Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
rbc weekly market up date Market Week: February 6, 2012 The Markets
Bolstered by a strong rally in the wake of Friday's encouraging employment report, both the Nasdaq and the Dow ended the week above last year's highs, and the Nasdaq actually hit a closing level last seen in December 2000. The S&P 500 and Russell 2000 weren't far from their 2011 highs; the Russell has now risen more than 36% from its most recent low in October 2011.
*Equities data reflect price changes, not total return.
Last Week's Headlines
The U.S. economy added 243,000 jobs in December, and according to the Bureau of Labor Statistics, retail jobs for the holidays weren't the major reason. Professional/business services, manufacturing, and leisure/hospitality saw the biggest job growth. The number of unemployed people also fell to a three-year low of 12.8 million. The gains brought the unemployment rate down to 8.3% and represented the fifth consecutive month of lower unemployment. The nonpartisan Congressional Budget Office predicted the nation's budget deficit for 2012 will be $1.1 trillion, down slightly from 2011's $1.3 trillion. The report said spending cuts and tax increases scheduled for the end of 2012 will increase the deficit by $3.1 trillion over the next 10 years, but that ending them would increase the deficit by more than $11 trillion in that time. The CBO also predicted that those tax and spending measures would cut GDP to 1.1% next year, as well as keep the unemployment rate above 8% for the next 2 years and above 7% until 2015. Home prices in the 20 cities tracked by the S&P/Case-Shiller index fell 1.3% in November, putting the year-over-year decline at 3.7%. According to the report, home prices have now fallen 32.9% on average since July 2006. The monthly decline was the third consecutive decrease. U.S. labor productivity rose 0.7% during Q4 2011; business output was up 3.6% while the number of hours worked rose 2.9%, according to the Bureau of Labor Statistics. Meanwhile, the Commerce Department said factory orders were up 1.1% in December. And the Institute for Supply Management's index of the manufacturing sector rose 1% to 54.1%, with 9 of 18 industries reporting growth, while the ISM's services index was up 0.6% to 52.6%. Construction spending rose 1.5% in December, putting it 4.3% above a year earlier, according to the Commerce Department. The bulk of December's growth--2.1%--was in the private sector, with nonresidential construction accounting for most of the increase. Status update: Facebook, founded in 2004, filed plans to go public later this year. Federal Reserve Chairman Ben Bernanke lectured Congress about the need to address unsustainable deficit levels to prevent the possibility of another financial shock. However, he also said that at the same time, lawmakers need to be careful not to choke off economic recovery, which he said was not incompatible with fiscal responsibility.
Eye on the Week Ahead
As earnings season continues, the elusive Greek debt deal will continue to be a source of speculation. The European Central Bank and Bank of England are expected to keep interest rates stable during a week that's light on economic data.
I have started to book a little profit in some of my small & mid cap equity ballast holdings as I am now seeing a topping out in equities from the T/A that I follow. Selling just a little mind you ... about a sum equal to one percent of my equity holdings.
With equities having the run that they have had in December and January I am now getting a little equity heavy based upon my asset allocation. This is due to some small buying I did in early fall to round our some equity possitions but it is mostly form capital appreciation on all my equity holdings that have once again put me at my rebalance mark of 63% equity. My normal fall seasonal starting allocation to equities is usually in the 60% range. I'll be farming my portfolio and reducing equities to 62% while I watch the coming days and following the T/A of the etf, ISI. If the momentum holds I'll continue to scale back keeping my equity allocation around 62% to 63% until perhaps early May. At this time I'll rebalance my equities back to around the 55% range and with these rebalances I will be raising my cash by a like amounts.
Thus, when the process completes I will now have farmed and harvested from the equity holdings. My grandfather used to have a couple of sayings ... "Don't leave the crops in the field too long ... and, it's time to milk the cows!" Makes some sence ... Does it not?
One of the mantras we have used over the last few years is that it is never a bad time to capture profits. By this I mean that if you invested $10,000 in ABC Fund, and it is now worth $12,500, why not capture the $2,500 gain and move that money to a) a less risky option, or b) to an investment that you believe will do even better over the next 12-24 months.
This may not apply in every instance, but it can reduce risk levels if done with consistency and without emotional input. For example, we have owned TGBAX for years in most client accounts, and until last year the fund was consistently good. Owners had racked up some impressive gains over time, and even though we had no intention of selling out of the fund, we thought it would make sense to capture the profits. The same thing with PRPFX, ODMAX, WASYX, PIPFX, PYZ and some other holdings that had great runs for us.
I would caution folks, however, to not become obsessed with this. Selling small amounts of any fund makes very little difference in the long run, so set your target on your larger holdings and key in on any significant gains.
The sometimes difficult decision is where to invest the dollars from the sales. If you subscribe to re-balancing, then that should be a relatively easy decision. If not, do you add to lower-risk assets or do you take a gamble with something else? Some folks will say the latter carries too much risk. There may be no one right answer here. But capturing gains (not selling out of a holding, unless you have no confidence in the manager), can be a sensible and risk-reducing process that should not be limited to once or twice a year re-balancing decisions.
Geez, I'm with Bob on this. Years ago, Art from FundVision used to say, 'no one ever went broke taking profits'.
It is ALWAYS time to book profits. I'm not talking about leaving the game, just raking down some gains.
Folks, investing in stocks is not unlike casino gambling. The odds are steep at best - whether because of the rules OR the fees, loads, expenses, and other sorts of vigorish. You NEVER, EVER, EVER, 'let it ride' in the stock market, just like you would never continue to 'double up' in gambling.
Winning doesn't count unless you bank some of the gains.
Comments
Market Week: February 6, 2012
The Markets
Bolstered by a strong rally in the wake of Friday's encouraging employment report, both the Nasdaq and the Dow ended the week above last year's highs, and the Nasdaq actually hit a closing level last seen in December 2000. The S&P 500 and Russell 2000 weren't far from their 2011 highs; the Russell has now risen more than 36% from its most recent low in October 2011.
Market/Index 2011 Close Prior Week As of 2/3 Week Change YTD Change*
DJIA 12217.56 12660.46 12862.23 1.59% 5.28%
Nasdaq 2605.15 2816.55 2905.66 3.16% 11.54%
S&P 500 1257.60 1316.33 1344.90 2.17% 6.94%
Russell 2000 740.92 798.85 831.11 4.04% 12.17%
Global Dow 1801.60 1928.27 1976.98 2.53% 9.73%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 1.93% 1.97% 4 bps 8 bps
*Equities data reflect price changes, not total return.
Last Week's Headlines
The U.S. economy added 243,000 jobs in December, and according to the Bureau of Labor Statistics, retail jobs for the holidays weren't the major reason. Professional/business services, manufacturing, and leisure/hospitality saw the biggest job growth. The number of unemployed people also fell to a three-year low of 12.8 million. The gains brought the unemployment rate down to 8.3% and represented the fifth consecutive month of lower unemployment.
The nonpartisan Congressional Budget Office predicted the nation's budget deficit for 2012 will be $1.1 trillion, down slightly from 2011's $1.3 trillion. The report said spending cuts and tax increases scheduled for the end of 2012 will increase the deficit by $3.1 trillion over the next 10 years, but that ending them would increase the deficit by more than $11 trillion in that time. The CBO also predicted that those tax and spending measures would cut GDP to 1.1% next year, as well as keep the unemployment rate above 8% for the next 2 years and above 7% until 2015.
Home prices in the 20 cities tracked by the S&P/Case-Shiller index fell 1.3% in November, putting the year-over-year decline at 3.7%. According to the report, home prices have now fallen 32.9% on average since July 2006. The monthly decline was the third consecutive decrease.
U.S. labor productivity rose 0.7% during Q4 2011; business output was up 3.6% while the number of hours worked rose 2.9%, according to the Bureau of Labor Statistics. Meanwhile, the Commerce Department said factory orders were up 1.1% in December. And the Institute for Supply Management's index of the manufacturing sector rose 1% to 54.1%, with 9 of 18 industries reporting growth, while the ISM's services index was up 0.6% to 52.6%.
Construction spending rose 1.5% in December, putting it 4.3% above a year earlier, according to the Commerce Department. The bulk of December's growth--2.1%--was in the private sector, with nonresidential construction accounting for most of the increase.
Status update: Facebook, founded in 2004, filed plans to go public later this year.
Federal Reserve Chairman Ben Bernanke lectured Congress about the need to address unsustainable deficit levels to prevent the possibility of another financial shock. However, he also said that at the same time, lawmakers need to be careful not to choke off economic recovery, which he said was not incompatible with fiscal responsibility.
Eye on the Week Ahead
As earnings season continues, the elusive Greek debt deal will continue to be a source of speculation. The European Central Bank and Bank of England are expected to keep interest rates stable during a week that's light on economic data.
I have started to book a little profit in some of my small & mid cap equity ballast holdings as I am now seeing a topping out in equities from the T/A that I follow. Selling just a little mind you ... about a sum equal to one percent of my equity holdings.
With equities having the run that they have had in December and January I am now getting a little equity heavy based upon my asset allocation. This is due to some small buying I did in early fall to round our some equity possitions but it is mostly form capital appreciation on all my equity holdings that have once again put me at my rebalance mark of 63% equity. My normal fall seasonal starting allocation to equities is usually in the 60% range. I'll be farming my portfolio and reducing equities to 62% while I watch the coming days and following the T/A of the etf, ISI. If the momentum holds I'll continue to scale back keeping my equity allocation around 62% to 63% until perhaps early May. At this time I'll rebalance my equities back to around the 55% range and with these rebalances I will be raising my cash by a like amounts.
Thus, when the process completes I will now have farmed and harvested from the equity holdings. My grandfather used to have a couple of sayings ... "Don't leave the crops in the field too long ... and, it's time to milk the cows!" Makes some sence ... Does it not?
Good Investing,
Skeeter
This may not apply in every instance, but it can reduce risk levels if done with consistency and without emotional input. For example, we have owned TGBAX for years in most client accounts, and until last year the fund was consistently good. Owners had racked up some impressive gains over time, and even though we had no intention of selling out of the fund, we thought it would make sense to capture the profits. The same thing with PRPFX, ODMAX, WASYX, PIPFX, PYZ and some other holdings that had great runs for us.
I would caution folks, however, to not become obsessed with this. Selling small amounts of any fund makes very little difference in the long run, so set your target on your larger holdings and key in on any significant gains.
The sometimes difficult decision is where to invest the dollars from the sales. If you subscribe to re-balancing, then that should be a relatively easy decision. If not, do you add to lower-risk assets or do you take a gamble with something else? Some folks will say the latter carries too much risk. There may be no one right answer here. But capturing gains (not selling out of a holding, unless you have no confidence in the manager), can be a sensible and risk-reducing process that should not be limited to once or twice a year re-balancing decisions.
It is ALWAYS time to book profits. I'm not talking about leaving the game, just raking down some gains.
Folks, investing in stocks is not unlike casino gambling. The odds are steep at best - whether because of the rules OR the fees, loads, expenses, and other sorts of vigorish. You NEVER, EVER, EVER, 'let it ride' in the stock market, just like you would never continue to 'double up' in gambling.
Winning doesn't count unless you bank some of the gains.
peace,
rono
http://www.marketwatch.com/story/franklin-templeton-investments-ranked-1-for-10-year-performance-in-barronslippers-best-mutual-fund-families-survey-2012-02-06?reflink=MW_news_stmp
http://www.theglobeandmail.com/globe-investor/personal-finance/rrsp/latecomers-to-the-bond-party-unlikely-to-have-much-fun/article2328240/
stocks least loved since 1980s - should we be worried - after the three years rally?
http://www.bloomberg.com/news/2012-02-06/stocks-least-loved-since-1980s-as-americans-scale-steepest-wall-of-worries.html
US stocks will rise 10% this yr
http://finance.yahoo.com/blogs/breakout/forget-europe-u-stocks-rise-10-ablin-140421947.html
[imho ... this make it only + ~4% more which is not that hard...I think we may have seen the total gain for the year already, probably will hobble until the end of the yr. Maybe best to hold more bonds during these time]