Equities and the Economy:

• S&P 500 and Nasdaq end at record highs on Friday.
• All three major indexes post weekly gains.

U.S. stocks finished higher on Friday with the S&P 500 and Nasdaq closing at record highs.  The former closed up 10 points at 2,399, its first record close since March 1^st.  The “on-fire” latter added 25 points on the day ending at 6,101.  The Dow advanced 55 points to close at 21,0007.  Although that isn’t a record high for the Dow, it is the first time the blue chip index has closed over 21,000 since early March.  For the week the Dow was up 0.3%, the S&P up 0.6% and the Nasdaq was up 0.9%.  The bottom line folks is that investors see the global economy growing evidenced by much improved corporate earnings.

As mentioned in Friday’s Blog, the big report of the day was the Labor Department’s Employment Situation Report for April.  Non-farm payrolls came in better than expected rising by 211,000 with economists looking for a gain of around 185,000.  The unemployment rate fell to 4.4%, a post-recession low, from 4.5%, however, that was because the participation rate decreased, i.e. fewer people looking for jobs, which is strange being how healthy the labor market is currently. Here’s an interesting statistic for you.  In the first four months of this year, early in Donald Trump’s presidency, the U.S. has added an average of 185,000 jobs a month.  That’s almost the same as in the final year of former President Barack Obama.

Hourly pay rose 0.3% and is up 2.5% over the past 12 months which is much better than a year ago when it was less than 2%.  Since the unemployment rate is technically at or near “full employment” the Fed has been keying in on wage growth, and it has been stubbornly low in the Fed’s view.  At the stage of where our economic recovery is historically wage growth runs 3% to 4%.  Being we’re materially below that a breakout in inflation is unlikely.  That being said, the Fed will still probably raise interest rates in June.  They’re behind the curve in raising rates and need to catch up.

The French presidential election is over and Emmanuel Macron stomped Marine Le Pen yesterday.  He’s France’s youngest president since Napoleon.  It looks like today is a “buy the rumor, sell the fact” day for on the heels of the French vote European stocks are on the defensive, albeit marginally, which is weighing somewhat on stocks here in the U.S.  The Dow is down 37 points.

It was a horrible week for gold.  On Friday it closed at $1,226.90/oz., its lowest level in about 7 weeks.  Prices fell 3.3% last week, the largest weekly loss since November 11^th.

Oil

• Oil prices rebound on Friday.
• Lose 6% for the week.

Oil prices posted gains on Friday with WTI closing up 70¢ at $46.22 and Brent rising 72¢ settling at $49.10, but it was a disastrous week for producers.  WTI logged a loss of 6% for the week with the closing price on Thursday the lowest since November 29^th, the day before OPEC announced the agreement to cut production.  Rising U.S production is the primary culprit of the price drop.

Baker Hughes noted in its rig count report on Friday that oil rig count rose 6 last week and the natural gas rig county rose by 2.  The Permian Basin continues to carry the load rising by 7 rigs.  Interestingly, in Oklahoma there was a decline of 7 rigs.

Goldman Sachs issued a bearish report on oil on Friday.  They stated their forecast for $50 Brent crude price for 2017 is in very real jeopardy.  Unrelenting ramp up in shale oil production in conjunction with slower than forecast declining inventories is weighing on prices.

This morning WTI is marginally higher, 29¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices pop on Friday
• Prices little changed in past month

The bulls took natural gas prices higher on Friday with the June contract closing up 8.0¢ at $3.266.  That being said, for the last month prices have been trading on either side of $3.20.  It appears the market is currently balanced between current demand, including the need to refill storage, and the fact that at current prices coal has captured back some market share from natural gas in the electric generation sector.

I haven’t commented on the weather lately because it’s been pretty much no load conditions but that looks to be changing in the 11-15 day forecast which is showing above normal temperatures for the eastern half of the nations which will most definitely bring on A/C load in Texas and the southeast.  It will also bring some beautiful, and overdue, weather to those of you in the Midwest and Northeast.

This morning the bears are pushing back on the bulls from Friday with natty down 9.1¢.

Elsewhere

As I mentioned in Friday’s Blog, Berkshire Hathaway had its annual shareholder meeting on Saturday in Omaha.  When Warren Buffett speaks, the investing world listens.  Here’s a dozen of the “Oracle of Omaha’s” investing tips.  By the way, each share of Berkshire Hathaway’s Class A shares will cost you $250.000.

• “Investing isn’t too complicated, but know what you’re investing in.”  “You have to be able to evaluate companies within your circle of competence.  The size of the circle is not very important, knowing its boundaries is.”

• “If you’re buying stock, you shouldn’t want prices to keep rising.”  “You’re going to be investing for years.  Only those sellers of equities in the near future should be happy seeing stocks rise.”

• “The term ‘value investing’ is redundant.”   “What is ‘investing’ if it is not the act of seeking value at least sufficient to justify the amount paid?”

• “If you can’t afford it, don’t buy it.”  “Never borrow to invest in stocks.”

• “Develop and build the habits you admire in others.”  “Chains of habit are too light to be felt until they are too heavy to be broken.”

• “Active trading can destroy decent returns.”  “Investors by their own behavior can make stock ownership highly risky.”

• “Passive Investing will make you more money than active investing.”  “Our portfolio show little change: We continue to make more money when snoring than when active.”

• “Stick with low cost index funds.”  “When trillions of dollars are managed by Wall Streeters chasing high fees, it will usually be the managers who reap outsized profits, not the clients.”

• “Seriously, you cannot go wrong with index funds.”   (I think he’s trying to make a point.)

• “The wealthy overpay for active investment management.”  “The wealthy feel their money should buy them something superior compared to what the masses receive.”  “My rough calculation is that the search by the elite for superior investment advice has caused it in aggregate to waste $100 billion over the past decade.

• “Continued U.S. prosperity is basically “a sure thing.’”  “Who has ever benefitted during the past 238 years by betting against America?”

• “Ignore all forecasting.”  “We’ve long felt the only value of stock forecasters is to make fortune tellers look good.”