retirement interruptus: That Was The Week That Was

The current crisis in the Middle East could represent the beginning of the return of the region’s leadership in commerce. Jim O’Neill, Chairman of Goldman Sachs Asset Management wrote in a letter to clients, ‘A post-revolution Middle East and North Africa could rival emerging markets of Brazil, Russia, India and China.’
Don’t expect things to settle down this week. More to do with perception regarding oil than the loss of.
The GAO reported that the U.S. has 15 different agencies overseeing food safety, 20 helping the homeless and 80 for economic development. In addition there are 82 federal programs to improve teacher quality, 80 to help disadvantaged people with transportation, 47 for job training and employment and 56 to help people understand finances. Reducing or combining could save billions. (Insert your punch line here.)
The biggest news service in the world no one has heard of is World News Connection. WNC is paid from a classified budget of the CIA. Don’t ask, I get nervous just blogging about it.
According to those that know the very first trading day of the month is the best for the S&P 500 index. According to Lawrence G. McMillan of MarketWatch.com report that 94% of the S&P500 gains in 2010 was on the first trading day of the month. (didn’t happen in March)
Barrons.com reports that a boom is brewing for 2011 but before ‘Happy Days’ is harmonized expect a huge hit late this year and into 2012 as corporate tax write offs contribute to sell off. So sayeth Randall W. Forsyth.
Investors still cautious while stocks in the S&P 500 since March 2009 287 have doubled while 405 have moved up by at least 50%. According to some traders negativity is stronger today than it was one year ago. Today’s investor is more likely to sell on any bad news as to buy.
Hello, gold. Goodbye, gold. Jim Lowell, editor of the ETF Trader newsletter said in a podcast with Chuck Jaffee of MarketWatch that there is a big fly swatter that’s about to squash gold bugs. ‘As soon as the world banks decide one way to bail out of their fiscal mishaps will be to sell gold at historically high prices – I think you will see a run on gold to the tune of 20% to 30% to the downside.’
Lowell also said that in the next 12-18 months those holding long bonds are going to see either flat or actual losses. A one percent rise in rates will see the long-term Treasury down 18-20% in terms of return.
Markets took a hit on March 1st as all indices down on oil and Libya concerns. At the rate and length of civilian protest in the Middle East the concerns on uncertainty may continue to stink up the markets for quite some time.
Car sales up BIG but stock prices crash as traders are running the markets, the small investor has no clout and all eyes and ears on oil. Gold, too.
Unrest in the Middle East means, according to Matt Freund, USAA portfolio manager: US dollar and Treasuries outperform, high gas prices could toss us back into a recession, energy companies should outperform higher oil prices and Europe could suffer more than the US as they depend more on Libya oil than we do. (but we knew all that!)
Who’s managing your mutual fund? Lots of funds use outside fund managers and investors chase those funds like they chase well known jockeys at the track. Seems like some funds handed over money to outside fund managers who handed over the investment money to…ta dah…Bernie Madoff! One of those ‘feeder funds’ is Tremont which funneled about $4 billion to Madoff over a 15 year period earning $180 million in finder fees. Tremont is being wound down and is/was a subsidiary of Oppenheimer Acquisition Corp which is a division of Massachusetts Mutual Life Insurance Company. Irving Picard the Asset Hunter entrusted for tracking down Madoff’s billions, is seeking return of some $2.1 billion in transfers from Tremont and its affiliates.
Higher interest rates will tank bonds for sure but where to go ask the ultra conservative investor? Seems TIPS will also suffer as rates increase (TIPS are swell for inflationary times but they also lose value when rates increase). The answer may be in senior secured floating rate bank loans that pay interest that floats, with coupons that typically reset every 90 days. Examining a chart when bonds lost value from 1992 through 2010 the floating rate seem to have done exceptionally well except for 2008 when nothing did well . I’ll soon get a memo out to all interested conservative investors on this.
In the February 28-March 6 2011 Bloomberg BusinessWeek Mary Meeker ex analyst with Morgan Stanley during the dot com daze reports on the state of the USA as a business. The country has a negative net worth of $44 trillion or an average of $143,000 per capita. Ms Meeker attacks entitlements stating that there is an 82% correlation between rising entitlement spending and falling personal saving rates. There is no doubt she and others are absolutely right as we saw the impact on socialism on recovering economies and peoples from East Germany and the Soviet states. She concludes that there is no secret to making the USA strong again but the wherewithal of politicians.
Germany is the European export powerhouse and does it by producing and shipping basic but expensive goods while ranking #16 in the Global Entrepreneurship and Development Index. One of their biggest exports are power saws. In the creativity biz the Germans rank just ahead of Puerto Rico and right behind Singapore. Americans think we need to produce cheap and innovative products to compete with the world economies but take a lesson from Apple and see quality plus a premium price to understand what others will buy. (Ford recently refused to cheapen their cars by reducing prices in Europe willing to take a stock hit for long-term value.) Make Made in America a brand that consumers throughout the world want is how to dig ourselves out of the economic hole.
Thursday last brought relief as markets rebounded and posted their biggest blue chip gains since early December. Oil moved below $102. The euro got support with comments from Bank Prez Jean-Claude Trichet who said the bank could raise rates next month for the first time since the 2008 global beat-down.
Whispers that FedEx is in a buying opportunity from Weekday Trader at Barrons.com. Shares are off 9% as of this writing and analysts say that FedEx could benefit from a domestic pricing recovery and continued volume strength from international express biz.
Hot but not are the currency IPOs that some $4 trillion a day in trades are run through. Stocks of FXCM and Gain both are below their IPO price and have regulatory issues and lawsuits from customers who content that their trading platforms punish profitable investors by shuttling them to a ‘slow server’ causing trade execution to slow down.
Too Big to fail just got bigger. Sheila Bair the tough talking FDIC chief said the government is not coming to the future rescue of the Big Banks if they stub their toe. The biggest institutions before the global crisis are even bigger today. Go figure. (Too bad Sheila won’t be around when it happens).
Jobless rate falls to under 9% a smidge but what the data doesn’t show is the participation rate of people dropping out of the Labor Force.I know people who lost their job at a job shop and now getting social security after a decade of off and on again employment. You too?
Standard & Poor's downgrades Toyota bonds to AA- from AA. Reasons is the company profitability may take years to recoup.
Food is costing more and farmers are expected to plant more and ramp up yield which should reduce costs going forward. Analysts, however, say supply of agricultural commodities will outstrip supply. Which is the reason I like the commodity funds for just about every investor. (The average investor shudders when someone mentions commodities as if it were a bad word.)
Bill Gross, Bond Trader Extraordinary, isn’t sticking around to see what The Ben Bernanke is going to do in his second act later this year. Bill has reduced holding of Treasuries in his flagship mutual fund Pimco Total Return Fund, according to Randall W. Forsyth who keeps tabs on stuff like that.
Stocks fell Friday after a huge up day Thursday but still ended up for the week. Oil closed at $104. This week expect more of the same.