Mid-year economic forecasting at Barrons.com was reported a few weeks ago. The range of conjecture from the group of experts shouldn’t surprise anyone who has listened to talk-radio or ask their next door neighbor for financial advice. As one wag said Economic Forecasters give fortune tellers a good name. For those that missed the article here’s a mini-recap of who said what. Scott Black minced no words when he said the U.S. economy was sputtering, but the markets were historically cheap. Unemployment, he pointed out was at 8.2% but counting those that have stopped looking or marginally employed and the real number is 14.8% (which I suspected but couldn’t prove). The rest of the world is in worse shape. Europe’s recession (our biggest single market) is causing an Asian slowdown for energy and commodities. 
Bill Gross, PIMCO C.E.O., and bond king extraordinaire, answered it would be another decade before the U.S. economy could stand on its own. He said the U.S. economy can ‘trundle’ along at 1%-2% growth, and hard to envision it growing faster than that. Mario Gabelli, small-cap wunderking-, said if the president wanted to get elected he should have concentrated on creating jobs and greater clarity on the economy. He also said the markets would be up or down 5%, with lots of volatility. Marc Faber, a cynical bear who may be building his own bomb shelter, said things would be getting worse before they got better. But Faber always says something just as cheery, even during Christmas. It’s not surprising that Faber likes gold and Singapore REITS. Oscar Schafer said the private sector must provide the needed stimulus and politicians need to focus on the deficit. Fred Hickey said the world is worse off now than it was in January. He expects turmoil in the next six months. He said that the U.S. should think of more personal and federal austerity measures going forward. Fred likes gold mining companies and the Canadian dollar (no surprise!). 
Finally, Abby Joseph Cohen, predicted that we will continue to see economic expansion and that there will be political will to preserve the European Union. But, she cautioned, there will be an extended period of disappointing economic growth. The bottom line is that things won’t necessarily get worse only may seem like it. Scary news will continue to pour out of doomster’s lips while healing continues. Both politicians and private sector need to get their acts together to make the process as painless to workers and shareholders alike.
Looking Ahead…Opinionated Alan Abelson, in his Up and Down Wall Street, Saturday, Barrons.com., notes and reports more of the same for the coming week and cites: 
‘The Philly Fed index plummeted to…a low of 16.6..the lowest in 10 months…it doesn’t speak kindly of what’s happening in manufacturing, …a now-flagging economy….unemployment insurance remains at a six month high. China…disclosed that its manufacturing sector has stalled again….sending the Shanghai composite index ‘hurtling’ lower.’ Finally, Bank Credit Analyst gives credit for early moves by the euro folk but warns that progress is occurring at ‘glacial speed’. It continues that the path of least resistance for risk assets, for the near term, is down.’
Facebook Surges…shares powered ahead the week before by 6%. Chief technology officer Brett Taylor would be leaving the company for his own start up. News didn’t impact share price.
The company has been on a buying spree, recently purchasing Face.com, a facial recognition software company.
Support of Facebook is found from two iconic companies- Ford and Coca Cola. Both announced last Tuesday that they planned on expanding their advertising on Facebook. Ford will spend, according to sources, about 25% of its total budget on digital advertising, this doesn’t mean it all goes to Facebook. FB closed Friday up at $33.08.
Put on a Happy Face! Each Morning, way before markets are open, and most people are up and about, I review the notes of the day before and jot them down for you to read at the end of the week. This morning Tony Bennett is singing ‘Put on a Happy Face’ on my iPod as I read Irwin Kellner’s opinion on the U.S. economy just a few hours after the Greeks 
voted to accept austerity, with about the same enthusiasm as a prisoner choosing his method of execution. 
Kellner points out that a second recession is already here in the United States. He points to a slowing retail sales number, piles of goods in factories and a struggling housing market as tangible proofs things are ill. Not surprising, he concludes, that business and individuals are hunkering down. This in an election year, I may add, which does not bode well for the President. Still the markets we’ve gotten to dislike, trade in a narrow range. On Monday the Dow was off a smidge while all other indices were slightly up.
Friendly Folks at Janus sent me their Fixed Income Outlook Newsletter. Instead of repeating 
everything Darrell Watters, Co-Portfolio Manager of Fixed Income, said you should know Watters and Janus like the corporate credit sector as the best risk adjusted return opportunities of all the bond sectors. The reason is that over the past year fundamentals have continued to improve, profit margins have been high and cash has been accumulating on balance sheets. Adding corporate income mutual funds, individual bonds and or ETFs may be a an excellent long-term source of income for investors right about here.
Markets Closed Higher Tuesday. Gold and oil were off. Investors were awaiting word on what the Federal Reserve would be doing to buttress the economy.
Secrets? A lot of people are plain fed up with what’s been going on with stocks, fixed income and the economy. They’re sure that there is some ‘secret’ to managing money with little or no risk. 
The secret ‘tell’ is in the indices. If a bank pays 1 1/2% on a 1-year CD and the 10-year Treasury yields 1.65% you just got to know that banks are buying business and that’s detracting from their bottom line. And if a bank fails and is taken over by another bank the new bank doesn’t have to honor the ‘promised’ rate of the failed bank. Nor does FDIC, which the higher limit of $250,000 expires in 2013, guarantee anything but principal. Some people make moves because they want to believe in some ‘secret’ that no one else knows. See the following sad story…
Allen Stanford sentenced to 110 years. Stanford stole over $7 billion from 21,000 people over a 20-year period of time. He did it by recruiting financial planners, brokers, insurance agents and salespeople to sell his ‘better than any other Certificate of Deposit Savings Accounts’. These high paying saving rates were eye popping enough to steal entire family fortunes while Stanford lived the life of a billionaire. It was a Ponzi scheme second largest only to Bernie Madoff’s investment scam. It may take years for ‘clients’ to get a portion of the money Stanford stole. The same old bottom line is If it sounds too good to be true…
Operation Twist Continues Through 2012. This was announced Wednesday by The Ben Bernanke who also said the Federal Reserve had ‘other’ tools in case the economy weakened further. He did not give details. 
The Fed will continue to buy longer-term Treasuries, replacing shorter maturities in order to bring down or keep the rates low on the longer maturity government bonds. The result is that investors are expected to buy corporate stocks, with higher dividends. BCA Research pointed out that the path of least resistance for corporate bond spreads is to tighten in absence of a recession or a sustained and intense ‘flight to quality’. The following chart from BCA Research illustrates the current cycle versus previous corporate spreads. 
The Markets expecting more from the Fed fell slightly.
Big Fan of Energy. Investors are of two minds. One their glad they’re spending less at the pump and Two wondering if they should continue to hold their oil and energy funds.
Remember as growth slows less energy is used to deliver goods and services and also keep factories humming. Second, and probably more important, oil is purchased in dollars. 
As the dollar strengthens oil gets cheap.Given time oil, through no fault of its own, will get dear without much of anything else happening except our dollar will lose its luster from investors looking for a safe haven. Investors who own energy funds should also look at their statement and see dividends being reinvested at lower share prices which will bode well going forward.
Time to perhaps put Starbucks on your ‘watch’ list. The company recently bought a ‘French’ bakery and now announced they will open this October their first Tea Only store. Tazo is a $1.4 billion brand. It’ll be their Tea store name. Also, Howard Shultz, recently returned as CEO, wrestled away control of packaged goods distribution from Kraft Foods (they were not doing the job).
Best Plans of Mice and Men…
And just as the Fed finished confirming a continuation of their investment policy Operation Twist markets fell 250 points Thursday as Goldman Sachs told clients to short the S&P 500 index. Analysts at GS set short positions at 1285, or 4% lower than where the index was at the time. Energy and materials led the markets lower. Previously owned homes also weakened and prices declined ( OMG- again!) in May. But the biggest monkey wrench into the machine of commerce was Moody’s the ratings firm. Moody’s downgraded the credit ratings of Citi, JP Morgan Chase, Bank of America, Goldman and Morgan Stanley. Crying ‘foul!’, Dick Bove of Rochdale Securities called it the most absurd thing Moody’s has done in the history of the company. (eh, where were you, Dick, when Moody’s plastered AAA on mortgage bundles back in the day?) Moody’s explained that the banks would be earning less going forward as the economy cools.
Friday Banks Rocked! 
Ignoring the downgrades by Moody’s investors snapped up bank shares as financials lead the market to a sorely needed up day. All the majors were up for the session, JP Morgan was one of the biggest advancers of the day along with Citi, Wells and Morgan Stanley joining the party. In Europe markets were lower. Next week brings a test of what’s happening overseas and here at home. Watch Spain as banks there agree to convert their preferred stock to common, much as Citi did in 2009. Weekend news is the Spanish banks will ask for money this week and that the markets have been oversold. 
Lots of news to digest right here at home this week as much of it involves weakness in the U.S. economy. Monday will see the release of the Chicago Fed activity index for May. Thursday will bring in jobless claims. But all the news could easily be set on its ear with the two day European Council Meeting in Brussels starting Thursday. Markets ended the session on Friday up and the Naz was the big winner ending up for the week. Gold ended at $1573 and oil barely peeked over $80.00 a barrel. 
Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
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