That Was The Week That Was-4th Week March

Time Magazine Suggested That The U.S. Economy Needs ‘Its Spinach’.

‘It’ being called, by some, the 97 pound recovery that some pundits say could easily shrivel up and blow away. The reasons: Unemployment is still over 8%, fear is that things are not getting better dominate the airwaves, new home sales were recently kicked to the curb and more talking heads worrying folks with a disaster coming at them right around the corner. The facts, the Time report concludes: It just isn’t so. It may be a wimpy recovery but all in all things are getting better. Time reporters Rana Fooroohar and Bill Saporito illustrate that the jobs picture brightens every week, housing permits have hit a three year high and Goldman Sachs chief economist Jim O’Neill, who’s been bullish on America for some time, tells whomever is listening, ‘The U.S. economy is returning to normality.’ Some additional facts I leaned to help you sleep better…

• Autos, agriculture and energy are busy and keeping railroads moving. Railroad Union Pacific is replacing 10,000 rails a day and rebuilding infrastructure.
• Chrysler is pouring millions into plants in Toledo. Honda is also growing in Ohio. GM will invest $2 billion in 17 manufacturing plants in 8 states.
• Raleigh-Cary pop. boom have lead to job growth in the health care industry.
• Austin is the coolest city in Texas and home for IT and energy. Apple plans to double its workforce there to 7000.
• Distillers expand in Kentucky.
• Logan, Utah boosts a 3% unemployment rate. One in five workers works in manufacturing. Pepperidge Farm is expanding goldfish production.
• Cedar Rapids, home to avionics and aircraft assembly companies, where biz is booming.

Plus America has a much younger work force and a cheaper currency to compete globally (Thank you, very much, The Ben Bernanke), and a diverse demographic and culture that oddly work in our favor. What makes us feel poorer is that the average worker hasn’t gotten a statistical raise since the 1970s plus the high cost of energy has made shipping products to and from faraway places more expensive.

Can this be called a Wimpy recovery? Not in all areas. For one thing Tech is still cheap, according to Barton Biggs, once of Morgan Stanley, and now of Traxis Partners, a hedge fund management company. Valuations, Biggs said, of big cap tech stocks are reasonable and have much further to go. For More on This Please Go to April 2, 2012 Time Magazine.

Super Ben put zip into the markets Monday!  He did it by not saying he would have the Federal Reserve do another round of Quantitative Easing. It was all about what he didn’t say that he had investors believing he would do. The markets had a triple Monday right after The Ben spoke. Usually markets tank when he speaks. This market upside and sudden Fed Chief silence caught crystal ball gazers unawares as they have been pondering what the Fed would do in 2012. The answer: Forgetaboutit for 2012 and probably 2013, as rates will remain low. The Chairman said he worries about hiring and the lack of ‘catching up’ of the jobless rate. This was more than just a ‘signal’ the Fed’s resolve to keep rates low. The following chart provided by the Labor Department and originally on WSJ, shows the progress the U.S. economy has made, but not enough to suit the Fed.

Investors have been tracking the Fed and pondering when and by how much rates would be hiked in 2012. The answer came Monday most emphatically – no hike in 2012. Expert tea leaf readers expect the Fed to raise rates more than 1% in 2014. The Dow jumped 161 points on the news and all indices did well for an astonishing good day for the markets Monday.

You won’t find Yours Truly on Facebook or any social website because of the nature of my business. It’s not that I can’t (I could) but I won’t. It all has to do with what I do for a living and the penalties if you don’t do it right. That said, social web sites are here to stay- especially Facebook. This is not only a social but rapidly growing political site. Two-time Israeli Prime Minister and current President Shimon Peres recently became a Facebook devotee. He was quoted as saying, ‘I think peace should be done not only among governments but among people. It was impossible,’ he said,’ before the Facebook.’ The Facebook IPO is coming in May. This is just one more compelling reason…out of almost a billion.

China is in an economic slowdown. It’s one of those times investors should be looking to buy bargains. In 2011 the Chinese stock market index  of blue chips fell 18%! This year it’s up almost 8%, according to Ken Fisher. I thought of the Chinese Google Baidu (BIDU), trading under $150 a share. Ken has other ideas on what to buy:

1. China Life Insurance Company
2. China Telecom (CHA)
3. Yanzhou Coal Mining
4. Aluminum Corporation of China
5. PetroChina- China’s biggest oil and natural gas provider (PTR)

Autos stocks stalled. Jimmy Cramer reiterated Monday evening what some pundits already said, domestic car manufacturers are having a rough 2012. It may be as good as it gets for Ford and GM stock price this year. Recession in Europe plus high gas and sale of small cars doesn’t put moola in the bank. Car companies need to sell those big SUVs and trucks at $10k a crack profit to bolster stock price. Ford is selling a lot of cars but missing Wall Street analyst expectations.

Dull Tuesday as markets lost their zip in the last hour or so of trading and ended down over 40 points. Gold down, as was oil. Either this was a rest stop, a pause before window dressing or, as some quips on CNBC’s Fast Money said, ‘Watch the small caps for a market retracement.’

Mr. Johnson @ Morningstar gave his 2 cents worth of quarterly commentary and reiterated his December vowels and consonants, expressing slow growth, recession in Europe, high gas wouldn’t derail the economy and low interest scenario. In other words, nothing you haven’t heard already. 

I spoke to my buddy who sells real estate up north on Tuesday and he said he was busy-busy. Nationally home prices fell again, only this time there was less of a thud. The bottom may be near. Inventories for homes are sharply off from one year ago, wrote WSJ reporter Nick Timiraos. Again, home builder stocks (certain select) make some sense right about here.

Gold’s next run to $2000 may be because the world’s developed central banks need to increase their reserves. George Osborne (UK Chancellor - FYI) let it be overheard that the Bank of England may start stockpiling gold. Under previous prime minister Brown the UK sold off a lot of gold at the bottom of the market. Their reserves are a paltry $46 billion versus China’s $3.18 trillion, Japan’s $1.2 trillion and the U.S. has less than $150 billion.  If Central Banks start their buying it is because lenders like to see something behind a county’s currency beside a printing press. In the greater scheme of things the UK has almost no reserves to speak of.  Gold lost its spark Wednesday as it tested $1700.

The Rich are different and regular folks have a weird take on what the rich spend their money on. Here’s the truth as Mendelsohn Affluent Survey found:

1. 27% of the very rich will invest in stocks & mutual funds this year as compared to 76% who’ll take a cruise.
2. 42% will update, remodel existing homes while 8% will make a new home buy.
3. Here’s where the rich really shop:

• Walmart 74%
• Target 73%
• Home Depot 63%
• Brooks Brothers 6% Tiffancy
• 5% Luis Vuitton 2%  (surprised?) 

Speaking of the uber-rich -Dennis Rodman is broke! Not exactly world beating news but the 50 year old ex-Piston blew $27 million and has nada-zip in the bank and is behind some $1 million in child support. His agent said The Worm has barely enough to support himself. ( it was probably all those fancy lady dresses that set him to ruin not to mention the facial hardware…) Where were his advisors? Hello?

Wednesday down. Things started pleasantly enough in the morning but by mid-afternoon the Dow was off 100 points and finally finished off  72 with oil leading the downside by shedding about $2 a barrel. On Thursday morn Spain’s unions staging protests against future austerity moves. Global IPO (Initial Public Offering) has fallen 69% in the first quarter. There have been 157 deals (must’ve been smallish stocks shares offered and the noise hasn’t been deafening). The total raised is a teeny $14.3 billion, the latest Annie’s Foods, a wholesome organic food company looked to net around $11 million, confirms the smallish share issue is where its at. The deal was done last Wednesday, in case you blinked. Annie stock roared but underwriters are doing the same trick of small number of shares in order to pump price. These deals stink and as Cramer once said, Ya’ll stay away and buy later.

Weak Profits?  1st Quarter loads of Negative Earning Guidance Among The S&P 500 stocks. The list contains: Allergan, Baxter International, Carnival (Who expected?), CenturyLink, Danaher, Dominion Resources, eBay, General Mills, PepsiCo, Texas Instruments and WalMart; to name a few.

60 Minutes had Sergio Marchionne interview about the resurgence of Chrysler and Fiat. Such a good interview I wanted to run out and buy a car. What Sergio didn’t say then was that he wants Jeep to be the dominant brand at Chrysler. The brand will build a St Petersburg, Russia factory (plus a re-tooled Limo factory in Moscow). He wants to market a Jeep to every Russian. The Russians call all SUV’s Jeeps but today the price tag is so expensive that Jeep will build a smaller car using Fiat body frame.  Jeep expecting to sell 120,000 of them in Russia. The global expectation is to sell 800,000 Jeeps in 2014. The goal for Chrysler is a Jeep in every wealthy Muscovites driveway.

Markets Hit a Wall Thursday. Worries over Europe and a sudden lag in consumer confidence caused markets to drop but claw their way back by closing to a positive 20 point Dow.S&P closed over magic 1400. Financials and oil were drags on the market.

Wedge Partners, a 10-year independent research firm tossed a poop into Apple’s punch bowl Thursday. The firm wasn’t going with the crowd on Apple’s stock to keep a-rising. Wedge reports that there are plenty of iPads at all stores and demand wasn’t outstripping supply. Shares backed off their daily high.

A Barclays’ Natural Gas ETN Implodes. While this shouldn’t be a bother for my clients its wise to know that an ETN mostly deals with derivatives and not the actual commodity. A few days earlier the Credit Suisse ETN VIX ETN imploded by 60% and now the iPath ETN GAZ that’s supposed to track natural gas fell 55% since March 19th. Remember ETN are Exchange Notes and no commodity, except paper, backs them. I don’t personally use or recommend ETN’s .

Seeking to Guarantee Long-term Income? News that the average American male now lives to age 83 puts stress on income. There is a way to make sure that in later years folks have money coming in the door using something called ‘Longevity Insurance.’ This is basically an annuity that doesn’t kick in with income until 80-85. People set aside about 10% of their savings in a longevity annuity just in case they live too long. The time to buy such a policy is between the ages of 55-70. There are several quality companies that sell this product but call me for more information if you are thinking of doing this.

Bestest Quarter Since 1998! That’s a Fist Pump, baby! Energy, healthcare and consumer staples rose the most among the 10 major industry groups. The Dow up 8.1% for the quarter. The S&P plus 12%. Apple up 48% this Year! (Yeah, baby!). The U of M and Thomson Reuters survey of consumer sentiment for March climbed to its highest level in more than a year as folks started feeling better about their economic situation. The Dow’s up 7 months in a row and needs only about 7% to top the record high that it hit in October, 2007.

Trading Volume over the past quarter has been less than stellar. Mom and Pop have been notably absent due to the financial crisis, the bear markets and last year’s incredible volatility. There is a lot of sitting on the hands, said Peter Boockvar, equity strategist at Miller Tabak. Daily volume of the S&P 500 stocks is averaging 5.8 million in 2012, versus 6.3 million in 2011 and 6.7 million in 2010, according to Factset Research Systems, Inc. The bottom line is a lot of people missed the bus this last quarter.

Groupon fell Friday. The Chicago company revised numbers on customer refunds. Shares fell 6.4% to $17.20. I don’t get this business model, it seems so 1970s to me….discounts, coupons, etc.  

Going Forward. Ben DeSharko at MarketWatch offers up his technical analysis using the St. Louis Fed Stress Index and the Chicago Reserve’s National Activity Index. As a reader you just want to know direction and not how Ben did the calculation to figure direction, right? The charts show activity is increasing and market stress declining. Market and economic conditions are oil and water but according to Ben the Markets move higher from here…until, he writes, he is proven wrong. That, he says, will come in a few weeks. The fundamentals are not strong enough to shrug off slowing earnings growth. Ben wrote that he is compiling his shopping list of low volatility stocks he can rotate into when the markets move lower.

Bert Randolph Sugar died a few days back.  Sports fans will recognize the face, cigar and hat before the name. Whenever he was on-air I would stop and listen. I knew he was a prodigious writer. What I didn’t know was that he authored over 80 books. Nicknamed The Hat Bert Sugar was the Dean of Boxing and knew more about the sport than any other person. He died much too soon at the age of 74.

Finally, FDIC Closes One Bank. Fidelity Bank in Dearborn, Michigan closed. Huntington Bank taking over customer accounts. Total Year to Date is 16 Bank Closings.

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