Outstanding housing affordability! – the best since they started keeping records.

The Housing Affordability Index published by the National Association of Realtors is literally headed off the chart.  (see their latest report here) It has never been as high nor risen as fast as it has in the recent past.  The index is a derivative of mortgage interest rates and personal income.  Rates are obviously low and personal income is rising.  Combine those facts with still very low home prices and -voila – more people can afford to buy more homes.  More home buying causes home prices to firm which helps consumer confidence which helps stimulate stock market investment – and that’s a good thing –eh?. . .  Jeb Terry, Sr. April 25, 2012

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Another measure points to improving economy – reaching a “tipping point” in American’s sentiment about financial security.

Bankrate’s Financial Security Index (here) is the strongest since the index was started in 2010.  The index is up 5 months in a row.  It comports with other measures of consumer confidence.  Rising confidence can lead to rising housing activity, rising retail activity and rising stock market investment activity – it’s all good . . . and all early.  The index is at a “tipping point” according to Bankrate.  They indicated it is at 99.9 but needs to break above 100 to show that Americans feel on the whole that their financial security is indeed growing stronger.  So while index is improving i.e. Americans are feeling LESS financially insecure, it does not yet mean we are anywhere near a peak in sentiment or in economic activity – this too is “all good”.  Much more to come.  Jeb Terry, Sr. April 23, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

So far, So good . . . the earnings reports for Q1 are beating earnings and revenue estimates by a wide margin.

While only 245 companies have reported earnings so far, 72% of those that have reported have beaten earnings estimates.  That is an outstanding beat rate.  70% of them have beaten the revenue estimates. The earnings beat rate at a similar point in time following Q4 was only 58.5%.  The charts below come courtesy of Bespoke Investment Group (here).  The beat rate is of course a function of rising revenue and earnings and analyst estimates that were too conservative.  Either way- the most powerful three words in the investment world is “better than expected”.  Next week is jammed with earnings reports.  Over half of the S&P 500 companies will have reported.  If the beat rates continue we should expect more market upside ahead.  That said, the strong market performance in Q1 still supports the fast money habit of “sell in May and go away”.  Jeb Terry, Sr. April 22, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

Market performance in Presidential election years – not bad and mostly up . . .

It’s logical to wonder what has been the tendency for the equity market performance in Presidential election years.  I have prepared the following table on the S&P 500 annual price performance going back to 1948.  As you can see, the market has been up in 75% of the years an average of 11.9%.  I think it is instructive that the best year was 1980 when Reagan defeated Carter.   Jeb Terry, Sr. April 19, 2012

CXO Advisory Group, LLC (here) was kind enough to post the following chart on the monthly returns for the Dow Jones Industrial Avg. in election years compared to non-election years.  It is visually clear that Presidential election years tend to have better than normal returns in July, much better returns than non-election years in August, better in September and better than years where there are no elections in Nov. and Dec.  April, May and October look to be usually down months.

Aberdeen Investment Management – a guide service for micro-cap technology investment

Mobile video – a big piece of TV Everywhere. . .

As we have said in the past, we concentrate on markets where there is a rising tide, where there is measureable new customer adoption with superior double digit growth.  These markets allow multiple adolescent companies to monetize their technology, establish a successful revenue model and hopefully reach scale.  The advent of smartphones and tablets has enabled an explosion in the amount of video viewed in a mobile context.  Mobile video viewership represents the biggest and fastest growing opportunity for new ad revenue for content owners, more effective ads for advertisers and market share and revenue growth for ad agency ecosystem.  Jeb Terry, Sr. April 19, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

Waiting for the “All Clear” Signal

ALL CLEAR?

  •  In the long run . . . it’s remarkably good
  •  People . . . Employment picking up. We remain in a sweet spot
  •  Productivity . . . Profits are strong and will get even stronger
  •  Capital . . . We are awash in liquidity, under loaned & under invested
  •  Consumers have the capacity to spend and invest
  •  Stocks are cheap
  •  Interest rates and high frequency data signal a sustainable recovery
  •  Housing will be a wind at our backs
  •  There is a Mobile Revolution going on
  •  Big government is the biggest risk

If you look past the ongoing political theatre and the soft patch we are experiencing due to last year’s panic to cash in Q3 (triggered a “tightening” impact) equities and the economy look more than “just fine”.  See full report here http://bit.ly/HVT5lX

Aberdeen Investment Management – a guide service for micro-cap technology investment

Q1 Earnings pre-announcements better than expected – signal improving profits

Thomson ONE just published results of the pre-season earnings announcements for the S&P 500.  79% of the 28 companies that pre-announced beat estimates by an average 9%.  This is FAR BETTER than the long term average of 62% of pre-announcements beating estimates.  They go on to report that the preseason earnings results have predicted the rate at which companies have reported better-than-expected results in the entire earnings season about 2/3 of the time. The blue line in the following chart is the pre-season “beat” rate.  Only the recovery from the 2008/2009 financial crisis has shown a better beat rate in the last 10 years.  This is GOOD!  Jeb B Terry, Sr. April 10, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

Don’t be misled by March employment report – Q1 saw more jobs added than in over 20 years

The financial media will be buzzing over the apparent slow down in new jobs reported from the Establishment Survey by the BLS.  If one looks at the job gains for the 1st quarter as measured by the Household Survey, from which the BLS calculates the unemployment rate, you will see a VERY DIFFERENT picture.  The Household Survey captures more of the small business job growth.  It shows us that Q1 had more new jobs than any quarter going back to the late 80’s.  Make no mistake – March was the weakest month in the quarter and actually saw a very slight decline in the number of employees.  Nevertheless – one month in a very noisy data series does not mean the trend has shifted.  Have a look at the following chart and make your own conclusion. By the way – our little tech companies are hiring.  Jeb B Terry, Sr. April 6, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

Riding a wave of Innovation – “Innovation is the central issue in economic prosperity” – Michael Porter

Michael Porter of Harvard B-School fame got it absolutely right in the above quote.  The U.S. is presently going through a state of furious innovation in communications, nanotechnology, cloud computing, healthcare . . . The current market rally is being led by technology companies – businesses based on a paradigm of abundance vs. scarcity.  The following chart was prepared several years ago but remains very effective in laying out the case that we are in a 6th multi-decade wave of innovation. Jeb B Terry, Sr. April 5, 2012

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