Educate Yourself - Under the Oak

Home

Past Questions

Main

Question: What do you think about government reports now? A few months after you last wrote about them?

Bryan Fish

Answer:

Dear Bryan,

Answer: Interesting statistics, out this week, seem to bode well for coming out of the recession – but only eventually, not instantly!

On August 11, the U.S. Labor Department reported that productivity was up for the second quarter. FYI, “productivity” in this context officially measures the economy’s output per hour of labor (or work).

The seasonally adjusted annual rate in the second quarter (April May and June) was 6.4% in the nonfarm business sector. This was the largest increase since the third quarter of 2003. The overall increase within the manufacturing segment was 5.3%.

This sounds positive and it is. However, you should be aware of the slight down side. The rise in productivity during the second quarter was almost universally the result of cost cutting. Companies around the country have consistently been laying off workers and reducing the hours of remaining employees. Consequently our unemployment rate is still hovering around 9.4%.

Nevertheless, the rise in productivity is good news for companies who have successfully stayed in business by operating on a mean and lean platform. They are now in a stronger position to be able to hire back workers as the economy recovers and as demand for their products or services increases.

Strong productivity has also kept profits at many companies from falling drastically. And, in fact, more than a few publicly traded companies reported increased earnings for the second quarter, while others reported higher earnings than expected.

$TIP: Click here to read our related column on this topic.

Even though the market overall has rallied since early March, add to your portfolio with care, keeping in mind that, as Warren Buffet reportedly said, “a rising tide does not lift all boats.”

The Laggards…

To avoid those not riding the waves, look at the companies that have been dropped from the S&P 500. Go to: www.standardandpoors.com and type “index changes” in the search box.

And for changes in the Dow Jones Industrial Average, go to: www.dowjones.com and type “changes to the Dow” in the search box.

Good luck!

The BUYandHOLD website contains links to third-party websites on the Internet. BUYandHOLD provides these links to these websites only as a convenience to users of the website. Links on the BUYandHOLD website are not endorsements by BUYandHOLD or Freedom Investments, implied or express, of the linked sites or any products, services or links in such sites; and no information in such sites has been endorsed or approved by BUYandHOLD. Linked sites are not under the control of BUYandHOLD or Freedom Investments, and we are not responsible for the contents of any linked site or any link contained in a linked site. No information contained in the BUYandHOLD website or accessed through any linked site, or any link contained in a linked site, constitutes a recommendation by BUYandHOLD or Freedom Investments to buy, sell or hold any security, financial product or instrument. Information accessed through linked sites is not, nor should be construed as, an offer or a solicitation of an offer, to buy or sell securities by BUYandHOLD or Freedom Investments. BUYandHOLD does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular security, portfolio of securities, transaction or investment strategy, and any investment decisions you make will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.