Mid-quarter Update ... Ruminations on markets, economy and jobs
It's mid-February, and that signals the half-way point through the first quarter. Most of the popular stock averages are ahead quite nicely, from +6% for the Dow Jones Industrials to 7% for the Standard & Poor's 500 Index, to 8% for the technology-laden Nasdaq 100 Index. That would be a very decent gain for even 6 months from a historical average of 10% yearly return for stocks the last 80 years. The market pundits and tea leaf readers tell us that a "correction" is overdue. Two data facts stand out: the rather uninterrupted 20% rise since Labor Day, 2010, and the doubling of stock prices since the bear market lows in March, 2009. There's an axiom "prices that double often head into trouble"; but I'm not predicting that here today. Our research director's in charge of timing and allocation of funds, and we're generally bullish and invested now. Call me for a free review of your financial situation and goals.
Here in the investment cockpit, we've evidenced a change this year in the market sector performance. The exchange traded funds we monitor and use for our clients now favor those sectors that would benefit from higher prices: energy, aggricultural commodities, technology and mining namely. The foreign country funds that served us well in 2010 are mostly all negative in our screens now; Peru, Taiwan, Chile, Singapore, Japan: all seemed to catch a cold in mid-January. These markets can change fast, so they could reappear at some juncture. As an example of a narrow-based ETF we're using now; Internet Holders (HHH); a 13-stock basket covering Internet Commerce. When you own HHH, you own 20% in eBay, 42% Amazon.com, 7% Priceline.com and the balance spread among Time Warner, E*Trade, etc. It's an excellent way to participate in this space without buying the stocks. An aggricultural ETF we favor now contains contracts for soybeans, corn, wheat, cotton, soybean oil, coffee and sugar. China announced they may not harvest enough wheat this year for their internal consuption.
Prices higher?
Today's producer price index report shows us - and some would say confirmed - commodity prices are picking up steam, and that could lead to higher consumer prices for us. Consumer prices are released tomorrow morning. Raw material prices including food and energy, gained 0.8% for January, the highest since 2008. Can companies that produce and bring to market our food pass along costs (think Kellogg, Kraft, Archer Daniels) to us in the supermarket? $5 for a box of cereal is a bit much, so I often defer to a healthy alternative or off-brand to get the same nourishment for my dollar. Higher consumer prices will hurt demand and not enable our economy to grow as fast. And the Federal Reserve is not worried about inflation yet? It seems that their dual mandate of stable prices and full employment are not working out too well so far.
Inflation will hurt fixed income (bond) prices also. If you own any, check your statements or ask us for help.
Main Steet vs. Wall Street (it's lack of jobs, stu**d)
Unfortunately, the events in the finacial district in New York, and the prices on Wall Street do not often correlate with the health of the rest of America and the problems and challenges we face economically. Jobs (lack of them) is front and center for Obama & Company. What concerns me is more longer term oriented; how our country is falling behind in smarts to prepare for the new services, technologies and industries that will need skilled labor in the future. I have a rather vested interest in this, as my two teenagers will have choices to make during their working years that could well be determined by how and what they study today.
Consider these factiods taken from last month's Barron's magazine as they interviewed top money managers and economists in their roundtable discussions.
* the percentage of the US population that's earned 4-year degrees has remained stagnant for 10 years.
* if you don't have a degree, you will most likely stay unemployed longer.
* Unemployment for women is 2% less than men, mainly due to the heavy toll manufacturing and construction jobs took during this recent recession.
* the pool of US students studying STEM (science, technology, engineering and math) has fallen dramatically the past 10-15 years.
* Tech companies, whose growth has spurred many jobs in the past, cannot find enough qualified US workers who graduate with these skill-sets.
* 70% of the PhD program graduates are non-US citizens (think Asian, Chinese, Indian, etc.)
* In the 1970's the US has 20 million manufacturing jobs with a 200 million populace; today it's 12 million on a 320 million population. So while corporations are doing rather well with profits and earnings worldwide, many workers are suffering as their incomes are dropping relative to expenditures. Median family incomes have dropped 4-8% in the past decade; and that's measured before the 2008 financial crisis hit us.
So what's my solution - mainly aimed here Generation Y (born 1981-1999)? Continue to learn and acquire new skills after you leave school to be compettive. Ask for help when you don't understand. Raise your hand a lot. Get a mentor or coach. Learn a second language. On this score, my daughter learned French in high school, my niece, Mandarin Chinese, and my son is tackling Spanish and German in high school. His first job in 2018 may be in Munich or Buenas Aires. As for me, I've joined a Spanish meetup group and intend to be fairly fluent by year-end.
My blog today is quite pessimistic, but sometimes we need to worry, because that will prompt changes for the better. I hope so.
Until next time,
Adios amigos !
Barry Unterbrink, CRPC
(954) 719-1151
It's mid-February, and that signals the half-way point through the first quarter. Most of the popular stock averages are ahead quite nicely, from +6% for the Dow Jones Industrials to 7% for the Standard & Poor's 500 Index, to 8% for the technology-laden Nasdaq 100 Index. That would be a very decent gain for even 6 months from a historical average of 10% yearly return for stocks the last 80 years. The market pundits and tea leaf readers tell us that a "correction" is overdue. Two data facts stand out: the rather uninterrupted 20% rise since Labor Day, 2010, and the doubling of stock prices since the bear market lows in March, 2009. There's an axiom "prices that double often head into trouble"; but I'm not predicting that here today. Our research director's in charge of timing and allocation of funds, and we're generally bullish and invested now. Call me for a free review of your financial situation and goals.
Here in the investment cockpit, we've evidenced a change this year in the market sector performance. The exchange traded funds we monitor and use for our clients now favor those sectors that would benefit from higher prices: energy, aggricultural commodities, technology and mining namely. The foreign country funds that served us well in 2010 are mostly all negative in our screens now; Peru, Taiwan, Chile, Singapore, Japan: all seemed to catch a cold in mid-January. These markets can change fast, so they could reappear at some juncture. As an example of a narrow-based ETF we're using now; Internet Holders (HHH); a 13-stock basket covering Internet Commerce. When you own HHH, you own 20% in eBay, 42% Amazon.com, 7% Priceline.com and the balance spread among Time Warner, E*Trade, etc. It's an excellent way to participate in this space without buying the stocks. An aggricultural ETF we favor now contains contracts for soybeans, corn, wheat, cotton, soybean oil, coffee and sugar. China announced they may not harvest enough wheat this year for their internal consuption.
Prices higher?
Today's producer price index report shows us - and some would say confirmed - commodity prices are picking up steam, and that could lead to higher consumer prices for us. Consumer prices are released tomorrow morning. Raw material prices including food and energy, gained 0.8% for January, the highest since 2008. Can companies that produce and bring to market our food pass along costs (think Kellogg, Kraft, Archer Daniels) to us in the supermarket? $5 for a box of cereal is a bit much, so I often defer to a healthy alternative or off-brand to get the same nourishment for my dollar. Higher consumer prices will hurt demand and not enable our economy to grow as fast. And the Federal Reserve is not worried about inflation yet? It seems that their dual mandate of stable prices and full employment are not working out too well so far.
Inflation will hurt fixed income (bond) prices also. If you own any, check your statements or ask us for help.
Main Steet vs. Wall Street (it's lack of jobs, stu**d)
Unfortunately, the events in the finacial district in New York, and the prices on Wall Street do not often correlate with the health of the rest of America and the problems and challenges we face economically. Jobs (lack of them) is front and center for Obama & Company. What concerns me is more longer term oriented; how our country is falling behind in smarts to prepare for the new services, technologies and industries that will need skilled labor in the future. I have a rather vested interest in this, as my two teenagers will have choices to make during their working years that could well be determined by how and what they study today.
Consider these factiods taken from last month's Barron's magazine as they interviewed top money managers and economists in their roundtable discussions.
* the percentage of the US population that's earned 4-year degrees has remained stagnant for 10 years.
* if you don't have a degree, you will most likely stay unemployed longer.
* Unemployment for women is 2% less than men, mainly due to the heavy toll manufacturing and construction jobs took during this recent recession.
* the pool of US students studying STEM (science, technology, engineering and math) has fallen dramatically the past 10-15 years.
* Tech companies, whose growth has spurred many jobs in the past, cannot find enough qualified US workers who graduate with these skill-sets.
* 70% of the PhD program graduates are non-US citizens (think Asian, Chinese, Indian, etc.)
* In the 1970's the US has 20 million manufacturing jobs with a 200 million populace; today it's 12 million on a 320 million population. So while corporations are doing rather well with profits and earnings worldwide, many workers are suffering as their incomes are dropping relative to expenditures. Median family incomes have dropped 4-8% in the past decade; and that's measured before the 2008 financial crisis hit us.
So what's my solution - mainly aimed here Generation Y (born 1981-1999)? Continue to learn and acquire new skills after you leave school to be compettive. Ask for help when you don't understand. Raise your hand a lot. Get a mentor or coach. Learn a second language. On this score, my daughter learned French in high school, my niece, Mandarin Chinese, and my son is tackling Spanish and German in high school. His first job in 2018 may be in Munich or Buenas Aires. As for me, I've joined a Spanish meetup group and intend to be fairly fluent by year-end.
My blog today is quite pessimistic, but sometimes we need to worry, because that will prompt changes for the better. I hope so.
Until next time,
Adios amigos !
Barry Unterbrink, CRPC
(954) 719-1151
