BDC Newsletter

August 13, 2010

Market Review

While we've recently experienced two attempts at a summer rally, these have sputtered out well below April's market highs and, given the latest data on jobs and spending, we believe equities will trend flat to down between now and mid-October, hopefully then rallying as November's election outcomes become apparent to all of us.

While stocks have experienced more downs than ups year to date, our bond holdings have done very well - providing our clients with capital gains as well as attractive dividends.  Additionally, our precious metals positions have been a clear winner for us here in 2010.  Although our gold and silver positions have corrected a bit recently, we continue to believe that gold and silver will be valued strategic holdings in our accounts for the foreseeable future.
 
While generally under-weighted to equities, we have recently taken an over-weighted position in electric and gas utilities.  The group, in our opinion, is reasonably priced and also provides attractive dividends.

Current Perspective

In September, 2008, our Government authorized $700 Billion in Bank, Auto, State and Local Government bailouts under TARP.  In January, 2009, Congress passed and the President signed a $787 Billion Stimulus Bill...Fannie Mae and Freddie Mac are a combined $450 Billion in the hole and continue to lose money...the Federal Reserve has printed over $2 Trillion in money and released it into the economy through the purchases of Treasuries and mortgages...Our economy ran a $1.4 Trillion budget deficit in fiscal year 2009...and, here in fiscal year 2010, with two months to go, we're sporting a $1.1 Trillion deficit.  All of this and Congress has the temerity to spend your tax dollars without having submitted a current budget for ratification.  Could you run your finances this way?
 
Let me ask you - Would you authorize unfunded mandates for expanded intrusion into our lives through a 2,300 page Health Care bill and fail to first address the deficits under Social Security, Medicare and Medicaid?  Social Security paid out more than it took in during 2009; more of the same is projected for 2010.
 
With unemployment hovering at 9.5%, would you go on to authorize a Financial Regulatory Reform Bill that will raise bank fees for everyone and further hamper the availability of credit for families and small businesses?
 
Beyond all of this, could you realistically expect businesses to make investments in new employees when they don't know what their taxes are going to be in the future and have no earthly idea what they're going to be paying for health insurance for their families and co-workers?
 
We have said it before: our Government stands alone in its belief that "the way out of a debt crisis is to go deeper into debt". 
 
In the words of Dr. Phil, it is time to ask ourselves: "How's that working for you?" 
 
Not very well...not well at all.
 
Sources:  The Congressional Budget Office -  www.cbo.gov
               The Bureau of Labor Statistics  - www.bls.gov

 
Looking Ahead

We appreciate the seriousness of the challenges that confront us.  While we don't predict futures, we do monitor investor demand within our tactical management discipline.  Daily, and more extensively, each Friday, we measure demand for stocks vs. bonds, for U.S. stocks vs. international stocks, for large stocks vs. small stocks, and for U.S. Treasuries vs. corporate bonds.  We measure everything against Cash and rank them in our work.  In late April of this year, these studies clearly told us to lighten up on stocks and to add to our bond holdings.  This allowed us to miss the brunt of the May 6th "flash crash", the investor malaise from the protracted effects of the Gulf Oil Spill and, with it all, a lot of stress.
 
After huge stock market corrections in 2000-2002 and 2007-2009, most investors need a portfolio manager who will also manage risk.  We would appreciate you sharing our name with anyone you know who may be looking for a competent advisor at this time.

Quote of the Month: 

"Courage is not simply one of the virtues, but the form of every virtue at the testing point".      - C.S. Lewis

Yours truly,

Gary

Gary W. Wood,  CFP®,

President, Benefit Design Corporation
Branch Manager, Raymond James Financial Services, Inc.  Member FINRA / SIPC

Securities offered through Raymond James Financial Services, Inc.
Member FINRA / SIPC

Benefit Design Corporation is independent of Raymond James Financial Services, Inc.  The information contained in this newsletter does not purport to be a complete description of the securities, markets, or developments  referred to in this material.  Any opinions are as of this date and are subject to change, and are those of Benefit Design Corporation and not necessarily those of RJFS or Raymond James.