What the experts say
A lost decade for equities?; Holiday cheer for retail stocks; Year-end tipping tips
A lost decade for equities?The return of the Dow Jones industrial average to 10,000 has been bittersweet, said Paul Lim in The New York Times. While it’s a relief to see that number back at five digits, it’s also a “reminder that stocks have gone virtually nowhere, on balance, for more than a decade.” The Dow first hit 10,000 way back in March 1999—and, when you factor in inflation, it may seem as if investors were much better off at that time. But not so fast. “Back then, the price-to-earnings ratio for domestic stocks stood at a very high 41.4.” By that measure, stocks now trade for half as much. Besides, for many sectors, the decade has been quite good. If you count dividends, energy stocks are up an average of 150 percent since 1999; consumer staples and utility stocks have gained 65 percent and 50 percent, respectively. “That’s hardly what I would call a lost decade,” says James W. Paulsen, an investment strategist at Minneapolis’s Wells Capital Management.Holiday cheer for retail stocksThis holiday shopping season may be “jollier” than Wall Street expects, said Robin Goldwyn Blumenthal in Barron’s. Retailers have “been paying strict attention to inventory management”—unlike last year, when most retailers cut prices in order to move inventory by Christmas. Companies are also benefiting from lower manufacturing costs—and, in a gift to investors, they’re not passing all those savings on to customers. Many retailers could see “robust, if not record, fourth-quarter earnings,” says Craig Johnson, president of Customer Growth Partners. To spot a bargain, investors should pick companies with “deftly managed inventories” and “appealing valuations.” Take a look at Best Buy, Chico’s, and Dollar Tree, where sales are growing at a faster pace than inventory—an excellent sign going into the holidays.
Year-end tipping tipsIt’s that time of year when you’re expected to show everyone, from your mail carrier to your manicurist, a “token of appreciation,” said Laura Cohn in Kiplinger’s Personal Finance. If you have a nanny or a housekeeper, it’s customary to tip a full week’s pay. For a regular hairstylist, plan to give the “cash equivalent of one appointment,” regardless of whether he or she is the owner. For your trash carrier and newspaper delivery guy, you can put “20 or 25 bucks” in an envelope. But your mail carrier can’t accept cash, so give him a gift instead. Likewise, don’t give money to your kids’ teachers. “It could be construed as a bribe.”