Category Archives: Market Comments

Confessions of A Federal Reserve Official

Posted on February 23, 2012 by | Comments Off

As mentioned in an earlier post, Dr. Harvey Rosenblum was the keynote speaker at the Texas Investment Symposium Event (Tips). Dr. Rosenblum, a very candid speaker with a knack for making complex subjects understandable, (economics can be very confusing) said something during his speech, very matter-of-factly that I have not heard before from a Fed official.

Dr. Rosenblum confessed that the FOMC’s current interest rate policy no longer has the teeth prior policy makers had available them.  Long suspicious of this fact by many, including myself, it was interesting to hear Dr. Rosenblum so casually mention this fact.

Why is current interest rate policy less effective?

The following chart is of the FOMC target interest rate policy. Notice how this last cycle we have moved to zero and are holding.

Where can you go from here ?

Fed Target Rate: New York Fed.org

There are no more bullets in the gun! Notice in prior years there was room to move down (turn the heat up on the economy) and have an effect on the economy. Since we currently have a close to zero interest rate policy, it makes sense that the latest changes have had a much slower result in changing the direction of our current economic situation.

Other Operations Necessary

Dr. Rosenblum mentioned over a half of dozen NEW economic stimulus plans that were established during the 07-09 crisis, many of which are now closed, as the new open market operations (economic stimulus) levers of the future.  While there may be many new future tools for the FED to embrace our bet is an eventual return to normalcy.

What is old is New Again

Similar to that old phrase of what is old is new again, we are wishful of an eventual rising of short-term rates that will allow Fed policy makers to “re-load” the gun for the eventual next economic downturn.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Economy, Interest Rates, Investing/Financial Planning

Are Those Rose Colored Glasses You Are Wearing? Zigg Makes an Appearance

Posted on February 10, 2012 by | Comments Off

You guessed it, Zigg is back, and this time with a different message. For those new to Zigg, he has a residence on small island near the shore of a large group of fair weather friends, called Zagger’s, who often represent the majority voice at any given moment.

Last fall, when everyone was Zagging in the negative direction, Zigg spoke calmly and confidently to us on Friday’s, pointing out the positive events of the week, and letting us know that things are not always as negative as they seem.

This week Zigg has a different message for us. Possibly Zigg’s message is due to his Zagging friends taking residence on his island, telling him the sky is bright, and it will never cloud again. 

Zigging while others are Zagging this week means pointing out a few items:

  • Consensus moods (Zagger’s) often lead to clumsy investing, do not let your guard down, just as we bought when markets were down, we sell when they are up in order to keep your portfolio driving speed (allocations) appropriate.
  • It is very highly likely, capital markets will not match their January return of 4% throughout the year, leaving us with a 48% return for the year.
  • Shhhh……. While we hate to say it, the EU still has a few problems.
  • It is an election year!

While always positive, and never one to stick his head in the sand, Zigg did want to pull the umbrella from a few of his Zagger friend’s drinks (and maybe send a couple home.)  Zigg also understands, be careful what you ask for!

Have a Great Weekend!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments

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Non-Farm Payrolls Blow Past Expectations – Black Clouds… ???

Posted on February 3, 2012 by | Comments Off

This morning non-farm payrolls came in at 243k versus expectations of 140k, far exceeding expectations. This surprising report has put a fire in the capital markets around the globe.

While this is only one report, most economists believe it takes about 210k to bite into the unemployment situation.

Given the Black Cloud CFA Forecast dinner post, and the dialogue I have gladly received from many of you, we now have another positive tea leaf on the table.

Thanks for all of your emails and comments, and thanks for reading our work, we greatly appreciate it!

Have a Great Day and we have another post coming shortly today to slide you lightly into your super bowl weekend !

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments

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The Black Cloud of Panelists at the CFA Dinner

Posted on February 2, 2012 by | Comments Off

Last night, as mentioned earlier in the week, a group of “experts” joined to visit and discuss the domestic and global economic situation at great length. Each one of the four horsemen spoke on a very macro view of the world.

As dinner concluded and the microphone volumes increased the blue skies turned dark and I began to fear of indoor lightning bolts and rain. Projected time frames ran from an optimistic 2018 to a pessimistic 2022 for the good times to return.

Over use of leverage, EU debt issues, and continued government criticisms were abundant as we hit the mid-point of the discussion. One speaker virtually guaranteed we were in a recession at the current time. We will keep track as the year passes.

While I operate most times from an optimistic view-point and “There are very few statues of pessimists!” it is healthy to always listen to the negative views. In the case of this dinner, one night may cover several days or even a week of negatives.

After reviewing my notes from the meeting one last time……still all negatives, definitely a weeks worth!

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Market Comments, World Political

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Facebook and Sipping from the Earnings Fire Hydrant

Posted on January 31, 2012 by | Comments Off

It appears the long-awaited Facebook IPO is nearing the Wall Street docks, with Morgan Stanley and Goldman Sachs (surprised Goldie is not lead, with their large earlier investment) being the underwriters.

Yesterday I saw or heard at least six different opinions on the Facebook IPO most of which were positive. At this time, given the lack of information that has been officially released, it is impossible to formulate an accurate opinion. It is difficult to pick the team that will win the big game, especially not having any idea who are the players. Our position is casual observers during this process, however we are always interested.

Today we have 29 companies from the S&P 500 reporting which is similar to taking a sip of water from a fire hydrant.  Most earnings have been ok, but not terrific, again setting the bar relatively low, in our opinion.

Donald is in town tomorrow for a group of expert forecasts for economic and capital market related events sponsored by the local CFA association. We will bring you the cliff note edition of facts, should they prove interesting.

Back to work as conference calls beckon.

Have a Super Day !

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Earnings Season, Investing/Financial Planning, Market Comments

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Iran the Powder Keg, From Two Points of View !

Posted on January 30, 2012 by | Comments Off
Sometimes we cannot see the forest due to the trees!

This saying came to mind as we have buried our heads in conference calls, economic data, government statements lately, only to have an epiphany moment twice in the last few days.

Iran’s actions, and possible reactions will have effects on the capital markets. Capital markets responses vary greatly depending on the conflict and occurences.  It is hard to determine what a major Iranian conflict may cause both market, and economically, but we felt if important to update you on the current situation, especially since it has been so prominently tossed in our lap over the last couple of days.

On Friday (1-27-12) I had the opportunity to hear Gil Elan speak at a Navy League meeting, thanks to a nice invite from a close friend and peer in the investment business.

Gil Elan

Mr. Elan, a retired Lieutenant colonel with vast experience as an Israeli combat and briefing officer, and terrific speaker, took the attending group of people through the most recent Iranian conflicts and possible outcomes of several scenarios. I was very surprised to hear just how “hot” the situation has become. While the outcome is not know, there are more negative possibilities than positive at this time. Thanks very much to Mr. Elan for the update and terrific history lesson.

Prepping for the upcoming week with my Sunday evening usual listening in the background, 60 Minutes; the headline story, an interview with Leon Panetta , US Defense secretary caught my ear. Mr. Panetta being such a jolly fellow, forces one to listen closely to his words as much of what he says is EXTREMELY pertinent and while guarded, can have nuggets of information buried within the delivery.

With Panetta and Elan both agreeing not only in the severity of the situation, but very nearly on the same time frames of actions and reactions to Iran’s nuclear program, less than a year, we thought it worth putting on all of our radar.

While this may not be a “Good Monday morning, have a great week!”  discussion, we do have a good runway of time before it appears there will be any actions, making it much easier to discuss with clarity, even if it is a Monday morning!

We will keep our eyes peeled for more details, but do understand there are sizable uncertainties when discussing the Iranian situation.

Have a Great day and Super week!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments, World Political

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The FOMC Mistake; Calling it as We See it !

Posted on January 26, 2012 by | Comments Off

Yesterday the FOMC released their regular statement regarding policy and actions at 11:30 AM central time followed by an extended live Q&A with the Fed Chief,  Bernanke. We feel the FOMC has made a mistake with their statement.

Here is the specific sentence in the release that has us concerned

“In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

As is often the case when we have a strong opinion, we have made it a point to not read the various analysis before voicing our thoughts.

Here are the reasons we feel this statement was a mistake:

  1. There was nothing gained by pushing the time line out another year right now. Keeping that statement in the hat for this time next year (if necessary) would have been a much safer way to go.
  2. It is too hard to predict what the economic situation is going to be that far in the future (We liked the original runway of time as it pushed any fed decision out-of-the-way of the election.)
  3. Investor  confidence (domestic and more importantly internationally) is paramount in retaining control of US interest rates. In investment professionals minds, holding rates low until next year, no matter the economic situation was feasible. Extending the stated term another year slightly cheapens this statement AND their original statement of low rates until 2013.

“Hot on the Long End”

Ultimately what we will now even more closely watch for is longer termed bonds rates rising.  In Wall Street lingo, it is called getting “hot on the long end.”  Rates have a funny way of making officials and investors eat their words. The FOMC changing their minds in the future would not be the worst thing that has ever happened.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

PS We are not being Zaggers, but do call it as we see it !

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Posted in Economy, Interest Rates, Investing/Financial Planning, Market Comments

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Dancing in Davos with Tea Leaves from a State of the Union, 90 Day Treadmill (The Mouse Wins)

Posted on January 25, 2012 by | Comments Off

As the World Economic Forum’s Annual Davos retreat  officially kicked off in Switzerland today, we find ourselves more interested in pondering the tea leaves from last night’s State of the Union (transcript.) 

Just so you know:

Yesterday early morning during our first 90 Day Treadmill post of this quarter, my laptop mouse and I had a conflict, with the mouse emerging as the winner.  Here is the full post for yesterday’s post as once the mouse took over only a partially completed early am email was sent, thanks for your patience. 

Dancing in Davos

There will certainly be interesting comments coming from Davos, however as of late we feel it is more of an honor to be seen at the summit than the importance of the delivery of information. Most programs are streamed and we see many acquaintances on the schedule over the next few days, however, remember this summit is more of at “Think Tank” summit than solution.

Tea Leaves in the State of the Union

While we are cautious to declare the finding of a needle in the haystack yesterday evening during the State of the Union address, we are interested by much of the rhetoric, especially concerning natural resources. Worth noting, it is always much easier to discuss than take action especially during an election year.

That’s it for now, from a very rainy Dallas Texas, finally! 

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Education, Investing/Financial Planning, Market Comments

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Q1 2012 Newsletter is Posted for Your Perusal, Little Brother Gets a Confidence Vote

Posted on January 18, 2012 by | Comments Off

Our Digital Q 1, 2012, professionally espoused coming year forecast Newsletter has been posted to our Website on our Newsletter Page. We question forecasts from any professional, but work hard to give you our best thoughts and ideas.

Q1 2012 Newsletter

For now, our internal list of very important items concerning capital markets has seen EU worries drop in importance, as China economic growth, and US earnings climb the rungs of importance.

Little Brother countries are having confident government bond auctions resulting in lower interest rates (See: “What Happens When Investors Lose Confidence in Your System” in our Latest Newsletter), and that is relieving investor concerns, which has resulted in a more positive capital market.

Starting tomorrow, the 90 day treadmill really kicks into high gear. With our ears to the conference call line grindstones, we look forward to bringing you varous managers outlooks soon!

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Earnings Season, Economy, Investing/Financial Planning, Market Comments, Newsletters

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Zigg’s Continued Sabbatical, Newsletter Update, a Happy Capital Market, Long Weekend

Posted on January 13, 2012 by | Comments Off

We let Zigg have another week off as his island is full lately and he has been busy chaperoning the party.  We feel certain his new-found friends will abandon him eventually, leaving him to espouse his views as his Zagger fair weather friends return to land.

The beginning weeks of the new year mark our annual “Preview and Review” of the capital markets, remember we are skeptical of so-called ”Professional” forecasts, including our own. Our re-designed Newsletter (thanks to Kathy our editor) is soon to arrive in your mailbox and will also be posted to our website and has a great review of the latest year’s results and our expectations for 2012.  In “What Happens When Investor’s Lost Confidence in Your Government” we review what happens to our hard-earned investment dollars when government bond rates rise, which has not happened in almost three decades. Believe us, just because it has not happened lately, does not mean it will not, or cannot.

A very important part of our job is to continually review, confirm, and educate ourselves on changes and opportunities in the capital markets .  Yesterday I spent over six hours in a rigorous examination of the options markets and new technology which we have been reviewing for almost a year, but will come on-line in full force in the next few weeks.  In a timely, final of four-part series, concerning our Armageddon insurance strategy, we feel even more confident in our early findings and results, see “Investing for the Long Term, While Protecting the Short” also coming up in our newsletter.

In manic like form, the capital markets and their participants are still cheering the Holiday spirits, ignoring negatives, and focusing on the positives. While we have been positive in Zigg fashion for some time, we are confidently aware sentiment can change faster than the lead of a Dallas Cowboys game. That’s ok, we always keep our wits. But do stay tuned!

We hope you have a happy weekend.  Next week, as our Newsletter is completed, we enter earnings season so we will be back to our more frequent posting schedule, as this latest week has been a bit of a catch up time for us.

Thanks for reading and have a great day and super extra long weekend! Domestic capital markets are closed on Monday in honor of Martin Luther King.

JK

214-706-4300

www.jkfinancialinc.com

FFTFF (Feel Free to Forward to a Friend)

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Posted in Investing/Financial Planning, Market Comments, Uncategorized

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