February 2013 S&P 500 Forecast Results

Financial Place Online provided a market forecast back in December.  The forecast was for the S&P 500 index to be above 1400 by 1 February 2013.  The good news is that this forecast came to be true.  The great news is that the S&P 500 is currently at 1513!   The primary concern though, is that the upward run has come too fast.  Very little of the underlying U.S. economy has changed in the last year.  The job market has modestly improved, but this is more than offset by fiscal uncertainty that may result in disaster coupled with a monetary policy that maintains the suppression of interest rates.

The 52 Week low for the S&P 500 was 1266.  Also, the index is up 100 points in the last month.  The price to earnings ratio (P/E) is a little above 17.  It is worth noting that the P/E ratio correlation to the stock market is weak as earnings growth is another factor which weighs heavily on the price of the index.  Forecasts for 2013 earnings growth are estimated to be anywhere from flat to 3%, hardly anything worth writing home about.

What may really be the cause of the run to over 1500, is the present 2.07% dividend yield.  Those who were invested in bonds found the S&P 500 dividend rate to be attractive since bond yields are low and interest rate risk is increasing.

Too little pay on the job? Owning your own production may be the answer.


Having a hard time getting ahead? Is your salary getting you down? Increasingly, this is all too common and unfortunately, it is by design. Only so much wealth can be created by one individual’s work. Past that point, additional wealth must be generated off of the efforts of others. This is the guiding principle behind any corporation and if you can align with one that pays well, then there is no issue. However, this is an exception to the rule as companies rarely pay a worker more than they have to.

And why should they? It’s a problem in economics. There are two concepts of interest here; marginal cost and marginal benefit. The marginal cost represents a small increase or decrease in the cost from the initial starting point. The marginal benefit is the change in benefit achieved by the change in cost. The two are combined as a ratio to determine how much benefit the next dollar buys. To a corporation, a worker’s marginal benefit will run out quickly at any cost beyond market rate. Why, because the corporation could have just as well hired anyone else at market rate.

For the individual, the problem of marginal cost and benefit is reversed. A person who owns their own production, in the case of a sole proprietor or single person corporation has an interest in maximizing their own total benefit. This is the point in which the income that they bring in is built up to the point where the marginal cost equals the marginal benefit. This is the maximum point of income generation at which beyond this point any additional work results in a loss for the individual. It is in this principle, that many self-employed have come to appreciate the liberating feeling of their work “on their own terms”

Financial Success Books

I was at the library again today with a mission of picking up some more good movies.  This time around I got Gladiator and Goldeneye.  There was a Roger Moore 007 movie I was looking for, but someone else with good taste had it checked out.  I also ventured out into the financial book section.  I don’t wander into this section often as I find myself lodged in a land of homogeneity.  Reading fiction or engineering is much more interesting.  However, finances are an important topic and when tackled from an engineering and mathematical perspective is particularly interesting.  With this in mind, I figured I would go see what I could get myself into.  I started picking up books by all of the well-known names and found two things in common.  The first is that all of these authors are excellent salespeople.  I mean each has been a bestseller and sells their newest book year after year.  The second, of course, is that they are all written exactly the same.  The content rotates a little, but essentially the main recipe is for self-help at the lowest common denominator.  Yes, it does help out readers, especially from the self motivational perspective, but the authors are helped out more than anyone else.  As I figure it, a real financial book is structured closer to a textbook.  They’re more than one time reads, and only need updating to keep up with modern rules, regulations, and techniques.  As such, I still have all of my MBA texts, and each one, (Organizational Behavior in particular) are fantastic reads.  These authors have created value for their readers and the entire industry.  This is was I want for Financial Place Online.  FPO’s worth should be determined not by sales ability, but by the value that it creates for its readers.

S&P 500 above 1400 in February 2013

Hello FPO readers,

FPO has been analyzing whether or not the S&P 500 will be above 1400 this upcoming February.  At this point, Financial Place Online has determined that it is best to keep with a long position in the S&P 500.  Despite some slowdown in big players like Apple, market sentiment appears to be high; at least higher than usual.  In addition, the anticipated settlement in the political front and the policy ease will keep the S&P 500 at above 1400 levels. The fools club stocks (worth looking up) and NASDAQ  are also expected to gain and perform well this upcoming year based on the 100 year old data and history.  A favorite resource for gaining a “chartist’s” perspective on this is http://www.forecast-chart.com/index-sp-500.html.  Keep in mind that chartology should not be the sole determinant of one’s investing theory.  It is recommended to apply it as a weighted factor along with many others, including at the time risk tolerance, and the volatility index.

 

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