George Chamberlin's Money in the Morning

February 27, 2015

Putting the wraps on February. Hard to believe, huh? The first two months of 2015 are just about behind us and it truly has been a tale of two months. January saw the major indexes fall about 3.5 percent, only to see things flip in February, making up all of the declines in the previous month. The most interesting story right now is the climb of the Nasdaq toward its record highs set in March 15 years ago during the peak of the dot-com bubble. The tech-heavy index is just about 1 percent away from topping the 5,100 mark. It fell all the way to 1,377 by February 2009, at the depths of the Great Recession. In hindsight, what a great buying opportunity that really was.

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Putting the wraps on February. Hard to believe, huh? The first two months of 2015 are just about behind us and it truly has been a tale of two months.

The first revision of the GDP -- gross domestic product -- for Q4 showed a slowdown in economic activity from the initial reading. The Commerce Department said the economy grew by 2.2 percent in the last three months of 2014, down from the first reading of 2.6 percent. Evidently, companies were in no rush to replenish inventories during the holiday season, a key contribution at the end of any year. For all of 2014, the revised report showed growth of 2.4 percent, following 2.2 percent in 2013 and 2.3 percent in 2012. The only positive part of the report was the continued strength of the American consumer, as spending rose 4.2 percent. You look at these numbers and wonder: How could the Federal Reserve possibly start raising short-term interest rates? To say the economy remains "fragile" is a bit of an understatement. Yes, things are getting much better, but could the economy tolerate rising rates? I don't think so.

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Speaking of consumers, February is ending with households in good spirits. The University of Michigan's consumer sentiment index rose in the past two weeks as consumers enjoyed the lower gas prices and improving employment situation.

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Apple has retained the top spot for the eighth year in a row as the most admired company, according to a survey from Fortune magazine. The ranking is based on nine factors including people management, social responsibility, financial soundness, long-term investment value and the quality of products and services. Apple is followed by Google, Berkshire Hathaway and Amazon.com.

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By the way, mark your calendar for March 9. That's when Apple will hold a special event to introduce the new Apple Watch with details on prices, features and other much anticipated bells and whistles. The devices will go on sale in April.

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Some encouraging news for the much maligned housing market. The National Association of Realtors said pending home sales -- transactions in the escrow process and not considered sold -- rose sharply in January to the highest level in 18 months. "Contract activity is convincingly up compared to a year ago despite comparable inventory levels. The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth," NAR chief economist Lawrence Yun said.

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If you are planning to hunker down over the coming rainy weekend and are looking for something good to read, I would suggest logging on to the website for Warren Buffett's company, Berkshire Hathaway. He will release his annual letter to shareholders bright and early Saturday morning and it is a great read. Sure, lots of technical stuff required by the SEC but his dialogue on investment issues is always packed with special words of wisdom. It reads like a letter from home, full of newsy tidbits and very personal insights. While you are there, go back and read some of the letters from previous years. Your faith in long-term investing and the American economy will be renewed.

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By the way, Buffett was interviewed in the latest issue of Fortune magazine and asked what he attributes for his longevity -- he's 83 years old. He said, "I eat like a 6-year-old." The Oracle of Omaha downs at least five cans of Cherry Coke each day, the leaded kind, no diet for Buffett. He, of course, is the largest shareholder in Coca-Cola so he obviously endorses the brand.

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