A New Year

Hello my New Year's Friends.
This is going to be a great year---not because of a rampaging bull-market, but because we deal with the market at hand. We take what it gives us and we put market forces to work for us. I've written several thoughts, about the market, the political arena and the economy.

ITEM #1: I still do not think we'll have that rampaging bull market. Many have commented on the fact that it's an election year. This time, I don't agree. Usually the third year of a presidency is the best of the four years. That didn't pan out last year, with the markets closing up or down a fraction of the beginning. I think political news will give short-term direction to the movements in the market. Notice I didn't say that political news and opinions, would drive the market up a big way, or down by big moves. I think, for the most part, it is range bound. I think the Dow (The DJIA 30 stocks), to the extent that it represents the whole market, will trade between 11,600 and 12,800. And those two points are the extremes. If the market goes higher or lower, I think it will be only temporary---or better said, those moves will be outliers. Then it will settle back within those perimeters. In short, it's stuck. I've written before what it will take, and I'll mention it briefly here: We need a repeal of Sarbanes-Oxley---especially Reg. FD, or Regulation Fair Disclosure. What a destructive law. And it would be a great boon to get rid of the new law passed last summer: Dodd-Frank. We have not yet seen the destruction that this law will cause. It's horrible.

I won't wax too political here, but a simple observation. Many people think that the current administration is dangerous for America. I do too. I project that every time news comes out that the Republicans will win the presidency (and to a lesser extent the Senate) the market will go up, almost despite the quarterly news cycle or news out of Europe. Conversely, every time news or polls come out that point to four more years of the current socialist agenda, the market will go down.
I hear and read this sentiment everywhere. It will get more pronounced as we get near election day.

ITEM #2: I was reading an article in Barron's that said, in regards to the market this year, 2012. He said overall that " . . . state of the market, Corporate America, the economy and the world." I think this mirrors my own feelings, in that there is more to a stock price movement, or a whole market movement than just earnings, though I think earnings are vastly important. Read two paragraphs below.
Recently I wrote a blog entitled "Picturesque." I stated that we look at a stock or a company and have to consider the arena of its existence, the whole market, the economy and the whole world, especially the current state of Europe (Which I hope is not our destiny). I will now add one more consideration to the list: It is the product or service of the company. Look at LuluLemon Athletica (LULU). I think the Barron's quotation is right on, but some of the points seem confusing, in that they are redundant. Again, you will not make decisions in a vacuum. You will not invest in a stock that is unaffected by Presidential decisions or liberal policies.

All of these aspects effect earnings and earnings growth. Remember, a stock price today is based on one thing: "A STOCK PRICE TODAY IS BASED ON THE ANTICIPATION OF FUTURE EARNINGS." Do you see how interest rates, a debt crisis, a lawsuit, a new competitor, or a host of other things effect the price of a stock?

I hope to be of service this coming year. I will study and contemplate things and try to help you connect the dots better.
Wade