Friday, June 12, 2009
(Cont'd from above)...

Jim (cont'd):   

We had the ABCs of "nerdom" on the move today... that's Abbott Laboratories (ABT*), Baxter International Inc. (BAX), and Clorox Co. (CLX)... All three of these companies have been putting up great numbers, saying all of the right things... introducing bold new products for months now... and everyone yawns in their faces... until today, when their good performance finally seemed to count for something, as all three nerds bounded higher.

Or how about nerd/newser, Procter & Gamble (PG)?... They sent their CEO upstairs. The company's getting its collective butt kicked all over the globe by Procter & Gamble (PG)... which is nerdy in itself, and of course up today... and yet, PG's stock was screamin'... You've got the big-time nerds, Verizon (VZ) and AT&T (T)... They are constantly treated with disdain... no matter how many times I explain "The Rule of 72"... which is a quick way to figure out how you can double your money just from a stock's dividend... As long as you are reinvesting it, even if the stock goes nowhere, you divide the number 72 by the stock's yield... although, this works for anything with a consistent return compounds... and the answer is the number of years before your initial investment doubles.

So, even though AT&T would double your money in just 11 years with a flat stock yield, at 6.5%, and Verizon's yield at about 6.1%... You could double your money with Verizon in 11.8 years... Under the same circumstances, these two go unloved... they're hated, they are ostracized like nerds! They clearly have bad skin and B.O.... How else do you explain why the two telcos are always ignored... Maybe they got some deodorant, because they've become more approachable, because they were up big.

Do you think this is just random action?...

To any individual who has been seasoned by years and years in the market, it might look that way... It is simple to say to yourself, well Clorox raised its dividend yesterday. That's probably why that's up. Abbott introduced its 342nd straight dividend... that's probably what gets that going... that's why I own it for my charitable trust... and... Baxter International Inc. (BAX) got its earnings estimates bumped by J.P. Morgan... that should have done it, right?...

You could look at each separate piece of good news as the reason each separate nerd went higher, but here's the thing?... This endless parade of good news from the nerds has been going on forever, and the market's been changing the channel on it ever since the bottom in March... America's most unwatched network of stocks...

If you want to understand what's happening... to get to the bottom of this revenge of the stock nerds... you need to think like a pro. The market is rotating into these stocks, because oil has finally gone up so much that the perception on the Street is that consumers are going to cut back... exactly as they did last year when oil spiked and gasoline rallied at $4.50. There's only so much room in America's collective shopping cart...

The market's also starting to factor in that, without something robust actually happening in the economy, we're going back to one of the original nerds... my friend, Bob Dylan, for guidance... "I don't care how many letters they sent. Morning came and morning went. Pick up your money and pack up your tent. You ain't going nowhere."

We got an inkling this might become an important theme for the market from HD the other day, when they talked about how things are simply "less bad"... Home Depot (HD*) raised guidance... one of the reasons why my charitable trust, ActionAlertsPlus.com owns it... but the company also made it clear that the better-than-expected news wasn't from sales, which would indicate that we were actually going somewhere, but from cost cuts... just from cost cuts... which could mean we could eventually be falling back into a deeper recession than we are right now because of energy.

In other words, without new... well, news... without something that would indicates that things are actually "kind of good" instead of "less bad," people are going to take profits in the oils and the minerals and even the techs... and they're going to hide in the nerds. That's kind of like what happened today.

You see, the revenge of the nerds is really upon us. But, you know what? Nerds don't have any staying power. How long do I think this will last? I don't think very long...

Part of today's problem with the usual leadership of energy, tech and finance was that oil (prices) were heading south... and that could be with us a couple of days without demand destruction... Remember that wrap... which turned out to be totally irrelevant, as the demand was from hedge funds gutting oil, and getting redemptions?... The spike in oil and subsequent collapse was never... to misquote Cramer-fave, James Carville, "the economy, stupid"...

Here's the bottom line...

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The Bottom Line!:     Mostly I believe the Revenge Of The Nerds can come to an end as soon as Monday... Mutual Fund Monday... where the retail money flows back into the hottest sectors... most definitely in mobile internet, with Apple (AAPL) and Research In Motion (RIMM) and Palm (PALM)... and all the other pin action plays that we all know are anything but nerdy. Oh, and what will happen is that the nerds will once again be banished as the market will play... ooh, eee... ride me high... because Monday's the day that the buyers are going to come, and the nerd rotation will flow right back into the easy chair.

[verbatim recap]

[end of segment]

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