aka "going along for the ride."
week saw cxw finish up +118.18% from its close on
12/29/00, the final trading session of the year just ended.
It's managed to trigger some positive T/A signals,
giving "longs" a scintilla of hope, causing some to
wonder whether popping those champagne corks might
shortly be in order, accompanied by rousing choruses of
the old "New Deal" campaign's theme song, "Happy Days
Are Here Again."
The General doesn't want to
rain on anybody's parade, but there're some stats of
the past week he wanted to share, courtesy of
Investor's Business Daily (IBD).
First of all, the
"private incarceration" companies (i.e. CXW, WHC, CRN, et
al) are classified by IBD as being part of the
Commercial Services-Security/Safety Industry Group. Out of
IBD's 197 industry groupings, that group finished up
2000 ranked in 103rd position out of 197, a mid-"C"
[in a "letter"-form, one-of-five from "A" (Best) to
"E" (Worst)] ranking. That industry group finished
1/05/01's session ranking 85th out of 197 groups. Still a
"C," albeit a low one, approaching the cusp with a
While many might consider the
private incarceration business as a "defensive" industry
(just like pharmas, phoods, health care, and utility
stocks), the group has not been treated as such.
Since the beginning of 2001, IBD's Defensive Index has
been the 4th worst performer (off 9.61%) of the 20
Market Sector Indexes that IBD reports on in each issue.
Only the New Issues Index (-10.34%), the
Medical/Healthcare Index (-12.20%), and the Dow Jones Utility Index
(-14.42%) have faired worse. The prison business' group has
gone the opposite way.
The General hastens to
point out that while the private prison business might
be regarded as a "defensive" one, none of its
companies are represented among the 20 companies in IBD's
Presented below is a table showing
the performances last week of the top three (by
market share) privatization companies (CXW, WHC, & CRN),
as well as the Relative Price Strength (RPS) ranking
of their Industry Group.
Since the respective
EPS ranking for each company is unchanged throughout
the course of the week past, the order of data for
the companies is just their respective Relative
Strength (RS) percentile ranking, and their
Accumulation/Distribution ranking (A/D), which ranges, in 5 "letter"
designations, from an "A," meaning Strong Accumulation
(buying), through a "C" (Neutral), to an "E," meaning
Strong Distribution (selling).
"X"s have been
employed in an attempt to maintain columnar alignment and
do not imply "multiplication."
Keep in mind
the impact of the FOMC's 50 b-pt interest rate cut on
DATE 1/02 x 1/03 x 1/04 x 1/05
RPS x 101 xx 119
xxx 87 xxx 85
CXW x 05/E x 07/E x 07/E x
WHC x 49/B x 53/B x 55/B x 62/B
CRN x 33/C x 34/B
x 34/B x 37/B
As can be seen, the week past
may have produced more than a double in CXW's price,
which happened to translate into a tripling of its RS
ranking, but, unlike CRN, whose A/D ranking at least moved
up a notch from a Neutral ("C") to a Moderate
Accumulation ("B") ranking, CXW remains stuck in the A/D
"toilet" with an "E" ranking.
One might've thought,
looking at CXW's big 3-month chart here on Y!-F, that the
end-of-the-quarter/fiscal year's heavy volume [due to: (a) institutional
window-dressing and/or (b) tax-loss selling] might've produced a
Obviously, it hadn't.
In the General's 3-parter last Sunday (messages numbered 18015, 18019, and 18022), the General opined that, thus far this year, there was nothing significant to distinguish the market performance among the 3 largest companies in the prison privatization business, CXW, WHC, and CRN.
The market has essentially treated them as a 'pack,' was the General's assessment.
Today's end-of-the-quarter session, however, has produced a rather clear distinction amongst them, to wit:
No. 3 'privateer', CRN, closed DOWN (-0.36%) on 42.42% of its ADV.
No. 2 'privateer', WHC, closed DOWN (-1.58%) on 325.58% of its ADV.
And No.1 'privateer', CXW, closed UP (+16.51%) on 250.08% of its ADV.
The message #16425, hyperlinked at the bottom of message #18015, is the correct url that the General intended (the "diversion" message).
Message #16372, that the General erroneously said was hyperlinked at the bottom of #18015 in the text, is the url to the "coat-tailing" message and is hyperlinked at the bottom of this message.
The reason that the General considers the (unintended) error a fortuitous one is that replying to this short intervening message following Part I, will provide the General more width of composing space than if Part II was composed as a "replies to" Part I.
Through Monday's (1/08/01's) session, the market
continued to see the "privatization" companies (as
represented, for these purposes, by its top 3 market-sharers;
CXW, WHC, & CRN) continue to make progress in-step
with its (currently) 48-constituent member Commercial
Services - Security/Safety industry group
Then yesterday, 1/09/01, the "privatization"
contingent continued on its merry way while its CS-S/S
industry group's Relative Price Strength (RPS) reverted
back to the ranking (103rd out of 197 groups) that it
held at the close of last year's last session,
Is this apparent falling out-of-step with its CS-S/S
industry group just a momentary fluke or aberation or will
we see it continue?
And, if this
"divergence" continues, what might it be telling us about the
market's assessment of the privatization companies AS A
The General has emphasized the "group" aspect
because, from a number of recent contributions to this
thread, the sense he has is that some contributors are
focussing more on CXW's present and near-term future
fundamentally arguable "merits" than they are on the group's
This approach is one that the General would normally
take. But in the extant situation, the General wonders
whether Mr. Market could be telling us something that
such a "focussed approach" might miss seeing, due to
It might not be simply a matter
of penny-stock momentum players wanting in on the
action. Some more observation could be worthwhile before
"betting" judgements are rendered, in the General's
January's "Early Warning" was not propitious re: the
outlook for the stock market in 2001. For readers who may
not be familiar with The Stock Trader's Almanac, the
General will attempt to 'splain in a future posting. It
remains to be seen what the month of January tells us.
Will January confirm or contradict its first 5 trading
session's "Early Warning"?
The prepoderance of
market-mavin "outlook" opinion that the General has read or
heard in recent weeks follows along the line that 1H01
won't be good, but that 2H01 should see a
"What if?", the General asks. What if?, it turns out,
the ecomomy's decline is either going to be more
protracted, or deeper, or possibly deeper AND more protracted
than these experts either figure or want you to think
will be the case.
Among things that tend to
happen when people have a negative outlook towards the
future (English translation: the economy will be ca-ca),
they tend NOT to invest (like in the equities
markets), they tend NOT to procreate (the birth-rate
declines a bit) and (once they're IN the ca-ca and it's
not abating) there tends to be an increase in
criminal activity and the incarceration numbers that
Could the market be telling us
that this is what we could be seeing down the road?
Could it be saying that if the boom-times and the bull
market of the 90s brought us low unemployment, the
"wealth effect", surpluses in state coffers, as well as a
reduced crime rate (all of which it did do), that the
pendulum has begun to swing the other way and the market
believes the "privatization" sector is the place to
is the market telling us that, INDISCRIMINATELY,
regardless of how the fundamentals of a particular company
appear to be either NOW or in the foreseeable NEAR-TERM,
"Though you be eyeball deep in germa_goo, you're gonna be
smellin' like a rose."
To be concluded in Part II.
Or, at least the General's TAke on it.
First an 'overview' recap of events over the past 6 months as they relate to the prison privatization companies. The General prefers to speak in terms of the 'privatization companies' (i.e. CXW, WHC, & CRN), because from his perspective, the market has not appeared to 'distinguish' between members of the 'pack.'
Inorder to avoid confusion, the General will refer to the top 3 privateers as the 'pack,' rather than as the 'group' because he prefers to use the noun 'group' as meaning the (now 55 constituent member) Commercial Services-Security/Safety industry group [CS-S/S], as constituted by IBD.
At the beginning of 2001,
the starting gates flung open and the pack headed down the straight-away, heading into the first turn. CXW, was a little late out of the gate but had caught up with the rest of the pack within the first furlong. Readers here may remember the General, in an early January message asking whether CXW was 'coat-tailing'?
The pack appeared to be in-synch (running) with the group.
Then, in message #16372 (hyperlinked at the bottom), the General noted an apparent "divergence" developing between the pack and the group, and posed the question as to whether the pack's << apparent falling out-of-step with its CS-S/S industry group >> was << just a momentary fluke or aberation or will we see it continue? >>
The answer to that question was exemplified in message #17523.
The reason that the General calls attention here to that earlier "divergence" between the pack and the group, is because a second "divergence" has recently occurred between the pack and the group which was the impetus for the General wanting to illustrate and discuss it here when, in message #17902, princessalouie gave the General a great lead-in (hence, the "great minds" remark in #17903).
This recent "divergence," however, has been just the opposite of the earlier one, 5 1/2 months ago. In that one, the pack remained strong while the group weakened.
Despite princessalouie's wanting to focus in on the "why?" of CXW's price attainment, the General does not see Mr. Market differentiating between the members of the pack. They, in the General's opinion, are being collectively regarded as a pack and their movement, so far, shows little 'distinguishability" within the pack.
If the General would have to cite a "weak sister"* amongst them, his vote (as will be subsequently illustrated) would NOT be cast for CXW.
* Editor's note: The General is not, hereby. seeking to be 'flamed' as a "sexist," it's just a colloquialism, folks.
Since the alloted width of these messages does not allow for everything to be spread-sheeted together, the General will have to do things piece-meal.
To be concluded in Part II.
In message #16426 (linked at the bottom), the General made a passing reference to the statistical likelihood that January's "Early Warning" was unpropitious. The General prefers the term "Early Indicator" rather than Early Warning since, in most years, the indications are not necessarily a foretelling of bad times ahead.
The Early Indicator is a predictor of how the stock market, as measured by the performance of the S&P Composite Index (aka the S&P 500), will fare by the end of the calendar year. It's based on how the S&P 500 does at the end of the first five (5) trading sessions of the year compared with where it ended on the the last session of the proximately preceding year.
This "predictor" is not the General's idea, it was formulated by Yale Hirsch, publisher (for the past 34 years) of the Stock Trader's Almanac (ST'sA).
Hirsch, for those readers unacquainted with the ST'sA, has been compiling and analyzing market stats primarily going back to 1950, but also, in some regards, prior to that.
The ST'sA's standard of measure as far as either January or its first five trading sessions are concerned (as a year-ahead's predictor), is the performance of the S&P 500 (SPC).
While the ST'sA contends that the entire month of January's SPC performance (the "January Barometer") has a very high degree of correlation with how the year will turn out, it also notes that just its first five trading sessions have had a pretty respectable batting average as an indicator of full year results.
Overall, over the past 51 years (beginning with 1950), January's Early Indicator has been correct in predicting how the SPC will end that year (higher or lower than it began the year) in 37 of those 51 years, for a batting average of 0.726.
But that ~ 73% "overall" performance is a bit deceiving. If you examine the correlation with the full year's SPC's performance based on whether January's "Early Indicator" finished higher or lower, the correlations are markedly different.
For example, over the course of the past 51 years, the SPC, after January's first five trading sessions, has ended higher in 32 years and lower in 19 years than it began the year.
Of the 32 higher ending Early Indicators, the corresponding year finished higher 28 times (87.50%).
Of the 19 lower ending Early Indicators, the corresponding year finished lower 9 times, a much poorer correlating 47.37%.
The SPC for January 2001's Early Indicator ended down, a -1.85%.
How good a prognosticator of the full year's SPC's performance, the full month of January's SPC's performance has been (the "January Barometer") will be the subject of the General's follow up posting.
To be continued.
Courtesy of IBD's data, here is the updated table
through yesterday's session, Tuesday,
Since the respective EPS percentile rankings for CXW,
WHc, and CRN remain pretty constant until their
respective quarterly earnings are reported (earnings
reported by all other companies might effect a
late-earning's-season reporting company by one percentile point, plus
or minus, if it's, statistically, on a percentile's
cusp), the EPS percentile rankings for CXW (27), WHC
(68), and CRN (82), will be omitted from the
The order of presentation of the data is:
2. Relative Strength percentile ranking
3. Accumulation/Distribution ranking
(A/D) ["A"- Strong Accumulation (Buying) through "C"-
Neutral, to "E"- Strong Distribution (Selling)]
Relative Price Strength
numerical ranking (out of 197
industry groups) for the Commercial Services -
Security/Safety industry group [CS-S/S] applicable to that day's
session is shown in the rightmost column.
have been employed in an attempt to maintain columnar
alignment and do not denote "multiplication."
CXW x WHC x CRN x CS-S/S
1/02: 05/E x 49/B x
33/C x 101
1/03: 07/E x 53/B x 34/B x 119
07/E x 55/B x 34/B x 087
1/05: 15/E x 62/B x 37/B x
1/08: 19/D x 71/B x 36/B x 084
1/09: 24/C x 82/B x
39/B x 103
Given today's continued positive
performance for CXW, it appears that, A/D-wise, it has risen
from being in the Strong Distribution's "toilet" and
may be moving on its way to joining its privatization
sector's "brethren" in the "accumulation" mode.
Once again you are ahead of your time. The reason
is I believe after talking to several friends in the
investment business. After taking a fall from grace like Cxw
has over the last two years even though everybody
knows Doc and Son raped the company. It is going to
take more than a good plan and three months of good
intentions to convince the investors and NYSE that Cxw is on
the right track. However I think if you continue to
see good consistent leadership out of Nashville and
they continue to fill up their beds that have been
open since Doc built approx. 7 - 8 thousand beds
without a contract just on a handshake. This group will
slowly gain back the confidence of the investors. Also
do not be suprised if they shut down at least two
more of their underperforming institutions in the next
few months. From my understanding the new management
wants nothing to do with anything that does not have a
good solid return that is measureable. UNLIKE DOC HE
WANTED A RETURN FOR HIM AND BUDDIES. Man that was a
mouthful. Yes you are right I think part of the growth was
some coat tailing. But if it makes you feel any better
I own a boat load of common, A & B stock. After the
split I am going to get more.
We still have a while
before anyone needs to pop any corks.