That Was The Week That Was – 4th Week November

 

News Monday that Euro-zone leaders are negotiating a groundbreaking pact, according to the WSJ, to further cement the currency bloc from fracturing. The deal, which would involve some arm twisting ( but more for show than go), would also allow the European Central Bank (ECB)  to intervene more aggressively. It is expected that something will be announced by the first week in December. The shortened trading week was all about problems in Europe and how the bi-partisan Super Committee failed to reach any compromise on tackling our deficit. And now for the week as it unfolded…

Today’s Value Investing Lesson: Warren Buffett and Benjamin Graham are two of the world’s best value investors. Value investing is nothing more than buying a stock on the cheap and, if possible, one that is trading at a price that is less than the liquidation value of the underlying company. Historically value investing produces greater total returns than investing for growth. So what stock or industry, I wondered, could I buy that is trading at or less than its book value? It doesn’t take a Warren Buffett or Peter Lynch to zero in on the  beaten up sector of financials-especially banks. Our friends at 247WallStreet.com ran a screen on bank stocks that showed Bank of America in July 2011 had a book value of $12.65 and last week the stock was selling for less than $5.50! Wow! It seems to be a screaming buy. But, and here’s the big but…the book value of BAC has been slowing dripping downward since the beginning of the year. It was worth more in book value in January than it is in November. While no one can say that someone is messing with numbers the fact is that Bank of America is not making money, has a huge losing portfolio of mortgages and has issues on where to make money going forward. This tells us that book value may continue to soften.  How can that be? More loans than expected can sour. Opportunities to make money may go south (much like the debit card fees of a few months back) or regulations could tighten further. In addition investors are unsure how much Euro debt the bank is exposed to. What all this tells us is that stock prices in some banks may stay depressed or even go lower for the extended future while the book value continues to deteriorate. And unless we want our money locked up, possibly doing nothing for a very long time, we should look elsewhere for other value plays. And, that’s the reason why some value- like stocks are being ignored in this crazy market. A few hedge fund managers have caste aside the value crowd concerns and leaped into financials. Greenblatt, Pabrai and Watsa are three that bought and own huge amounts of the banking industry and I’ll have more later in the blog. John Paulson’s hedge fund is down 50% this year because of his huge bets on banks and financials.

Black Friday Sales Strongest Since 2007! Never underestimate the American shopper. Give them sales and they will come. Sales were up 6.6% from a year ago and on-line sales grew 24.3%. This may be the year when pre-holiday promotion slowly fizzles as less product is available the closer we get to the actual holiday. Grab the deals while you can!

Election Year Investing: Here’s the deal- if you’re the President and want to get re-elected you need to make people happy- especially investor people, and do it as close to the election as possible. Marshall Nickles, EdD of Pepperdine University did a study that showed past President’s stock market results were actually the lowest 1.87 years into their term. This coincided with mid-term and not presidential elections. The stock market did rather well, for the most part, in presidential election years. The author of the study concluded that investors would be best served if they invested about 27 months into a President’s administration and sell directly after. Wars, recessions and bear markets tend to start or occur in the first half of the term and bull markets, in the latter. Since 1928 the S&P 500 index was down only three times in Presidential election years.

Super- dud-Committee – Billed as the go-to-folks failed!

The markets sensed this from the get-go Monday last and fell 300 points, or so, before climbing back and ending the day at a loss of 250 points on the Dow. Gold wasn’t the fav du jour as investors ran to cash, especially the dollar. Gold ended up at the lowest in 4 weeks at $1678.60! ( didn’t i write about this earlier in the Fall?) The weakest of the Blue Chips were Disney, HP and Bank of America. Volume, which is the key- sometimes- was pathetic. At the half way mark of the trading day only a quarter of the shares traded in an average day saw action which is telling in its own way. 

 Above the folks that couldn’t (wouldn’t) get er done!

Michael Kahn – Technical Analyst at Barrons.com writes that the market’s big drop Monday can be blamed directly on the folks above who failed to do their job. (I just got to say that if they were hired to play ball, engineer cars or sweep out classrooms, and did the same kind of work they’ve shown handling the nation’s welfare, they’d have been out of work in a heartbeat!) Kahn write that technically stocks are heading over the edge, probably to revisit last summer’s numbers. The technical's, he writes, are not impressive. He caveats that indeed volume was thin and the European problem still holds sway on a day to day basis.

The now defunct MF Global is not missing $600 million of investor money. It is estimated that it is missing $1.2 billion of investor money.The trustee reports much of the moola is stashed overseas and he has to review some 38,000 customer accounts. 

And the good news is or was…. Irwin Kellner at MarketWatch reported that the economic outlook may indeed be brightening. Earlier in the summer consumer spending was off. It is the engine of our economy and accounts for about 70% of our nation’s get up and go. That cutback in spending has caused commodity prices to fall, retailers to reduce prices on products and services without hurting profits, and bring the ye ole consumer back. In other words, Monsieur Kellner now sees the glass half-full rather than half-empty and the only thing that could put the kibosh on the growing  domestic recovery – OMG! -failure of the Super Committee.

The Cramer on NBC’s Today show said the market drop Monday wasn’t about the super committee’s failure but about Europe. ‘Europe’s problems are five times that of the United States,’ said he. He also said he wouldn’t be putting new money to work at these levels…at least for now. So what’s the mouth going to talk about at 6PM & 11PM?

From The Department of ‘Someone’s Got To Be The Grown Up’ – In Europe and in the United States self-preservation among politicians has to take hold and initiate common sense changes and policies to get economies back on track. It seems to me that language that initiates fear with little basis is puerile at best- destructive at the worst. PIMCO CEO Mohamed A. El-Erian was quoted by Bloomberg that U.S. Economic Conditions are Terrifying. There didn’t seem to be anything new that El-Erian said in the article that seemed  more frightening, let alone terrifying. Maybe you had to be there…

JP Morgan sees it differently: On Friday it came out with its fixed income outlook and said that the crisis in Europe would likely get worse before better and the spillover to the United States would ultimately be contained. They recommended High Yield and Emerging Market Debt for 2012.

Susan Pullman at WSJ, reported on how discussions with Fed Chief The Ben Bernanke turn into investment riches. The Federal Reserve Chief holds conversations with large institutional hedge fund managers in gauging which way policies by the Fed will be accepted or aid the economic health of the country. Those conversations, which are reported to be confidential and coded, often expose possible Fed action which money managers immediately pass on to their clients. One such instances was the possibility of the Federal Reserve buying longer maturity bonds. This evolved into what we know as ‘The Twist’ in which the Federal Reserve set about buying the long bond. Institutional money managers were able to take advantage of the buying of longer maturities before any news leaked to us lesser mortals. It’s all about buying on rumor, or what you deduce is the rumor, and selling on the actual news.

 

Oil trading a bit under $100 a barrel on concerns of…shucks, I don’t know why oil is trading as high as it is. In fact oil should be much lower with an economic slowdown in Asia, United States and Europe. News that oil shipper Frontline may run out of money surprised traders and the stock fell 41% Tuesday and the Overseas Shipbuilding Group ETF (OSG) fell 17% on news that there were too many ships and not enough business to cart oil from hither to yon. Some traders say that oil is more of a fear trade is because of a possible disruption as tensions mount with Iran.

Time Magazine reported on the 50 best and worst inventions of 2011. There were many top drawer inventions such as Twitter based hedge funds, capturing Twits and converting them into investment portfolios; but my favorite was the Perfect Razor made from iridium and each razor blade 5,000 times thinner than a human hair.The cost $100,000 but comes with lifetime sharpening service.The worst came from Japan which manufactured artificial meat from sewage. Pass the mustard

Ford versus General Motors…the old rivalry is back. Both stocks are down 39% in 2011 and Hilary Kramer at InvestorPlace.com put in her two bits which of the two companies she likes the best and the winner – Ford. The Hilary said the stock should double and a dividend announcement in 2012 wouldn’t hurt its chances to get there. From your lips, my dear …

Dunno if I’m thrilled with the idea of higher taxes while lots of folks out of work and personal savings rate is down. Consumer spending has chalked up its fifth consecutive month in a row of positive increases. This at a cost to personal savings as consumers are back at the malls. Talking heads criticize consumers saying they haven’t established a sufficient buffer of savings before spending.  and if we don’t spend we’re un-American and not contributing to the growth of the country….sometimes you just can’t win and please everyone.

Back to More Value Investing:  Charles Sizemore at MarketWatch blog likes master investors Mohnish Pabrai (author Dhandho Investor), Joel Greenblatt (Little Book That Beats The Market) and Prem Watsa ( Canadian but don’t let that be held against him); all strong institutional investors. Charles point is that two of the above three have huge positions in financial; especially the banks. They are also huge Bulls and the point being made is that many of us should take comfort in knowing that we are on the same side of the trade with some of the brightest value investors in the business.   Mohnish Watsa

Germany auction of 10-year bonds went ‘kaput’! The German government was only able to sell about 60% of the Wednesday auction of 10-year bunds with an average yield of 1.98%. Either this was a message by investors for the Germans to show leadership, forget  the hyper-inflation of yore and order the Central Bank to start the printing money; or there is a real concern regarding the future health of Germany. In any case this is a severe wake-up. Anyone will tell you  that the bond market is the barometer that usually leads recoveries or recessions. Our markets fell 0ver 200 points on the Dow. There isn’t a sector in the market that is immune as everything goes down at once and comes back at once. Asset allocation just doesn’t work in 2011 – gold stuck around $1700. Euro down 1% against the dollar. Germany doesn’t want to see the Euro disappear.  The German Mark was a strong currency and this caused pain for German exports. The Euro allowed the selling of German goods to other countries using a weaker currency and making Germany extremely competitive globally. In the sophisticated world of economics this is Germany now being in-between the rock and the hard place.  ( I’m not kidding, the phrase was actually first used to describe the U.S. banker’s panic of 1907.)

Europe has similar if not more difficult problems than we do….German Chancellor Merkel reiterated Thursday her stance on not pursuing Euro Zone bonds or changing the charter of European Central Bank. Her acquiescence would make Germany the default co-signer on all European debt -  something she and Germany do not want. It’s politics in Europe –same as in the U.S. While no one knows exactly what’s going on in Europe any more than we do in our own capitol; it’s individuals versus common good on both sides of the Atlantic and until that changes we’re in for a rough patch.

 

 Time out for AT&T as the company steps back to re-address their merger with T-Mobile. AT&T will pay T-Mobile $4 billion with $3 billion in promised break-up fees and the other billion for spectrum. Shares fell to $27.60. The companies removed the merger deal application and instead will press their case of a merger before a judge next year. And does this mean that Sprint & Clearwire are the winners? Whispers that the two beaten up shares are possibly poised for a comeback. Bob Citrone, hedge fund manager, added Sprint to his portfolio this past quarter. Sprint traded around $2.50 and Clearwire at $1.5o. on Wednesday, Credit Suisse also likes both long-term. The AT&T and T-Mobile merger may be as dead as yesterday’s Thanksgiving turkey. This may spell some problems for AT&T going forward.

Netflix is down again on news that it wants $400 million in capital and will get it by selling more stock and issuing debt. Netflix, as you remember, dear reader, was the golden goose that just kept on moving higher and higher (like Green Mountain only different industries), until misplaced direction in fees caused the whole thing to collapse. Shares moved down again to close at $68 Thanksgiving eve. A new fair value estimate by Tony Wible at Janney Capital on the stock is $49-$51 a share. Shares topped $300 only a few weeks earlier. Jimmy Cramer got it right the other day saying shares were toxic.

Markets approaching 7 week lows….

 

Luxury Real Estate in the Big Apple is so hot that real estate agents have resorted to cold-calling existing owners of condos and townhouses to prospect for sellers! Sandy Weill, he of Citigroup fame, has put his 6,700 square foot condo on the market for $88 million. What’s prompting this mania? Seems foreign buyers see value in the states and are swarming in, cash in hand to snap up what they see as bargains. Let’s hope for some trickle down. Bruce Willis is also selling his Idaho rancho for $15 million.

 

High Yield bonds used to be called Junk Bonds ( In the day of Mike Milliken who used them extensively to build businesses in the 70s and 80s and then went to jail in the 90s. Not before making hundreds of millions for himself and others) The firm he worked for, Drexel Burnham, did such deals as the RJR Nabisco and Ted Turner MGM/UA takeover using junk bonds. High yield bonds are those instruments issued from companies that have less than investment grade risk and therefore pay more to borrow money than those that do. These bonds have little to do with money markets as night has to day. However, a Schwab investment company manager, according to Financial Advisor News, thought it prudent to tell clients that the Schwab YieldPlus fund was as comparable to a money market- except the fund fell almost $2 billion by investing in private issuer mortgage backed securities. The exec was fired and Schwab ended up paying $119 million to resolve the SEC lawsuit and $235 million to settle investor lawsuits. Know what you invest in or find out from someone that does.

Time Magazine reports from the desk of Fareed Zakaria,that China has enjoyed decades of peace, stability and free trade and seems content to act narrowly and exclusively in its own interest, unconcerned about helping the global good. Was this a sly hint to the superpower to get involved in the global economies or simply pre-election bashing?

Quality over Quantity? InvestorPlace.com suggested investor explore the following Fav Five stocks: Ralph Lauren (A trip up north doesn’t quite feel the same unless I stop on the way and shop at his clearance store); Nordstrom (For some reason they are known for their shoes but I don’t get it); Tiffany & Company (Anything in the iconic blue box works for me – the rich always end up at Tiffany while I’m at Amazon); Coach (They just came out with a less expensive lady’s handbag that is…expensive!) and for good measure- Dollar Tree (Even the Grosse Pointers and Bloomfieldites sneak in to load up on their chotchkies. In the 60s you’d find their grandfolk at the downtown  Birmingham SS Kresge  store.)

Owning a House just got Cheaper Than Renting: The WSJ  3rd quarter survey in 28 markets found housing declined in all but five markets. Meanwhile rent rates have increased while mortgage rates have fallen to about 4%. The result that buying is cheaper than renting in 12 markets. In Atlanta a mortgage with 20% down is at $539 (average home) while rent hovers in the $840 a month range (Markets eventually will do what politicians refuse to do.)

Give Thanksgiving! New York Finance professor Baruch Lev admits to being thankful for, ‘a divided government and do nothing Congress. With a unified Congress, we would have stringent climate change laws, higher taxes on millionaires and billionaires, and public-employee pension fund bailouts.  We would be closing in on Greece without Germany bailing us out.’

Finally-Investors are losing patience with the EuroZone politicians. ‘Leadership understands,’ according to Italian Prime Minister Monti, ‘…that a collapse of Italy would eventually lead to the end of the euro….resulting in unforeseeable consequences.’ The strains on the Euro zone are adding additional pressure on German and French leaders which have so far failed to quell investor concerns, according to Friday’s WSJ.

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 – 3rd Week November

Inflation and a contagion fear from Europe are the two worrisome problems du jour and the outlook is either the EU is cooked like a Christmas goose or they can work their way out of the mess. Some experts point to the fact that EU’s problems will infect the U.S. but may take a few years to really impact us and then stick around for a very long time. Bill Gross of PIMCO said on Friday that the European problem is the U.S.’ biggest problem. What the problem is and how the United States could be infected will be discussed in this blog. Wednesday, prior to the markets open, inflation numbers came in less than expected, thus giving the Federal Reserve more leeway to stimulate the economy. Still, inflation at some point will rears its head and investors best be prepared.

The Euro-zone’s debt problems stem from overspending by certain countries. Those countries not only borrowed too much but with an economic slowdown have little resources to pay those loans back. The primary concern is with the PIIGS or Portugal, Italy, Ireland, Greece and Spain. The problem emerged late in 2009 and has been of deep concern since 2010. The fact that all these countries are using a common currency complicates the issue. The fear is that if even one country defaults that a domino like reaction will cascade throughout Europe. When that happens other banks and countries will suddenly stop lending and doing business with everyone in Europe and everything will standstill while the economies fall into a depression.

• Monday News suggested a solution to the crisis as the Europeans would meet the week after next to discuss selling Euro-Zone bonds that would replace existing individual sovereign bonds. Germany, it was reported in the WSJ, hates the idea believing it’ll get stuck paying back for their spendthrift neighbors. Here’s the chart from Eurostat a German company that provides statistics to European countries.

The Reasons Why Europe Is Important to US: Standard and Poor’s reported 30% of our overseas business is done with European nations. Europeans are also big buyers of our debt, real estate and stocks. Just go to Florida and see all the apartments and real estate our foreign friends own. Our bigger banks have large holdings of European bonds, and while there is no fear our banks will go bust when the overseas bubble bursts our banks will certainly lose substantial money. As an investor even our defensive stocks are global and subject to what happens in Europe: Cocoa Cola, Philip Morris, Kraft Foods, Newmont Mining, McDonalds and EMC Corp.  No question that the U.S. business will slow down if and when Europe falls into a recession. Thanks to Jim Woods at Investor Place for much of the above he shares with us. Ford and especially General Motors have reported slow downs in European sales.

It’s ALL about protecting the banks! Buyers of Sovereign Debt protect their investment by buying what is called Credit Default Swaps, an insurance offered by hedge funds, insurance companies, banks and brokers, in case bonds default. The total net exposure worldwide is estimated to be about 30 times the United State GDP. In other words there is not enough money to cover all the debt that is ‘supposedly’ ensured. AIG, before 2008, didn’t even bother with the charade of setting aside reserves for claims when they sold Credit Default Swaps to investors of mortgage bonds–they simply pocketed 100% of the premiums and when the mortgage market went bust they got bailed out by us.

Problem is that the  insurance on sovereign debt may hinder any negotiation of sovereign debt haircuts, according to WSJ Monday last. Credit Default Swaps are insurance to protect in case of default. If that’s the case, the question is, why should an investor readily agree to a discount, or a haircut, on the bonds they own?  Knowing this leaves the EU with little  room to  negotiate with holders of large chunks of sovereign debt from distressed nations. European Banks, according to BusinessWeek Bloomberg, painted a much different, if not a Catch-22 story. European regulators are demanding more banking reserves and as European banks sell sovereign debt to raise the cash and lower risk this process causes bond rates to rise. Institutions across the region are slashing their lending to PIIGS nations exacerbating the problem even further. This selling is causing rates to rise. It is the rising interest rates which, when compounded, become unsustainable and cause default.

The European Central Bank was chartered to be the lender of last resort- to banks. It has a mandate not to loan to governments – a rule implemented because what happened when Germany experienced hyper-inflation in the 1920s and a trillion marks equaled one dollar. Back then the central bank  printed money the way Charmin now prints toilet paper. The United States Federal Reserve has no such compunction against printing oodles of cash to bail out banks, financial institutions and even foreign countries. But the ECB is taking the high road and making noise that it would rather stick with principal and see a global catastrophe rather than print and hand over one Euro. The ECB officials ensconced in their comfy new Frankfort offices point to their charter which expressly forbids such nonsense of lending to save nations. The Federal Reserve, on the other hand. has printed $600 billion in Treasury securities, reducing the value of our dollar and exposing us to future inflation. The Bank of England, according to Randall W. Forsyth in Barrons.com, has largely followed our script. That leaves the ECB which experts contend will, in the end,  do the same. The result, throughout the world, will be a cheaper currency for each and every one of us along with inflation.  We will contend with it in the marketplace but it will be after the crisis of liquidity. One fire at a time.

Eric St-Cyr was offered his early Holiday present and asked what one investment he would like to own in last week’s MarketWatch.com blog. The Eric suggested that in stressful times the one thing all people had to do was eat and so he opted to buy the Agricultural Exchange Traded Fund. He reasoned that this was a great inflation hedge across all foodstuffs. His choice was PowerShares DB Agricultural Fund (DBA). The fund represents sugar, various wheat, cattle, cocoa, coffee, hogs and cotton.

Farmers buy back land they sold to developers just a few years earlier. (This reminds me of when the Japanese bought almost every American iconic piece of real estate back in the 80s such as Rockerfeller Center and Pebble Beach Golf Course for boku* yen and eventually American investors bought it all back for a song.) In the WSJ, November 14th, the news that the Arizona dairy family Vanderweys bought a 760 acre farm in foreclosure from Liberty Developers for $8 million that was bought by Liberty in 2004 for $40 million. The demand for farmland is being fueled by price hikes on everything from corn to cotton. One mega-farmer summed it up by, ‘Why should a farmer sell land now when everyone is making so much money?’ Investment in raw land through ETFs and mutual funds for the average investor is difficult since land alone doesn’t create income/cash flow. Funds concentrate on those areas of real estate that provide income or capital gains. The PowerShares AG ETF possibly makes a sensible substitution here.

*Boku in Japanese means a lot. In the 60s I met an American middle-weight fighter and he went by the fight moniker Boku.

The uber-rich are down on stocks. Barrons reported yet another survey where the Uber’s were Gloomy Gus’ on stocks-53% being downright pessimistic while 13% upbeat.  Still the big boy hedge fund investors have been trading equities and some, like Warren Buffett, stocking up on stocks. The Buffett bought his first ever tech stock – IBM. He bought a 5.5% interest in Big Blue at the stock’s highest value in a long time. Share closed around $190 and Buffett’s price wasn’t far from that. IBM trading at 11-13 times forward earnings. The Buffett also bought shares in Visa and CVS. He also added to his holdings in  Wells Fargo. Some wags are saying the Oracle of Omaha has finally lost it with his IBM purchase. The Buffett and others think that IBM can only go higher.

Monday markets off 73 points on the Dow and $14 off on gold.

Speaking of  The Warren Buffett… his stock, Berkshire Hathaway, owns some of the finest domestic companies and most bought on the cheap. Buffett adds to his current holdings when his favorites find favorable value. Recently he put more money to work in equities than he has done in 15 years and analysts think that Berkshire Hathaway is undervalued by about half. Today shares in both the A and B of Berkshire Hathaway are trading at book value. Something they haven’t done since 1992. Here’s a smattering of what he holds: Cocoa Cola, American Express, Bank of NY Mellon, Costco, DirecTV, Dollar General, Exxon, Intel, IBM, Kraft, CVS Caremark, GlaxoSmithKline and GE. And, lets not forget his insurance companies, including GEICO.  Steve Sjuggerud, editor of True Wealth, recommended shares in Berkshire as a buy saying, ‘Whenever you can put your money with the greatest investor in the world at close to liquidation value, you should…’

The Most Owned Stocks by Congress…it’s perfectly legal for a member of Congress to sit on a Committee and act on insider information they learn in that committee, which would put the rest of us in jail, as reported on 60 Minutes a week ago Sunday. Nancy Pelosi looked like a deer caught in headlights when asked the question at a news conference if it was proper for her to act on insider info. And, fixing the reporter with a gaze that could melt cobalt, she shot back, ‘What’s your point?’  (Even Willy Sutton didn’t have that much chutzpah) So here are the stocks most widely owned by our beloved leaders…er representatives in the District as reported last week in Barrons.com and Bloomberg: Exxon, AT&T, Wells Fargo, Intel, Pfizer, Cisco, Microsoft, Bank of America, Proctor & Gamble and GE. Doesn’t this remind ya’ll of Hilary, back in 1978, buying 10 cattle futures for $12,000 (she only had $1,000 in her checking account at the time!) and parlaying that into $100,000, with absolutely zero experience trading futures?

Fund & Institutional Money Managers Rotate Holdings and many are doing so now according to Tuesday’s CNBC. Financials are obviously not the place to be and many investors are finding their way to cash heavy tech. In this climate it’s impossible for the average investor to make moves that emulate the heavy hitters but by allocating across a wide range of sectors they can take advantage of where the markets are moving.  Bank of America sliding down to $6.00, again, even though book value is higher.

Looking to be Bold? Rare earth mining is in play. After bouncing off their lows experts contend that the future looks bright but bumpy. Major players include Molycorp and Rare Earth Element, Ltd. Experts contend that this is a volatile sector and investors have to consider their personal time frame and risk. Molycorp, for example, is  58% off its highs.

Michigan Retirees now will have to pay 4.35% Michigan Tax on Retirement Plan withdrawals effective January 1, 2012. There are exemptions for those who are or reaching age 67 in 2012; plus, a tax on a portion of income for those retirees who will be between the ages of 60-66. As always check your situation with your tax advisor.

Market fought back all day Wednesday from a deficit until Fitch, the ratings firm, opened its yap and said that U.S. banks could have some troubles if the European situation worsened (like that was a big surprise). And in the last trading hour the markets sank, lead by the banks, another 156 points on the Dow to close down 191 points. Interestingly gold was down $12 and oil up to close at $102.90. (This is both good and bad news. Good if you own oil/energy and bad if you’re a consumer as the trickle down will hit the pumps soon enough). Remember oil holding around $85 not that long ago. Bank of America fell under $6.00 a share. Let’s not forget home heating oil will start perking up as is the season. And major banks are toxic as investors are selling.

Ben Weiss Builds a AAA portfolio: Here’s a question, how many companies have a AAA rating?  Anyone? It’s 8. No longer Berkshire Hathaway, GE or Toyota- all gone from those high ratings. Twenty years past there were 80 companies and now, sob, only 8. The following eight have $105 billion of cash in their coffers and appear to be safe in the medium term from a downgrade. Here are the eight that anyone can own and build an income producing portfolio: Exxon, Microsoft, Johnson & Johnson, Imperial Oil, Automatic Data Processing, MTR Corp. ST Engineering and SMRT Corp.

Green Mountain stock – GMCR fell hugely when allegations of fraud were broadcast to investors. The company stock traded over $115 when whispers felled  stock prices in the coffee giant. The company produces those containers that one inserts into a brew-maker and makes a single serving of coffee, hot chocolate or tea in less than a minute. This method of coffee delivery seems to be the delight of many. Now Mitchell Pinheiro, of Janney Montgomery Scott, say that no matter the problems the company has the stock is worth $125 a share over the next 12 months. Shares closed up $52.30. The Cramer said ‘nyet!’ on owning Green Mountain.

Another Sell-off Thursday markets fell  230 points before regaining its composure and only losing 135 on the Dow. Gold was down to $1720 before closing at $1731. Oil fell to close a smidge under $100. We’ve been on this train before.

Angie’s List IPO came out Thursday and I don’t get it. This is like a on-line everyday Welcome Wagon for everyone from plumber to lawyer in 175 local markets. It’s supposed to be providing only those most highly rated firms as voted by consumers in the local area. Right! I used the service once and the highly referred plumber showed up driving a beater, old dirty street clothes, unshaven and reminded me of someone who’s picture would be hanging at the local post office. Still Angie cranked out $62.6 million in the first nine months of 2011. The stock closed up 20% from its IPO price of $13.00.

If inflation is on the horizon…and we know it is, wouldn’t that make owning stocks a best thing, just about the smartest thing ever to own? I was thinking way back when I was a kid for a buck I could buy a Big Mac, fries and Coke. Hasn’t inflation increased the cost of goods and also the price of shares?

 The Business of some Wall Street Traders is Always Finding a Short-Cut: In last week’s WSJ the story emerged about Pipeline Partners, a firm that matches large blocks of stock/bond buyers with sellers. Pipeline caters mainly to institutional investors that do not want every Tom, Dick and Harry on the Street to know what they are buying and selling in huge amounts. Pipeline has told clients that they matched orders without an intermediary. In other words the trades were secret. But, according to the SEC, Pipeline allowed a firm called Milstream access to the order information and Milstream acted on that information, placing trades before the customer orders were placed. Milstream, oddly enough, is a selling subsidiary of Pipeline. Pipeline was fined $1.2 million and cut loose two of its top executives without admitting or denying guilt. What a country!

Happy & Safe Thanksgiving to all!

Finally- FDIC closed 2 banks Friday bringing the total in 2011 to 90. Markets also closed mixed with stocks off 3% for the week.

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