The Markets

Popular wisdom about life says, “It’s the journey, not the destination.” In successful long-term investing, it’s just the opposite.

The financial markets contain short-term traders and long-term investors. Short-term traders focus on the day-to-day journey, not the destination. To them, it’s all about making money in a quick trade.

Long-term investors keep their sights firmly fixed on the destination. They understand that month-to-month fluctuations are normal and expected. Rather than selling during a brief period of turbulence, long-term investors tend to ride out the storm and wait for better weather to return.

Interestingly, traders and investors work synergistically in order to create opportunities for the other to make profits. Here’s how.

Since traders are short-term focused, they tend to buy and sell frequently. If a large group of traders decides to sell at about the same time, we may end up with a bear market low similar to what we just experienced leading up to March 9, 2009. That type of selling could create an opportunity for longer-term investors to swoop in and buy the potential “bargains.” As the longer-term investors step in to buy, that may lift prices and pull the traders back into the game.

Conversely, if traders end up pushing prices to the stratosphere, that may persuade longer-term investors to take some profits, which could push prices down and give the traders an opportunity to profit again by shorting the market. The cycle then starts all over again.

Of course, neither traders nor long-term investors can perfectly time their buys and sells. The point is simply that the markets can accommodate both. And the fact that the various market participants have different time horizons helps create profit opportunities for each of them.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not available.

WILLIAM SHAKESPEARE WROTE, “Neither a borrower nor a lender be.” Money manager Doug Kass took some liberty and used Shakespeare’s cadence to state a new phrase, “Neither a bull nor a bear be.”

As a financial advisor, we spend time doing research so we can be as prepared as possible to do a good job managing your financial situation. As part of this research, it’s easy to start forming an opinion about whether we are in a bull market or a bear market. However, having a stubbornly strong bullish or bearish opinion may actually be detrimental to successful investment management.

There are two potential problems with taking a strong bullish or bearish stance. First, when you take a strong stand like that, you tend to seek out evidence that corroborates your bias and then discount contrary evidence until it’s too late. For example, if we were really bearish, it’s human nature that the headlines that scream, “S&P 500 Heading to 600″ would draw our attention. By reading those stories, it would make us feel good and help “convince” us that our position was “correct.” Bullish stories would get scant attention since they didn’t fit with our pre-existing bias.

A second problem with taking a strong stance is your bias could turn out to be wrong. By taking a strong stand, you are effectively trying to predict the future, which is no easy task. If your bias is wrong, stubbornly sticking to an incorrect viewpoint could be very costly as the market runs in the other direction and you are left behind.

Is there a better way? Try being a realist. 

Realists keep an open mind. They may have an opinion about the future but they are not wedded to it if new information suggests something is changing. Instead of trying to predict the future, realists analyze new information as it arrives based on its merits. Instead of just reading stories that support their bias, realists read various viewpoints and get a more balanced view. Ultimately, realists are willing to embrace change as appropriate rather than waste precious time and energy defending a “known” that may no longer be relevant.

To summarize, “Let’s be real!”

Weekly Focus - Think About It

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”  — William Arthur Ward

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

• Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

 The Markets

The stock market has been on a very nice run over the past three months and there’s a divergence of opinion on what’s behind it.

Most analysts seem to agree on one point - we’re out of the “end of the financial system” doomsday scenario. That alone could be a major reason for the big jump in equity prices since the March 9 low. From there, opinions vary.

One camp says the “green shoots” are a clear sign that the economy has bottomed and that it’s just a matter of time before we are back to steady growth. Supporting this view is the fact that copper, which is traditionally viewed as an early indicator of economic strength, has risen 82% from its December 2008 low of $1.30 per pound, according to data from Seeking Alpha and The Wall Street Journal. Analysts in this camp think, “Happy days are here again.”

Another camp thinks we’re simply passing through the eye of the hurricane. They think this rally is a reprieve from the front end of the storm and that we’ll get slapped hard again when we hit the other side of the eye wall. Folks in this group typically coalesce around the idea that government actions to stem the crisis will eventually make the situation worse, not better.

A third camp is more middle-of-the-road. They think the rally we’ve seen is a normal reaction to panic selling in the first quarter and to the massive liquidity added to the financial system. Neither bullish nor bearish, they think we’re in a broad trading range and don’t expect new all-time highs or new cyclical lows anytime soon. 

Only time will tell which scenario comes to fruition. In the mean time, we continue to do our best to benefit from whatever the market has to offer us.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results.  Indices areunmanaged and cannot be invested into directly.  N/A means not available.

IS IT NEWS OR NOISE? Theoretically, just about everything that happens in the world has the ability to move markets. For example, the discovery of a large oil field off the coast of Brazil could cause oil prices to drop due to an increase in supply. A late freeze in the Midwest could cause agricultural commodity prices to rise due to crop destruction. The announcement of a $587 billion fiscal stimulus package in China could send stocks soaring as investors speculate it will lead to worldwide growth. A flu epidemic could cause stock prices to drop as it may lead to fewer people traveling and shopping, which could cut corporate profits. The list is endless.

But, here’s one more potential market moving event that many investors have never heard of. It’s called the “200-day moving average.” This is the average closing price of a security or index over the last 200 trading days. When updated daily and graphed, it creates a line that gives you a visual representation of the price trend. When the most current price breaks above this trend line, technical analysts view that as a bullish sign. When it breaks below, it’s considered bearish.

So, here’s the news - or noise - as it relates to the 200-day moving average. On June 1, the S&P 500 index closed above its 200-day moving average for the first time in 523 days, according to Bloomberg. That was the longest stretch of trading below its 200-day moving average since, you guessed it, the Great Depression. Does this mean the market will continue to move up from here?

The track record of the 200-day moving average is mixed. According to data from Bespoke Investment Group and Bloomberg, “The gauge rallied an average 21% over 12 months the last five times it crossed the 200-day mean after falling below it for a year or more.” That sounds bullish until you realize that investors using the indicator were misled in January 2002. Back then, “when the S&P 500 rose past the 200-day average, ending a 463-day stretch below it, the index slumped 23% in the following year as investors speculated interest-rate cuts by the Fed wouldn’t be enough to revive profit growth,” according to Bloomberg.

One of the fascinating things about investing is, what’s noise to one person might be news to another and vice versa. Some investors put great weight on a breakout of the 200-day moving average, while other investors simply shrug their shoulders. This 200-day moving average tug-of-war between opposing viewpoints is a microscopic example of the nearly infinite number of opposing views that buffet the market everyday. This interplay of opinions makes a market between buyers and sellers - and it’s healthy.

Just like “Beauty is in the eye of the beholder,” we can say, “News is in the eye of the investor.” So, whether we’re talking news or noise, they each have the ability to move the markets.

Weekly Focus - Think About It

“The feeling of being hurried is not usually the result of living a full life and having no time. It is on the contrary born of a vague fear that we are wasting our life. When we do not do the one thing we ought to do, we have no time for anything else - we are the busiest people in the world.”

– Eric Hoffer

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision.

• Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

 The Markets

This week marks the two-year anniversary of the financial meltdown. What lessons have we learned?

On June 12, 2007, news broke that a 10-month old Bear Stearns hedge fund that speculated in mortgage-backed securities was melting down. The fund used leverage and bet heavily on bonds tied to subprime mortgages. As the market for subprime mortgages began to implode in early 2007, so did the Bear Stearns fund. This was the first major piece of information that all was not well in the land of finance, and, of course, you know what happened over the next two years.

Interestingly, this news made major headlines at the time, yet the stock market continued to rise for four more months until the S&P 500 index hit its all-time high on October 9, 2007. 

Though the history books are still in process, here are a few meltdown lessons worth contemplating:

Market meltdowns don’t happen all of a sudden - they leave clues. But, being able to accurately decipher those clues is very difficult.

• Stock prices can rise much further and much longer than you ever expect.
• Stock prices can fall much further and much longer than you ever expect.
• When investors panic, fundamentals go out the window and securities may drop to levels that, in hindsight, appear to be ridiculously low.
• When prices get ridiculously low, they can soar very quickly on a snapback rebound. For example, witness the nearly 40% rise in the S&P 500 index in the past three months.
• The unimaginable can happen. For example, GM and Chrysler are in bankruptcy, Lehman Brothers and Bear Stearns are gone, the government owns AIG, Fannie and Freddie, and the government has spent trillions of dollars propping up the economy and the financial system.
• No matter how dark and desperate it seems in the financial markets, the sun will still rise in the east, children will play in the park, and life will go on.

As George Santayana wrote, “Those who do not learn from history are doomed to repeat it.” We realize that history does not repeat itself exactly, but it is close enough that we do all we can to learn from it.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not available.

SINCE WE ARE TALKING ABOUT HISTORY, let’s go back to January 2008. If you recall, the economy was doing fine, the stock market was just coming off all-time record highs, and consumers were still spending freely. Few people had any inkling of what would transpire over the next 18 months… except for Gary Shilling, a longtime Wall Street economist and part-time beekeeper. In January 2008, Shilling recommended the following 13 “investment strategies” in his subscription-based newsletter Insights as reported on May 31, 2009, in New York Magazine:

• 1. Sell or sell short homebuilder stocks and bonds.
• 2. If you plan to sell your home, second home, or investment houses anytime soon, do so yesterday.
• 3. Sell short subprime mortgages.
• 4. Sell or sell short housing-related stocks.
• 5. Sell or sell short consumer discretionary-spending companies.
• 6. Sell low-grade fixed-income securities.
• 7. Sell or avoid most commercial real estate.
• 8. Short commodities.
• 9. Sell or sell short emerging-market equities.
• 10. Sell emerging country bonds.
• 11. Buy the dollar before long.
• 12. Sell or sell short U.S. stocks in general.
• 13. Buy long Treasury bonds.

Amazingly, Shilling was 13 for 13. So what is he thinking now? Here are a few of his current thoughts according to the New York Magazine article, a recent interview with Bloomberg and an article in The Globe and Mail.

• Consumers will start saving more and spending less, which will slow economic growth over the next 5-10 years.
• Government involvement will slow us down further because of inefficiencies and protectionism.
• The recession will last another year.
• Housing prices will continue to drop.
• Loan demand will be weak and lenders will be tight.
• The biggest risk is deflation, not inflation.

Shilling was right back in January 2008 and it’s possible he could be right again this year. However, while it’s worth listening to various points of view, we don’t blindly follow any market forecaster because you never know ahead of time which of them will be accurate or when their forecasting skill will expire. Instead, we research, we monitor, and we make adjustments along the way. Ultimately, we use multiple sources, including our own experience, to do the best job we possibly can for you.

Weekly Focus - Think About It

“Fear not for the future, weep not for the past.”

–Percy Bysshe Shelley

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

The Markets

How do you spell higher stock market prices? J-O-B-S!

We all know that stock prices generally reflect the underlying growth of earnings, but companies cannot grow much unless consumers have jobs that allow them to spend money on stuff created and delivered by companies. So, how do we stand on the metric of job creation? Unfortunately, it’s ugly.

Since the recession started in December 2007, our country has lost 5.7 million jobs, according to the Department of Labor. Economists surveyed by MarketWatch predict another 500,000 were lost in May 2009. If May comes in as projected, that would mean the number of employed Americans would be the same as it was in August 2000. In other words, we would have a net change of zero new jobs created in roughly the past nine years, according to MarketWatch.

Is it any surprise that the major U.S. stock market indexes are lower now than they were nine years ago?

When you put it in that perspective, the government’s urgency to turbo-charge the economy and generate jobs makes more sense. The presently unanswerable question is, will the medicine to fix the economy in the short-term (e.g., massive budget deficits), stunt its growth in the long-term?

Reasonable people can argue both sides of that presently unanswerable question, but based on the recent surge in the stock market, those who think we can handle the debt seem to have the upper hand.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not available.

Sunk costs and mental accounting can be hazardous to your wealth. Let’s pretend that you just arrived at a theater and as you reach into your pocket to pull out the $10 ticket that you purchased in advance, you discover that it’s missing. Would you fork over another $10 to see the movie? Compare that to a second scenario in which you did not buy the ticket in advance, but when you arrive at the theater, you discover you lost a $10 bill. Would you still buy a movie ticket?

In these two scenarios, you effectively lost $10, but here’s where it gets interesting. Psychologists Amos Tversky and Daniel Kahneman of Princeton University conducted the above study in 1984. They discovered that only 46% of the study participants in scenario one said they would spend another $10 to buy another movie ticket. However, a whopping 88% of the subjects in scenario two said they would still spend $10 to buy a theater ticket.

Here’s what happened. More than half of the subjects in scenario one created a “mental account” for the theater ticket. They equated the $10 they spent on buying the ticket in advance with the additional $10 they would have to spend to replace that ticket and concluded that the theater ticket actually would cost them $20. Paying $20 for a $10 ticket was a non-starter for 54% of the study participants.

Conversely, in scenario two, 88% of the study participants did not create a “mental account” that equated the $10 theater ticket with the $10 bill they lost on the way to the theater. But, as you can see, in both scenarios, the study participants still lost $10.

So, are humans completely irrational? Sort of. The participants who lost the theater ticket succumbed to the “sunk cost” trap. They let the price they paid for the lost ticket affect their decision to buy a new ticket even though the two are technically unrelated.

Investors frequently do the same thing. They buy a security, watch it go down, and then tell themselves, “as soon as it gets back to breakeven, I’ll sell it.” But, the fact is, a losing security is a sunk cost and there should be no commingled “mental accounting.” Instead, each investment decision should stand on its own and be made based on the most current information.

Remember, you don’t have to recoup a loss in the same way that you generated it. Sometimes it’s best to take a loss and move on to a more promising investment.

Weekly Focus - Think About It

“When you let go of trying to get more of what you don’t really need, it frees up oceans of energy to make a difference with what you have. When you make a difference with what you have, it expands.”–Lynne Twist

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

• Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

The Markets

One key to an economic recovery is a thawing of the credit freeze. Let’s look at three indicators that suggest we’re making some progress in this area.

• First, the LIBOR is coming down. LIBOR stands for London InterBank Offered Rate and it is the interest rate that banks charge to borrow from each other. A high rate indicates banks are nervous about getting repaid while a low rate suggests banks are confident they’ll get repaid. The 3-month LIBOR peaked at 4.82%n October 10, 2008 in the throes of the credit crisis. Last Friday, it closed at 0.66%, according to Bloomberg. This dramatic drop is a good sign that banks no longer fear a collapse of the international banking system.

• Second, the 3-month TED Spread is coming down, too. This is the difference between 3-month LIBOR and the 3-month Treasury bill rate. A large spread suggests investors are concerned about default risk while a small spread suggests investors are less concerned. The TED Spread peaked at 4.65% on October 10, 2008 and closed last Friday at 0.48%, according to CNBC.

• Third, junk bond yields have come down significantly in recent months. The Merrill Lynch High Yield Constrained index, which limits individual issuer concentration to 2%, yielded 14.4% last Friday, according to The Wall Street Journal. While that is still high, it’s a big decline from its peak yield of 22.5% in the past 12 months.

Other areas of the credit market, such as consumer credit, business credit, and the mortgage market, have shown improvement, but they are still a bit tight. Overall, credit is flowing and interest rates are generally low, so the credit environment is constructive, but there is still room for improvement.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not available.

“Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.” –Jesse Livermore

Jesse Livermore is a famous early 20^th century trader and speculator who was immortalized in the 1923 book, Reminiscences of a Stock Operator by Edwin Lefevre. Many of today’s top traders consider Livermore one of the greatest traders and speculators who ever lived. Now, we’re not mentioning Livermore because we think aggressively trading and speculating in your account is the way to go. Instead, we want to highlight the above quote from Livermore and discuss its relevance to today.

“Wall Street never changes.” From the standpoint that Wall Street is all about making money, that statement is true. It was as true in “The Roaring 20s” during Livermore’s lifetime as it was during the internet bubble of the late 1990s.

“The pockets change, the suckers change, the stocks change.” Wow, that statement is spot on. Wall Street continues to come out with new products that they think the public will buy even if they make little economic sense. Do you remember all those shaky limited partnerships from the 1980s? How about the dot-com IPOs of companies that had little revenue and no profits? And more recently, we had newfangled mortgages that let you buy a house with no money down or skip payments or just pay the interest only, among other options.

“But Wall Street never changes, because human nature never changes.” This is the key quote. In particular, as humans, our emotions have a tendency to get the best of us. In good times, we tend to get greedy and make decisions that under normal circumstances would be too risky for us. In scary times, we tend to panic and “get out at all costs.” We like to keep up with our neighbors so we behave in a herd-like fashion. We extrapolate the most recent trends and expect that they will continue indefinitely. All these tendencies have the ability to work against us and preclude us from reaching financial security.

The “smart” people on Wall Street understand our human frailties and, unfortunately, some of them use it to their advantage. As your advisor, we are also your advocate. We do our best to understand how markets work and, equally important, how human behavior works. Our advice may sometimes go against popular opinion because as history shows, what’s popular may not always be what’s best for you. Our advice won’t always be right, but it will always be given with integrity and with your best interests in mind.

Weekly Focus - Memorial Day

To the men and women who serve our country and help protect us from danger - thank you. And for those who have given their life in the name of our country, we will never forget the great sacrifice you have made on our behalf.

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

• Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

The Markets

Warren Buffett has said his favorite holding period is forever. Does he follow his own advice?

Buffett’s Berkshire Hathaway recently posted its worst quarterly loss in more than 20 years and a big chunk of that was due to what Buffett called a “major mistake.” Less than a year ago, with oil prices nearing their all-time high, Buffett dramatically upped his stake in oil giant ConocoPhillips and became its largest shareholder. Unfortunately, his timing was horrible. ConocoPhillips stock subsequently plunged along with the price of oil and as of last Friday, the stock was down about 50% from its high of last summer, according to Yahoo! Finance.

So, here’s your question: You’re Warren Buffett, your favorite holding period is forever, and a stock you recently paid billions of dollars for is now down by billions of dollars in just a few months, what do you do?

Well, Mr. Buffett hit the sell button. In the first quarter of this year, he sold 13.7 million shares of ConocoPhillips and took a $1.9 billion loss, according to Bloomberg. But, that may not be the end of his losses. As of March 31, Berkshire still held 71.2 million shares.

There are two good investing lessons here.

First, if you make an investment and the facts change, don’t be afraid to cut your losses and move on to a potentially more rewarding opportunity. Remember, you don’t have to recover your loss in the same way that you generated your loss.

Second, taking a capital loss may offer some tax benefits. In Buffett’s case, the $1.9 billion loss may allow Berkshire to recover as much as $690 million in previously paid capital gains, according to Berkshire’s quarterly report. Tax benefits shouldn’t be the only reason for selling an investment, but they can be part of the equation.

Oh, and by the way, Berkshire entered into long-term derivative contracts in recent years that are more than $13 billion in the hole as of March 31, 2009, according to Berkshire’s quarterly report. These contracts have expiration dates between 2019 and 2028 so there is time for them to recover, but $13 billion is a big hole to climb out of.

Yes, even the greatest investors make mistakes. However, one thing that makes them great is their willingness to embrace change, cut their losses, and move on.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not available.

ARE WOMEN BETTER INVESTORS THAN MEN? In a battle of the sexes, finance professors Brad Barber and Terrance Odean crunched the trading data on over 35,000 households from a large discount brokerage firm. They built upon psychological research, which indicates that in the area of finance, men tend to be more overconfident than women. Additional research shows that overconfident investors tend to trade more often than less confident investors. Armed with this data, Barber and Odean went to work.

They hypothesized that men traded more frequently than women and that this excessive trading hurt their performance more than it hurt the performance of women. Here’s what they found in a 2001 study published in The Quarterly Journal of Economics:

• 1. Men overall traded stocks 45% more frequently than women.
• 2. Single men traded stocks 67% more frequently than single women.
• 3. Women overall earned annual risk-adjusted returns that were 1.0% greater than men.
• 4. Single women earned annual risk-adjusted returns that were 1.4% greater than single men.

So yes, based on this study, women are more successful investors than men because they earn a higher annual return. An interesting sub-point from the study is that the out-performance by women was solely due to their lower trading frequency. Women were no better than men at security selection; instead, their advantage came from making fewer trades.

Let the bragging begin!

Weekly Focus - Think About It

“A man’s errors are his portals of discovery.”

–James Joyce

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

• Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

 The Markets

The government’s ability to “stick the landing” will go a long way toward determining how well the economy - and, by extension, the stock market - will fare over the coming years.

If you’re a fan of gymnastics, you’re familiar with the concept of “sticking the landing.” Whether it’s coming off the vault, the beam, or the bars, gymnasts hope to make that picture perfect landing with a big smile and arms outstretched. Taking a step forward on the landing, a step backward, or, worse yet, falling on your you know what, leads to a dreaded deduction and a disappointing finish.

The government is in a similar position.

With its myriad of fiscal and monetary policies, the government is furiously working to “stick” an economic landing that will prevent the recession from turning into a depression or the recovery from turning into runaway inflation. Their stab at managing interest rates and trying to thaw the credit markets is a good example.

On March 18, the Federal Reserve announced they would purchase more than $1 trillion in government and agency debt and mortgage-backed securities in an effort to lower interest rates and spur growth. So, how well has it worked? The yield on the 10-year Treasury note immediately dropped one-half percent from 3.0% to 2.5% - a huge one-day decline and a quick sign that the market liked what it heard. However, by last Friday, investors had reconsidered and the yield on the 10-year note was back up to 3.0%.

While the yield on the 10-year note has done a round trip over the past few weeks (possibly due to improved economic expectations or higher inflation expectations), the Fed has achieved great success in lowering other rates. For example, interest rates for mortgages, investment grade bonds, junk bonds, and municipal bonds have all declined since the Fed went on its bond-buying spree. And, let’s not overlook the effect in the stock market. Since its March 17 close, the S&P 500 index has risen about 11%, according to data from Yahoo! Finance.

Overall, the government has made some headway in managing interest rates, but the credit markets are by no means back to normal.

Unlike gymnastics, where you know in an instant if the gymnast “sticks the landing,” we won’t know for months, or perhaps even years, if the government sticks its economic landing. In the meantime, we’ll continue to watch for the signs and make adjustments accordingly.

Notes: S&P 500, DJ Global ex US, Gold, DJ/AIG Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not available.

ARE GREAT INVESTORS BORN OR MADE? If you look at people like Peter Lynch, John Templeton, or Warren Buffett, it’s tempting to say that they were born with natural gifts that endowed them with special investing skills. In reality, the common thread among people who excel at something, whether it’s investing, sports, or playing the violin, is that they typically earned their skill through 10,000 or more hours of deliberate practice.

Researchers have concluded that deliberate practice to the tune of 10,000 or more hours is generally required to master a particular skill. Geoffrey Colvin, senior editor-at-large of Fortune magazine, defined deliberate practice as, “activity that’s explicitly intended to improve performance, that reaches for objectives just beyond one’s level of competence, provides feedback on results, and involves high levels of repetition.” In other words, it’s more than just reading The Wall Street Journal every day or hitting a few buckets of balls after work.

For example, what’s made Tiger Woods so good? How about he’s been playing golf since he was 18 months old under the tutelage of his hard-driving father who wanted to turn him into the greatest golfer that ever lived? By the time Tiger won the U.S. Amateur Golf Tournament at age 18, he had been practicing with intense focus for more than 15 years.

Lynch, Templeton (now deceased), and Buffett have similar stories. They have been passionate, deliberate investors for decades and developed specific strategies that they’ve honed for years. The result? They’re considered some of the greatest investors that ever lived.

Knowing how difficult it is to be a successful investor, we continue to engage in our version of “deliberate practice” on your behalf so we can do a better job as we try to navigate these unusually tricky markets.

Weekly Focus - Think About It

“Don’t judge each day by the harvest you reap, but by the seeds you plant.”

–Robert Louis Stevenson

Best regards,

Greg Womack

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

The Markets

One-fourth of the year is now history so let’s see what transpired in the financial markets.

STOCK MARKETS STARTED TO DIVERGE

In what could be interpreted as a positive sign, world stock markets started to chart an independent course in the first quarter. Unlike the fourth quarter of 2008 when virtually every stock market around the world declined, we actually had some winners this quarter.  

Best and Worst Country Returns Based on the Dow Jones Global Indexes

Ranked by U.S. Dollar Performance

Winners

Source: Dow Jones Indexes

Losers

Source: Dow Jones Indexes

Overall, the Dow Jones Wilshire Global Index, excluding the U.S., dropped about 11% during the quarter, as indicated in the box score above.  

CREDIT MARKETS NOT BACK TO NORMAL

The government certainly understands that a fully functioning credit market is critical to our economic recovery and they’ve been doing all they can to thaw the ice jam. On the short-end of the yield curve, they’ve had some success as many companies and banks have been able to tap the short-term markets to meet their immediate funding needs, according to The Wall Street Journal. Companies in distress, though, have been pretty much shut out as investors have shown little appetite for buying new high-yield bonds.

At the long-end of the yield curve, interest rates rose this quarter. That’s good news for savers, but bad new for companies trying to lower their interest charges. On the plus side, the government did have success in helping lower mortgage rates. The average 30-year fixed mortgage rate finished the quarter near 5% and that’s spurred a new round of refinancing.   

COMMODITIES WERE MIXED

The DJ AIG Commodity Index slid 6.4% for the quarter, but that masked some nice gains in a handful of its components. Gold finished the quarter up just over 5%. Silver rose 15%. Crude oil tacked on 11% while gasoline futures soared 39%, according to The Wall Street Journal. And good old Dr. Copper sprinted ahead by 32%, perhaps presaging a budding economic recovery.

Agricultural commodities were mostly down for the quarter as corn fell fractionally, soybeans fell 2.1% and wheat gave up 13%. Some analysts think the upcoming stimulus dollars will eventually drive commodity prices higher. Others think it will take a pickup in industrial demand. One thing we can say with certainty is we all still need to eat and the world population is growing so there will always be some demand for agricultural products.

THE DOLLAR IS HANGING TOUGH

A small band of vocal critics has warned that the government’s massive stimulus programs and expansionary monetary policy will lead to a debasement of the dollar. Well, it hasn’t happened yet. During the first quarter, the dollar strengthened 5% against the euro, 9% against the Japanese yen, and 4% against a trade-weighted basket of 16 currencies tracked by J.P. Morgan Chase, according to The Wall Street Journal.

The dollar’s strength may confound its critics because of the theory of relativity. No, we’re not talking Einstein here. The idea is that almost all countries are going through difficult times right now and, on a relative basis, the U.S. is perhaps no worse off than any other country. And in some cases, we may be better off, so our currency is still being used as a “safe haven” and could remain strong even with all the government spending.

Ironically, the government - although they likely won’t say it publicly - may want the dollar to weaken so it would make our exports more attractive and help revive our economy. It’s clearly a delicate balance between doing what’s good for the U.S. and keeping in mind that we live in a global economy so we can’t upset our trading partners.

SUMMARY

As the quarter drew to a close, stock markets around the world rallied amid early signs of an economic recovery. Whether this is a head fake or the start of something big won’t be known for a long time, but we’ll take it anyway. Rising unemployment is still a major problem and that may not ease until 2010. Later this year, the stimulus dollars will start flowing through the economy and that may help cushion the blow of weak labor markets.

Ultimately, the sun will rise tomorrow and we expect our economy to eventually get back on track.  

Weekly Focus - Think About It

“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma - which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”

– Steve Jobs

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

 The Markets

It’s about time.

Last week, the stock market, as measured by the S&P 500 index, staged its third-largest weekly gain since World War II, according to Reuters. The gain was partially attributed to the following good news:

• Banking behemoths Citigroup, Bank of America Corp., and JPMorgan Chase & Co., all announced that they were profitable in the first two months of 2009, excluding one-time charges. Shares of Citigroup and Bank of America Corp. responded by rising 73% and 83% respectively for the week, according to Associated Press.
• General Motors said it wouldn’t need the latest $2 billion installment of bailout money because its cost-cutting plan was taking hold, according to Associated Press.
• The widely watched Reuters/University of Michigan consumer sentiment poll ticked up slightly in early March, according to MarketWatch.
• The Commerce Department reported that February retail sales were not as bad as economists feared and the January numbers were revised substantially upward.
• General Electric received a credit rating cut last Thursday, but it was not as deep as some expected and the stock rose 13% that day, according to The Wall Street Journal.
• A number of well-known market analysts, who had previously been stock market bears, adopted a more bullish posture last week. This list included Doug Kass, Marc Faber, Steve Leuthold, and Barry Ritholtz, according to Yahoo! Finance.
• Prices for copper and scrap steel have risen recently, which suggests there’s demand from manufacturers, according to The Wall Street Journal.
• Oil prices are up 23% in the last four weeks on signs that demand may be firming, according to The Wall Street Journal.

So, if you look hard enough, you can find reasons for optimism even amidst the despair. We’ll be watching for more clues this week to see if this is just a blip or the start of something big. Let’s hope for the latter.

Sources: Yahoo! Finance, Barron’s. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly. Three-, Five-, and 10-year returns are annualized.  Assumes dividends are not reinvested.

HOW DO YOU DETERMINE THE DIFFERENCE BETWEEN a bear market rally and the start of a new bull market? Last week’s huge 10% rally still left the S&P 500 index slightly more than 50% below its October 2007 all-time high. Can we confidently say that we’re now off to the races and we’ll start reeling in that 50% decline?

Reasonable people can certainly disagree on whether last week’s move is a head fake or the real deal. Let’s look at some history to see if it will help us reach a conclusion. Comparisons to the Great Depression seem to abound these days so let’s start there and see if there were any head fakes. All data comes from Bespoke Investment Group.

The Dow Jones Industrial Average reached a peak of 381 on September 3, 1929. Few people had any idea what was to unfold next. Just 71 days later, the Dow had plummeted 48% and the stock market crash was in full swing. However, the Dow then turned around and by April 17, 1930, it had soared 48%. Case closed - we’re now in a new bull market - right? Not quite.

By December 16, 1930, the Dow turned around again and dropped 46%. But wait, just 70 days later, the Dow was up 23%. Hold on, 98 days later, it was down 37%. But don’t despair, 31 days later it was up 28%. Dizzy yet? Ninety-four days later, it was down 44%. We’re far from done, though. Just 35 days later, the Dow was up 35%. And 57 days after that, it was down 39%. No need to worry, though, because 63 days later, it was up 25%. Oops, 122 days later, it was down a whopping 54%. Then we received a huge turnaround. Just 61 days later, the Dow was up 94%. At this point, it’s now September 7, 1932, and after all these pops and drops, the Dow is down 79% from its September 3, 1929, all-time high. To prevent boring you with more numbers, over the next two years, the Dow experienced five more swings of 20% or more. Whew!

As you may have concluded from just looking at the large number of 20% moves up and down during the Great Depression, there were many head fakes interspersed with substantial rallies.

So, back to the question at hand, how do you determine the difference between a bear market rally and the start of a new bull market? Answer: you can’t in real-time; instead, you have to wait until substantial time has passed and you can place the market’s moves in historical context. Our job, then, is to take what the market offers us and do the best we can with it.

Weekly Focus - Think About It

“As your faith is strengthened you will find that there is no longer the need to have a sense of control, that things will flow as they will, and that you will flow with them, to your great delight and benefit.”

  — Emmanuel Teney

Best regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

* To unsubscribe from the Womack Weekly Commentary please reply to this e-mail with “unsubscribe” in the subject line.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

* Consult your financial professional before making any investment decision. 

Past performance does not guarantee future results.

Womack Investment Advisers

1366 E. 15^th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Womack Investment Advisers, Inc. and Cambridge Investment Research, Inc. are not affiliated.

The Markets

As it relates to the financial markets, essentially the only positive thing we can say about last week is that it ended.

The relentless decline in the stock market continued as investors focused on declining earnings, declining jobs, and lingering unhappiness with some of the administration’s proposed economic plans. Talk of limiting some deductions for wealthy taxpayers and a cap-and-trade system on greenhouse gas emissions, in particular, seemed to spook investors. Of course, this year’s projected $1.75 trillion deficit doesn’t help matters, either.

The Dow Jones Industrial Average touched a 12-year low last week, and that’s only the third time it’s ever happened, according to a MarketWatch article, which cited a J.P. Morgan Chase analyst report. The first time a 12-year low occurred was on April 8, 1932 and the second time was December 6, 1974. MarketWatch pointed out that, “In 1932, the April 8 crossing of a 12-year-old low came three months before the market hit its bottom, while, 42 years later, the December 6 breach marked the exact 1974 low.” The good news is, one year after the December 6, 1974 low, the Dow was 42 % higher, according to data from Yahoo! Finance. We would certainly welcome a repeat of that performance!

The Dow has now dropped more than 50 % since its all-time high of 14,164 in October 2007, according to Bloomberg. Clearly, this is not your typical bear market. Please be assured that we are monitoring the situation very closely and we are doing our best to opportunistically take advantage of whatever this market throws at us.

Sources: Yahoo! Finance, Barrons. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly. Three-, 5-, and 10-year returns are annualized.  Assumes dividends are not reinvested.

AS AN ADVISOR, one of the earliest lessons you learn is that historically, over a long period of time, stocks have outperformed bonds.  For example, from 1926 - 2007, stocks had an average annual total return of 10.4 %, while bonds had an average annual total return of 5.5 %, according to The Vanguard Group. As you can see, stocks significantly outperformed bonds during this long period.

However, over the last 30 years, the situation reversed.

According to a March 6, Bloomberg story, the cumulative total return of bonds over the past 30 years was 1,479 %, while the total return for stocks was a bit lower at 1,265 %. This switch of bonds outperforming stocks over the past 30 years occurred because of the tremendous drop in stocks since October 2007. To confuse things, if we took this measurement at the stock market peak in October 2007, it shows stocks returning 2,845 % and bonds returning 1,156 % since 1979. A bear market sure makes a big difference.

The point we want to make is that diversification, while not guaranteeing a profit or protecting against loss, is a prudent strategy. Stocks may outperform bonds in the very long term, but in the short term-which in this case is 30 years-bonds may outperform stocks. It makes sense to own both because you never know when one will outperform the other.

It’s also worth pointing out that there are very few “absolutes” in the investing business. When we have big declines like we’ve witnessed over the past year, it causes investors to reexamine long-held beliefs about how markets work. This is actually healthy because it forces you to continually upgrade your belief system based on new information. Investors who don’t adapt may face major problems.

Weekly Focus - Daylight Saving Time

While it’s debatable how much energy is saved by implementing daylight saving time (DST), it’s not debatable that DST has an effect on health. A Finnish study last year concluded that DST can disturb people’s sleeping patterns and make them more restless at night. Another study published last year found a spike in heart attacks during the first week of DST. The study also concluded that there’s a brief, slight dip in heart attacks when DST ends in the fall.

Apparently, the human body does not like a disruption in its sleep pattern.

Best Regards,

Greg Womack, CFP

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Investors cannot invest directly in indices.

Provided by: Womack Investment Advisers, Inc. (WIA)

The views are those of Womack Investment Advisers and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Consult your financial advisor for more information.

Investments are NOT DEPOSITS; NOT FDIC INSURED; NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.