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Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Tuesday, June 19, 2007
Economist: Mei-Lin (Emily) Chang
Economic Committee:James ChengPaul Hoffman Michelle LeeCasey PohlTerala, Vikranth Gupta
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
HeadlinesHeadlines
Energy July Oil Futures: $68.25
Housing Down 1.27% in May Sub-prime concerns
Dollar Declining value Trade deficit decreased from $62.4B to $58.5B
Growing Gap of Income Disparity Possible governmental interference
Economic Growth 86% of economist see improvements over next year
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
GDPGDP
Increased by 0.6 percent in first quarter of 2007 Increased by 2.5 in fourth quarter of 2006 Deceleration of GDP is due to increase in imports,
decrease in exports, private investment spending and governmental spending
GDPGDP
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Crude OilCrude Oil
Oil Futures
$66.50$67.00$67.50$68.00$68.50$69.00$69.50$70.00$70.50$71.00$71.50
Series1
Price expected to increase to over $70 per barrel over the next six months
Possibility for $4 per gallon at the pump
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
CPICPI
CPI was up 0.7% in May 12 month adjusted average is 2.7% December forecast 2.8%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Real personal disposable incomeReal personal disposable income
Real DPI decreased 0.4 % compared to 0.3% increase in March Real consumer spending increased 0.2% after remaining flat in March Prices increased 0.1%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Trade DeficitTrade Deficit
Trade deficit decreased to $58.5 billion in April from $62.4 billion in March Exports increased by $0.2 billion in April to $129.5 billion Imports decreased by $3.6 billion to $188 billion
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
UnemploymentUnemployment
Non farm payroll employment increased by 157,000 in May Employment rate unchanged at 4.5% Jobless rate forecast for November is 4.7% Payrolls intend to grow by 1055,255 jobs per month
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Strength of the DollarStrength of the Dollar
Dollar Euro Pound SFranc Peso Yen CdnDlr Canada 1.0683 1.4294 2.1098 0.85980 0.09906 0.00865 ... Japan 123.47 165.20 243.84 99.372 11.449 ... 115.58 Mexico 10.784 14.429 21.297 8.6793 ... 0.08734 10.095 Switzerland
1.2425 1.6625 2.4538 ... 0.11522 0.01006 1.1631
U.K. 0.50635 0.67750 ... 0.40753 0.04695 0.00410 0.47398 Euro 0.74738 ... 1.4760 0.60152 0.06930 0.00605 0.69960 U.S. ... 1.3380 1.9749 0.80483 0.09273 0.00810 0.93607 Source: Reuters
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Federal funds rateFederal funds rate
FFR for May – 5.25% Forecasted the same for June Expected to be down by quarter points
for December
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Current interest ratesCurrent interest rates
Primary credit - 6.25% Secondary credit – 6.75% Seasonal credit - 5.30%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Sector Performance
Leaders1. Basic Material (17.83%)
2. Oil & Gas (16.24%)
3. Telecommunication (14.60%)
Losers1. Financials (1.74%)
2. Consumer Service (4.77%)
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Basic MaterialBasic Material
Basic Materials 17.83%
Chemicals 13.77%
Basic Resources 22.71%
Forestry & Paper 15.25%
Industrial Metals 30.06%
Aluminum 33.78%
Steel 31.02%
Mining 13.76%
Coal 22.35%
General Mining 40.51%
Gold Mining -14.48%
Platinum & Precious Metals -5.09%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Basic MaterialBasic Material
Continuing growth in this prospective sector
Big Ideas for a Greener World Energy companies are vying for
investor dollars with some audacious approaches to providing cheap, clean energy.
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Consumer Staples
Consumer Goods 1.09%
Food & Beverage 0.90%
Beverages -0.28%
Brewers 4.70%
Distillers & Vintners 4.27%
Soft Drinks -1.33%
Food Producers 2.35%
Food Products 2.35%
Personal & Household Goods 1.19%
Household Goods -0.07%
Durable Household Products -0.54%
Personal Goods 2.89%
Personal Products 0.60%
Tobacco 0.77%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Consumer DiscretionaryConsumer DiscretionaryConsumer Goods 1.09%
Automobiles -0.49%
Auto Parts 2.47%
Tires 7.35%
Personal & Household Goods 1.19%
Nondurable Household Products 0.34%
Furnishings 2.88%
Home Construction -3.06%
Leisure Goods 3.63%
Consumer Electronics 9.98%
Recreational Products 10.65%
Toys -1.68%
Personal Goods 2.89%
Clothing & Accessories 5.65%
Footwear 5.18%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Consumer Staple & DiscretionaryConsumer Staple & Discretionary
Still performing well
Michigan Consumer Sentiment Index Fell in June
Increased marketing spending
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Energy
Oil & Gas 16.24%
Oil & Gas Producers 15.06%
Exploration & Production 22.42%
Integrated Oil & Gas 12.23%
Oil Equipment, Services & Distribution 19.75%
Oil Equipment & Services 21.07%
Pipelines 8.51%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
EnergyEnergy
Most prosperous sector Capitol Hill’s goal to reduce oil
consumption and increase other biofuel production and research
Maintain high gas prices, refineries neglected
Increase gasoline exports to keep up with demand
Most productive sub-industry: Exploration and Production
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
EnergyEnergy
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Industrial SectorIndustrial Sector
Increase growth opportunities through emerging markets
Aerospace and Defense sub-industries highly profitable
Heavy Construction remains strong as residential construction declines
Commercial Vehicles & Trucks, as well as Railroads become more appealing as more expensive airline fuel force the economy to find cheaper alternatives to ship goods.
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Financial SectorFinancial Sector
Struggling Sector Shanghai losses lead to
cascade of falling financials in emerging markets
Increasing sub-prime mortgage defaults
Insurance and Investment Banking sub-industries still remain strong
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
•Energy - Overweight
•Oil & Gas Exploration and Production
•Industrials - Overweight
•Aerospace and Defense
•Heavy Construction
•Commercial Vehicles & Trucks
•Railroads•Financials - Underweight
•Insurance - Overweight
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Technology Headlines
New Intel Chips Represent Change in Strategy Intel Corp. discussed two additions to its Itanium Chip line, each reflecting shifts
in strategy. On model expected in late 2008, called Tukwila. With Poulson, a sequel to Tukwila, will be built using a process that won’t arrive until at least 2009.
Google, Intel Drive Effort To Lift Energy Efficiency, Reduce Greenhouse Cases Google and Intel want to get computer makers and customers to reduce energy
consumption. Google Intensifies Microsoft Fight; Complaints Spur Review Over Whether
Vista System Violates ’02 Antitrust Pact Internet companies view desktop search as a key to building consumer loyalty
and use of new services. Google to Open Shanghai R&D Center in June seeking to wrest market
leadership in China from Internet search-engine firm Baidu.com Inc. IBM’s Deal to Acquire Telelogic Underscores Software Strategy rapidly
reshaping the company as an acquisitive software vendor. GE, Microsoft Discussed Buying Dow Jones
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Technology
Technology 7.66%
Software & Computer Services 5.41%
Computer Services 8.85%
Internet 4.51%
Software 4.36%
Technology Hardware & Equipment 9.22%
Computer Hardware 13.04%
Electronic Office Equipment 5.10%
Semiconductors 9.78%
Telecommunications Equipment 5.47%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
TechnologyTechnology
The computer and Peripherals Industry likely will face some headwinds this year, but it will post decent sales and profit gains. Assuming a more vigorous economic advance starting next year, we look for faster earnings growth for this sector.
The Semiconductor Industry is highly susceptible to changing economic conditions. The fortunes of the chip market are highly dependent on the economy. The primary catalyst for growth in the broader chip market will likely continue to be the consumer.
The estimation is slower top-line growth in 2007 for the semiconductor capital equipment industry. This forecast is predicted on the assumption that capacity will eventually catch up with production at the chip companies.
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
TechnologyTechnology
Underweight Technology is in low gross profit margin The economic is down and there is no impressive product recently that
attracts consumer or companies to increase budget in technology product
A big growth market for technology sector comes from foreign countries especially China, Brazil, Russia, and India which is developing prosperous
Passive on the technology sector in the long term
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Telecommunications HeadlinesTelecommunications Headlines
Telecom stocks rose Friday, with wireless carrier MetroPCS Communications Inc. up more than 8 percent as an analyst reassured investors that the company's plan to expand in Los Angeles is intact
AT&T Inc. stands a good chance of stealing customers away from other wireless operators by carrying Apple Inc.’s highly-anticipated iPhone.
Apple iPhone Users Will Need iTunes Account. Nokia to Add Bluetooth Link for Small Devices. Texas Instruments Inc. shares fell after hours the mobile-phone chip giant
narrowed its outlook for second-quarter sales and earnings. Start-Up’s Retrofitting Turns Cameras Wireless
Eye-Fi’s Card Adds Circuitry and Chips; Transfer Is Automatic
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Telecommunications
Telecommunications 14.6%
Fixed Line Telecommunications 14.2%
Mobile Telecommunications 16.24%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
TelecommunicationsTelecommunications
Telecommunications manufactures now find themselves in a market that is both high-tech and extremely price-sensitive. As a result, there has been a push towards consolidation. The biggest companies are not the only ones worth considering. Smaller companies are filling niches within the overall market.
The Wireless Networking Industry’s Timeliness ranking remains near the bottom 15% of all the industries covered by The Value Line Investment Survey, reflecting the negative momentum of profits and stock prices.
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
TelecommunicationTelecommunication
Neutral for holding Telecommunication matured in around 1930s I-phone is hot but it won't make more cell phone customers for the whole sector Telecommunication sector as a whole produce a steady stream of cash but it
doesn't have much growth potential a good defensive stock when the market goes down the market goes down, the stock will go down but the cash flow
won't be affect that much when the market is bullish, this kind of stock won't goes up as much
since there is no room for growth Companies in telecommunication give high cash dividend, therefore P/E ratio will
be an important factor when making investment decision Get one with low P/E as low as possible
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
UtilitiesUtilities
Utilities -4.31% Electricity -4.68%
Gas, Water & Multiutilities -3.10% Gas Distribution -0.62% Multiutilities -6.61% Water 5.43%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
UtilitiesUtilities
The performance of utilities was not so good because of the high oil price.
The terroristic attack in Nigeria may cause the oil price going up in the near future.
In the long-term aspect, the sector of utilities has potential to grow due to the increasing adoption of wind and nuclear power.
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Health Care
Health Care -1.01% Health Care Equipment & Service -0.20% Health Care Providers -0.96% Medical Equipment 0.35% Medical Supplies 0.72%
Pharmaceuticals & Biotechnology -1.47% Biotechnology 1.21% Pharmaceuticals -2.23%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Health CareHealth Care
The health care industry is the one which could consider to invest.
Pharmaceutical Research and Manufacturers of America, an industry group that represents drug and biotech companies, hired the Roth Group to lobby the federal government.
A new drug may be breakthrough for liver cancer.
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Consumer ServiceConsumer Service
Consumer Services 1.31% Retail 1.39% Food & Drug Retailers -0.92% Drug Retailers -1.57%
Food Retailers & Wholesalers 0.55% General Retailers 2.14% Apparel Retailers 1.94% Broadline Retailers 4.20% Home Improvement Retailers -0.26% Specialized Consumer Service -0.72% Specialty Retailers 2.38%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Consumer ServiceConsumer Service
Media 0.74% Broadcasting & entertainment 0.21% Media Agencies 5.95% Publishing 1.16%
Travel & Leisure 2.07% Airlines -2.58% Gambling 6.36% Hotels 2.85% Recreation Services 3.30% Restaurants & Bars -0.03% Travel & Tourism 5.98%
Economic Committee Report
The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program
Consumer ServiceConsumer Service
The overall performance of this sector was pretty good.
Vocation comes and people travels more.
The profit of airline decreased due to the rising oil price.