That Was The Week That Was-End of August

It’s that time of year to hope for a market rebound and at MarketWatch writer Jeff Reeves has a few words  about investing as we work our way through the rest of 2011: Investors should understand that- (1) There is No Expert that can tell which way the markets are going to move. (2) Both Good Times and Bad are fleeting. (3) Success is a personal thing. If you’re deal is to preserve principal don’t cry when markets soar. (4) Pay attention all the time. Don’t ignore and think all is well. It’s your money! (5) Understand there is a time when to take a little something off the table.

Dunkin Donuts was a successful IPO but Andrew Bary at Barrons.com thinks there are better and cheaper buys in the restaurant biz. He likes Starbucks, McDonalds and Tim Horton's over Dunkin Brands. On the flip side Bulls believe that Dunkin will grow from its eastern base and expand services, which now remain breakfast oriented.

Wal-Mart scores with Vudu! When the company released numbers Hollywood partners called and asked if the company made a mistake. Vudu charges two rates one to rent and one to buy the downloaded movie, different than NetFlix.

Five Triggers to Ignite the Next Bull Market

MarketWatch Dorothy Zhang reported before the Holiday the reason for the summer swoon was that investors were repricing equities to reflect earnings growth expectations. And, before we get our hopes up, remember that stocks don’t fare that well in September. Here is what we need for another step up: (1) U.S. deals with its debt (2) Europe resolves its debt problem (3) Retail sales strengthen (4)  Gold and the Swiss franc weaken (5) Bank stocks strengthen.

Mutual Funds have been lagging their benchmarks by a significant amount in 2011. The numbers given on Strategy Sessions on CNBC Monday were astonishing: 47%  of all funds lagged their benchmark by 250 basis points year-to-date and 25% lagged by 500 basis points. Either funds have been playing it safe or their investment acumen is in serious need of new blood. Perhaps once the A team of fund managers is back from vacation we may see the markets start to perk up as bonus time is right around the corner.  ( It may also spur higher markets.)

Markets! Popped Monday! On news that folks were spending – a 0.8% gain- the strongest since February. The problem, my dear friend, that the market will eventually factor in is that this was accomplished at the expense of savings and not from income alone. Core inflation also inched higher to 2%. Wiser and cooler heads cautioned that there could be a relapse if gains in payrolls and vehicle sales are not seen in the next two weeks.

Autos stagnate and it could be as UAW membership is itching to get lost bennies. Leadership seems to understand the fragility of manufacturing but a cadre of members doesn’t get it and want more. Bob King, current UAW president, said in a speech at the Detroit Economic Club, that members would go along with a new contract even if it meant no new wage increases. But, some old members want restoration of benefits lost, arguing that management has done well and time to start sharing. Auto shares could remain depressed until this is sorted out.

The Biggest & Brightest Guessed Wrong He gets paid millions for guessing which way fixed income is heading. Early this year Bill Gross, head of PIMCO, sold his stake in U.S. Treasuries and was wrong! So wrong that BlackRock (the world’s biggest money manager) had the other side and said  there was more to the U.S. Treasury market and they were the big winner. Gross has been adding Treasuries to the Total Return - the Flagship Fund of PIMCO since his flub and is now net positive but still underweight for the first time in months with U.S. Treasuries. Gross then goes on about Europe and U.S. are both in a recession.

When I get e-mails pushing Gold sales training

courses I know the party is just about over.

 Tuesday markets had a slight gain across the board except for oil.

Home Builders up. KB Home crushed in the last down cycle. Morningstar reports it will not reach break-even until sometime until next year- gives the stock 5 stars. Fair value of $16.00. Shares are under $7.00.

Dryships- once a $125 – a share darling of the trading set now fallen to under $3.00 as the company missed expectations. Hot Research in June 2011 from Barrons raved about the stock and said the company was ready to capitalize on the Ultra Deep Water business. This stock cannot be leveraged and probably not on the radar of hedge or fund managers until it reaches a better price.

‘Who loves ya, baby?’ Ford and GM may double by next year, according to blogger at Seeking Alpha Brian Nichols. Both companies have strong earnings and are prepared to out-produce 2010. Both companies are trading near their 2011 lows.

Angie’s List just filed for IPO (initial public offering)-according to Heard on The Street – shares will be pricey but The Street suggests investors keep an eye on. Personally I used the service once for plumbing and the referred drove up in a beater, dressed in scuds and appeared to be a refugee from a chain gang.

When BP exited the Russian market Exxon slid into the vacant seat. A big concern is the Russian mobster method of doing business of which Exxon has had a taste of recently as did BP. The Russians are in need of partners and want to change their methods. The deal initially wouldn’t add much to Exxon’s bottom line but in the long-term there is a prize of 108 billion barrels of oil which makes the gamble with the Russians once more appealing. It is also in a part of the world where Westerners are finding it difficult to gain a toe-hold.

Vermonters learned from others  –

Get the job done first and then request aide. Unlike Louisiana politicians that sat on their hands waiting for the government to help after the BP spill – Vermonters moved the river, patched roads and in true New England ethic started repairs as soon as the waters receded before asking permission. The reason is that they only have 10-12 weeks before winter and if repairs are not done some people may be stranded.

Factory orders jumped 2.4% in July- this was a huge surprise and contributed to the markets posting a late rally Thursday.

U.S. Department of Justice is stepping in to block the AT&T merger with T-Mobile. Those who feel the deal is dead include Morningstar and Craig Moffett at Sanford Bernstein, saying it was a shock to execs at T-Mobile and AT&T. Still others feel that the deal isn’t dead and as the WSJ reported Friday it depends on what judge AT&T draws to hear its appeal. The supposed winner is SPRINT (S) shares up 6% on the news. Morningstar cautions that this bodes well for S as long as it doesn’t do something stupid like chase T-Mobile for a partner. For AT&T this is bad news as they now need to spend more on capital investments.

August ends… thankfully and finally…

Dow down 4.4% but it could have been worse if not for a sterling 7.4% run in the past 8 trading days. Gold popped 12% enjoying its best month and Treasuries were still the place to be- the 10-year was yielding 2.216% late August 31st.

September –a cruel month, generally for stocks (except for last 2 years, ‘member?’) can be another bad month for stocks and make August appear as a walk in the park. This from Michael Kahn at Barrons.com Getting Technical.  He sees that in the charts but as one experienced trader once said, ‘There are a lot of ships on the bottom of the ocean with good charts.’

Have a safe and fun filled Labor Day.

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