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Sterling Weekly for January 26th, 2009

The overall market as measured by the Dow Jones Industrial Average lost approximately 521.62 points or approximately 6.0% in the two (2) weeks since our last edition of the Sterling Weekly. Basically every sector index I track is looking weak. One way of interpretating this is that there is not really any sector of the economy that is doing well.

I've often written that bull markets are created by new technologies and deregulation (or in some instances by new regulations). Those are the 2 items that create long term economic growth. Heavy government regulation and/or spending does not create growth; it creates a misallocation of resources that result in the picking of winners in one sector of the economy, and losers in another. Think about the recent government mandates for biofuels. Take a good look at the ethanol industry. The government required its use as a blending agent for gasoline and provided producers with a tax credit (ie. subsidy payment) of $0.54/gallon. Hundreds of ethanol plants were built as major companies entered the industry and almost every community in the midwest tried to put up its own ethanol plant. The result, an unsustainable spike in ethanol prices, the price of the feedstock (ie. corn), the cost of farming (farm land shot up in price as did the cost of fertilizer, ect.), speculators entered the commodities markets, consumers paid higher food prices and there were food shortages in some parts of the world, and finally we were left with an industry with way to much capacity and a shortage of raw materials. And when the market finally normalized everyone lost money. Many commodity funds have incurred huge losses and shut down, countless number of ethanol plants have gone bankrupt with their investors loosing money, even the farmers have had a hard time profiting during this, and all consumers have paid higher food prices as a result. In the end, everyone involved in the ethanol industry has been hurt. I've consulted for a biodiesel company since early 2006, and worked on numerous projects in the ethanol industry; additionally I've got family in the mid-west who farm and are involved in the ethanol industry. While they have made it through the turmoil in the industry, many others haven't. The moral of this story is when the government starts dictating things, no one comes out a head. Something everyone should be aware of when they start thinking that this government stimulus package is going to turn the economy around. It is going to make things worse.

Oh, and by the way. I consider myself to be multi-talented. I can do more than just criticize, I can offer my own solution; which I start providing in the next edition of the Sterling Weekly.

Sterling Calendars for the Week of January 26th, 2009
Economic Calendar
Date Est. Time Release

For

Consensus Prior
01/26 10:00am Existing Home Sales Dec. 4.40 M 4.49M
01/26 10:00am Leading Indicators Dec (0.3%) (0.4%)
01/27 9:00am Consumer Confidence Jan 38.0 38.0
01/27 9:00am S&P/Case Shiller Composite Nov.   (18.04%)
01/28 10:30am Crude Inventories 01/23   6.1m
01/28 2:15om FOMC Rate Decision     0-0.25%
01/29 8:30am Durable Goods Orders Dec (1.8%) (1.5%)
01/29 8:30am Initial Claims 01/24   589K
01/29 10:00am New Home Sales Dec. 400k 407K
01/30 8:30am Chain Deflator-Adv. Q4 0.5% 0.5%
01/30 8:30am GDP - Adv. Q4 (5.2%) (0.5%)
01/30 9:45am Chicago PMI Jan 34.2 35.1
01/30 9:55am Mich. Sentiment-Rev. Jan 61.9 61.9
01/30 10:00am Employment Cost Index Q4 0.7% 0.7%

  Misc. Calendar
Date: Comments:
01/26 American Express 'AXP' announces earnings after the close. Est. $0.22
01/26 Amgen 'AMGN' announce earnings after the close. Est. $1.07
01/26 Caterpillar 'CAT' announces earnings before the open. Est. $1.31
01/26 Eaton Corp. 'ETN' announces earnings before the open. Est. $10.04
01/26 Freeport-McMoran Copper 'FCX' announces earnings. Time N/A. Est. ($1.04)
01/26 Haliburton 'HAL' announces earnings. Time N/A. Est. $0.73
01/26 Kimberly Clark 'KMB' announces earnings. Time N/A. Est. $1.03
01/26 McDonalds Corp. 'MCD' announces earnings before the open. Est. $0.83
01/26 Texas Instruments 'TXN' announces earnings after the close. Est. $0.12
01/27 Avery Dennison 'AVY' announces earnings @ 8:30am Est. $0.43
01/27 Bristol Meyers 'BMY' announces earnings. Time N/A. Est. $0.41
01/27 DuPont 'DD' announces earnings before the open. Est. $0.24
01/27 E*Trade 'ETFC' announces earnings after the close. Est. ($0.23)
01/27 FPL Group 'FPL' announces earnings. Time N/A. Est. $0.89
01/27 Travelers Companies 'TRV' announces earnings before the open. Est. $1.46
01/27 Valero 'VLO' announces earnings before the open. Est. $0.84
01/27 Verizon 'VZ' announces earnings before the open. Est. $0.62
01/27 Yahoo 'YHOO' announces earnings after the close. Est. $0.13
01/28 Airtran 'AAI' announces earnings. Time N/A. Est. ($0.03)
01/28 AT&T 'T' announces earnings. Time N/A. Est. $0.65
01/28 ConocoPhillips 'COP' announces earnings before the open. Est $1.42
01/28 Legg Mason 'LM' announces earnings before the open. Est. ($3.79)
01/28 Wells Fargo 'WFC' announces earnings before the open. Est. $0.33
01/29 3M Company 'MMM' announces earnings. Time N/A. Est. $0.93
01/29 Black & Decker 'BDK' announces earnings. Time N/A. Est. $0.69
01/30 Arch Coal 'ACI' announces earnings before the open. Est. $0.31
01/30 Chevron 'CVX' announces earnings before the open. Est. $1.81
  The full earnings calendar for this week can be found (here)

Prime Update:

Sterling Investment Services is an investment research and money management firm publishing the Prime Stock Newsletter. The Prime Stock Newsletter is a daily comprehensive newsletter that is useful for investors and traders alike. Whether you are looking for short term trading opportunities ranging from day trading to a couple of weeks or if you looking to acquire a long term portfolio at smart entry points. Subscriptions are $50/month. A Free 2 Week Trial is currently being offered.

Our most recent Performance Report is now available available (here). 19 of our last 20 recommendation resulted in profitable trades for an average profit of $1.75/share. This is an 95% success rate.

Highlights from Recent editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Transocean 'RIG' Short Sale Dec 3 $53.96 $43.45 $10.51 Covered on the 5th
Norfolk Southern 'NSC'' Short Sale Jan 14 $41.68 $34.15 $7.53 Covered on the 23rd

Devon Energy 'DVN'' Short Sale

Jan 20

$57.67 $54.53 $3.14 Covered on the 20th
* The per share PROFIT is a theoretical calculation based upon the opening price the day the recommendation is published and the intra day high (or low for short sales) on the exit day. The exit day is determined based upon the application of our "Rules for Trading", the implementation of "stops" within our stated policy, and may not reflect the complete or full movement of the underlying recommendation.

Dow Jones Industrial Average (INDU)

Current Opinion: Closed @ 8,174.73Last Signal: Called Lower (again) with the close of 8,378.95 on October 24th. Current Expectations: We might see a short term rally however the Dow should continue to move lower and test 7,762.34 on a closing basis.


The S&P 500

Current Opinion: Closed @ 845.71 Last Signal: Called Lower (again) with the close of 876.77 on October 24th. Current Expectations: We might see a short term rally however the S&P 500 should continue to move lower and test 752.44 on a closing basis.


The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,194.41 Last Signal: Called Lower (again) with the close of 1,202.27 on October 22nd. Current Expectations: The NDX should continue to move lower and test 957.05 on a closing basis.


CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 2.519% Current Expectations: The TNX should move lower and test 2.345% on a closing basis.


Disclaimer: The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc. All information used in the production has been obtained from sources believed to be reliable and accurate. Sterling Investment Services does not warrant or assume any liability for inaccuracy of the information used to produce our publications. To receive further information on these services please visit our web page at: www.sterlinginvestments.com If you would like to contact us our fax # is (404)-816-8830 Email address is: enelson@sterlinginvestments.com Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.
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