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Newsletter for 2009 - Nov - 30

The Markets

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Weekly Commentary

November 30, 2009

 The Markets 

Two steps forward, one step back might be an appropriate description of the financial markets these days.

 

We started the week on a good note as the National Association of Realtors said existing home sales rose 10.1% in October to the highest seasonally adjusted annual rate since February 2007. Later in the week, the Commerce Department said new home sales rose 6.2% in October, which was well above the number that economists surveyed by MarketWatch had expected. And, the Labor Department said 466,000 Americans filed for unemployment benefits for the week ending November 21. That was the lowest number since September 2008. The stock market liked these numbers and by Wednesday of last week, the S&P 500 index had hit a 13-month high, according to MarketWatch.

Then came Thursday. As most of us were celebrating Thanksgiving, Dubai World – the investment arm of the country of Dubai, announced that it was delaying repayment on much of its debt. That surprise announcement sent stocks, bonds, and commodities around the world into a tailspin. By Friday, cooler heads prevailed and the decline in the U.S. market was limited. For the week, the S&P 500 was flat.

 

This week, investors will likely focus on the early read from “Black Friday” sales to determine if the consumer has any oomph left. Additional news from Dubai may also move the markets. While the S&P 500 is up about 60% from its March 9 low, last week’s surprise news from Dubai indicates that there may be lingering effects from the recession for some time to come.

 
Data as of 11/27/091-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor\'s 500 (Domestic Stocks)0.0%20.8%21.8%-7.6%-1.5%-2.5%
DJ Global ex US (Foreign Stocks)-0.736.044.8-5.33.60.9
10-year Treasury Note (Yield Only)3.2N/A3.04.54.36.2
Gold (per ounce) 2.334.143.322.220.914.8
DJ-UBS Commodity Index0.315.410.2-7.8-2.64.0
DJ Equity All REIT TR Index-2.915.331.3-15.0-0.610.1
Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable or not available. EXPERTS HAVE DEVELOPED MANY RULES OF INVESTING, some of which work better than others. It would make our lives easier if we found some rules that worked in all situations and at all times, but, of course, we haven’t found those rules, yet! Nonetheless, here are several from veteran investor and market observer Dennis Gartman that are worth considering. Gartman published these rules in a book edited by John Mauldin titled, Just One Thing. 


 

RULE # 1Never add to a losing position. Gartman says the market knows best and, if an investment is going down in value, then you should get out, not add more. RULE # 2Mental capital trumps real capital. Yes, you lose money (real capital) by holding onto a losing position, but Gartman says the emotional cost of holding onto a losing position is even more costly as you toss and turn about what to do. Better to take your loss and move on to something more promising. RULE #3Sell markets that show the greatest weakness; buy markets that show the greatest strength. This is similar to the old saying, “The trend is your friend.” You may not agree with the trend, but the market doesn’t really care what you think; it responds to what the majority of investors think. RULE #4Keep your trading system simple. Some of the most “sophisticated” investors were the biggest losers in 2008. Gartman says, “Complexity breeds confusion; simplicity breeds an ability to make decisions swiftly, and to admit error when wrong. Simplicity breeds elegance.” RULE # 5Do more of that which is working and do less of that which is not. Sounds simple, doesn’t it? Essentially, it’s add to your winners and sell your losers.  Rules-based investing is only as good as the “programmer” of those rules, the investor’s ability to implement those rules, and the markets’ desire to follow those rules. In reality, the financial markets reflect the combined actions of investors around the world. Trying to come up with rules that accurately reflect this human herd at all times in all situations is, if not impossible, right next to it. However, rules can be helpful as a guide. Weekly Focus – Think About It  “All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”--Warren Buffett Best regards, 

\"Signature\"                         \"\"

J. Martin Kooman, CFP®

Registered Principal, RJFS
http://www.kooman.com

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* This newsletter was prepared by PEAK for use by J Martin Kooman, CFP®, Registered Principal, RJFS

 * The Standard & Poor\'s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.  

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices

. 

* The 10-year Treasury Note represents debt owed by the United State Treasury to the public.  Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market.  The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 *Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.  * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.  * Past performance does not guarantee future results. * You cannot invest directly in an index.  * Consult your financial professional before making any investment decision.

 

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of J Martin Kooman and not necessarily those of RJFS or Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.  Tax or legal matters should be discussed with the appropriate professional.

 

 

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