Economics

   This Week’s Data

    December construction spending fell 1.4% versus estimates of a 1.0% decline.
    http://www.calculatedriskblog.com/2009/02/construction-spending-private.html

    The Institute for Supply Management reported its January manufacturing index at 35.6 versus forecasts of 32.0 and December’s reading of 32.4.
    http://bespokeinvest.typepad.com/bespoke/2009/02/ism-manufacturing-index-rises-for-first-time-since-june.html

    More on yesterday’s personal income and spending reports:
    http://econompicdata.blogspot.com/2009/02/personal-consumption-down-no-more.html

   Other

    The problem with hasty public investment:
    http://gregmankiw.blogspot.com/2009/02/problem-of-hasty-public-investment.html
   
    Alice Rivlin on stimulus:
    http://gregmankiw.blogspot.com/2009/02/rivlin-on-stimulus.html

Politics

  Domestic

Obama’s new social security proposals:
http://www.american.com/archive/2009/obama-vs-fdr

  International War Against Radical Islam

The Market
    
    Technical

    Yesterday, the indices (DJIA 7936, S&P 825) closed within the narrow trading range defined by DJIA 7853/9004, S&P 804/942.  Intraday the pin action had some volatility to it; indeed the DJIA traded very close to the 7853 level, and then rebounded.  Further, the groups that have been the leaders on downside over the last week spiked down with the DJIA and then bounced nicely on the close--very much like a reversal.  That was encouraging.
 
   Fundamental

    The number of companies beating their earnings estimates improved last week:
    http://bespokeinvest.typepad.com/bespoke/2009/02/earnings-season-beat-rate-jumps-to-55-from-45.html

    As you know, our strategy is driven by dividend growth.  Here is a great article on its virtues:
    http://seekingalpha.com/article/118100-dividends-the-secret-to-long-term-returns?source=front_page_long_ideas

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    I was also heartened by the news out of Washington.  As I interpret it, progress is being made both on the plan to deal with the remaining toxic assets as well as a refashioning of the stimulus plan. To be sure, it is long odds that we’ll get a perfect solution on either issue; but if the ‘bad’ bank plan is salvageable, the stimulus plan can be made more about stimulating and less about a liberal social/political agenda and the overall cost to the taxpayers reduced (significantly??), that would be a positive.

    As a result of the DJIA 400-500 point decline in the last week, the intraday performance of the DJIA yesterday (trading down the support and then rebounding) and the more promising news out of Washington, our Portfolios are going to commit a little more cash at the Market open this morning--‘a little more’ being the operative words.  Cash will be taken from 17% to 16.5%.

    This may be somewhat surprising after my weekend rant against the stimulus plan; but not so.  Remember at the November lows, Obama had just been elected and most conservative observers thought that He would reign as pinko commie.  So a liberal administration’s spending/tax agenda should be in the price of stocks.  Second, assuming the stimulus plan is reacted exactly as the House passed it, the impact on investment strategy would have less to do with cash and more to do with the composition of what we owned (more commodity, energy and hi tech).