That Was The Week That Was-2nd Week July

Talk Radio probably causes more grief than good. The first radio station I ever stepped into was back in the mid-60s in Montgomery, Alabama. At the time I was stationed at Gunter Air Force Base and Montgomery was the home of an ex-truck driver by the name of George Wallace and the North-South Football Classic. Both the football field and the governor were small and viewed close up almost insignificant. Montgomery was also the home to the Hank Williams, Sr. museum. The radio station operated pretty much out of a broom closet where my friend played rock and roll from noon to five. You couldn’t get three people standing in the same room my friend broadcast from. But, I was impressed. Decades late I did my talk radio on several Detroit area radio stations and hung up my earphones before the second recession of 2008. When I did my show I talked about concepts, allocations and economic events. I even ran a quiz, ‘Is it U.S. or is it Foreign?’ Today’s Radio Money Mouths talk about specific funds and stocks that you should be buying and selling. This causes lots of problems simply because some people don’t know what they own. These On-Air Motor Mouths are doing nothing more than using scare tactics designed to frighten listeners. They mask it through subterfuge of being the ‘helping hand.’  That’s how  Radio Mouths get new customers- by scaring the bejesus out of listeners. My point being that now your Quarterly statements should be in your mailbox and I urge everyone to take a look at them. Don’t just toss them into a drawer. Open the envelope and read what you own, what it did and where you are. If there are holdings you see that you don’t know what they are than either call or email me. You should also know where your account closed at the end of last year (2012) and where you are today. If you don’t than look up your year-end or tax statement and compare it. Or, pick up the phone and call me.  You should know what you own, what it does and why you bought it. If not, ask questions. Never assume…

The Perfect Financial Storm struck all investors in June. The only way to hide from what is being called ‘The Great Rotation’ is by ducking under a cover of cash. It was that ugly. From May to June markets in equities fell and bonds were crushed as interest rates rose. Even those funds that were disconnected to the bond market were impacted. Thomas H. Kee, Jr. wrote in MarketWatch.com on July 8th that it was surprising the suddenness of the investor stampede from bonds. The 20-Year ETF Treasury is down 12% year to date because of it. Banks are promoting equities as having value and moving clients from bonds to equity funds, he writes. But, Kee warns, this is not yet a Buy and Hold market.

China Reported  second quarter gross domestic product Monday July 8th and it showed that the economy slowed from 7.7% growth in the first quarter to 7.5% growth in the second. The country is attempting to become less reliant on construction and heavy industry and more on consumer spending.

 

The WSJ reported That China’s Problems Are Not Our Problems. US markets are shrugging off the latest bad news from China as their growth slows. Barclays predicts 3% growth for China in the next few years- off from high single digits. To be sure the report goes on that China woes can hurt domestic companies such as Yum!Brands, Wynn Resorts and Broadcom that count on 50% of their revenue.

Markets Up For Four Straight Trading Days at the End of Tuesday July 9th.

NetFlix CEO Reed Hastings said on Monday July 8th he will discuss second quarter results from the company’s website and from pre-arranged questions. Michael Pachter, an analyst with Wedbush Securities fumed, ‘I’m not going to submit my questions ahead of time and let them screen them to determine if they should be aired.’ Pachter has a sell rating on the stock. This remind me of the same argument David Einhorn made in his new book, ‘Fool some of the People All of the Time.’ Allied Capital was a ‘short’ by Einhorn who hired a private detective and forensic accountant to dig up shenanigans at the company. He was 99% sure of his information and was locked out of earnings conference calls by Allied who were well aware of Einhorn’s stock position. They also began using only prescreened questions. Netflix said it was modeling its conference call on Warren Buffett’s annual meetings. Netflix argued their ‘format’ provides ‘very forward thinking’. … and I got a bridge you may want to buy…

The Economy Isn’t Doing So Hot! Fed Chairman Bernanke said as much in his after the market close Q&A  that was reported in the WSJ on Wednesday the 10th of July, in which he said that it was too early to see of the economy had weathered fiscal policy headwinds, the unemployment rate probably understates the weak condition of the job market and the Fed was concerned about the very low real rate of inflation (currently pegged around 1%). That being said he stressed that rates were to stay low for a long time. He also laid out and defended his potential timetable to  wind down asset purchases. Many believe will start this September. The after-hour markets rallied on his answer. Still The Bernanke is a lame duck Fed Chair and he can say and do anything and everything and it means nothing past February, 2014. Wednesday markets mixed.

Last One Into The Pool Is … The Chairman’s words were heard and understood. Tapering doesn’t mean stopping and it doesn’t mean it happens tomorrow. Bernanke’s remarks soothed markets Thursday and opened the door to perhaps another Bull market run that was experienced in 1982 and ran to 2000. Bank of America Merrill Lynch analyst Mary Ann Bartels suggested just as much. Leading the way are the financials. Humiliated stocks and sectors the last few months have included gold, Apple, bonds, emerging markets. ‘We’re out of the trading range we’ve been since 2000.’ Bartels said in a Bloomberg interview on July 12th.  ‘Leading the way up will be the financials, energy, industrials and technology,’ she said. Since the market’s taper tantrum the market has finally realized that stocks are the place to be and the rotation from bonds has begun.

Hang On Just a Pea-Picken Minute! Not everything is all sweetness and sunshine. Jim Russell, senior equity strategist at US Bank Wealth Management said Friday the 12th of July, ‘Investors aren’t expecting good news as second quarter earnings start rolling in. This rally could be relatively muted and brief,’ he said. ‘Earning news will be bumpy and mixed, thanks in part to business conditions outside the U.S.’ And some investors said the Fed Chairman’s words shouldn’t have been taken quite as bullish as the market seems to have believed. Milton Ezarati, market analyst at asset manager Lord Abbett and Co., reminded us in a Bloomberg article published Friday the 12th, ‘Bernanke really hasn’t said anything new.’

So the summer rally is either on or off and we won’t know until we reach the end.

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A very good week for markets…Banks JPMorgan and Wells reported better than expected earnings but warned caution if rates stayed elevated! The biggest banks, the WSJ reported Saturday July 13th, were struggling with lackluster loan demand, a sluggish economy and a slew of new regulations that are crimping profits. Interest rates are still under the average during the Civil War.

Twinkies made by a New  Bakery Now at Wal-Mart.

Blackberry Smart Phones Now Being Discounted to $50.00 as Lack of Consumer Interest Hits Firm. It’s an Apple – Samsung world.

AT&T Buys LEAP Wireless! And then there were two.AT&T stores bandwidth with new acquisition. Looking ahead.

 

‘Little French Songs,’ great new album by Carla Bruni.

Robert C. Johnson, CFA @ Morningstar. ‘Still Bullish But Not Too Bullish.’ Published on their website on Saturday July 13th.

Form E-Mailed to Update Your Investment Comfort Level Requested by the S.E.C.  Each account needs an update every 3 years. If You Need help- call. I will be mailing out to everyone who is not an active e-mail user.

586-295-0430.

 

Taking a few days off this week but it’ll be a working break so call or e- if you need anything.

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.