Earnings and Consumer Confidence

The end of February is upon us and we still have time to make 2011 contributions to an IRA account and reduce your 2011 taxes. Given the rhetoric about future changes to entitlement programs, aka retirement money, it would be a great idea to contribute to your future nest egg. The headlines for this week included information on corporate earnings and consumer confidence. The biggest risk to our economy is not related to Europe, rather the price of gasoline and oil. It is important to keep a very close watch on consumer confidence. Now is a great time to invest and leave the news media behind you.


Vanguard Weekly Recap

Positive news emerged from two of the global economy's most-troubled precincts: the U.S. housing market and Greek debt negotiations. January results showed that home sales extended their favorable trend in the deeply depressed sector, while European negotiators hammered out an agreement on a second bailout plan for Greece, subject to approvals. For the week ended February 24, the S&P 500 Index rose 0.3% to 1,366 (for a year-to-date total return—including price change plus dividends—of about 8.9%). The yield on the 10-year U.S. Treasury note declined 3 basis points to 1.98% (for a year-to-date increase of 9 basis points).


Corporate Earnings

S&P 500 Gets 9% Cheaper as Record Profit Restores $3.2 Trillion to Stocks

By Inyoung Hwang and Lu Wang | Bloomberg – Thu, Feb 23, 2012 12:01 AM EST

Profits in the Standard & Poor's 500 Index are rising faster than its price, leaving the gauge 9 percent cheaper than it was in April even after American equities climbed within 6 points of last year's peak.

"The world is profoundly underinvested in U.S. equities," Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a phone interview on Feb. 21. His firm manages $300 billion. "The public is bombarded with all these negatives. Greece this, Portugal that, dysfunctional governments. The retail investor is frozen."

Corporate profits have topped analyst estimates for 12 straight quarters. Analysts that cover companies in the S&P 500 project earnings will rise this year to $104.27 a share, the highest level ever, according to data compiled by Bloomberg. That would represent a 69 percent increase in earnings since 2009, compared with the 22 percent rally in the index in the past two years. Earnings for S&P 500 companies from Priceline.com Inc. to MasterCard Inc. and Lorillard Inc. are estimated to jump 9.6 percent from last year.


Consumer Confidence

Consumer Comfort Highest in Almost Four Years

By Bob Willis | Bloomberg – Thu, Feb 23, 2012 9:45 AM EST

Consumer confidence in the U.S. increased last week to the highest level since April 2008 as more Americans had a favorable view of their finances.

The Bloomberg Consumer Comfort Index rose to minus 38.4 in the period ended Feb. 19, its fifth consecutive gain, from minus 39.8 the previous week. It marked the second straight week above minus 40, which is the level associated with recessions and their aftermath. Men, homeowners and households with annual incomes of more than $50,000 were the most optimistic in more than a year.

A majority rated their personal finances as positive for the first time since July, indicating a rising stock market and job growth may encourage consumers to keep spending. At the same time, higher gasoline costs threaten to unravel the recent gains in sentiment, as occurred a year ago.

"An improving labor market and rising equity prices have bolstered sentiment of survey participants, especially those in the upper-middle and wealthy classes," said Joe Brusuelas, a senior economist at Bloomberg LP in New York. Still, the "improvement will be put to the test in coming weeks due to the spike in gasoline prices."

The price of a gallon of regular unleaded gasoline climbed to $3.57 as of Feb. 19 from a 10-month low of $3.21 in December, according to AAA, the nation's largest automobile association. A year ago, gasoline costs rose through the middle of May, climbing to $3.99 a gallon, from $3.10 at the end of January. At the same time, confidence waned.


English Language - Somewhat confusing

Let's face it - English is a crazy language. There is no egg in eggplant, nor ham in hamburger; neither apple nor pine in pineapple. English muffins were not invented in England or French fries in France. Sweetmeats are can-dies while sweetbreads, which aren't sweet, are meat. If we explore its paradoxes, we find that quicksand works slowly, boxing rings are square and a guinea pig is nei-ther from Guinea nor is it a pig.

In addition, why is it that writers write but fingers don't fing, grocers don't groce and hammers don't ham? If the plural of tooth is teeth, why isn't the plural of booth, beeth? One goose, 2 geese. So one moose, 2 meese? One index, 2 indices? Doesn't it seem crazy that you can make amends but not one amend? If you have a bunch of odds and ends and get rid of all but one of them, what do you call it?

How can a slim chance and a fat chance be the same, while a wise man and a wise guy are opposites? You have to marvel at the unique lunacy of a language in which your house can burn up as it burns down, in which you fill in a form by filling it out and in which, an alarm goes off by going on.

English was invented by people, not computers, and it reflects the creativity of the human race, which, of course, is not a race at all. That is why, when the stars are out, they are visible, but when the lights are out, they are invisible.