Saturday, April 30, 2016

The Closing Bell

The Closing Bell


Statistical Summary

   Current Economic Forecast
            2015 estimates

Real Growth in Gross Domestic Product (revised)      -1.0-+2.0%
                        Inflation (revised)                                                          1.0-2.0%
                        Corporate Profits (revised)                                            -7-+5%

2016 estimates

Real Growth in Gross Domestic Product                     -1.25-+0.5%
                        Inflation (revised)                                                          0.5-1.5%
                        Corporate Profits (revised)                                            -15-0%

   Current Market Forecast
            Dow Jones Industrial Average

                                    Current Trend (revised):  
                                    Short Term Uptrend                                 17692-18646
Intermediate Term Trading Range           15842-18295
Long Term Uptrend                                  5541-19413
                        2015    Year End Fair Value                                   12200-12400

                        2016     Year End Fair Value                                   12600-12800

            Standard & Poor’s 500

                                    Current Trend (revised):
                                    Short Term Uptrend  (?)                              2106-2208
                                    Intermediate Trading Range                        1867-2134
                                    Long Term Uptrend                                     830-2218
                        2015   Year End Fair Value                                      1515-1535
2016 Year End Fair Value                                      1560-1580          

Percentage Cash in Our Portfolios

Dividend Growth Portfolio                          53%
            High Yield Portfolio                                     54%
            Aggressive Growth Portfolio                        53%

The economy provides no upward bias to equity valuations.   The stats this week were again weighted to the negative:  above estimates: month to date retail chain store sales, weekly jobless claims, March personal income, the April Richmond Fed manufacturing index, the March trade deficit; below estimates: weekly mortgage and purchase applications, March new home sales, April consumer confidence and consumer sentiment, March personal spending, March durable goods orders, the April Chicago PMI, the April Dallas Fed manufacturing index and first quarter GDP; in line with estimates: the February Case Shiller home price index.

The primary indicators were also negative: the March personal income (+), March new home sales (-), March personal spending (-) and March durable goods (-).  In the last 34 weeks, seven have been positive to upbeat, twenty six negative and one neutral. 

On the other hand, this week’s international economic stats, especially from Europe, were largely to the plus side--- something that hasn’t happened for months.  It is, of course, far too soon to assume that this is the first sign of a turnaround in the EU economy; but it could be.  We just have to wait for more data.

The Fed maintained its ‘when confused, dazzle them with your bulls**t’ routine following the latest FOMC meeting.  On the other hand, the Bank of Japan gave the world a real shocker by doing nothing at its meeting this week.  The reasoning is not entirely clear as yet; but it appears that the US gave them a stern warning (see below).  But whatever it was, the world is a better place because its inaction.

In summary, the US economic stats were negative while the international data was surprisingly upbeat.  Meanwhile, I am hoping that the BOJ’s inertia is the first sign of the end of egregious central bank overreach.

Our forecast:

a recession or a zero economic growth rate, caused by too much government spending, too much government debt to service, too much government regulation, a financial system with conflicting profit incentives and a business community hesitant to hire and invest because the aforementioned, the weakening in the global economic outlook, along with the historic inability of the Fed to properly time the reversal of a vastly over expansive monetary policy.

       The negatives:

(1)   a vulnerable global banking system.  This is a great interview with Jim Bianco on negative rates and global banking system:

US banks are certainly in stronger financial condition than in 2008.  That doesn’t mean that all is well in ‘too big to fail’ land.

(2)   fiscal/regulatory policy.  A follow up to last week’s Central States pension insolvency:  I noted that it was likely not an isolated incident.  Well, it didn’t take long for the second shoe to drop.  In this case, a UK retirement plan that is converting from a defined benefit to a defined contribution plan---in other words, a cut in benefits.  The ultimate consequence: lower consumer spending. 

The shockingly high cost of federal regulations (medium):

                         The future problem of rising debt levels (medium):

(3)   the potential negative impact of central bank money printing:  The key point here is that [a] the Fed has inflated bank reserves far beyond any comparable level in history and [b] while this hasn’t been an economic problem to date, {i} it still has to withdraw all those reserves from the system without creating any disruptions---a task that I regularly point out it has proven inept at in the past and {ii} it has created or is creating asset bubbles in the stock market as well as in the auto, student and mortgage loan markets.  

The Fed policy statement this week pretty much followed the expected script which was in a word---nondescript.  More mealy mouth blather, again confirming these guys (and gal) have tied themselves in a granny knot and have no clue what to do next.

On the other hand, the Bank of Japan surprised almost everyone by doing nothing.  Initially, I hoped that it might reflect the recognition that this whole aggressive central bank intervention policy has come to naught.  But the real reason is apparently a warning from the US Treasury to cease and desist any currency devaluation policies [this in the name of unfair trade practices].  Sounds familiar to the supposed warning from the Chinese at the last G20 meeting.  The attached article makes it sound like the whole G20 had a ‘come to Jesus’ agreement to stop such practices.  I have a hard time buying that.

But it doesn’t really matter what the cause was because the effect is all that counts---and that is that China, the US or both basically told the rest of the world to either stop any policies that could be viewed as aiding competitive devaluation or risk anti-trade steps from the US/China/both.  In other words, either halt any further steps toward more QE or negative interest rates---or suffer the consequences.  That threat may not stop further devaluations but it will likely reduce them. 

If I am reading this all correctly, this is a huge move.  It stops the trend to more QE/negative interest rates [and competitive devaluation] in its tracks and shifts the onus of government efforts to stimulate its economy back to fiscal policy---where it should have been all along.  More important, it means that securities markets have lost a major psychological bulwark---the further easing in monetary policy.

These developments also assume that the US/Chinese powers-that-be likely acted on the belief that the global slowdown is behind us.  Either that or it wasn’t the Japanese who figure out that all this QE bulls**t doesn’t work, it was the US/China.  Why else would they limit their own ability to utilize levers of monetary policy?

This doesn’t mean, of course, that the global slowdown is behind us nor does it mean that the process of unwinding asset mispricing and misallocation is about to begin; it just means the process QEInfinity is over.

To be clear, much of what I have said is just me speculating about motives and results; but it is not idle speculation.  Recent developments certainly make my conclusions reasonable. However, I could be wrong about the Treasury’s assumptions, motives and possible policy consequences. For the moment, I regard the above as a thesis that needs to be proven.

You know my bottom line: QE [except QE1] and negative interest rates have done nothing to improve any economy, anywhere, anytime.  What they have done is lead to asset mispricing and misallocation. Sooner or later, the price will be paid for that. The longer it takes and the greater the magnitude of QE, the more the pain. 

The end game from JP Morgan (medium):

(4)   geopolitical risks: about the only news this week was new US boots on the ground in Syria.  The good news is that there were only a few new boots.  The bad news is that it still more than there ought to be. 

Nonetheless, the risks from a step up of terrorists’ bombings, turmoil in the EU over immigration and assimilation policies and adventurist polices by Russia, Iran and North Korea all remain.  There is a decent chance of an explosive event stemming from one or more of the aforementioned, though I have no idea just how big it could be or which one is more likely to occur.

(5)   economic difficulties in Europe and around the globe.  The international economic stats released this week made a positive showing for the first time in a long time:

[a] the April German business climate index fell, but consumer confidence rose and unemployment declined,

[b] first quarter UK GDP growth slowed; however, Italian, French and EU first quarters were better than anticipated; first quarter EU inflation was below projections,

[c] March Chinese industrial profits were quite strong---if you believe it,

[d} Italian unemployment was below forecasts,

The relative consistency of the positive EU data is noteworthy.  As I indicated above, I don’t think that we assume that Europe has turned around and is heading out of the doldrums.  However, I don’t know how you could get a better first sign.  Clearly, this is something to which to pay close attention.  That said, if the numbers are signaling economic improvement, Draghi et al will soon be faced with the same dilemma as the Fed, to wit, the transition from easy to normalized monetary policy and with it all risks associated with tightening too fast [stymieing a nascent recovery] or too slow [inflation].
Bottom line:  a lot may be potentially changing.  To be sure, the US data in aggregate continues to point toward a recession.  However, the EU economy showed the first sign of life in months.  And the Bank of Japan inaction may indicate that peak QE and negative rates are behind us.  To be clear, neither of these possible changes to the economic landscape should be taken seriously at this point.  They are simply an alert that transformations could be afoot.  And remember, four weeks ago I thought that there was a possibility that the US economy could be turning and that came to naught.

Subject to more data, a deteriorating global economy and a counterproductive central bank monetary policy are the biggest economic risks to our forecast. 

This week’s data:

(1)                                  housing: weekly mortgage and purchase applications fell; March new home sales were terrible; the February Case Shiller home price index was in line,

(2)                                  consumer: month to date retail chain store sales were stronger than the prior week; both the April consumer confidence and consumer sentiment were below projections; jobless claims fell less than estimates,

(3)                                  industry: March durable goods orders were well below forecasts; the April Chicago PMI was below expectations; the April Dallas Fed manufacturing index came in below consensus, while the Richmond Fed’s index was better than anticipated,

(4)                                  macroeconomic: the March US trade deficit was lower than estimates; first quarter GDP was below projections;  March personal income was higher than forecasts while personal spending was below.

  The Market-Disciplined Investing

The indices (DJIA 17773, S&P 2065) had their first rough week in last six. Volume on Friday increased.  Breadth was weak.  The VIX continues to act as if it has made a bottom.

The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {17692-18646}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] below the lower boundary of its short term uptrend for the second day {2106-2208}; if it remains there through the close on Monday, it will reset to a trading range, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {830-2218}. 

The long Treasury performed a bit better this week.  But it is still in a congested range marked by a key Fibonacci level on the downside and the upper boundary of its intermediate term trading range on the upside.  As long as it remains in this area, it does not provide much informational value.

On Friday GLD (123) broke above its recent high and is a mere 1.25 points away from the upper boundary of its intermediate term trading range.  If that level is breached, 140 is the next resistance level,

Bottom line:  the bulls got their first taste of cognitive dissonance in over six weeks. If the S&P negates its short term uptrend, then this decline is apt to be more than just a pause that refreshes.  Still the Dow remains within its short term uptrend and the breadth while weakened is not flashing disaster.  I am changing nothing in my technical outlook at the moment.  But maintaining it could prove difficult next week.

Fundamental-A Dividend Growth Investment Strategy

The DJIA (17773) finished this week about 42.9% above Fair Value (12432) while the S&P (2065) closed 34.2% overvalued (1538).  Incorporated in that ‘Fair Value’ judgment is some sort of half assed attempt at getting fiscal policy under control, a botched Fed transition from easy to tight money, a historically low long term secular growth rate of the economy and a ‘muddle through’ scenario in Europe, Japan and China.

The US economic numbers were negative again this week which I believe lessens the probabilities of improvement.   On the other hand, the international economic releases were surprisingly upbeat.  However, one week of plus numbers is not enough to remove this factor as a headwind to our own recovery.

Oil prices continued to advance. While the stats currently don’t support the notion that supply/demand is coming into balance, still stocks have a way of anticipating change.  So if the fundamentals in energy are improving, then that would (1) at least begin to remove a negative [oil company bankruptcies] hanging over the banks and (2) serve as a positive for stock prices---if the current correlation between oil and equity prices continues to hold.  To be clear, I am not saying that energy fundamentals have improved; but like so many other changes that may potentially be occurring, this is a factor that must be watched.

In sum, our forecast of recession appears to be unfolding, though improving energy fundamentals and an EU economy could potentially be mitigating factors.  Nonetheless, most Street forecasts for the economy and corporate earnings are exceedingly optimistic; and stock valuations are priced for perfection.  Even if all these forecasts are met (1) there remains little upside in stock prices and (2) global central bankers are going to be faced with adjusting what has been a far too aggressive expansion of monetary policy and (3) markets will sooner or later be faced with the readjustment of asset pricing and misallocation.

And speaking of central banks, the Bank of Japan’s decision not to go further down the QE road may be the beginning of this process.  I am not saying that is occurring; I am saying that it could be and we need to be alert to that development.  Because, as I noted above, if central banks start reversing QE, they will be one step closer unwinding asset mispricing and misallocation; and that is not likely to be well received by the market.

I continue to believe that the cash generated by following our Price Discipline will be welcome as investors wake up to the Fed’s (and other central bank) malfeasance.  I suspect the results will not be pretty. 

Net, net, my two biggest concerns for the Markets are (1) declining profit and valuation estimates resulting from the economic effects of a slowing global economy and (2) the unwinding of the gross mispricing and misallocation of assets caused by the Fed’s wildly unsuccessful, experimental QE policy.

Bottom line: the assumptions in our Economic Model are unchanged.  If they are anywhere near correct, they will almost assuredly result in changes in Street models that will have to take their consensus Fair Value down for equities. 

The assumptions in our Valuation Model have not changed either; though at this moment, there appears to be more events (greater than expected decline in Chinese economic activity; turmoil in the emerging markets and commodities; miscalculations by one or more central banks that would upset markets; a potential escalation of violence in the Middle East and around the world) that could lower those assumptions than raise them.  That said, our Model’s current calculated Fair Values under the best assumptions are so far below current valuations that a simple process of mean reversion is all that is necessary to bring Market prices down significantly.

I can’t emphasize strongly enough that I believe that the key investment strategy today is to take advantage of any further bounce in stock prices to sell any stock that has been a disappointment or no longer fits your investment criteria and to trim the holding of any stock that has doubled or more in price. 

Bear in mind, this is not a recommendation to run for the hills.  Our Portfolios are still 55-60% invested; but their cash position is a function of individual stocks either hitting their Sell Half Prices or their underlying company failing to meet the requisite minimum financial criteria needed for inclusion in our Universe.

DJIA             S&P

Current 2016 Year End Fair Value*              12700             1570
Fair Value as of 4/30/16                                  12432            1538
Close this week                                               17775            2065

Over Valuation vs. 4/30 Close
              5% overvalued                                13053                1614
            10% overvalued                                13675               1691 
            15% overvalued                                14296               1768
            20% overvalued                                14918                1845   
            25% overvalued                                  15540              1922   
            30% overvalued                                  16161              1999
            35% overvalued                                  16783              2076
            40% overvalued                                  17404              2153
            45% overvalued                                  18026              2230

Under Valuation vs. 4/30 Close
            5% undervalued                             11810                    1458
10%undervalued                            11188                   1384   
15%undervalued                            105678                 1307

* Just a reminder that the Year End Fair Value number is based on the long term secular growth of the earning power of productive capacity of the US economy not the near term   cyclical influences.  The model is now accounting for somewhat below average secular growth for the next 3 to 5 years. 

The Portfolios and Buy Lists are up to date.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973.  His 47 years of investment experience includes institutional portfolio management at Scudder. Stevens and Clark and Bear Stearns, managing a risk arbitrage hedge fund and an investment banking boutique specializing in funding second stage private companies.  Through his involvement with Strategic Stock Investments, Steve hopes that his experience can help other investors build their wealth while avoiding tough lessons that he learned the hard way.

Friday, April 29, 2016

The Morning Call--Is the EU turning around?

The Morning Call


The Market

The indices (DJIA 17830, S&P 2075) see sawed back and forth during the day and then died in the last hour. Volume fell and breadth weakened.  The VIX jumped 11%, adding weight to the notion that it has made a double bottom.

The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {17651-18605}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] below the lower boundary of its short term uptrend {2099-2201}; if it remains there through the close next Monday, it will reset to a trading range, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {830-2218}. 

The long Treasury was up again on good volume again.  It has now bounced off of its 100 day moving and double bounced off of a key Fibonacci level with some authority.  However, it is still in a trading range dating back to early February.  So I am not sure that there is much information value until TLT breaks out of that range.

What the output gap means to bond prices (medium):

GLD was up 2%, finishing within in a short term uptrend, above its 100 day moving average and a key Fibonacci level and nearing its March high.  If it successfully challenges that high, the upper boundary of its intermediate term trading range becomes the next objective.

Bottom line:  the ‘do nothing’ BOJ meeting caused an early sell off, then stocks spent much of the day recovering---until Carl Icahn said (1) he sold his Apple stock and (2) a day of reckoning was coming in stocks.  That resulted in the late day sell off.  As I note above, the decline pushed the S&P through the lower boundary of its short term uptrend.  That is the first technical indication that the current rally could be over.  However, under our time and distance discipline, that trend break won’t be confirmed until next Monday.   Until that happens, I am holding on to my current assumptions: stocks are in heavily congested territory, so the upward progress will be more plodding but I expect them to challenge their all-time highs and fail.



            The US economic data couldn’t handle Wednesday’s good fortune returning to a more negative tone: first quarter GDP was below expectations (primary indicator), weekly jobless claims rose but less than anticipated and the April Kansas City Fed manufacturing index was down but not as much as in March.    

            International stats were the best in memory: March Chinese industrial profits rose 10%+, April EU consumer confidence was up slightly and April German unemployment fell.  Not to rain on the global data parade, but after a near continues chain of poor numbers over an extended period of time, one (now two) day is hardly a sign of any change in trend.  Still any turnaround starts with the first day’s improvement. So the door is open to the possibility of a shift; but that is it.

            ***overnight, Italian unemployment was below forecasts, while first quarter Italian, French and EU GDP were above, first quarter EU inflation was below estimates.

            The big economic news of the day was the surprise decision by the Bank of Japan to take no further steps to either increase security purchases or move deeper into negative rate territory.  I can think of a couple of reasons for this inaction: (1) the Chinese threat at the G20 meeting to stop the currency devaluations, (2) the realization that none of its QE/negative interest rate measures have worked, so why do more.   We all should be so lucky if it was the latter.  How thankful I would be if this is a sign that we might be seeing the beginning of the end of central bank overreach.  Of course, we don’t yet have a clear idea of the BOJ’s rationale.  Hopefully, that comes soon.

Bottom line: initially, the BOJ inaction looked like quite a blow to the QE forever crowd; but then stocks began a decent recovery almost immediately---which I have to say was confusing to me.  It maybe that the underlying price momentum of the Market is so strong that this bad news simply wasn’t enough to discourage the buyers.  Then the aforementioned Icahn statement disrupted the recovery in prices, making it more difficult to measure the full impact of the BOJ move in isolation.  I am sure we will know more soon.  

All this said, as a standalone (in)action, the fact that we don’t have more QE today than yesterday is a positive.

            My thought for the day:  Staying on the subject of Buy and Sell Disciplines: it is important to remember that no decision is irrevocable.  For instance, if you Buy a stock and it declines, hitting your Stop Loss Price, the concern is inevitably ‘what if I sell and the stock goes back up?’ (i.e. I am wrong twice)  So, what if does?  Remember that your portfolio doesn’t know what it doesn’t own---if you sell and the stock goes up, your portfolio doesn’t know and your performance won’t get docked for the subsequent rise.  In short, you should be agnostic to what happens after you sell because your portfolio sure is.  That said, even if that Stop proves to be wrong, you can always buy it back later.  If the upside hasn’t changed, whatever the opportunity cost (the difference between the Stop price and the price you Buy it back) is, it is likely to be negligible in the scheme of things.  On the other hand, if the stock continues down, you will have saved your portfolio the greatest sin---a big loss.

            More on profit margins (short):

            Earnings ‘beats’ and yesterday’s GDP number (medium):

            And even worse, is the SEC about to crack down on the free for all in non GAAP accounting? (medium and a must read):

       Investing for Survival
            The role of randomness in portfolio performance.

    News on Stocks in Our Portfolios
United Parcel Service (NYSE:UPS): Q1 EPS of $1.27 beats by $0.05.
Revenue of $14.42B (+3.1% Y/Y) misses by $150M.

MasterCard (NYSE:MA): Q1 EPS of $0.86 beats by $0.01.
Revenue of $2.45B (+9.9% Y/Y) beats by $70M.

Johnson & Johnson (NYSE:JNJ) declares $0.80/share quarterly dividend, 6.7% increase from prior dividend of $0.75.

AmeriGas Partners (NYSE:APU) declares $0.94/share quarterly dividend, 2.2% increase from prior dividend of $0.92.

Coca-Cola (NYSE:KO) declares $0.35/share quarterly dividend, in line with previous.

V.F. (NYSE:VFC): Q1 EPS of $0.61 beats by $0.03.
Revenue of $2.84B (flat Y/Y) beats by $10M

Praxair (NYSE:PX) declares $0.75/share quarterly dividend, in line with previous

Praxair (NYSE:PX): Q1 EPS of $1.28 beats by $0.01.
Revenue of $2.51B (-9.1% Y/Y) beats by $20M

Exxon Mobil (NYSE:XOM): Q1 EPS of $0.43 beats by $0.12.
Revenue of $48.71B (-28.0% Y/Y) beats by $3.29B


   This Week’s Data

The April Kansas City Fed manufacturing index was reported at -4.  Still it was not as bad as the -6 in March.

                March personal income rose 0.4% versus expectations of up 0.3%; February was revised from up 0.2% to up 0.1%---so a wash for the two months.  Personal spending was up 0.1% versus estimates of up 0.2%; February revision was unchanged.




  International War Against Radical Islam

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Thursday, April 28, 2016

The Morning Call---Surprise, surprise

The Morning Call


The Market

The indices (DJIA 18041, S&P 2095) traded in minus territory for most of the day, then closed narrowly up after the Fed delivered another confusingly dovish FOMC statement. Volume rose, breadth improved and the VIX continues to look like it has found a bottom.


The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {17610-18565}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {2095-2197---notice how the S&P has followed its lower boundary up the last three days}, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {830-2218 1%}. 

The long Treasury was up on good volume, responding to lowered odds of a June rate hike.  It closed above its 100 day moving average and a key Fibonacci level as well as within a short term uptrend.

GLD was also up 1%, finishing within in a short term uptrend and above its 100 day moving average and a key Fibonacci level. 

Bottom line:  as expected investors responded merrily to another dovish Fed statement which likely means the upward momentum will continue.  There is nothing in the technicals to alter my assumptions: stocks are in heavily congested territory, so the upward progress will be more plodding but I expect them to challenge their all-time highs and fail.

            Chinese commodities crash:  I am not sure what this means but it bears watching (too much speculation? lack of economic activity? both?) (medium):



            Yesterday’s economic data turned a bit positive: weekly mortgage and purchase applications were down but the March trade deficit and March pending home sales improved.  Not much but better than a sharp stick in the eye.

The slowdown is consumer driven (medium):

            Overseas, the numbers were mixed: first quarter UK GDP growth slowed but April German consumer confidence rose.

            Overnight, March Chinese industrial profits were up 10%+, April EU economic confidence rose slightly, German unemployment declined and (drumroll, please) the Bank of Japan did NOTHING.

            Of course, the headlines of the day came out of the FOMC meeting’s statement which was another ‘on the one hand, on the other hand’ (global concerns less, domestic concerns more) bowl of mush.  The bottom line is that there remains a low probability of a June rate hike (though the odds did rise fractionally)---which my six year old grandson already knew.   Unless the world economy explodes to the upside, there is no way the Fed is raising rates in front of the potentially disruptive Brexit vote.  Still it reassures investors another two months of a worry free Fed policy.  For those who are bored enough to want to read the statement, the link is here.

Bottom line: the Fed statement read pretty much as expected; and the BOJ has now stiffed the algos traders.  It will be interesting to see how much follow through to the downside there is.

            The madness of negative interest rates (medium):

            Tuesday I tried to make a strong case for always having a Stop Loss Discipline in order to never take a big loss.  Today I want to emphasize the opposite, to wit, don’t buy a stock, unless you are trying for a big gain.  That is the reason that our Sell Half Discipline is set at or near all-time relative and absolute highs.  As long as a stock is bought at or near its all-time relative and absolute lows and the underlying long term fundamentals of a company are intact, there is no need to disturb the position---too often you will be wrong, plus there is the commission costs and taxes.  Sure it may take longer than you want to achieve that all-time high.  But in the meantime, you are still making money. 

‘Letting you profits run’ is also the rationale for only Selling Half of a winning position once the price objective is achieved---again, as along as the underlying long term fundamentals haven’t changed.  CR Bard is a perfect example.  Our Dividend Growth Portfolio Bought BCR, it doubled, the Portfolio Sold Half and it doubled again.  To be sure, this is an exception rather than the rule.  But the point is, I don’t have perfect knowledge.  I can’t control what occurs after a stock hits our Sell Half Price; but I can control what happens when it does---our Portfolio takes a large profits and then plays with the House’s money.

A wise investor once said ‘Amateurs go bankrupt by not taking small losses. Professionals go bankrupt by taking small gains.’


       Investing for Survival
            The what, why and how of quality.

    News on Stocks in Our Portfolios
W.W. Grainger (NYSE:GWW) declares $1.22/share quarterly dividend, 4.3% increase from prior dividend of $1.17.

Chevron (NYSE:CVX) declares $1.07/share quarterly dividend, in line with previous.

C. R. Bard (NYSE:BCR): Q1 EPS of $2.34 beats by $0.17.
Revenue of $873.5M (+6.6% Y/Y) beats by $27.27M

Exxon Mobil (NYSE:XOM) declares $0.75/share quarterly dividend, 2.7% increase from prior dividend of $0.73.

Automatic Data Processing (NASDAQ:ADP): FQ3 EPS of $1.17 misses by $0.01.
Revenue of $3.24B (+6.9% Y/Y) misses by $30M.


   This Week’s Data

            March pending home sales rose 1.4% versus estimates of up 0.5%. 

            First quarter real GDP came in at +0.5% versus consensus of +0.7%; the price index was up 0.7% versus expectations of up 0.5%.

            Weekly jobless claims rose 9,000 versus projections of up 13,000.


            Greece goes from bad to worse (medium):



  International War Against Radical Islam

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