Weekly Review June 1 09

Investor’s Health Weekly For June 1, 2009

• Inflation and TIPS

• Automotive

• Recent Vital Signs

• Critical Events

Feature: Inflation and TIPS

Low: Developed

Moderate: Emerging

High: Restricted, closed


“Looking down the road, however, inflation will pick up and most likely move above the informal two percent target that the Fed is said to favor in the conduct of its monetary policy.”

Professor Jeremy SiegelWharton School of BusinessMay 22, 2009


LEADING INDICATORS OF INFLATION RATIONALE

↑ Oil prices An input cost that impacts industries and consumers

↑ Metals prices Surging demand as a store of value amid inflation fears

↑ Food commodities Increases cost of produced food

↑ Capacity utilization Prices rise more when economy is running over capacity

↓ Local currency Increase in price of goods/services imported from abroad

↓ Interest rates Expansionary monetary policy leads to higher price levels

↓ Unemployment Near-term upward pressure on wages

West Texas Intermediate (WTI) crude oil futures contracts price



Dow Jones Industrial Metals Index


Dow Jones Grains Index


Notes: The shaded areas are periods of business recession as defined by the National Bureau of Economic Research (NBER).

The capacity utilization rate for total industry fell in April, to 69.1%, a low over the history of this series, which begins in 1967.


GBP/USD exchange rate

EUR/USD exchange rate

TIPS: Treasury Inflation Protected Securities

• Treasury bonds whose principal adjusts with inflation

• Interest payments vary

• Marketable, liquid



• Lehman collapse

• TIPS vs nominal treasuries

• Program selling

• Current valuations


• Continued investor interest

• Price stability YE 2008

• Recovery 2009

Sector Focus: Automotive

• Sales declines

• Bankruptcies

• Consolidations

• Job losses

• General Motors

•A stock price that has declined from $18 to $.75 in the last 12 months

• Two years ago the shares were trading at $30



• Ford


•Honda Motor Company


• Goodyear


• BorgWarner


• LKQ Corp


• O’Reilly Automotive

• Overall mortgage delinquencies rose 1.2% in Q1

• Existing home sales up

• New home sales up

• Case Shiller price survey down

U.S. Highlights

• U.S. pending home sales for April

• U.S. light vehicle sales for May

• U.S. factory orders for April

• U.S. unemployment rate for May

Coming This Week

Thank you for your participation

Information, estimates and opinions contained in this report were obtained from sources we believe to be reliable, but are not guaranteed as to accuracy or completeness. This report has been prepared for informational purposes and is not a solicitation or an offer to buy or sell any security. It does not purport to be a complete description or analysis of the securities, companies, markets or developments referred to herein. All expressions of opinions are subject to change without notice, and we do not undertake to advise you of any change in our figures or recommendations. We, our employees, and/or our officers and directors may from time to time have long or short positions in the securities mentioned herein. The securities mentioned in this report may not be suitable for all types of investors; their value and the income they produce may fluctuate and/or may be adversely affected by exchange rates.

Weekly Review June 1 09

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