CI Outlook - Archives

October 2009

October 6, 2009

Current financial headlines are focused on unemployment and the prospect of a jobless recovery.  Low employment is a situation we believe will persist and slow the consumer driven part of our economy for a while longer.  That reasoning caused us to become prematurely cautious earlier this year.  Now rather than extrapolate the recent past employment weakness into the future we will listen carefully for guidance from corporations reporting earnings over the next few weeks.  During those calls it is normal to discuss corporate intentions to expand business and thus employee headcount.  In our opinion, a positive surprise concerning the employment situation could be a source of institutional buying that may prolong the current rally in stocks.

More importantly improving news on the job front could slow the ongoing rush in Washington to provide further economic stimulus.  Over the longer term we think slowing the expansion of  government spending is very important to the health of the economy,  and thus the domestic investment markets.  In the eyes of foreign investors and creditors excessive government spending, on our part, is destroying the value of the US dollar.  Subsequently the dollar has fallen against a basket of other currencies by over 15% this year.  That is the reason why we continue to emphasize investments in commodity based companies and foreign countries whose economies benefit from higher commodity prices.  We expect to continue this investment stance until the falling dollar forces the Federal Reserve to raise interest rates in order to defend the US currency.  At that time we will reevaluate all holdings as to suitability in the new investment environment.

With the foregoing in mind we are looking forward to the last quarter of this year as a chance to build on our successes of earlier this year.  We thank you for your patronage and look forward to hearing from you with any questions, concerns or comments.

 


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