The Market Rebounded in February

After a very volatile 2014, 2015 so far has been just as volatile.  The S&P 500 closed down for the month of January, but rebounded and made much of it back in February.  Our TD Ameritrade portfolios fared well with nice gains.

We invested in multiple sectors, at times against and then with bonds, and it paid off.  Being nimble in February was advantageous.

Ben Graham, who Warren Buffet considers his most influential teacher, was once quoted saying:  “Mr. Market’s main job is to fool the majority of the investors, the majority of the time!”  It’s easy to see why Mr. Graham felt that way, because as we looked at our computer screens on March 6th, the jobs report that was released was fantastic, but both stocks and bonds lost big.

We believe the main reason for this is that the market is addicted to low interest rates.  The Federal Reserve has said that once they feel the economy is on a firm footing, they will likely raise interest rates.  Rates have been very low for almost 6 years, and when good economic data is released, the stock and bond markets seem to suffer because good news means the low interest rate environment may be coming to a close.

If interest rates move up, bonds will most likely lose.  Because we have the ability to invest against (inverse) bonds, we are excited about this new environment and the opportunity that it presents.  We still have stocks in most of our portfolios, but if we feel a market correction is imminent, we may sell some or all of them in certain portfolios.  For now, we believe the market will eventually go up because the economy is improving, despite the recent fear of interest rate increases.

Interesting Notes

You’ve got Mail! – Last year, AOL made $602.5 million from its old (but still active) dial-up Internet business, which boasts 2.2 million subscribers.  –  Quartz, February 12, 2015

New Age of War The United States Air Force now trains more drone operators than bomber or fighter pilots. – The Week, December 13, 2014

Penny for your thoughts? A penny minted in 1793, one of the first coins to be issued by the U.S., sold at auction for $2.3 million, for an annualized compounded rate of return of 9.06%. – The Washington Times, January 9, 2014

Unhealthy Investing – A recent study shows that over the past 115 years, U.S. tobacco stocks returned 14.6% annually, compared with 9.6% for all U.S. stocks. One dollar invested in tobacco stocks in 1900 would have grown to $6.3 million by the end of 2014; the same $1 invested in the broader stock market would have grown to $38,255 – The Wall Street Journal, February 13, 2015

Very Scary – One in four Americans are unaware that the Earth orbits the sun. – NPR, February 14, 2015

Lent – A study by the Barna Group, a California research group, found that 16% of those who observe Lent planned to curtail their use of sites like Facebook and Twitter. By contrast, some of the well-know vices – swearing and smoking – were cited by no more than 2% of lent observers. Chocolate remained the biggie with 30% saying they were banning the sweet stuff.  – Marketwatch, February 18, 2015

Honeybees – For nearly a decade, beekeepers have been losing roughly 30% of their bees each winter, above the 19% depletion rate they say is sustainable. Honeybees are responsible for pollinating roughly one-third of the American diet.  – The Wall Street Journal, January 23, 2015

Market Performance

Name Type As of Date 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
DJ Industrial Average TR TR 03-10-15 -2.93 -0.39 -0.84 1.34 10.10 13.78 13.70
NASDAQ Composite PR PR 03-10-15 -2.41 2.61 1.51 3.75 12.12 17.60 15.55
NYSE Composite PR 03-10-15 -3.37 -1.48 -2.17 0.15 1.83 9.64 7.82
Russell 2000 TR TR 03-10-15 -2.10 0.50 0.55 4.34 1.99 15.51 13.87
S&P 500 TR TR 03-10-15 -2.97 -0.31 -0.97 1.41 11.14 16.71 14.67
S&P MidCap 400 TR 03-10-15 -2.43 1.64 -0.41 4.49 8.12 16.06 15.25