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

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

The bulls had it their way as the Dow and S&P; 500 closed in record territory.

Our Trend Tracking Index (TTI) for domestic funds/ETFs is now positioned +5.23% above its long-term trend line (red) as the chart below shows:

The international index has now moved to +8.90% above its own trend line, as you can see below:

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

Last Tuesday, the market could not find its bearings and the result was a sharp sell off. Seems like it was one of those days were all news were interpreted as bad news. Even Fed chairman Bernanke’s words on inflation couldn’t calm the Wall Street crowd.

One of the big news items of the day was Standard & Poor’s announcement that they might be downgrading some 2.1% of the $565 billion of subprime bonds because of the housing slump being worse than anticipated.

No surprise to me, but Michael Shedlock explains the ins and outs of this debacle with a great sense of humor in his article titled “Stress Test.” This is in reference to S & P’s report that it will implement a ‘stress test’ of subprime mortgages.

Hmm, I wonder if that is just another useless phrase that would fit well into the theme of my recent Sunday post “Why business people speak like idiots,” or if they actually have a valid plan. My guess is, it’s the former but I’m sure, as time goes on, we’ll hear more about it.

From time to time, you may come across some investing terminology and see terms like “R-Squared” used in an article. The formula is represented in the picture on the left and, if you’re a math wiz, you devour things like this for breakfast.

For the rest of us mortal human beings, here’s the definition by Vanguard:

“R-squared measures how much a fund’s past returns can be explained by the returns from its benchmark index.

The higher the R-squared, the more the fund’s return can be explained by the performance of the index, and so the performance of the market or market segment. The lower the R-squared, the more the return can be explained by the fund manager’s decisions.”

When would this be important to you? Most of the time, it does not matter, but when you invest in some of the newer more esoteric ETFs, which are all supposed to track an index, and the ETF performance differs from the underlying index performance, you now know why: Based on the above explanation, R-squared is less than 1.

It does happen occasionally, as I posted about in “ETF News: Straying From The Index.”

Okay, I had to shorten the title due to space limitations. I am referring to Larry Swedroe’s book “The Only Guide To A Winning Investment strategy You’ll Ever Need.”

It contains some interesting (but rehashed) information I have written about before. Larry is a proponent of index investing and seems to think that buying and holding indexes is far superior to active investing.

I have to be honest with you; there is not much in this book I can agree with. Actually, it makes my hair stand up and I could write endless posts on my disagreements. However, I will only focus on a couple of items, which I found worthwhile sharing with you.

Page 34 features a table showing the devastating effects of the last bear market and Larry’s point is that even royalty funds like Janus suffered severely.

To me, the interesting thing about reading forecasts is that nobody seems to agree on the direction of the market. Despite the fact that everyone has the same information available, opinions vary and many times are opposite of each other. That’s a dead giveaway of the value of a forecast, which is zero.

Nevertheless, I read some of them strictly for entertainment.

While I actually may agree with some of the views expressed, they never ever form the basis of my investment decisions. MarketWatch had a recent blurb called “Still a lot of chances to buy upward mobility,” which featured an interview with Donald Hodges, co-manager of the Hodges fund.

His opinion was that “that the stock market will remain stronger than many observers seem to think, and that there are days with severe reactions, but that’s more typical of a strong market than of a real bad one. The bad markets we have been through are the ones that roll over and just get you every day.”

I can agree with that.

The article ends with an opinion from Eugene Sit, chairman of Sit Investment Associates, who says that “he expects stocks to suffer a short-term downturn — in the neighborhood of 5% — before a year-end rally allows the market to finish the year about 3% higher than it was at the halfway point.”

I can agree with that too.

Here you have two somewhat different opinions similar to what you might read daily in any of the media. Unfortunately, many investors use these as a basis for making their investment decisions, and that’s the problem. It’s just an opinion, which you can agree with or not, but that’s it.

This is the exact reason why I never state a view as to where I think the market is headed, although I get many requests from readers who seem to think I have some mysterious power to look into the future.

I track trends and deal with facts; not what might be happening or what I want to happen, but strictly what the numbers tell me “is happening.” If you can get away from overindulging and participating in the (for the most part useless) daily news barrage, you might find yourself looking at facts rather that predictions, which are a far better basis for making more appropriate investment decisions.

I just finished reading a book called “Freakonomics” by authors Levitt and Dubner. Levitt teaches economics at the University of Chicago, while Dubner writes for the New York Times and The New Yorker.

Most economists, at least from my experience, string together endless numbers to make a statistical case. However, Levitt dances to the beat of his own drummer. I enjoyed reading about seemingly unrelated topics and how they actually tie together using his research, which is based on numbers, of course. He thinks way outside of the box yet his logic is impeccable and is supported by an obvious sense of humor.

You can’t take yourself too seriously if you write about topics like this:

Which is more dangerous, a gun or a swimming pool?

How did the legalization of abortion affect the rate of violent crime?

Freakonomics really examines the hidden side of everything. The inner workings of a crack gang. The truth about real estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Ku Klux Klan.

If you enjoy a book that looks at life’s day-to-day events in a different light, this is a fun read. My only suggestion to the authors would be to tackle another subject of interest to many, which would be examining the somewhat questionable dealings on Wall Street in the same way they did the topics featured in this book.