Vol.1 Issue 43 December 1st. , 2003
Send comments and
suggestions. or get more information at
of the Week:
through October produced an 8.45% return in the S&P 500 and
a 19.27% return in the Nasdaq. We're entering a period of historically
high returns. Earnings estimates are being revised upward and
stock valuations still appear reasonable relative to interest
rates. Without making a prediction, let's just say that it wouldn't
be too surprising to see stock prices keep climbing."
Odyssey Advisors, www.OdysseyAdvisors.com
, from his article, "Tis The Season for the Santa Rally," featured
in #43 iSophia e-zine.
Santa Stuff the Stocking with Sony Stock Certificates?
By Natalie Pace, CEO, iSophia.
Report Card: Sony, Disney, News Corporation, Viacom,
Time Warner, Vivendi. They all have movies out in
the hottest season, but which ticket is the best for
the Season for the Santa Rally,by Paul Woods. pwoods@OdysseyAdvisors.com.
Interest Rates, A Strong Currency, & Stormy Politics,
Oh Canada! By Meri Anne Beck-Woods, CFO, Odyssey
Advisors. 310.568.4711. mabwoods@OdysseyAdvisors.com.
Profit-Take or Let It ride? Profit strategies and
market predictions from the pros can be the holiday
gift that keeps on giving… Don't even think about profit-taking
until you read them…
Beauties: Inamed and Medicis wooed the FDA Advisory
Panel into recommending approval for two collagen competitors-Restalyne
and Hylaform. Good news for Baby Boomer women who want
to look 15 years younger!
Galas, networking, benefits, seminars and special
opportunities! Check out what's happening online at
the Calendar section of the web site.
in the News… News highlights, as reported by the
most respected sources in the world. Alphabetized for
Santa Stuff the Stocking with Sony Stock Certificates?
Natalie Pace, CEO, iSophia
Home of the Future
were shocked to learn this quarter that Sony management had managed
to fall behind in the gaming and audio division (remember the
old Sony Walkman?), but all indications are that Sony, a seasoned
champion in the electronics world, may be incorporating Muhammed
Ali's Rope-a-Dope trick, taking a beating this quarter, in order
to win in the final round. And while the company is against the
ropes, during this quarter's downturn and reduced annual projections,
they'll likely get in a few solid punches, especially during the
holiday season. Sony Walkman and Playstation 2 hardware and software
sales may be anemic in December, especially against X-Box and
the upcoming release of Halo 2 (the best action game ever
made, according to my teenager), but in the gifts for guys department,
Sony electronics sales are poised to take the season. SONY still
slaughters the competition in television, digital still cameras
and camcorders sales, with 16.4%, 17.9% and 42.1% of the market
share, respectively, and ranks number two, behind Toshiba, in
sales of DVD players, at 14.3%. PC notebook sales place fifth,
behind HP, Dell, Toshiba and IBM. Retailers report that digital
electronic products are flying off the shelves, and 54% of consumers
surveyed said that they will be browsing for electronics gifts
strong DVD and digital camera sales be enough to stop Sony's slide?
outdated product isn't the only brute that forced Sony to adjust
their annual outlook for fiscal year ending March 31, 2004 downward.
According to the company's quarterly report, "sales and operating
income exceeded July expectations," but "gains from
increased sales have been offset by a change in our exchange rate
assumptions for the second half of the fiscal year." Bush's
policy for the weak dollar, which according to C. Fred Bergsten,
Director of the Institute of International Economics "has
to continue to be weak in order to keep foreign investment coming,"
is expected to continue to negatively impact the strong holiday
sales and bottom line of the world's favorite brand—Sony.
take a hit, along with European and Japanese ADRs, every time
headlines explode on the declining dollar. Last week, on November
19th, shares of Sony declined again, on continued worries
that the American dollar will erode foreign profits. The Zach's
Average Brokerage Rating for Sony is a Moderate Sell, per www.MoneyCentral.msn.com.
Institutional investment in Sony is sitting in the corner, stalled
at 9.4%, while troubled American multi-media giants, Time Warner
Inc. and Disney, still weigh in at the powerhouse 60%+ institutional
investment levels. As we enter a season that is bound to team
with conflicting headlines—strong sales, weak dollar—Sony's share
price gains and losses are likely to be quite a wild ride. (Investors
who get seasick easily might want to wait on shore until the tides
become more predictable.)
Sony drop the joystick?
gaming software shipments have been reduced by 10 million units.
If you read the future strictly by the bottom line, Play Station
2 is last year's news, a death sentence in the rapid-fire innovation
world of gaming geeks, where software like Duck Hunter quickly
become relics in the Pong graveyard. However, the story
told in the most recent quarterly report filed with the SEC on
10.23.03 sounds much more like the Sony American consumers have
come to respect and love over the past few decades. "Operating
income decreased significantly in the Game segment due to an increase
in research and development expenses, primarily for semiconductors
designed for use in future businesses, and due to a decrease
in sales." R&D for future businesses? Just what does
Sony have on the drawing board?
that Sony is not so short-sighted as to abandon the field they
dominated just a few short years back, when parents were bidding
beyond five hundred bucks for Play Station 2 gaming consoles to
put under the tree for their tweens. Sony executives have poured
their money and R&D into what they are calling the Ubiquitous
"Value" Network, where the gaming console has Internet
capacity and also multi-tasks as a DVD player, a digital still
photo/video projector and a television remote control. This new
gaming console of the future is called the PSX, and is touted
to be the first commercial product in which Electronics and Game
converge. Similarly, the old "Walkman" will become the
PSP, a portable entertainment system that is designed to compete
with iPod and retail for just $60.
and COO Kunitake Ando describes the vision this way. "By
connecting AV, PC and mobile devices, we will create a huge platform
for the creation and enjoyment of rich digital content."
The various toys capable of linking into this interconnectivity
include digital cameras, cellular phones, flat screen televisions,
PCs, a home server and an online music service to compete with
iMusic, each with online, wireless capacity, and access to Sony
Entertainment's first-run features and televised shows. The American
nuclear home accommodates the separate digital needs of each family
member, with Junior battling friends in cyber space gaming scenarios,
Pops screening the latest heavyweight bout, Mom making dinner
reservations online and Sis chatting on instant messenger platforms—and
each of these personal devices can be synced up, linked up, filmed,
photographed, viewed on a flat screen and/or downloaded through
the family home server.
star date of this future family phenomenon? 2010? The PSX and
PSP both go on sale in Japan this year, with the US and European
product launch slated to be in 2004. By 2006, Sony projects
an increase in operating profit to 10% (from 2002's 4%), thanks
to cost cuts, streamlining, new product and strategic partnerships
with companies like Intel, Samsung, Bertelsmann BMG and Ericsson.
on paper and Power Point, but will the Japanese, European and
American consumers really embrace this vision? Research shows
that Americans can hardly wait. According to Taylor Nelson Sofres
Intersearch's study of 1,030 US adults, ages 18+, 47% of those
surveyed selected plasma TV models as the #1 trend consumers are
looking to become more affordable and mainstream in the next five
years. 47% also said that they would like to upgrade their primary
TV with new technology. "Our vision for Sony remains the
same—that of being the strongest consumer brand—as we promote
the convergence of Electronics and Game, Music and Pictures."
Nobuyuki Idei, Chairman and Group CEO, Sony.
So should Santa put Sony stock certificates in your stocking?
sales this year are expected to be up at least 12%. Holiday online
sales alone, according to Jupiter Research, are expected to exceed
$16.8 billion, up 21.7% from last year, to round out a whopping
Q4 2003 with $17.5 billion in online retail sales (Retail Forward).
According to the Department of Commerce, e-commerce sales for
3Q 2003 were $13.291 billion, with the grand total of 3Q 2003
retail sales in at $872.5 billion. What's the hottest gift item
this season? CoolSavings reports that the most popular item to
shop for online this year will be electronics (56% of households).
With Sony's top-line market share in consumer electronics, like
camcorders, digital cameras, DVD players and televisions, sales
may turn up even more robust than Sony executives are predicting.
even with an expected seasonal earnings surprise and assuming
that their new products will enjoy wild success in the 2004 launch,
there are still a few problems in Sony, beyond the dollar/yen
war. So far, it is the Financial Services, not the Electronics,
division that is the Cinderella story of Sony. In fact, Sony is
planning an IPO for the Sony Financial Services in 2006, and,
in anticipation of that time, the company intends to separate
and scrutinize the balance sheets of the Financial Services and
Electronics divisions "thus making apparent the value"
of the two distinctly different businesses. This could mean trouble
in Tinseltown, should Sir Howard Stringer's Sony Film unit continue
to turn in disappointing numbers. According to Sony's 10.23.2003
6-K, "In the Pictures segment, an operating loss was recorded
due to the disappointing performance of certain theatrical releases."
(Can you say Gigli?) Radio, Sony's newest release,
has only brought in $47.1 million as of 11.17.2003, and is losing
traction, though Spiderman 2 is hoped to be the blockbuster
in 2004 that the first one was in 2002.
Sony Entertainment has not yet achieved the customer satisfaction
levels that the electronics divisions have earned with consumers.
Americans rated Sony #1 in Harris Interactive's best brands survey
FOR THE 4TH YEAR IN A ROW, in an online survey conducted
between 6.16.2003 and 6.22.2003. Over the past nine years, since
Harris began asking this question, Sony has never fallen lower
than the third best brand with consumers.
Of all of
the MEGA MEDIA companies, including Disney, News Corp., Vivendi
Universal, Time Warner Inc., Viacom and InteractiveCorp., Sony
has the most sales by far ($62.3 billion for Fiscal Year ending
3.31.03), with one of the lowest market capitalizations ($31.25
billion). Should Sony's virtual life catch fire in an emerging
digital, wireless world, there's plenty of upside if a tsunami
of institutional participation washes in, from the low-tide of
9.4%. Finally, with Gateway, Dell and Canon in the flat screen
TV markets, and iPod in the personal digital music field, prices
are likely to become consumer friendly in a relatively quick period.
Research and history both show that when prices become affordable
on technology that consumers are dying to have, sales can reach
the distant galaxies. Sony may well be the starship to take us
there, though if you buy a ticket now, you may find yourself waiting
a few months for others to join you.
by Nobuyuki Idei, Chairman and Group CEO of Sony Corporation:
the second quarter ended September 30, 2003, sales and operating
income in the Game segment decreased, but we saw the beginnings
of a recovery in the Electronics segment, where we are improving
the competitiveness of our products. Looking forward to the second
half of the fiscal year, we will increase our range of product
offerings in advance of the year-end holiday selling season, and
we will continue to aggressively expand our business. We will
also begin to implement, in earnest, fixed cost reductions (including
headcount reductions) and will work to achieve further growth
through a renewed concentration of management resources on important
areas of our business and an improvement in the competitiveness
of our products. (Form 6-K, www.sec.gov/edgar.
Sony Corp. 10.23.03).
may boil down to this. Can the world's best brand win back the
support of institutional investments with great products alone,
or will the war between the dollar and yen continue to scare off
investors, particularly institutional investors, to perceived
safer ground? Will early bird investors get the worm or simply
a bumpy ride down the global boulevard of broken dreams? When
picking the winner, it doesn't hurt to pick the champion, especially
if the company has been training hard, pouring money into the
latest R&D and trimming off the fat, in order to win the race.
Natalie Pace owns shares of Sony Corporation (SNE: NYSE)
Report Card: Sony, Disney, News Corporation, Viacom, Time Warner,
all have movies out in the hottest season, but which ticket is
the best for your portfolio?
News Corporation and InteractiveCorp. have each increased their
bottom line—income--while Sony's profitability has taken a severe
slide, largely on the weakening dollar, with a side order of weak
sales in their gaming and motion picture sectors. As consumer
confidence improves and technology advances entice the American
consumer into transforming their living rooms from dial-up to
digital and Wi-Fi, which of these media giants are poised to lead
the new broadband/cable dominated market? Which companies will
benefit from holiday blockbuster films?
the two attached report cards, one from June
and one from November,
to make your own decisions about which companies are faltering,
and which are on the fast track to improved products and operations.
the Season for the Santa Rally,
the Season for the Santa Rally, by Paul Woods. Pwoods@OdysseyAdvisors.com.
Woods CEO, Odyssey Advisors
of the things professional investors grudgingly accept as they
gain experience is that the stock market is mostly unpredictable.
We can't get investors in at the bottom and out at the top. When
we try, we sometimes end up doing the reverse. Yes, there's no
shortage of systems or market letters out there that claim amazing
results and dazzling track records. Reality, however, is that
if you spend a lot of money for one of these, the only thing you
can count on is that someone besides you will be a bit richer.
develops a crystal ball that works, predicting the stock market
is going to remain extremely difficult. That being said, however,
many experienced investors still enter certain times of the year
with a bounce in their step, while other periods produce a queasy
feeling in the pit of their stomach. There is a lot of evidence
out there that indicates some times of the year tend to be more
rewarding than others for investors.
at monthly returns from 1971 to be able to compare the S&P
500 with the Nasdaq. In a nutshell, July through October is
usually the worst time of the year to own stocks. The golden period
in the stock market usually starts in November and ends after
January, but returns usually remain positive through June.
Following are average monthly returns from March 1971 through
average returns were as follows…
this appears to be a global pattern. Historic returns on European
and Japanese stocks tend to show the same pattern of high returns
in the winter and low returns in the summer. Psychologists have
come up with tortured explanations for this phenomenon that involve
daylight periods and psychology, but it may not be that complicated.
quarter earnings are reported, investors usually begin to look
at earnings expectations for the following year. As investors
begin to gain more confidence that earnings will be higher in
a year, money begins to flow into stocks again. In addition, cash
usually flows into the stock market from bonuses and contributions
to retirement plans in the first few months of each year.
usually a holding period. There's not much in the way of new cash
flowing into the equity markets, and it's still too early to get
a handle on the following year. Most people go on vacation sometime
during this period, and the stock market tends to get the blahs.
For what it's worth, September tends to be the worst. It's the
only month that usually produces negative returns for both the
S&P 500 and the Nasdaq.
We also looked
at the volatility of monthly returns, and one thing stood out.
Halloween belongs in October, because that's the scariest month
for investors. Notable stock market crashes have occurred in 1929
and 1987, but there have been enough good years to offset the
bad ones. Overall, however, October produces the widest range
of returns. The only thing investors know for certain is that
October will usually be an exciting month. There's usually a sigh
of relief when it's over.
showed a few differences versus the S&P 500. Both tended to
have lousy Septembers. However, for the NASDAQ, July is typically
also a down month. A partial offset was that NASDAQ stocks showed
very high returns in January. The explanation for this is known
as the January effect. The NASDAQ is made up of stocks in more
small companies. These tend to be riskier companies and those
that are down usually come under selling pressure at the end of
each year as investors take losses to offset gains for tax purposes.
Once the year ends and the tax selling pressure is lifted, these
stocks usually recover the following January.
To avoid volatility
and below-average returns, it's tempting to get out of the stock
market in June and get back in November. However, it's important
not to get too cute. If investors are diversified and have some
exposure to both markets, average returns are still much higher
than the current monthly returns on cash equivalents. If trading
costs and short-term capital gains taxes are factored into the
mix, doing nothing is usually a pretty good strategy in most years.
note: Short-term capital gains occur when you buy and sell a stock
within a 12-month period. You are taxed at your personal tax rate,
rather than the reduced 15% capital gains tax rate. This can be
a significant hit on your earnings. Day-traders take note!
One of the
things that makes the current rally in stock prices look convincing
is that stocks continued to climb in the summer of 2003, even
though there was a bit of the usual backsliding in September.
July through October produced an 8.45% return in the S&P 500
and a 19.27% return in the NASDAQ. Now, we're entering a period
of historically high returns. At the same time, earnings estimates
are being revised upward and stock valuations still appear reasonable
relative to interest rates. Without making a prediction, let's
just say that it wouldn't be too surprising to see stock prices
keep climbing. Remember, ‘tis the season.
Interest Rates, A Strong Currency, & Stormy Politics, Oh Canada!
Ann Beck-Woods, CFO, Odyssey Advisors. 310.568.4711. mabwoods@OdysseyAdvisors.com.
November 19, 2003, the Bank of Canada sold $3billion in Canadian
dollars ($2.3 billion in U.S. dollars) of 28 day Treasury Bills
maturing Dec 18, 2003, at an average yield of 2.73 percent and
a price of 99.79132. On the same day the comparison to a U.S.
Treasury bill maturing on Dec 18, 2003 had a yield of .93 percent,
a 1.80 percent difference. Meanwhile 5 year Canadian bonds yielded
4.085 percent and 10-year Canadian bonds yielded 4.817 percent
compared to U.S. 5 year yields at 3.22 percent and 10 year yields
at 4.24 percent. The biggest difference is in short-term rates
and that's because the Bank of Canada's target interest rate for
overnight lending among commercial banks is 2.75 percent, 1.75
percentage points more than the comparable U.S. rate. The Bank
of Canada has lowered interest rates to help spur the economy
but not as much or as fast as the U.S. and is expected to hold
them steady on Dec 2nd when they next meet to decide
on short-term rates.
in the U.S., Canadian bonds are attractive relative to U.S. Treasuries,
but, before you dive into the higher yields, you need information
on the United States-Canada Income Tax Treaty. There are tax consequences
related to Canadians buying U.S. stocks and bonds and Americans
buying Canadian stocks and bonds. Generally for dividend income,
the U.S. and Canada have agreed to tax each other's citizens at
the rate of 15%. For Canadian source income received by U.S. residents,
the Canadian income tax generally may not be more than 10%. For
help on U.S. & Canadian taxes go to http://www.irs.gov/index.html.
In the search bar put in Canadian Taxes, and then go to frequently
asked questions. One of the references, which you can print out,
is IRS publication 597 Information of the United States-Canada
Income Tax Treaty. This will give you more detailed information
on the sale of other assets, capital gains and such. You can also
get information on Canadian taxation from the Canada Customs and
Revenue Agency, which is their version of the IRS. The International
Tax Services Office can be contacted at 1-800-267-5177 or on the
Internet at www.ccra.gc.ca
the Canadian Dollar has gone up as much as 21 percent this year
versus the U.S. dollar and could go higher. While this has helped
Canadian bond sales to international investors, it has also raised
the price of exports from Canada, impeding growth. The Canadian
dollar recently reached a level of 77.02 U.S. cents (a U.S. dollar
buys C$1.3043) after the favorable report on U.S. housing was
released. The Canadian currency could strengthen by year -end
to trade at around 78 U.S. cents. Some economists say Canada's
dollar stands to gain further this year, because traders will
eventually sell U.S. dollars over concern the U.S. may not be
able to attract the $1.52 billion required each day to offset
the deficit in its current-account, the broadest measure of trade
and investment. During November, the Canadian dollar reached its'
highest level since 1993.
1993 was also
the year current Prime Minister Jean Chrétien's Liberals
came to power. Chrétien, 69, Canada's Prime Minister for
the last decade, will step down between now and February of 2004,
and be replaced by the new head of the Liberal Party Paul Martin.
Chrétien and Martin, who was Finance Minister, are credited
with crafting fiscal budgets for Canada that ended 27 years of
deficits in 1998. That began a string of surpluses that's set
to extend to a record seven years, in the fiscal year ending March
31. The government also introduced a record C$100 billion tax
cut in 2001, helping to make Canada's economy the fastest-growing
of the Group of Seven industrialized nations.
ran over the competition for the job of Party Leader. Chrétien
fired Martin from the cabinet in June 2002 after Martin refused
to end his campaign for the leadership. Chrétien officially
started the race 15 months ago by announcing he would retire.
John Manley, the current finance minister, dropped out in July
after sparring with Martin in six leadership debates, saying Martin
couldn't be beaten. Industry Minister Allan Rock disbanded his
campaign in January after five years of raising funds. After forcing
his two strongest leadership rivals to back out, Martin raised
10 times more money than his lone rival, Heritage Minister Sheila
over a party that holds 170 of 301 seats in Canada's Parliament.
That gives him the power to start implementing an agenda that
he says will include a review of government spending and lower
the size of the national debt to 25 percent of the country's C1.1
trillion gross domestic product. It now stands at about 40 percent
of GDP. In addition he has said he wants to give cities more money
for public transit and low-income housing, and suggested giving
them a portion of the federal gas tax. His other spending priorities
include more health-care money to reduce wait times at hospitals
and funding for research.
are not good between Chrétien and Martin, and Chrétien
has said he would have left in the year 2000 if Martin and his
supporters had not pushed so hard to get him out. Martin 65, who
is said to have the support of 90 percent of the voters, has not
always had good relations with the banks either. He denied merger
requests from four of the country's biggest banks in 1998, quashing
Royal Bank of Canada's bid to buy Bank of Montreal and Canadian
Imperial Bank of Commerce's attempt to combine with Toronto-Dominion.
All of these banks may try again as they have said they need to
merge to compete with U.S. and European rivals as the industry
Martin has pledged to give elected Liberal legislators who aren't
in the cabinet more say over lawmaking. He also wants to improve
relations with the U.S. and President George W. Bush, which soured
amid trade disputes over lumber and wheat and because of Chrétien's
refusal to back the U.S.-led invasion of Iraq. The U.S. and Canadian
economies are closely linked because about 85 percent of Canadian
exports are sold to U.S. customers. This represents about a third
of Canada's economy.
the manufacturing industry is set to accelerate as the U.S. economy
improves. The Canadian economy shrank 0.7 percent in August. By
comparison, the U.S. economy expanded at a 8.2 percent annualized
rate in the third quarter, the fastest in almost two decades.
The U.S. economy is expected to slow to a 4 percent rate in the
fourth quarter. Now, the Canadian economy is beginning to shake
off the temporary effects of a slowdown in tourism and shopping,
after an outbreak of severe acute respiratory syndrome killed
44 people in the Toronto area by mid-August. Also the discovery
of mad cow disease in one Alberta animal, forest fires on the
west coast, and a power shortage in Ontario had a slowing effect,
which is not expected to continue.
not a strong proponent of international investing, Canada has
some attractive features. A fiscally responsible government with
budget surpluses instead of deficits, a strong currency, relatively
attractive interest rates, and vast natural resources. All in
all Canada is not a bad place to put money.
Profit-Take or Let It ride?
strategies and market predictions from the pros can be the holiday
gift that keeps on giving… Don't even think about profit taking
until you read them…
- Tax Burden
of Day Trading. Did you know that, in the United States, if you
buy and sell within the same twelve-month period, you will be
taxed at your personal income rate, instead of the 15% capital
gains rate? Don't be caught unaware in the short-term gains tax
bracket. The first call you should make, before the broker or
the click and trade, should be to your accountant to understand
the tax consequences of your actions! Save half of your gains
or more just by knowing, understanding and applying the tax laws
of your country and state! Visit: www.irs.gov
in the U.S. or www.ccra.gc.ca
in Canada to get more information.
believe the dollar will continue to come down, due to the huge
trade deficit... The dollar has to continue to be weak in order
to keep foreign investment coming." C. Fred Bergsten, Director,
Institute of International Economics. With a weak dollar, foreign
ADRs (European, Japanese and other firms) have been suffering.
A weak dollar makes US goods more competitive (cheaper) in the
world market. Anyone interested in futures or currency trading
based upon Mr. Bergsten's (and other economists) predictions
should understand the risks before you dive in.
- Short selling:
Unlike regular investing, where the most you can lose is 100%
of your investment, with short-selling your losses are unlimited.
For example, if you sell short a stock at $6.50 and that stock
rises to $85.00, you are legally required to buy back the same
number of shares you sold short at that price. 100 shares at
$6.50 means you took in $650, but now it will cost you $8,500
to buy them back. That's a pretty hard punch in the wallet,
if you were only planning to risk a few hundred bucks!
the coat tails of institutions. Even if they're wrong about
the markets, they're right in the short term because they're
driving it." Rance Mashek, President, SpreadTrader.com
Five Point Star Trader System and nationally syndicated radio
quarter earnings growth still appears to be underestimated and
should bolster stock prices through year-end." Tobias Lebkovich,
The Portfolio Strategist, www.SmithBarney.com
growing the American economy and soon we'll be growing more
jobs. Today's strong performance [7.2%GDP in 3Q 2003] shows
the American economy is headed in the right direction thanks
to President Bush's Jobs and Growth Agenda." Donald L.
Evans, Secretary, Department of Commerce. On 11.24.2003, the
Gross Domestic Product, a measure of all the goods and services
produced in the U.S., was revised upwards, to 8.2% annual rate,
according to the Commerce Department. This marked the best quarterly
performance since a 9% surge in the first three months of 1984,
according to Dow Jones. Woo Hoo!!
would expect the powerful rally seen so far this year to continue
based on historical precedent...the NASDAQ Composite Index may
still have much more upside potential." Tobias Lebkovich,
The Portfolio Strategist, www.SmithBarney.com
improvement was something that the market has been aware of,
and the primary concern in the marketplace is valuation. We
pushed the NASDAQ back to the top end of the trading range earlier
in the week." Steve Massocca, president, Pacific Growth
Equities in SF, on November 8, 2003, reacting to the good news
that unemployment fell to 6% and 126,000 jobs were added in
October. It's always a good idea to make sure that you are not
racing along with the bulls toward a bubble bursting. Check
P/Es of your company and compare them with the sector AND with
the average S&P P/E. If the P/E is above 30, you should
have a good reason for buying in. (Predicted sharp increase
in earnings, company renaissance, new company just starting
to pay off debt, institutional investors planning to pour into
the company, etc.) Remember that some sectors, like biotechnology,
have higher P/Es than the rest of the markets.
- Don't forget
that we have elections next year. Amazing things happen in election
years, including economic recoveries. We think the economy will
start to do better by the end of the year. Paul Woods, Odyssey
Advisors. This was Paul's prediction for the economy, back in
investors who saw the steep yield curve (5%) in April 1992 and
bet on expansion were richly rewarded. The broad Russell 3000
index gained 20% over the next two years. www.smartmoney.com
(The current bond yield curve is again "steep.") For
more details on what, historically, the bond-yield curve means,
Do the above
predictions and indicators, so many of them positive for continued
strength in the markets, mean that the stock market will absolutely,
beyond a doubt, continue to rally through the end of the year,
and perhaps well into 2004? As the saying goes, there are no assurances
except death and taxes. Certainly if there is a major terrorism
attack, like the tragedy of 9.11.01, the markets will tumble far
and fast. On the other hand, the recovery of the markets after
a severe event tends to be quick and robust, within six months…
and Medicis wooed the FDA Advisory Panel into recommending approval
for two collagen competitors—Restalyne and Hylaform. Good news
for Baby Boomer women who want to look 15 years younger!
Nicholson, Inamed's Vice President, Business Development, told
iSophia, "[Inamed] is pleased with the panel recommendation.
Not an approval though, so we are still focused on working
with the FDA until they reach their decision. We will decide
upon pricing [for Hylaform] once we get the approval and launch.
Have not provided projections yet and will likely wait until
December or even later to do so."
and Hylaform are two new products that are designed to compete
with Collagen as "wrinkle-fillers," mostly in those
nasty lines from the nose to the mouth. The beauty of Restalyne
is that it has a long track record in Europe, lasts six months
and is not animal-based (therefore no skin test is required).
Hylaform has been on the market in Europe since 1996 and is sold
in 30 countries (according to Reuters). Both Restalyne and Hylaform
are made from hyaluronic acid, a complex sugar that is reportedly
well tolerated by the body and gradually absorbed. Because Hylaform
is made from rooster combs, the FDA panel of physicians recommended
that patients be screened for allergies before being treated.
or Hylaform make collagen obsolete? According to Michael Olding,
a panelist from George Washington University School of Medicine,
"When you look at the safety of this product [Restalyne]
and compare it to the safety of the collagen product, this appears
to be a much safer product." Hylaform, being based upon the
same acid, has an equally safe reputation.
If Dr. Olding's
observations are true and if the FDA approves Restalyne, Medicis,
in particular, may have a hit on their hands. By eliminating the
skin test required for both Hylaform and collagen, youth-seeking
Baby Boomer women can get instant gratification with Restalyne,
and instant gratification, especially in vanity purchases, usually
means a big boost in sales.
How much money
is on the line? According to Allergan, makers of Botox, net sales
of Botox were $439.7 million this year, an increase of over 60%
from 2002. The Fountain of Youth biotechnology companies are in
a billion dollar business.
networking, benefits, seminars and special opportunities! Check
out what's happening online at the Calendar section of the web
Members Only Chat on Wednesday, December 17, 2003 at 8:45 a.m.
- 9:15 a.m. PST. Natalie Pace, CEO, iSophia, will invite special
money managers into the chat room to sing praises to the Santa
rally, assuming that we all get what we want this holiday season—a
Stock Market Rally!! (And if we don't, then join us to complain
about what went wrong with the crystal ball.)
in the News…
highlights, as reported by the most respected sources in the
world. Alphabetized for easy reference.
Airlines (AMR) CFO, Jeff Campbell, is leaving. Mr. Campbell
who helped steer the world's largest airline through its post-Sept.
11 financial crisis, will join drug distributor McKesson Corp.
(MCK) as its CFO. Liquidity
at American Airlines has improved considerably, according to
Standard & Poor's. Unrestricted cash at Sept. 30, 2003,
was $2.8 billion, much better than the $1.2 billion at March
31, 2003, but AMR still faces substantial upcoming cash obligations.
Debt and capital lease payments in the fourth quarter are $169
million, a tax-exempt municipal bond issue of $200 million can
be put back to American, and cash (i.e., not pre-financed) capital
expenditures are about $100 million. In 2004, AMR has about
$800 million of debt payments, $800 million of cash capital
expenditures, and $600 million of pension-funding obligations.
This is above and beyond the daily cash drain of employees,
leases, maintenance, etc. The $2.67 billion liabilities are
probably the direct reason why American filed a shelf registration
with the Securities and Exchange Commissions, asking for permission
to periodically sell up to $3 billion in debt securities, common
and preferred stock and other securities. (Standard & Poor's
does extra cash mean AMR is profitable again? No!! American
Airlines' net loss for the first nine months in 2003 was $1.189
billion, compared to $2.768 billion in the same period 2002.
Last April, AMR indicated that they were looking for a total
of four billion dollar in operational cuts in order to return
to sustained profitability, which puts them $2.4 billion behind
the eight ball. Many brokerages may be "positive"
on AMR's progress and rate AMR a buy, but that doesn't mean
that American Airlines is going to make it through this very
difficult climate. In AMR's most recent 10-Q filing, dated 10.24.03,
American admits (again), "If the revenue environment deteriorates
beyond normal seasonal trends, or the Company is unable to access
the capital markets or sell assets, it may be unable to fund
its obligations and sustain its operations." Paul Woods,
a regular contributor to iSophia and the money manager who called
this year's rally back in July, admitted a few months ago that
if he believed in shorting, he'd definitely be betting against
American Airlines right now. (www.sec.gov)
Environmental (BEL) announced that it is in final negotiations
to acquire ELI Eco Logic International Inc, for $1,625,000 in
cash and a $100,000 promissory note payable on receipt of third-party
consents. The deal is expected to close on December 31, 2003.
ELI Eco Logic Inc. treats gases and contaminated liquids and
is a complementary service to Bennett's treatment of contaminated
soil and construction debris. The acquisition of ELI Eco Logic
International will cost Bennett approximately CDN$1.725 million.
In addition to the technology and synergy gained by this acquisition,
ELI Eco Logic International has significant tax losses, which
the Company expects to apply against its income resulting in
cash tax savings of up to CDN$7.0 million. (company press release)
Major Airlines: 3 CEOs GONE, since 9.11.01 (American, United
and now, Delta)
Airlines (DAL) CEO, Leo f. Mullin, is leaving on January
1, 2004, to be succeeded by Gerald Grinstein. Mr. Mullin will
remain the chairman until April 2004, when the shareholders
have their annual meeting. Why is Mr. Mullin leaving? Mr. Mullin
hasn't been successful in getting wage concessions from Delta
pilots, and his own compensation package has gone under the
microscope as "excessive" by union leaders and members
of Congress. His decision to leave, according to the NYT, was
voluntary. (NYT 11.25.03)
Board Room. The Unhappiest Place on Earth? Two Michael Eisner
dissenters have resigned from the Disney board this week. One,
Roy Disney, the last remaining member of Walt Disney, Disney's
founder, was forced to resign as the Disney board decided to
implement a mandatory retirement age of 72 on board members.
(Roy is 73.) Roy's money manager and ally, Stanley Gold, also
jumped ship, leaving scathing flotsam about Michael Eisner in
his wake. According to the Associated Press, Gold wrote, ``I
believe this company continues to face management failures and
accountability for those failures, operational deficiencies,
imprudent capital allocations, the cannibalization of certain
company icons for short-term gain, the enormous loss of creative
talent over the last years, the absence of succession planning
and the lack of strategic focus.'' Roy Disney believes that
Eisner should be resigning, not him. What does Wall Street have
to say about the public airing of private boardroom business?
Analysts believe the story ends at the bottom line. As long
as the share price continues to rise, Eisner will be in favor,
especially since he's eliminated all dissenters from the board,
including Andrea Van de Kamp, who resigned in January, after
Disney decided to reduce the size of its board to a more "manageable
size." (The ASSOCIATED PRESS 12.1.03)
Arts (ERTS), the world's most popular software maker, with
many popular titles including the Sims, is reportedly going
to miss sales goals this quarter due to heated competition from
Microsoft and Sony, according to William J. Lennan Jr., analyst
for W.R. Hambrecht. John Riccitello, Electronic Arts CEO, disagrees,
however, and says his company will meet its revenue forecast.
Traditionally, 50% of annual sales are made during the 4Q holiday
period. Last year, the same story circulated. Share price of
Electronic Arts fell to a desirable buy zone, and rebounded
quite nicely once the holiday numbers exceeded expectations.
Is this an annual trend? You be the judge or the gambler… (Bloomberg
(IMCL) Erbitux cancer drug is getting Priority Status by the
Canadian authorities on their New Drug Submission (NDS) for
the use of ERBITUX (cetuximab) in combination with irinotecan.
The FDA notified ImClone Systems that it has accepted for filing
and review the Company's Biologics License Application for the
use of ERBITUX (cetuximab) in combination with irinotecan for
the treatment of patients with EGFR-expressing irinotecan-refractory
metastatic colorectal cancer..Investors should note that Bristol-Myers
Squibb (BMY) has a significant investment interest in Erbitux.
An FDA approval may positively affect the share prices of BOTH
Airways (JBLU) filed its universal shelf registration statement
with the Securities and Exchange Commission in October, asking
for permission to offer and sale, from time to time on a delayed
basis, up to $750,000,000 aggregate amount of its common stock,
preferred stock, debt securities and/or pass through certificates.
These securities will be used to fund the working capital and
capital expenditures, including capital expenditures related
to the purchase of aircraft and construction of facilities on
or near airports. In other words, Jet Blue is asking for $$
to expand, while American Airlines is seeking $$ to pay off
continuing debt and stay alive. One is still bleeding cash.
The other is in great health. Brokerages, citing improvement
in the stricken company, are recommending American Airlines
with an average MODERATE BUY, while Jet Blue receives a MODERATE
SELL recommendation, per Zach's average brokerage recommendation
(probably on the belief that Jet Blue is currently overvalued).
While one can certainly argue to wait for a better buy-in price
on Jet Blue, it's hard to say the risk of American is worth
a strong buy recommendation. It should also be noted that Jet
Blue recently had a three-for-two stock split, which was
distributed on November 20, 2003 to stockholders of record at
the close of business on November 10, 2003. This most recent
split puts Jet Blue with 101.4 million shares outstanding and
$3.688 billion market capitalization, compared to its closest,
though more mature competitor, Southwest, which has substantially
higher market capitalization and shares outstanding, at $5.82
billion and 787.2 million respectively.
which do you trust? The numbers or the men on Wall Street?
(SDE) laid off 2,000 workers, 2.9% of work force, as falling
long-distance prices continue to put pressure on profitability.
Gary D. Forsee, CEO, is trying to reduce annual costs by $1
billion before 2006. Sprint has about 68,200 employees and $24.5
billion in operating expenses each year. (Bloomberg News 11.25.03)
VISION: To build
a global community of investors through seminars, a world-wide
web-site and, ultimately, television.
GOAL: Working change: To promote successful investing and ethics
MISSION: To build a global investment community by providing easy
access to important financial news, by promoting a dialogue between
members and industry professionals and by promoting ethical business
practices, products and services.
PHILOSOPHY: The W.I.N. philosophy centers around five principles:
Ongoing Education, Monthly Commitment, Diversified Portfolio,
Ethical Business Practices, Pooled Resources.
For more information on W.I.N. contact us at info@NataliePace.com
The NataliePace.com is NOT a stock brokerage service,
and does not operate or act as one.