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  • Stock Market Lingers At A Precarious Place

    The Dow Jones Industrial Average has flirted with its all-time of 14,198 twice in February as the Dow managed to rise above the 14,000 mark but then fell back. The S&P 500 Index is not quite as close to its all-time high, but it is within striking distance. There is widespread optimism that both indexes can break-out to new record highs, which would likely spark a new buying surge.

    On the other hand, if the Dow and S&P fail to break out, the result could be a nasty selloff. The stock markets shrugged off the fiscal cliff melodrama at the end of last year and then rallied strongly. But there are reasons to believe that the upcoming "sequester" fight could unsettle the markets and derail the attempt to make new highs. We'll talk about that possibility today.

    Before we go there, we take a look at the latest economic reports. There's good news and bad news - no surprise there. We'll also look at the latest surge in gasoline prices and why that is more bad news for consumers and the economy. And I will summarize the latest economic forecasts from the Congressional Budget Office. Finally, I will give you my thoughts on the issue of raising the minimum wage.

  • Beware: Bear Market Brings Out Tall Tales!

    This week, I'm going to share my thoughts about a couple of the recent investment-related articles I have read. The first article documents the day in February when the stock markets hit the milestone of having fallen 50% from their October 2007 peaks. Of course, this means that index investors will now have to earn 100% or greater returns just to get their accounts back to break-even. I'll also note how market action since that article has now taken the major market indexes even deeper into the red. The market's action over the past eighteen months or so highlights my frequent advice to include investments that employ active money management strategies in your overall portfolio. While there are obviously no guarantees, the ability to move to cash or hedge long positions can potentially help to minimize losses, especially during bear markets. This brings us to the second article. Many large mutual fund and brokerage companies have a vested interest in seeing discredited buy-and-hold strategies continue. Thus, it was not a surprise when I learned of a study sponsored by a major mutual fund company that supposedly showed the superiority of buy-and-hold over the active strategy of market timing - even in this bear market! It was also no surprise that the study was based on flawed assumptions that skewed the results in favor of buy-and-hold. I was surprised, however, that the Investor's Business Daily publication reported on the flawed study as if it were legitimate advice. In the E-letter, I'll point out how the mutual fund study was fatally flawed, and hopefully show you how to avoid taking such articles and studies at face value, even when they are published by seemingly legitimate sources....