Monthly Archives: April 2013

The Economy

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According to the Fed’s Beige book released last week, “economic activity expanded at a moderate pace” recently with housing leading the way. That is reflected in the data released.


Housing starts were at the highest level since June 2008. The monthly increase was a related to a surge in multi-family starts (there is significant month-to-month variability in multi-family starts), however single family starts were up 28.7% year-over-year, a strong increase too. And even with the recent increase in starts, housing starts – especially single family starts – are still low, and we will probably see continued growth over the next few years. Since residential investment is usually the best leading indicator for the economy, this suggests the economy will continue to grow over the next couple of years.


Of course manufacturing is seeing more sluggish growth (as reflected in the Empire State and Philly Fed manufacturing surveys for April). And initial weekly unemployment claims have increased recently – perhaps related to the sequestration budget cuts.


But overall the data suggests continued growth (Source: Calculated Risk).

Facts That Make A Difference

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We frequently hear of the burden governmental regulations place on business operations. It’s true. For an excellent example, consider that the Consumer Financial Protection Bureau (the bureau created from Dodd-Frank legislation) in January, 2013 issued a document of 804 pages to define the term “qualified mortgage”. Simply put, a qualified mortgage is where the home borrower’s monthly debt payments cannot exceed 43% of monthly before tax income.

The Numbers

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Last week, U.S. Stocks and Foreign stocks decreased. Bonds were little changed. During the last 12 months, STOCKS outperformed BONDS.


LAST WEEK -Here is a look the cause of the volatility created this week by hedge funds, institutions, and those we call “traders”.




































Returns through 4-19-2013


1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years


Bonds- BarCap  Aggregate Index

     0.1

     .7

3.6

  5.7

   5.8

     5.1  


US Stocks-Standard & Poor’s 500

    -2.1

     9.7

15.5

  11.5

  4.6

    7.8


Foreign Stocks- MS EAFE Developed Countries

    -2.6

     4.2

 11.2

   1.6

 -4.6

    6.1



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.

Moving Forward: Our Bethlehem Office Has a New Location!

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THE BETHLEHEM OFFICE HAS MOVED TO A NEW LOCATION!

I am pleased to inform you that Bethlehem office successfully moved! Moving an office is a complex project. Clients, Telecommunications, internet, renovations, utilities, moving companies, TV, mail, vendors, regulators, security, etc. all have to be coordinated. Nothing this complex happens without issues, but this move was the smoothest of any VN has undertaken, thanks to VN’s great staff.

Our Bethlehem office is now located at:

1655 Valley Center Parkway
Suite 100
Bethlehem, PA 18017

We moved the Bethlehem Office for two reasons: We needed more space due to growth, and it is a great time to buy real estate – we have an option to buy the building which we intend to exercise.

The Economy

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There was little economic data released this week. The trade deficit was much higher than expected, however the data might have been impacted by the port strike on the west coast. The Bureau of Labor Statistics reported job openings were up about 12% year-over-year and the 4-week average for initial weekly unemployment claims increased a little. Not much data, but next week will be busy!

Some quarterly data was released for office, apartment and mall vacancy rates and rents. All vacancy rates declined, although both office and mall rates are still near the cycle high – and apartment vacancy rates are already low.  Source:  Calculated Risk

The Markets This Week

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Large U.S. stocks fell more dramatically last week than in any other week this year, as weakness in China, middling U.S. economic data, a drop in commodity prices and a terrorist attack in Boston spooked investors.


A week after the Dow flirted with 15,000, the index retreated. It ended the week down 317.55 points, or 2.1%, at 14,547.51. That marks the index’s worst week since June 1, 2012. The S&P 500 fell 33.6 points, to 1,555.25. The NASDAQ fell 88.89 points, or 2.7%, to 3,206.06.


There were few safe U.S. assets for investors to reach for—gold futures fell $105, or 7%, to $1,395 per ounce. Silver tumbled 13%. And 10-year Treasuries were basically flat, yielding about 1.71% at the end of the week.


The trouble started on Monday, after China reported that first-quarter growth in gross domestic product (GDP) decelerated to 7.7% from 7.9%; investors had expected the country to grow its GDP at a rate faster than 8%. That data, along with spotty U.S. economic reports, sapped confidence in a market that has been running on easy money and optimism.


“Put those factors together and you start to worry we’re getting a replay of that movie we’ve seen the last couple years, ‘The Summer Swoon,'” said Mark Luschini, chief investment strategist at Janney.


Luschini doesn’t see a bear market coming, but he does see the bull taking a break. Earnings season simply hasn’t confirmed the market’s recent rise. Last week, some major companies released earnings reports that landed with a thud. IBM (ticker: IBM) fell 8.3% on Friday after reporting earnings below analysts’ expectations for the first time since 2005. Bank of America (BAC) stock dropped 4.7% on Wednesday as revenue fell at nearly all of its units.


“The market lift wasn’t on the back of good earnings, it was on multiple expansions,” Luschini said. “And now if we aren’t getting follow-through on earnings, what’s left to support the expanded P/E multiples?”


Luschini added: “I do think we’re in the midst of a growth scare.”


The slowdown may have actually begun last month. Since March 15, the S&P 500 has closed lower on more than half of all trading days, notes Michael O’Rourke, the chief market strategist at Jones Trading. “Concerns are rising that the sequester and the payroll-tax increase are starting to exert some influence.”


(Source:  Barrons Online).