1/25/08

Economics

The downside to biofuels:

http://news.wired.com/dynamic/stories/B/BIOFUELS_FEARS?SITE=WIRE&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-01-23-09-17-38

The merits of tax rebates versus spending cuts:

http://www.realclearmarkets.com/articles/2008/01/washington_embraces_keynes_and.html

a rising tax and regulatory burden (Government has never proven that it could solve economic problems efficiently or satisfactorily.)

http://article.nationalreview.com/?q=MjlhYjgxZmY4ZWQyM2EwYzgzODE0YjdkMTg5YjI1MjM=

Politics

Domestic

Giuliani on taxes:

http://online.wsj.com/article/SB120113714794811929.html?mod=opinion_main_commentaries

I am trying to stay out of the political side of the election process; but this editorial by Dick Morris, former Clinton adviser, about the current Clinton strategy viz a viz Obama is a really interesting read: http://www.townhall.com/columnists/DickMorrisandEileenMcGann/2008/01/23/theres_a_method_to_crafty_bills_madness

International War Against Radical Islam

The Market

Technical

I am embarrassed to say that my technical analysis in yesterday’s Morning Call was inaccurate. In that note I said ‘and while the DJIA (12270) didn’t rally back above its 1982-present up trend line (circa 12319), it got awfully close’ and I concluded that ‘the key points to watch are DJIA 12319 on the upside (if it were to close above that level today or tomorrow, from my non purist technical point of view, I would simply judge the last three days’ action as a long test of that up trend line...)’ .

The inaccuracy is related to the ascending level of the DJIA 1982-present up trend. Three days ago that level was circa 12319; but by definition, each day the lower boundary of a rising uptrend....well, rises. Yesterday that boundary was at 12419 not the 12319 I stated in my original comments (my only excuse is that I was focusing on stock prices and simply didn’t double check the level of that DJIA trend line). So for yesterday’s statement to be correct, it should have said ‘the key points to watch are DJIA 12419 on the upside (if it were to close above that level today or tomorrow, from my non purist technical point of view, I would simply judge the last three days’ action as a long test of that up trend line...).

The importance of this exercise is that yesterday the DJIA closed at 12379 which under terms of my original, but inaccurate, premise means that the DJIA would have closed above the 1982-present up trend line (12319) and hence all that happened in the prior three days was a bloody but successful test of that trend line.

Clearly despite the 100 rise yesterday, the DJIA remains below the 1982 trend line--just a little but still below it. The point being that (1) for me to get really comfortable with the conclusion that the Market has bottomed, the DJIA has to close above the lower boundary of 1982-present up trend--and it hasn’t yet, (2) I don’t want yesterday’s conclusion to be misleading, (3) but all that said, I still believe stock prices in general have bottomed.

Fundamental

Two fundamental points:

(1) yesterday’s news of the intercession by NY state regulators in the monoline insurers’ solvency problems appears to have been more of a publicity stunt than anything else [clearly bad news]; however, CNBC is reporting that Wilbur Ross [private capital] is negotiating to either buy or inject capital into Ambac. If that is so, it is actually better news than the original government intervention version because the solution would come from private capital--meaning it would likely be more efficient and less costly [to the taxpayers].

(2) W announced an outline to the federal government’s ‘bailout’ package which consists of three parts:

(a) a tax rebate [snore]--basically a political election year salve with little economic consequence,

(b) accelerated depreciation for small business which should encourage investment--that is a positive,

(c) a rise in the upper limit of the so called ‘jumbo’ loans which can be government insured from $417,000 to $735,000; the net effect of this provision is to make the servicing cost of these loans cheaper thereby [hopefully] encouraging them--also a positive.

All in all, a much more economically effective ‘bail out’ than I had expected.

Barry Ridholtz on the Societe Generale’s losses, the panic in oversea markets and the Fed rate cut:

http://www.seekingalpha.com/article/61614-fed-s-folly-fooled-by-flawed-futures

I like Barry but I think that he partially wrong on this one. I have been saying for sometime that the Fed needed to get short term interest rates down in order to encourage bank lending. So my read on this is that the Fed did the right thing but for perhaps the wrong reason.

Subscriber Alert

The stock prices of Quaker Chemical (KWR-$17) and Reynolds American (RAI-$62) have fallen below the upper boundary of their respective Buy Value Ranges. Accordingly, they are being Added to the High Yield Buy List. Since the High Yield Portfolio already owns both of these stocks, no additional share will be purchased.

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

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

In the recent Market decline. the stock price of General Electric (GE-$35) traded below the lower boundary of its Buy Value Range and was Removed from the Dividend Growth Buy List. The Dividend Growth Portfolio continued to Hold this stock. GE’s stock price has since recovered above the lower boundary of its Buy Value Range, so it is being Re-Added to the Dividend Growth Buy List. Since it already owns this stock, the Dividend Growth Portfolio will take no further action.

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

The stock prices of CME Group (CME-$635) and Landstar (LSTR-$45) have risen above the upper boundary of their respective Buy Value Ranges. Therefore, they are being Removed from the Aggressive Growth Buy List. The Aggressive Growth Portfolio will continue to Hold CME; however, it never Bought LSTR, so no further action is required.

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

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

The stock prices of Eaton Vance (EV-$36) and FactSet Research (FDS-$55) have traded below the upper boundary of their respective Buy Value Ranges. Accordingly, they are being Added to the Aggressive Growth Buy List. The Aggressive Growth Portfolio owns both of these stocks; however, at a prior time, both stocks have traded above their Sell Half Price and the Aggressive Growth Portfolio Sold a portion of each holding. With their price decline, the size of their position is now below a normal 3%; so the Aggressive Growth Portfolio will Buy additional shares of these companies at the Market open this morning.

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

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

The stock price of SAP Inc (SAP-$46) has fallen below the lower boundary of its Buy Value Range. Therefore SAP is being Removed from the Aggressive Growth Buy List. The Aggressive Growth Portfolio never Bought this stock, so not further action is required.

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

In the recent Market decline, the stock price of Fastenal (FAST-$40) traded below its Stop Loss Price and was Sold by the Aggressive Growth Portfolio. However, it has since recovered to above the lower boundary of its Buy Value Range. So it is being re-Added to the Aggressive Growth Buy List. The Aggressive Growth Portfolio will not buy share of FAST at this time.

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

News on Stocks in Our Portfolios

Microsoft (Aggressive Growth Portfolio) reported its second fiscal quarter earnings per share of $.50 versus expectations of $.46 and $.26 recorded in the comparable 2007 fiscal quarter.

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

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