Money Management & Retirement Planning Advice by Barry Unterbrink, Chartered Retirement Planning Counselor

Wednesday, August 03, 2011

Market Update: Stocks crater; bonds and precious metals have their game on!

Stocks crater; bonds, and precious metals have their game on!
It's been rough sledding in most of the equity (stock) markets the past couple months. The second quarter (April-June) saw no growth in the major stock indexes. In the period, stocks gained 7%, then fell 7%, then rallied into late June to finish even-steven for three months. July saw stock prices fall 2%.

It appears that the stock market wasn't at all inspired by the debt limit and spending brouhaha and negotiations and then passage by the Congress yesterday. Stock prices have fallen 8% in the past 8 sessions; and today looks like it might eek out a small gain. Year-to-date, the S&P 500 Index turned negative yesterday; no gains since New Year's. That is why it is imperative to mitigate your risks of owning stocks by investing in other areas. To wit, Asian stocks have basically ignored our troubles here, and rose in price by nice amounts: markets that you don't hear much about by the "talking heads" on the televison. Singapore, Thailand, Indonesia to name a few. Another area regaining it's glitter is gold and silver, which I've discussed in prior posts. July gains of 10% and 14% in the duo, respectively helped offset weakness in the US stock market. Bonds too are the preferable place to normally be when you have cash sitting on the sidelines and not stock invested. Bond, bond ETF's and bond mutual funds have been on fire of late as interest rates fall (bond prices rise). Gains of 1.5% to 3% are seen on the charts just in the past couple weeks. Phenomenal if you hold them.

Depending on your portfolio structure, a 10-15% allocation to metals or foreign stocks can have a noticeable effect on your performance. As for bonds, they can lessen your portfolio losses as well and keep you sleeping at night. Plus an added benefit is not being in the position to have to sell ALL your stocks in the bad times when your money is spred outside of US stocks. It's the mixture of stocks / bonds / cash that mostly determines your portfolio performance moreso than the individual securities owned.

In really nasty down markets, often staying even, or losing less is a favorable outcome. Remember, virtually all 30%-50% stock market declines start with a 5%, 10%, 15% decline first. Is your financial advisor offering you ideas like this?

National Deficit Math

We better get used to the "T" word now that we're deeply into the Trillions of dollars in our national indebtedness; $14 trillion last time I saw that clock-thing counting higher on the T.V. So just how much is $1 trillion?  It's 1,000 Billion dollars. It's 1 with 12 zeros trailing. It's a whole lot of coin! Per capita (per person) in the United States, that would equal about $44,000. So if we all chip in, we could wipe out all of America's debt over 10 years with JUST $12/day for you and me and the kids until year 2021. Any takers? Anyone trust our government not to get back into this mess again? Ponder that until I post again.

Personal Note:
August 2 marked my 29th year in the financial services business; starting 1982 at Dow Jones level of 822. My father hired me to join his investment newsletter and money management business out of college with my finance degree; thanks, Dad - for then and for all your assistance and mentoring through the years! 

No comments: