“When we recall the past, we usually find that it is the simplest things – not the great occasions – that in retrospect give off the greatest glow of happiness.”
– Bob Hope
If you are thinking about a reverse mortgage, you might consider an interfamily loan as a friendlier, lower-cost alternative. Either way, it may be wise to speak with a financial professional before making this kind of decision.
Sometimes you pass me slowly, yet other times I just fly by. Sometimes I simply slip away. Regardless of how slow or fast I am, one thing’s for sure: when I’m gone, I’m gone for good. So what am I?
Last month’s riddle:
Last month’s answer:
THE MONTH IN BRIEF
DOMESTIC ECONOMIC HEALTH
Was consumer confidence wavering? It depended on which barometer you checked. The Conference Board’s January survey fell to 61.1 from December’s 64.8 final revised mark, in the previous month, according to the Conference Board. Economists polled by Reuters had thought it would climb to 68.0. The University of Michigan’s consumer sentiment survey made a major advance in January, going to 75.0 from the year-end mark of 69.9.2,4
The initial estimate of Q4 2011 GDP arrived in late January; a growth of 2.8%, the best in six quarters, was still below the expectations of some analysts. Speaking of growth, our manufacturing sector grew for a thirtieth straight month in January, according the PMI index of the Institute for Supply Management, rising a full percentage point to 54.1. ISM’s service sector index had also posted a December advance to 52.6 from 52.0. Not surprisingly, durable goods orders improved 3.0% in December, the third consecutive monthly gain for the indicator; orders for hard goods increased 10.0% across 2011.4,5,6,7
As for consumer and wholesale inflation, the threat was mild to say the least. In fact, the Consumer Price Index didn’t budge in December and the Producer Price Index retreated 0.1% (with import prices falling for the fourth month in five). So, 2011 goes in the books with 3.0% consumer inflation and 2.2% core inflation; the most since 2007, but hardly remarkable.8
GLOBAL ECONOMIC HEALTH
Manufacturing did pick up in some key economies in January. Our key PMI (the ISM survey) improved for the seventh straight month, and China’s official PMI improved 0.2% to 50.5 with new orders at a three-month peak. The U.K.’s PMI climbed above 50 again to 52.1. Germany’s manufacturing index advanced for the first time since September, and that helped the EU’s Markit PMI rise to 48.8 last month, but the Markit PMI has been below 50 (read: contraction) since last July. Overall, JPMorgan’s global manufacturing index rose to 51.2 last month.11
Here was the change in average home loan interest rates between Freddie Mac’s December 29 and February 2 Primary Mortgage Market Surveys: 30-year FRMs, 3.95% down to 3.87%, 15-year FRMs, 3.24% down to 3.14%; 5/1-year ARMs, 2.88% down to 2.80%; 1-year ARMs, 2.78% down to 2.76%.17,18
LOOKING BACK…LOOKING FORWARD
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
We had a very nice January, and while you can’t gauge tomorrow’s market behavior off history, it is encouraging to note that the S&P 500 advanced an average of 23% during the last five years in which it gained 4% or more for January. Another nice tidbit: when the Dow has had a positive January, it has finished that year in the black 82% of the time.1,2
Manufacturing seems to have picked up around the globe, and our manufacturing sector might be among the world’s healthiest. We still seem to be in a slow recovery, and the chance of a recession in the European Union (along with its sovereign debt morass) may exert a drag on our markets in February and beyond. Still, it looks like Greece is in line for a second IMF bailout and an actual “solution” toward its debt problem, so institutional investors might be less troubled by the EU debt crisis. If our economy goes to stall speed, the Fed could even opt for a QE3 in the coming months (a possibility in the opinion of some Wall Street analysts). February holds a lot of promise; for the first month in many, world markets may turn on headlines from America instead of Europe.
UPCOMING ECONOMIC RELEASES: Here is the schedule for the rest of the month: the initial University of Michigan consumer sentiment survey for February (2/10), January retail sales and December business inventories (2/14), January industrial output and the January 25 FOMC minutes (2/15), the January PPI and January housing starts and building permits (2/16), the January CPI and the Conference Board’s Leading Economic Indicators index for February (2/17), January existing home sales (2/22), January new home sales and the final University of Michigan consumer sentiment survey for the month (2/24), January pending home sales (2/27), January durable goods orders, the December Case-Shiller home price index and the Conference Board’s February consumer confidence poll (2/28), and the second estimate of Q4 GDP plus a new Beige Book from the Fed (2/29). The January consumer spending numbers come out on March 1.
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1 – blogs.wsj.com/marketbeat/2012/01/31/data-points-u-s-markets-77/ [1/31/12]
3 – www.nytimes.com/2012/01/31/business/economy/incomes-rise-but-spending-is-flat.html [1/30/12]
4 – www.cnbc.com/id/46162429 [1/27/12]
5 – www.ism.ws/ISMReport/MfgROB.cfm [2/1/12]
6 – www.ism.ws/ISMReport/NonMfgROB.cfm [1/5/12]
7 – www.marketwatch.com/story/durable-goods-orders-up-strong-30-in-december-2012-01-26-92200 [1/26/12]
8 – www.businessweek.com/news/2012-01-20/consumer-prices-in-u-s-little-changed-as-fuel-costs-fall.html [1/20/12]
9 – blogs.wsj.com/marketbeat/2012/02/01/how-to-read-a-greek-debt-deal/ [2/1/12]
10 – money.msn.com/market-news/post.aspx?post=a677f0ec-38f9-432c-bbc1-fb98c5362013 [1/13/12]
11 – www.reuters.com/article/2012/02/01/us-global-economy-idUSTRE8101C520120201 [2/1/12]
12 – online.wsj.com/mdc/public/page/2_3022-intlstkidx.html [1/31/12]
13 – mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [1/31/12]
14- money.msn.com/market-news/post.aspx?post=cb1f3e7e-3c74-45b7-9f9a-4cccd825c584 [1/31/12]
15 – www.businessweek.com/news/2012-01-26/contracts-to-buy-u-s-homes-near-19-month-high-economy.html [1/26/12]
16 – www.foxbusiness.com/news/2012/01/26/us-new-homes-sales-drop-22-prices-fall/ [1/26/12]
17 – www.freddiemac.com/pmms/ [2/2/12]
18 – www.freddiemac.com/pmms/index.html?year=2011 [2/2/12]
19 – montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29 [11/2/12]
20 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F11&x=0&y=0 [1/31/12]
20 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F11&x=0&y=0 [1/31/12]
20 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F11&x=0&y=0 [1/31/12]
20 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F02&x=0&y=0 [1/31/12]
20 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F02&x=0&y=0 [1/31/12]
20 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F02&x=0&y=0 [1/31/12]
21 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/31/12]
22 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/31/12]
23 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf [1/9/02]