Greetings!

The behavior of this Market, and by that I mean the behavior of large institutional investors, is determined by the degree to which they suffered losses in the sub-prime meltdown.  Most lost 40 to 60 percent of their client's portfolios.  If the Fidelity Magellan fund had net assets worth $40 Billion in January 2008, and the fund lost 47% in this recession, the net assets would now only be worth 19 Billion.  That is a lot of paper money, and one heck of an eraser. 

Now imagine how many Mutual Funds there are, add to that the thousands of other institutional investors like Pension funds and Foundations, and then put some icing on that by including the investment losses of the 1,125 world-wide billionaires (as of 2008) and you get significant losses of paper money. 

Let me add that Forbes reports that of last years list of 1,125 Billionaires there now exist only 793.  You can read Forbes' full article at the link below, and have some fun viewing what some of these not so rich individuals are selling to raise needed cash:

http://www.forbes.com/2009/03/11/worlds-richest-people-billionaires-2009-billionaires_land.html.

This week the Federal Reserve went on the campaign trail reassuring investors that its policies are working. As a result, after two lackluster trading days on Monday and Tuesday, stocks moved higher on Wednesday after the central bank said the economy appears to be "leveling out" as opposed to simply shrinking at a slower rate. The Fed's more positive take on the economy bolstered hopes that the economy is in fact rebounding.

In other news this week, Germany and France officially became the first economies to show positive Gross Domestic Product (GDP) growth this year when reports came out showing Second Quarter growth for both of 0.3% in GDP.  This makes these 2 European Union countries the first countries to officially move out of the recession and into growth.

The central bank also made it known that it would leave interest rates unchanged.  Furthermore, if that was not enough to satiate the appetites of investors, the Fed indicated that October would be the target month for it to cease buying Treasuries.  All this positive news coming the Fed completed its two day Federal Open Market Committee meeting this week.  Investors must of liked what they heard as the tail end of the week saw share prices rising.

But some analysts are still skeptical, cautioning that the market can't maintain its recent climb even with the Fed's more optimistic words. Citing that the S&P 500 index is up 14 percent in the last month and 48.7 percent since March, these analysts remain skeptical.  Yet, the market continues upward despite other significant news this week showing increased unemployment numbers, and decreasing retail sales figures.  It is one thing to be in the market when it is going up, and quite another to be on the sidelines thinking, "it just can't continue."  Well, what if it does continue?

As we have previously reported, pent up anxiety to enter the market seems to be too strong to be pushed aside by negative economic numbers showing the consumer is not as economically viable as in the past.  Companies are still showing growth and profits and the reason may be that more and more have expanded their client base outside the US, and no longer rely heavily on domestic consumer spending for sales growth and profits. 

Here is an interesting bit of information.  Do you know which countries comprise the four largest holders of US Treasuries?  If you guessed China as #1 you would be correct.  The others in order of dollars spent are Japan, Great Britain, and you would never have guessed that the fourth is Brazil.  

I am old enough to remember the sixties when Brazil was a bankrupt country relying heavily on US foreign Aid and borrowing money from the International Monetary Fund (IMF).  To imagine that today not only does Brazil not need US foreign aid, but actually has become the fourth largest creditor to the US.  Oh My!   How the world has changed!

Have a great weekend!