Tuesday, May 1, 2007

Morning Market Comment

Welcome to May 1st. Is it time to go away in May? The Stock Trader's Almanac notes that the worst six months of the year begin in May. The Almanac also pooints out that an investment of $10,000 timed top sit only from November to April would have compounded to nearly $500,000; while the same 10-g's if timed to sit over the same 55 years from May to October suffered a small los of $500. I'm saying today is the day to dump all stocks, but some good hedges never hurt (uh oh, the last time I talked about hedging was in mid-Feb).

First, I realize this news is a bit old, but while I was climbing hundreds of stairs in an 1859 lighthouse yesterday some of the best news of day broke that real estate cheerleader extraordonaire, David Lereah, tendered his resignation as Chief Economist of the National Association of Relators. HUZZAH! The David Lereah Watch Blog does a great job summing things up. While it was bad enough that Lereah would constantly be spinning and telling us tall tales about things being so great in real estate, his manufactered reality actually hobbled the members of the NAR - yes, the realtors themselves. Lereah's gleeful assessments of the real estate market, picked up in the national press, led many home-sellers to insist their Realtors list their homes at inflated prices which would just keep them languishing in what were really ailing markets. It won't be soon enough that Lereah moves on to Move Inc. Let's hope the NAR will pick a new public face that will help its Realtors help their customers to make better decisions and not disasterous ones. Of course, there are hundreds of other Lereah like characters out there who will continue to pump, mislead and cheerlead, but Lereah was unusual for the amount of access he had to the media.

Back to this morning: Stock futures are more than a couple of points higher in turn around Tuesday fashion as a smattering of blue chip news flash plus of less than $1 in European trading (though most Euro markets were closed for May Day). 10 a.m. economic data features important numbers from the ISM Manfactuterers data series. A small nudge higher to 51 is expected. Pending home sales are also due at 10. April also sales will also be released as the day progresses.

Analysts comments are interesting this morning:
  • Sometime back, perhaps about a month, this blog warned about tough times ahead for the big electronic retailers. Yesterday Circuit City lowered guidance for the rest of this year and next - which should have happened with its earnings a few weeks ago, but I digress. Today a variety of analyst ratings changes - as if the bad news should be a surprise to those who cover stock: Circuit City downgraded by Smith Barney, CIBC, First Boston, Soleil and Raymond James. And here I was worrying about the CC May puts. My wife says I worry too much. I've known CC has been clueless for years. When they first opened a store here in my area they stupidly had only electric clothes dryers (this was before they exited major appliances) in stock - in a county completely supplied by natural gas. CC has been a favorite on and off short of mine for years, ever since the electric dryer incident back in the mid-90's.
  • Spillover into Best Buy (BBY) has been somewhat limited. Piper lowered estimates, but maintains an Outperform.
  • Before my kidney transplant, I was no stranger to hemodialysis and I pretty much despise those centers. Do these centers keep people alive by providing blood filtration services, yes but... there are many big "buts" from the human element to the cost element which I won't get into now. DaVita (DVA) has been downgraded to Underperform at Piper citing disappointing 2008 operating income with a $50 target on a stock that's $54. I wasn't treated at a DVA center, fyi.
  • Piper reiterates aQuantive (AQNT) a Top Pick, says its estimates may be conservative. AQNT has been volatile on takeover speculation and was downgraded by Citi's Smith Barney yesterday. Piper things Q1 results will robust.

My options screen had picked up on some large PG call buying including some big trades yesterday. Lo and behold: Procter & Gamble ups outlook.

I like Divx (DIVX) going into earnings and have some in the money calls there (this is not a recommendation, just an fyi disclosure). More later.

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