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Market Commentary
Economic Updates
Recent News |
Weekly
Commentary
April 12,
2010
The Markets
The U.S. stock market continued grinding its way higher last week
as the Dow Jones Industrial Average briefly pierced the 11,000 level for the
first time since September 2008, according to The Wall Street Journal. Back then, the Dow was piercing 11,000 on
its way down to below 7,000 in March 2009. This time, it's on its way up from
the March 2009 low. Same number, but clearly a much different feel.
The main difference between then and now is the economy--it was
bad then and getting worse, now, it is still weak but clearly improving.
On the improvement side, Thomson Reuters says analysts are looking
for a 37% rise in first-quarter 2010 corporate earnings. Retailers reported a
whopping 9.1% jump in March same-store sales, according to Barron's. On top of that, "The service sector is growing at
the fastest pace since May 2006, and manufacturing the most since 2004.
Employers are hiring again, and sales of existing homes rose 8.2% in
February," according to Barron's.
Stats like that are keeping investors interested in owning stocks even at
ever-increasing prices.
Of course, the problems of the Great Recession are still here such
as high unemployment, unsustainable budget deficits, tight credit, and weak
housing. However, there is a potential solution to working our way out of this
hole. The Economist magazine calls it
a "re-balancing" of the world economy. Put succinctly, the magazine
said, "If Americans save more and spend less while other big countries do
the opposite, the world economy will prosper." In effect, the U.S. will
need to export more to other countries who gobble up our goods and services. A
weaker dollar could speed up this re-balancing; and, word that China might let
its currency appreciate against the dollar in the near future supports this
re-balancing theory, according to MarketWatch.
The effectiveness of this re-balancing could determine whether the
next 1,000-point move in the Dow Jones Industrial Average is up to 12,000 or
down to 10,000.
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Data as of 4/9/10
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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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1.4%
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7.1%
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39.4%
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-6.1%
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0.2%
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-2.3%
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DJ
Global ex US (Foreign Stocks)
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0.8
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3.8
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51.2
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-6.5
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4.1
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1.0
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10-year
Treasury Note (Yield Only)
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3.9
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N/A
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2.9
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4.7
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4.5
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5.8
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Gold
(per ounce)
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2.6
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4.4
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30.9
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19.4
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21.9
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15.1
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DJ-UBS
Commodity Index
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0.7
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-3.2
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19.1
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-7.9
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-3.1
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3.6
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DJ
Equity All REIT TR Index
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4.1
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14.8
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78.0
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-9.5
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4.8
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11.9
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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.
U.S. COMPANIES ARE SITTING ON A RECORD PILE OF CASHand
that could buoy stock prices as companies use their cash to repurchase stock,
according to Bloomberg. At the end of 2009, S&P 500 companies were sitting
on a record $831 billion in cash, according to Standard and Poor's. This cash
hoard grew as companies spent only 28% of their operating profits on stock
buybacks in 2009, according to Standard and Poor's as reported by Bloomberg. Further,
Bloomberg said, "The last time the ratio dropped to that level, the
S&P 500 subsequently climbed for four years."
Prominent money manager and Forbes
columnist Ken Fisher said in a Bloomberg television interview in early April,
"There's cash sitting there, waiting to come in later, which will then later
help buoy both businesses and stocks. This bull market will carry on for
several years." Yes, it is getting easier to find reasons for the stock
market's year-long rise. But, just like in the late 1990s, a good fundamental
story can get taken to an extreme and end in major disappointment.
One of the hallmarks of great investors is their ability to manage
their enthusiasm. Rather than succumbing to euphoria, they try to maintain
perspective. They aim to balance the positive with the potential negatives and not
get carried away with an untamed crowd.
With the S&P 500 still down more than 20% from its all-time
high and trading volume relatively low, we are likely not in danger (yet) of a
new wave of market hysteria. However, we are always mindful of what could go
wrong and, if this market keeps rising, so will our concern about the danger of
getting caught in an "untamed crowd."
Weekly Focus - Think About It
"Markets are constantly in a state of uncertainty and flux and
money is made by discounting the obvious and betting on the unexpected."
-- George Soros
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Monthly Lifestyle Newsletter
April 2010
Don't
Worry. Be Happy.
Are you a
happy person?Studies have found that a variety of factors directly influence
our day-to-day happiness. For instance, researchers have found that hereditary
personality traits - such as sociability, conscientiousness, and a tendency not
to worry - which directly influence our level happiness, are linked to specific
genes. Although we cannot change our genetic make-up, we can control other factors
that have the potential to increase our happiness. Here are a few:
Practice
optimism.
Optimism is defined as 'an inclination to put the most favorable
construction upon actions or events or to anticipate the best possible
outcome. In one research study, participants were asked to imagine ideal
situations and describe them in journal entries. After several weeks of
journaling, participants reported having a heightened sense of well-being.
By practicing optimism, some people can train themselves to have a
positive outlook - and that can make them happier.
Be
kind to others.
It turns out, Mom was right. There is a benefit to being kind to others - it
can make you happy. Research has found that acts of kindness and
demonstrations of gratitude - such as shoveling a neighbor's driveway, doing
volunteer work, or writing a letter of thanks to a mentor or friend - can
make you measurably happier. In fact, research has found that one act of
kindness can inspire feelings of happiness that linger for as long as
three months.
Listen
to music. Music can
jumpstart certain parts of our brains by releasing endorphins and
melatonin, and sparking feelings of happiness and relaxation. In studies,
patients who listened to music during surgeries had lower blood pressure, reduced
heart rates, and lower anxiety levels than patients who did not listen to
music. In one study, surgical patients who listened to music required less
sedation.
Have
a good laugh.
Laughter is an endorphin trigger. It releases stress hormones and actually
can strengthen your immune system, in addition to making you feel happier.
Whether you prefer a funny television show, the shtick of your favorite
comedian, or a dinner with entertaining friends, make sure you get a
regular dose of laughter.
There is no
reason to mope around in life. If you're feeling blue, take action - make
yourself happy!
Skillet
Bread
Skillet bread
was a staple in the diet of pioneers who traveled by covered wagon across our
great nation. They generally carried just the essentials required for survival.
In terms of food, that might have included coffee, salt, sugar, beans, rice,
and baking soda. Often, their meals were prepared in a skillet over an open
fire. Try this modern day skillet bread recipe if you want to get a flavor of
the old west. Cook it in grandma's cast iron skillet, if you still have it.
Skillet Bread
2 tablespoons
olive oil
1 small
onion, thinly sliced
1 Yukon gold potato,
peeled and thinly sliced
1 tablespoon
rosemary
1 teaspoon sea
salt
¼ teaspoon black
pepper
1 package
refrigerated pizza dough
Cornmeal
Directions
Heat oven to
450° Fahrenheit. Add the oil to a cast iron skillet over medium heat. Add the
onion and sauté until golden. Transfer the onion to a bowl. Add the potato,
rosemary, salt, and pepper to the bowl. Mix these ingredients thoroughly.
Wipe the
skillet clean and turn it upside down. Sprinkle the bottom (which will be your
cooking surface) with the cornmeal to prevent sticking. Shape the pizza dough to
fit the skillet bottom and put the dough on the bottom of the skillet, which
has been sprinkled with cornmeal. Arrange the potato mixture evenly over the
dough, leaving a 1-inch border. Bake for about 20 minutes. Serve in wedges.
What Do You
Know About Citrus X Paradisi?
Citrus X Paradisi was called the forbidden fruit when it was discovered
in the mid-1700s in Barbados
and Jamaica.
Today, we know it as the grapefruit!
1. Grapefruit are believed to be an
accidental hybrid of which two fruits?
a. Limes and oranges
b. Lemons and oranges
c. Pummelos and grapes
d. Pummelos and oranges
2. Grapefruit peel is:
a. An important source of pectin
b. Squeezed and the oil is used for soft
drink flavoring
c. A source of flavoring for tonic water
and bitter chocolate
d. Combined with dried pulp and used as
cattle feed
e. All of the above
3. Why was this fruit nicknamed
grapefruit?
a. It is the color of wild grapes
b. It is the shape of a large grape
c. It is a hybrid of a grape and a
pummelo
d. It grows in bunches
4. A grapefruit is what percentage juice?
a. 25%
b. 50%
c. 75%
d. 90%
How Does Your
City Stack Up?
If you're
thinking of moving to another city once you retire, or are considering living
somewhere else for part of the year, it's important to do some research and
make an informed decision about your new hometown. A website called Sperling's Best Places can help. It provides
all kinds of valuable information about cities and states across America. You
can compare the cost of living, population characteristics, current and
projected economic conditions, cost of housing, and other information about
cities, counties, and states across America. For example, did you know
that:
Tucson, Arizona
has significantly better air quality than Phoenix
or Sedona, Arizona, but worse water quality than
both of those cities?
The median home price in Punta Gorda, Florida
is almost 40% higher than the median home price in Homosassa, Florida
and that the value of homes in Punta Gorda fell significantly further than
the value of homes in Homosassa during the housing crisis?
During the next 10 years, Gardnerville
Ranchos, Nevada - a popular retirement
community - is expected to experience more robust jobs growth than Pahrump, Nevada?
However, the cost of living in Pahrump is generally lower than the cost of
living in Gardnerville Ranchos.
Even if
you're not planning to move, it can be interesting to see how your town
compares to others. It's possible that a nearby locale may have a more
attractive profile - such as lower cost of living, more stable home values, or
better economic prospects - than the area you currently live in. Check it out
on Sperling's website.
Answers:
1d. Pummelos and oranges
2e. All of the above
3d. It grows in bunches
4c. A grapefruit is 75% juice
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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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