Unemployment News

The U.S. Labor Department reported today that the unemployment rate has increased to 10.2% -- this is a 26-year high. To understand the significance of our current labor market the above chart illustrates the unemployment rate since 1948.

The chart shows that today's move above the 10% threshold is only the second time since World War II that the rate has exceeded 10%. It is also worth noting that the unemployment rate historically tends to peak shortly after a recession ends. However, following the previous two recessions, the unemployment rate continued rising for many months following the beginning of an economic "expansion."

Investment Odd Couple

Through the third quarter, an odd couple has emerged as big winners in the investment world. The Dow Jones Industrial Average, representing the broad U.S. stock market, is up 14 %, while gold futures are up 19%.

Usually, a rise in the stock market reflects a confidence in an economic recovery, while an increase in gold prices indicates investors fear an unstable economy. Therefore, these two investment markets usually move in opposite directions. However, low interest rates and government stimulus have poured cheap money into financial markets, helping stocks. Yet the creation of all that money, together with the Federal Reserve's maintenance of near-zero interest rates and the prospect of heavy government borrowing to fund deficits, threatens to weaken the dollar and fuel inflation and economic volatility. This, in turn, creates a growing interest in gold.

While many institutional investors have been placing large bets on gold, gold futures can be volatile and probably shouldn't compose more than 5 percent of an individual investor's portfolio. While it's true gold futures have soared from $250 in 1999 to $1,055 for a troy ounce, gold would still have to double to $2,291 to reach its 1980 high adjusting for inflation. This illustrates why gold has not been a solid long-term investment. If you are interested in gold, be sure to buy gold futures on a legitimate exchange, not those pretty gold coins you see on TV late at night.

Of course, these type of investment decisions and building a well-rounded portfolio can be complex, working with a financial advisor can help. It's best to speak with an independent fee-only financial planner to make sure your investment portfolio represents your risk tolerance, investment goals, and time horizon before taking any action.

Joseph Pisani of CNBC News reports that the cost to attend a four-year nonprofit private college increased 4.3% for the 2009-2010 academic year, bringing the average annual price to $35,636. Meanwhile, during the last 12 months, the Consumer Price Index (a measure of inflation) actually fell 1.3%.


Shockingly, the cost to attend a public college grew at an even greater rate. Public in-state college costs climbed 5.9%, with the average cost reaching $15,213. Out-of-state students watched their costs rise 6% to $26,741, according to the College Board, a non-profit association of schools, colleges and universities. (All costs include tuition, fees and room and board.)

Interestingly, poor investment performance may be one reason college costs continue to measurably outpace the rate of inflation. Many schools are suffering significant losses in their endowments as a result of the current financial crisis. Some of the largest endowments in the country including places like Harvard, Princeton and even the University of Michigan have experienced declines of over 20 percent during the fiscal year that ended June 30, 2009.

However, Benjamin Franklin's words still hold true: "an investment in education pays the best interest." As a matter of fact, over a lifetime a high school graduate earns an average of $1.2 million, while a college graduate earns $2.1 million (in current dollars). Therefore, it's more important than ever to adequately plan for college tuition expenses. Work with an independent fee-only financial advisor to ensure you are taking the right steps to ensure your investments are ready when your student is.