Blog

07 Jun 2002

Posted at 15:23h in The Friday Brief by
It’s getting increasingly difficult to find the silver lining among these ugly, gray clouds.  Stocks have fallen for ten of the past twelve weeks.  The stock-price drubbings have taken their toll on the collective confidence of investors as well as this writer.  Each day brings news of tragedy in Israel and Palestine, or of escalation in the Kashmir region, or setbacks in the war on terror.  If the global news abates, there’s plenty of homespun grief to compensate; from political and bureaucratic finger-pointing over potential advance warning of 9/11, and an ever-growing list of blue-chip corporations admitting accounting transgressions, to company rating downgrades, and securities analysts stumbling over each other to get the bad news out first. 

30 May 2002

Posted at 15:30h in The Friday Brief by
In answer to the pleas of the citizens of Atlanta trying to save their city from destruction by fire, General Tecumseh Sherman wrote his infamous response “war is hell.”  As May draws to a close, it is war that worries equity markets.  Continued improvement of the economy has been insufficient to lift stock prices.  The declining dollar, Israeli-Palestinian tensions, and looming war between nuclear powers, India and Pakistan continue to suppress equity values.  It seems like that old malaise is back.

20 May 2002

Posted at 15:40h in The Friday Brief by
Investors spent the week coming to terms with the increasing likelihood of a slow economic recovery, mixed corporate news, softer retail sales, renewed terrorist threats, and general apathy.  The S&P was up two days and down two, not counting today.  It was down 1.3% for the week.  Our models were down only slightly though, due to the changes made over the last few weeks. 

17 May 2002

Posted at 15:43h in The Friday Brief by
Benjamin Graham, called the father of fundamental investing, said, “in the short run the market is a voting machine; in the long run, it is a weighing machine.”  A problem investors face today is that the ‘short run’ seems to be more like the long run.  Just how much longer the wrenching ups and downs will go, no one can say, but it is clear that the longer it goes, more people leave in disgust. 

10 May 2002

Posted at 15:48h in The Friday Brief by

“It was the best of times, its was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us . . .”  Charles Dickens – A Tale of Two Cities

The best of times seems like a distant memory in so many ways, particularly as we focus on all the bad news out there and ignore the good that peeks through occasionally.  There’s plenty of ‘darkness’ adding to our confusion, but there are hints of light too.  On Tuesday, Cisco’s Chairman John Chambers spoke of improving business.  His comments and his company’s results sent the markets soaring, as short-sellers covered their bets against optimism and buyers bet that the pessimism might be waning.  If only for a day, optimism was openly discussed and celebrated and the negative took a brief respite. 

03 May 2002

Posted at 15:51h in The Friday Brief by
My wife recently constructed a beautiful labyrinth in our garden.  Labyrinths have been around for thousands of years and are found in almost all religious traditions as well as cultures including Native American, Greek, Celtic and Mayan.  Like Stonehenge and the pyramids, they are magical geometric forms that define sacred space.  When one walks a labyrinth, he meanders back and forth, turning 180 degrees each time he enters a new circuit.  Changes in direction induce shifts in states of awareness. 

26 Apr 2002

Posted at 15:53h in The Friday Brief by
Another word for risk is volatility – specifically negative volatility.  Webster defines volatility as the tendency to vary often or widely, as in price.  Obviously, we worry more when stocks vary downward as they do in bear markets.  April and October are the market's most volatile months.  It is during these months that companies report their first and third calendar quarters.  The first quarter is important as it sets the tone of the year’s earnings expectations.  By October, enough of the year is ‘on the books’ for the company to give a rough idea of what the year will actually look like.  It is a time when ‘confessions’ are made if the company was too optimistic earlier in the year.  It also used to be a time when management expressed excitement if they had an exceptionally good year.  SEC Regulation “Full and Fair Disclosure” has effectively minimized those wildly optimistic statements because of the liability brought if they are not met. 

19 Apr 2002

Posted at 16:01h in The Friday Brief by
Over the past several days, companies have released their calendar first quarter earnings and given their best guesses about near-term prospects.  The actual earnings reports have been in rather stark contrast to the more downbeat management projections for business in the coming quarters.  Earnings reports seem to support the economic recovery, but they are somewhat below earlier expectations.  Thomson Financial/First Call estimates that profits for the S&P 500 companies probably dropped 10.7% in the first three months of 2002, more than the 8.2% drop forecast by analysts at the beginning of March.  On the flip side though, 59% of companies reporting to date have beaten earnings projections, a higher percentage than at any time since 1994: a period when the Fed actively promoted expansion as they do now. 

05 Apr 2002

Posted at 16:03h in The Friday Brief by
Companies will soon begin reporting their fourth quarter earnings to their shareholders and the market will have some real information to digest.  The market, between earnings announcements, is generally influenced more by macro economic, political, and emotional events than it is by the actual earnings performance of the sum of the companies it represents.  Since the SEC enacted Regulation FD (requiring all public companies to make significant and material announcements publicly and broadly) in August of 2001, a certain rhythm has developed.  The ‘dance’ as we shall call it between companies’ managers and analysts, media, and stakeholders actually has three movements. 

28 Mar 2002

Posted at 16:05h in The Friday Brief by
Today, economists are declaring the recession is over.  In fact, it was likely over before it was officially announced last fall.  This morning, the government released its data on fourth quarter Gross Domestic Product that showed the economy grew at a 1.7% rate. This strong increase suggests that the first quarter of this year may be the strongest in two years.  Increased spending on the part of the government and the consumer likely fueled growth as strong as 4.2% say the experts.  And that spending is likely to continue as the University of Michigan Confidence indicator rose to a 15-month high of 95.7 in March from a 90.7 in February.  Bloomberg reports that consumer spending grew at a 6.1% annual rate in the fourth quarter, the fastest pace since the second quarter in 1998.