Browse by Tags

In This Issue:

The Way Ahead
Long-Term Investors Welcome Stock Corrections
Mutual Funds May Beat Index Funds From Here On
Finding Current Income
The Bottom Line

Our special report last month that warned about a stock market correction, proved to be very timely. We would have actually been happier, not to mention a bit wealthier, to have been wrong. Unfortunately, Mother Market never consults us before making her moves.

In any event, from April 29 to May 26, the Dow and the Nasdaq dropped an uncomfortable -10.7% and -12.6% respectively. Judging from the strength of the decline, it has further to go before it runs out of steam. The Way Ahead

The biggest question for investors now is whether the decline is a normal correction, or the start of a bear market.

We think the drop is most likely a correction. It was to be expected following the heady run-up of the previous 12 months. The only surprise is the retreat didn't come earlier. The delay allowed many stock prices to move further ahead of the economy, which means they have more ground to give back before the scales are balanced again.

Fortunately, the economy is continuing to grow – and it is doing so at a higher pace than most analysts predicted. By the fall, we think the stock market will resume its advance in a classic catch-up move.

In This Issue:

The Economy Is Bad, But Stocks Are Priced For Worse
Stocks Outshine Their Competition
Behold The Halo Effect
A January Bounce Seems Likely
Energy And Foreign Growth Are Positives
We May Be Halfway Through The Economic Downturn
What Everybody Knows...
The Bottom Line This Week

Last week we received additional signals that a bear rally is probably in the works. During the five day period, investors were treated to a smorgasbord of bad news. Congress turned thumbs down on bailing out the Big Three automakers. Unemployment surged to a 26 year high. T-Bill returns dropped to essentially zero. Many bellwether companies issued earnings warnings. Several firms cut their dividends, and investors were shocked by a $50 billion hedge fund collapse.

So what did the market do? It barely budged. The Dow eased down less than 0.1%. The Nasdaq actually rose 2.1%. The market was also strong during the first three days of the current week. In our opinion, such resilience in the face of disturbing economic events indicates that investors are probably getting ready to do some buying.

In This Issue:

A Big Rebound May Be Close
Like Kids In A Candy Store
Super Stocking Stuffers
These Trends Are Your Friends
The Bottom Line This Week

Another bear trap snapped shut last week when the 4.8% stock market gain from October 6 - 10 turned into a 5.4% loss for the Dow and an ugly 9.3% plunge for the Nasdaq.

As has been the usual pattern during this stock market plunge, the drop was larger than the previous bounce. One of our group compared the market to a slot machine that gives just enough money back to make people want to keep playing.

We saw another inducement to play on Tuesday of this week when the market surged nearly 890 points when it became known that the Fed would lower interest rates again. When the official announcement came on Wednesday, stocks eased back 74 points. It was a textbook example of the old Wall Street rule to "buy on the rumor, sell on the news."