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Ryan Hobbs E-Newsletter

 
 

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Topics:

Justice Received

The Markets

A Different Perspective

Quote of the Week

Riddle of the Week

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Justice Received

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For almost 10 years, the USA and specifically our special forces have dreamed of this picture.  Apparently yesterday, this dream came true.  As undoubtedly you have heard, Osama Bin Laden has been killed by a special forces team of Navy Seals in Abbottabad, Pakistan.   While only time will tell the depth of this blow to the terrorist networks around the world, no one can deny the importance of eliminating Bin Laden as public enemy #1. 

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I remember like it was yesterday the television footage of the planes flying into the world trade center buildings and the absolute shock I felt when those towers collapsed.  I stayed at the Marriot World Trade Center Hotel only a few months before the attack.  I am proud of our country for enduring in the pursuit that justice demanded, and I am thankful for the freedom we enjoy because of the many sworn to protect us.  I hope it is never lost on any of us the sacrifices made by our service men and women who put their lives on the line for our country.  God Bless the USA!!!

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The Markets

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First things first…  The end of Osama Bin Laden is a game changer in some ways.  The market futures boosted over 1% on the news already, and I expect this to accelerate bullish sentiment keeping a strong bid in the US Dollar and our markets.

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Last week the high of 1344.05 on the S&P 500 was taken with a close at 1363.61.  Are we now are looking at the old trading range in the rearview mirror?  I believe it’s certainly possible.  The naysayers and risk adverse who have been predicting disaster are seemingly more desperate as the days progress.  I just flash back to the decline of January 2009, and I remember when no one believed that the markets could continue further down.  It is similar now only opposite.  Without a process devoid of emotion, many are wondering: When do I get back in?  & What would I buy if I did?  Now the mid-cap S&P 400 and the small-cap S&P 600 are at new highs and the S&P 500 is signaling that it may also move to new highs above the 1575 level.  With no clear process, the futility is evident!

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I mentioned last week that the markets were presenting renewed opportunities and the potential for a new move to the upside.  I believe this week could be the strongest week we have seen yet in this rally.  Our models have gotten a great deal of traction over the past 6 weeks.  As the S&P 500 oscillated in a pattern between 1290 and 1340, there were companies emerging ready to push forward.  This press has brought new life into this trend, suggesting that there is much more ahead for us. 

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Since September, there has been a 26% plus move in the S&P 500 and a 36% plus move in the S&P 400 and 600.  The positive rotation suggests there more positive momentum left in this trend.  Our clients are fully deployed.  If you have been waiting for an opportunity to regain your confidence and reenter the markets, don't fear this rally.  Instead embrace it as it is most likely long from over!  Remember however that we preach< "Process over Attitude or Opinion."

 

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Looking back on last week, the S&P 500 rallied as most companies continued to top earnings expectations.   Reports that first quarter GDP grew at a faster-than-expected pace apparently kept the bid in the market.  New buying last week across the board moved all sectors higher by 1% or more.  There were many earnings releases with nearly 150 S&P 500 companies releasing their results and seeing many of those stocks rendering new 52 week or all-time high.  Corporate America remains very liquid and very profitable.  They were able to take the austerity measures required to survive in our capitalist society.  Will our government now do what it needs to do to move country away from deficit spending?  The term deleveraging is not very well understood in Washington DC.

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To date, more than 300 S&P 500 companies have reported earnings and so far about 75% have had an upside surprise.  This has been the case as many of the analysts have been non-believers and have underestimated earnings for nearly two years now.  Finally, they are moving those estimates to reflect the reality.  The past quarter there was an 11.5% earnings improvement expectation and now they are moving it up to 16% looking forward.  While this may be the beginning of the end to this dramatic change, it won't be obvious until September or October.  At that time, we will likely see the number of companies reporting positive surprises relative to expectations finally decline somewhat.

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In economic news, Q1 GDP rose at an annual rate of 1.8%.  The Fed left the benchmark unchanged at between 0.00% and 0.25%, as expected.  The Fed did trim their 2011 forecast range by about 40 basis points.  On a positive note, the Fed also decreased its unemployment expectations, now forecasting a range of between 8.4% and 8.7%.

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As we look forward to this week, it appears that the market will do well early as the final few weeks of this earnings season wind down.  My expectations are for a very strong upward move this week and for most of the volatility to be on the upside for the next several weeks.

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Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  Index returns exclude reinvested dividends.

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A Different Perspective

 

Due to a severe winter storm, a rancher’s wife was confined to the home as it was time to give birth to her second child.  The house was very dark, so the father asked Kathleen, a 3 year old girl to hold a flashlight over her mommy so he could see to help deliver the baby.  Very diligently, Kathleen did as she was asked.  After what seemed like an eternity of pain and suffering, the baby was born.

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The father lifted the newborn baby boy by his feet and spanked him on his bottom.  Of course the newborn cried mightily, but he was soon calmed.  When things finally settled a bit, the father looked at a wide-eyed Kathleen and asked her to tell him what she thought of all that she had just witnessed.

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Kathleen quickly responded, “I’m not sure, but you should spank him again because he shouldn’t have been up there in the first place!”

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While this story is amusing, I often see parallels with even seasoned investors.  Many times it is easy to see what’s directly in front of us, but more difficult to remember that what we are seeing is not the whole story.  Many cogs in the wheels are in motion behind the scenes pushing capitalism forward.  While no system is perfect, humankind has no doubt invented none better to date.  While today marks the demise of one of the world’s greatest problems, there will be another problem in the future followed by another and another….  The question is not, “Will there be another problem?” but, “How will we solve the next problem when it arises?”  If we are wise enough to have faith in the future on our side, much of the battle has already been won!

 

Quote of the Week

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“Life is either a daring adventure, or nothing.”
– Helen Keller

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Riddle of the Week

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You go in through 1 hole and out through 3.  Once your inside, you’re ready to go outside, but once your outside you’re still inside.  What is it?

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Last Week’s Riddle

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Alice is walking through the forest of forgetfulness. She wants to know what day of the week it is. She stops and asks a lion and a unicorn. Now the lion lies all of the time on Monday, Tuesday, and Wednesday. The unicorn always lies on Thursday, Friday and Saturday. Alice asks the lion what day it is, he says, "Well, yesterday was one of my lying days." Alice can't figure it out just from the lion's answer so she asks the unicorn and the unicorn says, "Yesterday was also one of my lying days." What day is it?

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Answer:

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Thursday

 

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Best regards,

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Ryan Hobbs, CFP®

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Ryan Hobbs Investment Services

1119 Walnut Dr., Ste. 1

Ardmore, OK 73401

580-224-9977 or 866-808-9977

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Securities and advisory services offered through Geñeos Wealth Management, Member FINRA/SIPC

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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.  You cannot invest directly in an index.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

Consult your financial professional before making any investment decision. 

Past performance does not guarantee future results.

Sources for E-News materials are: Horsesmouth.com, MarketingLibrary.net, The Tax Foundation, VPM Online, www.irs.gov, Yahoo! Finance.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. 

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Check the background of this financial professional on FINRA's BrokerCheck