Dec 24

On March 13th (a Friday) I posted “Have We Hit Bottom?” and it seems we did. While the return on the S&P since then, a 49% rise from 750.74 to its 1220.59 close last night. But if we learned anything from the tech crash, it’s that not every company goes bankrupt after a major decline, most survive returning to some semblance of normalcy. To be fair, there were quite a few stocks that went belly up in 2001, many of which never had a viable business model in the first place.

In this past cycle, what would have been our reward had we put our money where my thoughts were, back in March? Let’s assume $2000 per company in invested among 10 different stocks and use the closing price on March 16, so you had the weekend to read my post of the 13th.

GMcert

GM – $2.52 to $0.49  $389 (left from $2000)
Ford – $2.10 to $10.08  $9,600
CitiGroup – $2.33 to $3.29 $2,824
Bank of America – $6.18 to $15.19 $4,916
Beazer Homes – $0.50 to $4.99 $19,960
Pulte Homes – $9.52 to $10.06 $2,113
Exxon – $66.97 to $68.26 $2,038
Sunoco – $28.12 to $25.52 $1,815
Merck – $26.21 to $37.25 $2,842
Johnson & Johnson – $50.73 to $64.57 $2,546

This basket of stocks chosen from 5 industries returned $49,043 or a gain of 145% from the March 16th date. Note, the bottom for each of these stocks was even lower than this. CitiGroup was under a dollar, Ford had an intraday low of $1, Beazer, 24 cents. If only we can learn to recognize and act on that bottom, we stand to be well rewarded. To be successful at profiting from such market moves one needs a cash reserve, steady job, and a very strong stomach. Also, I’m not suggesting that anyone make such moves with a large part of their portfolio. Most of my own retirement account is in a combination of index funds and ETFs.

Joe

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Aug 08

As I posted the other day, the market has been volatile of late. After reaching a high in Mid-July of 1555.90 the S&P touched 1427.39 on Monday (Aug 6) a drop of over 8%. But now back to 1497.49, the S&P has come back 4.9% from this recent low. This recent blip will look just like any other, meaningless in the long term. What will the market do tomorrow? Random Walk tells me I don’t know, and that short term movements simply don’t matter.

JOE

written by Joe

Aug 06

The market has gotten more volatile in the last month. Average point move on the S&P in the last 30 days has been 14.4 compared to the last year’s average of 6.9. This kind of volatility can certainly turn your stomach, but it’s the long run that matters. I touch on this topic in my article Market Timing, and also would recommend a look at MoneyChimp for an interesting take on how volatility for longer time horizons decreases.
Edit – I offer this chart courtesy of Yahoo Finance, illustrating the recent upturn in the VIX, the CBOE Volatility Index.

CBOE VIX

While short term, volatility has spiked up, we have just returned to the range of 1998 – 2003. We survived those days, and this, too, shall pass.

JOE

written by Joe