Week of October 29, 2007

The Markets
 
Black gold (oil) and the shiny yellow metal we simply call “gold” both seem to be coveted items these days.

Last week, crude oil prices reached an intraday all-time high of $92.22 per barrel on the New York Mercantile Exchange, according to Barron’s. That’s up nearly 30% from its price on August 24th. Surprisingly (and we’re not complaining), prices at the gas pump have not moved up nearly as much as oil prices. So what’s driving the spike in oil? According to MarketWatch, you can point to falling energy supplies, global political tensions, and weakness in the U.S. dollar.

It’s interesting to note that with all the talk about global warming, going green, and the search for alternative sources of energy, you’d think there’d be less demand for oil and hence, a drop—not a rise—in oil prices. Sometimes, the market appears to be illogical, but long term, it usually comes to its senses.

Gold is another eye-opening situation as it closed at $787.50 per ounce last week on the New York Mercantile Exchange. According to Action Economics, gold shot to its "highest level since January 1980 on a combination of inflation concerns and safe-haven buying in the wake of a sensitive geopolitical environment and renewed concerns about the U.S. growth outlook."  Throw in a weak dollar and the possibility of more interest rate cuts and you may have a recipe for continued strong gold prices, they added.

It was way back on January 21, 1980, that gold set its all-time record high of $875.00 per ounce, according to MarketWatch. Of course, after adjusting for inflation, current gold prices are dramatically below their 1980 high, whereas oil prices are very close to their inflation-adjusted all-time high.

With so many things to invest in these days besides the stock market, it seems like there’s always something that’s going up. That’s one good reason why it makes sense to diversify—you may have a better chance to own one of those things that’s going up.
   

Sources: Yahoo! Finance, Barron’s. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly. Three-, 5-, and 10-year returns are annualized.  Assumes dividends are not reinvested.

LAST WEEK, THE INTERNAL REVENUE SERVICE (IRS) released its cost of living adjustments for contributions to a variety of retirement saving vehicles. The limits affecting 401(k) plans, remain the same at $15,500. However, the limitation for defined contribution plans under Section 415 (c)(1)(A) increased from $45,000 to $46,000 and the annual benefit limitation for a defined benefit plan under Section 415(b)(1)(A) increased from $180,000 to $185,000.

HAS THE NEWSPAPER GONE THE WAY OF THE DRIVE-IN MOVIE when it comes to a job search? According to a recent study, our nation’s job seekers are steadily increasing their use of the Internet. The Conference Board reported last week that of workers who searched for a job between January and September 2007, 73% reported using the Internet compared to 66% of job seekers during the same time period in 2005.

The research shows that the Internet is being used for a variety of job search functions, from gathering employer/job information (59% of job seekers) and submitting resumes and applications (57%) to posting resumes on a website (40%) and signing up for email notifications (30%).

Just how many jobs are posted online? Hold on to your mouse. In September 2007, there were 4,270,000 online advertised job vacancies according to The Conference Board Help-Wanted OnLine Data Series™ (HWOL). That amounts to 2.78 advertised vacancies online for every 100 persons in the labor force in September.

Although still a vital job-seeking tool, newspapers are dropping in popularity. Used by 75% of job seekers in 2005, only 65% used them in 2007. The survey also found over half (51%) of job seekers reported networking through friends and colleagues as part of their job search and roughly one quarter (24%) used other methods, such as employment agencies.

Whatever tools they use, job seekers are successful. According to the Bureau of Labor Statistics, over the course of this year, jobless rates were down in 25 states and the District of Columbia, up in 23 states, and unchanged in two states. The national unemployment rate was essentially unchanged in September at 4.7%.

Weekly Focus – A Little Math

Each of the following letters stands for a different digit. Determine their values to solve the subtraction problem. This puzzle comes from Scientific American Mind magazine.

A N T E – E T N A = N E A T

See the end of the commentary for the answer. Good luck!

Best regards,

Fredrick J. Livingston, CLU, CFP

Securities offered through LPL Financial, Member NASD/SIPC

* 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 Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

Brain Teaser Answer:  It contains the numbers one to nine, in alphabetical order.