A Strategy That Can Used to Beat the Market

 Market Overview for 11/12:


A lot of red for the one day and the 5 day changes. The Nasdaq rose 0.3% to a fresh 14-year high. Meanwhile, the S&P 500 and the Dow Jones industrial average were fractionally lower. Volume increased over yesterday’s holiday session.

Exelon Corp. led utility shares to the biggest drop since June but was rebounding somewhat in the after hours trade. Sometimes we have to sit back and put things into perspective, a 3.5% decline in one day seems like a lot however,

EXC was ex-dividend today, that accounts for $0.31 of the move or 0.8%. Two steps forward, one step back.

Sector & Asset Class Watch:

Screen Shot 2014-11-12 at 7.02.30 PMHere we are and the S&P and Dow Industrials were slightly lower, the NASDAQ slightly higher. You would therefore not expect much going on underneath. All of the top 10 sector and industry ETFs are up on all time frame except 3 that remain lower on a year to date basis only. Those three involve the weakest sectors; energy and metals. For the day many were ahead by 1 half percent to almost two percent.

Look however, what led the charge for the day and maybe more; Retail, Banking, Communications. Looking at MG 410 Banking’s Composite chart we get an interesting picture: (Click picture for a full sized image)

410The top 2 boxes are dollar weighted volume calculations. In the cumulative chart (top) the moving average has turned up, the buying power is exceeding selling pressure in the second box. The cumulative volume (top) and the A/D line of the sector have exceeded the peaks of early September and price is not there yet. Relative strength over 6 months is not there yet and probably will not be for awhile. In essence the Banking sector is building fuel that could take it higher, even above the September highs. After the news of the Forex fixing fines and the set asides for legal fees, we could be climbing a wall of worry.  😎

Go to the Sector Charts and the Index charts and check out the composites. You will be hard pressed outside of Energy and Metals to find negative looking indications.

A Strategy Millennial Investors Can Use to Beat the Market

By Patrick O’Shaughnessy

If you do not subscribe to AAII (American Association of Individual Investors) you should. The basic membership is only $29 per year, granted they sell a good deal more but that is up to you. They now have a 30 day free trial which you could utilize to finish this article and read many more.

magine that you could rewind time to age 20. What investing lessons do you wish the 20-year old version of yourself knew at the time?

This is an important question to ask as a new generation starts their investing careers. For younger investors, learning the key points of a successful investing plan can mean the difference between a comfortable retirement and an exemplary one.

We tend to leave high school and college woefully undereducated on the topics of money and investing, but I think that convincing young people of three key lessons early on is a great place to start. Young investors can achieve impressive results if they learn to:

  • Start as young as possible,
  • Build a unique portfolio, and
  • Take steps to keep their emotions in check.

This article will explore each of these three lessons, with an emphasis on building a unique portfolio using AAII’s Stock Investor Pro fundamental stock screening and research database program.

Starting Young

As I write this, I am 29 years old. My age cohort—the millennial generation born between 1980 and 2000—faces obstacles that did not threaten our parents or grandparents. The main problem is that as a country we are getting older while at the same time taking on more debt. An aging global population—and the commensurate burden on governments to support that population—means that millennials may have to be more financially self-reliant than their parents.

Here are some concerning trends that should make millennials take notice. The personal savings rate has fallen over the decades, from 12.2% in 1967 to 5.4% in 2014. At the same time, the American government has spent a larger and larger percentage of its total budget supporting its citizens in retirement, primarily through Social Security and Medicare. These two programs accounted for 16% of the budget in 1967, but represented 35% in 2012. We are saving less and less while the government supports us more and more.

The problem for millennials is that the costs of these support programs is directly tied to our country’s demographic trends. An older population is much more expensive to support, and we are getting much older. In a few decades, the median age in the United States will be similar to the median age in Florida today. Compounding this problem is the fact that we will have far fewer working-age people (i.e., those paying income taxes) to support each retiree. In 1960, there were six workers per retiree. Today there are about four. When millennials reach their prime earnings years, there will only be two workers per retiree. All of this means that we may not enjoy the same support in our retirement as current retirees do. To soften that potential blow, we should build up our own portfolios as soon as we can.

While these obstacles are important and significant, millennials also have formidable advantages. My generation can access global markets at very low cost and with very little effort. If we were to simply buy index funds, we could build a global portfolio for virtually zero cost. And as we will see, there are even better options than global index funds.

We also still have the most impressive investing advantage of all: youth itself. This edge is bestowed on every new generation, but the sad paradox is that while we should care the most about investing when we are young (that is, when our dollars have the most potential), we tend not to care until much later in life, when retirement is visible on the horizon. This is often because of a lack of basic education about markets and investing, a void that I am trying to fill for young investors with my book “Millennial Money: How Young Investors Can Build a Fortune” (Palgrave Macmillan, 2014).

Full Article: A Strategy Millennial Investors Can Use to Beat the Market

Today’s Reports and Earnings:

Talking Points and ESA’s Rosetta Accomplished an Extraordinary Feat: 

Our Investment Beliefs (Research Affiliates)
S&P 500 headed to 2,500, courtesy of Japan? (Jon Markman)
The Bond Market and the Election (Cumberland Advisors)
The Pension Wars: Finite assets. Infinite managers. The battle is on. (CIO)
Three Hidden Red Flags for Stock Investors (Barron’s)
How Much Money Big Cable Gave the Politicians Who Oversee the Internet (Gizmodo)
Ideological Through-and-Through (Robert Seawright)
Why Jeremy Grantham is Right about Corporate Profit Margins (Advisor Perspectives)
Extreme Wealth Is Bad for Everyone—Especially the Wealthy ( Michael Lewis)
Polar vortex: Risk or opportunity for energy stocks? (Cam Hui)
Regulators Want Banks to Rescue Themselves Next Time (Bloomberg View)
Why Is Gold Losing Its Luster? (Yardeni)
How Costco is Crushing the Competition (The Firstadopter)
Behavioral Economist Dan Ariely on Happiness (Gretchen Rubin)

ESA’s Rosetta Accomplished an Extraordinary Feat

Have a Great Day!