Your Weekly Update and Buddha

This Week's Quote:
"Standing or walking, sitting or lying down, during all these waking hours, let him establish mindfulness of good will, which men call the highest state." ~ Buddah


J.L. Davis Thoughts This Week:

Buddha had it about right a couple of thousand years ago, in our view. Good will is truly mankind’s “highest state”. We could use a little more of it, don’t you agree?

We don’t know about you, but we are pretty tired of reading about the “Fiscal Cliff” lately and all the iterations and permutations of the multitude of problems that are supposed to ensue. The silver lining is that the media has forgotten temporarily about the Mayan calendar (ending December 20th or so with doomsday following shortly) and Greece (doomed to drag Europe and the world into recession). Lucky for them, they are still able to report on Hurricane Sandy’s impact. We could go on, but why!?

Many clients have asked, so here’ our take. People of good will always seem to find a way through even the stickiest of situations.

We would argue that in the case of the tax and revenue provisions set to change at midnight December 31st, those same “people of good will” have already reached agreement. The agreement is that these tax provisions and spending cuts will go into law unless they reach a different agreement. Which we think they will.

After much gnashing of teeth, posturing, pouting, laughing and crying, a compromise will be found as it always is.

In the meantime, we think continuing to invest in a carefully positioned equity portfolio, together with quality income (bond) instruments and others, investments continues to offer superior value to the long term investor, especially if that portfolio contains strategies for risk management.

With fixed interest rates on savings at or below 1% annually for the most part, maybe double to a whopping 2% or so if you lock up for 5 years, what other alternatives are there, really?

Let us know what you think.**


Market Week: December 3, 2012

The Markets

Domestic equities seemed to fluctuate with every new fiscal-cliff report out of Washington. Despite the uncertainty, investors seemed willing to take on more risk, giving the tech-heavy Nasdaq and small-cap Russell 2000 solid gains while leaving the S&P 500 and Dow industrials little changed and bond yields down a bit. Gold plummeted roughly $30 an ounce before a modest rebound to end the week at roughly $1,727.


Last Week's Headlines

•Saying that passage of austerity measures showed a good faith effort to cut spending, Greece's three primary creditors reached an agreement that will pave the way for receipt of another €43.7 billion in financial assistance. The so-called troika--the International Monetary Fund, eurozone finance ministers, and the European Central Bank--agreed to a longer timetable for reduction of Greece's debt burden.
•After initial conciliatory noises, participants in discussions over the so-called fiscal cliff seemed to retreat to their respective positions. Congress is not scheduled to adjourn until December 14, leaving plenty of time for more drama.
•Third-quarter economic growth was better than previously thought. The Bureau of Economic Analysis said its second estimate showed gross domestic product rising by 2.7%. That's substantially better than either the initial 2% estimate or the 1.3% growth of the previous quarter, and was helped by higher private inventory investments and exports. Meanwhile, after-tax corporate profits rose $48.1 billion, or 3.3%; that's an improvement over Q2's 2.2% increase. Net dividends were up 1.5% for the quarter and were 7.5% ahead of Q3 2011.
•Home prices across the country continued to improve with a sixth consecutive month of increases. The 0.3% gain in September put the 20-city S&P/Case-Shiller index at its highest level in two years and 3% ahead of last September, though it's still down roughly 29% from its summer 2006 peak. Meanwhile, the Commerce Department said sales of new homes slipped 0.3% in October, though they were 17.2% higher than a year earlier.
•Orders for durable goods other than autos and aircraft were up 1.5% in October, though the Commerce Department said declines in those two major categories left overall orders essentially unchanged. Nondefense capital goods orders (not including aircraft), an indicator of businesses' willingness to invest in growth, were up 1.7%.
•Securities and Exchange Commission Chairman Mary Schapiro will leave that post a year early as of December 14. Current commission member Elisse Walter will assume Schapiro's role until a permanent successor is named.
•Consumer spending was down 0.2% in October, though the Commerce Department said Hurricane Sandy likely played some part in the decline. It was the first spending decline since May. Meanwhile, incomes rose less than 0.1%, though it was the 11th straight month of increases, and the personal savings rate rose slightly to 3.4% of income.


Eye on the Week Ahead

Investor sentiment will likely continue to fluctuate based on how optimistic Washington seems about a tax deal, but unemployment also will be a focus, as will data on the U.S. manufacturing and services sectors.
Key dates and data releases: U.S. manufacturing, construction spending (12/3); business productivity, factory orders, U.S. services sector (12/5); unemployment/payrolls (12/7).

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 Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2012