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The 1995-2000 bubble.... and it was a humdinger.... was (as Don has pointed out) a direct result of the Federal Reserve depressing short-term interest rates to 3% in 1993, with bank CDs and other perfectly safe investment yields dipping under the magic 4%. In fact, I faced this problem myself about a year ago as a result of the Fed's current rerun of that scenario, with a renewing CD in an IRA. "I won't take less than 4%", I commented to the bank officer, which meant renewing the CD for 2 years. I figured at the time that the Fed would keep driving rates lower for at least another year (correct!) and that I might be able to ride out the "valley" in interest rates at 4%, then renew the CD for shorter terms to catch the next upswing in rates (strategy yet to be validated). I face the problem today in my TIAA-CREF retirement portfolio, where the money-market fund yields less than 2%. TIAA (at 6% or more) can be used as a money-market fund in my supplemental retirement annuity; in the regular retirement annuity, TIAA Real Estate is a viable alternative. You'll note that I'm no longer able to keep the "cash-equivalent" portion in the money-market fund at 5%-plus yield, as I did during the late-1990s bubble.
Excessive monetary growth always results in inflation. The problem with inflation is, people view it differently depending on where it occurs. Inflation is "bad" when people chase after goods and services (food, energy, consumer goods, collectibles), and "good" when people chase after financial assets (stocks, real estate), because they mentally mark up the values of those assets to market as the inflation takes hold, and are thus perceived to be "wealthier".
In the 1970s, demographics tipped the balance toward cost-of-goods inflation, because the baby-boomers were getting married and having children. In the 1990s and now, the kids have flown the coop (hopefully! ....sometimes, they bounce back), the crushing college loans are being reduced, and folks are thinking about their retirement, and maybe even doing something about it. This demographic bias will likely persist to about 2010, when the boomers begin retiring in large numbers and the baby-busters try to pay the bill.
So here we have Joe and Jane Boomer, who perhaps have within the last few years finally been able to set aside something for retirement, looking where to put their money. It keeps pouring into their 401(k)s, SEPs or IRAs every month, maybe even with "free" matching money from their employers, and the choices of where to put that money are.... various flavors of stock mutual funds, bond funds, perhaps a guaranteed-income fund, and the money-market fund, paying less than 2%. OK, so stocks haven't done too well for the past two years, but "stocks always go up over the long term", right? Joe and Jane look at the two-decade history of double-digit returns for stocks, and at the single-digit returns for bonds, and at that measly 2% return on the money-market fund... and you get one guess, and only one, as to where they're going to put those additional funds.
Our perverse tax laws also push them into this choice. Money put into 401(k)s and 403(b)s (and for some people, into classic IRAs) is pre-tax and thus reduces one's current income tax bill, and the earnings are tax-free until withdrawn. Meanwhile, mortgage interest rates, thanks to the Fed's easing, are around 7%, and inflation is about 2.5%, so the real cost of a loan against the house is about 4.5%. Itemizers get a 28% rebate (typically) on the interest expense from Uncle Sam, reducing the real cost to about 3.3%. If the borrowed money is fed into the 401(k), it will earn (historically) in excess of 7% per year in stocks after allowing for inflation (CPI). Let's see, that's a "free" inflation-adjusted return of 3.7% or more per year, as long as one can afford to "fund" the 401(k) through mortgage payments. If your employer offers, say, a 50% match to your funds in a vesting plan, that can easily place your effective after-inflation return in the low double digits over a decade.
Of course, people don't directly pour their home equity into their retirement plans, because they can't. It's done circuitously.... they fund their retirement plans through payroll deduction, then draw on their home equity for living expenses, or that Caribbean vacation cruise, or whatever. People do receive a real benefit when the Fed forces down short-term interest rates, and mortgage rates follow.... for they then can refinance their mortgages or home-equity loans and free up maybe several hundred dollars per month of income, some of which no doubt is used to retire credit-card-type debt or to pay bills, but some of which also will go into retirement plans which previously weren't affordable.
Thank your generous Uncle Al for a pretty good arbitrage deal. Like most arbitrage setups, it won't persist because people will descend in droves to take advantage of it, and prices will shift.... specifically, rise.... until the arbitrage advantage disappears. This shift can take the form of increased loan demand forcing mortgage interest rates higher.... or higher prices at which stocks are bought, reducing their long-term rate of return.... or higher prices on residential real estate, because it's in demand as something to borrow against. Probably, all three will be happen.
Let's be honest about the aftermath of the previous bubble. It's only partly popped. The greatest silliness was in the NASDAQ, with the telecom and dot-com rocket rides. Uncle Al's aggressive easing has forestalled a bloodbath in the broader market with its large-cap stocks (so far). Sure, a money-market fund has outperformed the S&P 500 for the past five years, but this has been no greater disaster than most typical postwar bear markets. (So what if stocks are still high priced? They've been that way for a decade, and that didn't prevent them from becoming more overpriced!)
So, when Uncle Al's thoughtfully-provided gusher of money starts looking for a home, my guess is that it will settle on that which suffered the least in the previous bubble's demise.... namely, big-cap and "value" stocks, and real estate, especially homes. I can already see this happening in real estate here in Worcester, the financial backwater of America, where house prices have risen 20% in the past three years, and continue to climb irrespective of the recession.
Once upon a time, people used to own their own homes. Maybe when you were young, you and the bank owned your home, but when you were ready to retire you owned it free and clear. Today, it's not clear who owns your house, especially if you've indulged in one of those "125% of appraised value" home-equity loans. If you have no equity in it, then you "own" it in name only. We could say the bank owns it, but probably not.... the bank probably sold your mortgage/loan and just collects its processing fees. Your loan has been repackaged - "securitized" - with others and sold to investors. Who owns your house? Other homeowners, through the derivatives held by REITS and mutual funds which are in turn held in the homeowners' IRAs and 401(k)s. We all own each others' houses.... and those of us who do own our own homes free and clear indirectly own the homes of those of you who are still in hock.
Just as with auto and credit-card debt, there is a reduced level of risk for an individual default when mortgage debt is securitized. But this does not protect against systemic risk. Exactly why Congress, in its great wisdom, decided to provide incentives for people to hock their homes at inflated prices so they could, in effect, trade them in for paper assets at inflated prices, is beyond me. (The American dream: Own your own home derivative.)
We were lucky in the bubble that just passed, because the craziness occurred mainly in a segment of the stock market; bonds, most stocks and real estate were not as greatly affected. When the Japanese bubble of the 1980s popped, it could not (in my opinion) be readily reflated because in their bubble, both stock and real-estate prices had been driven to absurd levels, and both were intricately intertwined through the Japanese banking system.
My concern is that in our next bubble, we will make the same mistake the Japanese did.... the values of both large-cap stocks and residential real estate will soar, and both will simultaneously correct when the next bubble pops. (In other words, your house will decline in value and your equity will disappear.... at the same time the net worth of your 401(k) shrinks because it indirectly reflects the value of real estate nationwide. Not a pretty picture.) In this case, Uncle Al, if he's still in charge then, will (like the Japanese) find it much more difficult to reflate the bubble due to the intertwining of paper-asset and real-estate values. And if real estate corrects sharply, the banks will be in serious trouble, just as they are in Japan.
Just how many iterations of bubble-popping and reflating we can go through before the
system is stretched to the breaking point, I don't know. But if the next bubble includes the
inflating of real estate to the extent I think it will, then we may be visiting that breaking point a
lot sooner than any of us would like.
Looking only at the most obvious and the most spectacular, unsustainable imbalances is more than shocking, it is frightening: Grossly overvalued equities, near-zero personal savings, the monstrous trade deficit, steeply rising trillions of foreign debts, a hugely overvalued dollar, badly weakened corporate balance sheets, the lowest corporate profitability in the whole postwar period, and a financial system that is founded on the most fantastic leverage. This is a virtual Pandora's box of interrelated and interdependent bubbles, and the one thing that is keeping all these bubbles afloat is the illusion of an imminent V-shaped recovery and blind faith in the magic of Mr. Greenspan. - Kurt Richebacher
I think the American consumer is brain-damaged. He should be pulling back and increasing his savings rate dramatically. But, no. He's pushed by CNBC and the authorities...into consuming more.... The American economy is a disaster waiting to happen. Greenspan's interest-rate cuts have supported consumption artificially and borrowed from the future. The so-called booms in car sales and housing will come to a very bitter end. Greenspan basically moved the bubble from Nasdaq into other sectors of the economy, and these bubbles also will burst. Whether they burst right away or in 2004 is immaterial. - Marc Faber [Nick's comment: No, it's not immaterial. Timing is important.]
....there has been no consumer retrenchment in the recession so far, an egregious anomaly that signals there is more pain and duration remaining. Consumer debt is becoming increasingly unserviceable, yet consumers, heeding the spin and bs from Wall Street, politicians, and the media, keep going farther and farther into debt. The denouement is still far ahead, and is likely to be very unsavory. - Don McAlvany
Both bear market and recession have been imposters, like the boom that preceded them. The bear market has failed to shake investors' faith in shares. And the recession has brought about no change of attitude by consumers. Americans are still super-confident that the Fed's easier money and extra-super-spiffy U.S. economy will correct the world's biggest bubble with the world's softest downturn. - Bill Bonner
The present recession has been unfolding against the backdrop of unbridled money and credit growth. Instead of a credit crunch, there has been a credit deluge. Since 1992, credit to the private sector has been expanding by more than one trillion dollars at annual rate. Yet the economy has abruptly stalled. Money growth keeps expanding at double-digit rates. This has no parallel in history.... No serious economic or financial crisis has ever come from tight money and a high interest rate. Nothing is easier to reverse than this. Every depression or protracted recession has been preceded by extremely loose money which - through credit excesses - tend to bring about far-reaching dislocations. - Kurt Richebacher
Indeed, it's becoming increasingly clear that September 11 put the recession on fast forward. Firms that would have strung out layoffs and restructuring for months or years used the calamity to front-load all of their tough decisions. It's like pouring on the gas as you head into a valley so you can get to the uphill side as quickly as possible. - Jonah Goldberg
Contrary to prevailing opinion, the boom of the 1920s was far more a consumption boom than an investment boom, the first of this kind in history. It centered on the rise of the automobile. The tripling of automobile productions was the single biggest force for economic growth in the boom, and it propelled similar growth in related industries, such as steel, rubber and highway construction. But by no means was it only new technology and the bull run of the stock market that stoked the auto boom. It was made possible through another watershed innovation that enabled millions of lower-and middle-class people to buy the car without having the money. This innovation happened in the financial sphere and was the invention of consumer installment credit. For the first time in history, consumers could spend large sums in excess of their current income.... The great shock to the prevailing complacency occurred more than a year after the stock market crash, in late 1930, when production continued to fall and serious troubles in the banking and the credit markets surfaced. - Kurt Richebacher
The American manufacturing base is moving so rapidly toward extinction that within a few years there'll be only two kinds of Americans: Those who make Starbucks cappuccinos and those who buy them. - Eric Fry [Nick's comment: Here in Worcester, the financial backwater of America, we still don't have a Starbucks.]
The adjusted monetary base - also called super money because banks loan it out in multiples - is growing at a double-digit annual rate. In fact, in October 2001 it grew from $614 to $637 billion, one of the largest single-month climbs in memory. Moreover the adjusted monetary base measured just $500 billion in 1998. The addition of $137 billion in just over three years is remarkable. Zero maturity money stock (MZM) has risen by $500 million, or more than 11%, over the past year. The broad-based measure of money, M3, has risen by more than 10%. And over the past year $20 billion in new cash has been pumped into the system. There is now $540 billion in cash in circulation, double the outstanding cash of 1990. In an ideal world the amount of money would grow lockstep with the economy. But the situation we have here is one where money is growing at a rate five to 10 times faster than GDP. Basic economics tells us that if the money supply is growing faster than the amount of goods and services, we end up with inflation. - John Meyers
It seems like I've been a Bear for the longest time and I guess this is true. I'm coming up on my seventh year! Yikes! ....I've been bullish before (I know that must seem impossible but it is true!) and I guarantee I will be bullish again in the future. Folks shouldn't think that I'm going to be a Bear forever but I have to go by what I have learned from studying the stock market, human nature, and history.... From my viewpoint (and by comparison of other down cycles) we are nowhere near the point where stocks can be considered historically undervalued.... Wall Street and the media will always tell you to buy stocks...that is their business. I think that before all this over investors are going to catch on to this. Anyway, I remain as bearish as I was during any period over the past seven years or so. And I'll say this -- If the bear market really is over and a new bull market has begun then no one should ever be bearish again. Seriously. If you can have a run up last from 1982 to 2000 with only a few brief setbacks followed by a relatively short bear market of two years, why should anyone ever be bearish? Eighteen years of plenty with just two years of lean? I'm not buying into that...it goes against everything that I have read in terms of cycles and stock market history. In my opinion it is as nutty a notion as a New Economy or the Internet e-commerce revolution. - Marc Sexton
Your tax dollars financed or underwrote more than $1.73 billion of overseas Enron projects; Long before Enron made headlines for the biggest bankruptcy filing in American history, Chairman Ken Lay got seats on 11 overseas trade trips during the Clinton administration, while diverting company funds to the president's re-election campaign; It was one of the federal government-backed projects - a $3 billion power plant in India - that triggered Enron's collapse; ....A total of 7 percent of all of OPIC's $16 billion in "investments" of your taxpayer dollars went to Enron; ....The federal government did everything for Enron but hand over blank checks. In return, Enron paid off officials of both parties with handsome political contributions - but none, mind you, like former President Clinton. Just four days after Clinton's cronies greased the skids for Enron's massive India project in June 1996, the company wrote a $100,000 check to the Democratic National Committee and the president's re-election effort.... The truth is, official Washington's fingerprints are all over this scam. No apologies here for President Bush and Vice President Cheney, either. They are further clouding the issue with their declarations of executive privilege regarding meetings with energy executives. - Joseph Farah
There was no shortage of ignorance in the Enron story. Ron Barone, an analyst at UBS Warburg, covered the company. After a meeting with Mr. Lay on August 17, Barone was quoted by Bloomberg: "Ken met with us to reassure us that there is nothing wrong with the company. There is no other shoe to fall and no charges to be taken." But less than 3 months' later, a whole leg fell off Enron when the company announced that $600 million was wiped out as the company restated earnings for the previous four years. By November 28, when Enron's shares were nearly worthless, Barone changed his recommendation from "strong buy" to "hold." - Bill Bonner
The economists assume that we can't know anything about future prices. This means that what happened to Enron stock is random. This necessarily means that, in the grand scheme of themes -- the great random economic universe -- what happened to Enron was random.... Enron's failure was not only not random, it was subsidized by the present system. The system increased the likelihood that it would happen. The system led to a greater than random probability that such an event would happen. And if it did this once, then the tendency of the system is to do it again. This is our problem. It isn't going to go away. - Gary North
I wanted to make a quick comment on the news that Amazon.com reported a genuine (none of that pro-forma crap) profit of a penny a share on Tuesday [January 22]. This isn't much, but I never would have thought the company would have accomplished such a feat. Now of course the fourth quarter is Amazon.com's strongest and there is always a possibility of some Enron-style accounting but a profit is a profit. I'll have to eat my long-held assertion that the company would never make a profit in any quarter. - Marc Sexton [Nick's comment: $5 million earnings, $16 million in interest income, so Amazon still lost $11 million on its main business of selling things.]
I have a German friend who used to sell the best vacuum cleaner in the world, the Vorwerk.
We bought one in 1997, back when this was still legal for Americans. It is a terrific unit. You
can't buy one, however. The U.S.
regulatory authorities stepped in a few years ago and prohibited their sale in the U.S.
because the design didn't have the right kind of safety features for the motor. In her relentless
war against dust, my wife places her life in mortal danger, if we are to believe America's
vacuum police. I have warned her. She doesn't seem to care. She is fearless in her war
against dust. (Personally, I regard dust as a naturally-occurring substance that should be left
in its pristine beauty. This is why I didn't own a vacuum cleaner when I got married.) - Gary
North
Over the past 75 years, a period that includes not just the failure of many corporate giants, but the Great Depression, several recessions and the stock market correction of 1987, the Standard & Poors 500 Index has had an annual rate of return of 7.75 percent after inflation. In fact, there is no 40-year period during which the real rate of return has been less than 7 percent, according to the Cato Institute. - Joel Mowbray
If stocks were properly valued, the Dow would be valued at roughly 36,000 today. The reason stocks are not properly valued is very simple. A revaluation process, whereby investors began to wake up to the true value of stocks, began in 1982, when the Dow was at 777. The Dow will continue to grow, powerfully, with fits and starts, with room for bear markets. But within a fairly short period of time, the Dow will get to this fully valued state. In 1999, I said that was a three-to-five year event. Now, obviously, that's not going to happen; I don't think we are going to see the Dow at 36,000 by the end of 2004. ... It may be by the end of this decade, stocks will be fully valued ... and we'll hit 36,000. And once that happens, stock returns will fall below the annual 11% average of the past 75 years, possibly to the same level of corporate profit growth, which has historically been the same as annual average GDP growth, in the 5%, 6% range.... there is a lot of research that shows that over the long term, stocks are no more risky than bonds. Over the past 75 years, they have returned an annual average of 11%, whereas bonds have returned 5% -- roughly double.... In other words, they are paying you for risk. But our argument is that that risk doesn't exist. We are not saying stocks are riskless -- but what we are saying is that over the long term, the riskiness of a benchmark Treasury security, which is subject to the slings and arrows of outrageous inflation, is no more risky than stocks. Investors, starting in the early 1980s, began to bid up the price of stocks and bid down the equity risk premium. Right now the process, we believe -- fellow economist Kevin Hassett and myself -- is halfway through. And when it's finished, the equity risk premium should be in the neighborhood of zero, maybe one [percent] . - James K. Glassman {Nick's comment: Jerk. Faulty research leads to outrageous conclusions.]
A sure sign that the general public is still in love with stocks: I walk into a local savings bank, and ask about rolling over 401(k) retirement funds from an ex-employer into an IRA. I tell them I want to buy IRA CDs with the money. The young lady there says: "Oh, retirement account? You need to talk to our financial counselor, he can put you in some great mutual funds that we recommend". Everybody and his brother wants to be in this "asset management business". Your local bank doesn't even want to talk about good old certificates of deposit, and FDIC insurance coverage. They want to sell you stocks and bonds. My gut says - it might take a few years, but the outcome of all this is going to be hideous. Given the nature of the times, preserving capital has become a critical priority for me. Sooner or later, great values are going to show up in the stock market. Won't be any use if we've blown up all our capital by then! - Ganesh Sundaresan
Capital depletion is the surest way to poverty, for individuals and societies. The United States is very rich, but it appears to have entered capital-depletion mode. Net savings by families are now negative. Business saving has fallen steadily over the last four years. This has accelerated rapidly over the last year. This decline in capital spending is what has caused the recession. Consumer spending has never faltered, but the economy has. The question is this: Has the United States entered a period of permanent decline economically? The dollar is strong. Most Americans are working. Incomes are rising. But thrift is declining. If you want to peer accurately into America's economic future, keep your eye on the statistics for capital spending and personal saving. If our good times keep rolling because of capital consumption, our future is not bright. - Gary North
If the evident recent success of fiat money regimes falters, we may have to go back to seashells
or oxen as our medium of exchange. In that unlikely event, I trust, the discount window of the
Federal Reserve Bank of New York will have an adequate inventory of oxen. - Alan
Greenspan [Nick's comment: Or possibly, hoarded gold will reappear in its traditional role as
a store of value and medium of exchange.]
But that's what the last three weeks of January were, in my opinion.... a correction in an ongoing new bull market.... OK, let's be honest, bubble. Look at the graph below:
Short-term interest rates aren't the only thing Alan Greenspan has been busying himself with lately. Look at the increasing growth rate of the narrow money supply from 1995 to 1999, which paralleled the growth of the stock-market bubble to gargantuan proportions. Note the deceleration of MZM growth in 2000, which preceded by about six months the onset of the recession no well-known economist predicted. Then note the extremely rapid growth of MZM in 2001.... and you're trying to tell me that this is the precursor to a major bear market for the rest of 2002? I don't think so.
If this were Japan, where confidence was broken, then all of that new money would simply disappear into the big black hole of asset deflation and not be seen again for twenty years. But this isn't Japan; consumer confidence (especially the future expectations component) is now rising, and it looks like the recession which is now probably behind us will be one of the milder ones of the postwar period.
If this were the 1970s, all of that new money would simply be chasing commodities, real estate, gold and other inflation hedges. But after 19.5 years of ongoing bull market, a goodly chunk of it is likely to go into what's been successful already.... namely, stocks (although I do expect gold and real estate to benefit as expectations of price inflation return).
Thus, I still expect to see a "buying panic" for stocks sometime in the first half of the year, and the Dow to top 11,000 by summer. The Fed may have goosed the system enough to carry the next bull.... er, bubble.... for two or three years, beyond the early-2003 period where I previously expected a major top to be formed. Ah, my crystal ball grows cloudy.... let's just take this a few months at a time.
Note that during the January correction, NYSE "Timer's Trend" remained solidly bullish, and the one for the NASDAQ (which took more of a beating in the correction) only waffled and whipsawed. In 1998 and 1999 I wrote about an "invisible bear market", where the majority of stocks were declining while the popular averages were probing new highs. Now we have an "invisible bull market", where the majority of stocks are going up even while the popular averages tread water. And I don't think we'll find ourselves waiting a year and a half, as we did for the bear, for the "invisible" bull market to become a real one.
Is our financial system overloaded with debt? Yes. Is the consumer tapped out? For the
moment, yes. Has the Federal Reserve shed all restraint? Yes. Are stocks still ridiculously
overvalued, historically speaking? Yes. Will everything crash and burn someday? Yes, but
"someday" is not now. All of these bearish arguments for why stocks "ought to" go down are
completely valid.... over the long term. But that doesn't tell you much about the trend for the
next few months, or maybe even for the next few
years. These warning flags only tell us to proceed with extreme caution.
Original cost (adjusted): $ 4,998.21
Present value: $ 4,143.30
Increase: $ -854.91 [-17.10%]
The performance of this portfolio and its predecessors ("Hedger's Delight", "Present and Future Income", "Crapshooter's Folly") from January 1987 to the present is -6.00%, for a compound annual rate of return of -0.40%. COMMENT on "Phoenix": There is no change from the last issue (cash balance is not up to date).
B. "Professors' Investment Group (PIG)" - investment club portfolio.
SUMMARY - "PIG":
Original cost: $ 9,899.00
Present value: $15,829.75
Increase: $ 5,930.75 [+59.91%]
COMMENT on "PIG": There is no change from the last issue.
C. Roth rollover IRA - real portfolio, includes commissions:
SUMMARY - IRA:
Original (1983-86) cost: $ 8,326.19
Present value: $10,348.28
Increase: $ 2,022.09 [+24.29%]
The performance of this portfolio (including its predecessors) from January 1, 1987 to the present is -5.64%, for a compound annual rate of return of -0.38%.
D. CREF Pension plan; I switch between indexed stock/bond/money funds:
Date Sold Bought
13Mar1992 stock @ 56.65 MM @ 13.41
29Apr1992 MM @ 13.48 bond @ 31.19
19Jun1992 bond @ 32.14 MM @ 13.55
29Jun1992 MM @ 13.57 stock @ 56.74
24Jul1992 stock @ 56.76 MM @ 13.61
29Oct1992 MM @ 13.72 stock @ 58.61
23Dec1992 stock @ 61.48 MM @ 13.78
16Jan1995 MM @ 14.83 equity-index @ 26.44
20Jan1995 eq-index @ 26.19 MM @ 14.84
30Oct1997 MM@ 17.24 bond@47.56 (27.17%)
30Oct1997 MM@ 17.24 i-i bond@26.12 (27.17%)
11Feb1998 bond@ 48.84 MM@17.52 (27.17%)
11Feb1998 I-I bond@ 26.23 MM@17.52(27.17%)
16Jun1998 MM@ 17.84 TIAA Traditional (45.87%)
23Sep1999 MM@18.99 I-I bond@27.56 (53.32%)
17-18May2000 rate adjustment to 7.25% in SRA
12-13Jul2000 rate adjustment to 7.5% in SRA
8Jan2001 TIAA Traditional bond@58.62 [22.77%]
8Jan2001 TIAA Traditional eq-idx@75.79 [4.56%]
1Feb2001 i-i bond@31.78 eq-idx@80.84 [26.76%]
20Sep2001 bond@61.99 eq-idx@58.42 [2.44%]
21Nov2001 i-i bond@33.80 eq-idx@67.52 [4.35%]
11Dec2001 i-ibond@33.28 eq-idx@67.95 [6.19%]
17Dec2001 i-i bond@33.13 RlEst@168.75 [9.94%]
17Dec2001 bond@61,54 RlEst@168.75 [9.26%]
31Dec2001 i-i bond@33.50 eq-idx@68.74 [8.21%]
Values, 31Jan2002: stock, 158.90; equity-index, 67.85; MM, 21.35; bond, 62.91;
inflation-indexed bond, 33.68; real estate, 168.25; TIAA current yield in SRA,
7.5% (new money at 6.25% through February 28, 2002)
Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%; 1996: 5.28%; 1997: 5.38%; 1998: 5.72%; 1999: 5.12%; 2000: 9.99%
Gain, January 1 through December 31, 2001: 1.11%
Total gain since January 1, 1988 (14 years): 220.33%
Compound annual rate of return: 8.67% (My long-term target: in excess of 10%)
Gain shown excludes the impact of additional monthly cash contributions.
Buying CREF stock on January 1, 1988 and holding it gained 419.53%, for a compound annual rate of
return of 12.50%.
COMMENT on NYSE "Timer's Trend":
The BUY on November 1 remains in effect.
____________________________ NYSE TIMER'S TREND _______________________________ Thu 1 Nov 01 . | #. }| 9263.90 | - * Fri 2 Nov 01 . | #. | 9323.54 | - * Mon 5 Nov 01 . | .# | 9441.03 + . * Tue 6 Nov 01 . | .# | 9591.12 | + * Wed 7 Nov 01 . | #. | 9554.37 | + * Thu 8 Nov 01 . | # | 9587.52 | .+ * Fri 9 Nov 01 . | #. | 9608.00 | .+ * Mon 12 Nov 01 . | #. | 9554.37 | + * Tue 13 Nov 01 . | . # | 9750.95 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Wed 14 Nov 01 . | . # | 9823.61 | .+ * Thu 15 Nov 01 . | #. | 9872.39 | .+ * Fri 16 Nov 01 . | # | 9866.99 | .+ * Mon 19 Nov 01 . | . # | 9976.46 | . + * Tue 20 Nov 01 . |# . | 9901.38 | .+ * Wed 21 Nov 01 . # . | 9834.68 | + * Fri 23 Nov 01 . | . # | 9959.71 | .+ * Mon 26 Nov 01 . | .# | 9982.75 | .+ * Tue 27 Nov 01 . | #. | 9872.60 | + * Wed 28 Nov 01 # | . | 9711.86 | + * Thu 29 Nov 01 . |# . | 9829.42 | + * Fri 30 Nov 01 . | #. | 9851.56 |+. * Mon 3 Dec 01 . |# . | 9763.96 + . * Tue 4 Dec 01 . | . # | 9893.84 |+. * Wed 5 Dec 01 . | . # |10114.29 | .+ * Thu 6 Dec 01 . | # |10099.14 | .+ * Fri 7 Dec 01 . | #. |10049.46 | .+ * Mon 10 Dec 01 .# | . | 9921.45 | .+ * Tue 11 Dec 01 . #| . | 9888.37 |+. * Wed 12 Dec 01 . #| . | 9894.81 + . * Thu 13 Dec 01 . #I . | 9766.45 |-. * Fri 14 Dec 01 . & . | 9811.15 |-. * Mon 17 Dec 01 . | #. | 9891.87 |-. * Tue 18 Dec 01 . | # | 9998.39 + . * Wed 19 Dec 01 . | #. |10070.49 |+. * Thu 20 Dec 01 . |# . | 9985.19 |+. * Fri 21 Dec 01 . | # |10035.34 | + * Mon 24 Dec 01 . | # |10035.34 | + * Wed 26 Dec 01 . | . # |10088.14 | + * Thu 27 Dec 01 . | . # |10131.31 | .+ * Fri 28 Dec 01 . | . # |10136.99 | . + * Mon 31 Dec 01 . | # |10021.50 | . + * Wed 2 Jan 02 . | .# |10073.40 | . + * Thu 3 Jan 02 . | . # |10172.14 | . + * Fri 4 Jan 02 . | . # |10259.74 | . + * Mon 7 Jan 02 . | # |10197.05 | . + * Tue 8 Jan 02 . | #. |10150.55 | . + * Wed 9 Jan 02 . | # |10094.09 | .+ * Thu 10 Jan 02 . | # |10067.86 | .+ * Fri 11 Jan 02 . |# . | 9987.53 | + * Mon 14 Jan 02 . # . | 9891.42 |+. * Tue 15 Jan 02 . | #. | 9924.15 |+. * Wed 16 Jan 02 . #| . | 9712.27 |+. * Thu 17 Jan 02 . | # | 9850.04 |+. * Fri 18 Jan 02 . |# . | 9771.85 |+. * Tue 22 Jan 02 . # . | 9713.80 |+. * Wed 23 Jan 02 . | .# | 9730.96 |+. * Thu 24 Jan 02 . | . # | 9796.07 | + * Fri 25 Jan 02 . | .# | 9840.08 | + * Mon 28 Jan 02 . | # | 9865.75 | .+ * Tue 29 Jan 02 .# I . | 9618.24 | + * Wed 30 Jan 02 . | #. | 9762.86 | + * Thu 31 Jan 02 . | . # | 9920.00 | + ========================================================================
COMMENT on NASDAQ "Timer's Trend": Whipsawing.... currently a weak SELL.
____________________________ NASDAQ TIMER'S TREND ____________________________
Thu 1 Nov 01 . | # | 1746.30 + . *
Fri 2 Nov 01 . #| . | 1745.73 |-. *
Mon 5 Nov 01 . | .# | 1793.65 + . *
Tue 6 Nov 01 . | .# }| 1835.08 | + *
Wed 7 Nov 01 . | # [| 1837.53 | + *
Thu 8 Nov 01 . |# . | 1827.77 | + *
Fri 9 Nov 01 . |# . | 1828.48 | + *
Mon 12 Nov 01 . |# . | 1840.13 | + *
Tue 13 Nov 01 . | . # ]| 1892.11 | + *
Wed 14 Nov 01 . | # | 1903.19 | + *
Thu 15 Nov 01 . | #. | 1900.57 | + *
Fri 16 Nov 01 . | #. | 1898.58 | + *
Mon 19 Nov 01 . | . # | 1934.42 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 20 Nov 01 . #| . | 1880.51 | + *
Wed 21 Nov 01 . | #. | 1875.05 | + *
Fri 23 Nov 01 . | . # | 1903.20 | .+ *
Mon 26 Nov 01 . | . # | 1941.23 | . + *
Tue 27 Nov 01 . | # | 1935.97 | .+ *
Wed 28 Nov 01 . #| . | 1887.97 | .+ *
Thu 29 Nov 01 . | .# | 1933.26 | . + *
Fri 30 Nov 01 . |# . | 1930.58 | + *
Mon 3 Dec 01 . #| . | 1904.90 |+. *
Tue 4 Dec 01 . | . # | 1963.10 |+. *
Wed 5 Dec 01 . | . # | 2046.84 | .+ *
Thu 6 Dec 01 . | .# | 2054.27 | .+ *
Fri 7 Dec 01 . |# . | 2021.26 | .+ *
Mon 10 Dec 01 . |# . | 1992.12 | .+ *
Tue 11 Dec 01 . | .# | 2001.93 | .+ *
Wed 12 Dec 01 . | #. | 2011.38 | + *
Thu 13 Dec 01 . # . | 1946.51 |+. *
Fri 14 Dec 01 . | #. | 1953.17 |+. *
Mon 17 Dec 01 . | .# | 1987.45 | + *
Tue 18 Dec 01 . | .# | 2004.76 | + *
Wed 19 Dec 01 . |# . | 1982.89 | + *
Thu 20 Dec 01 .# I . | 1918.54 |+. *
Fri 21 Dec 01 . | . # | 1945.83 | + *
Mon 24 Dec 01 . | # | 1944.48 | + *
Wed 26 Dec 01 . | . # | 1960.70 | + *
Thu 27 Dec 01 . | . # | 1976.42 | .+ *
Fri 28 Dec 01 . | . # | 1987.26 | . + *
Mon 31 Dec 01 . | # | 1950.40 | . + *
Wed 2 Jan 02 . | . # | 1979.25 | . + *
Thu 3 Jan 02 . | . # | 2044.27 | . + *
Fri 4 Jan 02 . | . # | 2059.38 | . + *
Mon 7 Jan 02 . | # | 2037.10 | . + *
Tue 8 Jan 02 . | . # | 2055.74 | . + *
Wed 9 Jan 02 . | .# | 2044.89 | . + *
Thu 10 Jan 02 . | .# | 2047.24 | . + *
Fri 11 Jan 02 . |# . | 2022.46 | .+ *
Mon 14 Jan 02 . & . | 1990.74 | + *
Tue 15 Jan 02 . I # | 2000.91 | + *
Wed 16 Jan 02 .# I . | 1944.44 |+. *
Thu 17 Jan 02 . I . # | 1985.82 |+. *
Fri 18 Jan 02 . #I . {| 1930.34 |+. *
Tue 22 Jan 02 .# I . | 1882.53 + . *
Wed 23 Jan 02 . I .# | 1922.38 + . *
Thu 24 Jan 02 . I . # ]| 1942.58 | + *
Fri 25 Jan 02 . I #. [| 1937.70 |+. *
Mon 28 Jan 02 . I # ]| 1943.91 | + *
Tue 29 Jan 02 .# I . [| 1892.99 | + *
Wed 30 Jan 02 . I# . | 1913.44 |+. *
Thu 31 Jan 02 . I . # | 1934.03 | + *
========================================================================
"Timer's Trend" is based on 4% and 10% exponential moving averages of the New York Stock Exchange or NASDAQ advance/decline lines (that is, the ratio of advancing to declining stocks). There are many symbols shown above, but the ones that count are the braces: NEXT ISSUE - will appear in late February. /Nick Chase