A Warm November?

Now that November is here, are stocks due to heat up for the next couple of months? There's a longstanding adage that investors should "Sell in May, then go away"; the time they're supposed to return to the market is in November. And there's a growing body of research suggesting this may be exactly the right move.

Two researchers in New Zealand recently took a staggeringly comprehensive look at the phenomenon, examining every bit of historical data they could from 108 different markets. They had a whopping 300 years’ worth of information regarding the market in the United Kingdom alone. The bottom line: Returns from November through April over all that time were 4.52 percent higher than returns from May through October. 

And if anything, the effect is getting stronger. In the past 50 years, the average advantage for May through October has increased to 6.25 percent. Over the last five 10-year sub-periods that the researchers looked at, the November Effect ranged from 5.08 percent to 8.91 percent. In other words, it’s lately been at least 5 percent, and is regularly much more than that. This is definitely something to keep in mind.

A Solid Foundation for Housing

As we assess the damage done to our homes here in New Jersey by Hurricane Sandy, it appears that the housing market around the country is in increasingly good shape. The median selling price rose in the third quarter of 2012 for 120 out of the 149 metropolitan areas surveyed by the National Association of Realtors. That's 81 percent of all U.S. cities showing an increase in prices.

Overall, home prices jumped 5 percent in September over the same month a year earlier. That's the biggest 12-month increase we've seen since June of 2006. Nationwide, the median price for an existing single-family home was $186,100 in the third quarter of this year.

One of the major factors was the dwindling number of homes for sale. At the end of the third quarter, 2.32 million existing homes were available for sale, 20 percent less than had been available in the year-earlier period. A big factor in that is the fact that all those foreclosures have been clearing off the market; we'll have to wait and see what effect Sandy has on home sales.

The Economic Toll

There's no denying the horrible destruction that the hurricane wreaked on our area. You simply need to look around to see evidence of that. Now some of the economic toll is starting to become clear as well. Consumer spending has more or less ground to a halt since the storm arrived, according to data compiled by MasterCard.

Here in New Jersey, retails sales for the week of October 28 through November 3 were just 60 percent of what that week normally sees. It was a little bit better in New York and Connecticut, which  had about 80 percent of the normal retail sales for the week. And those figures do not include automobile sales; it's hard to imagine many New Jerseyans were out buying a car over the weekend.

On the other hand, there has been an awful lot of economic activity accounted for by contractors, plumbers, electricians, etc. Those costs haven't been quantified, but the city of New York has already spent $5 million on pumping equipment alone. It's going to take an awful lot of spending to rebuild this kind of destruction.

Thoughts for Election Day

"A politician thinks of the next election; a statesman thinks of the next generation."  ~ James Freeman Clarke

“I'm tired of hearing it said that democracy doesn't work.  Of course it doesn't work.  We are supposed to work it.”  ~ Alexander Woollcott

“Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost.” ~ John Quincy Adams

Retirement Plans and The Middle Class

Both presidential candidates have been very forthright about their devotion to taking care of the middle class, but there's some evidence recently that the middle class hasn't been doing a good job of taking care of itself. The research firm LIMRA has conducted a survey of middle-class Americans - defined as those earning between $40,000 and $100,000 annually - and found that two thirds of them save less than 5 percent of their income for retirement. Nearly fourth of them save nothing at all.

What's even worse is that the closer people are to retirement, the less likely they are to save. Members of the middle class over the age of 55 were actually the most likely to be saving nothing at all, with 26 percent of them in that group. On the other hand, that cohort was also the most likely to say they knew they needed to save 15 percent or more of their income for retirement.

In a separate survey, the Insured Retirement Institute found that 30 percent of all Baby Boomers stopped contributing to a retirement plan during the past 12 months, and 16 percent of them prematurely withdrew funds from a retirement plan. Of course, the Boomers have started retiring, so you'd expect some of them to stop funding a plan - but not 30 percent of them.

October's Jobs Report

In the jobs report out this morning, October brought us a bit of a reversal from the September news. Back then, you'll remember, the overall number of jobs added was fairly weak, but the unemployment rate moved downward anyway. In October, we have a much stronger number of new jobs, with the economy adding 171,000. But the rate ticked back upward, from 7.8 percent to 7.9 percent.

This latest figure is right on target for what we've been seeing lately. Since July, the economy has added an average of 173,000 jobs per month. The Bureau of Labor Statistics also revised the figures for August and September, and announced that we added 84,000 more jobs than previously thought.

So why did the unemployment rate move upward? Primarily, it was because the work force expanded, with an additional 578,000 Americans starting to look for work. It appears as if the strengthening economy is encouraging more people to get back into the labor force.

The Bad - and Good - News About Gas

Among the other problems we're facing here in New Jersey, gasoline has been very difficult to find. Even some stations that are open and have gas also have waits of an hour or more for consumers to fill their tanks. Governor Christie has announced that stations will be allowed to buy gas from out of state, which is normally not allowed. That should ease things a bit.

But in the longer term, the storm might end up having a positive impact on fuel prices. Crude oil prices dipped yesterday, in large part over concerns that the damage from Sandy will limit driving and other transportation here in the Northeast. With less demand for fuel, gasoline prices could drop as well.

Of course, Hurricane Sandy isn't the only thing going on in the world. Chinese demand for oil has fallen as well, and world oil supplies are ample right now. Add it all up, and we might see some much-needed relief at the pump.