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Location: Kansas City, MO, United States

James Byrne has been in the investment arena for 28 years. He cut his teeth on the trading desks of Wall Street in the Fixed Income Institutional Arbitrage area working on some of the largest global financial institutional sales and trading desks. Opportunity allowed a move to Kansas City Missouri some 16 years ago. He branched out and established his own company Grand Street Advisors,LLC. 10 years ago. His goal, to bring professional investment management, using the same skills learned and utilized for his institutional clientele to individual investors in a very personal and customized manner. Account Minimum Size $100,000.00 Annual Fees Equities 1% Up to the First $1 millon Fixed Income .50% Up to the first $1 million

Sunday, December 2, 2012

Obama Wins, Now Time For A Bit Of Cliff Diving

Hallelujah! It's finally over! "Grab your forks and pop the corks" or so were the shouts from the celebratory Democrats feasting after an Obama rout, in the electoral college anyway. From the other lest festive group of conservatives it was more, " lock your door prepare to be poor". I can only speak for myself and share the not so sophisticated Byrne exit poll data that showed just about every donkey and elephant ,blue and red coat (even the lone yellow dog) suffered various degrees of election fatigue. The post election market reaction saw some players who had been soo convinced of a Romney victory they positioned themselves for a celebratory rally, quickly reversed course and unwind long positions. That selling was damaging but subsided heading into the holiday weekend. But, we'll get back to that later. So Now Where We Are. The US economy continues to heal, albeit the expansion has been inconsistent and uneven. We've seen a weakening over the summer months and rekindled fears of a stealth oncoming double dip recession. Quite the imaginations these perma-bears have. But, we don't do guess work here especially when it's all in the digits (data). So, here we go. Gross Domestic Product (GDP). The initial reading on third quarter GDP came in at 2% improving over the June quarter final reading of 1.6%. A solid improvement, but off a very low base. The better news is we should see the 2% initial reading be revised higher when we see the first revision coming this week possibly closer to 2 1/2% due to improved sales and inventories. Leading Economic Indicators (LEI). The LEI rose .2% for October coming off a .6% rise in September. This number was capturing some of the impact of hurricane Sandy's massive destructive force along the eastern seaboard. Still .02% suggest a continued slow below trend pace of economic growth going forward. Industrial Production (IP). IP showed a decline of -.4 after having increased +.2 in September. The main culprit was Sandy once again. Analysts calculate after taking into account the drop in utility output, food, transportation, electronics etc., Sandy accounted for roughly a full -1% decline in IP. Capacity utilization also showed a decline of -.4 to 77.8 a full 2.5%+ below its long term average leaving ample room to absorb inflationary pressures when they rear their heads. Inflation. Consumer Price Index (CPI), Producer Price Index (PPI). As reflected in the PPI and CPI indexes as well as the elevated rate of unemployed, inflationary pressures remain well contained. That is, as long as one needn't eat, drive or heat a hovel. Housing. Home sales continue to show a bottom is officially in. New home sales fell -3% in October the impact of Sandy remain in question. But even taking the number as clean, we can look at existing homes sales surging 2.1% over September and 10.9% yoy while pricing was up 11.1% yoy. Also importantly the supply of homes on the market is at a very manageable 5.4 months worth. Equally important for the home builders and home sales, rents continue to firm and rise from an already elevated platform. Employment. October non-farm payrolls added 171,000 in October and the jobless rate stood at a 1st term Obama low of 7.9%. Unemployment claims had fallen to a soled range of 350-385,000 and were trending down. Then Sandy hit. The November Jobs number may take a hit due to Sandy. The Union planned extinction of the Twinkies, and destruction of an estimated 18,000 jobs will also have an impact. But both events are blips in a job market heading in the right direction, just spending far too long traveling in the slow lane. Federal Reserve. Chairman Ben Bernanke has steered the Federal Reserve into a surreal version of Ground Hogs Day (if you haven't seen this Bill Murray classic call me and I'll fill you in). After introducing Quantitative Easing and his very publicly stated goal of "exceptionally low rates into 2015", he could simply push "replay" from here on. True he'll need to decide whether to continue Operation Twist, but all the surprises have been exposed. Investors may like his policies or not, what I find inarguable is Chairman Bernanke was the only one that GOT IT and was bold enough to take steps to prevent IT. IT being the looming and inevitable Great Depression Part II. Washington was frozen and in hyper finger pointing mode which we've come to realize was not a one time event but a skill being honed. What I believe can be debated is, has he gone too far. Too early to tell as his zero interest rate policy is still not making credit available to all those in need and importantly would normally qualify such as small businesses and potential borrowers with good not great credit. . International. It appears we've averted another Greek tragedy. The ECB and IMF found a way to restructure without a default. We're all aware of the old, "if it looks like a duck, walks like a duck and quacks like a duck, IT'S A DUCK". Take a look at the restructuring details if you will, but be warned to wear ear plugs as the quacking is still ringing in my ears. Nonetheless it's a restructuring and Greece gets their bailout funds. Now we await Spain's march up to the soup line. No doubt the European Union is on sounder footing with Greece's default and ensuing expulsion from the EU taken off the table. Shifting to China we see the hand off of power went smoothly and the economy rebounded to expansion mode after having contracted the previous three months due to significant expenditures in infrastructure spending. The private label HSBC China FLASH PMI moved to 50.4 while the official government figure is expected to come out at 50.6 from Octobers 50.2, any figure above 50 reflects expansion in the economy. India has also taken a cue its time to move as they've recently implemented pro growth legislation intended to liberalize their economy and encourage direct foreign investment. All in all strong positive news. On the not so positive. Iran would still like a new set of nukes for Christmas. Afghanistan is still a mess as is Pakistan. Israel after having bested Hamas in an aerial show that sent off in excess of 100 foreign fighters to greet their awaiting virgins in the afterlife is still on high alert. Energy. With the hotbed that is the middle east oil prices remain rather well contained even with Iran, Iraq, Pakistan, Syria and Afghanistan in some stage of war or civil revolt. Why? Saudi Arabia is pumping at full capacity. Iraq is pumping more oil than it has in decades with growing supplies and capacity. Libyan oil flow has recovered six months ahead of time. Most importantly the US is producing more oil and energy then ever. As long as we can manage drilling in hard to reach areas safely US production will spring board the US to the top global producer within 5 years and become a net exporter of oil by 2030. So much for the Peak Oil theory. Always be aware of who is funding all these "research" groups as the outcomes can be somewhat predictable and heavily biased. Going Forward. The markets are hanging on every statement coming from the gang that couldn't govern straight (last year anyway). Just today we saw the market fall 100 points on the Dow due to Sen Reid's "hands off entitlements" rhetoric. We saw a whipsaw move back up 86 when Boehner countered with his acknowledgement we are closer to an agreement than is believed. In the end we believe an agreement and grand compromise will happen that allows both parties to save a little face but not be totally happy. This spells good news for investors. We believe a calm cautious approach is warranted for now and maintain an aggressive and balanced positioning to the markets. Growth is improving on near all indices. Consumer spending is holding up well, home sales improving and auto sales remain on a 14mm+ annual run rate. Lastly, hurricane Sandy is currently a drag on growth but homes need to be rebuilt, washer dryers bought automobiles replaced and importantly personnel to man the registers, sod the lawns, and skilled labor to do the work. This should provide a nice bump to growth over the next 9-15 months on all fronts. We'll maintain our aggressive posturing for now and keep a watchful eye on DC for any signs of the reversion to stalemate to force our retrenchment from the markets. Should we need to get more defensive we'll be in contact immediately to discuss re-balancing and raising our cash positions.

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