Weekly Market Commentary 9-12-2011

I'm from the Government and I'm here to help.

Tim Phillips, CEO – Phillips & Company

caricature of government handouts

We heard that message loud and clear last week. Bernanke gave a speech to reiterate the FED still has plenty of tools at their disposal and Obama gave a speech to a joint session of Congress discussing his plans to create more jobs in our country.

The day after their speeches the markets fell 2+%. Either the market doesn’t believe these guys anymore or the market believes the problems in Europe outweigh any government help at home.

If we strip away the emotional reaction to the speeches and look at the facts, here is my assessment.

People elected to office are there to govern, make public policy and do things that try to improve our "lot" in life. Unfortunately, sometimes they can do more harm than good. My point is politicians –Democrat and Republicans– don't like to sit and do nothing even if doing nothing might be the right thing to do. So I suspect congress will take action.

If they act on the Obama plan- this will pump about 450 billion dollars into our economy over the next year and some economists suggest (Mark Zandi – Chief Economist of Moody’s Analytics) we will add 1.9 million jobs. According to Zandi the net impact of all this could be a 2% bump to next year.

If investors begin to believe the old saying, “We’re from the government and we’re here to help” and the political class will actually get something done, then we might see some kind of lift in equity markets.

This week we have retail sales numbers coming out and consensus is for 0.2% M/M increase. Based on the consumer data I highlighted in last week’s commentary, I expect this number to come out above consensus. We are also coming to the close of the third quarter and I suspect earnings will be slightly better than expected. Until then, it should be an interesting next few weeks.

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We would like to honor those who lost their lives and loved ones on September 11, 2001. I was visiting the World Trade Center just one month before September 11th and I will never forget the faces of those I met and spent the smallest sliver of time with.

Tim Phillips, CEO – Phillips & Company

@PHCO Advisors

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Research provided by:

Adam Gulledge, Associate – Phillips & Company