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Quarterly Investment Review Letter 2013 Q4

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Consumer confidence in the US is cautiously heading into 2014 with momentum. Housing prices rose north of 13% over 2013 according to an S&P / Case Schiller Report. “The key economic question facing housing is the Fed’s future intention to scale back quantitative easing and how this will affect mortgage rates,” said David Blitzer, chairman of the index committee at S&P. In other words this recent rise in prices remains on fickle and thin ice.


Whether the US or just about any other country you care to name, what’s needed to give the housing market – and the broader economy – a bigger boost in 2014 is a sharper increase in hiring. The US unemployment rate at 7% is still exceedingly high so late in an economic recovery, and there’s little pressure on companies to raise wages given a soft labour market in which workers have little bargaining power. Economies can’t shift into a higher gear without stronger employment gains and faster wage growth,


Of concern is that in six of the largest EU countries, as well as in the United States and Canada, the US Conference Board detailing CEO confidence reported that hiring intentions and expectations fell sharply throughout the last quarter. Remarkably though, the same report says that consumers feel better about their current circumstances now than at any time in the last 5 ½ years. My sense is to heed the CEO perspective.


What we know for sure is that there are opposing perspectives about the economic direction. The enhanced risk and volatility implicit in such circumstances will continue for some time, maybe a longtime yet!


The Value Style of both Monthly High Income (MHI) and of Cardinal / RMFP Value continues to offer consistency of income and preservation of capital in this confounding perfect storm. It is not over until it is over.


If you are up for a 16 minute video, which has a brilliantly detailed perspective on this perfect storm, please check out the link below: