Archive for September, 2007
Wednesday, September 19th, 2007
The FOMC chose to cut the fed funds rate by 50 basis points yesterday, hoping to mitigate market turmoil as a result of tightening credit markets and the housing downturn (the less important discount rate was also lowered as well). As expected, the markets reacted positively to the news, with the Dow Jones Industrials rising 2.5%, while the S&P added almost 3% to close at around 1,520. In addition, August CPI numbers came in lower today as well, which helped mitigate inflation worries and add support for the Fed’s move. However, while investors always welcome a lower cost of borrowing, many are left scratching their heads on the “moral hazard” issue.
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Tuesday, September 18th, 2007
Stock investors are patiently waiting for news from the Federal Open Market Committee on interest rates today. The FOMC meets at 2:15 EST, and an announcement on interest rates is expected to follow. Per Econoday, consensus is calling for a 50 basis point (0.50%) drop in the federal funds rate to 4.75% from 5.25%. This could send markets higher, as a rate cut would ease pressure on the currently troubled US credit markets. Oil futures have already rallied to a new high ahead of the announcement this morning.
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Monday, September 17th, 2007
Since 1997, the US government has issued what are called Treasury Inflation-Protected Securities (TIPS). These securities are essentially bonds with one huge benefit: the principle is adjusted for inflation based on the Consumer Price Index (CPI). Why is that important? Many investors forget that your real return is what matters. For example, if your portfolio returns 10% in a given year but prices have risen by 3%, your real return is actually only 7%. This is because it now costs more to purchase goods and services (which eats into your original return).
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Sunday, September 16th, 2007
Maintaining a portfolio of approximately 60% stocks and 40% bonds (to hold long term) reduces portfolio risk while still providing a reasonable real return on investment. In addition, structuring the portfolio so that fees and transaction costs are minimized helps boost returns as well. However, having a rebalancing strategy is absolutely crucial to the success of your portfolio. We’ll cover the step-by-step basics in this article.
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Tuesday, September 11th, 2007
Today marks the 6th anniversary of September 11th, 2001 - a day that will forever haunt the hearts and minds of all Americans. Like my grandfather, who bravely fought in the Pacific theater during WWII, I will always feel the weight of sadness when I recall the great tragedy of my time. His was Pearl Harbor, where over 2,300 Americans lost their lives during the Japanese attack on December 7th, 1941.
I am deeply grateful that he risked his life, like so many of the men of his generation, to fight for freedom in a world of great uncertainty and turmoil. I am also honored to call the men and women who showed such strength, courage, and selflessness on that day in September my fellow countrymen. God bless you all - we will never forget you.
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