The bull market in U.S. stocks is getting really old!

In fact, this bull has been charging, standing, or sitting for more than eight years. In April, it became the second longest bull market in American history, according to CNN Money.

There are some good reasons the stock market in the United States has continued to trend higher. For one, companies have become more profitable. During the first quarter of 2017, companies in the Standard & Poor’s 500 Index reported earnings increased by 14 percent, year-over-year. That was the highest earnings growth rate since 2011, according to FactSet.

In addition, the economy in the United States has been chugging along at a steady pace. CIO Charles Lieberman wrote in Bloomberg View:

“…U.S. economic growth is continuing at a moderate pace, an economic recovery is finally underway in Europe, inflation is under control, corporate profits are rising, and there is some prospect for tax reform and deregulation, even if whatever gets implemented is less than what is really needed. These conditions imply continued growth in corporate profits.”

Last week’s employment report boosted both stock and bond markets. Financial Times opined the report was weak enough to ease pressure on bond rates and strong enough to boost share prices higher.

No one can say with certainty how long a bull market will last. Typically, bull markets are interrupted by corrections – declines in value of 10 percent or more. Historically, bulls have turned into bears, eventually. That’s why it’s important to employ investment strategies that manage risk and preserve capital even when markets are moving higher.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

fresh from the annals of improbable research. Anyone who enjoys the Ig Nobel Prizes – which spur people's interest in science, medicine, and technology by making them laugh and then making them think – may like The Annals of Improbable Research (AIR). An enthusiastically nerdy science humor magazine, the publication offers readers the opportunity to read about new and improbable things every other month.

During its 21-year history, AIR has covered a variety of topics, including:

·         The Taxonomy of Barney. “In February 1994, we observed on television an animal which was there identified as a dinosaur, Barney. Its behavioral characteristics suggested that it was dissimilar to the diverse dinosaurian faunas that are so well documented…To test the hypothesis that Barney is a reptile descended from the true dinosaurs, we went into the field in order to capture and study a living specimen. This we accomplished with remarkable ease, as Barney was advertised to be appearing at a local shopping mall.”

·         Horse Calculus. “The idea is that a heart is like a little battery, pushing weak electric currents in a three-dimensional pattern round the body…During each heartbeat, the vector (tip of the arrow) draws a loop – the heart loop – whose shape is a powerful diagnostic of health. Therefore it is useful to measure this loop…His specific question was: does the theory apply to a real horse or only to an ideal cylindrical horse…The moral of this is that applications of mathematical knowledge can be unexpected; you may find yourself taking a surface integral over a horse.”

·         Which Feels Heavier – A Pound of Lead or a Pound of Feathers? “Which weighs more – a pound of lead or a pound of feathers?” The seemingly naive answer to the familiar riddle is the pound of lead. The correct answer, of course, is that they weigh the same amount. We investigated whether the naive answer to the riddle might have a basis in perception. When blindfolded participants hefted a pound of lead and a pound of feathers each contained in boxes of identical size, shape, and mass, they reported that the box containing the pound of lead felt heavier at a level above chance.”

Lurking beneath the unusual is some potentially useful scientific research.

Weekly Focus – Think About It

“Being a scientist is like being an explorer. You have this immense curiosity, this stubbornness, this resolute will that you will go forward no matter what other people say.”

--Sara Seager, Professor of Planetary Science and Physics

at Massachusetts Institute of Technology (MIT)

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

Is preparing for the future more important than enjoying the present?

There is a lot to enjoy today. Last week, Financial Times wrote:

“Wall Street ended an impressive week on a steady note – eking out a tiny gain to a fresh record close – as oil prices recouped some of the previous day’s steep losses and the latest U.S. Gross Domestic Product data reinforced expectations for a June rate rise.”

In fact, U.S. equities have been performing well for some time. The Standard & Poor’s (S&P) 500 Index achieved new highs 18 times during 2016 and, so far in 2017, we’ve scored 20 closing highs, including three last week.

While it’s important to enjoy current gains in U.S. stock markets, it’s equally important to prepare for the future. Bull markets don’t continue forever. They often experience corrections. A correction during a bull market is a 10 percent decline in the value of a stock, bond, or another investment. Often, corrections are temporary adjustments followed by additional market gains, but they can be a signal a bear market or recession is ahead.

One investment professional cited by CNBC believes a correction may occur soon. “Gundlach expects the 10-year Treasury yield to move higher, and a summer interest rate rise should ‘go along with a correction in the stock market.’”

Barron’s cautioned strong employment numbers also may signal a downturn is ahead:

“Think about it: Jobs are a classic lagging indicator, and bouts of high unemployment and economic distress are often accompanied by falling stocks. By the time the economy improves enough to enjoy full employment, share prices will reflect that rosier outlook. That’s not to say stocks can’t do well following periods of full employment…Unemployment was 2.5 percent in 1953, and yet the market delivered big gains over the next seven years. But stocks happened to be very cheap in 1953, with a cyclically adjusted price-to-earnings ratio of just 11.6 times…That valuation is now pushing 29 times.”

There is no way to know when a correction or market downturn may occur, but if history proves out, one is likely at some point in the future.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

are americans vacation avoiders? Project: Time Off reports Americans spent 16.8 days on vacation during 2016, on average. That was an improvement from 2015, when the average was 16.2, but it was well below the 20.3 days a year spent on holiday from 1978 through 2000.

The shortening of American vacations owes something to both fear and ambition, according to Project: Time Off:

“Americans are still worried about job security when it comes to taking time off. More than a quarter (26 percent) say they fear that taking vacation could make them appear less dedicated at work, just under a quarter (23 percent) say they do not want to be seen as replaceable, and more than a fifth (21 percent) say they worry they would lose consideration for a raise or promotion.”

While waiving a few vacation days may impress the boss, there are some significant economic consequences. For instance:

·         Forfeiting 206 million vacation days in 2016 cost employees $66.4 billion in aggregate and about $604 individually.

·         The increase in vacation day usage from 2016 to 2017 contributed $37 billion to the U.S. economy, helped create 278,000 jobs, and generated $11 billion in additional income across the country.

As it turns out, gender and job title are good predictors of the likelihood vacation days will remain unused. Last year, men were more likely than women to use all of their vacation days, even though women were more likely to say that vacation was extremely important.

The same was true of senior management. Company leaders believe corporate culture encourages vacation and often hear about the value of taking vacation, but are unlikely to use all of their vacations days.

Weekly Focus – Think About It

“The only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones who never yawn or say a commonplace thing, but burn, burn, burn like fabulous yellow roman candles exploding like spiders across the stars.”

--Jack Kerouac, American author 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

How much is too much?

There has been no shortage of drama since the new administration took office – legislative setbacks, controversial hiring and firing, and fiery tweets on various topics. Regardless, U.S. investors and markets remained stalwart until last week when the CBOE Volatility Index (a.k.a. the fear gauge) jumped 46 percent higher and markets declined.

Financial Times explained:

“…a range of stock benchmarks made their biggest single-day fall since November, as the political controversy over Donald Trump ties with Russia undermined investors’ faith in the administration’s ability to enact its pro-growth policies. Markets subsequently steadied, but investors are primed for further volatility as the White House faces the distraction of a lengthy inquiry led by an independent special counsel.”

Markets recovered some ground late in the week as the influence of Washington, D.C. drama was offset by strong earnings news. On Friday, FactSet reported first quarter earnings results were in for 95 percent of the companies in the Standard & Poor’s 500 (S&P 500) Index and 75 percent had beaten estimates. Altogether, corporate earnings were about 6.0 percent higher than expected.

Earnings performance was particularly strong for companies in the Information Technology, Healthcare, and Financials sectors, and relatively weak for companies in the Telecom Services, Real Estate, and Consumer Staples sectors.

Brace yourself. Next week may be bouncy. The Federal Reserve Open Market Committee will release minutes from its most recent meeting. In addition, we’ll receive the administration’s proposed budget, along with new economic data and consumer sentiment readings.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Are you helping your adult children financially? In 2015, Pew Research investigated whether aging parents received more assistance from adult children or adult children received more assistance from parents. In the United States, Italy, and Germany, they found parents provide more financial assistance to their adult children than the adult children provide to their parents.

The survey found 39 percent of American parents had helped their adult children with errands, housework, or home repairs during the past twelve months, and 48 percent had helped with childcare. Almost two-thirds had provided monetary support. Financial help appeared to be contingent on parents’ circumstances. Those with higher household incomes were more likely to give money to adult children.

Becoming the ‘Bank of Mom and Dad’ can be a slippery slope, according to AARP Magazine. Since parent-child relationships can be emotionally fraught, it’s sometimes difficult to gauge when financial assistance is a good idea and when it’s not. Should you pay for a car repair? Help with the down payment on a home or apartment?  Foot the bill for a grandchild’s private school or college? Fund a lavish wedding? Help with medical bills?

The AARP suggested answering four questions, using a scale of 0 to 5, may help parents determine whether to give money to an adult child. The questions are:

1.      Will this investment add stability and security to my child's life?

(0 = entirely optional; 5 = absolutely necessary)

2.      Is this a short-term or one-time cash need, or is it something that could go on for years?

(0 = guaranteed, long-term payouts; 5 = absolutely just one time)

3.      Is there risk in the investment beyond the cash outlay, such as financial liability on a contract or damage to your credit?

(0 = very high levels of risk; 5 = no additional risks)

4.      Can you lend or give this money without fear of damaging your relationship with your child? Or, will it cause tensions or resentments for the people involved?

(0 = guaranteed tensions or resentments; 5 = everyone is happy)

If the combined answers total 13 or higher, the answer is yes, give money to your adult child. If the total is less than 13, you may want to think twice before opening your wallet.

Weekly Focus – Think About It

“Life is to be lived, not controlled; and humanity is won by continuing to play in face of certain defeat.”

--Ralph Ellison, American author of ‘Invisible Man’

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

Does performance tell the whole story?

American stock markets have delivered some exceptional performance in recent years. Just look at the Standard & Poor’s 500 (S&P 500) Index. Barron’s reported the S&P 500, including reinvested dividends, has returned 215 percent since April 30, 2009. The index is currently trading 50 percent above its 2007 high.

The rest of the world’s stocks, as measured by the MSCI EAFE Index, which includes stocks from developed countries in Europe, Australia, and the Far East, returned 97 percent in U.S. dollars during the same period. At the end of April, the MSCI EAFE Index was 20 percent below its 2007 high.

If you subscribe to the ‘buy low, sell high’ philosophy of investing then these performance numbers may have you thinking about portfolio reallocation. However, performance doesn’t tell the full story.

For example, there’s a significant difference between the types of companies included in the two indices. At the end of April, Information Technology stocks comprised 22.5 percent of the S&P 500 Index and just 5.7 percent of the MSCI EAFE Index. Financial stocks accounted for 14.1 percent of the S&P 500 and 21.4 percent of MSCI EAFE.

It’s important to dig beneath the surface and understand the drivers behind performance before making assumptions or changing portfolio allocations.

Even so, European stocks have the potential to deliver decent performance this year, according to Barron’s. “The case for a revival in European stocks, particularly the Continent’s many multinationals, rests in large part on expectations for improving global growth…This year Europe’s GDP is expected to increase by about 2 percent, after growing 1.7 percent in 2016 – better than the U.S.’s 1.6 percent.”

Last week, the S&P 500 Index moved slightly lower.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

the herd of unicorns is growing. Since 1996, the value of companies listed on American stock exchanges has increased from105 percent of gross domestic product (GDP) to 136 percent of GDP, according to The Economist. (GDP is the value of all goods and services produced in the United States.)

During the same period, the number of companies listed on American exchanges has fallen from 7,322 to 3,671.

This fact might lead you to surmise that a few businesses have become dominant in their industries, but that’s not the case. Many companies are choosing to remain private rather than issue shares through an Initial Public Offering (IPO) and then trade on an exchange. Financial Times explained:

“Over the past 10 years the number of initial public offerings in the United States, and the total amount of equity raised by them, are way down on historical averages. If these had held there would have been more than 3,000 new public companies in the past decade. Instead, we have had fewer than half the number of IPOs.”

Why don’t the leaders of vibrant young companies want to issue shares? There may be several reasons:

·         Technology-intensive businesses may need less capital.

·         It’s relatively easy to raise money in private equity markets.

·         Regulatory requirements for public companies increase litigation risk from securities class actions.

·         Private markets are better at allowing companies to take a long-term perspective.

The reluctance to take companies public has fattened the world’s herd of unicorns – private firms worth over $1 billion that are not subject to public-company standards for accounting and disclosure. There are currently about 100 of them.

Weekly Focus – Think About It

“It may be possible to gild pure gold, but who can make his mother more beautiful?”

--Mahatma Gandhi, Leader, Indian independence movement 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal. 

Is it complacency? Exuberance? Uncertainty? Exhaustion? Insight? Intuition?

Last week, all three major U.S. stock markets gained value and two reached new record highs. On the face of it, that’s great news for stock investors. However, if you look below the surface, the markets’ upward trend may have you scratching your head.

Barron’s reported:

“That the S&P would hit a new high was all the more surprising given the lack of reaction to major headlines throughout the week. On the plus side of the ledger, Congress managed to avoid a shutdown, while on the downside, President Donald Trump tweeted that the U.S. ‘needs a good shutdown,’ and the Federal Reserve appeared more hawkish than prognosticators had been prognosticating. Nothing. Then there’s the prospect of a shocker in the French election over the weekend, though the pro-Europe candidate Emmanuel Macron is widely expected to beat the more-radical Marine Le Pen. Yet here we are. 'It’s like the market took Novocain and is numb to everything,’ says Thomas Lee, head of research at Fundstrat Global Advisors.”

It may be investors give more weight to company performance during the first quarter than to other factors. So far, 83 percent of the companies in the Standard & Poor’s 500 (S&P 500) Index have reported first quarter earnings (earnings measure a company’s profitability). Three-fourths of the companies reported earnings were higher than had been estimated, reported FactSet.

Strong earnings show companies have performed well. Price-Earning (P/E) ratios help investors gauge whether a company’s stock, or a stock index, is a good value. The P/E ratio indicates the dollar amount an investor may pay to receive one dollar of a company’s or an index’s earnings, according to Investopedia.

Last Friday, the trailing 12-month P/E ratio for the S&P 500 Index was 21.9. That’s quite a lot higher than the five-year average of 17.4 or the 10-year average of 16.7.

At the same time, the forward 12-month P/E ratio for the S&P 500 Index was 17.5. That’s also a lot higher than the five-year average of 15.2 or the 10-year average of 14.0.

So, why are highly valued markets moving higher? It’s a puzzle.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Is The U.S. government well run? Stop rolling your eyes. The Economist reported Steve Ballmer, former head of a large tech company, has been working on a new project – completing Form 10-K for the United States of America. The project is called USA Facts: Our nation, in numbers.

If you’re not familiar with Form 10-K, it is the global gold standard of corporate disclosure. United States regulators require public companies to provide comprehensive overviews of their businesses and financial condition each year, including audited financial statements. The information is provided on Form 10-K.

USA Facts aggregates publicly available data from federal, state, and local governments. It then groups the data into four operating divisions based on the ‘missions’ described in the U.S. Constitution:

·         Establish justice and ensure domestic tranquility

·         Provide for the common defense

·         Promote the general welfare

·         Secure the blessings of liberty to ourselves and our posterity

After reviewing USA Facts, The Economist wrote:

“Governance is poor. The country is not managed using a coherent taxonomy. So, for example, the House of Representatives, the Senate, and the White House each split the job of running America into roughly 20 operating divisions. But their categories are different, meaning crossed wires and insufficient accountability…”

The findings aren’t much of a surprise. The government does not compare favorably to corporations. It has a profit margin of negative 3 percent. (The S&P 500 average is 8 percent.) It invests more in the future than most companies. Research and development and capital expenditures are 12 percent of revenue. (The S&P 500 average is 8 percent.) Debt is 289 percent of tax revenues, which are a proxy for sales. (The S&P 500 average is 77 percent.)

If you’d like to review the numbers, visit USAFacts.org.

Weekly Focus – Think About It

“Ignorance and fear are but matters of the mind – and the mind is adaptable.”

--Daniel Kish, President of World Access for the Blind

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.