AIA Advocate for Absolute Returns

In This Issue:

Investors Are Deciding Which Way To Jump
Earnings Count More Than The GDP
Beat The Fixed Income Blues
A Dividend Honor Roll
If You Can't Beat Them...
The Bottom Line This Week

The past 30+ days was a weak period for stocks. Since our September newsletter, the Dow fell 0.6% and the Nasdaq dropped 2.3%.

However, investors have little cause to complain. The market delivered a 56% gain since March 9. At this point, a timeout could be a pause that refreshes. That's especially true since October has often been a tough month for stocks, particularly when it was preceded by a run-up. Another such shock was definitely not welcomed.

In This Issue:

The Outlook Is Better For An Improving Economy
Profit Growth Can Be Misleading
Big Companies Still Have An Advantage
Emerging Countries Are Making A Strong Recovery
Two Long Term Dividend Payers Look Good
Fasten Your Seat Belts, Oil Prices Are Roaring Back
The Bottom Line This Week

It's been a bear market for bears recently as their many doom-and-gloom pronouncements have gone wanting. The old bull just won't quit, despite all the logical arguments that predict his demise. It's a good lesson that paying attention to what is actually happening in the stock market is more profitable than following theories. Mother Market always has the last word.

The numbers tell the story. Since our last letter on July 29, the Dow and the Nasdaq have gone up 5.2% and 2.9% respectively. In only one of the four weeks did the market slide into negative territory, and then by less than 1%. By contrast, the best week registered a 7.3% gain. That's the sort of tailwind we like to have.

In This Issue:

Mixed Economic Signals Worry Investors
Another Kind Of Bailout Is Also A Concern
A New Economic Reality Is Emerging
For Efficient Companies, Slow Growth Can Be Profitable
Your Best Strategy Now
Three Analysts And A Fool Have Recommended This Stock
The Bottom Line This Week

In our last issue we remarked that 'the rally may be getting short of breath.' Shortly thereafter, the huffing and puffing began in earnest. On Monday of this week, definite wheezing sounds were heard as the bull dropped to its knees just short of pushing the market into positive territory for the year. Perhaps the old boy was out of shape after letting the bear take over for six months.

In any event, since May 28 the Dow dropped 0.8% while the Nasdaq managed to squeak ahead a miniscule 0.8%. More importantly, both measures slipped 3.0% and 1.7% last week - and they are even lower now.

In This Issue:

Signs Of A Better Economy? (Or At Least Not As Bad?)
Stocks For A Weak Recovery
The Bottom Line This Week

Last month investors received another booster shot from Wall Street as the Dow and the Nasdaq rose an additional 1.2% and 5.5% respectively. The gains left stocks up 26% from the rally's jumping off point. With any luck, and a few encouraging numbers from the economy, the rally could continue for another few weeks.

Lest anyone think the bear is finished, however, we must remind you that the market never moves in a straight line very long. Even if this is the start of a new bull market, we must expect to get some nasty shocks along the way. After such a strong rally, the first correction may be close at hand.

In This Issue:

The Federal Bailout Is A Mixed Bag
Capitulation May Have Been Reached
Some Blue Chip Stocks Will Win Blue Ribbons
A Speculation Is Also Attractive
Gold Regains Its Appeal, But There Are Problems
An Economic Indicator That We Can Love
The Bottom Line This Week

Since our last newsletter on January 29, the stock market took a sharp turn for the worse. In fact, calling it a "turn" is an understatement. "Plunge" would better describe the 9.6% and 4.4% declines in the Dow and the Nasdaq. The slide left the market at a 12 year low.

Curiously, the plunge isn't due to another panic. At this point in the long bear market, most investors are too tired to sprint for the exits. Instead, many of them are dropping their gear and are simply walking off the field.

In This Issue:

Credit Rebound Coming From Unexpected Sources
Signs Of Life Are Returning To Some Real Estate Markets
A Home Town Advantage With Stocks
Forget The Bottom, Focus On Value
Two Leading Stocks Look Especially Good Right Now
The Bottom Line This Week

As the inauguration of the new American president approached, many analysts expected the market would have an "Obama bounce." Alas, that happy event did not occur. On the contrary, as further economic and banking industry worries continued to mount last week, the Dow and the Nasdaq dropped another 3.7% and 2.7% respectively.

The market fell another 332 points on Tuesday, when our new president took office. (Nothing personal, Mr. Obama. As the Godfather used to say, "it's just business.")

On Wednesday, however, the mood brightened and the market rebounded 279 points.

In This Issue:

It's Time To Start Looking Beyond Current Woes
A Big Cash Horde Is Always Bullish
When It Comes To Rebounds, Too Early Beats Too Late
Eight Blue Chips Many Pros Are Buying
The Bottom Line This Week

There's nothing like the start of a new year to shake investors out of a funk. It happened again a few days ago when the market rallied as the first of January approached. The week the calendar turned over, the Dow and the Nasdaq went up an impressive 6.1% and 6.7% respectively. It was an encouraging end to a dismal year that saw the two indices plunge 33.8% and 40.5% - the third worst performance in recent memory.

Alas, it is far too early to declare an end to the bear market. With manufacturing and home sales dropping to very low levels, it is clear that the economy is still sinking. But as we will discuss later, that doesn't mean that a recovery is off the table for late 2009.

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.