AIA Advocate for Absolute Returns

The AIA "Advocate For Absolute Returns", an on-line publication of The Association for Investor Awareness, Inc., tracks market trends, industry news, the SEC, global trade and finance and Washington developments for you because they affect your investments. But who doesn't? Many sources simply report these issues as abstract facts.

We feel that's not enough. The AIA Advocate's job is to warn you of what's important and how these developments translate to ground-level forces and threats that directly affect your wealth as well as your current investment opportunities. Not just information, but information you can use. Until next time…

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  • Association of Investor Awareness - Week of 11/13/2008

    In This Issue:

    How Will The Obama Presidency
    Affect The Investment Markets?

    We had another roller coaster ride on Wall Street last week. Although the first day wasn't exciting, two others gave us a 553 point surge. On the two remaining days, the market plunged 930 points. When the shouting stopped on Friday afternoon, the Dow and the Nasdaq were down 4.1% and 4.3% respectively.

    The latest decline probably put the kybosh on the mid-cycle rally that appeared to be starting the week earlier, but it's not yet certain. As chaotic as the markets have been over the past two weeks, stocks were above where they started. Bear market rebounds often resemble walking up a sand dune where you move two steps forward and you slide back one. Sometimes it's hard to see if you're making progress.

    On Monday and Tuesday of this week stocks fell 73.3% and 176.6%, which was well under half the rate we saw several days ago. Perhaps the bear is running out of steam and stock prices will bounce back up again. The odds seem good, but bear rallies are of little use to value investors who benefit from lower prices. 

    ...

  • Association of Investor Awareness - Week of 11/20/2008

    In This Issue:

    Stocks Search For A Bottom
    High Energy Prices Will Return
    Commodities Will Also Rebound
    Infrastructure Spending Is Likely To Soar
    The Bottom Line This Week

    Stocks stumbled badly again last week as deteriorating economic news caused another round of investors to throw in the towel. By Friday afternoon, the Dow and the Nasdaq were down an additional 5.0% and 7.9%. The declines left the two indices down 35.9% and 42.8% for the year. Ouch!

    This week got off to an equally bad start. Although we had a 151 point gain on Tuesday, it was overshadowed by a 651 point slide on Monday and Wednesday.

    ...

  • Week of 10/09/2008

    Bargains Are Starting To Appear
    A Bottom Fishing Check List
    The Bear Isn't Finished Yet
    Big Drops Lead To Big Rebounds
    Financial Stocks Attract More Attention
    There Is One More Shoe To Fall
    The Biggest Question: Will The Bailout Work?
    The Bottom Line This Week

    Wall Street's thrill ride continued over the past week as investors made king-sized moves after every drop in the economic outlook. By the time the closing bell rang on Friday, the Dow and the Nasdaq were down 7.3% and 10.8% respectively. A good time was definitely not enjoyed by all.

    Once again, investors saved their biggest gyrations for the following Monday when the market plunged some 800 points. Fortunately, the market regained 430 points before the end of the day. Stocks resumed their slide on Tuesday and Wednesday when they fell a total of 689 points.

    ...

  • Association of Investor Awareness - Week of 10/16/2008

    The Biggest Danger Now Is A Series Of Bear Traps
    The Financial Crisis Has Further To Run
    Some Bear Market Investments Have Promise
    How Long The Bear Might Stick Around
    A Contrary Economic Outlook
    Another Shameless Plug For Blue Chip Stocks
    The Bottom Line This Week

    Stock volatility has become so extreme, we had to redraw the charts. Although there have been up and down days as large as those we have seen recently, never before have they come in such quick succession.

    Last week, as everyone from New Guinea to New York must know by now, the Dow and the Nasdaq fell 18.2% and 15.3% respectively. That would have been tough enough by itself, but what made the week even more hectic is it contained a 679 point jump that many investors believed was the start of a reversal. 

    The market leaped forward again this Monday with a breath taking 936 point surge when U.S and European leaders decided on a coordinated financial rescue plan. Stocks took a breather on Tuesday. Then it plunged 733 points the next day on poor consumer spending data. We must expect more whiplash days as the credit crisis continues to unfold. 

    ...

  • Association of Investor Awareness - Week of 01/15/2009

    In This Issue:

    Sometimes Good News Can Be Bad News
    Treasury Bonds May Be A Bubble
    It’s Time To Choose Shorter Bond Maturities
    Three Ways To Win If Treasuries Decline
    Investing In Times Of Extremes
    Staying Healthy During Impossible Times
    The Bottom Line This Week

    The optimistic mood that lifted the stock market two weeks ago didn’t last very long. In fact it might have been the smallest January bounce on record. After the 2nd, prices started to move back down again.

    There is some solace in noting that the market is still up some 20% from where the zigzag rally started on November 21. Despite all the turmoil, it may turn out that the bear market reached bottom at that time. We shall know soon enough.

    In any event, by the time last Friday afternoon rolled around, the Dow and the Nasdaq were down 4.8% and 3.7% respectively. During the first three days of this week, the market continued to decline sharply as more disturbing economic numbers were announced.

    ...

  • Association of Investor Awareness - Week of 11/06/2008

    In This Issue:

    The Rally May Have Legs – Or Not!
    A Banquet For Value Investors
    Dividends Shine In This Market
    A Yield Bonus That Few Investors Consider
    The Bluest Of The Blue Chips
    Love Those Dividend Aristocrats
    The Bottom Line This Week

    The mid-cycle rebound we have been expecting showed up last week with a spectacular opening. Even though the market on Monday showed a 203 point loss, huge gains over the remaining four days pushed the Dow and the Nasdaq up 11.3% and 10.9% respectively.

    This time the gains survived the weekend, but not for long. Monday was a yawn, but the market jumped 305 points on Tuesday as excitement about the presidential election boosted spirits. On Wednesday, however, America suffered a post-election hangover and stocks dropped a whopping 486 points. It looks like Wall Street plans to give President-elect Obama a very short honeymoon.

    ...

  • Association of Investor Awareness - Week of 02/26/2009

    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.

    ...

  • Association of Investor Awareness - Week of 11/26/2008

    Special Issue:

    When Deflation Comes,
    Cash Is King

    When everybody is certain the economy and stocks will move a particular way, usually just the opposite occurs. That's just what happened this summer when deflation suddenly overtook inflation as America's primary economic problem. Mr. Murphy, of Murphy's Law, seems to take particular pleasure in messing up the plans of investors.

    Deflation, of course, is just the opposite of inflation. Instead of seeing the value of money fall and the prices of goods rise, cash becomes much more valuable and prices decrease.

    Deflation is clearly in control today as homes, oil, and even precious metals plummet in price. Now food costs are beginning to sink. Jobs are being lost in most industries. Most experts think that wages will also begin to fall within a few months.

    The public is starting to show the effects of the deflationary squeeze. People are selling motor homes, pleasure boats, and many other big ticket items to raise badly needed cash. A disturbing 10% of Ohio's adult population is on food stamps. Of course, retail sales are also weakening.

    ...

  • Association of Investor Awareness - Week of 12/11/2008

    In This Issue:

    The Long-Awaited Bear Rally May Be Starting
    Although Weak, Some Hopeful Economic Signs Are Emerging
    Credit Is Slowly Opening Up Again
    If Fear Subsides, The Outlook Will Improve Immediately
    A Recovery Will Bring Unwelcome Inflation
    The Bottom Line This Week

    As we reported in our previous issue, the sharp stock market advance over the Thanksgiving holiday came to a crashing end on December 1. However, prices have been stronger since then. Although the gains weren't enough to fully erase the earlier plunge, the Dow and the Nasdaq managed to end last week down just 2.2% and 1.7% respectively. From Monday to Wednesday of the current week, the market managed to make some additional gains.

    It's significant that the price increases occurred while more bad economic news was breaking. A manufacturing decline, an auto sales plunge, and more job losses should have pushed stocks down several more notches. The fact that investors largely ignored the negatives may indicate that the bear market is close to a bottom.

    ...

  • Association of Investor Awareness - Week of 01/29/2009

    In This Issue:

    Reasons For Cautious Optimism Continue To Appear
    Many Promising Stocks Attract Long-Term Investors
    The Bottom Line This Week

    The stock market continued to lose ground last week as the Dow and the Nasdaq declined an additional 2.5% and 3.4% respectively.

    A growing number of analysts believe the stock slide will continue until the market tests (reaches) the low point it made on November 20. If so, it will be a classic correction to a bear market rally.

    A much bigger issue is what will come next if the November lows are reached. Pessimists believe the market will continue to decline until blue chip P/E ratios get closer to 10. If so, the S&P 500 would drop from today's 832 to 750, or so. Super bears think the index might fall another hundred points.

    On the other hand, optimists believe the market will bounce back in a classic stage two bear market rebound. If history repeats, the second time should be the charm as a new rally would typically test its former highs – and then continue up. The 298 point jump the market took during the first three days of this week suggests that the optimists may be right.

    ...

  • Association of Investor Awareness - Week of 01/01/2009

    In This Issue:

    The New Year Should Bring Investors Some Relief
    Consumers Have More Money Than Holiday Sales Suggest
    Most Corporations Are In Good Financial Shape
    Economy Gains From Cheaper Dollars, Oil, And Interest Rates
    The Faster The Pain, The Quicker The Gain?
    If You Don’t Play, You Can’t Win
    The Bottom Line This Week

    Investors who hoped that Santa might bring them some cheer over Christmas were sorely disappointed. The usually-jolly old gentlemen dropped off a rather large bag of coal. Even that gift was worth a lot less than would have been true a few months ago.

    In any event, when the stock market closed on Christmas week, the Dow and the Nasdaq were down another 0.7% and 2.2% respectively. The mood brightened over the weekend when unemployment claims dropped unexpectedly. During the last three trading days of 2008, the market went up 260 points. We suspect that the occasion will be celebrated with a little extra bubbly on New Years Eve.

    Of course, Wall Street’s revelers will need to overlook the fact that the S&P 500 went down a dismal 41% during 2008. It wasn’t the worst annual performance in history, but it was the worst in the memory of most investors living now.

    ...

  • Association of Investor Awareness - Week of 01/08/2009

    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.

    ...

  • Association of Investor Awareness - Week of 01/22/2009

    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.

    ...

  • Association of Investor Awareness - Week of 12/18/2008

    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.

    ...

  • Association of Investor Awareness - Week of 12/04/2008

    In This Issue

    Black Friday May Suggest A More Optimistic Outlook
    Most Insiders Are Not Selling
    Bear Market History: How We Compare
    Get Paid While You Wait
    The Bottom Line This Week

    Last week when everyone was stuffing themselves with turkey and other goodies, the urge to consume in abundance spilled over to Wall Street. By the time the market closed on Friday, the Dow and the Nasdaq were up an impressive 9.7% and 10.9% respectively. It was the first five day rally we've seen in over a year.

    The enthusiasm for stocks wasn't completely due to holiday cheer. Investors got wind of the fact that Black Friday sales were likely to be better than was first expected. As it turned out, instead of a miniscule 0.9% sales increase, Joe and Sally MidAmerica gave the retail industry a 3% boost. Shoppers were so eager to spend money, they trampled several people who got in their way, one of whom died.

    As we are sure you know by now, the enthusiasm didn't survive the weekend. The terrorist attack in Mumbai plus a dismal economic report sent the market down 680 points on Monday. Stocks recovered 442 points on Tuesday and Wednesday but the rebound seems unlikely to last very long.

    ...
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