The last time the Nasdaq 100 (NDX) traded at the levels we see today was 11 years ago when both Worldcom and Global Crossing carried nearly three times the weighting of Apple Computer (AAPL) within that index! As you may remember, neither Worldcom nor Global Crossing survived…
Back in 2001 Apple carried a 0.5% weighting in the Nasdaq 100, the weighting has gradually grown and is currently at 15%. Additionally, since the last time NDX traded at its current level of 2,500, there have been 125 component changes within this index. This is to say that the entire index has "turned over" in that 11 year period ... and then some.
Speaking of APPL, a revolution is taking place in the way we access and utilize technology. Users of most mobile devices access the ‘net, check email and play games through mobile applications or 'apps'. What's interesting about this phenomenon is that although it appears that these apps are just virtual, faceless programs; actual jobs are being created by this industry. Recently, I read an interesting article titled: AppEconomy is 'job leader' into the future by Mike Mandel. The article speaks to the significance of this industry and even its importance in leading the economy out of the 'recession'. A recent study by TechNet found that the:
“App Economy now is responsible for roughly 466,000 jobs in the United States, up from zero in 2007 when the iPhone was introduced. This total includes jobs at ‘pure’ app firms such as Zynga, a San Francisco-based maker of Facebook game apps that went public in December 2011. App Economy employment also includes app-related jobs at large companies such as Electronic Arts, Amazon, and AT&T, as well as app ‘infrastructure’ jobs at core firms such as Google, Apple, and Facebook. In additional, the App Economy total includes employment spillovers to the rest of the economy.”
Lastly, a word of caution regarding an up & coming tech company: Current tech giants Google & Apple have trailing price/earnings multiples of around 16. Assuming Facebook IPOs at $40, it will sport a multiple of 93 times trailing earnings. Google trades at a forward P/E of 14 and Apple at 10 times, Facebook at $40 would trade at 25 times forward earnings. As someone once said, “the best business can be a poor investment, if you pay the wrong price”.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Friday, February 10, 2012
Deja Vu
"Money managers are unhappy because 70% of them are lagging the S&P 500. Economists are unhappy because they do not know what to believe: this month’s forecast of a strong economy or last month’s forecast of a weak economy. Technicians are unhappy because the market refuses to correct and gets more and more extended. Foreigners are unhappy because due to their underinvested status in the U.S. they have missed a big double play: a big currency move plus a big stock market move. The public is unhappy because they just plain missed out on the party after being scared into cash. It almost seems ungrateful for so many to be unhappy about a market that has done so well. Unhappy people would prefer the market to correct to allow them to buy and feel happy, which is just the reason for a further rise? Frustrating the majority is the market’s primary goal."
-- Bob Farrell, Merrill Lynch
Source: Raymond James Financial, "Everybody’s Unhappy!?," by Jeff Saut (January 23rd, 2012)
This paragraph nicely describes the emotions existent in early-2012. However, Bob Farrell penned this in September 1989, way back when I was at Merrill Lynch. This is the nature of the market; rarely are investors content with what the market hath provided, and conversely, when investors are quite pleased with the market, that is generally a time when you should be concerned! While recent history should have little to do with today’s decisions, we know that it does. Investors who have enjoyed the recent move higher are wondering if it can continue in light of all the questionable economic news. While the investors who were scared into cash, are wondering if it’s too late.
My wealth management practice is built around a gameplan that constantly monitors the global markets and has adaptive characteristics, to change as they do. Being a successful investor is not about being correct 100% of the time, or even 95% of the time. Being successful, over time, is about constantly managing the risk in decisions you make, and whether proven "right" or "wrong" by the market, not staying wrong for long. Many investors feel as though markets collapse without any warning sign, which is very rarely the case. Often the signs are there, but few are looking for them, and even fewer still have the confidence and discipline to adapt to warning signs they may see.
The US Equity asset class remains the top ranked asset class and has started the year on a positive note - the weight of the evidence for this asset class continues to be positive.
A major headline in 2011 was the upward move in the price of Gold. Recently however, there have been some troubling signs from the yellow metal, not only in terms of absolute price, but in terms of strength versus other commodities. One of the beneficiaries within the Commodity space has been Crude Oil.
International Equities were an under- performing asset class last year. As the positive signs continue to mount, this will be an area to watch closely.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
-- Bob Farrell, Merrill Lynch
Source: Raymond James Financial, "Everybody’s Unhappy!?," by Jeff Saut (January 23rd, 2012)
This paragraph nicely describes the emotions existent in early-2012. However, Bob Farrell penned this in September 1989, way back when I was at Merrill Lynch. This is the nature of the market; rarely are investors content with what the market hath provided, and conversely, when investors are quite pleased with the market, that is generally a time when you should be concerned! While recent history should have little to do with today’s decisions, we know that it does. Investors who have enjoyed the recent move higher are wondering if it can continue in light of all the questionable economic news. While the investors who were scared into cash, are wondering if it’s too late.
My wealth management practice is built around a gameplan that constantly monitors the global markets and has adaptive characteristics, to change as they do. Being a successful investor is not about being correct 100% of the time, or even 95% of the time. Being successful, over time, is about constantly managing the risk in decisions you make, and whether proven "right" or "wrong" by the market, not staying wrong for long. Many investors feel as though markets collapse without any warning sign, which is very rarely the case. Often the signs are there, but few are looking for them, and even fewer still have the confidence and discipline to adapt to warning signs they may see.
The US Equity asset class remains the top ranked asset class and has started the year on a positive note - the weight of the evidence for this asset class continues to be positive.
A major headline in 2011 was the upward move in the price of Gold. Recently however, there have been some troubling signs from the yellow metal, not only in terms of absolute price, but in terms of strength versus other commodities. One of the beneficiaries within the Commodity space has been Crude Oil.
International Equities were an under- performing asset class last year. As the positive signs continue to mount, this will be an area to watch closely.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
The Roller Coaster Year
There is no doubt we will look back on 2011 and remember it quite aptly as a "roller coaster" year for the markets. Quite often that term is loosely applied to periods during which the market endures wild swings, which certainly describes 2011. But in this case the US markets met the complete definition of "roller coaster", which is that we returned to the ‘station’ at pretty much the same place where we began. Personally, I could have done without the ‘ride’ – in hindsight I would have been fine just sitting at the ‘station’.
This year’s fun has already begun – we have entered into a Leap Year and a Presidential Election year, and rejoice – we have about forty more weeks of political mud-slinging and the accompanying media circus! Our economy is improving, but not nearly as fast as people would like; consumer sentiment rose for the fourth month in a row in December, initial unemployment claims have started to fall and the unemployment rate is starting to decline. But there are still some obstacles that are preventing us from seeing a better business environment; a few of these obstacles are undoubtedly of a political nature; this election season we’re experiencing more than the usual allotment of political dysfunction and partisan politics.
Unfortunately, we are all well aware of what the market "feels" like today. The average mindset is extremely short-term and low confidence is causing investors to overreact to every piece of news for fear that the latest piece will be “the big one”. News flow in financial markets--much of it alarming, since scary news always gets better ratings--gives investors a multitude of opportunities to behave badly. The best strategy? Distract yourself!
A systematic, rules-based approach can be very helpful in this type of environment and that is the path I chose to pursue years ago. The most useful evidence, in any event, is often tallied from the actions of investors, as opposed to the opinions of pundits and the success of any strategy, more than anything else, is dictated by how well one can follow it over the long-run. Here’s looking at a great 2012!
In the for what it is worth category, according to Jason Goepfert of Sundial Capital Research:
“…wash years like 2011 are typically followed by big gains in the following year. The median market move following a year in which the S&P gains or loses less than 3% is a 12.3% gain”
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
This year’s fun has already begun – we have entered into a Leap Year and a Presidential Election year, and rejoice – we have about forty more weeks of political mud-slinging and the accompanying media circus! Our economy is improving, but not nearly as fast as people would like; consumer sentiment rose for the fourth month in a row in December, initial unemployment claims have started to fall and the unemployment rate is starting to decline. But there are still some obstacles that are preventing us from seeing a better business environment; a few of these obstacles are undoubtedly of a political nature; this election season we’re experiencing more than the usual allotment of political dysfunction and partisan politics.
Unfortunately, we are all well aware of what the market "feels" like today. The average mindset is extremely short-term and low confidence is causing investors to overreact to every piece of news for fear that the latest piece will be “the big one”. News flow in financial markets--much of it alarming, since scary news always gets better ratings--gives investors a multitude of opportunities to behave badly. The best strategy? Distract yourself!
A systematic, rules-based approach can be very helpful in this type of environment and that is the path I chose to pursue years ago. The most useful evidence, in any event, is often tallied from the actions of investors, as opposed to the opinions of pundits and the success of any strategy, more than anything else, is dictated by how well one can follow it over the long-run. Here’s looking at a great 2012!
In the for what it is worth category, according to Jason Goepfert of Sundial Capital Research:
“…wash years like 2011 are typically followed by big gains in the following year. The median market move following a year in which the S&P gains or loses less than 3% is a 12.3% gain”
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
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