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Monthly Archives: July 2009

Pace, Composition, and Sustainability of Recovery Will be Assessed This Week

While last week’s batch of economic data was sparse in number, the reports that were released continued to paint a picture of an economy that was on the cusp of recovery. This week’s data calendar is much more importantly, the pace, composition and sustainability of the economic recovery.

From the June index of leading indicators on Monday, July 20 to the University of Michigan’s consumer sentiment index for the second half of July on Friday, July 24, every piece of economic data released last week came in above expectations, was better than the prior month and showed that the overall economy was getting better – not just that it had stopped getting worse. That news, along with a solid week of Q2 earnings reports – and more importantly, earnings guidance – from S&P 500 companies allowed the S&P 500 companies to post a second consecutive weekly gain, leaving the index at its highest weekly close since October 3, 2008.

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Attention on the Deficit Disorder

According to recent polling data, the federal budget deficit is the top issue with voters, after the economy. The percentage of respondents voicing concern over the size of the deficit has doubled over the past three months as concerns over the economy have faded. The deficit ranks ahead of other issues such as health care, national security, and other considerations.

"Let me list some issues that have been proposed for the federal government to address. Please tell me which one of these items you think should be the top priority for the federal government". If more than one: "Well, if you had to choose just one, which do you think should be the top priority?"

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Buying the News

An old saw when it comes to investing is "buy the rumor, sell the news." Over the last month and a half we have seen just the opposite as market participants sold on the rumor of a tough second quarter earnings season and then, last week, bought on the news that it turned out to be less bad than expected.

After fears of bad news on earnings helped to push stocks down 7% from June 12 to July 8, stocks rebounded 7% last week as the S&P 500 posted the biggest weekly advance since the beginning of the rally back in March. The fuel came mainly in the form of better than expected news on earnings as companies such as Goldman Sachs Group Inc., Intel Corp., and Johnson & Johnson beat analysts’ estimates. Financial stocks soared, even as lender CIT Group appeared to be headed toward bankruptcy after failing to secure a federal guarantee for its bonds.

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Bernanke in the Hot Seat in a Cold Week for Data

Equity markets broke a four week losing streak last week, in part because the week’s economic data provided more evidence that the recession was over, or very close to being over. In fact, of the 12 key pieces of economic data released last week, 11 came in better than expected, and of those 11, six pointed to outright improvement in the economy versus the prior period. These six reports passed our "new paradigm" test for economic data: They beat expectations, were better than the prior month, and showed that the economy was improving, not just that the economy had stopped getting worse.

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Thinking About Starting a Business? In This Economy, Don’t Quit Your Day Job – Start With Good Advice First

If you’ve ever fantasized about quitting your job and starting a business, you’re certainly not alone. However, it’s definitely not something to do on a whim – you’ll need time and good advice.
A business startup requires parallel planning in advance for your business and personal finances.

That’s because business owners – even those who are acquiring ongoing businesses or starting their own companies on the cheap – quickly find their business and personal finances are inextricably linked. 

That means that before you plan the business, plan your finances first. Here are some basic steps to consider right now:

To see more of the services that MWBoone & Associates provides, please go to www.mwboone.com.


Firming Up Q2, and Second Half ’09 GDP Forecasts

After a very slow week of economic news last week, there is an enormous amount of data due out this week, which will help to firm up forecasters’ estimates of gross domestic product (GDP) growth in Q2 2009 and over the second half of 2009. The Q2 GDP report is out at the end of July.

Last week’s key economic data – jobless claims, May merchandise trade, May wholesale inventories and June service sector sentiment – suggested that real GDP in Q2 2009 was on pace to contract at about a 1.0% annualized clip in Q2, after dropping by 5.5% in Q1 2009 versus Q4 2008. Our published forecast is for real GDP to decline between 2.0 and 3.0% in Q2 2009, with real GDP growth turning positive in Q3 and Q4 2009, and we will stick by that forecast now. The consensus is looking for a 1.8% drop in real GDP in Q2, a 1.0% gain in Q3 and a 1.9% gain in Q4.

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To see more of the services that MWBoone & Associates provides, please go to www.mwboone.com.

Ways to Save Money on Health Care and Health Insurance in Troubled Times

Whether you buy your healthcare coverage through your employer or independently, you need to look at your coverage the same way cost-cutting entrepreneurs do.  Buying coverage in the future won’t stop at finding the best price – what you pay increasingly will involve how well you personally manage your health.

According to a report last year by benefits consultant Watson Wyatt, nearly half (47 percent) of the 453 large U.S. employers currently offer a consumer-directed health plan (CDHP), a high-deductible plan offered with a personal account that can be used to pay a portion of medical expenses not covered under the plan. In the world of independently purchased health insurance, it’s the same concept as the pairing of a high deductible health plan (HDHP) with a health savings account (HSA).

To see more of the services that MWBoone & Associates provides, please go to www.mwboone.com.


Earnings Season Preview

Four times a year investors focus on the most fundamental driver of investment performance: earnings. The second quarter earnings season gets underway this week. However, the companies that report early in the season are most often not the bellwethers they are commonly thought to be. We will not really know how results are shaping up until the end of the month when about half of the companies will have reported.

As companies report their second quarter results, we will be looking most closely at third quarter earnings guidance. The expectations for the third quarter matter more than results for the second quarter, since the economy showed signs of bottoming during the second quarter and investors are focused on the impact of this change in direction for profits. Second quarter GDP is likely to have been negative, reflecting shrinking economic output. However, in the third quarter GDP is likely to be positive, as the economy begins after a year of contraction.

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To see more of the services that MWBoone & Associates provides, please go to www.mwboone.com.

June Jobs Report Fails New Paradigm Test

The June employment report turned out to be a major disappointment for market participants looking for continued, straight-line improvement in the labor market. After seeing steady improvement in the labor market since early 2009, markets had come to expect that the steady improvement would continue until the economy was adding jobs by the end of 2009. The June jobs report called into question that "steady progress", as the economy shed more jobs in June (-467,000) than it did in May (-322,000), and shed more jobs than the market expected – the market was looking for a 367,000 drop in payrolls in June. The only "bright spot" in the June labor market report was the unemployment rate in June versus May was the smallest month over month rise since the unemployment rate held steady between August and September 2008. Between October 2008 and May 2009, the unemployment rate moved by an average of 0.4% per month.

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Be Careful When Rebalancing Your Kid’s 529 Plan Allocation

Market extremes tend to make uninformed people invest at extremes.  As the market has suffered over the past nine months, families putting their college savings into 529 college savings plans have watched their stock-based holdings shrink with the market and many have run for cover.

This has fueled a growing number of states with 529 college plans to offer accounts that are insured by the FDIC.  According to InvestmentNews, Arizona, Ohio, Montana, Virginia and the latest state, Utah, have adopted FDIC-insured investment options such as savings accounts and certificates of deposit.  Could your state’s plan be next?