Daily Bullets….April 11, 2014

As we review the daily news, we see articles that we believe have particular significance for the financial markets and our investment policy. We highlight some of these for you in this column. Our goal is to post daily on these items, but we know realistically there may be days where it is not feasible. Please let us know if you have comments or questions !

 

·         Yesterday………….Dow down 267 yesterday. Why? Necessary and overdue adjustment to what was becoming a short term overbought condition reflected in speculative froth in pockets of the market such as biotech, social media, and stocks with nose-bleed valuations. Could this be the start of a bondfide “correction” (meaning 10-20% decline)? Possibly. But more likely it’s another in a steady series of periodic downward “adjustments” of 5-8%, of which there have been seven since March 2009 (or about every 6-7 months).  Article link:
http://finance.yahoo.com/blogs/breakout/market-nose-dive--major-indices-shed-recent-gains-200646218.html

·         And Today………….Today, through mid-day, market continuing its moderate pullback based on concerns over an earnings report from JP Morgan, follow through from yesterday’s declilne, and perhaps some concern over today’s PPI number. Article link: http://money.msn.com/business-ews/article.aspx?feed=OBR&date=20140411&id=17500759

 ·         Consumer sentiment improving……….The Thomson Reuters/U- Michigan's preliminary April consumer sentiment index came in at 82.6, the highest since July, and up from March final reading of 80.0. Both current conditions and expectations improved. This is in contrast to mixed retail sales readings we’ve seen lately  but is positive for the overall economy and supports the thesis for moderate but steady economic growth and consumer spending, the “goldilocks” environment favorable for stocks. Article link: http://www.bloomberg.com/news/2014-04-11/wholesale-prices-in-u-s-rise-more-than-forecast-on-services.html

·         U.S. Wholsale prices:   Wholesale prices in the U.S. rose in March. Excluding food and energy, the index increased 1.4% year to year following a 1.1 percent year-to-year gain in February. The 0.5% month-to-month advance in the WPI was the biggest since June. Despite what appears to be some acceleration in WPI, 1.4% continues to be very moderate inflation and well below the Federal Reserve’s target inflation of 2%. For a variety of reasons both cyclical and secular, we continue to see inflation remaining fairly subdued in 2014, which is favorable for financial assets. Article link: http://www.bloomberg.com/news/2014-04-11/wholesale-prices-in-u-s-rise-more-than-forecast-on-services.html