8/19/08

Economics

Some interesting data bearing on the ‘decoupling’ (of the US economy from the rest of the world) debate:

http://themessthatgreenspanmade.blogspot.com/2008/08/decoupling-debate-continues-in-some.html

a rising tax and regulatory burden (Government has never proven that it could solve economic problems efficiently or satisfactorily.) A way out of the ethanol mess that we have created for ourselves:

http://www.american.com/archive/2008/august-08-08/a-2018safety-valve2019-for-biofuels

The coming showdown on the moratorium on off shore drilling:

http://www.clubforgrowth.org/2008/08/will_dems_shut_down_the_govern.php

Money supply and prospects for further increases in inflation:

http://mjperry.blogspot.com/2008/08/m2-growth-suggests-1970s-inflation-wont.html

Politics

Domestic

International War Against Radical Islam

The Market

Technical/Fundamental

Both the DJIA (11479) and the S&P (1278) were down big yesterday, closing very close to the lower boundary of the up trend off their respective July 2008 lows (DJIA circa 11452; S&P circa 1279). The ostensive cause was a negative article in this past weekend’s Barron’s on Fannie Mae and Freddie Mac. But there was nothing new presented which made yesterday’s pin action seem a lot like garden variety profit taking; that said, I am getting a little worried about the continued widening of credit spreads in the last couple weeks (suggesting that bond investors are pricing significant risk into the fixed income market), while equity prices have remained in the aforementioned uptrend (suggesting that the level of risk is declining). This seems terribly inconsistent to me--meaning that one of these two contradictory price moves needs to reverse itself. I am just not sure which. Here’s a chart illustrating my point on credit spreads:

http://bespokeinvest.typepad.com/bespoke/2008/08/credit-default.html

So until we get some sign of resolution to these incompatible price trends, I am slowing the rate at which our Portfolios are spending their cash reserves.

Subscriber Alert

At the Market open this morning, our Portfolios will Buy additional shares of current holdings sufficient to draw cash down to 17.75% of each Portfolio.

The Dividend Growth Portfolio will Buy shares of Johnson Controls (JCI-$33) and Illinois Tool Works (ITW-$49). The High Yield Portfolio will Buy shares of Plains All American Pipeline (PAA-$45). The Aggressive Growth Portfolio will Buy shares in Factset Research (FDS-65).

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

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

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

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

The stock price of CR Bard (BCR-$94) 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 will continue to Hold BCR.

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

The Dividend Growth Buy List

Company Close 8/18 Buy Value Range

Aflac $54.87 $49-56

Automatic Data Processing 45.31 41-47

Emerson Electric 48.60 47-54

Illinois Tool Works 48.94 45.52

Hormel Foods Corp 35.05 31-36

Johnson & Johnson 71.08 63-71

Manulife Financial 34.07 31-36

MDU Resources 31.47 29-33

Marathon Oil 44.25 44-51

Paychex 35.10 31-36

T Rowe Price 58.56 55-63

UGI Corp 27.35 24-28

News on Stocks in Our Portfolios

A positive write up on Penn Virginia (High Yield Portfolio):

http://www.zacks.com/blog/post_detail.html?t=14282

More Cash in Investors’ Hands