Bullish news
For the first time since January of 2008, an index based upon a survey of U.S. manufacturing purchasing managers crossed a threshold indicating growth in manufacturing output. Separate surveys showed manufacturing activity grew in China, France, Australia and other countries.
A recent pick up in the number of new companies filing for initial public offerings may indicate the U.S. stock market still has some steam left in it. A rise in IPOs indicates that risk tolerance among investors is increasing and corporate confidence is returning.
Bearish news
Alan Greenspan recently said, “We’re Ok for the next six months. We’re getting a recovery…but the process doesn’t have legs to it.”
According to TrimTabs Investment Research, in August, corporate insiders sold nearly 31 times as much stock as they bought. From last September through this past March, in the depths of the bear market, that ratio was just 2 to 1, and the long-term average is about 7 to 1. Executives who run companies can’t predict what the future holds, but they do know more about their own firm than outsiders do. Thus, it makes one somewhat cautious when they are selling at such a feverish pace.
The FDIC insurance fund that covers bank deposits has run dry due to the explosion of bank failures. As a result, the FDIC is assessing banks with additional “special” fees on top of their ordinary insurance premiums. A combination of skyrocketing insurance fees and the need to continue to set aside reserves for problem loans is creating a death grip on many banks. As one local bank executive recently told me, he would not be surprised to see the FDIC’s list of problem banks explode well beyond the current 416 being reported. It appears that the FDIC’s steps to shore up its insurance fund will actually push some struggling banks over the edge and into failure, thus increasing the losses it will have to cover. This is a very unfortunate and negative catch-22.
New oil discoveries
There have been recent announcements regarding huge oil discoveries off the coast of Brazil and in the Gulf of Mexico. Both discoveries are considered significant new finds and in deep ocean waters. Both discoveries should bring new oil supplies to the global market in years to come; however, the cost of extracting this oil is considerably more than more shallow water or dry land wells.
The Federal Government has limited oil exploration within United States borders and along much of its coast lines, even though there are proven oil reserves readily available for drilling. Ironically, the United States is going to lend billions of dollars to Brazil’s state-owned oil company, Petro-bras, to finance exploration of this new huge off-shore discovery. It is pretty hard to get behind a “buy American” theme when our own government continues to take steps to underwrite oil exploration in foreign countries and not allow it at home. (See Overseas news below for additional news regarding Brazil).
Overseas news
Just this year a combination of government stimulus spending, aggressive bank lending and strong inflows from foreign investors helped fuel a rally that pushed China’s Shanghai stock index up 103% from its lows of last November. In August however, the Shanghai Composite stock index declined 22%.
China is considered one of the best investment opportunities in the years to come. Currently there are concerns that a correction in Chinese stocks could weigh on other emerging markets such as Asian, Eastern Europe and Latin America. This could be the case in the short-term; however, it may be good for the Chinese and other emerging markets and even more developed markets like the United States to let off a little steam than to run up too fast and burst. Stock market prices that get too far ahead of their underlying economic fundamentals are never a good thing long-term.
Brazilian beef giant JBS SA plans to announce shortly its intent to acquire Texas-based Pilgrim’s Pride Corporation. Such a merger would pull Pilgrim’s Pride out of bankruptcy and create a new meat company that would rival Tyson Foods, Inc. This is just another sign that Brazil continues to strengthen its position as one of the world’s top oil, mining and food producers.
Upcoming Classes
Our Strategic Life Planning Director, Debra Kunz, MBA, CSLP, continues to speak and teach in the community.
“What Are You Made Of? Self Worth vs. Net Worth”
Debra Kunz is facilitating this program for the American Club Association, “Ignite 2009” series, on September 11. Guests are welcome. Debra shares ways to create your life instead of just react to it. Learn to shift your perspective from living by default to defining what you want; and from fearing the economy to understanding what you can control. Register at www.ignite2009.net.
“7 Do’s and Don’ts to Cope with a Layoff”
Debra Kunz continues to donate this class in the community so it’s free to attend. The information is helpful for those already in transition, or those thinking of making a change. The next session is presented by Grace Covenant Crossroads Church Job Club on Saturday, September 19, 8:30-10:00. RSVP to Debra or Sally, 913-897-2074 or dkunz@iia-kc.com.
Visit www.iia-kc.com/events for more information.
Quotes
“Humility leads to strength and not weakness. It is the highest form of self-respect to admit mistakes and to make amends for them.”
John J. McCloy, advisor to several U.S. Presidents
The best index to a person’s character is (a) how he treats people who can’t do him any good, and (b) how he treats people who can’t fight back.”
Abigail Van Buren, advice columnist
“Integrity is not a conditional word. It doesn’t blow in the wind or change with the weather. It is your inner image of yourself, and if you look in there and see a man who won’t cheat, then you know he never will.”
John D. McDonald, American novelist
Have a great Labor Day Weekend!
Tony Moeller, President
Integrity Investment Advisors, LLC
12721 Metcalf Ave., #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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