1) Phil's Financial Tip of the Day:
Gold is out and munis are in when it comes to trendy investment picks, but the larger lesson from a tumultuous year is to stick with a diversified plan.
It is that time of year to start thinking of rearranging your financial portfolio for 2012.
For 2012, Investing Pros Say Reshuffle the Deck-From SmartMoney
Gold is out, munis are in. REITs are trendy, but don't forget to balance out with Steady Eddies like dividend-paying stocks. And, oh yes, if you thought 2011 was full of drama, prepare for even more.
Across the country, financial advisers are reviewing portfolios and prepping clients on the plan for the year ahead. By most accounts, the advice regular investors are getting is to reshuffle the deck because so many investments have shifted so quickly.
Look no further than the stock market. Since the summer, when a dizzying plunge had some commentators advocating small investors get out of the market altogether, equities have turned north:
The Dow Jones Industrial Average is now up 6%.
Those who fled the market should return, advisers say, stressing that clients find the appropriate allocation determined by age and risk tolerance.
The same goes with munis. A year ago, the $3.7 trillion dollar municipal-bond market was rocked when Wall Street analyst Meredith Whitney predicted hundreds of billions of dollars' worth of municipal-bond defaults. Advisers say they had little choice but to tell nervous clients to pull back on what had been a staple of investing for decades for millions of Americans, especially retirees.
But the catastrophe never came to pass, and investors who stuck with muni-bond funds were rewarded: The average long-term national muni-bond fund is up 9% this year through Dec. 16, compared with a 4% loss for large blend funds, according to Morningstar.
That has many investors rushing back, but Jeff Sica, president and chief investment officer at Sica Wealth Management in Morristown, N.J., is telling clients not to overdo it. He is recommending muni-bond funds in small doses, and also placing some clients in individual muni bonds pegged to cities in Colorado, Wyoming and North Dakota that have high credit ratings and strong balance sheets.
The larger lesson from 2011, advisers say, is to stick with a plan rather than trying to keep pace with market fluctuations.
"Focus on appropriate long-term allocation and stick with that through all the ups and downs," says Sheryl Garrett, a fee-only financial planner in Shawnee Mission, Kan.
Within that framework, of course, investors should add exposure to those assets that could outperform in the short to medium term.
Aaron Schindler, managing director at Wealth Advisory Group in New York, is telling clients to add more dividend-paying stocks to their portfolios, especially those in sectors with higher payouts, such as telecom and energy. He also suggests REITs, which must pay at least 90% of their taxable income (rents less expenses) to shareholders as Americans continue to favor renting over buying real estate.
In Atlanta, Paul Jacobs, a certified financial planner at Palisades Hudson Financial Group, says he is telling clients to abandon the gold rush. If the economy picks up next year, he says, investors will quickly dump the shiny metal for stocks. "We definitely think that gold is overvalued," he says.
2) In the Markets today:
The Dow industrials fell 2.65 points, snapping a four-session winning streak for stocks as investors weighed improved consumer confidence against oil's return above $100 a barrel.
Stock Rally Hits the Wall-From The Wall Street Journal
U.S. blue-chips' year-end rally ran out of steam Tuesday, slipping slightly to snap a four-day string of gains as investors weighed a better-than-expected reading on consumer confidence against crude oil's rise back above $100 a barrel.
The Dow Jones Industrial Average edged down 2.65 points, or 0.02%, to 12291.35. The Standard & Poor's 500-stock index inched up 0.10 points, or 0.01%, to 1265.43 and the Nasdaq Composite gained 6.56 points, or 0.25%, to 2625.20.
Crude-oil futures shot up 1.7% to finish at $101.34 a barrel, a six-week high.
In a sign of continuing investor cautiousness, conservative utilities and telecommunications stocks led the day's gains. The utilities sector has been the best performer on the S&P 500 this year, gaining 15%.
Technology stocks were also strong. Intel and Cisco Systems led Dow components with gains of 1% and 0.8%, respectively.
Pulling market indexes downward were financial stocks. Bank of America fell 2.1% and J.P. Morgan Chase dropped 1.6% to lead the Dow's decliners.
The moves in the holiday-shortened week come after a week that saw the Dow gain 3.6%, including a 124-point rally on Friday that sent the blue-chip index to a five-month high. The S&P 500 also moved back into positive territory for the year, and is up 0.6% with just three sessions remaining in 2011.
"It was a real rollercoaster ride, but all things considered, it wasn't that bad a year for stocks—it could've been a lot worse given all the uncertainty and political headwinds," said Brian Gendreau, market strategist with Cetera Financial Group.
In recent weeks, Mr. Gendreau added, investor sentiment seems to have improved, thanks to improving economic data. "There's a feeling that 2012 is not going to be as bad as 2011, though that's a pretty low bar," he said.
"What we're seeing is that people see there are more jobs are around," said Dan Greenhaus, chief global strategist at BTIG. "We've seen a lot of improvement in labor market numbers lately. Clearly there's something going on here."
The consumer-confidence number helped a handful of household brands push to all-time highs. McDonald's gained 0.4% after breaking above $100 a share level for the first time in its history on Friday. Starbucks gained 1.1% and Intuitive Surgical rose 1.3% to reach new all-time highs. Google also rose 1.1% to hit a four-year high.
However, trading volumes were subdued as most investors took the week off. Just over two billion shares changed hands in New York Stock Exchange composite volume, less than half the daily average of 4.3 billion shares this year.
European markets finished the day flat, with the Stoxx Europe 600 inching up less than 0.1%. The U.K. market is closed, and activity and news flow elsewhere remain light. Asian bourses finished broadly lower. China's Shanghai Composite shedding 1.1% to close at its lowest level since March 2009.
Gold futures fell back below $1,600 an ounce, shedding 0.7% to $1,594.20. The U.S. dollar lost some ground against the euro and the yen. Treasurys inched higher, sending the yield on the benchmark 10-year note down to 2.009%.
The S&P/Case-Shiller index of home prices in 20 major U.S. cities showed a year-on-year decline of 3.4% in October, giving little solace to investors looking for a slowdown in the recent months' accelerating decline. However, regional Federal Reserve reports on Richmond and Dallas-area manufacturing came in below expectations.
In corporate news, Sears Holdings slumped 27% to lead the S&P 500 losers after the retailer said it would close 100 to 120 Kmart and Sears stores to reduce costs, and added it expects take fourth-quarter non-cash charges between $1.6 billion and $2.4 billion related to a valuation allowance and impairment on some goodwill balances. The company also said quarter-to-date same-store sales through Dec. 25 declined 5.2%.
Mead Johnson Nutrition rallied 5.8% after the company said over the weekend that a new round of sample testing of its Enfamil Premium Newborn formula didn't detect any presence of a potentially deadly bacteria.
Cal-Maine Foods climbed 4.4% after the egg producer reported fiscal second-quarter earnings and revenue that exceeded expectations.
Elsewhere, Parlux Fragrances soared 71% after the company said late Friday that it agreed to be acquired by Perfumania Holdings for about $170 million in cash and stock. Perfumania tumbled 33%.
3) Top financial story of the day:
Consumer confidence surged to its highest level since April, but the housing market continued to weigh on the economy.
Consumer confidence shoots higher again-From CNN Money
Consumer confidence shot higher for the second month in a row in December, according to a survey from The Conference Board.
The research firm's overall confidence index, released Tuesday, jumped 9.3 points to 64.5. The increase follows a 14.3-point rise in November.
"After two months of considerable gains, the index is now back to levels seen last spring," said Lynn Franco, director of the group's research center. "Consumers are more optimistic that business conditions, employment prospects and their financial situations will continue to get better."
Still, Franco cautioned that it's too soon to tell if the year-end optimism is simply a rebound from declines earlier this year or a sustainable shift in attitudes.
The jump of almost 24 points since October is the biggest two-month increase since March 1991, when consumer confidence got a shot in the arm from the quick U.S. victory in the first Gulf War. But the recent increases follow sharp declines that occurred from July through October as both economists and the general public became worried that the U.S. was at risk of falling into a new recession.
"When we get to our low point in October, that was probably overdoing it," said Tim Quinlan, economist with Wells Fargo Securities, who said that reading was below the levels of the 2001 and 1990 recessions. "I don't think things were that bad then. I don't know that things are that great now, but it does signal that consumers were feeling better going into the holidays, which is a key time for retailers."
Helping to lift confidence is the fact that since mid October stocks have rallied, gas prices have fallen and the labor market improved with both better hiring and a decrease in the number of layoffs.
While the survey found that only 6.7% of consumers believe jobs are now plentiful, that's nearly double the 3.6% who felt that way in October. Those who believe the job picture will be better six months from now rose to 13.3% from 10.8%.
Most importantly for consumer spending, those who expect their own income to increase in the next six months rose to 17.1%, outpacing the 14.4% who expect their income to fall. This is the first time since April that the percentage of people who expect their income to improve topped those who expect it to drop.
4) Inspirational Quotes@Inspire_Us from Twitter
Life is really simple, but we insist on making it complicated. -Confucius
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