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Economic Outlook

January 1, 2017

A positive economic outlook predominates, with steady market ascent since the February, 2016, 2 year S&P 500 low. The Dow Jones Industrials established a low in August, 2015, an equivalent low in February, 2016, with ascent since that time punctuated by various corrections. Gold prices, after a December, 2015, low, reached a high in June, 2016, with descent into December. Silver and Platinum (with a delayed peak in August), have followed similar patterns. Since the low in May, the dollar has been climbing steadily. The Euro, however, has remained in a trading range (USD equivalent) since early 2015, after the steep, recession driven, 2014 descent. The British Pound has been on a steady decline since mid-2014. 

The U.S. Unemployment Rate has been on a steady decline since late 2009, descending below the 5% level in 2016. Single-family housing starts have been climbing overall since 2009, and more noticeably since the early 2015 low. After a decline in the 10-year in 2Q, 2016, 2 and 10-year interest rates have been ascending steadily since July, hovering around the 1.25% and 2.5% levels in 4Q, respectively. 30-year treasury rates, after descending earlier in 2016, reached a high of 3.19% in mid-December, declining to 3.06% by year end.

China, despite slower growth, and India, with greater international business receptivity, led the Global Retail Development Index in 2016. The Dow Jones U.S. Retail Index remains in a slowly increasing trading range. While brick and mortar retail is enduring online-based competitive obstacles, e-commerce continues to thrive.

The U.S. Manufacturing PMI, after a decline in early 2016, expansion in 2Q, with a correction in 3Q, has been increasing during 4Q to a year-end high in tandem with U.S. Manufacturing Production.

The U.S. GDP grew by 1.6% in 2016, reaching $16.81 trillion by year-end. The U.S. CPI increased from 236.5 to 241.4 year-over-year, as of December, an annual rate of increase of 2.1%.

West Texas Intermediate (WTI) Crude Oil prices reach a 13 year low of $26.21 on February 11, 2016, relating to high OPEC, Russian, and U.S. production and inventories. U.S. crude oil production increased from 3.84 MM bpd in September, 2008, to 9.59 MM bpd in May, 2015. During 2016, crude oil prices increased during 1Q - 2Q, entered a trading range for the remainder of the year, and closed on December 28th, at an annual high of $54.06.

January 1, 2016

Economic indicators are consistent with a slowly improving but fluctuating economy with declining unemployment, increasing wages, and an increasing trade deficit.  Core personal consumption expenditures (PCE) was steady at 1.3%, GDP estimated growth is at 2% while actual numbers are awaited.  Inventories are up while new orders are down, with shipments increasing.  Core CPI grew by 2% in November exhibiting a widening gap with Core PCE.

Housing starts are leading but growing at a slower rate in the South as compared to the West which continues to expand on a month-to-month basis, . November utilities and mining declines pulled Industrial Production down into negative territory.

U.S. retailers saw significant growth year-over-year in online retail sales, with early numbers showing 8% growth in overall holiday retail sales year-over-year.

The U.S. Manufacturing Index revealed declining production and new export orders in November.  The January 4th update is awaited.

China's CPI is stable, with a small uptick in the PPI recently.  Their volatile food price inflation rate has stabilized for the moment, with non-food prices remaining stable at 2%.

Germany and Eurozone sentiment has been ascending during 4Q, 2015.  Australia Terms of Trade Indices and Real Net National Disposable Income continue to decline, taking a toll on national income growth.  Australia exports sharply increased as of September and GDP growth increased to 2.5% y/y as of December 1st.  Argentina, Brazil, and Colombia have experienced ascendance of inflation rates with Argentina inflation outpacing its neighbors at just above 14% annually.

July 10, 2015

The U.S. economy faltered in 1Q, 2015, after a strong 4Q, 2014, although the current 237.805 CPI has progressively ascended this year. 2Q, 2015 will prove greater strength in our view, when additional data becomes available. The U.S. unemployment rate has declined progressively to 5.3%, while the European Union unemployment rate has declined to 11.4% indicating progressive recovery, after exceeding 12% in 2013. The instability of the Greece economy and concerns as to debt repayment have contributed to recent international stock market volatility. The Eurozone HICP reached a low of -0.25% in December, 2014 and recovered progressively since that time to +0.338 % in May, 2015.

The nearby 30 Year T-Bond ascended to a 25 year high of 166.27 in March, 2015 (T-Bond pricing and interest rates are inversely related), descending to the trend line at 147 followed by recovery as high a 155.   The Fed has been alluding to an interest rate hike for September, however, we regard this as tentative due to the now recovering down cycling of the economy in 1Q. Nevertheless, with interest rates at historic lows, given progressive economic expansion, ascent may be on the horizon.

Crude oil prices continue below past years' levels, with considerable industry confidence that increases are forthcoming later this year or 1H, 2016. August Crude Oil is at 52.81, having ascended no higher than 64.12 in 2015. The trading range of $50 - $65 per barrel remains in place at this time. Natural gas, after reaching $6.5 in February, 2014, has declined to the $2.5 range and remained in a $2.6 - $3.3 trading range this year.

Gold reached $1920.8 in September, 2011, and has declined since to a level of $1159 as of today. The trading range of $1145 - $1442 continues presently, most recently nearing support. Silver is currently at $15.4, reaching a high of 49.82 in May, 2011, and declining progressively since, now testing support levels once more.

Wheat is 582 today after declining in a cyclic fashion since reaching a high of 947.2 in July, 2012. Corn has also progressively declined to 442 today, up from a low of 318.2 in September, 2014  after a high of 843.6 in August, 2012. 

December, 2014

After a hesitant start in the first half, the U.S. economy showed significant strength during 2H, peaking in the 4Q. The U.S. CPI progressively ascended from 234 to 238 mid year, then declined to the 235 range. U.S. GDP growth rate progressively increased from 3% to 5% midyear, then declined during the 2H to 0.2%. Eurozone HICP declined from 0.8% to -0.6%, the lowest level in more than 25 years.

The 30 Year T-Bond progressively declined in yield during 2014 from 3.6% nearing 2.2% at year end., with the nearby contract progressing fro 127.23 to a high of 148 in October, retracing, then opening 2015 above that level.

Drude Oil opened the year at 94.18, trading up gradually until midyear when the precipitous decline began, finally settling end year at 52.69.  Natural Gas peaked at 6.493 in February, declining to 3.003 at year end.

Gold opened the year at 1237, remained in a trading range, and closed end December at 1186.2. Silver opened the year at 20.19  and closed at 15.768.

September 30, 2013

The strength of the U.S. economy continues to expand, supported by upward movement of the U.S. equity markets since (our mention of) the market bottom in March, 2009 (see below), and continued strength in many regional real estate markets. Economic indices during the past 12 months showed an increase in the CPI of 1.5%, decline in the unemployment rate from 8.1% to 7.3%, an increase in the PPI of 1.4%, an increase in real earnings of 0.7%, a drop in import prices of 0.4%, and a drop in export prices of 1.1%.

The softs markets have shown steady decline overall since mid-2012, including corn, soybeans, soybean oil, and wheat.  Heating oil, gasoline, and crude oil have been in a trading range since early 2011, while natural gas bottomed in April, 2012, with gradual ascent since that time.  

The 30 year T-bond, (and therefore 30-year mortgage rates) steadily declined until July, 2012, at which time a positive shift occurred, driven by concern over the Fed's tapering of their economic recovery program, with a pause in April and May of 2013, and then a continued increase.  This upward interest rate movement has softened in past 2 weeks relating to the Fed's decision to continue their program as before in the form of substantial monthly T-bond buying, most likely through 4Q, 2013.  

The U.S. Dollar hit a 3-year low in May, 2011, and has been ascending since overall, with the appearance of a potential trading range since early 2012.  The Euro, after reaching its mid-2012 low, has been slowly increasing, without reaching its February, 2013, short-term high so far again this year.  The British Pound has been in a trading range since 2009, currently near the $1.50 USD lower end of that range. The Japanese Yen declined rapidly between 4Q, 2012, and 2Q, 2013, stabilizing in the recent 3Q. The Canadian Dollar has been in a trading range since mid-2011, while the Australian Dollar, also in a trading range since early 2011, has seen a subsequent significant descent initiating in June of this year.  The Swiss Franc's spike ascent in August, 2011, was followed by a rapid decline during late 2011, and more stable trading range levels since early 2012.

Specific indices classically lag in an economic resurgence to varying degrees, as one can observe from previous recoveries during the past 4+ decades. We are bullish on the market at this time, as well as the U.S. economy, while the European economies won't be far behind.  Corporate international growth interest has shifted somewhat away from China, and now focuses upon Brazil and other Central/South America markets, Eastern Europe, and India.  

August 23, 2012

While conflict continues in Syria, Mali, and other hot spots, the U.S. Presidential election continues to gather momentum. Polls continue to show parity within standard deviation ranges.  The addition of Paul Ryan to the ticket has drawn media attention to the GOP, as has Vice-President Biden's peppered speeches for the Democrats. Issues are slowly emerging over rhetoric in addressing the concerns of the American people.

Third quarter has brought sustained U.S. unemployment levels, PMI's in Europe and Asia revealing demand descent, and continuing concern over the global economic outlook.  The U.S. Prime Rate remains unchanged since January, 2009, at 3.25%.  The DJIA, S&P 500, and NASDAQ appear to be trending upwards with greater assurance of this observation when April/May resistance levels are exceeded and sustained.

Crude Oil remains in a trading range since 2Q, 20
, recovering from June, 2012 support levels, with recent price ascent at the pumps.   Natural Gas prices continue to be restrained, although above April lows. Gold has remained below 2Q, 2012 highs, within the trading range established by September, 2011, January, and May, 2012 support levels.  Silver has recovered from September/December/June support. Wheat and Corn are pushing July/August highs, after sharp drought-related June/July ascent.

Considering EU economic challenges, as well as growth rate slowing in Asia, continued progressive U.S. economic recovery will require masterful intervention, support, and some degree of patience. Third quarter corporate confidence levels appear to be part of expanding positivity with regard to the economic climate.

January 27, 2012

As the U.S. Republican primaries progressively narrow the candidate field, while the current administration is instituting increasing governmental guidance in addressing the economy, the stock market has responded positively during the past 2 months after bottoming on November 28th.  52 week high resistance is now being tested at the 12,841 level on the Dow, an encouraging scenario.

Crude Oil, after dropping to the 75 range in early October, has progressively climbed and remained in a 93 - 102 trading range for the past several weeks, thereby stabilizing prices at the pumps.  Natural gas prices have steadily declined since their high of 5 in June in an unseasonably warm U.S. winter to date. Heating Oil has remained in a trading range around 3 since 2Q, 2011.

The Fed is leaving interest rates essentially untouched for the foreseeable future, encouraging the steady growth that has recently occurred without evidence of an inflationary trend.  The unemployment rate has been declining progressively for the past 4 months, now at 8.5%, the lowest level since February, 2009. The real estate market continues to lag, with single-family property purchases down 2.2% to the 307,000 annual rate level.  Bank lending to small businesses continues to be flat, a key element necessary for progressive economic recovery.

Emerging and European markets declined further at end 2011, responding to the continuing EU debt crisis.  Credit ratings for Austria and France shifted downward. Market interdependency has taken its toll on the BRIC markets, slowing previously accelerated positive trends, as well as pressuring U.S. T-bond interest rates since late October.

While the Euro has declined during the same period, the U.S. Dollar has done well since bottoming in April, 2011, retracing during the past couple of weeks from the 82 resistance level.  The Yen has remained in a 1.3 trading range since August, 2011, and the Real has seen some recovery this year after its precipitous decline in 3Q, 2011.  India is experiencing inflationary pressures as a result of its strong growth during the past several years.

The EU will continue to experience difficulty in 2012 in the near term.  Asia markets offer promise of differing degrees for different markets, recoiling somewhat as a result of EU issues.  We are optimistic regarding the potential for progressive U.S. economic recovery during the next 12 - 24 months. 

September 12, 2011

Discussion of the possibility of a Greece default and discomfort with the Euro economy has led to a correction in the markets during the past several weeks. Gold's 7 month rally has recently paused at the 1920 level, now seemingly in a trading range. Crude Oil has declined since May, now exhibiting some recovery, although also in a 76 - 90 trading range for the nearby. Wheat has undergone correction in a pattern similar to Crude Oil, with Corn reaching a 5 year high in June, now more subtly correcting.  Natural Gas, after reaching a 5 year high in June, 2008, has endured descent since, to historically conventional levels.

The U.S. Dollar has fractionally exceeded the recent 4 month trading range, perhaps representing early evidence of forthcoming ascent, although further movement is needed to support this as a conclusion. The British Pound is approaching 8 month lows in a similar manner to the Canadian Dollar and the Euro, while the Yen continues its 4 year ascent.  


August 10, 2011

Erratic market activity has included a correction relating to the downgrading of U.S. credit and France's credit issues. While economic recovery is not progressing as quickly as most would like, nevertheless, the trajectory is upward in our view. Market corrections are to be expected along the way, a fact often forgotten by investors with a short-term perspective as well as the media. Technical analysis evidence that this is not a new downward trend includes a bottom consistent with Fibonacci retracement since the corrective low of June, 2010, and the 30 degree Gann conformity with the March, 2009 bottom of the market (which we subtly described on April 2, 2009 - see below).

The real estate markets continue to be burdened by excessive foreclosure property inventory selling as low as 50% of market value in many areas.  Stringent Fannie Mae and Freddie Mac qualification guidelines exclude the majority of home buyers who are required to show tax returns burdened with the economic fallout of the last 2 - 3 years, thereby further impeding the recovery.  The banks, also subject to heavy regulation and qualification requirements, are lending predominantly to thriving businesses who have remained untouched by recent economic conditions.  

Crude Oil has been volatile and declined in the 3Q to as low as $79 per barrel, while Natural Gas has also declined during the past 2 months, most recently settling near 4.05 on the nearby.  The Euro and British Pound continue their gradual ascent, while Gold approaches the 1800 mark.  The softs are retracing after reaching multi-year highs earlier this year, while the 30-year Bond has reacted in a conventionally inverse manner to equity market movement.


January 11, 2011

On this day of ones (1-11-11) we look at the continued ascent of the market as evidenced by the DJ at 11671.88.  The bull market continues in the face of mild dissent and pervading doubt in the financial community manifested from the past 3 years' experiences, usually a healthy sign.  

Crude Oil is again approaching the 100 mark, while Gold, after a rapid ascent until mid 4Q, remains in a trading range.  Coffee has retraced slightly after progressive December gains.  Sugar is approaching 31 resistance once more after dramatic declines in November followed by gradual recovery.  The Dollar has posted recent gains as well.

Housing starts remain flat, with the (core) PPI gradual recovery lagged by the CPI. 


October 25, 2010

As the bull market continues the DJ is approaching its previous 2010 high of 11,258, with continuation above this point indicative of a strong sustained move upward, and a resistance bounce another addition to the 4th wave, nevertheless part of an ongoing ascent.

Gold, making new highs, shows little sign of hesitation, supported by continued weakness of the dollar.  While the dollar may remain in the present trading range for some time, any breakout to the upside may affect the Gold trend.  Silver and Copper are benefiting from the recovery, with the latter now approaching potential resistance at 4 dollars.

The CPI has been slowly ascending this year, not yet reaching 2008 highs, while the PPI has been increasing for the past 3 months.  While the continued expansion of the economy is likely to sustain itself, greater momentum appeared imminent earlier in the year which has softened a bit, making it less likely that the Fed will raise rates in the near term.

Crude Oil has met resistance at the 84 level remaining in its present trading range, while Natural Gas is diminishing in price, achieving new lows. 

Wheat, after limit up moves in August, retraced moderately within its current upward trend.  Corn and soybeans remain strong.


May 5, 2010

The present bull market has pushed the DJ as high as 11,258 on April 26, with some expected pullback since that time.  Support remains at 10,730 with continuation upward prior to descent below that level illustrating continuation of the upward trend.

Discussion of the return of inflation as part of recession recovery has become more apparent recently.  While unemployment and real estate are lagging, consistent with previous post-recession trends, corporate earnings are on the ascent overall, with significant relative growth evident in the time period since the market bottom in March, 2009.

Gold, peaking at 1219.50 on December 3, 2009, has retraced somewhat, now re-approaching previous highs.  Crude Oil continues in a trading range of 64 - 88 during the past 12 months. 

Retail sales are gaining steadily, with overall upward trends in consumer confidence, consumer spending, and producer prices.

This is a unique time in investment history, with opportunities available in various sectors seen on only a handful of occasions during the past 2 - 3 decades.  Market leader growth curves will remain appealing during 2010.  Expect the Fed to gradually raise rates as early as 3 - 4Q, 2010. 

December 10, 2009

While there remains some caution from those who follow the markets, a clear bullish trend has continued as stated below in our previous Outlook narratives.  The DJ will likely remain in the 10,000 - 10,500 trading range for the remainder of the year, before continuing its advance. 

Gold has reached new highs with the decline of the dollar, although this trend will end with forthcoming inflation commencing, in our view, at the earliest in mid to late 2010.  Various other commodities are exhibiting upward movement.

The current Los Angeles Auto Show is devoid of at least 2 previously regular high-end exhibitors, and the crowds are somewhat thin to date.  Absent the government incentives earlier this year, confirmation of continued upward sales trends remains to be seen.

Retail sales this holiday season will  lag pre-recession growth rates, with some optimism beginning to emerge.  The Fed is likely to avoid raising interest rates through 1 - 2Q, 2010, unless clear inflationary signals prompt acute intervention.

Lagging employment and real estate market recovery is consistent with previous recovery patterns, and leaves us with a nevertheless optimistic view of relative economic growth for 2010.

August 10, 2009

As mentioned in early June, the DJIA rose to 9000, retraced and returned in a bullish fashion now approaching 9450 range resistance.  Some retracement is expected at this juncture as low as 8800, however the outlook continues to be a bullish one. 

The Financial community is now openly discussing current conditions as being consistent with the end of the recession.   At this stage, we view the economic outlook as favorable and anticipate continued advancement.

Crude Oil and Gasoline prices continue to waver, with a general upward trend following Crude Oil's bottoming at the 30 spot level several weeks ago.  September Gasoline reached a recent high, retraced, and is now on the increase once again, presently just above $2.  Heating Oil is likely to continue above the $2 range, while Natural Gas remains below the $4 range, based upon nearest futures contracts.

Financial Services industry recovery has been strong during the past several months.  The mindset of TARP fund repayment and recapture of management independence holds high priority among some participants. 

Although the Auto market was soft for 1H, 2009, the Cash For Clunkers program has been very successful, with relative sales increasing at rates not seen since 2007.  Funding endurance remains the chief issue of concern to dealers as well as their buyers.

June 2, 2009

As discussed on April 2 below, the DJIA rose to the 8400 range, hovered there and exhibited what is, in our view, bullish behavior, consistent with the progressive economic recovery currently occurring, by continuing to rise to the 8700 range.  As mentioned, the next resistance is at 9000, where retracement may occur. 

Recollection of previous recessions is accompanied by the understanding of variation in the rate of progress of economic recovery.  Talk of a "soft landing" after a varying periods of bullish activity, as evidence of normal price action driven by profit taking, is an integral part of the process.   

Recent bankruptcy filings by GM and Chrysler are evidence of extremes of economic fluctuation normally seen within the industry accompanied by the dynamics of international competitors' pursuit of alternative approaches.  Necessary transition will now occur in the face of current business conditions with the concurrence of the U.S. government as the majority shareholder.  We will be watching for opportunity here upon bankruptcy emergence.

The financial services industry is also continuing their recovery, with most of the borrowers looking toward repayment of TARP funds in order to restore independent management policies.  JP Morgan, Bank of America, and Citigroup, among others, are benefiting from building investor confidence levels.  Consumers and businesses are awaiting the necessary restoration of funds availability in order to restore the growth curve.

Crude Oil and other commodities are experiencing significant price recovery, as strengthening demand accompanied by the Northern Hemisphere tourist season and continuing growth in Asia occurs.  Retail gasoline prices will continue to ascend at least through the July 4th holiday in the U.S., consistent with seasonal trends.

April 2, 2009

After hitting a 12 year low of 6470 on March 6th, the DJIA has rebounded significantly to a high exceeding the 8000 level today.  Bullish movement is supported by gradually increasing stability of the Banking Industry with the support of the U.S. Government, low interest rates, the G-20 meeting, and a recovery mindset focused upon 2H, 2009. 

On a technical basis, The DJIA has reached a resistance level, with some retracing expected intermittently, and further bullish trend indicated by a breakout above 8400, next resistance at 9000. 

As with previous recessions, employment, housing, and consumer confidence levels, among other indicators, continue to bottom in a cyclic fashion.  The current scenario is consistent with a recovery trend, however, pinpointing market/economy turnaround points is entwined with considerable risk.  For those companies with available cash, the time has arrived, in our view, for aggressive acquisition at currently favorable price levels, where portfolio strategy and future synergistic upside paint a compelling picture.


March 10, 2009

As predicted in the article below, the market broke to new lows shortly after February 19, with the DJIA plunging to the 6500 range, retracing to 6800 so far today.

The banking sector has led the decline with Citigroup dipping below $1, and Bank of America in the $3 range.  Other competitors have declined as well, mostly based on the fear of government takeover of the banking system.

Crude Oil prices have bounced back to $47, while Gold has declined to the mid $900 area.

Retail Supermarket and Pharmacy chains are surpassing others in the current climate, as are sectors of the Food and Beverage Industry.


February 19, 2009

While the Financial and Automobile Industries are seeking additional government support along with various other sectors, President Obama recently imposed new restrictions on upper management stipends for new entrants.  Numerous international governments have followed the U.S. lead in structuring stimulus packages.

The Banking, Brokerage, and Real Estate sectors remain subdued, without apparent sign of notable recovery.   Occasional upticks in home sales reflect the record number of foreclosures resulting in good values for those able to secure financing and willing to buy and hold.  Fed Interest Rate lowering has added to the buyer's market.

Crude Oil price declines in late 4Q and early 1Q have been followed by intermittent recovery, reflected by prices at the gas pump.  Inventory decline drove prices higher today.  The wide spread between the nearby and longer term contracts continues, suggesting bottoming behavior.

The U.S. stock markets today, have broken out of their trading range to the downside, with the Dow Jones closing at a new low under 7500.  This defines, in our view, a possible first leg of another downside move on a technical basis, with fundamentals consistent overall.  Continued bearish movement of the markets over the next few days increases the probability of a sustained downtrend.

While the mindset of the country is hopeful following the recent U.S. election, and significant efforts are being made by the U.S. government to support and stimulate the economy, visible signs of a sustained recovery remain on the horizon.


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