Wednesday, January 28, 2015

Advice from "The Departed"

There's a great scene in "The Departed" when Frank is trying to determine the rat in his organization; he asks himself "Who can do what I can do?" And that fellow financial farmers, is a great litmus test that should be incorporated into your own decision-making process when determining security selection. I think it is a valuable tool to ponder "What company can do what XXX can do?" And if you find yourself without an answer, that's a GOOD sign. It implies that XXX is indeed in possession of some type of monopolistic ability, base, location, or combination therein.

A good read on this subject is "Zero to One" which similarly identifies all monopolies as being all different in their excellence. Check it out!

Thursday, January 1, 2015

Happy New Year!

With solid gains again racked up in 2014, we now look to the upcoming investing year fellow financial farmers!

According to the Stock Trader's Almanac, years ending in "5" have been the MOST bullish (high returns) of any other year. Sound crazy? Well there's probably a pretty good reason for this anomaly, mainly it seems tied to political terms, and specifically, to the 3rd year of a Presidential term.

Consider the statistics that from 1885 to the present, essentially since reliable records of the index returns have been kept, the Dow Jones Industrial Average has had a mean return of 28.3% in years ending in "5"!

Let's also put things in perspective as well, though; consider that we still have record low interest rates with little to no chance of significant raises predicted anytime soon, a recovering real estate market that is still gathering steam, a job market that has pretty much reached its near-term full employment potential, sustained growth in domestic profits, and finally, and by no means the least, a protracted downturn in oil prices.

The combination of these factors bode well for a continued bull run in the stock market. 28.3% sure sounds nice to me. :-)

Although past performance is no guarantee of future performance, those who choose to Invest Like A Farmer can pull some interesting data points and reference material from years past to assist them in planting a solid 2015 portfolio.