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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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Stock of the Week


December 5th 2008 The bad news keeps coming. The November unemployment number jumps to 533,000, a 34 year low. This is only the fourth time in 58 years that the U.S. lost half a million jobs in one month. Unemployment jumped to 6.7%. No more sugar-coating the economic data. It's bad. Two weeks ago was not fun. We went five years without a 10% correction. Then two week ago, we dropped 12% in just two days. It really looked like every stock was heading toward single digits. Since then, the markets did jump 20%. The financials were the main culprit for the sell-off. Thanks to government involvement, Citigroup will survive, but with plenty of strings attached, plus the dividend is down to a penny for the next three years. Investors have flocked to financials for income, but more and more have cut them. For income ideas investors have fewer options. Defensive plays like Altria, Phillip Morris, and Kraft will continue to provide good dividends as people will continue to smoke and eat. Altria is a 8% yield, Phillip Morris is 5%, and Kraft is a 4% yield. With the recent slide in GE, the yield is over 7%. Management two weeks ago said they have no intention to cut the dividend. This past week theyreiterated the same statement. They also provided in line guidance for the quarter easing some investor fears. Two other Dow components DuPoint and AT&T this week announced intentions to cut thousands of jobs. DuPont yields 6.8% and AT&T is at 5.7%. Rival, Verizon is also at 5.7%. This past week Cramer recommended Energy Transfer Partners, a unique firm that ships natural gas through out the Southwest through their pipe lines. Cramer believes the firm will remain highly profitable. There has been insider buying which is good and the company provides a dividend yield of 11%. Another pipe line company is Boardwalk Pipeline Partners which is partly owned by Loews Group. Boardwalk provides a dividend yield of 9.6%.
For investors looking for growth, I have featured plenty of large cap techs which dominate their industry and have billions in cash verse little or no debt. Stocks like Intel and Google seem to go down every day even though the companies have no debt and billions in cash. They will rebound and continue to dominate their industry into the future.
Another growth area which is getting more popular every day is the ETFs market. The company, Proshares has been around for a year providing ETFs for specific industries and sectors. They also provide ETFs that go long and short using leverage to obtain outsized gains. Case in point, the double financial ETF has down awful while the double short financial has performed great. Hopefully that will reverse soon. These ETFs provide good hedges when you like a stock or sector long term, but in the short term you may want to short the sector without using margin. These instruments have become so populae that new firms are creating ETFs for triple the returns. You see where we're going. Hopefully the regulators will curb this before we have another disaster on our hands.
The Proshares also provides ETFs for indexes. One good example is the SSO which is the double the S&P 500. This stock should as indicated double the returns for the S&P 500. But there is plenty of risk because when you're wrong, you lose twice as much. These ETFs are for aggressive investors, only.