Tuesday, April 10, 2012

Jersey Benefits Advisors Investor Newsletter Spring 2012

Market Watch

In the early weeks of April, much of the vegetation here in the Mid Atlantic region seems to be springing to life a bit ahead of schedule. It almost makes you feel like it is safe to put the summer plants outside, but the wary gardener knows a nasty frost can rear its ugly head at anytime in this very changeable season. With the best quarterly start for the markets since 1998, the prudent investor should also realize there are always dangers lurking ,when the markets jump off to such a stellar start.

At the end of the first quarter, the Dow Jones Industrial Average* closed at 13,212.04, which is an 8.14% gain. Meanwhile, the S&P500* ended at 1,408.47 posting an advance of 12%. Not to be outdone, the NASDAQ* roared to a close of 3,091.57 which was an eye popping 18.67% year to date increase. Needless to say, there is the distinct possibility there may be a bit of a pullback from these levels as we progress through the spring. This is in keeping with the natural ebb and flow of the markets, as investors evaluate the forces that have an effect on their psyche and decision making.

As we head into Easter, a bit of a pullback has already begun, and the same concerns we’ve discussed before are still very much in the minds of investors.  As I am writing this, the markets are reacting to concerns about the message in the FOMC minutes released this week.  While the Fed is still committed to holding interest rates at their current level until 2014, one statement in the report concerned the lack of a need for any more quantitative easing (QE), and so some investors started selling, because of their concerns the Fed won’t be quite so accommodating.  Yet, a less than accommodating Fed can also be read as a sign of economic improvement.  It just depends on your particular point of view.

There have been many positive signs of economic improvement, which is why the markets performed so well in the first quarter.  As the employment picture slowly improves, more people are beginning to feel confident that the economy is truly in expansion mode.  Demand for products continues to increase, with auto sales being the most recent indicator that the automobile industry is making a comeback.  Even with the setback from the President nixing the Keystone Pipeline XL, the oil and gas industries are still expanding production.  As company earnings are reported and guidance is issued this month, investors will have a better picture of the health of the economy.

Of course there are more concerns, besides the lack of accommodation by the Fed, which trouble investors.  The European economies are still slowing and recession concerns are very real.  China, India and Brazil are also hitting some economic rough spots, due to the problems in Europe.  Iran continues to thumb its nose at rest of the world in regard to uranium enrichment, and as a result, even though there is more than an ample supply of oil floating around the globe, prices have been rising perilously close to the level where they can seriously disrupt our economy.  The main reason prices are this high is because of the concern that Israel might attack Iran’s nuclear facilities, and Iran might retaliate by disrupting the flow of oil through the Straits of Hormuz. 

Cautious optimism is how I am personally approaching this juncture.  Recently, Iran was cut out of the SWIFT system, which seriously limits their ability to conduct commerce.  Slowly but surely,  our economy is improving.  Finally, at least some US politicians are beginning to talk about fixing Social Security, Medicare & Medicaid. 

It’s Time To Get Off The Bench And Into The Game

If you’ve been sitting on the sidelines with cash to invest, don’t despair after seeing the first quarter gains and feel like all of a sudden you need to get fully invested in the market.  Remember, the markets rarely go straight up or down.  While I don’t think we are headed for a pullback similar to last spring, the markets still face enough headwinds to provide investors ample opportunities to deploy capital.

Volatility was tame during the first quarter, and there were a minimal number of triple digit days.  Considering a 130 point move in the DJIA represents about 1%, dealing with moves of less that 1% daily helps investors, who are not particularly fond of roller coaster rides, feel a bit more confident.  Contact me to diversify your holdings and help you invest systematically.

Will the Politicians Finally Face Facts in 2012?

In previous issues of this newsletter, we’ve discussed many of the issues confronting our nation, and as we prepare for the 2012 election, hopefully, we will begin to take some positive steps toward getting our fiscal house in order.  I referenced above, the fact that some politicians are beginning to discuss ways to adjust Social Security, Medicare and Medicaid, the so called “safety net”, in order to preserve these programs for future generations.  We simply can’t get the government’s budget out of deficit, without making adjustments to our entitlement programs.  The argument is not whether or not to save these programs, because neither party, despite all of the demagoguery, wants to scrap them.  The argument is how do we save them, preserve benefits for those at or close to retirement age, and adjust benefits and expectations for those who will rely on these programs in the future.  This is no small task, and it will entail major compromises, including budget cuts and tax hikes. 

In the April 2012 edition of Smart Money, one of the articles discusses the changes in thinking of people near or in retirement.  Many of them are holding on to their jobs longer, or if they are retired, are looking for a second act.  This is at least partly due to the economic disruption we’ve experienced since 2008.  The article goes on to say, ”The decades long retirement is actually a relatively new invention.  In the early 1900’s nearly 80% of Americans over the age of 65 had a job.  Folks expected to work for as long as they lived, says Dora Costa, an economic historian at the University of California, Los Angeles, and they’d generally stop laboring only if they became too ill or frail to keep going.  The average retirement lasted three years.  That began to change, of course, with the introduction of Social Security and private sector pensions, both designed to free older workers from the need to choose between work and starvation.  By the latter half of the 20th century, longer life spans meant people could count on living well past retirement age, and an evolving financial services industry was pitching products to help people fund a long retirement.  The result, right before everything went to hell, the average retirement lasted 20 years”.

Nobody wants to go back to the Darwinian past, but as we are witnessing the unraveling of the European Social Democracies, it is important to realize we don’t have to go down the same path.  There needs to be a balance between the public and private sectors, because without the private sector, there can be no public sector.  It all comes down to whether you believe in free market capitalism, or whether you believe the government is the great job creation machine.

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
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL  33758-9053
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
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
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits
* 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.