Report Entry: Tuesday July 6th, 2010
A definition of perspective is as follows:
“The appearance of things relative to one another as determined by their distance from the viewer.”
Volatility in the market has more than doubled since mid-April as measured by the VIX index (measures the volatility of the S&P 500). I’m sure that was something most investors knew without looking at VIX.
According to the Bureau of Economic Analysis, real gross domestic product the output of goods and services increased at an annual rate of 2.7 percent in the first quarter of 2010. In the fourth quarter of 2009, real GDP increased 5.6 percent. There was a deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in exports, a downturn in residential fixed investment, a deceleration in nonresidential fixed investment, and a larger decrease in state and local government spending that were partly offset by an acceleration in personal consumption expenditures.
Recent market declines followed reports that showed the U.S. pending-home sales plunged 30% in May right after the homebuyer tax credit expired, and that the Institute for Supply Management’s June manufacturing index dropped more than expected. There have been further concerns about recent increase in jobs claims, European and U.S. debt concerns, and a very strong “June Gloom” in San Diego.
On the flip side, value or contrarian investors will see these price declines as an opportunity to purchase lower priced stocks following the principle of buying low and selling high. And, there are countering signals in different sectors indicating stabilization and potential growth.
So the market is reflecting the concern that we may be in for a long haul recovery and potentially a double dip recession. As an investor, these are no small matters as we continue to evaluate what to do with our hard earned money.
What is the best thing to do today? Every day we are overwhelmed with ‘great’ ideas. Gold, currencies, options, bonds, China, Brazil, plastics; you get the picture. Also, friends usually have some ‘smart’ person they know who has the secret to beating the market consistently; their personal version of Bernie Madoff. (continued)



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