DAVE HARRIS: Welcome to Dave On Stocks. I’m Dave Harris. This is podcast #43 for Monday February 26 2007. I’m a long term investor with a diversified portfolio of stocks. As we head into the trading week, I think the market is still going to keep a close eye on the economy. Recent economic reports suggested some inflationary pressures might be troubling for the Fed. Consumer prices rose higher than expected as reported last week. Wall Street was pretty convinced the Fed would cut rates later this year. Now investors are wondering if the Fed is just going to pause longer, or worse yet, decide to raise rates again. I don’t expect a rate hike any time soon. We recently had the Bernanke testimony that indicated inflation was under control and there’s moderate economic growth ahead. Two Fed officials had comments late last week. San Francisco’s Janet Yellen said interest rates should be raised only if necessary. Richard Fisher from Dallas said inflation was cooling down and the slow housing is helping to contain those pressures.

In my view, the market is taking a “wait and see” approach. I think last week’s mixed performance in the broad indexes (the DOW fell .94%, S&P lost .35% but the NAZ gained .75%) was a result of that attitude felt by investors. 

The video footage of rats at a New York City Taco Bell is blamed for the Yum Brands (YUM) sell off. The stock fell .55 cents Friday closing at $60.51 per share. That means buy the stock on this foolishness. Yum also owns the Pizza Hut and KFC restaurants. Yes, the U.S. operations are weak of late, but the international sales are strong. In the 4^th quarter profit grew 3%. Quarterly results beat expectations. For the full year, income rose to $824 million from $762 million. Performance in the U.S. was hurt by an E. coli  outbreak that sickened about 70 Taco Bell patrons, but the company is recovering. It was determined that lettuce caused it. Since then, Yum changed their supplier so that’s history. Taco bell has a great pipeline of new products in store. China is becoming an even stronger market with a 36% profit rise in the 4^th quarter. For the full year 2007, operating profit is expected to rise 20% in China and 5% in the states. Now is your chance to get a growing company at a cheap price because 1 restaurant was invaded by mice. Buy YUM now. I think the stock is going to $70. You’ll thank the rats later.

There’s a lot of economic data ahead. Early this week, we can see if housing looks any better with a report on last month’s existing home sales, that’s Tuesday. I’m not expecting any positive surprises. It’s also look at manufacturing activity that day with a report on durable goods orders (items that last 3 years or more). Also that day, there’s a reading on consumer confidence from the Conference board. The market expects a slight decline from last month. I feel we should welcome a decline because the economy is supposed to be slowing down. Then, a report on new home sales is Wednesday. Also that day we’ll get a read on economic activity when the Commerce Department reports Gross Domestic Product. Thursday is busy with initial jobless claims and personal income and consumption. Personal income is expected to have risen .3% last month, that’s below the .5% jump in December. Also Thursday we’ll see if there’s any improvement in the struggling auto industry when the Commerce Department reports on truck and auto sales. A revised reading on consumer sentiment from the University of Michigan is Friday.

A few significant companies report earnings this week. It’s a heavy week for clothing and discount stores. I think it will give us a good idea of how active consumers were in recent months. Nordstrom (JWN) the apparel store is Monday. On Tuesday its discount store Target (TGT) and retailer Federated (FD). Limited Brands (LTD) and Liz Claiborne (LIZ) the maker of women and men’s apparel is Wednesday. Thursday it’s the Gap (GPS), Kohl’s (KSS) and office supply store Staples (SPLS).

That’s all for today’s podcast of Dave On Stocks. I’m Dave Harris. You can email me with any questions or comments about the show at the “contact us” link on this page. My website is www.daveonstocks.com. Thanks for listening. I’ll talk to you again soon with another podcast. This is Dave On Stocks!