13,000 nice things about your accounts

Quote of the Week:
"Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria." - Sir John Templeton


With the Dow Jones® recent climb to 13,000, we have now witnessed what may come to be regarded as the most remarkable comebacks our lifetimes (at least we hope so!). Last seen in May 2008 when the recession was still in its infancy, Dow 13,000 seems like a big deal. But is it?

We, along with many experts, see the impact as mainly psychological. Today’s market to us isn’t fundamentally any different than it was at 12,900 or any other number. There is plenty of good economic data right now, but there wasn’t any single piece of data that pushed the Dow to this level by itself.

We note, however, that in the short term, investor confidence can drive markets. We expect, therefore, one potential in the near term is a continuation of the upward move for that reason. But regardless, we simply consider 13,000 milestone. Simply one more step on the road to financial independence and family wealth accumulation. The road itself is our main concern. Making certain it is built on a solid foundation of fundamentals is key. More on that in a moment.

Of course, there are still plenty of other challenges that face us: European debt, gas prices, Israel versus Iran. A very large list, just as always. However, hitting 13,000 is still an event among a series of positive events that suggest we are heading in the right direction. Since last fall, unemployment is lower, consumer confidence levels are on the rise and manufacturing has increased. There is reason for optimism.

Now, about those fundamentals. Some might see 13,000, then abandon their principles and get really aggressive. Throw caution to the wind. History cautions against this, and we are good students. At JL Davis, therefore, we will continue to emphasize the fundamentals of investing. While growth of assets is our objective, rational thinking will forever be our guide and not the vagaries of the markets.

We take the obligation of wealth management very seriously and are humbled by it. So while we’ll celebrate a bit at milestones like this one, we’ll quickly get back to work helping you accomplish your goals.**


Market Week: March 5, 2012

The Markets

The small caps of the Russell 2000 took it on the chin last week, while the other indices more or less held their own. The Dow finally managed to close above 13,000, which it hasn't done since May 2008, but couldn't hang on through the end of the week. Meanwhile, the Nasdaq continued to outpace its domestic peers.


Last Week's Headlines

• The U.S. economy grew at an annual rate of 3% in Q4 2011, a more rapid pace than the 2.8% previously estimated. According to the Bureau of Economic Analysis, inventories, consumer spending, and commercial construction were major contributors to the increase.

• European Union leaders (other than those of the United Kingdom and the Czech Republic) signed a treaty intended to impose greater fiscal discipline in the EU. Meanwhile, the German parliament voted to support the second Greek bailout and eurozone finance ministers agreed to release new funds for the permanent European Stability Mechanism that will handle financial assistance efforts. Also, European banks refinanced almost €530 billion worth of loans as part of the European Central Bank's second long-term refinancing operation (LTRO) to maintain liquidity in the financial system.

• Orders for durable goods such as autos, appliances, and furniture fell 4% (3.2% if transportation is excluded) in January after three straight monthly increases. The Department of Commerce said transportation equipment, especially orders for commercial aircraft, fell the most (-19%). However, declines also were seen in computers and heavy machinery, both down more than 10%, while orders for cars were up 0.9%.

• U.S. manufacturing continued to expand in February for the 31st straight month, though at a slightly slower pace. The Institute for Supply Management said new orders, production, and employment also grew.

• Recent increases in housing sales didn't translate into higher prices in December. The S&P/Case-Shiller national index showed home prices at their lowest level since mid-2006; the index was down almost 34% from its Q2 2006 peak.
Eye on the Week Ahead


Global markets will watch to see whether at least 30% of Greece's bondholders formally accept its bond swap offer on Thursday. U.S. unemployment numbers and eurozone GDP data also will be of interest.

Key dates and data releases: factory orders, U.S. services sector (3/5); labor productivity/costs (3/7); unemployment/payrolls, balance of trade (3/9).
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