Smart Money with Keith Springer Saturdays at 1PM and Sundays at 6AM on NewsRadio KFBK 93.1 FM and 1530 AM

Welcome to the 2nd Half of the Show – QE3 a Welcome Sight for Investors

looneytunesIt’s hard to believe that the 2nd half of 2011 is here already, and where does the time go? Josh will be 17 this month. It feels like just yesterday, I was announcing his birth in one of these newsletters. Times have changed for the better as I had a mustache then (Why didn’t somebody stop me?). Although, from an investor standpoint, it’s not so good as the market was at about the same level as it is today.

The worsening employment situation, as evidenced by this morning’s jobs report clearly shows that we’ll be slogging through the mud for a long time to come. However, lucky for us a new quarter is upon us and with it a new earnings season. At last something for the market to focus on other than Europe and the US economy. After all, it is earnings that really drive stocks. Sure, the worsening economy will have a negative effect on earnings, but it shouldn’t show up this quarter.

Pimco’s Bill Gross said it best:

“Corporations are in the catbird seat. They’ve got cheap financing, cheap leverage. They’ve got cheap labor and the ability to move from one country to another at their will. And so corporations basically have done very well.”

What Bill is essentially saying is that with all the excess liquidity sloshing around the economy from the quantitative easing programs and the continuation of QE Mini-me, corporations couldn’t help but prosper. This has translated into stellar earnings which will be reflected in this quarter’s as well, which I expect to push stocks to new highs. Although, if earnings disappoint, the recovery rally is over.

However, these advantages are quickly dissipating as corporations are running out of magic powder to increase productivity from workers. The continued high unemployment, over- leveraged consumer and our aging population will continue to hinder new large scale consumption until the next generation, the “Echo Boomers,” begin entry into their peak spending period, which is not for several more years.

Even though the economy has strengthened, much if not all of it has directly increased the deficit. On the surface, the massive borrowing needed to fund the stimulus programs, appears to be a good move, as it gives an instant and immediate boost to the GDP. This makes it like prosperity and good government policy. Unfortunately, it cannot substitute for private sector investments which are necessary to drive our nation’s long-term growth. More debt means higher future tax burdens, draining future private sector investments, and decreasing returns on investments. This reduces current and future private sector investments, which directly impacts future growth. This is discussed in great detail in Facing Goliath – How to Triumph in the Dangerous Market Ahead, a must read for every investor.

Therefore, barring another full scale QE3, this could very well be the peak in this cycle’s earnings phase, and investors have to prepare accordingly. Once this crippled economy starts to affect stocks, growth is going to be hard to find. Thus, we will continue to concentrate on our Tactical investment approach and focus on good quality tax-free bonds, high yielding stocks and corporate bonds, where we are still finding yields of over 8-10%. Investing should not be an all or none game, so why take all the risk of the stock market if you don’t need to? Invest for need, not for greed.

And that’s where we can help. If you would like a free second opinion on your portfolio, don’t wait until it’s too late. Give me a call today. Our active, hands-on tactical investment management style is tailor made for markets like this and can help you manage risk and deliver returns.

A word on gold:

I gave an interview to Myra Saefong at MarketWatch this morning on gold and here’s a brief synopsis of what I said:

“Investors know governments will now need to continue the stimulus programs and keep printing money,” said Keith Springer, president of Springer Financial Advisors in Sacramento, Calif. “They know they can’t and won’t throw in the towel yet and let the economy sink back into recession. Some investors are also buying gold as a hedge against Armageddon.”

Read the full article

Regards – Keith Springer

Springer Financial Advisors ("Advisor") is a federally registered investment adviser located in Sacramento, California. Advisor and its representatives are in compliance with the current filing requirements imposed upon registered investment advisers by the Securities and Exchange Commission and the State of California. Advisor's web site and its emails of general distribution are limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Advisor's web site on the Internet or dissemination of informational emails should not be construed by any consumer and/or prospective client as Advisor's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. A copy of Advisor's current written disclosure statement discussing Advisor's business operations, services, and fees is available from Advisor upon written request. You may also obtain publicly available information about Advisor through the SEC website as follows: http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx. Advisor does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Advisor's web site or incorporated in an email, and takes no responsibility therefore. All such information is believed to be reliable and authoritative but does not constitute sufficient information to be the sole basis for sound investment decisions and all users thereof should be guided accordingly. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended or undertaken by Advisor) made reference to directly or indirectly by Advisor in its web site, email, or indirectly via a link to an unaffiliated third party web site, will be profitable or equal the corresponding indicated performance level(s). Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client's investment portfolio. Certain portions of Advisor's web site (i.e. articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Advisor's (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Advisor, or from any other investment professional. The information is of a general nature and should not be applied indiscriminately to particular situations wherein it may not be completely applicable. Advisor is neither an attorney nor an accountant, and no portion of the content should be interpreted as legal, accounting or tax advice.