Today’s CPI report was very positive, coming in lower than expected.  This is very good news, if this trend continues the Federal Reserve might slow down on its rate hikes.  In addition, Friday’s July employment numbers were better than expected, although new unemployment claims are starting to rise, as companies are ramping up layoffs in certain industries.  Most of the economy is reasonably strong though, so this is far from a broad-based trend at this point.  Some industries such as housing are slowing down after being way too hot the last few years, which I don’t view as being anything abnormal, but prices are starting to come down in most markets.  GDP numbers came out recently, showing two consecutive declines, which historically has been a key indicator of being in a recession.  All in all, this is a very mixed bag of data so I wouldn’t worry too much about it, as really what matters is what we are investing in and how those businesses are performing.

This economic scenario of higher rates, but a potentially mild recession could be quite good for financial stocks, as they would benefit from the higher rates without the major hit to credit losses, which are largely linked to unemployment rates.  These stocks are mostly priced for a significant recession, which creates a fantastic opportunity for investors.  I’ve been very encouraged with the earnings reports that have come out from some of our key investments and I believe we have tremendous upside potential in our portfolios.  Below are some recent research reports that I’ve written to get you up to date on some of our investments, if you have time and interest:

AIG

AGO

LC

RDN

NMIH

Here is the video of my recent podcast appearance if you’d like to check it out: Value After Hours Podcast Link