The Financial Crisis Ten Years Later

Where has the time gone? It was ten years ago this week that the U.S. financial system was brought to its knees.

To help us retrace the events of that period, we’re joined today by Gretchen Morgenson, investigative reporter at the Wall Street Journal.

As the financial crisis was unfolding, Morgenson was working for the New York Times, and subsequently co-authored Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon.

There’s no one more qualified to walk us down memory lane and remind us of just how bad things actually were. In case you’ve forgotten, consider this timeline:

• 9/15/2008: Lehman Brothers files for Chapter 11 bankruptcy protection. On the same day, Bank of America announced its intent to purchase Merrill Lynch for $50 billion.
• 9/16/2008: The Federal Reserve Board authorized the Federal Reserve Bank of New York to lend up to $85 billion to AIG under Section 13(3) of the Federal Reserve Act.
• 9/16/2008: The net asset value of shares in the Reserve Primary Money Fund fell below $1 per share, primarily due to losses on Lehman Brothers commercial paper and medium-term notes. When the Reserve fund “broke the buck,” it caused panic among investors who considered money market accounts nearly the equivalent of bank savings accounts.
• 9/19/2008: To guard against a run on money market funds, the Treasury Department announced that it would insure up to $50 billion in money-market fund investments at companies that paid a fee to participate in the program. The year long initiative guaranteed that the funds' values would not fall below the $1 a share.
• 9/20/2008: The Treasury Department submitted draft legislation to Congress for authority to purchase troubled assets (the first version of TARP).
• 9/21/2008: The Federal Reserve Board approved applications of investment banking companies Goldman Sachs and Morgan Stanley to become bank holding companies.

All this in just one week!! An incredible moment in the history of this country, and it was only ten years ago.

“Better Off” is sponsored by Betterment.

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Financial Crisis Anniversary: What Have we Learned?

This week marks the seventh anniversary of the financial crisis. Sometimes people forget just how close to the brink we were. Yes, the U.S. and global financial system was brought to its knees, but it did not crumble. To measure our progress, it might be helpful to remember just how intense it was in that first week.

• 9/15/2008: Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection; Bank of America announced its intent to purchase Merrill Lynch
• 9/16/2008: The Federal Reserve Bank of New York lent $85 billion to AIG
• 9/16/2008: The net asset value of shares in the Reserve Primary Money Fund fell below $1. When the fund “broke the buck,” it caused panic among investors who considered money market accounts nearly the equivalent of bank savings accounts
• 9/19/2008: The Treasury Department announced that it would insure up to $50 billion in money-market fund investments. The year long initiative guaranteed that the funds' value would not fall below the $1 a share.
• 9/21/2008: The Federal Reserve Board approved applications of investment banking companies Goldman Sachs and Morgan Stanley to become bank holding companies, so that they could access money from the Federal Reserve and to fund their daily operations

Many people thought that the government’s intervention was over the top. “Let them fail!” was the rallying cry, but I always believed that saving the system was paramount, even if I did not necessarily agree with the terms of the various bailout deals (I thought that taxpayers should have gotten more of the upside of the financial service companies’ recovery, rather than simply receiving a repayment of the dollars, with interest) and the government’s more than $800 billion stimulus plan (“The American Recovery and Reinvestment Act of 2009"). Still, while both of the shotgun measures could have been more effective, they likely helped the country avert what could have been a Depression, rather then the horrible recession that we endured. The so-called Great Recession, which started in December 2007 and concluded in June 2009, was the worst contraction since the Great Depression.

Seven years later, what have we learned? Because the financial crisis stemmed from too much easy borrowing and lending in the housing market, one of the best lessons was the concept that borrowing can be dangerous. Just because some bank is willing to lend you a lot of money to buy a house or will extend to you a giant credit card limit, does not mean that you should take it. For most people, putting down a 20 percent down payment for a house is prudent. Even if FHA will allow borrowers to put down less than 10 percent to qualify for a mortgage, there is a good reason that the 20 percent down rule of thumb exists: just in case the housing market collapses, you have more equity in the house. Similarly, even if you have the ability to buy a lot of fun stuff on your credit card, you should only be charging what you can pay off on a monthly basis.

A corollary of the loan warning is to read the fine print on all documents. There were too many instances when borrowers really did not understand the terms of the loans that they were assuming. Although many regulations now require more transparency and disclosure on everything from mortgages to credit card statements, after the financial crisis we still must be vigilant in reviewing documents to protect ourselves.

The crisis taught us that an adequate emergency reserve fund (6 to 12 months of expenses for those who were employed and 12 to 24 months for those who were retired) could prevent us from selling assets at the wrong time and/or from invading retirement accounts. And of course for investors, we learned that a diversified asset allocation plan, that takes into consideration your risk tolerance and when you need to access your funds can prevent a lot of sleepless nights. Nobody wants to test these lessons any time soon, but let’s heed them.

Financial Crisis Anniversary: A Short History of QE

Happy Anniversary! Six years ago this week, the US financial system was brought to its knees. Over the course of seven days, Lehman Brothers filed for bankruptcy; Bank of America said it would buy Merrill Lynch; Goldman Sachs and Morgan Stanley became bank holding companies; the Federal Reserve bailed out insurance giant AIG; the Treasury Department had to insure money-market funds; and the government submitted its first draft legislation of TARP. Yeah, that all happened in one week! Two months after that momentous week, the economic downturn, which started in December 2007, accelerated. In an effort to create liquidity in the bond market and to help rescue the economy from plunging into the abyss, the Federal Reserve took the aggressive and unusual step of buying mortgage backed bonds, and eventually expanded the program to include government bonds.

As a reminder, here’s a short history of the central bank’s bond buying stimulus plan, known as “Quantitative Easing” or “QE”:

• November 2008: The first 15-month period of QE begins with purchases of mortgage securities, later expanded to include Treasury debt
• August 2010: Fed launches QE2 with a defined $600B target
• June 2011: Fed completes QE2
• September 2011: Fed announces “Operation Twist,” which allows the central bank to swap short term Treasuries for long-term ones
• September 2012: Fed launches QE3 and extends its intention to maintain low short-term interest rates until mid-2015
• December 2012: Fed announces that QE3 would be open-ended at $85B/month and that outright Treasury purchases would replace Operation Twist.
• June 2013: Fed Chair Bernanke announces that QE would wind down later in 2013 and would likely conclude by mid-2014, provided that the economy improves
• December 2013: Fed officials began the process of unwinding their bond-buying program by reducing purchases by $10 billion dollars to $75 billion

Six years later, the Fed strategy continues, but the central bank is in the process of unwinding the third version of that bond-buying program. The central bank will conduct a two-day policy meeting this week, where it is widely expected to announce another $10 billion cut, reducing monthly purchases to $15 billion. If you are doing your Fed math (or can subtract), you will quickly realize that QE3 will likely end at the October 29^th meeting.

And just like that, the Fed will have undone its historic policy and will return to its more mundane tool of manipulating short-term interest rates to fight inflation.

Remember way back in March, when Janet Yellen made her first and now-famous snafu? She said that the central bank might start increasing short-term rates “six months” after the conclusion of QE3, which would put the first hike in April of next year. Investors freaked out and sold stocks and bonds, because that time horizon was sooner than previously projected.

Those who think rationally might think, “If the data show that the economy is improving and as a result, the Fed increases short term interest rates, isn’t that a good thing?” You might think so, but so much of the recovery stock market rally has been predicated on zero percent interest rates, which have made equities the most favored asset class.

So how will markets react to higher rates? According to Capital Economics, “The S&P 500 rose by an average of about 5 percent in the six months before the first rate hike in each of the last seven major tightening cycles [1971, 1976, 1984, 1986, 1994, 1999, 2004]…And it also gained an average of about 5 percent in the nine months after the first hike.”

That said, it’s hard to count on the rally continuing indefinitely and although nobody wants to say it, this time is different, since this rate hike cycle follows a once-in-a-generation financial meltdown and large-scale asset purchases by the Fed. Fasten your seat belts…it’s going to be a bumpy ride.

MARKETS: Stock indexes snapped a 5-week winning streak.

• DJIA: 16,987 down 0.9% on week, up 2.5% YTD
• S&P 500: 1985, down 1.1% on week, up 7.4% YTD
• NASDAQ: 4467, down 0.3% on week, up 9.4% YTD
• 10-Year Treasury yield: 2.61% (from 2.46% a week ago)
• October Crude Oil: $92.27, down 1% on the week
• December Gold: $1231.50, down 2.8% on the week
• AAA Nat'l average price for gallon of regular Gas: $3.40 (from $3.54 a year ago, lowest since Feb)

THE WEEK AHEAD:

Mon 9/15:

OECD releases its global economic outlook

8:30 Empire State Manufacturing

9:15 Industrial Production

Tues 9/16:

8:30 Producer Price Index

FOMC 2-day policy meeting begins

Weds 9/17:

8:30 Consumer Price Index

10:00 Housing Market Index

2:00 FOMC concludes/Fed economic projections

2:30 Fed Chair Yellen Press Conference

Thurs 9/18:

8:30 Weekly Jobless Claims

8:30 Housing Starts

10:00 Philadelphia Fed Survey

Alibaba prices its IPO – could be largest IPO in US history

Scotland votes on a referendum on independence, which would break up the 307-year-old U.K. and plunge Britain into a constitutional crisis. Voting concludes at 5:00pm ET

Fri 9/19:

Apple releases iPhone6

10:00 Regional/State Unemployment

Quadruple Witching: simultaneous expiration stock index futures, individual stock futures, stock index options and individual stock options

Sat 9/20

G-20 finance ministers and central bankers meet in Cairns, Australia

Radio Show #133: Fed Fake-out!

The Federal Reserve shocked economists and investors by maintaining its $85 billion bond-buying program. Listeners were more interested in kick-starting their retirement savings and putting their cash to work.

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• Download this week's show (MP3)

Elizabeth from RI and Nick from NY are in their 20’s, living home and saving lots of money. They both needed help with figuring out how to start investing for retirement.

Judy from CO, Alma from AZ and Mel from MN all have a great problem: where to invest cash? Both Susan and Bonnie had allocation questions, which JM from New York City, asked about the Windfall Elimination Penalty provision.

As Mayor Rahm Emanuel once said, “You never want a serious crisis go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” While Emanuel was talking about politics, we can apply his statement to investor behavior leading up to and during the financial crisis. With five years of distance from the eye of the storm, here is my list of the top 5 lessons every investor can take away:

1. Keep cool: There are two emotions that influence our financial lives: fear and greed. At market tops, greed kicks in and we tend to assume too much risk. Conversely, when the bottom falls out, fear takes over and makes us want to sell everything and hide under the bed. If you had sold all of your stocks during the first week of the crisis in September 2008, you would have been shielded from further losses (stocks bottomed out in March 2009). But how would you have known when to get back in? It is highly doubtful that most investors would have had the guts to buy when it seemed like stock indexes were hurtling towards zero.

2. Maintain a diversified portfolio…and don’t forget to rebalance. One of the best ways to prevent emotional swings is to create and adhere to a diversified portfolio that spreads out your risk across different asset classes, such as stocks, bonds, cash and commodities. In September 2008, a client shrieked to me that “everything is going down!” But that was not exactly the case: the 10 percent allocation in cash was just fine, as was the 30 percent holding in government bonds. That did not mean that the stock and commodities positions were doing well, but overall, the client was in far better shape because she owned more than risk assets.

3. Maintain a healthy emergency reserve fund. Bad luck can occur at any time. One great lesson of the crisis is that those who had ample emergency reserve funds (6 to 12 months of expenses for those who were employed and 12 to 24 months for those who were retired) had many more choices than those who did not. While a large cash cushion seems like a waste to some (“it’s not earning anything!”), it allowed many people to refrain from selling assets at the wrong time and/or from invading retirement accounts. Side note: the home equity lines of credit on which many relied for emergency reserves vanished during the crisis.

4. Put down 20 percent for a mortgage (and try to stick to plain vanilla home loans (15 or 30 year fixed rate mortgages), unless you really understand what you are doing!) Flashback to 2004 – 2007 and you will likely recall that you or someone you knew was buying a home or refinancing with some cockamamie loan that had “features” that allowed borrowers to put down about 3 cents worth of equity. There’s a good reason that old rules of thumb work. Yes Virginia, house prices can go down. And despite the recovery, please shun the advice from so-called experts like Suze Orman, who are once again saying that 10 percent down is just fine.

5. Understand what is in your target date fund: Pre-crisis, many investors had started to use target date funds, in which the fund manager “targets” your future date of retirement and adjusts the allocation as you near the time that you will need to access the money. Unfortunately, many of these funds were far riskier than investors understood. Whether it’s a target date fund or an age-based investment for your kid’s college fund, be sure to check out the risk level before you put a dollar to work.

Thanks to everyone who participated and to Mark, the BEST producer in the world. If you have a financial question, there are lots of ways to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet me: @jillonmoney

Financial Crisis Anniversary: 5 Investor Lessons

Five years ago, when the financial crisis blew across the nation like a massive storm, it left a wake of destruction in its path. The Federal Reserve Bank of Dallas estimates that the total cost of the crisis (assuming economic output eventually returns to its pre-crisis trend), to be between $6 and $14 trillion. To put those big numbers into perspective, the loss amounts to $50,000 to $120,000 for every U.S. household. Ouch! The crisis tested every investor, from the neophytes to the most jaded traders on the street. With five years of distance from the eye of the financial storm, here is my list of the top 5 lessons every investors can take away:

1. Keep cool: There are two emotions that influence our financial lives: fear and greed. At market tops, greed kicks in and we tend to assume too much risk. Conversely, when the bottom falls out, fear takes over and makes us want to sell everything and hide under the bed. If you had sold all of your stocks during the first week of the crisis in September 2008, you would have been shielded from further losses (stocks bottomed out in March 2009). But how would you have known when to get back in? It is highly doubtful that most investors would have had the guts to buy when it seemed like stock indexes were hurtling towards zero.

2. Maintain a diversified portfolio…and don’t forget to rebalance. One of the best ways to prevent emotional swings is to create and adhere to a diversified portfolio that spreads out your risk across different asset classes, such as stocks, bonds, cash and commodities. In September 2008, a client shrieked to me that “everything is going down!” But that was not exactly the case: the 10 percent allocation in cash was just fine, as was the 30 percent holding in government bonds. That did not mean that the stock and commodities positions were doing well, but overall, the client was in far better shape because she owned more than risk assets.

3. Maintain a healthy emergency reserve fund. Bad luck can occur at any time. One great lesson of the crisis is that those who had ample emergency reserve funds (6 to 12 months of expenses for those who were employed and 12 to 24 months for those who were retired) had many more choices than those who did not. While a large cash cushion seems like a waste to some (“it’s not earning anything!”), it allowed many people to refrain from selling assets at the wrong time and/or from invading retirement accounts. Side note: the home equity lines of credit on which many relied for emergency reserves vanished during the crisis.

4. Put down 20 percent for a mortgage (and try to stick to plain vanilla home loans (15 or 30 year fixed rate mortgages), unless you really understand what you are doing!) Flashback to 2004 – 2007 and you will likely recall that you or someone you knew was buying a home or refinancing with some cockamamie loan that had “features” that allowed borrowers to put down about 3 cents worth of equity. There’s a good reason that old rules of thumb work. Yes Virginia, house prices can go down. And despite the recovery, please shun the advice from so-called experts like Suze Orman, who are once again saying that 10 percent down is just fine.

5. Understand what is in your target date fund: Pre-crisis, many investors had started to use target date funds, in which the fund manager “targets” your future date of retirement and adjusts the allocation as you near the time that you will need to access the money. Unfortunately, many of these funds were far riskier than investors understood. Whether it’s a target date fund or an age-based investment for your kid’s college fund, be sure to check out the risk level before you put a dollar to work.

Radio Show #132: Investing for the Post-Crisis Era

Over the course of one week five years ago, the U.S. financial system was brought to its knees. Throughout the show, I tell you where we stand five years after this momentous week, when it comes to jobs, income, housing, stocks and much more!

• Download the podcast on iTunes
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• Download this week's show (MP3)

To recap the action over that horrible 7-day period in September 2008:

• 4 investment banks vanished (Lehman Brothers declared bankruptcy, Bank of America swallowed the ailing and near-failing Merrill Lynch, and Goldman Sachs and Morgan Stanley were forced to become bank holding companies in order to access the government’s discount window)
• The government bailed out global insurance giant AIG
• There was panic in the money market fund industry after the Reserve Primary Money Fund “broke the buck,” dropping below the standard $1 per share valuation
• The Treasury Department introduced the first version of TARP, which was intended to grant the government the authority to purchase $700 billion of mortgage-related assets for two years.

Meanwhile, listeners were equally as interested in NOT repeating past financial mistakes. Margaret from MA started us off with a question about where to invest the proceeds of a CD that is coming due. Kevin followed up with a retirement planning question: how to create a stream of income from a $500K nest egg?

Joe from IN needs to access funds for his daughter’s education: which should he tap first?

Reeves from MO and John from KY are both in their 20’s and starting their first retirement accounts. We discuss their options and the advantages/disadvantages of 401 (k)s and Roth IRAs.

William from WI wrote in about a good problem: a large estate. If you are fortunate to have an estate larger than $5.25 million (for individuals) there are a number of options for addressing your potential estate tax.

Thanks to everyone who participated and to Mark, the BEST producer in the world. If you have a financial question, there are lots of ways to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet me: @jillonmoney

Week ahead: Financial Crisis Anniversary: Where We Stand

Over the course of one week five years ago, the U.S. financial system was brought to its knees. As a reminder of just how bad that week was, consider this timeline:

• 9/15/2008: Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection. On the same day, Bank of America announced its intent to purchase Merrill Lynch for $50 billion.
• 9/16/2008: The Federal Reserve Board authorized the Federal Reserve Bank of New York to lend up to $85 billion to AIG under Section 13(3) of the Federal Reserve Act.
• 9/16/2008: The net asset value of shares in the Reserve Primary Money Fund fell below $1 per share, primarily due to losses on Lehman Brothers commercial paper and medium-term notes. When the Reserve fund “broke the buck,” it caused panic among investors who considered money market accounts nearly the equivalent of bank savings accounts.
• 9/19/2008: To guard against a run on money market funds, the Treasury Department announced that it would insure up to $50 billion in money-market fund investments at companies that paid a fee to participate in the program. The year long initiative guaranteed that the funds' values would not fall below the $1 a share.
• 9/20/2008: The Treasury Department submitted draft legislation to Congress for authority to purchase troubled assets (the first version of TARP).
• 9/21/2008: The Federal Reserve Board approved applications of investment banking companies Goldman Sachs and Morgan Stanley to become bank holding companies.

Over the course of one week, four investment banks were gone (one absorbed, one went broke and two were forced to become bank holding companies); a global insurance company was bailed out; the money market fund industry was rocked; and the Treasury Department introduced the first version of TARP, which granted authority to purchase $700 billion of mortgage-related assets for two years.

Where do we stand five years after this momentous week?

Jobs: In September 2008, the unemployment rate was 6.1 percent, on its way up to 10 percent in October 2009. The rate now stands at 7.3 percent. Despite progress during the recovery, the economy still has 1.9 million fewer jobs than it did before the recession. At the recent pace of job growth it will take just under 11 months to reach the previous peak.

Income: For those lucky enough to have jobs, the financial crisis and recession put a dent in median household income. According to Sentier Research, July 2013 median household income ($52,113), adjusted for inflation, was 6.2 percent lower than December 2007 ($55,569), the first month of the recession. Incomes are 5 percent lower than in September 2008. It may be cold comfort to consider that the recession exacerbated a trend that was already occurring: July 2013 median was 7.3 percent lower than the median in January 2000 ($56,233), the beginning of the statistical series.

Economic growth: In the fourth quarter of 2008, when the impact of the financial crisis was cascading through the system, Gross Domestic Product dropped by 8.3 percent. For all of 2008, GDP slid 0.3 percent, followed by a 2.8 percent drop in 2009. The official end of the recession (as determined by the Dating Committee of the National Bureau of Economic Research) occurred in June 2009. While the total size of the US economy today ($15,681T) is larger than it was in Q3 2008 ($14.895T), the pace of the recovery has lagged the annual average post World War II growth rate of 3-3.5 percent.

Stocks: At the end of trading that first fateful week of the financial crisis, the damage wasn’t so bad, if you didn't have to live through the day-to-day swings. By Friday September 19, 2008 the Dow had dropped just 33 points to 11,388; the S&P 500 edged up 4 points to 1,255; and the NASDAQ was up 12 points to 2,273. Stocks bottomed out in March 2009 and then skyrocketed by nearly 150 percent to today’s near-record levels.

Housing: While stock markets bottomed out about six months after the Lehman Brothers bankruptcy, it took the epicenter of the crisis, the housing market, far longer. House prices peaked in 2006, then reached bottom in early 2012. National house prices are up nearly 16 percent from the post-bubble low, but still remain down over 23 percent from the peak. Currently, 14.5 percent of residential properties with a mortgage are still underwater (amount owed on mortgage is more than the home’s value), according to CoreLogic. The rate was down from the peak of 26 percent in the fourth quarter of 2009.

Bailouts: The government used extraordinary measures to save the financial system, including directly bailing out the financial and automobile industries. Of course, there were plenty of other measures that indirectly helped, liked providing financing through the Federal Reserve’s discount window for US banks, European banks and even for industrial conglomerates like General Electric. Here’s the accounting for some bailouts of note:

• Fannie Mae/Freddie Mac: $188B bailout, of which the companies are expected to return $146B in dividends by Sep 2013.
• GM and Chrysler: Of $80B committed, $51B repaid
• TARP: Of $700B, most has been repaid with interest. CBO puts eventual taxpayer tab at $21B.
• AIG: Fed and Treasury committed $182B, with taxpayers estimated to be fully repaid, plus $23B.

Regulatory: The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in July 2010, but lawmakers left a lot of the hard work to regulators. According to law firm Davis Polk, as of September 3, 2013, a total of 280 Dodd-Frank rulemaking requirement deadlines have passed. Of these 280 passed deadlines, 172 (61.4 percent) have been missed and 108 (38.6 percent) have been met with finalized rules. In addition, 160 (40.2 percent) of the 398 total required rulemakings have been finalized, while 126 (31.7 percent) rulemaking requirements have not yet been proposed.

Too Big To Fail: There may be fewer banks, but they are even bigger than they were at the beginning of 2007. The combined assets of the “Big Six,” which include JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley, have increased by 28 percent, according to data compiled by Bloomberg. The good news is that they have much more capital on hand. The bad news is that they are still leveraged, complicated and interconnected institutions, which makes them prone to inflict damage on the overall financial system.

Who paid what? There have been billions of dollars worth of penalties, which were levied as a result of the financial crisis. Among the biggies, the SEC has collected $2.73B and the national mortgage settlement will rake in $25B from the nation’s five largest mortgage servicers.

Who went to jail? Nobody. Jail is for federal crimes and there have been no federal convictions that have arisen from the financial crisis. (Fraudsters like Bernie Madoff and Alan Stanford didn’t have a direct connection with the financial crisis.) On the civil side, the SEC has filed civil charges against 138 firms and individuals for alleged misconduct just before or during the crisis, according to The Wall Street Journal. The biggest fish the regulators tried to land was former Countrywide CEO Angelo Mozillo, who ultimately settled with the SEC to the tune of $67.5 million in fines and a lifetime ban from serving as an officer of a public company. Former Goldman Sachs employee Fabrice “Fabulous Fab” Tourre was found guilty of misleading investors in mortgage securities issued by his firm.

Bottom Line: Just in time for the five-year anniversary, the Federal Reserve Bank of Dallas released a bleak assessment of the cost of the crisis. “Our bottom-line estimate of, assuming output eventually returns to its pre-crisis trend path, is an output loss of $6 trillion to $14 trillion. This amounts to $50,000 to $120,000 for every U.S. household…This seemingly wide range of estimates is due in part to the uncertainty of how long it might take to return to the pre-crisis growth trend.”

But, wait it gets worse. The Fed economists note that the U.S. may never return to trend, which would put the cost ABOVE $14 trillion. HAPPY ANNIVERSARY!

MARKETS:

• DJIA: 15,376 up 3% on week, up 17.3% on year (2^nd best week of the year)
• S&P 500: 1688, up 2% on week, up 18.4% on year (within 1.3% of its Aug. 2 all-time nominal high)
• NASDAQ: 3722, up 1.7% on week, up 23.3% on year
• 10-Year Treasury yield: 2.89% (from 2.94% a week ago)
• Oct Crude Oil: $108.21, down 2% on week
• Dec Gold: $1308.60, down 5.6% on week
• AAA Nat'l average price for gallon of regular Gas: $3.54

THE WEEK AHEAD: Here comes the Fed…the central bank will conduct a two-day confab, where most economists expect an announcement of a small pull back in monthly bond purchases (from $85B to $75B). Let the taper begin!

Mon 9/16:

8:30 Empire State Manufacturing

9:15 Industrial Production

Tues 9/17:

FOMC Begins

8:30 CPI

10:00 Housing Market Index

Weds 9/18:

2:00 FOMC Announcement/FOMC Forecasts

2:30 Bernanke Press Conference

Thurs 9/19:

8:30 Weekly Jobless Claims

10:00 Existing Home Sales

10:00 Philadelphia Fed

Fri 9/20:

Quadruple Witching: The expiration of stock index futures, stock index options, stock options and single stock futures…can lead to increased volatility.

New iPhones in stores