Greetings!
If you listen to the news, before too long you might start believing in what you're hearing. And the news, as we all know, is bad.
Bad news, after all, sells.
Today's Money Manager POV is compiled by a friend of mine, Jay Penney, who is an investment advisor in Arizona. He offers some insights to help us evaluate the challenges and opportunities we face. As you're reading this, we'll be spending time together at the Geneos Wealth Management annual conference learning and talking about investments. |
| A Money Manager's Point of View |
This table nicely summarizes the challenges we face as each one of us turns around our businesses and as a whole, we turn around our world economy.
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United States |
1982 |
2011 | |
Fed Funds Rate |
18% and only one way to go, down |
0.25% and only one way to go, up | |
10 Year T-Bond Yield |
15% and falling |
3.3% and rising | |
Inflation Rate |
10% and falling |
2.7% and rising | |
Savings Rate |
10% and falling |
4% and rising | |
S&P Price/Earnings |
8x |
17x | |
S&P Dividend Yield |
6.0% |
1.75% |
In short, if you were investing and living in 1982 as you are today, you felt bad (like you may feel today). However, things may have been primed for growth better in 1982 than they are today. It would be much easier to grow money in the stock market when prices are already low-when interest rates can be dropped these too would be good winds in the sails for our stocks.
However, we're not in a situation where any of the things that helped us end the 1982 recession could help us out now. We can't lower rates any further, we can't easily increase consumer spending, so what will pull us out? It seems daunting.
Looking at the glass half-full, the things that could really put a damper on our recovery will likely take time to worsen. For example, do you expect that rising interest rates will hit instantly? Or that inflation will rise instantly? Or that yields and dividends will all rise in any short amount of time? Not likely-but inevitable that these things will worsen over time, meaning that we'll likely face a prolonged "work out" of our economic challenges. (1)
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Economic Briefs |
HIRING TAPERS OFF IN MAY
Wall Street braced itself Friday for a subpar jobs report, and that was what arrived. Non-farm payrolls grew by just 54,000 in May - and if McDonald's hadn't added 62,000 fast-food positions last month, net hiring would have been negative. Payrolls had expanded by an average of 220,000 positions a month in the previous three months of data. The unemployment rate ticked north to 9.1% in May; the percentage of people without a job for six months or longer rose to 45.1%, nearly a record.(2,3)
ISM: SOME GOOD NEWS, SOME BAD NEWS
The Institute for Supply Management's manufacturing sector index slipped a troubling 6.9% to 53.5 for May. However, ISM's service sector PMI rose 1.8% in May to 54.6, and new orders increased by 4.1%. Expansion continues in both sectors.(4)
YEAR-OVER-YEAR HOME PRICES RETREAT
The newly released March edition of the S&P/Case-Shiller Home Price Index found home prices across 20 metro areas down 3.6% from March 2010. Overall, prices were 33.1% below the index's peak in July 2006 and at levels last seen during the middle of 2002. (5,6)
CONFIDENCE FALTERS
The Conference Board Consumer Confidence Index came in at 60.8 for May, notably beneath the 66.0 reading for April. The poll's Expectations Index decreased to 75.2 from April's 83.2 reading.(7)
A DOWNDRAFT ON WALL STREET
A major selloff last Wednesday contributed to the Dow extending its losing streak to five weeks. Here was how it went during the four market days from May 31-June 3: DJIA, -2.33% to 12,151.26; S&P 500, -2.32% to 1,300.16; NASDAQ, -2.29% to 2,732.78. The Dow has not had a five-week losing streak since July 2004. (8)
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| Market Summary |
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% Change |
Y-T-D |
1Yr Chg |
5-Year Avg | |
DJIA |
+4.96 |
+18.49 |
+1.61 | |
NASDAQ |
+3.01 |
+18.66 |
+4.63 | |
S&P 500 |
+3.38 |
+17.89 |
+0.19 |
(Source: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 6/03/11) |
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Create a beautiful week!
Karl Frank, MBA, MSF
Certified Financial Planner (R)
A & I Financial Services LLC
303.690.5070
Citations:
(1) - Jay R. Penny, LLC A Special Report, May 6, 2011
(2) - latimes.com/business/la-fi-jobs-report-20110604,0,3594048.
story [6/3/11]
(3) - cnbc.com/id/43267992 [6/3/11]
(4) - ism.ws/ISMReport/NonMfgROB.cfm [6/3/11]
(5) - nj.com/business/index.ssf/2011/06/home_prices_at_lowest_
point_si.html [6/1/11]
(6) - abcnews.go.com/Business/housing-prices-double-dip-downward-spiral/story?id=13723919 [5/31/11]
(7) - conference-board.org/data/consumerconfidence.cfm [5/31/11]
(8) - cnbc.com/id/43272370 [6/3/11
This material has been prepared and is distributed solely for information purposes only. It is not a solicitation or an offer buy any securities or instrument or to participate in any trading strategy. There is no assurance that a particular trading strategy will achieve investment success.
Securities offered through Geneos Wealth Management, Inc., member FINRA/SIPC. Investment advisory services offered through A & I Financial Services LLC, registered investment advisor. |
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| Watch Karl Frank's interview on MoneyLine9 9NEWS on May 9, 2011 | |
Click Here
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| Watch Karl Frank on Channel 9 News & Read his article "Where to Invest in Times of Turmoil" | |
Click Here
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| Read about us in the Denver Post | |
Karl Frank & Cameron Morgan were featured in the Denver Post. They talked about how to have a happy holiday while sticking to a budget.
Click here to read the article. |
| Riddle of the Week |
New furniture will be delivered to your office on the day before five days from the day after tomorrow. If today is August 18, when will the furniture arrive?
Last week's riddle:
Two lawyers sit at opposite ends of a large conference table. Nothing is in between them but the table, yet they don't see each other. How is this possible?
Last week's answer:
They are seated with their backs to one another. |
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