Investment Strategies 01 (Nov 08 - May 10)

[learn2win]

Changing With The Market by Carl Swenlin
October 31, 2008

When the market changes, we must change our tactics, strategies, and analysis techniques to accommodate the new market conditions. This is not a new idea, but it is one that is not very widely recognized, particularly when applied to the long-term. In recent writings I have emphasized that we are in a bear market, and that we must play by bear market rules. Overbought conditions will usually signal a price tops, and oversold conditions can often see prices slip lower to even more oversold conditions. When making these comments, my focus has been on the cyclical bull and bear markets. What I want to address in this article are the secular forces of which we must be aware.

On the chart below I have identified the five secular trends that have occurred in the last 80-plus years. First is the 1929-1932 Bear Market, which, although it was short, saw the market decline 90%. Next was a secular bull market that lasted from 1932 to 1966, which overlaps with the consolidation of the 1960s an 1970s. In the early 1980s another secular bull market began which peaked in 2000 (basis the S&P 500). Finally, we seem to have entered another consolidation phase that could last another 10 to 15 years.

The rest of the article @ http://www.decisionpoint.com/ChartSpotl ... 31_lt.html

[winston]

Long Live the King By Andrew M. Gordon

The world didn't get sick all at once. And it won't recover all at once either.

Without the ravenous Chinese maw gobbling up ores and coal and oil in great big heaping mounds, commodity-exporting countries are now feeling the pain. Welcome, Canada, to economic hard times. Welcome, also, Australia, Russia, and Brazil.

But it's the U.S. - the pied piper of countries worldwide - that led other economies down the path to ruin...

Europe followed obediently behind us. Their economies began to sour 6-8 months after ours.

It was only then that China reluctantly fell into line. They had their first sub-11 percent quarter in the April-to-May period. Now they're watching consumers from Peoria to Paris ratchet down shopping as hope of a short recession fades.

It has taken more than a year for the rest of the world to catch the slow-growth virus. In following us down the rabbit hole, they'll also follow us back up. But it's a process. If we're 10-24 months away from the beginning of a recovery, our fellow travelers are 16-30 months removed.

This is not a quick journey we're on. Companies will need lots of cash to see it through. More than ever, cash is king.

Source: ETR

[winston]

Will Stocks Soar after This Carnage? By Dr. Steve Sjuggerud, Daily Wealth

Stocks have had a terrible 12 months... the second worst on record going back to 1950.

But does a terrible 12 months mean we should have great returns going forward?

Does the "law of averages" somehow kick in here? Does a bad year beget a good one? We crunched the numbers to find out...

At DailyWealth, we try to be optimistic. We believe opportunity always exists somewhere, and it's our job to find it.

Of course, we know about all the bad things going on now. But we also know that great returns in stocks start in bad times. Stocks typically bottom right in the middle of recessions, for example. This recession has been going on for a while now... So are we at the middle of it yet? Is it time for stocks to soar?

Unfortunately, history doesn't tell us what we want to hear...

A good analyst doesn't start with a conclusion and look for facts to back it up. Instead, he looks at facts, and makes his conclusions. In this case, we looked at these facts to draw our conclusions: "rolling" 12-month returns on stocks and how they performed over the following one, three, and five years.

The reality is, stocks only performed worse than the 12 months prior just once since 1950, as measured by the S&P 500 and the Dow. That month was September 1974. Those 12 months were followed with a good 12 months... But the returns beyond that were pretty bad – nearly flat after the decent first year.

That's only one example though. To get more, we had to dig deeper.

We had to go all the way back to the 1930s and the Dow. And once again, the results weren't good... Since the 1930s were a terrible time for stocks, we had multiple 12-month periods just as bad as today. Twenty-nine(!) months in the 1930s had worse 12-month returns than what we just experienced. On average, the market was down 3% a year later.

Expanding the universe even more to the Nasdaq, many 12-month periods in 2001 had worse returns than the Nasdaq's return over the last 12-months. Once again, after a terrible year, the average returns a year later were negative again. In short, 2002 was another bad year in U.S. stocks.

In both the Dow in the 1930s and the Nasdaq after 2001, the three-year and five-year returns were also subpar.

The conclusion is simple, and not what we expected to find...

When stocks have a terrible year – as bad or worse than the year we've just experienced – it doesn't necessarily mean they'll have a good performance in the following years. As they say, past performance is no guarantee of future results.

In DailyWealth, we'll stick with what we've found works... buying exceptional value, when investors are extremely scared and we have the start of an uptrend in place.

Right now, we have the first two... but we're still missing that legitimate uptrend.

We suggest you bank on value and sentiment (as Buffett says, "Be fearful when others are greedy and greedy when others are fearful"). And don't give any credence to the notion that a good year must follow a terrible one.

Sticking with what works will keep you in the money.

Source: Daily Wealth

[winston]

Time to (Re)Build Your Portfolio By Christian Hill

The last 10 months in the market have been terrible. The Dow is down more than 30 percent, the S&P is down around 35 percent. One day we may look back on this year as the single greatest financial crisis ever, depending on how the next few months unfold.

The individual investor has taken it square on the chin. Over $2 trillion has evaporated from retirement accounts in the last 15 months. Given the massive amount of lemons around, how can you make lemonade?

You can start by either building or rebuilding your portfolio.

If you are just starting out in the market, value picks are plentiful. Now is the perfect time to pick up shares of industry leaders at deeply discounted prices. Sure, there may be some downside left, but no one can perfectly time any market.

And if you are one of the many who have seen their investments beaten up, now may be the time to buy into some industry leading companies that were too pricey for you in the past. Remember when Google was at $700 share? You can now buy it at half that.

If the price is right and you feel strongly about a company, you might as well buy it now. The market will rebound, valuations will return, and you will be wishing for the opportunity to go back and buy at today's prices.

Source: ETR

[kennynah]

Time to (Re)Build Your Portfolio By Christian Hill

If the price is right and you feel strongly about a company, you might as well buy it now. The market will rebound, valuations will return, and you will be wishing for the opportunity to go back and buy at today's prices.

this is another way of saying...timing a bottom....

[winston]

Tips for handling the financial tsunami by Ian Jackson

With former US federal Reserve chairman Alan Greenspan describing the last few weeks as a "once in a century credit tsunami," it is time to take stock and start to clean up the debris.

Make no mistake, there will be very few people with the wallets and purses or the ability who have not been hit in the first wave of the financial tsunami or the impending second wave.

Before the clean-up, it's important to recognize the nature of the storm; the fact that we continue to be impacted by the confluence of two waves - a financial/ banking wave, followed by a routine economic recession.

Governments around the world have "blessed" the recovery process. They have essentially seen that banks built up too much debt.

On that debt, by the way, Barclays Capital's Tim Bond believes that 80 percent of debt was used to buy assets (property, equities, etc) with only 20 percent entering the "real economy."

That debt must be financed and repaid on the one hand and more cash must be found in order to provide money for the banks to lend to the real economy, both corporate and private. It will take time.

Some US$10 trillion (HK$78 trillion) of asset value has been wiped out in the last few weeks.

What should you do?

Tip No 1: deleverage. Whatever it takes, look at your outgoings and consider what you can finance. Pay back credit cards. Focus your desires downward.

Conclusion on the first wave: clean up on borrowing and prepare for the second wave.

The second wave features our forthcoming recession. Hoping it doesn't mature into a depression. The problem with this recession-thinking is that it is clearly preventing a V-shaped capital market recovery.

Tip No 2: don't sell. Switch into other assets, maybe, but not into cash. For Castlestone's Angus Murray: "Most of the selling was and remains forced deleveraging to reduce debt. People have been selling what can be sold [liquid assets] regardless of the value," implying the selloff is not normal or value-driven.

Indeed, London's feel for a recovery is extremely strong. The problem is that nobody is confident enough to provide the "when."

Tip No 3: this remains a great time to "average in" investments into regular savings plans. Just don't read the short- term valuations; they are irrelevant to future value.

This leaves me with the following associated crisis.

Tip No 4: recruit a financial adviser who understands asset allocation. You will get your money back on good advice from this position.

Tip No 5: protect against capital erosion.

Remember: a 50 percent capital loss requires a 100 percent gain to recover the monies.

This will not be an unusual position for us as readers. It was a tsunami! In order to get 100 percent returns, an investor targeting 7 percent annual performance will need 10 consecutive years at 7 percent to recover the 100 per cent.

With a 4.5 per cent annual target you are looking at a 16-year recovery period.

Cash might be the short term king, but it is clearly just a short-term safe haven.

[winston]

Don't Sweat the Election By Rick Pendergraft

You may be concerned about the stock market now that Barack Obama has won the election. Some people believe that Republicans are better for Wall Street than Democrats are. But history shows that the market has actually performed better under Democrat presidents.

As bad as things have been, I expect the economy to bounce back in the second half of 2009 - and not because of the outcome of the election. Sure, there are certain sectors that will benefit from Obama's victory (biotechnology and alternative energy in particular). But the overall market is primed for a short-term rally. I say short-term, because there is a lot of resistance for the market to take out before the bear market can be declared dead.

The budget deficit, the ailing job market, and a broken financial system are going to be tough to overcome. The new president and Congress will have their work cut out for them.

Source: ETR

[kennynah]

Don't Sweat the Election By Rick Pendergraft

I expect the economy to bounce back in the second half of 2009

i wont be holding my breathe on this statement...get better than now maybe....bounce back, sounds as if all will be well by then....that, i am not so confident...

as in my opinion.... as long as the housing value does not inflate sufficiently....difficult for economy to bounce out of this current situation...

[winston]

After Selling, Your Work Is Only Half Done By Christian Hill

With the recent turmoil in the markets, chances are you liquidated some of your holdings. Whether it was because they hit your pre-determined stop-loss point or you simply threw in the towel because you'd had enough, you still have some work to do.

Did you re-examine your portfolio mix after you sold those stocks? Most likely you didn't, so do it now.

Selling at a loss is often an emotional and stressful experience. As a result, you aren't necessarily focusing on what remains in your portfolio, and you could quickly become overweight in one stock or sector.

After any selling, take the time to make sure you have the mix you want. It may mean selling some additional holdings to bring everything back in line, but it is best to take care of that now, rather than get caught down the road.

Source: ETR

[millionairemind]

Published November 19, 2008

Global equities could fall further: strategist
Investors advised to sell risky assets into any rally as volatility will remain high
By CONRAD TAN


A QUICK recovery in stock markets worldwide is most unlikely, the investment head of a private bank in Asia said yesterday.

'It's going to get a lot worse before it gets better,' said Benjamin Pedley, managing director and head of advisory services for LGT Investment Management Asia, a Hong Kong-based unit of LGT Bank.

He was speaking to fund managers in Singapore at a conference organised by Saxo Capital Markets for its clients.

'It's misplaced to be looking for recovery any time before 2010,' said Mr Pedley.

With Japan, Europe and the US - the world's three biggest economies - all sliding into recession, 'the only real hope is that we get some form of stability coming back to financial markets' in the months ahead, he said.

'Everyone is going to move into recession and it's going to take everyone a long time to come out.'

Although share prices worldwide have plunged in recent weeks, they could easily fall further as the extent of the damage to businesses from the economic slump becomes clearer in the coming months.

'Yes, the equity markets have fallen, but no one has any visibility beyond the first quarter of next year,' Mr Pedley said. 'Volatility will remain high. You've got to sell risky assets into any rallies.'

Banking stocks, which have plummeted in recent months, are also unlikely to stage a sharp rebound, he said.

'Bank earnings will be depressed for the next five to 10 years because we are swinging to a more regulated environment.'

Without the benefit of cheap debt to boost their returns, it will be very difficult for banks' earnings to bounce back quickly, he said.

In the US, there is 'still no sign of a bottom' in the housing market, another indication that the economic recession there is likely to drag on for many months, he added. Consumer spending there will continue to fall and 'any fiscal stimulus will likely be saved rather than spent'.

Also, a large number of people nearing retirement in the US who have lost heavily on investments in the stock market are unlikely to put their money back into stocks any time soon.

'The baby-boomer generation - that is a huge segment of the investor market that's not going to get back into the market. They've had enough,' Mr Pedley said.

To them, it won't matter 'whether the price-earnings ratio is low or that the economy is recovering - it's whether you have enough for retirement'.

Source: Business Times Singapore