Ben Schott is on vacation, recuperating from the hectic ETF Master Trader release last week. Lucky for you, we recruited a budding investing genius to fill his shoes in today’s Tycoon Report.

My daddy is very serious about The Tycoon Report.

He wants it to be the best source of investing advice and commentary that you read.

That means that he spends more time on his computer than he does reading me stories or giving me “raspberries” ... but I cut him some slack.

After all, I’m a big girl.

Happily, his work-aholism means that I spend a lot of time reading on my own.

I started off with the classics like “Goodnight Moon,” “The Hungry Caterpillar,” “Curious George,” “Green Eggs and Ham,” and “The Giving Tree.”

Frankly, I grew tired of those books.

So one day, I was playing one of my favorite games. I call it “Take-all-the-books-off-of-daddy’s-office-bookshelf-and-scatter-them-all-over-the-house.” (It’s a blast, you really ought to try it yourself!)

To make a long story short, one thing that I found on his shelf caught my attention: It was a copy of The Wall Street Journal.

I started flipping through the pages, and I came to the most wonderful thing I’d ever seen in all my 18 months:

Column after column and row after row of letters and numbers. And if there’s one thing I’m passionate about, it’s letters, especially in combination with numbers.

Daddy told me that these letters and numbers were called stock quotes.

From that moment forward, I was hooked.

Stack Your Profits Like Alphabet Blocks

Over my weeks and weeks of trading experience, I have developed a few proprietary and ultra-reliable research methods to identify the best stocks within my favorite sector: The baby-services sector (you won’t find an ETF for that one, but that’s just because investors in my age group are completely overlooked by Wall Street ... what a bunch of snobs).

Here are a few of the techniques that I use ...

Charting

Media Research

Good Old Fashioned Legwork

One Stock to Watch

One stock that’s been on my radar for a while is Kimberly-Clark Corp. (SYM: KMB).

This company’s brands include Kleenex, Scott paper towels, Kotex, and most importantly according to my analysis, Huggies diapers.

As of market close on Friday, the stock was trading at nearly $72 per share, with a P/E ratio of around 22.

And I’m here to tell you: None of that matters in the least.

In my vast experience, the only thing that matters when picking stocks is the demand for a company’s products and/or services.

In this case, the numbers speak for themselves:

As I mentioned above, I’m a big girl. I won’t need diapers very much longer. But did you know that KMB is also the maker of Pull-Ups???? You know, “I’m a big kid now!”

For that reason alone, I see demand for Kimberly-Clark’s products going through the roof based on what my mom and dad buy alone.

But that’s not the end of this story. Far from it.

Add to that the fact that two of my dad’s co-workers are new fathers ... and imagine all the diapers they’ll need over the coming months ... and then you’ll start to see why I’m so enthusiastic about this stock.

My recommendation: BUY, BUY, BUY! Elmo!

Bath Time ...

This is rather embarrassing.

Mommy says I need to go take a bath now. Just goes to show you the lack of respect we babies get in the investing world.

I’ll show her, though: As soon as she pulls out the “No More Tears,” I’ll give her my Johnson & Johnson (SYM: JNJ) pitch!

Letting the Game Come to Me,

Hannah Schott
Contributing Editor

Ben Schott
Chief Investment Officer
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Tuesday, April 24


10:00 - Consumer Confidence (for April): Consensus 105.0

Big Picture: The index reached a new five high in February.  Low long term yields and the tight labor market support a resilient economy, as volatile energy prices leave some bounce.  The index continues on an upward longer-term path.  Conference Board's survey is far larger and more business heavy than the household-heavy Michigan sentiment index.  The index is presumed to provide an early read on consumer spending, which is far better previewed through interest rates and income growth.

Implications: The Conference Board conducts a monthly survey of 5,000 households to ascertain the level of consumer confidence.  The report can occasionally be helpful in predicting sudden shifts in consumption patterns, though most small changes in the index are just noise.  Only index changes of at least five points should be considered significant.  The index consists of two subindexes -- consumers' appraisal of current conditions, and their expectations for the future.  Expectations make up 60% of the total index, with current conditions accounting for the other 40%.  The expectations index is typically seen as having better leading indicator qualities than the current conditions index.

10:00 - Existing Home Sales (for March): Consensus 6.50M

Big Picture: Home resales appear to be turning stronger, with gains in four of the last five months, as the level is now 7% above the September cyclical low.  Lower mortgage rates and prices help improve affordabiity, and thus demand.  Unsold inventory reached a 7.4 month high in October and is retreating.  The large stock of supply is leading the price decline.  Median prices have shown annual declines since August and stand -2.3% yoy lower in February.  Existing sales include condos/coops, which make up about 1/8 of the total.  The National Assoc of Realtors expects existing home sales to bottom in the second quarter.  The following rise should be very modest.

Implications: The name speaks for itself: this report provides a measure of the level of sales of existing homes.  The report is considered a decent indicator of activity in the housing sector.  Housing starts precede this report each month, but starts are a supply rather than demand-side indicator.  Existing home sales precede the other key demand-side indicator of housing -- new home sales -- thus boosting the visibility of this report.  Sales are highly dependent on mortgage rates, and will tend to react with a few month's lag to changes in rates.  Sales are also determined by the level of pent-up demand for housing -- immediately after a recession, sales are typically quite strong due to the demand which accumulated through the recession.


Wednesday, April 25

8:30 - Durable Orders (for Mar): Consensus 2.5%

Big Picture: Durable goods order growth has turned to an annual decline (-0.8% yoy) as business capital investment stalled since mid 2006.  Flush corporate balance sheets, high capacity use and rising exports remain strong underlying factors, as reduced demand tied to auto and housing add to weak capital investment.  Now business confidence plays a larger role in directing the pace of capital investment and the strength of the manufacturing sector.  A sustained downturn seems unlikely, but quite possible, given the roaring pace in early 2006 and record corporate profits.  Inventory downsizing adds to the weak demand to leave weak production growth.  Orders provide the outlook which has turned from stunning a year ago to declining currently.

Implications: The durable orders release measures the dollar volume of orders, shipments, and unfilled orders of durable goods (defined as goods whose intended lifespan is three years or more).  Orders are considered a leading indicator of manufacturing activity, and the market often moves on this report despite the volatility and large revisions that make it a less than perfect indicator.  These problems can be minimized by looking at the breakdown of orders.  The total number is often skewed by huge increases in aircraft and defense orders.  An increase based solely on strength in one sector tends to be discounted, while the market is more impressed with broadbased increases in orders.

10:00 - New Home Sales (for Mar): Consensus 885K

Big Picture: New home sales are down a large -38% from the peak in July 2005.  The year-end gains were more than doubled by the January/February plunge.  National Assoc of Realtors believe that new home sales bottomed in Q1 2007.  We expect a slightly stronger sales pace once the Spring season gets underway and weather is excluded as a dragging factor.  Lower fixed term mortgage rates, lower prices and the strong underpinnings of earnings growth and a low unemployment rate provide the underlying trend as the correction begins to fade.  Median prices are lower than a year ago, but prices will improve as unsold inventories are thinned.  Inventories reached a high of 8.1 months in February with the plunge in sales, and help direct the path for prices.  The high end of the market leaves average prices higher than a year ago -- 7.5% yoy in February.

Implications: The report indicates the level of new privately owned one-family houses sold and for sale.  New home sales usually have a lagged reaction to changing mortgage rates.  The home sales report is quite volatile and subject to huge revisions, making any one month's reading very unreliable.  The report rarely prompts a market reaction.  The market prefers the existing home sales report, which has a sample data pool four times as large and is released earlier in the month.


Thursday, April 26

8:30 - Initial Claims (for 4/21): Consensus NA

Big Picture: Initial claims follows a subtle upward trend as the aberrations are watched for clues on the labor market and economy.  The slow upward trends in both initial and continued claims reflect some slight loosening in the labor markets.  Claims provide a nearly real-time read on layoffs and the labor market, as the post-recession low 4.4% unemployment rate reflects the broader read of layoffs and hiring.

Implications: Initial jobless claims measure the number of filings for state jobless benefits.  This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signalling slowing (accelerating) job growth.  On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four week moving average to get a better sense of the underlying trend.  It typically takes a sustained move of at least 30K in claims to signal a meaningful change in job growth.


Friday, April 27

8:30 - GDP Adv. (for Q1): Consensus 2.0%, Chain Deflator Adv. (for Q1): Consensus 3.0%

Big Picture: Q4 leaves the last three quarters with average growth of just 2.4% as the Fed targets sub 'potential' growth (3%) to cool inflation pressures.  The forward risk is that sluggish manufacturing demand holds longer than expected, and on the upside that growth will outpace potential growth as the housing effect fades.  Lower energy prices aided Q4 growth by boosting consumer spending and slowing imports.  2006 growth was based on moderating consumer spending and the strong decline in housing as slowing business investment was bumpy.  2007 growth will be based on a more stable housing market as consumer spending remains stable and business investment provides the risk.  Inventories are currently overbuilt, but adjustments won't be severe after the firm Q4 slowing.  Stimulative fiscal policy contrasts with restrictive monetary policy as economic growth has softened but remains self-sustained.  Inflation risk is weakening as the slowed economy helps quell the pressures.  Little slack in the economy and  remaining inflation risks are the Fed's concerns.

Implications:  Gross Domestic Product (GDP) is the the broadest measure of economic activity.  Annualized quarterly percent changes in GDP reflect the growth rate of total economic output. The figures can be quite volatile from quarter to quarter.  Inventory and net export swings in particular can produce significant volatility in GDP.  The final sales figure, which excludes inventories, can sometimes be helpful in identifying underlying growth trends as inventories represent unsold goods, and a large inventory increase will boost GDP but might be indicative of weakness rather than strength.  The broad components of GDP are: consumption, investment, net exports, government purchases, and inventories.  Consumption is by far the largest component, totalling roughly 2/3rds of GDP.

In addition to the GDP figures, there are GDP deflators, which measure the change in prices in total GDP and for each component.  Though the consumer price index is a more closely watched inflation indicator, the GDP deflator is another key inflation measure.  Unlike CPI, it has the advantage of not being a fixed basket of goods and services, so that changes in consumption patterns or the introduction of new goods and services will be reflected in the deflator.

8:30 - Employment Cost Index (for Q1): Consensus 0.9%

Big Picture: Total compensation costs remain tame at 3.3% yoy given the low unemployment rate.  Wage growth is mildly accelerating but partly offset by the strong deceleration of benefit costs.  Wage growth of 3.2% yoy compares to 3.6% yoy for benefits which are half the growth pace of Q3 2004.  These figures contrast with the far more accelerated growth in the more inclusive productivity compensation costs and the wage/salary component in the personal income report.

Implications: The Employment Cost Index (ECI) is designed to measure the change in the cost of labor.  The ECI compensation series includes wages and salaries and employer costs for employee benefits.  The sum of the change in these two components equals the change in total compensation.  The Federal Reserve Bank of Cleveland aptly describes this aspect of the employment cost index thusly: "The ECI is the best measure of compensation (wages and benefits) growth available."  Briefing.com adds this extension: The usefulness of the ECI lies in its ability to tell us whether wage and/or benefit-cost growth appears excessive and whether compensation is growing faster than inflation.

10:00 - Michigan Sentiment (Rev. for April): Consensus 85.3

Big Picture: The push to a two-year high in January is largely tied to the drop in gasoline prices, as the recent equity drop and renewed fear about recession and sub prime mortgage lending leave the preliminary April index at an eight month low.  Fears are partly offset by the strong labor market.  The expectations component is up 9% since the August high in gasoline prices.  The University of Michigan survey is significantly smaller (500 phone calls) than the Conference Board's, includes a longer outlook (for expectations) as questions are focused on the household compared to the business heavy CB survey.  The index far better tracks the consumers' mood than spending habits better indicated through interest rates and income growth.

Implications: The Michigan index is almost identical to the Conference Board Consumer Confidence index, though there are two monthly releases, a preliminary and final reading.  Like the Conference Board index, it has two subindexes - expectations and current conditions.  The expectations index is a component of the Conference Board's Leading Indicators index.


Source:  www.briefing.com