The stock market is like a hamster in a wheel this month – going nowhere fast. However, this is not a bad thing. It is the holiday season and many investors are on the sidelines resting, just like many of us after a big Christmas dinner. That being said, there is some good news to report.
- FedEx CEO reported that the U.S. economy has reached a “turning point,” and the company saw a 17% increase in shipping on its peak day versus last year. As a result of what it considers positive economic signs, FedEx is reinstating some employee benefits that were suspended over the past year.
- Both Nike (athletic apparel) and Oracle (software) both reported that they are seeing positive signs for their products going forward.
- Retailers, thus far, are reporting decent sales this month. This is based partly on them not overstocking their shelves and resorting to “deep” holiday discounts. In addition, the weather has been good overall.
Along these lines, the following is an excerpt from a December 10, 2009 BusinessWeek article “More than two-thirds of corporate execs surveyed in November by the Business Roundtable expect their company’s sales to increase over the next six months. And the Roundtable’s CEO Economic Outlook Survey Index—designed to take the temperature of its 160 member corporations—rose to its highest level in more than a year in the fourth quarter.
More telling than what company bosses are saying is what they’re doing. Rather than focusing solely on cost-cutting, executives are preparing for growth by looking to hire workers, add to inventory, and build capacity.”
The following is a link to the entire article: http://www.businessweek.com/magazine/content/09_51/b4160016910212.htm
When I see positive economic news from several different industries, then I believe it is a sign that we may see a general trend for the overall U.S. and global economy.
It will take time to recover
The Wall Street Journal had an article on how the recent global recession has taken more than an economic toll on us. Many Americans and their counterparts around the world have had their faith shaken. This could be the result of seeing investments decline in value, being laid off, losing a home to foreclosure, etc. Whether it is one or a combination of these events, many of us will not forget what occurred. As such, our confidence as individuals and as a nation will take time to recover. In the mean time, I expect to see continued pessimistic comments and feelings for years to come. For those who experienced the “Great Depression,” it left a permanent imprint on their psyche.
I believe it will be a good thing if we learn that excess in whatever manner is harmful. In addition, a good dose of prudence and common sense can go a long way. Maybe the new chic will be “living within or better below your means and being debt-free.”
America has a proud history of being a leader and exuding the pioneer spirit. Therefore, it would be ridiculous for us as a nation to curl up in a fetal position of pessimism. On the other hand, unbridled spending and false pride is even worse. I sincerely hope that values and principles of “a penny saved is a penny earned” and “you watch the cents and the dollars take care of themselves” come back into vogue. These may seem like very simplistic ideals to a very complex set of issues we face. However, just talk with someone who has lived by these ideals over their lifetime and you’ll see a much more content, personally and financially secure, and well balanced person. This is in complete contrast to the young professional driving a new BMW, living in a large home with all the amenities, traveling and going out to eat, but with an ever increasing debt-load and stress level.
Succumbing to the urge to buy things is just as unhealthy as going back for a second desert or another plateful over the holidays. Both choices may feel/taste good at the moment; however, we incur financial and personal indigestion as well as added pounds and debt. As a child, and especially as a teenager, my brothers and male cousins viewed eating, especially at the holidays, as a competition to see how much we could consume and could never understand how our parents, aunts and uncles could exert such self-control. Now as an adult, with a slowing metabolism, I understand.
Especially as it relates to personal finances, stopping to think of the longer-term consequences, positive (living below my means, increasing my savings for retirement, delaying major purchase) or negative (increased credit card balances and monthly payments and related stress of how to pay them) is one of the best habits one could adopt.
Why has the U.S. dollar strengthened recently?
This has been a surprise to many to see the lowly U.S. dollar strengthen against many foreign currencies, especially the Euro. However, what it may be is a sign that, “The U.S. economy all of a sudden doesn’t look so bad….and the rest of the world doesn’t look so good,” as one currency strategist was quoted in today’s Wall Street Journal.
Yes, we have massive job losses and the federal and state budgets are hemorrhaging. However, we see that many countries, especially in Europe are in a worse situation. Thus, investors around the world may look for “less bad” options for their money in the short-term and this has increased the demand for the U.S. dollar in comparison to some other currencies. As I noted above, the U.S. has a history of being a very resilient economy and we have and will rebound. However, is it a proud moment to be considered the “star” pupil when you have a D average when it comes to financial responsibility and the other students in class all have Fs?
If we want to be an example to the world and remain a leader economically, then it calls for us and our government to begin showing some fiscal constraint. Otherwise, how can we be taken seriously when we preach one thing and practice another? The last person you should go to for financial advice is someone who is having trouble paying their bills or continues to open new credit cards to fund their living expenses.
Has China not learned from our bad example?
We all know about the shenanigans large U.S. banks and financial engage and its role in the “Great Depression.” Well, it appears that China can’t get enough of a bad thing as well. Currently, large Chinese banks are engaging in a practice of temporarily selling loans to Chinese trust companies and promising to repurchase them any time between a few weeks to a few years later. Then, the trusts repackage these loans into financial instruments for clients. The net result is the banks don’t list these loans on their books. This allows the banks to show reduced loan balances. This is at a time when China’s government has expressed concerns about too much lending and wanting banks to increase their capital reserves as a precaution against bad loans.
Currently, it is virtually impossible to get any hard facts as to how wide spread this practices are. However, we all know what happens when you loan too much money to too many people. Yes it is profitable for these banks to close, sell and even service these loans, but it can also be detrimental to them and the Chinese economy if this practice gets out of control as it did in the U.S. China’s growth has barely been impeded, while the U.S. and many other developed countries have seen big setbacks. The question now is this growth for real or just the result of throwing/lending money haphazardly.
Quotes
“It’s good to have money and the things that money can buy, but it’s good to check once in a while and make sure you haven’t lost the things that money can’t buy.”
George Horace Lorimer, editor-in-chief of The Saturday Evening Post
“There are two ways you can be rich. One is to have all you want, the other is to be satisfied with what you have.”
Anonymous
Tony Moeller, President
Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
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