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Stock Picks for September 12, 2007
  1. The rally today did not tell us anything about out our stock picks.  Simple.  A big rally on low volume, no indication of anything.  Market waiting on fed.  One theory is that big investors sit on sidelines at times like this waiting to see what monetary policy will be, lowering volume.  That being said...
  2. Lot's of good news today though.  OPEC raised production by 500,000 barrels, unexpected trade deficit fall, and the market is expecting a rate cut.  In fact, we see broker CDs priced out past 1 year definitely pricing a rate cut.  We wonder if Bernanke will bend to the will of the market or do what he thinks is right for the economy indepedent of what we think.  This is a real big defining moment for the fed leading up to this meeting.
  3. The FTC cracked down and issued warnings to about 200 mortgage companies about their advertising.  We need to see a lot more of this, and some of these companies need to be held accountable to misleading practices.  Now, people who did not read their contracts are also responsible, but misleading advertising is not right either.
  4. Apple is rumored to be considerng a movie rental service via their iTunes service.  $2.99 for 30 days.  Wow.  This could be huge, and why Apple is long term in our portfolio.  Would boost sales of the Apple TV device also.  If their movie selection is good, I will buy an Apple TV device.
  5. For those new to our service, a reminder of one of our FAQs.  If a position is currently cycling below the original entry price, this is a good place to enter a buy.  For those already in the position, wait for when we say to average down.  Do not do this on your own.  Here is why;  you may buy too high, and then run out of $$$ to get the lowest possible price.  Of course, if you feel comfortable on how to do this then by all means do it, you will get even higher returns than us.
  6. Well, we have some great picks coming post fed meeting, so stand by!  We may actually release one this week at a deep discounted entry price just in case we get another drop below 13000.  Stand by.
 
for September 11, 2007
  1. San Francisco and Atlanta fed presidents talked about how the fed lowering interest rates is not a layup for the September 18 meeting.  If they do not lower, we will probably see testing of the 12500 lows.
  2. We are still sitting on what we think are some great deals in stock picks, but we are real careful right now as we navigiate a continual housing implosion.
  3. A reminder;  2 million more ARM loans reset over the next 4 months.  Depending on the job market, this could cause more deliquencies and then more foreclosures over the next 6 to 9 months.
  4. Wachovia and Wamu continue to raise more estimates for housing loan releated losses.
  5. and with all of that, Oil closed at $77.49 its second highest close ever.  Remember high energy costs can significantly impact earnings for many sectors.
  6. A british investor bought 7% of BSC.  This shows you how the smart money thinks of the long term.  You will see more and more of this as the months trail on as those who understand when to buy, just get richer as those don't who panic.  We will be picking up some bargains over the next 12 months!
  7. Europe and Japan economies are slowing and producer prices in China are rising;  all of this is just more evidence that we are in a recession, globally.
  8. Nice upgrades on MYL.  UBS and Credit Suisse see it our way.  We will see great things from this stock eventually!  4% bump is a good start.
 
for September 10, 2007
  1. The evidence is still mounting that the broader economy is being hurt by all the housing areas that are dysfunctional.  The job report Friday showed the first drop in nearly 4 years.  This is extremely significant.
  2. Looks like the sale of SCHN may have been timed well.  We will have to wait and see.
  3. We still think the markets could be in for a lot more weakness.  A ton of money flowed into bonds last week, that is for sure.
  4. We promised a good bond fund for the large amount of cash our portfolio is noting.  If you are looking for a place to stash your cash while we ride out this storm, we like Vanguard Long-Term Investment-Grade (VWESX) Bond Mutual fund.  Low fees and no redemption fee.  It yields close to 6% dividend yield.  Nice.  More than CDs and close to 90% of the bonds are A, AA, and AAA.
  5. There are some really good deals out there on some stocks an there are certainly some cycling back to where we would buy in.  So, watch closely there may be another buy this week.  Once again, not rushing it.  We can't, not in these markets.
  6. Countrywide is cutting 20% of their workforce.  This is HUGE.  12,000 jobs.  If this continues to spread, no dount we are in a recession like we are saying.
  7. A slew of economic indicators (ECRI, IMF, etc) are all showing slowing growth.  Now, while we are still seeing growth, it is starting to slow.  We think it goes negative as the housing crisis is just starting.  However, if the ARM resets that will happen until the end of this year do not put significant more pressure we could pull out of this.  However, we do not think that will happen.
 
for September 7, 2007
  1. SCHN opened higher than our limit order, so our order filled higher!  A very nice 22% gain in 17 days.  In these markets, I'll take it.
  2. Of course the news continues on the record foreclosures.  Check out this article:  http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20070906
  3. The next wave to have potential impact is when Adjustable Rate Mortgages reset, an additional 2 million this year.  Prime, Alt-A, and subprime.  Some loans will double and triple according to an AP article this morning.  Whew!
  4. The MBA thinks that we have 4 more quarters of this causing problems.  We agree at least that.  We also think this is going to continue to spread tentacles all throughout the economy.  We continue to prepare the portfolio for the 'winter' and will work to pick up good positions slowly, with gains like SCHN as we see definite winners.
  5. Last note on LEH, our only loss, ever.  We continue to monitor the position and have determined that our sale was certainly timely.  Indications are that Lehman's earnings are going to get slammed, and the stock is in for a long road back.  Except for one rally in financials, it has never gone back above our sale price, and more weakness is ahead we think.  Staying out of retail and financials is in our strategy until further notice.
  6. Remember, if fed lowers interest rates, long term bonds (maybe bond funds or ETFs) are a good place to stash this large cash position until the bulls come back for more stock picks.  Be careful to not buy front or back end load funds or funds with Redemption penalties.  You want to be able to sell it when you want too.  We will do some research and recommend one Sunday to get a better return for some of the 12 slots that are in cash.
  7. Apple.  Geesh, we have to say we do not know what Jobs has up his sleeve here.  We still love the company and are sticking with it though.  Lowering the iPhone price and releasing this iPod touch was traumatic (just the iPhone price decrease) for the stock.  Then they come out the next day and offered a $100 store credit to iPhone buyers.  Was this planned from the beginning?  Yeh!  Think about it, $100 store credit so iPhone people go and spend more money, possibly on an iPod touch.  Brilliant! Whew, we do not even have any idea on what the financials of the iPhone look like at this point.  No matter, Apple has shown they can blow away results without the iPhone and now they have this new iPod and revenue pull from a store credit.   What a genius Jobs is.  Really.  In addition, the iPhone is going on sale in Europe.  This could be the price strategy; the Europeans were just not going to pay that much for a phone.  Smart Jobs!  We are confident to stick with this one!
 
for September 6, 2007
  1. Time to sell SCHN.  In these markets a 21% gain in a few weeks cannot be overlooked.  While there is possibly more upside, the gain is nice.  We will look to get back in on a pullback.
  2. Homes sales plunged, I mean big time.  As we have been saying, this is just the start of a longer cycle.
  3. Combine that with the fact that the fed is sending mixed signals now.  The latest biege book information can be interpreted as no rate cuts.
  4. Money is flooding into longer term treasuries and bonds.  This is not a good sign, and an even better reason why we are keeping so many open slots in our portfolio.
  5. In the meantime, we will stick to our longer term holds and some quick gains where possible.  As soon as the bears go back into hibernation we will stock up the portfolio.
  6. Bit of advice, if you are following our newsletter portfolio exactly, you are sitting on more cash than equities.  Make sure your broker is paying you a decent rate on that cash;  at least 4 %, should be 4.5% though.
  7. We shifted our screener over to 100% bear market parameters now and are looking at some great value stocks paying great dividends.  Historically, the best place to be in these markets.  We may release some of these picks as we get a bit more pullback.
  8. Until then, ride it out with us.  A 21% gain or two every few weeks and we will handily outperform the S&P 500, and a lot of the mutual funds through this period.
  9. A message to all those just joining us.  We are not a day trading or even a trading type place.  The stocks in our newsletter are meant for investing long term.  Our approach enters and exits to lock in profits and return higher gains.  You can read more in our FAQs.  That being said, you may have to wait a bit to get a new pick.  If one of our long term positions is cycling back below its original entry price you can pick some up at an even better price than the original newsletter price.
 
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