Third Quarter Begins

The third quarter began with a positive week. Stock prices rallied, after the drubbing they took in the second quarter, with the Dow Jones Industrials and SP500 rising 5%. We believe that early optimism in the new quarter is attributed to earnings expectations.

Next week begins the seasonal onslaught of quarterly reports and investors coming into the quarter may be expecting better expectations than what had been feared during recent market declines. If confirmed, it supports our long held discipline of investing based on the facts, and not the emotions created from nervous headlines. Owning stocks while they trade at twelve times estimated forward earnings is not a cheap asset class to own nor are they expensive. Any upward revisions now to forward estimates may give greater confidence to investors that a multiple expansion lies ahead.    

Advancements in the treatment of AIDS made the headlines this week as the U.S. taxpayer funded National Institutes of Allergy and Infectious Diseases reported in the journal Science that HIV antibodies were discovered in a 60 year old man. This may be an important step in creating vaccines for 33 million more people infected with the disease. Scientific advances like this are inspiring and a much needed recognition of the millions of public “investment” dollars spent over many years.  Other public investments paid for by American taxpayers that have helped modernize the world are the Internet and Global Positioning Satellites, without these we would hardly be able to run global banking and airline industries, to name a few. Perhaps we could find a way to charge all foreign users for their use, and employ the proceeds toward paying down our debt, rather than giving them away free to other nations as we do now? We have written often about the high amounts of debt that our nation has accumulated and how high levels of debt absorb and usurp economic prosperity. We have not written enough, however, on the tremendous advancements American taxpayer investments have made in creating a better standard of living for all for the world.

Global warming proponents received some ammunition to their long debated stand on climate change when temperatures in northeast cities sweltered into triple digits this week.  Some of the heat may have come from our nation’s capital as the Obama administration floated the idea of another stimulus package, which sparked a small political firestorm that has now grown to a bigger storm over debt, spending, and taxation.  Last week we wrote about the America Speaks project.  This week Winthrop Quigley of the Albuquerque Journal wrote an excellent article about needing public debate over all aspects of government spending, even defense spending.  We heartily agree and encourage our readers to get the facts, think things through and let us engage in a truly civil debate about the spending priorities of our government. Next week we expect to be writing about earnings.

Weekly Market Commentary is written by the MSF Investment Committee
*Information for this commentary was obtained from sources believed to be reliable. MarketSpace makes no assurance or guarantee regarding the information provided from outside sources.