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To QE Infinity and Beyond!
Weekly Update - December 17, 2012
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In This Issue
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The Markets:
Markets appeared to be in a holding pattern last week as traders await a fiscal cliff deal. Equities finished the week slightly in the red, pushed down by fresh concerns that lawmakers may not reach a deal this year. For the week, the S&P slid 0.32%, the Nasdaq trimmed 0.23%, and the Dow slipped 0.15%.[1]
Despite ongoing talks, no fiscal cliff resolution is imminent. While Congress had expected to recess last Friday, lawmakers are delaying their holiday break to see the process through and may stay until Christmas, if necessary. In a new twist, sources close to the talks say that House Speaker John Boehner has offered up tax increases on incomes above $1 million as part of a deficit reduction deal to move negotiations forward. In exchange, Republicans want tax cuts extended for all incomes under that amount, as well as spending cuts to entitlement programs.[2] While we don't know if a deal is around the corner, this shift toward compromise on both sides is an important breakthrough.
Last week, the Fed made a huge, game-changing step towards adopting a more aggressive, expectations based monetary policy. On Wednesday, the FOMC announced QE4, promising to buy $45 billion in longer-term Treasuries on top of its monthly purchase of $40 billion in mortgage-backed securities. In an unprecedented move, the Fed also announced that it will keep interest rates low until unemployment falls to at least 6.5%, as long as inflation remains below 2.5%.[3]
Tying monetary policy to specific guideposts is a fundamental shift in the way the Fed does business and moves it much closer to fiscal policy. We have hopes that this bold move will entice business leaders to move some of their cash stockpiles off of the sidelines and into the markets, giving the economy a much-needed boost. At the same time though, we're concerned about how the Fed will ever be able to disengage (by selling off bonds) from this massive purchasing program without sending markets into a decline. Only time will tell the whole story. Next week analysts will be watching the release of GDP and unemployment numbers and waiting hopefully for more news from Washington.
On a final note, we feel compelled to acknowledge the tragic loss faced by the families of Newtown, Connecticut. Our hearts go out to the community who unjustly lost 26 precious lives.[4] Though words cannot express the pain they are facing, may we at least be reminded how important it is to cherish our friends and family members with every moment we have.
NOTE: This will be our final commentary of 2012. Our next edition will be an annual recap sent on Tuesday, January 3rd. We urge you to take a break from the hustle and bustle of financial and political news to enjoy some undistracted time with your family and friends during the final weeks of this year, as we will also be doing.
ECONOMIC CALENDAR: Monday: Empire State Mfg. Survey, Treasury International Capital Tuesday: Housing Market Index Wednesday: Housing Starts, EIA Petroleum Status Report Thursday: GDP, Jobless Claims, Existing Home Sales, Philadelphia Fed Survey Friday: Durable Goods Orders, Personal Income and Outlays, Consumer Sentiment
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Performance
 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.. |
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Headlines
China promises to maintain prudent monetary policy in 2013. China's new Communist Party leaders reiterated their intention to closely monitor the country's still-fragile economy in case more policy easing is required. Although China's economy is recovering, weaker-than-expected November data indicates it's not out of the woods yet.[5]
U.S. factory output jumps in November. Manufacturing rebounded from Superstorm Sandy by posting its largest monthly increase, 1.1% - in a year. Strong auto production largely drove the gain, reigniting hope for the domestic economic recovery.[6]
Holiday retail shopping takes off. Despite worries about the effects of Superstorm Sandy and the fiscal cliff, retail sales rose 0.3% between October and November, driven by lower gas prices and a steady job market. However, with a decline in consumer confidence, retailers are still concerned that fiscal cliff worries may dampen December sales.[7]
Survey of economists/analysts says fiscal cliff is at top of worries. Over 35% of respondents to the CNBC survey say that the fiscal cliff is the biggest threat to the economic recovery. Although 41% believe that lawmakers will fail to reach a compromise in 2012, over 40% of respondents believe the issue will be resolved within the first weeks of 2013.[8]
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" If you aren't going all the way, why go at all?"
- Joe Namath |
Simple Roast Chicken  Cooking the vegetables with the chicken seasons this simple favorite and saves on cleanup time. Recipe from RealSimple.com.Ingredients:
1 onion, sliced
1 3 1/2- to 4-pound chicken, giblets removed
1 tablespoon olive or vegetable oil Kosher salt and black pepper
1 1/2 pounds new potatoes, halved
Directions: - Heat oven to 450� F. Place the onion in a large roasting pan. Pat the chicken dry with paper towels. Tuck the wings under the chicken and place it on top of the onion. Rub the chicken with 1 tablespoon of the oil and sprinkle with 1/2 teaspoon each salt and pepper.
- Scatter the potatoes around the chicken, drizzle with the remaining tablespoon of oil, and sprinkle with � teaspoon each salt and pepper.
- Roast, tossing the potatoes once, until a thermometer inserted into a thigh registers 165�F, 50 to 60 minutes. Let the chicken rest at least 15 minutes before carving. Serve with the potatoes and onions.
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Comparatively few golfers know how to practice the right way. Like a round of golf itself, practice sessions should be planned and organized. In competitive play, accuracy rather than distance is of paramount importance. The golfer will do well to remember this when he works on his shots, whether he is practicing on a driving range or on a practice fairway at his club.
Never practice without a target. You must give yourself some sort of standard by which to judge the success of your efforts. Try visualizing an average fairway in your mind and work to confine your shots to that limited area. Most fairways are at least 40 yards wide, so pick out a tree or some other marker and establish a 20-yard tolerance on either side of the target.
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Did you know that people eat their way through about 6,000 calories on Christmas day? That's about three times as much as we need. With all the tasty drinks and snacks around at Christmas, it's easy to over-indulge. Just a single piece of mince pie contains about 250 calories! So, if you can, keep tempting treats out of sight and make sure you have healthy alternatives available. Easier said than done - but hey - this is a health tip after all.
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Find a Green Retirement Community If you or someone you know is looking into retirement community options, consider your environmental impact by asking whether the community meets these green standards:
- Meets or beats the EPA's Energy Star standards
- Achieves high standards of indoor air quality
- Uses building materials that are locally produced and/or recycled
- Incorporates water conservation and storm water management
- Achieves a minimal footprint on the land
- Keeps carbon emissions low through use of renewable energy and efficient building insulation
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Share the Wealth of Knowledge!
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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 Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
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.briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-december-10-2012.htm
[2] http://edition.cnn.com/2012/12/15/politics/fiscal-cliff/index.html
[3] http://news.yahoo.com/fed-hawks-aim-central-banks-latest-policies-132818396--business.html
[4] http://edition.cnn.com/2012/12/16/us/connecticut-school-shooting/index.html
[5] http://news.yahoo.com/china-maintain-prudent-monetary-policy-2013-121807358--finance.html
[6] http://news.yahoo.com/u-consumer-prices-post-first-drop-six-months-133148522--business.html
[7] http://news.yahoo.com/us-holiday-sales-slowly-pick-sandy-212655813--finance.html
[8] http://www.cnbc.com/id/100297234
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