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Schmohl Talk:  Weekly Bullets


March 11, 2013


Economic themes: Employment, International Trade, Chinese Inflation, German Exports, Mutual Funds.


  • Employment: The unemployment rate fell to a 5-year low of 7.7% in February, from 7.9% in January, led by the goods-producing, construction, and services sectors, though it was held back by declines in government jobs.  While the news was more positive than expected, the declining unemployment rate can still be partially attributed to a declining work force.
  • International trade: The trade balance widened more than expected to $-44.4 billion in January, from $-38.1 billion in December, largely due to an increase in the petroleum deficit, and a decline in the services surplus.
  • Chinese inflation: As economic indicators in China appear to be slowing, including industrial production, retail sales, and power output, inflation in China increased to 3.2% in February, up from 2.0%.
  • German exports: Exports in Germany increased 1.4% in January, as imports increased 3.3%, resulting in a slight decline in the nation’s trade surplus to €15.7 billion, implying the economy is trying to rebound from severe declines.  Europe’s second largest economy, France, continues to struggle as outputs from factories, mines, and utilities declined by 1.2%.
  • Mutual funds: A 20-year study by Dalbar, a research firm, revealed that the average equity mutual fund investor returned 4.25% annually, compared to 8.21% for the S&P 500, helping confirm the value of a diversified, broad-based asset allocation strategy.
  • Economic highlights for the week ahead:
    • Wednesday, 3/13/2013: Retail Sales.
    • Thursday, 3/14/2013: Jobless Claims, PPI.
    • Friday, 3/15/2013: CPI, Industrial Production.


Municipal market themes: San Bernardino Salaries, Reno, California Redevelopment, Los Angeles.


  • San Bernardino: Employees of the bankrupt city are scheduled to receive a total of $1 million in wage increases for the upcoming year, due to police and fire fighter salaries being based on the average of 10 “comparable” cities.  Mayor Pat Morris admitted “it makes no sense.”
  • Reno: Credit ratings agency Standard & Poor’s revised the outlook on the City of Reno to stable and affirmed the ‘BBB’ rating.  The action reflects stabilizing pledged revenues.
  • California redevelopment: Moody’s Investors Service threatened to withdraw the credit ratings on several California redevelopment agency bonds due to a lack of timely and complete information.
  • Los Angeles: In a primary election, voters rejected a $0.005 increase in sales tax, which would have been used to close the projected budget gap.  Despite reducing the workforce by 5,000 employees over the past few years, the city continues to grapple with how to fund increasing pension and healthcare benefits for current and former employees.



This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service.  Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital.  Past performance does not guarantee future results.  Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.


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