« back
to News section
The Markets
Uncertainty remained the primary concern
on investor's minds last week as the bulls and bears continued
their back and forth struggle. We had a bit of everything
last week big declines, big rallies and a lot of volatility.
Investors
continue to be concerned about the unknown liabilities from
the sub-prime mortgage crisis. Wells Fargo’s President
said the housing market was the worst since the Depression,
and Barclay’s became the latest financial company to
announce multi-billion dollar write downs.
Jack Bogle founder
of Vanguard said in a CNBC interview Friday:
“I think
the probability of a recession is about 75%.” When
asked how investors should respond, he answered “I
would say do nothing – ride it out, if your asset
allocation is right. The bonds in your portfolio and the
long-term growth
of businesses will bail you out. Unfortunately 80% of the
market is speculators now, not investors. What would I
say to the speculator? I would say I'm nervous and I might
even
say get out.”
At Ford Wealth Management, we have become
increasingly defensive in clients' investment portfolios
to reflect the elevated
risks in the markets. There are more and more signs of
a possible major market correction, likely coinciding with
a significant recession. For more than two years there
have
been warning signs of:
- The housing bubble and the
adverse effects of the excessive credit risks involved
in sub-prime mortgages.
- Rising inflation coupled with the
falling dollar.
- The length of time of the current bull
market run (since 2002), which for the most part is defying
historical
trends.
In
anticipation of further negative economic news, we have accelerated a shift
to defensive investments for our clients.
In specific we have:
- Moved to a high cash position in all of our investment
programs.
- Remaining investments will be monitored closely
and have been temporarily hedged using bear market funds.
As we
give thanks this week, let me extend my wishes for a safe and happy holiday
to you and your family.
We are thankful to you for the confidence and trust that
you have extended us. We look forward to continuing
to grow our relationship in the future.
Happy Thanksgiving!
| Returns through 11/16/07 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
1.0 |
5.7 |
6.8 |
7.9 |
9.2 |
5.5 |
| Nasdaq Composite |
0.4 |
9.2 |
7.8 |
8.3 |
13.6 |
5.0 |
| Standard & Poor's 500 |
0.4 |
2.9 |
4.1 |
7.5 |
10.1 |
4.4 |
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.
Top Headlines:
- E-Trade (ETFC) continued
to fall further in early trading Monday as Citi downgraded the broker to
a sell rating, citing the company's lowered earnings forecast,
bankruptcy rumors and substantial losses from mortgage
market exposure. (11/12)
- Pending
Home Sales were surprisingly positive for the
month of September as the index rose 0.2%. While the
index is off 20.4% from a year ago, analysts were not
expecting an increase on the month. (11/13)
- Retail
Sales came in at a moderate 0.2% for the
month of October versus a 0.1% consensus. Sales
excluding autos
have now risen 5.2% in the past year. (11/14)
- The Labor
Department reported a 0.1%
increase in PPI and no change in Core PPI
for the month of October. Energy and food prices
both saw substantial price slowdowns
from the month prior. CPI
was also reported this week at 0.3%, highlighted
by a 1.4% increase in energy prices, the fastest
rise since May. Core CPI came in slightly
lower at its consensus of 0.2%. (11/14)
Earnings Snapshot
-
Home Depot (HD) stayed in line with expectations this
week as the home improvement retailer saw $1.1 bln in
3Q income. Down from the same quarter a year ago, the
company cites deteriorating housing indicators for the
decline in revenue. (11/13)
-
Wal-Mart (WMT) continued its
dominance as the world's largest retailer with
an impressive 8.8% increase in
3Q net sales. Strong performance in Wal-Mart
and Sam's Club stores in the United States reflected
the
positive
results for the quarter. (11/13)
-
J.C. Penney (JCP) furthered
uncertainty about the upcoming holiday season after
reporting a 9.1% drop in 3Q profit
and cutting its end of the year outlook. (11/15)
-
Starbucks
(SBUX) saw record growth for 4Q as revenue grew
by 22% and fiscal year revenue increased by 21%.
Despite posting record results, share prices
dropped
in early trading Friday as the company lowered
its outlook on concerns over a slowing economy.
(11/15)
ABOUT 73 MILLION U.S. HOUSEHOLDS NOW
HAVE DISCRETIONARY INCOME, up from about 57 million in 2002, according
to a recent report by The Conference Board. The percent of
the U.S. population with discretionary income has increased
to nearly 64 percent, up from 52 percent in 2002. Total discretionary
income in the U.S. topped $1.7 trillion in 2006, with the
household average at $24,335.
It’s noteworthy, however,
that nearly 78 percent of all discretionary income is held
by households earning more
than $100,000. Average discretionary income for this segment,
$66,451, is 2.7 times the national average.
Where is the discretionary
income concentrated? The region with the wealthiest concentration
of households is New England
(including Connecticut, Massachusetts, Maine, New Hampshire,
Rhode Island and Vermont). About 63 percent of households
have discretionary income, with an average amount of $27,337.
Household discretionary income is lowest in the West North
Central region (including Iowa, Kansas, Minnesota, Missouri,
Nebraska, North Dakota and South Dakota). Average household
discretionary income in this region is $20,749. California,
the most populous state, has the largest number of households
with discretionary income — 8 million. These households
hold $224.7 billion in total discretionary income.
Also interesting:
Of the 43.7 million households of baby boomers (born between
1946-1964), more than two-thirds have
discretionary income. As the largest group, the boomer
segment also has the highest average discretionary income,
$29,754.
Households with discretionary income, as
defined by the study, are those whose spendable income exceeds
that
held
by households with similar demographic features.
In the spirit
of the upcoming Thanksgiving holiday:
"Let us remember that, as much has been given us, much will
be expected from us, and that true homage comes from the
heart, as well as from the lips, and shows itself in deeds." -
Theodore Roosevelt
Best Regards,
P.S. Please feel free to forward
this newsletter to family, friends, or colleagues.
|
