That Was The Week That Was –1st Week March

Karen Hube of Barrons.com researched what the 40 top money management firms devoted to wealthy clients were doing in the asset allocation department and came  up with some not so surprising news. More money is being put to work in dividend paying stocks and funds with global reach. Exposure to Europe, needless to say, has been slashed and domestic funds increased. The scale back, according to Hube, has been at least 50%. Still, there are some wealth managers that are picking and choosing certain select European stocks that have fallen especially hard. Wealth managers are underweight Treasuries, which is no surprise since the risk to return is just not there. Also, listed as an almost ‘must have’ is emerging markets debt. On the REIT side apartment housing is finding acceptance. Again the REIT market is more or less a pick and choose area. Finally, cash is set aside for buying opportunities. Probably more in 2012 than 2011 more for opportunity buying than a risk hedge.

Did You Know I Update Your Accounts Every Month using Morningstar Principia? If you want to see your portfolio with risk, efficiency and returns you only have to e-mail or call.

Apple = $620.00 says Shaw Wu, an analyst at Sterne Agee and Leach, Inc. The math is using 12 x’s earnings in 2012 and 2013 plus $100 net cash. There are projections for the stock to go to $1500.

Pessimists versus The Oracle of Omaha Harry Dent, Gerald Celente and Robert Prechter, confirmed half-glass empty –pessimistic kind of guys all have been preaching a cataclysmic end to the U.S.A. and the stock markets. Prechter has been predicting a 1930’s style deflation and stocks could lose half their value. Buffett, on the other hand, is having none of it. On CNBC he said the 2008 economic meltdown was a financial Pearl Harbor and the country and markets have been coming back ever since. It’s a great time to buy a house and own a 30-year mortgage, he said. He also added its a better time today to own stock than 10-years from now and he predicts more people will be working at the end of this year than the beginning.

Markets Fell Monday The Dow fell 18 points, far off its lows of the day. Gold closed under $1700. The S&P 500 was off five for the day. Worries over China slowing down was the catalyst for a slow Monday trading day. Some investors worry that thinks are too quiet. But volume was about what you’d expect for a Monday and the markets did come back, which was creepy kind of trading day. Insiders, according to Mark Hulbert for the Dow Jones, and a Tom Bergeron look-alike, are in a Bear mode and think the next market move is down and not up and are selling shares.

Mark Hulbert. Tom Bergeron

New Update on Apple- $710 Barclays Capital reiterated an overweight on Apple and hike share expectation to $710 a share. With a new iPhone launch due in September the analysts expect Apple to earn a profit of about $75 a share.

The Worst Time to Buy Stocks? According to Randall Forsyth who reported that Walter J. Zimmerman, Jr., who heads technical analysis for United-ICAP thinks the perfect storm is being set up. The following reasons for Zimmerman’s bearishness: The Markets are overvalued, overbought, over bullishness, rising yield syndrome! The criteria for his projection is:

• The S&P is trading more than 8% above its 52 week moving average.
• The index is more than 50% above its 4 year low.
• The 10-year Treasury yield is higher than it was 6 months ago.
• Bullish sentiment stands at 47% versus Bears under 25%
• Escalating tensions with Iran.
• Surge in oil prices.
• And a hint of uncertainty.

( plus a lot of people think its just too darn quiet out there.)

What worries some managers is that investors will get tired of waiting for markets to determine direction and put new money to work at the worst possible time. 

Tuesday Markets Gave Up 200+ It was the worst market day of 2012 on fresh and continuing worries about our old buddy Greece and the impact of a disorderly bond default. It seems you can’t trust anything anyone says anymore and it certainly doesn’t seem to be shameful to lie to the world of investors, which may be the case here. Investors and analysts will be spending the week sorting things out.  On the NYSE ten stocks fell for every one issue gaining. Gold fell under $1700 to close at $1672. European stocks also closed lower as did crude which gave up $2 to close $104.70.

In a confidential memo, dated February 18th, the IIF (an organization of organizations), warned of, ‘very important and damaging ramifications that would result of a disorderly default on Greek government debt.’

Not so Fast, said Jimmy Cramer Wednesday morn on NBC’s Today Show. The markets were really reacting to the high price of gasoline. Every economic advance has died when the price of gas goes over $4 a gallon. The Greek problem will be solved and what investors should be concentrating on is the price of oil and ultimately gasoline. The jury is still out on the Greeks, at the end of the week, and may still cause economic disruptions.

Buy & Hold Investor Cannot Die’ According to Mick Weinstein of Dow Jones who writes that the buy and hold investor traditionally does better than anyone except the value investor who have learned how to resist price trends, painful as that may be. In other words, unless you know how to read technical charts, understand fundamentals you are better off allowing a fund manager and a simple allocation work for you.

‘Uncle!’, sez pension managers. Company pension managers are urging Congress to allow employers to put less money into their pension plans. Labor unions are on board, according to Kristina Peterson of the WSJ, to allow companies put in less but not to underfund their liabilities. The problem stems with low interest rates being seen as normal for the foreseeable future and companies use a discount rate to calculate their contributions based on a specific mix of corporate bond yields of the last two years. No word if anyone is listening in Washington.

China revised growth estimates down and the government targeted 7 1/2% growth versus 8%. Worrisome analysts said this new piece of business along with a backdrop of European woes made them concerned about China’s ability to engineer a ‘soft landing’ as it remains a ‘decelerating’ story.

Markets reversed course Wednesday and were mildly up but,,, Michael (The Technician) Kahn, wrote that investors should be vigilant. He points to technical damage done on markets Tuesday, the S&P 500 and Russell 2000, plus the industrials starting to lag the broader market. Don’t be surprised for a quick reversal.

Joe Terranova in his Blog offered investors a look at commodities as an alternative investment. Agricultural sector is his second favorite along with oil and refined products as his best bet for 2012. Investors can buy an Ag ETF or stock in Monsanto and/or Dow Chemical. There are also commodity funds that mimic the commodity index that many client currently own. Still the biggest names in oil and gas are a way to participate. Funds that own oil, gas and coal are another way to play the energy sector.

Not that many years back that the average investor couldn’t buy what was once reserved for the uber-rich. Now everyone can invest in lumber, raw land, commodities and precious metals. These sectors can be bought in mutual funds, ETFs or individual stocks.

 

‘Frothy,’ said Pete Najarian about certain casino stocks on CNBC Thursday. Frothy is not exactly a word used in connection with market action but aptly described where we are in the economic year. Not much is able to knock down where we are, even warnings of war from Steve Forbes who spoke to the Real Estate Strategies conference in Orlando Thursday. ‘Don’t panic if Israel strikes Iran,’ said the editor-in-chief of Forbes magazine. ‘It could get ugly very quickly.’ He went on to explain that Israel does not trust its security to anyone and when the Seven Days war started Israel notified the U.S. only when its planes were in the air. ‘Oil prices and insurance rates for oil tankers will skyrocket,’Forbes warned.

The same Najarian called McDonalds ‘an absolute buy’, on the dip in share price as the company announced that it missed global sales estimates. On the flip side trader Steven Weiss thinks differently and would trim his position saying that the company has been running well in excess of what to expect long term and some money should be taken off the table. MCD closed around $97 a share.

The Japanese Markets are Happy-Happy. Recovering nicely from a tragedy one year ago Japan is looking good, according to Ben Levisohn at Dow Jones writing for the WSJ. Japanese stocks are among the world’s cheapest- almost half of what the S&P 500 index is valued. Japan’s Central Bank has taken a page out of The Ben Bernanke play-book and bought Japanese bonds, making the yen cheaper and more competitive in the global markets. For investors looking to add to their portfolios a position in Japan companies they can do so by buying shares in certain select mutual funds or ETFs. Also Japanese stocks in the auto area could do nicely going forward.

Long-Term Care Insurance is Expensive. The premiums are costly plus the cost of care is getting pricey. Recently some companies increased their premiums almost 25% to compensate for the escalating cost of care. Then there are companies that were major players in the field and couldn’t stand the losses, namely Met Life and last month the announcement from the Unum Group. Most people cannot afford the cost of long-term care insurance, and others pretend that it won’t happen to them. Now, Prudential, one of the largest marketers of the product, has halted the sale of their individual long-term insurance and is exiting the business. Two things happened: the cost of providing care under the policies and the life expectancy of those receiving care were vastly underestimated. There are other companies that offer LTC policies but clients are cautioned to check claims paying ability and history before committing premiums.

Put In Your Order

With the markets trending higher and higher investors are not sure where to step in and make a buy. A good thing to know is that you can order your favorite stock at a price you find attractive. Let’s say you like ABC but the price is too expensive. Call your broker and order to buy the stock at the price your willing to pay and keep the order in place for as long as it takes by stating, ‘Good ‘Till Cancelled’. If your stock hits that price it’ll automatically trigger a buy. You can do the same with a sell order to protect your position if you feel the markets are too high and expect them to take a tumble. And, yes, you can always cancel your order if and when you change your mind or the markets do it for you.

Gold Holdings Are At All Time High. According to Bloomberg gold holdings in exchange traded funds is at 2.407 metric tons. That comes to about $131 billion.

Jobs strengthened with over 200,000 finding work last month- still its 8.3% unemployment as more people came out looking for work. Stocks were muted Friday, gold closed $1715 and oil finished at $107.42.

Finally- FDIC closed one small bank in Chicago bringing the total in 2012 to 13 closings.

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