Christina's Blog

I voted for class, redemption and honesty Monday night when I voted for Donald Driver in the Dancing with the Stars competition.

Like many people, I have admired Donald Driver the athlete and have followed his amazing career with the Green Bay Packers. I also have been lucky enough to get to know Donald Driver the man and have witnessed his charm, generosity and loyalty first hand.

I started watching Dancing with the Stars this season because I thought it would be fun to follow my friend. As the show progressed, though, I realized I was witnessing more than just a little Monday night entertainment. I was watching a master class in building a champion.

We viewers saw that Donald’s athletic prowess developed from God given ability and pure hard work, that his drive to excel came honestly and transcended everything he did, and that his family, with his adorable children, graceful wife, proud mother and siblings, came first.

I don’t think this competition has been easy for the man with the 1000 watt smile, but it has been worthwhile.

I look forward to next week’s finals during which I know I’ll see some fantastic dancing from three quality contestants. I wish Katherine and William well, but based on qualities I admire as well as fancy footwork, I’m voting for Donald.

Have you ever looked at U.S. debt in real time? A website called usdebtclock.org offers that opportunity and the view is sobering.

The numbers spin alarmingly as the United States continues to rack up more than 15 trillion dollars in debt. That number is staggering and the top two budget items, Medicare/Medicaid and Social Security are only going to get more expensive.

Congress needs to take specific action to address these numbers immediately. Without congressional action before December 31 the payroll-tax holiday ends, which means a tax increase for workers of as much as 2% of wages.

Additionally, income tax rates will rise across the board and domestic and defense spending will face cuts.

The problem is politics. Rather than facing the grim task of solving this problem, politicians from both parties prefer to kick the can down the road, especially in an election year.

But, this policy only works for a short period of time. Eventually, for instance, the markets will react and an economy that should be fired up to reduce the debt will falter.

The truth hurts, but I think it’s time for our policy makers to face it so we can all tighten our belts and move forward.

Much has been made of the 11th hour approval to raise the debt ceiling made by the House of Representatives late yesterday and by the Senate this morning.
Of the underlying problems that led to this point, however, we’ve heard very few genuine solutions. According to the U.S. Treasury, congress has acted 78 times since 1960 to raise, extend or alter the definition of the debt limit. And the idea of creating a statutory limit on federal debt dates all the way back to World War I with the Second Liberty Act of 1917.
Two things made this attempt to raise the debt limit particularly newsworthy: the threat to downgrade the U.S. Credit rating and the realization that we can’t continue in this direction. Currently, our debt burden stands at nearly 100 percent of gross domestic product, according to International Monetary Fund. Clearly something has to be done.
Standard and Poor’s still may downgrade the U.S. credit rating and, even though Moody’s has announced that they will not downgrade the AAA credit rating, they are issuing a negative outlook, meaning there is a risk of a downgrade in the medium term.
People are angry here and they’re even angrier abroad. Countries like Greece, Spain, Italy, Ireland and Portugal are facing negative responses to austerity programs they’ve launched and increasing hostility from their citizens.
The markets don’t like any of this uncertainty, and neither do we. We are waiting for all of the political posturing to settle down and for our government to offer us some real solutions to things like a lackluster job market, a shrinking GDP and the rising costs of Medicare.
Meanwhile, we are maintaining a cautious approach to our investments.
In a way, this crisis has been helpful because it has focused attention on the underlying problems that caused it. But that’s only half the battle. The time has come for solutions.

Despite recent gains, I am still cautious regarding overall market momentum.

Continued reports of companies launching large buyback programs to repurchase their own stock make me wonder if this might be behind some of the gains we saw during the first part of 2011.

Standard & Poor's said Wednesday that stock buybacks in the first quarter rose 63 percent to $89.8 billion.  According to the Wall Street Journal, in the past few weeks, Nike, Best Buy, Campbell Soup, Medtronic, Ameriprise, Discover, Autozone, Automatic Data Processing, Prudential Financial and PetSmart have all announced or expanded share repurchase programs.

Today also marks the final day for QE2, the federally sponsored program designed to put more money into the financial system and keep the economy growing.

I think the gains we're seeing today will be short term.

Consequently, we will continue to invest in high paying dividend stocks. I do not believe we'll see a true market upswing for some time.

 

I would like to take a moment to address the current turbulence of the global economy.
As you have probably noticed, the market has been particularly volatile and choppy over the past month. This situation is certainly stressful for those of us watching our investments, but we want to assure all of our clients that we are taking good care of their accounts.
Often, the summer months result in a slower period for the markets and sometimes a correction. Additionally, with the ending of QE2, the markets may continue to lag this summer. 
We have allocated a significant portion of many accounts to short-term bond funds/holdings. We anticipate that these holdings will keep up with interest rates and inflation.
As always we are continuously monitoring the economy and the financial markets to determine the best allocation for our clients’ accounts. We are currently and constantly rebalancing the portfolios to provide both safety and the prospect for strong returns for our clients.
Sadly, there seem to be a lot of risks to the economic recovery in addition to all of the great potential, and there is no way to know what the future may hold.

Did you know that food prices were on the rise? Wheat, rice, corn and soybeans are rising. Sugar inventories are at their lowest level in decades. We had a short term lull in food commodities because of the global economic crisis we have just seen. Watch for high prices long-term, which mean inflation for all. You might see panicked governments stockpiling. If you look carefully, the math isn’t hard to do. For instance, if you live on $2 a day in Egypt (which 40% of the population does) a 10%-20% spike in the cost of food can cause problems. This problem is worldwide. Keep in mind that soaring food prices, along with limited job opportunities can be severe threats to any economy. It is time to look at history and encourage all governments to make the needed changes.

This is not a large dividend paying stock, but it is something to consider. In research, we have found that the Chinese government reported that natural gas imports were 30% greater in the first 11 months of last year compared to the year before (2009) . So I am going to teach you about a "PUD." It stands for Proven Undeveloped Reserves. They are undrilled gas wells with zero exploration risk.Is there a North American Presence? Yes. Do some of these independent energy companies pay a decent dividend ? Yes. If there is a threat of inflation in the future, this may be an entrance at the bottom. Good drilling.

This quarter I will be looking to talk to you about dividends. We are revising our Seasons Portfolio to add this gem:

There is only one company that dominates the microprocessor industry. It sells 80 % of all microprocessors purchased in a given year. Its profit margins are consistently thick with a double-A-plus balance sheet. Many investors have avoided this stock. The price is about 70% lower than 10 years ago. It pays an annual cash dividend of $0.72 per share. It looks like a 3% yield. But it has raised its dividend every year for last seven years in a row. We intend to hold for five years. Even at a modest growth it should be a winner. Hope to tell you more about this in our newsletter.

Since the collapse of Lehman Brothers in the fall of 2008 lawmakers have come up with a new procedure for FDIC payments to some creditors. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, creditors and shareholders absorb losses when banks dismantle.  Specifically, the FDIC press release says, "In no event may taxpayer money be used to cover losses associated with the failure of a large financial firm.” There were 157 bank failures in 2010. Regulators closed banks in Colorado, New Mexico, Oklahoma and Wisconsin (Stoughton to be exact). Most bank failures are sapping billions of dollars out of the deposit insurance fund. So far this year 15 banks have closed. Keep alert.

Now for Homes: In 2010 foreclosures reached 1 million homeowners. Repossession is supposed to continue with another 1 million home being repossessed. The is a very bleak meltdown. It may be the peak. Let's hope so.

As we approach the end of the open enrollment period, I thought it would be a good idea to pass along some tips for what to consider when you make your healthcare choices. As you know, I am a big believer in annual reviews. I think it's a good idea to sit down and go over your budget, your insurance policies, your will and investments. So much can change in a year and it's a good idea to take stock o you can move forward with confidence.

Here's hoping 2011 is your best year yet! 

Interest rates are extremely low.  Inflation is lower than ever.  Unemployment is much higher than it should be.  Under normal conditions the Fed would respond to these challenges by easing monetary policy and lowering interest rates even further.  But these are not normal times and that solution has already been exhausted.  Is there another way to move to stimulate the economy?  Of course, the current idea is for the Fed to buy back lots of treasury bonds, as this lowers the interest rate and investors move to equities.  Hopefully, this will make it cheaper for corporations to make new investments and hire people.  And hopefully this will increase spending.

 There are still a number of risks in the muni bond markets, including decreased impact of tax exemptions and increased default risks.  In the last week all bond prices have taken a hit. However bonds are not the only asset class at risk.  This year over 29 banks have closed their doors and there will likely be more to come.  The Illinois’s state pension is looked at as the worst funded pension system. Watch it this year, as the pension may deteriorate more because of the bond (credit) industry. With higher unemployment there is less spending.  The weakening economy is hitting all avenues dealing with credit. 

 It is becoming increasing difficult to know who you can trust.  Even reputable companies are getting tangled up in complicated dealings that the market doesn’t fully understand.  Who is in bed with whom?  Who is working for whom?

 Last but not least, the European currency and debt market will be the number one issue.  I am not saying the US debt is not in trouble, but I am saying the bailouts for European problems are continuing to cause problems and this situation is certainly not resolved.  Greece, Portugal, Italy and Spain will continue to be problems during 2011.  For instance, Spain’s debt is being downgraded, which is further increasing costs for this already struggling country.  I would love to hear your ideas on Spain.

 Although our market looks good for the near future, we need to continue to keep an eye out for the world’s problems in this global economy.  Currently there are no investments without risks.  As an investor, you need to select all of your investment securities very carefully.

 Just about all of them.  At first the Fed program was tapped moderately, but by September 13 Wall Street firms and other organizations had used the credit facility.  Total borrowing from the facility hit $155.77 billion on Sept 29.  That day the House of Representatives failed to pass the Troubled Asset Relief Program.  That sent the Dow down 777.68 points (Congress later passed the bill)

 Just a few.....

Morgan Stanley borrowed $61 billion on Sept 26, 2008, the largest amount by any one bank. The figure combines two loans - one to Morgan Stanley and one to Morgan Stanley's London unit.

The largest single loan was $47.9 billion to Barclays Capital on Sept 18, 2008.  The day after the loan BarCap borrowed another $16 Billion.

It sure would be nice to get us all some help....so we could add to our investments.  It would be called "Stimulus for the Average Folk."

The extension of Bush’s tax program seems to be under pressure this morning; however, hurrah for Obama for taking a stand.  This program benefits all Americans.  The president agreed on the two-year extension of all current tax rates in exchange for an additional 13 months of federal unemployment insurance for the long-term jobless and cutting the payroll tax by $120 billion for a year.

Now all we need are taxes on all companies moving from the United States to “other” countries. We still need to address the lack of jobs in this country.  If it wasn’t so easy to move elsewhere we would not be in the predicament we are in today.