Tuesday, July 8, 2014

Historical Best Day of Month to Dollar Cost Average or Invest: UPDATED: 1950 to 2014

Historical Best Day of Month to Dollar Cost Average or Invest: Updated: 1950 to 2014

This article updates the previous "Best Day of Month to Dollar Cost Average".



1. This article now covers February 14, 1950 up to July 8, 2014.



2. The previous article used the Average S&P 500 methodology, which over weighed the S&P 500 when it is large (over 1500), and under weighed the S&P 500 when it was small (around 20 on the S&P 500 in 1950).



3. This article uses the "Percent Above 30 Trading Day Moving Average" methodology.   This way, whether the S&P 500 had a low value or high value, the results have equal weight.



4. To determine the best day of month to dollar cost average, choose the lowest "percent above 30 trading day moving average" value.



Chart:


The Results:

The best two days of the month to dollar cost average are on the 26th (#1) and 25th (#2) with the lowest value of percent above 30 trading day moving average.

#3a: 19th    (0.20%)
#3b: 27th    (0.20%)
#4a: 10th    (0.22%)
#4b: 24th    (0.22%)

The rest of the values can be seen in the chart above.

Beginning of the Month Boost:

At the beginning of the month, the percent above 30 trading day moving average seems to be at its highest values.

One possible reason why is because of investment in 401k and retirement funds close to the beginning of the month, which pushes the S&P 500 up during this time.










Wednesday, July 2, 2014

"Don't Fight the Fed" is Wrong? What Is One Year Return After Rate Hikes or Rate Cuts?

A. There is a common Wall Street mantra: "Don't Fight The Fed".


When the Fed is pumping liquidity (reducing Fed Funds Rate, instituting Quantitative Easing (QE)), you should follow the market upwards.  If the Fed is taking away liquidity (raising Fed Funds Rate, and taking away Quantitative Easing), then be careful in the stock market.


This "Don't Fight the Fed" mantra seems to have worked very well since 2009, as the Fed cuts rates and institutes many Quantitative Easing programs, resulting in the stock market having a very good rally.


If the Fed starts to cut back on Quantitative Easing and raises rates, it is best to be careful in the market.


B. Is "Don't Fight the Fed" still Valid?


Since July 2000 (till July 2014), what is the one year future return of the S&P 500 every time the Fed has raised or cut the Fed Funds rate?   Does this validate "Don't Fight the Fed?"


The results are as follows:
1. The S&P 500 return one year after the Fed cuts rates (since July 2000) averages: -14.2%
2. The S&P 500 return one year after the Fed raises rates (since July 2000) averages: 10.1%


Based on the one year forward return after the Federal Reserve cuts or raises rates, the S&P 500 is up when the Fed raises rates, and the S&P 500 is down when the Fed cuts rates.


This is opposite of the mantra: "Don't Fight the Fed!"


C. There is a better correlation using another metric: The actual Fed Funds Rate


Since the "Don't Fight the Fed" doesn't seem to work, is there a better metric to determine whether the one year S&P 500 forward return would be positive or negative?


After researching the data, it isn't whether the Fed is cutting rates or raising rates, but the actual Fed Funds rate plays a big role in the S&P 500 forward return:


The results are as follows:


Since July 2000, the S&P 500 return one year after the Fed changes rates (up or down) or announces a QE program when:


1. Fed Funds Rate is less than or equal to 1%:  13.1%
2. Fed Funds Rate is between 1% and 2% (not including 1%): -1.9%
3. Fed Funds Rate is between 2% and 3% (not including 2%): -8.9%
4. Fed Funds Rate is between 3% and 4% (not including 3%): -7.1%
5. Fed Funds Rate is between 4% and 5% (not including 4%): -6.3%
6. Fed Funds Rate is between 5% and 6% (not including 5%): -2.1%


Based on this, the actual Fed Funds rate seems to have a better correlation with the S&P 500 one year forward return.   The best one year S&P 500 forward return is when the Fed Funds Rate is less than 2%.   Fed funds rate greater than 2% has a more negative one year forward S&P 500 return.




D. Data Points:


Date Fed Funds Start Fed Funds End Fed Funds Diff S&P S&P Date + 1 year S&P + 1 year Return
7/3/2000   6.5 1469.54 7/3/2001 1234.45 -16.0%
1/2/2001 6.5 6 -0.5 1283.27 1/2/2002 1154.67 -10.0%
1/31/2001 6 5.5 -0.5 1373.73 1/31/2002 1130.2 -17.7%
3/19/2001 5.5 5 -0.5 1170.81 3/19/2002 1170.29 0.0%
4/17/2001 5 4.5 -0.5 1191.81 4/17/2002 1126.07 -5.5%
5/14/2001 4.5 4 -0.5 1248.92 5/14/2002 1097.28 -12.1%
6/26/2001 4 3.75 -0.25 1216.76 6/26/2002 973.53 -20.0%
8/20/2001 3.75 3.5 -0.25 1171.41 8/20/2002 937.43 -20.0%
9/14/2001 3.5 3 -0.5 1037.77 9/14/2002 889.81 -14.3%
10/1/2001 3 2.5 -0.5 1038.55 10/1/2002 847.91 -18.4%
11/5/2001 2.5 2 -0.5 1102.84 11/5/2002 915.39 -17.0%
12/10/2001 2 1.75 -0.25 1139.93 12/10/2002 904.45 -20.7%
11/5/2002 1.75 1.25 -0.5 915.39 11/5/2003 1051.81 14.9%
6/24/2003 1.25 1 -0.25 983.45 6/23/2004 1144.06 16.3%
6/29/2004 1 1.25 0.25 1136.2 6/29/2005 1199.85 5.6%
8/9/2004 1.25 1.5 0.25 1065.2 8/9/2005 1231.38 15.6%
9/17/2004 1.5 1.75 0.25 1122.2 9/17/2005 1237.91 10.3%
11/9/2004 1.75 2 0.25 1164.08 11/9/2005 1220.65 4.9%
12/13/2004 2 2.25 0.25 1198.68 12/13/2005 1267.43 5.7%
2/1/2005 2.25 2.5 0.25 1189.41 2/1/2006 1282.46 7.8%
3/21/2005 2.5 2.75 0.25 1183.78 3/21/2006 1297.48 9.6%
5/2/2005 2.75 3 0.25 1161.17 5/2/2006 1313.21 13.1%
6/29/2005 3 3.25 0.25 1199.85 6/29/2006 1272.87 6.1%
8/8/2005 3.25 3.5 0.25 1223.13 8/8/2006 1271.48 4.0%
9/19/2005 3.5 3.75 0.25 1231.02 9/19/2006 1317.64 7.0%
10/31/2005 3.75 4 0.25 1207.01 10/31/2006 1377.94 14.2%
12/12/2005 4 4.25 0.25 1260.43 12/12/2006 1411.56 12.0%
1/30/2006 4.25 4.5 0.25 1285.19 1/30/2007 1428.82 11.2%
3/27/2006 4.5 4.75 0.25 1301.61 3/27/2007 1428.61 9.8%
5/9/2006 4.75 5 0.25 1325.14 5/9/2007 1512.58 14.1%
6/28/2006 5 5.25 0.25 1240.12 6/28/2007 1505.71 21.4%
9/17/2007 5.25 4.75 -0.5 1476.65 9/16/2008 1213.6 -17.8%
10/30/2007 4.75 4.5 -0.25 1531.02 10/29/2008 930.09 -39.3%
12/10/2007 4.5 4.25 -0.25 1515.96 12/9/2008 888.67 -41.4%
1/18/2008 4.25 3.5 -0.75 1325.19 1/17/2009 850.12 -35.8%
1/29/2008 3.5 3 -0.5 1362.3 1/28/2009 874.09 -35.8%
3/17/2008 3 2.25 -0.75 1276.6 3/17/2009 778.12 -39.0%
4/29/2008 2.25 2 -0.25 1390.94 4/29/2009 873.64 -37.2%
10/7/2008 2 1.5 -0.5 996.23 10/7/2009 1057.58 6.2%
10/28/2008 1.5 1 -0.5 940.58 10/28/2009 1036.19 10.2%
11/25/2008 Start QE1 Start QE1 0 857.39 11/25/2009 1110.63 29.5%
12/15/2008 1 0.25 -0.75 868.57 12/15/2009 1107.93 27.6%
3/31/2010 End QE1 End QE1 0 1173.27 3/31/2011 1325.83 13.0%
11/3/2010 Start QE2 Start QE2 0 1197.96 11/3/2011 1261.15 5.3%
6/30/2011 End QE2 End QE2 0 1320.64 6/29/2012 1362.16 3.1%
9/13/2012 Start QE3 Start QE3 0 1687.99 9/13/2013 1687.99 0.0%












Sunday, June 29, 2014

SDIV: Global, High Dividend Exchange Traded Fund (ETF), Good Diversity.

Are you looking for a single ETF or mutual fund to help give you great diversification and a high dividend?  You should consider an international ETF which produces a high dividend.  SDIV, an ETF (Exchange Traded Fund) from Global-X Funds, does that.


As of June 2014, the 12 Month Dividend Yield is 6.01%.   The Total Annual Fund Operating Expense is 0.58%.     


In terms of country breakdown, 25.81% is invested in the United States, 17.85% in Australia, 9.14% in Canada, 8.14% in France, 7.69% in the U.K., 6.01% in Singapore, and so on.


In terms of industry, Financials occupies 20% of the portfolio, REITs (Real Estate Investment Trusts) 15%, Utilities 13.5%, Telecom Services, 12.2%, Mortgage REITs 10.6%, Energy 9.2%, Industrials 5.03%, Consumer Discretionary, 4.8%, Health Care 2.8%, Materials 2.7%, and Info Tech at 2.1%.  


SDIV could be a great way to get high dividend diversification.   And if you can find SDIV in a commission free program by your broker, you could invest in SDIV cheaply (because you have no commission fee) in an automatic investment plan where you invest some regular sum at regular intervals.   Watch your reinvested dividends (especially in a high dividend ETF), grow.   Experts often say that reinvested dividends is a great way to grow your money.



Tuesday, November 20, 2012

Is USA Doomed to Repeat 1921-1945: Prosperity, Depression, Totalitarianism, World War?

Is the USA Doomed to Repeat 1921-1945: Prosperity, Depression, Totalitarianism, Major War?

In a previous post, we speculated that there is an 84 year cycle which includes an 84 year Major War Cycle.

In 1921 to 1929, we had the Roaring Twenties, a time of great Prosperity.  There was great economic prosperity, the stock market had a large runup, and the 1920s was a decade of increased consumer spending and economic growth.  The Federal Reserve expanded credit, and set rates very low, and more people started buying on margin.

The Roaring Twenties was also a time of new products and technologies including Mass Production and Henry Ford's Model T, and the creation of infrastructure such as highways and expressways, funded by the government.  (Federal Income Taxes were created in 1913).

No one could see what would come on October 29, 1929, Black Tuesday, a Great Stock Market Crash on Wall Street, signalling the beginning of the Great Depression which lasted around 1929 to 1939 (or middle of the 1940s).

During this time of the Great Depression, there was a rise (in Europe) of more Fascist, Totalitarian regimes such as the rise of the Nazi Party in Germany from 1933 to 1945.

And the rise of Nazism helped start World War 2 (from 1938 to 1945).

Is it happening now?

2013 will be the 84th anniversary of Black Tuesday, the Major Market Crash in 1929.  There has been research and observation showing that there is a logical reason for the 84 year cycles, and it has to do with four distinct generations in a major 84 year cycle.

We've had great Prosperity (in the mid 1990s and the early 2000s), which reminds of the Roaring Twenties.

And there are many economic signs pointing to a long term economic stagnation, collapse or depression.   We may not be in the run of the mill downturn.  Demographics are against the U.S. as the Population is Aging, and there are less people to support an ever increasing dependent population, and this aging population has been shown to correlate with the Stock Market's Price to Earnings Multiple.

In addition, since the United States Federal Debt to GDP Ratio is now 100% and growing, there will be a long term debt overhang. There is a study by Carmen Reinhart (Peterson Institute for International Economics, NBER, CEPR), Vincent Reinhart (Morgan Stanley) and Kenneth Rogoff (from Harvard University and NBER) that shows those cases in history where debt to GDP exceeded 90%, experienced suboptimal growth lasting an average of 23 years.

Depressions can lead to Totalitarian Regimes (it may happen in other places such as Europe, which is going through their own economic upheaval including problems in the Eurozone, Spain and GreeceEven France had their credit rating reduced).

Finally, everything can culminate in a major war.

Possible Schedule:

Start Yr End Yr Past Event Start Yr End Yr Event
1921 1929 Roaring Twenties 1995 2013 Prosperity
1929 1939 Great Depression 2013 2023 Depression
1933 1945 Nazism 2017 2029 Totalitarianism
1938 1945 World War 2 2022 2029 Major War





Monday, November 12, 2012

Will there be a Major US War in 2028? (World War 3?) The 84 Year U.S. Major War Cycle

Will there be a Major United States Involved War in 2028, Possibly Global?

If the 84 Year Cycle remains true, then we will have a possible major war (World War 3?) around 2028.

Year Cycle Major U.S. War
1776   +84 American Revolutionary War
1860   +84 U.S. Civil War
1944   +84 World War II
2028   Next Major U.S. Involved War

Wednesday, October 24, 2012

Story of U.S. Stock Market in One Chart, 1975 to 2035

The Story of the U.S. Stock Market (S&P 500) in One Chart from 1975 to 2035:


The Chart above tells the story of the United States Stock Market (as represented by the S&P 500 index) from 1975 to 2035.

Baby Boomers are the largest demographic group in the United States born around 1946 to 1960, right after World War II.

In the 1980s and 1990s, the Baby Boomers were in their Peak Earning Years and they earned, consumed, spent, and invested for their retirement.  This was helped in 1995 by an increase in the Money Supply, and the Printing Money Started leading to Fed Chief Alan Greenspan to proclaim that there is 'Irrational Exuberance'.  This finally lead to the peak of the Tech Bubble in the year 2000.

The Tech Bubble and Dot-Com Bubble burst, and interest rates remained low, and with loans being very easy to get (including no downpayment loans, and no proof of income), the housing market started its ascent into the stratosphere ending in the 2007-2009 Housing Bubble Peak and Burst.

The market tried to recover, thanks to Fed Chief's Ben Bernanke policies keeping interest rates very low, and printing money with three rounds of Quantitative Easing (QE1, QE2, QE3).  This occurred in conjunction President Obama's increased spending and stimulus plans following the Keynesian way of spending government money to get out of a recession.

We are currently now in the Debt Bubble (consumer debt, state and local debt, international debt, and federal government debt where the U.S. Federal government owes $16 Trillion dollars amounting to over 100% of GDP, and this amount is continuing to grow), a Spending Bubble, and a Government Bubble.  These bubbles will eventually burst.

And starting in 2011, the Baby Boomers are starting to retire, and the Aging Population starts to put pressure on the economy.   The dependency ratio (65 years and older and 0-15 years old to the total population) is going to increase through the years, adding to the burden, and hindering economic growth.

In addition, since the United States Debt to GDP Ratio is now 100% and growing, there will be a long term debt overhang.  There is a study by Carmen Reinhart (Peterson Institute for International EconomicsNBER,  CEPR), Vincent Reinhart (Morgan Stanley) and Kenneth Rogoff (from Harvard University and NBER) that shows those cases in history where debt to GDP exceeded 90%, experienced suboptimal growth lasting an average of 23 years.

There are many signs pointing to continued economic stagnation, decline, and possibly recession and depression over the next twenty to thirty years (2032-2042).