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
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