2005 News Archive

December 6, 2005

555 Elm Street

November pulled markets ahead again this year. Replacing the losses of October, stocks strode into new growth territory, and carried portfolios to new highs. On average our portfolios are up 8.5% year-to-date and 12% from a year ago. Domestic stock indices range from 1-6% YTD and 3-7.5% over twelve months. Our diversified mix of solid investments keeps our progress strong.

Holiday traditions are inextricably bound with our oldest memories. Old anticipations and attachments fill the phantom presence of this season. Some good housecleaning helps to make the season bright. Sweep out the dust of old misunderstandings. Decorate the halls with the memories you cherish. We can make each holiday new for ourselves, even better than childhood. It's something to think about as we light a new candle in celebration.

November 2, 2005

555 Elm Street

October delivered the step back in the investment markets that we were long anticipating. Even as the month closed, indicators pointed to the uncertainty of investors despite lowering energy prices and signs of a strengthening U.S. economy. Some analysts interpret the current inactivity as "a lack of expectations" on the part of investors. There is no clear signal at the moment to inspire conviction in the market. The longer this pause the stronger the basis it provides for the next rally in stocks. We need to be patient with this down market to realize its best value.

Portfolio values were down across the board for the month, with drops in value for international as well as domestic stocks, REITs, health care, utilities and energy stocks, and bonds. Only cash continued positive. Diversified portfolios were down 2.1% on average for the month but hold 5.5% gains year to date and are up 13.0% from a year ago. U.S. market indices returns range from -3.2 to -0.5% YTD and 3.8 to 10% for the past 52 weeks.

November always seems to arrive suddenly. Certainly not unexpected, it still finds us unprepared. We were distracted, indulging in fair October. Then the clocks shift the sun day and November begins. Perhaps the least welcome month, this threshold of winter shakes our fading world and urges us to rebuild colors and warmth and light inside.

October 5, 2005

555 Elm Street

Statistically, September is a down stock market month more often than any other. It held up well this year, with every index gaining. Our diversified portfolios gained nearly 1% on average and pushed the YTD average portfolio returns to over 7.5%. Domestic stock indices range from -2% to +2.5% this year. International stocks continue to greatly outpace domestic returns. REITs however have stumbled the past two months and bonds have dipped under the weight of continued interest rate hikes. No surprise - hurricanes, oil prices and interest rate increases limit current domestic growth.

Predicting the immediate future in stocks is always a gamble with long odds. Since this rally began in March, 2003, our client investments have averaged 60% gains through the end of September, 2005. This has been a long and fruitful rally for all who participated. Sadly, this pace cannot continue indefinitely. It is time for stocks to take a breather, to slow down or even step back for a while. The longer we go forward at this pace, the harsher the end of the rally will be. So I'm hoping for a brief, shallow market soon, so that we can get on to the next bull market. We should not expect another market like the past 30 months, but all bets are off. I keep connected to information on market trends and leading economic indicators. This data can help reoptimize the diversified portfolio mix as needed. Our plan is to sell high and buy low according to portfolio needs, and leave the gambling out of investing.

Autumn eases in. The bees buzz urgently in the short-day basil-gone-to-flower. The farmstand still has sweet plums and a juicy peach amid pumpkins and crisp apples. A rare gift, this lingering summer extending our gentlest season against the inevitable blows of winter.

September 2, 2005

555 Elm Street

Hurricane Katrina changed millions of lives forever. The immediate generosity to these desperate victims from the rest of the country testifies to our values. By connecting with their struggle we find our answer: it could have been us - why were we spared - if not to respond?

Stock markets slipped a bit as the light trading of August cut into the major gains of July. Diversified portfolios for our clients averaged a 0.29% drop for August, with some portfolio balances actually increasing since July. Client portfolios average over 6.5% returns so far this year compared to U.S. stock indices ranging from +2.3 to -2.8% YTD.

Tight margins on oil supply and demand worldwide is creating volatility in markets. Katrina exacerbated this, closing major refineries. Investors remain eager to jump into energy stocks heedless of the dizzying high prices. When prices drop again, and they will, energy stocks will make a good long term addition to diversified portfolios. We are holding cash in many portfolios now, to avoid buying any stocks at currently inflated prices. Planned purchases will commence as markets drop. Meanwhile mutual fund money market rates rise weekly.

Technology again draws interest for investors as Apple and Google expand product lines and apply pressure to computer giants Microsoft and Intel. Competition is good for everyone. Consumers as well as investors should benefit from this assault on the status quo computer products of the tech monopolies.

These last weeks of summer are full of bounty - ripe days ladened with sweet riches. Stretch them out, savoring their mellow fullness and bright hints of autumn. They are so fleeting.

August 3, 2005

555 Elm Street

The mini-rally of late May has continued through June and into the doldrums of summer. Tech stocks figure significantly in this rally, although stocks have risen generally across the board. Smaller company stocks continue to outperform larger company stocks. Continuing signs of a strong economy have bolstered this rally despite rising energy prices. Analysts suggest this trend may continue into the fourth quarter. Diversified portfolios are up over 6% year-to-date, well ahead of all stock indices which range from -1.32 (DOW) to +4.32 (Russell 2000) sm. cap.

Those who know me well realize that I am more concerned when the market remains unexpectedly strong than when it drops. A prolonged rally leads expectations higher and inevitably ends in a drop in market values. While a market decline is not pleasant, we know it will recover and surpass past values. My immediate focus is on where the current trend is leading and minimizing the emotion of the moment. Emotions are dangerous investment partners.

Summer's sultry garden symphonies the air with scents. Enjoying early morning coffee on the deck redefines "breakfast blend" as nearby chives, thyme, tarragon, sage, basil, mint, cilantro, lavender, rosemary and bay pour out the burden of their night's work. Every New Englander lingers over summer pleasures. This one is perennially on my winter memory.

Be sure to watch the night sky this month for a unique view of mars. Its orbit brings the red planet closer than it has been for 5000 years and by the last weekend in August it will be high in the sky between 10 and midnight. A clear night, binoculars and the young people in your life will give this event a long memory.

July 7, 2005

555 Elm Street

The May stock rally con­tinued into June as in­ves­tors an­ti­ci­pa­ted word from Greenspan that in­terest rate hikes would soon cease. Ult­i­mately his words took away their hopes. Now Londoners reel from terrorist attacks after winning the Olympics host for 2012 just yesterday. June end investment values may be the highest for the summer. I still expect that the later months will bring the real market returns for investors this year.

The news of the TD Waterhouse merger to Ameritrade may have given you some concern. As background perspective, Toronto-Dominion Bank (TD) bought Waterhouse Services in the late 1990's. Ameritrade and TD are both successful companies and the merger is well perceived. I expect no change for us and anticipate no problems as the merger process continues. Our costs for brokerage services should remain low with Ameritrade, a discount, online trading service. We should have business as usual as the boardrooms work out the merger details. I will certainly keep you appraised of any change in my perception of this new development.

Graduations and the openings they create in lives - education only partially prepares the step forward. The zest for life, the need to spread the wings and test the skills and begin the first great adventure, draws us through the gate. For most this is only the first of many new challenges that lead to unimagined places in life. The graduate reminds us to rekindle the courage of new beginnings and celebrate the diversity in our own lives. Still it is sad to see them leave the nest.

June 2, 2005

555 Elm Street

The May "mini-rally" ended the two-month decline and lifted stocks to first quarter-end levels. All market arenas rose over the past two weeks, particularly growth/technology. Stock indices are still negative year-to-date. On average our diversified portfolios increased over 3% in May and are up over 1% YTD, continuing to outperform the indices.

A general sense that inflation is under control and a "Goldilocks" economy - "not too hot, not too cold" - has investors anticipating that the June interest rate hike will be the last. Greenspan's "conundrum" over persistent low yields in long term bonds as short term rates rise has uncertain implications for the economy. Demand for US Treasuries abroad is high, lowering their yield and affecting mortgage rates. The housing market continues to grow with these low rates and companies continue to offer low rate bonds, bolstering the economy. Greenspan will be handing over the reins as Fed Chair early next year. The question remains: will he continue to raise interest rates to ensure an inflation-protected economy as a legacy to his successor?

Good fortune arrives in unexpected packaging. A foggy morning that blossoms into a perfect day. A health issue faced and resolved. A generous forgiveness erasing an injury. The balm of someone's unexpected kindness on an aching moment. Great riches surround us.

I join you in anticipating the travels and gatherings that celebrate the season and bulge summer calendars.

May 3, 2005

555 Elm Street

April markets showed more volatility with steeper falls and rises in the stock markets. This is generally interpreted as a sign of investor nervousness. It is also the anticipated nine month effect of interest rate hikes that began last June. I expect markets to continue to struggle for the next few months. Perhaps a last quarter rally will save the year again. This is one of those times when cash works well in a portfolio. As interest rates rise steadily many money market funds will be paying close to 3% by the end of this month. And money markets move only forward - a "risk"-free return. Although cash is a portfolio burden in times of stock growth, current cash positions escape this yo-yo market action and are ready for purchases while prices are low.

Meanwhile certain segments of the market are a refuge when overall markets struggle. Healthcare, utilities and energy stocks have performed well so far this year. REITs and bonds have averaged positive returns over the past three months. As part of the balance in a diversified portfolio, these help a fully invested portfolio to weather a stormy market without a heavy cash position. Portfolio returns average -2% year-to-date while major indices are -4-11%. One-year portfolio returns average +9% as US stock indices range from +4.47% to -0.32%.

After the winter-that-would-not-end relinquished its hold, buds have burst and leaves unfurled at an amazing pace. The serendipity of summery air and snow-melt-ladened earth blew the schedule for spring off the calendar. Planning serves well when it prepares us for serendipity, the somewhat unexplained and unexpected moment of coming together of forces that make things happen.

If you have suggestions for additions, new links or changes to this web site, please let us know. We always enjoy hearing from you.

April 6, 2005

555 Elm Street

The initial rally of stocks in March succumbed to concern over rising oil prices and the effects of rising interest rates. On average diversified portfolios are down less than 1% over the first quarter. In comparison, year to date domestic stock indices are down 3 to 8%, bonds down over 1% and international stocks down less than 1%. Our conservative exposure seems to have tempered portfolio losses. Higher interest rates make it more expensive for businesses to borrow money, cutting into corporate profits and growth rates. Raising prices to offset costs triggers inflation. The main ingredient in the mix varies unpredictably: investor confidence or anxiety.

My take on the doom and gloom tone of market forecasts lately is more long term. We have experienced over a decade of roaring bull market. A protracted deeply down market corrects excessive growth, another recent experience. The bull market of the last two years is aging. With controlled inflation, if the next decade serves up more moderate growth we may avoid severe declines and actually do well. We align to current stock values with expectations for average returns of about eight percent for the next few years. Wherever markets are productive, our portfolios will tap into them. I look forward to the challenges of the future in investments, taking a short term slump in stride.

Give us a few balmy days in early April and we're euphoric. Winter-worn faces brighten like crocuses and outlooks rise with the new grass. Woolens and winter coats are whisked into storage. Summer furniture blossoms on sunny decks and porches. We are so ready for this change. I wish you good health and a kindly heart for the growing season.

March 2, 2005

555 Elm Street

On average, February markets returned to portfolios what January took away. So far this year stock indices are negative, with the distinct exception of international stocks. Technology stocks slumped over both months, suggesting a slowdown in that market. Diversified portfolios show a slight gain year-to-date. It has been a tumultuous two months that generally brought us back to where we began this year - but the year-end was a very good place for portfolios.

Optimism about the growing economy buoyed investors' hopes in February, but it is all a balancing act. The strengthening economy can ignite inflation, the enemy of investment growth. The response to curb rapidly rising inflation is to increase interest rates, which also slows the economy. Ideally we would have steady economic growth with limited inflation and interest rates ranging 3-4%. Two other concerns that rocked investors recently were a jump in oil prices and the weakening dollar. We will be evaluating all these and other players over the coming weeks.

New snow layers deeper the dreams of spring.  Ahh - to trade the snow shovel for a spade and work the wakening earth. Soaking in a sunny window with lushly illustrated garden catalogs offers a temporary refuge from winter but cannot hasten change. A good workload supports patience.

February 2, 2005

555 Elm Street

With Iraq's first elections successful, we need a signal to begin the end of our involvement there. As much as we want this chapter closed, the script is not written. We are mainly hopeful spectators as this plays itself out. Like the end of winter, we cling to any signs, for the Iraqis and ourselves that the season of endurance is relenting, and kinder times are ahead.

January markets took a step back, mainly in correction for 2004 year-end and not as an indicator for the year ahead. Only bonds and a very few value stock positions gained over the month. Looking back one year, twelve-month returns are flat for the DOW and Nasdaq and up 4.5% for the S&P 500, and 7.5% for the Russell 2000 small-cap stocks. Bonds are up 1% and International stocks gained 14% since a year ago. Diversified portfolios are up 7.3% on average, over the past twelve months, even including the drop of about 2% in January.

We have enjoyed nearly two years of the current bull market. Bull markets tend to last about two years. We may well have realized the best returns for this one, even if it is not over. The good news is that bear markets tend to last just a few months. Weighing all the indicators, I expect the coming year to be good overall, though not a remarkable one for stocks.  

January 4, 2005

555 Elm Street

The devastation of the Asian tsunami is incomprehensible. How can they ever recover? Yet they will – hopefully with our help and friendship. We need their goodwill as much as they need our support. Helicopters delivering rice and soldiers supplying water create a powerful peace-force image. Online and telephone collections from diverse groups surge in a response of the heart of nations, people reaching out to people. Only by sharing will we survive.

The last quarter piled returns into investments once again, offering a year rounded over in growth. The initial stock spike after elections left many investors scrambling to participate, and the ensuing demand pushed stock prices higher until the last days of 2004. Our portfolios averaged over 12% returns for the year, well ahead of the DJIA (+3.15), S&P500 (+8.99) and Nasdaq (+8.59). International indices were up 17-19%, REITs returned 32% and the small company index rose 17% for the year, giving diversified portfolios their leading returns. Bonds held respectable returns of 5-6 % for the year, recovering whenever stocks faltered throughout the year's seesaw performance.

As pleasing as the new numbers look in portfolios, there are some inflated values in the mix. We should expect to lose some of our gains with a January reality check, even as we advance overall in the year ahead. Our stock positions are generally moderate, selected to minimize losses and yet participate in gains. Your goals and market tolerance determine the level of return we seek for you. At regular meetings, we review and correct portfolio exposure as markets shift. The road we travel is bumpy but not treacherous. Your diversified portfolio has built-in shock absorbers.

New calendars, a new page in a notebook, new possibilities to uncover – welcome to 2005, with all the wonders it holds.

Copyright © 2003-2008 Victoria M. Lechner.  All rights reserved.