Friday, September 30, 2011
Thursday, September 29, 2011
What happened to drive the price down? The answer may lie not so much in supply and demand as in margin rules. Buying an investment on margin, as you probably recall, means putting down only part of the purchase price, and borrowing the rest. The Shanghai Gold Exchange just last week raised the silver margin requirements by 20 percent, which apparently triggered the fall in price.
You might not attribute the drop solely to the rules of the Chinese market - except that there was another silver price plunge earlier in the year, right after the Chicago Mercantile Exchange raised its own margin requirements for silver. Yet another lesson in one of the most important principles of investing: The global supermarket is a complicated place.
Wednesday, September 28, 2011
A decrease of around $400 per household shouldn't have a dramatic effect on the economy - except the drop in spending was worse than that. The average American household spent 2 percent less than it had in 2009, and that was coming off a spending drop of 2.8 percent from 2008.
That's why the consumer confidence numbers are so important. We've seen declines in consumer spending not just because Americans have less money, but because they're more reluctant to spend the money they do have. The Conference Board reported yesterday that consumer confidence was ever-so-slightly higher in September, posting a "marginal gain"; that's a good first step.
Tuesday, September 27, 2011
Interestingly enough, though, there are indications that women tend to be more proactive about their finances than men. Of the women surveyed, 47 percent have consulted with a financial advisor on their retirement, while only 42 percent of the men had. And slightly more women than men have tried to figure out how much money they need to save for retirement, by a margin of 55 percent to 52 percent.
That's crucial, of course, to any retirement plan: identifying the gaps in your knowledge and trying to fill them in with expert advice. To see the full IRI survey, click here. And if you're unsure of any aspect of your own retirement, please feel free to give me a call.
Monday, September 26, 2011
The four sectors that are already in bear territory:
* Telecom Services
That leaves six stronger sectors: Consumer discretionary, consumer staples, energy, health care, materials and utilities.
Friday, September 23, 2011
Like a lot of financial terms, "bear market" gets thrown around a lot casually but does have a technical definition attached to it. A stock market is officially considered a bear when it drops 20 percent off its peak. Though the S&P 500 has been falling pretty hard since July, it's down only about 12 percent from its peak, which means that American stocks are not officially in a bear market.
We're actually one of the few international stock markets that's not a bear right now. There are 24 developed stock markets around the world, and every one of them is officially in bear territory except for markets in Canada, New Zealand, Singapore - and the good ol' U.S. of A.
Thursday, September 22, 2011
While some economists see the move as a tool that will increase overall growth, it's worth pointing out that interest rates are already pretty low, including long-term ones. The yield on the ten-year Treasury fell to an all-time low after the Fed's announcement, and 30-year mortgage rates are down to around 4 percent.
Since this program won't add anything to the Fed's bottom line, it's a relatively cheap tool to use, but remember, American businesses are already flush with cash right now. Having access to capital is not holding back most corporations. So while there isn't much opposition to this move, it remains to be seen what kind of impact it will ultimately have.
Wednesday, September 21, 2011
Tuesday, September 20, 2011
How bad is that? In the four months after the Lehman Brothers bankruptcy, at the end of 2008 and beginning of 2009, investors pulled out $72.8 billion from equity funds. We've managed to top that mark. It's no wonder that in those four months, the S&P 500 managed to lose more than 10 percent of its value.
The big winner in all of this has been bond funds. From April through July, American bond funds added $42.3 billion from investors, although they did start to see some outflows in August.
Sunday, September 18, 2011
Friday, September 16, 2011
Don't Be Afraid of the Dark
A while back, a study found that the stock market tended to have rough days on those Mondays in the autumn just after we switched off of daylight savings time, and suggested that the loss of those daylight hours (or a lack of sleep) might be depressing stock traders, and causing those gains. In fact, the worst Mondays of the year tend to come in the fall, when the S&P 500 has suffered average losses of as much as 8 percent.
But if you're thinking of making some trades to take advantage of this year's switch back to standard time - which is coming up on November 6 - that might not be a wise idea. Another researcher has gone back to the original study, and found that the real explanation for the market woes was not a lack of afternoon sunshine but dim economic news.
The second researcher, Jeffrey Gerlach, did find those drops on autumn Mondays, but determined that they were the result of "seasonal patterns in market-related information." In other words, it's the result of the same old things that always drive the markets.
Thursday, September 15, 2011
Wednesday, September 14, 2011
It's important to understand what this proposal would and wouldn't do. It applies only to people in the top tax bracket, which means families with more than $250,000 in income, or singles with more than $200,000. It would cut back the tax advantage for tax-exempt munis from 35 percent to 28 percent. It would also have no effect on state taxation levels.
The idea is that the reduction of this tax break would help pay for other job-creating activities in the president's bill. Last year's deficit reduction panel had already made a similar proposal. But in addition to raising taxes, it could also make it even more difficult for state and local governments to borrow money and finance their projects; those state and local governments have cut more than 600,000 jobs since 2008.
Tuesday, September 13, 2011
The survey also knocked down previous estimates of consumer spending growth, from 2.8 percent in the May forecast to 2.1 percent in the current one. The prediction for monthly jobs added for the remainder of the year fell from 190,300 in May to 124,000 for the September survey.
If there's a bright spot to all of this, it's that inflation expectations have been tamped way down as well. The ten-year TIPS spread has dropped to right around 2 percent, reflecting a global trend. Around the world, bond yields indicate an expectation of just 1.3 percent for consumer inflation.
Monday, September 12, 2011
The crisis was resolved, however, probably because this is one situation in which there is plenty of money to go around. Forbes magazine annually estimates the value of each of the NFL franchises, and the champion this year was the Dallas Cowboys, checking in at a whopping $1.85 billion. Our local teams, the Giants and the Jets, rank fourth and fifth respectively, with franchise values of $1.3 billion and $1.22 billion. The average NFL franchise is worth about $1.04 billion.
Where's all that money coming from? The NFL's network TV deals alone - there are four of them, with CBS, Fox, NBC and ESPN - total $3.1 billion a year, plus an additional $1 billion from DirecTV's Sunday Ticket. That's more than $125 million for each of the league's 32 teams. And here in New Jersey, the Giants and Jets shared $400 million from MetLife in naming rights for their new stadium. That's a pretty big haul, before either team sells a single ticket.
Friday, September 9, 2011
Mortgage debt of all kinds is on the rise for older people. In 1994, 22 percent of homes headed by people aged 60 through 64 still had primary mortgage debt; now that number is up to 39 percent. The figures for secondary mortgages have risen from 12 percent in 1994 to 20 percent today.
Home mortgages aren't the only type of debt affecting older Americans. According to TIAA-CREF, which runs many types of retirement funds, loans taken out against retirement accounts rose by 18.8 percent in the past year alone. That's going to make a comfortable retirement awfully tough.
Thursday, September 8, 2011
There was a dollop of good news, though. Retail sales and tourism activity were both pretty solid, at least until the hurricane hit. The residential real estate market has been stable for existing homes, and the commercial real estate market is even starting to rebound, with both office and industrial spaces showing some signs of improvement. In northern New Jersey, the industrial vacancy rate was at its lowest level in two years.
One thing to watch for the housing market: The Beige Book reports that foreclosures have been weighing down the residential market, which comes as no surprise to those of us who live here. But the processing of those foreclosures is proceeding ahead now, which might temporarily depress home prices but should also mean more sales and a reduction of housing inventory on the market.
Wednesday, September 7, 2011
Wall Street Journal columnist Gerald F. Seib looked at the Michigan numbers, and was able to pinpoint the moment at which consumers lost all that faith: the debt-ceiling battle. During the negotiations over the debt ceiling, consumer confidence took a hit similar to those it suffered through the Iranian hostage crisis or the Lehman Brothers bankruptcy. Not surprisingly, 71 percent of Americans say they are unhappy with the way the debt negotiations were handled.
Seib calls the whole spectacle "Washington at its worst." But unlike, say, the Lehman Brothers meltdown, the same actors are still in place and capable of redeeming themselves. The question now becomes: What, if anything can Washington do to rebuild consumer confidence?
Tuesday, September 6, 2011
The real yield is figured by taking the yield that ten-year Treasurys are paying, and subtracting the expected inflation rate over that same ten-tear period, as expressed in the TIPS (or Treasury Inflation-Protected Securities) rate. Obviously, the yield on the ten-year Treasury has been in the doldrums lately, closing Friday at just a smidge over 2 percent. That leaves it - at least for one day- right at the expectation for inflation.
The real yield had hovered between 0.75 percent and 1 percent most of the year, before plummeting in early August, at the time of the debt-ceiling standoff. It had actually stood at zero once before this year, on August 9th; where it heads next is anyone's guess.
Monday, September 5, 2011
Work while you have the light. You are responsible for the talent that has been entrusted to you.
Friday, September 2, 2011
That, of course, is another blow to the economy. We would need to be adding roughly 250,000 jobs a month in order to make a serious dent in the overall unemployment rate. That's why the Obama administration released a study yesterday forecasting that unemployment would stay around 9 percent for at least another year, and wouldn't dip below 6 percent until 2016.
To point up how bleak that is, prior to the onset of the recession, unemployment had last been above 6 percent for five months in 2003, and before that, not since September of 1994. But if these latest forecasts hold true, we could be looking at unemployment staying at that lofty level for eight whole years.
Thursday, September 1, 2011
Instead, the opposite has happened. The month of August saw Treasury bonds reach their strongest gains in almost three years, since December 2008. Yields plunged to record lows as investors, rather than finding American debt risky, chased after it as a safe haven. Treasury bonds returned more, on average, than corporate bonds did in the month of August.
Does that mean that S&P's call was wrong? Not necessarily, but it does appear that the number of investors who think that America's debt has gotten more risky is a distinct minority.