- Stocks took a hit last week due to ongoing concerns about the European debt crisis, a potential economic slowdown in China, and JPMorgan's $2 billion trading loss.
- Investors are frustrated that after two years and 17 eurozone summits, the European debt issue is still not resolved and may be worse as options are running out.
- The US faces potential economic challenges including a presidential election and fiscal deadlines by the end of the year.
Spain requested a $125 billion bailout to rescue its failing banks as its economy struggles with high unemployment and recession. If Spain's financial troubles escalate, it could destabilize the entire eurozone economy. Meanwhile, Greece will hold a pivotal election that could lead to it leaving the eurozone, an unprecedented event that would plunge the region into uncharted territory. Federal Reserve Chairman Ben Bernanke stated the Fed stands ready to take action if European and global economic problems worsen.
The Federal Reserve Chairman Ben Bernanke outlined two major risks facing the US economy: 1) the ongoing Eurozone fiscal and banking crisis and its potential effects on the US, and 2) the unsustainable path of the US fiscal situation including the looming "fiscal cliff". While the US has little control over Europe, the fiscal cliff is within Congress's power to address. If no action is taken, the automatic spending cuts and tax increases could throw the economy back into recession according to estimates. Bernanke stated the Fed is ready to take further action if needed to support the recovery.
The European Union summit helped fuel a stock market rally by delivering more fiscal integration steps than expected. While the second quarter saw stock market gains reduced due to concerns over Europe, the US economy, and the Federal Reserve, the S&P 500 is still up 8.3% for the year. Investors remain cautious watching the US presidential election and looming fiscal cliff at the end of 2012.
Margaret Thatcher accurately predicted problems with the euro 17 years before the 2010 crisis. She argued that Germany would prioritize low inflation while the euro would devastate poorer countries' inefficient economies. True to her prediction, the shared currency is causing imbalances between countries with different economic and political systems. Resolving the eurozone's structural problems is very difficult given it requires agreement among 17 countries and their various political parties.
The document summarizes a weekly commentary from Hyre Weekly dated April 23, 2012. It discusses how corporate earnings in the US have overtaken concerns about the European debt crisis as the focus of investors. While most US companies reported better than expected earnings, earnings growth was only 3.7% compared to a year ago. Interest rates increased again in troubled European countries like Spain and Italy, suggesting their debt problems remain. The commentary concludes by noting the interconnection of global markets and how European problems could eventually impact the US.
The document provides a weekly market commentary for February 27, 2012. It notes that the markets have been calm recently as fears have declined. The S&P 500 reached its highest level in over 3.5 years and volatility is low. However, it warns of potential risks on the horizon from rising oil prices and geopolitical tensions in oil producing regions that could cause a market correction. The commentary emphasizes that investors should focus on long term trends rather than short term fluctuations.
The European debt crisis continues as Greece's government remains unstable and Italy's borrowing costs rise sharply. While Greece has received bailouts, it is running out of money and time. Italy's rising bond yields suggest investors are losing faith in its ability to pay debts, and Italy is a much larger economy than Greece. High debt levels worldwide continue to cause market volatility until reduced to more manageable levels. Recent data shows that U.S. government bonds outperformed stocks over the past 30 years for the first time since the Civil War, though low current bond yields mean they cannot provide the same returns going forward. History shows there are no guarantees in investing and the appropriate asset class depends on economic conditions.
Jamie Dimon, the CEO of JP Morgan who is known as one of the smartest bankers, revealed that the bank recently lost $2 billion on risky derivative bets. This loss shows that even experts can make mistakes, and provides three important lessons: keep strategies simple, closely monitor all investments, and remain humble, as even the smartest people can fail. The large loss damages JP Morgan's reputation of being well-managed during the financial crisis.
Spain requested a $125 billion bailout to rescue its failing banks as its economy struggles with high unemployment and recession. If Spain's financial troubles escalate, it could destabilize the entire eurozone economy. Meanwhile, Greece will hold a pivotal election that could lead to it leaving the eurozone, an unprecedented event that would plunge the region into uncharted territory. Federal Reserve Chairman Ben Bernanke stated the Fed stands ready to take action if European and global economic problems worsen.
The Federal Reserve Chairman Ben Bernanke outlined two major risks facing the US economy: 1) the ongoing Eurozone fiscal and banking crisis and its potential effects on the US, and 2) the unsustainable path of the US fiscal situation including the looming "fiscal cliff". While the US has little control over Europe, the fiscal cliff is within Congress's power to address. If no action is taken, the automatic spending cuts and tax increases could throw the economy back into recession according to estimates. Bernanke stated the Fed is ready to take further action if needed to support the recovery.
The European Union summit helped fuel a stock market rally by delivering more fiscal integration steps than expected. While the second quarter saw stock market gains reduced due to concerns over Europe, the US economy, and the Federal Reserve, the S&P 500 is still up 8.3% for the year. Investors remain cautious watching the US presidential election and looming fiscal cliff at the end of 2012.
Margaret Thatcher accurately predicted problems with the euro 17 years before the 2010 crisis. She argued that Germany would prioritize low inflation while the euro would devastate poorer countries' inefficient economies. True to her prediction, the shared currency is causing imbalances between countries with different economic and political systems. Resolving the eurozone's structural problems is very difficult given it requires agreement among 17 countries and their various political parties.
The document summarizes a weekly commentary from Hyre Weekly dated April 23, 2012. It discusses how corporate earnings in the US have overtaken concerns about the European debt crisis as the focus of investors. While most US companies reported better than expected earnings, earnings growth was only 3.7% compared to a year ago. Interest rates increased again in troubled European countries like Spain and Italy, suggesting their debt problems remain. The commentary concludes by noting the interconnection of global markets and how European problems could eventually impact the US.
The document provides a weekly market commentary for February 27, 2012. It notes that the markets have been calm recently as fears have declined. The S&P 500 reached its highest level in over 3.5 years and volatility is low. However, it warns of potential risks on the horizon from rising oil prices and geopolitical tensions in oil producing regions that could cause a market correction. The commentary emphasizes that investors should focus on long term trends rather than short term fluctuations.
The European debt crisis continues as Greece's government remains unstable and Italy's borrowing costs rise sharply. While Greece has received bailouts, it is running out of money and time. Italy's rising bond yields suggest investors are losing faith in its ability to pay debts, and Italy is a much larger economy than Greece. High debt levels worldwide continue to cause market volatility until reduced to more manageable levels. Recent data shows that U.S. government bonds outperformed stocks over the past 30 years for the first time since the Civil War, though low current bond yields mean they cannot provide the same returns going forward. History shows there are no guarantees in investing and the appropriate asset class depends on economic conditions.
Jamie Dimon, the CEO of JP Morgan who is known as one of the smartest bankers, revealed that the bank recently lost $2 billion on risky derivative bets. This loss shows that even experts can make mistakes, and provides three important lessons: keep strategies simple, closely monitor all investments, and remain humble, as even the smartest people can fail. The large loss damages JP Morgan's reputation of being well-managed during the financial crisis.
The document summarizes recent negative news headlines about weak global financial markets and slowing economies. While the headlines seem dire, the advisor argues they are designed primarily to generate readership rather than provide an accurate portrayal of the long-term economic situation. The advisor believes their role is to look beneath headlines and discern the real issues to help clients stay on track with their goals despite short-term market volatility.
The document summarizes the reaction of markets to a recent agreement by European leaders to address the sovereign debt crisis. It notes that stock prices rose significantly as investors were relieved by the three-point deal involving Greek debt relief and boosting the bailout fund. However, details remain unclear and challenges loom with the U.S. debt panel deadline approaching. Overall investors were in a relief rally but surprises can still occur as with sudden market moves or unexpected weather, much like the forecasting abilities of analysts and meteorologists.
Central banks around the world have created over $2.5 trillion since 2008 through quantitative easing programs. This involves banks creating money to purchase government and mortgage debt, with the goal of increasing money supply and stimulating the economy. However, low interest rates have resulted in a "stealth tax" on savers as interest earned is below inflation. While helping debtors, quantitative easing may be keeping the economy dependent on unsustainable monetary policy.
Warren Buffett and Bill Gross, two legendary investors, disagree on bonds. Buffett sees bonds as risky in times of inflation while Gross favors bonds in the short term due to low interest rates. Their views may differ based on timeframe, with Buffett looking 7-10 years out and Gross a couple years. Additionally, indexes may not fully reflect market performance due to decisions around their construction.
The stock market continued rising last week driven by optimism over a Greek bailout and better economic data. However, higher gas prices and tensions in the Middle East could impact consumer spending. In China, slowing housing prices following measures to boost lending have raised concerns. Surveys found Americans view $150,000 in annual income or $1 million in net worth as amounts needed to feel "rich", which has policy implications.
The S&P 500 has risen 12.6% since early October due to a lack of bad news. Three pieces of news that could be considered lacking in bad news are: 1) 75% of companies reporting earnings so far this quarter have beaten estimates. 2) Economic news has generally supported the idea that the economy is not collapsing. 3) European leaders may finally take action to address the sovereign debt crisis. Whether this lack of bad news continues remains uncertain.
Standard & Poor's downgraded the credit ratings of 9 eurozone countries including France and Spain. Most eurozone countries now have negative outlooks, indicating a risk of further downgrades. This underscores the ongoing economic problems in Europe. However, the US downgrade had little impact so far, and US investors are more focused on signs of economic momentum in the US than on European issues for now. Nevertheless, if the problems in Europe worsen significantly, it could negatively impact the US economy as well.
The document summarizes the strong performance of the stock market in the first quarter of 2012, with the S&P 500 rising 12% which was its best start since 1998. Analysts attributed the gains to an easing of Europe's debt crisis, a strengthening global economy, rising US consumer sentiment, and supportive Federal Reserve policy. However, some warn that the market could falter later in the year as it has in recent years, due to potential risks like renewed European debt issues or a slowing US economy.
- Greece and Italy recently replaced their political leaders in hopes that new leadership can help calm financial markets and drive structural reforms.
- The new leaders in Greece and Italy, Lucas Papademos and Mario Monti respectively, are expected to help lead their countries out of debt crises.
- If the new leaders take swift action and gain credibility, it could help boost the markets. However, it remains to be seen if political changes in Europe will be enough to significantly improve the markets.
The document discusses recent positive corporate earnings in the US that have boosted stock markets, despite ongoing issues in Europe. While many US companies reported better than expected earnings, earnings growth was modest at 3.7% year-over-year. The European Central Bank loaned over $1.3 trillion to European banks to purchase government bonds and lower rates, but rates are rising again as banks exhaust these funds, increasing concerns over European debt problems.
Central banks around the world coordinated actions to provide liquidity support to the global financial system in response to deteriorating liquidity conditions. This caused stock markets to soar as investors saw it as a sign that central banks will take aggressive actions to prevent the world economy from stalling. However, the actions only address short-term issues and do not solve the long-term problems of too much debt and too little growth faced by some countries. A long-term solution will require agreement on fiscal discipline policies from European political leaders.
The document summarizes market volatility in 2011 and discusses the Chinese government's crackdown on freedom of speech through restrictions on social media. Specifically:
- The stock market has seen high volatility in 2011, with the VIX hitting a record high and large intraday swings in the Dow Jones Industrial Average.
- Investors have been frustrated by the lack of direction in uncertain markets affected by European debt problems and US budget issues.
- China limits freedom of speech to control social unrest, recently requiring real name registration and verification for users of the popular Weibo social media platform.
- The government fears social media could enable mass organization that leads to instability, as seen in the Arab Spring, given China's
Elections in France, Greece, and Germany could impact markets as voters chose candidates favoring changes over austerity. French and Greek voters rejected incumbent parties, bringing political uncertainty. This document discusses the economic issues facing Europe, including recession, high unemployment, and low business confidence. Traders who actively communicated with their network were more successful at "connecting the dots" of information and making profitable trades.
The document summarizes economic and market data from early February 2012. It reports that January job growth and unemployment data surprised to the upside, pushing stock prices higher. Services sector growth also accelerated. However, housing prices continued to decline sharply from their 2006 peak. Interest rates on mortgages fell to a new record low. Overall, the economy appeared to be gaining momentum after a slowdown in late 2011, though questions remained about sustainability versus stimulus-driven growth.
The weekly commentary discusses the recent performance of the stock market and economy. It notes that Apple's strong earnings helped the S&P 500 gain 1.8% despite disappointing economic data from the US, Spain, and UK. The housing market continues to struggle with home prices at their lowest point since 2002, but sales have increased recently due to declining inventory levels. Overall the economy is growing modestly but not enough to indicate a clear direction.
The document summarizes a weekly commentary from Hyre Weekly on January 18, 2012. It discusses Standard & Poor's downgrading the credit ratings of several eurozone countries, including France and Spain. This underscores the ongoing economic problems in Europe. It also provides market performance data and discusses new technologies showcased at the recent Consumer Electronics Show, including OLED TVs.
The document summarizes economic concerns from a single day in May 2012. It discusses Greece potentially leaving the eurozone and going into economic collapse. It also mentions the weakening European economy, troubles in the European commercial real estate market, and issues with J.P. Morgan that were hurting market sentiment. However, the document expresses that diversification may help investors weather volatility and that the outlook is better than 2008-2009 despite some challenges still existing.
TFJ: The Mortgage Market is Still Heading Into the WoodsJoe Morgan
"Thoughts from Joe" is a weekly news summary and commentary from Joe Morgan, CIO of SVB Asset Management, a member of SVB Financial Group and wholly owned subsidiary of Silicon Valley Bank
- The US added 227,000 new jobs in February and 1.2 million jobs over the past six months, the highest six-month total since 2006. However, unemployment remains elevated and long-term unemployment is near record levels.
- Since the stock market low on March 9, 2009, the S&P 500 has risen over 100% while corporate revenues have barely increased due to widespread cost cutting, including large job cuts. Continued job growth may lead companies to add more staff and support revenue growth.
- US household net worth reached $58.5 trillion at the end of 2011, still $8.3 trillion below its 2007 peak, as the real estate and stock markets impact wealth. Households are
Silver prices have risen more than gold prices and stock prices over the past 10 years. Silver is seen as an alternative investment during times of economic uncertainty like the current issues with sovereign debt in Greece, Portugal, and Ireland. While rising precious metals prices and debt problems are interesting to financial professionals, they can also impact everyday investors which is why advisors are trying to profit from these situations and protect clients.
Volatility returned to the markets as the S&P 500 fell 2% for the week due to concerns over the European debt crisis and slowing growth in China. Spain became the latest problem country in Europe, while China's economy expanded at its weakest pace in over three years. Additionally, weak earnings reports from several U.S. banks led to weakness in financial stocks. Conflicting economic data from the U.S. also contributed to uncertainty and market swings. The "quitters" indicator from the JOLTS report provided a positive signal about consumer confidence, despite a disappointing jobs report and decline in consumer sentiment surveys.
The document discusses stock performance in 2011 and analyzes high-dividend stocks from the past. It finds that in 2011, stocks with the highest dividend yields were the only ones to experience positive returns, with gains of 10.4%, 6.4%, and 8.7% respectively. The document also examines "Nifty Fifty" stocks from the 1970s that were seen as guaranteed growth companies but have had varying performance over 40 years, with some like Eastman Kodak struggling in their transition to digital. Key lessons are that some iconic stocks remain so, promoting "one decision" stocks is not a sound strategy, and all stocks can decline to zero.
The document summarizes recent negative news headlines about weak global financial markets and slowing economies. While the headlines seem dire, the advisor argues they are designed primarily to generate readership rather than provide an accurate portrayal of the long-term economic situation. The advisor believes their role is to look beneath headlines and discern the real issues to help clients stay on track with their goals despite short-term market volatility.
The document summarizes the reaction of markets to a recent agreement by European leaders to address the sovereign debt crisis. It notes that stock prices rose significantly as investors were relieved by the three-point deal involving Greek debt relief and boosting the bailout fund. However, details remain unclear and challenges loom with the U.S. debt panel deadline approaching. Overall investors were in a relief rally but surprises can still occur as with sudden market moves or unexpected weather, much like the forecasting abilities of analysts and meteorologists.
Central banks around the world have created over $2.5 trillion since 2008 through quantitative easing programs. This involves banks creating money to purchase government and mortgage debt, with the goal of increasing money supply and stimulating the economy. However, low interest rates have resulted in a "stealth tax" on savers as interest earned is below inflation. While helping debtors, quantitative easing may be keeping the economy dependent on unsustainable monetary policy.
Warren Buffett and Bill Gross, two legendary investors, disagree on bonds. Buffett sees bonds as risky in times of inflation while Gross favors bonds in the short term due to low interest rates. Their views may differ based on timeframe, with Buffett looking 7-10 years out and Gross a couple years. Additionally, indexes may not fully reflect market performance due to decisions around their construction.
The stock market continued rising last week driven by optimism over a Greek bailout and better economic data. However, higher gas prices and tensions in the Middle East could impact consumer spending. In China, slowing housing prices following measures to boost lending have raised concerns. Surveys found Americans view $150,000 in annual income or $1 million in net worth as amounts needed to feel "rich", which has policy implications.
The S&P 500 has risen 12.6% since early October due to a lack of bad news. Three pieces of news that could be considered lacking in bad news are: 1) 75% of companies reporting earnings so far this quarter have beaten estimates. 2) Economic news has generally supported the idea that the economy is not collapsing. 3) European leaders may finally take action to address the sovereign debt crisis. Whether this lack of bad news continues remains uncertain.
Standard & Poor's downgraded the credit ratings of 9 eurozone countries including France and Spain. Most eurozone countries now have negative outlooks, indicating a risk of further downgrades. This underscores the ongoing economic problems in Europe. However, the US downgrade had little impact so far, and US investors are more focused on signs of economic momentum in the US than on European issues for now. Nevertheless, if the problems in Europe worsen significantly, it could negatively impact the US economy as well.
The document summarizes the strong performance of the stock market in the first quarter of 2012, with the S&P 500 rising 12% which was its best start since 1998. Analysts attributed the gains to an easing of Europe's debt crisis, a strengthening global economy, rising US consumer sentiment, and supportive Federal Reserve policy. However, some warn that the market could falter later in the year as it has in recent years, due to potential risks like renewed European debt issues or a slowing US economy.
- Greece and Italy recently replaced their political leaders in hopes that new leadership can help calm financial markets and drive structural reforms.
- The new leaders in Greece and Italy, Lucas Papademos and Mario Monti respectively, are expected to help lead their countries out of debt crises.
- If the new leaders take swift action and gain credibility, it could help boost the markets. However, it remains to be seen if political changes in Europe will be enough to significantly improve the markets.
The document discusses recent positive corporate earnings in the US that have boosted stock markets, despite ongoing issues in Europe. While many US companies reported better than expected earnings, earnings growth was modest at 3.7% year-over-year. The European Central Bank loaned over $1.3 trillion to European banks to purchase government bonds and lower rates, but rates are rising again as banks exhaust these funds, increasing concerns over European debt problems.
Central banks around the world coordinated actions to provide liquidity support to the global financial system in response to deteriorating liquidity conditions. This caused stock markets to soar as investors saw it as a sign that central banks will take aggressive actions to prevent the world economy from stalling. However, the actions only address short-term issues and do not solve the long-term problems of too much debt and too little growth faced by some countries. A long-term solution will require agreement on fiscal discipline policies from European political leaders.
The document summarizes market volatility in 2011 and discusses the Chinese government's crackdown on freedom of speech through restrictions on social media. Specifically:
- The stock market has seen high volatility in 2011, with the VIX hitting a record high and large intraday swings in the Dow Jones Industrial Average.
- Investors have been frustrated by the lack of direction in uncertain markets affected by European debt problems and US budget issues.
- China limits freedom of speech to control social unrest, recently requiring real name registration and verification for users of the popular Weibo social media platform.
- The government fears social media could enable mass organization that leads to instability, as seen in the Arab Spring, given China's
Elections in France, Greece, and Germany could impact markets as voters chose candidates favoring changes over austerity. French and Greek voters rejected incumbent parties, bringing political uncertainty. This document discusses the economic issues facing Europe, including recession, high unemployment, and low business confidence. Traders who actively communicated with their network were more successful at "connecting the dots" of information and making profitable trades.
The document summarizes economic and market data from early February 2012. It reports that January job growth and unemployment data surprised to the upside, pushing stock prices higher. Services sector growth also accelerated. However, housing prices continued to decline sharply from their 2006 peak. Interest rates on mortgages fell to a new record low. Overall, the economy appeared to be gaining momentum after a slowdown in late 2011, though questions remained about sustainability versus stimulus-driven growth.
The weekly commentary discusses the recent performance of the stock market and economy. It notes that Apple's strong earnings helped the S&P 500 gain 1.8% despite disappointing economic data from the US, Spain, and UK. The housing market continues to struggle with home prices at their lowest point since 2002, but sales have increased recently due to declining inventory levels. Overall the economy is growing modestly but not enough to indicate a clear direction.
The document summarizes a weekly commentary from Hyre Weekly on January 18, 2012. It discusses Standard & Poor's downgrading the credit ratings of several eurozone countries, including France and Spain. This underscores the ongoing economic problems in Europe. It also provides market performance data and discusses new technologies showcased at the recent Consumer Electronics Show, including OLED TVs.
The document summarizes economic concerns from a single day in May 2012. It discusses Greece potentially leaving the eurozone and going into economic collapse. It also mentions the weakening European economy, troubles in the European commercial real estate market, and issues with J.P. Morgan that were hurting market sentiment. However, the document expresses that diversification may help investors weather volatility and that the outlook is better than 2008-2009 despite some challenges still existing.
TFJ: The Mortgage Market is Still Heading Into the WoodsJoe Morgan
"Thoughts from Joe" is a weekly news summary and commentary from Joe Morgan, CIO of SVB Asset Management, a member of SVB Financial Group and wholly owned subsidiary of Silicon Valley Bank
- The US added 227,000 new jobs in February and 1.2 million jobs over the past six months, the highest six-month total since 2006. However, unemployment remains elevated and long-term unemployment is near record levels.
- Since the stock market low on March 9, 2009, the S&P 500 has risen over 100% while corporate revenues have barely increased due to widespread cost cutting, including large job cuts. Continued job growth may lead companies to add more staff and support revenue growth.
- US household net worth reached $58.5 trillion at the end of 2011, still $8.3 trillion below its 2007 peak, as the real estate and stock markets impact wealth. Households are
Silver prices have risen more than gold prices and stock prices over the past 10 years. Silver is seen as an alternative investment during times of economic uncertainty like the current issues with sovereign debt in Greece, Portugal, and Ireland. While rising precious metals prices and debt problems are interesting to financial professionals, they can also impact everyday investors which is why advisors are trying to profit from these situations and protect clients.
Volatility returned to the markets as the S&P 500 fell 2% for the week due to concerns over the European debt crisis and slowing growth in China. Spain became the latest problem country in Europe, while China's economy expanded at its weakest pace in over three years. Additionally, weak earnings reports from several U.S. banks led to weakness in financial stocks. Conflicting economic data from the U.S. also contributed to uncertainty and market swings. The "quitters" indicator from the JOLTS report provided a positive signal about consumer confidence, despite a disappointing jobs report and decline in consumer sentiment surveys.
The document discusses stock performance in 2011 and analyzes high-dividend stocks from the past. It finds that in 2011, stocks with the highest dividend yields were the only ones to experience positive returns, with gains of 10.4%, 6.4%, and 8.7% respectively. The document also examines "Nifty Fifty" stocks from the 1970s that were seen as guaranteed growth companies but have had varying performance over 40 years, with some like Eastman Kodak struggling in their transition to digital. Key lessons are that some iconic stocks remain so, promoting "one decision" stocks is not a sound strategy, and all stocks can decline to zero.
Central banks around the world coordinated actions to provide liquidity support to the global financial system in response to deteriorating liquidity conditions. This caused stock markets to soar as investors saw it as a sign that central banks will do what is needed to prevent the world economy from stalling. However, the actions only address short-term issues and do not solve the long-term problems of too much debt and too little growth faced by some countries. A long-term solution will require agreement on fiscal discipline from European political leaders.
The markets had a strong week with the S&P 500 and Dow posting their largest gains since December. Unemployment claims matched a four-year low and the Federal Reserve signaled it will keep interest rates low to support the economy. Meanwhile, Mongolia has emerged as one of the fastest growing economies due to its natural resources, but faces challenges in converting this wealth into long-term educational gains like more developed countries.
The Federal Reserve announced "Operation Twist" to lower longer-term interest rates by selling short-term Treasuries and buying long-term ones. While interest rates declined as intended, stocks fell over 6% due to fears of a Greek default, global financial crisis, slowing growth in China, and declining copper prices indicating weaker global growth. Dividends have provided over a third of the S&P 500's total return over 80 years and can enhance returns and provide stability, especially in a low interest rate environment.
The jobs recovery from the 2007 recession has been painfully slow. Over 4 years after employment peaked, only half the jobs lost have been recovered, unlike previous recessions where recovery took 2-3 years. Reasons for the slow recovery include financial crisis-related slowdowns, policy uncertainty, extended unemployment benefits, and euro crisis uncertainty. However, record corporate profits and cash levels could eventually spark new hiring if companies begin spending on growth.
The jobs recovery from the 2007 recession has been painfully slow compared to previous recessions. Over 4 years after employment peaked, only half the jobs lost have been recovered. Possible reasons for the slow recovery include financial crises typically resulting in slow recoveries, policy uncertainty in Washington, extended unemployment benefits, and eurozone crisis uncertainty dampening business demand. However, record corporate profits and cash levels could eventually provide a boost to hiring and the broader economy if companies begin spending more on new hires.
The document discusses the interconnectedness of global economies and markets. It notes that problems in countries like China can have worldwide repercussions. It also discusses the ongoing sovereign debt problems in Europe weighing on US stock prices. While the US economy is performing reasonably well, its recovery remains fragile due to uncertainty around Europe's debt situation. The document advocates for international diversification given the declining dominance of the US in global stock market capitalization.
The quarterly market review summarizes market performance in the first quarter of 2013. Global markets posted modest gains, with U.S. stocks outperforming international markets. The S&P 500 and Dow Jones Industrial Average reached new all-time highs. Ten-year returns remain positive across most asset classes and geographic regions, reinforcing the benefits of diversification and long-term investing.
The document summarizes recent quantitative easing programs by central banks and discusses the potential for the European Central Bank to engage in money printing to address the eurozone debt crisis. It notes that money printing is a softer method of default that reduces purchasing power over time. While money printing could reduce borrowing rates and ease the crisis temporarily, the ECB has so far declined to do so due to concerns over undermining its independence and inflation. The markets remain unsettled as Europe struggles to address its fiscal issues.
Elevation Wealth Management's quarterly review of the investment, financial, and economic landscape as of September 30, 2013. Key take-aways and useful insights for average and sophisticated investors alike.
The document discusses how European leaders are focused on addressing the liquidity problems facing European banks from Greek and other countries' debt, rather than the underlying solvency issues. A liquidity problem means short-term cash flow issues, while a solvency problem means the business model itself is unsustainable. Greece has both problems, and European banks heavily invested in weak countries may have solvency issues if more capital is not raised. Until tough decisions are made to solve both the liquidity and solvency problems, markets may remain volatile.
The document summarizes recent market contradictions and distortions that are contributing to investor risk aversion and confusion. Government interventions like stimulus programs, quantitative easing, and bailouts have generated unintended side effects in markets. Politicians debate the merits of intervention versus free markets. Falling stock prices may paradoxically reduce risk as valuations decline, setting up markets for better long-term returns according to some analysts. Overall, distortions and political debates are causing uncertainty, stagnation, and falling stock prices.
1. Hyre Weekly Commentary
May 21, 2012
The Markets
There wasn‟t much to „Like‟ in the financial markets last week as stocks took a hit on another
round of global worries. High on the list of concerns were:
Continuing anxiety over Greece‟s ability to avoid default and remain in the euro.
Rising borrowing costs for Italy and Spain.
Ongoing fears of an economic slowdown in China.
Loss of faith in the banking system due to JPMorgan‟s $2 billion (and growing) bad bet.
A very tepid response to the highly anticipated stock market debut of Facebook.
Source: CNNMoney
Investors are particularly frustrated that the European debt situation keeps popping up like
dandelions. After two years and 17 euro zone summits, the issue is still not resolved. In fact, it
might be worse than ever as Europe is quickly running out of road to kick the can down,
according to BusinessWeek.
Greece is at the epicenter of this worldwide concern despite the fact that its population is less
than the state of Ohio. Like the subprime crisis before it, investors are concerned that Greece
may be the falling domino that kicks off a series of undesirable effects. If Greece has a disorderly
collapse, it could spread to other weak European countries and then ripple out to the rest of the
world.
Unfortunately, the time for easy solutions has long passed. Central banks and governments
around the world have already added trillions of dollars to their balance sheets so they don‟t have
much room to maneuver. And, here in the U.S., we have a potentially bruising election and
looming tax and fiscal matters to deal with by the end of the year.
When you add it up, 2012 is on track to be another dramatic year in world affairs.
2. Data as of 5/18/12 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -4.3% 3.0% -2.9% 12.5% -3.2% 1.7%
DJ Global ex US (Foreign Stocks) -6.1 -2.8 -20.5 5.0 -7.4 3.7
10-year Treasury Note (Yield Only) 1.7 N/A 3.2 3.2 4.8 5.2
Gold (per ounce) 0.4 1.0 6.2 20.0 19.3 17.7
DJ-UBS Commodity Index 0.9 -3.3 -16.5 4.3 -4.7 3.2
DJ Equity All REIT TR Index -6.7 6.0 2.7 27.7 0.2 9.9
Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a
dividend) and the three-, five-, and 10-year returns are annualized; 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 at the 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 be invested into directly. N/A means not
applicable.
WOULD YOU GIVE YOUR MONEY TO THE U.S. GOVERNMENT for 10 years and lock
in a negative yield? Well, that‟s exactly what happened last week as investors handed over $13
billion to the government and, in return, received 10-year Treasury Inflation Protected Securities
(TIPS). These securities were sold at a record low negative yield of 0.39 percent, according to
The Wall Street Journal.
TIPS are a bit different from traditional government securities because, “The principal of a TIPS
increases with inflation and decreases with deflation, as measured by the Consumer Price Index.
When a TIPS matures, you are paid the adjusted principal or original principal, whichever is
greater,” according to the Treasury Department.
Now, why would anybody buy a TIPS with a negative yield when they could buy a traditional
10-year government security with a yield of about 1.7 percent last week? The answer lies in the
difference between the two yields.
As reported by Bloomberg, the yield difference between a 10-year TIPS and a comparable 10-
year Treasury security was 2.04 percentage points on May 17. Analysts call this the “break even
inflation rate.” It means investors were expecting inflation to average 2.04 percent over the next
10 years. When you add the 2.04 percent expected inflation rate to the negative 0.39 percent
yield of a TIPS, you get close to the yield of a traditional 10-year government security.
From an investment standpoint, if inflation averages more than 2.04 percent over the next 10
years, then owning TIPS might be a better deal than owning the traditional 10-year government
security. Likewise, if inflation averages less than 2.04 percent over the next 10 years, then
owning the traditional 10-year security might be better, according to The Vanguard Group.
With its built-in inflation protection component, TIPS are traditionally viewed as a hedge against
inflation rather than a play on interest income.
As an advisor, it‟s important for us to know the break even inflation rate that is embedded in
TIPS. Knowing the market‟s best estimate of inflation provides data we can use to help us value
and analyze other investments that may be affected by changes in investors‟ inflation
expectations.
3. Weekly Focus – Did You Know…
There is only one word in the English language with all five vowels in reverse order. Try to
guess what it is before reading below for the answer.
Source: http://www.byfaith.co.uk/paul2028.htm
The answer is “subcontinental.”
Best regards,
Jim Hyre, CFP®
Registered Principal
Raymond James Financial Services, Inc.
Member FINRA/SIPC
2074 Arlington Ave.
Upper Arlington, OH 43221
614.225.9400
614.225.9400 Fax
877.228.9515 Toll Free
www.hyreandassociates.com
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4. * This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the
named broker/dealer.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance
of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the
U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark
for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market
Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the
commodity futures market. The Index is composed of futures contracts on 19 physical commodities and
was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of
the Real Estate Investment Trust (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 future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
**Treasury Inflation-Protected Securities, or TIPS, are subject to market risk and significant
interest rate risk as their longer duration makes them more sensitive to price declines associated
with higher interest rates.
Sources:
http://money.cnn.com/2012/05/18/markets/stocks/index.htm?iid=HP_LN
http://www.euronews.com/2012/01/30/eu-leaders-hold-debt-crisis-summit-again
http://www.businessweek.com/news/2012-05-18/s-and-p-500-falls-at-3-times-2011-rate-as-may-losses-
deepen
http://online.wsj.com/article/BT-CO-20120517-711941.html
http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm
https://personal.vanguard.com/pdf/flgpt.pdf
5. 2074 Arlington Avenue, Columbus, Ohio 43221
614.225.9400 local | 877.228.9515 toll-free | 614.225.9400 fax
www.hyreandassociates.com | info@hyreandassociates.com
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC.