HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
Some Observations on the Market
The more data you take into consideration, the better informed you are to make investment decisions. I will review some of things I have been watching, a few of which I have previously mentioned.
Let’s start with interest rates. In general, falling rates are associated with a decrease in business activity (a decrease in demand for borrowing by businesses and individuals). The rate on the bell-weather 10-year Treasury bond is at the low for the year.
If there is one stock that has led this market up, it is Apple (AAPL). Apple has been weak, and really fell apart on Friday, with a new closing low for the year.
Everything needs oil to run. Oil closed Friday at a 4-month low, again suggesting decreased demand.
The demand for copper is a general indicator of business and construction activity. I have often mentioned Freeport-McMoran (FCX) as a stock market proxy for copper, and noted that it often leads the market up and down. FCX is close to the low of the year.
One more graph. It is hard to imagine the market doing well without the financials. XLF is an ETF for the major financials, such as JP Morgan (JPM), Citigroup (C), Bank America (BAC), Wells-Fargo (WFC) and Berkshire-Hathaway (BRK).
One more point. The gold and silver miners have been weak; silver is almost $15 from its high, yet gold remains strong. This suggests to me that people are concerned about the general economic situation, and are turning to physical gold.
No one can say where the market is going. QE II (basically, the government’s printing of money, and artificially low interest rates), which has been propping up the market, causing all assets to inflate (except the one the government really wants; housing), is scheduled to end at the end of this month. I fear that the Greek crisis is just the first of many that will be playing out over the next several months and years. I hope the US will avoid such a budget crisis, but I have my concerns.
The topic of next week’s letter is “How to Avoid a Wipe-out”. I believe it will be one of the best letters of the year. Stay tuned.
RMD
The Economist (6/11-17, 2011). “If China continued to pump out oil at the rate it did last year, it would exhaust its reserves in under a decade”.
RMD comment: China needs oil to run its economy. They will do whatever they must to get it, and they won’t take no for an answer. If China had conquered Iraq, they would now consider that oil theirs.
Wall Street Journal (6/13/11). “On Saturday, more than 500 people scaled…the summit of Blair Mountain, saying it should be preserved…not mined for coal…
Mallory Sutphin (whose husband is a coal miner) said “I told them to get the hell out of here, they’re ruining jobs”.
In the same issue of the Journal, the lead editorial is “The EPA’s War on Jobs”. “The EPA is currently conducting a campaign against coal-fired power…the 946-page rule…even by the EPA’s lowball estimates, is the most expensive rule in the agency’s history…
The International Brotherhood of Electrical Workers, normally a White House Union ally, says the rule will destroy 50,000 jobs and another 200,000 down the supply chain.
RMD comment: Last week I quoted Barron’s Roundtable member Archie MacAllaster, “Mr. Obama is anti-business”.
Every reasonable person wants a clean environment. In fact, the wealthier a society becomes, the more they are willing to spend on a clean environment. In poor societies, people are more concerned with just having something to eat.
The more I read about the greens (Mr. Obama is a very strong supporter), the more concerned I become. Their agenda is simple—anti-technology, anti-progress, and to tell you what to do with your life. If somebody wanted to take my job, I’d tell them exactly what Ms. Sutphin did. It would be interesting to find out what those 500 people who want no mining at Blair Mountain do for a living. I doubt if there are many with calluses on their hands or dirt underneath their fingernails.
I again recommend Green Hell (Milloy, Regency. The book is a little shrill, which decreases its effectiveness, but the points are no less valid). “In 2005, the National Resources Defense Council sued the Navy…claiming that the use of sonar…violates environmental laws…whales, dolphins and other marine animals could be spared excruciating injury and death (The NRDC presented no evidence that any whales were actually harmed by sonar)”. The case went all the way to the Supreme Court, where it was decided by a slim 5 to 4 vote for the Navy.
Wall Street Journal (6/14/11). “The US government is considering putting (the dunes sagebrush lizard) on the endangered species list, with the US Fish and Wildlife Service arguing oil and gas development in the Permian Basin…is destroying part of the lizard’s home…
“This is the most prolific oil-producing region in onshore America” said Ben Sheppard, president of the Permian Basin Petroleum Assoc…If you are to knock out a big portion of that, it clearly would drive up prices at the gasoline pump”.
RMD comment: If you want to give up your job for a lizard, go ahead, but don’t take the bread out of another man’s mouth. The green’s agenda will hurt your pocketbook, it will hurt our economic position and independence, and it could even hurt our national defense and your safety.
Wall Street Journal (6/17/11). “AARP, the powerful lobbying group…is dropping its longstanding opposition to cutting Social Security benefits…
In 2005, the last time Social Security was debated, AARP led the effort to kill…the plan for partial privatization. AARP has now concluded that change is inevitable, and it wants to be at the table to try to minimize the pain”.
This article was probably the #1 topic of discussion on CNBC on Friday.
RMD comment: This year the Federal government borrowed 40 cents of every dollar spent. We just cannot afford that. This sort of reasonable, pragmatic discussion gives me some hope.
I believe “pain” is an important word. We have been living beyond our means for too long. The end of this crisis will be painful. The sooner we make real, substantive change, the less painful they will be. The longer we delay the decision, the greater the pain, and the greater the potential cracks in the fabric of our society.
About 18-20% of alumni donate to their med school Alma Mater annually. Now that I am President of the Alumni Assoc. of the Pritzker School of Medicine and Division of the Biological Sciences at the University of Chicago, I think about reasons one might use to increase alumni participation.
One thing appropriately pointed out to me is that physicians have usually trained at multiple institutions; undergrad, med school, internship and residency, and possibly fellowship. Since I always suggest that charity be focused, if you donate to just one of the four, that is a 25% rate.
I would three points. The more aid you received, the more willing I hope you are to give back, so that future students have the same opportunity you did.
Secondly, one of the parameters US News and World Report uses to generate their rankings is percentage of alumni that donate. Whatever the shortcomings of these rankings; they are a fact of life and people look at them.
Also consider this: donating to your Alma Mater is an investment in your future. The value of your diploma rises and falls with the future fortunes of the school.
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