That Was The Week That Was-4th Week July

I had a different open for this week’s blog but instead decided to report on why Markets moved the last few days of the week with the Dow over 13,000 for the first time since…(yipes!) May 7th! It started as your typical lackluster week, as my next piece reports (see below Boxers), but on Thursday the ECB announced that they would do whatever they had to do to save the Euro and all bets were suddenly changed from shorting the market to covering shorts. On Saturday news that Germany and France jumped on the bus to proclaim their devotion to saving the euro was announced. But it all started with Thursday’s news that turned investor’s heads and wallets. The reality is there wasn’t so much a rally on Thursday as there was a covering of short positions in anticipation of a stock rally.  In other words-Thursday was the set-up day for Friday. I got the impression, and it was confirmed, that no matter what the news on the US economy Friday morning the markets would rock. In fact the GDP numbers on Friday confirmed that US growth is slowly sinking and we’re closer (if not actually in) a recession. Barrons reported that the economic report card for the US economy was magna cum lousy. The first quarter growth was at 2% and fell to 1.5% in the second quarter- if not a recession number an anemic number at best. This GDP took jobs from 225,000 (est) to 75,000 creation rate per month.Consumers also disappeared in the last quarter. It’s not that you, me and the candle stick maker do not want to buy a new car, refrig or a three pack of tidy whities; it’s that we’re keeping that plastic locked up in a drawer and only buying essentials- even as the price of gas falls. No secret that’s its the lack of direction and confidence from Washington and Europe that hurt retailers as we’ve buttoned up our pocketbooks. Also the dunderheads in Washington have allowed the tax crisis to fester, causing a lack of guidance. Without action by lawmakers the $600 billion in higher taxes and reductions in defense and other government programs will most assuredly throw us into a deeper recession. The only true bright spot has been the surprising and almost forgotten home builders that have shown a miniscule increase. But getting back to the markets on Friday they moved back to where we were earlier in the year in anticipation of more monetary easing by the Fed. Now we look forward to the Federal Reserve if they keep their word on more easing through buying the long-end of bonds. We also await what the EU will do to provide some assurance and breathing room for Spain and Greece. The EU problem, unfortunately, will be with us for some time.  In the meantime the markets move counter to what’s happening in the real economy. These market moves have nothing to do with fundamentals or value. They are simply siding with the central banks. Nothing really has changed, my friends.   100 days to election.

Earlier before Markets marched higher…

Like Boxers Evenly Matched…the markets mood shifts on rumor and innuendo. It’s not pretty but according to Tomi Kilgore of Dow Jones the Bull Trend is still up! I refuse to bore you with all the reasons  but Tomi gives the upward trajectory trend line on the S&P 500 from June 4th through last Wednesday and the 200 Day Simple Moving Average (SMA) as primary drivers. These trend lines are keeping the Bulls, my friends, in the game. It all has to do with Dow Theory which simply defines, ‘The Trend is your Friend.’ On road trips I listen to financial news on Bloomberg Wall Street radio (and not the frightening amateurs) and the analytical mood is noticeable as professionals discuss what lies ahead instead of the gibberish Armageddon being foisted on the American investor.

Click to Listen to My Podcast on the value of seniors buying higher yielding longer maturity bonds with death puts.

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Apple! I and a few clients bought the stock before the numbers were announced Tuesday after the bell. The Wall Street Cheat Sheet whispered that Apple could put up some home run numbers. They did but the numbers were not enough to beat analysts expectation and the stock fell in after hour trading. Analysts still love the stock and truly believe that it will retain its dominance in the smart phone, iPad and iPod and coming soon to an Apple store will be the Apple television. Apple has not made the mistake other firms such as Motorola made in the past and has integrated its products from iPhone to iPad to iPod. Going forward we should see the new iPhone 5 and a mini-tablet. This is a company that has a P/E of around 11, about $100 billion in cash and equity and no debt. Even as the stock fell on missing earnings there are analysts upgrading the stock higher. Stuart O’Gormon of Henderson Global  has set a target of $1,200 and Brian While of Topeka Capital says  $1,111. CNBC analysts Tuesday called Apple a must have stock and predicted $1500 by 2015. Shares in Apple closed a tad under $600 Tuesday. Morningstar confirms that Apple stock shares could and would bounce a bit as consumers hold back buying old product and await the more current versions of smart-phone and tablet.

Facebook makes numbers! But the stock is punished with vengeance! Zynga, the on-line game company associated with FB, missed numbers horribly and the stock price was trashed by traders. Because Zynga pays 30% of fees to Facebook investors assumed that the future is cloudy for Facebook as well. This may or may not be appropriate. Morningstar’s analyst Rick Summer warned in June that FB has a bright future but revenue growth and profits could stumble. Also as CNBC analysts reported the messed up IPO stink still lingers on the stock and investors jump ship much quicker than if the stock offering went well. Expect those original investors to cut and run in August when their lock-up ends.

The big problem is there is reticence among investment professionals to cuddle up nice and fuzzy with FB founder Mark Zuckerberg who wears business casuals from Unabomber Men’s Wear, and has all the warmth of  Robert Blake after an Italian dinner. The Zuck views Wall Street as a ‘necessary evil’. Wall Street returns the favor by ensuring FB shares keep to a narrow trading range. MarketWatch commented that Zuckerberg would be wise to lose the attitude and get with the program more like a Jami Dimon, arrogant but accessible. While the Zuck may be too full of himself and too young to realize his complete role there should be FB handlers to clean up his act and trot out the face of Facebook for investor conferences.  Zuck should also learn to discipline himself and heed what The Street demands. ( I would expect a mea-culpa when both Zuck and Facebook get their act together).

THIS IS ZUCK.

AND THIS IS NOT!

 

Positive’s For Facebook! Rich Bieglmeier reported for iStockAnalyst.com what The Street ignored was that revenues increased 32.3% for the  three months ended June 30, 2012 versus same period last year. Meantime, the Beiglmeier writes, R&D has increased 612% from $99 million to $705 million. Sales & Marketing increased from $96 million to $392 million – a 308 % jump. In total Facebook spent $1.1 billion preparing itself for tomorrow. Had the spending in those two areas remain flat Facebook would have added 42 cents to their earnings! The stock would have soared. FB is more a data collecting force than an advertising source, according to analyst Bieglmeier. And the General Motors Ad Honcho that said GM would pull all ads from Facebook only days before their IPO was fired by the company this past Sunday.

Hot Research in Barrons.com by JMP Securities boosted Facebook with a strong buy in June, 2012 saying, ‘…investors should not underestimate the company’s highly creative management team, its large user base, the virtuous circle created by its size to attract more users, and the attractiveness of such a large user base to advertisers and companies looking to sell on-line services. Currently Facebook’s ad revenue represents about 11% of the roughly $39 billion….and could reach 22% by 2015.’

Some Stocks Beaten Up… even as the markets jump over 200 points on Thursday. Never again, traders pledge to trust Netflix that a stumble could be quickly recovered. Netflix still struggles with their split between DVD and streaming biz. Amazon is in the streaming biz as is others. Netflix shares fall 25% on bad earning news Wednesday as the company still bleeds subscribers. Las Vegas Sands shares fell on lower house wins. The casino operator opened its fourth gambling house in Macau. Even though revenue increased 10% net income decreased by 40% on lower profit, pre-opening expenses for casino #4 in Macau and the cost of two land parcels on the island. Track this stock LVS.

IPO possible for MGM Holdings? Metro-Goldwyn-Mayer holds the James Bond franchise and the 88-year old firm has gone through several owners including Ted Turner and Kirk Kerkorian. In 2010 the company filed for bankruptcy protection and now hired Goldman Sachs to explore the possibility of an Initial Public Offering. ‘ Ready when you are, CB!’

Stocks started off strong Wednesday and fell off by the close. Markets ended mixed due to Commerce Department report on lower than expected home sales.

How Can You Determine Re Financing on Your Home Mortgage?

• Go to Zillow.com Check comparables and home values in your neighborhood.
• Calculate how much equity you have in your home. You’ll need at least 30%.
• Go to my web site and pull down mortgage calculator engine. ( primaryplanner.com) Fill in blanks and you should have your answer to either proceed or not.

Who owns Rolls Royce and who owns Audi? VW owns Audi. Rolls is owned by BMW. Porsche’ owns majority shares in VW.

Markets Popped Thursday 200 plus on the Dow on News ECB Would Do Whatever It Needed To Do. Still, we’re not out of the doghouse quite yet. CNBC reported much of the gains were due to short covering. New money coming in was not evident. Folks at 24/7 Wall Street twisted tight their thinking caps and came up with 10 Things We Need To See to Know The Recession Is Over. 

• GDP has to rise above 2 1/2 % annual rate.
• Need 250,000 new job hires per month.
• Housing and foreclosures stabilize.
• Recession ends in Italy, France and UK. (this may take a long time).
• China growth back to over 9%.
• Tax Rate Stays Put.
• Retail Sales increase (this includes autos)
• Consumer Confidence Back!
• S&P 500 stock index has quarterly earnings increase year over year.
• If Fed’s raise rate suddenly it could mean the economy is moving in the right direction.

Betcha you knew this but it doesn’t hurt to see it in print and understand there is no boogie man and that things can be put right doing just the simplest things.

My Allocation Since 2011 Has Concentrated On Domestic Funds, Stocks and ETFs. Yes, there are emerging market bond funds and global bond mutual funds on my preferred list but scant use of foreign equity funds, and only for contrarian purposes. Lloyd Blankfein, CEO and Chairman of Goldman Sachs raised & saluted the flag and extolled the virtues of the United States and the long-term value investing in the USA. His reasons include the domestic energy boom, green tech and the quick response by policymakers to the unfolding credit crisis. Don’t give up on the United States is his point even as he warns about our debt problems and that the retiring mass of Boomers will not sink the country into irrelevance.

Starbucks falls 10% on  Weak Guidance by Howard Schultz. Overall markets up 1% on Friday and Starbucks stock was, according to experts, marked to perfection before Shultz talked of weaker sales going forward. Seeking Alpha bloggers likes McDonalds and Exxon-Mobil as better values than Starbucks.

FDIC closes One Bank in Georgia. Bringing the total in 2012 to 39. According to FDIC about $2 billion in funds used to close banks this year. We are behind last year’s pace of 61 closings over the same time period.

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

That Was The Week That Was-3rd Week July

  We’ve come a long way as investors. Twenty years ago many people were frightened to death of buying foreign mutual funds or foreign stocks, such as Nestle’. Today investors go where the action and returns are. Emerging Markets is one of my favorite sectors. Most people associate emerging markets with the BRIC countries: Brazil, Russia, India and China. In actuality there are more 150 countries on the list which include Malaysia. Latvia, Israel and Slovakia, to name just a few. The definition of emerging countries are those that are undergoing rapid growth and industrialization. This was coined by World Bank economist Antoine W. van Agtmael in 1981. There is a difference between all the emerging market countries; the most senior is called Advanced Emerging Markets and  the others are termed as Secondary Emerging Markets. Advanced markets in 2010 were Brazil, Hungry, Mexico, Poland, South Africa and Taiwan. India, China and Russia are on the secondary market list. But there is another market that many investors have either not heard of or think too risky and that is Frontier Markets. These are countries that are just getting a foothold into the world’s economies and many just starting to move into the 21st century. Most African countries, outside of South Africa, according to source Mark Mobius at Franklin-Templeton, are considered to be frontier markets. He reports that a misconception is that Frontier countries’ growth is based on commodities. While that may be somewhat true it is not for all countries. For example Nigeria is dependent on oil exporting, Kenya is more of an agricultural society. Frontier economies are one way to allocate portfolios. Some emerging market funds did well in the first half of 2012 the same couldn’t be said of the frontier markets. Hard hit was the MSCI Frontier Market index which lost over 8% so far in 2012. Kenya, Nigeria and Bahrain were up while Bulgaria was down over 25% and the Ukraine fell over 35%, Still  while the growth in the United States is expected around two percent that of Frontier markets average around six percent. They usually do not move in correlation with our domestic markets. For more information on my favorite emerging and frontier market investments and how they could possibly fit in your portfolio call or write me.

 I got a phone call last week from a woman who introduced herself working for a company that was appointed to do marketing for a local credit union.  She said someone  would be in my neighborhood  and ‘dropping off’  information on the credit union. Okay, I know the game and who these folks are and they sell fixed high commission annuities. This ‘insurance’ agency (which she didn’t tell me she worked for but I know she does),  has been in hot water before selling high redemption annuities to seniors. I interviewed the attorney representing one of their victims on my radio show years back. And there was a channel 7 television investigation into their methods of gaining access to people’s homes. Of course I knew who she really represented but no mention of the affiliation out of her mouth. If you live in Michigan and get a call from someone with a similar pitch or someone wants to save you money on car insurance, or drop off some senior coupons, be..ware!

Experts See Signs of Pickup. Last week CNBC reported that Mark M. Zandt, the chief economist for Moody’s Analytics, who said, ‘ I do think the economy is stronger than what the numbers show.’ Some economists point to private forecasts showing a stronger June than the one depicted in government reports.  One such survey showed that the job creation was really 175,000 and not the DOL number of only 80,000. Some economists question if DOL made a big mistake.

Frustration With Washington, Banks, The Economy and The Stock Market Have Investors Looking For Answers. More than at any other time I am seeing sales people, with no experience in securities, counseling individuals to buy fixed annuities or equity-indexed annuities with extra-ordinary redemption charges and little opportunity for real economic growth. If you don’t know what you are investing in ‘ask someone!’ Once your money is gone- it’s gone. Don’t think you can sue them for your lack of knowledge or experience.

More Investment Myths. Here’s a few common thoughts you should know are not true.

• Bank savings are free- False -The bank uses your money to invest, pay their bills (including overhead and employees), and calculates how much ‘interest’ to pay customers depending on how long they can get them to lock up their money. A friend of mine was an officer at one of the major banks and bragged that at some branches a 1% return on the money on deposit was enough to pay all expenses for that branch.  Buying furniture or jewelry probably has less fat and commissions than a bank savings account. 
• Insurance Companies Are A Safe Place to Put Your Money – Maybe. It all depends on the insurance company. Unlike FDIC all money with the insurance company is guaranteed by the insurance company. If the company goes bust or is taken over some or all rules are re-written. That’s why its important to check the claims paying ability of the insurance company. Plus rules are different with insurance companies. Some of the rules are so odd that people cannot believe they invested and turned over their hard-earned money to an insurance company. In some cases redemption charges plus penalties before age 59 1/2 are exorbitant.
• Managed Investment Accounts Are More Efficient & Cheaper- And I have a bridge I’d like to sell you. Managed accounts use no-loads or load waived funds, ETFs and other vehicles with no up-front charges. There are still fund fees that are charges to reimburse expenses to the fund or Exchange Traded Fund -plus each account has an annual account fee that is deducted quarterly. The managed fee typically runs 1% to 3% annually depending on the company, the representative and how wide-awake the client. A lot of managed accounts are just as expensive, some more so, than if you buy a mutual fund and park it. In some instances the constant buy and sell of the manager is more for show than for actual account value. Some Managed accounts are also a good place to hide lousy funds just to keep them going. Don’t be fooled by the managed account story. Like anything else there are good ones and lousy ones. No secret here.
• Target Date Funds will get an investor from here to there with no worries. Let me see the plans to that bridge again. All Target Date funds are not equal and lately several companies have gotten out of the Target Date Biz. The Target Date concept is to invest in a fund that is more aggressive in the early years and gets more conservative, and stays that way, as you reach retirement. So today a Target Date fund invests in equities if you are young and as you age it’ll buy bonds. In other words today you’ll get the best of the worst worlds in one investment. The bond bubble should be well on its way by the time many are retiring and that’s where the assets will be invested. Most investors can do better.

Be Pro-Active. The days of invest and forget are gone. Don’t think that there is a product or concept that’s going to take you to the promised land with little work or effort on your behalf. Thankfully my clients are pro-active but there are a lot of seniors I meet that I wonder how they ever managed to accumulate a dime. If you don’t know something- hire someone. If you’re not sure of the person you hire- get someone else. It’s cheaper than losing your entire nest-egg. Don’t guess or think someone won’t take advantage of you and your money.

Robert Pollack, of the WSJ, knocked on George Shultz door a few weeks back… Shultz, former Treasury Secretary, who is 91 reminded us that when ‘Ronald Reagan took office inflation was in the teens, the prime rate was in the 20s, and the economy was going nowhere.’ Shultz also reminded us that the bailing of the autos was a political bankruptcy and not a rule following bankruptcy (as anyone who owned a GM corporate bond will tell you). The unions were paid off, Shultz said, and the regular creditors didn’t. (Bondholders are first in line as creditors but were left out of the negotiations.). In answer to what policies promote growth he answered, ‘ We need another round of the 1986 tax act. That is clean out the preferences and lower the rates.’ He also said that ‘like in sports people want to know what the rules are. Today business leaders are asked to play the game but not told what the rules are, or told that the rules will be made up as  they play.’

The Euro’s Fate: Randall W. Forsyth writing for Barrons  examined the difference between European leaders and Americans and how they are attacking the economic crisis. In America the central bank will print as much money as necessary to keep inflation low and promote job growth. In Europe the idea of printing more Euros is unseemly. Instead they Europeans promote tax hikes and spending cuts to solve their economic problem.Forsyth concludes that not only is that philosophy overseas not going to work, it could lead to a disaster. Instead he offered a thought that reducing the euro to equal the dollar in value (a across the board devaluation), would accomplish what we’re doing here without having the printing presses work overtime over there. An investment against the euro could be in order. In an interview Warren Buffett commented that the Euro couldn’t survive under the present rules.

Gold Buggy? 

Central banks have been buying gold by the ton. (Actually its by the tonne- which is 1000 kilograms, not exactly a ton and a substantial difference when calculating cost of gold per ounce.) In 2011 they bought 455 tonnes. Here are some of the purchases supplied by the World Gold Council. During the last 12 months the net purchases have averaged almost 20% of total annual supply. Russia added 15.5 tonnes in May and its reserves now stand at 911.3 tonnes. Thailand has raised its holdings by more than 80% since mid-2010. The Philippines have been quietly buying their own production and have added 32 tonnes in March. Central banks, excluding China and nations that don’t report gold purchases, have, according to the World Gold Council, added a net of 1,290 tonnes of gold since 2008. That would be a lot of gold except its off from what Central Banks held around 1980. If you were worried about a gold bubble there doesn’t seem to be an indication of one just yet. I also still like the gold ETF GLD as the most efficient way to buy and sell the metal. If you need help adding metals to your portfolio and wonder best entry points E or call.  Gold fell Tuesday as stocks moved higher after the Ben Bernanke testimony.

Speaking of Medals… Bloomberg’s BusinessWeek Etc. Department gives the lowdown on Olympic Medals. It takes 8 tons of gold, silver and copper to make the 4,700 medals for the Olympic and Paralympic Games.

• There is $325 of silver in the silver medal which has 92.5% silver and the rest copper.
• There is $660 of gold in the gold medal which  has only 1.34% of gold and the rest is silver.
• Each medal weighs almost 1 pound.

If You’ve Been Holding Oil… low prices were good for consumers- ‘cept consumers were not spending the gift of lower gas prices because gasoline prices lagged the lower oil prices. Investors, on the other hand, who owned oil stocks and funds were getting hammered as prices fell (partially due to a strong dollar). Reinvestment of dividends always helps while we wait for the correction. Now we’re seeing a slow but steady return to higher oil prices according to bloggster and investor Tom Bowley.

He draws the above parallel & Darn if the chart of the S&P 500 Index and Crude show a similar pattern. The argument is that the chart is illustrating higher long term bullishness in oil and equities as we go forward this year.

Barton Biggs Dies at 79. Once heading Morgan Stanley’s Investment Management division and founder of  hedge fund Traxis Partners when he left MS Biggs was known as a visionary. He called the Tech Bubble before it burst but was ignored in 1999. He was wrong on the 2008 market collapse but he was in good company on that one. Biggs was one of those people that when he talked you had to listen.

Cookie!? No- Donuts! Krispy Kreme.  The first time I heard about Krispy Kreme was reading Bob Talbert in the Freep. Talbert was from the south where Krispy Kreme called home and was as popular there as fried chicken. When the brand came to Michigan I knew why ‘ Shut my mouth’, Krispy’s were the donut of choice down south. Hard times followed the brand but now Stephens gives the stock an Overweight. They like shares to $9.00 from the current $6.52 close last Monday.

Cops and Robbers – Essentially. From the Libor scandal where 18 banks concocted a global conspiracy to fix interest rates in order to deceive regulators that all was well with the global economies, to the recent news that HSBC has become almost the bank of choice for money launderers and cartels, to the JP Morgan ‘opps trade’; banks have been in the news doing what banks shouldn’t be doing-which is stealing in one fashion or another. Now the snootiest of them all, Goldman Sachs, is building a private wealth unit to loan money and do business with the uber-rich and moneyed corporations. The war chest is estimated by the WSJ to be about $100 billion. Goldman is joining the ranks of Bank of America and JP Morgan Chase who do have wealth units in place, along with their retail trade. A weakness in European banking has prompted this entrance into the wealthy and corporate private area. Warren Buffett’s favorite bank, on the other hand, is Well Fargo – he said that he’s been a buyer almost every month of shares.

In Politics…In a tight Senate race Lyndon Johnson directed his campaign manager to slur his opponent with a particular nasty accusation. When the campaign chief said that both he and Lyndon knew it wasn’t true Johnson said, ‘I know. I just want to hear him deny it.’  Some things never change.

Fred Smith, founder of Federal Express, said, ‘Our tax code favors the financial sector, speculation and leverage at the expense of the  capital intensive or the industrial sectors.’ Smith advocates a territorial tax system which would only tax domestic, rather than worldwide income, bringing U.S. practice in line with most other rich countries. He also advocates more tax benefits for businesses to spend on equipment and software.   Fair to say that both Obama and Romney favor reducing the corporate tax rate.

Chuck Schummer (D-NY) told The Ben Bernanke last Tuesday to do whatever it was he and the Fed could since Congress wasn’t and wouldn’t be of any help. It’s as if the ghost of mean Chucky Colson invaded Washington and allowed Congress to allow the people of the United States to ‘dangle in the wind’. Bernanke pled with Congress to act on taxes before it was too late. He made it clear that he wasn’t lecturing Congress but needed help to turn around the economy. Bernanke’s words fell on deaf ears. Brian Kelly, founder of Shelter Harbor Capital, said after the Bernanke testimony, ‘Now you have to be long stocks.’ Kelly, as well as other market pro’s, according to CNBC, believe that Bernanke telegraphed that QE3 must be factored in all trades. Kelly also said, ‘Whatever comes along next is going to be big,’ and you want to be in stocks when that happens.

Get the feeling we are simply trading between government stimulus and forgetting investment basics. Seems you can toss asset allocation into the dustbin along with anything else of fundamental value.

Weekend Worries… I told an associate I worry about weekends even when there doesn’t seem to be any news on the horizon. The weekend ended Monday as more worries about Greek default and Spain’s weakness caused Wall Street jitters. World markets were down Monday morning as I was driving home about 3:30 ayem from a short two day mini-vacation up north. Bloomberg news shed light on the perils of the Eur0, the possibility that Greece would leave the EU  and in six months we’d be talking about higher oil prices and inflation along with EU worries. On the local front Bloomberg reported that most reporting domestic companies did better than expected but lowered forward guidance as they expect consumer economic slowdown.

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

That Was The Week That Was – 2nd Week July

From a Market Low in March, 2009 of 6443 on the Dow to the current 12,700 or so we’ve come a long way. Those investors that were in the market but left and sold some or all their holdings are now wishing they hadn’t. Others came back but only when the recovery was well under way. There is a lot to say about buy and hold, which I’ll save for another blog. Now getting to today’s point- The last year and a half have been miserable as the markets have settled into a non-discernable trading pattern. It’s almost random in its moves. Investors who short the market find themselves almost the next day on the wrong side as the markets go suddenly long. Others who decide to go long, find themselves looking at losses as Mr. Market laughs at them. Long- term buy and hold investors are frustrated from month to month as their accounts show either losses or back to even; and investment gains, when they do show up, are as thin as good news from Washington. Investors are frustrated and believe that there is a way to make money but no one is telling them. In the first half of this year some of the largest hedge funds that have the smartest analysts, fastest computers and most sophisticated software have seen either mediocre or poor returns. Global macro funds that make big bets on currency and interest rates were the biggest losers so far this year. In 2011 many hedge funds lost money. This year is bad but not as bad as last year. Still there is little to brag about. Most investors in hedge funds are institutional investors such as pension plans. The big Kahuna, of the hedge fund world, is John Paulson with his huge winning bet against mortgage backed securities in 2008. His hedge funds were the darlings of the hedge fund world amassing some $30 billion of new money. According to Bloomberg’s BusinessWeek in 2011 his two funds lost 36% and 52% respectively. At the end of May he is down 6% in one fund and  minus 9.3% in the other.  David Einhorn’s fund is up only 3.7% year to date. Explaining what’s happening,  ‘People are over managing their positions,’ said Peter Rup of Artemis Wealth Managers. Still there are investors who believe there is some ‘secret’ lurking in the dark. Unfortunately, even hedge funds with all their tools and savvy cannot unlock the kind of returns that will satisfy today’s frustrated investor.

Listen to My Podcast- All About Pension Rollovers.  Companies are attempting to reduce their pension liability (Ford and General Motors recently); and offering employees a lump sum distribution of their defined benefit pension. To make the decision on whether you should Rollover pension assets or not listen to my Podcast below. Click start below to listen. The entire talk is about 6 minutes. If you need more info call me at 586 783 7080 or send me an e-mail pstanley@westminsterfinancial.com

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CNBC reported that the global credit crisis is causing a ‘kind of herd’ mentality with investors that is making it difficult to identify stocks and other securities that will deliver returns ‘above and beyond’ that of the market. This EU mess is making it especially difficult for Hedge Funds, CNBC reported Tuesday.

Banks Buying Your Biz…like a loss leader at he checkout banks offer a 10-year Treasury return on a One Year Certificate. There are savers that are frustrated with the current interest rate climate and are demanding safety, liquidity and yield. Unfortunately, that’s not all available. At www.bankrate.com the top four banks that offer the best one year certificate are: CIT $25,000 min and a 1.10%, MetLife 1.05% with the identical min, Ally no min and 1.07% and Discover with a $2500 min and .90%.

Cody Willard in Monday’s MarketWatch suggests that the time to short the ‘financials’ is now. He said he has been waiting patiently to bet big against the banks and with the Libor rigging scandal and almost $6 billion in trading losses for JP Morgan Chase this is a good time.

Remember This: Listen to What I Say and Not What I Do. Analysts telling us not to buy Facebook for all the reasons. Seems, according to Morningstar, 160 U.S. based mutual funds couldn’t help themselves, didn’t listen to their cohorts, and bought stock in Facebook whether or not Facebook fit in their fund criteria, or not. All sorts of different funds bought shares in Facebook and it didn’t really matter to the manager what kind of company Facebook is for them to snap up shares. According to the WSJ on July 9th, some of the fund managers may have been in the ‘game’ just to buy and sell as soon as shares bounced. Unfortunately, with the Nasdaq screw-up, they got caught and today own lots of shares in the company. The ownership of Facebook is far flung and more than likely the reader of this article may indeed own shares through the company 401k mutual funds. The following chart published in the WSJ with information provided by Morningstar.

this is Robert Gibbs, senior campaign manager for the President… and this is not…

Alcoa Reports First and generally sets somewhat the tone of reporting season. The aluminum giant has lately been off its feed as either price, volume or both have been lower than analyst’s expectations. The company stock has hovered between $8-$10, well off its bullish price of yesteryear. Second quarter earnings were reported last Monday at six cents, up a penny over consensus. That wasn’t the good news- the really good news was that AA expected sales to grow 7% and that allowed a small pop in share price afterhours.

Dull Market? Mark Hulbert, writing while on vacation in Canada, said low volume on the NYSE wasn’t anything new. Numbers kept since 1888 show that summer usually has low volume and there is no correlation between lack of buyers and sellers and what’s going on with the market. The month of September, The Hulbert explains, usually has great volume but its traditionally the worst month of the year. He concludes that there is no way that low volume leads to poor or mediocre stock market performance.   

 

Trading Firm in Futures Files to Liquidate.  A scandal involving a long-time commodities firm developing, according to last week’s WSJ.  Peregrine Financial Group is missing about $215 million of customer money. The CEO is hospitalized after attempting suicide. The possible theft was discovered after a shift earlier this year to an electronic on-line system for verifying customer funds. Up to that time brokers and regulators relied on paper statements from banks. Much like the Ponzi scheme of Bernie Madoff, who’s crime was discovered when the markets went south, so was the Peregrine Financial downfall. On the heels of the MF Global scandal commodities regulators shifted their customer commodity account verification system to on-line methods. The National Futures Association said that it was possible the CEO falsified bank records. Customers in all investments are urged to know where their money is at all times. Simply getting a statement is no longer a sure method. Verify that money is invested, where it is invested and how liquid those funds are are important steps to safeguard funds. SIPC does not protect investors in case of theft.

Car Manufacturers Are Pretty Smart… Anyone remember the days when cars were manufactured and stored on lots about the metropolitan area in the thousands? When Lee Iacocca took over Chrysler the story was that he saw acres of new Chrysler cars and asked who they belonged to. When the answer came back that they were all being stored by the Chrysler company it was then that he knew the company was in trouble. Today you won’t find that excess as I discovered shopping for a car deal. Most of the dealers I have talked to are already stocking 2013 models and almost all 2012’s are gone. Today car buying is almost like buying a custom suit. You want a car? Then order one, wait three-six weeks for delivery. This method of car buying and manufacturing of both domestic and foreign will pay dividends both for the companies and shareholders.

But…Adam Lass of Bottarelli  Research writes that there exists weakness in all of the domestic auto makers and some of the foreign car manufacturers. He goes on to report that further weakness precludes him from ‘buying’ any of the autos just now. He would feel more comfortable seeing ‘bullish’ support before making a buy recommendation. On Thursday Barrons.com reported that car companies are not about to go back to the good old days and ‘give’ cars away to entice buyers. Those days are gone and instead ‘value benefits’ are offered on year-end and sales events.

Remember Meredith Whitney and Her Prediction About Municipal Defaults? Ms. Whitney was the one who blew the whistle on the banking blow-out but was poo-pooed when she said communities and states would be defaulting on their obligations, causing consternation with tax-free bond buyers. Well, Ms. Whitney is getting some creds now that a few communities are filing for bankruptcy. Certainly it’s not like a avalanche of states cascading down hill. But, it gives one pause that buying a muni-bond should be done with care and best in a mutual fund or ETF where you have diversification.

The Fiscal Cliff is Looming Large. According to CNBC a lot of our current economic woes are based because Washington is allowing corporations to dangle in the wind, not knowing which way to turn. ‘Do we hire, not hire? Expand, spend money on equipment? Move into new markets?  Borrow, extend debt, buy back stock? Or, nothing at all?’ Until Washington settles down to do the business of the nation the markets and the rest of us will suffer, no matter the quality of our holdings. 

Supermarkets Caught Between Rock & Over-ripe Avocado…Biz stinks at the nation’s top chains as their stock price reflects lost business to either end of the …er…food chain- Walmart –Whole Foods. Even Dollar General and Target are in the food biz, sort of. Supervalu, a 4400 store Minneapolis based chain, saw its stock plummet 40% when it put itself up for sale and suspended its dividend. The WSJ reported Thursday that supermarkets cannot keep doing the same old things they did in the 1990s and expect a better result. Things have to change. Until they do experts say avoid some or all of this sector.

the above info source from individual grocers and chart/graph source WSJ. Thursday July 12, 2012.

CHINA GROWTH SLOWS IN SECOND QUARTER TO 7.6%. THE SLOWEST PACE OF GROWTH IN THREE YEARS. Merrill’s China analyst Ting Lu said that the slow growth could represent a trough of the current cycle, with activity to pick up in coming months as pro-growth policies put forward by Beijing in May start to kick in.

Gambling Stocks with Macau Exposure Lowered… according to Sterne, Agee and Leach, on second quarter estimates too high. Although investors would like to own shares in Las Vegas Sands, Wynn Resorts and Melco Crown Entertainment at the current levels. Sands is down 30% off its 2o12 high. Sterne, Agee has lowered earning expectations but believes a positive Macau sector sentiment will return in the relatively near future. In the meantime keep an eye on the above companies in the world’s hottest gambling market.

Ford Mo Co Sales Down Sharply in Europe. So what didja expect?

Friday Markets Up on JP Morgan Chase better than expected news, even as the bank disclosed higher losses from their opps trading earlier in the year. Still markets showed guts as Dow up over 200 points. Next week more earnings and Talmer Bank’s Tim Basset wrote that this could be the first negative quarter growth in 10-quarters. He goes on saying ‘that at the half-way point in the year equity markets have still maintained much of their positive momentum from 2011.’ To me this year has been almost like a golf duffer getting beat up only to have one or two spectacular shots keeping him from stomping off the course.

The key is the consumer. Saying it best was Stuart Freeman of Wells Fargo who is quoted, ‘At some point the consumer needs to make some purchases to get on with his or her life, and we’re seeing signs of that.’

Finally…One Bank Closed Friday bringing the total year-to-date to 33.

Don’t have someone on your side as a financial planner, broker or investment professional call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. There is no charge for initial meeting.