At S&P 1065, a little more patience doesn't cost much
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    Retailers across the board reported September same store sales well  ahead of estimates.
    http://econompicdata.blogspot.com/2009/10/same-store-sales-rebound-to-2005-levels.html

    August wholesale inventories decline 1.3% versus expectations of a drop of 1.1%; but wholesale sales rose 1.0%, driving down the inventory to sales ratio again.
    http://econompicdata.blogspot.com/2009/10/is-long-awaited-inventory-correction.html

    The August US trade deficit declined modestly ($1.2 billion)
    http://www.calculatedriskblog.com/2009/10/trade-deficit-decreases-slightly-in.html
   
   Other

    How a weak dollar hurts the economy (long):
    http://online.wsj.com/article/SB10001424052748703298004574458923186941870.html

    Foreclosures are down substantially (short):
    http://mjperry.blogspot.com/2009/10/countrywide-reos-fall-to-febuary-2007.html
   
    Asian countries move to prop up the dollar (long):
    http://www.nakedcapitalism.com/2009/10/asian-countries-intervene-to-prop-up-greenback-dollar-bind-edition.html

Politics

  Domestic

Martin Feldstein has a healthcare plan (long):
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/07/AR2009100703048.html

  International War Against Radical Islam

    Charles Krauthammer on Afghanistan (long):
    http://www.washingtonpost.com/wp-dyn/content/article/2009/10/08/AR2009100803132.html

The Market
    
    Technical

    The Averages (DJIA 9786, S&P 1065) traded within the up trend off their March lows (9511-11388, 1058-1304).  Even though the S&P closed above the lower boundary of the up trend on Wednesday’s close, I was hesitant to assume that the S&P break below the lower boundary of this trend last week was a false signal.  Yesterday’s close goes a way’s to remove that uncertainty.  However, I am going to continue to view the S&P as trading in a range (989-1080): hence the S&P needs to take out the recent high 1080 high before being totally convinced.  The good news is the proximity of the lower boundary of the up trend (1058) to the recent intraday high (1080) makes being cautious a relatively risk free proposition.  If the S&P does take out 1080, our Portfolios will likely commit some cash.

    A great must read piece by Barry Ridholtz on this rally (short):
    http://www.ritholtz.com/blog/2009/10/the-most-hated-rally-in-wall-street-history/

   Fundamental
   
    This is a really great article on savings and retirement.  It is long but a must read.  If you don’t have time to read it today, save it and read it this weekend:
    http://www.ritholtz.com/blog/2009/10/how-economists-are-missing-another-one/

     Headlines

    Economic stats held the headlines yesterday: lower jobless claims (reported in yesterday’s Morning Call) and the better than forecast September retail sales (see above).  Investors as well as the talking heads welcomed these two numbers on top of the Alcoa profit/revenue report because they are the first really encouraging figures on the economy that we have gotten in the last couple of weeks.  Not mentioned as much was the wholesale inventory/wholesale sales data which I thought very encouraging (i.e. they were a strong indication of rising production).

    On a negative note, Pepsico reported better than expected earnings but its revenues were well short of estimates.

     Thoughts on Investing--more from The Money Game
    
    Research (on Wall Street) is all to the good , but the tide of it has now become so high that no one anywhere can escape knowing the output of the Trucial Sheikdom of Amrah increased in the second quarter to 11,674,322 barrels per day, while at the same time manufacturers’ inventories of medium–priced television sets were down 5.3% for the year before but up .6% from the preceding quarter.

    Unfortunately, as we have seen, the playing of the Game is not entirely a rational affair.  If it were, the most impeccable fact-finding would soon dominate the market...

What actually happens is that the analysts report to you the news of a company, together with enough generalizations that provide an adequate cop-out for whatever takes place.....but it you are patient long term, you may do all right.  That phrase ‘long term’ is a key phrase.  It is used probably for 80% of all stocks that are not headed for bankruptcy, at any given moment.  Never mind that the long term is a series of short terms, or that in the long run we are all dead.  The phrases ‘patient investor’ and ‘long term appreciation’ ring with the virtues of capitalist ethos. 

The assumption of most Wall Street report writers is that their audience consists of millionaires with their own railroad cars who move from Saratoga to Palm Springs amid the muffled sounds of silent servants and distantly ticking clocks.  What they really want is to be in the company of other millionaires:  They are the true, patient long term investors, and, in short, they have so much money they won’t want to be bothered with any more.  Research Departments, of course, don’t really assume that their audience is railroad-car millionaires, if you get them at home on a quiet night.  But the language they choose and the conclusions they reach would lead you to think that; such is the ambiguity of the cop-out.  It is much easier to say, ‘While the near term is uncertain, long term holdings need not be disturbed,’ than to say ‘Dump this one’.
 
  





Posted 10-09-2009 8:23 AM by Steve Cook