Newsletter (October 2011)
3rd Quarter Update
Donn Toney
Managing Partner
I have never liked the question "would you like the good news first or the bad news first". However you answer the question you are going to get both pieces of news anyway. Does it truly matter in what order? Just please, tear the band-aid off quickly.
OK, first the bad news. The U.S. economy is basically running in neutral at the moment with the general consensus for 3rd and 4th quarter GDP estimates at only 2% or less. This and other lackluster forecasts have people speaking of chances of another recession at 30%. Our housing market is likely to remain weak for some time, unemployment remains above 9%, and consumer spending remains lackluster. Meanwhile, our leaders in Washington prefer to feud more like kindergartners going into the 2012 election rather than agree on policies that could help get the American economy back on track.
Corporate profitability remains somewhat solid helped by strong exports, but the earnings comparisons will become more difficult in future quarters. Corporate balance sheets are still strong and these corporations are still hoarding cash, but we need to see more of the cash put to use whether through increasing dividends for shareholders, or hiring more people to begin a reversal in the unemployment rate.
As for our international brethren in the eurozone, the news is probably worse than it is in the US. Greece is bound to go into default soon while other larger European countries (Italy, Spain, and Ireland) have severe financial problems of their own. Further, European policymakers continue to delay any real actions or decisions towards a clear resolution. The Chinese economy is beginning to slow down from its incredible growth over the last few years and if their slowdown occurs too quickly, its effects will be felt worldwide. Japan is continuing to recover from the earthquake, tsunami, and nuclear disasters from earlier in the year.
Enough of the bad news, it's time for some good news. The good news is that we are even more diligent and steadfast in actively managing your investments through these volatile times towards your specific financial goals and needs. Our overall strategy is to maintain a high quality standard on your stock holdings with an emphasis on higher yielding stocks while maintaining proper diversification. We feel that investing in higher yielding stocks is very beneficial especially in the type of volatile, low interest rate market we are in today. We also continue to manage your bond portfolios by investing in Investment Grade bonds with shorter-term maturities.
As always, thank you for your friendship the confidence and trust you have in us and our abilities to understand and address your individual investment objectives.
But keeping an eye on what is happening today and sticking to a plan is critical to investment success.
For perspective, remember where we were a year ago. QE II was in the rumor stage. Unemployment was continuing to climb, the beginnings of double dip recession fears were being voiced and the mid-term elections were a month away. The investor was scared and thinking about getting out of the markets. It had been a bad year. Then, from October 1, 2010 to April 29, 2011, the S&P 500 Index rose over 18%. From April 29, 2011 to October 3, 2011, the S&P 500 dropped 19% with the majority of that loss occurring in the last few trading days of September. Some were again raising the question about getting out of the market. Well guess what has happened since October 3? Of course the market is up 12.6% as of October 21! Unprecedented decreases and increases! What if you had guessed wrong?
What's the point of this you ask? When to get out of the market and when to get in? No one has ever had or ever will have a crystal ball that can predict the whims of the investing world. We can see certain events that can have short-term negative effects on the market, but using these events as absolute predictors can be folly. There is always going to be volatility in the short-term. Over a period of 3 to 5 years, we anticipate you will see that volatility smooth out and your asset allocation plan will be the determining factor in controlling risk and reward.
Now what's ahead? We are in an election year, the European Union still has serious issues to address, the housing glut has still not been taken care of, and joblessness in the U.S. is holding the economy back. We feel we will have continued volatility, but as bad as things may be or appear to be, we think we are ahead of where we were a year ago. Our indicators are that the overall trend is positive and unless Europe fails to get a handle on its debt issues, we believe the trend will stay positive.
Securities Offered through Allen, Mooney & Barnes Brokerage Services, LLC. Member FINRA/SIPC.
The gift tax laws currently provide that an individual can pass up to $13,000 of assets to any recipient free of Federal gift tax, referred to as the "annual exclusion amount". If a husband and wife agree to make the gift jointly, this limit is $26,000 per recipient.
Eastover works closely with our clearing firms to provide this service to our clients who would like to take advantage of this gifting opportunity. Stocks, bonds or any other securities can be transferred as gifts.
If you would like to make a gift before the end of this year, it is important that you let our team know your intent. We want to ensure that your request is processed before the end of the year and our clearing firms will impose cut off dates. This date has not been made available to Eastover as of the writing of this article but in years past the cut off has been around mid-December.
To request a gift from your Eastover account, you may generate a Letter of Instruction to be signed by all owners of the account which requires the following information:
- Description of the security, number of shares to be gifted, and delivering account number
- DTC number of receiving firm
- Account number at receiving firm
- Name of account at receiving firm
You may mail, fax or email your request in for processing. As always, we look forward to the opportunity to serve you.
Securities Offered through Allen, Mooney & Barnes Brokerage Services, LLC. Member FINRA/SIPC.
Eastover provides friendly and objective assistance in helping you make sense of the vast number of different annuity products that are available. As independent planners, we feel we provide superior planning services, and can recommend annuity products from the widest range of companies. This assists us in providing our best advice possible, because we are not limited in the recommendations we can make due to restrictive affiliations.
We can help you:
- develop a personalized retirement plan that gets the most positive benefit from the annuity product you select
- maximize tax advantages and future retirement income by providing insight into how annuities would work for you
- help evaluate an existing annuity with respect to strength of provider, interest rates, tax advantages, growth potential, risk tolerance, and suitability for your personal needs
- help evaluate new annuities you are considering for a 1035 exchange, to include direct guidance on how any potential resets of your surrender charge period could impact planned liquidity or your original objectives
- determine how any bonus rates being offered by annuity companies as a growth incentive translate against other products you have access to
- provide complete full-service attention that focuses on your needs and how well the current market place can effectively meet them
Securities Offered through Allen, Mooney & Barnes Brokerage Services, LLC. Member FINRA/SIPC.
November 25 - Markets Close at 1:00 PM
December 26 - Market Closed
Please remember that our office is closed when the market is closed.