"It was the best of times, it was the worst of times;......." at least according to Charles Dickens in A Tale of Two Cities. I was thinking about that quote as I reviewed some of the recent economic news but realized that it didn't quite fit the circumstances. Maybe I should paraphrase it to, "It was the worst of times, it was the not-quite-as-bad-as-it-might-be of times."
The bad? Yesterday's release of the January 2011 S&P/Case Shiller Home Price Indices (http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----) showed another decline in the values of existing homes. To be more precise, the twenty-city Composite Index posted its 57th consecutive monthly decline, showing a drop of 31% from its May 2006 peak. Not all markets within the composite shared equally in the fall, as Las Vegas and Phoenix occupied the cellar at -58% and -55%, respectively. While Chicago posted a decline approximately equal to the Composite at -30%, Denver and Dallas values have fallen the least at 10% and 7%, respectively.
All of this data is relative, given that not all of the markets hit their peak values at the same time and across the country not all home owners bought at the peak. Closer to home, we bought our house in March 2005, and its value climbed fairly steadily for a couple of years. Although the greater Charlotte Metropolitan Area has values down 16%, which isn't bad compared to the national average, our home is only down about 2% from the purchase price.
This continuing slide of home values means more pressure on an already over-burdened real estate market. The continuing fall in values means more homeowners are under water on their mortgages and lower values continue to hold down the number of home sales in a market where there is already too much inventory.
When you're in a hole and want to get out, you first have to stop digging. So far, that hasn't happened.
The good? This morning ADP, the payroll processing giant, reported some positive employment information. According to The Wall Street Journal (http://online.wsj.com/article/SB10001424052748703806304576232393531640116.html) ADP said the US economy added 201,000 private-sector jobs, with the average monthly gain over the past four months of 211,000.
This would be much better news if the unemployment rate wasn't expected to remain extremely high at 8.9%. To move that 8.9% number, which represents about 15 million people out of work, down to about 4.5% over the next three years, the economy will need to create new jobs at a rate that's at least twice as fast as it has during the last four months. Job growth at 200,000 per month is good enough to stop digging our hole any deeper but not good enough to bring the American employment picture back to a more normal view.
When larger numbers of people go back to work, they'll buy more goods and services. Producing, moving and selling those goods and services will put even more people to work and larger numbers of them will buy some of those houses that have been sitting in inventory, losing value. The taxes all of these new workers pay will help put our local governments, including school districts, back in the black, too.
In my opinion, private-sector job creation is the number one challenge facing us today. Everything else is a distraction from that mission that we cannot afford.
Wednesday, March 30, 2011
Monday, March 21, 2011
The Real Estate Mess & Unanticipated Fallout
For decades, home ownership was part of the American dream. We all wanted it, even those of us who rented apartments or homes wanted it. It was the way of life to which we all aspired.
The federal government thought it was a pretty good idea, too, so it promoted home ownership with the deductibility of mortgage insurance, by exempting the capital gain on personal residences, by attacking banks for redlining practices, by passing and aggressively enforcing the Community Reinvestment Act and by forcing Fannie Mae and Freddie Mac into funding more and more sub-prime mortgages. All of these--especially the latter two--helped to build the false economic prosperity of the decade 1995-2005.
For as long as I can remember, another part of the American dream was being able to obtain credit when we wanted and needed it. We bought cars and refrigerators and washing machines on conditional sales contracts. No self-respecting American could be happy without a wallet or purse full of credit cards. The use and growth of consumer credit in part helped the American economy grow to become the biggest and strongest on the planet.
Along with mortgages and revolving credit lines came the responsibility to honor our obligations. For generations, we Americans felt that obligation deeply and the overwhelming majority of borrowers honored those obligations. If times got hard, we'd do without something else in order to make the mortgage or car payment. We did so because of a sense of duty but also because we feared the stigma of default. Bankruptcy was bad. Foreclosure was terrible. With them came dishonor and disgrace. Didn't it?
In today's troubled times we have a long way to go before we recover. Far too many homeowners have fallen behind on mortgage payments, far too many have suffered through default and far too many still are on the brink of foreclosure.
Some of these problems have been the fault of the homeowner, as many bit off more than they could chew, but most of them have been caused by lost jobs and reduced incomes. There have been so many credit defaults and foreclosures that existing home values have been pushed to a nine-year low with an unsold inventory of almost nine months on the market. It's a great time to buy if you're in the market but the market may not normalize for several more years.
A by-product of the current real estate mess is a troubling trend of people walking away from their obligations without concern or remorse. I'm not referring to the people who simply can't pay the mortgage. I'm talking about an increasing number who choose not to pay the mortgage.
I don't have statistics but the anecdotal evidence is that an alarmingly high number of people are continuing to spend money as if they had it. They spend for vacations and electronics and cars while choosing not to make mortgage and credit card payments. They continue to "run up" their credit card debt as high as they can to pay for their children's dance lessons and travel soccer teams, knowing they'll never be able to pay. When the credit runs out, they walk out leaving the keys on the floor. At least for them, bankruptcy and foreclosure have become acceptable solutions.
Why is this happening? I won't offer any defense of this phenomenon but I will offer a partial explanation. The stigma once associated with a credit default, bankruptcy or foreclosure has been lost. So many good people have lost their homes through no fault of their own that some not-so-good people are taking advantage of the opportunity. Shame on them.
I wish every reader well and hope that none of you ever face this dilemma personally. I also hope that if you witness this sort of irresponsible behavior by others that you'll take a stand and tell the offenders how wrong their actions are.
The federal government thought it was a pretty good idea, too, so it promoted home ownership with the deductibility of mortgage insurance, by exempting the capital gain on personal residences, by attacking banks for redlining practices, by passing and aggressively enforcing the Community Reinvestment Act and by forcing Fannie Mae and Freddie Mac into funding more and more sub-prime mortgages. All of these--especially the latter two--helped to build the false economic prosperity of the decade 1995-2005.
For as long as I can remember, another part of the American dream was being able to obtain credit when we wanted and needed it. We bought cars and refrigerators and washing machines on conditional sales contracts. No self-respecting American could be happy without a wallet or purse full of credit cards. The use and growth of consumer credit in part helped the American economy grow to become the biggest and strongest on the planet.
Along with mortgages and revolving credit lines came the responsibility to honor our obligations. For generations, we Americans felt that obligation deeply and the overwhelming majority of borrowers honored those obligations. If times got hard, we'd do without something else in order to make the mortgage or car payment. We did so because of a sense of duty but also because we feared the stigma of default. Bankruptcy was bad. Foreclosure was terrible. With them came dishonor and disgrace. Didn't it?
In today's troubled times we have a long way to go before we recover. Far too many homeowners have fallen behind on mortgage payments, far too many have suffered through default and far too many still are on the brink of foreclosure.
Some of these problems have been the fault of the homeowner, as many bit off more than they could chew, but most of them have been caused by lost jobs and reduced incomes. There have been so many credit defaults and foreclosures that existing home values have been pushed to a nine-year low with an unsold inventory of almost nine months on the market. It's a great time to buy if you're in the market but the market may not normalize for several more years.
A by-product of the current real estate mess is a troubling trend of people walking away from their obligations without concern or remorse. I'm not referring to the people who simply can't pay the mortgage. I'm talking about an increasing number who choose not to pay the mortgage.
I don't have statistics but the anecdotal evidence is that an alarmingly high number of people are continuing to spend money as if they had it. They spend for vacations and electronics and cars while choosing not to make mortgage and credit card payments. They continue to "run up" their credit card debt as high as they can to pay for their children's dance lessons and travel soccer teams, knowing they'll never be able to pay. When the credit runs out, they walk out leaving the keys on the floor. At least for them, bankruptcy and foreclosure have become acceptable solutions.
Why is this happening? I won't offer any defense of this phenomenon but I will offer a partial explanation. The stigma once associated with a credit default, bankruptcy or foreclosure has been lost. So many good people have lost their homes through no fault of their own that some not-so-good people are taking advantage of the opportunity. Shame on them.
I wish every reader well and hope that none of you ever face this dilemma personally. I also hope that if you witness this sort of irresponsible behavior by others that you'll take a stand and tell the offenders how wrong their actions are.
Wednesday, March 16, 2011
Quo Vadis?
Quo Vadis is a Latin term meaning, "wither goest thou?". I don't speak, read or write Latin and I don't make a habit of using it. However, in this case, I'm applying it to the US economy and investment markets.
Given all of the recent turmoil in the Middle East (read that as concern about oil) and the earthquake/tsunami double tap that hit Japan, markets have been erratic at best and quite negative at worst. There have been several bad days recently on world stock markets, including ours, but it might be helpful to put some of these recent loses into perspective.
Using the Morningstar US Market Index as representative of the entire US market, it was down 4.6% from its recent peak on February 18, and down 1.6% since the Japan earthquake and tsunami. A total negative move of almost 5% is not insignificant--I know my portfolio certainly has taken the hit--but in a market where 1% daily movement, up or down, is the norm, it's not a lot.
In the long term, most market movement is rational, with investors making decisions based on the same known information. In the short term, not so much. Investors, even institutional investors, are people and people sometimes react irrationally. In this case, I think (highly technical investment terminology) that many investors are overreacting.
The US economy runs a $60 billion annual trade deficit with Japan. A lot of that is automobiles and auto parts, in spite of the fact that the Japanese auto makers are now manufacturing a fairly significant number of cars in the US. The disruption in the Japanese auto industry, while having an extremely negative impact on the Japanese economy, may actually open a window of opportunity for US auto manufacturers to fill the void. Further, reducing the US-Japan trade deficit is not a bad thing for the US economy.
I'm not saying that US investors should seek profit opportunity in Japan's disaster. Far from it. I've previously commented on the tragedy and how deeply concerned I am for the people of Japan.
What I am saying is don't overreact to short-term irrationality in markets. Market corrections happen. They also make comebacks.
So, where is the market going, right now? It will have up and down days and it's likely that more of them will be down than up. The problem is that I can't tell you on what day that will change and we'll begin to see more up days than down.
It is not improbable that I'll make some changes to improve quality or reposition my allocation tactically. When the turn comes, I want to be invested and not sitting on the sidelines.
Given all of the recent turmoil in the Middle East (read that as concern about oil) and the earthquake/tsunami double tap that hit Japan, markets have been erratic at best and quite negative at worst. There have been several bad days recently on world stock markets, including ours, but it might be helpful to put some of these recent loses into perspective.
Using the Morningstar US Market Index as representative of the entire US market, it was down 4.6% from its recent peak on February 18, and down 1.6% since the Japan earthquake and tsunami. A total negative move of almost 5% is not insignificant--I know my portfolio certainly has taken the hit--but in a market where 1% daily movement, up or down, is the norm, it's not a lot.
In the long term, most market movement is rational, with investors making decisions based on the same known information. In the short term, not so much. Investors, even institutional investors, are people and people sometimes react irrationally. In this case, I think (highly technical investment terminology) that many investors are overreacting.
The US economy runs a $60 billion annual trade deficit with Japan. A lot of that is automobiles and auto parts, in spite of the fact that the Japanese auto makers are now manufacturing a fairly significant number of cars in the US. The disruption in the Japanese auto industry, while having an extremely negative impact on the Japanese economy, may actually open a window of opportunity for US auto manufacturers to fill the void. Further, reducing the US-Japan trade deficit is not a bad thing for the US economy.
I'm not saying that US investors should seek profit opportunity in Japan's disaster. Far from it. I've previously commented on the tragedy and how deeply concerned I am for the people of Japan.
What I am saying is don't overreact to short-term irrationality in markets. Market corrections happen. They also make comebacks.
So, where is the market going, right now? It will have up and down days and it's likely that more of them will be down than up. The problem is that I can't tell you on what day that will change and we'll begin to see more up days than down.
It is not improbable that I'll make some changes to improve quality or reposition my allocation tactically. When the turn comes, I want to be invested and not sitting on the sidelines.
Tuesday, March 15, 2011
Tragedy In Japan
For the first forty-six years of my life I lived in California, where I experienced several earthquakes first hand. One of the biggies was the Northridge Quake in January 1994, with an epicenter only about ten miles from our home. That was a shake I'll long remember but the quake was only a 6.7 (moment of magnitude) on the Richter Scale. All the same, it was plenty big enough for me. During that quake thirty-three people were killed, thousands injured and Southern California suffered tremendous damage.
In California we lived with the thought that "The Big One" might occur at any time but nobody dwelt on it. If it happened, it happened. We knew that if we were there when it did happen, there was nothing we could do about it. Sound engineering preparation was our only hope, as the sky scrapers and highways in Los Angeles supposedly were designed to survive it. For the most part they did survive the Northridge Quake but that was only a 6.7 shaker. Luckily, we never got the big one.
Last year a 7.0 quake hit the island nation of Haiti with enough force (three times the shaking amplitude of the Northridge Quake) to demolish much of the country and kill a Haitian government estimate of 316,000 people. As terrible as that tragedy was in loss of life, it was not the big one. Much of the damage and resulting loss of life in Haiti would probably not have occurred if building codes and requirements had been similar to those in California--or Japan.
Japan got The Big One. I saw a report yesterday afternoon that, although much of the media is still calling the Japan Quake an 8.9, the US Geological Survey had upgraded it to a 9.0. If the relative measures of the Richter scale are to be believed and accepted, the Japan Quake would have had a shaking amplitude 100 times greater than the Haiti quake of 2010.
The toll of damage, injury and loss of life is far from finished in Japan but the Japanese people will be struggling with the aftermath for decades. In the final tally, much of the damage and loss of life will have been caused by the tsunami, rather than the quake itself. How much of the tally will have been caused by damage to the nuclear power plants is an unknown and may take decades to determine.
My heart aches for the people of Japan.
Thursday, March 10, 2011
Unions in the News
I live in Union County, North Carolina, which is one of the most heavily Republican counties in one of the least unionized states in the country. Go figure. Although our professional football players are unionized, our teachers are not. I'll come back to both of those professions a little later.
Shifting quickly to one of the most heavily unionized states in the country, the Wisconsin legislature found a way to pass restrictions on the bargaining rights of most public employee groups. The pro-union forces thought they had the legislation blocked by playing hide-and-seek but the pro-taxpayer forces defeated them, eventually, by changing provisions in the controversial bill so that anti-democracy legislators could no longer block it by running away and refusing to vote.
It seemed as if the pro-union forces were saying, "If you won't let me win, I won't play. In fact, I'll run an hide so I won't even have to watch the game and by doing so, prevent the game from being played."
The tactic worked for a while and managed to draw the attention of the entire nation. Battle lines were drawn and large demonstrations were held in support of both sides of the issue. Overlooked somewhere in all the rhetoric were many of the facts.
The Wisconsin bill was not anti-union per se. It did not affect the bargaining rights of any workers at private companies. It only applies to public employees who are paid by the taxpayers of a state that was going quickly bankrupt. How bankrupt? Very.
Wisconsin was facing an immediate revenue (read that as tax receipts) shortfall into the hundreds of millions of dollars and longer-term deficits into the the billions. That's serious money the state didn't have, with the only means of getting it by taxing its citizens who didn't have it. The new limits on public employee collective bargaining won't fix the entire problem and there will need to be many other shared sacrifices by the citizens of Wisconsin. This is only one piece of the puzzle.
Although I haven't analyzed the Wisconsin budget, the biggest budget item for every state is employee expenses. Salaries make up a large part of it but, according to most published reports, Wisconsin taxpayers, the majority of whom work in the private sector, were being asked to pay for healthcare and retirement benefits of public employees that were far in excess of anything offered in the private sector. That's pretty tough to swallow if you're struggling to pay your mortgage, pay the power bill, put food on the table and put your kids through school.
Speaking of school, teachers have one of the most important and undervalued roles in our society. They are critical to our children and our future and they are not overpaid. In many situations they are underpaid. Teachers in my family are bright, capable, caring professionals who are very good at their jobs and the children in their classrooms are lucky to have them.
In Union County we have our own budget woes and we've had our share of cutbacks. A county government has to do the same thing a family does when there's a shortfall of revenue--cut expenses. I don't always agree with our school administration about where they cut or how they spend our money but none of that is the fault of the teachers. Our schools are still open and our children are still being educated by a caring group of dedicated professionals who are not represented by a union.
In case you haven't heard, there's also a collective bargaining war being waged in the National Football League where the median annual salary approaching $1 million and the average salary well in excess of it. I love football as much as anyone but that is collective bargaining gone insane.
Shifting quickly to one of the most heavily unionized states in the country, the Wisconsin legislature found a way to pass restrictions on the bargaining rights of most public employee groups. The pro-union forces thought they had the legislation blocked by playing hide-and-seek but the pro-taxpayer forces defeated them, eventually, by changing provisions in the controversial bill so that anti-democracy legislators could no longer block it by running away and refusing to vote.
It seemed as if the pro-union forces were saying, "If you won't let me win, I won't play. In fact, I'll run an hide so I won't even have to watch the game and by doing so, prevent the game from being played."
The tactic worked for a while and managed to draw the attention of the entire nation. Battle lines were drawn and large demonstrations were held in support of both sides of the issue. Overlooked somewhere in all the rhetoric were many of the facts.
The Wisconsin bill was not anti-union per se. It did not affect the bargaining rights of any workers at private companies. It only applies to public employees who are paid by the taxpayers of a state that was going quickly bankrupt. How bankrupt? Very.
Wisconsin was facing an immediate revenue (read that as tax receipts) shortfall into the hundreds of millions of dollars and longer-term deficits into the the billions. That's serious money the state didn't have, with the only means of getting it by taxing its citizens who didn't have it. The new limits on public employee collective bargaining won't fix the entire problem and there will need to be many other shared sacrifices by the citizens of Wisconsin. This is only one piece of the puzzle.
Although I haven't analyzed the Wisconsin budget, the biggest budget item for every state is employee expenses. Salaries make up a large part of it but, according to most published reports, Wisconsin taxpayers, the majority of whom work in the private sector, were being asked to pay for healthcare and retirement benefits of public employees that were far in excess of anything offered in the private sector. That's pretty tough to swallow if you're struggling to pay your mortgage, pay the power bill, put food on the table and put your kids through school.
Speaking of school, teachers have one of the most important and undervalued roles in our society. They are critical to our children and our future and they are not overpaid. In many situations they are underpaid. Teachers in my family are bright, capable, caring professionals who are very good at their jobs and the children in their classrooms are lucky to have them.
In Union County we have our own budget woes and we've had our share of cutbacks. A county government has to do the same thing a family does when there's a shortfall of revenue--cut expenses. I don't always agree with our school administration about where they cut or how they spend our money but none of that is the fault of the teachers. Our schools are still open and our children are still being educated by a caring group of dedicated professionals who are not represented by a union.
In case you haven't heard, there's also a collective bargaining war being waged in the National Football League where the median annual salary approaching $1 million and the average salary well in excess of it. I love football as much as anyone but that is collective bargaining gone insane.
Wednesday, March 9, 2011
Happy Anniversary!
Happy Anniversary. Today is the second anniversary of the low-point in the S&P 500 after an eighteen month fall of 56% of it's value.
That was the worst eighteen months of my experience as a financial professional and changed many of our lives. Like many boomers I was looking ahead at the retirement for which I'd been planning, although it was still five to seven years in the future. I was looking at my retirement nest egg with satisfaction and counting some chickens before they hatched. My, how things can change.
I was prudently invested and well diversified, as I hope all of you are, so my portfolio didn't take as bad a hit as the stock market. Even so, it lost about 30% of its market value. Ouch.
Based upon averages, that's about four years worth of gains that would have to be replaced. If I'd been thirty or forty years old, it would have been a relatively temporary set-back. I'd have had plenty of time to make up for the losses. At age sixty, not so much. That's why it was so important to catch the wave of improved returns that started two years ago and ride it back to the future I wanted.
During that eighteen month fall from the peak, I cautioned my investment clients, "Don't panic." Values were falling but they would return. The analogy I made was that of a round-trip airplane ticket. We had all paid dearly for a very expensive round-trip ticket and it was imperative that we not miss the return flight. That meant we had to stay invested. Although we had to be on the plane, we didn't necessarily need to be in the same seat. That meant we should upgrade to better, more appropriate investments for the return ride if possible. We should look to improve quality and adjust allocations where it was appropriate--but we should stay invested.
Of all my clients at that time (approx. 200), all but two stayed invested and made it home. I did, too, as my portfolio, now, is right back to where it was after taking a wild, two-year adventure.
A psychiatrist who was a sales trainer and coach once told me that I should think of my job as if I were a doctor. He said it wasn't enough to diagnose and prescribe treatment--I had to convince my patient to take the treatment.
I've moved on to my own consulting and investment business, now, but I still think about the two families who missed the flight home. They panicked and directed me to sell all their securities at the very bottom of the market. I had failed to convince them to take the treatment. I hope they are well.
Since March 9, 2009, the S&P 500 has gone up 95% but it didn't make that gain in a straight line. There have been many ups and downs, as the past few weeks have demonstrated. There will be more ups and downs, I assure you, but it doesn't change this fundamental truth of investing--no one knows when the ups will change to downs or vice versa.
The moral of the story is, be prudently invested appropriate for your objectives, stay well diversified but stay invested. The treatment for ailing investors is Time In The Market, not Market Timing.
Thursday, March 3, 2011
15 Million People Out of Work
Depending on whom you believe, about 15 million people are unemployed in the United States. That's a lot of folks.
Although the January unemployment figure fell to 9%, nationally, down 0.4% from the previous month and the lowest rate since April 2009, it marks the 21st consecutive month the rate has been 9% or higher.
At the same time many job vacancies are going unfilled. According to Bertha Coombs, a CNBC contributor, in an article published today, "While there are more than 25 job seekers for every open position in fields like construction, the exact inverse is true in technology, health and science-related jobs." Can this be so? Probably.
The truth is that many technical or highly-skilled jobs are staying open longer because it's a buyers market. Employers can wait for the perfect candidate, partially because they've learned to operate their businesses leaner and, well yes, meaner. Simultaneously, extended unemployment benefits, while hardly a replacement in dollars or self-esteem for real paychecks, make it somewhat easier for job seekers to hold out for better, higher-paying jobs.
I don't mean to understate the severity of the economic and jobs collapse we suffered. It was bad and could have been far worse. It's still bad, even though it's better than it was. However, many economists, including those at the Federal Reserve, are saying that full or normal employment might leave as much as 6.7% of the workforce out of work at any given time. That contrasts with the traditional number of 5% that they used for generations. The difference may not sound like much but in today's labor force it's almost 3 million workers.
The bottom line is unemployment remains the single biggest problem our economy faces. When you watch the news or pay at the pump or listen to another politician claiming his party has the answer and those other guys don't, don't lose sight of the fact that the answer to the current problem is JOBS.
Although the January unemployment figure fell to 9%, nationally, down 0.4% from the previous month and the lowest rate since April 2009, it marks the 21st consecutive month the rate has been 9% or higher.
At the same time many job vacancies are going unfilled. According to Bertha Coombs, a CNBC contributor, in an article published today, "While there are more than 25 job seekers for every open position in fields like construction, the exact inverse is true in technology, health and science-related jobs." Can this be so? Probably.
The truth is that many technical or highly-skilled jobs are staying open longer because it's a buyers market. Employers can wait for the perfect candidate, partially because they've learned to operate their businesses leaner and, well yes, meaner. Simultaneously, extended unemployment benefits, while hardly a replacement in dollars or self-esteem for real paychecks, make it somewhat easier for job seekers to hold out for better, higher-paying jobs.
I don't mean to understate the severity of the economic and jobs collapse we suffered. It was bad and could have been far worse. It's still bad, even though it's better than it was. However, many economists, including those at the Federal Reserve, are saying that full or normal employment might leave as much as 6.7% of the workforce out of work at any given time. That contrasts with the traditional number of 5% that they used for generations. The difference may not sound like much but in today's labor force it's almost 3 million workers.
The bottom line is unemployment remains the single biggest problem our economy faces. When you watch the news or pay at the pump or listen to another politician claiming his party has the answer and those other guys don't, don't lose sight of the fact that the answer to the current problem is JOBS.
Wednesday, March 2, 2011
I Must Be Officially Old
Several years ago on the eve of my 50th birthday I received my first invitation to join the AARP. Of course, there is nothing wrong with the AARP--I'm now a member--but come on. I was only forty-nine years old and trying desperately to hang onto the last vestiges of whatever youth I falsely could claim. If that wasn't bad enough, they kept sending invitations, reminding me how old I really was. The entire episode was a total downer.
Now that I'm old enough to claim Social Security Benefits, although I have yet, I no longer have any delusions of being in my middle age. I gladly and proudly joined AARP in the hope of garnering important discounts on hotel rooms or auto insurance or whatever other scam might also be available to we old geezers.
However, today I learned that I truly am old at the age of only sixty-two. How? Not AARP, as they'd found me more than a decade ago and I eventually succumbed.
Now, the Scooter Store has found me. Yep. They're ready to help me get a Power Chair and help me maintain my mobility and independence. Lucky me.
Intellectually, I know that it is not only older citizens that use Power Chairs. Intellectually, I accept that it has nothing to do with age and that even the young can need them. Emotionally, it feels just like getting that first AARP invitation a dozen years ago. Bummer.
In closing I'll confess that just prior to getting today's mail and finding this little bombshell, I was out driving around the countryside in my Porsche Carrera and shopping for new leathers and stirrup irons for my most recent distraction--riding horses. Hey, maybe I'm not as old as they think.
Now that I'm old enough to claim Social Security Benefits, although I have yet, I no longer have any delusions of being in my middle age. I gladly and proudly joined AARP in the hope of garnering important discounts on hotel rooms or auto insurance or whatever other scam might also be available to we old geezers.
However, today I learned that I truly am old at the age of only sixty-two. How? Not AARP, as they'd found me more than a decade ago and I eventually succumbed.
Now, the Scooter Store has found me. Yep. They're ready to help me get a Power Chair and help me maintain my mobility and independence. Lucky me.
Intellectually, I know that it is not only older citizens that use Power Chairs. Intellectually, I accept that it has nothing to do with age and that even the young can need them. Emotionally, it feels just like getting that first AARP invitation a dozen years ago. Bummer.
In closing I'll confess that just prior to getting today's mail and finding this little bombshell, I was out driving around the countryside in my Porsche Carrera and shopping for new leathers and stirrup irons for my most recent distraction--riding horses. Hey, maybe I'm not as old as they think.
Tuesday, March 1, 2011
Is March The Cruelest Month?
Happy March 1st, everyone. Although the calendar indicates it's late winter, it definitely feels like spring in the Carolinas. The unusually warm weather brought last night's thunderstorms but they've blown over and today will be seasonably perfect, with Carolina Blue sky and a temperature of about 60. I'm not sure what the rest of March will be like but today looks to be terrific.
The calm, cool morning and severe clear sky this morning started me thinking about analogies to the economy and investment markets. I know--I'm weird that way.
Is this the calm between the storms of winter and spring? Are our improving economy and recent successes of the stock markets merely a calm before we enter another stormy season? Let's take a look at what's happening.
As of the end of February 2011, The S&P 500 stock index is plus 4.4% YTD and plus 20.5% over the trailing six months. Since hitting bottom two years ago in March 2009, the index has risen over 96%. Wow! That's really, really good but the sad truth is the index is still about 15% below it's peak in October of 2007. Bummer.
Will the markets and our portfolios ever make it back to where they were? Surely they will. How soon? That's the question for which I don't have an answer.
Can equities keep up the blistering pace they've set over the past two years? Unfortunately, that is not likely.
Will we see a continued upward trend in the equity markets? It is not improbable that we will.
Why? It's still the only game in town--almost. I'll get back to that "almost" later.
Real estate values are still in the tank and they don't seem to have found the bottom. Interest rates on money market accounts and deposits are virtually nil and bonds, government or corporate, remain at historic lows. What's even worse in the bond market is that rates and yields poised to go higher relatively soon make buying bonds, now, a risky choice.
If you're sitting on a pile of cash, as many fund managers and big-time investors are, where can you put it? Stocks, of course, which, together with pretty solid corporate results, are driving stock prices higher. That is likely to continue, albeit at a slower pace, for the remainder of the year.
Will all markets and the equities traded on them rise uniformly? Not in the short term. I still believe strongly in broad diversification, including developed and developing international markets, but in the short term the US market is likely to outperform its international counterparts, especially the developing world.
Should you sell all of your international equity holdings and buy a S&P 500 Index fund? Probably not. However, it makes a lot of sense tactically to trim positions in international holdings and reposition them in the US markets.
Isn't there anywhere else to invest? Well, remember that "almost" from a couple of paragraphs ago? The alternative for many investors has been commodities. Over the past six months, the Dow Jones UBS Commodity Index, representative of a broad range of various commodities, is up a whopping 24.2%. That surpasses even the strong gains stocks have posted during the same period. What's more, commodities, including oil, copper, gold, cotton and corn, are likely to go higher.
So, should you sell your stocks and buy commodities? Should you get rid of your S&P 500 Index fund and buy pork bellies? Probably not. However, it makes a lot of sense to add or increase commodities exposure to portfolios.
Are there storm clouds on the horizon? Aren't there always? Among them are the political and economic turmoil in the Middle East and the looming debt crisis, with all of its ramifications, at home. These are very serious issues and worthy of our serious attention but, at least for now, let's hope they'll blow over, as last night's thunderstorms did.
The calm, cool morning and severe clear sky this morning started me thinking about analogies to the economy and investment markets. I know--I'm weird that way.
Is this the calm between the storms of winter and spring? Are our improving economy and recent successes of the stock markets merely a calm before we enter another stormy season? Let's take a look at what's happening.
As of the end of February 2011, The S&P 500 stock index is plus 4.4% YTD and plus 20.5% over the trailing six months. Since hitting bottom two years ago in March 2009, the index has risen over 96%. Wow! That's really, really good but the sad truth is the index is still about 15% below it's peak in October of 2007. Bummer.
Will the markets and our portfolios ever make it back to where they were? Surely they will. How soon? That's the question for which I don't have an answer.
Can equities keep up the blistering pace they've set over the past two years? Unfortunately, that is not likely.
Will we see a continued upward trend in the equity markets? It is not improbable that we will.
Why? It's still the only game in town--almost. I'll get back to that "almost" later.
Real estate values are still in the tank and they don't seem to have found the bottom. Interest rates on money market accounts and deposits are virtually nil and bonds, government or corporate, remain at historic lows. What's even worse in the bond market is that rates and yields poised to go higher relatively soon make buying bonds, now, a risky choice.
If you're sitting on a pile of cash, as many fund managers and big-time investors are, where can you put it? Stocks, of course, which, together with pretty solid corporate results, are driving stock prices higher. That is likely to continue, albeit at a slower pace, for the remainder of the year.
Will all markets and the equities traded on them rise uniformly? Not in the short term. I still believe strongly in broad diversification, including developed and developing international markets, but in the short term the US market is likely to outperform its international counterparts, especially the developing world.
Should you sell all of your international equity holdings and buy a S&P 500 Index fund? Probably not. However, it makes a lot of sense tactically to trim positions in international holdings and reposition them in the US markets.
Isn't there anywhere else to invest? Well, remember that "almost" from a couple of paragraphs ago? The alternative for many investors has been commodities. Over the past six months, the Dow Jones UBS Commodity Index, representative of a broad range of various commodities, is up a whopping 24.2%. That surpasses even the strong gains stocks have posted during the same period. What's more, commodities, including oil, copper, gold, cotton and corn, are likely to go higher.
So, should you sell your stocks and buy commodities? Should you get rid of your S&P 500 Index fund and buy pork bellies? Probably not. However, it makes a lot of sense to add or increase commodities exposure to portfolios.
Are there storm clouds on the horizon? Aren't there always? Among them are the political and economic turmoil in the Middle East and the looming debt crisis, with all of its ramifications, at home. These are very serious issues and worthy of our serious attention but, at least for now, let's hope they'll blow over, as last night's thunderstorms did.
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