The Bottom Line

Would you be better off with a Dart Board?

Volume III Issue IX – Friday September 21, 2007

A monthly newsletter of financial commentary for our friends

Things have a way of changing so quickly! At the beginning of the Third Quarter (July), the Fed was worried about inflation. At that time, the market was not anticipating that the Fed would cut rates anytime in 2007. If anything, there were even some that were predicting them to raise rates. Now here we are with a 4.75% Fed Funds rate. Not only did they lower the rate, but they shocked the markets with a .50% reduction. The stock market loved it. The DOW responded with a +325 point day on Tuesday! I guessed wrong. I was expecting a .25% reduction. As a matter of fact, I was expecting them to reduce rates at the end of last year. It just goes to show that economic forecasts are sometimes just as accurate as guessing the winner of the Super Bowl this year. It really makes one begin to wonder if you would be just as well off making financial predictions throwing darts at a dartboard? Most economists are just following the crowd, and regurgitating whatever they hear on CNBC. I will admit, there are a few sages out there that have a knack for economic predictions. But they are few and far between. Often your best economists are usually going against the crowd. That’s why you will never find this newsletter giving specific guesses as to what will transpire in the economy in the next few weeks or months. What you will find in this newsletter is a gathering of information that will better equip you to make good decisions going forward for your business and family’s finances. You will also find us identifying trends that we believe will develop in the future – but they are trends that will be years in developing. Will leave the specific guessing to Las Vegas.

One of those trends we have mentioned before is the great energy race. As crude oil hits another all time high today at $82 barrel, there is more and more incentive to find alternative energy sources for automobiles. The old oil tycoon, Boone Pickens, owns a company that has built Natural Gas service stations in the NY area. New model taxicabs have been the first in line. There will be many other substances such as ethanol and electricity that will be vying to be the power of the future for automobiles. Going green has become culturally cool, which will just fuel this new energy race all the more. As tensions remain in the Middle East (haven’t they always?), the incentive to be independent of black gold will reach epic proportions.

Do we really need China? A woman set out to find the answer, and documented her findings in a book called “A year without China.” She wanted to see if a typical American Family on an average income might be able to make it an entire year without buying anything made in China. A couple of highlights you might be interested in: Sneakers were $60 to $100 more expensive. Her blender broke, and she couldn’t even find one that wasn’t made in China. She left this experience with a real appreciation for the role that these goods play in our everyday life. Do you appreciate Chinese goods? We are rightfully upset about the jobs that are exported to China everyday. And yet, we are the beneficiaries of that exportation because it enables us to buy goods at a much cheaper price. Life is a series of trade offs. If we want the cheap goods, then we will just have to deal with China, and Wal-Mart, and all the other big institutions some people love to hate. If we are willing to pay a little more for bread, t-shirts, or Teenage Mutant Ninja Turtles, then you can preach against China and Wal-Mart to your heart’s content. We can’t have it both ways.

We are considering adding a blog about our musings on the market, how financial events affect you, and occasionally relating them to what the Bible has to say about money on our website at www.foundationbank.org. We are interested in hearing if this is something you might check out from time to time? Reply to this email to let us know if you would find it valuable. Thanks for reading. We don’t have a crystal ball, but we hope we’re your alternative to a dartboard.

Chad P. Wilson, CFP

Foundation Bank – a division of McKenzie Banking Company - 731-554-2423