A&I Financial Services Periscope

A & I Financial Services LLC Newsletter

For the Week of
July 28, 2011
 
Greetings!   
 
Every now and then, we need to get a different perspective. This week's Periscope comes from the manager of one of the largest fund companies in the world, Black Rock.
A Money Manager's Point of View

 

From Bob Doll of Black Rock:

 

Despite the current slowdown in growth, we believe there are reasons to be optimistic and do not believe another recession is in the cards. In particular, we can identify six reasons to be optimistic about the future path of the economy and believe that economic growth will accelerate during the second half of 2011: (1)
 

1. Gasoline prices have fallen noticeably in recent weeks (declining 30 cents from early May). This is particularly significant since gas prices typically rise during this time of year. Higher gas prices were one of the most-cited factors by households in recent months as a cause for economic distress, so any decline should not be overlooked as a source of optimism. 

 

2. The disruption from the earthquake in Japan is now fading. The interruption in supply chains caused a significant downturn in US automobile production in the second quarter, but that downturn appears to be over. 

 

3. Consumer deleveraging is slowing. Household debt levels are falling, bank lending is accelerating and credit standards are easing, all of which suggest that consumer spending is poised to pick up.  The soft patch in economic data is real and the pace of economic acceleration has slowed to less than it was last year.  

 

4. We believe there is significant pent-up demand in the economy. Outside of inventories, the other four cyclical components of the US economy (consumer durables, business equipment and software, commercial real estate and residential housing) remain well below their pre-recession highs and have room to climb. 
 

5. We do not believe the fiscal problems affecting the country will act as a significant drag. Some spending cuts are likely to be implemented as Washington wrangles over the debt ceiling issue and broader deficit problems, but cuts will be spread out over a period of 10 years, which should lessen the impact. 


6. Perhaps most importantly, the labor market is slowly recovering.

Economic Briefs

 

CRUNCH TIME ON CAPITOL HILL
After the defeat of the "Cut, Cap and Balance" bill in the Senate Friday, President Obama and House Speaker John Boehner (R-OH) were left to work on a deficit reduction plan with a projected $3 trillion cut in federal spending. Discussions stalled Friday, and Congress was not in session over the weekend. While Obama seeks tax increases as part of any accord, Congressional sources told Reuters that they may be tossed out of the deal. Any new bill will likely have to pass this week in the House in order to exit the Senate before the Treasury Department's August 2 deadline. Overseas, the European Union approved a $157 billion bailout package for Greece that could also bring significant debt relief to Portugal and Ireland.(2,3,4)

LESS HOMEBUYING, MORE HOMEBUILDING
Existing home sales declined by 0.8% in June, according to the National Association of Realtors. They were down 8.8% from a year ago, when the federal homebuyer tax credit was poised to expire. In better news, U.S. housing starts were up 14.6% for June and up 16.7% year-over-year.(5,6)
 
GOLD TOPS $1,600, OIL SETTLES NEAR $100
Gold gained $11.50 last week and settled at $1,601.30 per ounce Friday. Oil futures ended the week at $99.87 on the NYMEX, logging a 2.33% weekly advance.(7)
 
STOCKS ADVANCE 2.2% IN 5 DAYS
Progress in European debt talks and solid earnings sent U.S. benchmarks higher last week. Across July 18-22, the S&P 500 gained 2.19%, the NASDAQ 2.47% and the DJIA 1.61%. Friday, the major indices finished as follows: DJIA, 12,681.16; S&P 500, 1,345.01; NASDAQ, 2,858.83. Something notable occurred at One Liberty Plaza: the NASDAQ-100 hit its highest level since February 2001 on Friday. (7,8)
Market Summary

% Change

Y-T-D

1Yr Chg

5-Year Avg

DJIA

+9.53

+22.85

+3.34

NASDAQ

+7.76

+27.29

+8.30

S&P 500

+6.95

+22.98

+1.69

(Source: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 7/22/11).  Past performance is no guarantee of future results.  Indices are unmanaged, and investors cannot invest in them directly.
Create a beautiful week!

Karl Frank, MBA, MSF
Certified Financial Planner (R)
A & I Financial Services LLC
303.690.5070
 
Citations:   
(1) - Blackrock - An Investment Perspective: Summer Update, What's Ahead in 2011 by Bob Doll
(2) - latimes.com/news/politics/la-pn-senate-debt-vote-20110722,0,581804.story?track=rss [7/22/11] 
(3) - cnbc.com/id/43854298/ [7/22/11]
(4) - nytimes.com/2011/07/22/business/global/European-Union-Summit-Meeting-on-Greek-Debt.html [7/22/11]
(5) - realtor.org/press_room/news_releases/2011/07/existing_slip [7/20/11]
(6) - moneywatch.bnet.com/economic-news/blog/financial-decoder/housing-starts-rise-mortgage-rates-drop/4650/ [7/19/11]
(7) - blogs.wsj.com/marketbeat [7/22/11]
(8) - cnbc.com/id/43859347 [7/22/11]
 
This material has been prepared and is distributed solely for information purposes only. It is not a solicitation or an offer buy any securities or instrument or to participate in any trading strategy. There is no assurance that a particular trading strategy will achieve investment success.
 
Securities offered through Geneos Wealth Management, Inc., member FINRA/SIPC.  Investment advisory services offered through A & I Financial Services LLC, registered investment advisor.



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"A happy person is not a person in a certain set of circumstances, but rather a person with a certain set of attitudes."

Hugh Downs

Watch Karl Frank's interview on MoneyLine9 9NEWS on May 9, 2011

Click Here

 

 

Watch Karl Frank on Channel 9 News & Read his article "Where to Invest in Times of Turmoil"

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Read about us in the Denver Post

Karl Frank & Cameron Morgan were featured in the Denver Post.  They talked about how to have a happy holiday while sticking to a budget. 

 

Click here to read the article.  

Riddle of the Week

Two trains are crossing America from coast to coast, traveling over 3,000 miles of track. The Gentle Zephyr is going west at 70mph; the Western Wind is headed east at 80mph. So which train will be closer to the east coast when they roll by each other in Kansas? 

  

Last week's riddle: 

 

 Name two words in the English language that have the letter I twice in the middle of the word. 

 Last week's answer: 

 

  Skiing, taxiing.