retirement interruptus: That Was The Week That Was

You knew it was going to be the kind of week to pull the covers over your head and hide till Sunday when you heard the news that Steve Jobs, founder and CEO, of Apple would be taking indefinite medical leave. Concerns on how well The Apple would fare without his leadership was compounded as investors demanded that The Apple release some of its cash hoard estimated to be $50 billion, an amount that exceeds the GDP of two-thirds of the world’s countries.
Chances are you own The Apple if you own shares in a mutual fund. The Apple is the most widely traded and owned stocks and is the most prominent and successful American companies. It also makes up 10% of the iShares Morningstar Large Growth Index and 15% of the iShares Dow Jones US Technology Sector Index ETF.
One nice quarter not a year makes and already doubters are preaching the Dow on borrowed time, according to the ‘Abreast of The Market’ reporter J Cheng. Mark Arbeter, lead technical analyst for S&P. thinks the market is showing signs of fatigue. He postulates a pull back of about 12 1/2%. Others point to 2010 where the markets had a nice run for 7 weeks and then fell dormant until September. Jerry Rubin, head of research at Birinyi Associates, said, ‘We are not at extreme levels and the market has the ability to go higher.’
Renting? Get prepared for double digit rental increases as occupancy rates are at all time highs coupled with a severe shortage of multi-family housing units. With stiff banking rules on home buying and a large population losing homes the rental market is enjoying a boom. For every 100 units available, Robert Greer of Michaels Development said, there are 800 applicants.
Apple blew the doors off expected earnings with net income for the quarter at $6 billion and…excuse me…$60 billion in cash not $50 billion. Apple mum about the condition of Jobs.
Where to invest for the next decade? Experts are again polishing crystal balls for answers and we have a better chance playing the Lotto than minding what the professional scribblers and economic soothsayers think. (I’m still wrapping my gray cells around the Mayan doom calendar.) According to Wilmington Trust, founded by members of the DuPont family in 1901, they’re bullish on international stocks and emerging equities. Robert Doll, vice chairman and chief equity strategist for fundamental equities at BlackRock, Inc. said investing in equities over the next decade will not match the boom years of the 1980s and 1990s. No word from Uri Geller what his thoughts may be.
According to WSJ last Tuesday factory hires are up, creating more jobs than it eliminates for the first time in a decade. Mark Zandi, chief economist at Moody’s Analytics, said manufacturing is going to be a significant source of job growth over the next decade. Manufacturers are still able to get greater productivity with less people.
Social Security officially went into the red October, 2010. The annual report of the Social Security Trustees published in August, 2010 forecast that the Old Age and Survivors Insurance Trust would not exceed receipts until 2018. They were wrong. The shortfall was a whooping $40 billion before the ink dried on their report. Trustees blame the recession.
Asset Allocation is defined as the reverse correlation between investments. When one investment performs poorly another different sector should do well. That is why highly respected and talented investment folks buy bonds, foreign and domestic stocks for their clients with the expectation that not everything will go poof at the same time. We know that it doesn’t work as the past week vividly points out. Banks didn’t make numbers and all sectors fell and when China had an inflationary problem the rest of the world tumbled too. Worst day for the S&P 500 index last Wednesday in 2 months.
Spain is doing it! It plans on pouring billions of Euros into its troubled banks, according to WSJ. Ya’l l stand and shout, ‘Hurra!’
In case anyone asks, credit line extended to Macedonia. (Please don’t ask.)
2010 saw the biggest outflows from the biggest funds as American, Fidelity and Vanguard were punished by investors for poor overall performance, according to Morningstar.
Mention bad news and investor take heed as Lipper reported investors pulled $4 billion out of muni-funds in week. On December 19th Meredith Whitney, uber-analyst, predicted on 60 Minutes that there could be 50 to 100 sizeable municipal bond defaults.
Coming back to the stock market is Mrs. Watanabe, what Japanese traders call Mom and Pop investors that have been absent for some time. Retail Japanese investors are especially interested in foreign currency since the yen paying close to zero.
American banks laying off workers. Am Express 500 employees and Synovus Financial announced 13% cut and closing of 39 branch offices. Others looking to cut costs were PNC and Fifth Third.
Commodity risings and fallings. Cocoa and cotton up while oil, gold and silver fall. Dan Veru, chief investment officer of Pailisade Capital Management told Bloomberg Monday last, ‘ ‘Concerns about China is actually a good excuse to sell after a sharp run-up in stocks and commodities.’
Michael Swanson an analyst at Wells Fargo said he expects an average American barbeque increase by $10 this summer as food prices escalate. ‘Nuff said.
Google beat expectations! Earnings were $8.75 a share versus expectation of $8.06. When $8.06 expectations were published on-line Google search engine asked, ‘Did you mean $8.75?’
The U.S. Dept of Census reported that 1 out of every 4 Americans live in the four states that had the most bank failures.
It was GE that lead the markets on Friday. (smack! Who would have thought!) GE! Ever since beloved Jack Welch left the company has been battered and bruised by traders. Friday it lead the pack with better than expected earnings. Shares jumped over 7%.
They call you Dumb Money. Jason Zweig wrote in his editorial Saturday the 22nd in the WSJ as professional traders were wondering where the small retail investor was and if he/she would ever return to the markets. The bullies have always feasted on the small guy, selling off just as they bought. Charles Biderman of Trim Tabs was quoted, ‘The money managers who have been buying are looking for the greater fool to take them out, and the greater fool has always been the little guy.’ Now that stocks have run up 100% both bulls and bears are concerned that the small investor will not come in and buy. Remember the retail Japanese investor mentioned earlier (Mrs. Watanabe) was absent from the Japanese markets for over a decade before coming back last year. The hedge fund and other managers may just have to learn how to manage money the old fashioned way, with caution and expertise.
Eight. That’s the number of weeks the Dow has been up. Eight. The S&P 500 Index was off a smidge.