Economics
protectionism (Free trade is a major positive for world and
http://www.nypost.com/seven/11072007/postopinion/opedcolumnists/the_truth_on_trade_424240.htm
a rising tax and regulatory burden (Government has never proven that it could solve economic problems efficiently or satisfactorily.) More on the folly of the Farm Bill:
http://article.nationalreview.com/?q=MTcyNjRlMjQwN2M4ZmEwMDg4NGUyNGU3Nzk4ODI0NTA=
Politics
Domestic
International War Against Radical Islam
Fear of an Israeli attack on
http://www.timesonline.co.uk/tol/news/world/middle_east/article2827787.ece
The Market
Technical
Rough day was yesterday. At the end of the day, the DJIA finished (13300) right on the lower boundary of its uptrend line (13293), while the S&P (1475) remains above an uptrend line (1462), that may or may not have any technical validity. Should these levels not hold, the next major support level for the DJIA is around 12000-12100 and for the S&P 1353.
Fundamental
Fundamentally, the DJIA and S&P are close enough to Fair Value (DJIA-13187; S&P 1519) to give little support to a further erosion in stock prices. And surprisingly for me at least, this one day whackage comes at a time when the macro economic data has turned positive (strong third quarter GDP and employment gains last week along with better than expected productivity and worker compensation increases this week)--again, not an argument for a declining Market.
Yeah, I know oil, gold and the dollar; oil, gold and the dollar, etc. But the psychology driving oil and gold up and the dollar down just has the feel of over extension to me. http://www.seekingalpha.com/article/53428-gold-s-flight-to-2000-the-short-term-outlook
Of course, that judgment could be way early--just like I was with Citigroup and Merrill Lynch.
And let’s not forget the sub prime mortgage market which I think remains the real wild card. We still have no idea how big the losses are going to be; and it is this fear of the unknown that hangs over stock prices. Yesterday, psychology appeared to be to assume the worst; and if it holds, there is more downside.
My fall back in highly emotional Markets is always our Price Disciplines and secondarily technical support/resistance levels.
With regard to the former, two stocks closed yesterday below their Stop Loss Price: Synovus Financial (Dividend Growth Portfolio) and Mack Cali (High Yield Portfolio); and Cedar Fair and Duke Realty (both on the High Yield Buy List) fell below the lower boundary of their
The tougher one is what to do with SYN and CLI. I hate Selling stocks under current circumstances, i.e. the Market trades down big but closes on a major support level, without waiting to see whether or not that support level will Hold. My inclination is to let the Market open this morning, get a sense of direction; then act. If stock prices can Hold current levels or rally, I will (1) at least Hold SYN and CLI through the end of the day [if not, I will Sell them during the day; as usual, a Subscribe Alert will go out as soon as I make any decision] and (2) probably Buy at least partial positions in stocks on our Buy List that our Portfolios don’t yet own.
On another point. given that there was a decent amount of discussion yesterday and Tuesday on the business channels about the number of Fed governors that, at this moment, would not vote to cut the Fed Funds rate at its December meeting, I am prompted to continue to Sell slow growing utilities in the High Yield Portfolio that are at or near the high end of their newly computed (result of a change in our interest rate assumption) Valuation Range. This morning, the High Yield Portfolio will Sell its Position in Otter Tail (OTTR) and Integrys Energy Group (TEG).
Aggressive Growth Buy List
Company Close 11/7
UNH $49.85 $47-54 (has not been purchased)
EAT 24.73 23-26
OSK 51.72 51-56
News on Stocks in Our Portfolios
Universal Corp (High Yield Portfolio) reported its second fiscal quarter earnings per share of $1.25 versus expectations of $1.21. It also announced a $150 million stock buy back; plus it is raising its quarterly dividend per share from $.44 to $.45.
EPS: 2006 $3.48, 2007 $4.25, 2008 $5.00; DVD: $1.76 YLD 3.6%
http://finance.yahoo.com/q?s=UVV
More Cash in Investors’ Hands
Wells Fargo is buying back 75 million shares.
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