EQUITY MARKETS APPEAR to be tired of late, seemingly burdened with the worry of the world. By the numbers, for the two weeks ended Friday, June 17, 2011, the Dow Jones Industrial Average closed at 12004, down 147 points, or 1.2%. The Standard & Poor’s 500 closed at 1271, down 29 points, or 2.2%, and the NASDAQ Composite closed at 2616, down 116 points, or 4.2%.
George Soros sold $800 million of his gold holdings during the first quarter of 2011. Citigroup suffered a security breach at the hands of online hackers. Expect the security breach stories to become more common.
One more step in the move toward a nationalized economy is a Federal Reserve proposal to make annual decisions regarding whether the country’s largest banks can pay dividends or repurchase stock. The rest of the financial services industry – everything from mortgage brokers to independent advisory firms such as ours – will simply be regulated out of existence.
Steve Jobs plans to build an earthbound space ship as Apple’s new headquarters. I’ve always admired creativity and originality. Here’s hoping this investment also represents a solid return for Apple shareholders. In the meantime, Ron Johnson, head of Apple’s retail store operations, has joined JC Penney as its new CEO.
It appears that Greek debt holders are about to be stiffed. U.S. banks would take about a $41 billion hit. Some question whether this could happen in the States. Some are certain it will, with our elected federal officials apparently oblivious to the long term consequences of their actions. Others aren’t prepared to give up on the resiliency, sense of fairness, and love of freedom of the American people. Personally, I don’t expect the end of our country. It seems to me though, that the Golden Age of America is behind us. Here’s hoping I am completely wrong on that last count.
Some cities are realizing that they must get their financial lives under control. Brea and San Francisco California are both reducing pensions and benefits for their employees as a way to cut costs. Illinois is choosing to deal with massive budget deficits by increasing a wide range of personal and business taxes. Camden NJ recently laid off more than a third of its firefighters and police force, as voters refused to raise taxes.
In economic news, both the PPI and CPI showed modest signs of inflation. Residential construction grew more than expected in May, though annualized housing starts are about 600,000, compared to 2 million in 2006.
Larry Elliot, economics editor of The Guardian newspaper in the U.K., recently penned an article titled “Decline and Fall of the American Empire”. It makes for interesting reading, and can be found in the Guardian’s June 6th edition. In the article, Elliot draws parallels between America in 2011, and Rome in 200AD. Some of the warning signs he cites include military overstretch, a widening gulf between rich and poor, a hollowed-out economy, consumers using debt to live beyond their means, and more.
The news isn’t all bad. In fact, the good news is that within and in spite of what may seem like trying times, there is always opportunity. There is certainly economic and business opportunity, as one person or company’s problem is someone else’s profitable solution. Even more, there is the opportunity to show by example and counsel how to live an abundant, joyous, and peaceful life in the face of what many consider overwhelming challenges. I suspect this may be one of the greatest opportunities of all, as so many are simply looking for one person to show them how to live.
Even when we don’t understand, or have no clarity about what’s actually going on, God has not abandoned us. Neither has He forgotten us, or turned His back on us. Lean hard into Him, and trust His character. He is good for His word.
Quote of the week:
“…what does the Lord require of you? To act justly, and to love mercy, and to walk humbly with your God.”
Micah 6:8
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