Oil prices are dropping as anticipated. The call we made on oil in June is playing out exactly as planned. How did we know oil prices were going to fall? We have a faith in a political system that panders to big oil, and that "magical" things happen prior to an election.

I have to admit, I am saddened by the Presidential choices in 2008. I know the media has worked overtime getting us to believe that we have quality choices. I really don't agree. Corporate interests own the media, and have run government for many years. I don't think that will ever change.

Our job is trying to figure out what will happen next. We were right about our call on higher oil prices in 2004, consumer debt in 2005, the real estate bubble in 2006, and the temporary (??) top in oil in June 2008.

Oil is a tricky call since there are many factors influencing the price. Right now, the dollar is gaining ground, commodity and precious metals are selling off, but I am beginning to think this is a cyclical correction that will lead to a better buying opportunity in the coming months.

If one believes the stock market and the economy operates without the influences on our politicians by corporate America, they are being naive. Magicians use various apparatuses to create their illusions. So does corporate America with their various media outlets. We are not as interested in what the media is saying as much as what they are not. This is a very important ingredient of successful investing.

So, this being said, we will continue to operate under the theme of the great Paul Harvey, and use his line;

"You know what the news is-- in a minute, you're going to hear the rest of the story"

Here are our Top 10 ETF's for the week of September 2nd:

1) DBA: Powershares DB Agriculture Fund- .284
2) EWZ: Brazil Index- .279
3) SLX: Market Vectors Steel Index Fund- .260
4) FXF: Currency Shares Swiss Franc Trust- .198
5) EEB: Claymore ETF BNY BRIC- .177
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- Not Rated
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated

At first glace, it looks as if the commodity and BRIC nation trades have dissipated. For the meantime they have. But, the highest ranked ETF's in our universe remain T-Bills, short term bonds, crude oil which are falling in strength too. Our current position in DDM, DUG, KBE, and the IYF balance out the weakness of our commodity and BRIC holdings. Once the election year magic ends, we will be selling DDM and DUG, and adding more commodity and oil related positions.

Here are our Top 10 Fidelity Sector Funds for September 2008

1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance

NEW BUYS:

None

NEW SELLS:

None

Honorable Mention (Holds):

None

The Week in Review:

The media continues to tell us that the month of September is the worst month of the year for the stock market. With oil prices dropping like a rock, I wouldn't be real quick to buy into that opinion. If you take into consideration that lower energy prices are good news for the consumer, one can extrapolate this information into higher retail sales, and a consumer who is in better position to pay down debt. This is good news for the financials who hold mortgages, lines of credit, car loans, and credit cards.

In addition, as foreign economies continue to weaken, the ECB may begin lowering interest rates just as the US begins raising rates. This is good news for the dollar, and will create added pressure on energy prices.

As energy prices decline (our target is $85-90/bbl), oil and natural gas stocks will become more attractive. I believe that the valuations in the energy sector will become even more attractive in the coming weeks. As such, we believe a significant buying opportunity will present themselves in energy as well as precious metals.

The S&P 500 has dropped 22% from the October 2007 peak to the lows reached in mid-July. We are not convinced that these are the final lows since Real Estate faces increasing headwinds if the Fed does in fact begin hiking interest rates in 2009.

What we are faced with right now is a trading opportunity. A potential rally could drive the DJIA beyond its first level of resistance at 12,000-12,250, to the top of its downtrend channel at 12,600-12,700. This should set the stage for a good selling opportunity.

Average earnings heading into the final week of the 2nd quarter were down -39%. While things may improve into the end of the year, a reverse in the drop of oil in late 2008 and early 2009 could put an end to the optimism that a new bull is underway.

On the economic front, keep in mind that governmental agencies have an interest in painting a more rosy economic picture heading into an election. This positive spin will be followed by rosy projections on the news channels, but we will be keeping a close eye on the little guy for confirmation

Last week, the National Association of Realtors reported that existing home sales jumped 3.1% in July. This is all well and good but Case-Shiller said that "not one market is showing a positive return over the past 12 months and seven of the metro areas are reporting declines in excess of 20%."

In the subprime market, the ABX subprime mortgage index composite of 18 subprime bonds showed the bonds are now valued at 32 cents on the dollar, while the lowest rated bonds at 5 cents.