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.
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