…  is the “volatility” that most
people fear and that Wall Street loves them to fear. It can be narrowly
confined to certain sectors, or much broader, encompassing practically
everything. The broader it becomes, the more likely it is to be categorized as
either a rally or a correction.

Similarly, there
is absolutely no growing income component in any portfolio managed using Modern
Portfolio Theory (MPT). How many non-MCIM investors do you think have retired
recently with more liquid, income-producing assets than they had 12 years ago,
way back in 1999?

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Steve Selengut

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http://marketcycleinvestmentmanagement.com

The idea that an investment portfolio can contain any number of unrelated speculations without itself being speculative is the stuff that Wall Street’s alternative investment purveyors are selling. True investment portfolios need none of this, and the numbers prove it true beyond any doubt. There is no need to fight or to counteract the market cycle, which is what alternative speculations try to do.

Easily managed, goal-directed investment portfolios should contain both equity and income producing securities — each with their separate purposes within the portfolio, and each with their own unique reactions to the same economic, political, and market stimuli.

The IGVSI, a true blue-chip index, didn’t fall as far as the DJIA or S & P 500, and has risen to a new all time highs far sooner. IGVSI based portfolios, long-term, have done better by far than the dot-com-replacing ETFs, precious metals, and currency futures.

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.

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Steve Selengut

http://www.marketcycleinvestmentmanagement.com

http://www.valuestockindex.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

The ETF owns every security in the underlying index, and it does so absolutely all of the time. There is no thought of profit taking — and no manager to do it.

Is it clear that weighted indices have little concern with diversification — and why should they?

These are not real investment portfolios. They are sector-tracking mechanisms that have been securitized as Wall Street gambling devices. The three ETFs contained 206, 100, and 142 positions, respectively, but each had roughly 50% of the market value in the top 10 holdings.

And who do you think is influencing the fund creator’s weighting judgment?

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Steve Selengut

http://www.marketcycleinvestmentmanagement.com

http://www.valuestockindex.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

Instead of rejoicing as the DJIA and S & P establish new three year highs, pay attention to some reality based numbers: together they remain about 15% below where they were at their October 2007 highs. Each would have to gain an additional 18% or so to break even with where they were more than three years ago.

Can a glimpse of the DJIA ever provide the kind of information you need to stay in tune with the market?

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Steve Selengut

http://www.marketcycleinvestmentmanagement.com

http://www.valuestockindex.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

I was gritting my teeth, shaking more than just a little, palms sweaty but placing dozens of individual orders for the best NYSE, dividend-paying, companies — at prices that nearly everyone thought would drop even further.

Looking around the room, I seemed to be the only one in the office that was actually buying!

Five years later, a smaller scale but similar situation rattled the markets — we invested what we were then both calling “smart cash”, fearlessly, never doubting that we would eventually be taking profits on the new positions. And in 2000, we had a millennium celebration instead of a dot-com bubble bursting.

“Then twenty years later, where were you when the financial crisis hit the fan? Fully invested, or fully capable of taking advantage of renewed bargains in both equity and fixed income markets? And where are you today?”

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Steve Selengut

http://marketcycleinvestmentmanagement.com

http://valuestockindex.com/

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

There are at least eight reasonable explanations for recent Municipal Bond price weakness — there are at least eight excellent reasons why investors should be viewing this weakness as a buying opportunity. 

Contact Steve for a list of ten Closed End Funds to check out for appropriateness.

http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/18393

Falling income security prices are all the buzz in the financial media these days, but why does this translate into such fear and confusion? I saw a news report the other day that encouraged investors to abandon their income ship and sail away on a stock market steamer that has been cruising steadily higher for twenty months — the IGVSI equaled its September 2007 high on December 8th. 

And Lest we forget, the over-riding purpose of investing in income securities is, after all, the generation of income. That’s income, Alice, not growth in market value. Just income.

 Income securities, as measured by an index of high quality closed end funds (CEFs), remain roughly 50% above where they were at the bottom of the financial crisis and, more importantly, precisely within their normal price range of the past ten years. The most conservative CEFs are yielding from 6% tax-free to 8% taxable.

 There are at least eight reasonable explanations for recent price weakness — there are at least eight excellent reasons why investors should be viewing this weakness as a buying opportunity. Clearly, the financial press has not attended any of my seminars on income investing. Lower prices and higher yields are good news for income investors!

 One: Income security prices vary inversely with interest rate expectations (IRE) — eighth grade finance. After nearly two years of historical (hysterical) lows, the world expects interest rates to rise.

 Two: Rising IRE, regardless of its impact on the price of fixed income securities, has absolutely no impact whatsoever on the income generated by existing securities. In fact, in CEFs, it will eventually lead to higher payout levels when managers have access to higher yielding instruments.

 Three: The surging stock market has outsmarted most mutual fund managers, and rather than look stupid by holding income securities, they are taking losses in that area and “window dressing” their portfolios with equities that MCIM (Market Cycle Investment Management) investors are taking profits on. Inexperienced investors too, and too often, move from income to equity at precisely the wrong time.

 Four: Rumors about the weakness of individual state treasuries may lead to some downgrading of their bond offerings, and this certainly has added some pressure to municipal bond pricing — but there hasn’t been a significant Municipal Bond default since the WHOOPS fiasco of the early 1980s.

 CEFs contain hundreds of different issues, and defaults are not likely to occur when so many other fiscal alternatives are available. Perhaps the state employee unions will be forced to weaken their stranglehold on private sector worker pocketbooks.

 Five: As any MCIM practitioner would explain, income CEFs have been a bountiful landscape for profit taking as they rebounded from the price “haircut” of the financial crisis. By adding to positions during the 24-month decline, profits were quick to appear as prices rose to normal levels very quickly — profit taking has been replaced by other investors’ irrational loss taking, as CEF income continues unabated.

 Think of it like a sale at Target, but with bargain prices still 50% above where they were less than two years ago!

 Six: Recent speculation that Congress would raise income taxes led to increased demand for tax-free securities. Now, with that specter less likely, demand has lessened. As an aside, do you think they know (arguably) that every major tax cut in history has led to increased government revenues?

 Concurrently, State and Municipal bodies have been taking advantage of a new Federal government taxpayer pocket-picking program by issuing, taxable “Build America” bonds. Although they are forced to pay investors a higher rate of interest, the Fed picks up a third of it.

 This program reduced the supply of tax-free bonds, just when the potential tax increase was increasing demand. With a republican controlled house, it is less likely that this program will be continued, increasing the supply and reducing prices once again.

 Seven: CEFs, and the securities they own, are much less liquid than equities. Consequently, when there are more sellers than buyers (for whatever reason), prices will fall more quickly — and the impact on income? Nadda.

 Eight: During December and January each year, most CEF managements disburse their accumulated capital gains. This welcomed “bump-up” in income to investors is recorded in the market as a reduction in price as the cash is distributed to shareholders.

 So now you know why closed-end income fund prices, particularly for tax-exempt issues, have weakened. I look at it as a double Holiday bonus (or “gelt”, for those of you who know). Whether it is profit taking by MCIM aficionados, or loss taking by window-dressers; whether it is irrational “priceaholism” or simple issues of supply and demand — history tells us what to do about it.

 When prices rise, we take our profits, reinvest and increase our cash flow. When prices fall, we reinvest our unaffected (even increased) earnings, reducing cost basis while increasing yield on investment. Double your holiday pleasure with increased distributions and lower priced shares to choose from.

 Have you ever had so much fun? Who says income investing is boring!

 Steve Selengut

http://www.marketcycleinvestmentmanagement.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

The Market Cycle Investment Management model has outperformed the popular investment indices since it was first developed in 1970. It features an approach that embraces market volatility; selects securities using strict quality, diversification, and income standards; and operates under strict disciplines for asset allocation, buying securities, and profit taking.

In 1987, MCIM portfolios recovered totally from the October fiasco in less than a year. In 2000, they experienced no downturn at all while incredible carnage devastated NASDAQ no value stocks and the mutual funds that worshipped them.

No one can deny that the June 2007 to March 2009 “financial crisis” correction was different — perhaps scarier than anything ever experienced before. NASDAQ is still below where it was in 2007 (and 50% of where it was in 1999). The S & P is 23% below its 2007 high; the DJIA about 20%; while the IGVSI is just 7% below its all time high level.

Many MCIM users have been achieving new all time highs for months. What’s in your portfolio?

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Steve Selengut

http://kiawahgolfinvestmentseminars.net

http://www.marketcycleinvestmentmanagement.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

When the dot-come bubble destroyed “new economy” gladiators in a gory spectacle destined to repeat itself over time, what investment portfolios cheered unscathed from the coliseum bleachers?

If you reduce the amount of betting in your portfolio (and throw out politicians who don’t have a clue about the workings of free markets) you can safely navigate even the choppiest seas that the market, interest rate, and economic cycles roll your way.

Most investment mistakes are caused by basic misunderstandings of the securities markets and by invalid performance expectations. Losing money on an investment may not be the result of an investment sandbar and not all mistakes in judgment result in broken propellers.

Errors occur most frequently when judgment is rocked out of the boat by emotion, hindsight, and misconceptions about how securities react to varying economic, political, and hysterical currents. You are the commander of your investment yacht. Use these ten risk-minimizers as investment capital life preservers:

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Steve Selengut

http://www.marketcycleinvestmentmanagement.com/

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

The popularity of investment products has heightened the risk for all investors and has indirectly led to many of the policy errors that threaten both capitalism and the economic fabric of America. Individual equity market prices are increasingly and inappropriately influenced by decision-making based only on the derivatives that contain them.

Few people consider the investment risk associated with public policy decisions. Product investors and derivative speculators participate in less personal markets, where it is more difficult to connect the dots between their personal financial interests and their political alignments.

So in a very real sense, investors have to deal with public policy risk every bit as much as they need to analyze the risks associated with the securities and other financial products they hold in their portfolios — complicated, but it is doable.

For “the rest of the story”: http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/6996

Steve Selengut

http://www.marketcycleinvestmentmanagement.com/

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”