Published June 10, 2011
May was a bad month for stocks. The S&P dropped 1.4 percent for its worst loss in nine months. Since World War II, June has been flat as often as it has been up, making it the third worst month of the year.

So, should investors sell and go away? Should they find better returns somewhere else? Can they find better returns somewhere else? What about risk? These are all questions investors should be asking themselves.

Why is the market behaving so badly? Or is it? Through June 3, the S&P was up 3.4 percent year to date, and up 22 percent on a trailing 12 months. To be sure, the market was up more in the first quarter of this year based on year-to-date numbers, but gave back some of its gain in the second quarter. The market did the same thing last year.

Earnings season is over, so people tend to worry about the next season. Besides, after such a run-up,
it is not unusual to have a pullback.

Data revealed weakness for the first quarter this year, as it did last year. Weakness reappeared relating to jobs, construction and manufacturing. Commodity prices were elevated. Higher prices for gasoline and groceries have slowed consumer spending, and confidence. Private-sector job growth was weak, and state and local governments now have slashed about 850,000 jobs so far this year. In addition, the market has had to absorb uprisings in the Middle East and the impact on oil prices. Then there is concern over sovereign debt in Europe, our own debt crisis and the earthquake and tsunami in Japan with its resultant effect on our […]

Published November 5, 2010
See original article

In the 2008 election, Independent voters supported Democrats by an 18 percent margin. In the recent midterm elections, they favored Republicans by 15 percent, and with that shift, the Democrat coalition crumbled. Democrats lost ground among women, middle-income workers, whites and seniors. Driving the shift was a broad concern over the economy and doubt about big government.

President Obama was elected in 2008 as the standard bearer for hope and change. He brought change, but not the kind that voters were looking for. He also let congressional Democrats define his agenda and determine what hope and change looked like. Those were big mistakes, and his naturally cerebral approach to problem solving also disconnected him from voters.

Obama failed to notice that the economy remained weak and that getting people back to work was his number one priority. He should have take a page from the playbook of fellow Democrat James Carville, the “Ragin Cajun” who famously said, “It’s the economy, stupid.” Unemployment remained stubbornly high at about 9.6 percent, and will likely remain around 9 percent going into the presidential election cycle, which portends the loss of the White House to the Republicans. The idea that the supremely charismatic president suddenly might be a one term president became not only thinkable, but possible. Even chastened Senate Majority Leader Harry Reid, D-Nev., promised that his number one job was to create jobs. “The only thing that is going to solve our economic problems in this country is jobs,” Reid said. Unfortunately, many Democrats arrived at this conclusion much too late.

In the end, the election became a referendum on the president […]

Fear lingers as worry of a double dip fades. What can the Federal Reserve do?
The past quarter brought numerous gloomy headlines. The specter of a double-dip recession, a
depression or inflation loomed.

Each day seemed to bring more negative news and reason for gloom. Not surprisingly, markets
reacted, and after a strong July, equity markets dipped in August to an overall minus number for the
year. It did not help that investors withdrew about $34 billion from equity mutual funds for the year
and placed $32 billion into international and emerging market funds, or that the “flash crash” of May 6
caused many investors to wonder if they were playing with a stacked deck.

Job losses continued to mount last month with the unemployment rate hitting 9.6 percent. The Obama
administration took solace in the fact that the private sector in August added 67,000 jobs – about one fourth
of the number needed to provide jobs for new entrants into the workforce.

The question the market seems to be wrestling with is: Are we about to experience a “new normal” for
growth in the U.S.?

Historically, on average, the U.S. economy has grown about 3 percent per year – also about the rate
of inflation. Bonds have historically returned the rate of inflation plus 3 percent, for a total of 6
percent. Equities have historically returned about 9 percent.

As every investor knows, the last 10 years have been anything but normal, and the U.S. economy
seems to be growing less than normal. Is this the “new normal”? Should we expect less than 3
percent growth, or even none? Is the structural growth rate of the U.S. economy lower now than
historically? The answer has big implications for investors.

Both […]

Fear lingers as worry of a double dip fades. What can the Federal Reserve do?
The past quarter brought numerous gloomy headlines. The specter of a double-dip recession, a
depression or inflation loomed.

Each day seemed to bring more negative news and reason for gloom. Not surprisingly, markets
reacted, and after a strong July, equity markets dipped in August to an overall minus number for the
year. It did not help that investors withdrew about $34 billion from equity mutual funds for the year
and placed $32 billion into international and emerging market funds, or that the “flash crash” of May 6
caused many investors to wonder if they were playing with a stacked deck.

Job losses continued to mount last month with the unemployment rate hitting 9.6 percent. The Obama
administration took solace in the fact that the private sector in August added 67,000 jobs – about one fourth
of the number needed to provide jobs for new entrants into the workforce.

The question the market seems to be wrestling with is: Are we about to experience a “new normal” for
growth in the U.S.?

Historically, on average, the U.S. economy has grown about 3 percent per year – also about the rate
of inflation. Bonds have historically returned the rate of inflation plus 3 percent, for a total of 6
percent. Equities have historically returned about 9 percent.

As every investor knows, the last 10 years have been anything but normal, and the U.S. economy
seems to be growing less than normal. Is this the “new normal”? Should we expect less than 3
percent growth, or even none? Is the structural growth rate of the U.S. economy lower now than
historically? The answer has big implications for investors.

Both […]