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Market Commentary
Economic Updates
Recent News |
The Markets
Two steps forward, one step back might be an
appropriate description of the financial markets these days.
We started the week on a good note as the
National Association of Realtors said existing home sales rose 10.1% in October
to the highest seasonally adjusted annual rate since February 2007. Later in
the week, the Commerce Department said new home sales rose 6.2% in October,
which was well above the number that economists surveyed by MarketWatch had
expected. And, the Labor Department said 466,000 Americans filed for
unemployment benefits for the week ending November 21. That was the lowest
number since September 2008. The stock market liked these numbers and by
Wednesday of last week, the S&P 500 index had hit a 13-month high,
according to MarketWatch.
Then came Thursday. As most of us were
celebrating Thanksgiving, Dubai World - the investment arm of the country of
Dubai, announced that it was delaying repayment on much of its debt. That
surprise announcement sent stocks, bonds, and commodities around the world into
a tailspin. By Friday, cooler heads prevailed and the decline in the U.S.
market was limited. For the week, the S&P 500 was flat.
This week, investors will likely focus on the
early read from "Black Friday" sales to determine if the consumer has any oomph
left. Additional news from Dubai may also move the markets. While the S&P
500 is up about 60% from its March 9 low, last week's surprise news from Dubai
indicates that there may be lingering effects from the recession for some time
to come.
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Data
as of 11/27/09
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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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0.0%
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20.8%
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21.8%
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-7.6%
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-1.5%
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-2.5%
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DJ Global ex US (Foreign
Stocks)
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-0.7
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36.0
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44.8
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-5.3
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3.6
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0.9
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10-year Treasury Note
(Yield Only)
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3.2
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N/A
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3.0
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4.5
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4.3
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6.2
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Gold (per ounce)
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2.3
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34.1
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43.3
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22.2
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20.9
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14.8
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DJ-UBS Commodity Index
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0.3
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15.4
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10.2
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-7.8
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-2.6
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4.0
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DJ Equity All REIT TR
Index
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-2.9
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15.3
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31.3
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-15.0
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-0.6
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10.1
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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.
EXPERTS HAVE DEVELOPED MANY
RULES OF INVESTING, some of which work better than others. It would make our lives easier if
we found some rules that worked in all situations and at all times, but, of
course, we haven't found those rules, yet! Nonetheless, here are several from
veteran investor and market observer Dennis Gartman that are worth considering.
Gartman published these rules in a book edited by John Mauldin titled, Just One Thing.
RULE
# 1
Never add to a losing
position. Gartman
says the market knows best and, if an investment is going down in value, then
you should get out, not add more.
RULE
# 2
Mental capital trumps real
capital. Yes,
you lose money (real capital) by holding onto a losing position, but Gartman
says the emotional cost of holding onto a losing position is even more costly
as you toss and turn about what to do. Better to take your loss and move on to
something more promising.
RULE
#3
Sell markets that show the
greatest weakness; buy markets that show the greatest strength. This is similar to the old
saying, "The trend is your friend." You may not agree with the trend, but the
market doesn't really care what you think; it responds to what the majority of
investors think.
RULE
#4
Keep your trading system
simple. Some
of the most "sophisticated" investors were the biggest losers in 2008. Gartman
says, "Complexity breeds confusion; simplicity breeds an ability to make
decisions swiftly, and to admit error when wrong. Simplicity breeds elegance."
RULE
# 5
Do more of that which is
working and do less of that which is not. Sounds simple, doesn't it? Essentially, it's
add to your winners and sell your losers.
Rules-based
investing is only as good as the "programmer" of those rules, the investor's
ability to implement those rules, and the markets' desire to follow those rules.
In reality, the financial markets reflect the combined actions of investors
around the world. Trying to come up with rules that accurately reflect this
human herd at all times in all situations is, if not impossible, right next to
it. However, rules can be helpful as a guide.
Weekly Focus - Think About
It
"All
there is to investing is picking good stocks at good times and staying with
them as long as they remain good companies."
--Warren Buffett
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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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