Economics
This Week’s Data
The International Council of Shopping Centers reported weekly sales to major retailers fell 1.6% versus the prior week and rose a paltry .9% on a year over year basis; Redbook Research reported month to date retail chain store sales increased .8% versus the comparable period in 2007.
Other
The variability of unemployment between states:
http://mjperry.blogspot.com/2008/10/1-of-3-states-have-jobless-rates-below.html
Politics
Domestic
Former
http://jammiewearingfool.blogspot.com/2008/10/chicago-school-chief-on-annenberg-there.html
How Obama and McCain staffers are paid:
http://mjperry.blogspot.com/2008/10/political-hypocrisy-do-as-i-say-not-as.html
The significance of falling gasoline prices:
http://mjperry.blogspot.com/2008/10/falling-gas-prices-tax-cut-of-massive.html
International War Against Radical Islam
The Market
Technical
There is a pattern developing which will be helpful to me in managing our Portfolios’ cash position. In five out of the last six trading days the DJIA has either closed or traded at an intraday high in the 9270-9370 range (as opposed to the resistance level [9707] marked by its 2004 low). The corresponding S&P range is 897-1002.
In addition, both indices have made a very short series of higher lows and the up trend lines connecting those higher lows currently intersect at DJIA 8370, S&P 879. It is way too early to start pointing to either resistance or support levels as having significance; however, in the context of trying to more clearly define a trading range, these are worth watching as stock prices approach them.
This is particularly relevant today because in the case of the up trend (support) line while both the DJIA and S&P are approximately 7-8% above the aforementioned intersect points, many of the stocks in our Portfolios closed yesterday on or near their corresponding up trend (support) lines. As long as they hold those support levels, there is nothing to do; but if they suffer technical deterioration, action may be required.
Fundamental
The fundamental news this week is following the pattern that I suggested in last week’s Closing Bell, i.e. a thaw in the credit markets is proceeding apace shifting investor attention towards corporate earnings.
http://calculatedrisk.blogspot.com/2008/10/credit-crisis-indicators-more-progress_21.html
Unfortunately, several major profit disappointments have been recorded in the last couple of trading days, e.g. Hormel. I would note that an integral part of our strategy of managing the cash position (between 15-25%) of our Portfolios will be moving out of the stocks of companies that are not handling the economic difficulties as well as we would have thought and into those that have.
Subscriber Alert
Before this Market gets away from us on the downside, our Portfolios are going to do a little more selling this morning;
The High Yield Portfolio will Sell 10-15% of its holdings in Kimco Realty Trust (KIM) and Gannett (GCI. Both stocks are trading at or below their 10/10 low.
The Aggressive Growth Portfolio will Sell 20% of its holdings of Blackrock (BLK) and American Vanguard (AVD). Blackrock is selling at its October 10 low. American Vanguard has rallied dramatically, so profits are being taken.
Company Highlight
TJX Companies is a leading off-price retailer of clothing and home fashions. The company has grown profits and dividends at an 18-19% pace over the past ten years earning a 30%+ return on equity. TJX should continue this performance because:
(1) the current economic environment is beneficial to its steady growth, strong margin business model,
(a) struggling department stores offer a wider and higher quality variety of merchandise for the company to purchase,
(b) this stronger assortment of goods brings in new customers that are trading down from high priced retailer.
(2) geographic expansion. Currently, there are no major off price, brand apparel companies in
(3) an aggressive stock repurchase program. Management estimates that it will buy back $900 million in stock this year.
TJX is rated A+ by Value Line, has a 30% debt to equity ratio and its stock yields 1.3%.
http://finance.yahoo.com/q?s=TJX
10/08
News on Stocks in Our Portfolios
Pfizer (High Yield Portfolio) reported third quarter operating earnings per share of $.62 versus expectations of $.55. Positive comments:
http://www.thestreet.com/p/_htmlrmm/rmoney/pharmaceuticals/10443504.html
3M (Dividend Growth Portfolio) reported third quarter operating earnings per share of $1.42 versus estimates of $1.38 and $1.32 recorded in last year’s third quarter.
Blackrock (Aggressive Growth Portfolio) reported third quarter earnings per share of $1.62 versus expectations of $1.88 and $1.94 reported in the comparable 2007 quarter.
Positive comments on Abbott Labs (Dividend Growth Portfolio):
http://www.thestreet.com/story/10443388/1/abbott-labs-growth-yield-and-safety.html?puc=_htmlatb
US Bancorp (High Yield Portfolio) reported third quarter earnings per share of $.32 versus estimates of $.47.
More Cash in Investors’ Hands
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