That Was The Week That Was-4th Week February

A rising tide lifts all boats including the electability of an incumbent that only a few short months back was assuredly and most certainly staring at defeat. In Up and Down Wall Street, Randall Forsyth writes that as the stock market recovers so does the stock of the president. According to the ‘bettor’s line’ the President now has a 60% chance of getting re-elected. The fact that the Dow ended up before President’s Day at its highest level since May 2008 has made all the difference.  

UBS Wealth Management polished its crystal ball and predicted that the president would win a second term. Citing improving economic conditions and firming job approval as keys to his victory.

One of the five longest streaks of all time! Michael Santoli, of Barrons.com, wrote that as of last Thursday the market has gone 44 trading days without even slipping to its 20-day average. Wayne Whaley, a market analyst who does this kind of investigation, found that there were only 7 years before this year that a January rose at least 4% without a single 1% loss. Investor’s Intelligence found that 22% of those publishing investment newsletters were expecting a correction, 51% being bullish and 27% determined bears.

Consumers still shopping for deals even as food companies hike prices. General Mills reported that volumes are falling and earnings could disappoint. J.M. Smucker’s also announced last week that 4th quarter volume fell 10%. Those defensive food stocks may not be that defensive.

Sell in May and Go Away…? Ed Pawelec, Creator of Price Shock Trader, writes that the traditional sell in Spring and come back in September may be moved up to March 20th, the same day Greek debt is due. He cites an overbought market and that Greece will ultimately default. This shouldn’t surprise investors but will anyway.

Iceland Upgraded by Fitch! The country has managed to rebuild and stabilize sovereign creditworthiness after the 2008 banking scandal that involved all three of the countries major commercial banks. The entire country was a step away from bankruptcy. Their stock market fell by 90% and had to seek help from the German government. According to Fitch a promising economic recovery is underway. Icelandic women took over the reins of business and government immediately after the collapse. The U.K. newspaper Guardian, in 2009, proclaimed Iceland the most feminist country in the world.

 The Business Insider Provides The Following Insight to Rising Equities with Falling Yield of the 10-Year Treasury.

If investors moving from bonds to equities the yield should be moving up but according to the charts this is not the case. In 2011 both equities and yield moved closely together.

Larry Doyle, an ex- Wall Street Insider, publishes a blog, does a radio show and manages the money he’s earned … lately he wrote that he understands how and why Wall Street takes advantage of customers once in a while. But on the missing $1.6 billion from MF Global he says with conviction, ‘ We need a MF Global grand jury. Money does not vaporize. Money is misappropriated. Money is stolen.’  MF Global was a commodity trading firm that ‘supposedly’ made wrong sovereign bond bets that went sour. Regulators have been unable to account for almost $2 billion of investor money. It wasn’t lost trading, no records of where it went!  

According to Alan Abelson, The current Sports Illustrated Swim Suit Edition has an American model on the cover. Since 1978 that indicates the S&P 500 index averages a total return of 14.3% on average 88.2% of the time. When a non-American was on the cover the market was up 10.8% and was positive 76.5% of the time.

Katie Stockton of MKM Partners appeared on CNBC a week ago and speaking about the market volatility said,’ the price percentage swings have compressed.’ It implies that the markets will feature a ‘slow-grind’ higher. She went on to say that if the markets gathered support around 1371-1379 on the S&P that it could go to 1440.

Jim Rogers hedge fund manager and commodity guru said in a recent interview that the markets will fall apart in 2013-2014, His recommendation is commodities, especially silver since its price is more attractive than gold. Roger said, ‘In 2012 we have elections and many governments pumping money into the economy spending and printing money. It’s 2013-2014 we have to worry about.’ Jim sounds confident about 2012 but still owns no domestic stocks. He also believes the President will win re-election.

Wal-Mart Ups Stake in China E-Commerce.  The company announced over the weekend last that they plan to buy a majority stake, 51%,  in the Chinese company Yihaodian.On-line shopping is booming in China. In his recent book ‘Greedy Bastards,’ Dylan Ratigan wrote that Wal-Mart’s trade with China was equivalent to it being the 8th largest country in the world.

Ridiculously High Gas Prices Expected to Hit US Cities By Memorial Day…The Mercury News, as quoted in BusinessInsider predict prices to be  $4.50 a gallon, or more, on the West Coast. Others have ramped up estimate to $5.00 a gallon.

Readers were warned in 2011 of increasing price of gas for 2012. This shouldn’t be a surprise. BUT Economist Joseph LaVorgna of Deutsche Bank said that consumers may have seen about 1/3 of the increase offset by cheaper natural gas and lower winter utility bills. Meaning it won’t hurt as much as if it were a normal winter. ….spin,spin, spin….

So What Are The Reasons For The Increase? (1) The Iranian Situation is Volatile. (2) Other Geopolitical Risks Include Nigeria, Syria, Libya, Iraq as flashpoints. (3) Lack of Refining Capacity and the refiners are raising prices. (4) Summer is Coming and American Love to Drive. (5) Supply Risk & The American Recovery. (6) Speculators Are Piling On –some estimate $20.00 a barrel in crude is spec money.

How To Play High Gas Investment?  Zacks.Com reports that investors can buy the ETF UGA that directly invests in gasoline futures. On Friday the ETF spiked 80 cents afterhours. Shares have moved in the last 52 weeks from $44 to Friday’s close over $57. a share. This is the only ETF that allows investors to buy gasoline direct. Want more info call or e me….

Who Got Hurt In The Financial Meltdown? It wasn’t the rich, or those looking to buy a home. It was the middle-class and especially those workers who were on the cusp of retiring- the Baby Boomers. According to The Pew Research, the unemployment rate for workers age 55-64 increased from 2.9% in the final quarter of 2007 to 6.9% in the same period in 2009. Not only did those workers lose jobs but their homes lost value, many became underwater. Those that bought oversized homes as a method of funding their  retirement were especially hurt. Whatever savings they had was essentially used up in early distributions. To this day CEOs of banks and financial organizations that created the mess have not been prosecuted. No high ranking board member who supposedly signed off on corporate policy has been charged for a crime.

Small Cap Stocks  Up Big 2012 but investors pulling $15.9 billion since last April.  According to Jonathan Cheng at WSJ, investors have been ignoring small caps and there has been little trading in the sector. There are small cap Bulls who expect the sector to move up 20% this year. Bill Nasgovitz, founder and portfolio manager with Heratland Funds, says the small caps have rallied so far this year due to corporate buy-backs and investors reversing their bearish bets on small-caps- not pouring new money in.

Too Early To Celebrate A Greek Deal This Tuesday? Ministers and the ECB agree now its up to investors to take a 70% haircut on a new bond exchange. The deal must have 100% of all bondholders on board. In early morning trading the European markets were slightly down both Tuesday, Wednesday and Friday.

Domestic Markets Took Charge & Hit 13,000 On The Dow ….but couldn’t hold. This was the first attempt in 4 years. The Bulls say that stocks are at attractive levels. Bears contend that the markets are overbought and say key indices are signaling a modest rest. According to WSJ and other publications, including the talking heads on CNBC, a momentum trade may take place if the retail investors that have been sitting on cash think they are missing out on a rally decide to participate. Still others are taking risk off the table.

 

Silly stuff….

Baseball Fans know that players select ‘at bat’ music. Last year Tiger Ryan Raburn’s music was Hicktown by Jason Aldean, Brandon Inge chose anything by Kid Rock and Miguel Cabrera picked Fuego by Pitbull. Now the web site Spotify announces the ‘playlist’ for the coming Obama campaign (no joke this). I’ve downloaded many of his campaign manager’s choices to my iPod for my personal liberal driving experience and those sounds include: Keep Me In Mind, by Zac Brown Band; We Take Care of Our Own by the Boss; Mr. Blue Sky by ELO and Your Smiling Face by James Taylor. In all 29 songs approved and ready to rock at a campaign nearest you. You don’t get that kind of rock with Tea-partiers….

Pimco’s Mohamed El-Erian & Joe Terranova appeared on CNBC Tuesday, at different times and roles, but with identical message- ‘Take some risk off the table. El-Erian said the the contagion risks from Greek as well as disruptions to energy supplies from Iran and Syria pose even more economic risk, ‘We have less economic flexibility – that’s the bad news,’ he said, ‘The good news is that central banks are doing all they can to limit the damages to the payments and settlements system.’ Terranova commented that risk should be taken off the table as the markets are weakening. He also said Google had reached a price that was unsustainable based on current spending and leadership.

Meg Whitman, CEO, Hewlett-Packard, has a tough road ahead rebuilding what was once a well run machine. The stock HPQ, has fallen from the low $40s to $28.59 in less than a year. She provided Barrons Tech Trader Insight to her ‘Three Bucket’ approach to getting the company back on track. The company has seen its net fall 44%. Morningstar offers a 4 star rating offering that shares could be bought anywhere around $28.00 and gives a $40.00 fair value.

Brazilian Mining Company Vale is the world’s largest iron ore producer and second largest nickel producer. If you’re looking to bet on China continuing growth buying Vale ( VALE) is a good bet, according to Alex Crooke, portfolio manager of Henderson Global Equity Fund. Shares have fallen from the neighborhood of $35 a share to $25. The company boosts 6.5 x’s forward earnings, fattest profit margins of all competitors and boosting a 4.7% dividend. The company expects exports to China to grow over 4% in 2012. Morningstar likes shares at $15.00 and values them to $31.

SEC Chairman and Meg Whitman Look-alike Mary Schapiro wants to curb High Frequency Traders. Schapiro said that while high frequency traders provided retail investors with lower costs and greater liquidity, a large portion of their trades have nothing to do with the fundamentals of the company being traded. The process is worrisome and also includes greater volatility a a huge number of buy and sell orders that are later canceled. While Schapiro does not want to eliminate the HF traders she does want some control over their methods. One idea is to charge them for cancelled trades. An estimated 95-98% of all HF trades are cancelled. Critics say that the excessive cancelled trades are straining the ability of the markets to handle trading activity. ‘Like looking in a mirror, eh, Mary?’

Schmart Money Heading For Sidelines? According to CNBC institutional investors are slowly creeping to the exits. In February about $9 million has been tossed back into money markets, while a small amount CNBC admits, the amount has been slowly growing. Insiders are also unloading shares of company stock as retail price levels increase. So far in February they’ve dumped about $4.2 billion in stock, or double what was sold in January.

S&P strategist Sam Stovall sees  resistance for the ‘500’ in the 1360-1370 range, where a pullback of 5% or so is likely, sending the average down to the 1270 range. For the full years he expects the S&P to hit 1400, which would constitute a 9% or so run from the pullback levels. The Index closed Thursday a tad above 1363.

Bloomberg News Reports the S&P 500 gets cheaper as profits of individual companies rises. The analysis estimates that the index is 9% less expensive now that corporate profits have beaten analysts expectations 12 quarters in a row. Analysts also predict that earnings in 2012 will rise 69% from 2009 prices.

A Technical Indicator For Apple…It’s called an Outside Reversal Day. This is when a stock’s high and low for that day exceed those of the preceding day. That’s a Bullish Indicator. A Bearish Outside Reversal Day is when a stock closes below the prior day closing but also lower than the prior day’s intra-day low. It happened to Apple on February 15th, which means that the stock can make new highs but is susceptible to some corrective move lower. This info thanks and a tip of the cap to Costas Bocelli, CIO, Profit Skimmer.

 

Markets tried climbing over 13,000 again Friday and closed at 12,963. FDIC closed 2 more banks Friday bringing the total to 11 in 2012. For a short week there was a lot of stuff….

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