Special Note: The
horrible tragedy at Sandy Hook Elementary School tugs at the heart of all of
us. In the midst of a joyous season, we have another example of the fragility
of life. We pray for the innocent victims and their families and hope they may
find some measure of comfort and healing in their time of great pain.
The Markets
There they go again.
Doing its part to keep the economy afloat, the Federal
Reserve announced last week, “that it would enter 2013 with a plan to purchase
$85 billion a month of mortgage-backed securities and Treasury securities, part
of a continuing attempt to drive down long-term interest rates to encourage
borrowing, spending, and investing,” according to The Wall Street Journal.
In other words, the money printing not only continues, but
expands.
Prior to the financial crisis, the Federal Reserve’s balance
sheet stood at about $900 billion. Now, after previous rounds of securities
purchases, it weighs in at about $2.9 trillion. With last week’s announcement,
it’s on track to reach about $4 trillion by December 2013. And, based on the
Fed’s guidance last week, it could hit $6 trillion before the Fed rests.
There are two schools of thought on the wisdom of this
balance sheet expansion policy. One school says it will lead to massive
inflation and destroy the value of the dollar. The other school says it’s
necessary to keep the economy stimulated while giving fiscal policymakers time
to fix the structural issues with the economy.
For its part, the Fed says it can manage its balance sheet without
causing unwanted inflation.
So far, inflation is calm, the financial markets have
stabilized, and the unemployment rate has dropped steadily over the past two
years. By those measures, the Fed’s policy has been reasonably effective. Yet,
as The Wall Street Journal points
out, “Many critics of the central bank believe it has already gone too far in
its quest to boost economic growth, and say it might be exposing the financial
system to new risks of inflation or a financial bubble by pumping so much money
into banks.”
We are concerned about the potential long-term consequences
of the Fed’s unprecedented money-printing actions and we’ll continue to keep a
close eye for any sign of the market “rejecting” it.
THE BEST PERFORMING STOCKS BETWEEN ELECTION DAY 2008 AND ELECTION
DAY 2012 in the
S&P 500 index are quite a varied group. It’s interesting to see what
companies performed well during this time because it encompassed a good chunk
of the Great Recession and the stock market recovery that ensued. Without
naming names, here are the industries represented by the top 12 performing
stocks, according to a list from MarketWatch:
1) Leisure
2) Grocery Stores
3) Auto Dealers
4) Leisure
5) Lodging
6) Computer Systems
7) Restaurants
8) Auto Manufacturers
9) Footwear and Accessories
10) Software
11) Residential Construction
12) Data Storage
The cumulative
return during the 4-year period for these companies ranged from 373 percent for
company #12 to 1,107 percent for company #1. By contrast, the S&P 500 index
rose 47 percent during the period, according to data from Yahoo! Finance.
Notice that only
one industry – leisure – is represented by two different companies on the list.
This suggests the top performers were indeed a diversified group.
Are you ready for a
quiz? See if you can name three companies on the list given the following
hints:
Company #1 on the list: Their
spokesperson has gone “where no man has gone before.”
Company #2 on the list: It’s
sometimes referred to as “whole paycheck.”
Company #6 on the list: Their
commercial, which aired only once on TV in 1984, was rated the 12th best
ad campaign of the 20th century by Advertising Age.
Stumped? See below
for the answers. Let us know how many you got right!
Weekly Focus – Think About It…
“(Holiday) gift
suggestions:
To your enemy, forgiveness.
To an opponent, tolerance.
To a friend, your heart.
To a customer, service.
To all, charity.
To every child, a good example.
To yourself, respect.”
--Oren Arnold, novelist,
journalist, and humorist
Answers to quiz:
Company #1 is Priceline.com
Company #2 is Whole Foods Market
Company #6 is Apple
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