My Commentary

November 1, 2011

What a year this has been. As we reflect on the first 3 quarters of the year we have a great deal to be thankful for. At the same time we have a great deal to be fearful of. I think the second part has folks in an uncertain state of mind, lacking confidence. We watch TV and see the conflicts overseas on TV, what is taking place with the sovereign debt in Europe as well as the continued high unemployment rate even as our government leaders have thrown good money after bad into juicing up the economic engine.  The Michigan consumer sentiment poll shows confidence levels near an all –time low. At the same time Mr. Bernanke and Co.  at the Federal Reserve have lowered the boom on interest rates to record lows with the long end of the curve yielding barely over 3% as they implemented level 3, Operation Twist to move the economy As a result, we are hearing from multiple clients that their savings earned 18 cents in the last month. So where do we go from here.
Corporate America is on the whole doing well with loads of cash sitting on the sidelines as are many clients.  The stock and bond markets are being driven by economic uncertainty with no clear cut path to bring us out of what appears to be a slow period. It would appear that our lack of leadership in Washington with the  constant fighting between the politicians not focusing upon strengthening the economy is at the root of the problem. My belief is that until we see some real leadership come together our economic engines will not move forward anytime soon.
. Recently, I had an opportunity to talk with Jim Seneff , Chairman of CNL Securities. He is very involved with FINRA  and other boards that discuss policy for the financial services community. As a student of history his thoughts are to look at the “climate as opposed to the weather” for the economy. This being said  it appears the “flow of money” has been shifting to safe assets making bond prices extremely high while yields in spite of the S&P downgrade of the U.S. debt rating. This has inflated bond prices and low yields. If you think in terms of a rubberband, bond valuations are stretched. While the Federal Reserve has said they will not doing anything to increase rates through 2013 there is a good possibility that rates/inflation will rise in the not too distant future. For this reason we are discussing with clients the need to look at alternative investments from commodities, dividend paying high quality stocks to alternative investments that offer steady income with the potential for inflation protection.
  
Tom Eisenzimmer