12/7/07

Economics

protectionism (Free trade is a major positive for world and US economic growth.). Good news on the trade agreement with Peru; but there is more to do:

http://www.ibdeditorial.com/IBDArticles.aspx?id=281664179614983

Politics

Domestic

International War Against Radical Islam

The Market

Technical

Fundamental

A sub prime fix?

The efforts by bureaucrats, technocrats and assorted politicians to put forth various (nefarious) proposals to solve the sub prime problem took center stage yesterday with the announcement of the Administration’s plan. To the extent that we understand the broad outline of any of these schemes (including W’s), if implemented they may be a short term positive for the equity markets under the guise of providing clarity to how this problem is resolved (just look at yesterday’s Market performance), their impact on the long term health of our economy is, in my opinion, mostly negative. They are largely further attempts by the political class to play ‘nanny’ to the US electorate and absolve it of the responsibility to be accountable for its own decisions.

Let’s remember that this problem is largely a result of poor decision making. To the extent that fraud or some other form on misbehavior is involved, the legal system provides all the means necessary to correct an injustice. However, it does not nor should it offer a remedy for stupidity. To propose regulations that in essence abrogate a mortgage contract simply anticipates a solution that in the end stifles American entrepreneurship and ingenuity--specifically, if the government can alter a contract (mortgage) at its whim, what intelligent investor will ever invest in a mortgage backed security again? And if that is so, won’t it become much more difficult for the average American potential home buyers to get a mortgage? And if that is so, what impact will that have on the future growth of the economy?

Bottom line, to the extent that any solutions are mandatory and violate existing contracts, they would simply fall under the headings of a rising tax and regulatory burden (Government has never proven that it could solve economic problems efficiently or satisfactorily.) and both the domestic and international political environments are a negative for Your Money.

Subscriber Alert

At the Market open this morning, the Dividend Growth Portfolio will Buy the second half of its position in Wells Fargo (WFC-$33).

The stock price of Penn Virginia (PVR-$28) has risen above the upper boundary of its Buy Value Range. Accordingly, PVR is being Removed from the High Yield Buy List. The High Yield Portfolio will continue to Hold this position.

At the Market open this morning, the High Yield will Buy an additional one quarter position in LCA-Vision (LCAV-$18).

The stock prices of Nordstrom (JWN-$38), Raven Industries (RAVN-$36) and Landstar (LSTR-$44) have risen above the upper boundary of their respective Buy Value Ranges. Accordingly, they are being Remove from the Aggressive Growth Buy List. The Aggressive Growth Portfolio does not own RAVN or LSTR, therefore no further action is necessary; however, it will continue to Hold its position in JWN.

The stock price of Simpson Manufacturing (SSD-$28) has fallen below the upper boundary of its Buy Value Range. Accordingly, SSD is being Added to the Aggressive Growth Buy List. Since the Aggressive Growth Portfolio already owns Simpson, no additional shares will be purchased.

Oshkosh Trucks (OSK-$50) is one of those stocks that I wish I didn’t have to talk about. As you may recall, the Aggressive Growth Portfolio owned this stock but was Stopped Out during the recent Market decline. After its Sale, (1) I reviewed its Valuation Model but didn’t make any appreciable changes and (2) the stock didn’t decline too much below the original Stop Loss Price. As I said at the time when the Aggressive Growth Portfolio Sold OSK, I like the company; so I have tweaked its Valuation Range and it is being re-Added to the Aggressive Growth Buy List. At the open this morning, the Aggressive Growth Portfolio will Buy a one-half position in OSK.

News on Stocks in Our Portfolios

Ecolab (Aggressive Growth Portfolio) raised its quarterly dividend per share from $.115 to $.13.

Bank of Nova Scotia (Dividend Growth Portfolio) raised its quarterly dividend per share from $.45 to $.47.

More Cash in Investors’ Hands