The extension will maintain the current cut in the payroll tax rate from 6.2% to 4.2% through the end of the year. This is a savings of about $1,000 for the average family. The employer portion remains at 6.2%.

Long-term unemployment benefits will be extended through 2012 and the bill will also avert a 27 percent cut in payments to doctors who treat elderly Medicare healthcare patients.

CONSUMER PRICES UP 0.2% FOR JANUARY
Major factors in this increase in the Consumer Price Index include a 0.9% rise in the price of clothing as well as rising rents and healthcare costs. Core CPI also rose 0.2% in January. The annualized inflation rate hit 2.3% last month, yet the Federal Reserve expects but a 1.6% gain in the CPI across 2012. Wholesale inflation ticked up 0.1% for January, with the core Producer Price Index up 0.4%.¹
                                                                                                 
RETAIL SALES FALL SHORT OF (HIGH) EXPECTATIONS
The Census Bureau reported a healthy 0.4% rise in U.S. retail purchases for January. However, economists polled by Dow Jones Newswires thought they would rise 0.9% for the month. Subtract a 1.1% decline in auto sales from the data, and retail sales were up 0.7% for January.²
 
LEADING INDICATORS HIT 3½-YEAR PEAK
The Conference Board’s Leading Indicator Index rose 0.4% in January, with seven of ten indicators improving. (The most notable positive detected: a widening in the spread between short-term and long-term interest rates.) The index advanced for a fourth consecutive month.³
 
NASDAQ 3,000? DOW 13,000?
Both indices approached those psychological landmarks on Friday. The Dow went +1.16% for the week, the NASDAQ +1.65% and the S&P 500 +1.38%. At week’s end, the Dow was at 12,949.87, the NASDAQ at 2,951.78 and the S&P at 1,361.23. Oil futures soared 4.63% last week on the NYMEX to settle at $103.24 a barrel Friday. Gold had a flat week, settling at $1,724.50 Friday on the COMEX following a 0.07% five-day advance.^4,5,6
 
THIS WEEK: U.S. financial markets are closed Monday for the Presidents Day holiday; big news could come out of Europe Monday, as Eurozone finance ministers could greenlight a new bailout package for Greece. Tuesday, earnings reports roll in from Barnes & Noble, Macy’s, Dell, Saks, Wal-Mart, Kraft Foods, Home Depot and Radio Shack. Wednesday, the NAR puts out data on January existing home sales and quarterly results come in from Toll Bros., MGM, TJX, Dollar Tree, Fluor, Conseco, Hertz and Hewlett-Packard. Thursday brings earnings from Target, Kohl’s, Hormel, OfficeMax, Safeway, Sears, Public Storage, Gap and AIG. Friday, the final University Of Michigan consumer sentiment survey for February appears, the Census Bureau publishes January new home sales figures and J.C. Penney, Scripps and Berkshire Hathaway issue Q4 results.
 

Sources:cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 2/17/12^4,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

 WEEKLY RIDDLE:   What item binds two people yet touches only one?
 
             Contact our office or see next week’s update for the answer!
 
Last week’s riddle:  A train moving as fast as it can go strikes a man’s hand, yet he is uninjured and the train goes off its tracks. Under what circumstances could this happen?
 

Last week’s riddle answer:    The man is struck by a model train running around a train set.
 
 
Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.  
 

Thismaterial was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. 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. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
 
Citations.
1 – www.sltrib.com/sltrib/money/53537035-79/prices-inflation-percent-costs.html.csp [2/17/12]
2 – blogs.wsj.com/marketbeat/2012/02/14/retail-sales-miss-expectations-no-need-to-freak-out/ [2/14/12]
3 – www.usatoday.com/money/economy/story/2012-02-17/january-leading-economic-indicators/53130756/1 [2/17/12]
4 – www.cnbc.com/id/46427808 [2/17/12]
5 – montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [2/17/12]
6 – blogs.wsj.com/marketbeat/2012/02/17/data-points-energy-metals-547/ [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F17%2F11&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F17%2F11&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F17%2F11&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F16%2F07&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F16%2F07&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F16%2F07&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F19%2F02&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F19%2F02&x=0&y=0 [2/17/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F19%2F02&x=0&y=0 [2/17/12]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [2/17/12]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [2/17/12]
9 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf [1/9/02]

WILL THE MORTGAGE ACCORD BRING MUCH RELIEF?
While the $25+ billion settlement reached last week between five large mortgage servicers and 49 states was momentous, it may not help many borrowers in trouble. Only about 1 million of the estimated 11 million underwater homeowners will see relief as loans sold to Fannie Mae and Freddie Mac aren’t included in the deal. Much of the settlement money will go toward mortgage modification. Roughly 750,000 homeowners are slated to receive financial compensation from the accord (an average of about $2,000 per household). The lenders involved are JPMorgan Chase, Bank of America, Ally Financial, Citigroup and Wells Fargo; other banks could join them. (The state of Oklahoma forged its own agreement with the five lenders.)^1,2
                                                                                                   
CONSUMER CONFIDENCE TAKES A DIP
The University of Michigan’s initial February consumer sentiment survey fell to 72.5 from its one-year peak of 75.0 at the end of January. Economists polled by Bloomberg News had expected a 74.8 reading. However, the percentage of consumers who felt the jobless rate would fall in future months was at the highest level the survey had seen in 28 years.³
 
GOLD SLIPS, OIL GAINS
Gold futures pulled back $14.60 last week, settling at $1,723.30 on the COMEX Friday; that left gold up 10.06% YTD. Oil is still hovering around $100: NYMEX crude finished Friday at $98.67, advancing 0.85% for the week.⁴
 
STOCKS RETREAT FOR THE WEEK ON FRIDAY LOSSES
When the Dow’s worst day of 2012 brings only an 89-point loss, it seems the year is off to a good start. That loss occurred Friday after another stall in the Greek debt negotiations. On the week, the major U.S. indices pulled back a bit: DJIA, -0.47% to 12,801.23; S&P 500, -0.17% to 1,342.64; NASDAQ, -0.06% to 2,903.88.^5,6
 
THIS WEEK:  Monday, President Obama submits his 2013 fiscal budget proposal to Congress. Tuesday, the Census Bureau publishes January retail sales figures and MetLife issues Q4 earnings. Wednesday, the Fed issues the 1/25 FOMC minutes, the federal government comes out with figures on January industrial output and Q4 results arrive from Comcast, Deere, CBS, Abercrombie & Fitch and Nvidia. On Thursday, General Motors, Nordstrom and Baidu come out with earnings and new initial jobless claims are announced; January’s PPI is also released plus data on January housing starts, and Fed chairman Ben Bernanke speaks at an FDIC hearing. Friday, January’s CPI comes out along with the Conference Board’s newest leading economic indicator index; Q4 results come in from Heinz and Campbell’s Soup.
 

Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov – 2/10/12^6,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

WEEKLY RIDDLE:   A train moving as fast as it can go strikes a man’s hand, yet he is uninjured and the train goes off its tracks. Under what circumstances could this happen
 
             Contact our office or see next week’s update for the answer!
 
Last week’s riddle:  The wind is blowing east through the mountains. A lone pine tree stands on a cliff. Which way do its leaves blow?
 
Last week’s riddle answer:    A pine tree has needles, not leaves. So no leaves are blowing in the first place.

 
Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.  
 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. 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. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
 
Citations.
1 – abcnews.go.com/Business/feds-announce-25b-foreclosure-deal/story?id=15545458#.TzWEzOSX1c4 [2/9/12]
2 – www.thefiscaltimes.com/Articles/2012/02/10/What-the-$26-Billion-Bank-Deal-Means-to-You.aspx#page1 [2/10/12]
3 – www.businessweek.com/news/2012-02-10/consumer-sentiment-in-u-s-falls-more-than-forecast-economy.html [2/10/12]
4 – blogs.wsj.com/marketbeat/2012/02/10/data-points-energy-metals-546/ [2/10/12]
5 – montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [2/10/12]
6 – blogs.wsj.com/marketbeat/2012/02/10/data-points-u-s-markets-79/ [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F10%2F11&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F10%2F11&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F10%2F11&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F9%2F07&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F9%2F07&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F9%2F07&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F11%2F02&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F11%2F02&x=0&y=0 [2/10/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F11%2F02&x=0&y=0 [2/10/12]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [2/10/12]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [2/10/12]
9 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf [1/9/02]

Find Out More Here (PDF)

JOBLESS RATE DOWN TO 8.3%
Are we seeing a trend here? The unemployment rate has now fallen 0.8% in the last six months. We haven’t seen a descent this sharp and swift since 1984. January hiring blew away forecasts: the Labor Department said the economy added 243,000 jobs last month, while economists polled by Briefing.com expected non-farm payrolls to grow by 155,000 positions. The labor force hasn’t grown so much in a month since last April, and the numbers are making analysts wonder if the Federal Reserve will tinker with interest rates months ahead of expectations.^1,2
                                                                                                   
HOUSEHOLDS SAVE FIRST, SPEND SECOND
Consumer spending was flat in December after gains of just 0.1% in November and October. More significantly, consumer incomes rose 0.5% for December and so did the personal savings rate. People essentially put the extra money in the bank. In related news, the federal government estimated 2011 GDP at 1.7%, about half of the economic growth seen in 2010.³
   
BOTH ISM INDEXES RISE
The Institute for Supply Management’s closely watched purchasing manager indexes signaled expanding service and manufacturing sectors in January. ISM’s service sector PMI improved 3.8% to 56.8. Its manufacturing PMI advanced 1.0% to 54.1.⁴
   
CASE-SHILLER INDEX DECLINES AGAIN
This was the third straight monthly dip for the 20-city roundup of residential home prices. The latest available edition (November) showed a 1.3% monthly retreat in prices with a 3.7% year-over-year drop.⁵
   
NASDAQ TOPS 2,900
The tech-heavy index closed at an 11-year high Friday: 2,905.66. The Dow settled at 12, 862.23 at week’s end, its best close since May 2008. The S&P 500 finished Friday at 1,344.90. The weekly gains: DJIA, 1.59%; S&P, 2.17%; NASDAQ, 3.16%.^1,6
   
THIS WEEK:  Earnings take center stage in a stretch without much economic data. Monday brings Q4 results from Yum Brands, Humana and Hasbro. Tuesday, earnings arrive from Disney, UBS, Toyota, BP, Coca-Cola and Hartford Financial. Wednesday, Groupon, VISA, CVS, Sprint Nextel, Time Warner and Cisco join in. Thursday, the Bank of England and ECB wrap up policy meetings; new initial claims figures complement earnings reports from Expedia, PepsiCo, Dunkin’ Brands, Sirius XM Radio, Rio Tinto and Credit Suisse. Friday, the University of Michigan’s initial February consumer sentiment survey comes out plus Q4 results from Barclays.
 

Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov – 2/3/12^1,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

 WEEKLY RIDDLE:   A lone pine tree stands on a cliff. The wind is blowing from the east through the mountains. Which way do the tree’s leaves blow?
 
             Contact our office or see next week’s update for the answer!
 
Last week’s riddle:  It has no crown, yet when the chips are down it is more powerful than a king or queen. What is it?

Last week’s riddle answer:    An ace in a deck of cards.
 
Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.  
 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. 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. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
 
Citations.
1 – money.msn.com/market-news/post.aspx?post=7c25b3c1-0028-46a6-a114-77f785c12529 [2/3/12]
2 – www.briefing.com/investor/calendars/economic/2012/01/30-03 [2/3/12]
3 – www.mercurynews.com/breaking-news/ci_19853130 [1/30/12]
4 – www.ism.ws/ISMReport/NonMfgROB.cfm [2/3/12]
5 – www.latimes.com/business/money/la-fi-mo-home-prices-decline-20120131,0,3490723.story [1/31/12]
6 – montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F3%2F11&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F3%2F11&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F3%2F11&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F2%2F07&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F2%2F07&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F2%2F07&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F4%2F02&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F4%2F02&x=0&y=0 [2/3/12]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F4%2F02&x=0&y=0 [2/3/12]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [2/3/12]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [2/3/12]
9 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf [1/9/02]

Anticipation is high. Facebook filed an S-1 form with the Securities and Exchange Commission on February 1, taking its first big step toward going public. It aims to raise $5 billion through its upcoming IPO. Some of the details from the S-1 form:

• Facebook’s revenue climbed from $777 million in 2009 to $3.71 billion in 2011.
• Its annual profits went from $229 million (2009) to $1 billion (2011).
• Its profits grew by 65% last year alone.
• Its top source of revenue is advertising. (12% of Facebook’s 2011 revenues came from Zynga, a social network gaming company.)

 The Google IPO raised $1.9 billion, and this IPO could potentially dwarf that.¹

Will this IPO live up to all the hype? It might; it might not. Let’s examine some other key tech IPOs and see how those shares have done since.

• Google. The IPO set the share price at $85. Here in early February 2012, the share price is now around $580. A home run by any definition.
• LinkedIn. On the day of the IPO, the share price climbed from $45 to a peak of $122.70 and settled at $94.25. At the start of February, LinkedIn was trading for about $72.
• Pandora. Shares were offered at $16 in June 2011; eight months later, they were trading at $13.
• Zillow. Shares were offered at $20 in July 2011 and ended at $35.77 on the day of the IPO; in early February, Zillow traded at around $30.^2,3

All in all, these numbers look pretty good, right? Sure they do, to institutional investors. Keep in mind that the little guy gets there second. It is the institutional investor – not the small investor – who gets first dibs on the stock and who frequently realizes the terrific upside. The individual investors get to get in after the shares take off; sometimes they pay a price.

Lessons from the dot-com (and dot-bomb) years. The 1990s may seem like ancient history, yet there are examples from the past worth noting when it comes to IPOs.

• University of Florida finance professor Jay Ritter has maintained a huge database on IPOs for decades. He did a study of 1,006 IPOs from 1988-1993 (these were all IPOs that raised $20 million or more) and found that the median IPO underperformed the Russell 3000 by 30% in the first three years after going public, and that 46% of the IPOs produced negative returns.
• In 1999, 555 firms went public and the median share price gain for these issues on the day of the IPO was 30%. But what if you bought after the first day? If you did, the median gain after three months averaged 0%. Additionally, almost 75% of all U.S. Internet-related IPOs from mid-1995 to 1999 traded underneath their offering price at the moment of publication.²

Should Mom & Pop dive in? As MarketWatch columnist Mark Hulbert pointed out, Facebook’s IPO will be three times as expensive as Google’s and about 40 times as expensive as the average large IPO since 1975. As Hulbert found in the wake of a chat with Professor Ritter, Facebook’s price-to-sales ratio (PSR) looks to be about 26, with 2011 revenues of $3.71 billion and a reported IPO valuation of circa $100 billion. Google’s PSR was 8.7 at the time of its IPO. ^1,3

Looking back, Ritter found 76 companies since 1975 with trailing 12-month sales from the date of their IPOs of $3 billion or more (in 2011 dollars), firms with more or less reliable revenue streams. Their average PSR: 1.0. AT&T Wireless was the highest of them at 8.9, and that was a 2000 IPO.³

So in other words, Facebook would need staggeringly high revenues (or a consistently remarkable profit margin) for its shares to behave as well as Google shares did in those first few years out of the gate.

Could the tech sector see a “Facebook effect”? Yes, remember the “wealth effect” of the Google IPO? Some of the “best and the brightest” in the tech sector became overnight millionaires and went off and founded their own profitable firms. That sort of thing could happen again; there are tens of thousands of start-ups now generating revenues off of Facebook’s platform, so you have a whole ecosystem of smaller firms that are anticipating the IPO as much as institutional investors.⁴

Caution might be in order for those awaiting Facebook’s IPO. Individual investors have swung for the fences many times in situations like this, only to strike out. 

_________________________________________________________________________________________

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 –www.cbsnews.com/8301-500395_162-57369966/facebook-files-to-go-public-plans-to-raise-$5b/ [2/1/12]

2 – cbsnews.com/8301-505123_162-57369940/why-facebooks-ipo-shouldnt-excite-you/ [2/2/12]

3 – www.marketwatch.com/story/facebooks-ipo-will-be-way-overvalued-2012-02-01 [2/1/12]

4 – www.mercurynews.com/business/ci_19881493 [2/2/12]

Most companies periodically provide a financial statement for a banker. However, the assumption is made that the banker understands the company’s industry, challenges, ownership structure and use of the loan. This is not necessarily the case, and you should make a point of explaining the the situation to your banker.  In addition, you should make sure you understand your financial statements, debtor’s certificate and debt terms.

With regards to your financial statements, what metrics are important in your industry? Some common metrics to track are current ratio, inventory turnover, accounts receivable days outstanding and gross profit. It is important to not only understand what the calculation is, but how certain events effect these metrics, and most importantly, how you compare within your industry. Bankers will be impressed when you let them know that your inventory turns are better than the industry average because you were able to minimize the slow moving inventory utilizing a vendor who will ship directly to your customer. Likewise, if a metric is not as good as the industry you should be prepared to answer why. Maybe your accounts receivable days is older than the industry, but that is a risk your willing to accept because it relates to highly profitable items from key customers.

In regards to your line of credit, it is important to understand the terms of your debtor’s certificate. For instance, if an invoice for a customer exceeds 90 days, is the whole amount due from the customer disallowed? It is a good idea to look ahead to ensure that you will not be out of compliance with regards to your debtors certificate. Also, banks like to see that the line of credit is being used correctly, that is to smooth out cash flow. Accordingly, your line of credit should have a zero balance at least once a year. Bankers refer to this as resting the line of credit. If the line of credit is being used for other purposes, it is best to term out those loans and start paying them down.

Review your debt terms to ensure you have no unforeseen future problems. Is there a balloon payment you need to be concerned about? Are there any covenants that could be a potential problem?

It is very important to deliver quality financial statements to your bank in a timely manner. However, the monthly package should include more than just balance sheet and an income statement. A good package also includes a statement of cash flows and a narrative. The statement of cash flows will help your banker understand your cash position and what you are utilizing the loans for. The narrative, or write up, is a great opportunity to be proactive to questions the banker will, or should have. You can address how the company is doing compared to the budget for the year, explain significant variances in expense items, explain how the company has been managing the balance sheet, and of course you can look ahead, 3, 6 or 12 months to what you see coming down the pipe.

Nobody understands your business as well as you, and this is a great way to show it.

If you are looking for new financing, either with your current bank or a new bank, a well-put-together package and presentation will not only help you obtain financing, more than likely it will get you better bank terms, lower interest rates and lower fees. A package should include the following:

1. How much will you need and what will the loan be used for
2. An explanation about your company
3. A discussion about your industry, and how your company fits within it
4. Current ownership structure
5. Organizational chart, including resumes of the current management
6. Succession plan of the company
7. Historical financial statements
8. Prospective financial statements

A well-put-together package allows the banker to complete the loan application more completely, improving the chance of acceptance by the governing body.

In addition, before you present you package to a bank, be sure to check for possible problems areas so that you can address them with the banker beforehand. Be proactive! Is your industry experiencing a downtown, did the company have less then stellar results last year? Be ready to discuss any obstacles.

If you implement some of the ideas here, your relationship with your current or future bank should be significantly improved.

ECONOMY GROWS 2.8% IN Q4
While this is the best GDP reading since Q2 2010, the initial estimate from the Bureau of Economic Analysis still disappointed the markets. Many economists and investors were looking for growth of 3.0% or better. The majority of the growth actually came from increased inventories. Consumer spending rose 2.0% last quarter, with auto sales being the biggest factor. Durable goods orders did see 3.0% growth in December, putting them 45% above the recession low hit in April 2009.^1,2,3
                                                                                                 
DIPS IN NEW & PENDING HOME SALES
The number of signed home sale contracts fell 3.5% in December, according to the National Association of Realtors. Separately, a Census Bureau report showed that new home sales declined 2.2% in December.^4,5
 
MARQUEE SENTIMENT INDEX AT 11-MONTH PEAK
The Thomson Reuters/University of Michigan consumer sentiment index ended January at 75.0. This was way up from December’s 69.9 mark, and it beat the 74.1 reading forecast by economists surveyed by Reuters.^6,7
 
PRECIOUS METALS GAIN ALLURE
At Friday’s COMEX close, gold was +10.56% YTD, copper +13.18% YTD and silver +21.05% YTD. Crude futures finished last week at $99.56 per barrel on the NYMEX, putting oil merely at +0.74% YTD. (Retail gas prices were +3.67% for the month as of Friday.)²
 
A STRONG MONTH COMES TO A CLOSE
With just a couple of trading days left, January is shaping up to be the best month for U.S. equities since October (see the YTD numbers below). Across last week, the S&P 500 rose 0.07% to 1,316.33 and the NASDAQ gained 1.07% to 2,816.55; the Dow slipped 0.47% to fall to 12,660.46.¹
 
THIS WEEK:  The December consumer spending report comes out Monday. On Tuesday, earnings reports arrive from Amazon.com, Broadcom, ExxonMobil, UPS, Pfizer and Eli Lilly – and we also get the latest S&P/Case-Shiller home price index and the Conference Board’s January consumer confidence poll. Wednesday, Q4 results roll in from Qualcomm, Electronic Arts, Aetna and Marathon Oil and the latest ISM manufacturing index appears. Besides new initial claims figures, Thursday brings Q4 results from Unilever, Sony, Deutsche Bank, Merck and Beazer Homes. Friday, the January unemployment report is out along with ISM’s service sector index and data on December factory orders; Clorox also issues Q4 results.
 

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 1/27/12^1,8,9,10
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

 WEEKLY RIDDLE:   It has no crown, yet when the chips are down it is more powerful than a king or queen. What is it?
 
             Contact our office or see next week’s update for the answer!
 
Last week’s riddle:  I’m usually standing on a city sidewalk, and I’ll always stand by your car. But if you don’t feed me, you may get into trouble. What am I?
 
  Last week’s riddle answer:    A parking meter.
 
 
 
Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.  
 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. 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. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
 
Citations.
1 – www.cnbc.com/id/46162429 [1/27/12]
2 – money.msn.com/market-news/post.aspx?post=6e802a2f-f50a-4ae4-948b-7bc9555ff5f6&_nwpt=1 [1/27/12]
3 – www.npr.org/2012/01/26/145895744/durable-goods-orders-signal-business-investment [1/26/12]
4 – www.reuters.com/article/2012/01/25/us-usa-economy-idUSTRE7BM0AB20120125 [1/25/12]
5 – www.startribune.com/business/138174364.html [1/26/12]
6 – montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [1/27/12]
7 – www.cnbc.com/id/46162624/ [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F27%2F11&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F27%2F11&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F27%2F11&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F26%2F07&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F26%2F07&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F26%2F07&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F28%2F02&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F28%2F02&x=0&y=0 [1/27/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F28%2F02&x=0&y=0 [1/27/12]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/27/12]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/27/12]
10 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf [1/9/02]

To start off with, lets discuss desktops. Desktops offer power, performance and are expandable at a lower cost than a comparable laptop. Some of the advantages in power are higher speed processors, robust storage options and increased RAM capabilities. Due to these advantages, performance can be greatly enhanced. At the same time, desktops have a much larger range for expansion because of the overall size of the device, which includes additional drive bays, slots, etc. However, one of the major drawbacks to desktops is also its size, which makes them more cumbersome and require additional space to be set aside for their implementation. The size also prohibits it from being any type of mobile asset.

Laptops remove the mobile barrier because of their reduced size and weight. The reduced bulk allows it to be transferred between locations with very little hassle to the end user. In addition, if docking stations are being used. there is no need to worry about connecting or disconnecting external devices when going between locations. Wireless networking – which today is a standard for laptops – increases efficiency, allowing access from coffee houses to airports and hotels. Even with the smaller size laptops, there are still a variety of peripherals that can be attached. However, the small technology does come at a premium price. Laptops tend to run almost double the price of a comparable desktop, making them a much larger initial investment.

Tablets are the newest device in the market, offering laptop features for less than desktop prices in a majority of cases. Tablets are extremely mobile and compact, making them a great fit for the on-the-go user. Hospitals have been migrating to tablets, allowing doctors the ability to get patient information and enter notes without having to carry around patient medical records. The lower prices make them very attractive for users who are not looking to make a large investment for mobile computing to have at home or in the workplace. Here are some of the advantages: they are great for email, browsing the web, reading books, playing movies and audio. These lower prices do not come without disadvantages, like smaller drive size, lower processing speeds and limited capabilities with business applications.

After you turn 70½, the IRS requires you to withdraw some of the money in your retirement savings accounts each year. These withdrawals are officially called Required Minimum Distributions (RMDs).¹

While you never have to make withdrawals from a Roth IRA, you must take annual RMDs from traditional, SEP and SIMPLE IRAs, pension and profit-sharing plans and 401(k), 403(b) and 457 retirement plans annually past a certain age. If you don’t, severe financial penalties await.¹

If you are still working as an employee at age 70½, you don’t have to take RMDs from a profit-sharing plan, a pension plan, or a 401(k), 403(b) or 457 plan. Your initial RMDs from these accounts will only be required after you retire. However, you must take RMDs from these types of accounts if you own 5% or more of a business sponsoring such a retirement plan.²

You must take RMDs from IRAs after you turn 70½ regardless of whether you are still working or not.²

The annual deadline is December 31, right? Yes, with one notable exception. The IRS gives you 15 months instead of 12 to take your first RMD. Your first one must be taken in the calendar year after you turn 70½. So if you turned 70½ in 2011, you can take your initial RMD any time before April 1, 2013. However, if you put off your first RMD until next year you will still need to take your second RMD by December 31, 2013.¹

Calculating RMDs can be complicated. You probably have more than one retirement savings account. You may have several. So this gets rather intricate.

• Multiple IRAs. Should you have more than one traditional, SEP or SIMPLE IRA, the annual RMDs for these accounts must be calculated separately. However, the IRS gives you some leeway about how to withdraw the money. You can withdraw 100% of your total yearly RMD amounts from just one IRA, or you can withdraw equal or unequal portions from each of the IRAs you own.
• 401(k)s and other qualified retirement plans. A separate RMD must be calculated for each qualified retirement plan to which you have contributed. These RMD amounts must be paid out separately from the RMD(s) for your IRA(s).
• Inherited IRAs. The same applies; a separate RMD must be calculated for each inherited IRA you have, and these RMD amounts must be paid out separately from RMD(s) for your other IRA(s).¹

This is why you should talk to your financial or tax advisor about your RMDs. It is really important to have your advisor review all of your retirement accounts to make sure you fulfill your RMD obligation. If you skip an RMD or withdraw less than what you should have, the IRS will find out and hit you with a stiff penalty: you will have to pay 50% of the amount not withdrawn.²

Are RMDs taxable? Yes, the withdrawn amounts are characterized as taxable income under the Internal Revenue Code. Should you be wondering, RMD amounts can’t be rolled over into other tax-deferred accounts and excess RMD amounts can’t be forwarded to apply toward next year’s RMDs. ²

What if you don’t need the money? If you are wealthy, you may come to see RMDs as an annual financial nuisance, but the withdrawal amounts may be redirected toward opportunities. While putting the money into a savings account or a CD is the usual route, there are other options with potentially better yields or objectives. That RMD amount could be used to:

• Start a grandchild’s education fund.
• Fund a long term care insurance policy.
• Leverage your estate using life insurance.

There are all kinds of things you could do with the money. The withdrawn funds could be linked to a new purpose.

So to recap, be vigilant and timely when it comes to calculating and making your RMD. Have a tax or financial professional help you, and have a conversation about the destiny of that money.

__________________________________________________________________________

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – www.hartfordinvestor.com/servlet/Satellite?c=Page&cid=1284290138050&pagename=Investor%2FPage%2FCommon [9/23/11]

2 – www.irs.gov/retirement/article/0,,id=96989,00.html#8 [1/5/12]