Posts Tagged ‘Investors’

American investors in the stock market deserve a break this week. After falling 20% in the first two months of the year it is time for the market to begin a rally. Investors are battle weary and worn down by an economic tsunami that has generated an onslaught of negative economic performance in wave after wave of disappointment.

The relief, that we believed would come from the advent of the new administration and the natural lift we expected from a new team in the White House,  failed to materialize and they actually heightened the anxiety that already existed in the markets, making a bad market even worse.

Amid calls for the President to step out and begin to instill confidence in our economy he seems to have fallen silent. An action that is certainly better than the litany of crisis and catastrophe that he reiterated day after day as he talked the crisis up and the economy down to gain additional support for the excessive spending programs he has proposed.

Barack Obama is obviously an incredibly astute and focused individual. He identified and secured the loftiest of opportunities. He has succeeded in getting elected to arguably  the most coveted position in the world and he accomplished it at a pace that few in history can match. The challenge, that confronts we the governed, is that Barack Obama never operated a business or worked in a business environment and as such comes to his understanding of economic matters through academic as opposed to practical experience.

He has learned the buzz words which any leader understands are necessary to speak confidently about a broad spectrum of issues. Obama was never construed to be a business candidate, though numerous well heeled business elitists supported his candidacy and subsequent election. However, given that he has a broad social agenda and an economy at peril it would seem prudent to gain a better understanding of business and job creation in order to create a longer term revenue stream to accommodate his ambitious spending agenda.

Obama, occasionally talks the talk of business but he has never walked the walk. He does in fact project the traditional liberal disdain toward business that those who have never had to meet a payroll or are members of the academic elite often do.

The President appears to be an excellent communicator and a quick study. His has mastered the teleprompter as well as any veteran broadcaster. Perhaps the President should put those communication skills to the test by starting an entrepreneurial express tour.  Ceo4aday believes this man who promises so much change and transparency should reach out to business by meeting with not just the Fortune 50 elite but a broader range of small and mid cap businesses across a varied group of industries to get a real sense of what generates job creation.

Spend a few hours in a conference room Mister President as a management team wrestles with attaining their budget. Sit through a Board meeting and listen to the issues that confront businesses and Boards every day. Step out Mister President and meet the Americans that devote every day to assuring that a revenue stream exists for Washington to appropriate. Learn and communicate about successes in our economy. Deliver a positive message to the American public and watch day by day as America moves forward into the dawn of emerging growth.

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As the stock market, continues to tumble, the pressure mounts for Barack Obama to address the nation on Tuesday evening with a message of economic hope for a nation that continues to be battered by a global recession. Obama’s utterances to date on the economy have not been well received by investors as he seeds his comments with terms like catastrophic and historical.

 The Dow today closed at a level not seen since May of 1997. Several companies within the 30 stocks that comprise the index are now trading at share prices below $10 per share. General Electric an American industrial icon is now trading at levels not seen since 1995.

There is a growing concern on Wall Street and across the nation that America’s largest banks may be nationalized. The lack of clarity from the Obama administration has created increased angst in the markets further exacerbating a market that lacks confidence in the new President and his team.

Investors need a reason to invest and consumers need a reason to begin purchasing again. The President and his senior economic advisers need to bring clarity to the issues which are hovering over the markets and causing increased uncertainty. We need to hear with conviction that our political leadership is working in concert with our business leaders to execute a plan that will yield positive benefits to our economy and begin to assuage the fears of investors and consumers.

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Treasury Secretary Timothy Geithner outlined in broad strokes, the Obama administration’s Financial Stability Plan and emphasized the government’s focus on visibility in an obvious attempt to placate the electorate at the expense of bad policy. Reaction on Wall Street was an immediate sell off in the markets.

Touching on financial sins of the past and channelling the 1930’s Geithner, following President Obama’s lead and hitting a populist chord  spoke of the depth of the crisis and the potential collapse of the financial and credit markets, should the nation fail to act now to provide additional support to the nation’s banks.

The market appeared to be seeking more detail, with respect to the disposition of the toxic assets that are currently on the balance sheets of financial institutions across America. With out details, the market is unable to truly digest the likelihood of success of the plan.

Reaching out to million of Americans facing mortgage foreclosure, the Secretary touched briefly on the administration’s intent to address foreclosures and mortgage rates to alleviate the crisis in the housing market. He expressed that details would be forthcoming in the next several weeks.

What the market needs to hear from the Treasury Secretary and what the public wants to know, are specific details, that provide a framework to exit the current financial and credit crisis, that has triggered the turmoil in the current economy. Broadstrokes from politicians and senior cabinet members raising the specter of the great depression, do not serve to instill confidence in the economy or their ability to execute solutions.

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Barack Obama is clearly a student of history. He has studied the Presidency of Abraham Lincoln and allowed comparisons to be made. As the first biracial President of the United States, President elect Obama is already assured of a place unique in history, for becoming the symbol of a democracy whose electorate has proved to be color blind.

 One does not become President without a desire for greatness. Selflessness and humility, characteristics that we admire and expect from great leaders are learned and developed from life experience. The desire to attain and achieve great things resides within and is nurtured by opportunity.

It has been noted by some, that Barack Obama lacks the depth of experience more commonly associated with those who have sought and been elected to the nation’s highest office. What the world will quickly learn, is whether or not he has had enough life experience to hone the character traits that are vital to serve a nation. 

There is no doubt that he possesses the desire to accomplish great things. The American electorate has chosen to provide Barack Obama with the opportunity to achieve greatness at a time when clarity of vision and force of will are required to lead a nation and a world seeking a return to more prosperous times and the safety of a secure homeland.

It is in our nature as humans to seek solace from the symbols of security our leaders represent. It has been that way since the first human litthe first torch and grunted follow me. It is also our nature to project great powers upon our leaders to solve the problems of our day. The men and women we elect to lead us are generally spun from our own cloth however, we quickly forget that, as they assume the mantle of power, replete with all its’ trappings. 

As the America prepares to annoint Barack Obama its’ 44th President  it would serve the nation well to reflect upon the enormity of the task ahead of this new administration. Those on the left and on the right should seek unity of solution, with an urgency, perhaps not exhibited since  the second world war, with respect to addressing the economic crisis we are mired in.

We do not know what additional challenges will confront this new President as his term progresses and what future opportunities for greatness may evolve. There will be ample opportunity though in the coming weeks for us to judge the new President and determine if Barack Obama is capable of  providing the leadership necessary to infuse a sense of urgency into both government and business institutions to reignite the economy and inspire confidence in consumers and investors.

For the sake of this nation we pray that he is able to answer the clarion call of greatness as it presents itself. For while the nation celebrates his ascension to the seat of power, with a series of spectacular events in Washington leading to his inauguration on Tuesday, the world is waiting to test the mettle of the man.

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As oil lingers below $40 for a barrel of crude and heads toward $30 , the world seems to have turned upside down. It was only six months ago that we were accepting that oil,  hovering near $150 per barrel,  would soon be at $200. Now while contemplating $30 oil we can see the benefit at the pump when we fill our tanks with gasoline below $2 per gallon.

As oil, the most visible of commodities has declined,  the bubble has burst as well for a host of other commodities. The rapid increase in the cost of commodities forced most companies to raise prices and sent consumers scurrying for shelter from the fall out of higher prices.

The good news for consumers,  is that they will continue to feel relief at the pump for the foreseeable future however, with the exception of eggs, milk and some proteins,  it is unlikely that consumers will see lower prices in other consumer products. Manufacturers, having been able to raise prices, will  use this period of reduced input costs to improve margins in a period when unit volumes may show some declines.

This should result in some favorable earnings suprises in the consumer products goods sector as 2009 progresses and continue as revenues normalize later in the year. It should be particularly favorable to food companies as transportation costs and base commodities decline.

 Consumers continue to shift their food dollar toward more meals consumed at home reversing a trend that had dominated the food industry over the last three decades where meals eaten away from home grew consistently.

Supermarket Retailers and traditional branded and private label ingredient and prepared food companies stand to benefit most from this dramatic shift in purchase trends as consumers seek comfort from eating at home. Investors may be wise to take note.

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The stock market will rally on the first trading day of the new year on the heels of a year that saw the deepest declines in the market since 1931. Markets were heading up overnight in Asia and bode well for a strong opening on Wall Street when trading commences in the morning.

Will we see a rally through January or will markets move downward testing the lows seen in 2008? Will investor angst lessen enough for money to begin to move off the sidelines and into the market? Which sectors will be hot in 2009 and which will fall out of favor? These are questions which will be answered as we move through a year that  many economists have already concluded will be a dismal one for the economy.

Unemployment will become center stage as the focus on both the financial and automobile sector bail outs lessen. Government intercession in the economy will come in the form of additional stimulus provided by a democratically controlled Congress and a supportive President anxious to flex their electoral mandate.  A solution to stem the tide of depreciating home values will top the wish list of many investors.

Many investors are leery of the market following the 2008 crash and it remains to be seen what the impact of the Bernie Madoff fraud will be on the investing public. They may need to see some tangible appreciation in the markets before they are willing to commit to a market that suffered through its worst performing year since 1931. However, a stabilization of home valuations, a return to reasonable credit markets and continued low energy costs could fuel a banner year for Wall Street.

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I have just completed viewing Paramount Pictures, The Curious Case Of Benjamin Button. A tale of fantasy based on a Fitzgerald short story in which the premise of the story evolves around a character who is afflicted with a reverse aging process.

Given the events of the past several months in the financial markets as well as the broader global economy and more recently the revelation of self confessed ponzi scheme extraordinaire architect Bernard Madoff,  I am moved to ponder what might be if Madoff suffered from a similar affliction as Benjamin Button portrayed by Brad Pitt in the film.

Following the chronology of the film, its’ unlikely that Madoff would have been able to effect the fraud that has led to the dissolution of wealth for so many and has elevated the angst level in a global investor community already shell shocked by the implosion of the markets in 2008 and battered by the continual media feed of an economy deep in recession.

Madoff would have been unable to make off with any funds as he would have been devolving through his  teen years and into toddler hood during the alleged period that  his scam impacted investors in his fund. Investors which included the rich and famous, as well as a number of Jewish charities and separated many others  from their life savings would have been spared the gut wrenching realization that for many their lives are now forever changed.

Bernard Madoff is not Benjamin Button. Lives are changed, charities are shutting down and blood has been spent. In the coming months,  as we learn more about the Madoff fraud and his victims we will continue to be both sickened and amazed at the magnitude of this scheme perpetrated by Madoff and we may from time to time ponder the fantasy of Benjamin Button.

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A tip of the hat to the Fed for their dramatic response today to the continued economic plight that we find ourselves in as we count down toward 2009. I can’t imagine that  many Americans ever envisioned the Fed establishing a Fed funds target rate of between zero and one quarter of a percent but,  that is exactly the target that the Fed’s Board of Governors announced today.

Bernanke’s Fed continues to make the right moves to provide stimulus to a beleaguered economy. The stock market  responded with a strong embrace of the Fed’s action today as  the Dow was up nearly 360 points and the move today could signal a year end rally in the market.

With the Fed funds rate at historic lows and the various actions the government has taken to both provide stimulus and prevent further  implosion of our financial markets and institutions  it would appear that we may begin to take heart that these actions will prove fruitful.

Granted,  unemployment, continued erosion in the housing market, an auto industry seeking a lifeline and an extraordinary fraud by a prince of wall street,  all bring pressure to bear on the fragile psyche of the consumer and threaten further economic decline.

However, if the markets can indeed rally from this point through the year end and December 401k and other investment portfolio statements begin to show an improvement,  investors may enter the new year with the feeling that perhaps we are emerging from the devastation of 2008 to a more promising 2009.

The aggressive action by the Fed and the promise of further stimulus by the new administration and a democratic Congress bent on additional stimulus in the new year should bode well providing, certain of our lending institutions remember why they were prevented from failing in 2008 and begin loosening their stranglehold on the credit markets and initiate prudent lending during the year ahead.

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