The Inger Letter "'Tumultuous Trading Tactics'"

Gene Inger's Daily Briefing. . . . for Thursday, September 29, 2005:

Good Evening;

Tumultuous Trading . . . trounced any general lasting moves this Wednesday, as events for the most part came fairly 'hot & heavy' to roil sentiment (we actually sense something good out of that). The prior night's ideal call however was generally seen; and that was for an upward early move, sideways action, decline, and then revival. It faded at day's end, but our intraday work already had moved to the sidelines, and by design had no intention of trying to play any reversals in the day's final hour this time.

MarketCast (intraday audio-email comments) joined the Daily Briefings in departing from the 'consensus' view about discount retailers doing well because of recessions or other short-term pressures (and interestingly the stocks weakened ever since we thought Target's stumble earlier this past summer was not merely an anomaly, but an omen; not to mention our persistent disdain for certain aspects of WalMart as an investment as well as an interloper destroyer of indirect jobs in the Western World, not just creator of productive value). Is our view about to change on either of those? (That conclusion is reserved for ingerletter.com members.)

Another area we departed from the 'consensus' with, was the idea that the loss of rig availability in the Gulf would somehow immediately levitate oil prices. We thought the outcome would be a fading of price, as occurred after the spike (balance reserved). There's no doubt the oil production platforms will come back sooner than some of the Western Gulf exploration platforms as there's structural reasons for that. Some semi-submersible drilling rigs are floundering, lost, poorly anchored, or out of commission for one reason or another. As discussed in certain circles already at the same time as it has not seen oil prices flail to much higher levels. Why? Because it is self-limiting, and short-term fixes (including strategic reserves and foreign ships visiting U.S. port permissions) addresses this concern. By the time reserves might be in a dangerous state, such rigs (particularly the production, not exploration platforms) should operate at near-normal levels, and in the meantime remaining jack-up semi-submersibles still in places like Mobile might essentially be taken out (balance continues for members).

So, why do Oil drilling and production platforms, or the destruction of the South come together in these remarks, along with talk of the fortunes of cheap discounters that of course may sell fewer imported (mostly Chinese) goods? Well, it's a sign of the times of course. The media's preoccupied with discounters (catering to the lowest common denominator investors) because it sounds like a loss to small towns, when in reality the discounters destroyed most family owned small retailers, and are less significant to the future of American job opportunities, which should be the current strong focus.

And some discounter cheerleaders are more interested in a possible recession taking today's buyers at Macy's, and moving them downscale to Target, while the 'Targeter' goes to WalMart, and the Bloomingdale's customer moves to Sears. Clue: that's not going to happen. What they ought to focus on is the resurgence of American industry and (if they had the courage to find a real 'silver lining' in the hurricanes carnage) try to envision what it might mean if the workers who are today barely able to afford their small-town WalMarts suddenly have decent jobs (instead of mediocre retailing jobs at purveyors of trinkets or foreign-made odds-and-ends), or that within fairly reasonable timeframes they'll be moving upscale in their shopping, because they're now going to have jobs that pay decent salaries in construction, raw materials, shipping or trucking at a local level. Not to mention every aspect of reconstruction imaginable.

Could we carry this too far? Sure; we could argue that by the time reconstruction has been completed, the United States would no longer be so dependant on 'globalism' in a way that would actually (by virtue of this post-hurricane sort of 'new deal') detach us from the export of so much American money overseas, which then gets 'loaned' back to us. Doesn't anyone in the media want to stick their necks out and do pro-American stories suggesting that the outcome of this could be better American incomes and the lower deficit that Treasury Secretary Snow referred to by 2009, without mentioning all the reasons trotted-out here. Let's see, if industry creates American high-paying jobs, and with lessons learned from a miraculous recovery of 2006-2010, the United States sees the light, and while not becoming protectionist, doesn't allow non-level-playing-field industries the competitive edge we gave them by throwing away our birthright for decades (via both parties, so it's not political at all). (Details follow at ingerletter.com).

Is there a bullish argument about the next 10 years, or must we be negative, because the tendency of many older investors lean that way; whereas younger people (even if naïve) are normally optimistic about the future. We for sure do not have rose-colored glasses, but we do have historical precedent for why we've said what we said (more).

Daily action . . . won't focus on Tom De Lay; though that was part of why stocks had a drop in mid-session. Nor will we focus on the significance of General Pace moving into the Chairman of the Joint Chiefs of Staff position (as AF General Myers retires). The jump in Durable Goods trounced Street expectations, and other than a slowdown as the Nation reorganizes itself, we think won't do poorly next year either. So while pundits argue downscaling everything means a 'lump of coal' in this year's stockings at Christmas, we won't evoke an Auntie Mame holiday time, but suggest years that may more readily resemble sober optimism and real work returning, and restoring at least a bit of U.S. cohesiveness, as opposed to 'woe is us' or a Great Gatsby era.

From our perspective that's not quite so melodramatic as juxtapositioned views we all hear, but it's possibly more realistic. The Country sorts all this out, goes forward, not into stagnation (at least not for long), and embraces the 'slow growth' era we have championed all year now as probable; being a blessing not a curse. By such means can we envision not sink or swim, not high interest rates or artificially low rates just to crank things up, and reasonable monetary policy and reasonable objectives, while at the same time the jobs that are created (that nobody points-out) are all-American for the most part. The focus for now can't be 'consumer globalism', but energetic growth. A type of growth that's productive not just consumptive, and enhances the work ethic.

And remember, most of life isn't 'black or white'; it's shades of gray. So when extreme thinking tries to get people bearish after shakeouts or disasters (up to limits of course we hasten to add), just as extremist pundits get folks optimistic after unsustainable or huge run-up's (like late '99 and '00).. remember… matters regress to the mean. Most movements to the extreme are limited in duration, and we return to a gray area. That may seem boring (and less headlines for rash journalistic presses and reporters that often exaggerate troubles, or focus on the worst in a crisis, not the best) but is a best way for monetary policy, fiscal policy, grass-roots uplifting and other means to get the best handle on matters and not be roiled by excessive obsession with short-term risk.

For Thursday, our intraday forecasts probably will adhere to suggesting December S&P being on the defensive in the a.m. (more for ingerletter.com members). Rallying later in the morning or afternoon seem logical, with maybe some late fading possible.

Sure, next month (and last seasonal series of storms) some problems are likely to be faced again. But, all of this is a real opportunity for technologic advances to become shining examples for the future; and a great time for reforming institutional structures, like insurance relationships, that are totally affecting good faith by property owners as well as lenders. On the other hand probable restrictions on coastal building may be a first realization of the higher tides and storm eras that we're in, whether you believe in 'global warming' or not (irrelevant; as storms and warm water exist, as do melting ice caps). We envision slow growth; as you know believe this is a formula for protracted American growth and prosperity vs. short-term fixes that create long-term issues and greater challenges. Reconstruction of the South will take years, we realize, but it's going to underpin this growth. Again, the jobs created are primarily American, not foreign, so should be of interest too we suspect (with some increase in demand for cement and materials from both of our neighbors, Mexico and Canada, in terms of cement, lumber or other material goods, so it actually is a boon for NAFTA overall).

The Confidence data was surveyed right after Katrina; so people were despondent in many cases, rather than optimistic about the snapback. Further, that kind of report is going to make it even harder for the Federal Reserve to embark on restrictive policies (though we didn't expect them to really do that anyway; and have called for relatively low interest rates all year). Where they are having an effect is 'credit card debt' now a real concern at 4.81% of cardholders; so we think (reserved member commentary).

As to the Chairman, the media have covered the event adequately, and his emphasis on 'flexibility' of the U.S. economy is both an optimistic assessment as well as sort of an explanation (we think) as to why the U.S. muddled through various crisis points; of course even including a couple that the Fed was not particularly on the right track for (though we suspect they'll still never admit this just as was the case back in 2000). In a sense we concur, despite his 'French slip' the Paris press alluded to about the U.S. deficit (we won't emphasize it, because we're not sure the 2nd hand quote is realistic).

Bottom line: continues to suggest that the move projected to commence last week, be slightly sidestepped after a relief rally at the week's start, is underway. We think it continues Thursday, with some early shuffling on the final Q2 GDP as well (about inline with the prior Quarter) as it evolves into the pattern mentioned earlier. In the longer-run we have no problem with our anticipation of (reserved) in the S&P being revisited, as we have argued (before Rita) would be the eventual outcome as the market purged the weak-kneed types and prepared for a Q4 rally event overall.

Further comments provided via accompanying audio remarks tonight.

If it all goes just right the purges and shakeouts of September and October will have proved to be better times to enter than exit, but this won't really be known except in hindsight months down the road, and then it may be irrelevant for those focused on technology (should benefit anyway, particularly as we go into late '06), and relevant only to those focused on retail consumer-driven stocks; not American rejuvenation.

Besides, our primary interest these days is in special situation issues which may sink or swim (or bob around for awhile as they mature later, because we try to be early as opposed to late, before the pundits even have clues what business such companies are in), but whose funding isn't really attached to the short-term consumer situation (it is evident even today as a microcosm, since most moved very independently too).

Of course that doesn't mean we aren't concerned about some things, but it means we continue to see a 'silver lining' to the situation, and are in a sense glad that certain of the 'perceived' mainstream technicians are increasingly negative; just about where we prefer having them in September and October. (reserved for ingerletter.com.)

Earlier this week the Daily touched on a story about 'naked shorting' and what's going on (but hardly reported, because some are afraid to, and others don't want to or don't at all get it), and here and there a couple stocks are benefiting from a couple of listed (as opposed to OTC) stocks that have or are facing 'failures to deliver' situations.

According to a Financial Wire story the other day; Up to 35 brokerages and clearing firms, including (names withheld for non-members) are on top of regional outfits now apparently under intense NASD pressure to settle failed short trades in Regulation SHO threshold securities or have their clearance firms do it at possible substantive losses. Short-covering rallies can be sparked by a targeted firm (as some shorting is organized in an almost criminal manner so it seems on occasion), if the targeted firm has positive news that overwhelms shorts. At some point in such sagas, where the companies do not merit such shorting, shorts of a cocky nature stop defending their 'battle lines', after sometimes making threats implying they had insufficient optimistic information or they wouldn't have shorted (the most lame argument in existence, as it implies their arrogance of numbers or that their 'plans' exceeded their due diligence, as they couldn't repel buyers; mercurial arguments for a group normally priding itself on superior research work; but this is another era; a time in which shorts normally are functioning as a cabal rather than based on reasoned fundamentals fairly frequently).

In the meantime, we think the panic and reactive days we've gone through (and are contending with in oscillating fashion) actually enhances the prospects of stock price gains in Q4, almost irrespective (aside absolute worst-case scenarios) of what does result specifically from Rita's energy-disruption evaluations. Short-covering helps too, as the bears probably do realize that historically the 4th Quarter is the year's firmest, and sometimes that's especially so even if September or October have been rocky. So all of this occurs to undermine confidence, then the market goes up anyway..

Later this year we think markets actually accelerates as fund managers increasingly try craving-out a niche of gains for providing we survive (economically) Rita's oil hits, and Hitchcock's 'birds' don't attack quite yet. Eventually folks will start to absorb the reality of what happens to leveraged housing investments when prices come down, and if they don't plummet, which they probably won't because of the pressure to keep rates reasonable and the changed occupancy of so many cities (though the bloom has been off the rose for months in many areas), we may simply get a 'balancing' of assets a bit better between financial holdings and property retention, and that could be good for the stock market, and American family diversification, overall.

Bits & Bytes . . . recently provided investors in Ionatron (IOTN) a variation of some of the possibilities that could evolve from this ongoing 'chess game' involving what at that point again became increasingly a 'wild' stock; now rallying to around the 10 area with a huge short-position remaining, and new institutional block interest very evident.

And as we move into a realm of Directed Energy Weaponry (you may know the future weapons systems, almost all, have specs requiring power for devices of the type we envision, whether independently or jointly mounted and operated by all branches of the services, as we;ve explored periodically over the past year-plus since discovering this at 2); is there a point where investors grasp the defensive implications of LGE as a later 'core' technology (laser guided electricity is what DoD calls LIPC) holds for the pioneering company in the field; not the firm firing microwave or other weapons?

We can't answer these questions for you; but these aretopics we explore regularly as part of our assessment of this stock, and notably 'disruptive technology' generally.

Elsewhere: we touched on InkSure (INKS), Essex (KEYW), Texas Instruments (TXN), Motorola (MOT), Intel (INTC) and Advanced Photonix (API) tonight.

If you do quote excerpts of our remarks anywhere on the internet, please respect our work; as we request mentioning it came from www.ingerletter.com . At the same time, please realize sending or even posting our entire Daily to another investor isn't fair to us or members, and is discouraged, unless done rarely, to help enlighten an investor as to our work (that courtesy we graciously appreciate). No web site has permission to repost any Daily Briefing in its entirety, in any routine way. A web site may request to receive a once-weekly edited excerpt of one of our Dailies (normally on Thursday).

Members please note: we have no association with IOTN or any other publicly traded firm (never have had), other than as shareholders of course. Yours truly remains an Ionatron shareholder throughout coverage timeframes, as regularly noted. Comments are interpretative speculative postulations, provided 'as is with all faults', and all risks, with no assurance about future performance of anything, in any way, whatsoever.

In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including organized terrorist forces in various countries. A world awakening to terror or nuclear threats grows, as domestic concerns absorb us almost (too?) entirely, adjusting to the hurricane’s aftermath, the 'chain of command' issues, or now the epic ongoing post-Rita/Katrina recoveries.

Though few generally concurred for three years, our consistent view has been slow but persistent American growth isn't negative, allowing the protracted gradual growth without ancillary significantly high interest rate pressures. There's no truly-restrictive monetary policy; nor is there likely to be one, irrespective of oil-induced inflationary pressures. This is a continuing saga, which found a few too many curious converts to the bullish side of the ledger just most recently. However, that in itself doesn't mean it tops-out beyond the short-term after breaking-out anew, as that's the history of major bull markets, where in midstream a majority finally figure-out that trends indeed have been up. Often we get a speculative phase later, but increasingly towards the end of the overall rising phase. In our view, there's not been that degree of speculation, and that is a potential feature developing somewhere in the years ahead, barring disaster.

McClellan Oscillator finds NY 'Mac' oscillating currently; NY -103 today; NASDAQ neutral; presently -16. Issues continue including oil, terror; of course Iraq; recovery from the hurricane, and future storm events. Terror threats continue; while barbarians have a history of attacking where and when not expected. There's a new 'quiet' again reportedly in internet Islamist chattering, so we remain on-guard now, likely through Ramadan, starting Oct. 5th.
As to flies in the bullish alternative continuing; in our view, it's realization terror matrix issues continue, with challenges ahead, and as attacks and various difficulties show. Renewed earthquake temblors continuing in bunches across much of the West (not to mention 'fire season', while more concern about the West may evolve as the 7.5 shaker in Peru abruptly reminded all. The tropics are stable, but there is some minor swirling starting to take place off Florida once again (late season storms possible).
Members please refer to accompanying audio for speculation about other patterns. S&P is off 10 this evening; Thursday's likely pattern is explored technical via audio.
Enjoy the evening,
Gene
Gene Inger,
Publisher

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