4/14/08

Economics

February trade report:

http://mjperry.blogspot.com/2008/04/us-exports-show-strong-annual-growth.html

How the rich get richer (hint: hard work):

http://mjperry.blogspot.com/2008/04/inheritance-is-not-main-driver-of.html

Politics

Domestic

protectionism (Free trade is a major positive for world and US economic growth.)

http://online.wsj.com/article/SB120778566399303309.html?mod=opinion_main_review_and_outlooks

Another policy of self sabotage brought to you by your elected representatives:

http://mjperry.blogspot.com/2008/04/help-not-wanted-in-us-national-self.html

Ditto:

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

International War Against Radical Islam

The Market

Technical

A chart of the S&P and its 50 day moving average:

http://bespokeinvest.typepad.com/bespoke/2008/04/sp-500-testing.html

Fundamental

Friday was another one of those rough days. As I am sure you know, the sell off was participated by a shortfall in GE earnings. While most of the deficit was a function of problems in GE’s financial division, investors nevertheless decided that there were significant implications for the industrial sector and the economy in general--so they hammered stocks across the board. Leaving aside the specifics of GE, I think the general concerns are probably not all that well founded but rather they fit in the pattern that I have been expecting, i.e. stocks caught in a trading range as investors vacillate between relief that their worse fears seem unlikely to materialize and the uncertainty of not having quite enough clarity on the economy and the credit markets to push stock prices out of the trading range. In short, this decline warrants the additional commitment of cash reserves.

As to GE, the drubbing the stock took of Friday was as much a function of a loss of trust in management as a $.07 shortfall in earnings. Historically, GE has assiduously maintained a reputation of keeping the Market informed on the state of its business through both good and bad times. So when the CEO stated two weeks ago that all was well at GE, the Street accepted that as gospel. When it proved otherwise, the stock was punished not only for a disappointing earnings report but also for management dishonesty?/ineptitude?.

The stock has fallen below the lower boundary of its Buy Value Range, so it is being Removed from the Dividend Growth Buy List. It remains above its Stop Loss Price. So for the moment, the Dividend Growth Portfolio will take no action. However, GE now joins that group of stocks whose prices are between their Buy Value Range and Stop Loss Price and below more than three of the five technical markers that I have been monitoring. How the stock performs on any subsequent bounce in equity prices will dictate the action of the Dividend Growth Portfolio.

Subscriber Alert

The stock prices of Federated Investors (FII-$34), Sherwin Williams (SHW-$54), Avery Dennison (AVY-$49) and Emerson Electric (EMR-$50) have fallen below the upper boundary of their respective Buy Value Ranges. Accordingly they are being Added to the Dividend Growth Buy List. The Dividend Growth Portfolio already owns FFI and EMR. No additional share will be Bought in EMR. However, an additional one tenth position will be Added in FII at the Market open this morning.

The Dividend Growth Portfolio will also buy an additional one tenth position in Manulife Financial (MFC-$37). No shares of SHW or AVY will be Bought at this time.

The stock price of Reynolds American (RAI-$58) has fallen below the lower boundary of its Buy Value Range. Therefore, it is being Removed from the High Yield Buy List. For the moment, the High Yield Portfolio will continue to Hold RAI.

The stock prices of Schwab (SCHW-$18), Mastercard (MA-$228), Abercrombie & Fitch (ANF-$71) and SEI Investments (SEIC-$22) have fallen below the upper boundary of their respective Buy Value Ranges. Accordingly, they are being Added to the Aggressive Growth Buy List. The Aggressive Growth Portfolio already owns SCHW and MA and no further purchases will be made. At the Market open this morning, the Aggressive Growth Portfolio will Buy one quarter positions in ANF and SEIC.

News on Stocks in Our Portfolios

Federated Investors (Dividend Growth Portfolio) reported first quarter earnings per share of $.55 compared to $.50 recorded in its 2007 first quarter.

More Cash in Investors’ Hands