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Market Commentary
Economic Updates
Recent News |
Weekly
Commentary
November
9, 2009
The Markets
Take your pick - gold surging past $1,100 an ounce, the jobless
rate hitting double digits, Warren Buffett's, "all-in wager on the economic
future of the United States," a 3.2% rise in the S&P 500 index - there was
something for everyone last week in the economy and the financial markets.
The price of the shiny yellow metal keeps on rising despite little
sign of rampant inflation or extraordinary fear in the markets. Prices jumped
last week on news that India purchased 200 metric tons of gold from the
International Monetary Fund as a way to diversify its foreign-exchange
reserves. Gold bu
lls took that as a cue to get on the gold bandwagon.
The jobless rate and the economy seem to be living in alternate
universes. The economy grew 3.2% in the third quarter, yet the jobless rate
continued to spike, hitting a rate not seen since the early 1980s. Yes, they
say employment is a lagging indicator, but, at some point, we have to start
seeing a net increase in jobs or else we risk a double-dip recession.
Warren Buffett made perhaps the last major purchase of his
lifetime by agreeing to acquire the remaining shares of Burlington Northern
Santa Fe Corporation that he did not already own in a $44 billion deal.
Surprisingly, for a debt-adverse investor, he will borrow roughly $8 billion to
complete the deal.
And the stock market? No
matter the news, it seems to take it all in stride as the Dow Jones Industrial
Average closed above the 10,000 mark. The bulls are making it difficult for the
bears to find an opening.
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Data as of
11/6/09
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
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10-Year
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Standard & Poor's 500
(Domestic Stocks)
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3.2%
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18.4%
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14.9%
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-8.1%
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-1.7%
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-2.5%
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DJ Global ex US (Foreign
Stocks)
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1.7
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35.8
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34.8
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-5.0
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4.3
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1.5
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10-year Treasury Note (Yield
Only)
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3.5
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N/A
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3.7
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4.7
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4.2
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5.9
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Gold (per ounce)
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5.5
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26.1
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45.4
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20.5
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20.5
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14.3
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DJ-UBS Commodity Index
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-0.3
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12.1
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2.2
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-8.3
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-2.8
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4.0
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DJ Equity All REIT TR Index
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0.2
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12.4
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15.5
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-14.3
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-0.5
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9.4
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Notes: S&P 500, DJ Global ex
US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold
does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ
Equity All REIT TR Index does include reinvested dividends and the three-,
five-, and 10-year returns are annualized; and the 10-year Treasury Note is
simply the yield at the close of the day on each of the historical time
periods. Sources: Yahoo! Finance,
Barron's, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future
results. Indices are unmanaged and
cannot be invested into directly. N/A
means not applicable or not available.
THERE IS A FINE LINE between having the conviction to
stick to an investment position that is temporarily going against you versus
being flexible enough to change your mind as the situation changes. Knowing how
to discern that line is an important part of successful investing.
Before you make
an investment, here are three things you should know:
The rationale or thesis
behind your investment.
The level at which your
investment would become "fully valued."
What would have to happen
for you to realize that your rationale or thesis was no longer valid.
Having
clarity on those three items makes it easier for you to know where that line
between conviction and flexibility lies.
The British
economist John Maynard Keynes famously said, "When the facts change, I change
my mind. What do you do, sir?" Since nobody knows for certain what the future
holds, we have to review the data as it arrives. If that data is materially
different from our original thesis and the market is responding to it, then
that will likely cause us to change our mind. This concept of conviction versus
flexibility is something we are conscious of and we use it to help us be better
- and more flexible - investment managers.
Weekly Focus - Think About It
"An oak and
a reed were arguing about their strength. When a strong wind came up, the reed
avoided being uprooted by bending and leaning with the gusts of wind. But the
oak stood firm and was torn up by the roots."
-- Aesop
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Best regards,
Jim Forcella, CFP®, CFS
LPL Branch Manager
LPL Investment Adviser Representative
CA Insurance License #0635256
P.S. - Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
Closing Reminders - Should your personal or financial situation change (i.e. Marital or employment status, beneficiary changes or income needs) please contact us at 530.222.6301 or 800.546.5573 for either a phone review, or an appointment. We want to ensure that your current financial objectives meet your personal circumstances.
Forcella Wealth Management Information - Are you receiving too much mail regarding your investments? You now have the option to receive your LPL Financial communications electronically! LPL Financial is pleased to offer the convenience of viewing shareholder communications, including the fund prospectus, annual reports, and proxy statements online. Visit the link below to be directed to a secure website where you will enter your LPL Financial account number and Email address. You will no longer receive shareholder communications information through the mail but can request a hard copy at any time. Please feel free to contact us if you have any questions regarding this form.
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Forcella Wealth Management
1600 Victor Ave ● Redding, CA 96003
Phone 530.222.6301 ● Toll Free 800.546.5573 ● Fax 530.226.1677
jim.forcella@lpl.com ● www.forcellawealth.com
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* This newsletter was prepared by PEAK.
* The Standard & Poor's 500 (S&P 500) is an unmanaged
group of securities considered to be representative of the stock market in
general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities
designed to reflect the performance of the global equity securities that have
readily available prices.
* The 10-year Treasury Note represents debt owed by the United
States Treasury to the public. Since the U.S. Government is seen as a risk-free
borrower, investors use the 10-year Treasury Note as a benchmark for the
long-term bond market.
* Gold represents the London afternoon gold price fix as reported
by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and
diversified benchmark for the commodity futures market. The Index is composed
of futures contracts on 19 physical commodities and was launched on July 14,
1998.
* The DJ Equity All REIT TR Index measures the total return
performance of the equity subcategory of the Real Estate Investment Trust
(REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the
performance of an index between two specific periods.
* Opinions
expressed are subject to change without notice and are not intended as
investment advice or to predict future performance.
* Past
performance does not guarantee future results.
* You cannot
invest directly in an index.
* Consult
your financial professional before making any investment decision.
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Securities Offered Through LPL Financial Member FINRA/SIPC
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