much further as retail wasn't so strong
across the board. We dumped it for a .12 loss, a bit more than we can
call "flat". We use about ten cents as the "flat line" most of the
time. So, if we say we sold something flat, that usually means plus
or minus up to ten cents from where we got it.
Today the retailers didn't do a whole lot. WMT fell another buck, but
LOW gained fifty cents. HD and dozens more were closing within 50
cents of neutral. Overall it was a "wait and see the jobs report"
sort of thing. Friday is the jobs report and if it's good, we think
the retailers move higher. If the jobs report is weak however, we
could easily see them roll over even more. It seems our poor consumer
is running out of easy money and it's starting to show up.
If we roll over, JCP is still a good short. If they bounce, JCP will
bounce too. We are leaving it on the consider list.
http://clix.to/wallmann
-----------------
After the bell the auto industry released horrible sales numbers for
the month. Since GM and Ford make their money in financing, rising
rates are the last thing they need. It's getting very close to long
term shorts on both.
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Once again there was not a lot of big pharma news out on Wed. but we
didn't really care. We were holding ELN and as you've seen it can be
a bit volatile at times, so we were pretty interested in playing it
close to the vest. Well, once the FED nervousness was shaken, it
turned up and ran for 36 cents. Not a bad showing actually.
Overnight we learned that the "probe" that the US attorney General
had implemented on Cardinal Health has turned into a full scale
investigation into how revenues are recorded, and their guidance has
changed in a big way. This is never a good thing. They dropped some
17 dollars on the day.
As said in the past, the drug patch is full of intrigue, and it seems
CAH was doing some funny accounting. We were told all this stopped a
couple years ago when the FED's got involved and Spitzer went on the
warpath. Obviously they haven't caught all the rats yet.
Our only drug play has been ELN and so far it's been doing well for
us. There have been some shaky moments but for the most part, it's
holding up really well. We don't need to add to the sector Friday.
--------------
Wed. morning RIMM could do no wrong. After the blow out numbers they
posted Tuesday night, they were on fire, and a ton of shorts were
being forced to cover. For the most part it was a plus for the
telecoms, but they weren't spreading the joy around quite as well as
they could have.
We had JNPR on the list and when it crossed $24, we took a shot at
it. We had a couple nervous moments for sure, but when it was all
said and done, it did gain about 50 cents for us. Our other telecom,
the lowly Indian stock VSL perked up a bit today, gaining enough to
keep it interesting.
Today everything started on the right foot, but then shifted to the
wrong foot quickly and we were faced with making a decision on JNPR.
Do we hold it past our entry price? Nope. Not in a market that
couldn't even open green. We dumped out flat with about 9 cents in
the pot.
Our other idea, VSL however did well, gaining another few cents for
us. So far so good there. So, what happened in telecom land today
anyway? We think the funniest thing was Verizon. They had to admit
they might have overstated their hardline long distance figures by
1.5 million subscribers, but hey, don't worry it won't hurt earnings.
Why not slap us in the face while calling us stupid? They also agreed
to buy Quest's wireless for 418 million dollars.
We are happy with our Indian telecom and don't want to play anything
else for Friday. If the telecoms bounce, QCOM above $72.55 or JNPR
above $24 sounds about right. We are just going to pass however.
http://clix.to/wallmann
--------
How well is our financial system dealing with higher interest rates?
We know that Washington Mutual said they were getting hurt by them
and on Wed morning we saw the numbers out of the MBA. You can ponder
what it all means:
The Mortgage Bankers Association's composite index tracking
applications activity dropped by 4.4 percent in the week ended June
25 compared to the prior week, to reading of 575.0. Also on a
seasonally adjusted basis, mortgages for home purchases fell 4.2
percent, while refinancing's dropped by 4.7 percent.
It's our opinion that this entire economy is tied to housing and when
it falters, the effects will be huge. For the guys on TV who think
that this economy does just fine with a rising interest rate
atmosphere, we do beg to differ.
Today the financials had no clue what they wanted to do. Some like GS
ended the day down just a bit, while others like MWD for instance
fell hard. Unfortunately we had MWD and we had to sell the darned
thing right before going negative on the play. That's a shame
considering we were up nicely at one point and didn't take it home.
CFC was actually fun to watch. CFC fell past our entry and fell more.
We simply had to sell it and move on right? Wrong. We hung onto it
and sure enough it ended the day "unchanged". Now why would that
happen? Because they are going to go out of their way to try and
protect the mortgage lenders and CFC is the biggest of them all. Yes
they are going to crash and at some point we'd think they will be
under $20, but at this time, they are tossing the kitchen sink at
them.
We are going to sit tight with CFC and see if it bounces Friday, no
new plays in the financial sector.
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MSFT was in the news this morning with a brand new msn search page
that looks like a mirror image of Google's. Other than MSFT getting
deeper into the search, was there any other net news today? Merrill
came out and downgraded Yahoo, and that put all of them in a bit of a
funk. We cane into the day carrying AMZN and EBAY, and we dumped AMZN
as it was falling. We gave EBAY a lot more wiggle room simply because
we had sold half of that position earlier and had the wiggle room to
play with. Looking back, we should have dumped that too.
We are quite at ease only having one net heading into Friday, so we
aren't looking at adding here. If you need a play, a YHOO bounce
makes sense and watch SYMC, they dipped hard today, but there have
been new viruses in the news since Monday, and they could bounce.
http://clix.to/wallmann
---------------
The biotechs had our attention on Wed. Not because there were little
press releases bandied about, no we wanted to see if the money would
scatter from them once they saw that indeed the rates were going up.
Well the answer was a resounding "NO" as the BBH gained over 3. Our
favorite, although not in play, DNA gained over two. We did go back
into OSIP as it crossed 70, just as we said we would, and it ended
the day up at 70.44, not a lot of cushion, but not bad.
Today a lot of that good fortune fell apart. The biotechs all started
out looking good, even with the poor market open, but not long into
the day they started drifting and then they started falling. We
didn't have much wiggle room in OSIP and decided to get out flat. It
was a decent move being that OSIP fell a long way before bouncing
back some.
Will the bio's bounce Friday? We think so and are looking at OSIP
once again above $70, but we are also looking at AMGN. They've been
hit hard, really hard and if they can get above $55, we'll take a
shot at a rebound run in them.
---------
Wed. morning TASR came out saying the military had ordered some 1.8
million worth of the non lethal stun guns from them, and they saw it
as a tremendous "beginning" inroad to more military sales worldwide.
At one point ahead of the open, they were up $7. There is no other
stock that moves like this thing, it's definitely achieved cult
status. But TASR wasn't the only "security" stock in play Wed, as
another stock we've talked about in the past month, IPIX made this
news:
OAK RIDGE, Tenn.--(BUSINESS WIRE)--June 30, 2004-- IPIX Security, a
premium supplier of video surveillance technology, today announced
the signing of an agreement with Titan Ltd. for distribution of IPIX
Full-360 degree video surveillance systems. The distribution
agreement authorizes Titan to supply, install and support IPIX
CommandView(TM) systems across Turkey, Iraq and the Commonwealth of
Independent States of Azerbaijan, Kazakhstan, Turkmenistan, and
Uzbekistan.
With the summer games coming up, the idea of global security is a
high priority and these little niche companies are getting the
business.
Okay the techs closed out Wed. with a 12 point gain, which is about
right for FED day. How'd we do? Not bad, although we didn't have much
in tech land. Our only hold coming into Wed. was the SMH, and it did
well for us. CSCO however never crossed the buy in target, so we
didn't play.
There was something interesting today in tech land that didn't make
as much of an impression as it should have. This morning Emulex had
to warn about earnings because some original equipment manufacturers
were "tepid" in regards to buying things. Don't you find that odd
that we are supposedly in this economic sweet spot of all time, and
yet some major manufacturers are tepid?
Well tepid was a description you really couldn't use on the market
today, the market stunk and the techs stunk just as bad as everyone
else. The combination of ELX warning, YHOO getting downgraded and the
possibility of some form of terror strike here in the US over the
long weekend had them taking profits all day. When the bell rang and
the techs were down 32, we heard the moaning in the pits, but we also
heard the lame excuses. Overall it was a profit taking day, and
nothing more. We expected it on Friday.
So, it came today, how'd we do? Not so well actually. We didn't have
much in tech land, just the SMH, and when it started really falling,
we bailed out of it with just 70 cents to the plus side. Granted we
had sold half on the 28th for 37.11, it was still not what we wished.
That left us naked in tech land once again. In a way we are not
complaining because like EMLX today, you never know who's going to
come out and warn, but we think we might get a bounce Friday and we
don't have anything to go for the ride. So, what do we do about that?
We are going to look at the QQQ's for tomorrow. If the techs bounce,
the Q's will bounce and we'd be happy with that. The Q's closed at
37.04, and a move above 37.20 gets us in.
http://clix.to/wallmann
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