The AIA Advocate Newsletter

In This Issue:

No Direction Home
The Inflation/Deflation Balance Is Precarious
Top Investments For Core Portfolios
Africa: Sleeper Investment Of The Century
The Bottom Line This Week

Since our last issue, the stock market roller coaster made several more trips around the track. At this writing, prices are nearly back where they started with the Dow up marginally 0.3% and the Nasdaq off 0.7%. Although the market appears to be taking a breather at present, we think investors should expect a volatile summer.

No Direction Home

The stock market's gyrations reflect similar moves in most economic indicators. Not only are the key signals mixed, they often change direction from one week to the next.

It doesn't help that every few days or so another black swan shows up to make investors nervous. The most recent unwelcome incidents include the disastrous BP oil gusher in the Gulf of Mexico, the high profile raid on the Gaza 'peace' flotilla, the torpedoed South Korean patrol ship, and the plunging euro. There is a growing feeling among millions of people that political and economic stability in many parts of the world are hanging by a thread. Read On →

In This Issue:

The Way Ahead
Long-Term Investors Welcome Stock Corrections
Mutual Funds May Beat Index Funds From Here On
Finding Current Income
The Bottom Line

Our special report last month that warned about a stock market correction, proved to be very timely. We would have actually been happier, not to mention a bit wealthier, to have been wrong. Unfortunately, Mother Market never consults us before making her moves.

In any event, from April 29 to May 26, the Dow and the Nasdaq dropped an uncomfortable -10.7% and -12.6% respectively. Judging from the strength of the decline, it has further to go before it runs out of steam.

The Way Ahead

The biggest question for investors now is whether the decline is a normal correction, or the start of a bear market.

We think the drop is most likely a correction. It was to be expected following the heady run-up of the previous 12 months. The only surprise is the retreat didn't come earlier. The delay allowed many stock prices to move further ahead of the economy, which means they have more ground to give back before the scales are balanced again.

Fortunately, the economy is continuing to grow – and it is doing so at a higher pace than most analysts predicted. By the fall, we think the stock market will resume its advance in a classic catch-up move.

Consequently, we are recommending that investors buy high quality stocks that the correction has made more attractively priced. According to the Bespoke Investment Group (www.bespokeinvest.com) 89.8% of the S&P 500 stocks are oversold. Read On →

Special Report

Protect Your Stocks
From A Correction

In This Issue:

A Stock Market Downturn Is Overdue
Stop-Loss Orders Can Save A Portfolio
Safeguard Your Blue Chips With LEAPS
Some Funds Go Up During Downturns
We Don't Recommend Short Sales
An All-Weather Fund For Cautious Investors
The Bottom Line This Week

Since the bull market started last March 9, the stock market has been on a tear. For the 13 month period, the Dow rose 68.7% and the Nasdaq shot ahead 94.8%. After the unpleasant losses investors endured from late 2007 to early 2009, the rebound was especially sweet.

Although we think the bull market has further to go, we also think the near-term downside risks are becoming significant. Consequently, we are devoting this issue of the AIA Advocate to strategies that you can use to protect your portfolio while remaining invested for whatever additional profits are on the way.

Read On →

In This Issue:

Economic Momentum Is Increasing
Expect A Marathon, Not A Sprint
Stocks Are Leading The Way Back
Black Swans Do Exist
Index Funds Shine
The Bottom Line This Week

Something odd is occurring on the way to Armageddon that the army of doom and gloom predictors never expected. Instead of suffering a meltdown, Wall Street and Main Street are throwing parties.

We'll be the first to admit that the gaiety isn't setting any records. Nevertheless, economic growth is a healthy 4% and may be somewhat higher. We won't know until the Fed shakes the numbers out after the first quarter ends today. We should get the verdict next week.

Read On →

In This Issue:

Company Earnings Look Good
Dividends Are Also Increasing
Another Shameless Plug For Dividend Aristocrats
These Winners Remain Attractive...One For 194 Years
Smaller Stocks Are Coming Up Fast
Semiconductors Looking Good Too!
The Bottom Line This Week

Since our last newsletter, the stock market retreated from its earlier highs. That's not surprising since there was cheerless economic news from Europe. The infamous PIGS (Portugal, Italy, Greece, and Spain) are having an embarrassing problem with their colossal debts. Payments are due, but the big spenders are coming up short a trillion dollars or so. The exact number is still in dispute. Whatever it turns out to be will be a shocker.

Investors calmed down a bit when other European countries promised to bail out their spendthrift neighbors. But before anybody could start to buy stocks again, the Fed made a surprise ¼ point increase in the discount rate it charges banks. Read On →

In This Issue:

The 2010 Economy May Be Stronger Than Expected
The Bull Market Should Have Longer Legs
Our Recommendations Remain Very Attractive
Earnings, Earnings, Earnings!
Interest Rates, Interest Rates, Interest Rates!
Stick With Short-Term Bonds & CDs For Now
Rental Real Estate Is Starting To Look Good Again
The Bottom Line This Week

Last year the stock market reminded us of a Phoenix rising from the ashes. After suffering a devastating 18 month slide, stocks began to rebound on March 9. By the time the closing bell for the year rang on December 31, the Dow and the Nasdaq were up 18.8% and 43.9% respectively. How nice it was!

It is instructive to notice that most of the market's gains occurred while the economic outlook was especially bleak. In fact, stocks started to turn back up at the same time several economists said the outlook couldn't be worse.

Savvy investors, of course, realized that if the economy could not be worse then the slide must be over. Additionally, any change from 'worse' could only be positive. As we reported at the time, smart money was starting to buy stocks, and the rest -as they say- is history. Read On →

In This Issue:

A Santa Claus Rally Seems Unlikely
But We Could Have A Big January Bounce
Get Your Buy List Ready
A Dollar Obituary Is Premature
Cash Is Still King
It's Time To Start Building A Family Fortune
The Bottom Line This Week

Last month we reported that investors were starting to become very cautious. Since then, several positive earnings reports encouraged traders to add more stocks to their portfolios. The new purchases pushed the Dow and the Nasdaq up 4.7% and 3.4% respectively. It was a great start to the Holiday Season.

Read On →

In This Issue:

Investors Are Deciding Which Way To Jump
Earnings Count More Than The GDP
Beat The Fixed Income Blues
A Dividend Honor Roll
If You Can't Beat Them...
The Bottom Line This Week

The past 30+ days was a weak period for stocks. Since our September newsletter, the Dow fell 0.6% and the Nasdaq dropped 2.3%.

However, investors have little cause to complain. The market delivered a 56% gain since March 9. At this point, a timeout could be a pause that refreshes. That's especially true since October has often been a tough month for stocks, particularly when it was preceded by a run-up. Another such shock was definitely not welcomed. Read On →

In This Issue:

Will The Right Fundamentals Please Stand Up?
The "Uncle Sam Effect"
Small Investors Are Coming Back To Stocks
Inflation Fears Are Increasing
First Some Bad News, Then Some Good News
Easy Index Gains May Be Over
These Four Favorites Should Stay On Top
And So Should China
The Bottom Line This Week

Despite all the worries about overvalued stocks, the market is continuing to advance. To be sure, the gains aren't coming by leaps and bounds anymore - but they are still adding up nicely. Since our last newsletter, the Dow and the Nasdaq rose another 1.8% and 5.1% respectively.

Will The Right Fundamentals Please Stand Up?

When it comes to stock fundamentals, value is in the eye of the beholder. Traditionalists believe the market is too expensive for the weak economic recovery they expect to see. The analysts argue that the economy may take over a year to justify the whopping 46% gain in the Dow since March. Some analysts think the recovery will never gain the necessary strength. Read On →

In This Issue:

The Outlook Is Better For An Improving Economy
Profit Growth Can Be Misleading
Big Companies Still Have An Advantage
Emerging Countries Are Making A Strong Recovery
Two Long Term Dividend Payers Look Good
Fasten Your Seat Belts, Oil Prices Are Roaring Back
The Bottom Line This Week

It's been a bear market for bears recently as their many doom-and-gloom pronouncements have gone wanting. The old bull just won't quit, despite all the logical arguments that predict his demise. It's a good lesson that paying attention to what is actually happening in the stock market is more profitable than following theories. Mother Market always has the last word.

The numbers tell the story. Since our last letter on July 29, the Dow and the Nasdaq have gone up 5.2% and 2.9% respectively. In only one of the four weeks did the market slide into negative territory, and then by less than 1%. By contrast, the best week registered a 7.3% gain. That's the sort of tailwind we like to have. Read On →