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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (7947)	12/6/1997 11:34:00 PM
From: Pancho Villa	Respond to of 9285

From Barron's interesting [partial article to save my a... from the watch dogs] view on Friday's market. Action. Rightly or wrongly Barron's has turned bearish in the last few months. This is concerning. Their view seems to indicate that markets may be headed indeeded for an nevitable bubble. It seems rather stupid that we cannot learn from recent history [i.e. Japan] the link for the complete piece: interactive.wsj.com Friday's action furnished fresh evidence of this incontrovertible truism that stocks can only go up. The market had every excuse in the world -- from the still -- visible smoke left in the wake of the financial firestorms in Southeast Asia to the surprisingly strong November employment report-to backtrack. But it stoutly refused to do so, instead extending its winning streak to six in a row and pushing firmly above 8000. The job numbers were smashing in themselves and completely out of sight of the cockeyed consensus. In contrast to an anticipated rise of 215,000, payrolls last month shot up by 404,000. Some 44,000 new manufacturing jobs were added, roughly double expectations. Average hourly earnings climbed by a formidable seven cents over the previous month, again a big cut above predictions. And unemployment eased to 4.6%, the lowest in a quarter-century. That kind of showing, especially when it caught everyone as it did with their forecasts down, normally would have sent bonds into free fall and touched off a rout in the stock market. For those muscular numbers spoke loud and clear to the strength of the economy, loudly and clearly enough, ordinarily, for the Fed to sit up, take notice and even act. And bonds" immediate response was exactly what the script called for. But stocks, after some initial queasiness, firmed up smartly, and their cool behavior helped steady bonds. What helped steady them even more was that traffickers in bonds did a kind of double take and concluded that, since present circumstances were anything but ordinary and far from normal, maybe their knee-jerk reaction was a jerky reaction. Somehow the notion penetrated that Mr. Greenspan's big worry at the moment is the growing critical list in Asia and that an interest-rate hike here would be like prescribing a drop or two of cyanide for Korea and Malaysia and the other sickies languishing in intensive care. An anonymous Fed official whispered as much to a stray wire-service reporter early Friday morning, and the bond market duly heaved a sigh of relief. Equity types not only wised up swiftly to the absurdity of fears that the Fed would pay undue mind to the state of the labor market when it was worried about the state of the world -- particularly with commodity prices generally and gold in particular in a deflationary mode -- but they also spotted the positives in the job figures. The economy, those gains in payrolls and pay suggested strongly, is not about to roll over; so neither is consumer confidence, consumer spending, retail sales nor, most importantly, corporate profits. This, of course, was in perfect keeping with the long-established investment view that good news is bullish, bad news is bullish and no news is bullish. In other words, the irrational exuberance Mr. Greenspan espied precisely one year and 1,700-odd points ago hasn't changed; Mr. Greenspan has. What had sparked the market's spirited run in the five sessions leading up to Friday and then enabled it to take the employment shock beautifully in stride was the conviction, fed by the massive rescue effort by the IMF and the U.S., that, so far as Southeast Asia went, the worst was over. In some ways it is. But in other, more profound ways, it isn't. The worst may be over in terms of the financial impact; the currencies and stock markets are likely to stabilize; or at least, further damage will be contained. But the economic impact, and notably the impact on our economy, we submit, has yet to be felt.

To: Pancho Villa who wrote (7947)	12/6/1997 11:43:00 PM
From: Pancho Villa	Read Replies (2) \| Respond to of 9285

From Barron's short idea CNC and view on analysts repeatedly shared by us here at Rogers: >>Back in late July, we noted Ray's apostasy from raging bull to growling bear on Conseco, a company whose accounting practices Barron's has taken exception to over the years. We also noted that Ray has been embroiled with the company over a fee, but ventured our belief the row didn't inspire his bearishness on the stock (we're still of that mind). At the time, Ray had just put out a detailed report on Conseco and why it should be sold. And late last month, he followed up with another extremely detailed, extremely negative and (to these jaundiced eyes) extremely persuasive report. Ray, incidentally, is decidedly in the minority among insurance analysts, most of whom are bullish on the company (but, then, most analysts are bullish on most companies, particularly if the companies do a lot of acquisitions and stock offerings). We were especially impressed by Ray's dissection of third-quarter earnings. Ostensibly, Conseco had a strong quarter, exceeding analysts' projections. Ray, however, suggests that it did so only by dint of some deft accounting maneuvers. He cites, for example, a $62.4 million increase in loss reserves and writeoffs of deferred acquisition costs. Labeled nonrecurring operating items, these nonetheless are placed under net income rather than operating income and then are offset by realized capital gains on insurance-company bond holdings. Ray insists this is decidedly not the way it's supposed to be done. But had Conseco followed the usual procedure, he reckons, reported earnings would have been clipped by 19 cents a share. All told, Ray figures, Conseco's operating earnings in the third quarter were no more than 39 cents a share. He sees operating earnings falling from an estimated $1.75 a share this year to $1 next year and vanishing in the years beyond. For that matter, he sees the stock pretty much vanishing, too. From their current price of 45 1/2, within a year, he predicts, Conseco's shares will fall to between 1 and 2. << Pancho