Below is the Dogs of the Dow for 2021 with the breakdown of the other categories that we track.
- Japan
- Market Indicator
- Price Momentum Indicators
- Richard Russell
- Silver
- Speed Resistance Lines
- U.S. Dividend Watch List
Penultimate Profit Prospects: Then and Now
2020 Penultimate Profit Prospect and our Alternative
On January 12, 2020, we published the Penultimate Profit Prospect (PPP) based on the work of Micheal O’Higgins book Beating The Dow. For 2020, Pfizer (PFE) was the stock that was supposed to fit the guidelines of the stock that should have been selected. Additionally, we provided the alternative to the PPP which was Nike Inc. (NKE).
For the year of 2020, we have charted the price change in the Dow Jones Industrial Average, Pfizer, and Nike.
As it can be seen, Nike Inc. ended the year with a gain of over +39% while Pfizer, working on the COVID vaccine but kicked out of the Dow Jones Industrial Average, falling near -1% for the entire year.
2021 Penultimate Profit Prospect and our Alternative Continue reading
2020 Dogs of the Dow
Below is a chart of the performance of the Dogs of the Dow from December 31, 2019 to December 31, 2020.
As with 2019, the Dogs of the Dow (ten high yield stocks) failed to exceed the performance of the Dow Jones Industrial Average in 2020. In addition, the Dogs of the Dow (ten high yield stocks) severely underperformed the low yield stocks with a spread of 32 points.
Our commentary from the January 2020 Dogs of the Dow watch list had the following to say:
“…high price to book, high price to earnings, and low dividend yield are the categories that we like the most for outperformance...”
Overall, the performance of the respective categories achieved the stated objective. High price to earnings faltered with only the (2nd, 3rd, & 4th) grouping managing to match the DJIA.
High yield stocks not only underperformed they also led the charge lower. If the DJIA index managers are done with changes to the index, we should see the high yield stocks match or exceed the index as years of exceptional gain must come to an end and the stocks that have already been punished should outperform solely by virtue of not declining as much.
see also:
Posted in Dogs of the Dow, Low Yield
Transaction Alert
We executed the following transaction(s):
Coppock Stocks: December 2020
The market ended the year up more than 15%. Last month we published the first list of individual companies using Coppock indicator and the average gain was 5.0%, exceeding the S&P 500 gain of 2.3%.
The table below contains 9 companies that completed the buying indication based on the Coppock Curve at the end of December 2020.
The statistics below are based on a holding period of 1 year. One measure to pay close attention to is the success rate which is the number of times this indicator yielded a positive return within 1 year. The loss columns are there to remind us that investing is not risk free. Continue reading
When the Fed Tried But Couldn’t Crush Stocks
By the logic of many, the stock market is being propped by the Federal Reserve. How is the Fed propping the stock market? Pushing interest rates down and keeping them down and possibly considering going negative on rates.
As we’ve consistently maintained, the Fed doesn’t matter. The following is an example of when it appeared as though the Fed was doing everything in their power to undermine the rise in the stock market.
The standard arguments to the increase of the Dow Jones Industrial Average include the New Deal programs implemented in 1933 and/or WWII which began in 1939. These claims sound good but don’t quite explain the reversal of the Dow Jones Industrial Average in July 1932.
If the claim is that the Fed is propping the stock market now then it is because an examination of the extensive history of rate increases from 1942 to 1968 hasn’t been reviewed.
Finally, if the claim is that the Fed is bound and determined to use every tool in the playbook to increase the stock market, then by the record of the period from 1934 to 1971, we should see the discount rate increase ten times and a constant fiddling with the margin rate.
It is possible that the low rates and unlimited “stimulus” measure is actually capping the rise of the stock market.
2020 Penultimate Profit Prospect Results
On January 12, 2020, we said the following:
“…we’ve elected to choose the second lowest yielding stock (Nike), regardless of price, to see if it would perform any better than O’Higgins Penultimate Profit Prospect stock.”
For the year of 2020, the Penultimate Profit Prospect stock was Pfizer (PFE) as outlined in Michael O’Higgins book Beating the Dow.
Below is the performance of Nike (NKE) and Pfizer (PFE).
GDP versus the Market
In our last posting on January 16, 2020, we said the following:
“Worth noting is the fact that in periods when the year-over-year (YoY) data on the stock market went negative, as last shown in Q1 2019, the following recovery exceeded 20%, at minimum. Currently, as reported by the Federal Reserve Bank of St. Louis, we’ve seen an increase of approximately +12% from the Q1 2019 y-o-y low.”
At this time, the Wilshire 5000 sits at a +17% increase above the same quarter last year (October 2019). Meanwhile, the GDP data says there is a long way to go before achieving the descending trendline of 2.11% (YoY) from 1975.
Exceeding the 2.11% level in GDP will likely warrant the NBER declaring the recession as ended. However, we will wait to see as the pandemic seems to be resisting even the best of intentions.
Posted in GDP, Wilshire 5000
2020 Year to Date Index Returns
NYT Recession/Depression Index
On June 8, 2020, the National Bureau of Economic Research (NBER) officially declared the U.S. economy in recession. This follows the prior call of a recovery in the U.S. economy in June 2009. What does the New York Times Recession/Depression Index look like as of December 22, 2020?
We have put blue arrows to show the points of interest to us. We believe that we’re in the early stages of the recession which should see an intermediate drop in the indicator before another spike to a new high level. That spike should be at or above the 300 level and the peak would mark the end of the recession (+/- month).
See Also:
Posted in NYT Recession/Depression Index
Money Standards: Gold, Silver, & Paper
Below is a list of money standards, starting in 1870. Periods prior to 1870 will be added over time so please check back for updates.
The goal of this list is to update the areas missing with data that informs on why the standard ended. Any contributions to this topic are appreciated, especially if they accompanied with full citations from the sources.
2020 Year to Date Investment Returns
Below is a chart of investment returns for various instruments as published by Business Insider. This includes the 2nd, 3rd, and 4th ranked low yield stocks of the Dow Jones Industrial Average.
see also:
Posted in Bitcoin, Crude Oil, Dogs of the Dow, Index YTD
2020 Book List
Below are the books that we’ve read cover-to-cover in 2020. Don’t forget to check out our 2018, 2017, 2016 and Dow Theory Letters book lists.
The top three must read books from the latest list are:
The Market Ratio: December 2020
Since our last posting on the Market Ratio on August 13, 2020, the Dow Jones Industrial Average has increased approximately +7.40%.
However, this wasn’t the payoff based on our work of August 13, 2020. As seen below, the payoff has been a gain of nearly 3x what the DJIA had achieved in the same period. Continue reading