Practical Prosperity

December 2010

“Lucy – Incidentally, I know how you feel about this Christmas business, getting depressed and all that. It happens to me every year. I never get what I really want! I always get a bunch of stupid toys, or a bike, or clothes, or something like that.

Charlie Brown – What is it you want???

Lucy – Real estate!”

It’s the holiday season and I thought it would be perfect to quote one of my favorite holiday shows “A Charlie Brown Christmas”. Whatever holiday you celebrate this month, Lucy may just have a sound solution to your gift giving problems.

Real estate is cheap and buyers are still in command of the market. This year has been an interesting year in terms of the economy. Many expected real estate to have turned a corner and the unemployment rate to be falling. While manufacturing is up, corporate profits are strong, and prices are being held in check, our economy is still not firing on all cylinders yet. Let’s take a quick look at where we are as of November 30, 2010.

GDP (Gross Domestic Product)
2% - 2.50%
Inflation (Core CPI)
0% - 1.50%
Unemployment Rate
8.00% - 9.00%
Federal Funds Rate
1.00%
S&P 500 Return
8.16%
Bond Market Returns
4%

While it is shaping up to be a decent year for stock market returns, GDP and unemployment are still just barely hanging on. This prompted many to begin speculating a double-dip recession might be on the horizon. (We don’t believe that is the case.) What is most important is to remember, that things are growing. We may not be happy with unemployment and GDP, but they are slowly improving. Marrying these improvements with a reasonably priced stock market and strong corporate earnings, 2011 may also be shaping up for a pretty good year.

The amount of debt consumers took on was massive and we will see continued deleveraging for a number of years, however the savings rate is beginning to level off from its previous skyrocket. That means more money to put into the economy and if consumers feel good, that will happen.

On that note, its time to get merry! Let’s follow up on a tip I gave you in our December 2008 newsletter. Buy stock. Your $50.00 holiday gift would be worth this today:

Dow Jones $66.56 up 33.11%
S&P 500 $69.36 up 38.77%
NASDAQ $83.60 up 67.20%
Emerging Markets $92.89 up 85.77%

With return figures like that, if you were the lucky recipient, you should be quite merry. Giving a gift like this to a child or grandchild not only keeps on giving, but it teaches a great and necessary financial lesson.

Finally, each December it is also fun to take a look at the annual Christmas Price Index calculated each year by The PNC Financial Services Group. After little movement last year, the index had its 2nd greatest year of inflation in 2010, rising 9.2%. Gold rings surged 30% on rising commodities, and ladies dancing must be in high demand as their prices soared 15%. For some holiday cheer click here and waste an hour on a cold day laughing your way through an economics lesson.

So once again my calling, if you are just totally stumped on someone’s holiday gift, buy stock. Whether you have $50.00 to spend or $50,000 to spend, now is the time. Efficiently priced markets perform well independently of stellar economic returns. This is our environment and we should make the best of it. One of our missions at Mackey Advisors™ has always been for you to continually be prosperous. Whether that means giving gifts, volunteering time, hosting the family dinner, or helping a family in need make it your mission too this holiday season. A most safe and happy holiday to you and yours.

Andy Pulsfort