Birchtree's Account Talk

[wv-girl]

Re: Birchtree's account talk

Chaos has never been my forte. Boy, I'm glad I'm past the juvenile stage of having to obsess over $0.34. Such a fear of loss they all have. All wrongs are eventually righted - relax little kinematics.

I'm with you Birch. I fund will get it back.

 

[Birchtree]

Re: Birchtree's account talk

It looks like we are in a pause to refresh. Yesterday's highs will need to be taken out before we can once again be called in the clear. The reversal indicates that we still have a good bit of buoyancy in the market pattern overall. Because the NYSE breadth MCSUM is +853 we won't get much price decay but side ways chop for the next week. We are now in the process of attempting to build a new foundation base in which price structure can then rally off of. Be right and sit tight. I'll take all my DCAs under $16.00 for the next two months if you please. Snort.

 

[Birchtree]

Re: Birchtree's account talk

From TWSJ by Alister MacDonald, titled: Corporate Profits And Mergers Propel European Shares. January 2. 2007.

European shares jumped in 2006, completing a fourth consecutive year of gains, on increased corporate profits, merger and acquisitions activity and economic strength - factors that should ensure positive returns will continue into the new year. Still, rising interest rates, a softer U.S. economy (not) and the weakening of the dollar create risks likely to make 2007 a more challenging year for investors.

A fifth year of positive returns would echo the length of the last bull market, from 1995-99. European stocks have returned more than 140% since the end of the last downturn, in March 2003. At the end of 2006, the Dow Jones Stoxx 600 Index, which tracks Europe's 600 largest publicly traded companies, stood at 365.26, up 17.8% for the year, but still 9.9% behind the record close of 405.50 in March 2000. Europe's biggest indexes have soared. Britain's blue chipFTSE 100, up 10.7%, is around 51/2-year highs, Germany's DAX index of 30 blue-chip stocks powered by the country's best economic performance since 2000, rose 22% and the French CAC 40 index climbed 17.5%

Underpinning Europe's hopes for continued expansion is the strength of the region's economy. Gross domestic product in the euro zone, or nations that have adopted the euro, is expected to have increased 2.7% in 2006, above the 1.4% rise the region averaged the previous five years. Many forecasters expect an expansion of about 2% in 2007. The region has moved to make its economies more open, which will continue this year with such initiatives as deregulation of the region's energy markets. These little bits of incremental reform here and there, and all these things are gradually creating a less cumbersome environment for European companies to operate in.

Although European corporate profits were at some of their highest levels ever, the region's shares don't look particularly expensive, meaning there is room for more increases. Standard & Poor's Corp. says while the S&P Europe 350 index of big companies has doubled from the March 2003 low following the U.S. tech wreck, the move has been matched by a doubling in earnings, meaning that market values based on a ratio of price to per share earnings haven't changed much.

U.S. shares trade at around 15.4 times their expected 2007 per-share earnings, while European shares trade at 13.7 times. Shares in the United Kingdom trade at 12.6 times, leading some strategists to argue Britain is ripe for another year of strong performance. Mergers were a big factor in last year's strong stock-market returns. European merger volume was more than $1.36 trillion, including the assumption of debt in 2006, compared with about $833 billion the year before.

For all the optimism, there are doubters making the case that Europe could struggle. There is a triple whammy for the euro zone of hawkish central banks raising interest rates, a strong euro, tighter fiscal policy in Germany and Italy that could cause a sharper slowdown in 2007. Economists expect the European Central Bank, and to a lesser degree the Bank of England, to continue increasing their target rates.

Climbing interest rates have pushed Europe's main currencies higher against the dollar. The euro strengthened 11.5% against the U.S. currency and sterling is up 13.8%. Both are expected to strengthen further, potentially hindering European companies that have earnings in dollars or are competing against dollar-denominated exports. Another adverse impact from the U.S. could be its softer economy (not). A big debate among strategists is just how tied Europe is to the U.S. The U.S. is responsible for one-fifth of global GDP,and 2.4% of European GDP comes from direct exports to the U.S. Europe's gauges remain mainly upbeat.

 

[Birchtree]

Re: Birchtree's account talk

As an optimist I think that no Fed moves in 2007 would both restore investor's confidence in the Fed as an institution and convince them that the economy, unjolted so far by the housing slowdown, has an excellent set of shock absorbers. Since such an environment would leave far fewer companies vulnerable to an unexpected setback, investors might decide that stocks could trade at much richer valuations than they do now. We may be looking at the possibility of a perfect landing. The only problem with perfection is that the tolerances for error are so close. I think the Dow will close out 2007 somwhere close to 15,000. My ultimate top for January 2010 is 17,000. This year liquidity will be the force to progress. Although the current recovery is seven years old, the Fed has been tightening for almost 21/2 years and short term interest rates have increased 17 times, there is still very little evidence that liquidity has diminished. Both China and Japan will allow individual investors greater participation in global investing, so there is plenty of money looking for opportunity.

 

[nnuut]

Re: Birchtree's account talk

I say DOW at 14257 Jan 1st 2008. Who said that? I said that!:notrust:

 

[Birchtree]

Re: Birchtree's account talk

From TWSJ titled: Is Tokyo Set To Rise, by Andrew Morse - 1/3/07.

Japan's stock market disappointed investors hoping for a big rally in 2006, as it struggled to post a 6.9% rise for the year. But strategists are cautiously optimistic that conditions are still in place to push Japanese shares higher this year. Rattled by concerns over a slowing global economy that caused the country's listed companies to issue restrained earnings guidance, many investors grew weary of Japanese stocks in 2006. The tepid rise in the benchmark Nikkei Stock Average of 225 companies was a letdown for investors recalling its 40% jump in 2005.

Worries about growth haven't disappeared, but they are starting to fade a little. While the U.S. isn't growing as fast as it had been, the world's largest economy is continuing to expand. So are other key destinations for Japanese exports, like China and Europe. The Japanese economy, too, has showed resilience as its recovery from 15 years of slow or no growth continues. Expectations mount that consumers here, long careful with their money, will finally begin to loosen their purse strings. Corporate Japan is feeling more robust, too, after a season of better than expected earnings: companies reported pretax profits rose 11.7% in the first half, 6.5% more than the average forecast.

The stream of positive news has a growing number of strategists calling for a modest, controlled rise in Japanese stocks that could give the market a fifth-consecutive year of gains. They think earnings forecasts, calculated as worries about a global slowdown hit a peak, may be overly negative. Many also agree consumers will fuel economic activity. Lastly, changing attitudes among individual investors will likely drive more money toward the stock market. We continue to believe there is massive potential for Japanese shares, earnings will likely rise in fiscal 2007, which ends March 31, 2008, marking a sixth-consecutive year of earnings growth in Japan.

A combination of more revenue and streamlined companies suggests net orofits in Japan will rise 13% in fiscal 2007 - stronger than the consensus estimate of a 10.8% gain. Optimists see stocks getting a lift from a relatively new set of investors: Japanese individuals. Net assets in stock investment trusts - similar to U.S. mutual funds and a favorite way for individuals to invest - stand at 50 trillion yen ($420 billion). That is 25% more than their roughly 40 trillion in assets in 2005. Much of the money is coming into the market through defined-contribution pension plans similar to 401(k) plans in the U.S. Most Japanese investors have finally become comfortable that the economy has truly exited its "lost decade". They moe see stocks as a good way to invest in this growth. They are developing an equity culture.

 

[Birchtree]

Re: Birchtree's account talk

From TWSJ titled: Global Economy Gets Momentum, by Justin Lahart, 1/5/07

After years of depending on the U.S. economy for support, the world economy may finally have its own legs to stand on. The economy slowed throughout 2006 and seems to be starting 2007 without great momentum. Economists surveyed by Blue Chip Economic Indicators last month estimate that U.S. gross domestic product - the broadest measure of output - will grow 2.4% in 2007 versus 3.3% in 2006.

In the past, a U.S. slowdown would portend a global slowdown. But economists have been ratcheting up their growth forecasts outside the U.S. For the euro area, they expect GDP to grow 2% in 2007, more than the 1.9% growth they projected in June. Forecasts for China have risen from 8.6% to 9.3%. Economists like to call this decoupling. The U.S. and other economies seem to be going down different paths.

Movements in the Institute for Supply Management's monthly index of U.S. manufacturing activity in the past foreshadowed similar changes in the Ifo Institute's index of German business sentiment by about six months. Over the past year, the relationship has broken down. The ISM index has trended lower but Ifo hasn't followed: it has surged.

Purchasing-manager reports for more than a dozen other countries show stronger manufacturing activity than the U.S. Only Greece lags. Deutsche Bank economists say it's too early to declare an end to the world's dependence on U.S. growth. Globalization means interdependence should be deepening, not breaking down.

But maybe the U.S. will latch on to growth elsewhere. If the U.S. buys less from the rest of the world and the rest of the world buys more from the U.S., the U.S. trade imbalance could narrow. There are other ways for it to narrow, like a sharp drop in the dollar, followed by usurious interest rates or raging inflation. Decoupling might be a better way to get the job done.

 

[Birchtree]

Re: Birchtree's account talk

My good news for today is that I have discovered the holy grail to investing. It's actually been with me for awhile but was not recognized because it was so obviously simple: The wealthier you are, the more you will be able to withstand short-term shocks in the equity markets and focus on making long-term investments. It has only taken me thirty years to make that discovery. Now the question becomes will we top before 2010 - I honestly don't think we are anywhere close. The speculative public is still licking their wounds from the last cyclical bear market - they will push us over time to the top.

 

[SkyPilot]

Re: Birchtree's account talk

My good news for today is that I have discovered the holy grail to investing. It's actually been with me for awhile but was not recognized because it was so obviously simple: The wealthier you are, the more you will be able to withstand short-term shocks in the equity markets and focus on making long-term investments. It has only taken me thirty years to make that discovery. Now the question becomes will we top before 2010 - I honestly don't think we are anywhere close. The speculative public is still licking their wounds from the last cyclical bear market - they will push us over time to the top.

That's why the rich get richer . They don't have to spend their investment monies to buy groceries!

 

[fabijo]

Re: Birchtree's account talk

That's why the rich get richer . They don't have to spend their investment monies to buy groceries!

That's why we have a great advantage being in the TSP. We don't have to worry about losing our grocery money by paying trade commissions and suffering losses here and there. I say stay in the market as long as possible until you need to start taking money from your account. While sitting in G or F, you miss out on those big 3 -4 % gains in a day.

 

[fabijo]

Re: Birchtree's account talk

My good news for today is that I have discovered the holy grail to investing. It's actually been with me for awhile but was not recognized because it was so obviously simple: The wealthier you are, the more you will be able to withstand short-term shocks in the equity markets and focus on making long-term investments.

For the past two weeks, I've simulated 57 years of market activity and came to the same conclusion: It is riskier to be OUT of the market than IN.

 

[Spaf]

Re: Birchtree's account talk

Birch,
Glad to see you finally figured it out!
Once you have your investments where you want them, and they make a COLA, the objective should be capital preservation. If you get a bull-trend then go for it.
There is only so much stuff you can put on your lilly pad. But I found out that if you put some moth-balls in a container; the bugs and critters will stay away. And, STA-BIL is worth it's weight in gold.
Spaf

My good news for today is that I have discovered the holy grail to investing. It's actually been with me for awhile but was not recognized because it was so obviously simple: The wealthier you are, the more you will be able to withstand short-term shocks in the equity markets and focus on making long-term investments.

 

[Birchtree]

Re: Birchtree's account talk

Peeling off some small cap money for the Mrs. and buying more international - trade takes place at 1600 hours. That's called leveraging down and take the pain that comes with that technique.

 

[Birchtree]

Re: Birchtree's account talk

The NYSE breadth MCSUM is still at a high reading of +718, so it's unlikely that a trending price move to the downside is underway. We need a couple of good plurality days to get the index MCOs back to their zero lines - and then a base will have been built and lift off.

 

[Birchtree]

Re: Birchtree's account talk

It looks like I may have to leverage down on my energy holdings in a few weeks - oil is trying tp push down below $52.00. That'll make my dividend reinvestments more favorable. Energy is still a secular play and soon prices will be cheaper. Buy'em and tuck'em. I've found that time in the market is typically more rewarding than timing the market.

 

[fabijo]

Re: Birchtree's account talk

I've found that time in the market is typically more rewarding than timing the market.

I was able to simulate years of experience with a few runs of different parameters in a spreadsheet. I found the same thing.

 

[Birchtree]

Re: Birchtree's account talk

"Oh it's crying time again your gonna need me, I can see that far away look in your eye." If I had a -1.04% I guess I'd cry too. Bye my dear ayla. Sorry if I ever stepped on your bunny toes.

 

[airlift]

Re: Birchtree's account talk

Birch,
Would the drop in oil prices today significantly affect those of us who buy the I fund as of COB today? or, is the impact of the price drop already priced in?

 

[Birchtree]

Re: Birchtree's account talk

Energy is only a 9.5% component of the I fund. Other sectors like the industrials, consumer staples and utilities will more than likely balance out the underperformance of the large oils like Royal Dutch. Not really anything to worry about - it's all basically positive. I would try and focus on the countries like France that are unhappy with the strength of the euro and with the increase in euro interest rates. ECB did not increase rates today but it may be important to read the minutes for future indications. Those silly I funders take life too seriously. When someone chases the market without a distinct strategy they run the risk of falling through the trap door. Simply plan for that inevitability and relax.

 

[airlift]

Re: Birchtree's account talk

Thanks!