The Markets

Would you willingly give the government your money and expect nothing in return? Last week, that is exactly what happened.

Treasury bills maturing in January 2010 actually yielded -0.01% last Friday. The last time interest rates were negative was at the height of the credit crisis in late 2008 as panicked investors sought refuge in short-term government paper, according to The Wall Street Journal. Fortunately, this time around, panicked investors were not the reason for the negative rates.

Many large institutional investors have reaped significant gains in this year’s bull market and, rather than risk giving back some of those gains in an end-of-the-year swoon, some of those investors decided to park their cash in ultra-short Treasury bills. This strong demand for the bills, plus a temporary shortage of T-bills available for investment, helped drive the yields to effectively zero.

While the above explanation for the zero interest rates makes sense, there is always the possibility that there is more to the story. If large investors felt the rally would continue, would they risk missing it? We are always mindful that what “makes sense” may not always make money. Accordingly, we remain vigilant for any sign that the bull market is tired and ready to take a nap.    

Data as of 11/20/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-0.2%

20.8%

36.4%

-8.0%

-1.5%

-2.6%

DJ Global ex US (Foreign Stocks)

-1.4

37.0

61.5

-4.6

4.2

1.2

10-year Treasury Note (Yield Only)

3.4

N/A

3.1

4.6

4.2

6.1

Gold (per ounce)

3.3

31.1

54.5

22.2

20.5

14.5

DJ-UBS Commodity Index

2.5

15.1

14.9

-7.0

-2.4

3.8

DJ Equity All REIT TR Index

-0.5

18.7

81.8

-14.2

0.3

10.3

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 applicable or not available.

A COMMON MISTAKE MADE BY INVESTORS is to confuse the performance of the economy with the performance of the stock market. Logically, you would expect the economy and the stock market to move somewhat in synch. That is, if the economy does well, the stock market should do well and vice versa. Directionally, that is usually correct, but the degree of the moves could vary significantly.

This year is a great example of how the economy and the stock market are moving in the same direction, but the degree of the moves in each are way out of proportion. Specifically, the economy is slowly stumbling its way out of the recession while the stock market has been on a tear with the S&P 500 index rising more than 20% year-to-date.

How can stocks rise so dramatically when the economy is still lethargic? In a word - earnings. As the economy started to tank last year, corporate America quickly slashed costs. With a lowered cost structure, it only took a small up-tick in business to produce outsized earnings. In fact, Thomson Reuters said 80% of the S&P 500 companies reported third-quarter earnings that beat Wall Street estimates. To be fair, the earnings were better than Wall Street expected, but they were still generally down from all-time highs.     

UBS stock-market strategist Thomas Doerflinger came up with a clever way to describe this rapid improvement in earnings against a slow moving economy. He called it a “‘V’ shaped recovery in profits in a ‘U’ shaped economy.” Major cost-cutting essentially levered corporate earnings power so a small improvement in the economy could translate into a much larger profit improvement.

For bulls, this leverage means we could see record corporate profits before we see record corporate revenue. Sadly, for employees, this could be a “jobless recovery,” but for investors, it could be a profitable one.

Weekly Focus - Think About It

“Would our disappearance leave the world poorer, or just less crowded?” –Harold Kushner

Best regards,

Greg Womack, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

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. 15th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

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

The Markets

Take your pick - gold surging past $1,100 an ounce, the jobless rate hitting double digits, Warren Buffett’s, “all-in wager on the economic future of the United States,” a 3.2% rise in the S&P 500 index - there was something for everyone last week in the economy and the financial markets.

The price of the shiny yellow metal keeps on rising despite little sign of rampant inflation or extraordinary fear in the markets. Prices jumped last week on news that India purchased 200 metric tons of gold from the International Monetary Fund as a way to diversify its foreign-exchange reserves. Gold bulls took that as a cue to get on the gold bandwagon.

The jobless rate and the economy seem to be living in alternate universes. The economy grew 3.2% in the third quarter, yet the jobless rate continued to spike, hitting a rate not seen since the early 1980s. Yes, they say employment is a lagging indicator, but, at some point, we have to start seeing a net increase in jobs or else we risk a double-dip recession.

Warren Buffett made perhaps the last major purchase of his lifetime by agreeing to acquire the remaining shares of Burlington Northern Santa Fe Corporation that he did not already own in a $44 billion deal. Surprisingly, for a debt-adverse investor, he will borrow roughly $8 billion to complete the deal.

And the stock market? No matter the news, it seems to take it all in stride as the Dow Jones Industrial Average closed above the 10,000 mark. The bulls are making it difficult for the bears to find an opening.

Data as of 11/6/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

3.2%

18.4%

14.9%

-8.1%

-1.7%

-2.5%

DJ Global ex US (Foreign Stocks)

1.7

35.8

34.8

-5.0

4.3

1.5

10-year Treasury Note (Yield Only)

3.5

N/A

3.7

4.7

4.2

5.9

Gold (per ounce)

5.5

26.1

45.4

20.5

20.5

14.3

DJ-UBS Commodity Index

-0.3

12.1

2.2

-8.3

-2.8

4.0

DJ Equity All REIT TR Index

0.2

12.4

15.5

-14.3

-0.5

9.4

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 applicable or not available.

THERE IS A FINE LINE between having the conviction to stick to an investment position that is temporarily going against you versus being flexible enough to change your mind as the situation changes. Knowing how to discern that line is an important part of successful investing.

Before you make an investment, here are three things you should know:

  1. The rationale or thesis behind your investment.
  2. The level at which your investment would become “fully valued.”
  3. What would have to happen for you to realize that your rationale or thesis was no longer valid.

Having clarity on those three items makes it easier for you to know where that line between conviction and flexibility lies.

The British economist John Maynard Keynes famously said, “When the facts change, I change my mind. What do you do, sir?” Since nobody knows for certain what the future holds, we have to review the data as it arrives. If that data is materially different from our original thesis and the market is responding to it, then that will likely cause us to change our mind. This concept of conviction versus flexibility is something we are conscious of and we use it to help us be better - and more flexible - investment managers.

Weekly Focus - Think About It

“An oak and a reed were arguing about their strength. When a strong wind came up, the reed avoided being uprooted by bending and leaning with the gusts of wind. But the oak stood firm and was torn up by the roots.”  — Aesop

Best regards,

Greg Womack, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

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. 15th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

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

The Markets

The S&P 500 index jumped 4.5% last week as a weakening dollar and a positive earnings report from Alcoa helped keep the bulls in charge.

Early last week, Australia surprised the world and became the first central bank of the Group of 20 Nations to raise its benchmark interest rate during this economic cycle, according to MarketWatch. This helped send the dollar lower as currency investors realized that countries such as Australia may offer better growth prospects - and higher returns on interest-bearing investments - than the United States.

Alcoa, traditionally the first company in the Dow Jones Industrial Average to report quarterly earnings, started the reporting period with a bang as it reported revenues and earnings that exceeded Wall Street expectations, according to CNBC. As an aluminum maker, Alcoa’s products are used in manufacturing and the company’s results may provide a glimpse on how that sector of our economy is performing. While the quarter was above analyst expectations, the expectations were low. Alcoa’s revenue was down 37% from a year ago while its earnings per share were off 89%, according to CNBC.

The economy still has a long way to go before it regains its former glory days, but the financial markets are wasting little time in trying to recoup their bear market losses. 

Data as of 10/9/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

4.5%

18.6%

19.2%

-7.4%

-1.0%

-2.2%

DJ Global ex US (Foreign Stocks)

4.8

37.4

27.3

-3.3

5.4

1.8

10-year Treasury Note (Yield Only)

3.4

N/A

3.8

4.7

4.1

6.1

Gold (per ounce)

4.8

20.9

19.0

22.3

20.0

12.7

DJ-UBS Commodity Index

4.0

10.2

-14.8

-7.4

-3.9

3.9

DJ Equity All REIT TR Index

5.5

17.3

3.8

-13.0

1.2

9.8

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 applicable or not available.

GOLD PRICES HIT AN ALL-TIME HIGH last week driven by a weak dollar and concerns over potential inflationary pressure, according to CNBC. Many people consider gold to be a good inflation hedge. Is it true? Let’s look at some examples.

Way back in January 1980, gold prices peaked at approximately $850 per ounce. Last week, it closed at $1,051 per ounce according to the London Bullion Market Association (LBMA). This represents a gain of about 24%. By comparison, between January 1980 and August 2009, inflation, as measured by the consumer price index, rose approximately 179%, according to the 2009 Ibbotson® SBBI® Classic Yearbook and the Bureau of Labor Statistics. Score one for inflation beating gold.

If gold prices had kept pace with inflation since January 1980, gold would sell for roughly $2,400 an ounce in today’s dollars, according to MarketWatch. This is one reason why some investors feel gold could move to $2,000 an ounce without too much trouble.

However, before we get too carried away, let’s look at the other side of the story.

Like many statistics, what you pick as your starting point can greatly influence your results. By picking the January 1980 gold price peak as the starting date - after gold had already risen more than 2,000% in the previous 10 years - the returns between 1980 and today look weak.

A more representative analysis of the inflation-fighting benefits of gold would start in June 1973. By June 1973, all currencies were allowed to “float” freely without regard to the price of gold and the U.S. was a couple years past exchanging dollars for gold at a fixed price, according to the National Mining Association. In other words, by June 1973, we had a market-based price for gold that reflected supply and demand and we were just prior to the start of a major inflation binge in the U.S. The price of gold that month was approximately $120 per ounce, according to the LBMA.

Here are a couple numbers to consider:

First, between the June 1973 price of $120 per ounce and the January 1980 price of $850 per ounce, gold had risen 608%. By contrast, inflation rose 76% during that same period, according to the 2009 Ibbotson® SBBI® Classic Yearbook. Clearly, gold was an excellent inflation hedge during the inflationary 1970s. Score one for gold beating inflation.

Second, between the June 1973 price of $120 per ounce and last week’s price of $1,051, gold had risen 776%. By contrast, inflation rose approximately 385% during that same period, according to the 2009 Ibbotson® SBBI® Classic Yearbook and data from the Bureau of Labor Statistics. Clearly, gold has been an effective hedge against inflation since 1973, although past performance is no guarantee of future results. Score another one for gold beating inflation.

Here are some conclusions to ponder.

First, gold has historically been a solid inflation hedge over a long period of time. However, there is no guarantee this will hold true in the future.

Second, between the 1980 gold price peak and last week, gold has significantly underperformed inflation. However, it is misleading to say “gold is selling well below its inflation-adjusted 1980 price” as a reason why gold should easily move to $2,000 per ounce. It is misleading because gold had already moved up more than 2,000% during the 1970s, as measured from gold’s January 1970 price of $35 per ounce.

Third, gold has historically moved in long cycles. In the 1970s, it had a strong up move. In the 1980s through the early 2000s, it was in a down move. Since the early 2000s, it has been in a strong up move.

Presently, gold could be on the rise due to inflation expectations or as a hedge against a declining dollar. Most likely, it is a combination of both.

Because of its long history, gold enjoys a special place in society. It can be an investment. It can be a hedge. It can be worn on your body as jewelry. It can be exchanged for cash. And, because of its special place, we will likely still be talking about gold over the next millennium.

Weekly Focus - Think About It

“Thinking to get at once all the gold the goose could give, he killed it and opened it only to find - nothing.”

– Aesop

Best regards,

Greg Womack, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

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.

The Markets

As we enter the home stretch for 2009, let’s review what transpired in the financial markets over the past three months.

Data as of 9/30/09

3nd Quarter

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

15.0%

17.0%

-9.4%

-7.5%

-1.1%

-1.9%

DJ Global ex US (Foreign Stocks)

19.2

35.3

4.3

-3.6

5.7

1.9

10-year Treasury Note (Yield Only)

3.3

N/A

3.8

4.6

4.1

5.9

Gold (per ounce)

6.6

14.5

12.6

18.4

19.1

12.8

DJ-UBS Commodity Index

4.2

8.9

-23.9

-7.2

-3.6

3.3

DJ Equity All REIT TR Index

33.2

17.4

-28.1

-12.2

1.6

9.8

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 applicable or not available.

STOCK MARKET RALLY CONTINUED

Rising a stunning 15.0%, the S&P 500 scored its largest quarterly gain since 1998, according to The Wall Street Journal. International markets did well, too, as the Dow Jones Global Index, excluding the U.S. Total Stock Market Index, rose 19.2% in the third quarter. The gains reflected continued improvement in some aspects of the worldwide economy, as well as anticipation that the improvements will continue.

Year-to-date, worldwide stock market returns have been remarkable. Since the March 9 low, global stock markets have added about $20 trillion in market value, according to an October 4 Bloomberg article. Now that’s what we call “stimulus!”

INTEREST RATES DROPPED

Disappointed with low short-term rates and meager returns from perceived safe investments such as money market accounts, many investors fled the short-end of the yield curve and moved out to the longer - and riskier - end. So far, that has paid off as bond prices generally rose in the third quarter, according to The Wall Street.

If inflation becomes a problem or the dollar goes into a freefall, you could see interest rates reverse course and start to rise. Of course, that could lead to a potential setback for the economy so the government is trying to walk a fine line between flooding the economy with liquidity - to help it grow - but not flooding it too much that it would lead to rampant inflation.

With the significant decline in most interest rates over the past few months, investors appear comfortable with how the government has walked this fine line. However, there is a definite concern that down the road, perhaps one to three years from now, we could be in for inflation that rivals the worst of the late 1970s/early 1980s period. 

THE VALUE OF THE DOLLAR DECLINED

Big budget deficits, concerns about inflation, and a desire for riskier assets helped push down the value of the dollar last quarter. According to The Wall Street Journal, the dollar dropped 4.1% against the euro, 6.8% against the Japanese yen, and 9.5% against Australia’s currency.

In an August 18 op-ed piece in the New York Times, Warren Buffett opined that a continued rise in the debt-to-G.D.P. ratio could cause the U.S. dollar to “melt.” When Buffett gets involved, you know it’s time to take notice. Fortunately, if the dollar does liquefy beyond recognition (i.e., “melt”), other investments may rise in value and we would do our best to position for that accordingly.

SUMMARY

To say it’s been a wild ride in the financial markets this year is an understatement. We started the year with a massive decline and then after March 9, the markets exploded to the upside on faint signs of economic stabilization. While parts of the economy are working better, unemployment is staying painfully high. Some economists expect unemployment to hit or exceed 10.0% before it starts falling and that presents some strong headwinds for the markets in coming months.


Weekly Focus - Think About It

“In times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.”

– Eric Hoffer

Best regards,

Greg Womack, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

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. 15th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

The Markets

After closing at a post-recovery high on Tuesday of last week, the market headed south the next three days as investors assessed the impact of the Federal Reserve’s latest missive and digested some less exuberant economic data.

On Wednesday, the Fed said that, “Economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” This suggests interest rates should remain low for the foreseeable future, which may be healthy for the economy and the stock market. The Fed also said it was slowing the pace of its purchase of mortgage-backed securities. This program has helped stabilize the housing market. Unfortunately, the wording of this particular sentence made some investors think that the government will take away the punch bowl (i.e., the stimulus) a little sooner than expected. After pondering it for a few moments, investors decided it was a good time to book some profits and the market sold off shortly after the release of the Fed statement.

Later in the week, a couple of disappointing housing reports and a weaker than expected durable goods number contributed to further stock market weakness. On the bright side, the Reuters/ University of Michigan Surveys of Consumers said its index of sentiment for September rose to 73.5 from 65.7 in August. That was higher than expectations, according to a Reuters poll. It was also the highest reading since January 2008.

Last week’s uneven economic news suggests that this economic recovery may look like the printout of an EKG.

Data as of 9/25/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-2.2%

15.6%

-13.9%

-7.7%

-1.1%

-2.0%

DJ Global ex US (Foreign Stocks)

-1.7

34.2

-4.9

-3.4

5.8

2.0

10-year Treasury Note (Yield Only)

3.5

N/A

3.9

4.6

4.0

5.8

Gold (per ounce)

-2.0

14.0

11.6

19.3

19.4

13.4

DJ-UBS Commodity Index

-3.3

5.2

-31.2

-7.8

-3.9

3.0

DJ Equity All REIT TR Index

-5.7

15.5

-28.1

-12.5

1.5

9.7

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 applicable or not available.

ONE OUTCOME OF THE FINANCIAL CRISIS may be that we have to “live with messiness.” Instead of a neat and tidy explanation for everything that happens in the markets, it may turn out that humans are sometimes irrational and, as emotional creatures, we occasionally let fear and greed cloud our financial decisions. After witnessing the current financial crisis, the tech stock bubble and burst from a decade ago, and numerous other financial storms over the past 20 years, it seems that when it comes to money, humans are still working through their issues!

In a very interesting September 2 New York Times Magazine article, Nobel Prize winner and liberal economist Paul Krugman discussed the development of economic thought over the past 230 years and how the current financial crisis has thrown economic theory into disarray. Without getting into his political leanings, Krugman makes a case that almost all economists, whether they be conservative or liberal, financial or macroeconomic, missed this crisis. Despite their impressive-looking mathematical formulas and hundreds of years of history, economists, in general, failed to predict the size and timing of our current worldwide maelstrom, and, worse yet, were generally blind to the idea that a catastrophe of this size could even happen in this (enlightened) day and age.

Krugman says economists, “Will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic ‘theory of everything’ is a long way off.” In short, he says we have to “live with messiness.”

From a practical standpoint, as an advisor, it reiterates the importance of knowing that the financial markets are not perfectly rational and that they do not always behave in the way that econometric models predict. One could argue that changes in the financial markets are simply a reflection of the sentiments, fears, dreams, and hopes of us - the market participants. The markets are not separate from us - they are us!

Since we humans are, well, human, then the markets may behave in a way that reflects human behavior and that can get quite messy. Some of us are rational beings while others tip the scale in the other direction. Knowing this helps us remain aware and on guard for extreme movements in the markets. We can’t guarantee that we’ll always be on the “right” side of extreme market movements, but you can be confident that we will sure try.  

Weekly Focus - Think About It

“He who obtains has little. He who scatters has much.”

– Lao Tzu

Best regards,

Greg Womack, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

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. 15th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

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

The Markets

Like a winded mountain climber approaching 25,000 feet, the domestic stock market took a breather last week after several weeks of strong gains.

If this breather turns into the “pause that refreshes,” then the markets may soon resume their upward march and continue the healing from the bear market. Unfortunately, it does not always turn out that neat and tidy.

Sometimes mountain climbers take a break and realize they can’t go any further. Likewise, investors digested some of the news last week and realized that perhaps the market got a little ahead of itself. In particular, investors seemed a bit spooked by news that retail sales fell 0.1% in July and that the Reuters/University of Michigan index of consumer sentiment fell in early August to its lowest level since March. Although not a perfect correlation, gloomy consumers may turn out to be stingy spenders and that could be bad news for economic growth.

Similar to our hypothetical mountain climber mentioned above, the powerful rally over the past few months may be treading in rarefied air. Last week, it stopped to catch its breath. Over the next few weeks, we’ll see if it also catches a cold.

Data as of 8/14/09 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.6% 11.2% -22.7% -7.5% -1.4% -2.8%
DJ Global ex US (Foreign Stocks) 0.8 26.7 -17.8 -5.1 5.3 1.5
10-year Treasury Note (Yield Only) 3.6 N/A 3.9 5.0 4.3 6.0
Gold (per ounce) -0.3 9.6 16.6 15.1 18.9 13.9
DJ-UBS Commodity Index -2.1 8.8 -33.1 -9.5 -2.7 3.9
DJ Equity All REIT TR Index -5.0 7.7 -35.2 -12.9 1.0 N/A

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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.

HOW MUCH OF THE STOCK MARKET RALLY since the March lows is real versus fake? On the surface, 100% of the rally is real since we can clearly document through third-party sources that the market has risen significantly. But, is the rally real from the sense that it is being driven by legitimate, sustainable end-user demand or is the rally fake because it is being driven by temporary and unsustainable government spending?

Worldwide, governments have spent, lent, or committed trillions of dollars to support global commerce and to help end the recession. In the U.S. alone, the number is greater than $12 trillion, according to an analysis by Bloomberg. So far, that money has helped stabilize the world economy and helped pump up stock prices as corporate earnings did not fall as much as initially feared.

Consider this, though, what happens to the economy when the government’s “monetary lighter fluid” stops flowing?

Think of it this way. Let’s say you want to start a fire in your backyard fire pit. You gather some twigs, scrunch an old newspaper and then throw a few logs on top. To ensure a strong start to your fire, you douse it with lighter fluid. You light a match and then - poof - you have a roaring fire. If you’ve effectively laid out your twigs, paper, and wood, and your wood is dry, chances are your fire will keep burning long after the lighter fluid is consumed. If not, the fire will die shortly after the stimulus of the lighter fluid is gone.

As it relates to the economy, government spending is akin to the lighter fluid. It’s igniting the economy and keeping it stimulated. However, that stimulus will eventually end and taxes will likely rise. If the economy starts tanking again as the stimulus wears off, then we’ll know that all we’ve done is mask a major fundamental economic problem with a temporary pain reliever - albeit a very expensive one!

Nobody knows what will happen to the economy when the government largess ends. For our part, we continue to monitor the heartbeat of the economy to try to discern whether it can keep beating under its own power. If it can’t, we will do our best to adjust your portfolio and keep it beating to the tune of your long-term goals and objectives.   

Weekly Focus - Think About It

“Successful investing is anticipating the anticipations of others.”

–John Maynard Keynes

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.

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

The Markets

Here we go again making another comparison to The Great Depression. Only this time, it’s a positive comparison.

For the five months ending last Friday, the S&P 500 had its best performance streak since The Great Depression year of 1938, according to Reuters. During these five months, the S&P 500 index rallied 34%. Yet, despite this tremendous rise, losses between January and early March of this year limited the S&P’s year-to-date gain to 9.3%, according to data from Yahoo! Finance.

Several factors helped propel this rally including a normal bounce back from a deep correction, better than expected quarterly earnings, and “less bad” economic news. Rallies like this also tend to feed on themselves as trend followers jump on board and help push prices higher.

Interestingly, corporate insiders have been big sellers during this rally. According to Vickers Weekly Insider Report as reported by MarketWatch, the ratio of insider selling to insider buying over the past few weeks was at its highest level since the fall of 2007 - right before the bear market began. Although not foolproof, this suggests corporate insiders are less sanguine about the future of this rally.

Corporate insiders notwithstanding, this has been a powerful rally. Only time will tell if it continues into the fall or rolls over into a new leg down. Either way, we’re doing our best to help you preserve capital and generate profits as appropriate.

Data as of 7/31/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks) 0.8% 9.3% -21.7% -8.2% -2.3% -2.9%
DJ Global ex US (Foreign Stocks) 2.5 24.1 -23.2 -5.6 4.5 1.3
10-year Treasury Note (Yield Only) 3.5 N/A 4.0 5.0 4.5 5.9
Gold (per ounce) -1.3 8.3 2.3 14.1 19.1 13.9
DJ-UBS Commodity Index 2.6 7.9 -38.3 -10.8 -2.8 4.1
DJ Equity All REIT TR Index 3.6 -2.7 -39.2 -16.0 -1.0 N/A

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 WE HEADING TOWARD INFLATION OR DEFLATION over the next few years? The answer to this question may have significant portfolio implications.

With the economy having just completed four consecutive quarters of negative GDP growth, it’s hard to imagine that inflation could be a potential problem - but it is. Thanks to the government’s massive monetary and fiscal stimulus, all this money sloshing through our economy has the potential to juice it so much that we end up with double-digit inflation and a weak dollar.

Deflation, on the other hand, is possible, too. With unemployment near double-digits, consumer spending subdued, banks being tightfisted, and our industrial complex operating way below capacity, we could end up in a vicious circle of declining prices that overwhelms the government’s stimulus efforts.

From a portfolio standpoint, here’s the rub. Investments that have historically performed well in an inflationary environment may not necessarily do well in a deflationary environment and vice versa.

So, what’s an investor to do?

Ben Bernanke, Chairman of the Federal Reserve, is on the record as saying the government, “…would take whatever means necessary to prevent significant deflation in the United States.” From a political standpoint, some inflation is preferable because it allows the government to pay back its debts with cheaper dollars. Given the government’s comments and the political benefit to inflation, it’s reasonable to conclude that if the government errors, they are more likely to error on the side of inflation rather than deflation.

However, from an investment standpoint, putting all your eggs in an inflation-based portfolio would be risky. A more prudent strategy may be to include some asset classes that could benefit from inflation and some that could benefit from deflation and then monitor those assets closely to see which scenario unfolds.

Successful investing is never easy and it is issues like the inflation/deflation question that are especially vexing. While you may find this issue boring, it excites us and is an example of what you have hired us to help you navigate. Please be assured that we are doing all we can to find the smoothest route possible through this potential white water issue. 

Weekly Focus - Think About It

“And now let’s go hand in hand, not one before another.”

– William Shakespeare, The Comedy of Errors

How will your dreams become reality?  The CWMG Wealth Plan can help.  With our professionally designed Wealth Plan, you’ll see:

How close (or far) you are to retirement…

When to schedule a major purchase…

How to stabilize your retirement cash flow…

Contact our office for more details regarding our wealth planning process.

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. 15th St.

Edmond, OK  73013

405-340-1717

405-340-6091 Fax

http://www.womackadvisers.com/

 

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

The Markets

The second quarter earnings season started just like the Fourth of July - with a bang!

The hard-hit financial sector delivered some good news last week as companies such as Goldman Sachs and JP Morgan Chase announced earnings that pleased the market. In the tech sector, Intel and IBM provided support, too. On the other hand, widely watched General Electric came out with earnings and guidance last Friday that was disappointing and the stock dropped 6% by the end of the day. The good news was that the big drop in GE stock did not take the rest of the market with it - perhaps a sign that investors don’t view GE as the bellwether stock it once was.

By the end of the week, after all the news and noise, the S&P 500 index had surged 7% and had almost recaptured its recent June 12 high.

Going forward, investors will keep a close eye on the rest of the earnings reports looking for any sign that profits are being generated by revenue growth instead of relying on cost cutting. As you know, you can’t cost cut your way to 15% profit growth each year, so, eventually, we’ll need to see solid revenue growth before investors will feel confident that we’re out of the woods.

Data as of 7/17/09 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 7.0% 4.1% -25.4% -8.7% -3.1% -4.0%
DJ Global ex US (Foreign Stocks) 6.0 15.4 -28.2 -6.0 2.5 0.4
10-year Treasury Note (Yield Only) 3.7 N/A 4.0 5.1 4.4 5.7
Gold (per ounce) 2.7 7.8 -2.9 12.8 18.2 14.0
DJ-UBS Commodity Index 5.5 2.6 -44.3 -11.8 -3.9 3.9
DJ Equity All REIT TR Index 7.2 -13.3 -44.5 -18.1 -3.5 N/A

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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.

AMERICANS SOCKED AWAY MONEY AT THE HIGHEST MONTHLY RATE IN 15 YEARS last month, according to the Department of Commerce, and that’s good news - mostly. The personal savings rate rose to 6.9% in June, which is well above the average savings rate over the past decade. The personal savings rate is the percentage of personal disposable income that is saved each month.

A higher savings rate may reduce our dependence on foreign countries financing our deficits - a good thing - but, paradoxically, it might lengthen our recession. If we collectively save “too much” it could stunt economic growth as consumption slows down and fewer goods and services are produced and delivered. This “paradox of thrift” may hurt the economy in the short-term, but could be very beneficial in the long run. A higher savings rate also helps cushion families against unforeseen financial setbacks like the loss of a job, so that’s good, too.

To put the 6.9% in context, here’s how the number looks over roughly the past 50 years:

 

1960s Average

1970s Average

1980s Average

1990s Average

Jan 2000 - Sep 2008 Average

Oct 2008 - Jun 2009 Average

Personal Savings Rate

 

8.3%

 

9.6%

 

9.0%

 

5.2%

 

1.5%

 

4.4%

Source: U.S. Department of Commerce: Bureau of Economic Analysis

Notice that from the 1960s through the 1980s, the personal savings rate averaged a healthy 8.3% to 9.6%. During the 1990s, there was a noticeable decline in the savings rate as consumers started a nearly 20-year spending binge. As we started the new millennium and all the way up to September of last year, consumers were on a spending rampage as they not only burned through their income each month, but, in some cases, borrowed money to support their habits.

In August 2005, near the peak of the housing bubble, the personal savings rate was actually a negative 2.7%. This amazing financial alchemy was aided and abetted by consumers pulling out billions of dollars in home equity loans and using that money to finance an unsustainable lifestyle. Of course, this spending above our means also meant that the level of economic growth was unsustainable, too. This all abruptly shifted in August 2008 as the personal savings rate went from 0.8% that month to last month’s 6.9%.

Yes, it is generally a good thing that consumers are saving again. The big question is, have we learned our lesson? Is this new frugalness just temporary or is it the new normal? The answer to that question has major implications for the worldwide economy over the coming years.

Weekly Focus - Think About It

“Money often costs too much.”

– Ralph Waldo Emerson

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. 15th 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

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.

Data as of 6/19/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-2.6%

2.0%

-30.1%

-9.4%

-4.0%

-3.7%

DJ Global ex US (Foreign Stocks)

-3.7

13.2

-35.4

-6.6

2.1

0.5

10-year Treasury Note (Yield Only)

3.8

N/A

4.2

5.1

4.7

5.9

Gold (per ounce)

-0.2

7.5

3.6

17.9

18.8

13.7

DJ/AIG Commodity Index

-2.0

7.7

-44.6

-8.9

-2.9

4.6

DJ Equity All REIT TR Index

-6.5

-12.2

-47.3

-16.9

-2.5

N/A

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. 15th 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.

Data as of 6/12/09

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

0.7%

4.8%

-30.4%

-8.6%

-3.4%

-3.1%

DJ Global ex US (Foreign Stocks)

1.4

17.5

-31.9

-5.4

3.3

1.1

10-year Treasury Note (Yield Only)

3.8

N/A

4.2

5.0

4.9

6.0

Gold (per ounce)

-2.6

7.8

8.7

15.4

19.5

13.7

DJ/AIG Commodity Index

1.4

9.9

-42.9

-8.9

-2.3

4.7

DJ Equity All REIT TR Index

-1.7

-6.1

-43.0

-15.2

-0.3

N/A

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. 15th 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.

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