Quote of the Week:
“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”
John Quincy Adams
Leaders (so called) in the Arab world would seem to be in agreement with Mr. Adams, but in a strange way. By virtue of despotic rule, Libya, Egypt, Tunisia, and Bahrain have certainly inspired their citizens to "dream" of freedom.
In terms of U.S. market reaction (see below), did you know Libya is responsible for less than 1% of US oil imports*? But oil, or the price of it, is the latest media scare. Our media knows that fear sells. Unwise investors react while those following a long term strategic financial plan see opportunities, and continue executing their strategies.
On February 1, 1978, the day I was born, the S&P 500 index closed at 90 points**. Last Friday's close was 1,319***. Math majors know this to be an increase of over 1,400% over my 33 years on this planet. That is fascinating and real! And it happened together with multiple oil crises, debt crises, wars, inflation, real estate and technology "bubbles", and 5 recessions.
In light of the above, is it reasonable to assume that the latest headlines and Apocalypse Du Jour might not be as big of a problem as our media makes it out to be? Is it also reasonable to assume that if we behave appropriately with our investments, have a plan and don’t panic, we might just make it? We think the answer is a resounding affirmative.
Best Always,
Jeremy
*National Bureau of Economic Research
**www.economagic.com
***Google Finance
The Markets
Despite three straight days of selling that included back-to-back triple-digit losses, the Dow managed to stay above 12,000; the S&P did the same with the 1300 mark. However, the domestic equity indexes lost anywhere from a quarter to a third of their year-to-date gains to profit-taking from the recent multi-week rally and unease about political conflict.
Last Week's Headlines
• As the rebellion in Libya spiraled out of control, oil prices reached their highest level since fall 2008.
• Home prices in the 20 cities tracked by the S&P/Case-Shiller index fell by an average of a full percent in December. Prices are now down 2.4% from the previous December, and average prices for the fourth quarter of 2010 were at roughly the same level as in the first quarter of 2003.
• January sales of existing homes were up 2.7% from the previous month, according to the National Association of Realtors®. However, the Commerce Department said sales of new homes fell 2.4% in January compared to December.
• The economy grew more slowly in the fourth quarter than the Commerce Department originally estimated. The 2.8% revised figure was down slightly from the original 3.2% estimate. The Bureau of Economic Analysis said higher consumer spending, exports, and residential investment were offset by a decline in nonresidential fixed investments, slower private inventory investments, and reduced federal, state, and local government spending.
Eye on the Week Ahead
Investors will keep a nervous eye on the conflict in Tripoli, assessing the potential impact that higher oil prices might have on the economy. Also watched will be the congressional conflict over the budget deficit as the March 4 deadline for raising the nation's debt ceiling approaches. Finally, Friday brings unemployment data.
Key dates and data releases: Personal income/spending, pending home sales (2/28); U.S. manufacturing, construction spending (3/1); Federal Reserve "beige book" report (3/2); labor productivity and costs, U.S. services sector (3/3); unemployment, factory orders (3/4).
Data source: 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. Equities data reflect price change, not total return.
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.
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