7/3/08

Economics

With this morning’s rate increase in the ECB benchmark, the spread between it and the Fed Funds rate is now the widest since the ECB inception. The importance of this is that it contributes to further weakness in the dollar and as a consequence puts upward pressure on oil prices and inflation:

http://bespokeinvest.typepad.com/bespoke/2008/07/central-bank-ra.html

And here’s what that means for stocks:

http://bespokeinvest.typepad.com/bespoke/2008/07/its-still-all-a.html

Politics

Domestic

International War Against Radical Islam

W’s plan for a Palestinian state:

http://article.nationalreview.com/?q=NjBhMjViOTZmZDY3MjM4ZGVmYzU1MjdiMjQ5NWI0YmY=

The Market

Technical

Yesterday’s Market action was anything but pretty. For starters, the S&P (1261 closed below its January 2008 intraday low (1269)--and that’s not good, technically speaking. The March 2008 intraday low is 1256; but I am not holding out any hope of it providing support. Unless the S&P pops back over 1269 in the next couple of days, next stop on the charts--1167.

Despite this dismal stock price performance, neither the volatility index (VIX--now at 26; selling climax range 30-40) nor the volume is indicating a bottom. I opined yesterday that we didn’t necessarily have to have a ‘V’ bottom type flush; but if not, then a more protracted ‘U’ shaped bottom would likely occur--and yesterday’s price action certainly gave no hint of that alternative.

The other notable thing was that those stocks that have been the stellar performers--the materials stocks and the small energy related names--got whacked hard. It is not unusual that in the final throes of a Market decline investors will take out those stocks that have been performing the best and shoot them along with everything else. So the bad news is we have to scramble to protect our profits in those few stocks that have been really working for us (see below). The good news is that this could be a harbinger that the end is near. Of course, we have no idea how bloody the end will be, so we can’t get too excited.

http://bespokeinvest.typepad.com/bespoke/2008/07/coal-and-steel.html

Fundamental

Subscriber Alert

The stock prices of Federated Investors (FII-$34). Nike (NKE-$58) and Chevron (CVX-$97) have traded 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 FII and MA and will not Buy additional shares. It will not Buy shares of NKE at this time.

Visit www.strategic-stock-investments.com, learn about our dividend growth investment strategy, sign up and find out what we are buying/selling in our Portfolios.

Million Dollar Portfolio Challenge

Portfolio 1 (91.8): Sold: Canon

Bought: Northern Trust

Positions: Automatic Data Products, Johnson Controls, WalMart, Northern Trust

Portfolio 2 (90.7%): Sold: none

Bought: none

Positions: Franklin Resources, Chevron, SAP

XTO Energy

Portfolio 3 (94.1%): Sold: ConocoPhillips

Bought: Wells Fargo

Positions: XTO Energy, Smith Int’l. Wells Fargo, SAP

Portfolio 4 (87.8%): Sold: Peabody Energy

Bought: Wells Fargo

Positions: Suncor, Chevron, Wells Fargo, SAP

News on Stocks in Our Portfolios

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