As January Goes, so Goes the Year

As January Goes, so Goes the Year

This indicator is almost always right. Here’s why:

Yale Hirsch’s theory about the stock market is simple enough. If the Standard & Poor’s composite index is up in the month of January, the market average for the rest of the year also will be up. And if the S&P index is down in January, it also will be down over the rest of the year. Since 1950, the indicator has predicted the annual course of the market with astonishing accuracy. According to Hirsch, a publisher of financial newsletters, his indicator has been right 49 of 54 years, or 89 percent of the time.

There’s no great mystery, Hirsch believes, about why January is such an accurate barometer of the year. In fact, January is the month that many major economic and national policy decisions are announced by the government to kick off the new year. Congress convenes on January 3 and, every four years, a president is inaugurated less than three weeks later. More often than not, the president delivers his State of the Union message before the end of the month, laying out the year’s national goals. And the government budget also is released early in the year. “Switch these releases to any other month and chances are the January barometer would become a memory,” Hirsch says.

Here are some of Hirsch’s conclusions after studying a lot of Januarys:

• The top 23 Januarys launched the best marked years, had gains of 1 percent.
• Twenty Januarys were losers or had very small gains. All bear markets were preceded or accompanied by downbeat Januarys. Only one good year, 1992, followed a January loss.
• There were only three major errors in 54 years. They were in 1996, 1968, and 1982. Hirsch can account for the first two, citing the Vietnam War. He doesn’t have an explanation for 1982.

What can we expect in the next years? Nobody knows. There has not been a losing pre-election year for the stock market in almost a century. New presidents generally get rid of the tough jobs in the first year or two, then pull out all the stops to make things look good for the election. This has been going on for at least 170 years. We can see prosperous times and bull markets ahead one of those years, but who knows, we can always see slow years to come. One year can be very good and the next one just the reverse. Anyway, in 9 of every ten years, gains logged in January on the Standard & Poor’s 500 stock index roughly telegraphed a good year ahead.

A street in New York. Photo by Elena

A Get-Rich Slowly Scheme

A Get-Rich Slowly Scheme

Consider the case of Louie the Loser: stocks made him a winner

Buy low, sell high, it’s a dream of all investors hoping to strike gold in the stock market. The strategy sounds simple enough, but, as most investors know timing the market is elusive at best. Now it turns out timing may not matter much after all. Analysts at Capital Research and Management Co, a mutual fund company, created Louis the Loser, an investor with the world’s worst timing. Every year for twenty years Louie pumped five thousand dollars into Investment Co of America, an actual fund managed by Capital Research. Each year Louie invested at the worst possible time – the day that the Dow Jones average hit its peak for the year.

How did Louie fare? He was hardly a loser. After twenty years, Louie’s $100,000 grew to $441,000 – a respectable average annual return of 13.3 percent. By comparison, if a Willie the Winner had invested $5,000 a year on the day the market hit its annual low, he would have shown 14/9 percent return, only slightly better than Louie’s. Small wonder that shrewd investors, like Warren Buffett, advise ignoring the day-to-day gyrations of the market, preferring a simple buy-and-hold strategy for stock investing.

When devising your overall investment strategy, the best approach is to allocate your money among different investments, based on factors like your age, income and when you’ll need the money. To manage the risk of stock market ups and downs, a basic buy-and-hold strategy known as dollar cost averaging can help. By investing a set dollar amount regularly, say $200 once a month, you get more shares when stock prices are low and fewer when prices are high. Over time, the strategy reduces your average cost per share, improving your chances of becoming a slow but steady winner.

New York. Photo by Elena

History shows that stocks are sturdy. Measure stocks against bonds, cash in houses, oil, gold, or in collectables like stamps and diamonds, for example, is considered smart during times of high inflation, which can hurt stocks and bonds. But not over the long haul. After tracking the returns of different assets, R.S. Salomon Jr, founder of the Stamford, Conn. Investment management firm STI Management, found that returns on tangible assets fluctuate wildly from year to year. Silver may be hot one year, farmland the next. But in the long run, financial assets – bonds, stocks, even plain old cash – beat out collectibles and hard assets. This exercise proves that how you allocate your portfolio among broad categories is important, probably more so than which stocks or bond or hard assets you buy.

What happens if you pit stocks against cash over the long term? Again, stocks are tops. A cash investment is money invested in three-month Treasuries or a first-rate money market fund, not the emergency reserve you keep on hand for a rainy day. Looking back 50 years, cash has beat out stocks only 10 times, according to Ibbotson Associates. One of those rare periods was between August 1983 and the end of 1984, when the returns of the 30-day Treasury bill outperformed the Standard & Poor 500 stock index by three percentage points and the 20-year Treasury bond by 15 percentage points. Usually, though, periods when cash is king have not lasted longer than 24 months. Over the long term, cash has been a loser. After accounting for inflation, cash has returned an average 0.5 percent per year since 1926, compared with 6.9 percent after inflation for the S&P 500, according to Ibbotson.

How about stocks versus bonds? You could compare returns of small company stocks, large company stocks, long-term government bonds, U.S. Treasury bills and inflation going back to 1926. Assume you invested $1 in each of the four instruments at the end of 1925.

Through wars, depressions, bouts of high inflation and recessions, oil embargoes and market crashes, that dollar would have grown most if you had invested in small-company stocks. It would have ballooned to about $5,000 by now. By comparison, a $1 investment in ultra-safe Treasury bills would have returned a mere $20 (these number assume income from the investments is reinvested and do not consider commission costs or taxes).

Together, returns on large and small company stocks averaged 11.3 a year. Long-term Treasury bonds did less well, yielding an average 5.02 percent. Bond yields generally don’t match stock returns in the long race, but then again, bond investors experience fewer hairpin turns than stock market riders.

Is the past prologue to the future? Many investment analysts seem to think so. Some investors steer clear of consumer stocks and move toward bank and other financial stocks. Some other like economically-sensitive stocks such as airlines, railroads, paper companies, electronic manufacturers, and other technology stocks. We can strike a cautious note, however: Stocks and bonds are sometimes overreacting, and odds are they will underperform in the future. If so, the Louies and Willies may have to muster a bit more patience

How to Befriend a Bear Market

How to Befriend a Bear Market

Fight the instinct to run away. You may be better off feeding it money

Nobody likes a bear market. The Dow deeps more than 30 percent on average, downdrafts usually last over a year, and it often takes the market another year to recover. But bear markets aren’t all bad. In fact, they can be great buying opportunities.

Consider, for example, the bruising bear market of 1973 and 1974, one of the worst the U.S. has experienced in the XXth century. The Standard & Poor’s 500 stock index lost 43 percent, even with dividends reinvested, and didn’t rebound to its 1972 level until mid-1976.

Nevertheless, people who steadily invested in stocks would have done pretty well. By January 1976, in fact, they would have come out ahead of someone who had put the same amount into Treasury bills, even though T-bills were paying a respectable 6 to 7 percent a year at that time.

The analysis assumed that an investor put $100 a month into stocks beginning in January 1973. When the market hit bottom in September 1974, the investor would have invested a total of $2,100 and held stocks worth less than $1,500. But seven months later, the investor would have been about even with the $2,800 that they had invested. And by the first quarter of 1976, as the stock market was just returning to its previous high, the investor would have had more money than if he or she had instead invested $100 a month in T-bills.

Despite a brief dip in 1979, the long-term outlook remained bright. By the end of 1992, the investor’s $24,000 stake would have been worth $124,000 – more than twice the $54,000 it would have earned in Treasuries.

The average bear in the XXth century lasted 410 days the Dow Jones industrial average dropped some 31 percent. On the upside, there have been 31 bull markets in the same period. On average, they lasted about two years with a near 85 percent increase in the Dow. The last 10 bulls of the century haven’t run quite as strong, however.

Manhattan, New York Downtown. Photo by Elena

Riding out a recession

Like a bear market, recessions reward those with patience. In fact, there are investors who would sooner plunge into the Arctic than the stock market during a recession, which often coincides with a bear market. But many pros say investing when the environment looks bleak could turn out to be a boon. Stock prices – like the price of clothing, cars and condos – also plunge during an economic slowdown. Investors buying stocks for the long run then could end up with solid returns.

Recessions generally last about 11 months, with the market turning up 6 months before the economy picks up. Returns vary, depending on when you invest – before, during or after a recession. The most lucrative time: at the midpoint of a recession. Those who buy at a recession’s start make huge profits. Those who buy at a recession’s midpoint and hold for 12 months after the recession rake can earn even more. Even those who wait until the tail end of a recession to buy can be richer by dozen or so percent one year later.

Tip: Look always at industry groups that lead the way out of past recessions and that have historically scored big gains in the first 12 months after the stock market has bottomed out and their average percent gain, advise Wall Street’s most respectful analysts

Investment Newsletters

Investment Newsletters

Investment newsletters: Tip Sheets You can Use – Top newsletters beat the market, but the worst could lose you lots

It used to be that only Wall Street gnomes looked at stock-tip sheets, and an editor’s call to sell could send a ripple through the market. Today, more than two million people read investment newsletters. Hundreds of advisory publications are published, many of which carry one or more sample stock or mutual fund portfolios for subscribers to follow.

Financial newsletters are founded on the idea that you can beat the market, if you’re just smart enough or fast enough. If you don’t believe in market timing, you’re wasting your time with a newsletter, admit even the top-ranked mutual fund newsletters editors.

Most people subscribe because they think there are geniuses out there who are going to make them rich quickly. But they really should examine the past track record of these newsletters first.

A few sites monitor and rate the performance of the investment newsletters, examining a portfolio’s total return as well as its return on a risk-adjusted basis. If a newsletter recommends more than one portfolio, its ranking is based on an average of its portfolios. Risk-adjusted ratings are based on a ratio of return to risk to measure net profit.

Newsletters with the best-performing portfolios significantly outspace the stock market averages. For example, newsletters at the top of rankings have compound annualized returns of more than 20 percent in their portfolios. That’s one to one-third times the S&P 500 return. Over the same time, index of 5,000 companies show a compound annualized return of over 9 percent.

Beating the market on a risk-adjusted basis – the comparison is performance per unit of risk – is more difficult. Only few do it and the lowest-risk market-beating strategy approach is more statistical and sophisticated than common strategies, and only few make good use of index options.

One of the highest risk-takers to beat the market was The Chartist, edited by Dan Sullivan, a rare newsletter with a real account. Sullivan who erred on the side of caution, made his mark by buying when the market was declining.

Manhattan Island. Photo - Elena.

Two other market-beating timers, Zweig Forecast and Zweig Performance Ratings Report both published by Martin Zweig, took on average risk. Zweig’s Ph.D. in finance provides a clue to his rigorous investing, but most of his overall success rate can be traced to a hedge he bought smartly.

Overall, however, most newsletters’ real or sample portfolios have only turned in so-so performances. Seventy percent of the newsletters don’t make the grade. Only thirty percent of the letter beat the market over two market cycles.

Most readers, of course, don’t slavishly follow the investment advice dished out. Yet, some investors who already know what they want may still rely on an editor’s talent for market timing to flash a red or green light when it’s time to climb in or out of the market altogether. Many newsletters used to record daily messages on telephone hotlines for their subscribers. Because newsletter don’t earn a commission on your stock transactions, they may be more objective than a traditional stockbroker. After all, it’s their insights that convince subscribers to pay, on average, $100 to $300 a year.

But in their efforts to lure subscribers, newsletters often make exaggerated advertising claims and routinely cherry-pick statistics. Sometimes investment letter advertising makes outrageous claims that strain the business’ high tolerance for hype. For example, a well-known newsletter advertised that its editor was considered by many to be America’s foremost stock market analyst. In fact, many years of performance data for his newsletter showed that it was second from the bottom in rankings…

Apple : The Largest Taxpayer in the World

Apple: The Largest Taxpayer in the World

The facts about Apple’s tax payments

By paying over $35 billion in corporate income taxes in the last three years, Apple has become the largest tax paying company in the world. Because Apple’s worldwide effective tax rate is higher than average, at 24.6 percent, the company states that they are happy with the amount of economic contribution they have brought to the various communities around the world. In order to provide proof for the public, Apple published a few facts about their tax payments on November 6, 2017. Prior to this release, there had been a report by the International Consortium of Investigative Journalists that suggested some foul play by Apple and its leaders. The November tax release brought many of these accusations to light and discounted them

Apple pays billions of dollars in taxes to the US at the required 35% on investment income from all overseas cash and they pay a consistent 21 percent on their foreign earnings.

The 2015changes Apple made to its corporate structure, were specially designed to preserve its tax payments to the United States. They denied doing it in order to reduce its taxes. Apple also denied that operations or investments had been moved from Ireland. Apple put out an official statement saying, “When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the last three years we’ve paid $1.5 billion in tax.” They insisted that these changes did not change the amount paid to the US. This controversy still exists however, since the companies have not actually provided any paper.

Why the Apple employees don't wear Louboutins? Photo by Elena

Apple also made the statement that the debate shouldn’t be about how much they owe. It should be important to discuss where it goes instead. They stated that they have paid over $35 billion in corporate income taxes and had billions of added taxes in property tax, payroll tax, sales tax and VAT as well and are very proud of the economic contributions they have made to the communities that surround them.

“Under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States - where we do our design, development, engineering work and much more - so the majority of our taxes are owed to the US.”

Apple understands some people want the tax so multinationals’ taxes are spread differently across the countries where they operate, however, despite different opinions, Apple continues to follow the laws and complies when the laws are changed. They state,  “We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that.”

Because Apple has a dedication to designing new products and establishing new industries, it has led to the creation of revolutionary products and services that have profoundly improved people’s lives. Not only that, but it has created millions of jobs around the world.

Taxes alone can be complex, but they become even more complex when they are for multinational companies. There is; however, a principle rule that the taxes are to be based on wherever the value is created. The Organisation for Economic Co-operation and Development, Ireland, the United States and others all agree on this principle.

When a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place. Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there. Additional tax is then also due in the US when the earnings are repatriated.

The vast majority of the value in Apple products is created in the United States, where design, development, engineering work and more are accomplished. So, under the current international tax system, the majority of Apple taxes are owed to the US.

Back in 2016, the US Treasury published a white paper, expressing concern over European regulators’ attempts to tax money that is owed to the US. They claimed that the amount of foreign taxes imposed should not have been attributable to the relevant Member State and claimed that it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers.

Apple sells the majority of its products overseas so, naturally, they have cash overseas as well. Under the current tax system, post-tax earnings from foreign sales are subject to US tax. In addition to the $35 billion the company paid in corporate income taxes over the past three years, Apple earmarked more than $36 billion to cover US deferred taxes.

Apple has been a strong advocate for simplification of the tax code. They support a reform that will allow a free flow of capital claiming that it will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments, and ensure certainty of law for taxpayers.

Well, and finally, if you have an old Apple product to sell for top price, you can always do it here : https://igotoffer.com