11-26-2009

Let's Give Thanks for Thanksgiving Day 2010

This year is a day of contrasts.  Many Americans are doing very well: they have jobs, they have homes that are paid for, and their IRA and 401K’s are on the way to being repaired.  However, don’t look for an upbeat view from the nearly 6 million Americans who have lost their jobs in the last year, or the over 10 million Americans who have mortgages that are greater than the value of their homes.  Hopefully, the vast majorities of these people are in good health, and enjoy the freedoms that only America offers.  Nonetheless, millions of people know that they are not as well off as they were last year and wonder what the next year’s Thanksgiving will be like for them. 

Everything I know tells me that next Thanksgiving will indeed be brighter for those less fortunate Americans.  Our favorite anthem at Beacon Trust: The Stock Market Leads The Real Economy is playing a clear tune. We are in a recovery!!!

 The 10.x% unemployment rate that will soon be reported doesn’t feel good, but the pattern and direction of initial claims suggests that sometime between Valentine’s Day and Tax Day 2010 we will again begin to add jobs to the economy.  How will this happen?  It will happen when businesses spend some of their better than expected profits on adding jobs.  Businesses made their existing workers work harder in the first half of this year.  In the second quarter, they started to approve overtime, and added some temps.  Next year, they will be hiring people back.

Unsold house inventories are coming down.  They are down 15% from a year ago and now stand at 7 months supply. The last time inventories were this low was February of 2007!  This doesn’t mean that everyone who is waiting for a rebound in Nevada and Arizona and California and Florida will be happy next Thanksgiving.  However, the house market is clearing itself and most homeowners will be in much better shape next year. 

Many Americans who have no health insurance will also probably be better off next Thanksgiving.  Americans hate the current proposed plans.  As we predicted, the noise level is starting to get through to Congress.  For the first time, serious discussions are being held about how to sell insurance product across state lines.  If real costs are attacked, and special interests put aside, we have a chance at saving some money and covering the people who really need coverage help. 

Let’s all pray for an even more improved outcome by next Thanksgiving.  The market is telling us we have a really good chance to expect better times in 2010.  

Fred S. Fraenkel
Vice Chairman and
Chairman of Investment Policy
Beacon Trust Company

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