The markets have had an extraordinary January - one of the best in the last 20 years. If you believe in the January effect (the year's direction is determined by the performance in January) then we will have blue skies all year long. The January effect is well documented and proves true many more times than not so it is not to be taken lightly. However, there continue to be reasons to proceed with caution. While January has been very good, February lurks and it has historically been a tough month for the markets. On the heels of such a strong few weeks, it is becoming increasingly likely that a significant correction will develop in the coming days or weeks. Earnings have been adequate but not spectacular. The main driver behind the current rally seems to continue to be the easy money the Federal Reserve is intent on providing this market. There is no end in sight for the Fed so it will likely take some unforeseen event to create the correction many are now expecting. With the battle over the debt, deficit and the sequester still on the horizon, Washington dysfunction could put a real damper on the markets. This will come to a head in the next couple of months but the markets will begin to position itself well before Washington takes any action (or inaction as the case may be).

The rest of this week is full of economic reports and some remaining earnings reports. In line reports could extend the rally but any major stumbles would likely lead to some quick profit taking. Many individual investors remain on the sidelines having missed much of the latest rally and are poised to jump back in the market.   The resulting influx of cash could lead to higher prices (possibly significantly higher prices) before this rally ends. From a health standpoint, it would be very constructive for the rally to stall here for a week or two with a small pullback to wash out any that want to take profits and to provide an entry point for those wanting to get into the market. There is nothing in the current rally that would lead one to believe that more is not to come. However, as mentioned above, we will likely experience a correction (3-6%) before the market can forge too much higher. The Dow is closing in on 14,000 and the S&P is resting at 1,500 - both significant psychological barriers. Breaking these two areas will lend more credence to the rally and spark higher prices.   All in all, we are excited and optimistic about the current rally but want to see how the market reacts to the inevitable sell off that should come soon. We are prepared to act if necessary.

ENOUGH? - The maximum Social Security retirement benefit that can be received by an individual reaching full retirement age in the year 2013 (i.e., at age 66) is $2,533 a month (source: Social Security Administration).

FIVE TRILLION IN FOUR YEARS - The nation's debt ceiling was $11.315 trillion when President Obama was inaugurated initially on 1/20/09. During his first 4 years in the White House, the debt ceiling was raised 5 times to $16.394 trillion as of 1/20/13, the date of Obama's 2nd inauguration (source: Treasury Department).

As this newsletter goes out Sam is enjoying another birthday. As I look back on the last 13 years (very hard to believe it has been that long) being in partnership with him, I continue to realize how blessed I am to work with my father. I realize that sometimes working with family can bring a whole host of challenges but from day one our business relationship has been one of common ideals, mutual respect and common philosophies.   So here is hoping for at least another 13 years of partnership together. And join me in wishing Sam a very happy birthday.  

Sam and Bo

We continue to make posts to our blog throughout the week so check it regularly if you want to see our thoughts.  You can access it by following the link below. 

THE GREATEST COMPLIMENT

In these uncertain times, a trusted financial adviser is more important than ever.  Whatever comes over the upcoming months and quarters, the markets are certain to have lots of volatility and wild swings.  Europe, the US economy and dysfunction in Washington, and continued trouble in Iran and the Middle East to name just a few.  If you have family, friends and neighbors that may benefit from our services, would you please forward this email and/or provide our contact information to them.  We purposefully do not spend time marketing our services so that we can devote all of our resources to managing your assets.  Thank you to all who have provided us referrals - it truly is the greatest compliment you can give us.      

Remember to visit our blog for market comments and observations in between newsletters.  We try to provide a few comments in between newsletters and certainly when there is a particularly interesting market day.  You can access it by clicking here. 

Published by Sam C. Bills, Jr.  Copyright � 2008 Bills Asset Management.  All rights reserved.

BAM Market Wrap is produced and distributed regularly via email by Sam C. Bills, Jr. of Bills Asset Management  3001 Flagstone Drive, Franklin, TN 37069 Phone (615) 371-5928 Fax (615) 250-4903 - www.Billsasset.com

Bills Asset Management  is an independent registered investment advisor (RIA) not associated with any financial institution.  Data used in this publication is gathered from reliable sources, although completeness and accuracy cannot be guaranteed.  Performance results do not take into account any tax consequences and are not predictive of future results.  This publication does not give any specific investment advice, does not provide financial planning services, or consider any individual's financial situation, needs or goals.  This publication may not be reproduced or retransmitted in whole or in part without the consent of the author, Sam C. Bills, Jr.

Important Disclosure Information

Bills Asset Management ("BAM") composite performance results represent time-weighted actual performance results for continuously managed BAM accounts, which individual accounts BAM believes to be representative of its investment management process (i.e. mutual funds and exchange traded funds) for each specific strategy during the corresponding time period.  The composite performance results reflect the reinvestment of dividends and other account earnings, and are net of applicable account transaction and custodial charges, and the separate fees assessed directly by each unaffiliated mutual fund and exchange traded fund holding that comprised each account, and the maximum investment advisory fee that the accounts would have incurred (by applying BAM's current investment advisory fee as set forth in its current written disclosure statement) during the corresponding time periods.

Please Note:  Past performance may not be indicative of future results.  Therefore, no current or prospective client should assume that future performance will be profitable, equal the performance results reflected, or equal any corresponding historical benchmark index.  The historical index performance results for all historical benchmark indices do not reflect the deduction of transaction and custodial charges, or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results.  The historical performance results for all indices are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual client or prospective client in determining whether the performance of BAM program meets, or continues to meet, his/her investment objective(s).  A corresponding description of each index is available from BAM upon request.  It should not be assumed that BAM account holdings will correspond directly to any such comparative benchmark index.  The BAM performance results do not reflect the impact of taxes.

For reasons including variances in the investment management fee incurred, market fluctuation, the date on which a client engaged BAM's investment management services, and any account contributions or withdrawals, the performance of a specific BAM client's account may have varied substantially from the indicated portfolio performance results.

In the event that there has been a change in a client's investment objectives or financial situation, he/she/it is encouraged to advise BAM immediately.  Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investments purchased and/or investment strategies devised or undertaken by BAM will be profitable. 

Information pertaining to BAM's advisory operations, services, and fees is set forth in BAM's current disclosure statement, a copy of which is available from BAM upon request.  Performance results have been compiled solely by BAM, are unaudited, and have not been independently verified.  BAM maintains all information supporting the performance results in accordance with regulatory requirements.