Eyes on Europe and the Fed

No BS Weekly Update - September 19, 2011
Eyes on Europe and the Fed

In This Issue

Performance

Headlines

Recipe

Golf Tip

Dear ,

For any of you who joined us this summer for our Investing in Times of Global Uncertainty presentation, you may remember us talking about this slide.

European Debt Exposure

This graph was in a lot of articles purporting to show why there wasn't much danger of the European Debt Crisis spilling over and affecting the US. At the time we shared with you why we thought that analysis was wrong.

Is It Time To Worry Now?

When I saw the headline below on Friday I had to read further. I thought to myself, what the heck are we doing bailing out Europe when we can't even afford to bail ourselves out, especially if we have so little exposure as they were claiming in the chart above?

US taxpayers could be on hook for Europe bailout

Here is the paragraph that prompts my question: Should we worry now?

"The latest round of American financial assistance came Thursday with a promise by the Federal Reserve to swap as many dollars for euros as European bankers need. In the short run, those transactions won't have much impact because the central banks are simply swapping currencies of equal value..."

In the short run! What about the long run? What is the outlook for the Euro? Here are several stories that I have seen about the outlook for the Euro over the last several months:

The European Disunion - will the euro survive?

"As the currency crashes and the Continent is swept by protests, even key members such as Germany and France are starting to think the unthinkable about the euro."

Gordon Brown fears euro crisis worse than Lehman as 1930s beckon

For those that don't recall, Gordon Brown is the former Prime Minister of Great Britain.

Does the Euro Have a Future? By George Soros

This is from an Op Ed by George Soros who many consider to be one of the best currency traders of all time.

So here is something to think about. If we had so little exposure to this problem in Europe, why are we taking on so much more exposure? Could it be that the exposure is much greater than the government has led us to believe? After all, does it make sense to trade unlimited Dollars for Euros when there are many analysts that question whether the Euro can even survive? What will those Euros that the US government holds be worth if the Euro collapses? And most importantly, how does this strengthen the United States Economy?

Folks, as we've talked about many times, crisis creates opportunity. Would you like an idea of how to possibly benefit from the debt crisis in Europe? If so, please give us a call!

ECONOMIC CALENDAR:
Monday - Housing Market Index
Tuesday - Housing Starts, FOMC Meeting Announcement Wednesday - Existing Home Sales, EIA Petroleum Status Report
Thursday - Jobless Claims

Performance

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. N/A means not available.

Headlines

President Barack Obama said on Saturday that Americans need to be ready to "pay their fair share" to narrow the deficit, previewing his proposals to Congress that are expected to include more taxes on the rich. On Monday, the President will call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers, according to administration officials.[4]

Wall Street was cordoned off for a second consecutive day Sunday as about 300 to 400 people remained near Chase Manhattan Plaza for a protest dubbed "Occupy Wall Street." A smaller group, followed by a column of police motorcycles, marched uptown on Broadway as people beat drums, strummed guitars, and held up signs reading "end corporate welfare" and "we are too big to fail."[5]

With Europe's credit and banking crisis seeming to get worse by the day, there are now several reports that Brazil - as well as Russia, India, and China - may look to buy up a portion of sovereign debt from troubled European nations. The creation of a so-called euro bond, which would act as a common debt instrument much like the euro now acts as a unified currency, has been mentioned by many economists and financial experts as a possible way to help end the crisis.[6]

"Some people will do anything for money - even work." -P.K. Shaw

Frozen Crème Brulee

From: Vegetarian Times

These simple crèmes are made of vanilla ice cream topped with a brulee of soft caramel.

Ingredients:

2 cups vanilla ice cream, slightly softened

2/3 cup granulated sugar

1/4 cup evaporated milk

Fresh berries or mint sprigs for garnish, if desired

Directions:

1) Spread 1/2 cup ice cream into 4 oval crème brulee ramekins. Freeze until firm.

2) Meanwhile, combine sugar and 1/3 cup water in saucepan, and bring to a boil over medium-high heat, stirring to make sure sugar dissolves. Using pastry brush dipped in water, wipe down inner sides of saucepan to dissolve any sugar crystals that cling. Cook mixture about 10 minutes, or until it begins to caramelize (swirl pot to brown evenly). Cook 1 to 2 minutes more or until caramel is medium-brown. Remove from heat, and stir in 2 tablespoons water. Let cool 3 minutes, stirring occasionally. Stir in evaporated milk. Cool completely.

3) Spread thin layer of cooled caramel over ice cream in ramekins. Return to freezer until ready to serve. Garnish with fresh berries or mint sprig, if desired.

Short Game Swing

It is better to think long, slow, and smooth for the short game. Precision is important around the green, so there isn't much margin for error. It's vital that you maintain a steady, smooth rhythm and tempo for every short shot you hit. Forcing yourself to make a short swing because you have to move the ball a short distance throws off your timing.

Instead, try counting through each short shot you hit: "One, two, three." Count "one" as you start the club away from the ball, "two" when you reach the top of the swing, and "three" as you swing through. From 40-yard pitch shots to delicate chips off the apron, maintain this same count. If you do, you'll find it much easier to make consistent contact.

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Securities offered through Foothill Securities, Inc. Member FINRA/SIPC.
Reames Financial is not an affiliate of Foothill Securities, Inc.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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 Reames Financial and not necessarily those of Foothill Securities, Inc., and should not be construed as investment advice. Neither Phil Reames, Reames Financial, nor Foothill Securities, Inc. 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.

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[1 ]http://money.cnn.com/2011/09/18/markets/stocks_lookahead/index.htm

[2] http://www.marketwatch.com/story/us-stock-indexes-rise-for-fifth-day-2011-09-16?dist=markets

[3] http://pragcap.com/operation-twist-qe3-style

[4] http://www.msnbc.msn.com/id/44563075/ns/politics-the_new_york_times/t/obama-tax-plan-demand-more-millionaires

[5] http://www.bloomberg.com/news/2011-09-18/wall-street-occupied-by-a-few-hundred-people-as-protesters-ranks-dwindle.html

[6] http://money.cnn.com/2011/09/14/markets/thebuzz/index.htm?iid=SF_E_River

Phil Reames

Reames Financial

1856 Skyler Dr.

Kalamazoo, MI 49008

269-349-3966

preames@reamesfinancial.com

http://www.reamesfinancial.com