Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

September Monthly Commentary

September 3, 2010

Today’s employment report (September 3, 2010) showed the unemployment rate steady at 9.6%. This is the headline number that the media will seize upon in their weekend reporting. We would suggest looking a little deeper – in the same report it was revealed that the private sector created 67,000 new jobs. The Case-Shiller home-price index of Tuesday, August 31 reported that property values increased 4.2% from June of 2009.

The August 25th Durable Goods report (Durable Goods are just what it sounds like, stuff that is expected to last in excess of three years) was right in line with expectations: up 0.3%. But what was so interesting was that business investment in equipment and software was up 22%. Corporate America is buying stuff! This is also evidenced by the Institute of Supply Management’s Manufacturing Index that came in at 56.3 well in excess of the expected level of 53. This represents growth in general business activity: production, employment and inventories.

The ISM manufacturing index (formerly known as the NAPM Survey) is constructed so that any level at 50 or above signifies growth in the manufacturing sector. A level above 43 or so, but below 50, indicates that the U.S. economy is still growing even though the manufacturing sector is contracting. Any level below 43 indicates that the economy is in recession.

The point of all these statistics is that the economy is growing (yes, probably a little slower than we would all like but in our opinion slow growth is good growth), jobs are being created (yes, slower than we would like) and that the threat of a double dip recession, in our opinion, has been diminished. Not eliminated but highly unlikely.

Our expectation is for a strong third quarter earnings report from corporate America. The second quarter was pretty good with earnings growing about 30% stronger than analyst expectations. We would expect to see similar positive results. As we write (September 3, 2010) this US ten year Treasury yields have ticked up to 2.62% from the level seen on August 25 of 2.43%. Increasing bond yields and a positively sloped yield curve, in our opinion, indicate economic expansion. Just look at the mergers and acquisitions activity: Dell and HP in a bidding war for 3Par, Disney buying Marvel and all of 3M’s purchases just to name a few.

We continue to be fully invested. We are keeping bond maturities very short. We look for 2010 to end in a very profitable fashion for our investment portfolios.

Happy Labor Day.  Enjoy the upcoming football season!

Erick Zanner

JDM Investment Counsel

Information contained herein has been obtained from sources believed to be reliable, but are not guaranteed. This article contains the opinions of the author and is subject to change without notice and is not a recommendation of any particular investment product or security.