Download January 31, 2013 Good Morning: The equity markets continue to

 January 31, 2013
Good Morning:
The equity markets continue to trend higher in spite of headline news that disappoints.
Before the markets opened yesterday the U.S. Bureau of Economic Analysis reported their advanced
estimate for real gross domestic product in the 4th quarter of 2012. GDP decreased at an annual rate
of [0.1%]. The second estimate for fourth quarter GDP is due 2/28/13. Keep in mind the average
revisions are 1.3%. The actual change in 4th quarter GDP could be as much 1.3% better or worse.
Our belief is it will be better with positive revisions. The market seems to agree with the S&P 500
closing only .39% lower on Wednesday.
If individual investors become net buyers of equities instead of continuing to be net sellers as they
have been for five years, the bull market will move to stage II which is signified by broad investor
participation. The equity markets have advanced more than 130% since the market lows absent the
support of individual investors.
Stage II is marked by growing confidence among all investors which should drive equity prices
significantly higher.
It is stage III that will prove worrisome. It is the speculative stage when the markets uncouple from
reality. Stage I [fear] is when pessimism dominates investor psyches so that they cannot logically see
value at depressed prices. Stage III [greed] is when ultra-optimism dominates in ways that
frequently lead to inflated asset prices. [bubbles] Stage III is also the period when the last of the
holdouts “crashes the party” and denial of risk dominates investor rationale. The most recent
example is real estate.
The good news is we are somewhere between the end of Stage I and the beginning of Stage II. Do not
let stage II procrastination prevent you from taking action. Considering what we have been through
in the markets, the notion of waiting a little longer may seem reasonable. There is nothing about
procrastination that is reasonable.
As always I welcome your opinions and comments.
Best wishes,
Tom 30 SOUTH PEARL STREET • ALBANY NY, 12207 • (518) 391-4200 • (866) 432-1246  FAX: (518) 391-4242
WWW.CURRANLLC.COM