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The Stock & Bond Markets -
The worst first 2 months ever followed by the best monthly increase in 7 years. It's tough to make sense of what's going on and even more difficult to predict. This is the reason I encourage clients to be diversified, balanced and, more importantly, to rebalance portfolios regularly. The rebalancing allows for lightening up on allocations that have become to large (selling high) and reallocataing to other asset classes that are lower (buying low). This strategy has lead to substantial out-performance over the market averages as indicated in the Bottom Line column to the right. The investment road ahead is not likely to get less rocky and, to continue the analogy (metaphor?), it's better to be balanced on a rocky road than unbalanced.
As I stated previously, and until the situation changes, corporate and municipal bonds are finally looking attractive relative to Treasury bills, notes and bonds which many invested in due to the inherent safety of Treasuries. The yield for 1 year Treasuries is only about .4%, for 5-year notes about 1.75%, for 10 year bonds about 2.75% and around 3.50% for 30 year bonds. Investment-grade municipals yield tax free income and are paying about 2.5%, 4.5% and 5% for the same time periods. Similarly, investment-grade corporate bonds are yielding 5%, 5.25% and 5.5%. Given the passage of the stimulus package, the higher yields outside of the Treasury market are compelling.
CELEBRATING 28 YEARS
Since 1980, I have been providing financial advice to investors and I'm proud to say that our service and performance (see "Bottom Line" section on the right) continue to be superior to the market and our peers. Thanks for your support.
Real Estate -
The lowest level of U.S. homebuilding in over 50 years is the result of overbuilding during the boom and record 24% increase in foreclosures (35% in California) during March and the 1st quarter of 2009 has resulted in too many homes for sale, not enough buyers and trouble getting loans for even qualified buyers. To listen to "The Donald" Trump bravado, those interested in jumping into the market should consider this a "once in a lifetime" opportunity - that phase alone is enough to scare me. I'm reminded of my inquiry with respect to earnings about dot.com stocks at the end of the 1990's and being told by a money manager that there was a "new paradigm" for valuing companies that didn't require earnings - and we all know how that turned out. Still, builder confidence increased by the highest percentage level in 7 years. Additionally, sales of new and existing homes rose in February from record lows and there are other signs of a bottoming in the market. For those with patience and financial staying power, this may indeed be a time to look for opportunities. |
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