Hyre Weekly Commentary July 23, 2012The man with his finger on the pulse says the U.S. economy faces two main risks. We have nocontrol over one of those risks and the other, well, we do have some control, but whether ourpoliticians will appropriately exercise that control is a big question.Federal Reserve Chairman Ben Bernanke faced Congress last week and he delivered a rathersubdued outlook in his semi-annual monetary policy report. He said our economy faces twomajor headwinds: 1. The Euro-area fiscal and banking crisis and its potential spillover effects on our economy. 2. The unsustainable path of the U.S. fiscal situation (e.g., the “fiscal cliff”).Source: Federal ReserveThe U.S. has little control over the euro-area situation so we’re at the mercy of European leadersto make bold and tough decisions to get their houses in order. The second item, though, is clearlywithin our control.The so-called fiscal cliff, in which a series of tax hikes and spending cuts will take effect in 2013if Congress takes no further action, could throw the economy back into a recession. TheCongressional Budget Office estimates if no policy changes are made, then our 2013 federalbudget deficit will decline by about $600 billion. On the surface, that sounds great. However,such a huge shock to our system in a short period of time could be problematic.So, will Congress agree to adjust the legislation for the benefit of the economy? We’ll see.For his part, Bernanke said the Federal Reserve “is prepared to take further action as appropriateto promote a stronger economic recovery and sustained improvement in labor market conditionsin a context of price stability.” It’s good to know that the Fed is ready to help if needed. 1- 1- 3- 5- 10- Data as of 7/20/12 Week Y-T-D Year Year Year Year Standard & Poors 500 (Domestic 0.4% 8.4% 2.8% 12.7% -2.3% 5.2% Stocks)
DJ Global ex US (Foreign Stocks) 0.6 0.5 -16.9 3.3 -7.8 5.6 10-year Treasury Note (Yield Only) 1.5 N/A 2.9 3.6 5.0 4.6 Gold (per ounce) -1.2 0.1 -0.6 18.3 18.3 17.2 DJ-UBS Commodity Index 4.2 3.9 -11.1 6.3 -3.4 3.8 DJ Equity All REIT TR Index -1.1 16.0 9.5 31.4 2.7 12.1Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and thethree-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and10-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, djindexes.com, 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.IT’S BEEN ALMOST A YEAR since August 5, 2011, the day the U.S. lost its coveted AAAcredit rating from Standard and Poor’s. So, how have the financial markets responded in the yearsince? Quite well, actually.It may not feel like it, but the broad U.S. stock market, as measured by the S&P 500 index, rose13.6 percent between August 5, 2011 and last Friday, according to data from Yahoo! Finance.Despite all the angst from the credit downgrade, the threat of a double-dip recession and theturmoil in Europe, the stock market has hung in there.The returns in the bond market are perhaps even more startling. The 10-year Treasury yielded2.56 percent on August 5, 2011 and by last Friday, the yield had dropped to 1.46 percent,according to Yahoo! Finance. Normally, you might expect interest rates to rise after a creditdowngrade since the ratings agency is essentially saying your bonds are riskier than previouslythought.The U.S., though, is perhaps a “special” case. The day after the credit downgrade, none otherthan Warren Buffett went on Bloomberg television and said he thought the U.S. should be a“quadruple A” rating. And, to this day, the U.S. dollar remains the world’s leading reservecurrency as more than 60 percent of the world’s foreign currency reserves are held in U.S.dollars, according to BusinessWeek.We shouldn’t get overconfident, though. While the U.S. has tremendous assets, it might onlytake a few bad decisions from our leaders to undo what took decades to build.Weekly Focus – Think About It…“There is nothing wrong with America that the faith, love of freedom, intelligence, and energy ofher citizens cannot cure.”--Dwight D. Eisenhower, 34th president of the United StatesBest regards,
Jim Hyre, CFP®Registered PrincipalP.S. Please feel free to forward this commentary to family, friends, or colleagues. If you wouldlike us to add them to the list, please reply to this e-mail with their e-mail address and we willask for their permission to be added.Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC.* The Standard & Poors 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market ingeneral.* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.* The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on theNational Association of Securities Dealers Automated Quotation System.* Gold represents the London afternoon gold price fix as reported by www.usagold.com.* The DJ/AIG Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. TheIndex is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seenas a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate InvestmentTrust (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 futureperformance.* Consult your financial professional before making any investment decision.* You cannot invest directly in an index.* Past performance does not guarantee future results. mc101507* Some newsletter content was prepared by PEAK for use by James Hyre, CFP®, Registered Principal* If you would prefer not to receive this Weekly Newsletter, please contact our office via e-mail or mail your request to 2074 ArlingtonAve, Upper Arlington, OH 43221.* The information contained in this report does not purport to be a complete description of the securities, markets, or developmentsreferred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee thatthe forgoing material is accurate or complete. Any opinions are those of Jim Hyre and not necessary those of RJFS or RaymondJames. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as asolicitation or an offer to buy or sell any security to herein. Tax or legal matters should be discussed with the appropriateprofessional.Jim Hyre, CFP®Registered PrincipalRaymond James Financial Services, Inc.Member FINRA/SIPC2074 Arlington Ave.Upper Arlington, OH 43221614.225.9400614.225.9400 Fax877.228.9515 Toll Freewww.hyreandassociates.comFind Us Here:Raymond James Financial Services does not accept orders and/or instructions regarding your account by email, voice mail, fax orany alternate method. Transactional details do not supersede normal trade confirmations or statements. Email sent through theInternet is not secure or confidential. Raymond James Financial Services reserves the right to monitor all email. Any informationprovided in this email has been prepared from sources believed to be reliable, but is not guaranteed by Raymond James Financial
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