Boring Portfolio Report
Friday, October 4, 1996
by Greg Markus (MF Boring)
ANN ARBOR, Mich. (Oct. 4) Friday was a great day for the stock market and an even greater day for the Boring Portfolio. Traders took this morning's jobs report as confirmation that inflation is well under control and bid up the price of stocks accordingly.
The Dow surged 60 points, or 1.01%, to close less than 8 points from the 6,000 mark and set yet another new record. The S&P 500 finished above 700 for the first time ever, soaring 1.25%. The Nasdaq popped for 14.5 points, or 1.17%. Meantime, the yield on the 30-year T-bond slipped to 6.75%.
The Boring Portfolio held its own TGIF party, gaining 1.63% in net asset value to set a new high of $59,672.83 in net asset value. All eight Borefolio holdings rose today, half of them establishing all-time highs.
For the week, our Boring basket of equities appreciated by 2.12%, well ahead of the Nasdaq but a tenth of a percentage point behind the S&P 500. For the month to date, its Boring in the lead, by 0.47% over the S&P and nearly 0.85% over the Naz.
Common courtesy dictates that on such a happy day I should grin the grin of the supremely self-satisfied, uncork a well-chilled bottle on Mumm's, and offer a toast to one and all. And perhaps I will. At the same time, though, I can't quite suppress entirely the thought that just as the market has on a number of occasions this year blown all out of proportion the inflationary implications of modest and long-overdue improvements in jobs and wages, so too did it today perhaps get caught up in just a bit too much giddiness over a tiny decline in nonfarm jobs.
Yes, September nonfarm payrolls not only didn't rise by the 200,000 or so that most had expected, they actually declined by 40,000. The reported overall unemployment rate of 5.2%, however, was a tenth of a percent below what many economists said they were expecting. And average wages rose to $11.92, or 0.5%, on a seasonably adjusted basis -- well ahead of most expectations. If that weren't enough, the overall work week expanded by 12 minutes, to 34.7 hours.
Please don't misunderstand. I absolutely do not count myself among the head-shaking gooroos who warn that a tidal wave of inflation is surging just off Manhattan Island. If anything, my concern is more about sagging earnings growth in coming quarters than it is about runaway inflation. My intention here is simply to offer a small note of caution against getting swept away in the elation of the moment.
Now with that out of the way, permit me a to offer a "Well done!" to the four Borefolio mates that set new highs today. They are: Carlisle Companies, Cisco Systems, Green Tree Financial, and the S&P Depository Receipts.
Carlisle announced on Friday that it has completed the acquisition of the Engineered Plastics Division (EPD) from Johnson Controls, Inc. EPD makes precision-molded engine components and blow-molded bumper beams that are supplied to most major North American automakers. EPD will be combined with Carlisle's Geauga Co., also a supplier of components to the auto industry. To celebrate, CSL rose $1 1/8 on above average volume to easily establish a new high at $58 1/8.
There was no specific news on Cisco or Green Tree today, although the latter presumably benefited (along with other financial services stocks) from prospects for moderating interest rates. The Spiders, of course, mirror the S&P 500. So when the S&P sets a new high, our Spiders crawl up accordingly.
A couple of other quick notes:
Prime Medical Services filed notice with the SEC the other day that certain shareholders who were originally going to offer their 2.2 million shares along with the company's canceled secondary intend to sell those shares in the near future. (I just spotted the SEC filing today.) As you may recall, these aren't insiders shares but are shares that were used in various acquisitions of lithotripter operations in the past couple of years. PMSI stock dipped a dollar the day this filing appeared but has since recovered. Presumably, the market assumed that these shares would be sold sometime after the secondary was pulled, and so this filing is not exactly a revelation. We'll keep watch, in any event.
The only other news I noticed today was that Bethlehem Steel announced that it was considering closing or selling its plant that makes structural steel products. I mention this because that plant is one of only a handful of competitors that TXI's 95%-owned Chaparral Steel operation faces in its niche of lightweight construction beams. Should Bethlehem close that plant, that would reduce nontrivially the available U.S. capacity for producing those beams, which would presumably redound to Chaparral's benefit.
That's it. Please do have a great week-end, as will I.