Rerun…
February 02 2012
Today all eyes will be on the most famous rodent in the world; Punxsutawney Phil. As legend has it, if Punxsutawney Phil comes out and sees his shadow we have six more weeks of winter; if not, it will be an early spring. In the Bill Murray classic movie, "Ground Hog Day", the main character is trapped in a continuous loop of that day. Over and over the day is replayed with consequences irrelevant because the day will simply start again on Ground Hog day the next morning. A never ending loop of replaying the same day over and over; some would say that's what Washington DC is; one day played over and over, with no real progress being made to turn the page. I think we all would agree Phil needs to step up his game, and not see a shadow bringing us an early spring. But, I think we will see our shadow and winter will resume; leaving Washington reliving the same old day, over and over again.
The economy continues to slog along; not too hot, not too cold, but certainly not good enough. In fact, the Federal Reserve has suggested that they will keep short term interest rates at near zero through 2014. If you are a senior citizen who is dependent on the earnings your savings bring, this is sour news. I don't believe in my life time we have ever seen the size of "wealth transfer" from savers and senior citizens to the federal government that we are enduring right before our eyes. It is estimated that the annual difference between a normalized level of interest rates and the near zero policy we have, is an annualized $180 billion dollars. Another way of looking at this would be that this is an implied tax charged against every saver in America. That $180 billion dollars could go a long way in stimulating our economy. But, unfortunately, it also balloons the federal deficit by as much, and Washington has not been able to slow the growth of expenditures. This leaves Fed policy continuing to enable our politician's bad behavior over and over again.
Despite that, the stock market continues to work its way higher. Corporate earnings have been good, not great; suggesting that a recession here in the US is a remote possibility even as a recession in Europe is likely. For the first time since the default rumors of Greece surfacing, it appears as though the U.S. economy has found its own footing, shrugging off the dysfunction of the Euro-zone. Will this last? I think for a while it can, but the wild card of an election year could trump everything; and this political season has a long...long...way to go.
One last thought, Facebook announced its long awaited public offering last night, and I must say, the phenomenon of social media has been spectacular. But, what Facebook seems to offer is different from the brick and mortar manufacturing complex that heretofore created our middle class. General Motors or Ford; locally Gentex or Herman Miller are all companies we can see. We understand how these companies helped to forge a nation and allowed entrepreneurs to thrive. The new internet companies are different. Will they create the new middle class we desperately need and want or something else? Perhaps, it is an open question; that, in time, we will grow to appreciate. Innovation and entrepreneurship are still alive in America; so for all of you Facebook fans, our nation's status is ....hopeful.
The views and opinions expressed are those of Kevin Clark of Raymond James & Associates, are as of this date, and are subject to change without notice. This report is for informational purposes only and is not intended as a complete description of the securities, markets or developments referred to herein. The information has been obtained from sources considered to be reliable, but accuracy is not guaranteed. Further information is available upon request. Past performance does not guarantee future results. There can be no assurance the trends mentioned will continue. Investing involves risk and you may incur a profit or loss. No investment strategy is guaranteed to be successful. Commodities are generally considered speculative because of the significant potential for investment loss. They are volatile investments and may not be suitable for every investor. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. The S&P 500 is an unmanaged index of 500 widely held stocks. It is not possible to invest directly in an index.
