THE MARKETS
Two steps forward, one step back might be an appropriate
description of the financial markets these days.
We started the week on a good note as the National Association
of Realtors said existing home sales rose 10.1% in October to the
highest seasonally adjusted annual rate since February 2007. Later
in the week, the Commerce Department said new home sales rose 6.2%
in October, which was well above the number that economists
surveyed by MarketWatch had expected. And, the Labor Department
said 466,000 Americans filed for unemployment benefits for the week
ending November 21. That was the lowest number since September
2008. The stock market liked these numbers and by Wednesday of last
week, the S&P 500 index had hit a 13-month high, according to
MarketWatch.
Then came Thursday. As most of us were celebrating Thanksgiving,
Dubai World - the investment arm of the country of Dubai, announced
that it was delaying repayment on much of its debt. That surprise
announcement sent stocks, bonds, and commodities around the world
into a tailspin. By Friday, cooler heads prevailed and the decline
in the U.S. market was limited. For the week, the S&P 500 was
flat.
This week, investors will likely focus on the early read from
"Black Friday" sales to determine if the consumer has any oomph
left. Additional news from Dubai may also move the markets. While
the S&P 500 is up about 60% from its March 9 low, last week's
surprise news from Dubai indicates that there may be lingering
effects from the recession for some time to come.
|
Data as of 11/27/09
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.0%
|
20.8%
|
21.8%
|
-7.6%
|
-1.5%
|
-2.5%
|
|
DJ Global ex US (Foreign Stocks)
|
-0.7
|
36.0
|
44.8
|
-5.3
|
3.6
|
0.9
|
|
10-year Treasury Note (Yield Only)
|
3.2
|
N/A
|
3.0
|
4.5
|
4.3
|
6.2
|
|
Gold (per ounce)
|
2.3
|
34.1
|
43.3
|
22.2
|
20.9
|
14.8
|
|
DJ-UBS Commodity Index
|
0.3
|
15.4
|
10.2
|
-7.8
|
-2.6
|
4.0
|
|
DJ Equity All REIT TR Index
|
-2.9
|
15.3
|
31.3
|
-15.0
|
-0.6
|
10.1
|
Notes: S&P 500, DJ
Global ex US, Gold, DJ-UBS Commodity Index returns exclude
reinvested dividends (gold does not pay a dividend) and the three-,
five-, and 10-year returns are annualized; the DJ Equity All REIT
TR Index does include reinvested dividends and the three-, five-,
and 10-year returns are annualized; and the 10-year Treasury Note
is simply the yield at the close of the day on each of the
historical time periods. Sources: Yahoo! Finance, Barron's,
djindexes.com, London Bullion Market Association. Past performance
is no guarantee of future results. Indices are unmanaged and
cannot be invested into directly. N/A means not applicable or
not available.
EXPERTS HAVE DEVELOPED MANY RULES OF INVESTING,
some of which work better than others. It would make our lives
easier if we found some rules that worked in all situations and at
all times, but, of course, we haven't found those rules, yet!
Nonetheless, here are several from veteran investor and market
observer Dennis Gartman that are worth considering. Gartman
published these rules in a book edited by John Mauldin titled,
Just One Thing.
RULE # 1
Never add to a losing position. Gartman says the
market knows best and, if an investment is going down in value,
then you should get out, not add more.
RULE # 2
Mental capital trumps real capital. Yes, you lose
money (real capital) by holding onto a losing position, but Gartman
says the emotional cost of holding onto a losing position is even
more costly as you toss and turn about what to do. Better to take
your loss and move on to something more promising.
RULE #3
Sell markets that show the greatest weakness; buy markets
that show the greatest strength. This is similar to the
old saying, "The trend is your friend." You may not agree with the
trend, but the market doesn't really care what you think; it
responds to what the majority of investors think.
RULE #4
Keep your trading system simple. Some of the most
"sophisticated" investors were the biggest losers in 2008. Gartman
says, "Complexity breeds confusion; simplicity breeds an ability to
make decisions swiftly, and to admit error when wrong. Simplicity
breeds elegance."
RULE # 5
Do more of that which is working and do less of that which
is not. Sounds simple, doesn't it? Essentially, it's add
to your winners and sell your losers.
Rules-based investing is only as good as the "programmer" of
those rules, the investor's ability to implement those rules, and
the markets' desire to follow those rules. In reality, the
financial markets reflect the combined actions of investors around
the world. Trying to come up with rules that accurately reflect
this human herd at all times in all situations is, if not
impossible, right next to it. However, rules can be helpful as a
guide.
Weekly Focus - Think About It
"All there is to investing is picking good stocks at good times
and staying with them as long as they remain good companies."
--Warren Buffett
For your convenience the sources have been listed below:
www.marketwatch.com/story/us-existing-home-sal...
www.marketwatch.com/story/october-new-home-s...
www.bloomberg.com/apps/news?pid=20601084&si...
www.marketwatch.com/story/us-stocks-open-with...
www.safehaven.com/article-4471.htm
www.cnbc.com/id/34153472/site/14081545
www.investopedia.com/university/greatest/warrenbu...
