Monday, October 10, 2011

New hedge fund launches totaled 280 in Q2’11, a slight decline from the 298 opened in Q1’11, according to Hedge Fund Research, Inc. The 578 first half total was the strongest showing since the first half of 2007. Fund liquidations totaled 191 in Q2, up from 181 in Q1. Total hedge fund assets reached a record $2.04 trillion in June. There are over 9,000 hedge funds worldwide. Hedge fund managers struggled with the surge in volatility in Q3. Overall, hedge funds were down 5.5% in the quarter.

Tuesday, October 11, 2011

Holiday retail sales are expected to increase 2.8% this year to $465.6 billion, according to the National Retail Federation. While less than last season’s 5.2% growth rate, it is higher than the 2.6% average growth rate over the past ten years. Retailers are expected to hire between 480,000 and 500,000 seasonal workers, in line with last year’s 495,000. Retail stocks have performed well this year despite weakness in consumer confidence. The S&P Retail Select Industry Index, which tracks 94 companies, is up 3.86% year-to-date through 10/10. That is considerably better than the 3.48% loss posted so far by the S&P 500.

Wednesday, October 12, 2011

A survey released earlier this month by KPMG found that 75% of commercial real estate executives expect higher revenues in 2011 than a year ago, according to REIT.com. A little more than half (57%) said they do not expect a full recovery in commercial real estate until the end of 2013 or after. Roughly 75% of those surveyed said that distressed real estate could impact their investment strategies over the next year. Investors looking out a couple of years or more should note that the FTSE NAREIT Equity REIT Index is currently trading about 40% below its 10-year high set on 2/7/07. The index yields 4.06%, more than 13 times the yield on the 2-year T-Note.

Thursday, October 13, 2011

Total global M&A deal volume this year stood at $1.78 trillion (20,479 deals) in Q3’11, up 15.6% from the $1.54 trillion (18,898 deals) announced a year ago, according to Bloomberg. In Q3, the number of global transactions was down over 12% from a year ago, but activity in the U.S. was relatively strong. U.S. based companies (buy-side) accounted for 40% of total Q3 deal volume. Deal volume in Western Europe was down more than 26% due to the sovereign debt concerns in the region. The average premium paid in Q3 was 31.4% and 69% of the deals were cash transactions.

Friday, October 14, 2011

The extended period of low interest rates in the U.S. has put significant pressure on pension plans, according to Reuters. Two steep bear markets since 2000 only exacerbated the problem. The gap between assets and liabilities is the widest since World War II. The aggregate deficit of pension plans among S&P 1500 companies increased $134 billion in September 2011 to $512 billion, according to Mercer. The funded ratio of the companies in the index fell to 73%. Companies seek to keep the ratio above 80%.

This information is provided by First Trust Advisors L.P. • 1-800-222-6822 • Approved For Public Use • 10/17/11

Tuesday, October 4, 2011
In September, the dividend-payers (389) in the S&P 500 (equal weight) posted a total return of -8.73%, vs. -10.83% for the non-payers (111), according to Standard & Poor’s. Y-T-D, the payers were down 10.80%, vs. a decline of 15.26% for the non-payers. For the 12-month period ended September ’11, payers were down 0.17%, vs. a decline of 5.15% for the nonpayers. The number of dividend increases y-t-d totaled 242, up from 177 increases a year ago. Seventeen companies initiated dividends, up from 10 a year ago. Four dividends were cut, up from two cuts last year.

Wednesday, October 5, 2011
Office rents are rising again. Data from Reis Incorporated shows that the average effective rent, the amount tenants pay after deducting any landlord concessions, rose from $22.25 per square foot in Q2’11 to $22.39 in Q3’11, the highest it has been since Q4’09, according to Bloomberg. The average was $22.04 a year ago. Landlords had a net increase in occupied space of 6.19 million square feet, the fourth straight gain. The national vacancy rate dropped slightly from 17.5% to 17.4%.

Thursday, October 6, 2011
Approximately 7,000 publicly owned companies report dividend information to Standard & Poor’s Dividend Record. In Q3’11, the number of companies that increased their distributions totaled 350 – up 17.1% from the 299 increases registered in Q3’10. The number of companies that decreased their distributions totaled 23 – down 34.3% from the 35 decreases registered in Q3’10. Howard Silverblatt, Senior Index Analyst at S&P, reported that payout rates, which on a historical basis have averaged 52%, remain near their lows at less than 30%. So companies have a lot of room to boost their dividend distributions.

Friday, October 7, 2011
Moody’s reported that the global speculative-grade default rate stood at 1.8% in September, no change from August, according to The Wall Street Journal. The rate was 4.0% a year ago. Moody’s is forecasting a default rate of 1.4% for December 2011. The U.S. speculative-grade default rate stood at 2.0% in September, down from 2.1% in August. The rate was 4.0% a year ago. The default rate on senior loans stood at 0.90% in September, down from 1.05% in August, according to Standard & Poor’s LCD. At this pace, the default rate could fall to 0.23% by year end.

This information is provided by First Trust Advisors L.P. • 1-800-222-6822 • Approved For Public Use • 10/10/11

It took me awhile to warm up to the iPod, partly because I was not a fan of Apple Computer. My computer experience was driven by Windows software and Intel chips. The Apple Mac was from a different world. No matter how many times people would tell me that the Apple operating system was easy to use, I could never get used to it. I didn’t hate Apple. I hardly thought about Apple. But, when I tried to use an Apple product, I couldn’t. It was not user friendly to me. I was a Microsoft Windows guy.

But then I got an iPod as a gift and it was so user friendly that it was impossible to ignore. My wife and I gave an iPad to my 75 year-old mother and as she said “it changed her life.” I bought an iPad, and it is truly amazing technology. Every salesman in our company now has an iPad.

Steve Jobs and Apple were relentless in making their technology useful to everyone. And even a person who did not initially find their products helpful, has been brought into the fold. Steve Jobs did this. We all know his story – founder of Apple, drummed out of the company, but brought back in to save it. He was the consummate “entrepreneur.”

Many people use the term entrepreneur, but few truly understand it. Ludwig von Mises, in his book Human Action, carves out a special place for entrepreneurs in the world of economics. At econlib.org there is a searchable copy of Human Action – here are a few quotes from that book.

The entrepreneur is the agency that prevents the persistence of a state of production unsuitable to fill the most urgent wants of the consumers in the cheapest way. All people are anxious for the best possible satisfaction of their wants and are in this sense striving after the highest profit they can reap. The mentality of the promoters, speculators, and entrepreneurs is not different from that of their fellow men. They are merely superior to the masses in mental power and energy. They are the leaders on the way toward material progress. They are the first to understand that there is a discrepancy between what is done and what could be done. They guess what the consumers would like to have and are intent upon providing them with these things.

Like every acting man, the entrepreneur is always a speculator. He deals with the uncertain conditions of the future. His success or failure depends on the correctness of his anticipation of uncertain events. If he fails in his understanding of things to come, he is doomed. The only source from which an entrepreneur’s profits stem is his ability to anticipate better than other people the future demand of the consumers.

If all entrepreneurs were to anticipate correctly the future state of the market, there would be neither profits nor losses. The prices of all the factors of production would already today be fully adjusted to tomorrow’s prices of the products.

Profits indicate success for an entrepreneur and in this measure Steve Jobs was a massive success. Taxing away these profits, making profits evil, or regulating entrepreneurs with political motivation subtracts from the benefits that entrepreneurs bring to society.

The world needs more Steve Jobs, not fewer. The world is celebrating his life today and mourning his passing. I will always remember him as an entrepreneur– the one who didn’t give up until he found a way to get his products in my hand and convince me that they could help make me more productive. He did that. Steve Jobs, RIP.

Monday, September 26, 2011
A report out today by Aon Hewitt and investment adviser Financial Engines shows that participants in 401(k) plans that utilized some form of professional assistance in allocating their capital from 2006-2010 achieved annual returns 3% above those participants that made their own investment choices, according to the Associated Press. Assistance, for the purposes of this study, included the use of target-date funds, professionally managed accounts and online advice. Nearly 30% of workers used some form of help with their retirement investments in 2010, up from 25% in 2009.

Tuesday, September 27, 2011
Bankrate released the results of its annual study of checking accounts and it revealed that 45% of non-interest checking accounts do not levy fees, down from 65% in 2010 and 76% (peak) in 2009, according to CNNMoney.com. Roughly 92% of checking accounts, however, will give customers a pass on the fees providing they meet certain criteria, such as maintaining a minimum balance or making direct deposits. The average balance required to avoid the fee is $585, up from $249 last year. The average monthly fee for those charged is $4.37, up from $2.49 last year.

Wednesday, September 28, 2011
Morningstar data shows that close to 50% of the 1,300 ETFs currently trading have less than $50 million in assets – typically the minimum for an ETF to make a profit, according to SmartMoney.com. Only a handful of ETFs have closed so far in 2011. That number was 50 or more per year over the past three calendar years. Investwithanedge.com estimates that more than 150 funds are currently on “life support.” The marketplace is comprised of 36 ETF managers overseeing $1 trillion in assets.

Thursday, September 29, 2011
The combination of the correction in the stock market and the soft patch in economic activity helped curb the number of IPOs in Q3’11. Data from PricewaterhouseCoopers shows that just 20 companies have gone public this quarter, according to Fortune. The $3.1 billion raised represents a 74% decline from Q2’11, and is the lowest quarterly total in three years. The good news is executives are still optimistic. There have been 75 IPOs filed so far in Q3, including 25 during the volatile month of August.

Friday, September 30, 2011
The Q3’11 edition of the Investment Manager Outlook (released 9/29), a survey of investment managers conducted by Russell Investment Group, found that 78% of managers do not expect the U.S. to slide into a double-dip recession. Strong corporate balance sheets and high corporate profit levels were the top reasons cited. Managers are most bullish on the following asset classes (Q3’11/Q2’11): Emerging Markets Equities (74%/59%); U.S. Large-Cap Growth (73%/60%); and U.S. Large-Cap Value (63%/49%). The sectors managers are most bullish on are Technology (71%/65%) and Energy (57%/55%).

This information is provided by First Trust Advisors L.P. • 1-800-222-6822 • Approved For Public Use • 10/03/11

Monday, September 19, 2011

Data compiled by the Rockefeller Institute shows tax collections in the 46 states that have reported rose 11.4% (y-o-y) in Q2’11, the sixth consecutive quarter in which revenues were up, according to its own release. Tax revenues had declined significantly the five previous quarters. It was the strongest showing since Q2’05. All states reported growth in personal income taxes. Both personal income and corporate tax revenues increased 16.5%. Sales tax revenues rose 5.9%.

Tuesday, September 20, 2011

The Energy Information Administration (EIA) just released a report that forecasts a 53% rise in global energy use by 2035, with consumption strengthening in emerging nations like China and India, according to CNNMoney.com. The EIA sees fossil fuels remaining the dominant choice, with renewable sources accounting for just 14% of total consumption. It does not expect solar to become a significant energy source by 2035. The top three sources are expected to be oil (29%), coal (27%) and natural gas (23%). Nuclear power rounds out the group at 7%. With respect to oil, the North American rig count just reached an all-time high of 2,487, up 493 from a year ago, according to data from Baker Hughes.

Wednesday, September 21, 2011

S&P 500 stock buybacks totaled $109.24 billion in Q2’11, up 40.7% from the $77.64 billion executed in Q2’10, according to Standard & Poor’s. It was the eighth consecutive quarter companies increased their buyback activity. Buybacks were up 21.6% over the $89.84 billion repurchased in Q1’11. Buybacks peaked at $172.0 billion in Q2’07. Information Technology was the most active sector accounting for 22.2% of all buybacks. Financials boosted their buybacks by 95.7% to $14.4 billion from Q1’11 to Q2’11.

Thursday, September 22, 2011

The Department of Education reported that nearly 10% of all federal student loan borrowers defaulted over a 24-month span that ended September 30, 2010, according to SmartMoney.com. The default rate was 7% in 2008. A loan is considered in default when the borrower has failed to make a payment in over 270 days. Unlike credit card debt (bankruptcy protection) and mortgage debt (foreclosure), federal student loan debt can’t be discharged. Two out of three recent graduates are carrying education loans averaging around $24,000, according to Reuters.

Friday, September 23, 2011

At the start of 2011, Wall Street strategists offered a consensus year-end price target of 1374 for the S&P 500, according to Bespoke Investment Group. That target was forecasting a gain of approximately 9.3%. Bloomberg polls a dozen strategists each week for their estimates. The most optimistic consensus target given this year was 1406 on May 24, or a gain of 11.9%. This week’s consensus target was 1311, or a gain of 4.3% from the 1257 close on 12/31/10. If it were to prove accurate, it would represent a gain of approximately 16.5% from the 1125 reading reached in today’s trading session. The most optimistic target from this week’s poll was JPMorgan’s 1475, while the least favorable was the 1100 target from Credit Suisse.

This information is provided by First Trust Advisors L.P. • 1-800-222-6822 • Approved For Public Use • 09/26/11

Brian S. Wesbury – Chief Economist
Robert Stein, CFA – Senior Economist
Date: 8/29/2011

Market turmoil and a cycle of shrill headlines and worrisome “breaking news” convinced many to evacuate the equity markets. That was a mistake. The odds of recession are low, but the stock market seems to have priced one in, anyway.

We use a capitalized profits model to value stocks, dividing corporate profits by the 10-year Treasury yield. We compare the current level of this index to that from each quarter for the past 60 years to estimate an average fair-value. Not only are 10-year yields low (2.2%), but corporate profits are growing strongly. As a result, and hold onto your hats, this top down model says that the fair-value for the Dow is currently 40,000.

However, we think the Treasury market is in a bubble. So, instead of a 2.2% yield, we use a more conservative discount rate of 5% for the 10-year Treasury. This generates a “fair value” of 18,500 on the Dow and 1,940 for the S&P 500. In other words, the US equity markets are currently undervalued by about 65%.

Obviously, there are many moving parts to this model. Interest rates could go higher than 5%, profits could fall or both could happen. Profits, for example, are now 12.9% of GDP, the highest in measured history (back to 1947) except for one quarter in 1950.

So what does our model say if profits revert to the historical mean of about 9.5% of GDP? Even in that scenario, and assuming a 5% yield on the 10-year Treasury, equities are about 21% undervalued, with fair value at 1430 for the S&P 500 and 13,700 for the Dow.

The problem with this scenario is that it takes the worst of both worlds: a major decline in profits and a surge in interest rates. In the real world, a large decline in profits would normally be accompanied by a drop in bond yields. In other words, our model says the risk of investing in equities today is very low.

This is the opposite of what was happening back in 1999/2000. Back then, the market was over-valued and an ounce of gold traded for roughly 4 shares of Intel (INTC). Today it is trading for about 75 shares. Stocks look cheap and we think fears about the economy are overblown.

Yes, it would be good to trade the ups and downs of this market, but we don’t know anyone who can do that consistently. Rather, we focus on valuation, risk and reward. And right now, we believe the reward outweighs the risk by more than many people seem to believe. Fear will not disappear overnight, but the model says it is overblown and stocks are extremely attractive.

This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.

On another note, my son Luke was born on August 20. He was very early and as a result, he is still at the hospital, but he is doing great!

Anyway, on with the news:

Factoids for the week of August 22nd – 26th

Monday, August 22, 2011
The price of gold bullion rallied as high as $1,894.80 per ounce today in London and is up 15% so far in August, according to Bloomberg. While a Bloomberg survey of 13 traders and analysts revealed a median forecast of $2,000 per ounce by the end of the year, some analysts think it is overbought at this point and vulnerable to a pullback. A lot of the demand for gold bullion is coming from ETFs. Investor’s assets in these funds totaled 2,211.1 tons as of August 19, higher than all but four central banks.

Tuesday, August 23, 2011
Wall Street firms raised their earnings estimates on the S&P 500 for the 10th consecutive quarter, with a consensus forecast of 17% for 2011, according to Bloomberg. That projection is 9.9 times more than economists’ consensus estimate for GDP growth. The average ratio since 1954 is 5.4 times. Stock analysts are very bullish on corporate earnings.

Wednesday, August 24, 2011
Zacks Investment Research reported that a total of 68 banks have failed so far in 2011, according to MarketIntellisearch.com. There were 157 failures in 2010 and 140 in 2009. High unemployment and continued weakness in residential real estate have been particularly hard on smaller banks. The number of banks on the FDIC’s problem institutions list stood at 888 in Q1’11, the highest it has been since the total reached 928 in March 1993 (savings and loan crisis).

Thursday, August 25, 2011
In July, only 63.5% of men in the U.S. held a job (full or part-time), just slightly above the recent low point of 63.3% in December 2009, according to Bloomberg Businessweek. These are the lowest levels since 1948. The popping of the real estate bubble eliminated a substantial number of construction jobs – a male-dominated industry. On his recent bus tour, President Obama spoke a lot about funding infrastructure projects to put people to work. Currently, only 81.2% of men in their prime working-age (25-54) hold a job. That percentage never fell below 85% in the 1982-83 recession. In 1969, it was 95%.

Friday, August 26, 2011
Jonathan Litt, managing principal of Land and Buildings Investment Management LLC, just released a report in August in which he noted that the deleveraging that has taken place in the REIT industry makes REITs well positioned to cope with another financial crisis, according to REIT.com. He believes the fundamentals are actually improving. Traditional REITs recorded growth in funds from operations (FFO) of 10% in Q2’11, with roughly 75% of companies meeting or beating estimates. Litt sees full-year FFO rising by 14%, up from 12% at the start of the year.

Factoids for the week of August 1st – 5th

Monday, August 1, 2011
Only three of the major sectors in the S&P 500 have had their constituents raise guidance this earnings season beyond their respective 10-year averages, according to Bespoke Investment Group. The top sector so far has been Industrials, with 13.8% of companies raising guidance, compared to an average of 8.9% over the past 10 years. The other two are Consumer Staples (9.7% vs. 7.3% avg.) and Consumer Discretionary (11.0% vs. 10.2% avg.).

Tuesday, August 2, 2011
In July, the dividend-payers (388) in the S&P 500 (equal weight) posted a total return of -5.22%, vs. -6.95% for the non-payers (112), according to Standard & Poor’s. The S&P 500’s standard cap weighted total return was -2.03%. Y-T-D, the payers were up 2.21%, vs. a loss of 0.11% for the non-payers. For the 12-month period ended July ’11, payers were up 16.11%, vs. a gain of 14.44% for the non-payers. The number of dividend increases y-t-d totaled 209, up from 150 increases a year ago. Sixteen companies initiated dividends, up from 10 a year ago. Two dividends were cut, which matched the two cuts last year.

Wednesday, August 3, 2011
Commercial real estate loans remain a challenge for many small- to mid-sized banks despite efforts to extend/restructure loans to give property values time to rebound, according to REIT.com. In doing so, however, the amount of commercial real estate loans maturing in 2011 has essentially doubled from $450 billion to approximately $900 billion, according to Chris Macke, senior real estate strategist with CoStar Group. In July, the percentage of commercial mortgage-backed securities considered seriously delinquent (60 days or more past due) increased 39 basis points to 9.14%, according to Trepp LLC.

Thursday, August 4, 2011
A report issued annually by the U.S. Department of Agriculture revealed that a middle income family with a baby born in 2010 will spend an average of $226,920 on the child until he or she is 17 years old, according to DailyFinance.com. That is a 22% increase from 1960, in dollars adjusted for inflation. A recent survey from BabyCenter.com found that 60% of those mothers surveyed are worried about having enough money to raise their children. There were 4.1 million children born in the U.S. in 2009.

Friday, August 5, 2011
Despite the fact that the S&P 500 closed yesterday’s session at an eight month low of 1,200.07, the average yearend estimate from the 13 Wall Street equity strategists surveyed by Bloomberg has not budged from last month’s target of 1401. That would represent a gain of 16.75%. Forecasters believe the current climate of strong corporate earnings warrants a higher P/E multiple than today’s 13.10 (trailing 12-mo.) and 11.99 (forward-looking). Strategists see S&P 500 earnings rising 18% in 2011 and 14% in 2012. More than 75% of the constituents in the index have exceeded their estimates this quarter.

This information is provided by First Trust Advisors L.P. • 1-800-222-6822 • Approved For Public Use • 08/08/11

Hysteria and the Debt Debate

Contrary to popular belief, the “debt ceiling” has turned into the investor’s best friend. Professional politicians don’t like it, because they don’t want to limit their degrees of freedom. But the “limit” on debt, forces a debate about the size of government (and spending) before a country gets to the point of no return. In other words, the debt ceiling is a good thing.

Moody’s (the rating agency) has said that the US should get rid of the debt ceiling altogether, but this has it exactly backward. Greece never had this debate and spent its way into oblivion. The debt ceiling could very well keep the US from that fate. Nonetheless, the professional political class (and this includes the ratings agencies), are trying to scare people with a forecast of Armageddon.

This is hysteria and politics. Remember the fears about Y2K? Cars won’t start…elevators will stop…planes will fall out of the sky…ATMs will freeze. Well, none of it happened then, and a downgrade by ratings agencies, like Moody’s and S&P, or a few days failure to pass a debt ceiling increase, will not make it happen now.

There is absolutely no chance that the United States will “default” on its debt. Every dime of interest will get paid and every penny of principal will be rolled over. The markets understand this and that’s why the government can still borrow money at 3% or less for 10 years. The US is not Greece, it is not even close. The US does not need Germany and the IMF (like Greece did) to help it pay principal and interest. The US has more than enough tax revenue to pay interest on bonds.

The ratings agencies know this, too. But they say, even if the US pays its interest and even if the debt ceiling is raised, they could downgrade US debt for political dysfunction.

What are we missing, here? Democracy is chaotic and noisy. The US is not insolvent, nor is it illiquid. The ratings agencies, like many politicians, would like the whole thing to go away, but the Tea Party won’t let it. A courageous group of politicians, including Michelle Bachmann (R, MN) are forcing the government to debate its size and scope.

Don’t be fooled. If it weren’t for the November 2010 elections, and the rise of the Tea Party (which includes a huge number of Reagan Democrats and Independents), none of this would be happening. Status quo Republicans and Democrats would have voted on a clean increase in the debt ceiling, and the US would be happily spending its way into oblivion, which would not be noticed by the ratings agencies until a bond auction failed, or something dramatic happened.

Three things about this really bother us. First, where were the rating agencies when spending was ratcheted up so much? Why are they only speaking out now? Second, massive amounts of spending were done in the name of short-term economic stimulus. Forget whether it worked or not – how did this become permanent spending? And third, what about the economy? The huge increase in government spending has hurt the economy, cutting it back will boost growth.

Our models suggest that without the large increase in government spending that has occurred over the past five or six years, real GDP would be 3.2% larger today ($450 billion) than it is, the unemployment rate would be 7.6%, the US would have 2.5 million more jobs, and the stock market would be 24% higher (Dow 15,650 and S&P 1660).

The debt ceiling seems to be the only tool that might work. The benefits of using it, if successful in cutting the size of government relative to GDP, could be huge. Not only would jobs and growth pick up, but the stock market would rise, too.

What investors should be worried about is if this debate fails to limit the size of government, not that it leads to a pointless and unjustifiable downgrade by ratings agencies. Investors need to remain calm. Let the politicians be hysterical.

This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.

Monday, July 4, 2011
Markets Closed, Independence Day

Tuesday, July 5, 2011
Bloomberg reported that the number of municipal bond defaults totaled 25 ($752 million) in the first half of 2011, according to Jack Colombo, editor of the Distressed Debt Securities Newsletter. That was well below the 60 defaults, valued at $2.87 billion, registered in the first half of 2010. Municipal bonds posted the best return of the major debt categories in the first half of 2011. The following 6-month index returns are provided by Barclays Capital (6/30): Municipal Bond: Long Bond 22+ (+5.88%); Global Emerging Markets (+5.84%); U.S. Corporate High Yield (+4.97%); Global Aggregate (+4.38%); GNMA 30 (+3.56%); Intermediate Corporate (+3.26%); U.S. Aggregate (+2.72%); and U.S. Treasury Intermediate (+2.20%).

Wednesday, July 6, 2011
The manufacturing sector is leading the U.S. economy for the first time since the 1970s and companies in this space are “lean and mean” following an extended period of plant closings and employee downsizing, according to a Kiplinger interview with James Paulsen, economist and chief investment strategist at Wells Capital Management. While employment in the sector is down about 23% from levels reached 30 years ago, U.S. manufacturing output is up 2.5 times since 1972, according to MSNMoney.com. The U.S. is still the world’s largest manufacturer, producing 21% of all goods – the same share it held 30 years ago, according to the National Association of Manufacturers. Industrials and materials are two sectors that Paulsen believes should be owned, according to Kiplinger’s “2011 Midyear Investing Outlook.”

Thursday, July 7, 2011
Approximately 7,000 publicly owned companies report dividend information to Standard & Poor’s Dividend Record. In Q2’11, the number of companies that increased their distributions totaled 444 – up 32.5% from the 335 increases registered in Q2 ’10. The number of companies that decreased their distributions totaled 21 – down 38.2% from the 34 decreases registered in Q2’10. Howard Silverblatt, Senior Index Analyst at S&P, reported that dividend increases in the first half of 2011 totaled $30 billion, surpassing the $26.5 billion in increases for all of 2010.

Friday, July 8, 2011
The World Semiconductor Trade Statistics (WSTS) organization recently raised its semiconductor sales forecast for 2011 from 4.5% growth to 5.4% ($314.4 billion), according to the Semiconductor Industry Association. The WSTS sees sales growth increasing by 7.6% in 2012. Demand is clearly strongest for high-end electronics. All regional markets, namely the Americas, Europe and Asia (minus Japan) are projecting y-o-y growth for 2011 and 2012. Demand in Japan is expected to fall 6.2% (Tsunami) in 2011, but rebound in 2012 with a 9.8% growth rate. The Americas are expected to account for $58.1 billion of the $314.4 billion in total sales this year.

This information is provided by First Trust Advisors L.P. • 1-800-222-6822 • Approved For Public Use • 07/11/11