TGIF 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.Greece reported €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 in Europe.

China put 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. China lowered 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. Greece was 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 of US supremacy is the biggest driver for the global markets.  There will be more potholes and problems to deal with ahead no doubt.  But the US is 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

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