Portland Private Wealth Management Blog

<b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Winter: Cold Then Hot</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />The story begins January 20th when morning headlines read </span><i><span class="Apple-style-span" style="font-size:medium;">‘Greece to Crack Down on Tax Evasion’</span></i><span class="Apple-style-span" style="font-size:medium;">. From that day forward, the market (the S&amp;P 500) would fall 9.2% through February 9th. By that date, chatter of the </span><i><span class="Apple-style-span" style="font-size:medium;">PIGS</span></i><span class="Apple-style-span" style="font-size:medium;"> (Portugal Ireland Greece and Spain) was gaining momentum. But the mood changed and positive news of an economy on the mend took the market 16.7% in other direction until April 26th peak. Quietly, the Euro had shed 7% since mid January.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Spring: Cold</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />On April 27th, the headlines read </span><i><span class="Apple-style-span" style="font-size:medium;">Greek Debt Rating Cut to ‘Junk’ Status</span></i><span class="Apple-style-span" style="font-size:medium;">. Two days later I wrote an email to a client for whom I had promised a trading proposal: </span><i><span class="Apple-style-span" style="font-size:medium;">“I have been a little hesitant to make any suggestions. The market had essentially made no moves greater than 1% in the last 2.5 months, and it has moved over 2% in both directions in the last 4 trading days. I have been trying to get a feeling for how it might break.” </span></i><span class="Apple-style-span" style="font-size:medium;"><br /><br />Now we know. The euro would fall another 8% over the next 4 weeks and the U.S. stock market would fall 14.6% peak-to-trough through early Tuesday morning May 25th. A headline that morning from a budget conscious NYT travel writer was </span><i><span class="Apple-style-span" style="font-size:medium;">‘Greece - Why Now’</span></i><span class="Apple-style-span" style="font-size:medium;">. The last time we had such volatility was late February / early March 2009, the final capitulation phase of the 2008/2009 bear market.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Greenback: Warming</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />I have heard from TV pundits that </span><i><span class="Apple-style-span" style="font-size:medium;">Obamanomics</span></i><span class="Apple-style-span" style="font-size:medium;"> is creating mountains of public debt, its regulatory zeal is spooking corporations, and his tax policies are forcing business owners to tighten their wallets undermining job creation. The combination of all this is a hostile investment environment for the greenback and at any time China might pull the plug. Despite the hostile environment, big budget deficits and the $13 trillion mountain of debt, the dollar is on the rise and the real bottom started in March of 2008, long before </span><i><span class="Apple-style-span" style="font-size:medium;">Lehman</span></i><span class="Apple-style-span" style="font-size:medium;"> and </span><i><span class="Apple-style-span" style="font-size:medium;">Obamanomics</span></i><span class="Apple-style-span" style="font-size:medium;">.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Money Flow: Climate Change</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />On the surface, it would appear the dollar is doomed. But understanding the nature of money in our global system may help investors understand why the dollar has been on the rise for nearly two years despite dim prospects for the </span><i><span class="Apple-style-span" style="font-size:medium;">Land of Liberty</span></i><span class="Apple-style-span" style="font-size:medium;">. Expensive Euros will buy lots of cheap </span><i><span class="Apple-style-span" style="font-size:medium;">greenbacks</span></i><span class="Apple-style-span" style="font-size:medium;">, or U.S. dollar denominated assets. Just as air will move from areas of high to low pressure, money will flow from expensive assets to cheap assets until they are no longer cheap. Until 4 months ago, €1 would buy a $1.50. 10 years ago the Euro would only buy 85 cents USD. Those are likely two extreme levels. The right level is probably somewhere in between. But many investors have been positioned for a </span><i><span class="Apple-style-span" style="font-size:medium;">weak dollar / strong euro</span></i><span class="Apple-style-span" style="font-size:medium;"> environment which has been the proper posture for the last decade.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Weather Front</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />The weak dollar / strong euro era has probably come to a close with the accelerated drop in the Euro in recent weeks. Many private investors, hedge funds, governments, corporations, pensions and endowments are realizing they are on the wrong side of that trade. When air moves from areas of high to low pressure it is preceded by bursts of warm or cold air followed by weather. Atmospheric change is a seemingly chaotic event that can result in wind, rain, sleet, hail or snow, all swirling about. But as pressure finds new equilibriums, the sky begins to mellow out and the disturbance eventually disappears. The end of weak dollar / strong euro has upset the global equilibrium and money is flowing from one place to another find a new equilibrium. This process increases uncertainty and volatility.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Nasty Squall</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />On April 22, a deep-water drilling rig off the coast of Louisiana exploded and sank to the bottom of the Gulf of Mexico with 11 people aboard. By April 27th, news reports were suggesting it would be a serious oil spill. That same day, selling began in earnest when news hit the wires that Greek debt was now junk. The next 5 trading days were volatile with the market moving over 2% in each direction. On May 5th, 100,000 people took to the Greek streets in protest of government austerity measures. On May 7, the stock market fell roughly 9% in course of about 10 minutes (the so-called unexplainable </span><i><span class="Apple-style-span" style="font-size:medium;">Flash Crash</span></i><span class="Apple-style-span" style="font-size:medium;">) leaving most market participants with a knots in their stomachs. Though the stock market recovered 6% of those losses by the close that day, shockwaves hit debt markets and ancillary markets like preferred stocks.<br /><br />Over the next few days the market rallied and made a full </span><i><span class="Apple-style-span" style="font-size:medium;">Flash Crash</span></i><span class="Apple-style-span" style="font-size:medium;"> recovery, but violence in Bangkok reached new crescendos that lasted for the next week. Sellers returned, driving stocks down for the next 9 sessions. On top of all this, the House and Senate spent these days debating financial reform legislation. This issue, like the health care debate, is fraught with divisive prescriptions and remedies. Now in reconciliation, the uncertainty of the outcome and the potential unintended consequences of a major piece of legislation have all parties </span><i><span class="Apple-style-span" style="font-size:medium;">on pins and needles</span></i><span class="Apple-style-span" style="font-size:medium;">.<br /><br />The bottom came on May 25th as investors awoke to headlines that Kim Jong-il, Supreme Leader of North Korea, was mobilizing his army for war with South Korea. The market fell 3% at the open, but buyers came in accumulating stocks all day with the session ending at nearly the highest print. Nothing like the potential for a nuclear war to bring buyers into U.S. stocks. On May 29th, after a few good days, Fitch downgraded Spain from AAA to AA+ in the middle of Friday’s trading session before the Memorial Day weekend. All this begs the question – </span><i><span class="Apple-style-span" style="font-size:medium;">‘Was this just the squall before the hurricane?’</span></i><span class="Apple-style-span" style="font-size:medium;"><br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Weather Cycle</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />One way to think about financial markets is think about the annual </span><i><span class="Apple-style-span" style="font-size:medium;">weather cycle</span></i><span class="Apple-style-span" style="font-size:medium;">. If we are truly at the beginning of a new economic expansion, </span><i><span class="Apple-style-span" style="font-size:medium;">early cycle</span></i><span class="Apple-style-span" style="font-size:medium;">, then we are probably in </span><i><span class="Apple-style-span" style="font-size:medium;">spring</span></i><span class="Apple-style-span" style="font-size:medium;">. With spring come some nice days, but also a lot of cold, rainy days. As spring progresses, the weather improves. From time to time, you may have a thunderstorm, or a tornado, if you live in such a place. When </span><i><span class="Apple-style-span" style="font-size:medium;">summer</span></i><span class="Apple-style-span" style="font-size:medium;"> comes, the weather is generally nice. This period is called </span><i><span class="Apple-style-span" style="font-size:medium;">mid-cycle</span></i><span class="Apple-style-span" style="font-size:medium;"> for economic expansion. You are past peak tornado season and before hurricane season. It is the longest phase of the </span><i><span class="Apple-style-span" style="font-size:medium;">economic cycle</span></i><span class="Apple-style-span" style="font-size:medium;"> and the </span><i><span class="Apple-style-span" style="font-size:medium;">stock market cycle</span></i><span class="Apple-style-span" style="font-size:medium;">.<br /><br />The </span><i><span class="Apple-style-span" style="font-size:medium;">fall</span></i><span class="Apple-style-span" style="font-size:medium;"> could be considered late cycle, the point in the economic cycle where inflation pressures are building up and the prices of things are reaching extremes. During this time, bank coffers are full and lenders want to find places for their depositors’ money. </span><i><span class="Apple-style-span" style="font-size:medium;">Early contraction </span></i><span class="Apple-style-span" style="font-size:medium;">begins in the late fall and is marked by mostly cold October and November days. The rain and sleet return, maybe even an early blizzard. When there are no more warm days, this is the end of expansion. </span><i><span class="Apple-style-span" style="font-size:medium;">Full contraction</span></i><span class="Apple-style-span" style="font-size:medium;"> is winter. Day upon day of gray skies, cold and snow turned to ice that won’t melt. The economic cycle is generally 4 years, but it has gotten longer since WWII. The 1980’s and 1990s had very long expansions that made some observers think we had licked the business cycle. But this last recession has brought people back down to Earth.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Spring</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />When I look at the market action of recent weeks, I have to raise my level of apprehension as the Euro area debt problem, or even the U.S. debt problem may derail this economic cycle. I have to ask myself – </span><i><span class="Apple-style-span" style="font-size:medium;">“Have we entered a major cooling period like the ice ages where great expanses of the economy become frozen and the last 3 quarters of economic growth will be snuffed out by a this super cycle looming just over the horizon. Or are the events of May just a squall and summer is just around the corner.’ </span></i><span class="Apple-style-span" style="font-size:medium;"><br /><br />My gut tells me that the economy will be better off 6 or 12 months down the road. While European </span><i><span class="Apple-style-span" style="font-size:medium;">bond vigilantes</span></i><span class="Apple-style-span" style="font-size:medium;"> give me worry, I think the EMU is on the right track to stave of global cooling. With $1 trillion </span><i><span class="Apple-style-span" style="font-size:medium;">just off the presses</span></i><span class="Apple-style-span" style="font-size:medium;"> to buy debt of the PIGS, snowplows are on the streets clearing this late spring blizzard. Deflation is a symptom of excessive debt and inflation is exactly what central bankers are using to fight it. I am generally not one to </span><i><span class="Apple-style-span" style="font-size:medium;">fight the Fed</span></i><span class="Apple-style-span" style="font-size:medium;">.<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Just Another Storm?</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />It has been my observation that these kinds of storms eventually pass. In 1994, in order to bring soaring budget deficits and debt under control, President Clinton abandoned his campaign promise of tax cuts. This was the result of advice from his Treasury Secretary, Robert Rubin, former co-Chairman of Goldman Sachs. U.S. government debt was under significant selling pressure as so-called bond vigilantes shunned treasuries. James Carville, Clinton’s top political adviser, said, </span></span><div><span class="Apple-style-span" style="font-family:arial, serif;"><br /></span></div><div><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><i>“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody." </i></span></span></div><div><span class="Apple-style-span" style="font-family:arial, serif;"><br /></span></div><div><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">In 1995, Newt Gingrich would lead a Republican charge that shutdown the Federal government for several weeks. Through bi-partisan efforts and austerity, the deficit would fall and surpluses would come from 1997 – 2001. (Source: www.whitehouse.gov/omb)<br /><br /></span></span><b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;">Severe Weather Watch</span></span></i></b><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:medium;"><br />Deflation is still the problem and inflation will have to wait its turn. Inflation is a symptom of excessive money supply and is a late cycle phenomena. We have a few more seasons that must pass before we get there. But do not get me wrong. If I sense that a much nastier storm is coming, we may have to b</span><i><span class="Apple-style-span" style="font-size:medium;">atten down the hatches</span></i><span class="Apple-style-span" style="font-size:medium;">.<br /><br />It rained again all day. The high was 52 degrees. It will be June in four days and the </span><i><span class="Apple-style-span" style="font-size:medium;">summer solstice</span></i><span class="Apple-style-span" style="font-size:medium;"> is June 21. <br /><br />Jason McMillen, Chief Investment Strategist, PPWM</span><br /><br /></span> <b><i><span class="Apple-style-span" style="font-family:arial;"><span class="Apple-style-span" style="font-size:small;">This is the DISCLAIMER: Information, data and attachments contained on this website are from sources considered reliable but their accuracy and completeness is not guaranteed. Investing entails risks, including possible risk of principal. An investment in any equity, bond, fund or other financial instrument may be speculative and involve significant risks. We do not offer tax advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions. Past performance is not a guarantee of future results.<br /><br />Securities offered with and through First Allied Securities, Inc., a Registered Broker Dealer, Member FINRA/SIPC. First Allied Securities, Inc., is not affiliated nor endorses Portland Private Wealth Management or any other affiliated firms.<br /><br />If you would like to contact us feel free to email as at [email protected] or we can be reached at 503-703-4067.<br /><br />Thank you.<br /><br />© 2010 All Rights Reserved Portland Private Wealth Management Group.</span></span></i></b></div>

<!--StartFragment--> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><span class="Apple-style-span" style="font-family:arial, serif;"> <!--StartFragment--> </span></p><span class="Apple-style-span" style="font-family:arial, serif;"><div class="Section1"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><span class="Apple-style-span" style="font-size: medium;">Fall 2009 was the last time I brought you </span><i><span class="Apple-style-span" style="font-size: medium;">Prognosticating</span></i><span class="Apple-style-span" style="font-size: medium;">. Spring is here and perhaps it is a good time do it again. Previously, I mentioned that forecasting is potentially a futile exercise, but it is kind of fun. At the end of last year, I wrote a 3-piece blog essay titled </span><i><span class="Apple-style-span" style="font-size: medium;">Unprecedented </span></i><span class="Apple-style-span" style="font-size: medium;">that may shed some light on why I think ‘future tripping’ is often pointless. Basically, we have been talking about the end of the American empire since the empire started. </span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><span class="Apple-style-span" style="font-size: medium;">Below are some topics that often come up with clients. I have included comments from the Fall so you can see how these thoughts have progressed over time. Please take them with a grain of salt as the following disclaimer warns: </span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><span class="Apple-style-span" style="font-style: italic; font-weight: bold; "><span class="Apple-style-span" style="font-size: medium;">All </span><span style="color:black"><span class="Apple-style-span" style="font-size: medium;">estimates, opinions and views expressed are our own and constitute our best judgments as of the date of this podcast or email and may be subject to change at any time without notice. These opinions and views are made under conditions of great uncertainty and there is a good possibility that our judgments could be completely wrong. However, we hope for your sake and ours that we are more right than wrong of which there is no guarantee.</span></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b><span class="Apple-style-span" style="font-size: medium;"><br /></span></b></p></div> <div class="Section2"> <table class="MsoTableGrid" border="1" cellspacing="0" cellpadding="0" style="border-collapse:collapse;border:none;mso-border-alt:solid black; mso-border-themecolor:text1;mso-border-alt:.5pt;mso-yfti-tbllook:191; mso-padding-alt:0in 5.4pt 0in 5.4pt;mso-border-insideh:.5pt solid black; mso-border-insideh-themecolor:text1;mso-border-insidev:.5pt solid black; mso-border-insidev-themecolor:text1"> <tbody><tr> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;mso-border-alt:solid black;mso-border-themecolor:text1; mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt; text-align:center;tab-stops:256.1pt 509.5pt"><b>The PPWM Outlook Spring 2010<o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:1;height:96.5pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:96.5pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b><i><br /></i></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b><i>Economy </i></b><i> </i></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><i>Fall 2009 The global economy is nearing a trough in the business cycle marked by the early phase of a cyclical bull market in financial markets.<b> </b><o:p></o:p></i></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010</i> The global economy turned the corner. Economic growth returned in the middle of 2009 and has been stronger than expected. The U.S. is expected to grow in foreseeable future, but the rate of growth will be below 3%, which does not bode well for job growth. (Source: IMF WEO April 2010) The <i>Depression sale </i>is over in financial markets and with moderate economic growth we should expect moderate rates of return.<b> <i><o:p></o:p></i></b></p> </td> </tr> <tr style="mso-yfti-irow:2;height:83.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:83.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b><i><br /></i></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b><i>Stimulus </i></b><i> </i></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><i>Fall 2009 </i>Coordinated global fiscal and monetary stimulus provides a positive environment for investors<i>.<b> <o:p></o:p></b></i></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010</i> Fiscal stimulus will fade in 2010, but <i>monetary accommodation</i> is alive and well. While the Fed has stopped purchasing mortgages, interest rates are at historic lows. European central banks recently pumped more money into the EMU by purchasing debt of troubled governments. This a<b> </b>positive backstop for investors. <b><i><o:p></o:p></i></b></p> </td> </tr> <tr style="mso-yfti-irow:3;height:69.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:69.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><span class="Apple-style-span" style="font-weight: bold; ">Rates</span></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>Global interest rates will remain low for a significant period of time as central bankers work aggressively to stimulate risk taking behavior and economic activity.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010</i> One year ago, the yield on a 10-year treasury note was 3.89%. Today, that same rate is 3.76%. (5/18/2010) Real estate has a long way to go to get banks out of the ditch. Unemployment is high. I don't see rates going anywhere for a while. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:4;height:69.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:69.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Commodities</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>We are in a long-term bull market for commodities, driven by new demand from emerging markets. <b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010</i> Asia is expected to grow at a rate of 7% for the next two years. Latin America, Emerging Europe, Middle East and North Africa are looking at 4%+ growth rates. This kind of growth underpins global demand for commodities. (Source: IMF WEO April 2010)<b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:5;height:55.85pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:55.85pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Moderate Growth <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>The developed economies will grow slower than emerging economies.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>The U.S. is forecasted to grow at less than 3% over the next couple of years. Europe is expected to grow at a rate less than 1% and that may be optimistic. (Source: IMF WEO April 2010) Such growth rates are below the long-term averages. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:6;height:83.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:83.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Emerging Markets </b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>Companies in the developed world that can sell products into the developing world are attractive.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>The rapid economic growth in emerging economies provides opportunity for all sorts of companies -- heavy equipment, high tech machinery for manufacturing, energy infrastructure, consumer electronics, trendy global brands, entertainment, etc. The rise of the third world takes pressure off <i>the Core</i> to always be consumer of last resort. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:7;height:69.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:69.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Global Linkages</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>The rest of the world is geared toward selling consumer products to the U.S. consumer. They have a huge stake in the revival of U.S. consumption.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>Understanding the global flows of money, goods and services is critical to understanding why countries like China would buy trillions of dollars of U.S. government and corporate debt despite our apparent mismanagement of those funds.<b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:8;height:124.5pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:124.5pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Consumer</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>The U.S. economy and the consumer are resilient and will be highly adaptive to the headwinds they face, despite opinions to the contrary.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>When U.S. companies can shed millions of jobs to maintain profitability, governments can provide an effective safety net in the form of unemployment insurance to keep families in their homes, paying rents, and shopping at the corner store, it is no surprise that our economic system can take the blow it did, get back up and keep playing. This is why they call it mixed capitalism, and not capitalism. We have an enviable social safety net which makes are system more resilient shocks. Developing economies like China are emulating our system by building out a social safety net that will make them more stable, not less. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:9;height:69.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:69.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Inflation</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>When (assuming) the global economy starts growing <i>robustly</i> again, inflation will come back quickly.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>Inflation is the symptom of excess money printing. Deflation is the result of excessive debt. Once markets have cleared and deleveraging has run its course, the forces of inflation will have their time in the limelight. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:10;height:111.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:111.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Unemployment </b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>U.S. unemployment rates may not come back down in the near-term as the U.S. economy must make a tectonic shift from the hyper-activity of building automobiles, houses, condos, strip malls and office buildings – to doing something else – at least for the next 5 to 10 years.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>Unemployment<b> </b>will be a nagging problem for years to come. When politicians tell you that they can make jobs, or that the one's policies are not making enough jobs, just nod and smile with skepticism. All the data of past experience suggests that unemployment in the U.S. will get back under 6% in no less than 5 years time. (Source: IMF WEO April 2010)<b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:11;height:69.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:69.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Deficits </b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>The fiscal deficits of the U.S. government are unsustainable and highly problematic without serious sacrifices.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>Greece is the canary in the coalmine, so they say. The drop in tax revenues due to the global financial crisis has exposed governments around the world. The resulting deficits raise the specter that bondholders, the lenders to governments, may not be paid back in full.<b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:12;height:110.5pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:110.5pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Austerity </b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>Industrialized governments have made significant promises to their retirees that are significantly underfunded.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 Austerity is p</i>erhaps the new buzzword for the media, pensioners and governments alike will need to face the reality that there is not enough money to fulfill all their dreams and promises. </p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt">What’s new? We have been talking about reforming social security since the <i>Advisory Council Report on Social Security</i> in March 1975. Unions have been facing austerity for 30 years, but the economy seems to find ways to grow. Spain has defaulted 13 times since 1800. Greece has defaulted 5 times. (Source: Reinhard and Rogoff) Why is this time so calamitous?<b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:13;height:111.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:111.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Taxes</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>Higher taxes are on the horizon.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>While not the only answer to global deficits and debt, higher taxes will play a role to reducing deficits and paying off the government debt bubble incurred over the last 20 to 30 years. During the 1990s, a bipartisan commitment to deficit and debt reduction provided a foundation for a vibrant economy. Pray that factious politicians can find common ground again. </p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt">Let us be real – slower economic growth is the result of excessive debts built over a generation. Not because of lack entrepreneurial ingenuity. We will muddle through as history can attest, but we have now entered a time to <i>pay the piper.</i> <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:14;height:83.15pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:83.15pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Real Estate</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>Financial markets still have significant negative exposure to commercial real estate assets that could be disruptive to economic expansion.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>Commercial real estate prices may have stabilized taking the pressure off bank balance sheets and lowering the probability of a <i>systemic risk</i> event related to these debts. Residential markets, while seemingly on the mend, are stymied by <i>shadow inventory</i>, those bank repos not on the market, which means years, not months before the market can clear. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:15;height:138.5pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:138.5pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Bailouts <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>The government may to have to make additional capital injections into financial institutions in order to absorb future losses due to write-downs associated with commercial real estate (which have not yet been taken). Such injections may destabilize financial markets once again.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>Something that will no doubt be studied by academics, the Private Public Investment Partnership (PPIP), Geithner's silver bullet to remove toxic assets from the banks balance sheets, never left the bullet chamber. Upon the government's announcement of the program, the so-called toxic assets rallied so much that the financial elite like PIMCO took a pass on the program. Originally slated for up to $1 trillion, the mere creation of the program deemed it nearly unnecessary. Where are those toxic assets now? Still at the banks but not as toxic. <b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:16;height:138.5pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:138.5pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Secular Bear</b> <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Fall 2009 </i>A multi-year bull market may take stock market indices back to old highs, but a return to the <i>good old days</i> like the 1980s and 1990s where indices rose 15-fold is probably not in the cards until the ‘structural headwinds’ mentioned above have been addressed. This may mean another decade of volatile markets similar to the 1960s and 1970s.<b> <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>A term thrown around by market historians, secular bear markets are periods where returns for investors fall well below the average returns like the late 1960s and 1970s. Secular bull markets are periods when market returns are well above average, like the 1980s and 1990s. The Dow Jones rose 10-fold from 1982 to 2000. Today, it is still below the peak set in 2000. From 2003 to 2007 to Dow Jones nearly doubled, only to give back all those gains. Buy and hold? I don't think that is the best strategy right now.<b><o:p></o:p></b></p> </td> </tr> <tr> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><b>Euro <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><i>Spring 2010 </i>The euro has been under significant pressure recently as the aftermath of the global financial crisis left the Greeks unable to make debt payments that came due. The EMU and IMF came to the rescue but not before the markets let us imagine a cascade of European defaults, the seizing up of global financial markets, the return of the Deutschemark and German nationalism, and the end of the <i>Pax Europa</i>. The media loves all the innuendoes with minute-by-minute coverage of disgruntled <i>hoi polloi</i> and Molotov cocktails, stoking the pandemonium. </p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt">Despite the scary sound bites, the probable outcome is EMU will tighten its fiscal belts, impose austerity despite the political costs and emerge leaner and meaner at the end of the decade. Watch the prequel called the <i>Asian Financial Crisis</i> from 1998 when it looked like Korea and several others would default.<b><o:p></o:p></b></p> </td> </tr> <tr style="mso-yfti-irow:18;mso-yfti-lastrow:yes;height:261.0pt"> <td width="522" valign="top" style="width:7.25in;border:solid black;mso-border-themecolor: text1;border:1.0pt;border-top:none;mso-border-top-alt:solid black;mso-border-top-themecolor: text1;mso-border-top-alt:.5pt;mso-border-alt:solid black;mso-border-themecolor: text1;mso-border-alt:.5pt;padding:0in 5.4pt 0in 5.4pt;height:261.0pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b><br /></b></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><b>Wealth Destruction <o:p></o:p></b></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><i>Spring 2010 </i>At the end of WW II, much of Germany and Japan were destroyed, two of the biggest of the economies in the world at that time. <i>(</i>For further reading see<i> Wikipedia Strategic Bombing WWII </i>or the<i> The Fog of War </i>documentary film with Robert McNamara<i>.)</i> It is estimated some 60 million people died from combat, disease, starvation or genocide. The direct costs of the war, widely debated, are estimated at anywhere from $1.5 to $3 trillion in current U.S. dollars. Somehow, the global economy was back on track by 1948 even with U.S. debt at 120% of GDP, Britain’s at 260%, Germany’s at 217%, and Japan’s at 200%. (Source: Wikipedia, <a href="http://www.whitehouse.gov/omb">www.whitehouse.gov/omb</a>, Ritsch 1996, Kudo 2006). <o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt">Is wealth destruction a lower valuation on your real property at a point in time or the literal destruction of that real property? It is important to have the proper perspective on things to make good investment decisions. One-way to think about wealth is that <i>is not destroyed except by natural disaster or war, it merely changes hands.</i> </p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt"><o:p></o:p></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt">Last year, Paul Krugman, a Nobel Prize winning economist, wrote a blog called <i>1945</i> where he made the point that the U.S. has been in a tough spot before and <i>dealt with it</i>. In response to criticism to his blog, he made another interesting point that people have ways of making analyses in hindsight that suggests the wind was always at the back of that <i>Great Generation</i>, so it was natural they would escape their predicaments. </p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt">Today, has the wind stopped blowing, or is it always a headwind? I guess it is just how you look at things. I really doubt we are at the end of <i>progress</i> and <i>wealth creation</i>, or on the precipice of the new economic <i>Dark Ages</i>.</p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;tab-stops: 256.1pt 509.5pt"><o:p></o:p></p> </td> </tr> </tbody></table> </div> <p class="MsoNormal"><span class="Apple-style-span" style="font-weight: bold; "><span class="Apple-style-span" style="font-size: medium;">Investment Implications</span></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-size: medium;">As we have said before, we believe investors may need to be more proactive and nimble than they have been in the past. This may require considering new investments ideas, timing strategies and examining yield as an important slice of total return. We will continue to make investments in companies with exposure to basic materials (commodities) and emerging markets, either through the purchase of fixed income or equity instruments. In addition, we want exposure to investments that benefit from an improving global economy or can benefit from an inflationary environment. If you want specifics, we encourage you to contact us. These are our prognostications -- for now. </span><span class="Apple-style-span" style="font-size: medium;"><o:p></o:p></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-size: medium;">Jason McMillen, Chief Investment Strategist, PPWM </span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-size: small;"><b><i>This is the DISCLAIMER: Information, data and attachments contained on this website are from sources considered reliable but their accuracy and completeness is not guaranteed. Investing entails risks, including possible risk of principal. An investment in any equity, bond, fund or other financial instrument may be speculative and involve significant risks. We do not offer tax advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions. Past performance is not a guarantee of future results.</i></b></span><span class="Apple-style-span" style="font-size: small;"><b><i><o:p></o:p></i></b></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-size: small;"><b><i>Securities offered with and through First Allied Securities, Inc., a Registered Broker Dealer, Member FINRA/SIPC. First Allied Securities, Inc., is not affiliated nor endorses Portland Private Wealth Management or any other affiliated firms.</i></b></span><span class="Apple-style-span" style="font-size: small;"><b><i><o:p></o:p></i></b></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-size: small;"><b><i>If you would like to contact us feel free to email as at [email protected] or we can be reached at 503-595-1059. </i></b></span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size: small;"><b><i>Thank you.</i></b></span><span class="Apple-style-span" style="font-size: small;"><b><i><o:p></o:p></i></b></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-size: small;"><b><i>© 2010 All Rights Reserved Portland Private Wealth Management Group </i></b></span><o:p></o:p></p> <!--EndFragment--> </span><p></p> <!--EndFragment-->

<!--StartFragment--> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">Random as a Coin Toss<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">When I hear people say ‘It is different this time.’ I usually try to think -- what is the contrarian bet?<span style="mso-spacerun: yes"> </span>For example, if everybody is saying we are in the early phase of the Japanese style deflation, as a contrarian, I might suggest we might be on the verge a new productivity cycle instigated by Internet 3.0 and the integration of a huge quantity of highly educated labor from emerging market nations.<span style="mso-spacerun: yes"> </span>Who really knows?<span style="mso-spacerun: yes"> </span>I think such a prediction is as random as a coin toss. <o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">The New Economy<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">In the late 1990s, people said we were in a ‘new economy’, free from the boom and bust of the business cycle that plagued the ‘rust economy’.<span style="mso-spacerun: yes"> </span>In the new ‘information economy’, just-in-time manufacturing and real-time logistics had solved the dilemma of inventory cycles that led so often to the boom and bust of business cycles.<span style="mso-spacerun: yes"> </span>The new economy would ride smoothly as omnipotent central bankers like Alan Greenspan, referred to as the Maestro, would engineer soft landing after soft landing.<span style="mso-spacerun: yes"> </span>We now know this kind of thinking was horse manure.<span style="mso-spacerun: yes"> </span>It is true that advances in manufacturing enhanced the profitability of firms, but it did not make them immune to the business cycle.<o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">Move On<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">In meetings with clients, I often say that most people will remember 2008/2009 like they remember the Crash of ’87 (1987), the S&amp;L Bailout (1989), the Bond Crash of ’94 (1994), the Asian Contagion (1998); or the Tech Crash (2000), or the housing busts of 1979/1980, 1989/1990, and 2006/2007.<span style="mso-spacerun: yes"> </span>Or O.J. Simpson’s murder trial, or Janet Jackson’s wardrobe malfunction, or Brittany Spear’s tribulations or Tiger Woods’s indiscretions.<span style="mso-spacerun: yes"> </span>While the media may want to exploit these events in order extrapolate broader implications about society or the economy -- life simply moves on.<span style="mso-spacerun: yes"> </span>People’s attentions move on.<span style="mso-spacerun: yes"> </span>The economy moves on.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">The Education<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">In college, I spent a whole semester studying an autobiographical book called the <i style="mso-bidi-font-style: normal">Education of Henry Adams</i>.<span style="mso-spacerun: yes"> </span>Intercollegiate Review ranked it the best book of the 20th century and Modern Library (a division of Random House) ranked it #1 in its list of Top 100 Non-Fiction books.<span style="mso-spacerun: yes"> </span>Adams released the book privately in 1907 to his friends and it was eventually published after his death.<span style="mso-spacerun: yes"> </span>To give some color on his station in life, his great grandfather and grandfather were the 2^nd and 6^th Presidents of the United States.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial">Henry Adams was born in 1838 and died in 1918. <span style="mso-spacerun: yes"> </span>He was an American intellectual and represented himself as a journalist, historian and writer.<span style="mso-spacerun: yes"> </span>During his lifetime he observed significant changes in society and technology.<span style="mso-spacerun: yes"> </span>He witnessed the rise of steam powered rail transportation (1830s), electric light (1880s), motion pictures (1890s), and the automobile (1900s) – just to name a few of things that impacted the world he lived in.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial">In the latter part of Adam’s life he explored the idea of applying the laws of nature (Newtonian physics) to explain or even predict the course of human affairs.<span style="mso-spacerun: yes"> </span>But eventually, by the end of his life, he decided this was a futile exercise as life unfolded in ways that were truly unpredictable, or at least that is what I thought he was trying to impress. <span style="mso-spacerun: yes"> </span><i style="mso-bidi-font-style:normal">The Education</i> was one of those books that had a profound impact on my understanding of the world and history. <o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">Maybe A Couple Paragraphs<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">While the Financial Panic of 2008/2009 has been an important event in terms of affecting millions of people all over the world, it is not, in my opinion, some watershed moment, or one of the more important events in history.<span style="mso-spacerun: yes"> </span>It will get a paragraph or two in a history book, and perhaps a few pages in an economics textbook, maybe a chapter.<span style="mso-spacerun: yes"> </span>The economics profession will likely have to integrate more ideas from behavioral economics to provide a more robust understanding of how financials markets really work.<span style="mso-spacerun: yes"> </span>But has this event torn asunder the idea of the efficient market hypothesis, the idea that markets are made up of participants acting rationally on all known information, public and non-public?<span style="mso-spacerun: yes"> </span>No.<span style="mso-spacerun: yes"> </span>This financial panic has only demonstrated, once again, our limited understanding of the world around us.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">Rational Until Panicked<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">Humans are rational, until they are panicked.<span style="mso-spacerun: yes"> </span>Panic is born from truly unpredictable and random events, and that is why humans become panicked in response to those events.<span style="mso-spacerun: yes"> </span>In our attempt to master everything, to predict every possible outcome or reaction to every set of inputs is truly a futile exercise.<span style="mso-spacerun: yes"> </span>There will always be a set of circumstances in financial markets that will lead to financial panic despite the fancy risk models of the <i style="mso-bidi-font-style:normal">quants<a style="mso-endnote-id:edn" href="#_edn1" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[i]</span></span></a></i>, or the best efforts of policy makers and politicians to create a more perfect order.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial">Enforcing Common Sense<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial">We can make our financial system more stable by enforcing the rules we already have; we can limit excessive risk-taking by curbing the amount of leverage in the system (or clearly segregating highly leveraged entities and providing transparency so markets can assess the risk), we can minimize bad debts by employing prudent lending standards – these are not new ideas or rules – it is common sense.<span style="mso-spacerun: yes"> </span>We have had laws in place to prevent such calamities, some born out of the experience of the Crash of ’29 and S&amp;L Crisis of the 80s and early 90s.<span style="mso-spacerun: yes"> </span>Financial institutions have simply gone around these rules by developing new kinds of entities or new kinds financial instruments -- all under the guise of financial innovation (driven by greed and hubris).<span style="mso-spacerun: yes"> </span>We simply need our old rules to adapt to these new innovations and we move on – until the next financial -- crisis which I am sure will be <i style="mso-bidi-font-style:normal">unprecedented</i>.<span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <div style="mso-element:endnote-list"><br /> <hr align="left" size="1" width="33%"> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="#_ednref" name="_edn1" title=""><span class="MsoEndnoteReference"><span style="font-family: Arial"><span style="mso-special-character:footnote">[i]</span></span></span></a><span style="font-family:Arial"> See </span><a href="http://en.wikipedia.org/wiki/Quantitative_analyst"><span style="font-family:Arial">http://en.wikipedia.org/wiki/Quantitative_analyst</span></a><span style="font-family:Arial"><o:p></o:p></span></p> <p class="MsoEndnoteText"><span style="font-family:Arial"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial">DISCLAIMER: Information, data and attachments contained on this website are from sources considered reliable but their accuracy and completeness is not guaranteed.<span style="mso-spacerun: yes"> </span>Investing entails risks, including possible risk of principal. An investment in any equity, bond, fund or other financial instrument may be speculative and involve significant risks.<span style="mso-spacerun: yes"> </span>We do not offer tax advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions. Past performance is not a guarantee of future results.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial">Securities offered with and through First Allied Securities, Inc., a Registered Broker Dealer, Member FINRA/SIPC.<span style="mso-spacerun: yes"> </span>First Allied Securities, Inc., is not affiliated nor endorses Portland Private Wealth Management or any other affiliated firms.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;mso-bidi-font-weight:bold">If you would like to contact us feel free to email as at [email protected] or we can be reached at 503-703-4067.<span style="mso-spacerun: yes"> </span>Thank you.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial">© 2010 All Rights Reserved Portland Private Wealth Management Group. <o:p></o:p></span></p> <p class="MsoEndnoteText"><o:p> </o:p></p> </div> </div> <!--EndFragment-->

<!--StartFragment--> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">It Is Different This Time<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial;">Potentially one of the most costly trappings for investors is succumbing to a belief that <i style="mso-bidi-font-style:normal">‘it is different this time’</i>.<span style="mso-spacerun: yes"> </span>For instance, assuming that the economic engine of the United States is permanently broken or we are destined to the Japanese experience of permanent malaise may lead us to make the wrong choices when it comes to investment strategy.<span style="mso-spacerun: yes"> </span>Just over a year ago we experienced a ‘financial panic’. <span style="mso-spacerun: yes"> </span>It was not the first and it will not be the last.<span style="mso-spacerun: yes"> </span>A financial panic is characterized by a ‘run on the banks’.<span style="mso-spacerun: yes"> </span>Our recent experience was a ‘run on the system’.<span style="mso-spacerun: yes"> </span>What happens in a financial panic is that all financial players move in unison to ‘safe assets’ leaving financial institutions without risk capital to operate.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Banker Panic of 1907<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial;">While the Great Depression was kicked off with a series of ‘bank runs’, the most similar episode to recent <i style="mso-bidi-font-style:normal">Panic of 2008</i> was the <i style="mso-bidi-font-style:normal">Banker’s Panic of 1907</i>.<span style="mso-spacerun: yes"> </span>The stock market peaked in 1906 and fell 40% over the next year during a time of recession.<span style="mso-spacerun: yes"> </span>In the fall of 1907, with the economy and financial markets already on shaky ground, a number of financial institutions extended money to a group of investors (think subprime lenders) making big one-way bets.<span style="mso-spacerun: yes"> </span>When the investor bets soured (think housing bust) it led to the collapse of a prominent broker dealer in New York City (think Lehman) that caused another and much larger financial institution to fail (think AIG).<span style="mso-spacerun: yes"> </span>As news spread, depositors across the nation became nervous and began withdrawing their funds from all types of institutions (think of the mass exodus from money market funds after <i style="mso-bidi-font-style:normal">The Reserve Fund</i>, a money market fund with a small position in Lehman, <i style="mso-bidi-font-style:normal">‘broke the buck’</i>.)<span style="mso-spacerun: yes"> </span>From there, the entire system began to unravel.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">John Pierpont Morgan, the wealthiest and most prominent banker of the day (before the Federal Reserve Bank existed) stepped into the fray by making capital injections into several prominent banks (think Bernanke/Paulson with their Maiden Lane loans to AIG and the $250 billion TARP injections into the largest U.S. financial institutions.)<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-edit.g?blogID=7394734795211330076&amp;postID=765466111711800429#_edn1" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[i]</span></span></a><span style="mso-spacerun: yes"> </span>John D. Rockefeller, the wealthiest person in America at that time, made a large deposit into Citigroup’s predecessor (think Warren Buffet investing in Goldman Sachs and GE Capital).<span style="mso-spacerun: yes"> </span>After these initial injections, over the next few weeks, and through some serious banker wrangling, Morgan was able to pony up enough bankers and money prevent the total implosion of the financial system (think of the $500 billion in the 2^nd round TARP, as well as the TALF, CPFF, PPIP).<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-edit.g?blogID=7394734795211330076&amp;postID=765466111711800429#_edn2" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[ii]</span></span></a><span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Past Performance Does Not Predict Future Performance<o:p></o:p></span></i></b></p> <p class="MsoNormal"><span style="font-family:Arial;">The economy did shrink in 1908, but it grew again until it was stymied by the outbreak of World War I in 1914.<span style="mso-spacerun: yes"> </span>And in the aftermath of the 1974 ‘Great Bear Market’, the economy grew until 1980 despite double-digit interest rates and double-digit inflation during that time period.<span style="mso-spacerun: yes"> </span>It is hard to say if the <i style="mso-bidi-font-style:normal">Panic of 2008</i> was any worse than the <i style="mso-bidi-font-style:normal">Panic of 1907</i>.<span style="mso-spacerun: yes"> </span>Or the economy of 1975 was more resilient or in better shape than the economy of 2009.<span style="mso-spacerun: yes"> </span>Whatever the case, unprecedented is not a word I would use to describe the events of the last year or so.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">Looking forward, a belief that America is permanently broken, or on the wrong path, or is an empire in decline is generally a bad bet in my view.<span style="mso-spacerun: yes"> </span>In 1989, the Nikkei would peak at 38,000.<span style="mso-spacerun: yes"> </span>Japan was on a roll.<span style="mso-spacerun: yes"> </span>It had a vibrant economy, great manufacturing acumen, they were buying up the most precious real estate in America, and everybody wanted a Sony Walkman.<span style="mso-spacerun: yes"> </span>In America, our financial system was in shambles as we shuttered thousands of S&amp;Ls, Citigroup fell to less than a $1, Michael Moore made his first movie about a dying U.S. auto industry, and Apple’s first portable computer was a piece of crap.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-edit.g?blogID=7394734795211330076&amp;postID=765466111711800429#_edn3" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[iii]</span></span></a><span style="mso-spacerun: yes"> </span>Over the course of the next decade, the Nikkei would lose 66% of it value and U.S. stock market would rise 450%.<span style="mso-spacerun: yes"> </span>Do you think most pundits were betting on Japan or America in 1989?<span style="mso-spacerun: yes"> </span>Perhaps I am wrong, but I caution those that think <i style="mso-bidi-font-style:normal">it is different this time</i>.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">DISCLAIMER: Information, data and attachments contained on this website are from sources considered reliable but their accuracy and completeness is not guaranteed.<span style="mso-spacerun: yes"> </span>Investing entails risks, including possible risk of principal. An investment in any equity, bond, fund or other financial instrument may be speculative and involve significant risks.<span style="mso-spacerun: yes"> </span>We do not offer tax advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions. Past performance is not a guarantee of future results.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">Securities offered with and through First Allied Securities, Inc., a Registered Broker Dealer, Member FINRA/SIPC.<span style="mso-spacerun: yes"> </span>First Allied Securities, Inc., is not affiliated nor endorses Portland Private Wealth Management or any other affiliated firms.<o:p></o:p></span></p> <p class="MsoNormal"><span style="mso-bidi-font-weight:bold;font-family:Arial;">If you would like to contact us feel free to email as at [email protected] or we can be reached at 503-703-4067.<span style="mso-spacerun: yes"> </span>Thank you.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">© 2010 All Rights Reserved Portland Private Wealth Management Group. <o:p></o:p></span></p> <div style="mso-element:endnote-list"><br /> <hr align="left" size="1" width="33%"> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-edit.g?blogID=7394734795211330076&amp;postID=765466111711800429#_ednref" name="_edn1" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[i]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> TARP - Trouble Asset Relief Program<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-edit.g?blogID=7394734795211330076&amp;postID=765466111711800429#_ednref" name="_edn2" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[ii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> TALF (Term Asset-Backed Loan Facility), CPFF (Commercial Paper Funding Facility), PPIP (Public-Private Investment Program)<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-edit.g?blogID=7394734795211330076&amp;postID=765466111711800429#_ednref" name="_edn3" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[iii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> The Citigroup low is a split adjusted number.<span style="mso-spacerun: yes"> </span>Source: Goldman Sachs</span> </p> </div> </div> <!--EndFragment-->

<!--StartFragment--> <p class="MsoNormal"><span class="Apple-style-span" style=" ;font-family:Arial, serif;">One editorial writer for Bloomberg suggested that <i style="mso-bidi-font-style:normal">unprecedented </i>was the most overused word in 2009.<span style="mso-spacerun: yes"> </span>I think she was probably right. <span style="mso-spacerun: yes"> </span>2008/2009 was a year of tumultuous financial events.<span style="mso-spacerun: yes"> </span>But was it unprecedented?</span></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">This year is ending with much of the nation in a state of deep anxiety over the course of the economy. <span style="mso-spacerun: yes"> </span>Wall Street is flooded with red ink, but some of the biggest investment banking houses in the country are nevertheless paying year-end bonuses.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn1" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[i]</span></span></a><span style="mso-spacerun: yes"> </span>The recession will represent the longest slowdown since the 1929 – 1933 experience.<a style="mso-endnote-id: edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn2" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[ii]</span></span></a><span style="mso-spacerun: yes"> </span>There has been nothing like the present degree of apprehension since 1930.<span style="mso-spacerun: yes"> </span>The question on everybody’s mind is whether years like 1931 and 1932 lie ahead.<span style="mso-spacerun: yes"> </span>If the nation is to avoid another Great Depression, it has to face up to the real problems and dangers that lay ahead.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn3" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[iii]</span></span></a> <span style="mso-spacerun: yes"> </span><o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Feeling the Pressure<o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">Many individuals are cutting their expenditures because their pocket books are pinched, they don’t have the means to dip into their savings, and unemployment rolls are lengthening.<span style="mso-spacerun: yes"> </span>Businesses see new orders shrinking, unsold inventories piling up, costs rising and profits eroding.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn4" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[iv]</span></span></a><span style="mso-spacerun: yes"> </span>Last week, the largest airline in the nation said it would be forced into bankruptcy without a federal subsidy.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn5" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[v]</span></span></a> The Mayor of New York City has launched the toughest austerity measures since the Depression laying off thousands of employees and is seeking help from Washington.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn6" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[vi]</span></span></a><span style="mso-spacerun: yes"> </span>The depressing economic news has sent the stock market to the lowest levels in more than 12 years, as the government’s index of leading business indicators fell to its lowest level in 24 years and the unemployment rate reached its highest level in 13 years.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn7" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[vii]</span></span></a><span class="MsoEndnoteReference"> <a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn8" name="_ednref" title=""><span style="mso-special-character:footnote">[viii]</span></a> <a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn9" name="_ednref" title=""><span style="mso-special-character:footnote">[ix]</span></a></span><o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Negative Wealth Effect<o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">There is a real sense of wealth lost from the roughly 40% drop in the stock market since last year.<span style="mso-spacerun: yes"> </span>To the extent is impossible to quantify, this loss of wealth cuts into consumer spending, therefore total demand and production in the economy.<span style="mso-spacerun: yes"> </span>The drastic decline in the price of stocks (which some argue started at the beginning of this decade) eventually has an effect on the process of ‘capital formation’ in the American economy.<span style="mso-spacerun: yes"> </span>This is the means by which savings is transformed into the creation of new businesses and increased investment in plant and equipment.<o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Prognosticating<o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">There are some people on Wall Street that recommend investors should stay away from stocks all together.<a style="mso-endnote-id: edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn10" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[x]</span></span></a><span style="mso-spacerun: yes"> </span>One of the President’s top economic advisors suggested the recession would continue into the middle of next year.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn11" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[xi]</span></span></a><span style="mso-spacerun: yes"> </span>Another prominent economist said his personal view was that a new bull phase in stocks would not occur until spring at the very earliest.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn12" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xii]</span></span></a> On the flip side, gold prices have soared.<span style="mso-spacerun: yes"> </span>This clearly reflects a wave of private demand by people worried about the state of the world economy and particularly about inflation.<span style="mso-spacerun: yes"> </span>Some people regard gold as the only safe store of value at a time of global inflation and depreciating value of paper money.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn13" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[xiii]</span></span></a><o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">So Goes The Auto Sector, So Goes The Economy <o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">Automakers have been under heavy pressure as new car sales have slumped.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn14" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xiv]</span></span></a> The problems with the auto industry are not limited to Detroit.<span style="mso-spacerun: yes"> </span>Employing some 750,000 people directly, it is estimated that indirectly the industry creates another 13 million jobs in steel, aluminum, glass, fabrics, electronics as well as a whole host of other industries.<span style="mso-spacerun: yes"> </span>One automotive executive said the biggest deterrent to new car buying has been the sharp rise in the cost of vehicles because of federally mandated safety and emission standards.<span style="mso-spacerun: yes"> </span>On the other hand, some experts have argued that auto companies would be more profitable if they simplified their offerings and made fewer kinds of cars.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn15" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[xv]</span></span></a> <o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Politics in Flux<o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">The country is eagerly seeking Presidential leadership, not more of the same rhetoric it has ceased to believe or respect.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn16" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[xvi]</span></span></a> <span style="mso-spacerun: yes"> </span>The President has said he would be willing to revise the current economic program he has presented to Congress if economic conditions worsened.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn17" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xvii]</span></span></a><span style="mso-spacerun: yes"> </span>The Administration should have the courage to stimulate the economy through tax cuts and socially desirable expenditure increases.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn18" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xviii]</span></span></a> What inhibits the present Administration is the double fear of increasing the budget deficit and regenerating inflation.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn19" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xix]</span></span></a><span style="mso-spacerun: yes"> </span>The Chairman of the Ford Motor Company has suggested a gas tax to benefit those hit hardest by the recession – the poor and unemployed.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn20" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xx]</span></span></a> <o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Energy Policy: Getting Off Foreign Oil<o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">Measures to strengthen the domestic economy will require a strong national energy policy, whose centerpiece should be to conserve energy and reduce uncertain foreign oil supplies.<span style="mso-spacerun: yes"> </span>Doing without foreign oil supplies will reduce our trade deficit and avoid another Middle Eastern war. <span style="mso-spacerun: yes"> </span>As abundant as the supply of petroleum may seem, it is ultimately a wasting asset that will ultimately vanish.<span style="mso-spacerun: yes"> </span>It is time to consider new technologies like solar, wind and hydrogen.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn21" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character: footnote">[xxi]</span></span></a><span style="mso-spacerun: yes"> </span><o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style: normal"><span style="font-family:Arial;">Don’t Know How Good You Have It<o:p></o:p></span></i></b></p> <p class="MsoNormal"><i style="mso-bidi-font-style:normal"><span style="font-family:Arial;">Despite the economic gloom in America, foreign observers ask – ‘Why should so vast an economy such as ours, which depends to such a relatively small degree on exports, be more nervous than its trading partners who are wholly dependent on foreign trade to survive?’<span style="mso-spacerun: yes"> </span>The United States has immense natural wealth and requires only minimal discipline to regain its self-sufficiency.<a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_edn22" name="_ednref" title=""><span class="MsoEndnoteReference"><span style="mso-special-character:footnote">[xxii]</span></span></a><span style="mso-spacerun: yes"> </span><o:p></o:p></span></i></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><span style="font-family:Arial;">Plagiarizing<o:p></o:p></span></b></p> <p class="MsoNormal"><span style="font-family:Arial;">The paragraphs above have been cobbled together directly from newspaper articles written during the last months of 1974 with minimal change except to improve the readability.<span style="mso-spacerun: yes"> </span>It has been just over one year since I printed out and highlighted these articles, but it is still a worthwhile exercise to examine these writings as though they were current news to potentially help investors gain a deeper understanding of market psychology.<span style="mso-spacerun: yes"> </span>In early 1973, the stock market peaked and fell over 45% over the next two years.<span style="mso-spacerun: yes"> </span>It was a slow, grinding bear market called the ‘The Great Bear’ that ended in December 1974 around the time the articles referred to above were written.<span style="mso-spacerun: yes"> </span>The economy would contract the first quarter of 1975, but it started growing again until the recession in 1980 (the last great housing bust in the U.S.).<span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"> </span>And the stock market would find a bottom in first week of December, 1974, and rally 73% returning to its the old highs by 1976. <span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"> </span>While we do not know what may lay ahead in 2010, listening to the media or pundits may not help very much.<span style="mso-spacerun: yes"> </span>What we do know is that the events of recent months were not <i style="mso-bidi-font-style:normal">unprecedented</i> and it is difficult to predict the course of future events.<span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">DISCLAIMER: Information, data and attachments contained on this website are from sources considered reliable but their accuracy and completeness is not guaranteed.<span style="mso-spacerun: yes"> </span>Investing entails risks, including possible risk of principal. An investment in any equity, bond, fund or other financial instrument may be speculative and involve significant risks.<span style="mso-spacerun: yes"> </span>We do not offer tax advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions. Past performance is not a guarantee of future results.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">Securities offered with and through First Allied Securities, Inc., a Registered Broker Dealer, Member FINRA/SIPC.<span style="mso-spacerun: yes"> </span>First Allied Securities, Inc., is not affiliated nor endorses Portland Private Wealth Management or any other affiliated firms.<o:p></o:p></span></p> <p class="MsoNormal"><span style="mso-bidi-font-weight:bold;font-family:Arial;">If you would like to contact us feel free to email as at [email protected] or we can be reached at 503-703-4067.<span style="mso-spacerun: yes"> </span>Thank you.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Arial;">© 2010 All Rights Reserved Portland Private Wealth Management Group. <o:p></o:p></span></p> <div style="mso-element:endnote-list"><br /><hr align="left" size="1" width="33%"> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn1" title=""><span class="MsoEndnoteReference"><span style="font-family:Arial;"><span style="mso-special-character:footnote">[i]</span></span></span></a><span style="font-family:Arial;"> </span><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;">Cole, Robert J<i style="mso-bidi-font-style:normal">., Wall Street in Red, But Bonuses Flow</i>, The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn2" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[ii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Economic Threat, Recalling the 30s, What to Do About It,</i> The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn3" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[iii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Economic Threat, Recalling the 30s, What to Do About It,</i> The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn4" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[iv]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Economic Threat, Recalling the 30s, What to Do About It,</i> The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn5" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[v]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">Stocks Decline in Heavy Trading,</i> The New York Times, August 29, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn6" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[vi]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Major Events of the Day,</i> The New York Times, November 23, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn7" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[vii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Hammer, Alexander, <i style="mso-bidi-font-style:normal">Dow Stock Average Drops 9.46 Point to a 12-Year Low as Volume Increase</i>, New York times, December 7^th, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn8" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[viii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">Sears, Roebuck Planning Layoff</i>, New York Times, November 6, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn9" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[ix]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">Dow Soars 25.5 as Volume Rises</i>, The New York Times, October 30^th, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn10" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[x]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Vartan, Vartanig, <i style="mso-bidi-font-style:normal">Analysts Pick Some Winners for 1975</i>, December 29, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn11" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xi]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Hammer, Alexander, <i style="mso-bidi-font-style:normal">Economic Gloom Weakens Stocks</i>, The New York Times, October 27, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn12" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Vartan, Vartanig, <i style="mso-bidi-font-style:normal">Will 525 Be the Bottom?,</i> December 8, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn13" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xiii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Dale, Edwin, <i style="mso-bidi-font-style:normal">Gold for Sale: It Probably Will Make No Difference</i>, December 29, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn14" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xiv]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">Dow Soars 25.5 as Volume Rises,</i> The New York Times, October 30^th, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn15" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xv]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Mullaney, Thomas<i style="mso-bidi-font-style:normal">, What Will Help Detroit?</i>, November 3, 1974.<span style="mso-spacerun: yes"> </span><o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn16" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xvi]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Economic Threat, Recalling the 30s, What to Do About It,</i> The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn17" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xvii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Hammer, Alexander, <i style="mso-bidi-font-style:normal">Ignoring the Bad News, Market Advances on Broad Front</i>, October 30, 1970.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn18" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xviii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Economic Threat, Recalling the 30s, What to Do About It</i>, The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn19" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xix]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Economic Threat, Recalling the 30s, What to Do About It</i>, The New York Times, December 18, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn20" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xx]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> <i style="mso-bidi-font-style:normal">The Major Events of the Day</i>, The New York Times, November 23, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn21" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xxi]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Sulzberger, C.L., <i style="mso-bidi-font-style:normal">Let Them Eat Petroleum</i>, November 13, 1974.<o:p></o:p></span></p> </div> <div style="mso-element:endnote" id="edn"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn" href="http://www.blogger.com/post-create.g?blogID=7394734795211330076#_ednref" name="_edn22" title=""><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"><span style="mso-special-character: footnote">[xxii]</span></span></span></a><span style="font-size:10.0pt;mso-bidi-font-family:Arial;font-size:12.0pt;"> Sulzberger, C.L., <i style="mso-bidi-font-style:normal">The Gods That Are Failing</i>, The New York Times, December 1, 1974.</span></p> </div> </div> <!--EndFragment-->