How are you doing? How is your Spring going? I hope it is smoother than the markets. We are getting mixed messages on the health of our economy. What have you seen? I really would love to hear your feedback.

In this issue:
• Pullbacks are not pleasant, but they are healthy
• Will Europe be a concern for the foreseeable future?
• Facebook IPO
• Business of the Month – Prestige Wood Works, Tim Collins



Market pullbacks can be the financial equivalent of a forest fire


Bottom line– we are experiencing a normal pullback in reaction to continued concern about the economic health of Europe and the prospect for growth here in the US, this should not be anything terrible or long-term.

Just this month, we have seen the following declines: Dow and S&P500 -5%, gold -6%, developed markets -8% and emerging markets -10%. Bonds are mostly flat (long-term US Treasuries, the best performers, are up 2-4%, the rest of the bond world is flat-lining).

We have expected moves like this but just were not sure when they would come. We cannot have steady upward growth in the stock market, it is just not sustainable not to mention not normal. There was a fair amount of hope and wishful thinking baked into our stock markets’ performance and now some of that unsustainable growth on the forest floor is getting incinerated.

Much of our hope was based upon nice improvements in unemployment numbers but that hope has abated as job gains have stagnated. Yet, there are still reasons for optimism – housing numbers have been surprisingly good, corporate earnings were mostly positive, Facebook is going public . . . we’ll get to that.


How long do we have to worry about Europe?

Well, it will be well beyond the June 17 elections in Greece, unfortunately. Reforming the Greek government with the hope that a coalition will arise that will pledge to keep the country in the Eurozone is significant, but not the end of our worries.

The yield on Spanish treasury bonds spiked into the danger zone recently indicating a lack of faith by investors that Spain will continue to be able to pay its debts. As someone said recently, contagion in Europe is no longer a worry, it is a reality. Germany continues to hang in there, but even the industrious Germans cannot single-handedly stave off a continental recession.

So, until the US establishes firmer economic footing, we will remain bound to the fate of Europe and will see our markets whipsawed by news from across the pond. Some of our largest trading partners are in Europe and if they cannot afford to buy our goods, we will feel it.


Facebook

Most likely, by the time you read this, Facebook will have begun trading (starts at 11 a.m. Friday, May 18). There is a lot of hope for a successful IPO. The stock is priced at $ 38 (the amount Facebook will get for each share from the syndicate of investment banks leading the offering) and will likely trade up to twice that amount once it hits the open market.

It is not merely the financial impact, however, that makes this IPO so special. There are 900 million users on Facebook. There are some market makers who believe that such a widely recognized, socially relevant company can spur renewed investor interest in the stock market. That is a lot to ask, even of a soon-to-be $ 100 billion company.

Friends, family, clients have all asked me about Facebook and whether they should purchase shares. With a $ 100 billion valuation, it has big shoes to grow into and it may take some time to show the consistent revenue and earnings growth to justify that valuation. So, my belief is that there will be several years of no appreciation in the stock price but, rather, it will trade within a range.

Of course, I could be dead wrong. Even though I am on Facebook, I do not quite get the concept/utility of it. But my lack of understanding surely is not shared by almost a billion people. So, the company could surprise me with its performance, too.

In any case, it will be a fascinating story for years to come and May 18, 2012 will be an historic day.


Business of the Month: Tim Collins – Prestige Wood Works

Tim has done several jobs for us and always delivers first class, high quality results. Tim is also the kind of perfectionist you want building bookshelves, kitchen islands and cabinets. He will notice imperfections in his work that even my wife did not see and take the time to make sure the results match his high standards.

Here is a description of the business in their words: “We are a family owned and operated business. We do custom woodworking. All of our items are designed and built for the space you have. We have no show- room due to the fact that each item we build is one of a kind.”

Tim, his wife Kim and son, Matt, can be reached at 
http://www.prestigewoodworks.org/, prestigewoodworks@bellsouth.net or 919.772.4903


Thank you

All the best to you and your family.

Please let me know if I can help you, your family or any of your friends with their investment planning and needs.

Yours,
Doug
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Neuse River Capital, LLC key facts:
• Independent Registered Investment Advisor –

o no company pays me to sell their products;
o each client portfolio is built to match their goals, risk tolerance and tax sensitivity
• Low fees – 0.75% on first $ 1 million in discretionary funds under management for each client
• High service – regular communication, spend time to understand each client’s complete financial picture
• Min. account size $ 100K – can be rollover IRA, brokerage account, trust account, etc.
• Client accounts are held at Charles Schwab so clients have online access, account statements and other benefits of dealing with a large national financial services provider.

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