| Flourishing Weekly Update June 19, 2006 “The rate of [nominal] profit in the economy is raised to progressively higher levels the more rapidly the quantity of money, spending, and sales revenues rise.” -George Reisman, Ph.D., Capitalism: A Treatise on Economics (Jameson Books, 1996, p228. The Markets and the Economy From April 19 to June 13, the Nasdaq Composite Index declined by 298 points (12.57%). From May 9 to June 13, the S & P 500 Index declined by 95 points (7.17%). Both indexes rallied last Wednesday and Thursday, providing some emotional relief to concerned investors. Will the relief last? No, the relief will not last. In the stock market, emotional relief is always temporary. Never forget that psychic pain is at least half the price of superior investment returns. Now, let’s put the markets’ recent declines into historical perspective: On March 12, 2003, the S&P 500 Index closed at 804.19. Last Friday, it closed at 1251.54. That is a gain of 55.63%, not counting dividends. In the interim, quarterly dividends on the S & P 500 have risen from $3.92 to $5.91. That is an increase of 50.77%. Taking a slightly longer perspective, S & P dividends in the year 1998 were $12.44; in 2005 despite the, they were $22.21. In this era of fiat money, inflation is all but certain, and that means that the greatest financial risk to retirement income is loss of purchasing power due to inflation. While stock market valuations respond negatively to even moderate increases in the reported rate of inflation, reported corporate earnings and the resultant dividends are among the first and primary beneficiaries. Returns and Rates
Past performance is no guarantee of future results. Indices are unmanaged and money cannot be invested into them directly. 1, 3, 5, and 10-year returns are annualized. Returns do not include dividends.
Weekly Digression Two years ago, I invited Jack Schultz, the author of Boomtown USA: The 71/2 Keys to Big Success in Small Towns to speak to the audience at our annual Legacy of ThanksgivingBanquet. I also arranged for Jack to speak to an economic forum that was being held at Southwestern College here in Winfield on the same day. Altogether, Jack spoke to an audience of about 400 people. The powerful logic of Jack’s message is still helping to drive economic progress in Cowley County today. By the virtue of his message, Jack’s audience has grown exponentially these past two years. Jack is working on another book, has launched The Boomtown Institute, and been namedInc. Magazine’s “Entrepreneur of the Year”. I encourage you to visit Jack’s blog http://www.boomtownusa.blogspot.com. Until next week, PATIENCE, DISCIPLINE, and TRUST in the FUTURE. Mike Harvey, CSA Family Wealth Management 108 W. 9th Ave. PO Box 539 Winfield, KS 67156 620-221-2853 800-200-4229 P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them our distribution list, please reply with their email address and we will ask for their permission. Securities and insurance products offered through Linsco/Private Ledger Member NASD/SIPC
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