Growth deceleration

Stocks traded near their session highs in late-afternoon action Thursday, scoring solid gains after being up just modestly earlier.
The Dow Jones industrial average added 1%, the Nasdaq rose 0.8% and the S&P 500 gained 0.7%. Turnover continued to track down from Wednesday's level for the NYSE, but turned higher for the Nasdaq.
Leading stocks generally were faring well. Within the IBD 50, more than 40 stocks were up. As earnings season keeps rolling, a number of leading stocks were making big moves on their quarterly reports.
Equinix (EQIX) surged 12% in fast turnover. Late Wednesday, the provider of high-performance data centers said first-quarter EPS increased 34% to 71 cents, crushing forecasts for 49 cents. Revenue grew 25% to $452 million. The stock has rebounded off its 10-week moving average to a new high after making its first pullback to that level since a breakout in January.

Economic growth slows

U.S. Treasury debt prices rose Thursday after disappointing data on jobless claims fueled worries about slowing U.S. economic growth, which would hold down inflation and keep alive the chances of more bond purchases from the Federal Reserve.
Weaker-than-expected European economic figures stoked fears that the region is entering a recession and compounded safe-haven bids for U.S. government debt, analysts and traders said.
"We've seen a deterioration in data in the U.S. and Europe. That's keeping a bid for Treasuries," said Jason Brady, portfolio manager at Santa Fe, N.M.-based Thornburg Investment Management, which oversees $82 billion in assets.
Benchmark 10-year notes last traded up 11/32 in price for a yield of 1.95%, down 4 basis points on the day. They were up as much as 16/32 with a 1.93% yield, helped partly on safety bidding on persistent worries about contagion risk from the euro zone debt crisis.

If your company has pay ranges

The U.S. continues to add jobs, even if at a snail's pace, and pay raises are slowly becoming more common.
Saving more is a regular strategy for pumping up retirement accounts. As the economy improves, you should also look for ways to boost your pay.
Aon Hewitt, human resource consultant and outsourcer, projects U.S. pay hikes will average 2.9% this year.
In 2009, 48% of firms froze workers' pay. By last year that was down to 5%. Aon Hewitt expects that to drop again this year.
"Pay raises are no longer extremely rare," said John Challenger, CEO of outplacement consulting firm Challenger Gray. "But the old, routine 4% annual increase is not back yet either. If you want a pay raise, you've got to go after it."

Drove the prices of stocks

[The last fifty years] produced a persistent increase in asset prices vs. nominal GDP that led to an average overall 50-year appreciation advantage of 1.3% annually. That’s another way of saying you would have been far better off investing in paper than factories or machinery or the requisite components of an educated workforce. We, in effect, were hollowing out our productive future at the expense of worthless paper such as subprimes, dotcoms, or in part, blue chip stocks and investment grade/government bonds. Putting a compounding computer to this 1.3% annual outperformance for 50 years, produces a double, and leads to the conclusion that the return from all assets was 100% (or 15 trillion – one year’s GDP) higher than what it theoretically should have been. Financial leverage, in other words, drove the prices of stocks, bonds, homes, and shopping malls to extraordinary valuation levels – at least compared to 1956 – and there could be payback ahead as the leveraging turns into delevering and nominal GDP growth regains the winner’s platform. …Rage, rage, against this conclusion if you wish, but the six-month rally in risk assets – while still continuously supported by Fed and Treasury policymakers – is likely at its pinnacle. Out, out, brief candle.

The economic future

The piece below by Peter Boettke summarizes what I think about current economics. The Keynesian model or paradigm is wrong and always has been. Two primary reasons it was adopted were 1) the crisis of the 1930s was misunderstood but demanded “action” of some kind and 2) it gave the politicians a license to steal power and money from the citizens. If economics were a physical science where data could refute false hypotheses, it is doubtful that the paradigm would still exist today. Because it isn’t, reason number two became paramount. Most economists initially objected to  the theory, gradually agreeing with it over time. After all, it also provided lucrative rewards for them in terms of higher paying jobs in government and eventually a route to tenure after it dominated university economics departments.
The books referenced below in the fifth paragraph are excellent reads for anyone interested in the flaws and inconsistencies in the so-called General Theory. “The Critics of Keynesian Economics”

Look at our portfolio on the refining side

Global aluminum giant Alcoa may further cut capacity this year as it reevaluates demand, the company's Chief Executive Klaus Kleinfeld told analysts on its first quarter conference call.
Already, the conglomerate has announced it would cut smelting capacity by 12 percent, closing facilities in Tennessee and Texas in the U.S., as well as operations in Portovesme, Italy and La Coruña and Avilés, Spain.
"We continue to look at our portfolio, and we continue to monitor the outside world. And by the way, I mean, the 530,000 tons that we've taken off-line may not be the end," Kleinfeld said.

The amount of risky loans

Bank credit cards had a 41% increase in sub-prime consumers from 2010-2011, pushing sub-prime borrowing to a four-year high in December, according to a report from Equifax.
Sub-prime borrowers also make up over 46% of the auto-financing market.

Primarily invest in dividend stocks

BOSTON (AP) — Investing is about give and take.
Consider growth-oriented companies, which are focused on building business and expanding market share. When the economy improves, their stocks are likely to rise more sharply than those of well-established companies, such as General Electric and Johnson & Johnson. In exchange, growth stock investors pass up the potential for regular dividend income.
Most technology companies fall into this category. They spend heavily on new products and research to stay competitive. But many have built up so much cash that they're rewarding investors by starting to pay dividends, or by increasing them. It's an emerging trend that's giving tech investors solid dividend yields, along with strong potential returns from stock price appreciation.
Look no further than the biggest tech name, Apple. Its shares are up more than 50 percent this year, and its cash stockpile grew so large that it recently announced plans to begin paying a dividend. Starting this summer, Apple investors will get $10 billion in annual payments.

Banking and industry

Investors Business Daily opines that “Big government threatens our well-being with irresponsible health care “reform,” higher taxes on entrepreneurs, a tax-filled cap-and-trade energy bill, a host of new business-strangling regulations and trillion-dollar deficits as far as the eye can see.” Then they go on to say: “In late July, economist J.D. Foster of the Heritage Foundation put it succinctly: ‘This is no longer an experiment in economic policy. The results are in: Keynesian stimulus does not work.’ This GDP report doesn’t change that conclusion a bit”.
It is difficult to be more pessimistic than that. However, they do state that we have “stepped back from the abyss.” and that “our only hope going forward is the private economy. Though hindered by massive government intervention in housing, banking and industry, it’s still the most resilient in the world. Given the list of problems they cite, it is difficult to reconcile the optimism and pessimism contained in the piece. I suspect that we will slip back into recession in another quarter or so. I found little reason or justification for their, admittedly muted, optimism.

Accumulations of government debt

A nice article detailing the recent history of the dollar. The fact that the dollar has declined 79% in the last 9 years versus the Euro is shocking. What is even more astounding is that it has declined so much against a currency not backed by a country and a region that has underperformed for decades. The socialistic economies of “Old Europe” have been stagnant for many years, especially regarding job creation. What does this say about the US for the past 9 years? Obviously it has implications for our economy, regardless of what government-reported GDP statistics say. It says even more about our loose monetary policy which would reflect even more directly into exchange rates.

The image to the right depicts a unit of currency issued by the United States of America. On the back is the phrase: “In God We Trust.” To the extent that the dollar has much value left, it may be as a

Spending more money

Apparently things are so good that we are going to make them even better. Are we back in Alice in Wonderland? If this were not so serious, it would be comical. Another stimulus is being discussed. Who possibly could have seen this coming? Probably only all those that said the first one would not work. Of course, they and probably many more will now opine that a subsequent one will not either. But what do they know, they got lucky on their first call. Our “leaders” will ignore them once again.
The country and the Keystone Cops running it are bankrupt.  Spending more money when you have none appears to them a winning strategy. Perhaps it is, if your goal is to worsen things. Maybe it will enable the citizens to realize how lost our country is.