That Was The Week That Was – 1st Week November

• Last Monday on election eve, markets soared and then petered out and barely closed positive. Nervous traders took money off the table not sure of the election and concerns over the Fed’s decision to print more money and buy Treasuries to lower interest rates and, hopefully, stimulate the economy.
• The government may reduce stake in GM (see chart last week’s blog) to 50% from 35%, a basically symbolic number. Stock price will be set November 17th and the sale will be on the 18th.  It’s expected that GM will sell 24% of all shares or about $10 billion.
• Commodities rule, according to Barrons.com. Corn, cotton and crude oil are moving higher and the Reuters CRB index has reached its highest level since July 2008.According to Barrons.com the prices are closing in on levels that 2 years ago were called speculative frenzy but that sentiment is nowhere to be found today. (Much more room to run.)
• Investors looking for winners in emerging markets should look to countries who have already hiked their interest rates, according to Andrew Freris an Asia investment strategist at BNP Paribas in Hong Kong.
• Markets closed up on election day.
• Home real estate markets are unsettling. Irwin Kelliner at MarketWatch.com wonders what buyers are waiting for when: real estate is at 1990 levels, mortgage interest is at 1950s levels and real estate commissions have fallen to 4% from 6% and in some cases into the category of negotiable. Falling car, computer and cell phone prices have not stopped people from buying those items but real estate has the experts baffled.
• The GM IPO seems too low, according to Barrons.com. The pre-sales is drawing lukewarm attention from institutional investors. WSJ estimates fair value of GM at $44 a share.
• GM could be free of taxes for years. In a doc filed with regulators the car maker won’t have to pay $45.5 billion in taxes on future profits.
• Bush tax cuts don’t appear to be rolled backed this year with the huge Republican win. Expect things to remain as is…for a while. (whew!)
• Autos had a grand month with Ford, Honda and Nissan each reporting sale increases in excess of 15% with Chrysler stating sales were up 37% from a year earlier. Toyota’s sales declined.
• ‘Another sign this recovery is real!’, according to Seeking Alpha pundit Calafia Beach, it’s the auto sales surging (still low by historic standards) but the upside is positive with increased confidence in the future.
• In India investors are being told to buy Indian securities rather than gold. Gold, as you know, is a huge commodity in India. However, according to Swapnil Pawar, chief investment officer of Karvy Private Wealth Management in Mumbai, ‘Gold has not been a high-return investment over the long term. (Indian) stocks,’ he says, ‘could deliver 15% per annum over the next few years.’  Dear reader, in the USA we call Indian stocks as emerging markets.
• The Fed plans on spending $600-$700 billion of bonds, mainly in the 5-6 year maturities. The purpose is to keep interest rates low, or lower, and a stronger economic environment to create an inflation of 2% per year. There is much debate whether this strategy will work, weaken the dollar even more or do anything to increase employment.
• On CNBC.com supposition on a stronger stock and commodities market going forward with QE2. From their lips…
• The most fun I’ve had in a long time Thursday last with markets soaring over 200 points I just wanted to walk around town asking, ‘Is it good for you?’ The Dow closed at its highest level since September 2008 just before the Lehman Brothers collapse.
• GM touting its IPO in preparation of Nov 18th.  Execs predict pre-tax profit (when markets at strongest) of $17-19 billion with 9%-10& profit margins.
• Food prices increasing and manufacturers and retail stores reluctant to pass higher costs on to consumers. But chains like Kroger and Safeway have said they’ll pass supplier increases on. Reason for increases is rising demand from emerging markets such as China and India. This with moderate inflation.
• Last week ended with a sigh as the markets took a nap for most of the day only to awake at the close to end slightly up. They ended the week at 2-year highs.  The Dow climbed 2.9% for the week while the S&P rose 3.6%. This all on better jobs report.
• Finally, the week ended with 143 banks closed beating last year’s 140.

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