That Was The Week That Was-4th Week December

 

 

 DOW 18,000! In 1974 the DJIA hovered in the neighborhood of 740. When news of Nixon’s impeachment reached the street the Dow shot up about 23 points, one of the biggest days of the year. Today a 100 point move one way or another is common. Investors who bought and held quality, dividend paying companies since the days of Nixon, have been amply rewarded. In 2014, after a five day run the Dow 18,000 number was broken and held. U.S. gross domestic product estimate by the Commerce Department for the third quarter showed economic output expanded by 5%- up from the second quarter’s 4.6% and the best since the third quarter in 2003. Growth came from consumer spending, business investment in new equipment and software and rise in exports. Headwinds are sure to be there in 2014 as a strong dollar could reduce demand for U.S. made goods; falling oil prices could cutback domestic oil drilling; and the housing market still has not shown strong demand. Economists expect 2015 to grow between 2.6%-3%. Inflation just doesn’t seem to be there and with falling oil prices doesn't appear that inflation will show up anytime in 2015. The good news is that the consumer in 2015 will be back. They’ll be spending their savings from the gas pump as if it were a real raise in pay (which in some way it is), and buying what they’ve neglected because of the high cost of energy. The party on low energy prices may not last long as Boone Pickens explained on CNBC the eve of Christmas eve saying that $100 a barrel oil will be back in 12-18 months. This a modified prediction where a few weeks back he said oil pricing would be $100 in six months.WSJ, CNBC 12/23 & 24/2014.

 

THE WALL STREET JOURNAL REPORTED CHRISTMAS EVE THAT THE U.S. ECONOMY POSTED ITS STRONGEST GROWTH IN MORE THAN A DECADE.

 

 

GRASS ISN’T ALWAYS GREENER. Hedge Funds Are Where The Uber-Rich & The Large Institutional Investors Place Their Money. The fees at hedge funds are steep, the rewards are not always great but investors feel that their getting ‘specialized’ treatment with the best and smartest investment managers.  Through the month of September this year 664 hedge funds have closed their doors. They either lost too much investor money, had their backers pull cash or bet on the wrong sector or industry.  Meredith Whitney who made her name with Oppenheimer covering the banking industry, left and formed her own hedge fund, Kenbelle Capital, L.P., and now finds that in deep trouble. Following her prophesy of banking misdeeds she appeared on 60 Minutes in 2010 and explained that a huge number of cities and states would file for bankruptcy. Her statement roiled the municipal bond market. Outside of normal attrition and the Detroit bankruptcy she was hugely wrong.  In 2012 she was named one of the top stock pickers in the United States by the Financial Times. Today she’s reported to have lost her investment-business partner, her fund lost money, and is facing the reality that investment management is not a one trick pony. So if you think hedge funds are money machines and the grass is greener for the uber-rich, it isn’t always so. CNBC.com, Wikipedia.com 12/20/2014

Consider Art? Homes need decoration and many of us simply head to the local Target store and stock up with pictures and art that matches the sofa and drapes. As long as the color doesn’t clash we’re pleased. If and when we get a new furniture we simply take down the old and slap up another suitable color framed print. However with a little study you can mix investment with home decoration. Rather than buying something worth almost nothing because it has pleasing colors one can create an art collection to hang on the wall. Owning something you really enjoy, and may be worth at least what you paid for it, versus hanging a throw away poster takes time and a little study. For example Amazon has a Fine Art section that many people know little about. You can buy an original piece of art or a copy. While the above ‘Untitled Pink’ listed on  Amazon may  not be your cup of tea (asking price $12,500), there are plenty of offerings in modest prices along with instructional books. Other places to shop for real art are Detroit area auctions (specifically through DuMouchelles), hundreds of second hand, consignment stores, a handful of art dealers and estate sales.

We Got Even With North Korea for the Sony Hack! Mike Myers opened Saturday Night Live 12/20 as Dr. Evil. That was it- Mike Myers opened as Dr. Evil. Monday news reached us that North Korea was experiencing internet outages of historic proportion for a period of ten hours. This was not their normal sporadic outage but one that was continuous giving the impression someone was controlling the North Korean net.

 

Out-Performing The Matching Index. Ye Olde Conversation has been what’s better: Buying an Index Fund or an Active Managed Fund? While some investors believe that active managed mutual funds should outperform their counterpart index the reality is that investors buy the fund not so much for the return but for the (1) Active management (2) Risk basis (3) Manager Philosophy (4) Dividends. SPIVA U.S. Scorecard (A Dow Jones, S&P Comparison versus Active) provided a historical study ending in 2013 of the percentage of U.S. Equity Funds Outperformed by Benchmarks. In the five years ending 2013 the study found  of all large cap funds measured against the S&P 500 Index 72.2% were outperformed. In Real Estate Funds 80.28% were outperformed by the S&P U.S. Real Estate Investment Trust. The study goes on to illustrate that the shorter the investment time period the better the chances of the fund outperforming an index. Longer term, not so much. The upshot is don’t look for an active managed portfolio to consistently outperform any index.

Ford 2015 Trend Study found that there are 2 billion Gen X’ers world wide and, interestingly and unlike their predecessors, they find failure not as something bad. A great percentage would rather rent than own and a majority would have fewer than more possessions. X’ers, like Boomers, will morph as time goes on. That you can bet on. You can find the entire study online by going online searching Ford 2015 Trend report.

Carrots Help You See Better! USA Today reported that the myth that carrots help you see better originated during WW2 when the British didn’t want to give away why their pilots were able to shoot down so many German planes because it would give away their new invention radar. So the clever Brits made up the story that they fed their pilots extra helpings of carrots which aided in their vision. While the vitamins in carrots help in a lot of ways they won’t make poor vision better, or good vision extraordinary.

 

Bob Doll appeared as co-host December 22nd on the CNBC Morning Squawk and said that were in the 6th inning of the economic stock market recovery and the 7th inning in pricing.

ART CASHIN’S WORDS OF WISDOM.  Speaking to Bob Pisanti at the close Monday on CNBC Cashin offered up good news for the markets in 2015. Reasons were that historically stocks performed well in a year before Presidential elections and also in years that ended in the number five. I don’t know whether that’s considered a technical or fundamental reason. I knew someone who once picked horses at the race track that same way.

Remember that was a short trading week and with less than the usual volume. Markets closed to another record highs Monday & Tuesday, breaking 18,000 on the DJIA.

 ‘Just keep moving.’ The secret to long life from Dick Van Dyke.

Have a Safe & Enjoyable New Year!

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-3rd Week December

 

 Monday, the 15th, markets were prepped for a huge upside open. Premarket for the DJIA was + 100 points. By 10 A.M. I was on the road to a meeting and WJR radio news gave the market report as, ‘Just going negative.’ In other words in 30 minutes the buyers left the markets and selling entered. During the trading day the market was off as much as 150 points but closed down just shy of 100 on the DJIA. Both the NAZ and S&P 500 Index finished the day off 48 and 12.7 points . All indices were down a continuation of the previous Friday when the DJIA closed off over 300 points. Oil closed under $55 a barrel. One expert on CNBC expected the black gold to close and hold $55 a barrel. Investors Business Daily sent me a morning e-mail saying the markets were ‘in-correction mode’. Technically that means there is more pain in the markets. IBD cautions that it doesn’t know the extent of the downside and that the markets could recover in 4 days or 4 weeks. Jimmy Cramer said on his show Monday evening that he doesn’t know how the S&P 500 Index can keep going down when so many things are going right. As of the close Tuesday the markets were off approximately five percent. Despite the S&P losses there are things going extremely well for the economy. Alcoa’s Klaus Kleinfeld spoke to Cramer and said the Chinese economy is still a strong engine and the U.S. economy is doing fantastic. It’s time, he said, to put money into buying over there and building here. Machines programmed to handle investment trading will keep selling until their algorithms reach a point that tells them they’ve oversold and things start to reverse. Whispers that this should be a very merry holiday retail season and rumors that one ‘smart’ phone manufacturer actually has run out of product only added to the ‘sophisticated confusion’ of the markets.  info gathered from WSJ, CNBC, Barrons.com, MarketWatch.com. 12/15&16/2014 

 

 

Markets Don’t Move in A Straight Line and Asset Allocation Doesn’t Mean that Everything Moves in Concert. On December 11th it was the worst trading day since 2011. Crude fell again and experts had no idea where it would eventually end up. Channing Smith of Capital Advisors said that investors are realizing that a decline in oil prices is due to both supply and demand issues. Up to this point it was simply a supply issue. The United States is now an oil exporter and this has created a new global conundrum for existing oil exporters. The new U.S. ‘fracking’ oil business displaced our using Nigerian, Algerian, Angola and Brazilian imports. Canada continues to be a major importer of oil to the United States. The WSJ on December 13th reported that the Saudi’s dug in their heels with reduced pricing when Nigerian needed to find new customers and began encroaching on Saudi importers. The Saudi’s are not about to give up market share. Their cost to produce a barrel of oil is one of the lowest of all oil producing countries. Investors Business Daily reported that the International Energy Agency (IEA) lowered its outlook on December 12th for global oil demand for the fourth time in five months sending oil to a fresh five year low a week ago Friday. Demand growth is still expected to grow albeit more modest than previously foreseen. Until a pricing is finally established markets will continue to be volatile. WSJ, BARRONS.COM,IBD, MARKETWATCH.COM. & CNBC 12/12/2014

 

What Happened? Wednesday it was a Miracle! It was so Christmacy! There was joy and happiness all through the Street. It was a not so unexpected present from The Federal Reserve as they wrapped up their final meeting of 2014 and left a note that ‘they could be patient in beginning to normalize the stance of monetary policy’. No promises. Nothing definite. But it was enough to bring the Holiday Spirit to Wall Street and buy, buy, buy. Everything ran higher, reported IBD 12/18. Only two of IBD’s 197 industry groups lost ground. The DJIA +288, Naz +96 and S&P 500 +40. It was just beautiful.

 If You Liked What Happened Wednesday You Absolutely, Positively Were Crazy About Thursday’s Trading!  The best one day since April 8, 2002! The DJIA was up 421 points. The market was up in the past 2 trading days 4.5%. If you were trying to time the market, get out of the way of falling oil prices or lock in gains or do anything other than wrap presents, sip some eggy nog and celebrate the holiest season than you got yourself into some serious trouble. This is the problem with self-proclaimed market timers who get out or run out before things simmer down. There is still deep issues with oil producing countries. There is, and will be, increased volatility with the markets. The Federal Reserve has expressed its accommodation to the markets and the markets have responded. Info from WSJ, Barrons.com, CNBC & IBD

 Rebalancing is a process whereby a portfolio is kept within a strict investment design. Saturday last I was driving to Eastern Market and tuned to a financial show and the host was exhorting his listeners to ‘rebalance’ their portfolios as if their entire investment life depending on it. ‘This is one of the most important aspects of investing,’ he said. ‘Don’t do it every week but do it at least quarterly.’ He neglected to mention that rebalancing usually means that an investor sells their winners, buys more of their losers and possibly reduces overall portfolio risk at the expense of return when rebalancing. Most successful professional investors are not rebalancing aficionados. One of the big mistakes amateur investors make is holding losers and selling winners. The successful investor is able to cut their losses and move on while holding, or adding, to their winning assets. Before you consider rebalancing either your personal or retirement plan call me. Rebalancing is not something that you must, have to or need to do.

 

Any Similarity Between The Current ‘Market Correction’ and that of the 2008-2009 Depression is in the Mind’s of Those that Don’t Understand How Wide Spread the One and Specific the Other.'  Countries specifically in the ‘Oil Only’ business are in deep trouble. The Saudi’s can continue to hold their pricing while forcing others out of the business for an extended period of time. In 1979 the price of oil tripled and it wasn’t until 1981 that OPEC cut the price to $29 a barrel. The Saudi’s are shrewd and intelligent businesspeople and understand the oil business. They hold 26% of the known world reserves and fully understand their economic global clout. As investors if you understand what the Saudi’s are doing is ‘only business’, you get a small grasp of the global turmoil.

 

For those that enjoy conspiracies here’s one. I’ve been reading weird stuff that Putin, the CEO of Russia, Inc., has created a program to destroy the United States currency because of our involvement in what he feels are internal Russian affairs by wholesale selling those dollars in the world market. That may or may not be true. Conspiracy theorists believe that the current disruption in the oil market is the U.S. method of getting even by destroying the one single commodity that the Russian economy is based on and causing the ruble to sink in value. Makes a good movie, eh?

Who’s our friend? Bloomberg Financial,LP

What do the financial experts expect in 2015?  Make sure you come to my client breakfast meeting.

What Investment Sectors will Benefit From Lower Oil Prices? Ideas:

• Transportation. Those businesses that do not hedge their fuel costs.
• Restaurants Consumer Discretionary
• Tire Manufacturers
• Plastic companies
• Call me for specifics.

We Know John Paul ll had a lot to do with bringing down the Berlin Wall. What a lot of us don’t know is that the Vatican is a lot more geopolitical than we think. On the 17th we were stunned to hear that the Cuban embargo is ended. Something many of us Baby Boomers thought would have been impossible until the death of both brothers Castro. A new era between the U.S. and Cuba, with a political and business relationship, is being formed. A lot we still don’t know. But, we have learned that the Vatican was deeply involved in the negotiations. What I want to know is when are they going to start selling condo’s on the beach? And where are the Russians going?  It’s been a rough year for Putin. First the Ukraine, then his oil business and now his winter dacha.

Have a Merry Christmas. And for our friends who celebrate Hanukkah and Kwanzaa a joyous holiday!

Questions call Paul @ 586 295 0430 or write him a 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 December

 

A Good Thing!

Stocks dropped 268 points on the DJIA Wednesday primarily because of falling oil prices. Lost in the shadow of falling oil the U.S. passed a trillion dollar plus budget to get the United States through September of 2015. No haggling, infighting or stalling to get it done. Well, almost none. It looks like a deal and the president will sign it and word is he’s on the Republican side. Getting back to the oil pricing debacle MarketWatch.com shared a few reasons why we are seeing an almost 40% fall in value since the beginning of the year. (1) The increase in the U.S. as an oil shale producer. (2) A price war that the Saudi’s know they can win at the expense of their OPEC brothers to bury the fledging U.S. shale business. (3) Weaker demand from Europe and a slowing China. (4) Russian geopolitical fears diminishing. (5) A strong dollar. After the close on CNBC experts pondered the day’s events and concluded that eventually it would be a ‘good thing’ for the economy and U.S. workers. The apparent free fall of stocks is reminiscent of previous ‘market selloffs’ when hedge funds had to unwind positions that were ‘heavily’ leveraged or owned on margin. CNBC, WSJ, MarketWatch.com and Barrons.com 12/10-11/2014

 

Remember, a penny drop at the gas pump put $1 billion a year into the economy.

Now for the rest of the news…

Everyone has an opinion. And some of those opinions come attached to folk that have little else going for them but their opinion. That is perfectly okay if we’re in a bar, or around the office water cooler, talking about Angelina Jolie tattoos or should large curd cottage cheese best be served with canned peaches or pineapple. The problem is that a lot of opinions are published on web sites attached to financial information that other people are using as background information or to expand their understanding on a particular subject for investment purposes. It becomes truly disconcerting when a respected financial based web site publishes an article on let’s say oil prices and then invites every Tom, Dick and Harry to post their thoughts at the end of a piece. Suddenly everyone becomes a ‘Wildcatter’ or as knowledgeable as a Boone Pickens, and they let the world know it. It doesn’t matter if these same opinionates get confused between 10W40 and WD40 because online they are all self-proclaimed experts and more than willing to showoff their brilliance. This is the social evolution of ‘everyone’s knows more than anyone else culture’. The same guy that told you to bury your money in a mason jar in 2011 is doing the same thing online to an entirely new audience. Be careful out there. The fact that many of these post scripters hide behind fictitious monikers, express themselves like third graders with crayons, and have the financial acumen of monkeys (no disrespect to our simian friends intended) should be some clue as to their enlightenment. 

 Defense Wins! When Chuck Daly coached the Pistons he stressed defense. The philosophy then and now was if the other team has difficulty scoring you have a better chance of winning than if you get into a game of trading baskets. In almost every game played the team with a strong defense has the edge- the same is true with investing. A sterling defense doesn’t mean the other team can’t or won’t score. It simply means they won’t score as often. Investing in defensive sectors accomplishes several things: (1) During sudden market reversals you’ll lose money but historically not as much. (2) You’ll do relatively well when the markets are positive but generally not as well as the market indices. If you want to edge up your defensive positions call me. If you believe the pundits we may be in the half-time of our Bull Market. Time for many of us to review and, if it is something you need to do, check your portfolio if it is positioned defensively. Make sure you come to my annual client meeting in 2015.

 What country would be the biggest financial recipient of falling oil prices? The WSJ 12/8 reported that the top policy makers in the world were forecasting that low oil would be a huge boost to the global economy. West Texas Intermediate crude has fallen by $40 a barrel. This could certainly hurt our domestic oil drilling and (newly recovered) exporting business. But falling prices also could help major oil importing countries such as Japan, Italy and Germany. The big winner is expected to be Japan since it is a nation that has to import virtually everything. Falling oil prices usually is a harbinger of bad things as it signals an economic slowdown. This time ‘experts’ think that it is an over abundance of product rather than a global economic crisis. Info WSJ 12/8, PHOTO REUTERS WSJ.

Markets were Way Off Monday the 8th of December. Ben Lenisohn at Barrons.com wrote that there was some real pain in the S&P 500 Index Monday. He continues by reporting that Sean Darby of Jefferies and Company think that the ‘base case’ for 2015 is setting up to look a lot like the late 1990s. Darby’s report is called, ‘Back to the Future.’ To remind you the late 1990s were years where everyone was an investment genius and you could throw a dart and get a winner. Finding a double on your investment dollar was as easy as leafing through a money magazine at the supermarket checkout line. Low oil prices. a strong dollar and disinflation (same as now) were keys to the decade’s investment boon. But like all good things eventually unwound around March, 2000 and crushing the NASDAQ.

China market woes caused consternation in U.S. and foreign markets Tuesday last as Chinese regulators cracked down on trading practices. Using inadequate collateral and highly leveraged trading margins has created more volatility in the Chinese markets than is comfortable. Retail investors, according to WSJ 12/10, often are confused as to what caused stocks to go up or down with no reason. Many investors are quick to pull the trigger on holdings.

Tuesday Markets Down 150 on the Dow at the open but closed off their lows. Nasdaq finished up for the session.

Brian Belski of BMC Capital Markets predicted on CNBC Wednesday morning that we are six years into a massive 20-year Bull market.

Some insider trading is okay. It’s how you get the information. WSJ reported the reversal of convictions of three Wall Street traders with the jury saying government officials overreached. Expect more convictions to be reversed. WSJ 12/11/2014

whispers why the golden arches are not so golden and the red headed girl and some upscale eateries booming is because of the food. millennials don’t mind spending more $ for better quality and taste.

Thursday markets stopped their slide but the global ramifications of low oil still reverberated through Russia and Norway currencies. Stocks in energy companies in those countries fell to multi-year lows. Russian is trying to stem the fall of the ruble by hiking key interest rates to 9.5%.

Coal is down 60% and former Morgan Stanley senior economist Andy Xie told CNBC so will oil as China’s economy continues to cool down. He thinks oil was remain at $60.00 a barrel for the next five years. He believes this is the new normal for oil.

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-1st Week December

 

‘Friendship multiples joy and reduces sorrow.’-Swedish proverb

 

Do You Know The Difference Between an IRA Rollover and an IRA Transfer? There are plenty of folks that don’t. They get into expensive trouble for not knowing. A transfer is defined as when IRA assets are sent from one IRA custodian to another and made payable to the receiving custodian for the benefit of the IRA owner. In other words the account owner never has constructive receipt of the money. Transfers are never reported to the IRS and are not subject to frequency limits. If you want to move your money a dozen times a year you can. Rollovers are when the owner of the IRA takes the distribution personally and then re-deposits some or all the funds within a 60 day period of receiving the assets. You can only do One (1) Rollover per 12- month period. And the frequency of only being able to do one rollover a year is where people get into trouble. Doing more than one suddenly triggers a taxable distribution. People confuse rollovers and transfer. If a financial ‘expert’ inadvertently or unknowingly checks the wrong box on the application there may be problems in the future. Always consult with your trusted tax advisor or expert financial professional before any financial moves that may create unwanted income or tax burden. And know what previous moves were made and how they were defined.

‘ Japan May Be The Best Regional Bet For Stocks in 2015’ - Morgan Stanley.

Only the U.S. economy is expected to grow faster than anticipated, reported the investment bank. Lower energy costs boost a broad economic activity in the near term and fiscal policy becomes a bit more supportive of growth in 2015. Chart Morgan Stanley 12/1/2014.

 

It’s the dollar, baby! Oil is traded in dollars and when you’re happy-happy filling the family buggy and seeing it top at a ‘reasonable’ price, and you’re not sobbing as you empty your wallet, remember this has more to do with our strong dollar versus the rest of the world’s currency then some strange convoluted deal that cut the price of crude.(Well, there is plenty of that floating around since the U.S.A. got into the ‘fracking’ business.)The strong dollar also impacts stock values. Oil stocks are hurt but other industries, especially those in the transportation index, benefit enormously. A strong dollar makes it more fun to travel to foreign countries because we can buy more. In fact a strong dollar makes us feel ‘artificially’ rich. We can buy that foreign made wallet, purse or set of golf clubs at a more reasonable price. But, there is a trade-off. Selling our American made goods and services to a global marketplace makes our stuff more expensive. We may not sell as much which means our productivity may suffer. Think Germany and the currency they shrugged off in favor of the Euro. The German Deutsche Mark would be the strongest currency in the E.U. making it difficult to sell German made goods. That is the reason they like the Euro.The good news is that nothing lasts forever and a strong dollar eventually leads to a weak dollar and vice versa. So, enjoy it while you can.

Thanksgiving OPEC ‘No Cut in Production’ was the Big News (Along with the Lions waking up in the second quarter and eventually beating the Chicago Bears at home). The OPEC ministers met in Vienna and it was the worst kept secret as the Saudi’s were not about to give up market share for a cut in production. The Russian ruble fell as lower prices in energy are putting pressure on their economy. Other countries will be hurt that depend on at least $90 a barrel oil include Nigeria and Venezuela. Traders would do well to start ‘bottom-fishing’ in this sector and picking their spots. It’s thought that while crude oil is down 30% since June 2014 prices could fall even more. Our domestic shale oil drilling could also be curtailed as estimates of oil falling below $80 would be uneconomic for many producers. INFO FOR WSJ, CNN, CNBC 11/27 & 11/28/2014

According to veteran energy economist James Williams of WTRG Economics the bullet that the Saudi’s took in not cutting production but seeing oil prices tumble is just smart business. Had the cartel agreed to cut production we would have seen $100 a barrel oil. Instead we may see a return to $65 or lower in the not to distant future. We also would have seen global growth cut because of high oil prices. Oil demand hasn’t fallen. By not cutting production the Saudi’s are taking a hit in the pocket today, allowing economies globally to grow, and ensuring a better and more prosperous pricing in the future. With this move OPEC, according to Williams, over time will increase market and pricing share. This is the same tactic the Saudi’s took in 1979. MarketWatch.com, Barrons, CNBC, 11-28-2014

Gold Hasn’t Had a Good Year. We knew that going into 2014 with hedge funds and investment banks belittling the metal, warning investors that gold wouldn’t do much, if anything, at all in 2014. In Switzerland citizens are increasing their personal gold holdings while the nation holds a vote if the Swiss National Bank should refrain from selling more of its gold holdings and instead boost its percentage from 7% to 20% of assets. According to BuillionVault’s head of research existing Swiss customers have been raising their ownership in gold and silver by more than 60%. Switzerland was the last country to leave the gold standard in 1999. Campaigners for the yes vote cite that voting against the measure would weaken the Swiss economy. CNBC 11/30/2014

A No Vote Cooked Gold’s Goose as the Swiss Proposal was rejected Sunday. Gold has lost 16% since peaking March, 2014. There will be more pressure on gold now that the Swiss have rejected the proposal of their central bank adding to their ownership. The proposal would have made Switzerland the world’s 3rd largest holder by country of gold. Muted global inflation have made gold less attractive to investors. Bloomberg 11/30/2014

THE GOING MAY GET TOUGHER AS THE INVESTMENT ENVIRONMENT CHANGES, ROBERT C. DOLL, CFA, SENIOR PORTFOLIO MANAGER NUVEEN ASSET MANAGEMENT. According to Mr. Doll this is what we can expect going forward: Info from Nuveen weekly Investment Commentary 12/1/2014

Enjoy It While You Can! T Boone Pickens was on Mad Money Tuesday last and predicted the Saudi’s would eventually fold and cut production because of their OPEC members need for higher oil prices, and that oil would again climb to $100 a barrel in the next six months.  Low gas prices gave the auto stocks a kick in the boot, and the entire market 12/2/2014, THE DJIA UP 100+ as buyers ignored ‘sippy’ cars and went for the pickups! Sales of the economic autos fell by 15% while the guzzlers were up.  WSJ 12/3/2014

Low Gas Prices Are Good For The American Economy as 70% of our GDP is based on Consumer Spending.

Criticism of Public Pensions Holding More ‘Common Stock’ Than ‘Fixed Income’ in Their Portfolios. In the Opinions section of WSJ 12/3/2014, Andrew G. Biggs chides those public pension funds holding 75%+ of their assets in ‘riskier’ stock holdings. His convoluted albeit correct reasoning decided that pension managers have no choice but to hold these risky assets as total returns have fallen in the fixed sector making increasing contributions to funding of retirement plans mandatory. Plan designs are based on fixed return investment policy which demands these plans make up the difference in additional contributions. In some instances this would be as high as 50% of the normal contribution and, in most, if not all, cases, not feasible. More appropriately a better plan design would be one that would allow overfunding during good times rather than the current reduction of contributions during years of stellar performance, which is what usually happens.  Individuals managing their own retirement I.R.A.s have a similar problem. In order to meet income demands investors are being forced to look at dividend producing assets as a replacement for fixed income. Unlike a pension plan individuals cannot lock themselves into buying 30-year bonds during a rising rate environment. The balancing act both in public and private continues as to what is prudent and sensible.

Markets Up Wednesday the 3rd. Economic Activity Continued to Expand, according to the Fed’s beige book. Companies hired 207,000 in November according to ADP. Top C.E.O.s gathered in Washington, D.C. and told Congress and the President that corporate tax reform, less burdensome regulations (and more transparency), along with improvements in education are the things that can unlock the economy’s potential and create jobs. Rex Tillerson, CEO of ExxonMobil said there are something north of 4 million jobs that go unfilled simply because there are no skilled people to fill those jobs. Stephenson, CEO of AT&T, wanted to know about the president’s push for ‘net neutrality’. He wanted clarity on the subject and not getting it only caused corporate America to stall in moving forward. CNBC 12/3/2014

Comment: A few months ago I’d fill the old buggy and peel off a $50 bill and end up with coffee change, if that. The other day I did the same and I paid less than $30! That’s huge. While you and I can afford to pay higher gasoline prices many low income workers can not. Cheap gas is a godsend for them, especially during the Holiday season. Here’s the problem – cheap oil is temporary. It gives a false illusion of someone being richer than they really are. Most lower income earners will not save what they save at the pump but spend it. When the oil price trend reverses many of those same families will find themselves in worse shape financially than they were before the gas price drop.

Bill Gross May Just Have Something. In his market commentary at Janus Capital Group Bill Gross writes that’…solving the debt crisis by creating more debt cannot cure the disease if higher volatility distorts the historical flow of markets and associated commerce.’ He goes on to point out that the U.S. has had little focus on public investment and infrastructure spending. It’s been all monetary policy.’ Creating of more debt with artificially low yields leads to currency wars,exchange rate volatilities and distorts global capitalism.’  Which what each country is and has been doing-their own version of Quantitative Easing-keeping rates at, or near zero, and driving their own money value down. Barrons.com 12/5/2014

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-4th Week November

  The loss of lives when the Titanic sank were caused by the lack of lifeboats and the lack of understanding how to utilize those lifeboats to their maximum advantage. Some boats were overloaded and others were castoff virtually empty. The Titanic sank quickly and many lives were needlessly lost. The question I have to ask is:  Do You Have a Investment Life Boat Plan?  Global economic meltdowns could very well be upon you before you even realize the danger. Each investor should have their own specific plan for what to do when markets collapse. This is not a plan for market corrections but for a good old fashion Black Swan event that crashes markets and causes grown-ups to cry reading their investment statements. Your plan should be written because during an actual event, as history has shown,  you will not, in most cases, be able to think rationally. Your broker does not have the right to arbitrarily act for you without specific written instructions. Here are some questions you have to ask yourself to devise a feasible Investment Life Boat Plan:

• At what % loss do you implement your plan?
• Do you sell or hold?
• Do you sell everything or a portion?
• Do you come back in and when and at what number at what index do you buy?
• If you sell do you go to cash or to fixed investments, or some other investment?
• What specifically would you buy?
• Do you hold what you have and simply add to your portfolio? Buying what?
• Do you take advantage of the markets crash by buying Inverse ETFs? Which one would you buy?
• If you are an income recipient how do you weather the economic storm?

China ‘s Central Bank Reduced Rates to Jump Start Economy

November 21st two major central banks cut rates in order to reduce the possibility of deflation and boost the global economies. The People’s Bank of China and the European Central Bank signaled it may take new measures to boost inflation. This two weeks after the Bank of Japan said it would ramp up its own Quantitative Easing.  The global markets embraced the free money and the Dow opened plus 160 points before closing off its highs but still in record territory. WSJ 11/22/2014

 

 Do You Know This Man? He’s the guy who accurately predicted the crash of 2008. Peter Schiff, CEO of Euro Pacific Capital, and he’s back claiming the Federal Reserve unconventional,ultra loose, monetary policy has inflated the prices of stocks and bonds. He said what this economy needs to get itself back on track is an old fashioned recession. Schiff went on to say that gold will skyrocket and the dollar plunge as soon as the market realizes that stocks are overheated. He thinks that dollar could fall by 90%. There are others that scoff at Schiff’s reasoning and point to the fact that the Federal Reserve is not going to unwind its balance sheet anytime soon. Ethan Harris, global economist at Bank of America Merrill Lynch, said people confuse bank reserves with money. ‘Until banks start lending those reserves, those funds are not going to enter the economy.’ It’s a gradual process and not something that happens right away. MarketWatch.com., CNBC.com 11/22/2014

The Alan Greenspan Underwear Economic Indicator. Who remembers that? USA Today last Sunday reminded us of this 1970ish indicator created by Alan (I’m Taking A Bath!) Greenspan’s consulting firm. Basically it said that men’s underwear sales during good times were fairly flat but fell during bad economic times. Seems that there could be something to this as Victoria Secret sales are up along with HanesBrands. Let the good times roll, eh?

The NASDAQ Rocked Monday +42. It was a merry time if you were in the tech sector but the markets latest run has ignored banks, life insurance and REITs. While those businesses are fundamentally solid, according to Michael Kahn at Barrons.com, they pose a significant mixed message to investors. If the financials don’t pick up the pace and move forward they may be vulnerable to market weakness and technical failure. 11/25/2014 Barrons.com

Some Hedge Funds are having a dickens of a time making money in 2014. CNBC 11/24/2014 OPEC meeting decides if there is to be a cut in production. The cut has to be meaningful around 1.5 barrels a day. CNBC 11/24/2014

Those who believe in cycles, writes Avi Gilburt, author of The Elliott Wave Trader.net, there are indications that a ‘top’ could have been struck on Friday before last. Giburt’s analysis suggests either a pattern setup for a 300 point correction early in 2015, or to continue this rally into the end of the first quarter of 2015, before the 300+ point pullback takes hold. One way or another, he writes, there will be a higher market followed by a 300+ correction, which will then be followed by another 500 point rally. There are no indications that this bull market will not be seeing much higher levels in 2015, he predicts.