Thank God It’s Friday – January 18, 2013

The New Year has been quite kind to investors thus far.  Despite gridlock and anxiety with Washington, Global Markets have been looking beyond politics, and economic expansion is back.  We wrote in our Newsletter that international markets have become more attractive, and it all started with China.  Friday brought strong economic data from Beijing, stating its economy is back and growing near 8% again.  That was better than expected.  Things are certainly looking brighter in Asia, and global trade is heating up.  This has the DOW and S&P at 5-year highs. Conversely, China is finally emerging from a 2-year Bear Market, which saw its stock market plummet over 40%.  The China-led trade has returned. 

Mr. Market is a fickle animal, and often rises when most people think it should fall.  In fact, the last 18 months have seen money flow out of stocks in the US and into bonds each and every month.  You would intuitively think that the stock market would be down during this time with such an occurrence.  It’s been rising.  The simple explanation why is there has been more buyers than sellers.  Pretty basic stuff. Substantial cash positions remain on the sidelines, many investors simply have not participated in the upside.  Sellers have largely been absent.  Institutional investors have been buying dips, any dip, every dip for over a year.  Mr. Market is a discounting mechanism, and seems to be looking past Washington gridlock, and liking what he sees in Asia.  American companies with large revenues overseas have been rallying.  We think this trend continues.

Earnings season really comes front and center next week.  It’s the time where companies release their quarterly report card, and speak to the health of their business.  Consumers have been resilient, and we know what taxes are going to look like, so we expect a more positive tone from CEO’s.  Especially those with business in China.  Apple will come front and center on Wednesday, and the results will be scrubbed inside and out.  The Market seems to be pricing in a miss.  We’re not so sure.  Anything remotely positive should take the stock higher, and we think Apple has a lot of positive things to say. 

Before we get to the earnings scoreboard next week, there is a score to be settled in Atlanta on Sunday.  The Niners are knocking on the door to the Super Bowl for the first time in 17 years.  In 1995, Steve Young was Quarterback, Forrest Gump won Oscar, and I had just graduated from CAL.  Much has happened since then.  Much will happen going forward.

In honor of Dr. Martin Luther King, the Market will be closed on Monday.  So will our office.  We will be back dark and early Tuesday morning.  Have a great weekend.  And Go Niners!


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