The show will be on vacation this week due to Musikfest – why not head down to Bethlehem and enjoy all that ” ‘fest ” has to offer?
Congratulations to our friends at 401! Creative for the amazing poster design for this year’s ‘fest! Here’s what they had to say about the project:
“Working with ArtsQuest on the Musikfest poster has been a career milestone for us as the annual poster is one of the biggest visual icons to be associated with in the Lehigh Valley. Our inspiration ranged from vintage album covers to Van Gogh paintings to modern comic books. By the time we were done six designers had their hands on the project at some point. In the end we just wanted to create a poster our kids would think is “Cool” when we take them to Musikfest years from now with our vintage mugs in hand.” – 4O1!
My “60 on 60” golf score – 306 comprised of 14 Pars, 26 Bogeys, 16 Double-bogeys, and unfortunately 4 triples. Total of 60 holes played with the first swing at 6:45AM and the last putt at 6:45PM. It was a wonderful day. I could not have asked for better weather. At the end of the day, I was tired but still in great spirits. Still on top of the world.
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Washington’s debilitating squabble over the nation’s debt ceiling may have ended, but the damage done to investor confidence helped drive stocks down more than 10% from their recent April peak, and to a conventional definition of a correction. The kicker: Late Friday Standard & Poor’s downgraded the U.S. credit rating to double-A plus from the triple-A rating it had for 70 years.
Capitol Hill and the White House had some help in undermining confidence from Europe, where bond yields in Italy and Spain climbed to decade highs as investors fled the government debt of those countries for the perceived safe harbors of gold, Swiss francs, and the Canadian and Australian dollars.
Stateside, lawmakers clinched a last-minute deal to raise our $14.3 trillion debt ceiling so Uncle Sam can keep borrowing enough to pay his bills and avoid a default. But while the $2.4 trillion in spending cuts proposed by Congress are heavily back-end-loaded—most won’t kick in until after 2017—that noisy show of government belt-tightening is unnerving a market still heavily reliant on government benevolence.
It didn’t help that economic momentum seems to be slowing. Last week’s ISM nonmanufacturing survey showed the service sector, which drives three-quarters of our economy, decelerating in July. Particularly alarming was the decline in export orders to a reading of 49 in July from 57 in June, which reinforced fears that the global economy is stalling as China tightens credit and Europe cuts spending.
Then on Friday, there was some good news. U.S. nonfarm payrolls data showed a gain of 117,000 jobs, better than expected, while the unemployment rate dipped to 9.1% last month from 9.2% in June, the Labor Department reported.
Still, the specter of slowing global growth drove investors toward Treasuries, despite the threat of a credit-rating downgrade sometime during the next few months. The yield on 10-year U.S. notes last week fell below 2.5% at one point Thursday, and is down sharply from 3.74% as recently as February. The Standard & Poor’s 500 dividend yield, at 2.13%, is the closest it’s been to the Treasury rate in quite a while.
The Dow Jones Industrial Average ended last week down almost 700 points, or 5.8%, to 11,444.61. The S&P 500 had its third loss in four weeks and fell 93 points to 1199.38. It marked the worst weekly loss in almost three years for the benchmark, which has pulled back 12% from its late-April peak. The Nasdaq Composite Index fell 8% to 2532.
At one point last week, the Dow had fallen for eight straight days before its rout was interrupted, briefly and barely, by a shallow 0.3% rebound Wednesday. Stocks are oversold and due for at least a technical bounce. But the selling momentum—last week’s trading volume was among this year’s heaviest—also means rallies might draw more sellers.
Ironically, the masses railing against government spending also can’t seem to wean themselves off it, and hopes quickly emerged that the closer the S&P 500 falls toward 1100, the more likely our central bank is to rescue the market with a third round of quantitative easing, or QE3.
Don Rissmiller, Strategas Research Partners’ chief economist, examined the four segments that could lead our flailing economic cycle. Households propelled our economy for decades, but without appreciating real estate or easy credit their swagger is now limited. “Businesses can certainly drive the business cycle, but it seems hard to ask a profit-maximizing corporation to leverage up just as the cycle is slowing down,” he writes. Foreign demand might goose U.S. growth, but exports alone can’t carry us unless the U.S. dollar falls significantly lower. That leaves the government, which he thinks can make “the biggest difference.”
Last week, Strategas raised the odds of a recession in 2012 to 35% from 20%, and in 2013 to 60% from 50%. Rissmiller argues we need “pro-growth fiscal policy,” and “not just the removal of anti-growth issues” like the debt ceiling. Forceful government support dragged our economy out of recession in 2009, but growth slowed to 1.3% last quarter, jobs are still scarce, and the government is running out of tricks. And as the debt-ceiling fiasco reminded us, relying on our government can be an uncomfortable proposition (Source: Barrons Online).
Last week, US Stocks and Foreign Stocks decreased. Bonds increased. During the last 12 months, BONDS outperformed STOCKS (this is a change and the first such change in over one year).
Returns through 8-5-2011
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
.7
5.1
5.1
7.4
6.6
5.7
US Stocks-Standard & Poor’s 500
-7.5
-7.3
2.1
-5.6
-4.5
0.0
Foreign Stocks- MS EAFE Developed Countries
-9.9
-8.8
-.3
– 6.8
-4.0
1.9
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 excluding dividends.
President Obama signs the Budget Control Act of 2011 in the Oval Office of the White House. (Pete Souza/White House via Bloomberg / August 1, 2011)
So, we finally have a deal on the U.S. DEBT CEILING and it was passed by the House of Representatives last night and is probably destined to become law. But, was all the fighting over how to cut spending really worth it? MAYBE – only if this is the first step on a long road back to fiscal sustainability. And the special commission is the next step. I intend to closely monitor its recommendations and Congress’ reaction so as to determine whether we continue to move down the road.
The decisions yet to be made on spending cuts and new/higher taxes are difficult. Some decisions will have a negative impact on the U.S. economy. I continue to analyze the details of the Bill in order to determine the extent of this negative impact. I intend to report in the next two Weekly Commentary on the results.
The show is hosted by Valley National’s Laurie Siebert CPA, CFP®. This week, Laurie and her guest, Kim Wisser, Regional Director for Education and Community Relations for Money Management International will discuss:
“Money Management and debt management – tips that can help.”
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.
Several months ago I let you know that I intended to play 60 holes of golf in one day – my 60th birthday. Well, Friday August 5th is the day (although August 7th is actually my birthday). My club is comprised of 60 holes (three 18-hole courses and a 6-hole practice course). I intend to start play at 6:45AM Friday and play somewhat continuously for about 12 hours or so. I think I can make it around because I will use a golf cart and I will not use any practice swings. I may be stiff and sore on the weekend – I will let you know how it works out.
Last week, negative developments far outpaced those considered to be positive. As a result, stocks declined in value.
Here is a succinct summation of last week’s events:
Positives:
1) Thru all the political noise, yields with maturities ranging from 2′s to 30′s are all lower 2) June Pending Home Sales unexpectedly rise 2.4% 3) Initial Jobless Claims fall a touch below 400k for 1st time in 16 weeks 4) Conference Board consumer confidence up a touch but period ended 2 weeks ago before political noise got really loud 5) India steps up fight against inflation with 50 bps rate hike
Negatives:
1) DC politicians get us into this mess and have little courage to get us out 2) Overnight LIBOR, repo and t-bill yields all spike 3) Q2 GDP disappoints with only 1.3% growth off a lower than expected base from Q1, revised to just .4% gain 4) Chicago PMI falls a touch, follows weak NY, Philly, Dallas and Richmond mfr’g surveys 5) Final UoM confirms preliminary report that has confidence at lowest since March ’09 6) MBA said purchase apps fall to lowest since Feb 7) S&P/Case-Shiller home price index remains near multi yr low 8) Durable goods orders disappoint-non defense cap goods ex aircraft falling .4% 9) India hikes rates more than expected, are they killing growth?
