WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“When there is an original sound in the world, it makes a hundred echoes.”
 – John A. Shedd

WEEKLY TIP

To help keep your accounts secure, you should change Internet passwords often, never share them or write them down, and make them obscure. Never use your birth or anniversary date as a password.

WEEKLY RIDDLE

A woman walking along a canal sees a boat full of people, yet there isn’t a single person on board. How could this be?

Last week’s riddle:
The more of them you take, the more you leave behind. What are they?

Last week’s answer:

Footsteps.  

August 30, 2010

BERNANKE REASSURES WALL STREET
At the annual Federal Reserve summer retreat at Jackson Hole, WY on Friday, Fed chairman Ben Bernanke said that the central bank “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.” Translation: we are ready to do what it takes to support the economy. Bernanke stated that the Fed still had plenty of tools to fight deflation, with buying more Treasuries a prime option. He did not mention buying private assets. The Dow rallied for a gain of 164.84 Friday.^1,2

BREATHTAKING DROP IN HOME SALES
In July, demand in the housing market is usually at its highest. So the July housing numbers were confounding even with the absence of taxpayer credits: new home sales down 12.4% from June, existing home sales down 27.2% from June. In year-over-year terms, the rate of new home purchases was 32.4% below July 2009 while sale prices were -4.8% from last year’s median. (Analysts polled by Thomson Reuters had forecast July new home sales to be flat.) The National Association of Realtors said residential resales were down 25.5% from a year ago; however, the median sale price was 0.7% higher than in July 2009. ^3,4

SLIGHT GAIN IN DURABLE GOODS ORDERS
The 0.3% July increase underwhelmed analysts, who had expected a 3.0% gain. Excluding transportation orders, durable goods orders were -3.8% last month.³

CONSUMER SENTIMENT IMPROVES
The final August consumer sentiment poll is in from the University of Michigan and Reuters. The 68.9 index reading is an improvement from the final 67.8 mark in July; we are still a long way from seeing this index above 80, which was common before the recession.⁵

GOLD & OIL PRICES RISE
In fact, gold was up for the fourth week in a row – futures gained 0.72% last week to settle at $1,236.00 Friday. Gold is up 4.60% across that four-week stretch. Oil futures advanced 2.47% on Friday to pull off a 1.83% weekly gain and settle at $75.17 per barrel on the NYMEX.⁶

STOCKS SLIP DESPITE FRIDAY RALLY
The Dow actually closed below 10,000 on Thursday; fortunately, it regained that level, settling Friday at 10,150.65. The NASDAQ and S&P 500 also had slight weekly declines, respectively settling at 2,153.63 and 1,064.59 at week’s end.⁷

 
Source: cnbc.com, bigcharts.com, ustreas.gov, bls.gov – 8/27/10^7,8,9,10

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

The TPI Perspective: By Dr. Barry D. Kendell

This was another volatile trading week, with small gains in the small cap equities but a slight drop in the large caps. Friday’s late week results were buoyed by Bernanke’s statement that conditions remained conducive for economic growth in 2011. Both existing and new home construction and sales plummeted in July.

Better news came from an announcement that the jobless claims fell for the first time in four weeks. One of the more interesting activities in the market centered around the ongoing battle between Hewlett-Packard and Dell for the takeover of 3Par. Currently HP has made an offer that is 67 per cent higher than Dell’s original bid.

Next week’s investor focus will be on reports of the consumer confidence and manufacturing activity which will lead into Friday’s August payroll report.

Fidelity reports that due to heightened market risk, that they are trimming their stock fund exposure, while establishing positions in less risky emerging market bond funds and Annuity Models.

TPI along with its investment partners monitor market activities and patterns regularly and are able to ensure our client portfolios are positioned appropriately for the best possible return.

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  ]]> http://tripillarinvestments.info/?feed=rss2&p=386 0 http://tripillarinvestments.info/?p=384 http://tripillarinvestments.info/?p=384#comments Wed, 25 Aug 2010 18:21:25 +0000 editor http://tripillarinvestments.info/?p=384 Tri Pillar Investments: Presents

 

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“Chance favors only the prepared mind.”
 – Louis Pasteur

WEEKLY TIP

Spammers love to create emails that LOOK like they’ve legitimately come from your bank or credit card issuer. How can you be safe? Never use a “click here to log in” link. Always go directly to the website address for your bank or credit card provider and log in there.

WEEKLY RIDDLE

The more of them you take, the more you leave behind. What are they?

Last week’s riddle:
What appears once in a minute, twice in a moment, but never in a decade?

Last week’s answer:

The letter M.  

August 23, 2010

A JUMP IN HOUSING STARTS
In a relatively light week of economic data, one of the notable items was a 1.7% rise in new home construction in July. Economists had expected only a 0.2% increase in that category. However, the Commerce Department said most of the gain came in multi-family housing. In contrast, single-family housing starts were down 4.2% for the month, with building permits down 3.1%.¹

GM WILL GO PUBLIC
General Motors has announced it will reenter the stock market. Last Wednesday, it filed an IPO registration with the Securities and Exchange Commission. One of the largest IPOs in history may come as soon as October, including common and preferred shares. This signals the end of “Government Motors”: the Treasury Department will now have the opportunity to reduce its 61% stake in the company. GM earned $1.3 billion in 2Q 2010 – its second straight quarter in the black. ^2,3

LEADING INDICATORS TURN POSITIVE AGAIN
After a 0.3% slip in June and a 0.5% drop in May, the Conference Board’s Leading Economic Index eked out a 0.1% increase for July. The LEI has been more or less flat since March, yet components within the index have signified a mild economic expansion across that time.⁴

PPI RISES FOR FIRST TIME SINCE MARCH
July’s 0.2% increase in the Producer Price Index was in line with analysts’ forecasts. Core PPI (wholesale inflation minus food and energy prices) rose 0.3% in July, more than the 0.1% advance expected.¹

OIL FUTURES SINK; GOLD FUTURES RISE
In fact, gold prices rose $12.30 last week. That 1.01% weekly advance led to gold settling at $1,227.20 per ounce Friday on the COMEX. Over the last three weeks, gold prices have climbed 3.85%. Oil prices slipped $1.93 last week. At Friday’s close on the NYMEX, crude for September delivery was at $73.46 a barrel.⁵

LIGHT VOLUME, LOW ENTHUSIASM
August options were expiring last week, and initial jobless claims weren’t shrinking. Combine that with some bearish sentiment and you had a week of light trading marked by significant selloffs. The NASDAQ advanced 0.04% last week to close Friday at 2,179.76. The DJIA lost a bit of ground to settle at 10,213.62 Friday, while the S&P 500 ended the week at 1,071.69.⁶

 
Source: cnbc.com, bigcharts.com, ustreas.gov, bls.gov – 8/20/10^6,7,8,9

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

The TPI Perspective: By Dr. Barry D. Kendell

           During a very volatile week, stocks finished down slightly on the heels of the previous weeks poor performance. The Dow Jones Industrials shed just under 1.0% while the S&P 500 retreated 0.6%. There was comparatively low trading volume which often exacerbates the market swings which were experienced. Large stocks declined for a second straight week. Small stocks and Technology shares did outperform however and this was reflected in the Russell 2000 and tech-rich Nasdaq Composite holding level. There was an unexpected increase in the weekly initial jobless claims which has consumer confidence low and spending depressed.

                Overall however, second quarter profits have generally improved from a year ago, and even from the prior quarter. Top-line growth has also improved in a number of sectors, but not as much as the investor community would like. The top performing stock funds for the week were mid-cap growth funds which benefited by having a tech component in their portfolios. In overseas markets, stocks performed better than in the U.S., particularly in Canada and Japan. Based on a global view that inflation is dead, Fidelity’s Spartan Long-Term Treasury, an interest-rate-sensitive taxable bond fund, was up a whopping 2.8% over the prior four days. In the market, Intuit and Salesforce.com both had a standout week with the shares in both companies gaining 16%.

                A noteworthy transaction this week included Intel’s $7.7 billion cash purchase of McAfee which drove the McAfee stock up 58% for the day. General Motors filed for an IPO and is expected to raise as much as $15 billion later this year.

                Looking ahead to next week, there will be few earnings reports but economic data due out includes existing home sales, durable goods orders and the second-quarter GDP. TPI believes that stock valuations are attractive at present levels when benchmarked against consensus forward earnings estimates.

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  ]]> http://tripillarinvestments.info/?feed=rss2&p=384 0 http://tripillarinvestments.info/?p=382 http://tripillarinvestments.info/?p=382#comments Wed, 11 Aug 2010 18:50:29 +0000 editor http://tripillarinvestments.info/?p=382 Tri Pillar Investments: Presents

 

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“There have been as great souls unknown to fame as any of the most famous.”
 – Ben Franklin

WEEKLY TIP

Use just one credit card (not debit card) for online purchases – this makes detecting any fraudulent charges easier, and you’re protected under the Fair Credit Billing act. Try not to use your debit card, as it may expose your bank account if intercepted.

WEEKLY RIDDLE

Two fathers and two sons went truffle hunting. Each found a truffle yet they found only three in all. Why?

Last week’s riddle:
Six cups are lined up in a row. Cups 1-3 on the left are full of juice; cups 4-6 on the right are empty. How can you arrange this row so empty and full glasses alternate while moving only one cup in the process?

Last week’s answer:

Pour the juice from the second cup into the fifth cup.  

August 9, 2010

UNEMPLOYMENT REMAINS AT 9.5%
The American economy added 71,000 jobs in July but lost 202,000 others (143,000 of those positions were short-term Census Bureau hires). The private sector added 630,000 jobs during the first seven months of 2010; that 90,000 per month is far short of the 150,000 per month that would be commensurate with population growth. The bright spot: economists had presumed the jobless rate would edge up to 9.6% in July.¹

ISM: MANUFACTURING & SERVICE SECTOR GROWING
The Institute for Supply Management’s service sector index rose to 54.3 for July, a nice surprise (economists polled by Bloomberg had forecast a dip to 53.0). The new orders and employment components of the service sector index both showed growth. ISM’s manufacturing index came in at 55.5 for July, beating a Briefing.com consensus forecast of 54.2. (However, the Commerce Department noted that factory orders declined by 1.2% in July following a 1.0% fall in June.)^2.3,4

SAVING OUTPACES SPENDING
Personal spending and personal incomes were both flat last month according to the Commerce Department. The personal savings rate increased again to 6.4% – it has risen monthly since February, and it hasn’t been under 5.0% since October 2008. (During 2007, the personal savings rate averaged just 2.1%.) The good news is that households are accumulating cash reserves; the bad news is that the primary engine of the economy is subdued.⁵

FEWER HOMEBUYING CONTRACTS SIGNED IN JUNE
Pending home sales decreased by 2.6% in June, according to the National Association of Realtors; the number was 19.0% below year-ago levels. The June dip may reflect buyers rushing to sign contracts before federal incentives could expire.⁶

15-YEAR FRMs BELOW 4.0%; 30-YEAR FRMs BELOW 4.5%
Freddie Mac reported the average rate on a 30-year home loan at 4.49% last week; a year ago, the national average was 5.22%. Rates on 15-year FRMs were 3.95% last week, compared to 4.63% at this time in 2009.⁷

STOCKS GAIN FOR SECOND STRAIGHT WEEK
The DJIA rose 1.79% last week, the NASDAQ advanced 1.50%, and the S&P 500 gained 1.82%. At Friday’s closing bell, the S&P 500 was at 1,121.64, the NASDAQ at 2,288.47, and the Dow at 10,653.56.⁸

 
Source: cnbc.com, bigcharts.com, ustreas.gov, bls.gov – 8/6/10^8,9,10,11

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

The TPI Perspective: By Dr. Barry D. Kendell

Friday was a pivotal day for the markets in the U.S. as the Department of Labor released its employment report. The unemployment rate stayed at 9.5% for the month of July. Nonfarm payrolls fell 131,000 which was only partially offset by the private sector adding 71,000 new jobs. These results follow a drop of 221,000 jobs in June, much of which was related to the laying off of Census workers.  This has been perceived as another sign that the slowdown in U.S. growth is the real problem with the global economy, not the European debt crisis that influenced financial markets for much of the spring.

With these disappointing results, investors fled stocks and instead went to assets which are perceived as being safer. Foreign currency and  bond prices rose, which sent interest rates back to near historic lows. Gold also rose $7.50 to $1,206.80 an ounce which was the first time since July 15^th that the price closed above $1,200. The euro has bounced back from the losses it saw due to European government debts and is now at a four-month high against the dollar. The Dow ended up 1.8% overall for the week.

Attention for next week will be on the upcoming Federal Reserve’s meeting. The Fed has let several economic stimulus programs expire such as purchasing mortgage-backed securities, and investors are now wondering whether the central bank will be taking new steps to stimulate the economy.

On a historical note, thirty-eight years ago, then president Richard Nixon saw an opportunity to create a dialogue with China, and in 1972 he visited Mao Zedong in Beijing. Not many would have envisioned that China would become one of our key trading partners and have the second largest economy on earth. The historical shift in the world’s wealth to countries such as China provides many investment opportunities for our clients. TPI will continue to monitor and analyze all foreign markets and use this information to provide valuable advice for the diversification of individual portfolios.  

Please feel free to forward this article to family, friends or colleagues.
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  ]]> http://tripillarinvestments.info/?feed=rss2&p=382 0 http://tripillarinvestments.info/?p=378 http://tripillarinvestments.info/?p=378#comments Wed, 04 Aug 2010 14:37:50 +0000 editor http://tripillarinvestments.info/?p=378 Tri Pillar Investments: Presents

 

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“Live out of your imagination, not your history.”
 – Dr. Stephen Covey

WEEKLY TIP

Have you had the same internet passwords for years? Change them! In order to keep accounts secure, you should change your passwords often, never share them or write them down, and make them difficult. Never use your birth or anniversary date as a password.

WEEKLY RIDDLE

Six cups are lined up in a row. Cups 1-3 on the left are full of juice; cups 4-6 on the right are empty. How can you arrange this row so empty and full glasses alternate while moving only one cup in the process?

Last week’s riddle:
This vehicle has wheels and often flies, but it is certainly not an aircraft. What is it?

Last week’s answer:

A garbage truck.  

August 2, 2010

HOME SALES & HOME PRICES IMPROVE
The Commerce Department said new home purchases surged by 23.6% for June, bouncing back nicely from May’s historic retreat. The supply of new homes for sale diminished to 7.6 months worth, much improved from the 9.6 months worth of inventory estimated in May and much closer to the 6-month level of a healthy housing market. New home prices dropped only 0.6% from June 2009 to June 2010, the smallest year-over-year decrease since November 1987. Separately, the Standard & Poor’s/Case-Shiller home price index of 20 U.S. cities showed prices of existing homes rising 1.3% for May. Prices were also 4.6% higher than a year ago.^1,2

CONSUMER CONFIDENCE LAGS
The economic recovery is taking time – too much time for many Americans, according to the final July University of Michigan consumer sentiment survey and the July Conference Board poll. The Reuters/University of Michigan index came in at 67.8, way down from the final 76.0 of June. That is the lowest reading since November. The Conference Board’s survey also slipped to 50.4 in July from June’s 54.3 mark.³

ECONOMY GROWS 2.4% IN SECOND QUARTER
The preliminary GDP reading from the Commerce Department was received tepidly on Wall Street. Analysts surveyed by Reuters were predicting 2.5% 2Q growth, and the federal government had earlier estimated 1Q 2010 expansion at 2.7%. Still, the recovery is continuing. One interesting note: business expenditures on equipment and software increased by 29.1% last quarter – the biggest jump since 3Q 1997.^4,5

DURABLE GOODS ORDERS DOWN 1.0%
Economists polled by MarketWatch had forecast a 1.1% gain for June. Instead, the category posted its worst performance in 10 months. With transportation orders factored out, the decrease was only 0.6%.⁶

A GREAT JULY ON WALL STREET
While last week saw stocks retreat slightly, the Dow climbed 7.08% in July for its best month in a year. As of Friday’s close, about two-thirds of companies in the S&P 500 had issued earnings reports with about 75% surpassing expectations. The DJIA ended the week at 10,465.94, while the NASDAQ and S&P 500 respectively settled at 2,254.70 and 1,101.60 Friday. In commodities, oil logged its best month since March, with prices rising 4.39% to $78.95 a barrel at the July 30 NYMEX close. Gold had its poorest month since December, with futures falling 5.12% in July and ending the month at $1,181.70 per ounce on the COMEX.^5,7

 
Source: cnbc.com, bigcharts.com, ustreas.gov, bls.gov – 7/30/10^5,8,9,10

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

The TPI Perspective: By Dr. Barry D. Kendell

Stocks were on a roller coaster last week but ultimately all major indexes ended the week essentially flat. There were no significant surprises as second quarter earnings were announced during the week. In general, earnings were higher than the previous quarter and substantially better than a year ago, but analysts are already anticipating the third quarter with less optimism. This apprehension is based on data that indicates there will be a sluggish economy both in the U.S. as well as in Europe.

British Petroleum reported a $17 billion second-quarter loss due to more than $32 billion in charges related to the Deepwater Horizon rig explosion and oil spill cleanup. The company also announced that embattled Tony Hayward would be replaced by an American, Bob Dudley, who has been in charge of the BP Gulf Coast Restoration Organization. The temporary cap placed on the leak site has so far remained intact and efforts are now underway to bring the process to a close permanently.

Markets overseas performed better last week on the heels of the better-than-expected news from the European banking industries stress test. The Europe fund rose 1.3 % while the Japan Smaller Companies fund achieved a 3.2% increase.

The average Fidelity stock fund is up 1.1% for the year, while the S&P 500 is down 0.2%.  Based on the outlook for corporate profits and current valuations, equities remain attractive relative to other asset classes.

Looking forward to next week, investors are uneasy about the pending Labor Department’s July employment report which is due on Friday. Consumer spending is not expected to increase until there is more confidence about job security. The market also is waiting for additional earnings and revenue reports from companies such as Dow Chemical and Proctor & Gamble Co.

TPI continues to be optimistic about developing overseas opportunities for investment. We anticipate that while domestic economic recovery will be a long term situation, there are still many promising investment opportunities for our clients.  

Please feel free to forward this article to family, friends or colleagues.
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  ]]> http://tripillarinvestments.info/?feed=rss2&p=378 0 http://tripillarinvestments.info/?p=374 http://tripillarinvestments.info/?p=374#comments Tue, 03 Aug 2010 19:02:43 +0000 editor http://tripillarinvestments.info/?p=374 Tri Pillar Investments: Presents

THE WEEKLY ECONOMIC UPDATE

QUOTE OF THE WEEK:
“The world demands the qualities of youth: not a time of life but a state of mind,
a temper of will, a quality of the imagination, a predominance of courage over timidity
 of the appetite for adventure over the love of ease.” – Robert F. Kennedy

Existing home sales fall … and mortgage rates fall further

The June existing home sales figures from the National Association of Realtors show a 5.1% drop from May, an effect from the closing of the deadline for federal homebuying credits. On the positive side, NAR reports that sales are up 9.8% from a year ago. Interest rates on conventional home loans hit a record low of 4.56% in Freddie Mac’s July 21 survey; average rates on 15-year FRMs also fell to a two-decade low of 4.03%.^1,2

Long-term jobless benefits extended

President Obama extended emergency unemployment benefits for about three million Americans Thursday, not long after the measure made it past strong opposition in the Senate. The program had ended in June; Obama’s signature extends it for six more months.³

FDIC insurance permanently bumped up to $250,000

This is a byproduct of the financial reform bill. The current $250,000 FDIC insurance limit for banks and credit unions was set to expire in 2013. Incidentally, the $250,000 ceiling has been made retroactive with regard to the six U.S. banks that failed from January 1, 2008 – October 3, 2008, such as IndyMac.⁴

Conference Board’s leading indicators retreat 0.2%

They lost a little steam in June, but they beat expectations: economists surveyed by Thomson Reuters had expected the CB index to fall 0.3%. May’s increase was revised upward to 0.5%.⁵

Dow gains 300+ points in a week

The DJIA settled at 10,424.62 Friday, gaining 0.99% last week. The S&P 500 and NASDAQ respectively rose to 1,102.66 and 2,269.47. Strong earnings reports helped the Dow advance by triple digits on Thursday, and when 84 of 91 European banks passed an EU stress test, the DJIA climbed 102.32 on Friday. On the NYMEX, oil futures slipped a little more than 3% last week to close at $78.98 Friday.⁶

Last week’s riddle: Observe the following sequence of numbers: 11, then 1,331, then 161,051, then 19,487,171. Given this sequence, what would the next number be?

Last week’s riddle answer: 2,357,947,691. The numbers are 11 to the first power, 11 to the third power, 11 to the fifth power and 11 to the seventh power. Therefore, the missing number is 11 to the ninth power.

The TPI Perspective: By Dr. Barry D. Kendell

The economy showed signs of strengthening as 83 percent of companies in the Standard and Poor’s 500 Index exceeded the average analyst profit estimate this quarter. Both top-line profit and sales improved which is a good indication that the business environment is on the up-swing. This also has had a positive effect on the credit markets. Companies such as Caterpillar (CAT), 3M (MMM) and UPS (UPS) had significant profit increases which has allayed many fears of a double-dip recession. Companies that showed above expected performance in most instances had in common the fact that they had a diversified overseas exposure. High-yield, high risk bonds are rallying at their highest level in four months on speculation that defaults among the neediest borrowers will diminish as profits exceed forecasts. On another positive note, Ford reported earnings of 2.7 billion or 0.68 per share in the second quarter, making it the best quarter in six years.

The results of the long-awaited European bank stress test were released this week which led to a rally in both the U.S credit and equity markets. Seven of the 91 European banks examined failed the test (one German bank that is already nationalized, one Greek bank, and five Spanish savings banks). The results were better than market expectations but this still means that they will need to raise a total of EUR 3.5 billion of capital.

Last week President Obama signed the sweeping financial reform bill. Many questions remain unanswered-such as how profitable the industry be once regulators begin to enact changes, but so far investors have ignored these concerns.

The overseas markets were some of the best places to have exposure last week with the Latin America investments increasing 6.1 % and the China Region topping 4.8 %.

Over the next several months, the US financial institutions, the rate of unemployment and the health of the housing sector will have the biggest influences on our markets. It seems to most observers that foreign investments in countries such as Brazil, China and Germany may hold some potential gems. TPI will keep you informed and provide the investment advice tailored to your personal situation.

Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.

Consumer prices decrease a bit; consumer sentiment drops notably

In June, the Consumer Price Index fell for the third month in a row, heading south 0.1%. Analysts thought the June reading would be flat. The Labor Department noted that core CPI did rise 0.2% last month, largely due to rent costs increasing. The last time CPI went negative for three straight months was October-December 2008. Separately, the preliminary July Reuters/University of Michigan consumer sentiment index came in at 66.5 compared to 76.0 in June – analysts expected a number in the mid-seventies.1

Dodd-Frank bill off to Obama’s desk

The Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act Thursday by a 60-39 vote, with President Obama’s signature expected next week. The legislation is intended to protect consumers in the financial arena and prevent a repeat of TARP. Detractors think it gives too much power to regulators and might even open the door for further bailouts. House Minority Leader John A. Boehner (R-OH) called it “killing an ant with a nuclear weapon.”2

Shops sell less in June

Retail sales were down 0.5% last month, according to the Commerce Department, marking the second straight month of retreat. Additionally, business inventories gained 0.1% for June (the fifth monthly gain in a row for that category).3

Producer prices fall 0.5% last month

The trend here may look deflationary: as with the CPI, this was the third straight monthly decline. However, the Bureau of Labor Statistics noted that core PPI increased by 0.1% for June.4

Click here to download the full report.

“You are never too old to set another goal or to dream a new dream.”– Les Brown

Jobless rate drops to 9.5%
The Labor Department said 83,000 new jobs were created in the private sector in June, yet non-farm payrolls shrank by 125,000 positions (an effect of temporary U.S. Census workers being laid off). Still, the 0.2% drop in unemployment was considerably better than the 0.1% increase anticipated on Wall Street.1

Gains in personal spending, personal income & personal savings
Consumer spending rose by 0.2% as incomes climbed 0.4% in May, the Commerce Department stated last week. The personal savings rate reached 4.0% in May, a high unseen since September 2009. So consumers are aiding the recovery, albeit cautiously.2

$8K home buyer tax credit is back
The real estate market got some relief Friday morning as President Obama signed an extension of the federal homebuyer tax credit ($8,000 for first-time home purchasers and $6,500 for existing homeowners who move). The credit is now extended until September 30.3

Cheapest fixed-rate mortgages in decades
Right now, conventional home loans are almost as cheap as they were in the 1950s. The national average interest rate on 30-year FRMs fell to 4.58% last week, according to Freddie Mac’s final June estimate. This is the lowest rate Freddie Mac has recorded since the start of its Primary Mortgage Market Survey.4

Surprise drop in factory orders, but ISM index shows further growth
Factory orders fell 1.4% in May. Economists surveyed by Bloomberg had forecast a 0.5% slip. Minus transportation orders, the category was down 0.6% for the month. The Institute for Supply Management’s June manufacturing index slipped to 56.2 from 59.7 in May, but that still means growth.5,6

Wall Street in sell mode
It seemed like every market day started with a descent last week. The S&P 500 ended the week at 1,022.58, the Dow at 9,686.48, and the NASDAQ at 2,091.79. It was rough going – on the week, the marquee U.S. indices lost between 4.5%-5.9%. On June 30, the yield on

Click here to download the full report.

Congress agrees on a bill. How would it change the financial landscape?
Provided by: Tri Pillar Investments

Next month, President Obama will likely sign a bill into law ordering changes in the ways banks, credit card issuers and mortgage lenders interface with consumers. Here are the key features of the financial reform agreement that the Senate and House of Representatives came to on June 24, with a vote pending.

#1: The Bureau of Consumer Financial Protection. This new consumer agency answering to the Federal Reserve would supervise mortgages, credit cards, student loans and the banks, credit unions and private lenders that issue them. Institutions holding less than $10 million in assets wouldn’t be regulated by the BCFP – but they would have to follow its rules. The BCFP would aim to make these products easier to comprehend for consumers and crack down on any possible deceptive practices.1,2

#2: See your credit score for free. If you are turned down for a mortgage or a loan, the new reforms would give you the power to see the credit score supplied to your lender. Right now, you can request three free credit reports each year but you can’t see your actual score.1,2

#3: Tougher rules for mortgage lenders. These rules should have come into play years ago, of course, but better late than never. Mortgage lenders would need to verify the assets and income of borrowers, thwarting any surreptitious comeback for “liar loans”. Loan officers and mortgage brokers would not be able to receive bonuses for guiding you into this or that loan. Borrowers with ARMs and other types of complex home loans could not be hit with prepayment penalties should they want or need to pay off a mortgage before the end of its term.1,2

#4: Retail minimums for the use of credit cards. Score one for retailers, who don’t want to see people make $2 credit card purchases when the swipe fee alone cancels out the revenue. Under the new legislation, stores could set minimums for credit card use. The minimum transaction level could be as high as $10 if a store chooses; the Federal Reserve could raise that $10 limit on the minimum with time.1,2

Alternately, stores could offer consumers discounts if they pay for items with cash or debit cards. (They wouldn’t be able to vary the discounts for different debit cards.)2

Additionally, the proposed reforms could allow colleges and universities and the U.S. government to set maximums for credit card transactions.2

#5: Brokers could be held to a fiduciary standard. Under the new reforms, the Securities and Exchange Commission now has the chance to hold brokers to the same fiduciary standard common to financial advisers – that is, investment brokers would have to put a client’s best interest first and not simply recommend a “suitable” investment to a client. That new standard may or may not come into play, however; the SEC is undertaking a six-month study to see if such a rule would amount to regulatory overlap or not.3

#6: The “Volcker Rule” would be put into play. This is the rule that would prevent banks from trading with their own money. It would kick in with small concessions. While the reforms would halt most proprietary trading by banks, some limited investment would be permitted – they could provide up to 3% of a fund’s equity, and invest up to 3% of Tier 1 capital in hedge or private equity funds.4

The big banks got another key concession from Congress: they don’t have to get rid of their swaps-trading desks (some legislators had contended that this decision would drive such trading to foreign markets). They can still be involved in foreign-exchange and interest-rate swaps dealing.5

#7: An Office of Credit Ratings would appear. It would oversee the actions of Moody’s, Standard and Poor’s and other big names, and one of its objectives would be to flag potential conflicts of interest that could influence ratings judgements.1

#8: The SEC would no longer regulate equity-indexed annuities. The promotion and sale of these annuity contracts has generated much flak in recent years. Interestingly, they would be overseen by state insurance regulators if the reform bill passes, and treated strictly as insurance products.2

Now, what about Fannie Mae and Freddie Mac? Good question. Nothing made it into the final reform bill to address that dilemma. Some analysts expect another bill will emerge in 2011 to propose their restructuring or elimination.

Have a great 4th of July Holiday weekend.

Troy A. Buder

Highest consumer confidence since January 2008

That is what the final University of Michigan/Reuters survey for June reveals. The index came in at 76.0, an improvement from the final 73.6 reading for May. (For the record, the survey has averaged 84.5 across the past ten years.) The poll’s index of consumer expectations (the “better or worse six months from now?” question) improved 1.0 points to 69.8.¹

Home sales swoon in May

New and existing home sales plunged dramatically last month as federal homebuying credits left the picture. Economists expected new home sales numbers would dip, but the 32.7% decline announced by the Commerce Department surprised Wall Street and the real estate industry. The National Association of Realtors stated that existing home sales were down 2.2% last month.²

Durable goods orders fall, but corporate profits revised north

The Commerce Department noted an overall 1.1% decline in durable goods orders for May; minus transportation orders, there was actually a 0.9% gain in the category. It put 1Q GDP slightly lower at +2.7% in its final 1Q snapshot, but it also revised 1Q corporate profits north to +8.0%. Corporate earnings were 34.0% better than a year before – the largest year-over-year climb in 26 years, and a signal that both hiring and business investment are due to accelerate. The consensus 2Q forecast of a Wall Street Journal survey estimates second-quarter GDP will come in at +3.6%.^1,3,4

BP, financial reform concerns weigh on Wall Street

The DJIA wrapped up Friday at 10,143.81, ending a rough week. The S&P 500 closed at 1,076.76 Friday, while the NASDAQ closed at 2,223.48. All three indices wound up in the red for 2010 as of Friday’s close, but the Russell 2000 remained positive (+3.15% YTD).⁵

Last week’s riddle: A man claims he was 88 years old two days ago, and yet he also tells you that he will turn 91 next year. How can this be?

Last week’s riddle answer: He talks to you on New Year’s Day and his birthday is on December 31. So two days ago (12/30), he was 88. On 12/31, he turned 89. His 90th birthday occurs on 12/31 of this year, and he will turn 91 next year.

The TPI Perspective: By Dr. Barry D. Kendell

US stocks fell for the first time in the last three weeks due to lackluster corporate earnings and economic data that called into question the strength of the economic recovery. Stocks finished on the downside Monday, despite an early morning boost on China’s plans to float its currency. Still, material stock gained on the news. New home sales plummeted 33% to their lowest level on record in May – though this was not unexpected as the government’s home incentive plan expired.  Existing home sales were also weaker than expected. Homebuilder shares fell in sympathy. First quarter GDP was revised lower.

The House and Senate agreed on a finance reform bill, which will be voted on this coming week. Such far reaching changes have not been seen since the Great Depression. Many of the items feared most damaging to banks future profitability were softened in the final version. The new law will however limit banks’ proprietary trading, and investment in private equity or hedge funds. The new law opens the door for higher capital standards (meaning less leverage), which will result in a larger share of financial risk being absorbed by equity rather than debt. That will add to financial stability and reduce the risk of large taxpayer bailouts for particular firms. A new consumer financial protection agency, housed at the Federal Reserve, will also be created. Like any bureaucracy this means more paperwork for consumers. The question is how this agency will be used and whether or not it brings even more political pressure on the Fed. The new bill also raises a tax of $19 billion on banks and hedge funds. Any tax increase will distort markets, raise the price of financial services to consumers and hurt the economy. Banks have already been hit with higher deposit insurance rates by the FDIC. Also on the national front, a Louisiana judge overturned President Obama’s six month Gulf oil drilling moratorium though the administration plans to challenge it.

On the international front, the average international fund lost almost 2.0% for the week. With energy stocks taking a beating this week, Canada fund retreated 4.2% and Nordic was off 3.8%. Thanks to China announcing that it will allow its currency to float, Asia-oriented funds actually managed modest gains.

On the fixed-income front, investors turned to the relative safety of bonds this week as stocks sold off.  For the week, the tech-rich Nasdaq Composite was hurt more than most other widely watched indexes, as it retreated 3.9%. The large-cap S&P 500 fell almost as much with a 3.7% decline, while the small-cap Russell 2000 sank 3.4%. As for the Dow Jones Industrials, it was off 3.1% for the week.

Looking ahead, Friday’s payroll report is the week’s most anticipated event. While equity valuations are at compelling levels, trading could remain choppy as investors appear to be waiting for signs of economic growth before committing fresh capital.

The summit of the Group of 20 nations concluded with an agreement among the participating leaders on a target for advanced economies to at least halve deficits by 2013 and stabilize their debt-to-output ratios by 2016. As the participating countries tighten their belts, there will be far-reaching effects on US manufacturing, employment and trade. Several of us at TPI who were born and raised in Canada were extremely disturbed by the destructive behavior of many of the protestors in Toronto at the summit. We have pride in our heritage with its long history of friendliness and cooperation.

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I took this hot question to Troy Buder, the Founder & President of Tri Pillar Investments, LLC — a boutique Registered Investment Advisory firm which specializes in working with members of the Medical and Academic communities including Duke University, Wake Forest, UNC Chapel Hill, NC State, Emory and UCLA.

Damien Hoffman: Troy, a lot of people lost a lot of money in the recent few market busts. The cost of energy, food, and medical care is inflating. What are you telling clients who fear they may never retire?

Troy Buder: First we must look at three factors that encompass anybody’s retirement lifestyle: time, contributions, and rate of return. Time is how much time they are going to work.

Here is an example of the importance of time. We work with physicians who make a lot of money, but many of them specialize and don’t get out of school until they’re 38 or 39 years old. So, they’ve deprived themselves for a long time. Then, all of a sudden, they’re making some good money. However, they’re making $300,000 but spending $350,000 At age 50, they wake up and say, “Oh, my gosh. I haven’t even planned for my retirement. I have only 15 years to go.” Thus, time is something to consider much earlier.

Click here to read the full interview with Troy Buder by Damien Hoffman