5/2/08

Economics

Politics

Domestic

International War Against Radical Islam

From Victor Hansen:

http://www.realclearpolitics.com/articles/2008/05/the_halfwon_halflost_war.html

The Market

Technical

Investor sentiment indicators:

http://bigpicture.typepad.com/comments/2008/05/barrons-panic-e.html

And:

http://bespokeinvest.typepad.com/bespoke/2008/05/overbought-brea.html

And this on oil versus oil stock prices:

http://bespokeinvest.typepad.com/bespoke/2008/05/oil-stocks-vers.html

http://bespokeinvest.typepad.com/bespoke/2008/05/oil-closing-in.html

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So what do I know? I observed in yesterday’s Morning Call that Wednesday’s Market action, in which the DJIA was unable to sustain itself above its October 2007 to present down trend line and the S&P’s was unable to penetrate its November 2007 low resistance level made those resistance levels more formidable than they had been previously. Wrong. Stocks soared through those resistance levels in yesterday’s trading and never looked back. That said, as always I want to give the Market some time and space to be certain a trend has been broken. In addition, the S&P still has to negotiate its own October 2007 to present down trend line which is currently rests at 1411 (the S&P closed at 1406). However assuming that I was wrong, once free of the above mentioned resistance points, the Averages have almost no resistance between their current price levels and the old October 2007 highs (DJIA 14200; S&P 1575)--technically speaking. I am going to give it a couple of days before revising my technical parameters.

Fundamental

Just to prove how absolutely wrong I could be, I appear to have done a two-fer (two wrongs for the price one). Also in yesterday’s Morning Call, I made the fatal assumption that investors’ reaction to Wednesday’s Fed less-hawkish-than-I-wanted statement on monetary policy (stocks plunged following the release of its statement) reflected my own heightened concern over inflation--a worry that I thought would persist and keep a cap on stock prices. Au contraire, monsieur. The general consensus among the talking heads was that the Fed had indeed expressed more resolve in fighting inflation than my own interpretation; and clearly, the prices of gold, oil and the dollar in addition to stocks all pointed to me misreading the Fed’s tea leaves. To be honest, I am still not convinced even after spending the day listening to experts of all stripes tell me how wrong I am.

That said, I never let my opinion get in the way of making money. If the next few days demonstrate that investors are discounting a tighter Fed (and an improving dollar, lower gold), I will adjust our strategy. Most likely it will not involve a change in the allocation to cash (10-15%). However, I will adjust the levels at which I put cash to work, i.e. I will buy stocks at higher levels than I would have yesterday.

Subscriber Alert

The stock price of Nokia (NOK-$30) has risen above the upper boundary of its Buy Value Range. Accordingly, it is being Removed from the Dividend Growth Buy List. The Dividend Growth Portfolio never Bought NOK, so no additional action is required.

http://finance.yahoo.com/q?s=NOK

The stock price of Nustar Energy (NS-$53) has fallen below the upper boundary of its Buy Value Range. Accordingly, it is being Added to the High Yield Buy List. The High Yield Portfolio will not Buy shares of NS at this time.

http://finance.yahoo.com/q?s=NS

News on Stocks in Our Portfolios

ExxonMobil profits and taxes:

http://mjperry.blogspot.com/2008/05/exxon-paid-almost-3-in-taxes-for-every.html

More Cash in Investors’ Hands