Photo Credit:  Chris Ratcliffe (Bloomberg)/Peter Foley (Bloomberg)

I think T-R-O-U-B-L-E is still brewing in Greece.  Greek Prime Minister George Papandreou raised the possibility of taking legal action against US banks, which he said bear “great responsibility” for Greece’s debt crisis.  The Greek parliament is currently looking into deals Greek authorities carried out in 2000 with help from Goldman Sachs that allowed them to mask the extent of Greece’s debts through the use of complex financial instruments. In my opinion, the risk that Greece will repudiate (a type of default) a portion of their debts is still very high. 

“One of the few things that can’t be recycled is wasted time.”
           –Sean Covey

1. One in four households with cell phone, no land line – One in 4 households has a cell phone but no traditional landlines, up 2 percentage points from the first half of the year, according to data reported by the federal Centers for Disease Control and Prevention. More than a third of people under age 35, including about half of those age 25 to 29, have only cell phones. Source: SFGate

2. Maiden Voyage For the First True Space Sail-  Japan’s aerospace exploration agency (JAXA) plans to launch the first spacecraft fully propelled by sunlight on May 18, piggybacking on Japan’s Venus Climate Orbiter.  Source: NewScientist

Photo:  The Harrisburg Incinerator at South 19th Street (which the production of incurred much of Harrisburg’s debt) Photo by PAUL CHAPLIN, The Patriot-News.

About 6 months ago, we warned you in The Weekly Commentary that Pennsylvania was heading for trouble with the current year’s budget and the budget shortfall might be so large as to result in a credit rating downgrade. Now, the Wall Street Journal has reported that this budget deficit forecast is becoming fact. The budget deficit widened significantly, from $720 million at the end of March to more than $1 billion on May 3, when the Pennsylvania Revenue Department disclosed that April income-tax collections were well below forecasts. Gov. Ed Rendell has proposed increasing taxes, cutting spending and shifting state funds to balance the budget. However, many reserves have already been consumed There is not much to fall back on. A credit downgrade is becoming more likely. Investors should avoid many Pennsylvania municipal bonds especially those with a maturity of more than 4 years.

Pennsylvania is only one example of the growing budget problem at the state level. Other examples are California (of course), Illinois, Florida, Nevada, Arkansas, Kansas, and Idaho – several additional states are suspected of having problems but have not yet released tax revenue data. The end result is that municipal bond investors can no longer sit back and simply collect their municipal bond interest. Municipal bond investors must now keep a very close eye on the fiscal distress signals of each of their issuers or sell their municipal bond holdings and wait on the sidelines until the uncertainty is reduced.

U.S. Stocks and Foreign stocks and Bonds all rose this week.  During the last 12 months, STOCKS have substantially outperformed bonds.

Source: Morningstar Workstation. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  Three, five and ten year returns are annualized.  Assumes dividends are not reinvested.

“Your Financial Choices” airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®.  This week, Host Laurie Siebert, CPA, CFP® will be joined by guest, Bob Bleiler of Bleiler Insurance Agency to discuss what you need to know about property and casualty insurance.

Laurie will take your calls on this subject and other financial planning topics at 610-758-8810. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org. 

Imagine taking 4 plane flights over 3 days and arriving ON TIME 4 out of 4 times.  It happened for me last week on Air Tran, not exactly the buzz word for world famous airlines – but reliable nevertheless.  I travelled to an investment conference in Naples, Florida.  No golf clubs – it was work, really! 

Photo courtesy of Reuters

Something happened Thursday to make the stock market suffer its sharpest drop in its history before rebounding like a rubber ball at the end of the day.  And, no one has told us what caused these phenomena.  Afterward, the stock market exchanges arbitrarily cancelled only those stock transactions where the stock price dropped more than 60%.  Sadly, if you are one of the unfortunate investors who just happened to place a sell trade seconds before the big plunge you could have received only 59% (or less) of what you thought you would receive and you would have to live with it!  The Stock Exchanges said there is no appeal of their arbitrary decision.

Why 60%.  Why not 50%?  Or, 70%?  Or, 10%?  Or, why not cancel ALL of the trades during the 40 minute interval that caused the problem?  The arbitrary decision is just not right.  Many innocent investors were hurt.  And, there is no recourse.

Full disclosure is needed to explain what happened and exactly what will be done to prevent its re-occurrence.  I will keep you posted.

The American economy is expanding at a healthy rate and more workers are employed.  But, the Markets are not paying attention.  Instead, they are focusing on:

1. Will Greece agree to reform its finances?

6. Will criminal charges be levied against Goldman Sachs?

In other words, the Market’s plate was so full last week that the market could not concentrate on the good news in the U.S. economy.              

“Nothing great was ever achieved without enthusiasm.”

–Ralph Waldo Emerson