Week 13 Performance

Performance to Date (since inception Nov 3rd)
(Nov 3rd - Dow closed 10522, S&P closed 1219, NASDAQ 2169)
Broader market gain: 2.6% Dow, 3.7% S&P, 4.3% NASDAQ
LIVEROCKET gain: 19.55%

Performance Year to Date - Up 9.16%
(Dec 30th close- 10717 Dow, 1248 S&P, 2205 NASDAQ. LIVEROCKET VALUE $109,015)Broader market gain: 0.71% Dow, 1.28% S&P, 2.59% NASDAQ
LIVEROCKET gain: 9.16%

Stock Performance Overview
Stock Growth >40% 2 out of 21
Stock Growth >30% 1 out of 21
Stock growth >20% 1 out of 21
Stock Growth >10% 4 out of 21
Stock Growth 5%~10% 4 out of 21
Stock growth 0%~5% 3 out of 21
Stock growth <0% 6 out of 21

Week 13 Performance
Broader market loss: -1.05% Dow, -1.56% S&P, -1.82% NASDAQ
LIVEROCKET loss: -2.1%

Stocks up for week: 1 out of 8 (excludes ET and NTRI added mid-week)

Weekly Performance Overview
LIVEROCKET beat Dow/S&P: 9 out of 13 weeks
Dow/S&P beat LIVEROCKET: 2 out of 13 weeks
LIVEROCKET tied Dow/S&P: 2 out of 13 weeks

New STOPS
AKAM - $21.8

A few comments
We bought NTRI and ET on Wednesday. Sadly, NTRI fell 15% same day. That one stock pushed us under the broader market performance for the week.

What happened and what do we do about it?
First of all, sentiment has shifted a bit away from tech stocks for the moment. Last week NASDAQ was the place to be. GOOG, EBAY, and AMZN missed expectations, and I think that triggered a general pull back from tech.

Sentiment is driving both the excitement and the disappointments. It is 4 weeks before we will see pre-earnings excitement. That means a lot of drifting.

There will be some days that will drive volatility. The market remains concerned about possibilities of more rate hikes and worse. GDP grew at a sluggish 1% last quarter. At the same time, inflation fears are rising: energy costs remain high and the impact is starting to appear in CPI. Also, strong employment figures but dropping productivity suggest that salaries are rising, which could trigger both rate hikes and a drop in margins/profitability. Fears of stagflation are popping up.

Let’s be clear. There will be a slowdown at this point of the business cycle. But I see more positives right now. Manufacturing spending us strong. Consumer confidence remains strong. There is a reason why people are able to ask for a raise. I do expect another rate hike.

Wild cards remain, and most of them are negative.
Positive #1 - By the end of this year, I expect US troop reductions in Iraq. Sure, Defense spending is growing, but the sentiment is a powerful positive.
Positive #2 – Commodity prices will drift down, offsetting inflationary pressures
Positive #3 – The world economy continues to integrate, boosting US exports and business and offsetting inflationary pressures. For example, Chilean agriculture now provides a cheap produce alternative.
Positive #4 – With the housing market slowing, money should flow back to the Equity Market.
Negative #1 – Oil. Iran issues can cause havoc. I don’t know when Caspian Sea oil shipments will kick in, but I think that isn’t this year.
Negative #2 - Housing is slowing down and a bust at the end of the Summer will drive panic. Don’t be fooled by positive signs from housing suppliers like BMHC. BMHC reported increased profits but that doesn’t come from housing demand. Rather it comes from limited supply due to re-building in New Orleans and Florida.
Negative #3 – Slowing economy. As the economy slows, the market will lower expectations and P/Es will slip.
Negative #4 - World demand for US dollars could slip. That would drive up costs of imports like oil.

So the overall theme is a slowing economy with a critical housing bust on the horizon. Other factors can moderate the impact (interest rates, oil, world markets), but the tone is not positive.

Our response is as follows:
Keep the faith. Many of our stocks are up since last week. In fact, we are almost back up to our Week 12 levels (21.5%)
Technology is experiencing a second wave. A friend of mine sent me a heads-up about a company called Modeo. They will be offering TV broadcasts to your cell phone.
Stock market activity is booming and consolidation continues.
Fuel continues to be valuable and we are positioned nicely
Things may bounce for the next 4 weeks on no news. By March, pre-earnings excitement will be kicking in again.

AKAM – They will be announcing tomorrow. I expect some good news but the market has been incredibly unforgiving lately. I don’t like AKAM’s recent softness and want to be sure that we lock in a strong performance. Set a STOP at 21.8. We can always buy back in if they slip.
SNDK – There continues to be some softness here. With cell phone companies gearing up to offer more features and functionality, demand for flash memory has never looked more promising.
NTRI – They committed to 300% growth and have a forward P/E of 30. Enough said.
MDR – Softness from an asbestos bill on the Senate floor. MDR has a subsidiary with exposure to asbestos lawsuits and this bill would offer protection. All Asbestos linked companies are facing similar price pressure.