Commentary for the week ending October 30, 2009
The Commerce Department reported yesterday that the U.S. economy, fueled by government stimulus, grew 3.5% from July through September. The rebound ended the record streak of four straight quarters of contracting economic activity. Exports of U.S. goods soared at an annualized rate of 21.4 percent in the third quarter, the most since the final quarter of 1996. Businesses, meanwhile, reduced their stockpiles of goods less in the third quarter, after slashing them at a record pace in the second quarter. With inventories at rock-bottom levels, even the smallest increase in demand probably will prompt factories to boost production. This restocking of depleted inventories is expected to help sustain the recovery in the coming months, economists said. The news lifted stocks on Wall Street.
But the government aid, from tax credits for home buyers to rebates for auto purchases, is only temporary. Consumer spending, which normally drives recoveries, is likely to weaken without it. The National Association for Business Economics thinks growth will slow to a 2.4 percent pace in the current October-December quarter. It expects a 2.5 percent growth rate in the first three months of next year, although other economists believe the pace will be closer to 1 percent. Still, with unemployment at a 26-year high of 9.8 percent and credit hard to get, the recovery faces obstacles.
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Last July my wife’s grandmother broke her hip. As a result, we decided to remodel our basement to include a new bathroom, kitchen and bedroom so she could spend some time with us while she recuperated. In the process of finding a contractor, we auditioned over 10 companies. Once we were able to narrow it down to three contractors, we went about the selection process. We asked for references, went to their current job sites and viewed past work. All three seemed legitimate and all three seemed knowledgeable. In the end we went with the lowest bid and paid him a 50% down payment to get started.
We went through what we believed were the necessary steps to help insure we hired a legitimate contractor. We did a check with the Better Business Bureau (BBB) and we ran a criminal and civil background check in Johnson County (where we live). Both times, no results were found. We asked him if he was licensed, bonded, and insured to build in Johnson County. His response was he was fully qualified as a contractor in Johnson County and we left it at that. Read more
New Landings Job Club presents this
FREE Education Program
Wednesday, October 28, 2009
6:30 pm – 8:30 pm
Rolling Hills Presbyterian Church
9300 Nall Ave, Overland Park, KS 66207
RSVP to Debra or Sally, 913-897-2074 or dkunz@iia-kc.com
This event is open to the public.
Your next career move, money, retirement and family depend upon how you manage this life transition.
- Learn what to start doing and what to stop doing
- Protect your family
- What to do, and not do, with your 401k
Program donated and taught by:
Debra Kunz, MBA, CSLP
Strategic Life Planning Director
Integrity Investment Advisors
913-897-2074
dkunz@iia-kc.com
www.iia-kc.com/life-and-business
About the Speaker: Debra Kunz is a speaker, author and coach on life and business issues such as strategic life planning, team dynamics and business changes. She teaches individuals, groups and businesses, to create their life and business instead of just react to it.
This week a client relayed the following story to me. The grandfather sometimes has the TV on when his four-year old grandson (Max) visits and one particular time it was tuned to CNBC (the financial news channel). Max asked him, “what do the numbers with the red and green arrows next to them mean.” He explained the numbers represent the price of stocks, and the green arrow shows that it is going up in price (i.e. making money) and the red arrow is just the opposite.
He then told Max that when the arrows are green they are making money, which allows them to pay their bills in retirement. However, if the arrows are red, then they need to be careful about spending extra money.
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The buzz on the “Street” is not the stock market rally, but the decline in the U.S. dollar. Since the beginning of 1999 through the present, the U.S. dollar has fallen over 21% against a basket of foreign currencies (as provided by Laffer Associates) in today’s Wall Street Journal.
It is true that when a currency drops in value, it makes that country’s goods and services cheaper for foreigners to buy. Yes our trade balance may improve some, because our goods and services are cheaper and we cannot afford to buy as much from our foreign counterparties. However, over the long term capital flees countries with declining currencies. Investors will stop buying U.S. government and corporate bonds, as well as stocks in U.S. companies. Bottom-line, they will dramatically pull back on investing in anything in the U.S. including real estate, private and startup companies since they will continue to depreciate against foreign currencies. This will result in businesses not able to get loans or investments to expand and hire more workers, or if they can get loans it will be at much, much higher interest rates, which results in lower profits and them becoming less competitive globally.
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September was a good month for investors. As a matter of fact, after back-to-back 15% gains that made for the best two quarters since the first half of 1975, the S&P 500 Index still needs to advance another 39% for the index to break even for the decade.
That being said, yesterday the stock market incurred its sixth drop in seven days as it has taken a break from its bull run.
“Fear is still very, very fresh in people’s minds and the magnitude of the potential disaster that we had last September through March, I think still has investors pretty skittish,” said Darell Krasnoff, managing director of Bel Air Investment Advisors in Los Angeles. ”So our sense is that some bad news can shift sentiment pretty quickly.”
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