3/28/08

Economics

A look at one of the causes of the mortgage crisis (liar loans):

http://bigpicture.typepad.com/comments/2008/03/zippy-cheats-tr.html

Politics

Domestic

McCain on Iraq:

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/27/AR2008032702616.html?sub=AR

McCain on the mortgage meltdown:

http://article.nationalreview.com/?q=ZTQ4Y2YyNjcyMzk5MTYwYjBkMDUzN2QzYzNiZjFjMDY=

International War Against Radical Islam

The Market

Technical

After spending two days above the downtrend line off their November/December highs, both the DJIA (12302) and the S&P (1325) closed below that trend line ( DJIA-12374; S&P 1340) yesterday. I had been using this trend line as one of the five technical markers that I have been tracking as measures of relative strength, but considered it only a minor resistance level that needs to be overcome, and felt like the November 2007 lows were a much more powerful resistance level. With stocks having been unable to Hold above these trend lines, they could take on more significance. Right now, it just means that I will be watching them more closely than I did before.

Chart of the day (S&P advance/decline line):

http://bespokeinvest.typepad.com/bespoke/2008/03/sp-10-day-advan.html

Signs of risk in the credit markets:

http://bespokeinvest.typepad.com/bespoke/2008/03/l.html

Current short interest:

http://bespokeinvest.typepad.com/bespoke/2008/03/sp-500-short--1.html

Fundamental

Subscriber Alert

The stock prices of Manulife Financial (MFC-$38), UGI (UGI-$25), Johnson Controls (JCI-$34), General Electric (GE-$37) and ExxonMobil (XOM-$86) have traded into their respective Buy Value Ranges. Accordingly, they are being Added to the Dividend Growth Buy List. The Dividend Growth Portfolio owns all of these stocks; however, at the Market open today, it will Add a one tenth position in MFC and a one quarter position in General Electric.

A brief aside on GE. As you may recall, the Dividend Growth Portfolio Sold a portion of its Holding of GE during the recent turmoil in the Market. The stock had traded below the lower boundary of its Buy Value Range plus traded below all but one to the five technical markers that I have been monitoring. On a rally in which the stock demonstrated little signs of life, the above mentioned Sale took place. Subsequently, the stock has not only traded back into its Buy Value Range but is now trading above all five of the technical markers mentioned above. The bottom line here is that I got whipsawed on those shares that were Sold. It happens. I have no excuse except that sometimes our Price Disciplines don’t work with perfection.

The stock price of Clorox (CLX-$57 continues to trade between the lower boundary of its Buy Value Range and its Stop Loss Price. In the recent rally, it could rise back into its Buy Value Range; in addition, it is currently trading below three of the five technical markers that I have been monitoring. Therefore, it is being Removed from the Dividend Growth Buy List and barring a more positive price performance will be on our Watch List for Sale.

The stock price of Penn Virginia Resource Ptrs (PVR-$25) has fallen below the upper boundary of its Buy Value Range. Accordingly, it is being Added to the High Yield Buy List.

At the Market open this morning, the High Yield Portfolio will purchase a one quarter position in Realty Trust (O-$25 and a one quarter position in RPM Int’l (RPM-$20)

The stock prices of Franklin Resources Inc (BEN-$99) and American Vanguard (AVD-$17) have risen above the upper boundary of their respective Buy Value Ranges. Therefore, they are being Removed from the Aggressive Growth Bu list. The Aggressive Growth Portfolio will continue to Hold these stocks.

The stock prices of Staples (SPLS-$23) and Medtronic (MDT-$48) have fallen 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 already owns these stocks; however, at the Market open this morning, it will Buy an additional one tenth position in Staples. It will also Buy an additional one tenth position in Ecolabs (ECL-$43)

The Dividend Growth Buy List

Company Close 3/26 Buy Value Range

Canadian Nat’l RR $48.71 $45-52

Chevron 84.40 79-91

Emerson Electric 51.17 46-53

General Electric 36.83 35-40

Johnson Controls 33.79 31-36

Johnson & Johnson 61.33 60-69

Manulife Financial 37.64 34-39

Northern Trust 66.76 64-73

Proctor & Gamble 69.41 66-75

UGI 24.81 24-28

UPS 71.92 67-77

VF Corp 78.49 72-83

ExxonMobil 86.20 86-99

Company Highlight

Manulife Insurance provides life insurance, pension products, annuities and mutual funds to individuals and groups in the Canada, the US and Asia. The company has earned a 13-15% return on equity and grown dividends and profits in excess of 20% over the last five years. Fueling future growth is:

(1) the continuing stream of new products such as the introduction of its variable annuity products via the Edward Jones broker system,

(2) the expansion of its variable annuity and life insurance products into Japan and China,

(3) an increase in the funds under management in its mutual fund business,

(4) management ongoing focus on cost reduction

(5) an aggressive share buyback program.

The company is rated A+ by Value Line, it has a debt/equity ratio of 11% and its stock yields 2.5%.
http://finance.yahoo.com/q?s=MFC

News on Stocks in Our Portfolios

General Electric (Dividend Growth Portfolio) has sold two divisions:
http://www.thestreet.com/s/ge-deals-card-business-to-american-express/newsanalysis/financial-services/10409544.html?puc=_htmlbooyah

Accenture (Aggressive Growth Portfolio) reported strong second fiscal quarter earnings per share of $.69 versus $.47 recorded in the comparable FY 2007 quarter.

http://www.thestreet.com/s/accenture-tops-estimates/newsanalysis/techsoftware/10409610.html?puc=_htmlbooyah

For those of you who own Altria (Dividend Growth Portfolio), the stock will split today into two companies, one comprising the current US operations of MO and one that will own the international assets of MO. I want to study the financials of the separate entities before making an investment decision; but from what I have seen to date, it seems likely that the Dividend Growth Portfolio will continue to Hold and Add to the international division (now Phillip Morris--ticker symbol PM) and the domestic entity will be switched to the High Yield Portfolio.

More Cash in Investors’ Hands