That Was The Week That Was-1st Week April

 Ah, spring, when an investor’s thoughts go to market meltdowns. Historically traders follow the adage, ‘Sell in May and come back in the fall.’ Last year we made it to the summer when all the wheels fell off our domestic market, and it took the rest of that year and part of this to get back some or all of what we lost. So what are the schmart bunnies thinking for spring 2012? The Alan Abelson at Up and Down Wall Street, says the pain in Spain may indeed rain on our domestic parade. Spain has some major problems. The big Spanish bank, Banco Santander, is down 47.5% in the past 2 years. The single cause is…real estate, what else? While The Abelson doesn’t think much of an apocalyptic  scenario. saying even the most somnolent of central bankers and political mucky-mucks wouldn’t be alert to the perils of inaction or, worse, inept policy.(Geez, I couldn’t have phrased it better!). That someone will do something is a forgone conclusion. (But, as of last week EU lenders were kicking their troubles down the road.) While back at home, and on the flip side, The Fed Reserve chief, Mr. Bernanke, is being thought of as an awfully clever lad by not saying the U.S. Bank would step in if needed, but those non-verbal signals are interpreted that he would. In addition, there are specific troubles on the home front. Notably the good jobs are not there, even as more folks go back to work. There is but a timid increase in durable-goods orders and consumer savings is once again on the down slide- falling 3.7% in February from 4.3% in January (But, could that savings lag be from paying the income tax?).  And finally, Oil will crash. Yes, dear reader, coming on the heels of the Boone Pickens prediction, who stepped out from trying to corral the water rights for all of Texas, to pronounce that the price of oil will only go higher, some other smart folk say we can expect a crash in the price of crude. There is just too darn much of the stuff.  We are simple awash in crude. This huge of a stockpile of Texas Tea hasn’t been seen since 1984. And, for a fact, oil tanker stocks slip lower, as ships sail empty begging to haul the stuff we got plenty of, for now.  But, if we are going to see a drop in the price of crude you’d expect that would be good for the U.S. and the loverly consumer, now wouldn’t you?  Then, again, you never want to bet against the Booner who says Brent crude will top $148 as the Saudi’s are almost tapped out, and as proof  Pickens pointed to the fact that the Saudi’s opened a well that hasn’t been active in almost 30 years.

This week begins on a cautious note as last week was the worst full week for 2012. Not a surprise that there was a semi-mild sell-off in stocks last week as investor complacency & confidence was so ingrained that it seemed like 1999 all over again.Then the Friday jobs report was about as brutal as one could expect. Lots of people who’ve been out of work for ages just tossing in the towel and the unemployment numbers steady at 8.3%, which is about the same percentage Jimmy Carter had in his final years. Any retracement in the stock market has been expected and all it needed was a catalyst. That’s what any sell-off needs, an excuse to sell, rotate into other stocks and move forward. Pundits of doom will be coming out of the woodwork but be assured things are much better today than they were in 2010 or even last year.With a lousy jobs report and a reluctant Fed that may be all that the Bears need.   

Next Stop Earnings – which starts this week – with expectations low- any uptick will carry some real weight going forward. The Ben Bernanke will speak to the Atlanta Fed conference on Monday (2) Alcoa starts the earning season on Tuesday (3) Google, Rite-Aide, LDK Solar and Fastenal report Thursday (4) Friday JP Morgan, Wells Fargo and Infosys report.

Recovery The Real Deal? Tidy Whities signal all systems are Go! Underwear sales are steady and even a small drop can signal a major economic downturn. Marshall Cohen, head retail analyst at NPD Group, said, ‘We should’ve known something was rotten when sales stopped in 2009.’

Golf Rounds Are Up.  Rounds have increased 21.4% in January over 2011.

Eating Out. Annual sit-down restaurant sales ticked up 8.7% in January over the same time period in 2011. Fast food thrives during recessions. Sit down indicates a strong sign we’re on track. (I reported on restaurateur opening a handful of new restaurants in the Detroit metro area last month.)

Beauty Salon sales up 5.4% over the past two years.

Mobile Homes Sales up 30%. In December over 3800 units shipped. Nicolas Colas a strategist at ConvergEx Group said strong trailer park sales may signal stronger over-all housing.

Tooth Fairy Payouts dropped 17% last year. This doesn’t bode well but according to Delta Dental the tooth fairy is hopeful for a recovery this year.

 Monday saw strong factory expansion! The Institute for Supply Management reported that manufacturing expansion continued as did employment which buoyed stocks/ Factory employment still grew at a healthy clip. Construction spending slowed a tad. The building industry has expanded to the tune of 100,000 jobs and a glut of cheap, foreclosed homes is still keeping new home building in check. Demand, according to a recent WSJ article, may be perking up as home building permits have increased to their highest levels in 3 1/2 years.

Dr. Copper had its highest jump in price since late February. Traders have been ‘ignoring’ bad news about China and focusing on the positive. Which is a strange way to think, for most of them. Investment funds moving into commodities also gave copper a lift, said Rich Ilczszyn, chief market analyst at iTrader. Dr. Copper isn’t really a doctor but traders call it doctor because of its uncanny way to predict the direction of the global economy.

I get E-Mails For Pedicure Discounts  but have to travel 40 miles across town….so no deal for me. It’s the Groupon Marketing Machine. Offering deals on stuff we’d not normally be spending money on and the stock is already off its IPO price of $20.00 per share and sinking. Stifel Nicolaus, analyst at Jordon Rohan, downgraded the stock to Sell from Hold and set a $13.00 fair value on it. I wrote about this last week, fair warning.

IPOitis?  Some investors love to get a hold of shares of new companies as soon as they’re out of the gate. I don’t know what it is- that new stock smell? Beats me. The fact is I’ve made money trading IPOs but by buying and selling them the same day. I’ve also lost money doing that. My best trade was MasterCard. I bought, held and did well. Facebook is coming to the market in about a month. I expect a few phone calls. That’s why the Louis Navellier piece is worthy of a read. He reiterates on the more than a bushel basket of IPOs that came, excited and tanked. Recently we wrote about our old buddy Groupon and then there is Pandora Media and not to forget Renren, Inc that came out at $24 and now is going for $5.50 in less than a year. Advice is if you are not going to trade the stock on the first day of it going public than let it settle in and look at it when earnings have and the stock has had matured. Chances are your attitude may change.

Free Money? News leaked that the Federal Reserve is not keen on more bond buying  as analysts read their March meeting notes. Dan Orlando at Deutsche Bank AG in New York said it threw cold water on any continuing rally. Gold fell $40, closing at $1632. Oil was off to $103.60. Yields on Treasuries popped as prices fell. The 10-year jumped .09% to close at 2.28%. As yields go up principal falls. Most investors were looking for ‘The Gift That Kept On Giving’, namely the Fed buy bonds program and instead were shown a sack of coal, said David Gilmore at Foreign Exchange Analysts. Markets tanked triple digits as traders soured but came back and closed off lows.

Whassamatter Autos? Like an ancient but bad relationship you can’t get out of your head investors can’t get their pocketbooks around auto stocks no matter how good they perform. Seems folks keep remembering the old days when the credit department of car companies kept the autos afloat and the joke was that Ford and GM were banks that made cars just as a sideline. In those days they certainly didn’t make money manufacturing cars and trucks. Tuesday all autos reported better sales than a year earlier. GM said sales of small cars up 62% and the Street punished shares by five percent.

Apple Keeps Going Higher. While markets fell Tuesday Apple gained another $10.00 and change. Brian White at Topeka Securities set a $1001.00 price target for the stock. Gene Munster at Piper Jaffey put shares at $910 based on 14 times earnings not including the $100 billion in cash. Irrational Exuberance is not a problem for this stock said Munster. It’s cheap. If Apple reaches that value it would represent 26% of the entire U.S. Tech market. Right now it is 17% of the total. 

The ‘You-Know-What’ Hit The Fan Wednesday as investors came to a semi-realization that the era of cheap money may be over. The actual work of finding quality stocks may be beginning. Gold fell to $1618, following stocks in a solid retreat. This was the lowest price of gold since January, 2012 and below its 50 day moving average.  Gold and stocks have been moving up in tandem lately. Wednesday both fell. Folks have been trading gold as an equity- not as an inflation hedge as of late. Bill Gross, of PIMCO, said the stock plunge was much to do about nothing. He went on to say that the Fed and other central bankers had to provide or continue some sort of stimulus if they expected the stock markets to continue higher. This is dependent on how far the markets fall, Bill Gross said.

Markets Up 30% off October Low! Some say that any fall will be shallow and short-lived. The mentality among investors is to buy every dip. Others expect that Monday (today) will provide a glimpse after Friday’s jobs report.(Which we know was ugly). The markets were closed Friday. PNC’s Wealth Management chief investment strategist Bill Stone said he’s been waiting for a 5% pullback and this may be it. You hope, he said, that it is the pause that refreshes. Thomas Lee of JP Morgan said whatever happens will be pretty shallow. He said he’s been expecting a pullback for weeks. Other analysts say that the timing is right to fit the sell in May scenario. Traders expect markets to be flat throughout the summer. 

Great Cons Exposed Amy Reading writes a book on some of the most masterful con artists prior to Madoff. Dennis Kozlowski, former head of Tyco who siphoned off $600 million for his personal use. George Parker, in the early 1900s forged documents and sold New York landmarks such as the Brooklyn Bridge and the Statue of Liberty to gullible tourists. Finally, Pope Leo X, for a fee one could be absolved of sin. The book is titled, The Mark Inside.

Billionaire Warren Buffett Thinks That Income Taxes Are Too Low and Wants Everyone (including you, me and the candle stick maker) to pony up to pay more. Rex Sinquefield, a retired multi-billionaire, founder of Dimensional Fund Advisors and helped devise index funds back in 1973, is on the other side, promoting low taxes. So far he’s poured $2.5 million into a campaign to lower Missouri’s income tax. His reasons:

• Income taxes punish work.
• Stymie growth
• A horrible way to raise money.

Some of Buffett’s buddies say if Warren wants higher taxes no one is stopping him from writing a check and sending in more money to the government if he wants, just leave them out of it.

It Wasn’t Pretty! Shortened week ended with the Dow laying an egg (a tip of the hat to the headline writer @ Dow Jones  for that smiley). Thursday markets ticked down a tad, except for the Naz, which lead by Apple, continued its cruise upward. European markets ended with a slight gain, Asian were mostly lower. Oil gained about 2% to finish at $103.31 and gold added 1% to end at $1628.50. Facebook decided to list on the Nasdaq, confirming it as the favorite for high-tech companies. Retail made some noise as a handful of retailers beat analyst expectations. Costco fell as same store sales rose less than expected. Macy’s fell for the day but on good news. Speaking of shopping centers…there may be a rebound in Mall occupancy. There has been virtually no new retail development for the last three years and that plays into current landlord’s existing property. According to WSJ this is a sharp departure from the last few years when retailers were consolidating and closing stores. Jobs remain unchanged at 8.3% unemployment. The economy added approx 120,000 non-farm jobs in March, not enough to move any economic needle forward but enough to provide a stall to bullish investors. This week should confirm if a full bear market exists as Europe and the lack of future Fed stimulus worries investors.

It Ain’t What You Make It’s What You Keep!

Warren Sapp, All-Star Football Player with Tampa and Oakland filed for bankruptcy citing $6.7 million in debt, including child support and alimony against $6.2 million of assets.

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