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InvestWELL Report |
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May 3, 2008
Dear Reader,
In April, the market continued to move up while the high volatility still persisted. In the coming month, the upward movements of the market will be negatively affected by the summer seasonality which is traditionally bearish.
Our next InvestWELL Report will be released on June 6, 2008.
(following the Labor Report which is generally recognized as a "market mover").
Derek Polcyn,
President
Investment
Idea
Quiz
Our Results
Market Highlights
Behavioral Finance Indicators
Answer to the Quiz
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Question:
How can I use the mosaic theory in my investment research?
Answer:
The Mosaic theory is defined as a method of analysis which involves collecting both public and non-public (often non-material) information about a company in order to determine the proper value of the company’s share.
For example, the company’s president makes a public announcement that a company will be expanding into new profitable product lines, but does not disclose any more information. Your friend owns a large grocery store and tells you that the company was making inquiries about a particular product which is very profitable and currently available only in Australia. Hence, you have a potential to put the two pieces of information together (based on mosaic theory) and perform analysis that incorporate public and non-public information.
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Which of the following is an example of financial analysis based on mosaic theory?
A) Listening to the company’s teleconference
B) Putting together public and non-public information
C) Technical analysis
D) All of the above
Answer to the Quiz
at the bottom of the newsletter
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(Cumulative %)
Investment Strategy – MEMBER SECTION
InvestWELL Picks continues to outperform the market (as defined by S&P 500 index.) but the margin of out-performance has decreased due to the market’s recent upward push.
Chart 1.
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- During the last month, the US equity market continued to advance following a large downward thrust during the middle of the month (Chart 2 & 3) Many economists are still not sure if the economy would be able to avoid the recession altogether.
3 Years and Last Month
Charts courtesy of StockCharts.com
- During the last month, the Canadian market was able to outperform the US market largely due to the strength in resources (Charts 4 & 5).
3 Years and Last Month
Charts courtesy of StockCharts.com
- Last month, the US economy lost 20K jobs while the unemployment rate went down to 5.0%. The results were much better than what the economists had predicted with the consensus being a negative of 75K jobs and unemployment of 5.2%.
- Last month, the Canadian economy added new jobs, but the results will not be published until May 9th.
- The number of vacant homes for sale in the United States set a new record in the first quarter of 2008. The Census Bureau reported that 2.9 percent of U.S. homes or 2.28 million properties, not including rentals, were vacant and for sale. It was the highest quarterly number as far back to 1956 when records of such vacancies were first kept.
- The world’s largest and most expensive home will be completed in January. The 27-story skyscraper in downtown Mumbai, India, will be the residence of Mukesh Ambani, who is the fifth richest man in the world. The home will have 400,000 square feet of interior space, nine elevators, a ballroom and a section for security guards and assistants to relax. The estimated value is $2 billion but the real question is - will they be able to pay their mortgage?
- Two-thirds of the 52 economists surveyed last week by USA Today say the U.S. is in a recession. Another 13% believe that the economy is headed that way sometime this year. The good news is that nearly all believe the recession will be short and shallow and that inflation will decline.
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(see
explanation)
Here is a direct quote from the Behavioral Section in last month’s Member newsletter:
"Overall, we believe the market may not be able to push upwards much higher".
It turns out the market did push up a few percent.
Charts 6 - 8: Advancing/Declining Line, AAII and Equity Put/Call Ratio
Charts courtesy of StockCharts.com
and DecisionPoint.com
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D is correct.
The Mosaic theory combines both public and non-public information. It helps to improve the quality of financial analysis as well.
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Thank you for reading InvestWELL Report. This is a non-member version of InvestWELL Report.
Please sign up for our membership to receive the member version of the InvestWELL Report.
InvestWELLFinancial.com
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