Labor Day's Origin; Market Update

As we head into the Labor Day weekend, I wish all of you - clients and friends - a safe and enjoyable time off with your family and loved ones.

Labor Day History

Labor Day honors the American Labor Movement and the contributions that workers have made to the strength, prosperity, laws and well-being of the country. 

Trade Unionists first set forth the idea in the late 19th century. The Central Labor Union organized the first parade in New York City in 1882. Oregon was the first state to make Labor Day an official public holiday 5 years later. By 1894, it was proclaimed as a Federal Holiday.

The selection of the date to celebrate the first Monday is September was thought to be contrived to be equi-distant between the July 4th and Thanksgiving holiday, as it nearly is so today.

Today, we think of Labor Day as the un-official end of summer, when vacations end, schools start back, and the seasons weather turns toward Autumn. Sports fans are ready for football games and baseball playoffs. 

Obviously, designating the day as a Monday holiday greatly helps those who work and wish to get away for a 3-4 day vacation. An estimated 30 million American’s will travel this Labor Day weekend, Friday being the busiest day.

In the financial markets, this summer is anything but boring. Many industries and companies are reporting excellent profits, and their stock prices are moving higher. Stocks are ahead 6% to 9% (Dow and S&P 500), while Gold and Bond prices are mixed with the higher interest rates affecting their attractiveness. Gold’s lost about $100 an ounce this year.

Employment is very robust, and unemployment falling rapidly this year to under 4%. This ‘bull market’ with rising asset prices is now the longest on record, commencing March, 2009. 

These times are getting a bit ‘giddy’ in my opinion. One example: the U.S. has legalized recreational use of marijuana in 5 states now: Alaska, Colorado, Oregon, and Washington state. Add Washington D.C. to that list also. Hmmm, maybe that’s why our politician’s are acting foggy and confused? 

Canada will legalize recreational POT in mid-October. Could this all add up to the great fall of Western civilization as we know it? Time will tell, readers.

My question on all of this (mostly) good news is: what will be the catalyst to cause the BULL to stop running? And what will that look like for investor’s portfolios? Rising interest rates along with inflation? Geopolitical events, the trade situation escalating.

The last bear market - in case you missed it - saw prices fall in half from 2007 to 2009; 17 months to be more exact. An equal fall today would take the Dow Jones Industrials Average down from 26,000 to 13,000. I think that’s not likely; but plausible. One last point for long-term investors. If you are disciplined and long term thinking, you can almost always recover from bear markets in decent shape - if you have the time and don't get too antsy.

To wit: If you bought all your stocks at the market high in October, 2007 - Dow 14,000 - and held them until today; you would have gained 7% on average each year.

Sure, that may not make you the hit of the party vs. your friends who own Apple or Amazon shares (or that 'hot' marijuana farm stock), but you can sleep at night by being conservative and diversifying your money across stocks and bonds, and some cash. And that's not a pipe dream.*  

Do have a happy and safe holiday.     

~Barry Unterbrink, C.R.P.C.

* an unattainable or fanciful hope of scheme.
 

     

May's Markets Review - Two New Programs to Consider

May’s financial performance in the markets was good to great, overall.

Stocks rose 1.5% to 5% depending on the index measured. Big stocks rose the least; the Dow and S&P 500 tallied +1.4% to +2.5%, while the Nasdaq Composite ran ahead over 5%. The chief reason: Big technology names such as Facebook, Netflix, and Apple all shot ahead between 11%-14% in May, thus supercharging the NASDAQ index.

Bonds did well too, as interest rates fell back from their highs (falling rates means higher bond prices).

5 year Treasury Notes ended May with a 2.66% yield, while the 10 year was 2.82% and the long 30-year Bond paid 2.99%. For uninvested cash, we recommend a couple short/intermediate term bond ETF’s that earn 3% to near 4% interest.
Our favored commodity, Gold pulled back about 1-1/2 percent, as the yellow metal declined $14 to $1,297 per ounce. Gold is even for this year thus far.

If you’ve been a reader here for a while, you will know that I do not recommend individual stocks. We use groups of stocks, called Exchange-Traded Funds (ETF’s) which cover a broad sector of the U.S. stock market.
Technology, Financials, Energy – are examples of these ETF’s. There are 10 in total. We rotate these sectors according to their performance each month. Technology and Energy are owned for June. We feel this is a safer way to manage money, as there is less single-issue risk. Why not use mutual funds, you may ask? Good point, but mutual funds are very actively managed – and that comes at a price – in trading costs and operating expenses that are deducted from your fund values. Mutual Fund fees may average near 1%-1.2% per year, vs. the ETF fees of 1/5% to ½% per year. ETF’s are the new mutual fund for many cost conscious investor now-a-days.
We recommend that you continue to have a diversified portfolio of stocks, bonds, and some Gold. And, consider some safe (no loss) savings instruments also such as fixed annuities and CD’s. Rates are rising here too; a plus for older savings-oriented folks.

2 New Strategies Offered this Summer

I have been researching and kicking the tires - with some professional financial firms during the past few months - that offer exceptional strategies that may greatly interest you and your money. Next month, I will get an invitation out to you on more details and how you can participate via my on-line webinar on this.

The first program is a system to pay down your debts much faster that you are now, using the same spending you are using now. Credit card, student loans, mortgage, etc. Paying down debt quicker frees up cash flow for more options with your money – agreed? And gets you on the road to asset accumulation / savings much faster too.

The second program is very unique – and involves using your qualified retirement money, IRA’s, 401k, etc. and – with the I.R.S. blessing – restructuring your money so that it falls outside the normal distribution and investment limitation rules of your current plan. It’s a bit complex, and requires qualifications from you the investor. Stay tuned for more information, or e-mail me and I will make sure you get advance notice.

Have a nice and safe weekend!
~Barry Unterbrink
 954.719.1151 w
 954.560.3622 m
 Unterbrink@usa.net

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