Bill's Portfolio:

I'm going to skip this section today. As you know, my focus has been elsewhere.

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Sector ETF:

Here are the ETF charts for sectors 10 (energy: IYE), 15 (basic materials: IYM), 20 (industrial: IYJ), 25 (consumer discretionary: XLY), 30 (consumer staples: XLP), 35 (healthcare: IYH), 40 (financial: IYG), 45 (technology: IGM, IGV and IGW), 50 (telecom: IYZ) and 55 (utilities: IDU).

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Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)

Here's the XLE Hourly and Daily data charts:

XLE Hourly data:

XLE Daily data:

Three weeks ago I convinced myself that XLE "hit the cycle high of 46.15. Yes, that was the top; the cycle has peaked. XLE is now done like dinner". Well, XLE traders liked the prospects of $60+ crude oil so much, they bid the XLE from the 44's in June up to a new high of 47.30.

The oil market seems to have found some new drivers, including: (1) more major hurricanes in the Caribbean to worry about, which makes this a four season play to go along with the "freeze in the dark" winter seasonal play, (2) CNBC's timely hype of charismatic oil men like T Boone Pickens and the Saudi Prince Gazillionaire, (3) congressional hype over the threatened loss of "strategic" oil reserves, and (4) other stories found at PR firm Hill & Knowlton, as and when needed.

XLE closed the week at 45.37, which was down "1.88 pct on the week, largely because of the "2.07 pct pull-back in XOM. This group is not quite like an internet/Y2K bubble replay (1999-2000), but industry experts are wondering how long $60 crude oil can hold up. They remember the days not so long ago when the oil contracts traded mostly in the teens.

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Sector 15 (basic materials: IYM, XLB, IGE and VAW)

Here's the XLB Hourly and Daily data charts:

XLB Hourly data:

XLB Daily data:

XLB, unlike XLE, has a potential to rally here; however the long-term outlook for most of the components in this Basic Materials sector is negative. It is tough for certain industries, like chemicals, paper and forest products, and the industrial metals, to remain bullish if the global economy is not firing on all cylinders.

XLB closed the week at 27.90, up +0.76 pct W/W. It is still well below the M40 (40-week moving average), which is at 28.97.

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Sector 20 (industrial: IYJ, XLI, VIS, and IYT)

Here's the XLI Hourly and Daily data charts:

XLI Hourly data:

XLI Daily data:

The Industrials ETF (XLI) was up +0.70 pct W/W to 30.03, which is now right at the 40-Week Moving average (M40=30.07).

Like XLB, and probably XLP, there might be a further small rally in the days ahead, but the long-term cycle is pointed down.

A month ago, I wrote: "Traders in this Industrials sector (and the Basic Materials) have to be closely watching the USD action in the next month. I believe that the over-bought USD will come off, which could help these two sectors for a couple weeks anyway."

Well, the USD finally cooled, off -0.59 pct this week, and XLI failed to move up as much as the broad market. I was wrong.

But let's see what happens next week.

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Sector 25 (consumer discretionary: XLY, IYC and VCR)

Here's the XLY Hourly and Daily data charts:

XLY Hourly data:

XLY Daily data:

Consumer Discretionary Spending stocks (XLY) were up +1.88 pct to 34.11, which is back above the M40 (33.32).

I expect XLY to correct to the downside soon " maybe next week " on account of the tired out hype over new car sales (at highly discounted prices), big screen TV sales, and mp3 (iPod) sales.

Moreover, CNBC is repeatedly showing interviews with real estate agents for homes in the $5 million to $25 million range. For all that 98 pct of America can relate to, they might as well be showing Disneyworld. I take this example of CNBC programming as just one more in a series of promotions aimed at getting people with abundant funds to spend them -- in an effort to revive a slowing economy.

Until there is evidence of significant retail buying in other industries, particularly the ones involving middle and lower class Americans, the jury remains out.

I continue to see U.S. society as becoming more a case of the haves and the have-nots, which is a worrisome trend.

Most Americans will have a difficult time paying debts if interest rates continue to rise. Many are already having a challenge paying down the principal on their increasing mortgage debt, and, as I have said before, they cannot even afford to gas up their aging automobiles to drive to Wal-Marts to cash in on the sales that are being held before the Yuan is revalued higher, which will make goods from China even more expensive.

But then, government continues to say inflation is not a problem. ;-)

It is for the middle and lower classes.

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Sector 30 (consumer staples: XLP, VDC, RTH and IYK)

Here's the XLP Hourly and Daily data charts:

XLP Hourly data:

XLP Daily data:

The most defensive sector for traders, Consumer Staples (XLP), was up +1.57 pct W/W to 23.36, but was flat on Friday. The current price sits just above the M40 (22.98).

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Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)

Here's the IYH Hourly and Daily data charts:

IYH Hourly data:

IYH Daily data:

A month ago, IYH was up to 62.42. This week, the healthcare sector index fund was up +0.69 pct W/W to 62.35, so it is trying to hang in. I think you can buy it cheaper in the weeks and months ahead.

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Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)

Here's the XLF Hourly and Daily data charts:

XLF Hourly data:

XLF Daily data:

Two of the four Dow component losers this week were AXP and C. But, the Financial XLF was up +1.64 pct W/W to 30.37. The M40 is now at 29.33.

I'm surprised the current XLF price can stay above the M40, particularly as interest rates are rising. You want to buy financials when interest rates are falling and avoid them when rates are rising.

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Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, and MTK)

Here's the SMH Hourly and Daily data charts:

SMH Hourly data:

SMH Daily data:

The semiconductor index (SMH) was up a spectacular +4.08 pct W/W, which was another surprise. I think the stock touts on CNBC are running full-time to pump financial and technology stocks on account of the heavy market weighting and typical leadership of these sectors. I think both are toppy.

In fact, one third of this week's gain in the SMH happened immediately at Monday's open. Talk about hype.

The same event occurred the week earlier on Monday morning. This is called "stock promotion".

On the other hand, as I see it, the U.S. Senate is still serious about putting 27 pct tariffs onto Chinese goods, which will likely mean a ~20 pct price increase in similar Japanese, Taiwanese and Korean products. That surely cannot help the U.S. economy.

Why not just wait until the Yuan is revalued higher to experience the same effect?

Here's a look at the leading chip stocks. They have had a heck of a six-day run through Friday the 15th.

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Sector 50 (telecom: IYZ, VOX and IXP)

Here's the IYZ Hourly and Daily data charts:

IYZ Hourly data:

IYZ Daily data:

The Telco Services sector (IYZ) was up +0.97 pct W/W to 23.86, which is now back above the M40 (23.40).

There seems to be a major showdown coming between traditional telco operators (who are rapidly going into VoIP and mobile) and the CATV companies that figure to extend their TV service with telco. Who is to win in the long run? I think telco operators.

Anything without wires. Wires are so twentyish century.

Still, I'd wait until the broad market has a further pull-back before jumping into even the best of this lot.

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Sector 55 (utilities: IDU, XLU, and VPU)

Here's the XLU Hourly and Daily data charts:

XLU Hourly data:

XLU Daily data:

The Utilities (XLU) hit another cycle high, closing at 32.02, although the fund was up just +0.09 pct. For some reason, the beat goes on. Obviously these stocks will come off once interest rates hit the tipping point.

I'd avoid the lot. Actually, I thought the game was over for this sector on Thursday, but Friday's action was a holding one. Let's see what happens to the sector next week should interest rates continue to rise.

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Bonds:

If you have been watching the bond market this past month you will see that rates are rising, but also that the yield spread is narrowing. Both are important situations to watch.

Hourly data charts:

Daily data charts:

At some point " which is called the tipping point " higher interest rates, which are presently knocking down bond prices, will begin to impact stock prices.

The latter, which is illustrated below, is a sign from the bond market that the economy is not healthy.

From the U.S. Fixed Income (Bonds) Yield Table at Yahoo Finance, the 30-year T-Bond (actually 26 years) is now yielding 4.40 pct, up from 4.21 pct just three weeks ago, which is a significant move. At the same time, the 3-month T-Bill yield moved up strongly, and relatively faster, from +2.82 to +3.08 pct.

Combine these two actions, and you see the spread between 30-year T-Bonds and 3-month T-Bills presently stands at +132 (which has dropped from almost +200 basis points two to three months ago). While the spread did collapse to +128 bp a couple weeks ago, and has improved slightly, this condition is still a red flag and bears watching.

A yield spread of 300 basis points (between the 30-year and 3-month Treasuries) reflects a healthy economy in the U.S..

As pointed out yesterday, as the yield curve has been flattening over the past many months, traders have become aware of the fact that, rather than "it's the economy, stupid", it is in fact international money flows that are increasingly needed to keep the U.S. real estate and capital markets game afloat.

Should the bond market start to stumble here, it could dramatically affect the U.S. economy in a negative way, and quickly pull down the equity market.

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Commodities:

Commodity prices have stayed flat now for three weeks since the time the $CRB index rebounded to move up to 312.

If you recall, it was a month ago that I wrote: "This week the $CRB was up +2.81 pct W/W to 310.98, and looks like it's going higher next week." Then: "This week, $CRB was up +1.26 pct to 312.24. Still, the index is far off the intermediate cycle high of 323.33, which might hold, as it is 3.6 pct away."

Yes, I was concerned that the $CRB index could not sustain its rally to move up to new cycle highs, and since then it did not.

This week, $CRB closed at 309.57, basically unchanged. The M40 is 295.83, so the index is still in a rising intermediate-term trend.

The following chart shows that the crude oil price, and not the gold price, is moving the $CRB commodity index.

During my Week #25 in Review, I stated: "Can oil go higher from here? I'd say the speculation is ripe to see crude oil contracts trade well up into the mid-60's in the next couple weeks. There may be little to no fundamental reason for oil to be trading in the 40's, or even the 50s, nevertheless the 60s, but there is also no technical resistance on the charts. And, boy, do those oil traders like to trade on their charts."

So, yes, crude oil contracts did trade up into the 60's for the past couple weeks, but weakness is starting to show in the oil futures. It seems to me that $WTIC (Crude Oil), and hence $CRB, are headed lower in the next week, and perhaps after that.

Lower commodity prices will be promoted by the market bulls as a sign that costs will soon be falling and profits rising. The bears will point out that a failing economy is the reason for lower commodity prices, which will soon hurt top line (revenue) growth, which in turn will negatively impact corporate profits.

The market is always a glass half full or half empty situation. For this reason, I like to keep my eye on the ball as to where stock prices have been, and to the likelihood of a 'reversion to the mean' scenario playing out.

For a look at commodities, and the economic impact, I have been printing the following list of oil stocks in sub-industry groups every week, as I say, "until another market driver, like interest rates, takes the lead."

Recently, I have been suggesting that oil is looking tired, and will decline, and that interest rates will start to rise, and take the place of oil as the major worry of traders.

I have been early on the oils for a couple months, but the bond market has now started to break down, so next week I expect to switch from a primary focus on oils to a primary focus on interest-sensitives.

So for one more week, let's keep our eye on the oil ball. I say that with dangerous Hurricane Emily missing the Gulf of Mexico oil fields " if that happens to be the case " then oil prices will start down.

10101010 Oil & Gas Drilling

10101020 Oil & Gas Equipment & Services

10102010 Integrated Oil & Gas

10102010 additional list.

10102020 Oil & Gas Exploration & Production

10102020 additional list.

10102030 Oil & Gas Refining & Marketing

10102040 Oil & Gas Storage & Transport Companies in storage and/or transportation of oil, gas and/or refined products.

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Gold:

When I last wrote this report three weeks ago, $GOLD was up to $440.08, and the M40 was 429.97.

Let's review what I wrote last time out for the Week in Review:

"Yes, I've been more bullish on gold since mid-May, saying that I see gold bullion up to $450 this summer (and it's now summer), but really there is a seasonal strength after the summer that moves into the winter. And the USD remains strong here, and China is not likely to revalue the Yuan until the 3Q05 (which I started saying in 1Q05). So traders ought to be nimble here.

As to the immediate direction for the gold market, the recent cycle highs are 447.05 (short-term) and 456.87 (intermediate-term), which are targets. There may be a pull-back in the gold markets (both the metal and the miners) before the next major advance. If next week, bullion ($GOLD, the EOD continuous contract) does not close above 447.05, I'd be nervous, because the pull-back could be at hand.

If equity prices come off hard next week, for example, unless the USD also comes down hard (which is unexpected), traders will tend to throw away their PDG, NEM, GG and the like. It's human nature. If that happens, it would set up another buying opportunity for the goldminers."

I'd say that was prescient on my part. Maybe it was just a good guess?

This interactive chart shows the week for the Gold Bullion index.

Three weeks ago, I wrote: "The Philly Gold & Silver stock index (XAU) had a six-session move of +8.65 pct before this week. Unfortunately, this week $XAU was down "0.33 pct to 92.60. It failed to exceed the highs of a week ago, and the M40 is a ways off at 95.76. So you gold bulls ought to be careful."

Did you heed my specific warnings?

The Daily and Weekly data cycle high (443.70) and low (413.85) are now the same, which means that the gold market is ready for a break-out, in my view.

I could be wrong (obviously!), but I feel that a trend line drawn over the recent cycle peaks indicates that an upside break-out is possible at about 437, within three weeks. I feel strongly that gold bullion is not going lower than the cycle low of 413.85, and will soon start to move higher to establish a new cycle high (i.e., above 443.70).

Typically the goldminer stocks are the foreteller of such a move, so let's look at $XAU (Philly goldstock index and TSX: XGD, which is the Toronto Stock Exchange/S&P goldminer index).

The $XAU closed this week at 90.09, down "2.26 pct, well below the M40 (95.11), and since on Friday $XAU was down "1.28 pct, that's not a good sign.

The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF, which trades under the ticker symbol TSE:XGD was down "2.34 pct W/W to 47.95, which is another bad sign.

The M40 for XGD is now 50.23, so the last rally could not overcome the technical resistance line. I had been thinking XGD would take out the M40 in July, but the strong USD remains a deterrent, at least so far.

It appears then that the goldbugs will have a couple weeks to accumulate or add to positions in precious metals share holdings. On weakness, I like to write puts in the hopes that I get some stock put to me, and where I get to earn the premiums on the other option contracts that expire worthless.

Always I am trying to lower my cost base for my core portfolio -- whether it is goldminer stocks or whatever. Writing puts after extreme price weakness helps to accomplish that objective.

When you think about it, the cost base of your holdings is the most critical aspect of portfolio management. Daily prices -- where your portfolio is being marked to market (i.e., valued daily) -- is not that important because prices change all the time. But your cost base doesn't change unless you take an action.

The fact that capital markets are so liquid and permit such actions any day is why I prefer trading there as opposed to say real estate. With real estate, I suppose you could sell a purchase option on your home, or lease out a room or two, in order to reduce your cost base, but that is a messy thing. With optionable stocks or ETF's, however, it is enormously easy.

Just to stay on this point (about cost base of holdings) for a moment, many traders always look at current dividend yield (i.e., dividend to price), whereas the only thing important to them when reviewing their holdings is the dividend to cost. That's a very big deal.

Too many investors, I feel, are caught up in the high return game with regard to income trusts. That could possibly be a mugs game because the yield is simply a return of capital, and the capital base (per unit) is not likely to rise in most cases. But with a good quality common stock that pays a nice dividend, the share price (i.e., your share of the capitalization) is typically rising. The dividends also tend to rise. And if you position yourself with options writing to be constantly lowering your cost base, you will find that your return on invested capital improves significantly over that of the income trusts.

Enough said. Here is the chart(s) -- Hourly data and Daily data -- for the TSX Goldshares index.

Here are the interactive charts of the leading goldminers on the board.

List #1

List #2

List #3

Also, for you goldbugs, here is a neat website that is well organized for research purposes: www.goldsheetlinks.com

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Forex:

The U.S. Dollar weakened this week. The USD closed at 89.72, down "0.59 pct on the week, although on Friday it was up +0.36 pct. A turning point could finally be at hand as traders start to focus on the upcoming Chinese yuan revaluation.

The $XEU closed up +0.97 pct this week to 120.54, although it was down "0.28 pct on Friday.

Charts of the $XEU are looking like a bottoming pattern has completed, which would be a godsend to goldbugs.

I do understand the reasons that forex traders are so down on the Euro: the European economy is in relatively bad shape, the EU Constitution in doubt, the central banks not wanting to tighten, and so forth, all of which hurts their currency.

But other than some dubious evidence of a rapidly strengthening U.S. economy, and a Fed (i.e., U.S. central bank) committed to tightening (apparently), the U.S. economy seems to me to be on the brink.

How much debt can one country load on the backs of its workers before reality sets in? I'm talking not just government debt, which we all share, but real estate debt, car loan debt, credit card debt...It's all debt!

Ironic isn't it that corporations are so flush, and the Average Joe in America is worrying about the monthly (or is it now weekly?) nut.

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International Equities:

The Canadian equity market remains strong, but the Japanese and U.K. markets look relatively weak here. With Canada, it's been a matter of the oils and the financials, which have been so very strong.

Japanese equity market ETF: EWJ

Japan (EWJ) was down "0.10 pct W/W to 10.22, which is the same level of three weeks ago.

The Japanese equity market has declined modestly for over a year. The operative words are ‘declined' and ‘year'.

I have said before that if China and the U.S. were not such hot trading partners, this country would not be doing so well. Until I see a pattern of global economic expansion, however, I remain mildly negative.

I thought it would be appropriate to show the Monthly data series charts for these markets for the next month or so, and that way you can look at the changing RSI values of the most important data series.

Also, especially for Japan and the U.K. market ETF's, note the long-term data topping out -- and declining from very high values -- of the MACD, Stochastic and RSI indicators. That is a reason why I say that longer-term (i.e., for the Extra-Year Trader), the technical picture looks negative. In that kind of scenario, it is just a matter of time for the intermediate-term and short-term data to begin showing a breakdown of the trends and cycles. This is a time for caution.

Monthly Data for EWJ:

U.K. equity market ETF: EWU

The U.K. market (EWU) was up modestly +0.22 pct this week to 17.94. I remain mildly negative.

Monthly Data for EWU:

Canadian equity market ETF: EWC

The EWC had a tough week, down "1.01 pct W/W to 18.70 because of the pull-back in oil stocks.

Monthly Data for EWC:

With respect to the Canadian equity market, a month ago, I wrote: "Now that's where the beef is!" I should have written, "where the good beef is" because, horror of horrors, the U.S. has admitted its first case (or two?) of Mad Cow Disease. So now Canadians want to lock their borders to American vacationers trying to sneak in with U.S.-made Big Macs. And, please, no U.S. cattle or meat products. But you can have ours! They're safe! Isn't that the irony of all ironies?"

Well, this week, the U.S. authorities have finally opened the borders to Canadian beef, which should help the economy even more in Western Canada.

And there is discussion of a dual pipeline for gas and oil coming down through B.C.-Alberta into the U.S., which is precisely what is needed to create jobs, bring in affordable and plentiful energy supplies, and so forth. In future years, this will be a massive boost to the economy in Canada's West and the U.S. Northwest.

For an interactive look, here are the hourly data charts of the various international equity markets as represented by the U.S.-listed and dollar-denominated ETFs:

(Japan, Taiwan, Hong Kong, Singapore)
(U.K., Germany, France, Italy)
(Canada, Mexico, Brazil, Australia).

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U.S. Equities:

Here is the 60-minute data chart of the Dow, S&P 500, Nasdaq Composite, and Russell 2000 (small cap) indexes.

Here is the Weekly data chart of the Dow, S&P 500, Nasdaq Composite, and Russell 2000 (small cap) indexes.

For the week, the $DJX (Dow 30) was up +1.84 pct to 10640.83, the Nasdaq Composite up +2.08 pct to 2156.78, and the $SPX and $RUT up +1.33 pct and +0.24 pct respectively, all W/W.

That was a very good week; but it may be one of the last ones, so don't spent the weekend rejoicing if you have recently been buying stocks with the intention of holding them for the long term.

The following charts for the Monthly data series indicate that RSI and Stochastic data values (both are similar calculations by the way) are at very high levels, which typifies the topping out of a bull market. This is the time to be ultra cautious.

Three weeks ago, every Dow stock was down on the week and I thought that the bear cycle might have commenced at that point. Then two weeks ago there was the terrible London bombing of the mass transit system, which caused an emotional reaction that shot equity prices higher, for a brief spurt anyway.

But the end of the bull cycle is near and readers ought to be taking steps to protect their portfolios.

There are many ways you can do that, such as:

· Selling stocks that have given you exceptional profits, or are up significantly since 1Q03

· Buying put options against core portfolio stocks you don't want to sell but would if you believed they were to fall say 7 to 10 pct at the start of a bear market. That way, if the market does rally, you keep the stock, but your cost base rises by the cost of the puts.

· Buying counter-cyclical stocks that have already had a major bear phase or those that appear ready to start a new bull. Gold stocks would be in that category.

You have to remember that successful portfolio management is as much protecting against losses as it is positioning for profit opportunities. Whether or not you care to accept this advice, a bull market that began in 1Q03, or 4Q02 as some believe, going into 3Q05, is a lengthy cycle, in historical terms.

In addition, most stocks are up 50 pct to 200 pct or more in that time frame. When you calculate the total pct return on capital over this time, including dividends; that happens to be a spectacular piece of history.

There will definitely be a reversion to the mean; so I say lock in your profits, and sit in cash if you want to.

Inflation presently is so low that the cost of waiting out the balance of the cycle and into the bottom of the next bear cycle is not prohibitive. At the end of the day, I believe you will be far ahead of the game.

The following table shows the weekly price performance of the Dow 30 stocks, which I sorted by 1-week price change.

This week, however, there were 26 Dow components up and just four down.

The five biggest winners were: MCD, up +8.17 pct; GM, up +5.94 pct; DIS, up +5.52 pct; IBM, up +3.88 pct; and HD, up +3.82 pct.

The MCD was probably a reactionary "dead cat" bounce following the Mad Cow news that hurt the stock earlier. Although the PE is a reasonable 16, the stock is technically over-bought.

Long-term it's time to take profits in MCD. From a price of 12 in 1Q03 to 34.56 at the end of the 2Q05, owners have enjoyed a phenomenal performance record for a mature restaurant chain that has no shortage of competition and no "unfair advantage" in the marketplace.

But revenues are expected to grow no faster than 5.0 pct annually and profits less than 9.0 pct annually, so "where's the beef"?

With GM, I did not sell too early (a month ago, at 35). I already explained that there would be many traders, including professionals who ought to know better, that giving away cars at employee discount prices is a scheme designed to clear dealer lots of inventory, rather than a strategy to make any money. Next you're going to hear management complain about losses, and the UAW labor isn't going to pay any attention to the whimpering.

GM has serious issues ahead.

As to DIS, I happen to like the Disney company, and have it ranked in the Cara Best 100 Companies. Now that the dissident shareholder group has endorsed the incoming CEO, I see clear sailing ahead. The only problem here is the state of the broad market. DIS is over-bought on the Daily and could come off say 10 pct on a serious broad market decline. But, this is one stock I would not hesitate to accumulate on weakness.

IBM is another stock that can be bought on weakness. The stock is technically over-bought on the recent market run-up, however. Longer-term, the recent 74 cycle low will likely not be seen again for many years.

For the four Dow losers this week, XOM led the pack, down "2.07 pct. The others, BA, AXP and C, were down only a small pct. How many of you really believe that next week, the second biggest loser W/W will be down just "0.49 pct?

Not too many, I hope.

You can do this table yourself by copying the following list of the Dow 30 stocks and entering them in the window for "Summaries" at Investertech.com.

AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG SBC UTX VZ WMT XOM

After you bring up the list, click on the Performance tab. To sort for the relative price performance for any recent period, you just need to click on the column header of the period that interests you.

Here are the Dow charts from Investertech.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)

(AA) (AA) (Here is the Apr. 22 Value Line report on AA: next one is due Jul. 22)

(AIG) (AIG) (Here is the May 27 Value Line report on AIG: next one is due Aug. 26)

(AXP) (AXP) (Here is the May 27 Value Line report on AXP: next one is due Aug. 26)

(BA) (BA) (Here is the Jun. 24 Value Line report on BA: next one is due Sep. 23)

(C) (C) (Here is the May 27 Value Line report on C: next one is due Aug. 26)

(CAT) (CAT) (Here is the Apr. 29 Value Line report on CAT: next one is due Jul. 29)

(DD) (DD) ( Here is the Apr. 22 Value Line report on DD: next one is due Jul. 22)

(DIS) (DIS) (Here is the May 20 Value Line report on DIS: next one is due Aug. 19)

(GE) (GE) (Here is the July 15 Value Line report on GE: next one is due Oct 14)

(GM) (GM) Here is the Jun. 3 Value Line report on GM: next one is due Sep. 3)

(HD) (HD) (Here is the July 8 Value Line report on HD: next one is due Oct 7)

(HON) (HON) (Here is the Apr. 29 Value Line report on HON: next one is due Jul. 29)

(HPQ) (HPQ) (Here is the July 15 Value Line report on HPQ: next one is due Oct 14)

(IBM) (IBM) (Here is the July 15 Value Line report on IBM: next one is due Oct 14)

(INTC) (INTC) (Here is the July 15 Value Line report on INTC: next one is due Oct 14)

(JNJ) (JNJ) Here is the Jun. 3 Value Line report on JNJ: next one is due Sep. 3)

(JPM) (JPM) (Here is the May 27 Value Line report on JPM: next one is due Aug. 26)

(KO) (KO) (Here is the May 6 Value Line report on KO: next one is due Aug 5)

(MCD) (MCD) (Here is the Jun 10 Value Line report on MCD: next one is due Sep. 10)

(MMM) (MMM) (Here is the May 20 Value Line report on MMM: next one is due Aug 19)

(MO) (MO) (Here is the May 6 Value Line report on MO: next one is due Aug 5)

(MRK) (MRK) ( Here is the Apr. 22 Value Line report on MRK: next one is due Jul. 22)

(MSFT) (MSFT) (Here is the May 27 Value Line report on MSFT: next one is due Aug. 26)

(PFE) (PFE) (Here is the Apr. 22 Value Line report on PFE: next one is due Jul. 22)

(PG) (PG) (Here is the July 8 Value Line report on PG: next one is due Oct 7)

(SBC) (SBC) (Here is the July 1 Value Line report on SBC: next one is due Sept 30)

(UTX) (UTX) (Here is the Apr. 29 Value Line report on UTX: next one is due Jul. 29)

(VZ) (VZ) (Here is the July 1 Value Line report on VZ: next one is due Sept 30)

(WMT) (WMT) (Here is the May 13 Value Line report on WMT: next one is due Aug. 12)

(XOM) (XOM) (Here is the Jun. 17 Value Line report on XOM: next one is due Sep. 16)

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This was a difficult week for me to get back to work, but unfortunately my family challenges are not yet finished. More on that later.

Another story in the news this week is also a sad one, I think, and relevant to all of you.

On Friday, an Ontario Court of Justice convicted former RBC Dominion Securities mergers & acquisitions managing director Andrew Rankin on all ten counts of tipping friend Daniel Duic in advance of M&A deals. This was Canada's biggest ever case of insider trading.

The RBC man made no profit on the illegal tipping " at least that prosecutors could find " but the tippee, his childhood pal and close friend, now ex-friend, ratted out to the regulators in order to escape scott free.

In the words of the judge, "This man (the tippee) pockets $4.5 million from insider trading and gets to keep most of it and gets to walk the streets a free man...It is public opinion and not for me to determine if this kind of deal should have been accepted (by the securities commission)."

I call it an outrage.

You already know what kind of job I think the regulators do to "serve and protect" the public, so I won't comment further here. I hope to review this trial in a separate article.

Today, however, for the purposes of conveying to you what I think this capital market has become, I thought I'd point out some even more telling statements by the judge. Remember, this was Canada's biggest ever case of insider trading.

On the nature of the M&A business, the judge stated: "In short, M&A work is Monopoly for grown-ups;There's a requirement for timing, the value of strategy and perhaps most importantly, it teaches the need for properly evaluated risk taking."

On the case, he remarked: "(It) has damaged careers and reputations and provided a glimpse into the rarefied world of privilege."

On the defendant and the prosecutor: "(He) laid waste to his credibility. (For the prosecutor, it was like) shooting fish in a barrel".

On RBC Dominion Securities witnesses: "They all had an agenda, an image to protect, a lawsuit to be mindful of and, for the underlings, job security to protect."

The judge added that he "had to suppress a chuckle" each time a DS witness said that what was discussed over late night pizza was just personal.

In the 1980's, I worked for over three years at RBC DS at their headquarters office in Toronto. I followed that with three years at (Morgan Stanley) Dean Witter, also in Toronto. The people I worked with in these companies were not crooks. They represented the industry's finest. And I'm proud to say I enjoyed my time there.

Of course there are bad apples everywhere, but the public should take this case as a learning experience; you simply must learn to "serve and protect" yourself.

The financial services industry is called the sell-side because they have vested interests. While they say that one of their interests is to serve you (the public), the Securities Act permits them to serve themselves in the same transaction(s).

That is a conflict so blatantly obvious -- so pathetic -- that the public must put a stop to it. All the regulation in the world is not going to undo the damage that will be done next year, and the years after that, which will inevitably come because that is the only possible outcome with such a flawed system.

Human nature being what it is, the public is almost always served second. I look at the Rankin case as one more example of people in authority attacking symptoms and not the cause of problems.

For that I hold the legislators and the regulators at fault, and I feel sorry for the Rankins and the Duics of this world because they are merely chess pieces acting out roles in this modern day play called Capital Markets 2005.

If I happened to leave my wallet " identification and all -- in a public place, do I expect to see it returned, contents intact?

Would the person who found my wallet be at fault? I think not.

It is not Rankin or RBC DS that is dysfunctional; it is the capital market itself. Without a better capital market system, the users of the system " the owners of capital " are not up to the challenge. The odds are stacked against them.

I know; I was on the other side -- you might say at the top of the other side. The penthouse of the Toronto Stock Exchange tower in a broker-dealer that I designed and built from scratch.

So, believe me; I know about these things.

Some may say that I don't like the sell side, but that is untrue. I care about the sell side. I was a willing part of it. But, if gambling is becoming a social problem today, do I go around a casino blaming the employees? Hardly!

One of the reasons I write this blog is to attack the enemies of the owners of capital " not personally, but in principle.

That's because whether you are a small player like me, or a large and powerful institutional owner or manager of capital, you cannot win this game fairly. You need an unfair advantage, even one like Daniel Duic found in Andrew Rankin.

Surely a hard working, well intentioned, society deserves better.

There is a fall-out to the breakdown of the capital market system. I venture to say that 60 pct of all trading today is now managed directly by computer algorithms. Algorithmic systems of one kind or another also significantly impacts probably half the balance.

There are reasons why people now act like robots while trading markets. It's because nobody trusts anybody else. We'd rather trust an impersonal computer.

So what is happening today is that we trade for the day or the week, and not for the decade or the generation. Tactics (based on guessing) has replaced strategy (based on knowledge and analysis).

I encourage you to read a book called Stock Market Jungle by my friend Michael Panzner. I have reviewed his book in my own pages, which he has added to his new website.

I will not repeat myself here, so I ask you to click on the link.

The message has not changed.

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It took me a long time to write this today, and the writing shows I have little humor, but the fact is I care and I managed. Thank you for returning to read my message, and thank you again for your kind words about the loss of my parents.

BCara@BillCara.com