S&P 500 has a 3.7% Return in the First Quarter 2006, Highest First Quarter Return Since 1999

If Investors Followed the Author’s Advice and Held the S&P Equal-Weighted Index, You Are Up 6.6% for First Quarter.
Author Vows to Start Following His Own Advice*.

2006 has been a good year for most stock market sectors. Of the major tracked indices, only the Dow Jones Utility Index was down. But with interest rates moving ahead, one should expect utilities to struggle with their interest-sensitive financial models.

The S&P 500 Index, as many readers know, is a capitalization-weighted index. The more the company is worth, the more a company is weighted in the S&P 500. It has often been observed that the 400 companies at the bottom of the S&P 500 have less effect upon the index than the top 100. (Whether this is entirely accurate would require some quantitative analysis, but it is generally accurate as a rule of thumb.)

ONE COMPANY, ONE VOTE

The Author has frequently written about the SPEWI, the S&P 500 equal-weight index. This index gives each company in the S&P 500 one-allocation unit in the index. This index will be less affected by the movements of a few large S&P 500 stocks and more accurately reflect movements in the general stock market.

The SPEWI trades as a Rydex ETF under the symbol RSP. RSP is up 6.6% for the first-quarter of 2006, substantially greater than the 3.7% 1Q gain for the S&P500. * THE AUTHOR DID FOLLOW HIS OWN ADVICE AND HOLDS A POSITION IN RSP.

WHERE FROM HERE?

The Author uses a trend following, not a trend-predicting, strategy. But we are clearly in a nice upturn and all indices that the Author tracks are positive. Extended, but still positive. So keep the money in the ring.

AUTHOR UPDATE

The Author is putting his toe back in the water and will try to bring out some posts on a more regular basis. On the motorcycle front, the Author is talking to some motorcycle entrepreneurs and some ideas are beginning to form.



TAKE A DAY TO LOOK INWARD IN THE DESERT OF THE REAL!