That Was The Week That Was-5th Week November

 Some people spend more time planning a vacation than they do their investments or tax strategies. No one knows what the new tax horror will be for us in 2013 and beyond. Suffice to say when I see rich folk start acquiescing to the concept of paying more in taxes- you and I are next in line. After stuffing my face with leftovers the day after Thanksgiving, wiping my tears at the Michigan loss to Ohio I booted up the old HP and surfed some tax moves that you may want to consider and talk over with your tax professional.  The AMT, if not repealed, will impact some 33 million households in 2012 exceeding the previous 4 million. Remember this all started because one millionaire filed back in the day and didn’t pay a penny in tax. This so enraged Congress, and the American public, that they installed a punitive tax law that calls for everyone to pay something. Little did anyone foresee that this would cascade causing millions of Americans to pay, what is almost, a penalty. The law of unforeseen consequences. Here’s some ideas for 2012:

• Make charitable gifts now. If not sure if the group is eligible go to www.irs.gov
• Wait before you donate IRA assets to charity, this expired in January 2012 but may be reinstated by legislators.
• Max contributions to your qualified plans.
• Make an extra payment on mortgage.
• Harvest gains and losses only with the assistance of a tax professional.
• Make tuition checks before end of the year. Qualified families get benefit.
• Businesses buy depreciable equipment.
• Set up a Health Savings Account- you don’t have to fund it for 2012 but you do have to have it open by the end of 2012.

Baby Bonds….from zero assets a year ago to $600 million today. Jason Zweig reported on the boom in these ‘smaller denomination $25.00’ per bonds for business development companies. These pint size bonds pay a hefty yield of 5.75% to 7.375%. Investors are cautioned that these baby bonds have exceptional risk and little history. Many of them currently trading under par – but some aficionados say that as the public gets used to them that will iron itself out. Baby bonds trade like stocks on the New York Stock Exchange, with a typical spread of one-to five cents per $25 unit. The other thing is that these are unsecured, and while Zweig doesn’t say it, in case of default don’t expect anything of value to be left after those first in line get done picking at the carcass. I would think best way to get exposure would be through an active managed bond fund or ETF.

Dividend and Capital Gain Estimates Are Available For Most Funds 2012. Need estimate on how much you will be paying for 2012 call or email me. 

While drumbeats for an economic turnaround are heard from retailers and on-line businesses the State of Michigan has about 90,000 people, including children, who are homeless.  This year rather than sending client Holiday cards that money will find itself to a local Macomb charity. There are local food banks and shelters that deserve our holiday (and year-round) dollars more than a greeting card company.

Monday Markets Mixed…ah, but there was some surprises when a previously bearish Facebook analyst suddenly got optimistic and said there was more Upside to the stock than there was downside. Shares jumped 8%. Bernstein Research upgraded the Facebook stock to outperform and tagged it with a $33 share price. Apple moved Nasdaq- shares up over 3%. Some analysts reviewed and downgraded their price on Apple saying the company is facing tougher competition and corporate headwinds. Still most analysts have a buy on the company. Apple also bought ‘lightening’ trademark from Harley Davidson (HOG). A Canadian (eh) will lead the Bank of England. Mark Carney who runs Canada’s Central Bank will become a governor of the BOE in July. Applause was heard in global financial circles and groans at the hallowed halls of BOE. Some say even the Canadian magic can’t save GB’s economy.

Private Label green beans, cookies and storage bags are  common enough but did you know that some of the most well known financial-brokerage firms sell mortgages under their name that is managed by another firm? PHH is a Baltimore based car leasing and mortgage company. According to Jon Lang at Dow Jones the company handles auto fleet leasing for a good number of Blue Chip companies. It also branched out into the mortgage loan and service biz for such operations as Morgan Stanley, Merrill Lynch, First Horizon and beginning in January for the U.S. division of HSBC. The company also underwrites and does deals for community banks and credit unions. You won’t see the PHH name but Coldwell Banker, Century 21 and ERA mortgages are also private label. PHH closed around $21 a share and has a forward P/E of 7. As home buying gathers steam expect PHH to be somewhere either making the mortgage or servicing it. The company does not hold the mortgages but sells them to government sponsored entities. For those looking for a housing play Land suggests investigating PHH.

Markets down across the board Tuesday. Everything was off its feed and there wasn’t much happy-happy on any particular stock or sector. Europe also tracked along with the U.S. markets. It was all about Senate bickering about the fiscal cliff that filtered to The Street. Shares in the gambling arena moved up but that was mainly on the coattails of Penn National, that runs 29 casinos, and split their shares creating both casinos and REIT shares. Hotels have separated management from real estate eons ago. We may not see that with the big players such as Sands and Wynn.

Coke Split shares some time back and… Westminster Financials’ Joan Goodman presented a ‘Buy’ on the stock. Highlights on KO include: AA- Credit Rating, ranked the most valuable brand worldwide. KO is on a buyback stock repurchase program of $4-5 billion over 2012-2013. The dividend is 2.7%. And cash on hand is $18.08 billion or about $4 a share. Like someone once said, ‘You could do worse.’

Stocks dead and so are bonds, according to Pimco’s money managers Gross and El-Erian. The two have been lauded as kings of money management for years. Bill Gross is known as the king of bonds. His bond fund is the world’s largest and has performed exceptionally well. Now the end is nigh, as the song says, and bonds are close to the end of their run. The U.S. economy will not perform at a 4%-5% rate as some economists predict, they have predicted; both Gross and El-Erian say that the numbers will be far less and that the United States is in for a long slow grind. There is a laundry list of reasons why both men find nothing happening for the economy until after 2022. One of the reasons is that politicians are clueless (you think?). The Street has found fault with many of their conclusions and debated the issue on CNBC and in the WSJ. Still the men have their advocates. The problem is that they are not infallible and earlier they predicted they end of Treasuries and were…(cough) wrong. 

According to experts- Apple’s breakout number is $626.00. The hill to climb is $600.

Want to own Apple? Can’t buy more than a handful of shares? You can buy a Tech Mutual Fund or ETF, Apple is overweight in most funds. Still want more bang? How about Corning? They’re the folks that make the Gorilla Glass used at Apple and a slew of smart phone and tablet companies. Corning came out with proud as punch forward guidance, and Morningstar gives it a fair value of $15.00. Most people still think Corning makes those dishes that don’t break and those white ceramic like cooking/serving pans. They do plus lots more, including television screens. The company is not just hanging their hat onto Gorilla Glass, although that’s a good enough reason to buy the stock right about now say some bloggers.

Krispy Kreme was originally all about the hype. Much like Boston Chicken the company’s expectations were larger than its business acumen. In 2003 shares in KKD were above $43 a share. Troy Peterson at Gap Edge Trading says be patient and see if shares climb and hold around $9.50. Investors could see a possible $13.00.  Boston Chicken, some thought would crush KFC, is basically bankrupt, and shares trade in the pinks and are worthless.

Wednesday’s markets were down in the early slog but before you could say, ‘Happy Face,’ stocks reversed and closed up across all indices. It was all about whispers from Washington that the two sides were close to some sort of a deal, although you wouldn’t know it if you tuned in to the evening news. Both were waving proprietary political flags for the camera. Whatever it was that was whispered it did ignite a mini-rally on Wall Street.

Auto Show in L.A. Execs were stoked about 2013 and it wasn’t just the smog talking- it was car sales as aging ownership is forcing buyers into the showrooms. With Europe in the doldrums auto manufacturers look at USA as a growth market, said BLW Ludwig Willisch, AG’s North American chief. 2013 sales are projected as high as 15 million. The other bright spot is that banks that were not financing just a few short months back are. Even if the U.S. falls into the chasm experts are saying auto manufacturers could still break even. Share price on Ford and GM inching upward. 

Obama Health Care? Hedge Funds Love These Stocks… according to Insider Gorilla.com

• Cigna
• McKesson
• CVS Caremark
• Humana
• Walgreen
• Gilead Sciences
• Aetna
• WellPoint, Inc.
• Express Scripts Holding Co.

 

Friday Morning Games in Washington Continue. It still seems to be, ‘My way or the highway,’ mentality. At least for the public. With backs to the wall German Parliament Approved at the last second a bill on Greek aid. Only when the consequences of the collapse of the euro sink in did the politicians vote to give Greece more time to meet budget targets. ( Ya’ll know that’s not going to happen and its the game of kick the can goes on…) A band-aid is a good bet for the American economy as politicians continue their political posturing. If that’s the case the economy and business will grow but markets will be volatile.

Markets moved up slightly Thursday but closed off their highs. News that charities are lobbying members of Congress to ensure their tax deductibility is sacrosanct was posted in various news releases. The Limbaugh Show on Thursday dragged out the old chestnut that there may be some revamping of the existing 401k structure. While the U.S. is not a saver but a spender I find the possibility remote of the government confiscating all 401k’s, rolling them into Social Security, eliminating the tax deduction for contributions. It’s idiotic. Time Magazine reported that the 401k benefited only the top 20% of all workers. On the face of it the statement is ludicrous since corporations eliminated defined benefit pensions and shoveled retirement savings onto the workers without increasing their pay to increase their bottom line. For those that remember, employee pay is comprised of both current and deferred with benefits. The deal always has been, ‘I will take a little less today if you promise to pay me that deferred amount at retirement.’  More in next week’s blog on your 401k.

Case-Shiller reports housing in midst of recovery. Among 20 cities tracked 13 posted gains. iShares U.S. Home Construction Index Fund ITB has doubled in the last 12 months. Investors looking to take advantage of the construction growth should call or email me.

Markets slightly mixed Friday but Up for November. Yum Brands lost 10% of its share price Friday on China slowing worries. The company has 5000 stores in China. Apple iPhone debuts in China on December 14th. Also available will be its Wi-Fi version of the iPad mini and fourth generation iPad. The iPhone 4s was a big hit when it was initially introduced in China. I expect so will this phone. Apple also has a desktop called the iMac- more like a piece of art than a computer.

Cheap Money lures corporations to the bond market. More bonds offered and snapped up by yield crazy investors then in 2011. Companies have raised over $1 trillion dollars this year. The cheap money has made companies dip into the bond pool whether they needed money or not. Interest rates may never be this cheap again. Last week Amazon, Costco, Disney and Chevron all had debt offerings. Home owners may want to take a cue from business and call their mortgage company and see if they can reduce their interest rate. Many banks are offering far less than 4% fixed for 30-years. On $100,000 you could be saving $2,000 a year for a cheaper mortgage.

Finally-Just as they called it in late summer the markets predicted that the President would be re-elected they see no fiscal cliff and believe some kind of a deal before year end will be declared. While we’ve seen markets move in weird ways the last two years, the trend, according to Tom Kilgore at WSJ, for stocks is up. 

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