March 22, 2013

While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment.  Today’s comment is from John Lloyd.

Americans are more pessimistic about the economic future than any time since Gallup began polling their opinions in 1959.  Yet the stock market continues to rise to all time highs.  Maybe it is time to cheer up.  The best time to invest is when others are fearful.  The press has scared investors with stories of the harm political gridlock is doing.  It could be political gridlock is saving the country from wrong choices.

There is a tension between Federal Reserve policy of easy money to fund the current Federal deficit and the liquidation of private debt.  One promotes economic growth and the other retards it.  The concern is that the Federal debt rises to a level that becomes either difficult to service, or ultimately is a burden to our children and grandchildren.  However, there is much discussion, even among liberals, about this issue and often recognition of a problem is the first step toward solution.  Already, statistics show that federal receipts (taxes) are rising faster than outlays, although many would argue that the government needs to take more drastic action to cut the shortfall.  Confidence in the soundness of the dollar and federal debt is a key to continued economic growth and while there is no practical alternative to the dollar as the world reserve currency, faith in the dollar can be undermined by poor policy.  Today, all currencies are under pressure because governments seek a trade advantage by devaluating their respective currencies.  Is gold an alternative currency?  Maybe it is for central banks, but you and I aren’t going to take a grain of gold to the local grocer.

At present, the economy is growing at about 2%.  The government deficit continues to shrink because receipts are at a new high and outlays are flat.  America could be on its way to growing out of its debt problems.  Housing is recovering and unemployment is declining.  In short, the stock market is rising for good reasons. 

All of us at Tower Bridge worry about the current administration in Washington putting roadblocks and disincentives to economic growth.  It is high time that we build the Keystone pipeline.  I prefer to look at the wonderful results that can come from innovation which produces better results when un-yoked by governments.  Better technology creates growth.  Right now the new technology of getting oil and gas from rock rather than reservoirs is creating hundreds of thousands of new high-paying jobs, reducing costs for business and consumers and reducing our trade deficit.  Better technology is lowering supply chain costs and increasing access to information worldwide.  The economic cycle is finally at a point where investors would be better served by focusing on the positives rather than the negatives.

We believe that clients should continue to own stocks. 

John S. Lloyd, CFA 610-260-2218

Additional information is available upon request.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request.  This report is not a complete analysis of every material fact representing company, industry or security mentioned herein.  This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned.  This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities.  The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed.  This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report.  Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized.  Opinions are subject to change without notice. 

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