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Monthly Commentary

 

 

November 2008

Amidst all the gathering dark clouds of market performance and worsening economic news there is a bit of good news that may help bring us out of the recession that we find ourselves in. We are seeing inflationary numbers as measured by the consumer price index falling to the range most preferred by the Federal Reserve. This is not only evident here in the US but abroad as well.   (read more)

 

October 2008

Another horrible month comes to an end, but at least we saw some relief at the end of the month from the constant downward pressure we have been living with. All three major indices finished strongly higher in last week's trading. The S&P 500 gained 10.5% (Year-to-date down 34.0%), the Dow Industrials jumped 11.3% (YTD down 29.7%) and the NASDAQ Composite moved ahead 10.9% (YTD down 35.1%). Six of 10 S&P sectors outperformed the Index and all 10 managed to gain ground on the week. The best performing sectors were Consumer Discretionary (up 16.9%), Materials (up 14.4%) and Energy (up 13.0%). The worst performers were Health Care (up 5.3%), Utilities (up 6.2%) and Consumer Staples (up 8.3%).  (read more)

 

 

September 2008

The bailout plan is the topic of the month.  While the headlines and the press give the impression that this is yet another gift to business to forgive them for their sins of greed, the actual terms of the plan paint another picture.  The simple details of the plan are that funds will be made available to purchase troubled assets on the books of financial firms.  The funds will come from the increase in the debt ceiling and an oversight board will be established to watch how the funds are applied.  While the total package may be $700 billion, the funds won’t be made available all at once.  Two other important elements of the plan cover the pricing of the assets and the destination of the proceeds from the sale of the assets when they economy begins to recover.  (read more)

 

 

August 2008

Investors are increasingly concerned about the health of the U.S. financial system. The Federal Deposit Insurance Corporation (FDIC) recently indicated that 117 financial institutions are now on the Trouble List, up from 90 previously. Not all of these financial institutions are going to fail, but some will. In his comments last week Fed Chairman Bernanke discussed the issues of regulation in our financial system.  While many investors look to the Federal Reserve as the ultimate regulator, Bernanke said that the Fed has some regulatory power over the financial system but not complete power. Our regulatory system is primarily designed to keep an eye on individual institutions like banks or brokerage firms and until now has worked quite well.  However, when you have problems throughout the system caused by easy lending, the failure of one has the potential to set off a chain reaction for other institutions.   (read more)

 

 

July 2008

With 2008 now more than half over let’s take stock of where we are. First unless you just landed on earth after spending a year in space you would know that we are in the clutches of a bear market. Don’t worry about hanging the “recession” label on this economy as market conditions can rarely be described with one single word. Suffice it to say the economy has slowed considerably from this time last year and many sectors have been dealt a near knock-out blow. On July 15 the Dow hit a new 52 week low of 10, 962 taking out the support level of 11,000.  (read more)

 

 

June 2008

OUCH!!! The month of June is over and the DJIA closed out the month with the worst performance for June in 78 years. For the year the S&P 500 is down 12.8; the Dow is off 14.4 and the NADQ is 13.5 in the red. With half of the year out of the way, we can hope the second half goes much better. (read more)

 

 

May 2008

In my mid month email I commented on how the price of oil has largely been affected by the speculators who are using the commodity as a means to hedge inflation.  The once powerful US Dollar has been losing its luster for some time and in a rush to find a replacement for it, large institutions have settled on the price for a barrel of oil as the means to protect their portfolios.  Even more attractive to them is that the price of oil is much easier to manipulate than the dollar is.  As I mentioned in my comments, more and more institutional money is entering into this activity and this increased activity and demand is playing a large part in driving up the price of oil as well as other commodities.  The commentators on CNBC would have us all believe that it is the increasing demand and shrinking supply that is driving the price up.  This is of course a factor, but so far, with few exceptions, the story of the oil speculators is not getting much attention at all.  (read more)

 

 

April 2008

I guess we can blame this one on the Feds.  Before the announcement of their current interest rate strategies the markets were moving along nicely.  The final week of April was filled with a number of important economic reports and investors had plenty of reason to hold their breath.  Early on in the day the markets reacted positively to the first batch of reports and were up nearly 1% across the board.   The Labor Department reported a five-year low in April consumer confidence, although the index was modestly higher than expectations (reported 62.3 v. estimated 61.0). The April ADP Employment report showed private-sector jobs increasing 10,000 versus an estimated loss of 60,000 jobs and the first reading on 1Q GDP showed growth +0.6%, which was slightly greater than the estimate of 0.5%. (read more)

 

March 2008

Uncertainty continues to dominate the market outlook as the major indices trade in a choppy fashion. According to an S&P study of daily swings, the U.S. stock market is the most volatile in 70 years. The S&P 500 benchmark for American securities has advanced or declined 1% or more on 28 days this year. That's 53% of the trading sessions so far. Trying to find rationale to explain this volatility is a tough task but suffice it to say most of the blame lies at the feet of the investors themselves. (read more)

 

February 2008

There is a bit of irony in the market performance for the last day of February in 2008. The major stock averages fell sharply. The Dow and the S&P 500 finished with their fourth straight monthly losses for the first time since 2002. The S&P 500 dropped more than 3% during the month. Weak economic reports, an early decline in the dollar, credit worries, and disappointing earnings all contributed to the selling pressure. Since we only have 29 days in February every 4 years, let’s be hopeful we won’t see another month like this for at least four more years.  (read more)

 

January 2008

A volatile January ended on a positive note with the major indices all moving up and on strong volume for the last trading day of the month.  How can this be in the face of near recession?  It’s pretty simple actually.  There is still a great deal of fear out there.  Fear and Greed are the two major tools of Wall Street and both are designed to make them money.  Fear and Greed cause people to do things.  It is nearly impossible to sit idly by when all the talking heads are spewing non-stop data at you, all designed to get you to make moves.  It doesn’t matter in which direction as long as you feel compelled to buy or sell something.  That’s when they make money, not when you sit quietly observing the happenings.  (read more)

 

December 2007

As we leave the month of December allow me to bring a little Roman history into the year end discussion for perspective. In 46 BC, Emperor Julius Caesar instituted a new calendar to better track the year in line with the seasons and in doing so gave us the months and days that we still use today. This calendar remained in use until the 16th century when Pope Gregory XIII gave us our current calendar that bears his name. The first month of the Julian calendar was named after the double-faced Roman god Janus. Janus was the god of gates and doors, beginnings and endings, and is the reason why at this time of the year we look ahead to the near year while still remembering the year just ended.

(read more)

 

November 2007

November was some kind of month, bringing new meaning to the definition of volatility. From a S&P 500 high on November 1 of 1,545.79 to the monthly low of 1,406.10 on the 26th, investors experienced a ride unlike any other November. Wide swings in daily numbers gave one the impression that if you didn’t like the numbers that day, all you had to do was to wait until the next day for totally different ones. These conditions are certainly not for the faint of heart by any means.  (read more)

 

October 2007

Now they have done it!    Citing a need to “forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time,” the Feds gave the markets what they wanted: another interest rate cut of .25%.  The markets greeted the news with a modest bump in the closing numbers.  There was some downside to the Fed’s statement in that they noticed “recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation.”  You don’t have to look far to see evidence of that in commodity prices.  (read more)

 

September 2007

As Lewis Carroll once wrote, “It’s a poor sort of memory that only works backward.” While we have all wished for the foresight to know what to invest in, before the market moves, we feel it’s best to look ahead at what the economists are forecasting and try not to dwell too much in the past. That being said, let’s take an objective look at September. (read more)

 

August 2007

The current market is in transition.  We have seen steady upward momentum for over 53 months.  Markets like stability in the economy and they prefer conditions where the road ahead is clear and straight.  It is certainly acceptable if a few storm clouds are on the horizon, but ideally that horizon should still be somewhat in the distance.  For this market and the economy in general, those storm clouds have moved in closer.  In fact they have moved in so close that people are seeking shelter and openly are wondering if the storm will ever pass.  Of course we know it will, but none the less, it makes weathering the actual storm an unpleasant experience.  (read more)

 

July 2007

Many people seek their thrills by bungee jumping, sky diving or alpine skiing.  Who needs that when you have the ups and downs of the market?  While maybe not life threatening, being an investor does have its share thrills.  To illustrate that point let’s take a look at performance of the Dow Jones Industrial Average over the last two weeks. (read more)

 

 

 

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