Green Book September 2008

August Market Action

The broad market continued to trace out a labored recovery from the July lows, yet the day to day performance volatility continued to keep many market participants from getting too comfortable with the trend.

Automotive Retail...Initiating A New 7% Portfolio Position

Adding a new equity group holding in Automotive Retail. This gives us about a market weight in the Consumer Discretionary sector, our most significant exposure in several years.

CPI Expected To Decelerate To +5% By Year End

CPI Inflation measured on a twelve month basis may be close to a cyclical peak.

Context For Today's Financial Mess

Think we’ve never seen such turmoil in the financial sector? Back in 1986-1995, the S&L crisis wiped out about half of the federally insured thrifts (from 3234 to 1645).

Crude Oil Regression Analysis

Analyst estimates for oil stock earnings never seem to fully capture the impact that the price of oil has on their earnings.

Materials: From First To Worst

Materials sector has fallen fast and hard in our GS Score rankings and is now the worst rated. Still see further downside based on valuations and technical factors. No, we do not think the underlying commodities can outperform while the stocks fall.

Small Cap Outperformance: More Questions Than Answers

Small cap out performance so far in 2008 is baffling. Earnings growth has been weak relative to large caps and valuations are still excessive. Interestingly, EAFE Small Cap Index is underperforming, while its U.S. counterparts are doing well.

The 2007-2008 Bear Market...Restated!!

We're Bullish (And Hoping For “Small” Gains)

Improving cyclical leadership could be signaling that the bear market is in its final stages. In 10 of the 12 past bear markets, cyclical stocks turned up prior to the conclusion of the bear.

Where Wall Street Meets Pennsylvania Avenue

Presidential election-year performance vs. non-Presidential election-year performance…. Searching for an intersection that doesn’t exist!