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 Personal Money Planning'se-Newsletter for April 26, 2011
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Bernanke At Your Book Group? Sure!
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Disclosure | |
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This newsletter is produced by Gary Silverman, dba Personal Money Planning, a registered investment advisor located in Wichita Falls, Texas.
Information in this newsletter is believed to provide accurate and authoritative information in regards to the subject matter covered. However, the accuracy, timeliness, or applicability of the information is not guaranteed and is provided with the understanding that we are not rendering legal, accounting, tax, or other professional advice or services.
This publication should not be construed by any consumer and/or prospective client as Personal Money Planning's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Nor should links provided to other sites be construed as the recommendation of the services or products mentioned on those sites. If such services are required, the help of a competent professional should be sought.
Remember that past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment, investment strategy, or product made reference to (directly or indirectly) on this Website will be profitable or equal to indicated performance levels. Different types of investment involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for your investment portfolio.
Historical performance results for investment indexes and categories generally do not reflect the deduction of transaction or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results.
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Personal Money Planning does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Personal Money Planning's web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
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A Look At The Last Quarter
This last quarter provided the best gains in U.S. stocks in more than a decade. As your gas station bill probably warned you, the best sector was energy, up over 16% in just three months. While international stocks showed gains, the main rally was in the U.S. small cap stocks, which continued their lead with mid-cap stocks close behind. (We've been actively selling some small-cap holdings to lock in profits for our clients.)
Bonds continue to yield at historic lows. 3-Month and 12-Month T-Bills yield just 0.09% and 0.27% respectively; Five-Year bonds yield 2.28%; 10-Year bonds yield 3.47%. Extending the maturity all the way out to 30 years gains you a yield of only 4.5%. Interestingly, 30-Year municipal bonds yield more, at 4.82%, a sure sign that investors believe that municipal bond defaults are likely.
As with energy stocks, commodity prices also rose dramatically: the S&P GSCI Commodities Index was up 11.56% for the quarter. Most of this change came due to petroleum prices soaring over 16% over that period.
Gary Silverman, CFP
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| gary's newspaper column | Newspaper Articles You May Have Missed |
From the Wichita Falls Times Record News
Pulling Out Of The Market
If you are going to make a bad move, this would be the best time to do so. Gary explains why.
Promises, Promises Gary makes a few promises about the direction of the stock market in this article. And he promises you won't like it. |
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Ready For Their Closeup
The Federal Reserve seems a bit opaque, and perhaps even mysterious to most people. The Fed didn't always let anyone know what they were doing until it was already done. Then, in 1994, they began to let us know if they were planning to raise, lower or maintain short-term interest rates. Now, on the 27th of this month, Ben Bernanke will give the first of a new series of quarterly news conferences. In them, the Fed Chairman will answer questions about Fed policy decisions.
It's not Oprah, but it is historic.
--Gary | |
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Article links from |
The Economist |
Too Many "Better Mousetraps"?
Americans make four times as many patent applications per capita as Europeans, which has long been a source of growth and prosperity. But now, says The Economist, there is a new concern: excessive patenting, which discourages researchers from innovating in areas that depend on prior discoveries, for fear of being sued for patent infringement. The magazine says that the research community is concerned that America hands out patents too readily. So-called "patent trolls" buy many obscure patents and then bombard alleged infringers with lawsuits; meanwhile, it now takes an average of 30 months for the U.S. Patent Office to grant a patent after application.
The U.S. Senate has passed the biggest overhaul to patent law since the 1950s, designed to eliminate the backlog, but not everybody is happy. It is still too easy to sue over patent infringement, and still too hard to challenge patents, say economists--and there is still no means to object to a patent before it is granted. The bill now heads to the U.S. House, which is preoccupied with budget battles. http://www.economist.com/node/18389167
Financial Aftershocks
After the Japanese earthquake and tsunami, the Nikkei 225 average in Japan fell by 6.2% and 10.6% on subsequent days, and on March 15, global equities suffered their biggest one-day loss for seven months. This article in The Economist notes that there have been other black swans flying around the markets: a combination of rising equity prices, the prospect of tighter monetary policy in many countries, unprecedented political battles over government debt, political unrest across north Africa and the Middle East, rising oil prices and sovereign debt crises among countries in Southern Europe.
The article lays out the case for pessimism and optimism. On the pessimistic side, the Japanese disaster has exposed the flaws in "just-in-time" assembly and the global supply chain. It turns out a surprising number of manufactured items--particularly electronics--assembled in China and the U.S. require Japanese-manufactured components, which are now scarce or not available. Oil prices are not likely to decline over the Summer, adding costs to the business sector. On the other hand, the global economy seems to have entered a period of real recovery, and the Japanese recovery will add to growth--at least in the short term. The profits of S&P 500 firms are expected to rise by 15.4% this year after growing by 39.3% in 2010, and European profits are expected to grow by almost 15% in 2011. The selloff in global stocks might turn out to be a buying opportunity, for investors who can overcome their anxiety every time they open the daily newspaper.
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from gary's facebook pages |
Facebook Stuff You May Have Missed
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World Economy News From the Dallas Fed
While there are still some risks to global growth, the last few quarters have been favorable for the world economy.
Links from Gary:
Oh, Space Station, How You Have Grown Are you aware just how big the Space Station is now? Take a look at each step of its growth in this link.
http://i.usatoday.net/tech/graphics/iss_timeline/flash.htm
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| parting thoughts
Investment Math
Over the last several years, the stock market has highlighted one of the peculiarities of investment math. Prior to March of 2009, the S&P 500 had, in round numbers, fallen 54% since its 2007 peak. The recovery, again in round numbers, has achieved a remarkable 100% gain since the March 2009 low point (yes, you would have doubled your money in two years). Yet the market has not yet fully recovered to its former heights.
The reason is that investment math tends to understate losses and overstate gains. After a 20% decline in your investment portfolio, you need a 25% gain before the portfolio is made whole again. As the declines get bigger, the disparity grows dramatically; a 50% drop requires a 100% gain to repair the damage, and an 80% drop (think the Great Depression) would require 500% subsequent rise before you climbed back to where you started from. |
Gary
Gary Silverman, CFP
Personal Money Planning
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