AIA Advocate for Absolute Returns

In This Issue:

A Second Nip From A Double Dip
Bonds Are Soaring, But Could Be A Bubble
Blue Chip Discounts May Not Last Long
Two Bond Substitutes Look Especially Good
True Cash Returns Are Higher Than They Appear
The Bottom Line

Since our last newsletter in July, the economy signaled that it may not be doing as well as it was earlier in the year. The employment rate is failing to improve, consumer confidence is slipping, retailers are singing the blues, many manufacturers are reporting fewer orders, and July home sales plunged a disturbing 27%.

As a result, many analysts are beginning to think the economy may be heading for another leg down – the dreaded “double dip.” If so, many stock prices have been pushed too high. Accordingly, investors have been pressing Wall Street’s down button of late. Since July 29, the Dow and the Nasdaq declined 3.9% and 4.9% respectively.

In This Issue:

No Direction Home
The Inflation/Deflation Balance Is Precarious
Top Investments For Core Portfolios
Africa: Sleeper Investment Of The Century
The Bottom Line This Week

Since our last issue, the stock market roller coaster made several more trips around the track. At this writing, prices are nearly back where they started with the Dow up marginally 0.3% and the Nasdaq off 0.7%. Although the market appears to be taking a breather at present, we think investors should expect a volatile summer.

No Direction Home

The stock market's gyrations reflect similar moves in most economic indicators. Not only are the key signals mixed, they often change direction from one week to the next.

It doesn't help that every few days or so another black swan shows up to make investors nervous. The most recent unwelcome incidents include the disastrous BP oil gusher in the Gulf of Mexico, the high profile raid on the Gaza "peace" flotilla, the torpedoed South Korean patrol ship, and the plunging euro. There is a growing feeling among millions of people that political and economic stability in many parts of the world are hanging by a thread.

At the same time, however, many multinational companies are reporting very good earnings. In addition, consumers are still paying visits to the mall although they are being more careful with their money. The summer vacation season is also off to a good start. In short, much of the evening news is grim but the day to day reality for most Americans is pretty good.

Special Report
Protect Your Stocks
From A Correction

In This Issue:

A Stock Market Downturn Is Overdue
Stop-Loss Orders Can Save A Portfolio
Safeguard Your Blue Chips With LEAPS
Some Funds Go Up During Downturns
We Don't Recommend Short Sales
An All-Weather Fund For Cautious Investors
The Bottom Line This Week

Since the bull market started last March 9, the stock market has been on a tear. For the 13 month period, the Dow rose 68.7% and the Nasdaq shot ahead 94.8%. After the unpleasant losses investors endured from late 2007 to early 2009, the rebound was especially sweet.

Although we think the bull market has further to go, we also think the near-term downside risks are becoming significant. Consequently, we are devoting this issue of the AIA Advocate to strategies that you can use to protect your portfolio while remaining invested for whatever additional profits are on the way.

In This Issue:

Company Earnings Look Good
Dividends Are Also Increasing
Another Shameless Plug For Dividend Aristocrats
These Winners Remain Attractive...One For 194 Years
Smaller Stocks Are Coming Up Fast
Semiconductors Looking Good Too!
The Bottom Line This Week

Since our last newsletter, the stock market retreated from its earlier highs. That's not surprising since there was cheerless economic news from Europe. The infamous PIGS (Portugal, Italy, Greece, and Spain) are having an embarrassing problem with their colossal debts. Payments are due, but the big spenders are coming up short a trillion dollars or so. The exact number is still in dispute. Whatever it turns out to be will be a shocker.

Investors calmed down a bit when other European countries promised to bail out their spendthrift neighbors. But before anybody could start to buy stocks again, the Fed made a surprise ¼ point increase in the discount rate it charges banks.

In This Issue:

A Santa Claus Rally Seems Unlikely
But We Could Have A Big January Bounce
Get Your Buy List Ready
A Dollar Obituary Is Premature
Cash Is Still King
It's Time To Start Building A Family Fortune
The Bottom Line This Week

Last month we reported that investors were starting to become very cautious. Since then, several positive earnings reports encouraged traders to add more stocks to their portfolios. The new purchases pushed the Dow and the Nasdaq up 4.7% and 3.4% respectively. It was a great start to the Holiday Season.

In This Issue:

Will The Right Fundamentals Please Stand Up?
The "Uncle Sam Effect"
Small Investors Are Coming Back To Stocks
Inflation Fears Are Increasing
First Some Bad News, Then Some Good News
Easy Index Gains May Be Over
These Four Favorites Should Stay On Top
And So Should China
The Bottom Line This Week

Despite all the worries about overvalued stocks, the market is continuing to advance. To be sure, the gains aren't coming by leaps and bounds anymore - but they are still adding up nicely. Since our last newsletter, the Dow and the Nasdaq rose another 1.8% and 5.1% respectively.

Will The Right Fundamentals Please Stand Up?

When it comes to stock fundamentals, value is in the eye of the beholder. Traditionalists believe the market is too expensive for the weak economic recovery they expect to see. The analysts argue that the economy may take over a year to justify the whopping 46% gain in the Dow since March. Some analysts think the recovery will never gain the necessary strength.

In This Issue:

Stocks Got A Second Wind In July
But, How Long Will It Last?
Technology Appears To Be Turning Around
Blue Chips Top The Best Sellers Chart
The Economy Looks Better, But Not Great
Asia's Growth Is Much Stronger
A Single Stock Covers China And Its Neighbors
The Bottom Line This Week

As everyone knows all too well, the government has been working overtime to send billions of dollars in bailout money to banks. That's only fair since the poor banks depleted their resources taking such good care of us. And they say there are no more American heroes.

In any event, some of that money found its way to the stock market where it triggered the nice rally that has been warming our hearts and wallets for several months.

In This Issue:

Is The Economy Finally Turning Around?
Companies With Cheap Eats Are Doing Well
China's Economy Is Still Hot (Compared With Everybody Else)
Energy Investments Are Looking Good Again
The Bottom Line This Week

The stock market rally that started on March 9 is proving to have longer legs than even the most optimistic investors dared hope. Through the end of May, the S&P 500 was up 30 percent even though the economy was continuing to decline.

Over the past month, however, the market's performance suggests that the rally may be getting short of breath. Since our last newsletter, the Dow gained an unremarkable 1.1% and the Nasdaq barely rose 0.7%. It remains to be seen if stocks will get a second wind and run for another few laps, of if a correction is on the way.