Wednesday, September 24, 2008

9/25/08

Economics


Recent Data


August existing home sales dropped 2.2% versus expectations of a 1% decline; also home prices continued to fall more than estimated. A graphic look:

http://calculatedrisk.blogspot.com/2008/09/august-existing-home-sales-decline.html


Weekly mortgage applications plunged 10%; higher rates are being partially blamed for this disappointing performance.


August durable goods orders fell 4.5% versus expectations of a 1..4% decline.

http://econompicdata.blogspot.com/2008/09/durable-goods-shipments-move-on-nothing.html


Weekly jobless claims rose 32,000 versus expectations of a 10,000 decline.

http://calculatedrisk.blogspot.com/2008/09/weekly-unemployment-claims-jump-to.html


Both the durable goods orders and employment numbers were influenced by Hurricane Ike.


Other


A reasoned look at the Paulson plan:

http://article.nationalreview.com/?q=ZDNkOTc5ZTY4YTlkMDkyMDY3MmI1NTk5ZjZmZDkxY2U=


And this from Bill Gross (Chief Investment Officer of Pimco):

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/23/AR2008092302322.html


The rating agencies role in the financial crisis:

http://bigpicture.typepad.com/comments/2008/09/bloomberg-blame.html


The latest data on consumer credit:

http://mjperry.blogspot.com/2008/09/what-credit-crunch.html


Politics


Domestic


International War Against Radical Islam


The Market


Technical


Market performance following periods of high volatility (like we have been in):

http://traderfeed.blogspot.com/2008/09/relative-range-expansion-in-s-500-index.html

********************************************

The Markets (DJIA 10825; S&P 1185) closed pretty much unchanged yesterday (DJIA -29 pts; S&P -2.pts) leaving the DJIA above its July 2008 low (10809) and the S&P below (1198). Volume was nonexistent and the volatility index remains exceedingly high. Basically, nothing is transpiring because investors, traders, etc are all sitting in front of their TV’s watching Washington’s version of As The World Turns; and no one wants to commit funds long or short until they know what the final version of the Paulson plan looks like. The good news is that it looks like the necessary legislation will be forthcoming in a timely manner.


In this current state of suspended animation, assuming that your cash position is where you want it to be (our Portfolios are roughly 19-20% in cash) and you would buy your current portfolio at the Market open this morning, there is nothing to do. If not, then take advantage of the lull in this Market to make adjustments. As you know, I believe that the plan has to be approved and therefore it will be because the consequences of not doing so are so onerous that intelligent, thoughtful men can’t not do it. So today we do nothing. Nevertheless, I have both a Buy and a Sell list ready when clarity comes.


As a final thought, I remind you that even if we avert disaster, the US economy is facing a prolonged period of slow economic growth as the financial system heals in which ironically the biggest threat will likely be inflation as the Fed attempts to re-absorb the extraordinary infusion of money required to avert disaster in the first place. I think that that argues for a high cash position (15-20%) and a more trading oriented approach to investment strategy.


Fundamental


Subscriber Alert


The stock price of CME Group (CME-$366) has traded above the upper boundary of its Buy Value Range. Accordingly, it is being Removed from the Aggressive Growth Buy List. The Aggressive Growth Portfolio will continue to hold this stock.

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


Aggressive Growth Buy List


Company Close 9/24 Buy Value Range

Harley Davidson $39.18 39-45

Styrker 63.96 64-74


News on Stocks in Our Portfolios


Positive comments on Lowe’s (Aggressive Growth Portfolio):

http://www.thestreet.com/story/10439021/1/lowes-sees-rise-in-fiscal-2009-sales.html?puc=_htmlbtb


Nike (Dividend Growth Portfolio) reported its fiscal first quarter operating earnings of $1.03 versus expectations of $.92 and $.92 recorded in the comparable quarter last year.

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


More Cash in Investors’ Hands

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