6/4/08

Economics

Some thoughts on the commodity index funds and their complicity in pushing up prices:

http://www.poorandstupid.com/2008_06_01_chronArchive.asp#8485589573526664671

And another view of cap and trade:

http://www.realclearpolitics.com/articles/2008/06/just_call_it_capandtax.html

Some perspective on how very lucky Americans are:

http://mjperry.blogspot.com/2008/06/how-rich-are-you-even-minimum-wage.html

Want cheaper gasoline?

http://mjperry.blogspot.com/2008/06/want-cheaper-gas-here-are-4-easy.html

Politics

Domestic

International War Against Radical Islam

McCain on Israel, Iran and Iraq (warning, it’s a bit long):

http://www.realclearpolitics.com/articles/2008/06/mccains_speech_to_aipac.html

The Market

Technical

Yesterday the DJIA (12402) traded well below the August 2007 low (12511); the next support level is the April 2008 low (12263). The S&P (1377) remains above its August 2007 low (1370). Forgoing a lot of tedious technical analysis, the bottom line is that both indices appear to have further downside (DJIA circa 1%, the S&P circa .5%) to their next support level.

Fundamental

That said, this week’s economic data continues to portray an economy that is wounded but by no means dying. Further, yesterday Mr. Bernanke made a strong statement supporting the dollar which right now is a key determinant in the future direction of oil (and other commodities) prices as well as inflation. In other words, the long term economic outlook appears to be at worse ‘muddling through’ and at best improving.

http://article.nationalreview.com/?q=MTRlNzgxZjBhYjU0ZDY4NjgzMTdlNDZlMzNiZmRlMDI=

And a chart of the dollar:

http://bespokeinvest.typepad.com/bespoke/2008/06/us-dollar-marat.html

A possible source of concern is Lehman Bros--rumors of its demise and all that. It could happen; but the Fed has already shown that it won’t allow the collapse of one entity to threaten the whole economy. Further, the financial sector has been repairing itself; so it is in better shape to take a bankruptcy than it was when Bear Stearns rolled over. Nonetheless, here is the pessimistic view:

http://bigpicture.typepad.com/comments/2008/06/more-financial.html

On the other hand:

http://seekingalpha.com/article/80047-identifying-a-bottom-for-financials

Another possible fly in the stock valuation ointment is politics. Yesterday, it became clear that barring the revelation of photos of Mr. Obama and a goat in intimate discourse, that he will be the Democratic presidential candidate; and I think it is general consensus among the investor class that an Obama presidency will be more likely to result in higher taxes, higher spending, more regulation and less free trade than a Clinton presidency. As you know, about a month ago I incorporated a Democratic sweep of both Congress and the presidency into our Valuation Model and that resulted in some downward adjustments to the 2008 and 2009 Year End Fair Values of the Averages and the stocks in our Universes. It may be that investors over the last couple of days have had one of those ‘emperor’s new clothes’ moments and begun adjusting their expectations to that reality--although as I pointed out at the time, stocks generally are still below those downward adjusted Values.

In the interest of being fair and balanced:

http://www.bloggingstocks.com/2008/06/04/why-president-obama-will-be-good-for-the-economy/

Or it may be nothing more than the ‘noise’ of trading or an early preview to a long dull summer of meandering stock prices.

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CNBC Million Dollar Portfolio Challenge

Portfolio 1 (84.8%): Sold: CR Bard

Bought: General Dynamics

Positions: Automatic Data Products, 3M, T Rowe Price,

General Dynamics

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Bought: Graco

Positions: Franklin Resources, Graco, Schwab,

Luxottica

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Bought: Illinois Tool Works

Positions: Illinois Tool Works, Ross Stores. Schwab, Federated Investors

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Bought: UPS

Positions: Home Depot, State Street, XTO Energy,

UPS

News on Stocks in Our Portfolios

A positive note on ExxonMobil (Dividend Growth Portfolio):

http://seekingalpha.com/article/80019-exxon-mobil-worlds-safest-investment

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