The Disciplined Dividend Investor: 3/20/08

Economics

More news under the heading of ‘clarity in the resolution of the credit crisis’. Federal regulators have eased the capital requirements of Fannie Mae and Freddie Mac allowing them to invest an additional $200 billion in the mortgage market. The intent of this move is to make it easier for adjustable rate mortgage holders to refinance into lower cost fixed rate mortgages.

This is a great article on how the municipal auction market is adjusting to the credit crisis:

http://www.marketwatch.com/News/Story/Story.aspx?guid={E95DD48B-08AB-492D-B5C1-980D5F6F6642}&siteid=nbs

A chart on mortgage rates:

http://bespokeinvest.typepad.com/bespoke/2008/03/mortgage-rates.html

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.). The latest on earmarks:

http://www.clubforgrowth.org/2008/03/massive_influx_of_pork_project.php

A positive look at immigration:

http://mjperry.blogspot.com/2008/03/more-visas-more-jobs.html

Politics

Domestic

See how your senator voted on the anti-pork amendment:

http://www.cagw.org/site/News2?page=NewsArticle&id=11322#71

International War Against Radical Islam

The Market

Technical

Yesterday, the Averages traded up to near the December 2007 to present down trend line, reversed themselves and closed down big on the day. Two observations:

(1) the initial resistance level for the very short term trading range is now in the DJIA 12495-12500 and S&P 1354-1370 range,

(2) I had a discussion with a subscriber yesterday about the volume of trading our Portfolios have engaged in of late in light of one of the professed objectives of my strategy to keep trading costs to a minimum. The answer to this seeming contradiction is the incredible volatility of stock prices over the last six months. Without getting into the arithmetic of our Valuation Model, the bottom line is that when the daily magnitude of the increase or decrease in stock prices [along with the inevitable distortions that accompany them] equals what historically constitutes two or more months of normal volatility, the result is that they get pushed to their extremes [i.e. a Stop Loss Price or Sell Half Range] more rapidly. That doesn’t negate the validity of having a firm discipline for action at those extremes, it just means that the triggers get exercised with increasing frequency as stock price volatility rises.

Fundamental

Subscriber Alert

Staying with our current investment strategy, given yesterday’s weakness, this morning at the Market open:

(1) the Dividend Growth Portfolio will add modestly to its Holding of UGI (UGI-$25),

(2) the High Yield Portfolio will add modestly to its Holdings of Kimco Realty (KIM-$36), Rayonier (RYN-$42). In addition, the stock prices of Realty Income Trust (O-$26) and RPM Int’l (RPM-$19) have entered their Buy Value Range. Accordingly, they are being Added to the High Yield Buy List. The High Yield Portfolio will purchase a one third position in each at the Market open.

(3) The Aggressive Growth Portfolio will add modestly to its Holdings of Ecolab (ECL-$43) and Accenture (ACN-$34). It will also start an initial one third position in Fastenal (FAST-$40) which is on the Aggressive Growth Buy List but isn’t currently owned. Finally, the stock price of Alcon Inc (ACL-$139) has re-entered it Buy Value Range. Therefore, it is being Added to the Aggressive Growth Buy List. The Aggressive Growth Portfolio will add modestly to this position this morning.