Archive for ND&S Updates

Weekly Commentary: NOT SO BAD AFTER ALL?

September 24, 2012 


We came upon a recent article with the catchy title “U.S. EMBARKING ON A NEW SECULAR BULL MARKET?”. We were taken not so much by the title but by the good developments referenced in our economy.  While a caveat of fears about the fiscal cliff exists, a number of fundamental changes have occurred.  Annualized decreases in Government expenditures have actually occurred in the 2009-12. Household debt has decreased from 98% of GDP to 84%.

Households keep only 27% of their wealth in real estate compared for example to France’s 57%. Housing prices have stabilized as have starts.

Then we have some of the advantages accruing from finding more natural gas here.  Drilling is a nice stimulant in itself, but the effects of $3.00 gas prices are manifold. Electricity costs are much lower in the U.S. which has positive effects on our chemical, metals, machinery and paper industries.  We are now competitive with China for domestic prices of steel.  Finally, there is the advance in technology which helps almost every industry.  You need look no further than the Apple iPhone 5 to see the fruits of technological advance.

In sum we sometimes ignore many of the good changes which can underpin the economy and the markets in the years ahead.  Now if we can just get by this fiscal cliff problem.

“Unless someone like you cares a whole awful lot, Nothing is going to get better. It’s not.”
-Dr. Seuss

Weekly Commentary: QE 3

September 17, 2012 


Last Thursday the Fed announced QE 3 saying that it plans to spend $40 billion per month to purchase mortgages and it pledged to keep short term interest rates low until mid-2015. The news started a 2 day stock market rally which put the DJIA at its highest level since 2007.

Retail sales were also reported last week and were up 0.9% for the month of August mostly due to higher gasoline prices and auto sales. Without those items sales were only up 0.1%. Oil prices are back close to $100/barrel and gasoline prices have risen for the last 2 months and may weigh on consumer spending going forward. CPI was also up 0.6% for the month, the highest monthly increase in 3 years, due mostly to higher gasoline prices.

“If the world was perfect, it wouldn’t be.”
– Yogi Berra

Weekly Commentary

September 10, 2012 


September, historically the worst month of the year, got off to a roaring start, with the NASDAQ up 2.3% and the DJIA advancing 1.6%. The markets were buffeted by mostly positive political developments offset by mixed economic reports.  This week will be more of the same, leavened by Wednesday’s launch of the new iPhone.

Bernanke started the week on a strong note by reaffirming his commitment to act if economic conditions deteriorate, noting that our labor market is a grave concern. On Wednesday, Bloomberg reported that the ECB would do unlimited [but sterilized] bond buying. Thursday Mario Draghi confirmed that the ECB will buy bonds of countries who ask for aid. All of these items helped support/propel the markets higher.

While the week’s economic data was much less positive, it was mostly interpreted in a positive manner.  Friday’s jobs data was an important reaffirmation of the weakening economic recovery. Nonfarm payrolls added only 97,000 [130,000 expected] and the prior report was reduced by 22,000. Moreover, the widely watched unemployment rate came in at a superficially favorable 8.1% [8.3% expected], but this was achieved by having more people leave the workforce.  The immediate response was to increase hopes for more quantitative easing [the glass is half full!]. The problem is that each additional round of QE has less and less positive impact [similar to an addict getting one more dose of his favorite drug].

AAPL’s products have been a big positive over the last decade, and this year’s goodies will be no exception. New product details have been leaking for weeks [where is Steve when you need him?], and they include a bigger [longer] and thinner screen, smaller connector, LTE/4G [but no NFG!], new mapping etc. Santa will not be wanting for ideas [new iPods too?] this holiday season.

“ Leadership is action, not position. ”
— Donald H. McGannon

Weekly Commentary: Waiting for Godot (and the Fed, China and Europe)

September 4, 2012 


Markets were fairly quiet last week in an end-of-summer, low volume, vacation week haze.  The Dow and the S&P 500 were down fractionally by 0.3%.  International stocks were a bit lower on continuing concerns of economic slowing in Europe and China.

The Dow Jones Industrial Average rose 0.6% in August for the third consecutive monthly gain.  The S&P 500 rose 2% for the month to close at 1406.58.  Oil prices (and gas prices) moved higher … potentially putting a cap on consumer spending.

Markets reacted positively to continuing signs of improvement in the US housing market, marginally higher 2nd quarter GDP and positive comments by the Fed.  The June Case-Shiller Home Price Index rose 0.5% versus expectations of a decline of 0.3%.  It was the first year-over-year increase since late 2010.  U.S. GDP for the 2nd quarter came in at 1.7% versus consensus expectations of 1.5%.  Lastly, Ben Bernanke and the Fed came to the rescue of the markets as they indicated a willingness to further stimulate (artificially, of course) the economy if necessary.

Europe and China are another matter.  There are definite signs of slowing in Europe and China.  Investors are anxiously awaiting the ECB’s press conference this Thursday for signs of hope.  Let’s hope that it is not more of the same – rhetoric.

We suspect that the markets will give back August’s gains as investors wake-up to the headwinds in Europe and to the geopolitical challenges in the Middle East.  Let’s not forget that September is historically the worst performing month of the year.  Buckle-up.

“Let us not waste our time in idle discourse! Let us do something, while we have the chance! It is not every day that we are needed. But at this place, at this moment of time, all mankind is us, whether we like it or not. Let us make the most of it, before it is too late!”
– Samuel Beckett, Waiting for Godot