After years of speculation, rumor and guesses as to whether Facebook stock is a good investment at all, the company has finally announced plans to go public. Facebook will trade on the NASDAQ under the ticker symbol FB following its IPO. Like many other technology IPOs of late, this offering will leave CEO and founder Mark Zuckerberg in iron-fisted control of the company. He’ll control approximately 57 percent of the voting power in the company after it goes public, leaving shareholder lawsuits as the only chance for investor control.

The company indicated and initial public offering range of $28 to $35 per share. This would value the company somewhere between $77 billion and $96 billion dollars, which is close to many technology pundit’s wishes of a $100 billion valuation. Regardless, of where within that range it prices, Facebook will be the internet IPO ever. With a $100 billion valuation, Facebook would be close in market value to long established technology companies such as Amazon and Cisco.

The IPO would raise something in the $11 to $13 billion dollar range, although the company will only get half of that. Investors in the company are cashing in a big pot of chips in order to lock in gains for their own investments and for their venture capital funds. That isn’t necessarily a bad sign, but an investor who thinks that there is a lot of upside left in Facebook’s stock price wouldn’t be so eager to sell at the beginning. However, many of the investors were early stage investors in the company who made very risky bets that have already paid off much more than can be usually be expected. No one can blame them for wanting to take some money off of the table.

Employees would face a lock-up period of around 180 days during which time they would be prohibited from selling their shares that they have earned over the years.

Although there is less concern that Facebook will end up trading underwater quickly and staying there like recent IPOs from Zynga and Groupon, there is some concern about Facebook’s lofty valuation. At the high end of the range, Facebook will trade at 99 times earnings, a multiple higher than virtually all of the S&P 500 companies according to Bloomberg.

Still, there is so much buzz around this IPO that there is little doubt investors will both swarm it under and take the shares higher in the short term. The question remains if Facebook stock will be a good investment for long-term investors. For the average investor, this trade is a gamble, but one many are willing to take. Time will tell if this is the next great thing in corporate America, or another AOL that looked like it couldn’t fail, until every realized that it couldn’t succeed.

Related posts:

1. Facebook Valuation Estimates Billions Wrong?
2. Tax Due Date 2012

Facebook IPO 2012 originally published at Personal Finance Blog - FinanceGourmet.com

Apple reports earnings on April 24. This report is actually for earnings from the 2nd quarter of Apple’s fiscal year, even though corporations on a calendar year are reporting first quarter earnings right now. (Several tech companies reported earnings last week.)

After a rough week for the company in the headlines, these earnings will likely be used as a gauge for the short-term future of Apple stock.

Recently, Apple has been the subject of legal action from the Justice Department regarding alleged price-fixing for ebooks. Although this makes up a tiny portion of Apple’s revenue, it is a major key in how the Apple store works. If there is a problem with this model for books, there could conceivably be issues in other markets as well.

What is not in doubt is that Apple will continue to dominate the tablet computer market and that its prolific iPhone will continue to be a huge player in the smartphone market. There is little doubt among analysts that things in the marketplace look good for Apple in both the short and long-term.

In fact, the only real question about Apple stock these days seems to be whether the company’s shares have risen too far, too fast. The stock, which hit $600 earlier, has declined to closer to $575 per share. There are two main concerns about Apple’s stock. One, is have investors simply gotten ahead of themselves, in which case share prices would hold at this level or rise much more slowly going forward. The second is has the company’s extraordinary growth finally topped out, in which case, share prices might need an actual reset in the marketplace.

As CEO Tim Cook likes to point out, the markets Apple is in are huge and they are growing. Additionally, it isn’t like Apple has an 80 percent market share in mobile phones. There is theoretically plenty of room for Apple to grow there.

However, just because Apple doesn’t dominate the entire smartphone market, it may dominate the smaller high-end smartphone market. In other words, if everyone who wants, and can afford, an iPhone already has one, then the company’s growth is on shaky ground. There are few analysts, however, who espouse this theory.

Some technology pundits have begun suggesting that Apple will see reduced subsidies from carriers for the iPhone. However, Apple has multi-year agreements with carriers, so any impact from such a move would be down the line. In addition, unless a dazzling Windows Phone or Android phone comes to market, Apple still has remarkable leverage with carriers. In fact, some analysts question whether Sprint gave up too much to be in the iPhone market. That isn’t something that you worry about right before a company is forced to agree to less favorable terms.

Expect Apple’s stock price to move dramatically following the earnings announcement, but the expect whatever movement occurs to be tempered over the coming weeks as clearer heads prevail.

• Check Apple’s investor relations webpage to listen in on an audio webcast of the earnings conference call.

No related posts.

Apple Earnings Good or Bad? originally published at Personal Finance Blog - FinanceGourmet.com

This past week featured the earnings release of several major technology companies, coming closely on the heels of major earnings announcements from other tech companies, including Google and Apple.

IBM Earnings

First up, IBM reported revenue of $24.7 billion leading to earnings of $2.78 per share. The consensus estimates from analysts were a bit higher for revenue, but a bit lower for earnings per share. The company did raise its full-year earnings guidance, but it wasn’t enough. Investor reaction wasn’t pretty with shares dropping 2.4 percent the following day, and continuing down. The technology giant closed on Tuesday before reporting earnings at 207.31 and closed Friday at just 199.55. IBM’s results have also been blamed for the general downward direction of the markets for the end of the week.

Still, IBM has a long history of boosting its share prices, primarily by buying back enormous amount of stock each year.

Intel Earnings

Intel’s earnings didn’t make investors any happier. The stock has had a pretty good run-up as of late, so anything other than a gangbusters quarter was likely to lead to a poor reaction. Intel shares got it. The stock closed before earnings on Tuesday at 28.48, but finished the week at 27.60.

The company reported revenue for the first quarter of $12.9 billion and net income of $2.74 billion. Earnings per share were 53 cents.

Microsoft Earnings

Microsoft reported earnings on Thursday. Unlike Intel and IBM, the software giant’s earnings news did not disappoint investors. Rather, the stock rallied more than five percent on Friday.

The company reported third-quarter results (of its fiscal year) of $17.4 billion in sales and a $5.1 billion, or 60 cents per share, profit. Although 60 cents is slightly lower than last year’s 61 cents a share profit, that number included a one-time tax benefit to the company’s bottom line.

The big news out of Redmond was that personal computer sales rose last year. Many technology pundits have been forecasting a decline to the rise of personal computing devices like tablets and smartphones. That data translated into a four percent increase in Windows sales ahead of next year’s release of Windows 8, which, once again, is considered a make or break product for the company.

It wasn’t all good news. The company reported lower sales in its entertainment business, which consists primarily of its Xbox gaming system. The aging platform is reaching saturation, where pretty much anyone who wants to have a current Xbox system already has one. Since the company isn’t expected to release an update to the system in the near future, this is an area where weakness will likely continue.

EMC Earnings

EMC is the world’s largest maker of corporate data storage equipment, and the owner of VMware. It’s earnings, therefore, show specific insight into how big business technology spending is going.

The company earned 37 cents per share on revenue of $5.1 billion, an increase of 11 percent. The company attributes much of that gain to continuing demand for cloud computing. However, the company’s outlook for the future disappointed investors who dropped the stock down four percent on Friday.

eBay Earnings

On Wednesday, eBay reported quarterly revenue of $3.3 billion, and a profit of $725 million or 55 cents per share.

The company, which also owns popular payment service PayPal, foretasted similar profits for next quarter.

Unlike the others, eBay’s earnings impressed investors who pushed the stock price from a Wednesday close of $35.87 to a close on Friday of $40.29.

Tech Forecast for 2012

The outlook for technology stocks for 2012 looks mixed right now. If the economy manages to maintain its slight upward growth, it looks like the tech bellwethers will be in good position to capture the upside. However, if economic growth fizzles, it looks like customers and business will have no problem quickly retrenching and quashing tech spending for the remainder of 2012.

If you are going to be investing in tech during 2012, keep a sharp eye on the economic indicators going forward. The industry does not have the momentum to rise in the face of an overall decline in the economy for the remainder of the year.

No related posts.

Tech Earnings Week originally published at Personal Finance Blog - FinanceGourmet.com

Albert Einstein once said that the most powerful force in the universe was compound interest. What most people don’t understand is that, while powerful, compound interest needs a lot of time to work.

Unfortunately, when most people start looking for financial planner, or stock broker, or just researching how to invest on their own, they start with unrealistic expectations of how rich investing can make them. The most important thing to remember is that it takes money to make money, even in investing.

If you aren’t starting with a million dollars, you won’t be making a million dollars any time soon.

How Fast Can Investing Make Me Rich?

When a lot of people start investing, they start with something like their 401k plan or other retirement plan. Usually, they contribute a small part of their paycheck each month. Over time, the money adds up nicely, but not to the extend that makes anyone excited. After saving up some money outside of a retirement account they start thinking about online trading, or investing in something that grows faster. Not to put too fine of a point on it, they want to get rich fast.

Unfortunately, that isn’t really how investing works. If you don’t already have a lot of money, investing isn’t going to make you a lot of money, no matter how well you do.

Let’s say that you have $10,000 to invest. You can risk it all and invest in the riskiest investment strategy out there. Now, let’s say that I’m the best investor in the entire world. I’m so good that I earn you 50 percent return every year, with no fees or expenses. In other words, this is completely unrealistic.

There is no one who can do this. Not Warren Buffet, not the best mutual fund, not the best hedge fund, not even Bernie Maddoff’s ponzi scheme. No one. In fact, if you start talking about a 50 percent annual return with any financial professional anywhere, they will start talking you down, because 50 percent is utterly unrealistic.

But if you could earn 50 percent return per year, how fast could investing $10,000 make you rich?

Let’s see what happens if you earn 50% on your money every year.

• Start Investing: $10,000
• After 1 year: $15,000
• After 2 years: $22,500
• After 3 years: $33,750
• After 4 years: $50,625
• After 5 years: $75,937
• After 6 years: $113,906
• After 7 years: $170,859
• After 8 years: $256,289
• After 9 years: $384,433
• After 10 years: $576,650

After a DECADE, you finally have half a million dollars.Now, at this point, compound interest really does start to work. Of course, you had to have a few hundred thousand dollars before it gets impressive, and remember we’re talking about very unrealistic returns here.

Not really what you were expecting is it?

What about the more standard 10 percent return?

How Much Can You Really Earn Investing?

There are just as many people out there who will tell you that a 10 percent annual return is unrealistic as there are who will tell you that a 10 percent annual return over time is completely realistic. It is important to remember that no matter which one it is, they are talking about average annual return, but for the sake of simplicity, how much would you have after 10 years at 10 percent?

• Starting with $10,000: $25,937
• Starting with $25,000: $65,843
• Starting with $50,000: $129,687
• Starting with $100,000: $259,374
• Starting with $250,000: $648,435

I don’t know about you, but until you get to $250K, those numbers don’t seem very impressive.

But, look what happens after 20 years:

• Starting with $10,000: $67,275
• Starting with $25,000: $168,187
• Starting with $50,000: $336,375
• Starting with $100,000: $672,750
• Starting with $250,000: $1,681875

Those numbers are a little more impressive. But, it took TWO DECADES to get there.

What it all adds up to, is that investing is slow. All of those people out there who are billionaires didn’t get rich by investing $25K or even $100K. They got rich by running companies and businesses. Even then, it usually took decades.

As far as those who got rich “by investing”, they got rich by investing millions and billions of dollars. Even Warren Buffet didn’t get rich investing his own money. He went out in the beginning and got people to invest millions of dollars with him. If he started with just $250,000, and somehow had the exact same track record, he’d have millions of dollars by now, but not billions.

When you start investing, be sure you understand the reality of expectations. Do some quick math to see how much money you would have, even if you doubled your money every year, and then realize that isn’t going to happen. But, if the 100% return numbers aren’t impressing you, you can be pretty sure that you won’t be impressed by what happens at 8 percent or even 10 percent either.

It takes a sizable starting investment to end up with a million dollars before decades have gone by. Always remember, compound interest is very powerful, but it is also very slow.

Related posts:

1. Get Rich Not So Quick in Real Estate
2. Should I Pay Off My Mortgage Instead of Investing

Get Rich Investing? originally published at Personal Finance Blog - FinanceGourmet.com

Just got the 2011 IBM annual report. It never ceases to amaze me how much money this company puts into share repurchases, rather than actual dividends.

For 2011, the company boasts that they were “… able to return $18.5 billion to you,” the shareholder. Of course, a paltry $3.5 billion of that was actually returned to shareholders in the form of a dividend. The remaining $15 billion went into buying back shares, which does a lot more to make it easier for executives to meet various per share bonus targets than it does to enrich shareholders. Theoretically, shareholders benefit from fewer outstanding shares, but I bet most shareholders would have benefited more from a triple-size dividend payment.

Any way, this is par for the course for IBM which spent $15 billion in 2010 and 2011, and $7.5 billion in 2009 buying back its stock. And, it isn’t done, yet. The board has already authorized the repurchase of $8.66 billion more stock, and there is little doubt the board will approve a new $15 billion or more in share repurchase authorizations for 2012.

As a shareholder, you must factor this into your investment. Your dividend will be substantially lower than it should be from a company of this size and health, but over the long-term, you may benefit from the ongoing reduction in the amount of IBM shares outstanding.

Related posts:

1. IBM Boosts Share Buyback Again
2. Are Share Buybacks Really Good For Shareholders?

IBM Share Repurchases Continue originally published at Personal Finance Blog - FinanceGourmet.com

Apple (AAPL) announced that after years of building up a massive pile of cash with its record earnings that it will begin to return some of that money to shareholders. Apple will pay a quarterly dividend of $2.65 per share starting in July. It will also repurchase up to $10 billion in stock over the next three years.

So, what does this Apple announcement mean for the stock and for the company?

Apple Dividend

At first blush, Apple’s announced quarterly dividend seems very large. But, how much is Apple’s dividend? It works out to $10.60 per year. That’s higher than most companies pay out in dividends. However, remember that Apple’s stock price is much higher than most companies. The stock currently trades around $600 per share. That makes the dividend approximately 1.8 percent, which, while respectable, is nothing to write home about.

Why did Apple announce a dividend now?

There are several reasons that Apple has finally decided to start paying a quarterly dividend after refusing to do so for years. First, and foremost, is that Steve Jobs is no longer around. Apple’s iconic CEO had the street cred to tell people, “No dividend,” no matter how high the companies cash balance got without getting anything other than minor push back. Although new CEO, Tim Cook, gets to claim some of that credibility as Apple’s CEO, the truth is that he is not Steve Jobs, and the larger Apple’s cash horde got, the more people would wonder whether he was doing the right things with it.

Second, Apple’s cash pile had grown very close to the psychologically important level of $100 billion. Although there is little real world difference between $99 billion and $101 billion, there is a big difference in people’s minds. Building up a cash account of greater than $100 billion would only raise more questions about what that much money could possibly be used for and when, if, such a huge transaction (or series of transactions) occurred, would they actually be worth the price.

Finally, Apple is growing up. As THE growth company of the 21st century, Apple raced ahead of former tech superstars to become the most valuable company in the world by market capitalization. It’s hard to make the claim that growth will continue to come forever when you are already so big. By moving now, while there are no questions about Apple’s state, the company establishes a sizable dividend as the normal course of business. Waiting until growth stagnated would have sent the message that the dividend came because the company ran out of room to grow. Paying a dividend also opens the company up to investment from mutual funds and other institutional investors who require dividends to allow an investment. This means Apple no longer relies on only growth investors for its stock price.

Apple’s Share Buyback

Apple’s share repurchase announcement makes much less sense. The company’s stock trades at an all-time high, making it difficult to suggest the stock is undervalued.

I’ve questioned the size of IBM share buybacks in the past, which seem designed more to allow executives an easier time of hitting financial targets than improving shareholder value. It seems odd that Apple would need to be doing such things with everything going right. However, it is possible that the directors and executives at Apple see the writing on the wall. By announcing the share buy  back now, they avoid the scrutiny of using such share repurchases to meet those all important per-share metrics that bonuses are tied to.

Ironically, the stated reason for Apple’s buyback is the most concerning. The company says that it is repurchasing stock to avoid dilution caused by future stock grants to employees and executives. $10 billion worth of stock grants in the next three years? That seems incredibly generous.

For now, there is really no downside from an investor’s point of view. Apple shares are still priced well based on projected earnings. Also, it appears that even with the new dividends and share repurchase, Apple will still be adding to it’s reduced cash pile as new earnings and profits roll in.

Overall, this is good for Apple stock, especially if the company continues to focus on dividends and not so much on share repurchases.

Related posts:

1. Apple Stock Good Investment or Passing Fad
2. Apple Stock Price Tied to Steve Jobs

Apple Stock Paying Dividends originally published at Personal Finance Blog - FinanceGourmet.com

PIMCO is synonymous in the investing industry with bond mutual funds. More specifically, PIMCO is synonymous with Bill Gross and the PIMCO Total Return fund, which is the world’s biggest, and one of the best, bond mutual funds. However, PIMCO actually offers a full range of investment products, including equity mutual funds.

As Reuters reports, PIMCO actually managed to win the best large company equities award from the Lipper Fund Awards. I’m not sure whether to mock Reuters for repeatedly using Pimco, when everyone knows it’s PIMCO, or if there is an AP Style rule I’m missing. Either way, the bond mutual fund giant won the award last year as well, marking two straight years at the top.

Before you load all your money up into PIMCO StockPlus TotalReturn or PIMCO StockPlus Short Strategy fund, it is interesting to note that PIMCO’s funds of this nature aren’t very traditional. Rather than owning shares of publicly traded U.S. companies, these funds have a lot of investments in various derivatives and contracts. This allows PIMCO to profit from moves of a macro nature rather than being right about specific companies.

There is an advantage to this form of investing. For example, if your analysis says that the banking sector should rise, you might by shares in several major U.S. bank stocks. But, even if you are correct about the sector moving up, your gains can all be undone by one of your investments taking due to unrelated events such as a lawsuit or government action. By investing in securities and contracts that represent the overall sector, you can still be right, no matter which stocks conspire to make you look wrong.

PIMCO Total Return ETF

Although it didn’t win any awards, PIMCO does have another interesting offering called the PIMCO Total Return ETF. Like all exchange traded funds, this ETF trades like a stock that can be bought and sold anytime during the trading day. That allows investors to use stop-loss and limit orders.

Unlike ETFs tied to an index, this one is managed for “attractive risk-adjusted returns” by holding a portfolio of high grade intermediate bonds. The ETF is actively managed so it does behave like a mutual fund when it comes to returns.

The PIMCO Total Return ETF just started on March 1, 2012 and has a ticker symbol of TRXT. Should be interesting to keep an eye on this one over what promise to be at least a couple of volatile years in the markets.

Related posts:

1. PIMCO Total Return Bond Fund Cuts U.S. Government Holdings
2. Mutual Funds – Know What You Are Buying

PIMCO Equity Funds Win Again originally published at Personal Finance Blog - FinanceGourmet.com

As always, the mainstream media perked up about the stock market and investing world when the Dow Jones Industrial Average passed the made-f0r-headlines 13,000 level. The guys that write news story headlines love round numbers, maybe because everyone else does too. But, just like our infatuation with round number birthdays, such as turning 40, there is no real difference between Dow 12,956 and Dow 13,000, just like there is no real difference between being 39 and being 40 years old.

Is Dow 13,000 Meaningful?

The 13,000 number is purely psychological, but it does provide an opportunity to take a look at how the stock market and the economy are doing lately.

First, and foremost, most storied correctly noted that this is the first time the Dow has managed to gain the 13 K level since 2008. That is significant for two reasons. One, 2008 basically marks the beginning of the stock market crash caused by the bursting of the housing bubble and the subsequent financial crisis, all of which triggered what has become known as The Great Recession. Two, it means that maybe some investors should be seeing a recovery in their portfolios.

It is tempting to draw the conclusion that this means the market is back and fully recovered. However, that would be jumping the gun. While the stock market is a leading indicator, it’s pricing is currently based on pretty much everything going right in the near future. In other words, this level is precariously balanced between the Greek debt crisis lessening, the U.S. economy continuing to improve, and Washington D.C. not ruining the whole thing in a rash of election year politics.

Lost Decade Lost?

Perhaps more significant than the mental importance of a round number like 13,000 or what it means relative to 2008, is what this level is starting to represent in the bigger context.

Over the last few years, investment product marketers, particularly annuities, have made a lot of hay out of what is called, “The Lost Decade.”

The lost decade refers to the concept that if you invested some money 10 years ago, you have the same or less money than when you started. Of course, to them, the solution is an investment product with a guaranteed rate of return such as a variable annuity or equity-index annuity.

We’ll leave that discussion for another day, but let’s take a look at where we are with the recent market improvement.

The week of March 4, 2002 saw the Dow close at 10,572.49, significantly less than the market’s current 13,000 level. Now, that is hardly an eye popping return for the last 10 years, but it starts to throw cold water on that argument, particularly if the market continues to improve.

The other thing to notice is how quickly this whole thing happened. From that 13,000 of 2008 to under 7,000 in 2009 took less than a year. That scared a lot of people and many of them pulled their money out of the stock market or stopped putting money into their 401k plans or IRAs. Unfortunately, as history has shown time and again, that was exactly the wrong move.

From the 6,600 level in March, 2009 the market made a wrenching set of moves up and down shaking confidence even further. But, given the benefit of hindsight, the market essentially climbed right up from that low to over 10,000 by the beginning of 2010. 2011 started around 11,500 and now, in 2012, we are talking about 13,000.

However, there has been no “all clear.” No one says the economy is out of the woods. It is only recently that unemployment has started to come down and that other economic statistics have started to go up. In other words, if you have been waiting for things to get better or more stable before you moved back into the market, you are already too late. This is why most people never get the 10 percent historical return in the stock market. When you pull out when things are low, chances are you don’t get back in until they have already recovered.

What will the next 10 years bring? I don’t know, and neither does anyone else. What I do know is that if you maintain the proper asset allocation, rebalance  your portfolio annually, and stay invested, you’ll be richer than you are today.

Related posts:

1. 2011 Stock Market Update Q3
2. Stock Market 4th Quarter Turn Around

Dow 13,000 What Does It Mean? originally published at Personal Finance Blog - FinanceGourmet.com

Remember Meredith Whitney?

Right about now, she’s probably hoping you forgot. Whitney is the analyst who said,

“There’s not a doubt in my mind that you will see a spate of municipal bond defaults…”

She went on to say that there could be 50 to 100 sizable defaults or more and that those defaults would amount to hundreds billions of dollars worth of defaults.

Municipal bond markets reacted by bidding up the yield for muni bonds.

Most experts didn’t buy Whitney’s prediction. Even I wrote a 2011 article about how safe are muni bonds when people kept asking me about it. Of course, none of those stories was a big, inflammatory prediction of doom from a “name-brand” financial analyst.

Analyst Predicts Muni Bond Defaults

Wall Street and the financial markets are a very weird place. Preeminent analysts are created by making market calls or predictions that come to pass, especially when they make calls that no one else saw coming. Ironically, those same analysts aren’t necessarily held accountable when they make bad calls.

Goldman Sachs’ Abbey Joseph Cohen made a name for herself by making ever higher market calls during the technology fueled stock market bubble of the late nineties. When other analysts concluded that there was no rational basis for the stock market to go any higher and predicted a downturn, Cohen was always there with an even higher market prediction, and she was right (for a while).

Unfortunately for the people that listened to Cohen, she was most decidedly not right about when the market would finally turn. Indeed, when the market first began heading down, Cohen predicted a rebound. Listening to her would have cost you much more money that it would have made. In fact, Cohen predicted an UP year for the stock market in EVERY SINGLE YEAR during and after the internet bubble popped, which means she has NEVER thought the stock market would go down.

It’s a sad fact that there is little or no real accountability in the investing world. The bond rating agencies Moody’s, Standard and Poors and Fitch have suffered no negative effects from rating toxic mortgage securities as AAA until long after it was obvious to EVERYONE that there were problems. Many securities went straight from AAA to Junk status, an admission that the AAA rating was either gross incompetence or outright fraud. Either way, all three companies continue to prosper.

Meredith Whitney’s Muni Bond Default Prediction Defaults

Financial analyst Meredith Whitney rose to fame by making a call warning about bank stocks in 2007, before everyone else realized the ship was sinking. Later, she predicted the dividend cut by Citigroup, further cementing her reputation as someone who saw things others could not see.

In mid-December of 2010, Whitney made another call no one was making, that muni bonds were headed for big waves of failures. The reality is that despite a very tough 2011, the end of stimulus dollars flowing from Washington and state and local tax collections below predictions, there have actually been FEWER muni bond defaults in 2011 than in previous years.

The closest thing to Whitney’s prediction were two defaults late in the year when Harrisburg, Pennsylvania and Jefferson County, Alabama defaulted. That $3 billion is a far cry from the hundreds of billions Whitney predicted. A closer looks shows a flawed project and not a tidal wave of financial problems sweeping up an entire county’s finances. Remember, the giant (and very real) financial issues of California led to not one single dollar of California muni bond defaults.

In the real world, Whitney’s credibility should be destroyed. In the world of finance, however, Whitney will lie low for a while before putting a better spin on her remarks. There will be caveats, and things that she said elsewhere in much lower profile that seem to make her bold prediction less of a failure.

The terminally stupid will by into this spin, and use it to defend her. But, the fact remains that when the press was swirling around and her name was in big BOLD headlines, she did not make one remark, give one interview, or say one single thing that suggested she was in any way uncomfortable with how her prediction was being represented. Only now, after she has been proven wrong and it looks bad for her will she suddenly point out the subtle nuances that meant it was all just a big misunderstanding.

For 2012, make your investing resolution to be, “To stop listening to analysts who make their living by making a lot of noise with big predictions.” After all, sooner or later you’ll be listening to Abbey Joseph Cohen call an up year for the markets in 2008, or Meredith Whitney telling you to get out of bonds before all those non-existent defaults in 2011.

Related posts:

1. Muni Taxes Stay the Same
2. PIMCO Total Return Bond Fund Cuts U.S. Government Holdings

Meredith Whitney Muni Bond Defaults Fails to Materialize originally published at Personal Finance Blog - FinanceGourmet.com

The results of the stock market for 2011 are basically flat. While the Dow Jones Industrial Average can claim a small gain, the S&P 500 Index ended 2011 with a small loss. Likewise, the NASDAQ ended down for 2011 as well.

2011 Dow Jones Up

The Dow finished up for 2011 thanks in part to the makeup of the index. The stocks in the Down Jones Industrial Average contain only large U.S. companies. While financial companies make up a significant number of the stocks, their impact is limited because the Dow Jones Average is a price-weighted index. That means that higher priced stocks have more influence on the average than lower priced stocks.

Most financial stocks have very low share prices these days, and as a result, their performance doesn’t drag as heavily on the average. Bank of America was the worst performer in the Dow having lost 58.3 percent for the year.

The Dow Industrials finished up 5.5 percent for the year. That is three consecutive positive years for the Dow, although nobody is dancing in the streets over this year’s performance, where many components had flat or down years.

The top 5 Dow stocks for 2011 were McDonald’s (up 30.7%), IBM (up 25.3%), Pfizer (up 23.6%), Home Depot (up 19.9%) and Kraft Foods (up 18.6%).

2011 S&P 500 Down

For 2011, the S&P 500 Index finished down for the year, although it’s performance was essentially flat, down less than 0.1 percent for 2011.  Unlike the Dow average,t he SP500 index is weighted based upon each stock’s market capitalization. The dismal performance of the financial stocks included in the index have large market caps and weighed heavier, pulling the index down.

For example, IBM’s high share price (around $185 per share) means that it’s positive returns for the year count a lot toward the up side for the Dow versus Bank of America’s terrible performance being only a small impact thanks to its $5 a share price. On the S&P 500 Index, however, Bank of America’s $56 billion market cap gives it much more pull.

NASDAQ 2011 Performance Down

The Nasdaq Composite Index was also down for 2011. It finished the year down about 1.8 percent.

Other Stock Markets in 2011

International markets didn’t do as well as the U.S. In Europe, the growing Euro crisis has engulfed not only Greece and Ireland, but Italy and Spain as well. Britain’s main index, the FTSE dropped 5.6 percent for the year and the main German index, the DAX, was down approximately 15. That is its first down year since 2008.

Elsewhere, the Asian index, the Nikkei was down 17 percent.

For 2011 Gold was up 10.2 percent for the year (down from this summer’s +33 percent peak). Oil was up 8.2 percent for the year.

2011 Market Recap

So, what does the market performance for 2011 mean for investors?

Almost nothing.

The small gains and losses for the year hide the extreme volatility that took place during the year through bone-headed gridlock in Washington, particularly over raising the debt-ceiling, and the building financial crisis in Europe.

Overall, regular investors would be wise to take very little stock of how the markets overall performed during 2011. Instead, investors should focus on finding good companies with strong management since those are the only ones poised to benefit from what looks to be weak economic growth during 2012.

For American’s regular lives, the markets offer no real solution or problem to the ongoing economic issues. Recent economic data suggests that the economy might FINALLY be turning a corner, assuming the current my-party-is-more-important-than-the-country mentality in Washington can either be overcome, or sidelined by a nation that has grown largely disgusted with everything the comes out of the nation’s capital.

If jobs continue to get created and Congress doesn’t break the fragile economy, 2012 might see better investment performance, and more importantly, set the stage for real economic growth and investment performance in 2013.

Happy New Year, Everybody!

Related posts:

1. 2011 Stock Market Update Q3
2. Stock Market 4th Quarter Turn Around

Stock Market 2011 Results originally published at Personal Finance Blog - FinanceGourmet.com