Weekly Market Update through 3/18/11

as of March 18, 2011        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 13.14% 2.23% 2.23% -3.47%
S&P 500 11.92% 2.15% 2.15% -3.52%
DJ Industrial Average 12.97% 3.04% 3.04% -2.89%
Nasdaq Composite 11.70% -0.17% -0.17% -4.94%
Russell 2000 18.00% 1.62% 1.62% -3.41%
EAFE Index* 3.95% -1.04% -1.04% -6.18%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 5.28% 0.98% NA 0.62%
Barclays Intermediate US Gov/Credit 5.08% 1.00% NA 0.64%
Barclays Municipal  1.82% 1.38% NA 0.53%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $102.57    $100.12
Natural Gas    $4.18    $4.02
Gold    $1,429.20    $1,424.80
Euro    $1.41    $1.39
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 103.83% 42.15%    
S&P 500 97.23% 39.86%    
DJ Industrial Average 91.72% 37.92%    
Nasdaq Composite 112.61% 45.14%    
Russell 2000 137.83% 53.41%    
EAFE Index* 80.05% 33.70%    
*EAFE index does not include dividends.        

Mark A. Lewis

Research & Trading Associate

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Japan

Before trying to put into perspective the events that have occurred in Japan over the past five days, we must begin by expressing our deepest concerns for those directly and indirectly impacted by this horrible tragedy. We are unable to absorb a news article or financial report without first overcoming the intense feelings of sadness and despair for those directly affected by the earthquake and subsequent tsunami that rocked Japan on Friday. However, it is our job to unemotionally analyze world events and try to determine the short and long-term financial impact of them. Although some of our opinions may appear stoic and unsympathetic, please know that first and foremost our thoughts and prayers are with the Japanese people and those affected by this natural disaster.

When addressing the impact of these events, it is important to make sure we don’t paint with a broad brush. For this reason we need to look at the financial implications of Japan, as well as the rest of the world (especially the U.S. economy), on both a short and long-term basis.

Japan (short-term)

It is obvious that both Japan’s people and economy will be the most affected by the recent earthquake/tsunami. Over the last two days, we have seen the Japanese stock market fall by over 16%. With the risks of a large-scale radiation leak, it is difficult for anyone to speculate on the cost of this tragedy in both financial terms and human life. For this reason, it is likely that the Japanese stock market will continue to struggle and experience large swings based on big picture news headlines. After the Kobe earthquake on January 17th of 1995, the Nikkei declined 24.6% by the end of July and fully recovered its losses by year end. Although this may present speculative investment opportunities, we prefer to invest in a much more predictable environment.

Japan (long-term)

Over the past decade, Japan has been stuck in a deflationary spiral that has led to massive budget deficits and a lack of economic growth. On Monday, the Bank of Japan doubled its asset buying scheme to 10 trillion yen, or $122 billion, in order to provide liquidity to the country’s financial institutions. Although the quake-tsunami-nuclear uncertainty will undoubtedly cause a short-term drop in output and GDP, the Japanese central bank remains steady in their view of the resumption of a moderate economic recovery.

There are also many economists and analysts that believe that the Japanese government and central bank will be forced to throw their short-term austerity measures out the window. They will need to be strong in their voice and accommodative with both fiscal and monetary stimulus. The extraordinary amount of stimulus needed to rebuild may actually help pull Japan out of their deflationary trend and lead to stronger long-term GDP.

Similar to the Kobe earthquake of 1995, the most difficult part of this catastrophe will be paying for it. Earlier this year, Moody’s Ratings Agency placed Japan’s Aa2 credit rating under negative outlook due to the unlikelihood that they will be able to internally finance such an enormous debt load. The spending required to rebuild Japan will put their credit rating under further pressure. It is impossible to know when the market will begin to question Japan’s ability to repay their debts, but the additional stimulus required to rebuild can only shorten the leash.

We have very little direct exposure to Japan in our client portfolios, most of which is held indirectly through foreign mutual fund holdings. Although there will be a time to add to one’s foreign stock exposure, now is a good time to revisit one’s asset allocation in order to make sure they are not directly overexposed to the Japanese economy.

US – World (short and long-term)

With the devastation in Japan, it can be easy for one to forget the fact that markets were becoming more volatile over the last month due to tension in the Middle East and escalating oil prices. The recent events in Japan have further increased the “risk off” trade; causing investors to sell all liquid investments in order to reduce market exposure. That is evident in the fact that all investment assets (U.S. stocks, European stocks, emerging market stocks, oil, gold and silver) are selling off in unison. The only investment benefiting from the recent turmoil is US Treasury securities, which have reached their 2011 highs (in price) over the last two days.

The most likely impact on the world economy and markets from the recent event is a temporary loss of confidence. Japan’s economy is approximately 8% of global GDP and they were not expected to grow GDP much in 2011. Although their loss of output will reduce global GDP for the next few quarters, the effect on U.S. GDP should be minimal. One could argue that the recent decline in oil prices will more than offset the headwinds created by Japan’s GDP lag. Today’s world is increasingly interdependent and global. Japan is a supplier to the global economy as a net exporter. Since there continues to be a lot of slack in the global economy, the short-term absence of Japan as a supplier should actually benefit many U.S. companies.

The difficulty with market corrections it that they are often anticipated, but rarely can investors predict why and when they will occur. However, it is important to realize that corrections do occur and are subsequently followed by recoveries. Given the magnitude of the disaster in Japan and a 100% rebound off of the 2009 market bottom, a modest correction in the S&P is expected. Although the situation in Japan could worsen, we are of the belief that we are merely experiencing a temporary market correction that will ultimately lead to the market continuing its trek to new highs within the next few years. The emotional decline in the markets this morning has already moderated significantly. This moderation highlights the market’s resilience in the face of this terrible tragedy. For this reason, we do not recommend any short-term portfolio adjustments as a result of the recent market decline. As markets stabilize, we will begin taking advantage of the recent price declines by purchasing high quality U.S. equities that may benefit from a renewed demand for U.S. goods and services.

As always, we want to thank you for your confidence in Parsec Financial as a steward of your financial assets. If you have any specific questions related to your financial plan or portfolio allocation, please contact us at any time.

Michael Ziemer, CFP(R)
Partner

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Weekly Market Update through 3/11/11

 

as of March 11, 2011        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 16.67% 4.06% 4.06% -1.74%
S&P 500 15.66% 4.14% 4.14% -1.64%
DJ Industrial Average 16.55% 4.65% 4.65% -1.38%
Nasdaq Composite 15.84% 2.54% 2.54% -2.37%
Russell 2000 19.97% 2.63% 2.63% -2.45%
EAFE Index* 7.85% 1.68% 1.68% -3.60%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 5.15% 0.58% NA 0.22%
Barclays Intermediate US Gov/Credit 4.89% 0.64% NA 0.28%
Barclays Municipal  1.22% 0.72% NA -0.13%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $100.12    $105.50
Natural Gas    $4.02    $3.86
Gold    $1,424.80    $1,431.50
Euro    $1.39    $1.39
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 107.49% 43.90%    
S&P 500 101.07% 41.66%    
DJ Industrial Average 94.71% 39.41%    
Nasdaq Composite 118.37% 47.61%    
Russell 2000 140.20% 54.80%    
EAFE Index* 85.00% 35.90%    
*EAFE index does not include dividends.        

 

Mark A. Lewis

Research & Trading Associate

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Weekly Market Update through 3/4/11

as of March 4, 2011        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 21.49% 5.55% 5.55% -0.34%
S&P 500 20.01% 5.42% 5.42% -0.44%
DJ Industrial Average 19.66% 5.62% 5.62% -0.46%
Nasdaq Composite 22.74% 5.12% 5.12% 0.09%
Russell 2000 27.99% 5.43% 5.43% 0.20%
EAFE Index* 14.26% 5.27% 5.27% -0.19%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 4.57% 0.15% NA -0.21%
Barclays Intermediate US Gov/Credit 4.19% 0.23% NA -0.13%
Barclays Municipal  1.37% 0.71% NA -0.13%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $105.50    $98.34
Natural Gas    $3.86    $3.94
Gold    $1,431.50    $1,422.50
Euro    $1.39    $1.38
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 110.45% 45.44%    
S&P 500 103.54% 43.02%    
DJ Industrial Average 96.52% 40.51%    
Nasdaq Composite 123.88% 50.04%    
Russell 2000 146.74% 57.57%    
EAFE Index* 91.55% 38.71%    
*EAFE index does not include dividends.        

 

Mark A. Lewis

Research & Trading Associate

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Weekly Market Update through 2/28/11

as of February 28, 2011        
  Total Return
Index 12 months YTD QTD February
Stocks        
Russell 3000 24.25% 5.90% 5.90% 3.64%
S&P 500 22.58% 5.88% 5.88% 3.43%
DJ Industrial Average 21.60% 6.10% 6.10% 3.16%
Nasdaq Composite 25.59% 5.03% 5.03% 3.16%
Russell 2000 32.60% 5.21% 5.21% 5.48%
EAFE Index* 16.81% 5.47% 5.47% 3.10%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 4.93% 0.37% NA 0.25%
Barclays Intermediate US Gov/Credit 4.36% 0.36% NA -0.03%
Barclays Municipal  1.72% 0.84% NA 1.59%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $98.34    $89.95
Natural Gas    $3.94    $3.94
Gold    $1,422.50    $1,407.00
Euro    $1.38    $1.36
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 111.16% 45.99%    
S&P 500 104.43% 43.62%    
DJ Industrial Average 97.43% 41.11%    
Nasdaq Composite 123.67% 50.31%    
Russell 2000 146.24% 57.80%    
EAFE Index* 91.91% 39.09%    
*EAFE index does not include dividends.        

Mark A. Lewis

Research & Trading Associate

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Weekly Market Update through 2/18/11

as of February 18, 2011        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 25.51% 7.16% 7.16% 4.87%
S&P 500 23.78% 7.07% 7.07% 4.59%
DJ Industrial Average 22.44% 7.45% 7.45% 4.47%
Nasdaq Composite 27.74% 6.96% 6.96% 5.06%
Russell 2000 34.28% 6.63% 6.63% 6.91%
EAFE Index* 16.82% 6.07% 6.07% 3.69%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 4.99% -0.48% NA -0.60%
Barclays Intermediate US Gov/Credit 4.54% -0.28% NA -0.66%
Barclays Municipal  1.28% 0.01% NA 0.75%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $89.95    $85.60
Natural Gas    $3.94    $3.91
Gold    $1,407.00    $1,363.20
Euro    $           1.3668    $           1.3456
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 113.68% 47.67%    
S&P 500 106.73% 45.18%    
DJ Industrial Average 99.93% 42.71%    
Nasdaq Composite 127.79% 52.60%    
Russell 2000 149.57% 59.92%    
EAFE Index* 93.00% 40.15%    
*EAFE index does not include dividends.        

Mark A. Lewis

Research & Trading Associate

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Crooks and Thieves!

Does anyone use cash any more? We all are using our credit cards to get points or cash back and I use my debit card more often than I use cash. I use my debit card for on-line purchases, at the gas station and in restaurants and shops. While on vacation in Florida recently, my debit card was declined at a grocery store, both as a debit and as a credit. The grocery store clerk told me it happens all the time, but I’m sure she thought I was a deadbeat. Fortunately, I have a credit card that saved the day. I called the phone number on the back of my debit card and found out my card was frozen because someone had used my debit card number making purchases in Las Vegas! My emergency phone number for my bank was my home number and since I was out of town I didn’t get the message. Lesson number one is to use your cell phone as an emergency number.

As luck would have it, the fraud was caught immediately and only $60 was charged to my account which has since been reimbursed. I found out that the bank does reimburse the account holder for charges but it could take several days or weeks so it is important to have an emergency credit card. If somebody steals your cash just as you were ready to make your on-line mortgage payment, you could be in trouble! They are researching how my card was compromised and they indicated they would let me know their findings, although I find it hard to believe they will be able to track it down. The bank also recommended that I establish an “on-line” account and just move enough money over from my main account to cover purchases.

We have clients who don’t open their brokerage statements or balance their checkbooks. The first line of defense in protecting your assets is to thoroughly review all of your statements to ensure that things are as they should be. Also, you should check your account frequently on-line and not wait for monthly statements. It is also helpful to notify your credit card issuer that you will be on vacation in (wherever) so they can make note of that in your file.

Many cases of fraud have occurred because advisors have some form of “custody” of their client’s money. The SEC has recently strengthened the rules regarding custody to protect investors. The client is better protected if their assets stay in their name in a separate brokerage account and are not co-mingled with other client’s assets. Many of the temporarily successful ponzi schemes were get rich quick opportunities, where the only person getting rich was the perpetrator. Remember, there are no guarantees, so be wary of anyone who promises a certain return.

Barbara Gray, CFP®
Partner

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Weekly Market Update through 2/11/11

as of February 11, 2011        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 27.70% 5.95% 5.95% 3.69%
S&P 500 25.72% 5.90% 5.90% 3.45%
DJ Industrial Average 24.27% 6.30% 6.30% 3.36%
Nasdaq Composite 30.38% 5.99% 5.99% 4.11%
Russell 2000 37.45% 5.00% 5.00% 5.27%
EAFE Index* 17.63% 3.95% 3.95% 1.62%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 4.39% -0.90% NA -1.02%
Barclays Intermediate US Gov/Credit 4.06% -0.64% NA -1.03%
Barclays Municipal  0.26% -0.98% NA -0.24%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $85.60    $88.78
Natural Gas    $3.91    $4.24
Gold    $1,363.20    $1,351.00
Euro    $1.34    $1.35
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 111.26% 47.37%    
S&P 500 104.48% 44.90%    
DJ Industrial Average 97.80% 42.42%    
Nasdaq Composite 125.72% 52.52%    
Russell 2000 145.74% 59.38%    
EAFE Index* 89.15% 39.16%    
*EAFE index does not include dividends.        

 

Mark A. Lewis

Research & Trading Associate

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Weekly Market Update through 2/4/11

as of February 4, 2011        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 27.77% 4.23% 4.23% 2.00%
S&P 500 25.79% 4.38% 4.38% 1.96%
DJ Industrial Average 24.15% 4.61% 4.61% 1.71%
Nasdaq Composite 31.67% 4.46% 4.46% 2.60%
Russell 2000 37.36% 2.16% 2.16% 2.43%
EAFE Index* 15.78% 3.93% 3.93% 1.60%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 3.90% -0.90% NA -1.02%
Barclays Intermediate US Gov/Credit 3.75% -0.57% NA -0.96%
Barclays Municipal  0.15% -1.20% NA -0.46%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $88.78    $91.65
Natural Gas    $4.24    $4.32
Gold    $1,351.00    $1,330.30
Euro    $1.35    $1.36
         
         
RECOVERY!        
  Since 3/09/09      
Index  Total Return TR annualized    
Stocks        
Russell 3000 107.83% 46.68%    
S&P 500 101.53% 44.34%    
DJ Industrial Average 94.65% 41.74%    
Nasdaq Composite 122.46% 52.00%    
Russell 2000 139.10% 57.85%    
EAFE Index* 89.11% 39.61%    
*EAFE index does not include dividends.        

 

Mark A. Lewis

Research & Trading Associate

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An Introduction to Continuing Care Retirement Communities

If you are around people who are familiar with Continuing Care Retirement Communities (CCRCs), you are likely to hear the statement, “If you have seen one CCRC, you have seen one CCRC”…acknowledging the variation that exists among the organizations that carry that label. An in-depth familiarity with a given CCRC may provide no particular insight into another CCRC, even if it is in the same town.

Any entity that provides facilities and appropriate levels of care covering independent living, assisted living, and skilled care and controlled by a central management structure can be designated as a CCRC. What the differences mean to a consumer is, in part, that the service offered as part of the basic fee structure of one CCRC may be available for a fee at another CCRC and may not be available at all at a third. The key to all CCRCs is the continuity of care that gives a resident access to living arrangements that cover the three levels listed above.

The independent living option has a housing unit as a requirement and frequently adds a number of amenities. These amenities can be so attractive that there are residents who enter well before retirement. They have chosen the move to relieve themselves of the responsibility for home maintenance and/or to take advantage of the extras provided. The extras can include access to exercise facilities (gym, pool, tennis court, even golf courses), regular entertainment on the campus, organized excursions…anything that the management designs.

A second kind living arrangements is the assisted living level. This level is available to those who need assistance with the activities of daily living. A resident may have an opportunity to be on this level or a higher level of care on a temporary basis when recovering from an accident, an illness or a medical procedure. It is also an option when the resident needs ongoing assistance with bathing, eating, mobility or any of the other activities of daily living.

For those who need more assistance, there is the level of skilled nursing care. At this level, medication can be administered and special medical needs met. It is important to know that it is not for the acutely ill. It is not a substitute for a hospital. Further, the degree to which a facility is prepared to deal with dementia is one of the variations among CCRCs.

Two of the benefits cited by those who have chosen a CCRC over other options are 1) the knowledge that they have made a move that should allow them to avoid some of the uncertainty that comes with varying needs for living options and 2) the knowledge for a couple that, should one of them require a higher level of care than the other, they would not have to be separated by a significant distance.

There is no question that CCRCs meet a need, but they are not for everyone. Even for those who can use the services of a CCRC, not every CCRC matches a specific need. Any mention of a CCRC is incomplete without mention of the need to read contracts and have them reviewed by a legal and a financial advisor.

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