That Was The Week That Was-4th Week January

Stock Overlap is a condition usually prevalent in very large mutual fund families. It makes asset allocating difficult using just those funds in the family. There are about 7,000 mutual funds and about, give or take a few hundred, the same amount of domestic stocks available. Not all stocks are qualified to be purchased since each mutual fund has certain rules on what they can and cannot buy. Needless to say with a one to one ratio between stocks and funds ( the numbers are horseshoe reckoning) the investment results are always in the management of assets. But, when a fund company makes a large purchase of a single stock and then parcels it out amongst its various fund managers this becomes an allocation nightmare if you are allocating within the same fund family. The next time you look at your funds check and see if you own the same stocks in all the funds- if you do then that’s the reason your entire portfolio goes up and down in tandem. Mutual Funds in a portfolio should act as reverse magnets and act in disconnect. That’s the primary purpose of asset allocation. Diversification is what most people confuse asset allocation with. Spreading the risk amongst many. Unsure what you own call me for an analysis.

It’s Called Simply, ‘Davos’, and it’s a place not the group or event which is a meeting of political, business and academic leaders called The World Economic Forum. The WEF is a non-profit out of Cologne with a goal to improve the state of the world.  News out of Davos this past week was that a warning from its members of an impending credit bubble as demand for fixed income assets continues. The result, eventual and about as sure of a thing as a one horse race, will create inflation and loss of principal in devastating effect. (see my breakfast invite)

Housing & Better Than Expected Jobs Boosted The Market For Another Week. Now there are whispers sotto voce that say the market roll could well continue for the entire first quarter of 2013. Along with better news from the housing front the ancillary home improvement and companies that sell power tools, a-c’s, carpets, furniture and cement are showing expansion.   It’s the real deal folks…so far, so good.

The Folks at Dow Jones Published A List of Retirement Don’t(s) Earlier This Month.  So here’s  a few ...

• Your Home Is Not an Investment
• Don’t Invest in Anything You Don’t Understand
• Don’t Think You Can Get Quality Financial Advice for Free or The Price of a Lawn Service
• Don’t Overestimate Your Investment Prowess
• Don’t Waste Your Time Searching for an Investment Guru

Morningstar’s Stock Strategists Suggested Stocks, Funds and ETFs for 2013. Here are a few in no particular order with the caveat that before plunking down some hard cash you do your research.

• Kraft
• Microsoft
• Cisco
• Google
• Vodaphone Group, PLC

Worst Kept Secret is The Coming Demise of Opportunities in Treasury Bonds… You may like the comfy feeling of owning debt more than equity and that’s understandable. But as interest rates inch up principal value falls. Rather than buy an individual bond with a long maturity, which could help you sleep at night, consider these offerings in bond funds:

• High Yield Bonds
• Senior Floating Notes
• Emerging Market Bonds
• European Dividend Stock Funds

Warren Buffett observed, ‘The Federal Deficit Should Be Stabilized In Relation to U.S. Economic Growth, but that the nation’s $16.4 trillion is not trouble in and of itself. Let’s not encourage those gasbags in Washington to spend more than we have to. Buffett went on to say as a percentage the debt is lower today than it was after WW2. i just had that argument…130% of GDP after WW2 and only 100% today….mmmmmm? about $50,000 for each person in the U.S. of A.

Sitting Out Until Things Are Perfect? You May Have Missed About 2% Year-to-Date. Last Year 7% If You Just Matched The DJIA. Good intentions on timing the markets cause people more money than holding through good times and bad. No one can time using the rear-view mirror and you can’t sue a radio talking head who has no skin in the game except scare ratings.

Feeling Richer? Home owners should since home values popped on a national average in 2012 about 5.9% and are expected to increase by an average 3.3% in 2013. Home sales increased 20% from the year before. Remember real estate has always lead recoveries…

Have You Registered For My Inflation-Tax Breakfast Meeting February 16th? You may not believe inflation is heating up but it is especially when talk in Washington mulls the re-jiggering of COLA in order to curb the increase in Social Security payments. Next you have the Republicans toss in the towel on increased taxes you can bet there lurks higher taxes for each and every one of us. You don’t need a lighted stick of dynamite in a dark room to tell you something is amiss and its happening now- slowly but surely. You may only walk away with one key investment idea of concept from this hour long meeting but it could save your pension or retirement savings. Register Now- call me at 586 783 7080.

What’s Your Pension Plan Up To? Seems there are pension managers, according to Tuesday’s last WSJ, who are all about juicing up returns by leveraging bonds while stating (with a straight face) that using leverage really reduces risk and they have the math to prove it.  Anyone besides me remember the new-new math where 1+1 = whatever they wanted it to?Problem, according to us grade school graduates, is that few folk really understand (1) derivatives, (2) leverage as measured against what and (3) who asked you to jack fixed returns anyway? Some of these managers are calling it the Holy Grail and in Virginia the Fairfax County Employees Retirement System have revamped their entire $3.4 billion portfolio around this risk parity approach. This could be a so-called lifeline to get pension plans back into the black after a disastrous meltdown in 2008. Critics charge that leverage, by its very nature, magnifies profits when trades go well and increases losses when they go sour. I wonder if these so-called bright pension-managers are the same one’s that bought bundles of mortgage bonds from Wall Street and watched the meltdown not understanding what they bought. Check with your pension manager to see what their doing with your retirement money. ‘Beam me back, Scotty!’

Dow Theory Signals- Buy…maybe… Remember when we talked about Dow Theory? Basically it  postulates that if one of the averages (industrial or transport) advance above a previous important high it is accompanied by or followed by a similar advance in the other. And, we know things can’t go smoothly up on the DJIA if the transports are sinking like a cheap canoe.  According to Mark Hulbert @ MarketWatch, a week ago last Friday, we should be entering Bull territory- almost. ‘Let’s not get giddy’, piped Richard Russell, editor of the Dow Theory Letters, and the one holdout out of the three, who said the DJIA has to close above 14,165 to confirm a Bull run. Not confirming or attaining could be Bearish news for the markets. As others have said- and lets wait and see.this is Mark Hulbert

 and this is Tom Bergeron. One is really funny and one is …maybe not…

Hello, Mr. President! The markets are all about making money and they don’t care if a Tory, Whig or Tea Partier runs the nation’s business, as long as it’s run right. ( Wall Street has voted Republican and Democrat in recent elections and been both pro-this current administration and against it.) Tuesday after the public inauguration markets did a very nice thing and extended their previous run with gold off a bit and oil up a bit. Google beat expectations, sort of. Stock was up in after-hour trading. Europe was up- Asia down for the session. Wednesday was another up day and pretty much mimicked what happened Tuesday.  Dow and S&P up, Naz fell afterhours and gold down with oil up a  fraction.

Apple After Hours Meets Numbers- Barely-And the stock is immediately crushed last Wednesday! Shares of the largest company in the U.S. fell from $705 to $515 over the previous quarter and then took another dip afterhours because of (1) Barely making expected numbers (2) Illustrating fair to middling expectations for the March quarter. Analysts and talking headers are having a field day with Apple’s so called problems. These problems include a China Mobile launch, $137 billion in cash, a tad over a 1% dividend, a P/E of 8 and a stock buy-back program that could get more aggressive. This is another case of what have you done for me now and being punished for not doing more than expected. Morningstar reduced valuation to fair value $600 from its original $770.00. Goldman Sachs knocked $100.00 off its 12- month target price to $660. The analyst at Morningstar speculated that the company could have a mid-2013 new product launch and save the year. This is the most widely held fund by investors. Over the last 23 days more blogs and opinions- both pro and con- on Apple have surfaced.

Whispers the markets could stall right around the S&P 500 numbers of 1505. A friend of mine who talks to a lot of Wall Streeters, day-traders, and the ilk and who has a gift for charting, sez everyone into the lifeboats right about the above number. Get everyone into cash, he sez, and then you can move them all back in when the danger is past. This is his money management method.The problem is that he’s been wrong about as many times as he’s been right. And even if he’s right we don’t know for sure when the ‘right’ time is to move back in. ( he’s been wrong about that, too.)  And as we’ve learned markets go up and they go down but they don’t go one way or the other forever. And then you have the situation where markets stall, stay sideways for an extended period of time before dancing up or down.

Markets tank? What to Do? Solution-Buy more, let dividends reinvest, ignore the bad news till it passes. I have never seen an effective timing market program that doesn’t cost the investor a lot of money. Allow asset allocation to do what its meant to do and Ignore the Noise! Ask anyone who’s been in and out and in and out of the market and they’ll tell you it was the worst thing they could’ve done with their money. Fear or exuberance, neither are stellar qualities for investing.

Who Likes Ford? Alex Cho created the chart and suggested things look rosy at the automaker.

Gold Down Thursday. Oil Up. Microsoft barely hit numbers and it was almost no big deal. Hey! This is a Big Company, Too!! Shares fell 27 cents in afterhours trading. Morningstar reaffirms target price.Asian stocks up on Bank of Japan policy to knock down the yen and Global recovery- namely U.S. of A.

It’s almost the end of the month. A nice month. And things are very quiet out there.  It’s like when you told the kids to go to their rooms and play and you don’t hear any noise.  You just know they’re up to something…

 

Another hug for Facebook- The Intelligent Speculator scribbled a few words…The blogger boosts the love for Facebook promoting it needs to be owned.  Citing a continuing evolution and in the Digital Economy Facebook could be the biggest player- more than Apple, Google or Amazon. Let’s not forget a billion members. And-News of cessation of 600,000 members in Great Britain was false and published by another social organization.

Friday another (yawn) Day another dollar..Markets climbed another 71 points on the Dow with every index up, gold down (again) and Oil up. We may have come up a little to fast in 2013 so don’t be peeved if we move down a bit. Facebook was up and closed at $31.54. All of a sudden a darling for social site investors. The company has made it difficult if not impossible for friends or other social companies to move information out of Facebook. This closed loop of information spells money to Facebook and their investors as over a billion members..er…friends share every single thought, moment of their lives on-line.

If you own a mutual fund through your 401k, or a sub account in your variable life insurance policy or have a savings account with ETFs or mutual funds you probably own stock in Apple. Almost every semi-significant portfolio manager, talking head or analyst has poo-pooed the stock lately and some have even announced the company is dead. Its finished, kaput, as a door-nail.  Let me remind investors on how fickle and inaccurate these so called analyst’s take on is on just about any investment or company that has a mediocre quarter or stumbles.  Back in September 28 2012 there was some bad news on another giant company and they called the company’s performance a Horror Show That Wouldn’t End Well. And the news was that things were just not going to end well with the company stock off from $300 to $70. Even a sequel wasn’t going to be pretty, said the critics. The company, they scoffed, even planned on cannibalize their existing customer base (yipes)! The company in question was mocked for its global growth pretentions and critics poked fun saying that was easier said than done. The company had a huge stash of cash and ‘the smart ones’ wrote and said management would burn through their pile and could possibly go to zero as competition heats up. Finally they concluded that investors would be better served running with whatever cash they had left of their original investment and plunking it down at Apple or Amazon. The company in question was Netflix. Last Thursday Netflix reported earnings and blew through numbers. The stock  soared 70% in one day! This was less than 4 months after the experts had called the company dead. Don’t get hung-up on what some idiot with a title behind his or her name sez or writes. I am reminded of the story that Money Magazine originally reached out and hired professional investment people to write for them. The investment professionals were so atrocious in their communication that the magazine simple hired writers that masqueraded as knowing investment types. Well, that’s the story and I got that from a contributing writer- an interesting way to end the week.  

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

INFLATION BREAKFAST MEETING

   Coming soon is an economic one-two punch of higher prices on goods, services and more taxes- what I call tax-flation- that could possibly cripple income buying power and investment portfolios.

February 16th- Saturday at 9 AM @

Sycamore Hills Golf Course- A Breakfast Meeting on Inflation. No Charge to Attend. 100% Educational!

  A Good Many Folk Think Bank Saving Interest Rates Will Skyrocket as They Did in the 1980s.  Don’t Bet On It. Banks and Insurance Companies Learned Their Lesson. Investors will need a plan and a good one to survive.

Call Paul Now @ 586 783 7080

There Are Only A Set Number of Seats For This Saturday Morning Breakfast. Reserve Now!

What You Will Learn…

• A History of Inflationary Time Frames
• Income versus Costs of Goods
• Will It Be Hyper-Inflation?
• Who Really Gets Hurt
• Comparing Past and Present
• Will Stocks Survive? Which?
• What Sectors to Own-What to Broom.
• What is an Uncorrelated Asset?
• Are All Bonds Deadly?
• The One Single Investment Everyone Needs to in their Portfolio
• How to Allocate and More…

 

Everyone attending gets a Free 34 page Inflation Workbook

 

Bonds Could Be Deadly During Inflation But Not All Bonds. Learn What to Hold and What to Fold

 

Register Now. E-Mail Your Name, Number Attending and Phone For Confirmation. Or:

Call 586-783-7080 or send eMail to Paul pstanley@westminsterfinancial.com

Are You Holding The Wrong Stuff in Your Portfolio?

 

 

1. LEARN WHAT TO HOLD.
2. LEARN WHAT TO FOLD.
3. LEARN THE ONE SINGLE INVESTMENT EVERYONE SHOULD HAVE IN THEIR PORTFOLIO.

Still Not Sure? Ask Yourself These Qs About Your Investments or Savings….

• Why Am I Holding What I Own
• Why Did I Buy It or Them
• What Would Make Me Dissatisfied
• What Do I Expect To Happen
• What’s The Worst That Can Happen

 

While No One Expects Inflation To Sky-Rocket Today Smart Folk Are Preparing Their Portfolios Now.

Learn How to Allocate Your Assets Without Destroying Your Core Portfolio! A few additions and/or deletions may be all your investment/savings needs.

Go To www.primaryplanner.com & Register!

Because People Wanted A Saturday Morning Meeting I Got You One…Figure 90 Minutes & then You’re Out Shopping…

Register Now BEFORE YOU FORGET!

Let Me Know How Many People Will Be attending with you. this is to have enough workbooks plus coffee, tea, juice and rolls. BRING A FRIEND!

90 Minutes. Comfortable atmosphere. Q&A after.

Sycamore Hills Golf Course-48787 north avenue, macomb, michigan

Paul Stanley Registered Representative Westminster Financial Services, Inc. A Securities Broker/Dealer, Member FINRA/SIPC.

That Was The Week That Was-3rd Week January

  Risk versus Return? The other day I was talking with a client regarding risk versus return and brought up the fact that risk and volatility went hand in hand but expecting to get a high return with a high risk portfolio, on a continuous year after year basis, was suspect if not impossible. Occasionally one will hit a fund or sector with high risk/volatility and end up a winner. Risk/volatility make up a winning strategy for traders- it’s a wonderful thing for those folks who buy-sell and do it over and over again versus the buy and hold investor. Personally, I search and invest in funds, stocks and ETFs that present a risk/volatility less than the overall market but are able to equal or match the market sector’s actual return. Investors can do that by researching a fund’s or stock’s Beta- which is a measurement of risk/volatility. Use the Beta as a measurement against the broader market- usually the S&P 500 Index and then compare it to other funds or stocks and how they’ve performed. The S&P Index 500 benchmark uses a 1 as the number benchmark and anything more than 1 is more volatility and anything less is less volatile. For example a fund with 1.5 Beta is 50% more volatile than the S&P 500 Index and a fund, stock or ETF with a Beta of .85 is 15% less volatile. Investors doing that will find their returns and overall volatility to correspondingly increase and decrease as time goes on. It’s important to continually check the numbers since nothing in the investment world is static and a low Beta fund, stock or ETF may suddenly change and you’ll want to know that before it damages your portfolio. Questions or an analysis of your portfolio call me at 586 783 7080.

MARKETS CLOSED MONDAY!

Back in the Day… Foreign funds and stocks were about as popular with American investors as the chicken pox. Eventually American investors realized that people in London and Berlin lived in regular homes with indoor plumbing and foreign companies, like Unilever and Bayer, provided quality and value and folks overcame their suspicions. Fast forward to the 21st century and for the average investor they’d rather take a long Sunday drive with their in-laws than even contemplate an emerging market mutual fund. Still emerging markets have considerable value as long as the investor does their homework. Demographics are just one component when choosing an emerging market fund. Today’s investors should examine not only the equity side of emerging markets but the income possibilities that provide higher yield and negative correlation to domestic income funds. Emerging does not mean the country is unsophisticated but one that has a high current capacity for industrialization. Frontier is what most people erroneously associate as emerging.

 

Inflation Breakfast Meeting February 16th at 9 AM a Saturday at Sycamore Hills Golf Course.

You may think inflation isn’t a problem and if it was you’d figure you’d have seen or heard about it on radio or from one of the ‘talking head-financial experts’. Well, you didn’t and it is. The usual reaction from folks my age is when inflation rears its head they say they’ll simply wait until bank interest rates are in double digits and then lock in as much as they can for as long as they can. The problem is that rates will not immediately ‘pop’ to double digits and in the meantime some serious losses will be incurred with other assets. Knowing what stock sectors to own, what fixed income assets can be held and how to allocate all or a portion of your portfolio into an Inflation Proof Portfolio will be discussed at my breakfast meeting. Plus I will reveal the single one investment that everyone should buy when interest rates start percolating upward.  Bring a pen, a friend and make sure you call me with your reservation. Nibbles, coffee, tea and juice will be there along with a take-home workbook. Call 586 783 7080. write for reservation www.pstanley@westminsterfinancial.com

The U.S.CONSUMER FINANCIAL PROTECTION BUREAU IS CONSIDERING WHETHER TO TAKE AN ACTIVE ROLE IN MANAGING AMERICAN’S RETIREMENT SAVINGS. Bloomberg reported last week that the government agency, which was created to make sure financial products and markets work for the American consumer, is considering managing the $19.4 trillion of retirement assets held by citizens. This would probably fall under their Office for Older Americans. Worried about fraud and scams the agency could well take an active role in the money management of assets. The SEC has jurisdiction over such matters but the CFPB could well step in to handle the money management duties. The following management structure of the agency is below. Let’s see how this works out…?

Eeeck! Apple Cuts iPhone 5 Production by 50%. That was the news on Monday and every blog was pulsating with opinions on how Apple was doomed. I spent the better part of the day reviewing pros and cons and with an Apple January 23rd quarterly report coming I think $500 is pretty darn cheap price for a company that keeps reinventing how I communicate, learn, entertain and work. Not just me but anyone who has one or more of the Apple products either tablet, phone or iPod. I won’t waste anyone’s time going through the reasons that Apple is cheap and leave that investigation to ya’ll. Trust me, Apple is cheap…Morningstar reaffirms a buy at these levels and a $770 value. And, let’s not forget the company has just begun marketing in China!! Cook sez it will be their single biggest market.

Another old stone in my shoe…FACEBOOK….Like millions of others I bought it at the open when the Naz and Morgan Stanley screwed up and couldn’t sell or even confirm if I owned it until the following trading day. If ya’ll listened to the talking head baloney the stock was dumb, Zuckerberg was a hoodie dope and I could have done better by burning my money. Cody Willard urged readers of his blog to buy more as the stock fell to the teens. Everyone else I talked to said I was a dummy buying it and as the stock fell none of them were so bright they thought of accumulating a few shares. Tuesday Cody said he’d be a buyer of more Facebook stock at these levels as long as his time horizon was a few years out. What the heck is a $35.00 price tag, he wrote, when shares are possibly $200? Rumors confound Facebook, too, as talking heads say the company has lost 600,000 members in Great Britain.

 Monday Last- Markets Quiet.

As Was Tuesday.

The only real-real news on Tuesday was on Facebook coming out with something called, ‘Graph Search.’  And Apple continuing seeking a bottom as it fell below $500. Graph search is stepping into other search engine territory allowing Facebookers to look up from their friends of friends the best restaurants, movies, possibly employees or a date for Saturday night. It will make Facebook users more active, create more in-depth information and allow Facebook to use that information to be sold to advertisers. This point to point marketing misses those that cannot be influenced by a certain product or will never be a prospect for that product. It all depends on how good members record their likes, dislikes and specific information. Shares fell as The Zuckerberg held his press conference announcing graph search. What? Someone thought it was The Bernanke press conference?

Detroit May Be #4 of the worst managed cities in America but shares #1 as bedbug capital of the USA. and we still beat the Yankees in the playoffs.

Worries confounded the Markets Wednesday… still a minor hiccup as Apple found footing amid widespread speculation before earnings announcement the 23rd. JP Morgan came out with big numbers and shares popped 47 cents. Dell whispers of going private and share price rose better than it had the last several years. Gold still off its feed around $1681 and Oil rose over $94.00 a barrel. There isn’t as much discontent this earnings session as there has been in the past. There is no major sell-offs on disappointments and no huge buys on good news. Everything is rather muted. Almost like old guys at a Gentleman’s English Reading Club. So far, outside of news and speculation on Facebook and Apple (and more Apple than anything) the entire week has been a snore.

Insider Buying! I have never seen this as an attractive reason to buy shares in a company. Some people think that it is just but one thing that should catch your attention before the serious homework starts. I remember Michael Dell spending millions on buying stock in his company only to see the investment shrink. And if Michael doesn’t know- who would? Here’s five picks from the folks at Marketwatch who say they’ve reviewed records and have compiled a list of insiders buying their company stock:

• Visteon
• Weatherford Int’l
• Nustar Energy
• Hilltop Holdings
• Access Midstream Partners

Why, some wonder at Seeking Alpha, are Interest Rates Low When Most of the Treasury Bonds are Owned by Private Investors and Not by The Federal Reserve?

The more significant question is that historically the 30-year averages about 250 basis points above inflation- meaning that they should be at the 30 year somewhere around 4 1/2% yield. The supposition is that the overall the economic outlook is genuinely bearish and investors are willing to pay a premium (see Treasury yields) for safety and security. This also gives an quasi-excellent indicator that the Fed may not be able to keep rates significantly low for much more of an extended time period.

Peeve…People who say, ‘I must say,’ after they say something. It takes the place of, ‘Okie dookie.’ …

Grind ‘em Out Week. Stocks for the most part in a holding pattern. Not much excitement Thursday Trading Day. Bank of America, Citi and JP Morgan announced earnings and as expected JP beat estimates while Citi and BAC missed. Most active stocks for the day included the aforementioned plus Ford, AT&T, CBS, GE and Pfizer. Dow up 88 points. Doomsters wrong (again) on Chinese economy as GDP raises above forecast 7.8%. S&P 500 at 5 Year High. Bloomberg noted PM Cameron prepping for speech in which GB would renegotiate its role in the EU or they’d split.

Securitization- Sounds really professional but simply means taking something that creates a cash flow or income, bundling it up with other like related cash creating things and selling it to someone else. Investment managers have been doing that with debt from credit cards to mortgages. Usually there is something backing the debt. Now real estate investors are scrambling to create Rental Bonds- securitizing rental payments. The snag is that rating agencies will rate these as junk offerings reducing the customer base. If the real estate mavens can figure this out it could mean additional area of financing to buy more real estate. All this from current Bloomberg news. Stay tuned….

Markets ended their 3rd Straight Week of Gains…Apple hangs onto $500 stock price waiting next week earnings report. Gold finished down, Oil @$95.25.  Worries over consumer spending consumed Friday’s trading day as the payroll tax reduced the amount available for spending.This could prove troublesome going forward.

Oil Production in USA Grew More in 2012 than in any year in history. 2013 is expected to be a boom year with 900,000 barrels of crude produced per day. Increased crude will not necessarily reduce the cost of gasoline, said San Antonio based refiner Valero Energy Corp.

Double Digit Returns Came From REITS in 2012. Real Estate Income Trusts pass earnings direct to investors and last year was a good one both for earnings and capital appreciation.  Mall companies were the best performing REIT in 2012 after industrial real estate and warehouse owners. Bloomberg reports that Mall owners such as Simon and General Growth are ditching failed shopping malls and mortgages. Operators are focusing on the most lucrative malls. Tired operations are being turned back to lenders which is a good sign for REITS and bad for certain banks and lenders in the commercial real estate business. Two years earlier there were whispers of major commercial real estate defaults yet to hit banks and corporate lenders….

Next Week Top Picks From Morningstar Strategists Plus Five Money Moves to Make to Cushion a Bond Market Meltdown…

Earl Weaver and Stan Musial Died last Week. It was like Jefferson and Adams of the Baseball Hall of Fame.

Finally- FDIC closes 2nd Bank of 2013 in Minnesota, First Regents. 

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