2010 Review

I hope that your Christmas was filled with blessings and that you are safe and warm given the Christmas snow. Since this is the last week of 2010, this gives a brief review of 2010 from an Economic Business Cycle Investing perspective. The first section is the weekly recap from Vanguard.

Vanguard

With the holidays upon us, consumers are increasingly jolly with their spending, as evidenced by personal income reports. Third-quarter real GDP was revised upward again to an annualized increase of 2.6%, even as the housing industry continued to struggle and durable-goods orders fell. For the holiday-shortened week ended December 23, the S&P 500 Index rose 1.0% to 1,257 (for a year-to-date total return of about 14.9%). The yield of the 10-year U.S. Treasury note rose 8 basis points to 3.41% (for a year-to-date decrease of 44 basis points).

2010 Review

The US economy stayed in the recovery mode of the economic business cycle for the year with hints of growth toward the end of the year. As with any economic recovery, this year had some turbulence with periods of fear and jubilation creating swings in interest rates and the value of stocks.

Interest Rates: Interest rates tend to stay flat during a recovery. Looking at the entire year the interest rates have been relatively flat where the rates at the end of the year being similar to that at the beginning. So far the 10 year US Treasury rate has dropped by 0.44%, not much of a change. The interest rates did drop giving a great opportunity to refinance a mortgage. Purchasing of US Treasuries by the Federal Reserve did influence interest rates.

Stock Market: Stocks typically do well in a recovery. The S&P 500 index has risen 14.9% for the year, above the historical average. Considerable volatility did exist as a high was reached in April followed by a significant drop and ending the year at an even higher level. It kind of looked like a yoyo climbing a flight of stairs.

Employment: The employment rate normally stays relatively flat in a recovery. The key metric is hours worked per week as employers delay hiring until the growth phase of the business cycle. Next year will bring employment gains.

Commodity Prices: The price of commodities normally stay flat during a recovery and rise during the growth phase. This was true during most of the year with increasing prices toward year's end. This recent rise indicates that the economy is entering a growth phase especially if you look at the price of oil, gas, and copper. We should expect even higher commodity prices next year.

The bottom line is that 2010 acted fairly normally for the recovery phase of the economic business cycle. Commodity prices are indicating that economic growth is coming and because of this some changes will occur to investing profiles during 2011.

The next posting will give the investing gameplan for 2011. I encourage you to read it and respond if you have a question as it is important to have a common vision for the upcoming year. Also, feel free to forward it to others.

Review of the First Quarter 2010

My how time flies, it is hard to imagine that the year is 1/4th done already. This newsletter will review some of the highlights and look at the 2nd quarter. At the end are some Easter facts for your enjoyment. Enjoy your Easter!!!

From an economic business cycle perspective, the 1st quarter was fairly normal. Interest rates stayed relatively flat and the Federal Reserve did not adjust interest rates. The stock market ended up about 5% but it did have some volatility with a pullback about the middle of January to the middle of February. Commodity prices have started to move upward as oil and copper prices are at the highest levels for the quarter. All 3 of these reflect an economic business cycle that is stabilizing and starting to grow.

Growth is being seen in the manufacturing and service sectors helped by the value of the dollar and the effect of the stimulus spending. The construction industry, commercial real estate and housing market remain flat showing stability. Consumer confidence and employment are starting to look more positive. Again these indicators are fairly normal for this part of the economic business cycle.

So what does this mean for investing for the 2nd quarter? These trends should continue and no adjustments are anticipated except for perhaps a change in a bond mutual fund. Some experts are talking about the chance for another economic dip in the 2nd or 3rd quarter, this makes absolutely no sense and these experts should stop talking. Relax and enjoy the good things of life.

Easter Facts

Easter is a Christian Festival that celebrates the Resurrection of Jesus Christ. On the third day after Good Friday, the day of his crucifixion, now called Easter Sunday, He rose from the dead. Mourners went to His tomb to collect His body. However, He was not there and they were greeted by an angel who said
"He is Risen".

The cross is a symbol of His crucifixion and Resurrection. Hot cross buns, a cake or biscuit eaten by many during this season, are also, symbols of these events. The lamb is another symbol associated with Jesus.
He is often referred to, in scriptures, as the, 'Lamb of God',who sacrificed his life for all mankind's eternal life.

Lights, candles and bonfires mark celebrations in many countries. Roman Catholics often put the candles in the church out on Good Friday and light them again with the Pascal Candle or Easter Candle, on Easter Day.

Eggs are a symbol of the new life that returns to nature at Easter Time. The custom of exchanging eggs began long before Easter was celebrated. It was a custom of the Egyptians and the Persians. They exchanged eggs decorated in Spring colors. They believed Earth hatched from an egg which contributed to this custom. Early Christians used red colored eggs to symbolize the Resurrection. In England they began writing messages and dates on their eggs and exchanging them with friends and loved ones. In the 1800's, candied eggs were made. They were open on one end and a scene was put inside. They were used as table centerpieces.