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Sam Bass Jr.

‘Tis the Tax Selling Season

By | The Friday Brief | No Comments

To the casual observer, this week’s markets seem overly concerned with news that should have been expected and already priced into stocks.  We know, for instance, that a recession means higher unemployment numbers, declining payrolls, and weaker retail sales.  So why did it seem like investors ran for the exits this week after the buying spree of the week before?  The answer lies somewhere between human nature and the tax code.  Last week saw a market poised shake off months of pessimism in favor of the possibility that the economy would be turning soon.  Stocks rallied as investors and portfolio

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Recovery Ahead? – The Market Believes

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In April of 1991, the National Bureau of Economic Research declared that a recession had begun eight months earlier in July of 1990.  They later announced that same recession had ended in March of 1991.  The recession was actually over and recovery in progress before the recession was officially declared.  The same official body recently declared that our economy entered a recession in March of this year. The economy contracted at a 1.1% annual rate between July and September as consumer spending slowed, business spending slumped, and companies slashed inventories. It is the largest decline since the first quarter of

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The ‘R’ Word is Out

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Often, the fear of the monster lurking in the darkness is greater than the actual sight of it.  The monster’s out, the U.S. is in recession.  The National Bureau of Economic Research on Monday said the U.S. entered a recession in March even though contraction did not actually show up until the third quarter.  A common definition of a recession is two consecutive quarters of economic contraction, but the NBER, considered the official arbiter, relies on a variety of factors to determine the state of the economy.  Most expect contraction in the fourth quarter of this year as well.  On

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Strong Signs the Worst Is Over, But Recovery Remains Elusive

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On Tuesday of this week the government announced that U.S. retail sales rose more in October than in any month in the government’s 10 years of record-keeping.  Consumers spent money at auto dealers, department and discount stores, and building supply outlets.  Sales surged 7.1%, almost three times analysts’ expectations, after falling 2.2% in September. The Commerce Department’s report also showed sales excluding a record increase in purchases from car dealers rose 1% after falling 1.5% in September. The rise in vehicle sales was a result of no-interest financing offered by automakers.  General Motors has announced a continuation of their 0%

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Money Goes Where It’s Treated Best

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Over long periods of time the stock market outperforms bonds by a substantial margin.  But, it should come as no surprise that bonds were the winners over the past two years.  In fact, bonds have outperformed the S&P 500 by a 60% premium, the strongest difference in seventy years (1931 and 1932).  Tom Galvin of Credit Suisse First Boston notes that the year following the strong bond performance, stocks posted a 54% return in 1933 as the cycle reversed.  A similar story of good treasury returns during two consecutive bad years for equities came during 1973 and 1974.  That period

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Patience and Confidence

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Just like the Yankees, this market refuses to give up.  Down two games to none, the Yankees faced the possibility of a sweep by the upstart Arizona Diamondbacks as they came back to New York for game three of the World Series.  But with faith, determination, and more than a little luck, they homered their way back into the series, winning all three of their games in front of the home crowd.  In the last two games, the Yank hitters overcame the Diamondbacks in the ninth innings as they capitalized on the weakness of Arizona’s relief pitcher staff. 

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Letters of Terror and the Waning Influence of Mr. Greenspan

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Wednesday’s market opened with much promise.  Our president said there were indications that our efforts against the Taliban and Al Qaeda were showing success.  IBM and several other notable companies reported earnings that were better than expectations.  The DOW and NASDAQ opened up 100 and 30 points, respectively, above their Tuesday close.  Investors seemed to ignore the news that terrorists had crossed yet another line by assassinating Israeli Tourism Minister Rehavam Ze’evi outside his hotel room.  Later in the morning, though, the weight of two events finally began to drive the resilient market down.  The first was a lack of

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Half Full or Half Empty?

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“If you look at life one way, there is always cause for alarm.”  -Elizabeth Bowen, Irish novelist That the economy is ailing is no surprise to anyone.  Unemployment statistics, additional corporate layoffs, and earnings disappointments are part of every news segment.  While there is plenty of support for the negative case, there is also cause for optimism.  Many strategists are now saying that the market is at or near the bottom.  They say that it is too late to be defensive in portfolio makeup, and that the risk/reward ratio now favors being more invested in equities than bonds.  Even the

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Hope

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To wish for something with the expectation of its fulfillment Our expectations for a market recovery were growing stronger in the days before the attacks as factory orders began showing improvement.  After the markets’ week long close investors sold stocks with renewed fears of recession.  The theme among pundits was that we were probably in recession before the attacks and that likelihood seems almost certain now.  Experts further agree that the recession will be deeper than before, but of a shorter duration.  There are several rationales for a shorter, deeper, or “V shaped” recession.   The consumer, credited with holding this

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