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    <title>The Capital Advisor Blog</title>
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    	<description>The Capital Advisor Blog</description>
 	<pubDate>Wed, 08 Sep 2010 13:58:11 +0000</pubDate>
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	<item>
         	<title>The Search for Yield</title>
         	<link>http://www.capitaladvisors.com/corporate_cash_investments/the_capital_advisor.html</link>
		<category></category>
         	<pubDate>Wed, 01 Sep 2010 00:00:00 +0000</pubDate>
         	<dc:creator>Capital Advisors Group</dc:creator>
         	<guid>520</guid>
 		<description><![CDATA[&nbsp;
The meager addition of just 71,000 private sector jobs in July underscores the structural challenges the U.S. economy is facing as it tries to establish a self-reinforcing growth cycle. Against a backdrop of consumer and business deleveraging, private sector job creation faces additional head winds from the regulatory uncertainty of the Frank/ Dodd financial reform bill along with higher taxes from healthcare reform. Additionally, private sector job growth is uncertain as a result of the expiring Bush tax cuts. All of these factors weighing on the labor market come at a time when the temporary impact of last year&rsquo;s government stimulus is beginning to wane.
&nbsp;
The statement from the August 10th FOMC meeting confirmed, &quot;The pace of recovery in output and employment has slowed in recent months&quot; and the Fed downshifted its expected pace of the recovery.&nbsp; In support of the recovery, the FOMC took steps to continue its quantitative easing program by reinvesting principal payments from agency debt and agency mortgage-backed securities into longer term Treasury securities thereby maintaining current Fed balance sheet levels. This action postpones the unwinding of extraordinary balance sheet build up the Fed started in 2008 and sustains one of the few remaining tools that can impact borrowing rates. Following the Fed announcement, Treasury yields declined substantially with the 2-year Treasury yield reaching an all time low of 0.47% in late August.&nbsp; In early April, the 2-year yield reached 1.17%; the swift decline in short term yields suggest market participants believe the Federal Reserve may maintain exceptionally low interest rates for several years.&nbsp; Whether this is an accurate predictor is open to debate.
&nbsp;
So&hellip;for treasurers faced with this investment environment and tasked with deploying prudent cash investment strategies, the question becomes how to improve returns while maintaining high credit quality and liquidity. Capital Advisors Group has managed cash portfolios through many interest-rate and credit cycles over the past 19 years. Given our experience and in light of recent regulatory changes that have shortened the duration and strategic use of money market funds, we want to share our insights for navigating a yield- challenged investment landscape.&nbsp; This month&rsquo;s research spotlight article explores cash investment strategies specifically tailored for the current low rate environment where the pursuit of yield can feel more like a search for a needle in a haystack.
&nbsp;]]></description>
		<dc.keywords>The Search for Yield</dc.keywords>
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 	<item>
         	<title>August Economic Recap</title>
         	<link>http://www.capitaladvisors.com/corporate_cash_investments/the_capital_advisor.html</link>
		<category></category>
         	<pubDate>Wed, 01 Sep 2010 00:00:00 +0000</pubDate>
         	<dc:creator>Capital Advisors Group</dc:creator>
         	<guid>505</guid>
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&nbsp;
Investors became increasingly concerned about the stability of the economic recovery in August as data painted such a dim picture of the economy that even the Fed admitted that the recovery &ldquo;is likely to be more modest in the near term than had been anticipated&rdquo; at its August 10th monetary policy meeting.&nbsp; The FOMC, as expected, did not make any changes to the overnight target rate but did announce that it will not reduce the size of its balance sheet just yet and instead will reinvest the proceeds from maturing agency debt and agency mortgage-backed obligations into longer-term Treasury securities in order to support the markets.&nbsp; The major equity indices had their worst month since August 2001 and the 10-yr Treasury note has plummeted by 38 basis points since the start of the month.&nbsp; Short-term Treasury yields have also declined, with the 2-yr note down to 0.50% after closing out July at 0.55%.
&nbsp;
Residential Housing
The residential real estate market continued to soften three months after the home purchase tax credit expired.&nbsp; July housing starts grew 1.7% in July while building permits, an indicator of future construction activity, decreased 3.1% to the lowest level in over a year. New home sales fell to a record low in July, dropping 12% from June and the median home price declined 4.8% year-over-year to the lowest level since late 2003.&nbsp; Existing home sales plunged 27.2% in July to the slowest sales pace since comparable records began in 1999.&nbsp; At the current sales pace, it would take 12.5 months to clear the inventory of existing homes, marking the highest level since 1999.
&nbsp;
Spending

In its second estimate of Q2 GDP, the government reported that the economy expanded at a 1.6% annualized pace, below the original estimate of 2.4% and also lower than the 3.7% pace set in the first quarter.&nbsp; Imports jumped by 32.4% leading to a wider trade deficit that subtracted 4.45 points from growth.&nbsp; Business spending increased 17.6% as businesses replenished equipment they did not replace during the recession.&nbsp; The Conference Board&rsquo;s consumer confidence reading dropped in July, falling to 50.4 from 54.3 in June.&nbsp; The gauge of expectations for the next six months tumbled; only 10% of respondents anticipate higher salaries in the next six months. The University of Michigan&rsquo;s final August gauge of consumer sentiment came in at 68.9 &ndash; a decrease from the preliminary reading of 69.6 but an improvement over July&rsquo;s final reading of 67.8.&nbsp; U.S. retail sales rose 0.2% in July, led by an increase in auto and gasoline sales.&nbsp; Excluding autos, sales fell by 0.1%.&nbsp; Consumer credit dropped by $1.3 billion in June, while revolving debt, such as credit card debt, contracted for the 21st consecutive month to the lowest level since October 2005.&nbsp; On the business side, the pace of expansion in the manufacturing sector has abated while business spending remains strong. The ISM Manufacturing index decelerated in July but remained in expansion territory as activity expanded at a reading of 55.5, below June&rsquo;s reading of 56.2.&nbsp; For July, the Chicago Purchasing Managers Index remained in expansion mode for the 10th straight month, climbing to 62.3.&nbsp;&nbsp; Orders for durable goods rose by 0.3% In July, led by orders for transportation equipment.&nbsp; Excluding transportation, orders plummeted 3.8% following a 0.2% increase in the previous month.&nbsp; Orders for non-defense capital goods excluding aircraft, a proxy for future business investment, dropped 0.8% in July after climbing 3.6% in June.&nbsp; Finally, the U.S. trade deficit widened by $49.9 billion in June &ndash; the highest level since October 2008 - as imports climbed 3.0% and exports decreased 1.3%.&nbsp;
&nbsp;
Labor Market
The unemployment rate remained unchanged at 9.5% in July as many Americans gave up on their job search and were no longer counted in the labor pool.&nbsp; Non-farm payrolls fell by 131,000, about twice the expected decline, following a revised 221,000 payroll loss in June (previously reported as a 125,000 decline).&nbsp; Initial jobless claims, a leading indicator of the labor market, fell for the first time in a month during the week ending August 21st, declining to 473,000 from 504,000 the week prior.&nbsp; The four-week moving average of initial claims increased to 483,500.
&nbsp;
Inflation
Overall price pressures continue to remain well contained, giving the Federal Reserve plenty of room to fine tune monetary policy at its own pace.&nbsp; In fact, markets are increasingly paying attention to the threat of deflation - a prolonged downturn in overall prices.&nbsp; St. Louis Federal Reserve President James Bullard said on July 29th that in the face of a deflationary threat, the Fed should reengage quantitative easing tactics, such as purchasing Treasury securities, to stimulate inflation.&nbsp; On August 10th, the Fed announced that it will reinvest the proceeds of maturing agency debt and agency mortgage-backed securities into long-term Treasuries.&nbsp; The consumer price index increased for the first time in four months in June, rising 0.3%, while core prices, which exclude volatile food and energy prices, were 0.1% higher.&nbsp; In the same period, the producer price index increased 0.2% while core prices rose 0.1%.&nbsp; Compared to a year earlier, core consumer prices are up 0.9% while core wholesale prices have risen 1.5%.
&nbsp;
The next FOMC meeting is scheduled for September 21st and, in light of subdued economic growth trends and indications of disinflation, market participants currently expect the FOMC to leave the overnight lending rate unchanged until late 2011.
&nbsp;
&nbsp;]]></description>
		<dc.keywords>August Economic Recap</dc.keywords>
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