11/5/08

Economics

This Week’s Data

September factory orders dropped 2.5% versus expectations of a .5% decline and August’s -4.0% report.

The International Council of Shopping Centers reported weekly sales of major retailers up .6% versus the prior week and up .9% versus the comparable period in 2007; Redbook Research reported month to date retail chain store sales up .3% on an annualized basis, an historically weak level.

Other

More on economic inequality:

http://www.ibdeditorials.com/IBDArticles.aspx?id=310602019188647

Libor rates continue to improve (fall):

http://econompicdata.blogspot.com/2008/11/libor-improves-again.html

Update on credit crisis indicators:

http://calculatedrisk.blogspot.com/2008/11/credit-crisis-indicators-more-progress.html

Politics

Domestic

International War Against Radical Islam

The Market

Technical/Fundamental

Chart on new highs versus new lows:

http://traderfeed.blogspot.com/2008/11/new-highs-and-new-lows-stock-market.html

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

What a great day. The Averages (DJIA 9625, S&P 1005) closed up big on the day, though both remain within a trading range (DJIA 7853--9707; S&P 839--1062). The S&P also manage to close above a previous mid October high that the DJIA left behind a week ago. The volatility index fell a lot again, though it is still high (47); and volume finally picked up a bit.

Other positives include: (1) another day absent a late day margin call driven sell off and (2) another day that greeted the Market with disappointing economic statistics [see above] yet stocks rose in spite of it.

To be sure the positives are just that; but rather than persuading me to buy, they just raise my confidence that the 10/10 lows marked the bottom of this latest down cycle. I am not flinching (at least not yet) from my opinion that the Market will trade in a range until we get more data on the length and depth of the current down turn. I may be wrong about the boundaries of that trading range but for the moment I think that the oft repeated parameters listed above are a good operating model.

So with yesterday’s bounce, I want to scale back further on those holdings that have really spiked in this latest up move--and I am going to. However, because our Portfolios are already at their maximum cash position (25%) under our current strategy, the funds received from those sales will be reinvested into holdings that have remained above their 10/10 lows, have made higher lows but have lagged or performed in line with the Market in general.

Subscriber Alert

The following transactions will be executed at the Market open this morning:

In the Dividend Growth Portfolio:

Selling small pieces of Wells Fargo (WFC), UGI (UGI) and Chevron (CVX).

Buying small pieces of Manulife Financial (MFC), MDU Resources (MDU) and Marathon Oil (MRO)

In the High Yield Portfolio:

Selling small pieces of Alliance Resource Gp (ARLP), Sanofi-Aventis (SNY) and ATT (T)

Buying small pieces of Quaker Chemical (KWR) and Plains All American PL (PAA)

In the Aggressive Growth Portfolio:

Selling small pieces of SEI Investments (SEIC), Luxoticca (LUX), CH Robinson (CHRW) and

Peabody Energy (BTU)

Buying small pieces of CME Group (CME), Avon Products (AVP), JTX Corp (TJX), Reliance Steel (RS), Alcon (ACL) and Rockwell Collins (COL).

I recognize that AVP and ACL are exceptions to the criteria that I laid out above (i.e. they are trading above their 10/10 lows and have made higher lows). As you know both stocks were whacked hard on earnings disappointments. I think that this damage was way over done and that is the reason for including these two stocks in the purchase list.

Company Highlight

Matthews Int’l manufacturers and markets custom made products that are used to identify people, places, products and events (trophies, rings, plaques) as well as caskets. The company has grown profits and dividends 12-15% annually over the last 10 years earning a 16-17% return on equity. The company should continue to perform as a result of:

(1) a recent move to direct distribution of caskets which has led to both higher volume and higher prices,

(2) an aggressive acquisition program,

(3) management’s ongoing cost cutting effort.

MATW is rated B+ by Value Line, has a debt to equity ratio of 22% and its stock yields .5%.

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

11/08

News on Stocks in Our Portfolios

More Cash in Investors’ Hands