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Is the Market Overvalued? Interesting Thoughts from Fortune’s John Cassidy

By JLP | April 2, 2014

I found this tidbit from John Cassidy’s latest column in Fortune to be interesting:

“A couple of months ago I mentioned the cyclically adjusted price/earnings (CAPE) ratio, which was flashing amber. Another warning sign is provided by the so-called Q ratio, which compares the market value of corporate assets with their replacement cost, and which was developed by the late James Tobin, a Yale economist. As of March 6, when the S&P 500 closed at 1,877, the Q ratio was indicating that the market was overvalued by 76%, says Andrew Smithers, a London-based analyst who helped popularize the measure. The only times the market has been more overvalued with the late 1920s in the late 1990s.”

My wife and I are still in the accumulation phase and I’m not one to time to try to time the market. If the market comes crashing down, I simply won’t look at the 401(K) balance for a few months. Ignorance is bliss.

Topics: 401(k), Investing, Retirement Planning | No Comments »

America’s Future Doom and Gloom or Overblown?

By JLP | March 14, 2014

I have been (slowly) working my way through a book titled “Changing Texas – Implications of Addressing or Ignoring the Texas Challenge.” It’s a pretty dry read.

I came across this part that I wanted to share with you [brackets] mine:

1. The U.S. workforce is becoming more racially and ethnically diverse;

2. The racial and ethnic groups that are less well educated (e.g., Hispanics) are the fastest growing due to higher rates of natural increase and [illegal?] immigration;

3. The increasing rate of retirement of “baby boomers”–the most highly educated generation in United States history–is expected to lead to a drop in the average level of education of the U.S. workforce now and for the next two decades;

4. If these current population trends continue and states do not improve the education levels and graduation rates from high school and college for all racial and ethnic groups, the knowledge and skill levels of the U.S. workforce will decline;

5. If the knowledge and skill levels of the workforce decline, occupational achievement will be lower;

6. If occupational achievement declines, the income of the U.S. residents will decline;

7. If the levels of knowledge and skills of the U.S. workforce decline, more jobs will be exported off-shore;

8. As jobs are exported off-shore and U.S. residents’ incomes decline, the taxes paid by U.S. residents will decline; and

9. As taxes decline, revenue for state and federal support of state and federal of state and federal services will decline, including support for education.

This chain of interrelationships is dependent on the validity of three key demographic and socioeconomic trends:

1. The rate of increase in minority populations with reduced socioeconomic resource bases;

2. The relationship between the demographic characteristics of populations and the education level of the population; and

3. The relationships between education and income (both personal and household) and between education and poverty and other types of socioeconomic change.

Will jobs be exported or will people from other countries come to live and work in the U.S.? I have also read that basby boomers will most likely work longer because so many of them haven’t saved enough for retirement.

Either way, I do not like the sound of a less education society. I cannot see this as being a good thing.

Topics: Economics | 2 Comments »

As Goes January…?

By JLP | February 10, 2014

The S&P 500 Index was down 3.46% in January. There’s a saying that goes something like “As goes January…”

Well, based on history, that’s not necessarily true. Take a look at the following two graphics. The first one is all the returns (these are total returns) for the month of January listed in order from worst to best. The other column shows the total return for the remainder of that year (February – December). The second graphic summarizes those results, looking only at the Januaries with negative returns.

S&P 500 Januaries

Negative Januaries

Of the 33 Januaries with a negative return, 18 of them were followed by a positive return for the remainder of the year. Interestingly, of the 56 Januaries with a positive return, only 11 of them had a negative return for the February – December that followed.

Basically, January’s return doesn’t mean too much when it’s negative&151;at least as far as I have looked at it. I’m sure the results hinge more on where the January return is in a market cycle (not good for January 2014 if you look at 2013’s amazing year).

Anyway, I post the info and you form your own opinions.

Topics: S&P 500 Index | No Comments »

The Periodic Table of Dow Jones Total Market Index Sector Total Returns (Through 2013)

By JLP | January 2, 2014

Here is a newly-updated Periodic Table of Dow Jones Total Market Index Sector Total Returns:

Periodic Table of DJTMI Sector Returns (2013)

Topics: Investing | 1 Comment »

2013 Total Returns for the S&P 500 and Other Indexes

By JLP | January 1, 2014



What a year.

• The Dow Jones Industrial Average was up 29.65%

• The S&P 500 Index was up 32.39%

• The S&P MidCap 400 Index was up 33.50%

• The S&P SmallCap 600 was 41.31%

Of the ten indexes I keep track of here at AFM, 7 were up. Of the three that were down, Gold was by far the worst, losing 28.24% for the year.

The S&P 500’s 2013 return was its best since 1997 (it ranks 14th in the 88 years that I have data for).

You can view the full report (along with the numbers for 2011 and 2012) by clicking on the following graphic.

Index Performance - December 2013

Topics: Investing, S&P 500 Index | 1 Comment »

This Will Make You Laugh (or Cry)

By JLP | December 28, 2013

My wife bought me some Martini glasses for Christmas. We aren’t usually Martini drinkers so I had to go buy some supplies. My wife wanted to try a Cosmopolitan, which calls for cranberry juice. On my way home from the liquor store, I stopped at H-E-B, a popular grocery chain here in Texas. I picked up a bottle of Ocean Spray Cranberry Juice and this is what I saw:

Ocean Spray

Any time you see the phrase “NEW LOOK,” beware. It usually means the size has changed. Sure enough. They reduced the size from 64oz. to 60oz. The price…was still the same.

I don’t know about you guys, but I HATE this kind of inflation. I would rather the company just raise their prices than to try to be sneaky about it.

Anyway, when I got home I did a quick search and found a customer complaint regarding the new bottle size on Ocean Spray’s facebook page. This was their response (keep in mind that this response was written by someone who works for Ocean Spray):

“Hi Ethan, We understand your frustration. We did reduce our 100% juice drink bottles from 64 to 60 ounces to accommodate the rising costs in the bottling materials and juice concentrate used in our 100% line. We chose not to pass these rising costs onto the consumer, and therefore chose the alternative of reducing the bottle size. We still have a variety of 64 oz. options and would be happy to discuss with you further at 800-662-3263.”

So a reduction in the container size&151;while the price remains the same&151;ISN’T passing the rising costs onto the consumer? Did I really just read that?


I paid $2.97 for a 60oz. container (basically $.05 per ounce). Had I paid that same price per ounce for a 64oz. container, I would have paid $3.17. That’s the equivalent of a 6.7% price increase. IT IS A PRICE INCREASE.

I would rather companies just be honest with their customers rather than trying to treat us as if we are stupid.

Topics: Inflation | 5 Comments »

Venezuela Moves to Cap Prices. Dumb Move.

By JLP | November 12, 2013

This is just comical to me.

Venezuela Moves to Cap Prices, Profits

The cause for the inflation?

“The amount of bolĂ­vares in circulation rose 70% over the past year, a clear sign the government is printing ever larger amounts of money to stoke a slowing economy.”

So, the government floods the economy with new money, prices rise, and the government moves to cap prices. Pretty crazy, isn’t it?

Topics: Economics | 2 Comments »

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