Fed Raises Rates again

So the Fed is raising rates again to 3.25%. How is this affecting the 10yr treasury? Not the way that it is "supposed to", but rather, the way it has been in the last several months. The 10yr is below 4%! At the close it was at 3.94%. What does this mean??

You really need to keep your fixed income holdings SHORT. Some people are proposing the bar bell strategy. Looking at the current inventory and the prices of these longer-term bonds, you really don't want to go out more than 3yrs. When I say longer-term, I'm talking about 15+yrs.

The yield curve is pretty flat. What does that mean? It means that if the short term rate is 3.25% and the 10yr rate is 3.94%, there isn't that much of a difference in the yield, is there? So, why would you want to hold onto something for 10yrs and get 3.94% when you can get into something that matures in 1yr at a rate of just above 3.25%??

Back from vacation

Hello! I'm back from several vacations that I took this month and now it's back to work. I'm sorry that I haven't been able to provide any good information lately. Now that I'm back, you can ask any question you want!

Tip for the day:
Having a trust is important because if you die without one, it is called "dying intestate". It basically means that everyone (yes, even that nosy neighbor) can have access to your personal information through the courthouse. You have to settle your estate through the court system and it is NOT a pretty process so do yourself and your heirs a favor: SET UP A TRUST!!!

Payroll growth

Apparently, the non-farm payroll growth in May was a lot slower than in April. This explains why the market took a nosedive today. It may still turn around with almost 3 hours left in the market, but chances are, it will be a down day. It's fascinating to me how people focus on the payroll growth number and yet, when you look at the unemployment rate, we are doing better than last month! We are at 5.1% unemployment, compared to 5.2% last month!

People are starting to think that the Fed is done with their rate hikes, claiming that the economy has decelerated so much that if the Fed hiked the rates any further, there might be a catastrophe!

Wow....people just get so overzealous about everything and you can thank the media for that. Looking at the fundamentals of a company, there are many healthy ones out there trading lower than they should. There are some trading higher than they should. GDP is still growing. Companies are making money. Investors are making money.

Isn't it funny how overly sensitive the market is to the smallest news, good or bad?

M&A Activity

M&A = Mergers and Acquisitions. Yes, people do "sell out" to THE MAN. Shopping.com is being acquired by that Internet giant, E-Bay and Sun Microsystems is planning on buying StorageTek. What does this mean? The company being acquired usually spikes in price and the company doing the acquiring usually drops a bit in share price. If it is a good merger or acquisition, E-Bay and Sun will profit over the long-term from this strategy. If it is a bad merger, a la Time Warner and AOL, you will be holding a dud of a stock for awhile.

Sun definitely needs all the help they can get right now and this should help their long-term growth strategies. Sun also has lots of cash. We like companies with lots of cash.
E-Bay's acquisition of Shopping.com should bring a lot more cash to the table for the combined company, not that Ebay was hurting for cash in the first place. This should help them diversify their core business even further.

Roth IRA

Someone asked me today if they could take money out of their Roth IRA. You can always take out the portion that you put in, even if you are under the age of 59 1/2. This is different from a regular IRA because with a regular IRA, you have to wait until age 59 1/2, even on the money that you put in.

For example:
Larry, who is 50 yrs old, puts $10,000 of his own money into his Roth over the course of 4 years. That $10,000 grows to $14,000 during those 4 years. What can he take out without penalty?

Answer: $10,000. That is the principal. The $4,000 that remains is the earnings which must stay in the Roth until age 59 1/2 or else he will have to pay a penalty.

Hello world

SB Moneyline is born! Let's take some time to celebrate this new creation!