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Success In A Down Market…

Some Of My Friends enjoy collecting art and antiques for eventual resale, some collect different types of gold and silver coins while others even “collect” parcels of real estate.  Personally, my only collection of value is the Mutual Funds in my 401k.

Interestingly those Collectors (Investors) who are successful never give up their passion even when the market (demand) for their specific investment goes down.  

Actually they sense a buying opportunity and they’ll often invest more money than they otherwise would, purchasing “new pieces” for their collections.

On the other hand, when unsuccessful Investors (Collectors) hit a protracted down market they’re often driven by basic fears that expose their lack of confidence in their chosen investments.

The positive payoff for a down market shows up in the low price paid for each share or “piece” purchased.  Then when good times return and prices rebound the payoff shows up in the overall account balance.

“Buy Low, Sell High.”

Success in a down market begins when we buy low and is finalized when we sell later on at a significant profit.

Maximize your money in the market over time

From ClarkHoward.com* May 2008

Are you afraid to open your own mail for fear of seeing your 401(k) statement? Clark recently spoke to one man who referred to his plan as a 301(j) because it keeps going the wrong way!

The Financial Times of London reports that every mutual fund company is seeing people pull money out with all the market volatility. American Funds saw a 7% decline in assets during the last 90 days, while Vanguard has seen a 4% decline.

Why is this happening? People fear a loss twice as much as they enjoy a gain. It's part of being human. We're backwards creatures; when stocks roar along, people pour money into them. So we're always paying too much on the way up and getting too little on the way down.

Just don't try to figure out when to sell and when to buy. Keep buying every month through your 401(k) or other retirement plan. Time in is more important than timing. People are always asking Clark, "Is it time yet to get back in the market?" His standard reply is, "I never got out."

Read More:

http://clarkhoward.com/liveweb/shownotes/2008/05/02/13514/*

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

A Mutual Fund Report Card…

BusinsessWeek.com offers a very interesting Mutual Fund Tool that gives an overall A through F report card rating of your chosen funds.

As you know, we love investing tools that make research simple and this is definitely one of those.  Still if you’d like more than just a simple rating they’ll provide that as well.

Search for your favorite funds by scanning the alphabetical list or enter the fund name or ticker.  Two report card style letter grades pop up; one is an overall rating while the other is a more specific category rating.

Other available fund information (updated monthly) includes 1, 3 and 5-year returns, along with percentage of foreign investments and even expense ratios. Click on the fund name to see a line graph of your fund’s performance along with a list of the fund’s major holdings 

BusinessWeek Mutual Fund Scoreboard*

Are You Or Someone You Love,

Retiring Into Poverty??

Too Many Women Run The Risk Of Retiring

Into Poverty

by Mark Miller* 10 April 2008   From RetirementRevised.com*

The income gender gap is well known. But did you know that the economic gap between men and women spills over into retirement? The largest segment of Americans living in poverty is elderly women. The gender gap in retirement income security is appallingly high, for several reasons.

First, women earn about a third less than men make during their working lives; that means they generate smaller contributions to Social Security, pensions and 401(k) accounts. A contributing factor there is care giving; women are far more likely to interrupt their working lives-or retire early-to take care of children or aging parents. That work most often is unpaid, and interrupts employment and earnings.

Perhaps most important, women live longer than men. At age 65, a woman can expect to live an average of 19 more years, three years longer than men. That means whatever she’s saved for retirement must last longer.

Cindy Hounsell has some ideas about improving this grim situation. She directs the Women’s Institute for a Secure Retirement* (WISER), a non-profit group that works to promote financial education and planning.

When Hounsell counsels women, she always starts with the most basic element of retirement income: Social Security. She advises women to pay close attention to the annual statement all Americans receive each year projecting their future Social Security benefit.

“It’s a day of reckoning,” she says. “If that statement says you’re going to get $1,000 a month, that’s $12,000 a year. If you need $25,000 a year to live, there’s your shortfall-and you need to do something about it.”

Hounsell also says women need to take more time to understand money and family finances. Many also don’t focus on estimating what they’ll really need in retirement-and don’t get information and advice early enough in life to impact their retirement security.

“What happens is that women do so many things with their families-kids, parents, grandparents,” she says. “They’re taking care of a lot of people, and they don’t take the time to sit down and ask, ‘Where am I?’ or ‘What’s going to happen to me?’

Hounsell also advises women to, “Pay attention to the benefits you have at work. And don’t wait to get information about them until 20 minutes before you retire. You need that information sooner so that you can make better choices.”

Read More:

Too many women run the risk of retiring into poverty*

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

* Included source links and/or logos serve only to further viewer research and in no way indicate any endorsements, sponsorships or relationships. No accuracy guarantee of their content is implied.  This information is not presented as legal, tax or financial advice.

Reported performances of the past are not a prediction or guarantee of future returns.

The Election Effect…

As A Rule, Election Years Usually Inspire Positive Markets, But There Are A Couple Of Exceptions.

History shows us that it’s all about who wins in November.  If the incumbent party wins then look for the positive domestic market run to start sometime in August and continue through most of the 4^th quarter.

Traditionally throughout the year the U.S. Market is either flat or down until the month of August no matter which party wins.  But if the challenging party wins the White House then the Market as a rule ends up either flat or down depending on which party is the winner.

Click the link for the article below to see the graph showing the month by month picture.  The data used is inclusive dating back to 1900.

Other graphs showing the typical four year election cycle are also shown along with the current four year cycle.

Election Years and the Stock Market

From Charles Schwab* On Investing

by Patricia Barry Levy

From an interview with Fritz Meyer, Senior Market Strategist For INVESCO AIM.

It’s an election year.  Are your stocks headed higher?  Could be.  Many investors are familiar with the chart on the top of page 19 that clearly shows how well, on average, the stock market has done in election years.  Going all the way aback to 1900 (and also since World War II), the best average stock market gains have come in pre-election years - or third years - followed by election years, which have the second best showing.

On the other hand, in the first post-election year – following a typical six month honeymoon run-up – the bloom has fallen from the stock market’s rose and post-election years have seen just modest gains.  The second post-election year has been, on average, the weakest performer.

Will History Repeat Itself?

Averages can be misleading, however.  In the case of the election year stock market cycle, this is a particularly relevant caveat, because the historical record suggests the in 2008 the market could react differently, depending on the outcome of the election.  If the Republican Party wins, history suggests a strong stock market.  If the Republicans lose, history suggests no net gain at all for the election year.

Whither The Economy?

This year’s correction (see chart in article) appears to have been in anticipation of the slow-down, if not recession that the U.S. economy is presently experiencing.  In response, the Federal Reserve has applied aggressive monetary stimulus; fiscal stimulus, courtesy of our elected officials, is about to follow.  These tonics have never failed to work their magic of stimulating economic recovery. 

On average, stocks have bottomed out approximately midway through a recession as investors anticipate recovery.  These rebounds have usually been startling in their swiftness and magnitude.  Such a stock market rebound could likely occur between now and year-end 2008, in my opinion.

Read It All Here:

Election Years and The Stock Market *

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

* Included source links and/or logos serve only to further viewer research and in no way indicate any endorsements, sponsorships or relationships. No accuracy guarantee of their content is implied.  This information is not presented as legal, tax or financial advice.

Reported performances of the past are not a prediction or guarantee of future returns.

Breaking Out…

High Priced Oil Has Taken Over From Last Year’s Mortgage/Credit Crisis As The Biggest Mover And Shaker Of The Market.

When Oil moves in a big way it trumps virtually every other area of the Market.  But there are areas that have shown strong rebounding strength and seem to be breaking out of Oil’s suppressive hold.

Since April, the Mid-Caps (shown in red in the linked graphs below) have broken away from the other sectors and overall they’re trending stronger in spite of Oil’s huge run-up.

Mid vs. Small & Large-Caps YTD *

All Three Indexes vs. Oil (in yellow) YTD *

Still the Large Cap, S&P 500 (shown in green) represents the lion’s share of the market as well as most of the popular mutual funds held in 401k accounts. 

Unfortunately Large-Cap performance overall since April has been flat, largely suppressed by Oil’s influence.

You’ll find many of the healthier Mid-Cap funds highlighted in the attached Fed’s Funds 50 Chart, as well as the Weekly and High-5 Charts.

Location, location, location.  It’s important where you’re invested simply because, Performance Pays.

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

Saving For A Future

That You Can Count ON!

* Included source links and/or logos serve only to further viewer research and in no way indicate any endorsements, sponsorships or relationships. No accuracy guarantee of their content is implied.  This information is not presented as legal, tax or financial advice.

Reported performances of the past are not a prediction or guarantee of future returns.

What Would It Say??

If the “Future You”, let’s say 15 years from now, could send a message to the “Present You” here in 2008, What Would That Message Say?

For sure, many of the decisions we’re making now will have a major impact on our future’s health, life and lifestyle.

Some of us have obligated our future-selves to some pretty hefty mortgage payments.  Perhaps you’ve been educating, fattening or even tattooing the Future You.

So look things over, how will you feel about the way you’ve set yourself up for the future?  What advice or even praise would you send back to yourself then, if you could?

“Thanks!  Life is still good, because you saved enough!”

“Hey, Sell The Motorcycle, Now!”

“Please, Please Quit Smoking.”

“Stop worrying, the Kids turned out great!”

“You think things are tight now?  It’s really tight here in 2023. Do us both a favor and save a little more.”

It Doesn’t Work That Way

OK, you’re right it doesn’t work that way.  We can preserve and time capsule things for the future but the future simply cannot send things back to us here and now. 

But how about you sending your future-self some advice, encouragement or even a reminder?  That can be arranged.

Maybe a little humor from the past would help to brighten your upcoming days.  Are you currently robbing or mortgaging your future to give yourself a better today?  Perhaps an apology is in order?

Either way you can send your message to your future at:

http://www.FutureMe.org*  You pick the time of delivery and it’s a free service.

"I know you'll badmouth me sometimes, and I'm sure I deserve it," one e-mailer writes. "But I'm pulling for you."  Spoken like a true friend.   – FutureMe.org

Wishing You The Very Best Of Returns,

 The Fed’s Funds Staff

The Driving Force…

Like A Ship At The Mercy Of Driving Storm, The Market Is Being Driven By the High Price Of Oil.

It’s on everyone’s mind at some point in the day as more and more decisions are being based on affordability in view of the high cost of energy.

The Market is no different; our nation’s mindset is undergoing a change that now factors in the real possibility and the consequences of continued high energy prices.

Is this trend leading to a new, much higher level in energy prices?  Or will this run-up be a “bubble” that bursts bringing energy costs back to more reasonable levels?

Since no one knows the answer for sure the Market is being understandably tossed to and fro by this huge unknown.

As with other crisis in the past, the solution(s) will be worked out in time and a balance will return to the Market.  Until then theories, speculation and predictions will abound.

Some Speculation:

Oil-Led Recession? I Wouldn't Bet On It

by Jim Cramer  TheStreet.com*

A recession led by oil. That's what the stocks are saying today, and I don't know if I agree.

You know my view: The stocks aren't telling it right. We aren't going to have a recession because of oil, because we haven't had a recession because of oil. In fact, the credit that is becoming available will offset the gasoline issues, and the companies that have adjusted to these prices will continue to adjust.

Oil Led Recession?*

What the Export Land Model Means for Energy Prices

May 20, 2008  FXSTREET.COM*
by John Mauldin

Millennium Wave Investments

I have written for years that we are not going to run out of oil or energy, just cheap oil. I was just in South Africa, where much of their gas and diesel comes from coal gasification. At one time this was an expensive way to make gas, and South Africans had to pay more for their gas than the rest of the world. Now, it is getting close to "par" to the cost of gas in the US, and is cheaper than gas in Europe.

Many of the countries from which the US gets its oil are seeing production fall, not rise. Some of it is political ineptitude, but much of it is from oil production peaking.

Yes, we can move to coal gasification, and the US has centuries of coal for such purposes, but building such plants takes time and capital and political will, the latter of which is in short supply. In the meantime, and until we get a full-blown crisis, oil is going to continue on its path to $200 and higher. But such a rise will not only make gasoline prices higher, it will make a host of new technologies competitive for the first time. The shift in how we make energy is inevitable.

…Energy Prices*

Is $130 oil a bubble?

Some say no. They say unlike the tech and real estate bubbles, there's no overabundance of supply. Others say these high prices are not sustainable.

by Steve Hargreaves, CNNMoney.com* staff writer

Is $130 oil nothing more than one big bubble?

The answer depends on who you ask.

“A bubble is where supply overwhelms demand," said Stephen Leeb, an investment manager who has authored two books on oil scarcity.

Leeb pointed to previous bubbles - like the tech bubble in the late 1990s where companies with zero earnings issued massive amounts of stock, and the real estate market a decade later where home builders went on a frenzy, overshooting the number of homes the market could absorb.

“But unless I'm missing something here, I don't see any massive increase in the supply of oil," he said.

Like many in the not-a-bubble camp, Leeb pointed to surging demand from places like China - some estimates see auto ownership there surging 30-fold in the next few decades - coupled with dwindling supplies as the main reasons behind pricey oil.

Others say there's no way $130 oil is justified.

“This thing has to turn around, it's insanity," said Peter Beutel, an oil analyst at the consultancy Cameron Hanover. "Ultimately we'll see a huge collapse in prices.”

Beutel doesn't know when that collapse would come, but he predicts it will be within weeks or months, not years.

But he doesn't know just what might bring it about - perhaps the Federal Reserve increasing interest rates or a big drop in consumption as people worldwide can no longer afford to fuel their cars or heat their homes.

‘If these prices stick, you may see whole neighborhoods where people abandon their homes," he said predicting that in the Northeast U.S. it will cost $5000 to heat a home unless prices fall.’

Many analysts said supply and demand justifies expensive oil - maybe $90 or $100 a barrel - but $130 is just too much.

Is $130 Oil A Bubble?*

The Energy Holdings Of Your Funds

Find out how heavily weighted your funds are in the Energy Sector by entering the ticker of your fund on Yahoo Finance* then click “Holdings” in the left column.  Scroll down to find the Sector Weightings.  Here are some examples:

Fidelity Convertible*

Fidelity Latin America*

Fidelity Growth Discovery*

Oakmark Growth and Income*

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

* Included source links and/or logos serve only to further viewer research and in no way indicate any endorsements, sponsorships or relationships. No accuracy guarantee of their content is implied.  This information is not presented as legal, tax or financial advice.

Reported performances of the past are not a prediction or guarantee of future returns.

Stop Contributing??

From: Don’t Lose Faith In Your 401k

By Walter Updegrave  CNNMoney.com*

Q. Is it still a good idea to contribute to my 401(k) right now even though the economy isn’t doing too well?

A. Let me see, how do I say this to get across just how strongly I feel about this answer? How about: Definitely. No question. Positively. Absolutely. Without a doubt. Or to put it another way: Yes!

When you’re contributing to your 401(k) early in your career - say, when you’re in your 20s or 30s - you know that this money is going to be invested at least another 20 to 40 years. So as long as you’re investing in a diversified mix of stock and bond funds, it doesn’t make much sense to get caught up in the short-term ups and downs of the market.

If you’re on the verge of retirement, then clearly you’ve got to give more consideration to what might happen to the value of your account over the next few years. You don’t want to see your 401(k)’s value decimated by market setbacks on the eve of retirement.

But even then the answer isn’t to stop contributing. Indeed, the money you invest in the last few years before you call it a career may very well turn out to be the funds that will sustain you in the later stages of a retirement that could last 30 or more years. Rather, the way to protect your nest egg as you approach retirement is to gradually shift more of your 401(k) portfolio from stocks to bonds.

I realize, however, that concern about the short-term can often blind us to long-term considerations. So I’d like to offer three more immediate reasons why you shouldn’t abandon your 401(k) now.

You’ll be giving up a tax break, and possibly free money. One of the nice little advantages of participating in a 401(k) is that you get to invest pre-tax dollars, which lowers your current tax bill.

You may be foregoing attractive returns. There are no guarantees when it comes to the financial markets. But there’s a good chance that the money you invest in your 401(k) when the markets are struggling will give you some of the highest returns you’ll earn over the long run.

This is a somewhat counterintuitive concept. People tend to feel most comfortable about investing after the markets have been on a roll and have racked up big gains. But the exuberance that naturally occurs during bull markets eventually leads investors to bid up share prices to blimpish levels. That diminishes the potential for future gains much the same way that overpaying for a house does.

When things are looking more bleak and investors are wary, on the other hand, share prices are generally lower relative to companies’ long-term earnings power. That translates to a greater potential for higher long-term returns than when things are going swimmingly.

You might not resume contributing if you stop now. Another nice advantage of contributing to a 401(k) is that it forces you to live a bit below your means.

If you suspend your 401(k) contributions, however, you’ll be giving up this little psychological advantage. Your paycheck will be larger, thus freeing up more money for you to spend. Even if you plan on resuming your contributions when the economy improves, doing so may be more difficult than you think, especially after you’ve gotten used to having that extra money to throw around.

Read The Entire Article:  Don’t Lose Faith In Your 401k*

There is an old Chinese saying: “If you don’t care about money, money doesn’t care about you.”  You have to give it some attention.

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

Saving For A Future

That You Can Count ON!

FedsFunds.com

* Included source links and/or logos serve only to further viewer research and in no way indicate any endorsements, sponsorships or relationships. No accuracy guarantee of their content is implied.  This information is not presented as legal, tax or financial advice.

Reported performances of the past are not a prediction or guarantee of future returns.

My Favorite Fund…

Q. My Favorite Fund Went Way, Way Up Today!  But on some days it goes way down.  How can I figure out what is driving my fund??

A. The Market overall has gone almost nowhere this year, with a YTD performance of -4%:

S&P 500 YTD*

But narrow sectors of the Market have boomed:

S&P 500 + USOil + Potash (Fertilizer)*

When narrow sectors are the only real movers those funds that rely heavily on them tend to have stronger upward and downward swings.

To see what is moving your favorite fund type your fund’s ticker symbol into the quotes box at Yahoo Finance*.

Then click the Holdings link in the left column to see its top 10 holdings.

Example: Fidelity Independence Holdings*

There you’ll see a list of the largest holdings that the fund has along with a Sector Weightings Chart so you can see what sectors your fund is heavily invested in.

Finally click the large link titled “Get Quotes For Top 10 Holdings”.

Example: Quotes For Top 10 Holdings FDFFX*

Now you’ll see the day’s movement for each of the top 10 stocks that the fund owns.  Also below this you’ll find recent headlines for these companies which may help you understand the reasons behind each stock’s performance.

Wishing You The Very Best Of Returns,

The Fed’s Funds Staff

* Included source links and/or logos serve only to further viewer research and in no way indicate any endorsements, sponsorships or relationships. No accuracy guarantee of their content is implied.  This information is not presented as legal, tax or financial advice.

Coming Fund Changes…

Three Funds Will Be Removed From Our 401k Plan This Month.  Also one additional fund has been merged into a different fund from the same fund family.

Delaware Trend (-10.0 YTD), American Century Select (-6.1 YTD) and DWS Growth and Income (-4.6 YTD)