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Sy Harding's STREET SMART REPORT
505 East New York Ave., Ste. 2, DeLand, FL 32724.
1 year, 17 issues, $225.
Market in unfavorable season
Sy Harding: "The market is now in its unfavorable season according to our Seasonal Timing Strategy based on the long-time "Sell in May and Go Away" maxim.
The market has been unable to make any sustainable headway in spite of major positive reversals in its previous concerns, which were the dismal employment picture, the unexpected string of lousy economic numbers in January and February, and concerns about what those lousy economic numbers might mean for 1st quarter earnings. As you know, the employment numbers for March were stupendous, as were the economic numbers. And 1st quarter earnings significantly exceeded Wall Street's estimates. The old saying is that a market that rises in spite of bad news is in bull-market mode, while a market that cannot make gains on good news is in bear-market mode.
This week pretty well ends the 1st quarter earnings reporting period. Since the market is primarily driven by its outlook for the economy and earnings six months or so out, it's difficult to see what it can find to drive it higher once the Q1 earnings reporting period ends, given the way the spectacular economic and earnings numbers of the past 6 weeks were not able to do so.
And our technical indicators remain on the Feb. 4th sell signal.
And yet, we have an uncertain feeling, normal after four months of market indecision that has resulted in only a sideways move, that at this point it could possibly be a base-building phase before a new leg up, and not as clear that it's a topping out stage before a leg down.
The fact that it's an election year does factor in to some degree. As we have noted before, election years have no more tendency to be up than any other year. However, they do have a tendency for their corrections to be less severe. That was particularly true before the last election year, 2000, blurred the picture, being of course the first year of the major 2000-2002 bear market."
NATIONAL TRENDLINES
14001 Berryville Rd., North Potomac, MD 20874.
1 year, 4 issues, $85. Hotline included.
Anticipates best buying opportunity
of the past several years ahead
Douglas Jimerson: "Stocks are roughly in the middle of a correction that is preparing us for the next buying opportunity. We are anticipating this buying opportunity to be the best of the past several years for a trend-following system. Long-term moving averages have fallen dramatically from the levels of a year ago, affording a lower entry level when stocks rally again.
VInternational stocks are also declining impulsively, although lagging behind the correction in U.S. stocks. Bonds continue to advance and remain on a long-term trend buy signal from late last year. International bonds are now lagging and may turn negative soon. Gold and gold stocks have declined from the highs and should be sold.
The asset allocation accounts remain positioned 20% in government bond funds, 80% in money markets."
HENNING: The Stock Market Curmudgeon
Thomas Henning: "The Bond Market has cracked to the downside suggesting that the rally that has been consolidating the 123 to 103 downleg is probably finished. This breakdown suggests that the next leg down may be starting. A close below 110 and then 103 would suggest a downleg to the 90 level, which would crank up interest rates to the 7% level. Anyone for a depression? Tra la.
PS. The muni bonds are particularly weak. Is Arnold is trouble?
The Stock Market is throwing on another upleg to fulfill an alternate count alluded to in my article in this issue. If a new Dow high is scored above 10,737.70, it will be interesting to see if the Transports and internals confirm. This is doubtful.
At any rate, closes below Dow 10,000, Transports below 2740, with the Spot S&P Futures closing below 1080, would turn the Weekly Hard Momentum downward and would confirm a breakdown. Given the putrid action in the bonds, closes below these levels would be ugly.
Since last December, the Gold Complex has been consolidating the recent upleg that started in early 2003. The correction does not look done, given that the O.B.V. and gold/gold stocks ratios act el stinko, which harmonizes with the favored count that suggests that the correction should slop into late April, early May.
However, closes above XAU 115, Gold above 430, would confirm the start of the next upleg.
From a pragmatic standpoint, this analysis is for orientation purposes only. Stay with the main probable cyclic bull market. The trend is your friend."
The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389.
George Dagnino: "The stock market: For some time I have been suggesting that the 1160-1170 levels would be difficult for the S&P 500 to overcome. This was the peak of the market in 2002, just before it sagged more than 20%.
A churning market is what I predicted and this is exactly what is happening.
The fundamental indicators are bullish. The growth of the money supply has been rising in the past 3 months. The dollar is also moving higher, reflecting inflow of foreign capital. Short-term interest rates are stable and bond yields have risen, but remain within the 3.7%-4.4% range of the past 12 months.
The technical indicators have become slightly bearish. Trading volume has declined. Trading volume needs to rise above 1.5 billion shares to justify a major move on the upside. Resistance is strong at these levels and cannot be overcome with low volume.
The overbought - oversold indicators have moved from overbought to neutral. They will have to drop further before experiencing a strong move.
The advance - decline line is pausing, suggesting that the weakness of the market is quite broad, since the a-d line reflects the trend of the majority of the issues listed on the NYSE.
Sentiment indicators are neutral to slightly bearish. The AAII members are unusually bullish, and this happens at market tops.
The market seasonality suggests that the market is much stronger in up years by this time. Is this a down year?
Outlook. The market will continue to churn until it becomes more oversold. The good news is that the strength of the dollar and the increase in the growth of the money supply point to higher prices. Be patient."
MONEYLETTER
360 Woodland St., P.O. Box 6020, Holliston, MA 01746.
1 year, 24 issues, $150.
Walter Frank: "You cannot turn around nowdays without running into another article about the Fed itching to raise rates and the potential negative effects on the stock and bond markets. A good case can be made that the nervous market this month is directly caused by concerns about the Fed.
There is something perplexing about Wall Street's hullabaloo concerning the Fed. It can't be news to anyone on the Street that rates are going to rise. Alan Greenspan has said so himself more than once, and he did it in English (instead of Greenspanese). Other Fed Governors have echoed the line. So what's new? Why the sudden panic selling in such assets as REITs?
What's new is that the economy has been more robust than many on Wall Street expected only one month ago. That, and cost pressures showing up from varied sources (commodities, the dollar, etc.), has Wall Street in a flap, convinced that inflation is on the rise. If inflation is on the rise can rate increases be far behind?
It is the expectation of an earlier rather than a later rate increase that has thrown Wall Street off-stride. Many of the institutional players on The Street acted until now as if the inevitable rate increase was an issue for tomorrow or whenever, but certainly not for today. No longer. What has changed is not the event, but its timing.
Now that the rate increase seems relatively near at hand (August? November?), and Wall Street wakes up to the inevitable, the reaction in the markets needs to be put in perspective. What is going to happen (and that is some months away) is that the Fed will be starting the process of withdrawing stimulus, not actively working to slow the economy.
The Fed is about to undertake a delicate mission: wean the economy away from basement level interest rates without breaking its momentum. Wall Street's behavior this month would leads one to believe that instead the Fed is just about to begin a standard round of tightening with recession as its endpoint.
The rate rise ahead may turn out to be another chapter in the history of classic Fed tightenings, but that outcome, if it happens, is a long way off.
What will be important for the markets, in our opinion, is the strategy the Fed will use to reach its goal of withdrawing stimulus. Fed Governor Donald Kohn, a former Fed staffer, touched on the issue in a speech given on March 25th. He said the Fed could just wait until "convincing evidence" appeared that it was time to act. Or the Fed could start earlier with gentle rate rises and "gauge the financial and economic response to its actions and reduce the odds that a sharp tightening tack would be required at some point..."
Another way of gaining some perspective on the rate issue came from John Berry, a veteran and respected Fed watcher. As he wrote in Bloomberg on April 16, "unlike any time since the early 1960s, the Fed will not be working to bring inflation down but only to keep it at a low level." Berry makes an extremely important point that seems to have escaped many on the Street.
In that light, the Wall Street reaction to the rate rise issue and inflation has been extreme. As usual, the Street has overdone."
THE CHARTIST
PO Box 758, Seal Beach, CA 90740.
1 year, 17 issues, $175. www.TheChartist.com.
We remain in the bullish camp
Dan Sullivan: "Long-awaited signs of job growth have finally appeared. Non-farm payrolls rose by 308,000, surpassing estimates of 120,000 by a wide margin. January and February payroll numbers were revised higher. The number of new jobs added in March was the highest figure since April 2000. Stocks rallied and bonds fell in response to the news. The lack of job growth is the main reason the Fed has been reluctant to raise rates; however, a couple more months of strong payroll growth would prompt the Fed to move. Some are now predicting a rate hike as early as this summer. Other strong economic data suggests this is a distinct possibility. The Institute of Supply Management reported that their Purchasing Manager's Index (PMI) for both the manufacturing and non-manufacturing sectors came in above expectations. The PMI for the non-manufacturing sector hit a record high in March, coming in at 65.8 versus expectations of 61.5. On top of all the positive economic data, optimism over improving business conditions surged during the first quarter. Based on a survey conducted by the Conference Board, confidence among CEOs is the highest level in twenty years.
That's the good news, which has already been factored into the market. Going forward, this bull market, which began almost 18 months ago, must be labeled mature but, based on historical yardsticks, it is far from over. We say this because all of the bull markets since the 1950's have lasted, at the very least, two years. In fact, five out of the last ten bull markets have lasted well over three years. It is somewhat debatable as to just when the current bull market began. The purists will say that it started on October 9, 2002. However, it could be argued that, for all intents and purposes, it started on March 11th of last year. On that date, the S&P 500 was only +3.09% above the 10/9/02 lows.
At its outset, stocks were not on the bargain counter; in fact, they were considered to be overvalued based on P/E ratios, book values and yields. It was also one of the few bull markets in which majority of stock market newsletter writers got it right, almost from the start. The bears were in the majority for a single week at last year's March bottom but quickly moved to the bullish camp and have remained there ever since. For many, many months, bulls out numbered bears by a ratio well in excess of two to one.
The benchmark S&P 500, from its 3/12/03 intra-day lows at 788.90 through its most recent peak at 1163.23 (intra-day) on March 5th, posted a gain of +47.44%. The first correction of any consequence came early in the move when the S&P lost -5.33% between March 21-31 of last year. Since that time through the recent peak, 339 calendar days went by without corrective activity exceeding 5%. This is a rare occurrence because, over the last 100 years, this number of days without a 5% correction had only been exceeded on 10 previous occasions. On these ten occasions, the bull markets which were in effect at the time, had on the average - a long way to go once the initial 5% correction was out of the way. The last time a bull market rally exceeding 300 days without a 5% correction failed to have additional follow-through after the initial 5% correction was back in 1961. We remain, as we have been over the past twelve months, in the bullish camp."
THE YAMAMOTO FORECAST
P.O. Box 573, Kahului, HI 96733.
Monthly, 1 year, $350.
Irwin Yamamoto's short-term indicators for Bonds are bullish; Stocks, bearish; Gold, bullish. His long-term stock market indicators are bearish.
"What makes me believe that we're in a bear period instead of a new bull run is the leader of the current move is the same as the previous one. I am referring to the high-tech industry. Historically, different sectors replace the old group in a new cycle. Until high technology steps aside, I interpret the advance as rally in a secular bear market.
Yours truly is not the only person labeling the present valuations of equities, namely the Internet securities, as a "mini-bubble." So does Microsoft Corp. Chairman Bill Gates. Both of us might not be calling the backdrop as another bubble. Then again, it's a mini-bubble. Remember all bubbles, regardless of the size, end badly. Pretty badly."
THE PRIMARY TREND
700 Water St., Milwaukee, WI 53203.
Monthly, 1 year, $80.
Barry Arnold: "The Dow Jones Industrial Average got another facelift on April 8th. This is the Dow's first change in over four years.
Out with the old: AT&T (telecom), Eastman Kodak (consumer cyclicals), International Paper (basic materials).
In with the new: American International Group (financial), Pfizer (healthcare), Verizon Communications (telecom).
Due to its role as the most widely watched stock market barometer and because of its select list of honorary members, changes in the DJIA are always big news. Our Centerfold Feature details the "family tree" of the Dow 30 since its birth on October 1, 1928. Technically, the DJIA was born on May 26, 1896, and consisted of only 12 industrial stocks. It wasn't until October 4, 1916, that it became the Dow 20 - and then eventually, the original Dow 30 on October 1, 1928.
Here are a few interesting observations regarding the Dow's recent makeover:
1. This is the first change since 11/1/99 when the Dow received a "new era" botox injection. Old stalwarts such as Chevron (now ChevronTexaco), Goodyear Tire, Sears and Union Carbide (merged into Dow Chemical) were replaced by the technologically weighted foursome of Home Depot, Intel, Microsoft, and SBC Communications.
2. AT&T Corp., a Dow component since 1939, has been booted out by two of its own offspring. "Ma Bell", which spun off its seven "baby bells" in 1984, has witnessed the inclusion of SBC Communications and now Verizon Communications at its own expense.
3. These three new changes will boost the market cap of the DJIA by $350 billion to its new total of $3.7 trillion. The three outgoing stocks (AT&T, Eastman Kodak and International Paper) have an aggregate market cap of only $44 billion, while the three incoming stocks (American International Group, Pfizer, and Verizon Communications) total $576 billion.
4. The Dow divisor increases negligibly to 0.141 (from 0.135), which means that for every $1 move is one of the 30 Dow components, the DJIA will increase or decrease by seven points. With the divisor under 1.00, it actually acts as a multiplier.
5. While The Wall Street Journal editors have usually been prescient in the past when they've announced changes in the Dow 30 lineup, their 1999 makeover was quite a mistake. All four of the newcomers had big losses (including dividends) since their inclusion on 11/1/99: Home Depot (-26%); Intel (-28%); Microsoft (-45%); and SBC (-42%). On the contrary, of the four stocks that were booted, only one had a total return loss: ChevronTexaco (+12%); Dow Chemical (+18%); Goodyear (-72%); and Sears (+70%).
In 1999, it was difficult to rationalize the "technological makeover" for the Dow at the height of the Tech Bubble. The changes made today, however, are much more prudent. The three new additions are great companies. But are they great stocks? And will they help propel the DJIA forward? We will see."
Consumer Reports MONEY ADVISOR
101 Truman Ave., Yonkers, NY 10703.
Monthly, 1 year, $24.
Deciding when to cut your losses
"Let's face it: If you have a stock or a mutual fund that's a loser, it's not easy to call it quits. But by giving your stinkers every chance to prove you were right all along, you ignore better things you could be doing with that money. This tendency to hang on to losers too long-and to sell winners too soon-is so prevalent that academic researchers have given it a name: "the disposition effect." If you have a dog in your portfolio, you should ask yourself the following three questions to help decide whether to give it the heave-ho:
Would I buy the stock or fund today? If you thought it was a good investment at a higher price, it should be an even better deal now. But in reality there's a reason an investment's price may have fallen or stagnated for a long period: the emergence of a new competitor, a management change, a government investigation, or a product recall. When you take these factors into account, the lower price may not compensate for the increased risk.
Could I use a tax break? Even if you believe that your loser will eventually recover, it may take time to regain its good health. In the meantime you could get an immediate payoff from selling. You can use the loss to offset capital gains on your taxes. If you don't have enough gains to offset all losses, you can deduct up to $3,000 of excess losses from ordinary income-and you can carry over any additional losses and deduct them in future years. The catch: If you buy back shares of the loser within 61 days of selling it, you could be subject to "wash sale" rules, which bar you from deducting capital losses from income. So talk to your accountant before making any fancy tax moves.
How does my investment compare with others like it? For stocks, check the quarterly income statement, which you can view at http://finance.yahoo.com. Type in your stock's ticker and go to Income Statement. Find operating income, the best measure of earnings because it's less affected by one-time events. Next, divide operating income by total sales or revenues (the top line) to get the operating margin. If either the number is getting choppy or dropping from quarter to quarter, the company may be having financial problems. Finally, compare your firm's quarterly income and margins with those of its closest rivals. If they show similar income and margin disruptions, then the companies-and their industry-may merely be stuck in a downturn. But if the company's income growth or margins have been falling behind the competition, you should sell. With mutual funds, you should compare managers who are using a similar strategy. To find the peer group, go to www.morningstar.com, click on Funds, and use the link to the Mutual Fund Screener under Morningstar Tools. Choose your fund's category and click on three, four, and five stars. If your fund is underperforming most of the funds in the list, you should sell."
Editor's Note: Consumer reports, the trusted, independent consumer group debuts with a focus on money decisions people have to make in their everyday lives. Regular topics will include retirement, taxes, savings tips - and anything that's current and helpful to readers. Subscription details can be found online at www.ConsumerReports.org.
GROWTH STOCK OUTLOOK
P.O. Box 15381, Chevy Chase, MD 20825.
1 year, 24 issues, $235.
Lost jobs, torts, and job outsourcing
Charles Allmon: "Why all the rage over job outsourcing with nary a squeak from anyone about tort mafia and job loss? For 17 years a long-time friend has been serving as an expert witness in the ongoing asbestos litigation. He tells me that before the asbestos litigation runs it course, it may bankrupt half of the 30 DJIA companies. What's more, 57 companies (at last count) already have declared bankruptcy from asbestos litigation. Enough is enough!
You can imagine the heart-wrenching upheaval with families and children, school trauma by uprooted students, community shock, personal bankruptcies, the whole milieu of life in America thrown in disarray by widespread job loss from torts that strip clean U.S. companies, their employees, and their families. Who can blame companies that close down U.S. operations and move to stay in business?
California is a prime example of government run amuck in creating labor laws that make it impossible for employers to operate. So they leave for countries that want and appreciate their business.
American business, by my book, is getting a bum rap over the job-outsourcing flap. They have a choice: Move or die. Who has the guts in government and the media to call a spade a spade? Let's export company-wrecking torts instead."
THE STEVE PUETZ LETTER
2800 Wilshire Ave., West Lafayette, IN 47906.
Monthly, 1 year, $185.
Multiple bubbles of unparalleled magnitude
Steve Puetz: "Currently, the US economy is experiencing multiple bubbles of unparalleled magnitude. Of those bubbles, the commodity market bubble appears the strongest. While the commodity bubble is not sustainable, it is likely to persist long enough to burst the weakest (and most leveraged) of the bubbles - the bond market bubble. Once the bond market bubble bursts, the rest of the bubbles will collapse shortly thereafter. Already, the stock market encounters large down days when the bond market swoons. Good economic news is no longer a good thing for stocks and bonds.
Because the commodity market bubble is inconsistent with the stock and bond bubbles, and because the current Nasdaq pattern is suggestive of a looming crash. Continue to prepare for a crash and to maintain a maximum bearish strategy. Use 75% of your funds for short positions in S&P 500 futures. Allocate the rest to S&P 500 puts with June expirations and strike prices of 700,800, and 900."
The JERRY FAVORS ANALYSIS
7748 Chancel Dr., Columbus, OH 43235.
Monthly, 1 year, $190.
We have not seen the
bull market high for this year yet
Jerry Favors: "While we remain bullish for this year, we are not convinced that we are quite ready for the next rise to new highs for the year just yet. This does not mean we should not see any further rally over the short term. For this coming week any rise above 10,497 on a print basis and 10,544 intraday on the Dow will signal that some further rally is coming short term. Any rally above 2052 on the Nasdaq this week will signal that some further rally is coming short term, which could test the current short-term resistance at 2079, plus or minus 5 points. The Dow has a short-term upside projection calling for a rise to 10,640, plus or minus 44 points intraday. If a stronger rally comes in the next resistance for the Dow should be in the 10,850, plus or minus 50-point area intraday.
One of the reasons we are not convinced that this is the start of a rise to new highs for the year is that several key indices like the Dow and the S&P 500 have fallen below their respective short-term Pivot, and unless this is reversed fairly soon, a still-stronger correction over the next few weeks will be likely. To reverse the Pivot Point sell signals the Dow would have to rise above 10,755 on a point basis and 10,795 intraday. To reverse the same signal the S&P 500 would have to rise above 1164. At this point no Pivot sell signal on the Nasdaq has been given, but a decline below 1887 from here would give such a signal.
If the upper resistance levels we mentioned for the Dow and the Nasdaq are exceeded this week, any subsequent decline below 10,250 on a print basis and 10,200 intraday on the Dow, and 1973 on the Nasdaq will signal that a still-stronger correction is coming over the short-term. In terms of the Dow, we would expect next support near the 9900, plus or minus 50-point area.
Our bottom line is that we have not seen the bull market high for this year yet, so we will hold current positions for now, until we are convinced the start of the next move to new highs for the year is underway."
THE STOCK PERFORMER
343 Mount Pleasant Avenue, Mamaroneck, NY 10543.
1 year, 24 issues, $449.
Past patterns favor
a big May market move
Bob Conrad: "The market will be in a Key-Dated Reversal Zone from May 11 thru 17. Allowing for a day of grace at either end expands the zone to: May 10 thru 18. Nearly all significant market moves begin inside such zones, and if you count both legs of the typical key-date whipsaw the total DJI points available for trading gains are likely to exceed 950.
May Market Turn Projections: Whether we'll have an upside or downside resolution from the May key-date reversal zone depends on which band we're inside, or closer to, at the center of the zone (May 13) or near the end of the zone. Band #94, the top band in the Resistance zone, or #88 the strongest band in the Transition/Short Term Support zone. The two most likely scenarios:
1. The market has been rallying and it's near 10756. The rally had probably started in the 10468-10322 range, and it will serve as the first leg (size 288 to 434 pts) of a whipsaw. Second and decisive leg: down 669 to 836 pts, to make a solid bottom in the 10087-9920 range. The strength of band #87 supports the higher end of the range.
2. The market has been declining and it's near 10147. The decline had probably started in the 10435-10581 range, and it will serve as the first leg (size 288 to 434) of a whipsaw. Second and decisive leg: up 669 to 836 pts, to make a solid top in the 10816-10983 range. The strength of band #96 in the Upside Blowoff zone favors the higher end of the range."
Editor's Note: See 35th Anniversary Special Offer at www.key-volume.com.
THE GRANVILLE MARKET LETTER
P.O. Drawer 413006, Kansas City, MO 64141.
1 year, 46 issues, $250.
A great decline lies ahead
Joseph Granville: "We still see a continuing series of Dow declining tops. My work tells me that we are very very close now to a wicked break catching Wall Street completely off guard.
In case you don't know what is happening to real estate funds, I draw youy attention to the evidence of a developing crash. The AMEX lists the IShares of Dow Jones Real Estate, symbol IYR. In the past month shares of the Dow-Jones Real Estate Index Fund in but 7 sessions have lost 50% of their gain since October 2002.
I am currently seeing an increasing number of stock charts which are not only warning of sharp pullbacks ahead, but are currently pointing to complete retracements of the entire advance going back to last March. That could only be seen if the market as a whole was soon to crash. Trusting that I am talking to wise people, a word to the wise is sufficient. The charts are not lying. Something big is afoot and it requires no further warnings.
You don't want to get caught on the long side of this market. A great decline lies ahead. Smart money is selling. Dumb money is buying."
INVESTECH RESEARCH
2472 Birch Glen, Whitefish, MT 59937.
1 year, 17 issues, $295.
Do rate hikes pose a threat
to the global economic recovery?
James Stack: "With interest rates in the U.S. poised to move higher, does that spell a similar bout of rate hikes in foreign financial markets which might pose a threat to the global economic recovery? Not necessarily...
Central banks in other major economies aren't in the same predicament as our Federal Reserve. For one thing, they haven't driven short-term interest rates to artificially low levels. Only Japan is currently sporting short-term rates lower than in the U.S. On the other end of the scale, Britain has a 3-month money market rate well above 4% versus 1.1% here in the U.S.
We aren't too concerned about the international picture if Greenspan & Company decide to boost interest rates. Here's why:
- The U.S. currently has the widest yield spread between short- and long-term interest rates among major economies; therefore, the greatest incentive to raise interest rates lies with the Federal Reserve.
- While the Fed is in a predicament, it's a self-made problem and not a global one. Other regions are not experiencing the same economic pressures.
- If the Federal Reserve increases interest rates, it may upset Wall Street, but it's not likely to bring the global expansion to a halt. Other central banks don't have to follow a Fed lead."
THE MAJOR TRENDS
250 West Coventry Ct., Ste. 109, Milwaukee, WI 53217.
Published for clients of Sadoff Investment Management, LLC.
www.sadoffinvestments.com.
Undervalued department stores
Ronald Sadoff: "Over the last few months we have added several department store stocks to our client's portfolios. Three are upscale stores: Nordstrom, Neiman Marcus, and Saks. Two are more moderate chains: May Department Stores and J.C. Penny.
Why department stores? First understand that monetary and fiscal policies are providing a massive amount of stimulus, the likes of which modern day economy has never seen. Next keep in mind that consumer spending accounts for nearly two-thirds of the GDP. If consumer spending slows, the economy will stall. If consumer spending heightens, the economy will trend higher. In summary, the climate of low interest rates, sizeable tax cuts, the mortgage refinancing boom and Washington's deficit spending has provided an extraordinary punch to household purchasing power.
In addition the fundamentals are dramatically improving for these retailers. Revenues, profit margins and earnings are all strengthening. May Department Stores is expanding its bridal store chain. The related gift registry business (30,000 in 2003) is attracting new department store customers from a very important age group. Plus they are closing their unprofitable Lord & Taylor stores. Nordstrom has already boosted their gross margins by two percentage points with its new logistic software. Neiman Marcus is showing spectacular same store sales gains, which will certainly improve their profit margins and reduce their need to take markdowns. Saks has a new president. Last month the company announced a special $2 dividend. J.C. Penny has a new CEO and recently sold their Eckerd drug store division for $4.5 billion.
In summary, the improving fundamentals for these stocks confirm their recent upside breakouts. Undervalued stocks turning around with great upside potential!"
GLOBAL INDICATORS
The George Washington University
710 21st St. NW, Suite 206, Washington, DC 20052.
Job growth remains central concern
William Handorf: "The markets reacted quickly to the large number of new jobs created in March. Most surveys of the manufacturing sector, the service sector and company CEOs indicate firms are more likely to hire than fire for the remainder of 2004. Productivity gains that averaged 4.8 percent between the fourth quarter of 2001 and the end of 2003 will be unable to continue for the foreseeable future. Firms will need more workers to increase production when the U.S. economy returns to more typical productivity gains of 2.6 percent per year. If the U.S. can add 125,000 plus workers monthly over the rest of the year, economic growth will reach sustainable expansion. Job growth will improve confidence and spending even if the torrid housing market cools. New jobs will lead to the construction of new offices in selected markets. More expensive mortgage loans will lead to greater use or apartments, declining vacancy rates and again new multi-family construction. A less vibrant housing market will be offset by a more robust commercial real estate market. New job creation - subject to an orderly transfer of government in Iraq - will affect the presidential election. Job growth remains the central concern of the U.S. economy."
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