September 12, 2011
Commentary by Stuart Brown
Since 1900, the stock market has averaged six percent growth per year, excluding
dividends. Seldom have stocks been priced as inexpensively as today. When at this valuation in the past, a year later, on average, the market was up over twice the historic average.
Most recently, in June 2009, a dollar invested in the S&P represented 1.7 times the yield on the thirty-year Treasury bond. A year later, the market had risen 28%.
Today, with reported earnings of $85.18 and the S&P at 1169 (an earnings yield of 7.3%) the market is priced at over twice the 3.5% yield of Treasuries.
The stock market has been similarly valued 46 times over the past century. Each following year, the market had rebounded sharply (with the exception of the early years of WWII). There are no assurances as to what the future might bring. But if things unfold the way they have in the past, this could be a very profitable time to own stocks.
There are ways, other than higher prices, for stocks to appear expensive, e.g. if interest rates soared above 9%, the market would no longer look as cheap in comparison. Or if a soft patch turns into full blown recession and earnings decline. There are three moving parts to this model: earnings are reported quarter by quarter, interest rates and the price of the market change moment by moment.
Most recently earnings have been reported for the second quarter and have generally been good. For the Dow Jones Industrial Average, earnings rose on average 14% on 10.5% higher sales. Not bad, but the market, concerned about where earnings might be next year in a slower economy, sold off some 15%. Money moved to bonds, driving the yield on the Treasury down from 4.7% to under 3.5%.
Irene blew her way up the east coast. While hurricanes aren’t known for doing much good, there may be one nice thing about a market decline; once again stocks are offered at a compelling price. Stocks are as cheap as they were in early 2009—at the recent market bottom.
August 09, 2011
Commentary by Warren Capital
WASHINGTON, Aug. 9, 2011 -- It appears that the Fed is on the edge of more monetary easing, and that at the inner circles of the Fed they are becoming concerned about what remaining arrows they have in their quiver to energize the economy.
However, there are options: a Fed-backed Infrastructure Fund.
Washington, D.C. based money manager Joseph Warren, founder of the Warren Capital Group wealth management firm, proposed an infrastructure fund to the Fed in November. (See Letter to Chairman Bernanke here) Such a Fund could be used for building and improving schools, roads, water systems and the electric grid across America.
"If the Fed is going to create money out of thin air, why not build the value of the country rather than bail out those who made bad decisions and can't pay their debts," Warren says, adding that he understands there may be technical difficulties to be considered.
"Naysayers might point out that this type of Fed funding is completely outside the realm of the Fed. But this is no more outside the intent of the central banking system than bailing out AIG or buying Lehman's Maiden Lane mortgage portfolio," Warren offered in his Nov. 16, 2010 letter to Fed Chairman Ben Bernanke.
"The government is already in the market of helping states and municipalities with their infrastructure needs through the Build America Bond program. Furthermore, this cannot be derailed by an incapable Congress as the Fed can actually create these new dollars and this plan does not add to the deficit."
Warren did receive a response from the Fed, and neither Fed policymakers nor anyone else has come up with a legitimate rebuttal of this concept.
Warren says he's hoping that someone in the administration, Congress, the Fed or any other able entity will at least consider an infrastructure option.
A creation of an Infrastructure Fund by the Fed could pump real jobs into the economy, Warren says.
This idea is timely given the Fed meeting today.
"After the events that have transpired in Washington of recent, I am truly concerned that very few policy makers have quality ideas on how to improve the economy and that our country will be permanently impacted by more of the same. Policy makers don't know how lucky they are that treasuries rallied yesterday," Warren says.
Warren Capital Group is a registered investment advisor specializing in wealth protection and growth for high net worth individuals, institutions, foundations, and corporations. As a fee-based private wealth management firm, Warren Capital Group assists clients with asset allocation, risk management, estate planning and liability management via mortgage services. Warren Capital Group and its independent financial advisors are based in Washington D.C.
www.warcap.com
www.themarketsvalue.com
CONTACT: For interviews, contact:
Joseph Warren
Warren Capital Group
Phone: 888-262-1040
Email: jrw@warcap.com
Address: 2 Wisconsin Circle, Suite 700
Chevy Chase, MD 20815
May 18, 2011
Commentary by Warren Capital
Washington, D.C. — Shifting incomes and reduced home values in the wake of the housing market downturn and Great Recession caused many borrowers to find themselves trapped in their existing loans — unable to refinance and take advantage of lower interest rates.
A new consumer-friendly mortgage product, the HarmonyLoan, allows borrowers to avoid this trap in the future: The HarmonyLoan allows borrowers to lower their interest rate to market — without ever refinancing their loan again.
Homebuyers can quickly and easily reset their HarmonyLoan by accessing a state-of-the-art, 24/7 web interface. Upon resetting, they have the advantage of an at-market lower interest rate without the cost, hassle and hurdles of a traditional refinance or new mortgage.
Washington, D.C.-based Warren Capital Group is the first wealth management firm in the nation to offer the HarmonyLoan to consumers.
“Properly growing net worth requires managing both the asset and liability sides of a personal balance sheet,” says Joseph Warren, founder and CEO of Warren Capital Group. “While most investment advisors manage their clients’ assets, we are the first to be able to help manage what is often our client’s biggest liability — their home mortgage.”
Warren Capital believes the HarmonyLoan removes the costly inefficiencies of the mortgage process and affords greater economic security to clients.
“By not only being cognizant of their interest rate but also being able to help them reset their rate without any cost when the rates are most attractive, we dramatically reduce our clients’ mortgage liability and increase their homeownership,” Warren says.
Consumers often don’t understand the implications of refinancing.
Each time homeowners refinance, they subject themselves to a new 30 year amortization schedule. That means that the vast majority of their monthly payment is going toward paying interest rather than paying off the principal they owe. As a mortgage calculator and amortization chart show, it is not until year 17 of a 30 year loan that more of the monthly payment goes to principal than interest.
The HarmonyLoan allows consumers to get the best mortgage rate available without backsliding on the amortization schedule as occurs with a traditional refinance.
To learn more about the HarmonyLoan™ please contact Warren Capital Group at 888-262-1040 or email jrw@warcap.com. To schedule a press interview with Mr. Warren, please contact Simona Sanders.
Warren Capital Group is a registered investment advisor specializing in wealth protection and growth for high net worth individuals, institutions, foundations, and corporations. As a fee-based private wealth management firm, Warren Capital Group assists clients with asset allocation, risk management, estate planning and liability management via mortgage services.
Warren Capital Group
www.warcap.com
www.themarketsvalue.com
888-262-1040
2 Wisconsin Circle, Suite 700
Chevy Chase, MD 20815
