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Wednesday, November 10, 2004
Market Recap
The Fed chairman announced the decision on interest rates today, and the interest rate was raise by .25 basis points. As expected, it was no surprise to the markets as the rate hike was already priced in. The brief sell off following the announcement was nothing to be concerned with. The volume right after the announcement was not significantly greater than the rest of the trading day. After the brief selling, the market began to rally and looked like it may close strong. But toward the end of the day, the market started to fall again. At the end of the day, the indices were all down slightly, making the fed decision a non-event. The Dow was down less than a point, the S&P lost 1 point, and NASDAQ suffered an 8 point decline.
The best news from today's FOMC meeting was that the Fed seemed to have a positive outlook going forward. Interest rates may be going up, but at least they are keeping things in check this time around. I look for them to slow down at this point. They have another meeting in December, but I will go on record now and state that they are done raising rates for 2004. With the strong job numbers and oil back under $50 a barrel, the Fed will want to make sure they do not slow down the growth and over do it on the raises like they did back in 2000.
An Oxymoron to Watch
The US Senate is working on an Intelligence Bill. If ever there was an oxymoron, it is the senate working on anything intelligent:
http://www.cnn.com/2004/ALLPOLITICS/11/09/congress...
However, there is some merit to this. This Bill will be watched very carefully by security stock traders. It will no doubt be passed in one form or another and the security sector will benefit from it. The intelligence report comes from the 9-11 briefings. With both the House and the Senate in stronger Republican control, we can expect to see a Bill on the President's desk before the end of the year. This Bill will open the doors for funding various programs, all pertaining to the security of the United States. Stocks tend to run up in advance of expected news, so security stocks could run ahead of time in anticipation of this Bill passing.
Security is the Big Winner
The war on terror is far from over and America will never be the lackadaisical country it used to be. The attitude that America cannot be touched is now gone. These are very uncertain times we live in and certainly not as safe as we once were. To take a quote from a 1960's pop song, “The world is a terrible place to live, but I don't want to die.” How true that is now days. We must fix this problem because life is too precious to feel unsafe in the very world in which we live. On the positive side, this Bill could be one of the steps to making our world safer. And while we are working on making the U.S. a safer and better place for our families, we may be able to profit from it at the same time. Watch the security sector; it will be the beneficiary of this Bill in 2005. We are already tuned in and watching the stocks that could have a dramatic run-up as a result.
KKD Update
Our prediction of single digits for this over inflated donut maker is almost a reality. We first shorted the stock at $35.00, and now it is just .81 away from being the single digit stock. It closed today at $10.80. No doubt, we could have made a lot more “dough” if we had held our short position, but KKD is a slower mover and this is a trading service as opposed to holding positions. However, I did mention that it was a very good long term short.
Looking Ahead
Tomorrow is Veterans Day. The stock market is open but volume will be light as many traders take the day off. I expect volume to return to the market next week and the market to forge ahead, leading us to a six week end of year rally. This rally will do wonders for our holiday cheer.
The Gift of Giving
Speaking of holidays, as we approach the holiday season, everyone should take a few moments and reflect on the positive things in their lives. Most of us are trading and making some good gains lately. Every time I do well in the market I think of those less fortunate than myself. This is the time of year when giving is most important. If there is someone you know having difficulty in there lives, please stop and take a moment out of your busy schedule to try and help them. You would be surprised just how much the little things mean to someone. Giving is contagious, when you give, others will give. We can make it a little better for those we help and they in turn may help someone even less fortunate then they are. Maybe it will go a long way in helping them have a happy holiday season.
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