Showing posts from February, 2010

Stocks Still Cheap

by Peter Brimelow and Edwin S. Rubenstein

Commentary: Stocks have more potential upside than downside risk

Stocks rebounded strongly in 2009. But they're still fairly low by historic standards.

We base this conclusion on the work of Prof. Jeremy Siegel of the University of Pennsylvania's Wharton School, author of the classic book, "Stocks For the Long-Run." (Note: Siegel should not be blamed for the conclusions we draw from his data.)

Siegel's most famous finding: Counting capital gains and dividends together, and adjusting for inflation, stocks have accumulated on average in real terms at a remarkably consistent 7% or so over the past 200 years. Shown on a log scale, this consistent trend appears as an impressive upward-slanting straight line.

For several years, we've been writing columns that look at stocks relative to that upward-slanting trend line.

Since the Crash of 2008, we've twice pointed out that stocks had reached levels below trend that in the past …

An Experiment Shows the Risks of Shorting

by James B. Stewart

Back in late October, with stocks rallying, I decided to hedge some of my exposure by buying a "short" exchange-traded fund -- an ETF designed to rise when the market falls. At the time, based on historical norms, the market was overdue for a correction.

After all, stocks had gone up nearly 57% without any correction of 10% or more since March, despite a sluggish recovery and rising unemployment. So I bought shares in the ProShares UltraShort S&P 500 fund, which aims to double the inverse return of the Standard & Poor's 500-stock index. In other words, for any given day, if the S&P 500 fell 10%, this ETF would be expected to gain 20%. I wrote then, "I'm deliberately calling this an experiment, not a recommendation. I suggest that conservative investors let me be the guinea pig."

The guinea pig is back with his report.

It's long been my policy to avoid bets on short-term moves in the stock market. There are good reasons for t…

10 Management Practices to Axe

by Liz Ryan

Every few years, a management book or philosophy emerges to change our thinking about the best ways to lead employees.

From The One Minute Manager to Who Moved My Cheese?, new and revived leadership concepts have shaped the way we organize, evaluate, inspire, and reward team members. With so many competing management theories in the mix, some ill-conceived practices were bound to take hold—and indeed, many have. Here's our list of the 10 most brainless and injurious:

1. Forced Ranking

The idea behind forced ranking is that when you evaluate your employees against one another, you'll see who's most critical on the team and who's most expendable. This theory rests on the notion that we can exhort our reports to work together for the sake of the team 364 days a year and then, when it really counts, pit them against one another in a zero-sum competitive exercise. That's a decent strategy for TV shows such as Survivor but disastrous for organizations that intend…

Loving Your Day Job and Your Life

by Laura Rowley

Back in 2007, bored and frustrated with her day job as an office administrator, New York musician, artist and writer Summer Pierre wrote and illustrated a 'zine about her double life.

"I wanted to make something that honors the fact that most of us have two lives and that takes A LOT of energy," the California native wrote on her blog. "I also wanted to make something that could be an easy reminder that you are living your ONE life right now (not later) -- why not enjoy it as much as you can -- with a day job or not."Pierre's whimsical handbook was a hit with struggling artists as far away as Japan, New Zealand and Egypt. "The Artist in the Office: How to Creatively Survive and Thrive Seven Days a Week," was published in paperback this month by Perigree. The book offers inspiration and practical tips not only to frustrated artists, but alienated workers clinging to jobs they hate, reluctant to move on because of the tough economy.


Outlook: Where Will the Markets Go Next?


A year ago, investors were dealing with heavy losses from the most brutal stock-market selloffs in years. The last thing they expected was a ferocious bull market. And yet, shares soon began to soar -- climbing more than 50%.

Last year's unexpected stock rebound -- and the sudden selloff last week -- should remind investors to be on the lookout for the next surprise. That's because big profits come in being early to the next trend, and in preparing for the next downturn.

"If you don't leave yourself open to surprises, when they occur you probably won't respond correctly," says Mike O'Rourke, chief market strategist at institutional trader BTIG LLC.

It's a simple rule of thumb: Buy before the good news; sell before the bad. The tricky part comes, of course, from guessing where the news might break to begin with.

Here are some places to watch:

Energy Boost: Many analysts expect energy prices to keep climbing, as demand from China pushes o…

Branson warns that oil crunch is coming within five years

• Virgin chief and fellow business leaders call for action
• Energy crisis threatens to be more serious than credit crunch

* Terry Macalister
*, Sunday 7 February 2010 20.18 GMT

Sir Richard Branson and fellow leading businessmen will warn ministers this week that the world is running out of oil and faces an oil crunch within five years.

The founder of the Virgin group, whose rail, airline and travel companies are sensitive to energy prices, will say that the ­coming crisis could be even more serious than the credit crunch.

"The next five years will see us face another crunch – the oil crunch. This time, we do have the chance to prepare. The challenge is to use that time well," Branson will say.

"Our message to government and businesses is clear: act," he says in a foreword to a new report on the crisis. "Don't let the oil crunch catch us out in the way that the credit crunch did."

Other British executives who will support the warning include Ia…

The Best Way to Quit Your Job

By Karen Burns

A majority of Americans are unhappy with their jobs, according to a recent Conference Board survey. What does this mean? For one thing, it's a clue that as soon as this economy improves, an awful lot of people are going to be setting off for greener pastures.

Now is a good time to talk about how to quit a job with class. (A lot of this also applies to how to leave a job classily under any circumstances, voluntary or not.)

It helps to break down the process into three phases: before you give notice, when you give notice, and after you give notice.

Before You Give Notice:

1. First and foremost, if you're leaving for another job, have the offer for your new job in writing. Make sure everything is absolutely a "go."

2. Get your work up to date, and organize it in a way others will be able to understand. Don't leave messy, half-finished projects for your soon-to-be-former-coworkers to clean up. You wouldn't want people to do it to you.

3. Erase your digita…

How to Tell a True Market Bottom

ByKen Shreve, Portfolio Manager

Throughout history, market bottoms and the ensuing uptrends have shown price and volume trends that recur with an eerie regularity. For investors, the question is, how do you spot a follow-through day? I've been watching follow-through days for the past 14 years, and they have a good track record of flagging bottoms.

The current market pullback is still young, but when one occurs, it's important to be ready.

Basically, market bottoms are put in when new institutional money starts to go to work again. Obviously, this isn't happening now, but new market uptrends tend to start when they're least expected, so it's important to watch for a follow-through day in coming days and weeks. Uptrends can start amid a lot of negative headlines.
What to Watch For

I learned a system for identifying bottoms from my former boss, Bill O'Neil, the founder of Investor's Business Daily. He's a savvy, highly profitable stock-picker who has an uncan…

Bull Looks Long in the Tooth

by E.S. Browning

After 64% Runup, Biggest Gains Are Likely Past; What History Has to Say

Wall Street has a cliche for times like these: The easy money has been made.

After a 64% gain for the Dow Jones Industrial Average between mid-March and Jan. 19, thanks to an unprecedented wave of government stimulus, no one expects the market to maintain its breakneck pace.

Although stocks are down 6% from that high, few analysts believe the bull market has ended. But a number of analysts and investors are concerned the market could be in for a period of ragged, possibly disappointing, stock behavior.

Instead of pushing stocks higher on good news and betting on the future, investors lately have been using temporary stock gains as an opportunity to cash in profits, a change from their behavior of the past 10 months. On Friday, the Dow finished at 10067.33, startlingly close to the 10000 level it hadn't seen since early November.

"The 'sweet spot' for financial-market performance seems n…

Five Hidden Gems That Are Obscured by Past Failures

Russel Kinnel

Sometimes even five years isn't enough to make people forget about a fund's poor history.

A couple of weeks ago I mentioned that Loomis Sayles Small Cap Growth (NASDAQ:LCGRX - News) was a good fund that no one had noticed because its strong five-year record was obscured by a still crummy 10-year number. Thus, the fund had just $132 million in assets. Management had only been on board for six years, so that didn't make sense.

That made me curious whether there were other funds like that. I found five that fit the bill. It's a handy list because you're finding funds that have a lot of promise yet still have a modest asset base.

Harbor International Growth (NASDAQ:HAIGX - News) is a strong choice for an aggressive foreign fund, but it's easy to miss it given its weak 10-year numbers. However, since James Gendelman took over in 2004, the fund is comfortably ahead of its benchmark. Gendelman is also ahead of his benchmark at Marsico International Opportuni…