August 24, 2010 Weekly Market Commentary

The Markets

“We don’t think the world has ended.”

With so much doom and gloom being published these days, it’s refreshing to hear a respected leader of a global, blue-chip company make a positive statement. Doug Oberhelman, the chief executive officer of Caterpillar, met with analysts last week and painted a rather bright picture of the world economy, including the quote above.

Oberhelman went on to say that Caterpillar does not expect a double-dip recession because the world’s central bankers are staying on top of the situation and the global economy is improving -- especially in the developing world. As the world’s largest maker of construction and mining equipment, Caterpillar is considered a good indicator of worldwide economic health, according to Associated Press.

One question that many analysts and economists are struggling with is, “Can the world recover without the United States?” As the world’s largest economy, there’s an old saying that when our economy sneezes, the world catches a cold. Well, we’ve certainly done more than sneeze in the past three years. Optimists say that yes, the U.S. is still important in the world economy, but other countries, most notably China, India, and Brazil, can still prosper even if the U.S. is down for a few counts. They call this “decoupling.”

Underscoring this idea of decoupling is the fact that China just passed Japan as the world’s second largest economy, according to The New York Times. Forecasters are predicting that China will surpass the U.S. as the largest economy by as early as 2030.

Caterpillar, for one, thinks the world will continue recovering even if the U.S. is a bit weak. And the stunning growth of China makes that idea plausible.

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s,, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.

Weekly Focus – Think About It

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” --George Soros

Best regards,

Kevin Kroskey

* The Standard and Poor 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* This newsletter was prepared by PEAK.

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Any future blog posts will be done at . Thank you, Kevin Kroskey, CFP, MBA