retirement interruptus: That Was The Week That Was-2nd Week May

Jobs are what it’s all about. According to the WSJ Sunday before last companies cranked up hiring April to the fastest pace in five years. Don’t get excited there are 13.7 million Americans still out of work and another 8.6 million who wanted to work full time but could only find part-time jobs. Get the jobs picture rolling brighter housing will follow. Speaking of which…
Housing suffered another drop as median U.S. home values fell another 3% from the previous quarter. This the largest decline since 2008.
Dow 16,000?! According to technical analyst Gene Peroni Jr. at 16,000 the Dow would represent a 27% gain from last week’s close. ‘There is still a reluctance,’ he said, ‘on the part of sideline investors.’ Peroni’s current outlook calls for continued strength from what he calls THEM stocks, an acronym for technology, health care, energy and manufacturing.’ I like the way this guy rolls. I also like tech, energy and manufacturing.
AIG, the insurance monster, that was propped up by the government in order to pay all the claims for Goldman, Bank of America, JP Morgan and others for the ill managed mortgage mess is about to sell the U.S. shares. The government owns 92% of the company and needs $28.73 a share to break-even on their investment. The problem is gauging price. Morningstar like fair value at $38. a share but others place share price closer to $23.00 a share. However experts contend that even if the government walks away with $22 a share they’ll be okay since there was profit on the residential mortgage-backed paper it acquired on AIG’s behalf at the beginning of the crisis. (AIG tickled $50 a share earlier this year before falling to current levels.)
Citi completed reverse stock split and shares opened over $40.00 a share on Monday last and closed down. Jimmy Cramer wrote shares need to get rid of investors who bought for the split before gaining any altitude.
Split Cisco into Threes – according to the smart folk at Morgan Stanley. Ehud Gelblum believes by dividing the company into threes hidden value may be uncovered up to 40% more than current share price. Cisco disagrees and states it cannot manage three separate ‘disparate’ businesses. Lots of shorts on the stock.
Buy Treasuries? The end of QE2 (coming this June) may actually boost bonds and not kill them. Bond prices move inversely to rates. While fine folk at PIMCO sold their Treasuries the other folk at BlackRock bought more Treasuries anticipating exactly such a scenario. In other words BlackRock believes bond rates will fall while Pimco’s bet was that they would rise. More from the fine folk at Pimco later…
Commodity price collapse last week attributed to computer sell programs. Oil rarely falls $10.00 a barrel in a single trading day and momentum built until everyone sold to get out of the way. Hope this explains…but it still hurt…
World financial markets got a wake up call to the strength of the U.S. and its financial institutions. The dollar grew stronger immediately after the death of bin Laden. It was a reminder that the U.S. is still the strongest country militarily and financially. No other country comes close. The U.S is the world’s largest holder of gold in the world with Germany number two and China number three. In addition the U.S. has eleven aircraft carriers that are able to sail and strike anywhere in the world. China will float her first and only sometime this year. Hope this makes you feel better…
Bounce on Monday as commodities came back, oil closed over $100; gold and silver tacked on gains.
David Weidner got testy with the Oracle of Omaha, Warren Buffett, writing that Buffett doesn’t get overly worked up over Berkshire quarterly earnings unless they’re good. (Meow) With claws extended Davey went for the jugular reported that Buffett keeps explaining his losses away by stating, ‘ …each security will grow to their intrinsic value…’; which Weidner writes is the value of a security that is only in Buffett’s brain and nowhere else…( tuna anyone?).
You can almost imagine Homer spinning in his grave as ratings company Standard and Poor’s cut Greek ratings from BB- to B. The European debt crisis has returned like musical chairs at a kid’s party. Political pressure in Germany and other frugal northern European countries putting the kibosh on any additional aid. This is getting serious with little wiggle room. Greece may not be able to work any deals and default unless EU raises more cash. Add in the arrest this past weekend of the head of the IMF for allegedly accosting a hotel maid and this coming week can see more turmoil and uncertainty.
PIMCO has more than $1 trillion in assets. In April Bill Gross increased short bets on U.S. debt. So far the markets have moved against him. Treasuries have increased .3% on the strength of the economy and the elimination of bin Laden.
Despite a commodity correction 10 days earlier the charts show no relief for oil and especially gasoline. According to Getting Technical writer Michael Kahn investors can expect more upside. Technically Kahn explains, ‘…crude remains above its trend line. It also remains well above its November breakout level of 87…the excess were wrung out, but the bull market was left intact.’
Alan K. Simpson, ex-senator from Wyoming and former Cranbrook graduate (Bloomfield Hills, Michigan), lawyer and all around Speaks- Before- He- Thinks kinda guy said Social Security was a Ponzi scheme and not meant to be a retirement plan. (AARP execs immediately got their shorts in a bunch even though ‘technically’ Simpson was right.)
Tuesday markets closed up. Green all the way except for oil down a bit to close $103.50. If you’re counting four straight days of positives.
Michelle Girard & Omair Sharif, economists at RBS Securities believe that while the Fed is in no hurry to raise rates in a few months they better start thinking seriously about the inflation picture. Girard and Sharif were winners of the MarketWatch Forecaster of the Month in April, beating out 42 other forecasting teams.
Ouch. Gasoline lead markets lower as margin increases roiled investors into liquidity last Wednesday. The selloff wasn’t wide spread. Retail, especially Macy’s, did exceptionally well. Up 10% for the day. Apple also hung in plus positive news for J&J. Oil closed under $100. Gold and silver also found themselves lower.
Dead Cat Bounce? This is where a stock jumps up, sucks in investors, and then continues its death spiral. Was it a bounce on Tuesday? It may have been for metals but not the economy according to David Callaway in MarketWatch.com. Professional investors still expect a continued economic recovery. The other side of the coin belongs to those that believe the second leg of the recession is going to be lead by more bank failures and derivative losses.
Thursday markets started off lower but ended the session substantially up as oil settles around $100 even as Congress grilled oil executives in a bid to rid the industry of tax benefits.
Removing the Punch Bowl? According to Randall W. Forsyth last week’s turmoil could be a precursor to the Fed ending the QE2. Commodities may have temporarily ended their run. Mr. Copper has given up fifty cents a pound in April. Traders move to more defensive stocks, retail and pharma.
Oil Company Tax Hike? Puleeze….either Congress thinks we’re dumber than we are or they’re dumber than we know they are. Watch commodity roller-coaster which identically matches last 2010 template.
What did I tell you about silver last week?
The 10-Year Treasury found itself attractive to investors (again!) as yields fell almost 35 basis points to 3.15%, about where it was a year earlier. This was the lowest yields have been in 2011. This flight to safety was acerbated by the Greece crisis, the U.S. debt ceiling, strengthening dollar, commodity price reversal and the upcoming end of QE2.
GM’s stock price lags analyst’s expectations.
Kirk Ludtke of CRT Capital Group has a $42 =12 month target. Ludtke said GM is the No. 1 player in the two regions that will account for half the world’s unit growth over the next five years: North America and China.
Friday the 13th usually bodes well both for stocks and Treasuries. Looking back at the past 10-years the 13th was up 65% of the time. It didn’t this last week.
German growth accelerated.
Japanese banks lose ground as fear grows they may have to take a ‘haircut’ on billions of dollars in loans made to Tokyo Electric Power Company which disclosed three damaged cores at their reactors damaged by the earthquake and tsunami.
Hedge fund conference in Las Vegas brought some interesting ideas last week. Cooperman at Omega likes General Motors, which is sitting on a pile of cash and could return significant amounts to shareholders. Daniel Loeb of Third Point, LLC, is excited (?) about Delphi and suggested it could reach the high 20s. Steven Tananbaum who runs GoldenTree Asset Management said in the past he has bet against Treasuries but currently he is ‘flat’ but may put the trade on soon.
Finally- Jeff Reeves at MarketWatch names the three worst stocks in the Dow here to date. Here they are with no silly comments: Microsoft, Bank of America and Cisco.