Mark Twain on “statistics”, and your weekly update

The writings of Mark Twain are is a constant source of “illumination”, not to mention a good bit of fun, on many things in life.

This week, we use a very famous quote of his to shed some light on the steady stream of information we are receiving that leads us to believe that recent improvements in the equity markets, as well as the US economy, will continue to be a theme during the remainder of 2013.

We hope you enjoy it, and thank you as always for the business and referrals you continue to graciously send our way.

All the best,
Lee and Jeremy

This Week's Quote:
"Figures often beguile me, particularly when I have the arranging of them myself...There are three kinds of lies: lies, damned lies and statistics."~Will Rogers

J.L. Davis Thoughts This Week:

Regular readers of this weekly missive know that we are passionate optimists when it comes to the resilience of US capital markets. The last 18 to 24 months have seen a steady confirmation of that optimism. No one can foretell the future, but at this point, it seems quite natural to ask if the recent trends will continue.

We think there’s a good chance they will. With all due respect to Mark Twain’s viewpoint (which is one we generally agree with, by the way), here are just a few snippets of recent data from the current steady stream of economic, consumer, and government news that might support this point of view*:

•Of the 334 S&P 500 companies that have reported fourth-quarter results, 72% have beaten earnings expectations and 67% beat their sales expectations. This type of performance is generally good for stock prices.
•The US trade deficit decreased nearly 21% in December, the most recent month to be reported, falling to a two-year low. Exports have risen significantly while imports have fallen partly due to strong exports of oil. These results likely mean that fourth-quarter GDP is likely to be revised higher than originally reported.
•Factory orders rose 1.8% in December and the ISM (Institute of Supply Management) manufacturing index rose to its highest level since last April.
•Same-store sales rose 5% in January showing that consumers paid little attention to increased payroll taxes. In addition, consumer borrowing continues to be strong growing by more than $14 billion in December. This is often a sign of faith in the economic recovery.
•January trade data from China indicates a resurgent economy into 2013. New lending by Chinese banks in January was more than double the size it was in December. The dragon could be reawakening.

We could go on. While recoveries are never perfectly linear, and almost always involve fits and starts, this one seems to be plodding along on the positive side quite nicely. Positive, as well, are the carefully diversified investment portfolios of many of our great clients.

We’ll keep you posted!**
*Source: Bloomberg, ING Investment Management, Factset, 2/13


Market Week: February 11, 2013

The Markets

After suffering its first triple-digit loss of the year on Monday, the Dow fought to hang on to the prior week's 14,000 level but in the end just couldn't manage to do so. The other domestic indices managed minimal gains, and the S&P 500 hit its highest level since November 2007. Meanwhile, the Global Dow was hampered by anxiety about rising Spanish and Italian bond yields.

Last Week's Headlines

• The nonpartisan Congressional Budget Office said the annual U.S. budget deficit as a percentage of the economy will shrink in 2013 for the fourth year in a row. The estimated $845 billion deficit would be less than $1 trillion for the first time in five years, and represent only 5.3% of GDP--roughly half the ratio of 2009. The bad news? Without tax and spending changes, the CBO said that the total national debt will be at 77% of GDP in 10 years and growing, largely because of rising health-care costs for an aging population and interest payments on federal debt.
• The U.S. trade deficit shrank to its lowest point in almost three years as a result of record oil exports. According to the Commerce Department, the trade deficit fell more than 20% to $38.5 billion.
• The U.S. Treasury said it will launch its first new investment product in 15 years when it auctions floating-rate notes sometime in 2013. The Treasury also said it plans to increase issuance of Treasury Inflation-Protected Securities (TIPS) this year.
• New factory orders were up 1.8% in December, with an 11.7% jump in transportation-related orders leading the way, according to the Commerce Department. It's the third increase in factory orders in the last four months.
• The U.S. services sector grew at a slightly slower pace in January. The Institute for Supply Management's index registered 55.2% for the month. That's slightly lower than December's 55.7%, but any figure above 50% represents growth, and it's better than the 53.1% of the ISM's manufacturing index.
• The U.S. Justice Department filed suit against Standard & Poor's, charging that during the three years prior to October 2007, the ratings service deliberately inflated its ratings of certain mortgage-backed bonds because of its own business concerns.
• Bond yields for Spanish and Italian sovereign debt rose to 5.4% and 4.5% respectively after Spanish Prime Minister Mariano Rajoy's political party was accused of taking kickbacks and as polls showed new strength by former Prime Minister Silvio Berlusconi as Italy's February 24-25 elections get closer.


Eye on the Week Ahead

As earnings season winds down, the approaching March 1 deadline for implementation of the sequestered federal budget cuts may begin to get renewed investor attention. Retail sales may give insight into the consumer mindset.

Key dates and data releases: retail sales, business inventories (2/13); industrial production, options expiration (2/15).

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 2013