No Load Fund/ETF Tracker updated through 5/7/2009

Ulli Uncategorized Contact

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

Up, up and away with no worries was the motto this week as the major indexes gained strongly.

Our Trend Tracking Index (TTI) for domestic funds/ETFs remains below its trend line (red) by -0.49% thereby confirming the current bear market trend.



The international index has broken above its long-term trend line by +2.94% triggering a Buy signal for that area. The effective date will be Monday, May 11, 2009.



[Click on charts to enlarge]

For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

Waiting For Stress

Ulli Uncategorized Contact

So far, nothing has been able to kill this current market rebound and yesterday was no exception. Despite some leakage about tomorrow’s results of the stress tests, the major indexes moved higher with the Dow closing above the 8,500 level.

By the time you read this on Thursday, you will most likely know if the stress test results will be fueling this rally or bringing it to a screeching halt—or anything in between.

Hat tip goes to Dr. Housing Bubble this week, for the following story on the Pecora hearings and Bill Moyers’ interview:

Mr. Pecora had an uncanny ability to put together complicated Wall Street jargon into a tangible and understandable argument. Not only did he have this ability, but he understood what the public would be furious about. We need to remember that at this time, it had already been over 3 years since the Crash of 1929.

If we want to put a date on our current crash, we can look at August of 2007. If that is the start date, we are not even two years into this crash which is shocking to even think about. So the public in 1933 had already had enough and was on the verge of populist anger. The country ousted Herbert Hoover from office and brought in Franklin D. Roosevelt. Roosevelt being savvy allowed Pecora more time to investigate the shenanigans of Wall Street. So this was a bi-partisan fight.

Bill Moyers has an excellent talk which came out last week regarding the Pecora hearings:

http://www.pbs.org/moyers/journal/04242009/watch.html

Buy And Monitor?

Ulli Uncategorized Contact

There’s a new name for a glorified version of buying and holding I had not heard before as featured in “Stop, look and listen:”

Whenever investors roiled by the market’s downturn declare that as an investment strategy “buy-and-hold is dead,” Leonard “Pat” Goodall, editor of the No-Load Portfolios newsletter, thinks about how mistaken they are.

But Goodall, whose publication is in the top 25% of newsletters tracked by Hulbert Financial Digest over the past 15 years, is not suggesting that buy-and-hold critics are wrong. Instead, he contends that a true buy-and-hold approach never really worked at all.
…

“More and more, there is something to be said for minimizing activity — for finding good things, keeping costs and taxes down, rather than trying to trade yourself back to profitability,” Goodall said.

“Minimizing activity is not buying something once and holding it forever,” he added. “The people saying that buy-and-hold is dead missed the idea that it was never really a good strategy to begin with.”

The superior strategy, according to Goodall, is to “buy and monitor,” where an investor is not only making an initial purchase, but regularly re-examining the decision, buying more by reinvesting dividends or dollar-cost averaging — but also prepared to sell to protect gains or because a fund has changed or lost its edge.

“Most people ought to have a foundation portfolio, a core of investments they believe in, and then trade around that,” Goodall said. “Asset allocation is still fundamental, and it may sound like you then buy and hold — and both asset-allocation and buy-and-hold haven’t worked well in this market. So it sounds old-fashioned, but it will work in time.”

[Emphasis added]

Read that highlighted section again. It opens up more questions than it provides answers. Sure, we all need to monitor and examine our holdings, but I don’t see any useful suggestion as to when and how to determine to protect gains or conclude that a fund has lost its edge.

This is nothing more but putting a different lipstick on the same old buy-and-hold pig. Why do you have to have a foundation portfolio to trade around? I would like to see how that foundation held up last year or in any prior bear market.

To my way of thinking, articles like this one mislead investors by offering the carrot that buy-and-hold over time will work fine without pointing to the pitfalls (translation: sharp portfolio draw downs) that accompany such a blind approach.

Up, Up And Away

Ulli Uncategorized Contact

Yesterday, the markets only looked up and disregarded any negative or questionable news while the Dow powered higher by some 214 points.

All major averages followed suit, and the S&P; 500 managed to wipe out its year-to-date loss by moving into positive territory, although by only a scant +0.47%. Our hedges advanced nicely on yesterday’s rally, and our Trend Tracking Indexes (TTIs) are now within striking distance of a new Buy signal.

The domestic TTI moved to within 1.18% of breaking its long-trend line to the upside. As I mentioned last week, the international arena really picked up the slack, and our international TTI crossed above its long-term trend line by a tiny +0.10%.

I really don’t consider that move a breakout yet, so I will wait a few days for more upside confirmation and until the trend line is recomputed, which happens every Friday. This will also allow the effect of some important market data to be absorbed by the market place.

The crucial numbers this week, which could add some drama to Wall Street, are the results of the Fed’s stress test of 19 of the biggest banks (due out on Thursday) and the all important unemployment report on Friday.

If any of these numbers contain unexpected surprises, you can consider yesterday’s rally a typical pop-and-drop move since a sell off would be all but certain.

I believe that this week will offer further clues as to the direction of the stock market, at least short-term. I am comfortable with our hedged positions since they appear to give us an element of stability in an unstable world.

Sell In May?

Ulli Uncategorized Contact

Todd Harrison offered some interesting thoughts in a recent article titled “Sell in May and go away?” Here are some highlights:

We asked last year whether we should sell in May and go away following the spirited sprint off the March lows. In the 12 months that followed, the S&P; was sliced in half as a confluence of negatives combined to create the financial equivalent of a perfect storm.

We humbly offered in January that 2009 could see two 20% bear-market rallies that litter the landscape with false hope and empty promises. As we digest the initial lift, the obvious question is whether we’ll see a meaningful decline before a second such move arrives later this year.

The most constructive possible path at the end of March was a sideways digestion of the gains as a function of time rather than price. That worked off the overbought condition and created potentially bullish reverse head-and-shoulder patterns across the major indices. We must respect that scenario if it triggers with a trade above 875 on the S&P.;

Be that as it may, I believe the current rally will prove a massive stock tease. We monitored the cumulative imbalances as they built through the years and it would be myopic to assume we’ve swallowed the bitter pill in its entirety. While there are two sides to every trade, we must remember that social mood and risk appetites shape financial markets.
…

While healthy skepticism of further upside remains, there is widespread acceptance that a breakout above S&P; 875 would clear a path towards the 200-day moving average at S&P; 970. As such, clearing that technical hurdle would clean out the shorts and potentially set the stage for a vicious head-fake.
…
I, like most of you, stand to benefit from an economic expansion that buoys our spirits with the rising tide of good fortune. The popular opinion is rarely the profitable one, however, and my hope is that sharing these potential caveats provides utility as we collectively prepare for the future.

Financial staying power, risk management over reward chasing and proactive financial intelligence remain three staples of any successful investment approach.

[My emphasis]

I agree with Todd’s assessment. My view is that this bear market is far from being over, which does not mean that it won’t propel our Trend Tracking Indexes (TTIs) into the bullish zone.

If that happens, we will follow our buy signals with our eyes wide open, with no complacency, and at all times aware of the fact that this could turn out to be gigantic head fake similar to our whip-saw signal of 5/15/08 to 6/22/08.

While we don’t have any control over how long any bullish period will last, we do have control over our exit strategy, which will remain firmly in place to assure that our risk is limited when adverse market conditions strike without warning.

Sunday Musings: Double Stimulation

Ulli Uncategorized Contact

My wife Terri, who is an accountant, pointed to an article titled “Taxpayers to get rude surpise,” which addresses President Obama’s tax credit. Here are some important highlights:

Millions of Americans enjoying their small windfall from President Barack Obama’s “Making Work Pay” tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.

At-risk taxpayers include a broad swath of the public: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income.

The Internal Revenue Service acknowledges problems with the withholding tables but has done little to warn average taxpayers.
…
For many, the new tax tables will simply mean smaller-than-expected tax refunds next year, IRS spokesman Terry Lemons said. The average refund was nearly $2,700 this year.

But taxpayers who calculate their withholding so they get only small refunds could face an unwelcome tax bill next April, said Jackie Perlman, an analyst with the Tax Institute at H&R; Block.

“They are going to get a surprise,” she said.

Perlman’s advice: check your federal withholding to make sure sufficient taxes are being taken out of your pay. If you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers. If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a Form W-4.
…
Obama has touted the tax credit as one of the big achievements of his first 100 days in office, boasting that 95 percent of working families will qualify in 2009 and 2010.

The credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more $95,000 and couples making more than $190,000 are ineligible.

The tax credit was designed to help boost the economy by getting more money to consumers in their regular paychecks. Employers were required to start using the new withholding tables by April 1.

The tables, however, don’t take into account several common categories of taxpayers, experts said.
…

Some retirees face even bigger headaches.

The Social Security Administration is sending out $250 payments to more than 50 million retirees in May as part of the economic stimulus package. The payments will go to people who receive Social Security, Supplemental Security Income, railroad retirement benefits or veteran’s disability benefits.

The payments are meant to provide a boost for people who don’t qualify for the tax credit. However, they will go to retirees even if they have earned income and receive the credit. Those retirees will have the $250 payment deducted from their tax credit — but not until they file their tax returns next year, long after the money may have been spent.

Retirees who have federal income taxes withheld from pension benefits also are getting an income boost as a result of the new withholding tables. However, pension benefits are not earned income, so they don’t qualify for the tax credit. That money will have to paid back next year when tax returns are filed.

Leave it up to government to turn this stimulus into an accounting nightmare for many. Most people are not even aware of these issues since they are not exactly front page news. If you think you might be affected by having to return part of your stimulus, be sure to consult with your tax professional to ensure compliance.

Otherwise, you may become part of the dark side of this stimulus plan, which means the IRS could potentially assess you penalties and interest for non-compliance resulting from a problem you didn’t create in the first place.