Weekly Market Update - June 8, 2008 | Get FHA, VA, USDA Mortgage Rates and Tips

Weekly Market Update – June 8, 2008

John Thomas June 8, 2008

EQUITY MARKETS HAVE A POOR WEEK:

Some modest positive news early in the weak was drowned out by rising oil futures prices and a radical jump in unemployment numbers. The Dow Jones Industrials were down 3.39% and the S & P 500 was down 2.83%.

REITS BOUNCING BACK:

Real estate investment trusts (“REITs”) outperformed other major market benchmarks during the first five months of the year. The FTSE NAREIT all-REIT index was up 6.5%, for the period, while equity REITs rose 8.2%. Self-storage and residential REITs were the biggest gainers, posting returns of 21.1% and 15.6% respectively. The REIT gains have helped the group recover from last year. Equity REITs posted a return of -17.8% last year.

This is a great example of the premise behind asset allocation. People who jumped out of REITs last year missed out on gains of 2008 when REITs have been a good counterbalance to equity investments.

One of the many things we as financial planners must assume in making projections are investment returns. In times like the present, clients will challenge even fairly conservative, long-term return assumptions. Evidently, however, there are still optimists out there. The governor of Pennsylvania, Ed Rendell wants to sell the toll-taking rights on the Pennsylvania Turnpike for an up-front payment, pay off some debt, and invest the remaining $10 billion with the state pension fund, set aside a bit for inflation, and pocket an average 12 percent each year, or $1.1 billion, to fix rundown roads and bridges.

MUNICIPAL BONDS GET A SHOT IN THE ARM:

Markets hate uncertainty. Fortunately, the U.S. Supreme Court just took some uncertainty out of the municipal bond market. A federal appeals court had held that individual states may not exempt residents who own same-state municipal bonds from state income taxes. This case was accepted to the U.S. Supreme Court (Dept. of Revenue of Kentucky vs. Davis) which decided that states may continue to exempt their residents from paying taxes on that state’s municipal bonds. Clarifying the tax status of state municipal bonds for local residents removes an issue that had been weighing on the market for municipal bonds in addition to the general credit issues affecting the markets.

PERSPECTIVE, IT HAS BEEN WORSE:

As of January 1, 1934, 44% of all US homes were in default on their mortgages. As of 3/31/08, 4.5% of mortgages were at least 30 days delinquent on the payment of their monthly principal and interest amount. PERSPECTIVE, IT HAS BEEN BETTER: As of 4/30/08, there were 4.6 million existing homes for sale in the USA. Just 3 years earlier (4/30/05), the number of homes on the market was 2.5 million (source: NAR).

LONG-TERM CARE STAT:

According to a variety of sources, 6% of retirees will spend at least $100,000 (a present value amount) on long-term care expenses. 50% will spend nothing.

JUST ONE BAD EVENT AWAY:

One of the things which got me interested in financial planning as an attorney was when I developed a debt work-out practice for individuals who were on the precipice of but wanted to avoid bankruptcy. I heard all the stories as to how these individuals found themselves in the state they were in. In short, people allowed themselves to be one bad event away from financial distress, and two bad events away from bankruptcy. Currently, 55% of all personal bankruptcies in the United States occurred at least in part due to illness, injury, the death of a family member, or the birth of a new child (source: Health Affairs).

MARRY WELL:

Republican Presidential candidate John McCain reported $387,000 of adjusted gross income (AGI) on his married filing separate 2007 income tax return. His wife filed an extension on her 2007 return but she reported $6.1 million of AGI on her 2006 tax return.

This information is provided by my good friend and business associate Doug MacGray. If you would like to schedule a free consultation with Doug, please call me, John Thomas, at 302-368-7132 Ext.12 or send me an e-mail to DelawareMortgages@yahoo.com and I will help you set up an appointment with Doug.

If you would like to apply for a Mortgage Loan, you can APPLY ONLINE HERE, you can call John Thomas at 302-703-0727.

John R. Thomas – NMLS 38783

Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

248 E Chestnut Hill Rd, Newark, DE 19713