Daily Archives: March 7, 2012

“Your Financial Choices” on WDIY 88.1 FM

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The show
airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley
National’s Laurie Siebert CPA, CFP. Last week’s show was rescheduled to this
week.  Laurie and guest attorney Stanley Vasiliadis of Vasiliadis and
Associates will discuss:

“Long Term Care Planning – What is it
and What is the Process?”

Laurie will
take your calls on this subject and other financial planning topics at
610-758-8810.  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.  

Real-Life Situations

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QUESTION:  I am buying a new home and I am trying to figure out when to “lock” in my mortgage rate.  Would you lock in the rate now or what until closer to the closing date?

ANSWER:  I recommend locking in the rate today.  Mortgage rates move up and down in reaction to up and down moves in the rate on 10 year U.S. Treasury rates.  While no one can foresee the future on exactly how interest rates will behave there are at least two compelling reasons to believe these interest rates will move higher in the coming months:  (1) Investors will demand higher interest rates in the face of the inability of the politicians in Washington to solve our national debt problem and (2) The FED has indicated in it vague language the QE III may not be implemented which removes a large buyer from the market.  

Feel free to contact me if you or someone you know has this type of situation. 

Financial Planning advice presented here is general in nature, and individual circumstances make applying these general rules tricky; thus, the above answer cannot be applied to all circumstances because the slightest variation could cause a different outcome.

Personal Notes

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I am looking forward to attending the “The Irish Comedy
Tour” at the SteelStacks on Wednesday 3/14/2012 at 7:30PM.  The Comedy
Tour’s goal is to set a party atmosphere of a Dublin Pub with boisterous and
belly-laughing comedy.  I will be attending the comedy event with my
American golf buddies who are accompanying me on our Ryder Cup format golf trip
to Dublin in late May.  We intend to pick up some Irish humor to pass
along to our Irish competitors when we all arrive at the 19th hole.

For more information about The Irish Comedy Tour including
ticket availability, click:  http://www.artsquest.org/pages/details.php?52356

The Economy

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Last week POSITIVE developments outweighed the NEGATIVE and the economy appears to be slowly improving.  

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

Positives:

1) LTRO2 gives 530b more euros to European banks giving them cheap money, more time, chance to prefund ’12 maturities and play carry trade
2) Italian, Spanish bond yields fall again
3) Euro zone economic confidence up 1 pt, a touch better than expected
4) German consumer confidence rises to 1 yr high
5) US Initial Jobless Claims at 351k, lowest since Mar ’08
6) Vehicle sales reach 15mm for 1st time since Feb ’08
7) Consumer confidence jumps to best in a yr
8) Pending Home Sales rise another 2% to most since Apr ’10
9) Purchase apps gain 8.2% off last week’s lowest level since Oct
10) China’s state weighted mfr’g PMI rises to 5 month high at 51

Negatives:

1) LTRO2 take more than in Dec, banks still need help, dependency on ECB grows, what will happen in 2015 when 1T euros need to be returned to the ECB?
2) Portuguese bond yields rise, are they next problem child?
3) Euro zone unemployment rate rises to 10.7%, highest since 1997
4) Feb German jobs report a touch weaker than expected
5) Euro zone inflation remains sticky with Feb CPI up 2.7% y/o/y and Jan PPI up 3.7%
6) Jan US Durable Goods well below expectations, hangover from gov’t tax benefit?
7) CS home price index falls to lowest since Feb ’03
8) ISM mfr’g surprisingly weak with new orders, backlogs, production and employment all down while prices paid rise to highest since June
9) According to AAA, gasoline prices rise another .07 on the week and now up .30 over past month.  

Source:  The Big Picture

The Markets This Week

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The stock market spun its wheels last week, with prices ending little changed for many big issues. Small-caps, however, dropped 3%, one of a few technical market divergences that investors should watch.

U.S. Federal Reserve Chairman Ben Bernanke’s congressional testimony Tuesday dispensed with investor hopes for more monetary stimulus in the near term. Gold got the message and plummeted 5% Wednesday before recovering a bit to $1,712.60 per ounce by Friday.

The Dow Jones Industrial Average flirted with the 13,000 level, closing above it on Thursday, the first time that’s happened since May 2008. But the Dow couldn’t hold on to that round number and ended Friday at 12977.57, five points off the previous week’s close. The Nasdaq Composite gained 0.42% to 2976.19. The one sour note came from the small-cap Russell 2000 index, which fell 3% to 802.42. 

The drop in small-caps in the past 30 days or so, as well as a decline in the past month in the Dow Jones Transportation Average, are divergences from the broad market that investors shouldn’t ignore. There is a complacency and lethargy to the market that suggests a quick and humbling 3% to 5% pullback could be in the offing, one trader says.

The economic news out last week was slightly less positive than investors have been accustomed to. Consumer-confidence figures rose sharply, but some manufacturing indicators fell. Despite a recent 20% rise in gasoline prices, a “remarkable” data point came from car sales, which reached their highest levels in February in nearly four years, says David Kelly, chief market strategist for JPMorgan Asset Management. The rise was equivalent to an annual sales rate of 14.7 million cars.

“It reflects both pent-up demand [from the past couple of years] and a rising tide of consumer confidence,” he says. Given the importance of companies such as General Motors (ticker: GM) and Ford Motor (F) to the U.S., rising car sales are good for the whole economy. A year of 15 million units in car sales is just about the 20-year average for the U.S.

The price of energy is probably the greatest near-term risk that market faces, says James McDonald, chief investment strategist at Northern Trust. Only if economic indicators continue to be strong will investors be comfortable with higher oil prices, he says.

Investors’ worries have shifted from topic to topic in the past 12 months, just as a baton passes hands in a race. The European sovereign-debt situation was enemy No. 1 last spring. The worry next turned to whether U.S. economic growth would turn flaccid. Now it has morphed into concerns about rising oil prices, what with crude above $100 per barrel. 

One thing the market won’t like is a potential military strike by Israel against Iran. Look for this talk to heat up in the spring (Source:  Barrons Online).

The Numbers

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

Returns
through 3-2-2012

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds-
BarCap  Aggregate Index

     
.2

   
   .9

  
8.6

  
7.4

  
6.3

   
5.7

US
Stocks-Standard & Poor’s 500

     
.3

    
9.3

  
6.9

  27.7

  
1.9

   4.0

Foreign
Stocks- MS EAFE Developed Countries

   
-.8

  
10.6

-10.0

  18.0

 -5.5

   
3.4


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.