Reames Financial
 
No BS Weekly Update - October 17, 2011
Say What?
In This Issue
The Markets
Performance
Friends and Families
Headlines
Recipe

 

CNBC LogoUS to Play 'Very Major Role' In Helping Europe: Geithner

(Click on image or headline for story)


Say What?


You may remember that it was just this past summer that this chart was making the rounds.


European Debt Exposure

 
The stories that accompanied it purported to show that there was very little exposure to the US from what was going on in Europe.  You may recall that we questioned that belief at the time.


Well now we have Treasury Secretary Geithner saying that the US will play a "very major role" role in the European bailout.


A Few Questions!


-How are we (the US taxpayers) going to play a major role?


-Why are we going to play a major role?


-What is the risk to the US in playing that role/what is the risk in not playing that role?


-And finally, can we afford to play that role?


The How


Let's start with the how.  Here is the second paragraph from the article.


"With global leaders preparing for next month's Group of 20 nations (G20) summit in Cannes, France, the International Monetary Fund - of which the U.S. is the greatest contributor - is being relied on to help underwrite whatever efforts are needed to backstop toxic European sovereign debt  ."


We are the greatest contributor to the IMF.  That means that a great share of the money that the IMF uses to bail out the PIIGS comes directly from US taxpayers so that is the how.


The Why?


Why?  If there is so little risk to the US from what is going on in Europe, why are we playing a very major role?  We've got our own problems here at home to deal with.


My belief is that the reason we are doing this is that there is way more risk to the US system than they have been letting on.  I believe the feeling is that they would rather "stop it over there" before it spills over to our shores. 


What Are The Risks?


As with any strategy there are always risks so the issue becomes which risks are the more prudent or acceptable?  I just want to address here what I think are the two main risks, so this is not meant to be an all-inclusive discussion of risk. 


I think that the main risk in playing the role is that we waste resources that could better be used here at home.  As Jim Rogers pointed out in this article on September 28, 2011 (  http://www.moneynews.com/StreetTalk/Rogers-US-Threats-Europe/2011/09/28/id/412527  ), the US has states that are bigger than Greece that are in worse financial shape than Greece.  Might those resources better be used here at home.


On the other hand if we don't help and things come crashing down over there it will surely spread to this country.  I think seeing it happen on our shores will have a much more severe impact on our citizen's confidence than seeing it happen over in Europe.


Can we afford it?


Here is my biggest concern.  Can we afford it?  Why is Greece (and the rest of the PIIGS for that matter) in trouble?  They have too much debt!  Other countries were willing to loan to Greece as long as they had a reasonable expectation of getting paid back. 


Unfortunately for Greece, it has become apparent that they don't have the ability to pay the money back so other countries have stopped loaning to them.


Now here comes the US (through the IMF) saying we will help guarantee this bailout of Greece, et al.  But where does the US get the money that they give the IMF?  Is it surplus from our tax revenues?  Nope.  We borrow it!


So let's see, Greece is in this mess because they borrowed money until no one would loan to them anymore.  Now the US is going to help guarantee the bailout by borrowing (until they can't borrow anymore?).  Wow, isn't it ironic?


As I've said in the past folks, the only real difference between the situation in Greece vs. the situation here in the US is that Greece has reached the end of their credit limit, the US hasn't, YET!


Our advice going forward continues to be use caution, there is way more risk out there right now than many want to acknowledge.  If you would like some ideas on how to do that give us a call! 

 

ECONOMIC CALENDAR: 

  
Monday - Empire State Mfg Survey, Industrial Production
Tuesday - Producer Price Index, Treasury International Capital, Housing Market Index, Ben Bernanke Speaks at 1:15 PM ET
Wednesday -Consumer Price Index, Housing Starts, EIA Petroleum Status Report, Beige Book
Thursday - Jobless Claims, Existing Home Sales, Philadelphia Fed Survey, Leading Indicators


 
Performance


Chart_10_17

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.

The Friends and Families of Reames Financial
We would like to introduce a new feature that you will occasionally see in our Weekly Updates.  That new feature is The Friends and Families of Reames Financial. 
 
In this first addition I would like to recognize a couple of up and coming artists, Ron and Sue Heath.  I have known Sue since the early 80's.  Sue and her first husband, also named Ron, were business mentors of mine.  Sue's life met tragedy in the late 90's when Ron passed away from cancer. 

After mourning the loss of her first husband, Sue eventually met Ron Heath through her father.  So few people are blessed with even one great spouse in their lives and here Sue was blessed with a second great guy in her life.  In their retired life together they have been exploring their artistic passions.

I'd like to let each of them tell a bit about their art.  We'll let Sue go first.

SueWorking in pastel, mono- chromatic and colored pencil, I especially love painting and drawing portraits. Striving to capture the character and spirit of someone is truly a challenge, but one I find compelling and inspiring. For me creating an emotional connection on a two dimensional surface begins with the play of light and shadow falling on the expression of the face and position of the body. It tells a story and one that I hope to convey once the portrait is done.........(click here to read more of Sue's story)

 
Now let's hear from Ron.
Ron
My fascination with glass goes way back to when I was a young boy.  At the county fairs, I would stand and watch the glass blowers produce their small figures until my folks would drag me away.  My fascination stayed with me all through these years, hidden, until I married my wife Susan, an accomplished artist in pastels, colored pencil and acrylics.  Through her encouragement, I purchased my first kiln from my sister-in-law and began experimenting with small pieces...........(Click here to read more of Ron's story)

Ron and Sue have been enjoying growing recognition and success with their exhibits in Three Rivers and Grand Haven as well as the growing collection on their website
Here are a few examples of their work. 

 

Clam Shell Bowl Lily Pastel Woven Bowl Nightshades

 

Click on the images to see more like them. 
 
To learn more about Ron and Sue's art, please visit their website at
Headlines

Earnings season is in full swing as the week ahead includes reports from nearly half of the Dow's 30 components, including Intel, McDonald's, and General Electric, and 96 members of the S&P 500 including, Apple, Southwest Airlines, and Chipotle Mexican Grill. S&P 500 company earnings are expected to have climbed 23% in the third quarter of 2011, according to earnings tracker Thomson Reuters. Revenues of the companies in the benchmark index are expected to have risen 10%.[4]

France and Germany have less than a week of frantic negotiation ahead to resolve key differences on a "comprehensive plan" to end the Eurozone sovereign debt crisis after the world's leading finance ministers put the ball firmly in their court over the weekend. The Group of 20 richest nations told the Eurozone that by the European summit next Sunday it should: agree on the losses the private sector should take on Greek debt; arrange a credible plan for the recapitalization of Europe's banks; and install a firewall to protect other countries from Greece's woes.[5]

Throngs of Apple fans lined up in the wee hours Friday outside the company's flagship store in Manhattan to be among the first to get their hands on the new iPhone 4S. Two hours before Apple's new smartphone was slated to go on sale, hundreds of aspiring buyers filled the plaza outside the Fifth Avenue glass cube, echoing scenes that had already played out earlier in the day in Australia, Japan, Germany, France, and other Apple stores around the world.[6]



Quote of the Week
"The man is richest whose pleasures are cheapest."
- Henry David Thoreau
Recipe of the Week

Apple Totter


Recipe_10_17
From: Vegetarian Times

 

Ingredients:
6 small, crisp apples, such as Golden Delicious, Honeycrisp, Braeburn, or Newtown pippin  
1 cup sugar  
2 tablespoons unsalted butter  
1 teaspoon apple cider vinegar  
Pinch coarse salt  
3/4 cup crispy brown rice cereal

Directions:
1) Line baking sheet with wax paper. Remove stems from apples, if necessary, and push Popsicle stick or chopstick in stem end of apple.
2) Combine sugar and 1/2 cup water in saucepan. Bring to a boil. Add butter, vinegar, and salt, then simmer over medium heat 10 to 15 minutes, or until mixture reaches hard crack stage (290 degrees F) on candy thermometer. Alternatively, boil toffee until tiny amount dripped into bowl of cold water becomes firm.
3) Place brown rice cereal in bowl. Dip apples in toffee, twirling to coat bottom half. Let toffee drip off bottoms before rolling in cereal. Place on prepared baking sheet, and cool. If not eating right away, wrap in wax paper and refrigerate.
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[1]  http://www.google.com/hostednews/ap/article/ALeqM5g2jVJQwTAzQj4jEVjyUF4D-rBE2A?docId=50f584fc1fb6437e966b30df232971ea 
[2]  http://www.ibtimes.com/articles/222945/20110930/markets-rates-central-banks-stocks-politics-q4.htm?cid=2 
[3]  http://www.stocktradersalmanac.com/sta/home.do 
[4]  http://money.cnn.com/2011/10/14/markets/stocks_lookahead/index.htm?iid=HP_LN 
[5]  http://www.ft.com/intl/cms/s/0/52e9c856-f815-11e0-a419-00144feab49a.html#axzz1aynePlqB 
[6]  http://money.cnn.com/2011/10/12/technology/iphone_4s/index.htm?iid=HP_River 


 

 
Phil Reames
Reames Financial
1856 Skyler Dr.
Kalamazoo, MI 49008
269-349-3966