That Was The Week That Was-3rd Week June

  Summer Time May Be A Great Time to Review Your Portfolio. Lots of reasons to do it now. Call me for your review time at 586 295 0430. The review checks your allocation, risk, dividends and historical returns. We also review your beneficiaries and make sure everything is tied in with your professional estate plan. This is also to ensure that your portfolio has not increased  unwanted risk.

Leading to the Stock Selloff Last Week was Bernanke’s comments that the Fed would start to reduce their bond buying, which, for all intents and purpose, has supported the markets and kept interest rates near zero. The news was ‘shocking’ (I can’t believe that), that the end was so near. Sell programs kicked in and a global stock selloff was initiated. Probably the most revealing aspect of the week was the increase in interest rates. It’s been no secret that rates have been slowly climbing but attention was suddenly put on them as the 30-Year Mortgage is roughly 4.66%, up from 3.75% in January. Investors have pulled about $18 billion from bonds funds in the 2 weeks ending June 12th, according to Lipper. I have been slowly working with clients and selling bonds and bond funds in anticipation of this event. The 10-year jumped to a 15 month high closing over 2.5%. Earning season is just around the corner and has supported the market’s current valuations. The job market has also mirrored the current market values.

The above charts show how in-step both the jobs creation and corporate earnings have lock-stepped with stock prices. If either one or both falter we may be in for a long summer. Mitch Zacks wrote that, while rising interest rates are bad for both bonds and stocks, he believes that the economy is on track for recovery. He gives 66%-34% odds of the markets rising over the next four weeks. If you plan on staying invested for the next several years you’ll be rewarded, Zacks concludes. He is more worried about China and the disruptions occurring in their financial system than by the ‘well-functioning and independent Federal Reserve.’

Driving Home Sunday I listened to talk radio and a Talking Head was bemoaning an upcoming housing crash saying the current ‘high’ interest rates will keep buyers away and drive home prices down. Interest rates are below Civil War rates! You and I know that Home buyers buy when rates are high and rates are low. There were buyers at 8% and 10%, for those that can remember. What could hurt is the lack of product both in the new and used markets.

Zillow has become the default real estate value guide. Just in case you didn’t know- www.zillow.com.

Updates on calculators on my web site. Everything is fresh and updated and printable. Check it out from retirement planning to mortgages. Just log out of my blog and back into www.primaryplanner.com.

Has Gold Seen Its Best Days? Here is what Robert Wagner wrote in his blog:

• The high in gold is almost 2 years behind us.
• Gold has failed to make a new high and broken many trend lines of support.
• The trend is lower and if $1,200 is broken the next level of support is $1,000.

Avi Gilburt writes That a week ago Friday’s spike in silver may have been a bullish indicator. Watch for it to consolidate around 19/20 and then recover to around $25.00. Ari is a chartist and has his own opinions.

My guess is that Detroit will be forced into bankruptcy. Kevyn Orr called the state of affairs dysfunctional and wasteful and expected to negotiate with  what he called ‘reasonable’ people.

I own an iPad and a Kindle. The best is the iPad. The best!

The Vine app is used in conjunction with Twitter. It is Twitter’s video sharing application and can be found online at Vine.co, instead of Vine.com. Why? According to CNBC the Vine.com domain name belongs to Amazon.

Markets are in that delicate stage of increasing interest rates and increasingly global volatility. Fear that the Fed will end QE3 sooner rather than later has caused this market insecurity. On the equity side we will recover. The losses being experienced on the fixed side unfortunately are here to stay.

For Target Date Fund Aficionados The Surprise May Be At The End. Most investors don’t understand the concept of the ‘investment glide path’ of the Target Date Funds. The glide starts from some arbitrary age point and ends at another arbitrary age point until the portfolio is primarily fixed income. With decades ahead of us in fixed income Boomers will be surprised to see the destruction of their portfolios not through equity losses but from inflation.

  Mr. Obama said that Mr. Bernanke has been around longer than he anticipated or wanted. or some such language. Essentially firing him on the spot, some say. Still without Bernanke no one in Washington would have been doing anything to pull our domestic chestnuts out of the frying pan. You may disagree with Bernanke but he did what he did and got us moving economically. You may not like the speed or the length of the battle that Bernanke fought but he was the right man for the job. Some argue that Bernanke hurt the middle-class with the zero interest being paid on CDs and passbook savings. Others say he destroyed senior citizens savings and retirement. Rex Nutting reported that the average middle class ‘family’ has about $8,500 in assets that pay interest! So how bad were they really hurt? Maybe a loss of a few hundred dollars of taxable income? But, the real benefit of Bernanke’s policies has been the interest that these same families have saved on mortgages and car loans. That amounted to thousands of dollars. That was money that was saved not just one year but for those that remortgaged Casa Grande they got the savings for the next 20 plus years. The losers have been the banks and major lenders. Now tell me again, with a straight face, how bad Bernanke was for the economy and the average family. By January 2015 we’ll be wondering why we allowed Bernanke to leave.

Finally- Vince Flynn Died. It was that bad of a week.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER FINRA/SIPC.

That Was The Week That Was-2nd Week June

 

Sideways Action Marked The Beginning of The Trading Week. Robert C. Doll, CFA, of Nuveen Asset Management, reported:

• Non-farm payrolls rose slightly ahead of consensus with average earned wages flat.
• Manufacturing Purchasing Managers Index fell in May. Expect it to improve in the second half.
• 80% of the S&P 500 companies that provided guidance for the second quarter expected negative outlook.

CNBC Reports a Surge to Leveraged ETFs that are equity based. This is usually a negative contrarian signal.

Every Major Asset Class in the World is Overpriced, according to TrimTabs in its weekly analyst market letter. Reported at CNBC online last Monday this report suggested caution.

James Paulson at Wells Capital Management said, ‘I don’t see anything to end Bull stock market.’  Paulson went on to say that he thinks the 10-year Treasury will yield closer to 3% by the end of the year- a 33% move. Also he expect the S&P to touch 1700 this year. For those of us with poor memories it wasn’t that long ago that we wondered if the S&P would hit 1400.

Tuesday & Wednesday Global Market Action… it went something like this… More further on…

Thursday Markets Across Asia Fell! The Japanese stock market suffered the worst- falling 6%, and into official Bear territory. Chinese stocks were also battered. All this on worries over our Federal Reserve monetary policy and worries over cooling emerging markets. Europe was also down about 1%. The Dow fell over 120 points on Wednesday.

 

Golly! Thursday Dow Jumped on better than expected jobless and easing Fed worries. Dow up 181, S&P 500 up 23 Gold closed at 1382. Asia also saw a rebound on Friday morning.

My Inflation Meeting Early in The Year Reported on How to Take Advantage of Rising Rates. We have seen rates rise to 4.15% last week on the 30-year mortgage. This is a 14 month high. Experts contend this may stifle the bank refinancing business. It may slow it down for a bit but it won’t hurt the overall business.  

THIS COULD BE THE TIME TO STEP IN AND BUY THE ETF THAT SHORTS BONDS.  The Exchange Traded Funds that act as inverse to the bond market could see rewarding long-term returns if investors believe this is the beginning of a long-term trend of rising rates.  Call me for the list and options.

Friday saw a surprising sell-off.  Markets see-sawed and finally traders ran for the exit, unwilling to wait out the weekend. The Dow off 105 points, S&P –9 and gold up. Overall the Dow lost 1% for the week.

The news from Wallstreetdaily.com was that the short interest (betting markets will tank) is as low as it has been in a very long time.

The Intelligent Investor in WSJ blog on Saturday offered up the recent sell-off is good for investors. Stock prices have again gotten attractive in several sectors.

DETAILS ON THE WEEK AND EDUCATION NEWS FOLLOWS: 

 The Australian Retirement System has about half the assets of the U.S. 401(k) plans with 1/14 of the workers! It’s reported that 90% of the workers are enrolled in a mandatory retirement plan with an average contribution of 9% of earnings.  According to Dow Jones contributor Matthew Heimer the system works because it is mandatory, the contributions are after tax (15%), and all withdrawals are tax-free. Maybe someone should clue in lawmakers on what works?

Retirees Looking For Part-Time Work May Want to Explore:

• Patient Advocate
• Tax Prep
• Temp Help
• Mr or Mrs Fixit
• Tutor
• Non-Profit Consulting

E-Cigarettes the Next New Thing. Investors such as Fidelity and Founders Fund are climbing aboard the e-smoke train. Lorillard’s ‘blu’ currently has 34% of the e-smoke market. More brands coming on-board. A dozen states have banned sale of e-cigs to minors. Health issues remain and sales of the new fangled smokes are expected to reach $1 billion in 2013- double where they were in 2012.

 

 

New Apple Bling…or Bloop?

New features, cleaned up iPhone, iRadio,photo sharing ala Samsung, new iMac with Intel engine boost made in USA coming out now, and still boo-bears beat stock down almost $3.00 a share Monday as they were not impressed. Morningstar maintains shares to $600. Cody Willard wonders why the Market rewards McDonalds with a product anyone can replicate and ignores Apple that creates something only a handful of companies on the planet could possibly duplicate. Apple spoiled investors with their awe-some products and properties.

 

 

It’s always something!

US regulators are investigating the $32 billion in overdraft fees banks charged customers in 2012. In 2011 Bank of America was considering a $5 a month debit card fee for customers but decided against it. Fees are huge moneymakers for banks in a climate of low interest rates and consumer loans. Still some banks are considering hiking existing fees another dollar.

 

Bank of Japan Created Global Sell-Off Tuesday. Worries over Central Bank Commitment to Providing Continued Liquidity Had Global Stock Markets Shaken.  Investors were ‘disappointed’ that the Bank of Japan was simply ‘maintaining’ its stimulus. Investors were hoping the BOJ would ‘extend’ the asset purchases further.

The Federal Reserve Chairman Used the Word ‘Tapering’ to Describe The Process of Ending the Bond Buying Program aka QE3.

and that’s just this year!The definition of ‘tapering’ is not stopping….that’s what the confusion is all about.

Is This is The Start of The Summer Correction?

This is the S&P 500 Chart from Yahoo.com Finance page. Notice it was higher May 20th than it is June 11th?

The question the WSJ and others raised is the ‘tapering’ of the stimulus ending the equity recovery.

Love This Chart.

Makes Reagan look positively…conservative.

Summer Sell-Off? A Refresh? Markets can only fall so far. Unlimited upside. Mitch Zacks says an amateur investor’s worst enemy is ‘The News’.

Finally: FDIC closed 1 Bank in Tennessee making a total of 16 Year to Date.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER SIPC/FINRA.

That Was The Week That Was- 1st Week June

 

 

May Jobs Report Hasn’t Changed a Thing

Chairman Bernanke Promised to Reduce it’s Bond Buying When Unemployment Numbers Decrease. The Chairman will be gone in January and some wonks wonder if his policies will remain. The primary beneficiary has been the stock market. At the current rate of wellness the Fed may continue their bolstering through 2017. Read more on Friday’s market reaction further on in my blog.

 

‘How’s That Hopey-Changey Stuff Working Out For You?’

 

  Last Sunday I read a blog by a respected financial author Paul Merriman.  It was a waste of time because  he advocated buying bonds. Merriman is known as a smart guy. I don’t get it. Here, at the bottom, the basement, the very chasm of opportunity in fixed income he has the chutzpah to sell a strategy to have Mom & Pop of all ages buy bonds.  He recommends short-term and medium term government bonds over corporate or longer term fixed offerings. And our Mr. Merriman suggests bond mutual funds and not individual offerings. Certainly his suggestion minimizes investor extreme losses that one would get if one owned long-term Treasury funds. The rule of thumb is that for every 1% hike in Fed Fund rates a long-bond would lose 10% of its value. Mr. Merriman seems to have forgotten that someone who is 40 and follows his advice and buys short-term bond funds still has the significant chance of losing 5% of their portfolio value for every 1% increase, and may eventually see their bond portfolio lose 25%-40% value over their lifetime as interest rates rise ever higher. My conclusion is if someone is truly enamored with bonds they’d best shop for the best quality medium term maturity individual corporate bonds, ladder them out in a sensible strategy and hold them to maturity to eliminate principal losses. It may take time to piece together such a solid strategy but investors will be well rewarded for their patience. That is if you really want to be in bonds at this economic junction.  Above is an excellent simple example of a five year bond ladder.

Markets Did a Ninja Monday Springing a surprise triple digit gain at the closing hour, offsetting a boring trading day. GM was up after hours on the anticipation of being relisted on the S&P 500. Avi Gilburt reports that the markets may have one more substantial rally before ‘swooning’. He calls the markets oversold at last Monday’s juncture.U.S. factories posted their worst month since the end of the recession. According to WSJ Monday’s manufacturing report was the latest in a series of signs that the sector is losing steam. Hiring has also slowed. Troubles in the U.S. were minor compared to the EU, which saw factory contraction for the 22nd straight month. The jobs picture darkened as an Eaton representative said they were reluctant to hire going into the summer months and the uncertain economic picture. 

Robert Doll, CFA, of Nuveen Asset Management, reports that the equity bull market is intact, but…’Over the next several weeks,’ he reported, ‘ we could argue for any of the following scenarios' to happen:’

• 7%-10% correction
• Consolidation in the 1600s (S&P range)
• Strong market highs before July 4th (this not so much as 1 &2)

 

 

Qualcomm has a Westminster Financial Companies, Inc. Buy Rating.

• S&P & Credit Suisse both have a $85.00 per share target price.
• QCOM pays a 2.2% dividend at last Monday’s closing price.
• Has no debt
• $13.5 billion of cash
• P/E of 12.9X 2014 earnings
• A dominant global supplier of smart phone chips. A market that continues to grow.

Midway Tuesday Markets Edged Lower as Analysts called it-‘Tired.’ By 2PM the Dow was off triple digits but closed off its lows. This broke the string of 22 straight upside Tuesday’s. Gold made a small move up and closed at $1400. We’re seeing the 10-year moving up in yield while stocks are confused.

Morningstar Analyst John Rekenthaler wrote a piece in answer to another piece written in the WSJ  that proclaimed that today’s investors are paying too much for investment advice. Rekenthaler writes that he can show that the industry pricing structure has indeed changed since just the 1980s. (Personally I can remember mutual funds charging 8.5% maximum front end charges). He says that fund investors are paying less than they were 30 years ago. In fact, on a global scale, American investors are paying much less than investors outside the U.S. The pricing structure of non-U.S, funds is roughly double that of the U.S. and not trending lower.

Apple is still loved by Morningstar and confirmed a $600 share price. Samsung downgraded as their ‘cheap’ phones may cut into profits. Apple creating system to buy used iPhones at their retail locations.

Federal Budget Cuts & Higher Taxes Spelled Doom Wednesday as Markets Slumped. ADP reported fewer workers hired in May. Mortgage rates jumped to 4% on the conventional 30-year. Analyst downgrades included Microsoft and Joy Global. Home Builders fell 1%. The Chicago Board Options Exchange Volatility Index VIX jumped 7.1%,  GM fell as the Treasury announced they plan on selling 30 million of the carmakers shares. Fed Beige Book offered moderate to modest economic expansion.

The worst Market Drop Since April 2013.

Gold off slightly to close at $1396. Dow dropped 217 and the S&P 22 to 1609.

Changes a-coming to Money Market Funds. Remember when there was almost a run on money markets and the government stepped in and ‘guaranteed’ deposits, cutting the possible stampede off at the pass. Well, pard, the SEC has suggested ‘liquidity fees’ as solving that possible problem. The big selling point of money markets has been liquidity and earning the best short term rates of interest. Forget about all that. Now there would be a liquidity fee if a fund fell 15% below its weekly liquid assets (and investors wouldn’t know that until they tried to get their money), and a suspension or freeze on assets if things got ‘touchy’. Hello, Cyprus! Tell me again why anyone would want a money market as a major part of their portfolio?  I’ll let you know when the ‘plan’ is implemented.

 

It was a rollercoaster kind of day Thursday.  Seemed like a fight between shorts and longs and finally-Up with a nice finish.

JP Morgan Chase in their Market Recap Likes Stocks over Bonds.

And the Housing Market Has Lots of Room to Grow…

Yes, dear Reader, lots more upside. Did you know you can invest in Homebuilder ETFs? Call or write me for more info.

 

A Better Than Expected Jobs Report Sent Markets Soaring in The Early Going Friday. by mid-day stocks stubbornly hung onto gains.Stocks closed up 207 points on the Dow. Europe closed higher while Asian shares were lower.

This was not a great jobs report. It was a Goldilocks jobs report. Not t00 much. Not too little but just right for the markets. A little less or more would have been the kiss of death. Markets are hanging in on stimulus and its the only game in town, nothing more. This is not the sign of a broad based recovery.

Gold off Friday $32.00 to close at $1384.00

Our friends at Talmer Financial report that the coming week there is little financial news which may lead to low volume trading, and lead to a break.

Finally, 14 Banks Closed Year to Date versus 23 Last Year Same Time.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER FDIC/SIPC