Archive for ND&S Updates

Grinding, Grinding, Grinding …

March 31, 2014 


Equity markets continued to grind last week on the heels of mixed economic news and continuing geopolitical tensions. Bond prices moved slightly higher as yields pushed modestly lower. 

For the week, the Dow Jones Industrial Average finished at 16,323.06 to close the week barely higher by 0.12%. The broader-based S&P 500 closed at 1,857.62 for a loss of 0.48% for the week. The Nasdaq Composite closed the week at 4,155.76 for a hefty decline of 2.83% (due to selling in biotech and technology). International markets moved higher as the Dow Jones Global (ex US) Index gained 2.16% for the week (international markets have been pushing higher lately … perhaps playing catch-up to U.S. markets). After last week’s grind, several market averages remain slightly negative for the year-to-date period with the Dow Jones Industrial Average down 1.5% and the NASDAQ lower by 0.5% (the S&P 500 is up 0.5% for the same period). The 10-year Treasury rallied slightly to close the week at a yield of 2.71% … down a bit from last week’s 2.75% yield. 

Economic news released last week was fairly mixed, but there was enough data to support a slightly positive bias in the economy. Among the better-than-expected releases were durable goods orders, initial jobless claims, purchasing manager’s index and consumer confidence. Gross domestic product and pending home sales lagged expectations. Some rays of light within the modestly disappointing GDP numbers were robust consumer spending and business investment during the fourth quarter. News out of China was less-than-satisfactory as their purchasing manager’s index dropped to an eight-month low. Perhaps this soft news out of China prompts the People’s Bank of China to initiate another round of stimulus … time will tell. 

We suspect that the next few months could see more of the same – increased volatility and markets grinding higher and lower on mixed news. First quarter earnings will likely be challenged due to lousy weather over the quarter … analysts have already cut their first quarter earnings estimates by 4.5%, according to FactSet. The next month or so will bring a mixed-bag of quarterly earnings reports … buckle-up. 

Spring is here (even if it doesn’t feel like it) … we suggest investors head outside and take-in some fresh air.

“No winter lasts forever; no spring skips its turn.”
-Hal Borland


Laissez Les Bon Temps Rouler

March 24, 2014 



While there are plenty of issues to keep us up at night-Putin’s Ukraine forays and the sad story of the Malaysian Airliner- there is a happier event to report.  The Fed has completed its recent stress test for the major banks in the United States and 29 of 30 have passed the test.  As a result, we expect many banks and financial institutions to be allowed to raise their dividends and/or buy back their shares.  There will certainly be jockeying between the Fed and the banks, and we should know what will be allowed this week.


One of the banks we follow closely is Citicorp which is only paying $.04 per year while earning $4.35 last year.  They seem ready for a substantial increase in dividend. Some of the best capitalized banks were American Express, RBS Citizens, PNC, Wells Fargo and U.S. Bancorp. 


We feel confident this will be the year that major banks will be permitted to show shareholders some affection. We’ll find out very soon….ayez de la patience

“Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful, that’s what matters to me.”
-Steve Jobs


Looking Forward to Spring

March 17, 2014 


Last week the S&P 500 suffered its largest weekly loss since late January due to disappointing economic data and uncertainty over the situation in the Ukraine. Most economists are attributing the weaker reports to severe winter weather. The DJIA was down 2.4% for the week and is now down 3.1% YTD. 

This week look for several reports on the housing industry as well as the results of a 2 day Fed meeting. Most people expect the Fed to continue its tapering program by reducing bond purchases by another $10 billion per month. Economic numbers should improve as the weather improves. 

One note of caution is a report in the WSJ that insider selling, when adjusted to only include officers and directors, shows a record level of selling particularly in capital goods, technology, consumer durables and consumer non- durables.

S & P 500 Chart

     An Irish Blessing      

May your troubles be less
And your blessings be more
And nothing but happiness
Come through your door.


The Glass is Half-Full!

March 12, 2014 


Despite many headwinds and distractions, the market advanced again last week.  The much anticipated payroll data was better than expected: 175,000 jobs were added to nonfarm payrolls in February, and the January revised up by 14%.  The Russian invasion of the Crimean region of the Ukraine (and the US’ impotence) is temporarily on the back burner, although Gazprom’s implied supply disruptions have a lid on European equity performance.

We have referenced the slower-than-typical economic recovery for some time now, and have referenced regulatory drag as the primary problem.  Overall this problem continues, but there are occasional glimmers of hope.  The recent Medicare Part D denouement is a case in point.

HHS proposed a plan to gut this very popular (39M beneficiaries) and very efficient (45% less costly than originally budgeted!!) drug subsidy program first enacted in 2003 (a NIH resentment?). Fortunately, this produced an overwhelming protest [277 groups signed a protest letter and a bipartisan group of 24 Senators rebelled]. Consequently, HHS decided to shelve the plan, at least for now.

Thankfully, Washington DC does occasionally act in the voters’ best interest (at least when sufficient pressure is exerted!). Note that the January market swoon has been more than offset by subsequent strength, such that the S&P 500 is now up 1.6% year-to-date. 

“Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.”
Thomas Paine

Graham and Buffett

March 3, 2014 


It’s around this time of the year when investors start looking for Warren Buffett’s annual letter to the stockholders of Berkshire Hathaway.  As usual there is much to sink your dentures into; we found Buffett’s open dependence on Benjamin Graham’s 1949 book, The Intelligent Investor, noteworthy.  Buffett describes Graham’s ideas as logical, elegant, and easy to understand.  The revised edition of chapters 8 and 20 are the keys to Buffett. In a strange twist, Geico and Burlington Northern or their predecessors were two companies that Graham himself purchased that Mr. Buffett later purchased for Berkshire Hathaway.

Both men place little emphasis on market timing or macro-economic analysis, focusing instead on knowing their companies inside and out.  Buffett is actually pleased by the “capricious” nature of investors, causing them to listen to pundits, and worse yet, acting on their comments.  He is more than happy to buy when all sounds gloomy. Conversely, he remembers Barton Biggs’ famous quote: “A bull market is like sex.  It feels best just before it ends.” Tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values.  A climate of fear is your friend when investing; a euphoric world is your enemy….words of wisdom from Benjamin Graham and Warren Buffet. 

“When one door of happiness closes another opens; but often we look so long at the closed door that we do not see the one which has been opened for us.”
-Helen Keller