MONTHLY QUOTE
“The
large print giveth, but the small print taketh away.” –
Tom Waits
MONTHLY
RIDDLE
Michael
introduces Levi to his friends, stating that Levi’s father is
also the son of Michael’s father. But Michael is an only child.
So how are Michael and Levi related?
Last month’s riddle:
Tim says he heard that you can find $200 stuffed between pages 147 and 148 of a romance novel at the library. What detail convinces you that he is wrong?
Tim says he heard that you can find $200 stuffed between pages 147 and 148 of a romance novel at the library. What detail convinces you that he is wrong?
Last month’s answer:
Pages
147-148 would not be facing pages; page 148 would be printed on
the back of page 147.
MONTHLY
TIP – FOCUS ON LONG TERM CARE RISKS
Many
of my baby-boomer clients have friends or family members who have
dealt with the hassle and expense of long-term care for their
loved ones. Your odds of needing this care sometime during your
lives are very high, and you have only a few choices to plan for
this concern. You can a) to “do it yourself/pay for it
yourself” (this is very stressful to the family or friends
providing the care, often doesn’t provide the best care to the
patient, and can be financially devastating to all but the
ultra-rich), b) rely on the government/Medicaid (this is not an
available or desirable option, for many reasons), or c) to
acquire long-term care insurance (this increases your flexibility
to supervise high-quality care, not suffer through providing it
yourself, and preserves what could be a huge chunk of the
family’s assets for lifestyle or other purposes).
I
would be happy to talk to you about long-term care insurance and
how it could work in your financial plan. Although the market
for this product is changing, some of the better insurance
options will still be available for a few more months.
In
short, many of my clients and friends have concluded there has
never been a better time to address this risk in their financial
plan. Let me help you in this important area.
THE
MONTH IN BRIEF
June was looking pretty bleak … but then economic indicators turned surprisingly positive and Greece passed austerity measures that could help it avoid default. The month concluded with a powerful Wall Street rally. Still, the S&P 500 lost 1.83% for June. Most of the month’s data substantiated that we were seeing a soft patch. While politicians butted heads over the debt ceiling, the real estate market flashed weakness and the commodities sector suffered a collective hit. Even so, Wall Street’s mood has improved as we head into the next earnings season.1
June was looking pretty bleak … but then economic indicators turned surprisingly positive and Greece passed austerity measures that could help it avoid default. The month concluded with a powerful Wall Street rally. Still, the S&P 500 lost 1.83% for June. Most of the month’s data substantiated that we were seeing a soft patch. While politicians butted heads over the debt ceiling, the real estate market flashed weakness and the commodities sector suffered a collective hit. Even so, Wall Street’s mood has improved as we head into the next earnings season.1
DOMESTIC
ECONOMIC HEALTH
Consumers weren’t spending very much, and they weren’t feeling too confident either. Personal spending was flat in May (after ten straight months of gains) and actually decreased 0.1% in inflation-adjusted terms. Both of the major consumer confidence polls went south for June: the Conference Board’s survey dipped 3.2 points to 58.5, and the University of Michigan’s final June consumer sentiment survey retreated to 71.5 from May’s 74.3 mark.2,3,4
Consumers weren’t spending very much, and they weren’t feeling too confident either. Personal spending was flat in May (after ten straight months of gains) and actually decreased 0.1% in inflation-adjusted terms. Both of the major consumer confidence polls went south for June: the Conference Board’s survey dipped 3.2 points to 58.5, and the University of Michigan’s final June consumer sentiment survey retreated to 71.5 from May’s 74.3 mark.2,3,4
Consumer
inflation moderated and unemployment increased. The May edition
of the Consumer Price Index rose 0.2%; core CPI was up 0.3%. Food
prices were up 0.4% and energy prices were up 0.6%, but even so
this was the smallest monthly increase in inflation in seven
months. Year over year through May, consumer inflation was 3.6%
(and core inflation was 1.5%). The Producer Price Index advanced
0.2% in May; the preceding two months had seen increases of 0.7%
and 0.8%. Annualized wholesale inflation was 7.3% - the highest
wholesale inflation rate since the summer of 2008. The nation’s
jobless rate ticked up to 9.1% in May.5,6,7
On
the bright side, the Institute for Supply Management’s twin PMI
indices signaled that the pace of expansion had accelerated in
both the service and manufacturing sectors. ISM’s May service
sector index increased 1.8% to 54.6, with a 4.1% boost in new
orders. The recently released June manufacturing index was a
pleasant surprise: defying expectations of analysts, it rose from
53.5 to 55.3. The Conference Board’s index of leading
indicators bounced back from an -0.4& showing in May to go
+0.8% in June as eight of ten indicators improved. Durable goods
orders had increased by 1.9% during May, and May’s 0.2% dip in
retail sales was shallower than analysts had expected.2,8,9,10,11
In
Washington, there was much argument over the federal debt ceiling
but little agreement. While hiking the debt cap is all but
inevitable, Congress elected to take the NFL/NBA approach and
sustain the dispute. Meanwhile, Standard & Poor’s warned
that it would cut the U.S. debt rating from AAA to D if the debt
cap wasn’t raised by August 2; Moody’s threatened a cut to
somewhere in its Aa category.12
GLOBAL
ECONOMIC HEALTH
The International Energy Agency surprised the futures markets in late June when it announced a plan to release 60 million barrels worth of crude from global reserves. In the big picture, the move has a chance to tame inflation pressures (especially in Europe) and aid the dollar.13
The International Energy Agency surprised the futures markets in late June when it announced a plan to release 60 million barrels worth of crude from global reserves. In the big picture, the move has a chance to tame inflation pressures (especially in Europe) and aid the dollar.13
Speaking
of Europe, reassuring news emerged from the EU as the Greek
government embarked on actions to service its debts and stay in
the euro. Yet Greece is not out of the woods by any means – the
possibility of default still looms, and Standard & Poor’s
said it would regard a proposed rollover of privately held Greek
debt led by French banks as a “selective default”.14
New
manufacturing index data indicated that Asia’s economies were
muddling through a soft patch as well. In June, India’s
benchmark PMI had its biggest one-month fall since November 2008,
reaching a nine-month low of 55.3. Taiwan’s PMI went below 50
for the first time in nine months (meaning sector contraction),
and South Korea’s PMI slipped to its lowest level in seven
months. China’s official PMI fell to 50.9 for June – a
28-month low.15
WORLD
MARKETS
Some benchmarks went positive in June, others negative. According to Morningstar calculations in U.S. dollar terms, major Asian benchmarks did okay - Sensex, +2.34%; Nikkei 225, +1.26%; Shanghai Composite, +0.68% (yet Australia’s All Ordinaries went -2.70%). In Europe, the big indices mostly retreated: DAX, +1.11%; CAC 40, -0.62%; FTSE 100, -0.74%; STOXX 600, -2.92%. To our north, Canada’s TSX Composite went -4.41%. The key MSCI indices also lost ground in June (World, -1.73%; Emerging Markets, -1.86%).16,17,18
Some benchmarks went positive in June, others negative. According to Morningstar calculations in U.S. dollar terms, major Asian benchmarks did okay - Sensex, +2.34%; Nikkei 225, +1.26%; Shanghai Composite, +0.68% (yet Australia’s All Ordinaries went -2.70%). In Europe, the big indices mostly retreated: DAX, +1.11%; CAC 40, -0.62%; FTSE 100, -0.74%; STOXX 600, -2.92%. To our north, Canada’s TSX Composite went -4.41%. The key MSCI indices also lost ground in June (World, -1.73%; Emerging Markets, -1.86%).16,17,18
COMMODITIES
MARKETS
It was another rough month for the majority of commodities investors. Oil slipped 7.1% in June, a drop aided by the IEA’s surprise call for nations to tap into petroleum reserves. Gold had its second down month in a row (its May-June performance was -3.5%) but remained +5.71% on the year despite a -2.19% month that left prices settling at $1,502.30 on June 30. When the Department of Agriculture said that America had greater inventories and acreage of corn (and other key crops) than estimated, ag futures took a big hit. Wheat lost 21.0%, corn 17.0%, soybeans 6.0% and rice 1.4% in June. Even the dollar lost some ground: the U.S. Dollar Index went -0.21% last month, wrapping up June at 74.54.19,20,21
It was another rough month for the majority of commodities investors. Oil slipped 7.1% in June, a drop aided by the IEA’s surprise call for nations to tap into petroleum reserves. Gold had its second down month in a row (its May-June performance was -3.5%) but remained +5.71% on the year despite a -2.19% month that left prices settling at $1,502.30 on June 30. When the Department of Agriculture said that America had greater inventories and acreage of corn (and other key crops) than estimated, ag futures took a big hit. Wheat lost 21.0%, corn 17.0%, soybeans 6.0% and rice 1.4% in June. Even the dollar lost some ground: the U.S. Dollar Index went -0.21% last month, wrapping up June at 74.54.19,20,21
REAL
ESTATE
What can you say about a real estate market which features reduced sales activity during the prime homebuying season? There isn’t much positive to report when assessing the May data: existing home sales were down 3.8% while new home sales were down 2.1%. In annual terms, new home sales had improved by 13.5% with the average price better by $1,400;existing home sales were down 15.3% year-over-year with the median price retreating 4.6%.22,23
What can you say about a real estate market which features reduced sales activity during the prime homebuying season? There isn’t much positive to report when assessing the May data: existing home sales were down 3.8% while new home sales were down 2.1%. In annual terms, new home sales had improved by 13.5% with the average price better by $1,400;existing home sales were down 15.3% year-over-year with the median price retreating 4.6%.22,23
Speaking
of home prices, the April edition of the Case-Shiller/S&P
home price index actually showed a 0.7% overall price gain across
20 metro markets – but there was a 4.0% annualized dip in
prices to take any celebration out of that small monthly advance.
The good news is that pending home sales really rebounded in May:
the National Association of Realtors said home sale contracts
were up 8.2% from April’s seven-month low and up 17.0% from the
June 2010 trough.24,25
Freddie
Mac’s June 30 Primary Mortgage Market Survey showed descents in
average interest rates on the four common mortgage types compared
with its June 2 survey: 30-year FRMs, -0.04% to 4.51%; 15-year
FRMs, -0.05% to 3.69%; 5/1-year ARMs, -0.19% to 3.22%; 1-year
ARMs, -0.16% to 2.97%.26
LOOKING
BACK…LOOKING FORWARD
Early in June, bears were groaning. By the end of the month, the bulls were back in charge. In fact, June 27-July 1 represented the best week for the Dow and S&P 500 since mid-July 2010. Still, it was a negative month for stocks.27
Early in June, bears were groaning. By the end of the month, the bulls were back in charge. In fact, June 27-July 1 represented the best week for the Dow and S&P 500 since mid-July 2010. Still, it was a negative month for stocks.27
| % CHANGE |
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
+7.23
|
-1.24
|
+27.01
|
+1.82
|
NASDAQ
|
+4.55
|
-2.18
|
+31.49
|
+2.84
|
S&P
500
|
+5.01
|
-1.83
|
+28.13
|
+0.79
|
| REAL YIELD |
6/30
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
0.75%
|
1.15%
|
2.54%
|
3.52%
|
Sources:
online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov -
6/30/111,28,29,30,31
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into
directly.
These
returns do not include dividends.
So
with this newfound momentum or at least interest in equities, we
find ourselves in July – traditionally a pretty good month on
Wall Street, powered by anticipation of 2Q earnings. Since 2000,
July has been a little less positive than in previous stock
market cycles: the Stock
Trader’s Almanac
notes that the Dow and S&P have respectively averaged July
gains of 1.24% and 0.16% in the last 11 years, with the NASDAQ
averaging a 0.45% loss for the month. That is the recent history.
The current reality is that we still have concerns about a
flagging world economy, severe debt problems plaguing multiple EU
countries and no agreement yet on the federal debt ceiling. Let’s
hope that earnings season casts its spell on the collective mind
of Wall Street, with 2Q results impressive enough to make stock
market performance in July 2011 correspond to Julys of decades
before.32
UPCOMING
ECONOMIC RELEASES
Looking at the balance of July, here is what’s ahead: the June ISM service sector index (7/6), the June jobs report and May wholesale inventories (7/8), June PPI and retail sales and May business inventories (7/14), June CPI and industrial output and the initial University of Michigan July consumer sentiment survey (7/15), June building permits and housing starts (7/19), June existing home sales (7/20), the Conference Board’s LEI index for June (7/21), June new home sales, May’s Case-Shiller home price index and the Conference Board’s July consumer confidence poll (7/26), June durable goods orders and a new Federal Reserve Beige Book (7/27), June pending home sales (7/28), and the first take on 2Q 2011 GDP and a final June consumer sentiment poll from the University of Michigan (7/29). The Commerce Department report on June consumer spending will be released on August 2.
Looking at the balance of July, here is what’s ahead: the June ISM service sector index (7/6), the June jobs report and May wholesale inventories (7/8), June PPI and retail sales and May business inventories (7/14), June CPI and industrial output and the initial University of Michigan July consumer sentiment survey (7/15), June building permits and housing starts (7/19), June existing home sales (7/20), the Conference Board’s LEI index for June (7/21), June new home sales, May’s Case-Shiller home price index and the Conference Board’s July consumer confidence poll (7/26), June durable goods orders and a new Federal Reserve Beige Book (7/27), June pending home sales (7/28), and the first take on 2Q 2011 GDP and a final June consumer sentiment poll from the University of Michigan (7/29). The Commerce Department report on June consumer spending will be released on August 2.
*Registered
Representative and Financial Advisor of Park Avenue Securities
LLC PAS.
Securities
products/services and advisory services offered through PAS a
registered Broker-dealer and investment advisor.
Field
Representative, The Guardian Life Insurance Company of America
(Guardian) New York, NY.
PAS
is an indirect wholly owned subsidiary of Guardian.
Wealth
Design Group is not an affiliate or subsidiary of PAS or
Guardian.
This
material was prepared by MarketingLibrary.Net Inc., and does not
necessarily represent the views of the presenting party, nor
their affiliates. This information should not be construed as
investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. The Dow Jones
Industrial Average is a price-weighted index of 30 actively
traded blue-chip stocks. The NASDAQ Composite Index is an
unmanaged, market-weighted index of all over-the-counter common
stocks traded on the National Association of Securities Dealers
Automated Quotation System. The Standard & Poor's 500 (S&P
500) is an unmanaged group of securities considered to be
representative of the stock market in general. It is not possible
to invest directly in an index. NYSE Group, Inc. (NYSE:NYX)
operates two securities exchanges: the New York Stock Exchange
(the “NYSE”) and NYSE Arca (formerly known as the Archipelago
Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a
leading provider of securities listing, trading and market data
products and services. The New York Mercantile Exchange, Inc.
(NYMEX) is the world's largest physical commodity futures
exchange and the preeminent trading forum for energy and precious
metals, with trading conducted through two divisions – the
NYMEX Division, home to the energy, platinum, and palladium
markets, and the COMEX Division, on which all other metals trade.
BSE Sensex or Bombay Stock Exchange Sensitivity Index is a
value-weighted index composed of 30 stocks that started January
1, 1986. Nikkei 225 (Ticker: ^N225) is a stock market index for
the Tokyo Stock Exchange (TSE). The Nikkei average is the most
watched index of Asian stocks. The SSE Composite Index is an
index of all stocks (A shares and B shares) that are traded at
the Shanghai Stock Exchange. The S&P/ASX All Ordinaries Index
represents the 500 largest companies in the Australian equities
market. The DAX 30 is a Blue Chip stock market index consisting
of the 30 major German companies trading on the Frankfurt Stock
Exchange. The CAC-40 Index is a narrow-based, modified
capitalization-weighted index of 40 companies listed on the Paris
Bourse. The FTSE 100 Index is a share index of the 100 most
highly capitalized companies listed on the London Stock Exchange.
With a fixed number of 600 components, the STOXX Europe 600 Index
represents large, mid and small capitalization companies across
18 countries of the European region. The S&P/TSX Composite
Index is an index of the stock (equity) prices of the largest
companies on the Toronto Stock Exchange (TSX) as measured by
market capitalization. The MSCI World Index is a free-float
weighted equity index that includes developed world markets, and
does not include emerging markets. The MSCI Emerging Markets
Index is a float-adjusted market capitalization index consisting
of indices in more than 25 emerging economies. The US Dollar
Index measures the performance of the U.S. dollar against a
basket of six currencies. Additional risks are associated with
international investing, such as currency fluctuations, political
and economic instability and differences in accounting standards.
All information is believed to be from reliable sources; however
we make no representation as to its completeness or accuracy. All
economic and performance data is historical and not indicative of
future results. Market indices discussed are unmanaged. Investors
cannot invest in unmanaged indices. The publisher is not engaged
in rendering legal, accounting or other professional services. If
assistance is needed, the reader is advised to engage the
services of a competent professional.
Citations.
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[6/30/11]
2
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3
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[7/1/11]
4
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marketwatch.com/story/consumer-sentiment-declines-in-june-2011-07-01
[7/1/11]
5
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6
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7
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11
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12
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[6/30/11]
13
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[7/1/11]
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17
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[6/30/11]
18
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[6/30/11]
19
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[6/30/11]
20
–
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[7/5/11]
21
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[7/1/11]
22
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23
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24
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[6/29/11]
25
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[6/29/11]
26
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27
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28
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bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F10&x=0&y=0
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28
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28
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29
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[7/5/11]
30
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[7/5/11]
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[1/10/01]
32
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33
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[7/6/11]
