That Was The Week That Was-4th Week September

 

  You got bad news, good news and wrong news. As I was driving back from up-north, after my fixed income breakfast meeting of last week, I had talk radio tuned in all the way and heard no happy-happy news on the economy,  or the presidential race.  From one end of our state to the other fear ruled the airwaves.  ( Another hour of listening to their yammering and I would’ve rushed home to dig a bomb-shelter.) The election, according to pollsters, is a dead heat. Michigan has gone to the incumbent predict the pollsters and doubt if any attempt will be made by the Republicans to sway the Michigander independents.  The economy for next year is already being called a bust no matter who occupies the White House. So-called smart money is predicting a slow-down, some even say that a repeat of a 2007-2008 cycle.

.  The truth is no one knows what will happen in 2013 anymore than you and I know what we’ll have for lunch next week. When Clinton was elected soothsayers predicted bad things for the market but the Clinton years were remarkably productive. Recently even the economic news investors have counted on to trade has been wrong. The Washington Post reported late Thursday that the nation’s businesses probably hired 453,000 more people than earlier reported. Republicans didn’t holler ‘no mas’ in Michigan but opened two additional campaign offices just in the last week. So much for cut and run, eh? Stocks were positively yummy this summer, even with the European mess, with both the Dow & the S&P 500 at multi-year highs. Historically 3rd quarters are usually not productive but the markets this summer were just dandy. And, we have the fourth quarter to look forward to which has been the uber performer for just about every previous year. Of course there is always that nasty October surprise that springs up and occasionally bites investors…anyone remember 1987 when the stock market lost 25% of its value in one trading day?  But I’m still betting on window dressing and trader bonuses to make it a good year wrap-up.

Harry S Truman’s Bid for a Universal Health Care Plan in 1945 was destroyed by the politicizing of the AMA. They claimed it was socialized medicine and called those that supported the policies as followers of the Moscow party line. Unlike the current national health care plan the Truman health care plan was optional to join, there would be monthly fee that would pay for the insurance, the government would pay for the cost of services to those doctors who signed up and a cash stipend would be paid to policy holders who lost income due to accident or sickness. The star, or center, of the Truman plan was to provide health care in rural areas. Truman wanted to bring both doctors and hospitals to those areas. The AMA said, ‘Nyet!’

Speaking of Fixed Income Breakfast Meeting… If you didn’t make the September program I have scheduled another  for October 16th, a Tuesday at 9 am at Sycamore Hills Golf Course in Macomb on North Avenue at 21 1/2 Mile Road. Watch your email for more news. To register please go to my web site and click on seminar registration or call me at 586 783 7080. The last meeting took 75 minutes, everyone got a copy of my 20 page fixed income workbook and learned the different sectors that could increase their returns. There are a lot of options available to each and every single person with a variety of risks and rewards. There is no reason that anyone should be getting 1% on their money by leaving it in a bank savings or short term certificate of deposit.

Why is Gasoline Prices so High and Oil so Low? Commodity traders and other speculators just pulled the plug on more that $5 billion of U.S. commodities. This was reported over the weekend by Reuters. Oil prices tanked but gold was still up as a huge hedge against government inaction both here and abroad. Shorts took the place of longs in soybeans, coffee, sugar and natural gas.

Marty Zweig, ‘Don’t fight the Fed.’

Clients make a Note: The serious issue of coming inflation is real and nasty. Kirk Spano at MarketWatch.com explained it best by writing that inflation will not only be driven by monetary policy but also by increasing demand for scarce resources particularly food, energy and healthcare. Preparing for the going forward recovery investors should be looking at shorting the 20-year Treasury, buying TIPS, dividend funds, stocks or ETFs, emerging markets and commodity funds all have to be a part of the shopping list. Facebook, Spano notes is a brand monster with huge upside. Twenty years ago the most important book in everyone’s home, outside of the Bible, was the phone book. Facebook, according to Spano, is fast becoming the new phone book and will monetize it in several ways going forward.

Facebook should be able to monetize their own  specific search engine using over 901 million friends as a resource. Question specific answers such as who do I know that works here? Has anyone eaten at this restaurant? Have you used this contractor? Do you own a Ford? How do I get my remote to work? Forget consumer reports and those web sites that cater to finding a plumber or handyman. Wait for it…. when they get er done it’ll be awesome.

Gerald Seib, an assistant managing editor, at the WSJ, opinionated that all may not be lost with the Romney campaign and is bully enough to give three reasons: Highly motivated voters that want more to vote against Mr. Obama than vote for Romney;(2) Strong conservative support and (3) the grouchy, undecided voters. This is the group that definitely don’t support one candidate or the other. They give Mr. Obama a low job approval rating and are not warm to him personally. They also have a low opinion of Mr. Romney which is the reason that they are floating undecided. Politics is now a part of investment planning. Portfolio managers will be deleting and adding key stocks as we get closer to the finish.

House Leader Representative Cantor said on CNBC Tuesday, ' The Romney campaign is fighting two opponents, the Democrats and the media.’ Joe Kernen wondered why the Republicans couldn’t get their message of 45 million Americans on food stamps and over 8% unemployed out and instead had to defend why Romney paid less than 20% in Federal income taxes, as if that was a crime. The Democrats appear better organized and equipped to handle dirty tricks…er…political necessities.

Where are all the Tea Partiers? Just asking…

Owning stocks and bonds still make sense. Real estate is becoming pricy. Meena Krishnamsetty @ MarketWatch reports 5 stocks that Billionaires are crazy about…Apple, Google, Qualcomm, Microsoft and News Corp. In 2013 those five stocks had an average return of 33%.

Tuesday Zacks’ Steve Reitmeister explained there is too much complacency among investors. He calls for a 3%-5% pullback…and wonders if it’ll happen now or after the market advances to 1500 on the S&P. He calls it a coin flip and writes he is 68% invested. The markets fell over 100 points on Tuesday as bad news from Europe continued. Nasty expletives between China and Japan over disputed land continued.

Barry Diller who, back in the day, plunked down some serious money into QVC, cashed out and now owns a piece of Ask.com plus Match.com and sits on the board of Expedia was on the CNBC Squawk Box and said that Biz was great and unemployment was …’mumble, mumble,’ basically not so good. He also said he wouldn’t vote or promote Romney but would lead the charge for Mayor Bloomberg saying ‘that he is a great businessman and leader’.On tech he loves both Apple and Google and said now was a great time to buy Facebook.

BlackRock was on CNBC Friday and their tech pick is Google.

Should investors back off in some Homebuilders…home prices roared back for the 6th consecutive month. The good news for us who own a shanty is that the lack of quality housing could drive prices up 5% to 7% per year through 2015. Analysts suggest that this could move home prices to exceed levels reached during the housing boom. Getting back to homebuilders seem a few have outrun their valuations and analysts suggest being prudent and moving instead into Pulte and KB that have not seen a big a run as some. David Blitzer, chairman of the index committee at Standard and Poor’s said, ‘Housing is out of the woods and should be making a contribution to the economy going forward.’

Research Mutual Funds were all the rage a few years back. The idea was to allow analysts to do the stock picking without the leadership or benefit of a fund manager. The folks at Morningstar spent time examining past and present Research Funds and concluded that an experienced fund manager can add value through portfolio construction and even knowing each analyst’s strength and weakness. Still Research funds have been with us for some time. Many have come and gone but Morningstar examined historically the ones that have most influenced investors. MFS has two large research funds: International and Bond. Janus funds seem bent on increasing its exposure to analyst driven funds. This from a company that was a leader in having Star Fund Managers such as Hayes and Marsico. American Funds, due to their size, have continually used research analysts to drive their portfolios. Fidelity calls its research funds Stock Selector and appears to be growing that bit of investment offering. Still Russel Kinnel at Morningstar isn’t that impressed with the results of the above offerings. He is enthusiastic about two quasi-research funds – the Mutual Series (owned by Templeton) and the Columbia Acorn International Fund. Still if you have to go to this much trouble to find something of value you’re much better off simply allocating using plain vanilla fund managers.

 

 Talmer Bank and Trust indicated in their investment news report that fundamentals in our domestic economy are slowly eroding. The stock market isn’t quite sure what to do next but will eventually move down.  Bull still alive although you wouldn’t know it from the mid-point of the markets last week.

 

 Consumer confidence is back! With housing poking its nose up a bit consumers can breath easier. Also, a lot of 401k plans are healthier as  values popped a bit in 2012. The WSJ reported in ‘Heard on The Street’, that consumers and businesses have been at odds with each other. The former not spending all they could and the latter not hiring all they need. Housing is still important with almost 70% of American families owning a home in 2010. The auto biz is also getting a boost as the industry is expected to sell 14.6 million cars this year.

Speaking of Cars…Cody Willard exhorts readers to short the shares of car maker Tesla. He calls it a welfare company that’s dependent on taxpayer largesse.  Indeed a very pricy car that buyers get a bit back from the government subsidy  for going electric. The car company is pursing solar powered charging stations.

Sprint?! Here’s the deal, maybe? A stock I’ve owned, sold and bought and sold again. Cheez, how many times does this thing have to disappoint as I buy and sell at all the wrong times. Still the shares are up (if you bought right) a 130% in 2012.  Once considered dead as a doorknob the company has cash at a six year high and sales boosted with the iPhone franchise. The rumor is that now Sprint can pursue a takeover and be a real third player in a so far two company wireless dominated world.A deal for MetroPCS or Leap Wireless is being bandied about in last week’s Bloomberg. But naysayers urge the company to reduce its debt and complete work on its network upgrade before making any acquisitions.

 Thursday Markets up and settled off their highs.  We don’t care how we got it or where it came from we just wanted the bleeding to stop. Three days of down was a bit much even though fundamentals stink, the fiscal cliff is looming and Europe looks like it’ll be stuck in their mess for a decade, maybe more.

Five Dividend Stocks Folks @ Street Authority Like. They all pay a nice dividend and have been around forever. The Street Authority says investors can hold these stocks forever but I wouldn’t carry it that far. Here they are: Colgate-Palmolive (Not P&G as those folks have issues but the Street Authority likes anyway); Johnson & Johnson (6th largest consumer health care company); Coca-Cola; Walgreens (folks settled with Express Scripts); Exxon Mobil. You don’t buy or sell anything until you do your homework.

 

 Apple struggles to climb $700 a share. The company removed Google from its mapping app and replaced it with its own version that is so bad that Rand and McNally are rolling in their graves. Critics argue that if Lewis and Clark attempted to navigate the United States using Apple maps Americans could still be looking for a way west. Apple fell 5% this week and critics are slobbering at knocking the company. Some even advocate shorting the stock that is held in just about every portfolio and every index fund. Yes, dear reader, there are those hedge fund managers that are seriously considering shorting ‘America’s stock’, and call it the greatest short sale of all time.  I listened to Jeff Gundlach on CNBC suggesting that people sell Apple. Gundlach a bond hedge fund manager has been trying to get traction on his short Apple and will go to any lengths to get leverage. On the heels of many advisors suggesting that Apple could reach $1000 a share a few slick money fund managers are itching to beat the snot out of the stock. The problem is the stock is trading under the S&P Price to Earnings ratio and may just have more to run.

Finally. Markets ended down Friday. This was across the board with every index. But…I just looked at the Nasdaq Index and noticed that it had really moved substantially up over the summer months. The Naz closed September at 3116 and  started around 2640 January 1st. Remember in the year 2000 the same index hit 5000 before plummeting on air and gasps.

You don’t know nutin about fixed income? Okay, you say you do – here’s a quiz- what’s a TIP? And, how does it work? How does an Emerging Market Bond differ from a Global Bond and what’s the risk? What’s the one big problem with opening a Canadian bank savings account? Why doesn’t your banker offer more than just a CD or an annuity?

Don’t know? That and more to help you be a better saver. Register for my last fixed income class October 16th at 9AM. Call 586 783 7080 or go to the seminar registration on this web site.

  Need help call Paul Stanley @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog and info with someone who cares about their money.