Now What: A Guide to Retirement During Volatile Times

Fed Chair Bernanke makes a significant ‘revision’ for 2011, and 2012

With the Dow logging its seventh drop in eight weeks and the S&P off 7% from its three-year high at the end of April , many people are wondering if the markets have hit a speed bump or a roadblock. Combine weak stock performance with lukewarm economic readings and it’s easy to understand Fed chairmen Ben Bernanke’s comments last week: “We don’t have a precise read on why this slower pace of growth is persisting…some of these headwinds may be stronger and more persistent than we thought.”

The expressions: “We don’t have a precise read” and “than we thought” are interesting. They clearly demonstrate that even the “experts” do not have all the answers, and that they must change their viewpoint from time to time. Along these lines, the Fed issued new economic projections that call for slower growth, higher unemployment and higher inflation in 2011 and 2012 than in its previous forecast. At a press conference Wednesday afternoon, Bernanke referred to the new forecast as a significant revision. At the same time, the Fed still downplayed the chance of another recession, saying that it "expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline."

Why do we point this out? This illustrates why we do not try to predict the future of the stock market or the economy. Doing so consistently and accurately is simply not possible. Whether we are facing a temporary slowdown or one that will last much longer is still open to interpretation and there are vocal proponents on both sides of the issue.

Since there is no way for us to predict the future, our goal is to help you commit to a sound investment plan based on your personal risk tolerance, goals and time horizon. Doing this requires that we take a long-term approach, not a short-term one. If we lose sight of the long-term and think we can time the market by exiting at the peak and re-entering at the trough, we open ourselves up for big mistakes. To quote legendary investor Warren Buffet: "Someone is sitting in the shade today because someone planted a tree a long time ago."

ECONOMIC CALENDAR: Monday – Personal Income and Outlays Tuesday – S&P Case-Shiller-HPI, Consumer Confidence Wednesday – Pending Homes Sales Index, EIA Petroleum Status Report
Thursday – Jobless Claims, Chicago PMI Friday – Motor Vehicle Sales, Consumer Sentiment, ISM Mfg Index, Construction Spending

Data as of 06/24/2011 1-Week YTD 1-Year 5-Year 10-Year
Standard & Poor's 500 -0.24 0.86 18.1 0.38 0.35
Dow -0.58 3.08 17.6 1.72 1.25
NASDAQ 1.39 0.00 19.6 5.01 3.04
MSCI EAFE -0.76 -0.02 20.1 1.04 2.59
10-year Treasury Note (Yield Only) 2.94 NA 3.12 5.23 5.12

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

HEADLINES:

Irving Picard, the trustee liquidating Bernard Madoff’s firm, revised a claim against JPMorgan Chase & Co. requesting a minimum payment of $19 billion in damages for its role in the fraud. The new amount represents Picard’s latest estimate of principal lost by all Madoff investors by the time the Ponzi scheme collapsed in December 2008.

On Thursday, President Obama decided to release 30 million barrels of oil from the nation's strategic reserve, which will put 60 million barrels of fuel on the market over the next 30 days. Done in conjunction with other developed nations including Saudi Arabia, the move is not only an attempt to salvage Libya’s lost supply and meet rising demand in Asia and the Middle East, but is also seen as an attempt to lower fuel prices.

New-home sales fell 2.1% in May, the Commerce Department reported Thursday. The numbers showed a seasonally adjusted annual rate of 319,000 homes, far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.

An EU-IMF team has approved Greece’s new five-year austerity plan after committing to an additional round of tax rises and spending cuts.

Can the economy improve for the second half of 2011?

Though our economic growth is being challenged by some strong headwinds, including high food prices, high gas prices, and a soft housing market, good news came at the right time last week. The Conference Board reported on Friday that its index of leading economic indicators grew by 0.8% in May. This represents the largest increase since February and is a strong improvement over the initial forecast. Some of the things that helped lift the index were:

• Federal Reserve policies designed to help financial markets.
• An increase in building permits, which signal future construction.
• A boost in consumer confidence as gas prices fell.
• Fewer people applying for unemployment benefits.

This report reaffirms what many economists have already been saying – while we are clearly facing some obstacles, the overall picture is improving. According to Moody’s analytics, economists are anticipating second-quarter growth between 2% and 2.5%. "Consumers are not panicking. We should begin to emerge from the soft patch in the second half of the year; a lot of the drags on the recovery are fading," said Ryan Sweet, a senior economist there.

In related news, the Dow rose for the first time since April and the S&P 500 broke a six-week losing streak by climbing 0.3%. In addition, suppliers are finally able to predict full rebounds from the March Japanese earthquake, with Honda projecting a return to normal production in August and Toyota following suit in September. While the economic recovery will likely continue to ebb and flow, these are some of the signs that we are still headed in the right direction.

ECONOMIC CALENDAR: Tuesday – Existing Home Sales Wednesday – EIA Petroleum Status Report, FOMC Meeting
Thursday – Jobless Claims, New Home Sales Friday – Durable Goods Orders, GDP

HEADLINES:

The Senate voted Thursday to cut the $5 billion-a-year subsidy given to oil refiners for blending ethanol into gasoline. Provided in the form of tax credits, the subsidy gives 45 cents a gallon to refiners who use ethanol, a renewable fuel additive that comes mainly from corn in the U.S..

Ownership of the Los Angeles Dodgers baseball team will be determined by a one-day divorce trial. The outcome will decide whether Frank McCourt is the sole owner, or if the team should be considered community property, which could likely lead to a sale of the team.

Microsoft won antitrust approval to complete the purchase of Skype, an internet phone service. Its largest acquisition to date, the company will buy Skype for $8.5 billion.

In the United States, 176 million people watched online videos last month, much of it on YouTube, according to the latest survey by comScore. Each person watched 15.9 hours on average.

Has the economy hit a "soft patch"? Or something worse?

With hiring at a crawl, home prices at a low, consumer and business spending slowing, and the stock market logging its sixth straight week of losses, headlines continue to declare doom and gloom. As is frequently the case, all this negative press has caused investor sentiment to swing wildly. The latest American Association of Individual Investors (AAII) survey shows that bearish sentiment jumped 14.2% last week alone. Despite the bearish sentiment though, there are positive markers that bode well for a slow-growth recovery.

While leading economists have trimmed their forecast for 2011 GDP growth to 2.7% from 3% a month ago, they are still predicting stronger growth for the second half of the year. 2.7% isn’t that far off the 2.9% growth we saw in 2010. Additionally, manufacturing continues to expand and the ISM Non-Manufacturing Index for May reported that economic activity grew in May for the 18th consecutive month, providing a pleasant surprise last Friday. And while U.S. supply was significantly reduced in the auto and technology sector as a result of the earthquake in Japan, the problems are being steadily resolved.

Lower commodity prices are also a positive side effect of slowed growth. All things being equal, as commodity prices fall, growth prospects improve. In fact, Goldman Sachs Group recently turned bullish on commodities, making the case that dropping prices will stimulate growth and send commodity prices rising again. This aptly illustrates the cyclical nature of our economy.

Strong corporate earnings have allowed for cheaper stocks. Interest rates remain extremely low and aren't expected to start rising until at least a year from now. U.S. exports climbed to an all-time high on Thursday, increasing to $175.6 billion in April, and now comprise 13% of the GDP. As you can see, there is still a lot of positive information out there.

Market sentiment and media reports often go hand-in-hand. When circumstances seem glum, the good news tends to get buried behind fearful forecasts. And while it can be tempting to go with the flow and join the ranks of anxious investors, we urge you to examine every part of the economic picture before drawing conclusions.

ECONOMIC CALENDAR: Tuesday – Producer Price Index, Retail Sales, Business Inventories Wednesday – Consumer Price Index, Empire State Mfg Survey, Industrial Production, Housing Market Index, EIA Petroleum Status Report
Thursday – Housing Starts, Jobless Claims, Philadelphia Fed Survey Friday – Consumer Sentiment

Data as of 06/10/2011 1-Week YTD 1-Year 5-Year 10-Year
Standard & Poor's 500 -2.24 1.06 16.9 0.30 0.05
Dow -1.64 3.23 17.5 1.95 0.89
NASDAQ -3.26 -0.34 19.2 4.76 1.94
MSCI EAFE -2.95 1.56 24.6 1.48 2.36
10-year Treasury Note (Yield Only) 3.00 NA 3.32 4.98 5.33

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

HEADLINES:

Oil prices fell 2.5% Friday on reports that Saudi Arabia plans to increase production 13% to 10 million barrels per day. The increased production is expected to slow this year’s 26% rise in oil prices and the 2% increase in gasoline.
The Fed will buy $50 billion of Treasury’s in the final series of government bond purchases that marks the last phase of QE2. Launched in November 2010, the purchases will end June 30, though the stimulus will continue with the Fed reinvesting maturing securities.

The White House confirmed that it is considering cutting the payroll taxes that businesses pay. In December employees began paying 4.2% of their wages, two percentage points less than usual, while employers continue to pay the standard 6.2%. The potential policy change hopes to improve employment numbers by promoting hiring.

Paying a total of $2,626,411, an anonymous donor has won lunch with Warren Buffett. Already winning the eBay auction, the bidder topped their previous offer by $100. Proceeds from the auction benefit Glide, an organization that benefits poverty-stricken residents of the San Francisco Bay area.


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

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http://money.cnn.com/2011/06/10/news/economy/recession_economic_survey/index.htm?iid=EL
http://www.aaii.com/sentimentsurvey
http://money.cnn.com/2011/06/10/news/economy/recession_economic_survey/index.htm?iid=HP_LN
http://www.ism.ws/ISMReport/nonmfgROB.cfm
http://www.smartmoney.com/invest/stocks/why-the-market-worrywarts-are-wrong-1307117379674/
http://www.smartmoney.com/invest/stocks/why-the-market-worrywarts-are-wrong-1307117379674/
http://www.smartmoney.com/invest/stocks/why-the-market-worrywarts-are-wrong-1307117379674/
http://www.nytimes.com/2011/06/10/business/10markets.html
http://online.wsj.com/article/BT-CO-20110609-708605.html
http://www.businessweek.com/ap/financialnews/D9NP4RCG1.htm
http://www.cnbc.com/id/43356436
http://blogs.marketwatch.com/election/2011/06/10/employer-payroll-tax-proposal-panned/
http://money.cnn.com/2011/06/10/news/companies/buffett_lunch/index.htm?iid=HP_LN

How much longer will the market's correction continue?

U.S. Stocks fell for the fifth straight week after disappointing reports on jobs and manufacturing fueled concerns that economic growth is slowing. The S&P 500 slid 2.3% to 1,300, its lowest level since March, while the Dow fell 290.32 points, or 2.3%, to 12,151. Should this be cause for alarm? This week, we would like to share what some industry insiders have recently said about the matter.

"Our view is that we're clearly seeing a slowdown, but you'd need a shock to the system to see things get much worse from here. There's little room for error, but there are reasons to expect growth, and we don't see a whole heck of a lot more downside."

- Andrew Goldberg, market strategist at J.P. Morgan Funds in New York
"We don't see material downside from here. A five percent correction is appropriate for the slowdown we're experiencing, and over the intermediate term, our expectation is that we'll regain some momentum.”

- Jim McDonald, chief investment strategist at Northern Trust Global Investments
“Investors should be looking for buying opportunities. The economy is not as bad as it looks right now.

- Byron Wien, vice chairman of Blackstone Advisory Partners
From experience we know that the “experts” aren’t always right. In this case, we agree things are not as bad as some of the headlines make them out to be. The recovery is progressing slower than we would like, but it is still progressing. Until employers start persistently hiring again, the housing market gets straightened out, and Washington figures out what to do about the deficit, the recovery is going to ebb and flow.

The events that ultimately led up to the so-called Great Recession took years, even decades to unfold. In a similar way, the economy will take years to recover, not weeks or months. It is good to keep this fact in mind when we pick up the newspaper, turn on the television, or visit our favorite news website.

ECONOMIC CALENDAR:
Monday: Ben Bernanke Speaks
Tuesday: Consumer Credit
Wednesday: EIA Petroleum Status Report, Beige Book
Thursday: International Trade, Jobless Claims
Friday: Import and Export Prices, Treasury Budget

HEADLINES:
Greece has agreed to speed its sale of state-owned property and cut billions of dollars more from its budget to satisfy requirements for promised loans from the International Monetary Fund and other European countries.

The president of Toyota Motors said on Saturday he expects the automaker to resume full production globally in November and its Japanese output is expected this month to recover to 90% of levels seen before the March earthquake.

Two bottles of the world’s oldest Champagne, which spent about 170 years at the bottom of the ocean, sold for 54,000 euros ($78,400) at an auction in Finland today.
The computer phishing attack that Google says originated in China was directed, somewhat indiscriminately, at an unknown number of White House staff officials, setting off the Federal Bureau of Investigation inquiry that began this week, according to several administration officials.