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Tuesday, January 25, 2011

Kirk Lindstrom's Two Investment Letters

I write two different, but related, newsletters.

#1 "Kirk Lindstrom's Investment Letter" is $155 a year and uses the "core and explore" method to invest. It has two core portfolios plus an explore portfolio of individual stocks. My aggressive core portfolio has 80% equities while my "conservative" core portfolio has 50% in equities. My core portfolios are made of index funds and ETFs for the very lowest expenses.

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 212%  vs. the S&P500 UP only 25% vs. NASDAQ  UP a only 22%   (All through 12/31/10) 

In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% 
vs. the DJIA up 1.8%
In 2010 my "Explore Portfolio" gained 20.5%!! 
vs. the DJIA up 13.8%

The explore portfolio was roughly 70% equities for the year so the stocks in the portfolio had a banner year!  Click for a full performance table here
I recommend people start by getting their proper core portfolio created THEN add individual securities (Stocks, ETFs, Specific TIPS and even specific fixed income investments) I cover in my explore portfolio to build your own explore portfolio for 5 to 20% of your investment portfolio total.
"Kirk Lindstrom's Investment Letter Explore Portfolio" gained 20.5% in 2010 with 75% in equities and 25% fixed income with an overall portfolio beta of 1.0. For 2010, the DJIA gained 13.8%  (FREE Sample Issue - More Info - Return Data )
I have target prices to buy and sell my explore stocks so I find I almost look forward to market declines to get really great prices for stocks I can sell later at higher prices. Of course, following this explore portfolio is more work than buying index funds and rebalancing once a year that I recommend for my core portfolios. Compared to "other newsletters" costing more, my core portfolios and general stock market coverage in the first 11 pages of the 35 page monthly letter offer significant value even for those who don't dabble in individual stocks. I do (so far successfully) a small amount of "market timing" with a small portion of my explore portfolio but it mostly follows my "asset allocation strategy" as explained in "Using Asset Allocation to make money in a Flat Market."

#2 I write "The Retirement Advisor" with David Korn. We sell this for a very modest $99. We offer three model portfolios. We do not recommend individual stocks but we have articles that discuss current financial events such as economic data and Social Security COLAs. We also have articles to help you save money plus we find CDs with FDIC paying the highest rates. Our most aggressive portfolio has 50% in equities. Our most conservative portfolio contains no equity exposure.
Difference: The conservative (50:50) core portfolio in "Kirk Lindstrom's Investment Letter" is slightly more aggressive than the aggressive model portfolio #1 in "The Retirement Advisor." Over the very long term, you should expect the most aggressive portfolio to have the highest returns but at a price of higher volatility. When we started the "The Retirement Advisor" in 2007 we thought people like Bob Brinker were far too aggressive with equity exposure recommendations for retired people at such a risky time for the markets. If you recall, Brinker's Model Portfolio #3 was nearly 2/3rds in equities when the markets peaked. As our great returns show, we were right.

Summary:
"Kirk Lindstrom's Investment Letter" is for those who want to use individual stocks in an attempt to enhance their core portfolio returns. Some like to buy or trade individual stocks for extra return as they try to beat the markets over the long term as they build their investment portfolios to retire someday in the future. For those people, I recommend they place 120% less their age of their investment portfolio in my "core aggressive" portfolio and use remainder to follow some or all of my explore portfolio. For example, someone 40 years old would have 80% in my core aggressive portfolio and 20% in my explore portfolio.
For those at critical mass in retirement, there is no need to take a lot of risk so I recommend 95% of investment assets in my "core conservative" portfolio and the remaining 5% in some or all of my explore portfolio for "entertainment."
In sharp contrast, "The Retirement Advisor" has no individual stock advice. The portfolios are designed not to try and beat the markets but to help you sleep better at night in retirement with lower portfolio volatility. "The Retirement Advisor" also helps you manage your "living expense" or "emergency" account that is outside your investment portfolio. In addition to portfolio and living expense management help, "The Retirement Advisor" has articles to help you save money, understand Social Security, follow the basics of the economy and how it relates to our advice.

Many of my readers subscribe to and enjoy both newsletters.

"Kirk Lindstrom's Investment Letter"
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____
The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007


The Retirement Advisor Portfolios

Dollar Value on
12/31/2010

Change

Model Portfolio 1

$237,774

18.9%

Model Portfolio 2

$243,039

21.5%

Model Portfolio 3

$250,072

25.0%

DJIA 12,501.52 on 1/1/2007

$11,578

(7.4%)

S&P500 1,418.30 on 1/1/2007

$1,258

(11.3%)

  • Click here to start your subscription to The Retirement Advisor now!
FREE SAMPLE issue of The Retirement Advisor newsletter in pdf (sometimes it is slow to load.)

Friday, January 21, 2011

ECRI's WLI Back to 36 Week High

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released their latest readings for their proprietary Weekly Leading Index (WLI) this morning. (More about ECRI
For the week ending January 14, 2011
  • WLI  is 128.9 up from the prior week's reading of 128.1 and equal to the reading for the week ending December 24, 2010.  These are the highest readings since 36 weeks ago  on May 7, 2010 when WLI was at 131.9.
  • The lowest reading for WLI on record was 105.3 for the week ending March 6, 2009.
  • Last week's ECRI WLI Update for January 14, 2011
  • Since apparently bottoming at -10.3 for the week of August 27,  WLI growth moved higher or was flat for the 21st consecutive week to plus 3.1% from plus 3.6% a week ago.  
  • WLI growth of 4.1% is a 34-week high.
  • The last time WLI growth was higher was the reading for the week ending May 21, 2010 when it stood at positive 4.9%
  • My Portfolios at All Time Highs as we Enter 2011
On November 30, 2010 we reported in "ECRI Calls for Revival of US Economic Growth" that ECRI said "with a lot of conviction, that there is a revival in growth right ahead of us."  Since then, the economic data continues to slowly improve.
Commenting on the January 14th release, ECRI's Co-Founder, Chief Operations Officer and author of "Beating the Business Cycle", Lakshman Achuthan said: " With WLI growth rising for ten straight weeks to a 33-week high, U.S. economic growth will soon begin to revive."
Chart of WLI and WLI growth vs GDP Growth   
click to view full size charts
Since ECRI releases their WLI numbers for the prior week and the stock market is known in real time, you can sometimes get a clue for next week's WLI from the weekly change in the stock market. Notably, in the lead-up to the last two recessions, the WLI turned down months before the stock market did.
Chart of S&P500 vs ECRI's WLI
I want to point out that a correction in the stock market now would not necessarily change ECRI's call for an economic growth rate revival.  It takes a "pervasive" (for the majority) change of direction of their indicators in a "pronounced and persistent" way for ECRI to call for a turn in the economic cycle. These indicators and the trigger levels are proprietary.  I have found no one who has duplicated them or ECRI's success in calling business cycle turns based on their reading of their indicators.
Note that the chart above of the S&P500 vs. WLI shows a breakout above the dashed blue line that represents the neckline for a "Head and Shoulders Bottom" pattern.  This is a very bullish development.  A correction to test the pattern from above with a bounce to a higher high would be even more bullish, but not necessary for a continued market advance.
Chart of WLI from 1973 to 2010
Chart courtesy of ECRI
Notes: 
  1. The WLI for the week ending 1/21/11 will be released on 1/28/11
  2. Occasionally the WLI level and growth rate can move in different directions, because the latter is derived from a four-week moving average.
  3. ECRI uses the WLI level and WLI growth rate to HELP predict turns in the business cycle and growth rate cycle respectively. Those target cycles are not the same as GDP level or growth, but rather a set of coincident indicators (including production, employment income and sales) that make up the coincident index. Based on two additional decades of data not available to the general public, there are a couple of occasions (in 1951 and 1966) when WLI growth fell well below negative ten, but no recessions resulted (although there were clear growth slowdowns).  
  4. For a better understanding of ECRI's indicators, read their book, Beating the Business Cycle.
My take on ECRI's indicators, WLI and FIG plus how they relate to investments is included in "Kirk Lindstrom's Investment Letter."  FREE SAMPLE

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 212%  vs. the S&P500 UP only 25% vs. NASDAQ  UP a only 22%   (All through 12/31/10) 
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 1.8%

In 2010 my "Explore Portfolio" gained 20.5%!!
vs. the DJIA up 13.8%
(the explore portfolio has 70% in equities and 30% in fixed income so the stocks are doing very, very well)


KEY ECRI Articles:

Lakshman Achuthan - Beating the Business Cycle

“This easy-to-read book tells you how the respected ECRI calls turning points, and how you can, too.”
—Jane Bryant Quinn, Newsweek columnist

" The Economic Cycle Research Institute can justify a certain smugness now that business cycles are back in fashion."
--Harvard Business Review

“Shows... how far the state of the art in cycle forecasting has advanced, and how investors can profit from it.”
—Jon Markman, award-winning CNBC/MSN financial columnist 




Friday, January 14, 2011

ECRI WLI Indicates US Growth To Revive Soon

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released their latest readings for their proprietary Weekly Leading Index (WLI) this morning. (More about ECRI
For the week ending January 7, 2011
  • WLI  is 128.1 down from the prior week's reading of 128.9 and equal to the reading for the week ending December 17, 2010
  • The lowest reading for WLI on record was 105.3 for the week ending March 6, 2009.
  • Since apparently bottoming at -10.3 for the week of August 27,  WLI growth moved higher or was flat for the 20th consecutive week to plus 3.7% from plus 3.3% a week ago.  
  • WLI growth of 3.7% is a 33-week high.
  • The last time WLI growth was higher was the reading for the week ending May 21, 2010 when it stood at positive 4.9%
  • My Portfolios at All Time Highs as we Enter 2011
On November 30, 2010 we reported in "ECRI Calls for Revival of US Economic Growth" that ECRI said "with a lot of conviction, that there is a revival in growth right ahead of us."  Since then, the economic data continues to slowly improve.
Commenting on this data release, ECRI's Co-Founder, Chief Operations Officer and author of "Beating the Business Cycle", Lakshman Achuthan said: " With WLI growth rising for ten straight weeks to a 33-week high, U.S. economic growth will soon begin to revive."
Chart of WLI and WLI growth vs GDP Growth   
click to view full size charts
Since ECRI releases their WLI numbers for the prior week and the stock market is known in real time, you can sometimes get a clue for next week's WLI from the weekly change in the stock market. Notably, in the lead-up to the last two recessions, the WLI turned down months before the stock market did.
Chart of S&P500 vs ECRI's WLI
I want to point out that a correction in the stock market now would not necessarily change ECRI's call for an economic growth rate revival.  It takes a "pervasive" (for the majority) change of direction of their indicators in a "pronounced and persistent" way for ECRI to call for a turn in the economic cycle. These indicators and the trigger levels are proprietary.  I have found no one who has duplicated them or ECRI's success in calling business cycle turns based on their reading of their indicators.
Note that the chart above of the S&P500 vs. WLI shows a breakout above the dashed blue line that represents the neckline for a "Head and Shoulders Bottom" pattern.  This is a very bullish development.  A correction to test the pattern from above with a bounce to a higher high would be even more bullish, but not necessary for a continued market advance.
Chart of WLI from 1973 to 2010
 
Chart courtesy of ECRI

Notes: 
  1. The WLI for the week ending 1/14/11 will be released on 1/21/11
  2. Occasionally the WLI level and growth rate can move in different directions, because the latter is derived from a four-week moving average.
  3. ECRI uses the WLI level and WLI growth rate to HELP predict turns in the business cycle and growth rate cycle respectively. Those target cycles are not the same as GDP level or growth, but rather a set of coincident indicators (including production, employment income and sales) that make up the coincident index. Based on two additional decades of data not available to the general public, there are a couple of occasions (in 1951 and 1966) when WLI growth fell well below negative ten, but no recessions resulted (although there were clear growth slowdowns).  
  4. For a better understanding of ECRI's indicators, read their book, Beating the Business Cycle.
My take on ECRI's indicators, WLI and FIG plus how they relate to investments is included in "Kirk Lindstrom's Investment Letter."  FREE SAMPLE

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 212%  vs. the S&P500 UP only 25% vs. NASDAQ  UP a only 22%   (All through 12/31/10) 
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 1.8%

In 2010 YTD my "Explore Portfolio" gained 20.4%!!
vs. the DJIA up 13.8%
(the explore portfolio has 70% in equities and 30% in fixed income so the stocks are doing very, very well)
(Subscribe Now - FREE Sample Issue - More Info - Return Data )

KEY ECRI Articles:
 
Lakshman Achuthan 
Beating the Business Cycle

“This easy-to-read book tells you how the respected ECRI calls turning points, and how you can, too.”
—Jane Bryant Quinn, Newsweek columnist

" The Economic Cycle Research Institute can justify a certain smugness now that business cycles are back in fashion."
--Harvard Business Review

“Shows... how far the state of the art in cycle forecasting has advanced, and how investors can profit from it.”
—Jon Markman, award-winning CNBC/MSN financial columnist 


Monday, January 10, 2011

Ed Hyman & Dennis Stattman's Outlook for 2011

Summary of Consuelo Mack's interview with Wall Street's long-time number one ranked economist, Ed Hyman of ISI Group, and BlackRock's star Global Asset Allocation Fund manager, Dennis Stattman. You can watch the full interview at the bottom of this summary.
State of the US Economy:
Ed Hyman:
The economy is not very healthy because we are doing quantitative easing.  About 3 months ago, it looked like the economy was going into a double dip. Since then, the economy is looking "much, much better."
Dennis Stattman:
Chronic problems will be with us for a long time. We have too much debt.  We are not producing enough in our economy compared to what we are consuming.  Harder to get employment going due to higher costs of employment.  But, compared to expectations of three or six months ago, the economy on the short-term is doing better.  The big problems will be there for years.
Ed Hyman's expectations
  • 3% Real GDP in 2011.  
  • 10-year Treasury at 4.0%
  • Fed Funds Rate of near zero percent for the full year.
6 quarters of 3% growth and unemployment last month was 9.8% so 3% is not enough to grow jobs. Thus believes the Fed and the president want 4% GDP growth to grow jobs.  Like Clinton, he believes Obama is doing his version of a move to the center to grow jobs and get reelected in 2012.
Dennis Stattman:  Believes the monetary policy is near the level of "desperate."  Spending has been very aggressive but little has been done to address the  production side of the economy.  Regulation and tax uncertainty is hurting small businesses.  Politicians will have to move to address this or they won't get reelected.
Ed Hyman: Believes focus will shift to 2012 with Q1-2011 GDP coming in at a "new high."
Dennis Stattman:   "Stocks in the US are quite reasonably priced."  Many US stocks benefiting from higher growth rates outside the US but they are selling at low PE ratios due to US troubles.  Blackrock's Global Allocation fund is at 36% of fund in US Equities, the highest exposure in a long time.  Fixed income exposure is lowest ever and thinks bond market is dangerous to investors.
Ed Hyman: Believes the US stock market "is going up."  Adding to Dennis`s picture, Ed believes the Fed introduced QE2 to increase the value of stocks, to drive investors into riskier assets, to increase confidence with higher stock prices and thus lead to increased hiring.  Ed agrees "completely" with Dennis on bonds and believes that the bond market (10-year yield) is heading towards 4.0%.  To go above that would be "epic."
On the US Dollar.
Dennis Stattman:  Has about a market weighting in the dollar or 60%.  Most investments are in dollar but that also means 40% are in non-dollar investments.   "I would be very nervous to be 100% US Dollar."
Ed Hyman: "Being neutral sounds like a reasonable position. "Agrees with Dennis and believes the emerging currencies like the Yuan will go up.  Not bullish or bearish on the dollar.
Stocks:
Dennis Stattman: Likes IBM (Charts & Quote).  Get a very solid growth investment with a 1.7% yield. Thinks IBM has a good "blueprint" to get earnings per share to $20 by 2015.
Ed Hyman:  "I would put my money in Dennis's fund."  The one stock that sticks out to him is Citigroup (C charts and Quote).  He likes emerging economies and Citicorp or Citigroup has done a better job than the other banks in the emerging markets.  He also believes Vikram Pandit is "an emerging markets person" and is a great leader.  If Citi gets over $5, then the stock can be bought by more institutional investors.  If I had to pick one stock, I'd pick that stock.

Disclosure:  I own both IBM and C


Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 212%  vs. the S&P500 UP only 25% vs. NASDAQ  UP a only 22%   (All through 12/31/10) 
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 1.8%

In 2010 YTD my "Explore Portfolio" gained 20.4%!!
vs. the DJIA up 13.8%
(the explore portfolio has 70% in equities and 30% in fixed income so the stocks are doing very, very well)

Friday, January 07, 2011

ECRI's WLI Ends 2010 on a High Note

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released their latest readings for their proprietary Weekly Leading Index (WLI) this morning. (More about ECRI
For the week ending December 31, 2010
  • WLI  is 128.9 down a tick from the prior week's reading of 129.0.   The last time WLI was higher was the reading for the week of May 7, 2010 when it stood at 131.9.
  • The lowest reading for WLI this year was 120.4 for the week ending July 16.
  • Since apparently bottoming at -10.3 for the week of August 27,  WLI growth moved higher or was flat for the 19th consecutive week to plus 3.3% from plus 2.3% a week ago.  
  • The last time WLI growth was higher was the reading for the week ending May 21, 2010 when it stood at positive 4.9%
  • My Portfolios at All Time Highs as we Enter 2011
On November 30 we reported in "ECRI Calls for Revival of US Economic Growth" that ECRI said "with a lot of conviction, that there is a revival in growth right ahead of us."  Since then, the economic data continues to slowly improve.

Chart of WLI and WLI growth vs GDP Growth   
click to view full size charts
Since ECRI releases their WLI numbers for the prior week and the stock market is known in real time, you can sometimes get a clue for next week's WLI from the weekly change in the stock market. Notably, in the lead-up to the last two recessions, the WLI turned down months before the stock market did.
Chart of S&P500 vs ECRI's WLI
I want to point out that a correction in the stock market now would not necessarily change ECRI's call for an economic growth rate revival.  It takes a "pervasive" (for the majority) change of direction of their indicators in a "pronounced and persistent" way for ECRI to call for a turn in the economic cycle. These indicators and the trigger levels are proprietary.  I have found no one who has duplicated them or ECRI's success in calling business cycle turns based on their reading of their indicators.
Note that the chart above of the S&P500 vs. WLI shows a breakout above the dashed blue line that represents the neckline for a "Head and Shoulders Bottom" pattern.  This is a very bullish development.  A correction to test the pattern from above with a bounce to a higher high would be even more bullish, but not necessary for a continued market advance.
Chart of WLI from 1973 to 2010
 Chart courtesy of ECRI
Notes: 
  1. The WLI for the week ending 1/7/11 will be released on 1/14/11
  2. Occasionally the WLI level and growth rate can move in different directions, because the latter is derived from a four-week moving average.
  3. ECRI uses the WLI level and WLI growth rate to HELP predict turns in the business cycle and growth rate cycle respectively. Those target cycles are not the same as GDP level or growth, but rather a set of coincident indicators (including production, employment income and sales) that make up the coincident index. Based on two additional decades of data not available to the general public, there are a couple of occasions (in 1951 and 1966) when WLI growth fell well below negative ten, but no recessions resulted (although there were clear growth slowdowns).  
  4. For a better understanding of ECRI's indicators, read their book, Beating the Business Cycle.
My take on ECRI's indicators, WLI and FIG plus how they relate to investments is included in "Kirk Lindstrom's Investment Letter."  FREE SAMPLE

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 212%  vs. the S&P500 UP only 25% vs. NASDAQ  UP a only 22%   (All through 12/31/10) 
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 1.8%

In 2010 YTD my "Explore Portfolio" gained 20.4%!!
vs. the DJIA up 13.8%
(the explore portfolio has 70% in equities and 30% in fixed income so the stocks are doing very, very well)

Thursday, January 06, 2011

Fund Flows: Equity, Bond & Money Market Yearly Totals

Equity, Bond & Money Market Fund Flows - Yearly Totals & 2010 YTD

Weekly Data for 1/7/2011

Fund Flow Totals by Year & 2011 through 1/7/11 
Table 1 AMG Fund Flows for Full Year - $B
Fund Flows for Equity Tax Bond MM Fund
2003 40.8 40.7 NC
2004 95.0 11.3 (64.3)
2005 71.9 9.3 89.0
2006 52.5 29.9 308.3
2007 111.3 68.8 569.5
2008 3.5 (3.3) 608.0
2009 6.0 172.0 (280.2)
2010 24.8 148.4 (392.3)
20119.32.9(9.6)
  • NC = Data Not Compiled
  •  += Some data points for Money Market Fund flows between March 2010 and July 14, 2010 are missing but the overall trend is clear. 
  • Raw data from AMG Weekly Fund Flows Data: 
This table shows a summation of the weekly fund flow data. Money Market funds yield next to nothing so people have taken money out to buy bonds as well as live on during the recession and long recovery period with high US unemployment (9.4%)

ExETFs—For the week ended 01/05/2011 all Equity funds report net inflows totaling $3.446 billion, with Domestic Equity funds reporting net inflows of $2.150 billion and Non-Domestic Equity funds reporting net inflows of $1.295 billion... ExETFs—Emerging Markets Equity funds report net inflows of $0.715 billion, the group’s thirty-first consecutive week of positive flows... Net inflows are reported for All Taxable Bond funds ($2.932 billion), bringing the rate of inflows of the $2.729-trillion sector to -$0.941 billion/week... International & Global Debt funds posted net inflows of $0.647 billion... Net inflows of $0.743 billion were reported for Corp-High Yield funds while Flexible Funds reported net inflows of $0.758 billion… Money Market funds report net outflows of -$9.583 billion… ExETFs—Municipal Bond funds report net outflows of $1.693 billion, their eighth consecutive week of outflows...

Saturday, January 01, 2011

My Portfolios at All Time Highs as we Enter 2011

In 2010 YTD my "Explore Portfolio" gained 20.4%!!

Happy New Year everyone!

2010 was another great year for stock market investors.  The Dow Jones Industrial Average gained and the S&P500 both had double digit returns.  When you include dividends, the DOW and S&P500 gained 13.8 and 14.9%, respectively.

2010 was an even better year for "Kirk Lindstrom's Investment Letter" where my "explore portfolio" handily beat the S&P500 yet again with only 70% in equities! 
After gaining 33.5% in 2009, my "explore portfolio" in 2010  gained another 20.4% to finish higher than it was at the end of 2007 and just a few points below its all time high.
The two "total portfolios" that I recommend for aggressive and conservative investors finished 2010 at new record highs! How many can honestly make that claim?
My Returns by Year
Click for full size tables
This shows how the "core and explore" portfolios are making new highs.
Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 212%  vs. the S&P500 UP only 25% vs. NASDAQ  UP a only 22%   (All through 12/31/10) 
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 1.8%

In 2010 YTD my "Explore Portfolio" gained 20.4%!!
vs. the DJIA up 13.8%
(the explore portfolio has 70% in equities and 30% in fixed income so the stocks are doing very, very well)



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