Sunday, November 26, 2006

Black Friday Requires a New Name

After a nice long weekend, we are now ready to begin another week of waiting for the stock market to decline. There are several economic reports due out this week and we will take a look at them as the week progresses. The big ones are durable goods, existing and new home sales, and GDP preliminary report. The jobs report isn’t due until next week Friday due to the first falling on Friday.

As for a review of last week’s action, there really isn’t much to say. As reported in our last post, DELL announced their delayed earnings and the stock managed to pop about 10% and gave a lift to the NASDAQ indexes on Wednesday. The news wasn’t particularly bullish in our view but the stock went up anyway. This stock has been one that has participated in the rally the last several months—again, we’re not sure that the outlook for DELL is all that positive. That said, someone thinks it is worth 40% more than it was in the summer?

We expect much chatter about the Black Friday results over the next few days. The analysts will try to put a bullish spin on the numbers as we go into the Christmas buying season. As we see it, the retailers put on huge discounts to get people into their stores. Black Friday needs to be renamed because it used to be the day the retailers were able to get into the Black for the year. We figure margins were barely positive for the weekend and very negative for Black Friday Morning. The consumer is there if you sell something about 25% under cost.

That reminds us of the local paper we saw today. On the front page there were two articles. On the left was a picture of a couple sitting in front of their 96 inch screen watching a TV show they had recorded. On the right was an article about how foreclosures had increased. Exotic mortgages were to blame in the article, the author saying that people had gotten into them without really knowing what they were. We wonder how many of them had bought large screen TV’s on the same type of notion.

The bulls are very complacent about the current run up in the stock market but we do wonder if their days are numbered. We will be watching and waiting. Let’s see how the week gets started, shall we?

Dow Industrials: 12,280.17 -46.78
VIX: 10.73 (5% jump)
QQQQ: 44.65
RYVNX: 16.60
RYAIX: 21.24
RYCWX: 36.30
TLT: 90.62
BEGBX: 14.16 (new 52 week hi with dollar falling)

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