That Was The Week That Was- 2nd Week December

If There Isn’t a Morningstar for Dummies There Should Be: As you know Morningstar is augmenting its star rating system by adding Gold, Silver, Bronze metal ratings illustrating what they think a fund thinks it will do in the future. In 2011 they have 300 funds researched and graded. By 2012 they’ll have done 1,000 out of the approx 7,500 funds. I just examined one of their entries and more than slightly confused. It’s the Clipper Fund, rated 1 star because it has a terrible performance over the past 5 years averaging a negative 4% per year. Morningstar rates the fund high in people, expenses, service and lousy in its results making money for investors. It also gives the fund a Gold star going forward, although fund management has shown it hasn’t been successful with investor money in the past. So you can see my confusion. You have a fund that in five years its corporate methodology, expenses and governance is super keen but making money doesn’t seem to be what the fund is awfully good at. I don’t see how that’ll change in the future. And, that’s basically the main reason I buy any fund is its ability to make money for its customers. Even the Morningstar analysis of the fund states.               ‘Despite a post-financial-crisis rally, the funds record under its current management team is still lackluster.’ Maybe Morningstar needs more time to get its act together on future’s rating of fund performance or I am missing something.

Last Week Ended With The Dow + 1.4% . The Euro problem was seemingly put to a temporary rest by agreeing to extreme sanctions and no financial bailout for those countries that did not adhere to strict economic prudence. The meeting last week by Euro Zone leaders ( see the happy leaders above Merkel & French President Sarkozy) was the first step in so-called fiscal integration. There still could be months of what the WSJ calls ‘wrangling’ before anything of substance is done. And, still, when everything is said and done the Big Gun, the ECB (European Central Bank), has not indicated that it would undertake massive purchases of euro-zone debt to prop up the region’s bond markets as the United States did with their Federal Reserve. So while the markets welcomed any kind of a deal it didn’t seem to be the deal that cemented the end to the problems in Europe. On Monday early of this week markets in Asia were up and European stocks fell.

But, from all weekend indicators  that I have been reading, our domestic markets appear to be soothed as we move into the Holidays. Everyone from The Street, to Barron’s guru Randall Forsyth agree that what happened on Friday seems to ‘pacify’ investors. This may be the beginning of a pleasant holiday after all.

 Maverick’s Pa once said, ‘If a man needs to make out a will he just ain’t paying attention to properly spending his money.’ A recent WSJ article reported on how some bill collectors are going after surviving family members for the debts of their relative. Usually when someone dies their debt dies with them. It is true those that are owed money may go after whatever assets the debtor owned at his or her death, but rarely have they gone after relatives of the deceased – until now. Debt collectors are playing the ‘moral card’ when chasing down money from family members. In fact their tactics are just as brutal, according to the Journal, as if the debtor was attempting to sidestep paying off the debt themselves instead of being dead. Some collection firms even send condolence cards that double as collection letters. One woman received over 200 threatening phone calls regarding her deceased mother’s credit card accounts. The rules are simple, and always check with your attorney, but unless you are a co-signer with the deceased, or joint owner on an account, you have no legal obligation to pay a penny for any money owed by your relatives or spouse.

Guess Who Could Be The Next Oil Producing Powerhouse? According to last week’s WSJ the United States is at the forefront of shale sourced oil and gas exploration and drilling. By 2020 experts say that the United States will be the top oil and gas producer, surpassing Russia and Saudi Arabia. This is reshaping the oil industry as the major oil companies are fed up with fiefdom politics and terror tactics in the third world. Australia is also part of this energy revolution along with Canada, West Africa, deep waters in Brazil and Mexico. Many of the majors are simply finished with countries like Venezuela that took their property after the firms spent billions in building the country’s oil infrastructure. This revolution would keep profits at home, cut costs of energy, eliminate political uncertainty and blackmail.

HSBC Bank in UK fined for inappropriate advice to elderly. A five year minimum investment was recommended to aged retirees to fund their long-term care insurance plans. HSBC planners sold asset backed bonds to be used to pay premiums on the Long Term Care  insurance. A review by a third party found that 87% of those recommended the product were unsuitable for it.

Online Holiday Shopping in USA breaks $7 billion for the week. India has its own on-line shopping spree going for it. According to Time Magazine 80 million internet users in India will collectively spend $10 billion online shopping in 2o11. This from a country that had virtually no on-line sites in the year 2000 when the dot com market collapsed and U.S. investors cut the cord between Indian and the United States internet entrepreneurs.

Monday Markets Happy-Happy- a triple digit upside until Standard &Poor’s opened its yap and said they planned on downgrading the ratings of 15 Euro Nations- ‘cept Cyprus and Greece which are already on high risk of default and been downgraded pretty much to dirt ratings. The S&P ratings ‘credit-watch negative’ signals a downgrade within 90 days and has a 50-50 chance of being confirmed. Stocks closed mixed after the news and at lower than half their day’s high. CNBC said markets already factored in a downgrade. As you can imagine no one in the investment business takes anything the rating people say with any authority. Cramer, live on CNBC in the ayem, said he would respect the wisdom of Steve Leisman before he would a ratings firm.

Philly Cream Cheese, Jell-O, Oscar, Kraft Cheese to the right and …Cadbury, Nabisco, Oreo and Tang to the left as Kraft Foods splits itself into two. Planters moves from snacks to grocery while Trident sticks with Cadbury and Tang…got it? Grocery, it seems is the slower grower, and snacks is where the action is. Kraft Foods is trying to get more oomph out of the company and the split will be a tax-free spin-off of one company into two. Morningstar still places a price of $39.00 on shares no matter how it is parceled.  Shares have gone nowhere in ages…

What Not to Buy For Xmas….according to Kiplinger Magazine: It’ll be cheaper in January….Televisions, Linens (I get pillows 2 for 1 as soon as the calendar cranks a 1), Snow Blowers, Cameras (Sony has a new one I got my i on), Outerwear, Skis, Furniture, Cars, Cruises (although deals are being made throughout 2011), Bicycles and (ahem) Gym membership. And PNC Bank has a price tag on all 364 gifts in the 12 days of Christmas of $101,120. Getting them Lords to be a leaping can’t be cheap…

Get Met… according to Barron’s Take. The country’s biggest insurer Metropolitan Life has languished in 2011 and now Barron’s thinks the company is ready to rumble higher. While Met gets 40% of its business internationally it is one of the largest providers of annuities and institutional savings products. Jeffrey Schuman, analyst at Keefe, Bruyette & Woods, thinks the stock could go to $50. in the next 12 months.

Window Dressing2: Fund Managers dump those stocks that have been abnormally punished throughout the year and expect shareholders to believe that the fund they managed didn’t own them in the first place. According to Mark Hulbert these very stocks will get beaten up even more and experience a “January” bounce. George Putnam of the Turnaround Letter said those stocks, historically, produced a 15% bounce in January’s past. In that same period the Dow Jones was up  just 2.7%. Here’s a list of this years massive losers: US Steel, NetFlix, Monster Worldwide, Janus Capital, First Solar, Bank of America, AIG, Computer Sciences.

Ye Ole Post Office is losing money and their solution is to cut service and raise prices. Is there anyone besides me that thinks there is something wrong with this business plan?

Starbucks =Mobile Transactions via Smart Phone: The first company that got it right. 29 million transactions since January. Customers love it, according to CNBC, because they trust and like the company behind the product. Starbucks is the first brick and mortar brand to embrace the phone transaction app and make it work efficiently. Expect this to heat up with other firms in 2012.

Water as an Investment: Most water as a product is owned by governments and there are few investments available that are water focused. Powershares Water Resources is the biggest of four ETFs that invest in the water industry. They hold shares in publically traded companies that deliver services related to water. There are no pure water plays and yet the global need for clean potable water is growing. The coming shale oil-gas exploration revolution positively gulps water like crazy.

Verizon Planning Streaming Web Video but with limited programming. The news was enough to kick NetFlix down 2% on Tuesday reported Barrons.com. The report wasn’t really a report but came from reliable anonymous sources…. said Barrons.com

Apple Plans to re-accelerate its retail growth…Share in the company have languished since Steve Jobs death. The company opened 30 new stores with 21 overseas. Barclay’s Ben Reitzes has an overweight on shares and a $555 price target. Shares closed Tuesday a tad under $400. a share.

IPO after Market? According to Barrons interview with Renaissance Capital’s Kathleen Shelton Smith the IPO after market has been extremely volatile. Many investors are waiting for Facebook as the next Google. While you, me and the candle stick maker may not be able to get in line for IPO shares at a price that institutional investors get them at there are ways to own IPO’s either before they get to market or after. The after market can be owned through The Global IPO Plus Aftermarket Fund (IPOSX), which owns those new companies that the managers think will be eventually owned by institutional investors. Currently there are 50 stocks in the fund including LinkedIn, Pandora Media and Verisk Analytics. Year to date the fund is down 20%.

Last Week’s Blog IPO Fund Buyer GSV Capital that invests in IPOs along with the big boys has just gotten coverage and Ladenburg Thalman gave the stock a buy rating. Shares up from last week and closed Wednesday at $15.65 a share. GSVC. If you want action on IPOs you may want to research the stock.

Next Week a Flood of New Deals will hit the Street as Eleven IPOs are expected to launch. This is expected to be the busiest week for new businesses since November, 2007. The biggest name to go public will be Zynga. There will be six IPOs next Thursday, a crowded field as firms vie to go public before the year-end. If you need more information on what firms will be going public besides Zynga and Jive Software, call or write.

 

A Fair and Equal Playing Field in the stock market…except the SEC thinks that some players should be treated fairer than others. In baseball an umpire gives the benefit of the doubt on a close strike pitch to either the pitcher or batter, depending on who has the greater reputation. In investments the SEC seems to side with mega-fund managers with a long history of compliance. What has happened is that Warren Buffett asked and got to conceal some of his big buys from other players and the SEC allowed it because he is Warren Buffett!  So far  in 2011 50 managers managed to hide their buys from the public and competition. Those given special treatment explain the reason they did what they did is that it is their proprietary trading knowledge and they want to shield what they buy from the public – for a while.

Exxon has never been managed by idiots. The company has oodles of cash, great scientists, experienced management and if overnight cow manure becomes the next world energy source they’d be sure to have a fence around a mountain of meadow muffins. Exxon has admitted to researching for the last decade a forward world energy outlook. Exxon now declares that by 2025 natural gas will be the number 2 in fuel use dropping coal to number three. Coal will still be a major player in emerging markets but not not in the industrialized world where energy demands will grow by 30% by the year 2040.

Small Business Gets Screwed….A new law was supposed to reduce costs for merchants that accept debit cards but instead the processing costs are higher. Before the Dodd-Frank Act (them two guys again), credit-card companies (banks) have merchants discounts on debit card fees. The Dodd-Frank Act placed a cap on the fees and bankers did what bankers do and eliminated the discounts on debit cards. Now small biz is forced to hike prices to customers to pay for the higher bank debit card fees. You’ll even see this at vending machines that accept credit/debit cards such  as RedBox, soon to be charging $1.20 up from $1.00. Do you think that Dodd and Frank signal their intentions and allow loopholes in their law to purposely screw consumers and business? Every time I get a ‘Good News’ letter I start reading the fine print.  And, don’t be surprised to see one or both Dodd ( Retired and on the Friends of Angelo Christmas Card List) and Frank (that’s Barney who’s retiring) working in the banking industry.

Ford Reinstates A 5 cent Dividend. This may be what investors have been waiting for- while the stock fell after the announcement on Thursday the markets were off almost 200 points, which, as you know takes everything either up or down depending on the mood.  More important to the company, and shareholders, is the reinstatement of Investment Grade Rating. This would allow those financial institutions to buy shares in the company currently constrained because of the junk status. The dividend may be the final piece to get the Investment bump up and see shares mature to a price more reflectively of the company’s earning power. GM is also sitting on a huge cash cache but said they were more concerned making up pension shortfalls than paying a dividend.

Consumers Are Shopping – Surprising the Naysayers- Consumers finally coming to grips with home values reduced and savings ravaged by the recession are back to spending and less saving. Greg Daco, an economist at IHS Global Insight, ‘reckoned was the easing of inflationary pressures and access to credit became somewhat easier.’ The fact is that people need new stuff to replace the stuff that’s worn out.

China’s Inflation Lessens: The lowest inflation reading since September 2010 surprise 16 economists in the Dow Jones Newswires survey. HSBAC economist Ma Xiaoping said, ‘The government should accelerate loosening efforts and make stimulating economic growth a more prominent priority.’ Which is the news for those who were burying the Chinese economy.

 Finally- Don’t Forget to Call and Have Your Portfolio Analyzed for Risk & Allocation as we go into 2012.

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