John Mugarian's Dynamic Growth

The January 2nd briefing was posted to the newsletter section of the website a few days ago. We have several changes to our Fidelity Select Sector Fund portfolio.

To access 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.

To access 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.

After being up as much as 117 points yesterday, the DJIA did an about face after the Fed released the minutes of its December meeting. The Fed minutes showed that inflation remains the "predominant" concern and additional interest rate hikes are still possible.

Yesterday in the pre-market, the Dow futures were up 76 points. The Dow actually traded down as much as 50 points intraday, which was a 167 point reversal off the high.

The big sell-off yesterday was in the oil patch as mild weather caused crude to fall $2.73 to $58.32 per barrel. Clearly, this sell-off is setting us up for one of the best buying opportunities of the year.

In the Dynamic Growth Sector Fund portfolio, we added another energy fund to the list.

DJIA: 12,474.52, up 11.37
S&P 500: 1416.60, down 1.70
Nasdaq: 2423.20, up 7.90

The January 8nd briefing has been posted to the newsletter section of the website. We have several changes this week to our Exchange Traded Fund (ETF) portfolio.

To access 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.

To access 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.

Since getting creamed in the mid-term elections, we have not heard much sabre rattling out of the Bush Administration in terms of Iran. As you are well aware, Iran continues to move forward with their uranium enrichment program, and Israel is very upset.

Recent media focus has been the US troop surge in Iraq. I would hardly call an additional 30,000 troops a surge. If an additional 130,000 troops were sent to Iraq, I would call that a surge. My initial reaction now is why only 30,000?

Here's a thought. On January 7 the London Times reported that Israel has drawn up plans to bomb Iran's nuclear facilities with tactical nukes. So, what role would the US play if Israel went ahead with their plan? My guess is the US will only play a supporting role in the attack by allowing the Israeli's to use Iraqi airspace.

Tell me this would not wreak havoc in the oil market.

All eyes are on the EIA numbers this morning which is expected to show another build in US fuel stockpiles. That being said, I will be looking in the opposite direction to see if there is another draw in crude oil inventories.

Crude oil futures continue to trade down 57 cents at $55.07/bbl. OPEC has yet to follow through on their production cuts since December's oil output totaled 26.945 million b/d, which represents no change from November production levels.

So, if there continues to be a draw down in crude inventories, who is doing it? In October,
OPEC agreed to reduce oil output by 1.2 million b/d from Nov.1 and another 0.5 million b/d from February 1st. So far, nothing has been done.

I thought this would happen. You can read the news for yourself as well as a few other interesting articles on energy.

RTTNews: "Crude Oil Inventories Fall Again"

T. Boone Pickens

EIA: Short-Term Energy Outlook

To access 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, and I respect all reasonable opinions. The latest opinions on oil however seem to be based more on conjecture than cold hard facts.

Here is an article written by William Trent from Seeking Alpha. I like a guy who checks his emotions at the door and just gives us the facts.

As I mention yesterday, oil inventories continue to decline. I don't know why, and I don't know who, but we do know someone is buying. I could care less about the build in gasoline and heating oil inventories, I am more interested in the significant drawdown in crude oil.

By now, you have probably heard that a US submarine has collided with a Japanese tanker near the Straits of Hormuz. Pat Buchanan weighs in with this article about Israel's preparation for a strike against Iran's nuclear facilities.

To access 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 are some headlines that may move the markets today.

Advanced Micro Devices (AMD) and SAP (SAP) Issue Profit Warnings- I believe technology is making its way back from the trenches, but too much emphasis is being put on the launch of Microsoft's new software launch (Vista). If you have guys like Cramer screaming buy tech before the launch, and saying sell the day after the release, don't you think the smart money will be ahead of the game?

Longer term, I think technology stocks will make a nice comeback, and that bodes well for the NASDAQ and select technology mutual funds. In our Fidelity Select Sector Fund portfolio, we are currently holding the Fidelity Select Computers & Software (FSCSX) fund. For January, it is ranked #5 out of the top 15 funds in the portfolio.

Retail Sales Rose 0.9% in December- This is really a good news, bad news scenario. Its good that retailers beat expectations, but now all bets are off for a Fed cut in early 2007. This morning interest-rate futures rose, and some believe the FOMC may actually raise rates in the months ahead.

OPEC Ready to Take Action- Many have discounted the comments of OPEC in recent days as crude prices have fallen to a 19 month low. In recent days we have seen some panic selling as investors have jumped ship due to abnormally high temperatures, and a lack of action by OPEC.

Crude prices could hit $50/bbl or slightly lower, but the low PE's of many of the major integrateds are making the group a very attractive bet. OPEC will take serious action, its only a matter of time. As such, buying on bad news can be very rewarding especially given the longer term supply and demand issues facing the world. As the spring/summer months approach, Wall Street will want to own oil again.

National Association of Realtors say Housing Slump is over-All I can say is "Liar, Liar, Pants on Fire". Actually, what else would we expect them to say? As they say down south, "we have a dog in this hunt". After several years of making a fortune in commissions, the National Association of Realtors is getting a little edgy with the current slowdown.

While we may see a rebound in the coming months, the current real estate debacle seems far from over. Does anyone want to buy a waterfront condo where insurance costs are astronomical, and you can potentially get creamed by a hurricane? Well if you do, come on down.

The reality is, real estate prices are still very high. Since property taxes are based on the price you pay for a home or condo, paying $600,000- $1,000,000 for a property can quickly put you in the poor house.

A friend of mine here in Florida (who does not live on the water) just received his insurance bill for 2007. For a 4500 square foot home, his insurance is going to cost him $24,000 for the year. Yes, I said $24,000. Anyone want to move to Florida? The costs are astronomical but the orange juice is great!

Despite the woes here in Florida, I would not be surprised to see a very sharp rally in the homebuilders this spring. Since real estate usually goes through multi-year corrections, occasional sharp rallies do occur.

Here are this mornings research ratings from Lehman on a few major integrated oil companies;

Chevron (CVX)- Rated Overweight 1, Price Target $92
Conoco (COP)- Rated Overweight 1, Price Target $84
Exxon (XOM)- Rated Equal Weight 2, Price Target $81
Marathon (MRO)- Rated Equal Weight 2, Price Target $97.00
Petro-Canada (PCA)- Rated Underweight 3, Price Target $37
Sunoco (SUN)- Rated Equal Weight, Price Target $56

The January 15th briefing has been posted to the newsletter section of the website. We have one new buy and one new sell for the week in the Exchange Traded Fund (ETF) portfolio.

Our newest addition to the ETF portfolio scored very high on the Navellier rating system, enough so that the fund catapulted itself to #3 in our top 15.

To access 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.

To access 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.

Last week I reported that there continued to be a draw down in crude inventories even as prices were falling. Today, we found out who was buying.

According to Chinese industry sources, China increased its strategic reserves in December by 12.4 million barrels. The report also indicates that China took advantage of lower crude prices to fill 70% of their strategic storage tanks- Read Article

Oil prices are falling this morning on news that Saudi Arabia's oil minister said there was no need for an OPEC emergency meeting to discuss further cuts to oil production. OPEC said they would wait until the February meeting before deciding on any additional cuts.

At this stage of the game we have to assume the Chinese are buying because they see the fall in crude prices as a bargain, and not a sustainable trend. Chinese oil imports for December were 50% higher than the imports in November.

On Monday, news reports said that Iran asked Saudi Arabia to help them mediate their nuclear talks with the United States. It is also being rumored that Saudi Arabia has told the US to back-off.

If the US takes part in a military strike against Iran, we may begin to see the word "Embargo" resurface again.

To access 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 often said that you can learn more about the economy by talking to the person on the street than you can by relying on government statistics.

We have had some remodeling work done on our home, and I like to find out what is going on in the real world by talking to business owners. Now that energy prices have retreated some from the highs, I asked a business owner of a large plumbing company about his costs, expenses and what he charges as a result.

Simply put, he said that material costs have risen dramatically, and as a result, he had to raise his prices. He said the fuel costs were eating him up, and he raised prices to pass those costs on to the consumer.

I asked him if fuel prices began to decline, would he lower his prices to reflect the fall in energy prices. He said, "are you kidding me?"

I continue to believe that the inflation data we get in the US is basically worthless. The components making up the CPI have been so watered down that what is being reported does not reflect reality.

Last Thursday, the Bank of England raised its key lending rate .25 basis points to 5.25%. This came as a surprise to many economists, but the UK does not water down its inflation numbers the same way we do here in the US.

Here is the UK's take on the Real Inflation Rate.

The UK allows each person to calculate their own inflation rate based on their individual spending habits- Personal Inflation Calculator.

In the "Up & Down Wall Street" column in Barron's this week, Randall Forsyth said the fall in energy prices were a result of more supply, and less demand. Here is the paragragh I have a problem with;

"Conspiracy theorists pointed to a rejiggering of the commodity indexes as the culprit for crude's collapse. Simple supply and demand provide a sufficient explanation. Inventories of refined products, even gasoline, are ample amidst soft demand from much-discussed warm winter weather in the east. It's odd, isn't it, how the plunge in the crude pits has yet to slow up at the pumps? Could that be why shares of Exxon Mobil (XOM) have held up well despite the drop in oil?"

To access 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.

It was only a matter of time before we received a report saying crude oil inventories declined for the week. I have been reporting that reported crude inventories have been dropping for 6 weeks prior to today's report. During the latest drop in crude prices, the Chinese were using the sell-off as an opportunity to add to their strategic reserves.

The closet idealists on CNBC were cheering the recent news, and even suggested that oil may be heading for a bear market. In a Bloomberg interview today, Jim Rogers said, " Oil will resume its march toward $100 a barrel after a ``correction.'' While in Tokyo, Rogers added, "I'm just not smart enough to know how far down it will go and how long it will stay, but I do know that within the context of the bull market, oil will go over $100. It will go over $150. Whether that is in 2009 or 2013, I don't have a clue, but I know it's going to happen.''

On January 16th, Bloomberg quoted T. Boone Pickens, who said "he was sticking to his prediction that prices will average $70 a barrel this year."

To access 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.

The January 21, 2007 Briefing of the Dynamic Growth newsletter has been posted on the "newsletter" portion of the website.

To access 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.

It looks as if the stock market is exhausted. I think you would be well advised to ignore of the "Points Above Closing High" graphics we continue to see on CNBC.

For starters, I am expecting a 5%-10% correction on the major market averages. The market has not had a 10 percent correction in four years, and one is way overdue.

What is odd about the current market cycle is that previous Fed tightenings were often followed by a correction in the stock market. In this cycle, this has not been the case. With the threat of another tightening in the works, the stock market may react negatively to the announcement of another rate hike.

If the news of another Fed hike does not bring the market down, news of a peak in corporate profits will. High energy prices have lead to massive profits in the oil industry which has been the main catalyst for double-digit earnings on the S&P. Now that the energy sector is transitioning from its up-cycle to a plateau (but still a high levels), y/o/y earnings growth will decline for the first time since 2003. This puts the S&P's string of double-digit earnings growth in jeopardy. This alone can cause a re-adjustment in the P/E ratio of the index and in turn trigger a correction.

To access 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 are three stocks that have traded within a predictable trading range. Given that oil prices may trade sideways (pending no blow-up in the Middle East) for a while ($50-$60/bbl), traders have the potential to make some nice gains by trading a few stocks.

Conoco-Phillips (COP): I am expecting COP to break-out above of its current trading range sometime in 2007 because of additional stock buybacks, but until the stock establishes a new trading range, we can trade the current one.

Conoco-Phillips (COP) Jan 06-Jan 07:

Buy Target: $60-$63
Sell Target: $$70-$73
Quick Trade: $60-63/ Sell $65-$68

Below $60: 7 times in 13 months
Below $63: 10 times in 13 months

Above $65: 11 times in 13 months
Above $70: 4 times in 13 months
Above 73: 1 time in 13 months

** On a break above $73, the new trading range for 2007 will probably be $65-$75.

To access 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.

The January 29, 2007 Briefing of the Dynamic Growth newsletter has been posted on the "newsletter" portion of the website.

To access the member portion of the website, simply click on the "Subscribe Now" tab (www.johnmugarian.com), 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.

Frigid weather across the nation coupled with news that Saudi Arabia will continue to cut production sent crude prices soaring today. Oil prices closed up nearly $3 per barrel, its biggest jump in sixteen months.

Not to sound like a broken record, but I have mentioned that the scare tactics earlier this month by many oil bears were nothing more than "Pure Conjecture". I also said that the sell-off we witnessed over the past 4 weeks may be "one of the best buying opportunities of the year." A few weeks ago, the media was trying to get us to believe that the warm weather we experienced earlier in the month was here to stay. They didn't fool us.

We may not see $80 again until the next price shock (war, hurricane, etc), but its becoming very clear that the energy sector is transitioning from its up-cycle to a plateau, but at higher levels. Even at $50-$60/ barrel oil, energy companies will still make very nice profits.