Last week we took a break and no commentary was sent out. As you might have noticed, we have changed the format of our weekly commentary. We are using MailChimp e-mail reporting service. It allows us to better track how our commentaries are being used and see how many people are actually reading them and forwarding them onto friends. This service does not track any individual information and does not take any of your information; it only tracks if you opened the commentary or forwarded it.
News this week
The stock market has held recent gains on continued belief that the recession has ended and we are beginning to see a turnaround. This has helped spur consumer confidence, but the banking industry is still facing challenges. The number of U.S. banks and thrifts on an official watchlist rose 416 in the second quarter of this year, and some analysts are calling for another 200 to fail before this banking crisis runs its course. I had a meeting with a local bank executive yesterday, and he commented on what a challenging environment it is for most banks. It was his belief that the KC metro area will see several more banks fail or be taken over before it is all said and done. I wouldn’t be worried since FDIC will be insuring those who qualify.
It was reported this week that the White House forecasts the U.S. debt will grow an additional $9 trillion dollars over the next decade. This is sending alarm bells. Even Warren Buffett, who has been a supporter of the stimulus spending, is now worried about the long-term effects for Americans. Fortunately, the U.S. government continues to find buyers for its debt / bonds. This is extremely crucial as the government continues to auction off massive amounts of new Treasuries to pay for its efforts to revive the economy.
- Where’s all the Bio / alternative fuel?
The Wall Street Journal reported today that the “biofuel” revolution has hit a wall. Credit has tightened up and lower oil prices have taken a toll on the industry. It is estimated that two-thirds of U.S. biodiesel production capacity now sits unused. Some companies are stopping production or selling plants. Unfortunately, low oil prices make alternatives too expensive and they soon find their dream of contributing to our energy independence fading away.
- Health care reform
Caterpillar is taking steps to lower health care costs by hiring Walgreens to offer prescription drugs directly to its workers. The heavy-equipment maker already has a similar program in place with Wal-Mart. By doing so, Walgreens and Wal-Mart are able to buy the drugs directly from the pharmaceutical companies, which bypass the pharmacy benefits managers. If the program is successful, then Caterpillar employees may also receive discounts on nonpharmacy goods. Also, Walgreens and Caterpillar are considering expanding the program to provide health care clinics at or near Caterpillar offices. No matter where you stand in the health care reform debate, if given time, I believe we will see more innovative options / solutions brought to the market.
- Who’s right?
The Wall Street Journal reported this week that hedge fund managers increased their holdings of financial stocks by 55% to $70 billion. One particular manager has purchased 168 million shares of Bank of America. Additionally, Fannie Mae, Freddie Mac, AIG and Bank of America (four financial stocks) comprised 37.50% of all trading activity on the New York Stock Exchange for the first four trading days of this week. Bullish to say the least!
World stock markets have been trending upward based upon increased business and consumer confidence in Europe and other areas around the globe.
Jeremy Grantham, chairman of Boston asset-management firm GMO, encouraged investors to buy on March 10th of this year, right near the market lows now believes the U.S. stock market has zoomed right past what his firm considers its fair value.
September does not have a good reputation for investors. Studies have shown that historically, September has not been friendly to investors compared to other months.
Some policy makers don’t want to see a repeat of the 1929 crash. During that period the stock market and the economy both rebounded strongly from 1933 into 1937. However, in 1937 both the stock market and the economy fell hard, which is why you may hear analysts speak of a W-shaped recovery. The concern is that we are in the upward trend in the middle of the W and could see another drop down before eventually recovering.
Outspoken retail analyst, Howard Davidowitz, has recently been interviewed on various financial news shows. Basically, he is extremely bearish for the U.S. retail sector and the consumer. His belief is that there is too much retail capacity / stores in the U.S. and consumers are digging in (i.e., saving and not spending).
I believe it is healthy to see some concerns and negative comments about the economy and the stock market. An overwhelming “bullish” mentality is harmful to the market and an overwhelming “bearish” mentality often occurs near bottoms. Cautious optimism may allow the market to slowly creep upward, but not without some corrections.
- Identity Fraud
Just this week it was reported that Ben Bernanke (Chairman of the Federal Reserve) and his wife were victims of identity fraud. Last August Mrs. Bernanke’s purse was stolen and it contained personal checks, four credit cards and personal identification. Just a few days later, a man walked into a Bank of America branch and deposited a $900 check under the names Mr. and Mrs. Bernanke into a third person’s account and then withdrew $9,000 from that person’s account using other stolen identities.
The unusual activity in their bank account was spotted by Mr. Bernanke and reported to Bank of America. Action was taken and the Bernanke’s didn’t lose any money. However, the man accused of identity fraud has told detectives that he made as much as $50,000 a day on the scams. This is becoming a quick and easy theft for criminals and costs American businesses and consumers billions and billions of dollars a year. I will be following up on this issue in future commentaries, especially on what steps you can take to avoid and what to do if you become a victim of identity fraud. Please take caution with all your personal financial information and contact us if you are concerned about this issue. We will be happy to share what information we have available that can be of help.
Quotes
“Old age is like climbing a mountain. You climb from ledge to ledge. The higher you get, the more tired and breathless you become–but your views become more extensive.”
Ingrid Bergman, actress
“Knowledge speaks, but wisdom listens.”
Jimi Hendrix, musician
Tony Moeller, President
Integrity Investment Advisors, LLC
12721 Metcalf Ave., #202
Overland Park, KS 66213
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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