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Shoreline Wealth & Investment Management
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The Stock & Bond Markets The economic recovery seems to have "legs" as consumer spending rose for the 3rd consecutive month and corporate spending rose by the most since 2006. Manufacturing expanded in January at the fastest pace since 2004 according to the Institute for Supply Management reflecting increases in order, production and employment. While much of the economy isn't participating and unemployment continues to be problematic, manufacturing seems to be the first industry "out of the blocks" and leading the recovery, not just in the U.S. but in several global economies. How this bodes for the market is questionable given that it tends to be a leading indicator. The 50% increase from the lows of 2009 clearly indicated this recovery but a declining market in January may be signaling a different message. As always, our advice is to be diversified among asset classes, both domestically and internationally.
The world's biggest bond fund manager and Morningstar's mutual fund manager of the decade, Bill Gross, offered some global predictions. The best economies (conservative lending practices and low debt relative to their gross domestic products) were Australia, Canada, Germany, Norway & Sweden. The worst included Britain, France, Italy, Japan and the United States. Economies poised for growth, according to Gross, were Brazil, China and India. The yield for 1-year Treasuries is only about .3%, for 5-year notes about 2.4%, for 10-year bonds about 3.7% and around 4.5% for 30-year bonds. Investment-grade municipals yield tax free income and are paying about .5%, 1.6%, 3.2%, and 4.5% for the same time periods. Similarly, investment-grade corporate bonds are yielding 1.2%, 2.9%, 3.% and 6.4%. This is a time to consider diversifying bond holdings between the U.S. and attractive economies (referenced above) from around the world. For those worried that inflation make negatively impact bond values but still prefer the safety and income offered by bonds, this may be a time to consider "inflation-protected" Treasuries.
CELEBRATING 30 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 While it is still clearly a buyer's market, the question is when is the best time to buy. Will it be an even better market to buy in 6 months? 1 year? There was a lot of negative data recently released as well as some moderately positive news. Sales of newly built homes fell in December to the lowest level since 1971 while the supply was the highest in more than 6 months. This follows a brief recovery due to the "first time buyers" tax credit which has been extended until June and includes almost all other categories of buyers as well. Whether this extension will spur demand is up to debate. What is not up to interpretation is the record number of homes for sale which continues to put downward pressure on home prices. Much of the supply comes from foreclosures which continue to increase. California accounted for 9 of the top 20 metropolitan areas (population over 200,000) followed by Florida with 8, Nevada with 2 and Arizona having the remaining 1. Poor lending practices led the first wave of foreclosures along with unsustainable price increases in which the buyers now owe more than the home is worth. The next wave may come from increasing unemployment gripping the nation. It is clearly a better time to be a buyer than seller. |
| Selecting an Advisor |
Warren Buffet, the most successful investor of the 20th century learned his craft from Benjamin Graham, author of several books including the legendary "Intelligent Investor." This important book has been updated by Jason Zweig who includes 16 key questions to ask your advisor and 11 an advisor might ask ... click here for more details |
| Investing: Understanding 529 Plans |
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| Living Trusts: Disinheriting Uncle Sam |
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Thanks for reading. Please send questions or comments.
Sincerely,
Chuck
Charles M. Bloom
Shoreline Wealth & Investment Management
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