Manarin Investment Counsel, Ltd.

A recent report from the Tillman Stock and Bond Hotline offers some promising data and statistics that bode well for the rest of 2012! Enjoy!

Reprinted with permission from the Tillman Stock and Bond Hotline
For: Wednesday, April 25, 2012
(800) 219-1333. vethotline@aol.com

A few weeks ago, some of the skeptics on Wall Street pointed at April 25 as a possible trigger point for a new bear market in U.S. stocks.  That's because investors were due to digest both an earnings report from Apple (AAPL) and the post FOMC meeting statement.  Not surprisingly, the bears expected both of those news events to go badly.  Instead, Apple handily beat expectations and the stock gained nearly nine percent on the day - putting the shares only 4.1% below their recent lofty all-time closing high of $636.23.  As for the latest news out of the Federal Reserve - the FOMC did not throw any curveballs at the market.  Basically, the Fed said that the economy has been stronger than expected so far this year but acknowledged that conditions could become more challenging next year - once tax cuts expire at the end of 2012 (and certain spending cuts take place).  As a result, Ben Bernanke and Company repeated the earlier pledge to keep interest rates low into 2014 or later and to offer the U.S. economy some new help if conditions call for it.  With first quarter earnings running stronger than expected (so far), buying pressure overwhelmed the sellers today - sending the broad stock market up by 1.4%.  The Nasdaq gained 2.3% on the day.  The Wilshire 5000 is now down by only 2.1% from its April 2 multi-year high.  That must be quite discouraging for the people that recently declared that a new correction is underway.

The stock market is already up by about 10 percent so far this year (basically matching our expectations for the entire year).  As you know, there are plenty of people looking for the stock market to turn lower soon and enter full crash mode as problems in Europe spread to America and pull the rug out from beneath the market.  The debt problems in Europe remain very much alive and well.  However, what the overly enthusiastic bears seem to be doing (again) is to underestimate the ability of financial officials in Europe to handle the crisis in the near-term.  The European Central Bank took steps earlier this year to provide ample liquidity to the system.  Such measures have already helped to avert the kind of cash crunch that paralyzed much of the global financial system back in 2008.  Here in America, the economy should do okay during 2012.  Earlier today, the durable goods report came out much weaker than expected (with ex-transportation orders posting a decline of 1.1%).  The headline number fell by a hefty 4.2%.  It is going to take a lot more than one month of weakness in a notoriously volatile economic statistic to convince us that the economy is suddenly slipping into a new recession.

Tomorrow, we will get a look at the latest weekly jobless claims report.  Many economists are looking for jobless claims to drop back by 10,000 or more from the previous week's total of 386,000.  If jobless claims trend higher during the month ahead, it would be a troubling sign for the economy and the near-term outlook of the U.S. stock market.  Many of the bears have been jumping the gun regarding such economic data.  They have been celebrating the slightest signs of weakness and even making silly claims about how some of the recent data has been a disaster.  Data regarding the housing market has been an especially popular topic of misinformation coming out of the bears' camp.  The broad data on home sales and home prices have been showing stability and even some improvement.  However, we have heard a number of commentators say that the recent reports on housing show that the sector is leading the economy back into recession.  When analysts have to exaggerate in order to make their point, they are asking for trouble.  Quite a few of the corporations that have already released their first quarter results have beaten expectations.  Not so long ago, many analysts were looking for S&P 500 companies to come in with flat year-over-year earnings.  With the results to date in hand though, there are indications that earnings could grow by five percent or more.  That bodes well for the bull market trend remaining intact during 2012.  The Wilshire 5000 closed today at 14,549.38, up by 77.08(0.5%) in the past week.  The Volatility Index (VIX) closed at 16.82, down from 18.64 a week ago.  The yield on the 10-year Treasury note closed at 1.98%, unchanged.  More next week.

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Economic data has improved considerably over the past few months. The Dow Jones opened at approximately 13,000 the first trading day of 2008 and it closed above 13,000 on Feb. 28, 2012. The fact that we’re already back at 13,000 is probably mind-boggling to commentators who said it would take 10 years to get back.

Investors should be thrilled. So why are people still afraid?

The market mayhem of 2008 and early 2009 is lodged deep in their memories.  The market dip in the summer of 2010 (oil spill in Gulf) and 2011 (Europe and U.S. Budget problems) did not help investor optimism either. This year, with the Presidential election, you can anticipate one party will tell us everything is still bad under the current administration and the other party will tell us everything is good. This back and forth will also not help the psyche of the average investor.  Admittedly, there has been a shift among average investors toward dividend stocks, but they seem to be doing that more for yield rather than optimism.

Could we see another dip in the market?

In the short term, you bet!  The market has been on a roll since October 2011.  We’ve seen five months of upward movement as big investors have watched the good news about the U.S. economy.  However, Europe and the Middle East still have a lot of problems to resolve.  Any bad news from there could be an excuse for profit taking. That will only reinforce the existing wide-spread pessimism.  But that’s okay, as general uneasiness bodes well for the future.  Market pessimism is the bedrock upon which bull markets are built.

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U.S. Tech seems to be one of the big stories of 2012, as more and more investors continue to turn their heads toward Silicon Valley. There is no question investors should pay attention to this growing sector. Just how much faith should they put in its future? Consider the background of a few big technology companies that continue to make headlines.

• Apple.  It’s a large, well-known company, but one has to keep in mind they are still operating under some of Steve Jobs’ ideas.  When they reach the last of his ideas, what then? I’m not saying people should stay away from Apple. Before you invest, just remember the reason for Apple’s success and consider the company’s long-term future now that Jobs is no longer part of it.

• Facebook is another one that gets a lot of attention, but a lot of that attention was focused on the IPO estimates rather than Facebook’s prospects as a publicly traded company.

In general, we believe in not focusing on any one specific sector or company, but rather holding investments in an actively managed portfolio that examines businesses from all sectors.  This allows for the opportunity to share in the rise of businesses that don’t receive quite as much attention in the media.

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Manarin Investment Counsel Investment Advisor Representative Thomas P. Kerins advises to "Expect the Unexpected" in an article recently published on Morningstar.com. Check it out here!

 

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"Based on cyclical patterns of market history, the odds are better than two chances in three that the Dow Jones Industrial Average will reach 15,000 or higher over the next two years," – Barron’s magazine.

 Here’s more evidence for what we’ve been telling you all along. Don’t pay attention to the news channels. They make money by making you scared.

http://www.moneynews.com/StreetTalk/Barrons-Dow-15-000/2012/02/13/id/429220?s=al&promo_code=E281-1

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My mentor, Sir John Templeton, once said, “Whenever you can buy a large amount of future earning power for a low price, you have made a good investment.” Pessimism has held stock prices down in relationship to corporate earnings. Please read and share this article from Bloomberg about the potential opportunity in the market.

http://www.bloomberg.com/news/2012-01-30/longest-s-p-500-valuation-slump-since-nixon-discounting-record-u-s-profit.html

-Roland

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There are a few beacons of common sense in the House of Representatives. Representative Mike Kelly of Pennsylvania seems to be one of those voices.

http://www.youtube.com/watch?v=zUrEs_Um71g

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We’ve got some great guest hosts to share the studio with Dana and Curren this week for the radio show.  For those of you in the Omaha area, be sure to tune in to 1110 AM KFAB this Sunday morning at 9AM catch a special edition of our radio show, “It’s Your Money.”  For everyone else, you can find the show here on our website at http://manarin.com/radio-show/.  Advisors Tom Kerins and Tim Bastian join us to discuss the Fed’s latest announcement, what’s going on in Greece, and how they see things shaping up in the next couple of years.   Tom, our lead author for our newsletter, & Tim are former members of the economics faculty at the United States Air Force Academy and Tim is currently in the same role at Creighton University.  You’ll certainly want to hear their insights on the current financial environment.

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Corporate profits in the second quarter (both nominal and inflation-adjusted using the business sector price deflator) reached all-time record highs during the April-May period of this year, according to today's BEA report on GDP and corporate profits for the second quarter (see chart above).  Real GDP growth in the second quarter was revised down from the previous estimate of 1.3% to 1%, based on more complete data. While overall economic growth remains weak as measured by real GDP, the record level of corporate profits shows that American companies are financially healthy and strong, and can easily weather the current spring-summer "soft patch." 

Read the rest here

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