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.