Commentary

George Chamberlin

GEORGE CHAMBERLIN has been associated with The Daily Transcript at SDDT.com since 1998 and became Executive Editor in 2006. He is responsible for the development of editorial strategies for the newspaper and website. He has introduced video and audio into the editorial products and is the public face of the company at many community events. George regularly chairs industry roundtables and conducts video interviews of participants for use on the San Diego Source. He writes two daily columns, "Money in the Morning" and a daily stock market wrap-up.

George, a long time resident of North County, lives in Vista with his wife Terry.

From the Executive Editor

Winding down the first quarter of 2015. As of Friday, it looked like the first three months of the year would go into the books with the major indexes posting modest declines as stock prices have seesawed through the quarter and the Dow industrials were down just 0.8 percent. Well, what a difference a day can make. At the start of trading today, the Dow has jumped more than 250 points and, if the quarter ended right now, would be up 0.8 percent for the period. There's no accounting for why the markets are swinging in broad strokes right now. Some headlines suggest that the possibility of an agreement with Iran on its nuclear power plans are helping change the mood. Oil and gold are stumbling, which usually is good for stocks. Or it could simply be the same thing we have seen for the past six years: Any selling is considered a buying opportunity.

Four in a row. Yes, this has not been a stellar week for stocks as the Dow industrials have declined every day this week. Yesterday's loss was just 41 points but a loss is a loss. Still, even with the string of down days, the blue chip index is still off just 0.8 percent since the start of the year. We could make that back in one good day.

Hardly a year goes by that there isn’t some type of legislation or regulation proposed to address abusive short-term lending programs often referred to as payday loans. This year is no different.

Grab on to something and hold on tight. Yes, the big correction, six years overdue, apparently has arrived. The Los Angeles Times headline this morning screams, "Stocks sink for a third straight day." I wonder what the headline would be if stocks had been up for three days. Probably would have been ignored. It is important to keep things in perspective: Even after yesterday's drop of 292 points, the Dow industrials year to date are down a measly 0.6 percent and the S&P 500 index is down 0.1 percent. It appeared early today that the markets were headed for another sharp decline but, much to the disappointment of the permabears, the losses have been very limited.

It's way too early to call it the summer doldrums but investors seem to be very comfortable sitting on the sidelines right now. One day, one day down, it is a trendless stock market right now. It's as if everyone is waiting for something -- good or bad -- to break out of the recent malaise. The Fed announcement last week didn't do it, a deadline for the Greece economy is pretty much being ignored, a couple of strong housing reports went nowhere and even today's megamerger in the food business is being greeted with yawns. Don't worry; something will happen to break this market out.

It has long been suggested that passive investments — the use of index mutual funds without the need for expensive professional management — outperform actively managed portfolios. And a new report shows, indeed, passive significantly beats active.

A welcome relief. Stocks were little changed yesterday following a week of extreme volatility when the Dow industrials were either up or down more than 100 points in each of the five trading sessions. The Dow was down just 11 points yesterday and looks to be trading in a narrow range again today. The uncertainty about the next move by the Federal Reserve seems to be the driving force behind actions on Wall Street. And since it looks like an actual bump up in short-term rates is still months away, investors seem comfortable relaxing with the arrival of spring.

Back to its winning ways. Stocks were higher last week as the Fed policy to keep interest rates low for an undetermined time was celebrated by investors. The Dow industrials were up 2.1 percent, snapping a three-week losing streak and the S&P 500 gained 2.7 percent. The Nasdaq finished Friday just 22 points away from a new all-time high set back in 2000.

The Wall Street rollercoaster continues to be a wild ride. The Dow industrials were down 117 points yesterday as the indexes seesaw from gains to losses. Stocks are trying to end the week with another triple-digit move, this time to the upside. Other than the Fed announcement -- or nonannouncement -- regarding the prospects for higher interest rates, this has been a relatively quiet week as buyers and sellers do battle for control of the world economy.

Go back to the years leading up to the Great Recession and ensuing recovery, and there is one common thread running throughout the economy: housing. And nowhere is it more evident than in the actions of the Federal Reserve Board.

What Fed fears? The Janet Yellen crew fooled most market pundits yesterday with a policy statement suggesting rates would ultimately be on the rise but failing to say exactly when. In the official statement following the two-day meeting, the Fed said, "Inflation is anticipated to remain near its recent low level in the near term, but the committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy prices decline and other factors dissipate." As a result, the Fed will maintain its near-zero percent Fed funds interest rate policy, but, "will assess progress -- both realized and expected -- toward its objective of maximum employment and 2 percent inflation." It is the "expected" part that makes me and others nervous. When the Fed makes decisions based on what it anticipates rather than what is real is when the markets can get rather jittery.

Anticipation. Like the TV commercial in the 1970s featuring Heinz ketchup, the build-up to today's announcement from the Federal Reserve has the financial community on pins and needles. Granted, most people on Main Street are oblivious to the announcement, which "experts" believe will provide a secret clue as to when the Fed will ultimately begin raising short-term interest rates to fight off phantom inflation. To be sure, the Fed will not announce an immediate hike in rates. What the majority of analysts expect is the removal of the word "patient" from its policy statement, which they believe will be a clear indication a bump is coming. Or maybe not.

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