Correlation

History has shown us that when investors get scared they think in a "risk on" / "risk off" mentality - regardless of the asset class.  These knee-jerk reactions cause an unprecedented amount of correlation in the market.  The following chart does a nice job of showing how fear contributes to the overall correlation of stocks in the S&P 500 dating back to 1986.

More recently, you can see peaks in correlation around the Great Recession, fear of a double dip recession, uncertainty surrounding the Eurozone's debt calamity, and the possibility of global contagion.

Source:

www.ritholtz.com

Who actually owns the most US debt?

It has become a common occurrence to hear that the Chinese are the biggest holders of US debt... but that is simply not true. In fact, there are many different pieces of the pie, and China accounts for 9.5%. While this is nearly 1 out of every 10 dollars of US debt, it does not constitute a majority by any means.

American individuals, institutions, and Social Security are by far the biggest owners of US debt, accounting for approximately 60% of our Government's debt.

This chart from Political Calculations is a great depiction of the scenario:


              Political Calculations

Gigantic Facebook IPO

The picture says it all - these other behemoth companies sit in the shadows of Facebook's impending IPO. Let's be serious though, you shouldn't be surprised based on the amount of time you spend checking your news feed and stalking your "friends".

Source:

www.ritholtz.com

Mo' Money Mo' ... Dividends?

According to data recently released by S&P, companies are on track to pay a record $252 billion in dividends in 2012 based on tracking dividend rates of 394 companies. Stocks of companies that paid dividends did very well in 2011 and the theme should continue into 2012. Below is a dividend trend chart and a breakdown of the top dividend payers by sector...



Source:
NYT

Real return vs. Nominal return

Referring to the graphs below, you can see that over the long term, the S&P 500 has returned an average NOMINAL return of about 10%. Adjusting for inflation, the bottom chart shows the average REAL return for the S&P 500 at about 7%. After ending the year precisely where it started in 2011, perhaps the S&P can revert to the mean in 2012.

Real return = Nominal return - Inflation





Source:
www.ritholtz.com

2011 Forecast Report Card

2011 was a wild ride for stocks, but in the end we closed not far from where we began the year. As the chart below illustrates, many market strategists were too optimistic. This just goes to show that even the wizards of Wall Street don't have a crystal ball.

Source: 

Birinyi Associates

www.ritholtz.com