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2011 Newsletters

US & World Economy –

The US economic growth stalled over the summer as consumer confidence dropped to a 30 year low amidst the disappointment of watching a nearly nonfunctioning Congress and the first time ever downgrading of our government debt. This has led economic forecasters to increase the likelihood of a recession to 50/50, produced sharply lower worldwide stock prices and reduced earnings estimates. Inflation fears have also receded and interest rates were driven to multi-year lows. All of which has left US consumers a bit shell shocked as they continue to deleverage to shore up home finances and trim spending, while the stock, corporate bond and commodity markets had their worst quarter in almost three years.

US & World Economy-

The US economy, along with much of the world, has been experiencing an easing in the pace of recovery growth. This is common in post-recession rebounds and usually lasts 4-6 months unless accompanied by tightening from the Fed (fortunately, the US Fed is still very accommodating with low short-term interest rates). Recoveries are usually uneven. Our housing market and bank lending industry are the largest laggers inside the country and euro-zone sovereign debt crisis along with China’s inflation/growth fight are the current biggest international concerns. Nevertheless, we continue to slowly grow and the S&P 500 is expected to earn a record $100 per share this year for the first time. California businesses are also recovering and many valuations are back to or nearing all time highs as well.

US Economy-

The US Economy continues to chug along, rising for seventh consecutive quarter, fueled by strong corporate earnings, a long awaited drop in unemployment, renewed consumer confidence and earnest attempts to focus on our out of control budget deficits – all of which caused the stock market to post its best first quarter since 1998 (after a 6.4% pull back, which fit neatly into our last quarter newsletter’s 5-7% pull back forecast). However, the news has not been all good. The CPI rose almost 2% (8% annualized) over the quarter as the dollar continued to fall and commodities, led by oil, rose swiftly. Inflation is heating up around the world and foreign central bankers are starting to raise interest rates. It is only a matter of time before our zero interest rate policy comes to an end.

US Economy-

The economic expansion we had forecast is finally in full swing. Market pundits and economists are continuing to raise GDP and profit expectations for 2011, while the stock market has followed with uninterrupted gains since the major structural shift in the financial markets in early November (see December 3, 2010 update). In fact, investor sentiment may soon get too far ahead of the economy, leaving the stock markets vulnerable to a pull back.