Issue: #  21
SEPTEMBER 2010
Bautis Financial
Dear ,
 
Welcome to the September 2010 issue of The Wealth Chronicle
 
article 
Third Quarter Market Review
 
As the third quarter comes to an end it's a good time to look back and see how the economy and markets have been performed.
 

Equities
Stock Markets in the last three months saw a continuation of the roller-coaster-like turbulence of the past couple of years.  After a strong first quarter and a big pullback in the second quarter, July saw a strong recovery in global markets.  This was followed by weak performance in August, and September (historically a troublesome month for markets) actually saw a nice bounce back

Corporations continued reporting good earnings and Stocks have had the best September in over 60 years.  A look at a chart of the Dow Jones Industrial Average shows just how strong that September was.  The DJIA index went from approximately 10,000 on September 1st to 10,800 in the last week of the month

Fixed Income

Investors have fled the stock market the past couple of years and in search of safety and have put their money into fixed income instruments such as treasuries and municipal bonds.  When there are a lot of inflows of money to an area the price of investments in that area are driven upwards.  In the fixed income world when prices go up the yields on those investments go down.

Example:

If you buy a bond for $1000 that has a 10% coupon (or interest rate), you will receive $100 every year in interest and your yield would be 10%.

If there is a lot of demand (by investors) for that bond you may have to pay $1100 to own that same bond.  The bond will still have a 10% interest rate and you will still receive $100 every year in interest, but your yield is not 10% anymore, it is actually $100/$1100 or 9.01%

The example above has occurred in the fixed income world, except that instead of yields going from 10% to 9%, they have gone all the way down to 2-5% in some areas making them less attractive investments.  There has been a great run in the bond markets over the past 15-20 years and although it does not look like it is over yet, it does appear to be winding down.  Treasuries, Municipals, Corporate Bonds, and other types of fixed income investments are still good to include in your portfolio, but if you are in search of obtaining additional income it may also be wise to look at Dividend stocks, REIT's, and even Preferred Stocks.  There is an increase in risk in these types of investments, but for getting the most bang for your buck, they may be the better choice right now.

Europe
This summer was a quiet one regarding news about the European Debt Crisis.  It seems like a distant memory that the economic world was going to come to an end because Greece could not make payments on their debt.  Last week that lion roared again and now Ireland has the bulls-eye on their back.  The soverign debt crisis that they are projected to go through is being compared to Greece's problems.

Overall
We are starting to hear chirpings from different media sources that a double-dip recession is now not likely to occur and there has been some positive comments that came out this month from some of the business leaders in this country

"I'm a huge bull on this country...we won't have a double-dip recession. I see our businesses coming back almost across the board...."

-Warren Buffett, Sept. 13, 2010

"I am very enthusiastic what the future holds for our industry and what our industry will mean for growth in other industries."
- Steve Ballmer, Microsoft

"Business at GE is improving. Signs across the world show growth improving, as evidenced by a rise in GE's orders."
- Jeffrey Immelt, GE

There is also plenty of talk on the other side about how the debt levels in this country are spiraling out of control and it's only a matter of time before we suffer a depression that makes the recession in 2008 and 2009 look like a walk in the park. 

While I think there are some truth's to both side of the story, which is why I think in the short term we will probably continue to be in a volatile environment. 

There are investment opportunities out there that can provide a good return especially when you consider the alternative of stashing it under a mattress.  You do have to consider the risk you are taking to earn that additional income.  There are no free lunches out there so if you reach for additional returns, most likely you are also increasing your risk levels.  It is important to keep a good balance between the two and to be in investments that you are comfortable with the risk associated with them.

Profiles

The Sea Was Angry That Day My Friends

Lou Cerchio made a trip to Point Pleasant beach on September 19th for what he thought would be some time to spend with his family on the beach.  The 6-8 foot swells in the ocean from Hurricane Igor made it too rough for any swimming in the water, so he kicked back to enjoy the warm sand with his wife and children.  That was until Lou heard screams for help from Rachel Fischer and her 10 year old son.  They were swept into the ocean when trying to clean off their beach toys at the water's edge.
Cerchio - Point Pleasant 

Without hesitating, Lou, a Westfield Fireman, raced into the water.  The situation quickly deteriorated and Lou had to go out past the breakers to bring Rachel and her son back to shore.  Battling a ferocious riptide, Lou was able to make a heroic rescue.

There were a 100 people on the beach that day, but only Lou raced into the water.  You could say that Lou's fireman training kicked in, as saving people is part of the job description.  Physically, it was an amazing feat to rescue two people without the aid of any flotation devices.  You could probably attribute some of that to the fact that Lou was an All-American wrestler while at Seton Hall University.  But I think most of all this act of heroism speaks to Lou's character.  Lou didn't go into the water on Sunday because he wanted to be a hero, he did it purely because someone needed help.  One of Lou's friends summed it up best when after reading the account of what happened said "Great story Lou, wouldn't expect anything less from you."

You can read the Star-Ledger's story on Lou's rescue - http://www.nj.com/news/local/index.ssf/2010/09/family_swept_to_sea_by_hurrica.html

Article from Westfield Patch
http://westfield.patch.com/articles/off-duty-firefighter-risks-life-to-save-two-from-drowning-at-shore

Seton Hall Wrestling
Article 


Will Social Security be there for me?

About 20 years ago the financial services industry starting sounding the alarm about Social Security and its overall health. When Social Security was first instituted in 1935, there were some 40 workers paying into the system for every retiree drawing benefits out. Now when baby boomers go to retire there will just 2 or 3 workers paying in for every retiree drawing benefits out.  Because of that, and the state of the economy the past couple of years the alarms have gotten louder and crazier. Fewer people currently working means fewer payroll taxes being collected and Social Security application are up as out-of-work people age 62 and older decide to go on Social Security earlier than they had anticipated.  Some people have gone so far as to say the system is "broke." This has led to lots of misunderstandings and irrational fears about the solvency of the Social Security system. Every year, the Social Security Trustees publish a comprehensive report showing the long-range outlook for Social Security.

The 2010 Social Security Report  was published this month.  The report analyzes the Social Security system over the next 75 years.  The good news is that even taking the current recession into account little has changed with the health of the system from last year.  In the near term the system is as healthy as ever and the Social Security Trust fund is currently at $2.54 trillion.  There will be changes needed to make the Social Security to ensure its long term health, however for now the system is fine to pay the benefits that it is expected to pay.

Company Spotlight 

Dylan Berkowitz (Blauweiss/Berkowitz Jewelers)

As part of Blauweiss/Berkowitz Jewelers, Dylan has been in the jewelry business since birth.  His family are fourth generation jewelers with their store located in the heart of Rockefeller Center on 5th Ave. 

Whether you are looking for wedding jewelry, heirloom-quality, fashion jewelry, or quality repairs, Dylan can help take you through the process.

Dylan and I are members of LeTip of Hoboken, a networking group that meets weekly in Hoboken.  The following is a video of Dylan at one of our meetings discussing the 4C's of buying a diamond.
 
Dylan 
 
Dylan Berkowitz
Jewelers On Fifth
578 5th Avenue (47th Street)
New York, NY 10036

(212) 575-1075
BidandAsk
 

When thinking about insurance. the types that come to mind include Life, Health, Car, Home.  Well Troy Palamalu, a Safety on the Pittsburgh Steelers proved that just here about anything is insurable.  Head and Shoulders, the shampoo company that Palamalu endorses took out a $1 million dollar policy from Lloyds of London on Palamalu's hair.  It is not public what must happen for Head and Shoulders to collect on that policy but opponents have used Palamalu's hair in the past to tackle him.

September is Life Insurance Awareness Month.  This was created in response to growing concerns about the large number of Americans who lack adequate life insurance protection.  There are 68 million adult Americans who have no life insurance and most Americans who have some life insurance coverage have far less than they need.

$75,000: That's the amount of household income that Angus Deaton and physchologist Daniel Kahneman (A Nobel laureate) say maximizes happiness.  Their study draws data from 450,000 Americans and claims that the further a person's household income falls below that level, the unhappier he or she is.  But no matter how much more than $75,000 people make it does not bring them any more joy. 

U.S. retirement deficit reaches $6.6 trillion. That is the gap between the retirement savings that American households have today and what they should have today to maintain their standard of living, according to a study published this month by the Center for Retirement Research in conjunction with Retirement USA (http://www.retirement-usa.org/retirement-income-deficit-0). The study takes into account all major sources of retirement income and assets: Social Security, traditional pension plans, 401k style plans, and other forms of saving, and housing. 

 

The Lost Decade: If you were to invest one dollar into the S&P 500 on January 1, 2000 you would only have about 90 cents on December 31, 2009.  But was all lost?  Over that same period, had you invested one dollar in U.S Government bonds you would have essentially doubled your money, and government bonds are considered to be among the safest places to put your money.  One of my favorite pictures that shows the importance of diversification can be found here.
Please contact me if you have any questions about the articles above or about your personal or business finances.

Sincerely,
Marc Bautis
Wealth Manager
tel: 201-221-6895
fax: 201-754-9760
Disclaimer:The information contained in this newsletter is for information purposes only and may not be suitable for your specific financial situation.  You should consult a financial advisor before making any investment decisions relating to the information contained in this newsletter

What's Inside?
Third Quarter Review
Profile: Lou Cerchio
Social Security Health
Company Spotlight: Dylan Berkowitz
Bid and Ask
Bautis Headshot
MEET MARC

Marc Bautis is a Wealth Manager specializing in working with retirees and those nearing retirement who want to protect their principal and ensure their money lasts. He is committed and proud to deliver independent advice, always in his clients best interest.

Marc is a graduate of Seton Hall University.  He is a Bergen County native, from Lyndhurst, where much of his extended family still resides. He currently lives in Hasbrouck Heights with his wife Katie and Old English Bulldog, Winnie.

 

 

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