Returns for the week ending 11/28/08
Strategic Growth Model (SGM) portfolio, returns for the past…
1 week: -7.5%
26 weeks: +16.4%
52 weeks +35.0%
Value of $10,000 invested at inception: $54,033
SGM portfolio is on a SELL signal, NEXT week’s holdings:
1/2 of funds in RWM
1/2 of funds in CASH
Saturday, November 29, 2008
Sunday, November 23, 2008
Is the Market Undervalued?
click to enlarge chart
The S&P 500 index is now trading 49.4% off its 2007 peak. Some analysts are saying the Market is undervalued and this is a great time to put capital at risk in the stock market. Maybe.
The Hussman "Prior Peak Earnings Model" (PPEM) is a good way to measure the market's valuation relative to prior bear market bottoms. As shown on the chart, secular bear markets often reach bottom when the S&P 500 index is trading at a multiple less than 10x prior peak earnings.
At the end of this week, the SPX closed at 800.03. At this level, the Market is trading at roughly 9.4x prior peak earnings, a level that is considered "undervalued." When the market has reached this valuation level in the past, stocks have ALWAYS outperformed T-bills over the next 10 year period.
But that is not saying that the Market can't first go lower from here before it goes higher. If the SPX dropped another 160 points (20%) from here to 640, the P/E would be 7.5x prior peak earnings, similar to the valuation trough of the bear market of 1983, 1980, 1974, 1949, and well above the valuation troughs of the bear markets of 1942, and 1932.
Every Mutual Fund has Has Lost Money in 2008...
Except One
Out of the 11,585 U.S. and international stock mutual funds tracked by Morningstar Inc., 11,584 have lost money in 2008, according to fund data through Nov. 20.
In other words, just one fund hasn’t lost money this year—and that is the APX Mid Cap Growth Fund, which was flat through Thursday’s close. That’s right, folks, its return—or lack thereof—is a mere zero thus far in 2008.
5 weeks to go for some of these Mutual Funds to show a positive return.
The SGM portfolio, as documented here in the live test, is up 40% YTD.
Do you have 26 years?
click to enlarge
Buy-and-hold is what Wall Street promotes to the Sheeple. Buy-and-hold has been a good way to get fleeced this year. The fallacy of B&H should now be clear.
The above chart shows the crash of 1929 and the bear market that followed. If you had bought the Dow at the top of the market in 1929 and held onto your investment, you would have recovered your original capital 25 years later, not accounting for inflation.
A better way is to allocate your capital in accordance with prevailing market conditions. For example, the SGM portfolio's timing system generated a SELL signal on 9/12/08, neatly avoiding the OCT/NOV plunge. As documented here in the live test, the SGM portfolio has been net-50%-short the market and is UP 31% over the period since 9/12/08.
Saturday, November 22, 2008
The Professionals?
Feeling mauled by the seemingly undying bear market? The S&P 500 is down -44.4% for the year.
Take a look at the year-to-date performance for some biggest of the big-name investors and consider yourself in good company:
* Warren Buffett (Berkshire Hathaway): -43%
* Ken Hebner (CMG Focus Fund) -56%
* Harry Lange (Fidelity Magellan): -59%
* Bill Miller (Legg Mason Value Trust) -50%
* Ken Griffin (Citadel): -44%
* Carl Icahn (Icahn Enterprises): -81%
* T. Boone Pickens: Down $2 billion since July
* Kirk Kerkorian: Down $693 million on his Ford shares alone
These results suggest that “a bear market gets everyone” — even Wall Street legends.
A Photo Album of Bear Markets
click to enlarge
The current bear market has moved into first place for the deepest decline since the inception of the S&P 500 in 1957. Although the ultimate severity of today's bear market is unknown, the rate of decline has been faster and deeper than the other post 1950 declines. At this point in time (about 300 days into the bear market) all the other bear markets were only about halfway to their ultimate bottom.
Sunday, November 16, 2008
Sunday, November 9, 2008
Sunday, November 2, 2008
Live Test - Performance Summary
click to enlarge
The Strategic Growth Model (SGM) portfolio is performing well during these adverse market conditions. It has generated 60% in excess returns over the past 52 weeks compared to the market and it is showing no correlation to the market trend.
Shock-tober!!!
The Strategic Growth Model (SGM) portfolio was UP 16.5% during the month of October. Let's look at how some of the market indices fared...
EQUITIES:
• October 2008 was the most volatile in the 80-year history of the S.& P. 500. (see NYT chart, above)
• The Dow dropped 14% drop over the past four weeks — the biggest October decline since 1987, when the crash sent markets down 23% for the month. The S&P 500 was down 17%, and Nasdaq fell 18%. This ranked as the 15th worst monthly decline for the Dow Industrials since 1900.
• Compare 3 recent SPX Bear Markets: -46% from October 2007; Compare that with 1973-74 down 48% over 23 months. The 2000-03 bear was 49 percent over nearly 3 years.
• The S&P 500 had the most volatile month since November 1929 (1% moves higher or lower).
• Consider days with 4% moves up or down: None from 2003 through 2007; Three throughout the 1950s and two in the 1960s. October 2008 - 9 days with four percent plus or minus. That edges out September 1932’s record of 8. (NYT)
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