ECONOMY.  Economic indicators continue to be strong.  Raymond James Chief Economist Scott Brown projects a GDP of 4% annualized for the 4^th quarter versus 2.5% just last quarter and negative numbers the first 2 quarters.  This is an amazingly quick turnaround.  There are encouraging signs in the housing start arena and reports that commercial real estate may not be as wide spread of a problem as first thought. Case-Shiller and the Federal Housing Finance Administration cite that home price indexes have bottomed.   Unemployment reports look progressively “less bad”.  The first quarter of 2009, our economy was losing almost 700,000 jobs, which fell to around 400,000 jobs by the end of the second quarter, and 200,000 by the end of the third quarter.  In November and December, job losses are averaging in the 60,000 per month range.  Still, in the short run, the 15 million people remain out of work will be the largest detriment to our ability to spend our way out of the recession.  And, in the coming 3-5 years, government policy and spending will dictate whether this improvement is sustainable or not.      MARKETS.   Markets have managed to continue upward the last few months, although the upward trend has become increasingly more difficult.  A synchronized global recovery appears to be taking place.  The S&P 500 YTD is 23.7 as of 12/08/2009.   The Dow Jones Industrial Average is 20.73 for the same period.  The MSCI-EAFE (overseas) index is 27.21.   You cannot invest directly in any index.  Past performance doesn’t guarantee future results.  Because new highs are more harder fought of late, many of the technical experts are calling for a short term correction – which they’ve been projecting for 2 months - with the S&P 500 level of 1080 as a key area of support.  (Source: Riverfront, Jeff Sout) MY THOUGHTS.   My belief is that for the next few months, we have more chance of missing upside than downside in the markets.  Current economic indicators are generally improving, historical statistics indicate more recovery in the markets will likely occur if past recoveries resemble anything today, and demand for stocks seems to still be place.   In my gut, I am concerned about many risks still in the marketplace – deflation in the short run/inflation in the long run; the bad financial health of many states; the possible downgrade of our government debt and risk of dried up interest in buying treasuries by our foreign neighbors; the continued devaluation of the dollar in the long run; the affect/timing of tax policy on the consumer’s ability to buy; the lack of credit for business expansion.   After what I think will be some additional moves upward in our markets, I get nervous.  The back half of 2010 and into the next few years, I can make a strong case that traditional stocks/equities will languish; I can also make an equally strong case stocks will rise.  When it comes to growth, you only get it in 3 ways – consumer, business, or government.  If consumers can’t afford to buy goods, companies can’t exactly drive up values and stock prices.  If credit can’t be had, innovation and business can’t contribute to growth.  That only leaves the government to save the economy - and they are already spending at record levels.  On the other hand, if any demand can be stimulated, companies have gotten lean and mean.  Because companies have cut costs and productivity is at all time highs, new revenue in the door could translate much quicker to profits – and to stock prices.  It just remains to be seen which of these scenarios plays out in 2010.    While I’d love to make a prediction and bet all my money on one horse, I think doing so in today’s environment is more risky than ever.  My bets are very different when I talk about short term vs. long term.  Timing is impossible.  We invest accordingly.  

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Any opinions are those of Shari Burnum and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.