An Hour to Go….

It’s a pretty lousy day on Wall Street so far. Every stock on the Buy List is lower except for Frontier Airlines (FRNT). Unless things change very quickly, it looks like 2005 will be a negative year for the Dow. Today will mark the 298th straight day that the Dow will close between 10000 and 11000.
The S&P 500 has been a better performer this year. Last month, the index was able to break out to new highs. As recently as two weeks ago, the S&P 500 got to 1272, a level it hadn’t seen since June 2001. But the index is still about 18% below its all-time high set in 2000.
Today, the S&P 500 is in a nasty fight with 1,250. The indexes like to flirt with these year-end numbers. In 2003, the Nasdaq closed out the year at 2003.37. If the S&P ends at 1250, it will represent about a 5% gain for the year, including dividends. That’s about half the long-term average. Value has a narrow lead over growth this year, and mid-caps have beaten both small- and large-cap stocks.
I’m still amazed that interest rates are so low. The 10-year bond is also stuck in a trading range. Right now, an investor can lock-in a yield of roughly 4.4% for the next ten years. In my opinion, that’s absurdly low. Several of our stocks on the Buy List (and the new Buy List) will probably grow their earnings more over the next three years than that bond will do over the next decade.
I’m not so sure that stocks are a great value but they look a whole lot better than bonds. Plus, you can get about the same yield by buying a two-year bond.

Posted by on December 30th, 2005 at 2:44 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.