By Craig Pulliam, CFP^® and Michael Comstock, CFP^®

As we write this, the World Health Organization has issued "Level 5" pandemic alert for the swine flu.  So we hope this finds you well.  From the news reports we don't know whether to panic or just remain cautiously concerned as the President suggested.

Well, it's always something, isn't it?  Just as the economy and the stock market start to show signs of life, we have to deal with an impending "pandemic" (which is a sudden worldwide outbreak of a virus, in this case).  If the media didn't have this to fill their news, they'd just have to content themselves with pirates and floods.  Boy, this really is sounding like a Depression!

We really don't want to appear too cynical about the swine flu.  People have died, after all, and more will get sick.  It's serious.  But the nature of news reporting with 24 hour service is such that some fairly normal or benign events can get embellished and "over reported" in order to attract viewership.  We honestly don't know if this is a serious threat, because we are not totally convinced of the objectivity of our news.

Nowhere have we seen greater lack of objectivity, evenhandedness and balance than in the reporting about the economy that has dominated the media for the last 18 months.  While a Grapes of Wrath scenario has been featured on almost every major outlet for a year . . . once we started to get better economic news (we know we are not totally out of the woods)… media coverage of the economy actually declined by over half (Pew Center for Excellence in Journalism report April 21, 2009).  Apparently, the economy wasn't scary enough to report, but . . . pirates were!  And now the swine flu.  News organizations are like ants driven to a pile of sugar.  They swarm to it, and –when a new pile is placed nearby- they leave it and swarm to the next (swine flu), and grind the heck out of it.

So, we don't think you've been getting the straight story about a lot of things, but we'll talk about the economy in particular here.  Because, even as things turn for the better, and –even if you hear positive stories-most of it will be punctuated by "Yes, that may be true, but . . ."   Things are simply not as horrible as they seem or are reported, but good news doesn't sell advertising or attract viewers like bad news does. 

To offer some balance, we will share some economic news that we think has been given too little air time.

Consumer confidence, measured by the Conference Board and the University of Michigan, rose significantly in April, after posting gains in March.  The Expectations Index which measures consumers' confidence in expected business conditions, employment, and their own total family income over the next 6 months rose to 49.5 from a level of 30.2 in March.  When consumers are hopeful and confidence rises, spending increases and the economy starts to grow.

There is evidence that home sales began to grow and that the inventory of homes for sale is slowly coming down.  This, coupled with the fact that interest rates are very low and the government is offering a tax credit for home purchases seems to bode well for the housing market.  The recovery will be slow, but inevitable.  Homes are replaced every 75 years, on average, but at the rate of home sales we saw earlier in the year, the average home would have been in use for over 225 years before being replaced.  That is not realistic.  Home sales of new and existing homes should rise dramatically, and The National association of Realtors reports that homes are the most affordable (the Affordability Index) than they've been in over 30 years.

The technology sector, normally a big mover as we emerge from bear markets and recession, has looked strong with Intel, Oracle, IBM, and Apple –among others- all beating estimates for growth and earnings.  These companies should benefit from the pent up demand from both individual and corporate consumers.

The 19 largest banks have undergone a stress test by the federal government, and initial reports are that banks are stronger than it was thought just a few months ago.  There is some stabilization in our banking industry, and 7 banks have already begun to pay back their TARP money.

Jobless claims have slowed their rate of increase, and are getting no worse as of this writing.  This is exactly what happens at the end of a recession (although we cannot predict the end).  The rate of job loss slows, stabilizes, and then jobs slowly get added.  It's a normal cycle.

Jeremy Siegel, financial author, Wharton School Professor and Director of the Securities Industry Association Institute, stated in a recent interview that there are almost no bad outcomes for the next 10,15 and 20 years after a market drops 50% from its peak . . . that future returns are even better than they have been historically.

And the American public seems to be making a re-assessment about what are necessities in life, and what are luxuries.  The number of Americans stating that cars, clothes dryers, home air conditioners, microwaves, cable TV, etc. were necessities declined from 2006 to 2009 (PEW Research Center).  8 in 10 adults reported having taken specific steps to economize during these times.  Now, you may have other thoughts on what is a necessity and what is a luxury, but we see this as a very optimistic sign that there may be some subtle shift away from some over the overindulgent and acquisitive behaviors that helped bring us to this point.  People will begin to spend more, but we think they will be more cautious about debt, and will save more, too.  This is a very good thing.

There is an unprecedented amount of money in "cash" (CDs, money markets, Treasuries), making next to nothing in interest.  This money has begun to flow into stocks and bonds seeking growth, and this will push the markets higher.  Since this has largely been a recession of "net worth" (home values and 401ks), this will be a huge boon to most people.

There are many more aspects to the recovery that we think has begun.  We could not have written the above 6 months or even three months ago.  There is positive news now, but it's not getting as much coverage as the bad stuff.  Certainly rebounds and economic recoveries take many months to fully right the ship, and there will always . . . always . . . be some negative aspects to any economy, even in a growth cycle.  We will have days when the stock market drops 200 points, we will have some bad months, we will have some scares.  But – on balance- when the ship is righted- the good will outweigh the bad.

Craig Pulliam and Michael Comstock are CERTIFIED FINANCIAL PLANNER^™professionals practicing at 112 Westwood Place, Suite 310, Brentwood, TN.  They own Premier Asset Management and are registered representatives and investment adviser representatives with/and offer securities and advisory services through Commonwealth Financial Network:

 A Registered Investment Adviser, Member FINRA www.finra.org , SIPC www.sipc.org .

They can be reached at 615-777-2125.Back issues of our Commentary may be found at www.premiercares.us