THE MONTH OF MAY has certainly added an interesting perspective to the financial markets. Since our last report, almost two months ago now, we have witnessed all manners of news. By the numbers, for the six weeks ended Friday, May 7, 2010, the Dow Jones Industrial Average closed at 10,380, down 470 points, or 4.3%. The Standard & Poor’s 500 closed at 1110, down 56 points, or 4.8%, and the NASDAQ Composite closed at 2265, down 130 points, or 5.4%.
Some of the best minds and petroleum engineers in the country are attempting to figure out how to sop up the oil in the Gulf of Mexico. Seeing a recent video demonstration brought back memories. Farm equipment leaks oil. The easiest way to soak up the oil was just to throw some loose hay on it. The oil would stick to the hay, and we would then just burn the hay.
Seems to me that it may be time to order several ships full of hay bales to spread around the gulf. Bermuda or prairie grass would work best. Hay doesn’t sink, and is fully biodegradable. Just a thought.
Based on last Thursday’s market gyrations, it appears that some of our country’s largest financial institutions don’t quite have a handle on the operations side of their trading systems. This will simply further endear these paragons of virtue to those millions of Americans who entrust their retirement savings to these firms.
As of last week, 437 of the S&P 500 had reported first quarter earnings. 77% of those reporting beat analyst’s earnings estimates, reflecting earnings 56% ahead of the first quarter in 2009. Not only are staff cuts having the desired effect, but top lines are growing as well.
On Main Street, my friend Steve, who owns a local pizza shop, tells me that April was the first month in fifteen months that sales didn’t decline. I’ll let you know what his May looked like in a couple of weeks. Other privately held businesses are reporting solid sales gains for March and April.
It looks as if Merkel and Sarkozy were able to get their friends to agree to bail out Greece. They must, if they intend to maintain the EU. Not that a bailout addresses the issue. What must be done, around the world, and including the USofA, is for nations to spend less than they take in, and for governments to wean their constituents from the government teat. I haven’t met or heard a politician with the will to do such.
Cameron and Clegg have agreed to lead Britain, replacing Brown. What remains to be seen is whether these two will step in to articulate a meaningful future, and help make the tough decisions to move Britain toward that future, or whether Britain has chosen to saddle itself with elected officials who can see no further than the next election or board position. All countries face the same questions, and too many are answering poorly.
On the economic front, the US added 290,000 non-farm jobs in April, the biggest increase since March 2006. Hiring has risen for four straight months, reversing nearly two straight years of job losses. Unemployment remained at 9.9%, meaning more people have begun looking for work again. Construction spending rose 0.2% in April, primarily from highway and public sector spending. Productivity jumped 3.6%, while unit labor costs were down 1.6%.
We have a choice. We can engage, or we can withdraw. Whether in war, in business, or in personal relationships, we can choose to engage, often at risk of physical or emotional harm, or we can withdraw. Withdrawing may allow us to escape momentary pain, and may be our reaction in an attempt at self-preservation. What we often miss is adventure, love, victory, freedom, and the richness of life that comes with the willingness to risk. A wise man once said that in order to gain life, we must be willing to lose ourselves. Charge the hill. It is much better to risk defeat than never to have attempted victory.
Quote of the week:
“…every form of refuge has its price…”
-The Eagles, “Lyin' Eyes”