Posts tagged ‘MarketWatch’

The Halloween Indicator Buried at Cemetery in 2009

Scary

Boo!

Statisticians, economists, speculators, and superstitious investors have been known to get spooked by scary patterns. Tomorrow marks the end of the menacing six month period of supposed underperformance that starts in May and ends on Halloween. The so-called “Halloween Indicator” has popularized the expression of “sell in May and walk away.” The indicator obviously has not followed the alleged tendency in 2009, as there has been more “treat” than “trick” for investors over the last six months. The S&P has rallied about +22% (excluding dividends) with only one day left in the trading period. Numerous academics have studied the phenomenon and not surprisingly there is some debate regarding the validity of various studies (see past study) – differing opinions have risen to the surface, depending on the number of years compiled in the data.

Here is what Mark Hulbert at MarketWatch had to say on the subject:

“Over the Dow’s history up until the last 12 months, there were no fewer than 17 occasions (15% of the years) in which both the winter months turned in a net loss for the stock market and the summer months produced a gain. There furthermore were 45 years (41% of the time) in which the stock market during the summer period did better than it did over the winter months that immediately preceded it. So the stock market’s performance over the last 12 months is hardly exceptional. It would take a lot more than the recent seasonal missteps to convince a statistician that this long-term pattern has stopped working for good. “

Other calendar effects besides the Halloween Indicator include, the January Effect, Monday Effect, and Presidential Cycle. Even though some pundits point to evidence supporting calendar effects, in many cases the data is proved to be statistically insignificant.

With Halloween just around the corner, here’s Sidoxia Capital Management wishing you a larger bag of treats rather than tricks in your quest in following calendar effects.

Wall Street Halloween Costume Ideas:

Short of ideas for Halloween costumes this year? No need to fear. Here are a few bloodcurdling Wall Street costume ideas with the help of Joshua Brown at The Reformed Broker and our friends at Forbes:

Bernanke Mask

Top Ten Scariest Wall Street Halloween Costumes

 Forbes Halloween Masks

Halloween Index:

For those that would rather get there treats from the stock market rather than a candy bowl, perhaps you may find a sweet idea from Stockerblog’s Halloween Stock Index.

Have a happy and safe Halloween!

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management and client accounts do not have direct positions in any of the Halloween Stock Index companies with the exception of long positions in WMT for some Sidoxia accounts. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page

October 30, 2009 at 2:00 am Leave a comment

Tortuous Path to Productivity

Medieval public beheading

There is a silver lining to the deep, tortuous job cuts in this severe recession and it is called “productivity.” Those fortunate enough to retain their jobs are forced to become more productive. In layman’s terms, productivity simply is output divided by hours worked.

Unemployment dropped to 9.4% in July, thanks in part to a decline in the job losses to -247,000 from a peak in January of -741,000 job losses. During this period of job-loss cratering, we managed to sustain a decline of a mere -1% in Q2 Gross Domestic Product (GDP). How could we lose more than 6 million jobs since the beginning of 2008 and still be on a path to recovery? A large contributor is our friend, productivity, which came in at a whopping +6.4% in Q2 – the highest in six years.

Productivity increased in part because of a slashing of work-hours by employers. Employees that have maintained employment are therefore forced to produce more output (goods and services) per unit hour of employment. In this severe recession that we are pulling out of, the American worker is being stretched like a rubber band. At some point, the “Law of Diminishing Returns” kicks in and employers are forced to hire new employees to meet demand levels, or the rubber band will snap.

The prime ways of increasing productivity are raising the amount of capital per worker (capital intensity) and also elevating the workers’ average level of skill, education, and training (labor quality).

Not only are the surviving U.S. workers toiling harder, they are not getting pay increases large enough to offset inflation. For example, Q2 hourly compensation increased +0.2%, but after accounting for inflation, real hourly compensation was actually down -1.1%.

As the MarketWatch article points out:

The early stages of recovery are typically the best for productivity: Output is rising, but cost-cutting plans are still being implemented… Productivity gains are the key to higher living standards, higher wages, increased profits and low inflation… Productivity averaged about 2.7% annually from 1948 to 1970, then slowed to 1.6% from 1971 to 1995. Since then, productivity has grown about 2.5% annually. In 2008, productivity increased 1.8%.

 

Productivity allows the U.S. to produce more goods and services with fewer workers. For instance, the MarketWatch article also highlights the U.S. is producing 20% more output relative to a decade ago, yet employment has not changed at all over that time period.

We are certainly not out of the woods when it comes to the recession, and for those lucky enough to maintain employment, they are being asked (forced) to work more for less pay. These productivity improvements feel like torture to the survivors, however this pain will eventually lead to economic gain.

Wade W. Slome, CFA, CFP

Plan. Invest. Prosper.

August 20, 2009 at 4:00 am Leave a comment


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