Heard it on GNN (Good News Network) – your weekly market update

This Week's Quote

“In America the press rules the country; it rules its politics, its religion, its social practices.” - E.W. Scripps

It almost goes without saying that media coverage is remarkably negative, yet powerfully persuasive, as the media magnate E.W. Scripps observed decades ago.

Turning on the television or reading the papers today, we find endless stories about the problems of Europe, the difficulties in regard to student loans, California falling off into the ocean and/or their municipal debt problems, Facebook’s stock price plummeting, and the difficulties and the rest of the world, especially the Middle East. One would think there is no future!

Not only that, but we could replace these topics six months ago with the difficulties in Egypt and China, oil prices skyrocketing, foreclosures quickening, Ireland, Greece, the Japanese tsunami/earthquake/ meltdown, and on and on. Media is almost uniformly negative, almost all the time!

In our world (financial) in the meantime, the S&P 500 stock index representing the largest 500 companies in United States has staged a remarkable gain. Returns are currently over 12% since January 1st of this year. These 500 companies have more cash on hand that at any other time in a recent recorded history according to the Wall Street Journal. Consumer is spending at a record high according to CNBC and other sources. Retail sales are up substantially over last year, and were up then over the year before. Business investment is absolutely soaring according to Bloomberg.

What all this means is that we should be prepared to hear a lot about all the problems in society from the media, but little about the “FACTS” just mentioned. Here JL Davis, we’ve become used to this, to the point where the media represents nothing more than noise to us, generally speaking.

We find the remarkable resilience of the markets and free markets in the world infinitely more interesting and germane to investment performance.

So as the TV and papers drone on about the outcome (in their opinion) on the election, all of the stories above, along with the new ones that surface, we’ll be keeping our eyes on things that really matter… like facts.**



Market Week: August 20, 2012

The Markets

Equities had a sixth consecutive week of gains, with the small caps of the Russell 2000 leading the way for a change. The S&P 500 ended the week only a single point away from its year-to-date closing high, and the Nasdaq continued to be the best performer of 2012. Meanwhile, renewed appetite for risk left the 10-year Treasury yield only 8 points from where it began the year.


Last Week's Headlines

• The Bureau of Labor Statistics said consumer prices saw no change in July, leaving the annual inflation rate at 1.4%. Energy costs, primarily for electricity, natural gas, and fuel oil, fell 0.3%, offsetting a 0.1% increase in food prices. Not including food and energy, core consumer inflation rose only 0.1% for the month.
• U.S. industrial production was up 0.6% in July, according to the Federal Reserve. That was substantially higher than the 0.1% increases seen in May and June, and 4.4% higher than last July. Also, usage of the nation's manufacturing capacity rose to 79.3%; that's the highest level since April 2008. However, manufacturing activity in the Fed's Philadelphia and New York regions contracted by 7.1% and 5.9% respectively.
• U.S. retail sales were up 0.8% in July. According to the Commerce Department, that was the first increase in four months and put sales 4.1% ahead of last July. Nonstore retailers were up almost 12% from a year ago, and sales of sporting goods, hobbies, books, and music rose almost 11% in the same time; both categories also saw the strongest monthly gains.
• After a 6.8% increase in June, housing starts fell 1.1% in July, though the Commerce Department said they were still 21.5% higher than the previous July. Prospects for future construction improved as the number of new building permits increased 6.8% to hit a level that was almost 30% higher than July 2011.
• The Conference Board's index of leading economic indicators continued to seesaw, rising 0.4% in July after June's decline and an increase in May. The biggest contributors were growth in housing permits and lower first-time unemployment claims.


Eye on the Week Ahead

With continued low trading volumes expected, economic reports from Europe could have as much impact as domestic data, while minutes of the Fed's internal debates about further economic stimulus also will receive attention.


Key dates and data releases: Federal Open Market Committee minutes, home resales (8/22); new home sales (8/23); durable goods orders (8/24).


Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.


Prepared by Lee & Jeremy Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2012