Where is the recovery in jobs?
In the 10 recessions between World War II and 2001, the jobs
lost during the recession were fully recovered within 4 years of the previous peak
in employment, according to the blog, Calculated Risk. In fact, with the
exception of the 2001 recession, the previous 9 recessions had recovered all
their lost jobs within a relatively short 2½ years.
The 2007 recession, however, is a different story.
At its nadir in February 2010, the U.S. economy had shed
nearly 9 million jobs from its prior peak, according to the Bureau of Labor
Statistics (BLS). As of last week’s June employment report, the U.S. economy
had recovered less than half of those lost jobs – and we’re more than 4 years removed from the peak employment level of
late 2007, according to the BLS.
Why has the jobs recovery from this recession been so
painfully slow? Here are several reasons:
(1)Recoveries
from recessions caused by financial crises – like this one – are notoriously
slow.
(2)Extremely
high economic policy uncertainty emanating from Washington made corporations
cautious in hiring.
(3)The
extension of unemployment benefits to 99 weeks reduced some people’s desire to
find new work.
(4)Uncertainty
from events related to the euro crisis dampened business demand and the need
for more workers.
Sources: Gary Becker, Nobel Prize
Winner and Richard Posner blog; The Wall
Street Journal
There is some good news, though, that could eventually provide
a spark for new hiring.
Corporate profits as a percentage of gross domestic product
(the value of all goods and services produced in the U.S.) recently hit an
all-time high, according to Business Insider. This means corporate profits are
at record levels. On top of that, corporate cash levels have reached historic
highs which suggest corporations have plenty of money to reinvest for growth,
according to Yahoo! Finance. With corporate profits and balance sheets looking
solid, all we have to do is get these companies to start spending some of that
cash on new hires. If that happens on a large scale, it could be a huge boost
to the economy and the financial markets.
Data as of 7/6/12
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
-0.6%
|
7.7%
|
0.8%
|
14.7%
|
-2.4%
|
3.3%
|
|
DJ
Global ex US (Foreign Stocks)
|
-0.1
|
1.0
|
-17.8
|
5.4
|
-7.4
|
4.6
|
|
10-year
Treasury Note (Yield Only)
|
1.5
|
N/A
|
3.1
|
3.5
|
5.2
|
4.8
|
|
Gold
(per ounce)
|
-0.7
|
0.8
|
3.9
|
19.7
|
19.6
|
17.7
|
|
DJ-UBS
Commodity Index
|
1.1
|
-2.7
|
-13.8
|
5.0
|
-4.4
|
3.4
|
|
DJ
Equity All REIT TR Index
|
1.2
|
16.3
|
10.2
|
33.2
|
2.0
|
10.9
|
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.
INVESTORS HAVE GROWN VERY
FICKLE in recent years as measured by how long they hold on to a
stock. There was a time when investors were really investors and bought a stock
for the long run. In fact, between 1940 and 1975, the average length of time a
New York Stock Exchange stock was held before it was sold was almost 7 years,
according to data from the New York Stock Exchange as reported by a September
2010 Top Foreign Stocks blog post. By 1987, it had dropped to less than 2
years. And, in the highly volatile year of 2008, the average holding period was
less than 9 months, according to The New York Stock Exchange.
So, does this fast trading result in better returns?
A highly quoted study by Brad Barber and Terrance Odean of University
of California-Davis published in April 2000 analyzed the results of nearly 2
million trades from a discount brokerage firm between 1991 and 1996. The study
concluded that the 20 percent of investors who traded the most frequently underperformed the 20 percent of
investors who traded the least frequently by a whopping 7.1 percentage points
on an annualized basis after expenses.
The main conclusion of the study was, “Trading is hazardous
to your wealth.”
One very interesting tidbit from the study was the gross
returns between the frequent and infrequent traders were basically the same. In
other words, stock selection was not a problem for the fast traders; rather, it
was the expenses of the frequent trading that caused their net returns to lag
far behind the infrequent traders.
From a practical standpoint, selling a stock is necessary
from time to time. The study simply drives home the point that keeping trading
costs as low as possible is critical to having net returns come close to gross
returns.
Weekly Focus – Think About It…
“Learn every day, but especially from the experiences of others.
It's cheaper!”
--John Bogle, founder of The Vanguard Group
Value vs. Growth Investing (7/05/12)
|
3.22
|
10.06
|
6.63
|
-1.78
|
3.47
|
18.13
|
0.45
|
|
|
2.86
|
10.28
|
6.46
|
-1.54
|
5.58
|
16.82
|
0.12
|
|
|
2.31
|
10.31
|
6.77
|
-1.22
|
7.03
|
16.84
|
1.62
|
|
|
4.18
|
14.60
|
5.79
|
-3.02
|
9.20
|
18.71
|
2.36
|
|
|
1.96
|
6.23
|
6.67
|
-0.52
|
0.35
|
14.86
|
-3.87
|
|
|
4.00
|
9.01
|
6.47
|
-3.20
|
-2.37
|
21.34
|
0.78
|
|
|
3.77
|
9.64
|
5.71
|
-2.24
|
1.54
|
23.09
|
1.66
|
|
|
4.91
|
10.28
|
7.09
|
-3.98
|
-5.72
|
21.18
|
1.53
|
|
|
3.25
|
7.07
|
6.58
|
-3.55
|
-3.00
|
19.60
|
-1.17
|
|
|
4.92
|
10.67
|
8.87
|
-0.28
|
-1.48
|
21.81
|
1.99
|
|
|
4.66
|
9.80
|
7.80
|
-1.80
|
-4.96
|
20.51
|
0.41
|
|
|
5.67
|
11.38
|
9.64
|
0.25
|
-1.58
|
20.45
|
2.59
|
|
|
4.44
|
10.86
|
9.20
|
0.79
|
2.50
|
24.57
|
2.70
|
|
|
2.76
|
10.17
|
6.67
|
-1.42
|
5.19
|
18.45
|
1.72
|
|
|
4.42
|
13.48
|
6.29
|
-3.01
|
5.26
|
19.42
|
2.26
|
|
|
2.39
|
6.72
|
6.82
|
-1.06
|
-0.21
|
16.47
|
-2.85
|
©2004
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is
proprietary to Morningstar; (2) is not warranted to be accurate, complete or
timely. Morningstar is not responsible for any damages or losses arising from
any use of this information and has not granted its consent to be considered or
deemed an “expert” under the Securities Act of 1933. Past performance is no
guarantee of future results. Indices are
unmanaged and while these indices can be invested in directly, this is neither
a recommendation nor an offer to purchase.
This can only be done by prospectus and should be on the recommendation
of a licensed professional.
Office Notes:
2013 Tax Provisions for the Health Care Act
Now that the Courts have upheld the
Health Care Act and no matter which side of the isle you stand with, here is a
chart of the added taxes set to go into effect January 1, 2013, six months from
now.
This is the perfect time to start
planning for alternative ways to save on your taxes. Call our office to schedule an appointment to
examine ways to save on your taxes.
Best
regards,
Michael L. Schwartz, RFC®, CWS®, CFS
P.S.
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Advisory
Services offered through First Allied Advisory Services, A Registered
Investment Advisor.
Schwartz Financial Service is not an
affiliate of First Allied Securities, Inc.
This
information is provided for informational purposes only and is not a
solicitation or recommendation that any particular investor should purchase or
sell any security. The information contained herein is obtained from sources
believed to be reliable but its accuracy or completeness is not
guaranteed. Any opinions expressed
herein are subject to change without notice.
An Index is a composite of securities that provides a performance
benchmark. Returns are presented for
illustrative purposes only and are not intended to project the performance of
any specific investment. Indexes are
unmanaged, do not incur management fees, costs and expenses and cannot be
invested in directly. Past
performance is not a guarantee of
future results.
* 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 DJ Global ex US is an unmanaged group
of non-U.S. securities designed to reflect the performance of the global equity
securities that have readily available prices.
* The 10-year Treasury Note represents debt
owed by the United States Treasury to the public. Since the U.S. Government is
seen as a risk-free borrower, investors use the 10-year Treasury Note as a
benchmark for the long-term bond market.
* Gold represents the London afternoon gold
price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be
a highly liquid and diversified benchmark for the commodity futures market. The
Index is composed of futures contracts on 19 physical commodities and was
launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures
the total return performance of the equity subcategory of the Real Estate
Investment Trust (REIT) industry as calculated by Dow Jones.
* 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.
* Past performance does not guarantee
future results.
* You cannot invest directly in an index.
* Consult your financial professional
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