Income Tripler

Small-Cap Stocks: The Most Important Trend Headed into 2009

by Louis Basenese, Advisory Panelist, Investment U
Associate Investment Director, The Oxford Club
Wednesday, December 23, 2008: Issue #906

Yesterday we got confirmation that the U.S. economy contracted by 0.5% in the third quarter. And most economists expect the downturn to accelerate, with GDP checking in as low as negative 6% in the fourth quarter. Here’s why I’m not concerned…

A more important trend is emerging. Remember, on November 19 I told you to consider going big, by going small with small caps. Well, the markets didn’t leave much time for preparation.

In that short span, small caps jumped 6.38%, almost tripling the returns of large caps, based on the Russell 2000 and Russell 3000 indexes. Of course, it’s too early to declare a full-blown rally. But we shouldn’t be ignorant to the subtle shifts in market leadership.

Remember, the market’s a forward-looking beast. And that means even in the darkest hours we need to be thinking about the next bull market… and positioning ourselves to profit.

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Small Caps: It’s Time to Think Small

by Louis Basenese, Advisory Panelist
Associate Investment Director, The Oxford Club
Wednesday, November 19, 2008: Issue #888

Over one million jobs vanished this year. Retail sales cratered for the eleventh consecutive month. Auto sales, and for that matter automakers, are headed for the junkyard. And there’s no sign of consumer confidence anywhere.

It’s not official yet. Apparently the committee of “esteemed” economists at the National Bureau of Economic Research (NBER) doesn’t get paid for timeliness. But the statistics don’t lie… we’re in a recession.

And that’s got me giddier than an Obama supporter scoring an inauguration ticket. That’s right. I’m actually glad the economic data stinks. Because when a recession is here, a small-cap rally isn’t far behind.

Accordingly, I’m loading up on small caps in my own portfolio. I suggest you do the same, instead of joining the lemmings piling into Treasuries.

If you’re reluctant and afraid small caps are too risky, chew on this:

In the year following the six major bear markets of the last century, small cap stocks soared an average of 82%, according to Ibbotson Associates.

If the prospect of an 82% gain doesn’t excite you in these trying markets, check your pulse. If it does, read on…

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