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.