That Was The Week That Was-3rd Week June

  Summer Time May Be A Great Time to Review Your Portfolio. Lots of reasons to do it now. Call me for your review time at 586 295 0430. The review checks your allocation, risk, dividends and historical returns. We also review your beneficiaries and make sure everything is tied in with your professional estate plan. This is also to ensure that your portfolio has not increased  unwanted risk.

Leading to the Stock Selloff Last Week was Bernanke’s comments that the Fed would start to reduce their bond buying, which, for all intents and purpose, has supported the markets and kept interest rates near zero. The news was ‘shocking’ (I can’t believe that), that the end was so near. Sell programs kicked in and a global stock selloff was initiated. Probably the most revealing aspect of the week was the increase in interest rates. It’s been no secret that rates have been slowly climbing but attention was suddenly put on them as the 30-Year Mortgage is roughly 4.66%, up from 3.75% in January. Investors have pulled about $18 billion from bonds funds in the 2 weeks ending June 12th, according to Lipper. I have been slowly working with clients and selling bonds and bond funds in anticipation of this event. The 10-year jumped to a 15 month high closing over 2.5%. Earning season is just around the corner and has supported the market’s current valuations. The job market has also mirrored the current market values.

The above charts show how in-step both the jobs creation and corporate earnings have lock-stepped with stock prices. If either one or both falter we may be in for a long summer. Mitch Zacks wrote that, while rising interest rates are bad for both bonds and stocks, he believes that the economy is on track for recovery. He gives 66%-34% odds of the markets rising over the next four weeks. If you plan on staying invested for the next several years you’ll be rewarded, Zacks concludes. He is more worried about China and the disruptions occurring in their financial system than by the ‘well-functioning and independent Federal Reserve.’

Driving Home Sunday I listened to talk radio and a Talking Head was bemoaning an upcoming housing crash saying the current ‘high’ interest rates will keep buyers away and drive home prices down. Interest rates are below Civil War rates! You and I know that Home buyers buy when rates are high and rates are low. There were buyers at 8% and 10%, for those that can remember. What could hurt is the lack of product both in the new and used markets.

Zillow has become the default real estate value guide. Just in case you didn’t know- www.zillow.com.

Updates on calculators on my web site. Everything is fresh and updated and printable. Check it out from retirement planning to mortgages. Just log out of my blog and back into www.primaryplanner.com.

Has Gold Seen Its Best Days? Here is what Robert Wagner wrote in his blog:

• The high in gold is almost 2 years behind us.
• Gold has failed to make a new high and broken many trend lines of support.
• The trend is lower and if $1,200 is broken the next level of support is $1,000.

Avi Gilburt writes That a week ago Friday’s spike in silver may have been a bullish indicator. Watch for it to consolidate around 19/20 and then recover to around $25.00. Ari is a chartist and has his own opinions.

My guess is that Detroit will be forced into bankruptcy. Kevyn Orr called the state of affairs dysfunctional and wasteful and expected to negotiate with  what he called ‘reasonable’ people.

I own an iPad and a Kindle. The best is the iPad. The best!

The Vine app is used in conjunction with Twitter. It is Twitter’s video sharing application and can be found online at Vine.co, instead of Vine.com. Why? According to CNBC the Vine.com domain name belongs to Amazon.

Markets are in that delicate stage of increasing interest rates and increasingly global volatility. Fear that the Fed will end QE3 sooner rather than later has caused this market insecurity. On the equity side we will recover. The losses being experienced on the fixed side unfortunately are here to stay.

For Target Date Fund Aficionados The Surprise May Be At The End. Most investors don’t understand the concept of the ‘investment glide path’ of the Target Date Funds. The glide starts from some arbitrary age point and ends at another arbitrary age point until the portfolio is primarily fixed income. With decades ahead of us in fixed income Boomers will be surprised to see the destruction of their portfolios not through equity losses but from inflation.

  Mr. Obama said that Mr. Bernanke has been around longer than he anticipated or wanted. or some such language. Essentially firing him on the spot, some say. Still without Bernanke no one in Washington would have been doing anything to pull our domestic chestnuts out of the frying pan. You may disagree with Bernanke but he did what he did and got us moving economically. You may not like the speed or the length of the battle that Bernanke fought but he was the right man for the job. Some argue that Bernanke hurt the middle-class with the zero interest being paid on CDs and passbook savings. Others say he destroyed senior citizens savings and retirement. Rex Nutting reported that the average middle class ‘family’ has about $8,500 in assets that pay interest! So how bad were they really hurt? Maybe a loss of a few hundred dollars of taxable income? But, the real benefit of Bernanke’s policies has been the interest that these same families have saved on mortgages and car loans. That amounted to thousands of dollars. That was money that was saved not just one year but for those that remortgaged Casa Grande they got the savings for the next 20 plus years. The losers have been the banks and major lenders. Now tell me again, with a straight face, how bad Bernanke was for the economy and the average family. By January 2015 we’ll be wondering why we allowed Bernanke to leave.

Finally- Vince Flynn Died. It was that bad of a week.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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