January, 2010 Market Timing Update

money

January, 2010

"Diversification is a protection against ignorance. It makes little sense for those who know what they're doing."

~ Warren Buffet

The Professional Opinion

S&P 500 Index: 1115.1

Bull vs Bear

Heading into the new year a bear market decline in excess of 20% is not likely. 5-10% corrections are, and are usually followed by new bull market highs.

LEI - Leading Economic Index

The LEI has risen for eight straight months which translates into an annualized rate of a bit better than ten percent.

Six of the ten leading economic indicators advanced in the month of November

ICEI - Index of Coincident Economic Indicators (Learned a new Acronym today)

What is it?

It is a compilation of statistics which are merged together to produce one number for tracking the economic environment.

Statistics Factored In:

Employment
The Unemployment Rate
Real Earnings
Average weekly hours worked in manufacturing.

The current reading is 100.1

Now you know as much as I care to know.

The Economic Recovery

Real GDP is projected in the 2-3% range for 2010.

At some point the Fed will have to begin withdrawing all the added stimulus when the economy gets into a real recovery. How the Fed handles this is a big question mark. Let's hope for the best.

1. Industrial production has risen for the fourth time in five months.

2. Retail sales rose in November to 1.8%

3. The CPI rose .4% in November, bringing the year over year inflation rate to 1.8%. Out of control inflation is still a long ways off.

4. The soft US dollar has stiffened up a bit, but continues to help exports.

5. The market continues to be reasonably priced based on the earnings outlook.

Question: How does one know when government stimulus is no longer needed?

Answer: When consumer spending absent government programs and the like overtakes federal stimulus efforts.

Summary

A Model Portfolio Change!

The Vangard FTSE All-World ex-U.S fund (VFWIX) has been added to each of the three model portfolios.
This is an index fund which invests everywhere except the U.S.

I don't think I will be jumping into this one anytime soon.

Bob also mentions that he has been named once again to the Hulbert Financial Digest honor roll, which I find kind of hard to believe considering this last time around that he rode the bear all the way to the bottom with no substantial changes to any portfolios.

This was the result of, "Superior fund selection combined with our fully invested position."

Pardon me while I choke.

Other than that, remain fully invested and buy on the dips.

This is one unhappy Junco and one great picture. This in theory could personify portfolio lift-off for the rest of the year.

Lots of headwinds, though.

Chief among them the knotheads in congress who wish to subvert the US of A to someone's perverse dream of a Utopian society headed up by the Libs. Say a prayer or two for a change in direction in 2010 because if that doesn't happen, please note the final photo.

Personal Portfolio

Here we have our local embarrassment to the state of Nevada praying to the only god with which he has to do (I think his name is Adam) in the fervent hope that teleprompter sponsored health care legislation passes. This ought to be challenged on constitutionality and if not that, criminality.

Unbelievable

The Year in Review

The gain for the year of 54.55% has me quite pleased.

I have to give some personal thanks to the stock of Palm and that of Huntsman (HUN), whose tremendous gains helped leave me off only 12% from the all time highs in 2007. While I no longer own any Palm, my Huntsman shares are once again pushing towards 10% of the portfolio and the share price is showing no signs of falling back to earth.

I still don't have a real idea as to how a growth and income fund (FGRIX) can close out 2009 with a gain of 72%. Must have been some realllly cheap, high quality municipal bonds and a very forward thinking fund manager.

Changes

I ended up selling Pengrowth Energy (PGH). It seems the Canadian government finally figured out exactly how many companies were converting to trusts and are in the process of closing the 'loop hole', for lack of better word.

CPNO

I used some of the proceeds to buy Copano Energy which has an extensive gathering and storage system for natural gas. The natural gas sector is starting to show signs of life so I thought a good place to diversify out a bit would be in the transmission of same. The stock has a high PE and a fairly generous yield.

CPNO

It's up about 17% from where I bought in and I think this is one to keep a fairly close eye on.

Another stock in the natural gas arena I've been looking at is Westport Innovations (WPRT). Turns out Cramer was looking at it too and it got the Cramer bounce.

This US Based company produces vehicle engines which use natural gas. They are currently focusing on fleet vehicles, where trying to find a fill-up station of NG powered vehicles is not much of an issue.

They also recently diluted their share base by about 20%.

WPRT

I don't know that it is worth the investment at these prices, at this time, but if the government wants to do something useful, what could be more useful than providing constructive leadership in reducing the overall demand for foreign oil.

Owning a speculative bit of stock in a couple companies such as this could pay off quite well.

What Else....

Another chunk of the proceeds were used to increase positions in Dow Chemical (DOW), Bank of America (BAC), Regions Financial (RF). I bought more of the banks during the latest banking sell off because I think there is fertile ground here as the economy continues to turn.

MBI

MBI has been added to SPF as a trading opportunity. MBI is usually heavily shorted, is quite volatile and worth looking at for buying on a good dip to realize some reasonably short term profit. It is easy to make 15-20% on a trade and depending on how much you buy.....

A Beta of > 2 is something to take notice of. It is very easy to get on the wrong side of this stock.

Closing Comments

If you are still looking to add some juice to the portfolio and have a longer time horizon, I would still suggest having a look some of the regional banks. Also, XL is worth looking at even at these prices.

Do you really want the government to take care of everything for you?

Do you really want to give up your freedoms for a bit more security?

Given your druthers, on which side of the cage would you rather be?

If you like the security of the cage, please vote for the Libs.

Word of warning though - the Libs control the cage door and should you get a backbone and decide to go against the dictates of the nanny state, it would be rather depressing to end up eaten alive for having a difference of opinion.