STOCK MARKET WATCH, TUESDAY OCT 7....(#1)

Don’t Get Fooled Again

We’ll be fighting in the streets
With our children at our feet
And the morals that they worship will be gone
And the men who spurred us on
Sit in judgment of all wrong
They decide and the shotgun sings the song….
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again
~ The Who ~

For those who are worried, I’m not getting into the music business. Nor am I joining a rock-n-roll band. However, the lyrics of this song sung by The Who resonated in my ear as I thought of this quarter’s earnings season. Each quarter Wall Street and companies play the earnings game, a quarterly entertainment designed to thrill the masses. The actors are the same and so are the lines. Wall Street, major corporations and the media give their performance with much aplomb and certainty. The plot is always the same. Analysts lower earnings estimates, companies easily beat them and investors respond enthusiastically by bidding up shares. Nobody looks behind the stage or examines the numbers. In a world of make believe, the lines are accepted for what they are. The numbers always look good and companies always beat estimates. Just like a Hollywood movie there is always a happy ending.

This quarter will be different. There is a lot riding on the numbers. After promising a second-half recovery for the last four years, it is time to deliver. Stocks have exploded since their October lows of last year based on an economic recovery that is finally expected to take root and deliver spectacular earnings. In anticipation of this occurrence investors, both institutional and individual, have been bidding up shares all year long. So far there is nothing to show for it but expanding PE multiples. Investors have increasingly been willing to overpay for earnings that are of lower quality and less consistent. Earnings have risen year-over-year, but not by much. Since Q1 they have actually been declining and are expected to fall for the remainder of this year. You wouldn’t know this of course by following the headlines. The numbers always look good, if not spectacular. Pro forma earnings have been rising; while real earnings have been declining quarter-over-quarter. The difference between GAAP and CRAP is still as wide as the Grand Canyon. There are also widening differences between what companies report to shareholders and what they report to the IRS.

The Inside Story

Despite the gains in this year’s speculative stocks reflected by the lead of the NASDAQ over the S&P 500 and the Dow, fundamentals always win out in the end. Perhaps that is what insider selling is telling us. Who do you think has the most reliable information as to how well the company is actually doing? The insiders or mad hat investors who are chasing returns? Despite inside knowledge the individual investor can have access to the same information if he or she is prepared to do some homework. The information is there, buried in the company 10-Q report and especially in the footnotes. The footnotes tell the story behind the story and are truly critical in understanding a company’s true health. The companies would prefer that you don’t read them. Wall Street would prefer that you ignore them, because it may cast a doubt on their perpetual story that it is always a good time to be buying stocks. The footnotes, along with Management’s Discussion and Analysis, should be a must read for investor.

much more...

Nice wrap up. Let me ask you this, when do you think the bottom will fall out of this and how far will we fall?

:donut: :donut: :donut: :donut: :donut:

If you were to see my bank account you might not be asking financial information of me. :D

Since I am no where near completion of an advanced degree in economics, I will quote Jim Puplava from an installment dated July 18, 2000:

STORM FRONT #1: CREDIT EXPANSION

Today, credit stands at ten times the available savings of the nation. It now takes five dollars of debt to create one dollar of economic growth. The Wall Street Journal recently featured an article on the nation's debt binge. U.S. corporate debt has grown by 67% over the last five years to a record $4.5 trillion. Household borrowing has risen almost as much rising 60% to another record of $6.5 trillion. What is even worse is that most of this debt is being accumulated by those least able to afford it. The riskiest borrowers are piling on the most amount of debt. We are seeing low-income consumers with bad credit histories and fledgling corporations using junk bond financing receive easy money.

STORM FRONT #2: STOCK MARKET GYRATIONS

The public is being sucked into the market by the new economic theories of Wall Street, which stand in sharp conflict with basic economics. Stockbroker economics rejects data that is inconsistent with the hypothesis that the stock market always goes up. Objective economic analysis relies on data that is scientific and non-manipulative to form basic premises. In the world of Wall Street, the hypotheses of investing are driven by self-interests. On Wall Street, stocks are always beautiful. Any broker or analyst who discards this hypothesis will rapidly join the ranks of the unemployed. Stockbrokers draw on evidence that continuously supports the supposition that buying stocks is always a good thing. Any evidence that conflicts with this theory does not make commercial sense. That is why today any objective measure that points to extreme market overvaluation is quickly discarded. Those who question Wall Street valuation criteria are quickly scorned.

Now, what Jim describes here are the mechanics of impending financial disaster, plus the hype that keeps things looking healthy.

Now, I think that popular psychology will eventually fail. What happens at that point - I do not know. There are systems built into the "system" that will not allow for the crash of Black Monday 1987 when the Dow lost about 22% of its value.

So for a "bottom to fall out" of these markets - teh safeguards would have to fail. And I do not know what force is strong enough to do that.

I think there is one force that can take the brakes off of anything and that is the Bush administration.

and the message is:

when nobody loves me.....

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 91.87 Change -0.54 (-0.58%)

And greetings, DU Market Crew! Well, let's just take a lillte look at the financial news....

Dollar tests lows vs. euro
U.S. currency slips to lowest point in three months against European currency on economic concerns.
October 7, 2003: 6:02 AM EDT
LONDON (Reuters) - The dollar slid against the euro early Tuesday as investors fretted over the growing U.S. budget and current account deficits amid few signs of a sustained U.S. economic recovery.

The euro hit its highest level against the greenback in more than three months, rising to $1.1788 by 5:55 a.m. ET (0955 GMT), as European monetary policy makers said the dollar's fall was unavoidable.

However, the greenback steadied against the buoyant yen, pegged by the specter of intervention from the Bank of Japan, while European bond markets were little changed.
<more>

Holiday sales forecasts turn chilly
Industry watchers say job concerns could scare away the consumer even before the snow hits.
October 6, 2003: 2:00 PM EDT
By Parija Bhatnagar, CNN/Money Staff Writer
NEW YORK (CNN/Money) - The 2003 holiday shopping season may not be as feeble as last year's, but some industry watchers say it certainly won't be a holly jolly Christmas either for retailers.

Less than a month after the National Retail Federation said holiday sales this year are expected to ring their best gains in four years, skepticism is mounting that the forecast is "too optimistic."

Richard Hastings, chief retail analyst with Bernard Sands, says consumer spending will grow weaker, not more robust, going into the key November and December shopping period.
<more>

Earnings reports make up the bulk of the financial news until Thursday's job reports. Those will most likely cause only minor stampedes; I'd expect some real profit-taking and re-alignment following the run-ups of the past few trading days, but nothing radical.

a rush for the exits

http://asia.reuters.com/newsArticle.jhtml?type=businessNews&storyID=3570865

"The overall macroeconomic picture is coming into play," said Tim Mazanec, director of foreign exchange at Investors bank and Trust Company in Boston. "Worries about the U.S. current account deficit are coming back and foreign capital is just not in place to finance the gap," he said.

<snip>

"If we do skid (decisively) below 110.0 yen, most of the stops (stop loss orders) will be triggered," which could send the dollar climbing sharply higher, Molloy said.

...more...

so they say that the lower the dollar drops, the more chance of its rise????

and here is the current reading

Last trade 91.74 Change -0.67 (-0.73%)

all in all a very good start to what promises to be one helluva riveting day! Between the Street and the recall in Cali. and the stories already going, well it's oneof those days that resembles a car wreck. Likely to be real ugly but you can't turn away...

Ozy I loved that 'toon! hahahaha!!!!!! I look forward to when the circus in Cali is over so there is one less big distraction from this fiasco in DC.

Have you caught futures? Dark. Grim even. UpinArms and Maeve, chilling news on the dollar-watch front, I'd say. If interest rates were to rise sharply anytime soon......well I shudder to think.

This whole financial picture reminds me of that feeling when you anticipate some sort of pain, that feeling of tense, wincing expectation......the only difference really is the eternity this one is taking to make impact. Like a physical blow, the sooner we take the hit the sooner we can heal.

Getting a Dem in the WH should help to expediate that healing process. :-)

Julie

in the immediate future

http://www.forbes.com/personalfinance/retirement/newswire/2003/10/07/rtr1101290.html

excerpt:

The dollar suffered a late New York sell-off after comments from European Central Bank chief Wim Duisenberg in an interview on Monday that a dollar fall was unavoidable. Its losses mounted on Tuesday, bringing its fall to around two percent in 24 hours.

It was also closing in on a three-year low against the yen at 110.07 yen although traders were wary Japanese authorities could once again step in to curb export-harming yen gains.

Dutch and Belgian finance ministers added to the impression that euro zone policymakers were unlikely to actively oppose the dollar's fall against the euro at this stage, saying the euro's rate was not currently a problem.

"You have only one major bloc (the euro zone) that is willing and positively biased toward a strengthening currency," said Peter Fontaine, currency strategist at KBC in Brussels.

...more...

Is there nothing good coming out of today's news?

James always asks the tough questions. I feel that some of the Stormwatch sentiment has made a deep imprint on my brain today. So I do not expect anything good to come from today's financial news.

I did, however, have a dream last night that the recall failed. Wishfully prophetic perhaps.

PeopleSoft earnings rise
Stocks gain; Oracle may have to offer more for takeover bid

Verne Kopytoff, Chronicle Staff Writer Tuesday, October 7, 2003

--------------------------------------------------------------------------------



Shares of PeopleSoft Inc. rose 3.1 percent Monday after the software company said its third-quarter earnings will exceed previous forecasts, creating another wrinkle in Oracle Corp.'s hostile takeover bid of the Pleasanton firm.

PeopleSoft's stock finished regular trading up 62 cents at $20.43, lifting it further past Oracle's buyout offer of $19.50 per share. Analysts said that if Oracle executives want to continue with the takeover plans, they will probably have to pay more.

"PeopleSoft's shareholders have no interest in selling at a discount,'' said Trip Chowdhry, an analyst for FTN Midwest Research, a financial research firm in Cleveland. "I think they'll have to go to $26.''

Jennifer Glass, a spokeswoman for Redwood City's Oracle, tried to shoot down such speculation. In an interview, she said that "Oracle believes $19.50 is still a full, fair offer.''
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They are not going to make it easy for Oracle are they!

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/10/07/BUG9Q26KPH1.DTL

9:32


Dow 9,566.39 -28.59 (-0.30%)
Nasdaq 1,882.81 -10.65 (-0.56%)
S&P 500 1,030.63 -3.72 (-0.36%)
10-Yr Bond 4.173% +0.022

NEW YORK (CBS.MW) -- U.S. stocks looked set to post their first losses during the month of October on Tuesday, pressured by renewed selling in the U.S. dollar.

And analyst upgrade of McDonald's and the official start of what is expected to be a strong third quarter earnings reporting season failed to bring out buyers.

lots of numbers

Funny to see analysts come to the same conclusions we came to months ago. Well, at least they are smart enough to get paid for it. haha

9:43 and getting ugly:

Dow 9,552.91 -42.07 (-0.44%)
Nasdaq 1,880.17 -13.29 (-0.70%)
S&P 500 1,028.51 -5.84 (-0.57%)
10-Yr Bond 4.179% +0.028

Julie

Dow 9,557.50 -37.48 (-0.39%)
Nasdaq 1,885.37 -8.09 (-0.43%)
S&P 500 1,029.35 -5.00 (-0.48%)
10-Yr Bond 4.177% +0.026

11:00AM: Indices start the "Tuesday drift"...on numerous recent Tuesday's, particularly on slow news days, the market has drifted higher through the day after opening lower...that isn't a forecast for today, but watch for it anyway...drugstore sector is higher on CVS (CVS 33.4 +1.3) raising guidance...restaurants are getting a boost from McDonald's upgrade...semiconductors are also higher (again)...
http://finance.yahoo.com/mo

Dow 9,567.65 -27.33 (-0.28%)
Nasdaq 1,887.62 -5.84 (-0.31%)
S&P 500 1,029.27 -5.09 (-0.49%)
10-Yr Bond 4.210% +0.059

Dividends declared and profits retained and the purpose for retaining those profits.

Pro forma and GAAP numbers are both worthless.By the time even GAAP numbers get to the investor, the dividend is 1/3 of what the original numbers were, and no answers about what happened to the difference. Upped the CEO's pay, well that's part of the answer. What's the rest?

The SO and I are having an appraisal done on the abode today.
We were "tidying up" rather frantically last night and I can't remember where I put Ching!

Hopefully life will regain some sanity tomorrow. I'll be here in spirit.

Sending good karma to California......

"The overall macroeconomic picture is coming into play," said Tim Mazanec, director of foreign exchange at Investors bank and Trust Company in Boston. "Worries about the U.S. current account deficit are coming back and foreign capital is just not in place to finance the gap," he said.

http://story.news.yahoo.com/news?tmpl=story&cid=568&e=4&u=/nm/markets_forex_dc

Dow 9,614.68 +19.70 (+0.21%)
Nasdaq 1,900.09 +6.63 (+0.35%)
S&P 500 1,034.76 +0.41 (+0.04%)
10-Yr Bond 4.230% +0.079


I will be away for the rest of the day. Take care everyone!

http://asia.reuters.com/newsArticle.jhtml?type=businessNews&storyID=3571765

Stocks Shed Losses as Dollar Springs Back

The dollar had fallen to fresh three-year lows against the yen and a three-month low against the euro, but by late morning, it had snapped back against the yen in a move traders pinned on possible intervention by the Bank of Japan.

"The dollar got much stronger with all kinds of hints of intervention," said Tim Smalls, managing director at S.G. Cowen. "We're not accustomed to seeing the dollar weaker ... Any change in the fundamental situation is a little upsetting to investors."

and here's that "rally"

Last trade 91.78 Change -0.63 (-0.68%)

...sliding below the waterline on stocks -

Dow 9,586.98 -8.00 (-0.08%)
Nasdaq 1,890.38 -3.08 (-0.16%)
S&P 500 1,031.64 -2.71 (-0.26%)
10-Yr Bond 4.225% +0.074

Moving sideways just below th opening numbers.

Dow 9,580.54 -14.44 (-0.15%)
Nasdaq 1,889.58 -3.88 (-0.20%)
S&P 500 1,031.36 -3.00 (-0.29%)
10-Yr Bond 4.220% +0.069

Yahoo Finance analysis:
"1:00PM: After setting new session highs, the major averages have encountered some selling pressure...
Currently, the Dow and the Nasdaq are hugging the flat line, while the S&P 500 is underperforming on a relative basis due to the lagging drug, oil services, utility, and housing sectors... The weakness in the latter comes on the back of a six-day rally, which has lifted the HGX index by 8.9% to a new 52-week high... Also inciting profit-taking in the group is the rise in interest rates over the last week...
Specifically, the yield on the 10-year note has lifted from its recent low of 3.93% to the current yield of 4.22% over the past four sessions, contributing to fears of a slow-down in the housing market..."

Looks like the lethergy is ending -

Dow 9,561.94 -33.04 (-0.34%)
Nasdaq 1,886.32 -7.14 (-0.38%)
S&P 500 1,029.38 -4.97 (-0.48%)
10-Yr Bond 4.241% +0.090

Looks like things are zippin' right along. 2:51:


Dow 9,614.39 +19.41 (+0.20%)
Nasdaq 1,897.01 +3.55 (+0.19%)
S&P 500 1,034.94 +0.59 (+0.06%)
10-Yr Bond 4.242% +0.091

Julie

Dow 9,654.61 +59.63 (+0.62%)
Nasdaq 1,907.86 +14.40 (+0.76%)
S&P 500 1,039.25 +4.90 (+0.47%)
10-Yr Bond 4.244% +0.093

Volumes are back up near the averages, although that 10 year is awfully high today - is there someone out there that knows something that Wall Stree doesn't?

Guess we might find put tomorrow. See everyone here around lunchtime CST.

this week for one thing. Plus the dollar is struggling...

Crazy day on the Street. See you Marketeers in the mornin'!

Julie