Contents: Overview; Tea leaf readings; Economic reports; Perspective, “How do we stack up with the world markets?”
"Advice is seldom welcome and those who need it the most, always like it the least.” - Lord Chesterfield (1694-1773) English Statesman, Author
Overview
What a fun week for the markets!
Even though the traders looked tired by Friday, we still managed to pick up all we lost over the past four weeks – and then some. We had been down about 5% and we closed up over 7%. Trading volume remains seasonally low but – up is up…
Positive comments from a previously bearish analyst on the bank sector got us going and then the earnings from some of the market leaders not only came in positive but, in most cases, better than expected. JPMorgan, Intel, Goldman Sachs, IBM and Google, to name a few, all came in with nice numbers. More important, I believe, was that most of the companies felt that the remainder of the year and into next year looked very good for them.
Stocks go up because their earnings go up. Growth stocks go up not only based on today’s numbers but what the company and the analysts following it see for the future. As the future brightens, the shares go up in anticipation of those rising earnings. I believe that today’s market – and for some time to come – will see growth stocks at the fore. That’s one reason the NASDAQ is doing so well is that the Index is primarily growth and tech issues, aka, market leaders.
As I look at the markets from my perspective of 36+ years of day-to-day participation and advising, I am quite convinced that we’re going to see the economy grow much more than what the prevailing wisdom has it…and ahead of this growth, the equity markets will improve very nicely.
Here’s a few reasons why I quite comfortable saying this. Look for continuing drops in business inventories; increasing exports; home building to bottom soon and begin to rise as starts must rise a lot, just to get to normal and that consumer spending will continue to rise as well.
Bottom line. Get your money out of the First National Mattress and put it to work for you now.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“You’ve got a corporate America that’s poised for growth coming into the second half and the first half of next year. Inventory levels are down, companies have right-sized their levels of employment. You’re going to be in place for an explosive growth in a couple of quarters and the best upside surprise will be in technology.” - Art Hogan, managing director, Jefferies
“While markets remain fragile and we recognize the challenges the broader economy faces, our second quarter results reflected the combination of improving financial market conditions and a deep and diverse client franchise." - Lloyd C. Blankfein, Chief Executive, Goldman Sachs Group (announcing profits jumping 65% from a year earlier)
“The Great He-Cession - The unemployment rate for men hit double-digits, 10%, in June, while for women it's 7.6%. The industries that tend to employ lots of men, such as construction and manufacturing (and auto dealerships), have suffered deeper job cuts in the recession than the education and healthcare jobs that employ more women.” – Wall Street Journal
“Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand. A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low. Supply is outpacing demand by about 1 million barrels a day.” - Philip Verleger, academic and former US government adviser (He correctly predicted in 2007 that prices were set to exceed $100.)
“Stocks traded outside of the U.S. are worth $14 trillion, or 59% of total value of global shares. (The figures are as of June 30.) Yet the average American has only 11% of their stock holdings abroad…they are missing an opportunity for better diversification and returns.” – Forbes
“Bank stocks are in for, at least, a short-term gain of 15% as the industry benefits from accounting changes and legislation aimed at helping lenders.” – Meredith Whitney, bank analyst (She had been very bearish on the entire sector since early 2007)
"The data showed the (Chinese) economic recovery is stronger than expected. There will be no suspense about achieving the government's goal of 8% GDP growth this year." - " Zhu Jianfang, chief economist, Citic Securities, Ltd.
Economic reports from the past week (with occasional translations…)
“The Dow Jones Industrial Index managed to cement a 7.3% rally this past week that came as earnings season kicked into full gear. The Standard & Poor's 500 and the tech-laden NASDAQ both also capped off strong weeks. For the week, the S&P was up a shade under 7%, while the NASDAQ gained 8% over the past eight sessions.” – Wall Street Journal
US homebuilder sentiment in July jumped to its highest level in 10 months as improved sales conditions boosted confidence in the market for new single-family homes according to The National Association of Home Builders. "Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices." - Joe Robson, NAHB Chairman and home builder, Tulsa, Oklahoma
US business inventories 1% in May, marking a ninth consecutive monthly decline. Business sales slipped 0.1% in May. That pushed down the inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, to 1.42 months' worth from 1.43 in April. Companies have been purging inventory and that has contributed to the recession. Many economists expect that pattern to reverse soon, which should help lift economic growth in the second half of the year. - US Commerce Department
Initial jobless claims dropped for the second straight week to levels lower than forecast on a seasonally adjusted basis, while total continuing claims also fell by a record amount to the lowest level since January. – US Labor Department (Continuing drops in initial unemployment claims are positive leading indicators of the change in the economy.)
China's economic growth accelerated in the second quarter amid a stimulus-fueled surge in consumer spending and factory output.
The world's third-largest economy expanded by 7.9% in the April-June quarter from a year earlier. That was up from 6.1% growth in gross domestic product (GDP) the previous quarter.” - National Bureau of Statistics (According to Forbes, many analysts expect China to be the first major country to emerge from the global economic slump.)
Housing starts in June climbed 3.6% from May. Single-family home starts jumped 14.4%, the biggest rise since December 2004. Both overall starts and single-family starts have risen for two straight months.
It was the first time since February-March 2007 that single-family starts posted two months of gains and the first time since January-February 2008 for overall starts. June permits to start construction, an indicator of builder confidence, increased by 8.7%, the highest since December. – US Department of Commerce
Perspective
“How do we stack up with the world markets?”
The media and many government types seem to have the goal of working to diminish our country’s position in the global economic stage. Many people are heard to recycle what they get from those sources as their opinions about our ability to compete, the horrors of outsourcing, the dollar being only good as wall paper and how foreigners “control” us by buying our bonds.
There is always an element of truth in these spin stories but most of it can be traced to the psychological fog those same sources have placed many people.
Let’s start with this fact – not opinion of some misguided media maven. The World Economic Forum, a global economic think tank based in Switzerland, recently announced that the US is number 1 – as in the top – in its annual global competitiveness report. These people have no ax to grind nor advertising space to sell. Could be why that hasn’t been made more of, I’m thinking.
Same church, different pew
Today’s economic environment – in terms of unemployment levels, fear, concerns, change – is highly reminiscent of times in the 1970s and again in the 1980s. I can assure you that those periods were just as uncomfortable as this one is now. The biggest challenge – I believe – is that because we had a period of unprecedented growth from 1982 through 2002, most people of any age have little experience with down markets other than having read or heard of them.
Markets and economies are cyclical – there are downs to follow ups and, as is the case now, the up to follow the down. And, contrary to my governmental and media buddies profess, this is nowhere near as bad as the Depression. Even if the economy ultimately hits over 3% down from its highs, in the 30s, that drop was 25% - and no FDIC or unemployment insurance!!! To attempt to compare the two periods is stupid and irresponsible.
Going back 60+ years, we have averaged a recession about every 5 years. It’s not usually as significant as this one is proving to be but that’s the cycle. The point is that we’ve had them before and we’ll have them again. The longer your investment time horizon, the less impactful they will be.
Debt and housing
The folks at the International Monetary Fund (IMF) tell us that Ireland, Spain, the UK, Australia and some eastern European countries have worse overall housing bubbles than we do/did.
As to the debt levels, the IMFers say that, as a percentage of our GDP, our total government debt will average about 57% - as compared with the median of around 40% over the last 20 years. By the way, in the US, the level was right at 50% in the 80s. For comparison, and according to the IMF figures, Japan will have a ration of 151% with the Euros (16 countries) averaging 66%.
Outsourcing is no biggie
This is the, I believe, natural progression due to a global trade reality. In the US, it’s true that we’ve lost about 6.5 million manufacturing jobs since 1980. The part that the negative types magically overlook is that – over the same period and adjusted for inflation – the total value of what we do put out from our manufacturers is up by 70%!
That’s done because we use technology to give us the greater productivity. The low-skilled and labor intensive jobs have gone to countries that flourish in that environment. The higher skilled and, by the way, higher paying jobs remain here.
Who has the biggest GDP?
You may recall/have read that in the mid to late 1980s, Japan was set to “take over” as the head of the economic pack. Oops! The media blew another one.
Right now, the US GDP – after getting beaten up over the past 9 months – is at $14.3 Trillion. The media and negative government types like to tell us that there are others “poised to take over our leadership role.” I concur that we need to adjust, adapt and tune-up a lot in our education system to help us stay ahead. However, let’s see where Japan is now.
Japan is in the number 2 slot. Their GDP is $4.9 Trillion. As a percentage or just a differential, that’s not even close. From a GDP per capita basis, China still has some way to go as it ranks number 100 of all the world’s countries. Safe to say, they’ll be growing but let’s keep things in context.
Prognosis
We can’t be complacent but neither should we be concerned about our ability to recover. WE will lead the global economy back. WE set the example for innovation, adaptability and flexibility. WE are still the place where the best and brightest want to come to learn and, perhaps, live.
Get rid of your fear – False Evidence Appearing Real. Our economy, our markets are the strongest in the world – media nay saying and governmental bad policies, notwithstanding.
Act in your own best interest and move into the markets today. Do it all at once; do it incrementally – just do it, as the folks in Beaverton say.
Remember – the future is so bright, you have to wear shades!
All my best,
Mike
509-747-3323
Closing values as of 10 July 2009: Dow Jones 8743 NASDAQ 1886 S&P500 940 Oil $63.51/bbl Gold $940.00/oz
Monday, July 20, 2009
Monday, July 13, 2009
Market retrospective - week of 10 July
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “GM – Part 2”
"Generally speaking, investing in yourself is the best thing you can do. Anything that improves your own talents. Nobody can take it away from you. They can run up huge deficits, the dollar can become worth far less, you can have all kinds of things happen. But, if you've got talent yourself and you maximize your talent, you've got a terrific asset." - Warren Buffett, Investor, Omaha
Overview
We’re now off 5% in the markets over the past four weeks – just in a kind of drift mode until more corporate earnings begin to reveal themselves over the coming weeks. Oil is down 15% as talk of “controlling” speculators, high product inventories and a slow economy continue to push down the price of crude. Other commodity prices moved somewhat lower as well.
The neither unusual nor unanticipated summer weakness has us firmly in its grasp. To try and make sense of the markets when trading volume continues to be exceptionally weak/slow, is like trying to catch the wind. As has been seen over the recent trading sessions, there is very little price movement. The markets are at the “want to get started higher” stage. However, there needs to be a catalyst to set things off.
Analysts are estimating that profits at S&P 500 companies fell an average 34% in the second quarter compared with the year-age levels, according to data compiled by Bloomberg. The companies who beat their estimates and/or put forward favorable estimates will be well rewarded by nicely higher trades over the coming months.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“In a study of 401(k) plans, 3 million employees with 57 large US companies were interviewed. It was found that, regardless of their age or income, African-American and Hispanic workers have lower participation rates and contribute less to their retirement plans than white and Asian employees.
Asian employees contributed the most - an average of 9.4% of income, followed by white workers with 7.9%, Hispanics with 6.3% and African-Americans with 6%. The contribution and participation gaps led to smaller average account balances for Hispanics and blacks, a discrepancy that is compounded at higher pay rates.” - The study was conducted by the Ariel Education Initiative, the nonprofit associate of Ariel Investments and by Hewitt Associates.
“The economy is on its way to recovery, though some work still remains before a complete recovery will occur.” – James B. Lee, Jr., Vice Chairman, JP Morgan
"I find it shocking anyone would buy a 10-year Treasury yielding 3%. If you dilute the number of anything, its price has to go down. I don't know who has the confidence and comfortability in buying a 10-year Treasury yielding 3.4%, but I think it's absolutely insane.” - Michael Pento, chief economist, Delta Global Advisors (In reference to the 10 year US Treasury auction this past week.)
“Is there any example in the history of our global economy where a government pulled back their fiscal stimulus spending in time to avert price problems? I can't think of one.”…Andrew B. Busch, Global FX Strategist, BMO Capital Markets
“Big oil investors and Asia's central banks and sovereign wealth funds are poised to grow twice as fast as other institutional investors, underscoring how financial power is continuing to shift away from the West.” - Report from the McKinsey Global Institute
"I think this was a very positive report and consistent with the idea that the US recession will come to an end in the next few months." – Mark Zandi, chief economist, Moody's Economy.com (Concerning the widely lower than expected trade deficit.)
Economic reports from the past week (with occasional translations…)
“If you're trying to rebuild your portfolio of U.S. stocks, preliminaries show that growth funds--large-, mid- and small-cap - trounced value funds in the first half of 2009. The best-performing category was mid-cap growth, with the average fund gaining 13.01% from 1 Jan through 30 June. Small-cap growth funds follow closely, with an average six-month gain of 11.44%. Large-cap growth funds produced a total return, on average, of 10.92%.” – Lipper Analytical
“Even as federal debt issuance has ballooned, the government's interest payments have fallen. Despite record borrowing, US net interest payments are set to fall in 2009 to $170 billion from $253 billion in 2008, according to Congressional Budget Office projections. It expects those interest costs to remain flat in 2010, on the assumption that the Treasury will continue to issue large amounts of short-term debt at very low rates. In June 2009, the average cost of government debt fell to 2.69% from 4.04% a year earlier.” – Wall Street Journal
“High output from the first wells drilled at the Horn River basin shale-gas field in British Columbia, announced Thursday, suggests huge potential. Wood MacKenzie last year estimated the region might hold up to 47 trillion cubic feet of reserves. That would put it on a par with Texas' prolific Barnett Shale fields. Combined US and Canadian proved natural-gas reserves have jumped 29% in the past decade according to BP PLC.” - ExxonMobil release
“The US trade deficit unexpectedly narrowed in May to the lowest level in almost a decade, as exports jumped while imports of crude oil and auto parts declined. The gap between imports and exports decreased to $26 billion, the smallest deficit since November 1999, from a revised $28.8 billion in April that was lower than previously estimated. Imports fell while exports rose the most since July 2008.” – US Department of Commerce
Perspective
“GM – Part 2”
On Friday, General Motors Company rose from the bankrupt ashes of General Motors Corporation. Their CEO, Fritz Henderson, said that the new company - which is currently owned 61% by US taxpayers, 12% by Canadian taxpayers and 18% by the UAW – will repay its loans well ahead of the 2015 deadline. He also said that, “the new General Motors will be faster and more responsive to customers than the old one and it will make money and repay government loans faster than required.”
The company plans to keep its best assets and to be rid of an additional 6000 employees, along with 16 plants and related real estate in Delaware, Ohio, New York, Indiana, Pennsylvania, Virginia and, of course, Michigan. GM now consists of just four US brands and will only be offering Chevrolet, Buick, Cadillac and GMC trucks.
Over the past year or so, the US taxpayers have provided about $60 billion in financing, including $30 billion in bankruptcy financing. About $50 billion of the US government financing will be converted into stock in the new company.
An initial public offering that would take the newly private and reorganized GM back into public ownership could happen as soon as the first half of 2010, depending on the market conditions.
So now, all the “old” shares of GM Corporation are worthless as this new venture officially gets under way. After all the money that’s been spent, the lives negatively affected and the economic injury it has caused, it would be nice if all this works out in a positive manner. There definitely is a big pent-up demand for new vehicles – but will they be GM name plates? Simply changing the structure doesn’t bring in buyers. Their competition isn’t just watching all this time.
Among other things, GM is going to have to greatly improve designs, quality of product and be as responsive as the CEO has said they will. The bigger problem, in my opinion, is that the management and union people who brought them to this dismal point are still – to a major extent – in power.
I hope they can change their spots and actually revive a former icon and not just have it on life support for a time…
All my best,
Mike
509-747-3323
Closing values as of 10 July 2009: Dow Jones 8146 NASDAQ 1756 S&P500 879 Oil $59.86/bbl Gold $912.40/oz
"Generally speaking, investing in yourself is the best thing you can do. Anything that improves your own talents. Nobody can take it away from you. They can run up huge deficits, the dollar can become worth far less, you can have all kinds of things happen. But, if you've got talent yourself and you maximize your talent, you've got a terrific asset." - Warren Buffett, Investor, Omaha
Overview
We’re now off 5% in the markets over the past four weeks – just in a kind of drift mode until more corporate earnings begin to reveal themselves over the coming weeks. Oil is down 15% as talk of “controlling” speculators, high product inventories and a slow economy continue to push down the price of crude. Other commodity prices moved somewhat lower as well.
The neither unusual nor unanticipated summer weakness has us firmly in its grasp. To try and make sense of the markets when trading volume continues to be exceptionally weak/slow, is like trying to catch the wind. As has been seen over the recent trading sessions, there is very little price movement. The markets are at the “want to get started higher” stage. However, there needs to be a catalyst to set things off.
Analysts are estimating that profits at S&P 500 companies fell an average 34% in the second quarter compared with the year-age levels, according to data compiled by Bloomberg. The companies who beat their estimates and/or put forward favorable estimates will be well rewarded by nicely higher trades over the coming months.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“In a study of 401(k) plans, 3 million employees with 57 large US companies were interviewed. It was found that, regardless of their age or income, African-American and Hispanic workers have lower participation rates and contribute less to their retirement plans than white and Asian employees.
Asian employees contributed the most - an average of 9.4% of income, followed by white workers with 7.9%, Hispanics with 6.3% and African-Americans with 6%. The contribution and participation gaps led to smaller average account balances for Hispanics and blacks, a discrepancy that is compounded at higher pay rates.” - The study was conducted by the Ariel Education Initiative, the nonprofit associate of Ariel Investments and by Hewitt Associates.
“The economy is on its way to recovery, though some work still remains before a complete recovery will occur.” – James B. Lee, Jr., Vice Chairman, JP Morgan
"I find it shocking anyone would buy a 10-year Treasury yielding 3%. If you dilute the number of anything, its price has to go down. I don't know who has the confidence and comfortability in buying a 10-year Treasury yielding 3.4%, but I think it's absolutely insane.” - Michael Pento, chief economist, Delta Global Advisors (In reference to the 10 year US Treasury auction this past week.)
“Is there any example in the history of our global economy where a government pulled back their fiscal stimulus spending in time to avert price problems? I can't think of one.”…Andrew B. Busch, Global FX Strategist, BMO Capital Markets
“Big oil investors and Asia's central banks and sovereign wealth funds are poised to grow twice as fast as other institutional investors, underscoring how financial power is continuing to shift away from the West.” - Report from the McKinsey Global Institute
"I think this was a very positive report and consistent with the idea that the US recession will come to an end in the next few months." – Mark Zandi, chief economist, Moody's Economy.com (Concerning the widely lower than expected trade deficit.)
Economic reports from the past week (with occasional translations…)
“If you're trying to rebuild your portfolio of U.S. stocks, preliminaries show that growth funds--large-, mid- and small-cap - trounced value funds in the first half of 2009. The best-performing category was mid-cap growth, with the average fund gaining 13.01% from 1 Jan through 30 June. Small-cap growth funds follow closely, with an average six-month gain of 11.44%. Large-cap growth funds produced a total return, on average, of 10.92%.” – Lipper Analytical
“Even as federal debt issuance has ballooned, the government's interest payments have fallen. Despite record borrowing, US net interest payments are set to fall in 2009 to $170 billion from $253 billion in 2008, according to Congressional Budget Office projections. It expects those interest costs to remain flat in 2010, on the assumption that the Treasury will continue to issue large amounts of short-term debt at very low rates. In June 2009, the average cost of government debt fell to 2.69% from 4.04% a year earlier.” – Wall Street Journal
“High output from the first wells drilled at the Horn River basin shale-gas field in British Columbia, announced Thursday, suggests huge potential. Wood MacKenzie last year estimated the region might hold up to 47 trillion cubic feet of reserves. That would put it on a par with Texas' prolific Barnett Shale fields. Combined US and Canadian proved natural-gas reserves have jumped 29% in the past decade according to BP PLC.” - ExxonMobil release
“The US trade deficit unexpectedly narrowed in May to the lowest level in almost a decade, as exports jumped while imports of crude oil and auto parts declined. The gap between imports and exports decreased to $26 billion, the smallest deficit since November 1999, from a revised $28.8 billion in April that was lower than previously estimated. Imports fell while exports rose the most since July 2008.” – US Department of Commerce
Perspective
“GM – Part 2”
On Friday, General Motors Company rose from the bankrupt ashes of General Motors Corporation. Their CEO, Fritz Henderson, said that the new company - which is currently owned 61% by US taxpayers, 12% by Canadian taxpayers and 18% by the UAW – will repay its loans well ahead of the 2015 deadline. He also said that, “the new General Motors will be faster and more responsive to customers than the old one and it will make money and repay government loans faster than required.”
The company plans to keep its best assets and to be rid of an additional 6000 employees, along with 16 plants and related real estate in Delaware, Ohio, New York, Indiana, Pennsylvania, Virginia and, of course, Michigan. GM now consists of just four US brands and will only be offering Chevrolet, Buick, Cadillac and GMC trucks.
Over the past year or so, the US taxpayers have provided about $60 billion in financing, including $30 billion in bankruptcy financing. About $50 billion of the US government financing will be converted into stock in the new company.
An initial public offering that would take the newly private and reorganized GM back into public ownership could happen as soon as the first half of 2010, depending on the market conditions.
So now, all the “old” shares of GM Corporation are worthless as this new venture officially gets under way. After all the money that’s been spent, the lives negatively affected and the economic injury it has caused, it would be nice if all this works out in a positive manner. There definitely is a big pent-up demand for new vehicles – but will they be GM name plates? Simply changing the structure doesn’t bring in buyers. Their competition isn’t just watching all this time.
Among other things, GM is going to have to greatly improve designs, quality of product and be as responsive as the CEO has said they will. The bigger problem, in my opinion, is that the management and union people who brought them to this dismal point are still – to a major extent – in power.
I hope they can change their spots and actually revive a former icon and not just have it on life support for a time…
All my best,
Mike
509-747-3323
Closing values as of 10 July 2009: Dow Jones 8146 NASDAQ 1756 S&P500 879 Oil $59.86/bbl Gold $912.40/oz
Monday, July 6, 2009
Market retrospective - week of 3 July
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “It’s a bull market”
“Hope is the magic elixir of capitalism and capitalism is optimism monetized”. – Dennis Kneale, Media & Technology Editor, CNBC
Overview
“You may start your engines”
The above phrase is used to begin the Indianapolis 500 race. I use it since this coming week will begin the long anticipated earnings reports for publicly traded US companies. From these revelations – it has been said – we will be able to determine just how the markets and, ultimately, the economy will be doing through the end of the year.
This past week, the markets completed its very best quarter in just about 10 years. While the week itself was less than exciting since the holiday was coming, things should be picking up a bit very soon.
The companies will be reporting how they did this second quarter compared to the year ago period. I think it’s safe to say the results will be lower. There are two keys to be looking for.
If a company puts up better than expected numbers, their stock will likely go up. They may be lower than last year’s but “not as bad” as what the back room types had thought. The other is how do they see their markets developing over the rest of the year and later.
It could be an interesting week, to be sure.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“Jeremy Siegel, market historian and finance professor at the University of Pennsylvania’s Wharton School, is forecasting an annualized return of 8.0% (after inflation) for the S&P 500 over the next ten years. Siegel sees the S&P 500, which is up 4.0% this year through June 29, ending 2009 up 10 - 12%. Siegel believes that the economy is going to grow faster than expected over the next six months. He sees a V-shaped recovery, but says the upward slope of the V will not be as steep as usual.” – quoted in Kiplinger Magazine
"Equity markets have entered a phase of reality checks, during which the expectation-driven rise from the March lows has to be beefed up by hard economic data." - Gerhard Schwarz, head of global equity strategy, UniCredit
"We're seeing a classic bull-bear battle here." - Tom Schrader, managing director for U.S. equity trading, Stifel Nicolaus Capital Markets
“The summer forecast for stocks is higher. Both the valuations and volatility measures are pointing to a higher market. You've lost some of the impetus, but we'll probably grind higher through the summer. It's more of two steps forward and one step back. The market's widely anticipated ‘pull back’ may not materialize; the market may have caught its breath with the sideways move stocks made in the last couple of weeks.” - Tobias Levkovich, chief U.S. equities strategist, Citigroup
Economic reports from the past week (with occasional translations…)
Stimulus package ~ One of the inherent problems with the Obama Administration’s $787 billion stimulus plan is that 60% of the package was never going to have much of a stimulative effect, according to Congressional Budget Office Director Douglas Elmendorf. With respect to the other 40%, initiatives capable of providing real stimulus will be among the slowest to come online. Contracts totaling $152 billion had been let as of June 19, but only $53 billion has been spent in the four months since the stimulus bill was enacted, according to Recovery.gov. The Department of Transportation has spent just $369 million of the $19 billion it has appropriated for highways, airports and other construction projects.
Oil prices/demand ~ The International Energy Agency slashed its forecast for world oil demand over the next five years, saying that by 2013 global demand will average 87.9 million barrels a day, 3.7% fewer than it expected in December and 7% fewer than it expected last July. Richard S. Eckaus, professor of economics at the Massachusetts Institute of Technology, published a paper titled "The Oil Price Really Is A Speculative Bubble".
He wrote that "there seems to be a preference for the claim that the price increases are the result of basic economic forces: rapid growth in consumption, pushed particularly by the oil appetites of China and India, the depreciation of the U.S. dollar, real supply limitations, current and prospective and the risks of supply disruption, especially in the Middle East." He briefly explored - and debunked - each of those possibilities and wrote that the price of oil is behaving much like any other speculative bubble.
Home prices in the 20 major metros ~ Home prices fell in April at a slower pace than forecast, a sign the plunge in real-estate values is abating. The S&P/Case-Shiller home-price index decreased 18.1% from a year earlier, following an 18.7% drop in March. The measure declined 19% in January, the most since the data began in 2001.
Price declines are likely to keep moderating as demand steadies and distressed properties account for a smaller share of transactions
Pending sales of homes (national) ~ According to the National Association of Realtors, pending sales of previously owned US homes rose slightly in May v. the expectations of it being unchanged. This now makes the fourth straight monthly gain.
US factory orders ~ Orders to US factories increased in May by the largest amount in nearly a year, further evidence that the nosedive in manufacturing is nearing an end. The Commerce Department said total orders rose 1.2% in May, better than expected. The back-to-back increases in April and May were the first consecutive gains in nearly a year.
Jobs data ~ US employers cut 467,000 jobs in June, more than expected, while the unemployment rate rose to 9.5%, the Labor Department said on Thursday. However, new weekly claims for jobless benefits fell in the latest week, largely in line with expectations. Continuing claims for regular benefits fell again. Finally, employers are planning fewer layoffs than at the same time last year.
The point is that the unemployment rate is NOT an indicator of what’s to come but a reflection of what has been. As is always the case in economic recovery periods, it will be the last of the major indicators to turn positive – well after the economy is moving ahead.
Perspective
“It’s a bull market”
This is what’s known as a declarative statement. For those of who still may be having a bit of a tough time getting your mental arms around this, here is some of the rationale for my position.
Our economy has never healed in a perfectly straight line, with all aspects of the economy getting better at the exact same time; it has way too many moving parts. So, let’s consider how some of those parts are doing.
Among the categories that have bottomed include such areas as housing activity and prices, car production, business inventories and capital spending. Reports show that durable goods shipments are improving and family wealth, that is the combination of real estate and investment holdings, was better at the end of the quarter, due to the market movement.
What about the talk about “everyone” is saving and only “buying the basics?”
Let’s look at that a little more closely as well. The top 20% of US income earners are disproportionately – through personal and retirement accounts – large owners of stock. (For the record, the top 20%, 77% of which had two or more income earners, had incomes exceeding $91,705.) According to Tobias Levkovich, these consumers are much more driven by what happens to stock prices than real estate values. Further, since they also make up more than 40% of the 70% that consumer spending represents in the economy, they have a strong impact. They are feeling wealthier and are more inclined to make whatever purchases they are inclined to do.
As Dennis Kneale, the gentleman I quote at the beginning has said – and with which I agree wholeheartedly – “I reject the doomsday proclamations that the consumer psyche has been altered permanently; we want what we want.” There is a pent-up demand in the system that will also aid in the recovery.
The biggest problem I perceive in investors is psychological – it’s as if this recession stuff has never happened before. Well, it has – the problem is that it just hasn’t happened within the memory of most investors…they were in 1974 and 1982. As it happens, we had no long-lived recessions of any sort from 1982 until 2002 - and that was just a speed bump. So, people have no frame of reference.
Those two periods had record high interest and inflation rates and credit defaults that were just as ugly as what has gone on recently. Looking back, it’s easy to anecdotally say well, it all turned out all right. I can assure you we didn’t know that when it was going on.
In terms of cycles alone, I feel I can make the case that we’re going higher. When you look at the 10 worst GDP declines going back to 1958, the fourth quarter last year is included. What’s also important to note - courtesy of the Bureau of Economic Analysis – is that the market was higher in every instance within one year of that bad quarter. The average gain has been 24%. That average gain, based on the year-end close, would get us to about 10,800 on the Dow…that’s up another 30% from Friday.
The fact is that ALL bull markets move higher before fears decline.
By the time many feel it’s okay to get back into the pool, a move has taken place that makes them hesitate even more. The former fear of losing it all has now been replaced by a fear of buying right before we go down again. So, they get frozen by emotional inertia as the markets work themselves higher.
New bull markets tend to keep may people nervous and in their low to no return savings vehicles. Let the record reflect that it takes discipline to step in and buy when the media and their friends are all saying “better watch out.”
In order for you to participate in the bull market, you have to have this discipline. The discipline to be objective – to position yourself for what’s coming and not be concerned by what’s already occurred – is what makes for a successful investment style.
Just so you know. In every recession I’ve experienced, (1974 to date) the previous market high was ultimately passed and exceeded. If that’s the case, we’re about 5,500 points below that on the Dow right now, so don’t feel as if the train has already left the station. There are still plenty of great seats available…
All my best,
Mike
509-747-3323
Closing values as of 2 July 2009: Dow Jones 8280 NASDAQ 1796 S&P500 896
Oil $66.34/bbl Gold $930.40/oz
“Hope is the magic elixir of capitalism and capitalism is optimism monetized”. – Dennis Kneale, Media & Technology Editor, CNBC
Overview
“You may start your engines”
The above phrase is used to begin the Indianapolis 500 race. I use it since this coming week will begin the long anticipated earnings reports for publicly traded US companies. From these revelations – it has been said – we will be able to determine just how the markets and, ultimately, the economy will be doing through the end of the year.
This past week, the markets completed its very best quarter in just about 10 years. While the week itself was less than exciting since the holiday was coming, things should be picking up a bit very soon.
The companies will be reporting how they did this second quarter compared to the year ago period. I think it’s safe to say the results will be lower. There are two keys to be looking for.
If a company puts up better than expected numbers, their stock will likely go up. They may be lower than last year’s but “not as bad” as what the back room types had thought. The other is how do they see their markets developing over the rest of the year and later.
It could be an interesting week, to be sure.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“Jeremy Siegel, market historian and finance professor at the University of Pennsylvania’s Wharton School, is forecasting an annualized return of 8.0% (after inflation) for the S&P 500 over the next ten years. Siegel sees the S&P 500, which is up 4.0% this year through June 29, ending 2009 up 10 - 12%. Siegel believes that the economy is going to grow faster than expected over the next six months. He sees a V-shaped recovery, but says the upward slope of the V will not be as steep as usual.” – quoted in Kiplinger Magazine
"Equity markets have entered a phase of reality checks, during which the expectation-driven rise from the March lows has to be beefed up by hard economic data." - Gerhard Schwarz, head of global equity strategy, UniCredit
"We're seeing a classic bull-bear battle here." - Tom Schrader, managing director for U.S. equity trading, Stifel Nicolaus Capital Markets
“The summer forecast for stocks is higher. Both the valuations and volatility measures are pointing to a higher market. You've lost some of the impetus, but we'll probably grind higher through the summer. It's more of two steps forward and one step back. The market's widely anticipated ‘pull back’ may not materialize; the market may have caught its breath with the sideways move stocks made in the last couple of weeks.” - Tobias Levkovich, chief U.S. equities strategist, Citigroup
Economic reports from the past week (with occasional translations…)
Stimulus package ~ One of the inherent problems with the Obama Administration’s $787 billion stimulus plan is that 60% of the package was never going to have much of a stimulative effect, according to Congressional Budget Office Director Douglas Elmendorf. With respect to the other 40%, initiatives capable of providing real stimulus will be among the slowest to come online. Contracts totaling $152 billion had been let as of June 19, but only $53 billion has been spent in the four months since the stimulus bill was enacted, according to Recovery.gov. The Department of Transportation has spent just $369 million of the $19 billion it has appropriated for highways, airports and other construction projects.
Oil prices/demand ~ The International Energy Agency slashed its forecast for world oil demand over the next five years, saying that by 2013 global demand will average 87.9 million barrels a day, 3.7% fewer than it expected in December and 7% fewer than it expected last July. Richard S. Eckaus, professor of economics at the Massachusetts Institute of Technology, published a paper titled "The Oil Price Really Is A Speculative Bubble".
He wrote that "there seems to be a preference for the claim that the price increases are the result of basic economic forces: rapid growth in consumption, pushed particularly by the oil appetites of China and India, the depreciation of the U.S. dollar, real supply limitations, current and prospective and the risks of supply disruption, especially in the Middle East." He briefly explored - and debunked - each of those possibilities and wrote that the price of oil is behaving much like any other speculative bubble.
Home prices in the 20 major metros ~ Home prices fell in April at a slower pace than forecast, a sign the plunge in real-estate values is abating. The S&P/Case-Shiller home-price index decreased 18.1% from a year earlier, following an 18.7% drop in March. The measure declined 19% in January, the most since the data began in 2001.
Price declines are likely to keep moderating as demand steadies and distressed properties account for a smaller share of transactions
Pending sales of homes (national) ~ According to the National Association of Realtors, pending sales of previously owned US homes rose slightly in May v. the expectations of it being unchanged. This now makes the fourth straight monthly gain.
US factory orders ~ Orders to US factories increased in May by the largest amount in nearly a year, further evidence that the nosedive in manufacturing is nearing an end. The Commerce Department said total orders rose 1.2% in May, better than expected. The back-to-back increases in April and May were the first consecutive gains in nearly a year.
Jobs data ~ US employers cut 467,000 jobs in June, more than expected, while the unemployment rate rose to 9.5%, the Labor Department said on Thursday. However, new weekly claims for jobless benefits fell in the latest week, largely in line with expectations. Continuing claims for regular benefits fell again. Finally, employers are planning fewer layoffs than at the same time last year.
The point is that the unemployment rate is NOT an indicator of what’s to come but a reflection of what has been. As is always the case in economic recovery periods, it will be the last of the major indicators to turn positive – well after the economy is moving ahead.
Perspective
“It’s a bull market”
This is what’s known as a declarative statement. For those of who still may be having a bit of a tough time getting your mental arms around this, here is some of the rationale for my position.
Our economy has never healed in a perfectly straight line, with all aspects of the economy getting better at the exact same time; it has way too many moving parts. So, let’s consider how some of those parts are doing.
Among the categories that have bottomed include such areas as housing activity and prices, car production, business inventories and capital spending. Reports show that durable goods shipments are improving and family wealth, that is the combination of real estate and investment holdings, was better at the end of the quarter, due to the market movement.
What about the talk about “everyone” is saving and only “buying the basics?”
Let’s look at that a little more closely as well. The top 20% of US income earners are disproportionately – through personal and retirement accounts – large owners of stock. (For the record, the top 20%, 77% of which had two or more income earners, had incomes exceeding $91,705.) According to Tobias Levkovich, these consumers are much more driven by what happens to stock prices than real estate values. Further, since they also make up more than 40% of the 70% that consumer spending represents in the economy, they have a strong impact. They are feeling wealthier and are more inclined to make whatever purchases they are inclined to do.
As Dennis Kneale, the gentleman I quote at the beginning has said – and with which I agree wholeheartedly – “I reject the doomsday proclamations that the consumer psyche has been altered permanently; we want what we want.” There is a pent-up demand in the system that will also aid in the recovery.
The biggest problem I perceive in investors is psychological – it’s as if this recession stuff has never happened before. Well, it has – the problem is that it just hasn’t happened within the memory of most investors…they were in 1974 and 1982. As it happens, we had no long-lived recessions of any sort from 1982 until 2002 - and that was just a speed bump. So, people have no frame of reference.
Those two periods had record high interest and inflation rates and credit defaults that were just as ugly as what has gone on recently. Looking back, it’s easy to anecdotally say well, it all turned out all right. I can assure you we didn’t know that when it was going on.
In terms of cycles alone, I feel I can make the case that we’re going higher. When you look at the 10 worst GDP declines going back to 1958, the fourth quarter last year is included. What’s also important to note - courtesy of the Bureau of Economic Analysis – is that the market was higher in every instance within one year of that bad quarter. The average gain has been 24%. That average gain, based on the year-end close, would get us to about 10,800 on the Dow…that’s up another 30% from Friday.
The fact is that ALL bull markets move higher before fears decline.
By the time many feel it’s okay to get back into the pool, a move has taken place that makes them hesitate even more. The former fear of losing it all has now been replaced by a fear of buying right before we go down again. So, they get frozen by emotional inertia as the markets work themselves higher.
New bull markets tend to keep may people nervous and in their low to no return savings vehicles. Let the record reflect that it takes discipline to step in and buy when the media and their friends are all saying “better watch out.”
In order for you to participate in the bull market, you have to have this discipline. The discipline to be objective – to position yourself for what’s coming and not be concerned by what’s already occurred – is what makes for a successful investment style.
Just so you know. In every recession I’ve experienced, (1974 to date) the previous market high was ultimately passed and exceeded. If that’s the case, we’re about 5,500 points below that on the Dow right now, so don’t feel as if the train has already left the station. There are still plenty of great seats available…
All my best,
Mike
509-747-3323
Closing values as of 2 July 2009: Dow Jones 8280 NASDAQ 1796 S&P500 896
Oil $66.34/bbl Gold $930.40/oz
Monday, June 29, 2009
Market retrospective - week of 26 June
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “Inflation?”
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.” - Dr. Laurence J. Peters, (1919-1990), Canadian Writer
Overview
“Déjà vu all over again”
Mr. Lawrence Berra, better known by his nom de sport of Yogi, was renowned for his ability to create statements that didn’t sound right at first but do as you consider them longer. I’m borrowing this one to describe the market week – and, truthfully, the two prior to that and likely the one to come. It’s something we’ve just experienced and we’re about to do it again. Think of it in a three part synopsis.
Light volume, no direction, lack of buyers.
There is nothing to inspire the traders right now as there are no economic reports of note coming out in this holiday shortened week. (Markets are all closed Friday in observance of the 4th.) No earnings reports either. These will start being reported in force beginning the 6th. Once those start coming, we’ll learn who is able to grow in this early recovery environment and whose share values will represent a brighter outlook.
So, try and stay awake through this week and, hopefully, some positive fireworks will be in store for after the holiday.
Tea Leaf Readings (I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
The Federal Reserve will "employ all available tools to promote economic recovery and to preserve price stability and that it would keep its target rate for overnight loans, currently between 0% to 0.25%, at exceptionally low levels for an extended period.”- Federal Reserve news release after their on Wednesday
"I think the window dressing is a big deal. There's just a force underneath the market that wants to keep it higher." - Joe Saluzzi, co-head of equity trading, Themis Trading LLC
"People are hesitant to take a position one way or the other." - Doug Roberts, chief investment strategist, Channel Capital Research
"The credit crisis is abating and the worst is behind the Federal Reserve." - Michael Feroli, an ex-Fed official, now with JPMorgan Chase
“A careful study suggests that the Fed has decided to stay the current course. Indeed, with no explicit mention of an exit strategy or an indication that the Fed will increase the size of its Treasuries purchases, the stance of the Fed appears to be unchanged. Notwithstanding, it appears that the deflationary fears that may have pervasive only a few months ago among some members may have abated.” - Millan L. B. Mulraine, TD Securities
Economic reports from the past week (with occasional translations…)
Market moves ~ JPMorgan Securities said that they believe the Standard & Poor's 500 was facing a correction that likely would take it to between 830 and 875, which would represent a 5 to 10 percent drop from its current level. A rally likely would follow the drop and take the S&P to 950 to 1,000 by the end of the year.
Consumer Confidence Survey ~ Consumer confidence rose in June to the highest since February 2008. The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for June was at 70.8 from 68.7 in May, equaling that of February, 2008.
"Such a sizable gain has usually indicated that an end to the economic downturn is on the horizon, as consumers begin to increase their spending on houses, vehicles, and large household durables," the Reuters/University of Michigan Surveys of Consumers said in a statement.
Personal Savings Rate ~ The Commerce Department reported that personal spending, incomes and savings all rose in May. Personal saving rate is now 6.9%, the highest since 1993, compared to zero early last year. This rise will help support consumer spending in the year ahead.
Q1 Gross Domestic Product ~ The economy contracted at a 5.5% rate, the Commerce Department said in its final reading on first-quarter GDP. That was a smaller contraction than the 5.7% initially reported.
Treasury auction ~ There was solid demand for three Treasury auctions this past week. In all, the government sold a record $104 Billion worth of debt. The successful auctions helped boost confidence in some that Washington will be able to raise enough money to fund its economic recovery programs.
Durable goods orders ~ According to the Commerce Department, new orders for durable goods, such as transportation equipment, machinery and metals, rose 1.8% in May. Those suggest companies in the US and abroad are becoming more optimistic about business and sales.
Orders climbed for the third time in four months. The gain was driven by higher orders for aircraft, machinery and computers, which helped offset a slump in demand for autos.
Existing home sales ~ The National Association of Realtors reported that, for the second straight month, sales rose. They increased by 2.4% in May. The inventory of exiting homes for sale also moved lower.
Perspective
“Inflation?”
For whatever reason they select, people seem to becoming more concerned about potential inflation issues and not the deflation that many were all up in arms about just four or five months ago. I didn’t ever believe that deflation was going to be long-lived. Right now, I don’t think inflation is a threat either. Having said that, it’s the one I am setting my long-range detectors for, however.
The Fed thinks that with unemployment as high as it is – and will likely become before peaking - along with the large amount of currently idle factory space, there is probably little near-term risk of prices overheating. That gives the Fed the ability to keep borrowing costs low until it believes that the economy is strong enough to handle an interest rate hike.
Matter of fact, according to economists advising the American Bankers Association, there may be four consecutive quarters of positive US economic growth before the Fed is ready to budge, probably in the third quarter of 2010. I think that’s a little long myself but that’s my opinion.
Nobel prize-winning economist Milton Friedman believed that inflation is “always and everywhere a monetary phenomenon. Persistently creating too much money chasing too few goods will, over time, push up inflation.”
Current Fed policies will likely produce some inflation. Before we need to really worry about it, we’ll need to see some evidence that home prices have stabilized. We’ll also need to see more evidence that normal lending policies are returning, without government intervention. And then, government being government, the Fed will probably hesitate in its changes to policy with the rate of inflation eventually getting higher than what many would prefer. I don’t think that whomever is at the Fed will let things get to the hyperinflation stage.
Stocks are a great inflation hedge and this is yet another fine opportunity to check your asset allocations. Strictly from a valuation standpoint, stocks definitely appear more attractive than any fixed income instrument alternative over the next five years. You get a store of value in stocks. It’s not just the dividend “while you wait”, but the capital appreciation for you to draw upon at a later time.
There is still plenty of liquidity to help move the stock market higher. Historically, initial periods of monetary stimulus like we’re in now are usually great times for stocks. Those periods where inflation ranges from 0-4% is associated with some of the best times in the stock market.
There is never a “best” time to buy. I heard something once that I’ve always thought made sense along those lines and that is that “the best time to buy is when you have the money.”
If you only wait for the times of economic certainty to invest in the stock market, your performance would be dismal…the largest part of the move up has already occurred by then.
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 26 June 2009:
Dow Jones 8434 NASDAQ 1838 S&P500 918 Oil $69.35/bbl Gold $941.40/oz
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.” - Dr. Laurence J. Peters, (1919-1990), Canadian Writer
Overview
“Déjà vu all over again”
Mr. Lawrence Berra, better known by his nom de sport of Yogi, was renowned for his ability to create statements that didn’t sound right at first but do as you consider them longer. I’m borrowing this one to describe the market week – and, truthfully, the two prior to that and likely the one to come. It’s something we’ve just experienced and we’re about to do it again. Think of it in a three part synopsis.
Light volume, no direction, lack of buyers.
There is nothing to inspire the traders right now as there are no economic reports of note coming out in this holiday shortened week. (Markets are all closed Friday in observance of the 4th.) No earnings reports either. These will start being reported in force beginning the 6th. Once those start coming, we’ll learn who is able to grow in this early recovery environment and whose share values will represent a brighter outlook.
So, try and stay awake through this week and, hopefully, some positive fireworks will be in store for after the holiday.
Tea Leaf Readings (I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
The Federal Reserve will "employ all available tools to promote economic recovery and to preserve price stability and that it would keep its target rate for overnight loans, currently between 0% to 0.25%, at exceptionally low levels for an extended period.”- Federal Reserve news release after their on Wednesday
"I think the window dressing is a big deal. There's just a force underneath the market that wants to keep it higher." - Joe Saluzzi, co-head of equity trading, Themis Trading LLC
"People are hesitant to take a position one way or the other." - Doug Roberts, chief investment strategist, Channel Capital Research
"The credit crisis is abating and the worst is behind the Federal Reserve." - Michael Feroli, an ex-Fed official, now with JPMorgan Chase
“A careful study suggests that the Fed has decided to stay the current course. Indeed, with no explicit mention of an exit strategy or an indication that the Fed will increase the size of its Treasuries purchases, the stance of the Fed appears to be unchanged. Notwithstanding, it appears that the deflationary fears that may have pervasive only a few months ago among some members may have abated.” - Millan L. B. Mulraine, TD Securities
Economic reports from the past week (with occasional translations…)
Market moves ~ JPMorgan Securities said that they believe the Standard & Poor's 500 was facing a correction that likely would take it to between 830 and 875, which would represent a 5 to 10 percent drop from its current level. A rally likely would follow the drop and take the S&P to 950 to 1,000 by the end of the year.
Consumer Confidence Survey ~ Consumer confidence rose in June to the highest since February 2008. The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for June was at 70.8 from 68.7 in May, equaling that of February, 2008.
"Such a sizable gain has usually indicated that an end to the economic downturn is on the horizon, as consumers begin to increase their spending on houses, vehicles, and large household durables," the Reuters/University of Michigan Surveys of Consumers said in a statement.
Personal Savings Rate ~ The Commerce Department reported that personal spending, incomes and savings all rose in May. Personal saving rate is now 6.9%, the highest since 1993, compared to zero early last year. This rise will help support consumer spending in the year ahead.
Q1 Gross Domestic Product ~ The economy contracted at a 5.5% rate, the Commerce Department said in its final reading on first-quarter GDP. That was a smaller contraction than the 5.7% initially reported.
Treasury auction ~ There was solid demand for three Treasury auctions this past week. In all, the government sold a record $104 Billion worth of debt. The successful auctions helped boost confidence in some that Washington will be able to raise enough money to fund its economic recovery programs.
Durable goods orders ~ According to the Commerce Department, new orders for durable goods, such as transportation equipment, machinery and metals, rose 1.8% in May. Those suggest companies in the US and abroad are becoming more optimistic about business and sales.
Orders climbed for the third time in four months. The gain was driven by higher orders for aircraft, machinery and computers, which helped offset a slump in demand for autos.
Existing home sales ~ The National Association of Realtors reported that, for the second straight month, sales rose. They increased by 2.4% in May. The inventory of exiting homes for sale also moved lower.
Perspective
“Inflation?”
For whatever reason they select, people seem to becoming more concerned about potential inflation issues and not the deflation that many were all up in arms about just four or five months ago. I didn’t ever believe that deflation was going to be long-lived. Right now, I don’t think inflation is a threat either. Having said that, it’s the one I am setting my long-range detectors for, however.
The Fed thinks that with unemployment as high as it is – and will likely become before peaking - along with the large amount of currently idle factory space, there is probably little near-term risk of prices overheating. That gives the Fed the ability to keep borrowing costs low until it believes that the economy is strong enough to handle an interest rate hike.
Matter of fact, according to economists advising the American Bankers Association, there may be four consecutive quarters of positive US economic growth before the Fed is ready to budge, probably in the third quarter of 2010. I think that’s a little long myself but that’s my opinion.
Nobel prize-winning economist Milton Friedman believed that inflation is “always and everywhere a monetary phenomenon. Persistently creating too much money chasing too few goods will, over time, push up inflation.”
Current Fed policies will likely produce some inflation. Before we need to really worry about it, we’ll need to see some evidence that home prices have stabilized. We’ll also need to see more evidence that normal lending policies are returning, without government intervention. And then, government being government, the Fed will probably hesitate in its changes to policy with the rate of inflation eventually getting higher than what many would prefer. I don’t think that whomever is at the Fed will let things get to the hyperinflation stage.
Stocks are a great inflation hedge and this is yet another fine opportunity to check your asset allocations. Strictly from a valuation standpoint, stocks definitely appear more attractive than any fixed income instrument alternative over the next five years. You get a store of value in stocks. It’s not just the dividend “while you wait”, but the capital appreciation for you to draw upon at a later time.
There is still plenty of liquidity to help move the stock market higher. Historically, initial periods of monetary stimulus like we’re in now are usually great times for stocks. Those periods where inflation ranges from 0-4% is associated with some of the best times in the stock market.
There is never a “best” time to buy. I heard something once that I’ve always thought made sense along those lines and that is that “the best time to buy is when you have the money.”
If you only wait for the times of economic certainty to invest in the stock market, your performance would be dismal…the largest part of the move up has already occurred by then.
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 26 June 2009:
Dow Jones 8434 NASDAQ 1838 S&P500 918 Oil $69.35/bbl Gold $941.40/oz
Tuesday, June 23, 2009
Market retrospective - week of 19 June
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “Reform and regulation”
“You can never plan the future by the past.” – Edmund Burke (1729 – 1797) Irish political philosopher and statesman
Overview
“Running in place”
The markets continued their lack of movement this week. The averages finished a bit lower than last but the difference was nothing significant; the Dow being down 3% was the “worst” of it. Oil ran into some profit-taking while gold was about unchanged. I don’t think we’ll see much stock movement in any direction until the second quarter earnings reports begin in earnest after the 4th.
We did have two pieces of good economic news this week. One was the drop in total unemployment, breaking a string of 21 straight increases in continuing claims. The other was the Index of Leading Economic Indicators – designed to forecast activity in the next three to six months – rose more than expected and the highest increase since 2004.
It wasn’t that long ago that we were in a similar sideways situation in the markets. About eight months after the big decline of July, 2002 – as we are now – the markets were back to even with where they were. In market history, it takes about eight to nine months after a big blow off to start getting some traction back to the upside.
Using history again, looking at the markets of 1974 and 1982, we again have beaucoup money parked in various places all earning, effectively, nothing. These were also the only other times that stocks have been as cheap as they have been over the recent period. Further, from an analytical standpoint, a sideways market is usually seen as a positive indicator.
I can’t pinpoint the time when the market really digs in and starts getting back up toward its previous highs but, in my opinion, it’s a whole lot sooner than later.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
"With all the carnage we went through, this is the opportunity of a generation to own great companies at just ridiculously low valuations. Wall Street can deal with recessions—we had 10 in the last 60 years. The abyss, the true crisis mode, is over." - Nadav Baum, managing director of investments, BPU Investment Management
"Despite significant weakening in the near-term economic outlook, projected fiscal deficits and the high fiscal costs of government support of the US financial sector, we still believe that the US government's credit strengths continue to outweigh its weaknesses." - Nikola Swann, analyst, S&P. (The rating agency cited the US dollar's reserve status and the US economy's openness to trade as supporting the AAA rating, which has traditionally given US Treasury bonds the status of a safe-haven investment.)
“The jobless-benefit rolls always stabilize or decline right around the end of the recession." - Abiel Reinhart, economist, JPMorgan Chase & Co
“I look at the [market weakness] as a buying opportunity. I’ve been bullish for a while … When the March lows were set and when we climbed out of there, we saw the worst past us.” - Gary Hager, president and founder, Integrated Wealth Management
“There is an inverse relationship between revenues and taxes. Revenues are determined by economic growth and capital appreciation which is impelled by innovation. Higher tax rates do nothing to raise revenues over any significant period of time (more than one year).” – George Gilder, co-founder, Discovery Institute
“Risk aversion has eased, while inventory rebuilding and new business spending bode well for an economic recovery that could provide a dramatic surge in corporate profits by year end.” - Abby Joseph Cohen, senior investment strategist, Goldman Sachs
“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” – Paul Krugman, in 2002, Nobel Prize in Economics (accountability not a requirement for the prize)
Economic reports from the past week (with occasional translations…)
Housing starts ~ According to the Commerce Department, US builders broke ground on more houses than forecast in May, offering a sign that the industry’s slump, now in its fourth year, may be approaching an end. The 17% increase in housing starts to an annual rate of 532,000 followed a 454,000 pace the prior month. Building permits, an indicator of future construction, also rose more than estimated.
Inflation indicators ~ US wholesale prices rose less than anticipated in May as food costs dropped. The Labor Department reported that its producer price index, (PPI), fell 5% over the last year, the biggest slide since 1949.
The cost of living in the US, as measured by the Consumer Price Index, (CPI), rose less than forecast in May, culminating in the biggest 12-month drop in prices since 1950. The CPI is the broadest of the three monthly price gauges from Labor because it includes goods and services.
TARP funds ~ Ten of the largest U.S. banks, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, repaid billions of dollars in taxpayer bailout funds Wednesday, getting out from under the government's thumb. Banks have been anxious to return funds taken from the $700
billion Troubled Asset Relief Program to escape the many strings attached, including restrictions on executive compensation.
State taxes ~ Faced with gaping budget holes, 23 states have raised taxes this year and 13 more are considering doing so as they set out to approve 2009-2010 budget agreements, according to a report by the Center on Budget and Policy Priorities, a liberal think-tank. In most cases, the tax increases come on top of cuts in public services. The raises include income, sales and business taxes and take aim at anything from slot machine licenses to motel room taxes. Another popular target is alcohol and tobacco.
California ~ Moody’s warned California’s credit ratings could face a “multi-notch” downgrade if the state legislature can’t agree on a budget soon. These comments come of the heels of a similar warning made by S&P earlier in the week as the state battles its current budget shortfall.
Moody’s cautioned that “the state's cash situation will deteriorate to the point where the controller will have to delay most non-priority payments in July.” Such a downgrade would make California ineligible for more favorable interest rates, pushing the cash-strapped state’s borrowing costs up.
Perspective
“Reform and regulation”
I chose Mr. Burke’s comment for this week’s note as I believe that’s what the DC types are doing now with their calls for reform…trying to “fix” the future based on the past.
Beginning last year with the mark-to-market accounting fiasco and allowing Lehman Brothers to fail – among other things – I’m of the opinion that government is what led us into the type recession we’ve had. As Groucho Marx once said: “Politics is the art of looking for trouble, finding it, misdiagnosing it and then misapplying the wrong remedies.” That started last fall and has been massively compounded since January.
These people have NO grasp of the financial markets and how they inter-connect. You have politicians who are driven by polls being advised by professors and lawyers. None of them – okay a minute percentage of them, maybe – have ever managed investment funds, made buy and sell decisions about stocks professionally or, God forbid, had to deal directly with an investor. And yet, these ivory-tower commandos are trying to dictate to and regulate a complex, multi-faceted industry.
Further, the people assigned to create all this regulation seem to come from the “government knows best; all consumers are potential victims” school of illogic. These are representatives of the same group who brought us – and want to revive – the Community Reinvestment Act. (See the Paul Krugman quote in Tea Leaves.) That was the law that forced banks and other lenders to make loans to “under qualified” borrowers and led directly to the housing challenge. Oh yes, please may I hear more “wisdom” and “guidance” from those people…
Proper rules of the free market, capitalistic world should ensure that people – and companies – pay for their own mistakes…not government. Arthur Seldon, a British economist, said, "risks which cannot be removed or shifted profitably must be born by the entrepreneur. He will generally do so only as long as his expectation of profit outweighs the chance of loss." If the Feds take that risk away through short-minded regulations designed to fight the last war, so to speak, you don’t have capitalism.
And please understand that capitalism hasn’t failed in this recession – government has. The recovery has been created through a strong monetary policy response – due to smart people at the Federal Reserve, primarily – and the normal types of events that occur in the latter stages of a recessionary recovery.
Minimal stimulus money has hit the economy, so far. The spending bill that just “had to be passed” last fall has had no discernible impact as yet. And, due to its size, the degree to which it ultimately proves to be helpful is open for debate.
I hope that, during what will be a long and spirited debate about all these high-cost, low benefit reforms, knowledgeable people with influence will be able to prevent the government from creating more long-term problems with their “good intentions.”
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 19 June 2009:
Dow Jones 8539 NASDAQ 1827 S&P500 921 Oil $69.40/bbl Gold $934.30/oz
“You can never plan the future by the past.” – Edmund Burke (1729 – 1797) Irish political philosopher and statesman
Overview
“Running in place”
The markets continued their lack of movement this week. The averages finished a bit lower than last but the difference was nothing significant; the Dow being down 3% was the “worst” of it. Oil ran into some profit-taking while gold was about unchanged. I don’t think we’ll see much stock movement in any direction until the second quarter earnings reports begin in earnest after the 4th.
We did have two pieces of good economic news this week. One was the drop in total unemployment, breaking a string of 21 straight increases in continuing claims. The other was the Index of Leading Economic Indicators – designed to forecast activity in the next three to six months – rose more than expected and the highest increase since 2004.
It wasn’t that long ago that we were in a similar sideways situation in the markets. About eight months after the big decline of July, 2002 – as we are now – the markets were back to even with where they were. In market history, it takes about eight to nine months after a big blow off to start getting some traction back to the upside.
Using history again, looking at the markets of 1974 and 1982, we again have beaucoup money parked in various places all earning, effectively, nothing. These were also the only other times that stocks have been as cheap as they have been over the recent period. Further, from an analytical standpoint, a sideways market is usually seen as a positive indicator.
I can’t pinpoint the time when the market really digs in and starts getting back up toward its previous highs but, in my opinion, it’s a whole lot sooner than later.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
"With all the carnage we went through, this is the opportunity of a generation to own great companies at just ridiculously low valuations. Wall Street can deal with recessions—we had 10 in the last 60 years. The abyss, the true crisis mode, is over." - Nadav Baum, managing director of investments, BPU Investment Management
"Despite significant weakening in the near-term economic outlook, projected fiscal deficits and the high fiscal costs of government support of the US financial sector, we still believe that the US government's credit strengths continue to outweigh its weaknesses." - Nikola Swann, analyst, S&P. (The rating agency cited the US dollar's reserve status and the US economy's openness to trade as supporting the AAA rating, which has traditionally given US Treasury bonds the status of a safe-haven investment.)
“The jobless-benefit rolls always stabilize or decline right around the end of the recession." - Abiel Reinhart, economist, JPMorgan Chase & Co
“I look at the [market weakness] as a buying opportunity. I’ve been bullish for a while … When the March lows were set and when we climbed out of there, we saw the worst past us.” - Gary Hager, president and founder, Integrated Wealth Management
“There is an inverse relationship between revenues and taxes. Revenues are determined by economic growth and capital appreciation which is impelled by innovation. Higher tax rates do nothing to raise revenues over any significant period of time (more than one year).” – George Gilder, co-founder, Discovery Institute
“Risk aversion has eased, while inventory rebuilding and new business spending bode well for an economic recovery that could provide a dramatic surge in corporate profits by year end.” - Abby Joseph Cohen, senior investment strategist, Goldman Sachs
“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” – Paul Krugman, in 2002, Nobel Prize in Economics (accountability not a requirement for the prize)
Economic reports from the past week (with occasional translations…)
Housing starts ~ According to the Commerce Department, US builders broke ground on more houses than forecast in May, offering a sign that the industry’s slump, now in its fourth year, may be approaching an end. The 17% increase in housing starts to an annual rate of 532,000 followed a 454,000 pace the prior month. Building permits, an indicator of future construction, also rose more than estimated.
Inflation indicators ~ US wholesale prices rose less than anticipated in May as food costs dropped. The Labor Department reported that its producer price index, (PPI), fell 5% over the last year, the biggest slide since 1949.
The cost of living in the US, as measured by the Consumer Price Index, (CPI), rose less than forecast in May, culminating in the biggest 12-month drop in prices since 1950. The CPI is the broadest of the three monthly price gauges from Labor because it includes goods and services.
TARP funds ~ Ten of the largest U.S. banks, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, repaid billions of dollars in taxpayer bailout funds Wednesday, getting out from under the government's thumb. Banks have been anxious to return funds taken from the $700
billion Troubled Asset Relief Program to escape the many strings attached, including restrictions on executive compensation.
State taxes ~ Faced with gaping budget holes, 23 states have raised taxes this year and 13 more are considering doing so as they set out to approve 2009-2010 budget agreements, according to a report by the Center on Budget and Policy Priorities, a liberal think-tank. In most cases, the tax increases come on top of cuts in public services. The raises include income, sales and business taxes and take aim at anything from slot machine licenses to motel room taxes. Another popular target is alcohol and tobacco.
California ~ Moody’s warned California’s credit ratings could face a “multi-notch” downgrade if the state legislature can’t agree on a budget soon. These comments come of the heels of a similar warning made by S&P earlier in the week as the state battles its current budget shortfall.
Moody’s cautioned that “the state's cash situation will deteriorate to the point where the controller will have to delay most non-priority payments in July.” Such a downgrade would make California ineligible for more favorable interest rates, pushing the cash-strapped state’s borrowing costs up.
Perspective
“Reform and regulation”
I chose Mr. Burke’s comment for this week’s note as I believe that’s what the DC types are doing now with their calls for reform…trying to “fix” the future based on the past.
Beginning last year with the mark-to-market accounting fiasco and allowing Lehman Brothers to fail – among other things – I’m of the opinion that government is what led us into the type recession we’ve had. As Groucho Marx once said: “Politics is the art of looking for trouble, finding it, misdiagnosing it and then misapplying the wrong remedies.” That started last fall and has been massively compounded since January.
These people have NO grasp of the financial markets and how they inter-connect. You have politicians who are driven by polls being advised by professors and lawyers. None of them – okay a minute percentage of them, maybe – have ever managed investment funds, made buy and sell decisions about stocks professionally or, God forbid, had to deal directly with an investor. And yet, these ivory-tower commandos are trying to dictate to and regulate a complex, multi-faceted industry.
Further, the people assigned to create all this regulation seem to come from the “government knows best; all consumers are potential victims” school of illogic. These are representatives of the same group who brought us – and want to revive – the Community Reinvestment Act. (See the Paul Krugman quote in Tea Leaves.) That was the law that forced banks and other lenders to make loans to “under qualified” borrowers and led directly to the housing challenge. Oh yes, please may I hear more “wisdom” and “guidance” from those people…
Proper rules of the free market, capitalistic world should ensure that people – and companies – pay for their own mistakes…not government. Arthur Seldon, a British economist, said, "risks which cannot be removed or shifted profitably must be born by the entrepreneur. He will generally do so only as long as his expectation of profit outweighs the chance of loss." If the Feds take that risk away through short-minded regulations designed to fight the last war, so to speak, you don’t have capitalism.
And please understand that capitalism hasn’t failed in this recession – government has. The recovery has been created through a strong monetary policy response – due to smart people at the Federal Reserve, primarily – and the normal types of events that occur in the latter stages of a recessionary recovery.
Minimal stimulus money has hit the economy, so far. The spending bill that just “had to be passed” last fall has had no discernible impact as yet. And, due to its size, the degree to which it ultimately proves to be helpful is open for debate.
I hope that, during what will be a long and spirited debate about all these high-cost, low benefit reforms, knowledgeable people with influence will be able to prevent the government from creating more long-term problems with their “good intentions.”
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 19 June 2009:
Dow Jones 8539 NASDAQ 1827 S&P500 921 Oil $69.40/bbl Gold $934.30/oz
Tuesday, June 16, 2009
Market retrospective - week of 12 June
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “Recovery without government spending”
“The one law that does not change is that everything changes and the hardship I was bearing today was only a breath away from the pleasures I would have tomorrow and those pleasures would be all the richer because of the memories of this I was enduring.” - Louis L'Amour (1908-1988) American Author
Overview
“It’s about time”
The markets are in a lull between earnings report times and are focusing almost exclusively on economic reports. The economic reports have generally been good with the net result being that such action as there was in the averages last week moved the Dow Jones Industrials, the S&P 500 and NASDAQ up for the year. It was quite a tough slog but we’ve made it.
Given the lack of any significant market moves this past week – up or down – as a result of those reports, the trend continues sideways for now. A bull market needs volume to thrive and, until market participants feel more motivated to participate, sideways will rule the day.
Nonetheless, it looks as if we may have just received additional fuel for a near-term continuation to the upside.
This has to do with some technical market data. The NASDAQ’s 50-day moving average crossed over its 200-day moving average last week. It seems likely to me that we’ll see the same type of move for the Dow and S&P very soon. The reason for the move is that the market traders often look at these moving average crossovers as bullish - or bearish - indicators.
In this case, a move of a shorter term moving average (the 50-day) above a longer term average (the 200-day) is seen as bullish. This kind of crossover is an indication of positive market momentum and could help to drive the markets even higher as other traders react.
Stay tuned for the exciting conclusion!
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“The US economy will beat China and other economies in shaking off the recession and returning to growth. The American economy is the one that’s looking best in the world at the moment.” - Roger Nightingale, strategist, Pointon York
"We're in this cross current. There's still a ton of money on the sidelines. A lot of professionals don't believe this rally is true. From a short-term perspective, it's anybody's guess. If I had to be a betting man on the near term I would say we're due for a modest pullback. A lot of the technicians out there can only buy if you trade above the 200-day moving average."" – John Buckingham, chief investment officer, Frank Asset Management (See comment in Overview)
“I think growth is likely to warrant (interest) rates as low as they are now for some time. We'll just have to wait to see how the growth process unfolds.” - Jeffrey Lacker, President, Richmond Federal Reserve Bank
“We’re absolutely in a bull market and U.S. stocks will rally for another couple of years. Anxiety is in the part of the people who have missed the rally and they’re trying to talk the market down so that they can get back in.” - Laszlo Birinyi, President, Birinyi Associates
“We’ve calmed down the healthy players that were frozen with fear, so the 91 percent who have a job throughout the crisis are beginning to spend again.” - James Paulsen, Wells Capital Management
“The US economy is in the midst of recovery. We’re at a point where there’s much greater stability. People are now starting to ask, 'maybe I can earn more than zero?' Armageddon is behind us." - Laurence Fink, CEO, BlackRock (On Friday, his firm put their money where their mouth is and acquired Barclays Global Investors for $13.5 billion.)
“The sky is not falling — it’s rising. Ninety percent of all stocks are above their 10-day moving average, which means we’re not going to have any more corrections above 5 to 6 percent—that’s historically a fact.” - Harry Clark, President/ CEO, Clark Capital Management Group
"Market participants' concerns are shifting from a potential lengthening and deepening of the recession to the inflation that might be stoked by a rapid recovery. In the past, high and rising inflation has proven to be a far harder problem to solve than a weakening economy in recession." - Jeff Kleintop, Chief Market Strategist, LPL Financial
"This is quite easily the biggest combined fiscal stimulus the world has ever seen in modern times. That liquidity will impact anything that is sensitive to it, ranging from short-term fixed-income securities through stock prices through property prices and into people's personal wealth." - Jim O'Neill, Chief economist, Goldman Sachs
Economic reports from the past week (with occasional translations…)
National Federation of Independent Business - An index measuring sentiment among small business owners gained for the second consecutive month, moving just below a level that would indicate positive growth in the economy.
Citigroup – The bank swapped $58 billion of its preferred stock into common, and the Treasury converted a portion of the $25 billion of Citigroup preferred it holds, to give the Feds a 34% ownership. This closes the debit noted as a result of the recent bank stress tests.
Oil prices – Oil closed at its highest levels for the year. The surge in price is being driven by a combination of oil being seen as a hedge against inflation along with the International Energy Agency having raised its global oil demand forecast as a result in improving global economics.
Retail sales –Sales numbers rose in May after having dropped in April. This is seen as another indicator of an improving consumer sector.
Initial unemployment claims – For the third week in a row, this number has fallen and it fell much more than had been forecast.
Chrysler - Chrysler and Fiat finalized their government-brokered alliance a day after the U.S. Supreme Court removed the deal's last remaining obstacle. Chrysler will now operate as Chrysler Group LLC.
Perspective
“Recovery - without government spending”
Let’s consider where we are right now.
Since hitting its low point in February, consumer confidence has had the fastest three-month increase ever. The Institute for Supply Management's manufacturing index, which had fallen to historic lows over the winter, has risen. It’s another indicator that the overall economy is now expanding.
In the financial markets, the yield on the 10-year Treasury note is back up to 3.81%, almost exactly where it was in August, 2008, just before the wheels came off the markets. Additionally, key commodity prices, such as oil, copper, lumber and gold are well off their lows.
US companies have reacted to the easier money with new issues of stocks and bonds. In May, according to Dealogic, more new stock was issued by existing companies in US markets than at any time since 1995, when the company began keeping records.
Some of the market gains, of course, reflect choices of investors who believe that the worst of the global recession is over and that investments tied to global growth will be big beneficiaries.
In general then, the economic scene is quickly returning to where it was in September, 2008 – before the horror show started.
Today we have the short-sellers (those who only make money when a particular security or market index is down), together with those many money managers who weren’t ready for the nearly 40% rally of the past three months and have been waiting for a drop, continuing to argue that the stock market will go back to test its lows. Or, they think (hope?) a sharp correction is in order. But this seems to be more of a wish than a legit forecast.
Any short-seller who hasn’t covered their open positions, along with the aforementioned equity managers, has taken a major hit. The only way for them to climb out of that hole is for the market to provide lower prices. The challenge is that with having so many investors in the position of having missed the rally – professional and non-professional alike – this makes a re-test of the lows less likely. This rally won’t be over until these short-sellers throw in their towels – probably along with the rest of their laundry.
My point is that we’re well on the way to recovery - and with no Federal spending having been required. Let me explain a bit.
A new Congressional Budget Office study shows that, through late May, only about $37 billion – that’s just under 10% of authorized spending under the grandly named American Recovery and Reinvestment Act of 2009 (ARRA) - has been spent. In fact, the Departments of Education, Transportation and Energy have spent 2%, or less, of their combined allocations.
In the heat of last fall’s market gyrations, many said that we “needed” this fiscal stimulus and that there was no way we would recover without it. Our current Vice President indicated that virtually all economists agreed with this view. (Not exactly) Given our improved and improving economic outlook, i.e., due to a normal recovery after a recession, it appears to me that haste of passage is going to prove to be a significant and very expensive public policy mistake.
The spending bill was promoted under the (I believe) old-fashioned view that only the federal government was capable of digging us out of the hole that we had gotten ourselves into and that excavating job could only have been done with massive federal spending.
One of the reasons we’re hearing about inflation for the first time in many years is due to the fact that there is this tsunami of money sitting out there - and it’s not really needed. It will come flooding into the economy and help drive many things higher – to include the markets for a time. However, any politician who claims that the ultimate recovery was caused by the ARRA is not exactly being forthright. That would have happened anyway – history shows that to be true.
The good news is that since the impact of this monetaqry tsunami is still somewhat long in coming, the Federal Reserve may be able to be light-footed enough to get us through it. No one really knows. There will be higher interest rates as a result of all this money, in order to fight inflation – but not too soon.
The markets are efficient – unlike government – and to try to influence them through “actions” of government has always proven to be pretty much of non-starter.
In the interim, enjoy the positive fruits of the recovery and invest now to benefit from it.
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 12 June 2009:
Dow Jones 8799 NASDAQ 1858 S&P500 946 Oil $72.25/bbl Gold $939.40/oz
“The one law that does not change is that everything changes and the hardship I was bearing today was only a breath away from the pleasures I would have tomorrow and those pleasures would be all the richer because of the memories of this I was enduring.” - Louis L'Amour (1908-1988) American Author
Overview
“It’s about time”
The markets are in a lull between earnings report times and are focusing almost exclusively on economic reports. The economic reports have generally been good with the net result being that such action as there was in the averages last week moved the Dow Jones Industrials, the S&P 500 and NASDAQ up for the year. It was quite a tough slog but we’ve made it.
Given the lack of any significant market moves this past week – up or down – as a result of those reports, the trend continues sideways for now. A bull market needs volume to thrive and, until market participants feel more motivated to participate, sideways will rule the day.
Nonetheless, it looks as if we may have just received additional fuel for a near-term continuation to the upside.
This has to do with some technical market data. The NASDAQ’s 50-day moving average crossed over its 200-day moving average last week. It seems likely to me that we’ll see the same type of move for the Dow and S&P very soon. The reason for the move is that the market traders often look at these moving average crossovers as bullish - or bearish - indicators.
In this case, a move of a shorter term moving average (the 50-day) above a longer term average (the 200-day) is seen as bullish. This kind of crossover is an indication of positive market momentum and could help to drive the markets even higher as other traders react.
Stay tuned for the exciting conclusion!
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
“The US economy will beat China and other economies in shaking off the recession and returning to growth. The American economy is the one that’s looking best in the world at the moment.” - Roger Nightingale, strategist, Pointon York
"We're in this cross current. There's still a ton of money on the sidelines. A lot of professionals don't believe this rally is true. From a short-term perspective, it's anybody's guess. If I had to be a betting man on the near term I would say we're due for a modest pullback. A lot of the technicians out there can only buy if you trade above the 200-day moving average."" – John Buckingham, chief investment officer, Frank Asset Management (See comment in Overview)
“I think growth is likely to warrant (interest) rates as low as they are now for some time. We'll just have to wait to see how the growth process unfolds.” - Jeffrey Lacker, President, Richmond Federal Reserve Bank
“We’re absolutely in a bull market and U.S. stocks will rally for another couple of years. Anxiety is in the part of the people who have missed the rally and they’re trying to talk the market down so that they can get back in.” - Laszlo Birinyi, President, Birinyi Associates
“We’ve calmed down the healthy players that were frozen with fear, so the 91 percent who have a job throughout the crisis are beginning to spend again.” - James Paulsen, Wells Capital Management
“The US economy is in the midst of recovery. We’re at a point where there’s much greater stability. People are now starting to ask, 'maybe I can earn more than zero?' Armageddon is behind us." - Laurence Fink, CEO, BlackRock (On Friday, his firm put their money where their mouth is and acquired Barclays Global Investors for $13.5 billion.)
“The sky is not falling — it’s rising. Ninety percent of all stocks are above their 10-day moving average, which means we’re not going to have any more corrections above 5 to 6 percent—that’s historically a fact.” - Harry Clark, President/ CEO, Clark Capital Management Group
"Market participants' concerns are shifting from a potential lengthening and deepening of the recession to the inflation that might be stoked by a rapid recovery. In the past, high and rising inflation has proven to be a far harder problem to solve than a weakening economy in recession." - Jeff Kleintop, Chief Market Strategist, LPL Financial
"This is quite easily the biggest combined fiscal stimulus the world has ever seen in modern times. That liquidity will impact anything that is sensitive to it, ranging from short-term fixed-income securities through stock prices through property prices and into people's personal wealth." - Jim O'Neill, Chief economist, Goldman Sachs
Economic reports from the past week (with occasional translations…)
National Federation of Independent Business - An index measuring sentiment among small business owners gained for the second consecutive month, moving just below a level that would indicate positive growth in the economy.
Citigroup – The bank swapped $58 billion of its preferred stock into common, and the Treasury converted a portion of the $25 billion of Citigroup preferred it holds, to give the Feds a 34% ownership. This closes the debit noted as a result of the recent bank stress tests.
Oil prices – Oil closed at its highest levels for the year. The surge in price is being driven by a combination of oil being seen as a hedge against inflation along with the International Energy Agency having raised its global oil demand forecast as a result in improving global economics.
Retail sales –Sales numbers rose in May after having dropped in April. This is seen as another indicator of an improving consumer sector.
Initial unemployment claims – For the third week in a row, this number has fallen and it fell much more than had been forecast.
Chrysler - Chrysler and Fiat finalized their government-brokered alliance a day after the U.S. Supreme Court removed the deal's last remaining obstacle. Chrysler will now operate as Chrysler Group LLC.
Perspective
“Recovery - without government spending”
Let’s consider where we are right now.
Since hitting its low point in February, consumer confidence has had the fastest three-month increase ever. The Institute for Supply Management's manufacturing index, which had fallen to historic lows over the winter, has risen. It’s another indicator that the overall economy is now expanding.
In the financial markets, the yield on the 10-year Treasury note is back up to 3.81%, almost exactly where it was in August, 2008, just before the wheels came off the markets. Additionally, key commodity prices, such as oil, copper, lumber and gold are well off their lows.
US companies have reacted to the easier money with new issues of stocks and bonds. In May, according to Dealogic, more new stock was issued by existing companies in US markets than at any time since 1995, when the company began keeping records.
Some of the market gains, of course, reflect choices of investors who believe that the worst of the global recession is over and that investments tied to global growth will be big beneficiaries.
In general then, the economic scene is quickly returning to where it was in September, 2008 – before the horror show started.
Today we have the short-sellers (those who only make money when a particular security or market index is down), together with those many money managers who weren’t ready for the nearly 40% rally of the past three months and have been waiting for a drop, continuing to argue that the stock market will go back to test its lows. Or, they think (hope?) a sharp correction is in order. But this seems to be more of a wish than a legit forecast.
Any short-seller who hasn’t covered their open positions, along with the aforementioned equity managers, has taken a major hit. The only way for them to climb out of that hole is for the market to provide lower prices. The challenge is that with having so many investors in the position of having missed the rally – professional and non-professional alike – this makes a re-test of the lows less likely. This rally won’t be over until these short-sellers throw in their towels – probably along with the rest of their laundry.
My point is that we’re well on the way to recovery - and with no Federal spending having been required. Let me explain a bit.
A new Congressional Budget Office study shows that, through late May, only about $37 billion – that’s just under 10% of authorized spending under the grandly named American Recovery and Reinvestment Act of 2009 (ARRA) - has been spent. In fact, the Departments of Education, Transportation and Energy have spent 2%, or less, of their combined allocations.
In the heat of last fall’s market gyrations, many said that we “needed” this fiscal stimulus and that there was no way we would recover without it. Our current Vice President indicated that virtually all economists agreed with this view. (Not exactly) Given our improved and improving economic outlook, i.e., due to a normal recovery after a recession, it appears to me that haste of passage is going to prove to be a significant and very expensive public policy mistake.
The spending bill was promoted under the (I believe) old-fashioned view that only the federal government was capable of digging us out of the hole that we had gotten ourselves into and that excavating job could only have been done with massive federal spending.
One of the reasons we’re hearing about inflation for the first time in many years is due to the fact that there is this tsunami of money sitting out there - and it’s not really needed. It will come flooding into the economy and help drive many things higher – to include the markets for a time. However, any politician who claims that the ultimate recovery was caused by the ARRA is not exactly being forthright. That would have happened anyway – history shows that to be true.
The good news is that since the impact of this monetaqry tsunami is still somewhat long in coming, the Federal Reserve may be able to be light-footed enough to get us through it. No one really knows. There will be higher interest rates as a result of all this money, in order to fight inflation – but not too soon.
The markets are efficient – unlike government – and to try to influence them through “actions” of government has always proven to be pretty much of non-starter.
In the interim, enjoy the positive fruits of the recovery and invest now to benefit from it.
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 12 June 2009:
Dow Jones 8799 NASDAQ 1858 S&P500 946 Oil $72.25/bbl Gold $939.40/oz
Tuesday, June 9, 2009
Market retrospective - weeek of 5 June
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “The real risk is being in cash”
“Become a possibilitarian. No matter how dark things seem to be or actually are, raise your sights and see possibilities, always see them, for they're always there.”
- Norman Vincent Peale (1898-1993) American Preacher, Writer
Overview
While, overall, the week was fairly quiet, we did manage to finish higher, so we’ve now been up 11 of the last 13 weekly market sessions.
We did get a nice big blast on Monday to start the week and month.
The first trading day of the month often brings with it a big chunk of new money from mutual funds, especially those in 401(k) plans. This month it appeared that a large part of the money went into stock funds. That flow helped the S&P and Dow break through their 200-day moving averages for the first time in well over a year. (Moving averages are closely watched technical barometers for market trends. Some traders use strategies to automatically buy or sell if those levels are penetrated.)
I do firmly believe that we’re still going higher. I also believe that we can see profit-taking take place, either in a sideways market as people reallocate their profits, or in a more defined selloff. It matters not. The trend is still firmly and strongly higher.
By the way, also on Monday – “as you may have heard” – GM did file for Chapter 11 bankruptcy. As it stands now, the administration will spend a bit more than $30 billion to fund the bankruptcy and in exchange receive 60% of GM's stock. The Canadian government will put in $9.5 billion for a 12% piece and the UAW pretty much controls the rest. I think the government involvement is totally inappropriate and sets taxpayers up for a chance to throw huge amounts of good money after bad. Right now, if you could buy the new GM stock, it would qualify as a speculative investment, at best.
A fine example of just how well this government “business management” works can be demonstrated in the ongoing boondoggle known as Amtrak. This year, that fine institution is expected to lose yet another $476 million. It’s never, ever been profitable while run by the Feds over multiple long years. While chump change compared to what’s already been burned by GM, I’m afraid it’s a preview of what’s to come from our now, Government Motors…
Tea Leaf Readings (I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
Consumer Reports ~ The magazine recommends 70% of Ford’s vehicles, but only 19% of GM’s. Finances are only one of GM’s many challenges.
Microsoft ~ The company said its new Windows 7 operating system will be generally available on 22 October, well ahead of its original schedule and in time for the holiday shopping season. The new operating system will replace the (polite term) unpopular Vista. No word on what affect this will have on Apple’s ad campaign…
“For the time being, US macro-economic data seems to be what’s driving crude prices and not the fundamentals, which look uninspiring at best. For now, it is inadvisable to stand in the way of what seems to be investor money clearly piling into commodities.” - Edward Meir, analyst with MF Global Ltd.
“I think everyone’s waiting for a pullback so that they can get in. So, that tells me we’re not going to get much of one — and if we do, it’s not going to be as big as people expect.” - Scott Billeadeau, managing director, Fifth Third Asset Management
“At some point, it's hard to fight the trend and the trend over the last couple of months has been up. People don't want to be left out.” - Ryan Larson, senior equity trader, Voyageur Asset Management
“Inflation is likely three to five years down the road and investors should stay relatively close to the front end of the yield curve where the bond prices are protected by the Fed position of low Fed funds and interest rates.” - Bill Gross, co-CIO and founder, Pimco
Economic reports from the past week (with occasional translations…)
Personal savings rate ~ For the April period, it increased to 5.7% from 4.5% in March. It was the highest monthly increase since 1995.
Energy Information Administration ~ Oil soared to seven-month highs earlier this week -double its price in March - on investor expectations that the economy is stabilizing. The EIA also said Wednesday that the amount of crude oil being held in storage unexpectedly rose by nearly three million barrels last week. That’s about 20% above year-earlier levels, suggesting demand remains sluggish. (Nonetheless, a prediction from Goldman Sachs Group Inc. this week said that crude may reach $85 a barrel by the end of the year.)
Initial unemployment claims ~ For the third straight week, fewer Americans filed claims for unemployment benefit. This suggests that the worst of job losses may be over.
Even better news, in terms of the trend of unemployment, is that the number of people actually collecting unemployment insurance fell for the first time in almost five months, breaking a string of 17 consecutive record months of increases.
Worker productivity ~ According to the Department of Labor, productivity, a measure of employee output per hour, rose at double the gain estimated last month.
National unemployment rate ~ Also from the US Labor Department, the report for May showed job losses dropping at the lowest rate since September, 2008. However, the national unemployment rate moved up to 9.4%. This is the highest level since August, 1983, when we last had a tough recessionary period. It’s important to understand that this rate will continue to go up for a period because it’s a lagging indicator. This means it reports data that are based on past events. It will be the last major indicator to turn positive.
Pending sales of previously owned homes ~ April unexpectedly had the biggest monthly gain in 7 1/2 years, according to the National Association of Realtors. It was the biggest monthly increase since October, 2001, taking the index 3.2% above its year-ago level.
China and US Treasury paper ~ China – along with Japan, India and South Korea - all said in separate interviews that they would “keep buying US Treasurys even if the US credit rating were to be cut.” Those comments this week were viewed as an expression of support for all the dollar-denominated assets of these nations that, collectively, control about half of the world's currency reserves. Federal Reserve data show foreign central banks added about $69 billion to their holdings of Treasurys in May. They don’t seem too afraid to me.
The grandstanding by the locals around the Treasury secretary’s visit to China this week was really for domestic consumption. It seems pretty obvious that, as long as China continues to run a trade surplus and control its currency by buying up the dollars generated by that surplus, it has little choice but to park the proceeds in US Treasurys where they know they’re safe.
Perspective
“The real risk is being in cash”
Here’s my benchmark.
The bear market ended March 9 and the “official” end of the worst recession since the 70s is within sight/reach/grasp. I think it’s already dead, personally.
Many people are using the rear-view mirror and deciding that if Treasuries were good last year, they’ll still be good today. Not a solid investing approach. My good buddies at Merrill Lynch – the former brokerage firm currently part of a bank – have created something called the US Treasury Master Index. The Master says that Treasuries – so far this year – have provided investors with a total return of MINUS 5.3%. My point is that nothing is always a good investment…
And consider this.
Because of how the Feds are keeping short-term rates at basically zero, many – a lot – of money market funds are not paying any return. (Their return would be negative too if the fund managers hadn’t elected to waive their usual management fees…) I guess the thinking is that, as long as it doesn’t go down, I’m okay.
Don’t let the media keep you from making good decisions by telling you that GM’s bankruptcy will really mess up the economy. GM is an out-of-date company. They’re a 19th century technology, using mid 20th century systems to try and survive in the 21st century. Sure, unemployment numbers will go up for a while as a result of their bankruptcy ripple effect but, in the big picture, it’s no biggie. There are 25,000 remaining employees. There are millions working for the new economy companies of Microsoft, Cisco, Wal Mart, Home Depot, Apple, et. al.
To the point, earnings yields on high quality companies still remain comfortably above the yield on 10-year Treasuries. Based on my experience, they should have the ability to absorb higher interest rates driven by economic recovery. Your total return potential, growth plus dividends, remains excellent.
It’s summer. You know how you dip your toes into the pool, lake or ocean to get used to it? And then, once you’re in, it’s quite refreshingly comfortable. I think the same can be true with your investing.
Start getting your monetary toes wet now. If you have one, step up your 401(k) contributions into the best options you have – you’ll automatically be buying the dips. Even if you don't, look for some of the many good quality choices that are now available. Make sure that you will participate in the recovery.
And again, in the spirit of summer, remember that…
The future’s so bright – you have to wear shades.
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 5 June 2009:
Dow Jones 8763 NASDAQ 1849 S&P500 940 Oil $68.58/bbl Gold $955.70/oz
“Become a possibilitarian. No matter how dark things seem to be or actually are, raise your sights and see possibilities, always see them, for they're always there.”
- Norman Vincent Peale (1898-1993) American Preacher, Writer
Overview
While, overall, the week was fairly quiet, we did manage to finish higher, so we’ve now been up 11 of the last 13 weekly market sessions.
We did get a nice big blast on Monday to start the week and month.
The first trading day of the month often brings with it a big chunk of new money from mutual funds, especially those in 401(k) plans. This month it appeared that a large part of the money went into stock funds. That flow helped the S&P and Dow break through their 200-day moving averages for the first time in well over a year. (Moving averages are closely watched technical barometers for market trends. Some traders use strategies to automatically buy or sell if those levels are penetrated.)
I do firmly believe that we’re still going higher. I also believe that we can see profit-taking take place, either in a sideways market as people reallocate their profits, or in a more defined selloff. It matters not. The trend is still firmly and strongly higher.
By the way, also on Monday – “as you may have heard” – GM did file for Chapter 11 bankruptcy. As it stands now, the administration will spend a bit more than $30 billion to fund the bankruptcy and in exchange receive 60% of GM's stock. The Canadian government will put in $9.5 billion for a 12% piece and the UAW pretty much controls the rest. I think the government involvement is totally inappropriate and sets taxpayers up for a chance to throw huge amounts of good money after bad. Right now, if you could buy the new GM stock, it would qualify as a speculative investment, at best.
A fine example of just how well this government “business management” works can be demonstrated in the ongoing boondoggle known as Amtrak. This year, that fine institution is expected to lose yet another $476 million. It’s never, ever been profitable while run by the Feds over multiple long years. While chump change compared to what’s already been burned by GM, I’m afraid it’s a preview of what’s to come from our now, Government Motors…
Tea Leaf Readings (I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
Consumer Reports ~ The magazine recommends 70% of Ford’s vehicles, but only 19% of GM’s. Finances are only one of GM’s many challenges.
Microsoft ~ The company said its new Windows 7 operating system will be generally available on 22 October, well ahead of its original schedule and in time for the holiday shopping season. The new operating system will replace the (polite term) unpopular Vista. No word on what affect this will have on Apple’s ad campaign…
“For the time being, US macro-economic data seems to be what’s driving crude prices and not the fundamentals, which look uninspiring at best. For now, it is inadvisable to stand in the way of what seems to be investor money clearly piling into commodities.” - Edward Meir, analyst with MF Global Ltd.
“I think everyone’s waiting for a pullback so that they can get in. So, that tells me we’re not going to get much of one — and if we do, it’s not going to be as big as people expect.” - Scott Billeadeau, managing director, Fifth Third Asset Management
“At some point, it's hard to fight the trend and the trend over the last couple of months has been up. People don't want to be left out.” - Ryan Larson, senior equity trader, Voyageur Asset Management
“Inflation is likely three to five years down the road and investors should stay relatively close to the front end of the yield curve where the bond prices are protected by the Fed position of low Fed funds and interest rates.” - Bill Gross, co-CIO and founder, Pimco
Economic reports from the past week (with occasional translations…)
Personal savings rate ~ For the April period, it increased to 5.7% from 4.5% in March. It was the highest monthly increase since 1995.
Energy Information Administration ~ Oil soared to seven-month highs earlier this week -double its price in March - on investor expectations that the economy is stabilizing. The EIA also said Wednesday that the amount of crude oil being held in storage unexpectedly rose by nearly three million barrels last week. That’s about 20% above year-earlier levels, suggesting demand remains sluggish. (Nonetheless, a prediction from Goldman Sachs Group Inc. this week said that crude may reach $85 a barrel by the end of the year.)
Initial unemployment claims ~ For the third straight week, fewer Americans filed claims for unemployment benefit. This suggests that the worst of job losses may be over.
Even better news, in terms of the trend of unemployment, is that the number of people actually collecting unemployment insurance fell for the first time in almost five months, breaking a string of 17 consecutive record months of increases.
Worker productivity ~ According to the Department of Labor, productivity, a measure of employee output per hour, rose at double the gain estimated last month.
National unemployment rate ~ Also from the US Labor Department, the report for May showed job losses dropping at the lowest rate since September, 2008. However, the national unemployment rate moved up to 9.4%. This is the highest level since August, 1983, when we last had a tough recessionary period. It’s important to understand that this rate will continue to go up for a period because it’s a lagging indicator. This means it reports data that are based on past events. It will be the last major indicator to turn positive.
Pending sales of previously owned homes ~ April unexpectedly had the biggest monthly gain in 7 1/2 years, according to the National Association of Realtors. It was the biggest monthly increase since October, 2001, taking the index 3.2% above its year-ago level.
China and US Treasury paper ~ China – along with Japan, India and South Korea - all said in separate interviews that they would “keep buying US Treasurys even if the US credit rating were to be cut.” Those comments this week were viewed as an expression of support for all the dollar-denominated assets of these nations that, collectively, control about half of the world's currency reserves. Federal Reserve data show foreign central banks added about $69 billion to their holdings of Treasurys in May. They don’t seem too afraid to me.
The grandstanding by the locals around the Treasury secretary’s visit to China this week was really for domestic consumption. It seems pretty obvious that, as long as China continues to run a trade surplus and control its currency by buying up the dollars generated by that surplus, it has little choice but to park the proceeds in US Treasurys where they know they’re safe.
Perspective
“The real risk is being in cash”
Here’s my benchmark.
The bear market ended March 9 and the “official” end of the worst recession since the 70s is within sight/reach/grasp. I think it’s already dead, personally.
Many people are using the rear-view mirror and deciding that if Treasuries were good last year, they’ll still be good today. Not a solid investing approach. My good buddies at Merrill Lynch – the former brokerage firm currently part of a bank – have created something called the US Treasury Master Index. The Master says that Treasuries – so far this year – have provided investors with a total return of MINUS 5.3%. My point is that nothing is always a good investment…
And consider this.
Because of how the Feds are keeping short-term rates at basically zero, many – a lot – of money market funds are not paying any return. (Their return would be negative too if the fund managers hadn’t elected to waive their usual management fees…) I guess the thinking is that, as long as it doesn’t go down, I’m okay.
Don’t let the media keep you from making good decisions by telling you that GM’s bankruptcy will really mess up the economy. GM is an out-of-date company. They’re a 19th century technology, using mid 20th century systems to try and survive in the 21st century. Sure, unemployment numbers will go up for a while as a result of their bankruptcy ripple effect but, in the big picture, it’s no biggie. There are 25,000 remaining employees. There are millions working for the new economy companies of Microsoft, Cisco, Wal Mart, Home Depot, Apple, et. al.
To the point, earnings yields on high quality companies still remain comfortably above the yield on 10-year Treasuries. Based on my experience, they should have the ability to absorb higher interest rates driven by economic recovery. Your total return potential, growth plus dividends, remains excellent.
It’s summer. You know how you dip your toes into the pool, lake or ocean to get used to it? And then, once you’re in, it’s quite refreshingly comfortable. I think the same can be true with your investing.
Start getting your monetary toes wet now. If you have one, step up your 401(k) contributions into the best options you have – you’ll automatically be buying the dips. Even if you don't, look for some of the many good quality choices that are now available. Make sure that you will participate in the recovery.
And again, in the spirit of summer, remember that…
The future’s so bright – you have to wear shades.
All my best,
Mike
509-747-3323
PS If you, or someone you know, has suffered the death of a spouse, been divorced or changed jobs and has a retirement plan they’re not sure what to do with, please let them know I can be of help. Thank you.
Closing values as of 5 June 2009:
Dow Jones 8763 NASDAQ 1849 S&P500 940 Oil $68.58/bbl Gold $955.70/oz
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