The Tasgall Group

International stocks were one of the main investment options that many argued you need a top notch manager to effectively invest in. Au contrair! MarketWatch reported in September on a July Standard & Poor study comparing the 5 year returns on International Index managed funds and index funds and this report bears repeating here. Nearly 60-65% of Index Funds outpaced their Managed equivalents. Now the odds are better that you can find an actively managed international fund that outperforms the benchmark than you can find an actively managed US fund that does, but the odds are still not in your favor. An interesting Journal of Financial Planning article from 2002 had found that Small Cap and International Funds outperformed the benchmark index, but this is not reflected in the more recent S&P report.

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It’s obvious that the falling dollar has had a positive impact on International equities, but how much?? One way to compare the two is to see how much a Barclay’s International ETF has performed vs. the index upon which it’s based (trading in the local currency).? The Washington Post just ran an article analyzing this, and it found that, for example, “Year to date through Nov. 28, the EAFE index was up 17.4 percent in dollar terms but had gained only 7.9 percent in local currencies.”? When you’re thinking of rebalancing your portfolio, think about whether you want to continue making this dual bet:? that International equities will continue to flourish and that the dollar will continue to fall.? These two factors will greatly influence whether the excellent returns of 2006 will happen again in 2007.

After a fairly depressing week of news showing relatively little impact on the equity markets, there seems to be a large amount of optimism still left in the current bull market trend (it’s safe to call this rally a bull market, right?).? A quick glance at the bond market seems to suggest that this week woke some up to the fact that things might be bad enough soon that the Fed might have to actually start cutting rates before too long:? VBMFX is a good example of how prices are sharply up upon this week’s news.? While I’m not a major fan of bonds when there’s several options for money market rates at over 5% and 5.15% right now, it is nice to know that the bond market is aware that this equity uptrend isn’t going to last.? I’m of the opinion that we’re not going to get to finish this bowl of porridge before it gets too cold.? But this is just a gut feeling right now, since the trend still seems to be up (note that 100 point after 2:00 recovery in the DOW on Friday).

The Wall Street Journal has compiled a list of the more than 120 companies that have come under scrutiny for past stock-option grants here.? The list is long, and worth reviewing to remind yourself how many executives put their own financial well being above the fiduciary responsibility of protecting the rights of their shareholders.

The problem is so widespread that it is even showing up in Dilbert…

While it seems like everyone was very excited about the Dow Jones hitting all time highs only a couple of weeks ago, no one seems to notice or really care that the NDX (Nasdaq 100 index) has finally broken above the highs set back in January.

While the S&P 500 and the Dow have been powering forward, the NDX has been struggling just to hit a 52 week high.

In other news this morning, DR Horton, one of the larger home builders in the US, had this news release: “…fourth-quarter earnings fell 51 percent as customers canceled orders for new houses.”? (Bloomberg)? The stock (DHI) is up over 9% in pre-market trading…

I saw an ad for the newly redesigned quote.com website, and went to take a look… the website is nice, but I found a rather dubious headline chart:

Now it’s nice to see the relative performance of the major indexes, but why would you compare them like this? The Dow was up over 100 points on Monday, while the Nasdaq Composite was up less than 50 points. Does that contain any relevant information?

If they were trying to show anything accurately, they would show that the Nasdaq was up 1.5% and the Dow was up 1.2% on Monday. In fact, the Nasdaq Composite has outperformed the Dow since August.

The head of NovaGold Resources Inc. says he’s “embarrassed” for Barrick Gold Corp. after shareholders again resisted a takeover offer from the world’s largest bullion producer, prompting Barrick to extend the hostile bid for a fifth time.

“Isn’t this starting to get embarrassing for them? It should be. I’m embarrassed for them,” Rick Van Nieuwenhuyse, NovaGold’s president and chief executive officer, said in an interview.

– GlobeAndMail.com

There was news this morning that Canada is considering changing it’s tax laws regarding unit trusts. They’re proposing to remove the special tax status of the trusts (they’re similar to REITs in the US — they pay little or no corporate tax if they pay out a majority of their revenue for the year). As a result, the entire TSX income trust sub-index was down 12% in early trading today.

The trust status was being abused by some Canadian companies (i.e. a telephone company was about to convert to trust status), and the immediate consequences of the proposal would most affect new trusts — existing trusts can operate under the same tax situation for 5 more years.

This is particularly noteworthy because (a) I own a few shares of Canadian unit trust companies, and (b) this is a powerful reminder of some less obvious risks in the market. (more…)

In case you haven’t heard, Bank of Ameica is offering stock trading without any commissions… Business Week. There are plenty of catches including account minimums and number of trades per year… Hopefully this will spur another round of commission competition as I don’t personally want to switch to BofA.

Those of us who are cynical have to ask the question though… if the Bank is willing to give us free trades, where are they making their money from offering this service? Front-running my orders? Lower money market rates? Fees for other services?

Today’s rally of the DJI and S&P500 was broad and strong.? 27 of the 30 DJI were up, 450 of the 500 S&P500 were up.? This is one indicator that things are very bullish in the short term.