The DOW is down 222 points today

The stock markets uptick is being fed by all those people coming out of money market accounts and those who have saved their cash for the "next" bull market.

With all the good news coming out from Wall Street and Washington DC, people are gaining more confidence that our recession has bottomed out, and will begin to show some profit.

Not really knowing how the investors will continue to feed or draw back on their equity investments for the remainder of this year, I'm still on my strategy plan to remove my YTD gains into some other equity funds with a small portion still going into bond funds.

The pundits are saying that bond funds are a real bad deal right now, because they're all saying that the feds will increase interest rates, and the prices on bonds will drop more than they gain.

What say you? I was hoping to realign my investments into 60% bonds and 40% equities by year end.

I have opinions, but no advice.

As you note, when interest goes up, bonds go down. I can't find a reason in the world to believe interest can decline significantly (.5% is significant) from present levels, so basically, I'm scared to death of bond funds. Here's why. If interest increases, as I expect, bond funds will drop, with the possibility of numbers of people pulling out of them. When (if) they do, the only way the funds will have to satisfy the demand for cash is to sell some of the underlieing bonds at the market, and that would very likely be a badly inopportune time to be selling bonds.

Maybe funds that specialize in short term maturities. . . ? Even there, I'm not optimistic.

For my own situation, I'm aware that State Farm bank in now paying less than .8% on relatively short term CDs. Not much at all, but about 800% above my money market returns. We have a local savings bank offering much better, I may be moving there from money market, depending on how they check out on the FDIC site. Anyhow, my own situation is that I can pull a certain amount from 401K at .1% and reinvest it in time deposits varying from below .8% up to nearly 2%. Chicken feed, I know, but lookee here. 401k withdrawals are taxable income, but at the moment I can drag out some amount to be determined this weekend without exceeding std deduction, personal exemption, and the additional "elderly" exemption - and the money goes from uninsured to FDIC insurance.

It's bad to have an income so low as to permit that, but in an extreme case, could result in saving taxes at a marginal rate of 15%, the last time I checked. Nothing else is paying that well.

By the way, here is the link Phoenix once posted for FDIC bank ratings. It's a government site, so be patient. It is a bit cumbersome.

http://www2.fdic.gov/idasp/main_bankfind.asp

Money market is paying close to zero, and ten year yields are about 3.5%, but my thinking now is that by then all the current deficit spending is going to be inflationary in about ten years, and that kind of return now is hardly worth the paper it's written on. So, the 64-thousand dollar question is, where's the best place to park our investments now?

I will never consider gold as an investment. Paying over $1,000/oz for gold is foolish. Money will always be king when the world economy is maintaining current levels of production, and unemployment is still under 10% in the US. There are a lot of good buys out there, because retail and leisure industries are hurting for business, and they're discounting stuff to bargain prices, and I believe it's going to get better before they begin to stabilize. Hang on to your $$$$$. I only wish we had more liquidity, but we invested most of our cash into remodeling our home last year.

as of yesterday my return on investment for this calendar year to date is 8.1%.

I don't know the percentage, but our investments are throwing off a nice piece of change. Before the crash, our investments were up, (on paper) 60%. At one point during the recession, we were in the red, but now we are up 28%. I'm not complaining.

I'm not moving a lot of funds into metals and I'm not buying hard metal but my mining shares are up 68% since June. China is slowly dumping dollars and buying gold. They can't do it quickly because then they will affect the price of the very commodity they're trying to buy at lower prices. But, that's why gold hasn't dropped as the Dow has come up. The Chinese are worried about how much of our paper they're holding --- can't say as I blame them --- and are looking to pick up more Australian dollars and more gold so that they're less dependent on USD. It won't be fast but gold mining stocks (be careful, there are some pitfalls to know about in picking mining stocks) should out-perform bullion.

dys, Your investments are tooooo conservative; you need a better mix of funds.

Phoenix, My funds are up 19% YTD, and my wife's funds are up 12%. I've already shifted the remainder of my money market account that was left over when I sold some stocks when the market was over 14,000. The three funds I purchased in June from the transfer are also up 18%.

JPB, In my younger days, I used to look at metals, because my best friend was invested in them, but I never felt enough confidence. I remember he used to brag about how much he was worth on paper back then, but I also remember he never said anything when the market was down. I've been following gold ever since I can remember, but by all indications, the stock market always outperformed gold - even during inflationary times. It's still a mystery to me how one ounce of gold can be sold/bought at $1,000+.
I've always believed that we must always have confidence in our economy, because that's the vehicle by which all our lives depend. Without it, everybody will be living what was experienced during the depression. If that ever happens, nobody will be wealthy enough to live well. With the increased mix of what and how the world economy is made up, I do not believe a depression is possible in this world. I see the mixed messages every time I travel outside of Silicon Valley. Even in Austin recently, some of the famous/best restaurants were busy with customers. Our older son told me that Austin's economy is pretty stable, and the signs were evident from all the people still buying their food at Whole Foods and the malls.

I believe the base of our economy is fundamentally strong even while thousands continue to lose their jobs and hours cut - all at slowing rates.

With this boon in stocks, I'm feeling a bit anxious that the P/E ratios are increasing too much too quickly.

This mix of contradictions is healthy for all of us, but do we bet on black or white?

I'll say that silver seems like a good deal right about now; better 4-5 years ago, but still priced at the lower end I think.

maporsche, While you are still young and working, it's okay to devote a portion of your investments into more speculative stocks that have a potential of growing faster. However, be forewarned that most day-traders lose money; it's impossible to predict how any stock will perform in the short term. That's the reason we see so much volatility in the market when looked upon in short terms.

That's why I diversify and why I stay away from bullion. Mining shares are as easily traded as any other stock. I'm still less than 5% in metals (probable a little more given their performance), but they're doing very, very well.

Diversification is the best investment advise for any investor. The likelihood that they'll all tank at once is very remote, and funds are managed by people who continue to pay attention to all the mix in the funds to ensure their safety. Let the pros manage the funds; most investors cannot keep up with individual stocks to keep abreast of how the company is performing during good and bad times.

As we age, it's a good idea to have a larger ratio in bonds, because huge losses cannot be recovered in the short term, and we must protect the principal.

This is getting very scary; the market is up almost too much, and I'm feeling very uncomfortable. I looked at our funds before I left for Vietnam, and after studying the options available for transfer, I found that most of the funds I now have meets most of my current needs, so I didn't move anything. Sept 29 was even better, and the news about the world economy looks very promising.

If only our economy can begin hiring - which the majority of small business owners now say they will during the next six months.

Looks promising!

Today could be a Very Interesting Day. Unemployment numbers worse than expected on the heals of a jittery market week.

Today's the 8th; what has transpired since you last posted?

First it went down and then it came back up, lol.

Alcoa opened the earnings reports season with good news and the jobless numbers are "improving" so the market will respond positively. I think it's a short-winded climb (a bear rally rather than a bull market), but I'm staying in until I see a reason to bail.

I noticed our funds hit new highs; I've studied my funds before I took this trip and found that what I now own pretty much meets my ideal funds leaning a little heavier on bonds. I feel pretty comfortable with my mix of funds, but I'm still not sure how the market will perform for the rest of this year.

What I have concluded is that it may still hit some more lows, but since I'm in it for the long term, any bear will be short-lived and will recover by the middle of next year. Businesses have pretty much shed most of their fat, and most business owners have said they're going to add workers by year end.

I have to believe them.

Anyone's best guess is the only crystal ball we have. I do believe that the recovery has begun. I don't subscribe to the V-shaped recovery model that the bulls are espousing but even an L-shaped recovery is better than the melt-down we were looking at a year ago. I'm not convinced that we aren't looking at a long-term Japan-style recovery which lasted 20 years. I don't think (hope, really) that ours will take that long, but I do think it will be a very long time before we see a 14,000 Dow.

JPB, I don't even expect to see 12,000 for the next five to ten years.

It looks like we'll be bumping up against 10,000 soon. I expect some profit-taking will push it back down, at least temporarily.