Q2/2012 Market Review ~ Summer: Time to Jump in the Card Pool!
July 18, 2012
It's summer! Read below about how you can save money by jumping in the card
The Kalorama Wealth Strategies Quarterly Market Review is a brief updating the
performance of the financial markets and providing information on investment and
financial planning topics.
Although stocks rose in the final month of the second quarter, including a
final-trading-day surge of 2.5%, it was not enough to offset losses from April
and May. Concerns about a weak domestic economy and employment, as well as the
ongoing European sovereign debt crisis, weighed on equity performance for the
quarter. Nearly all major asset classes were lower; the only exception was real
estate, edging up 1.5%. For the first half of 2012, all the broad sectors moved
ahead, except for energy and natural resources, as the Dow Jones - UBS Commodity
index dropped 3.7%.
While stocks were struggling, investors continued to find a safe haven in U.S.
Treasury bonds and other fixed-income securities. In reaction to a dismal May
employment report, on June 1st the yield on the 10-year Treasury Note sank to a
record intra-day low of 1.44%. All major bond sectors rose for the second
quarter and first half of 2012. Leading the pack at mid-year were U.S. Corporate
High Yield and International Emerging Markets, jumping 7.3% and 7.0%,
respectively, with U.S. Treasury TIPs next in line, rising 4.0%.
After its June 20th meeting, the Federal Reserve announced that it would expand
its "maturity extension program" to put downward pressure on long-term interest
rates, reduce unemployment, and stimulate the economy. The "Operation Twist"
program was initiated in September 2011 whereby the Fed would "twist the yield
curve" by selling $400 billion of Treasury securities in its portfolio with a
maturity of less than three years and use the funds to purchase securities with
maturities ranging from six to 30 years. The expansion will add $267 billion
through the end of 2012.
Unchanged was the Fed's policy on short-term interest rates at zero to 0.25%.
Also unaltered was its policy of reinvesting its portfolio of maturing housing
debt into agency mortgage backed securities, as well as the expectation that
economic conditions will warrant keeping short-term interest rates
"exceptionally low" through 2014.
At the close of the quarter, the yield on the 10-year Treasury Note was 1.64%,
sinking 57 and 24 basis points for quarter and first half of 2012, respectively
(the yield as of July 17th was 1.51%).
Below are rates of return for selected market indices for the second quarter of
2012, year-to-date 2012, and the three, five, and 10-year compound annual
returns as of December 31, 2011.
Summer: Time to Jump in the Card Pool!
the ongoing economic malaise, consumers continue to seek ways to stretch their
dollars. One way is to purchase gift cards at a discount. Gift card exchange web
sites such as Card Pool (www.cardpool.com),
Plastic Jungle (www.plasticjungle.com),
and ABC Gift Cards (www.abcgiftcards.com)
sell discounted gift cards from hundreds of retailers. The wide variety includes
home improvement (Home Depot, Lowes), drug (CVS, Rite Aid), electronic (Best
Buy, Apple), big-box (WalMart, Target), and department stores (JC Penney,
The web sites pay up to 92% for unwanted or unused gift cards and then re-sell
them at discounts ranging from 2% to 35%. There is no sales tax and shipping is
free; electronic gift cards are also available. Some items to consider when
purchasing discounted gift cards:
- Only purchase cards from stores where you
actually shop and that sell items you really need. Otherwise, you will end
up with cards collecting dust and be in the same position as the person who
sold them to the web site.
- Only purchase cards from web sites that sell
cards with no fees and no expiration date.
- Check out the guarantee program to determine
the policy for returns and card value (read the fine print!). Cardpool
guarantees the card will be valid at the merchant and to the dollar amount
specified for up to 100 days from the date of purchase, up to a maximum of
$1,000 per customer. Plastic Jungle offers a guarantee for 60 days from the
date of purchase and up to a maximum of $1,000 per customer. ABC Gift Cards
has a 45-day return policy for invalid cards or balance discrepancies.
- Upon receipt of a card, call the 800 number on
the card and/or take it to the retailer to confirm its value.
Finally, to get a bonus on top of your discount, use a credit card with a cash
back or rewards program to purchase the gift cards! Happy shopping!
Update: Further Markdowns on Interest Rates!
up from our October 2011 Newsletter (see Interest Rates on Sale at http://www.kaloramawealth.com/docs/Q311.pdf),
the weak economy and Federal Reserve actions continue to drive home mortgage
interest rates to their lowest levels since records have been maintained.
Freddie Mac last week reported average rates of 3.56% and 2.86% for 30-year and
15-year fixed rate mortgages, respectively.
If you can qualify for a mortgage, it is an incredible opportunity to lock in
low, long-term borrowing costs with a home purchase or refinance. Even if you
have refinanced within the past couple of years, if your mortgage has an
interest rate above 4%, it may make sense to consider going through the
money-saving process again.
Please contact Kalorama Wealth Strategies if you would like to discuss whether
refinancing makes sense. For more information on our investment advisory and
financial planning services, please see our web site at www.kaloramawealth.com.
Please feel free to forward this link to friends and colleagues who can benefit
from information about investing and financial planning. If I can be of any
assistance to you or anyone you know, please do not hesitate to contact me.
P.S. - What topics interest you? Please email us at firstname.lastname@example.org.
David M. Taube, CFA, CFP®
CEO and Chief Investment Officer
Kalorama Wealth Strategies, LLC
Logo: Kalorama in Greek means "beautiful view." Through our planning
process, our goal is to provide you "A Beautiful View To Your Financial