October 1, 2012

Another quarter has ended and while the sword of Damocles is still over our heads the string holding it has been reinforced. Three things have improved the situation, two in the EU (European Union) and one in the US. The German court cleared some of the hurdles to Germany Bank), the counterpart of our Federal Reserve Bank) has passed rules which allow them to print money the way we are. Why the market thinks it is good is beyond me but this action has again held the EU together and gives more time to resolve their debt problems. They are in a recession but it is hoped to be a “small” one. I actually think they may be able to keep the whole thing going. The third bit of news is the announcement by our Fed of QE3 or Quantitative Easing to infinity.  The Fed will buy our own bonds at a rate of 40 billion a month until the economy gets better. We are again in the surreal state that we have bad economic news so we are going to print money to get out of it. The market has been ecstatic. The results while confusing have been good for the markets. The actual benefit to the economy is questionable at best and the potential of the cure being worse than the disease is very real. A very good explanation of our debt issues can be seen on You-Tube. Search on You Tube: United States Budget Dilemma or http://www.youtube.com/watch?v=EW5IdwltaAc. It is 5 minutes long and made by a retired CPA from IBM. It is worth watching as it puts things into perspective.

So the good news, the broad US stock market is up 13.31%* YTD and 7.63%* this last quarter. Your portfolios have reflected this positive market movement. While the above mentioned issues are ever present it would appear that we may be seeing small signs of growth in our economy. I will not discuss the “fiscal cliff” which must be addressed before year end. Time has been our friend and shows that a balanced portfolio over time is one of the best places for our capital. As usual, I thank you for your trust in us.

Yours Truly,

Willis

Willis Ashby, CFP®

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