After Thursday's sell off, everyone seemed to have taken a look around and decided to chill a bit, so not much was accomplished on Friday and the markets just went quietly into the weekend.
I was at a meeting this morning and the general feeling about the economy came up. All there - about 25 people - agreed that there is a disconnect between what they are experiencing personally and what they read and see about the economy. They are all business owners - none in housing or the mortgage business - and all report gains compared with the year prior. Yet the media and one political party seem to very much want to perpetuate the idea that something must be wrong. I share their confusion.
Emotion
This confusion is, to me, one of the main reasons the markets are where they are now. As I've mentioned many times previously, emotion will always trump logic in making personal decisions. It certainly is true in the markets. People are afraid / concerned / uncertain about the US markets right now. The typical response is to hide - to be "safe."
These feelings have caused many to move from the "bad" US markets to the "good" global markets in order to be protected. Others had moved to the commodity-related issues and had driven up those prices too. A huge majority, however, have moved underground and gone into US Treasury Bills and Notes, in addition to CDs and bonds. The assets remain there now in record numbers.
This stock market exodus has driven the returns way down. The 90 T-Bill, which is seen as the equivalent of cash, is paying a big 1.67% right now. The 10 year Note is giving its holders 3.65%.
I wish I knew how to redirect investor emotions. The opportunities in front of them are totally amazing and yet, nobody wants to be the first one into the pool.
Facts
Before I present these for your consideration, please understand that I really, truly, 100% believe what I'm putting forward. Because I have been doing this for so long and have lots of market-created Purple Hearts as a result of past actions, I am not moved by daily news items. It's the trends that count and I firmly believe that the worst is well past. I cannot though say when it will finally move up with strength. Maybe if the readers of this will pass it on to your friends, we can be the market catalyst that get things going again. Enough pontificating.
I think we can all agree that we are truly in a global consumer economy. There can be politicians and union guys wanting to go backward but NAFTA and its ilk are simply acknowledging the realities of the world. As a direct result, markets around the world are now more related than they have ever been.
The values of currencies in other countries impact what we pay for things and vice versa. For example, those currencies that represent commodity-based economies are now sliding rapidly lower v. the dollar and yen as the value of their goods is diminished by those downward price movements. So too are the markets in those countries dropping - making those previously "good" investments a lot less appealing.
As "bad" as our market has appeared to be, we're still seen as the safest of all havens - a fact that's also helping to push those T-Bill rates down. We're the most productive economy on the planet - everyone wants to sell to us.
The values that the stock prices of many high-quality companies represent today are huge stores of value for the investor with a time horizon of a few years. Many who are facing retirement literally can't afford to continue to stay in these "safe" fixed-income investments. The returns aren't even keeping up with the current relatively low rate of inflation - forget it if you factor taxes into it. At some point, they have to understand that the reward for the ownership of stocks is well worth the risk of that ownership.
So, what to do?
If you're a media person or a fan of the doom party, I guess you should keep your money in your backyard coffee can and ignore reality.
If you can think for yourself, start taking positions in the companies or funds you like. If you think there's more on the downside, don't commit all your capital. Just stage it in with a timeline for full commitment.
Don't be one with the big scabs on your forehead. You get those from having beaten it against the wall in the coming months as we move on up and you are mired deep into the shoulda, coulda, woulda state of mind.
You heard it here first.
Friday, September 5, 2008
Thursday, September 4, 2008
Market review
"Longest losing streak since January" - so read the headlines as a result of Thursday's market actions. The fact that this means only 4 days is somehow overlooked. So, in order to eliminate any cries of my being all Pollyannaish about the markets, let's look behind the curtain and see what moved things lower.
Stats first
The Standard & Poors 500 is off 18% for the year - after taking in today's selling. Slightly above the definition of bearish but not especially great otherwise. Please to recall that just about 6 years ago, we were down over 30% at the bottom of that bear market. So, it's bad but not horrible and we've proceeded quite well since that time, seems to me. In other words, just cuz we're down now is absolutely no indicator that we'll be staying here.
Perceptions
What caused today's selling is the interpretation of the news. To wit. Oil is down - the dollar up again. Just a few weeks ago, there would have been hosannas in the streets about this. But, as the song goes, what a difference a day makes. It's old hat now. This has been turned into bad news as the "slowing global economy" is the reason for reduced oil prices and that's now a bad thing.
Many of the companies that have been benefiting from a weak dollar by exporting their products or services are going to see earnings reduced as sales will slow. Further, with commodity prices dropping through the floor, those related companies will also see their earnings drop. Add to that mix the continued uncertainty in the financial sector and you get a market drop. That seems pretty straightforward.
Many of the companies that have been benefiting from the low dolar / high commodity combo coincidentally happen to be components of both the Dow Jones and S&P 500 Indexes. Both of these are what's called weighted indexes, meaning that not all stocks within in them are considered equal. Some, so to speak, carry more weight than others. So, when you get companies like Exxon Mobil, Caterpillar, United Technologies and Chevron all having big individual drops on Thursday, it's multiplied in the Index results.
Jobless numbers
You can always tell what type market you're in by the response to news items.
It was reported by the Labor Department that first-time jobless claims were up 15,000 for the most recent period. This number "heightened concerns the economic slump is worsening." Also helped cause the sell off. Hmmm. 15,000 as a percentage of our population is no meaningful figure. As a percentage of the working population, it's still below what was considered a "normal" percentage in the 90s. Press forgot that - what a surprise.
They also forgot that people actually employed - as in working full-time - rose to over 3.4 million. That's the highest number of folks working since November, 2003. So, the news focus is on 15,000 v. 3.4 million. Am I the only one who doesn't seem to need glasses here?
Commodity prices
The S&P 500 Materials Index, another of the 10 industry indexes in the S&P, is now down 20% since May - that's a bear market. Even better, oil continues to slide and is now off 27% from its July top. To me, this augurs well for price drops in our goods and services going forward and takes even more pressure off the Federal Reserve. Inflation as a major problem continues to be just a figment of some doomsayers imagination.
The wrap
Investing is something that is done over a long time period - read more than 3 years, at least. To focus on daily market events as meaningful in themselves is the same as obsessing over the fact that it's raining today when the forecast is for sunny skies for the rest of the week.
One down day - or even 4 - does not a trend make. It's frustrating if you own some issues but it's also enervating as you're looking for bargains. The eternal yin and yang of the markets.
So, file today's action as "interesting" and go back to the rest of your life.
It's days like these that set the table for the returns of tomorrow...
Stats first
The Standard & Poors 500 is off 18% for the year - after taking in today's selling. Slightly above the definition of bearish but not especially great otherwise. Please to recall that just about 6 years ago, we were down over 30% at the bottom of that bear market. So, it's bad but not horrible and we've proceeded quite well since that time, seems to me. In other words, just cuz we're down now is absolutely no indicator that we'll be staying here.
Perceptions
What caused today's selling is the interpretation of the news. To wit. Oil is down - the dollar up again. Just a few weeks ago, there would have been hosannas in the streets about this. But, as the song goes, what a difference a day makes. It's old hat now. This has been turned into bad news as the "slowing global economy" is the reason for reduced oil prices and that's now a bad thing.
Many of the companies that have been benefiting from a weak dollar by exporting their products or services are going to see earnings reduced as sales will slow. Further, with commodity prices dropping through the floor, those related companies will also see their earnings drop. Add to that mix the continued uncertainty in the financial sector and you get a market drop. That seems pretty straightforward.
Many of the companies that have been benefiting from the low dolar / high commodity combo coincidentally happen to be components of both the Dow Jones and S&P 500 Indexes. Both of these are what's called weighted indexes, meaning that not all stocks within in them are considered equal. Some, so to speak, carry more weight than others. So, when you get companies like Exxon Mobil, Caterpillar, United Technologies and Chevron all having big individual drops on Thursday, it's multiplied in the Index results.
Jobless numbers
You can always tell what type market you're in by the response to news items.
It was reported by the Labor Department that first-time jobless claims were up 15,000 for the most recent period. This number "heightened concerns the economic slump is worsening." Also helped cause the sell off. Hmmm. 15,000 as a percentage of our population is no meaningful figure. As a percentage of the working population, it's still below what was considered a "normal" percentage in the 90s. Press forgot that - what a surprise.
They also forgot that people actually employed - as in working full-time - rose to over 3.4 million. That's the highest number of folks working since November, 2003. So, the news focus is on 15,000 v. 3.4 million. Am I the only one who doesn't seem to need glasses here?
Commodity prices
The S&P 500 Materials Index, another of the 10 industry indexes in the S&P, is now down 20% since May - that's a bear market. Even better, oil continues to slide and is now off 27% from its July top. To me, this augurs well for price drops in our goods and services going forward and takes even more pressure off the Federal Reserve. Inflation as a major problem continues to be just a figment of some doomsayers imagination.
The wrap
Investing is something that is done over a long time period - read more than 3 years, at least. To focus on daily market events as meaningful in themselves is the same as obsessing over the fact that it's raining today when the forecast is for sunny skies for the rest of the week.
One down day - or even 4 - does not a trend make. It's frustrating if you own some issues but it's also enervating as you're looking for bargains. The eternal yin and yang of the markets.
So, file today's action as "interesting" and go back to the rest of your life.
It's days like these that set the table for the returns of tomorrow...
Wednesday, September 3, 2008
Some economic anti-venom
Nothing big back on the street of dreams on Wednesday. The markets were about unchanged.
The dark side
I had the occasion today to read an opinion article written by a person in Philadelphia. I know that it is, in many ways, a failing city - putting it nicely - and that may contribute to her world view but I sure hope she is actively seeking professional help. This is one depressed human. Her outlook for this country and our economy is way worse than terrible. She and her ilk have been saying there's a recession, the world is ending and the sky falling for some time now. While the facts aren't there to back them up, that sure doesn't stop them from spreading their badly confused views.
Luckily, as I demonstrated in yesterday's comments, most of us aren't buying it. Let me help you - with the help of real data - to further allay any lingering fears this person and her doomsayer buddies are trying to create in you.
More positive news
You remember me referring to those folks in Denver last week - the ones who were talking about us slipping into a modern day depression where US workers are working "harder and harder for less and less"? I think those folks must be afflicted by that new math tripe they tried to sell us. I say that because the US Census Bureau - in their most recent report - pokes monster holes in that bit of hyperbole.
It says here that incomes have been rising, poverty remains low and income inequality has shrunk dramatically in 2007. Yep, it's true. And get this. Our real - that's after you factor in inflation - median family income of the family that's smack in the middle of the income distribution curve hit an all-time - yes, Virginia, that's all-time - high of $61,355 in 2007. And this doesn't include fringe benefits and/or Medicaid or Medicare benefits. Boy, those Denver visitor's must really live high on the hog if this kind of income is a problem for them.
And that's not an aberration either. This is a jump of 2.1% since 2006 and the third consecutive increase. In light of the challenges we've been facing, I think that is pretty dang good. The previous high had been set in 2000.
It's about cycles
The fact that it took seven years to make a new high is normal. According to the folks at First Trust, there has been a down, then an up pattern during every recovery of the past 30 years. It wasn't until 1986 that the previous high set in 1979 was beaten. It then took until 1996 to beat the high that had been set in 1989. It's all about cycles. Please note that in our country each previous high is followed by reaching another high. In the world of markets, that's called a upward trend line. As I've said before, the trend is your friend.
Oh, yes. The 2007 inflation-adjusted median earnings - again, from the Census Bureau - of full-time workers was up a lot - up 3.8% for men and 5% for women. Once again, I just don't get what the blues singers are carrying on about.
As usual, the conventional wisdom isn't - wisdom, that is
There is always - again, in certain quarters - a lot of hoo-hahing about the "growing gap in incomes between the top and the bottom earners." Now, in my not very humble opinion, there are a lot of reasons for that disparity. Nonetheless, the share of income earned by the top 5% was 20.1% with the bottom 20% earning 4.1%. That differential is the lowest since 1995. Translated, it means to me that the bottom folks are improving their productivity - yet another good thing.
So, we now have a new record high income level for the real typical US family - not some hard case brought out for show and tell - while the inequality difference is shrinking. The trend continues as our friend.
Somehow, the Philly lady and her buds missed this news.
What about the poverty level?
Good question. Every society since there have been societies has had a poverty portion. And, as the man from Calcutta said, he wanted to visit America so he could see poor, fat people. Social commentary aside, in 2007, our poverty rate was 12.5% - up from the 12.3% level in 2006.
Well, what does that mean?
The Census Bureau says that this is a normal year-over-year change. More to the point, the current 12.5% rate is actually lower than every year from 1980 through 1998. Better yet, it's lower than the approximate 13% average that has been the case since the late 1960s. So, while not good overall, it's a lot better than it has been for some time.
The recap
We have record family incomes, shrinking income differentials and poverty at lower levels than has been the norm over the last 40 years. And we all know the past performance doesn't mean it will happen again mantra. Nonetheless, why all the gloom? The facts don't justify it. But, the popular media doesn't report it. Hence, most folks are confused by their ongoing disinformation.
Be positive. Be proactive.
Let the Force be with you...
The dark side
I had the occasion today to read an opinion article written by a person in Philadelphia. I know that it is, in many ways, a failing city - putting it nicely - and that may contribute to her world view but I sure hope she is actively seeking professional help. This is one depressed human. Her outlook for this country and our economy is way worse than terrible. She and her ilk have been saying there's a recession, the world is ending and the sky falling for some time now. While the facts aren't there to back them up, that sure doesn't stop them from spreading their badly confused views.
Luckily, as I demonstrated in yesterday's comments, most of us aren't buying it. Let me help you - with the help of real data - to further allay any lingering fears this person and her doomsayer buddies are trying to create in you.
More positive news
You remember me referring to those folks in Denver last week - the ones who were talking about us slipping into a modern day depression where US workers are working "harder and harder for less and less"? I think those folks must be afflicted by that new math tripe they tried to sell us. I say that because the US Census Bureau - in their most recent report - pokes monster holes in that bit of hyperbole.
It says here that incomes have been rising, poverty remains low and income inequality has shrunk dramatically in 2007. Yep, it's true. And get this. Our real - that's after you factor in inflation - median family income of the family that's smack in the middle of the income distribution curve hit an all-time - yes, Virginia, that's all-time - high of $61,355 in 2007. And this doesn't include fringe benefits and/or Medicaid or Medicare benefits. Boy, those Denver visitor's must really live high on the hog if this kind of income is a problem for them.
And that's not an aberration either. This is a jump of 2.1% since 2006 and the third consecutive increase. In light of the challenges we've been facing, I think that is pretty dang good. The previous high had been set in 2000.
It's about cycles
The fact that it took seven years to make a new high is normal. According to the folks at First Trust, there has been a down, then an up pattern during every recovery of the past 30 years. It wasn't until 1986 that the previous high set in 1979 was beaten. It then took until 1996 to beat the high that had been set in 1989. It's all about cycles. Please note that in our country each previous high is followed by reaching another high. In the world of markets, that's called a upward trend line. As I've said before, the trend is your friend.
Oh, yes. The 2007 inflation-adjusted median earnings - again, from the Census Bureau - of full-time workers was up a lot - up 3.8% for men and 5% for women. Once again, I just don't get what the blues singers are carrying on about.
As usual, the conventional wisdom isn't - wisdom, that is
There is always - again, in certain quarters - a lot of hoo-hahing about the "growing gap in incomes between the top and the bottom earners." Now, in my not very humble opinion, there are a lot of reasons for that disparity. Nonetheless, the share of income earned by the top 5% was 20.1% with the bottom 20% earning 4.1%. That differential is the lowest since 1995. Translated, it means to me that the bottom folks are improving their productivity - yet another good thing.
So, we now have a new record high income level for the real typical US family - not some hard case brought out for show and tell - while the inequality difference is shrinking. The trend continues as our friend.
Somehow, the Philly lady and her buds missed this news.
What about the poverty level?
Good question. Every society since there have been societies has had a poverty portion. And, as the man from Calcutta said, he wanted to visit America so he could see poor, fat people. Social commentary aside, in 2007, our poverty rate was 12.5% - up from the 12.3% level in 2006.
Well, what does that mean?
The Census Bureau says that this is a normal year-over-year change. More to the point, the current 12.5% rate is actually lower than every year from 1980 through 1998. Better yet, it's lower than the approximate 13% average that has been the case since the late 1960s. So, while not good overall, it's a lot better than it has been for some time.
The recap
We have record family incomes, shrinking income differentials and poverty at lower levels than has been the norm over the last 40 years. And we all know the past performance doesn't mean it will happen again mantra. Nonetheless, why all the gloom? The facts don't justify it. But, the popular media doesn't report it. Hence, most folks are confused by their ongoing disinformation.
Be positive. Be proactive.
Let the Force be with you...
Tuesday, September 2, 2008
A four star day
Granted, the markets didn't record any significant moves on the first day back to school. However, I saw four things in the financial news on Tuesday should give us all some nicely positive food for thought
Star number 1
As with most things that are negatively anticipated - and even though the exalted network talking heads were there - Gustav didn't really amount to a whole lot and only dumped a bunch of rain and blew down a few things. That not being a problem is good - but not worthy of the star.
The star is the fact that oil is at a five-month low and gasoline prices are down 13% from their respective highs hit in July. Even better, the Coastal Guardians report that there doesn't appear to be any structural damage on the offshore rigs nor any oil spills. That's all very good. No reason for the traders to inflate prices on the maybe factor.
Star number 2
Drawn down by the crashing petroleum prices, other major commodities continued their respective slides as well. Copper, gold and aluminum all moved much lower today - as did the companies which are the marketers and providers of them. These commodities had been the receptacle for all the "safe" money that ran from stocks earlier in the year. The ripple effect also caused prices of most things to rise over the past few months.
This combination contributed greatly to the over-reaction of prices on the upside as a result. However, I certainly hope no one is looking for a rebound anytime soon in these commodity prices. The trend is definitely not your friend here.
What deserves the star in this case is that the drop in these commodity prices removes a great deal of upward pressure on inflation rates - and the cost of goods in general. That should also keep the Federal Reserve from feeling that interest rates have to go higher.
Star number 3
The US dollar is at its highest level in 7 months, as compared with the other major global currencies. This then also helps move commodity prices lower and provides further positive impetus to the Fed for standing fast on interest rates.
Star number 4
For the month of August, the industry that did the best of the 10 within the Standard & Poors universe was the one called Consumer Disposables. This group consists of the retailers, car companies, lodging issues and restaurants. You know - these are the groups the media has said were dying on the vine cuz no one was spending money. I really wonder where those cats get their information because the reality is that the group was up 7% in August. That's a pretty fine number for one month.
Connecting the dots
While we don't have Jupiter aligning with Mars just yet and some kinks still have to be worked out, items such as these noted above have to put a smile on investors faces. This is really good stuff and it looks to me like we're starting to get some traction on the upside in the broader markets.
Ours was the first market to suffer. So, in my opinion, it likely will be the first to recover and benefit those worthies who have the faith and fortitude to step up.
Don't be left in the woulda, coulda, shoulda group...
Star number 1
As with most things that are negatively anticipated - and even though the exalted network talking heads were there - Gustav didn't really amount to a whole lot and only dumped a bunch of rain and blew down a few things. That not being a problem is good - but not worthy of the star.
The star is the fact that oil is at a five-month low and gasoline prices are down 13% from their respective highs hit in July. Even better, the Coastal Guardians report that there doesn't appear to be any structural damage on the offshore rigs nor any oil spills. That's all very good. No reason for the traders to inflate prices on the maybe factor.
Star number 2
Drawn down by the crashing petroleum prices, other major commodities continued their respective slides as well. Copper, gold and aluminum all moved much lower today - as did the companies which are the marketers and providers of them. These commodities had been the receptacle for all the "safe" money that ran from stocks earlier in the year. The ripple effect also caused prices of most things to rise over the past few months.
This combination contributed greatly to the over-reaction of prices on the upside as a result. However, I certainly hope no one is looking for a rebound anytime soon in these commodity prices. The trend is definitely not your friend here.
What deserves the star in this case is that the drop in these commodity prices removes a great deal of upward pressure on inflation rates - and the cost of goods in general. That should also keep the Federal Reserve from feeling that interest rates have to go higher.
Star number 3
The US dollar is at its highest level in 7 months, as compared with the other major global currencies. This then also helps move commodity prices lower and provides further positive impetus to the Fed for standing fast on interest rates.
Star number 4
For the month of August, the industry that did the best of the 10 within the Standard & Poors universe was the one called Consumer Disposables. This group consists of the retailers, car companies, lodging issues and restaurants. You know - these are the groups the media has said were dying on the vine cuz no one was spending money. I really wonder where those cats get their information because the reality is that the group was up 7% in August. That's a pretty fine number for one month.
Connecting the dots
While we don't have Jupiter aligning with Mars just yet and some kinks still have to be worked out, items such as these noted above have to put a smile on investors faces. This is really good stuff and it looks to me like we're starting to get some traction on the upside in the broader markets.
Ours was the first market to suffer. So, in my opinion, it likely will be the first to recover and benefit those worthies who have the faith and fortitude to step up.
Don't be left in the woulda, coulda, shoulda group...
Through a glass darkly
The title for this piece is one which, in doing my research, I found to my surprise was based on a Bible verse. The meaning if it is interpreted to mean that humans have an imperfect perception of reality. Boy. How appropriate for what's going on in the political arena vis a vis our economy. I, of course, have a realistic view, while those who disagree do not - I think that sums up most folks perceptions.
Well, as is my wont, I'd like to make the case for the positive side and back it up with facts, instead of the weighty negative proclamations that have been thrown about quite recklessly - especially this past week.
Let's begin at the beginning
The - presumably - well-meaning but highly inaccurate presenters at last week's party in the 1609 Meter High City portrayed us all as living in an economy that's barely teetering along. Based on their lamentations, I thought for sure we'd be seeing interviews with the 21st Century equivalent of apple sellers between the speaker's blovations.
Other than their most perverse supporters, I'm happy to report that most of us don't see the world that darkly. And it's not just my opinion. The folks at the American Enterprise Institute - together with those fun folks at Gallup - have come up with some interesting data. Apparently, the Denver party people weren't on the distribution list.
Seems the economy is actually continuing to grow and the overall unemployment rate is still lower than when the last time the party holding forth in Denver was driving our economic bus. I know. It kind of flies in the face of a news media that has been calling for a recession. Seems to me that a fair perspective would have been that - in addition to pockets of trouble - how resilient and strong our economy has been in the face of the housing challenges and much higher oil prices. But, once again, I digress.
How does the American public feel?
Here's a direct quote from an expert at the American Enterprise Institute. "Most Americans are feeling pretty good about their jobs and their personal lives". Remember Phil Gramm's impolitic - but accurate - comments about us being in a "mental recession"? Seems the Denver party people and their media buds may have a vested interest in creating such a mindset.
Here's a major point of confusion that the data revealed. The survey said that 76% of us report that we're actually optimistic about the direction of our own lives and personal economic situations. That's good. Why then are only 18% of us optimistic about the country? According to the AEI expert, "these numbers haven't changed much over time." S'pose the media might have an influence there???
What about jobs?
The Gallup folks found that job security and job satisfaction are both high in our country too. Once again, the lady from the AEI reports that, "In Gallup's August 2008 survey, 48% working Americans said they were completely satisfied and another 42% somewhat satisfied. Only 9% were dissatisfied with their jobs." In the Marine Corps, we were taught that there would always be a 10% factor. Looks like they were right.
The surveyors also found that all that hoo-hah about jobs going overseas isn't ringing true either. Only 8% of us are worried about losing our jobs to foreign countries. In my opinion, it's likely that most of those worriers are probably union types in some sort of manufacturing. Studies from the Tax Foundation support this lack of US job loss from companies moving jobs away.
What's our biggest economic worry?
Like kids say - I'll give you three guesses and the first two don't count. Gas prices.
The Gallup's reported that in July - coincident with the highest prices for oil and gasoline - 75% of us said those high gas prices were the main cause of financial hardship. That compares with a 40% number eight years ago. The Denver folks have made some comments saying. effectively, that the check for energy independence was in the mail.
Looks like another non-starter with a lot of their broader audience. It is, politely speaking, a very low probability that anything remotely approaching oil energy independence in the next 10 years will occur - especially if being done under the auspices of some governmental boondoggle. Moreover, it seems that recent polls are highly supportive of the opening of ANWR and other domestic properties that were closed by political fiat back in the 80s...moves that can help us somewhat minimize overseas energy reliance.
What do I think?
One thing about our country is that even when you're way off base - see economic conclusions and comments from Denver last week - you can still say them. So, now it's my turn to have my say.
Assuming that the markets are not allowed to be interfered with, here's what I truly believe:
The US economy and financial markets are the strongest in the world - and will continue to be so.
Our investors will recognize the outstanding values represented by the prices of excellent companies and their investment will move prices higher across the board.
The banks will become less restrictive, more realistic and move back to a more normal lending environment which will help reduce inventories and move home prices back to normal appreciation levels.
Our Federal Reserve Bank will provide the liquidity necessary to keep our financial institutions functioning well.
Negativity wears on listeners. History shows that those who promote a reasonable, justifiable and positive program will always receive more support than any negative view of the same situation.
Perceptions are reality for everyone. Use facts - not unsupported opinions - to guide your market and economic perceptions and you will be well rewarded for your faith and trust.
As the sign on Sir Winston Churchill's desk read - "Please understand there is no depression in this house and we are not interested in the possibilities of defeat. They do not exist."
What he said...
Well, as is my wont, I'd like to make the case for the positive side and back it up with facts, instead of the weighty negative proclamations that have been thrown about quite recklessly - especially this past week.
Let's begin at the beginning
The - presumably - well-meaning but highly inaccurate presenters at last week's party in the 1609 Meter High City portrayed us all as living in an economy that's barely teetering along. Based on their lamentations, I thought for sure we'd be seeing interviews with the 21st Century equivalent of apple sellers between the speaker's blovations.
Other than their most perverse supporters, I'm happy to report that most of us don't see the world that darkly. And it's not just my opinion. The folks at the American Enterprise Institute - together with those fun folks at Gallup - have come up with some interesting data. Apparently, the Denver party people weren't on the distribution list.
Seems the economy is actually continuing to grow and the overall unemployment rate is still lower than when the last time the party holding forth in Denver was driving our economic bus. I know. It kind of flies in the face of a news media that has been calling for a recession. Seems to me that a fair perspective would have been that - in addition to pockets of trouble - how resilient and strong our economy has been in the face of the housing challenges and much higher oil prices. But, once again, I digress.
How does the American public feel?
Here's a direct quote from an expert at the American Enterprise Institute. "Most Americans are feeling pretty good about their jobs and their personal lives". Remember Phil Gramm's impolitic - but accurate - comments about us being in a "mental recession"? Seems the Denver party people and their media buds may have a vested interest in creating such a mindset.
Here's a major point of confusion that the data revealed. The survey said that 76% of us report that we're actually optimistic about the direction of our own lives and personal economic situations. That's good. Why then are only 18% of us optimistic about the country? According to the AEI expert, "these numbers haven't changed much over time." S'pose the media might have an influence there???
What about jobs?
The Gallup folks found that job security and job satisfaction are both high in our country too. Once again, the lady from the AEI reports that, "In Gallup's August 2008 survey, 48% working Americans said they were completely satisfied and another 42% somewhat satisfied. Only 9% were dissatisfied with their jobs." In the Marine Corps, we were taught that there would always be a 10% factor. Looks like they were right.
The surveyors also found that all that hoo-hah about jobs going overseas isn't ringing true either. Only 8% of us are worried about losing our jobs to foreign countries. In my opinion, it's likely that most of those worriers are probably union types in some sort of manufacturing. Studies from the Tax Foundation support this lack of US job loss from companies moving jobs away.
What's our biggest economic worry?
Like kids say - I'll give you three guesses and the first two don't count. Gas prices.
The Gallup's reported that in July - coincident with the highest prices for oil and gasoline - 75% of us said those high gas prices were the main cause of financial hardship. That compares with a 40% number eight years ago. The Denver folks have made some comments saying. effectively, that the check for energy independence was in the mail.
Looks like another non-starter with a lot of their broader audience. It is, politely speaking, a very low probability that anything remotely approaching oil energy independence in the next 10 years will occur - especially if being done under the auspices of some governmental boondoggle. Moreover, it seems that recent polls are highly supportive of the opening of ANWR and other domestic properties that were closed by political fiat back in the 80s...moves that can help us somewhat minimize overseas energy reliance.
What do I think?
One thing about our country is that even when you're way off base - see economic conclusions and comments from Denver last week - you can still say them. So, now it's my turn to have my say.
Assuming that the markets are not allowed to be interfered with, here's what I truly believe:
The US economy and financial markets are the strongest in the world - and will continue to be so.
Our investors will recognize the outstanding values represented by the prices of excellent companies and their investment will move prices higher across the board.
The banks will become less restrictive, more realistic and move back to a more normal lending environment which will help reduce inventories and move home prices back to normal appreciation levels.
Our Federal Reserve Bank will provide the liquidity necessary to keep our financial institutions functioning well.
Negativity wears on listeners. History shows that those who promote a reasonable, justifiable and positive program will always receive more support than any negative view of the same situation.
Perceptions are reality for everyone. Use facts - not unsupported opinions - to guide your market and economic perceptions and you will be well rewarded for your faith and trust.
As the sign on Sir Winston Churchill's desk read - "Please understand there is no depression in this house and we are not interested in the possibilities of defeat. They do not exist."
What he said...
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