April 20, 2009

I hope this finds you well. Our President has said we have “glimmers of hope” and I hope he is correct. I think that we will have to wait until after September and look at unemployment (a lagging indicator) to know for sure.

I recently listened to a presentation from Jeff Rosensweig PhD who is an economist from EmoryUniversity. I have included 4 of his slides relating to jobs and unemployment. (If you would like his entire presentation let me know). The first is the job market by industry; all sectors are down except for two, Government and Health Services/Education. Next is the true unemployment rate and the last two are the Federal Deficits and the Federal Debt Ratio to GDP. The current government spending is almost universally agreed as being a good thing. The spending late in 2010 and later is hotly debated. Only after WWII was debt above GDP.  This presents us with the problem of inflation. The usual best response to this would be stocks. The unprecedented intrusions of our government into business make me very nervous. GM has a government czar deciding what the company should do with the various divisions and the Unions. Some banks have been forced to take TARP funds that didn’t want them (Wells Fargo and Chase). They now have the funds with the attached government restrictions. What’s next???? Doctor Salaries? Thus caution must be taken when jumping in as stocks may not be the optimal solution.

We are having a nice rally, up 20% from the March bottom. I look forward to seeing you again and I thank you for your trust. I will continue to put my best thought into where to invest.

Sincerely,

Willis

Willis Ashby

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