Greetings!
Recently, the Denver Nuggets became (perhaps) the best team in the NBA. Those of us who have lived here long enough to remember the Nuggets' inception, and know names like Doug Moe and Mutumbo, still may feel heartache about the Nuggets. The old refrain was, "Same old news, Nuggets lose." Yet, by ending the best year in the club record, we ought to be celebrating.
Recently, the Colorado Rockies started their best season ever. Still, it's a similar story for those of us who have rooted for them since their inception. We are biased. We hold on to the painful memories of prior seasons.
Similarly, the stock market has had one of the best starts in many, many years. Yet, last week posted the worst decline of this calendar year. Now, many of us have this emotional response. We say, "I told you so!" and then we think awful thoughts. The trick to investing is to feel things fully, and act carefully, if at all.
Recency bias is a proven psychological phenomena. It says that what just happened is likely to continue to happen. We cannot help it. Yet, if that were all that was happening, we'd think the Nuggets and the Rockies will win the championships. So instead, what's happening is that we remember the pain greater than we remember the recent gains.
Stock market investors remember 2008 as if it were yesterday, and the recent rally since then as if it were a dream that will be suddenly and rudely interrupted. This year's best performers are the "defensive" stocks, which leaves an even greater opportunity for "growth" stocks in the near future. They may be under-priced relative to their peers and as we've been arguing for months, stocks could be cheap compared to bonds.
If something cannot continue, it won't, and we expect prices to reflect values eventually. |
| Weekly Economic Update | |
INFLATION DECLINES
Consumer prices retreated 0.2% in March as fuel costs fell, a sea change from the 0.7% rise in the Consumer Price Index seen in February. (Labor Department data did show a 0.1% rise in core CPI.) Annualized consumer inflation was at 1.5% in March, down half a percent in a month. Year-over-year inflation hasn't been so mild since July, and that is reassuring news for the Federal Reserve.1
SURPRISE DIP FOR LEADING INDICATORS
After six straight months of advances, the Conference Board's index of leading indicators unexpectedly retreated 0.1% for March. It had risen 0.5% across January and February. As for anecdotal evidence of the economy's health, the latest Fed Beige Book noted "moderate" expansion, adding that household spending "grew modestly" even with the payroll tax hike and higher gas prices.2
HOUSING STARTS UP 7.0% IN MARCH
The Commerce Department noted that they reached a 1.04 million annual rate last month, a pace last seen in June 2008. While single-family projects dipped 4.8% in March, apartment starts jumped 31.0% to their highest level since January 2006.1
VOLATILITY KEEPS STOCKS IN CHECK
The CBOE VIX rose 24.13% last week, and the DJIA (-2.14% to 14,547.51), NASDAQ (-2.70% to 3,206.06) and S&P 500 (-2.11% to 1,555.25) basically gave back the gains realized from April 8-12. NYMEX crude lost 3.1% last week to settle Friday at $88.01; COMEX gold fell another 7.1% last week to $1,395.60 at Friday's close.3,4,5
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| Market Summary |
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% Change |
Y-T-D |
1Yr Chg |
5-Year Avg | |
DJIA |
+11.01 |
+12.21 |
+2.64 | |
NASDAQ |
+6.18 |
+6.60 |
+6.68 | |
S&P 500 |
+9.05 |
+12.95 |
+2.37 |
(Source: cnbc.com, usatoday.com, treasury.gov, treasurydirect.gov -04/19/13). Past performance is no guarantee of future results. Indices are unmanaged, and investors cannot invest in them directly. |
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Create a beautiful week!
Karl Frank, MBA, MSF
Certified Financial Planner (R)
A & I Financial Services LLC
303.690.5070
Citations:
1 - www.sfgate.com/business/bloomberg/article/Housing-Starts
-Climb-as-U-S-Consumer-Prices-4438798.php [4/16/13]
2 - www.futuresmag.com/2013/04/18/leading-economic-indicators
-index-in-us-unexpected [4/18/13]
3 - www.cnbc.com/id/100656119 [4/19/13]
4 - www.foxbusiness.com/news/2013/04/19/market-snapshot-
us-stocks-rise-ibm-weighs-on-dow/ [4/19/13]
5 - www.cnbc.com/id/100655012 [4/19/13]
Securities offered through Geneos Wealth Management, Inc., member FINRA/SIPC. Investment advisory services offered through A & I Financial Services LLC, registered investment advisor.
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| Words for Thought |
"Friendship is a single soul dwelling in two bodies."
Aristotle
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Riddle of the Week
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What has a tail and head, but no body?
Last week's riddle:
You have 31 baseballs in a box. You have 31 kids lined up to get them. You give each kid a baseball, but at the end, one baseball remains in the box. How is this possible?
Last week's answer:
As you give the last baseball away, you give it away within the box - that is, the 31st kid to get a baseball also gets the box.
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