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July 2012 Monthly Newsletter


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Aloha!  I recently returned from a family-first trip to Hawaii: the island of Kauai to be exact.  It is a remarkable place to visit.  The highlight of our trip was a catamaran ride up the Na Pali Coast: the views were spectacular and we saw a school of dolphins.

Upon returning to the office, Annette “whispered” that maybe I should stay on vacation, given the Dow has again crested 13,000.  As of 8/3/12, the Dow and S&P 500 had posted their fourth weekly gain.  The total gain was modest, but since June the markets have been steadily setting higher-highs and higher-lows.  What this means is that the sell-offs are not as strong as the rallies.  Technicians consider this a bullish trend.

While the economy grew slowly in Q2 and does not appear poised to ramp-up significantly in the second half, there have been some modestly positive reports.  Most notably, on Friday, 8/3, The Bureau of Labor Statistics reported an employment gain of 172,000 in July, which was significantly higher than the three previous months and about 60,000 more than forecast.

Also on Friday, Zacks.com reported that 410 of the S&P 500 companies had posted their Q2 earnings.  Of them, 66% had exceeded their earnings expectations, yet only 38% had beaten their revenue expectations.

Not surprisingly, energy/oil companies were a big drag on earnings this quarter, as their profits fall with lower oil prices.  While this may not benefit neither them, nor the numbers above, it is a benefit to us the consumer.  We have been paying less at the pump during the summer driving months.  This is good for the consumer and the economy.  None of these reports are great, but they are indicative of a moderately growing economy.

 

Of course, there was also news out of the European Central Bank, suggesting that aid would come to the euro zone’s debt-stricken nations.  True enough, this story sounds like a broken record, but it lead to many markets there (e.g. Dax) spiking up notably.

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