Economics
fiscal profligacy (Government spending as a percent of GDP is too high and the looming explosion in entitlement expenditures will make it worse. There is no good solution save spending discipline.). Here is a scorecard on how all Senators rank as devotees of pork. Check out your Senators:
http://porkbusters.org/scorecard.php
Politics
Domestic
International War Against Radical Islam
The Market
Technical
Once again the DJIA couldn’t breach the 13690 level and the S&P after trading briefly above 1527 fell below it. The headline reasons for the sell off were (1) trouble in the sub prime market--S&P put a slew of bonds on credit watch, Moody’s downgraded some securities and rumors on the Street are that six junk bond deals can’t get done, (2) trouble in housing and (3) trouble in the retail sector. The question is, is there any rationale behind these reasons or is this action just the recognition by investors that at the DJIA 13690 [S&P 1527] level, they are unwilling to pay higher prices?
As for the retail news, it was company specific--Sears is a merchandizing disaster and Home Depot is struggling; so for the moment, we are not going to translate that to mean retailers are doing poorly in general and, therefore, we wouldn’t this as a reason for the Market to decline.
Housing is a bit more of a problem. Before we left on vacation, we noted that it looked like housing was starting another leg down. Unfortunately, there has been no news since to suggest otherwise; however, the bears have been relentless in their pessimism on this sector for the last year. Even though we may have been more positive, it is not likely that this latest lousy housing news was unexpected--again not providing an adequate explanation for the whackage.
The sub prime market is the big unknown. We said a couple of weeks ago that we won’t know how bad things are in the sub prime market until we look back over our shoulder and then it will be too late. That was the reason why we made some modest sales of the financial stocks. We still count this as the big unknown and the most likely source for exogenous bad news.
http://www.bloggingstocks.com/2007/07/10/subprime-industry-hit-again/
The most likely sign as to whether this sell off was the result of buyers stepping back after a nice run or that the sub prime market is about to tank and will take the rest of the Market with it will be in the follow through. So in our opinion we need to keep one eye on the Market and the other focused on the news or lack thereof out of the sub prime credit market.
Fundamental
News on Stocks in Our Portfolios
EPS: 2006 $.74, 2007 $.88; DVD: $.29, YLD 2.7%
http://finance.yahoo.com/q?s=RMCF
Cramer loves ConocoPhillips (Dividend Growth Portfolio):
Medivation (10 Bagger) is being added to the Russell 2000 Index.
Market Analysis
More Cash in Investors’ Hands
Gerdau is acquiring Chaparral Steel for $4.2 billion in cash.
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