Do January Returns Bode Well for 2013?

As we close out the first trading month of 2013 on a positive note, some investors may be wondering about the January Effect when it comes to the equity markets.  The January Effect is simply looking at how the rest of the year performs vs. how the actual month of January performed.  Not very scientific but nonetheless the data according to this Barron's article shows the DOW has better shot of staying in the positive than if January was a down month.

It goes with out saying, we would not make investment decisions based upon this data point alone.

January Barometer

Dow in January is…	% of time Dow rises from February through December	Average Dow gain from February through December
Up	73%	7.68%
Down	52%	3.78%
All years in sample	66%	6.27%

Best Values in Public Colleges, 2013

Kiplinger is out with it's top 100 college value choices.  According to Kiplinger their criteria is based upon tangible measures of academic quality—including test scores and four-year graduation rates—as well as affordability.

Top 5 list is below along with a couple of highlights.  The University of North Carolina takes the top spot for the 12th time.  Go Heels!

• Despite a slowly improving economy, the landscape for public colleges continues to look bleak. Having endured cuts in state appropriations over the past several years, colleges have bumped up class sizes and trimmed administrative staff. Meanwhile, the average sticker price—$17,860 for in-staters and $30,911 for out-of-staters, according to the College Board—climbed 4.2% and 4.1%, respectively, over last year, once again outpacing inflation and family incomes. An even bigger cause for concern: The net price (sticker price minus financial aid) for in-state students has risen for the third year in a row.
• The outlook for new grads isn’t much better. Many recent graduates are swapping mortarboards for part-time or low-paying jobs, while tackling student debt. "The notion that college is a ticket to a good, middle-class life of prosperity is perceived to be less true today," says Richard Vedder, of the Center for College Affordability and Productivity. Still, a typical college grad can expect to make about $20,000 more per year than the typical high school graduate.

Top 5 Ranked Colleges according to value

1. University of North Carolina at Chapel Hill
2. University of Virginia
3. University of Florida
4. College of William and Mary
5. University of Maryland, College Park

Speedier Internet Rivals Push Past Cable

How much internet speed does one really need?  Well the need may or may not be there, but the demand is surely growing.  According to the graph below by RVA Market Research courtesy of this WSJ article, high speed internet users are scheduled to reach over 10M by 2016.

This could mean costly upgrades for current carriers who have been using huge amounts of free cash flow to buy back stock and increase dividends.  This would also mean pressure on earnings but would the investment be worth it?  Some costs would likely be passed along to consumers who are already looking for low costs alternatives to the current major cable subscribers.

This is likely a very long trend that would have to play itself out, but one worth keeping your eye on.

Everything Is Marketing: How Growth Hackers Redefine The Game

For those of you small business owners out there struggling without a lofty ad budget, review this piece in Fast Company that discusses the new ways of marketing.

• At the core, marketing is lead generation. Ads drive awareness…to drive sales. PR and publicity drive attention…to drive sales. Social media drives communication…to drive sales. Marketing, too many people forget, is not an end unto itself. It is simply getting customers. And by the transitive property, anything that gets customers is marketing.
• innovations were possible because they came from startups, businesses typically averse to traditional marketing for two reasons: 1) they don't have the money and 2) they don't have the experience. Because they didn't have access to the "luxuries" of an ad budget or the burden of proper training, they were able to be creative enough to broaden the definition of marketing to immense advantage. Meanwhile, companies with the ability to spend millions a year (or month), chug along with poorer results and poorer ROI.

Although the article may be light on specifics, if may give you a spark to think of something different that you can do as far as getting the word out about your own product or business.

Ray Dalio on CNBC

Amazing that Ray Dalio, founder of Bridgewater Associates, one of the largest hedge funds in the world started with $5M and grew it into $130B in asset under management.  Notice how he sets the stage for the interview.  We like Dalio because he is not about stock tips but how the economic machine works and understanding its cause and effect.

Visit NBCNews.com for breaking news, world news, and news about the economy

Hoisington Quarterly Review and Outlook, Fourth Quarter 2012

Each quarter we post the Hoisington Quarterly Review.  There team does a tremendous job of breaking down the future US and global economic outlook.  This quarter there is a keen focus on the increases in taxes and the effects that it could have or will have upon the US economy.  We had listed in a previous post the tax increases that were going to occur as part of the American Taxpayer Relief Act, we have listed them again below as part of the Hoisington Quarterly Review

1. A 4.6% increase in the top marginal tax rate to 39.6%;
2. A phase-out of itemized deductions (mortgage interest expense, various state taxes - income, property and sales - and charitable gifts) for high-earners;
3. A phase-out and elimination of personal exemptions for high-earners;
4. An increase in the tax rate to 20% for capital gains and dividends for highearners;
5. A 3.8% surtax on capital gains, dividends and other investment-type incomes for high-earners;
6. A 0.9% surtax added to the Medicare tax for high-earners;
7. A 2.3% excise tax on medical device manufacturers;

Barron's: The Next Boom

This weekends edition of Barron's featured a great cover story called  Made in America which highlights the cheap natural gas and oil boom occurring within the US and how it is making manufacturing more affordable than producing goods overseas.  This is certainly not a new theme to TAMMA readers as we have been pounding this story for the past few years.

The Barron's article highlights 8 specific companies that they think will do well given the energy boom and related increases in manufacturing.  While we do not agree with all or many of there choices, we do see value in the railroads which the article highlights two companies Union Pacific and Kansas City Southern.

Most of the eight companies featured are large companies but within this strategy we would prefer to find smaller companies with the ability to grow faster or be acquired by one of their larger competitors.

Billionaire Hedge Fund Showdown on CNBC

For those of you that follow the big hedge fund managers, Bill Ackman and Carl Icahn are two of the biggest.  This is an extremely rare event for this type of conversation to take place on air.  Behind closed doors any thing can go.

2013 Week 4 Performance.....8 Days in a Row

Yes believe it or not, the equity markets have now been up 8 days in a row.  We have not seen this type of streak since 2004.  Also this week marked a return to a 5 year high in the S&P 500.

Unfortunately not everyone is participating in this rally.  You have a group of people that have

1. Sat on the sidelines
2. Bet against the market during this rally mode
3. Chosen specific stocks that for one reason or another have not participated in this upward momentum, especially within the last month

At TAMMA Capital we could fall into a 4th category if you will, touching points two and three but also participating in the increased gains as well.

We had an earlier post this week, Why does this bull market get no respect?  We discussed the upcoming four year anniversary of the Great Recession bottom in market terms as well as the fears people have in getting into the equity markets now fearing a new top.

At TAMMA we have always emphasized that being invested in the markets is not a all or nothing strategy.  There are times when caution is the best way to proceed while at other times, it is best to be more aggressive.

You are never going to be able to call every bottom or top so the best strategy to employ in our opinion is one of balance based upon our own analysis and conviction.  Right now that conviction is being put to the test in the form of Apple and Netflix.

These two stocks which we highlighted in this post, have completely changed spots as far as a stock that was the envy of the market to one that no one wants to own.  Apple was once hot and now it is not.  Netflix was once cold and now it is not.

The question that we posed is what strategy or analysis will come out on top?  The fundamental strategy that Apple is a much better company than Netflix?  Or the current technical trend that says Netflix is the one to own and Apple is the one to dump?

We have squarly made our decision and that is to continue to back our long position of Apple and add to our short of Netflix.  Yes, Apple could turn into a value trap but with a Fwd P/E of 7.4 vs. a 68.5 for Netflix, we like our chances with a proven winner like Apple vs. Netflix.

Our performance this week underscores the change in market prices between these two stocks.  We finished this week down while the rest of the markets were up.  To offset the unfavorable Apple/Netflix performance, we have had our other long-term strategies of agriculture and solid companies with good dividends continue to pay off.  This is where the balance that we spoke about earlier pays off and why it is never a good idea to bet the "farm" on one stock.

On the economic front this week we learned that the supply of exiting homes is getting tighter which is helping to increase home prices.  Good for those that own a house and are trying to sell.  On the flip side, new home sales are seeing continued strong momentum and price increases.  The median price of $248,900 is the highest in more than five years. This does not bode well for our short home builder position which we will be exiting next week.

Continued improvement in the labor markets showed again in the release of initial jobless claims.  The four-week average is nearly at a five-year low.  More people keeping their jobs could increase consumer confidence and thus spending.

The Week Ahead

This week is the bonanza of economic data releases.  The biggest event will be the jobs report at the end of the week but there is so much data to get through before Friday that could have major implications upon the equity markets.  A better than expected GDP number on Wednesday or jobs number on Friday could push equity markets towards all time highs.  Also pay attention to the auto sales numbers are Friday which could give further indication of how well the consumer is willing to spend.

• Mon - Durable Goods Orders, Pending Home Sales Index, Dallas Fed Mfg Survey
• Tue - FOMC Meeting Begins, S&P Case-Shiller HPI, Consumer Confidence
• Wed - ADP Employment Report, GDP, FOMC Meeting Announcement
• Thu - Challenger Job-Cut Report, Jobless Claims, Personal Income and Outlays, Employment Cost Index, Chicago PMI
• Fri - Motor Vehicle Sales, Employment Situation, PMI Manufacturing Index, Consumer Sentiment, ISM Mfg Index

Have a great week!

TAMMA Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what TAMMA can do for you.  No matter what stage in life you are currently at, TAMMA can help you plan for your ever changing needs.

TAMMA can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.

Who Cares About Debt if We're All Dead in the Long Run?

There is not much that I am going to add to this Randal Forsyth Barron's column except for that it makes for a very good discussion between those that are married and those that are single.

Mind Blowing Turn of Events

Apple and Netflix are certainly a tale of two different companies and two different stock prices right now.  Once the envy of the market, we have well documented the free fall that Apple's share price has been in since last fall.  On the other side of the equation, Netflix whose stock was being hammered for most of 2012 is now on a trajectory towards the moon.  The reason...one company reports an unbelievable quarter and misses expectations i.e. Apple, while Netflix beats expectations while turning in a decent quarter.

Full disclosure we are long Apple and short Netflix.  The stories between these two companies could not be more different.  In the Apple, you have a company setting all time records as far as revenue, profit and cash are concerned but there is fear of where the next big break through will occur and legitimate concern over margin compression.  With Netflix, you have decent but not great subscriber growth and an ever rising cost of content that is sure to eat into profits and cash.

The big winner in this surge in Netflix share price is billionaire investor Carl Icahn.  Icahn reported a 10% stake in the company in November, buying about 5.5 million shares at around $58 a share. He is now sitting on a nearly $500 million gain.

From a fundamental standpoint Apple and Netflix are on opposite ends of the spectrum.  From a technical standpoint Apple and Netflix are on opposite ends of the spectrum.  So which side wins?

We are betting that the fundamentals are going to eventually win out in this current dual between these two companies.  In fact, we will likely be adding to our short position of Netflix today and have already indicated that we would be buying Apple near the $425 mark.

Investors should be somewhat patient with this strategy as it could take come time to play out.

Morningstar piece on Nertflix

WSJ piece on Apple

Reconstructing Apple

As Apple’s stock price continues to decline, it becomes cheaper on a fundamental basis.  There are times within a stock’s price history that it relative value discounts from the actual market value.  Is this one of those times for Apple?

A key question investors are asking themselves is what will drive the stock higher?  This quarter’s earnings report shows the slowest growth in almost a decade and margins may be compressing due to pressure to serve lower price markets and a change in product mix.

Is Apple going the way of Microsoft where it is a huge generator of cash but cannot move the needle on growth because of its massive size?  Think...The Law of Large Numbers courtesy of the Kahn Academy and a partial definition below from  Investopedia

• If a large company continues to grow at 30-50% every year, it would eventually become bigger than the economy itself! Obviously, this can't happen and eventually growth has to slow down. As a result, investing in companies with very high market capitalization can dampen the potential for stock appreciation.

As you can see, there are more questions than answers.  What is clear is that Apple’s stock was heading to the moon up until it hit the $700 mark and then from there has been in a complete free fall.  It has blown through the key technical support of $500 and the next level of support looks to be around $425.  If the stock did reach back down to $425 per share, that would represent a drop from it's high of nearly 40%.

Full disclosure, we currently are long the stock and long an option position that doesn't expire until January 2014 in our TAMMA Fund.  We also hold Apple positions in our client managed accounts.  With that said, we are going to hold onto Apple for now and would look to be buyers around the $425 price.

While growth may be slowing we believe that other catalysts and opportunities will present themselves such as TV and delivering lower cost product to more of the mass market will certainly help to expand the massive brand.  Margins may not be as high as the last few years but cash flow will certainly grow.  This could lead to an increase in the dividend, special one time dividends, and/or future acquisitions.

Reuters article

Marketwatch article

Why does this bull market get no respect?

This quarter we mark the 4 year anniversary of the bottoming of the great recession, at least in equity market terms, because as we know there is still a large portion of the country that has still not recovered.

The past weekend's edition of USA today was headlined by a question Why does this bull market get no respect?  One of the short answers is the lack of confidence people have in investing period.  After being rocked by the dot.com bubble in the early 2000's then enduring the subsequent equity market free fall along with the bursting of the housing bubble, investors are practically scared stiff.

To make matters worse investors who have sat this huge rally out are probably even more fearful to get back in now as the equity markets touch new 5 year highs.  With investing you have to be forward looking.  Does the future look better than the past?

As we pointed out in this post along with Doug Kass, there will always be varying degrees of uncertainty.  The question then becomes, which ones are worth dealing with and which ones are not?  As more "black swam" events appear to be occurring more frequently, it gets harder and harder trying to decided when to be in the markets and when to be out.  In our minds, it is not an all or nothing strategy.  Rather it is having a basic understanding of what future risks could be and then adjusting your strategy to minimize those risks head on.

Full USA Today article here

Websites Vary Prices, Deals Based on Users' Information

Have you ever noticed the variation in pricing among online retail sites?  Have you ever wondered why?  Personally I have seen prices for items on Amazon change by the hour.  This WSJ article takes an in depth look at the why and how of online pricing.

In case you were wondering, price discrimination is perfectly legal as long as it does not discriminate based upon race, gender, religion, etc.  Case in point an airline can charge you $400 for a plane ticket while the person next to you only paid $200.

This article can give you some additional insights as to what to look for in online deals and also provides details on how some of the mentioned companies look to maintain or increase profitability.  Maybe some of these methods could work for you business owners out there.

Doug Kass: 15 Surprises for 2013

We wanted to get this post out before the first month of the new year passed us by.  Every year mark news maker and portfolio manager Doug Kass of Seabreeze Partners puts out his list of 15 surprises.  His list can tackle not only financial topics but also political and world issues.

What I like about the Kass article is what he says right off the bat which are the lessons he has learned from putting together such a list year after year.

• how wrong conventional wisdom can consistently be;
• that uncertainty will persist;
• to expect the unexpected;
• that the occurrence of black swan events are growing in frequency; and
• with rapidly changing conditions, investors can't change the direction of the wind, but we can adjust our sails (and our portfolios) in an attempt to reach our destination of good investment returns.

I especially like his second point, "that uncertainty will persist."  As we celebrate the ceremonial inauguration of President Obama today as well as Martin Luther King, hope and optimism rain supreme.  There is a phrase that I often hear which is "It's always morning in America".  Translation, tomorrow is a new day and anything is possible.While there will always be opportunities to tackle, there will always be opportunities for success.

For the complete Kass list go here

2013 Week 3 Performance.....Divergence

While the equity markets continued their steady climb higher since the beginning of the year, there has been a divergence of late between the benchmark averages.  This week the DJIA, S&P 500, and Russell were all up over 1% while the NASDAQ could only muster a gain of 0.3%.  The answer comes down to one word, Apple.

Apple continued its slide lower down another 3.9% this week alone.  For the year it is down just over 6%.  This has definitely impacted our performance with the TAMMA fund as Apple is our largest holding representing about 5.1% of our total portfolio value.  This can largely sum up our under performance thus far this year but we are not alone.  The strong rally this month has caught many fund managers off guard and the questions now becomes will there be a pullback and when?

The railroad companies CSX and Norfolk Southern both report earning after the close on Tuesday this week.  The rails can be a good indicator of the overall health of the economy.  We have had these two names on our watchlist for sometime now just waiting for the right entry point.

Living in Detroit there has been a buzz about the city surrounding the international auto show this week. As noted there were over 50 new vehicles launches and while some were just cosmetic in nature other vehicles received a complete overhaul.  So far traffic is up for all of the shows events including opening day to the public which occurred on Saturday.  Some estimates have total vehicle volumes over 15M units this year which would put us back on pace to where we were pre-Great Recession.  The big difference this time around is the automakers have right sized their businesses to really take advantage of this increase in demand.  Currently we own Ford in the portfolio have have previously owned BMW.

Things in Washington have were once again on the quiet side this week.  It appears as though politicians are preparing to kick the debt ceiling and deficit cuts down the road a few more months.  Although it shouldn't come to a surprise for any of us, it is baffling on how this group of people cannot come together to do what is right for the country.  When do we ever see clarity again?

Credit the equity markets and their resilient nature for having the ability to look beyond this set of current uncertainties and rally strong as they have done basically all month long.  Sooner or later fund managers are likely to capitulate and start buying in order to not be left behind which could in the short term drive markets even higher.  It takes a balanced approach, one that we are looking at every day in order to decide how to enter the markets and at what price level on specific positions.

You can never predict the markets so you use the best data available to drive decisions that affect when and what to buy.  Having conviction in whatever strategy you choose is a must have requirement which we certainly have at TAMMA.  However, you have to have a level of flexibility to change with market conditions   A bend but don't break mentality if you will.

As we noted the portfolio trailed the benchmarks this week and we are working on various ways we can enter this market with some degree of confidence and most importantly a margin of safety. 

The Week Ahead
There is a rich amount of housing and manufacturing data of this week.  Markets are closed on for the Martin Luther King holiday.  Monday is also the public Presidential swearing in ceremony.  The President was actually sworn in on Sunday the 20th.

Look for earnings reports to come fast and furious this week.  In addition to CSX and NSC, we will be watching the following names; F5, McDonald's, and Microsoft.

• Mon - Markets closed
• Tue - Chicago Fed National Activity Index, Existing Home Sales, Richmond Fed Manufacturing Index
• Wed - FHFA House Price Index
• Thu - Jobless Claims, PMI Manufacturing Index Flash, Leading Indicators, Kansas City Fed Manufacturing Index
• Fri - New Home Sales

Have a great week!

TAMMA Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what TAMMA can do for you.  No matter what stage in life you are currently at, TAMMA can help you plan for your ever changing needs.

TAMMA can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.

Google Throws Open Doors to Its Top-Secret Data Center

In my attempt to catch up on my readings over the Holidays which includes Wired Magazine, I cam across this piece about Google data centers.  In an unprecedented manor, Google granted access to Wire writer Steven Levy who was able to tour a few facilities including the data center in Lenoir, NC which is close to where I used to reside.

Typically you would think of these giant centers as the ultimate consumers of energy.  While they do consume a lot, Google has been able to re-engineer these data centers to use less while producing additional capacity.  These data centers definitively help to provide Google with a competitive advantage.

The full Wired article can be viewed here.  The video below also gives you good insight as well

• This is what makes Google Google: its physical network, its thousands of fiber miles, and those many thousands of servers that, in aggregate, add up to the mother of all clouds. This multibillion-dollar infrastructure allows the company to index 20 billion web pages a day. To handle more than 3 billion daily search queries. To conduct millions of ad auctions in real time. To offer free email storage to 425 million Gmail users. To zip millions of YouTube videos to users every day. To deliver search results before the user has finished typing the query. In the near future, when Google releases the wearable computing platform called Glass, this infrastructure will power its visual search results.
• Hölzle and his team designed the $600 million facility in light of a radical insight: Server rooms did not have to be kept so cold. The machines throw off prodigious amounts of heat. Traditionally, data centers cool them off with giant computer room air conditioners, or CRACs, typically jammed under raised floors and cranked up to arctic levels. That requires massive amounts of energy; data centers consume up to 1.5 percent of all the electricity in the world.
• Google’s breakthroughs extend well beyond energy. Indeed, while Google is still thought of as an Internet company, it has also grown into one of the world’s largest hardware manufacturers, thanks to the fact that it builds much of its own equipment. In 1999, Hölzle bought parts for 2,000 stripped-down “breadboards” from “three guys who had an electronics shop.” By going homebrew and eliminating unneeded components, Google built a batch of servers for about $1,500 apiece, instead of the then-standard $5,000. Hölzle, Page, and a third engineer designed the rigs themselves. “It wasn’t really ‘designed,’” Hölzle says, gesturing with air quotes.
• All of these innovations helped Google achieve unprecedented energy savings. The standard measurement of data center efficiency is called power usage effectiveness, or PUE. A perfect number is 1.0, meaning all the power drawn by the facility is put to use. Experts considered 2.0—indicating half the power is wasted—to be a reasonable number for a data center. Google was getting an unprecedented 1.2.

2013: Talk Gets Cheaper, TV Gets Smarter

WSJ tech columnist, Walt Mossberg, is out with his views for what to expect in 2013.  Below are a few of the topics that he addresses in his article here with our own comments.

• Tablets vs. PCs, your beginning to see more things that you can do on a tablet that you used to only be done on a PC
• Integrating Hardware and Software, companies are beginning to follow Apple's lead where they make the hardware and the software
• Rethinking Television, I personally own two Sony Google smart TV's and honestly they both come in very handy with my large family.  I agree that this technology will continue to improve especially if Apple can get into the ball game
• Cheaper Smartphones and Plans, Apple has already stated that it is coming after the low cost smart phone market...well maybe slightly below its current line of product pricing. 
• Costlier, Better Music Players, I abandoned my music player a long time ago when I went with my iPhone.  It's hard to imagine this sector being able to grow.  I can envision it walking away like the walk-man

Andy Puddicombe: All it takes is 10 mindful minutes

2013 Week 2 Performance.....A Quite, Steady Week

For the most part this week it was a steady march higher with the occasional bumps along the way. Economic news was light this week and there wasn't much news out of Washington which probably led to some of the calmness.

This week however things could begin to get a little more volatile especially for those companies that begin reporting their quarterly earnings and calendar full year performances.  We really like to use MSN Earnings Calendar function which can help you find out when specific companies report or to get a look at a total week's worth of reports.

Even though equity markets weren't as high as the first trading week of the year, gains were still positive.  Last year the DWCM Fund was hot hot hot in Q1 thanks to Apple's huge performance.  This year while we remain in positive territory, the gains have not been as large and we are actually trailing the four major benchmarks that we track against.

The under-performance can be broken down in a few different views.  First as we just mention, Apple which is our largest holding, has lagged the markets down 2.2% while the overall equity markets have been up over 3%.  Second, our portfolio positioning is more defensive than it was last year.  Our cash position is much higher and our current selection of stocks have a defensive tilt to them.  Finally, our short position in a group of home builders has continued to be under pressure as the housing segment delivers decent number, and our short position in Netflix has been disappointing as the stock has rallied higher and rewarded riskier names.

We plan on sticking by Apple and would look to add to our position down around the $500 level.  However, any drop below $500 would be detrimental to the stock and additional losses could ensue as this is a key technical level.

We want to get through this next fiscal debate in Washington before choosing to unwind any of our short positions.  We set up these positions as an additional defensive barrier to any declines in the markets due to going off the Fiscal Cliff.  That situation has since stabilized for now, but as the next date of Fiscal austerity comes closer so too will increased volatility.

Overall, the market feels a little overheated from the big gains that we have seen on the last day of 2012 and the first two weeks of 2013.  Much of our open orders continue to sit as prices have moved higher.  As we state time and time again, we are not in a hurry to chase market performance to the upside.  We can and have the ability to be patient in the short-term which could also result in some short-term under-performance which we are okay with.  Recall that our first objective is capital preservation and then long-term capital appreciation.

The Week Ahead
There will be a slightly heavier load of economic data being release this week along with a plethora of Fed speeches including Bernanke to start the week.  Look for markets to feed off of earnings report that begin to get into full swing.

Being in Metro Detroit, the North American International Auto Show kicks off in full gear on Monday.  There are a reported 50 new vehicle launches at the show this year although be careful what constitutes a new launch.  Most launches aren't a complete makeover of a vehicle, instead they are likely to be minor or subtle changes to the exiting line.

• Mon - Ben Bernanke Speaks
• Tue - Producer Price Index, Retail Sales, Empire State Mfg Survey, Business Inventories
• Wed - Consumer Price Index, Housing Market Index
• Thu - Housing Starts, Jobless Claims, Philadelphia Fed Survey, 
• Fri - Consumer Sentiment (p)

Have a great week!

DreamWorks Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what DWCM can do for you.  No matter what stage in life you are currently at, DWCM can help you plan for your ever changing needs.

DWCM can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.

13 Tax Increases in 2013

Courtesy of The Heritage Foundation,

1. Payroll tax
2. Top marginal tax rate
3. Phase out of personal exemptions
4. Phase down of itemized deductions
5. Tax rates on investment
6. Death tax
7. Taxes on business investment
8. Another investment tax increase
9. Another payroll tax hike
10. Medical device tax
11. Reducing the income tax deduction
12. Elimination of the corporate income tax deduction
13. Limitation of the corporate income tax deduction

7 Economic Surprises for 2013

Morningstar's Bob Johnson, Director of Economic Analysis.

Karen Thompson Walker: What fear can teach us

The One Conversational Tool That Will Make You Better At Absolutely Everything

How can you glean more value from your meetings?  What about being able to utilize coaches, mentors, and peers to maximize their value to you?  Headlines such as these grabbed my attention in this Fast Company piece.

According to writer Shane Snow, most people are terrible at asking questions. His article provides insights that may be able to move your career, business, or organization forward.

• Good questions can move your business, organization, or career forward. They squeeze incremental value from interactions, the drops of which add up to reservoirs of insight. Of all the skills innovators can learn from journalists, the art of the expert Q&A is the most useful.
• We talk too much and accept bad answers (or worse, no answers). We’re too embarrassed to be direct, or we’re afraid of revealing our ignorance, so we throw softballs, hedge, and miss out on opportunities to grow.

Here are some additional bullets that Snow points out.  See full article here for details

• Don’t Ask Multiple-Choice Questions
• Don’t Fish
• Interject With Questions When Necessary
• Field Non-Answers By Reframing Questions Later
• Repeat Answers Back For Clarification Or More Detail
• Don’t Be Embarrassed

Why Notre Dame Is Back on Top

As most readers know I am a huge Notre Dame fan.  Having endured many turbulent football seasons over the past 20+ years, this has been a magical year.  Typically I will attend almost every home football game throughout the season.  But with the growth of my family that has been greatly reduced which actually makes those trips to South Bend that much more special.

Notre Dame is more than just football.  To me it represents something much more, it means family, friends, and a bonding experience like no other.

So as Notre Dame prepares to play in their first BCS national championship game, rather than being in Miami watching the Irish in person I will be spending it with my new born daughter like I have since early in the season the weekend she was born.  Thus creating a new bond with an old familiar twist.

Stephen Moore of the WSJ interviewed the last coach at Notre Dame to win a national championship, Lou Holtz who is now an analyst at ESPN.

Full article here

A Google Researcher Reveals 4 Crucial Things "Average Users" Should Know But Don't

Dan Russell, a Google employee, works on quantifying how people search and research things for Google.  In his role, Russell tries to figure out what people do and do not understand about search and, by extension, their computers.

Here are a few of his points via this Fast Company piece.  

• Among U.S. K-12 teacher (Control+F knowledge) is around 50%, with huge variations by school district and location. As you'd guess, tech-savvy schools (districts) do reasonably well. But most of the U.S. is not tech-savvy. I've seen many cases where the lack of the ability to find a text on the web page leads to all kinds of scholastic hilarity.
• People often don't take advantage of the tabs and windows browser operations in ways that would help them. Although you might know how to open a link in a new tab, most people don't. Likewise, moving a tab out of the window (useful when you have a second monitor) or re-arranging tabs to reflect the organization of your work... just not widely done, even though these correspond naturally to physical actions on a real desktop.
• We know that people often have rather wide screens and suffer reading disruptions as a side effect of trying to read lines that are 10 inches wide (that is, between 20-50 words wide). While most people feel that's uncomfortable, what they don't realize is that they can easily resize the window to make the (word) wrapping much better for them.

Meet the New Class: The Senate Swears in a Historic 20 Female Senators

Power to the women.  A record setting 20 women US senators take their role in helping to define our nations future this week.  ABC's Diane Sawyer featured the woman in a two part series this week on ABC World News.

I hope that these woman can find a better way to compromise and make better decisions than their male counterparts.  While watching the video I couldn't help but wonder if maybe one of my daughters would become a senator one day?

Full article here on ABC News

Watch More News Videos at ABC | Technology News | Celebrity News

Breakthrough: Robotic limbs moved by the mind

We have discussed the emergence of robotics in our lives quite extensively over the past few years.  But now it looks like robots could become a part of our own bodies.  Which is a good thing.

Scott Pelley looks at this government funded program through the University of Pittsburgh that allows for completed disabled people to move a robotic arms by simply using their own thoughts.  The process requires a delicate brain surgery in which neurotransmitters are implanted into the brain.

The process can also work with people who have lost limbs which is how and why the government began looking into this remarkable science in order to help wounded veterans.

The piece of the video that also caught my attention was when Pelley asked Jan Scheuermann, a Pittsburgh mother of two and writer, why she was so excited about being the first person to go through with the procedure.  "I've always believed there's a purpose to my illness. I didn't think I would ever find out what it was in my lifetime. And here came this study where they needed me. You know, they couldn't just pick any Tom, Dick or Harry off the street. And in a few years, the quadriplegics and the amputees this is just going to help.The Department of Defense is funding some of this for the vets. To be of use to them and service to them, what an honor."

2013 Week 1 Performance.....Off to a Bang

You can certainly say that the equity markets kicked off 2013 with a fast and furious start to the upside.  Even before the fiscal cliff deal was reached on Jan 1st, the equity markets began the week on the last trading day of 2012 with a pop that carried into the first day of trading in 2013 with an explosion with most equity markets up over 2%.

But as we noted in this Don't Celebrate Quite Yet post, there is more high stakes drama to play out in Washington over the next few months with number one being a call on increasing the debt ceiling level.  As we have noted, we see this debate just as cantankerous as the fiscal cliff deal.  Republicans battered and bruised from cliff talks are certainly not going to cave in on this issue.  While on the other hand, the President has already stated that he is not negotiating this issue.

All of this leads to uncertainty within the markets which as we all know does not usually lead to positive returns.  While the markets may have brushed off the worries for now, new ones are just over the horizon.

But with that said let's take a look at how we finished up 2012.

We posted a return of 21.7% here at DWCM with the portfolio that we manage on Investopedia.  This return beat all four major equity benchmarks that we track to which include the Dow Jones Industrial Average, S&P 500, NASDAQ, and Russell 2000.  You can see from the chart below that we beat the DJIA by almost 3 times and the other benchmarks by almost 1.5 times.

You will also see in the chart above our under performance in Q4 vs. the benchmark indices.  This was largely due to the poor performance of our largest holding Apple AAPL.  After hitting its all time high of slightly over $700 per share back in the fall, the stock has been in somewhat of a free fall down almost 22% over the past 4 months.

We still believe that in the long run, Apple is a stock worth owning.  It has great fundamentals although the technical indicators are a bit troublesome at this point.  Any break below the $500 level would be quite alarming so what this mark quite closely.

We are poised to continue riding this rally out to see how things begin to develop over the next few months.  We are certainly not going to go out and chase performance.  And while this may hurt short-term performance when compared against the major indices if this rally continues, then so be it.  Our first goal is always to preserve capital which we see as the prudent thing to do right now.  We always have our watchlist handy if and when prices come down to levels that we see as attractive entry points or to build upon current positions. 


A defensive type of strategy never reveals its true purpose until the crisis has shown itself.  This is evident in our DWCM Fund performance this first week in January.  Sitting on as much cash as we currently are and holding relatively a high portion of conservative positions, when the market takes off we aren't likely to participate in the festivities.  But when the music stops we are in a much better position to preserve capital and live to hear another song.

The Week Ahead
This week is relatively light with economic data especially compared to last week's heavy load with the release of the jobs report on Friday that basically came in as expected.  It is unclear to us how long it will take before the debate heats up in Washington over the debt limit.  If things are quiet, this rally could continue to run in the short-term through January and possibly into February.

• Mon - N/A
• Tue - NFIB Small Business Optimism Index
• Wed - N/A
• Thu - Jobless Claims
• Fri - Import and Export Prices

Have a great week!

DreamWorks Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what DWCM can do for you.  No matter what stage in life you are currently at, DWCM can help you plan for your ever changing needs.

DWCM can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.

How Deal Was Made, Unmade, Then Saved

This WSJ article provides a play by play if you will on on the fiscal cliff deal was structured.  We have already posted our thoughts here with Don't Celebrate Quite Yet.

Everyone will have some negative or positive to say about this deal.  Usually you would give the two major players involved in this case Biden and McConnell, credit for at least getting the deal done and avoiding the cliff.  However, it may have been better to take the pain rather then to prolong it even more.

Wondering how each state either Democrat or Republican voted?  See this interactive WSJ graph

Don't Celebrate Quite Yet

The New Year started off with a bang yesterday with huge gains in the equity markets across the board.  The reasoning, relief that the fiscal cliff was avoided and we are on our way back to sunshine and happiness. Warning...don't believe the hype.

All this current deal does it kick the can down the road a little further while increasing the taxes on the wealthiest Americans.  It does nothing to address our spending problems here in the US rather than some proposed revenue problem.  Simply put, the US government has over promised and one day will have to under deliver on those promises.  It is just a matter of time.

The fight and bipartisanship in Washington has only just begun.  The Democrats likely see this as a huge win while the Republicans duck their heads between their legs once more after a dismal showing in the November elections.  This collision between two ideologically different parties is what will provide even more drama within the next few weeks.

Even though the Republicans are now somewhat divided within their own ranks, those that remain firm against reducing spending have the majority within the party and don't look for them to back down when it comes to extending the debt limit.  They are likely more stoic in their stance now that no cuts were part of this last deal.

The President is already on record as saying, "While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up."  It is not about paying the bills, it is about reducing the bills by cutting spending.

Most Americans realize that they need to balance their own budget in order to have financial stability which usually leads to lifestyle stability.  The US government has walked away from their responsibility to maintain proper fiscal controls in order to balance the nation's budget.

So while everyone celebrated yesterday with the huge rally on Wall Street we shook our heads.  We know that eventually reductions will have to happen and the longer we put them off the more painful they will be.

The other concern that we have is that everyone's taxes are going up not just the wealthiest Americans.  The expiration of the two year payroll tax holiday will largely affect every American.  The reinstatement of the previous rates we believe will have a profound effect on consumer spending once people begin to see their first paychecks of the new year.

Retail sales over the Christmas holiday season were already coming in weaker than expected.  Was this due to the uncertainty of the fiscal cliff, change in consumer sentiment, or maybe even people taken control over their personal finances and making prudent decisions when it comes to spending?  We don't know but it will be interesting to see if this trend continues into the New Year and how people will feel about the new battle in Washington that lies ahead in the coming months.

This was an excellent article in Reuters that touches on this very topic here.

• "Our opportunity here is on the debt ceiling," Republican Senator Pat Toomey of Pennsylvania said on MSNBC. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."
• Deteriorating relations between leaders in the two parties do not bode well for the more difficult fights ahead. Vice President Joe Biden and Republican Senate leader Mitch McConnell had to step in to work out the final deal as the relationship between House Speaker John Boehner and Obama unraveled.
• The debate over "entitlement" programs is also bound to be difficult. Republicans will be pushing for significant cuts in government healthcare programs like Medicare and Medicaid for retirees and the poor, which are the biggest drivers of federal debt. Democrats have opposed cuts in those popular programs.
• The vote underlined the precarious position of Boehner, who will ask his Republicans to re-elect him as speaker on Thursday when a new Congress is sworn in. Boehner backed the bill, but most House Republicans, including his top lieutenants, voted against it.

Reuters/Joshua Roberts