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 Just a Do-Over -- Despite all the market drama last year, the S&P 500 finished the year within 0.04 of a point of where it started. It's as if 2011 didn't really matter. But it did for investors with limited portfolios of individual stocks. Five of our six models managed to best their benchmarks although returns, like those of the broad market, were fairly muted.
Lessons from Portfolio 2 -- It's every investor's dream to buy the next Microsoft when it first goes public and hold on until it becomes one of the top companies in the S&P 500. Rags to riches makes a great story, but that's not really how long-term investors make money in small caps. Our small cap Portfolio 2 is a prime example.
The Election Year Economy -- There are few things in life that can be known with complete certainty. One is that if you consistently spend more than you have, your financial status will consistently deteriorate. A second certainty is that stocks, bonds, and virtually all investments will perform better in an environment of financial stability and economic growth. Can investors count on politicians to come up with a way to do that when they're on the campaign trail?
The Search for Forward-Looking Factors -- Quantitative investors are often faulted for focusing on the past when making decisions for the future. Instead, many investors seek "forward looking" measures rather than those derived from the past. Initially that makes sense because if certain factors lead to future success, they should work regardless of what happened in the past. Unfortunately, what often sounds reasonable in theory isn't possible to apply in practice.
 Don't be scared by the name. Sure it sounds like something you tried to avoid in high school, but there really is something to it. Here -- in plain English -- is how you can make math work for you in portfolio construction.
Why rely on value, or growth, or any particular style for that matter? There are good reasons to consider each of these approaches -- and they're not as different as you might think.
Any monkey -- or even mutual fund manager -- can pick a bunch of stocks, but can they really build a portfolio? Here's how you can.  If you're a regular visitor, you might want to know what changed since the last time you were here. Look no further.
Unlike some of those newsletters you pay for that always tell you how wonderfully some of their selections did, we show you the whole shooting match.
The old page museum where you'll find previous commentary ("Stating the Obvious"), economic forecasts ("True Facts"), and evolution of our quant models ("Work in Progress"). Nothing's changed although dead links have been removed.  For the Week Ending February 10, 2012 Stocks went virtually nowhere last week until yet more worries from Greece led to some Friday selling.. When viewed against January's gains and the hot start to February, investors were left wondering if this was a sign of a coming correction. It's one thing for stocks to pause to catch their breath, it's quite another if it's the turning point before a quick retracement. Those fearing a correction point to the fact that even in a bull market, stocks tend to take two steps forward and one backward. Maybe it's the Fibonacci sequence or just a coincidence, but the market tends to move in cycles in which gains are often followed by something approximating a 33% pullback towards the rally's starting point. In more dire situations, steep gains mark the final stage of a bull market. This so-called "blow-off" phase marks the peak of the euphoria when just about everyone has turned bullish. Indeed there are indications that after January, bears may be throwing in the towels. Some of Wall Streets perma-bears are now sounding more bullish in their near-term outlooks. Analysts who started the year with cautious notes are now raising their future estimates to the extent it will be difficult for companies to meet, much less exceed, them. If everyone's already bought or is buying now, who will in the future?
That being said, it's not clear the bull has finished its run. Valuations, while more stretched than a month ago, are still not exceptionally high. The Financial sector which typically leads the market up, has yet to truly participate in the current upswing. Perhaps the government-forged settlement with major mortgage lenders announced last week will clear the air for the Financials' return. If so, that could provide the impetus for at least another leg up. Regardless of when a correction does occur, investors are right to be circumspect. It's not like they haven't seen this before -- in fact, they saw it just last year. As you'll notice from the nearby chart, 2011 got off to a quick start, too. January's gains were muted by the late month pullback, but shares quickly recovered leaving them up almost 7% by mid-February. By mid-March, stocks were back where they started, wiping out all of the early year gains. So far, 2012 is following in 2011's footsteps, except the gains have been steeper and there really haven't been any notable mid-course pullbacks. If anything, that arguably makes a correction even more likely than last year at this time. Nothing is ever certain in investing, that's why it offers higher returns than simple saving. Perhaps one thing that comes close to being certain is that stocks can't and won't go up indefinitely. What investors need to consider is if the pullback -- whenever it comes -- will be as sharp as 2011's. If that's the concern, it's probably a good time to capture a few gains. One other almost certainty is no one ever lost money taking profits.
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