Economics
Recent Data
Weekly jobless claims rose 22,000 versus expectations of an increase of 15,000. Total claims are at a multi year high; though Hurricanes Gustav and Ike are at least partially responsible.
August factory orders fell 4% versus estimates of a 3% drop. As you know, up to a month or so ago, the industrial sector had been the primary source of strength in the economy. That is now fading.
September nonfarm payrolls declined 159,000 versus forecasts of fall of 105,000--not good.
http://calculatedrisk.blogspot.com/2008/10/employment-declines-by-159000-in.html
Other
The bear case. Unfortunately to date, this guy has been right:
http://www.forbes.com/opinions/2008/10/01/goldman-morgan-run-oped-cx_nr_1002roubini.html
An argument against passing the rescue plan:
http://www.american.com/archive/2008/october-10-08/a-bill-that-deserves-to-fail
Politics
Domestic
International War Against Radical Islam
The Market
Technical
A technical overview of the current Market:
http://www.thestreet.com/p/_htmlrmm/rmoney/technicalanalysis/10440325.html
******************************
Another rough day yesterday. Both indices (DJIA 10482; S&P 1114) closed below their July 2008 lows and the lower boundaries of the August 2007 to present downtrend. I remind you that the next technical support level is DJIA 9707 and S&P 1062.
Volume picked up but was in no way reflective of past emotional sell off/reversals. In addition, the volatility index moved into the mid 40’s but guys in the pits tell me that there was no sign panic meaning that this index could easily go higher (stocks lower). As I mentioned in yesterday’s Morning Call the kind of constant daily high volatility we have witnessed in the last week or so could be a sign that the end may be near. It just doesn’t look like it is here yet.
One final thought, the employment numbers this morning were not good; but the Market looks like it will open up. When stocks go up on bad news that is a pretty good sign that the worse of a decline is over. Let’s see if it plays out that way.
Unfortunately, some of our Portfolios holdings suffered some serious technical damage yesterday and a portion of each holding will be sold (see below).
Fundamental
A bear’s case on valuation:
http://www.thestreet.com/story/10440427/1/the-other-shoe-dow-7000.html?puc=_htmlatb
******************************
There seems to be a growing consensus that the house will approve the rescue plan--300+ DJIA points down notwithstanding. I actually think that investor focus has shifted from ‘if the government doesn’t engineer a rescue, the economy could suffer severely’ to ‘the economy is going to suffer badly and if we don’t get a rescue plan, it could be truly severe’--the distinction here being that consensus seems to have moved from ‘ the economy is slowing and could experience a mild recession’ to ‘ how bad is this puppy going to be?’
Over the last week, our Portfolios have been adjusting to this change in perception. Specifically, our Sell Discipline has been forcing us to sell stocks in the materials and industrial sectors as they penetrate either the stop levels set to preserve profits or their Stop Loss Price. However, I have to say that I am a bit anxious in doing so because I am not convinced that global growth story (of which the material and industrial companies are major beneficiaries) is dead. The issue in my mind is ‘is the perception that the economy could go into a severe recession causing the dismay on Wall Street or is negative investor psychology spawning dire economic forecasts’? With the emotional level so high right now, I just don’t have a great feel for the answer. Time will tell.
On a near term basis, of course, the answer makes no difference--our Sell Discipline is eliminating these stocks from our Portfolios. I make point only to say that the global growth may in fact not be dead and we may be buying these same stocks back at lower prices.
Make money by accessing all our Portfolios, the supporting research and Price Disciplines at www.strategic-stock-investments.com. Our work is focused on making money for our Portfolios not as some academic exercise in Internet investing. Check our performance (audited)--our Dividend Growth Portfolio has beaten the S&P by 500 basis points per year for the last seven years but with a beta of only .62. (Mandatory Disclaimer: past performance is not a guarantee of future results.) We give you everything you need to duplicate our results, in particular, a strict price discipline for both Buying and Selling.
News on Stocks in Our Portfolios
Positive comments on General Dynamics (Dividend Growth Portfolio):
http://www.zacks.com/rank/zcommentary/?id=8768
Positive comments on Oneok Ptrs (High Yield Portfolio):
http://www.zacks.com/rank/zcommentary/?id=8772
Wells Fargo (Dividend Growth Portfolio) is buying Wachovia in an all stock deal:
http://dealbreaker.com/2008/10/wachargo-it-is.php#more
More Cash in Investors’ Hands
No comments:
Post a Comment