Value Investing News

Investors constantly focus on the event instead of the opportunity that the event represents. Being retrospective instead of hindsightful helps us learn from our experiences. The length, depth, and scope of the financial crisis correction were unknowns in mid-2007. The parameters of the recent advance were just as much of a mystery--- in April.

It's likely that many of the products, derivatives, funds, and fairy tales that emanate from Wall Street were thrown together over "ti many martunies" at Bobby Van's or Cipriani's, and just like alcohol, the addictive products created in lower Manhattan have led many a Hummer load of speculators down the Holland tubes.

Is it enough to say that we tax pension and other retirement income, including the sacred pittance from Social Security. There have been many excellent, yet thoroughly ignored, tax reform proposals, including the elimination of all taxes on retirement and investment incomes. A consumption tax is the best and least manipulatable of the lot.

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But if you have grown to the point where you know you need a long term strategy that fuels itself with short-term trading; if you recognize that most investment professionals (stock broker, financial planner-advisor, etc.) have been regulated out of the individual security business; if you are wary of wealth managers who have never managed any wealth of their own --- welcome.

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This morning's classic E-mail question wondered: "Is this the real thing?" The reference was to the Media applauded five month spurt in the Dow Jones Industrial Average (DJIA), an advance to the highest levels in about four years, but still miles from an All Time High (ATH). The meaning inside was much, much greater ---

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Clearly, the MPT creators were once Mutual Fund investors, looking for something better after years of disappointing investment returns. True, mutual fund managers rarely beat the markets --- but why? And also true, private, individual, portfolio managers rarely fail to beat the market averages over significant time periods.

Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations to finance their growth and development.

Call it foresight, or hindsight if you want to be argumentative, but a long-term view of the investment process eliminates the guesswork and points pretty clearly toward a trading mentality that keys on the very natural volatility of the hundreds of investment grade value stocks out there for your portfolio building attention.

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IGVSI Eclipses 2007 All Time High --- above 2007 levels since mid-February 2011 --- now up 6.9%; ahead of DOW and S & P by roughly 19%. Market Cycle Investment Management Model Portfolios build upon 18% gain in 2010. S & P 500 and mighty DOW lag the IGVSI, need average of 14% more just to equal 2007 levels.

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Your IGVSI selection universe will become the conscience of your equity investment program --- allowing no room for creative adjustments to the rules and guidelines you've established. You will be able to focus on diversifying properly and on identifying stocks that are ready for purchase.

The S & P 500 contains 165 more stocks than the IGVSI, but less than half are Investment Grade Value Stocks. Although it is more broad based, it is also more speculative, and has not done as well as the DJIA. Still 14.7% below the 2007 high, it would need to gain another 17.2% just to claw back to its 2007 level.

Dividends are a sign of a company that is both strong financially and respectful of the investment made by shareholders --- certainly a less risky class of equities. But there is a whole 'nother family of securities (generally safer and more generous with cash flow than any equity) intended primarily for income production.

Even with the MCIM "Mirror Portfolios" that are based on six different model portfolios that I supervise, each participant account will contain securities purchased at different prices than in the model. These are designed for people who don't want to do it themselves, who like the Market Cycle Investment management approach, and who don't have regular disbursement needs.

Unlike most investment strategies, the Market Cycle Investment Management Methodology includes a selling-for-profit discipline that (incredulously) seems to be a unique investment model. Over the past 40+ years, MCIM users have taken profits during every market upswing and repurchased Investment Grade Value Stocks during every down bubble. Any feel for what the results must have been?

To most investors, the DJIA provides all of the information they think they need, and they worship it mindlessly, thinking that this time tattered average has mystical predictive and analytic powers far beyond the scope of any other market number. It's Wall Street's rendition of 'The Emperor's New Clothes'.