Grow Your Portfolio the Intelligent Way

October 2007 Issue

By Richard C. Young

Contagion…

A noun meaning to spread, as of a doctrine, influence or emotional state. Direct reference can be made to the Butterfly Effect, where an isolated and perhaps minuscule event can trigger violent reactions far from the original source. Over the past month, just such activity has taken place in the financial markets. And as often is the case in financial markets, the erudite Ph.D. crowd has taken the most scalding of baths.

Once in 10,000 Years

Remember Long Term Capital Management? The quantitative crowd absorbed a savage roasting. Matthew Rothman, head of equity strategies for Lehman Brothers Holdings, summarized today’s conditions succinctly in The Wall Street Journal of 11 August 2007. "Events that models only predicted would happen once in 10,000 years happened every day for three days.

And how bad has the carnage been? The Boston Globe reported, “State Street Corp.’s Limited Duration Bond Fund, which managed $1.4 billion for institutional clients, lost about 37% of its value in the first three weeks of August.”

Sowood Capital Disaster

According to the WSJ, Global Alpha–Goldman’s widely known internal hedge fund–is now down about 16% for the year. And The Boston Globe reports that Sowood Capital Management, a $3 billion Boston hedge fund launched just three years ago by former Harvard endowment manager Jeffrey Larson, recently sold most of its holdings in troubled debt markets, telling investors that it had losses in July of more than 50%.

Hedge Funds Wiped Out

Jeremy Grantham (always pay heed to J.G.) told the WSJ that he believes that up to half of hedge funds, along with a substantial percentage of today’s private equity firms, "will cease to exist."

No T-Bills Available

Investors seeking to avoid the carnage have rushed to quality in a tidal wave unseen in a long, long time. A recent three-month T-bill sale was the largest amount offered since 1990. We were recently on a motorcycle trip through Montana, Idaho and Banff, Alberta. While we were in Canada, an Ontario institutional investor tried to place an order with one of the Big Five banks for Canada T-bills, and he was told that they weren’t available. As this startled institutional investor pointed out, "I’ve been in this business for 28 years, and I’ve never heard of anything like that before."

Seasoned veteran fund manager Martin J. Whitman (Third Avenue Value) writes, "The vast majority of great financial fortunes built in this country, especially by Wall Streeters and corporate executives, were not built by people who took investment risks. Rather, the secret to building a great fortune is to avoid, as completely as possible, the taking of any investment risk."

Mutual Funds–Safe Harbor

Along with U.S. and international Treasuries, where have the safe harbors been, and what is the smart play looking ahead? Vanguard’s head of active quantitative strategies Joel Dickson noted in the WSJ, "Mutual funds were insulated because, unlike hedge funds, they typically avoid being short or leveraged. Both moves, which are popular with hedge funds, can magnify the effect of bets."

Compound Interest Key

My consistent advice to you over many decades has been to rely first and foremost on the cold, hard cash flow to your serious retirement account provided by interest and dividends. Over this long period, I have written that I’m not a fan of investing with the idea of selling to someone else at a higher price, especially over the short term, like a year or two. I’ve also written to you–I’m sure ad nauseam–that the two most important words in investing are compound interest. And to allow compounding to operate like clockwork for your inimitable behalf, you want to invest for a stream of cash in the form of interest and dividends. Capital appreciation (as opposed to taxable gains) will come along in the process and serve as insulation against the loss of portfolio purchasing power. For example, a portfolio consisting of 50/50 stocks and bonds and yielding a perfect retirement portfolio average of 4.5% would look to long-term capital appreciation to keep the annual 4.5% initial draw real.

I’ve long liked investment-grade (A-rated and better for me) blue-chip preferreds as generators of a steady cash flow for compounding. I’m especially keen on General Electric‘s AAA-rated 6.45% issue (symbol: GER). Dodge & Cox Income (DODIX) is also still open to you. I love the Dodge & Cox committee approach. Young Research’s Retirement Compounders have returned 5.3% (unaudited) YTD. One reason for the consistency here is the relatively high yield of 3.2%. The message, of course, is stick with dividend payers.

Keep It Simple

Many big-name aggressive funds are down YTD. Legg Mason’s widely media-covered Value Trust is down 0.4% YTD. The 10-year total return is 8.4%. This compares with the conservative Dodge & Cox Balanced Fund‘s (DODBX) 10.1%. The more you focus on compounding, the better you will sleep, the less anxiety attacks you will have, and the less attention you will pay to events of the day. Keep it simple.

T. Rowe Price Japan

There has been some confusion about my T. Rowe Price Japan (PRJPX) recommendation. I dropped the fund from my ETF & Mutual Fund MML in July to make room for the addition of nine new ETFs. You did not see the fund dropped from my list until August due to my monthly rotation between stocks and funds. I added the T. Rowe Japan fund back to my Monster Master List last month. Therefore, you will see the fund in this month’s ETF & Mutual Fund Monster Master List.

My T. Rowe Price Japan advice is based on a top-down view of Japanese stocks that I detailed in my June Intelligence Report issue. You can invest in Japan through T. Rowe Price Japan or iShares MSCI Japan (EWJ). If you sold T. Rowe Japan, buy iShares MSCI Japan to gain exposure to Japanese stocks. The expense ratio on the iShares fund is lower than the expense ratio on T. Rowe Price Japan, and it will provide you with the same top-down exposure to Japanese stocks. If you still own the fund in a taxable account and have a sizeable unrealized loss, sell your position and buy the iShares MSCI Japan fund. You will harvest a tax loss that can be used to offset other capital gains in your portfolio and still maintain exposure to Japanese stocks.

Sturm, Ruger

As last month’s issue was going to press, Sturm, Ruger (NYSE: RGR) shares took a nosedive. My recommended sale price on the stock was $21 per share. During the free fall, the shares traded as low at $13.86 after closing above $22 just two days earlier. The sell-off was quite puzzling. My best explanation is a forced liquidation. No negative information was released on RGR other than some insider-selling filings, but those were released more than a week before the sell-off. RGR shares quickly bounced back and now sell for $18.88 per share. If you still own shares, sell them now.

My Sturm, Ruger sale advice is a textbook example of when to sell a stock. RGR shares are overvalued, overbought, and insiders are liquidating shares. Even at $18.88, down from $21 when I advised selling, RGR is priced for perfection. My Year-To-Year Rate of Change chart on the stock shows that momentum has reached a probable peak. The likely direction of the stock moving forward is down. Insider selling at the company has picked up in a big way. Insiders sold shares in late July and then again in August. When a stock is overvalued, overbought, and insiders are dumping shares, a sale is usually the right move.

Preferreds

At my family-run investment company (www.younginvestments.com), preferred securities are a vital component of our fixed-income strategy. The high yields, transparent commissions, and liquidity are ideal for retail investors. Today, the preferreds market is offering compelling values to income-oriented investors. Panicky investors are liquidating anything and everything with credit risk and dumping the proceeds into Treasuries. The broad-based liquidation is driving Treasury yields down and preferred yields up (preferreds carry credit risk). The divergence in yield is unlikely to last for long. Once the credit market calms down, investors will return to high-quality preferred securities. Credit spreads will tighten, and preferred prices will rise.

Short-term price declines in preferreds can be startling to the uninitiated, but you can take comfort knowing that the power of compound interest quickly turns short-term losses into gains. My Total Return Price chart on the Merrill Lynch 7.0% preferred, a longtime holding at my family-run investment company, shows the benefits of riding through short-term volatility in the preferreds market. I count six instances of short-term volatility in the price of the Merrill Lynch 7.0% preferred. Every short-term decline was quickly wiped out by the magic of compound interest.

To take advantage of the opportunity in preferreds, you can buy shares in the recently issued Citigroup 7.25%, rated A2/A+, yielding 7% (symbol: CPRF). This Citigroup issue is one of the more attractive issues I have seen come to market in years. A 7% yield allows you to comfortably draw 4% and leave 3% to offset inflation. You also want to add the General Electric Capital 6.45% preferred that I recommend in the Economic Analysis supplement and earlier in this issue.

Bank-Stock Bets

For income-oriented investors, the opportunities created from the credit market crunch do not end in the preferreds market. Big-bank stocks are offering yields too good to pass up. In the short term, the credit crunch is negative for all banks but, over the long term, the turmoil plays into the hands of banks with solid franchises and reliable funding bases. The banks left standing will gain market share and regain pricing power as irrational lending practices are eliminated.

I am adding Bank of America (NYSE: BAC) to my Monster Master List.Bank of America is one of the world’s leading financial institutions. The company made headlines recently with an equity infusion into Countrywide Financial. Bank of America bought a $2-billion-dollar convertible preferred with very favorable terms that might be renegotiable if conditions at Countrywide worsen. Sounds like a good deal for Bank of America. Bank of America shares yield 5.2% and sell for 10.5X earnings. Citigroup (NYSE:C) shares also continue to look especially attractive at these levels. The stock yields 4.7% and sells for 10.5X earnings.

You are in good company when you invest in big-bank stocks. The latest institutional holdings reports show that Warren Buffett initiated a position in BAC and, in total, added nearly $2.0 billion to big banks. Eddie Lampert, often cited as the next Warren Buffett, is also loading up on big banks. He is hot on shares of Citigroup. In the second quarter, Lampert added $500 million to his already large Citigroup stake at prices far higher than today’s price of $46.23.

Top 10 Common Stock Countdown

(1) United Technologies (NYSE: UTX): The U.S. airline industry is setting records. Not good records, of course. The Bureau of Transportation Statistics reports that delays at major airports reached an all-time high in 2007 with 25% of flights arriving or taking off late. The emergence of VLJs (very light jets) offers an attractive alternative to traditional air travel. Customized direct flights and very little to no wait times? Contrast that with the traditional won’t-let-you-off-the-plane-for-10-hours or can’t-fly-anywhere-without-stopping-in-Atlanta airlines, and the future of air travel seems obvious. UTX’s Pratt and Whitney division is developing the PW600, a 300-pound super-small jet engine that will be used to power VLJs. My chart on United Technologies shows consistent power relative to the S&P 500. Buy.

(2) Pepsi Bottling (NYSE: PBG): Pepsi Bottling is the world’s largest manufacturer, seller, and distributor of Pepsi Cola beverages. Worldwide volume is estimated at more than 1.7 billion cases of beverages each year. As you might have guessed, the fortunes of PBG are directly related to the success of PepsiCo’s beverages business. If you can buy PepsiCo at 19X earnings and PBG’s results are tightly aligned with PepsiCo’s results, why not buy PBG at 15.7X earnings? You should buy both Pepsi Bottling and PepsiCo. My Long-Term Trend chart on Pepsi Bottling shows the stock trading below trend.

(3) PepsiCo (NYSE: PEP): PepsiCo shares are once again in favor with the brokerage community. A quarterly earnings surprise and a flight to quality are the catalysts this time around. Long-term investors are attracted to PepsiCo’s world-class brand and consistent record of earnings and dividend increases. Your investment in PepsiCo has compounded at 12.2% annually over the last 36 months. My price chart on PepsiCo shows the stock breaking through all-time highs. Buy.

(4) Boeing (NYSE: BA): Boeing unveiled its 787 Dreamliner on July 8. The Dreamliner is the fastest-selling airplane ever, with more than 600 planes ordered so far. To put that in perspective, only 1,500 747s were sold over 39 years. Production on the 787 is sold out until 2013. And a competing aircraft is still years away. Boeing’s astute decision to build a midsize aircraft when Airbus was planning a now-delayed 550-seat behemoth, catapulted the company into an enviable position. The 787 is in high demand, the company’s main competitor is in shambles, and the threat of a serious competitor entering the market is a long shot. The Dreamliner has given Boeing a virtual monopoly in large-aircraft manufacturing for the foreseeable future. My price chart on Boeing shows a mini correction that offers an attractive entry point. Buy.

(5) Procter & Gamble (NYSE: PG): With a portfolio of brands including Pampers, Tide, Ariel, Folgers, Pringles, and Gillette, P&G rarely trades at a discount to trend. Now is one of the few opportunities that you will get to buy shares of this household products powerhouse at a large discount to trend. Procter & Gamble has raised its dividend every year for the last 53 years–the longest streak of dividend increases in the U.S. Buy.

(6) Nestle (OTC: NSRGY): Did you know Nestle traces its origins back to 1867 when Henri Nestle created a "milk food" (baby formula) to save his neighbor’s baby? Nestle’s company was bought by Jules Monnerat in 1874, and the company has been making smart acquisitions ever since. The recent acquisition of Gerber Products seals Nestle’s position as the world’s largest producer of baby food. Nestle shares provide exposure to my highly favored Swiss franc. The franc is a hard-currency alternative to the U.S. dollar. My price chart on Nestle shows the stock making a powerful upside breakout. Buy.

(7) Newmont Mining (NYSE: NEM): Newmont is the world’s second-largest gold producer. The company owns over 93.9 million equity ounces of gold reserves spread over four continents. With the recent elimination of all gold hedges, Newmont’s earnings are now tightly aligned with movements in the price of gold. Rumors are circulating once again that Barrick is planning a takeover of Newmont. Barrick denies the rumors but, if Barrick is not interested, someone is likely sniffing around–takeover rumors are rarely entirely unfounded. My relative-strength chart on Newmont shows the shares have reached a probable low in relative terms. Buy.

(8) Sysco Corp. (NYSE: SYY): Sysco is the global leader in selling, marketing, and distributing food products to restaurants, healthcare and educational facilities, lodging establishments, and other customers who prepare meals away from home. Sysco supplies food and tableware to 27% of the 935,000 restaurants in the U.S. Sysco has increased dividends at a rate of 16% compounded annually over the last five years. My Long-Term Trend chart shows the stock trading below trend. Buy.

(9) J.M. Smucker (NYSE: SJM): For the first time in a long while, this quiet, family-run business is available to you at a price that is not well above trend (see my chart). I recently tried the low-sugar, organic strawberry jam. Taste is great, and in the taste bargain, you endure only 6 grams of carbs and 5 grams of sugar per serving and no sodium. I also like Smuckers USDA organic peanut butter, once again with minimal sugar. Two great products ideal for school kids’ lunch boxes. What a nice mix. Conservative Smuckers has $200 million in cash and equivalents and only $392 million in debt. A dividend has been paid annually since 1949. The current P/E of 20 is reasonable in light of the company’s 14%, five-year earnings growth. Over the last 60 months, you’ve averaged nearly 14% a year on your conservative, family-run Smuckers. Buy.

(10) T. Rowe Price (NASDAQ: TROW): If you have ever questioned the importance of relative-strength charts, take a look at my long-term relative-strength chart on T. Rowe Price. For more than 20 years, T. Rowe Price has outperformed the S&P 500. The only sustained period of relative weakness was just prior to and just after the 1990s’ tech craze when all rationality escaped the market. Buy T. Rowe Price shares and aggressively add to your position on dips.

Great BlackRock Bets

On the fund side, BlackRock Dividend Achievers Trust (BDV) has a large stake in big-bank stocks. Among the fund’s top-ten holdings are Bank of America, Citigroup, Wells Fargo, and U.S. Bancorp. BDV employs a simple-is-sophisticated strategy to stock selection. The strategy starts with a screen to find the 100 highest-yielding stocks in the Mergent Dividend Achievers universe. To qualify as a Mergent Dividend Achiever, a company must have increased its regular annual dividend for at least each of the last 10 years. Less than 5% of all U.S. publicly traded stocks make the cut. After narrowing the list of Dividend Achievers down to the 100 highest-yielding stocks, BlackRock constructs a portfolio of approximately 60 to 90 stocks, taking into account factors such as industry, sector, and market capitalization. The final portfolio is a diversified mix of high-yielding companies that are likely to raise their dividends in the future.

BDV offers shareholders a reliable source of income through the fund’s managed distribution policy. BlackRock pays out a fixed amount of income per share to fund shareholders each quarter, regardless of how much dividend income or capital gains were earned in that period. BlackRock sets the distribution rate by estimating the amount of dividends and capital gains that the portfolio will generate. The current rate is 90 cents annually. At the end of the year, if dividends and capital gains generated by the fund fall short of the 90-cent annual distribution, the balance is considered a return of capital. BDV currently yields 6.5% and trades at an 11% discount to net asset value.

When quality closed-end funds are trading at a discount to net asset value, you want to buy shares. The "net asset value" of a fund is the value of all assets owned by the fund minus the value of all liabilities the fund owes. If a closed-end fund were liquidated and the proceeds were distributed to you, you would receive a check equal to the net asset value. When you buy a closed-end fund at a discount to net asset value, you are buying a dollar’s worth of securities for less than a dollar. The concept and logic of buying closed-end funds at a discount to net asset value is straightforward once you get past the jargon.

My Discount/Premium to NAV charts show all four BlackRock closed-end funds on my ETF & Mutual Fund MML trading at wider-than-normal discounts to net asset value. BlackRock Global Opportunities Equity Trust (BOE) and BlackRock Enhanced Dividend Achievers Trust (BDJ) look especially attractive. Both funds write covered calls on positions held in their portfolios to generate additional income. BOE yields 8.7% and trades at an 8% discount to net asset value, and BDJ yields 9% and trades at a 4% discount to net asset value. Favor both funds in tax-deferred accounts.

Added to Monster Master List

In addition to Bank of America, I am adding Anglo American (OTC: AAUKF), Chevron (NYSE: CVX), and Procter & Gamble (NYSE: PG) to my Common Stock Monster Master List. Procter & Gamble is featured in my Top Ten this month, while Anglo American is one of the world’s largest diversified mining companies. I will have information on Anglo American and Chevron for you next month.

Dick’s Harley Record

My chart on Harley-Davidson compares a buy-and-hold strategy with my Intelligence Report strategy since my initial buy in 30 May 1992 (unaudited). Buy and hold worked great, but as my chart clearly indicates, my fine-tuning added an enormous amount of value. Today, I’m out of Harley, awaiting the emotion-wracked selling wave once Wall Street figures out that Harley, in order to meet Wall Street pressures, continues to overproduce Hogs. Dealer showrooms are clogged not just with new 2008s and 2007s, but also often with 2006s. And for the first time in my experience, some dealers are refusing to take trade-ins. At the recent Sturgis, S.D., annual Harley bash, attendance looks to have been off hard. Remain on the sidelines until management focuses more keenly on what’s right for its dealers and riders and less on the quarterly earnings mavens.

What’s Up & What’s Down

Despite recent volatility, year-to-date returns still look good. The Dow is up 8.2% year-to-date, and only six of the funds included on my What’s Up & What’s Down fund list are down year-to-date. The losers are predominantly in the real estate sector. International stocks continue to outshine domestic stocks with a number of near-20% gainers on my list. The only weak spot on the international scene is Japanese stocks. Japanese stocks are cheap, and the outlook for the yen is improving. Carry-trade investors are ducking out of positions as volatility in the foreign exchange market gathers steam. My fixed-income funds made a powerful recovery since last month as investors sought out the safety of government guarantees. Vanguard GNMA (VFIIX) is now ahead 3% year-to-date. American Century Global Gold (BGEIX) is down 10.8% year-to-date. If you own the fund in a taxable account, have a meaningful unrealized loss, and will not incur any redemption fees or trading penalties if you sell, swap American Century Global Gold for Market Vectors Gold Miners Index (GDX). The Market Vectors ETF will give you similar exposure to the American Century Fund and allow you to harvest a loss that can be used to offset future gains.

Today, Congress is looking to raise your taxes on income, dividends, and capital gains. I’d like to see President Bush not only call for permanent status for his previous cuts, but also offer up a new round of cuts as a prelude to moving to a consumption tax, which would eliminate the IRS code, including all taxes on personal and corporate income dividends and capital gains. The modest gains seen so far this year in U.S. stocks would extend sharply on such a progression. Your Congress would do well to examine what’s going on with taxes in Singapore, New Zealand, Taiwan, and, for that matter, Vietnam.

Boeing now has 677 orders for its new "fresh cabin air" soothing blue-tinted LED lighting, big windows, super-smooth riding, comfy, roomy 787 Dreamliner. The 787 is on track for first delivery next May, my 2008 Big Idea year. You can expect hand-to-hand combat and ethical bribery in order to get a seat. For a little less than $200 million, you can own a 787, but, nuts, Boeing is sold out through 2012. Boeing is the #2 holding in my highly favored Dow Diamonds (DIA). You should own the Diamonds.

  
2005
% Change
2006
% Change
2007 YTD
% Change
Dow Jones 30 Ind. 1.7 19 8.2
Dow Jones 15 Ut. 25.1 16.6 9.0
Dow Jones Trans. 11.6 9.8 6.8
S&P 500 Index 4.3 15.1 4.1
NASDAQ Comp.      2.2 10.3 6.6
Value Line 2 11 1.1
Dodge & Cox Bal. 6.6 13.9 2.3
Vanguard Bal. Index 4.7 11 3.9
Wellesley Income 3.5 11.3 3.4
Wellington 6.8 15 5.5
Dow Diamonds Trust, Series 1 2.5 18.9 8.1
Mutual Shares (Z-Shares) 10.4 18.4 3.3
Vanguard 500 Index  4.8 15.6 4.4
Vanguard Growth Index 5.1 9 6.8
Vanguard Value Index 7.1 22.2 2.7
Vanguard Equity Income 4.4 20.6 4.8
Third Ave. Value 16.5 14.7 3.7
Third Avenue Small-Cap Value 11.1 11.4 1.4
Dodge & Cox International 16.8 28 6.7
Fidelity Canada Fund 27.9 15 19.7
iShares Australia 16.7 30.8 18.2
iShares Hong Kong 7.3 29.3 12.9
iShares Singapore 14.3 45.8 20.0
iShares Switzerland 13 30 3.1
T. Rowe Price Japan 40 -5.7 -5.5
T. Rowe Price Em Eur & Mediterranean 59 34.7 4.3
iShares Sweden 10.3 43.7 6.5
iShares Malaysia -0.6 36.4 22.2
Third Avenue International 18 17.1 6.9
Fidelity International Real Estate 14.9 42.9 -5.3
T. Rowe Price Real Estate 14.5 36.8 -10.6
Third Ave. Real Estate Value 14.4 30.2 -7.0
Vanguard REIT Index 11.9 35.1 -10.5
American Century Global Gold 28.9 26.8 -10.8
iShares Goldman Sachs Natural Resources 36 16.4 16.4
streetTracks Gold Shares 17.8 22 5.0
T. Rowe Price New Era 29.9 17 19.7
Jennison Natural Resources 54.6 21.7 16.7
Vanguard Precious Metals & Mining 43.8 34.3 12.4
Vanguard Inflation-Protected Securities 2.6 0.4 4.6
Amer. Century 2025 (US Treasury STRIPS)   14.2 -1.6 1.3
Dodge & Cox Income 2 5.3 2.2
Vanguard GNMA 3.3 4.3 3.0
Vanguard High-Yield Corp. 2.8 8.2 0.2

 

Here & There

Here’s my three-pronged approach to asset accumulation through the power of compound interest: (1) Diversify between interest-paying fixed-income and dividend-paying equities (review charts #49 to #53 for complete support). (2) On the fixed-income side, stick 100% with blue chips and full-faith-and-credit, including GNMAs. On the equities side, stick with dividend-paying blue chips. (3) For long-term capital appreciation to maintain portfolio purchasing power, seek out sectors of the economy with powerful long-term-demand characteristics. I like the following: (A) Japan and the yen. Japan convicts 99.9% of those arrested. Tokyo is a safe city with much to teach, for example, New Orleans. There is a huge push today to increase shareholder value in Japan. As The Economist notes, "In theory, Japanese shareholders can vote directly on dividends and executive pay." (B) Natural Gas. Clean-burning domestic natural gas is down 13% YTD versus a 21% increase in crude oil. Anadarko Petroleum (NYSE: APC) and Apache (NYSE: APA), from my Monster Master List, give you gas exposure. (C) Platinum. Just over the horizon is potential huge demand for platinum in fuel cells. Continue to buy Vanguard Precious Metals & Mining (VGPMX) +12% YTD. (D) Coal. The U.S. has the biggest reserves in the world. Coal gasification offers a much cleaner way of burning carbon-based fuel. See my Monster Master List for coal stocks. Your first bets this month are to add T. Rowe Price Japan or iShares Japan Index and my two high-yielding blue-chip preferreds, General Electric Capital 6.45% and Citigroup 7.25%. Make it a good month.

Warm regards,


Richard C. Young

P.S. In Iraq, virtually all the Jihadis who commit suicide with explosives are foreigners. And it is Iran-supplied rockets that have fortified Moqtada al-Sadr’s Mahdi army. Now the Shia cleric has frozen his army for six months. The Iraqi people are fed up with al Qaeda. U.S. casualties are down. I have never bought the Shia/Sunni civil war nonsense. And now the Reaper cometh. The pilotless drone has the bombing power of an F-16 and can fly three times the speed of the preceding Predator (tracked al-Zarqawi to his Smart Dust end). Finally, President Bush is not fooling around with Iran. All good news for the U.S. economy.

P.P.S. Former Credit Suisse employee Frank Quattrone was recently found not guilty in his 2003 IPO case. The legal tab? $20 million. Nice.

P.P.P.S. You will find Garmin (NASDAQ: GRMN) in my Monster Master List. On our recent trip to Montana (go to www.youngresearch.com), we used the Garmin Zumo 500/50 GPS extensively and loved it. Third Ave. fund manager Curtis Jensen notes, "We’re looking at anything distressed." Go to www.youngresearch.com for details on our new Distressed Securities report as well as this month’s essential music listings.

Richard C. Young’s Intelligence Report® (ISSN 0884-3031) is published monthly by ACP Phillips Investment
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