Stock Market Falls Hard Again; How to React

The stock market’s fall last Thursday and Friday totaling 1,100 points on the Dow Jones raised a few eyebrows – for the second time this year.

The early February cliff-dive from the then-highs was met with a quick rebound in prices. In two weeks, the market gained back 2/3^rd of the decline from the low of February 8^th. Financial and Technology stocks – leaders for quite some time now, fell faster in price those two days. They both fell Friday 2-1/2 to 3%.

Will this latest fall of about 7% in the Dow Jones act as a floor or a celling? Or perhaps the start of another round of selling to lower prices?

We advocate watching your investments while you discuss them with your financial advisor. What is your plan for selling if (when) prices continue falling?

We recommend, as I have said in this space before – to watch your allocations: how much you have invested in stocks, bonds, and alternative investments - and make adjustments in necessary to keep them in line with your risk tollerance. Less stock usually = less risk. More bonds and gold mean less risk and volatility of falling portfolio values. In the late January / early February turn down, an equal mix (1/3^rd ,1/3^rd ,1/3^rd ) of stocks, bonds, and gold – fell 3% overall vs. a 9% decline in stocks only. That’s diversification!

Interestingly, besides gold acting as a hedge against falling stock prices; it has returned some nice numbers on its own. It has averaged a +8% gain each year since late, 2004 (see gold investment recommendation below). Not too shabby, eh?

We don’t forecast of this and that happening in the markets. But we do look at trends and get ready for what ‘could’ happen to affect our client’s investments, so we’re ready in advance.

Our thoughts on Gold

Gold had a very good week – most of it capped off by Friday’s $17 gain to close at $1,347 per ounce. For the week, gold gained $37 or +2.8%. Not many stock-watchers probably know that. The financial media TV station, CNBC was asleep at the switch also. The reporters and guests on the Closing Bell - Friday’s wrap up of the days trading, offered little insight and ideas into where to shield your money from falling stock prices. Not one comment was made on Gold, even as the price was blinking with green arrows on the bottom of their quote feed. Unbelievable!

They must want you to think – and believe – that stocks, and stock-like investments (mutual funds and exchange-traded funds) are the only game in town. And that you are too dumb to look elsewhere for investments that can aid your money in a stock market downturn.

If you wish to get some exposure to the shiny metal, as our client's do - we recommend using the SPDR gold exchange-traded fund. The symbol is GLD.  It trades like a stock, and holds exclusively gold bars in their London vaults – 27 million ounces of gold. You own a fraction of that gold, and the share price you pay reflects the daily trading price of the gold bullion on the world markets.

For more information on this, please visit their web site at: http://www.spdrgoldshares.com/

For more information on my services, please contact me.

  

Thanks for reading. 

~Barry Unterbrink
(954) 719 1151
Unterbrink@usa.net

 

  

Third Quarter Tally Impressive for Stocks, Bonds, Gold

The third quarter turned in some decent results, in light of the historically weak seasonal period most years. We saw disparity in the market sector performance - that it - there was a wide range between the highest and lowest performing stock sectors.

Technology came out on top, with a gain of 8%, Financials, +4.7%, and Healthcare, +3%. Utilities, Communications gained about 3% each. Industrials, Energy up near 6% each, and Consumer Discretionary and Consumer Staples lagged; +1% and down 1%. There are 10 Sectors to the market: 5 beat the market itself, and 5 did not.

For the three months, we held the same two sectors - Technology and HealthCare. This improved our client results, as the “market” was up near 4% on the S&P 500 for the quarter. Combined with our holdings of bonds and gold, that was a winning combination with less risk than holding an all-stock portfolio. Gold rose $70 an ounce, or 3%.

So, for the quarter: Technology sector ETF, +8%
                               HealthCare sector ETF, +2.8%

                               S&P 500 (the market), up +3.9%

                               Gold, up +3.1%

                               Bonds, even to +1%

Remember that these sectors of the market are not stocks, they are Exchange Traded Funds (ETF’s) that hold many stocks but trade as a single security. We use these for most client portfolios to reduce individual stock risks. We also use bond ETF’s when clients desire monthly income.

The two other ‘core’ stock-based ETF holdings we use returned 2% and 4% for the quarter (clients: you will see any new selections for October by week’s end in your accounts).

As we all get older (don’t remind me), we are less comfortable to accept the risks of the markets; losing principal namely. We aim to generate performance that is diversified and pretty darn safe in bad bear markets. 

With stocks up about 15% through nine months this year, we’re pleased to show gains of +9% to +12% depending upon the client objective and mix of stocks / bonds / gold we recommend. Call me to see how we may help you.

In early August, it occured to me: I've been in the financial services business for 35 years! In 1982, I joined my father's investment firm after spending a year or so after college at Manufacturer's Hanover Bank in Durham, North Carolina. I wish to thank immensely my father Larry for his guidance and teaching me this business through the ups and downs.

He is still quite active on the job most days as Research Director - and we spend time every week discussing strategy, odds, and ideas that make sense for our clients and family investments.

With 78 years of experience between us - we've seen it all (or close to it all).

Thanks for reading.

Barry

   

Stocks Fall, Bonds and Gold Rally Sharply

U.S. stock prices fell today by about 2% across the broad gauges of measurement; Dow Jones, S&P 500 and Nasdaq markets. That's quite a hit for just one day. However, unless you live in a cave, or under a rock - you have to know that the stock market has been performing rather well the past few years.

If all your money is in the stock market - which is not common for most folks, then your gains or losses today would be different than what the media reports on the nightly news tonight.

Before today's action, stocks were ahead 8% on the year. Today they are 2% less, so we're about +6% year-to-date.

If most folks don't own all stocks, what do they own? A normal, balanced portfolio would own some bonds, and some fixed interest investments (CD's and fixed annuities, or cash), and perhaps some contrarian - asset like silver or gold.

We own bonds and gold in all client portfolios, and like to see it offset the risks of an all-stock portfolio. It has proven itself over 40 + years.

Today, Gold rocketed up $25 an ounce - that's +2%.

And bonds; they rose also as prices rose from demand that was leaving stocks today. Interest rates fell quite a bit: The popular bond funds and ETF's gained between 1/2 percent and 1% - a huge gain on one day for a bond investment!

All said and done, if we look at a diversified portfolio, stocks fell 2%, bonds gained about 1%, Gold gained 2% and cash under the mattress is still all there. If you held all 4 of these "buckets" of money with $100,000 total, you gained $250 today !

We always advocate a balanced approach to investing; it keeps the stress lower and we can sleep well at night.

Contact me for further information on our money management and planning services. Thanks for reading!

~Barry Unterbrink
(954) 719-1151