Bob Brinker Free Discussion Site 59,820+

Top 839. Dec 12, 2005 9:55 AM

» gadget767 - 2006 Outlook from BusinessWeek.....1360 at year end?

SYNOPSIS: They have a modest + 6.7% outlook for 2006 with 10 yr yield at 5.2%

BusinessWeek Online
We Look for Modest Gains in 2006
Monday December 12, 8:13 am ET
By Joseph Lisanti

Looking back over the past five years, investors in large-cap stocks have had little to cheer about. The average annual price change for the S&P 500 has been negative, and growth stocks in the index have fared even worse than the benchmark.
This mediocre performance comes at a time when corporate earnings have generally risen. Operating earnings on the S&P 500 rose from 56.13 in 2000 to an estimated 76.80 in 2005, a gain of 36.8%. And that overall gain came despite a 31% decline in operating earnings in 2001.

One way to understand the anemic performance of large-cap stocks in the past half decade is to see it as a reaction to the huge advance in the bubble years of the mid-1990s. From the end of 1994 through 1999, the S&P 500 rose 220%, or 3.5 times the growth of operating earnings in that period.

Things even out a bit if you take a somewhat longer view. Though the S&P 500's compound annual change for the five years ended Nov. 30, 2005 is -1.02%, that figure for the 10 years ended on the same date is 7.5%.

For 2006, we see the S&P 500's total return at 8.5% as the economy and corporate profits continue strong. Specifically, Standard & Poor's economists expect the real gross domestic product in the U.S. to increase 3.4% in 2006. We see inflation, measured by the consumer price index (CPI), remaining muted at 2.4% and core CPI, which excludes volatile food and energy prices, at 2.3% for the coming year. We think the projected $200 billion likely to be spent on rebuilding efforts in the wake of Hurricane Katrina will contribute to growth in the first half of 2006.

Corporate profits should continue to rise, albeit at a somewhat slower pace next year. Aggregating Standard & Poor's analysts' earnings estimates, we project that operating profits on the S&P 500 will advance 11.5% to a record 85.60.

We expect that a larger part of those profits will benefit shareholders via dividends and stock buybacks. Through Dec. 7, Standard & Poor's logged 300 dividend increases by companies in the "500" this year. As a result, we now expect dividends on the index to total 22.10 in 2005. With the payout ratio of the "500" low by historical standards, we see room for additional dividend increases in 2006. For next year, we project S&P 500 dividends will total 24.50, a 10.9% advance.

Cash on the balance sheets of nonfinancial companies in the S&P 500 hit another record in November, at $638 billion. This has enabled companies to increase their share buyback programs. In years past, some companies used buybacks to offset shares issued in conjunction with exercised options. Now that options have to be expensed, we are seeing less of this activity, and buybacks are actually reducing shares outstanding. Over the 12 months ended Sept. 30, 61 issues in the S&P 500 have lowered their share count by at least 4%. We think this has positive implications for per-share earnings and, therefore, stock prices.

In our view, the S&P 500 is attractive at a current multiple of 16.5 times our estimate of 2005 operating earnings. That compares favorably with the 19.8 average p-e ratio on estimated operating earnings for the period 1988 through 2004. In addition, relative to bond yields, the current 6% earnings yield of the index (the inverse of the p-e) suggests to us that the market is undervalued.

We expect that the yield of the 10-year Treasury will rise slightly, reaching close to 5.2% in the third quarter of 2006. This should come as the Federal Reserve's efforts to quell any incipient inflation begin to affect longer-dated debt instruments. In our view, the Fed is likely to halt its current round of tightening with the fed funds rate at 4.75%, perhaps in the first quarter of 2006. We also see oil averaging $56 a barrel next year, providing some degree of price stability.

One risk to our forecast is that the Fed could continue tightening short-term rates to the point where the economy slides into recession. However, given the measured pace at which the Federal Reserve has been moving, we consider this scenario highly unlikely. A less quantifiable risk involves energy. Should the Gulf of Mexico suffer another hurricane season like the last one, damage to the energy infrastructure could cause oil prices to spike.

We think it is an appropriate time to consider higher-quality stocks. Recently, stocks with above-average Standard & Poor's quality rankings have not performed as well as lesser-quality issues. Our research suggests that such underperformance of high-quality stocks (those above the ranking of B+) is cyclical, and likely to revert to a more normal pattern before long. Over longer time periods, stocks that have above-average growth and stability of earnings and dividends for the preceding 10-year period have tended to outperform.

We see the S&P 500 ending 2006 at 1360, for a 6.7% advance over the 1275 we now forecast for the end of this year. The projected advance is modest in part because the bull move that began in October 2002 is getting a bit long in the tooth. Furthermore, corporate profits, though growing, are doing so at a slower pace. Nevertheless, the advance we see is not far below the 7.6% average annual gain that the S&P 500 has posted since 1929.

We recommend that you keep 45% of your investment assets in domestic stocks, 20% in foreign equities, 20% in short-to-intermediate-term debt instruments, and 15% in cash. Among sectors of the market, we currently favor consumer staples, health care, and financials.

-- posted by gadget767

Top 840. Dec 12, 2005 7:56 PM

» gabbai - Re: Re: Capran's 14% return on his portfolio

In response to Re: Capran's 14% return on his portfolio posted by capran:

what do you use to determine your moving average figures?

-- posted by gabbai

Top 841. Dec 12, 2005 8:45 PM

» capran - Re: Re: Re: Capran's 14% return on his portfolio

In response to Re: Re: Capran's 14% return on his portfolio posted by gabbai:
The 50 day MA is just that. the sum total of the last 50 days divided by 50. Todays close, for example, was 689.54. I keep it in Excell and just pull it down. The 50 day moving average is 657.86. so todays close is 4.8 % above the moving average, which I figure to be in an over bought position.

-- posted by capran

Top 842. Dec 13, 2005 9:08 AM

» BoltonCT - Re: Re: Capran's 14% return on his portfolio

In response to Re: Capran's 14% return on his portfolio posted by capran:

Please explain:
Moved 75% in may 12 at 586. pulled all out june 17 at 644. Didnt make any moves all summer as I am on a boat with no communication to time anything. pulled 25% out sep 1 at 668, another 25% out at 677 on sept 7, and another quarter out at 678. (so at that point I am 75% out.

If you pulled all out on june 17 and did nothing until september when you took out another 75%, wouldn't that be 175% out?

You must have put it all in over the summer not all out. That was a good move because the summer had a rally.

-- posted by BoltonCT

Top 843. Dec 13, 2005 6:10 PM

» bbaddict - Re: Google Added to NASDAQ-100 QQQQ ETF

In response to Google Added to NASDAQ-100 QQQQ ETF posted by Kirk:

Kirk, you took the words right out of my mouth! I don't want Google at $400+. The others they are adding don't excite me, either. I guess it's time to convert my QQQQ position to a tax loss.

BTW, what % of the Q's will GOOG be?

-- posted by bbaddict

Top 844. Dec 13, 2005 7:53 PM

» capran - Re: Re: Re: Capran's 14% return on his portfolio

In response to Re: Re: Capran's 14% return on his portfolio posted by BoltonCT:
I was at the bottom of my excell page on June 17. I pulled 100% of the russell that date but let the s&p ride. I did call in a trade on the russell June 27 where I went back in with the russell portion. (I was in port for a couple of days and caught the declining russell at the summer low, and had access to a phone booth). I could have made more had I been around in late July or early August, as I know I would have pulled out as the market was peaking. Would have pulled out before the very top, but as I did in early Novemeber, would have laddered out as it went up. This probably isnt the right forum, but I could cut and past the actual shares and dates. I always figure if I was gaining ground on the indexes I was doing OK. Of course, the converse of that appears to be going on with me currently all out, in that the indexes average is 5.25 (russell 2k and s&p500, so am losing alittle ground to my prior gain on the indexes.. I also plan, if it were to get away from me and go up 10% from where it is now in a relatively short span, I will pull all the 403b/roth pile, moving it all into a money market fund and then make arrangements to move all that money into Vanguard and wait for the next decline to DCA in.

-- posted by capran

Top 845. Dec 13, 2005 9:24 PM

» gabbai - Re: Re: Re: Re: Capran's 14% return on his portfolio

In response to Re: Re: Re: Capran's 14% return on his portfolio posted by capran:

Two questions:

1. What is the other forum you post on?
2. You said you start to sell when the index gets to 3.5% above the 50 day moving average. When do you start to buy back in?

-- posted by gabbai

Top 846. Dec 14, 2005 5:31 AM

» capran - Re: Re: Re: Re: Re: Capran's 14% return on his portfolio

In response to Re: Re: Re: Re: Capran's 14% return on his portfolio posted by gabbai:
in the technical analysis forum. Generally as the index approached the 50 day MA, although there was some variation. I did download every transaction for the year under activity history. It is a large excell document (actually 2 documents, one for my account and one for my wifes, as I trade both the same), as it includes initial monthly deposits, as well as a thing called the TIF account, as well as all transations including number of shares bought and sold in each index. A typical transation had 4 to 6 lines of exchanges, as it lists the withdrawl from the money market fund and shares purchased. If you really want to see it in the years entirity, I could email it...capran@-nospam-yahoo.com remove the no spam. I don't think there is any sensitive info in the document as it doesnt include identifying info.

-- posted by capran

Top 847. Dec 15, 2005 6:30 AM

» capran - Re: Re: Capran's 14% YTD return on his portfolio

In response to Re: Capran's 14% YTD return on his portfolio posted by Kirk:
Since Brinker espouses himself as a "market timer", and I am doing market timing in my self directed state retirement fund, I'd hoped it was appropriate in this forum. Brinker, the little that I ever catch him, hasnt even seemed to be mentioning the secular/cyclical issues- althought I have never listened to a whole show in over a year. Since that pool of money is the only one I do market timing in, that is the only one that I am referring to re the 14%. This weekend, if I can figure it out, I'll post the excell sheet on one of those free home pages and post a link here.

As to the gain, yes, I am using a basic math solution. I started the year with about 220,000. We added about 12k via monthly deductions from our checks, and out current balance is alittle over 262k, giving us a gain 0f @ 32k, hence the 14 % (currently 13.98 % but with the 2 to 3 more pennies from the money market gain, will be slightly over 14 by Dec 31. But it's not on my total. After having lost so much in 2000, as perviously posted, I did two things different. First, I stopped adding to the 403b account. I didn't sell anything, but for the past 3 years I left the Roth Money in a money market accound, until last March when I moved three years worth of the roth into a balanced fund. The only other change I made was to take advantage of a sheltered state program. Thanks to Bush, they upped the contribution limits. It used to be that people were allowed to shelter a total of 20% into all tax deferred accounts including state retirement funds, deferred comp programs etc. Now we have been allowed to contribute 10% of our income into the state retirement self directed program, plus 18,000 into the deferred comp. program, an additional 28% of our income. And due to the prior losses in the market, I have put all that money into "the savings pool", a relatively low risk, low yield account. It's annual average is a tad over 5%. We could put that in an s&p or Russell 3000, or a few other stock funds, but I am not willing to subject that part of my future retirement to market risk, especially if, indeed, we are in a secular bear market. Besides, we didn't have a balanced portfolio that included bonds, so I am thinking of it as similar to a bond fund. I cetrainly don't have a total return of all my money of 14% as you do. That's just on my actively managed market timing account. smile

-- posted by capran