5/8/08

Economics

Barry Ridholtz looks at the math of recessions:

http://bigpicture.typepad.com/comments/2008/05/positive-gdp-re.html

Some perspective on food prices (must read):

http://www.realclearmarkets.com/articles/2008/05/good_news_on_food_prices.html

Politics

Domestic

McCain on his judicial philosophy:

http://www.johnmccain.com/Informing/News/Speeches/5385b2dd-fc8f-4bc9-9fb0-da2e2f1d9f98.htm

Mrs. Obama, in her own words:

http://article.nationalreview.com/?q=OGQ1MzFkMWU4MmYxMjhkZmNiZGE5YWY3NWUzNGMyMmY=

International War Against Radical Islam

This from the New York Times Baghdad bureau:

http://baghdadbureau.blogs.nytimes.com/2008/05/05/back-from-syria/#

The Market

Technical

Tough day yesterday--a day late from the decline I had been expecting. But that’s okay. Stocks had a nice run, they are backing off which shouldn’t be unexpected. Both of the major indices did crack their October 2007 to present down trend line which, as I suggested in yesterday’s Morning Call, brings that trend back into play. That sort of muddies the technical waters so to speak; but the good news is that increased lack of technical clarity won’t like last very long. The lower boundary of the rising March 2008 to present trend line is now at DJIA 12688/S&P 1384; while the boundary of the declining October 2007 to present down trend is DJIA 12838/S&P 1407. That means that there is only about a 1-1.5% price spread between those two conflicting trend lines; so stocks are going to tell us pretty quickly if they are in an up or flat price trend.

Another opinion:

http://bespokeinvest.typepad.com/bespoke/2008/05/sp-500-down-ove.html

An updated chart of the dollar:

http://bespokeinvest.typepad.com/bespoke/2008/05/the-us-dollar-a.html

Another of volatility:

http://bespokeinvest.typepad.com/bespoke/2008/05/market-volatili.html

Fundamental

Subscriber Alert

The stock price of Alliance Resource Ptrs (ARLP-$45) has traded higher into its Sell Half Range. Accordingly, at the Market open today, the High Yield Portfolio will Sell sufficient shares to reduce ARLP to a normal sized position.

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

In line with our current strategy to Buy stocks during price declines, at the Market open this morning: the Dividend Growth Portfolio will Buy additional shares in Wells Fargo (WFC-$29) and United Technologies (UTX-$73) and the Aggressive Growth Portfolio will Buy additional shares in SEI Investments (SEIC-$24) and Rockwell Collins (COL-$63).

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

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

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

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

In addition, Bank of Nova Scotia (BNS-$48) was recently moved from the Dividend Growth Universe to the High Yield Universe. The primary reason was that while BNS could no longer meet the quality standards of the Dividend Growth Universe, it still met those of the High Yield Universe and its stock yield qualified it for inclusion. Today at the Market open, the High Yield Portfolio will purchase a one half position in Bank of Nova Scotia.

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

Aggressive Growth Buy List

Company Close 5/7 Buy Value Range

Abercrombie & Fitch $72.66 $67-77

Ecolabs 45.40 43-49

FactSet Research 60.08 58-67

Medtronic 47.81 44-51

Microsoft 29.21 26-30

Rockwell Collins 64.06 61-70

SAP Inc 48.97 46-54

SEI Investments 23.72 22-25

Staples 22.60 20-23

Company Highlight

Peabody Energy is the largest private sector coal company in the world with 3.5 billion tons of proven and probable reserves in the US and Australia. The company has grown earnings per share from $.32 in 2002 to $2.25 in 2006 while earning an approximate 20% return on equity. BTU cut production in 2006 and 2007 due to a weather related price decline and it negatively impacted 2007 earnings. However, with rising global demand and a more normal US winter, prices should recover. The company should resume its above average growth as a result of:

(1) strong global demand in particular from countries seeking affordable energy sources

(2) rapidly expanding need of emerging economies for coal and steel to build out their infrastructure; the proximity of BTU’s Australian reserves to China, India and Indonesia provides it with a huge pricing advantage,

(3) coal prices have soared in the last six months and BTU has a record amount of unpriced tonnage that will be sold in the spot market,

(4) the company is generating significant cash flow much of which will be used to pay down debt which will in turn improve future cash flow and earnings.

Peabody is rated B++ by Value Line, carries a 55% debt to equity ratio and its stock yields .5%.

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

News on Stocks in Our Portfolios

A positive write up on General Dynamics (Dividend Growth Portfolio):

http://www.thestreet.com/p/_htmlrmm/rmoney/investing/10415598.html

Penn Virginia Ptrs (High Yield Portfolio) reported first quarter income per unit of $.55 versus $.30 recorded in the comparable 2007 quarter. PVR also raised its quarterly distribution per unit from $.44 to $.45.

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

Quaker Chemical (High Yield Portfolio) raised its quarterly dividend per share from $.215 to $.23.

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

A positive write up on Amphenol (Aggressive Growth Portfolio):

http://www.zacks.com/rank/zcommentary/?id=7579

American Vanguard (Aggressive Growth Portfolio) reported first quarter earnings per share of $.06 versus $.08 recorded in the comparable 2007 quarter. The shortfall has attributed to delays in planting due to weather.

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

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