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 ON A PERSONAL NOTE...
Happy New Year! Happy Valentine's
Day! Happy President's Day!
My apologies for the delay
in our first newsletter of 2009! I've been
enjoying
time
with our now 11 week old daughter Ellie.
She is babbling, laughing & loves her sleep almost
as much as I do. She sleeps through the night for
10 - 12
hrs at a time!
For those interested we've posted some more pictures here: Ellie
Gallery 3
Now back to business! 
"“The eyes of our citizens
are not sufficiently open to the true cause of our distress. They ascribe
them to everything but their true cause, the banking system; a system
which if it could do good in any form is yet so certain of leading
to abuse as to be utterly incompatible with the public safety and prosperity.
The Central Bank is an institution of the most deadly hostility existing
against the principles and form of our Constitution.” - Thomas
Jefferson
THE MARKETS
Thanks a trillion, Secretary
Geithner.
After weeks of heightened
anticipation, Treasury Secretary Tim Geithner unveiled the
administration’s comprehensive
plan to restore confidence in the financial markets. Unfortunately,
it landed with a big ol’ thud. Many analysts felt the
plan lacked details and investors responded by dumping stocks.
The
market’s reaction to Geithner’s plan highlights
an important point about today’s financial markets.
The markets, to some extent, seem to be trading based on
pronouncements from Washington, as opposed to expected earnings.
Now, one could argue that the actions by Washington will
affect earnings and there’s some truth to that. But,
for the long-term health of the markets, it’s important
that they trade based on business results, not government
intervention.
While most people expect the
economy to get worse before it gets better, optimists are
hoping that the recently
approved
stimulus package will prevent the economy from turning dramatically
worse. Along with the stimulus jolt, we need to remember
that, “time and price are the only arbiters of our
financial fate,” according to Todd Harrison of Minyanville.com.
It will take time to work
out our economic imbalances and it will take low prices to
entice buyers back into the marketplace.
Those items, coupled with the stimulus package, are what
many investors are banking on to turn this economy around.
Between now and then, we need to be prepared for a little
more darkness before the dawn.
| Returns through 2/13/09 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
-5.2 |
-10.6 |
-36.4 |
-10.3 |
-5.9 |
-1.7 |
| Nasdaq Composite |
-3.6 |
-2.7 |
-33.9 |
-11.8 |
-5.7 |
-4.0 |
| Standard & Poor's 500 |
-4.8 |
-8.5 |
-38.8 |
-13.3 |
-6.3 |
-4.0 |
Source: Yahoo! Finance, Barrons.
Past performance is no guarantee of future results. Indices
are unmanaged and cannot be invested into directly. Three-,
5-, and 10-year returns are annualized. Assumes dividends
are not reinvested.
DOES THE STOCK MARKET START RECOVERING
WELL BEFORE A RECESSION ENDS? There’s a
common perception that the stock market starts advancing
about five to six
months before a recession officially ends. If true, then
we need to understand that it’s possible for the stock
market to advance even if the economy is continuing to deteriorate.
According to data from Bloomberg, “The S&P 500
began recovering on average five months before recessions
ended in 1975, 1982, and 1991.” Money manager John
Hussman has a little different conclusion to this question.
In his analysis, he reviewed stock market performance in
the two years before and the two years after every recession
since World War II. Instead of discovering the “five
to six month” figure, he reached the following conclusions:
1. “Major gains reliably begin only about three months
prior to the end of a recession and continue into the recovery.”
2. “Regardless of how stocks perform during a recession,
the market is nearly always advancing strongly by the time
that the recession has three months to go.”
Based on Hussman’s analysis, all we have to do is
determine when this recession will end, then backup three
months and start investing heavily. That’s the golden
ticket. As true as that may be, its practicality is rather
limited since none of us know when this recession will end.
Darn!
The Hussman and Bloomberg reports do add
support to the idea that the stock market is a “forward projecting” mechanism.
Stock prices tend to move based on projected earnings so
it’s very possible to see prices move up even if current
earnings are poor. In today’s environment, one of the
biggest hurdles investors face is projecting the near-term
earnings picture. On Wall Street, they call it “earnings
visibility” and right now, it’s quite foggy.
Eventually,
we expect the fog to clear and, as always, we will continue
to monitor what’s happening and make
portfolio adjustments that we believe are in our clients’ best
interests.
A Post Valentine's Day Thought
Throughout
the ages, poets and romanticists have portrayed love as coming
from
the heart,
not the head.
Well, neuroscientists beg to differ. Using a functional magnetic
resonance imaging machine, scientists have put love to the
test and concluded that, “Love mostly can be understood
through brain images, hormones, and genetics,” according
to Associated Press writer Seth Borenstein. Some scientists
have concluded there are four tiny areas of the brain that
form a “love circuit” and that “romantic
love is an addiction.” How unromantic!
One of the researchers,
Larry Young, Ph.D., said that romantic love theoretically
can be simulated with chemicals, but “if
you really want, you know, to get the relationship spark
back, then engage in the behavior that stimulates the release
of these molecules and allow them to stimulate the emotions.” We’ll
let you figure out what those behaviors are.
Thanks for your trust & confidence,
P.S. DON'T KEEP US A SECRET! At Ford Wealth Management we know that referrals from your friends, family and colleagues are the sincerest form of flattery. We appreciate your business and hope that you will pass along our name and number to anyone who would benefit from our services.
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