Thanksgiving

Friday,  November 7, 2009

 

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As we celebrate the Thanksgiving holidays, incremental improvements in jobs and housing starts are giving the stock market a boost. Consumer spending and personal income have also shown modest increases. The Dow and the S&P 500 have both recovered from their late October correction and moved to higher levels. The Russell 2000 and the NASDAQ are still slightly below their October highs, but are also catching up.

 

If monetary policy is the engine of recovery for the stock market, runaway government spending is the anchor for the economy. There is growing recognition that all of the so called stimulus spending isn’t creating jobs and will seriously limit economic growth for many years to come.

 

In the political arena, concern about spending is becoming bipartisan. Senator Russ Feingold (D-WI) has initiated his “Spotlight on Spending” public information series to highlight specific actions Congress can take to reduce the deficit. The greatest contribution from TARP and the Stimulus Package would come from canceling both programs before they can add any further to the deficit.

 

Meanwhile, the threat of deflation remains the primary threat to the world-wide economy. Our objective is to own investments that can benefit from loose monetary policy and improving business conditions. For now, we continue to advise our clients to avoid cash and bonds.

 

Happy Thanksgiving!

 

– Dan

 

 

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