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Monday, 31 July 2006 00:00 |
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The major stock market indices reversed course this week to post healthy gains. After marking a pause on Wednesday and Thursday, markets resumed their march higher Friday after the release of GDP(gross domestic product=all the goods and services produced in a year in the US) data for the second quarter. GDP growth came in at 2.5%, less than the 3.1% figure economists had expected. A quarterly measure of inflation rose to 3.3%, just under estimates of 3.4%. The news pleased bond investors as the evidence of a slowing economy means that the Federal Reserve may be done with its rate-hike campaign. Bonds and stocks score big gains on the day. However, one should note that Friday's rally occurred on the lowest volume of the week. It clearly shows that institutional investors largely remained on the sideline, even though their participation is required if the gains are to be sustained. |
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Monday, 24 July 2006 00:00 |
The stock market gyrated wildly with the conflict in Israel and the Middle East. I am still processing the news today that Condoleezza Rice met with the government of Lebanon and offered them aid in exchange for a ceasefire with certain stipulations. Despite the conflict escalating and power outages in California, a stock market rose today. Sometimes things that take place in the stock market make no sense. For example, here is the New York Times quote from July 15, 2006.
“The Company met Wall Street’s expectations of earning 47 cents a share, lifting profit by 11 percent compared with the second quarter last year, and quarterly revenue grew to $39.9 Billion, an increase of 9%” “Still, that did not appear to be enough to please investors, who pushed shares of G.E. to their lowest point in nearly two years yesterday.”
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Monday, 17 July 2006 00:00 |
WOW what a week in the world. Israel seems to be under attack by some of the Arab part of the world. Some have suggested that the attacks were motivated by Iran. But with all the activity in the Middle East, which is where much of our oil comes from, our positions in energy and energy services have done well. However the general market has gotten a spanking. From all our latest research, it appears that the institutional investors are still staying invested at this point. The Federal Reserve also appears to be increasing its flow of money supply which should help stimulate the economy once some of these fears pass.
As any longtime reader can attest, I am concerned about the U.S. economy. In our extensive research we find that there are signs of the economy slowing and what it will mean for middle America. This week I found an interesting article from the “Daily Reckoning”. Almost ¾ of our economy is run on consumer spending. When consumer spending slows, the economy will slow. See if you can find the hidden nugget as to consumer spending in the attached.
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Tuesday, 11 July 2006 00:00 |
Eleven years ago I did a presentation in Minneapolis for a major company there. My co-presenter was the chief investment officer at Norwest Bank now Wells Fargo Bank. Our presentation talked about the return to double digit inflation around the year 2012. Our reasoning was based on the fact that the Federal Reserve would be forced to raise interest rates to combat inflation created in part by the baby boomers retiring and no longer contributing to Social Security. The excessive borrowing by individuals, companies and government today will likely hasten the return to inflation and higher interest rates. The Federal Reserve is attempting to slow the economy down to avoid rapid inflation. As the economy slows
“there are a number of headwinds to the economy. Among them:
- High energy prices serve as a tax
- Central banks everywhere tightening
- A slowing housing market
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