Pat Webb - Phase 2 Advisors
 
Headlines Drive Volatility 
Weekly Update - July 30, 2012
In This Issue
Performance
Headlines
Recipe
Golf Tip
Health Tip
Green Fact
The Markets:

Volatility was the name of the game last week as markets responded positively to better-than-expected earnings, flinched at ratings downgrades in Europe, and then rallied again on news that the EU is moving towards tighter integration. Overall, equities remained in positive territory, with the S&P 500 gaining 1.7%, the Dow picking up 2.0%, and the Nasdaq growing 1.1%.[1]

 

Last week's earnings results continued the trend established at the outset of the season in which nearly two-thirds of S&P companies have beat earnings estimates, while 60% have missed revenue expectations. Despite the worst showing for corporate profits in three years, investors seem relieved that things aren't worse. The fact that earnings are still relatively strong despite problems abroad is giving some traders confidence that equities might be a value play right now.[2] While revenue misses show that the slow economy is affecting business, strong earnings may leave firms poised for growth when things turn around.  

 

After the week's promising start, global stocks tumbled midweek as ratings agencies continued to issue warnings and downgrades on Europe. Moody's cut its outlook on Germany and Holland, and issued a negative warning on Luxembourg on fears that bailout commitments will negatively impact the economies of core nations.[3] Egan-Jones continued the previous week's downgrade rampage by cutting Italy's debt rating to CCC+ from B+, officially pushing the world's 8th largest economy into junk bond territory.[4] In spite of all this, stocks managed a rally on Thursday after remarks by European Central Bank president Mario Draghi indicate that the ECB is actively pursuing closer EU fiscal integration and stands ready "to do whatever it takes to preserve the euro."[5]

 

Despite the market's optimism, the growing realization of the eventual cost of multiple bailouts makes the ECB's promises ring hollow. Is the European Union really worth saving at any cost? The previously unthinkable possibility of a Greek exit is starting to be actively discussed by analysts. Just last week, in fact, the prestigious Wolfson Economics Prize[6] was awarded to the research group with the best plan for a euro breakup. With Greece unwilling (or unable) to abide by its bailout terms, a Greek exit is looking more likely, and it might not be such a bad thing. Allowing Greece to exit gracefully would enable it to return to its sovereign currency, devalue its currency (to make its exports cheaper and pay back its debt more easily), and develop an austerity plan on its own, all without threatening the rest of Europe.

 

It appears that domestic equity markets are being affected more by headlines from abroad than the underlying strength of American companies, so we will not be surprised if we see continued volatility in the months ahead as the European situation continues to develop.  

 

ECONOMIC CALENDAR:
Monday:
Dallas Fed Mfg. Survey

Tuesday: Personal Income and Outlays, Employment Cost Index, S&P Case-Shiller HPI, Chicago PMI, Consumer Confidence

Wednesday: Motor Vehicle Sales, ADP Employment Report, ISM Mfg. Index, Construction Spending, EIA Petroleum Status Report, FOMC Meeting Announcement

Thursday: Jobless Claims, Bloomberg Consumer Comfort Index, Factory Orders

Friday: Employment Situation, ISM Non-Mfg. Index

 


Performance


Chart 07_30_2012

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.


Headlines

Second quarter GDP grows just 1.5%. The economy slowed in the spring, with growth declining from 2.1% in the first quarter and 4.1% late last year. A drop in consumer spending was the main culprit, though some analysts blame concerns about the upcoming "fiscal cliff" and spending cuts for slowing the economy.[7]

 

Unemployment claims drop again. Despite a drop to 355,000 last week, analysts are wary of trusting the latest results, and continue to express concern that seasonal adjustments are responsible. However, should claims remain consistently below 375,000, it would likely lead to a decline in the unemployment rate.[8]

 

Durable goods orders report mixed. The Commerce Department's durable goods orders for June rose 1.6%, matching May's increase. However, excluding aircraft and transportation equipment, factory orders actually dropped 1.1%, suggesting that the sluggish economy might be weakening the manufacturing sector.[9]

 

Has housing turned the corner? Four months of growth in the housing sector leads real estate research firm Zillow.com to forecast a rebound from its five-year slump. Zillow predicts that home values will increase in 43% of the markets it tracks, although a rise in foreclosures on the market may drive prices down in some areas.[10]

 



Quote of the Week

"Believe you can and you're halfway there." - Theodore Roosevelt

Recipe of the Week

Peach and Raspberry Parfait


Recipe_07_30_2012

You're just five ingredients and five minutes away from this delicious dessert.  

Recipe from RealSimple.com.

Ingredients:

2 peaches cut into 2 1/2-inch pieces

1 1/2 cups raspberries

2 tablespoons sugar

1 tablespoon fresh lemon juice

1 pint vanilla ice cream

 

Directions:

1) In a large bowl, combine the peaches, raspberries, sugar, and lemon juice and let sit for 20 minutes, tossing once.

2) Scoop the ice cream into bowls or glasses and top with the fruit mixture.




Golf Tip

Know the Grain


Most golfers can gauge the slope and speed of a green, but typically fail to determine grain. Check for grain at the cup. Usually, one side of the cup will be ruffled, and the other, smooth. Toward the smooth side is the direction of the grain. Uphill putts into the grain will have to be struck more firmly; downhill putts with the grain need a softer touch.


Healthy Lifestyle

Quick Daily Exercise

 

It can be difficult to get into a workout groove, but use these tips to help you minimize resistance and get yourself moving.

  • When you're having a low-energy day, tell yourself you only have to exercise for ten minutes. That'll get you moving and once you're in the groove, you'll usually want to finish your workout.
  • Start a friendly workout group for walking, running, or gym training. The peer pressure and camaraderie will help you overcome resistance and do wonders for your motivation.
  • Make your workouts convenient by scheduling it for a time of day when you typically feel energetic. Have a gym bag packed and ready to go in your car or by the door.
  • After a good workout, jot down a few sentences about how great you feel and use it for motivation the next time you don't feel like exercising.
Green Living

Clean Air

  • Dust with a damp cloth to prevent household dust, which may contain toxins, from being stirred back into the air.
  • Aerosol chemicals produce droplets which can remain in the air (and be inhaled) even hours later. Hand-powered sprays or those applied with a rag may be best.
  • Use chlorine-free dishwashing detergent. The hot water in a dishwashing cycle can easily vaporize chlorine, releasing it into your home's air.
  • Occasionally air out your house to blow away air pollutants and naturally freshen your home.
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

  

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

  

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

  

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.   

  

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

  

The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.   

  

The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.

  

The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.

  

The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.

  

Google Finance is the source for any reference to the performance of an index between two specific periods.

  

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

  

Past performance does not guarantee future results.

  

You cannot invest directly in an index.

  

Consult your financial professional before making any investment decision.

  

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

  

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

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[1]  http://www.google.com/finance 

[2] http://www.usatoday.com/money/markets/story/2012-07-28/corporate-earnings-stocks/56547766/1  

[3] http://www.forbes.com/sites/steveschaefer/2012/07/23/crisis-threatens-europes-core-moodys-sours-on-germany-netherlands/ 

[4] http://articles.marketwatch.com/2012-07-25/markets/32841526_1_default-risk-downgrades-ratings-agency¬  ¬ ¬  

[5] http://www.cnbc.com/id/48356383¬  

Pat Webb
Pat Webb - Phase 2 Advisors
8100 Turman Ct
Fort Collins, CO 80525
970-776-3306
patwebb@phase2adv.com
http://www.phase2adv.com