November 06 Market Timing Update

The completion of the mid-year correction is over.  Those in the bearish camp must be pretty unhappy
at this juncture because as usual the news media hopped all over the negative bandwagon.

So,  what  are the key factors of a Bear Market?   Do we really need to sweat the load?

Tight Money: 

    Tight Money isn't there.
    The fed is expected to further ease interest rates at the beginning of the  2007.
    The monetary base needs to be expanded.
     My Guru would like to see the Fed become more proactive to stimulate economic growth, which is lagging.

Rising Rates:

    Short term rates should reduce in the first half of next year.
    Inflation expectations are expected to remain low.
    Rising energy prices have reduced consumer discretionary spending, keeping the inflation lid on.

Rapid Growth:

     Not there either.
    Third Quarter real GDP in an advance report has slowed to an annual rate of 1.6%.
     My Guru expects real GDP growth to average between 1.5 - 2.5 % in 2007.

Over Valuation:

  The market is reasonably valued base on the critical variables of inflation and interest rates.
  The S&P 500 index has a PE of  15.7 or so and in 2007 is expected to trade in a range of 16 to 16.5%

Bear Market Summary:

    No Bear Market in the near future. Remain fully invested.

Market Timing Portfolio Changes:

   No Portfolio Changes

Personal Portfolio Changes:

   Bought a little stock:

   OC - Owens Corning
   USG - US Gypsum
   DHI - DR Horton

   Sold what was left of the Muhlenkamp fund and am buying the Hodges Fund (HPMAX)