retirement interruptus: That Was The Week That Was

Monday March 21st Oil jumped overnight on bombing of Libya $2 a barrel. Libyan supply disruption had been priced into oil prior to this morning’s hike but Gadaffi could cause disruptions to ships traveling the Med.
AT&T over the weekend announced buying T-Mobile which would increase customers to 130 million or almost a third more than Verizon. Long-time and suffering suitor Sprint was critical of the deal and said they would raise concerns with FCC and the Justice Department. Sprint shares had soared last week in anticipation of them making some sort of a deal with T-Mobile.
Radiation is the supreme fear as Japan manufacturers everything from electronics to pharmaceuticals. The US officials recommended evacuating U.S. citizens 50 miles from the failed reactors which stunned the Japanese who were told that 12 miles was a safe distance. Radiation could circle the globe in two weeks even though UN officials don’t expect the amount to be harmful. In Japan radiation has already been detected in milk and spinach as far as 30 kilometers from the reactors. The dangers are the seepage into the food system as it did at Chernobyl.
Just as the Japanese stock markets started gaining traction in 2011 the tsunami devastated the country, setting it into rebuilding mode. Radiation on Monday was leaking at lethal levels and their markets dropped 6% as investor hurried into cash and cash equivalents then the following day dropped another 10%. In the U.S. on Monday our domestic markets were off slightly as oil fell to under 100 and gold was off highs. Investors ran to Treasuries for safety.
Markets ended up last week but hedge funds were off. Paulson’s hedge fund lost 6%.
Markets see-sawed all week basically because of no news. There were 3 conflicting stories: The Japanese government, the utility that ran the power plants and the US experts. Investors did not know who to believe or what the real story was.
Experts timed it wrong. Behind the Money, Executive Producer for Fast Money John Mellow reported Monday that in February investors put more money into Japanese exchange traded funds than only one other area and that was the US energy sector. It was more than 1 billion dollars that flowed into various Japanese funds in February according to Biriniyi Associates data.
What stocks have the highest exposure to the Japanese markets? According to Barrons.com Pru, MetLife, Aflac. Coach and Tiffany.
Warren Buffett, in the meantime, with Berkshire Hathaway investment dollars bought a company right in his wheel house. A meat and potatoes easy to understand type basic company with nothing to do with high tech or software-Lubrizol, a specialty chemical maker. As he has done in the past with well run companies Buffett kept management intact with the marching orders to keep doing what you’ve been doing.
Mushy bananas and temporary closure into Iranian markets drove Dole Food to a loss.
Other stock impacted by the Japanese disaster were Toyota –7.9%, Sony –9.1% and GE –2%.
NFL lockout may impact broadcasters.
HP hikes dividend 50% and ‘promises’ a full cloud stack. CEO Apotheker said HP plans to build upon its financial strength by focusing growth, operational excellence and quality.
Keeping ‘big brother’ home. Rivals NYSE and NASDAQ may still play together as the younger exchange has made a bid to keep NYSE from becoming part of the German Deutsche Borse, AG. The Naz was in talks to line up financing.
SEC investigates Las Vegas Sands for possible violations of the Foreign Corrupt Practices Act, aka greasing the palms of foreign officials/non-officials in regard to it’s Macau operations. The stock has been a high flyer and been put on Hold from Buy by Jeffries and Company analyst David Katz until investigation is over.
Tuesday domestic markets fell by over 300 points on the Dow but came back as investors saw value and cut those losses to 130 on the Dow. Asian markets on Wednesday rebounded as investors finally figured that the sell-off was overly done.
Coming back from being beaten up were Asian automakers Toyota and Honda along with tire manufacture Bridgestone.
Compelling was the price of oil as it is traded in dollars and investors ran to Treasuries for safety oil fell, Treasuries up and gold, for some reason, also down. Oil is still expected to hang with some volatility as Saudi discontent with Bahrain continues and Iran makes disparaging remarks. As the tragedy in Japan ebbs the oil story still continues.
Barton Biggs, former chief strategist at Morgan Stanley, who now runs hedge fund Traxis Partners said he was buying shares in Japan. He bailed from Japanese investments in 2005 but states he is back arguing that the rebuilding will boost the Japanese economy.
First Eagle Management has also been adding to their Japanese exposure albeit selectively. Unknown to many fund investors some of the world/foreign sector mutual funds have slowly been adding positions in Japan as that economy has been improving the last few years.
Forgettaboutit! Don’t expect massive nuclear power construction anytime soon in the US of A. Barrons,com in the Tuesday Barron’s Take solidly recommended Exxon Mobil (XOM). ‘We see big oil as offering a favorable risk/reward opportunity in an uncertain environment.’ Yes, dear reader, expect coal, oil and natural gas to be the energy power commodities for quite some time.
Wednesday’s domestic and global markets again reiterated the global concern of ‘not knowing’, and this coupled with the Japanese Utility in charge of the nuclear reactors in question with a history of ‘not providing’ information. Oil and gold up. Briefly the Yen outpaced the dollar. Domestic markets beat down across the board. Tokyo markets recovered some from off their day lows. Japan accounts for about 9% of the global gross domestic product compared to when it was 18% back in 1994.
Yipes and Holy Smoke, Batboy and girls! Apple on Thursday was downgraded to Market Perform from Outperform. Analyst at JPM Securities Alex Guana said this was to reflect the deceleration in its primary manufacturing partner Hon Hai in Taiwan. Barrons.com wrapped up by stating that investors with a longer horizon will likely find their portfolio healthier for buying Apple on today’s dip.
Japanese mutual fund managers are staying the course according to the WSJ on Thursday ayem. Neil Hennessy, portfolio manager and CIO of Hennessy Funds which include 2 funds specific to Japanese companies said in the last 2 days his funds lost 20% of their value.Taizo Ishida, portfolio manager of the $87.5 Matthews Japan Fund is staying the course with his current allocation which is heavy in Japanese industrials and consumer discretionary stocks. Japanese auto companies still not manufacturing cars as of Thursday.
Domestic markets got a Value jump Thursday last as the markets had oversold. Nike got a push off the cliff as numbers for the Swoosh legend were disappointing and shares fell 5.5% while inventories rose 18%. Diet Coke makes it #2 soft drink behind…taa dah..Coke, knocking off Pepsi. Natural gas big winner in this crisis as fuel heading to Japan. Yen surged and then was forced down by a consortium of banks. A strong Yen would make it more difficult for Japan to recover as their products would become more expensive to sell. Tokyo shares were up with a 2.7% gain.
Michigan communities just got a hand to protect them from possible Bully Labor. The Gov signed a law allowing communities in trouble to have the state assist in negotiation and providing the state with powers over local governments and ‘school districts’. If this wasn’t a stab at the state’s strong Teacher’s union I don’t know what is/was. The new law motivated Raul Garcia, president of the Flint Firefighters Union to put forward a list of new concessions saying, ‘I would rather give concessions that I would like than have an emergency financial manager come in and say that this is what you are going to do.’
Janus Funds came out with their perspective on the Japanese crisis and reminded us that the Kobe earthquake in 1995 was in a more industrialized part of the country and experts predicted a 4% drop in the GDP which didn’t happen. The current crisis is in a fairly light industrial region.’ Janus didn’t mention that the Kobe quake didn’t create a nuclear disaster.
Germany has suspended nuclear power operations at seven plants and Switzerland has announced a moratorium on new nuclear plants pending safety reviews.
Domestic utility funds were hit as many held shares in nuclear power plants. Franklin Utilities owns holdings in such plants but was up slightly at the close on Friday. Exelon, a Chicago electric and gas utility with significant nuclear exposure also saw a sell-off as did Shaw Group, a Baton Rouge, La., construction company that works in nuclear sector.
Apple with the iPad2 may find itself with no product.
Demand for natural gas and coal seem to be a natural for increased demand, according to Shawn Reynolds an energy analyst for the Van Eck Global Hard Assets Fund.
GM halts two European factories as supplies are cut short from Japan. Craig Fitzgerald of Plante & Moran of Southfield said that Japan is a critical supplier of electric components used by virtually all automakers. Supplies were in short supply before the crisis. If supplies are interrupted from China this could close domestic manufacturing.
Disappointing. American Mutual Funds reported nothing to the registered representatives in a recent update except they were monitoring the situation in Japan. I expected more from one of the world’s largest money managers. Dumb.
Banks given green light to pay stock dividends and buybacks. According to WSJ 17 of the 19 largest have issued statements as such. Citigroup said it expects to return capital to investors starting in 2012. The extensive list and specific may be found online. The news of possible and slight increase to existing payouts was enough to bolster the markets.
Junk Bond meltdown? It’s when income hungry and greedy investors pile into a sector which is already stretched to the max. YTD high yield is up about 3% according to WSJ ‘Weekend Investor’. A better play for investors, according to the article, is emerging market bond funds which offer higher yields without the debt problems that many developed countries have. PIMCO’s Bill Gross is a huge fan of this play as I reported last week.
Finally: After 9/11 the our domestic markets fell 5% but rebounded within 6 months. The Chernobyl’s meltdown cost 3% of the market but was short lived. I would expect that the tragedy in Japan has created buying opportunities for those investors willing to take the risk. The Japanese markets were recovering from their decade long struggle prior to the tsunami and Japanese stocks are now selling about the same as they were at the economic global crisis of 2008.