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"Education is the
ability to listen to almost anything
without losing your
temper or your self-confidence." ~ Robert Frost
The Markets It
was another rollercoaster ride for the markets last week.
By the end of the week, all the up and down "noises" just
about cancelled each other out with the Dow posting its sixth-straight
weekly gain.
Last week's news included the Fed's decision
to keep rates unchanged, April's disappointing retail sales,
better than expected reports on inflation, mixed earnings
reports and more merger & acquisition activity. Ultimately,
the same trends we've seen for weeks now continued.
After a good performance last Monday,
the Dow Jones Industrial Average, which had risen in 24 of
27 consecutive sessions
(tying an almost 80-year-old record, according to Reuters)
lost steam and fell on Tuesday. On Wednesday, the Federal
Reserve's Open Market Committee left rates unchanged
at 5.25% for the seventh time in a row, and the FOMC statement
did not indicate that inflation was getting worse. As a result,
the Standard & Poor's 500 Index finished the day
near an all-time high. News that retail sales slumped unexpectedly
in April, possibly because of higher gas prices and weakness
in the housing
market, caused investors to worry about the strength of the
economy and triggered a sell off in the markets on Thursday.
On Friday, the Producer Price Index, which measures the rate
of inflation when manufacturers purchase goods, suggested
that inflation was under control. That eased investors' inflation
worries, and the markets rebounded. Friday's gains
also reflected investors' belief that weakening economic
growth could cause the Federal Reserve to lower rates later
this year.
Data coming out this week:
Labor Department's Consumer Price Index for April.
The National Association of Home Builders' housing market
index.
| Returns through 05/11/07 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
0.5 |
6.9 |
17.1 |
10.0 |
5.7 |
6.2 |
| Nasdaq Composite |
-0.4 |
6.1 |
14.2 |
9.9 |
9.2 |
6.7 |
| Standard & Poor's 500 |
0.0 |
6.2 |
16.6 |
11.2 |
7.0 |
6.0 |
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.
SO WHAT DID THE FEDERAL RESERVE BOARD SAY?
As expected,
the Federal Reserve held rates steady this week, while noting Q1 GDP weakness
and the pesky inflation problem that won't go away. However,
they assured the market that "the economy seems likely to expand at
a moderate pace over coming quarters." Does this sound familiar? Take
a look at what they've they been saying in recent meetings?
- "Going
forward, the economy seems likely to expand at a moderate pace." (October ‘06)
- "the
economy seems likely to expand at a moderate pace on balance over coming
quarters." (December '06)
- "the economy seems likely to expand
at a moderate pace over coming quarters." (January ‘07)
- "the
economy seems likely to continue to expand at a moderate pace over
coming quarters." (March ‘07)
Hmm, the Fed failed to predict
the anemic Q1 GDP number, and has given no support for their reasoning
that economic growth will pick up in the months ahead,
but I feel good about this latest forecast, don't you?
BULLS VS BEARS:
This is one of the toughest economies to figure out in history. Here is an
example of two highly educated investment professionals looking at the same
market data and forming two completely different opinions. This is what a
market is made of… a buyer (Bull) and a Seller (Bear).
 "A big bull move is now directly in front of us. Various
value-oriented measures suggest that the S&P500 has another 30% to
40% of upward potential in the next few years."
From David R. Kotok, Chairman and CIO of Cumberland Advisors, Full article»
"On a normalized basis, the valuations for the largest
3000 U.S. stocks are currently in the 97% percentile of historical experience,
noting “A correction
back to the historical valuation median implies a 35% decline."
From John P. Hussman, Ph.D. of Hussman Funds, Full article»
 Why
is the Shanghai continuing to move up at such an incredible pace?
Because
of supply and demand of investors. From the supply side, over 10,000,000
Chinese citizens opened new stock trading accounts during the past 4 months.
Last week ...over 1,000,000 opened new stock trading accounts. No matter
how you calculate it, that has been an average of 1 million new investors
per week for 13 straight weeks in China. The Chinese stock market is up
300% in 18 months! Here
is a bubble that is about as big as you will ever see in your lifetime.
YOU'VE HEARD THAT OLD SAYING, “PAY YOURSELF FIRST.”
Well, are you? If you haven't managed to prioritize saving then you may
want to consider dollar cost averaging. It's less complicated than its
name. All you do is invest a specific amount of money (say, $100), at regular
intervals (say, every month), in the investment of your choice. It can be a good
approach to investing because you end up purchasing more shares when the price
of the investment is low and less shares when the price of the investment is
high. Best of all, setting up dollar cost averaging through an automatic investment
plan means you're paying yourself first. Remember, dollar cost averaging
does not assure a profit or protect against loss in declining markets.
Bonnie and Clyde are fellow con artists.
Recently Bonnie was put in jail for stealing a rare and expensive
diamond. Only a few days after this, Clyde sent her a friendly
letter asking her how she was. On the inside of the envelope
of the letter, he hid a code. Yesterday, Bonnie escaped and
left the envelope and the letter inside the jail cell. The
police did some research and found the code on the inside
of the envelope, but they haven't been able to crack it.
Could you help the police find out what the message is?
This
is the code:
llwatchawtfeclocklnisksundialcirbetimersool
Click here for the answer.
Best Regards,
P.S. Please feel free to forward
this newsletter to family, friends, or colleagues.
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