Now What: A Guide to Retirement During Volatile Times

March came in like a lamb, and is leaving like a Bull by Ken Mahoney

The bulls charged again last week, marking the 4th week of gains in a row for U.S. stock markets, and the longest streak of weekly wins since August. The winning run came even as daily gains largely dissolved on Thursday and Friday amidst continued jitters about a bailout plan for Greece and rising U.S Treasury yields which have highlighted concerns that the federal government is digging itself into a deep deficit hole.

In early trading on Thursday, the Dow flirted with 11,000 when it hit 10,995 – a new high for the bull market that began in March 2009 – but quickly retreated in a dramatic reversal when the day only closed with a 5 point gain. According to the standard definition, this is known as a “key reversal day” which generally has bearish implications for the stock market. At the same time though, signs of an impending bear market are negligible. Said Richard Bernstein, head of Richard Bernstein Capital Management, "To have a bear market, there are certain things you'd see: profitability start to slow, fiscal restraint. That's not really happening.

Profitability is ramping up and monetary policy is accommodative." Investors in general also feel optimistic about the future of the U.S. markets. Ned Davis Research reported on Wednesday that their so-called "Crowd Sentiment Poll," which is a composite of a number of separate sentiment indicators, has just risen into the "Extreme Optimism" zone. It’s good to see that some of the market’s skeptics are finally putting a portion of their sidelined cash reserves back to work.

In spite of mixed news, the markets have experienced wonderful momentum lately. With only 3 trading days remaining, it looks as if the first quarter of 2010 will be fondly remembered by the history books.

Key things we’ll be watching this week:

Tuesday – S&P/Case-Shiller Home Price Index, Consumer Confidence Wednesday – Factory Orders Thursday – Initial Jobless Claims, ISM Manufacturing Index, Construction Spending Friday – Stock Market Closed for Good Friday

HIGHLIGHTS: With projections of millions of foreclosures over the next five years, the Obama administration announced Friday it would make major adjustments to its $75 billion mortgage-modification program, aimed at assisting a greater number of unemployed and other troubled homeowners in modifying or refinancing their mortgages.

Regarding health reform: If your earned or investment income exceeds $200,000: In about two years, the Medicare payroll tax will rise nearly 1 percentage point to 2.35% on wages of individuals with earnings greater than $200,000 and married couples earning more than $250,000. A new 3.8% Medicare tax will be levied on investment income including interest, dividends and capital gains that exceed those thresholds.

Regarding health reform: If you itemize deductions for income tax: Starting in 2013, medical expenses have to reach 10% of your adjusted gross income to qualify for a tax deduction, as opposed to today's 7.5% standard. But seniors age 65 and older would be able to claim an itemized deduction at 7.5% of income through 2016. Congress passed a bill Thursday to make Washington the one-stop shop for cheap student loans and to boost need-based scholarships. Starting July 1, nearly all federally backed student loans, like Stafford loans, will come directly from the federal government.

Sources: Marketwatch The Wall Street Journal Online http://www.marketwatch.com/story/what-health-reform-means-for-you-2010-03-22 http://www.marketwatch.com/story/white-house-to-expand-mortgage-relief-program-2010-03-26 http://money.cnn.com/2010/03/25/news/economy/student_loans_senate/index.htm 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 average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia. 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. Google 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 before making any investment decision.

March Madness Continues for US Markets

After an 8 day winning streak, the markets finally slipped back on Friday, but still ended the week in positive territory. The Dow was up 1.1% for the week, the S&P 0.86%, and the Nasdaq 0.29%. The last time the markets had a 9 day winning streak was 1996.

The Dow’s gains represent its longest positive run since late August 2009, and many stocks are hitting fresh 52-week highs. On Wednesday alone, some 1,231 of them did so. In a positive sign of investor optimism, the Chicago Board Options Exchange Volatility Index (commonly regarded as a gauge of fear) fell below 17 last week – for the first time since May 2008. We also saw the dollar slide against higher-yielding currencies, giving further evidence that investors are leaving safe-haven investments in favor of riskier assets.

The Dow is up over 62% since its March 9th, 2009 bottom, 3% for the year, and 4% for March. “It’s been subtle – almost silent – and yet here we are at new highs,“ said Mark Luschini, Chief Investment Strategist for Janney Montgomery Scott. “It certainly doesn’t feel like the market’s climbing by leaps and bounds, but very subtly, we’ve gained 10 points here, 30 points there.”

Despite its recent winning streak, the Dow is still nearly 700 points from its close before the Lehman meltdown, leaving us a lot of ground to make up. In imitation of the famous tortoise from Aesop’s fable, let’s hope the markets keep up their slow-and-steady advancement.

Key things we’ll be watching this week:
Tuesday – Existing Home Sales, Redbook
Wednesday – Durable Goods Orders, New Home Sales
Thursday – Initial Jobless Claims, Fed Balance Sheet
Friday – GDP, Corporate Profits, Consumer Sentiment

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HIGHLIGHTS:
A transformative health care bill is headed to President Barack Obama for his signature as Congress takes the final steps in Democrats' improbable and history-making push for near-universal medical coverage. Obama cast the debate as a war over whether the U.S. health-care system works better for the insurance companies or for consumers, and said that the bill is a "patient's bill of rights on steroids."

The Federal Reserve kept its benchmark interest rate at a record low level Tuesday and made no changes to the key "extended period" policy pledge, a signal that it believes the economy still needs support to get to a sustainable path.
Four additional banks in Georgia, Alabama and Minnesota were closed by regulators Friday, bringing the national total to 37 for the year to date.

Sources:
Marketwatch
The Wall Street Journal Online
http://www.marketwatch.com/story/fed-stands-pat-on-rates-wording-2010-03-16
http://www.marketwatch.com/story/obama-to-push-health-care-bill-ahead-of-key-vote-2010-03-19
http://www.marketwatch.com/story/consumer-price-index-flat-in-february-2010-03-18
http://www.marketwatch.com/story/four-more-bank-failures-bring-2010-tally-to-37-2010-03-19
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 average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

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.

Google 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.

Are the markets preparing for March Madness?
By Ken Mahoney
www.thesmartinvestors.com

It’s the time of the year when we get our ‘brackets’ and figure out who will win the NCAA tournament. It is an exciting month for college basketball.
The markets have been very tame lately with low volatility. Perhaps the markets volatility will pick up and join the madness?

U.S stock indexes managed a second week of gains on Friday after wrapping up a trading session that was nearly stuck in neutral from mixed reports that showed retail sales rising, but consumer sentiment declining. The abundance of conflicting data, and the market’s reaction to it, is a reminder of what a news-sensitive environment we’re in right now. With nothing significant enough to move the indices decisively in either direction, the equities market is still trying to find its way.
Even as key indices advanced last week, commodities pulled lower. Gold futures fell 2.4% to just over $1,100 an ounce, and crude oil prices dropped to just above $81 a barrel, posting a slight loss for the week. The dollar also lost some steam on Friday, while Treasurys were mixed.

Amidst so much uncertainty, we are wise to take a longer view of the economy, ignoring the minute-to-minute volatility that can take you from depression to euphoria before breakfast. The vast majority of economists are calling for a long, slow recovery – but a recovery nonetheless. “The tailwinds behind the economy are getting stronger than the headwinds holding it back”, said Maury Harris, chief economist for UBS Securities.

Factors such as low inflation, growing exports, and solid corporate profits, combined with weakening resistance from tight credit and willingness to borrow, bode well for the long-term future of the economy.

Key things we’ll be watching this week:
Monday – Industrial Production, Housing Market Index
Tuesday – Housing Starts, Redbook
Thursday – Initial Jobless Claims, Consumer Sentiment, Leading Indicators

Data as of 03/12/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 0.99 3.13 52.0 0.83 -1.75
Dow 0.55 1.89 47.0 -0.27 0.70
NASDAQ 1.78 4.34 65.4 3.19 -5.31
MSCI EAFE 1.01 -0.41 64.2 0.12 -1.01
10-year Treasury Note (Yield Only) 3.71 N/A 2.95 4.49 6.17

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.

HIGHLIGHTS:
AIG said to cut bonuses to ex-workers by $21 million to meet Feinberg goal. American International Group Inc., the bailed-out insurer, cut retention bonuses to be delivered to former employees today by about $21 million to meet a target imposed by U.S. paymaster Kenneth Feinberg, said a person briefed on the company’s plans.
Industrial production in U.S. unexpectedly rose 0.1% in February. Fed says industrial production unexpectedly rose in February as growing demand for computers and communications gear overcame a drop in autos, pointing to a pickup in U.S. business spending.

A typical 65-year-old married couple without chronic conditions will need $197,000 to pay for out-of-pocket medical costs throughout retirement, according to new calculations by the Center for Retirement Research at Boston College. That figure includes insurance premiums, services not covered by Medicare, and home healthcare expenses, but it excludes nursing-home care. Retirees also have a 5% chance that healthcare costs not covered by insurance will exceed $311,000, according to the study, which was underwritten by Prudential.

Chileans braced for more blackouts after an outage yesterday left 80% of the population in part of the country without electricity, the result of grid damage from last month’s earthquake.

by ken | 08:22 in |

Lessons from the market low of one year ago this week.
by Ken Mahoney

Has it really been a whole year? It sure has! This Tuesday marks the 1-year anniversary of the March 9th low that saw markets reeling from the worst bear market in 8 decades. Through March 4th, the S&P has crawled back a whopping 66% since that dark day. The question on everyone's mind now is: Will this bull have a second year to run?

Of course, past performance is no guarantee of future results, but there are important lessons to be learned by analyzing how the markets have behaved during past recoveries. According to Sam Stovall, chief investment strategist at S&P Equity Research, stocks historically tend to keep rising during the second year, though not as powerfully. He said: "First-year bulls tend to recover an average of 84% of what they lost in the entire bear market." Then, noting that this bull run has retraced about half of the loss, he added: "So you could say that on a recovery basis, we have more room to go."

Adding to the case for an extended recovery, it's interesting to note that no bull market since 1949 has ended inside of 2 years. The shortest one, in fact, was 26 months long, beginning in 1966. According to S&P, the average length of a bull market since 1932 has been 50 months. In all fairness, we should mention that four of the five bulls between 1932 and 1947 lasted less than 2 years. Let's hope the bull we're riding now keeps its legs!

Regarding last week, Friday's widely anticipated jobs report ignited the best 1-day gain in stocks in more than 2 weeks, as investors bet more heavily on the economic recovery. The Labor Department said nonfarm payrolls fell only 36,000 in February; far below the drop of 90,000 forecasted by economists polled by MarketWatch. The unemployment rate also held steady at 9.7%, better than the 9.8% economists expected. The Dow closed 1.2% higher at 10,566.20, and the S&P gained 1.4%, getting an added boost from consumer credit numbers showing that consumers increased their debt in January for the first time in a year. For the week, the Dow added 2.3%, the S&P 500 gained 3.1%, and the Nasdaq Composite climbed 3.9%. It was the second straight week of gains for the indexes.

Key things we’ll be watching this week:
Wednesday – Wholesale Inventories
Thursday – Initial Jobless Claims
Friday – Retail Sales


HIGHLIGHTS:
The dollar fell against the euro on Friday after Greece's parliament approved a package of budget cuts and Greece's prime minister said it wouldn't need aid from its European neighbors.

More consumers are choosing to pay credit cards rather than their mortgage. The number of consumers delinquent on their mortgages but current on their credit cards rose to 6.6% in the third quarter of 2009 from 4.3% in the first quarter of 2008, according to a TransUnion study of 27 million anonymous consumer records pulled randomly from its database. Meanwhile, the portion of those who fell behind on credit-card payments but paid their mortgage dropped to 3.6% from 4.1%.

Apple on Friday said the first version of its iPad tablet computer will go on sale Saturday, April 3 in the U.S., with other versions becoming available globally later in the month. The initial U.S. version of the iPad, costing $499, has Wi-Fi built in, but it cannot connect to the Internet over 3G wireless-phone networks. Other iPad versions, including global models, will have both Wi-Fi and 3G access. They go on sale "in late April," Apple said.

General Motors Co. will reinstate about 600 dealerships that it had originally planned to drop from its network, The Wall Street Journal reported Friday in its online edition. GM had initially planned to eliminate 2,400 dealerships as part of its reorganization but about 1,160 of the dealers had appealed through an arbitration process, the Journal said.

Crude-oil futures closed above $81 a barrel Friday and added more than 2% for the week, buoyed by U.S. jobs data and positive comments from Chinese officials about economic growth.

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 before making any investment decision.
.

The Market comes in like a lamb for March; will it leave a Lion? by Ken Mahoney
www.thesmartinvestros.com

After a month of choppy trading, U.S. stock investors were thankful to see February finish in positive territory. The month’s modest gains were the best since November despite concerns about consumer spending, sovereign debt, and the pace of the global recovery. The mixture of negative and positive economic news kept investors vacillating as evidenced by a Dow that experienced 8 sessions where it gained or lost at least 100 points.

Positive news was welcomed on Friday when the Commerce Department released a report saying that GDP grew at an annual rate of 5.9% in the fourth quarter of 2009, the fastest pace in 6 years. On the other hand, consumer spending was weaker at a 1.7% annual rate, down from 2.8% in the third quarter when the government’s cash-for-clunkers program was boosting auto sales.

Existing home sales in the U.S. fell for the second month in January by 7.2%, surprising economists who expected sales to remain relatively steady after December’s record decline. In the last week of February alone, reports on jobless claims, home sales, consumer confidence, durable goods orders, and manufacturing all missed expectations. Data like this doesn’t help bolster the optimism of investors who are still nursing wounds from the subprime mortgage crisis, many of whom are concerned that debt issues in Greece could be the start of broader problems in the euro zone.

This pattern of two steps forward and one step backward has certainly seemed to characterize the recovery so far. Along these lines, portfolio manager Frank Ingarra of Hennessy Funds commented: “I think the overall trend is that we're starting to see the markets get back to normal. We're fine for the long term, but in the near term, you can have some rough stretches.” Ingarra’s words echo the familiar sentiment that we aren’t out of the proverbial woods yet, although things are looking up.

Whatever happens in the days, weeks, months, and years ahead, our primary goal is to always protect the assets you’ve entrusted to our care. We’ll also do our best to keep you well informed in the process.

HIGHLIGHTS:
An 8.8-magnitude earthquake, the fifth most severe in more than a century, struck Chile early Saturday, killing at least 300 people, collapsing structures and throwing the South American country into turmoil.
Copper prices jumped as much as 5% over the weekend, amid concerns that the earthquake in Chile would cause a supply shortage from the world's largest producer of the metal.

Crude-oil futures on Friday rose $1.49, or 1.9%, to end at $79.66 a barrel, with the commodity gaining 9.3% for the month and off 0.5% for the week. Crude prices have been lingering near or just above the $80-a-barrel level as supply-and-demand issues began to take hold in a market for months dominated by moves in the dollar.

President Obama used his weekly address Saturday to reiterate support for attempts to overhaul the U.S. health-care system. The remarks came at the end of a week that saw Obama unveil his blueprint for passing his proposed changes into law and host a televised meeting with Congressional leaders, dubbed the health-care summit.

American International Group Inc. (AIG) reported a fourth-quarter net loss of $8.9 billion, or $65.51 a share, on Friday. That compares to a net loss of $61.7 billion, or $458.99 a share, in the fourth quarter of 2008.

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Mr. Mahoney is a registered broker with Aurora Capital, LLC, an SEC registered broker-dealer and member FINRA and SIPC. Aurora Capital Brokerage, trades cleared by Legent Clearing.
Sources:
MarketWatch
Barron’s
Wall Street Journal
http://www.marketwatch.com/story/tsunami-warnings-across-pacific-after-chile-quake-2010-02-27
http://www.marketwatch.com/story/copper-jumps-after-chilean-quake-gold-slides-2010-03-01
http://www.marketwatch.com/story/crude-oil-futures-gain-93-in-february-2010-02-26-1448110
http://www.marketwatch.com/story/obama-stands-firm-on-health-care-overhaul-2010-02-27
http://www.marketwatch.com/story/aig-reports-89-bln-quarterly-net-loss-2010-02-26
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 average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

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.

Google 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 before making any investment decision.
.