18-May-12 -  Dividends and Inflation
In accordance with our long-term strategic view, we believe large-cap, dividend-paying U.S. multinationals should be a core component of an investment strategy given their strong balance sheets, dividend growth potential, and ability to capitalize on faster growth in developing markets.

In this note, we focus on the positive relationship between dividends and inflation as another reason why investors should be favoring equity dividends over coupon payments from long-term Treasuries for income generation.

25-Apr-12 -  Market Monitor: No Real Surprises from the Fed
In essence there were two, key takeaways from the latest FOMC meeting and they did not surprise us at all, because they are consistent with what we have been saying for some time: (1) Monetary policy will remain supportive for the equity market; and (2) The FOMC remains fully prepared to adjust its securities holdings if incoming data warrant such a switch.

13-Apr-12 -  Market Monitor: Beware Seasonal Affective Disorder
Can the equity market rally continue? It can and we believe it will, but we do not think it will be a rally that continues uninterrupted. Several psychological challenges are festering that could lead to some unsettling selling pressure and heightened volatility after the strong start to 2012. Accordingly, our near-term tactical view is more cautious entering the seasonally pernicious May to October period.

Be that as it may, we continue to hold to our long-term view that stocks offer excellent relative value versus bonds.

29-Mar-12 -  Equity Strategy: Earnings Up, Dividend Payout Ratios Down
From our vantage point, we believe there is a risk of complacency in the market over the near term as earning growth slows and investors lock in gains after a tremendous first quarter.

For those concerned that a market correction could occur, high-quality, high-dividend stocks provide a conservative alternative.  We adjusted our proprietary dividend model to screen for companies that have liquid balance sheets and low dividend payout ratios.  These companies have the balance sheets to sustain any correction, and to potentially increase payout ratios.

24-May-12 -  Data Detail: Durable Goods Orders - April 2012
Relative to expectations, the durable goods orders report for April was a mixed bag.  Still, the second straight month of declines in orders for nondefense capital goods excluding aircraft -- a proxy for business investment -- will mesh with concerns that the macro uncertainty is driving a slowdown in business investment that could persist.

23-May-12 -  Data Detail: Home Sales - April 2012
A lack of available distressed properties tempered growth of existing home sales for a second consecutive month as investors waited on the sidelines for more bank-owned properties to come to the market. That same lack of inventories, however, bolstered new home sales by reducing the premium paid for a new home versus an existing home.

18-May-12 -  GDP Monitor: May 14 - 18, 2012
After years of negatively contributing toward GDP, we feel comfortable stating that the residential construction sector has bottomed and will help contribute positively to economic output for the foreseeable future. The number of homes under construction has been on a steady upward trend since August 2011 and inventory levels are at all-time lows. Builders will have to continue adding to new production even if sales growth is at a minimum.

16-May-12 -  Data Detail: Housing Starts, Ind. Production - April 2012
There was a lot of talk that recent increases in housing starts were the result of homebuilders taking advantage of warmer-than-normal temperatures. The data suggest, however, that the weather effects were overblown and that construction levels are clearly rising. Residential construction will be a positive influence on GDP after many years of dragging down overall economic growth.

21-May-12 -  Fixedated: May 14 - 18, 2012
Treasury prices soared to new heights as the yield on the 10-year hit an all-time low of 1.69% (overnight) last Thursday.  Germany’s parental stance regarding Greece’s need to take its medicine may be weakening.  There appears to be a growing belief among other members that the long-term solution may lie in the issuance of group-backed euro bonds.

Corporates took a hit last week with yields on the investment-grade and high-yield indices rising 13 bps and 45 bps, respectively.  Munis continue to be a compelling relative value trade vs. USTs as the percentage of relationship for 10-year AAA debt stands at 127%.

14-May-12 -  Fixedated: May 7 - 11, 2012
The investment world has reached yet another apex of fear.  Greece’s newly adopted “Thanks for the help, but we have got it from here” stance towards further aid, China’s decelerating economy, and J.P. Morgan’s trading gaffe have investors piling into USTs.  Greece's push back against previously negotiated austerity measures is akin to the tail trying to wag the dog.  In this case, the tail is likely to get cut off if it continues to be a problem.

Corporates were mixed.  Investment-grade bonds continued to rally, hitting another all-time-low yield (3.53%), while high-yield sold off a bit.  Munis continued to grind lower as investors sought out alternatives to USTs.

07-May-12 -  Fixedated: April 30 - May 4, 2012
Treasuries rallied last week on weak economic data and, of course, European debt fears.  The elections in France and Greece over the weekend did nothing to quell the uncertainties investors face.  When in doubt, take cover – and USTs are the ultimate security blanket.

Corporates saw good strength across the board last week as the investment- grade and high-yield indices moved to lower yields.  Munis gained a bit last week and relative value also improved.

30-Apr-12 -  Fixedated: April 23 - 27, 2012
Another week saw yet another series of disappointing events out of Europe, with Spain leading the way, and lackluster economic data in the U.S. (consumer sentiment and pending home sales notwithstanding).  As such, the safety trade refused to loosen.

Corporates gained across the board last week.  The ML U.S. 7-10-year Corporate “A” Index hit an all-time-low yield (3.61%).  Munis were fairly flat last week as participants took down the limited new-issue calendar with little trouble. The relative value argument for AAA munis remains intact.

23-May-12 -  Trend Watch: May 7 - 18, 2012
The downturn in May has been fueled by the festering debt crisis in Europe, concerns about slowing economic activity in China, worries about sluggish job growth in the U.S., and a stunning revelation of a huge trading loss at JPMorgan Chase.  In brief, there has been a confluence of factors that has raised the level of uncertainty for market participants who have been inclined to sell first and ask questions later.

We discuss these factors in this week's Trend Watch, including:

• A new, more pessimistic view on the survivability of the eurozone
• Why the Federal Reserve's economic outlook is too bullish
• How we remain hesitant to initiate positions in corporate bonds
• A reaffirmation of our long-term view on natural gas, even as it has rallied in the face of a pullback in commodities

09-May-12 -  Trend Watch: April 16 - May 4, 2012
The Great Recession was driven by a credit contraction, and the U.S. continues to work its way out.  Positive signs keep emerging, including new data over the last two weeks that indicate a rebound in small business lending may finally be here.

Unfortunately, the credit situation continues to deteriorate in Europe.  Standards loosened in the first quarter, but the reemergence of the eurozone debt crisis should lead to another round of tightening.  And demand continues to decline.

We discuss these points in this week's Trend Watch, as well as other views including why we would be cautious about initiating large, new positions in corporate bonds right now, and how a structural dislocation in the labor market could soften potential payroll gains.

18-Apr-12 -  Trend Watch: April 2 - 13, 2012
The yield on Spain’s 10-year bond has climbed from 4.58% on February 1 to as high as 6.02% on April 16.  Over the same time period, the TED spread, which is regarded as a gauge of perceived credit risk in the general economy, has declined nearly 9 bps.  A narrowing TED spread at this fearful juncture seems to imply that there is less fear about contagion risk from Spain hitting the U.S. economy and U.S. banks.

We discuss that point in this week's Trend Watch.  We also break down the Macau gaming market, including an update on our top recommendation in the industry, Las Vegas Sands, and discuss the hybrid vehicle market and its lack of customer loyalty.

04-Apr-12 -  Trend Watch: March 19 - 30, 2012
Friday's Prospective Plantings report from the USDA ratcheted higher the projection for corn plantings in the 2012/13 season, at the expense of both wheat and soybeans.  This record-setting figure would have set a negative tone for corn prices if it were not for Friday's other release, the Grain Stocks report.

We review those reports in this week's Trend Watch, while also discussing ways to invest in water, a vital resource that may begin encountering supply issues, and two new reports that say the euro area may already be out of a recession.