The Stock & Bond Markets I was reminded recently of Warren Buffet's two rules of investing: number 1, never lose money and number 2, never forget rule number 1. As it turns out, he may have forgotten rule number 2 when he lost a personal fortune of $25 billion in 2008. It will be interesting how he fares in 2009 since he made his reputation buying when others were selling and on more favorable terms than are available to mortals like us. And buy he did so we'll see how it turns out for the Oracle of Omaha.   Similarly, it will be to see who prevails in the tug of war between economists who are generally gloomy (slow economic grow, rising unemployment, consumers on a spending vacation) and analysts who are pointing to 25% (predicted) profit increases in 2010 which are growing at almost 11 times the gross domestic product (GDP) unlike past recoveries which have grown at about 6 times GDP. I tend to side with the economists since expected GDP growth is expected to be 2.3% and would need to be 4.1% to meet the optimistic analysts growth expectations. In short, stay diversified, keep your portfolios balanced and call or e-mail with questions.

Treasuries rallied in August after a 4th consecutive monthly decline, the longest monthly decline since 1996 meaning that bond investors still think there may be another "shoe to fall" with negative implications for the economy (and good news for bond holders). Two strategies to deal with this perspective involve either: 1) the purchase of higher yielding corporate or municipal bonds; or 2) buying inflation-protected Treasuries which pay a lower yield but add a multiple of inflation to the total return. The yield for 1-year Treasuries is only about .4%, for 5-year notes about 2.3%, for 10-year bonds about 3.4% and around 4.3% for 30-year bonds. Investment-grade municipals yield tax free income and are paying about .7%, 1.7%, 3.2%, and 4.6% for the same time periods. Similarly, investment-grade corporate bonds are yielding 1.4%, 2.8%, 3.6% and 5.4%. Given the passage of the stimulus package, the higher yields outside of the Treasury market are compelling.

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Real Estate While foreclosures increased in August, they were down from the prior month. Prices increased (not a typo) in the 20-City Case-Shiller Home Price Index. Granted, prices were down 15.4% from year-ago levels but that's an improvement from being down 19.1% year-over-year as they were a few months ago. Existing home sales rose in July for the 4th consecutive month for the first time since 2004 according to the National Association of Realtors. Additionally, July-2009 sales were 5% above their July-2008 levels, the first year-over-year gain since the market peak in November 2005. This continues to be welcome news for owners who have seen property values decline and potential buyers who may begin to feel this is the bottom and looking for a time to step back into the market.