So Far So Good 10-14-05

Good Morning.

The Core Consumer Price Index (CPI) came in less than expected offering much relief to the "Fed"-up market. In addition retail sales ex-auto's came in better than expected at +1.1%; another knife in the back of stagflation (as Martha says, "It's a good thing"). However, business inventories were slightly higher than expected and Consumer Confidence was less than expected. All-in-all the economic news was mixed. In this current environment we'll be happy with mixed.

General Electric (GE) had better than expected earnings and reaffirmed double digit growth into 2006. Texas Instruments (TXN) caught a downgrade, however Verisign (VRSN) caught an upgrade and Morgan Stanley increased earnings estimates for Analog Devices (ADI), as well as Piper raising estimates for Fairchild Semiconductor (FCS). The Semiconductor group showed life and leadership yesterday as we had predicted. We will monitor this group closely for follow through over the coming days. A little pullback from here would be okay.

Have you noticed the response to earnings reports so far? For example GE and Apple Computer (AAPL) have held up well since their reports, so have the few other companies who've reported decent earnings. Expectations are so poor that companies simply need to deliver inline performance in order to provide a little bid under their stock price. Imagine the market's delight when overall earnings and guidance come in much better than expected, as we predict. Importantly, positive momentum created from this event would be coming at exactly the right time.

Although the market still may need to chop around for a little while, the ingredients are still in place for at the very least a powerful year end rally. We are excited and nervous about our Bullish outlook and how we are positioned for it, however we are cognizant of the fact that we may be wrong and are aware of the danger of stubbornness. Therefore, we are forever monitoring the internal health of the market, especially our own positions.

Stay tuned.

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