The Week That Was–First Week In June

• In The Month That Was, May was the worst month for the DJIA since FDR was in office in 1940. As a reminder there was the ‘flash crash’, fears over Greece, new fears over Spain, oil collapsed in price, the euro fell but the dollar gained and the 10-year U.S. Treasury was also up. On the last trading day of the month the markets seemed to cruise along until the last few minutes when the bottom fell and the Dow finished off over 122 points. Good riddance to an awful month for investors.
• Conflicted? Don’t feel alone. In the most current Fortune.com two articles, side by side, almost by accident; one warning of the markets slide to S&P 800 and the other, by a respected mutual fund manager, exhorting investors to pick up bargains.
• Stock market history buff & columnist Jason Zweig reported May 29th WSJ on the ‘Flash Crash’ of 1962. He writes that after a 27% run-up in stocks in 1961 and with Polaroid and Texas Instruments trading at up to 115 times earnings and without warning stocks ‘broke; and plunged May 6, 1962. The Dow fell 5.7% or off 34.95 in volume so heavy the tape took two hours to completely print after market close.He is drawing parallels to that and today.
• Free Money? According to CNBC’s morning round table on June 1st current Fed philosophy allows huge opportunities for large cap stocks trading at reasonable valuations.
• From the Department of Misleading Idioms ‘Beggars, it seems, can be choosers.’ Prudential, PLC, not the ‘Rock’ insurance carrier but the London based, turned away from AIG who demanded more money then what Pru offered them for their Asian insurance unit. How much you ask? The $23 billion in cash would have made a big dent in the $$$s or $132 billion owed the American taxpayer.
• Markets were down on Tuesday at the open, gained strength on more good news throughout the day and then collapsed in the final hour of trading. 
• Friday the DJIA plunged below 10,000 as nervous traders, looking for any good news, saw an impressive triple digit rally disappear with a so-so jobs report and news that Hungary may default on its debt. Market corrections of this magnitude rarely occur in an environment that is ‘fundamentally improving,’ words uttered by market strategist Mike O’Rourke. Other ‘savvy’ investors have issued more upbeat pronouncements.
• I-Couldn’t-Have-Said-It-Better, ‘If 2000 was the peak of irrational; exuberance, with investors paying for companies without earnings, today has to be the era of irrational pessimism,’ James Paulson said in a June 5th, 2010 WSJ article.
• Finally, short term emotions do not mix well with long-term investment objectives.

If you have questions call Paul at 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.