That Was The Week That Was-3rd Week April

Gold Finished the week of April 13th at $1660 an ounce. It was as high as $1900 in 2011 before coming down to where it was the other day. Still many believe shares in gold and in the stocks of gold miners can and will go higher. Darren Pollock at Cheviot Value Management is a bona fide Bear with no good thoughts about our domestic economy. He believes gold stocks have ‘languished’, even as equities have staged an ‘impressive ‘ rally. He calculates that gold is trading  at a 8-1 stock market ratio when it should be trading closer to 5-1. If he’s right that means, according to a recent Barrons.com article penned by Alan Abelson, gold should be trading at $3,000 an ounce. Pollock also points out one group of investors, namely the central banks, who are ‘keenly’ aware of debt monetization, another way of saying- lower currency value and higher inflation, are busily accumulating the precious metal. Pollock believe that there is value in the gold miners and suggests investors buy the ETF Market Vector Gold Miners GDN, to get an allocation in gold miners. The GLD symbol for the ETF that buys and stores gold usually trades around 10% of the actual price of the metal. However, Pollack believe a correction is due for gold and investors should wait before stepping in.

Last Thursday Markets Fell Across the Board -Causing Concern Investors Were In For Another Session of Summer Doldrums. The Chart below used resources from Federal Reserve, National Assoc of Realtors and US Labor Department and published in Friday’s April 20th WSJ.

Is There A Pullback in The Market for 2012? News on anything from a mild dip to a repeat of 2011 has been hashed and rehashed. The markets tend to always disappoint the greatest number of investors.   Others disagree. Ken Fisher calls the economic climate, ‘as beautiful as I have ever seen it.’ And Quincy Krosby, market strategist at Prudential touched on the greed factor when he said, ‘Nobody wants to wake up to learn there was a big move.’ Still every Bull market pauses. Jim Stack at InvestTech Research said that during the great Bull market of the 90s there were 24 corrections of more than 4% and from October 2002 to October 2007 there were nine. Still Investor Intelligence advisor services found that Bulls held an edge 44.1% down from 52.7% a few weeks earlier. Bears edged up slightly 23.7% from 21.5%.

Before Investors Get Scared to Death of Summer, Steve Reitmeister at Zacks.com wrote that while sell in May and Go Away is a market mantra the facts are that:

• 59% of the time stocks went up from May through October.
• 5 out of the last 7 years have been profitable over that same period of time.
• Some big profitable summers include +18.9% in 2009 and +15.6% in 2003.

Charities Unwitting Publish Social Security Numbers of Donors! Identity Finders discovered that between 2001 and 2006 fully 20% of all non-profits published the social security numbers of donors, scholarship receipts, tax preparers, directors and trustees on their tax returns, which are public record. There were 132,000 charities that published 473,000 social security numbers!

Organization Didn’t Come To The Option’s Business Until the Early 1970s. Until then stockbrokers and investors did their best matching up sellers and buyers and it was a hodge-podge with prices all over the place. Many times options were sold by advertising in the newspaper. With organization came full disclosure and transparency. Transparency, as defined, as the left hand always knowing what the right hand was doing.  It also provided up-to-the minute prices. This in order that no one is blind sided with an off the wall price. Which is what happened to traders a week ago when a huge private block option trade on the Euro came through ( the Euro is known as the most traded of all options), and traders on the floor didn’t learn about it until after the deal was done. As the investing world watched frustrated traders left their posts and walked out of the CME trading floor to protest this blind-sighted trade that could and probably did cost several of them a lot of money.

Pink Slime! Blogger Bettina Elias Siegel started a petition at Change.org asking Ag Secretary Tom Vilsack to put an immediate end to the use of ‘pink slime’ in schools after seeing a photo of celebrity chef Jamie Oliver pouring raw ammonia over a mound of ground beef in an article published by British newspaper TheDaily.com, owned by the muckrakers from News Corp. entitled, ‘Partners in Slime’. Siegel, a forty-something, Harvard educated law grad started a blog, ‘The Lunch Tray’, based solely on the information contained in the on-line news. The result is that BPI, the company that manufactures ‘pink slime’, is almost out of business and has had to lay off 700 workers. The truth about the product and the company is out in recent issue of BusinessWeek Bloomberg. Elton Roth, the owner of BPI, discovered a way, some 31 years ago, to take scraps of beef, that normally would be wasted, and remove the fat by spinning it incredibly fast like in a lettuce dryer, and quick freezing the remaining pink pulp that when mixed in with regular ground beef made the overall combination of meat leaner. When he got the news of four children dying from an E. coli poisoning in 1992 and 1993 Roth stepped up and asked the U.S Department of Agriculture if he could treat his product with a ‘puff’ of ammonium hydroxide after the fat was spun out of the scraps of beef. The puff raises the meat’s pH to a level that can kill bacteria. He didn’t mix or pour raw ammonia into the meat! Every carton of Roth’s meat is tested for pathogens before going to customers. After Siegel started her viral rant in 2012 customers ran from BPI, which has been, according to experts, in the forefront of food safety for over a decade. McDonalds, Wal-Mart, Burger King, Kroger and Taco Bell all have used the product in the past and all have quietly stopped ordering it. The company has closed three of their four plants and laid off half their workforce. Unintended consequences borne of too little knowledge and a viral planet. Even as this story has been out for weeks no major network or newspaper has reported on it!

Taxes on Mutual Funds A Mess, sez Chuck Jaffe, on the day tax payments were due last week. Why is it that mutual funds cannot track exactly what and when you buy instead of lumping in your capital gains with everyone else who owns shares in the fund? The issue impacts 90 million investors and is generally a pain every year. Someone who buys a fund in September is stuck with the same capital gain as someone who bought in January even though the price per share is different. Which is the reason many representatives and investors do not buy funds in non-retirement accounts after September 15th.

The Chicken Business Had a Lousy 2011. Things could be different now that Chefs are  singing the praises of the ‘dark’ meat from poultry and that has created a buzz in the biz.  Chicken processors are feeling the pinch as there is a shortage of dark meat. Ten years ago boneless chicken thighs sold for 1/2 of what boneless chicken breasts sold for. Not anymore as both now sell for an average of $1.30 a pound. With only 2 legs per bird genetic scientists may soon create three or four legged birds to make up for the demand.  

Musical Chairs? Monday saw markets move around-a bit. Apple saw a continuation of a painful selloff. Jimmy ‘The Mouth’ said it was orchestrated by those that want Apple lower. Dow was up 73 points as the Naz, lead by Apple fell by 23 points. Apple lost $50 billion in just a week of their market capitalization. Shares have been up 43% year to date. Worries, or those worries created by rumor mongers, say that Apple Mac may not keep pace with sales estimates. Shares have given up almost 10%. Still Analyst Gene Munster, who loved Apple when it was trading around $16.00 said the stock is going to $1000. The stock got hammered this past week.

Gene Munster not to be confused with look-a-like Ed O’Neill Modern Family star…who probably uses Apple…

Tuesday Surprise Out of the Blue! Stocks rocketed! All indices up, Apple regained its form and the Nasdaq was up while gold lost a few  $s and oil closed a bit over $104. There was nothing exceptionally noteworthy about the rally except perhaps as a rebuttal to last week’s sell-off. The Biggest news is the buzz that Apple may indeed be ready to tank and investors waiting in line to buy shares at a ‘reasonable’ price may do well to wait for shares to fall before doing so.

Chris Rowe @ Tactical Tuesday on the Blog the Tycoon Report  said he was convinced that Apple shares could fall another 90 points. He writes by mimicking Jimmy Carter in the Presidential debate when his five year old daughter Amy (ya’ll remember this one), said to her daddy that nuclear proliferation was too scary. Well, Chris wrote that his five year old daughter looked at a recent Apple chart and said, ‘Daddy, this stock has to go down. It’s gone up too fast.’  My five year old son back in the day couldn’t flush a toilet let alone understand a stock chart, but that’s a different story. Chris goes on to say that he expects Apple to retrace and investors can find support and monetary happiness when shares find $535 and/or $505; suggesting to buy 1/2 your allotment at the former and the other half if shares retreat further.

More News on Apple confirming over bought conditions and ‘watch-out below’ scenario. Ramki Ramakrishnan noted in his blog that investors should look for twists and turns from Apple and a possible low of $510 a share. On Thursday shares in Apple fell as Verizon reported  iPhone activations were down 26% from the 4th quarter 2011. Apple closed at $585. Wednesday markets were lower across the board as investors continued their rotation from tech to safer consumer stocks in anticipation of a stock market decline. This from CNBC talking heads as they analyzed the action.  Going Lower and a good reason to sell before May, according to technical analyst Michael Kahn at Barrons.com. Kahn writes that stocks need a few big upside surprises on the earnings front. Another drop in the Nasdaq would confirm the party is over, reports Kahn. Who also said… ‘The stock market needs good news and needs it now. Stocks must follow-through to the upside quickly. If they can’t it is going to be a rough summer.’

  Jobless Claims Hit Higher Level Than Expected. Claiming 380,000 initial claims for April revised numbers indicate 388,000. This may be a certain indicator that the jobs markets have stalled.

Facebook scheduled for May 11th. In the meantime Facebook ‘like’ investments getting a charge- Splunk, Inc., a new IPO, had a double off its intended price. It’s a software company with clients like Google and Edmunds, Inc. The action was all before offering to the public. Once ‘out-there’ shares pretty much leveled out. By the by, the company was formed in 2004 and is still unprofitable. Speaking of IPO’s…Hedge Fund/Private Equity Firm Carlyle is going public, joining Blackstone and Fortress. Before you plunk down your dough heed the history as private equity has disappointed everyone except the owners of the firm when they went public.

Ford preparing for an entire ‘plan’ for the China market. Share of Ford fell under $12.00 as investors continue to ignore the autos.

Dow up 1.4% for the week, the Naz off a smidge, even with Apple being trashed. Apple fell to $573 and was down for the third straight session Friday and remains up 40% for the year but off 10% of its all time high. Goldman Sachs and Bank of America were also beaten up on options expiration day Friday. But overall the financials did rather well even though there was some weakness in the sector. Gold closed at $1643. Slowly, dripping  down as metals were being sold. Gold found itself lower at the close this past Friday than it opened on the previous Monday.

Finally FDIC closed one bank in New Jersey last Friday bringing the total to 17 for 2012. The number of bank closings has really slowed down. This time last year there were 34 bank closings. In all of 2011 92 banks closed in and in 2009 there were 140 bank failures.

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