Second Quarter 2008

It was a pretty bad week last week. The DJIA was down 4.2% last week and down 19.9% from the October high. Here are some year to date returns for various market caps: large cap stocks down -10.84%, mid cap stocks -6.5% and small cap -6.36%. Large cap growth did better than value but the opposite is true for small and mid caps with value outpacing growth stocks. International stocks are down -11.3%--equity income funds are down -12.5% and even balanced funds, which are meant to hold up well in declining market environments are down -6.42% year to date. The only thing that has held up in here are commodities. For example, oil as measured by the ETF USO is up 46% year to date.

Here is the big problem facing the Fed with what to do with interest rates: CPI (a widely used measure of inflation) is up 4.2% year over year--core inflation (which excludes food and energy prices for those of us that don't eat or use fuel) is up 2.3% year over year. These numbers, particularly the total CPI, is much higher than it has been in years. Slowing economic growth coupled with rising inflation is a real dilemma for the Fed.

I have started reading a very interesting book called Simple Wealth, Inevitable Wealth by Nick Murray available only at www.nickmurray.com. Murray is a consultant to financial advisors but wrote this book for clients. He has been in the financial services industry for 41 years and has seen a lot. I really like to read and hear the wisdom of people who have been involved in the markets for a long time--they seem to make so much sense and they don't get pulled into the over zealous media's negativity. What Murray says is when the markets are down is the time to buy more shares of your favorite stocks or funds or just index funds as part of your long term investing plan--Warren Buffet once said that the only thing Americans won't buy on sale is stocks! Well, they are 20% off now!! As investors, we all must invest with rationality not emotions. History has shown that the stock market has always gone up over the long term--don't believe anyone who says it is different this time--the details may be different, but the cycles remain the same.
Thanks for reading.

Financial Education

I often come across really interesting information I like to share. There is an organization called the National Endowment for Financial Education that puts out some great research and has developed age appropriate financial education programs to be used at all grade levels within the school environment. The website is http://www.nefe.org/. One article particularly useful addresses the topic of raising a money smart child.

Read here :http://www.smartaboutmoney.org/nefe/pages/popups/1770.asp?resource=227



There are other tons of articles available at http://www.smartaboutmoney.org/ especially for those friends who do not work with a financial planner who maybe should be considering it.



Another great resource is the Mature Market Institute at http://www.metlife.com/ under the "brokers & consultants" tab which addresses issues of retirement, longevity, long term care insurance, social security and medicare.



There is so much information available on the internet--it's nice to have a guidepost. If anyone else has found helpful websites, please post so we can all take a look.

Thanks for reading.