This week was a little wild with fluctuations in commodity prices. This briefly talks about the correlation between these 3 types of assets. The beginning section is a weekly recap from Vanguard. The final section gives some trivia about the human body.
I do want to mention the Relay for Life event on June 3rd and 4th to raise money for the American Cancer Society. This week, 3 more people became sponsors which is a wonderful thing and I do a 25% match to their donations. Please join the list, we all know way too many people impacted by cancer. If you want to make a donation let me know and if it is based upon distance, I plan on walking at least 40 miles.
Vanguard
Steep gasoline prices impacted key indicators this week as major sectors of the economy felt the squeeze of high fuel costs. Prices paid by producers and consumers rose at their fastest 12-month clip in more than two years while retailers also endured the impact of high energy costs. Economists are thus keeping a sharp eye on inflation, though upward pressure shows some signs of easing. For the week ended May 13, the S&P 500 Index fell 0.2% to 1,338 (for a year-to-date total return—including price change plus dividends—of about 7.1%). The yield of the 10-year U.S. Treasury note fell 1 basis point to 3.18% (for a year-to-date drop of 12 basis points).
Stocks, Long Term Bonds, and Commodities
These 3 asset classes represent most things that impact our day to day lives. Long term bond rates impact lending rates, like mortgages. Commodities impact us at the pump, grocery store, etc. Stocks impact the average investor that invests in a stock or a mutual fund. So the question is does their performance relate and can it be correlated? The answer is that they are loosely related and a correlation factor can be calculated which changes with time.
Generally speaking, in a growing economy stock prices rise, long term bond rates rise (price drops), and commodity prices rise. The reason is that corporations will grow giving better profits and allowing for hiring of more people. Commodity prices rise due to higher demand from companies and people who have more money. Long term bond rates rise as investors sell long term treasury bonds to purchase stocks and commodities.
Generally speaking, in a slowing economy the opposite happens. Commodities are traded on exchanges around the world and people invest in them by buying them directly, purchasing stock in a company, or purchasing a mutual fund/ETF. Since commodities are traded worldwide the value of a currency will impact the prices. This means if the value of the US Dollar declines 10% that the cost of commodities that we import will increase by 10%, another reason to solve our Federal debt problem.
This relationship breaks down when commodity prices get so high that it impacts the ability for a company to make a profit or us consumers to purchase day to day items. Normally, when things act wild it means that an investment class is at a resistance level. This suggests that the rise in commodity prices has peaked for now and any talk of commodity prices continuing to rise this year, such as gas prices over $5/gallon, does not make much sense to me. Longer term, higher commodity prices make sense with an improving global economy and our growing Federal debt.
If you are concerned about having to pay higher prices at the pump or in the store own a mutual fund that invests in commodities. If commodity prices rise you make money to cover the added expense. If commodity prices fall you have more money in your pocket. Some food for thought on how to look at this issue from both sides.
The Amazing Human Body
• There are 230 joints in the human body.
• The average length of arteries, capillaries and veins in the human body is 62,000 miles.
• It has been medically proven that laughter helps control pain, lower blood pressure and relieve stress.
• Most able people will walk 115,000 miles in their life-time – or around the world 4 ½ times.
Saturday, May 14, 2011
Sunday, May 8, 2011
Happy Mother's Day - Funding Her Retirement Account
First, let me wish you a Happy Mother's Day. The last section gives some trivia information for this special day. The first section is from Vanguard giving a recap of last week's events. In the middle is a short section on the importance of funding a retirement account for a wife or mom.
Vanguard Weekly Recap
Two reports issued this week offered contrasting (and somewhat contradictory) assessments of the unemployment situation. On the positive side, the number of payroll jobs created in April was surprisingly high. The overall unemployment rate, however, inched upward in April instead of staying flat, as had been expected. The week's other reports painted a mixed, but generally encouraging, picture. For the week ended May 6, the S&P 500 Index fell 1.7% to 1,340 (for a year-to-date total return—including price change plus dividends—of about 7.2%). The yield of the 10-year U.S. Treasury note fell 13 basis points to 3.19% (for a year-to-date decrease of 11 basis points).
Funding Her Retirement Account
This is my opinion that it is important to fund the retirement account for your wife or mom. A view that has existed is that only the primary wage earner should have a retirement account. My view is that it is important for every adult to have a retirement account for financial and self sufficiency reasons.
My observations is that a person who enters retirement with money in an account has a greater sense of control for the future. Also it makes good sense financially to fund an IRA for both spouses as this can reduce the current tax burden. In the end you reduce the tax burden, have more resources during retirement, and give her a sense of security during retirement, a triple play.
Mother's Day Trivia
One of the early calls to celebrate a Mother's Day in the United States was the "Mother's Day Proclamation" by Julia Ward Howe. Written in 1870, it was a pacifist reaction to the carnage of the American Civil War and the Franco-Prussian War. The Proclamation was tied to Howe's feminist belief that women had a responsibility to shape their societies at the political level.
In the years after the Mother's Day Proclamation, Ann Jarvis founded five Mothers' Day Work Clubs to improve sanitary and health conditions. In 1907, two years after Ann Jarvis' death, her daughter Anna Jarvis held a memorial for her mother and began a campaign to make "Mother's Day" a recognized holiday in the US. Although she was successful in 1914, she was already disappointed with its commericalization by the 1920s.
In 1912, Anna Jarvis trademarked the phrases "second Sunday in May" and "Mother's Day", and created the Mother's Day International Association."She was specific about the location of the apostrophe; it was to be a singular possessive, for each family to honour their mother, not a plural possessive commemorating all mothers in the world." This is also the spelling used by U.S. President Woodrow Wilson in the law making official the holiday in the U.S., by the U.S. Congress on bills, and by other U.S. presidents on their declarations.
Vanguard Weekly Recap
Two reports issued this week offered contrasting (and somewhat contradictory) assessments of the unemployment situation. On the positive side, the number of payroll jobs created in April was surprisingly high. The overall unemployment rate, however, inched upward in April instead of staying flat, as had been expected. The week's other reports painted a mixed, but generally encouraging, picture. For the week ended May 6, the S&P 500 Index fell 1.7% to 1,340 (for a year-to-date total return—including price change plus dividends—of about 7.2%). The yield of the 10-year U.S. Treasury note fell 13 basis points to 3.19% (for a year-to-date decrease of 11 basis points).
Funding Her Retirement Account
This is my opinion that it is important to fund the retirement account for your wife or mom. A view that has existed is that only the primary wage earner should have a retirement account. My view is that it is important for every adult to have a retirement account for financial and self sufficiency reasons.
My observations is that a person who enters retirement with money in an account has a greater sense of control for the future. Also it makes good sense financially to fund an IRA for both spouses as this can reduce the current tax burden. In the end you reduce the tax burden, have more resources during retirement, and give her a sense of security during retirement, a triple play.
Mother's Day Trivia
One of the early calls to celebrate a Mother's Day in the United States was the "Mother's Day Proclamation" by Julia Ward Howe. Written in 1870, it was a pacifist reaction to the carnage of the American Civil War and the Franco-Prussian War. The Proclamation was tied to Howe's feminist belief that women had a responsibility to shape their societies at the political level.
In the years after the Mother's Day Proclamation, Ann Jarvis founded five Mothers' Day Work Clubs to improve sanitary and health conditions. In 1907, two years after Ann Jarvis' death, her daughter Anna Jarvis held a memorial for her mother and began a campaign to make "Mother's Day" a recognized holiday in the US. Although she was successful in 1914, she was already disappointed with its commericalization by the 1920s.
In 1912, Anna Jarvis trademarked the phrases "second Sunday in May" and "Mother's Day", and created the Mother's Day International Association."She was specific about the location of the apostrophe; it was to be a singular possessive, for each family to honour their mother, not a plural possessive commemorating all mothers in the world." This is also the spelling used by U.S. President Woodrow Wilson in the law making official the holiday in the U.S., by the U.S. Congress on bills, and by other U.S. presidents on their declarations.
Sunday, May 1, 2011
Sell in May and Go Away
The topic is the saying Sell in May and Go Away. The first section is from Vanguard.
Vanguard
The U.S. is on the mend from the recession and financial crisis, but while the repairs are evident, the workers aren't yet ready to pack their tools and take down the scaffolding. The economic situation is serious enough that Fed Chairman Ben Bernanke held the first-ever news conference for the Federal Market Open Committee (FOMC) in addition to releasing a customary statement. Overall, the economic news this week was mixed. Real gross domestic product (GDP) grew at a slower pace in the first quarter than it did in the fourth quarter of 2010. Consumer confidence and the housing market are slowly improving, but still not at levels considered healthy. The stock market surged on good news and shrugged off the bad. For the week ended April 29, the S&P 500 Index rose 2.0% to 1,364 (for a year-to-date total return—including price change plus dividends—of about 9.1%). The yield of the 10-year U.S. Treasury note decreased 10 basis points to 3.32% (for a year-to-date increase of 2 basis points).
Sell in May and Go Away
This is a saying for investors in stocks to sell all stocks on May 1st and repurchase them at the end of September to avoid the summer lull in the stock market. It is a saying to tell people how to time the market. If you look at the average return for these months compared to other months it does suggest that the stock market is calmer during these 5 months.
However, if you analyze the monthly return data for these month you will find that the variability is greater than the average return. This means statistically this saying has no real value and this saying should be avoided. The best thing to do is invest in stocks as the economy is growing and ignore this saying.
Vanguard
The U.S. is on the mend from the recession and financial crisis, but while the repairs are evident, the workers aren't yet ready to pack their tools and take down the scaffolding. The economic situation is serious enough that Fed Chairman Ben Bernanke held the first-ever news conference for the Federal Market Open Committee (FOMC) in addition to releasing a customary statement. Overall, the economic news this week was mixed. Real gross domestic product (GDP) grew at a slower pace in the first quarter than it did in the fourth quarter of 2010. Consumer confidence and the housing market are slowly improving, but still not at levels considered healthy. The stock market surged on good news and shrugged off the bad. For the week ended April 29, the S&P 500 Index rose 2.0% to 1,364 (for a year-to-date total return—including price change plus dividends—of about 9.1%). The yield of the 10-year U.S. Treasury note decreased 10 basis points to 3.32% (for a year-to-date increase of 2 basis points).
Sell in May and Go Away
This is a saying for investors in stocks to sell all stocks on May 1st and repurchase them at the end of September to avoid the summer lull in the stock market. It is a saying to tell people how to time the market. If you look at the average return for these months compared to other months it does suggest that the stock market is calmer during these 5 months.
However, if you analyze the monthly return data for these month you will find that the variability is greater than the average return. This means statistically this saying has no real value and this saying should be avoided. The best thing to do is invest in stocks as the economy is growing and ignore this saying.
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