retirement interruptus: That Was The Week That Was

Last week started with concerns that Congress would wait until the last second before raising the debt ceiling. Both WSJ and Bloomberg’s BusinessWeek urged readers and elected officials to not play chicken with the debt. This game of politics, according to experts, would make the U.S. look more like an Argentine government and diminish our respectability among world leaders.
The problem facing Congress is to focus on the long-term debt. A special committee called ‘The Gang of Six’, which is comprised of Sen. Mark Warner, Sen. Saxby Chambliss, Dick Durbin, Kent Conrad, Tom Coburn and Mike Crapo; will offer up their blueprint of sharply curtailing the growth of entitlements, shrinking or eliminating home-mortgage interest deduction and charitable-giving deductions. It also plans on reducing tax rates for the richest citizens.
Reasons why Congress needs to get their act together – The U.S. risks triggering the following events according to WSJ: Shake investor confidence, Undermining the recovery, Roiling global markets and Disrupting the flow of government services.
Michael Santoli, in ‘Streetwise’ in the Sunday Barrons.com, wrote there is bear-watching as we approach the ‘sell in May’ part of the year. But, there are optimistic reasons for being bullish on stocks. John Roque, technical strategist at WJB Capital said, ‘I wonder, in this environment, if the rails aren’t as good a bellwether as we might need?’ Rail stocks are up 10% offering credence both to commodity-demand strength and the general global recovery story. A big fan is Warren Buffett who bought Burlington Northern and made $14 billion.
People like exotic pets and the most exotic is the recent love-fest with raising Honey Bees. Ever since there has been talk of the bee’s strange demise people have taken up raising them in backyards throughout the nation. Over 125,000 Americans are now registered beekeepers, and there is no telling how many more raise bees off the books. Some communities have laws against raising honey bees and as one council person explained, ‘You can’t put a leash on a bee.’
Emerging Markets will see more from Private-Equity investors. Institutional investors are under pressure to find growth opportunities and emerging markets are a compelling story. Sarah Alexander, president and CEO or Emerging Market Private Equity Association, said, ‘… while China and India still top limited partner wish lists investors also include less penetrated markets of Latin America and Southeast Asia.’
Hedge Funds the domain of the rich are baaaaaack! The funds that cater to the wealthy individuals, pensions and large investors are approaching $2 trillion in assets. The asset growth does not match returns. So far the S&P 500 index is up 5.4%, according to WSJ April 18, 2011, but the average hedge fund’s gains are a lackluster 1.6%.
The Chinese love pecans. Boy, do they love pecans! Five years ago they bought hardly any and in 2009 the Chinese bought 25% of the U.S. pecan crop. Pecans, according to Chinese lore, are good for the brain. Nearly 20% of every dollar spent by the Chinese on U.S. goods went for food. The price of the nuts have tripled ever since the Chinese developed a taste.
From rubberstamping AAA quality on garbage CDO’s that lead to the global collapse, for Goldman and others, Standard & Poor’s strapped on its high and mighty act last Monday and roiled domestic markets by warning that they may have to revise their long-term outlook from ‘stable’ to ‘negative’ on United States debt. The reason they gave is that if the government does nothing or too little to tackle the debt issue the U.S. may have to pay more to borrow money. S&P worried that the White House and Congress would continue to play the politic game. The stock market feared that this would cause a lack of liquidity, with higher interest costs eminent, immediately tanked and ended the day with the Dow off 140 points. Treasuries, contrary to what one would expect remained steady, an indicator that this has already been priced into the fixed income market.
The equity markets, technically, were already in precarious position after stalling near its February high, according to Michael Kahn at Barrons.com in his Getting Technical column. Kahn believes the markets can retreat another 5%-10% before recovering.
Tech is a hit. It’s like the good old times with Silicon Valley as venture capital firms jockey for position to throw money at start-ups. Why it’s like 1995 all over again and the question is will investors be smart enough to side step the inevitable bubble? Even scarier is will there be a Bubble and investors simply miss the boat?
Google’s Anti-Wall Street, according to their credo, and that’s cool as long as it’s their money and not pension plans, institutions and regular folks. Co-founder Larry Page dissed analysts when he joined a conference call for three minutes and walked away. Wall Streeters were not happy campers with the insult. Since Page came back aboard shares in the firm have fallen 12%. Bring back the grown-ups.
Hot Research at Barrons.com likes Hyatt Hotels (H) and offers up a rating of outperform with a princely price tag of $49.
Muni-defaults? So far nary a word and wonder is if in fact there are any out there. So far no cry from investors.
Apple, the stock, according to Minyanville.com, has been acting poorly since Jobs took his sick leave. According to the Wise Boys and Girls at Minyanville, the stock Apple looks tremendously undervalued. They repeat in their Tuesday last blog that many analysts still have price targets of Apple at $450 a share.
Tuesday is my neighborhood garbage pickup day and with all the Monday concerns about U.S. downgrade you’d expect a garbage market day. The opposite was true and the Dow was up 65 points, as were metals and oil and all other indices. It was as if investors simply tossed Monday’s news out with their old TV dinner trays.
Intel crushed estimates with revenues almost up a Billion….yes, dear reader, a Billion dollars. (This is some serious tech market, by gum!)
China is attempting to gussy up their currency the Yuan to make it easier to use throughout the world. The new rules would make it easier for global customers to boast their China business. They could access cheap funding in the Hong Kong Yuan bond market and then use it to expand their business.
This would upset the current dollar dominate global currency markets but experts say in the WSJ April 20, 2011 that this still could be a long-way off.
Wow! Profits drove the market as manufacturing output grew more than four times as fast in the first quarter as the ESTIMATED rate for the overall U.S. economy. The sector is being fueled by companies flush with cash who are spending on computers, machinery and other equipment. Wednesday the Dow ended up 187 points while the Nasdaq gained 58. Oil closed over $111 a barrel and gold piled on another $9 an ounce.
Throwing cold water on the mighty fine day was David Callaway in his commentary at MarketWatch.com who wrote and wondered if the tech sector was strong enough to help lift the moribund financial services sector out of their doldrums. He reports that Goldman, Morgan, Citi and Bank of America all have been dogged by weak lending and lackluster institutional activity among clients. Even darling Wells Fargo has been hurt by continued weak loan demand. It is no wonder that banks look at Washington’s reform at killing their business and this summer looks like a lobbyist dream as they battle reformers.
There are analysts who love Ford and telling clients to buy because they believe Ford will deliver solid numbers this coming Tuesday. Ford down 15% is expected to deliver first quarter earnings between 36 cents-60 cents.
Remember when I wrote about life insurance settlements and how insurance companies and state insurance commissioners were all getting their shorts in a bunch because regular folks were selling their life policies for far more than the cash surrender value to investors? AIG, that’s the American International Group, the company that insured all those so called… hrmph…CDOs that went bust and the government had to bail it out in order it could pay Goldman, Morgan and others have announced a securitized investment nicknamed blood pool of life insurance policies. The sale, unfortunately, isn’t going so well as AIG cannot get a rating on the pool from Standard and Poor’s. S&P, suddenly acting like it belongs at the Royal Wedding sipping high tea with its pinky in the air, is in the middle of reinventing itself as an entity that can be trusted after stamping AAA on all the CDOs that AIG insured and Morgan and Goldman and others laughingly sold and which almost all went bust. Someone give me a pill!
General Electric blew the doors off in profits up 77% over a year ago, increased its dividend for the 3rd time in a year, and still had its stock punished. (lemme repeat The Street hates this stock ever since Jack Welch left!) Almost every analyst piled on after the mind-blowing profit number stating everything from ‘ …wind turbine problems…operating earnings were flat…weak industrial margins…and finally…GE gave us little to be excited about…’ Morningstar seems to be the only one that likes the stock at fair value $25 and it traded last Thursday under $20.
Credit Suisse, the investment banker, in Barrons.com., likes Lear, Ford, GM, American Axle and Magna International. Yes, dear reader, they also reported a least favored list of manufacturers which included Kar Auction and TRW.
Expect huge oil profits to be announced.
Markets ended the week up on Thursday.