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KPIG Radio – The Profit Motive April 13


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Stocks enter the final hour on a down note despite the earnings season getting off to a decent start. Since Monday, the DOW has lost a little over 1% while the NASDAQ has slipped about ½%. Indeed, unlike the first quarter when stocks roared the 2nd quarter finds the major averages struggling with losses though they remain positive year to date.

The March CPI increased .3%, annualized the rate is running well below the historical average of 3.1% coming in at just 2.4%. Using the Cleveland Fed trimmed mean CPI and the figures are plus .2% in March and plus 2.2% from a year ago. Once again inflation shows it’s not a threat in the aggregate a theme that is repeated over and over again with the assorted price measuring metrics post bust and what inflation there is primarily comes from the commodities sector, mostly energy and substantially derived from speculation.

Nothing like bad news to generate eye catching headlines. With many pointing to the recent jump in Spanish Sovereign bond spreads as proof the European financial crisis is coming back to life I note the following. This week, relative to their 10-year German counter parts Spanish bond yields increased .22%, Portugal jumped .32% while Italy increased just .07%. France, Belgium, Ireland and Greece all saw yields decline over the same period. On a year ago basis, again relevant to their 10-year German counterpart Spanish yields are .98% higher, Greece is unchanged while Italy, France, Belgium, Portugal and Ireland are all lower, some significantly. Once again, data without context isn’t particularly useful.

Despite all the recent headlines about stocks reaching 4-year highs and analyst comments about Apple hitting a thousand, I remember they said similar things about Amazon at the height of the Dot-Com bubble, in case you’ve forgotten that didn’t end well, but I digress. A piece in the Financial Times shows that equity mutual funds continue to see significant outflows as last week was the highest this year with almost 1% of total assets going out the door, led by withdrawals from domestic stock funds.


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