4/25/08

Economics

All day long yesterday I had one of those ‘emperor’s new clothes’ feelings which is to say that suddenly investors were starting to connect some dots that had previously appeared randomly placed. I think what triggered this phenomena was a Wall Street Journal article speculating that the Fed may be done lowering interest rates. That seems to have pushed investors to consider that the Fed (1) is less concerned about the credit crisis; so maybe investors should be too. Suddenly, the narrowing credit spreads (the interest rate spread between lower quality and higher quality bonds) which suggest a decline in fear and loathing and the improvement in industrial activity from February to March became part of a larger pattern that includes the financial markets working their way out of the sub prime problem and the economy slowing but not falling off a cliff, and (2) is worried about inflation, will not keep money easy for too long and therefore the decline in the dollar which has contributed mightily to increasing inflationary pressures may well be over.

http://bespokeinvest.typepad.com/bespoke/2008/04/earnings-beat-1.html

If I am right about this change in psychology then yesterday marked the end of the end of the latest Market decline. To be sure, it is too soon to make that call; but like most turning points, it won’t take long before we know; and if it is so, we will have to get more aggressive getting our cash reserves to work. That doesn’t mean that I’m changing strategy--our cash position will remain at the 10-15% level--but instead of buying one tenth positions on price weakness, I will be buying one third and one half positions.

Politics

Domestic

George Will on the state of education in the US:

http://jewishworldreview.com/cols/will042408.php3

International War Against Radical Islam

This is probably not good:

http://www.longwarjournal.org/archives/2008/04/pakistan_pushes_peac.php

The Market

Technical

For three days in a row the DJIA has tried to push below the November 2007 low resistance (now support) level and couldn’t get it done. I said Tuesday that I was mildly impressed with the lack of success of the first try; I guess the least that I can say today is that I am mildly impressed x3. I do think that this speaks to the improving internal fundamentals of the equity Market and switches my focus to the March low to present uptrend (DJIA circa 12448-13250; S&P circa 1250-1442)

Fundamental

International exposure and corporate earnings:

http://bespokeinvest.typepad.com/bespoke/2008/04/earnings-beat-1.html

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Subscriber Alert

The stock prices of Canadian Nat’l RR (CNI-$52 and Emerson Electric (EMR-$54) has risen above the upper boundary of their respective Buy Value Ranges. Accordingly, they are being Removed from the Dividend Growth Buy List. The Dividend Growth Portfolio will continue to Hold these stocks.

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

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

The stock price of Nokia Corp (NOK-$28) has fallen below the upper boundary of its Buy Value Range. Therefore, it is being Added to the Dividend Growth Buy List. The Dividend Growth Portfolio will not buy Shares of NOK at this time.

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

The stock prices of Alcon (ACL-$155), Donaldson (DCI-$42) and SEI Investments (SEIC-$25) have risen above the upper boundary of their respective Buy Value Ranges, Accordingly, they are being Removed from the Aggressive Growth Buy List. The Aggressive Growth Portfolio will continue to Hold these stocks.

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

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

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

News on Stocks in Our Portfolios

Ecolabs (Aggressive Growth Portfolio) reported first quarter earnings per share of $.41 versus $.35 recorded in the first quarter of 2007.

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

Penn Virginia Resource Ptrs (High Yield Portfolio) raised its quarterly per unit distribution from $.44 to $.45.

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

Federated Investors (Dividend Growth Portfolio) reported first quarter earnings per share of $.55 versus $.50 reported in the 2007’s first quarter. FII also raised its quarterly dividend per share from $.21 to $.24.

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

A review of 3M’s quarter:

http://www.thestreet.com/p/_htmlrmd/rmoney/industrials/10413680.html

Microsoft (Aggressive Growth Portfolio) reported its third fiscal quarter earnings per share of $.47 versus expectations of $.44 and $.49 reported in the comparable 2007 fiscal quarter.

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

More Cash in Investors’ Hands