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.
Max took this to heart. Shortly after that Max was at the grocery store with his dad and asked if the market was up or down for the day. His dad used his internet-enabled phone to check and informed him that the market was down. To that Max said, “we can’t afford to buy this food, we had better put it back.” Subsequently, grandma took Max out for their periodic ritual of a milkshake at a local burger joint. When Max and grandma come into the house, they see grandpa watching the financial news and Max asks if the market is up (green) or down (red). Grandpa tells him that it is red. To this Max astonishingly gives his grandpa a look of fear and confusion and says, “but we’ve already bought the milkshakes!”
I know this gentleman / grandpa well enough that once he got done laughing, he took the time to explain that what the stock market does daily does not impact their immediate financial decisions / purchases. However, I do find it refreshing to see a child connect the dots and realize that you can only spend it if you are making it. I just wish that many of our fellow Americans, as well as local, state and federal politicians, would take the same type of approach with their personal and taxpayers’ checkbook.
Bad news – Good news
Today’s negative earnings reports from Bank of America Corp. and General Electric Co. reminded investors that businesses and consumers are still struggling to pay off their debts.
Bank of America’s announcement reminds us of the serious challenges banks still face including high unemployment, weak consumer spending and diminished home values.
Unfortunately, the Bank of America and GE reports overshadowed solid results from Google Inc., Intel and AMD this week. Google noted that companies are more optimistic and ready to spend additional dollars to advertise on the Internet. Computer chipmaker Intel and AMD’s positive earnings reports bolster hopes that PC demand and technology spending are on the rebound.
The Markit iTraxx Crossover index, which tracks the credit risk of 50 mostly junk-rated European companies, became the barometer of fear in the European credit markets. Just this week the index crossed an important threshold. By doing so the index is now where it was in June of 2008, which is prior to the great credit meltdown of last year. This suggests that corporate bond defaults should decrease and confidence is improving, which is allowing the bond market to provide refinancing, with lower-rated companies able to raise cash and rebalance their maturity profiles. This is an important step in allowing corporations to become fiscally healthier, more profitable and eventually expand and bring on new workers.
Quotes
“More people should learn to tell their dollars where to go instead of asking them where they went.”
Roger W. Babson, entrepreneur and business theorist
“Property may be destroyed and money may lose its purchasing power; but, character, health, knowledge and good judgement will always be in demand under all conditions. “
Roger W. Babson, entrepreneur and business theorist
”If you want to make an easy job seem mighty hard, just keep putting off doing it.”
Olin Miller, author
Tony Moeller, President
Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
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