Economic problems again
by Peter Switzer
In summary, the Dow lost 144 points or 1.39 per cent to 10,271 while the broader S&P 500 gave up 1.7 per cent to finish at 1075.
On the plus side, merger and acquisition activity is on the rise as evidenced by the BHP move on Potash this week. This reflects the fact that companies have repaired their balance sheets, cut costs and now have a pile of cash.
However, we need to see some progress on unemployment in the States to see the stock market really get excited in a sustained way. Dealogic says the M&A deals topped US$84.8 billion this week, which is huge on recent figures.
In the news
Having a look at the offending economic news and the Philadelphia Federal Reserve's survey of manufacturing activity dropped to –7.7, which was the worst result in over a year. A rise was tipped by economists.
Against this, the July leading indicators reading did rise in July by a slim 0.1 per cent but it fell 0.3 per cent in June, so there was some improvement, though not much.
The worst news was that jobless benefits claims for first-timers went up by 12,000 to 500,000, and this is the highest level in nine months.
If this ordinary news persists the US government might have to seriously consider extending the Bush tax cuts.
Clearly, we’re in a wait-and-see game until the US economy starts creating jobs again.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.
Published on: Friday, August 20, 2010blog comments powered by Disqus