AlphaProfit Sector Investors' Newsletter: January 20, 2008 Bulletin

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AlphaProfit Newsletter: January 20, 2008 Bulletin

Subject: An Unrelenting Bear

Dear Valued Subscriber,

The equity markets have hit the skids in the New Year. The Dow Jones Wilshire 5000 benchmark is down 10.1% year-to-date.

Losses from sub prime mortgages continue to spiral. Mortgage insurers like MBIA and Ambac are running short of money to cover nearly $500 billion worth of impaired loans. With the economy worsening, investors are looking to the government to step in and provide relief. President Bush is pushing a $150 billion economic stimulus package to jump-start the economy.

Given the broad ramifications, the adequacy and timeliness of measures taken by the government will likely have a substantial impact on the course of equity prices in the near-term. A meaningful step that boosts confidence can cause equity prices to rally sharply.

At just about 1% of U. S. gross domestic product, we do not expect the $150 billion package proposed by President Bush to have a material impact on the economy. Ideally, we would like to see the government use its resources to hit the sub prime problem head-on rather than rely on higher consumer spending to prop things up. The government could potentially buy mortgage insurers and partly compensate banks for failed loans.

Federal Reserve Chairman Ben Bernanke has stated that the central bank will cut interest rates. Investors are expecting short-term interest rates to be reduced by up to 1% before the end of January. Any disappointment here will cause the slide in equity prices to worsen.

At a company and industry level, outlook for future earnings will play a role in setting stock prices. The upcoming week is a busy one for the technology sector with Apple (Jan. 22), Motorola (Jan. 23), and Microsoft (Jan. 24) being just a few of the names on the deck.

The recent decline in stock prices has made valuation metrics for the overall market quite attractive. While this will not preclude additional large declines in the near-term, we believe the possibility of a 2000-2002 style bear-market is relatively remote.

We continue to like the prospects for the recommended industry groups. We are not making any changes to the model portfolios or the recommendations. We recommend subscribers with asset allocation consistent with their investment objective and risk tolerance to stay the course. Subscribers with higher-than-desirable investments in equities may use periods of strength to reduce exposure to the appropriate level.

The next Indicator Update will be published on Friday, February 1.

Sincerely,
Sam Subramanian
AlphaProfit Investments, LLC
Ideas. Insights. Results.
http://www.alphaprofit.com

Notes: The AlphaProfit Sector Investors' Newsletter™ is for information purposes only. AlphaProfit Investments, LLC is not soliciting any subscriber to buy or sell any security. Nothing herein should be construed as an offer to buy or sell securities or to give individual advice on investing. Before buying or selling any mutual fund, exchange-traded fund, security, or investment, read the prospectus carefully. For securities held in brokerage accounts, read the broker's specific terms and conditions which apply to trading of the securities. AlphaProfit Investments, LLC cannot and does not give any assurance that the present or future model portfolio changes will be profitable. Past performance is not a guarantee for future results. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. AlphaProfit Investments, LLC is not responsible for any errors or omissions. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from any of the mutual fund companies, brokers, or entities connected with the exchange-traded funds mentioned in the newsletter. Please review our Terms and Conditions of Use and Subscriber Agreement which is available on our website at www.alphaprofit.com; they govern your relationship with AlphaProfit Investments, LLC, including, but not by way of limitation, use of this newsletter. No part of the AlphaProfit Information may be reproduced or re-transmitted in any manner without written permission of AlphaProfit Investments, LLC.