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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Diamonds and Dogs

March 6th, 2009

Nothing like a Good Stimulus

On Friday, horrific numbers were reported by the federal government with respect to the economy. These numbers, another 600,000+ jobs lost in February, 14 million unemployed, and 17 million receiving food stamps were actually expected by market players. The Dow ended up for the day. That is little consolation though, as the Dow is off by about 25% this year alone and this week being our worst week of the year. People are banking on the government stimulus to get us out of this.

In a perverse way, the recently approved government stimulus should work better as more and more people lose their jobs. Forget about the long-term economy, stimulus plans are designed to immediately stimulate the economy by giving money to where it will have the greatest "multiplier effect", or fastest immediate pop to the economy. And what expenditures have multipliers greater than one? (Fastest to compound through the system) Money that goes to the poor via unemployment benefits, food stamps, Medicaid, etc. will have the biggest impact. Poor people spend their money as fast as they can get it and in essence, the recent $750 billion dollar stimulus package is directly positioned to do that. Short term it might work. This package will only be negative to the long term economic growth of our country. The plan will penalize those who create jobs, invest, and are productive. By definition, I guess that is what a stimulus plan does, in and out in short order and give an adrenaline shot to the economy. As more and more people loss their jobs, current leadership may finally realize that Red Bull is fine, for a few hours.

The first government bail-out (TARP) went to the greedy fat cat Wall Street types to try to save the financial system. The second government bail-out (stimulus bill) is going to poor people so that they can spend money. The final one should be a lowering of taxes and shrinkage in government so that those who produce can begin to rebuild the strongest economy in the world. That one might work.

Diamonds and Dogs

Thursday, March 5th, 2009
Diamonds
With the Dow down 25% year to date and 4%today, there is not much in the way of diamonds. Wal-Mart stores rallied $1.26 to $49.75 on a better than expected increase in same-store sales.
Dogs
You can pick one. Citigroup is all but done, and traded below a buck today. There is "change" for you; Citigroup is change in your pocket.

Wednesday, March 4th, 2009
Diamonds
BJ Wholesale (BJ) keeping in tune with the discount retailer theme in a depressed economy, rallied $1.98 to $29.42 as investors looked for a deal.
Dogs
US Bancorp (USB) fell $1.57 after they announced their dividend would be cut 88%. Which bank is going to make it? Regional banks?

Tuesday, March 3rd, 2009
Diamonds
Thrifty shoppers will go to AutoZone (AZO) in a recession/depression and the shares are benefiting as they climbed almost 8% in a down market. AZO finished at $150.94 for the day.
Dogs
Insurers were punished today including MetLife (MET) which dropped 16% to $13.72. Insurance companies have made deals they may not be able to keep and it is a matter of time before a big one fails and needs Uncle Sam to come to the rescue.

Diamonds and Dogs market commentary is a journal of daily observations on anything that happens to be of interest to our author. Obviously, our primary focus is the stock market and world economic events, but for this page we have no defined topics. We want this page to be dedicated to the interests, concerns, and possibly to the financial gain of our clients and friends. All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.