Employment Figures Lift Market

The broad market hit new highs as the S&P climbed 1.3% higher for the week. It was a positive week which got a jump start when fears over Dubai’s credit situation subsided. The Dubai crisis started last week and frankly we felt got way overblown, a stance that the market softened this week with more encouraging news from Dubai. But the bigger player last week was the employment report which came in better than expected, with fewer jobs being lost than expected. Furthermore, prior month employment figures were revised to show smaller drops as well. The end result was an unemployment rate that fell from 10.2% to 10%. Now before we get out the party favors, it is important to recognize that the economy is still losing more jobs than are being created. But the good news is that the jobs reports lends additional support to the position that the economy is not getting worse. The other big news was Bank of America and their plan to fully repay the government TARP money by year end. B of A plans to sell stock to raise the necessary capital. We would expect more banks to follow suit and that is a sign that capital and liquidity positions have been improving at financial institutions. We watched Michael Milken of the Milken foundation speak recently and he quoted figures suggesting that more capital was raised in recent periods than in our entire corporate history. We translate that to mean that corporations have significantly improved their capital and liquidity positions, and that gives us more confidence that corporate America will weather this storm just fine. We still expect the economy recovery to be anemic for some time, as consumers, investors, and companies will be slow to use their pent up cash. But once the recovery gains momentum, it could be a strong one given all of this cash on the sidelines! All in all, we still consider current stock market levels reasonable and plan to stay invested.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services) and have added two new stocks Gulf Resources (GFRE, Chemical Manufacturing) and HealthSpring (HS, Accident & Health). Last week we purchased Telenor (TELNY) and Bucyrus (BUCY) so we have removed those two stock from our watch list. HealthSpring is a managed care organization with a primary focus on Medicare. The stock has been on a tear recently and the fundamentals remain very strong. We actually are looking at buying a call option on HealthSpring if we can get in at an attractive premium. Gulf Resources is also an interesting play. The company manufactures and sells chemical products used in oil exploration, wastewater processing, and papermaking processes. The company sells their products in China, which is the country with the strongest growth prospects. On a percentage basis, the stock price has risen astronomically, nearly 1000% over the past year. However, that was from a very low stock price which sometimes can distort percentage gains. The stock still trades around $10 and we still think there is room to run. However, stock price volatility has risen sharply over the past three months, so we know buying this stock could be a very bumpy ride over the near term.

Retirement Portfolio up 58% YTD!