Phil Mahoney’s The Cornerstone – December 2011

The Cornerstone
December 2011
“Acronym Soup”

The whipsaws continue. Due to surging consumer spending, good economic indicators and central bank intervention the S&P surged 7.4% in the week that ended December 2nd. The move was second in history only to the huge week of March 9-13, 2009, according to money manager Louis Navellier. This explosion upward may be the beginning of a sustained market move, but it’s my prediction that the volatility in the marketplace will overshadow the good news and frighten those investors who, in my opinion, should be seeing today’s market as an opportunity. We have seen record earnings from corporations, which means record cash on hand. This allows them to withstand disruptions much more easily than before and gives them the ability to invest – in R&D as well as inventory. It remains my base case that due to these earnings and more favorable economic factors that another recession now would be like jumping out of the basement window – it’s possible, but not an easy thing to do.

Like many industries with multiple masters we are blessed with associations, agencies, commissions, exchanges and other government entities that enforce rules and regulations. I cannot list them all today, but I think if I can pass on a few each month and give you some information, it will help everyone understand the architecture of the financial world a bit better.

FINRA: Financial Industry Regulatory Agency- Largest independent financial regulator for all securities firms. Their chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA touches virtually every aspect of the securities business. Kind of our “non-benevolent Godfather”.

SEC: The federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation’s stock and options exchanges, and other electronic securities markets in the United States.

BD: A broker-dealer is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers. Although many broker-dealers are “independent” firms solely involved in broker-dealer services, many others are business units or subsidiaries of commercial or investment banks or investment companies. When executing trade orders on behalf of a customer, the institution is said to be acting as a broker. When executing trades for its own account, the institution is said to be acting as a “dealer”.

ADR: An American depositary receipt (ADR) is a negotiable security that represents the underlying securities of a non-U.S. company that trades in the US financial markets. Individual shares of the securities of the foreign company represented by an ADR are called American Depositary Shares (ADS).

We sincerely thank you for your business this year and wish you the best for a great Christmas and Holiday Season.

Phil, Rosemary, Heidi, Jenny, Mark, Martin and Chris
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Stock investing involves risk including loss of principal. Past performance is not indicative of future result. Indices are unmanaged and cannot be directly invested into.