Good Employment News

The Friday non-farm payroll report posted positive employment news.  Even better than expected employment trends were well received by global equity markets as the dollar made a strong early morning push at the yen as optimism hit trading floors around the world. 

• U.S. employers cut 247,000 jobs in July
• Unemployment eases to 9.4% (9.6% projected)
• June job losses 43,000 less than originally reported
• Health and Education add 17,000 new jobs
• July hourly earning up 0.2%
• Average work week 33.1 hours vs. 33.0 hours in June
• Service industry trims 119,000 jobs
• Manufacturing falls by 52,000
• 19^th straight month of job losses

 The Obama Administration was ahead of the news and seized the momentum to praise current policy.  Generally, analysts were pleasantly surprised but cautioned that while the news was better than expected there still remains plenty for room for improvement.  The U.S economic fundamentals remain troubling and laden with risk as real unemployment stands at 16.3%.

 The July non-farm payroll report is the most favorable report since August 2008 and raised hopes that the corner has been turned on the recession.  The 247,000 job losses and the 43,000 revised June figures served to lower non-farm unemployment by 0.1%.

Fast & Furious

The bulls have charged.  The bears have missed something.  A high sense of optimistic anticipation surrounded the Friday non-farm payroll report.  On Thursday evening, President Obama may have tipped his hand.  The President spoke favorably about the probability of a substantial decline in new unemployment applications.

“We’re losing jobs at half the rate we were at the beginning of the year.  Our financial system is no longer on the verge of collapse.  The market is up, housing prices are up for the first time in three years.” Obama told a Thursday night political crowd.

To support the expected good news, the U.S. Senate buoyed the Cash For Clunkers program approving a fresh $2 billion injection.  With the re-opening of several Chrysler and General Motors plants, manufacturing is expected to show a 50,000 gain in jobs.  Manufacturing employment is responsible for approximately one third of all U.S. economic activity. Manufacturing trimmed 136,000 jobs in June.

Modest gains were also anticipated in the deeply troubled construction industry as well as in health and education.  An important indicator in employment strength is the length of the average workweek.  The current workweek is stalled at 33.0 hours.  A further decline would raise skepticism about the sustainability of the recovery.

At the core of the skepticism are questions about the value of certain fundamentals.  Some analysts suggest that government incentives are fueling the baseless recovery and that a rocky road lies ahead. 

Regardless of the Friday report, long-term unemployment is expected to increase by 69,000 settling at 6.31 million unemployment recipients.  This would push unemployment to 9.6%, the highest rate since 1983, and make the 10% projection a strong probability.

Employment Growth Critical

Since the stimulus package was passed, 2 million more Americans have filed for unemployment.  Patience is wearing thin on Main Street.  Other than in the auto industry, out-of-work laborers are not being called back to their previous jobs.  Below the surface, Americans are showing increased dissatisfaction with the Administration’s handling of the recession.

Despite employment gains in auto manufacturing, non-manufacturing employment has dipped significantly.  Main Street perceives that the recovery is baseless.  Auto manufacturing employment gains are based on publicly funded incentive programs and bankruptcy filings by two of the biggest three automakers.  Where would unemployment be if the U.S. taxpayer had not bailed out automakers?  Even with the Cash For Clunkers program, auto sales are split equally between U.S. and foreign auto manufacturers.   

Consumer spending is the driver of the U.S. economy.  There are some encouraging signs as retailers reported lower than expected losses in July.  Yet, same-store sales were headed for the 11^th consecutive monthly slide.  Most analysts agree the stage is set.  Now, the recovery is all about jobs.

Bernanke on The Hill

The Chairman of The Federal Reserve stared down the Senate Banking Committee and displayed the perseverance that has led the country through its deepest recession.    In two days of testimony on Capitol Hill, the chairman concluded his semi-annual report on the central bank’s monetary policy.  Ben Bernanke took the opportunity to advise the Senate on a wide range of issues. 

Bernanke has come under fire for his handling of Bear Stearns, AIG and the Fed’s role in the JPMorgan takeover of Merrill Lynch.  There has been strong support for changes to the Federal Reserve’s operating authority and mandate. 

Bernanke attacked a bill proposed by The House of Representatives and calling for audits of the Federal Reserve to be performed by the Government Accountability Office (GAO).  The chairman believes that such audits would alarm financial markets causing nervousness that monetary policy will fall subject top political agenda.

Of late, the Fed has been severely criticized for failing to protect consumers.  The new bill would remove consumer protection from the Fed’s mandate and vest the responsibility with another agency.  Bernanke agreed that the central bank has made errors but strongly suggested these powers should remain with the Fed.

“A few suggestions I would make.  One would be to put consumer protection in the Federal Reserve Act along with the full employment and price stability as a major goal of the Fed.  A second step could be to require the chairman to come before another committee at least once a year to present a report the same way we do for monetary policy, on our consumer protection steps,” Bernanke said.

Republican Jim Bunning asserted that “I understand your concern about the Fed’s independence, but you are the one that threw away the independence by acting as an arm of the Treasury and engaging in fiscal policy…  Your job is monetary policy, not fiscal policy.”

Unemployment and Consumer Confidence

Chairman Bernanke indicated that an easing in housing was underway.  He also reported that the Fed is working with banks to bring the Commercial Real Estate market under control. 

Bernanke made it clear that while corporate profits and equity markets were improving, the biggest obstacle to recovery is the declining employment market.  The chairman expects unemployment to remain very high well into 2011.  This trend will only intensify pressure on overall consumer confidence.

The news came in the wake of high corporate earnings generated through the trimming of operating costs and specifically employment.  Many companies that report impressive earnings are still lagging in sales.  Year-over-year sales figures are alarmingly low and attest to the lack of consumer confidence.

Meanwhile, the central bank has lowered interest rates to near zero and has doubled the balance sheet to $2 trillion to combat the effects of the global recession.  This huge expansion will pose a strong test for the control of inflation. 

Bernanke explained that the Fed has an exit strategy and can pull back on its enormous stimulus when the time is right.  The Fed could arrange reverse re-purchase agreements with financial firms and could also offer term deposits. 

The chairman made it clear that he does not see the American consumer leading the country out of the recession.  Bernanke stressed that the Fed is busy advising American trading partners that they must push their national consumers to participate more aggressively in the recovery.  Bernanke’s assessment that countries must encourage their own national infrastructure spending to spur their economic growth sent waves through equity markets.

CIT Down To Wire

Trading of CIT Group, one of the country’s largest lenders specializing in loans to small and mid-sized businesses, was halted late Wednesday afternoon.  The struggling lender received $2.3 billion in TARP funding in December and has applied to The Federal Deposit Insurance Corp for assistance under a program that guarantees newly issued debt for bank holding companies.

The FDIC is reluctant to intervene.  In strained meetings with the FDIC, The Treasury and The Federal Reserve, CIT’s financial instability has come under fire and poses a serious roadblock for a proposed bailout.

At stake is the financial security of CIT’s one million customers.  Aware of CIT’s tenuous position, many of these clients began to draw down on their credit lines to the tune of $750 million on Monday and Tuesday.

With a staggering, unexpected first quarter loss, CIT’s funding options began to disappear as investors migrated to safer platforms.  With $2.5 billion in debt due in 2009 and another $7.4 billion due in the first quarter of 2010, the handwriting may be on the wall for CIT.

Although similarities ring true between the CIT dilemma and Lehman Bros. and AIG, the consensus is that CIT Group does not fall into the too big to fail category that spurred the government bailout of many of the country’s biggest banks.  Second quarter big bank earnings indicate a return to strength for the country’s biggest lenders. 

David Havens, a credit manager at Hexagon Securities, explained; “I think the market is looking at CIT as an isolated situation.  There aren’t many sizable companies that fit into that bucket.”

Fed Policy at Stake  

While CIT appears imperiled, the company’s customer base puts it in a unique position.  As a big lender to small and mid-sized businesses, many of these business may fall be the wayside.  Small business is expected to generate big employment numbers to ease the recovery’s most detrimental component.

Reportedly, the failure of CIT Group would leave approximately one million small business borrowers unable to meet payroll.  CIT Group provides financing to airlines, railways, retailers and manufacturers.  According to the Small Business Administration, CIT was the country’s top lender to small business in 2008 with $524.9 million in loans.  2009 loan volume stands at $65.7 million and places CIT Group as the 16^th largest small business lender.

“They are major players when it comes to financing.  But, I don’t see the same type of impact if CIT goes under as when AIG was being batted around,” said the managing director of fixed income at Wall Street Access.

Although CIT Group now qualifies as a bank holding company and as such meets the criteria for FDIC intervention, FDIC chair Sheila Bair remains unwavering in her opposition to CIT’s application for assistance.  A fierce defender of the FDIC, Bair cites heavy risks related to CIT’s junk-status credit rating, the quality of its assets and its liquidity problems as a formula for disaster.  If CIT Group receives Bair’s endorsement, the FDIC would be responsible for the company’s losses in the event of default.

The Treasury and the Fed have entered the CIT fray.  Round the clock meetings have yielded no results as the Fed and Treasury look for ways to protect the small business clientele by giving CIT Group another temporary lifeline.

Financing Options

Under consideration is temporary bridge financing.  The question is where the bridge will lead.  One government plan proposes that CIT transfer its assets to its bank and then pledge the assets at the Federal Reserve discount window and thus refinance some of the debt.  Raising money through conventional means is not an option for CIT.

The real rescue debate is fueled by the perception that the risk may outweigh the gain.  Opponents of government assistance support community bank involvement in financing the country’s small businesses with assistance of the bigger banks for mid-sized businesses. 

On Wednesday, the SEC halted trading of CIT GROUP shares as the Chairman of the House Financial Services Committee addressed the subject in interviews.

“I have spoken with Secretary Geithner and I understand they’re working hard to try to come up with something responsible to try to prevent the failure.  I think there would be a great deal of harm to the overall economy,” said Frank.  The Chairman went on to suggest that Congress needs to design a system that allows large financial institutions to unwind while minimizing the residual fallout.

The chief executive of the National Retail Foundation is pressing hard for government intervention.  Financing for more than 10,000 small retailers is at stake.  In an industry already struggling with the effects of the recession, this will close many doors, empty much commercial real estate and add significantly to the unemployment dilemma.

The retailers characterize the CIT problem as short-term liquidity, but FDIC Chair Bair remains adamant in her staunch opposition.  Her resistance has pulled Geithner and Bernanke to the table.  

 

 

     

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.

 

 

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!

Stanford Strong In Antigua – Weak on Morals

Robert Allen Stanford – Strong in Antigua, Weak on Morals

Robert Allen Stanford has defrauded 50,000 customers and misrepresented his handling of billions of investor dollars.  Today, Stanford was taken into custody by the FBI while his Antiguan-based Stanford International Bank, the island’s largest employer, attempts to survive a run on cash withdrawals. 

In addition to Stanford, Chief Financial Officer James Davis and Chief Investment Officer, Laura Pendergast-Holt, of the Houston-based Stanford Financial Group have also been charged in yet another Madoff-styled Ponzi scheme.  The three Stanford defendants have had all personal assets frozen and a federal marshal has been appointed as receiver of these assets.

The Stanford International Bank Board consisted of family and friends including Stanford’s father, his college roommate (Davis) and Pendergast-Holt, who possessed no major investment experience prior to her appointment at the bank.  This group oversaw the management of billions of dollars. 

Like the Madoff disaster, the Stanford collapse will have far reaching global implications.  Recently, the Stanford group announced shock at the Madoff scandal and tried to distance itself from closer scrutiny.

The SEC has filed a host of complaints and has requested emergency relief for defrauded investors.  Meanwhile, more hard-earned money is gone, taken from honest investors.

Custodio Asset Management is well aware of the repercussions of this scandal and other Ponzi schemes.  Investors familiar with CAM’s operating practices are appreciative of the company’s highly transparent investment practices.  All questions regarding new or existing accounts are welcome at 410-988-2511 or at info@camtrading.com.

CAM Posts Big Gain 02-12-09

CAM’s Chief Investment Strategist, Almond Custodio, continues to apply the age-old adage “if it ain’t broke, don’t fix it” to the CAM portfolio and the company’s expanding client base is liking the results.  The disciplined investment strategy in the major indices returned a stellar gain of  1.88% for the week ending Feb 13th.  Having achieved their goal for the week, CAM has captured the net of fees profit and gone to cash.

While the buy-and-hold market remains turbulent, Almond has consistently employed his proprietary strategy to increase client wealth.  New and existing clients could not be happier.  Unfortunately SEC regulations prohibit testimonials, but CAM is receiving rave reviews from exuberant clients.

Year-to-date gains now stand at +4.045% and CAM has produced +191.312% in a little over three years.  While the marketplace is uneasy, there remains opportunity for structured profits.  Over more than three years investing for CAM, the CIS is determined to continue the company’s tradition of excellence.

Please feel free to contact the company at 410-988-2511 or by e-mail at info@Camtrading.com.

 

 

8 Steps To Open A Cam Account

Custodio Asset Management       info@camtading.com        410-988-2511

8 Steps to Open Your CAM Account

Opening you new CAM account at Rydex is easy and assures account holders of secure, 24/7 total access.

 Custodio Asset Management offers three types of accounts

 1.    A cash investment account

 2.    Tax deferred accounts like IRA’s, 401(k) rollovers, or other qualified plans.

 3.    Uniform Gift to Minors Accounts (UGMA).

 Step 1 –     Account holders and investors must first determine the type account they will open.

 Step 2 -  Read the Custodio Asset Management Investment Advisory Contract, which is the agreement that describes CAM’s legal responsibilities to each investor. 

 Step 3 -      Upon reading and accepting the terms of the Custodio Asset Management Investment Advisory, please sign and date page 3.

Step 4 -      Read the Appointment of Financial Professional limited power of attorney form that allows CAM to manage your account on your behalf.  Upon execution of this document, each investor permits CAM to apply  their proprietary investment strategy to individual investor accounts.  As a limited power of attorney agreement, CAM is not allowed to withdraw funds from your account or change any beneficiary information or personal information without your written consent.

The Appointment of Financial Professional limited power of attorney form is a two-page form that requires the investor’s signature, printed name and date of acceptance.

Step 5 -      Review the Rydex Funds IRA Application (pages 3-6 of Retirement Kit).  This is the application for a new IRA account through Rydex Investments.  This form is required for investors who are rolling over from a previous custodian. 

Instructions for completing this form are as follows:    

1. IRA Account Registration:  Check the box that says: Rollover IRA then complete the personal information including social security number, date of birth, and contact information.
2. IRA Investment Method:  Check the box that says:  Transfer then fill out the estimated transfer amount $ with what you believe to be the balance of your investments (approximate numbers are acceptable).
3. Investment Selection:  Skip this section.
4. Beneficiary Information:  Designate your beneficiaries and determine the % of allocation to each.  Please remember to include the social security number for each beneficiary. 
5. Account Options and Services (Optional).  You may skip this step.
6. Signature Section:  Upon reading and agreeing to the account application’s terms, please sign and date.

Step 6 –     Read the Rydex Funds Retirement Account Transfer/Direct Rollover Request (pages 9-10 of Retirement Kit)

1.   IRA Owner Information:  Complete information requests including, SSN, DOB, and Contact Info.  Check the box: “This is a new Rydex IRA.  I have completed and enclosed an IRA Application with this transfer form.”

2.   Current IRA Custodian/Trustee Information:  Complete this form to the best of your knowledge. 

3.   Transfer Information:  On the “This transfer is a: (please check one)” check the: “Complete Transfer” box.  Then on the “This transfer should be made: (please check one) check the:  “Immediately” box.  On the right side of the same section, choose the one that applies.  In your case it will be from: “Traditional IRA” and to: “Rollover IRA.”

4.   Signature and Acceptance:  Upon reading and agreeing to the account application terms, please sign and date.  On the right side, there is a “Medallion Signature Guarantee.”   This is required if you are transferring more than $25,000 in assets to Rydex.  After completing the form, you should visit your local bank and have them notarize these documents.  This step provides an added layer of security in case of fraud against your accounts.

5.   Transfer Instructions:  Check the:  “By Check” box.  Then on the FBO (For Benefit Of) you would put your name.   Leave the account number blank as you have not received your new Rydex account number.

Step 7 -  Upon completing all forms, please send to:

Custodio Asset Management

9510 Rommel Drive

Columbia, MD 21046 

If you are sending a check, the check should be made payable to Rydex Investments.  We recommend that you send the completed forms with a confirmation receipt or other tracking methods.

Step 8 – Perform the following Spot Checks:

1. Did you sign and date all necessary forms?

2.     If you are rolling over an IRA from a previous custodian, did you include a copy of the statement in the package to mail to us?

3.     If you have beneficiaries, did you include all social security numbers?

4.     If you are writing a check to fund your investment account, did you make the check payable to “Rydex Investments”?

5.     If you are transferring more than $25,000 did you arrange a signature guarantee?

 

From The CEO – 01-06-09

CEO Report 01-05-09

Custodio Asset Management wishes Happy New Year to all.  2009 promises to be a challenging year for investors, the Obama administration and for U.S. and global economies. 

As the Madoff Ponzi Scheme falls under the scrutiny of the Congressional Hearings in Washington, CAM expects more startling revelations about the firm’s blatantly dishonest investment practices.  Clearly, the SEC’s oversight is lacking and Madoff knew how to manipulate the system.

2009 will present opportunities for investors.  CAM’s proprietary investment strategy has provided +179.42% gains since October 2005.  Our transparent and third party audited wealth accumulation system stands ready to welcome all new clients.

To our current clients, we give thanks for the opportunity to serve and for our good fortune in 2008.  We look forward to working with you in 2009.

CAM welcomes all inquires at 410-988-2511 or at info@Camtrading.com