Golden Bells September, 2011
What is different this time?
The stock markets have dropped tremendously in the past few weeks. Panic set in last Thursday with a collapse of over 500 points. The latest job figures were a little better than expected but still behind the curve of normal recoveries. More analysts are talking about another recession now.
There are numerous reasons for the market drop, chief of which is the European economic crisis. Bill Gross, one of the leading bond investors in the world intimated Friday that the European Union losing Greece or Italy is like a cancer patient losing a finger or toe. Spain may be next and would be like losing a leg. Mr.Gross was the first to mention the possibility of France following down the debt death spiral. That is the heart of the European Union.
The US is not much better. The debt ceiling deal solved only the problems of the politicians, putting off the next fight over the ceiling until after the 2012 elections. Nothing, nil, was done to help the country. Rating agencies threatened to lower our AAA credit for the first time ever if we didn't cut $4 trillion from our spending over the next 10 years. We promised to cut less than 3 over 10 years. As a result, Standard & Poor's, the premier rating agency for sovereign debt, downgraded the United States of America to AA+. Moody's and Fitch, the other two rating agencies, have yet to follow suit but this is the first time in history we have not held the top AAA rating from all three.
When given advanced notice of the impending downgrade, the Obama administration tried to convince S&P not to go through with it. They claimed a $2 trillion error was made and things were better than they appeared. A Treasury spokesperson said, "A judgment flawed by a $2 trillion error speaks for itself."
Of the 127 sovereign nations, only 18 are now AAA-rated. None of these have a negative outlook by rating agencies. In college football terms, we are no longer in the top 20.
Budget numbers like these are hard for the average, non-bureaucrat person to comprehend (source- The Wall Street Journal):
| US Income: | $2,170,000,000,000 |
| Federal Budget: | $3,820,000,000,000 |
| New Debt: | $1,650,000,000,000 |
| National Debt: | $14,271,000,000,000 |
| Recent Budget Cut: | $38,500,000,000 |
So let's chop off 8 zeros and think of our country as the Jones family (concept- Dr. Jeff Nicholson):
| Jones family annual income: | $21,700 |
| Amount the Jones spent: | $38,200 |
| New Debt on their credit card: | $16,500 |
| New credit card balance: | $142,710 |
| Amount cut from new family budget: | $385 |
The world continues to turn, wobbling on its axis to create the seasons, and people are still people. Politicians make promises with other people's money and the markets try to predict what is next.
So, what is different this time? We are different {see previous Golden Bell "Who Is Atlas?"}.
A large majority of our accounts are now tactically managed by professionals who watch our accounts every day and make trades as needed based on our individual risk profiles.
We, for the most part, pay fees instead of commissions, which not only lower our costs in volatile times, but put us all on the same side of the table when making investment decisions.
We have a larger amount of 'protected' income in investment vehicles that assure us of lifetime income, no matter what the markets do.
We have identified specific needs and opportunities through one-on-one financial planning. All families are the same and all families are different. Taking care of the basic things gives us the ability to be especially proactive on the details that are unique to each family.
We communicate better and therefore know more. Regular review meetings, the ability to see our accounts online, private sessions with money managers, bi-monthly client webcasts, public educational seminars, telephone calls, and missives like this one help us have the information to be confident in our decisions.
As we hear analysts, pundits, politicians, and other types of salesmen go on and on about what might happen, I am reminded of a favorite:
"All hard work brings a profit but mere talk leads only to poverty."Proverbs 14:23.
Let us continue to work hard, pray for guidance and look forward to the future.
VIEW OUR GOLDEN BELLS ARCHIVES
Who is Atlas May 2011
Performance Anxiety February 2011
Ball of Confusion October 2010
Into the Storm June 2010
Year 2009
April 2009
March 2009
Year End 2008
Halloween 2008
PryorMcCormick Investments
4000 Southlake Park, Suite 200
Birmingham, AL 35244
Securities and investment advisory services offered through Sterne Agee Financial Services.
Member FINRA/SIPC.
PryorMccormick is not an affiliate of Sterne Agee Financial Services.