Fidelity Select Fundranker

Fundranker Blog—December 2008 Archive

Is it time to reinvest?

The Fundranker system does not try to predict what may happen in the short term; using past performance, it attempts to position you advantageously for whatever may happen. Using the Fundranker system, you don’t have to make emotional decisions each month on whether to stay in the market or not, or get back in or not. More often than not, emotional investment decisions lead to worse results than sticking with a sound system like Fundranker.

Be that as it may, did you move some or all of your investments to cash recently because of the recent downturn, the worst since the 1930’s Depression? If you did, you weren’t alone, by any means. The question now is when should you reinvest your cash in Top Eight Model Portfolio funds?

December is looking good for the market and even better for Fundranker so far, and we all hope that recovery will continue in 2009, but should you reinvest in January? Unfortunately, if you moved to cash, that is a decision only you can make. Perhaps you should think of your reinvestment decision the same as if you were investing in Top Eight Model Portfolio funds for the first time. No matter which month you decide to reinvest, just as when you first invested using the Fundranker system, Fundranker will begin to position you advantageously for whatever happens.

One thing we can and do say here at Fidelity Select Fundranker is that despite the recent downturn, our Top Eight Model Portfolio still has better long term performance than the S&P 500 and the Nasdaq Composite indices, and we have confidence in future long term results for the Fundranker system.

Posted 12/21/08 12:28pm ET in Fundranker | Permalink | Comments (0)

December Rally

The market has finally turned somewhat positive in December. After the Top Eight Model Portfolio, the S&P 500 tracking portfolio, and the Nasdaq Composite tracking portfolio suffered sharp losses of 8.1%, 8.9%, 9.0%, respectively, on December 1, they have come roaring back with gains of 10.1%, 6.6%, and 8.1%, respectively, through December 15. The Top Eight Model Portfolio clearly has outperformed the market indices during this 10 trading day period. In fact, one of the new funds Fundranker bought on December 3 gained 23.4% through December 15. Is this the beginning of a bull market or just a bear market rally? The stock market is usually an advance indicator for the economy, but who knows how long and deep our recession will be? Only time will tell, but in the meantime, let Fundranker position you advantageously for whatever rallies do occur.

Posted 12/16/08 1:12pm ET in Market | Permalink | Comments (0)

Global Recession

The bad news just keeps on coming. The World Bank released a forecast this week saying that the world is on the brink of a rare global recession. It predicts that the global economy will eke out growth of 0.9% in 2009, down from 2.5% this year and 4% in 2006, but that world trade will fall next year for the first time since 1982. Deutsche Bank is even more pessimistic, forecasting global growth of only 0.2%, even less than the 0.3% recorded in 1982. Justin Lin, chief economist at the World Bank, summarized as follows, “We know that the financial crisis now is likely to be the worst since the 1930s.” The World Bank report gives hope that a recovery will begin to show results with 3% growth for the global economy in 2010.

Marc Ambinder, in his politics blog at the Atlantic magazine, recently wrote that it seems that Barack Obama’s economics transition team is very worried that the economy will get a lot worse before it gets better, as in double digit unemployment, huge declines in aggregate demand, and significant, persistent deficits. However, he also says that the general level of concern among Obama advisers and transition staffers is reassuring; that they actually get the magnitude of the problems and are paying attention.

The news these days has been inundating us with bits and pieces of the current bad economic climate. The World Bank and Deutsche Bank forecasts along with articles like Marc Ambinder’s help paint the big picture for us, and a bleak picture it is.

Posted 12/11/08 12:13pm ET in Economy | Permalink | Comments (0)

NBER Recession Declaration

The National Bureau of Economic Research announced on December 1 that our economy entered a recession in December, 2007. This is par for the course for NBER, which in its own words, always waits long enough so that the existence of a recession is not at all in doubt and until it can assign an accurate date. Apparently, NBER is not in the business of calling recessions in a timely fashion; it is only in the business of saying when they begin and end, and it waits until it is absolutely certain to make its announcements. Despite this completely unsurprising announcement coming an entire year after the recession started, there is not much doubt that it contributed to the DJIA’s 678 plunge on December 1. Maybe this final and definitive corroboration of the fact of recession was like the straw that broke the camel’s back.

The NBER is equally careful on saying when recessions end. It did not announce the end date of the last recession (November, 2001) until July 17, 2003, nearly two years later. In fact, the NBER did not announce the beginning of the last recession (March, 2001) until November 26, 2001, which turned out to be the month it ended.

It seems pretty safe to say that is not the case this time, as there is little doubt we are still in recession and will be into 2009, if not longer. It remains to be seen how huge economic bailout and stimulus plans, both recent and soon to come, will impact the eventual end date of this recession. The only safe bet now is that this recession will be over long before the NBER tells us so.

Posted 12/7/08 7:45pm ET in Economy | Permalink | Comments (0)

Retail Sales

The Christmas shopping season is not looking so good this year, or is it? On one hand, retailers cut prices enough to get lots of shoppers out the day after Thanksgiving, nicknamed Black Friday because it traditionally is when large retailers finally have enough sales to go from operating in the red to operating in the black for the year. But the deep discounts needed to get shoppers out combined with Thanksgiving falling late in November have really cut into profits this year. For example, Abercrombie & Fitch’s November same store sales were down 28%, Kohl’s were down 17%, Target’s were down 10.4%, and Costco’s were down 5%. Wal-Mart stood out with November same store sales that increased 3.4%. Same store sales declined an average of 2.5% for 40 retailers that reported on Thursday, according to TNS Retail Forward, a market research and consulting firm. A year ago, the same retailers reported same store sales had increased an average 4.3% from 2006.

But take a look at how Select Retailing has performed in December, gaining 6.45% in the first five trading days this month, more than any other Select fund. The stock market is usually an advance indicator for the economy. Is Select Retailing’s gain just an anomaly, or is the market trying to tell us something about retail sales?

Posted 12/5/08 9:35pm ET in Economy | Permalink | Comments (0)

Missing Out

The November/December issue of Fidelity Investor’s Monthly has a good article about the hazard of missing time in the stock market. An S&P 500 index investor who capitulates after big drops in the index and sells his position can easily miss some of the best days in the market. For example, if you sold on Black Monday, October 19, 1987, when the S&P 500 fell 20%, you would have missed out on the 15% rally over the next two days. If you sold on October 10, 2008, after the S&P 500 fell for eight consecutive days, you would have missed out on the S&P 500’s 12% gain the following day. More recently, if you sold on November 20, 2008, after the S&P 500 fell 17.4% over five days, you would have missed out on the 19.2% gain over the succeeding five days.

The Fidelity article also charted the performance of the S&P 500 from January 1, 1980, to October 31, 2008, nearly 28 years. A $10,000 investment in the S&P 500 would have grown to $202,730 with a buy and hold strategy. If the investor had missed just the best five days for the S&P 500, the portfolio’s ending value would be only $134,842, 33% less. Missing the 10 best days lowers the ending portfolio value to $104,648, a drop of 48%. Missing the 30 best days impacts the ending portfolio value even more, lowering it to $45,703, 77% less. Finally, missing the best 50 days leaves the investor with an ending portfolio worth only $22,969, 88% less.

Analyses like this one are popular during times of market downturns, but that doesn’t make them any less meaningful. It never hurts to emphasize the perils of trying to time the market, especially in times of great turmoil, when it is even more tempting to do so.

Posted 12/4/08 12:02pm ET in Market | Permalink | Comments (0)