March 2008 

"All I ask is the chance to prove that money can’t make me happy.” 

Spike Milligan

The Professional Opinion

S&P 500 Index: 1330.63

Bob's model remains in positive territory as spring approaches.  The last two months has seen a classical stock market bottoming process take place.  What usually happens is one sees an initial closing low,  a short term rally and then further testing of the closing low.  Trading volume remains relatively light.  Selling pressure is light since the January closing low  and as far as Bob is concerned, the market is a buy on any weakness that occurs in the low 1300's

The prospect of seeing a brief, mild recession is entirely possible with little or no growth expected in the first quarter of the year.  The second quarter may be helped somewhat with tax rebate checks and a further reduction of interest rates.  The operative words here are 'brief' and  'mild'

Bob believes economic recovery will begin in the second half of 2008 pick up through 2009, which suits my plans anyway.

Inflation Risk

Inflation pressures are expected to be kept under control in 2008, even though energy prices have risen almost 20%.  Consumer spending will be kept in check by high oil prices.  This acts as a defacto tax on the consumer, which further restrains inflation.  

Interest Rate Risk

It looks like another interest rate cut of .5 - .75 basis points is baked in the cake at the March 18 meeting of the FOMC.  It generally takes 6 - 8 months for rate cuts to work their way through the economy so the outlook is for improvement in the second half of the year. Bob  says seeing interest rates of 2.5 percent or lower by the end of April is not out of the realm of possibility.

Valuation Risk

The stock market at these levels is considered undervalued, given  a PE ratio of 15.3.  Low interest rates and low core inflation  has the potential for seeing the S&P 500 index trading into the 1600's  in 2009.

The 60 day put/call ration is still very high with a reading of 1.07.  This contrary indicator measures investor sentiment.  This and other gages suggest any further weakening of the economy will be brief and mild.


No changes to portfolios.  


Buy on weakness in the low 1300's. Otherwise, dollar cost average any new money.

Winters here are awesome!
Back in the Yukon........................again.  

I decided to take take a brief time-out and work a few ideas floating around upstairs into a coherent analysis of the transportation issues found in the great white north.  

Investing in transport companies who work in the Yukon to me, is a risky proposition.  

I believe I have nailed the root cause affecting this costly experiment in mechanized transport.

No one likes a whiner so I humbly propose my own solution.

Personal Portfolio
The Funds The portfolio was looking quite nice until that last correction on the last day of the month. It was down only 5%. For the second month in a row, direct stock ownership helped the bottom line.  

Only one fund went positive and that was PSPFX.  No surprise there, considering what commodity prices have been doing.

My two favorite telecom funds got hammered.  This is an example of why you don't want to go much over 5% in a sector fund.  What goes up can also go down.

Fairholme did a pretty good job of hanging in there and since I had a relatively small position in the fund, I sold it and decided to do a little bottom fishing.

The GE DRIP plan is at a point where it is about in line with the 4-5% guideline.I don't think I will need to fund that for a while so the Masco DRIP plan will get the bulk of the attention.

By the way, it is a great time to get into a couple DRIP plans if you are so inclined, stock prices being what they are.  GE is about like owning a well diversified mutual fund and other than the $1.00 (yes, $1.00) cost per transaction, there are no other fees. No 12B-1 fees, no loads and no sales charges.

You get more bank for your buck with Masco though, if you are looking at the cost of every dollar's worth of dividends.

And.....don't forget that dividends are currently only being taxed at 15%.  That might not last much longer though, considering the way the race to the White House is shaping up.

Who is most likely to end up affecting your ability to save and invest?

This is kind of scary:

A nice-sounding bill called the "Global Poverty Act," sponsored by Democratic presidential candidate and Senator Barack Obama, is up for a Senate vote on Thursday and could result in the imposition of a global tax on the United States. The bill, which has the support of many liberal religious groups, makes levels of U.S. foreign aid spending subservient to the dictates of the United Nations.  

........The legislation would commit the U.S. to spending 0.7 percent of gross national product on foreign aid, which amounts to a phenomenal 13-year total of $845 billion over and above what the U.S. already spends.  

The legislation itself requires the President "to develop and implement a comprehensive strategy to further the United States foreign policy objective of promoting the reduction of global poverty, the elimination of extreme global poverty, and the achievement of the Millennium Development Goal of reducing by one-half the proportion of people worldwide, between 1990 and 2015, who live on less than $1 per day."

The bill defines the term "Millennium Development Goals" as the goals set out in the United Nations Millennium Declaration, General Assembly Resolution 55/2 (2000). 

The U.N. says that "The commitment to provide 0.7% of gross national product (GNP) as official development assistance was first made 35 years ago in a General Assembly resolution, but it has been reaffirmed repeatedly over the years, including at the 2002 global Financing for Development conference in Monterrey, Mexico. However, in 2004, total aid from the industrialized countries totaled just $78.6 billion-or about 0.25% of their collective GNP." 

In addition to seeking to eradicate poverty, that declaration commits nations to banning "small arms and light weapons" and ratifying a series of treaties, including the International Criminal Court Treaty, the Kyoto Protocol (global warming treaty), the Convention on Biological Diversity, the Convention on the Elimination of All Forms of Discrimination Against Women, and the Convention on the Rights of the Child.

The Millennium Declaration also affirms the U.N. as "the indispensable common house of the entire human family, through which we will seek to realize our universal aspirations for peace, cooperation and development." 

To be fair I suppose I should mention Mrs. William Jefferson Clinton and her plan to save the housing market by freezing interest rates for five years.  If her grasp of foreign affairs is as profound as her understanding of the world of finance and she gets elected.........

And of course there is John McCain,  who the libs thought would make a fine democrat vice presidential candidate four years ago.
I mean, if that's what you want - why vote for a pretender when you can get the real thing in spades.

In the end we always seem to get the president we deserve.  I wonder who we deserve this time.

How about that Wireless Ronin?  (RNIN)


Up about 36% since the beginning of the year.  Walked away with a few awards too:


This was rapidly closing in on 10% of the portfolio so I sold off about half and diversified out into SIMG,  ABK and BGS.
Wait  a minute, did I say ABK?  


Yes,  I said ABK - but only a small amount.  I have no faith in the company but I expect it could pop quite nicely on any well substantial  rumor, true or otherwise,

It could pop in the other direction if their financing plans fall through.  Stop Losses are in on this one.

I found a report issued by Pershing Square Capital Management,  which is quite thorough in explaining the whole sub-prime, bond insurer mess and why speculating on stocks like ABK is a bad idea .  

It is informative, a lengthy read and I actually understood most of it.  Worth the time if you are so inclined.  About 500k and 140 pages.  

The Dreaded 'R' Word:

The following came from a magazine I occasionally get, whose focus is on people buying commodities for their businesses.
It pretty much jives with what Bob has been saying and is always nice to get another perspective:


That's all, Folks!