Central Plains Advisors

Information may not be reliable

The current week's Web Buzz commentary is posted below. We invite you to browse the site for more information about us and our investment programs. Please contact us if you have any questions or would like more information.

Septembers personal income numbers declined 0.1% while spending was up 0.2%. Personal income declined $16.8 billion while disposable income (minus taxes) decreased $20.3 billion. These numbers fluctuate from month to month, but a look at the following chart gives one an excellent idea of the trend.

Adapted from calculatedriskblog.com
We see nothing in the economic future that would lead us to believe that this trend will soon move upward. Again, the indicators we follow tell us that things, in all likelihood, will trend flat to downward from this point forward. Last quarters real GDP came 70% from a build in inventory, not final sales. The present quarter should have little, if any, inventory build, thus leading to a flat to negative GDP number.
Annualized GDP deflator came in at +0.6% during the second quarter. Using historical spreads, this means the 30-year government bond should be selling at 2.7% as opposed to the 4.0% it is at currently. If it was selling at this historically modulated level, the gain from here would be 26%. Where we think it might go would be 45%.
The recent decline in price occurred as another inflation scare caused traders to pare back their holdings. As in the past, this too shall pass as the multitude of unused resources limits the passing along of any increases in commodity prices.
Central Plains Advisors, Inc.
Information contained in these commentaries is based upon information obtained from sources both external and internal which we consider to be reliable, but the accuracy of the information and the recommendations contained herein cannot be guaranteed, nor do they constitute a solicitation for the purchase or sale of any securities mentioned herein. Information contained in this commentary may not be reproduced in any form without written permission from Central Plains Advisors, Inc.
Disclosures: As benchmarks for comparison, the indexes used represent an unmanaged, passive buy-and-hold approach. The volatility and investment characteristics of the benchmarks cited may differ materially from those of CPAI. Please be advised that the comparison to the S&P 500 is not an apples to apples comparison, as they are a different class of assets. The account performance figures reflect the reinvestment of dividends and capital gains. Past performance may not be indicative of future results and does not guarantee positive returns. The performance results for 1991 through 2009 have been independently compiled by CPAs from information provided by CPAI. The period of 1991-1999 was one of generally rising stocks and bonds. The period of 2000-2003 was one of generally lower stocks, but rising bonds. The period of 2004-2007 was one of rising stocks and bonds. The year 2008 experienced a stock market crash and average bond market. 2009 experienced a strong stock market and positive bond market.