That Was The Week That Was – 4th Week January

Two stories from people with ideas ( one good and one not so ) from last  week…. Mark Mobius is Chairman of Templeton Emerging Markets Group and he has a plan for 2012 and beyond. The other story takes us to The Suze Orman who has hooked up with a dubious portfolio manager to manage her ‘people’s money. She is also hawking her new debit card to ‘help’ her fans in getting their finances straight. 

 Mobius, who oversees billions in investor money at Templeton, is a confirmed Euro Bull.  (As a pretty smart guy who works with money 24-7 I’d call him an expert on what’s happening in Europe over some radio or TV talking head.) In a MarketWatch interview the Doctor said he thought the euro could play a greater role in the global economy by 2020. His ideas for global investors include: (1) Stick with energy- everyone needs electricity. (2)Software delivers hard profits – Great Indian companies such as Tata Consulting. (3) Have confidence in consumers. Buy companies that consumers buy from. (4) Commodities and materials are building blocks. He expects the global demand for all commodities to continue to grow.

On the flip side we have Suze Orman ( who calls herself ‘The Personal Financial Expert of the World’) and who has hooked up with Mark Grimaldi, an investment manager in Wappingers Falls, N.Y. ( Not exactly a household name in the business.) He manages about $120 million, which, Jason Zweig calls, a minnow in the money management business. Orman and Grimaldi are in biz together, although the relationship isn’t as clear as one would like. Orman touts Grimaldi for her clients and Grimaldi brags about his management returns which he states produced an average of 10.25% from August, 2002 to October, 2011. The problem is that the fund wasn’t launched into December, 2009. There’s more but I’ll let you research. Suze also is promoting her new debit card. For years Suze has harped on people buying and using only those products with low costs and fees. According to Chuck Jaffe the card has 20 ways to charge a fee and allow The Orman to make money off her vast, adoring and trusting audience.         More than one way to shear sheep… eh, Suze?

Too Often Investors Give Credit to So-Called Experts that have ulterior motives.

*** This week starts with European meeting in Brussels. Germany wants a say in Greek national budget and Greece minister says, no. They will handle their own budget, thank you very much. According to David Marsh at Dow Jones expect typical political public posturing that may not bode well for our domestic stock markets.

Facebook will file this week for its Initial Public Offering. The value will be in the neighborhood of $100 billion. Expect shares to trade sometime before May. Now for news of last week….

Last Monday markets pulled back a smidge. Overall volatility has been tame. Money is again flowing into domestic markets from overseas and institutional investors. According to Justin Bennett, in his Dynamic Wealth Report, expect a pullback even though stocks have broken through resistance. Institutional money pouring in is more of a fear of the train leaving the station than anything else. Historically, the last 2 years, the stock market has weakened the last two weeks in January.

 

WSJ- Investors may have positioned themselves for a European collapse. Still some are concerned about the quick rise in the markets. Dennis Gartman of the Gartman Letter expressed his concern saying, ‘We’re antsy.’ Which is technical investor talk… 

China alive and well, according to Frank Holmes at US Global Investors and writing in Business Insider. He provides the following:

• China inflation tempered with China raising interest rates three times in 2011. Plus requiring increased reserves each month for the first six months last year.
• Copper Inventories Increase. The Price of Copper has risen as China has restocked depleted supplies.
• Energy reliance has shifted as more energy imported.

And lets not forget it’s the year of the Dragon!

Natural Gas Glut. More energy companies have switched their focus from gas to oil. Prices of natural gas fell to 2 year lows. An abundance of the commodity is causing some producers to ‘flare’ away gas from wells. Four years ago natural gas sold for $9.00 per million BTUs. Bank of America estimates it could sell soon for less than $2.00. There will soon be a trade in NG.

Germany will close all nuclear plants by 2022- according to BBC. Citing worries over safety  the German government will close all plants and have to replace their energy with more traditional fossil fueled plants. The atomic energy used is about 23% of current energy needs. Commodities worldwide will see increased costs. I would expect natural gas to slowly increase after falling to multi-year lows.

Campaign Numerology- Economist Douglas Hibbs, Jr. for 2 decades used a simple formula to predict presidential winners. He uses a a real income growth calculation with more weight given to an incumbent’s time in office. His results show that the President is a massive underdog and headed for a huge defeat.

Art = +10.2% in 2011

S&P 500 =0.00%

Impressionist and modern art outperformed Old Masters by 14% versus 4.8% info from Bill Saporito at January 20 2012 Time Magazine.

Avoiding Poverty – study shows only a 2% chance of falling into poverty if a person graduates from high school and has children after getting a job.

Bloomberg Reports…. A Greek Default You Can Mark on Your Calendar. It’s March 20th and Greece simply doesn’t have the $18.5 billion it owes bondholders. If the date comes and the default is…less than orderly, than you can expect spreading panic. Apple has over $100 billion tucked away…. On Friday WSJ announced Athens and creditors may have reached a deal. The deal is to hand in current high interest bonds for low interest new bonds. There is about $260 billion outstanding and if not enough private holders turn in their bonds willingly than Greece could transform the deal to a coercive default. In which case the insurance on Greek bonds kicks in and pays private bond holders.

Odd Numbers? In 1960 3% of American couples had a college degree. In 2010 25% of same have degrees. In1970 the average CEO made $1 million, in 2006 the average CEO made $16 million.

Apple Keeps Running! Worries about the company without Jobs have been put to rest as the company’s profit more than doubled and increased about $10 billion more than analysts expected. The stock soared about 5% in after hours trading.

Apple now surpasses Exxon as the Biggest Company in The World & Many Investors still Think Shares May be Cheap!

McDonalds Still Offers Sizzle according to Teresa Revas at Barrons the company had same store increase of 9.8% in the U.S. and 10.8% in Europe and 6.5 %in Asia. The stock is up close to 10% since November, 2011.

Ford reinstated its quarterly divided of 5 cents a share. Seeking Alpha Blogger says in short run the stock he would be a seller into anything over $13.00 and be a buying opportunity on any pullbacks at or below $11.00. Ford missed expectations by a nickel a share Friday and stock punished. Morningstar states that while revenue was up profits per share were down. Flooding in Asia cost the company about 32,000 units. Ford states they expect weakness in Europe in 2012. Shares fair value by Morningstar still at $23.00. F closed a tad over $12.00

Survey of CEOs shows pessimistic attitude about the global economy.

PriceWaterhouseCoopers, International, reported 48% of CEOs said they expected the global  economy to decline. Confidence was in short supply in Western Europe. China was also not immune from a decline in sentiment with only 51% saying they were positive about the Chinese economy down from 72% last year. This survey was taken of 1,258 CEOs from 60 countries in the last quarter of 2011.

Expect to Pay More For Gasoline This Spring. It’s all about reduction in refining capacity. Expect to pay about$4.00 a gallon starting around March.

Markets Moved on Fed Announcement – Low Rates Through 2014! More money to be printed as Fed promises to keep rates at effective Zero for at least two years. With a slight improvement in the economy the Fed announced continued economic weakness. Keeping rates low will accomplish three things:

• Supposed motivation to spur economic activity.
• Banks will continue not loaning.
• Savers will be forced to look for safe yield anywhere but the guaranteed sector.
•   Extending  maturities to increase yield make sense at this point.

Speaking of The Fed…. The Business Insider reports that the Federal Reserve is worried and we should be too. Disposable income is growing slowly, the consumer is back to being prudent with their money and new hiring is disappointing. Companies are increasing their use of robotics replacing people because robots do not fall into the Administration’s confusing regulations and wish lists. Without a new pro-business approach from Washington The Fed and the rest of us will follow suit and worry and muddle along.

Surprise! A Hedge Fund That Made Money in 2011! Bridgewater Associates made 23% in 2011. They did it by buying U.S. Treasuries, German Bonds and Japanese Yen. This year the firm states its bullish on gold versus inflation and emerging market currencies.

Commodities Crashed in 2011- WSJ reports a huge exodus abandoning copper, cotton and corn. Open interest in 13 key commodities dropped from 10.7 million contracts to 8.7 million last year. The collapse          ( may we mention) of commodity trading firm MF Global Holdings also (likely) contributed to the decline. Some interest percolating in 2012 but analysts say investors won’t step back in until the early January rally gains momentum.

Markets fell slightly Thursday on worse than expected housing sales….

From Weekday Trader in Barrons.com… Halliburton is the second largest oilfield services company and has a court date end of February regarding its culpability in the BP disaster. A possible $1 billion settlement could come, in which case expect HAL to reverse trend. It has a possible 40% upside, especially with earnings expected to jump 19% this year. HAL has over $2 billion in cash and analysts say the market isn’t giving the company credit after the Gulf disaster. Morningstar loves the stock giving it 5 stars, a buy at anything at or under $50.00 and a fair value of $72. The stock closed Thursday at $36.88.

  Is it just me or do you want to yell at Washington to ‘get to work!’

It Isn’t Just Me…. Ford CEO Mulally said on interview with CBSs Scott Pelley Friday in answer to why businesses were not spending part of the $1 trillion in cash reserves to hire people. ‘Most people want to buy a new car. But until they start to get some confidence- that they know where we’re going as a country…. it’s going to be very hard for them to make big decisions.’

Dogs of The Dow = Total Return 2011:

17.2%! a few weeks back I wrote about

the Dogs of The Dow and how to implement that investment plan- Bloomberg reported the Dogs returns for last year and why the Dogs may well perform going forward as Blue Chip Dividend Paying stocks are now in favor. Wanna know how to create such a portfolio, or buy a fund that uses that method, call or e mail me.

You A Gambler? Here’s the House Edge on some of the most popular casino games:

• Craps        0.60%
• Blackjack 0.80%
• Baccarat (banker) 1.17%
• Baccarat (player) 1.63%
• Roulette (single zero) 2.7%
• Roulette (double zero) 5.26%
• Keno    25%

A one-cent copper coin minted in 1793 (not this Penny)

sold  for a record $1.38 million at Heritage Auctions event held during the annual Florida United Numismatists convention. Not this penny, either. It’s the only pic of a penny I had on file…

That Big Football Game coming up on February 5th could generate as much as $11 billion in consumer spending! This from new TVs to snacks, food and beer. Its estimated over 5 million people will buy a new TV simply to watch the game.

Mixed Markets Friday. The 3 week win streak comes to a halt. The Dow is up about 3% for 2012 and that’s enough to give it a rest. The Nasdaq, oil and gold all up. Materials and healthcare held up the markets on Friday while utilities and consumer staples lagged. Seagate Technology was up almost a buck as it announced an aggressive buyback plan of $1 billion and dividend was increased.

Finally…four more banks closed last Friday, according to the Huffington Post. All four found buyers and spent the weekend changing over for customers Monday. Closures were 2 in Tenn, 1 in Florida and 1 in Minnesota.

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 January

  Everyone loves a bargain. Even the rich like getting something for less than its advertised. The investment business basic premise is to buy low and sell high- most average folk do it the other way ‘round. Still getting an investment cheap is no guarantee it won’t get cheaper. Mortgage Insurers are dirt cheap! PMI, MGIC and Radian Group have all suffered. PMI & Old Republic have been ordered by state regulators into a ‘run-off’, which means they can’t sell service to new homeowners and can only pay claims and collect premiums. The stocks, according to Jonathan Lang at Barrons, are trading in the pennies and with more foreclosures on the horizon may trade lower, or vanish all together. The lesson is to buy a quality stock at a great price not a bad stock at bargain price.

 Important week as 117 S&P Companies Report Earnings. Based on analysts projections the Street should see positive earnings from Apple, Motorola Mobility, Legg Mason & Textron.

 

The Barrons’ Roundtable sees trouble (with a capital T) in Europe but buying opportunities in United States and Emerging Markets! Pessimism equate with opportunity, so sayeth Roundtable member Fred Hickey on the 14th of January. They go on to say that people will kill themselves to get a bargain on a new television but run from a stock bargain- or sell the stock instead of buying more- when the price falls. Here’s a few other things from their meeting:

• There’s a growing divergence between US companies and the US economy.
• Plus or minus 10% for the domestic markets this year.
• Most of the cash in US companies sitting overseas and would be again taxable if repatriated.
• Europeans countries in financial trouble own a lot of assets but it’ll take time to sell. They could sell land holdings and even tax the church, which would solve all the problems in the world.
• Euroland is dysfunctional. It’s the northern parent versus the spoiled children of the south.
• Every European country will be in recession in 2o012- certainly by 2013.
• When money yields nothing, banks won’t lend.
• One has to invest in the least dirty shirt and the US is the one.
• Most companies don’t know what to do with all their money.
• Corporate profits will not collapse but may decrease by 20%.
• China is more important than Germany and France combined.
• Brazil has oil. Is the breadbasket of the world. Exports commodities to China. Plus they’re pretty smart people.
• Gold has to be bought some time this year- probably in the second half and under $1600.
• It’s not that gold will so much go up it’s that paper money will go down. Fifteen to 25% of all assets in gold. 

Definition of Asset Allocation: Asset classes have different levels of risk and return and so each will behave differently over time. Don’t expect them to go up and down at the same time.

Six Things Going to Cost More   

                    2012

 THANKS TO CNN MONEY

• AIR FARE
• MEAT & FISH
• COFFEE
• GAS
• MAIL
• CLOTHES

Investors prepare by investing in commodity index or specific stocks of companies reflecting inflationary sectors.

Morningstar’s Fund Manager of The Year! Global Manager Lost 4.13%

 

In Search of Yield – its not at the bank….Some companies can see their stock price pop if they increase dividend. According to Sunday’s Barrons Apple, Google, Berkshire Hathaway, Waste Management, Oracle, Cisco and Disney could all see shares go up. There are many funds and ETFs paying 3-4% but the stock leaders for dividends are the following:

Technically….speaking…Michael Kahn at Barrons.com writes that the party for banks may be over. In the last month the bank stocks outperformed the S&P 500 by 10% but a bearish technical reversal is soon upon the same.

Markets Up Monday- Gold & Energy Higher.

New Stupid Depression Indicators: Each economic downturn preceded by building a taller skyscraper than was in existence before. India in recession and just completed two skyscrapers and 14 more under construction. Our Empire State Building built in… 1931.

The woman who created the Consumer Protection Agency, and should have had the job leading it, is instead running for the U.S. Senate. Elizabeth Warren vows to be voice of the middle class. Has a campaign war chest that makes her a formidable opponent.

Gold on everyone’s shopping list!? You don’t need to get scared or even think the world’s going to end to come to the conclusion that gold should be in everyone’s portfolio. When to buy is the key and Tom Lydon shares his view later in the blog. Most agree about gold that it’s the only bit of pseudo-currency that’ll keep pace with inflation.  Matthew Lynn’s London Eye Column, which he writes for Dow Jones, on January 18th, ‘ Markets are getting used to the fact that Sovereign Debt is no longer a safe haven. The Big Five- US., France, China, Japan and Italy are all running huge deficits and little signs of bringing them under control. One of two things will happen- either they will all default or they will inflate away their debt using compliant central banks.’ He predicts that by 2020 Government Borrowing will slowly come to an end.  Money will be flowing into new safe assets: Emerging market debt, gold, corporate bonds and blue chip equities. Emerging Markets as a core holding is getting more and more mileage from analysts and planners.

Big Investors Bullish For 2012 Sectors

SOURCE CIRA-US EQUITY STARTEGY.

 

Performance Year-to-Date

RETURN FROM DECEMBER 31 2011 TO JANUARY 18 2012. THINGS CAN AND WILL OR MAY CHANGE.

 

China’s Urban Pop. Larger Than Rural…691 million out of 1.3 billion, rural workers moving to cities from farms to seek fortune. The important news is that the young prince and princess (as their elder’s call them) are quickly becoming super consumers. Credit Suisse reported that China’s middle class is rapidly being replaced by the affluent young. Middle class in China is defined as earning 7500 yuan or $1,188 per month which is equal to our workers earning $2,000 a month. We are seeing a more Americanized Chinese consumer spending the way we do- which is great for American Business.

Inflation Concerns? Buy Commodities!

Thursday stocks closed at a 6-month High. Copper soared to a 4 month high. Gold was off a smidge as was oil.

 But Michael Kahn at Barrons Technical says don’t chase this rally. His take is that a better opportunity is later in the year and that a tumble is due for this market. Not saying when but suggests that this market looks eerily similar to April 2, 2011 just before markets moved to 2011 highs in May.

Bank of America Thursday made a profit of 15 cents that propelled shares higher. The bank announced a profit of $1.4 billion for 2011 against a loss of $2.2 billion in 2010. On the whisper front some expected the bank to announce 19 cents and were disappointed. Still some advocate buying on a trade.

Regular Folk were not the only one’s to pull money from equities in 2011. Hedge Fund investors ( the so-called sophisticated rich) collectively pulled out more money in 2011 than they put in since the second quarter of 2009. This from Steve Eder at WSJ.

Anyone watching Cisco? Amazon slowly moving up. IBM close to what The Oracle paid for it. Friday Big Blue moved up on better than expected earnings. Tech Sector held back by Google as Nadaq-100 attempting to break out from 2011

Marc Faber- Professional Doomster-said, ‘ Stock markets have already discounted some very bad news and there is no reason to think that stocks will sink, despite gloom prospects for the global economy. Major support he says goes back to the S&P 1010 all the way to August 2010.’ S&P 500 closed last Thursday at 1315.

 

Most Dangerous Banks in The World – Too Big To Fail – Assets to Home Country GDP

From China’s one bank to the United State’s Eight Banks- The world has 25 institutions simply too big to fail. Italy has one bank, France has four, Germany has two. Information gathered by Blogger PolyCapitalist at Seeking Alpha.

 

Every Major U.S. Bank Donated Most To The Campaign of Mitt Romney For President- From Business Insider. And he still lost to Newt….

Buy Canada! by Eric St-Cyr (sounds Canadian, eh?:

• Commodities- Canada has huge deposits of metals, minerals and agricultural products.
• Energy – only developed nation that is a net exporter of energy.
• Total Debt to GDP-lowest of the 10 largest developed nations.
• AAA Rating
• Political stability
• The Trade – iShares ETF - EWC

Buy Gold? ETF Trends reports: Bullish activity on gold and some bulls state gold will reach  $2,000 ounce in 2012. But, warns ETF Trend writer Tom Lydon, ‘Gold exchange traded funds need to get safely above the 200-day moving average.’ GLD closed Friday $162.00.

Existing Home Sales Up 5% in December

  Mortgage rates, improved jobs picture and rising rents caused slight bump. Don’t get excited but still a look at homebuilders may be in order.

Auto Makers expect to Hire in 2012. Employment in the industry rose 4% in 2011 to 590,000.

Markets up- Gain puts Dow at its highest since July 2011

Nasdaq-100 ETF Breakout hampered by loss at Google. The Naz is aiming for new highs but stumbled as Google missed numbers and fell 8% in after hour trading last Thursday. Mixed messages coming from analysts about buying Google on the dip. Some advocate against pointing out that the recent purchase of Motorola Mobility and some 30,000 new employees to absorb plus a poor third quarter from Motorola a hindrance.

Finally, FDIC closed 3 Banks Friday. Small banks in Florida, Georgia and Pennsylvania were shuttered.

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