The Economy: Uncertainty has been reduced in our outlook. Last week the Israeli Prime Minister gave his “red line in the sand” speech about the Iranian nuke program. The implication was that an Israeli unilateral strike against Iran would be put off until spring 2013. This is taking pressure off rising oil prices. Spain reported their bank stress tests. All banks passed; though we question the validity of any test with a 100% pass rate. Slowing global growth was again confirmed with U.S. durable goods dropping 13% for August. This was followed by final estimates for Q2 GDP which was revised downward to an annualized 1.3%. This morning the unemployment rate unexpectedly fell to 7.8% from 8.1%. The conflicting economic numbers continue to confound optimists, pessimists and conspiracy theorists. If your neighbor loses his job, it’s a recession. If you lose your job, it’s a depression. The silver lining to global economic news confirming a slowdown is that it allows for greater confidence in planning for the future. Decisions to hold ‘em or fold ‘em can be made with greater certainty. Understanding where we are in the economic cycle creates opportunity for both aggressive moves as well as defensive strategies. We’re eternal optimists but when if it’s raining outside, we’ll grab an umbrella or just stay put by the roaring fire in the hearth.
Food for Thought: The San Diego economy continues to grow in spite of the global slowdown. Many of our privately owned local companies report that revenues are up almost 20% over last year. Privately held construction, defense, med-tech and consumer products companies lead the way. Consumer confidence in San Diego continues to rise as local residential real estate has stabilized. Record low interest rates are fueling refinancings. The rising stock markets have also helped. At Higgins Capital we continue to see opportunity in defensive sectors. With the elections followed by the Fiscal Cliff, we are taking profits. Contact us if we can help you with your investing or financial planning.