I’ll be writing this summer about the US ability (and struggles) to sell bonds and finance the debt, particularly as QE2 ends and the Chinese bubble bursts (at some point in the future).
This article talks in depth about an issue we may see more of in the future–US debt being downgraded. This is from a German, not US, rating agency, but it could be just the beginning.
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This article takes a contrarian view, particularly on the debt, which I want to present to you.
He argues there are “diamonds in the rough”, which is almost always true.
I’m still quite negative on municipals in general, but it’s good to see the other point of view.
This week’s video is my 1st Quarter Review and my 2nd Quarter Preview.
The first quarter was good (yeah!), and I list the items I’ll be watching and thinking about for the 2nd quarter.
A must see video (if I do say so myself).
TRANSCRIPT:
Hi Clients and Friends, Mike Brady here. This is the first quarter review and second quarter pre-view for 2011.
Now, in general, the first quarter was a little bouncy in February, but overall a positive quarter; actually, a very strong and nice quarter. The indexes, which of course you can’t invest in indexes, but they’re something that you see in newspapers and TV, etc., that we refer to all the time, the stock market indexes in general were all positive sort of in the middle numbers, four, five, six, something like that. The big winner was the sector that is small cap around nine or ten percent for the first quarter, depending on which slice you look at. Corporate bonds were positive for the year, for the first quarter I should say. And that is good for them, two to three percent. Government bonds were pretty flat either zero or actually negative, between zero and one percent, once again depending on which slice and what duration you want to look at.
So for this second quarter, what’s going to happen? Oh, boy, that’s always a tricky one. We have to look at it, I think, week and month by month. Some of the things I will be paying attention to will be quantitative easing, ending in June. Quantitative easing, (QE2 is what we call it) has been an influx of capital into the markets and that is going to end in June. Also Bernanke is going to give his first ever press conference at the end of April and boy, I think if you’ve been watching my videos and reading my newsletters you know I’m not a big fan of Ben Bernanke, so I’m kind of curious what he’s going to say and well you know kind of what the reaction is to him.
I’m going to continue to watch for the real numbers. I’m becoming more and more of a proponent that what you read and what gets put out there is not really telling the full story. A great example would be unemployment. The unemployment rate is 8.8 percent right now which is supposed to be good news. But the U6, which is the unemployment number including people who have given up looking, is quite high, sixteen or seventeen percent. So, I’m going to continue to look at what the real numbers are, telling us the real data. Just one more example while I’m thinking of it is inflation. Inflation, the CPI, does not include food and oil, as if we don’t drive or eat. I mean that’s a goofy number. So what are the true numbers so that we can understand what the recovery is saying.
I’m going to continue to watch oil. Oil has really increased in the last three or four months or so. And as I mentioned at the beginning of the year oil can be a real sidetrack, a good de-railer for the economy if it increases. And it has increased quite a lot since the beginning of the year. I don’t have the number right in front of me but as I recall it was around $88, and now it is right around $113, or $114. So it has started to increase and that is of concern to me.
These are some of the things that I’m going to really watch very closely this second quarter. And of course, I encourage you to give me a call as we go through the quarter if there are any concerns or questions you might have about the impact of this or that on the markets and on your portfolio, etc.
My name is Mike Brady. My company is Generosity Wealth Management, The phone number is 303.747.6455. I am a registered representative with Cambridge Investment Research. And we’ll talk to you next week. Thank you bye bye.
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Europe continues to be sick and will slow down the global economy.
The worst with Europe is not over. It’s the end of the beginning, not the beginning of the end.
What does this mean for you?
I’m not a fan of a large holding in Europe. Internationally, though, I continue to be impressed with some of the emerging markets out there. Irritatingly, Europe is being forced to address many fiscal imbalances we have here in the United States, but they’re just a number of years ahead of us in addressing them.
I continue to have a minimal to zero exposure to Europe for my clients.
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The first quarter was a bumpy ride for US Treasuries (as I mention in my video which you should have listened to already), and essentially ended flat to slightly negative.
Much of what will happen in the next quarter will be dependent on the ending of quantitative easing in June and whether the Federal Reserve increases interest rates.
What to do? Stay tuned and be diversified. Too much of an allocation to any category can be negative. Too many Treasuries may lead you to lose purchasing power because you’re not staying up with inflation.