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Investors' concerns about the election
caused the markets to dive and sail like kites in a gusty
wind, but they stayed aloft.
Strong performance early in the
week was fueled by falling oil prices and good earnings
reports. By Thursday, however,
uncertainty about whether the newly elected Congress would
be sympathetic to business issues triggered a sell off,
according to Reuters. Shares of drug companies and healthcare
stocks
took a hit as investors anticipated that Democrats will
address rising healthcare costs and related issues. The market
recovered
on Friday, and the major indexes finished the week higher:
the Dow finished up about 1%, the S&P rose more than 1.2%,
and the Nasdaq turned in the strongest performance, up about
2.5%.
| Returns through 11/10/06 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
1.0 |
13.0 |
13.3 |
7.1 |
4.6 |
6.7 |
| Nasdaq Composite |
2.5 |
8.3 |
8.5 |
6.3 |
4.8 |
6.4 |
| Standard & Poor's
500 |
1.2 |
10.6 |
11.8 |
9.2 |
4.1 |
6.4 |
Source: Yahoo! Finance, Barrons
Past performance is no guarantee of future results. Indices
are unmanaged and cannot be invested into directly.
Three-,
5-, and 10-year returns are annualized. Assumes dividends are
not reinvested.
THE BIG STORY OF THE EARLY 21ST CENTURY is
China's status as the world bank, the country who the United
States and others are becoming increasingly indebted to. The
U.S. dollar fell to the lowest against the euro in more than
two months after Reuters reported People's Bank of China Governor
Zhou Xiaochuan said he has a "clear" plan to diversify the
country's foreign-exchange reserves. China's foreign currency
reserves hit $1 trillion this past week, and of those reserves,
over 70% are in US assets.
If and when China decides it's had
enough with dollars, where will it turn? Some say to gold,
of which China only has about
1% of its forex reserves, or about 600 metric tons. By comparison,
the United States has 8100 metric tons of gold reserves.
If China increased its reserves to around 5%, it would swallow
up two years of global gold mining production, which is
one
of the many reasons gold bulls argue that gold will advance
in the years ahead. Is it possible that China is exerting
more influence than we think?
We get a lot of economic data
this week, so hopefully that'll yield some clues.
ARE
YOU SAVING FOR COLLEGE IN A 529 PLAN? If
you are, you'll be glad to know that the Pension Protection
Act (PPA) of 2006 permanently extended the tax
benefits of state-sponsored 529 college savings plans (also
called Qualified Tuition Plans). That means the money you've
stashed away in a 529 Plan will continue to grow tax-deferred
and can be withdrawn tax-free to pay for qualified education
expenses. These tax benefits were originally set to expire
after 2010.
What are 529 Plans?
If you're not familiar with them, 529 plans are state-operated
investment plans that allow anyone to prepay, or make contributions
to, an account that will be used to pay a child's
or grandchild's qualified education expenses. Contributions
are not tax deductible, but any earnings grow tax-deferred
and distributions that are used to pay qualified expenses
— like tuition, room and board, mandatory fees, books,
and computers
(when required) — are tax-free. Each state's plan
has its own set of rules and restrictions, which are subject
to change.
Two Types of Plans
There are two kinds of 529 plans: prepaid tuition plans
and college savings plans. Prepaid tuition plans allow you to lock in future tuition
costs at in-state public colleges (and some private colleges)
at current prices. College savings plans allow you to
save money in professionally managed accounts and use
the proceeds
at any college or university in the United States.
If
you have grandkids, you may find 529 plan contributions
particularly beneficial. Contributions may be considered
gifts and excluded from your estate. In addition, the
assets accumulated in 529 plans can generally be used
for any grandchild.
If you would like to learn more, please give us a call.
Weekly Focus — Here's a riddle
for you.
Three friends check into a hotel for the
night. The clerk tells
them a
room costs
$30, payable in advance. They pay $10 each, and go to their
room. A few minutes later, the clerk realizes he has overcharged
the group $5. He asks the bellhop to return $5 to the three
friends. The bellhop decides to return $3 to the friends,
reasoning that it would be difficult to divide $5 among
3 people. He gives a dollar back to each of the friends,
pockets
$2 and goes home for the day!
Now, each of the three friends
has paid $9 for the room which is a total of $27 for the
night. We know the bellhop
pocketed $2. Adding that to the $27, gives you $29, not
$30 (the amount originally spent). Where did the other dollar
go? Email us if you need help with the answer.
Best Regards,
Ken Ford
P.S. Please feel free to forward
this commentary to family, friends, or colleagues.
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