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Monthly Archives: August 2008

Reiterating Our Views on the Economy

Last week’s batch of economic data – July producer prices, industrial production and housing starts, the August reading on the National Association of Homebuilders sentiment index and the latest weekly reading on jobless claims – did nothing to dissuade financial markets that the U.S. economy remains mired in a slow-growth environment along with uncomfortably high inflation readings. Market reaction to the data was somewhat limited, as the focus remained squarely on the outlook for the two troubled government sponsored mortgage giants, Freddie Mac and Fannie Mae, and the impact on the financial sector from a potential U.S. government takeover of those entities. 

http://www.mwboone.com/library/LPL_Weekly_Economic_Commentary_8_25_08.pdf

A New Deal for the GSE’s?

Friday’s stock market rally capped another up week for the S&P 500, with stocks now 6% above the July low. The driver of investor optimism was a sign that the lingering uncertainty surrounding troubled financial firms Lehman Brothers, Fannie Mae, and Freddie Mac was nearing a resolution. The state-owned Korean Development indicated it was reviewing options that may include buying Lehman Brothers in some form. Lehman Brothers might find the capital it may need to remain solvent, but how close are Fannie and Freddie? Last week Freddie Mac fell 52% to $2.81 and Fannie Mae dropped 37% to $5, and their preferred shares traded as low as 19 cents on the dollar.

To view the rest of this article, please click on the link below:

http://www.mwboone.com/library/LPL_Weekly_Commentary_8_25_08.pdf   

 

Overweight Recommendation to Consumer Discretionary Continues to Work

We are reiterating our overweight recommendation to this sector, as we expect investors to increasingly embrace early cyclical industries. Since our last Consumer Discretionary report on April 30, when we upgraded this sector, it has out performed the market, with the bulk of the return coming in last month. Many companies in this sector, particularly within Retail, reported better-than expected second quarter earnings. Investors reacted positively to these earnings and the positive GDP figures and have begun to rotate into this sector. Our view is that the economy will not experience a deep and prolonged downturn, but rather a shallow slowdown that will begin to recover later this year into next year.

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/articles/RagingBull_8_22_08.pdf

 

Are Accelerated Death Benefits a Good Backstop for Uninsured Health Care Costs?

At one point, the buzzword was “viatical settlements,” a practice of selling one’s active life insurance policy to a company that would pay the insured the estimated present value of the death benefit so uninsured healthcare costs and related expenses could be paid. Such settlements grew in popularity during the 1980s AIDS crisis, when insured individuals, mostly young men at the time, desperately needed funds for what was at the time an almost guaranteed death sentence. That business eventually attracted some unscrupulous dealers.

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Weekly Economic Commentary

Last week’s economic data confirmed that:

  • The U.S. export sector continued to be one of the bright spots for the U.S. economy as Q2 2008 ended.
  • The U.S. consumer endured a terrible July – despite the impact of the rebate checks.
  • Consumer price inflation in July remained uncomfortably high.
  • Jobless claims are still being distorted by the new extended benefits program.

There are only a handful of economic releases due out this week, and of those, only one or two will garner any attention from financial market participants – the July housing starts data, the August National Association of Homebuilder Index, and the July Producer Price Index data

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/articles/LPL_weekly_commentary_8_19_08

Facts are our Friends

In the financial planning and management business, it is critical that we look past the soundbites and headlines to the facts underlying a situation.   In finance, the facts are often in numerical form and every bit of true information we can gather has some value.   In this regular feature we will highlight some numbers that have a lot to say, or are at least interesting to consider.   Most will be about economics or personal finance, but some may only be there because we thought they were interesting. We hope you enjoy.

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Is McCain’s Stock Rising?

By the start of March, John McCain had clinched the Republican nomination, and since then the economy has been the number one issue for investors and voters, so maybe it is no surprise to see the relatively tight relationship between the performance of the stock market and McCain’s odds of winning the 2008 presidential election.

To see the rest of this article, please click on the link below: 

http://www.mwboone.com/library/articles/LPL_Weekly_Commentary_8_12-08.pdf

 

Weekly Economic Commentary

"Last week’s modest slate of economic data was largely overshadowed by the big gain in the US dollar, big declines in commodity prices, and the economic and interest rate outlooks provided by the Federal Reserve and the European Central banks (ECB) – even as both entities left their key policy interest rates unchanged. The data that was released last week does suggest that real GDP growth in Q3 2008 could be negative.

This week, financial markets will digest key reports on the U.S. export sector – the strongest area of the economy over the past 18 months – and on retail sales and consumer price inflation in July".

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/articles/LPL_Weekly_Economic_Commentary_8_12_08.pdf

Alternative Strategies: Outside the Style Box

Private Equity is defined broadly as private transactions in public or private companies. Typically Private Equity’s two main objectives are to provide an opportunity for high net worth clients to diversify their equity holdings and to provide returns in excess of the public markets’ returns. Private Equity funds often take an active management role within the companies where they’ve invested with the goal of creating additional value prior to selling the company. Unlike many investments, private equity investments do not offer liquidity. In fact, investors should expect their funds to be committed for ten years or more.

There are four basic categories of private equity, which are segmented largely by stage of development of the target company and focus on a particular sector or strategy.

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/articles/LPL_Outsidethestylebox_7_31_08.pdf

Fact are our Friends

In the financial planning and management business, it is critical that we look past the soundbites and headlines to the facts underlying a situation.   In finance, the facts are often in numerical form and every bit of true information we can gather has some value.   In this regular feature we will highlight some numbers that have a lot to say, or are at least interesting to consider.   Most will be about economics or personal finance, but some may only be there because we thought they were interesting. We hope you enjoy.

(more…)