5/15/08

Economics

More on the absurdity of our energy policy:

http://www.setamericafree.org/wordpress/?p=301

A graphic of the Fed’s balance sheet:

http://bigpicture.typepad.com/comments/2008/05/the-feds-balanc.html

Some details on yesterday’s inflation data:

http://bigpicture.typepad.com/comments/2008/05/us-inflation-mi.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.) Reasons to veto the Farm Bill:

http://gregmankiw.blogspot.com/2008/05/farm-bill-veto.html

Food costs as a percent of disposable income:

http://mjperry.blogspot.com/2008/05/as-share-of-disposable-income-food-is.html

A chart on the growth of the monetary base:

http://mjperry.blogspot.com/2008/05/is-concern-for-inflation-inflated.html

Politics

Domestic

Obama on Lebanon:

http://www.commentarymagazine.com/blogs/index.php/pollak/5491

International War Against Radical Islam

An update on Afghanistan:

http://www.strategypage.com/qnd/afghan/articles/20080514.aspx

The Market

Technical

Comparing today to 1990:

http://bespokeinvest.typepad.com/bespoke/2008/05/1990-all-over-a.html

Fundamental

First quarter S&P earnings:

http://bespokeinvest.typepad.com/bespoke/2008/05/q1-sp-500-group.html

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Subscriber Alert

Two stocks in the Dividend Growth Universe have traded back into their Buy Value Range: McGraw Hill (MHP-$43) and Illinois Tool Works (ITW-$55). Accordingly, they are being Added to the Dividend Growth Buy List. The Dividend Growth Portfolio will not purchase shares of these stocks at this time.

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

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

The stock price of Praxair (PX-$96) has traded into its Sell Half Range. Accordingly, the Dividend Growth Portfolio will Sell sufficient shares to reduce this Holding to a normal size (about 20% of the PX shares).

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

The Dividend Growth Buy List

Company Close 5/14 Buy Value Range

Abbott Labs $54.83 $49-56

Automatic Data Processing 44.13 41-47

Avery Dennison 49.67 45-52

Brown Forman 73.14 65-75

Canon Inc 52.89 47-54

Coca Cola 56.44 53-61

Colgate Palmolive 71.60 65-75

Federated Investors 35.99 32-37

Home Depot 29.12 26-30

Illinois Tool Works 55.23 53-61

Ingersoll Rand 44.43 42-48

Johnson & Johnson 66.81 60-69

Manulife Financial 38.02 34-39

McGraw Hill 43.53 41-47

Proctor & Gamble 65.50 66-75

Sherwin Williams 58.11 53-61

State Street Corp 73.09 66-76 UGI 26.45 24-28

UPS 71.60 67-77

VF Corp 77.60 72-83

Wells Fargo 28.91 27-33

Company Highlight

Coca Cola (KO) is the largest US beverage company distributing Coca Cola, Sprite, Barq’s, Mr. Pibb, Fresca, Dasani, Evian, Danone, Powerade and Minute Maid. The company has grown profits and dividends 8-10% for the past 10 years earning a 28-30% return on equity. We expect that trend to continue with:

(1) new product development in both carbonated and noncarbonated beverages,

(2) acquisitions particularly in the noncarbonated ‘lifestyle’ categories such as energy drinks , enhanced water and green tea,

(3) geographic expansion especially in emerging market countries,

(4) its continuing effort in marketing innovation

(5) KO’s aggressive stock buy back program estimated at between $1.5-2 billion in 2008.

KO is rated A++ by Value Line, has only a 6% debt to equity ratio and its stock yields 2.6%.

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

CNBC Million Dollar Portfolio Challenge

Under the category of ‘for whatever it’s worth’, I am trading four portfolios in this contest and I thought that subscribers would like to follow the trades. In including these, I am in no way suggesting that subscribers follow suit. Trading is not part of our strategy; in addition, my Buy/Sell decisions in this contest are based on one factor--the stock’s chart. Fundamentals are involved only to the extent that all these stocks are in one of our Universes. Finally, some positions may be subject to intra day changes. None of these trades should be looked at as a formal recommendation. But those subscribers who trade a part of their portfolio might find my attempts at trading of interest.

Portfolio 1: Wells Fargo, State Street, Automatic Data Processing, Home Depot, ExxonMobil

Portfolio 2: FactSet Research, Rockwell Collins, Medtronic, SEI Investments

Portfolio 3: Eaton Vance, Expeditors Int’l, Microsoft, Rayonier

Portfolio 4: Paychex, Optionsxpress, Oshkosh Truck, Expeditors Int’l

News on Stocks in Our Portfolios

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