Wednesday, November 23, 2011


For me this time of the year is a time of reflection and thanks. My grandfather came to this country in the 1870’s with nothing but a strong back. I am the recipient of his and my grandmother’s (who came over as an indentured servant) legacy. As I look back, I think of the Berlin Wall going up; the assassination of a President; a financial meltdown; economic recovery; a Vice President resigning; a President resigning; a financial meltdown; economic recovery; the Berlin Wall coming down! The pattern seems clear to me. We seem to have good times and bad times, we keep going on and get through it all without thinking back about how we did it! My forecast for the future is that we will have more economic recoveries and more financial meltdowns and we will survive and do just fine! I hope you all have a safe and thankful Thanksgiving! Ed Mallon

Monday, November 14, 2011

CD's, Bonds and Stocks

Recently, I was speaking with someone at one of the banks where we do business and asked about their CD rates. In general, I find CDs to be somewhat of an indicator of inflation. Rates are currently being held artificially low by the Federal Reserve’s quest to keep short-term interest rates as near zero as possible. According to the bank, the rate for a six-month CD was 0.2% and gradually increased with the length of the CD’s term to two years, which was 0.5%. Treasury debt runs from zero for a 90-day maturity to 3% if you project it over 30 years*. If you decide to raise the risk and invest in investment-grade corporate bonds, you will have an average return of about 4.58%, with a maturity that is now out to 5.1 years* (in the past, maturity been more like 4.5 years). If you decide you want a fixed investment and are willing to take more risk, you can buy High Yield bonds, which currently average about 7.82% with an average maturity of about 3.91 years*. As you can see, to get a decent return these days, you need to take more risk. But what about US stocks? The good news is that stocks are up in the US at this point for the year to date. The bad news, as we all know, is that volatility has been horrendous, with stomach wrenching drops followed by heady moves up! The overall answer appears to be: diversify, diversify, diversify! One of our clients recently asked why I don’t comment on the 200-day moving average of the DJIA. This has not been a pretty picture for a while, with the DJIA falling below the 200-day moving average in late July and just recovering to a position above the 200- day moving average at the beginning of November, where it now remains. This is a good sign, because it generally points to the stock market overall momentum headed in an upward direction. We will see! Ed Mallon *Statistical data provided by Bloomberg LP