Hyre Weekly Commentary May 7, 2012The most important news last week may have actually happened this past weekend.On Sunday, voters went to the polls in France, Greece, and Germany and the results could have amajor impact on world markets. French voters sent incumbent president Nicholas Sarkozypacking and, instead, elected Socialist Party candidate Francois Hollande. Hollande “has pledgedto shift the burden of economic hardship onto the rich and to resolve the protracted eurosovereign-debt crisis by softening the current prescription of austerity,” according to The WallStreet Journal. While his strategy is debatable, it will likely cause a rift with Germany and adduncertainty to recent eurozone agreements.Greek voters also went to the polls and “delivered a stinging rejection of the two incumbentparties, with many people casting ballots for smaller, far-left and far-right parties,” according tothe The Wall Street Journal. This, too, will likely result in more political and economicuncertainty. And in Germany, incumbent Angela Merkel’s party suffered some setbacks in stateelections.What’s leading to all the angst in Europe? Here are three things: 1. Recession fears – 11 European countries have now experienced two consecutive quarters of economic contraction. 2. Unemployment fears – the unemployment rate across the eurozone is at a record high. 3. Business confidence fears – April’s read on the manufacturing PMI for the eurozone – a measure of confidence among businesses – fell to the lowest since June 2009.Sources: MarketWatch, The GuardianThe bottom line is citizens are voting for change, but “political realities will complicate evenmore what is an already delicate economic and financial outlook for Europe, the world’s largesteconomic area,” according to Mohamed El-Arian, CEO and Co-CIO of PIMCO, as reported byCNBC.These elections show that the economic crisis that began in 2008 is still rippling throughout theworld.
1- 1- 3- 5- 10- Data as of 5/4/12 Week Y-T-D Year Year Year Year Standard & Poors 500 (Domestic -2.4% 8.9% 2.2% 14.7% -1.9% 2.7% Stocks) DJ Global ex US (Foreign Stocks) -2.1 6.7 -15.7 9.6 -5.6 4.8 10-year Treasury Note (Yield Only) 1.9 N/A 3.2 3.2 4.6 5.1 Gold (per ounce) -1.2 4.4 6.7 21.8 19.0 18.1 DJ-UBS Commodity Index -2.5 -2.5 -18.8 5.8 -4.7 3.5 DJ Equity All REIT TR Index -0.6 12.9 9.7 28.8 0.4 10.5Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvesteddividends (gold does not pay a dividend) and the three-, five-, and 10-year returns areannualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-,five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield atthe close of the day on each of the historical time periods.Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.Past performance is no guarantee of future results. Indices are unmanaged and cannot beinvested into directly. N/A means not applicable.WHAT DO DOTS HAVE TO DO WITH BEING A BETTER INVESTOR? In his fascinatingnew book, Imagine: How Creativity Works, author Jonah Lehrer describes the creative processand what steps we can all take to be a little more creative. One of those steps is to talk to morepeople and expose yourself to new situations. By “colliding” more often with people who are notlike you and throwing yourself into new environments (like a foreign country), your mind willcome up with more new ideas than you could have thought of on your own.And, while business owners may not like this, Lehrer’s research suggests, “The most importantplace in every office is not the boardroom, or the lab, or the library. It’s the coffee machine.” It’sthose casual conversations with colleagues that generate new interactions and spark ideas.This leads to an important point about investing.Brian Uzzi, a professor at the Kellog School of Management, studied the instant messages (IM)sent by traders at a large hedge fund over an eighteen-month period. As reported in Lehrer’sbook, these traders sent more than two million messages over that period and the average traderwas involved in 16 different IM conversations simultaneously – talk about multitasking!Essentially, these traders were rapidly communicating with each other and trying to make senseof the latest news so they could profitably trade on it.As summarized by Lehrer, Uzzi concluded, “The best traders were the most connected, andpeople who carried on more IM conversations and sent more messages also made more money.”Further, Uzzi said, “The act of investing is like solving a difficult puzzle. These traders are tryingto connect the dots. Because the traders are listening to their network, they manage toaccomplish what they could never have done by themselves.”In essence, successful investing partly relies on “connecting the dots” of information thatbombard us. While we’re not day traders like the people Uzzi studied at the hedge fund, the
concept of connecting the dots still applies – albeit on a much longer timeframe. And, to connectthe dots, we have a large network of colleagues who can help us separate the daily noise fromwhat’s truly meaningful.Weekly Focus – Think About It“Everyone whos ever taken a shower has had an idea. Its the person who gets out of the shower,dries off, and does something about it who makes a difference.”--Nolan Bushnell, founder of Atari, Inc. and Chuck E. Cheese’s Pizza-Time TheatersBest regards,Jim Hyre, CFP®Registered PrincipalP.S. Please feel free to forward this commentary to family, friends, or colleagues. If you wouldlike us to add them to the list, please reply to this e-mail with their e-mail address and we willask for their permission to be added.Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC.* The Standard & Poors 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market ingeneral.* 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 theNational Association of Securities Dealers Automated Quotation System.* Gold represents the London afternoon gold price fix as reported by www.usagold.com.* The DJ/AIG Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. TheIndex is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seenas a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate InvestmentTrust (REIT) industry as calculated by Dow Jones* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict futureperformance.* Consult your financial professional before making any investment decision.* You cannot invest directly in an index.* Past performance does not guarantee future results. mc101507* Some newsletter content was prepared by PEAK for use by James Hyre, CFP®, registered principal* If you would prefer not to receive this Weekly Newsletter, please contact our office via e-mail or mail your request to 2074 ArlingtonAve, Upper Arlington, OH 43221.* The information contained in this report does not purport to be a complete description of the securities, markets, or developmentsreferred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee thatthe forgoing material is accurate or complete. Any opinions are those of Jim Hyre and not necessary those of RJFS or RaymondJames. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as asolicitation or an offer to buy or sell any security to herein. Tax or legal matters should be discussed with the appropriateprofessional.Jim Hyre, CFP®Registered PrincipalRaymond James Financial Services, Inc.
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