Posted on October 19, 2012 | Stock Superstars Report

Stock Superstars alert for the week ending 10/19/2012 updated.

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Lessons from Black Monday

Posted on October 19, 2012 | Investor Update

Tomorrow will be the 25th anniversary of Black Monday. The Dow Jones industrial average lost more than 22% of its value on Monday, October, 19, 1987. The losses were not just restricted to stocks either, as the futures market was roiled by traders who incorrectly bet on arbitrage strategies.

The events of that day are well documented, and there are many texts about previous panics and market crashes. Developing an understanding of what happened and what factors compounded investors’ losses can help you better manage your portfolio in the future.

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GADGET CORNER – olloclip for iPhone 4/4S

Posted on October 19, 2012 | Computerized Investing

A three-in-one lens system for your iPhone 4/4S.

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Dogs of the Dow

Posted on October 19, 2012 | Financial Planning

Every January, Dogs of the Dow draws attention. The strategy is simple. At the start of every calendar year, sort through the 30 stocks in the Dow Jones Industrial Average and buy the 10 with the highest yields. An equal dollar amount is allocated to every stock and the portfolio is held for the entire year. On the first trading day of the next calendar year, repeat the process.

The idea behind the strategy is that every year a new portfolio will be created. This portfolio is designed to be held for 12 months. Investors should profit by purchasing supposedly out-of-favor stocks whose relative yields suggest their valuations are attractive.

The idea of buying the 10 highest-yielding Dow components was popularized by Michael O’Higgins and John Downes in “Beating the Dow” (Harper), first published in 1990. In the 2000 edition, the authors also discussed implementing the strategy at different times, such as in October or mid-December.

In actuality, there may be no benefit to buying stocks on the first day trading day of the New Year as opposed to, say, the day after Thanksgiving. While studies have shown that the markets tend to perform better between November and April than between May and October, last year “selling in May and going away” would have caused you to miss out on a rally that sent the Dow higher by more than 18%.

Yield is the amount of dividends paid relative to a stock’s price. The calculation is simple: total dividends expected to be paid over the next 12 months divided by current share price. For example, let’s say a company has historically paid a quarterly dividend of 25 cents per share and is expected to continue to do in the future. If the company’s stock trades at $40 per share, the yield would be 2.5%. (Total expected dividends of $1 per share divided by a $40 share price equals 2.5%.)

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AAII Sentiment Survey: Pessimism is at its highest level since June

Posted on October 18, 2012 | AAII Survey

Pessimism rose to its highest level since last June as optimism fell for the fourth consecutive week in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.9 percentage points to 28.7%. This is the lowest level of optimism registered by the survey since July 26, 2012. It is also the eighth consecutive week and the 28th out of the last 29 weeks that bullish sentiment is below its historical average of 39%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.8 percentage points to 26.8%. This ties June 7, 2012, for the lowest reading of 2012. The historical average is 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, jumped up 5.7 percentage points to 44.5%. This is the highest pessimism has been since June 7, 2012. It is also the eighth consecutive week and the 24th out of the last 28 weeks that bearish sentiment has been above its historical average of 30%.

The bull-bear spread, which measures the difference between bullish and bearish sentiment, is at -15.8. This is the most negative the spread has been since July 19, 2012.

Bearish sentiment is at unusually, but not extraordinarily, high levels. Though stocks pulled back last week, the market has rebounded this week. The economic data released over the survey period (Thursday morning through Wednesday night) has mostly matched or topped expectations.

There are a few factors at play. The first is that this year’s rally has been disliked, or at least not trusted, by many individual investors. The readings in our survey and the outflows from domestic equity mutual funds reported by the Investment Company Institute both suggest this. Some investors are worried about the potential outcome of the presidential election. There are also ongoing concerns about the pace of economic growth, Europe’s sovereign debt problems and the possibility of the fiscal cliff occurring.

It should be noted there are still individual investors who are encouraged by the year’s rally in stock prices and improvement in economic data.

This week’s special question asked AAII members if they think consumers will spend more or less on holiday shopping this year. (The National Retail Federation forecasts a 4.1% increase in sales.) By an approximate 2-to-1 ratio, respondents thought holiday sales will rise this year. The primary reason cited was better economic conditions and improved consumer confidence. Several responds also thought that many consumers are simply tired of austerity. Among those who thought spending would decline, a weak economic recovery was the most cited reason.

Here is a sampling of the responses:

  • “People want to spend more and buy things. They think they have been frugal enough.”
  • “More. The overall economy is improving, so spending will improve accordingly.”
  • “More people are employed than last year, so overall spending should increase.”
  • “Consumers will spend slightly less. Too many are unemployed or underemployed.”
  • “Less, many consumers are hurting.”
  • “I just walked through the mall and noticed in the window displays that hemlines are rising. That’s all the evidence I need to believe that the market and holiday sales are going up!”


The AAII Sentiment Survey has been conducted weekly since 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: July 1987 and asks AAII members whether they think stock prices will rise, remain essentially

Upcoming Chapter Meeting: AAII Birmingham

Posted on October 18, 2012 | Local Chapters

Date: Thursday, October 25, 2012
Topic: Top Six Risks for a Wholesome Financial Future
Speaker: Springna Zhao, Wealth Management Strategist, NEXT Financial Group, Inc.

Zhao will discuss the top six risks for an investor’s financial future. These will include rising health care costs, critical illnesses, tax law changes and other significant risks. These are all expected to have a major impact on investments in 2013.

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Weather Channel iOS App

Posted on October 18, 2012 | Computerized Investing

The Weather Channel iOS app delivers local weather forecasts, alerts and maps to your iPhone or iPod touch.

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Upcoming Chapter Meeting: AAII Twin Cities

Posted on October 18, 2012 | Local Chapters

Date: Thursday, October 25, 2012
Topic: Productivity as a Factor for Companies and Economies
Speaker: Tor Dahl, Tor Dahl & Associates

Professor Dahl presents a review of the relative growth paths and strategies of two similar-sized populations and economies—those of Singapore and Minnesota. Data will also be shared on the relative performance of the U.S. national and Minnesota state economies since 1929, with a particular focus on growth, tax policy and the political configurations of government. In addition to broader economic data, information, specifically about corporate performance, will be presented in terms of the actual profits earned by American companies under Republican and Democratic presidents and the consequences that arise from various configurations of split governments.

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Upcoming Chapter Meeting: AAII Los Angeles

Posted on October 18, 2012 | Local Chapters

Date: Saturday, October 20, 2012
Topic: How to Analyze a Stock
Speaker: Wayne A. Thorp, CFA, Senior Financial Analyst, AAII; Editor, Computerized Investing

AAII has been developing and testing a variety of stock screens for over 10 years. While many members follow these screens, a common question once they have their list of passing companies is “What now?” Using real-world examples and some of today’s most useful financial websites, Wayne will show you how to perform a step-by-step analysis of a company using popular online research and data sources to decide whether it’s right for your portfolio.

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Upcoming Chapter Meeting: AAII Washington D.C. Metro

Posted on October 18, 2012 | Local Chapters

Date: Saturday, October 20, 2012
Topic: Securing Your Lifetime Income Stream
Speaker: Bob Carlson, Editor, Retirement Watch

Americans increasingly are on their own to establish lifetime financial security. It’s especially difficult in a time of zero interest rates and rising taxes. Bob Carlson shows how to develop a steady, reliable paycheck for life. He highlights the tools still available, the traps to avoid and new strategies that increase financial security.

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