Thank God It’s Friday                                                                March 30, 2012

What a spectacular first quarter!  Best start in 14 years. And how about this: Apple is responsible for 15% of the S&P-500′s first quarter gains, and virtually all of the S&P 500 earnings growth versus a year ago.  

Here in the U-S-A, as The Boss would say, many positive things are happening: Our economy is accelerating; The American Consumer is roaring back and American innovation dominates investment themes.  When you add the strong possibility of energy independence at lower costs, then you’re looking at a return to US manufacturing dominance and higher paying jobs.  We are close to welcoming a prosperity renaissance: Closer than we’ve been in decades.

Europe remains problematic. The emerging BRIC nations (Brazil, Russia, India and China) as well as South Africahave threatened to withhold additional funding for the IMF (International Monetary Fund) unless they’re given greater voting power. The five countries declared there is an urgent need to “enhance the voice and representation of emerging market and developing countries” at the IMF. Saber rattling.

Mega Million Mania has caught the imagination of lottery players as the wheel spins tonight on a $640 million jackpot. I even bought one today! Now comes the tough job of deciding to take the money as a lump sum or paid-out over 26 years! No brainer: Lump Sum! Why? Because with interest rates as low as they are now, the Lump Sum pays more. And there are other re-investment principles at work here which include the Rule of 72 meaning your money will DOUBLE every 7.2 years as long as it earns 10% each year. Yes, it’s all about interest rates from where I sit.  If per chance, I do NOT win, I’ll be here bright and early Monday morning to advise YOU how to re-invest your winnings. But please lower your expectation because one of my lucky numbers is “49”. 

By: Jude Bedell

 Thank God It’s Friday                                                                March 23, 2012

Spring has sprung as stocks continue to rise buoyed by rising energy shares and hot tech products. The country’s largest 500 stocks continue to demonstrate strength and resilience despite posting its second negative week so far this year. In fact, it appears the S&P Index is set up to complete the best back-to-back quarters since 2009: It is near its highest point since May 2008.  Really.

While it’s nice to wax sentimental about the mystical scents of spring flowers, there is also a lot of hot air out there: Everybody who’s anybody is making speeches.  Federal Reserve Chairman Ben Bernanke is lecturing college students in order to enhance their appreciation of the workings of our nation’s central bank.  President Obama’s team is stomping across the internet with a video covering his specific accomplishments since arriving at the White House.  Both are thought-provoking and professionally produced.  Popular actor, Tom Hanks, narrates the President’s video adding an attractive buzz to the piece.  Looks like we will have to survive another seven months of hot air before Election Day.  Here is a mitigating influence to comfort you: Markets rise during Presidential Election years and 2012 has surely started off on the right foot.

We have been very focused on bonds because interest rates have been inching higher. You may recall, when interest rates rise, bond prices often fall.  However, with money market rates still in the cellar, investors are still searching for yield under every rock. This demand for income will continue to keep a lid on interest rates for the time being. 

The downside to spring’s sweetness is the advent of APRIL 15^th.  Remember tax time is HERE, IRA contributions for 2011 are due and ones for 2012 are do ‘able.  Let us help you!

By: Jude Bedell 

TGIF March 16,2012

March Madness or Market Madness?  Regardless, it’s an exciting time around the country.  Just as the storied annual college basketball tourney tipped off, the S&P punched through 1400 while the Nasdaq and DOW climbed back above the big round 3,000 and 13,000 levels.  They’ve never been at these levels together.  But is this Market move truly madness, or really warranted?  That is such a critical question, and will likely get answered in the coming weeks. 

 We have felt all along that 2012 would have a nice start, with a continuation from the year-end rally of 2011.  Boy has it.  We’ve seen nothing short of an 11% pop to start the year, another record, and a 30% run, pretty much unabated, from the October lows.  We definitely think the strength is warranted, but the ”Madness” has come in the speed and trajectory.  The rally has come directly in the face of rising oil and gas prices which threatens consumers around the globe.  Oil has never been this high, this early in the year.  The big risks, like European credit and Geopolitics, have taken a backseat, and that’s a very good thing.  We know they still exist, but so far seem to have been managed quite effectively to the Market’s satisfaction. 

 Investor Sentiment has gotten very bullish, it’s the most bullish posture we’ve seen since 2007, which was the Top.  That said, Stocks continue to rise, and momentum is clearly with the Bulls.  We have been overbought for weeks now, but the thing is, overbought usually lasts far longer than oversold.  We have taken some defensive measures in recent weeks, by taking profits in stocks that have run.  We have been early with our defensive posture, but we can never feel bad about taking profits.  We continue to let the Market be our guide, and we must continually demonstrate patience. 

 Anything can happen in March Madness, and it’s been nothing short of exciting and stunning with this Market move in 2012.  We always have to remind ourselves, it’s a long game and this is only the beginning.  Many issues have yet to be resolved, and the Presidential election will be here sooner than you think.  Our belief stands, that this Market should continue to do well throughout the year, but as Sir Isaac Newton phrased it best “what goes up, must come down”.  For those Newton fans, his first law of motion established that objects in motion, remain in motion until an external force is applied.  Sounds very simplistic, but often times simplicity is the best frame of mind for decision making.  Currently, the Market reflects his first law, but it’s only a matter of time for a natural force to impede this vertical trajectory. 

 Have a nice weekend.  We will be back dark and early Monday morning.  We’re on it.

By: Mike Frazier

Thank God It’s Friday                   March 9, 2012 

The US Bull Market turned 3 today. Following the worst financial disaster since the Great Depression, America is roaring back while still fighting through the pain. The controversial intervention of the government bailing out 700 different banking organization, has worked out as an investment. The government invested $205 Billion and so far has received $211 Billion back in dividends, interest and debt repayments. Only $16 Billion is outstanding! Despite the criticism of government intervening in our free market economy, the American taxpayer got exceptional investment returns in 3 short years.

More good news came today from the American labor market: It continues to improve. This boosts consumer confidence and spending. The result of rising employment is higher tax receipts which in turn narrows the federal deficit. In the midst of an election year, the battle cry of both political parties, “it’s the economy, stupid”.

The most immediate risk to this happy scenario is the recent spike in gasoline prices. Interestingly, though, it hasn’t yet depressed consumer confidence. The Bloomberg Weekly Consumer Comfort Index is at its best reading since April 2008.  The spike in gasoline prices hasn’t depressed auto sales either, which rose to a seasonally adjusted annual rate of 15.1 million units in February. Could it be that a very solid improvement in the labor market is more than offsetting higher gasoline prices? We think so.

Overseas things are slightly better but still problematic.Greecereported €172B of bonds were tendered by private investors in its debt swap, making the participation rate 85%. Meanwhile, Spanish unions called a general strike for March 29 after failing to reach a deal with the government on labor reform.  More trouble brewing inEurope.

 Chinaput a damper on the momentum reporting weak retail sales and factory output. The silver lining was inflation fell. This increases likelihood of stimulus action.  More Chinese investment will have great influence on global growth.Chinalowered its guidance for 2012 GDP growth to 7.5%, the lowest in a decade.  That sent global markets lower, and has investors concerned that one of the major growth engines is stalling.  The Bull case thinksChinahas set the bar too low.  It’s a maturation process for emerging economies so cycles tend to be very choppy.

 It was an eventful week, but we got through major market moving events.  The “New iPad” is officially coming. Greecewas able to somewhat smoothly swap debt.  And another solid job report validates the resiliency and continued strength of the American economy.  Forget about Europe this weekend, and don’t fret about the slowdown inChina.  The return ofUSsupremacy is the biggest driver for the global markets.  There will be more potholes and problems to deal with ahead no doubt.  But theUSis behind the wheel again and firmly in position to control our destiny.  Smart and tough long-term decisions today will ensure a much better future and affirm our best days lie ahead.

 Have a nice weekend.                         By: Mike Frazier & Jude Bedell

Thank God It’s Friday                   March 2, 2012 

The tech rich Nasdaq Composite Index hit 3,000 this week, a level it hadn’t seen since the bubble burst in year 2000.   

In the late 1990s, investors enjoyed a period of euphoria that rivaled the Roaring 20′s.  Internet stocks were all the rage, and the World Wide Web was promising to change the world: Traditional methods of communicating no longer applied.  We certainly know that the internet has been a game-changer, but the stock market got ahead of its elf when investors became irrational.   How could we forget the irrational exuberance which created the hyper-inflated bubble?  Some companies with names ending in dot.com had no plans for making a profit, and were primarily focused on its IPO a/k/a its Initial Public Offering.  The multi-year dot.com party ended with a massive hangover.  Great wealth was created rapidly then quickly disappeared.

The Nasdaq remains well below the peak of 5,000, but the tech heavy index is primed for long-term growth.  Technology stocks have reasserted their leadership in recent years, and Tech is clearly the strongest industry within the US Economy.  It might surprise some, but Technology has been the largest sector in the S&P 500 since 2008, which means it has the greatest influence on the stock market.  For those Market historians, NASDAQ was founded in 1971, and stands for National Association of Securities Dealers Automated Quotations.  It replaced the traditional Over-the-Counter system of trading, and is still commonly referred to as the “OTC”.

Innovation remains a staple of the American Way, and Silicon Valleycontinues to lead the charge.  This week, we spent time at Morgan Stanley’s Tech Conference in San Francisco, and the buzz continues.  We have discussed many times the massive migration to mobility which is upon us: It is still very early in the transition to mobile computing and communicating.   Investment opportunities abound.  The primary themes this year revolve around “Social Media”, digital distribution of Traditional Media, and 24/7 connectivity, being dubbed “Always On”. 

Smart-Phones and Smart-Tablets are the key ”Must Haves” which are no longer just for “Techies”.  It is still so early in this trend, because despite the fact that the Consumers around the globe have jumped on these sleek devices, Corporations have yet to embrace them.  It is only a matter of time until Companies will be providing these devices for its employees, and the next wave of growth will hit, and it will be tidal.  Further out we should see massive adaptation from emerging markets as they develop and modernize.  To put in perspective, less than 20% of Chinese and Indian citizens have a computer, let alone a Smartphone.  These 2 countries represent nearly 40% of the global population. 

It’s been a fantastic start for investors in 2012.  Traditionally one of the worst months for the Market, February had one of its best showings ever.   March is ripe for some profit taking so we anticipate a healthy correction.  There are many key risks still out there, especially Europe andIran.  We continue to manage through these risks while seeking growth opportunities and cash flow for years to come.  It won’t happen this year, but we are confident that we see NASDAQ 5,000 again in our future.

Have a nice weekend.                                                       

By: Mike Frazier

The price of Oil continues its ascent, with West Texas Crude (WTI) now above $108, having risen $10 a barrel in 2012 already. European Brent Crude, which has maintained a premium to the US for years now, is above $124. Importantly, 2/3 of global oil is priced in Brent.

The drivers in the rise of oil prices are a combination of improving economic growth, led by the US and Asia, as well as growing tensions with Iran . U.S. officials have said they’ve seen no evidence to revise their judgment that Iran continues to only enrich uranium at low levels, and don’t present an immediate nuclear threat. Iran has stated all along they are using nuclear technology to generate alternative energy sources to oil. Senior U.S. officials have said that Israel does not dispute the basic intelligence or analysis. But what’s critical to understand is Israel has less patience, and a much lower threshold for action than the US and the rest of the world on this subject. This tension isn’t likely to go away quickly.

China , India and Japan are planning cuts of at least 10% in Iranian crude imports as tightening US sanctions make it difficult for the top Asian buyers to keep doing business with Iran . These 3 countries account for nearly half of Iran ‘s crude exports. The US has not bought oil from Iran since 1979. If you recall, the US implemented sanctions at the beginning of this year that will punish financial institutions that deal with Iran ‘s central bank, the main clearing house for oil revenues, by shutting them out of US markets.

Currently, Iran is producing the lowest amount of oil since 2002, just over 3 Million Barrels per day. These sanctions could cost Iran around $35 billion in oil export revenues. 80% of Iran ‘s economy is driven by oil, so this is really hurting them. Supplies can be made up to meet the strong demand from other sources. But the risk of Iran doing something drastic, like shutting off the Straits of Hormuz, where 20% of global oil passes on a daily basis, remains high.

One of the keys to our future is securing safe and stable energy sources at home. With technological advancements, we now have the ability to be independent from foreign oil, with major discoveries of both oil and natural gas under US soil, while we continue to innovate renewable sources as an alternative to fossil fuels for a brighter future. For the time-being, the world still runs on crude so we are subject to these types of risks, and oil producing nations know it. This is the highest oil has ever been this early in a year, and doesn’t bode well for gas prices which have already moved over $4 in the Bay Area. High gas prices are always a threat to the consumer and the global economy.

We are on top of this issue and these threats, and have measures in place to hedge against a continued rise in the price of oil. We stated in our Winter Newsletter that we see WTI at $120+ at some point this year. It’s on its way. Have a nice weekend.

By: Mike Frazier