Stock Market Commentary
For the week of October 13, 2008
Trading activity on Friday showed that at least some investors believe the markets to be near a bottom, after one of the most volatile weeks in Wall Street history. Down 468 points at 3 p.m., the Dow jumped 790 points to +322 points just after 3:30 p.m. before a round of profit taking brought it down to close at -128 points. For the week, the Dow lost 18.09 percent to end at 8,451.49. The S&P lost 18.14 percent to finish the week at 899.22, and the NASDAQ dropped 15.30 percent to close the week at 1,649.51.
Let’s Go Out To Dinner – Americans spend $1.5 billion a day at restaurants and bars (Source: National Restaurant Association, BTN Research).
Receiving Benefits – Before 1960, the Social Security Administration would not approve disability benefits for any individual younger than age 50. The average age today of the 7.1 million disabled American workers receiving disability benefits from Social Security is 52.4 years of age (Source: Social Security, BTN Research).
Health Insurance Rate Hikes – The premium paid by employees for employer-provided health insurance has increased more on an annual basis than the national rate of inflation (using the CPI as the inflation proxy) for each of the last 10 years (1998-2007). Surprisingly, there was a four-year stretch of time (1994-97) when the annual rate of inflation in the U.S. exceeded the annual increase for health insurance premiums during each of the years. The consumer price index (CPI) is a measure of inflation compiled by the U.S. Bureau of Labor Studies (Source: Department of Labor, Employee Benefit Research Institute, BTN Research).
We Sell. China Buys – U.S. exports to China are on pace to reach $74 billion in calendar year 2008, an increase of $9 billion over our $65 billion of exports to China during 2007. The latter amount represented a $10 billion increase over the $55 billion we sold to Chinese buyers in 2006 (Source: Department of Commerce, BTN Research).
RTC History – The eventual cost to taxpayers of the Resolution Trust Corporation (aka RTC, which ran from 1989-95) was $120-140 billion, more than 70 percent less than the original $500 billion cost estimate. The RTC was created to sell real estate assets from failed savings and loans (Source: New York Times, Denver Post, BTN Research).
WEEKLY FOCUS – Fighting Your Impulses
In an uncertain market, you may be tempted to do one of two things: hide under the covers and do nothing, or make radical moves like investing in a “hot stock” you heard about through a much forwarded email.
Intellectually, you know that either course can have disastrous results on your portfolio. But sometimes it’s hard to rein in those emotions. We like to think our office provides the reassuring hand on your shoulder in times of financial uncertainty. However, we understand that unrelenting itch to do something. Here we offer some productive actions you can take to scratch that itch.
Schedule a check-up: Call us for an appointment to review not only your investments but your big picture, including any changes in your job, family or long- term plans. A small change, like a pebble in a pond, can have broader impact. Covering all the bases helps ensure we don’t miss a potential problem – or opportunity.
Educate yourself: Knowledge is power – if it’s the right kind of knowledge. Call us for some recommendations on books, magazines and web sites that present solid information on investing. Increasing your understanding of investment concepts can help us better communicate with you about your goals and help you better understand the basis for our recommendations.
Ignore the hype: It’s easy to get caught up in the seemingly endless universe of self-proclaimed experts touting the next great thing. That’s exactly the kind of follow-the-leader mindset that created the dot.com bubble. Someone somewhere does have a good idea. Determining who that might be among thousands of contenders would be nearly impossible. And even if you found that idea, it might not apply to your situation. Call us when you need a sounding board.
Help someone else: Does your parent or child need assistance with their finances? Have you been avoiding family financial conversations? Market uncertainty provides a great way to start that conversation. Call us if you need a neutral third party to assist you in talking finances with your adult family members.
It’s easy to get caught up in the hype, so next time you get that urge to do something, call us, your professional sounding board.
* 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 Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Written by Securities America. SAI# 288604