Friday, April 30, 2010

Quick Notes for the Day - April 30

Q1 GDP Grows 3.2% - The Commerce Department in its initial estimate of Q1 GDP reported that the economy grew at a 3.2% rate. The rise was based on a fastest rising consumer spending in three years - a 3.6% annual rate. Business spending jumped dramatically by 13.4% with investments in equipment and software. The US GDP is a consumer driven economy, so even though business spending was far higher, the consumer is the engine of the economy.

Consumer Sentiment Rises - The Reuters/University of Michigan consumer sentiment index rose to 72.2 in late April versus a 69.5 reading in mid-April. This is compared to a final reading of 73.6 in March.

Chicago PMI Shows Growth - The Chicago purchasing managers' index (PMI) showed a steadily improving region with a reading of 63.8% in April versus 58.8% in March. The current reading is now the highest since 2006.

Battle on to protect shore from massive oil spill - Reuters - "A huge spreading oil spill in the Gulf of Mexico washed up to coastal Louisiana wildlife and seafood areas on Friday and the U.S. government and military struggled to avert what could become one of the nation's worst ecological disasters."

Monday, April 26, 2010

Quick Notes for the Day - April 26

Financial reform nears test in Senate - Reuters - "The most sweeping overhaul of financial regulation since the Great Depression appeared unlikely to clear its first hurdle in the Senate on Monday as Republicans held out for a bipartisan deal."

Oil Falls Below $85 - Crude-oil futures fell this morning under $85 a barrel on worries about Greece and pressure the Euro might face. Crude oil traded at $84.99 a barrel on NYMEX. Last week, oil was volatile, but finished the week with a 0.5% gain.

Gold Stable for Now - Gold futures have been fluctuating, but remain relatively stable as investors watch Europe for issues with Greece, the euro, and the other eurozone countries. Gold futures were up 0.1% ($1) to around $1,155 an ounce.

Greece in limbo will keep markets volatile - Reuters - "Until investors have a clear idea of exactly how much money Greece will receive from the European Union and the IMF -- and when -- uncertainty stemming from the Hellenic Republic's growing fiscal despair will weigh on global markets."

Monday, April 19, 2010

Quick Notes for the Day - April 19

March Leading Indicators Rise - The Conference Board reported that the index of leading economic indicators rose 1.4% in March versus 0.4% in February. This was the twelfth consecutive month of improvement. Going forward, the strength of demand "remains the big question," said Ken Goldstein, economist at the Conference Board. "Improvement in employment and income will be the key factors in whether consumers push the recovery on a stronger path."

Oil Falls to 3-week Low - Crude oil dropped about 2.5% on Monday to below $81 for the first time since late March. Oil was reacting to the continued concerns over fraud charges against Goldman Sachs which is the largest commodities broker. There are concerns that the investigations could move beyond just the mortgage sector within Goldman.

Citigroup profit $4.4 billion, tops Street view - Reuters - "Citigroup Inc posted a $4.43 billion first-quarter profit, its best result in more than two years, as the global economic recovery lifted the values of its worst assets and allowed the bank to set aside less money to cover credit losses."

Goldman faces pressure, reform momentum grows - Reuters - "Goldman Sachs Group Inc faced rising regulatory and legal pressure on Monday as allegations that the bank duped clients fueled momentum for regulatory reform on both sides of the Atlantic."

Thursday, April 15, 2010

Tax Time

Rollins & Associates, P.C. and Rollins Financial Counseling, Inc. will be closed on Friday, April 16th for our annual day of rest after tax season.

Our office will reopen on Monday, April 19th at 8:30.

Have a good weekend.

Wednesday, April 7, 2010

News - April 2010

The stock rally over the last 12 months has continued in earnest through March of 2010. Stocks are roughly 75% higher than they were at their nadir in early March of 2009. The early part of the rally indicated the first signs of economic stabilization, and now economic indications like retail sales and employment are showing actual improvement. The improving economic landscape has sustained the push higher for stocks in early 2010. The recovery in asset prices has been nothing short of amazing until you put the rally in a longer term context.

The S&P 500 spent most of the month of October 2007 nearly 30% above the current valuation. The 1,500 level achieved in 2007 was first eclipsed in March of 2000. The S&P 500 ended this past March 31st just below 1,170, where it spent much of late 1998. Therefore, some observers could say that not much has happened in the past 11½ years. Hence, there has been a lot of talk about the “Lost Decade” that investors have endured.

It’s true that the S&P 500 did not offer any returns for investors from January 2000 through December 2009. In fact, the return offered over that period was slightly negative. That said, a diversified portfolio of international stocks, bonds, real estate, and commodities did fare considerably better.

Emerging market stocks and REITs both gained over 10% per year for the “Lost Decade”. Commodities returned over 7% annualized and the most widely followed diversified bond index gained 6.3% annually from 2000 through 2009. Of course, many investment portfolios had a significant weighting to large cap U.S. stocks that are represented in the S&P 500, but even a small weight to these other assets classes would have had a tremendously positive impact on returns.

The S&P 500 has gained 5.4% through the first quarter of 2010. While many still argue that the market has gotten ahead of itself, we would also like to point out that the S&P 500 index first reached the 1,175 level in 1998 and also has only regained about 50% of the loss from the 2007 highs. The DOW and the NASDAQ posted similar gains at 4.8% and 5.9% for the quarter, respectively. Small cap stocks were the notable outperformer of the widely followed indexes, gaining 8.7% from December 31, 2009 through March 31, 2010. The U.S. dollar climbed a modest 3.1% during the quarter, but has surged 7.8% over the past five months. This may explain some of the outperformance in U.S. small cap stocks as they don’t have as much international business, which can be aided by a weaker U.S. dollar.

Likewise, international investments generally trailed the U.S. markets as evidenced by the 0.9% positive return for the developed market index; the emerging market index gained 2.8% for the quarter. Gold rose 1.5% for the quarter, while the price of oil increased by 4.6% through March 31, 2009. The widely followed commodities somewhat bucked the trend of trading inversely to the U.S. dollar. Strong oil prices may indicate more confidence in a recovering worldwide economy, as stronger gold prices may reflect a continued surge in investor appetite for diversifying investments and hedging against future inflation.

The employment report for March showed the unemployment rate remaining at 9.7%, but finally, a significant 162,000 jobs were created during the month. The government data suggests hiring across most industries as many companies are at last showing enough confidence to hire at least some new employees. The number of new jobs created in March pales in comparison to the 8 million jobs which were lost during the recession, but it’s hopefully the start of a new longer term trend.

The question going forward is how the economy and markets will react when much of the government stimulus is removed. Short term interest rates will eventually need to go higher and the Fed has already said it will put an end to its program of buying mortgages. The Federal government cannot afford many more, if any, spending initiatives. Tax cuts are almost certainly off the board for some time. The low interest rates, government spending, and various bailouts, for better or worse, were intended to temporarily patch up the ailing economy. Now that the economy has improved, it may well be time to pull back on government spending, let interest rates inch up, and allow the economy to try and sustain its own improvement.

Some would certainly make an argument that the aforementioned programs will actually deter economic progress and growth going forward. That may be true due to the higher taxes and debt burden on those taxpayers. But without at least some of those programs, the economic trough might have been deeper and even more people would have been unemployed.

We don’t have much doubt that the economy can overcome the challenges. If there is an unemployment reduction of 1% per year, which will should be accompanied by higher economic growth than many are predicting, say 3.5%-4% annually. Big “if’s,” but that might be the best case scenario; it’s also the likeliest given the U.S. economic history. Despite the relative strength of the emerging nations, the United States still offers the most compensation and best market of consumers for the innovators and entrepreneurs.

Friday, April 2, 2010

Form ADV Offer

The Securities and Exchange Commission requires every investment advisor managing over $25 million for clients to submit a Form ADV filing with the SEC. Therefore, every year Rollins Financial files electronically part I of the form ADV to the SEC detailing the nature of its business. This filing is mandatory for all advisors.

It is that time of year where we offer all of our clients a copy of our Form ADV part II. Part II is a written disclosure statement that provides information about business practices, fees, etc. the adviser may have with its clients. Please contact Robby Schultz or Eddie Wilcox at (404) 892-7967 or (800) 253-3113 if you would like a copy of our ADV Part II.

Thursday, April 1, 2010

Quick Notes for the Day - April 1

Jobless Claims Fall - The Labor Department reported that the number of initial claims for unemployment benefits fell 6,000 to a seasonally adjusted 439,000. The four-week average fell to the lowest level since September 2008 at 447,250. For the week ended March 20, continuing claims fell 6,000 to 4.66 million. The four-week average of these ongoing claims declined 12,500 to 4.68 million which is the lowest level since January 2009.

ISM Rises to Six Year High - The Institute for Supply Management (ISM) reported the ISM manufacturing diffusion index rose to 59.6% in March versus 56.5% in February which is the highest reading since July 2004. Seventeen of 18 industries were growing in March. The orders and production indexes rose above 61%. The employment index slipped to 55.1%.

Oil, Gold Rise on Upbeat Data - Crude oil rose momentarily above $85 a barrel which is the highest since 2008. Gold rose 0.1% to $1,124 this morning. Commodities rose in response to economic data around the world that was more upbeat than previously estimated.

Jobless claims fall, March manufacturing surges - Reuters - "The number of U.S. workers filing new claims for jobless aid fell last week and factory activity in March hit its highest level in more than 5-1/2 years, pointing to a continued expansion in the economy."