Transcript Weekly Economic Report January 29, 2007

Conference Call
January 29, 2007
Economic News – Housing Market
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Slightly improved
Commerce Department
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National Association of Realtors
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New home sales rose 4.8% in December – 4th monthly gain
in past 5 months
Existing home sales fell 0.8% in December
Existing home sales fell 8.4% in 2006 – largest decline in 17
years
Inventories of new and existing homes – high and
may take many months to work the inventory levels
down
Economic News – Durable Goods
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Durable Goods
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Non-defense capital goods (excluding aircraft) rose
2.4% in December
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
Orders for durable goods were up 3.1% in December
Rose 7% for 2006
Strong orders in December are partially offset over 5%
decline for core capital goods in Oct and Nov
Conference Board reported that its index of leading
indicators rose 0.3% in December
–
Forecasting stronger growth in the next 6 months
Markets
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Except for Russell 2000 – the major stock indexes
fell slightly last week
Telecommunications sector leading sector for the
week– up 2.58%
Dow Jones has gone 135 days without a correction
of 2% of more – longest run since 1958
Interest rates increased significantly as the yield on
the 10-year US Treasury note rose to 4.88% at the
end of last week – possibly because of stronger
housing and economic data
–
Short term cut in rates is NOT likely in the next few months
Business Cycle

QInsight’s business cycle model is in the PLUNGE
phase
–
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Historically: Financial, Financial Services, Basic Materials,
Consumer Discretionary and Consumer Staples
QInsight concerned that stock investors are
expecting the Fed Reserve to begin reducing shortterm interest rates far earlier than the economic data
or the Fed’s statements indicate is likely
Plunge Phase
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Stocks should be in industry groups that have
historically outperformed in the Plunge phases of t
–
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http://www.qinsight.com/current.htm
The industry groups should show rising relative
strength as compares to the S&P 500 index
The stocks should have excellent valuation
characteristics
Looking Forward – This Week
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Economic Reports:
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Wednesday: GDP for Q4 2006
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Thursday: ISM report – manufacturing
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Estimated to be about 3.0%
Best economic indicator
Friday: Non-farm payroll data

Greatly affects the bond market