Despite some headlines, last week proved uneventful for our portfolio:
- Maxtor +0%
- UTStarcom +0%
- Disney -1%
- ProFunds Ultra Semiconductor +2%
That leaves Maxtor and UTStarcom up a respective 48% and 30% since I suggested them. I think we’ll see them move higher into the new year. You can always see a quick snapshot of recent performance in the Kelly Command Center box at left.
I was pleased to see my Double The Dow portfolio move up 2% last week. That puts the running portfolio balance at $15,545. Despite being down some 16% earlier this fall, it now stands at +3% so far this year. It’s nice to see this tried-and-true strategy continue to work through all types of environments. It’s a wonderful core portfolio holding for the long term, particularly well-suited to you dollar-cost-averagers. If you are looking for something to buy every month regardless of price, my Double The Dow portfolio should be at the top of your list. Don’t know what it is? You can read about it and all of my Dow strategies in Chapter 4 of The Neatest Little Guide to Stock Market Investing, then follow their ongoing success on my Strategies page.
So, what happened last week? The market started well and rose to midweek, then hit a big sell-off on Friday.
On Tuesday, the Federal Reserve raised the fed funds rate 25 basis points to 2.25% for a fifth consecutive time, and issued a statement that was almost exactly what it said in November: “With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” That probably means another rate increase in February. None of this surprised the market. So, when General Electric said that it expects double-digit growth starting in Q4 and better than expected revenue growth of 10%, the market heard an all-clear signal and rallied broadly.
Wednesday was another happy day when Sprint said it would buy Nextel for $35 billion.
Worth noting is that the Philadelphia Housing Index surged 3.3% as all the major homebuilders hit new 52-week highs. I think that sector along with the housing market in general is due for some down time. That doesn’t mean you should sell your home and move to an apartment in anticipation of lower property prices around the corner. But it does mean that you should not buy new property now. The seesaw of housing is that when interest rates are low, property prices are high. Well, interest rates hit 40-year lows in the past year so prices are way up. The action to take (as suggested here and in just about every other form of financial media) was to refinance your home and whatever other property you own. Now, that time is past. Rates are rising and we’re in a middle zone where we wait for property prices to react accordingly. Eventually, property prices will fall again as rates continue climbing higher. When all the media starts crying about the drop in home values, you know it’s a good time to buy property again. You’ll need to initially finance at a high rate, but when the cycle repeats and rates drop again, you can refinance. That’s the real estate game. Sit tight and keep saving your money for the day when bargains reappear on lawn signs.
Back to the week. All was going along well until Friday when Pfizer said that a cancer trial on its painkiller Celebrex showed increased risk of heart damage. The drug giant lost 11% and accounted for some 10% of the entire NYSE volume.
I don’t see how Celebrex affects the future of our holdings, nor the rest of the market. Friday was just a steam-blower for a market that has been steadily rising in this oft-predicted winter rally. It’s still winter, and it’s still a rally.
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