Most Expensive States in the US

While surfing the Internet to research a particular piece of tax information, I came across an article listing the 10 most expensive states for 2012.  What surprised me was that Vermont and Alaska were in the top 10.  Sadly, in a few years it's possible Connecticut could move to #1 or #2 with increased income tax and sales tax rates implemented in 2012.  See the top ten list below:

10. Massachusetts

Movie ticket: $10.77
Rent: $1,450
Doctor visit: $145.33
Gallon of gas: $3.503
T-bone steak: $9.61

9. Vermont

Movie ticket: $9.19
Rent: $1,354
Doctor visit: $102.50
Gallon of gas: $3.494
T-bone steak: $8.75

8. Maryland

Movie ticket: $10.86
Rent: $1,577
Doctor visit: $87.98
Gallon of gas: $3.625
T-bone steak: $10.28

7. Rhode Island

Movie ticket: $10.85
Rent: $1,375
Doctor visit: $149.00
Gallon of gas: $3.606
T-bone steak: $10.51

6. New Jersey

Movie ticket: $10.86
Rent: $1,631
Doctor visit: $83.24
Gallon of gas: $3.449
T-bone steak: $9.91

5. California

Movie ticket: $10.81
Rent: $2,524
Doctor visit: $121.27
Gallon of gas: $3.741
T-bone steak: $10.25

4. New York

Movie ticket: $13.06
Rent: $3,378
Doctor visit: $140.40
Gallon of gas: $3.884
T-bone steak: $14.25

3. Connecticut

Movie ticket: $10.38
Rent: $1,993
Doctor visit: $116.74
Gallon of gas: $3.845
T-bone steak: $10.82

2. Alaska

Movie ticket: $10.50
Rent: $1,437
Doctor visit: $156.42
Gallon of gas: $3.941
T-bone steak: $10.64

1. Hawaii

Movie ticket: $10.31
Rent: $2,658
Doctor visit: $129.13
Gallon of gas: $3.987
T-bone steak: $7.80

 

An Interesting Divergence

While the US markets continue to move higher in 2013, operating earnings for S&P 500 companies for the year ending 12/31/2013 continue to move lower - an interesting divergence.  The most recent projection has 2013 earnings of roughly $111.50 for the S&P 500 Index.

As you can see in the chart below, the estimates for 2013 during the first 6 months of 2012 stayed about the same until companies provided more guidance for the next year around July 2012.  This is when earnings estimates for 2013 began to decline.  During the last quarter of 2012, the decline in earnings estimates for 2013 decreased more dramatically.  While the decline may just be an adjustment to have more accurate numbers, we find it interesting that in January 2012, the expectations for earnings for the calendar year 2012 were roughly $110.00.  However, the actual operating earnings for the S&P 500 will likely come in around $98.00, well below the $110.00 estimate from January 2012.

If the estimates right now ($111.50) are accurate the markets should experience solid earnings growth in 2013 versus 2012.  However, if these estimates continue to move lower over the course of this year (as they did last year), we would expect the markets to adjust expectations accordingly causing volatility to increase.  Earnings estimates will be an important barometer of the economic health of the economy and should be watched carefully over the coming months.

Expectations for 2013

 

As we begin 2013, the financial markets appear to only be concerned with the existence or non-existence of macro headlines and events.  At the end of 2012 it looked like the market was about to nosedive because of the fiscal cliff issue.  But a last minute deal sent the market up into the beginning of the year for one of the best January returns on record.  There seems to be a disconnect between market movements and basic fundamentals.  Chasing momentum and liquidity can be a dangerous venture because when the markets turn, all of the momentum driven gains can be wiped out in a short period of time.  Surprisingly, the markets have basically returned half of an average year's return in just one month.

We continue to look for attractive risk/reward opportunities, but find it difficult in a market that does nothing but move higher.  We expect the market to have a respectable year if the economy continues its modest growth track and fiscal policies continue.

However, we wonder how long current fiscal policies can be sustained.  Long term, secular trends with a reliance on deficit spending, ongoing stimulus, tax increases, and central bank intervention to promote growth are simply not sustainable in our opinion.  Intervention is not a viable solution and there is likely going to be a cost to fix all of this.  What are policy makers going to do when the economy begins to slow down again? Guess that's for someone else to worry about. 

Growth in Food Stamps vs Payroll Jobs

Since the Great Recession officially ended in 2009, the growth in individuals on food stamps has greatly outpaced the rate of job growth.  The number of food stamp recipients has jumped by over 30% since June 2009, while the number of non-farm payroll jobs has grown by just 2% over that same time period.  Considering many of the jobs created are in low wage industries, the household sector is clearly still suffering.