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Bernie: Hi everyone today is Wednesday, February 8, 2017 and this is our midweek, market update call, brought to you each Wednesday to bring you observations and decisions we are making in our investment thinking.

Today’s comments cover financial news items as well as a review of our indicators that help us provide guidance for your portfolios. Jim is traveling today and has asked me to pass on these comments.

Benchmarks, benchmarks, benchmarks. Benchmarks help in a number of ways, in a way they are like a compass. They tend to help us see where we are going, but not necessarily why or how. Technically, benchmarks are derived from bell curves and can statistically be very valuable.

In the financial services industry, in particular the indices like the S&P 500, benchmarks are over-used, not understood and mis-used. When James McGraw and John Hill founded McGraw Hill Publishing Company in 1917, it is unlikely they ever thought their educational book company would ever be the distributor and research origin for today’s Standard and Poors 500 index and 850,000 other indices they publish!

But the benchmark that was created like a Fortune 500 index to identify the 500 “best” companies to own was never intended to be a benchmark for investor performance. It was intended to be a research reference of companies that were desirable to either work for or invest in.

But how the composition is made up is not only puzzling but difficult to see how it is relevant. For the S&P 500 is put together on a capitalization weighted formula. That means the market price of the stock at a given time is multiplied by the number of shares outstanding and that product, that answer is considered the capitalization of the company. Once that is done, it can be ranked in size with all the other 499 selected companies. Then depending on its size has its weighted impact on the entire 500 stock index.

Why this isn’t relevant for benchmarking with investor account performance is because investor accounts are rarely—if ever—put together this way. So why would one compare an investment account to an index that was so complicated and confusing to use?

In recent years, a dollar weighted S&P 500 index has been created that would be more relevant to compare to an investor account which customarily may be structured this way. However, use of this index has never been used in news or media reports in spite of it being better aligned with what an investor might own. And yes, because each stock as the next has the same weight in this style index, the appreciation or depreciation of the index will be different than in capitalization weighted, even though the companies are identical.

We’ll have more on this next week.

*Our indicators? The attributes we follow continue to act favorably. The **Large Groups of stocks we follow,

• the 2000+ on the New York Stock Exchange
• the almost 2500 in the Over-the-Counter Market and
• the combined group of those two – a select group of almost 3000 found in both of those markets that have options that trade with the stocks.

For several weeks now we have seen the New York Exchange stocks locked in place with its bullish percent positive and trying to move higher. That changed 2 weeks as the New York Stock Exchange Bullish Percent broke through on the upside, a bullish action, and has locked in place.

Asset Class Rankings? The race is still tight with the top three being Domestic Equities, International equities and commodities. The last three classes ranked are fixed income, cash and currencies respectively. These are virtually unchanged in order or size over the last several weeks.

Sector Rankings? In recent weeks we have seen Oil Exploration, Oil Service. Computers, Waste Management, auto parts and precious metals being in favor. Precious metals and semiconductors and protection safety equipment lead the way this week as they did last week.

Interest rates? We have seen rates fall in recent weeks, and that continued ever so slightly this week. This has kept bond prices stable for the time being.

These conclude Jim’s comments. I’ll briefly highlight my bullet point from our e-mail which was Costco – Overlooked Savings.

You either shop at Costco or know someone who does, right? So I found this article interesting because we are always analyzing our clients cash flow spending and income plans to see where folks can save money, if possible.

If you are a regular shopper of Costco's you know that the chain offers good deals on a variety of food, clothing, household supplies, and bathroom staples. You can sometimes get a good deal on electronics, clothing, toys, and even alcohol. But what's overlooked is that there are all sorts of other areas, where you may be able to save money.

A few areas that might interest you include:

• Gym memberships – up to half price
• Hearing Aids and Contacts
• Cars, I wasn’t aware of this – they have an auto-program
• My favorite is passes to local ski resorts
• And finally, for you small business owners: you may be able to save on items like: QuickBooks, payroll services, business-phone services, and various insurance needs. According to the article I read, these deals simply work as if the individual business member were part of a larger buying group. Instead of paying the price for one small company, the member gets the Costco discount.

Link to article: https://www.fool.com/investing/2017/02/06/4-things-that-make-your-costco-membership-a-better.aspx

Thank you and we’ll talk to you next Wednesday at 12:00 PM.

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Opinions expressed are not necessarily those of Raymond James & Associates. The author's opinions are subject to change without notice. Information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. There is no assurance these trends will continue or that forecasts mentioned will occur.

Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security.

The S&P 500 is an unmanaged index of 500 widely held stocks. It is not possible to invest directly in an index.

There is an inverse relationship between interest rate moments and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices rise. One basis point is equal to 1/100^th of 1%, or 0.01% (0.0001).

Commodities are generally considered speculative because of the significant potential for investment loss. U.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value.

International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets.

James Schmidt, Raymond James, its affiliates, officers, directors, or branch offices may in the normal course of business have a position in any of the securities mentioned in this report.

Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.

Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.

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