Headwinds Coming Sooner Than Expected In 2010?
By Ken Mahoney

In our last newsletter we suggested some factors you should keep on your radar screen as you evaluate your investment strategy for 2010 – the Federal Reserve Bank, oil and China. Any strategy to be successful requires attention and it is important to keep abreast of the ever changing tides of domestic and global economies.

While the stock market had a great 2009, return on the S&P 500 was around 26%, many on “Main Street” are not celebrating a “victory” – consumer leveraging and unemployment remains high. Also, sooner or later some of the programs implemented by the Federal Reserve Bank to help the ailing mortgage and real estate markets will be phased out and interest rates will likely rise.

With the recent election of Massachusetts’s Scott Brown to U. S. Senate and the impact on passing a healthcare reform act, it appears President Obama may be changing his focus from healthcare reform to overhauling the banking system.

The current proposal states that banks cannot own, invest, or sponsor hedge funds or private-equity funds for their own investment accounts. Also proposed is a limit on the size of a bank's activities. Theses proposals raise far more questions than answers.

It may be very popular to blame Wall Street and the banks for the economic problems of the past couple years but what are the unintended consequences of such recent proposals? One foreseeable and potential consequence is the inability of the banks to make many loans to consumers and businesses. Without loans - which have enabled entrepreneurialism and expansion - the likelihood of a slow down in economic growth is not to be unexpected.

In addition, the recent announcement of a 15-basis point fee on deposits to raise as much as $100 billion as payback for bailing out the system seems to play well to the voters. It could, however, eliminate over $1 trillion dollars of potential lending.

Only time will tell what these and other proposals will have on the reversal of our current circumstances.
I welcome the opportunity to discuss this email with you in greater detail.
Please feel free to call me at 845/371-0101 or email me at kmahoney@auroracapital.com.
And don’t forget to visit my blog for additional articles and comments – http://kenmahoney.blogspot.com
Mr. Mahoney is a registered broker with Aurora Capital, LLC, an SEC registered broker-dealer and member FINRA and SIPC. Aurora Capital Brokerage, trades cleared by Legent Clearing.

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