The Weekly Update 12-30-2011

Headlines you are likely to see in 2012:

Meltdown of Euro banks hits China , economy slows.

U.S. total debt and liabilities hit $116 trillion.

U.S. unemployment remains stubbornly high.

Banks forced to sell foreclosed property to meet liquidity requirements.

Federal Reserve  announces QE-3 to induce economic growth.

Consumer spending stuck in the mud.

Half of homeowners are under water as home values continue down.

Payroll tax reinstated after two month extension, consumers frozen.

Oil back over $150/bbl causing large drop in consumer spending.

This all adds up to "OPPORTUNITY"!  But you have to be ready, willing and able to act.  For those that are, the rewards over the next three to five years should be beyond great.  You also need a plan.  Here is our plan to guide our clients to wins in 2012.

1)  Have no debt where possible.  Debt causes fear and fear never wins!
2)  Know how much you need to run your life each day, i.e. a budget.
3)  List where the money for your budget comes from, i.e. work, investment income, Social Security, etc.
4)  Have an emergency reserve fund in cash. Enough that you can sleep at night.
5)  Dollar cost average in to positive long term investment trends.

What are the positive long term trends?  Here are a few favorites, without the names...which are our "special sauce".  Technology, biotech, health care, energy, precious metals, food/ agriculture.

HAPPY NEW YEAR TO YOU AND THOSE YOU LOVE! 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

Weekly Update for 12-23-2011

This is a key number......approximately one in three jobs is related to NEW housing.  Therefore, it would be reasonable to conclude that NEW jobs growth is unlikely to occur without an increase in NEW housing sales.  Why NEW housing?  Well, existing houses are already built and require little, if any, new job creation in the economy to be sold.  This is why you keep an eye on NEW home sales.

In addition, this data can be effected by miscalculations.  This week the National Association of Realtors announced they had been double counting existing home sales and therefore reduced 2007 sales by 11%,  2008 by 16%,  2009 by 16%  and 2010 by 15%!!!   This makes one wonder how much NEW home sales have been over estimated.

As if that were not enough weak news,  we are starting to see banks selling homes they have foreclosed on hitting the market.  An incredible 46% of November 2011 home sales were foreclosure related!  This will likely keep a lid on home prices for 2012.

And the kicker is home prices have continued to drop with an additional 3.5% reduction for November 2011!  Perhaps more importantly this data suggests that NEW home sales, which create a ton of jobs, are still finding a bottom and any growth of significance is beyond 2012.   

Fewer applications for unemployment is not the same as job creation.  Without an increase in NEW housing sales NEW job creation will flounder as will consumer spending.  The daisy chain of economic data of present does not seem to jive with the Rosy market outlook of late.

I  would suggest there is a potential for 10% upside in this year end rally, yet the risk on the downside could be 20-30% , or more.  We are likely to know much more about 2011 trends and their effect on 2012 by the end of January 2012.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

Weekly Update 12-16-2011

It's pretty much all about Europe!  On my weekly post dated 11-18-2011 I clearly detailed the daisy chain of European events and the cause and effect each has on our U.S. Equity markets.  See that posting at  http://www.wealthstratgroup.com/.   

The end of this story is the U.S. market lives or dies with Europe!

If Europe is in a state of flux, we can pretty much expect at least a few more months of directionless drift punctuated with a lot of volatility.  Europe will probably have a recession starting this last quarter, and the U.S. MIGHT have a mild recession, but that is not what is driving the markets right now.  It is fear of a Eurozone meltdown!

If we do see a U.S. equity market drop of significant proportions, it will have started in Europe.  Most of all, it is difficult to timeline the who, what, where, when, why or how contributors

The macroeconomic picture is just terrible, the demographic picture is terrible and we must continue to be realistic in our expectations.  That said, cash dividends do not lie.  I continue to like income investment vehicles.  I will continue to focus on income generation in our client accounts keeping cash on hand to take advantage of good pricing on dips in this market.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

Weekly Update 12-9-2011

If you want to see a very cool graphic on consumer spending, which is the core of U.S. economic growth, you should go to WWW.WEALTHSTRATGROUP.COM.  Once there, drop down to the tab for WSG Investment Index.  The first graphic is a five year "glance" of consumer spending versus the S&P 500. 

The first graph is interesting, but use your mouse and scroll down to the second graphic.  This clearly shows the "Black Friday" consumer shopping spike and the significant drop off since.  As I have written before, it is VERY important that consumer spending stops dropping, levels off and best case starts to increase as holiday shopping continues.

What's the big deal?  Simply this:  If this chart drops or remains flat Gross Domestic Product (GDP) for the quarter will likely be the same.  Since jobs are driven by economic growth, a flat or decreasing GDP would suggest the same for jobs.  Without the growth of both GDP and jobs we will have yet another round of quantitative easing which further erodes the purchasing power of our dollars, i.e. your standard of living drops!

This chart updates about every two days.  If you watch this second graph you will find it is like having the economic news three or four months in advance..... at your finger tips today!  Pretty cool!!  It is a gift use it wisely!       

Weekly Update 12-2-2012

Jobs creation is the canary in the coal mine. 

The economy will remain slow, sick and not very fun until unemployment comes down to at least 7% and preferably 6% or less.

Non-farm payrolls came out with an increase of 120,000 jobs, which was the result of 140,000 newly created jobs in the private sector offset against a 20,000 reduction in government jobs.

However, the mainline press seems to skip the line I write about so much regarding the birth/death model.  Remember, this is not the birth or death of people looking for jobs.  Instead it is a guess by our government, using a telephone survey of small business, as to the number of new jobs created.  This month the “guess” was +102,000 jobs.

If the birth/death model guesstimate is taken out of the calculation, the actual number of jobs created goes negative.  An interesting point to note is that the birth/death model is only adjusted for accuracy once per year.  For the last few years the pattern has been to release a high birth/death model jobs creation number and adjust later. 

For 2010 that annual adjustment to “the true new jobs data” resulted in the reduction of over 1,000,000 jobs!  Sorry, but to miss by 83,000 jobs a month, for every month of the year, rings of intentionally misleading the data.