November 2008 Newsletter
The Economy in November
by Guy Baker
Most of our readers know by now that The Federal Reserve (FOMC) lowered short-term interest rates by fifty basis points. The rate is now a whopping 1% and at the lowest level since 2003. What else could we expect when the economy is showing negative growth (-0.25%) during the third quarter based on the Commerce Department data.
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When times are tough, turn to the seasoned pros for advice
Mark Twain may have had it right when he defined October:
“This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
October 2008 has gone down in the investment pantheon as one of the worst Octobers of all time.
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Conventional advice may be wrong
A lot of traditional financial planning advice is just plain wrong and can hurt your chances of retiring successfully, says Laurence J. Kotlikoff, economics professor at Boston University.
Kotlikoff, who has studied and written widely on personal finance, says American workers sometimes should do exactly the opposite of the traditional advice. . . . -READ More-
Our brains are not designed for good investment decisions
The human brain is a marvelous phenomenon, developed over the years into a highly complex thinking and feeling device, capable equally of flights of poetry or space rocketry.
When it comes to the investment markets, however, it is probably more of a hindrance than a help, says Wall Street Journal columnist Jason Zweig in his recent book, “Your Money & Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich” (Simon & Schuster, 2007).
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Optimistic advisers, stock losers, and more
A majority of professional advisers think the stock market will be higher in 12 months and that interest rates will remain low, says Naples Asset Management Co., which surveyed investment managers, CPAs, and attorneys in the southeast.
It found that 65 percent of professionals predicted the Dow Jones Industrial Average would gain over 12 months.
Meanwhile, 81 percent said that global oil and gas supplies are peaking and that the next president will have little power over their prices. . . . -READ MORE-
Stock market has done better under Democratic presidents
Regardless of an investor’s political affiliation, the U.S. stock market has done better under Democratic presidents than under Republicans since 1929. During this period, each party has controlled the White House for 40 years.
The stock market rose under all six Democratic presidents, and fell under three of the seven Republicans. . . . -READ MORE-