Tuesday, April 29, 2008

Investors are Fed-Proofing Their Portfolios

Investors are considering the possibility of the Fed starting to adjust its policy. They probably will still cut rates, but we're interested in the language they use for what they'll be focusing on. Most think they may change focus from "economic weakness", which left the door open for future rate cuts, to "inflationary pressures" which could jeopardize that. The result of that could strengthen the dollar, cause oil and gold prices to drop, and the weak dollar game plan which has worked for the last year could be on hold. I still have to believe this would only be temporary though, so its not prudent to re-adjust one's entire portfolio. But if you've had some good gains in these stocks, maybe take a little off the table.

Mastercard (MA) reported a good quarter, saying overseas growth is strong (shocker!). They also said they saw a trend away from luxury goods to consumer staples, again not a surprise. Investors have poured money into Mastercard and Visa because they only process transactions and don't hold the actual debt. That's great, but do you really want to pay 33x earnings for a company that reliant on consumers? Debt or no debt, its getting a little expensive. Be careful of the herd behavior here.

Portfolio holding Manitowoc (MTW) reported earnings that beat estimates, and confirmed full year guidance. But the stock gets clipped 6%. Hmmm. Maybe if they lost billions, slashed jobs, cut their dividend, like all the banks, they would trade up 6%! Crazy. This stock gets played too much. Don't get shaken out of it. It is a good company.

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