Highlights of This Week’s Update:

  1. Remember the victims of 9/11 and let us never forget.
  2. This may be a good time to change your online passwords after Home Depot is the latest victim of a security breach.
  3. The major U.S. stock indices inched slightly higher last week.
  4. The European Central Bank announces a small interest rate cut and their version of Quantitative Easing (QE).
  5. Our outlook has not changed, with less exposure than normal for all risk levels and a focus on individual stocks vs. stock/equity mutual funds.

Read on for Additional Details……………………………………………………… 

9/11: 13th Anniversary this Week:

Let’s never forget those that lost their lives on 9/11/01 and 9/11/12 at the U.S. Embassy in Benghazi.  I won’t ever forget that day.  We must always remember what happened and be sure future generations of Americans don’t ever forget as well.  Be safe and take a little time to reflect on how it has changed all our lives since the initial attack on the World Trade Center.


It appears Home Depot has fallen victim to the recent rash of security breaches, joining Target, Michael’s, P.F. Chang’s, and UPS.  Now would be a good time to change passwords for your online accounts if you have not already done so in the last few weeks.

The Markets:

The major U.S. stock indices were basically flat for the week ending Friday, September 5th. Both the Dow Jones Industrial Average and Standard & Poor’s 500 stock index each gained only 0.2% in five trading days.  The yield for the 10 year U.S. Treasury inched higher, moving to 2.46% from 2.35% the week before.  (Source: MarketWatch, U.S. Treasury)

The Eurozone Attempts to get out from Behind the Deflationary Eight Ball

The typically conservative European Central Bank (ECB) decided not to toy with the deflationary monster that is knocking at its door (Deflation is an outright decline in the price level, which can encourage consumers and businesses to delay purchases and further aggravate economic problems).

It wasn’t a unanimous decision (ECB press conference), but European Central bankers decided to cut the key overnight lending rate (similar to the fed funds rate in the U.S) from 0.15% to 0.05%. It reduced the rate it pays on the cash banks park at the ECB from -0.10% to -0.20%.


It was a symbolic move. A 0.10 percentage-point reduction will do little to fix Europe’s economic problems, and ECB President Mario Draghi (Janet Yellen’s European counterpart) acknowledged that’s the case.  More importantly, the ECB announced its own version of what is popularly called “quantitative easing” or QE –a series of upcoming asset purchases by the central bank, presumably with freshly minted cash.

In the U.S., the Federal Reserve is wrapping up its monthly bond buys, which have consisted of longer-term Treasuries and mortgage-backed securities.

In today’s modern economy, access to capital is crucial. Unlike the U.S., where borrowers have access to a number of sources for funds, 80% of lending in Europe comes from banks, and banks aren’t lending (ECB). As Draghi pointed out, lending is down 2.2% from a year ago, exacerbating problems.  The ECB’s goal – banks may be more willing to lend if they know there is a buyer for their loans. Undoubtedly, it’s a departure from the more traditional role of a central bank.

Will it work? It’s hard to say at this point because details are lacking, and there are unpredictable variables in the equation.  With rates falling in Europe, the most immediate reaction to the more aggressive monetary policy from the ECB has been the recent decline in the euro to a 14-month low against the dollar. Lower rates in Europe make its currency a less attractive alternative to foreign investors.

For Europe, a weaker euro can also put upward pressure on import prices, which may help slow the disinflationary trend. It may also make exports more competitive. It’s what the ECB wants to accomplish.

Our Outlook:

We continue to monitor our portfolios and maintain an underweight in equities/stocks for all risk levels.  The overall stock market still appears overvalued at this point and some type of downturn could very well occur before year-end.  We will move forward with a focus on individual stocks that appear fairly valued or even undervalued in this environment.  An emphasis on divided yield for holdings in our Level One stock model is also utilized to generate a regular income stream to help mitigate some of the inherent market risk.  We will keep you posted.

God Bless,

Your TEAM at F.I.G. Financial Advisory Services, Inc.


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