Whispers 2011

Here we go. Hope you missed me the last few weeks as I’ve been organizing some great new ideas to share starting with what the experts are predicting for the coming year. Someone always has a hot tip, a no-lose opportunity, an obscure facto or a better crystal ball than yours or mine. Here are a few ideas from other investment folks about 2011.

Let’s start with Harry Shultz’ last testament. If you like the smell of Napalm with your morning coffee Shultz is just the investment guru for you. Shultz just finished his last investment news letter, retiring at age 87. According to Peter Brimelow at Marketwatch Shultz the last few years has been brilliant predicting the economic collapse. Here is what Shultz wrote, ‘ Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched & where the rot is by far the deepest.’ Shultz writes favorably of David Stockman, former Reagan Budget Director, who suggested, ‘Get some gold, beans, water, anything that Bernanke can’t destroy….If a sell-off of U.S. bonds starts, it will be an Armageddon.’

Kate Gibson at Marketwatch.com writes that current stock market optimism raises the prospect of a pullback. The end of December investment sentiment is showing a lack of fear. Marc Pado at Canto Fitzgerald comments that January may be strong with a mild pullback late winter. However Pado is convinced of a strong equity market in 2011.

TIPS are the bonds du jour, according to Kevin Giddis, president of fixed income at Morgan-Keegan in Memphis, Tenn. In 2010 TIPS gained 6.07% and Treasures posted 5.65% according to Barclays index data.

The Bloomberg BusinessWeek Jan 3-Jan 9 2011 predicts for 2011 the following from their Bloomberg Surveys:

• Average price of oil in 2011: $87
• Average price per troy oz for gold: $1400.
• Fed Funds 2011 average: 0.50%
• 10-year Treasury yield average in 2011: 3.53%
• U.S. Unemployment Rate 2011 average: 9.4%
• U.S. Housing starts in 2011 (from The Nat’l Assoc of Home Builders): 29%
• The dollar versus the Euro average in 2011: $1.30

Read carefully, dear reader ( and bond holders), Berkshire Hathaway was the first investment grade issuer out the gate in 2011 with a $1.5 billion of senior unsecured notes on January 3rd. What made this interesting is that while everyone was talking higher rates Berkshire was selling $375 million of three year floating rate notes. Berkshire is saying through this offering they believe that the Fed will not raise rates through 2013. GS Group chief U.S.  economist, Jan Hatzius, thinks that the Fed won’t raise rates until 2013, saying the 9.8% unemployment rate will stave off inflation that could prompt an increase.

Irwin Kellner at MarketWatch.com reported that corporations are looking at a glass half-full and not half-empty. Better days ahead for American companies in 2011 and here are a few reasons, ala Kellner, why:

• Stock market ended 2010 on a high note
• Tax uncertainty is off the table and set for 2 years
• New Technology available
• Profits up and going up – rose 2010 26% above 2009
• Oodles of cash in their coffers – 49% higher than 3 years earlier
• Banks are loosening purse strings and rates are low
• Sales are climbing due to pent up demand

The IPO market plans on being bigger and better than the last few years (except for the General Motors initial public offering of 2010). Facebook, with an evaluation of $50 billion, is planning its debut in 2012 so save your nickels and dimes and Ill keep you up to date as we get close to the actual date. But, in 2011 there are some dandy offerings which include Nielsen, the folks that call or send you a quarter in the mail, and get your opinion about what TV show you like or TV dinner you don’t. HCA is the largest hospital operator and it’s planning a $4.6 billion offering. Toys ‘R’ Us is coming back as a public company after having its retail stores spruced up and its internet stores streamlined. Zynga has created some of the hottest on-line games and is expect to launch publicly this year. Linkedin is looking to get a leg up on Facebook and be the first social network site to go public. Whispers at the Motley Fool, among others, has it that it has a value in excess of $2 billion and shares are expected to sell for $23.

Finally, Brett Arends writes that we shouldn’t trust Wall Street’s top picks rather invest in what they like least. He points out that if you invested in the S&P 500 index in 2008 you’d have lost 39% But if you listened and invested in the top 10 picks of Wall Street Analysts you would have lost 48%! But for all you who still cling to the belief that someone knows something here is the hot list for 2011. Pssst…in 2010 Ford, AIG, Sears and Berkshire Hathaway were on the least liked list.

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