Economics
protectionism (Free trade is a major positive for world and
http://www.clubforgrowth.org/2007/08/free_trade_with_korea_in_jeopa.php
And this threat from
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml
Politics
Domestic
Border security--W just doesn’t get it:
http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20070809/NATION/108090083/1001
International War Against Radical Islam
The Market
Technical
Watch DJIA 13701. A close above that level could be positive.
Fundamental
Liquidity is returning to the debt markets; as the default risks become better defined (transactions are the best guide), the broader risks to the economy are also easier to identify and discount in stock prices. Meanwhile, second quarter corporate profits have been coming in at a rate of two times estimates, employment is strong and global economic growth is smoking, all of which should further serve to isolate credit problems largely to financial institutions. What that means to us right now is that it makes sense to average into new holdings in non financial stocks that have suffered price erosion over the last month.
On the other hand, we recognize that by ignoring our Price Discipline and not buying the financial stocks, many of whom have declined sharply and by any measure in our Valuation Model should be bought, we are violating every rule that we have ever quoted to you. However, in prior times, the facts related to any negative event or series of events were basically knowable; our Quality Discipline, Valuation Model and Price Discipline simply disagreed with other investors in the interpretation of those facts. Not to be repetitive, but this time the important facts, i.e. how low quality credits are being priced by the major institutions, the amount of low quality credits owned by those institutions and the extent to which medium quality assets that they own will become worthless as the lower tier debts default, aren’t knowable because they depend on non objective internal pricing decisions by the managements of those financial institutions and the communication of that information to the public--which isn’t being done until the institution or its funds or both are in bankruptcy; and therefore the risk can’t be known until it becomes manifest and then it is too late.
That is not to say that we are ignoring the financial stocks. We are paying very close attention; and truth be told we are as nervous about not buying them as we would be if we did buy them. But we think that additional transparency is needed before it makes sense to begin purchasing them. What does that mean? Something like--but not necessarily limited to (1) sufficient time passes during which investors in aggregate agree on the pricing of more and more lower quality debt instruments, (2) major financial institutions announce to the Street how much sub prime and second and third tier debt they own and how they are pricing it, (3) a major transaction occurs in the low quality debt market that is well received by institutional buyers or (4) a major institution announces a problem and financial stocks rise, i.e. the worst case has been discounted. So far none of these have happened; so we wait.
However, this is a positive sign:
http://www.thestreet.com/p/_htmlrmm/rmoney/financials/10373064.html
So is this (must read):
http://www.thestreet.com/p/_htmlrmd/rmoney/technicalanalysis/10373148.html
News on Stocks in Our Portfolios
A positive article on Altria (Dividend Growth Portfolio):
http://retail.seekingalpha.com/article/43982
American Vanguard (Aggressive Growth Portfolio) reported second quarter earnings per share of $.13 versus $.12 reported in the comparable quarter of 2006.
EPS: 2006 $.57, 2007 $.75, 2008 .95; DVD: $.08 YLD 0.5%
http://finance.yahoo.com/q?s=AVD
Ecolabs (Aggressive Growth Portfolio) is buying Microtek Medical, a supplier of infection and fluid control products, for $274 million.
EPS: 2006 $1.43, 2007 $1.65, 2008 $1.85; DVD: $.40 YLD 1.2%
http://finance.yahoo.com/q?s=ECL
More Cash in Investors’ Hands
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