The Stock & Bond Markets -
April was a very strong month in the global stock markets. The question remains what, if anything, does that imply for the rest of 2007. There is the theory that says "sell in May and go away" and the historical numbers for this "seasonality" trading strategy are quite compelling. Over the past 56 years, if someone invested $10,000 in the stock market every November 1 and put it in interest bearing accounts every April 30, the value would have grown to $544,300. If the same individual invested $10,000 in the stock market every May 1 and put it in interest bearing accounts every October 31, the value would have fallen to $9,800. Pretty compelling, eh? We don't time the market and tend to be fully invested in a variety of asset classes and have outperformed the market substantially over the past several years. Still, it is a statistic we make our readers aware of every May and find very interesting.

Federal Reserve Chairman Ben Bernanke has intimated that inflation remains a concern and the Fed may be reluctant to lower the Federal Funds rate sooner rather than later. While the chief economists of Goldman Sachs, Morgan Stanley and Merrill Lynch believe the housing "crisis" will mandate rate cuts, the Fed seems to be holding out and they're the ones that decide what happens, not the experts. We recommend diversifying (aka "laddering") across the yield curve and emphasizing high quality bonds rather than higher yielding (aka "junk") ones.

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Real Estate Bubble? -
The National Association of Realtors reported sales of "existing" homes having their sharpest decline in 18 years (and first year-over-year drop in 11 years) despite a slight rise in "new" home sales. The weakness continued despite lower prices. Meanwhile, the Census Bureau reported a record high in homes for sale which are sitting vacant although experts suggest these are owned by speculators who are willing to sell at a loss in order reduce their exposure to a market they believe is heading downward. Vacations homes were a bright spot in the residential market because these are generally more of a life style purchase than a speculative one.