2009 should be a vintage year for your portfolio

The world markets are generally in positive territory again today. Typically the market moves in waves of buying and selling. Traders concentrate on the daily ripples and institutional money managers focus on three years or longer but continually turn over their portfolio once or twice during the year because there are many sectors and they are always rotating. In the past I did some rotating about every three months when stocks hit relative highs that met my original targets. The Re-spiral method I have tested for two years and now use tends to work for major moves in once a year and out once a year when I go into more cash or short positions. So since I am now in the market I would not be surprised to see a sell signal some time in 2009 only because statistically that is what tends to happen. However the method does not predict such an event at this time and with the new “President Obama” the honeymoon with the analysts and newly polyannerized press the stock market could go right up all year long.

The housing implosion could be solved by mid year causing hundreds of $billions in upward revisions to bank assets with tens of $billions in profits immediately. Because Obama has already attracted such wealthy (though perhaps addle minded) patrons as Soros and Warren Buffet we can expect even more international wealth to be attracted back to the stock markets. We can expect the dollar to start off weak favoring investment abroad but later there would be long term profits from relative improvements in American exports. So we would want to rotate into more domestic investments before the dollar started to strengthen again. Ideally the dollar would be weak well into summer to bring tourism to America in 2009.

Therefore in 2009, even if the stock market moves up all year we expect the need to at least rotate investments over the year. Currently we favor high dividend stocks with safe balance sheets (cash and little debt). Those are a mix of US and foreign at this moment. Also Asian and Pacific stock ETFs (excluding Japan) still look oversold and in an upturn at this time.

At a minimum we should be diversified over five sectors... but that implies about $20,000 minimum. Less than that implies risk which increases toward 100% as a portfolio approaches $2000 because $2000 is where some brokers begin to annoy their customers because they in general do not like the small investor. Above $100,000 the expense side gets appreciably smaller and by the time your portfolio hits $500,000 they roll out the red carpet for you.

The last week or two of the year is usually bullish because the market makers want to put more money to work and show some great stocks in their portfolio. So these low volume good days are no guarantee 2009 will start off good. But I do indeed expect a good start in January. Most of the analysts favored Obama and so we should not fault analysts for their emotional and irrational negativism in the last days of the Bush administration. They want President Bush to look as bad as possible so that Obama will look that much better. But when Obama becomes president in twenty days you are going to think the campaign has begun again. The analysts will be falling all over themselves to say good things about the American economy to make the new “President Obama” look more infallible than the Pope. Don’t be surprised if international leaders including the Pope come to Washington for an audience and perhaps a blessing from “President Obama”. The stock market should shoot up at least 100 days until the first setback.

Have a very prosperous new year.