That Was The Week That Was – 3rd Week July

• The Bears took over last Monday’s market. Even as IBM – Big Blue- reported a billion- dollar- profit-shares in the company still sank. Guidance was strong for the tech giant but there was too much other stuff going on for traders to concentrate. Fear of another Lehman has haunted the Street and investors have been selling first and asking questions later.
• What’s on people’s minds more- Europe crisis or U.S. dithering politicians? Seems analysts can say with authority it’s the problems in Europe. It appears to be a classic case of contagion as investors worry about what happened in one place selling assets in another which causes a spiraling effect. Not so fast, say other traders, it’s the lack of compromise in Washington, D.C. In either case volume weaker until some solutions are reached.
• Huge lack of confidence for Washington, DC. Don’t know who they think they’re representing but both sides have lost a tremendous amount of support. Voters will eventually have their way. You betchum.
• Dow Transports broke out in June to new highs, signaling a strong buy. Monday last the index fell. The transports, according to Dow Theory, are in a short-term decline. However, if they cannot hold onto March lows ( 4920) then a sell signal will be on the table, wrote Technical editor Michael Kahn for Barrons.com.
• Gold closed over $1600 an ounce. Analysts now say that $1600 is the new support level for the metal. Oil closed $96.77 for the day. Gold still off its inflation adjusted high of $2400 an ounce. The dollar weakened. (see if gold has topped below)
• Doomsters the end of Kodak. Shares fell to $2.52 Monday last. Bond selloff illustrates the fear that with almost $400 million of debt coming due the company may not have enough cash to pay piper. A simple illustration of how a company loses its way, poor management and no imagination going forward. Remember Polaroid, anyone?
• Morningstar reports that Meredith Whitney is full of beans!  Whitney, analyst- superstar, reported the death of the Muni-Market, predicting hundreds of billions defaulting. Morningstar said, don’t hold your breath waiting for Whitney’s prediction to come true.  While the reporting company did not write about specific issues it did offer guidance on certain muni-bond funds.  Half –way through the year defaults were running about average and in the millions not billions. probably something wrong in that crystal ball connection and Whitney may want to upgrade to broadband…
• No weakness in oil drilling stocks as Halliburton posted huge numbers in a down day. Horizontal drilling is the story here with land drilling in the U.S. getting better better all the way through 2012. Globally oriented Schlumberger got a kick in the pants instead of a leg up because of its international ties. HAL was up 2%.
•  Cisco did what it promised as new management starts to clean house. The tech giant cuts 11,500 or 16% of workforce. This part of a $1 billion cost cutting to get the company back on track. Shares have fallen over 30% the past year. buying shares in Cisco in 2011 has been like trying to catch a falling knife.
• Tech Contrarians argue, in Mark Hulbert’s column, that Cisco is a better bet than Apple. Apple is up 50% and investors wonder, ‘Would you like to make a lot of money with a mediocre company or realize a mediocre return with a great company?’
• Macau, a Portuguese founded island, 38 miles from Hong Kong is the world’s biggest gambling town. It has five times more activity than Las Vegas. While Vegas struggles Macau booms and casinos are doing very well. Wynn Resorts had a blowout quarter but because their share price has already risen to extraordinary levels stock fell. Morningstar reports that the best of breed is Las Vegas Sands. LVS reports at the end of the month and shares closed at $45.00 Tuesday.
•  Tuesday July 19th, Dow has best day ( thank you very much) in 2011! The market reacted favorably to a potential new debt deal. Naz roared as tech took off. Even rail transports shook off doldrums as CSX had shares rise 1%, Chipotle Mexican Grill missed second quarter earnings and stock fell 6%. Coke up on overseas sales and shares up 3.7%. Company plans on offering various sized Coke for China customers to fit their budget. Coke sales in China hit 1 billion cases year to date.
• Nothing like a government poking its nose  under your tent to get potential illegal activities under control. HSBC will no longer assist rich clients in parking ( euphemism?) cash in far away places such as India. A new law in 2011 requires stringent and expensive reporting for such…hiding…err…parking.
• Apple big winner Tuesday as shares popped 7%! Analysts were expecting $25 billion in revenue and instead the company announced $28.57. Morningstar says more room to run and has a $475 price tag on the stock. Jimmy (The Mouth) Cramer upped his forecast to $500 a share for Apple on Wednesday’s program.
• The Gang of Six….just so you know who if you run into them on the street.
• AT&T and Verizon may come under pressure from apps and software titans. Consumers are finding ways of paying less even as shares are trading at multi-year highs. Craig Moffett, veteran telecom analyst with Bernstein Research said, ‘Tech is slippery.’ He calculates that the companies are not even earning a return above their cost of capital.
• Good Quote? From Brad DeLong, UCB economics professor, ‘I think we need QE3. If Milton Friedman were here with us and if he was giving us the same advice he gave to Japan a decade ago, Milton Friedman would be saying that we need QE3.’And some would disagree….
• China crash? Bloomberg’s BusinessWeek reports, Food is taking up more of the average Chinese budget.  China consumes almost half the world’s production of iron ore, coal and steel. It uses 40% of all copper. Samsung got 20% of all 2010 revenue from China. Slow growth would hurt multi-nationals such as Toyota, GM and VW. Signs of a slowdown include bad real estate deals, inflation spike over 6%. If China slows the global economies come to a halt as China is a majority importer in Asia, 14% from Europe, 9% from North America and 19% from the rest of the world.
• Ye Old Gold Bugs- Richard Russell, 87 year old Dow Theory Letters Publisher has the definitive word, ‘In my experience, great extended bull markets, such as the current 10-year bull market in gold, don’t die with a wheeze and a whimper. They die amid excitement, torrid speculation and finally the wholesale entrance of the retail public. I’ve yet to see any of those characteristics in the current gold bull market. Therefore, I’m trusting history, and I’m sitting the gold bull market out.’ i take it russell’s in not out like gone – old poops are sooo hard to understand.
• The difference between buy and hold and perfectly timing the market is an annual average return on the timing side of 0.01%.              ( Remember buy and hold doesn’t mean set it and forget it – there be a difference.)
• Zillow- IPO- again another new  tech issue that hasn’t made a dime and offered a limited number of shares to pump price at offering this past week and boy! -did it do well or did it do well! Up 79% at the close Wednesday from offering price. Again- frenzy in the IPO market has left common sense at the curb. How investors can ignore companies that actually make money, blow away estimates and glom onto overpriced issues is beyond me. (Gots to be the water…)
• Intel’s numbers were positively giddy and the company gave strong guidance for the 3rd quarter – all good things. The stock, however, took a hit for nine cents a share as investors were not impressed. The tech giant, according to The Street, had double digit gains across all business segments. The company surpassed $13 billion in revenue for the FIRST time. (Same thing happened on Wednesday for Am Express which blew away numbers and traders ignored. What’s a company got to do to get some respect? )
• Hey, Picasso! The art world is doing just fine with auction house Christie’s selling….$3.2 billion of fine art in the first half of this year and Sotheby’s said it sold $2.9 billion over the same time period. Biggest collectors came from Europe. (If I find out they were Greek buyers I’m demanding an investigation….!)
• Cigarette maker Altria Profit falls 57% on less folks smoking and tax-related charges. Still the  company predicted upbeat forecast for the 4th quarter (not so much for the next or 3rd quarter). Altria, symbol MO, maker of Marlboro and others, is still pursuing a stock buy back program and shares rose slightly in light pre-market trading. It’s up 26% in the last 12 months.
• Surprise! Thursday last news of a U.S. deal (promptly denied by both White House and Speaker’s office) ignited the markets along with a deal cut by the Euro-zone leaders on a deal to really nail down the Greek issue and stop any contagion. All surprisingly good news considering where we were Sunday morning (scroll to the top of the page to see tears and hold monitor to your ear to hear weeping). Dow wrapped up off its highs closing up 152 points, gold down and oil settled to around $100 a barrel. 
• Really Rich Guy and Hedgie John Paulson said Thursday   he was too aggressive with some of his bets (His flagship fund is down 12% for the first half of the year) and cutting back on Bank of America and upping holdings in Capital One and Wells Fargo.
• Bubblicious? According toMichael Santoli in Barrons cover piece, social networking companies are at the brink of bubble-land. LinkedIn, Zillow and Pandora Media  all haven’t made money but are at rich valuations.  Cheapest and most worthy play in the landscape currently is Google. Facebook may change all that when it offers its IPO in 2012.
• Investors pulled $1.6 billion out of stock funds last week and small cap saw $1.3 billion invested. Health care ETFs and Biotech also saw positive action.
• Citigroup research report said Water is the next big thing. (Okay, I’ve been saying that for a while but no one listens to me….)   Citi likes Danaher (DHR), G.U.D Holdings (GUD), Pentair (PNR) and Nalco (NLC). The water ETF is the Powershares Water Resources (PHO). Citi says they expect huge holding tanks and water tanker trucks – much like oil storage.
• Kevin Marder in his commentary wrote that the intermediate market trend is up.  A normal reaction, he writes, consists of a retracement of between one-third and two-thirds of the prior advance. However, volume on this upswing is a bit worrisome, according to the Kevin.
• Microsoft profit rose 30% in 4th quarter.  That’s all I got…
• Buying TIPS for extreme inflation protection is going to disappoint.
• General Electric had a great quarter- 21% rise in earnings due to demand in oil and natural gas production equipment and jet engines. For all that shares punished 12 cents to close at $19.04.
• Christian Radio Talk Host Patrick Kiley indicted in Ponzi scheme over $194 million. On his radio show, ‘Follow the Money’ Kiley asked listeners to call and he counseled them on currency trading that guaranteed double digit returns. In his defense Kiley said he was simply reading from a script.
• Coming up this week July 25th  are 11 IPOs slated to open this week with Dunkin Donuts as the most familiar. The company will trade under DNKN. Advanced Micro Devices was one of the top gainers last Friday and is trading in the middle of its range at $7.75 and Forbes likes it to $10.00.
• Deficit talks and raising the debt limit dissolved Friday in a hissy fight. The President taking it to the public and The Speaker writing a note explaining he couldn’t work with ‘that man’ and was taking his toys to talk to other Senators. Both should be ashamed.
• FYI- 57 BANKS closed by FDIC year to date. Three closed on Friday, July 22nd.

  Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

That Was The Week That Was – 2nd Week July

•  Sell on rumor was all the rage last week as fears of Greek contagion spilled over to Italy and Spain. Moody’s downgraded Ireland Tuesday adding fuel to an already speculative and explosive situation. The Moody’s downgrade, according to traders, proved this is a headline driven market. Some of Europe’s biggest banks called in lines of credit in anticipation of default by either Italian of Spanish financial institutions. Not only did that acerbate a bad situation it may hasten a crisis. European politicians seem to be kissing cousins of ours as they appear to stand on the sidelines doing little to assist or defuse the situation.
• ‘Fasten your seat belts, it’s going to be a bumpy week.’- Along with debt woes on both sides of the Atlantic major corporations will release earnings the week of the 18th. Among them Goldman Sachs, Morgan Stanley, Microsoft, Yahoo, Intel, IBM, AT&T, GE and Apple, Expect good numbers but more important key in on ‘going forward’ or the guidance companies give for the future. Still there are analysts that believe the S&P 500 is undervalued as compared to other investments.
•  Investment rules  state that an investor needs to have and read a current prospectus to get the fund’s mission statement, ownership, costs and what is allowed and not by the fund’s management. All the information has to be factual. Hooey, said the Supreme Court, in answer to a lawsuit against Janus Mutual Fund management. According to the high court, ‘A fund’s investment advisor may not be sued for securities fraud due to misstatements made in the fund’s prospectus.’ Notably the Court was ruling on Janus Funds allowing certain investors to trade in and out of their funds to the detriment of long-term investors. The fund paid the fines and restitution while fund management allowed the rapid trading that was in direct conflict with the prospectus. 
• Four Industries with No Future- according to writer and investor James (I Need A Haircut) Altucher: Casinos, Cell Phones, Health Care Providers (drugstores will take over) and alternative energy industry (fracking in Texas alone could make the U.S a bigger oil provider than Saudia Arabia).
• There are two worlds working here. There is the overall economy which is slowly grinding on with an over 9% unemployment rate, no paycheck raises in ages, slowly increasing inflation and homes value underwater. Then there is the corporate investment side that has recovered nicely, has more money banked today than it did before the crash and is making obscene profits.  The Naz hit a 10-year high last week. Talking heads and self-proclaimed investment experts confuse one for the other.
• Jason Zweig –‘Inflation, since 2007, has eaten away 9% of your purchasing power.’

• Thinking of buying a summer cottage or winter ski chalet and worried prices may escalate? Not so sayeth Doug Ramsey of investment firm Leuthod Group who calculated that single-family housing starts would have to soar 60-70% from their current half-century low of 419,000. He goes on to state every bubble (including housing) works thusly: a steep decline lasting 3-4 years, followed by a brief rally that ends in years of stagnation. He uses the Nikkei as an example of it trading at less than a third where it peaked 22 years ago. Shop on, dear second home buyer, you’ve got lots of time and prices on your side.
• Worries over Greece contagion felled markets Monday as all indices down dramatically. Concerns now over the financial health of Italy and Spain. Euro under 140 and expected to continue its move down. The EU is expected to announce another plan to stem the tide.  The best plan being considered a EuroZone Bond where banks toss their Greek and miscellaneous PIIG debt to extend it out and distribute along with  zero coupon bonds. This would be much like the old Brady Bonds that were issued for emerging market debt. By pairing PIIG debt  with a zero coupon bond investors would be guaranteed not to lose all their investment.
• After hours Monday last earning season officially began as Alcoa crushes numbers! Concerns about missing were never in doubt. On Monday July 18th Credit Suisse analyst Richard Garchitorena reiterated a Strong Buy on the stock with a price of $20.00 a share. Morningstar has it at $19.00 a share. Shares of AA were $17.58 in May, 2011 but closed Friday at $15.48. Ford stock continues its fall and sentiment for auto stocks in 2011 is not getting better even though Ford beat estimates.
• Technical analyst Michael Kahn for Barrons.com write that stocks (before Monday) reached their price ceiling. He believes we’ve reached fair value on the S&P 500 index. He concludes with the financials lagging the broader market during the recent bull run may signal an end to the Bulls and banks may fall another 10%.  There are others that think differently but chartists are stubborn- usually right- eventually.

 

• Put me in, coach!  NFL union and owner representatives met for marathon 15 hours on Thursday to thrash out an agreement. The same day the White House and representatives from both parties got together to solve the nation’s debt crisis and spent a grand total of 90 minutes. Guess who’s serious about their business and who’s not?  By the time you have a donut  the meetings over.

 

•   Invest your money in emerging stable democracies, wrote Matthew Lyon from London, a city with its own share of high unemployment and inflation woes. Citing Renaissance Capital that has studied 150 countries from 1950-2009 once a country reaches a per-capita gross domestic product of $10,000 per year it is what the bank terms an ‘immortal democracy.’ It can find no country with those numbers that has been overthrown (politically stable) Even GDP $6,000 may be relatively safe. What that tells us is that Russia, Brazil and Turkey but not China- yet – quantifiably attractive places to invest.
• Cisco, according to The Street, may finally be getting some respect- and a return to a decent stock price. It currently ranks as the cheapest Dow component based upon a variety of metrics. The company has finally decided to cut costs and margin expansion. This on firing workers, installing a dividend and buying back shares.
• The Ben Bernanke spoke on Wednesday and markets cut their gains in half at the close.  You don’t have to be an Inspector Clouseau to finally figure out the Street has no confidence in The Ben Bernanke. The Fed Chief said that there was more that the government could do but it would involve going into untested waters and he didn’t know what the outcome would be. Michael Pento, senior economist at Euro Pacific Capital in New York said, ‘Bernanke thinks the answer to everything is printing money. …He’s doing what he does best, which is counterfeit the U.S. dollar.’  Markets fell on Thursday after The Ben Bernanke said that the Fed would not immediately create another QE3 stimulus program. But he didn’t rule it out either.
• The U.S. Budget deficit, for the first nine months of 2011, less than a year ago by a significant amount- however spending was double that of revenues.
• (whisper) Hedge funds scour web in search of social gaming companies like Zynga to invest in.
• Oil still a tad under $100. See how well the government use of releasing millions of barrels of Strategic Reserves has worked to reduce the cost to the consumer.  Just about every investor should own an energy mutual fund.
• Investors motivated by fear and not greed according to Morningstar Friday July 15th. Confidence is so low and for good reason – Hello, Washington.
• Thursday was a good day for some stocks as Google was up huge- profits up 36% and the stock soared 12% in after-hours trading.  Morningstar says lots more to run for this stock. Earlier JP Morgan unexpectedly posted 13% profit and started an early morning run for stocks before The Ben Bernanke opened his mouth and killed the rally. Jimmy (The Mouth) Cramer called JP Morgan a Rock Star!
• While American lawmakers dither (meetings in the White House every day that last an hour or two? Come on!) Asian investors worry-and voiced their concern on what was happening in Washington, D.C. but also said they had little alternatives for parking their cash.
• The Italian government did a preemptive strike to announce their budget deficit will be less than the government’s target for 2011 and 2012. Italy’s economic minister also said he expected 16 growth-boosting measures in a bill to increase Italy’s economic activity ‘significantly’. The Italians are getting their act together- or certainly trying- and we cannot or won’t?
• Food as an investment makes sense to me. Instead of an Ag ETF how about Monsanto? MO, according to Hot Research, is getting ready to explode. The company acknowledges it’s all about ‘seeds’ and not chemicals. The company boosts the best hybrid corn seeds in the world- accounting for 43% of total operating income. China won’t allow Frankenstein seeds into the country but will have to  import corn to a growing nation of corn lovers. Each American consumes- 36 bushels- of corn per year. It is used in everything from Cheese Whiz to ketchup. Hot Research puts an Outperform on the stock closing Wednesday last week $74.13.
• Ze banks all of a sudden charging! From playing dead the last few quarters and being the least productive sector financials catch fire. Citigroup profit explodes on Friday – up 24% beating analysts expectations. Shares still fell Friday after a slight bump in price.
• For all us not so technical investors Dunkin’ Brands is getting set for its IPO- price $16-$18 a share and looking to sell 22.25 million in 2011….Investors not only get the donuts but also Baskin-Robbins in the same deal. No date set.  Yum?
• Wha Happened to recent IPO LinkedIn? shares have soared past $100 with unjustifiable valuation according to analysts. (Someone is buying!) Realistic price should be closer to $45 a share.
• Dirt Devil up for sale. Current Hong Kong based owners bought the iconic sweeper from Hoover for about $100 million cash and now want to cash-out and are asking over $900 million.
• Big News Friday that 8 Banks failed the EU stress test and then we find out that these are smaller regional sized banks. This is important because of fears of (see where we started the week) contagion from Italy and Spain and can the banks withstand losses of magnitude. Critics, Andrew Lim of Espirito Santo Investment in London, said can’t be much of a stress test if none of the big firms did not fail.
• Where to invest going forward? I get a call from inside wholesale rep for JP Morgan  last Friday who says large cap growth is the place I gotta be. On the flip side Global Strategist for JP Morgan Jan Loeys says in Barrons.com interview. a week ago Saturday, that small-caps and emerging markets are better places for you and me.
• Consumer prices drop for the first time in a year! The CPI fell to a seasonally adjusted 0.2% in June, matching expectations. At the same time jobless claims drop to 405,000 the lowest level since April. (not enough to get excited about)
• Conoco Phillips plans to split into 2 companies. On one side an oil refiner and on the other an oil producer. No major has attempted this although similar energy breakups with second tier oil producers have happened.
• Quick name someone in Washington you’d vote for- again! (thought so)
• Finally- a bad week ends up. All green as Friday mercifully comes to a close. Great numbers for those companies reporting, banks and Google. Oil ends up a tad under $98.00 and gold hit new highs. WSJ exec fell on his sword for his boss of 50-years. Little time given in the Journal this past week for News Corps troubles as stock fell $2.00 a share. Morgan Stanley analysts downgraded Google (even as others upgraded the stock) from overweight to equal weight with a $600 price target.

 Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com . Share this blog with someone who care about their money.

Less Stocks – More Annuities –On More Fear

A recent study reported by doomster Robert Powell that said retirees need more annuities and less stocks because of the real danger that markets will keep falling while retirees are taking money out of their accounts. This Powell said was from a report by W. Van Harlow, Ph d., CFA, and director of research at the Putnam Institute.  The danger of a falling equity market while systematically removing cash increases the odds that a retiree will outlive their money, said Van Harlow.

What Van Harlow and a few others (especially in the insurance business) want is the soon to be retired or already retired investor to bail out of securities and buy an annuity that will guarantee a lifetime income. Van Harlow’s beef is with volatility and he feels a retiree’s portfolio is not a place for it.

He goes on to say that retirees should not take out any more than 3%-6% of their savings in order not to run out of money before running out of life. They also should not have more than 25% of their savings in stock or equity mutual funds.

He along with Sri Reddy, senior vice-president and head of institutional income at Prudential Retirement, agree that the investment professional needs to help people arrive at a destination with some level of comfort.

Reddy went on to say that people need a baseline understanding of what they need for retirement. ‘We also need to focus on outcomes,’ said Reddy. ‘Not account values, but how much we need in terms of retirement income.’

That said, I agree that owning annuities have a place in just about all investor plans. But some of the arguments given above do not pass the common sense sniff test. One of the problems that Reddy and Van Harlow neglect is that most income annuity plans only provide 5-6% guaranteed income withdrawal rate while a great many clients need 8% of more to provide a comfortable income from the amount they have saved. These folks have no choice but to take as much as they can out of their savings in order just to live.

There has been and will continue to be from the majority of people a huge deficit in the amount of money they’ve managed to save for retirement. The last decade has not allowed those middle age workers to do what previous generations were able to do – namely accumulate significant sums of money for retirement.

In addition, once invested in an annuity or insurance company it is not so easy to bail/sell/withdraw/move assets to another company as easy as it is to sell a stock, bond or mutual fund. Care most be taken to invest only with the best quality company available. Left to their own resources the majority of investors are poorly equipped to choose a company with a solid balance sheet over another.

Not understanding that some annuity income options leave zero sum to beneficiaries other than spouse.

Investors also have to understand that the guarantee on their money will always be with the insurance company and not with any underlying investments. There is no FDIC on money invested with an annuity. Constant monitoring of an insurance company’s financial health becomes extremely important. If a company fails and another company steps in to service the client’s account the original benefits may not be available.

Some insurance companies sell plans that provide higher benefits to newer clients than they provide existing ones. Those annuity clients who need the higher benefits may have redemption charges that will cost them if they move assets to a more up-to-date policy.

To say an annuity is an easy and efficient method of reducing volatility and without investment risk is a misnomer. Costs, benefits and company financial health all need monitoring just as an investor reviews stock and fund portfolios.

However, for those investors who want to be conservative and put a fence around some assets with a guarantee of safety an annuity is a good choice. This allocation to insured guaranteed dollars may be just the ticket for the retiree (or soon to be retiree) who desires to give up some appreciation for peace of mind and no matter what happens to the economy a guaranteed monthly income. For more information on what plans are available call or write me.

Call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share his blog with someone who cares about their money.

 

That Was The Week That Was – 1st Week July

•     Doing a little dance…get down tonight…Investors expressed joy the final week in June. The markets recovered just as talking heads, investors and analysts couldn’t see if there was an end to the bearish mood. Fears of Recession-2, Greece, high oil, the end of QE2, politicians that didn’t get it, and housing in the dumper, had kept stocks going lower for six consecutive weeks. Investors were rewarded for their patience as the S&P index was up 5.6% for the week.  Check out the following chart illustrating trying to time, or getting in and out of the market, is …. impossible.
• Lesson: We all experience some (or a lot) of anxiety when the markets keep moving lower across all indices. The difference, we learned, between what is a correction and a massive sell-off is that during a selloff no stock is sacred and everyone (Hedge fund, mutual fund and institutional managers) all try to get liquid as quick as they can. Investors trying to time the market and missing just the best 10 market days of the year can reduced total returns from a positive to a dramatic negative. 

Earning season begins this week starting with Alcoa reporting after the bell Monday. Watch for Alcoa to post second quarter earnings of .34 cents a share and revenue of $6.28 billion. In addition, Citi, JPMorgan and Google will also set a tone for investors. Companies have lowered their forecasts compared to last quarter. Materials and energy are expected to post the steepest growth rates. Tech and industrials expected to make the sharpest slowdown. Utilities, consumer staples and telecommunications are expected to show the worst performance.Analysts say they’ve been paying weekly attention to the numbers so there shouldn’t be any surprises. As always, we’ll have to see. And now for last week’s play by play…

• The Future Belongs To America: from a July 2nd Op-Ed in WSJ-Walter Russell Mead wrote, ‘… the United States is better placed to surf this (economic) transformation than any other country. Change is our home field. It is who we are and what we do….’
• According to Bloomberg BusinessWeek-politicians can simply vote to extend the discussions about the debt limit- some think to 2012.
• Barton Biggs, hedge fund manager, once Morgan Stanley CIO, has finally expressed what millions of us have been asking for the last several years – Why hasn’t the government instituted a massive public works program? The UK, with China’s help, and other countries are rebuilding infrastructure while the U.S. Treasury simply spends money and supports low interest rates, a cheap dollar and banks. This would seem to be the perfect time to rebuild with so many roads, bridges and public buildings in disrepair. The President said last week that rebuilding would put some unemployed vets to work…
• Sterne Agee analyst Lynn Collier likes Darden. The restaurant chain which owns Red Lobster had 4th quarter earnings up 19%. Upscale Ruth Chris’s steak house has risen nicely for four quarters. The stock has also gone up from a low of a buck to $6.40 and worth keeping an eye on according to Barron’s.com Jonathan Laing. Ticker RUTH.
• U.S. auto makers report that there is still high pent up demand for their product. The problem is that the supply of small cars remains tight. June sales will be reported Friday this week.
• Citi up but analyst Erik Oja at S&P lowered price to $50 a share from $60 citing industry weakness. C closed up 3.2% and has room to run.
• Oil can average $150 a barrel next spring with spikes to $165-$170. Barron’s sees some short selling this summer but not enormous pressure. They believe there is a great buying opportunity for bulls on petroleum. This is the second leg of the oil bull market as global economic expansion continues. ( Ya’ll know how much I like the oil bidness as a long-term investment.)
• Zynga – the online games developer files for a $1billion IPO. Founded just four years ago the company has more monthly active users on Facebook than the next 15 social games developers combined. And…wait for it…unlike some IPOs actually had a profit in 2010 of $90 million! The IPO is expected for 2012. I’ll keep you informed.
• According to Mark Hulbert at MarketWatch you, me and the candle sticker-maker are richer today than we were in 2007. This from Lipper who reported that 45% of the funds today are ahead of where they were in 2007.
• Emerging markets offer second half investors a richer opportunity. WSJ writer Richard Barley reports that concerns regarding valuations are receding and emerging economies are close to balanced budgets, and debt to GDP should decline. Rising consumer wealth and deepening financial  markets should support asset prices.
• Japan discovers huge trove of rare earth materials under the ocean. Problem is mining it without destroying eco-system.
• S&P the ratings firm put on his ‘good guy’ face and announced the deal cut with Greece was tantamount to having Greece default on its debt. Remember S&P was stamping AAA on just about anything passed under its nose a few short years back. Portugal cut to junk rating on Tuesday. EU shot back that ratings were rigged. Bogus!
• After QE2 where will interest rates go? According to Mark Hulbert’s MarketWatch column of July 5th the real smart people predict rates will go up modestly in the next 30 days and at the end of the year the 10 year Treasury will be at 3% or a slight increase over the current 2.9% yield.
• It ain’t the same emerging market Chinese economy anymore. Businesses moving plants from China and looking for cheaper labor in Vietnam and Indonesia. Others beginning building automation factories to contain labor costs. This due to a stronger Yuan and labor costs doubling over the past two years.
• This Depression has proven, according to the WSJ, the worst recovery since the Great One in 1930. Exports and corporate profits are up but just about everything else is just grinding forward. Consumer debt was 125% of household income before the 2008 meltdown but, and due to many banks forgiving debt, is now 112%.  This is still up from 84% of income in the 1990s. Only 24% of households, according to the U of M study, expect to find themselves in better shape a year from now. This is the lowest this measure has been since right after World War ll.
• Pssst….The Weekday Trader at Barrons.com recommends Callaway Golf (ELY). Trading a shade above $6.00 the stock has a book value of $8.00. With new management coming on board to slash costs shares have an outperform rating by Robert W. Baird and Company of $9.00 a share.
• Who would be dumb enough to buy real estate in this market? Me would. I especially like those that invest in shopping centers.  Regional malls have been the best performing REIT sector according to WSJ. The sector continues to benefit from stronger retail sales and expansion by national discounters.
• Retail sales brightening for June after showing some weakness in May.
• Ford the best American Car Manufacturer? According to Jimmy (The Mouth) Cramer- who oozes love for Ford as doing all the right things. The new Ford five year plan focusing on selling 50% more cars, already up 11% in China, and reducing debt will all contribute to making more money per car going forward. Cramer gives F a strong buy from The Street on July 5th. Morningstar reports autos will eventually cycle higher.
• GM trucks starting to pile up with 122 days of inventory and one analyst Peter Nesvold told Bloomberg, ‘It’s unbelievable we’re right back to where we were.’
• Morgan Stanley analyst Adam Jonas picks GM over Ford. Reasons he gives is that Ford has underperformed and reason he gives for liking GM is that it has underperformed. (You reading it right- same reason- different results.) Wednesday GM up and Ford closed down.
• Watch Fed-Ex! Don Hays of Hays Advisory says watch transports, especially Fed Ex if it breaks above $98.50. (If it hits that number Hays thinks the party is on) The transport index is the economically sensitive index that measures what the stock market thinks about those industries that carry the goods the consumers order. Fed Ex is the canary in the coalmine. FDX closed at $95.50 on Tuesday.
• Bond Investors are getting closer to the point of fish or cut bait as interest rate hikes get closer. A 1% hike in rates can mean a loss of over 9% of principal. Bond managers are in the midst of creating new bond portfolios that be more long/short and employ hedging strategies that can profit when bond prices fall. All sorts of problems come to mind including risk and not knowing what is being bought or owned by the managers. These hedge like funds have little history before being tested on a new generation of Bond Loving investors.
• Buy Citi with CONVICTION shouts Bank of America analyst Guy Moszkowski- ‘cause its going to $53. Shares of Citi fell.
• Retail numbers starting to perk up and lots of movement in retail stores. Good news for MasterCard and Visa.
• New 401k rule that states employers must automatically enroll employees into retirement plan unless they opt out has startling result. Contributions fell as less money invested for retirement. Employers contribute 3% when average employee contribution- if left to their own devices- of 5%-10% they typically would invest. Automatic enrollment is leaving billions of dollars from being invested.

• Alphonse Fletcher, Jr., a NY Hedge Fund manager, who in the 1990s reported 300% a year returns for his firm and later said his flagship fund went 11 years without a single losing month has made promises to three Louisiana pension boards. With $100 million at stake from the three public pensions Fletcher promised 12% returns. Last month when two of the pensions boards asked for some of their money Fletcher didn’t send the cash but instead sent them a promissory note that said, in part, ‘in satisfaction of this redemption request’ that pledged payment in two years! Fletcher’s hedge funds are stated to have assets totaling over $500 million but some assets Fletcher counted at least twice and the actual number is closer to $200 million. The third pension board has since requested liquidation. I’ve seen the cable show Swamp People and if I were Alphonse ‘Buddy’ Fletcher I’d be overnighting a cashier’s check tout suite. 
• A better jobs and retail report made things hop Thursday as markets responded across the board. Oil moved up to closed just shy of $99.00 a barrel on expectation of recovery. CNBC reported NASDAQ at highest level in 10-years.closing at 2873. Gold was up $2.00. But, when revised employment numbers were posted Friday the markets fell, gold was up and oil traded down. Analysts on CNBC were shocked by the news and one said that only better than expected earnings could help offset the pain.
• Prediction that PIIGS will all go bankrupt in   eighteen months. According to Dennis Gartman he concedes that problems will probably be contained in the short term- in the long term he doesn’t see the situation playing out terribly well at all, according to Fast Money Recap. Jon Najarian see big money placing big bets AGAINST the Euro. The short ETF is EUO. PIIGS are Portugal, Ireland, Italy, Greece and Spain.
• Who is the one, if not our bestest, global trading partner, speaks and looks a lot like us and we haven’t had a bad word with in….well..like almost forever? It’s Canada! And right next door our Canadian, almost American, friends are pulling 1.5 million barrels a day of oil out of the ground and we’re turning our nose up buying more ‘cause the way its produced is causing lots of carbon dioxide. CO2 is the cause of global warming, or so say environmentalists. Folks in Edmonton, Alberta are becoming the next oil superstar and we’re all fussy-wussy how its mined from the oil sands with them having the third largest proven concentration of crude oil reserves in the world. (Ya’ll want to read that again?). And we don’t want too much of that yucky oil cause the way its manufactured is polluting the atmosphere. Washington has ignored the building of a pipeline that could double exports from Alberta to the U.S. Seems we’d rather do bidness with governments that use our money to bomb our buildings and kill our citizens.  Did I mention that Alberta plans doubling production over the next 10-years? I think I need a nappy.
• Billionaire John Paulson’s Hedge Fund lost 11% in June as all strategies slumped. I know the feeling, John, about strategies and allocations failing but no one I know lost 11%!
• Financial Advisor Magazine reported that Mass Marketing Investment Advisor Ken Fisher was ordered to pay $375,000 on retirees losses. Fisher’s firm, according to the complaint, did what it does with all its clients and invested her, just like everyone else, into a global strategies equity fund after selling her bond portfolio.  According to the attorney representing the retiree Sharyn Silverstein, who was invested with Fisher for one year from….(drum roll) September, 2007 to September, 2008, both Sharyn and her husband were high pressured to turn their account over to Fisher.  She would’ve lost money even if she stayed in bonds….! 
• Friday’s stunning lack of employment confirmation  blasted the markets into the basement in the first few hours of trading but they closed off their lows. FedEx didn’t collapse and interestingly IBM finished up a penny! That said everything. It ain’t over. For the week we were up. David Blanchflower, a professor at Dartmouth, said the government will launch QE3 by this fall. Employment numbers, as CBS reported, were falling long before the recession and NAFTA may have had something to do with it. Gold closed up $14 and oil was down to close @ $96.48.
• Finally- Investment Newsletter publisher’s the Aden sisters, notoriously bearish, write in The Aden Forecast, ‘We see this prolonged, lumpy recovery as a chance to continue to buy shares we like at cheaper prices.’

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.