The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP. This week Guest host, Rod Young, CPA, CFP, will be joined by Jane Hathaway, Mortgage Executive to discuss:

“The nuts and bolts of mortgages and refinancing”

This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.wdiy.org.  

“Thank you” to the Baltimore Ravens for playing so poorly
on the road and losing to San Diego last night.  Now, my Pittsburgh
Steelers have to play well on the road tonight against the tough San Francisco
49’ers in order to take a giant step toward their division’s first place, home
field advantage, and a bye-week in the playoffs.

Last
week showed a lackluster economy where the number of POSITIVE developments
equaled the NEGATIVE developments. And, the stock market dropped

Below is a succinct list of last week’s
events:

Positives:

1)
European bond yields fall across the board and across the curve (except Italian
10 yr)
2) Euro basis swap, euribor/ois spread down a touch on the week
3) Euro zone mfr’g and services composite index unexpectedly rises to 47.9 from
47
4) German ZEW 6 mo expectations outlook up slightly
5) Philly and NY mfr’g survey’s surprise to upside and 6 month outlook improves
6) Initial Claims fall to 366k, the least since May ’08
7) CPI rate of change about in line
8) MBA said refi’s rose to 5 week high
9) Big demand for Treasury auctions of 3′s, 10′s and 30′s
10) No QE3, for now at least. Money printing just a drug and hangover will come
anyway at some point
11) China’s HSBC flash mfr’g # rises to 49 from 47.7 but still below 50 for 5th
month in past 6

Negatives:

1)
Implementation of EU summit agreement easier said than done
2) Euro zone CPI runs 3% y/o/y for 3rd straight month
3) US CPI up 3.4% y/o/y headline, 2.2% core, core rate at most since Oct ’08
4) US retail sales in Nov light vs estimates
5) MBA said purchase apps fall to 4 week low
6) Nov IP unexpectedly falls .1% led by auto’s and nat gas output
7) Shanghai index falls another 4% on week, FDI down 9.8% in Nov, 1st drop
since July ’09
8) Indian Sensex drops to lowest since Nov ’09 as Oct IP falls 5.1% vs forecast
of .7% fall
9) Japanese Q4 Tankan mfr’g # falls to -4 from +2
10) Solid demand for Treasury’s 3′s, 10′s and 30′s, what does that say about
the economic outlook?
11) FOR STOCK MARKETS ONLY, no QE from Fed and ECB (Source: The Big Picture).

Stocks fell about 3% last week but did manage to finish
up from lows reached Wednesday. Market volatility shows little sign of abating,
but trading was less panicky than such a big drop would have it. Is it possible
all the volatility of the past six months has numbed investor sensibility to
big swings?

The Dow Jones Industrial Average fell nearly 2.6%, or
over 300 points, to close at 11,866.39.  The tech-heavy Nasdaq Composite
finished at 2555.33, losing 3.5%. Trading volumes were modest, apart from late
Friday, when many derivatives contracts, like options and futures, expired.

For investors who haven’t noticed, in 2011 stocks of
domestic-oriented companies have outperformed companies with lots of foreign
sales. Despite a week in which both Europe and the U.S. fell about 3%, U.S.
stocks remain by far the best-acting equity market this year.

There are indications, avers Jack Ablin, chief
investment officer at Harris Private Bank, that a decoupling will continue. He
points to a recent divergence between euro currency moves and the Chicago Board
Options exchange Volatility index, or the VIX, which is a measure of
volatility. In the past two weeks, drops in the euro have not been accompanied
by a higher VIX reading.

When the euro broke below $1.30 last week, a key
psychological level, the VIX didn’t move much, he says. Previously, a drop like
that would have argued for much more volatility and a much higher VIX level, he
adds.

Instead the VIX closed around 24.29, edging closer to
those halcyon levels seen before the U.S. and Europe debt problems erupted last
August, sending markets into tailspin and the VIX into the high 40s
(Source:  Barrons Online).

Last
week, Bonds increased while U.S. Stocks and Foreign Stocks decreased. 
During the last 12 months, BONDS outperformed STOCKS.   

Source: Morningstar Workstation. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  Three, five and ten year returns are annualized excluding dividends.

The future holds many possible scenarios; but, in my opinion, we need to discuss two. It is very difficult to predict the actions of European central bankers and politicians. Thus, I believe we should consider each of these scenarios as equally likely:

SCENARIO ONE: No further action by the central banks nor the European Central Bank (the “ECB”). This would be a big disappointment. In a matter of days or weeks, the stock markets would re-start their downward spiral. Pressure would build again on the banking system; thus, creating a situation similar to the Lehman Brothers bankruptcy in September, 2008. Our stock market could drop substantially under this scenario.

SCENARIO TWO: The efforts initiated by worldwide central banks on November 30th and Friday’s announcement of a closer fiscal union are just the first two moves in a series whose end result is to build a lasting solution to the festering problem in Europe. Germany MUST play a big part in this scenario by placing its impressive cash reserves on the line. If Germany makes a clear commitment soon to do this, the U.S. stock market will be poised to enjoy its traditional Santa Claus rally which could propel stocks to a much higher level.

So, how do you invest in this time of high uncertainty? I recommend the following, depending upon which category fits your unique circumstance:

The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP. This week Laurie will be joined by Matt Petrozelli, financial advisor with Valley National Financial Advisors. Laurie and Matt will discuss:

“What to Look for in an Advisor”

This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org