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Weekly Commentary
November 16, 2009
The Markets
Can Sir Isaac Newton's first law of motion help explain the continuing surge in the stock market?
In 1686, the great mathematician and physicist first presented his three laws of motion. The first law stated that, "Every object will remain at rest or in uniform motion in a straight line unless compelled to change its state by the action of an external force." Well, some unknown "external force" compelled the stock market to change its downward spiral in early March and since then, it's been up, up, and away.
Last week, the S&P 500 index rose another 2.3%, stopping just shy of the 1,100 mark. Better than expected earnings from companies such as Disney and Abercrombie plus more merger and acquisition activity (Hewlett-Packard agreed to buy 3Com at a large premium) helped keep the market in upward motion. Gold continued its fabulous run and finished the week with its ninth gain in the past 10 trading days, according to Associated Press. And, the U.S. dollar became cheaper last week against most of its major counterparts, partly due to reports showing other countries are recovering faster than the U.S., according to Bloomberg.
We are keeping our eyes and ears open for early signs of an "external force" that may change the upward course of the markets. In the meantime, enjoy the ride.
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Data as of 11/13/09 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
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Standard & Poor's 500 (Domestic Stocks) |
2.3% |
21.0% |
25.2% |
-7.6% |
-1.6% |
-2.4% |
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DJ Global ex US (Foreign Stocks) |
2.3 |
39.0 |
48.3 |
-4.3 |
4.5 |
1.5 |
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10-year Treasury Note (Yield Only) |
3.4 |
N/A |
3.8 |
4.6 |
4.2 |
5.9 |
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Gold (per ounce) |
0.7 |
26.9 |
54.7 |
21.0 |
20.3 |
14.3 |
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DJ-UBS Commodity Index |
0.2 |
12.3 |
6.6 |
-7.7 |
-2.8 |
3.7 |
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DJ Equity All REIT TR Index |
6.2 |
19.4 |
24.4 |
-12.6 |
-0.3 |
10.3 |
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.
WHEN IS MONEY A GOOD INVESTMENT? Back in 1962, artist Andy Warhol completed a hand-drawn silkscreen painting titled "200 One Dollar Bills." True to its title, the massive 7½-foot wide painting depicted 200 one dollar bills reproduced in tones of black on grey, according to Bloomberg. The owner of the work, Pauline Karpidas, a London-based collector, purchased the painting with her husband back in 1986 for $385,000. Last week, Ms. Karpidas sold the painting for - are you ready for this - an incredible $43.8 million! And we all thought the dollar was depreciating.
From $385,000 to $43.8 million in 23 years translates into an average annual return of nearly 23%. Not bad for a painting. By contrast, the S&P 500 index rose at a modest-by-comparison average annual rate of approximately 6.5% from mid-1986 to today, according to data from Yahoo! Finance.
As the stunning value of the Warhol painting shows, investment opportunities may show up in places you wouldn't normally think of. Unlike the financial markets, though, there are no easy ways to invest in masterpiece paintings on behalf of our clients. However, the point of mentioning Warhol is that we do search far and wide to try and find investment opportunities that may help offset the volatility of the stock and bond markets. Fortunately, innovation in the financial markets over the past few years has expanded the types of products available and we continue to analyze and perform due diligence on them to see how they might benefit our clients.
Weekly Focus - Think About It
"Money is neither my god nor my devil. It is a form of energy that tends to make us more of who we already are, whether it's greedy or loving."
--Dan Millman | |
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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
| * 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. |
Securities Offered Through LPL Financial Member FINRA/SIPC
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