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Briefly Noted

What Historical Trends Say
About 2010

Jeffrey A. Hirsch and J. Taylor Brown observe in the “Stock Trader’s Almanac 2010” that 2010 has two factors on the proverbial wall of worry: midterm elections will be held in November and the fact that it is a “zero” year.
Midterm election years tend to be the third worst in the four-year election cycle. Often, crises and dissatisfaction with the incumbent party have coincided with market drops.

Years ending in a zero have also not been kind to investors. The Dow has declined during eight out of the last 12 years that ended with a zero. The blue-chip average did, however, post gains in 1950, 1970 and 1980.

Though historical trends make for interesting conversation, there is nothing particularly unique about a midterm election year or a year that ends in zero. Rather, it is the factors impacting investor sentiment, corporate earnings and economic growth that determine whether stocks will rise or fall. It just so happens that crises have tended to occur during the first two years of a presidential term. (This is due to a combination of factors, including a “testing” of the new president and events that originated under the former president’s term.)

In terms of 2010, Hirsch told AAII that he expects the midterm elections to have a more profound effect than the “zero” year phenomenon. In particular, he notes the potential for increased attacks by the Republican Party in an effort to regain Congressional seats. Such attacks could, in turn, hurt sentiment toward current economic policies. On a brighter note, Hirsch does note that midterm election-year market pullbacks are typically followed by significant rallies. These rallies are aided by economic and fiscal policies intended to help the incumbent get reelected.

It is worth noting that the big issues for the markets this year are likely to be the pace of economic recovery and corporate profit growth. Thus, investors should be more focused on the fundamental trends that impact their portfolio than the calendar, especially since past performance is no guarantee of future returns.

Getting Top Dollar for
Gold Jewelry

Gold’s rally last year renewed interest among both individual and institutional investors. Money flowed into the metal itself as well as gold related-funds. At the same time, many people started realizing that there is unrealized value in their jewelry boxes.

Seemingly overnight, businesses and Web sites are actively offering to buy your unwanted gold. At the same time, gold parties have become increasingly popular. Though the offers may sound tempting, the actual price you will receive can be considerably less than what the spot (market) price for your gold actually is.

Complicating matters is a variance percentage of the spot price that buyers will pay you for those earrings or bracelets.

Consumer Reports’ SHOPSMART magazine recently investigated the gold-buying marketplace. Heavily advertised Web sites such as Cash4Gold, GoldKit and GoldPaq paid only 11% to 29% of the daily market price for gold. A reporter had better luck at a gold event held in hotel, where the offer price was about 50% of the metal’s meltdown value. Jewelry stores in New York City’s diamond district were far more generous, offering about 70%. The highest offers came from metal refiners, but the magazine noted that these companies typically look for large quantities.

Just as is the case with stocks and mutual funds, transaction costs can have a significant impact on how much cash you will actually receive for your gold. How do you minimize these costs? SHOPSMART offered these suggestions.

  1. Determine if the jewelry has any antique or resale value beyond its meltdown price. Diamonds and gemstones may make the piece more valuable.
  2. If the jewelry is worth scrapping, look for the karat mark, weigh the jewelry on a kitchen scale and use the calculator at www.dendritics.com/scales/metal-calc.asp to determine current meltdown value.
  3. Call jewelry stores and pawnshops for quotes and do not be afraid to negotiate.
  4. If you decide to go to a gold party, ask for the name of the gold-buying company and what percent of the spot price for gold they will pay. Then check the company out with the Better Business Bureau (BBB.org).
     


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