Good news is; BP has temporarily capped the oil leak in the gulf, the new iPhone is out, and Intel along with other tech companies is reporting increasingly improving results. Unfortunately, there is an air of pessimism over the market. Business leaders (from small mom and pop operations to large multi-national corporations) are not completely embracing the recovery. Along these lines, it was reported today that the University of Michigan’s survey of revealed consumer sentiment dropped in the last month.
In addition to the above items, China reduced the amount of U.S. government bonds it purchased in May, the financial reform bill has been passed and Federal Reserve officials have noted that they see slower growth in the second half of this year for the U.S. economy. That being said, some Fed officials have mentioned that additional easing or lowering of interest rates may be necessary if this occurs. And to top things off, Citigroup and Bank of America both announced this week that they may have made accounting mistakes and misclassified billions of dollars of debt in their attempt to “window dress” (i.e., make things look better than they actually are) prior financial statements.
The director of trading and derivatives at the Schwab Center for Financial Research noted in a web interview that he sees no clear direction to the market currently. Unfortunately, pessimism has crept back into investors (from individuals to institutions) minds. Warren Buffett met with the President this week to discuss the economy. It is being reported that Mr. Buffett warned the President that the recession created a huge overhang of excess capacity in the economy that would simply take time to mop up. Unfortunately this resurgence of pessimism from Wall Street to Main Street can negatively affect spending and possibly put a damper on corporate profits in the near term, which does not help investors.
Outside of some portfolio fine tuning, what can be done? When it comes to personal finances, I believe prudence is the word of the day. Taking steps to review and trim living expenses and keeping an emergency fund on hand are key. Does this mean ignoring our investments? No. What it means is that by having a better handle on our day-to-day financial picture then, we can better allocate funds for short-term, intermediate and long-term needs. Unfortunately, some are caught realizing that they need additional funds for various reasons, but have not budgeted or set the money aside. As such, money that was initially intended for longer-term investment purposes is prematurely accessed, and oftentimes in down markets, which compounds the problem. In no way am I trying to downplay declines in account values. However, not needing to prematurely access those accounts allow them time to recoup when better times arrive.
Creating and sticking with a well thought out budget, along with an emergency or rainy day fund are two of the best things you can do for yourself. Separately, refinancing a home mortgage (if lower rates can be obtained) is another. In regards to this, I have spoken with several clients this week who have either refinanced or in the process of refinancing their mortgage. Almost universally, they are each saving hundreds of dollars a month. In turbulent times like these, any additional adjustments to your personal financial picture can help.
Weird News
You know you are in strange times when unions are hiring non-union demonstrators to picket. This was actually reported in today’s Wall Street Journal. Unfortunately, the unions are not alone. Other advocacy groups are doing the same. Thus, some of the unemployed are being paid minimum wage to protest various events. As such, I appreciate the fact that some of the unemployed are earning something to pay for their living expenses, even if it is minimum wage.
However, the disturbing part of this equation is that some, and in several cases, the majority if not all the demonstrators / protestors have no connection to the organization they are representing. I find it very unfortunate that some organizations have chosen to create a fall sense of advocacy or passion for their cause.
Quotes
“An empty stable stays clean, but there is no income from an empty stable!”
Poverbs 14:4
“Capital is to the progress of society what gas is to a car.”
James Truslow Adams, American writer and historian
“Increased borrowing must be matched by increased ability to repay. Otherwise we aren’t expanding the economy; we’re merely puffing it up.”
Henry C. Alexander, famous bank executive
“Money is a terrible master but an excellent servant.”
P.T. Barnum, circus showman
“Money doesn’t change men, it merely unmasks them. If a man is naturally selfish or arrogant or greedy, the money brings that out, that is all. Money is like an arm or leg-use it or lose it.”
Henry Ford, car factory pioneer
Tony Moeller, President
Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.
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