2009: Facts and Figures Perspective

With all the volatility we have experienced in the financial markets during the past few years, a little perspective is sometimes helpful. While we usually focus on the long-term, this one year perspective is also insightful.

Format below: 12/31/08, 12/31/09, Change

S & P 500: 903, 1115 +23.5%

Dow Jones Indus: 8,776, 10,428 +18.9%

30 yr. Treas Bond Yld 2.68%, 4.63% huge relative increase

10 yr. Treas Bond Yld 2.21% 3.83% significant increase

90 day T bill rate .07%, .06% no change; historically low

30 yr. mortgage rate 5.10%, 5.14% no change

Crude oil, spot price $38.95, $78.87 increase $39.92/barrel

increase 102%

Price per gallon of gas: $1.90, $2.60

While this post is full of figures, what are some thoughts about what they mean?

Though the first part of 2009 was horrendous for the stock market, as was 2008, investors who remained disciplined were very well rewarded, particularly if they had a globally diversified portfolio.

Interest rates remain very low, particularly for very short term investments. Note the rise in the long term bonds. One of the biggest risks, and stories of the future, will be the eventual rise in interest rates and investors who lose significant amounts of money by holding their “safe” investments in bond funds. As interest rates rise, investors in bond funds will lose significant dollars as the value of their funds decline. This is why we do not recommend bond funds for our clients and prefer holding individual fixed income securities, like CDs, individual bonds, etc.

It is also interesting, and I can’t explain why, that the price of oil per barrel more than doubled, but the price of gasoline rose 37%. While they increased in correlation, they did not rise by the same percentage.

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