Thursday, October 15, 2009

Who are you?

POSITIVE EARNINGS SURPRISES lifted the equity markets last week. By the numbers, for the week ended Friday, October 9, 2009, the Dow Jones Industrial Average closed at 9865, up 377 points, or 4%. The Standard & Poor’s 500 closed at 1071, up 46 points, or 4.5%, and the NASDAQ Composite closed at 2139, up 91 points, or 4.5%.

U.S. President Barack Obama won the Nobel Peace Prize for his extraordinary efforts to strengthen global diplomacy, according to the announcement from the Norwegian Nobel Committee.

Alcoa kicked off earnings season by reporting a surprise third quarter profit of $77 million, on revenue of $4.6 billion. Gold, which has run to about $1050 an ounce, will be at $2000 an ounce within a decade, according to commodities bull Jim Rogers. Grupo Santander raised $8 billion by selling a 16% stake in Banco Santander Brasil.

Analysts expected retailers to report September sales declines of 2%, instead of the 0.1% increase actually reported. 24 France Telecom staffers have put their own lights out in the last eighteen months. The head of the company’s French operations, Louis-Pierre Wenes, has resigned.

Looking at the overall economy, the U.S. trade deficit fell in August to $30.7 billion from July’s $32 billion. The Institute of Supply Management reported that its index of nonmanufacturing activity rose to 50.9 in September. Readings above 50 are considered a sign of economic expansion. September was the first reading above 50 in more than a year.

According to a recent study from PriceWaterhouse Coopers, within 15 years public pension and healthcare systems will have less than half the money they need to pay mandated benefits. Makes me look with a bit more discernment at muni-bonds.

We are born alone, not known to ourselves or others, and often spend many years looking for our identity. There is only One who can reveal to us our true identity, and that is our Creator. If we reject this identity, we invest enormous sums of time, energy, and money attempting to identify, or find, ourselves. Unfortunately, too many of us, to paraphrase Mickey Gilley, look for our identity in all the wrong places.

Quotes of the week:

“If I think of human beings I’ve known and of my own life, such as it is, I can’t recall any case of pain which didn’t, on the whole, enrich life.”
                                                                                       Malcom Muggeridge

“My mother had morning sickness after I was born.”
                                                                                       Rodney Dangerfield

Wednesday, October 7, 2009

How Much is $1.6 Trillion?

ONCE AGAIN, EQUITY INDICES took the week off. By the numbers, for the week ended Friday, October 2, 2009, the Dow Jones Industrial Average closed at 9487, down 178, or 1.8%. The Standard & Poor’s 500 closed at 1025, down 19 points, or 1.8%, and the NASDAQ Composite closed at 2048, down 42 points, or 2.1%.

Opinions abound as to whether the stock market will continue its upward trek, whether there will be a small drop in prices, or whether we will have a sharp decline that will test March lows. We will know in hindsight.

Rich Karlgaard, writing recently in Forbes, had what I thought was an interesting observation. Rich suggested an S&P 500 of 1200, then ongoing volatility and market muddling for several years. He further suggested that in times of economic uncertainty, those companies with focus and adaptability will do quite well, and others will no longer be in business.

Ken Lewis will be stepping down from Bank of America by the end of the year. My guess is he is simply a fall guy for government shenanigans. Rio de Janeiro will host the 2016 Olympics, trumping Chicago and several other contenders. Job losses in September took the unemployment rate to 9.8%, a 26 year high. Angela Merkel was returned to office in Germany.

Starbucks has introduced Via, an instant coffee. We’ll see. Gannett said it expects to post earnings that are higher than analyst’s expectations, on an increase in ad revenue. I’m not sure this is an indication of recovery in the newsprint business. Xerox announced plans to buy Affiliated Computer Services for $6.4 billion in cash and stock.

More economic stats – Personal income rose 0.2% in August, and personal spending increased 1.3%. Construction spending rose 0.8%, which is annualized rate of about 10%. The federal government’s fiscal year ended last Wednesday, with what is expected to be a $1.6 trillion deficit. What happens when decent people go to Washington? Does power vaporize all intent, and life-long values? Does the need to be a part of whatever Washington represents cause them to sell out? All of us know we can’t run our homes and businesses in such a fashion. allows you free access to the annual reports of thousands of companies. The U.S. Census Bureau indicates that median family income fell in 2008 from $52,163 to $50,303. The 10% of Americans with the highest incomes earn more than $138,000 annually.

Perhaps you have heard that America spends much more on health care, as a percentage of GDP, than other developed countries. In the same breath, you may also hear that life expectancy in the U.S. lags that of most of these countries, as if we don’t get as much bang for our healthcare buck as other countries. Both pieces of information are correct, but the correlation that some attempt to make doesn’t necessarily exist. Marie-Josee Kravis of the Hudson Institute, in a recent column, offered some interesting observations.
Life expectancy calculations are influenced by many factors, including diet and lifestyle. For example, the U.S. has the highest incidence of road fatalities in the world, which impacts life expectancy calculations, but is unrelated to healthcare spending. A one-payer health system won’t stop speeding. The homicide rate is ten times in the U.S. what it is in the U.K. Universal access cards won’t replace guns. 32.2% of Americans are obese, compared to 21.7% of Aussies, 18% of Canadians, and 13.6% of Germans. One stop healthcare won’t automatically drop those pounds. Obese Americans spend 36% more for health services, and 77% more for medications, than those of normal weight.

Last year, the journal Lancet Oncology found that Americans have a higher survival rate for 13 of the 16 most common forms of cancer than other developed countries. Similar studies for other illnesses have documented the same trend. Americans who use our current health system live longer, and more of them survive, than in those developed countries that have a one-payer system.

Quote of the week:

“We have not been given a spirit of fear, but of love, and power, and a sound and disciplined mind.
St. Paul