The 2010 election is over and President Obama was given a good whooping for delivering on his campaign promises.  Popular opinion is a fickle thing, however, and the public memory is short.  A Republican majority will storm back into the House of Representatives early next year.

Unemployment is horrifically high and home foreclosures continue at a scary pace, but we have travelled far from the precipice to the second Great Depression.  The economy is growing slowly, and many corporations are reporting healthy profits.

In my last newsletter blast September 15, 2010, when the Dow Jones Industrial Average was at 10,572, I noted the Dow was "creeping its way back toward - dare I say it-11,000?"Yesterday, the DJIA closed at 11,434, and is now trading at a 2-year high.  A close above 11,867 would confirm the higher trend, and I wager that will happen before the end of the first quarter 2011.  It is said the stock market climbs a wall of worry.  Problems abound, and there is plenty to worry about, yet investors should remember two cardinal rules: "don't fight the tape", and "don't fight the Fed."

The stock market has a mind of its own.  Money flows into and out of stocks as seen on the stock ticker and reported every day in the business news.  This flow of money on the stock ticker is called "the tape", and the tape shows good demand for stock.  The ticker train is moving forward. Get onboard and enjoy the ride.

"Don't fight the fed."  In a period of "easy money" or low interest rates, money flows into stocks via corporate buybacks and acquisitions, as well as by individuals and institutions seeking a higher yield.  Many quality companies and mutual funds pay good dividends.  Go with the flow.

Now on to my personal predictions.  I believe that the Dow Jones Industrial Average may exceed 12,000 in the first half of next year, and that 14,000 may be approached in the final year of Obama's first term.  Gridlock is good.  So long as short-term interest rates stay low-and I believe they will, due to the weak economy and a low inflation rate-stocks could march steadily, if erratically, higher

So, it's not too late, folks!  You will generally make a more timely investment when you are a bit afraid than when you are comfortable.  While nothing goes straight up, and there will be some scary days when stock indexes drop by more than 1%, the trend is still higher, and the trend is your friend.

Of course, you should not invest money in stocks that you may need anytime soon, and you should only invest within the parameters of your investment goals and risk tolerance.  I am happy to review your unique circumstances with you and advise accordingly.

Investment Class Offered
I will teaching the class, "Portfolio Management Like the Pros" on three Monday nights beginning the Monday after Thanksgiving, November 29, at Bayview Elementary School on Bay Avenue in Santa Cruz, 7:00 to 8:30 p.m.  The course description and enrollment form can be viewed at http://www.cityofsantacruz.com/index.aspx?page=540.  This will be the last investment class offered for a while. Please let me know if you plan to attend.

The Quantitative Solution
Day to day fluctuations in the financial markets cannot be predicted yet one money manager has achieved excellent returns with just 36% of the risk of the S & P 500. (1)   OKLO Financial is a quantitative money manager which uses sophisticated mathematical modeling to:
1)      PREDICT VOLATILITY using quantitative analysis of securities markets and their derivatives;
2)      MINIMIZE DOWNSIDE RISK by reducing exposure to volatile assets;
3)      DIVERSIFY and actively allocate to obtain the lowest risk invested portfolio.

A side effect of risk aversion is above average performance.  Never a home run, never a strike out, just consistent above average performance with below average risk.  Financial system "shocks" cannot be avoided should they occur, but the OKLO's risk management system is designed to weather these shocks successfully, and has done so throughout the turbulence of the past few years, recovering to new portfolio highs beginning in September 2010.

More information about OKLO Financial and their track record can be viewed at www.oklo-financial.com.   OKLO Financial is a Registered Investment Advisor offering management services to investors through Foothill Securities, Inc.  If you are interested in learning more about OKLO Financial please let me know.

Once again I thank you for your continued confidence and trust.  Your referrals are greatly appreciated.  Please let me know if you have any questions about your investments, or if your financial circumstances, goals, or risk tolerance has changed.

(1)  See www.oklo-financial.com