Sometimes, I feel as if we are watching a re-run of “Groundhog Day,” as there are many similarities from 2010 to this point in 2011. Two examples are a relatively strong first quarter in each year followed by some unrest in Greece and Europe because of their unsettled economic situation.Year to date, through June 28, 2011, the Dow is up 5.54%, and the S&P is up 3.49%. (Source: CNN Money) While Greece itself has relatively little economic impact on the rest of the world, it is symbolic that their government has recently passed an austerity plan and given the banks an extra year or so to try and work out some of their difficulties. Greece seems to be a microcosm for the rest of the world in attempting, once and for all to eliminate a “kick the can” philosophy and make some difficult economic choices. No matter your politics or beliefs, it is somewhat encouraging that the state of New Jersey had bipartisan support for the recent bill which increased both health insurance and pension contributions for state employees. That sense of cooperation and problem solving has not made its way from Trenton to Washington as both parties continue to act like a group of middle school girls engaging in a rather high stakes cat fight. Yes, it is deplorable. Are there any leaders out there? There will be much talk between now and August 2, about the raising of the debt ceiling. Don’t think for one instant that the ceiling will NOT be raised. Why aren’t they doing it now? For the same reason there wasn’t a settlement of the NFL labor issue in May…because they didn’t have to. I will wager anyone a bottle of Oban 18 yr that the NFL will not miss a game, and the debt ceiling will be raised timely so the United States may meet their obligations.
In addition to the mixed political news, economic news was also mixed. There has been inconsistent jobs growth as well as mixed news about a housing recovery. In any economic recovery, it is unrealistic to think that growth will occur in a straight line, because it will not. Many economists have referred to this as a soft patch, and whereas, last year at this time there was talk of a double dip, that particular type of rhetoric has cooled. Prominent analyst Abby Joseph Cohen of Goldman Sachs remains mildly optimistic for the balance of 2011. When thinking in terms of the directions of the markets, etc, I always refer back to Warren Buffet’s favorite quotation…When other people become greedy, I become fearful, and when other people become fearful, I become greedy. So much of investing is psychologically driven. Do not become a prisoner to the media to help make your decisions. Decisions should be pragmatic, not emotional. Just as an aside, if you have access to HBO, please make the movie “Too Big to Fail” appointment viewing. It describes the financial crisis of 2008 in remarkable detail and the character impersonations are first rate.
This material contains forward-looking statements including, but not limited to, predictions or indications of future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties