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December 8, 2008

ON A PERSONAL NOTE...

Please join me in welcoming the newest member of our family...Elizabeth Euphemia Ford!    Ellie was born on December 2 at 11pm. She weighed 9lbs 5oz and is a joy to behold. Mother and baby are both doing fine and I am just as proud as can be! We are looking forward to all the New Year holds and wish you and your family the best this holiday season.

Happy Holidays!

P.S. For those interested we've posted some more pictures here: Ellie Gallery

 

“Let me be clear on one point: I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over. ” ~ Warren Buffett

THE MARKETS

How do you know when the bottom is near? When ugly headlines turn into positive results in the stock market.

Last Friday morning’s headline economic number was the November unemployment report. In a word, it was “ugly.” The Labor Department said U.S. employers cut 533,000 jobs from payrolls last month. To compound the dreary news, the September and October job loss numbers were revised to reflect significantly more job losses than originally reported. So, how did the stock market respond? It took a relatively mild dip as the market opened, but then it rallied near the close and the Dow Jones Industrial Average ended the day with a healthy 3% gain, although it still lost a couple percent for the week.

While the headline number was bad, we did a little more digging and concluded that it wasn’t quite as weak as it first appeared. Here’s what we dug up:

The loss of 533,000 jobs in November was the sixth largest monthly decline on record and the largest decline since December 1974, according to Bespoke Investment Group. However, when we measure the number of jobs lost as a percent of the workforce, it comes in as only the 41st worst monthly job loss on record. For example, back in December 1974, the economy lost 602,000 jobs out of a total workforce of 77.7 million people. That translates to a 0.78% loss of jobs in one month (602,000/77.7 million). By contrast, the 533,000 jobs lost last month were out of a workforce of 136.2 million people. That translates to a much lower 0.39% loss of jobs in one month (533,000/136.2 million). So, yes, the November job loss number was disappointing, but put in context, it’s not nearly as bad – on a percentage basis – as the headline would suggest.

The takeaway is that dramatic headlines may be deceiving. A little more work may reveal a truth that some investors miss and that truth might be part of the difference between a successful investor and an unsuccessful one.

And, by the way, in the 12 months following the December 1974 loss of 602,000 jobs (January – December 1975), the S&P 500 index rose 31% excluding reinvested dividends, according to data from Yahoo! Finance. Could history repeat itself?

Warren Buffett recently suggested that if you wait for the robins, spring will be over. Not only should investors not wait for good news on profits and the economy, they should actually brace themselves for the news to worsen predictably, well after the stock market reaches its lows.

Good news during a recession: stocks are on sale.

Recession—the very word causes confusion and uncertainty among investors. Yet, since the 1950s, the market has weathered nine recessions, but historically has recovered quickly, and has continued to grow over time. So it’s important to keep recessions in historical perspective. Consider:

• What does it mean to be in a recession? A recession is generally defined as a decline in gross domestic product (GDP) for two or more consecutive quarters.
• How often do recessions occur? Since the 1950s, the U.S. has experienced nine recessions, each lasting from six to 16months.
• What should I do as an investor? Typically, recessions have generated buying opportunities for investors.

Often, this means investing when prices have fallen—buying low is not easy, but can potentially be very rewarding.

IF EVERYONE IS SELLING THEN WHO'S BUYING?

According to Investors Intelligence:

The latest company insider data shows an increased buying pace with the market decline. For the seventh consecutive week their buys exceeded their total sells, and again it was better than a 2 to 1 pace. Insiders have certainly noticed the market weakness yet they remain optimistic for their company’s potential or they wouldn’t be buying at a rate not seen for ten years. Insiders are normally predisposed to sell but throughout 2008 insiders have used any market retreat to accumulate their
shares. That was clear in January, March and July, but the latest buying surge far exceeds those prior readings. That is long-term bullish, signaling that trading is at the area of a major bottom.

BEAR MARKET FUNNIES:

What is the one thing Wall Street and the Olympics have in common? Synchronized diving.

I went to buy a toaster and it came with a bank.

What is the difference between an investment banker and a pigeon? A pigeon can still make a deposit on a BMW.

What is the difference between an investment banker and a large pizza? The pizza can still feed a family of four.

What's the definition of optimism? An investment banker who irons 5 shirts on a Sunday night.

I tried to make a withdrawal from an ATM and the machine said 'Insufficient Funds'. I wasn't sure if it meant for me or the bank.

I lent my friend $20 last week and according to the market I qualify as the country's 4th largest lender.

I wrote a check for $100 to my friend but he never got it; the check was good, the bank bounced.

Thanks for your trust & confidence,

* 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 Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.
* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
* 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.
* Consult your financial professional before making any investment decision.
* You cannot invest directly in an index.
* Past performance does not guarantee future results.