We can add the ABI to the drumbeat of data points that continue to point to economic expansion.
The employment reports this morning were quite positive. I follow the Household Survey which remains within its trend since July 2011 of gains of ~280,000/mo gaining 296,000 in April 2013. The Establishment Survey reported April 2013 gains of 165,000 and March 2013 revised higher from 88,000 to 138,000 an increase from the previously reported gain of 50,000. The Bureau of Labor Employment Report can be found at this link: BLS Employment Report April 2013
Charlie Munger on Discount Rates and Opportunity Cost
Discounting future cash flows is one of the most frequently used methods of business valuation. It's also the preferred method of Warren Buffett and Charlie Munger. If you’re looking for value stocks, and exclusive access to value-focused hedge fund managers, check out Hidden Value Stocks. While he's never laid out his exact valuation process, Buffett Read More
Construction Employment (part of the Establishment Survey) was reported with an increase of 27,000. At the bottom of this note the March 2013 ABI (Architecture Billing Index) shows steady improvement. The ABI trend which is correlated to future Construction Spending and Construction Employment is reported to subscribers monthly but available quarterly at this link: ABI March 2013 Residential Sector appears strongest but other sectors are rising and still have considerable improvement ahead before we enter economic maturity.
Fundamentals are Directly Correlated to Stock Prices
1. All of the important economic indicators remain in uptrends.
2. Higher Lt Vehicle Sales and higher Household Survey(Emp) lead to higher corporate revenue and profits.
3. Higher Corporate Profits = Higher Stock Prices
The construction cycle remains in early stages. Fulfilling the basic demand for the level of residential and commercial structures required for our ~310mil citizens and the additional infrastructure of roads, sewers, water systems, schools, bridges, hospitals and etc. requires hiring/rehiring millions of people. Historically one can estimate that it is likely to take 5yr-6yrs to work through the pent-up demand of the past 5yrs and many of these individuals will themselves buy vehicles and homes. This has always occurred in the past and has pushed our economy to its upper level of performance in previous cycles.
In my opinion we have some distance to go yet till we need to be more prudent with our equity exposure. Optimism remains (more than a little) warranted.