Economics
Recent Data
The Conference Board’s September index of consumer confidence came in at 59.8 versus expectations of 54.0 and 56.9 recorded in August. Brian Wesbury’s article below argues that consumer sentiment is in no way a indicator of future economic activity; but an upbeat report still seems better than a negative one.
The September Chicago purchasing manager’s index (secondary indicator) of business activity was reported at 56.7 versus estimates of 53.0 and August’s reading of 57.9.
The International Council of Shopping Centers reported weekly sales of major retailers down .2% versus the prior week and up a paltry 1.1% on a year over year basis; Redbook Research reported month to date retail chain store sales rose a similarly disappointing 1.0% versus the same period in 2007.
Other
Some happy thoughts from Brian Wesbury:
http://www.clubforgrowth.org/2008/09/brian_wesbury_on_the_bailout_v.php
A sociological look at income inequality (this is really interesting):
A chart of the dollar--a positive for (lower) inflation:
http://bespokeinvest.typepad.com/bespoke/2008/09/dollar-soars.html
Politics
Domestic
A look at those who voted against the rescue plan:
http://article.nationalreview.com/?q=NDQ0ZGQ4ODZmZDVkNDcwODE0NTk3ZWZkZDlkOWIxZGU=
As (if) you watch the vice presidential debate tomorrow night, keep this in mind:
http://www.wnd.com/index.php?fa=PAGE.view&pageId=76645
International War Against Radical Islam
The Market
Technical
I gotta tell you yesterday was an amazing day. The DJIA (11850) actually closed above its July 2008 low (10809); although the S&P (1164) could not regain its similar level (1198). Volume was light (not encouraging) and while the volatility index declined, it remains in the 30’s which is also a great sign that there is still more risk to the downside. And the credit markets remain clogged up--also not good.
More on the credit markets:
http://bigpicture.typepad.com/comments/2008/09/all-time-high-o.html
Added to all that, virtually all of our stocks that suffered a technical/fundamental break down on Monday didn’t gain enough back to re-establish their prior price trends either within their Buy Value Range and/or above the technical level that they broke on Monday--which leaves me in sort of a no man’s land between admitting that our sales at the Market open yesterday may have been wrong and the temptation to sell more.
And think about this: the indices regained the levels that existed Monday BEFORE the rescue plan fell through; however, remember that at that point, the DJIA was already down a couple of hundred points even though the rescue plan was expected to be approved. So it seems reasonable to ask, if the Market rallied yesterday on the increased promise that the plan will be approved later this week and it closed at the same level as it was on Monday when it was also discounting the approval of the plan, is there anything left to the upside from here? Moreover, what if the democrats simply go back to their caucuses and write a bill that they can pass without the republicans (which would likely be much worse than the one that didn’t pass on Monday)? My only point here is that to the extent that yesterday’s rally was grounded on the expectation that a rescue plan will be passed this week, I am not sure there is much upside left.
Technically, I will be watching the S&P to see if it can get through its July 2008 low (1198) as a sign that this latest flush is over or the DJIA to decline below its July 2008 low as a signal that there may be more downside. If ever happens, preferably it will be accompanied by significant volume.
Fundamental
On the other hand, there were a couple of positive developments yesterday that may have been giving investors solace. First, the SEC announced that it is moving to ‘clarify’ the ‘mark to market’ rule which will allow some sort of management judgment on the valuation of nonmarketable assets. As you know, I have been advocating this step since the financial crisis started. Assuming that the revision to this rule will allow some flexibility in pricing assets, it should help relieve the capital strains on many financial firms. Mind you, it is not going to solve their liquidity problem (although it could potentially help); but it will help resolve the insolvency issue (this is the asset problem). That is a major short term positive. (Not to get too technical; but, the next step is for the regulatory authorities working with the exchanges to set up a market for these securities so that ultimately there is transparency).
Second, it appears that the rescue plan will raise the limits on FDIC insurance coverage to $250,000 (this helps solve is the bank liability problem). Frankly, I think that the limit ought to be taken to $1,000,000; but this is start. This coupled with the Treasury’s backup to the FDIC’s power to inject cash as an investment in the troubled institution (like Wachovia) would help solve bank liquidity problems.
The question is will these two measures help the credit markets? Because if they don’t, history tells us that stocks are in trouble. Today our fundamental focus is on the credit markets.
The Dividend Growth Buy List
Company Close 9/30
Automatic Data Processing $42.75 $41-47
Colgate Palmolive 75.35 75-86
Home Depot 27.58 24.28
Hormel Foods Corp 36.60 33-37
Johnson & Johnson 69.28 63-71
Manulife Financial 36.69 33-38
McDonald’s 61.70 59-68
Northern Trust 72.20 68-78
Paychex 33.03 31-36
T Rowe Price 53.71 55-63
UGI Corp 25.78 24-28
Wells
News on Stocks in Our Portfolios
More Cash in Investors’ Hands
No comments:
Post a Comment