Daily Bullets……For April 17, 2014

·         Banks ramping up lending….In a very encouraging sign for the economy, the Wall Street Journal reports this morning that large U.S. banks increased commercial loans outstanding by a healthy 8.3% in the first quarter, suggesting both borrowers and lenders are becoming more confident about the economy. This is a significant positive for the economy in part because tight credit has been one of factors contributing to the slow economic recovery we’ve experienced. This is another factor that supports our outlook for acceleration in GDP growth this year (no link for this comment).

·         Pension problems….A large hedge fund, Bridgewater, stated on CNBC this morning that 85% of public pensions could fail in 35 years. It is a hypothetical and controversial view. It points up the serious problems with significantly underfunded public pensions, which is not new news. However, we expect the problem could lead to pension reform and potentially reduced secular economic growth. Link: http://www.cnbc.com/id/101575849?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=101575849%7COutlook%20for%20pensions%20is%20p

·         More positive data points……..Closely watched initial unemployment claims came in a little better than expected, while Philly Fed Business Activity Index increased to its highest level in seven months. This data adds to a recent string of positive data that paints a picture of an improving economy, again in line with our previous expectations. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&Date=20140417&ID=17529893&topic=TOPIC_ECONOMIC_INDICATORS&isub=3

·         Hedge funds struggling……Interesting article out this morning on the continued struggles of hedge funds which, in general, have been badly underperforming. Why? Bifurcated and over-concentrated bets which, when wrong, have disastrous consequences. This is more support of Warren Buffett’s famous bet five years ago that the S&P500 index will beat hedge funds. So far he is correct by a long shot. Diversification works and is important in conservative and responsible wealth management. Link: http://www.cnbc.com/id/101592736?__source=msn|money|headline|headline|story|&par=msn