Sunday, January 01, 2006

All's Well That Ends Well

The equity markets staggered to the 2005 finish line with a nearly flat performance for December. For the year, the S&P500 index was up roughly 4.8%, while my equity portfolio returned roughly 14.1% on a gross basis.

Despite all the hand-wringing by sell-side (a/k/a brokerage desk trading-biased marketing reps) analysts over; economic 'soft patches,' oil prices, natural gas scarcity and price, natural disaster impacts on the economy, housing bubbles, declining consumer confidence, the non-existence of a growing US economy, and a lackluster holiday retail season, the economy did grow in 2005. A nearly 5% return for the year may not be excessive, but it hardly represents a recession economy, either.

Being invested in housing and commercial real estate, energy production and distribution, selected retailers, finance and biotech, my portfolio out-performed the index by almost 10 percentage points. I guess energy was a good place to be, even if you didn't trade positions since July. As was biotech, finance and some retailers.

To me, 2005 provided yet another demonstration of why it is typically better to ignore most of the manufactured "news" from the sell-side of Wall Street, and focus instead on key indicators of whether or not a serious market decline is likely to occur. It served me well this past year, and I expect it to do so again in 2006.

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