Greetings!
Miners kept a canary in their coal mine to keep them safe. When they heard the whistle and song, they knew they had enough air to breathe. When the bird died, they were next.
Cyprus is the canary in Europe's coal mine. The rest of Europe has every right to fear that any state, who cannot control their own currency, could be tempted to steal it from their depositors. Not so in the USA. Our fears are misplaced. In fact, the threats we face are omnipresent and ignored.
Cyprus is a city in California. Like canaries in a coal mine, California's municipalities struggle for breath.
Sacramento has a debt greater than $2 billion and an annual tax revenue of approximately $300 million. They are one of many cities across our country who have accumulated more debt than they can realistically pay. Many states are in similar straights. Without the ability to control their own currency, they are forced to balance their budgets. Many states have saved only 5% of the money they need to pay the pensions of their retiring state employees.
Our 50 states are, like European Union countries, dependent upon the kindness of strangers to pay their bills. They have no military to back their taxing authority and no currency creation powers. Instead, their bailout is the Federal Government. And so, they are the surprise that is right in front of our eyes, the one we've known about and ignored, and a crisis awaiting a trigger.
On a good note, the answer (of course) is likely to be, as it always has been, a Federal bail-out.
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Weekly Economic Update |
HOUSEHOLDS BOUGHT LESS LAST MONTH Retail sales were down 0.4% in March, according to the Commerce Department. This unanticipated dip was the deepest retreat in nine months. Even with volatile car and truck sales factored out, the March decline remained 0.4%. (1) CONSUMER SENTIMENT SLIPS The University of Michigan's overall index of consumer sentiment came in at 72.3 in its preliminary April reading - down significantly from the final March mark of 78.6. Last month's imposed federal budget cuts may have had an effect. (1) PRODUCER PRICE INDEX DOWN 0.6% Cheap gasoline was the big factor. Economists polled by Reuters had forecast a 0.2% retreat in the PPI for March, but the decline in pump prices made more of an impact. Core PPI (with food and energy costs subtracted) rose 0.2% last month. (1,2) GOLD ENTERS A BEAR MARKET Friday, the precious metal settled at $1,501.40 on the COMEX after a 4.1% one-day plunge. Futures fell 4.7% across last week. The April 12 settlement price was 20.5% below the record close of $1,888.70 notched on August 22, 2011. (3) STOCKS CLIMB 2% IN A WEEK Unfazed by soft economic indicators, Wall Street was in a buying mood last week. After a 2.29% gain in five days left the S&P 500 at 1,588.85 at Friday's close, investors wondered if the index would top 1,600 soon. The Dow (+2.06% to 14,865.06), NASDAQ (+2.84% to 3,294.95) and Russell 2000 (+2.12% to 942.85) all advanced impressively on the week.(2)
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Market Summary |
% Change |
Y-T-D |
1Yr Chg |
5-Year Avg |
DJIA |
+13.44 |
+14.46 |
+4.12 |
NASDAQ |
+9.12 |
+7.83 |
+8.77 |
S&P 500 |
+11.41 |
+14.51 |
+3.84 |
(Source: cnbc.com, usatoday.com, treasury.gov, treasurydirect.gov -04/12/13). 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 - www.nasdaq.com/article/us-stocks-slip-with-weak-consumer-sentiment-retail-data-20130412-00393#.UWhv1cpXqXk [4/12/13] 2 - www.cnbc.com/id/100637362 [4/12/13] 3 - www.marketwatch.com/story/gold-prices-slip-with-weekly-
declines-in-sight-2013-04-12 [4/12/13]
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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Words for Thought |
"Find somebody else to run your business on a day-to-day basis." Richard Branson
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Riddle of the Week
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You have 31 baseballs in a box. You have 31 kids lined up to get them. You give each kid a baseball, but at the end, one baseball remains in the box. How is this possible?
Last week's riddle:
They have not flesh, nor feathers, nor scales, nor bone. Yet they have fingers and thumbs of their own. What are they?
Last week's answer:
Gloves |
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