I have not posted since September. Most sectors of the US markets made a net up from the September level. It turned an otherwise break-even year-end result to one of double-digit percentage gain by today. Some sectors run faster than other. From hindsight: oil, gold, agriculture commodities, cloud computing companies, emerging country ETFs, luxury consumer brands, consumer discretionaries, did well. The double dip talk faded away after the summer and there seems to be little fear going into 2011 among US equity investors. It seems that this euphoria will carry into the first 3 months.
There are increasing noise in the media about bond prices falling esp. municipals. PIMCO, the largest bond trading house, seems to have reportedly in the last few months voted against bond for stocks. So the theme next year (or some part of the year) may be the fear of inflation. Or that should be a latent driver that lasts.
This year I have subscribed to two newsletters to benchmark my own view with those ‘experts’ and watch the performance. It is hard to follow newsletter because of the time lag between a recommendation and the actual trade. This is especially true for the short-term (days) trading newsletter. So, while some of the recommendations are good ideas to start. Better results – good risk to reward– require our own skills and tools in technical analysis (chart analysis). If you do subscribe to any, please make sure it matches your trading horizon – days, weeks, or months. For many investors on training wheels, like myself, it is important to learn risk management well, setting stop loss points and staying with the plan.
For the last two years, keeping a trading perspective of 1/2 to 1 years seems to work. So, I do not plan to post too frequently. It just adds unnecessary noise without adding to noticeably better results.
Dashboard Bar to the right bottom. This year even our simplest indicator helped, like the Monthly Stock Trend. For next year, I have added a new tool to the Dashboard: Sector Performance. You can drill down to individual stocks in each sector. If you look at this sector tool every week or two, you will not miss out on some sectors on the move (up or down). As we go into the 3rd year of expansion (uptrend), getting on the right sector may become more relevant. The notion about risk-on (buy stocks, commodities, metals, oil, emerging countries etc.)and risk-off (sell them) and how that mechanism affects the US major stock indexes is best followed by looking the performance of the US dollars: US$ – now added. I have removed the oversold and overbought indicators because they have not been helpful. Less is more.
End of the year is not a good time to buy ETF or mutual funds, as you may get hit with unexpected tax liability because the fund are distributing profits. So, if you do trade, stay with individual stock of a company until after 1/1/2011. This year, it may be useful to look at possible Roth IRA conversion. Please go to Fidelity or Schwab to search for those assessment tools and articles. With the tax law just past in December, it may make sense to convert (albeit a small amount) for some of you. I would also add that you need to look at your AMT (Alternative Minimal Tax) as most website tools does not cover that. Or check with your tax person. As long as your immediate tax outlay for conversion is low (relative to your criteria), you can convert some of your regular IRA to Roth and gain some benefits. No one know when and how much taxes will go up to make up for the debt we have accumulated as a nation. But many ‘experts’ expect higher taxes after the effect of the December tax law wears out. An opinion on conversion: http://www.genspring.com/documents/Roth-IRA-Conversion-Opportunity-2010-GenSpring.pdf
There are other money management subjects to ponder the next few days: like investing in real estate or other assets, personal estate planning, gifting etc. That should keep many of us busy for a few days before 2011.
Happy Holidays and a Prosperous 2011.
GC – Editor
