For the past few weeks, we've talked about the differences between US spending and European spending. We've talked about all the money in the world and all the malaise. We've gone all around the world and come back to the good old USA because here is where the world's money is moving.
Why, in the first three months of 2013, with all the partisan rancor, did the world's financial markets send money to US companies? Why did the dollar rally? After all, the written and televised press tell me that doomsday is inevitable. Partially it's because of the infinite spending capacity (in dollar terms) of the US government. Partially it's because of the stability of our political system. Partially it's because the rest of the world looks worse than the USA. We looked at European countries who do not have the same currency (tax and print) power as the US Federal government. We've made the case that it cannot happen here in the USA, by definition. Recently, the Cyprus debacle has folks worried. In Cyprus, they threatened to confiscate money from private bank accounts. We take threats like this and look at our own lives and think, "What if they did that to me, in the USA?" This is erroneous and expensive thinking. We often focus on current events and forecast with terrible inaccuracy because we overweight the importance of current events and underweight our history. Unlike the US, Cyprus permits money laundering. It has no strong democracy or military and tax control.
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| Weekly Economic Update | |
Q1 GDP COMES IN AT 2.5%
The initial estimate of first quarter growth from the Bureau of Economic Analysis disappointed some analysts who had expected 3% expansion or better. Personal consumption and inventory accumulation were the prime sources of growth. Personal spending rose 3.2% in the quarter, but real disposable personal income fell 5.3%, which led the personal savings rate to slip to 2.6% from 4.7% in Q4. The big picture? The economic recovery is definite, but still sluggish. Overall durable goods orders dropped 5.7% in March, according to the Commerce Department.1,2
EXISTING HOME SALES FALL; NEW HOME SALES RISE
While March brought a 0.6% dip in residential resales, the National Association of Realtors also noted the 10.3% gain in the pace of home buying from a year before. The Census Bureau reported a 1.5% gain in new home sales last month, with the year-over-year improvement in the sales pace at 18.5%.3
CONSUMERS GROW MORE POSITIVE AS APRIL ENDS
Economists polled by Reuters had forecast April's final consumer sentiment reading from the University of Michigan to rise mildly to 73.2. Instead, it jumped to 76.4. That was still underneath the final March mark of 78.6.4
STOCKS KEEP ADVANCING
Across a volatile week, the Dow went +1.13% to settle at 14,712.55 Friday. The NASDAQ (+2.28% to 3,279.26) and S&P 500 (+1.74% to 1,582.24) also improved. At Friday's close, about half of S&P 500 companies had reported quarterly results; just 42% had surpassed revenue forecasts, but 69% had beaten earnings expectations.4
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| Market Summary |
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% Change
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Y-T-D
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1Yr Chg
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5-Year Avg
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DJIA
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+12.27
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+11.42
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+2.82
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NASDAQ
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+8.60
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+7.50
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+7.07
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S&P 500
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+10.94
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+13.02
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+2.64
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(Source: cnbc.com, usatoday.com, treasury.gov, treasurydirect.gov -04/26/13). 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.bloomberg.com/news/2013-04-26/latest-gdp-report-shows-u-s-economy-still-waiting-for-liftoff.html [4/26/13]
2 - briefing.com/investor/calendars/economic/2013/04/22-26 [4/26/13]3 - www.csmonitor.com/Business/new-economy/2013/0423/New-home-sales-climb-1.5-percent-bolstering-housing-recovery [4/23/13]4 - www.cnbc.com/id/100678668 [4/26/13] 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
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"You can be standing right in front of the truth and not necessarily see it, and people only get it when they're ready to get it."
- George Harrison
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Riddle of the Week
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How can you name three consecutive days without mentioning the words Monday, Tuesday, Wednesday, Thursday, Friday, Saturday or Sunday?
Last week's riddle:
What has a tail and head, but no body?
Last week's answer:
A coin.
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