|Bob Brinker Advice & Economic Review
Bob Brinker's Stock and Bond Advice1 Plus Market Outlook
October 4, 2013
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MARKET NUMBERS AS OF FRIDAY October 4, 2013Current Series I Bond Rates
Stocks - S&P500: Bob Brinker continues to be constructive on the Equity markets and is estimating the potential S&P 500 traded into the upper-1700’s going forward. Progress beyond this range will be a function of the continuation of economic growth along with the proper execution of the Federal Reserve monetary policy, which will include a new Fed Chairperson early next year. This is no time to be complacent about the market, and he remains vigilant for possible changes in his outlook.
Kirk Here: Bob Brinker remains fully invested and has recommended dollar cost averaging in new money into the stock market. Bob Brinker has had his model portfolios FULLY INVESTED, 100% in equities, since March 2003. Bob Brinker's "Marketimer" newsletter missed the biggest bear market since the Great Depression where he was wildly bullish near the top so take his ability to time the stock markets with a grain of salt. For more on this, read:
Kirk Here: As a reminder, a duration of "8" means you can expect a bond fund to lose 8% if interest rates jump by 1% overnight. Of course, the lowest duration is ZERO and you get that from FDIC insured CDs and Savings Accounts without having to pay management fees to a low yielding bond fund that could lose money, especially if interest rates go up quickly. This is the reason I currently ONLY recommend FDIC insured CDs and Savings Accounts for core portfolios in my newsletter. You can find savings accounts that pay as much as 0.90% at this link:
VTI - Vanguard Total Stock Market ETF
ISM Index – Institute for Supply Management (values below 50 indicate a recession trend & values above 50 are a growth trend): Following two consecutive monthly gains, the ISM Non-Manufacturing Index fell below expectations in September to a reading of 54.4, from 58.6 in August.
Growth remains the story for the manufacturing sector as production, employment and orders all remain in expansion mode. The ISM Manufacturing Index came in at 56.2 in September, up from 55.7 in August. New orders remained positive for September at 60.5. Export orders were positive for the tenth consecutive month with a September reading of 52.0 and employment increased to 55.4.
Real-Estate: The cost of a 30-year conventional mortgage is close to 4.3% as of late-September, up from 3.6% in early May. Although rates remain low by historical standards, the increase in rates has slowed the housing recovery with the housing figures leveling off in recent months.
Following a sharp decline in July, new home sales rose 7.9% in August to a 421K-unit annual pace. Sales of existing homes increased 1.7% in August to a 5.48 million annual rate and housing starts gained 0.9% to an 891K-unit annual rate. The median selling price of an existing home rose 14.7% from one year ago to $212,100. This is the largest year-over-year price increase since October of 2005.
Consumer Sentiment: The conference Board survey ended September 13th showed Consumer Confidence fell 2.1 points to 79.7. The survey was taken early in the month when worries over Syria were greater and of course the debates around the continuing budget resolution and debt ceiling.
Labor: The nonfarm payrolls increased by 169,000 in August, which was below the 177,000 consensus. More notably, July payrolls were revised down nearly 36% to 104,000 from 162,000. The unemployment rate ticked down to 7.3% from 7.4%, but once again, was the result of a drop in the labor force participation rate to 63.2%. This represents the lowest rate since August 1978. The one bright spot could be found in aggregate income, which increased 0.6%.
Fed: The U.S. Federal Reserve said it would continue buying bonds at an $85 Billion monthly pace for now, expressing concerns that a sharp rise in borrowing casts in recent months could weigh on the economy.
Global: The real GDP in the 17 economies that comprise the Eurozone grew 0.3% in Q2. The positive growth rate is noteworthy because it brought to an end the second recession that the Eurozone area has suffered in the past five years. The August Eurozone Manufacturing Index came in at 51.4. This is the best level since June 2011.
Real GDP in China grew 7.5% (annualized) in Q2, which is rather slow by Chinese standards.
Investors can find plenty to worry about: the risks in the Middle East, a partial government shutdown, a debt ceiling and budget deficit showdown reminiscent of the summers of 2010-2011and the selection of the next Fed Chairman. The wall of worry on Wall Street never ends.
Note1. Commentary emailed by the "Bob Brinker Group"Kirk's Two Investment Letters - Which is Best for You?
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