Criteria for Good Stock Picks

Four Bad Bear Markets

The 2008 Stock Market Crash

Since the S&P 500 peaked in 2007, the stock market has plummeted a whopping 42% from the peak. The dot-com bubble deflated over several years, whereas the United States housing bubble has collapsed over a much shorter time period and has brought down with it the American banking system. Fear has run amuck, and the question is, has rational thought regarding value given way to irrational fears regarding market risks?

If one believes that the market is a somewhat random geometric series of cash flows that resembles exponential growth, then one should be able to identify peaks and troughs in the market by defining an “upper peak” and “lower trough” line.

The recent bear stock market has easily broken through the previous “lower trough” line and therefore savvy investors may now find substantial value in good stocks that have solid balance sheets and dividends that pay above safe investments like bonds. The following graph shows the S&P 500 and the upper and lower trading bands:




http://calgaryrealestatemarketblog.wordpress.com/2008/

Making Sense of the U.S. Housing Slowdown

Economic Letter—Insights from the Federal Reserve Bank of Dallas
Vol. 1, No. 11
November 2006
Federal Reserve Bank of Dallas

Making Sense of the U.S. Housing Slowdown
by John V. Duca
A robust housing market buoyed the U.S. economy during the 2001 recession and fueled growth once recovery began. The record-setting building of single-family homes created construction jobs and spurred demand for building materials, appliances and home furnishings. Business was brisk for mortgage lenders and real estate brokers alike.

Perhaps even more significant, rapidly rising housing prices had allowed consumers to tap into their mounting home equity, providing them the financial wherewithal for a buying spree. By mid-2004, however, home prices had risen to the point where many analysts worried that markets were overheated, making homes less affordable, particularly for first-time buyers already facing the drag of rising energy prices.

Today, signs of a housing market slowdown are unmistakable. New and existing home sales have been declining since mid-2005, although they remain high by historical standards (Chart 1A). Building activity has begun to cool a bit, while single-family housing permits have fallen 34 percent from their peak, settling back to pre-2002 levels (Chart 1B). The building permits data suggest further declines in single-family construction are likely, given the usual six to eight months it takes to complete a home.

http://www.dallasfed.org/research/eclett/2006/el0611.html

Dividend Growth Graph

Here's a graphical representation of the Dividend Growth:




http://www.financescholar.com/stocks-valuation-timeline2.html

Different investments offer different levels of potential return and market risk.

Large-cap stocks are represented by the total returns of the S&P 500 index. Midcap stocks are represented by a composite of the CRSP 3rd-5th deciles and the S&P 400 index. Small-cap stocks are represented by a composite of the CRSP 6th-10th deciles and the S&P 600 index. Foreign stocks are represented by the total returns of the MSCI EAFE index. Bonds are represented by the total returns of the Barclays U.S. Aggregate Bond index. Cash is represented by a composite of yields on 3-month Treasury bills and the Barclays 3-Month Treasury Bills index.
Based on average 12-month returns from 1980-2009. (CS000168)

Different investments offer different levels of potential return and market risk. International investors are subject to higher taxation and currency risk, as well as less liquidity, compared with domestic investors. Small-cap and midcap stocks are generally subject to greater price fluctuations than large-cap stocks. Unlike stocks and corporate bonds, government T-bills are guaranteed as to principal and interest, although funds that invest in them are not. Past performance is not a guarantee of future results.

http://fc.standardandpoors.com/srl/srl_v35/library_article.jsp?tid=0099

Typically a bull market will accelerate at the beginning and end of the cycle

Keep an Eye on The Investment Clock

Can you beat this stock picker?

Be cyclically aware and responsive.

This means 

• a) monitoring the progress of the economic cycle, using the 3-phase, 7-waypoint cyclical model I developed and have been using in my Cyclical Investingnewsletters for the past 24 years, and 
• b) allocating assets profitably in relation to the current state of the economic cycle, owning those assets supported by economic forces at the time, and avoiding those likely to be depressed by them. 

http://www.cyclical-investing.com/

World Stock Market Capitalization

The chart below, borrowed from Dr. Marc Faber's Market Commentary December 1, 2008, is devastating.  The chart shows a stunning loss of $30 trillion stock market wealth around the world.  By some estimates, combined losses in commodities, stocks, bonds, real estate are greater than $60 trillion.  This is beyond rescue.


http://www.greenfaucet.com/economy/not-your-garden-variety-depression/78457

Relating PE to Stock Price

The concept of High PE, Low PE and average PE of a stock.







http://seekingalpha.com/article/192426-potential-new-long-and-short-ideas

25 Largest Stocks in the World

http://budfox.blogspot.com/2007_10_01_archive.html

Defensive Portfolios

http://www.teensguidetomoney.com/Investing/stock-labels-mostly-unofficial-stock-classifications/

Bull Market Gains (1940 - Current)

The bull market that began on March 9, 2009 has gotten off to the strongest start of any bull market in U.S. stocks since 1940.

http://seekingalpha.com/article/160154-strong-start-for-bull-market-but-investors-are-nervously-eyeing-the-exits