Roger David

How Do You Determine The Difference Between A Bear Market Rally & A New Bull Market

March 18th, 2009 at 11:43 am by under Uncategorized, Your Money

Last week, the stock market, as measured by the S&P 500 index, staged its third-largest weekly gain since World War II, according to Reuters. The gain was partially attributed to the following good news:


·         Banking behemoths Citigroup, Bank of America Corp., and JPMorgan Chase & Co., all announced that they were profitable in the first two months of 2009, excluding one-time charges. Shares of Citigroup and Bank of America Corp. responded by rising 73% and 83% respectively for the week, according to Associated Press.

·         General Motors said it wouldn’t need the latest $2 billion installment of bailout money because its cost-cutting plan was taking hold, according to Associated Press.

·         The widely watched Reuters/University of Michigan consumer sentiment poll ticked up slightly in early March, according to MarketWatch.

·         The Commerce Department reported that February retail sales were not as bad as economists feared and the January numbers were revised substantially upward.

·         General Electric received a credit rating cut last Thursday, but it was not as deep as some expected and the stock rose 13% that day, according to The Wall Street Journal.

·         A number of well-known market analysts, who had previously been stock market bears, adopted a more bullish posture last week. This list included Doug Kass, Marc Faber, Steve Leuthold, and Barry Ritholtz, according to Yahoo! Finance.

·         Prices for copper and scrap steel have risen recently, which suggests there’s demand from manufacturers, according to The Wall Street Journal.

·         Oil prices are up 23% in the last four weeks on signs that demand may be firming, according to The Wall Street Journal.


So, if you look hard enough, you can find reasons for optimism even amidst the despair. We’ll be watching for more clues this week to see if this is just a blip or the start of something big. Let’s hope for the latter.


Returns through 3/13/09







Dow Jones Industrial Average







NASDAQ Composite







Standard & Poor’s 500







Sources: Yahoo! Finance, Barron’s. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly. Three-, Five-, and 10-year returns are annualized.  Assumes dividends are not reinvested.

 HOW DO YOU DETERMINE THE DIFFERENCE BETWEEN a bear market rally and the start of a new bull market? Last week’s huge 10% rally still left the S&P 500 index slightly more than 50% below its October 2007 all-time high. Can we confidently say that we’re now off to the races and we’ll start reeling in that 50% decline?

 Reasonable people can certainly disagree on whether last week’s move is a head fake or the real deal. Let’s look at some history to see if it will help us reach a conclusion. Comparisons to the Great Depression seem to abound these days so let’s start there and see if there were any head fakes. All data comes from Bespoke Investment Group.

 The Dow Jones Industrial Average reached a peak of 381 on September 3, 1929. Few people had any idea what was to unfold next. Just 71 days later, the Dow had plummeted 48% and the stock market crash was in full swing. However, the Dow then turned around and by April 17, 1930, it had soared 48%. Case closed – we’re now in a new bull market – right? Not quite.

 By December 16, 1930, the Dow turned around again and dropped 46%. But wait, just 70 days later, the Dow was up 23%. Hold on, 98 days later, it was down 37%. But don’t despair, 31 days later it was up 28%. Dizzy yet? Ninety-four days later, it was down 44%. We’re far from done, though. Just 35 days later, the Dow was up 35%. And 57 days after that, it was down 39%. No need to worry, though, because 63 days later, it was up 25%. Oops, 122 days later, it was down a whopping 54%. Then we received a huge turnaround. Just 61 days later, the Dow was up 94%. At this point, it’s now September 7, 1932, and after all these pops and drops, the Dow is down 79% from its September 3, 1929, all-time high. To prevent boring you with more numbers, over the next two years, the Dow experienced five more swings of 20% or more. Whew!

 As you may have concluded from just looking at the large number of 20% moves up and down during the Great Depression, there were many head fakes interspersed with substantial rallies.

So, back to the question at hand, how do you determine the difference between a bear market rally and the start of a new bull market? Answer: you can’t in real-time; instead, you have to wait until substantial time has passed and you can place the market’s moves in historical context. Our job, then, is to take what the market offers us and do the best we can with it.



This material does not constitute tax, legal or accounting advice, and neither Rinvelt & David, LLC, Mutual Service Corp. or LPL Financial are in the business of offering such advice.  Any person interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors.
Roger J. David

Rinvelt & David, LLC

Securities and Advisory Services offered through Mutual Service Corporation.  Mutual Service Corporation and LPL Financial are afiliated companies and are members of FINRA/SIPC.  Rinvelt & David, LLC is not affiliated with Mutual Service Corporation or LPL Financial.




Distributions From Traditional IRAs Prior To Age 59 1/2

March 17th, 2009 at 8:09 am by under Your Money

A Summary Of This Article:
1. In General
2. Example showing the effect of taxes and penalties
3. Exceptions to the premature distribution tax
4. How do you pay the premature distribution tax?
5. Should you take distributions from your traditional IRA before age 59½?
6. IRA rollovers
7. Converting or rolling over traditional IRAs to Roth IRAs


Balancing Your Investment Choices With Asset Allocation

March 11th, 2009 at 12:38 pm by under Your Money

A chocolate cake. Pasta. A pancake. They’re all very different, but they generally involve flour, eggs,
and perhaps a liquid. Depending on how much of each ingredient you use, you can get very different outcomes.  The same is true of your investments.  Balancing a portfolio means combining various types of investments using a recipe that’s right for you.

Getting the right mix

The combination of investments you choose can be as important as your specific investments. The mix of various asset classes, such as stocks, bonds, and cash alternatives, accounts for most of the ups and downs of a portfolio’s returns.

There’s another reason to think about the mix of investments in your portfolio. Each type of investment has specific strengths and weaknesses that enable it to play a specific role in your overall investing strategy. Some investments may be chosen for their growth potential. Others may provide regular income.  Still others may offer safety or simply serve as a temporary place to park your money. And some investments even try to fill more than one role. Because you probably have multiple needs and desires, you need some combination of investment types.

Balancing how much of each you should include is one of your most important tasks as an investor.  That balance between growth, income, and safety is called your asset allocation. It doesn’t guarantee  a profit or insure against a loss, but may help you manage the level and type of risks you face.


A.C.T. Now Regarding Your Finances

March 9th, 2009 at 4:23 pm by under Your Money

If you have seen your retirement plan or personal investment account value drop 40% to 50% in the last 18 months you may be asking yourself … What Do I Do Now?

What you should do is A.C.T. …  Assess, Calculate & Take Action.

A – ASSESS your current situation.  Do an inventory of your assets and liabilities and revisit your goals and time horizon. The critical piece of information is your current and/or future monthly budget needs.  Review your monthly expenses and complete a side by side analysis of how each of your expenses will change when you enter retirement.  You also need to dust off those Social Security statements you receive and review your benefit amount at different ages.  If you have a defined benefit pension plan, you should contact your employer and have them calculate your pension benefit.  You should have them do this for you at the various possible ages you may want to begin benefits and at the various payout options provided within your plan.

C – CALCULATE your financial projections (mainly retirement).  There are a number of web-sites that you can use to calculate retirement projections.  You should be careful that you are inputting the proper information and using realistic assumptions within your calculations. You may want to consider inflation between 3-4% (4% if you want to be conservative).  Also, the rate of return you may want to consider while accumulating for retirement may be 7% to 8% and possibly 5% to 7% during your retirement years.  There are many web-based tools or even the over-the-phone investment company planning support services you may be able to access.  However, I would recommend working with a financial professional that has the knowledge and resources to help you over time and not just during the initial planning stage.  A financial professional can also help you accurately interpret the data generated.

T – TAKE ACTION. Once you have an updated analysis of where you stand, you should implement any changes your analysis suggests.  Changes that may relate to your desired retirement date, your spending or saving strategy, cash reserve needs or portfolio adjustments.  This is the difficult part. There is more to managing your situation than just changing investments or rebalancing your asset allocation.  You may find that you are on still on track and you don’t need to make any changes. You you may find that some adjustments are necessary and should be addressed immediately.
You may need to spend less, save more or change your portfolio to produce more income.  Whatever you discover in your recalculation you need to act on.  Don’t ignore it and simply hope for the best.

Remember, ASSESS your situation, CALCULATE the impact of recent events and TAKE
to address needed changes.

The time to A.C.T. is now.

Roger J. David
Rinvelt & David, LLC
Securities and Advisory Services offered through Mutual Service Corporation. Mutual
Service Corporation and LPL Financial are affiliated companies and are members of
FINRA/SIPC.  Rinvelt & David, LLC is not affiliated with Mutual Service Corporation or LPL Financial.