DAVE HARRIS: Welcome to Dave On Stocks. This is podcast #47. This podcast is for Monday March 12^th, 2007. I'm Dave Harris. I'm a long term investor with a diversified portfolio of stocks.

We begin the week after Friday's February jobs report which left the market mixed. I was surprised because it was a good report. The job market is in great shape. Unemployment fell to 4.5% and that's pretty encouraging. Wages went up and the number of nonfarm jobs increased by 97,000. That's a bit lower than the 100,000 expected. But I think if it was any higher, it would raise concerns about inflation. Some on Wall Street think this Jobs report suggests the Fed will be less likely to cut rates because of this large number of jobs added. Even though the economy is in great shape, I still expect the fed to cut by the later half of this year in response to the struggling auto and housing segments. I don't expect a turnaround in housing any time soon.

It was probably the wholesale inventories reading that bothered investors Friday. In January, inventories went up .7% according to the Commerce Department. This suggests slower economic growth to some. But I think this is in line with what the Fed wants. That's slow, but steady growth that avoids a recession and controls inflation. On Friday, Fed official Susan Bies mentioned how great job growth is and that our economy is strong.

With that in mind and data that says consumer spending should hold up, I still think the cyclical stocks are going higher. These are stocks closely tied to the state of the economy. Caterpillar (CAT), the construction and farm machine maker, closed .10 cents higher Friday at $64.40 per share. I recommended CAT in my last podcast #46 from Monday March 5^th when it was selling at $62.34. It's selling very cheap now with a P/E of only 12.45 compared to the industry's earnings multiple of 17.21. I still think General Electric (GE) is a strong buy in this environment. Last earnings, their 4th quarter rose by 11%, beating expectations. I think the stock is going to $45. I also like 3M (MMM), the maker of Scotch tape and Post-It notes. That stock is too cheap selling at a P/E of only 14.77 vs. the industry's average of 18.60. 3M should go to $85 per share.

Overall the February same store sales were disappointing. But how important is February? Wal-Mart (WMT) missed expectations with a .9% same store sales gain on weak apparel performance. Federated (FD), owner of Macy's, had a weaker than expected 1.2% rise. Limited Brands (LTD), which includes the Bath & Body works and Victoria's Secret shops, only went up 3%. But there were some upside surprises. Nordstrom (JWN) said same store sales went up 9.1%. Target (TGT) had a healthy 5.7% increase. The weather was the problem here. Shoppers didn't want to buy light spring apparel during last month's colder conditions. Keep in mind that February is not a very important month for retailers. November and December are the big months including Halloween, Thanksgiving and Christmas. On Friday, Wal-Mart closed down .46 cents to $47.42 and Target closed up .19 cents to $61.88. Both of those stocks are going higher in the long term because I'm expecting the consumer to remain strong.

Further evidence came last week that the job market is in good shape. There was a big decrease in the number of freshly laid off workers seeking benefits last week. It's the lowest we've seen in a month at 328,000. The market was expecting 335,000. That means more people are working and spending. Yes housing has been weak, but I don't believe that has had much impact.

The REITs are bouncing back. Friday's gainers include Vornado Realty Trust (VNO), General Growth Properties Inc. (GGP), and my favorite Simon Property Group (SPG). Simon Property the retail REIT closed up $1.26 to $110.93 Friday. I suggest buying SPG now. The company recently reported a great fourth quarter and I think the stock is going to $120.

The market is still a tad concerned over the subprime lenders which are having problems. Stay away from New Century Financial (NEW), Freddie Mac (FRE) and Freemont General (FMT).

On Friday, the DOW added 15.62 to close at 12,276.32. The NAZ lost .18 to 2,387.55 The S&P rose .96 to 1,402.85.

We have some reports investors will watch this week to see if economic growth will continue at a steady and slower pace. Consumer spending will be in focus Tuesday with the release of retail sales from the Commerce Department. Also that day is a report on business inventories. A look at our nation's trade balance with import and export prices comes out Wednesday. That could alter views on GDP. Two very important inflationary indicators come out this week. Thursday it's the Producer Price Index. That's price levels at the wholesale level. Then Friday we get the Consumer Price Index which measures the cost of living for consumers. A preliminary reading on consumer sentiment from the University of Michigan comes out Friday.

That's all for today's podcast of Dave On Stocks. Write me with any comments or questions at the "conact us" link on this page. My website is www.daveonstocks.com. I'll talk to you again soon with another show. This is Dave On Stocks.