Markets look great, again

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May 6, 2006 6:42 am

Despite all the doom and gloom about Walmart, gas prices, Iraq, and low

poll numbers, the Russell 2000, the S&P 400 Mid-Cap, and the Dow are all

at new all-time highs. So is the EAFE and emerging markets. The only one

not at a new high is NASDAQ.



My accounts look great. Hope yours do to.





SKEE

May 6, 2006 11:55 am

Our accounts have been doing great as well... We have been reviewing allocation strategies for our clients and have been taking some profits in certain areas, such as multi-cap growth and emerging markets. Better to sell out 80% of the gains over/above the allocation percentage and redeploy into other areas. We are still keeping about 110% of the value in these areas but have begun moving the excess profits into areas such as short term paper and money markets.


Our clients appreciate the prudence we are taking and agree that with the indexes approaching record levels and the increasing uncertainty, that realizing some profits may be a good short term strategy....

May 6, 2006 8:08 pm

Sounds good to me. Don't you feel bad for those clients locked into a 60/40

fixed income/equities mix? Ouch!

May 6, 2006 10:11 pm

The Dow has a bit more to go if I remember right...I think it peaked around 11,700...

May 7, 2006 3:35 pm

Don't get your clients too excited, with the current market trends. Remember, part of our job is to manage client expectations. If you feed your client too much optimism, they'll become hooked on that drug. Then when the market and their account, takes a hit, they'll acat their money out of there.


Historically speaking, depending on which type of S&P earnings you go by, i.e., operating, core, or as reported, the most we can hope for, over the next 10 years, is an annual return of approximately 6-8%. This is a trend that goes back as far as the early 1900's. Of course, things could be different this time. (Yeah, right)


Keep in mind, that an annual return of 6-8% doesn't mean smooth sailing. You could have a bear market for a majority of those 10 years and the market then make it up on the backside. Of course, by then, you will have lost the account.


I agree with blarmston, that taking some profits now is a prudent thing to do.



May 7, 2006 7:38 pm
doberman:

I agree with blarmston, that taking some profits now

is a prudent thing to do.





I'm with ya. Only I'm waiting for the Fed to stop raising rates before I do.

May 7, 2006 7:39 pm

"Buy the rumor...sell the news!"

May 7, 2006 7:48 pm
doberman:

the most we can hope for, over the next 10 years[/

B], is an annual return of approximately 6-8%.





Minus taxes and management fees? Might as well buy pre-refunded Munis

or stay in money market and call it a day. Right?



Man, if you came to me with that pitch I definately wouldn't sign the ACAT.

You're a good man and you like my jokes. Still friends?

May 7, 2006 9:01 pm

skeedaddy:
Man, if you came to me with that pitch I definately wouldn't sign the ACAT.
You're a good man and you like my jokes. Still friends?


-----------------------------------------


Still friends? You bet. You could call me a wacked-out nut job. And as long as you said that, with a smile on your face, I'd give you my kidney if you needed it. Disagreements are prevalent in this business and everybody is right, at some point in time.


Who's to say what the market's going to do? (Past performance is not...blah, blah) Personally though, I'd put more stock in 80 years of market trends than some optimistic, overqualified bean-counter any day of the week. 


Besides, if you're dealing with the wealthy, they're more interested in preserving wealth than growing it. As a result, I am more apt to get an acat, than someone promising growth to the moon.


The biggest favor you can do for yourself and your practice, is to focus on selling the process of investing. Versus, if you put "investment returns" front and center of your sales pitch. If those returns are disappointing, your client will leave you.


Whereas, a broker with a distinctive "process of investing" will weather the market downturns with fewer outgoing acats. Why? Where else is that client going to find a broker who does as much due diligence on their investments?

May 7, 2006 10:39 pm
Indyone:

The Dow has a bit more to go if I remember right...I think it peaked around 11,700...


The S&P 500 still has a long way to go.

May 7, 2006 10:42 pm

I was really, really busy on Friday.....selling out of of positions that is.  Always trust your insticts and stick to your disciplines. 

May 17, 2006 6:45 pm

Man, talk about speaking too soon. I just got royally spanked in less than a

week. This has been brutal. Straight wholesale selling. Did anything go up

today?

May 17, 2006 7:51 pm

skeedaddy:


Man, talk about speaking too soon. I just got royally spanked in less than a week. This has been brutal. Straight wholesale selling. Did anything go up today?


-------------------------------------


Yea, the price of gas and the price of just about everything else.  


Tuesday, I was approached by 2 beggars asking for gas money.


One approached me as I was filling-up. This guy had already parked his car at the pump and was rolling around in his wheelchair to all the pumps, asking for money. The other guy hit me up on the street. I never gave them money, since I couldn't tell the huskster from someone truly in need.


I guess my forehead was stamped,"Ask Me For Gas Money".

May 17, 2006 10:46 pm

It's all about value. This ain't a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the "fed model". If we use this valuation method then we are hostage to interest rates. (Now about those "poor saps" that use a 60/40 allocation.)

May 18, 2006 7:51 am

The market is pulling back and seems that it is likely to continue,
which I think is pretty healthy at this point.  I don't believe in
secular bull or bear markets...money can be made in both.  IF you
bought the index at the peak, rode it down and came back up you would
have a balance of X.  If you had a 60/40 mix implemented a the
peak, rebalanced on the way down and on the way back up you balance is
X+++++. It is just short term view vs long term view. 

May 18, 2006 7:59 am
Revealer:

It's all about value. This ain't a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the "fed model". If we use this valuation method then we are hostage to interest rates. (Now about those "poor saps" that use a 60/40 allocation.)


Perfect. No bull market has EVER commenced with a P/E higher than 11. In addition, the average gain in up years is higher in a BEAR market than a bull market.

May 18, 2006 8:30 am

I'm considering using overbought/oversold as trigger points. Which means I

should be buying right now, but it takes a strong stomach. Let's see how

things develop.

May 18, 2006 8:45 am

If that is all you are using to determine when to buy you are not making the best decisions.  Really.  If you are going to start to use technicals you need to learn how to use more than just that.

May 18, 2006 11:29 am
remotecontrol:
Revealer:

It's all about value. This ain't a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the "fed model". If we use this valuation method then we are hostage to interest rates. (Now about those "poor saps" that use a 60/40 allocation.)


Perfect. No bull market has EVER commenced with a P/E higher than 11. In addition, the average gain in up years is higher in a BEAR market than a bull market.



Fair enough.  How does one make money in this market then?

May 18, 2006 12:09 pm

"Fair enough.  How does one make money in this market then?"


Employing a diversified portfolio to weather any pullbacks, while allocating a small percentage to tactical non-correlative asset classes to potnetially add return. Also, by taking advantage of rather attractive cash yields right now.