Gene Inger's Daily Briefing
An 'indecision' pattern . . . dominated most of Wednesday's trading; a rangebound day yet-again, that has prompted all kinds of talk about enduring lackluster action for the markets. The craziest of all surrounds ideas that real estate is so hot that people can 'stay home' and watch it go up, without working. Remind us all of anything? That is what they said about stocks (and we disputed it) in the late '90's; doesn't last long.
Now of course, real estate has demographics that support overall stability; what they also don't have is the capability of 'crashing' like stocks can; as everyone has to have a roof over their head; but they don't have to own equities. But, most statistics tend to be clever, and hence obscure downsizing by 'empty nesters' or retirees, versus the tendency to upsize by those entering the formative family-growth years. What you get is median price improvement, by virtue of a cluster of improvement in the mid-ranges, while the higher ranges essentially work sideways. Easy to speculate about a spree of renewed housing speculation because of the lethargy of other investments, but the ability of the society to generate enough folks capable of sustaining the increases in taxes, insurance and basic costs, has to be questioned. If not now, at some point.
Of course there are those who put housing in a 'bubble' category like we did stocks in the late '90's; they're likely wrong on that aspect, because of the demographics. But you can have a period in which investor's desires for 'something' (read, anything) to deliver superior returns, pushes them in a direction of over-commitment to properties, similarly to the way they over-committed to equities in the late '90's. Much of this is sensitive to events such as deurbanization (a trend suspected evident, but expanded after 9-11), whether or no new attacks in fact hit certain metro areas of the U.S., and whether natural disasters occur soon (not to sound alarms, but we have noticed the uplifting in California and Oregon, historical precursors, sometimes, to earthquakes and/or volcanic activity, plus commencement of hurricane season on the Eastern and Gulf seaboards this week), or are in any way impacted by particular occurrences.
No, we do not believe people will become disaffected with properties; newly affected by stocks in a mania way (and that's good for both probably). It wouldn't shock things too much, if properties just moved sideways, tax district hikes flattened (at some point there should be community protests of rates, as the assessed value increases would typically stoke the coffers of tax districts anyway, for awhile), and as media pundits at this point have joined the 'critique' of the 'confidence crisis' facing the Street (also not news), resulting in equities becoming more interesting than they're perceived lately.
But not necessarily instantaneous; so an inability of stocks to pop here at month-end, is a good reflection of the lack of interest, as stocks (per last night's remark) continue to be heavy, or fall of their own weight (that may well temporarily change very soon). Notably while the focus typically is technology woes (reserved remark), the real crux of the current drop is related to multinational weakness, led by renewed big-cap Oil (XOI) stock selling. A little selling has increased in the Banks (BKX) too; but this so far has simply been a retracement of (technical comment reserved for subscribers). Of course, a weak Dollar, as we have argued and the markets prove, isn't favorable; and that's despite the pressures on Government (from multinationals) for that idea. At the same time Gold made a higher-high, looks o.k. for next month, but probably has a pause-to-refresh coming-up anytime now.
Special note: due to the characteristic of 'spoofing' round-robin viruses and spurious emails, we have discontinued some of our email addresses to the office and myself. New ones are noted below; and we encourage readers not to add these (or any other folks) to their contact lists (address books) unless using regularly updated anti-virus software that scans email both incoming and outgoing, as we do. If you don't, what is likely to occur is your address creates false transmissions that you didn't originate, or emails circulate masquerading as having come from you, which they didn't. We urge everyone to support 'safe computing' by using strong protection on their various PC's.
Daily action (is a commentary on current and projected action, reserved for readers of ingerletter.com as a courtesy).
The probe of the Defense Secretary's former firm (Halliburton) doesn't help the mood; as Government or others seeking to rerun or hindsight quarterback some of the most egregious or anticipated woes of the late '90's; isn't unusual in the wake of a period of time in which investors tend to finger-point in all kinds of directions, about factors that weren't even nettlesome to most while those stocks were going up years ago (talking about forward risks back then often got protestations about how wrong we'd be; not). We don't know how far recriminations go; but do know that the longer they do, things happen; capex commitments are deferred; venture capital fails to appear; initiative is throttled; irregularities are culled-out; but the price paid is a persisting lethargy. This is not to say that accounting and other changes don't have to be finessed; they do; in fact we mentioned the FASB changes forthcoming for a couple years, when not quite so popular to do so. And many companies have no choice but to gird for dealing with it, because while they've typically got religion now, they can't undo historical reporting more so than analysts can retract their hysterically ridiculous over-expectations then.
At the same time people worry about the credibility of the FBI and other institutions; a spreading of recriminations to both Governmental, as well as private and public units. It's a difficult time for the Nation; because (to all who understand stress), we're at war as this occurs; and the enemy loves to see internal jousting in the U.S.; rather than a focus on the specifics of attacking them going forward, rather than reviewing the past. No doubt, part of catching them includes a streamlining of systems; but we worry just a bit that, maybe because we survived the holiday intact, too much focus is spent on the past, than on the present and future. We're not against changing bureaucratic or public relations cultures in Government; but do suspect more mobilization is needed.
Certainly, there is one particular aspect of the market that is bothersome; and that is a contributing factor to much of our still-outstanding forecast for the month of June. It is the inability of investors to (so far) do much toward month-end, while after that time is past, not only will investigative intrigues likely increase, but so will the war effort. To us it's less a question of 'selling in May and going away', than it is catching swings of a non-seasonal variety; (forward-tense balance reserved for ingerletter.com readers).
In the meantime, the hotline (900.933.GENE or direct-dial access) couldn't do much; as there wasn't much to do Wednesday. Probably a wash or even slightly worse, was the outcome; as several efforts clustered around the June S&P 1070 level were for naught today. We suspect another attempt on Thursday; probably from around or just over the 1060 level; but again (reserved projection). However we would contemplate that the romp, if ignited, could be fairly feisty at some point over the next couple days. It is not essential at all from our continuing overall perspective, but is relevant from a standpoint of those involved with after-the-fact shorting into weakness lately; risky.
Bits & Bytes . . . touches on individual issues seen appropriate for notable moves, or as to entry and exit points occasionally, as well as support and resistance on several representative issues in focus, rather than trying to select stocks for the sake of it; as serious players know that's something unnecessary, except on particular occasions. Comcast (CMCSA), Intel (INTC), Merck (MRK), Texas Instruments (TXN) and the choppy Cisco Systems (CSCO) were highlighted in today's remarks.
Economic News Releases: (reserved section)
In summary . . general malaise is accompanied by resigned tensions; not only as a commemoration of the World Trade Center attack occurs in the morning Thursday, but as the antagonists on the Indian Subcontinent seem to move toward what seems like an inevitable conflagration; incredible as it is to ponder. Let's pray it's avoided by a prevailing of clearer heads; particularly understanding how al Qaeda may be trying to pit these traditional enemies against each other, totally for their evil objectives and in a way that stirs things up further between Islamic worlds and the rest of civilization. It's high time for countries other than the U.S. and Great Britain to convey concerns.
As to McClellan Oscillator readings: deteriorated a tad more to near oversold; with a read of -99 for the NYSE; with slightly lower behavior on the NASDAQ; at -26. With so many still edgy, the prospect of a Thursday tempoary turnaround looms realistic.
Our prayers and thoughts remain with our troops fighting anywhere in the world, and as events of this week explicitly continue to remind us of various new risks the Allied fighting forces face, or may face, we try to keep in mind that the unexpected remains a risk as civilization cheers human progress, but worries about those trying to reverse hundreds of years of modernity. Stay focused to news trends aside from paramount concerns about India and Pakistan. There are reports, missed by the general media at the recent NATO gathering in Rome, that a Russian general says Iran has nukes. Also recent: unconfirmed stories of terrorists storing chemical warheads in Lebanon. Let's hope that both stories aren't complete, and reflect fear more than new realities.
Keep in mind renewed rally attempts will clearly deal with challenging the recent mild breakdown points; while shorter-term declines are expected to be resisted in terms of undoing all that was gained before, although there are geopolitical risks that can be a concern as they combine with an initial summer slowdown, as well as deferred profits realization, though the long-run should still see this year as a transition following very basic economic exhaustion; though rallies for now should at best be (reserved ideas for readers). At mid-evening S&P futures up about 120, with premium near 34 or so.