No Load Fund/ETF Tracker updated through 12/4/2008

Ulli Uncategorized Contact

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

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

Despite a strong effort by bullish crowd, the major averages closed lower.

Our Trend Tracking Index (TTI) for domestic funds/ETFs remains below its trend line (red) by -13.31% thereby confirming the current bear market trend.



The international index now remains -25.23% below its own trend line, keeping us on the sidelines.

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

A Real Estate Parody

Ulli Uncategorized Contact

With economic news lacking any kind of positive twist, it’s time to view things with a bit more distance and a sense of humor.

Reader Tom sent me the following video clip, which is very funny even if you don’t speak German. Just watch the plot unfold and follow the English subtitles:

[youtube=http://www.youtube.com/watch?v=bNmcf4Y3lGM]


While a great focus of this current economic malaise has been the effect on Main Street America, wealthy individuals have been suffering as well as the article “When the money goes, so does the toxic wife,” clearly shows:

‘You loser!” screamed Katie, aiming a vase at her husband. “You’ve destroyed my life,” she continued, hurling it. “Just look at my hair, look at my nails! You loser, you jerk, you nobody.”

Katie’s husband, Jack, whose property portfolio disintegrated in the financial crash, had just told his wife that she would have to cut back on her thrice-weekly visits to Nicky Clarke, the nail salon in Harvey Nichols, and the oxygen facials, chemical peels and seaweed wraps at Space NK.

Not only that, but they no longer had the money to pay for an army of bullied Eastern Europeans to wait on her hand and foot.

Worse was to come – the brow-lift would have to be cancelled; her black Amex card would have to be snipped in half; and there was no way, he told her, that he could carry on spending £28,000 a year on Henry’s school fees at Eton.

Chloe, too, would have to leave the marginally cheaper (only £25,000 pa) Wycombe Abbey immediately.

Such was the aggression and verbal and physical abuse that followed that Jack was left with cut lips and blood streaming from a broken nose.

Their eight-year-old child, not yet at boarding school, sat cowering in a corner and dialling 999. When they arrived, they had to restrain Katie forcibly from attacking her husband.

An extreme and isolated example of the global economic meltdown hitting the £1 million home? Sadly no. When the super-rich feel the pinch, inevitably, the Toxic Wife heads off.

The Toxic Wife, first identified in these pages almost two years ago, is a particular and terrifying species.

Not to be confused with the stay-at-home mother who selflessly devotes herself to the upbringing of her children, with all the housework and domestic chores that entails, the Toxic Wife is the woman who gives up work as soon as she marries, ostensibly to create a stable home environment for any offspring that might come along, but who then employs large numbers of staff to do all the domestic work she promised to undertake, leaving her with little to do all day except shop, lunch and luxuriate.

Having married her wealthy husband with his considerable salary uppermost in her mind, the Toxic Wife simply does not do “for richer, for poorer”. Little Dorrit, she ain’t.

Indeed, lawyers and financial advisers have reported a 50 per cent increase in the number of divorce inquiries since the financial markets collapsed in September.

While I think this is funny and sad at the same time, this issue is probably not limited to only British men, and may very well spread across the Atlantic, if it hasn’t already.

When Actions Speak Louder Than Words

Ulli Uncategorized Contact

The CEOs of the Big 3 automakers apparently got the hint and traveled to Washington by hybrid vehicles for another round of pleading for monetary assistance.

November auto sales were absolutely dismal, and new restructuring plans were submitted that included plant closings, layoffs as well as shrinking dealer networks. This made me think of a video clip I recently saw that focused on a different type of CEO with a total different mindset. Take a look:

http://www.flixxy.com/japan-airlines-ceo-work-ethics.htm

I bet you would never see this in the U.S. no matter how difficult the financial times for a company might be.

Hitting A Brick Wall

Ulli Uncategorized Contact

Last week’s feel-good rally came to an abrupt end yesterday when the major indexes ran into a brick wall in form of further weak economic news.

I’m sure that profit taking had some effect on the sell-off and, as I mentioned before, hopefully, many investors used that opportunity to get out of their long positions.

Contributing to the market’s malaise was a report by the National Bureau of Economic Research announcing the U.S. economy fell into a recession in December 07. Just in case you did not know it, it has now become official. Another report on manufacturing came in worse than expected, as was news on construction spending.

This week will be loaded with market moving news with the service sector index being on the menu on Wednesday followed by Friday’s jobs report, which is expected to show that the economy lost 300,000 jobs last month.

While bad news is already factored in the market, anything worse than expected can send the major indexes heading further south. Watching this carnage safely from the sidelines is the best course of action, unless you like living on the edge watching your portfolio bounce around like a super ball in a trampoline factory.

Should I Ease Back In?

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Reader Rich is considering moving back in the market by allocating a small portion of his 401k. Here’s what he said:

Last March I sold all mutual funds in my retirement accounts at work and moved them into money market funds, currently allocating 100% of new monies into those money market funds.

My question is: In your opinion, should I begin allocating a percentage of new money back into the market in my 401K & 403B? I am satisfied to stay in cash but would hate to miss a 30%-40% increase even if I only have small monthly allocations of say, 2-10% going back in to the market.

I have heard several opinions lately advising people to get back in. One guy on CNBC said the only thing worse than experiencing a 40% decrease when the market declines, is missing a 40% increase when the market turns around. Well, I missed the decrease when I moved into cash.

Yes, there are many opinions floating around, especially on CNBC, as to what the best course of action might be. I have four reasons for you as to why you should stay put:

First, you are far better off than most investors by having avoided the sharp market drop. Congratulations!

Second, you have put yourself in the enviable position of not having to make up losses. So there is no reason for you to have to make panic decisions in trying to be afraid of missing a 40% rebound. Besides, chances are pretty low of the market first dropping 40% and then rallying 40%. That’s wishful thinking given the current economic circumstances.

Third, your plan is to allocate 2-10%. While that is a small amount to risk, it also will not make much of a difference on your overall portfolio performance even if the market decides that a Santa Claus rally of another 10% or so is warranted.

Fourth, as I have repeated mentioned, in my opinion it is questionable whether the real market bottom has been set in November. I think there is more downside risk, and you’re better off waiting for an actual trend reversal before committing your serious money.

However, if you consider a small portion of your portfolio “play money,” then by all means go ahead and take a chance. Just be sure that you never confuse your pile of serious money with your pile of play money, so that your investment priorities will always be in order.

Sunday Musings: A Sucker’s Rally?

Ulli Uncategorized Contact

The past week’s rally has been one of the strongest on record in some 30 years. As I said before, these kinds of rebounds don’t happen in bull markets but only in bearish environments when markets have been pushed down to extreme levels.

While those who have held on to their losing positions throughout year are cheering loudly, it’s questionable whether this current up move will be anything other than a sucker’s rally. For some thoughts on that, let’s listen in to Dr. Housing Bubble, who had these comments a couple of days ago:

We’ve just witnessed one of the most potent and unrelenting bear market rallies in history. And all it took was 4-days. Over this 4-day rally, the Dow Jones Industrial Average is up 15.5% which is the biggest run-up since August of 1932 during the Great Depression. The S & P 500 has even done better shooting up 18% and the NASDAQ is up 16.4%. Taken alone, these would be excellent returns for one year. With such a strong rally, you would think that the markets would be back at par but nothing can be further from the truth.

So how are the markets performing for the year after this stunning rally?

Even after this historic rally, for the year the Dow is down 34%, S & P 500 is down 39%, and the NASDAQ is down 42%. It would be one thing if this rally was fueled by excellent earnings, strong employment numbers, or superb retail numbers but none of this has occurred over this time. Let us recap the excellent news over the 4-day rally:

Friday November 21: Big 3 automakers continue to beg with tin cup in hand for more money from an already broke government. Citigroup on the verge of going off a cliff.

Monday November 24: Existing home sales come in at a weak 4.98 million while the market expected 5.05 million. Citigroup received a bailout over the weekend injecting more capital into the ailing bank while backstopping $306 billion in toxic mortgages, which comes out to be half of the already committed TARP plan. Consider this a mini TARP for Citi.

Tuesday November 25: GDP showing even more contraction coming in at -0.5 when the market expected -0.3. Consumer confidence is still at record lows. Absurd bailout of consumer and mortgage back security debt which is already committed from the Fannie Mae and Freddie Mac bailouts.

Wednesday November 26: Durable orders fell a stunning 6.2% when the market only expected a drop of 2.5%. Unemployment claims are still running high at 529,000. Over 500,000 easily puts us into recession territory. Personal spending fell a strong -1% when the market was looking at -0.7%. The Chicago PMI got hammered into the ground while new home sales are at half century lows.

This was the fantastic news that made our markets rally. Make no mistake. This was a suckers rally.
…

This is the first time since the 1950s that the S & P 500 dividend yield is higher than the 10-year Treasury yield. I’m certain many fund managers started dumping money into the market because of the following reasons:

(a) The above notion of value investing and trying to lock in short-term gains before the year is over.

(b) Big fund investors trying to play “guess the next bailout” and dumping money into certain battered down financials.

(c) Assuming many of the S & P 500 firms will have earnings in 2009.

I think the final point above is the biggest problem. This current notion that the yield is signifying a bottom simply assumes that many of these companies will remain at their same earnings levels next year. This is not going to happen. As I wrote in a previous article highlighting 10 reasons why this will be the worst recession since World War II, next year will be even worse than 2008. So the delusional idea that many of the companies will continue to pump out dividends is insane when unemployment will be rising and our crushing debt will force us into austerity.

The recent rally happened for 2 main reasons in my humble opinion:

(1) A leadership vacuum was filled. This doesn’t mean anything has materially or fundamentally changed. But the mere sense something new is coming along gave the market new feet.

(2) We hit technical lows. The market fell so quickly and breached so many technical support levels that we were bound to hit a retrenchment point. We did. The question that remains is whether this sucker rally has any legs. The news will continue to be bad so if it does rally, it will be based on purely speculative reasons and we know where that will lead us.

I’m in total agreement with this analysis; however, I would not be surprised if this current rally continues for a little while longer before the next reality check pulls the major indexes back down.

Whether this happens or not makes really no difference to those of us following long-term trends, since we have a clearly defined plan to re-enter the markets; whenever this point in time occurs.