Major Two Daily Rally — Hold Steady11/25/08
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U.S. stocks posted the biggest two-day rally since 1987, rising over 13%. That coming after the Obama announcement of his Treasury Secretary choice on Friday and the weekend announcement of over $300 billion for the Citi bailout, and in spite of Bloomberg’s calculation of total rescue costs ove...
$7.4 Trillion Bailout - Oh My, Oh My11/24/08
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This news leaves us simply speechless.
Nov. 24 (Bloomberg) — Fed Pledges Exceed $7.4 Trillion to Ease Frozen Company Credit — The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescu...
Market Becoming Harder to “Bear”11/24/08
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We have been bears for most of this year. We are bears now. Just look at the charts and it’s hard to be anything else, but the yields and price-to-book on US stocks are becoming attractive.
The critical factors we are watching to identify a prudent re-entry point — information we will use to ...
Multiple Asset Class Short-Term Returns11/24/08
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These tables show the 1-week, 4-week, 13-week, 26-week and 52-week returns for a wide spectrum of asset types.
They, and other tables, are updated each Saturday morning on our site. These tables are for the week ended November 21, 2008.
click images to enlarge
Key Asset Types
US Sectors
Bonds
Mu...
There Is Someplace to Hide — Cautiously11/24/08
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In spite of Friday’s 6% US stock market rise, the general mood is gloomy and getting gloomier. This week’s Barron’s was particularly gloomy.
Multiple articles said there is no place to hide. We have said the same, as in our Oct 26 post of the same name, “No Place to Hide”. The fact is...
Financial Headlines Still Flash Caution11/20/08
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In our November 19 post, we said we are monitoring five key dimensions on ten key asset categories to gauge when, how and how much to commit the cash we raised in the summer to the markets in the future.
1. Technical Market Factors
2. Valuation Fundamentals
3. Risk Levels
4. Government Intervention P...
EFAVTIHoped for Stocks Bottom Pierced11/20/08
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Today was a rotten market day, in a rotten market month, in a rotten market year, in a troubled economy. Otherwise, things are OK.
The Good News:
Aggregate bonds (AGG or BND), Treasuries (SHV, SHY, IEI, IEF, TLH and TLT) and investment grade bonds (LQD) were up.
The Bad News:
Municipal bonds (MUB),...
Monitoring Ten Major Asset Categories11/18/08
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We believe that these ten exchange traded products can give a fairly wide angle, macro view of world market conditions:
VTI - US Stocks
EFA - Non-US Developed Market Stocks
EEM - Emerging Market Stocks
DJP - Global Commodities
VNQ - US Equity REITs
AGG - US Bonds, excluding Municipals
IEF - US Treas...
US Capital Markets Composition11/17/08
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How has the US structured itself in terms of equities and debt instruments?
According to the September research report from the SIFMA (Securities Industry and Financial Markets Association), as of June 2008, the US capital structure was:
Equities 40.6% (proxy VTI)
Money Markets 8.2%
Municipal Bonds ...
US Stock Market Equity Allocation Weight11/17/08
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We believe that the starting point for evaluating the allocation weight to be given US equities within the overall equity allocation in a portfolio should begin from the world weight of US equities.
It may well be that US equities should be overweighted or underweighted for any number of reasons, but...
JJCUSOLower Prices Now - Massive Inflation Later?11/12/08
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The global economy is declining. As a result, prices of important kinds of “stuff” is falling. Governments are pouring money onto the markets to solve a problem that may have been caused by easy money originally.
If you party too much and awake the next day with a hangover, taking a shot of alc...
Expectations: What a Difference a Year Makes11/11/08
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Asset allocation is important to reduce risk. Approximately 90% of portfolio total return comes from the asset classes you select and the relative weights you give them.
The word “never” is a dangerous term to use, particularly with respect to investing, but we believe it is probably safe to sa...
Bond Fund Correlations to S&P 50011/10/08
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The matrix below is from Barclay’s iShares, showing the 1-year total return correlation between the S&P 500 (proxy SPY) and several key bond fund types available from iShares:
AGG: Lehman Aggregate Bonds
SHY: 1-3 year Treasuries
IEI: 3-7 year Treasuries
IEF: 7-10 year Treasuries
TLH: 10-20 yea...
An Ebbing Tide Lowers All Boats11/08/08
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Pretty grim out there. Where is the basis for current optimistic stock market views?
Markets may anticipate recovery, but how soon could that recovery be, given the depth of the problem? How many more stimulus programs are needed? How many more can be paid for now or later? Are we sowing the seed...
Wiley Coyote Suspended in Air Over a Canyon11/07/08
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There is nothing left in the charts to suggest support for the S&P 500 index if it pierces the approximate 800 level (roughly 80 for its proxy SPY).
The index has been volatile within a range between generally 850 and 1,000 over the past few weeks.
Only fundamentals remain to gauge opportunity. ...
Thoughts on a Market Bottom - Last Week’s Press11/03/08
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Financial Week, November 2, 2008
Jeremy Grantham, chairman of Boston-based GMO LLC and a renowned wet blanket in the face of irrational exuberance, sounds uncharacteristically giddy these days.
… equity markets are “below trend lines” for the first time since 1994.
… CFOs should phase back...
Current S&P 500 P/E in Historical Perspective11/03/08
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As we look for a bottom and read articles about P/E ratios as they relate to historical norms, it can be quite confusing.
The numbers seem all over the lot. The principle reason is that there are many different methods of calculating P/E, and the norms against which they are compared are not alway...
Bye-Bye Dividends11/02/08
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Stock dividends are in jeopardy on multiple fronts. This is not good news for equity income investors or the US stock market overall. Four forces are converging on and against US dividends:
Companies are cutting dividends or not raising them
Tax trap in existing dividend tax rules
Congress will ...
Investment Approach for Mature Accounts10/30/08
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Whether we are coaching you as you manage your assets, or whether we are managing assets for you, if your investment account is mature, we follow this general approach — appropriately tweaked to your specific process preferences and needs.
A mature account is one for which expected new money additi...
Conflicting Evidence10/29/08
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The fact is that today’s stock markets were extraordinary in their strength. Emerging markets (proxy EEM) up about 20% and the S&P 500 (proxy SPY) up about 11%.
There are important positive facts to consider:
for the past couple of weeks SPY has been trading sideways — that’s good.
SPY w...
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