Economics
fiscal profligacy (Government spending as a percent of GDP is too high and the looming explosion in entitlement expenditures will make it worse. There is no good solution save spending discipline.). Have I said enough about earmarks?:
http://www.weeklystandard.com/Content/Public/Articles/000/000/014/759qrdgc.asp
Politics
Domestic
McCain on economics:
http://mjperry.blogspot.com/2008/02/chief-economic-advisor-to-mccain-dr.html
International War Against Radical Islam
Here’s an interesting take on what is going on in Kosovo:
http://www.stephenbainbridge.com/punditry/comments/russias_military_options_in_kosovo/
The Market
Technical
Last weekend, I spent time looking at the technical strength of holdings in each of our Portfolios. Specifically, I was looking at the price of the stock at the close last Friday versus its price (1) at the August 2007 low, (2) the November 2007 low, (3) the January 2008 low and (4) relative to the long term trend then in place on August 2007. (versus the DJIA which is trading below all four markers and the S&P which is trading below all but the trend in place in August 2007).
Surprisingly (at least to me) was that the prices of only three stocks in the Dividend Growth Portfolio were below any of the above four; in other words, all stocks except three were trading at prices higher than their price at the August low, the November low, the January low and the lower boundary of the trend in place as of August 2007. I interpret that to mean that to date they have strong investor support and carry less downside risk if we get another sell off.
The three exceptions are McGraw Hill, which is trading above the January 2008 low and the trend line in place in August; and Brown Forman and General Electric, which are only trading above their January 2008 lows. If my interpretation is correct, then these stocks carry the greatest price risk in a downturn.
In the High Yield Portfolio, again only three stocks were below any of the four benchmarks. A.J. Gallagher is trading above the January 2008 low and the trend in place August 2007; Plains All American is trading above the November 2007 and the January 2008 lows; LCA-Vision is trading only above its January low--and not by much (update: see below).
In the Aggressive Growth Portfolio, I was not so fortunate. Ten stocks (about 1/3 of the total) are trading below one or more of the four benchmarks. Staples, Medtronic and Accenture are trading above all but their August low; Quest Diagnostics is trading above its January 2008 low and the trend in place August 2007; Eaton Vance, Luxoticca, Expeditors Int’l, Rockwell Collins and SAP are trading above only their January lows.
My bottom line: (1) the greatest risk is in those stocks with the weakest recent trading history and (2) in any Market rally, I will likely sell any stock that can’t recover above these markers, especially if it is in the group that on a fundamental basis has been trading between its Stop Loss Price and the lower boundary of its Buy Value Range and can’t recover.
A positive short term technical indicator:
http://bigpicture.typepad.com/comments/2008/02/of-stocks-on-th.html
Charts on oil:
http://bespokeinvest.typepad.com/bespoke/2008/02/oil-above-100-.html
And mortgage rates:
http://bespokeinvest.typepad.com/bespoke/2008/02/mortgage-rates.html
Fundamental
An interesting article on the practicality of breaking up the monoline insurers:
http://bigpicture.typepad.com/comments/2008/02/blog-spotlight.html
Options-Covered Writes
This morning at the Market open:
The Dividend Growth Portfolio will Sell C.R. Bard March 100 calls at $1.25 against one quarter of its position.
The Aggressive Growth Portfolio will Sell Donaldson March 45 calls at $.875 against one quarter of its position.
Subscriber Alert
The stock price of T Rowe Price (TROW-$48) has fallen below the lower boundary of its
The stock price of LCA-Vision (LCAV-$14) traded near its Stop Loss Price; it also traded below its January 2008 low. Therefore, the High Yield Portfolio will Sell this stock on the Market open this morning.
The stock price of Eaton Vance (EV-$32) has fallen below the lower boundary of its
The stock price of Best Buy (BBY-$44) has fallen below the upper boundary of its
At the Market open this morning, the Dividend Growth Portfolio will Buy a 1/5 position in United Technologies (UTX-$72) and the Aggressive Growth Portfolio will Buy a 1/5 position in Sun Hydraulics (SNHY-$22).
News on Stocks in Our Portfolios
A positive write up on WalMart (Dividend Growth Portfolio):
http://seekingalpha.com/article/65318-wal-mart-excelling-in-a-dismal-environment
More Cash in Investors’ Hands
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