If anyone out there was reading my diary, sorry for the lack of posts this month. My daughter celebrated her Bat Mitzvah last weekend and that kept me occupied the first part of the month and it took me this last week to recover.
The stock market has been volatile but gone nowhere so far in November with the S&P 500 closing Friday at 1050.35 vs. an Oct 30 close of 1050.71. The S&P reached 1059 before retreating to current levels. The NASDAQ continued its run, making a recovery high on Nov 12 at 1973.11 putting it up over 2% for the month at that point. Friday's drubbing brought the NASDAQ back to 1930.20 vs an Oct 31 close of 1932.21. It appears that all the good news on the economy and corporate earnings was anticipated in the run-up and despite continued news that would suggest the economy and coprorate profits are strong, the market has stalled. So far every stall and pullabck from highs has been met by buyers taking advantage of the dip. In prior posts, I noted that these dip buyers are probably fed by performance anxiety as many professional and amateur investors have not made as much money as they could have this year. Thus, pullbacks are met with buying from those hoping to capture a year end rally. This coming week will be interesting to see if the pattern continues or if the selling last week was the beginning of a more severe pullback. My own view is that we may see weakness through Thanksgiving followed by one more run to year end. Much will be made of another few percent down being the end of the rally, but I think the market can drop another 5% plus without violating the uptrend in place since spring.
I read a great recap form Ned Davis Research commenting on the reasons for the sharp pickup in GDP growth. Among the reasons cited were: the sharp drop in the dollar, the spring collapse in interest rates with corporate and junk bond spreads tightening, increased government spending (deficits), and large tax cuts. Easy comparisons caused corporate proftis to soar on modest revenue growth and steep cost cutting. For the next few quarters these trends are likely to stay in place. However, come 2004, growth will likely moderate. How that moderation is perceived will be critical to the market and political economy. I beleive we will see headlines about slowing growth and fears that the 2003 growth was one-time in nature. Thus, we could arrive at spring 2004 with decent growth, but the perception the economy is running out of steam.
Before I close, a few comments on the stocks I own for myself that were listed in prior market report. Since that post, I sold SIRI as I was dissatisified by 3Q sub growth and did not like the sound of XM's claims that they could hook up their service to SIRI wired cars.
Two of the holdings had news as CETV reported solid 3Q results and picked up its first research coverage in the US. Both seemed to help as CETV made a new 52 week high last week on good volume. NTLI is conducting a rights offering and reported 3Q results. 3Q numbers looked solid with the only blemish being a probably explainable increase in churn. The rights offering is being well received as it positions NTLI to produce considerable free cash flow the next few years as high cost debt is either retired or refinanced at lower rates. I still own CETV and NTLI (including new shares via exercise of the rights) and the other stocks from my 10/31 diary entry except SIRI.