4Q Earnings On Track To Be Worse Than 3Q
Thomson Financial/First Call projects a 22% decline in Q4 '01 earnings, similar to the 21.6% drop in 3Q earnings. As First Call points out, year-ago 4Q results were much weaker than the year-ago 3Q results -- meaning the Q4 '01 results are actually much weaker than those of Q3 '01, seasonally adjusted. (DJ)

Closing Summary

Index	Last	Change	% Change
Dow Jones Industrial Avg.	9,811.15	+44.70	+0.46%
S&P 500	1,123.07	+3.69	+0.33%
Nasdaq Comp	1,953.17	+6.66	+0.34%
Russell 2000 Index	471.30	+2.63	+0.56%

S&P 500 Has Biggest Weekly Loss Since September
The Standard & Poor's 500 Index had its biggest weekly slide since September on concern profits may not rebound enough to justify its 16 percent gain the past three months. The Nasdaq Composite Index had its first weekly drop in six. It had rallied as much as 44 percent from its Sept. 21 low on speculation falling interest rates and energy costs will help lift the economy out of its first recession in 10 years. We may need some time for earnings to catch up with share prices.

January Rate Cut a Pipedream ?
Last Rate Cut May Have Been Holiday Gift
The tone of the FOMC minutes suggests that committee members were becoming more comfortable with the state of the economy at the November meeting. The latest 25 BP ease in the fed funds and discount rates last Tuesday now looks like a Christmas gift from the FOMC to the markets. It didn't cost them much and they can always take it back if things heat up too quickly. It also likely rules out a January ease. (Dow Jones)

Amgen (AMGN) takeover of Immunex (IMNX) Priced
Immunex up last week on report of Amgen interest. IMNX spiked up $3.20, or 13 percent, to $27.65, after CNBC reported on the takeover speculations. AMGN is said to be offering between $15 - 16 billion dollars, or $29 - 30 per share.

-Nasdaq 100 rebalancing:

Added:
ImClone Systems (IMCL)
Charter Communications (CHTR)
CDW Computer Centers CDWC)
Symantec (SYMC)
Sepracor (SEPR)
Invitrogen (IVGN)
Express Scripts (ESRX)
Cephalon (CEPH)
ICOS (ICOS)
Cytyc (CYTC)
Protein Design Labs Inc. (PDLI)
Integrated Device Technology (IDTI)
Synopsys Inc. (SNPS)

Removed:
Ariba (ARBA)
BroadVision (BVSN)
CMGI (CMGI)
CNET Networks (CNET)
3Com (COMS)
Inktomi (INKT)
Level 3 Communications (LVLT)
McLeodUSA (MCLD)
Metromedia Fiber Network (MFNX)
Novell (NOVL)
Palm (PALM)
Parametric Technology Corp (PMTC)
RealNetworks(RNWK)

Nasdaq said it updates the index every year at this time based on a company's number of shares outstanding and stock price. There are 23 domestic mutual funds and seven international funds linked to the Nasdaq-100 Index, plus the Nasdaq 100 Index trust, known as the QQQs.(Dow Jones)

- AMGN, IMNX The WSJ reported today that Amgen was near an agreement to buy Immunex for about $15 billion in cash and stock -- about 29 - 30 per share. The transaction is about 85% in Amgen stock, with the remaining 15% in cash. Much of the arbitrage is already in both stocks.

- INVN The WSJ "Heard on the Street" column today focuses on how "Highflying InVision May See Gains Erode." The column goes on to note that "InVision Technologies has done explosive business since Sept. 11, but some say the stock price of the maker of bomb-detection equipment could soon be defused." (we have had an "Avoid" on this one for some time).

- DISH, V Vivendi to Acquire 10% of EchoStar for $1.5 Billion
Vivendi Universal, Europe's biggest media company, agreed to buy 10 percent of EchoStar Communications Corp. for $1.5 billion in cash to gain U.S. satellite distribution for its films and TV programs. The EchoStar purchase and talks with USA Networks Inc. are part of a strategy to compete with U.S. rivals such as AOL Time Warner .

- USAI, V Vivendi, take 2: Vivendi has offered to pay more than $10 billion for the entertainment assets of Barry Diller's USA Networks and make the media tycoon head of Universal Studios, according to the Los Angeles Times.

- ORCL Reported in line earnings on slightly soft revenues. Company says this quarter is looking like the bottom in its cycle

- AC, CPN Alliance Was Too Cozy With Enron, Lawsuit Says
Moody's backslide on Calpine's (CPN) debt rating late last week impacting the shares today. Lehman cut its rating on the stock to market perform; Moody's decision to put Calpine debt on watch for a possible downgrade back to junk may hamper the company's ability to boost its corporate ratings. "Moody's flip-flop isn't exactly the soothing balm the sector needs to calm the fears of investors still smarting from Enron's (ENE) failure." (Bloomberg)

- Is Our V Bottom in Jeopardy?

Is our V bottom in jeopardy? Charts show that the NASDAQ has pulled back constructively to its 200 day moving average and the support base of its last launch. Perhaps the Oracle news of Larry Ellison saying that 'the lows in his business are in' will add some bullish spunk to the mix. Sentiment mongers suggest that there's still plenty of downside. Six days of the down stroke that seems to be gaining momentum & breaking support levels along the way has burned off some of the 'overbought' with the McClellan Oscillator now at a negative 105. Ken Gammage of the Richland Report (858-459 2611) who's a McClellan fiend with data going back a gillion years says that this is a "buy spike" developing. That means that when the market finally does reverse it it's a 'buy em big' set up that suggests much higher prices. Kens slants toward the Kondratioff bearish mindset of impending doom, so this kind of pitch from him is a Market plus.

While the Indexes are at reversal points in support zones of S&P 500 1120, Dow 9700, NASDAQ 1940 anything below those numbers today is a sell. Today's early set up suggests a bounce but give it a half an hour before getting wet, as these early flurries are generally fake outs. (Source: Dr. John Faessel-ON THE MARKET)

For Services Economy, Inflation A Worry

What deflation? Some economists are saying no way. "What matters is service prices. We are a service economy and service prices are rising," says Argus Research economist Richard Yamarone, who notes that many parts of the CPI are actually posting aggressive year-over-year gains. Core CPI, rent, medical costs and education are all examples. (Source: DJ)

Market Stats

Market	NYSE	Nasdaq
Total Volume	1456.61m	2062.17m
Up Volume	458.65m	447.66m
Down Volume	923.16m	1,603.78m
Advancers	1065	1305
Decliners	2053	2316
New Highs	43	83
New Lows	36	32

- STOR Storage Networking has a nice, steady up trend. Pullbacks to the 20 day moving average offers ideal buy in between 6.50 and 7.25; Use a 5.90 stop, with an upside targets of $8.75 than $12. (Added intraday on 12/13)

- CY Short Call: Cypress SemiConductor

Q301 10/18 Results: Revenue $180.3 Million; EBG $0.14 Loss Per Share; Restructuring and Non-Recurring Charges of $312 Million - The company missed already lowered numbers by 3 cents.

After running from 14 to 25 over the past 60 days, the chart of this third tier semiconductor co has run out of steam. The chart is definiteively broken, time segmented volume diverged from the December top - another negative.

Short between here and 23; Cover on a break out over $24.50;
Target: I'm looking for a 68% retracement of this run -- or down to 17 - 19 from these levels.

- ADLAC continues to look strong in a mixed market; Our price objective remains $32 short term. We continue to be encouraged by both the price action and insider buys.

Things That Warrant Attention On The Charts

- Yen Plunges to a Three-Year Low
Japanese Bankruptcies Surge

New York: The yen tumbled to a three- year low against the dollar after a report said Japanese companies are failing at the fastest pace since 1984, fueling concern a recession in the world's second-largest economy will intensify. Japan's currency sank to 127.93 per dollar, its lowest point since October 1998, from 126.07 yesterday. It later pared its loss to 127.24. The yen fell to as low as 115.48 per euro and 185.68 per British pound, the weakest levels in more than two years, before trading at 115.08 per euro and 185.19 per pound. The bankruptcy figures boosted speculation foreign investors will move their money out of Japan, especially after some Japanese officials suggested this week that they want to push the currency lower to boost exports. The yen has already lost 10.2 percent of its value against the dollar so far this year. (Bloomberg)

"Any fool can criticize, condemn and complain - and most fools do. But it takes character and self-control to be understanding and forgiving."
- Dale Carnegie

The More Things Change, The More They Stay The Same

Teen angels
by Michael Sivy

Contrarians can find plenty of stocks that offer above-average long-term returns and P/Es in the teens.

EXCERPT: At this point in the recession, uncertainty about corporate profits is at a maximum -- and lots of stocks are suffering. But for long-term investors, the current market turmoil offers plenty of buying opportunities. If you believe a company's franchise is fundamentally attractive and the price/earnings ratio of its stock is below 20, the odds are that it will perform well over the next decade, even if there are setbacks during the next quarter or two.

That may sound like a wishy-washy approach to investing, but it's based on one of the most important truths about human nature -- people are very bad at gauging what they know and what they don't know. For stocks, that means that investors put too much credence in quarterly earnings projections, overreact to earnings surprises and undervalue long-term earnings potential.

LONG-TERM BARGAINS
Companies with solid growth potential and low P/Es

* Boeing
* Fortune Brands
* Honeywell
* MBNA
* United Technologies
* Washington Mutual

Companies that are upstream from the troubled airline industry are undervalued from a long-term perspective. It's true that airlines are in a shambles and are canceling orders for new planes, but people aren't going to stop flying. Moreover, as airlines go out of business or merge, the survivors will be able to raise prices. That's bad for consumers looking for cheap flights. But it's good for airline profits -- and ultimately for the businesses that make planes and aircraft components. Boeing, Honeywell and United Technologies all offer long-term growth of more than 13 percent and another point or two of dividend yield. And all three stocks trade at less than 17 times earnings.

FED DROPS INTEREST RATES, ACID AT POLICY RAVE
Federal Reserve Not So Reserved Anymore

Washington, D.C. (SatireWire.com) — Proving the Federal Reserve is anything but reserved, U.S. central bank governors this week announced they had dropped interest rates, their pants, and 162 tabs of acid and Ecstasy during what turned out to be a two-day "policy rave" that ended Thursday.

According to those present, Fed Chairman Alan Greenspan did not ingest any hallucinogens, although he was affected. "Alan didn't drop, which was probably a good thing, because for about two hours there he barked like a chicken and had laser beams shooting from all 12 of his eyes," said committee staffer Julie Lindstrom. "But his gossamer wings were soooo beautiful."

"Everyone was soooo beautiful," she added.

The closed-door session of the Federal Open Market Committee reportedly began with Greenspan discussing his upcoming Congressional testimony. However, it quickly raved-up after an unidentified staffer, frustrated at not being able to understand the opaque chairman, passed around tabs of Ecstasy and LSD, which he identified only as "Greenspan Decoders."

"About 45 minutes later, (Fed Governor) Nathan Gladstone says to me, 'Julie, can you bring us the reports on monetary interventions, bond yields, and three dozen pacifiers?'" recalled Lindstrom. "Then we ordered some glowsticks and Jurassic-5 CDs, and the Open Market meeting got really, really open."

For the next 36 hours, the committee's dignified board room was transformed into a trance room, with the heads of the New York and Dallas central banks banging out jungle-drum rhythms on the massive oval table, and the head of the Detroit bank insisting consumer confidence tastes like candy-coated clouds. Toward daybreak, male committee members and staff reportedly took off their trousers after their zippers began to emit radio signals which they feared could be picked up by passing spaceships.

While the rave was "definitely a dope groove," Fed Governor Bradley Muer said members did exhibit restraint. "Some people were going to candyflip (combine Ecstasy with acid), but most of us are Old Economy, and acid just seemed more traditional," he said.

The rave fizzled about 7 a.m., and was about to adjourn when a staffer reportedly noticed the committee hadn't covered every item on the agenda. "We just hit re-entry, and were going watch the sun come up over the Treasury Building, when somebody said, 'Oh shit, we forgot to drop the fed fund rates,'" explained FOMC member Gerald F. Cohen. "Then everybody just started calling out whatever numbers they saw floating in front of their eyes."

Hours later, the board finally agreed to cut rates half a percentage point. Initially, said Cohen, committee members decided to lower rates by 8 million basis points, from 2.00 to minus 7,999,998, but were talked out of it by an art deco wall sconce that claimed it was Cary Grant.

--Barry Ritholtz
December 17, 2001

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