Mobile advertising estimates for 2013 raised by 63% to $7.2bil from $4.4bil.

Projections for ad spending on mobile devices went from high to higher.  You wouldn’t know it from the stock prices of companies in the space but this tide is rising.

An article in Mobile Marketer (here) had this to say . . .  eMarketer recently significantly increased its 2012-2016 projections for U.S. mobile advertising.  In December 2012, eMarketer raised its 2012E U.S. mobile advertising estimate to $4.4 billion from its previous estimate of $2.6 billion, a forecast it made in January 2012. This implies U.S. mobile advertising growth of 180 percent in 2012, up from the previous estimate of 80 percent growth. 

eMarketer revised 2013-2016 estimates even more than its 2012 estimate.  In fact, eMarketer is now projecting U.S. mobile advertising to increase 77 percent in 2013 to $7.2 billion, a full $2.8 billion higher than its previous forecast of $4.4 billion.  [plus 63% ]  The firm attributed the significant increase in its estimates in large part to the success of “native ad” formats such as Facebook’s mobile news feed ads, Twitter’s Promoted Products, and Google’s direct response advertising.  EMarketer now projects U.S. mobile advertising in 2016 ($20.9 billion) to be nearly twice the size of its previous estimate ($11.9 billion). 

The increase and slope are dramatically up and to the right in the following chart.  We remain focused on ways to exploit this development.  Jeb B. Terry, Sr. March 16, 2013

Mobile ad spend est increased 3-16-13

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“Affluents” are 26% more optimistic than in October 2012

The mood of owners of 69% of the American net worth are feeling better.  No wonder equity mutual fund inflows and home purchasing are up.  Perhaps a virtuous cycle is beginning to take effect . . .

According to survey by Ipsos (here) . . . “ affluent optimism in the U.S. economy, and in their own futures, has risen significantly. In February, 43% of Affluents were optimistic about the U.S. economy, up from 40% in December 2012, and 34% in October 2012. In contrast, only 36% described themselves as pessimistic in February 2013.

In addition, 52% now believe they personally will be better off in 12 months, up from 41% in December 2012. The survey defines “Affluent” as adults living in households with at least $100,000 in annual household income. Approximately 20% of the U.S., Affluents hold 69% of the privately held net worth in America, and are vitally important for many marketplace categories including luxury, automotive, financial, technology, and travel. Dr. Stephen Kraus, SVP & Chief Insights Officer, concludes: “Affluent optimism has risen in 2013, buoyed by the performance of stock and housing markets, as well as perceived improvements in the economy as a whole, and the job market in particular.” 

This is encouraging. Jeb B. Terry, Sr. March 16, 2013

Companies are buying their shares in record amounts. Sign of weakness or a sign of strength?

The simple facts are that there has never been as much money spent and / or approved by corporate America to buy in shares.  This has happened as a dramatic spike as can be seen in the charts blow from JPMorgan and Birinyi Associates.  We haven’t seen as dramatic a spike since late 2005.  The S&P 500 rose from that time in a nearly uninterrupted slope to its peak in late 2007.  Can it happen again?  The economy and the market were not peaking in 2005.  The economy is certainly not at a peak condition today.  Perhaps the spike in stock buy backs reflects managements’ belief things are looking better.  Perhaps it’s a reflection of corporations having hoarded cash in anticipation of the “fiscal cliff” that didn’t happen and now deciding to get a better return than the little or no interest they are earning on cash.  Perhaps it is all of the above.  The facts remain that they are buying and they have ample resources to continue to buy whatever the motivation may be.  So . . . my bet is the spike in buy-backs is like 2005 and is a sign of strength.  Jeb B. Terry, Sr. March 13, 2013

JPM stock buybacks 3-13-13

Birinyi stock buyback 3-13-13

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The boom in all things “mobile” is continuing and expected to continue for the foreseeable future.

It’s appropriate to revisit the outlook for the growth in all things “mobile” coming on the heels of the Mobile World Congress.  Cisco updated their forecast of mobile data traffic last month (“wireless” is the operative concept).  I have included a chart and tables that hit some key points such as mobile data traffic grew 70% in 2012 and was 12X the size of the entire internet in 2000.  Cisco says mobile data traffic will grow 13-fold between 2012 and 2017.  Mobile video traffic now accounts for more than 50% of traffic – this has implications for not only video content but also for video ads and video communications (think Skype / Facetime).  The takeaways from the growth estimates include but are not limited to: a continuing scramble to provide sufficient bandwidth (much of which will be via WiFi offload), accelerating amounts of mobile commerce (and an attendant increase in malware and viruses), a boom in mobile marketing and advertising, a final emergence of mobile payment platforms, an explosion in M2M (“machine to machine”) and growth in multi-screen video consumption and software platforms to enable and measure who is watching.  Aberdeen is concentrated on investing in all of the above areas.  Jeb B. Terry, Sr. March 9, 2013

Mobile data traffic & Wifi Offload 2012-1017

Cisco tables re traffic and devices 2012-2017 Feb 2013

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The case for the end of the secular bear market and start of a secular bull market.

Multiple stock indices and sub-indices are breaching all-time high price levels.  There is no confusion over the fact that we have been in a “bull market” since 2009.  There is a debate if we are exiting the secular bear market that started with the tech crash and entering a new 10 year plus secular bull market.  Are we just having a cyclical bull market in the context of a secular bear market with a few years to go?.  The first chart below displays the secular highs and lows since 1871 – quite the data set –eh? The present secular bear market has gone down enough to qualify.  The second and third charts are part of the case that we have indeed entered a new multi-year bull phase that can last well beyond 2020.  Chris Puplava of PFS Group wrote a compelling piece that can be read here and also under our “Brain Food” tab.   Sounds good to me. Jeb B. Terry, Sr. March 9, 2013

Secular highs and lows 1871-2013Secular Bull and Bear Markets By Doug Short

The following charts make the case that the market will not return to the epic low of 2009 and that the 10 year return on equities has years to go before it peaks.

Secular market cycles -puplava

Secular cycle duration - puplavaThe Secular Bear Market in Stocks Is Over By Chris Puplava

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Two leading labor indicators pointing up = more upside to employment and more . . .

The labor report of March 8, 2013 was better than expected.  Within the report were encouraging indicators that the improved results may persist.  The Carpe Diem Blog published the following chart of temporary help workers and manufacturing overtime. Each are sloping upward.  Each are precursors to changes in the direction of hiring. Each are at levels and rates of change that have been consistent with improving economic growth and market appreciation.  Jeb B. Terry Sr. March 9, 2013.

temp Help & Mfg Overtime 3-8-13

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New all-time high for the Dow – What comes next? Bullish or Bearish?

Historical analysis says “bullish” . . .  We have access to data covering the S&P 500 instead of the Dow.  The takeaways seems likely to be the same.  Analysis by Ned Davis Research suggests the bull market could go one for another 400+ days and the market could rise another 18%.  I have included a summary table below.  While that information is encouraging we must acknowledge there were only 13 occasions revealed by NDR over the last 70 years.  As you consider the possibility of the data proving to be true, recall that the market today is undervalued compared to prior market highs in terms of P/E ratios and in terms of the value implied by earnings discounted by the 10 year Treasury rate.  The P/E ratio at the last new all-time high for the S&P 500 in 2007 was over 17X vs. 15.6X today.  The market was approximately 22% undervalued relative to the 10 year Treasury rate.  Today the market is 70% undervalued compared to where it should be trading in light of the 10 year Treasury rate.  2007 happened to be the worst case experience in the data set.  There can be much debate about whether either valuation tool is appropriate at this time but suffice to say that neither is signaling over-valuation.  My takeaway is that the achievement of a new all-time high hasn’t been a convincing signal of a market top in the past and likely doesn’t signal a near term top now.  Jeb B Terry Sr. March 5, 2013

Bull mkt extension after new mkt high 3-5-13

(HT to Josh Brown of Reformed Broker).

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Cash beginning to be mobilized in markets and the real economy

After unprecedented growth in cash held in banks in response to the 2008 financial crisis, the European debt crisis, U.S. debt ceiling panic attack, fear over the Presidential election and the “fiscal cliff” – we are beginning to see billions of dollars start to flow back into the markets and real economy.  Regardless of the destination of money, we can measure on a weekly basis the flow of money into or out of the banking system which I have included in the first chart below. $76 billion flowed out of M1 in the 3 months ended as of mid February.  We have never seen that level of outflow in modern times. That outflow helps explain the strength in the stock market, the strength in the housing market and the better than expected strength in durable goods orders and the recent manufacturing ISM report.  While the flow of cash back into the economy is impressive, the second chart shows that we still have over $2.4 trillion sitting idle in the banks earning virtually zero interest.  There is much more cash available to drive economic growth.  Jeb B. Terry, Sr. March 3, 2013

M1 flows Feb 2013

M1 level Feb 2013

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“History’s verdict is clear… You’re much better off buying at new highs than at new lows”

There is a classic debate as to whether to “Buy High. Sell Higher” or “Buy Low, Sell High” between momentum investors and value investors.  Dr. Steve Sjuggerud of Daily Wealth blog, raised this topic of many doctoral studies last week.  The upshot is his claim that buying stocks when the stock market is at a 12 month high and holding for 12 months beats the return of buy-and-hold.  Here is a snapshot of the results of his analysis using market highs and market lows. 

Buy sell higher Feb 2013

If you are like me, you probably have an investment style that blends momentum with value.   Jeb B. Terry, Sr. March 3, 2013

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Many reasons to see sustained market gains but margin debt may suggest a correction

Margin debt has been rising along with the stock market.  My suspicion is that the increased participation by hedge funds and other leveraged players may distort the historical picture. Nonetheless, spikes in margin debt (i.e. “negative credit balance” in the following chart) have been consistent with approaching market corrections or at worst, material market tops.  The analysis below was courtesy of Doug Short of Advisor Perspectives as annotated by Chris Kimble of Kimble Charting Solutions. Jeb B. Terry, Sr. March 3, 2013

Margin Debt March 2013

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