The old normal allocation between the three most basic classes (Cash, Bonds and Stocks) is currently the new normal.

While the old normal return expectations for U.S. securities, and the allocation between U.S. securities and global securities (particularly emerging market securities), is not likely to resemble the past, the old normal weighting between cash, bonds and stocks from whatever country is more likely to be used than not.

Nobody has the time or patience to wait 82 years to experience the long-term, but if they did (or if they wanted to bet on the future based on the long-term past), here is how a simple allocation between the S&P 500 index and the U.S. Aggregate Bond index worked out from 1926 through 2008.

Related proxy funds: SPY, IVV and VFINX for stocks; BND, AGG and VBMFX for bonds.

Saturday night the U.S. House of Representatives brought us one large step closer to a national healthcare system. Investors should be cognizant of the financial effects that would follow.

In the extreme short-run, it would be reasonable to assume that the U.S. stock market would react negatively, although short-term price movements are often chaotic. In the intermediate-term, if the legislation goes forward, the healthcare sector should perform at a lower level than in periods prior to national healthcare.

One big investment risk is subscribing to a popular mantra with your life’s savings, without continuously checking the data — the facts — to make sure the mantra continues to make sense.

The “China up” and “U.S. down” theme is a major current mantra. There are plenty of very bright, well informed, high profile people espousing the virtues of investing in China — people such as Marc Faber, Jim Rogers, Mohamed El-Erian, George Soros and many others.

National healthcare wherever it is implemented squeezes prices and profits of the private businesses involved in the system.

Obamacare in the U.S. will be no different. For investors in healthcare companies, it is a good idea to begin to think through which companies will be most severely negatively impacted or least impacted, to potentially make deletions or substitutions.

The elections are over in Germany and the new finance minister is making sobering statements about recovery. Germany is a major part of the European economy. With Italy limping and Spain bleeding, Germany’s statement is hardly welcome.

New York Times (October 25, 2009)

Amidst all the soundbites and data tidbits about the condition of the U.S. fiscal and debt situation, it may be helpful to look at the data produced by the Congressional Budget Office. While they may be way off, it is a good idea to know what figures your government is using to make its spending and tax policy decisions.

The downloadable PDF file provides an historical perspective from 1968 through 2008, and projections for 2018 for taxes, spending and public debt.

There are many good things about being rich, but wealth also brings some problems. The most obvious problem is how to stay rich in these troubled times. Less obvious for the wealthy, is the fact that they have fewer practical investment vehicles than the average investor.

Just as large institutional investors have a smaller universe of individual stocks they can buy without becoming too big of a factor in the security, wealthy individual investors and smaller non-profit or institutional investors have a smaller universe of funds they can buy without becoming too big of a factor.

This article presents the shape of the price change frequency distribution for the S&P 500 over approximately six decades on a daily basis, monthly basis and calendar year basis.

The degree of “normality” of S&P 500 price changes is high on a daily basis — it’s visually symmetrical. The average change of 0.03% is less than the median change of 0.05%.

These two charts present the monthly and daily percentage price changes in the S&P 500 from January 1950 through the most recent period in 2009, roughly 60 years.

After the exceptional experiences of the past year, a long-term look back may be helpful. Of course, we are in a different environment than the U.S. has seen since 1950, and the U.S. economy has been and is in continual change. But an awareness of history is still a good thing to have.

We don't know if the furor over climate, economic and sovereignty issues coming to a head over the impending December Copenhagen climate treaty is correct, incorrect, exaggerated or spot-on.

Obama on Cost Impact of Climate Policies (March 18, 2009):

The CBOE publishes several options implied volatility indexes that can be helpful to stock investors who want to peek around the corner to the future through the eyes of options traders.

These two tables show the options implied (30-day future) volatility for several important indexes or index funds:

This is a practical follow-up to our recent article on volume as an indicator, and on divergence between volume and price action in particular.

We screened the S&P 1500 for stocks with rising prices and falling volumes. More specifically, we looked for stocks with “sinker” attributes:

In our last article, we estimated the probable price range of the S&P 500 based on historical and implied volatility, and suggested that the positive area of the range was more likely than the negative area for the next few weeks, because of the moving average trend indicators and the declining volatility of the 1-month and 3-month CBOE volatility indexes.

We also expressed our concern that we could not assess the myriad economic data and opinions to draw a convincing fundamental argument to support those technical conclusions. The fundamentals are mixed and the global condition may be delicate, with potentially major geopolitical risk in the background (Pakistan/Taliban and Iran/Israel in particular). The rewriting of the rules of capitalism in the U.S and the still looming foreclosure situation are not encouraging.

The S&P 500 index has an 80% probability of ending 2009 between the low 970s and 1150 to 1170. Historical volatility for the past three months would suggest 971 to 1151 for 80% probability, while implied volatility in the 3-month CBOE volatility index would suggest about 974 to about 1172.

In our last article, we continued the discussion of price projection based on historical volatility. We provided an historical example of quarterly projections from December 31, /2002 at 95% probability (two standard deviations) based on 63 days (3 months) of daily historical volatility. Some of our readers have asked for a projection with a narrower range, so here is one based on 80% probability.

Last week we published a visual view of price range probability cones for several securities (SPY, FXI, TLT and UUP). This article builds on the concepts in that article and provides a tabular view of the same kind of data for twenty-seven asset categories.

The two tables below show the maximum and minimum price change that statistics would suggest are probable over the 21 trading days after October 9 (last Friday), based on 21 days (1 month) and on 63 days (3 months) of historical price volatility.

There is no way to realistically make a precise price prediction for a particular date for a traded security. It is possible, however, to observe the recent historical volatility (standard deviation) of a security to make realistic estimates of the probable range within which the security price may close through a future date.

In this article, we provide short-term probable price range estimates for large-cap US stocks (SPY), China stocks (FXI), the US Dollar (UUP) and US long-term Treasuries (TLT).

It can be useful to know how the average other guy is allocating assets, whether you are inclined to follow the crowd or to do something else.

Asset Allocation Among Public Investment Funds: