Relapse Less Likely

Statistically, the probability that the U.S. may suffer a relapse into recession has dropped 10 percentage points since the end of the 4th quarter 2009. Rising profits was a major contributing factor to the reduction, now estimated at 15% as of the close of the 1st quarter 2010. Standard & Poor's 500 Index of corporate earnings have more than doubled over those measured in the final quarter of 2009 in what is being described as a V-shaped recovery in profits. This increase represented the first consecutive month-to-month quarterly gain since 2007.

While corporate profits remain below pre-recession levels, estimated earnings of $13,698 per worker recorded in the 4th quarter of 2009 are approaching their record high of $14,477, reached in the third quarter of 2006, according to estimates based on government data.

The surge in profits has left companies with a surplus of cash. Liquid assets at non-agricultural businesses rose to a record $1.8 trillion at the end of 2009, compared to $1.48 trillion in 2008, according to the Federal Reserve. Results from a recent economic survey of CEOs by the Business Roundtable indicated that 47% of executives plan to spend more during the next six months; while only 7% expect to reduce expenditures. The remaining 46% anticipated no change. We will keep you posted…

30 Day Libor	10-Year Treasury	Prime
0.32%	3.74%	3.25%

Penstar Realty Advisors can be reached at (818) 883-9609.