Weekly Market Commentary

October 19, 2015

The Markets

How quickly emotions have changed since August. Worry? Angst? It’s already priced into the markets, according to some experts.

Last week, Barron’s published the results of its Big Money Poll, a biannual survey of professional investors and money managers. A majority of those surveyed (55 percent) were bullish about U.S. markets’ prospects through June 2016, 29 percent were neutral, and 16 percent were bearish. That’s a big shift. Last spring, just 45 percent of those polled were bullish and nearly one-half were neutral. This time around, things are different:

“After a wild and crazy summer for U.S. stocks, marked by an 11 percent correction in August, Wall Street’s bulls are showing conviction again…the pros expect stocks to rise by as much as 7 percent through the middle of 2016, propelled by a growing economy and gains in corporate profit. The Big Money investors see fresh value in beaten-up energy stocks and financials, as well as dividend-paying blue chips. And, they don’t expect a likely interest-rate hike – when it comes – to break the bull’s stride for long.”

Investors who participated in the American Association of Individual Investors’ October 14 Sentiment Survey weren’t quite so optimistic. The survey showed just 34 percent of investors were bullish, 39 percent were neutral, and 27 percent were bearish. The bulls were down 3 percent from the previous week, and the bears gained a percent. Uncertainty seemed to be the name of the game, though, as the number of investors who held neutral opinions increased by 4 percent.

As an interesting side note, the professionals surveyed by Barron’s estimated the number of investors who weren’t sure where markets are headed was much larger – 76 percent!

If you’re a contrarian – an investor who does not subscribe to popular opinion – there are a lot of opinions to consider.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

it’s not always a good idea to rollover company stock from a 401(k) plan to an IRA. In fact, doing so might mean you pay more in taxes to Uncle Sam than necessary.

If company stock held in an employer-sponsored 401(k) plan has appreciated, the difference between the amount paid for shares (the cost basis) and the current value of those shares is known as net unrealized appreciation (NUA). For instance, if an investor paid $10 a share for 1000 shares ($10,000) for stock that is now worth $15 a share, then the investment is worth $15,000, and the NUA is $5,000.

If the shareholder completes a rollover from a 401(k) plan to an IRA, those shares of company stock will be liquidated, along with the other assets in the account, and moved to an IRA where the assets will have an opportunity to continue growing tax-deferred. When the assets are distributed from the IRA, they may be taxed as ordinary income. If the investor is in the 28 percent tax bracket, the taxes owed would be about $4,200.

There is an alternative that could be a better choice tax-wise. An investor can request company stock be distributed in-kind and sent to a taxable account. The stock is not liquidated. The shares are moved to the new account. The investor may owe ordinary income taxes (and penalties if he or she is not yet age 59½) on the cost basis ($10,000). However, the net unrealized appreciation ($5,000) will not be taxed until the shares are sold. Taxes on the cost basis would be about $2,800.

If the investor takes a distribution right away, and the shares have been held for more than one year, the proceeds may be taxed at the long-term capital gains tax rate, which is currently lower than the ordinary income tax rate. If the investor is in the 15 percent capital gains tax bracket, another $750 would be owed in taxes. In this example, the investor could save about $650 in taxes overall.

Please keep in mind this is a hypothetical example and is not representative of any specific situation.  Each investor is unique and your results may vary.  Executing an NUA strategy seems pretty straightforward, but it can be tricky and not everyone is eligible. If you would like to learn more, please give your tax professional a call.

Weekly Focus – Think About It

“If you wish to forget anything on the spot, make a note that this thing is to be remembered.”

--Edgar Allan Poe, American poet

Best regards,

Lee R Barczak

President

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg 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 Total Return 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.

Weekly Market Commentary

October 12, 2015

The Markets

They’re investors. They’re allowed to change their minds.

Just a few weeks ago, on September 17, the Federal Reserve Open Market Committee (FOMC) decided to leave the fed funds rate unchanged. In part, this was because, “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

The next day, September 18, stock markets tumbled. By the time September was over, many markets had closed on their worst quarter in four years, according to the BBC. The Dow Jones Industrial Average fell by almost 8 percent, Britain’s FTSE 100 was down 7 percent, Germany’s Dax was off by almost 12 percent, and the Shanghai Composite lost more than 24 percent.

Last week, on Thursday, the minutes of the FOMC meeting were released. Investors’ response was quite different. Barron’s reported many believe a rate hike during 2015 is less likely than it once was, and that reinvigorated investor optimism:

“Going into Friday’s session, global equity markets’ valuations were enriched by some $2.5 trillion, according to Bloomberg calculations. As for U.S. stocks, Wilshire Associates reckons that they tacked on 3.44 percent, or approximately $800 billion, over the full week, based on the gain in the Wilshire 5000 index, their biggest weekly gain in nearly 12 months.”

Why does the same news elicit two very different responses? There are many reasons. Foremost among them is the fact a lot of elements influence markets – investor confidence, company valuations, central bank actions, automated trading, and many others.

What does last week’s upward push mean? One analyst cited by Barron’s suggested we’re seeing a bear market rally, but only time will tell. 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

do you Hate doing the laundry? Then, you May be in luck. The world’s most recent laundry bot was introduced at Japan’s 2015 Combined Exhibition of Advanced Technologies (CEATEC), a technology trade show. The Telegraph reported the robot was developed to eliminate the tedium of laundry, which (as moms and dads everywhere know) is one of the least popular household chores. Not only does ‘Laundroid’ wash and dry clothes, it also can sort them, fold them, and put them away in a cupboard.

If you’re thinking, it sounds to good to be true, you’re right – for now. Digital Trends pointed out Laundroid works quite slowly:

“The last laundry-folding robot we saw in action took a long time to get a small towel neatly folded into a little rectangle, and that was with the video sped up. Laundroid is no faster, based on a demonstration at the CEATEC...It took several minutes for the robot – hidden inside a futuristic-looking black cabinet – to fold up a freshly washed T-shirt, according to Engadget. Although it did the task decently, if not in Martha Stewart-approved style, it’s obviously not ready to take on a basket full of jeans and sheets.”

The fly in the ointment is the bot must determine a shirt is a shirt, and a pair of pants is a pair of pants, and so on, before it can fold items. After all, each item is folded differently. Socks, it seems, pose a particularly ticklish challenge. So, how long does it take? Laundroid needs about seven hours to fold a basket of clothes.

If you have a lot of laundry, you may want to check back in a few years.

Weekly Focus – Think About It

“Human subtlety will never devise an invention more beautiful, more simple, or more direct than does nature because in her inventions nothing is lacking, and nothing is superfluous.”

--Leonardo da Vinci, Inventor

Best regards,

Lee R Barczak

President

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.  *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.  * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.  * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.  * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.  * The Bloomberg 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 Total Return 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.  * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.  * Past performance does not guarantee future results. Investing involves risk, including loss of principal.  * You cannot invest directly in an index.  * Consult your financial professional before making any investment decision.

Weekly Market Commentary

October 5, 2015

The Markets

Well, third quarter was a humdinger.

It began with the first International Monetary Fund (IMF) default by a developed country (Greece) and finished with Hurricane Joaquin possibly headed toward the east coast. In between, China's stock market tumbled, the Federal Reserve tried to interpret conflicting signals, and trade growth slowed globally.

After such a stressful quarter, we may see an uptick in the quantity of alcoholic beverages consumed per person around the world. That number had declined (along with economic growth in China) between 2012 and 2014, according to The Economist.

No Grexit - for now

Despite defaulting on its IMF loan, rejecting a multi-billion-euro bailout plan, and closing its banks for more than two weeks, Greece was not forced out of the Eurozone. Instead, Europe cooked up a deal that left the IMF unhappy and analysts shaking their heads.

The Economist reported the new deal for Greece was an exercise in wishful thinking. The problem is the deal relies on "the same old recipe of austerity and implausible assumptions. The IMF is supposed to be financing part of the bailout. Even it thinks the deal makes no sense." It's a recipe we're familiar with in the United States: When in doubt, defer the problem to the future.

A downturn in China

Despite reports from the Chinese government that it hit its economic growth target (7 percent) on the nose during the first two quarters of the year, The Economist was skeptical about the veracity of those claims. During the first quarter:

"Growth in industrial production was the weakest since the depths of the financial crisis; the property market, a pillar of the economy, crumbled. China reported real growth (i.e., after accounting for inflation) of 7 percent year-on-year in the first quarter, but nominal growth of just 5.8 percent."

That statistical sleight of hand implies China experienced deflation early in the year. It did not.

On a related note, from mid-June through the end of the third quarter, the Shenzhen Stock Exchange Composite Index fell from 3,140 to about 1,716, according to BloombergBusiness. That's about a 45 percent decline in value.

Red light, green light at the Federal Reserve

Green light: employment numbers. Red light: consumer prices, inflation expectations, wages, and global growth. Late in the quarter, the Federal Reserve decided not to begin tightening monetary policy. According to Reuters, voting members of the Federal Open Market Committee (FOMC) decided uncertainty in global markets had the potential to negatively affect domestic economic strength.

They may have been right. The Wall Street Journal reported, although unemployment remained at 5.1 percent, just 142,000 jobs were added in September. That was significantly below economists' expectations that 200,000 jobs would be created. The Journal suggested the labor market has downshifted after 18 months of solid jobs creation.

Global trade in the doldrums

The global economy isn't as robust as many expected it to be. According to the Business Standard, the World Trade Organization (WTO) lowered its forecast for global trade growth during 2015 from 3.3 percent to 2.8 percent. Falling demand for imports in developing nations and low commodity prices are translating into less global trade. Expectations are trade growth will be 3.9 percent in 2016, which could help support global economic growth.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

change is coming.America's share of the global economy is potent. Our country accounts for 16 percent (after being adjusted for currency differences) of the world's gross domestic product (GDP) and 12 percent of merchandise trade. According to The Economist, we dominate "the brainiest and most complex parts of the global economy." Our presence is strong in social media, cloud computing, venture capital, and finance. In addition, the dollar is the world's dominant currency.

While the view from the top is pleasing, we may not be there forever. The Economist explained:

"In the first change in the world economic order since 1920-45, when America overtook Britain, [America's] dominance is now being eroded. As a share of world GDP, America and China (including Hong Kong) are neck and neck at 16 percent and 17 percent respectively, measured at purchasing-power parity. At market exchange rates, a fair gap remains with America at 23 percent and China at 14 percent... But any reordering of the world economy's architecture will not be as fast or decisive as it was last time...the Middle Kingdom is a middle-income country with immature financial markets and without the rule of law. The absence of democracy, too, may be a serious drawback."

It may be hard to believe, in light of recent economic and market events in China, but change is on its way. Regardless, the influence of the United States should continue to be powerful well into the future.

Weekly Focus - Think About It

"Governing a great nation is like cooking a small fish - too much handling will spoil it."

--Lao Tzu, Chinese philosopher

Best regards,

Lee R Barczak

President

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg 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 Total Return 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.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Weekly Market Commentary

September 28, 2015

The Markets

Oh, the uncertainty!

Investors are keeping one eye on the Federal Reserve and the other on politicians trying to determine what may happen during the last quarter of the year.

The Fed, which is the central bank of the United States, is responsible for conducting monetary policy with an eye toward full employment and stable prices. If, as St. Louis Fed President James Bullard told Reuters, the economy is near full employment and inflation is sure to rise, then why didn’t the Fed raise rates in September?

Reuters reported voting members of the Federal Open Market Committee (FOMC) decided uncertainty in global markets had the potential to negatively affect domestic economic strength. Mr. Bullard believes the decision puts an October increase in doubt, too, according to Nasdaq.com.Mr. Bullard told reporters:

“For the committee, it's always hard to have made a big decision at one meeting and come back at the next meeting. The key question will be what kind of data did you get during the intervening period that changed your mind, and it's not that clear what data we will have in hand in October that we would be able to cite to support my position, relative to what we had at the September meeting. But it is possible.”

Regardless, Chairwoman Janet Yellen made it clear last week she expects to see a rate hike before year-end. That might have helped settle markets, except Speaker of the House John Boehner resigned soon after Yellen spoke. The Speaker’s resignation made a government shutdown this week less likely, according to Barron’s. However, fiscal policy issues haven’t been resolved. A meeting of the political minds this week would set the stage for a mid-December showdown and that’s data the Fed will have to consider if the December FOMC meeting occurs amidst a government shutdown and debt-ceiling crisis.

No one seemed to be happy with the state of affairs this week, and stock markets were awash in red ink.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

what will they say? Soon, cars will be able to talk with one another. Vehicle-to-vehicle communication (V2V) has been tested in Ann Arbor, Michigan, a relatively mild and polite Midwestern town. Now, V2V is being rolled out in New York City, along with technology that allows traffic signals to contribute their two cents. Just imagine what a New York cab might have to say to another New York cab that changes lanes without signaling.

Okay, it’s nothing like that.

The idea is to reduce traffic accidents. If a dangerous situation arises an alert sounds. Gizmodo.com described it like this:

“These sensors send out signals over a specific wireless spectrum band and also receive them from other vehicles, creating a network of communicating sensors that ping when there’s danger… A secondary form of the technology, called Vehicle-to-Infrastructure, does the same thing – but with sensors embedded in stop signs, traffic lights, and other pieces of road infrastructure.”

Soon, people will be able to install V2V on smartphones so they can ping a warning to approaching cars as well.

While V2V seems like a good idea, pinging a warning to a distracted driver moments before a crash and expecting them to respond appropriately may be asking too much. The Economist suggests that automation – giving vehicles the ability to take over – cannot be far behind. “Depending on how you look at it, that’s a good thing – or terrifying… opening cars and buses up to computerized control also means opening them up to hackers… Imagine the fun they could have if thousands more vehicles could be controlled from computers or smartphones.”

Ultimately, intelligent transportation systems are expected to optimize the number of vehicles that can use roadways, helping save money that would otherwise be spent on expanding infrastructure to accommodate population growth.

Weekly Focus – Think About It

“Forgiveness is the fragrance that the violet sheds on the heel that has crushed it.

--Mark Twain, American writer

Best regards,

Lee R Barczak

President

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.

*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg 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 Total Return 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.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Weekly Market Commentary

September 21, 2015

The Markets

As Tom Petty often sang, “The waiting is the hardest part.”

Whether it’s waiting for college acceptance letters, medical test results, employment offers, or Federal Reserve monetary policy changes, waiting can produce a lot of anxiety. A 2012 research paper written by Associate Professor Kate Sweeney and Graduate Fellow Sara Andrews of the University of California, Riverside, explained it like this:

 “…Although waiting for inevitable events such as the arrival of a bus or one’s turn in line may be irritating…the combination of uncertainty about the outcome and waiting for that outcome can be particularly excruciating. In fact, waiting may be more anxiety provoking than actually facing the worst case scenario…”

That may go a ways toward explaining why markets didn’t rally when the Federal Reserve decided to leave rates unchanged last week. The Federal Open Market Committee’s statement indicated they were concerned, “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

On the face of it, continued low rates should have been good news for assets like stocks, according to Barron’s. However, any positive aspects to the news were mitigated by the fact everyone expects the Fed to begin raising rates soon. Investors are waiting for it to happen, and they’re uncertain how economies and markets will react when it does.

Heightened anxiety may be one of the reasons investors responded the way they did last week. On Friday, after mulling the Fed’s decision, national stock market indices around the world – in the United States, England, Germany, France, and Japan – fell significantly, according to Yahoo! Finance.

Now, we’re back to waiting.

If anxiety remains high, markets may be volatile.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

It’s official. the IGs are in. Ignoble is a word rarely heard in everyday conversation. Merriam-Webster defines it as meaning, “of low birth or common origin, or characterized by baseness, lowness, or meanness.”

The 25^th First Annual Ig^® Nobel Prize Ceremony was held last week at Harvard University. Improbable.com reported, “Winners traveled to the ceremony, at their own expense, from around the world to receive their prizes from a group of genuine, genuinely bemused Nobel Laureates…” Winners completed research that made people laugh and then caused them to think.

• The Management Prize went to Gennaro Bernile, Vineet Bhagwat, and P. Raghavendra Rau, authors of ‘What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior.’ They examined the link between CEOs’ early-life exposure to major fatal disasters and the financial and investment policies adopted by their companies. They found, “CEOs who experience fatal disasters without extremely negative consequences lead firms that behave more aggressively, whereas CEOs who witness the extreme downside of disasters behave more conservatively.”
• The Economics Prize was awarded to the Bangkok Metropolitan Police, which implemented a new policy in an effort to reduce bribery. They pay a bonus to police officers who refuse to accept bribes, even though the officers are required by law not to accept bribes. (It’s a concept that may resonate with parents.)
• The Literature Prize went to Mark Dingemanse, Francisco Torreira, and Nick J. Enfield, who presented evidence and arguments supporting the idea that ‘huh?’ is a word, and that it “is found in roughly the same form and function in spoken languages across the globe.”

If you’re interested in learning about the ignoble undertakings of other winners (who documented chicken walking like dinosaurs, created bee sting pain indices, and completed other thought-provoking experiments), visit www.Improbable.com.

Weekly Focus – Think About It

“A day without sunshine is like, you know, night.”

--Steve Martin, American comedian

Best regards,

Lee R Barczak

President

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.

*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg 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 Total Return 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.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.