Winter 2012 Newsletter

By January 4, 2012November 28th, 2017Quarterly Newsletters

WINTER 2012 NEWSLETTER

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2012 Themes and Outlook

by Jude Bedell & Mike Frazier

 A strong finish to the turbulence of 2011 demonstrates that bothU.S.Markets and the American consumer are strikingly resilient. With all the negativity circulating around the world, it’s remarkable that the Dow Jones Average ended in the green whilst most foreign markets declined over 10%. The greatest irony of 2011 was the downgrade ofU.S.credit by Standard & Poor’s. This action drove hoards of global cash into American markets and the U.S. dollar. Seeking safety, the world came to American shores for refuge once more recognizing our financial su­premacy. In 2012, American stocks and bonds continue to be the ones to own.

Bull Markets historically last about four-and-a-half years. This current run began in March of 2009, so the survey says we have another year-and-a-half of wind at our backs. It’s naïve to think we can proceed the old fashioned way of buying low and selling high. We have to act quicker and be more nimble. Markets move faster than ever and so do we. Ultimately, we believe that investors need to embrace longer-term themes to reduce the short-term gyrations. But for the time-being, we plan to continue to buy like inves­tors … but sell like traders.

WHAT WE KNOW

Europe’s problems will not be solved quickly nor easily.Europewill remain a thorn in the side of the global econo­my in 2012 and beyond, with resolution far from clear and more pain likely.

There will be a Presidential election in theU.S.in 2012. Election years are historically positive for investors. It is way too early to tell who will represent the Republicans, but it is clear that both parties are gearing up for a street fight. The election will no doubt have an impact on the Markets. The problem is thatWashingtonhas been in elec­tion mode since last summer, and the prospects of getting meaningful legislation before 2013 is slim to none. This gridlock frustrates investors and voters alike.

WHAT WE SEE

Contrary to popular belief, theU.S.economy actually continues to grow. We are not in a recession. We repeat, we are not in a recession. Job creation is at hand. The unemployment rate has come down, currently sitting at the lowest level in two-and-a-half years. It’s still high by historic standards, but it’s moving in the right direction. Recent polls suggest companies are planning to hire more in the new year. Spending creates jobs and new jobs create more spending. And so the economy grows.

2012 INCOME THEME: MANUFACTURING CASH

The 2012 Income component of your portfolio will “man­ufacture” cash in three ways: collecting dividends (think stocks!), depositing interest payments (think bonds!) and accumulating cash premiums up front (think options!).

2012 GROWTH THEMES: TECH, ENERGY AND THE CONSUMER

Innovation has not been hampered by the problems in Eu­rope nor the bickering in Washington. Demand for Smart­phones and other web-enabled devices is only getting stronger, and they’re not just for “techies” anymore.

We are in the midst of an energy renaissance in the U.S., with vast reserves of oil and natural gas secured. The result could be lower energy costs, a reduction of CO2 emissions, more stable supplies, removing dependence on foreign energy, and a source of new and higher-paying jobs. Technology has made this renaissance possible.

The American consumer is back with a vengeance. Retail sales jumped a whopping 4.7% this holiday season. We continue to be impressed by the consumer’s toughness and see this trend continuing into 2012.

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