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Insights from a seasoned investment manager
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Joe Chornyak discusses his interaction with financial analysts at a recent American Funds conference in Los Angeles. The exclusive meeting of minds, restricted to only 120 advisors from across the United States, yielded some important insights on the economy and investment philosophy.
Don't miss our latest YouTube video in which he shares the thoughts of one of the nations most seasoned investment managers on the strength of equities investments over the next 5-10 years.
Click here to view the video.
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Giving the gift of good financial advice
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Repaying student loans
According to the College Board's Trends in Student Aid 2010 study, almost all students who earn four-year degrees from for-profit institutions graduate with debt. Most federal loans offer grace periods before repayment must begin, but many private loans do not. If a graduate anticipates repayment difficulties, he or she should contact the lender immediately to take advantage of possible consolidation options or to work out an agreement to defer payments.
Set up a budget
Now is the time to put a realistic budget in place. It should include:
- Creating an emergency fund. In these challenging economic times, the often-recommended three-month safety net may not be enough; a six-month safety net is more appropriate. A nice emergency fund can bridge the gap between unexpected job loss and a new position, as well as pay for those unanticipated car repairs or even moving expenses.
- Building a nest egg. Although it may seem impossible to squeeze retirement savings out of a new graduate's budget, the message is simple: start saving soon. One easy way is to contribute to an employer-sponsored 401(k), especially if there is a company match.
- Making sure that social activities don't break the bank. Social life cannot be eliminated entirely in an effort to save money, but it's not a good idea to spend lots of extra cash on happy hours, dining out, or concerts. We recommend finding a budget-friendly, happy medium.
Read the entire article here.
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Bright spot in a gloomy economy
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Lord Abbett reports that strong manufacturing and capital spending bode well for stocks
Recent headlines suggest that the mood of the economy has turned gloomy. Economic growth in the first quarter came in weaker than expected, and the Federal Reserve and other forecasters have revised downward their outlooks for the year. Despite this apparent soft patch, however, growth is still occurring. In fact, it has occurred despite some significant head- winds in recent months.
Political turmoil in the Middle East caused oil prices to jump, which hit the pocketbooks of businesses and consumers alike. And the earthquake and tsunami in Japan disrupted some manufacturers' supply chains.
Still, the manufacturing sector has continued to chug along. The Institute for Supply Management's (ISM) purchasing managers index remains comfortably above the 50% mark that indicates
expansion.
Read the entire article here.
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The science of success: why happiness matters
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Cultivating happiness
Positive psychology can be remarkably helpful in overcoming challenges, both in your business and your personal life. In addition to your bottom line, think of the effects a positive mindset could have on your clients, staff, and family, not to mention on yourself!
Positive psychology: an introduction
In 1998, Martin Seligman, one of the world's leading psychology researchers, surprised the scientific community by announcing that, as president of the American Psychological Association, he would focus on a brand-new field of study: positive psychology. In short, positive psychology is the scientific study of what allows individuals, families, and communities to flourish. Over the past decade, it has emerged as a valuable complement to traditional psychology, giving us concrete ways to overcome stress and challenges by adjusting our outlook and behavior.
While positive psychology focuses on positive emotions, it doesn't hold that optimism and pessimism are mutually exclusive. In fact, Seligman advocates "flexible optimism." In other words, we should employ optimism (or other positive approaches) when that's the best tool, and pessimism (or other more negative approaches) whenever it serves us better. But when should we use one over the other?
This article, based on the book The Happiness Advantage by Shawn Achor, Harvard University lecturer, shows that happiness plays a bigger role in success than you might think.
Read the entire article here.
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This communication is strictly intended for individuals residing in the States of: AL, AR, AZ, CA, CO, CT, FL, GA, IA, IL, IN, KY, LA, MA, ME, MI, MT, NC, NY, OH, PA, SC, TX, VA WI, WV. No offers may be made or accepted from any resident outside these States due to various state requirements and registration requirements regarding investment products and services.
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July 2011
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At the American Funds conference I attended earlier this year I spoke with a portfolio manager with more than 49 years in the business. The lead article this month is actually a video based on his remarks regarding the future of equities vs. fixed income investments. Make sure you tune in to this short discussion on our new YouTube site. I believe you'll find it interesting and perhaps useful in planning your investments. In the article "Giving the Gift of Financial Advice," we pass along some tips for saving now to reduce the financial burden that your child will face after college graduation. Planning for your children's college or university education may be something that you'd rather not think about, but the earlier you begin, the better.
In spite of the doom and gloom that we hear these days about the nation's economy, the manufacturing sector is holding its own. In addition, increases in c apital spending indicate that businesses are ramping up production and investing more in future production. Don't miss this update from Lord Abbet.Finally, did you know that recent discoveries in the field of positive psychology have shown that contrary to the traditional belief, happiness fuels success, not the other way around. When we are positive, our brains become more engaged, creative, motivated, energetic, resilient, and productive at work - an important message in this time of frugality and belt-tightening. Be sure to check out this article from Commonweatlh Financial Network.
Please feel to call me toll free at 877-389-2121 or
e-mail me at chornyak@chornyak.com
with any comments or questions on what we've presented in this month's e-newsletter.
If you like what you've read, you can forward this e-mail to friends, colleagues, or relatives.
Joe
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| Monthly Market Update |
Equity markets slide lower
Equity markets softened during May, as investors eased back on the risk trade. After several months of volatility, the S&P 500 Index is trading at levels similar to those seen in February of this year. For the month, the S&P 500 lost 1.31 percent, though it is still up 7.82 percent since January 1. The Dow Jones Industrial Average was down 1.53 percent for the month, but it, too, is positive for the year, up 9.79 percent.
In the first quarter, 68 percent of companies in the S&P 500 beat earnings expectations, and earnings per share grew 19.70 percent. Although still very strong, earnings and net income growth were less robust than they were in every quarter last year. On the other hand, sales grew 9.19 percent year over year, which was slightly faster than in the previous two quarters. The data suggests that companies may be reaching the limit of their cost-cutting measures and that, going forward, they may have to rely more on revenue growth. Firms may also have to battle higher commodity prices, which could impact margins as the year progresses.
Bonds add support for investors
Bond prices pushed higher in May, and rates fell. The Treasury rally boosted the Barclays Capital Aggregate Bond Index 1.31 percent. For the year, the index is up 3.20 percent. Yields for the 10-year Treasury are now hovering above 3 percent, having closed May at 3.06 percen
The recovery hits a soft spot
Domestic equity markets took notice this month, as a variety of economic indicators began to signal a weaker environment for growth. A number of regional manufacturing indices fell below expectations, including surveys out of the New York, Philadelphia, and Richmond areas. The slower growth wasn't limited to the manufacturing sector, as the April ISM Non-Manufacturing Index caused a negative market reaction as well. In general, businesses complained about higher commodity prices and weaker end demand for products. The slowdown wasn't good news, but manufacturing and business growth still appear to be increasing in absolute terms.
Our debt and beyond
We believe the nation's debt is a long-term concern. The larger short-term issue facing the federal government is the economy, especially because elections are only 17 months away. The economy still seems to be chugging along, and we have likely avoided the double-dip scenario that some had predicted.
The challenge for any presidential candidate will be to spur organic economic growth and increase the number of jobs in the absence of government stimulus. As always, investors should continue to monitor the situation in Washington and in the broader economy. But they should also bear in mind that market performance does not always perfectly reflect domestic political and economic events.
Go to our web site to read the complete market update.
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