AAII Investor Update: Put an Asterisk by Second-Quarter Results

Posted on July 27, 2012 | Investor Update

If there is a common theme we are seeing in second-quarter earnings reports, it’s the adverse impact the stronger dollar and the weaker global economy are having. Many companies are blaming both for dampening profits.

The slowing economy is curtailing spending. Earlier this week, truck manufacturer Paccar (PCAR) said its customers are choosing to hold onto aging trucks for a longer period of time, rather than replace them. The stronger dollar is hurting companies ranging from PepsiCo (PEP) to United Technologies (UTX). My colleague Wayne Thorp and I both feel like each earnings report we look at has a profit number that has been adjusted to offset the impact of currency translation.

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7/27/2012 automatic update and SSG files are available

Posted on July 27, 2012 | Stock Investor Pro

Automatic update for Stock Investor Pro and SSG files as of 7/27/2012 are available.

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Due Diligence: 10 Steps to Avoiding Ponzi Schemes and Financial Fraud

Posted on July 27, 2012 | Financial Planning

Bernie Madoff is now behind bars. But the uncovering of his enormous and long-running Ponzi scheme, and the fraud committed by several other financial hucksters, highlight the importance of asking the right questions and doing your own due diligence before selecting an advisor or participating in an investment.

What areas should you focus on when performing a due diligence review?

Here are 10 basic steps all investors can take—as well as certain indicators that should serve as red flag warning signs of the potential for trouble down the road.

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AAII Sentiment Survey: Bullish Sentiment Stays Below 30%

Posted on July 26, 2012 | AAII Survey

Bullish sentiment rebounded, but stayed below an unusually low level of 30% for the second consecutive week in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 5.9 percentage points to 28.1%. Even with the improvement, this is the first time optimism has been below 30% for two consecutive weeks since May 31 and June 7, 2012 This is also the 17th consecutive week that bullish sentiment has been below its historical average of 39%.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, plunged 7.3 percentage points to 28.8%. This is only the second time in the past six weeks that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.3 percentage points to 43.1%. This is a four-week high for pessimism. It is also the 12th consecutive week and the 15th out of the last 16 weeks that bearish sentiment has been above its historical average of 30%.

AAII members continue to worry that further declines in stock prices could occur over the short term. Bullish sentiment is in the midst of its longest streak of below-average readings since a 29-week period between April 2, 1993, and October 15, 1993. Market volatility, slowing global economic growth, Washington politics and the European sovereign debt crisis are all responsible for the downbeat outlook.

This week’s special question asked AAII members whether slowing global economic growth, the potential U.S. fiscal cliff or the European sovereign debt crisis pose the greatest risk for stock prices. Members were split between the three, though the fiscal cliff-the potential for significant budget cuts and the expiration of tax cuts-received just a few more votes than slowing growth or the European crisis. Several members said all three pose significant risks.

Here is a sampling of the responses:

“The U.S. fiscal cliff because all solutions hamper growth. Doing nothing puts us on the brink of disaster.”
“The U.S. fiscal cliff. The world needs the U.S. economy to be decent and this could kill it.”
“The European sovereign debt crisis. The fall of the euro will lead to a global banking crisis.”
“Slowing economic growth is the greatest risk because it will exacerbate both of the other risks.”
“Each risk is hard to quantify and if a worse case scenario occurs, it could have a significant impact on stock prices.”

This week’s AAII Sentiment Survey:

Bullish: 28.1%, up 5.9 percentage points
Neutral: 28.8%, down 7.3 percentage points
Bearish: 43.1%. up 1.3 percentage points

Historical averages:

Bullish: 39%
Neutral: 31%
Bearish: 30%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at: http://www.aaii.com/sentimentsurvey?a=blog

You CAN Lose With Bonds

Posted on July 26, 2012 | Investing

Stocks are risky because stock prices go up and down all the time—sometimes wildly so—and if you have money invested in stocks, the value of your original investment can drop substantially.

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Buy-and-Hold Versus Market Timing

Posted on July 26, 2012 | Computerized Investing

A look at Theodore Wong’s research into building a moving average crossover system and testing it against a buy-and-hold approach.

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Posted on July 25, 2012 | Computerized Investing

Internet Quotes Assistant – Internet Quotes Assistant (IQA) is a basic, yet useful program that helps users keep track of their investment portfolios.

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Sell of the week 7/25/2012

Posted on July 25, 2012 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Advanced Micro Devices (AMD) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week 7/25/2012


Posted on July 24, 2012 | Computerized Investing

Jemstep is a free online portfolio guidance and management system designed for individual investors. According to Jemstep, the website uses technology to provide objective, transparent ratings for more than 20,000 mutual funds and exchange-traded funds (ETFs). Jemstep takes into account your objectives, goals and risk tolerance and identifies recommended investment options. In addition, Jemstep is able to track your holdings.

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Posted on July 24, 2012 | Quarterly Mutual Fund Update

Mutual fund investors are constantly warned against chasing short-term performance, and the dangers of doing so were exemplified in the second quarter. What worked very well in the first quarter, didn’t work well in the second quarter. Conversely, some of the first quarter’s worst-performing categories were the best-performing categories in the second quarter.

A renewed focus on the European sovereign crisis combined with worries of a global economic slowdown caused many investors to adopt a more defensive stance. Many investors sought safety in government bond funds and dividends in less economically sensitive utility stock funds.

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