U.S. stock index futures are pointing to a flat opening
on Tuesday. A day or two of consolidation make sense after Monday's big
rally. Investors will also start to handicap the employment report, due
out on Friday.
Today's Economic Calendar:
- Motor Vehicle Sales
- ICSC-Goldman Store Sales 7:45 AM ET
- Redbook 8:55 AM ET
- Factory Orders 10:00 AM ET
- Pending Home Sales Index 10:00 AM ET
- 4-Week Bill Auction 11:30 AM ET
News For Thought
Northrup Grumman to move headquarters to Washington D.C. As we noted here
on 1-4, the defense sector is on the move. And one company, Northrup is literally
moving. According to The Wall Street Journal: " Northrop Grumman Corp. said Monday
it plans to move its headquarters to the Washington, D.C., area from Los Angeles,
marking the departure of the last major aerospace firm from the industry's birthplace
in Southern California. The shift will put Northrop's top executives near its
biggest U.S. military and intelligence customers and the congressional holders
of the military's purse strings." The fact that California is likely to turn
tax hostile toward corporations as its budget woes continue to escalate probably
has something to do with it as well. The big picture here is all about the changes
in society and demographics in the U.S. and how the new decade may shape up to
be totally different with regard to real estate and job opportunities.
According to the Journal: "The company will relocate about 300 jobs, though it
will still have more than 20,000 employees in the Los Angeles area, according
to local officials. Still, Northrop's move underscores a broader struggle for
Los Angeles: It is the nation's second-largest city with 13 million people in
its metropolitan area, but has suffered a growing exodus of corporations. In
addition to defense and aerospace industries, there has been a steady erosion
of its other iconic trade, the movie business, as states lure away film productions
with rich tax incentives."
Congress looks at bypassing traditional conference committees on health care. According
to The Baltimore Sun: "As Congressional Democrats attempt to arrive at a final
healthcare bill, they appear increasingly likely to forego the formal conference
committee process for merging House and Senate versions of legislation, instead
opting for closely-held negotiations between leaders from the two chambers. Under
that scenario, aides said, the House would be likely to take up and amend the
Senate bill before sending that bill back to the Senate for a vote."
Plea deal possible for Christmas terror susptect. In what is likely to
be hugely controversial, the Christmas bombing suspect could theoretically walk
away from his alleged crime. According to The Washington Post: "President Barack
Obama's chief counterterrorism adviser indicated Sunday that the suspect in the
Christmas Day airline bombing attempt would be offered a plea agreement to persuade
him to reveal what he knows about al-Qaeda operations in Yemen."
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We're getting tired of the "lost decade" articles, so we thought we'd look around
and see if the prevailing conventional wisdom, that America is on its last legs
and that the last decade was a total bust for everyone.
As it turns out, if you dig deeply enough you find that although times were hard
for many people, at least in one area, that of savings, some folks did better
than most. And they did it by having a plan.
To be sure, given our penchant for timing the markets, this wasn't exactly our
cup of tea. Yet, it's the concept that matters, meaning that patient investors
who stick to their plan can actually do reasonably well in any environment.
According to The New York Times: "If you invested $100,000 on Jan. 1, 2000, in
the Vanguard index fund that tracks the Standard & Poor’s 500, you would
have ended up with $89,072 by mid-December of 2009. Adjust that for inflation
by putting it in January 2000 dollars and you’re left with $69,114." Yet, if
you spread your risk around between stocks and bonds, added money to your account
on a monthly basis, and rebalanced your portfolio at the start of every new year,
you could have done lots better. According to The Times, if you started the decade
with $100,000 and allocated your account 25% into Vanguard Total Stock Market
Index Fund, 25% into Vanguard’s Total International Stock Index Fund and 50%
into Vanguard’s Total Bond Market Index Fund while adding $1000 to your account
every month and rebalancing the account to the 25/25/50 allocation every January,
you would have ended up with $313,747, or $260,102 in January 2000 dollars.
That's more than doubling your money in ten years, which is hardly a bad turn.
If you added a few technical rules, such as going to cash when the S & P
500 fell below its 100 or 200-day moving averages, and continued to save, you
at least would have slept better, even if your gains might have been a bit better
or worse than that.
So what's the point? As we point out in "Market Timing For Dummies," the most important aspect
of investing is having a trading plan. The plan may be as simple as the one featured
in the New York Times article, or it may be more sophisticated, including technical
analysis, the use of individual stocks, or ETFs.
Investors need to be consistent and have a long term horizon, despite the gyrations
of markets and the changes required by any kind of trading strategy.
The more time you have, the more your opportunity to save and add to your portfolio.
If you have an IRA, add the maximum to it every year if you can. In your 401-k,
do everything you can to get the maximum matching funds from your employer. And
if you need money, try and resist the urge to borrow from your retirement fund.
Above all, look at your own circumstances and compare them to what you're seeing
in the news. Ask yourself, is this what I'm doing? If large numbers of people
are buying houses beyond their means and financing them with funny mortgages
that will lead to ballooning payments in a few years, does that sound as if it's
going to turn out all right?
And if people are financing extravagant life styles on maxed out credit cards,
is that something that sounds good to me?
Life and investing have everything in common. The same principles that lead to
success in one lead to success in the other. The bottom line is that asset allocation,
patience, common sense and a good plan are the key to success.
Conclusion
If you spend a lot of time reading newspapers or watching cable news, you can
get a very biased view of any situation. And yes, the world is nowhere near being
a friendly place.
Yet, if you're fortunate or crafty enough, you can still put yourself in a better
position than that portrayed as the norm in the news cycle. The key is to keep
your wits about you and to stick to your plan.
If you own your own business, and business is decent, then you should be able
to set aside enough money to add to your retirement account on a periodic basis.
Even quarterly or yearly contributions, especially if they are sizeable will
add up over time, if you are prudent with your investments.
It's not so much about market timing, although we believe that timing is an important
aspect of any investment plan, but more about consistency and monitoring of your
investments. And it's about making sure that the basis for your savings plan,
your job or your business stays healthy enough so that you can fund your retirement.
If 2010 and the next few years pan out as they well could, meaning higher taxes,
slower economic growth, and a rising potential for international conflicts, having
a consistent investment plan will take you a long way.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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The Ishares
Singapore ETF (NYSE: EWS) delivered a chart breakout on
Monday.
Chart Courtesy of StockCharts.com
Emerging markets usually exaggerate the trend of the U.S.
market, both on the up side and on the down side. And Singapore
is often a fairly good bet on that trend.
If you're going to trade international ETFs you should consider doing so via
charts rather than news or fundamentals. For example, Singapore's GDP fell nearly
7% in the fourth quarter, and likely 2% for 2009. Yet, the Singapore ETF broke
out on the first trading day of the year.
The bottom line is that trading is about trends and momentum, which means that
if you are an aggressive trader, at this point, this is an ETF worth considering.
Volatility, and external events can always derail all investments, but especially
those that are concentrated in one country or one sector. That means that the
total allocation given to any one area needs to be limited.
The ETF has more than doubled since its March 2009 bottom, again proving the
need to trade this instrument via charts, not via news.
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