John Mugarian's Dynamic Growth

At times like these, I begin to think the stock market has a mind of its own. Sometimes its does, particularly when there is divine intervention from underlying sources. But despite all shenanigans from Executive Order 12631- the Plunge Protection Team, the misleading retail sales numbers, the misleading inflation data, the misleading jobs data, etc. The bottom-line is that corporate profits and a rising stock market depend on people like you and I.

As I was flipping through the channels last night, I caught a very gutsy comment by Glen Beck. While I don't agree with everything Beck says, he did say something that really hit home with me.

Without Christians, there would be no Christmas. Without Christians retail sales would tank. Christians are the one's that drive retail sales during the months of November and December. Like it or not, Christmas literally means “the Mass of Christ".

If 70% of GDP is the consumer, and since an estimated 82% of the U.S. population is Christian, I would think retailers would do everything in their power to appeal to this group during the biggest shopping time of the year. In other words, they need to do some major sucking up. Remember, corporate profits are all about people.

I have been around the markets a long time, and I cannot remember a market that has been more manipulated, or filled with as much hype as this one.

I am almost to the point of nausea when I hear comments like;

Soft Landing
The Economy is Strong.
The Fed is going to cut rates sooner rather that latter.
Inflation is under control.
Consumer spending is strong.
Energy prices have declined sharply.
The housing bubble has bottomed.
We are winning the war in Iraq.
Back up the truck and buy.
The labor market is strong.
Black friday sales up 19%.

Please, I can't take it anymore. Particularly when I know;

Wal-Mart's Same-Store Sales were Down 0.1% in November:
Retail sales are disappointing.
Recession Risks have Risen above 50%.
Foreclosures hit a new high in October.
Housing wealth is falling and housing and consumer debts are rising.
Oil prices are rising.
Employment continues to fall in housing, manufacturing, retail and temp jobs.
Inflation is not accurately accounted for in the CPI.
The US yield curve is more inverted than ever before.
The US dollar is falling.
New homes sales fell sharply.
Mortgage applications fell sharply.

I could go on, but I think you get the picture.

Here is a technical piece put out by S&P on Nov 30, 2006;

When I heard that the FDA was lifting restrictions on silicone breast implants, I couldn't resist proclaiming that the 1970's were back. Oh, but we have more similarities than just breast implants.

The question now is will we see an end to this cyclical bull rally and see a 1973-1974 bear market, or will the market begin a new bull market without a final low?

1) Supply-side shocks (OPEC's two oil embargoes of the 1970's) caused energy prices to soar. Today demand for energy resources are high (China & developing nations) creating another supply-side shock.

The first mention of Hubbert's Peak began in 1970 when many proclaimed that U.S. oil production had peaked. Today, many researchers are saying that U.S. production has fallen to the levels of the 1940's. In 2005, U.S. oil imports were twice as high as domestic production.

OPEC countries like Saudi Arabia have not reduced their oil reserve figures for many years even leading many to doubt whether they have the reserves that they claim. This same situation occurred from 1973-1979 when U.S. oil companies claimed to have more oil than they actually had.

Two-thirds of the world's known oil reserves are in the Persian Gulf. Saudi Arabia is the world's largest producer, followed by Iraq, which may explain why President Bush keeps saying that" we must stay the course" in Iraq.

Today, we are seeing the same situation with U.S. oil companies. Many of these domestic companies report as their reserves the joint ventures they have with foreign countries. Given the political conflicts in South America, many U.S. oil companies are being expelled from countries like Peru, and Venezuela.

This weekend, Venezuelan President Hugo Chavez won a landslide victory in the nations recent elections. For the next six years, Chavez will continue to gain support from other countries in South America, and build coalitions against U.S. oil interests.

We are almost finished with the new "Dynamic Growth" website. Starting Monday, December 11, 2006 (hopefully), when log on to www.johnmugarian.com, you will automatically be connected to the new Dynamic Growth website.

Dynamic Growth was the brain child of John Mugarian, and his good friend Louis Navellier.

There will be s few changes that I think you will enjoy;

1) The "Journal" link on the website will be the blog. This will remain a free service. I will continue to give you the same insights and commentary that you have come to enjoy.

2) For a limited time only, we are allowing investors to subscribe to the Dynamic Growth newsletter for free. On June 1, 2007, all free trial subscriptions will expire. Many trial subscriptions last only 30 days, but we want to earn your business with our performance, and not with a bunch of hype. I want you to have enough time to judge the benefits of Dynamic Growth for yourself.

3) Dynamic Growth will have 2 portfolios. One portfolio will be our Top 15 Exchange Traded Funds (ETF's), and the other portfolio will be our Top 15 Fidelity Select Sector funds. Eventually, we hope to add a portfolio of our Top 15 Stocks. The current Investor Alert Portfolio will be discontinued.

What is Dynamic Growth ?

Dynamic Growth is a Sector Rotation newsletter that "Harnesses the Power of Sector Investing". By investing in sectors that only provide the best investment results, and avoiding the sectors that do not, our research has showed that investors can handily beat the market averages.

"I asked Louie if he and his research team at Navellier & Associates could apply their impressive stock picking system to No-Load Sector Mutual Funds and ETF's. After running a number of sector mutual funds through Navellier's proprietary research, we were both stunned by the incredible performance!"

The boys at the Big Picture have done another outstanding job. This time they quoted an article by Herb Greenberg on hedge fund legend Julian Robertson. I encourage you to read the article.

I would like to thank Barry Rithholtz and the wonderful people at the Big Picture for the great work thay do.

In case you can't find it, here is the article from the Big Picture;

Julian Robertson on Irrationality in Markets

I was speaking with Herb Greenberg on Monday about Julian Robertson. He had mentioned this little tidbit, buried at the end of Herb's most recent column (which I had missed):

Hedge fund manager, investment conference impresario and newsletter publisher Whitney Tilson has a terrific piece in the latest edition of his Value Investor Insight, in which he does a mea culpa to legendary hedge fund manager Julian Robertson, who quit the business in 2000 at the height of the last round of stock-market insanity.

On Monday night, I had the pleasure of watching the 1939 film classic, “Mr. Smith Goes to Washington.” The movie starred Jimmy Stewart, and was one of the most popular films about American government ever made. After its release, the film was nominated for 11 Academy Awards.

Jimmy Stewart plays Mr. Smith, a man who was probably no different than you and I. After the death of the current Senator, the governor of an unnamed state had to pick someone to fill the spot until the next election.

The film showed how big money political bosses (big business) basically tell politicians what to do. In this case, the big money wanted the Governor to pick a stooge who had an honest background, but basically would do what he was told to do. They chose Mr. Jefferson Smith, who was the head of the Boy Rangers.

Once Mr. Smith found out that his fellow Senators did not actually represent the people who elected them, he tried to make a difference by standing up to big business and the crooked politicians. When he did, they tried to destroy him. Big business used the power of the press to twist the facts and turn his supporters at home against him.

Unlike today, Mr. Smith actually succeeded.

On Tuesday I said; “We are almost finished with the new "Dynamic Growth" website. Starting Monday, December 11, 2006 (hopefully), when log on to www.johnmugarian.com, you will automatically be connected to the new Dynamic Growth website."

I will list the Top 15 Fidelity Funds in the "Portfolio" portion of website today. Next week the new ETF portfolio will replace the current stock portfolio.

We are still on track for this launch, but just in case we hit a snag, I want to give you our Top 15 Fidelity Select Sector funds for December. Remember, once the new website is up and running, you will have to register, and establish a "username" and "password" to access the "Newsletter and "Portfolio" section.

Here are some ground rules to get you started;

1) We will post the Top 15 Fidelity Select Funds at the beginning of each month. Keep track of the day you purchased each fund so you can make sure you hold it for a minimum of 30 days. If a fund is bought and sold (or switched) within 30 days, you will be charged a redemption fee.

2) Open a Brokerage Account that allows you to buy Fidelity no-load funds, or accepts wrap accounts (fee in lieu of commissions). Fidelity sector funds are available for brokerage as well as retirement accounts. The minimum investment required to invest in each sector fund is $2,500. Fidelity does not charge a fee to buy or sell a Fidelity Select Sector Fund as long as the fund is held for at least 30 days.

3) The Exchange Traded Fund (ETF) portfolio will be updated this weekend. When we receive the latest data from Navellier, we will post the Top 15 ETF's on Monday morning. Make sure you use a discount broker, or a wrap account that charges you a quarterly fee in lieu of commissions.

4) Before you start buying, you have to ask yourself: What is my risk tolerance? Are you comfortable owning a smaller, more volatile portfolio? (Top 10 Funds), or do you prefer owning a more diverse strategy? (Top 15 Funds).

In the "Reports" section of the new website, and on Investor Alert, I have a report entitled “How to Be Your Own Broker; And Why You Should." Here you can answer 5 simple questions that will help you determine your risk tolerance, and help you choose an asset allocation model. This is just a guide to get you started..

5) Aggressive investors should buy the Top 10 funds each month- If a fund falls out of the Top 10 the following month; replace it with the newest addition to the Top 10.

**As a footnote, If you are using the Top 10 strategy, and one of your funds fall out of the Top 10, you can keep the fund if you wish, as long as the fund does not do not fall out of the top 15 list.

6) Growth Investors should buy the Top 15 funds each month- If a fund falls out of the Top 15 the following month; simply exchange the old fund for the new one. By exchanging rather than selling, you can switch from one fund to another in one transaction.

Let's get started;

The standard of living for many Americans continues to drop as the Bureau of Labor Statistics released its monthly jobs report.

Get this, and here's the spin. Jobs in the low paying services sector (professional and business services, food services, and health care) gained in November; while employment for higher paying jobs (construction and manufacturing) continue to decline.

The financial news media continues to celebrate the fact that an increase in jobs paying minimum wage and slightly higher, is better than the loss of jobs in construction and manufacturing paying $15-20/ hour or higher. I just don't get it. Here is another example of Wall Street continuing to celebrate bad news as good.

The new website is up and running! We are very excited about the "Dynamic Growth" investment service. Dynamic Growth is a one of a kind investment system that picks only the top no-load sector funds and ETF’s, while focusing on sector rotation, and the sector rotation model.

Every week, we publish the results of our research by picking a portfolio of the Top 15 Exchange Traded Funds (ETF's), and every month, we publish our research on the Top 15 Fidelity Select Sector Funds.

For a limited time only, we are allowing investors to subscribe to our service for free. On June 1, 2007, all free trial subscriptions will expire. No money or credit cards are required during the free trial period. All you have to do is go to the sign-up page and register. You will be able to establish your own "username" and "password" to access the "Newsletter and "Portfolio". The sooner you sign up for our free trial subscription, the more time you will have to evaluate our performance.

Now, let’s get to the markets.

Are Wal-Mart, Best Buy, and Texas Instruments trying to tell us something? It looks like our call for a slowing economy is beginning to happen.

On Thursday, Treasury Secretary Hank Paulsen, and Federal Reserve Chairman Ben Bernanke will take their dog and pony show to China in hopes to convince the world's next dominate economic power to throw them a bone.

Since taking office in July, some strange things have occurred under Paulsen's watch. Take for example the Goldman Sachs re-weighting of gasoline in its institutionally copied commodity index from 7.3% to 2.5%. This adjustment to the index occurred a few months before the November elections.

Prior to taking a job with Goldman Sachs in 1974, Paulson served as assistant to John Ehrlichman in the Nixon administration from 1972 to 1973.

In his weekly update, Jeff Saut at Raymond James said;

"As for the “here and now,” we have deemed the recent performance by the major market indices to be somewhat “unnatural.” Markets typically go up, correct by 25%, and then re-rally if they are going to trade higher. This, ladies and gentlemen, has not been the case recently as the averages have “unnaturally” vaulted higher without so much as ANY correction.

** Please remember to establish a username and password to access the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

It’s almost laughable. The US delegation which is being led by Hank Paulsen (Treasury Secretary), Ben Bernanke (Fed Chairman), and Susan Schwab (U.S. trade representative) is not going to get much out of the Chinese. In fact, China is in the driver’s seat. Why would they give in to demands from a country that has nothing in return but the issuance of more debt?

Usually when you go to the bargaining table, you have to have something to bargain with. Paulsen and Bernanke brought along what they thought were bargaining chips, ( the Secretaries of Energy, Commerce, Labor, and Health & Human Services) only to have China say, no thanks.

I get very frustrated when I watch TV because of all the advertisements. I know, I should get Tivo or a DVR, but thus far I haven't.

A few weeks ago I decided to do something odd. I actually counted the minutes of ads while watching ABC's "Boston Legal". After I tallied the numbers I was shocked that 25 minutes of the hour long program were advertisements. This really frustrated me since I pay a fee to a cable company to watch my own TV, and then they waste 25 minutes of my time trying to sell me something during the show. Television is nothing more than a sales tool that has molded and shaped the minds and spending habits of consumers.

Then it hit me. Now I know why America has a zero savings rate, while the Chinese have a savings rate of 50%. Hence, my 4th quarter score above stands, Chinese 50%, the US 0%.

The recent changes to the Dynamic Growth ETF portfolio were posted last night. To gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

This month, we will be watching energy prices to see if the Feds recent decision to leave interest rates unchanged continues. The CPI data has shown a slight decline in inflation over the past 3 months, but that was mainly due to the pullback in energy prices.

If energy prices do resume their march higher, the CPI will begin to reflect a higher inflation number than the street is currently expecting. This could throw a serious monkey wrench into the consensus opinion that the Fed will begin lowering interest rates by March.

Now that OPEC has announced it is cutting an additional 500,000 barrels per day to their previous cut of 1.2 million barrels, we think energy prices could go higher as we head into the summer driving season.

Oddly, we have noticed that the S&P 500 and oil prices have moved up in tandem. During the early summer, as oil prices moved higher, the S&P moved lower. The stock market is shrugging off something they thought was a serious threat earlier in the year. Odd isn't it?

**To gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

This morning, Circuit City (CC) the nation’s second largest retailer of consumer-electronics said that it lost $16 million in the third quarter ending Nov. 30. This loss comes on the heals of our warning that "the deflating of the real estate bubble is causing some problems for consumers who have been using home equity extractions to fuel their spending habits."

Since consumers latest fascination is for electronics, the Circuit City news is a tell tail sign of events to come for the retail sector. Shares of Best Buy (BBY) fell 3.3% in sympathy on news of Circuit City's 3rd quarter loss. But last week Best Buy said that “profits for its third quarter, which ended Nov. 25, rose less than estimates because it was forced to cut prices to keep pace with Wal-Mart and Circuit City.”

Bloomberg reported this morning that the International Council of Shopping Centers and UBS said that “Sales at stores open at least a year rose 2.4 percent in the week ended Dec. 16 from a year earlier."

Clearly, consumers have delayed their Christmas purchases in hopes to see massive price discounting in the days leading up to Christmas. I was at our local mall, and stores like Joseph A. Bank (JOSB) and Aeropostale (ARO) have announced 50% off sales.

**To gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

I have to admit I enjoyed watching Donald Trump discipline the 20 year old reigning Miss USA, Tara Conner. Trump simply did what parents today cannot or will not do. Anyone who has had a teenager the past 10 years knows that society is out of control. Personally, I don't really care what other people do as long as it does not affect or danger my family. People are free to make any choices they wish, and must eventually live with the consequences of those choices.

By the way, this is not a lesson in morality; this is a lesson in behavioral finance.

One would assume that the behavior of Miss Conner is an isolated case. This would be a misguided assumption. Miss Conner's behavior is rampant among 17-25 year olds.

Unfortunately, the choices that other people make can affect your family. When a driver decides that they will not what to stop at red a light, this can affect your family. When a you send your child to a school (junior high or high school) where parents turn a blind eye to drug and alcohol use by teenagers, this can affect your family. The results of these choices can eventually end in the death of one of our family members.

Oddly, one of largest demographic groups that retailer’s love to market their products to is the 17-25 year old age group. Come on, you've seen it too if you’re paying attention. Have you walk into an Abercrombie & Fitch (ANF) lately? I can't figure out if they are selling sex, or clothing.

Here are a few examples from the Abercrombie & Fitch website;

Example #1: Why is this boy pulling off his shirt while looking at this girl? How can this girl resist this boy? What in the world does this have to do with clothing? It’s not about the clothing if it’s not the clothing you are looking at.

Example #2: What does this retailer want a consumer to buy, the coat, or the model?

Are you getting my drift? The reigning Miss USA, Tara Conner is a victim of society. Tara is a victim of the marketing campaigns to her demographic group by clothing retailers as well as television shows and movies. Selling sex to the most vulnerable hormonal group in the nation is a very profitable tactic, as well as a recipe for disaster.

My point in this common sense exercise is that the 17-25 demographic are not the only one's manipulated by retailers, television shows and movies. The financial lives of you and the investing public have been manipulated as well. Hopefully, you didn't fall for it.

**To gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

Something important is brewing in the oil patch. Yesterday the EIA released its inventory numbers and gasoline and heating oil had unexpected builds, while crude stocks drew significantly more than what had been anticipated.

Humm, what's going on? Now that the elections are over is the Strategic Petroleum Reserves once again adding to their stockpiles?

Despite what we are being told about warm weather, someone continues to draw down crude. Who is doing this? On Wednesday, the Department of Energy said they had not received any requests from Gulf Coast refiners despite the problems occurring along the Houston Shipping Channel. Well, someone is obviously buying!

Yesterday, I took the afternoon off and went shopping with my family. It was only four days before Christmas, and I didn't encounter the crowds I thought I would at the upscale malls we visited. Later that afternoon we visited an outlet mall, and my observations were about the same.

Many of the stores we visited were selling items at 50% off or had a 2 for 1 sale. At first blush, I would say that the Christmas shopping season won't be a disaster, but it won't be the 19% sales boom that the cheerleaders of Black Friday originally reported.

Just about every store we entered signed off with "Merry Christmas" as we left. I heard it so many times that I determined it was just another "corporate thing". That being said, I still enjoyed hearing it. It looks like Corporate America is beginning to wise up.

Yesterday, I updated the Dynamic Growth ETF portfolio yesterday, and we have three new buys, and three sells. You will also be able to view our current Fidelity Select Sector Fund portfolio which is updated monthly.

To gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

Remember, you can gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

Here is another great article by Jeff Saut at Raymond James. This week's article is entitled "Predictions?!". Enjoy.

Remember, you can gain access to the member portion of the website, simply click on the "Subscribe Now" tab, establish a username and password, and you'll have full access to the Dynamic Growth newsletter and portfolio. This free trial will end on June 1, 2007.

Everyone has an opinion. In recent days, many investment gurus were giving us their forecasts for the stock market in 2007. In reality, these forecasts are nothing more than a guess.

We have all heard the term "educated guess", but even one who is educated and guesses is no better than someone who is not educated and guesses. I say this because the world is in constant state of flux, and no one can predict what the stock market will do unless we live in a utopian society.

So, forget about all the predictions for the stock market since they are nothing more than a useless waste of news print.