There is an incredible amount of data coming through our system. For those of you who were paying attention 6 months ago, the fact that we have a functioning system currently is reason enough to celebrate. The market has responded and the DOW sits some 2,000 points above its lows. On October 12, 2007, the Dow was at ~14,000. March 6, 2009, it was at ~6600. We now stand around 8500.
Is it safe? The answer lies in our own translation. Economically, we are starting to show signs of life. When you have the flu, and are finally able to sip soup without getting sick, you may feel slightly better, but are you fully functional? I use the analogy because at this stage, you understand that you are on the road to recovery, but also realize that eating a ton of Mexican food is probably not the best idea. The economy is no different. Currently, we are sipping our chicken noodle and hoping for signs of further recovery. We have seen increased consumer confidence and the expected GDP for the second quarter is estimated to be “less negative” than expected. On the surface, we are seeing signs of hope as leading trends are beginning to stabilize.
Our concern lies not in the accuracy of the data, but in the incredible amount of stimulus enacted by our Government. The continued deleveraging of consumers and businesses alike, have caused a sea change in both the economy and the market. We are currently in uncharted waters and, if Geithner and Bernanke were honest, they would say that they were leery of the next 12 months as well. We do feel that inflation will become a problem. The question is when (not if) and the severity of the resulting pressure. The market made a very big assumption that the Government would provide better leadership coming out of the crisis than it did getting itself into the problem. In addition, we are assuming that the U.S. consumer can spend its way back into debt, after it has gone through the pain of its own deleveraging. This poses a problem. Unemployment needs to be reduced and housing needs to recover, so that the consumer sees a better tomorrow than today’s reality. Buying on credit is not much more than confidence in your ability to pay in the future.
We need to see more signs of recovery – increased trade, more liquid credit markets, and unemployment reduced. We need to understand if the stimulus plan(s) will work, and we need to avoid getting caught up in the emotions that our marketing masters put forth on TV every day. Staying objective, we are still cautious.
Is it safe? No it is not. Is it getting safer or more stable? Absolutely. We are staying away from the herd because we feel there is not enough justification to get aggressive. If we underperform slightly over the next two quarters, but have substantially mitigated the risk of slaughter, then we feel we are acting properly.
As always, we appreciate your business.
- Scott Airey
Marathon Man – 06/09/2009
There is an incredible amount of data coming through our system. For those of you who were paying attention 6 months ago, the fact that we have a functioning system currently is reason enough to celebrate. The market has responded and the DOW sits some 2,000 points above its lows. On October 12, 2007, the Dow was at ~14,000. March 6, 2009, it was at ~6600. We now stand around 8500.
Is it safe? The answer lies in our own translation. Economically, we are starting to show signs of life. When you have the flu, and are finally able to sip soup without getting sick, you may feel slightly better, but are you fully functional? I use the analogy because at this stage, you understand that you are on the road to recovery, but also realize that eating a ton of Mexican food is probably not the best idea. The economy is no different. Currently, we are sipping our chicken noodle and hoping for signs of further recovery. We have seen increased consumer confidence and the expected GDP for the second quarter is estimated to be “less negative” than expected. On the surface, we are seeing signs of hope as leading trends are beginning to stabilize.
Our concern lies not in the accuracy of the data, but in the incredible amount of stimulus enacted by our Government. The continued deleveraging of consumers and businesses alike, have caused a sea change in both the economy and the market. We are currently in uncharted waters and, if Geithner and Bernanke were honest, they would say that they were leery of the next 12 months as well. We do feel that inflation will become a problem. The question is when (not if) and the severity of the resulting pressure. The market made a very big assumption that the Government would provide better leadership coming out of the crisis than it did getting itself into the problem. In addition, we are assuming that the U.S. consumer can spend its way back into debt, after it has gone through the pain of its own deleveraging. This poses a problem. Unemployment needs to be reduced and housing needs to recover, so that the consumer sees a better tomorrow than today’s reality. Buying on credit is not much more than confidence in your ability to pay in the future.
We need to see more signs of recovery – increased trade, more liquid credit markets, and unemployment reduced. We need to understand if the stimulus plan(s) will work, and we need to avoid getting caught up in the emotions that our marketing masters put forth on TV every day. Staying objective, we are still cautious.
Is it safe? No it is not. Is it getting safer or more stable? Absolutely. We are staying away from the herd because we feel there is not enough justification to get aggressive. If we underperform slightly over the next two quarters, but have substantially mitigated the risk of slaughter, then we feel we are acting properly.
As always, we appreciate your business.
- Scott Airey