Market Projections…There is an old saying that the stock market will perform in a way that will surprise the most investors. The only individuals that are right in their projections seem to be those who have been making the same projection for years. The only models that seem to work are those that “predicted 9 of the last 5 declines.”

We use a different projection technique, Legal insider trading, another term for corporate share reductions. The two main reasons a company falls off our buy list is that they become overpriced or that they reduce their buybacks. Usually a company falls off and another makes the buy list. What concerns us is a major decline in the number of companies on the list. We believe this is an indicator that we should become more cautious. It is almost automatic. We sell items that fall off and with no new purchases we build cash.

We believe that reducing share purchases is the easiest action a nervous board of directors can take. A key complaint about buybacks is that companies buy more shares at higher prices when they could have purchased them at lower prices during a recession. So, a good deal of Board thought goes into the decision to reduce buybacks. We believe this decision is very valuable data in our investment planning.

At the present time we have a robust list of buy recommendations which for us is bullish. We are certainly aware of the negative issues plaguing our country. There are and will probably always be issues. Generally, they are serious, solvable, and individually not disruptive enough to stop economic progress. Occasionally the number of issues rises to a level that does cause a recession. That does not seem to be the case now.

Katz Family Financial