That Was The Week That Was- 4th Week December

 

 

  It’s That Time of Year. My annual client breakfast meeting for 2014. Saturday 8:30-10:00 AM, February 8th, 2014. Continental Breakfast. Sycamore Golf Club, Macomb, Michigan. The topics discussed will be taxation on inherited IRAs, Non-Qualified Investment Accounts and Annuities. Make a Note. Also a compilation from leading money managers and investment professionals: ‘Your Investments -What to Expect in 2014’. I encourage you all to attend and bring a friend or ‘beneficiary’. A lot of money has been given to the government needlessly because beneficiaries did not know the tax rules or asked the wrong people. For those that have attended previous meetings you know there’ll be plenty of parking, lots of coffee, tea and juice plus pastries and fruit. But, you do have to let me know how many will be in your party with names, phone numbers and e-mails. This allows me to tell the people at Sycamore how many chairs to set up. You can call or send an e-mail to let me know. 

Resolutions? 2014?  Here’s How to Make Them a Success:

• Make Goal Specific.
• Make the Goal Measurable.
• Set a Time Limit.
• Be, of all things, Realistic.
• And, if need be, Get Help.

Christmas Rally was underway last Monday. It’s bonus time, you know.

WSJ reported 12/24/2013 that Home Builders were poised to ride the jobs wave. Okay, awkward phrasing but new sales were ready to climb as renters started home shopping and those in existing homes were looking to move up.

Christmas Eve WSJ Pointed Out the Recent Rally on Wall Street Was All About the Benjamin’s for Traders & Managers. You can’t prove it but managers and traders do a little  ‘window dressing’ end of the quarter and especially end of the year for bonuses. For this 2013 it’ll be a very merry holiday, indeed. Busy managers will be buying what they missed only to show investors at the end of the year they owned something hot even though they bought it at the top year-end price. Thursday the rally continued. I sometimes wonder what the boys and girls who are trading are smoking when I see some of these prices and then I realize it’s CHRISTMAS!

10-year Treasury yield closed at 3% actually it was 2.99% on 12/26. Still from 1.5% just a year or so earlier this is a huge jump.

China Forecasts 7.65% Economic Growth in 2014. WSJ reported while still a sluggish economy Chinese officials forecast government investment in rail and subway construction coupled with tax and other business incentives helped boost growth. 12/27/2013. For China investors this is the low end of the growth spectrum and hasn’t been seen in a decade.

Mortgage rates up. Almost a full point off their lows. It ain’t over. Rates will climb, probably more subdued as home prices recover and buyers continue to trickle in as the jobs picture gets better. This coincides with Fed tapering and expect auto loans to increase as well.  Rates increase news from bankrate.com 12/28/2013.

FINALLY: chart from Barrons.com.

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

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

That Was The Week That Was-3rd Week December

Mark Hulbert in MarketWatch.com 12/14 reported on how you, me and the candle stick maker can all invest like the Oracle of Omaha. A new study published by the National Bureau of Economic Research. which is headed by people who manage $90 billion of hedge fund monies, report they have found the formula that Buffett uses successfully to buy stocks. Here’s the two part recipe:

1. Focus on cheap, safe, quality stocks, ‘defined as those that have exhibited below average volatility and sport low ratios of price to book value.’ Also make sure that the stocks are growing at an above-average pace and that they pay out a significant portion of their earnings as dividends.
2. Buy shares on margin. Investigators found that to get the ‘Buffett’ returns shares would need to be 60% margined.

Paul A. Merriman shares why most investors are ‘just plain wrong.’ What a lot of investors do that’s wrong is:

• Blindly follow pundits
• Focus on recent performance
• Thinking mutual funds are risk free
• Believing fund sellers will protect you
• Thinking advisors are a waste of money

WATCH FOR NEWS OF CLIENT 2014 BREAKFAST MEETING Taxes on retirement plans to heirs and beneficiaries plus 2014 Economic Outlook will be the agenda.

Monday Markets ‘Soared’ On No Real News Except Markets Were Down The Week Before.

The Rich Are Different! Reading Bloomberg Tuesday 12-17 About How The Uber Wealthy Can and Have Created Gift Trusts that They Own (?) & At The End of 2 Years The Monies Are Returned Back to The Creator. These are called Walton grantor retained annuity trust GRAT. There is no gift tax involved and if anything is earned on the money placed in the trust it is given to heirs- tax free. At the end of 2 years the cycle starts all over. The only cost that for the lawyers to create the Trust. Yes, Congress created it and it’s, according to attorney Richard Covey who uses them for clients, ‘a beautiful thing.’

The trick to use this is to be really really rich.

Whispers…. in a not so secret secret a certain big investor may have his eye on a food company known for its ‘chicken soup’. Investors have bid up shares in anticipation.  News on Bloomberg.com and  other newsworthy places 12/17.

MARKETS MIXED TUESDAY.

Here’s a simple rule: Whatever the majority of investors believe the stock market will do it will always do the opposite. It always disappoints the greatest number. Wednesday last was no exception as the Federal Reserve announced a cutback into their bond/mortgage asset buying program by a measly $10 billion a month and you’d expect the markets to crash, thud, correct, or whatever superlative you want to tack on to the event but instead no sooner was the news announced the markets shot up! Interest rates will remain very low as long as unemployment is above 6.5%. The news that the Fed stimulus is beginning to taper signaled the economy is getting better. Not everything was rosy as Ford was hammered even though it announced a $8 billion pretax profit for 2013 but warned that its pre-tax profit could drop in 2014 by as much as 18%. Financials and healthcare led gains in the S&P 500 Index. News from Bloomberg, WSJ and MarketWatch.com

Very Interesting Idea From Amber Hestla in 12/20 TopStock Analyst Digest. We’ve all heard of the Dogs of the Dow, buying at the end of each year the worst performing but highest yielding 10 stocks of the 30 Dow but what Amber does is buy call options LEAPS on only the 5 of the worst performing. She swears the results are outstanding and outperformed the traditional Dogs by a wide margin.

Let me share…I was reading a piece by Brent Arends and he touched on  why some older (or is it more mature) investors avoid the market and I want to amplify on it. Some investors get scared because they look at their current age, then the stock market, and conclude they don’t have a lot of time for risk investments. They make the wrong assumption that a ‘particular age’ is like a cliff where everything should stop just before the edge. What the amateur doesn’t think is that everyone has a ‘long’ time only ‘long’ is defined differently for each of us. A person 65 may have 15-20 years. Someone who is 55 could have 35 years but each think of a single point in time as being close and a point in time that means they should be in cash and fixed income. Equities, or risk investments, that pay dividends, should be a part of all our holdings. It is only with these that we can have our savings keep up with inflation and also provide a reasonable income. Ask the 80 year old living on dividend paying stocks versus the one trying to make it on bank cds.

Finally: Market Wrapped Up the Week Up as The Economy in U.S. Grew in 3rd Quarter at Fastest Rate Since 2011. More at my annual client breakfast in February.

A very Merry Christmas and Happy Holiday to you and your family!

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 SECUTITIES, INC. MEMBER FINRA/SIPC.

That Was The Week That Was-2nd Week December

Investors who were in the market in 2008 and now sitting on the sidelines have this fear that as soon as they invest the markets will crash.Unreasonable as that may seem they have missed what may have been the best part of the stock market recovery but there is plenty left according to James Dlugosch on December 5th published MSN.com. Here are a few reasons why Dlugosch believes 2014 will continue to be a good year for stocks:

• Doom and Fear. Bubbles and crashes need massive euphoria not doom every time the market sighs or gives up a 100 points.
• The Federal Reserve. It’s on Wall Street’s side.
• Compelling valuations. Stocks for the most part still look attractive and not over the top.

Fixed Investors Waiting for Bank Saving Alternatives to Perk Up Will Find Little For Several Years as Interest Rates Will Remain Painfully Low.

Wednesday News Broke That The House & Senate Negotiators Came Up With a Budget Agreement That Would Avoid A January Government Shutdown. Sen. Patty Murphy and Representative Ryan announced the deal that compromised on sequestered items and deficit reductions spread out over the next 10-years. The WSJ, Bloomberg and others announced the rare feat of bi-partisanship only to have certain conservative groups in the House express their dissatisfaction with any kind of loosening of the purse strings. The deal is supposed to ease spending limits on both domestic and defense spending. Certain cuts in federal pensions and military retiree pensions have also been implemented. Let’s see what the ‘other party’ does to ruin a ‘possible good thing’. Speaker Boehner showed some gumption and stood up to ultra-conservative groups who poo-pooed the compromise before it was even published. The House did pass the budget pact by a WIDE margin on Thursday!  We can make all sorts of assumptions but the one we think makes the most sense is that political gridlock is off the table for at least the next 24 months. From an investor viewpoint this can only be a good things as we move forward. Markets still have had a rough week on ‘tapering’ concerns but could be more so as investors take profits before the year ends.

Investor’s Business Daily Called The Budget Compromise A Waste of a Good Crisis. 12/16

Fed Up! That’s what large institutional investors are with the way the markets are hurting their ability to get best price. Because of the rapid trading caused by computers and the proliferation of other structural issues large institutional managers are changing the way they buy equities.

Because of the size of their trades it may take days or weeks to fulfill a particular order. Often it may take a manager using ten or more brokerage firms to buy his shares. Along the way prices may go up, word may leak of the buys and the process, according to December 9th WSJ get riskier as prices change. Now more firms are off-exchange trading is getting more popular. It is cheaper and carries more confidentiality than buying in the marketplace.

U.S. Sold G.M. Remaining Stake Recouped $39 Billion of the $49.5 Bail Out. Overall U.S.A. will lose about $15 Billion In Auto Related Loans. The Company also announced Tuesday a new CEO would lead the company. WSJ 12/10/13. The President called the bailout a success saying it created over 375,000 jobs. Lets not mention the tens of millions lost by bondholders when the administration changed the rules and many small investors lost their savings.

MarketWatch.com December 10th Reports on What China Really Needs From the U.S.A.

• Airplanes- 5600 over 20-Years from Boeing.
• Soybeans- 20% of all Agricultural Products Imported.
• Aluminum Scrap-Tons shipped to China 2013.
• Cars- Ford and GM sales Up 51% 2013 and growing.
• Computer Chips.

Now that you know the sectors you can do the company investment search.

Markets Fell Tuesday. Markets Fell Wednesday. Ditto Thursday!

Hey, has anyone noticed the price of gas? Merry Holidays, for sure!

 

FACEBOOK ADDED TO S&P 500. Social media giant will be added after December 20th. This just 19 months after its IPO. Investments that specialize in Index investing will have to add the stock to its portfolio.There was roughly $1.6 trillion linked to the S&P 500 portfolio reported WSJ on December 12th.

WSJ REPORTED 12/13/2013 US RETAIL SALES ROSE O.7% IN NOVEMBER. Whispers of a bad holiday season are nothing more than rumor as shoppers have opened purses both in brick and mortar stores and on-line.

Mexican Congress Passes Historic Energy Bill! Warren Buffett added to his Exxon Mobil stake by 8.8 million shares in November and we wondered why when energy has had a rough year. Now with the Mexican state owned energy firm Permex and the government opening the door to foreign companies within the country’s borders, we have to wonder how did Buffett know, when did he know and how is Exxon going to benefit? In Friday’s WSJ it was reported that proponents of this revolution to allow foreign companies to drill and explore for new energy within the country will bring tens of billions of dollars into Mexico’s sluggish economy. Exxon stated that they think that this new attitude would be a ‘win-win’ and benefit the country and energy consumer globally. One thing is clear this deal wouldn’t have happened if it wasn’t for the fact that Permex, the state owned energy monopoly,  does not have the cash or knowledge on how to tap deep water reserves. And, according to some, the energy fields are where our domestic oil companies will concentrate. Economists, reported the Journal, say that this move will send shock waves through the global energy market, deepening the energy revolution in North America and eventually helping make the region an energy exporter.

Finally: A far cry from a few months ago where every week a handful of banks were being closed by FDIC. This year only 24 banks closed. The latest last Friday, reported by the AP, a small bank in Woodland, Texas. The assumption is that we are either running out of weak banks or the economy is getting stronger. Probably both.

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 SECURITIES, INC. MEMBER FINRA/SIPC.

That Was The Week That Was-1st Week December

 Lindsay Gellman in the Sunday WSJ Journal wrote about the things you need to do by New Year’s:

• Boost Your 401(k) Contributions for 2014
• Fund Your 529 Accounts
• Take Your required minimum IRA distribution
• Book Capital Losses
• Make Charitable Contributions
• Make Gifts to Individuals
• Group Deductible Expenses

 

Jeff Reeves wrote, ‘Two seasonal trends are bearing down on the market.’ December and January bring the Santa Claus Effect. These seasonal trends have more to do with actuality than they do mythology. Reeves reports that the S&P is up, since 1980, 81% of the time in December. And out of the last 63 years its been up 77% of the time. And while Reeves is not quite as sure about January having a solid upside he isn’t about to go negative on the new year. He finishes in his 12/3/2013 commentary that everything historically considered there are some pretty compelling reasons to trust a rally across December and January. 

 

A FEW TRILLION REASONS TO STAY BULLISH, by Zacks Profit From The Pros- Kevin Cook 11/29/13 So what’s driving the market? Cooks writes its the same things he wrote about last January:

• Macro Risk off- Investment Risk On.
• Economic growth is good enough and building momentum.
• The Fed remains on the side of pro growth and re-flation.
• Corporations are producing record profits and balance sheets are strong.
• Cash is still trash and fund managers must chase and compete for stock.

A correction could come at any time, but it will only make valuations even more attractive again, and probably pull more money from the sidelines and bonds.

 The Number of U.S. Banks has Dwindled to Its Lowest Level Since The Great Depression. From a peak of 18,000 to 6,891 there has been consolidation, mergers and failures. The losses are entirely within those banks with $100 million or less in assets. Small lenders are having a harder time with new rules, weak economy and low interest rates: WSJ/12/3/2013.

 

Gold Prices Had Their Worst November in 35 Years- If You Even Care. The glitter is off the metal as investors have looked elsewhere. Gold fell 12% in June and another 5.5% in November.

Bill Gunderson, writing for Dow Jones 12/02/2013: ‘Dow one million?’  Simple math, Gunderson writes, will get the Dow to 1 million in another 87 years. He states that when his mother was born the Dow was 160 and today 16000. Now his granddaughter is a baby and when she reaches 87, and if the Dow marches forward at a simple 5.5% per year,  it’ll be a million. The fact that the Dow reached 1000 when Nixon was President was in fact something that a lot of people were surprised by. Back then it was a real big deal.

Irwin Kellner, MarketWatch, reported 11/26, Retail Investors are Getting Nervous. Mom and Pop investors fear du jour is the next crisis. The small investor truly believes a massive tsunami-like correction is coming and so they’ll sit out any upside to avoid any possibility of financial pain. No matter the argument for investing, Kellner writes, the average investor has an answer. It is also interesting because in a Bull market many people are asking for tips but this time money is being taken off the table. Investors also fear that when the next crisis comes the big banks won’t be interested or able to help the government bail out the smaller weaklings, certainly not after the way several big banks have been treated by the powers that be. Now that’s very interesting and banks have long memories. You can bet they won’t be so quick to fly the flag and step up to do the ‘right thing.’ The ghost of Jamie Dimon will have the last laugh.

A Correction is inevitable. No matter when you invest at some point a 5%-15% correction will occur. If you are looking for that ‘sweet spot’ where you won’t get a correction within your investing lifetime you will be disappointed. The important thing to realize it is a ‘correction’ and not a catastrophic market crash. The market crash of 1987 saw a sell-off of about 25% and still investors who invested earlier in the year saw themselves even or slightly positive.

Monday & Tuesday Markets Fell on Tapering Fears. Worries over the era of cheap money drove traders to sell and at one time Tuesday the Dow was off over 100 points but closed losing less than that. A report from JP Morgan that hit my email on Wednesday morning supported the beginning of tapering by the Federal Reserve. Reading what other fund managers are comfortable with many support the start of an interest rate hike and a slowing of bond and mortgage purchases by the Fed.

John Williams, President of the San Francisco Reserve Bank, said that he fears investors have not been listening to the Fed. In an interview published December 2nd Williams said that interest rates will stay low as long as the unemployment rate is above 6.5%.

Bill Gross write in Morningstar’s Perspectives, 12/3/2013; Paraphrasing his statement about his associate Mohamed, the creator of the, ‘New Normal’, worries over the T junction investment future where markets approach a time uncertain inflection point and no one know which way they’ll burst. Gross blames it on negative aspects of fiscal and monetary policies in a highly leveraged world. Poor fiscal leadership and cheap money, same problems faced before the French Revolution.

A Bubble is Defined Differently Depending on The Asset in Question. Generally it is a bubble when prices are higher than the actual intrinsic value of whatever someone  is either buying or selling. Add leverage, or borrowed money, and when prices start to fall its accelerated by traders and investors trying to get from under their leveraged assets. The more they sell the faster prices fall until at some point there a bottom. A bubble typical is a collapse of markets as we saw in 2008 and 1987. A correction is a temporary respite and is more V shaped and very temporary. It’s difficult to know if one is in the beginning of a bubble collapse or correction until we’re well into it.

APPLE AND CHINA MOBILE SIGN DEAL TO OFFER iPHONE. A person who was familiar with the subject told Lorraine Link at Dow Jones and she reported it on December 4th. This gives Apple access to a market 7 times larger than Verizon network. Later in the day China Mobile said no deal, yet. So much for trusting the news.

Going into Friday Markets on 5 Day Losing Streak.

Wunderkind Eddie Lambert of Hedge Fund and K-Mart, Sears Fame and a person that Jimmie Cramer Gushed as the Smartest Guy in the House; the WSJ reported 12/5 his hedge fund is returning billions to investors as they redeem shares. Five years ago he was the star of the hedge fund world where he commanded a five year lock-up and $25 million minimum investment. Unlike Warren Buffett, who holds an open candid investor meeting once a year, Lambert has always maintained that clients pay him to invest their money and not explain his rationale. His flagship Sears has seen better days as Lambert has given shares in the company as part of the redemption process.

Two Things Happened Last Friday- The Jobs Report Showed Unemployment Fell to 7% as 203,000 Jobs Added the Labor Department Announced.

Michael Gapen, chief US economist at Barclay’s Capital, ‘It’s a pretty clear picture, one of broad based strength.’  The Dow popped 198 points, gold fell $3. David Petratis, chief executive of Allegion, PLC, ‘The U.S. will help lead the world in terms of the recovery.’  Still low paying industries have dominated the U.S. job growth for much of the recovery. The Friday jobs report signals the housing market continues to improve and that manufacturing gets busier. The Second Item Friday was that it was clear that the jobs report cleared the way for the Fed to begin tapering and exiting its bond buying. The next Fed policy meeting is scheduled for December 17-18. The WSJ reported it best on 12/07 that the gains on Friday showed that the Fed has had some success reassuring investors that they will maintain an easy money policy for years to come.

Finally:

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 SECURITIES, INC. MEMBER FINRA/SIPC.

That Was The Week That Was-4th Week November

 

Is It A Computer Shell Game or New Currency? You may have heard of bitcoins being used online to buy things. But most us have never owned a bitcoin or used one. And a lot of us don’t know where the coins come from. These are not money in the traditional sense but created by people as currency through a mathematical equation and special computers. Bitcoins are traded in real dollars. To own one you need to get it from someone who does,and in January one bitcoin would have cost you $13.50. On November 27nd your $13.50 bitcoin was worth $1000. The experts, as reported in the WSJ on the 22nd, there are 12 million bitcoins in circulation with about 9 million yet to be discovered. I have no idea how they know that or who actually did the counting. The scary part is that bitcoins may actually become real currency in the real world. Today they can only be traded online but it may not be that long before they will traded in global currency markets. PS –There was news that someone who bought and stored millions of dollars of bitcoins on his computer hard drive forgot about them and threw his old computer out. Last heard he was at the dump searching for his old computer.

The Nasdaq collapsed in 2000 as the dotcom ‘King Wore No Clothes’ was unveiled for what it was. The index hit 3000 in 2000 and for years didn’t come close and now has kicked the door past 4000. Talk is of a possible bubble but  Mark Hulburt reported in MarketWatch.com on November 21th that any comparison to then and now was strictly in the imagination of the beholder. 

Cody Willard Echoes in The Cody Word ‘There is a bubble blowing bull market we’re in …but I don’t think the current market is about to pop as I think the fiscal and monetary policies of the current regimes in place around the developed world are set to blow these asset bubbles bigger than ever-before they crash yet again some day. Just not yet.’ 11/21

Willard also writes of the next big thing is ‘wearable computer bubble’. This is starting with the glass from you know who and they are already planning ‘stores to be fitted for their special glasses’. Also the watches and anything that someone can wear and is attached to the internet. All the major tech firms are competing on that future platform. Could be a multi-trillion dollar industry in 10-20 years, writes Willard.

The Fact That There is So Much ‘Bubble’ Talk Has to be more about leadership and political uncertainty than the stock market. 2013 has been the first year since the crash that there has been no major correction. Michael Sincere in his ‘Long Term Trader’, comments, ‘We need more irrational behavior to create a bubble.’ He also expects the DJIA to hit 20,000 before things go awry. He goes on to say that investors are not excited about the market and in fact disinterested. They are not buying stocks like 1999, or buying homes like 2007. Just before a bubble bursts almost everyone is an expert on the stock market and has an opinion and a favorite stock. Bubbles pop when no one expects. When Greenspan talked about irrational exuberance it took another 4 years for the markets to fall. Sincere’s writing 11/22/2013.

Went shopping at the Apple store- 10 AM and packed….before Thanksgiving….

Shortened Trading Week…

Finally: Robert C. Doll, CFA, Nuveen Asset Management in his weekly newsletter, ‘ A key development is the apparent acceleration in the growth rate of the S&P 500 revenue and earnings. Although one quarter does not make a trend, the third quarter marked the first time in six quarters in which revenue growth moved out of near zero range. More data is needed to confirm an inflection, but an improvement would support higher stock prices and take the pressure off of multiple expansion.’

Questions call Paul @ 584 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Securities Offered Through Westminster Securities, Inc. Member FINRA/SIPC.