Sunday, April 27, 2008

Reasons for Global Food Crisis/Riots/Shortages. Can we Profit from Trend?

In many parts of the world, there are food riots as the price of rice has gone up to painful levels. What are the reasons behind this and how can we profit and play this trend?

According to Raj Patel, author of Stuffed and Starved: The Hidden Battle for the World Food System, there are five main reasons for the high food prices:
  1. Food production is heavily dependent on fossil fuel and oil prices are soaring.
  2. Biofuel production is boosting prices.
  3. As nations get richer, they demand more meat, shifting grain "out of the bowls of the poorest people into the stomachs of livestock."
  4. Poor harvests may be the front end of climate change.
  5. Speculation on food prices fuels spikes.

Soaring oil prices are a main reason as food production is dependent on fossil fuels. In addition, higher fossil fuels encourage alternative energy solutions which includes biofuel production such as ethanol. Rather than providing food for people, fields are being used to produce biofuels such as ethanol. Some people have criticized subsidies for ethanol for encouraging hunger and global warming.

In addition, as the global boom continues, and as nations get richer, nations start preferring more meat. According to, it takes an estimated five pounds of grain to produce a single pound of beef.

There is also a growing trend as the global food crisis continues where countries with a surplus, such as China, Cambodia and Egypt, have imposed policies that discourage outflow of surplus rice to conserve supplies for domestic consumption. According to an article by Lala Rimando, some exporting countries are holding on to their stocks waiting for the time to unload when prices go further up.

How do we play this Trend?

The most direct way continues to be the agriculture plays. Companies such as Monsanto (MON), the biotech of seeds, Potash (POT), the fertilizer company, and Deere (DE), the farm equipment company, stand to profit.

This trend will most likely continue to be a multi-year trend, and the agriculture sector appears to be a good play.

What about Fast Foods and Restaurants?

Demand for meat will increase, but that also means that the cost of food and meat will increase. But what will rise faster? Demand or the cost of the underlying food product? Let us wait and see what will happen.

Health Foods?

Some people propose and suggest that people go vegetarian because of this crisis.

But will this be a widespread phenomenon?

It would be a good idea to keep track of the health food companies, companies such as Hain-Celestial (HAIN) and Whole Food Markets (WFMI). In general, people will start to be more health conscious and this is good for the health food companies.

Your Ideas

Do you have any stock ideas or thoughts on this long term trend? Please do comment.

Thursday, April 24, 2008

Is the U.S. Penny Worth More as a Metal (Copper, Zinc) than as US Currency?

With metal prices rising rapidly, people on television and radio often comment that a U.S. Penny is worth more as a metal than its value in the US as a unit of currency.

How true is this?

Many people notice that a penny is (mostly) copper and they see copper prices rising rapidly. Is the Penny mostly made out of copper?

Material Composition of a Penny

Each year, the composition of the U.S. Penny could vary from time to time. For the most part, before 1982, the U.S. Penny weighs 3.1 grams, and is made out of 5% zinc and 95% copper. After 1982, the U.S. Penny weighs 2.5 grams, and is made out of 97.6% zinc and 2.4% copper.

Current Price of Zinc and Copper

Currently, as of April 24, 2008, using a Cash basis, the price of copper is $8.701/KG, and the price of zinc is $2.220/KG.

Calculating the Value of the Penny Based on Value of Material

Calculating the value of each, we find the value of each type of U.S. Penny:
  1. Pre-1982 Penny: 2.5968545 cents
  2. Post-1982 Penny: .593886 cents

Answer to our Initial Question

So is the U.S. Penny really worth more as a metal than as U.S. Currency? It depends on the edition of the U.S. Penny. For the most part, pre-1982 Pennies are worth 2.59 cents each! That exceeds the value of the U.S. Penny (1 cent) by more than 2 times!

However, if we look at the cost of the post-1982 U.S. Penny, the value of the metals is currently equivalent to .59 cents, currently less than 1 cent.

Is the Penny Obsolete?

But if we add the cost of producing the U.S. Penny, even the post 1982 edition of the Penny, the total cost (cost of producing plus price of the metals) could exceed the value of the coin itself (1 cent as US Legal Tender).

Many law makers have been proposing to make the U.S. Penny Obsolete because of this.

Melt a Penny and Sell the Material? That's Illegal

If you are having thoughts of melting a pre-1982 US Penny and selling the raw material, you have to know that there is a law against that.

Calculation Assumptions
  1. 1 KG = 1000 g
  2. Zinc = $2.220 / KG
  3. Copper = $8.701 / KG
  4. pre-1982 Penny: 3.1 grams, 5% zinc, 95% copper
  5. post-1982 Penny: 2.5 grams, 97.6% zinc, 2.4% copper


Pre-1982 Penny = (3.1g) (.05 zinc) (1 KG / 1000g) ($2.220 / KG) +
(3.1g) (.95 copper) (1 KG / 1000g) ($8.701 / KG)
= $.0003441 + $.025624445 = $.025968545
= 2.5968545 cents

Post-1982 Penny = (2.5g) (.976 zinc) (1 KG / 1000g) ($2.220 / KG) +
(2.5g) (.024 copper) (1 KG / 1000g) ($8.701 / KG)
= $.0054168 + $.00052206 = $.00593886
= .593886 cents

Tuesday, April 22, 2008

Books of Jim Cramer, Host of CNBC Show "Mad Money"

Are confused about the Books of Jim Cramer, host of the popular finance CNBC show, "Mad Money"?

Here's an overview of the books.

  1. "Real Money: Sane Investing in an Insane World" is the book that Jim Cramer gave his hedge fund employees, when he was running a hedge fund. If you are a sophisticated investor and stock picker or wish to head towards that direction, this is the book for you. Jim Cramer has written down what he knows about the stock market.

    The Book includes sections on investing basics, spotting tops and bottoms, investing rules, creating your discretionary portfolio, and the popular business cycle/sector rotation chart.

    There is even a chapter on options and some advanced speculating techniques that Jim Cramer (most likely) intentionally left out in other books.

    Some would consider this book Jim Cramer's "Magnum Opus".

  2. "Real Money: Sane Investing in An Insane World" was a very good book. However, the book sometimes went over the heads of some people.

    Jim Cramer (along with nephew Cliff Mason), decided to write a book similar to "Real Money", but wrote it in a manner more accessible to more people. Chapters include ways to buy a stock Mad Money Style including "Knowing Yourself and Your Goals", lessons on how to do your stock picking homework, and how to buy using limit orders and buying incrementally.

    Jim Cramer also writes about selling stocks the right way and gives insight on how to watch Mad Money, from some behind the scenes insight on the "Lightning Round", information on how to watch the CEO interviews, new lessons learned including some buy and sell rules, background on how Jim Cramer Picks stocks on the show, and more behind the scenes "Mad Money" commentary.

    There is also an update of the popular Cyclical Investing Chart in the "Real Money" book.

    Since this book was intended for a wider audience, Jim Cramer does not include a section on options and advanced speculating techniques.

    If your first introduction to Jim Cramer is through the Mad Money show, and if you wish to pick individual stocks, perhaps this book should be the first "Jim Cramer" book to buy and read.

    Once you outgrow "Mad Money: Watch TV, Get Rich", you can purchase the "Real Money: Sane Investing in an Insane World" book.

  3. Both books, "Real Money" and "Mad Money" focused on individual stock picking.

    But to have an even wider audience, Jim Cramer (with Cliff Mason) decided to write "Jim Cramer's Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer)."

    "Stay Mad for Life" is more of a personal finance book and talks about 401k plans, retirement plans and even mutual funds (he does not talk much about mutual funds on his "Mad Money" CNBC show). He talks about budgets, credit card debt and following a budget and dealing with health insurance. Jim Cramer also writes about family finance and talks about getting children interested in investing.

    If you want to read a book from Jim Cramer focusing mainly on Personal Finance, this is the book to get.

    If you are interested in more in depth individual stock picking information, choose either "Real Money" or "Mad Money" books.

  4. If you wish to read Jim Cramer's fascinating autobiography, "Confessions of a Street Addict" by Jim Cramer, is the book to purchase. Read how Jim Cramer went from rags to riches and read stories about how he lived in a car for some time. He also mentions his experience during the infamous market capitulation of 1998, and the way he treated others in pursuit of the next trade.

    This book could become a compelling movie. Jim Cramer, on one of his Mad Money shows mentioned that some studio was thinking of making the book into a movie but Jim Cramer declined because they would have portrayed Jim Cramer as a bad guy, similar to Michael Douglas' character Gordon "Greed is Good" Gecko in the 1987 movie, Wall Street.

There are other products as well such as the "Mad Money" DVDs:
  1. Mad Money with Jim Cramer - Back to Basics
  2. Mad Money w/ Jim Cramer Back To Basics II: Invest Like A Pro

Thursday, April 17, 2008

Current (April 17, 2008) Cheap Growth Ready to Breakout Stocks. Hanes Brands (HBI) is on the List.

Recently, we revisited the Cheap Growth Ready to Breakout Screen. We've looked at the results of several portfolios:
  1. September 12, 2007 to April 11, 2008
  2. Results of Three Portfolios Checked on April 15, 2008.

So what are the current stocks in the Cheap Growth Ready to Breakout Screen?
Stocks are sorted from Highest to Lowest Market Capitalization:

The Current Stocks in Cheap Growth Ready to Breakout Screen

TickerCompany5 yr. GrowthFwd PE
RTPRio Tinto3514.58
AMXAmerica Movil29.6714.53
WFTWeatherford Intl2114.44
FMXFomento Economico2017.05
NENoble Corp25.887.91
LLLL-3 Comm21.2415.26
ESVEnsco Intl20.537.89
FTIFMC Technologies2319.76
AKSAK Steel2016.27
CLRContinental Resources41.416.55
MEEMassey Energy29.8816.48
SPNSuperior Energy26.759.06
ATWAtwood Oceanics33.510.37
HBIHanes Brands22.512.01
EGOEldorado Gold10018.26
WHQW-H Energy2013.63
CRKComstock Resources31.6515.39
SFYSwift Energy30.337.34
PETDPetroleum Dev2017.62
TTEST-3 Energy Services81.2515.36
MEAMetalico Inc4313.04
NCITNCI Inc2115.59

All these stocks have a growth rate greater than their forward PE, and their forward PE is less than 20.

What sectors are the stocks in?

Many of the stocks in the list above are in the commodity sector including oil, energy, steel, and gold. Commodities continue to appear strong.

AMX, an emerging market wireless telecom company, appears to remain a good growth play.

International Markets remain strong. AMX, the Mexican and South America play is on the list, as well as the beer and beverage maker FMX, Fomento Economico.

Hanes Brands??

A surprising entry in this list is Hanes Brands (HBI), a retail play.

As of April 17, 2008, the stock looks like it is breaking out.

Hanes earnings call is scheduled for Monday April 21, 2008.

According to a Barrons Blog:"HANESBRANDS CLEANS UP
The affirmative news in the Hanesbrands (HBI) (besides the fact that macro economic conditions don’t really determine the need for undergarments) story: cotton prices have traded in patterns distinct from other agricultural commodities. In fact, after cotton, which for much of this year was keeping pace with the bulge in farm products, reached its high last month, the commodity has sold off to the tune of about 16%. In addition, the company’s largest customer is Wal-Mart (WMT), as Credit Suisse noted in a research report Tuesday, and Wal-Mart has proved to be one of the more resilient names in the retailing sector, which limits the risk Hanesbrands has to slower retailing traffic. The firm also said the company’s efforts to restructure its costs hasn’t been reflected in the balance sheet. All that suggested there could be some upside in shares, despite the 40% improvement off the January lows, which have carried the stock to within pennies of its highs for the last year."

Hanes Brands (HBI) might be worth looking into.

Tuesday, April 15, 2008

Results of 3 Portfolios: Cheap Growth Ready to Breakout (April 15, 2008)

In a previous article, we described the Cheap Growth Ready to Breakout Screen.

In this post, we will continue to track the performance of three portfolios. We are taking the snapshot as of Tuesday, April 15, 2008. We previously had a snapshot on July 17, 2007.

Portfolio 1: February 23, 2007

# Symbol Start End Return
1 AMX 46.89 64.06 36.62%
2 TSM 10.91 10.36 -5.04%
3 VIP 17.04 31.34 83.92%
4 IPR 73.35 83.65 14.04%
5 AYE 47.64 52.40 9.99%
6 WCRX 15.15 17.48 15.38%
7 BRP 41.40 76.50 84.78%
8 SCS 17.24 10.80 -37.35%
9 MLHR 39.16 22.47 -42.62%
10 AIR 30.61 20.80 -32.05%
11 GRT 25.53 11.94 -53.23%
12 DVR 12.49 11.95 -4.32%
13 TGI 54.92 55.15 0.42%
14 CRAI 53.88 32.36 -39.94%
15 TLF 7.99 2.75 -65.58%
16 APH 33.85 41.08 21.36%
17 GIL 26.80 33.63 25.49%
18 MIDD 58.88 61.90 5.13%

Total 0.94%

SPY 141.96 133.24 -6.14%
IWM 81.44 69.01 -15.26%
EFA 74.77 73.31 -1.95%

Portfolio 2: March 14, 2007

# Symbol Start End Return
1 TSM 10.60 10.36 -2.26%
2 DISH 38.26 30.49 -20.31%
3 WFR 55.05 72.28 31.30%
4 ASX 4.98 5.03 1.00%
5 SPIL 8.73 8.73 0.00%
6 BRP 41.75 76.50 83.23%
7 LAUR 59.28 61.95 4.50%
8 KSU 33.65 40.54 20.48%
9 BEAV 30.73 34.01 10.67%
10 CVO 24.50 9.94 -59.43%
11 IART 43.45 41.65 -4.14%
12 KNL 22.39 10.94 -51.14%
13 AIR 30.25 20.80 -31.24%
14 MYE 17.63 12.08 -31.48%

Total -3.49%

SPY 136.08 133.24 -2.09%
IWM 76.72 69.01 -10.05%
EFA 71.02 73.31 3.22%

Portfolio 3: May 16, 2007

# Symbol Start End Return
1ESV 58.35 65.00 11.40%
2RIG 90.43 149.30 65.10%
3TDW 64.24 57.44 -10.59%
4KB 93.35 66.57 -28.69%
5FCX 70.25 105.50 50.18%
6VLO 71.62 48.56 -32.20%
7NBG 11.33 10.14 -10.50%
8ACGY 21.16 25.50 20.51%
9AYR 33.27 12.85 -61.38%
10FTI 36.84 66.17 79.61%
11HXM 62.29 61.50 -1.27%
12SZE 57.58 68.75 19.40%
13SLB 75.86 91.13 20.13%
14CLB 92.77 137.91 48.66%
15CKR 20.08 11.04 -45.02%
16CEPH 80.14 62.67 -21.80%
17TDK 86.09 62.72 -27.15%
18SNDA 26.65 26.44 -0.79%
19LKQX 12.15 20.11 65.51%

Total 7.43%

SPY 148.71 133.24 -10.40%
IWM 81.06 69.01 -14.87%
EFA 78.14 73.31 -6.18%

The Results

SPY represents the S&P 500 ETF, IWM represents the small cap Russell 2000 ETF, and EFA represents the Developed International ETF.

Looking at all three portfolios, the Cheap Growth Ready to Breakout Screen outperformed:
  1. Outperformed the S&P 500 in 2/3 portfolios with an average outperformance of 7.84%
  2. Outperformed the Russell 2000 in 3/3 portfolios with an average outperformance of 15.02%
  3. Outperformed the EFA in 2/3 portfolios with an average outperformance of 3.26%


  1. Prices used are the adjusted prices based on Yahoo Finance. Price is adjusted based on splits and dividends.
  2. LAUR (Laureate Education) no longer trades as LAUR. The last known price is used.
  3. GSF (Global Santa Fe) merged with Transocean (RIG). The RIG stock price is used here.

Sunday, April 13, 2008

Outperforming Portfolio Since September 2007 Using Cheap Growth to Breakout Screen

Sometime back, we created a (buy and hold) portfolio on an online site using our Cheap Growth Ready to Breakout Screen.

Many months later, after the S&P 500 declined 9.42% from September 12, 2007 to April 11, 2008, we checked the portfolio and discovered that the portfolio even during the market decline increased by 2.21% outperforming the S&P 500 and even posting a gain!

The Portfolio

Here is the Portfolio. We tried evenly weighting each position, but weighting could vary.

ACGY $24.20 $27.77 -13.18%
AMX $62.65 $64.100.39%
ATW $99.61 $78.5926.49%
BEAV $35.80 $44.45-20.82%
CAM $45.71 $43.40 5.07%
CEO $158.77 $130.71 21.21%
CHK $47.60 $37.6026.35%
CHL $81.40 $65.9923.1%
CLB $131.40 $110.01 19.18%
DWSN $72.16 $76.39-5.79%
ESL $55.30 $50.988.22%
FTI $61.81 $51.5319.7%
GIGM $15.30 $15.74-3.05%
HLX $32.53 $45.65-29.58%
HRS $48.69 $59.90-18.71%
KNDL $43.68 $39.0211.69%
NNDS $46.51 $56.50 -18.02%
NOV $67.48 $67.99-1%
NTG $42.85 $50.78 -15.87%
NWK $5.77 $12.55-54.28%
OIIM $8.03 $14.49-44.83%
OTEX $33.50 $26.0428.39%
SGP $17.21 $32.48-47.23%
SII $67.77 $69.33-2.35%
SXE $24.54 $22.0111.24%
VIP $31.15 $25.5921.48%
WHQ $72.54 $69.593.99%

Overall Results

Period: September 12, 2007 to April 11, 2008:
  1. S&P 500 Return: -9.42%
  2. This Portfolio: 2.21%

Cash Percentage (Portfolio): 5.7%

The Stocks and Sectors

Stock Name Sector
ACGY Acergy Oil and Gas
AMX America Movil Central and South American Telecom
ATW Atwood Oceanics Oil and Gas
BEAV B.E. Aerospace Aerospace and Defense
CAM Cameron International Oil and Gas
CEO CNOOC Chinese Oil and Gas
CHK Chesapeake Energy Oil and Gas
CHL China Mobile Ltd Chinese Telecom
DWSNDawson GeophysicalOil and Gas
ESLEsterline Technology Aerospace and Defense
FTIFMC Technologies Chemicals: Agriculture, Industrial, Specialty
GIGMGigaMedia Ltd Chinese Online Game and Internet Services
HLXHelix Energy Oil and Gas
HRS Harris Group Industrial Communication Systems
KNDL Kendle International Clinical Research
NNDS NDS Group Broadcast and Digital TV Equipment
NOV National Oilwell Varco Oil and Gas
NTG Natco Group Oil and Gas
NWK Network Equipment Telecom Equipment and Networking
OIIM O2Micro Int'l Semiconductors
OTEXOpen Text Enterprise Content Manager Systems: Tech
SGP Schering-Plough Pharma
SII Smith International Oil and Gas
SXE Stanley Information Equipment for Defense and Gov't
VIP Vimpel Communcations Russian (Wireless) Telecom
WHQ W-H Energy Services Oil and Gas

Comments on Sector

A large part of the outperformance is due to overweighting the Oil and Gas sector, which continues to be a hot sector.

Other popular sectors on the portfolio are the Emerging Market Telecom plays, Aerospace and Defense, and select Tech and Pharma companies.

Saturday, April 12, 2008

Results of Russian and Eastern Europe Mad Money Tour

Last week, on the CNBC hit show Mad Money, Jim Cramer, the host of the show went through one Russian or Eastern European Stock per week. The results:
  1. Michel Steel (MTL)
  2. Wimm Bill Dann Foods (WBD), a Russian Dairy, Juice, Water and Baby Products Producer.
  3. CTC Media (CTCM), a Russian Television Network Operator
  4. Central European Distribution (CEDC), best known for Polish Vodka.
  5. Central European Media Enterprises (CETV) invests, develops, and operates Television stations in Eastern and Central Europe.

Before Wednesday's show, this blog attempted to guess the three remaining stocks Jim Cramer would choose on his show that week.

Here are the Perfect Matches. We were correct on:
  1. CEDC
  2. CETV

We missed CTCM. CTCM and CETV are too similar.

What was missing was Russian and Eastern European Telecom. We still say that Vimpel Communications (VIP) is a good choice for the region. Emerging Market Telecom is a growth area.

Wednesday, April 9, 2008

Russian and Eastern European Stock Tour by Jim Cramer on CNBC Show "Mad Money"

This week on the CNBC Show "Mad Money", ex-hedge fund manager Jim Cramer, host of the show, is recommending Eastern European or Russian Stocks, one stock each day of the week.

On Monday, Jim Cramer recommended Michel Steel (MTL), a steel company.

On Tuesday, Jim Cramer recommended Wimm Bill Dann (WBD) a dairy and juice producer.

Can we guess the other three companies?

There aren't that many Russian stocks which sell as ADRs (American Depository Receipts), and Mad Money can't recommend stocks on the "pink sheets".

First Guess

Jim Cramer will recommend a telecom company. Candidates include Mobile TeleSystems (MBT), Rostelcom (ROS), Golden Telecom (GLDN) and Vimpel Communications (VIP).

My first guess would be Vimpel Communications (VIP) and possibly Mobile TeleSystems (MBT) because of the wireless growth.

Second Guess

Eastern European companies are under consideration.

My second guess would be Polish Vodka company, Central European Distribution (CEDC).

Third Guess

Another Eastern European company worth considering is Central European Media Enterprises (CETV). Growth in this area should be great.

Fourth Guess

A Natural Resources Company would be my fourth guess. There are many Russian resource companies such as Lukoil and Gazprom, and Norilsk Nickel (world's top producer of Nickel), but they sell on the "pink sheets".

Monday, April 7, 2008

Historic S&P 500 PE Ratio, Dividend Yield and Total Return 1960 to 2007

YearPE RatioDividend YieldS&P 500 ReturnTotal Return
1961 21.23 2.85% 23.13% 25.98%
1962 17.21 3.40% -11.81% -8.41%
1963 18.15 3.13% 18.89% 22.02%
1964 17.79 3.05% 12.97% 16.02%
1965 17.45 3.06% 9.06% 12.12%
1966 14.84 3.59% -13.09% -9.50%
1967 17.67 3.09% 20.09% 23.18%
1968 18.15 2.93% 7.66% 10.59%
1969 15.08 3.52% -11.36% -7.84%
1970 16.72 3.46% 0.10% 3.56%
1971 18.32 3.10% 10.79% 13.89%
1972 19.12 2.70% 15.63% 18.33%
1973 12.25 3.70% -17.37% -13.67%
1974 7.33 5.43% -29.72% -24.29%
1975 11.70 4.14% 31.55% 35.69%
1976 11.03 3.93% 19.15% 23.08%
1977 8.75 5.11% -11.50% -6.39%
1978 8.26 5.39% 1.06% 6.45%
1979 7.42 5.53% 12.31% 17.84%
1980 9.06 4.74% 25.77% 30.51%
1981 8.07 5.57% -9.73% -4.16%
1982 10.17 4.93% 14.76% 19.69%
1983 12.41 4.32% 17.27% 21.59%
1984 9.93 4.68% 1.40% 6.08%
1985 13.48 3.88% 26.33% 30.21%
1986 16.78 3.38% 14.62% 18.00%
1987 15.41 3.71% 2.03% 5.74%
1988 12.20 3.68% 12.40% 16.08%
1989 14.71 3.32% 27.25% 30.57%
1990 15.20 3.74% -6.56% -2.82%
1991 21.83 3.11% 26.31% 29.42%
1992 24.04 2.90% 4.46% 7.36%
1993 23.53 2.72% 7.06% 9.78%
1994 16.98 2.91% -1.54% 1.37%
1995 17.42 2.30% 34.11% 36.41%
1996 20.70 2.01% 20.26% 22.27%
1997 24.51 1.60% 31.01% 32.61%
1998 32.15 1.32% 26.67% 27.99%
1999 32.57 1.14% 19.53% 20.67%
2000 25.38 1.23% -10.14% -8.91%
2001 25.97 1.37% -13.04% -11.67%
2002 18.62 1.83% -23.37% -21.54%
2003 20.53 1.61% 26.38% 27.99%
2004 18.08 1.60% 8.99% 10.59%
2005 18.28 1.79% 3.00% 4.79%
2006 17.30 1.77% 13.62% 15.39%
2007 16.78 1.89% 3.53% 5.42%

Total Return equals the S&P 500 Return plus the Dividend Yield that year.

Table above uses some raw data from Aswath Damodaran at Stern Business School. Aswath got the data from Bloomberg and Standard And Poors.

Friday, April 4, 2008

Forward Stock Market (S&P 500) Return Based on Distance from 52 Week High

What is the One Year Forward Return of the S&P 500 (from 1/1/1950 to 3/31/2008) when we are some distance away from the 52 Week High?

If the S&P 500 is 10% or more below the 52 week high, the average return during the 1950 to 2008 period, is around 11.72%, compared to 8.30% if the S&P 500 is within 10% of the 52 week high.

If we go further down to 20% or more below the 52 week high, the S&P 500 one year forward return goes up to 15.75%.

At 30% below the 52 week high, the one year forward return increases to 23.58%.

At 40% below the 52 week high, the average one year forward return is a whopping 31.28%.

So the pattern appears to be true:

The further we are below the S&P 500 52 week high, the better chances we have of having a better than average one year forward return.

If the Index loses 10%, we consider this a correction. If the index loses 20%, we often call this a bear market.

Today's S&P 500 Index Value

As of April 3, 2008, the S&P 500 is 1369.31, and the 52 week high is 1576.09.

This means that the S&P 500 is currently around 13% below the 52 week high.

While a greater percentage below the 52 week high would be ideal, 13% below the 52 week high is not bad, if we wish to invest for at least one year or more.