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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (39787)	6/22/2003 2:42:13 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71567

Interesting comments from the article: GM jumped +1.50 at the open after saying they were going to sell $13 billion in bonds to shore up its massive pension deficit. In the world of magic numbers GM derived about 50% of its 2002 net profit from its pension plan despite the plan being $25 billion underwater. How they can do that is anybody's guess. Actually 63 of the S&P companies reported net pension income as part of their earnings in 2002 despite their funds being in the a deficit. Let's see, if my pension fund liability is increasing $10 billion a year but assets are only increasing $100 million a year, is it right for me to claim a profit of that $100M? Other deficit winners include Ford -$16 billion and BA -$7 billion. . . . Helping the bounce this morning was an S&P rebalancing of sorts. IBM increased its shares outstanding by 2.2% by donating them to its pension fund. This increase in outstanding shares means every index fund must increase its outstanding position in IBM by +2.2%. Over the last week this has pushed IBM up to strong resistance at $85. Going the opposite direction CMCSA has bought back 60 million shares and fund managers have to reduce their stake. This rebalancing at the end of the half added to the quadruple witching confusion. . . . Weighing on the market was news that home foreclosures had soared to a record high of 1.20% in the first quarter. The previous record was 1.18%. Homes that started into foreclosure in the first quarter also increased. The rise in joblessness is being blamed for the high rates. This weighed on the market sentiment causing beliefs that the recovery may not come soon enough to stave off an even larger problem over the summer. . . . Unemployment was also given as the reason KB Homes failed to please investors on Friday. KBH beat the street by 30 cents and raised future estimates by 20 cents. Everything appears rosy on the surface but traders were expecting even better news from the home sector. The KBH CEO said they saw the market weakening due to unemployment and lack of job growth in some of their biggest markets. Despite the low interest rates they are having trouble selling homes in some areas and they see the problem growing. The CEO said, "it was a much more challenging market now than in the last couple years". This is not what investors wanted to hear. After months and months of worries about the real estate bubble it appears it may finally be coming to pass. KBH lost -5.70 after beating the street by 30 cents and raising estimates. Ok, but that is past tense, what are you going to do for us this quarter? CTX, PHM RYL and HOV all had similar drops. NVR dropped -$16 but then they are a $400 stock. (no options) . . . With tech exports down to $166 billion in 2002 from $223 billion in 2000, a -26% drop and still falling, it is likely we will eventually see another wave of tech earnings problems. The key is whether the economic recovery will fill the gap first. Since the recovery has not yet appeared the odds are some more techs will confess next week. I would not be surprised to see more big caps warn as well. Remember, the beginning of this quarter was not exciting. . . .In 2008 37 million baby boomers will begin hitting the social security/Medicare rolls. This massive influx of retirees will decimate the workforce and swamp the already overburdened social security system. This massive cash drain will have to be compensated for in some form. That means taxes on the rest of us in some fashion. Lots of taxes. . . . Oddly enough the beef industry was mentioned as something likely to suffer as retirees ate less beef due to income and health reasons. . . . Capacity utilization is at a ten year low (75%) which means there is no incentive for companies to spend money to buy more equipment. Until demand picks up and the excess capacity is absorbed there is not going to be a broad based recovery. This is not likely to happen over the summer. Until those numbers begin to pickup there is a 26% S&P gain at risk. Only one time in the last 50 years has the S&P gained more than 26% off a bottom. Can you say over bought? . . . The first week of July is the best week of the month as the retirement contributions for those 37 million baby boomers hits the market. After July 8th it begins to get grim for cash flow and that is when earnings ramp up to a fever pitch. For short term traders I would be cautious about being long around July 15th.