Our disipline always drives us to look past the headline noise and try to decipher the fundamental issues that will effect the US domestic economy and financial markets. Here are some of the current issues that we believe have some bearing on our investment decisions.

Forecast

Earnings were strong in Q2 &Q3. S&P earnings estimate 2011 = $95, 2012 = $104 ($84 in 2009)

Companies are running very lean:
-Labor cost remain static
-Benefits have been reduced or eliminated
-Long term debt has been refinanced
-Many companies are sitting on large amounts of cash

Inflation remains low.

The U.S. Dollar is cheap relative to our trading partners.

Commodity prices have moderated.

The Housing market is showing signs of stabilizing.

Mortgage rates remain accommodating, declining to 3.90% last week.

Non Farm payrolls are showing some signs of recovery.

New 2011 forecast to 1.3 % GDP growth. Outlook for 2012 is 2.00 % GDP growth.

The positive sloping yield curve predicts a growing economy.

Emerging market growth continues (China is managing their inflation).

Politics: (Tax policies  are under discussion that we hope will help the economy)
-Extending payroll tax should help the economy
-Reduction of corporate taxes
-Research & Development tax deduction