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    <title>The Capital Advisor Blog</title>
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    	<description>The Capital Advisor Blog</description>
 	<pubDate>Fri, 05 Sep 2008 08:15:22 +0000</pubDate>
    	<language>en-US</language>

	<item>
         	<title>August Economic Recap</title>
         	<link>http://www.capitaladvisors.com/corporate_cash_investments/the_capital_advisor.html</link>
		<category></category>
         	<pubDate>Wed, 03 Sep 2008 00:00:00 +0000</pubDate>
         	<dc:creator>Capital Advisors Group</dc:creator>
         	<guid>377</guid>
 		<description><![CDATA[Economic data released in August indicated weakening growth and increasing inflation pressures, leaving Federal Reserve policymakers in a difficult spot.&nbsp; While the statistics in August were concerning (most of which reflect data gathered in July), the price of a barrel of oil in August provided much needed relief.&nbsp; And fortunately for wary residents of New Orleans, Gustav hit the Gulf with less ferocity and caused less damage than it could have.&nbsp; Crude prices are now 28% lower than they were in mid-July, trading around $105 per barrel instead of $145.&nbsp; While no new inflation statistics have been released reflecting this price drop, a reduction in core price pressures can certainly be expected.&nbsp;
Labor Market
Weekly jobless claims in August remained very high, hovering near 450,000 throughout the month.&nbsp; The Labor Department&rsquo;s July Employment Report revealed further bad news as the labor market shed jobs for a seventh consecutive month and the unemployment rate jumped to 5.7%.&nbsp; July&rsquo;s loss of 51,000 payroll jobs brought the total so far this year to 463,000.&nbsp; August&rsquo;s report is due for release on Friday, and is projected to show that the economy lost an additional 75,000 jobs on the month.&nbsp; Tax rebate checks from the government helped incomes in May, but figures released last month showed that personal incomes grew by only 0.1% in June, and when adjusted for inflation were in fact lower by 0.7%.&nbsp; Last week personal income data for July showed a larger 1.3% decline including the inflation adjustment.
Residential Housing
Housing data released in August exposed further declines, suggesting that housing will continue to hamper economic growth for months to come.&nbsp; Building permits, a leading indicator of future housing activity, were down 17.7% in July, while housing starts sank 11% from the previous month to the lowest level in 17 years.&nbsp; The scale of the decline was skewed by a change in New York building codes that artificially increased the previous month&rsquo;s data; nonetheless, the low levels suggest no near-term end to the housing downturn.&nbsp; Existing home sales surprisingly increased by 3.1% in July, but the median home price was 7.1% lower than a year earlier, with sales down 13% over the same period.&nbsp; New home sales increased, but only after the previous month&rsquo;s figure was revised drastically lower; the July result of 515,000 sales of new homes was lower than the initial June reading of 530,000 but beat the revised June tally of 503,000.&nbsp; The inventory of new homes represents 10.1 months of supply at the current sales pace.
Spending
Business sector spending, as indicated by durable goods orders in July, was surprisingly strong.&nbsp; Durable goods orders grew 1.3% in July, matching June&rsquo;s upwardly revised gain, as foreign demand continues to support U.S. manufacturing.&nbsp; Since then though the dollar has strengthened, making U.S. exports more expensive abroad &ndash; which is likely to cause some weakness in these figures going forward.&nbsp; ISM Manufacturing data did not indicate any improvement in July; the reading of 50.0 represents the tipping point between expansion and contraction.&nbsp; The Philadelphia Fed index improved in August from the previous month, but to a level that still indicates a shrinking manufacturing sector.&nbsp;&nbsp; On the consumer side, consumer confidence improved in August on declining energy prices, but individual survey questions suggest that respondents were still pessimistic on the future of the labor market.&nbsp; Personal spending grew 0.2% in July, but fell 0.4% when adjusted for inflation.
Inflation
Inflation statistics continued to provide cause for concern in August, though the figures had little impact on markets as more attention was paid to retreating oil and commodity prices.&nbsp;&nbsp; At the wholesale level, the Producer Price Index surged 1.2% in July, and core PPI jumped 0.7%.&nbsp; Core producer prices were 3.5% higher than a year earlier, well above the Fed&rsquo;s target zone of 1% to 2%.&nbsp; The Consumer Price Index grew 0.8% in July, with core CPI higher by 0.3%.&nbsp; Core consumer prices were 2.5% higher on a year-over-year basis.&nbsp; The price gauge tied most closely to consumer spending and a rumored favorite of the Fed, the core personal consumption expenditures gauge, has risen 2.4% over the 12-month period.
No action is expected at the next FOMC meeting on September 16th, and current fed futures contracts indicate only30% odds of a rate hike by year end.]]></description>
		<dc.keywords>August Economic Recap</dc.keywords>
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 	<item>
         	<title>What We've All Learned From The Auction Rate Debacle</title>
         	<link>http://www.capitaladvisors.com/corporate_cash_investments/the_capital_advisor.html</link>
		<category></category>
         	<pubDate>Wed, 03 Sep 2008 00:00:00 +0000</pubDate>
         	<dc:creator>Capital Advisors Group</dc:creator>
         	<guid>376</guid>
 		<description><![CDATA[I understand that not all recipients of our monthly newsletter would have been affected by the meltdown of the auction rate securities market; however, the structure of the recent broker-dealer/SEC settlements may pique the interest of many corporate treasurers. Of specific interest to us is the manner in which institutional investors have been largely left out of the settlement process. Most of the settlements contain clauses that effectively exclude or delay ARS purchases for so called &ldquo;institutional investors&rdquo; that hold more than $10 million in ARS. You can read more about the details of these settlements in this month&rsquo;s Research Spotlight article to the left.
The fact of the matter is that institutions whose balance sheets may be suffering due to this defunct market have been dealt yet another blow. First, they were placed into these suspect securities which subsequently failed; now, they&rsquo;re forced to take a back seat in the settlement process as others regain their liquidity.
While this entire process has been one long and particularly painful lesson for all involved, it has served to bring to the forefront the critical nature of cash investing. Where cash investments were once almost an afterthought, we&rsquo;re now seeing an increased diligence by boards and CFOs in the cash manager vetting process &ndash; and rightly so. Strong credit research departments and solid track records are becoming more powerful differentiators in the decision making process. And, in this new environment, we expect that many companies, even those unaffected by the ARS debacle, will continue to adopt new behaviors and criteria when determining who will be responsible for the care of their cash in the future.
Regards,
Ben Campbell
President &amp; CEO]]></description>
		<dc.keywords>What We've All Learned From The Auction Rate Debacle</dc.keywords>
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