“If
you want to go somewhere, it is best to find someone who has
already been there.”
–
Robert Kiyosaki
MONTHLY TIP
For
the best protection and cash flow flexibility in retirement,
consider diversifying your assets three ways:
1)
by asset type (stocks, bonds, cash, real estate, etc.),
2)
by tax type (currently taxed, tax-deferred and not taxable) and
3)
by risk type (market exposed, interest-rate exposed and
downside-protected).
Let
me show you how. – Jim Hecker
MONTHLY
RIDDLE
Take
a 5-letter word identifying a crop. Take away the first letter,
and you have a form of energy. Take away the first 2 letters and
you have a verb. Rearrange the 3 letters left and you have a
drink. What is this 5-letter word?
Last month’s riddle:
2
boxes each hold 4 hot sauce packets and 4 soy sauce packets.
Without looking, you take 1 packet from each box. What are the
chances that at least 1 of the packets you draw is a hot sauce
packet?
Last month’s answer:
You
have a 75% chance. You could pull out 1 hot sauce packet and 1
soy sauce packet, 1 soy sauce packet and 1 hot sauce packet, 2
hot sauce packets or 2 soy sauce packets. So 3 out of 4 times,
you'll draw at least 1 hot sauce packet.
THE
MONTH IN BRIEFIn
August, Wall Street waited for a debt deal, reeled from Standard
& Poor’s downgrade of the U.S. credit rating, contended
with mounting anxieties over mediocre domestic indicators and
troubles in Europe, felt an earthquake and braced itself against
an oncoming hurricane. No wonder the S&P 500 slipped 5.68%
during the month – a month that most investors would rather
forget.1
DOMESTIC
ECONOMIC HEALTHCongress
finally passed a bill lifting the nation’s debt ceiling,
meeting the August 2 deadline set by the Treasury Department.
However, Standard and Poor’s dropped the hammer on August 5,
cutting America’s credit rating from AAA to AA+. Moody’s and
Fitch Ratings did not follow suit, but the damage was severe to
stocks and global investor confidence.2
Consumer
confidence really plummeted: the University of Michigan’s final
August poll presented a 55.7 mark, way down from 63.7 to end
July. The Conference Board’s consumer confidence index dived
nearly 15 points last month, coming in at 44.5. Unemployment
stayed at 9.1% in August, and for the first time since September
2010, the economy added no new jobs.3,4,5
There
was some good news: consumers were still spending, and not just
on the basics. The Commerce Department said that consumer
spending soared 0.8% in July, and 0.5% in inflation-adjusted
terms (the best such advance in20 months). Overall retail sales
were up 0.5%, with August increases in clothing store sales
(0.5%), electronics and appliance sales (1.4%), online retail
purchases (0.9%), auto and auto parts sales (0.4%) and furniture
sales (0.5%). In another encouraging sign, durable goods orders
soared by 4.0% in June; economists polled by Bloomberg News had
forecast a 2.0% gain.6,7,8
The
Consumer Price Index rose 0.5% in July with core CPI up 0.2%. The
Federal Reserve’s PCE gauge rose 0.4%; the Labor Department’s
Producer Price Index rose 0.2%, with core PPI rising 0.4%.9,10
As
for the Institute for Supply Management’s key manufacturing and
service sector indices … the August manufacturing index looked
shaky, descending to 50.6 (indicating just a small expansion) …
and in early August, the July service sector PMI came in at 52.7.
Yet the Commerce Department said that factory orders rose 2.4% in
July thanks to both a boost in aircraft orders and the biggest
one-month demand for autos in eight years.11,12,13
GLOBAL
ECONOMIC HEALTHAt
mid-month, German chancellor Angela Merkel and French president
Nicolas Sarkozy appeared together to reaffirm the European
Union’s support for the euro and to announce three new
responses to the EU debt crisis: a new EU economic
forum/leadership panel that would meet every six months, a tax on
financial transactions, and (shades of the Tea Party) a proposal
for all EU countries to adopt constitutional balanced budget
amendments. To Wall Street, this was little better than rhetoric.
There was no decision to bolster the €440 billion euro
stability fund or to create a “Eurobond”, a move that many
analysts feel could help to stabilize bond yields across the EU’s
17 nations and aid its most indebted countries.14,15
In
the Asia-Pacific region, factories seemed to be slowing down
their pace of production. The much-watched official PMI of China
did show some growth, rising 0.2% to return to the 50.9 level it
had been at in June. Purchasing manufacturers indexes in Taiwan
and South Korea flashed contraction. Consumer price indexes in
Thailand and South Korea also climbed more than analysts had
forecast, with inflation in South Korea surpassing the
government’s target for the eighth month in a row. Industrial
output fell far short of forecasts in Japan – economists had
expected a 1.5% improvement in August, but there was only a 0.6%
gain. On the bright side, analysts surveyed by Reuters felt that
Japan’s economy would expand by 1.2% in 3Q 2011, outpacing all
other major industrialized economies.16,17
WORLD
MARKETSWhile
Wall Street had a trying month, other benchmarks had it worse, as
these Morningstar numbers for August indicate: Canada’s TSX
Composite, -2.40%; Australia’s All Ordinaries, -2.90%; China’s
Shanghai Composite, -4.97%; England’s FTSE 100, -7.23%; India’s
Sensex, -8.36%; Japan’s Nikkei 225, -8.93%; Hong Kong’s Hang
Seng, -9.16%. The truly severe losses came in Europe: France’s
CAC 40 plunged 11.29% on the month and Germany’s DAX dove
19.19%. Some of the YTD numbers were also pretty remarkable on
August 31: the Sensex and DAX were respectively - 18.69% and
-20.08% YTD.18
The
Dow was just about the only major stock index that was not
in the red at the end of August. The MSCI World Index and MSCI
Emerging Markets Index also took big hits during the month,
respectively sinking 7.26% and 9.19%.19
COMMODITIES
MARKETSThe
flight to gold was dramatic in August. Gold futures gained
$200.20 (12.3%) last month. The precious metal wrapped up August
at $1,828.50 an ounce and +28.67% YTD. How did other metals do?
Silver went +4.1% for August, platinum +4.0%, palladium -4.5% and
copper -6.3%. Oil slid 7.2% in August, with futures settling at
$88.81 per barrel on the NYMEX on August 31. The 19-commodity
Reuters-Jefferies CRB Index posted a 0.33% loss on the month and
the U.S. Dollar Index realized a 0.30% gain. The real yield of
the 10-year note was just 0.18% on August 31 (and it was briefly
negative earlier in the month).20,21,22,23,24
REAL
ESTATENew
home sales (-0.7%) and existing home sales (-3.5%) declined in
July, along with housing starts (-1.5%) and building permits
(-3.2%). Pending home sales diminished by 1.3% in July, according
to the National Association of Realtors. One relative bright
spot: June’s S&P/Case-Shiller Home Price Index revealed a
3.6% quarterly gain in home sale prices, although the YOY price
retreat deepened to 5.9%.6,25,26
Comparing
Freddie Mac’s July 28 and September 1 Primary Mortgage Market
Surveys, we see that mortgages became even cheaper last month.
The average rate on the 30-year FRM fell 0.33% in this period to
4.22%, and rates on 15-year FRMs fell 0.27% to 3.39%. The average
rate on the 5/1-year ARM shrank 0.29% to go to 2.96% and the
average rate on the 1-year ARM went 0.06% lower to 2.89%.27
LOOKING
BACK…LOOKING FORWARDAugust
2011 was the poorest August since 2001 for America’s three
major stock indices. All three had their worst month since May.1
| % CHANGE |
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
+0.31
|
-4.36
|
+15.96
|
+1.67
|
NASDAQ
|
-2.77
|
-6.42
|
+22.02
|
+4.29
|
S&P
500
|
-3.08
|
-5.68
|
+16.16
|
+0.75
|
| REAL YIELD |
8/31
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
0.18%
|
0.95%
|
2.24%
|
3.50%
|
Sources:
cnbc.com, bigcharts.com, treasury.gov - 8/31/111,24,28,29,30
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into
directly.
These
returns do not include dividends.
After
a wild and vexing August, we are now in September - traditionally
a lousy month for stocks. Of course, Wall Street has not exactly
behaved according to tradition these past few years. On the
hopeful side, the latest consumer spending data indicates that
America’s economic engine has not stalled – and the August
unemployment figures were affected by the fact that 45,000
Verizon workers went on strike (i.e., were technically jobless)
during the week in which the Labor Department compiled its data.
Factor in the recent demand for durable goods, the nice numbers
on discretionary spending and the descent in oil prices and the
economy may be in better shape than the bears presume. Perhaps we
will also see a better September for stocks than analysts
expect.5
UPCOMING
ECONOMIC RELEASESLooking at the balance of September, here is what is on tap: the
August ISM service sector PMI (9/5), the Federal Reserve’s
newest Beige Book (9/7), a look at July wholesale inventories
(9/9), the August PPI, August retail sales figures, and July
business inventories (9/14), the August CPI and August industrial
output (9/15), the initial University of Michigan September
consumer sentiment survey (9/16), a much-anticipated Federal
Reserve meeting (9/19-9/20), August housing starts and building
permits (9/20), August existing home sales (9/21), the Conference
Board’s August LEI index (9/22), August new home sales (9/26),
the July Case-Shiller home price index and the Conference Board’s
September consumer confidence poll (9/27), August durable goods
orders (9/28), August pending home sales plus the final estimate
of 2Q GDP (9/29), and August consumer spending and the final
University of Michigan September consumer sentiment survey
(9/30).
*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.
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 S&P/ASX All
Ordinaries Index represents the 500 largest companies in the
Australian equities market. The SSE Composite Index is an index
of all stocks (A shares and B shares) that are traded at the
Shanghai Stock Exchange. The FTSE 100 Index is a share index of
the 100 most highly capitalized companies listed on the London
Stock Exchange. 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
Hang Seng Index is a freefloat-adjusted market
capitalization-weighted stock market index that is the main
indicator of the overall market performance in Hong Kong.
The
CAC-40 Index is a narrow-based, modified capitalization-weighted
index of 40 companies listed on the Paris Bourse. The DAX 30 is a
Blue Chip stock market index consisting of the 30 major German
companies trading on the Frankfurt Stock Exchange. 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.
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2
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[8/11/11]
3
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[8/25/11]
4
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[9/2/11]
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