Apple enthusiasts lined up outside Apple stores across the globe in hopes of getting Apple’s new iPhone 5, which went on sale this morning. Many analysts predict that the iPhone 5 will be the largest consumer electronics debut in history. Apple may sell as many as 10 million iPhones in this first weekend alone. This is a very exciting time for Apple and the success of this new iPhone launch is critical to fuel growth, as Apple generates about two-thirds of its profit from the iPhone. Early estimates appear to be positive, as many analysts are predicting that Apple will sell an unprecedented 250 million units across the iPhone 5’s product life cycle.
Meanwhile, financial markets cooled this week as investors seem to be digesting the recent market rally and are starting to look for the next market catalyst. The S&P 500 was little changed this week and remains at a four year high. Now that the short term market euphoria generated from the Fed and the ECB announcements last week seem to have dissipated, investors should start to shift their focus to the impending fiscal cliff and the November elections. Continue reading
The two big stories this week were the Federal Reserve’s announcement of more aggressive stimulus for the economy and the threat to U.S. Embassies and citizens in many Mid East Countries.
The Federal Reserve sent a very clear message that they will continue to support record low interest rates with monetary policy tools for several more years in an announcement on Thursday of this week. The central bank said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month. Fed Chairman Ben Bernanke and the Federal Open Market Committee (FOMC) is taking a more aggressive approach then most economists predicted and financial markets pushed higher after this announcement . The Federal Reserve has a dual mandate of full employment and stable prices. This latest announcement clearly shows that the Fed will go above and beyond in its efforts to help the economy create jobs and that they feel inflation is still moderate and within an acceptable range.
The markets continually defy popular sentiment and that is very evident in 2012. The year started with the majority of the commentators and forecasters predicting “new normal” growth rates of 3-5% for the U.S. Stock market. The constant media “fear peddling” led many investors to continue to move assets to cash, CD’s and Treasury Bonds. Much like we all felt in 2008, as we watched our investments go down significantly, investors who remain out of the market today are getting that same “sick to my stomach” feeling as they watch from the sidelines as stocks continue their rise… My point is not to rub it in – it is simply to discuss an important process that appears to be underway and that is investor “capitulation”.
In our opinion, we faced a historic moment this year. Had we seen panic selling come back into the markets due to a collapse in the European Union or some other macro event, it is quite likely that many investors simply would have considered throwing in the towel because they simply could not stomach any more market selloffs. Continue reading
Housing shows signs of life in 2012…
Home prices in the U.S. increased by 0.5 percent in June compared to the same month a year ago. This was the first increase in home prices on a 12 month basis since September 2010. Nationally, prices jumped last quarter by the highest percentage in more than six years. The lowest mortgage rates on record as well as a decline in sales of distressed properties may help the real estate market contribute to the economic expansion that is now in its fourth year. A more sustained rebound may require easier lending conditions. This would also give consumers a lift after a report today showed household confidence sank to the lowest level of the year. The key is that the housing market may be forming a bottom and should continue to improve because affordability is so attractive right now.
Federal Reserve Chairman Ben Bernanke defended his unprecedented policies in his speech at the Jackson Hole Symposium today. He said additional bond purchases are an option as central bankers weigh current economic conditions. But once again, Bernanke left investors yearning for more definitive insight into what the Fed will actually do in their upcoming FOMC meeting when he said the Fed is “prepared to act” if unemployment does not improve. The Fed Chairman was not willing to commit to action in his speech today but we think it is very likely that they will announce new stimulus at the next Federal Reserve meeting in two weeks. Continue reading