Economics
A look at yesterday trade deficit report:
http://mjperry.blogspot.com/2008/03/us-exports-at-record-high-show-strong.html
More on the income ‘squeeze’ on the middle class:
http://mjperry.blogspot.com/2008/03/cant-we-bury-middle-class-income-myths.html
And income inequality:
http://mjperry.blogspot.com/2008/03/college-educated-are-getting-richer.html
Don’t believe the 1970’s stagflation doomsayers:
http://mjperry.blogspot.com/2008/03/inflation-in-pictures-its-sure-not-like.html
A first step in curbing out of control Medicare costs:
http://article.nationalreview.com/?q=MzE3M2M1Y2RkNmMxZWRhZGE5YzNhNGRiMDI0NGZlMTY=
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The big news yesterday was the Fed’s move to provide an additional $200 billion lending facility to embattled financial institutions--in essence, the Fed will lend US Treasury bills (it owns about $800 billion) for 28 days to the banks and investment banks in exchange for mortgage backed securities, which at the moment can’t be accurately valued. The purpose is to (1) prevent the financial institutions from having to markdown their portfolios or meet margin calls based on the lack of pricing [value] certainty surrounding their illiquid asset backed securities and (2) perhaps sell the [some] Treasuries and use the funds received to make new loans--presumably with tighter credit standards than previously employed; but nonetheless, it should provide liquidity for loans to keep business activity growing. Further, the Fed said that it could expand (more loans) and/or extend (longer than 28 days) this program.
Two points:
(1) the Fed action doesn’t mean that loan losses won’t be incurred by financial institutions and it doesn’t mean that home prices (houses being the asset behind much of these derivative loans) will stop declining. What this action does is buy time so that a more orderly market in the various financial derivative instruments can develop,
(2) by providing liquidity in this manner [a] it does not expand the money supply--they are simply trading one security for another and [b] it opens the possibility that the Fed will be less aggressive in lowering the Fed Funds rate. Both of these factors will help assuage the consternation among investors about inflation and the weak dollar. Incidentally, another measure the Fed took yesterday was to do $36 billion in currency swaps with foreign central banks to help stabilize the dollar.
Did someone say ‘more visibility to the resolution of the credit crisis’?
Politics
Domestic
International War Against Radical Islam
The Market-Disciplined Investing
Technical
What a difference a day makes. When I said in yesterday’s Morning Call, that if the DJIA and S&P rallied back above the support levels (DJIA 11900; S&P 1282) they had broken on Monday, I wouldn’t view the break as of much consequence, little did I expect Tuesday’s upward explosion in stock prices. Today as I look at the Market technically, stock prices are back in the trading ranges that have been operative since January (DJIA 11600/11900--12722; S&P 1282--1735).
That said, I do not think that yesterday’s Titan III performance signified a beginning of a new Bull Market. Yes, it had volume; yes, it was more than short covering; but I am uncomfortable that this upturn in price and volume didn’t occur either during a day or immediately following a day of complete capitulation. It seems to me that investors have simply not yet thrown in the towel; so I am concerned that we haven’t seen the final ‘flush’. At the moment, stocks are back in the old trading ranges mentioned above; and until investor sentiment can push them above the August intraday low (DJIA-12506; S&P 1370) and November intraday low (DJIA-12722; S&P-1406) or below DJIA 11600 and S&P 1269, they will be until they are not.
Subscriber Alert
Given the above conclusion, our investment strategy remains unchanged--we need to be Buying stocks during weakness and Selling into strength. At the moment, I am focused on moving out of those stocks that have been performing weakly in terms of both their fundamentals and their technical picture. I am defining that as stocks (1) which are and have been trading between the lower boundary of their Buy Value Range and their Stop Loss price and can’t recover into their Buy Value Range AND (2) which are trading below at least four of the five technical markers that I have been monitoring over the last month (the August 2007 intraday low, the November 2007 intraday low, the January 2008 low close, the January 2008 intraday low close, the trend in place in August 2007, the trend since August 2007).
At the close of business yesterday there are several stocks that fit the above criteria. Accordingly at the Market open this morning:
The Dividend Growth Portfolio will Sell one half of its positions in General Electric (GE-$33), Abbott Labs (ABT-$51) and McGraw Hill (MHP-$37).
The Aggressive Growth Portfolio will Sell one half of its positions in CME Group (CME-$504), Eaton Vance (EV-$31), Expeditors Int’l (EXPD-$41) and Rockwell Collins (
When UnitedHealth (UNH-$37) opened down yesterday morning, the Aggressive Growth Portfolio Sold one half of its position, as I outlined in yesterday’s Morning Call: “Accordingly, the Aggressive Growth Portfolio will wait till the Market opens this morning and in the absence of any rebound; it will Sell one half of its position in UNH.”
Again, I want to wait through the opening this morning; and again, if we don’t witness a rebound in UNH, the Aggressive Growth Portfolio will Sell its remaining one half position.
The above sales are creating more cash in the Aggressive Growth Portfolio than I want (30%+), so at the Market open today, the Aggressive Growth Portfolio will Buy additional shares in Mastercard (MA-$195) and Franklin Resources (BEN-$94).
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A look at the outstanding short interest:
http://bespokeinvest.typepad.com/bespoke/2008/03/sp-1500-short-i.html
A look at what happens the day after a big rise:
http://bespokeinvest.typepad.com/bespoke/2008/03/largest-positiv.html
Fundamental-A Dividend Growth Investment Strategy
News on Stocks in Our Portfolios
A positive write up on Bucyrus Int’l (Aggressive Growth Portfolio):
http://www.zacks.com/rank/zcommentary/?id=7155
This looks like good news for Medivation (10 Bagger):
More Cash in Investors’ Hands
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