Ben Bernanke is sending a signal to Wall Street and investors!

Yesterday, the Dow Jones Industrials, S&P 500 and NASDAQ had a combined average decline of 1.29%, which many equated to the same day comments by Federal Reserve Chairman Ben Bernanke.   

Mr. Bernanke said at a news conference the Fed may begin reducing its stimulus measures (i.e., bond-buying program) later this year if the economy is strong enough, with the goal of ending in mid-2014. This is something that investors, especially large institutions, have been expecting for some time. However, once Mr. Bernanke's comments gave an explicit timeline on pulling back, the reaction was one of shock and caused stocks to tumble on heavy selling volume. 

If the economic growth we have is sustainable without the Fed's help, then that's good news, but it's hard to wean Wall Street off the easy money. 

As the old saying goes, "all good things come to an end," even though many economists, analysts and investments professionals would argue that the Fed's actions have not been a good thing and gone too far. It is obvious to everyone that Wall Street had become addicted to the Fed's cheap money/low interest rate policies. As such, Mr. Bernanke is starting to pull the punch bowl of cheap money away from the partygoers, and they're immediately throwing tantrums and going into withdrawal as they're told that they're going to be cut off at some point.  

I believe it is better for Mr. Bernanke and the Federal Reserve to start getting the message out now, so the stock and bond markets can start to adjust their expectations. Once this is done, Wall Street's focus will shift to more traditional indicators such as the economy, corporate earnings and new jobs when analyzing where and when to invest versus relying on Uncle Ben for guidance. 

Today's environment is challenging 

The rush to dividend-paying stocks has made it harder for even veteran portfolio managers to find good stocks to buy, says a long-time manager.

“I find it an easier climate to sell, rather than to buy,” says John Spears, vice president of the Tweedy, Browne Fund and speaker at the Morningstar Investment Conference in Chicago. Incidentally, another fund manager noted that he was finding it hard to find good names to invest in currently. Investing is similar to shopping, when prices go up, good shoppers and investors become much pickier. 

Is working instead of retiring better for your health? 

Teddy Roosevelt once said “the best prize that life has to offer is the chance to work hard at work worth doing.” Recent research suggests he may have been more right than he knew:

Two separate studies by researchers at Harvard and the University of Wyoming, and the Institute of Economic Affairs in the U.K. revealed health benefits derived from employment and identified negative and substantial effects on health from retirement. The UK study found retirement to be associated with a significant increase in clinical depression and a decline in self-assessed health, and that these effects grew larger as the number of years people spent in retirement increased.

Similarly, a study published in 2008 by the National Bureau of Economic Research found that full retirement increased difficulties with mobility and daily activities by 5 percent to 16 percent and, by reducing physical exertion and social interactions, also harmed mental health.

 I am not saying that everyone needs to work until their late 70's. However, it has been shown that work does keep individuals mentally and physically active and socially connected. That being said, retiring from a job directly to a recliner and watching TV is a recipe for disaster for your mental and physical health, as well as your marriage. However, by taking the attitude that you are retiring to _______ is much more healthy. I've seen many retirees over the years that transferred their energy and passions from work into their hobbies, spending more time with family, charitable work, social interactions, travel, etc. and remained quite healthy and happy as a result. 

Making the most of an uncomfortable situation 

Due to my sons' involvement in Boy Scouts, I've done more camping in the past three years, than I did in the prior 48 before that. Some of the experiences that come to mind are:

Being snowed on in May of this year,

Sleeping in the back of the minivan due to our tent poles breaking from high winds and eventual storms,

Enduring several days at camp with hundreds of Boy Scouts and dads in  100° plus temps ,humidity levels that would steam up your glasses, and supervising boys that believed showering with soap and water is the devil's work, along with dining in sweltering mess halls that serve food that I could not identify via taste or sight.

In spite of all this, the boys and I have had a blast. Memories are being created, though at the time may not have seemed like fun, but are priceless over the years.

This weekend, I am going on a father - daughter float trip with Tess near the Ozarks. We will be camping out in tent around a campfire with a bunch of other dads and daughters from church.  As such, I am sincerely hoping for a dry weekend so that she'll be able to take part in all the activities, and I can maintain my sanity three hours from home. 

Quotes 

"Gratitude shares, appreciation speaks, thankfulness shows, compassion does."               

                   Jill Davis 

"When you find yourself stressed, ask yourself one question: Will this matter in five years from now? If yes, then do something about the situation. If no, then let it go."

                   Catherine Pulsifer 

"Don't spend a dollar's worth of time for 10 cents' worth of results."

                   Author Unknown 

"Trying to work with someone with whom you have unresolved baggage is like trying to ride a bike with an elephant on the handlebars."

                   Marc Lewis

 

Tony Moeller, CPA  

The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.  

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