Both of the following trivia items were noted in today’s Wall Street Journal.
Currently, all three major U.S. stock indexes, the Dow, S&P 500 and NASDAQ have lost money year-to-date, and some believe a weak January bodes ill for stocks the rest of the year. According to Ned Davis Research, in years when the Dow has risen in January, the median rise for the rest of the year is 10.4%. In years when the Dow has fallen, the median rise for the next 11 months is just 0.28%. However, this predictor is not fool proof. Last year, the Dow, S&P 500 and NASDAQ were all down in January and all three indexes came roaring back to end the year with nice gains.
Along these lines, which team wins the Super Bowl has been a remarkably accurate predictor (79% accuracy rate – 34 out of 43 Super Bowls) for the stock market. It is based on whether or not an “original” National Football League team (i.e., any NFL team that existed prior to the merger with American Football League in 1970). The premise is if an original team wins the market will rise for the year. However, if an original team loses, then the market will fall for the year.
Ironically, both the Indianapolis Colts and New Orleans Saints are “original” NFL teams. In no way do I believe either of the above mentioned predictors should impact your investment decisions. However, this year’s Super Bowl predictor is offering better historical odds for investors than you’d find in Vegas.
For more details on this interesting piece of trivia, please click on the following link.
http://online.wsj.com/article_email/SB20001424052748704194504575031472377532074-lMyQjAyMTAwMDIwOTEyNDkyWj.html
Real world issues to consider
- The economy grew for a second straight quarter from October through December, posting a better-than-expected 5.7 percent annual rate, the fastest quarterly pace since 2003. Companies have worked through most of the inventory and need to replenish their stockpiles. For example, Caterpillar recently told its steel suppliers it will more than double its purchase of metal this year. Economists call this the “bullwhip effect.” Even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain. This is a huge boom for the hundreds of companies that supply Caterpillar with parts.
- Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade. Many estimate the nation’s gross domestic product will slow to a 3 percent rate in the current quarter and to about 2.5 percent for 2010.
- Microsoft and Amazon both reported huge jumps in profits for last quarter. This is a sign that corporations and consumers are spending. Along these lines, P&G and Colgate noted they are seeing consumers return to names brands versus store brands. In addition, they are seeing sales growth in emerging countries like China and Brazil.
- U.S. companies have taken steps to rebuild and stabilize their finances. The Wall Street Journal reported this week that Gimme Credit (a corporation that monitors changes in companies’ credit scores) noted that 70% of changes in 2009 were upgrades compared with 12% of the changes in 2008.
- The International Monetary Fund sees a global economic rebound in 2010; however, the U.S. and other “rich” countries lag developing countries.
- Chief Financial Officers are gaining confidence in their economic outlook, according to findings from the fourth quarter “CFO Outlook Survey” conducted by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business. CFOs are looking up, but remain committed to utilizing some of the important lessons learned during the downturn and keeping companies streamlined.
What does all this mean?
Some businesses are beginning to see sunnier days ahead; however, others are still struggling to survive. If you want to get a read on the health of the economy, just ask a local CPA. He/she has their finger on the pulse of the local economy. They may not be dealing directly with Wal-Mart, IBM or Caterpillar; however, many of their clients are small businesses whom are suppliers to much larger companies. As such, they hear first hand if new orders are coming in or not.
Currently, many small business owners will tell you the recession is not over, and this may be the case for them. However, there is a large amount of cash currently on the sidelines. Many institutions, individuals of substantial means and large corporations have stockpiled cash. With today’s extraordinarily low interest rates, many remain skeptical and would rather earn next to nothing than invest. At some point their skepticism will turn to optimism and money will be deployed into real estate, business expansion, investments, etc. Once this occurs, the implications will be felt all throughout the economy from large multinational corporations to mom and pop stores.
As I have noted in prior commentaries, globally there is enough uncertainty and skepticism regarding economic and political climates that the stock market may continue to see staggered up and downs and very little progress. For the time being, do not be surprised to see the U.S. and foreign stock markets drop even in the face of what would normally be considered good economic news.
As such, I believe a very strong message from U.S. leaders regarding sensible and serious steps taken to address / reduce our national debt would be a catalyst for other countries like Japan, Greece, Portugal, Ireland, Spain, and others to get their financial house in order too.
If policies in the U.S. can be enacted to stabilize our nation’s finances, then it would put pressure on other nations with large deficits to either follow our example or be left behind. I can assure you, whatever country steps to the plate with “real” solutions will see foreign investors and corporations increase capital investment within its borders, a stronger currency, new and expanding businesses, dramatically lower unemployment and a robust economy. The U.S or any government can take the necessary and “painful” steps to reduce spending and raise revenue (i.e., and this does not necessarily mean large tax increases) and thus reduce their debt. Investors are going to flock to a country where they perceive a sense of certainty, stability and prudent financial policies.
Just ask yourself, would you rather partner with someone who’s working hard and making sacrifices to pay their bills on time and pay down their outstanding debts or someone who is continually borrowing from others to pay their bills? In the years to come, investors around the world will be putting much, much more consideration into this factor.
Semi-annual reports
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Quotes
“Good sense is at the bottom of everything: virtue, genius, wit, talent and taste.”
J.J. De Chenier, institutional investor
“Worry does not help tomorrow’s troubles, but it does ruin today’s happiness.”
Unknown
“The only people you should try to get even with are those who have helped you.”
Unknown
“They tell you that you’ll lose your mind when you grow older. What they don’t tell you is that you won’t miss it very much.”
Malcolm Cowley, author
“Strategic planning is worthless unless there is first a strategic vision.”
John Naisbitt, author
Tony Moeller, President
Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.
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