Newsletter 07-01-09

Is Our Economy Recovering from the Deep Recession?

These days the market looks for anything to cheer about!   On a daily basis, sharp gains immediately are followed by negative declines.  Lately, the pattern is ongoing.  After the Dow loses 180 points one day, it gains 200 points the next.  These shifts have created the false impression of an economy that is in recovery.  

Recent numbers paint a different picture. 

The latest non-farm payroll report shows 467,000 more Americans filed for unemployment.  National unemployment is at 9.6%.  Housing prices continue to decline and more people on all economic levels are facing foreclosure.  In efforts to help ease the glut of unsold real estate flooding the market, the government is now creating incentives to close short sales.

The US auto manufacturers are still burdened by enormous debt while the government is scrambling to bring order to the chaos. 

For the past several weeks, attention-grabbing headlines have had no correlative effect on the market’s direction.  What may seem like good news before the start of the day could cause a sell-off by the close. 

This recent, random volatility has brought a -1.0% return for CAM’s clients for the month of June   bringing the YTD return to -1.22%.   CAM’s strategy simply did not fit the daily volatility of the recent market patterns.  By the end of the month, the market outperformed us.   

As we move to the second half of the year and look forward to the future, we are confident and stand behind our evolving strategy to continue producing year-over-year positive results for our clients.   Every day is challenging, but investing with a long-term perspective will allow our clients to see through the clutter and keep their goals in sight.

As always, we welcome all inquires at 410-988-2511 or by e-mail at info@Camtrading.com.

Supreme Court 5-4 For Consumers

New York State Attorney General Andrew Cuomo won a stunning decision when Supreme Court Justice Antonin Scalia abandoned his conservative philosophy  and cast the deciding vote in a 5-4 decision that allows states to enforce their consumer protection laws against federally chartered banks.  In the surprise move, the High Court’s most conservative member, Justice Scalia joined the four most liberal members of the Supreme Court in overturning a long-standing OCC regulation.

The decision supports consumer protection and strikes a blow to the country’s largest banks as well as to the Office of the Comptroller of the Currency (OCC), which previously barred state oversight of federally chartered bank lending practices.  The decision immediately gives regulators greater power to review and police big bank lending policies. 

Scalia’s decisive vote was based on his belief that it is “bizarre” for the OCC to block states from enforcing their valid consumer protection laws against banks that are nationally chartered.  The vote countered a 2007 decision regarding irregular mortgage lending practices utilized by Wachovia Bank.  The 2007 ruling pertained specifically to mortgage lending while Cuomo’s decision deals with consumer protection.

New York Had Support

Cuomo has been a highly visible critic of Wall Street and the banking industry’s lending practices.  The Attorney General has led intense investigations into investment irregularities and is a strong proponent of consumer protection. 

Cuomo had the support of all 49 other states and the District of Columbia.  Cuomo’s argument was that by striking the OCC rule protecting banks, the Court was not unfairly burdening banks, who must now defend themselves against multiple state lawsuits. 

The group of banks that supports the OCC rule is named The Clearing House Association, LLC.  The Clearing House has long supported the “principle of uniformity in national bank enforcement.”

Citigroup, JPMorgan Chase and others

Cuomo’s action was actually initiated by controversial, former Attorney General Eliot Spitzer, who began the inquiry into controversial lending practices provided by Citigroup, HSNC Holding Pic, JPMorgan Chase and Wells Fargo & Co.  Spitzer asserted that the mortgage lending practices were significantly different for blacks than they were for whites.  Blacks had an unusually high percentage of high-interest mortgages. 

Cuomo has taken the position that the banking and economic crisis was caused by reckless subprime mortgage lending and avoidance of consumer protection laws.  Cuomo is pushing for more regulation and regulation with backbone.

Michael Calhoun of the Center for Responsible Lending called Cuomo’s victory “a victory for taxpayers who have suffered enormously as a result of abusive practices in all types of lending.”

Cuomo Ruling Affects Consumer Protection Agency

The OCC ruling had prevented states from protecting consumers through regulation.  The Supreme Court decision is apt to change the look of the Obama Administration’s push for a new Consumer Financial Protection Agency.  The creation of this new agency is an important component in Obama’s financial regulation overhaul.

The Consumer Financial Protection Agency is intended to combine oversight of credit cards, mortgages and other lending products.  All regulation would be administered by one department rather than by the ten agencies currently providing oversight.  Cuomo’s victory now interjects state protection laws into a new equation.

OECD Good News!

OECD Upgrades March Report

The Paris-based Organization for Economic Cooperation and Development (OECD) was founded in 1961 to coordinate international economic policies.  The OECD has 30 highly industrialized member nations.  The recession  has provided significant challenges fro OECD and its members.

On Wednesday the OECD elevated its economic forecast for the first time in two years.  The announcement sharply contrasted an early week report from the World Bank that indicated the global recession will intensify more than predicted in its report three months earlier. 

The OECD report projects the combined economy of the world’s most industrialized nations will contract 4.1 percent this year before growing 0.7 percent in 2010.  March forecasts indicated a 2009 contraction of 4.3 percent with a 2010 increase of 0.1 percent.

The OECD report was accompanied by strong recommendations that the Federal Reserve and the Bank of Japan should sustain current interest rates until 2011.  The organization also recommended that the European Central Bank (ECB) reduce its current rate.

The OECD report is strongly based upon the consensus that the U.S. economy will contract 2.8 percent this year and bottom during the second half of 2009 before beginning to expand in 2010.  The group projects an expansion of 0. 9 percent in 2010.  March projections called for a decline of 4 percent in 2009 and zero growth in 2010.

OECD chief economist Jorgen Elmeskov suggested the Federal Reserve would not need to raise its key interest rate until 2011.  OECD Secretary General Angel Gurria declared, “Economic activity in the OECD countries is reaching bottom.  We foresee a recovery that will be rather slow and fragile for some time.”

U.S. to Bottom this Year

Gurria urged the Obama Administration to move forward with their public-private partnership plan to rid the toxic assets from bank balance sheets.  The group ominously warned that the Federal Reserve might have to be more aggressive than originally anticipated.  OECD advised that the Fed might well have to purchase longer-term U.S. Treasury securities.

The report reflected continuing turmoil in the U.S. labor market and a resulting negative projection in consumer spending.  While the housing market seems to be bottoming, the market remains over-supplied and with high unemployment and tight credit, consumers are cautious. 

The OECD report said, “Restoration of trust in financial intermediaries and markets is vital for a sustained and strong economic recovery to occur.”

At CAM we appreciate the faith our expanding client base has bestowed upon us.  While these are volatile times, we remain steadfastly respectful of our client’s portfolio investment.  This commitment and our track record of accomplishment are the factors that have tripled our number of accounts under management in the past twelve months.

If you would like to learn more about CAM and our wealth management services, please call 1 – 410- 988 – 2511  or e-mail info@Camtrading.com.

 

 

 

Dark Pools

Dark Pool Liquidity

With the situation in Iran spiraling out of control and with North Korea threatening missile launches in the direction of Hawaii on July 4^th and with the media focus on Secretary Geithner’s Senate Finance hearing last week, the public may have overlooked a relatively obscure news release on June 18^th.  The head of The Securities and Exchange Commission, Mary Schapiro, called for an investigation to shed light on an automated trading oddity called “dark pools”

Dark pools were created to identify the most active trading pools and to secure the intentions of automated traders.  It was feared that these large scale transactions could trigger volatile public responses.  Schapiro and the Obama Administration are strong proponents of complete transparency. 

Dark pools occur when orders are anonymously matched so that traders do not alert the broader market as to their intentions.  The practice has come under scrutiny because the dark pools create a lack of transparency especially relevant to stock prices.  The practice allows a select, distinct minority of traders to have early access to sensitive information.  Many of these traders may have benefited from knowledge of dark pool activity. 

As Schapiro explained to the New York Financial Writer’s Association;  “This practice has the potential to undermine public confidence in the equity markets, particularly if the volume of trading activity in dark pools increases substantially.”

“The lack of reliable information can prompt speculation and suspicion about the basis for market fluctuations.”  Schapiro reported that the SEC is taking a serious look at possible regulatory actions to protect investors and increase market integrity.

Actual dark pool trading accounts for less than 9% of U.S. stock trades.  Schapiro continued that all financial professionals who provide investment advice should have a fiduciary duty to their clients.  This practice would place a higher standard on broker-dealer conduct and require financial advisers to always act in the customer’s best interest.

At CAM, we have always been committed to complete transparency to upholding our fiduciary responsibilities.  Despite the current market volatility, CAM assures clients that their investment success is our sole interest.

CEO Report 06-11-09

CEO Report 06-11-09

The Recession has taught us that everyone has an opinion.  The airwaves are filled with experts and the media likes opposing views.  Turn on any financial reporting network and you can get four different market readings. 

Today, Blackrock’s Bob Doll said that what looked good in March may not look so good today.  Doll said the S&P 500’s rise into the 900’s looked good.  He then qualified his reluctance to engage by saying he fully expected a downturn below 800 in the very near future.

Experts are encouraged by today’s unemployment report that jobless claims are 25,000 less than last week.  However, adjusted numbers put the number of overall unemployment recipients treacherously close to the 7 million mark.  That figure does not include employees whose hours have been diminished or whose benefits have expired.

As Bank of America’s Ken Lewis is grilled by Congress, the market falters wondering if Ben Bernanke and former Secretary Hank Paulson improperly influenced the takeover of Morgan Stanley.

CAM sees current market conditions as unique.  Investors are not acting on performance.  This is an abundance of information fueling a sense of desperation.  CAM is committed to our proprietary strategy and we believe the market will return to the principles of sound investing.

Although we are not keeping pace with the market performance, we are well positioned to capitalize on a return to form.

As always, we welcome queries at 410-988-2511 or by e-mail at info@Camtrading.com.

 

 

The CAM SEP IRA

The CAM SEP IRA

The Simplified Employee Pension (SEP) IRA retirement plan is available to employers, their employees and self-employed individuals.  Under the SEP IRA plan, the employer is permitted to make tax-deductible contributions on behalf of eligible employees.

The employer is allowed to take a tax deduction for plan contributions for each employee on a discretionary basis.  Employees do not pay taxes on SEP contributions or growth until the employee who is under 59 ½ years of age receives a distribution from the SEP IRA.

The SEP IRA is the most overlooked type of retirement account.  Most investors are familiar with the 401(k), the Traditional IRA and the Roth IRA.  Each of these retirement plans has distinct advantages and limitations.

New 2009 legislation has increased demand and awareness for the SEP IRA.

         *  Annual SEP IRA contributions now have a ceiling of $49,000,        the highest of any retirement plan.

• SEP IRA plans provide rollover options to any qualified custodian, of which CAM is one.  Typical 401(k) plans must remain in the custody of the employer’s choosing.
• CAM clients do not have to be self-employed to start a SEP IRA.  Most brokers require self-employment documentation, a tax ID or an Employer Identification Number.

While investment strategies adjust in these tumultuous times, it has become abundantly clear that Tax Deferred Retirement Plans should be part of each investor’s diversified strategy.

CAM stands ready to answer all questions regarding these necessary investment accounts.  Please feel free to call 410-988-2511 or contact info@Camtrading.com.

Newsletter 06-01-09

Newsletter 06-01-09

We are disappointed that over the past three months the market has outperformed CAM.  To add insult to injury, the month of May produced a net-of-fees loss of -2.168% while the S&P 500 gained an impressive +5.308%.  CAM’s May loss ended our streak of 6 consecutive profitable months.  May’s performance reduces our YTD return to +0.746%.

Market performance in these volatile conditions has been abnormally unpredictable.  Our proprietary strategy, which has produced a net-of-fees gain of +182.08% since our opening in 2005, has helped CAM avoid big losses but has not produced with our usual high rate of return.

We believe the market faces many challenges.   

 

• Will this rally continue recent impressive returns for another 6 months?
• Will the market rise back to its October 2007 peak? 
• What could be the catalyst for such growth?  
• Will the 6.7 million unemployed workers in the nation find work?
• Will US Automakers become profitable in the next 6 months and fuel the market’s comeback? 
• When will the $1 trillion dollars committed to the government programs aimed at restoring liquidity to the financial system become working assets rather than heavy debt?  

The statistical data does not support recent market trends.  However, fueled by the Obama Administration’s debt management and abundant public relations skills, the market has yielded solid gains since March.

Overall, we are pleased that we avoided losses during the most devastating market collapse in the past 70 years.  The same investing principles that yielded a +24% return in 2008, have not applied to the market since March 2009.

Since our opening, we have experienced other down periods.  In the volatile period at the beginning of 2008, our investment fund was down more than 13%.  As it has always done, our proprietary strategy brought us back and turned in the sizable 24% gain by year’s end.

At CAM, we are very conscious of protecting our client’s wealth.  Our success is based on our ability to accumulate all relevant data and interpret the results.  This ability is what has generated our amazing growth for more than three years.

Our data suggests that the market will continue to be volatile.  There will be opportunities to reap rewards.  We are committed to identifying these opportunities and to prudent, responsible investing at those times.

As we begin the last month of the second quarter, we are also committed to following the same principles that have seen our Accounts Under Management grow by more than 200% and our fund increase by more than 300%.

            At CAM:

 

• We will continue to be completely transparent.
• We stand ready to answer any and all questions about client accounts.
• We will invest as aggressively dictated by our proven strategy.

CAM is well positioned to capitalize on market conditions.  The months ahead will be challenging and as volatile as the previous year.  While it is always tempting to consider events in hindsight, our profits are realized by our ability to read the market before events unfold.  We are ready for second half of 2009 and we believe our strategy will once again prevail.

 

 

CEO Report 05-12-09

CEO Report 05-12-09

Custodio Asset Management reports year-to-date gains of +3.124%.  The CEO is pleased with year-to-date results but acknowledges that the company has traded with care during the turbulence of the recession. 

In the first quarter, 2008, CAM endured substantial losses, yet was able to finish the year with a positive +23.98% return.  This year, the company’s first quarter strategy has been cautious.  As the markets return to the basics, CAM will be there, diligently helping your portfolio grow. 

The CEO and the CIS remain confident in their abilities to read the market, interpret the data and make wise investment decisions.

Thank you for your confidence and support.  We welcome all inquiries at 410-988-2511 or at info@Camtrading.com.

 

Stress Test Show & Tell

Stress Show And Tell is on!

On Thursday, the Obama administration puts transparency and regulation on the table when they detail the results of Treasury’s banking stress tests.  Treasury Secretary Timothy Geithner gave the country’s 19 largest banks a little extra time to prepare for the public release of the department’s findings. 

Meanwhile at least 10 the nation’s largest banks have spent recent days trying to explain unproven abilities to withstand a deepening of the recession.  The Treasury’s projections relative to the bank’s commercial real estate loans are especially troubling.  Treasury is projecting a 12% loss over a two-year period on commercial real estate loans. 

Monday, White House Press Secretary Robert Gibbs indicated that recently several banks had sought additional taxpayer funding.  Gibbs said that the White House was encouraging banks to meet capital requirements by raising private investment.

Meanwhile, the administration’s transparent handling of the stress tests has caused controversy.  Many of the banks as well as investors, like Warren Buffett, feel profits now being generated by the banks will cover a downturn.  Spurred by a responsibility to account to taxpayers, the administration is determined to release Treasury’s findings.

A bigger banking controversy is brewing.  On Wednesday, Congress is holding hearings pointed towards increasing the government’s regulatory arm.  Chaired by Senator Chris Dodd of Connecticut, the Senate Banking Committee will launch the first of several upcoming discussions focused on regulating too-big-to-fail banking institutions.  The House Financial Services Committee is expected to enter the controversy next week.

The Obama administration has pressed to expand the government’s regulatory authority over bank holding companies. The U.S. has received much international criticism for its lack of regulatory authority over commercial banks.

The Treasury and the Federal Reserve have long been pressing for legislation for more regulatory controls.  Currently, the FDIC can ascertain a bank’s strength or weakness and when necessary can intervene to arrange a solution.  Currently, the government has no such authority over bank holding companies.

The Treasury has submitted a proposal to Congress enabling “the federal agency acting as conservator or receiver to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution’s contracts (including with its employees) and to address the derivatives portfolio, thus reducing the potential for further disruption.”

Federal Reserve Chairman Ben Bernanke said to Congress last winter that “what is missing is a comprehensive dissolution authority to address systematically critical firms.”  With billions of dollars on big bank balance sheets, indications are that there is no quick fix to the increase of regulatory authority.

Message From CEO

Message from The CEO

These are serious times.  The economy, the recession, banking, automakers, equity markets and currency markets are operating feverishly.  As serious as are the times, nothing is more serious than our health.

The Swine Flu or H1N1 has been elevated to a level 5 pandemic crises by the World Health Organization (WHO).  Anyone suffering flu symptoms should contact a physician as soon as possible.

Swine flu symptoms are similar to those of seasonal influenza and include a sudden fever, coughing, muscular aches and fatigue.  H1N1 may also be accompanied by diarrhea and vomiting episodes.

While the seasonal influenza vaccine may help protect against the virus, the CDC advises that there is no specific vaccine for the H1N1 strain.  A vaccine is being developed at this time. 

CAM recommends that concerned persons visit the Center For Disease Control and Prevention (CDC) website at http://www.cdc.gov/swineflu/ for information.

We extend healthy wishes to all!