Archive for January, 2011

  • We’re Already Ahead of the Market
    , January 3rd, 2011 at 4:49 pm

    That’s one trading day down this year—just 252 more to go.

    I’m happy to say that we had a very good day and that the Buy List is already ahead of the S&P 500. The Buy List gained 1.39% today to the S&P 500’s 1.13%. The old Buy List was only up 1.08% so our new stocks certainly helped.

    I’m also pleased to see new 52-week highs from companies like Wright Express (WXS), Moog (MOG-A), Leucadia National (LUK) and Becton, Dickinson (BDX). AFLAC (AFL) crept up to a new two-month high.

    We obviously shouldn’t read too much into one day, but let’s hope this is a preview of good things to come in 2011.

  • Treasuries Down. Cyclicals Up. Lather. Rinse. Repeat.
    , January 3rd, 2011 at 1:33 pm

    It’s still all about cyclicals. Treasuries are down and economically-sensitive stocks are up.

    It was just one month ago that we celebrated the Morgan Stanley Cylical Index (^CYC) busting through 1,000. Today, it’s been as high as 1,070.

    The CYC is on track to outperform the S&P 500 for the 32nd time in the last 43 sessions. If the Dow had performed as well as the CYC since the March 2009 low, it would be closing in on 25,000 today.

  • 1% Per Week for Eight Years
    , January 3rd, 2011 at 12:48 pm

    Apple (AAPL) reached a new all-time high today of $330.20 per share.

    On April 21, 2003, Apple was going for $6.57 per share (adjusted for a split).

    This means the stock is up 50.26-fold in exactly 402 weeks. That works out to an average weekly gain of 0.979%.

    In other words, Apple has gained an average of 1% per week for nearly eight years.

  • The Ever-Collapsing Dollar
    , January 3rd, 2011 at 11:56 am

    On Google, “collapse of the dollar” currently returns over 1.5 million items. Funny, for something that’s about to happen — or I should say, always has been about to happen — it hasn’t happened yet.

    If a person only followed market commentary but not prices, would they have any clue that the dollar rose last year?

  • So Far, So Good
    , January 3rd, 2011 at 11:08 am

    The market is off to a good start for 2011.

    We’re still in the Santa Claus Rally period which runs from December 22 to January 7. Historically, the market has made 40% of its gains during this period.

    Some of the market’s best days on average come during this stretch. For example, January 2 is the market’s second-best day (the best is October 20 which has often done well due to the market snapping back after big falls). December 31 is the seventh-best day and January 6 is the twelfth-best day. This is, indeed, the most wonderful time of the year.

    Compounded with the new year is the turn-of-the-month effect. Historically, if you had been in the market for just a seven-day run each month—the last four trading days plus the first three trading days—you would have outperformed the market. For the rest of the month, the market is down. Also, the December-to-January turn has been the top-performer. Obviously, taxes and trading costs would have eaten your gains if you really had gone in and out of the market so frequently.

    Another simple idea has worked well over the past 11 years — just invest on the first day of the month:

    An S&P report recently found that someone who invested $10,000 in the S&P 500 on Dec. 31, 1999, and left the money there until Dec. 1, 2010, would have just $8,209. An investor who was in the market only on the first day of every month over the same time — for example, buying at the close on Dec. 31 and selling at the close of the first trading day in January — would have $13,816.

    That’s nearly 70 percent more than buying and holding the whole time. S&P didn’t include reinvesting dividends in either scenario because of the complications of figuring out which companies paid dividends on the first trading day of the month for 11 years. But even if you include all possible dividends for the buy-and-holders, the first-day trade strategy came out 33 percentage points ahead.

  • December ISM = 57.0
    , January 3rd, 2011 at 10:08 am

    Moe good news for the economy. The December ISM Index came in at 57.0. Last month, it was 56.6.

    The ISM is a good economic indicator to follow. I like that it comes out at the beginning of the month and that it’s not endlessly revised like GDP and employment numbers are.

    It’s also very simple: If the ISM is over 50, the economy is growing. If it’s below 50, the economy is contracting. The ISM also has a decent track record of dating recession. Whenever the ISM is below 45, there’s a very good chance that the official recession dating committee will call that a recession.

  • “Yet Groner Felt No Urge To Keep Up With The Neighbors
    , January 3rd, 2011 at 9:43 am

    I originally posted this back in March, but since Abbott Labs (ABT) is now on the Buy List, I thought it a good time to revisit the story of Grace Groner.

    In 1935, she invested $180 in ABT. She died last year at the age of 100. That ABT position had grown to $7 million.

    Groner was born in a small Lake County farming community, but by the time she was 12 both of her parents had died. She was taken in by George Anderson, a member of one of Lake Forest’s leading families and an apparent friend to Groner’s parents.

    The Andersons raised her and her twin sister, Gladys, and paid for them to attend Lake Forest College. After Groner graduated in 1931, she took a job at nearby Abbott Laboratories, where she would work as a secretary for 43 years.

    It was early in her time there that she made a decision that would secure her financial future.

    In 1935, she bought three $60 shares of specially issued Abbott stock and never sold them. The shares split many times over the next seven decades, Marlatt said, and Groner reinvested the dividends. Long before she died, her initial outlay had become a fortune.

    Marlatt was one of the few who knew about it. Lake Forest is one of America’s richest towns, filled with grand estates and teeming with luxury cars, yet Groner felt no urge to keep up with the neighbors.

  • Morning News: January 3, 2011
    , January 3rd, 2011 at 7:58 am

    Stocks Rally, Dollar Strengthens on Economic Outlook

    European Manufacturing Expands Faster Than Estimated, Led by German Gains

    China and Spain: A Brighter Future Through Win-Win Cooperation

    Hong Kong Share Trading at Record on China Policy Concern, IPOs

    Commodities Beat Stocks, Bonds, Dollar in 2010

    The New Speed of Money, Reshaping Markets

    Wheat Advances on Flooding in Australia, Dry Weather in U.S.

    Exits Lag in the Fourth Quarter, but IPO Hype Boils for 2011

    Facebook Worth $50 Billion After Goldman Investment

    Bank of America to Take $3 Billion Mortgage Settlement Charge

    Fiat May Increase Chrysler Stake to 51% Before IPO

    The Social Web Index … All-Time Highs in Pressure and Price and Shame on Facebook

  • The S&P 500 Total Return Index
    , January 2nd, 2011 at 11:21 am

    For 2010, the S&P 500 gained 12.78%. The Total Return Index, which includes dividends, gained 15.06%. Over the last five years, the Total Return Index gained 11.99% and over the last ten years, it’s up by 15.07%.

    Even after an explosive rally, the index is still more than 12% below its all-time high from 2007.

    Measured from August 2000, the S&P 500 Total Return Index is up by 0.47%.

    I prefer to follow my own invention, what I call the Highly Selective S&P 500 Total Return Index. See, things don’t look so bad now:

  • Wait ‘Til the Sun Shines, Nellie
    , January 1st, 2011 at 1:07 am

    Happy New Year! One of Wall Street’s very old traditions is to sing “Wait ‘Til the Sun Shines, Nellie” on the final day of trading of the year. Here’s a clip from last year.