That Was The Week That Was-4th Week November

The Motley Fool, you may have thought being long gone, is still very much with us. It’s a company that offers a wide range of services from investment advice through newsletters and blogs to mutual funds. The company was started in the 90s by two Gardner brothers and a friend, Eric Rydholm. The friend was jettisoned early in the firm’s development of a money management company. The two brothers had no experience and were trying to grow their business out of their bedroom and advertised for clients by handing out flyers in residential doorways. Luck and timing were with the Gardners as AOL and the internet were at their infancy. The Gardner’s thought that the internet would be a good place to advertise for customers. Someone at AOL noticed their ads and asked if the Gardners would be interested in writing a financial column. The rest, as they say…

The 1990s were a perfect time to grow an investment advisory business especially with no real life experience, little knowledge of markets, a booming new internet and an innocent, inexperienced but willing customer base that would initiate the Day Trading craze. The Fool grew wildly in popularity. Hubris accounted for 99% of what the Fool’s sold America in those days. At one point they exclaimed that anyone could get rich in the stock market. The dot com craze made millionaires of anyone with an idea for a web site; and the Gardners continually wondered  why everyone didn’t plunk all their money into the internet and get filthy rich. The two brothers wrote best selling books, appeared on Public Radio and had millions of loyal fans. ‘It was easy to get rich in the market,’ The Fools preached. ‘You can’t lose.’ And the Gardner brothers couldn’t fathom how anyone could lose money in the stock market. But, as they soon found out, it all was not to be beer and Schnitzels forever. They certainly were no students of money management and not of stock market history. The dot com collapse illustrated how ill prepared and ignorant The Fool really was. The company shuttered operation’s overseas, fired workers and ended up with about 20% of what they had before ‘The Troubles’. Racing forward and Before the 2007 recession the Fool had its critics. In 2003 Mark Hulbert at MarketWatch criticized The Fool’s investment advice as being less than mediocre (my interpretation of his words). Not only did The Fool’s portfolios lose more money than did The Indices in 2002 but in the previous six years their picks produced only 1/3 of what the markets actually did. The Fools have bounced back ( sort of) and today have three mutual funds, a premium subscription service and their own web site, independent from AOL. The mutual funds have garnered little investor money and an average annual return on all three portfolios that is surprisingly modest since the funds came out ‘after’ the 2007 market collapse and should have done much better. All three funds are managed by the same crew, sans Gardners. The portfolios are unremarkable both in content and in returns. I occasionally read and report on their stock analysis but find little at The Fool that hasn’t been already reported. What I do find missing is ‘The Fool’ chutzpah- that back in the day made them refreshing whether right or wrong.

Dividend Trap? Consider…

Tobacco stocks have been bashed. Truly a sin stock these companies are the target of many government regulations- currently Russia and Australia. Still there are many regions that welcome them and the taxes they bring in to government coffers. Tobacco companies pay high dividends, increase their payout consistently and a few are involved in stock buybacks. These stocks have had a remarkable run the last five years and investors who owned them have done well. The last quarter has seen an exodus from tobacco, along with share price. Critics argue that tobacco companies artificially keep dividends high to keep investors satisfied. They also report that these dividends cannot be maintained for long period of time. Still Big Tobacco continues to motor along-finding new markets and customers. Investors searching for yield may want to put tobacco on their watch list. At some point they will provide value both immediately and future.

Also…

Busy, busy, busy… describes Boeing. The company has orders to keep it manufacturing for the next five years or so. The company expects to build and deliver 42 737’s a month beginning in 2014. That’s a lotta airplanes! The stock pays about a 2 % dividend and the stock priced right around where it was five years back. Run your own conclusions as to where the company shares will trade in the future; however, it would appear a consistent dividend is in the intermediate future. BA closed last Monday around $72 a share with a Morningstar fair value of $73.

Investors searching for stocks paying healthy, sustainable dividends may want to start now- or, wait as some analysts warn- share value may get even cheaper.

Warren Buffett, billionaire, wealth creator, and genuinely well respected guy has said he plans on giving away the vast majority of his billions. He goes on to say that he believes his family should work for what they get. What he doesn’t say is how extremely well off his immediate family is now, and for the future. He also has said that rich people should pay more in taxes. He has even stepped up to voice his concern that folk like him get to pay relatively low rates on dividends and capital gains, and he doesn’t think that’s fair.  Other rich people agree- another one or two percent in taxes, some of them say, is not sending any of them to the poor house. Another story Warren likes to share is that when he buys a stock he buys it forever. He insinuates that average investors follow his lead. He points to Coca Cola and  Wells Fargo as companies he has owned and added to over the years.  The illusion he gives is that once Berkshire-Hathaway buys a company it really buys the company-period. And, in many cases, especially insurance, Buffett and his team do exactly that-they end up owning entire companies like GEICO and Sees Candies. The buy and hold forever mantra was never a part –even close- to what Buffett and  his long-time business partner Munger did. It’s even less so today now that Buffett is approaching the age where he may not get out of bed one morning; he has two rambunctious lieutenants, that he recently appointed, that manage about 10% of the entire portfolio. He and Charlie Munger still manage the other 90%. Changes are being made as those ‘ never to be traded ‘ stocks in the top ten list are being sold off. Names such as Kraft, Proctor and Gamble and Johnson and Johnson. Berkshire has sold about 30% of PG along with large stakes in ConocoPhillips and US Bancorp. Picking up shares or adding to them this year has been shares in CVS Caremark, Dollar General, General Motors and General Dynamics. Then in the third quarter the firm sold both CVS and Dollar and bought Deere, Precision Castparts and Wabco. The point is that investors shouldn’t believe every investment fable rich people toss about. Firms need to buy new, sell old and re-allocate or they’d still be owning buggy whips, railroads and oil companies.  Keep that in mind as the new year approaches…

Surprise! Least expecting even a modest rally The Street gave a Holiday bump to stocks Monday with a 200 point move to the upside. S&P closed at 1387. Moody’s  downgraded France, because they don’t have a central bank. This put pressure on the entire EU- again. Apple bounced over 7%… but no one really respected that as a permanent move- most think a short lived relief rally and there is another bounce due- according to analyst at MarketWatch, Avi Gilbert. Facebook rolled out an ‘Amazon’ like click and buy e-commerce ‘New Gifts’. It works like Amazon, the company collects credit card info and Facebook, or one of its providers, send gift to anyone on the giver’s list. Another way Facebook makes money- not competing with Amazon but part of an entire ‘social’ web experience. Intel fading in the chip wars as PC sales down and the company is not positioned in the mobile devices. The company closed around $20.00 with fair value by Morningstar at $27. The company needs to re-arm to get into the mobile game.According to WSJ on Tuesday the company pays a healthy dividend around 4% but even that is not enough to entice investors at this point.

Financial Advisor- a Business Mag- reported on a Congers, New York chap who fleeced investors out of $3 million. He advertised on the internet, bragging about his, ‘Best Trading Days’. He claimed to invest the money in hedge funds…only he didn’t. He also wasn’t licensed in any shape or form in securities or advising in securities…He had a history as a burglar, confidence man, thief and drug addict. one phone call would have saved millions…just one…

Morningstar in a Greg Wolper article asked if Emerging Markets were truly emerging? The phrase ‘emerging markets’, Wolper writes is meant to denote not an overall development but in an investment sense. Some countries are wealthy but have few publicly traded companies and have limited trading volume. Investors should also know that large cap foreign funds may have up to 25% of their assets invested in emerging markets. The emerging market group also has a pattern. The MSCI Emerging Markets Group has gained 2%, on an annualized basis over the past three years, while the European developed sector has lost 0.1% in the same time period.

Sprint has a deep pocket partner and AT&T and Verizon are in for a fight. Masayoshi Son, Japanese billionaire of Korean parents, acquired 70% of Sprint earlier this year. In Japan he had a scorched earth policy to his telecomm rivals- cutting prices that, according to the WSJ, made them chose between customers or stock holders. The Journal warns that both AT&T and Verizon are already in a stringent pricing strategy and this could be the exactly wrong time to pick a fight. Son’s bet is if he can make the Sprint network better than both his domestic big rivals he can draw away customers. Shares closed Friday @ $5.61 and Morningstar estimates fair value at $7.00.

Markets mixed Tuesday…mostly up, though..Fed Chairman Bernanke, in the WSJ, indicated that the Fed would continue through 2013 its policy to push down long term interest rates. Bernanke also warned that failing to stave off the falling off the fiscal cliff the Fed could do nothing that would save the country from being thrown back into a massive recession. A lot of them in Washington still don’t really get it…

Talk to Your Accountant or Tax Attorney. Time is now to cull your portfolio. Sell both winners and losers ahead of 2013. Lock in gains and losses.

 

Home Building is vital for the economy- Construction of new homes creates jobs not only in the building trades but you get jobs in distribution, cement, lumber, heating & cooling, lighting and other specialties. In addition the industry creates jobs in sales, architects, lawyers, lenders and other professionals and businesses. Home building has been the stalwart leader in all recessions. The nations inventory of existing homes, according to Reuters, would be exhausted in 5.4 months. The average home nationally increased in October 11.1% from a year earlier. The share of distressed properties was flat from September.

Better than expected manufacturing news out of China boosted the markets on Wednesday. Dirt has been shoveled on the China grave as analysts and soothsayers have been predicting the slowing of China’s growth.  Ford Motor is expected to expand its dealership in China, saying  Western China is growing faster than Eastern China. ( We get that in Michigan, too. There’s the east-siders and west-siders and some folk never venture across Woodward-ever.) By 2015 Ford plans to add 130 dealers in Western China. Ford is also looking for dealers for its Lincoln brand.

Morningstar’s Patrick Oey reported on his picks for an investor to get exposure to China. Chinese stocks are trading at near all-time lows. With the meeting of China’s 18th Party Congress, where new leaders are elected to 10-year terms, improving economic figures were supported by government mandated infrastructure spending from earlier this year. For those interested in the Chinese market Oey suggests the following ETFs: SPDR S&P China (GXC), which holds both Hong Kong listed and New York listed Chinese securities. iShares MSCI Hong Kong Index (EWH) is an ETF dominated with property companies, utilities and banks. Call me for analysis and if either one or the other fits your portfolio.

Life Insurance companies are bailing out of the business. The latest this past summer was Jackson National Life that decided not to sell life insurance policies. The company has not provided details on what will happen to existing policyholders. The Hartford left the annuity and life business last year. A combination of low rates and poor investment returns in the fixed arena are causing companies to rethink their positions. Expect consolidation in the industry. If you have an existing Hartford or Jackson National policy call or e to determine exactly what you should do.

Bloomberg reports that store mannequins will be keeping an ‘i’ on customers. Equipped with cameras the  EyeSee dolls, developed by Italian mannequin manufacturer, will be watching for thieves in national retail stores this holiday season.

 Friday’s news before the markets opened was that the Europeans were having a difficult time coming to some sort of a budget resolution. The Brit’s, French and Germans were in opposite corners. Down day, I thought. Wrong!  Trumping politics was encouraging economic data from Germany and China. Ignoring EU political petulance U.S. investors tacked on another n..i..c..e day. RIM, considered a doorknob not that many days ago, rallied 14%. Now some advocates, according to WSJ, think its cheap even with the bounce. Tech was up 4%.S&P 500 gained 3.6%-largest weekly gain since June. But…wait, short trading day and volume was light.

Zacks cautions that big investors are sitting on the sidelines as Congress has 2 weeks. That’s  weeks where they have to come to some sort of an agreement. And some folk are unsure that they can do it- or even want to. If we can’t get our house in order why should foreign governments loan us money by buying our debt? There’s the rub, you see.

 Finally- Who killed Ho-Ho’s, Twinkies and Ding-Dongs? Was it the union with demands or management that piled on too much debt? In the end the unions gained nothing, management lost a business, investors lost money, ancillary businesses and suppliers lost future business and anything owed to them by Hostess. It doesn’t matter. The recipe and brand will be sold for pennies to repay debtors and the general public won’t care as long as they get their sugar fix. In a way this was a microcosm of what’s now going on in Washington, DC.

Questions call Paul @ 586 783 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 November

There are times when leaving your 401k at your old employer makes perfect sense. Every Tom, Dick and Harriet stockbroker, insurance agent and banker wants your old 401k to be rolled over into their IRA. Sometimes it doesn’t behoove you to do that. One good reason is if you have a loan on your 401k then rolling over the plan assets will trigger the loan as a distribution and cause taxes and a possible penalty to appear on your next Federal income tax. And please don’t think you can only roll the actual assets and leave the loan. You cannot.

Another reason is that some 401k plans allow employees to start taking income while under the age of 59 1/2 and not triggering a 10% penalty as it would out of an IRA. Usually its age 55 and termed early retirement. Those who decide to take income from an IRA and not age 59 1/2 can do so under 72(t). Call or email me for details.

If you owe money, have lawsuits or past due taxes an IRA is now creditor proof, as are 457, Roths, 403b and 401k plans. However under the new law this is limited to about 1.2 million dollars.

Finally having company stock in your 401k could leave the door open for tax saving strategies under 10-year averaging or Net Unrealized Appreciation. These are specific rules especially if you have highly appreciated company stock. Make sure you talk to your tax-advisor if you have this opportunity. The rules are very specific. Usually a professional advisor can help you make that determination. ( call or write me with your questions). In most cases you are indeed better off rolling over your plan to an IRA. Also, if your assets are five thousand dollars or less the company may send you a check and close out the account automatically- Questions whether you should roll your plan over or not- call or email me. ‘

Time Magazine Last Week had a huge story on Bill Gross and Mohamed El-Erian of PIMCO, the mega-billion fund company. The starship of the PIMCO fund family is the Bond Fund that Gross manages. What Time reported on is old news- months old. In fact The Street has argued and poo-pooed Gross’ and El-Erian’s conclusions for months. I want you to know this since I have no idea why Time published Gross and El-Erian’s opinions at this late date. What Gross and El-Erian have been telling investors is that going forward don’t expect the kind of returns in stocks and bonds that you’ve gotten used to over the past 20-plus years. In fact, that’s what has gotten these two in trouble- telling folks the truth to the embarrassment of hedge funds, ETF and mutual fund managers. In a nutshell here’s their reasoning: Stocks, real estate and bonds, because of the current Fed policy, will not have the kind of returns investors experienced in the 80s and 90s. With interest rates at or close to zero there isn’t much room for growth in the domestic bond arena. Because Washington has been more worried about politics than the welfare of the country certain growth enhancing programs such as Jobs Training, New Deal-style infrastructure building and energy and education have been ignored. The result is putting the U.S. decades back in true growth. Not only is there truth to this but Gross and El-Erian are laying out an investment strategy that remarkable mimics that which would be used in an inflationary atmosphere. While some experts could call them contrarians the fact is that the future is relatively clear. What investors need to do is also abundantly transparent. My breakfast meetings next year will clarify this and exactly what investors should be doing going forward.

Monday’s WSJ Reported Investment Scale Back. Major companies fear that the failure to resolve issues will result in tipping the country into a recession. Also, a possible compromise could include tax code changes that hurt certain businesses/sectors.There could be a January boost if an agreeable compromise is reached before the end of the year.

 

Freakonomics explores stuff you and I may think of but don’t know why we’re for or against except we know we are. For example if you’re a Detroit Tiger fan you may still be in either mourning or shock at the beloved Tigers taking a four-zip pasting at the hands of the SF Giants. The Giants! fercryingoutloud! According to the results of the series the Giants are the best team in baseball. Whoa,  this may not necessarily be so. Steve Levitt, the author of Freakonomics, recently wrote in his blog that a seven game series is not nearly long enough to truly indicate the better team. In that short of a series a crummy team has all the possibilities of winning. In fact to really test the best team the series should go to 23 games. In a 23 game series this results in the weaker team having only a 5% chance of winning. So a true test of best in all of baseball is to extend all the playoff games. This could result in a six month playoff system but who cares as long as the Tigers can come out and bat in game five, six, seven…well, you get what I mean…

Tax Threat is the real culprit behind the market selloff.  A wise accountant once told me that you never invest primarily for tax reasons…you get into more trouble that way.

62% of all eligible voters voted. so I don’t want to hear the other 38% complaining…

It won’t be cheap but we’ll have plenty of it!

  I’m talking about oil-, black gold, Texas Tea (someone cue the Beverly Hillbillies!)… move aside Russia and Saudi Arabia the good old U.S. of A is back, says the International Energy Agency, a Paris, France based organization that studies energy patterns and scarcity. According to the study the U.S. surge in oil production is projected to be 11.1 million barrels a day by 2020. New methods of extracting oil and the glut of natural gas should make us almost independent of importing energy in the next seven years. In addition to a reduction in use and more efficient refiners the United States will further reduce its dependence on foreign oil. U.S. oil consumption dropped last year by more than eight percent. However the cost of extracting oil through fracking and other means is not inexpensive and so don’t expect to see low energy costs going forward. Independence has a price. Energy companies paying dividends still make sense going forward and as an inflation hedge. Talk to me before trading or adding to your current portfolio.

Global Correlation Has Increased, reports Morningstar. (yawn…) What does it mean in dollar and cents for the average investor? First when designing an asset allocated portfolio what one wants is to own stuff that doesn’t all go up and down at the same time. If it does than something is wrong- somewhere. Long-term investors want to own different stuff and different sectors. That means that things are not correlated. But, Morningstar did a study and found that Global stocks and our domestic’s have a closer correlation than one would think. While this is not historically accurate it seems to have been creeping up over the years. The reasons are there are more global companies and the most current financial crisis is worldwide. Both situations have brought our markets closer in risk and performance. Large cap global stocks are more prone to be closer to our domestic indices than smaller stocks. Investors should review performance of their different sector funds and broom those that have close correlation to the large cap domestic funds. Call or e if you need some help or software analysis.

Don’t Fight It! Healthcare is on the table and will be with us for four years. There are some great opportunities in healthcare funds that (1) pay dividends (2) have a great history and (3) the time is right. Use professionally managed funds for your portfolio instead of trying to find which stock will benefit the most from our National Health Care Insurance Plan. Many of the funds have already factored in Obama Care.. and the opportunities presented may be un-correlated to the rest of your  investment portfolio….which is a good thing. Call me for my Healthcare picks.

Storage Locker Wars on the ether. Cloud storage is a locker for computer stuff. Google has one and so does Microsoft,  Apple; and they are proprietary and cannot be shared from one device to another. One saves one’s stuff in the Cloud and uses it when its needed. The problem is that Google is Google and Apple runs on Apple and never the twain meet. But Dropbox offers free storage to a certain degree plus uses of multiple tool support-either iPhone or iPad, etc. The company is not public-yet, but keep your eye on it- there are 100 million users of Dropbox and its gathering consumer and business support.

The painting is a Mark Rothko and titled No. 1 Royal Red and Blue. I find it interesting. Not $75 million interesting, which is recently sold for, but interesting. (Someone hand me a brush!)

Now that the election is in the rearview mirror what are investors to do? The problem is that we sometimes over-think stuff. Nothing has changed and the basic philosophy out of Washington hasn’t suddenly become enlightened or made a move to the middle. Investors who stay the course and reallocate as the economy grows should do well.  

Bill Minor sent me his real estate letter and seems real estate is still moving up in price. Mortgage rates declined. Homes sales did fall to a seasonally adjusted  4.75 million units,  but an 11% increase from 2011. The number of properties that are distressed have been decreasing but still high by historic standards. To get Bill’s newsletter delivered to your in-box click on Billminor@kwrealty.com.

Markets ended Wednesday last at 4 month lows. That’s the headlines and scary news indeed only if we hadn’t been here before. Mr. Market always surprises and Wednesday was no different. Facebook stock shares were unlocked, meaning over 800 million shares owned by a select group were eligible to be traded. Everyone was expecting FB shares to dump in price. Instead, on a down market day, FB shares popped over 12%. Lots of reasons why and the most common one is that simply because shares could be sold/traded is not a reason that they would.

Apple is off its feed. Really off its feed. Whenever you see a stock get hit, even though it has a history of being socked, its still unnerving. But Avi Gilbert for Dow Jones wrote back in August ( as I was whistling past that particular graveyard), Apple, on the charts, could be a great buy right around $515/517. He’ amended that on November 13th to up the price to $522, and writes that you may see all time highs for the stock as early as next year. Silver, he expects, to double. The ETF SLV closed $31.64, and Gilbert likes it around $29.70 level. However, he warns, not to get lost among the leaves in the forest. For whatever reason that makes sense….Starbucks in June opened its first Tazo stand alone tea shop. The company announced it would be a buyer of Teavanno Holdings, Inc. The 300 store tea company has 100 loose leaf teas and artisanal tea equipment and merchandise. Share in Teavanno jumped 59% on the announcement. The global tea business is valued at $40 billion, according to Starbucks, and growing. SBUX closed under $49 a share, a $53 fair value, with Morningstar.

Sin stocks were once the rage. Phillip Morris was the King of Sin owning several cigarette brands, Miller Brewery and Kraft Foods. The story was you could eat a bowl of mac and cheese, smoke a cigarette and wash it all down with a beer and make one company rich. Today cigarette companies are still huge dividend payers for shareholders even as they scrounge for new markets. The old Phillip Morris is now Altria and a mere shadow of itself having divested both Kraft and Miller. Today social conscience funds are more attractive to the investor psyche. But don’t count out sin. Booze is still a big deal, especially in emerging markets. Cigarettes, too. Then there are fast food stocks, many making billions in China and other BRIC countries. And don’t forget firearms. More guns have been sold during the Obama administration than any previous. One firearm company had to stop taking orders because of the backlog. The United States is one of the biggest arms exporters in the world. Ignoring sin in your portfolio could be costly.

2013 Ford Fusion with all the bells and whistles $34,770… 0-60 in 9 seconds! Imagine running that on Woodward from Teds to the Big Boy in 1956- or from the Totem Pole to Teds….

I don’t get it! No Tax Hike For The Middle Class…unless… Anyone that can count on their fingers and toes knows, ‘It’s the government spending that needs a muzzle.’ The WSJ published a chart showing the tax increase on specific incomes if politicians don’t get to work on a fiscal cliff compromise.

CPI inches up in October even as energy prices fell.Food and housing were up. The Empire State manufacturing index improved in November from October levels. The Phily Fed November manufacturing survey showed a contraction. Hurricane Sandy was blamed.

ING the Dutch Insurance/Financial Services Firm is getting dolled up for an Initial Public Offering of its U.S. unit.

Hostess Twinkies are gone. Maybe not the tasty treats but certainly the company that made them for about 85 years is kaput. A one-two-three punch of too much debt and no more concessions from the baker’s union combined to kill the company and lay off all 18000 workers. Two hedge funds, who bought all the old loans for pennies, attempted to reconstruct the current debt and union’s demands when it all fell apart. The hedge funds are left with enormous debt and some equity in buildings, machinery and the Twinkie and Hostess names. Down the road some bakery will buy the recipe and Hostess and  Twinkies will again be in lunch bags throughout America. Still the big story is another 18000 workers will be out of a job. A fried Hostess Twinkie with raspberry sauce….!

Time to Buy…Evan Niu, CFA, of the Motley Fool     ( I’ll have more on the Fool next week) on November 8th wrote Apple and Bank of America are two stocks beat up enough with room to run (my interpretation of his analysis). Remember, always do your homework- and both stocks fell more since his article was published. 

Markets moved up slightly Friday- FDIC shut down a Georgia bank Friday bringing the total bank closings in 2012 to 50. 

Questions call Paul @ 586 783 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 November

 Just as people are getting back to work and rejuvenating their 401ks Vanguard, the money management folks, have come out reporting that-‘ dollar-cost-averaging is not the best way to invest your money.’ It seems that investing in lump sum has better results.

Most people only have a little money they can put away each and every month. But once in awhile a few people, either inherit or though some luck, find themselves with a significant pile of dough. Vanguard says to these folks, ‘dump it all in’ and you’ll be better off in the long run.  To that end the folks at Vanguard ran some pretty sophisticated computer models to show that there would be, in an almost perfect world, a difference in total gains between savings a little bit each month or investing it all in one sum. The dump all in crowd came out a winner- which, to tell the truth- I can’t believe. Because I think if someone started saving in 2000 and retired in 2007 they’d be significantly under water no matter if they dumped everything in or invested by dollar cost averaging. It’s all about the timeline. Or, as the investment types say, ‘Rolling periods.’

And, as I delved into the report, sure enough the difference between the two methods, over rolling periods, was significant but not by  ‘buy a Gulfstream’ significant.  Luck, it seems, also plays a more than significant part in investing. Those generations before us caught a huge wave as the S&P 500 index climbed from around 100 when Nixon was President to about 700 when Clinton left office. Today the index stands around 1400 from where Clinton left office. That, my friends, is where the lump sum and dollar cost average crowd can both agree. The investment years from Nixon to Clinton were much better than the years from Clinton to Obama. And as we look from Obama to whomever it seems that either lump sum or dollar cost averaging works-the markets have created more wealth than any other method of saving.

Stop! Required Minimum Distributions have to be done by the end of this year. If you are 70 1/2 and older… I notified all clients back in January of the amount they needed to take out of their IRAs. The penalty is severe- its 50% of the amount you should have taken out but didn’t. Call me if you have questions.

Also! This may be the last year for preferential numbers for capital gains. If you have investment gains and losses to offset, do it before the end of December. If you have questions call your tax advisor. Call me with your investment questions or send an e-mail. Don’t wait until the last week in December.  ‘Cause it just might not happen…

Before the news of the week…expect more volatility this week, according to our friends at Talmer Bank & Trust, unless the Fed releases some ‘vanilla’ reports. They caution a defensive stance through the end of the year and into next as the U.S. debt problem still remains unresolved. Emerging markets continued to be the bright spot, losing less than domestic equities. Talmer likes emerging markets going forward as the best positioned group, even with, Talmer reports, a slowing China.

Made in America means quality, strength, durability and, maybe, to some, a cachet of luxury or of independence. Of course this wasn’t always true as those of us old enough to know not to buy a new car that was manufactured on certain days because the odds were that the quality wasn’t quite up to snuff. The NY Times in September wrote about the ‘new’ Made in America meaning; and its a far cry today from the old made in America. Products made in America cannot compete on price so companies have to compete on quality and doing business the right way. Some overseas businessmen interviewed said that doing business with American companies meant that they knew if the job wasn’t done right the first time that the American’s would re-do it until it was right. The American brand it seems is back. I just have one question, and why is my favorite brand of canned peaches now grown and processed in China?

 

Here’s a dandy piece on historical time cycles. How long, how high and how low.

Just putting finishing touches on my Inflation Breakfast Meeting Workbook-

The workbook comes in at 33 pages- filled with info you can use. What industries will be impacted by inflation- what investment sectors should you be looking at and what group will be most impacted as inflation runs and runs. This is without a doubt- my best meeting ever. You are going to want to attend if for one reason to know if stocks or bonds are historically strong during inflationary times and if not, what is. Call or e for a seat coming in February.

Toyota raises outlook even as China sales tumble. Both Honda and Nissan cut full year expectations but powered by demand for a remodeled Camry Toyota’s operating profit and sales rose in all regions. CFO Ozawa said the company has raised prices and cut costs. Toyota is set to outsell its rivals GM and VW. GM’s China sales rose 14%, including its joint venture with Chinese SAIC Motors while Ford was up 48% over the same period. Ford had basically no presence in China until recently.

Election Eve markets were quiet- positive ending but quiet.  

The New America… Europe cheered and their markets were up as the President was re-elected Tuesday.  Asia, too. For all the talk of change Americans want not of it. Wall Street correctly called this election, and I published it, back in September. Wall Street was for Romney but conceded that the president would win. On CNBC Jack Welch said Tuesday morn that a Romney win would energize the markets and create 4% growth going forward. The markets even had a little incumbent preview Tuesday with a solid triple digit gain on the Dow. One pundit on CNBC said though unemployment was at hideous numbers those that were unemployed were likely to vote Democratic rather than Republican only to ensure that they would continue to receive un-employment checks. Jimmy Cramer called the winner of the campaign a week before the election. Studio talking-heads gave him dirty looks but Cramer held his ground. The current players, such as Fed Reserve Chief Bernanke, will stay the course, (of course) printing more money well until 2015. His term is up in January, 2014 but expect him to stay for another term if asked and you can bet he’ll be asked. Jim Rogers, the commodity guru said to get ready for cheap money to run ‘amok’. ‘If the president wins expect more inflation, more money printing, more debt, more spending.’ And on the election Limbaugh said, ‘You can’t beat Santa Claus.’

Investing with the Democrats. Stocks and Sectors gathered from CNBC, MarketWatch, WSJ and other sources… Bio-tech, technology, environmental stocks (wind, solar),  retail, housing. On specific stocks: CHS, Excelon, GE, HCP, Thermo Scientific, First Solar, HealthSouth. Jimmy Cramer on Today said don’t bet on banks or that Mr. Obama will be taking calls from corporate CEO’s. Bonds, too, should be fine for the time being. Catching the Mouth on his late show Wednesday he reversed direction on banks and gave them a half-hearted endorsement. I choked on my peach cobbler in confusion….and then Thursday the Cramer said on his program that maybe Romney wouldn’t or couldn’t boost the banks any more than Mr. Obama.

 

 

Was that the ‘Collapse?’ For months talking heads have been scaring the you-know-what out of investors. The world was coming to an end if the president was re-elected. Talk show hosts, with their own agenda’s, have proclaimed the end of civilization as we know it as soon as Mr. Obama returned to office. So was that it? On the day after the election markets were petulant and fell a goodly amount- over 300 points as investors unwound their Romney bets. They also sent a clear signal to the president, if he was listening or learned anything (as he said he did). The markets abhor unknowns and if anything the previous four years was (with few exceptions) loaded with unknowns. Now Wall Street steps up and unloads by selling off- a signal that more may come-the Street wants a resolution along with immediate effort. The first thing on the agenda is the fiscal cliff.

I be bargain shopping…The fact is that the economy is on the mend. Housing is perking up. The consumer is back to spending. Interest rates are low. Inflation is also low- for a bit. It’s the politics. The debt. The huge numbers of unemployed. The uncertainty. The total lack of intelligence in Washington. The absence of leadership. The divided electorate.

Continued concerns our ‘leaders’ won’t get their respective acts together caused another down day on Thursday. Zacks reminds us that the markets are selling off for the precise reason that there is no change in the make up of our government. Mitch Zacks writes that he believes that the fiscal cliff will be kicked into 2013.  On the Eurozone Zacks doesn’t see a complete failure. If that were the case our markets would not be up this year. All well and good, still I think most bad things happen when we don’t prepare or think they can’t.

Groupon had another bad day. From an IPO price of $30.00 the company now trades under $4.00-  I was not and am not a big fan of the company or the concept (so old world!), that I see nothing attractive here. But, the company has laid off about 80 employees last week and totally lost 954 for the year. Wall Street had low expectations going into earnings and Groupon came in with even less.  Some see value but remember what is cheap can get cheaper.

JP Morgan Chase’ Dr Kelly wrote in last week’s Market Insight that the fiscal cliff not being resolved is a remote possibility. Investors with a significant investment timeline should be looking at equities as an appropriate long-term allocation, the Doctor wrote. Nothing much will change going forward as its the same old bunch we didn’t like much then and  who will be with us for another four years. There is still too much business leaders do not know and we cannot expect them to do anything until the politicians grow up and give direction.

Worst week since June 2012. Disney fell 6% last week. Hello? Reason? it missed revenue expectations. Moving in correlation is one complaint the WSJ hears from mutual fund managers that they can’t beat their index. Active managers, that is. Correlation is when a portfolio all moves up all at once and all down all at once. That’s not asset allocation but managers say that’s what happened when they mixed and matched their stocks and bonds this past year.

I’ve written that some mutual fund families have stock overlap within their funds in the same family that make asset allocation a real bummer. Another complaint from the same managers is that mediocre fund performance has been caused by dispersion, or the difference in returns between the best and the worst performing stocks. Still, folks should remember that back in the previous decade active managers trounced almost all index funds, especially the S&P 500 index. Ya’ll remember?

1987-like Crash Whispers?! Several writers penned scary thoughts of a ‘87’ meltdown. Drawing on similarities that are not there ( a cute writers trick) Jon Markham at Dow Jones goes on and on and one for a full page of itsy-bitsy print and finally as your eyes cross he finishes, ‘….I don’t think this will happen…’ It was Friday, it was slow news and he had a deadline.

UK Banks show thin capital levels, according to Morningstar. The Bank of England has urged banks to raise additional capital. Morningstar reports profits at UK banks will be weak for the near future. The most attractive of the banks, even including its exposure to Scotland, is Royal Bank of Scotland, at today’s prices, according to the analyst at Morningstar.  Lloyds, they report, is the least attractive.

The Washington Post reported on election eve…That neither the president nor the governor could or would turn the U.S. into a bleak financial hellscape. Both, the Post wrote, believe in the genius of free markets, the necessity of a federal safety net and the importance of a strong military. The records show, according to The Post, that both men govern prudently, analytically, and honorably. If that’s the case tell me why I stood in the cold for forty minutes to vote last Tuesday?

Finally, according to Bob Schieffer of CBS News the President didn’t get a mandate but a second chance. We all hope he understands the difference.

Questions call Paul @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money. Call or write if you have questions about upcoming breakfast meetings or investment accounts.