August, 2009 Market Timing Update

money

August 2009

"Ever wonder about those people who spend $2 apiece on those little bottles of Evian water? Try spelling Evian backward."

~ George Carlin

The Professional Opinion

S&P 500 Index: 987.48

LEI - Leading Economic Index

The month of June makes for three out of three months where the LEI has improved. In Bob's view this is signaling a turnaround in the
second two quarters. He likes this particular index.

Industrial production declined by .4% in June, which was less than the 1.2% drop in May. It is also the smallest decline in eight months.

The Paradox of Thrift

The paradox of thrift says that people save money when times are bad and in doing so, prolong economic recovery because they are not
consuming. Less consuming means less manufacturing and fewer jobs.

Americans are saving for the first time in years. Consumer debt actually declined .7%, which is the first decline in the 57 years that this statistic has been tracked. There are numerous examples where consumers are going on the cheap to save money. Campbells Soup
has cited reduced demand for vegetable juices because consumers are drinking more tap water.

Oil

Oil remains a wild card because we have done nothing to get out from under the thumb of OPEC.

(Our energy policy consists of teleprompters tilting at windmills)

Inflation

None in sight

Housing

Single family homes and condo resale climbed in June to 3.6%, which is the best monthly figure since last October. These resale
figures have risen for three straight months.

New home sales rose 11% in June, making that the third month in a row of increasing sales.

(As an aside, I notice DR Horton (DHI) is actually advertising on TV - decided to pick up some shares).

Summary

The cyclical bull market which Bob believes we are in remains intact. Buy on the dips. Buying an oil stock or two on price declines is a good way to hedge against higher energy prices going forward. Bob prefers oil companies located in North America and producing oil in North America. A good place to start looking is in the province of Alberta, CA.

Dusk over the Sierras

Personal Portfolio

Not a bad month! I beat Bob's portfolio by about 8% and gained considerable ground overall.

This was in large part because BofA and Masco turned around nicely. Even GE actually recovered a bit. I replaced PDPPX with MSSMX and HWCIX. Turned out to be a good choice.

Well it looks like a government health care plan in its current state is facing serious opposition in congress and in the senate. Cap and Trade looks like it is in trouble too.

The market is forward looking and I hope the Teleprompter in Chief remains distracted with other priorities, like learning to keep his mouth shut before all the facts are in - a certain police arrest incident comes to mind.

Financials and Commodities seem the place to be at present so the portfolio is skewed in that direction.

There has been a bit of encouragement in the housing market and I think it is worth looking in that direction as well - the Home Builders and Materials Suppliers.
YTD

Personal Portfolio

The plan it seems, is going as planned with a few minor tweaks along the way. I was not happy with the way UNH was performing so I switched that for Electronic Arts (ERTS).....a lot of ERTS. I've always liked the stock but did not like the price and I think it is now attractive for purchase.

The portfolio is up 60% from its all time low set this year and is up 30% year to date. Picking really cheap, quality stocks mixed in with some cheap, more speculative ones has worked quite well. Let's hope socialized health care and Cap and Trade get flushed down the toilet permanently.

A Big Miss

Sprint is still losing subscribers but their 'Boost' subscriber base is growing and it looks like they are buying Virgin Mobile.
Since I bought this stock at 2 and change, I think it is worth hanging on to. I lightened up on this one a while back so I'm good with that.

A Big Drop

USEC

USEC has been a favorite trading stock of mine and fortunately I was in cash when the news hit that the DOE denied their loan application. There have been some talks about some chicanery going on with this. I don't know about that, but I am staying away from this one for a while because Teleprompters don't like nuclear energy. I think it's that simple.

A Big Increase

Masco raised their guidance for the coming year and that's all the market needed to hear. I am heavily invested in this one and even at these prices I would be a net buyer.

Deja Vu All Over Again

I've owned DHI before and it looks to me like this one might be worth getting back into so I did. Patience is going to be a requirement and while I am waiting, the stock still pays a dividend. Some encouraging news came out:

News

One note about the homes DHI are building - they are all spec homes.

Broker Advised or Financial Adviser Advised - there is a difference.

How many times have you heard about what brokers advised and how that didn't work out so well. Brokers are supposed to be financial advisers aren't they?

That is not necessarily the case.

Suitability Standards vs. Fiduciary Standards vs. You

Brokers as a general rule are not financial advisers and are held to a 'Suitability' standard when providing financial advice. Is the product you are interested in or what he is pitching suitable for your needs. There is considerable latitude here and it is what makes selling product worthwhile for the broker. Don't go asking brokers for financial advice and expect them to always have your best interests at heart.

Registered Financial Advisers are held to a 'Fiduciary Standard' - They accept a much larger degree of financial responsibility when recommending investment options and it is much easier to go after a Financial Adviser who has caused you financial damage through bad investment choices.

If you want to buy your own stocks, use a broker.

If you are seeking financial advice, use a registered financial adviser.

There is some legislation out there in the latest wave of securities reform that seeks to tighten up broker responsibilities to their clients, which it think is a good thing, and one of the few good things to come out of the current administration. Link

Looking North from Stillwater Wildlife Refuge, southeast of Fallon, NV