Newsletter of Economic and Market Events
-- RECENT FACTS -
RECORDS: DJIA trades off its all-time historic record 14279.96 [Oct 11 '07]. S&P 500 1,576.09 [Oct 11 '07], DJ Transportation [Jul 19 '07], DJ Utilities [May 21 '07], Mid Cap [Jul 13 '07], Small Cap [Jul 17 '07]. Global Markets hit $62.6 trillion (10/31/07): Europe 1,388 (MSCI Europe Index, Jul 13 '07), Asia 173 (MSCI Pacific Index, Nov 1 '07), Latin American 5,862 (S&P Latin America 40, May 20 '08), Emerging markets 466 (MSCI BRIC, Oct 31, 2007) and Middle East & Africa 307 (S&P Middle East & Africa, Nov 7, 2007) markets trade at all-time historic highs.
Next FOMC meeting announcement 11:15 PST Tuesday March 16.
AIG sells AIA Group Ltd. (its Asian life insurance operations) to Britain's Prudential PLC for $25 billion in cash and $10.5 billion in stock and other securities.
Earnings season for 1Q10 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 1Q10 is expected to be 22%.
Month of February 2010
Dow: 10,325
Dow month: 2.56%, ytd: -0.99%, 6 mo: 8.73%
S&P 500: 1,104
S&P 500 month: 2.89%, ytd: -0.99%, 6 mo: 8.24%
NASDAQ: 2,238
NASDAQ month: 4.24%, ytd: -1.37%, 6 mo: 11.40%
Federal Reserve increases the Discount rate 25 bps to 0.75% (February 19) - first increase (since Jun 29, 2006) when the Fed increased 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% and the 'discount rate' to 5.25% from 5.75% (September 18).
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.
Chilean earthquake (Feb. 28) 8.8 magnitude struck 70 miles north-east of Concepcion and 200 miles south-west of Santiago about 1.5 million homes damaged. Chile's 1960 9.5 Valdivia earthquake (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.
Month of January 2010
Dow: 10,067
Dow month: -3.46%, ytd: -3.46%, 6 mo: 9.77%
S&P 500: 1,073
S&P 500 month: -3.77%, ytd: -3.77%, 6 mo: 8.71%
NASDAQ: 2,147
NASDAQ month: -5.38%, ytd: -5.38%, 6 mo: 8.54%
FOMC neutral stance (January 27) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
General Motors sells Saab to Spyker for $74 million in cash and $326 million in preferred shares.
Haiti Earthquake (Jan 14) 16 mi from Port-au-Prince, 200,000 people may have died. U.N. suffers its greatest loss of life (85) in single event - G7 to cancel all Haiti bilateral debt.
Earnings season for 4Q09 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 4Q09 is expected to be 65%, ex-financials 16% - ending 9 quarter of negative growth, a record.
Best Investments in 2009
U.S. Total stock market returned 26% in 2009, Stocks had historic gains, Bonds had historic losses of -3.5% and inflation was -0.3%. Only January and February had losses in all 3 major U.S. indexes.
Of the 4 largest sectors in the U.S. Economy: Technology 56%, Natural Resources 33%, Healthcare 19% and Financials 15%. By size: Mid Cap 41% while Small Cap, Large Cap and Micro Cap returned 23-25%; both oil (88%) and gold (24%) rose with commodity prices.
Of the World's largest economic regions: Latin America 95% and Emerging Markets 89% recovered most from terrible selloffs, Asia 35% and Europe 22%. Of the World's largest Developed non-U.S. Economies: Canada 31%, Germany, Britain and France 22-24% and Japan 19%. In the Emerging markets Russia 128%, Brazil, India and China 80-83%. Hedge funds 20% (in 2008, -19%; bettering 2003, 19.5%; not 1999, 31.3%) and PE underperformed market indexes.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. U.S. returns in 2009 recovered from oversold panic levels in March - assets that fell the furthest generally recovered the most.
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.
2009 complete News (click)
2007-09 PANIC facts (click)
Markets lost 13 years of value:
DJIA trades 6,469.95 (Mar 6) lowest since November 1996 - 54.6% lower than 14,279 (10/11/07).
S&P 500 trades 666.79 (Mar 6) lowest since May 1996 - 57.7% lower than 1,576 (10/11/07).
NASDAQ trades 1,265.52 (Mar 9) lowest since October 1996 - 55.7% lower than 2,861 (10/11/07).
MSCI Europe Index trades 529 (Mar 9) lowest since December 1996 - 61.8% lower than 1,388 (7/13/07).
MSCI Pacific Index trades 70 (Mar 10) lowest since June 2003 - 59.5% lower than 173 (11/1/07).
U.S. unemployment rate rose to 10.1%, 17.4% U-6 (Oct). 8.4 million jobs lost since December 2007.
US economy contracts -2.4% (worst since 1946) - though grows by 2.2% in the 3Q09 and 5.9% in the 4Q09. Following U.S. gdp of 3Q08 -2.7%, 4Q08 -5.4%, 1Q09 -6.4%, 2Q09 -0.7% (first time since the 1930's that the US has suffered 4 consecutive quarters of declining gdp).
Federal Reserve left interest rates at 0%-0.25% and the Discount rate to 0.50%, historic lows - for all of 2009.
Government and Central banks provide over $11 trillion of support for Financial institutions: $1.56 trillion in capital injections, $5.21 trillion for asset purchases and guarantees and $4.64 trillion in debt guarantees.
10yr Treasury ends the year at 3.81%. Treasuries fell -3.5% this year, the worst annual performance since 1978. U.S. Treasuries posted their biggest 1 day rally (March 18, since 1962) rallying from 3.01% to 2.46% following the Fed's announcement to begin purchases of $300 billion of 2-10 year Treasuries. U.S. Treasury yield curve steepens to record as 2-10 year Treasury spread increases to 2.88%, Dec 22.
U.S. Dollar closed the year at $1.43 to the Euro - depreciating from $1.2326 (Oct 27 '08) to 1.5135 (Nov 25). U.S. dollar's share of global currency reserves rises to 65% the euro's share 25.9% - flight to quality.
Gold traded at a new all-time high $1226, Dec 2 - rising from $681 (Oct 23 '08) to $1,096 (Dec 31 '09) a 60.9% gain. Silver $9.09 (Oct 24 '08) to $16.84 a 85.3% gain. Platinum $752.10 (Oct 27 '08) to $1460 a 94.1% gain. Copper $1.25 (Dec 26 '08) to $3.32 a 165.6% gain. Oil $32.40 (Dec 19 '08) to $79.36 a 144.9% gain. CRB 327.50 (Dec 5 '08) to 485.75 a 48.3% gain. Wheat $4.71 (Dec 5 '08) to $5.41 a 14.9% gain. Corn $3.05 (Dec 5 '08) to $4.14 a 35.7% gain. Rice $11.19 (Mar 16 '09) to $14.56 a 30.1% gain. Soybeans $7.76 (Dec 5 '08) to $10.39 a 33.9% gain.
LIBOR trades below 0.25% (Dec 21) falling from 3.64% (Oct 10 '08). VIX trades below 20 (Dec 22) falling from 89.53 (Oct 24 '08). TED spread trades below 0.16% (Sep 10) falling from 4.64% (Oct 10 '08) and 3-Month LIBOR-OIS Spread trades below 0.07% (Dec 28) falling from 3.64% (Oct 10 '08).
Federal Reserve required 10 of the 19 major U.S. banks need to raise a total of $74.6 billion in capital.
- Fed returns $46.1 billion (total net income $52.1 billion, 2008) to the Treasury up from $27.5 billion ($35.5 billion, 2008).
- Treasury Secretary Timothy Geithner announced the Public-Private Investment Program using $75 to $100 billion from TARP.
- Federal Reserve began Term Asset-Backed Securities Loan Facility (TALF), up to $1 trillion.
- EESA/TARP invests second $350 billion (with new programs) in other financial institutions - more than 700 institutions participating.
U.S. Banks and securities firms (Citigroup, B of A, Wells Fargo, etc.) write off losses of $1.1 trillion. Worldwide reported losses over $1.7 trillion of mortgage-related writedowns from asset-backed securities while Banks have raised over $1.5 trillion of new capital.
S&P 500 earnings for 4Q09 is positive 65% - ending 9 quarters of negative growth, a record.
140 banks fail at a cost of over $30 billion (2008, 25 banks failed, $17.6 billion) and 31 Credit Unions (2008, 15 failed).
Mergers and acquisitions fell to $1.75 trillion from $2.5 trillion 2008 and 2007's record $4.04 trillion.
Real estate prices fell - S&P/Case-Shiller 20 cities high of 206.52 (July 2006) falls to 139.21 (April 2009) - down 37.4%.
Swedish Riksbank, August 7, 2009 (world's oldest central bank, 1668) is the first central bank to post a negative interest rates (their repo rate was cut to 0.25% and their deposit rate 50 bps lower at to -0.25%).
- European Central Bank cut interest rates to 1.00%, a record low.
- Bank of England (founded in 1694) cut interest rates 0.50%, lowest ever, founded in 1694.
- Reserve Bank of Australia (Oct 6) becomes first major central bank to raise its policy rate 25 bps. to 3.25% rate, following a 49-year low.
President Obama signs the American Recovery and Reinvestment Act of 2009, a $787.2 billion Stimulus bill.
- Obama announces a housing plan that may help 3-4 million homeowners, the $75 billion plan ($50 billion from TARP and $25 billion from Fannie Mae and Freddie Mac).
- Obama signs $24 billion Worker, Homeownership, and Business Assistance Act of 2009.
President Barack Obama wins the 2009 Nobel Prize for Peace.
SEC rules 'Naked' Short-Selling ends requiring that brokers must promptly buy or borrow securities to deliver on a short sale.
FASB (Financial Accounting Standards Board) requires off-balance-sheet loans (qualifying special purpose entities) to be reported.
- FASB loosens fair value rules from mark-to-market to cash flows and other factors for distressed assets.
China's foreign-exchange reserves exceed $2.4 trillion.
- China purchase more cars 13.6 million (up 46%, 2008) then the U.S. 10.4 million (down -21%, 2008) first time since 1908.
- China passes Germany as largest exporter $1.2 trillion compared to $1.17 trillion.
- China sells an inaugural 6 billion yuan ($878.7 million) of sovereign bonds in Hong Kong (issued Oct. 27) representing 0.013% of $7 trillion of total foreign exchange reserves.
- ChiNext opens (Oct 31) China's newest exchange for small cap companies. All 28 ChiNext IPOs worth $10 billion (68.6 billion yuan) double on the first day to $20.5 billion (140 billion yuan).
- China approaches second largest economy, Japan's total GDP $5.085 trillion while China's was $4.909 trillion
Group of 20 nations to replace G-8 (G-7 from 1975 until 1997) as primary organization coordinating global economic policy. IMF offers $250 billion of SDRs (Special Drawing Rights) on Aug. 28. and an additional $33 billion on September 9.
- Japan, China, South Korea, Thailand, Indonesia, Malaysia, Singapore, Philippines and 5 Southeast Asian nations agree to form a $120 billion pool of foreign-exchange reserves to defend their currencies.
- G20 agrees to provide the IMF with $1 trillion of lending power by selling 403 tons of gold.
- European Union pledges $100 billion (€75bn) to the IMF and doubles funds for non-Eurozone countries to $68 billion (€50bn).
BlackRock buys Barclays Global Investors for $13.5 billion and retains a 19.9% stake, the world's largest money manager, with over $2.7 trillion (State Street $1.44 trillion and Fidelity Investments, $1.25 trillion) in assets under management.
- AIG receives up to $30 billion of new loans from TARP funds after reporting a $61.7 billion loss in 4Q08 (largest in corporate history), total authorized assistance of $182.3 billion.
- Citigroup converts $25 billion of preferred stock (debt from Treasury's TARP) into common shares, 33.6% of outstanding shares.
- FDIC sells IndyMac Bank to IMB Management Holdings LP for $13.9 billion - FDIC's bank insurance fund losses are expected to be approximately $9 billion.
- Morgan Stanley agrees to buy 51% of Citigroup's Smith Barney for $2.7 billion.
$27 trillion (notional value/gross exposure) of credit-default swaps, ICE US Trust LLC, Intercontinental Exchange's entity, started clearing contracts (March 9, 2009) before the CME Group (NYSE Euronext), Eurex AG and LCH.Clearnet Group Limited.
- $458 trillion (notional value/gross exposure) of interest rate derivatives, International Derivatives Clearing Group, LLC (IDCG), subsidiary of NASDAQ OMX Group, started clearing over-the-counter interest-rate swap contracts on December 29, 2008.
General Motors exits bankruptcy ($91 billion, 4th largest in U.S. history) in 40 days, closing 2,400 dealerships with $30 billion in exit financing from the US government. General Motors Co. is 60.8% owned by U.S. taxpayers.
- Chrysler Group exits bankruptcy ($39 billion, 7th largest bankruptcy in U.S. history) in 42 days, closing 8 factories and 789 dealerships, with $6.6 billion in exit financing from the US government. Chrysler is 23% owned by U.S. taxpayers.
CIT Group files Chapter 11 bankruptcy, $71 billion in assets and $64.9 billion in debt, one of the U.S.'s largest small-business lenders - the fifth-largest bankruptcy in U.S. history.
- Capmark Financial Group (formerly commercial lending at GMAC) filed for bankruptcy (Oct 25) debt of $21 billion and consolidated assets of $20.1 billion, a top servicer of U.S. commercial real estate loans and the largest servicer of loans in the rest of the world.
- Colonial BancGroup fails with assets of $25 billion, biggest U.S. bank failure in 2009, taken over by BB&T Corp.
- NCUA (National Credit Union Administration Board) placed U.S. Central Federal Credit Union ($34 billion) and Western Corporate unions ($23 billion) into conservatorship.
British government (Nov 3) bails out: RBS £25.5 billion (total £45.5 billion, U.K.'s government stake increases to 84.4% from 70%), the world's most expensive bank bailout. Lloyds Banking Group (acquired HBOS Plc on Jan 16) to receive £5.6 billion pounds (government's rights to buy stock, in addition to earlier £17 billion) and plans to raise £21 billion (£13.5 billion pounds in a rights offering and £7.5 billion in a bond exchange) denying the government majority control which owns 43.5%.
UBS paid (Feb. 18) $780 million to avoid prosecution for helping wealthy Americans evade taxes, disclosing information on more than 250 secret accounts, the U.S. continues to seek the identities of 52,000 American account holders suspected of tax evasion on $20 billion in assets.
- UBS AG agrees to disclose details on 4,450 accounts to the Internal Revenue Service. Switzerland, Liechtenstein, Andorra and Monaco banking authorities all pledged to comply with OECD (Organization for Economic Cooperation and Development) standards for banking transparency and information exchange.
SIPC releases $534.25 million to 1,558 Madoff's vicitms. Exceeding the $520 million (from all 321 prior SIPC liquidations) since the program began in 1970.
SEC charges Robert A. Stanford for a fraudulent $7 billion CD / Ponzi scheme.
Month of December 2009
Dow: 10,428
Dow month: 0.81%, 6 mo: 23.45%, ytd: 18.82%
S&P 500: 1,115
S&P 500 month: 1.83%, 6 mo: 21.33%, ytd: 23.48%
NASDAQ: 2,269
NASDAQ month: 5.83%, 6 mo: 23.65%, ytd: 43.88%
FOMC neutral stance (December 16) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
Gold trades at a new all-time high $1226, Dec 2.
LIBOR trades below 0.25%, Dec 21. VIX trades below 20, Dec 22. U.S. Treasury yield curve steepens to record as 2-10-year Treasury spread increases to 288 bps, Dec 22.
U.S. Commodity Futures Trading Commission (CFTC) raises capital standards requiring the inclusion of over-the-counter derivatives positions into their risk-based capital calculations and raises margin requirements from 4% to 8%.
GMAC Financial Services gets $3.8 billion in capital (total amount of government aid $16.3 billion) U.S. government's ownership is 56%.
U.S. Banks and securities firms (Citigroup, B of A, Wells Fargo, etc.) write off losses of $1.1 trillion. Worldwide reported losses over $1.7 trillion of mortgage-related writedowns from asset-backed securities while Banks have raised over $1.5 trillion of new capital.
Month of November 2009
Dow: 10,344
Dow month: 6.51%, 6 mo: 21.69%, ytd: 17.87%
S&P 500: 1,095
S&P 500 month: 5.69%, 6 mo: 19.15%, ytd: 21.26%
NASDAQ: 2,144
NASDAQ month: 4.84%, 6 mo: 20.86%, ytd: 35.95%
FOMC neutral stance (November 4) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
U.S. unemployment rate rises to 10.1% though 4,000 jobs created, U-6 reaches 17.4%. 8.2 million jobs lost since December 2007, ending 22 consecutive monthly declines in payrolls.
President Obama signs $24 billion Worker, Homeownership, and Business Assistance Act of 2009. Extending unemployment benefits (up to 20 weeks) and extending the $8,000 homebuyer tax credit (signed by April 30 and closed by June 30), the credit will have been used by 1.8 million homebuyers in 2009.
CIT Group files Chapter 11 bankruptcy, $71 billion in assets and $64.9 billion in debt, one of the U.S.'s largest small-business lenders - the fifth-largest bankruptcy in U.S. history.
British government (Nov 3) bails out: RBS £25.5 billion (total £45.5 billion, U.K.'s government stake increases to 84.4% from 70%), the world's most expensive bank bailout. Lloyds Banking Group (acquired HBOS Plc on Jan 16) to receive £5.6 billion pounds (government's rights to buy stock, in addition to earlier £17 billion) and plans to raise £21 billion (£13.5 billion pounds in a rights offering and £7.5 billion in a bond exchange) denying the government majority control which owns 43.5%.
Internet Gambling Enforcement Act in 2006 signed October 13, 2006 compliance is not required until Jun 1, 2010 to comply with the rules intended to limit the use of payment systems for Internet gambling.
Month of October 2009
Dow: 9,712
Dow month: 0.00%, 6 mo: 18.90%, ytd: 10.67%
S&P 500: 1,036
S&P 500 month: -1.99%, 6 mo: 18.81%, ytd: 14.73%
NASDAQ: 2,045
NASDAQ month: -2.25%, 6 mo: 19.10%, ytd: 29.68%
US economy grows by 2.2% in the 3Q09. Following U.S. gdp of 3Q08 -2.7%, 4Q08 -5.4%, 1Q09 -6.4%, 2Q09 -0.7% (first time since the 1930's that the US has suffered 4 consecutive quarters of declining gdp). From 1929-2008, the average annual gdp was 3.4% and from 1997-2008, the average annual gdp was 2.8%.
U.S. unemployment rate rises to 9.8%.
President Barack Obama won the 2009 Nobel Prize for Peace.
Reserve Bank of Australia (Oct 6) becomes first major central bank to raise its policy rate 25 bps. to 3.25% rate - following a 49-year low.
China sells an inaugural 6 billion yuan ($878.7 million) of sovereign bonds in Hong Kong (issued Oct. 27) representing 0.013% of $7 trillion of total foreign exchange reserves.
ChiNext opens (Oct 31) China's newest exchange for small cap companies. All 28 ChiNext IPOs worth $10 billion (68.6 billion yuan) double on the first day to $20.5 billion (140 billion yuan).
Capmark Financial Group (formerly commercial lending at GMAC) filed for bankruptcy (Oct 25) debt of $21 billion and consolidated assets of $20.1 billion, a top servicer of U.S. commercial real estate loans and the largest servicer of loans in the rest of the world.
SIPC releases $534.25 million to 1,558 Madoff's vicitms. Exceeding the $520 million (from all 321 prior SIPC liquidations) since the program began in 1970.
Earnings season for 3Q09 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 3Q09 is expected to be -18%, ninth quarter of negative growth is a record.
Month of September 2009
Dow: 9,712
Dow month: 2.27%, 6 mo: 27.66%, ytd: 10.67%
S&P 500: 1,057
S&P 500 month: 3.63%, 6 mo: 32.62%, ytd: 17.05%
NASDAQ: 2,092
NASDAQ month: 4.13%, 6 mo: 36.91%, ytd: 32.66%
FOMC neutral stance (September 23) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
U.S. unemployment rate rises to 9.7%.
Group of 20 nations to replace G-8 (G-7 from 1975 until 1997) as primary organization coordinating global economic policy. Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
IMF offers an additional $33 billion of SDRs (Special Drawing Rights) on September 9.
Month of August 2009
Dow: 9,496
Dow month: 3.54%, 6 mo: 34.47%, ytd: 8.20%
S&P 500: 1,020
S&P 500 month: 3.34%, 6 mo: 38.78%, ytd: 12.96%
NASDAQ: 2,009
NASDAQ month: 1.57%, 6 mo: 45.90%, ytd: 27.39%
FOMC neutral stance (August 12) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
IMF offers $250 billion of SDRs (Special Drawing Rights) on Aug. 28 comprised of 4 major freely convertible currencies: US dollars: 44%; Euros: 34%; Yen: 11%; and British pound 11% distributed to member countries in line with their shareholder stakes, secondary market restricted to participating governments or central banks. SDR 21.4 billion to SDR 204.1 billion (about $317 billion).
Swedish Riksbank, August 7, 2009 (world's oldest central bank, 1668) is the first central bank to post a negative interest rates (their repo rate was cut to 0.25% and their deposit rate 50 bps lower at to -0.25%) a penalty on banks that refuse to lend. U.S. Treasury repo rates are generally 5 to 10 bps below the Fed funds rate.
Colonial BancGroup fails with assets of $25 billion, biggest U.S. bank failure in 2009, taken over by BB&T Corp.
UBS AG discloses details on 4,450 accounts to the Internal Revenue Service.
Month of July 2009
Dow: 9,171
Dow month: 8.57%, 6 mo: 14.62%, ytd: 4.50%
S&P 500: 987
S&P 500 month: 7.40%, 6 mo: 19.49%, ytd: 9.30%
NASDAQ: 1,978
NASDAQ month: 7.79%, 6 mo: 34.01%, ytd: 25.43%
U.S. unemployment rate rises to 9.5%.
General Motors exits bankruptcy in 40 days, closing 2,400 dealerships with $30 billion in exit financing from the US government. General Motors Co. is 60.8% owned by U.S. taxpayers, with 11.7% by the Canada and Ontario governments and 17.5% by the United Auto Workers' retiree medical benefits trusts (with 2.5% of preferred stock and $9 billion in notes) and the remaining 10% owned by Motors Liquidation (the old GM) to pay off creditors and unsecured bondholders (with 15% of preferred stock).
'Naked' Short-Selling ends. SEC rules require that brokers must promptly buy or borrow securities to deliver on a short sale.
China's foreign-exchange reserves exceed $2 trillion while China owns $939.9 billion of U.S. Treasuries.
Earnings season for 2Q09 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 2Q09 is expected to be -27.3%, eighth quarter of negative growth is a record.
Month of June 2009
Dow: 8,447
Dow month: -0.62%, 6 mo: -3.75%, ytd: -3.75%
S&P 500: 919
S&P 500 month: 0.00%, 6 mo: 1.77%, ytd: 1.77%
NASDAQ: 1,835
NASDAQ month: 3.44%, 6 mo: 16.36%, ytd: 16.36%
FOMC neutral stance (June 24) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
U.S. unemployment rate rises to 9.4%.
GM files Chapter 11 bankruptcy ($91 billion, removed from the DOW index having received $19.4 billion) 4th largest in U.S. history. Pontiac division, first produced in 1926 - closed. Opel and Vauxhall brands, European GM, will be purchased by Magna International (Canadian parts supplier with €1.5bn in credit guarantees from the German government). Sichuan Tengzhong Heavy Industrial Machinery Co. to buy Hummer. Penske Automotive Group to buy Saturn. Koenigsegg to buy Saab.
Chrysler Group exits bankruptcy in 42 days, closing 8 factories and 789 dealerships, with $6.6 billion in exit financing from the US government. Chrysler is owned by a United Auto Workers union trust 55%, Fiat 20% (rising to 35%), U.S. taxpayers 23% (falling to 8%) and 2% the Canada government. Secured bondholders get about $0.29 while the Indiana pension funds get up to $0.72.
BlackRock buys Barclays Global Investors for $13.5 billion and retains a 19.9% stake, the world's largest money manager, with over $2.7 trillion (State Street $1.44 trillion and Fidelity Investments, $1.25 trillion) in assets under management. In 1996 Barclays bought and merged Wells Fargo Nikko Advisers with its BZW Investment Management unit.
Month of May 2009
Dow: 8,500
Dow month: 4.06%, ytd: -3.14%, 6 mo: -3.73%
S&P 500: 919
S&P 500 month: 5.39%, ytd: 1.77%, 6 mo: 2.57%
NASDAQ: 1,774
NASDAQ month: 3.32%, ytd: 12.49%, 6 mo: 15.57%
Federal Reserve released that 10 of the 19 major U.S. banks need to raise a total of $74.6 billion in capital - B of A ($33.9 billion), Wells Fargo ($13.7 billion), GMAC ($11.5 billion), Citigroup ($5.5 billion), Regions ($2.5 billion), SunTrust ($2.2 billion), Morgan Stanley ($1.8 billion), KeyCorp ($1.8 billion), FifthThird ($1.1 billion), PNC ($0.6 billion) while AmEx, BB&T, BNYM, CapOne, Goldman Sachs, JPMorgan Chase, MetLife, State Street and USB do not need additional funds.
Credit-Card Act signed into law.
U.S. unemployment rate rises to 8.9%.
GM receives an additional $4 billion and GMAC an additional $7.5 billion ($19.4 billion and $12.5 billion, respectively) of TARP funds. Treasury offers $22 billion of TARP funds to Insurers: Prudential, Hartford, Allstate, Lincoln National, Principal and Ameriprise.
FASB requires off-balance-sheet loans (qualifying special purpose entities) to be reported, which may result in the nation's 19 largest banks reporting $900 billion in previously unrecognized assets and liabilities requiring an increase of capital reserves.
European Central Bank cut interest rates 25 bps to 1.00%, a record low.
Month of April 2009
Dow: 8,168
Dow month: 7.36%, ytd: -6.93%, 6 mo: -12.41%
S&P 500: 872
S&P 500 month: 9.41%, ytd: -3.43%, 6 mo: -9.92%
NASDAQ: 1,717
NASDAQ month: 12.37%, ytd: 8.88%, 6 mo: -0.17%
FOMC neutral stance(April 29) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
Chrysler files Chapter 11 bankruptcy, Cerberus Capital Management, Daimler, Fiat SpA, U.S. government, UAW and other creditors will reorganize.
G20 agrees to provide the IMF with $1 trillion of lending power by selling 403 tons of gold.
FASB (Financial Accounting Standards Board) loosens fair value rules from mark-to-market to cash flows and other factors for distressed assets.
U.S. unemployment rate rises to 8.5%.
European Central Bank cut interest rates 25 bps to 1.25%, a record low.
Earnings season for 1Q09 according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 1Q09 is expected to be -35.5%, seventh quarter of negative growth is a record.
Month of March 2009
Dow: 7,608
Dow month: 7.73%, ytd: -13.31%, 6 mo: -29.88%
S&P 500: 797
S&P 500 month: 8.44%, ytd: -11.74%, 6 mo: -31.65%
NASDAQ: 1,528
NASDAQ month: 10.97%, ytd: -3.11%, 6 mo: -26.92%
DJIA trades 6,469.95 (Mar 6) lowest since November 1996 - 54.6% lower than 14,279 (10/11/07)
S&P 500 trades 666.79 (Mar 6) lowest since May 1996 - 57.7% lower than 1,576 (10/11/07)
NASDAQ trades 1,265.52 (Mar 9) lowest since October 1996 - 55.7% lower than 2,861 (10/11/07)
MSCI Europe Index trades 529 (Mar 9) lowest since December 1996 - 61.8% lower than 1,388 (7/13/07)
MSCI Pacific Index trades 70 (Mar 10) lowest since June 2003 - 59.5% lower than 173 (11/1/07)
2008/09 PANIC facts (click)
FOMC neutral stance (March 18) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
Treasury Secretary Timothy Geithner announces the Public-Private Investment Program using $75 to $100 billion from TARP: 1) creating the Legacy Loans Program (backed by FDIC, guaranteeing financing for up to 6 times the capital) to purchase and hold loans, 2) the Federal Reserve's TALF will expand to include asset-backed securities, and 3) establish Legacy Securities Program, 5 public-private investment funds, to purchase asset-backed securities, managed privately with up to 100% financial matching with profits or losses shared with the Federal Reserve.
U.S. Treasuries post their biggest 1 day rally (March 18) since 1962. 10yr Treasuries rally from 3.01% to 2.46% following the Fed's announcement to begin purchases of $300 billion of 2-10 year Treasuries (March 25) hoping to reduce consumer borrowing costs.
U.S. unemployment rate rises to 8.1%.
Federal Reserve begins TALF (Term Asset-Backed Securities Loan Facility, up to $1 trillion) lending $84 to $95 for every $100 in ABS posted as collateral - initial interest rates for 3-year loans from 1%-3%.
NCUA (National Credit Union Administration Board) placed U.S. Central Federal Credit Union ($34 billion) and Western Corporate unions ($23 billion) into conservatorship.
EESA/TARP invests second $350 billion in other financial institutions: Citigroup ($25 billion), Bank of America ($20 billion, Federal Reserve will backstop $118 billion of acquired Merrill assets), GM ($15.4 billion), GMAC ($5.0 billion), Chrysler ($4.5 billion), Chrysler Financial ($1.5 billion), American Express ($3.4 billion), CIT ($2.3 billion), Discover Financial Services ($1.2 billion), GM ($1 billion), M&T Bank Corp ($600 million) and New York Private Bank & Trust ($267 million) - 555 institutions now participating.
European Union pledges $100 billion (€75bn) to the IMF and doubles funds for non-Eurozone countries to $68 billion (€50bn).
ICE US Trust LLC, Intercontinental Exchange's entity, started clearing contracts (March 9, 2009) before the CME Group (NYSE Euronext), Eurex AG and LCH.Clearnet Group Limited. $27 trillion (notional value/gross exposure) of credit-default swaps.
European Central Bank cut interest rates 50 bps to 1.5%, a record low. Bank of England (founded in 1694) cut interest rates 100 bps to 0.5%, lowest ever.
AIG receives up to $30 billion of new loans from TARP funds after reporting a $61.7 billion loss in 4Q08 - the largest in corporate history.
Switzerland, Liechtenstein, Andorra and Monaco banking authorities all pledged to comply with OECD (Organization for Economic Cooperation and Development) standards for banking transparency and information exchange. UBS paid (Feb. 18) $780 million to avoid prosecution for helping wealthy Americans evade taxes, disclosing information on more than 250 secret accounts, the U.S. continues to seek the identities of 52,000 American account holders suspected of tax evasion on $20 billion in assets.
Month of February 2009
Dow: 7,062
Dow month: -11.74%, ytd: -19.53%, 6 mo: -38.82%
S&P 500: 735
S&P 500 month: -11.02%, ytd: -18.60%, 6 mo: -42.67%
NASDAQ: 1,377
NASDAQ month: -6.71%, ytd: -12.68%, 6 mo: -41.83%
President Obama announces a housing plan that may help 3-4 million homeowners, the $75 billion plan ($50 billion from TARP and $25 billion from Fannie Mae and Freddie Mac): 1) Loan modifications owned or guaranteed by Fannie Mae and Freddie Mac and 2) A separate modification program through a participating lender. Loans originated before Jan. 1, 2009 are eligible for modification through 2012, mortgages up to $729,750 and rates as low as 2%.
President Obama signs the American Recovery and Reinvestment Act of 2009, a $787.2 billion Stimulus bill. Spending (& Aid), $575.2 billion (incl. $267 billion of Aid): health care ($141.3 billion), infrastructure ($89.7 billion), education ($87.3 billion), energy ($86.2 billion), aid to poor and unemployed ($67 billion), direct cash payments to entitlement recipients ($14.2 billion), state block grants ($8.8 billion), housing ($9.5 billion), science ($5.6 billion), law enforcement ($4 billion) and homeland security ($3.8 billion). Taxes, $212 billion: 2009-10 tax credit ($400 per-worker, $800 per-couple) AMT, college, child, homebuyer ($8,000), low-income earned income tax credits; renewable energy, depreciation and auto sales incentives.
Japan, China, South Korea, Thailand, Indonesia, Malaysia, Singapore, Philippines and 5 Southeast Asian nations agree to form a $120 billion pool of foreign-exchange reserves to defend their currencies.
Treasury Secretary Timothy Geithner announces EESA/TARP 2: 1. Financial Stability Trust (a Comprehensive Stress Test for Major Banks, Increased Balance Sheet Transparency and Disclosure and Capital Assistance Program), 2. Public-Private Investment Fund ($500 Billion - $1 Trillion), 3. Consumer and Business Lending Initiative (Up to $1 trillion), 4. Transparency and Accountability Agenda - Including Dividend Limitation, 5. Affordable Housing Support and Foreclosure Prevention Plan and 6. A Small Business and Community Lending Initiative.
Citigroup converts $25 billion of preferred stock (debt from Treasury's TARP) into common shares, 34% of outstanding shares.
U.S. unemployment rate rises to 7.6%.
Bank of England cuts interest rates to 1% - lowest ever, founded in 1694.
SEC charges Robert A. Stanford for a fraudulent $7 billion CD / Ponzi scheme.
Month of January 2009
Dow: 8,001
Dow month: -8.83%, ytd: -8.83%, 6 mo: -29.68%
S&P 500: 826
S&P 500 month: -8.53%, ytd: -8.53%, 6 mo: -34.81%
NASDAQ: 1,476
NASDAQ month: -6.40%, ytd: -6.40%, 6 mo: -36.52%
FOMC neutral stance (January 30) Fed Funds rate 0%-0.25% and the Discount rate of 0.50%.
U.S. unemployment rate rises to 7.2%, 2.6 million jobs losts in 2008, most since 1945.
European Central Bank cut interest rates 50 bps to 2%.
Morgan Stanley agrees to buy 51% of Citigroup's Smith Barney for $2.7 billion. Citigroup to split between - Citicorp: retail, corporate, investment and private banking, credit card businesses and Citi Holdings: brokerage, asset management, CitiFinancial and CitiMortgage.
Bank of England cuts interest rates to 1.5%, lowest ever, founded in 1694.
International Derivatives Clearing Group, LLC (IDCG), subsidiary of NASDAQ OMX Group, started clearing over-the-counter interest-rate swap contracts on December 29, 2008. $458 trillion (notional value/gross exposure) of interest rate derivatives.
FDIC sells IndyMac Bank to IMB Management Holdings LP (J.C. Flowers & Co., Paulson & Co., MSD Capital LP and Stone Point Capital) for $13.9 billion - FDIC's bank insurance fund losses are expected to be approximately $9 billion.
Earnings season for 4Q08. according to a consensus of Wall St. analysts the blended growth rate for the S&P 500 index for 4Q08 was negative -67%, the sixth quarter of negative growth ties the record set 1Q51 to 2Q52.
Best Investments in 2008
U.S. Total stock market returned -38% in 2008, Stocks had historic losses, Bonds had historic gains of 14.9% and inflation was 0.1%, lowest since 1954. Only April and August had gains in all 3 major U.S. indexes - the Dow lost -33.8% its worst year since 1931, the S&P 500 lost -38.5% its worst year since 1937, while NASDAQ lost -40.5% its worst year ever (conceived in 1971).
Of the 4 largest sectors in the U.S. Economy: Healthcare lost the least -25%, Technology -42%, Natural Resources -50%, while Financials lost -57%. By size: Small Cap lost the least -32%, followed by Mid Cap -37%, Large Cap -38%, while Micro Cap returned -41%; only gold (5%) and the U.S. dollar index (6%) had gains.
Of the World's largest economic regions: Asia fell -42.7%, Europe fell -45.8% and Latin America lost -51.8%. Of the World's largest Developed non-U.S. Economies: Britain fell -31%, Canada -36%, Germany -41%, Japan -42%, while France lost -43%. In the Emerging markets which lost -51%: Brazil fell -42%, India -53%, China -66%, while Russia lost -73%. Hedge funds returned on average -19% (assets fell to $1.1 trillion from an all-time high of $1.9 trillion in June 2008).
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of U.S. denominated assets which rose against all major currencies (except the Japanese Yen and Chinese Yuan). Government and sovereign bond returns muted one of the worst years for equities.
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.
2008 complete News (click)
2007-09 PANIC facts (click)
The Dow and S&P 500 Index have worst year since 1931 and 1937 respectively, NASDAQ it's worst year ever.
VIX (volatility index, fear) hits new record high of 89.53 spiking 32% from 67.80 (Oct 24) - spiked 22% to 81.17 (Oct 16), spiked 19% to 76.94 (Oct 10) and spiked 29% to 58.24 (Oct 6). TED spread (3-month Treasuries to 3-month Eurodollars) trades at 4.64% and the Libor-OIS spread (3-month London interbank offered rate to Overnight indexed swap rates) trades at record 3.64% on October 10.
Federal Reserve loosening cycle - FOMC cut Fed Funds rate on December 16 to 0%-0.25% and the Discount rate to 0.50% easing started with the Emergency FOMC inter-meeting Fed Funds rate cut on Jan 22 of 0.75% to 3.5% from 4.25%.
U.S. unemployment rate rises to 6.7% from 5% - 2.6 million jobs losts in 2008, most since 1945.
10yr Treasury ends the year at 2.21% trades 2.035% (12/18) rallying from 4.32% (Jun 13) up 52.8% in 6 months - the lowest yield in its 46-year history. 3 month Treasuries traded below 0%, Dec. 9 - first time since the U.S. began selling them in 1929.
- U.S. Treasuries return 14.9% highest since 1995 (18.5%). 19.7% is a record spread on yields between high-yield, high-risk corporate bonds and Treasuries, Dec 2008.
U.S. Dollar trades an all-time low of $1.6038 (July 15) to the Euro - falling from $0.8228 (October 26, 2000) a 95% decline in little more than 7 years. U.S. dollar rallies to $1.23 (Oct 23) from $1.60 (Jul 15) - up 22% in 3 months.
U.S. home prices fell (S&P/Case-Shiller) falls from a high of 206.52 (7/06) to 150.66 (Dec '08) - down 27.0% - 3.2 million foreclosures in 2008.
Oil trades $32.40 (Dec 19) down from an all-time high of $147.27 (Jul 11, oil trades above $100 for the first time on Jan 3) - down 77.2% in 4 months. CRB futures trade $327.50 (Dec 5) down from an all-time high of $618 (July 2) - down 47.0% in 4 months. Gold trades $681 (Oct 27) down from an all-time high of $1033.90 (Mar 17) - down 34.1% in 7 months. Platinum trades $752.10 (Oct 27) down from an all-time high of $2308.80 (Mar 4) - down 67.4% in 7 months. Silver trades $9.09 (Oct 24) down from $21.44 (Mar 17) matching its highest level since December 1980 - down 57.6% in 7 months. Copper trades $4.26 lbs. (May 5) down 70.6% to $1.25 (Dec 26). Wheat trades $13.49 (Feb 17) down 65.0% to $4.71 (Dec 5). Corn trades $7.79 (Jun 27) down 60.8% to $3.05 (Dec 5). Soybeans trades $16.60 (Jun 27) down 53.2% to $7.76 (Oct '06). Rice trades $24.35 (Apr 18) down 47.5% to $12.77 (Dec 5)
U.S. corporations raised $4.54 trillion issuing securities down from $5.14 trillion in 2007. Global merger activity fell 39% to $2.5 trillion from the record $4.1 trillion in 2007. Takeovers fell 43% to $873 billion from the record $1.54 trillion in 2007.
Banks and securities firms (Citigroup, UBS, Merrill, etc.) report over $1.012 trillion of mortgage-related writedowns from subprime securities - while raising over $750 billion of new capital.
Earnings season for 2008 the blended growth rate for the S&P 500 index was negative for all 4 quarter - the worst quarterly performance since 1991.
NASDAQ OMX Group becomes the world's largest exchange - operations of over 60 exchanges in 50 countries. NYSE Euronext agrees to buy the American Stock Exchange. CME Group (Chicago Mercantile Exchange and Board of Trade, merged July 2007) buys Nymex (NY Mercantile Exchange) the world's largest physical commodity futures exchange.
VISA becomes the largest U.S. IPO ever at $17.86 billion - surpassing the $10.62 billion record held by AT&T in 2000.
World leaders summit (G20) in Washington DC (November 15) to issue guidance to financial markets and the global economy and agree on a common set of principles to reform global regulation of the markets.
G20 Declaration on Nov 15, 2008 (click)
ECB cuts rates from 4.25% to 2.5%. Bank of England cuts rates to 2% - lowest since 1951. The central banks of China, Japan, Switzerland, Sweden, Danmark and New Zealand all lowered their rates.
China becomes the third largest economy passing Germany - behind the U.S. and Japan.
Barack Obama defeats John McCain to become 44th President of the United States.
Federal Reserve increases its balance sheet to $2.3 trillion from $924 billion (9/10) in 2 months. Federal Reserve increases currency swaps with foreign central banks to unlimited amounts and increased the Term Auction Facility, the Fed's emergency loan program, to $900 billion.
- Federal Reserve begins to purchase U.S. commercial paper from U.S. companies and Money market funds - a $1.8 trillion market. Federal Reserve allows GSEs (government sponsored enterprises) Fannie Mae and Freddie Mac access to their discount window - they guarantee $5.4 of $12 trillion of U.S. mortgages. Federal Reserve announces $200 billion of support for debt backed by consumer and small-business debt (credit-card, auto, student and SBA loans) and the Fed will purchase up to $100 billion of debt from Fannie Mae and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Freddie Mac, Fannie and Ginnie Mae.
- Federal Reserve's new regulations for mortgage lenders: banning repayment penalties, prohibiting lenders from issuing loans to borrowers that cannot repay while requiring the verification of their incomes and assets, and requiring escrow accounts for property taxes and homeowner's insurance, as well as: actual appraisal of a home's value and good faith lending practices. Federal Reserve, CFTC and SEC announce that a central clearinghouse for the $33 trillion credit-default swap market will be running by December 31.
$168 billion Stimulus plan signed into law - Tax rebates (to over 130 million Americans), Business tax breaks and Housing provisions (Fannie Mae and Freddie Mac may temporarily purchase mortgages up to $793,000 up from $417,000 while the FHA can insure loans for up to $729,000).
Housing bill signed into law creating the FHFA (Federal Housing Finance Agency, GSE's regulator) for Fannie Mae and Freddie Mac - FHFA then places Fannie Mae and Freddie Mac into conservatorship and through senior preferred stock and warrants will own 79.9% of each agency. Fannie Mae and Freddie Mac (own or back 31 million U.S. mortgages) modify mortgages. FHFA orders Fannie Mae and Freddie Mac to purchase $40 billion a month of underperforming mortgage bonds.
President Bush and the Treasury intercede extending $13.4 billion in loans to GM and Chrysler (another $4 billion in February - Ford did not seeking government assistance) and the Federal Reserve approves GMAC's request to become a bank holding company.
FDIC guarantees $1.4-1.8 trillion of bank-to-bank lending for more than 3 years (FDIC depositor insurance increases from $100k to $250k through Dec 31, 2013) as part of the EESA.
SEC issues an emergency rule (July 21 - August 12) to limit naked short selling in 19 major financial firms - the 'tick test rule' was repealed on July 6, 2007. SEC issues rules for short sales requiring delivery of securities by the settlement date, effective Sep 18. Short selling by Hedge funds of $100 million must now report positions to the SEC.
- SEC halts short selling of Financial stocks (Sep 19, effective immediately) protecting 799 financial companies - through Oct 2. SEC extends short selling ban of Financial stocks protecting 950 financial companies - through Oct 8.
Paulson's Treasury Dept. administers the Troubled Asset Relief Program, or TARP (Emergency Economic Stabilization Act of 2008, EESA) a $700 billion rescue of financial institutions by investing $125 billion in 9 large banks: Citigroup, J.P. Morgan, Wells Fargo, Bank of America/Merrill Lynch, Goldman Sachs, Morgan Stanley, Bank of New York Mellon and State Street.
- EESA/TARP also invests $125 billion in: AIG, Federal Home Loan Mortgage, PNC, U.S. Bancorp, Capital One, SunTrust, Regions Financial, Fifth Third Bancorp, BB&T, KeyCorp, Comerica, Marshall & Ilsley, Northern Trust, Huntington Bancshares, Zions Bancorporation, Synovus Financial, Popular, First Horizon National, ETrade Financial, Colonial BancGroup, Associated Banc-Corp, Webster Financial, City National, Fulton Financial, TCF Financial, South Financial Group, Wilmington Trust, East West Bancorp, Sterling Financial, Whitney Holding, Susquehanna Bancshare, Valley National Bancorp, Citizens Republic Bancorp, UCBH Holdings, Cathay General Bancorp, Wintrust Financial, First Merit, SVB Financial Group, Trustmark, Umpqua Holdings, Washington Federal - and 88 banks borrowing less than $200 million. EESA invests second $350 billion in other financial institutons: GMAC, American Express, CIT, Discover Financial Services, GM and M&T Bank.
Paulson's Treasury Dept. protects US money market mutual funds with insurance as some of the $3.6 trillion of funds 'broke the buck'. Treasury announces the Credit Union Homeowner Affordability Relief Program a $41 billion lending facility where retail credit unions could borrow up to $2 billion at favorable rates - about 8,400 U.S. credit unions with $775 billion in assets.
15 leading European nations commit $2.3 trillion and agree to a 14pt plan to aid troubled banks by adding capital through investment and by guaranteeing inter-bank lending. China announced a $586 billion (4 trillion yuan) economic stimulus package. Japan expands package to $385 billion - ¥10 trillion of stimulatory spending to save job cuts and ¥13 trillion to protect the banking system.
IMF provides loans to Hungary (approved $15.7 billion), Ukraine (approved $16.4 billion), Iceland (approved $2.1 billion), Latvia (approved $10.4 billion), Serbia (approved $516 million), Pakistan (approved $7.6 billion), Belarus (approved $2.5 billion) both Turkey and Romania seek loans - Britain was the last European country to receive an IMF loan in 1976. Japan promises $100 billion in loans to IMF raising their funding capacity to $250 billion.
Countrywide Financial (January 11, 2008) is purchased by Bank of America for $4.1 billion.
- Bear Stearns fails, the 5th largest U.S. investment bank, March 17, 2008 is purchased by JP Morgan Chase for $10 (down from $172, 2007) the Fed intervenes (non-recourse loan of $29 billion) in the protection of investment banking for the first time since the 1930s.
- IndyMac Bancorp (July 11, 2008) is seized from imminent failure by the Office of Thrift Supervision and files for bankruptcy with $33 billion of assets (exceeding Continental Illinois, $9.5 billion in 1984) costing the FDIC $10.7 billion.
- FHFA (Federal Housing Finance Agency) places Fannie Mae and Freddie Mac into conservatorship.
- Lehman Brothers Holdings (September 15, 2008) files $691 billion, largest U.S. bankruptcy - passing WorldCom which filed for bankruptcy (7/21/02 at $103.9 billion). Lehman's bankrupcy sets their credit-default swap liability to counterparties at $0.91375 creating $270 billion in payments.
- Merrill Lynch fails, the 3rd largest U.S. investment bank, September 14, 2008, is purchased by Bank of America for $50 billion.
- Federal Reserve approves Goldman Sachs and Morgan Stanley to become bank holding companies - ending independent investment banks.
- AIG fails with $1.1 trillion assets and 74 million clients in 130 countries subsequently receiving an $85 billion emergency U.S. Federal Reserve loan (total authorized assistance of $182.3 billion), September 16, 2008 - consequently relinquishes 79.9% percent ownership in the company.
- Washington Mutual (September 26, 2008) seized by Federal regulators filing a $327.9 billion, largest U.S. bank bankruptcy and sold to J.P. Morgan Chase for $1.9 billion - 2nd largest in U.S. history.
- Wachovia (October 12, 2008) purchased by Wells Fargo (as Citigroup exits) in an $11.7 billion all-stock offering.
- American Express (and AmEx Travel Related Services) becomes a bank-holding company.
- Citigroup receives $20 billion (in addition to the initial $25 billion) from TARP to protect $306 billion of troubled mortgages and assets - Citigroup assumes losses on the first $29 billion the Treasury will absorb 90% of the remaining losses and $27 billion of preferred with an 8% dividend.
- Bradford and Bingley nationalised (joins Northern Rock as U.K.'s 2nd mortgage lender) and rescues for European lenders Fortis (Benelux's banking and insurance group), Hypo Real Estate (Germany's real estate firm), Glitnir (Iceland's third-largest lender) and Dexia (Franco-Belgian's bank, world's biggest lender to global local governments).
Bank of America modifies (cuts interest rates and/or principal) 265,000 mortgages and 400,000 of acquired Countrywide's mortgages - the largest predatory lending settlement, $8.6 billion.
- J.P. Morgan Chase will modify 400,000 borrower's mortgages from their acquisition of Washington Mutual.
Citigroup will modify 500,000 borrower's mortgages.
UBS, Merrill Lynch, Wachovia, Citigroup, Morgan Stanley, Bank of America, JPMorgan Chase and Royal Bank of Canada agree to buy back failed auction-rate securities.
SEC charges Bernard L. Madoff with securities fraud for a $65 billion dollar Ponzi scheme. The largest U.S. securities fraud settlement - Enron shareholders and investors will share $7.2 billion.
Hurricane Gustav (Sep 1) made landfall in Louisiana (near New Orleans) and Hurricane Ike (Sep 13) made landfall on Galveston Island causing 145 deaths and $31.5 billion of damage - the 3rd most destructive U.S. hurricane (behind Katrina 2005 and Andrew 1992).
Over 4,000 U.S. soldiers lose their lives in Iraq - the Vietnam War claimed 58,000 American lives, the Korean War 36,000 and World War II 405,000.
2008 Beijing Summer Olympics begins with 100 heads of state in attendance, 204 nations participate (87 nations win medals) - Michael Phelps wins a record eight Olympic gold medals (totaling 14 career golds), Natalie Coughlin wins 6 medals and Usain Bolt wins three golds. The United States takes a total of 110 medals while China takes the most golds, 51. Great Britain takes 47 medals 19 are gold heading into the 2012 London games.
Best Investments in 2007
U.S. Total stock market returned 6% in 2007, Stocks have underperformed while Bonds were above their historic average and inflation was above average (4.1%). Most gains for the year were punctuated by sell-offs in February/March (NASDAQ -7.9%), July/August (NASDAQ -12.4%) and November (NASDAQ -11.2%).
Of the 4 largest sectors in the U.S. Economy: Natural Resources performed best 32% followed by Technology (14%) and Health (6%) while Financials (-21%) returns were negative. By size: Mid Cap performed best 7% followed by Large Cap (6%) while Small Cap (-1%) and Micro Cap (-9%) had negative returns.
Of the World’s largest economic regions: Asia driven by China (CSI 300 index 161% / Shanghai 96% / Hong Kong 39%) / India (46%) performed best followed by Latin America 48.4% and Europe 6.6%. Of the World’s largest Developed non-U.S. Economies: Germany returned 22%, Canada (7%), Britain (4%), France (1%) while Japan (-11%) was negative. In the Emerging markets which returned 32%: Brazil and Eastern Europe-Russia (added to the returns of China, India, etc.). Hedge funds returned on average less than 5% with private-equity outperforming hedge funds - PE had problems in fourth quarter acquiring funding.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. U.S. returns in 2007 were muted because of the 'credit crisis' caused by non-performing, non-prime U.S. mortgage loans.
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.
2007 complete News (click)
2007-09 PANIC facts (click)
Federal Reserve loosening cycle - FOMC cut inter-meeting 8/17 - the 'discount rate' to 5.75% from 6.25% citing tighter credit and shaken financial markets. Central banks in the U.S., Europe and Asia had injected more then $400 billion (Aug 9-16) into the banking system providing liquidity to global credit markets. Libor traded up to 240 bps over 3-month Fed funds rate. Fed Funds rate currently stands at 4.25%.
Congress, Federal Reserve and other Federal agencies proposed new guidelines for subprime mortgage loans (7.5 million and approximately 5 million Alt-A or non-traditional / non-prime loans) because of growing delinquencies, foreclosures and bankruptcies. Effecting over 2 million Americans with over $1.9 trillion of subprime mortgage loans.
U.S. 10 yr Treasuries end the year at 4.02%. Inverted Yield curve of U.S. Treasuries ends Jun 7 '07 it began on Dec 27 '05 (75 weeks) - the last U.S. Bond yield inversion was from Feb 24, '00 - Dec 22, '00, 8th time since 1980. Investors shied away from shorter U.S. Treasury maturities impacting global debt markets (10 yr typically exceeds 2 yr yields by aprox. 90 bps). Inversions had averaged 30 weeks (9 to 59 weeks) and -46 bps (-8 to -133 bps). The "carry-trade" (borrowing in low-interest rate countries) fueled M&A activity worldwide.
- U.S. Treasuries returned an average of 8.7% in 2007 - compared with 3.0% in 2006, 2.9% in 2005, 3.5% in 2004 and 2.3% in 2003. U.S. 10 yr. Treasuries rallied 27.8% from 5.32% (Jun 13) to 3.84% (Nov 26) - in 23 weeks.
Dollar ends the year at $1.46 - traded $1.49 (Nov 23) to the Euro – falling from $1.17 (Dec '05) a 26% depreciation in 2 years. British pound hits a 26-year high trading above $2.11 to the dollar while the Canadian dollar traded above $1.10.
U.S. GDP in 2007 advanced by 2.2%. GDP advanced by 3.3% in 2006, 3.2% in 2005, 4.4% in 2004, 3.0% in 2003 and 1.9% in 2002.
Earnings for S&P 500 companies in the 3rd quarter of 2007 was negative for the first time since Q4 2001 - Q1 2002.
2007 sales of single-family homes declined 13% and prices dropped 1.8% - the first decrease since 1968 and probably since the 1930's (NAR records began in 1968).
$100 billion in reported losses at more than 20 of the world's largest banks and securities firms holding SIVs (Structured Investment Vehicles holding non-performing, non-prime U.S. motgage loans).
U.S. venture capital climbed to a 6 year high of $29.4 billion in 2007 (3,813 deals), $26.6 billion in 2006 up from $19.7 billion in 2003 - $40.6 billion in 2001 (4,500 deals).
Gold ends the year at $838 - traded $848 (Nov 7) - highest in 27 years (when it traded 2 days above $800, 1/18/80, $835 and 1/21/80, $850). Platinum trades at all-time high of $1551.50 (Dec 26). Silver traded $15.90 matching its highest level in December 1980. Uranium traded at an all-time high of $136.
- Oil ends the year at $96 - traded at an all-time high of $99.29 (Nov 21) - up almost 100% from Jan '07 lows.
- Reuters-CRB (Commodity Research Bureau) Index of 17 commodities trades at an all-time high $479.50 (Dec 31) up 26% in 2007.
Total global foreign-exchange reserves surpass $6 trillion - the U.S. dollar accounts for 63% while the Euro accounts for 27%.
ECB raised interest rates to 4% - the 8th increase for the Euro since Dec '05. The Bank of England raised rates up to 5.75% and the Bank of Japan raised interest rates from 0.25% to 0.50%.
Global mergers and acquisitions exceed $4.4 trillion - a record surpassing the $3.55 trillion in 2006.
Europe (24 markets, including Russia and eastern Europe) at $15.7 trillion passes U.S. in stock market value ($15.6 trillion) for the first time since WWI.
BRIC emerging markets - Brazil became the last member to reach $1 trillion in overall stock market value. Russia surpassed $1 trillion in September of 2006, then China (January '07) and India (May '07).
China's CSI 300 index surged 161% - the Chinese stock market overtook the Japanese market (8/07) in capitalization. Shanghai Composite Index rallied from below 1000 (Jun 6 '05) to 6,124 (Oct 16, '07) more than 512%, in little more than 2.3 years - as over $2.3 trillion of Chinese savings (earning less than 3%) flooded into Chinese stocks.
- PetroChina became the first $1 trillion company as it debuted on the Shanghai Exchange, 11/5 (Exxon Mobil is valued at $475 billion). The People's Bank of China raised borrowing and lending rates in order to cool inflation. Additionally, the Chinese government reduced the tax on personal savings and raised bank reserve requirements to encourage savings and curb a possible asset bubble. 60 million brokerage accounts were opened in 2007.
- China adds gold (also aluminum and steel) becoming the world's largest producer - 276 metric tons of gold in 2007 overtaking South Africa (largest producer since 1905).
Sovereign wealth funds 2007 high-profile purchases: China $20 billion in China Development Bank (Dec. 31), Singapore up to $5 billion in Merrill Lynch (Dec. 24), Singapore $9.75 billion and undisclosed Middle Eastern $1.8 billion in UBS (Dec. 10), Abu Dhabi $7.5 billion in Citigroup (Nov. 26), China $2.7 billion in China Everbright Bank (Nov. 7), Abu Dhabi $1.1 billion in Och-Ziff (Oct. 29), China $1 billion in Bear Stearns (Oct. 22), Qatar 20% of the London Stock Exchange and 10% in the Nordic bourse (Sept. 20), Abu Dhabi $1.35 billion in Carlyle Group (Sept. 20), China $3 billion and Singapore $2 billion in Barclays (July 23), Abu Dhabi $750 million in ICICI Bank (India's largest bank) (July 13), China $3 billion in Blackstone Group (May 20) and Abu Dhabi undisclosed stake in HSBC (May 2).
- Sovereign wealth fund (SWF) first established in the 1950s (Kuwait's Kiribati, the oldest) estimated value of $1.8 trillion. 31 SWFs from 23 nations, the largest is Norway's Government Pension Fund ($326 billion) - 13 are based in the Middle East / North Africa, 10 Asia-Pacific, 4 Sub-Saharan Africa, 3 Non-Pacific Asia and Norway, about half the funds were established since 2000.
UAW workers at General Motors, Ford & Chrysler (Cerberus Capital Management) divested their multi-billion dollar health care obligation to a UAW-run VEBA trust.
Steriods dominated Major League, Olympic and International sports as Barry Bonds, Marion Jones, Flyod Landis and many other faced accusations / reprisals.
Best Investments in 2006
U.S. Total stock market returned 14% in 2006, while Treasuries averaged 3% and Inflation averaged 3.0%. Stocks outperformed while Bonds were below their historic average and inflation was near average. Most gains for the year were accumulated in the second half of 2006.
Large Cap performed best 16% followed by Small Cap (15%) and Micro Cap (15%) while Mid Cap stocks returned only 10%. Financial stocks performed best 19% while Technology (10%), Natural Resources (10%) and Health (7%) returns were less impressive.
Of the World’s largest economic regions Latin America performed best 38.4% followed by Europe 16.7% and Asia-Pacific 14.5%. Of the World’s largest Developed non-U.S. economies Germany returned 22%, France (17%), Canada (15%), Britain (11%) and Japan (7%). In the Emerging markets which returned 29%: China, Eastern Europe-Russia and India continue to excel. Hedge funds (8,000, controling $1.3 trillion) and private-equity firms (over $700 million) - returned on average 13% with private-equity generally outperforming hedge funds.
Those who diversified with MPT did best, a trend which should accelerate – indicative are the returns of non-U.S. markets just mentioned. Returns in 2006 were strong aided by historic corporate earnings, low unemployment and borrowing costs.
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.
2006 complete News (click)
U.S. residential housing market cools from its record unsustainable (price) growth rate - over $1.9 trillion of ARMs will reset at higher interest rates in 2007-08 ($11 trillion mortgage loans outstanding).
FOMC Tightening Cycle - Fed Funds rate increases to 5.25% (17 consecutive increases). Fed Funds rate began the year at 4.25% (Fed Funds was 1% from Jun '03 - Jun '04 and 6.5% from May '00 - Jan '01).
U.S. 10 yr Treasuries end the year at 4.68% - trades 5.24% (Jul 5). U.S. inverted yield curve tests markets worldwide (began, Dec 27 '05 - first time since Feb 24, '00 - Dec 22, '00, 8th time since 1980). U.S. Treasuries returned an average of 3.0% in 2006 - compared with 2.9% in 2005, 3.5% in 2004 and 2.3% in 2003.
U.S. unemployment rate falls to 4.4%.
United States (as a nation) for the first time since 1915 owns less assets oversees than foreigners own of U.S. assets - a trend which is expected to increase. $8.4 trillion of U.S. Treasuries outstanding.
Dollar ends the year at $1.32 to the Euro – falling from $1.18 at the beginning of the year an 11% depreciation.
U.S. GDP in 2006 advanced by 3.3%. GDP advanced by 3.2% in 2005, 4.4% during 2004, 3.0% during 2003 and 1.9% in 2002.
Oil ends the year at $61 - trades $77.03 (7/10) an all-time cash high - up from $10 (Dec '98). Oil started the year at $60.
- Gold ends the year at $636 - traded $732, highest since February 1980, when Gold spent 3 weeks above $700. Platinum traded $1335 and Copper traded $4.03/lbs at all-time cash highs. Silver traded $15.21 - highest since February 1983. Uranium (actually more common than silver) rose
more than 10-fold from $7.10/lb (1/01) to $72/lb.
- Reuters-CRB (Commodity Research Bureau) Index of 17 commodities trades at an all-time high above $409 (Dec '06).
Global mergers and acquisitions exceed $3.55 trillion - a record surpassing the $3.4 trillion in 2000.
World’s financial stock of the 5 wealthiest: US (35%), the Eurozone (32%), Japan (20%), the UK (8%) and China (5%) - estimated at $150 trillion. Foreign exchange reserves - China's reserves surpass $1 trillion eclipsing Japan's $900 billion - foreign buyers hold $4.4 trillion of $8.4 trillion of U.S. Treasury debt.
European Central Bank (ECB) raised interest rates to 3.5% from 2.00% (6th time since Dec '05) for 12 European nations - Slovenia to become the 13th EU member state to introduce the Euro, Jan. 1. Bulgaria and Romania join the European Union, bringing membership to 27 nations.
Bank of Japan raises interest rate to 0.25% up from 0.0% ends over 7 years of deflation fighting.
China increases interest rates in order to cool domestic economy growing at 9-11%. Industrial and Commercial Bank of China (ICBC) launches the world's largest IPO ever - $21.9 billion.
Russia ($1 trillion economy) invited to join the World Trade Organisation (WTO) of 149 members - China joined the WTO in 2001.
Inter-American Development Bank estimates that 12.6 million U.S. Latin American-born immigrants will send home more than $45 billion — of about $460 billion earned in 2006.
U.S. population exceeds 300 million (China, 1.32B and India, 1.10B) 100 million reached in 1915 and 200 million in 1967.
Ben Bernanke succeeds Alan Greenspan as Chairman (retires after 18½ years) of the Federal Reserve.
NYSE, the world's largest stock market, demutualizes and mergers with Archipelago Holdings Inc. (and Pacific Exchange) then NYSE Group reaches deal to acquire Euronext. NASDAQ purchases a 30% interest in the London Stock Exchange.
Medicare (Part D) Prescription Drug benefit over 38 million of Medicare's 43 million beneficiaries enroll in 2006. 77 million Baby Boomers are estimated to be eligible for Medicare by 2031.
SEC and State Attorney Generals investigate the backdating of corporate options at 140+ companies (resulting in 70+ firings/resignations of corporate officials) - the practice, appears to have originated in Silicon Valley (in companies like Sanmina, Novellus & Juniper Networks pre-9/11).
U.N. Security Council adopts resolutions to impose sanctions on North Korea (for a nuclear-bomb test, Oct 9) and Iran (for its nuclear program, Dec 23).
2006 XX Olympic Winter Games Torino, Italy where German, American, Canadian, Austrian, Russian & Norwegian athletes scoop up medals.
Michael Schumacher retires as the world's first billionaire athlete - Formula One driver. Schumacher, 7-time world champion, 91 race wins & 154 podium finishes - brought wins to Ferrari (2000-04) for the first time since 1979.
Warren Buffett gifts 10 million of Berkshire Hathaway (B shares - over $31 billion) to the Gates Foundation - surpassing Bill and Melinda Gates' endowment of $25.9 billion.
Best Investments in 2005
U.S. Total stock market returned 5% in 2005, while Treasuries averaged 3% and Inflation averaged 3.5%. Stocks and bonds were below their historical averages while inflation was near average. Most gains for the year were earned in May 3.7%, July 3.9% and November 4.0%.
Mid Cap (12%), Small Cap (8%) and Micro Cap (8%) stocks performed best for the 6th year. Financial (6%), Health (8%) and Technology (4%) returns were below average but above Large Cap stocks which returned only 3%. 2005 was a year where Natural Resources (37%) outperformed.
Of the World’s largest economic regions Latin America performed best 50.6% followed by Europe 22.7% and Asia-Pacific 21.8%. Of the World’s largest Developed non-U.S. economies Japan returned 40%, Germany (27%), Britain (16%), France (23%) and Canada (22%). In the Emerging markets which returned 34%: China, Eastern Europe-Russia and India continue to excel. Hedge fund performance in 2005 was spotty with a wide dispersion of performance (mean 6%).
Those who diversified with MPT did best, a trend which should accelerate – indicative is the Dow Jones: the DJ 30 Industrials returned -0.6%, while the DJ 20 Transportation returned 11% and DJ 15 Utilities 21%. Performance of non-U.S. markets was equally impressive. Returns in 2005 were dampened by increases in borrowing costs (Fed Funds rate) and increases in commodity prices (oil/gasoline, metals etc.) but offset by good corporate earnings, low mortgage rates and a stronger dollar.
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.
2005 complete News (click)
FOMC Tightening Cycle - Fed Funds rate increases to 4.25% (13th consecutive increase). Fed Funds rate began the year at 2.5% (Fed Funds was 1% from Jun '03 - Jun '04 and 6.5% from May '00 - Jan '01).
U.S. 10 yr Treasuries end the year at 4.35% - trades 3.80% (Jun '05) lowest since Mar '04 (3.65%) and 3.07% on Jun 16 '03. Greenspan warns that the long U.S. Treasury bond's yield is unusually low - "a conundrum”. Inverted yield curve starts (Dec 27, '05) between 2-year and 10-year U.S. Treasury notes for the first time since Dec '00 as investors shy away from shorter maturities. U.S. Treasuries returned an average of 2.9% in 2005 - compared with 3.5% in 2004 and 2.3% in 2003.
World’s financial stock of the 5 wealthiest: US (35%), the Eurozone (32%), Japan (20%), the UK (8%) and China (5%) - estimated close to $145 trillion. Foreign exchange reserves - Japan holds $847 billion and China $819 billion (foreigners hold $4.2 trillion of $7.9 trillion of U.S. Treasury debt outstanding).
Hedge funds surpass $1 trillion in assets under management - SEC oversight forthcoming.
U.S. GDP in 2005 advanced by 3.2%. GDP expanded 4.4% during 2004, 3.0% during 2003 and 1.9% in 2002.
Gold ends the year at $517 - futures trade $544 (Dec '05, 24½ year high) up from $440 at the start of the year. Silver futures trade above $9.30 (18 year high). Platinum futures trade above $1,025 for first time in 25 years. Copper futures trade above $2.20 /lbs. an all-time record high.
Oil ends the year at $60 - trades $55 (Nov '05) down from $70.85 (Aug '05). Oil reaches an all-time record, a 600% rally in 6½ years, up from $10 (Dec '98). Oil started the year at $42.
Dollar ends the year at $1.18 to the Euro - trades $1.16 (Nov '05), strongest in 2 years - rallying from an all time low of $1.36 (Jan '05).
Reuters-CRB (Commodity Research Bureau) Index trades a (non-adjusted) all-time high of $351 (Dec '05).
Hurricanes Katrina, Wilma & Rita ravage Gulf Coast residents from Texas to Florida - taking over 2,140 lives, displacing 2 million Gulf Coast residents, costing possibly $250 billion and years of rebuilding.
National home prices stall. U.S. bank regulators issue new tighter guidelines on mortgage loans ($11 trillion outstanding).
Japan, world's second largest Developed economy, Prime Minister Junichiro Koizumi wins landslide relection and a popular mandate to push through market reforms - Japan Post to be separated and privatised.
Germany, world's third largest Developed economy, Christian Conservative Angela Merkel (Iron Frau) defeats 7 year incumbent Social Democrat Chancellor Gerhard Schroeder to become Germany's first female Chancellor.
European Union agrees on 7 year budget (2007-13, €862.4 billion
Euros). Tony Blair negociates to reduce the U.K.'s EU budget rebate by €10.5 Billion Euros - though the EU constitution was rejected for now.
China decouples the Yuan from the Dollar - pegging instead to a basket of international currencies.
Pope John Paul II (Karol Wojtyla, 1978-05 the first non-Italian in 455 years) is mourned by 5 million people visiting Rome including dignataries. Cardinal Joseph Ratzinger (German) becomes Pope Benedict XVI.
Chief Justice William Rehnquist dies at 80; 16th in U.S. Supreme Court history 1972-2005. John Roberts is confirmed as the 17th Supreme Court Chief Justice, the youngest Chief Justice in over 200 years.
London terrorist bombings on 7/7 kills 52 on subways and one bus - prompting new British laws.
Iraqi people vote and adopt their first democratic constitution and first regional parlimentary General elections - the Council of Representatives, a 275-member body, will shape Iraq's future government.
Kashmir earthquake (October 8) kills over 85,000 and leaves over 3.5 million Pakastanis homeless.
Lance Armstrong wins Tour de France for his 7th consecutive victory (1999-2005).
Chicago White Sox win their first World Series title since 1917.
Best Investments in 2004
U.S. Total stock market returned 12% in 2004, while Treasuries averaged 3.5% and Inflation averaged 3.5%. Stocks and inflation are near their historical averages while bond returns were below average. Most gains for the year were earned in November 4.5% and December 3.5%.
Small Cap value stocks earned 25% - the fifth year of returns in excess of 20% per year. Mid & Small Value Cap stocks have appreciated 125% in the past 5 years. Energy (34%) and Utility (24%) stocks performed best in 2004. Large Growth stocks returned 6%, while Technology stocks returned 10%.
Of the World’s largest economic regions Latin America performed best 36% followed by Europe 17% and Asia-Pacific 8%. Of the World’s largest Developed non-U.S. economies Japan returned 8%, Germany (8%), Britain (8%), France (8%) and Canada (12%). In the Emerging markets which returned 25%: China, Eastern Europe-Russia and India continue to excel. The S&P 500 returned 9% under-performing (due to the concentration of Large Cap stocks) the broader market. Hedge fund performance in 2004 was disappointing (compared to '00-'03), generally performing worse than the Stock market (mean 8%). Treasury bills yielded a real (inflation adjusted) loss of 2% due to historic low Fed funds rate (1%).
Those who diversified with MPT did best, a trend which should accelerate. Despite a rally from March ‘03 through the end of 2004 Large Growth Technology stocks still lag (worth 2/5 of their values from their peak). The NASDAQ Composite Average fell from 5,132.52 (its Mar 10, 2000 peak) to 1,253 (its Mar 12, 2003 low) a 77% decline. The S&P 500 is still down about 21% from its peak of 1552.87 on Mar 24, 2000.
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.
News in 2004
FOMC Tightening Cycle - Fed Funds rate increases 5 consecutive times to 2.5% from 1% (from Jun 25, '03 - Jun 30, '04 rate was 1%, in 2000 Fed Funds rate was 6.5%).
U.S. 10 yr Treasuries end the year at 4.25% - U.S. Treasuries returned an average of 3.5% in 2004 up from 2.3% in 2003.
Dollar ends the year at an all-time low of $1.36 falling from $0.8228 (October 26, 2000) to $1.36 in the past 4 years (a 65% decline) to the Euro. The Euro began trading on Jan 1, 1999 between European banks at $1.17.
Oil ends the year at $42. Oil started the year at $27 then traded just below $50 at Halloween. In December 1998 oil was $10.
Gold ends the year at $440 with highs of $470 and lows of $385 (up from $250 in April of 2001).
Prescription Drug Bill, Medicare (Part D) signed into Law.
Sumatra-Andaman earthquake occurs on Dec 26. The 9.2 earthquake lasted nearly 10 minutes causing the entire planet to vibrate (the total fault slip measured nearly 50 feet over about an hour). The subsequent Tsunami (may have reached as high as 100 feet) and killed between an estimated 223,000 - 283,000 making it one of the worst natural disaster in recorded human history. Donor nation pledges exceeded $13.6 billion.
President George Bush defeats John Kerry in 2004 Elections for 2nd term.
U.S. and Coalition forces had successes and failures in Iraq after toppling Saddam Hussein's Ba'ath Party government. More than 200,000 people are estimated killed/"disappeared" during Saddam's rule, and more than 1 million were killed during the Iran-Iraq War (1980-1988), the first Persian Gulf War (1991) and the current Operation Iraqi Freedom (2003-).
9/11 Commission hearings undertaken and reports released.
Madrid terrorist train blasts kill 190 people, which consequently effects Spanish Elections.
Chechen militants seize school in Russia more than 330 children and adults killed.
China undergoes first peaceful leadership transition since the 1949 Communist revolution.
Afghanistan holds its first democratic Presidential election since the removal of the Taliban. Operation Enduring Freedom returned rule to the Afghani people in 2002.
North Korea and Iran are pressured by U.N. member states on their nuclear programs.
European Union admits 10 new members, mostly from the former Soviet bloc - Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
Sudan's Darfur region ravaged by violence - a humanitarian crisis claim tens of thousands of lives.
Hurricanes (4) hit Florida: 117 killed, damage tops $22 billion.
President Ronald Reagan dies at 93; 40th President of the United States from 1980-88. Reagan abandoned detente instead indentifying the Soviet Union as the "Evil Empire" and demanding that East Germany "tear down" the Berlin Wall. Reagan, Margaret Thatcher, Pope John Paul II, Solidarnosc and the power of the American economy forced Mikhail Gorbachev in 1986 to introduce glasnost ("openness") and perestroika ("restructuring") effectively ending the Nuclear Arms Race and the Cold War. Russian Economic and Political reforms followed in 1988 dismantling the totalitarian state (established in 1917 by Lenin and Stalin) and freeing Eastern European states from Soviet control for the first time since 1945. Reagan introduced supply-side economics lifting the U.S. economy out of stagflation, creating 16.7 million jobs and the greatest economic recovery since post-WWII.
Athens defies skeptics and hosts a successful 2004 Summer Olympics. American swimmers stand out - Jenny Thompson becomes the most decorated swimmer in Olympic history with 12, Michael Phelps won 8 medals a record for a non-boycotted Olympics Games and Natalie Coughlin won 5 medals tying her for the most medals by a U.S. woman in any sport in a single Summer Olympics.
Boston Red Sox win their first World Series title since 1918, beating the New York Yankees (ending the "Curse of the Bambino" the infamous trade of Babe Ruth to the New York Yankees following the 1919 season) and then the St. Louis Cardinals in 8 straight games.
NASA's 2 rovers reach Mars and transmit images and data. Hubble Space Telescope estimates the age of the universe at 13.7 billion years.