As the 2010-2011 school years draws closer, many back-to-school shoppers might be eagerly anticipating the tax free holiday weekend they have enjoyed in past years. However, there's no relief at the register for Georgians this year.  State legislators did not approve the renewal of the popular tax free weekend on account of a $2 million deficit.  This much anticipated "holiday" began in 2002 and generally draws many shoppers who are eager to save on back-to-school clothes, shoes, supplies, and computers. This break for shoppers costs the state about $12 million in revenue and due to budget constraints, the tax-free weekend which was originally proposed for July 29-August 2 of this year will not take place.

This will be my last prediction for the summer of 2010.  So far, I am batting almost 1000 and close to being wrong every time.  Perhaps if I predict a lower market, I will put a jinx on the market and it will go up.

The news is all gloomy.  In spite of the overriding negative bias, we are not going to zero but I believe that we have some down side exposure and it could last for a while.  My Bruce indicator, which I wrote about a few weeks ago, predicted a bottom at 1,042 on the S&P 500 and the Bruce barometer proved to be wrong this time so perhaps Bruce was correct at least so far. 

Next week is the beginning of earnings season and expectations are high for most companies.  These companies will most likely report similar earnings to the first quarter which were generally pretty good, but the market was not happy with them at that time and the market went down.  I think that the same scenario will help push the market down again as expectations are not likely to be exceeded in most cases.  This coupled with continued bad news about the new financial regulations, European debt problems, American debt problems, incompetent government leadership and the mother of all oil wells still spewing out oil will overshadow any good news.

My prediction is an S&P 500 below 950 within the next 90 days.  This will be a great buying opportunity if you have the stomach to dive in.

I generally believe that the economy is improving and that long term the market will go up.  Therefore, with some cash on the side I remain 80% plus or minus invested hoping that I am wrong and the market goes up.

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.  Investing in stocks, bonds, mutual funds and other investments involves risk, and may decline in value and are not insured by the FDIC or any other Federal government agency.

Contact Richard B. Taylor for additional information.

Two new distracted driving laws go into effect July 1, 2010.  One is the House Bill 23 and the second is the Senate Bill 360.  The House bill prohibits drivers under the age of 18 from using wireless devices, whether they are using a hands free set or not.    The bill:

 “prohibits use of wireless telecommunications devices by persons under 18 years of age with an instruction permit or Class D license while operating a motor vehicle"

The Senate bill prohibits all drivers from texting, emailing or instant messaging while driving.  This includes when you are sitting at a red light.  You are allowed to pull over and put your car in park in a parking lot and type your message then.  This bill reads: 

"No person shall operate a motor vehicle on any public road or highway of this state while using a wireless telecommunications device to write, send, or read any text based communication, including but not limited to a text message, instant message, electronic mail, or Internet data."

Of course, this begs the question, “how are they going to enforce this law anyway?”  Police officers will be looking for suspicious activity such as slamming on breaks and swerving.  Also, if a person causes an accident, the police can use the records from the various cell phone companies to prove whether a person was sending a text message or email.

So be careful out there and just remember that the email can wait until you get home or back to your office.  If it is urgent, pull over, put your car in park and check your messages.

The news continues to be focused on all of the negatives and not much positive at the moment.  This news often spooks investors into panic mode and causes them to exit the market.  By the time the average investor gets back in, the market has already recovered to beyond where they exited. 

Here are a number of reasons to be invested for the long term:

1. Statistics show that the U.S. recovery is underway and confidence is improving.
2. The Yale Institutional Crash Confidence Index is improving.  This index measures the likelihood of a crash within the next six months and is declining.
3. The Yale Institutional 1-Year Confidence Index indicating that the market will rise in one year is increasing.
4. The Conference Board’s Leading Economic Indicators continue to predict near term growth.
5. The University of Michigan Consumer Sentiment Index which measures consumer sentiment is improving.  The consumer is still holding back the recovery but is gaining some optimism.
6. The ISM Manufacturing Index indicates that the recovery is stable.
7. The 10 largest US companies achieved impressive quarterly sales growth.
8. As measured by P/E ratio, most companies still sell for multiples that are lower than the historic S&P 500 average.
9. Over the long term, the markets tend to always go up.

Hopefully these indicators accurately portray the confidence of investors as the market must have confidence in order to increase in value. While we recommend that investors remain invested, it might be wise to keep a little cash in the event that the market gives us an opportunity to buy cheap.

For additional information contact Richard Taylor.