Stock prices in general fell sharply again yesterday after breaking down through long-term price-support levels last week and then failing to penetrate above short-term price-resistance areas earlier this week.
My models indicate that stocks in general will continue to fall over the coming weeks.
So the party has just begun — at least for those of you who've followed my investment recommendations in The ETF Strategist! Our subscribers have been profiting handsomely from the precipitous decline in stock prices, as my top ETF recommendations are up 37 percent, 33.2 percent and 17.5 percent, respectively, since the inaugural edition of The ETF Strategist on Sept. 18, 2007.
Unfortunately, we've also had one losing investment recommendation — that's right, only one loser — which has generated an unrealized return of negative 8.6 percent since we first recommended it for purchase.
Yeah, I know, what a surprise, right? I'm willing to admit that not all of my investment recommendations for The ETF Strategist have resulted in profitable investment returns.
I bet you've rarely heard that from other investment professionals. They are rarely willing to admit so readily that their investment recommendations did not perform in the way they initially expected.
An admission of losing investment advice simply isn't in the vernacular of the strong majority of these so-called experts.
But, maybe I shouldn't be surprised, after considering that so many Wall Street "experts" told their followers only a few months ago that the U.S. economy was in good shape, that inflation didn't exist and that stocks were "cheap."
Just one more note on The ETF Strategist: On an equally-weighted basis, our recommended conservative portfolio of ETFs has returned 9.2 percent since we started The ETF Strategist last September, while our aggressive portfolio has returned 22.1 percent. In comparison, the S&P 500 Index has fallen 6.5 percent during this same period.
OK, let's get to the latest economic developments.
Yesterday morning, the U.S. Department of Commerce reported that retail sales fell 0.4 percent during December vs. the prior month, and that this important indicator of economic activity slowed to a year-over-year rate of 4.1 percent, from 5.9 percent in November. Sales at major retail chain stores grew at the slowest pace since 2002 – just as I began forecasting would happen this past August.
The mainstream financial media commented on the retail sales report by stating that retail sales "unexpectedly" or "surprisingly" declined in December. However, my models show that there was nothing unexpected or surprising about the latest retail sales figures.
Another "surprising" and "unfortunate" economic statistic that was released Tuesday morning was the latest reading on wholesale inflation, with the U.S. Department of Commerce reporting that finished manufactured goods ready for distribution to retailers rose 6.8 percent during December, following a 7.7 percent increase in November. Consumer prices are up sharply, too, naturally.
Adding to yesterday's "bad" economic statistics, Citigroup posted the biggest loss in the U.S. bank's 196-year history, as surging defaults on home loans forced the bank to write down the value of its mortgage investments by another staggering $18 billion.
As the result, Citigroup cut its quarterly dividend for the first time since the bank merged with Travelers in 1998. (Only two months ago, Citigroup announced that it had no plans to reduce the company's dividend – sound familiar?).
But, as I've warned in the past, I urge you to ignore the Wall Street cheerleaders who've repeatedly claimed over the past few months that the stocks of financial institutions are "cheap" – even though the prices of those stocks have continued to decline.
My research indicates that those same stocks will still get a lot "cheaper" – that is, continue to fall, as fourth quarter corporate profits for companies in the financial sector are on track to be the worst earnings period for the financial industry in many years.
If you'd like to hear more of my thoughts and analysis of the investment markets, you may want to try The ETF Strategist. For a trial subscription to this top-performing investment newsletter go here now.
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