Greetings All Quarter 1, 2013 has ended and in a truly remarkable fashion.  The markets have had the strongest quarterly performance since 2007; led by strong corporate activity, housing, employment and a continuing accommodative Fed. It seems that more retail investors, investors like us, may be tip-toeing back into the stock market. According to an April 2^nd article by Jee Yeon Park of CNBC, various equity investments recorded net inflows of money exceeding $100 billion year to date.  Inflows of this magnitude may be considered positive indicators for the stock markets. The question remains however, will these inflows continue or are we headed for a correction erasing all this positive momentum?  According to John Fox, a professional investment manager, quoting in the same CNBC article, “After several years of outflows, we’ve been seeing better inflows so far this year, and we think we have a ways to go.  It’s driven today by people who feel that they’ve been missing out, but we’re still in the early innings of retail investors coming back.”  So…are we in the early innings or have the retail investors, you and I, already invested all we intend? Markets usually peak when extreme investment euphoria is present.  This is no certainty but remember when non-investment professionals [teachers, clerks, mechanics, etc.] start to provide investment advice as a “matter-of-fact”, telling you what investments to buy, that might be a sign of extreme investment euphoria; 1999 – 2000 comes immediately to mind.  Market reports and analyst articles confirm that this euphoria is not present.  Presently, skepticism and suspicion are the dominant attitude.   Where then is this continued distrust of investing coming from? In a word…Media!  The media continues to report solely on the crisis situations worldwide.  They are failing to report on the improving conditions.  One such improving condition is corporate economics within the US – the economic improvement that primarily affects market performance.  Market corrections come when the markets rise to a level that overvalues companies based upon certain market measures.  Presently those market measures are not indicating an overvalued situation.  What you are seeing is a continuation of headline news creating stock volatility even while companies for the most part are in solid or improving financial condition; much better than say their condition in 2007.  So portfolios must be reviewed to insure good quality companies are within them, that individual investments are appropriate regarding risk and then patience must be exercised throughout the biased reporting status quo the media continues to exemplify. Another question many are asking is, “why is the market going up to record highs, where is the money coming from driving these increases and will it continue?”  After the 2007-2008 financial crisis, investors immediately became very cautious and began to build up huge cash positions.  According to the Federal Reserve Statistical Release dated March of this year, this cash position domestically has grown to over ten trillion dollars as of Jan 31, 2013.  During February of 2013, this cash position declined for the first time in 24 months but by only $33 million. So the money driving the markets over the first quarter clearly did not come from cash savings.  Where it may have come from is other asset categories.  A shift if you will, from possibly gold, treasury bonds, corporate bonds, etc.  The theory here is that once the economic weaknesses were handled and the US economy began its recovery (which it clearly has), this cash savings as recorded by the Fed would be available for investment.  Continuing with the theory, this cash savings could potentially be the fuel that improves market performance.  It seems however, that this money is still available for investment and therefore we can derive, to our own personal degree, a likely future direction for the markets. According to the Investment Company Institute report of 30 September, 2012, more than $500 billion was removed from these same various equity investments between 2007 and 2012.  This trend, as mentioned earlier, reversed during the first quarter of 2013.  However this is clearly not a record level of money moving into equity investments again when compared to 1999 – 2000.  Back then as you recall, it was out of control; no pessimism existed.  “euphoria” instead existed where double digit percentage annual equity returns would continue forever!  We know how that story ended.  Today this euphoria is not present. For the first time though, investors have a clear indicator of how the Fed will proceed going forward.  This is unprecedented.  The Fed Open Market Committee has clearly indicated that it will leave interest rates unchanged (near zero) and will continue buying $85 billion in debt each month until unemployment falls to 6.5 percent and we see an economic growth rate of 2.5%.  This has created the thinking that as a result of the central bank’s easy-money policy, equity investments may be a positively performing asset category as long as Fed policy remains in place. [This I watch closely every day.  Main concern?  Labor Rate! As Quarter 2 begins, there exist many positives.  The domestic economy continues to improve.  Personal levels of debt have been declining.  Corporate America continues to grow; its levels of cash have also been increasing.  Housing continues to improve.  Interest rates are low.  Inflation is tame.  All of these are very encouraging.  What are the concerns?  The labor market, although improving, is very inconsistent in its improvement.  Europe still has many social, economic and political issues.  Finally, the US political machine is still demonstrating its inability to make good sound decisions in a non-partisan manner.  That said, the positives still appear to outweigh the negatives and the negatives, concerning for sure, but they are at the forefront of consideration, effort and resolution. I continue to be amazed at all the inconsistencies that exist today regarding investing and market performance compared with the “news” affecting it.  Seems that there was a simpler time but those days have long since passed.  Working closely together, using proper risk analysis and asset allocation along with consistent discussion we can maintain your existing investment strategies and continue the high level of patience necessary that will get us through all this confusing rhetoric.  From my seat I see improvement occurring just below the surface but the chop on top is causing doubt but that chop is decreasing, it will continue to do so but with the global complexity existing today I am not sure it will ever become “calm”. I continue with my client specific focus and work daily to disseminate all the information flowing about.  I thank you for your continued support and referrals.  2013 will be an interesting year so let’s stay in close contact throughout.  My best to you and yours and this oratory will continue in July.  Thanks! Regards, Martin The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  “Stock investing involves risk including loss of principal.  The Down Jones Industrial Average is an unmanaged index and cannot be invested into directly.  Past performance is no guarantee of future results.”