Stockscom Report for Sunday Oct 21, 2001

Publisher: Colin Alexander     Editor: Ken Wilson (450-691-4617)

Subscriptions and Administration: Pierre Fichaud (866-487-9711)

 

 

 

Market Synopsis

 

We saw the beginnings of the fall reporting season this past week and while there were some positive surprises, namely in companies such as IBM and Symantec, more often we listened to companies such as Microsoft admit that weak PC sales would likely hinder their ability to generate profits moving forward. Another big name, Intel reported a profit of just 2 cents per share for the quarter yet by week’s end, its share price was still over $24.

 

The predominant feature of the charts this week is Nasdaq’s resistance to crossing the upper boundary of the down trending channel within which it’s been moving for the past 14 months. The strong reversal in price on Wednesday from this boundary reinforces our belief that the techs are setting up for another test of the September lows and in fact this is simply a healthy market reaction to the precipitous fall after the attack. If this low holds, we could see a more sustained rally shaping up going into the end of the year. A drop to around the 1550 level would confirm long-term support first established in late 1997 and subsequently confirmed in the 1998 lows. 

 

Similarly, the S&P could have a drop and a bounce off the 1040 level, which would set the stage to an interesting rally. Confirmation of support here would strengthen a line first developed in the 1998 lows.

 

Fiscal Stimulus

 

There’s been much discussion about the fiscal stimulus package being put together in congress. Many consider this plan to be the key to relaunching the economy, but is this truly the answer? Since January, the Federal Reserve has cut interest rates from 6.5% to 2.5% yet the consumer has stopped buying, unemployment and announced layoffs have soared (even before Sept 11) and businesses have continued to delay capital expenditures. Business inventories have been reduced to manageable levels, oil prices have been easing and all this with historically low interest rates and a money supply that grows like it’s on steroids. Now the government is about to pass from budget surplus to budget deficit with the introduction of this $75 billion fiscal stimulus package. The (overextended) consumer has not reacted to the monetary stimulus; there is little reason to believe that they will now rush to take advantage of this good fortune.

 

In an environment such as this where global recession is clearly upon us and the government goes overboard in its efforts to turn around the economy, where the loose money policy should deter investors from supporting the value of the currency but doesn’t, strong consideration must be given to holding gold or gold shares as a method of protecting the value of one’s assets. We firmly believe that for the first time in a generation, we are witnessing the confluence of conditions necessary for a bull run in gold to begin.

 

Retirement Portfolio

 

Recently, we began to look at the question of developing a very conservative retirement portfolio that under present conditions would be useful for somebody approaching this stage of their life. The goal was to develop one that showed exceptional promise over the tumultuous period of the past 12 months and one that had the potential to continue its performance into the next 12 months. Please click here to view.

 

Our Stock Picks

 

As we mentioned last week, we repeat again that of the newest recommendations, BCE and SO appear poised for capital appreciation. Both have consolidated around current levels and are making motions as if beginning breakouts. These remain as the strongest shares when adding to positions.

 

In reference to the discussion on gold, adding to positions in AEM and GOLD is also recommended.

 

New Buy Recommendations:

These two companies are also gold miners – the # symbol is used to identify shares eligible as Canadian content for Canadian RSPs.

GLG #

LIHRY

 

New Short Sales

None.

                                                                                  

Stock Positions to Sell/Exit:

 

None.

 

List of Current Stock Recommendations:

Action Ratings. The following is the legend for designating immediate action
for our stock recommendations. The first is B, meaning the stock is timely
to buy but the case for doing so right here is not overwhelming. Either the
stock may have gotten ahead of itself and may be vulnerable to a retracement or
else the stock has been performing disappointingly but may simply be
regrouping. B+ and B++ indicate stocks for which there is a technical case
to buy now, with plusses adding weight according to how many there are, up
to a maximum of two. Stocks rated H are ones to hold, awaiting confirmation
to buy more or to sell. SELL, of course, means what it says. It seldom pays
to override this designation. In the case of stocks held short, the rating is S where positions should be retained. S+ and S++ indicate stocks for which there is a technical case to add to the positions with plusses adding weight similar to long positions. The maximum number of plus signs is 2.

Stocks marked # are eligible as Canadian content in Canadian RSP funds. Otherwise there is a 30 percent restriction on foreign stocks held in these accounts.

Date of Entry	Name	Symbol	Entry Price	Current Price	Action Rating
02/01/01	Acm Government Income Fund	ACG	8.07	8.61	B
02/01/01	Acm Government Opportunity Fund	AOF	7.99	8.98	B
10/08/01	Agnico-Eagle Mine	AEM #	10.85	9.88	B
10/08/01	BCE	BCE #	22.80	24.05	B+
10/08/01	Gold Fields ADR	GOLD	4.97	4.59	B
10/08/01	GPU Inc	GPU	40.60	41.10	B
08/27/01	Health Care REIT	HCN	25.85	25.09	B
12/18/00	Kinder Morgan *	KMP	25.00	37.30	B
10/08/01	Moore Corp	MCL #	8.45	8.21	B
10/08/01	Petro-Canada	PCZ #	26.00	25.71	B
02/01/01	Pioneer Interest Shares	MUO	11.95	11.53	B
10/08/01	The Southern Co.	SO	25.73	25.16	B+
12/18/00	Trans Canada Pipelines	TRP #	11.19	13.06	B
02/12/01	US Treasury 20 Year Bonds	USZ	103.01	106.09	B

·       Rolled from the March contract and price adjusted (in 32nds)

*   Split 2:1 – 09/04/01