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
- 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.
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