Category: Monthly Commentary

Monthly Commentary

November 2010 – Market Commentary

Overview
November saw the markets cool off as fixed income and foreign stock had down months.  Domestic stock markets had positive, but weak performance from large cap stocks, while small and mid cap stocks continued to perform well.  European debt concerns dominated the news and weighed heavily on fixed income and foreign stock.  Investors began to pull back for the first time in years from the bond market after its tremendous decade long run.  The Fed’s stimulus move was met with mixed reviews by foreign leaders, but the markets responded strongly.  Several economic readings continued to lend investors confidence in the recovery with positive job news, retail sales and business and manufacturing growth.  GM roared back into the markets as one of the largest ever IPOs was broadly snapped up by investors around the globe.

Economic News
-Hiring increased in October with a surprising 151,000 jobs created adding to hopes that the recovery might finally be accelerating.  Most of the job increases came from service businesses and the private sector had its largest gain since April with an increase in 159,000 jobs.  However, the jobless rate remained steady at 9.6% for the third month in a row as more workers were no longer actively seeking employment. Increases in hiring have many optimistic the economy may be moving faster than the 2% analysts are projecting for the 4th quarter.

-Business readings continued to tick up over the month breeding optimism for the economy.  The manufacturing index in October reached its highest level since May, factory output continued its upward trajectory, car maker’s sales rose 13.4% in October, and wholesalers raised their inventories in September 1.5%.

-Retail performance continues to improve as retail sales grew 1.2% in October to reach their highest level since August 2008.  Kicking off the holiday shopping season the Black Friday shopping weekend sales numbers were better than last year with consumer traffic and store and website sales up.  The upswing in performance carried through “Cyber Monday” with retailer’s sales jumping approximately 20% over last year.  The increased consumer spending is underscored by consumer confidence hitting its highest level in 5 months.

-In an attempt to rectify a “disappointingly slow” economic recovery the Fed announced its plan to purchase $600 billion of US Government bonds over 8 months to lower interest rates and promote borrowing to aid economic growth.  In addition, proceeds from existing securities holdings coming due will be reinvested, which accounts for another approximately $300 billion. According to fed estimates the bond buying move would have the equivalent affect of cutting interest rates ¾ of a percent.  The Fed’s plan has come under fire globally and from the GOP criticizing the move as undermining the dollar and potentially engendering large scale inflation.

-The CPI rose .2% in October based mostly on energy costs.  Without volatile food and energy prices the index was unchanged for the third straight month.  Over the past year the rate has been 0.6% the lowest level since the data was first tracked in 1957.  The flat lining of inflation has lent support to the Fed’s stimulus program to drive inflation towards its informal target.

Corporate News
-GM triumphantly reemerged from its long nightmare in November as it reported a $2 billion profit in the third quarter and had the second largest IPO ever.  Over $18.1 billion shares sold marking an extraordinary two year turnaround from pleading for a bailout to posting repeated positives earnings.  The company sold 478 million shares at $33 a piece, a price much higher than anticipated with an additional 72 million shares sold through an overallotment due to the overwhelming demand.  The US Gov cut its ownership share in GM from approximately 61% to 27% through the IPO.

Regulatory News
-Government authorities are completing a three year investigation into alleged insider trading that could involve consultants, investment bankers, hedge fund and mutual fund traders and analysts across the U.S.  Offices of three large hedge funds were raided by Gov agents and they have broadened their inquiry looking for trading and other information from hedge fund giants SAC Capital Advisors and Citadel LLC in addition to mutual fund companies Janus Capital Group Inc. and Wellington Management Co.

Market News
-Initially reacting tepidly to the Fed bond buying announcement, markets, after digesting the information, rocketed to pre-crisis levels.  However, the surge was short lived as investor’s fears of European sovereign debt began creeping back into the spotlight. After initially resisting pressure from the European Central Bank (ECB) and European leaders to take a bailout, Ireland finally succumbed to the realities facing the financially troubled nation and came to terms on a $90 billion bailout. The EU was worried that troubles in Ireland could lead to a devaluation of the Euro currency and was seeking to avoid problems spreading to other weak nations including Portugal and Spain.  The ECB also developed new rules for future bailouts, but the plans did little to quell investor fears and borrowing costs for Spain and Italy reached record highs.

-Investor’s continued wariness of European debt over the second half of the month weighed on foreign stocks, but domestic indices were mostly up. The Dow ended the month at its lowest level for the month finishing down -0.6%, while the S&P 500 was flat returning 0.0%.  Broader indices like the Russell 3000 finished in positive territory.  Growth continues to outperform value and small cap stocks outperformed large cap stocks yet again.  International markets saw the European issues affect performance more substantially with developed and emerging markets returning -4.8% and -2.6%, respectively.

-Bonds saw poor performance in November over European debt woes and investors pulling money from bond funds for the first time in two years.  Performance was down across all terms and sectors for the month with longer term, municipals and international bonds fairing the worst with performance between -1.4% and -2.0%.  Short term and high quality fared better but were still down -.1% to -.2% for the month.  Yields continued to rise over the month with the yield on the 10 year Treasury note up to 2.80%.

Index Performance – November
US Large Cap Stock (S&P 500) +0.01%
International Stock (FTSE AW ex US) -3.92%
US Broad Bonds (BarCap Aggregate)-0.57%
US Government Bond (Barclay’s Govt)-0.67%
Cash (ML 3Month T-Bill) +0.01%

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.

October 2010 – Market Commentary

Overview
-October once again saw positive performance in virtually all asset classes.  Domestic and international stock markets continued their upward climb and fixed income performance remained up in short and intermediate term maturities, but some longer term bonds moved into slightly negative territory.  Economic news continues to show an economy struggling to return to pre-recessionary levels with positive, but meek growth.  The Fed has made overtures that jumping back into the bond markets is a given, aiding investor confidence.  Investors cheered the predominantly positive profit reports as corporate earnings were released throughout the month spurring gains.

Economic News
-Government job losses over shadowed modest gains in the private sector to increase unemployment by 95,000 in September.  The unemployment rate remained 9.6%.  The gain in private payrolls assuaged investors’ fears about the economy falling back into recession.  Initial jobless claims dropped to 434,000, the lowest level it has been in over 3 months.  Economists still remain skeptical that the job market has adequately improved and would like to see more progress.

-New home construction edged up in September increasing 4.4%, yet the number of new homes being built is still at less than half of the average of the past 50 years.  Home sales rose in September up 10% over August, however the overall sales remain weak and many analysts are revising their expectations for a housing recovery until late 2011 or early 2012.  If the housing market continues to limp forward the market’s overall recovery will remain slow.

-Consumer spending rose in September with U.S. retail sales up 0.6% and large U.S. chain stores having higher than expected sales numbers.  The results elevate hopes for the holiday season.

-Inflation worries have replaced deflation concerns as recent growth has eliminated apprehension of a double dip recession.  The US Treasury sold inflation protected bonds at a negative yield for the first time ever on a combination of growing inflation anxiety and low interest rates.  If inflation does not occur as investors expect they could be paying to lend the government money.

-The possibility of the Fed announcing they are renewing quantitative easing practices at their next meeting has become all but a formality as the central bank is dissatisfied with the current “unacceptable” conditions in the economy.  The gradual bond purchase program is estimated to be several hundred billion dollars and is expected to take place over several months.  The goal of the monetary stimulus is to spur more investment and spending and in turn accelerate the recovery.

Corporate News
-Third quarter earnings season has seen overwhelmingly positive performance as corporations begin to move back into the black.  Earnings of companies included in the S&P 500 index grew 28% in the third quarter according to analysts’ estimates over a year earlier, well above the average increase of 9% since 1988.  Firms including Intel, Google, Apple, Caterpillar, Ford, Northrop Grumman, Delta, Exxon, Microsoft and Samsung all reported a surge in earnings.  The year over year return comparisons have been helped by the fact that the previous years have been so poor.  Going forward corporations will have tougher sledding to see such outperformance.

-The largest mortgage issuers in the country are embroiled in a foreclosure mess.  Bank of America, JP Morgan and GMAC all put a moratorium on foreclosures to review their practices that came under fire from Freddie Mac for poor documentation practices.  They resumed foreclosure proceedings after not finding any issues with their processes, however a coalition of state attorneys general has launched a probe against the mortgage giants suspected of shoddy foreclosure processing.

Market News
-Stock markets cooled off from their blistering September, but have continued to post gains across the board.  The Dow was up for the month as blue chips advanced 3.2% and the S&P 500 gained 3.8% for its best October since 2003.  Growth continued its recent trend of outperforming value and small cap stocks outperformed large cap stocks.  Stocks continued prosperity was on display in the international markets to a lesser degree with developed and emerging markets returning 3.6% and 2.9%, respectively in October.

-Fixed income saw mostly positive performance for the month with longer term maturities moving into negative territory.  Long Term Government and Credit bonds fared the worst at -2.2% and the Municipal sector saw negative performance across all maturity levels.  On the positive side intermediate term credit and agency bonds faired the best with returns ranging from 0.5% to 0.8%. Yields rose over the month but continue to remain near historic lows with the yield on the 10 year Treasury note up slightly to 2.63%.

-The Dollar continued to sink over the month hitting record lows against many major currencies.  The IMF and G-20 countries held summits over the month with currency values dominating the agenda.  While some progress was made, the meetings fell short of U.S. expectations.  The U.S. hoped for tougher measures against China who is believed to be keeping their currency artificially low.

-China surprised the market by announcing they are raising interest rates a quarter of percentage point.  Its GDP rose 9.6% compared to the 3rd quarter of 2009, but is down from the 10.3% it posted in the 2nd quarter showing investors that China’s break neck expansion might be easing.

Index Performance – October
US Large Cap Stock (S&P 500) +3.80%
International Stock (FTSE AW ex US) +3.34%
US Broad Bonds (BarCap Aggregate) 0.36%
US Government Bond (Barclay’s Govt) -0.06%
Cash (ML 3Month T-Bill) +0.02%

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.

September 2010 – Market Commentary

Overview
Global stock markets had their best September in over 70 years, however the rally had more to do with the lack of bad news than advances in the economy.  Economic reports saw minimal improvements, but they dissipated fears of a double dip recession.  Investors also began to look past the November congressional elections with the assumption that Republicans will likely gain seats and therefore make tax increases less likely.  Fed comments gave investors further confidence that they would be willing to take additional action if the need arose.  Stocks bounced back from a weak August to have a very strong September and third quarter.  Investors continued to move into fixed income over the quarter, but did not see the same results as earlier in the year with fixed income indices mostly flat for the month.

Economic News
Several businesses related economic reports released in September edged up.  Manufacturing activity surprised by accelerating in both the U.S. and China in July and business spending continued to expand in the third quarter in the U.S.  Factory goods orders increased in July and U.S. industrial output continued its upward climb in August.  While not overwhelming positive, these economic reports show that the economy continues to grow.

The U.S. continued to lose jobs in August for the third month in a row as the unemployment rate rose to 9.6%, however the increase was due to more people seeking to enter the workforce and not layoffs.  The private sector added 67,000 jobs in August, which beat economist expectations.  Fewer people applied for jobless benefits in September as the 4 week moving average dropped to 458,000.  However, the number still is evidence of a weak job market.

Wholesale prices rose little in August, up 0.1% when excluding volatile food and energy prices, showing that prices continue to remain flat and are teetering close to deflation.

After the Fed’s monthly meeting they made their strongest overtures yet about taking new steps to bolster the economy if organic growth does not pick up soon.  The Fed is weighing the costs and benefits of beginning another bond purchase program.

Total volume of global imports and exports fell 21% between April 2008 and May 2009, however as of June it is within 2% of its peak.  The U.S. Trade deficit narrowed to $42.8 billion in July down $7 billion from a month earlier as exports increased and imports fell.  Global trade has had a significant role in the recovery and the degree to which the recovery continues will rest heavily on the continued expansion of global trade.

Corporate News
Corporations reported a round of generally strong earnings in September, however most reports were accompanied with some negative news.  Oracle, RIM, FedEx, Lennar, Adobe, and Inditex (the largest clothing retailer by revenue) all had their quarterly profit grow substantially.  On the other hand, RIM added fewer subscribers than expected, FedEx expressed concern over U.S. economic growth and is cutting 1,700 jobs from a business line,

Lennar is still struggling in its core home building business and Adobe’s 4th quarter projections disappointed investors.

Regulatory News
Regulators from around the world agreed to new global banking rules with the goal to reduce risky financial activities taken by institutions that led to the financial crisis and to prevent future crises.  The new rules, which increase the amount of capital banks are required to hold on hand to guard against losses, are to be phased in over 8 years in attempt to avoid upsetting the staggering economy.

The U.S. Government stepped in to aid wholesale credit unions that were being squeezed under the weight of subprime mortgages.  It includes a plan to manage $50 billion in troubled assets inherited from failed institutions.  The National Credit Union Admin. plans to issue $35 billion in government guaranteed bonds that are supported by the feeble mortgage related assets.

Market News
September started off with a bang as all major stock indices shot up over 3.0% in the first trading days of the month and didn’t let up as a traditionally poor month for stocks saw one of the best Septembers ever.  The Dow gained 7.9% and the S&P 500 rose 8.9% for the month of September.  The strong performance from both July and September was enough to outweigh the poor results from August to send U.S. stocks up 11.5% for the third quarter.  International equity was strong as well with developed and emerging markets returning 16.5% and 18.0%, respectively in the third quarter.

Due to the ongoing unease with the global recovery, gold continued to soar throughout the month settling at a record high of $1,308 an ounce to end September.

As concern over a double dip recession eased, fixed income performance for the month was flat.  Returns ranged from 0.0% for Short Term treasuries to 0.9% for Intermediate Credit bonds. Yields remained low as investors continued to pile into bonds. The yield on the 10 year Treasury note rose slightly to 2.52%.

Currency trading has grown tremendously in recent years as trading has reached $4 trillion a day, up 20% since 2007.  Governments became increasingly active in the space in September.  Japan’s government got into currency markets for the first time in 6 years to try to abate the quick ascent of the Yen.  Other active countries include China, Brazil, Taiwan and South Korea.  Governments are trying to keep their currencies low to spur exports and their countries’ economies.

Index Performance – September
US Large Cap Stock (S&P 500) +8.92%
International Stock (FTSE AW ex US) +10.18%
US Broad Bonds (BarCap Aggregate) +0.11%
US Government Bond (Barclay’s Govt) +0.05%

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.

August 2010 – Market Commentary

Overview
Global stock markets retreated in August as evidence mounted that the economic recovery was slowing.  Numerous economic reports, lowered earnings expectations and fears of deflation all led to uncertainty about the U.S.’s ability to continue to recover from the “Great Recession.” The Commerce Dept. revised down its estimate for GDP for the 2nd quarter from the previously projected 2.4% to 1.6%, emphasizing the overall trend.  Investors’ fears of the recovery weakening led to investors bailing out of equities and moving into traditional safe haven investments over the course of the month.

Economic News
-U.S. job creation continues to be a major issue as initial jobless claims grew to 500K the week ending August 14th.  The four week moving average, used to smooth the volatility of the number, reached its highest level this year in August.  With the current unemployment rate at 9.6%, significant inroads in job creation will need to be made in order to get consumers to begin spending again.

-Despite 30 year mortgages hitting record lows of 4.49% sales of existing U.S. homes fell 27.2% in July to a level that has not been seen in over a decade.  New home sales fell 12.4% in July, the lowest since 1963.  Due to an increase in inventory, many buyers on the sidelines after the new home tax credit expired and the poor job market, home prices are likely headed for another decline.

-Factory activity grew, but at a slower pace in many major economies in July.  Non-defense capital spending dropped 8% and durable goods orders fell 3.8% in July.  Both are indicators that businesses are turning cautious about the future.

-July’s inflation numbers remained tame as the CPI rose only 0.1%, excluding volatile food and energy prices.  The low number along with the continued lack of consumer spending exacerbated fears of deflation.

-With weakening economic news being released daily, the Fed announced it would begin reinvesting proceeds of maturing mortgages into U.S. Treasury Debt.  While the move is mostly symbolic, the change from shrinking the portfolio illustrates the Fed’s concern over the recovery.  The FOMC stated that the “pace of economic recovery is likely to be more modest in the near term than had been anticipated” and they would be open to making “additional stimulus” moves.

-In Europe the picture was slightly rosier as the Euro-zone GDP rose 3.9% in 2Q aided significantly by a 9% increase in German growth.  Additionally, business purchases continued to show growth and economic sentiment improved in the Euro-zone in August, hinting that Europe might be able to withstand a slowdown in the U.S. and Japan.

-China is expected to become the world’s 2nd largest economy, passing Japan, later this year.  China’s GDP for 2Q was $1.339 trillion, or $51 billion ahead of Japan’s. This is an unprecedented position for a still developing country and is further evidence of China’s break neck expansion.

Corporate News
-Merger and acquisition news dominated the headlines over the month of August as companies, frustrated with lack of market growth, have looked to expand by taking over other firms.  The M&A activity was at its highest level since late 2009 providing some good news for the economy.  Mining goliath BHP Billiton, packaging and storage product producer Rank Group, Intel, First Niagara Financial Group, HP and Dell all were heavily involved with M&A activity over the month completing or making highly publicized attempts at acquiring other firms.

-Large tech firms Cisco and Intel both were cautious with their earnings forecast as they see weak demand eating into sales in the second half of the year.

-As investors poured into the debt markets, rates for new issues dropped precipitously.  Johnson and Johnson issued $1.1 billion of 10 and 30 year bonds at the lowest rates ever for corporate debt with those maturities and junk bond issues hit weekly highs.

Market News
-Worsening economic data weighed on stocks as the Dow lost 3.9% and S&P 500 lost 4.5% for the month of August, which has historically been a positive month for stocks.  It was the worst August for the Dow since 2001 and both indices moved back into negative territory for the year to date.  The Russell 2000, measuring small cap stocks, posted its worst August in 12 years dropping 7.4%.

-Investors’ fears of the recovery weakening led to a mass exodus from equities and a move to traditional safe haven investments.  Fixed Income indices were up across the board on the flight to quality with returns ranging from 0.1% for short term treasuries to 2.3% for 7 year Munis. Yields continued to drop as investors piled into bonds with the yield on the 10 year Treasury note falling to 2.50%, its lowest level since April 2009.

-The Yen continued to climb hitting its highest level in 8 months due to China’s rapid buying of the currency and continued weakness in the U.S.  This resulted in the Bank of Japan having an emergency meeting and agreeing to take additional steps to curb the swift ascent of its currency.

Index Performance – August
-4.51% – US Large Cap Stock (S&P 500)
-2.77% – International Stock (FTSE AW ex US)
+1.29% – US Broad Bonds (BarCap Aggregate)
+1.78% – US Government Bond (Barclay’s Govt)
+0.03% – Cash (ML 3Month T-Bill)

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.

July 2010 – Market Commentary

Overview
July posted a mostly stagnant round of economic reports including GDP estimates of a 2.4% annualized rate for the second quarter (although Q1 results were revised up a full point to 3.7%), showing that the US economy has cooled off over the last few months .  As we hoped, corporate earnings reports were almost all positive and most increased guidance for the upcoming quarter.  Unfortunately, few corporations posted any substantial increase in top line sales growth.

After quickly climbing from 2% in ’07 to over 7% in a short 18 months, personal savings had dropped to below 6% by the end of 2009.  That trend has started to reverse again as savings climbed back up to 6.4% in June.  Rampant fears about coming inflation due to massive government stimulus have given way to new fears of potential deflation.  As the battle wages on between consumer spending and corporate profits, the US continues to steadily push forward for a healthy economic growth rate.

Economic News
The US is lagging in job creation behind other major economies that have a manageable debt burden and healthy banking systems.  Office space vacancies and delinquent commercial loans remain stubbornly high.  New construction on single family homes remains very slow with the albatross of high inventories.  The Commerce Department posted the second lowest annualized rate of new home sales since 1963 as consumers with concerns about the job market remain hesitant to buy.

Business spending, as measured by wholesale and factory inventories, and nondefense capital goods orders, continues to rise and is a positive sign amid indications of a slowdown in economic activity.  The amount of goods on hand compared with sales (inventory-to-sales ratio) were just 1.24 times sales, up only slightly from the record low of 1.23 they hit in April, suggesting business will continue to slowly rebuild stock levels in the coming months.

China has passed the US in energy consumption to become the world’s biggest consumer after years of double digit growth.  As China rapidly expands its clout as an industrial giant, they continue to buy up natural resources and oil; it is potentially reshaping the oil and natural resource market in its wake.

Regulatory News
The Senate passed the financial overhaul bill and the President signed it into law last month in the biggest expansion of government power over banking and markets since the Great Depression.  The debate continues over the details surrounding the more muscular regulatory framework that extends from ATM cards to Wall Street traders.

Corporate News
With 70% of companies in the S&P 500 having reporting earnings through Thursday July 29, second quarter earnings are running 42% higher than a year ago, including Intel, Caterpillar, Amazon, Microsoft, Ford, and McDonalds.  Goldman Sachs was one of a few companies that performed poorly as they posted an 82% decline in profit.  This was a result of its settlement with the SEC, a new U.K. tax on bank bonuses, and a wrong-way bet on the stock market’s volatility.

Market News
US equities had their best month in a year, with the Dow up 7.1% in July, as encouraging corporate numbers helped investors push the market back near positive territory for the year.  At the same time evidence of a slowdown in economic activity remains ever-present, as steel prices have begun declining after holding steady the last few months, another sign that consumers remain uneasy at the thought of large ticket purchases.

The flood of money being plowed into the bond market has given companies a constant source of funds as companies with “junk” credit ratings have taken advantage of the record low interest rates.  July was the busiest on record, companies continue to sell new bonds to improve their balance sheet or reissue older vintages at lower rates to reduce their interest expense.

China has significantly increased its purchases of Japanese debt in an attempt to diversify its foreign currency reserves.  China has bought $6.17B of bonds in the first four months of the year, more than double the record amount previously set in 2005.

Index Performance – July
US Large Cap Stock (S&P 500) +7.01%
International Stock (FTSE AW ex US) +9.12%
US Broad Bonds (BarCap Aggregate) +1.07%
US Government Bond (Barclay’s Govt) +0.68%
Cash (ML 3Month T-Bill) +0.02%

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.