 | :: Newsletter |
|
| Author: Mike Celeste | Editor: Tony Ponzo | August Circulation: 13041 |
STAT SHEET WEEK ENDING Aug. 20/ 05
**************** Percent / Points
Dow Weekly Change - 0.4 % + 41
S&P Weekly Change - 0.8 % - 10
Nas Weekly Change - 1 % -21
*********************
Comments:
Another August week gone by, thank goodness. The Dow reversed the previous week's move, to the negative side. The Nas alternated an up day and a down day for 10 consecutive days, except for the very last minute on Friday, when it slipped to a loss of 0.52 points. The general market came back a bit on Friday, but not enough to make up for the down moves during the week. Our Chart Indicator has been confirmed to be in negative territory and can be seen daily on the web site, on
the Big Dipper page. (Team Members).
The economy is starting to pay attention, again, to the gas prices, as they affect the general business sector. Wal-Mart reported that their sales are being affected by the high gas prices keeping customers from making as many trips to the store. Prices of gas continued to go up---still all on speculation of potential shortages from producing companies, along with refineries being shut down for "certain" reasons. The weekly report from "This Week in Petroleum" showed another increase in inventory, both from last week and from this time last year. Gas inventory went down, but that was because some refineries were out of production. It keeps getting down to the refineries. There is plenty of oil, and the fears of earlier weeks that oil supplies would be cut have not proved to be true, as shown by the increase in inventory. President Bush indicated months ago that he was in favor of building more refineries, and he is supposed to be an oil supporter. Why hasn't there been any advances in this area? I'd hate to think that the oil companies don't want more refineries because they are making such high profits as matters stand.
Moving on to the economic reports, we saw that the consumer price index report came out this past week. Here is the part that simply infuriates me--quote "Energy is a killer, but if you don't use it, you're not seeing a whole lot of inflation," said Joel Naroff, chief economist at Naroff Economic Advisors, a consulting firm in Holland, Pa. Right, the "chief economist" says that if we leave it out of consideration, things aren't bad. What kind of remotely intelligent statement is that? Let's take anything negative out of our lives, and boy, things are pretty good. What kind of world is he living in? It certainly isn't the world that most of us live in.
In the same news article on consumer inflation there was this quote--"...core inflation, excluding food and energy, is up just 2.2%" Here we go, again. We just exclude whatever is negative. I guess we just don't eat and use utilities, or drive vehicles. The problem with all this, is that this type of reporting by the media is being accepted by the general public to a far greater degree than it should be. We have become numb to this sort of thing. It takes more and more drastic news to bring us to action. We don't make the media back up their reporting with accurate, provable facts. Demand for gas is not the same as it was---just ask yourselves and your friends and neighbors. China is cutting back on oil, not increasing. Inflation is going up in reality, not as fantasy wishful thinking.
How about the housing market? I still see ads that say "Record Low Mortgage Rates"
and that is a fabrication. Rates have been moving up. Right here in my local area of Southern California, one lending firm rep told us that there is one street nearby that now has 8 houses for sale---and all were purchased in the past year, and the reason they are for sale is that the owners can't afford to make the payments. On top of that, many mortgages were obtained with false income statements, in order to get the people to qualify for the mortgage--as reported in the news, and well-known in the industry. Several companies are being publicly investigated for their practices. Thanks, John, for your input in this area---team members have lots of good info. I don't believe for a second that the real hot housing markets are just going to level off and not see prices drop. I feel there is going to be a ton of foreclosure notices going out in the not to distant future, and that is going to put a whole lot of houses on the market--at prices lower, not level, with the current market. Now that's just my opinion--you can throw it back at me next year if I'm wrong--but it is based on my many years of close connections to the real estate market here in Southern CA. Every other hot time frame was followed by lower prices--some time periods lower than others. When I came here a long time ago, the first time I saw prices drop was in the 1970's, also when oil prices started their first great increases. Realtors said the same thing--CA real estate won't drop in price, it will just level out. They were wrong then, and ever since--and I think they will be wrong again.
So, how does all this economic stuff affect the stock market? Greatly. At some point.
Business has been doing well, but there is no guarantee that it can continue. The above mentioned sectors play a big part in our nation economy--and in the world economy, too. However, there are always two sides to these equations. What is a negative for one person can be a positive for another. We suffer from high gas prices, but the oil companies are making large profits, and if you are a stockholder, you have benefited. If you haven't been able to buy a house you might see a drop in prices to a level that you can afford. The seller might suffer, but you benefit. The same thing applies to housing stocks---high prices hurt potential buyers, but reward stock owners of building companies. And the list goes on. It isn't strange, either, that many of the recent splitters are energy and home building companies. We keep saying that a main reason companies split their stocks is that they are doing well.
On to a particular stock that was a splitter I forgot to mention last week. We indicated that HANS was a splitter that scared us. It scared us because it had tremendous volatility, similar to action in a previous high flyer, TASR. We mentioned that the earnings were scheduled to be released before our regular sell date. Then we set a target sell price if it was hit before the earnings report, scheduled for a conference call at 10:30 am on the announced day. It didn't hit it right up to the day before earnings. On the morning of earnings announcement, and before the conference call, the stock opened up about 10 points higher. We immediately sent out an email alert saying that we felt it was a sell for us. The prices were 96+ the day before and the opening was at 106, with a high of 107. Opening was great as far as we were concerned. Then, that volatility hit, big time. The stock split that day, so I'm using pre-split prices. The high/low range for just that one day was a high of 107 and a low 91---a whopping 16 point range. One of the reasons was that the earnings just about tripled, per the release, but the conference call had questions from analysts. It turned out that a closer look at those earnings turned up points that were considered negative by the investment community. Following days showed more decline, so that the last price on this past Friday was the equivalent of about 87---or 20 points lower than the high on the day earnings were released. We sure felt good about picking that stock to get out of before our regular sell date---something that we rarely do, and we don't like to do, except in exceptional circumstances. We get lucky once in a while---lucky by experience, I hope.
With the drop in the market prices of stocks, we have seen our Big Dipper list show more hits. We have a very large number of splitters in our Basic System compared to normal times. Lately it has been feast or famine. July was very slow--again a fairly normal occurrence for this time of year. As stated, August is again doing its thing, and we warned early on about it---mentioning that consideration might be given to lowering the number of shares/options investments, or waiting for Big Dippers to hit--or a combo of both. Currently we have 6 Big Dippers that hit the target buy price. Three of them are at profits and three are under the BD buy price. However, the 3 that are below are all down less than $1 under the buy price. We could use a nice quick rally to pull us up. Options, of course, could also use that rally, as a $1 change in price could be a 20% move in the price of the option.
That's about it for this week--lots happening all around us--and more coming.
Today's Thought---Every moment, you are fully capable of living with wisdom, strength, confidence, success and joy. It's not a matter of chance, but always a matter of choice. (Sometimes tougher to do than at other times.)
The Splitmaster.com information system delivers email to addresses provided by subscribers. To Subscribe or Un-Subscribe go to our Newsletter page.