Few investors will mourn the passing of 2008. For good reason.
The Dow Jones Industrial Average fell 33.8%, it's worst drubbing since 1931 and its third-worst year ever. The Dow's loss has been exceeded only by a 53% loss in 1931 and a 38% loss in 1907. It was slightly worse than its loss in 1930.
The Standard & Poor's 500 Index fell 38.6%, its worst performance since 1937 and third-worst loss.
The Nasdaq Composite Index, established in 1971, lost 40.5%, its worst year ever -- even worse than after the dot-com bust.
Next year may not be anything like 2008 and could even see a rebound. But there are enough minefields facing both the economy and investors that deep caution will be the watchword.
The housing industry still hasn't bottomed, and the year-old recession is likely to be the worst since the 1970s. Meanwhile the fates of General Motors (GM, news, msgs), Ford Motor (F, news, msgs) and Chrysler are problematic.
Yet a new administration takes over in three weeks, with promises of a big stimulus package to jump-start the economy. An administration's first year is often good for stocks.
Wednesday, December 31, 2008
Thursday, December 25, 2008
investing books
Vitaliy Katsenelson, author of Active Value Investing, writes:
We find ourselves glued to the computer screens or CNBC waiting to find out what the Dow’s next tick is going to be. Unfortunately, we are left with only a headache and wasted time. OK, what’s next? Here is my advice –- read. Read books that will bring you sanity, the ones that will snap you back into the shell of investor and out of the sorry shell of nervous observer of the daily stock market melodrama. The following books are excellent choices and will come with plenty of sanity and sage advice.
We find ourselves glued to the computer screens or CNBC waiting to find out what the Dow’s next tick is going to be. Unfortunately, we are left with only a headache and wasted time. OK, what’s next? Here is my advice –- read. Read books that will bring you sanity, the ones that will snap you back into the shell of investor and out of the sorry shell of nervous observer of the daily stock market melodrama. The following books are excellent choices and will come with plenty of sanity and sage advice.
Sunday, December 21, 2008
Dividend All-Stars
I'm looking at dividendinvestors.com (from an article in the paper).
One neat feature is that they tell you how many consecutive years the company has increased their dividends. For example, JNJ had increased their dividend for 45 years in a row. MMM for 49 years. PG for 54 years.
Maybe I'll actually sign up to see more.
* * *
According to this article there are high dividend achievers and high dividend aristocrats. The Achievers are those who have increased dividends 10 or more years. The aristocrats have increased 25 or more years. There are 312 achievers, but only 59 aristocrats.
Well, looking now, there are only 52 (five financial companies have cut their dividend). Among them are XOM, GE, LOW, PFE, TGT, WAG.
One neat feature is that they tell you how many consecutive years the company has increased their dividends. For example, JNJ had increased their dividend for 45 years in a row. MMM for 49 years. PG for 54 years.
Maybe I'll actually sign up to see more.
* * *
According to this article there are high dividend achievers and high dividend aristocrats. The Achievers are those who have increased dividends 10 or more years. The aristocrats have increased 25 or more years. There are 312 achievers, but only 59 aristocrats.
Well, looking now, there are only 52 (five financial companies have cut their dividend). Among them are XOM, GE, LOW, PFE, TGT, WAG.
Tuesday, December 16, 2008
time to buy?
The 2007-08 bear market has been the worst since the Great Depression, more savage than that of 1973-74, which most of us remember only dimly, if at all, and 2000-02, which we remember all too well.
What's more, the combination of two deep bears in less than a decade has poisoned many people against common stocks. The Standard & Poor's 500 Index ($INX) has gone down an average of 0.9% a year over the past 10 years, from November 1998 through November 2008.
Since this bear market began 14 months ago, virtually every asset class, from foreign and domestic stocks to commodities to real estate, has been driven down at least 50%. Even among bonds, only U.S. Treasurys have held up well. The benefits of diversification, in short, have proved to be illusory.
"Today, in my view, the stock market is presenting you with one of the great buying opportunities of your lifetime -- perhaps the greatest," says Steve Leuthold, the manager of the Leuthold Core Investment (LCORX) fund, which ranks in the top 2% of similar funds over the past 10 years. "Buy 'em when they hate 'em."
Having pointed out the negative returns of stocks over the past 10 years, Leuthold tracked the history of stock performance in every 10-year period in which the market averaged an annual gain of 1% or less. Then he looked at the succeeding 10 years. The worst performance in those periods was a gain of 101% between 1938 and 1948. The best was a surge of 325% between 1974 and 1984. The average was 183%.
What's more, the combination of two deep bears in less than a decade has poisoned many people against common stocks. The Standard & Poor's 500 Index ($INX) has gone down an average of 0.9% a year over the past 10 years, from November 1998 through November 2008.
Since this bear market began 14 months ago, virtually every asset class, from foreign and domestic stocks to commodities to real estate, has been driven down at least 50%. Even among bonds, only U.S. Treasurys have held up well. The benefits of diversification, in short, have proved to be illusory.
"Today, in my view, the stock market is presenting you with one of the great buying opportunities of your lifetime -- perhaps the greatest," says Steve Leuthold, the manager of the Leuthold Core Investment (LCORX) fund, which ranks in the top 2% of similar funds over the past 10 years. "Buy 'em when they hate 'em."
Having pointed out the negative returns of stocks over the past 10 years, Leuthold tracked the history of stock performance in every 10-year period in which the market averaged an annual gain of 1% or less. Then he looked at the succeeding 10 years. The worst performance in those periods was a gain of 101% between 1938 and 1948. The best was a surge of 325% between 1974 and 1984. The average was 183%.
Monday, December 15, 2008
Saturday, December 13, 2008
rebounds follow drops (usually)
Through the end of November, we experienced a very rare event, with the S&P 500 down 30% during three straight months of declines. Looking at the history of the market since its inception, there were only five prior cases where returns were this weak—four during the Great Depression. As you can see in "Market physics: rebounds have typically followed sharp drops" below, the market was higher during subsequent periods the vast majority of the time.
Bernard Madoff
NEW YORK (AP) — They had known him for years as a golf partner, a family friend. Some were neighbors or fellow members of country clubs on Long Island and in Florida.
Many had begun investing with 70-year-old Bernard L. Madoff decades ago, often after being referred by a friend or relative who had known the Wall Street veteran even longer.
There had been some warnings: Financial consultants had been suspicious for years about his astounding run of success.
They couldn't figure out how he managed to produce steady returns, month after month, even when everyone else was losing money — and leave almost no footprint while moving billions of dollars in and out of the markets.
"People would come to me with their statements and I couldn't make heads or tails of them," said Charles Gradante, co-founder of the Hennessee Group and advisor to hedge fund investors.
"He only had five down months since 1996," Gradante said. "There's no strategy in the world that can generate that kind of performance. But when people would come to him and say, 'How did I make money this month?' he didn't like it. He would get upset with people who probed too much."
Those investors were scrambling Friday to learn whether they had been wiped out by what prosecutors described as a multibillion-dollar Ponzi scheme. The assets of Madoff's investment company were frozen Friday in a deal with federal regulators and a receiver was appointed to manage the firm's financial affairs.
According to the criminal complaint, Madoff estimates he lost as much as $50 billion over many years. If true, it could be one of the largest fraud schemes in Wall Street history.
* * *
[12/24/08] PARIS - A French investment fund manager badly hit by the multi-billion-dollar Madoff scandal committed suicide in his New York office on Tuesday, a French newspaper reported.
Thierry de la Villehuchet, 65, was the co-founder of Access International, a company that raised funds on the European markets to plough into Bernard Madoff's fraud-hit investment scheme.
Villehuchet "could not cope with the pressure following the outbreak of the scandal. He took his own life, this morning, in his office in New York," the website of la Tribune business daily quoted his relatives as saying.
"This is a farewell from someone who had done nothing wrong," they said.
"For the past week, he had tried day and night to find a way to recoup his investors' money and had begun legal action in the United States against US authorities," his relatives said.
***
[10/13/09 via libertarians_2000] Madoff wins one
Many had begun investing with 70-year-old Bernard L. Madoff decades ago, often after being referred by a friend or relative who had known the Wall Street veteran even longer.
There had been some warnings: Financial consultants had been suspicious for years about his astounding run of success.
They couldn't figure out how he managed to produce steady returns, month after month, even when everyone else was losing money — and leave almost no footprint while moving billions of dollars in and out of the markets.
"People would come to me with their statements and I couldn't make heads or tails of them," said Charles Gradante, co-founder of the Hennessee Group and advisor to hedge fund investors.
"He only had five down months since 1996," Gradante said. "There's no strategy in the world that can generate that kind of performance. But when people would come to him and say, 'How did I make money this month?' he didn't like it. He would get upset with people who probed too much."
Those investors were scrambling Friday to learn whether they had been wiped out by what prosecutors described as a multibillion-dollar Ponzi scheme. The assets of Madoff's investment company were frozen Friday in a deal with federal regulators and a receiver was appointed to manage the firm's financial affairs.
According to the criminal complaint, Madoff estimates he lost as much as $50 billion over many years. If true, it could be one of the largest fraud schemes in Wall Street history.
* * *
[12/24/08] PARIS - A French investment fund manager badly hit by the multi-billion-dollar Madoff scandal committed suicide in his New York office on Tuesday, a French newspaper reported.
Thierry de la Villehuchet, 65, was the co-founder of Access International, a company that raised funds on the European markets to plough into Bernard Madoff's fraud-hit investment scheme.
Villehuchet "could not cope with the pressure following the outbreak of the scandal. He took his own life, this morning, in his office in New York," the website of la Tribune business daily quoted his relatives as saying.
"This is a farewell from someone who had done nothing wrong," they said.
"For the past week, he had tried day and night to find a way to recoup his investors' money and had begun legal action in the United States against US authorities," his relatives said.
***
[10/13/09 via libertarians_2000] Madoff wins one
Wednesday, December 10, 2008
negative interest on t-bills
Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.
The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.
The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.
Thursday, December 04, 2008
buying in a meltdown
In our 30 plus years of investing, we have rarely seen opportunities the likes of which we are seeing today. In times such as this, we are comforted by the fact that we have survived and prospered through many other crises over the years. Not to be flip, but we are reminded of the time back in 1962 when Russian missiles were on their way to Cuba to confront the U.S. blockade. Joe Reilly, a former partner of Tweedy, Browne, was in our trading room feverishly buying stocks in one of the biggest market meltdowns in stock market history. When asked by Howard Browne how he could be so confident in the face of such impending doom, Joe remarked, “Either this is going to turn out OK and the markets will turn around, or the world is going to come to an end. In either event, I’ll be fine as long as God doesn’t require cash.”
[Tweedy Browne Investment Adviser's Letter via iluvbabyb]
[Tweedy Browne Investment Adviser's Letter via iluvbabyb]