Latest Research

By traditional measures, the New Zealand stock market is the most undervalued market in the developed world. As of this issue we are incorporating a 6% package of New Zealand stocks into our asset allocation models, both the conventional and the unconventional.

For years we have been searching for better measures of secondary stock activity. When the new Russell 1000, 2000 and 3000 indices were developed we thought our search was over. Despite some criticism of the Russell indices, we still think this index gives the best representation of secondary stock action.

This is indeed a strange environment, where higher short-term rates in effect have become a bond market positive. High short rates cool the economy and keep the dollar strong. Both of these consequences are bond market positives.

Another New Year has arrived.

A month ago this section lead off with the headline "All Systems Are Go".

Since year end, several clients have called to inquire about the 1988 performance of the S&P 500 with each component stock given equal weight.

For a number of years, we have used Jim Floyd's computer screen to isolate stocks most likely to score the largest gains from early December through the end of January.

The table on the following page is a performance run down for our equity market sectors ranked by 1988 performance.

In recent months, a number of you have been asking about technology stocks and the technology sector.

Self examination can be good for the soul, so each year time is taken to look back over the preceding year or so, critically reviewing the significant studies, portfolio shifts and recommendations appearing in this publication. Including the good....and the bad.

Holiday Wishes...New Quarterly Publication BenchMarks Will Be Introduced and Sent at No Extra Cost to All Clients... Client Questions Answered

As indicated in our November 29th Interim Memo, our Early Warning Index, which is designed to detect intermediate stock market bottoms, turned positive as of the November 28th calculation. I expect a significant rally in December.

In September and October, we viewed the improved market action of the “Airlines” as possibly only a knee jerk response to lower oil prices. But in November, oil prices strengthened and so did the airlines. Clearly, more was going on than just lower oil prices.

For the month of November, the S&P 500 lost 1.9%, with the DJIA down 1.6%. The Russell 2000 (a good measure of secondary issues) was down 3.6%. Blue chip growth groups and Utilities tended to dominate the leaders along with Airlines.

This year we have decided to “play the bounce” with 8% of our model’s equity assets. The market environment looks right and we have confidence in our quantitative and qualitative judgement disciplines.

As promised, in this issue we present the very long-term record of this long-term low risk stock market momentum tool. With a data assist from Bill Doane of Minuteman Financial in Boston, we can now present the record tracking back to 1897.

Forget about the economy, forget about the uptick in the CPI, and forget about the bulge in bond supply. U.S. interest rates rose in November because the dollar went down.

LBO Mania and Ramifications...Dr. Ravi Batra’s Sequel “Surviving the Great Depression of 1990”...Leuthold Commodity Speculation Experiences

Even considering the LBO mania and the market’s contracting breadth, I still think the stock market is basically healthy. While a 5%-10% post-election correction is now expected, our Major Trend Index remains comfortably in positive territory.

For the month of October, the S&P 500 gained 2.6%, with the Value Line Composite down 0.1% and the DJIA up 1.7%. Cyclical and blue chip growth groups tended to dominate the leaders while secondary technology oriented groups were concentrated toward the bottom of the list.