The Weekly Commentary - Insight on the current state of the stock and bond markets

Motivational Quote of the Week

The Weekly Commentary — Wed, 16 May 2012 17:45:39 GMT

"When you innovate, you've got to be prepared for everyone telling you you're nuts."

Larry Ellison

Personal Notes

The Weekly Commentary — Wed, 16 May 2012 17:44:33 GMT

I am on a diet to take some weight off my right hip and knee which have been giving me some pain after walking more than a dozen holes of golf. I am suspicious that the cause of my discomfort is arthritis building up in the joints where I took many hits while playing defensive tackle in high school and college. I reckon the loss of weight will help alleviate the pain. But, I do not know how many pounds I have to lose. I have dropped 19 pounds and the pain is still there; but, now I can walk 12 holes without discomfort, up from 9 when I started at the beginning of April. The diet plan? Weight Watchers. I find Weight Watchers to be easy because I love veggies and fruit. By the way, have you seen this season’s strawberries and blueberries? They are awesome in size and taste. I can’t wait for the peaches!

Economic Reports Last Week

The Weekly Commentary — Wed, 16 May 2012 17:39:47 GMT

Below is a succinct list of last week’s events:

Positives:

1) Initial Jobless Claims total 367k, below 370k for 2nd week after previous 3 weeks above 380k.

2) University of Michigan confidence in May rises 1.4 pts to best since Jan ’08, one yr inflation expectations fall to lowest since Dec ’10.

3) Gasoline prices fall another $.06 on the week to $3.73, the lowest since late Feb according to AAA.

4) Jobs Openings and Labor Turnover Survey data reveal most amount of job openings since July ’08.

5) US exports rise to record high in March but so do imports mostly due to petro.

6) National Federation Independent Business’ small business optimism index up 2 pts to highest since Dec ’07.

7) For those looking to buy a home or refinance, average 30 yr mortgage rate falls to new low at 3.78% according to Bankrate.com.

8) US Producer Price Index unexpectedly falls .2% m/o/m and y/o/y gain of 1.9% below 2% for 1st time since Oct ’09 (core rate though remains elevated), April Import Prices fall more than expected.

9) Factory Orders in Germany in March surprise to upside, somewhat dated data and likely to change but points to resilience of its economy.

10) Chinese CPI falls to 3.4% y/o/y gain in April from 3.6% and Producer Price Index outright falls for 2nd straight month.

11) Job gains in Australia and Canada well above expectations.

Negatives:

1) In response to chaos in Greece, newly issued Greek bonds fall to new lows, Greek stocks fall 11% on the week to lowest since 1992.

2) Spain’s 10 yr yield rises back to 6%, 5 yr CDS up at record high, IBEX (Spain’s stock market) index trades to lowest since ’03 but bounces off it.

3) Spain wants its banks to write off another 30billion euros but market wanted 50billion.

4) In China, retail sales, Industrial Production, money supply, bank loans, imports and exports all rise less than expected confirming further the slowdown.

5) India Industrial Production in March falls 3.5% vs expectations of a gain of 1.7% Source: The Big Picture

The Look Ahead: Market Perspective from Charles Schwab & Co

The Weekly Commentary — Wed, 16 May 2012 17:33:09 GMT

What’s going on out there? Should you react to the turmoil and market volatility? At least one well respected Strategist, Liz Ann Sonders of Charles Schwab & Co, believes the picture in 2012 is different from 2011 (for the better), but confidence remains key.

Here We Go Again….or Not?

by Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co,

Inc.; Brad Sorensen, CFA, Director of Market and Sector Analysis; Michelle Gibley, CFA, Senior Market Analyst, Schwab Center for Financial Research

May 11, 2012

Concerns are rising that 2012 may be a repeat of the previous two years. The

picture is different, but confidence remains key.

Key points

• Softer economic data has prompted concerns that the market may be headed for a summer swoon—similar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important.

• Some appear to be hoping for weaker data in order to spur the Fed to enact another round of quantitative easing (QE3). We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Fed’s job is the coming “fiscal cliff” out of Washington at the end of this year.

• The political situation in Europe has injected even more uncertainty into an already tenuous environment. Public cries for a reduction in austerity, despite many proposed measures not taking affect yet, raises questions as to the sustainability of the eurozone as is. Spending cuts are important, but must be accompanied by serious structural changes that encourage growth and innovation to provide hope for the future.

We’ve seen this movie before … or have we? After starting out the previous two years in a positive direction, stocks experienced disappointing downturns beginning around this time of each year and continuing throughout the subsequent summers. Recently we’ve seen economic data soften, global concerns rise, Treasury yields fall, and stocks correct, prompting more questions as to whether we’re seeing a very unwelcome sequel. We believe not.

Before getting into why we don’t believe we’re in store for Summer Swoon III (a sequel, like many, that no one wants to see), we want to again point out that trying to time the market is largely a losing game for investors. And we also continue to remind investors that sticking to a disciplined long-term plan is key, rather that chasing crowd psychology or past returns. We’re reminded of the continued chasing mentality that almost inevitably leads to disappointment as

ISI Research reported that bond mutual fund inflows were at a record high during the first four months of the year, while equity fund outflows were the third largest on record.

Currently, investor apprehension is rising, indicated by increasing volatility and a stock market in correction mode, as the possibility of a replay of the previous two years is considered. However, we believe there are several important fundamental differences that help to support a renewed market advance before too long. First, we aren’t dealing with any major natural crises such as the Japanese earthquake and tsunami we saw last year; or the spike in food inflation

that unleashed the “Arab Spring.” In fact, commodity prices are largely moving lower, allowing central banks around the world to ease monetary policy, as we’ve seen in Brazil, Australia, and India among others. And while there are still major concerns regarding the debt crisis in Europe, discussed in further detail below, the European Central Bank (EC has made moves that indicate they will be aggressive to preserve some semblance of stability in the European markets. Finally, in the United States we’re seeing further signs of housing stabilization, a

continued improving job situation, and a rebound in auto sales, which is now a larger driver of GDP than residential investment. But there’s the impact of “muscle memory” given the past two years’ volatility; and perception can become reality. There is a risk that investors increasingly lose confidence in the economic recovery, pressuring stocks, and causing businesses to again pare back. In the short term, market performance can have more to do with sentiment than fundamentals, again illustrating the folly of short-term timing.

Temporary Softness or a New Trend?

Data has been mixed lately, with regional manufacturing surveys largely disappointing: the Chicago PMI fell to its lowest level since November 2009, although remaining in expansionary territory and the Dallas Fed Index slipped into negative territory. The national index provided more encouragement as the ISM Manufacturing Index rose to 54.8, the best level since June 2011, while the forward looking new orders component rose to 58.2, the best level since April

2011. This is distinctly better than the trend in most global PMIs. However, more concern came in the form of the ISM Non-Manufacturing Index, which softened to 53.5 from 56. But while the important service sector showed some softness, we continue to see consumers improve their balance sheets, which should help to support spending going forward.

Consumers’ debt position is much improved

Key to consumer spending continuing to hold up is likely the continued improvement in the job market, which has been in question lately. Jobless claims started to creep higher before experiencing a relatively sharp reversal recently and remaining well below the critical 400,000 level. However, payroll growth continued to be disappointing as a soft reading for March was followed with another one in April. We saw ADP report a mere 119,000 private jobs were

added, while the Bureau of Labor Statistics (BLS) reported that nonfarm payrolls expanded by a weak 115,000 positions; although the previous two months were revised higher. The unemployment rate fell to 8.1% due largely to a drop in the labor participation rate, which now stands at 63.6% -- the lowest level since 1981. We do want to temper any great concern at this point with the reminder that these numbers are lagging by nature, and that some softness was expected due to the unusually warm previous months that likely saw some job additions

pulled forward. Also, perhaps somewhat counter intuitively, first quarter productivity falling by 0.5% on an annualized basis could portend good things for job additions as it appears that companies may be largely unable to squeeze any more out of current workers, and may be forced to hire in order to meet even modestly increasing demand. Helping to support that potential demand is a modest improvement in credit availability from banks, pushing more consumer spending. Note in the below chart that it’s a year-over-year percent change therefore even though the line for willingness has moved lower-it still indicates and increasing willingness over last year to make consumer loans.

Easing standards could help support demand. Hope for more Fed action?

We continue to be somewhat surprised that many market participants appear to be hoping for another round of quantitative easing by the Federal Reserve. First, we believe that data would have to get substantially worse than the relatively neutral picture we’re currently seeing, not a great development. And second, we are highly skeptical of the actual effectiveness of QE2. There continues to be enormous amounts of money in the economy that remains sidelined.

Getting that money to work is the key, not adding more liquidity to the already existing massive pile. Down the street in Washington, however, we are much more concerned about the potential for a big hit to the economy due to the so-called “fiscal cliff.” This is scheduled to occur at the end of the year and presently represents approximately $410 billion in tax increases and roughly $120 billion in spending cuts, which would represent about 3.5% of US gross domestic product (GDP) according to Strategas Research Partners. The market appears to be hoping that Congress and the President will come together in a lame duck session following the November elections to forestall at least a portion of the scheduled actions. We remain concerned about their ability to get anything substantial done and believe this is one of the biggest current risks to our relatively optimistic outlook. This concern was reinforced by Federal Reserve Chairman Bernanke recently saying that, “The size of the fiscal cliff is such that there’s no chance the Fed could have any ability whatsoever to offset that effect on the economy.”

Growth needs to accompany austerity in Europe

Falling off a cliff doesn’t begin to describe the ongoing problems in Europe and recent events have demonstrated the unpopularity of austerity. The adjustment to living within your means requires difficult choices and takes time – there is no magic cure. However, Europe’s problems are exacerbated by low (or negative) underlying growth, as well as a common currency and monetary policy that applies to countries possessing differing outlooks. Politics have added uncertainty, which will likely stay elevated for the foreseeable future for the

following reasons:

• In France, we believe newly-elected President Hollande could be a negative for the French economy, and his presence could exacerbate near-term concerns regarding the eurozone debt crisis. Hollande’s ability to govern will be subject to the outcome of parliamentary elections on June 10 and 17, where anti-austerity sentiment could remain elevated. However, longer-term, campaign promises have to contend with reality, and Hollande may be forced to soften his anti-austerity stance.

• Greece remains highly uncertain. Fractured voting on May 6 likely results in the inability to form a government, which could bring another election in mid-June. The next vote could become a vote on staying in the euro, with the possibility of a better outcome. While the May quarterly bailout funding from the European Financial Stability Facility (EFSF) has been authorized, further aid for Greece could be withheld until guarantees of commitment to austerity are received; and because fiscal targets have likely been missed with economic growth below expectations. There could be renewed calls for Greece to exit the euro as the year progresses.

• Ireland’s vote to ratify the eurozone fiscal pact on May 31 could be threatened by increased regional anti-austerity sentiment. Joining the fiscal pact is required to access to the longer-term bailout fund that starts in July, the European Stability Mechanism (ESM). Without the backstop of the ESM, investor concern could rise and hurt Ireland’s hoped-for return to capital markets later in 2012.

The French and Greek electorates voted against austerity, but absent reforms to improve potential growth, there are few alternatives to austerity. Economic growth in the eurozone is forecasted to fall 0.8% in 2012 and grow a mere 0.3% in 2013 according to the International Monetary Fund (IMF). In this environment, running fiscal deficits when debt is already elevated becomes unsustainable. As debt grows to elevated levels, investors require higher interest rates to compensate for the higher risk. As such, austerity isn’t a choice, it is a requirement. However, austerity needs to be accompanied by reforms to improve growth prospects.

Additional austerity and growth changes we favor include:

• Substantial labor reforms to allow businesses to adjust workforces to demand, which could improve labor productivity and economic growth.

• Reduce bureaucracy and regulations that hamper innovation by lessening the incentive to start new businesses.

• Tax reform – simplify regulations and improve tax collection. Tax cuts could improve compliance.

• Cut spending on social programs such as health care and pension systems that remain generous by US standards.

We view Hollande’s “growth” plan of fiscal stimulus for infrastructure spending as misguided, as it merely provides a temporary boost. As for monetary stimulus, the European Central Bank (EC remains constrained.

Weak European banks pressure economic growth

The ECB’s three-year loans to banks earlier this year staved off a global banking system crisis. The loans provided a new buyer for maturing bank debt, with the ECB acting as an intermediary, or substitute, for capital markets; but new capital was not injected into banks. Therefore, eurozone banks likely remain weakly capitalized for the problems in the region, and the IMF estimates eurozone banks need to reduce their balance sheets by $2.6 trillion (2.0 trillion euro) over the next 18 months, with about 25% of this achieved via reduced lending.

Spanish banks in particular are under the microscope due to a housing bubble that is still deflating while a recession deepens and unemployment at 24% continues to rise. Plans for government aid to Bankia—the second injection of public funds in two years—may validate concern that banks have overvalued real estate assets on their books. Estimates of Spanish bank capital funding needs range from 50 – 200 billion euros, with many converging on a 100 billion euros forecast that equates to 7% of eurozone real GDP.

As the Spanish government may not have the leeway in the bond markets to provide this amount of funding without risking a spike in interest rates and threatening its own solvency, outside help is likely needed. Solutions are limited though, as eurozone bailout funds are currently prohibited from direct infusions into banks. Any “bad bank” proposal to off-load bad loans from balance sheets likely needs to have credible loss estimates and be mandatory in order to provide a lasting shot of confidence. Meanwhile, Spanish bank equity is being diluted

by debt for equity deals.

European banks limit economic growth

A weak banking system is likely to rein in lending, the lifeblood of economic growth. This may already be playing out - the eurozone PMI in March and April reversed sharply downward, indicating Europe could continue to pressure global growth.

Global easing still ongoing

There are concerns about a repeat of 2011, but a key difference in 2012 is a nearly universal global downtrend in inflation. While last year, emerging market central banks had to raise rates to keep inflation under control, this year’s growth slowdown is accompanied by an inflation “green light,” with emerging market central banks joining developed markets in the rate cut party.

In just the past month, Brazil cut rates by 0.75% and India cut interest rates for the first time in three years. Additionally, Australia returned to easing after being on hold, and the asset purchase program by the Bank of Japan was increased.

Fall in food prices key for emerging markets

We believe inflation on a global basis will likely remain subdued this year. Food prices in particular have fallen, important for the growth economies in the emerging world, where food accounts for a disproportionate amount of the change in inflation. If inflation remains contained, central banks could to continue to provide stimulus, underpinning global economic growth.

Important Disclosures

The MSCI EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index

that is designed to measure developed market equity performance, excluding the United States and

Canada. As of May 27, 2010, the MSCI EAFE Index consisted of the following 22 developed market

country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong,

Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,

Switzerland and the United Kingdom.

The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed

to measure equity market performance in the global emerging markets. As of May 27, 2010, the MSCI

Emerging Markets Index consisted of the following 21 emerging-market country indexes: Brazil, Chile,

China, Colombia, the Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico,

Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

The S&P 500® index is an index of widely traded stocks.

Indexes are unmanaged, do not incur fees or expenses and cannot be invested in directly.

Past performance is no guarantee of future results. Investing in sectors may involve a greater degree of risk than investments with broader diversification.

International investments are subject to additional risks such as currency fluctuations, political instability

and the potential for illiquid markets. Investing in emerging markets can accentuate these risks.

The information contained herein is obtained from sources believed to be reliable, but its accuracy or

completeness is not guaranteed. This report is for informational purposes only and is not a solicitation or a recommendation that any particular investor should purchase or sell any particular security. Schwab does not assess the suitability or the potential value of any particular investment. All expressions of opinions are subject to change without notice.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

The Markets This Week

The Weekly Commentary — Wed, 16 May 2012 17:22:52 GMT

Stock prices fell more than 1% last week, but the slide seemed less alarming than the string of bad news accompanying it.

As the week opened, the election of a socialist president in France and a vote in Greece that weakened support for its bailout seemed a likely good right hook to the market. Then a surprise left uppercut arrived Thursday in the form of an "at least $2 billion" trading loss revealed by JPMorgan Chase (ticker: JPM).

Despite the market's drop, small stocks still did better than big stocks. That runs counter to the previous week's bigger "risk off" move to the downside, and suggests that investors didn't take the news as badly as was feared.

Though stocks slid, there seemed to be no influential theme last week, and trading still felt generally directionless, says Andre Jude Bakhos, director of market analytics at Lek Securities. The market is biding its time, waiting for a theme or a driver, he adds.

The Dow fell 1.7%, or 218 points, to 12,820.60, a second consecutive drop. The Nasdaq Composite declined by 23 points, or 0.8%, to 2933.82. Meanwhile, the Russell 2000 small-cap index did the best, dropping only 0.22%, to 790.06.

The bearish developments in Europe were offset by continuing good first-quarter earnings news, observes Kate Warne, investment strategist at Edward Jones, resulting in a mostly churning and confused market. As for JPMorgan, investors took the loss as specific to the bank itself rather than an indication of systemic problems, she says.

Warne expects continued market churning as the tension between worries abroad and a better domestic economic situation plays out. The market backdrop remains unsupportive of either a big gain or loss from here. A likely worsening of the situation in Greece could prove a nasty summer hiccough, but the driver the market is awaiting still looks to be our own November elections (Source: Barrons Online).

The Numbers

The Weekly Commentary — Wed, 16 May 2012 17:17:25 GMT

Last week, U.S. Stocks and Foreign Stocks decreased and Bonds increased (again). During the last 12 months, BONDS outperformed STOCKS.

Returns through 5-11-2012	1-week	Y-T-D	1-Year	3-Years	5-Years	10-Years
Bonds- BarCap Aggregate Index	.1	1.7	7.2	7.0	6.5	5.7
US Stocks-Standard & Poor’s 500	-1.1	8.4	3.1	16.6	0.0	4.6
Foreign Stocks- MS EAFE Developed Countries	-2.6	2.3	-17.4	4.5	-8.4	2.2

Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.

The Look Ahead

The Weekly Commentary — Tue, 08 May 2012 17:03:30 GMT

The finances of the Social Security system and Medicare Part A (hospitalization coverage) are a mess. The trust funds backing up these two systems will be depleted in 2033 and 2024, respectively, according to a report issued last month. While these dates seem far in the future, the problem is like a snow ball rolling down hill. The longer Congress waits to fix the problem, the more drastic the measures required to fix it. Congress knows this, too. At the end of this year, after the elections, I reckon Congress will take a stab at fixing the problem by combining the following solutions: (1) pushing back the age for retirement benefits of today’s youth, (2) raising the highest income tax rate (currently 35% but keep in mind the highest rate equaled 92% in 1953 and the lowest equaled 28% in 1989); (3) raise Medicare tax rate from .7% on each the employer and the employee which will fix Medicare.

Motivational Quote of the Week

The Weekly Commentary — Tue, 08 May 2012 16:36:10 GMT

"Win without boasting. Lose without excuse."

Albert Payson Terhune

This Week On "Your Financial Choices

The Weekly Commentary — Tue, 08 May 2012 16:33:00 GMT

This week Laurie will be joined by guest host Attorney Judith Harris who has over 25 years of experience in the areas of taxation, wills, trusts and estate administration. They will discuss the following subject matter:

"Estate Planning and the Future of the Estate Tax”

Laurie and Judith will take your calls on these subjects and other financial planning topics at 610-758-8810. This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

Personal Notes

The Weekly Commentary — Tue, 08 May 2012 16:30:41 GMT

Each summer, Valley National employs at least one college student as an intern. This year, our intern is Samanthia “Sam” Hirsch. Sam is an accounting and finance major and will be a Senior in the fall at Saint Francis University (of Loretto) which is located midway between Johnstown and Altoona. She was an intern in the Johnstown office last summer. This year, in our Bethlehem main office, Sam will assist in accounting, analysis, and other administrative efforts.

Economic Reports This Week

The Weekly Commentary — Tue, 08 May 2012 16:26:07 GMT

Last week was another week of mixed economic reports – with more NEGATIVE developments than POSITIVE developments.

Below is a succinct list of last week’s events:

Positives:

1) Average duration of unemployment while still high, falls to 1 yr low.

2) Initial Jobless Claims end 3 week run above 380k and total 14k less than expected at 365k.

3) Institute of Supply Management manufacturing index surprises to upside, especially in light of regional weakness, at 54.8 vs 53.4 in March and estimate of 53. Best since June ’11.

4) Vehicle sales hang in above 14million for 4th straight month.

5) Q1 Home Ownership rate falls to 65.4%, back to the 57 year average, things normalizing, renting helps create more dynamic, mobile, flexible economy.

6) Royal Bank of Australia cuts rates an unexpected 50bps. Having conducted one of the most stable monetary policies (kept rates above rate of inflation) over the past 30 yrs, they have room to maneuver.

7) Spanish and Italian bond yields fall.

Negatives:

1) April Payrolls rise only 115k, 130k of which from the private sector. Participation rate falls to lowest since 1981, household survey declines as does size of labor force, average hourly earnings flat month over month and up just 1.8% year over year, still below the rate of inflation.

2) Institute Supply Management services in April falls to lowest since Dec at 53.5 vs 56 in March.

3) Retail comps in April miss expectations (could this be a weather give back?) .

4) Spain’s economy as expected officially back in recession.

5) German unemployment unexpectedly rises in April.

6) Euro zone manufacturing and services composite index revised to 6 month low.

7) United Kingdom manufacturing and services indices also fall to multi month low.

8) Euro zone Consumer Price Index up 2.6% year over year vs 2.7% in March, above estimate of 2.5% and higher than 2% European Central Bank target rate for 17 straight mo’s.

9) Spanish and Italian stocks trade lower again.

10) China’s Purchasing Managers Index services component falls to 3 month low and while mfr’g Purchasing Management Index up at best since Mar ’11, was slightly softer than expected.

Source: The Big Picture

The Markets This Week

The Weekly Commentary — Tue, 08 May 2012 16:24:11 GMT

Just like that, the "risk-on" trade was off last week, and stock prices fell more than 2%. Sentiment was decidedly more downbeat than might be expected in a week that saw the Dow industrials briefly touch their highest point since late 2007.

In a stark reversal of the previous week's festivities, big stocks outperformed small-caps, as investors fled risk. Concern about continued mixed U.S. economic news—particularly Friday's jobs data—gained the upper hand. Worry about the Sunday, May 6, elections in France and Greece also had some investors on edge.

The Dow closed Friday at 13,038.27, down 1.4%, or 190 points, for the week. On Tuesday, the index had reached 13,279.32, its high since Dec. 10, 2007. The Nasdaq gave up 113 points, or 3.7%, to 2956.34. The Russell 2000 small-cap index slid 4%, to 791.84.

Investors are worried that the deteriorating trend in economic data portends a sustained slowdown, says Steve Einhorn, vice chairman at Omega Advisors. For the most part, the market had been resilient until Friday, when it was "unable to swallow" the jobs numbers, he adds.

The Labor Department said April payrolls rose 115,000, some 45,000 fewer than expected. April was the third consecutive tepid month. Though the unemployment rate dropped to 8.1% from 8.2%, it was due partly to people dropping out of the workforce.

It's no coincidence that the rally that began Oct. 4 has been confined over the past two months to a tight S&P 500 index range of 1350 to 1400. It's constrained on the one hand by that string of continually bland economic reports, particularly on jobs, but supported on the other by strong corporate profits.

Einhorn argues the market is wrongly interpreting the data as a sustained slowdown. Instead, he says, the less strong numbers are a consolidation after much higher-than-expected improvements last winter, caused in part by much warmer weather.

Even so, investors don't like the idea of consolidation as much as they do expansion. Steadily improving jobs data would be a recipe for the resumption of stock gains.

The European elections seem far away, yet they can still cause market mayhem. Jeffery Saut, chief investment strategist for Raymond James, says that if Sunday's votes and others that follow in June give markets the idea that agreed-to sovereign-debt deals might be watered down, then it could be a long hot summer.

Longer term, stock investment continues to be warped by the Fed's low interest-rate policies. Nicolas Colas of ConvergEx points out in a recent report that a $1 million investment in three-month Treasuries returns just $200 (Source: Barrons Online).

The Numbers This Week

The Weekly Commentary — Tue, 08 May 2012 16:19:54 GMT

Last week, U.S. Stocks and Foreign Stocks decreased and Bonds increased. During the last 12 months, BONDS outperformed STOCKS.

Returns through 5-4-2012	1-week	Y-T-D	1-Year	3-Years	5-Years	10-Years
Bonds- BarCap Aggregate Index	.3	1.7	7.5	7.0	6.4	5.7
US Stocks-Standard & Poor’s 500	-2.4	9.6	3.8	17.3	.3	4.5
Foreign Stocks- MS EAFE Developed Countries	-2.5	5.1	-16.7	7.0	-8.0	2.4

Motivational Quote of the Week

The Weekly Commentary — Tue, 24 Apr 2012 19:59:36 GMT

"The great thing in the world is not so much where we stand, as in what direction we are moving."

--Oliver Wendell Holmes Jr.

Personal Notes

The Weekly Commentary — Tue, 24 Apr 2012 19:57:23 GMT

It was a tough loss yesterday in the “Battle of Pennsylvania” when the Philadelphia Flyers eliminated the Pittsburgh Penguins in National Hockey League playoffs. I think the Penguins have an outstanding team with plenty of talent. But, the Flyers have had great success against them. We need to attribute a great deal of their success to Philadelphia’s coach and General Manager. I wish the best to the Flyers and I hope they carry the Stanley Cup back to Pennsylvania!

Economic Reports Last Week

The Weekly Commentary — Tue, 24 Apr 2012 19:48:31 GMT

Last week was a good week for economic reports as POSITIVE developments exceeded NEGATIVE developments

Below is a succinct list of last week’s events:

Positives:

1) German business confidence index and investor economic confidence index showed improvement.

2) Spain sold 12 mo, 18 mo, 2 yr and 10 yr debt successfully, yields hold steady near highest since December.

3) UK retail sales and jobs data both better than expected.

4) US Retail Sales in March broad based and above estimates but core figure ex auto’s, gasoline and building materials were touch light.

5) Housing construction permits rise to most since Sept ’08 led by multi family housing.

6) Refinancing applications rise to 5 week high as mortgage rates drop near lows again.

7) Brazil and India both cut interest rates as focus more on growth than inflation.

8) Shanghai index closes at 5 week high on growing speculation of another Reserve Requirement Ratio cut.

9) Positive for Japanese exporters as yen weakens after Bank of Japan deputy Gov says they will print all the yen it takes to get to 1% inflation.

Negatives:

1) While Spanish yields flat on week, Credit Default Swap rate rises to record high, the Spanish IBEX stock index trades near lowest since Mar ’09, Italian 10 yr rises to just shy of highest since Feb, Italian and French Credit Default Swap at most expensive since Jan

2) Initial Jobless Claims again surprises to upside, 4 week average rises to most since Jan

3) Existing Home Sales, Starts and National Association of Home Builder’s builder survey all below expectations

4) Purchase applications fall to 6 week low

5) NY and Philly manufacturing surveys fall but components mixed

6) Industrial Production flat month over month

7) China says home prices fall in 37 cities in March, up from 27 in Feb

Source: The Big Picture

The Markets This Week

The Weekly Commentary — Tue, 24 Apr 2012 19:44:59 GMT

Stocks finished generally higher last week, and on an up note Friday. Nevertheless, a big drop in Apple's (AAPL) share price and some other highflying stocks damped market sentiment.

In particular, investors last week were worried about the first round of elections in France, scheduled April 22, where Socialist party presidential front-runner François Hollande could score important gains. Some momentum investors in particular wanted to get out of way of any losses that might come next week on electoral results unfriendly to capital markets.

On the domestic front, the first-quarter earnings results seen so far are as expected, for the most part. Second-quarter U.S. economic data continue to be less positive than that seen in the first quarter.

The Dow Jones Industrial Average rose 1.4%, or 180 points, to 13,029.26, for the first weekly gain in three weeks. Bucking the trend, and hurt by Apple's 5.3% drop, the tech-heavy Nasdaq Composite drooped 0.36% to 300.

Other stocks that fell last week after huge run-ups included Priceline.com (PCLN), down 3.4%, and Chipotle Mexican Grill (CMG), falling 5% even though it posted strong first-quarter results last week. These are names being "rented" by momentum funds, but they are getting skittish ahead of the elections and earnings results, traders say.

"The French elections will be closely watched," says Timothy Ghriskey, chief investment officer at Solaris Asset Management, "and a big influence was Apple," which is reporting first-quarter earnings Tuesday.

Apple has shown two weeks of relative underperformance, which is unusual for this stock.

The big event for markets over the next four weeks or so will be the giant Facebook initial public offering, which will probably come about mid-May, he Ghriskey says. It's likely to be a huge IPO where the value and demand will be closely watched by market participants. The Facebook road-show is likely to get under way soon, and if the IPO goes well, it could give a lift to the market as a whole, he says (Source: Barrons Online).

The Numbers This Week

The Weekly Commentary — Tue, 24 Apr 2012 19:34:53 GMT

Last week was a good week for economic reports as POSITIVE developments exceeded NEGATIVE developments.

Returns through 4-20-2012	1-week	Y-T-D	1-Year	3-Years	5-Years	10-Years
Bonds- BarCap Aggregate Index	.1	1.2	8.0	6.9	6.4	5.7
US Stocks-Standard & Poor’s 500	.6	10.3	5.9	20.8	.7	4.1
Foreign Stocks- MS EAFE Developed Countries	1.6	7.0	-13.0	10.3	-7.6	2.6

"Your Financial Choices" on WDIY 88.1 FM

The Weekly Commentary — Wed, 07 Mar 2012 14:29:48 GMT

The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP. Last week’s show was rescheduled to this week. Laurie and guest attorney Stanley Vasiliadis of Vasiliadis and Associates will discuss:

“Long Term Care Planning - What is it and What is the Process?”

Laurie will take your calls on this subject and other financial planning topics at 610-758-8810. This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

MOTIVATIONAL Quote Of The Week

The Weekly Commentary — Wed, 07 Mar 2012 14:26:19 GMT

"There are two primary choices in life: to accept conditions as they exist, or accept the responsibility for changing them."

--Denis Waitley