Monthly Archives: April 2013

Gold is the most popular long-term investment with Americans – Shard Financial Services


The Markets

If anyone doubted the power of Twitter, their skepticism was laid to rest this week. Early Tuesday afternoon, a tweet from the Associated Press reported President Obama had been injured by explosions in the White House. Stock, bond, and commodity markets fell sharply on the news and then rebounded when the Associated Press communicated that its Twitter account had been hacked. This wasn’t the first time such a thing had happened on Twitter or the first time false and market moving information had been posted. In February, the stocks of Burger King and Jeep moved after a post on each company’s Twitter account indicated the company had been sold to a rival firm. The lesson to take from these events? Everyone may want to be wary about buying or selling investments based on news reported through Twitter or any other social media feeds.

Economic and earnings news was mixed during the week. Durable goods orders were off by almost 6 percent which was a mark in the negative column. There were fewer jobless claims than analysts expected which was a positive. The initial estimate of U.S. GDP growth for first quarter was released by the Commerce Department. Growth was about 2.5 percent annualized during the first quarter. That was significantly above fourth quarter’s 0.4 percent annualized growth, but below expectations for 3.0 percent growth. An above average number of companies beat expectations for the quarter. Sixty-nine percent of the companies in the Standard & Poor’s 500 beat analysts’ expectations, according to Thomson Reuters data reported on Yahoo! Finance. Since 1994, about 63 percent of companies have beaten expectations on average.

Markets generally recovered from Twitter trickery and were unfazed by mixed economic news. Stock markets finish the week higher with the Standard & Poor’s 500 gaining 1.7 percent, the Dow Jones Industrial Average rising by 1.1 percent and NASDAQ Composite Index up 2.3 percent. Treasury prices were higher by the end of the week. According to, that’s an indication the world still believes U.S. Treasuries are a safe haven.

Data as of 4/26/13
Standard & Poor’s 500 (Domestic Stocks)
10-year Treasury Note (Yield Only)
Gold (per ounce)
DJ-UBS Commodity Index
DJ Equity All REIT TR Index

Notes: S&P 500, 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, Barron’s,, 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.

What’s the story with gold? According to an April 2012 Gallup Poll, Americans believe gold is the best long-term investment. Overall, real estate, stocks, and savings accounts were near-followers. When Gallup broke the statistics down demographically, they found men prefer gold while women prefer real estate, independents prefer gold while Democrats and Republicans prefer stock, and wealthier people prefer real estate and stocks while middle and lower income Americans prefer gold.

Gold’s popularity is interesting because research suggests investors hold less than 20 percent of the world’s $9 trillion gold supply. Much of the world’s gold is held by central banks – the U.S. Federal Reserve, the European Central Bank, and others – and other financial institutions. One of the world’s largest holders of gold is the International Monetary Fund (IMF). The IMF is “an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”

The IMF and central banks hold gold as foreign exchange currency reserves because gold is universally accepted and highly liquid, according to The Economic Times. The World Gold Council reports developed countries often hold a significant portion of their reserves in gold. The United States has 75.1 percent of its reserves in gold, Germany has 72.1 percent, Italy has 71.3 percent, France has 69.5 percent, and the Netherlands 58.7 percent. In addition, central banks in emerging countries hold gold reserves although their reserves are often smaller than those of developed countries. Early in 2013, 9.5 percent of Russia’s reserves were gold, 9.6 percent of India’s, and 1.6 percent of China’s.

Some experts believe high demand for gold from emerging countries combined with limited gold supply may push gold prices higher. Other experts have compared the recent highs of the gold market to the dotcom and housing bubbles. Who’s right? Only time will tell.

Weekly Focus – Think About It

“Faith consists in believing when it is beyond the power of reason to believe.”

Voltaire, writer, historian, and philosopher

Best regards,

Margie Shard, CFP®

President & Wealth Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.


Securities offered through LPL Financial, Member FINRA/SIPC.


* 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 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 Weekly Market Commentary please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at 1537 N. Leroy St., Ste D, Fenton, Michigan 48430.
Sources:–finance.html  (Click on the blue Download This Paper button to see the entire PDF document. First reference on Page 2; second reference on Page 44.)  (Page 18)

Learn Bond Basics from Fenton MI Financial Advisor Margie Shard

Getting to Know Bonds

Many investors own bonds or debt based investments as a strategy for balancing the short-term market risk historically associated with stocks.1 It’s important to understand the characteristics of bonds when making decisions about how to invest.
A bond is an “IOU” for money loaned by an investor to the bond’s issuer. In return for the use of that money, the issuer agrees to pay interest at a stated rate known as the “coupon rate.” When the bond matures, the issuer repays the investor’s principal.

Benefits and Risks of Bonds

Because bonds may not move in tandem with stock investments, they may help provide diversification within an investor’s portfolio.2 Bonds frequently provide investors with a steady income stream, although zero-coupon bonds and Treasury bills are exceptions: The interest income is deducted from their purchase price, and the investor then receives the full value of the bond at maturity. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and, if held to maturity, offer a fixed rate of return and fixed principal value.

Some bonds carry credit risk, or the risk that the bond issuer will default before the bond reaches maturity. In that case, you may lose some or all of the principal amount invested and any outstanding income that is due. Bonds are often rated by Moody’s and Standard & Poor’s (S&P), with ratings based on the issuer’s creditworthiness.

High yield “Junk” bonds (so-called because of their lower credit ratings) are fairly common investment vehicles. Lower-quality debt securities involve greater risk of default or price changes due to changes in the credit quality of the issuer and may not be suitable for all investors.

Like stocks, bonds can present the risk of price fluctuation, or market risk, to an investor who is unable to hold them until the maturity date when the principal and interest are paid to the bondholder. If the investor is forced to sell or liquidate a bond before it matures, and the bond’s price has fallen, the investor will lose part of the principal investment as well as the future income stream.

An Inverse Relationship: Interest Rate Risk

Another risk common to all bonds is interest rate risk. When interest rates rise, a bond’s price usually will drop. When interest rates fall, the price of a bond usually rises. Historically, bond prices have been more stable than their stock counterparts. Moreover, because bond investors may be concerned primarily with receiving income (instead of capital appreciation) from their bonds, they may not be as concerned with fluctuating bond prices.

Types of Bonds

Most bonds fall into four general categories: corporate, government, government agency, and municipal.
• Corporate bonds can provide an investor with a steady stream of income at a generally higher rate than other bonds.
• Government bonds include long-term and U.S. Treasury bonds. Intermediate-term bonds mature in three to 10 years, whereas long-term bonds generally mature in periods of up to 30 years.
• Government agency and government-sponsored entity bonds include those issued by the Federal National Mortgage Association (“Fannie Mae”) and the Government National Mortgage Association (“Ginnie Mae”).
• Municipal bonds are issued by a government authority to raise funds for general use or particular public works projects. Municipal bonds are subject to availability and change in price. They are also subject to market and interest rate risk if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax free, but other state and local taxes may apply.

1Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.
2There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.
GNMA’s are guaranteed by the U.S. government as to the timely payment of principal and interest, however this guarantee does not apply to the yield, nor does it protect against loss of principal if the bonds are sold prior to the payment of all underlying mortgages.
High yield/junk bonds are not investment grade securities, involve substantial risks and generally should be part of the diversified portfolio of sophisticated investors.
Because of the possibility of human or mechanical error by Financial Communications or its sources, neither Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.
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