Quarterly Commentary
“Déjà vu”
Colorado’s summer is finally here, complete with beautiful wildflowers, afternoon thunderstorms and threats of fires and pine beetle devastation. It’s always a mixture. If we were in a different state or country we could be dealing with very high unemployment (MI), floods (MO), drought (China and Russia) or the aftermath of tsunamis or volcanoes (Japan and Iceland). Where we live and our own personal circumstances always color our view of the world.
In the financial world, the summertime mixture is bringing stability to some areas and continued uncertainty in others. We cannot control the Euro zone, but we can and do limit our financial exposure to it. We cannot avert the effects of the failure of Congress to address our spending and debt problems in a timely manner, but we can and do position investments to minimize the effects on portfolios. Will the financial world in America come to an end in early August if agreement is not reached on the debt ceiling? No!
We have been here before. The Congress did not agree on any program to address the meltdown in 2008 until the stock market fell 780 points in 30 minutes to focus their attention. It is quite possible the bond market will have to administer a similar jolt in August to demand a result. (We will plan to go shopping!!)
Our financial discipline is a longer term framework which helps put short term crises and fears into perspective. Yes, there are looming problems. There always are.
We know that inflation will eventually return and we have already inserted investments into portfolios to compensate – even though we know we are a little early. We can see the kindling and the wood – but the velocity of money in the economy is presently so extremely low that there is no match to start that fire quite yet. The Federal Reserve knows well how to control inflation when it arrives, but is never quite able to apply remedies when and as needed, which is why it always makes us think the economy is lurching forwards and backwards, rather than growing smoothly.
As you can see from the Chart below, all of the equity markets struggled in the 2nd Quarter while bonds provided strong returns. The net result is a positive return across all asset categories so far in 2011.
We do not see any sustainable economic factors at this time that will create a “double dip” recession. The markets (leading indicator) suggest that the economy is recovering slowly and by year end that should be more visible, making it possible for an interest rate increase in 2012. We think we see, in the global convergence of wages and prices a renaissance beginning in American manufacturing, which will be good for the world economy as well as our own.
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Office Notes:
We welcome Jessica Sare who has joined our firm as a Client Service Representative. Jessica spent the last thirteen years in the banking industry and is a terrific addition to our team.
We will continue our tradition of closing our office at 1:00 pm on Fridays until Labor Day to take advantage of the Colorado Summer.
If you would like us to e-mail your quarterly reports in the future, please let Donna know at
Donna@shwj.com
We hope that this July 4th holiday renews all of our faith and belief in the “special providence” which has allowed America to be so successful for so long. And we look forward each year to celebrating with you your own Financial Independence.
Sincerely,
Sharkey, Howes & Javer
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Archive:
January 2011 - The Ides of March are come… -
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January 2010 - A Pleasant Suprise -
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October 2009 - A Year Later
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July 2009 - Bond Markets and Inflation Fears - Send To Friend
January 2009 - Be Greedy -
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