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Elizabeth Wilson, MS, CFP, CMFC

The Monarch Report July 16, 2012


The Markets
Should the Federal Reserve raise interest rates to fire up the economy? For the past few years, the Fed has been on a mission to lower rates as much as possible. The thinking is lower rates will spur economic growth by making it less costly for businesses and consumers to borrow money. Unfortunately, it hasnt quite worked as planned. Short-term interest rates are near zero and 30-year mortgages are at a record low, yet the economy is still just muddling along, according to Barrons. Now, some investment managers are saying the Fed should reverse course and raise interest rates. Last week, prominent money manager David Einhorn went on CNBC and said, I think having very low zero rates is depressing to people. I think it deprives savers of reasonable incomes, the ability to forecast a reasonable income, and it cuts down on consumption. He went on to say low rates drive up food and oil prices and lower standards of living. Folks relying on a stream of income from their fixed investments can probably relate very well to what Einhorn is talking about. As recently as July 2007, $100,000 worth of 1-year Treasuries would have generated about $5,000 of annual income (a 5 percent yield), according to data from the Federal Reserve. Now, it would generate only about $200 (a 0.2 percent yield). The Fed may be in a classic Catch-22, according to CNBC. With sluggish economic growth, its certainly hard to justify a rate hike, yet, low rates are increasingly ineffective. CNBC says a growing number of analysts suggest the best course of action is to allow the cash-rich private sector to sort out its own problems without the government's interference. However, they acknowledge it likely would be painful, but could be the only sustainable path to recovery. With the Fed on the record as saying they plan to keep interest rates at their historically low range of 0 to 0.25 percent through late 2014, investors shouldnt expect the Fed to raise rates any time soon, according to Fox Business. Only time will tell if this low rate strategy is the right medicine for the economy.

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Data as of 7/13/12 Standard & Poor's 500 (Domestic Stocks) DJ Global ex US (Foreign Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index

1-Week 0.2% -1.1 1.5 0.5 2.5 0.9

Y-T-D 7.9% -0.2 N/A 1.3 -0.2 17.3

1-Year 3.1% -17.4 2.9 1.1 -14.8 12.7

3-Year 14.6% 5.7 3.4 20.7 7.2 34.8

5-Year -2.7% -7.9 5.1 19.1 -4.3 2.3

10-Year 4.0% 5.2 4.6 17.5 3.5 11.6

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barrons, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

HOW DO YOU TURN A PENNY INTO 1.25 BILLION DOLLARS? Sounds like a magic trick, right? Well, theres really no magic other than the law of large numbers. Heres how it works and how it may benefit our economy. A report from the Federal Highway Administration shows Americans traveled approximately 2.94 trillion miles in motor vehicles for the 12 months ending April 2012. Now, when you figure how many gallons of gas that burns up, you get a really big number! Moodys Economy.com chief economist Mark Zandi has done the math and, by his reckoning, each penny change in the price of a gallon of gas equates to, you guessed it, about $1.25 billion over the course of a year, as reported by CNBC. With the wild swings weve seen in the price of gas, the savings or cost can add up quickly. A recent check with AAA showed the average price for a gallon of regular gas dropped by about $.25 over the past year. So, multiply $1.25 billion by 25 and you get, to quote Carl Sagan, billions upon billions of additional coin in consumers pockets. And, that coin could fuel further growth in consumer spending. Youve heard the old saying, A penny saved is a penny earned. Today, a few pennies saved on gas can add up to billions!

Weekly Focus Did You Know


Theres about $1.1 trillion of US dollars in circulation today an all-time record high. However, most of it is not floating around in everyday transactions. About 75 percent of the $1.1 trillion is in $100 bills which dont circulate much. On top of that, about 50 to 66 percent of U.S. cash is held abroad. Despite the proliferation of credit cards and debit cards, we still seem a long way away from a cashless society.
Source: CNNMoney

Best regards, Your Monarch Team

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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. * The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. * The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Past performance does not guarantee future results. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * To unsubscribe from The Monarch Report please reply to this e-mail with Unsubscribe in the subject line, or write us at karen.rogers@lpl.com. Sources: http://online.barrons.com/article/SB50001424053111903431804577502672376902492.html? mod=BOL_twm_mw# http://www.federalreserve.gov/releases/h15/data.htm (Treasuries constant maturities/1-year/Monthly) http://www.cnbc.com/id/48121736 http://www.foxbusiness.com/economy/2012/04/25/fed-decision/#ixzz20jPr0zfc

903B Murfreesboro Road Franklin, TN 37064 615-614-0070 www.monarchadvisorygroup.com

http://www.fhwa.dot.gov/policyinformation/travel_monitoring/12aprtvt/12aprtvt.pdf http://www.cnbc.com/id/48096924 http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp http://tech.fortune.cnn.com/2012/07/12/6-fascinating-facts-about-cash/

903B Murfreesboro Road Franklin, TN 37064 615-614-0070 www.monarchadvisorygroup.com