Image via WikipediaA study of 45 years of stock market data shows that some strategies produce greater returns than the S&P 500 while others produce less. A range of strategies were tested with the past data, re-balancing the strategies annually, with each strategy involving the 50 stocks which met the criteria for inclusion.

Here are the conclusions:

• Avoid buying last year's losers each year - as a rule, losers continue to be losers.
  
• Avoid buying companies on high multiples such as high price to sales ratio.
• Buy companies with high relative strength (shares that are rising) in combination with a value factor such as low p/e or low price to sales ratio (overlooked or out of favor sectors or old economy).
• Low price to sales stocks tend to out-perform the higher p/s stocks.
• Low price to cash flow stocks tend to do better than high p/cash flow stocks.
• Low price to book stocks tend to perform better than high p/b stocks.
• Price to sales ratio is the best single value ratio to use for buying market beating stocks.
• Last years earnings gains alone are worthless when determining if a stock is a good investment.
• Large well known stocks with high dividend yields tend to outperform the S&P500.
• Relative strength is the only growth variable that consistently beats the market.

Conclusions from James P. O'Shaughnessy's book "What works on Wall Street".

Labels: Stock market, strategies

Ten people who predicted the financial meltdown

from the Times Online - Money Central

1. Vince Cable - deputy leader of the Liberal Democrats
November 2003: “The growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level. What action will the Chancellor take on the problem of consumer debt?”




2. Christopher Wood – chief strategist of CLSA, a broking firm in the Asia-Pacific Market.

October 2005: "Investors should sell all exposure to the American mortgage securities market."
2007: "Some institutions have been behaving like leveraged speculators rather than banks… The UK economy is heading for a sharp shock. It just remains to be seen how bad."

3. Founders of www.stock-market-crash.net




4. Henry Weingarten - astrologer, head of the Astrologers Fund





5. Nouriel Roubini - economics professor

On September 7, 2006, at an International Monetary Fund meeting, he announced that a crisis was brewing.

6. Nikolai Kondratiev - Russian economist
In the early 1920s, he predicted an imminent dip, and he was proved right with the Wall Street Crash in 1929. The current crisis may mean he is about 10 years out – but, still, not a bad prediction for a man who died in 1938.

7. Founders of Housepricecrash.co.uk – property website
In October 2003, its founders predicted “one of the potentially biggest economic boom bust events in living memory” was coming.

8. Lord Oakeshott - Liberal Democrat Treasury spokesman
He warne the government of the possible collapse of Icelandic banks back in July: "What steps [have] the United Kingdom financial authorities taken to satisfy themselves, independently of the Icelandic financial authorities, of the solvency and stability of Icelandic banks taking deposits in the United Kingdom?”

9. Stephen Roach - senior executive at Morgan Stanley
In November 2004, Mr Roach predicted an “economic Armageddon”.

10. Ron Paul - Republican Congressman - and Peter Schiff, his economic advisor
Back in September 2003, Mr Paul told a House Financial Services Committee that: “Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market.This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions."

Labels: debt, Stock market, United States

More Jim Rogers quotes

"I would tell you what has always worked throughout history and I'll tell you what has always not worked.

The Japanese tried this in the 90s, they kept putting band-aids on and they wouldn't let people fail. You remember the term "zombie" companies, "zombie" banks? Well it's eighteen years later and the Japanese stock market is still down over 75 percent. They talk about the 90s as a lost decade.

America tried it in the 70s - they wouldn't let anybody fail. We had one of the worst economic decades in American history - high interest rates, high inflation, a collapsing currency. It didn't work.

Korea in the 90s, took a hit. They had a horrible two or three years but, since then, they've been one of the most rapidly growing economies in the world. The Russians took a horrible hit - since then, they've been one of the most rapidly growing economies in the world.

This is not politics, this is not philosophy. I'm telling you what has worked throughout history and what has not worked throughout history.

Look it up."

"Let 'em fail two by two or three by three. I mean, what is this? Banks have been failing since the beginning of time and they're probably going to fail again until the end of time.

The way it's always worked successfully has been, let the incompetent fail and the competent people - banks, mainly in this case - take over the incompetent banks and everybody starts over.

Yeah, you have a very bad year or two but we've had the worst excesses in the credit market we've had in world history. Never before in world history have people been able to buy a house with no money down, and many of them bought four or five houses with no money down and no jobs, and then the bankers were saying, "This is fun, let's do it with car loans, student loans, credit card loans".

We've had horrible excesses -this has to be cleaned out."

Labels: banking, Jim Rogers, Stock market, United States