The Best Stock Market Buy Signal In 51 Years

by Alexander Green, Chairman, Investment U Investment Director, The Oxford Club Monday, January 5, 2009: Issue #910

Media pundits keep reminding us how tough 2009 will be economically. Nevertheless, I predict this will be a good year for the stock market.

How can this be?

The stock market is a leading indicator. It generally falls before consumers and investors realize just how bad the economy is.

It also recovers long before economic activity picks up. Perversely, that means stocks often plummet during good economic times and rally during recessions… or worse.

In the January issue of The Oxford Club Communiqué, for example, I note that:

In the 13-month recession in 1926-27, the market went up 41.1%.

 

In the eight-month recession in 1945, it went up 19.5%. In the 11-month recession in 1948-49, it went up 15.2%.

 

In the 10-month recession in 1953-54, the stock market went up 24.2%.

 

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A Question of Leadership at Apple (NYSE: AAPL)

Based off the last news reports, without Steve Jobs, the multi-billion-dollar enterprise that is Apple (NYSE: AAPL) would simply cease to exist. Every new report of his health is followed in the market, and Apple’s stock price takes corresponding hikes and plunges.

But Apple isn’t the only corporation with similar founder/leader issues.

Berkshire Hathaway (NYSE: BRK.A), and Dell, (NYSE: DELL), for example, both have stocks tied to the brand name of their founders - Warren Buffett and Michael Dell.

And when investors worry about the health of these figureheads, they send the stock price plummeting. But does this mean that the fundamentals of these companies are also in danger?

Far from it.

Microsoft (NYSE: MSFT) hasn’t collapsed since Bill Gates stepped down. Martha Stewart’s Martha Stewart Living

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NFLX: The Netflix Index

Nuevo-indices, like Estee Lauder’s (NYSE: EL) “lipstick index,” the bartender index or the video game index, all have their day in the sun during market downturns. Often they’re dismissed as distractions, or excuses for poor performance.

But their fundamentals are based on real consumer trends and psychology.

Areas like entertainment, clothing and luxury items are often cut back during downturns. But that doesn’t mean they aren’t replaced with substitutes. Frugal doesn’t mean spendthrift. Consumers are still buying.

Purchases are justified by their reduced cost, or the “savings” from not spending money elsewhere. Entertainment like Netflix (Nasdaq: NFLX) carries a cost – but nothing like going to a movie three times a week. It’s this mentality that we can find profits in.

Many companies have benefited from cost-conscious shoppers and savers, and others are benefiting from negative psychology.

Kraft Foods (NYSE: KFT) and

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The 4 Biggest Investment Myths of 2008

by Alexander Green, Chairman, Investment U Investment Director, The Oxford Club Monday, December 29, 2008: Issue #907

Pessimism about the U.S. economy and financial market is so thick right now you could cut it with a knife.

I’ll be the first to admit that times are tough. But Americans have seen tough times before. And we have always prevailed.

Too many investment myths have gone unchallenged lately. Today I plan to refute them - and explain why financial markets are likely to perform much better than most investors believe in the year ahead.

Let’s begin by examining the four biggest investment myths circulating right now…

Investment Myth #1: The Era of Free Markets is Over

It’s true that many of the apostles of free-market economics have begged Congress for government intervention during the current credit crisis. But nobody is seriously arguing that

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Bond Market’s Glimpse Into 2009

On Friday, Treasuries posted their first weekly loss since October - even as Middle East tensions pushed yields up again. As the year draws to a close, Treasuries have come out as the clear asset-class winner in 2008.

But they may have reached their peak in popularity when investors rushed to get a 0% yield. The rest of the market hasn’t been so popular. The Dow, S&P 500, and Nasdaq are all down more than 36% for the year.

Unfortunately, just because Treasuries become less popular doesn’t mean there’s a market uptick in our future. But the bond market does give a glimmer of hope for the New Year.

When investors become less risk averse, the spread between the yields of Treasuries and corporate bonds becomes smaller. The spreads have narrowed, and are almost half what they were months ago. Investors are starting

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Small-Cap Stocks: The Most Important Trend Headed into 2009

by Louis Basenese, Advisory Panelist, Investment U Associate Investment Director, The Oxford Club Wednesday, December 23, 2008: Issue #906

Yesterday we got confirmation that the U.S. economy contracted by 0.5% in the third quarter. And most economists expect the downturn to accelerate, with GDP checking in as low as negative 6% in the fourth quarter. Here’s why I’m not concerned…

A more important trend is emerging. Remember, on November 19 I told you to consider going big, by going small with small caps. Well, the markets didn’t leave much time for preparation.

In that short span, small caps jumped 6.38%, almost tripling the returns of large caps, based on the Russell 2000 and Russell 3000 indexes. Of course, it’s too early to declare a full-blown rally. But we shouldn’t be ignorant to the subtle shifts in market leadership.

Remember, the market’s a forward-looking beast. And

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Wall Street’s Ghosts of Christmas

There’s a powerful force visiting Wall Street this year. Call it the ghost of Christmas past, present and future. And the worst thing is what it does to companies who accept its influence, even while the number of those falling under its spell continues to grow:

General Motors (NYSE: GM), American International Group (NYSE: AIG), Bank of America (NYSE: BAC), Citigroup (NYSE: C), Well Fargo & Co. (NYSE: WFC) and the list goes on and on…

It’s been quite apparent about its intentions. But what warnings do these Spirits of Christmas - a.k.a. the government - want to give investors? Their message is simple:

Investors can no longer ignore the government when investing.

Regulation is back, and while it seems a heavy hand is needed with lapses like those in the Madoff-ponzi

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I.O.U.S.A. & The Coming Entitlement Meltdown

by Alexander Green, Chairman, Investment U Investment Director, The Oxford Club Monday, December 22, 2008: Issue #905

During the current economic crunch, top executives at Bear Stearns, Lehman Brothers and other financial giants received hundreds of millions of dollars in compensation… just before their firms keeled over.

This is galling to many. But the excessive and unwarranted compensation at Bear Stearns and Lehman doesn’t bother me, personally. Why? Because I never owned a share of either one of them.

However, we all have a stake in the future of the U.S. economy. No one can afford to ignore how Uncle Sam spends money. Fiscal policy will play a key role in determining the strength of the economy, the performance of our financial markets and the value of the dollar.

The incoming Obama administration is talking about spending up to a trillion dollars - a temporary shot in the

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Toyota (NYSE:TM): A First Time For Everything

This morning, Toyota Motor Corporation (NYSE: TM) announced it expects its first loss in 70 years. But the Japanese automaker sits on almost $19 billion is cash with little debt - a far cry from the dismal situation over a General Motors (NYSE: GM).

Around the world governments have been struggling to find answers to the collapse of the credit markets. The result has been massive government investments and bailouts. But it’s been the auto industry that’s drawn the most criticism and debate.

Canada just announced it would be injecting $3.3 billion into its auto production to prevent production from moving across the boarder. And their auto industry accounts for a much larger share of their economy than in the United States.

Their program helps Toyota and Honda Motor Corp (NYSE: HMC) as well, not just the

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A Rare Bank Without Defaults

by David Fessler, Advisory Panelist Friday, December 19, 2008: Issue #904

No Credit… No License… No History? No Problem?

Even before our current mortgage meltdown, most banks would never touch a prospective customer with any one of the above issues, let alone all three. But there’s one bank in a quiet little corner of Pennsylvania that’s made thousands of loans - all to customers who have no credit history, zero credit scores, no drivers license and nothing beyond an eighth grade education. The most amazing part is that they’ve never had even one customer default on a loan. And that’s thousands of customers over a 20-year period. How can this possibly be true?

A number of reasons…

This bank strictly adheres to one of the most basic principles of

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