Greetings!
What happened to January? Are you still signing "2012" instead of 2013?
As time flies, so do our dollars. And this is a good thing.
One major reason America will not suffer the plights of Greece, Spain or another debtor country is because of the US dollar. The Federal Reserve issues more dollars with a keystroke. With more dollars, the value of each dollar may decline.
Let's look at two sides to this argument, first the relative value of the dollar and second, the absolute value of the dollar.
The dollar does not exist in a vacuum. Relative to other currencies, the US dollar is the "reserve currency." Many other countries peg their currencies to it. Almost every asset around the world is priced in dollars. Currently, the USA enjoys currency stability because of our political, military and economic strength. We are the world's reserve currency because of our relative power. As the chart goes up, the dollar gains in value. As it declines, it goes down in value relative to other currencies:
The real purchasing power of the dollar declines over time with inflation. Time and dollars fly quickly these days. Three thousand dollars, 30 years ago, purchased a Ford Mustang. Today, the same Mustang is 10 times as expensive. Every year, every thing we buy gets more expensive. The chart, and this truth, are scary!
Yet during the same 30 years, the quality of life has also increased around the world due to incredible technological advances. We live longer, healthier lives than ever before. As investors, we are both optimists and realists. Instead of complaining or worrying, we act and change. As Robert Louis Stevenson said, "To travel hopefully is better than to arrive." |
| Weekly Economic Update | |
MORE HIRING ... AND YET, MORE UNEMPLOYMENT
In January, the jobless rate ticked up to 7.9%. The Labor Department countered that with some good news: 127,000 more workers were hired across November and December than previously thought. Last month, 157,000 new jobs were created. (1)
EXAMINING CONSUMER BAROMETERS
According to the Commerce Department, personal spending rose 0.2% in December while personal incomes rose 2.6% (thanks in part to dividends being issued ahead of the fiscal cliff). The savings rate hit 6.5%, a 43-month high; after-tax incomes improved 2.8%. Elsewhere, while the Conference Board's January consumer confidence survey plunged 8.1 points to a 14-month low of 58.6, the University of Michigan's final January consumer sentiment poll improved 0.9 points to 73.8. (2,3)
GDP WANES; HOME PRICES, MANUFACTURING PERK UP
The economy contracted 0.1% in the past quarter, according to the initial estimate of the Bureau of Labor Statistics. Analysts termed it an anomaly, with reduced defense spending a big factor. The Institute for Supply Management's January PMI showed an impressive gain of 2.9% to 53.1. November's Case-Shiller Home Price Index revealed an overall 5.5% year-over-year improvement; the National Association of Realtors reported a 4.3% decline in pending home sales in December. (1,4,5)
DOW ENDS WEEK AT 14,009.79
Friday's close was within 200 points of the index's 2007 peak. The Dow gained 0.82% last week, while the NASDAQ advanced 0.93% (to 3,179.10) and the S&P 500 gained 0.68% (to 1,513.17). (6,7,8)
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| Market Summary |
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% Change |
Y-T-D |
1Yr Chg |
5-Year Avg | |
DJIA |
+6.91 |
+10.17 |
+1.99 | |
NASDAQ |
+5.29 |
+11.62 |
+6.35 | |
S&P 500 |
+6.10 |
+14.28 |
+1.69 |
(Source: cnbc.com, usatoday.com, treasury.gov, treasurydirect.gov -02/01/13). Past performance is no guarantee of future results. Indices are unmanaged, and investors cannot invest in them directly. |
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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 - www.businessweek.com/articles/2013-02-01/januarys-
strong-jobs-report-trumps-a-decline-in-gdp [2/1/13]
2 - www.bloomberg.com/news/2013-01-31/consumer-spending
-in-u-s-climbed-in-december-as-incomes-surged.html [1/31/13]
3 - www.bloomberg.com/news/2013-02-01/u-s-michigan-
consumer-sentiment-increase-may-boost-spending.html [2/1/13]
4 - www.ism.ws/ismreport/mfgrob.cfm [2/1/13]
5 - briefing.com/investor/calendars/economic/2013/01/
28-01 [2/1/13]
6 - money.cnn.com/data/markets/dow/ [2/1/13]
7 - money.cnn.com/data/markets/nasdaq/ [2/1/13]
8 - money.cnn.com/data/markets/sandp/ [2/1/13]
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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| Words for Thought |
"There are two ways to live life. The first is as if nothing is a miracle. The second is as if everything is a miracle."
Albert Einstein |
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Riddle of the Week
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What five-letter word becomes shorter when you add two letters to it?
Last week's riddle:
I am gentle enough to soothe the skin, light enough to reflect the sky, yet hard enough to crack rocks. What am I?
Last week's answer:
Water |
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