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| Author: Mike Celeste | Editor: Tony Ponzo | July Circulation: 13012 |
STAT SHEET WEEK ENDING July 16 / 05
**************** Percent / Points
Dow Weekly Change + 1.8 % +182
S&P Weekly Change + 1.3 % +16
Nas Weekly Change + 2.1 % +44
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Comments:
We saw this week as a milestone week for some parts of the indeses this year. The S+P500 set a record a bit over 4 years old. The Dow and Nas haven't been able to get above the close of Dec. 31, 2004,but they are pretty close. Our Chart Indicator has verified that we remain positive, after a test less than 1 month ago. Maybe the summer doldrums aren't going to equate into a negative market--let's keep our fingers crossed. The news in the economy has definitely been to the positive side and the markets are reacting accordingly.
Oil---
While this remains the attention draw, we had record setting oil prices, but the market still had a great week. Are we getting used to it? I have no idea,except to keep saying that when you have to pay more for gas, you usually spend less on something else. You can draw on savings, or you can borrow to keep up the spending, but something has to give. There was one comment on CNBC that the real price, excluding speculation about the future, should be somewhere around $45/barrel. What should be and what is often times do not match, so we have to wait it out. All we know for sure is that oil inventories are much higher than a year ago, when gas prices were much lower.
Analysts---
Long time readers of this newsletter know what I think of analysts as "experts" in helping investors. Nothing has changed that negative opinion, and I would like to share from an article this week in the Los Angelest Times, written by the excellent financial columnist, Tom Petruno. He is the Senior Markets Editor, also. The article was titled "Earnings Outlook May Be Cautious" and was mostly about earnings, but there was mention of analysts. Mr. Petruno said in part,"Wall Street analysts have been underestimating profit growth for US companies for two years, and the stock market's bulls are hopeing that streak insn't about to end......In theory, analysts should be picking up on the economy's strength and adjusting their earnings estimates accordingly. But as a group they've done a relatively poor job over the last two years of predicting profit growth. At the start of the first quarter, for example, analysts expected S&P 500 companies to post year-over-year growth of 7.6% in that period. When the results were all in, the actual increase was 13,9%, according to Thomson data. Those numbers reflect operating earnings.......Among industry sectors in the S&P 500, financial services companies' earnings were expected to decline 1% in the first quarter from a year earlier. The actual change was a gain of 10%. Profit in the healthcare sector was expected to be up 6% in the first quarter. It rose 12%. Many experts say analysts purposely set their estimates low so that companies in effect have an easier time beating the numbers, thereby boosting the chances that their stocks will get a pop when results are announced. But that wasn't true in 2001 and 2002, when analysts were consistently too optimistic about earnings growth, Thomson data show."
So, we hear that analysts were too optimistic and they were too pessimistic. How can you believe what they say? I believe you have to have a track record that calls for respect. I have no respect for their track record, and I don't pay attention to analysts. Wait a minute---I do pay attention. When analysts downgrade a stock there seems to be a ready following of investors that react and sell their stock. Often times, that drop in the stock will mean that the stock price hits our Big Dipper System target buy price, and that means we stand a good chance of making a profit on that move. Our computer studies have shown that such has been the case and we believe in history repeating itself. The unfortunate timing of a downgrade, tho, comes right around the day we post for a sale of the stock (or option) based on our computer studies. Then, it hurts us. Overall, we feel analysts are far overpaid for what they provide for investors and in helping investors make decisions. Our computer studies are based on 30 years of data and the record for stock splits shows that our criteria results have shown a profit for each and every one of those 30 years. When these " experts" say that stock splits don't add value to the stock they just don't know what they are talking about. Do you ever hear them give any statistics to back up their statements? I have never heard any. There is a time after a stock split has been announced and shortly after the stock split, when the stock price increases at a faster rate that general stocks. That is clear and concise.
I shout at the TV when the financial news brings on these "experts" and they give recommendations on certain stocks. Don't get me wrong, I am all for that--
IF--the financail station will later give the results of their recommendations. This is especially true when there are 2 "experts" on, with opposing positions on the same stock. Wouldn't it be nice to see which one was correct, by going over the stock prices at a later time? I think most viewers would appreciate that. But they don't do it on any level that is consistent. I would like to exclude one TV person from this negative thought. That is Jim Cramer, on CNBC, with his own show. He is both entertaining and informative. While I don't see much follow-up, I can understand why. He covers so many stocks on his program, it would take equal time to see what they do. However, I have jotted down a number of his opinions and find he is more right than wrong---in my opinion. Catch his show--it is on several times a day on CNBC.
OK, so much for my thoughts (and Mr. Petruno's) about analysts. I got it off my chest for now.
Splitmaster strategies have also done well. We are running almost 6% ahead in the Basic System for July and the Big Dipper has one play running and it is ahead at this point--. The options are doing their thing, too. I would like to point out that the put options are doing exceptionally well, yet not too many are taking advantage of it. We have had 16 straight winners on puts and there was a small 5% loss on one, with a string of 17 straight before that loss. So, 33 out of 34 winners. And you don't need to invest anything except have margin to back up the put, in case the stock is put to you to purchase. Take a look at www.SplitMaster.com and click on Past Results to see how our results compare to yours.
Mike Celeste
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