Lindsay sits down with Michael Covel, author of “Turtle Trader” and “Trend Following”

U.S. Equity Deal-Making: From Rebuilding To Re-leveraging

13:19:00, May 25, 2007

After several years of aggressively rebuilding balance sheets, the U.S. corporate sector has started to re-leverage, which is equity-bullish but corporate bond-bearish. Our U.S. Investment Strategy service noted last week in a Special Report that corporate bond spreads have stayed tight, and the level of bond yields remains low, acting to turbo-charge the stampede to buy/retire equities. The wide gap between equity and corporate bond valuations is being arbitraged and will persist until the valuation gap is closed. If a mania develops like in the late 1990s, then the gap could even move into negative territory. Although such a shift seems a long way off, M&A activity is expediting the re-leveraging, and the financial and investment communities are rushing to take part in this stampede.

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Risk is high for a downturn in the market for the next few months but patience and maintaining exposure to the strongest players will be rewarded

My favorites right now (in order of preference) are:

Big positions*
Google (still the most exciting company in the world and offers the best exposure to the growth of the internet and future growth in computing in high technology such as genetics),
Whole Foods [combines natural, healthy food with indulgence and a somewhat ethical, feel-good culture; It is the best (alternative) grocer in North America].

Next best
Powershares DB Agriculture (offers exposure to corn, wheat, soybeans, and sugar futures.
Apple (exposure to the future of personal computing, net media and gadgetry),
Microsoft (it's still the king of software and will benefit with the growth of the net and computing).

More risky favorites (and thus smaller positions)
China Life Insurance (offers great exposure to the mainland Chinese stock markets),
New Oriental Education (private education company in China),
CDC Corporation (enterprise software, mobile apps, and digital gaming in China),
Shanda Interactive (innovative digital game company in China),
Echelon Corporation (makes power grids more efficient, saving energy and money).

There would be others, but I choose to stay away from heavy industry, mining, pharmaceuticals, biotech, and companies whose business is primarily military contracting. My favorites also preclude companies, sectors, industries, and countries I don't understand well enough.

*With big positions come big risk.

What Could End The Emerging Markets Bull Run

by BCA Research: 11:40:00, May 23, 2007

The conditions which have historically ended emerging equity bull markets are an inflation outbreak or debt deflation. Our Emerging Market Strategy service argues that neither are currently present. With regards to inflation, core CPI is either low or falling in the vast majority of emerging economies, despite five strong years of global growth. Rampant productivity gains in the global economic system have resulted in both healthy profit margins and disinflationary pressures. Specifically, falling unit labor costs continue to offset the impact of rising raw material costs and reduce the pressure on the corporate sector to aggressively hike selling prices. China presents a good example. The country is the epicenter of global growth and consequently, it is natural to expect that inflation will first begin creeping up there. Moreover, monetary conditions in China are extremely stimulative, with a cheap currency and borrowing costs substantially below nominal GDP growth. However, inflation is not a problem in China: Core CPI running as low as 1%.

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Equities: Enjoy The Rally, Think About Insurance

by BCA Research: 15:16:00, May 22, 2007

According to our Global Investment Strategy service, equities momentum might look stretched, but waiting for a correction is likely to prove too costly. While many technical indicators are warning of a correction, the global equity market has continued to grind higher aided by an avalanche of liquid public savings moving into stocks. Recent market behavior resembles that of the second half of the 1995, when the Fed went on hold and share prices escalated. During this episode, stocks consistently looked overbought and ready to correct, however, a sizable pullback only came in 1998. Waiting on the sidelines proved extremely costly. This leg of the bull market is typically both rewarding and volatile. Correspondingly, investors should stay invested but consider an insurance strategy. Bottom Line: The market is overbought but a hard correction is unlikely. Hedge potential volatility, but stay long.

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Google

I doubled my position in Google to 8.3% of my overall portfolio today. I think Google has about 30% downside risk from here, but I would assign low probability to that. It is much more likely that Google will be up 30% in the next 12 months and will at least double in the next 3 years.

Portfolio as of today

Today I bought Whole Foods just under $40 and doubled my position in Google at $461. CENTRAL GOLD TRUST
25.00	11-May-06	78.69	26	1,883.44$1,883.44	ISHARES COMEX GOLD TRUST
25.00	31-Oct-06	9.51	370	3,714.80$3,714.80	CENTRAL FUND OF CANADA LTD CL A
25.00	11-May-06	118.00	20	2,838.46$2,838.46	ISHARES SILVER TRUST
25.00	31-Jul-06	51.17	70	3,974.62$3,974.62	IPATH DJ AIGCITR ETN
12.00	12-Jan-06	27.00	190	5,305.01$5,305.01	POWERSHARES DB AGRIC
25.00	31-Jul-06	51.23	70	3,192.05$3,192.05	IPATH GSCI TRI ETN
25.00	31-Aug-06	27.39	36	2,110.04$2,110.04	DAWSON GEOPHYSICAL
25.00	4-May-06	8.70	115	1,802.18$1,802.18	ECHELON CORP
25.00	20-Jul-06	22.15	45	1,097.03$1,097.03	AQUA AMERICA INC
25.00	28-Aug-06	29.78	32	1,206.01$1,206.01	PENTAIR INC
25.00	29-Aug-06	15.66	60	1,618.32$1,618.32	FUEL TECH INC
25.00	31-Oct-06	28.66	70	2,400.22$2,400.22	MICROSOFT CP
25.00	16-Mar-07	89.60	25	2,961.51$2,961.51	APPLE INC
50.00	3-Nov-06	465.66	10	5,215.72$5,215.72	GOOGLE
9.95	22-Nov-06	28.40	80	2,578.89$2,578.89	YAHOO INC
25.00	8-Nov-06	39.45	45	3,139.63$3,139.63	AMAZON.COM INC
25.00	31-Aug-06	26.77	37	1,651.70$1,651.70	BLACKBOARD INC.
25.00	29-Aug-06	41.21	24	1,270.29$1,270.29	MONSTER WORLDWIDE
29.00	28-Sep-06	25.90	40	1,847.43$1,847.43	NINTENDO CO LTD ADR
25.00	16-May-07	39.43	115	5,053.72$5,053.72	WHOLE FOODS MARKT
25.00	29-Dec-05	15.43	70	3,379.78$3,379.78	GUANGSHEN RAIL CO LT
25.00	26-Oct-06	23.17	100	3,629.74$3,629.74	HOME INNS & HOTELS
25.00	8-Sep-06	21.47	46	2,385.98$2,385.98	NEW ORIENTAL EDUCATI
25.00	4-Jan-06	18.23	60	2,604.94$2,604.94	FOCUS MEDIA HOLDING
25.00	6-Jan-06	32.60	34	2,709.49$2,709.49	CTRIP.COM INTL LTD
25.00	6-Jan-06	16.90	60	1,238.90$1,238.90	51JOB, INC.
25.00	8-Sep-06	33.23	30	1,589.18$1,589.18	CHINA MOBILE LIMITED
25.00	23-Jan-06	4.17	250	2,036.14$2,036.14	ASIAINFO HLDGS INC
50.00	28-Mar-06	62.36	24	3,436.61$3,436.61	BAIDU.COM, INC.
25.00	8-Nov-06	15.54	110	3,235.20$3,235.20	SHANDA INTERACTIVE
25.00	2-May-06	4.66	215	2,016.83$2,016.83	CDC CORPORATION CL-A
50.00	18-Jul-06	19.69	100	2,682.85$2,682.85	CTC MEDIA, INC.
25.00	8-Sep-06	59.99	17	1,878.18$1,878.18	VIMPEL COMMUN
50.00	20-Sep-06	32.00	66	3,200.48$3,200.48	BANCO ITAU HLDG ADS
25.00	31-Aug-06	19.02	50	1,630.57$1,630.57	TELVISA S.A.