« back
to News section
“It is not the return
on the money; it’s the return of the money that counts.”
- Will Rogers
The
Markets
By now, you should not be surprised.
You have received enough newsletters & phone calls from
me, over the last several stock market inflection points,
to not be surprised.
We have felt for some time that the direction
of the stock market may well be predicated by the health
of the real estate
market. US stocks tumbled in the past week over signs that
sub-prime mortgage troubles are making their way into other
areas of the Markets and the Economy.
Making matters worse,
last Friday, Bear Stearns chief financial officer, Sam Molinaro,
told analysts on a conference call
that the current bond market turmoil, “may be a
worse predicament than the 1987 stock market crash and the
bursting
of the Internet bubble in 2000,” according to a
Reuters news story. Adding more fuel to the fire the Labor
Department announced that
non-farm
payrolls grew by a less than expected 92,000 in July and
that the unemployment rate ticked up to 4.6%, according to
MarketWatch.
Ironically, corporate earnings in the second
quarter are looking good. According to Zacks Investment Research, “With
more than 70% of the earnings reports in, it looks like the
second quarter is yet another winner on the earnings front.
The median growth rate is 12.82%, which is well above the
10.0% that the market managed to pull off in the first quarter.” So
yes, earnings look solid right now but investors aren’t
paying too much attention to that. Instead, they’re
figuring that the current bond market turmoil might slow
the economy and hurt earnings down the road.
We have always
felt that one psychological warning sign of a pending market
decline can be when client phone calls
increase about wanting to move to a more aggressive investment.
It never fails!
Our client’s portfolios have been
conservatively positioned and we recently increased our
cash positions and/or purchased
a Bear fund as protection against a market decline. Over
the next couple of weeks the market actions will determine
whether
or not we will get more defensive and begin preparation for
a longer bear market.
Tomorrow the Fed meets and we’ll look to see what
their position on rates is now. It should prove to be an
interesting/volatile day for the markets. As advisors, we
must always keep the long-term picture in mind. In the meantime,
we’ll get our shopping list ready for when it is a
less risky time for stocks down the road!
| Returns through 08/03/07 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
-0.6 |
5.8 |
17.3 |
9.4 |
10.5 |
4.9 |
| Nasdaq Composite |
-2.0 |
4.0 |
20.4 |
11.3 |
16.3 |
4.8 |
| Standard & Poor's 500 |
-1.8 |
1.0 |
12.0 |
9.9 |
11.8 |
4.4 |
Source: Yahoo! Finance, Barrons
Past performance is no guarantee of future results. Indices
are unmanaged and cannot be invested into directly. Three-,
5-, and 10-year returns are annualized. Assumes dividends
are not reinvested.
Top Headlines:
- The Labor
Department reported a 92k rise
in new jobs for the month of July, below the consensus
estimate of 135k. This reduction in new hires caused the
unemployment rate to inch up to 4.6%. (8/3)
- Consumer
Confidence was reported at 112.6 this week, marking it`s highest
level since September 11, 2001.
This confidence was fueled by overall improvement in
business conditions and the job market. (7/31)
- Problems
in the sub-prime mortgage market continued this week
as Accredited
Home Lenders (LEND) reported
doubts over it`s ability to survive the recent volatility
in the market as their shares plummeted over 40%.
American
Home Mortgage (AHM) was forced to discontinue
most
of its operations. (8/2)
- The ISM
Manufacturing Index dipped
in the month of July, but still is in an expansionary
phase as orders from
overseas remain robust. (8/1)
- Core
PCE Inflation rose
by 0.1% in June for the fourth consecutive month. This
put core inflation at 1.9% for
the past year, just inside the Fed`s comfort
zone. (7/31)
 What ever happened to the Berlin
Wall? A recent article in Time Magazine answers the question. After
the German reunification in 1989, politicians wanting to
emphasize unity had the concrete knocked down and taken away.
However, with the route still marked by a double trail of
cobblestones in the ground, avid cyclist Michael Cramer,
a Berlin resident and spokesman for the Green party’s
transport committee in the European Parliament, had an idea:
create a bike path along the Wall’s former course.
Five
years later, the Berlin Wall Trail opened for riders this
spring. According to Time, the 160-km trail is punctuated
by historic information boards that mark sites such as
Checkpoint
Charlie, where the standoff between Soviet and U.S. tanks
occurred in 1961.
UPS Celebrates Its 100-Year Anniversary
It started out in 1907 as the brainchild of two teenagers
in a Seattle basement, whose fledgling messenger service
made deliveries on foot or on bicycle. As UPS Inc. celebrates
its 100-year anniversary
later this month, it now is the world's largest shipping
carrier -- a $47 billion business with a fleet of trucks,
an airline and operations
in 200 countries.
There was competition even in 1907, when 18-year-old
Claude Ryan and 19-year-old Jim Casey opened the American
Messenger Company with a $100 loan from a friend of Casey. Working
out of their basement
headquarters in Seattle, employees -- Casey's brother and
a handful of other teenagers -- ran errands and carried
notes on foot or on bicycle.
In 1913, the company acquired its first delivery car,
a Model T Ford, renamed itself Merchants Parcel Delivery
and shifted its primary
focus from messages to packages. Six years later, the
company expanded beyond Seattle and renamed itself United Parcel
Service.
 In the Tour de France, what is the position of a rider, after he passes the second placed rider? Click here for the answer.
Best Regards,
P.S. Please feel free to forward
this newsletter to family, friends, or colleagues.
|
