The US Markets are now up 4 weeks in a row, Now What? By Ken Mahoney

The recession is over and it ended 15 months ago. Surprised? According to the National Bureau of Economic Research, an independent group of economists, it’s true. In a statement released on Monday, September 20th, the bureau announced that the recession technically ended back in June 2009. As many economists had expected, this official end date makes the most recent downturn the longest and deepest for the U.S. economy since the Great Depression.

So does this mean that everything is back to normal? I think most of us know better than that. According to a new CNN/Opinion Research Corporation poll, 74% of Americans believe the economy is still in a recession. Even the bureau took care to mention that the end of the recession, by definition, is only the period until the economy reaches its low point – not necessarily a return to its previous vitality. They said, “In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.”

So if the recovery began back in June 2009, why do most Americans think we’re still in a recession? Because to many of them, it feels like it. Often, when referencing events that occur in the economy, the words “official” or “technical” are used. Incidentally, you can find both those words in the first paragraph of this commentary. But as we all know, just because something is “technically” true doesn’t mean it’s practically true. Commenting on this, President Barack Obama said last week, "Obviously, for the millions of people who are still out of work, people who have seen their home values decline, people who are struggling to pay the bills day to day, [the recession is] still very real for them." Whether or not you agree with Mr. Obama’s policies, it is easy to see that this statement has some merit. And as long as Americans feel that we are in a recession, the pace of the recovery will be challenged by lower spending, slower hiring, and the like.

On the bright side, the same CNN/Opinion Research Corporation poll found that the percentage of Americans who say the country is in a recession has dropped 13 points since August – a significant spike in sentiment. The stock market is also looking good for the moment, as Friday closed out the week with a surge that put the Dow Jones Industrial Average on track for its best September in 71 years. Even if the recovery isn’t moving as fast as everyone would like, “slow and steady” seems to be its mantra.

Key things to watch this week:

Tuesday – Consumer Confidence
Thursday – GDP, Jobless Claims, Chicago PMI
Friday – Motor Vehicle Sales, Personal Income and Outlays, Consumer Sentiment, ISM Manufacturing Index, Construction Spending

Data as of 09/24/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 2.05 3.01 9.32 -1.10 -2.07
Dow 2.38 4.14 11.9 0.85 0.01
NASDAQ 2.83 4.94 13.0 2.50 -3.74
MSCI EAFE 3.26 -1.02 0.68 -0.25 023
10-year Treasury Note (Yield Only) 2.75 N/A 3.38 4.25 5.83

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.

HEADLINES:
Silver climbed to its highest price since 1980 last week, as the dollar’s slump boosted demand for precious metals as alternative assets. Gold also climbed to another record, topping $1,300 an ounce.
The economy expanded at a 1.6% annual rate in the second quarter, and will probably finish the current quarter at a 1.4% annual rate, according to estimates by St. Louis forecasting firm Macroeconomic Advisers.

Legislation pressing China to raise the value of its currency is set for a vote in the U.S. House next week, as Republicans joined Democrats in expressing frustration that the Yuan is appreciating too slowly.

Nearly 11% of mortgages modified under the government's Home Affordable Modification Program, known as HAMP, have fallen two months behind in payments, according to a banking regulators' report issued Friday.
In his first comments on Iranian President Mahmoud Ahmadinejad’s statement that the Sept. 11 terrorist attacks may have been orchestrated to bolster the U.S. economy and “save the Zionist regime,” President Barack Obama told BBC Persian that “for him to make a statement like that was inexcusable. It was offensive, it was hateful,” Obama said, according to an excerpt of the interview released by the White House.

QUOTE OF THE WEEK:

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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Do we have ‘irrational negativity’ about the US Markets and Economy? By Ken Mahoney

In his famous "irrational exuberance" speech on December 5, 1996, then Federal Reserve chairman Alan Greenspan posed a rhetorical question: "How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?” With those words, he underscored the influence that emotions can have on financial assets.

Thinking along these lines, it is interesting to note that if there is such a thing as “irrational exuberance”, the opposite must also exist. Let’s call this converse emotion “irrational negativity”. Is there such a thing? The ABC News Consumer Comfort Index is a rolling average based on telephone interviews with 1,000 randomly selected adults over the previous four-week period. Last week, 89% rated the economy negatively, while only 54% rated their own finances negatively. Translation: People think we are worse off than we actually are (irrational negativity).

For the year, the S&P 500 is up 0.94%, the Dow is up 1.72%, and the Nasdaq is up 2.05%. Company earnings are strong, and stocks have moved steadily higher in September thanks to a series of encouraging signals on the economy. Despite this fact, gold set another record last week, and Treasury prices edged higher in a sign that investors remain cautious.

Will people eventually come around? There are reasons to believe they will. One good sign is that Americans are spending more. The U.S. Census Bureau announced Tuesday that consumer spending rose 0.4% from July to August, and 3.6% from 12 months ago, with retail sales up 0.5% and 3.7% respectively. This was the 10th month in a row of year-over-year growth in consumer spending estimates from the Census Bureau, following 14 months of year-over-year declines. All told, Americans spent $363.7 billion at retailers in August – the most since April. Since consumer spending accounts for more than two-thirds of the U.S. economy, this provides yet another silver lining in what many still view as confusing times.

Key things to watch this week:

Monday – Housing Market Index
Tuesday – Housing Starts, FOMC Meeting Announcement
Thursday – Jobless Claims, Existing Home Sales, Leading Indicators
Friday – Durable Goods Orders, New Home Sales

Data as of 09/17/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 1.45 0.94 5.64 -1.81 -2.32
Dow 1.39 1.72 8.42 -0.06 -0.29
NASDAQ 3.26 2.05 8.88 1.44 -3.96
MSCI EAFE 1.55 -2.98 -2.40 0.72 -0.19
10-year Treasury Note (Yield Only) 2.80 N/A 3.40 4.26 5.83

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.

HEADLINES:

President Obama named Harvard law professor Elizabeth Warren a special adviser Friday and tasked her with setting up an agency to look out for consumers in their dealings with banks, mortgage companies and other financial institutions. Calling Warren "one of the country's fiercest advocates for the middle class," Obama said she would ensure the Consumer Financial Protection Bureau ends abusive practices.

Americans' net worth – the value of assets like homes and investments, minus debts like mortgages and credit cards – fell 2.7% last quarter, or $1.5 trillion, the Federal Reserve said Friday. That left net worth at $53.5 trillion – above the bottom hit during the recession ($48.8 trillion in the first quarter of 2009), but below the pre-recession peak of $65.8 trillion.

General Motors announced Friday that it is planning to invest $483 million and add 483 jobs to its engine plant in Spring Hill, Tenn.
The number of people with health insurance in the United States dropped for the first time in 23 years, the U.S. Census Bureau said Thursday. There were 253.6 million people with health insurance in 2009, the latest data available, down from 255.1 million a year earlier.

After months of debate and significant pressure from the White House, the Senate on Thursday passed a $42 billion bill aimed at helping small businesses. The measure is expected to create 500,000 jobs, according to a Senate summary of the bill.

As the tax debate continues, will the market show improvement this fall? By Ken Mahoney

After taking one giant step back on Tuesday followed by three baby steps forward on Wednesday, Thursday, and Friday, U.S. stocks managed to rise into positive territory for the second straight week. Although September is traditionally the worst performing month of the year for equities, stocks have been on the mend so far as reports on the labor market, manufacturing, and business activity have been better than expected. Recent economic reports are confirming that while the rate of economic recovery has slowed, it's still on a positive trajectory.

The President also agrees with this sentiment as expressed by his words Friday at a nationally televised news conference. "While the economy is growing again...the hole in the recession left was huge and progress has been painfully slow," he said. Over the last week, Obama has rolled out a series of new proposals, including a six-year, $50 billion plan to rehabilitate the nation's transportation infrastructure and provide jobs. He also called for federal income tax rates to return to their pre-Bush levels for the 2-3% of Americans who earn more than $250,000 – a move that will bring in $700 billion to the US treasury, Obama said. Critics argue that while $700 billion is a hefty sum, it is hardly enough to close the fiscal gap, and is likely to do more harm than good as the nation’s highest income earners curtail their spending.

In the week ahead, readings on retail sales, industrial production, jobless claims, and consumer prices should help give direction to the markets. And with November elections fast approaching, politics are also in play. Currently, all three indexes are hovering around what analysts consider to be key levels, and are likely to meet continued resistance until more economic numbers come in positive. At this point, most people accept that the recovery is going to be slower than expected. What they are looking for is further confirmation that it is expanding rather than contracting.

Key things to watch this week:

Monday – Treasury Budget
Tuesday – Retail Sales, Business Inventories
Wednesday – Industrial Production, Empire State Manufacturing Survey
Thursday – Producer Price Index, Jobless Claims, Philadelphia Fed Survey
Friday – Consumer Price Index, Consumer Sentiment


HEADLINES:

The Greek government is planning no new austerity measures as part of efforts to pull the country out of debt and might even exit international supervision earlier than expected, the prime minister said Sunday. George Papandreou said Greece was on track to meet targets for reducing its deficit by nearly 40% this year.

China's major economic indicators picked up in August after slowing for several months, data issued over the weekend show, an unexpected rebound that could help prospects for global growth.

Michael Barr, assistant treasury secretary for financial institutions, and Edward DeMarco, acting director of the Federal Housing Finance Agency will testify on Capitol Hill next week on the future of Fannie Mae and Freddie Mac. Barr and DeMarco will appear before the House Financial Services Subcommittee on Capital Markets on September 15.

Work on the ultimate seal of BP's troubled gulf oil well will begin sooner than expected, officials said Friday. The 'bottom kill' procedure, in which the well is filled with mud and cement, will start this weekend – closing for good the well that spewed 4.9 million barrels of oil into the Gulf of Mexico.

Donald Trump offered Friday to purchase the site of the proposed mosque near Ground Zero in order to end the national controversy. His bid includes $4.8 million, the amount that businessman Hisham Elzanaty paid for the two-building site, plus a 25% premium. But Elzanaty's lawyer, Wolodymyr Starosolsky, blasted the offer as a publicity stunt and told The Post that his client "found this letter somewhat laughable."

The markets are at a crossroad, which turn does it take? By Ken Mahoney

Imagine that you are driving to an important destination when you unexpectedly reach a crossroad. As you consult your map and look to the street signs for direction, you notice there is a conflict. Your map indicates that you should turn left, but the signs indicate that you should turn right. Which is the proper course to take?

In many ways, this scenario illustrates the challenge facing investors today. There are signs pointing in the direction of a deteriorating economy, and there are signs pointing in the direction of a stabilizing and steadily growing economy.

To make matters even more complicated, the signs seem to change every week. Good news – bad news. Bad news – good news. The result is that many people are nervously holding onto their cash. According to Schaeffer's Investment Research, Americans are currently sitting on $9.4 trillion in cash, which is 27% more than in 2007. This, in turn, contributes toward low trading volume and increased volatility in the stock market, which further scares investors away. In a way, it is a self-perpetuating cycle. So what happened last week?

Good news: The Labor department reported that hiring is picking up. Businesses added 67,000 jobs to their payrolls in August, marking the eighth straight month of job growth, following nearly two straight years of job losses. Nonfarm payrolls only fell by 54,000 last month, roughly half the decline that had been feared. Unfortunately, the unemployment rate rose from 9.5% to 9.6% because the number of job seekers was still greater than the number of job openings. So while this report shows that things are headed in the right direction, it also shows that the labor market is still soft.

More Good news: The ISM (Institute for Supply Management) manufacturing index hit 56.3 in August, up from July and significantly ahead of expectations. Any reading above 50 is considered a sign of growth, while a drop below 41.2 is associated with a recession in the broader economy. Good news also came out of the housing sector as marked by an unexpected increase in pending sales of used homes.

How did this dose of positive economic news affect the stock market? The Dow kicked off September with its best three days at the start of a month since March 2009, and its best pre Labor Day week since 1990. Echoing how many investors feel, Phil Orlando, an equity strategist at Federated Investors was interviewed by MarketWatch on Friday and quoted as saying, “In the last two weeks or so, things have been starting to firm up, and today's jobs numbers really put an exclamation mark on that. We're feeling a lot more comfortable about our view, than those thinking about a double dip. If you had a bearish bent in the middle of August when you went on vacation, the story seems different today – it seems constructive."

Little economic news is anticipated in the holiday shortened week ahead, and trading volume is expected to remain light as vacationers return home from their travels. Eyes will undoubtedly be fixed on the President Wednesday as he outlines his administration’s plans to spark the economy. Let’s hope the upcoming “street signs” offer clear direction.

HEADLINES:

According to a CNN/Opinion Research Corporation survey released Sunday, 81% of the public rated the country's economic conditions as poor, with 18% describing the economy as good. 44% of people questioned described economic conditions as very poor, up seven points from July.

President Obama is scheduled to lay out a new plan for the economy this Wednesday. Administration officials previously told CNN that the president is considering a payroll tax holiday as well as new infrastructure spending, among several proposals his economic team has been weighing.

According to Schaeffer's Investment Research, the Dow is on pace to register 90 days this year with swings of 100 points or more – more than twice as many as in any of the three years leading up to the crash.

Burger King said Thursday that it has agreed to be acquired by investment firm 3G Capital in a deal valued at $4 billion. The New York-based firm will buy the fast food chain for $24 a share. That marks a 46% premium over Burger King's closing price of $16.45 on Tuesday, the day before news reports said the company was up for sale.

The nation's top automakers reported disappointing sales Wednesday, resulting in the worst August for industry wide auto sales in 27 years. According to sales tracker Autodata, U.S. new vehicle sales fell just short of 1 million vehicles, a drop of 21% from a year ago.