8/8/07

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.).

http://article.nationalreview.com/?q=ZTQxMGM3OWVkZWUwNjg5ZGYxYTBlOTE3MGRlNjkxNjk=

The Fed

The Fed met yesterday. In the press release following the meeting, it said:

(1) the economy is growing moderately and should continue to do so, although

(2) the financial markets are experiencing increased volatility,

(3) credit markets are tightening,

(4) the housing downturn is continuing, and

(5) while inflation is moderating, price pressures continue and, therefore, it remains the Fed’s biggest concern.

In summary, the Fed thinks that the economy will get through the credit problems without any material impact on economic growth.

In our opinion, this statement is as close to a Goldilocks ‘just right’ statement as we could have hoped for--meaning that the Fed is not restricting monetary growth nor does it at the moment see a reason for easing. Equity market gave it a mixed review--the biggest complaint apparently being that it didn’t indicate a more forceful move toward ease. By way of response, we want to make one important point and it is very similar to our point on oil--it is not the price of credit that will cause economic dislocation, it is the availability; and the Fed basically said that it is fully aware that there could be an issue with availability. That is all that we think that investors could hope--assurance that the Fed is attuned to the risks in the system.

On a related item, pricing stability appears to be returning to the higher risk sectors of the credit market. This also is clearly a positive--enough so to raise our confidence to continue to slowly average into the stocks of non financial firms, but, in our opinion, not enough so to warrant increasing our Portfolios’ commitments in financial stocks.

Politics

Domestic

International War Against Radical Islam

The Market

Technical

Fundamental

For those who want more background on the current credit problem, the excellent (and somewhat long) Wall Street Journal article is a must read:

http://online.wsj.com/article/SB118643226865289581.html

News on Stocks in Our Portfolios

Hershey (Dividend Growth Portfolio) raised its quarterly dividend 10% to $.2975 per share.

EPS: 2006 $2.34, 2007 $2.25, 2008 $2.45; DVD: $1.19 YLD 2.4%

http://finance.yahoo.com/q?s=HSY

Expeditors International (Aggressive Growth Portfolio) reported second quarter earnings per share of $.30 versus $.25 reported in the second quarter of 2006.

EPS: 2006 $1.08, 2007 $1.25, 2008 $1.45; DVD: $.28 YLD 0.6%

http://finance.yahoo.com/q?s=EXPD

A positive article on Proctor & Gamble (Dividend Growth Portfolio):

http://www.zacks.com/newsroom/commentary/?id=5622

Progress Energy (High Yield Portfolio) reported second quarter operating earnings per share of $.59 versus $.47 reported in the comparable 2006 quarter

EPS: 2006 $2.05, 2007 $2.80, 2008 $2.90; DVD: $2.44 YLD 4.7%

http://finance.yahoo.com/q?s=PGN

Integrys Energy (High Yield Portfolio) reported second quarter operating earnings per share of ($>27) versus $.63 recorded in 2006’s second quarter. The loss was the result of expenses related to the consolidation of its merger with Peoples Energy as well as outages at an electric facility which raised maintenance expenses and necessitated the purchase of high cost substitute electricity.

EPS: 2006 $3.54, 2007 $3.45, 2008 $3.80; DVD: $2.54 YLD 5.0%

http://finance.yahoo.com/q?s=TEG

ParkerVision (10 Bagger) reported second quarter earnings per share of (.18) versus ($.18) reported in last year’s second quarter.

http://finance.yahoo.com/q?s=PRKR

More Cash in Investors’ Hands