The Disciplined Dividend Investor

Wednesday, June 18, 2008

6/18/08

Economics

A look at housing starts (reported yesterday):

http://bigpicture.typepad.com/comments/2008/06/housing-starts.html

An interesting take on the likelihood of a Fed rate increase:

http://bespokeinvest.typepad.com/bespoke/2008/06/fed-headlines.html

The sad state of US energy policy:

http://www.foxnews.com/story/0,2933,368204,00.html

Politics

Domestic

Congress and school choice:

http://mjperry.blogspot.com/2008/06/member-of-110th-congress-are-3-4-times.html

International War Against Radical Islam

On the constitutional rights of jihadists and why they shouldn’t have them:

http://article.nationalreview.com/?q=NTFhZTdmZWZlMGExNDRjOWRlZWUxYzEwNjg0MWEzZDc=

The Market

Technical

The DJIA (12160) closed below the April 2008 support level (12263)--this for the third time in the last 10 days. I have already been wrong once in my assumption of stock price direction following an earlier penetration below 12263; but at the risk of doing so again, my opinion hasn’t changed from the first time that I was wrong--which is to say, it looks to me like, technically, there is a real chance that the DJIA will challenge its January 2008 low (11634).

Meanwhile the S&P has been the much stronger index, technically speaking; only breaking its August 2007 low. Indeed, it could easily trade down to its 1982 to present up trend line (which is very close to intersecting with its April 2008 low) while the DJIA was testing its January low.

Assuming that there is additional downside in stock prices, hopefully both Averages can hold the support levels mentioned above.. Of course, I could be wrong-- again (i.e. the Market could rebound) and it wouldn’t be the first time. The difference this time is that I am not going to commit cash reserves until we clearly have either a well defined trading range or up/down trend.

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The first half of this article addresses speculation in the oil pits:

http://www.thestreet.com/p/_htmlrmd/rmoney/commodities/10421794.html

A chart on consumer sentiment:

http://bigpicture.typepad.com/comments/2008/06/consumer-sentim.html

Fundamental

Subscriber Alert

Visit www. strategic-stock-investments.com to see what we are buying/selling today.

CNBC Million Dollar Portfolio Challenge

Portfolio 1 (85.5%): Sold: none

Bought: none

Positions: Automatic Data Products, Johnson Controls, Nucor,

Canon

Portfolio 2 (86.3%): Sold: Best Buy

Bought: Nokia

Positions: Franklin Resources, Graco, United Technologies,

Nokia

Portfolio 3 (90.9%): Sold: Ross Stores, Federated Investors

Bought: Smith Int’l, Mastercard

Positions: Nucor, Smith Int’l. ConocoPhillips, Mastercard

Portfolio 4 (80.8%): Sold: Wells Fargo

Bought: VF Corp

Positions: VF Corp, Dow Chemical, Peabody Energy, Walgreen

News on Stocks in Our Portfolios

Reliance Steel (Aggressive Growth Portfolio) is buying PNA Group for $1.1 billion. PNA processes and distributes carbon steel plate, bar, structural and flat rolled products.

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

Penn Virginia Resource Ptrs (High Yield Portfolio) is buying the gathering and transportation assets of Lone Star Gathering for $160 million.

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

A positive write up on Abbott Labs (Dividend Growth Portfolio):

http://www.zacks.com/rank/zcommentary/?id=7868

More Cash in Investors’ Hands

Tuesday, June 17, 2008

6/17/08

Economics

The talking heads are abuzz over Robert Novak’s article predicting that the Fed won’t raise interest rates. His forecasting history leaves something to be desired:

http://bigpicture.typepad.com/comments/2008/06/novak-is-no-exp.html

A new study on government spending and economic growth:

http://online.wsj.com/article/SB121357899416776129.html?mod=opinion_main_commentaries

Politics

Domestic

Analysis of Obama’s social security proposal (from liberal blogger Mickey Kaus).

http://www.slate.com/id/2193674/#bigdonut

International War Against Radical Islam

The Market

Technical

A history of stock market performance during options expiration week:

http://bespokeinvest.typepad.com/bespoke/2008/06/option-expirati.html

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Technically speaking, yesterday the Market didn’t give us much additional information about its direction. DJIA (12269) closed about 6 points above its April 2008 low (12263); the S&P remains within the 1982 to present up trend. Neither index attempted to attack the May 2008 to present down trend line we discussed in our last Closing Bell. So the question before us remains, is DJIA 12263 truly a support level and will the May 2008 to present downtrend lines once again offer resistance? At the moment, I think that there is no clearly defined trend/trading range around which to base our cash reserve management strategy, i.e. raising cash reserves at the top end of a trading range and spending it at the lower end. Hence, we do nothing.

Fundamental

The price of oil versus the price of oil stocks:

http://bespokeinvest.typepad.com/bespoke/2008/06/oil-outperformi.html

Expected earnings growth for the second quarter:

http://bespokeinvest.typepad.com/bespoke/2008/06/expected-second.html

And for the next four quarters:

http://bespokeinvest.typepad.com/bespoke/2008/06/expected-earnin.html

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Subscriber Alert

Visit www.strategic-stock-investments.com to see what we are buying/selling today.

Company Highlight

Dow Chemical manufactures basic chemicals and plastics as well as specialty chemical products. While its 10 year record of profit and dividend growth has been sub par, recent improvements its operations has resulted in 25%+ annual earnings growth over the last five years and a return of equity in the 15-20% range. This trend should continue as a consequence of:

(1) its increased penetration of faster growing geographic markets,

(2) its business strategy of growth through the formation of joint ventures which [a] provide additional capital for deployment into faster growing, less cyclical specialty chemicals, [b] reduce earnings volatility, [c] improves margins,

(3) its improved operating results allows DOW to continue to make additional acquisitions, form additional joint ventures, buy back shares {50 million shares have been repurchased since 2006} and debt repayments.

DOW is rated A by Value Line, carries a 28% debt to equity ratio and its stock yields over 4%.

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

CNBC Million Dollar Portfolio Challenge

Portfolio 1 (86.6%): Sold: 3M

Bought: Johnson Controls

Positions: Automatic Data Products, Johnson Controls, Nucor,

Canon

Portfolio 2 (88.3%): Sold: Nokia

Bought: United Technologies

Positions: Franklin Resources, Graco, United Technologies,

Best Buy

Portfolio 3 (91.9%): Sold: none

Bought: none

Positions: Nucor, Ross Stores. ConocoPhillips, Federated Investors

Portfolio 4 (81.8%): Sold: Blackrock, Donaldson

Bought: Wells Fargo, Dow Chemical

Positions: Wells Fargo, Dow Chemical, Peabody Energy, Walgreen

News on Stocks in Our Portfolios

More Cash in Investors’ Hands

Monday, June 16, 2008

6/16/08

Economics

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.) Earmarks make a come back:

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061204282.html

The price of oil, money supply and inflation:

http://mjperry.blogspot.com/2008/06/oil-shocks-are-not-necessarily.html

Comparing the inflation of 1970’s with today’s:

http://mjperry.blogspot.com/2008/06/why-today-is-different-from.html

The Fed and ‘Bubbles’:

http://www.nytimes.com/2008/06/15/business/15view.html?ex=1371182400&en=3651ad1dae5b77eb&ei=5124&partner=permalink&exprod=permalink

Some good news on prices:

http://mjperry.blogspot.com/2008/06/new-real-car-prices-fell-by-2500-from.html

Politics

Domestic

A comparison of the Obama and McCain tax plans: