(Michael Schwartz) - Two tragedies, worlds apart, reached a boil last week and affected the financial markets in a not so pleasant way. Greece, which is an ocean away and no stranger to tragedy, (think Aeschylus, Sophocles, and Euripides), nearly imploded last week on fears that its government was bankrupt. With huge budget deficits and no credible way to pay them, Greece saw....

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(Michael Schwartz) - Lloyd Blankfein, the chief executive of Goldman Sachs, described himself as "doing God's work," in a profile last year in London's Sunday Times. Last Friday, the SEC charged Blankfein's firm with defrauding investors in connection with securities linked to subprime mortgages. Investor reaction was swift as Goldman's stock dropped more than 12% on the day and the Dow Jones Industrial Average lost 125 points, according to Associated Press.

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(Michael Schwartz) - The U.S. stock market continued grinding its way higher last week as the Dow Jones Industrial Average briefly pierced the 11,000 level for the first time since September 2008, according to The Wall Street Journal. Back then, the Dow was piercing 11,000 on its way down to below 7,000 in March 2009.

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(Michael Schwartz) - The stock market followed 2009's powerful rally with a strong performance in the first quarter. The S&P 500 rose 4.9%, excluding dividends, which was its best first-quarter percentage gain since the heady days of 1998, according to MarketWatch. Strong corporate earnings, solid corporate balance sheets, and upbeat manufacturing data helped support the stock market's bullish results, according to The Wall Street Journal.

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(Michael Schwartz) - The stock market seems to be climbing the proverbial "wall of worry." Despite potential road hazards such as sovereign debt issues, rising interest rates, a weak job market, and a stalled housing recovery, investors bid up stock prices last week to an 18-month high, according to MarketWatch. Of course, these things could eventually affect stock prices, but, for now, stocks are riding the momentum of improving earnings and some underlying stability in the economy.

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(Michael Farr) - Last Sunday, the House passed a historic $938 billion health care bill and on Tuesday, President Obama signed the bill into law. The Senate will try to pass a second measure passed by the House on Sunday amending portions of the bill through a process called reconciliation. This massive health care overhaul is expected to guarantee insurance coverage for 32 million uninsured Americans. The cost of covering these currently uninsured citizens is expected to be covered by a combination of taxes on wealthy individuals and companies and through Medicare cost cuts.

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(Michael Farr) - Toyota's recent problems with "unintended acceleration" and faulty brakes could prove to be a valuable lesson for those who believe that protectionism is the answer to all our problems. Earlier this week, Senator Mike Johanns of Nebraska questioned whether the US should impose restrictions on Toyota vehicle imports in response to the safety concerns. He pointed out that Japan had banned imports of US beef in December, 2003, when fears about Mad Cow Disease were widespread. The beef ban remained in place until 2006, causing much harm to the US cattle industry. Up until the ban, Japan had been the industry's largest export market. Needless to say, Japan's actions caused much anger and led to calls for retaliatory trade restrictions on Japanese imports. The fears of a trade war were very real.

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(Michael Schwartz) - The U.S. stock market has had several "mini corrections" since the March 9, 2009 low and last week's strong performance has some analysts saying the recent 9% drop in the S&P 500 from its mid-January high may have run its course, according to the Associated Press. Stocks rose for the second consecutive week and have now recouped about two-thirds of the 9% drop that occurred between January 19 and February 8. Jitters about sovereign debt problems in Europe, central governments "taking away the punch bowl" of easy money, and a surprise rise in the discount rate last week have started to give way to the good news that corporate earnings are still moving up smartly, the manufacturing sector is on the rise, and inflation is subdued, according to Bloomberg.

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(Michael Schwartz) - The Reuters/University of Michigan consumer sentiment preliminary index for February that was reported last week declined slightly from the late January number and it was lower than expected as consumers continued to fret over unemployment. The index is now down 24% from January 2007, according to data from the St. Louis Federal Reserve. Ironically, when consumers are glum, that could be good news for the financial markets.

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(Michael Farr) - Timing is important. When the old Medicine Man was asked if rain dances really work, he answered that they most certainly do but a lot depends on timing. "How are your investments doing?" may be one of the most complicated of all investment questions. There are a number of considerations: relative to what benchmark; over what specific time period; for what risk level? Measuring the twelve months ended March, 2009 would have resulted in horribly negative returns (S&P 500 was down -39.7%, excluding dividends) using most any long strategy. Measuring the twelve months ended September, 2009 was only modestly negative (-9.4%), while returns for the year ended December, 2009 were strongly positive (+23.5%). Moreover, a portfolio that fared relatively well during the downturn (ie, declined less than the overall market) may not have fared as well for the rally. In fact, a defensive portfolio would be expected to produce results inferior to the overall market in strong years such as 2009. Conversely, an aggressive portfolio would be expected to suffer much more than the overall market in declining markets while rebounding more quickly than the overall market as the markets rebound.

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