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Weekly Market Update

Week of February 28, 2011 - SPECIAL EDITION

Oil and Gas on Higher Ground

As turmoil in the Middle East continues to roil the markets, it is no coincidence that "oil" is at the root of economic concerns.  From an investment perspective, analyzing oil's relationship to the markets is crucial, but the reality is that nearly everyone (investors and non-investors alike) are affected by oil prices.  So what exactly is affecting the rise in oil costs? And, more importantly, do oil prices have the potential to derail America's economic recovery?

After the fall of dictatorial governments in Tunisia and Egypt, unrest has spread throughout the Middle East, with Libya dominating the spotlight this week.  The International Energy Agency reported late Friday that Libya is probably producing about 850,000 barrels of oil daily, down from its normal capacity of 1.6 million barrels, which represents just under 2% of the world's oil supply.  While the sudden oil shortage hits European refiners the hardest,[1] oil fears still caused the stock market to suffer its first weekly loss in a month. For the week, the S&P 500 slid 1.7%; the Dow dropped 2.1%, and the Nasdaq fell 1.9%.[2]  Happily, fears were eased somewhat on Friday when Saudi Arabia reported it has increased its crude oil production to 9 million barrels a day to make up for supplies lost in Libya.[3]


What we're seeing right now is a tug of war between worry and economic fundamentals. While most U.S. economic data looks good, investors are focused on the potential implications of interruptions in oil production. For the moment, this issue will dominate the headlines regardless of how attractive other data looks.

02/28/2011 oil graph


*Graph courtesy of  


U.S. drivers have already been feeling the pinch at the pump, with gas prices spiking 6 cents on Friday, the biggest one-day jump in two years.  The national average price for a gallon of regular gas rose to $3.29, according to AAA, marking the fourth day in a row that prices have risen and bringing the national average to the highest level since October 2008.  In general, every $1 increase in the price of oil costs consumers $1 billion over the course of a year.[4]  Higher oil prices also weigh on the U.S. economy by increasing the costs of moving goods,[5] thus transferring  rising costs to manufacturers, wholesalers, retailers, and eventually the American public.


02/28/2011 gas graph


*Graph courtesy of  



If gas prices continue to rise as some analysts predict, how will this affect the economic recovery?  Put simply, there is no way to know for sure. Granted, when gas prices go up, Americans have less to spend on everything else.  And since consumer spending makes up over 70% of the U.S. economy[6], a drop in spending could slow the recovery down.  At the same time though, modest increases in fuel prices do not inevitably cause economic slowdowns. What they more often do is cause alarm, thus affecting consumers' perceptions about what they can afford and causing them to react by tightening their belts.


So while the natural reaction may be to retreat to conservative investments and cut-off all spending on nonessentials, it is important to avoid overreacting. The coming week promises to shed more light on the true status of our domestic economy as various data related to jobs, payrolls, and manufacturing are released.[7] 



Monday - Personal Income and Outlays, Chicago PMI, Pending Home Sales

Tuesday - Redbook, Construction Spending

Wednesday - ADP Employment Report, EIA Petroleum Status Report, Beige Book

Thursday - ECB Announcement, Jobless Claims, Productivity and Costs, ISM Non-Mfg Index        Friday - Employment Situation, Factory Orders  





02/28/2011 graph

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. NA means not available.

Quote of the Week
"The secret of happiness is freedom. The secret of freedom is courage."-- Thucydides
Recipe of the Week

Lemon Verbena Cookies

02/28/2011 recipe

From: Better Homes and Gardens
Lemon verbena adds pleasant tang to these simple sugar cookies.

Servings: 36 cookies
Prep: 20 mins
Total: 28 mins

2-1/2 cups all-purpose flour
2 tablespoons dried lemon verbena leaves, crushed
2 teaspoons baking powder
1/4 teaspoon salt
1 cup butter (no substitutes), softened
1-1/2 cups sugar
2 eggs
1 teaspoon vanilla

1.Combine flour, lemon verbena leaves, baking powder, and salt; set aside. Beat butter in a large bowl with an electric mixer on medium speed for 30 seconds. Add sugar, eggs, and vanilla. Beat until well combined. Add half of the flour mixture. Beat until combined. Stir in remaining flour mixture with a wooden spoon until combined.

2. Drop dough by rounded teaspoonfuls 2 inches apart on an ungreased cookie sheet.  Bake in a 350 degree F oven for 8 to 10 minutes or until edges are lightly browned. Remove to wire racks and cool. Makes 36.

Golf Tip of the Week

Maintain Your Balance


Maintaining your balance is important in all sports. In golf, better balance throughout your swing insures a solid shot. Here are two ways to improve your balance, which in turn will improve your ball contact and control, thus leading to lower scores.

1) Limit the amount of force you use when hitting the ball. Too many golfers think they need to use all their strength to hit the ball and this causes severe control problems. The majority of golf professionals will tell you they only use about 75% of their strength when hitting and/or swinging at the ball.

In order to practice this, simply go to the driving range and try to develop the feeling you are only hitting and/or swinging at the ball with 75% of your power by:

A. Hitting balls with a 3/4 back swing

B. Hitting balls shorter distances, say 25% shorter.

2) Wear the slickest soled regular street shoes or boots possible whenever you practice (NOT spikes or golf shoes). It's amazing how fast you learn to swing within yourself, keep in balance and maintain control when NOT doing so could cause you to lose your balance.

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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.


The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.


The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.


The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.


Google Finance is the source for any reference to the performance of an index between two specific periods.


Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.


Past performance does not guarantee future results.


You cannot invest directly in an index.


Consult your financial professional before making any investment decision.


Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.


These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.










Pat Webb
Pat Webb - Phase 2 Advisors
8100 Turman Ct
Fort Collins, CO 80525