FOCUS ON THE 15: Q-C shares find peace amid market turmoil

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By Jim Victor | Sunday, December 23, 2007 4:25 PM CST | () comments

"Peace on earth” is a wonderful holiday refrain, but there was little of it in the financial markets last week. A list of banks and finance firms continued to divulge losses attributable to the nation’s home mortgage woes. Banks, brokerage and bond insurers all have been stung by a decline in the market value of mortgages due to uncertainty over the reliability of homebuyers to repay those mortgages.

Despite strength elsewhere in the economy, mortgage market woes continue to capture headlines, creating worry that leaves stock investors with little peace. Despite the troubled stock market response, our Quad-City Times Key 15 enjoyed a 64.78 gain to 1,469.98.

Indeed there is strength away from the housing slowness and the mortgage turmoil. There’s strength in travel, with the Quad-City International Airport reporting that the strength will continue. Holiday travelers will only add to the 11-month record for passenger enplanements so far this year. November was the 11th record month, with enplanements up 3 percent to 39,764 travelers. For the 11 months of 2007, boardings are up 7 percent to 445,516. We travel for business and we travel for pleasure, but regardless we travel more, a sign of business growth and personal income growth.

Truly much of the turmoil in markets is about what slowing we could see ahead. But in a positive look behind, we see the nation’s total output or gross domestic product.

Even after stripping out inflation, the Federal Reserve confirmed that real growth in the third quarter was at a 4.9 percent annual rate, the fastest in four years. Go ahead, read that again: the fastest quarterly growth in output of goods and services in four years. Higher exports to customers abroad are helping.

My favorite report, however, is even more recent. Friday’s Commerce Department release showed our combined personal income up 6.1 percent for the 12 months ending in November over last year, due to increasing employment and wages. Personal spending was up 6.7 percent. Since consumers drive 70 percent of the nation’s output, it seems we are driving it pretty well, despite housing slowness.

Among Quad-City firms, Alcoa (a) (b) publicly applauded the higher fuel efficiency standards approved last week by Congress and President Bush. “We are confident that the automotive industry will be able to meet or exceed these goals through the increased use of lightweight materials,” said Kevin Kramer, who oversees Alcoa’sAutomotive Market Sector Team. That new law requires 35 miles per gallon on new cars by 2020. Alcoa pointed out that each pound of aluminum can replace two pounds of iron or steel, helping to save fuel. Alcoa shares gained 1.16 to 36.35.

On Tuesday, Congress approved final passage of a wide-ranging energy bill that mandates raising production of biofuels up to 36 billion gallons per year, more than four times our current output. And Archer Daniels Midland (a) (b), the nation’s largest ethanol producer, is a major employer in our region. ADM was quick to compliment the legislation, noting that the pronounced goal underscores today’s ethanol and biodiesel as solutions. ADM shares set a new 2007 record high last week, gaining 5.63 to 44.27.

Who is buying shares of Isle of Capri, the owner of both our Iowa side gaming facilities? Rob Goldstein and Jeff Goldstein, known to many Quad-Citians. Both are on Isle’s board of directors, and have been repeat buyers, according to filings with regulatory offices. Their holdings mount, as Isle shares trade near a 2007 low, up 1.19 last week at 14.50. The full 2007 range has been 12.62 to 29.97. Isle’s most recent quarterly report showed revenues rising, but a bottom line loss, partly due to expansion costs and non-recurring expenses.

As the hours dwindle down to Christmas, let’s remember that all the hurry and hassle is about giving. Giving love and sharing peace may be the greatest of those gifts. Merry Christmas and Happy Holidays.

Jim Victor is senior vice president-wealth management and financial advisor for Smith Barney, Davenport. Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its affiliates and is used and registered throughout the world.

The information contained herein has been obtained by the writer from sources believed to be reliable, but he does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. a) The firm is a market maker in the publicly traded equity securities of this company. b) Within the past 3 years, Citigroup or its affiliates has acted as manager or co-manager of a public offering of securities of this company.