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The Rally Continues

Isn't that a pretty chart? The rally continues to build and move up the 13-day exponential moving average. The difference between the 13-day EMA and the 34-day EMA continues to widen, also a bullish sign. And one of my favorite things is that we have successfully moved above the large Volume by Price bar at 840 and are showing lessening overhead resistance to further upside. All in all a very nice technical picture. We are on track to move up to the 200-day moving average at 975 on the S&P 500 Index.

I'm sorry I haven't posted this week. It's been busy with board meetings and strategy sessions, but I wanted to share our updated Investment Strategy with you.
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As we move through this rally toward the 200-day moving average, here are the strategic areas that we will focus on in our equity investment management:

· Agriculture (it continues to have the best investment fundamentals of any sector and will outperform when a new bull market begins),

· Information Technology (growth stocks outperform during the recovery phase of the market),

· Energy (the Chinese stimulus will increase demand for petroleum products – we are in the process of reviewing all holdings in the energy sector to determine which companies will realize the most benefits),

· Industrial Metals (the Chinese stimulus has already increased demand for Copper, always the first to respond to increased economic activity),

· Financials (after at least two years where we have avoided financials, based upon the government's liquidity, bank rescue plan, and explicit guarantees, we have begun to build positions in this sector), and

· Commodities and Gold (we are currently in the beginning stages of an inflation issue – its being masked by the economic downturn, but the strength in these two areas demonstrates that we must have exposure here in order to outperform long-term).

We have also updated our Investment Strategy to reduce emphasis on the following areas:

· Health Care and Biotechnology (the proposals being floated in the Capital relative to the country's health care system have had a very negative impact on the stocks in these sectors – until all details are known they will continue to be under pressure and will not likely lead the market);

· Consumer Staples (just as growth stocks outperform during the recovery phase of the market, value stocks like consumer staples underperform),

· Aerospace/Defense (the long range government budget projections show decreased government spending in this sector which will likely cause it to underperform – additionally the Defense Secretary has stated that he wants to focus on manpower and not equipment with the budgeted expenditures), and

· Utilities (the Cap and Trade legislation that is being proposed will have a negative impact in the earnings of many utility companies which will likely negatively impact their stock prices and dividend payments – on the flipside, there will be some utility companies that will benefit from the improvement in the electrical grid for wind power transmission that the government says it will discuss in greater depth later in the year, so until more information is available we will de-emphasize utilities).

In our fixed income investment management, we continue to focus primarily on certificates of deposit, but we have begun to add some corporate exposure to companies that we have confidence in their financials (e.g., Caterpillar and John Deere 5% bonds). We also have added some exposure to convertible securities through the Calamos closed-end funds. At this part of the investment cycle convertible bonds tend to outperform other bonds and equity investments.