I have been thinking about my predictions for 2010 and getting ready for my fourth year in a row of published predictions on the markets and global economy.  The next post will be an evaluation of my 2009 predictions which I know I nailed a couple.

Good expectations and predictions are built on a couple of fundamental building blocks:  A knowledge of history (especially recent history) and knowing that it will not be what it just was.  Who would think cause would beget identical cause?  No, cause creates effect or affect (is there a difference?) anyway look at history and predict the reaction to that cause with a time lag. 

So in the effort, time for a history lesson. 



That is the SP 500 against the sector funds.  I added a new one, MOO.  It is in some accounts and I have not looked at it in this context before.  Needless to say, I am a bit surprised how well it has performed. 

At this point, XLU looks kind of attractive with a dividend of nearly 4 percent and the worst performing sector for the past twelve months.  Our focus is forward and extreme performance - good or bad is more predictable going forward if you accept mean reversion.