Newsletter of Economic and Market Events
Year of 2011 Best Investments in 2011
2011 complete News (click)
Month of December 2011
Dow: 12,218
Dow 2011: 11,577.51 to 12,217.56
Dow return for 2011: 5.53%
S&P 500 2011: 1,257.64 to 1,257.6
S&P 500 return for 2011: 0.0%
NASDAQ 2011: 2,652.87 to 2,605.15
NASDAQ return for 2011: -1.8%
10 year Treasury: 1.87% yield down -43.33% prices up
World Equity Market: $45,912 trillion down -11.69%
MSCI Europe Index 717.28 down -16.49%
MSCI Asia Pacific Index 112.82 down -18.07%
S&P Latin America 40 4,135.66 down -21.16%
MSCI BRIC 267.83 down -24.85%
S&P Middle East & Africa 265.14 down -20.67%
U.S. Total stock market returned 0.9% in 2011, Stocks had below average gains, Bonds had above average gains and inflation was average 2.9%. August and September had large losses while October had large gains.
Of the 5 largest sectors in the U.S. Economy: Healthcare 12.3% and Real Estate 9.1% outperformed, Natural Resources 2.8%, Technology 2.6% while Financials -17.1% underperformed. By size: Large Cap returned 0%, Small Cap -0.2%, Mid Cap -3.1% while Micro Cap lost -10.9%. Both gold 10.2% and oil 7.2% rose while commodity prices (CRB) fell -10.2%.
Global markets fell by -11.7% of the World's largest economic regions: Europe -16.5%, Asia -18.1%, Latin America -21.2% and Emerging Markets -24.9% all underperformed. Of the World's largest Developed non-U.S. Economies: Britain -5.6%, Canada -11.1%, Germany -14.7%, France -16.9% while Japan lost -17.3%. In the Emerging markets Brazil -18.1%, China -21.7%, Russia -22.1% and India -24.6%. Hedge funds -5% and Private Equity both underperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns in U.S Treasuries, Healthcare, Real Estate and the commodities gold and oil.
Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
Months 2009-12 (click)
U.S. unemployment at 8.5% to 9.1% remained a major concern. 2011 gdp 1.7% with 1.64 million jobs added.
FOMC neutral stance (Dec 13) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Federal Reserve (QE2) to "purchase, by the end of June 2012, $400 billion of Treasury
securities with remaining maturities of 6 years to 30 years and to sell
an equal amount of Treasury securities with remaining maturities of 3
years or less" and "reinvest principal payments from its holdings of
agency debt and agency mortgage-backed securities in agency
mortgage-backed securities. In addition, the Committee will maintain its
existing policy of rolling over maturing Treasury securities at
auction".
- Federal Reserve "will maintain its existing policy of reinvesting principal
payments from its securities holdings" - System Open Market Account at
about $2.654 trillion, about $300 billion of purchases over the next 12
months.
- Federal Reserve (11/30) extends U.S. dollar swap lines to Feb. 1, 2013
with the European Central Bank and the central banks of Canada,
Switzerland, Japan and the U.K.
- Federal Reserve believes challenges facing the U.S. economy "are likely to
warrant exceptionally low levels for the federal funds rate at least
through mid-2013."
- Federal Reserve returns $75.4 billion to the U.S. Treasury. Fed's balance sheet rose to a record $2.928 trillion on Dec. 28.
Treasuries returned 9.6% in 2011, 5.9% in 2010, up from -3.7% in 2009 and 14% in 2008. 30-year fixed mortgages fall to all time low 3.91% (12/21).
2yr Treasuries trade 0.1431% (9/20) and 10yr trade 1.6714 (9/23). U.S. 1 month Treasuries trade at a negative yield : 6/27-30, 7/6-7,13-20, 8/4-8, 9/8-30, 10-31, 10/4-7 and 11-12 and U.S. 3 month Treasuries negative: 7/5,7,13-14, 8/4-8,19-30 9/12,14-19,22-26 and 10/3-7.
Gold trades at an all-time high of $1,923.70 (Sep 6).
- Silver trades at an all-time high of $49.82 (Apr 25), surpassing $49.45
during the silver Hunt brothers scandal, Jan 18, 1980. Copper trade at
an all-time high of $4.6495 lb (Feb 15).
Obama signs Budget Control Act of 2011 (8/2): $917 billion deficit
reduction and budget caps on spending through 2021.
- Obama signs Temporary Payroll Tax Cut Continuation Act of 2011 ($33 billion) a 2 month stopgap.
ECB raises rates from 1% to 1.25% (May) and to 1.5% (July). ECB lowers rate (Nov 3) to 1.25% as Mario Draghi succeeds Jean-Claude Trichet (11/1) and starts 1 year bond purchase of unlimited size. ECB lowers interest rate (12/8) to 1% while Euro-area governments must rollover €1.1 trillion of long and short-term debt in 2012 while European banks have about $665 billion of debt coming due in
the first 6 months of 2012.
- European Central Bank (12/21) lends €489 billion ($638 billion, Long Term Refinancing Operation) to 523 banks under a (restarted) 3 year lending facility. ECB's balance sheet rose to a record €2.73 trillion ($3.55 trillion) 12/28.
- Greek 10-year Bond yields 36.142% 12/21/11. Portugal 10-year Bond yields 14.328% 12/1/11. Ireland 10-year Bond yields 14.219% 7/15/11. Italy 10-year Bond yields 7.483% 11/9/11. Spain 10-year Bond yields 6.729% 11/25/11.
Mergers and acquisitions rose to $2.26 trillion up from $2.19 trillion in 2010 and $1.77 trillion 2009, $2.5 trillion 2008 and 2007's record $4.04 trillion. Venture capital rises to $6.57 billion up 19%, $5.52 billion in 2010.
EU (10/27) agrees to sovereign debt crisis fixes: private holders of
Greek debt accept a 50% writedown, European Financial Stability Facility
(EFSF) leveraged to €1 trillion, 70 EU banks required to
increase core capital levels to 9% and recapitalize (by June 2012)
raising €106 billion in new reserves.
- The €440bn EFSF (European Financial Stability Facility)
bail-out fund can now help countries not currently getting bail-outs,
including precautionary lines of credit, the ability to recapitalize any
struggling bank in the Eurozone, and buy bonds on secondary markets in
"exceptional" circumstances (subject to the approval of the European
Central Bank). The ESM (2012) is expected to have €500 billion in lending capacity.
Greece (7/21) receives a €110 billion ($157 billion) restructured EU/ECB/IMF aid package - Greek Parliament approves budget to receive aid.
Portugal gets €78 billion bailout package (€12 billion for banks).
EU banks hold $147 billion of Greek sovereign bonds and $115 billion of
Portuguese and Irish debt - 5% of annual European Union gdp.
Swiss Central bank (Sep 6) intervenes imposing a Euro-Swiss franc "minimum rate of 1.20" .
Japanese yen rallies to all-time high of ¥75.31 on 10/31.
S&P downgrades U.S. Treasuries from AAA to AA+ also Fannie Mae,
Freddie Mac, the Federal Home Loan Banks, U.S.'s 4 Clearinghouses, 744
U.S. Federal, State and Agency bonds and about 11,500 Municipal bonds.
China's rural population falls from 81% (1979) to below 50% (2011) - the number of people living in towns and cities increased to 690.79 million. China's foreign-exchange reserves exceed $3 trillion in March 2011.
Arab spring - Overthrew governments in Tunisia. Then Egypt (Feb 11, Hosni Mubarak). Libyan revolution and civil war (Aug 23, Muammar Gaddafi). Syria suspended from the Arab League (Nov 12).
Japan Sendai 9.0 Earthquake and nuclear accident, near 19,000 deaths.
- 2011 deadliest year for tornadoes 549 deaths (157 fatalities in Joplin, Mo.), causing $28 billion of damage.
- Mississippi River exceeds some damages caused by the Great Mississippi Flood of 1927, causing $4 billion of damage.
- Hurricane Irene makes U.S. landfall (Aug 27) at Cape Lookout, N.C. and
works its way up the Eastern seaboard toward Maine taking 45 lives and
causing $8 billion of damage - over 7 million US homes and
businesses lost power across 13 states.
FHFA (Federal Housing Finance Agency, conservator for Fannie Mae and
Freddie Mac) files lawsuits against 17 financial institutions alleging
over $196 billion of violations in the sale of residential private-label mortgage-backed securities.
- Jefferson County, Alabama (11/9) files largest U.S. municipal bankruptcy
with more than $3 billion of sewer-system debt - Orange County, CA
filed $2 billion in obligations in 1994.
- MF Global Holdings files bankruptcy (10/31) with debts of $39.7 billion
and assets of $41 billion, 8 largest U.S. bankruptcy.
- UBS, Kweku Adoboli (9/16) charged with $2.3 billion fraud by abuse of position and false accounting.
- Raj Rajaratnam, founder of Galleon hedge fund (managed $7 billion), sentenced to 11 years. Perfect Hedge: 56 found guilty of insider trading.
Dow month: 1.42%, 6 mo: -1.80%, ytd: 5.53%
S&P 500: 1,258
S&P 500 month: 0.85%, 6 mo: -4.73%, ytd: 0.0%
NASDAQ: 2,605
NASDAQ month: -0.57%, 6 mo: -6.05%, ytd: -1.80%
U.S. unemployment falls to 8.5%, adding 223,000 jobs.
FOMC neutral stance (Dec 13) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
30-year fixed mortgages fall to all time low 3.91% (12/21).
Obama signs (12/23) Temporary Payroll Tax Cut Continuation Act of 2011 ($33 billion) a 2 month stopgap: 160 million Americans continue their payroll tax cuts and 2 million Americans without jobs for 6 months continue their unemployment benefits. Doctors do no get a 27% cut in their Medicare payments - paid by increases on guarantee fees on new home loans backed by Fannie Mae, Freddie Mac and Ginnie Mae.
European Central Bank (12/21) lends €489 billion ($638 billion, Long Term Refinancing Operation) to 523 banks under a (restarted) 3 year lending facility. ECB's balance sheet rose to a record €2.73 trillion ($3.55 trillion) 12/28.
ECB lowers interest rate (12/8) to 1% from 1.25%. Euro-area governments must rollover €1.1 trillion of long and short-term debt in 2012 while European banks have about $665 billion of debt coming due in the first 6 months of 2012.
Month of November 2011
Dow: 12,046
Dow month: 0.76%, 6 mo: -4.16%, ytd: 4.05%
S&P 500: 1,247
S&P 500 month: -0.48%, 6 mo: -7.29%, ytd: -0.85%
NASDAQ: 2,620
NASDAQ month: -2.38%, 6 mo: -7.58%, ytd: -1.24%
U.S. unemployment falls to 8.7%, adding 157,000 jobs.
FOMC neutral stance (Nov 2) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Federal Reserve (11/30) extends U.S. dollar swap lines to Feb. 1, 2013 with the European Central Bank and the central banks of Canada, Switzerland, Japan and the U.K.
ECB lowers rate (Nov 3) to 1.25% from 1.50% as Mario Draghi succeeds Jean-Claude Trichet on Nov. 1.
Jefferson County, Alabama (11/9) files largest U.S. municipal bankruptcy with more than $3 billion of sewer-system debt - Orange County, CA filed $2 billion in obligations in 1994.
Month of October 2011
Dow: 11,955
Dow month: 9.55%, 6 mo: -6.67%, ytd: 3.26%
S&P 500: 1,253
S&P 500 month: 10.79%, 6 mo: -8.07%, ytd: -0.37%
NASDAQ: 2,684
NASDAQ month: 11.14%, 6 mo: -6.58%, ytd: 1.17%
U.S. unemployment falls to 8.9%, adding 112,000 jobs.
EU (10/27) agrees to sovereign debt crisis fixes: private holders of Greek debt accept a 50% writedown, European Financial Stability Facility (EFSF) leveraged to €1 trillion, 70 EU banks required to increase core capital levels to 9% and recapitalize (by June 2012) raising €106 billion in new reserves.
German 10-year Bund yields 1.636% (9/23) record low, in a flight to quality, while Greek 2-year Bond yields rise to 83.48% (10/26) and Greek 10-year Bond yields 26.70% (9/15).
30yr Treasuries trade 2.6922% (10/4). 1 month Treasuries trade at a negative yield : 10/4-7, 11-12 and U.S. 3 month Treasuries negative: 10/3-7.
Obama administration expands rules on HARP (Home Affordable Refinance Program) fewer than 895,000 borrowers helped, number could double over next 2 years. Student loan forgiveness - 1.6 million student borrowers will be eligible to lower their payments 2012.
MF Global Holdings files bankruptcy (10/31) with debts of $39.7 billion and assets of $41 billion, 8 largest U.S. bankruptcy - $1.6 billion of customer money missing.
Raj Rajaratnam, founder of Galleon hedge fund (managed $7 billion), sentenced to 11 years (10/13, fined $63.8 million) for securities fraud and conspiracy through expert networks with ties to Goldman Sachs and Silicon Valley technology companies - additionally, a $93 million SEC civil settlement, 11/8. Highest profile insider trading case since Ivan Boesky (November 14, 1986, pleaded guilty to illegal stock manipulation, paying $100 million) and Michael Milken (April 24, 1990, pleaded guilty to securities and tax violations - paying $200 million in fines, $400 million to investors. Also Drexel Burnham Lambert agreed to pay $650 million (Feb 13 1990, fines and restitution half went to investor's and client's civil claims - DBL files for bankruptcy April 28 2003), also guilty Dennis Levine and Martin Siegel).
Earnings season for 3Q11 for the S&P 500 index was positive 17%.
Month of September 2011
Dow: 10,913
Dow month: -6.04%, 6 mo: -11.42%, ytd: -5.74%
S&P 500: 1,131
S&P 500 month: -7.22%, 6 mo: -14.71%, ytd: -10.07%
NASDAQ: 2,415
NASDAQ month: -6.36%, 6 mo: -13.16%, ytd: -8.97%
FOMC neutral stance (Sep 21) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. FOMC to "purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less" and "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction".
U.S. unemployment unchanged 9.1%, adding 210,000 jobs.
2yr Treasuries trade 0.1431% (9/20) and 10yr trade 1.6714 (9/23). 1 month Treasuries trade at a negative yield : 9/8-30 and U.S. 3 month Treasuries negative: 9/12, 14-19, 22-26.
FHFA (Federal Housing Finance Agency, conservator for Fannie Mae and Freddie Mac) files lawsuits against 17 financial institutions alleging over $196 billion of violations in the sale of residential private-label mortgage-backed securities: JPMorgan Chase $33 billion, Royal Bank of Scotland $30.4 billion, Countrywide $26.6 billion, Merrill Lynch (First Franklin Financial) $24.9 billion, Deutsche Bank $14.2 billion, Credit Suisse $14.1 billion, Goldman Sachs $11.1 billion, Morgan Stanley $10.6 billion, HSBC $6.2 billion, Bank of America $6 billion, Ally Financial (GMAC) $6 billion, Barclays $4.9 billion, Citigroup $3.5 billion, Nomura $2 billion, Societe Generale $1.3 billion, First Horizon National $0.88 billion and
General Electric $0.55 billion.
Gold trades at an all-time high of $1,923.70 (Sep 6).
Swiss Central bank (Sep 6) intervenes imposing a Euro-Swiss franc "minimum rate of 1.20" (first intervention since 1978, against the Deutsche mark). Record EUR/CHF 1.0075 (Aug. 9), intervention from 1.1019 to 1.2189 (Sep 6, 10.6% depreciation), EUR/CHF 1.6825 on October 11, 2007.
UBS, Kweku Adoboli (9/16) charged with $2.3 billion fraud by abuse of position and false accounting.
Month of August 2011
Dow: 11,614
Dow month: -4.36%, 6 mo: -5.01%, ytd: 0.32%
S&P 500: 1,219
S&P 500 month: -5.65%, 6 mo: -8.14%, ytd: -3.07%
NASDAQ: 2,579
NASDAQ month: -6.42%, 6 mo: -7.30%, ytd: -2.78%
FOMC neutral stance (Aug 9) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. The Fed believes challenges facing the U.S. economy "are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."
U.S. unemployment unchanged 9.1%, adding 104,000 jobs.
S&P downgrades U.S. Treasuries from AAA to AA+ also Fannie Mae, Freddie Mac, the Federal Home Loan Banks, U.S.'s 4 Clearinghouses, 744 U.S. Federal, State and Agency bonds and about 11,500 Municipal bonds. Global markets loses nearly $9 trillion from $55t (7/26) to $46t (8/10). Vix trade 48 (8/8) up from 17.15 (7/21). 460 stocks triggered the SEC short sale rule (8/4, 10% or more) when DOW falls 512. U.S. 1 month Treasuries trade at a negative yield : 8/4-8, 10-31 and U.S. 3 month Treasuries negative: 8/4-8, 19-30.
Obama signs Budget Control Act of 2011 (8/2): $917 billion deficit reduction and budget caps on spending through 2021 (excluding certain "program integrity" initiatives), requires Congress to vote on a balanced budget amendment, increases the national debt limit initially by $400 billion and future increases of $2.1-2.4 trillion. Creates a Congressional Joint Select Committee on Deficit Reduction to propose deficit reduction - $1.5 trillion in spending cuts by Nov. 23 if the committee fails establishes automatic cuts up to $1.2 trillion. Congress failings cause: U.S. 1 month Treasuries trade at a negative yield : 6/27-30, 7/6-7,13-20 and U.S. 3 month Treasuries negative: 7/5,7,13-14.
European Central Bank starts 6 month bond purchase of unlimited size (Greece, Portugal and Ireland) and Securities Markets Program (lending unlimited amounts for 1 week, 1, 3 and 6 months) through 2011. Italian 10 year bonds trade 6.40% (8/5) and Spanish 6.45% (8/2). ECB agrees to purchase Italian and Spanish Government bonds, August 5. France, Spain, Italy and Belgium impose short-selling bans, August 12.
Hurricane Irene makes U.S. landfall (Aug 27) at Cape Lookout, N.C. and works its way up the Eastern seaboard toward Maine taking 45 lives and causing over $8 billion of damage - over 7 million US homes and businesses lost power across 13 states.
Month of July 2011
Dow: 12,143
Dow month: -2.40%, 6 mo: 2.12%, ytd: 4.88%
S&P 500: 1,292
S&P 500 month: -2.12%, 6 mo: 0.47%, ytd: 2.73%
NASDAQ: 2,756
NASDAQ month: -0.61%, 6 mo: 2.07%, ytd: 3.89%
U.S. unemployment falls to 9.1%, adding 127,000 jobs.
European Central Bank (ECB, 7/7) raises rates 25bps to 1.5%.
Greece (7/21) receives a €110 billion ($157 billion) restructured EU/ECB/IMF aid package. Private sector bondholders (Europe's biggest banks and insurance companies) will swap and/or rollover (€54 of €135 billion) current Greek debt getting 4 options: 3 forms of debt exchange and 1 rollover plan - with different durations (up to 30yrs) and coupons (up to 6.8%). Private investors will take a 21% loss of their current bond holdings. Greek 2 yr note traded 40.46% (7/20) and 10 yr Greek bond traded 18.38% (7/19). The notionally voluntary scheme triggers a temporary Greek sovereign selective default rating. Greece, Ireland's and Portugal's interest rate is reduced to about 3.5% and their repayment schedules lengthened from 7.5 years to 15-30 years. The €440bn EFSF (European Financial Stability Facility) bail-out fund can now help countries not currently getting bail-outs, including precautionary lines of credit, the ability to recapitalize any struggling bank in the Eurozone, and buy bonds on secondary markets in "exceptional" circumstances (subject to the approval of the European Central Bank). ISDA (International Swaps & Derivatives Association) cites plan "should not trigger credit-default swaps" on the nation because it's "expressly voluntary". A credit event can be caused by a reduction in principal or interest, postponement or deferral of payments or a change in the ranking or currency of obligations.
Earnings season for 2Q11 for the S&P 500 index was positive 12%.
Month of June 2011
Dow: 12,441
Dow month: -1.02%, 6 mo: 7.46%, ytd: 7.46%
S&P 500: 1,320
S&P 500 month: -1.86%, 6 mo: 4.96%, ytd: 4.96%
NASDAQ: 2,773
NASDAQ month: -2.19%, 6 mo: 4.53%, ytd: 4.53%
FOMC neutral stance (Jun 22) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. The Fed "will maintain its existing policy of reinvesting principal payments from its securities holdings" - System Open Market Account at about $2.654 trillion, about $300 billion of purchases over the next 12 months.
U.S. unemployment rises to 9.1%, adding 20,000 jobs.
U.S. Department of Energy (6/23) and International Energy Agency (28 member nations) each will release 30 million barrels of oil from Strategic Petroleum Reserves over next 30 days. Emergency stockpiles were released after Hurricane Katrina (2005) and the 1991 Persian Gulf War, since 1974. Saudis may increase production by 1 million barrels/day after OPEC failed to increase production on June 8, oil traded $114.83 (May 2).
Greek Parliament approves budget to receive €12 billion ($17 billion) rescue tranche. Austerity program imposes a personal income tax of 1-5%, taxes on incomes starting at €8,000 (from €12,000) and a €300 tax on the self-employed with the lowest rate 10%, exempted people under 30 years old, pensioners over 65 and the disabled. Greek 2 yr note traded 30.32% (6/16) and 10 yr Greek bond traded 18.35% (6/17). EU banks hold $147 billion of Greek sovereign bonds and $115 billion of Portuguese and Irish debt - 5% of annual European Union gdp.
Fiat buys 6.6% (6/3) equity stake in Chrysler for $560 million from U.S. Treasury, raising Fiat's holding to 52%.
Bank of America will pay $8.5 billion to 22 investors (PIMCO, BlackRock, MetLife, the Federal Reserve Bank of New York, etc.) holding $56 billion (530 mortgage trusts with an original loan balance of $424 billion) in private-label mortgage-backed securities acquired through its Countrywide Financial deal.
Month of May 2011
Dow: 12,569
Dow month: -1.88, ytd: 8.56%, 6 mo: 14.20%
S&P 500: 1,345
S&P 500 month: -1.32%, ytd: 6.95%, 6 mo: 13.98%
NASDAQ: 2,835
NASDAQ month: -1.32, ytd: 6.87%, 6 mo: 13.49%
U.S. unemployment rises to 9.1%, adding 53,000 jobs.
Portugal gets €78 billion bailout package (€12 billion for banks) cutting deficit to 3% of gdp by 2013. Portugal's public debt totals €160.4 billion (93% of gdp). European Union, European Central Bank and International Monetary Fund each contribute €26 billion (average rate 5-5.25%).
AIG repays (5/24) Treasury in $8.7 billion stock offering (300 million shares at $29, above its $28.72 breakeven). AIG has sold 33 businesses and raised more than $57 billion in cash and securities since 2008 bailout. Treasury's AIG holdings fall to 77% from 92.1%.
Chrysler (operated by Fiat) repays (5/24) U.S. government $5.9 billion and Canadian and Ontario provincial government $1.7 billion - U.S. government now owns 6.6%, Canadian government 1.7% and Chrysler retiree health-care trust (UAW) 46%.
Mississippi River exceeds some damages caused by the Great Mississippi Flood of 1927 from Indiana to Louisiana. National Flood Insurance Program covers 5.6 million policies and provides $1.2 trillion in coverage, currently $18 billion in debt - because of 2005 claims caused by Hurricanes Katrina and Rita.
Joplin, Missouri (5/22) deadliest US tornado 134 deaths (116 killed in Flint, Michigan, 1953), destroying 8,000 buildings. 2011 deadliest year for tornadoes since 1950, with 523 deaths. (Tri-State Tornado of 1925 - Missouri, Illinois and Indiana on the ground for 219 miles over a 3.5 hour period responsible for 695 deaths.)
Month of April 2011
Dow: 12,810
Dow month: 3.98%, ytd: 10.65%, 6 mo: 15.22%
S&P 500: 1,363
S&P 500 month: 2.79%, ytd: 8.38%, 6 mo: 15.22%
NASDAQ: 2,873
NASDAQ month: 3.31%, ytd: 8.30%, 6 mo: 14.60%
FOMC neutral stance (Apr 27) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. Federal Reserve will complete $600 billion of purchases and continue to reinvest maturing securities (both Treasuries and MBS) maintaining their current balance sheet.
U.S. unemployment rises to 9.0%, adding 232,000 jobs.
ECB raises rates to 1.25% from 1% (May 2009).
Silver trades at an all-time high of $49.82 (Apr 25), surpassing $49.45 during the silver Hunt brothers scandal, Jan 18, 1980. Corrects to $32.50 (5/12, 34.3%).
Tornadoes April 25-28, 2011 - towns across Alabama, Mississippi, Tennessee, Arkansas, Georgia, Virginia and Louisiana. Some 301-426 tornadoes (3 level 5s over 200mph and up to a mile wide) 10,000 buildings destroyed killing over 350 people.
Earnings season for 1Q11 for the S&P 500 index was positive 19%.
Month of March 2011
Dow: 12,320
Dow month: 0.77%, ytd: 6.41%, 6 mo: 14.20%
S&P 500: 1,326
S&P 500 month: -0.08%, ytd: 5.44%, 6 mo: 16.21%
NASDAQ: 2,781
NASDAQ month: -0.04%, ytd: 4.83%, 6 mo: 17.44%
U.S. unemployment falls to 8.8%, adding 221,000 jobs.
FOMC neutral stance (Mar 15) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Japanese yen rallies to all-time high of ¥76.25 on 3/16 (¥79.75 in April 1995) as BOJ injects emergency funds of ¥43.6 trillion ($539 billion, rallying to ¥85.53 on April 6). G7 intervenes to sell Japanese yen (first intervention since September 2000 when G7 bought Euros). Speculator's expectations of fund repatriation by Japanese insurers, unwinding of the yen-carry trade and loss-cut sales of foreign currencies in margin trading - following Japan's earthquake.
Cotton trades at an all-time high of $2.197 (Mar 7) following global supply disruptions - up 200% from a $0.60 average. CRB trades at a new all-time high of 688.3 (Mar 7).
Libyan revolution - U.N. Security Council authorize no-fly zone (3/18), first major attack (3/19) by coalition forces "Odyssey Dawn" strikes surface-to-air missiles, early warning sites and key communication centers to stop Moammar Gadhafi's from attacks on his own people (ruled since military coup in 1969, 41 years) as Gadhafi's troops advanced on rebel pro-democracy movement in Benghazi.
Japan Sendai 9.0 Earthquake (Mar 11, 232 miles north of Tokyo), 23-50 foot tsunami and 7.0, 7.4 and 7.2 aftershocks follow within 45 minutes killing near 19,000. Crescent City waves surge 8.1 feet destroying harbor and Santa Cruz waves cause $25 million of harbor damage, in California. Oshika Peninsula shifts over 17 feet and drops by over 4 feet. Fukushima nuclear plant's 3 of 4 nuclear reactors melted down and leak radiation.
Month of February 2011
Dow: 12,226
Dow month: 2.82%, ytd: 5.60%, 6 mo: 22.08%
S&P 500: 1,327
S&P 500 month: 3.19%, ytd: 5.52%, 6 mo: 26.50%
NASDAQ: 2,782
NASDAQ month: 3.04%, ytd: 4.87%, 6 mo: 31.60%
U.S. unemployment falls to 8.9%, adding 194,000 jobs.
Copper trade at an all-time high of $4.6495 lb (Feb 15).
Deutsche Boerse (Eurex / Frankfurt Stock Exchange / International Securities Exchange) offers to buy New York Stock Exchange (NYSE / Euronext / Amex Options / NYSE Arca Options) for $9.53 billion creating the world's largest equities and derivatives market.
Egypt (Feb 11) - President Hosni Mubarak steps down as president and hands power to the military following 18 days of protests in Tahrir Square that began January 25, after Tunisia's President Zine El Abidine Ben Ali stepped down on January 14.
Month of January 2011
Dow: 11,891
Dow month: 2.71%, ytd: 2.71%, 6 mo: 13.62%
S&P 500: 1,286
S&P 500 month: 2.26%, ytd: 2.26%, 6 mo: 16.70%
NASDAQ: 2,700
NASDAQ month: 1.78%, ytd: 1.78%, 6 mo: 19.73%
U.S. unemployment falls to 9.0%, adding 63,000 jobs.
FOMC neutral stance (Jan 26) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Earnings season for 4Q10 for the S&P 500 index was positive 37%.
Year of 2010 Best Investments in 2010
2010 complete News (click)
Dow 2010: 10,428.05 to 11,577.51
Dow return for 2010: 11.02%
S&P 500 2010: 1,115.10 to 1,257.64
S&P 500 return for 2010: 12.78%
NASDAQ 2010: 2,269.15 to 2,652.87
NASDAQ return for 2010: 16.91%
10 year Treasury: 3.30% yield down -13.39% prices up
World Equity Market: $51,998 trillion up 13.13%
MSCI Europe Index 858.94 down -2,25%
MSCI Asia Pacific Index 137.70 up 14.32%
S&P Latin America 40 5,245.92 up 14.05%
MSCI BRIC 356.40 up 7.26%
S&P Middle East & Africa 334.21 up 25.95%
U.S. Total stock market returned 15.6% in 2010, Stocks had above average gains, Bonds had above average gains and inflation was below average 1.5%. Only January, May, June and August had large losses in all 3 major U.S. indexes.
Of the 5 largest sectors in the U.S. Economy: Real Estate 21.8%, Natural Resources 21.1%, Financials 11.6% and Technology 10.9% over-performed, while Healthcare 2.9% underperformed. By size: Mid Cap, Small Cap and Micro Cap returned 25-27% while Large Cap returned 12.8%. Both gold 28.6% and oil 15.7% rose with commodity prices (CRB) which rose a historic 122.5%.
Global markets rose 13.1% of the World's largest economic regions: Asia 14.3%, Latin America 14.1% and Emerging Markets 7.3% while Europe -2.2% underperformed. Of the World's largest Developed non-U.S. Economies: Germany 16.1%, Canada 14.5%, Britain 9.0% while Japan -3.0% and France -3.3% lost. In the Emerging markets Russia 22.7% and India 17.4% while Brazil 1.1% and China -14.3% lost. Hedge funds 8% (in 2009, 20%) and Private Equity both overperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns in Real Estate, Mid Cap, Small Cap, Micro Cap and commodity markets.
Months 2009-12 (click)
2007-09 PANIC facts (click)
U.S. unemployment at 9.4% to 9.9% remained a major concern. 2010 gdp 3%, after shrinking -2.6% in 2009. 8.75 million jobs lost during recession, in 2010 940,000 jobs added.
Gold trade at a new all-time high of $1,432.50 (Dec 7). Silver traded $30.93 (Dec 30), highest since March 1980. Copper trade at an all-time high of $4.372 lb (Dec 30). CRB trade at a new all-time high of 630.5 (Dec 30).
Treasuries returned 5.9% in 2010, up from -3.72% in 2009 and 14% in 2008 - treasuries have averaged a 8.15% return since 1978. Corporate bonds yields fell to 3.36% (Oct. 11) down from 7.41% (March 17, 2009), returning 7.12% compared with 16.3% in 2009.
Federal Reserve continues to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities: $250-300 billion plus $600 billion of new purchases of longer-term Treasury securities through the end of the 2nd quarter of 2011 (about $110 billion per month with an average duration of between 5 and 6 years).
- Fed extends U.S. Dollar Liquidity Swaps extended (12/17/10) following troubles in Ireland (through August 1, 2011).
- Fed extends GSE Mortgage-Backed Securities and GSE Debt Purchases (8/10/08). System Open Market Account (debt purchases) concentrating new purchases in 2-10 year Treasuries, up to $10-25 billion/ month.
- Fed extends U.S. Dollar Liquidity Swaps extended (5/9/10) following the May 6, 2010 DJIA interday 998 pt fall (through January 2011).
- FOMC increases the Discount rate 25 bps to 0.75% (February 19) its first increase (since Jun 29, 2006) when the Fed raised from 5.00% to 5.25%. Then the Emergency FOMC inter-meeting cut (August 17, 2007) to 5.75% from 6.25% (at outset of credit crisis) and the Fed Funds rate cut to 4.75% from 5.25% (discount rate to 5.25% from 5.75%, September 18).
Dec 17 - Middle Class Tax Relief Act of 2010 ($858 billion bill for 2011-12). Extended Income tax rates, Extended Alternative Minimum Tax,Social Security tax reduction, Expanded Child tax credit, Estate tax, Unemployed, Extended Capital Gains rates, Marriage penalty relief, Expanded College credit and Individual tax break extensions.
July 21 - Dodd-Frank Wall Street Reform and Consumer Protection Act signed. Requiring 243 new rules to be writen by 11 different federal agencies. Creates a Financial Stability Oversight Council, a Consumer Financial Protection Bureau, a Federal Insurance Office, OTC derivatives clearing, stricter Bank Capital standards (including restricted Propriety trading), Credit-rating business oversight, new authorities for the SEC and required registration for Hedge funds and Private Equity funds - phasing in through 2022.
Obama signs Small Business Jobs and Credit Act of 2010 ($30 billion) $18 billion of federal funds for small bank small businesses loans and $12 billion in business tax breaks.
- $26.1 billion Education Jobs and Medicaid Assistance Act of 2010 providing $10 billion for state teacher's payrolls and $16.1 for state Medicaid funding.
- $34 billion Unemployment Compensation Extension Act of 2010 extending unemployment benefits.
- $18.2 billion Continuing Extension Act of 2010 extending unemployment benefits.
- $940 billion (over 10 years) Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act of 2010 extending health care coverage to 32 million. Subsidized coverage for uninsured Americans and phasing out pre-existing conditions by 2014 - financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and higher-earning Americans. Student loan reform - ending government subsidies to private lenders. Healthcare.gov
- $17.6 billion Hiring Incentives to Restore Employment (HIRE) Act.
DJIA falls 998.5 points (May 6, a 1010.14 point swing, markets lose $862 billion in 20 minutes), the 9.2% plunge its biggest since the 1987 crash.
Mergers and acquisitions rose to $2.19 trillion in 2010, up from $1.77 trillion in 2009, $2.5 trillion 2008 and 2007's record $4.04 trillion.
SEC, June 11 - Exchanges mandated uniform "circuit breakers" across NYSE, Nasdaq, BATS Global Markets, Direct Edge, International Securities Exchange, Chicago Board Options Exchange, CME Group Inc. and Intercontinental Exchange (following the May 6, 2010).
- SEC restricts short sales (February 24) once a stock falls 10% from the previous day's closing price - then one can only execute a short sale at a price above the market's best bid (an uptick). The curb stays in place through the following day.
EU leaders (16 euro nations) agree to a €750 billion ($940 billion) stabilization facility fund for the Euro.
Basel III, 27 nations agree to raising bank Tier 1 capital ratio to 6% (core to 4.5%, up from 4% and core of 2%) and a capital conservation buffer up to 2.5% - phased in 2013-18.
China surpasses Japan to become the world's second largest economy. Japan was second since 1968, when it surpassed West Germany. Chinese RMB (renminbi) fixed-rate ends on June 21 (band, low 6.78 8/26/08 to high 6.885 12/1/08) and re-floats against the U.S. dollar after nearly 2 years.
Prime Minister Brian Cowen negotiates Ireland's rescue as government budget deficit reaches 32% of gdp, a bailout from the European Union and the International Monetary Fund.
Greece receives a €110 billion ($146 billion) rescue package, EU nations (led by Germany and France) €80 billion and the IMF €30 billion. Greek government receives EU-IMF aid backstop (€30 billion EU and up to €15 billion IMF, total $61 billion) at below-market interest rates.
GM goes public with an IPO with both overallotments the deal raises a total of $23.1 billion. General Motors sells Saab to Spyker for $74 million in cash and $326 million in preferred shares.
Goldman Sachs settles $550 million SEC fraud (July 15), largest SEC penalty in Wall Street history.
British Petroleum's Deepwater Horizon oil rig explodes (April 20), 50 miles southeast of Louisiana in the Gulf of Mexico, 11 crewmen dead. British Petroleum stops leaking Macondo well July 15 (4-5 million barrels).
Haiti Earthquake 7.0 (Jan 14) 16 mi from Port-au-Prince, 200,000 people may have died. U.N. suffers its greatest loss of life (101) in single event - G7 to cancel all Haiti bilateral debt.
Chilean earthquake 8.8 (Feb. 28) 70 miles north-east of Concepcion and 200 miles south-west of Santiago, 500 people may have died about 1.5 million homes damaged. Chile's 1960 Valdivia earthquake 9.5 (May 22, 1960) is to date the most powerful earthquake ever recorded, killing 1,700-6,000 people.
Vancouver 2010 Olympics - U.S. wins most medals 37 (9 golds) while Canada wins the most golds 14 (26 total), Germany wins 30 medals and Norway 23. Apolo Anton Ohno wins 3 medals (1 Silver and 2 Bronzes) for a total of 8 Olympic medals the most-decorated American male Winter Olympian.