Since 1950, the Standard & Poor 500’s performance in January of each year has been a pretty accurate indicator of how the stock market would perform for the entire year. There were only six years when the S&P 500’s January results went in one direction and the index moved significantly in the opposite direction for the full year, a forecasting accuracy of 90 percent. This history has been thoroughly discussed in the January 10, 2010 Pittsburgh Post Gazette. The Market Oracle in the UK wrote about the same phenomena on January 6, 2010. Even Mark Hulbert acknowledges the history of the January indicator although he does point out some flaws that I have not been able to verify.

January 2010 has been dismal for the market. Let’s face it, the economy sucks. I will be watching for growth indicators but right now the January theory is the one I will follow.

Wescom Credit Union has been making me nervous for at least a year.  It’s a large organization based in Pasadena, California. The have had 43 branches in Southern California from Santa Maria to San Diego and inland to Temecula.  They have been rated poorly, are losing millions of dollars and now will close 12 branches.  They got in trouble lending to those who could not afford to repay their loans.  Just like Citi Bank, Wachovia, and all the rest.   

Arianna Huffington has been running a campaign to encourage people to move their savings to good quality community banks.  Arianna writes “The idea is simple: If enough people who have money in one of the Big Six banks (the four we mentioned earlier, plus Goldman Sachs and Morgan Stanley) move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it’s meant to be.”

It’s hard to find the link but here it is at http://moveyourmoney.info/. Just enter you ZIP Code to find the good banks in your area.

Smart people sold their S&P 500 Index accounts, other equity mutual funds, and many of their stock holdings when they saw the market had dropped 10% to 15% from its peak.  Were you asleep or what?  The S&P 500 Index peaked at 1576.09 on October 11, 2007.  Don’t tell me you didn’t notice the market was going down.

As you read the various articles about the change in our wealth over the past decade you come to the conclusion that all your savings and high earning investments in the stock market were for naught.  On average you would have been better off putting your money in bank CDs because you would have at least earned some return.  This simplistic view assumes that no one looks at their investments.  Those writers think that most people just follow the broker’s advice and never question anything.

I contend that most people are not that lazy.  After all, almost every news broadcast includes stock index averages.  We all know their names.  Dow Jones Industrial Average, Nasdaq, and S&P 500.  Most of us looked at our investments.  Each of us made decisions about those investments.  I do not accept Ali Velshi’s assumption that most of us were dunderheads who simply followed broker advice without question.  I am sure some people did blindly follow the “buy and hold” pitch given by the brokers.

Initially I did accept the notion that all of us blindly followed broker advice.  Wait!  We all did do some analysis.  Most of us did read the newspapers.  Many did make mistakes but some of us did the right thing and earned large amounts of money.

When the DJIA hit 666 last March I was skeptical that the bottom was there.  I promised myself that after the average had grown by 20% I would reinvest.  Then I looked at my earnings in GNMA and decided the market was too volatile.  My decision.  I made a mistake.  I could have grown some of my money by about 63 %.  My decision.

We read, we listen and we decide.  There is still money to be made but we all take a chance.  The poorest among investors simply can’t afford too much risk.