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With war overseas, an overblown
housing market, a new Federal Reserve Board Chairman, rising
interest rates, and a mid-term election, few investors could
have predicted that markets would perform so well during 2006.
Last week, the news continued to boost investor enthusiasm.
Inflation was down, there were fewer jobless claims, manufacturing
showed some strength, and holiday sales were strong, according
to Barron's Online. The good news helped the Dow hit
new records on Thursday and Friday. It has gained more than
16% for the year, and both the Dow and the Standard & Poor's
500 have risen during four of the last six weeks.
During its meeting last week,
the Federal Reserve left interest rates unchanged—as expected. The Fed continues to be
concerned about inflation and tight labor markets, according
to MarketWatch. While many would like to see the Fed begin
to lower rates early next year in order to boost economic
growth, skeptics continue to question whether the Fed will
move that quickly.
| Returns through 12/15/06 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
1.1 |
16.1 |
14.4 |
7.5 |
4.7 |
7.1 |
| Nasdaq Composite |
0.8 |
11.4 |
9.1 |
8.6 |
4.3 |
6.9 |
| Standard & Poor's
500 |
1.2 |
14.3 |
12.6 |
10.1 |
4.7 |
7.1 |
Source: Yahoo! Finance, Barrons
Past performance is no guarantee of future results. Indices
are unmanaged and cannot be invested into directly.
Three-,
5-, and 10-year returns are annualized. Assumes dividends are
not reinvested.
- Jim Stack of Investech
notes that the current bull market, at 4.2 years in duration,
is unusually
mature from a historical perspective. He notes, "Only
4 bull markets over the past 75 years had life spans which
exceeded the current one." Those included 1949,
1974, 1982, and 1990.
- Dr. John Hussman
of the Hussman Funds noted that valuations on a price/peak-earnings
basis,
are now in the same range
as the 1929, 1972, and 1987. Peaks & profit margins
are also at record levels.
- Cash levels are very low in mutual funds and hedge funds.
That means that those who have money have already bought,
and have limited buying power remaining.
- Current insider
activity still shows that "smart money" is
taking advantage of the higher prices. The overall action
continues to show insider sales far exceeding their limited
purchases. The insiders continue to trim their positions
at an even faster pace than we noted last month.
- The national debt has been growing at
a pace of 10
billion per week!
- SANTA CLAUS RALLY: A surge in the price of stocks that
often occurs in the week between Christmas and New Year's.
- JANUARY
EFFECT: A general increase in stock prices during the
month of January generally attributed to investors buying
stocks that have dropped in price following a sell-off at
the end of December by investors seeking to create tax losses
to offset any capital gains.
- SOFT
LANDING: A term used to describe a rate of economic growth
high enough to avoid recession, but slow enough
to avoid high inflation.
Rearrange the following
letters to form a popular holiday song:
A WRY MONTH SOFTENS
Click
here for
the answer.
To your enemy: Forgiveness.
To an opponent: Tolerance.
To a friend: Your Heart.
To a customer: Service.
To all: Charity.
To every child: A Good example.
To yourself: Respect.
~ Oren Arnold
Happy Holidays! 
Ken Ford
P.S. Please feel free to forward
this commentary to family, friends, or colleagues.
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