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Gene Inger's Daily Briefing 4/22/4


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#1 TTHQ Staff

TTHQ Staff

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Posted 26 April 2004 - 09:37 AM

Gene Inger's Daily Briefing. . . . for Thursday, April 22, 2004: Good Evening; 'Actions as necessary' . . . were the tone and prevailing message the market seems to be deducing from the Fed Chairman's amplified remarks, and describes responses to all kinds of 'changes that are happening', as discussed in these Daily Briefings in recent weeks. Among those transitions, were of course the multi-month forecast of a stronger Dollar while international speculators argued for a further purge (disputing both the substance and intent of their desire, we flat-out thought they'd be wrong on it as they were); and (more discussion for ingerletter.com subscribers). We thought Tuesday's purge was not appropriately triggered entirely by Greenspeak, though everyone else thought so; as the war news and other ramifications battered a number of sectors. Today's Greenspan testimony suggested that either yesterday did temper his tone, or that it was the conclusion of something we thought was obvious in most cases to everyone before the prior day's remarks. We looked for a rebound, got it, though it might have been even more dramatic had the market been negative early in the session. Nevertheless, it sufficed, and now we have to monitor (key overhead levels), which we thought were key ahead, not the continuation of short-term selling. The Chairman spoke to the obvious: that Fed funds must rise at some point; that as yet there has not been the environment to cause the Fed to pull the trigger; saying they'll act as necessary; that we should anticipate slower GDP growth rates ahead (we said so all year, because there's no way to replicate year-over-year gains coming off a recession then huge transition year comparisons). We also think the market very much liked the Beige (Tan) Book report; robust or upbeat in most every way (more). The primary onset of this evolution included the (rather glaring) double-top in Gold (a breakdown of the primary uptrend then occurred, which made plenty of sense given the unsustainable rise of commodity pricing, primarily correlated to Chinese demand), and the erratic conclusion of the T-Bond rebound anticipated to rollover after strong jobs numbers weeks ago, as forewarned here. We don't know that there's a 'crash' in China coming; though we do know about the excesses there, including their stocks of course, and we do suspect that a shakeout there could help contribute to lower Oil in the year's second half here, something we already forecast prior to political dynamite associated with the Saudis and the White House, right after Bob Woodward's book. It can be said a breakdown in China would have ramifications (reserved for readers). Daily action . . . will be abbreviated tonight to allow for a more extensive discussion of LIPC (laser induced plasma channel) and prospects for the leader in the field (as it increasingly gets a focus beyond simple local-area less wide-area weapon systems) for Directed Energy Weapons, as well as possibilities ahead for a major electronics, and an optical networking stock that could be on a threshold of notable improvement. The behavior in stocks has been volatile, but continues evolving in a way that is both tricky, and rewarding, and potentially interesting as regards our summertime forecast. MarketCasts (intraday audio-emails) picked-up pretty decent rebounds via the 1116 June S&P long, and we were pleased the market held-together into the day's close. In the short-term nothing's changed from last evening's discussion; we got a rebound but not a barn-burner, though aside from the interest rate sensitive preferreds (etc.), it was pretty decent (as the case should be). Keep eyes (reserved for ingerletter.com). But, if there is anything that continues to bother us, it's the prospect that the course of the war is not going well, and that the market (as it often does in wars) is reflecting to us the worrisome tensions or subtle successes (as cases may be) that are evolving. At this point the market is more worried that comforted, as a barometer of most of us. There's probably hardly an American around (including the political opposition) at this point that doesn't understand risks to the Country or the threats that we face (more). Bits & Bytes… today Intel (INTC) and Texas Instruments (TXN) and other techs in fact were either mixed or firm, which was welcome behavior in a fairly neutral climate. Motorola (MOT) was the barn-burner of course, on explosive earnings (we’d thought recently they were about due for a move; this was really an impressive report), and it was not followed by meaningful (good news) profit-taking. MOT anticipates a robust Q2 as well (more). Our suggested entry dates back to the 8 area or so, thus in our view we've no reason to chase this, but reasons to hold for higher levels, as there's clearly no rush to exits, and MOT is barely circulating their best (more for readers). The latest behavior of a most-volatile contender for the throne of Directed Energy Weapons favorite, as (it) potentially seeks to unseat old laser sector leaders, like Taser, as the year continues to evolve, is discussed. We do not encourage anyone to become overly engrossed or become 'seduced' by technology, but we have felt in these past two months that there was a transition of interest between 'old-line' simple early electrical discharge hand-held devices and true 'weapons' of the new Century. A speculative stock mentioned, was not to discredit Taser (with whom they really do not compete), though we had forewarned of massive profit-taking squalls there. We'd be contemplating that a rotation of such 'security oriented' funds into stocks with large or growing Government testing or contracts would evolve favorable, and it did. Since then, the shares of the speculative (not yet on a Board) issue more than doubled and we do not believe the maximum speculative potential has been garnered for the year. Readers occasionally ask specifics (as well as are known or suspected) regarding at least the capital structure of the company (whose name we will not mention again in courtesy remarks seen publicly, until they change their name in the near future), and will try to sort-out some of the confusion about 'floating supply' and 'potential cap', as some have asked. The acceptance of the demo device may set the market's tone. Again, we do not encourage anyone not comfortable with point swings daily in both directions to even fiddle with the shares; as for those comfortable with such volatility, it is an understandable condition, due to the relatively thin nature of the float, which is suspected to remain that way if indeed it catches a wider following sometime later. Of course caveat emptor to those chasing speculation or news (such as today's key one of delivering a demonstrator, not just a prototype), while to those comfortable with the long positions (especially from the 2's), we'd not get overly involved with daily moves. Elsewhere, small-caps were mostly mixed. Little Corvis (CORV) has benefited little in recent weeks from the increased probable cash balances or other factors (more). Will the company report smaller losses (talk about FCF, or 'free cash flow', later), and will telecom analysts start to realize oldline companies are competing on price, but not on quality or bandwidth or video? Will they consider Corvis can operate profitably, given their low infrastructure costs of Broadwing, enabling the realization of positive cash flow later this year? (Speculation about the answers to that will now follow.) One note to members who may be quoting anything we say on other web sites; all we ask (in fairness to other members), is that you do not quote us in full entirety, but do quote us 'in-context', and with a courtesy attribution to ingerletter.com if you do so. Sometimes we prefer that we not be excerpted at all, and do say that, but if one does share our thinking (right or wrong), we'd at least appreciate being accredited for it. In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including assorted terrorist or groups. A world awakening to terror threats is upon us, as news from 'the front' continues to be enrapturing and difficult to contend with. Increasingly we're interested to hear what this Administration will do to further secure borders ahead of a challenging summer. McClellan Oscillator finds the NY 'Mac' reading at -168 now; at -14 on NASDAQ. No structural variance from last month's outline until now; as a crucial inflection resolved to the negative, which elicited an overt response from technically-oriented traders (all of them ran for the hills simultaneously). Now with many short (as were we profitably Tuesday afternoon, but not Wednesday), will they be forced to cover; will we washout and rebound with gusto? Being attempted. In a normal (non-wartime) setting it would create a potential for higher recovery highs in the long run. Might anyway by the way, but there are variables to deal with this year, most explicitly the market intimation that the progress of the war is not exactly going well. (Stay tuned for more on this later.) So if there was a fly in the bullish alternative, in our view, it's not earnings or markets, but realization that the terror war continues expanding, not contracting, with difficult challenges ahead, speculated about on occasion; plus troubling increased California earthquake risk. Overall the threat matrix remains quite high, pretty much worldwide. God be with our troops in these battles; of which tension continues to increase along the Syrian border at last report. As of mid-evening the S&P futures are up about 70. For now we'd like to see mild upside follow-through, some testing, then more upside. Have a pleasant evening, Gene Inger, Publisher