OK, I lied.
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    Weekly mortgage applications (secondary indicator) rose 11%.
    http://mjperry.blogspot.com/2009/04/mortgage-applications-increase-by-676.html

    February wholesale inventories dropped 1.5% versus estimates of a .8% decline; that as wholesale sales rose .6% bringing the wholesale sales to inventory down for the first time in months.

    Weekly jobless claims fell 20,000 versus forecasts of a 4,000 decline.
    http://www.calculatedriskblog.com/2009/04/unemployment-insurance-continued-claims.html

   Other

    More analysis of Geithner’s P-PIP plan:
    http://www.city-journal.org/2009/eon0407ng.html

    More analysis of the latest G20 meeting:
    http://www.american.com/archive/2009/april-2009/can-the-imf-really-save-the-world-economy

    The free trade pact with Columbia.  Not dead yet?  We should be so lucky.
    http://www.ibdeditorial.com/IBDArticles.aspx?id=323651516799281

    This is a great analysis of our current economic environment and what will and won’t work to correct it (must read):
    http://www.thefreemanonline.org/uncategorized/a-microeconomists-protest/

Politics

  Domestic

Another gem of an appointment:
http://michellemalkin.com/2009/04/08/transparency-killer-at-hud-another-disastrous-obama-nominee/

  International War Against Radical Islam

The Market
    
    Technical

    Stocks rallied yesterday and the Averages (DJIA 7837, S&P 825) closed up but still below the late March resistance level highs (DJIA 7949, S&P 834).  I said in yesterday’s Morning Call that if stocks were not able to recover above the 7949, 834 level, I would likely become a seller. 

    Well, I lied.  I am back to being impressed with the strength demonstrated by stocks in the face of bad news yesterday.  Specifically, (1) a number of companies were out talking their earnings down and (2) the Fed released the minutes of its last FOMC meeting in which it lowered its expectations for an economic recovery.
http://www.calculatedriskblog.com/2009/04/march-fomc-minutes-outlook-revised-down.html

    The other thing that got my attention was the volatility index which traded below 40 for the first time in a long while.  That suggests less fear and an upward bias to the Market.
    http://bespokeinvest.typepad.com/bespoke/2009/04/vix-breaks-below-40.html

    If all that confuses you, join the crowd.  I am clearly teetering on the brink of uncertainty.  The reason is that it looks to me like buyers and sellers are struggling for control of the tape.  Yes, the indices are below the 7949, 834 level; but not by much.  This is one of those times that I just don’t feel comfortable making a bet based on a single price level.  So rather than risk selling then getting whipsawed and incurring a unnecessary trading costs, I am going to incur the risk of being slightly later to a move than I might otherwise have been and do nothing.  I think it 50/50 whether stock prices break higher or lower.

    The same goes for gold.  It closed down slightly on the day--the ETF price a bit below its former support level.  The bottom line being the same as above--I don’t have enough conviction to act, so I am still not a seller and will risk being a day late. 

   Fundamental

    Jeremy Siegal wrote an article advocating weighting S&P earnings by the market value of the reporting companies (I linked to it in this commentary).  It caused quite a stir and was roundly criticized.  Here is his rebuttal:
    http://finance.yahoo.com/expert/article/futureinvest/153794

*********************************************

There were a couple of other items in the news yesterday.  They were positive to me, but could easily be interpreted as a negative by others:

(1)    the SEC decision to put out for discussion five potential changes to the short selling ‘up tick’ rule: while some might argue that this is a positive, I thought it a typical bureaucratic CYA maneuver in which the agency Angel avoided the assumption of any leadership on the issue and Beer didn’t even address the real problem that was at the heart of the real short selling abuses in this latest Market downturn--naked short selling in which a short seller sells stock short that he/she hasn’t borrowed

(2)    Geithner now wants to give TARP money to insurance companies [an unnecessary negative] while his TALF program has fallen flat on its face and banks are scrambling to give back as much TARP money as possible [a clear victory for free Market capitalism],

The only clear positive is that it appears that credit default swaps [CDS] are going to be standardized which will increase transparency and make pricing them much easier.
   
       A Look at Financial Strength

    These are stocks owned in the Aggressive Growth Portfolio

                                       Debt/                    # Yr EPS Down    Net        Value Line
    Company                    Equity         ROE      Since 1998      Margin       Rating

    Blackrock Inc                  7%            9%             1                 33%          A
    Franklin Resources           2              22               4               28              A   
    Mastercard Inc                 5               30              0*                23             A
    Pepsico Inc                    29              32               0                 23             A++ 
    Sysco Corp                    36               32              1                   3             A++
   
    *MA went public in 2004

     








Posted 04-09-2009 8:17 AM by Steve Cook