Collective thoughts from the Kooman team.

May 21, 2012

The Markets

There wasn’t much to ‘Like’ in the financial markets last week as stocks took a hit on another round of global worries. High on the list of concerns were:

  • Continuing anxiety over Greece’s ability to avoid default and remain in the euro.
  • Rising borrowing costs for Italy and Spain.
  • Ongoing fears of an economic slowdown in China.
  • Loss of faith in the banking system due to JPMorgan’s $2 billion (and growing) bad bet.
  • A very tepid response to the highly anticipated stock market debut of Facebook.
    Source: CNNMoney

Investors are particularly frustrated that the European debt situation keeps popping up like dandelions. After two years and 17 euro zone summits, the issue is still not resolved. In fact, it might be worse than ever as Europe is quickly running out of road to kick the can down, according to BusinessWeek.

Greece is at the epicenter of this worldwide concern despite the fact that its population is less than the state of Ohio. Like the subprime crisis before it, investors are concerned that Greece may be the falling domino that kicks off a series of undesirable effects. If Greece has a disorderly collapse, it could spread to other weak European countries and then ripple out to the rest of the world.

Unfortunately, the time for easy solutions has long passed. Central banks and governments around the world have already added trillions of dollars to their balance sheets so they don’t have much room to maneuver. And, here in the U.S., we have a potentially bruising election and looming tax and fiscal matters to deal with by the end of the year.

When you add it up, 2012 is on track to be another dramatic year in world affairs.

Data as of 5/18/12 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -4.3% 3.0% -2.9% 12.5% -3.2% 1.7%
DJ Global ex US (Foreign Stocks) -6.1 -2.8 -20.5 5.0 -7.4 3.7
10-year Treasury Note (Yield Only) 1.7 N/A 3.2 3.2 4.8 5.2
Gold (per ounce) 0.4 1.0 6.2 20.0 19.3 17.7
DJ-UBS Commodity Index 0.9 -3.3 -16.5 4.3 -4.7 3.2
DJ Equity All REIT TR Index -6.7 6.0 2.7 27.7 0.2 9.9

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.

Weekly Focus – Did You Know…

There is only one word in the English language with all five vowels in reverse order. Try to guess what it is before reading below for the answer.

Source: http://www.byfaith.co.uk/paul2028.htm

The answer is "subcontinental."

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.
The Dow Jones Industrial Average (DJIA), commonly known as "The Dow", is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal.