At the risk of sounding like a broken record, when you look back at market performance for the third quarter, you can’t help but realize the litany of investor concerns were quite similar to the worries of the first two quarters of 2011. Unemployment stuck at 9.1%, global unrest, natural disasters and the European sovereign debt crisis, especially in Greece, seemed to be the recurrent themes causing investor angst. Unfortunately, the market indices were unable to mount the end of quarter surge that provided some relief during the first two quarters, and the market indices took a tumble in the third quarter, leaving them teetering near bear market territory.
Of course, Congress did not disappoint with their political partisanship exhibited during the August debt limit debacle. Their inability to develop a credible solution to the country’s fiscal situation, and the President’s inability to propose anything other than tax increases on the “so called rich” and more spending led to a downgrade by S&P on US debt. Of course, S&P may have had just a slight reason to play gotcha, since their ratings of mortgage backed securities and collateralized debt obligations during the housing boom have been called into question by Congress and the President.
It looks like we might be stuck in this current range for the markets until the 2012 elections are over unless the super committee, which was born out of the debt limit crisis, can come up with some recommendations for trimming the deficit and getting our fiscal house in order. If they don’t, $1.2 trillion across the board spending cuts will be implemented. The clock is ticking, as their deadline is November 23.
It gets extremely frustrating when you listen to the rhetoric of our leaders and realize their utter cluelessness at how their inability to compromise affects the markets. They talk about helping main street, yet they fail to realize the markets contain the retirement assets of most of the citizens of this fair land. In his testimony before Congress’s Joint Economic Committee, Ben Bernanke, Chairman of the Federal Reserve, stated, ”Political brinksmanship over the debt ceiling is no way to run a railroad”. Too bad Congress doesn’t get it, regarding the effect of their inaction on market sentiment.
The Dow Jones Industrial Average* closed the quarter at 10,913.38 down 12% for the quarter and a –5.74% return for the year. The S&P 500* ended the quarter at 1,131.42 a –10.04% year to date return and off 14% for the quarter. Meanwhile, the NASDAQ* finished the quarter at 2,415.40 having fallen 13% for the quarter and –8.95% for the year. As uninspiring as these results are, the market indices have not crossed into bear market territory as we go to print on 10/6/2011. Even though there have been some harrowing events in October, the crashes of 1929 and 1987 come readily to mind, Jeff Hirsch, editor in chief of Wiley’s Stock Trader’s Almanac states, “Going back to 1950, September has had a greater average loss than October”. Furthermore, according to research by Bank of America Merrill Lynch, since 1964 there have been 15 quarters in which the S&P 500 lost 10% or more. After12 of those 15 quarters, the subsequent quarter saw an average rally of 10%. Let’s hope the odds are in our favor going forward, and that there are some adults in the room during the super committee’s debate on deficit reduction.
If you have any questions or concerns, please don’t hesitate to contact me.
ARE WE HEADING FOR THE DREADED DOUBLE DIP?
Most economists are not predicting a “double dip recession”, but it is a topic currently being discussed. I have heard odds of anywhere between a 20% chance of it happening, to the point where some people are saying we are already in recession again. If you remember in the past, we discussed an inverted yield curve as a recessionary indicator. At the current time the Fed is attempting to lower long term interest rates and flatten the yield curve, since it now has a positive slope.
While it is possible for the economy to slip into recession with a positive yield curve, I don’t think we will see a double dip. Businesses will be reporting their earnings in the next few weeks, and it will be positive for the markets. There is just too much doom and gloom, so I’m a contrarian on the double dip.
A Familiar Chart?
Dot Com Bust!
Housing Bust!
Gold?
OPERATION TWIST & NEW ADDITION TO OUR WEBSITE
OPERATION TWIST
At the September FOMC meeting the Federal Reserved stated the economy was facing headwinds and interest rates would remain low. They also announced Operation Twist, one of the tools at the Feds disposal to put pressure on long term interest rates. This tool was last used in the 1960’s and gets its name from Chubby Checker’s hit of that era, The Twist. Basically, the Fed will be selling short term bonds from the Treasury and replacing them with longer term bonds with maturities between 25 and 30 years.
The Fed will be competing with individual and sovereign bond buyers, so the objective is to increase the price of longer term bonds, which in turn lowers the yield. Besides lowering long term interest rates, the Fed is also hoping investors will move their assets into higher risk investments. Recently, investors have been fleeing riskier investments for the perceived safety of Treasuries. They have been willing to park their money in an investment with no return, in order to prevent losses. This creates risk too, because bonds purchased at a premium can fall in price and produce a loss.
ONLINE LIFE INSURANCE
We have partnered with ORG, Inc. to develop and market an online life insurance quotation system that allows individuals to enter their information and receive competitive quotes from major insurance carriers online. In most cases the application can also be completed online. There is also a direct toll free line to speak to a customer service representative, as well as an email link to ask questions or receive assistance with the quotation or application process. The quotes can be obtained from our Jersey Benefits Group, Inc. Website, or the Jersey Benefits Life Insurance Website. For people who wish to complete the process of applying for life insurance totally on their own, and like to evaluate numerous quotes independently before applying, this site should satisfy their needs. Quotes are free and no money is exchanged until the individual is approved for the policy quoted.
Of course, anyone who is interested in talking to an insurance advisor, who will meet with them in the traditional face to face manner, simply needs to contact the company either by telephone or email to set up an appointment. Through the ORG network, we can assist individuals outside the state of NJ to locate insurance professionals who can meet with them face to face. The toll free number to call, outside NJ, is (855) 802-4123 and the email address for those outside NJ is jersey.benefits@life4org.com. Anyone in the state of New Jersey can contact me directly for their insurance needs at (609) 827-0194 or by email Kaighn@JerseyBenefits.com.
* THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. SAVING A PORTION OF OUR PAY EACH MONTH IS VERY IMPORTANT. COMPANY SPONSORED PENSION PLANS ARE ONE METHOD TO SAVE AND SHOULD BE USED FOR RETIREMENT. OTHER SYSTEMATIC INVESTMENT ACCOUNTS, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES CAN ALSO BE OPENED, AND DEBITED DIRECTLY FROM YOUR CHECKING OR SAVINGS ACCOUNT. FOR MORE INFORMATION, JUST CALL TO SET UP AN APPOINTMENT. REFERRALS ARE ALWAYS WELCOME.
COMPANY INFORMATION:
Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
sors.
Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits Advisors.
LD41861 - 10/11
