Camarda Financial Advisors, LLC

FLEMING ISLAND, FL - Camarda Financial Advisors, Inc., a Southeast regional fee-only investments manager, today publicly released a new Chairman’s Communiqué:

A Word from Jeff

Happy New Year to each of you! It's prime time once again for predictions, and time for a preview of my annual economic and markets forecast, which we'll still call "Surviving the Great Recession" (my favorite media name for it, from the New York Times) "An Investor's Guide to Prosperity," even though I'm pretty sure the green shoots are firmly poking through the clouds at last. This new report will be included in the April statement packages, but if you want it faster contact us an advance PDF copy.

What follows is the table I prepared exactly one year ago, with my predictions for the next half-decade.

		2009	2010	2011	2012	2013
1.	Unemployment	Rising Rapidly	Rising	Changing	Falling	Falling Rapidly
2.	Residential Real Estate Values	Falling	Falling/Changing	Changing	Rising	Rising Rapidly
3.	Commercial Real Estate Values	Plummeting	Falling Rapidly	Falling	Changing	Rising
4.	U.S. Stocks	Changing/Rising	Rising Rapidly	Falling	Rising	Rising Rapidly
5.	Foreign Stocks	Changing/Rising	Rising Rapidly	Rising	Falling	Rising
6.	Inflation (worldwide)	Falling	Changing	Rising Rapidly	Rising Rapidly	Hyperinflation
7.	Interest Rates	Falling	Rising	Rising Rapidly	Rising Rapidly	Rising Rapidly
8.	Economic Growth	Negative	Changing	Recovering	Rising	Rising Rapidly
9.	Dollar	Rising	Changing	Falling	Falling	Changing
10.	Quality Spread	Very Wide	Falling	Falling	Falling	Falling
11.	Emerging Markets Stocks	Changing/Rising	Rising Rapidly	Rising Rapidly	Severe Drop	Rising Rapidly
12.	Investor Sentiment	Fear-ravaged	Bearish	Changing	Changing	Rising
13.	Personal Income Tax Rates	Cut	Rising	Rising	Rising Rapidly	Rising Rapidly
14.	Corporate Income Tax Rates	Cut	Rising Rapidly	Rising Rapidly	Rising	Stable
15.	Capital Gains Rates	Stable	Rising	Rising Rapidly	Rising Rapidly	Stable
16.	Real Estate Depreciation/Tax Incentives	Adopted	Significant	Significant	Significant	Challenged

 

I think I got the first eight items pretty much dead-on right. Items 9-12 were mostly right but happened faster than I had predicted, with some of the forecasted 2010 effects actually occurring in 2009. To me this is the most interesting aspect and I will discuss it briefly below. Finally, the tax stuff – items 13-16 – I think I got at very best partially right. The trend for higher taxes is clearly confirmed, but the legislative focus in Washington had been so nearly singular in 2009 as to give little clue on how the Internal Revenue Code might change on non-health issues, even on the pressing matter of estate taxes. At this point, all one can do is continue to speculate.

Anyway, the most exciting part is how rapidly the economy seems to be healing, far faster than even optimists like me had expected. Asia barely missed a beat after the meltdown, and even the pummeled U.S. stirred off the mat way sooner than had seemed possible. Given the severity of the blows, to me this is a dramatic testament to the prescience and discipline of the Bernanke-Paulson-Geithner team, and the wisdom of both Congress and the Bush and Obama administrations in doing what needed to be done to avert a much more damaging outcome. Say what you will about partisanism, politics, and the country's current direction, at least in this regard our leadership seems to have pulled off an extremely improbable turn-a-round. (Not that I believe the good times are back or that there is still not colossal pain ahead…the woods stretch on for many miles, yet. But compared to what might have been – or what was in the 1930's – we are lucky to be walking at least in the park).

That said, the government's not perfect. No less than the New York Times reports that the current health juggernaut will likely result in higher employer costs, reduced employee benefits, cost-shifting to employees, and by (my) extension, severe payroll and job cuts at a time when unemployment has emerged as amongst the severest threats we face. With health reform now a done deal, I hope that Congress will show the wisdom to forbear the expense of implementation until the economy is more fully healed and can better tolerate the change. And despite Chairman Ben's recent observation that it "could move lower from here," the winds seem already to be whipping the flags of inflation somewhat mightily. Even with the worst economic conditions in 80 years, inflation will likely come in at over 2% for 2009 – a year in which we should have had deflation (and actually did in many, many sectors). And the cash-in-circulation "monetary base" – which has a very high long-term correlation to inflation – is flashing an effective increase of over 13%, "one of the highest changes ever measured" according to Bill Teford, who studies and trades on such data. The short is that the Fed has pumped (and appears poised to keep puffing and pumping) far more cash into the economic system than can be productively absorbed. Sadly, I still think that the worst inflation in a generation will be a likely side effect of our recent economic salvation. Blame this (low U.S. interest rates compared to most of the rest of the world), by the way, for the dollar's decline since peaking early in the year when things looked darkest; when our rates rise, so should the currency.

Finally, we think that you will continue to be very pleased with ISIS'® performance when you peek at your statements this month. Pretty well across the board, our results have spoken strongly for themselves once again, and we are very pleased to have delivered these for you. I continue to expect robust – even explosive – performance for the markets in 2010 and (way) beyond, and rest assured that Camarda will continue striving to deliver value and satisfaction well beyond what the markets produce for you. Be happy and prosperous in 2010!

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These communications are written for Camarda clients and those on its priority email list, then released to the public after priority dissemination.

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Camarda Financial utilizes the trademarked ISIS® investment process, invented by Chairman Jeff Camarda, CFP, ChFC, CLU, CFA, CFS, BCM, and is based in Jacksonville, Florida.

Important Information – Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment strategy or product made reference to directly or indirectly in the communique will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or position. Moreover, you should not assume that any discussion or information contained in this communique serves as the receipt of, or as a substitute for, personalized investment advice from Camarda Financial Advisors, Inc. (“Camarda”).

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