2011 half time report with speakers notes
TRANSCRIPT
Half-Time Report, July 2011
Global Economies and Financial Markets:
True RecoveryOr
“Two” Big To Fail?
A love triangle between global governments, consumers,and their debt…
Michael L. Schwartz, RFC, CWS, CFS offers securities and advisory services thoughFirst Allied Securities, Member FINRA - SIPC
$
The 4 Big Stories As We Enter The 2nd Half of 2011:
1.GREEK BAILOUT
2.GLOBAL DEBT
3. “TWO” BIG TO FAIL?
4. U.S. HOUSING, UNEMPLOYMENT, AND CONFIDENCE
A Review of Greek History
490 BC – Defeated Persians at Marathon
404 BC – Peloponnesian Wars, disunity
327 BC – Alexander the Great conquers Persia
900-1200 AD – Byzantine economic expansion
1453 – Fall of the Greek Byzantine Empire
1829 – Greek independence achieved
1940 – Fought off Italian invasion during WW2
1980-81 – Rejoined NATO and European Union
2001 – adopted Euro as its currency
But wait, there’s more………………
2010May 2 – first bailout ($43B)May 18 – second bailout ($18.7B)September – IMF says Greek reform “ahead of schedule”
2011January – rating agencies cut Greek debt to “junk”February – third bailout ($19.5B)April – Europe leaders urge Greece to control spendingMay – S&P cuts debt to B (just above Pakistan) as anti-austerity protests riseJune 8 – fourth bailout ($8.5B)June 9 – GDP tumbles 5.5%June 13 – S&P downgrades to CCCJuly 2 – fifth bailout ($17B) approved, for disbursement July 15
A Review of Greek History
First Half 2011Market Review
Name 2011 Thru June 24
2011 Thru June 30
1 Year
2 Years
3 Years
5 Years
10 Year
s
15 Years
S&P 500 TR 1.78 6.02 30.69 22.29 3.34 2.94 2.72 6.50
MSCI World Free USD -0.10 3.99 27.84 17.51 -1.72 0.17 2.10 3.63
BarCap US Agg Bond TR USD 4.00 2.72 3.90 6.66 6.46 6.52 5.74 6.32
Source: Morningstar
2011’s First Half: What A Difference A Week
Makes!
Other Observations:• Depending on your time frame, the equity markets look very different.
• The past 15 years resulted in what some might consider a mediocre return for the S&P 500 (6.50%). Many “experts” predict similar returns in the future. The “10% stock market return” concept is likely more myth than reality.
• Stocks and bonds have been a close match over the past 15 years. Bonds will be hard pressed to replicate those returns going forward.
2011 FIRST HALF ASSET CLASS ADVANCERS INCLUDED:*
Healthcare and Biotech stocksEnergy stocksSilver (metal)Swiss FrancRetail stocks
2011 FIRST HALF ASSET CLASS DECLINERS INCLUDED:*
Natural Gas stocksAlternative Energy stocks
Gold and Silver Mining stocksIndia stocks Bank stocks
* Source: Morningstar
“We Are All Winners”…Well, Not Really
Bulls Say (The optimists’ view of the stock market going forward)
1.Low bond yields – Make stocks more attractive by comparison
2.Steep U.S. yield curve – A prelude to stronger growth
3.Strong corporate earnings – Many expect S&P 500 EPS at $100 this year
4.U.S. economic “cleansing” – Four years into it, banking system now recapitalized
5. Housing market is “cheap” – Most affordable in 60 years
6. Consumers living within their means – Past prosperity periods started like this
7. U.S. companies control the virtual economy:* Ebay, PayPal, Apple, Facebook, Linkedin, Groupon,
Fedex, UPS, Amazon, etc.
8.U.S. role as a world leader: We feed the world, keep it secure, invent a large part of the best medical science
Source: Richard Bernstein, Smead Capital Management and others
Bears Say(What could cause a large drop in the stock market by middle of
2012)
1.Recovery Is Uneven – Some regions of America are almost economically dead
2.Underwater mortgages – More than a quarter of US mortgages are underwater
3.Stocks are expensive – Stocks looked cheap in late 2007 until earnings collapsed
4.Inflation – Can’t afford higher food, clothing prices when incomes are not moving up
5.Companies hoarding cash – Dividend increases help shareholders, but no one else
6.Everyone's shedding their workforce – Companies not hiring + government layoffs
7.China's slowing economy – Many American firms need China sales
8.Greece is tanking – Will go under and take many other small EU nations with it
(A series of defaults among the nations may damage the bank and credit system more than the collapse of Lehman, decimate European banks)
Source: 24/7 Wall Street blog, by Douglass McIntyre
The State of U.S. Housing
and Real Estate
Homes Are More Affordable…
…But How Low Can They Go?
This is Not How You Want to Increase Home
Sales
Source: Richard Yamarone, Chief Economist, Bloomberg
Unemployment
One of These Things is Not Like the Other One…
Under-Employment: A Big Issue…
…And Some Jobs May Not Come Back
Other Key U.S. Economic Observationsat Mid-Year
Confidence Rising from Lows…
…But Energy Inflation is A Concern
Inflation is Tame… If You Are Selective About What You Call
“Inflation”
We’ll Conclude With
Some Much-NeededPerspective
50 Ways to Invest Your Money
Thank You for Listening!
Michael L. Schwartz, RFC, CWS, CFS offers securities and advisory services thoughFirst Allied Securities, Member FINRA – SIPC
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested
into directly.