Dana Investment Advisors
Commentary
Solutions in Search of Problems
by Team of Dana Investment Advisors,
The American Institute for Economic Research has developed a new way of measuring inflation. They call it the Everyday Price Index. The EPI, which is a proprietary index, measures things people buy frequently such as food, gasoline, prescription drugs, TV and phone service, and child care. The Consumer Price Index by contrast measures large ticket items such as cars, appliances, houses and everyday goods. The CPI increased 0.8% in March while the EPI was up 1.9% in March. Most people would agree, that inflation is higher than what the CPI would indicate.
Commentary
We're Number One
by Team of Dana Investment Advisors,
The US has overtaken Japan as number one when it comes to the corporate tax rate. On April 1 Japan cut its corporate tax rate to 36.8% from 39.5%. The US has an average combined federal and state tax rate of 39.2%. In three years Japans corporate tax rate will drop further to 34.5%. Other Asian countries have even lower rates. Granted, corporations can reduce taxes through deductions and creative accounting. Nevertheless, high marginal tax rates hamper our ability to compete in the global market place.
Commentary
Far From Normal
by Team of Dana Investment Advisors,
Economists say that if we can sustain the current rate of job creation, we will need two more years to get the unemployment rate under 7%. Ben Bernanke at the Fed is still concerned that the job market is far from normal. As a result, you can expect the Fed to make no changes in their accommodative stance of near zero interest rates. Their goal is to control inflation while seeking lower unemployment.
Commentary
Spin City
by Team of Dana Investment Advisors,
The December jobs report was recently released and politicians are falling all over themselves to spin interpretations. It pays to look at these numbers in an objective way. As Mark Twain once said, Get your facts first, and then you can distort them as much as you please. So here goes. The private economy created 212,000 net new jobs in December and the unemployment rate dropped to 8.5%. Most industry sectors added jobs, even construction added 17,000 jobs. The government lost 12,000 jobs, but that is good news as it indicates that government is paring back to better control their budgets.
Commentary
The Three Scrooges
by Team of Dana Investment Advisors,
Lawmakers are lining up to play Ebenezer Scrooge in the seasons production of A Christmas Carol. The backdrop for this years production is energy and the key players trying for the lead role are the EPA (Environmental Protection Agency), the Department of Energy, and Congress. They are each doing their best to stifle energy development thereby keeping gas prices high and curtailing job growth.
Commentary
Giving Thanks
It has been a tumultuous decade starting with 9/11, the wars in Iraq and Afghanistan, natural disasters (hurricanes, earthquakes, floods, tornados and fires), the financial crisis starting in 2008, and upheavals in the Middle East and the continuing financial problems in Europe. All these events have combined to cause worldwide recession and slow economic growth particularly in Europe and the US. With the mortgage meltdown and the continuing high unemployment rate, you would think that there is little to be thankful for this holiday season, but you may not be seeing the forest for the trees.
Commentary
Setven Jobs - RIP
by Team of Dana Investment Advisors,
Just when it appears the free trade bills with South Korea, Columbia and Panama are about to be passed, South Koreans are protesting in the street to stop it. Before the worldwide economic crisis they were all for it. Now they feel their economy (exports) will be hurt by it. In this economic crisis it is every country for themself. There is legislation currently in Congress to impose a tariff on Chinese imports mainly because they will not allow their currency to float to levels that would be fairer to their trading partners - mainly us. Bad idea.
Commentary
The Money Pit
Zero net non-farm jobs were created in August. Likewise, QE1 and QE2 have not boosted economic growth and we certainly do not need a QE3. The Fed has nothing left, and it is not their job to stimulate the economy. Policy decisions coming from Washington will be instrumental in determining our economic recovery. Intentionally or not, Fed policies are propping up our stock market. With the daily bombardment of bad news around the globe you would think equity prices would be in a free-fall. However, corporate earnings are relatively strong and we are still the safest haven for investor money.
Commentary
Clueless
In Greece and Italy national debt now exceeds GDP. Spain and Ireland are not far behind. It is causing turmoil in equity markets across the globe. Meanwhile, here in America Congress pats themselves on the back for finally agreeing to their own debt solution. They must not have been reading the papers as our debt just surpassed our GDP and Standard & Poors dropped our credit rating from AAA to AA+. Our debt is now like the Titanic waiting for an iceberg. So what did Congress accomplish? Its not clear. The best we can tell is Congress agreed to cuts of $900 billion over ten years.
Commentary
A Framework for the Equity Market Correction
Corrections of 5-10% are fairly common, even in bull markets. The major indexes usually experience corrections of this magnitude two to three times a year. As investors, we certainly fear them while they are happening, but tend to forget about them once they have passed. The current 11% correction has heightened fears due to the compressed time frame in which it has occurred.
Commentary
Commitment to Excess
The current debt debates taking place in Washington would be amusing if they weren?t tragic. What is the sense of having a debt ceiling, if we just keep raising it? There have been 75 increases in the debt ceiling in the last half century. So who is buying the new debt issued by the Treasury to pay our bills? It?s not Japan. They have their own fiscal problems right now. China? They are reducing their exposure to dollars. It?s certainly not Europe. That leaves the Fed. In effect, we are issuing more debt to buy from ourselves. Every hour the US spends 1/5 of a billion dollars it doesn?t have.
Commentary
Bad News Bulls
It?s been said that the stock market climbs a wall of worry. The bear market touched a bottom in March 2009 and proceeded to rise about 85% to a high in April. We are now in the midst of a correction from that high, but the overall trend remains positive for equities. Not so much so for the economy. Well, the economy is still growing, albeit slowly. At this stage in a recovery the economy should be recovering more rapidly. The economic news is not getting better. The May jobs report indicated that 54,000 new private sector jobs were created. Economists had forecasted 170,000.
Commentary
Achilles II
The other Achilles heel is what Representative Paul Ryan calls ?the most predictable crisis in the history of the country.? We are talking about debt and it has one cause ? spending. Congress prefers to kick the can down the road and let the next generation deal with it. Now that Congress has passed a budget bill for the fiscal year ending this October, perhaps they will get serious about cutting spending ? more than the recent 1% budget cuts.
Commentary
Achilles
Since the beginning of the Republic, the US has been invincible, overcoming many disasters. The US was first made aware of its Achilles heel during the 1970s oil embargo. Fortunately, the Middle East agreed to pump more oil, and the negative impact on the economy was short lived. The ensuing financial crisis pushed oil back to $32 per barrel in 2009. The global economic recovery has once again caused heavy demand and rising prices for the liquid gold. Now, however, we add tensions in the oil producing countries in the Middle East and we have a perfect storm brewing.
Commentary
Tipping Point
The current unrest in Egypt actually began in Tunisia and the tipping point there was when a young man immolated himself over government harassment over a business permit. Trouble had been fomenting in the streets, but this was the tipping point that escalated the turmoil that spread to Egypt and could ensnare Jordon, Syria and even Saudi Arabia. This almost certainly will turn into a different state that will have ramifications well beyond the Middle East. These are exciting times and the world faces many tipping points that will change many established paradigms.
