Wed 28 Sep 2011
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“The “Risk On” trade is back today sending stocks and commodities sharply higher, and the US 10-year Treasury yield back up towards 2%. Meanwhile, as of Monday’s close the S&P 500 dividend yield remained higher than the 10-year T-note, a move seen only 20 times in the past 58 years on a quarterly basis according to S&P research. The phenomenon rewrites the rulebook for yield-seeking investors, as the broader stock market offers more than a traditional bond investment.”
Huh? When you get 2% from a T-Bill and more than 2% from the S&P, economic theory states that people will switch investment vehicles given an equal risk with either investment. This same theory puts forth that when interest rates are…say…4%, that people will gear more of their investments towards fixed income or be less likely to spend in order to save.
“The Commerce Department said Monday that new-home sales fell 2.3% to a seasonally adjusted annual rate of 295,000. That’s less than half the roughly 700,000 that economists say must be sold to sustain a healthy housing market.
New-homes sales are on pace for the worst year since the government began keeping records a half century ago.
High unemployment, larger required down payments and tougher lending standards are preventing many people from buying homes. Plunging stocks and a growing fear that the U.S. could tip back into another recession are also keeping people from entering the housing market.”
Personally, I think it is a great time to be allocating funds towards purchasing stocks. For those with a 20+ yr time horizon, getting started on saving is the most important, it is NOT the how much or at what price as much as the WHEN. If prices fall, you are still diverting funds to purchase at a lower rate, something known as dollar cost averaging. If you are just getting started, putting even more money in as prices fall might be the way to go, but that applies to buying index funds, not houses, not individual stocks, do not catch a falling knife…housing prices are more like a giant sledgehammer…or a spring suspended slowly coming to rest hydraulic jack since it can come up with such force and generally takes a lot more time to settle.
Save save save, invest, wait, save invest…wait….wait…spend returns or spend returns + principal
[Growth Calculations post in progress]
Other News :
DOE Mulls Green Energy Loans At $23 Million Per Job
“The Department of Energy is set on Thursday to announce whether nine federal loan guarantees amounting to $6.5 billion for green energy projects will get final approval.
The number of full-time, permanent jobs they would create? According to the DOE’s own figures, a grand total of 283. That is nearly $23 million per job.”