Jim (cont'd):     

With mortgage rates coming down… hey, by the way I am refinancing at 4.675%, 30 year fixed… I have to believe that my housing call is if anything, maybe a little too pessimistic… despite what looked to be horrible quarterly numbers today from KB Homes, the giant California home builder… but also Southern Region planner… thanks to the government, which has started pulling out all stops… remember the government is taking a Malcolm X by any means necessary approach… to cutting mortgage rates… maybe housing actually bottoms sooner… and all these mortgage rate declines and refinancing… definitely means more money… to shop at the Home Despot… when you combine the lowest interest rates in 47 years, with the best home affordability figures in 20 years… you are going to get people to buy homes and fix them up… did you know that prices in the hardest hit areas of the country, like the inland part of California, have already stabilized down 40%… they are already bottoming… even KB Homes said that today… as a matter of fact, they said that there have been more than hundreds of percent increase in sales in that region… that was said on today’s call, probably about 10 of 12... my jaw dropped when I heard it...

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The west coast of Florida has also stabilized in pricing… as our interest rate declines… and affordability cause a bottom… that is what happens guys… these two areas Florida and the inland empire where housing first started falling apart… and so it is natural right… that they are the first to bottom. Do you know that home Depot has a huge presence in both of those two bottom markets… that is terrific… the year to year comparisons are going to be great I predict… plus with mortgage rates this low… it is insane not to go find some real estate to buy… as long as you can get the loan… and you can… there is more documentation… I had to go thru more documentation, a little more hoops, a little more money down than I thought… but you can get it… believe me, you can get it… and that is just what has happened so far… the stimulus package could include a $22,000 tax increase for home purchases… if you get that… expect full parking lots at Home Depots around the country… President-elect Obama, please apply the tax credit only to existing homes and not new homes… because that would cause the home builders to crank out more homes and wreck my beautiful supply demand equilibrium thesis… that is the rock bed to my 173.

Now, Home Depot has also been doing a decent job at self improvement lately… this is an effort the moment that started the moment that CEO Bob Nardelli, now running Chrysler, and begging at the federal trough walked out the door… now let me just tell you for the record… I think Nardelli has run Chrysler into the ground… at an even faster than he wrecked Home Depot… it must be ram tough hemi engine thing… over the last four quarters without nare-do-well Nardelli… Home Depot’s gross margins have increased year every year… the company has become much more effective at merchandising and pricing… they are really good at this now… two new initiatives that they are not done implementing yet… we can do it, you can buy it… and don’t forget about the monster move that Sears (SHLD) had yesterday… if Sears is holding up at all… I mean come on, doesn’t that say good things about Home Despot… I think it does…

Now, I do not think that Home Despot is going to be as exciting or stable as Lowes… but because Lowes isn’t in the Dow… it can’t be one of my Dow All-Stars… that’s it… there is one thing about Home Depot that Lowe’s doesn’t have… and that is a notoriously B.I.G. juicy dividend with a 3.8% yield … if you haven’t seen Notorious yet… a movie about our favorite investment/rapper… and a strategy about buying accidentally high yielding stocks… get yourself to movie theaters…it will soon be in broad distribution… unlike Iron Man, I am not a starring character… although, I certainly should be.

If you wait to let Home Depot go lower… that is fine… $22.50 is where you get that 4% accidentally high notorious yield… and then buy some more as the stock goes lower and the yield goes higher… and then you will not only have a solid play on a housing turnaround… but a great source of income from the dividend while you wait… and don’t you worry, Home Depot will be able to cover it’s dividend just fine… the expected payout is .92 cents this year and the companies cash flow should come in at $2.97... this company makes a lot of money just as what is know as turns… it pays its suppliers once a month… but sells the same stuff over and over again.

We want a play on the housing turn in our Dow All-Stars, don’t we?… This one could become one of the biggest movers of 2009... and don’t miss it. We have now got a tech stock, a Telco stock, a retailer, a recession resistant stock, and a true industrial. Man, are we ever diversified.

Here is the bottom line…

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The Bottom Line!:     Home Despot (i.e., Home Depot (HD), once hated… now one of my five favorite stocks in the Dow… along with Hewlett Packard, Verizon, JNJ, and Caterpillar. Our Mad Money Dow All-Stars are now complete… we are not big fans of the market right now… we told you buy the weakness.. not the strength of these stocks… and reiterate that if you chase these stocks in 2009... it will be just as stupid as if you chased them in 2008.

For A Housing Turnaround Play With A Juicy Dividend, Buy Home Depot (HD), My Last Dow All-Star Play...

Dow All-Stars of 2009 - Hewlett Packard, Verizon, Johnson & Johnson, Caterpillar, Home Depot… and a lot of notoriously B.I.G. yields coming with that...