The Fed: Moderate Ado About Nothing

By Adam Lass & Ann Sosnowski

Plus... Retail Stocks: Sell Tween Brands Inc. (TWB:NYSE) for 22% Gains!

Blue-Chip Investing
Today the “GDP upgrade,” the spin guys have been pitching for weeks came in (a percentage lower than they predicted) at 0.7% per year. That, to be blunt, ain’t c**p. When third-world countries grow that slow we call them failed states and parachute in World Bank accountants armed with coercive loans.

Diligent Investor
My suspicion was correct: TWB hit a new 52-week high this week at exactly $49 per share.

After two day’s of meetings, the Fed finally spoke. At least I think it did. It was awfully hard to hear such mouse whispers amongst the din of commentary. Lots of ostensible “journalists” will try to spin the Fed’s decision to keep rates flat for the umpteenth time, without actually telling you what it said. I don’t think that’s fair, so I will start with the Fed’s own statement:

“The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5 1/4 percent.

“Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at a moderate pace over coming quarters.

“Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

“In these circumstances, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”

They keep telling us that economic growth is “moderate,” but may at any moment improve for reasons they decline to elaborate.

Growth is not moderate: it’s barely above a perfect flat line and headed toward the negative! Today the “GDP upgrade,” the spin guys have been pitching for weeks came in (a percentage lower than they predicted) at 0.7% per year. That, to be blunt, ain’t c**p. When third-world countries grow that slow we call them failed states and parachute in World Bank accountants armed with coercive loans.

So why hasn’t the Fed found some er, ah, “spine” and lowered rates like the speculators at the CBOT Fed Funds Futures guys thought that they would? Well we are right back to that oil thing again:

The only reason GDP went up at all is because of all the money the oil companies are making. Speaking of which, oil is back up over $70/barrel, which means that all those “non-core items” like food, lights, gasoline and electricity are going to eat more and more of folks’ relatively static paychecks.

What’s more, despite early reports to the contrary, core inflation is growing as well. Q1 saw the rate that items like blue jeans, cars and computers get more expensive accelerate another 2.3%. Strange that this too should be considered “moderate.” Equally strange that they want us to believe that this is going to change anytime soon.

Considering the paucity of supplied facts, I tend to believe what I see. And what I see is a Fed board without theory or conviction, completely paralyzed by its loyalties, and unable to act in any way other than to put out occasional bulletins noting their indifference.

Diligent Investor
Retail Stocks: Sell Tween Brands Inc. (TWB:NYSE) for 22% Gains!

A little more than two months ago, I alerted you to a free Market Report stock buy on Tween Brands Inc. (TWB:NYSE), a retailer that caters to girls between the ages of 7 and 13.

The argument was simple: “Tween” girls, a large chunk of what’s being termed Generation Y, have some of the strongest purchasing power in the retail industry, as they’re able to tug and pull at the purse strings of their parents, who will do anything to avoid public temper tantrums.

These tween girls alone spent $11.5 billion on apparel last year, up more than 9.5% from 2005.

On the technical side of TWB, I pinpointed an “Adam” and “Adam” double top from December, which had already completed its expected retracement and was to continue higher into new 52-week-high territory.

My suspicion was correct. TWB hit a new 52-week high this week at exactly $49 per share. Interestingly enough, even with consumer confidence levels dropping to its lowest level in the past year by five points from May (to 103.9), TWB posted a gain of $1.69 per share while its specialty retailer competitors dropped.

It also happened to be the same day that the company opened its 200th Justice-brand stand-alone storefront, a trendy specialty store concept for tween girls with aspiring high- fashion hopes.

With a model portfolio entry price of $37.11 per share on April 13, TWB’s current price of $45.19 per share gives us a quick 22% gain… that’s about 11% per month of hold time.

With the first half of 2007 looming upon us, I’m interested in taking whatever strong capital gains I have in all of my portfolios and calling it a day. Specifically with TWB, the company’s stock had a huge volume spike on Tuesday, and after a few days of new highs, RSI has breached into overbought territory.

Sell Tween Brands Inc. (TWB:NYSE) at its current price for gains around 22%. Congratulations for your second-quarter gains!

As always, I love to hear from you, so please, if you took my advice, drop me an e-mail to let me know how you did!

And speaking about gains, I want to update you real quick on the success that Diligent Investor is having recently.

I’ve tallied up the numbers for the first half of 2007, and they’re pretty good if I can say so myself. As far as the open positions that we’ll carry over into the second half of 2007, Diligent Investors are sitting on gains of 388% and counting. While some of our positions I consider at a “hold” status, there are still 15 stocks in our portfolio that I currently consider at good entry prices. That’s nearly 68% of the portfolio!

Why should you be interested? Because you can be among the elite group of investors who are seeing extreme capital gains in this current bull market. For the first half of 2007, Diligent Investors been able to cash out for gains totaling 669%, with each position averaging gains of 26%.

For the second quarter of 2007, they made gains of 165%! Not too bad in three months’ time!

As I said before, there are still 15 positions that are at available buy prices. Buying into them now will get you on the road to even more gains for 2007. This year, our goal is to tally more 1,000% gains on closed positions.