That Was The Week That Was – 4th Week September

Worried investors saw concerns about Greek debt and U.S. government slowdown evaporate on Monday last but Gold prices sank to new lows as  precious metal selling continued by institutional investors to get liquid.

Driving to an appointment in Southfield early Monday morning the folks at Franklin Templeton called and made sure I, and my clients, understood that this was not another 2008 but a selling to liquidity with the dollar and yen being the safe havens. Markets up 273 points on the Dow and across all indices Monday.

Euro banks  stuck with Greek, Spanish and Portuguese debt, are trying to find buyers for the paper that has been drastically discounted. Germany, which has a pledge with its citizens, when it joined the EU, not to give, or loan, money to poorer neighbors, has given money to the Euro Zone which has given money to Irish banks which has used the loans to repay the Germans for their bad bets. You’d think someone would cut out the middle-man?

Gold $1100 according to Marc Faber- maybe. John Woods, chief investment officer at Citi, said Gold $1400- maybe. ‘It was massively overbought in the last few weeks and now it will get over-sold,’ Woods said. 'HSBC polished their crystal ball and predicted gold would likely be $2025 in 2012. Tuesday ayem last Gold was trading at $1630. And, finally, according to Michael Kahn, chartist for Barrons.com., he calls the recent fall of metals a mere correction. He wraps up his analysis by writing, ‘ Precious metals are in better shape than their respective mining shares. And gold is in better shape than silver. For the long-run, the technical reasons for higher gold prices in the coming months are good.’

Free Trade good for the world and for the U.S. economy? We were told it was better for our economy that someone else made our tidy-whities  while we concentrated on Big Manufacturing; but, that too was take overseas. The results being passed around economist’s breakfast tables last week are that ‘calculated gains from trade with China were completely wiped out by the losses from the increased use of government benefits.’  Higher exposure to Chinese imports, the reports state, have led to larger increases in unemployment insurance, food stamps, disability payments and other government benefits. M.I.T. conducted the study in coordination with economists at University of California and The Center for Monetary and Financial Studies in Madrid. And who can forget Senators praising their Southern Auto Manufacturers and stating GM should be allowed to go the way of the horse and buggy.

Rick Pendergraft @ Cabot Options Trader is Bullish! The Rickster gives multiple reasons for his attitude including that the day after the S&P downgraded U.S. credit the S&P index fell to 1120 and then tested again and again and again on August 10th, 19th and 22nd and closed above that level each time. #2 –Using the Robert Shiller inflation adjusted P/E ratio he sees a reading of 20.44 (puleeze, don't ask me how that's calculated!), and that number is a good indicator of a buying signal. Finally- sentiment and whenever bearish sentiment exceeds bullish that’ s a bullish sign. And, for good measure whenever bullish exceeds bearish by 3 times its time to sell.

Markets popped on Greek promises of austerity and  sticking to budget goals!   But, blue chips faded faded faster than a politician giving his word. Over 300 points on the Dow ended at 145 points.  But don’t kid yourself Greece default is as crystal clear as anything I’ve seen. Matthew Lynn writes that unlike when Lehman Brothers went belly-up there were governments and institutions Johnny-on-the-spot. European leaders have no clue as to what to do once Greece floats to the surface. While a Greek default will be ugly, and hang on to the side-bars, it will not be the end of Western Civilization. Almost every asset will be hit with the possible exception of the dollar and yen as the flight to safety will begin. These are times when traders and investors run to the exits if they think there is a 20% chance of losing money- what do you think they’ll do when the default arrives?

Turbulence Not Over –A few good days doesn’t mean thinks will be swell heading to Fall.   Barrons.com writes that the downside may test S&P level of 1008.

Amazing if you look at what happened to IBM or as us oldsters refer affectionately to Big Blue. The stock cratered in the maelstrom from about $171 to $159 and then popped back to close Tuesday afterhours at $178.71. The stock’s high in 2011 was $185.

Employers’ Health Insurance Premiums Up 9%. The cost increased from $13,770 in 2010 to $15,073 this year (Is this Crazy?). Costs may be reflecting an aging America.

Bye-bye to your favorite Allstate insurance rep? Maybe? The company is thinning its ranks and getting rid of lower performers. A 20% cut in commissions to best performers with instructions to bundle more sales of products to customer is the marching orders noted in Wednesday’s WSJ. Allstate is pushing for higher performance per agent with less pay. Watch as more Allstate reps leave for other companies or independent status. Whenever the bean-counters take-over a sales organization it’s usually a kiss of death. No one gets motivated by subtraction.

Jim Rogers-billionaire and hedge fund star- said on CNBC Tuesday last the United States has more problems than Europe. A student of George ( I hate America) Soros, Jim said that Europe has a few bankrupt states but so does the United States. He also doesn’t like our debt, saying that we have more than Europe and we have a huge balance of trade deficit that the Europeans do not have. This is hedge fund investor Jim Rogers not to be confused with 72 year old singer and face-lifted Kenny Rogers Before and after pics..

Bob Johnson – black, billionaire, Democrat said on CBS news that getting the country back on track will need politicians to sacrifice their thinking of a lifetime in Washington to one term and doing what needs to be done and not just hanging in to get a paycheck. He went on to say that businesses are not going to do anything until after the 2012 election. There’s over 2 trillion dollars sitting in corporate coffers and no hiring or spending will be done until the government does what it has to do.  Get used to this until this Administration either gets it or gets out! Johnson was extremely critical of the President!

Looking to short a stock- you probably have a better chance of finding one that goes down in value than one that’ll make you a bundle. Here’s 5 potential shorts from Seeking Alpha blogger Hedgephone:Harbin Electric; Universal Display; Linkedin; Westport Innovations; and the casino stock Wynn.

 

The Rich Are Different but Not Immune to Market Downturns. A view that’s incredible and developers of the Hawaiian resort Kukui’ula’s just broke ground in 2008 when a few months later Lehman Brothers went under. Today only a few people live or own property there and those that bought early and had to sell were lucky to get out with half their money.   

Many still believe that the bottom in resort property is still not there. This Hawaiian resort is building $1 and $2 million dollar cottages and charging $1,000 a month fees. The management contends they will not sell at fire sale prices even though they believe they are 2-3 years, and maybe more, from getting fair value.

Schmart Trade? If you’re going to listen to anyone in the investment biz Wilbur Ross is an extraordinary bright investor and you could do a lot worse. On Wednesday he talked to the WSJ and he can best be described as not too pessimistic, not too optimistic and far from being just right. In fact Wilbur thinks stocks have reached their low IF, and a laundry list includes: Depends on European officials ringing Greek debt and doing it with plenty of money, reducing the chance of contagion. Making sure none of the Big European banks go bust. And re-jigger the EU formula so there is some sort of central bank. For the U.S. he thinks the best trade is shorting the Treasury- but- that’s a long term trade and not now. For now he doesn’t think inflation is a big risk, in fact just the opposite. He doesn’t have faith in the Administration and cutting the necessary amount of debt. But, in August Mr.. Ross said he believed that Ireland would once again be the Celtic Tiger, and his firm invested in the Bank of Ireland.

Treasury ETF shorts: For the average investor the plain vanilla Pro-Shares 20+ Year Treasury TBF is the one to own. If you’re a gunslinger the ProShares UltraShort Barclays 20+ Year Treasury seeks to deliver 200% leverage on the same index as above. The symbol is TBT. Remember The Ben Bernanke is trying to reduce yields by buying longer term Treasuries. This is not the time to fight The Fed.

Bad Bank, bad bank. Real Estate developer Stephen Ross, no relation to Wilbur Ross, decided in 2010 to invest in the banking industry. He raised $1.1 billion and after studying the issue decided that the industry was too sick to invest in and it could be three more years before investing was practical. He returned the raised investment back to the investors.

Ze Down & Ze Up… Get used to it…! Whenever markets move on emotion and not fundamentals the roller-coaster ride is treacherous. Wednesday markets off almost 2o0 points and Thursday some relatively benign good European news whipped the markets up by lunchtime by almost the same number. Then it fell and all indices were down and someone decided to buy and the Dow ended up in a mixed day. Gold was off, oil was up and Treasuries sold at their lowest in ages.

BRIC in the world of investment parley vu’ means Brazil, Russia, India and China; and Thursday investors started not to like them very much. True there has been weakness; a persistent nagging like a tickle in the back of the throat has now flowered into a full fledged cough and folks now wonder if it’s the flu or just seasonal allergies. And from the world of Fed Up they may as well be thrown into the simmering pot of Don’t Know Stew and allowed to cook down along with everything else that’s been tossed in this year.

Hard Landing for China- hits shares of high end retailers, according to the Emerging Markets Report and writer V. Phani Kumar. William Gamble, president of Emerging Markets Strategies, said he believes China was heading for a hard landing but unlikely to collapse. Others disagreed. A ‘hard landing’ said skeptics is when growth is completely decimated and that is unlikely.

Rare Earth, those metals and minerals used in everything from autos to cell phones have been falling faster than  the President’s popularity.  Car companies have been looking for alternatives ever since China has been buying everything associated with rare earth. Shares in Molycorp, a rare earth miner, has fallen from a high of $79 to $34 while Rare Earth Resources has tumbled from $18. to $5.58.  According to Molycorp CEO Mark Smith the trend remains short supply and heavy demand.

Earning Season Starts officially with Alcoa on October 11th. Whispers are that companies will be cooling their profit projections due to our weak economy and the mess overseas. Lets see hands from anyone who disagrees…anyone? Corporate earnings are excepted to have risen in the third quarter and to keep rising in 2011. The disagreement is how fast they will climb- if at all in 2012.

Finally – pssssst looking for some Action? James Altucher has a few ideas including Amazon with its new Tablet- a game changer, he calls it. Plus he looooves MicroSoft while nobody does. The reason is because no one is going to challenge MicroSoft on what it does best- ever & it owns Skype and eventually everyone will be using Skype to communicate. And, he writes, at 8xs earning and 50 some billion dollars in cash the price is cheap. Next ExxonMobil –a company with 36% year over year revenue growth and a P/E of eight. Nuff said?

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