10/15/08

Economics

Recent Data

The International Council of Shopping Centers reported sales of major retailers up .7% versus the prior week and up 1.0% on a year over year basis; Redbook Research reported month to date retail chain store sales up .5% versus the comparable period in 2007.

In addition, September retail sales were weak:

http://calculatedrisk.blogspot.com/2008/10/retail-sales-decline-sharply-in.html

Other

Bernanke, in his own words:

http://online.wsj.com/article/SB122394360912831019.html

Chart porn on the magnitude of expanded Fed credit facilities:

http://bigpicture.typepad.com/comments/2008/10/total-fomc-lend.html

Thoughts on the economic outlook and what that means for investment strategy:

http://www.capitalspectator.com/archives/2008/10/mr_market_econo.html

Comments by San Francisco Fed President Janet Yellen on the economy:

http://calculatedrisk.blogspot.com/2008/10/feds-yellen-us-economy-appears-to-be-in.html

How about some good news—commercial loans continue to rise:

http://mjperry.blogspot.com/2008/10/total-commercial-bank-loans-reach-new.html

Politics

Domestic

International War Against Radical Islam

The Market

Technical/ Fundamental

A great read on making mistakes (as an investor):

http://traderfeed.blogspot.com/2008/10/thoughts-about-breaking-trading-slumps.html

A not very optimistic look at dividends:

http://econompicdata.blogspot.com/2008/10/evaluating-shares-as-dividend.html

More chart porn on credit spreads:

http://econompicdata.blogspot.com/2008/10/all-is-still-not-well-in-credit-land.html

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Yesterday the Averages (DJIA 9310, S&P 998) made an assault on their respective 2004 support levels (DJIA 9707, S&P 1062--which now act as resistance) and backed off. Despite the fact that the DJIA was down 300 points at one point, it ended the day off modestly, I am taking that as a sign that the worst of this selling is over and further that last Friday’s intra day stock price lows will prove to have been the bottom (DJIA 7853, S&P 839). However, that doesn’t mean that there weren’t some negative aspects to yesterday’s trading. For one, the volatility index just isn’t backing off which suggests more days of triple digit price swings and lower prices. In addition, volume was again anemic meaning that buyers are being very cautious. Finally, in what was basically only a mildly negative day on the surface, a number of stocks got pummeled which suggests that not all of the forced selling is complete.

Whether yesterday’s pin action was simply a momentary digestive process after a big quick up move or reflective that the above mentioned 2004 price levels are as high a valuation as investors collectively are currently willing to pay, we will know soon. (If the latter, clearly our Portfolios shouldn’t have spent the 3% cash it did yesterday.) Either way, what we want now is for stocks to more clearly define (what I am hypothesizing is) a new trading range. Within this new range, our Portfolios will build cash to 25% when stocks advance and spend cash down to 15% when their prices decline. Right now for the first time in a week or so, our Portfolios do nothing. (I recognize that if stocks were to advance from here and are sold, our cash position will rise above 25%. I can live with that problem till we have a better feel for how this Market is going to trade.)

Subscriber Alert

The stock prices of Becton Dickinson (BDX-$74) and Sigma Aldrich (SIAL-$46) have risen above the upper boundary of their respective Buy Value Ranges. Accordingly, they are being Removed form the Aggressive Growth Buy List. The Aggressive Growth Portfolio will continue to Hold these stocks.

Aggressive Growth Buy List

Company Close 10/14 Buy Value Range

Balchem Corp $24.62 $23-26

Harley Davidson 28.73 29-33

Mastercard 174.07 162-186

Peabody Energy 30.55 32-39

Qualcomm 40.32 35-41

Reliance Steel 26.81 28-32

Styrker 59.91 56-64

TJX Corp 27.12 25-29

News on Stocks in Our Portfolios

A neutral write up on Johnson & Johnson (Dividend Growth Portfolio):

http://www.thestreet.com/p/_htmlrmm/rmoney/pharmaceuticals/10442312.html

Positive comments on Coca Cola (Dividend Growth Portfolio):

http://www.thestreet.com/p/_htmlrmm/rmoney/retail/10442287.html

And KO reported third quarter earnings per share at $.81 versus expectations of $.77 and $.71 reported in the comparable 2007 quarter.

More Cash in Investors’ Hands