retirement interruptus: That Was The Week That Was

Markets plummeted Tuesday last on Mid-East worries. All domestic and foreign indices fell but closed off their lows. Worries about oil disruption in the Middle East sent the price of crude to new 2011 highs. Libyan dictator vowed to stay the course Tuesday. Worries that civilian discontent could spill over to Saudi Arabia and Iran drove market fears.
The coming week will be dominated by OIL, according to The Street. Jobless numbers plus auto sales will be announced but will oil continue to gain or drop like a stone? CFO Almir Barbassa of Petroleo Brasileiro, SA, one of the world’s largest energy company, stated on Sunday that oil prices will find themselves between $70-$90 in the short to medium time.
Warren Buffett said in his letter to clients, ‘…we live (American citizens) six times better than when I was born.’ He continues to say that he expects 2011 to be an outstanding year, housing will begin to recover next year and he is eager for new acquisitions. Net income in Berkshire Hathaway increased in the 4th quarter 43% over the year before. He also said there is an abundance of opportunity in the United States.
Wal-Mart same store sales fell even though the retailer posted a 27% jump in profits; problems persist as the company fights the dollar stores. Management has been slow to get lower price goods into their stores. Sales have fallen for 8 consecutive quarters – the longest losing streak in company history.
For several weeks Middle East unrest didn't faze the markets. But with the push into the oil producing countries along with 2 1/2 year market highs a pullback was in the cards. Certainly this was a lesson that owning energy funds still make sense.
Amidst the unrest companies still report earnings but all attention is on the Middle East as Libyan conflict overtakes all the news, the price at the pump rises and worried traders wonder if civil unrest will transfer to other dictatorships in the region. Talking heads confuse the issue as one pontificates that $150 a barrel oil will kill the economy while another head tut-tuts with, ‘We’ve been there and done that,’ attitude, So far there is no oil disruption just traders nervous and bidding up the price.
Wednesday last the markets started off swell and then someone reminded someone that there was trouble on the horizon and the tanking began. All indices off, the Dow triple digits.
Buying junk by investors has paid off big time. Investors who had the guts to buy bonds of troubled firms that were in default, bankruptcy or in some measure distressed were well rewarded. Often times, a Moody’s study found, companies use the threat of default as a bargaining chip so that bondholders ride to the rescue and bail the firms out. MGM the film studio used that tactic, according to Moody’s, and was rewarded with elimination of $4 billion in debt. Lenders later recovered 44 cents on the dollar.
Markets mixed Thursday last with Apple and IBM showing gains. Experts from CNBC and the Trading ‘Getting Technical’ suggest another 10% before Bulls cut in and waltz.
Didja know that you can invest in the IPO market, especially with huge investor interest in the coming Tech stocks, by buying an exchange traded fund? Not a one of us has enough clout to get shares at the IPO price so the ETF called The First Trust U.S. Index Fund buysan IPO seven days after issue and sells after 1,000 days. The ETF has outperformed the NASDAQ over the past 2 years but not the past five years. Russel Kinnel director of mutual fund research at Morningstar says he wouldn’t buy the fund. (Russel is worse than Warren Buffett when committing dollars on the cheap and has a history of waiting way too long.)
The Justice Department is waging a war of extinction on the tobacco companies. They want the industry to state that they purposely deceived Congress and the public for years and publish this in newspapers and on their product. (There has to be a reformed smoker somewhere in this mess.)
According to U.S. officials current oil stockpiles are sufficient to meet any supply disruption.The White House said the U.S. and the world community had the ‘capacity to act’ should a major disruption of supplies occur following events in Libya. (Ya’ll know what ‘capacity to act’ means, doncha? If you ever wondered why the USA keeps its Big Boats in that part of the world, now you know it’s the capacity to act.)
It’s not nice calling China sneaky but according to the WSJ the country’s government wealth investor last year more than doubled their investments in major Japanese blue-chip companies very quietly.
Stocks closed the week with a slight bounce but still off 2 1/2% their 2 1/2 year highs. (Hey, you can buy that number straight or box it!) Oil settled off highs but smart traders say the deal with Saudi Arabia to step in and even out the rough spots may not be all that it is supposed to be. The country may indeed be in the crosshairs of civilian change. James B Stewart in Saturday’s WSJ, ‘Common Sense,’ said he wouldn’t be selling oil related stocks but adding to them for the long haul.
Barron’s Cover reported that 3M is the 3rd most innovative company in America with a machine that introduced 1,300 products last year while the stock moved only up 7%. According to Barrons the company may be entering a ‘sweet spot’ for its stock. The company is into health care, energy conservation, touch screen gaming and 3-D technology. (Yeah, it make those sticky things, too.)
India’s economic growth slowed to 8.2%, the expansion was below the expected 8.6%. (in case you were wondering why emerging markets slipped the last quarter). This compared to USA 4th quarter grew at 2.8% rate down from 3.2%.
Nasdaq is looking for a partner to team up and buy venerated NYSE Euronext’s stock trading biz. The Naz has been super aggressive with their financial policies and their triple B bond rating is two notches above junk. As you recall the Germans have been on the prowl to add the venerated NYSE to their German exchange.