1/8/08

Economics

An interesting statistic relating recession to a move up in the unemployment rate:

http://bigpicture.typepad.com/comments/2008/01/merrill-recessi.html

Politics

Domestic

International War Against Radical Islam

Meanwhile, back in Pyongyang:

http://www.commentarymagazine.com/blogs/index.php/schoenfeld/1755

The Market

Technical

Fundamental

Subscriber Alert

The stock price of Illinois Tool Works (ITW-$50) has fallen below the lower boundary of its Buy Value Range. Accordingly, ITW is being Removed from the Dividend Growth Buy List. The Dividend Growth Portfolio will continue to Hold this stock.

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

At the Market open today, the Dividend Growth Portfolio will Sell another one-third of its position in Graco (GGG-$35). This will leave a one-third position in GGG, for the moment.

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

The stock price of US Bancorp (USB-$30) has fallen below the lower boundary of its Buy Value Range. Therefore, it is being Removed from the High Yield Buy List. The High Yield Portfolio will continue to Hold USB.

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

At the Market open this morning, the Aggressive Growth Portfolio will Sell one third of its positions in Reliance Steel (RS-$47) and Simpson Manufacturing (SSD-$24). The prices of both of these stocks fell below the lower boundary of their respective Buy Value Ranges on Friday and were Removed from the Aggressive Growth Buy List. They declined further yesterday; but they remain above their respective Stop Loss Prices, The deterioration in the price action of these industrial company stocks accompanied the breakdown in several of our technology holdings (ADP and CAJ) on Friday--both industry groups are acting ugly apparently the result of the growing consensus that the economy is slipping into recession.

So what to do? On the one hand, (1) as I mentioned Friday, there is a lack of historical precedence for a triple bottom [meaning a further decline in equity prices substantially raises the risk of a technical breakdown in stock prices in general], (2) the volatility measure of both RS’s and SSD’s stocks are above average for our Universe [meaning any downward move by the Market would be magnified for the stock prices of RS/SSD] and (3) both companies are economically sensitive at a time when investors appear increasingly convinced a recession is in the offing [meaning the natives are restless]. On the other hand, (1) I am somewhat more sanguine than many about the likelihood [or lack thereof] of a recession, (2) I am hesitant to over ride the Price Discipline without good cause [meaning selling these stocks before they hit their Stop Loss Price] and (3) the last thing I want is to get stampeded into a Selling at or near a bottom.

So, as I did on Friday with CAJ and ADP, I am taking the coward’s way out, again invoking the ‘discretion is the better part of valor’ rule and initiating a gradual move out of these securities--insuring that I will likely be both partially wrong (if the Market soon finds a bottom) and partially right (if there is much more to go on the downside).

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

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

News on Stocks in Our Portfolios

UnitedHealth Group (Aggressive Growth Portfolio) is acquiring Unison Health Plans, which exclusively services public sector health plans, Unison serves approximately 370,000 customers and generates $950 million in revenues. Terms were not disclosed.

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

Microsoft (Aggressive Growth Portfolio) is acquiring Fast Search and Transfer, a Norwegian developer of search software, for $1.2 billion.

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

More Cash in Investors’ Hands