That Was The Week That Was- 1st Week September

                             No Confidence by business with the Administration kept employment numbers at net zero.

Corporations did not hire in August and CNBC reports that a lack of confidence in the Administration is and was a compelling reason. Markets fell Friday before the Labor Day Holiday long weekend.

Before I get to the news of the week…share the wisdom of Citi’s Tobias Levkovich, ‘Valuation has turned positive as has sentiment (in terms of being in panic territory on our model) and most recently earnings expectations have been coming down to levels that are normally indicative of a market bottom….Thus, the outlook for an equity market rally into year-end is firming up in our minds as we are getting more bullish.’

More Bad News as the week of September 12th starts. Europe woes point to some sort of an orderly Greek default. Charles Aitken, managing director of Bell Potter in Sydney said, ‘It now appears that this situation in Europe is not going to end well and the now plummeting euro is trying to tell you that some sort of Greek default and subsequent European bank recapitalization program is imminent.” This after Friday’s European comments that any default was simply rubbish (see the bottom of my blog). German Economy Minister also said Europe could not rule out an orderly default for Greece as it struggles with its debt. The United States, we may as well add, cannot come to the aide of foreign nations as it is well distracted with its own set of economic problems.

Expect continued volatility in our domestic markets as both Asia and Europe down Monday morning on the Greek debt problems. U.S. corporations, according to this morning’s WSJ, will have their earnings weakened as 50% of business is from Europe.

And…now the market recap…remember this is news from the first of September…

The Twist may be a dance from the 60s but it’s also another tool for the Fed to lower rates by extending bonds to 4o years and buying the short-term paper. Expect this to happen sometime before November but announced this month. It’s a modified QE3. *Remember FDR created the first 30 year mortgage back during the Depression 1. Markets moved on the news but don’t expect it to generate much long-term enthusiasm.

AUTOS  continue being treated as step-sisters as GM, Chrysler, Nissan posted huge August sales over one year ago with Ford up 11% and the stock of GM and Ford fell in mid-day trading Friday, September 1st. Chrysler sales were up 31% – but I guess it doesn’t matter when computer modeled traders run the markets instead of fundamental money managers.  GM sales were up 18% and showed consumers have not gone away but instead are buying prudently.

Stocks that historically avoid the September slump: Nike,Flir Systems,BlackRock, NYSE Euronext, NetFlix, Google, Red Hat, Wynn Resorts. Salesforce.com CME Group and OME Group.  In September stocks, according to The Street, usually fall over 1% on average since 1896. The trick is to cull through the list and buy only those company stocks that have follow-through for the rest of 2011.

Sin sells!?

Some money managers advocate that during tough times investors buy shares in companies that manufacture, sell or provide such products as tobacco, liquor and gambling. These sin stocks are supposedly immune from depressions and recessions. Seeking Alpha blogger  Nick Pardini also adds gun stocks to the mix, saying they do well in bad times as people get more desperate. The sin stocks that Pardini likes include Diageo, Phillip Morris, Altria, Ambev and Boston Brewing. Gambling stocks that have a strong presence in Macau include Wynn, Las Vegas Sands, MGM  and Melco Crown. Macau does five times the action of Las Vegas.

 

FYI  STOCK AND BOND PERFORMANCE REPORT

 September started on a down note. 

 

 Factories throughout the world are slowing down, according to Tuesday’s WSJ. Manufacturing downturn made the first day of September a triple digit loser. Defense business has dropped 50% as military contractors see a pullback in federal spending.

Oil prices will be higher, Charles Maxwell of Weeden & Company. As the world slowly recovers and oil prices will increase as the world nears it full working capacity. Maxwell is and has been a senior energy analyst at Weeden since 1997.

Master Limited Partnerships are products that trade like stocks but have attributes of partnerships that distribute 90% of their dividends to shareholders along with substantial tax benefits. In the Barrons.com Weekday Trader Dimitra Defotis introduces us to Penn Virginia (PVR)  a Master Limited Partnership that has a current yield of 7.6% and is invested in America’s coal industry. This is an American MLP and not Canadian. Money manager at Neuberger Berman Doug Rachlin finds this a compelling story because of the company position in the much talked about gas-rich underground in Pennsylvania rock Marcellus Shale. The company projects 20% growth which is money in the bank to shareholders as most of this is returned to them.

Dow 13600 by February 2012 - Veteran stock analyst told Mark Hulbert at MartketWatch that the Dow will be at 13,600 by next February. Sam Eisenstadt has spent 63 years at Value Line Investment Survey. His projections have been, ‘statistically quite significant,’ writes Hulbert.

and…Advisor One blogger Ben Warwick at Aspen Partners reports that he expects markets to muddle through the 4th quarter and end with single digit gain. The reason is that P/Es are low and bank stocks are cheap. Lack of competition from bonds is another driver for Warwick.

The U.S. sues 17 banks for lying to investors about the quality of the mortgage paper they were passing around which was instrumental in the global collapse. The big losers will be shareholders and borrowers. Money used to bail out the banks will now be renegotiated to be returned to the government, profits will be slashed and fees raised to pay for what we gave them in the first place. ( If it wasn’t so sad it would make for a great farce. You just can’t make this stuff up!)

WHICH WAY FOR 2011? Ask the experts from the previous Saturday’s Barrons.com: Positive views from most.

if it was easy everyone would be doing it….

Pssst…3 oversold stocks reported by Ryan Fuhrmann at StreetAuthority Investor last Saturday. Ryan likes General Motors, Met Life and Petrobras (The Brazilian oil and gas giant). Morningstar gives five stars to GM and four to the others. He also warns that if conditions weaken in September all three could get cheaper so do your homework.

Dividends are the result of profits earned by a company and portion of those profits shared with stockholders. In 2011 nearly half the companies in the S&P 500 have increased or initiated a dividend payment. Cash coming back to shareholders in the form of dividends is estimated to increase by 18% in 2011 and continue to go higher in 2012,  according to Matt Andrejczak at MarketWatch.

 Warren Buffett is viewed as the ultimate investment manager. His Berkshire Hathaway stock is named after his biggest failure and a constant personal reminder. Recently The Buffett invested $5 billion into Bank of America, he says he thought of the trade while taking a bath. But Buffett is not immune to the down markets and his recent history is average at best. His flagship Berkshire A shares fell 32% in 2008, was up 3% in 2009, had a great year in 2010 21 1/2% and down  8.87% so far in 2011. In order to get the storied total return bragged upon by analysts & Buffett admirers an investor has had to buy and stick with the Buffett from the beginning somewhere in the mid-1960s.

Gold is an investment during times of inflation. We’ve seen the run-up in 2011 as it is being used as a currency hedge. How far will it fall when the dollar strengthen or the markets stabilize?

Buy Tech!   According to Hilary Kramer at GameChanging Stocks, she recommends that investors own Amazon, Google and Apple; those three for September 2011 and beyond.

Sprint remains in the wireless race, according to WSJ on Heard on The Street. With the iPhone coming on line Sprint’s margins will be tested through 2012 but the good news is that it will eliminate running two separate wireless networks requiring twice as many towers as Verizon and AT&T. This savings, according to Credit Suisse analyst Jonathan Chaplin should lift Sprint’s profit margins by 10% over the next few years. Morningstar gives Sprint 5 stars and a $7.50 target. Shares are trading under $4.00.

Blue Chip? In the book ‘Panic’ Michael Lewis compiles articles from various authors explaining how people reacted to market meltdowns. In 1987 one writer suggested that investors simply buy the bluest of the blue chip stocks, notably General Motors, Eastman Kodak and IBM. Following that advice an investor would have eventually lost 100% of their money in GM, over 90% loss in Eastman Kodak and earned just an average of 1.44% per year plus dividends by owning IBM. Today buy and hold just doesn’t work.

5 Concerns for September?

‘It’s always something.’

Ouch! The first day back from the Holiday stocks sank again on concerns over Europe as gold really popped to new highs, 10-year Treasuries fell below 2% and the Swiss central bank put the kibosh on the their franc, setting a minimum of 1.20 Swiss francs to the euro, the safe haven currency plunged by more than 9% against the euro and dollar, according to the WSJ. The Dow finally ended the session down 100 but other indices were up in mixed trading.

So far it looks like 1 Term but no one across the aisle fit to do the job. You, too? The speech the Prez gave Thursday ( and Yes, I did listen to him) didn’t remind me of The Gipper but it was the first time I heard some kind of a plan and seeing him use the office to urge a Do-Nothing Congress to do something!

Markets up Wednesday: Fear Tuesday- Ride the Optimism roller coaster Wednesday. Thursday The Ben Bernanke spoke and markets fell over 100 points.

Facebook the social network phenom doubled revenue in the first half of 2011 from $800 million to $1.6 billion. Social gaming, advertising and the sale of virtual goods accounted for the increase. The company is planning an IPO ( Initial Public Offering) in 2o12. Investors are awaiting in anticipation the public issue of shares. The company will begin to share information, they say, in April. Without a doubt probably the Most desired public offering in a very long time.

Google buys Zagat to continue to find new avenues to advertising growth. Without a doubt Google, Apple, Facebook and Amazon will continue to innovate and change the way the world does business. Investors fearful of tech just haven’t looked at it lately. It ain’t the same old day-trading tech of yesterday.

 Shopping for Stocks in September? Seems everyone has an opinion. If you plan to buy stocks in September Hilary Kramer, at GameChanger, suggests beaten down stocks that have sold off sharply but still have potential fire power. Names given by Hil include Goldman Sachs-GS and Cummins –CMI (the engine maker). She expects or suggests investors to rotate out of gold and bonds and also to avoid defense stocks such as Lockheed Martin, Northrup Grumman and General Dynamics. The worry for them is fear of deep government cuts even as the above three continue to thrive.

Mo’ stocks, mo’ stocks… Jeff Reeves, editor at InvestorPlace.com  in his August 31st blog suggests that the following are huge firms that can withstand troubled times… He likes AT&T, Cisco, McDonalds, Wal-Mart and Pepsi.

Friday I spoke with the Inside Fidelity Advisor rep and he mentioned that the S&P was in a narrow trading range between 1120 and 1220 and in order for it to break out it would need (1) jobs (2) more consumer spending (3 Europe to get its act together (my language not his). He also said advisors at the firm believe S&P 1400 by next March.

 Stocks fell Friday….  on renewed Greek default fears. But in Europe leaders there, according to Barrons.com on September 9th, called such speculation rubbish. On that news the Dow fell 2.65%. Go figure.

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